# Valley National Bancorp: Form 10-Q for the period ended Sep 30, 2024

- Company: [Valley National Bancorp](/companies/vly.md) (CIK 714310)
- Form: 10-Q
- Filed: 2024-11-12
- Accepted by EDGAR: Nov 12, 2024, 16:35 ET
- Period: 2024-09-30
- Accession: 0000714310-24-000164
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/714310/000071431024000164/vly-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/714310/000071431024000164/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $28.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $84.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $97.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $264.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.18 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.49 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.18 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.49 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 511,342,932 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 510,713,205 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $156.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $9.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $170.3m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $8.5m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2024-09-30 | $62.09bn | us-gaap:Assets |
| Total liabilities | at 2024-09-30 | $55.12bn | us-gaap:Liabilities |
| Short-term borrowings | at 2024-09-30 | $58.3m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-09-30 | $6.97bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 147,441 characters.

The following MD&A should be read in conjunction with the consolidated financial statements and notes thereto appearing in Part I, Item 1 of this report. The MD&A contains supplemental financial information, described in the sections that follow, which has been determined by methods other than GAAP that management uses in its analysis of our performance. Management believes these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance, our business and performance trends and facilitate comparisons with the performance of others in the financial services industry. These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.

### Cautionary Statement Concerning Forward-Looking Statements

The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about our business, new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as “intend,” “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “would,” “could,” “typically,” “usually,” “anticipate,” “may,” “estimate,” “outlook,” “project” or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:

- the impact of market interest rates and monetary and fiscal policies of the U.S. federal government and its agencies in connection with the prolonged inflationary pressures, which could have a material adverse effect on our clients, our business, our employees, and our ability to provide services to our customers;
- the impact of unfavorable macroeconomic conditions or downturns, including an actual or threatened U.S. government shutdown, debt default or rating downgrade, instability or volatility in financial markets, unanticipated loan delinquencies, loss of collateral, decreased service revenues, increased business disruptions or failures, reductions in employment, and other potential negative effects on our business, employees or clients caused by factors outside of our control, such as future policies and legislation under the new U.S. presidential administration, geopolitical instabilities or events (including the Israel-Hamas war and the

escalation and regional expansion thereof); natural and other disasters (including severe weather events, such as Hurricanes Helene and Milton in late September and early October 2024, respectively); health emergencies; acts of terrorism; or other external events;

- the impact of potential instability within the U.S. financial sector in the aftermath of the banking failures in 2023 and continued volatility thereafter, including the possibility of a run on deposits by a coordinated deposit base, and the impact of the actual or perceived soundness, or concerns about the creditworthiness of other financial institutions, including any resulting disruption within the financial markets, increased expenses, including FDIC insurance assessments, or adverse impact on our stock price, deposits or our ability to borrow or raise capital;
- the impact of negative public opinion regarding Valley or banks in general that damages our reputation and adversely impacts business and revenues;
- changes in the statutes, regulations, policy, or enforcement priorities of the federal bank regulatory agencies;
- the loss of or decrease in lower-cost funding sources within our deposit base;
- damage verdicts or settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent, trademark or other intellectual property infringement, misappropriation or other violation, employment related claims, and other matters;
- a prolonged downturn and contraction in the economy, as well as an unexpected decline in commercial real estate values collateralizing a significant portion of our loan portfolio;
- higher or lower than expected income tax expense or tax rates, including increases or decreases resulting from changes in uncertain tax position liabilities, tax laws, regulations, and case law;
- the inability to grow customer deposits to keep pace with loan growth;
- a material change in our allowance for credit losses under CECL due to forecasted economic conditions and/or unexpected credit deterioration in our loan and investment portfolios;
- the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;
- changes in our business, strategy, market conditions or other factors that may negatively impact the estimated fair value of our goodwill and other intangible assets and result in future impairment charges;
- greater than expected technology related costs due to, among other factors, prolonged or failed implementations, additional project staffing and obsolescence caused by continuous and rapid market innovations;
- cyberattacks, ransomware attacks, computer viruses, malware or other cybersecurity incidents that may breach the security of our websites or other systems or networks to obtain unauthorized access to personal, confidential, proprietary or sensitive information, destroy data, disable or degrade service, or sabotage our systems or networks;
- results of examinations by the Office of the OCC, the FRB, the CFPB and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;
- application of the OCC heightened regulatory standards for certain large insured national banks, and the expenses we will incur to develop policies, programs, and systems that comply with the enhanced standards applicable to us;
- our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements, or a decision to increase capital by retaining more earnings;
- unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other public health crises, acts of terrorism or other external events;
- our ability to successfully execute our business plan and strategic initiatives, including our goals to reduce the commercial real estate loan concentration on our balance sheet and expand other areas of commercial lending activity; and
- unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, risk mitigation strategies, changes in regulatory lending guidance or other factors.

A detailed discussion of factors that could affect our results is included in our SEC filings, including Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023.

We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations, except as required by law. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

### Critical Accounting Estimates

Valley’s accounting policies are fundamental to understanding management’s discussion and analysis of its financial condition and results of operations. In preparing the consolidated financial statements, management has made estimates, judgments and assumptions in accordance with these policies that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of financial condition and results of operations for the periods indicated. At September 30, 2024, we identified our policies on the allowance for credit losses, goodwill and other intangible assets, and income taxes to be critical accounting policies because management has to make subjective and/or complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Management has reviewed the application of these policies and estimates with the Audit Committee of Valley’s Board. Our critical accounting policies and estimates are described in detail in Part II, Item 7 in Valley’s Annual Report, and there have been no material changes in such policies and estimates since the date of Valley’s Annual Report.

### New Authoritative Accounting Guidance

See Note 4 to the consolidated financial statements for a description of new authoritative accounting guidance, including the dates of adoption and effects on results of operations and financial condition.

### Executive Summary

**Company Overview.** At September 30, 2024, Valley had consolidated total assets of approximately $62.1 billion, total net loans of $48.8 billion, total deposits of $50.4 billion and total shareholders’ equity of $7.0 billion. Valley operates many convenient branch office locations and commercial banking offices in northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn and Queens, Long Island, Westchester County, New York, Florida, California, Alabama and Illinois. Of our current 228 branch network, 56 percent, 18 percent, and 18 percent of the branches are located in New Jersey, New York and Florida, respectively, with the remaining 8 percent of the branches in Alabama, California, and Illinois combined.

**Impacts of Hurricanes Helene and Milton.** In the early stages of the fourth quarter 2024, the credit quality of our Florida loan portfolio has remained resilient in the aftermath of Hurricane Helene, which hit Florida in late September 2024, and Hurricane Milton, which made landfall on October 9, 2024. At this time, there have been relatively few loan concessions (mostly in the form of loan payment deferrals up to 90 days) for distressed borrowers impacted by the hurricanes. However, we continue to assess the impact of the hurricanes on our Florida client base and, where appropriate, we will work constructively with individual borrowers. At September 30, 2024, our allowance for loan losses included an $8.0 million qualitative reserve for estimated losses resulting from Hurricane Helene. While not anticipated based on information currently available, Hurricane Milton and greater than expected losses from Hurricane Helene at September 30, 2024 could result in a significant increase to the current hurricane related reserves within the allowance, loan charge-offs and our provision for the fourth quarter 2024.

In an effort to support our associates who have been directly impacted by Hurricane Helene, we are offering various disaster assistance, including low interest rate personal and automobile loans with terms ranging from 12 to 60 months.

**Subsequent Event.** On November 12, 2024, Valley issued and sold 49,197,860 shares of its common stock in a registered public offering, including 6,417,112 shares purchased under an over-allotment option exercised in full by the underwriters at the public offering price of $9.35 per share. The net proceeds of the offering, after deducting underwriting discounts and commissions and offering expenses payable by Valley, were $448.9 million and are expected to be used for general corporate purposes and investments in the Bank as regulatory capital.

**Financial Condition.** During the third quarter 2024, we continued to strengthen the position of our balance sheet to best perform in the current economic environment, while also prudently managing and reducing the overall risk of our loan portfolio. The following items, including key balance sheet initiatives, are highlights at September 30, 2024.

- **Commercial Real Estate Loan Concentration:** Total commercial real estate loans (including construction loans) totaled $30.4 billion, or 61.6 percent of total loans at September 30, 2024 as compared to $31.8 billion, or 63.2 percent of total loans at June 30, 2024. While commercial real estate lending remains a key pillar of the success of our relationship banking model and our lending expertise, we continue to proactively diversify our loan portfolio by reducing new originations of certain types of commercial real estate lending, such as non-owner occupied and multifamily loans. We remain focused on growing our commercial and industrial, owner occupied commercial real estate, and consumer loan portfolios. As a result, we currently have a strategic balance sheet goal to reduce our CRE loan concentration ratio (defined as total commercial real estate loans held for investment and held for sale, excluding owner occupied loans, as a percentage of total risk-based capital) to approximately 400 percent and 375 percent by December 31, 2024 and 2025, respectively. At September 30, 2024, our CRE loan concentration ratio declined to 421 percent as compared to 442 percent and 474 percent at June 30, 2024 and December 31, 2023, respectively. The decline in the ratio from June 30, 2024 was largely due to repayment activity during the third quarter 2024, which outpaced new and refinanced loan volumes due to the planned lower production within the non-owner occupied and multifamily loan categories. During the third quarter 2024, we also transferred performing commercial real estate loans totaling $823.1 million, net of unearned fees, to loans held for sale at September 30, 2024. These loans are currently under an agreement to sell to an unrelated third-party in the fourth quarter 2024. The combined impact of this pending loan sale and the aforementioned common stock issuance on November 12, 2024 would have reduced our CRE concentration ratio of 421 percent at September 30, 2024 to 380 percent on an as adjusted basis. See further details of our loan activities under the “Loan Portfolio” section below.
- **Regulatory Capital and Shareholders' Equity:** Total shareholders' equity increased $234.6 million to $7.0 billion at September 30, 2024 as compared to June 30, 2024 largely due to net proceeds of $144.7 million from the issuance of our Series C preferred stock in August 2024 and net income and net other comprehensive income for the third quarter 2024. Valley's total risk-based capital, common equity Tier 1 capital, Tier 1 capital and Tier 1 leverage capital ratios were 12.56 percent, 9.57 percent, 10.29 percent, and

8.40 percent, respectively, at September 30, 2024 as compared to 12.17 percent, 9.55 percent, 9.98 percent and 8.19 percent, respectively, at June 30, 2024. Currently, we have a strategic goal to increase Valley's common equity Tier 1 capital to 9.8 percent and 10 percent (or higher) by December 31, 2024 and 2025, respectively, largely through growth in our retained earnings and continuous management of the overall regulatory risk weighted asset profile of our balance sheet, including the goal to reduce our commercial real estate loan concentration. We expect our regulatory capital ratios to benefit by approximately 100 basis points as a result of the combined impact of the commercial real estate loan sale expected to close during the fourth quarter 2024 and the common stock issuance in November 2024. See the "Capital Adequacy" section below for more information.

- **Allowance for Credit Losses:** The ACL for loans totaled $564.7 million and $532.5 million at September 30, 2024 and June 30, 2024, respectively, representing 1.14 percent and 1.06 percent of total loans at each respective date. The increase reflects, among other factors, the aforementioned qualitative reserve of $8.0 million related to the estimated impact of Hurricane Helene at September 30, 2024. Given our current projections for continued growth in our commercial and industrial loan portfolio and credit trends within our loan portfolio, including the expected impact of Hurricane Milton, we anticipate a future reserve build in the ACL to approximately 1.20 percent and 1.25 percent of total loans at December 31, 2024 and 2025, respectively. However, we can provide no assurance that our actual future ACL for loans required under our CECL methodology will not exceed these current projections at each of the respective reporting dates. See the “Allowance for Credit Losses" section for additional information.
- **Credit Quality:** Non-performing assets (NPAs) as a percentage of total loans and NPAs decreased to 0.61 percent at September 30, 2024 as compared to 0.62 percent at June 30, 2024. Total net loan charge-offs to average loans were 0.34 percent for the third quarter 2024 as compared with 0.29 percent for the second quarter 2024. See the “Non-Performing Assets” section for additional information.
- **Liquid Assets:** Our liquid assets totaled $4.7 billion at September 30, 2024, representing 8.2 percent of interest earning assets as compared with $3.4 billion, or 6.1 percent of interest earning assets at June 30, 2024. We continue to maintain significant access to readily available, diverse funding sources to fulfill both short-term and long-term funding needs. See the “Bank Liquidity” section for additional information.
- **Deposits:** Total deposits increased $283.8 million to $50.4 billion at September 30, 2024 as compared to $50.1 billion at June 30, 2024 mainly due to higher direct commercial customer money market and non-interest bearing deposits, partially offset by a decline in time deposits. During the third quarter 2024, we added roughly 25 thousand new deposit accounts, including nearly 11 thousand accounts that are non-interest bearing deposits. Total indirect customer deposits (including both brokered money market and time deposits) totaled $9.1 billion at September 30, 2024 and remained relatively unchanged compared to June 30, 2024. We intend to use a significant portion of the net proceeds from the expected sale of commercial real estate loans held for sale to repay maturing indirect customer deposits in the fourth quarter 2024. See the “Deposits and Other Borrowings” section for more details.
- **Investment Securities:** Total investment securities increased $317.7 million to $6.3 billion, or 10.1 percent of total assets, at September 30, 2024 as compared to June 30, 2024 mainly due to targeted purchases of residential mortgage backed securities primarily issued by Ginnie Mae (with a risk-weighting of zero for regulatory capital purposes) that were classified as available for sale. See the “Investment Securities Portfolio” section for more details.

**Quarterly Results.** Net income for the third quarter 2024 was $97.9 million, or $0.18 per diluted common share, as compared to $141.3 million, or $0.27 per diluted common share, for the third quarter 2023. The $43.5 million decrease in quarterly net income as compared to the same quarter one year ago was mainly due to the following changes:

- a $65.9 million increase in our provision for credit losses mainly due to higher quantitative reserves allocated to commercial real estate loans, commercial and industrial loan growth, and the additional qualitative reserve related to the estimated impact of Hurricane Helene at September 30, 2024;
- a $2.3 million increase in non-interest expense mainly due to higher FDIC assessment fees, largely offset by lower technology and consulting related expenses; and
- a $1.9 million decrease in net interest income as higher yields on both new and adjustable-rate loans and additional interest income from investment security purchases were more than offset by an increase in the overall cost of average interest bearing liabilities.

Which were partially offset by:

- a $24.7 million decrease in income tax expense mostly due to lower pre-tax income in the third quarter 2024 and a higher level of investment in tax credits as compared to one year ago; and
- a $2.0 million increase in non-interest income that was mainly driven by increases in other income, tax advisory fees (within wealth management and trust fees) and bank owned life insurance income, partially offset by a mark-to-market loss on loans transferred to loans held for sale in the third quarter 2024 and a decline in net gains on the sales of assets.

See the “Net Interest Income,” “Non-Interest Income,” “Non-Interest Expense” and “Income Taxes” sections below for more details on the impact of the items above and other infrequent non-core items impacting our third quarter 2024 results.

**U.S. Economic Conditions.** During the third quarter 2024, real gross GDP increased at an annual rate of 2.8 percent as compared to an increase of 3.0 percent during the second quarter 2024. The increase was driven by government spending, residential & nonresidential fixed investment and net exports. In addition, most measures of inflation continued to reflect a moderation in price pressures during the third quarter 2024. The rate of inflation declined to 2.4 percent in the third quarter 2024 as compared to 3.0 percent for the second quarter 2024.

At its Federal Open Market Committee meeting in September, the Federal Reserve implemented a 0.50 percent rate cut resulting in a federal funds target rate range of 4.75 percent to 5.00 percent. The rate cut represented the first interest rate change in a year and the first rate cut in more than four years. On November 7, 2024, the Federal Reserve cut the federal funds target rate another 0.25 percent to a current range of 4.50 percent to 4.75 percent. The Federal Reserve's projections released in September 2024 signal that they may cut the federal funds target rate by another 0.25 percent at their next meeting in mid-December 2024.

The 10-year U.S. Treasury note yield ended the third quarter 2024 at 3.81 percent, or 55 basis points lower as compared to the second quarter 2024, and the 2-year U.S. Treasury note yield ended the third quarter 2024 at 3.66 percent, or 105 basis points lower as compared to the second quarter 2024.

For all commercial banks in the U.S., total loans and leases grew 0.4 percent from June 30, 2024 to September 30, 2024. Commercial and industrial lending and commercial real estate lending increased 0.2 percent and 0.3 percent, respectively, during the same period. For the third quarter of 2024, banks reported continued easing of underwriting standards for most commercial and industrial loan products to large and middle-market companies. Banks reported stronger demand for commercial and industrial loans as the majority of customer demand transitioned from commercial real estate loans.

Although Federal Reserve efforts to combat inflation are showing continued, but modest progress, several factors, including, but not limited to, new and proposed bank regulatory actions, potential weakening of the labor market, elevated inflation and interest rates, future policies and legislation under the new U.S. presidential administration and geopolitical conflicts have contributed to uncertainty to the future path of the U.S. economy and created a challenging bank operating environment. Should these conditions persist or further deteriorate, they may adversely impact our banking clients and our financial results, as highlighted in this MD&A.

### Deposits and Other Borrowings

Our cumulative deposit beta remained generally stable at 60 percent as of September 30, 2024 from 58 percent at June 30, 2024 and 57 percent at December 31, 2023. The slight uptick from each comparable period was driven by a modestly higher cost of interest-bearing customer deposits and mix-shift from non-interest to interest-bearing deposit products. We define cumulative deposit beta as the change in our cost of total deposits relative to the change in the Fed Funds rate during the current rising interest rate cycle which began in the first quarter of 2022. See the "Net Interest Income" section for additional details on the changes in our cost of deposits during the third quarter 2024.

Total average deposits increased by $1.0 billion to $50.4 billion for the third quarter 2024 as compared to the second quarter 2024. Average time deposits balances increased $921.8 million primarily due to our increased use of indirect customer (i.e., brokered) CDs as an alternate and attractively priced funding source (mainly compared to similar term FHLB borrowings) starting in the second quarter 2024. Average non-interest-bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 22 percent, 50 percent and 28 percent of total deposits for the third quarter 2024, respectively as compared to 23 percent, 50 percent and 27 percent of total deposits for the second quarter 2024, respectively.

Actual ending balances for deposits increased $283.8 million to $50.4 billion at September 30, 2024 from June 30, 2024 mainly due to an increase of $358.3 million in savings, NOW and money market deposits and an increase of $36.0 million in non-interest bearing deposits, partially offset by a decrease of $110.5 million in time deposits. Non-interest bearing deposit and savings, NOW and money market deposit balances increased at September 30, 2024 from June 30, 2024 mostly due to increases in national specialized deposits and higher direct commercial customer deposit accounts. Total indirect customer deposits (including both brokered money market and time deposits) totaled $9.1 billion in both September 30, 2024 and June 30, 2024. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 22 percent, 50 percent and 28 percent of total deposits as of September 30, 2024, respectively, as compared to 22 percent, 49 percent and 29 percent of total deposits as of June 30, 2024, respectively.

The following table lists, by maturity, uninsured CDs at September 30, 2024:

*(in thousands)*

|  | September 30, 2024 |
| --- | ---: |
| Less than three months | $632,057 |
| Three to six months | 717,036 |
| Six to twelve months | 590,381 |
| More than twelve months | 251,998 |
| Total | $2,191,472 |

Total estimated uninsured deposits, excluding collateralized government deposits and intercompany deposits (i.e., deposits eliminated in consolidation), totaled approximately $11.6 billion, or 23 percent of total deposits, at September 30, 2024 as compared to $11.0 billion, or 22 percent of total deposits, at June 30, 2024.

While we maintained a diversified commercial and consumer deposit base at September 30, 2024, deposit gathering initiatives and our current deposit base could remain challenged due to market competition, attractive non-deposit investment alternatives in the financial markets and other factors. As a result, we cannot guarantee that we will be able to maintain deposit levels at or near those reported at September 30, 2024. Management continuously monitors liquidity and all available funding sources including non-deposit borrowings discussed below. See the “Liquidity and Cash Requirements” section of this MD&A for additional information.

The following table presents average short-term and long-term borrowings for the periods indicated:

*(in thousands)*

| Average short-term borrowings: | Three Months Ended September 30, 2024 | June 30, 2024 | September 30, 2023 | Nine Months Ended September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| FHLB advances | $3,804 | $29,396 | $349,728 | $499,544 | $2,165,507 |
| Securities sold under repurchase agreements | 63,860 | 63,710 | 82,442 | 64,853 | 93,709 |
| Federal funds purchased | 13,587 | 4,396 | 4,348 | 6,022 | 105,019 |
| Total | $81,251 | $97,502 | $436,518 | $570,419 | $2,364,235 |
| **Average long-term borrowings:** |  |  |  |  |  |
| FHLB advances | $2,624,905 | $2,624,937 | $1,688,285 | $2,394,359 | $1,365,258 |
| Subordinated debt | 642,761 | 637,019 | 750,249 | 639,275 | 754,835 |
| Junior subordinated debentures issued to capital trusts | 57,326 | 57,239 | 56,978 | 57,240 | 56,892 |
| Total | $3,324,992 | $3,319,195 | $2,495,512 | $3,090,874 | $2,176,985 |

Average short-term borrowings decreased by $16.3 million and $355.3 million during the third quarter 2024 as compared to the second quarter 2024 and third quarter 2023, respectively, mostly due to a shift from the use of short-term FHLB advances to primarily indirect customer money market and time deposits in our average mix of funding sources.

Average long-term borrowings (including junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition) increased $5.8 million and $829.5 million as compared to the second quarter 2024 and third quarter 2023, respectively. The increase as compared to the third quarter 2023 was mainly due to new FHLB advances totaling $1.0 billion issued in early March 2024. The new long-term FHLB borrowings have a weighted average rate of 4.54 percent and a weighted average remaining contractual term of 3.1 years at September 30, 2024.

Actual ending balances for short-term borrowings decreased $5.5 million to $58.3 million at September 30, 2024 as compared to June 30, 2024 mainly due to a moderate decline in securities sold under repurchase agreements. Long-term borrowings totaled $3.3 billion at September 30, 2024 and remained relatively unchanged as compared to June 30, 2024.

### Non-GAAP Financial Measures

The table below presents selected performance indicators, their comparative non-GAAP measures and the (non-GAAP) efficiency ratio for the periods indicated. Valley believes that the non-GAAP financial measures provide useful supplemental information to both management and investors in understanding Valley's underlying operational performance, business, and performance trends, and may facilitate comparisons of our current and prior performance with the performance of others in the financial services industry. Management utilizes these measures for internal planning, forecasting and analysis purposes. Management believes that Valley’s presentation and discussion of this supplemental information, together with the accompanying reconciliations to the GAAP financial measures, also allows investors to view performance in a manner similar to management. These non-GAAP financial measures should not be considered in isolation, as a substitute for or superior to financial measures calculated in accordance with GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.

The following table presents our annualized performance ratios:

*($ in thousands)*

| Selected Performance Indicators GAAP measures: | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income, as reported | $97,856 | $141,346 | $264,560 | $426,957 |
| Return on average assets | 0.63% | 0.92% | 0.57% | 0.93% |
| Return on average shareholders’ equity | 5.70 | 8.56 | 5.20 | 8.72 |
| **Non-GAAP measures:** |  |  |  |  |
| Net income, as adjusted | $96,754 | $136,363 | $267,845 | $437,974 |
| Return on average assets, as adjusted | 0.62% | 0.89% | 0.58% | 0.96% |
| Return on average shareholders' equity, as adjusted | 5.64 | 8.26 | 5.27 | 8.94 |
| Return on average tangible shareholders' equity (ROATE) | 8.06 | 12.39 | 7.40 | 12.71 |
| ROATE, as adjusted | 7.97 | 11.95 | 7.50 | 13.04 |
| Efficiency ratio, as adjusted | 56.13 | 56.72 | 58.26 | 55.34 |

| Common Equity Per Share Data: | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Book value per common share (GAAP) | $13.00 | $12.79 |
| Tangible book value per common share (non-GAAP) | 9.06 | 8.79 |

57

Adjusted net income is computed as follows:

*(in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income, as reported (GAAP) | $97,856 | $141,346 | $264,560 | $426,957 |
| Non-GAAP adjustments: |  |  |  |  |
| Add: FDIC special assessment (1) | — | — | 8,757 | — |
| Add: Losses on available for sale and held to maturity debt securities, net (2) | 1 | 443 | 12 | 476 |
| Add: Mark to market loss on commercial real estate loans transferred to loans held for sale (3) | 5,794 | — | 5,794 | — |
| Less: Restructuring charge (4) | — | (675) | 954 | 10,507 |
| Add: Provision for credit losses for available for sale securities (5) | — | — | — | 5,000 |
| Add: Merger related expenses (6) | — | — | — | 4,133 |
| Less: Litigation settlements (7) | (7,334) | — | (7,334) | — |
| Less: Gain on sale of commercial premium finance lending division (8) | — | — | (3,629) | — |
| Less: Net gains on sales of office buildings (8) | — | (6,721) | — | (6,721) |
| Total non-GAAP adjustments to net income | $(1,539) | $(6,953) | $4,554 | $13,395 |
| Income tax adjustments related to non-GAAP adjustments (9) | 437 | 1,970 | (1,269) | (2,378) |
| Net income, as adjusted (non-GAAP) | $96,754 | $136,363 | $267,845 | $437,974 |

(1) Included in the FDIC insurance expense.

(2) Included in gains (losses) on securities transactions, net.

(3) Included in (losses) gains on sales of loans, net.

(4) Represents severance expense related to workforce reductions within salary and employee benefits expense.

(5) Included in provision for credit losses for available for sale and held to maturity securities (tax disallowed).

(6) Included in salary and employee benefits expense during the first quarter 2023.

(7) Represents recoveries from legal settlements included in other income.

(8) Included in gains on sales of assets, net.

(9) Calculated using the appropriate blended statutory tax rate for the applicable period.

In addition to the items used to calculate net income, as adjusted, in the table above, our net income is, from time to time, impacted by fluctuations in the level of net gains on sales of loans, wealth management and trust fees, and capital markets fees. These amounts can vary widely from period to period due to, among other factors, the amount and timing of residential mortgage loans originated for sale, brokerage and tax credit investment advisory activities and commercial loan customer demand for certain interest rate swap products. See the “Non-Interest Income” section below for more details.

Adjusted annualized return on average assets is computed by dividing adjusted net income by average assets, as follows:

*($ in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income, as adjusted (non-GAAP) | $96,754 | $136,363 | $267,845 | $437,974 |
| Average assets | $62,242,022 | $61,391,688 | $61,674,588 | $61,050,973 |
| Annualized return on average assets, as adjusted (non-GAAP) | 0.62% | 0.89% | 0.58% | 0.96% |

58

Adjusted annualized return on average shareholders' equity is computed by dividing adjusted net income by average shareholders' equity, as follows:

*($ in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income, as adjusted (non-GAAP) | $96,754 | $136,363 | $267,845 | $437,974 |
| Average shareholders' equity | $6,862,555 | $6,605,786 | $6,781,022 | $6,531,424 |
| Annualized return on average shareholders' equity, as adjusted (non-GAAP) | 5.64% | 8.26% | 5.27% | 8.94% |

ROATE and adjusted ROATE are computed by dividing net income and adjusted net income, respectively, by average shareholders’ equity less average goodwill and average other intangible assets, as follows:

*($ in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income, as reported (GAAP) | $97,856 | $141,346 | $264,560 | $426,957 |
| Net income, as adjusted (non-GAAP) | 96,754 | 136,363 | 267,845 | 437,974 |
| Average shareholders’ equity (GAAP) | $6,862,555 | $6,605,786 | $6,781,022 | $6,531,424 |
| Less: Average goodwill and other intangible assets | 2,008,692 | 2,042,486 | 2,016,790 | 2,051,727 |
| Average tangible shareholders’ equity (non-GAAP) | $4,853,863 | $4,563,300 | $4,764,232 | $4,479,697 |
| Annualized ROATE (non-GAAP) | 8.06% | 12.39% | 7.40% | 12.71% |
| Annualized ROATE, as adjusted (non-GAAP) | 7.97% | 11.95% | 7.50% | 13.04% |

59

The efficiency ratio is computed as follows:

*($ in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Total non-interest expense, as reported (GAAP) | $269,471 | $267,133 | $827,278 | $822,270 |
| Less: FDIC Special assessment (1) | — | — | 8,757 | — |
| Less: Restructuring charge (2) | — | (675) | 954 | 10,507 |
| Less: Amortization of tax credit investments | 5,853 | 4,191 | 17,206 | 13,462 |
| Less: Merger related expenses (3) | — | — | — | 4,133 |
| Total non-interest expense, as adjusted (non-GAAP) | $263,618 | $263,617 | $800,361 | $794,168 |
| Net interest income, as reported (GAAP) | 410,498 | 412,418 | 1,205,731 | 1,268,203 |
| Total non-interest income, as reported (GAAP) | 60,671 | 58,664 | 173,299 | 173,038 |
| Add: Losses on available for sale and held to maturity debt securities, net (4) | 1 | 443 | 12 | 476 |
| Add: Mark to market loss on commercial real estate loans transferred to loans held for sale (5) | 5,794 | — | 5,794 | — |
| Less: Litigation settlements (6) | (7,334) | — | (7,334) | — |
| Less: Gain on sale of commercial premium finance lending division (7) | — | — | (3,629) | — |
| Less: Net gains on sales of office buildings (7) | — | (6,721) | — | (6,721) |
| Gross operating income, as adjusted (non-GAAP) | $469,630 | $464,804 | $1,373,873 | $1,434,996 |
| Efficiency ratio (non-GAAP) | 56.13% | 56.72% | 58.26% | 55.34% |

(1) Included in the FDIC insurance expense.

(2) Represents severance expense related to workforce reductions within salary and employee benefits expense.

(3) Included in salary and employee benefits expense during first quarter 2023.

(4) Included in gains (losses) on securities transactions, net.

(5) Included in (losses) gains on sales of loans, net.

(6) Represents recoveries from legal settlements included in other income.

(7) Included in gains on sales of assets, net.

Tangible book value per common share is computed by dividing shareholders’ equity less preferred stock, goodwill and other intangible assets by common shares outstanding, as follows:

*($ in thousands, except for share data)*

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Common shares outstanding | 509,252,936 | 507,709,927 |
| Shareholders’ equity (GAAP) | $6,972,380 | $6,701,391 |
| Less: Preferred stock | 354,345 | 209,691 |
| Less: Goodwill and other intangible assets | 2,004,414 | 2,029,267 |
| Tangible common shareholders’ equity (non-GAAP) | $4,613,621 | $4,462,433 |
| Book value per common share (GAAP) | $13.00 | $12.79 |
| Tangible book value per common share (non-GAAP) | $9.06 | $8.79 |

### Net Interest Income

Net interest income on a tax equivalent basis of $411.8 million for the third quarter 2024 increased $8.8 million compared to the second quarter 2024 and decreased $1.8 million as compared to the third quarter 2023. Interest income on a tax equivalent basis increased $27.1 million to $861.9 million for the third quarter 2024 as compared to the second quarter 2024. The increase was mostly due to higher yields on both new loan originations and adjustable rate loans, as well as higher yields and additional interest income from targeted purchases of taxable investments within the available for sale securities portfolio during the second and third quarter 2024. Total interest expense increased $18.3 million to $450.1 million for the third quarter 2024 as compared to the second quarter 2024 mainly due to an increase in average time deposit balances coupled with higher costs on most interest bearing deposit products. See the "Deposits" and "Other Borrowings" sections below for more details.

Average interest earning assets increased $849.1 million to $57.7 billion for the third quarter 2024 as compared to the third quarter 2023 mainly due to a $1.1 billion increase in average taxable investments largely resulting from purchases of residential mortgage-backed securities classified as available for sale during the nine months ended September 30, 2024. Compared to the second quarter 2024, average interest earning assets increased by $878.7 million. The increase was mainly driven by increases of $598.1 million and $176.7 million in average taxable investments and average overnight interest bearing cash balances, respectively, as compared to the prior linked quarter. The average loan balances also increased by $106.1 million to $50.1 billion for the third quarter 2024 mostly due to organic loan growth in the latter half of the second quarter 2024.

Average interest bearing liabilities increased $1.8 billion to $42.7 billion for the third quarter 2024 as compared to the third quarter 2023 primarily due to increases of $1.4 billion and $829.5 million in average interest bearing deposits and long-term borrowings, respectively, partially offset by a decrease of $355.3 million in average short-term borrowings. The increase in average interest bearing deposits was largely due to increased NOW deposit balances, while average long-term borrowings increased mostly due to several new FHLB advances totaling $1.0 billion in early March 2024. The $355.3 million decrease in average short-term borrowings was mostly the result of a shift from the use of short-term FHLB advances to indirect customer time deposits in our mix of liquidity funding sources. As compared to the second quarter 2024, average interest bearing liabilities increased by $1.1 billion for the third quarter 2024 largely due to an increase in average indirect customer time deposit balances. See additional information under “Deposits and Other Borrowings” in the Executive Summary section above.

Net interest margin on a tax equivalent basis of 2.86 percent for the third quarter 2024 increased by 2 basis points from 2.84 percent for the second quarter 2024 and decreased 5 basis points from 2.91 percent for the third quarter 2023. The increase as compared to the second quarter 2024 was largely driven by higher yield on average interest earning assets largely offset by an increase in the cost of average interest bearing liabilities. The yield on average interest earning assets increased by 10 basis points to 5.98 percent on a linked quarter basis largely due to higher yielding investment purchases and new loan originations during the second and third quarter 2024. The overall cost of average interest bearing liabilities increased 7 basis points to 4.22 percent for the third quarter 2024 as compared to the second quarter 2024 largely due to higher interest rates on deposits. Our cost of total average deposits was 3.25 percent for the third quarter 2024 as compared to 3.18 percent and 2.94 percent for the second quarter 2024 and the third quarter 2023, respectively.

Based upon our latest model estimates, we anticipate net interest income to decline approximately one percent for the fourth quarter 2024 as compared to the third quarter 2024. The projected decline is largely due to lower forecasted interest income resulting from the expected sale of the commercial real estate loans transferred to loans held for sale during the third quarter 2024. Exclusive of this, we would have forecasted net interest income for the fourth quarter 2024 to be slightly higher relative to the third quarter 2024 as a result of modest loan growth and lower funding costs in the wake of the 50 basis point reduction to the federal funds target rate in September 2024. Our forecasts include several other uncertain assumptions, including changes in the level of market interest rates and the interest sensitivity of our balance sheet. As such, we cannot provide any assurances that our future net interest income or margin will meet our current estimates or remain near the levels reported for the third quarter 2024. For a detailed discussion on the risks related to interest rates please refer to Part I, Item 1A. “Risk Factors” in our Annual Report.

The following table reflects the components of net interest income for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023:

### Quarterly Analysis of Average Assets, Liabilities and Shareholders’ Equity and

### Net Interest Income on a Tax Equivalent Basis

*($ in thousands)*

| Assets Interest earning assets: | Three Months Ended September 30, 2024 Average Balance | Interest | Average Rate | June 30, 2024 Average Balance | Interest | Average Rate | September 30, 2023 Average Balance | Interest | Average Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans (1)(2) | $50,126,963 | $786,704 | 6.28% | $50,020,901 | $770,987 | 6.17% | $50,019,414 | $753,662 | 6.03% |
| Taxable investments (3) | 5,977,211 | 55,629 | 3.72 | 5,379,101 | 46,801 | 3.48 | 4,915,778 | 37,682 | 3.07 |
| Tax-exempt investments (1)(3) | 573,059 | 6,145 | 4.29 | 575,272 | 6,075 | 4.22 | 620,439 | 5,800 | 3.74 |
| Interest bearing deposits with banks | 974,417 | 13,385 | 5.49 | 797,676 | 10,902 | 5.47 | 1,246,934 | 17,113 | 5.49 |
| Total interest earning assets | 57,651,650 | 861,863 | 5.98 | 56,772,950 | 834,765 | 5.88 | 56,802,565 | 814,257 | 5.73 |
| Allowance for credit losses | (529,100) |  |  | (477,373) |  |  | (447,045) |  |  |
| Cash and due from banks | 428,342 |  |  | 421,026 |  |  | 410,715 |  |  |
| Other assets | 4,868,455 |  |  | 4,972,181 |  |  | 4,802,711 |  |  |
| Unrealized gains on securities available for sale, net | (177,325) |  |  | (170,145) |  |  | (177,258) |  |  |
| **Total assets** | $62,242,022 |  |  | $61,518,639 |  |  | $61,391,688 |  |  |
| **Liabilities and Shareholders’ Equity** |  |  |  |  |  |  |  |  |  |
| **Interest bearing liabilities:** |  |  |  |  |  |  |  |  |  |
| Savings, NOW and money market deposits | $25,017,504 | $235,371 | 3.76% | $24,848,266 | $231,597 | 3.73% | $23,016,737 | $201,916 | 3.51% |
| Time deposits | 14,233,209 | 174,741 | 4.91 | 13,311,381 | 160,442 | 4.82 | 14,880,311 | 164,336 | 4.42 |
| Total interest bearing deposits | 39,250,713 | 410,112 | 4.18 | 38,159,647 | 392,039 | 4.11 | 37,897,048 | 366,252 | 3.87 |
| Short-term borrowings | 81,251 | 451 | 2.22 | 97,502 | 691 | 2.83 | 436,518 | 5,189 | 4.75 |
| Long-term borrowings (4) | 3,324,992 | 39,488 | 4.75 | 3,319,195 | 39,051 | 4.71 | 2,495,512 | 29,159 | 4.67 |
| Total interest bearing liabilities | 42,656,956 | 450,051 | 4.22 | 41,576,344 | 431,781 | 4.15 | 40,829,078 | 400,600 | 3.92 |
| Non-interest bearing deposits | 11,158,521 |  |  | 11,223,562 |  |  | 11,951,398 |  |  |
| Other liabilities | 1,563,990 |  |  | 1,964,752 |  |  | 2,005,426 |  |  |
| Shareholders’ equity | 6,862,555 |  |  | 6,753,981 |  |  | 6,605,786 |  |  |
| **Total liabilities and shareholders’ equity** | $62,242,022 |  |  | $61,518,639 |  |  | $61,391,688 |  |  |
| Net interest income/interest rate spread (5) |  | $411,812 | 1.76% |  | $402,984 | 1.73% |  | $413,657 | 1.81% |
| Tax equivalent adjustment |  | (1,314) |  |  | (1,299) |  |  | (1,239) |  |
| **Net interest income, as reported** |  | $410,498 |  |  | $401,685 |  |  | $412,418 |  |
| Net interest margin (6) |  |  | 2.85% |  |  | 2.83% |  |  | 2.90% |
| Tax equivalent effect |  |  | 0.01 |  |  | 0.01 |  |  | 0.01 |
| Net interest margin on a fully tax equivalent basis (6) |  |  | 2.86% |  |  | 2.84% |  |  | 2.91% |

62

*($ in thousands)*

| Assets Interest earning assets: | Nine Months Ended September 30, 2024 Average Balance | Interest | Average Rate | September 30, 2023 Average Balance | Interest | Average Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans (1)(2) | $50,131,468 | $2,329,268 | 6.20% | $49,120,153 | $2,124,108 | 5.77% |
| Taxable investments (3) | 5,485,564 | 145,055 | 3.53 | 5,004,480 | 114,592 | 3.05 |
| Tax-exempt investments (1)(3) | 576,047 | 18,291 | 4.23 | 624,299 | 19,600 | 4.19 |
| Interest bearing deposits with banks | 823,711 | 33,969 | 5.50 | 1,762,065 | 66,594 | 5.04 |
| Total interest earning assets | 57,016,790 | 2,526,583 | 5.91 | 56,510,997 | 2,324,894 | 5.49 |
| Allowance for credit losses | (485,760) |  |  | (453,254) |  |  |
| Cash and due from banks | 429,510 |  |  | 423,473 |  |  |
| Other assets | 4,881,831 |  |  | 4,738,418 |  |  |
| Unrealized gains on securities available for sale, net | (167,783) |  |  | (168,661) |  |  |
| **Total assets** | $61,674,588 |  |  | $61,050,973 |  |  |
| **Liabilities and shareholders’ equity** |  |  |  |  |  |  |
| **Interest bearing liabilities:** |  |  |  |  |  |  |
| Savings, NOW and money market deposits | $24,886,886 | $699,474 | 3.75% | $22,971,446 | $517,524 | 3.00% |
| Time deposits | 13,384,437 | 486,248 | 4.84 | 12,290,300 | 370,398 | 4.02 |
| Total interest bearing deposits | 38,271,323 | 1,185,722 | 4.13 | 35,261,746 | 887,922 | 3.36 |
| Short-term borrowings | 570,419 | 21,754 | 5.08 | 2,364,235 | 89,345 | 5.04 |
| Long-term borrowings (4) | 3,090,874 | 109,464 | 4.72 | 2,176,985 | 75,237 | 4.61 |
| Total interest bearing liabilities | 41,932,616 | 1,316,940 | 4.19 | 39,802,966 | 1,052,504 | 3.53 |
| Non-interest bearing deposits | 11,188,294 |  |  | 12,903,406 |  |  |
| Other liabilities | 1,772,656 |  |  | 1,813,177 |  |  |
| Shareholders’ equity | 6,781,022 |  |  | 6,531,424 |  |  |
| **Total liabilities and shareholders’ equity** | $61,674,588 |  |  | $61,050,973 |  |  |
| Net interest income/interest rate spread (5) |  | $1,209,643 | 1.72% |  | $1,272,390 | 1.96% |
| Tax equivalent adjustment |  | (3,912) |  |  | (4,187) |  |
| **Net interest income, as reported** |  | $1,205,731 |  |  | $1,268,203 |  |
| Net interest margin (6) |  |  | 2.82% |  |  | 2.99% |
| Tax equivalent effect |  |  | 0.01 |  |  | 0.01 |
| Net interest margin on a fully tax equivalent basis (6) |  |  | 2.83% |  |  | 3.00% |

(1) Interest income is presented on a tax equivalent basis using a 21 percent federal tax rate.

(2) Loans are stated net of unearned income and include non-accrual loans.

(3) The yield for securities that are classified as AFS is based on the average historical amortized cost.

(4) Includes junior subordinated debentures issued to capital trusts which are presented separately on the consolidated

statements of financial condition.

(5) Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.

(6) Net interest income as a percentage of total average interest earning assets.

The following table demonstrates the relative impact on net interest income of changes in the volume of interest earning assets and interest bearing liabilities and changes in rates earned and paid by us on such assets and liabilities. Variances resulting from a combination of changes in volume and rates are allocated to the categories in proportion to the absolute dollar amounts of the change in each category.

### Change in Net Interest Income on a Tax Equivalent Basis

*(in thousands)*

| Interest Income: | Three Months Ended September 30, 2024 Compared to September 30, 2023 Change Due to Volume | Change Due to Rate | Total Change | Nine Months Ended September 30, 2024 Compared to September 30, 2023 Change Due to Volume | Change Due to Rate | Total Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans\* | $1,624 | $31,418 | $33,042 | $44,438 | $160,722 | $205,160 |
| Taxable investments | 9,011 | 8,936 | 17,947 | 11,669 | 18,794 | 30,463 |
| Tax-exempt investments\* | (465) | 810 | 345 | (1,530) | 221 | (1,309) |
| Interest bearing deposits with banks | (3,743) | 15 | (3,728) | (38,224) | 5,599 | (32,625) |
| Total increase in interest income | 6,427 | 41,179 | 47,606 | 16,353 | 185,336 | 201,689 |
| **Interest Expense:** |  |  |  |  |  |  |
| Savings, NOW and money market deposits | 18,246 | 15,209 | 33,455 | 45,845 | 136,105 | 181,950 |
| Time deposits | (7,370) | 17,775 | 10,405 | 35,023 | 80,827 | 115,850 |
| Short-term borrowings | (2,863) | (1,875) | (4,738) | (68,403) | 812 | (67,591) |
| Long-term borrowings and junior subordinated debentures | 9,844 | 485 | 10,329 | 32,322 | 1,905 | 34,227 |
| Total increase in interest expense | 17,857 | 31,594 | 49,451 | 44,787 | 219,649 | 264,436 |
| Total decrease in net interest income | $(11,430) | $9,585 | $(1,845) | $(28,434) | $(34,313) | $(62,747) |

\* Interest income is presented on a tax equivalent basis using 21 percent as the federal tax rate.

### Non-Interest Income

Non-interest income represented 6.6 percent and 6.7 percent of total interest income plus non-interest income for the three months ended September 30, 2024 and 2023, respectively and 6.4 percent and 6.9 percent of total interest income plus non-interest income for the nine months ended September 30, 2024 and 2023, respectively. For the three and nine months ended September 30, 2024, non-interest income increased $2.0 million and $261.0 thousand as compared to the same periods in 2023.

The following table presents the components of non-interest income for the three and nine months ended September 30, 2024 and 2023:

*(in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Wealth management and trust fees | $15,125 | $11,417 | $46,191 | $32,180 |
| Insurance commissions | 2,880 | 2,336 | 9,089 | 7,895 |
| Capital markets | 6,347 | 7,141 | 19,796 | 35,000 |
| Service charges on deposit accounts | 12,826 | 10,952 | 35,287 | 31,970 |
| Gains (losses) on securities transactions, net | 47 | (398) | 99 | 197 |
| Fees from loan servicing | 3,443 | 2,681 | 9,322 | 8,054 |
| (Losses) gains on sales of loans, net | (3,644) | 2,023 | (1,142) | 3,752 |
| Gains on sales of assets, net | 55 | 6,653 | 3,747 | 6,938 |
| Bank owned life insurance | 5,387 | 2,709 | 13,167 | 7,736 |
| Other | 18,205 | 13,150 | 37,743 | 39,316 |
| Total non-interest income | $60,671 | $58,664 | $173,299 | $173,038 |

64

Wealth management and trust fees income increased $3.7 million and $14.0 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. Increases in both periods as compared to the same periods in 2023 were mainly driven by stronger fee production from tax credit advisory services. Brokerage fees also increased $2.7 million to $17.5 million for the nine months ended September 30, 2024 as compared to the same period in 2023 due to stronger customer trading volume at our broker dealer subsidiary during the first half of 2024.

Capital markets income decreased $15.2 million for the nine months ended September 30, 2024 as compared to the same period in 2023 mainly due to a decline in the volume of interest rate swap transactions, and resulting fees related to commercial loan customers.

Service charges on deposit accounts income increased $1.9 million and $3.3 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 mainly due to additional treasury service related fees for commercial deposit accounts.

Net gains on sales of loans decreased $5.7 million and $4.9 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 mainly due to a $5.8 million mark-to- market loss recognized on the transfer of performing commercial real estate loans to loans held for sale at September 30, 2024 reported within this line item. Overall, our ability to generate net gains on sales of residential mortgage loans originated for sale continues to be challenged by several factors, including the historically higher level of mortgage interest rates, lower customer demand for conforming loan products, and our decision to not originate certain residential mortgage loans for sale. This decision can be influenced by many factors, including our current goal to reduce our commercial real estate loan concentration and further diversify our loan portfolio.

Net gains on sales of assets decreased $6.6 million and $3.2 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The decrease as compared to the

third quarter 2023 was mainly attributable to a $6.7 million net gain on the sale of non-branch offices located in Wayne, New Jersey in the third quarter 2023. The decrease for the nine months ended September 30, 2024 was net of a $3.6 million net gain realized on the sale of our commercial premium finance lending business in the first quarter 2024.

Bank owned life insurance income increased $2.7 million and $5.4 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 due to improved performance of the underlying investment securities.

Other non-interest income increased $5.1 million for the three months ended September 30, 2024 as compared to the same period in 2023 largely due to income from litigation settlements totaling $7.3 million for the third quarter 2024.

### Non-Interest Expense

Non-interest expense increased $2.3 million and $5.0 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023.

The following table presents the components of non-interest expense for the three and nine months ended September 30, 2024 and 2023:

*(in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Salary and employee benefits expense | $138,832 | $137,292 | $421,478 | $431,872 |
| Net occupancy expense | 26,973 | 24,675 | 75,548 | 73,880 |
| Technology, furniture and equipment expense | 28,962 | 37,320 | 99,627 | 106,304 |
| FDIC insurance assessment | 14,792 | 7,946 | 47,474 | 27,527 |
| Amortization of other intangible assets | 8,692 | 9,741 | 26,672 | 30,072 |
| Professional and legal fees | 14,118 | 17,109 | 48,521 | 55,329 |
| Amortization of tax credit investments | 5,853 | 4,191 | 17,206 | 13,462 |
| Other | 31,249 | 28,859 | 90,752 | 83,824 |
| Total non-interest expense | $269,471 | $267,133 | $827,278 | $822,270 |

Salary and employee benefits expense decreased $10.4 million for the nine months ended September 30, 2024 compared to the same period in 2023 largely due to restructuring severance charges of $10.5 million and merger related costs, primarily consisting of severance and retention compensation, totaling $4.1 million for the nine months ended September 30, 2023. These items were partially offset by normal increases in labor costs for the nine months ended September 30, 2024.

Net occupancy expense increased $2.3 million for the three months ended September 30, 2024 compared to the same period in 2023 mainly due to an increase in property tax expense, as well as incremental increases in rent and repairs expense on buildings.

Technology, furniture and equipment expense decreased $8.4 million and $6.7 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods of 2023 mostly due to a decrease in software licensing costs, as well as lower telecommunication related expense.

FDIC insurance assessment expense increased $6.8 million and $19.9 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods of 2023 partly due to the overall growth of our balance sheet as well as an increase in internally classified loans (see the "Credit Quality Indicators" section under Note 7 to the consolidated financial statements for more details). The increase for the nine months ended September 30, 2024 was also due to $8.8 million expense related to the FDIC special assessment accruals recorded during the first six months of 2024.

Professional and legal fees decreased $3.0 million and $6.8 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 largely due to lower technology managed services and consulting expenses.

Other non-interest expense increased $2.4 million and $6.9 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 mainly due to additional costs related to the loan credit risk transfer transaction, consisting of a credit default swap, executed in June 2024. The premium expense and other transaction costs associated with the credit protection totaled $3.2 million and $4.7 million for the three and nine months ended September 30, 2024. The increase for the nine months ended September 30, 2024 was also attributable to increased interest charges on collateral held related to derivative transactions.

### Income Taxes

Income tax expense totaled $28.8 million for the third quarter 2024 as compared to $22.9 million and $53.5 million for the second quarter 2024 and third quarter 2023, respectively. Our effective tax rate was 22.7 percent, 24.5 percent and 27.5 percent for the third quarter 2024, second quarter 2024 and third quarter 2023, respectively. The decrease in the effective tax rate from the second quarter 2024 and third quarter 2023 was primarily due to lower pre-tax income and larger investments in tax credits.

GAAP requires that any change in judgment or change in measurement of a tax position taken in a prior annual period be recognized as a discrete event in the quarter in which it occurs, rather than being recognized as a change in effective tax rate for the current year. Our adherence to these tax guidelines may result in volatile effective income tax rates in future quarterly and annual periods. Factors that could impact management’s judgment include changes in income, tax laws and regulations, and tax planning strategies. Based on the current information available, we anticipate that our effective tax rate will be 24 to 25 percent for the full year ended December 31, 2024.

### Operating Segments

Valley manages its business operations under operating segments consisting of Consumer Banking and Commercial Banking. Activities not assigned to the operating segments are included in Treasury and Corporate Other. Each operating segment is reviewed routinely for its asset growth, contribution to income before income taxes, return on average interest earning assets and impairment (if events or circumstances indicate a possible inability to realize the carrying amount). Valley regularly assesses its strategic plans, operations, and reporting structures to identify its operating segments and no changes to the operating segments were determined necessary during the nine months ended September 30, 2024. Certain prior period amounts have been reclassified to conform to the current presentation for each operating segment and Treasury and Corporate Other.

The accounting for each operating segment and Treasury and Corporate Other includes internal accounting policies designed to measure consistent and reasonable financial reporting and may result in income and expense measurements that differ from amounts under GAAP. The financial reporting for each segment contains allocations and reporting in line with Valley’s operations, which may not necessarily be comparable to those of any other financial institution. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.

The following tables present the financial data for Valley's operating segments, and Treasury and Corporate Other for the three months ended September 30, 2024 and 2023:

*($ in thousands)*

|  | Three Months Ended September 30, 2024 Consumer Banking | Commercial Banking | Treasury and Corporate Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Average interest earning assets | $9,929,693 | $40,197,270 | $7,524,687 | $57,651,650 |
| Income (loss) before income taxes | 13,326 | 133,618 | (20,270) | 126,674 |
| Return on average interest earning assets (before tax) | 0.54% | 1.33% | (1.08)% | 0.88% |

*($ in thousands)*

|  | Three Months Ended September 30, 2023 Consumer Banking | Commercial Banking | Treasury and Corporate Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Average interest earning assets | $9,681,379 | $40,338,035 | $6,783,151 | $56,802,565 |
| Income (loss) before income taxes | 15,100 | 210,055 | (30,323) | 194,832 |
| Return on average interest earning assets (before tax) | 0.62% | 2.08% | (1.79)% | 1.37% |

See Note 15 to the consolidated financial statements for additional details.

### Consumer Banking Segment

The Consumer Banking segment represented 18.5 percent of our loan portfolio at September 30, 2024, and was mainly comprised of residential mortgage loans and automobile loans, and to a lesser extent, home equity loans, secured personal lines of credit and other consumer loans (including credit card loans). The duration of the residential mortgage loan portfolio (which represented 11.5 percent of our loan portfolio at September 30, 2024) is subject to movements in the market level of interest rates and forecasted prepayment speeds. The weighted average life of the automobile loans portfolio (which represented 3.7 percent of total loans at September 30, 2024) is relatively unaffected by movements in the market level of interest rates. However, the average life may be impacted by new loans as a result of the availability of credit within the automobile marketplace and consumer demand for purchasing new or used automobiles. Consumer Banking also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, brokerage, insurance and tax credit advisory services, as well as Valley's international and domestic private banking businesses.

Consumer Banking’s average interest earning assets increased $248.3 million to $9.9 billion for the three months ended September 30, 2024 as compared to the same period of 2023. The increase was largely due to increases in average auto loan balances and new residential mortgage loan volumes originated for investment rather than sale over the last 12-month period, partially offset by a decline in average other consumer loans mainly driven by lower secured personal lines of credit balances.

Income before income taxes generated by the Consumer Banking segment decreased $1.8 million to $13.3 million for the third quarter 2024 as compared to the third quarter 2023 and was mainly driven by a combination of higher provision for loan losses and an increase in non-interest expense, partially offset by increases in net interest income and non-interest income. The provision for loan losses increased $10.6 million for the third quarter 2024 as compared to the third quarter 2023 mainly due to additional qualitative reserves related to the estimated impact of Hurricane Helene, as well as the level of residential mortgage and automobile loan growth in the 2024 period. See further details in the “Allowance for Credit Losses” section of this MD&A. Non-interest expense increased $3.4 million for the third quarter 2024 mainly due to additional costs related to our automobile loan credit risk transfer transaction, consisting of a credit default swap, executed in June 2024. Net interest income for this segment increased $6.6 million mainly due to higher interest rates on new and adjustable loans, partially offset by an increase in funding costs driven by higher interest rates. The non-interest income increased $5.2 million mainly due to a higher volume of transaction and other related fees generated by our tax credit advisory subsidiary. See further details in the “Non-Interest Income” section of this MD&A.

Net interest margin on the Consumer Banking portfolio increased 21 basis points to 1.89 percent for the third quarter 2024 as compared to the third quarter 2023 mainly due to a 53 basis point increase in the yield on average loans, partially offset by a 32 basis point increase in the costs associated with our funding sources. The 53 basis point increase in loan yield was largely due to higher yielding new loan volumes and adjustable rate loans in our portfolio. The increase in our funding costs was mainly driven by higher interest rates on most of our interest bearing deposit products during the third quarter 2024. Our cost of total average deposits was 3.25 percent for the third quarter 2024 as compared to 2.94 percent for the third quarter 2023. See the “Executive Summary” and the “Net Interest Income” sections above for more details on our net interest margin and funding sources.

The return on average interest earning assets before income taxes for the Consumer Banking segment was 0.54 percent for the third quarter 2024 compared to 0.62 percent for the third quarter 2023.

### Commercial Banking Segment

The Commercial Banking segment is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as adjustable and fixed rate owner occupied and commercial real estate loans. Due to the portfolio’s interest rate characteristics, Commercial Banking is Valley’s operating segment that is most sensitive to movements in market interest rates. Commercial and industrial loans totaled approximately $9.8 billion and represented 19.9 percent of the total loan portfolio at September 30, 2024. Commercial real estate loans and construction loans totaled $30.4 billion and represented 61.6 percent of the total loan portfolio at September 30, 2024.

Average interest earning assets in Commercial Banking segment decreased $140.8 million to $40.2 billion for the three months ended September 30, 2024 as compared to the third quarter 2023 mainly due to our strategic initiatives in 2024, including loan sales and low new loan volumes outpaced by repayment activity, to reduce our commercial real estate loan concentration as a percentage of regulatory capital.

Income before income taxes for Commercial Banking decreased $76.4 million to $133.6 million for the three months ended September 30, 2024 as compared to the same period of 2023 mainly due to a higher provision for credit losses and a decrease in net interest income. The provision for credit losses increased $55.3 million to $69.0 million as compared to the same period in 2023 mainly due to higher quantitative reserves allocated to commercial real estate loans and the reserve build required for our strong commercial and industrial loan growth. See details in the “Allowance for Credit Losses for Loans” section of this MD&A. Net interest income for this segment decreased $13.8 million to $359.1 million for the third quarter 2024 as compared to the same period in 2023 primarily due to the higher cost of funding.

The net interest margin for this segment decreased 13 basis points to 3.57 percent for the third quarter 2024 as compared to the third quarter 2023 due to a 32 basis point increase in the cost of our funding sources, largely offset by a 19 basis point increase in the yield on average loans.

The return on average interest earning assets before income taxes for the commercial banking segment was 1.33 percent for the three months ended September 30, 2024 compared to 2.08 percent for the same period in 2023.

### Treasury and Corporate Other

Treasury and Corporate Other largely consists of the Treasury managed AFS and HTM debt securities portfolios mainly utilized in the liquidity management needs of our lending segments and income and expense items resulting from support functions not directly attributable to a specific segment. Interest income is generated through investments in various types of securities (mainly comprised of fixed rate securities) and interest-bearing deposits with other banks (primarily the FRB of New York). Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are allocated from Treasury and Corporate Other to the Consumer Banking and Commercial Banking segments. Interest expense and internal transfer expense (for general corporate expenses) are allocated to each operating segment utilizing a transfer pricing methodology, which involves the allocation of operating and funding costs based on each segment's respective mix of average interest earning assets and/or liabilities outstanding for the period. Other items disclosed in Treasury and Corporate Other include net gains and losses on AFS and HTM securities transactions, interest expense related to subordinated notes, amortization of tax credit investments, as well as other non-core items, including income from litigation settlements, merger, restructuring expenses and FDIC special assessment charges.

Treasury and Corporate Other's average interest earning assets increased $741.5 million to $7.5 billion for the three months ended September 30, 2024 primarily due to higher average AFS investment securities balances. The increase in securities was partially offset by a $272.5 million decline in average interest bearing cash held overnight as our excess liquidity returned to more normalized levels in 2024 after being elevated in response to the bank failures in most of 2023.

For the three months ended September 30, 2024, loss before income taxes totaled $20.3 million compared to $30.3 million of income before taxes for the same period in 2023. The $10 million increase in the pre-tax loss during the third quarter 2024 was mainly driven by lower internal transfer income, partially offset by lower non-interest expense. The internal transfer income decreased $1.2 million to $150.8 million for the three months ended September 30, 2024 as compared to the same period in 2023. Non-interest expense decreased $5.5 million to $200.6 million during the three months ended September 30, 2024 as compared to the same period in 2023. See further details in the “Non-Interest Income” and “Non-Interest Expense” sections of this MD&A.

Treasury and Corporate Other's net interest margin increased 27 basis points to 0.23 percent for the third quarter 2024 as compared to the third quarter 2023 due to a 43 basis point increase in the yield on average investments, partly offset by a 16 basis point increase in cost of our funding sources. The increased investment yield was largely due to growth within our AFS portfolio due to purchases of higher yielding residential mortgage-backed securities during the nine months ended September 30, 2024.

The following tables present the financial data for Valley's operating segments and Treasury and Corporate Other for the nine months ended September 30, 2024 and 2023:

*($ in thousands)*

|  | Nine Months Ended September 30, 2024 Consumer Banking | Commercial Banking | Treasury and Corporate Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Average interest earning assets | $9,855,089 | $40,276,379 | $6,885,322 | $57,016,790 |
| Income (loss) before income taxes | 37,311 | 408,247 | (96,100) | 349,458 |
| Annualized return on average interest earning assets (before tax) | 0.50% | 1.35% | (1.86)% | 0.82% |

*($ in thousands)*

|  | Nine Months Ended September 30, 2023 Consumer Banking | Commercial Banking | Treasury and Corporate Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Average interest earning assets | $9,599,359 | $39,520,794 | $7,390,844 | $56,510,997 |
| Income (loss) before income taxes | 31,258 | 633,362 | (75,253) | 589,367 |
| Annualized return on average interest earning assets (before tax) | 0.43% | 2.14% | (1.36)% | 1.39% |

### Consumer Banking Segment

The Consumer Banking segment's average interest earning assets increased $255.7 million to $9.9 billion for the nine months ended September 30, 2024 as compared to the same period in 2023. The increase was primarily due to a higher level of new residential mortgage loans originated for investment rather than sale over the last 12-month period, as well as strong automobile loan application volumes from our indirect auto dealer network.

Income before income taxes generated by Consumer Banking increased $6.1 million to $37.3 million for the nine months ended September 30, 2024 as compared to the same period in 2023 and was mainly driven by an increase in non-interest income, partially offset by higher provision for loan losses. Non-interest income increased $17.9 million mainly due to a higher volume of transaction and other related fees generated by our tax credit advisory subsidiary, as well as brokerage fees generated from our private banking clients. See further details in the “Non-Interest Income” section of this MD&A. The provision for loan losses increased $8.5 million for the nine months ended September 30, 2024 largely due to loan growth and additional qualitative reserves related to the estimated impact of Hurricane Helene. See further details in the “Allowance for Credit Losses” section of this MD&A.

Non-interest expense also increased largely due to $4.7 million of premium fees associated with credit risk transfer swaps executed in June 2024 for a portion of our auto portfolio.

Net interest margin on the Consumer Banking portfolio decreased 4 basis points to 1.81 percent for the nine months ended September 30, 2024 as compared to the same period in 2023 mainly due to a 60 basis point increase in the costs associated with our funding sources, mostly offset by a 56 basis point increase in the yield on average loans. The increase in our funding costs was mainly driven by higher interest rates on most of our interest bearing deposit products and indirect customer deposits, as well as the mix of our adjustable rate and other borrowings during the nine months ended September 30, 2024. The 56 basis point increase in loan yield was largely due to higher yielding new loan volumes and adjustable rate loans in our portfolio. See details in the “Executive Summary” and the “Net Interest Income” sections above for more details on our net interest margin and funding sources.

The return on average interest earning assets before income taxes for the Consumer Banking segment was 0.50 percent for the nine months ended September 30, 2024 compared to 0.43 percent for the same period in 2023.

### Commercial Banking Segment

Average interest earning assets in the Commercial Banking segment increased $755.6 million to $40.3 billion for the nine months ended September 30, 2024 as compared to the same period in 2023. This increase was primarily due to organic loan growth over the last 12 month period, largely within the commercial and industrial loan portfolio.

For the nine months ended September 30, 2024, income before income taxes for Commercial Banking decreased $225.1 million to $408.2 million as compared to the same period in 2023 mainly driven by higher provision for credit losses, a decrease in net interest income and an increase in non-interest expense. The provision for credit losses increased $169.0 million to $188.5 million during the nine months ended September 30, 2024 as compared to the same period in 2023 mainly due to higher quantitative reserves allocated to commercial real estate loans, commercial and industrial loan growth, and additional specific reserves and charge-offs associated with the revaluation of collateral dependent commercial loans during the 2024 period. See details in the “Allowance for Credit Losses for Loans” section of this MD&A. Net interest income for this segment decreased $39.8 million to $1.1 billion for the nine months ended September 30, 2024 as compared to the same period in 2023 primarily due to the higher cost of funding. Non-interest expense increased $8.8 million to $136.7 million for nine months ended September 30, 2024 as compared to the same period in 2023 mainly due to higher FDIC insurance assessment expense resulting from both special assessments and the impact of changes in our internal risk classification of certain commercial real estate loans. See further details in the “Non-Interest Income” and “Non-Interest Expense” sections of this MD&A, as well as under the "Credit Quality Indicators" section of Note 7 to the consolidated financial statements.

The net interest margin for this segment decreased 20 basis points to 3.55 percent for the nine months ended September 30, 2024 as compared to the same period in 2023, as a 60 basis point increase in the cost of our funding sources was partially offset by a 40 basis point increase in yield on average loans.

The return on average interest earning assets before income taxes for the commercial banking segment was 1.35 percent for the nine months ended September 30, 2024 compared to 2.14 percent for the same period in 2023.

### Treasury and Corporate Other

Treasury and Corporate Other's average interest earning assets decreased $505.5 million during the nine months ended September 30, 2024 mainly due to a $938.3 million decline in average interest bearing cash held overnight, partially offset by an increase of $432.8 million in average investments. Our excess cash liquidity held overnight returned to more normalized levels in 2024 after being elevated in response to the bank failures for most of 2023.

The loss before income taxes totaled $96.1 million for the nine months ended September 30, 2024 as compared to $75.3 million for the same period in 2023. The $20.8 million increase in pre-tax loss was mainly driven by a decrease in net interest income combined with lower non-interest income. Net interest income decreased $23.3 million as compared to the same period a year ago mainly due to the higher cost of funding. The negative impact of these items was largely offset by decrease in non-interest expense and provision for credit losses and higher internal transfer income. Non-interest expense decreased $6.5 million to $622.4 million for the nine months ended September 30, 2024 as compared to the same period in 2023 partly due to additional severance expense related to workforce reductions in 2023 period. See further details in the “Non-Interest Expense” section of this MD&A. Provision for credit losses decreased $4.8 million mostly due to credit related impairment of one corporate bond issued by Signature Bank during the nine months ended September 30, 2023. The internal transfer income increased $3.8 million to $466.7 million for the nine months ended September 30, 2024 as compared to the same period in

2023 due to slightly higher allocations of the overhead expense to the Consumer Banking and Commercial Banking segments.

Treasury and Corporate Other's net interest margin decreased 40 basis points to 0.76 percent for the nine months ended September 30, 2024 as compared to the same period in 2023 due to a 60 basis point increase in cost of our funding sources, partially offset by a 20 basis point increase in the yield on average investments. The increase in the yield on average investments as compared to the same period in 2023 was largely driven by new higher yielding investments.

### ASSET/LIABILITY MANAGEMENT

### Interest Rate Risk

Our success is largely dependent upon our ability to manage interest rate risk. Interest rate risk can be defined as the exposure of our interest rate sensitive assets and liabilities to the movement in interest rates. Our Asset/Liability Management Committee is responsible for managing such risks and establishing policies that monitor and coordinate our sources and uses of funds. Asset/Liability management is a continuous process due to the constant change in interest rate risk factors. In assessing the appropriate interest rate risk levels for us, management weighs the potential benefit of each risk management activity within the desired parameters of liquidity, capital levels and management’s tolerance for exposure to income fluctuations. Many of the actions undertaken by management utilize fair value analysis and attempt to achieve consistent accounting and economic benefits for financial assets and their related funding sources. We have predominantly focused on managing our interest rate risk by attempting to match the inherent risk and cash flows of financial assets and liabilities. Specifically, management employs multiple risk management activities such as optimizing the level of new residential mortgage originations retained in our mortgage portfolio through increasing or decreasing loan sales in the secondary market, product pricing levels, the desired maturity levels for new originations, the composition levels of both our interest earning assets and interest bearing liabilities, as well as several other risk management activities.

We use a simulation model to analyze net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on various interest rate scenarios over a 12-month period. The model is based on the actual maturity and re-pricing characteristics of rate sensitive assets and liabilities. The model incorporates certain assumptions which management believes to be reasonable regarding the impact of changing interest rates, non-maturity deposit betas, and the prepayment assumptions of certain assets and liabilities as of September 30, 2024. The model assumes immediate changes in interest rates without any proactive change in the composition or size of the balance sheet, or other future actions that management might undertake to mitigate this risk. In the model, the forecasted shape of the yield curve remains static as of September 30, 2024. The impact of interest rate derivatives, such as interest rate swaps, is also included in the model.

Our simulation model is based on market interest rates and prepayment speeds prevalent in the market as of September 30, 2024. Although the size of Valley’s balance sheet is forecasted to remain static as of September 30, 2024, in our model, the composition is adjusted to reflect new interest earning assets and funding originations coupled with rate spreads utilizing our actual originations during the third quarter 2024. The model utilizes an immediate parallel shift in market interest rates at September 30, 2024.

The assumptions used in the net interest income simulation are inherently uncertain. Actual results may differ significantly from those presented in the table below, due to the frequency and timing of changes in interest rates and changes in spreads between maturity and re-pricing categories. Overall, our net interest income is affected by changes in interest rates and cash flows from our loan and investment portfolios. We actively manage these cash flows in conjunction with our liability mix, duration and interest rates to optimize the net interest income, while structuring the balance sheet in response to actual or potential changes in interest rates. Additionally, our net interest income is impacted by the level of competition within our marketplace. Competition can negatively impact the level of interest rates attainable on loans and increase the cost of deposits, which may result in downward pressure on our net interest margin in future periods. Other factors, including, but not limited to, the slope of the yield curve and projected cash flows will impact our net interest income results and may increase or decrease the level of asset sensitivity of our balance sheet.

Convexity is a measure of how the duration of a financial instrument changes as market interest rates change. Potential movements in the convexity of bonds held in our investment portfolio, as well as the duration of the loan portfolio may have a positive or negative impact on our net interest income in varying interest rate environments. As a result, the increase or decrease in forecasted net interest income may not have a linear relationship to the results reflected in the table below. Management cannot provide any assurance about the actual effect of changes in interest rates on our net interest income.

The following table reflects management’s expectations of the change in our net interest income over the next 12- month period considering the aforementioned assumptions. While an instantaneous and severe shift in interest rates was used in this simulation model, we believe that any actual shift in interest rates would likely be more gradual and would therefore have a more modest impact than shown in the table below.

*($ in thousands)*

| Changes in Interest Rates (in basis points) | Estimated Change in Future Net Interest Income Dollar Change | Percentage Change |
| --- | ---: | ---: |
| +300 | $133,747 | 8.19% |
| +200 | 82,385 | 5.04 |
| +100 | 30,931 | 1.89 |
| –100 | (76,502) | (4.68) |
| –200 | (133,143) | (8.15) |
| –300 | (185,850) | (11.38) |

As noted in the table above, a 100 basis point immediate decrease in interest rates combined with a static balance sheet where the size, mix, and proportions of assets and liabilities remain unchanged is projected to decrease net interest income over the next 12-month period by 4.68 percent. Management believes the interest rate sensitivity of our balance sheet remains within an expected tolerance range at September 30, 2024. However, the level of net interest income sensitivity may increase or decrease in the future as a result of several factors, including potential changes in our balance sheet strategies, the slope of the yield curve and projected cash flows.

### Liquidity and Cash Requirements

### Bank Liquidity

Liquidity measures Valley's ability to satisfy its current and future cash flow needs. Our objective is to have liquidity available to fulfill loan demands, repay deposits and other liabilities, and execute balance sheet strategies in all market conditions while adhering to internal controls and income targets. Valley's liquidity program is managed by the Treasury Department and routinely monitored by the Asset and Liability Management Committee and Board Risk Committee. Among other actions, the Treasury Department actively monitors Valley's current liquidity profile, sources and stability of funding, availability of assets for pledging or sale, opportunities to gather additional funds, and anticipated future funding needs, including the level of unfunded commitments.

The Bank adheres to certain internal liquidity measures including ratios of loans to deposits below 110 percent and wholesale funding to total funding below 25 percent, as summarized in the table below. Management maintains flexibility to temporarily exceed these thresholds in certain operating environments.

The following table presents Valley's loans to deposits and wholesale funding to total funding ratios at September 30, 2024 and December 31, 2023:

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Loans to deposits | 97.9% | 102.0% |
| Wholesale funding to total funding | 22.5 | 19.5 |

Valley's short and long-term cash requirements include contractual obligations under borrowings, deposits, payments related to leases, capital expenditures and other purchase commitments. In the ordinary course of operations, the Bank also enters into various financial obligations, including contractual obligations that may require future cash payments. Management believes the Bank has the ability to generate and obtain adequate amounts of cash to meet its short-term and long-term obligations as they come due by utilizing various cash resources described below.

On the asset side of the balance sheet, the Bank has numerous sources of liquid funds in the form of cash and due from banks, interest bearing deposits with banks (including the FRB of New York) and other sources.

The following table summarizes Valley's sources of liquid assets:

*(in thousands)*

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Cash and due from banks | $511,945 | $284,090 |
| Interest bearing deposits with banks | 527,960 | 607,135 |
| Trading debt securities | 3,996 | 3,973 |
| Held to maturity debt securities (1) | 203,837 | 194,094 |
| Available for sale debt securities (2) | 2,602,260 | 1,296,576 |
| Loans held for sale | 843,201 | 30,640 |
| Total liquid assets | $4,693,199 | $2,416,508 |

(1) Represents securities that are maturing within 90 days or would otherwise qualify as maturities if sold (i.e., 85 percent of original cost basis has been repaid) within the held to maturity debt security portfolio.

(2) Includes approximately $2.1 billion and $840.3 million of various investment securities that were pledged to counterparties to support our earning asset funding strategies at September 30, 2024 and December 31, 2023, respectively.

Total liquid assets represented 8.2 percent and 4.3 percent of interest earning assets at September 30, 2024 and December 31, 2023, respectively.

While not part of our liquidity management strategy, we executed certain asset sales (largely under an initiative to reduce our commercial real estate loan concentration risk and the sale of a small specialized commercial lending business) and a preferred stock offering with the primary goal to bolster our regulatory capital, which also benefited the Bank's liquidity and cash position during the nine months ended September 30, 2024, including the following:

- an additional capital contribution of $95 million to the Bank from Valley in the third quarter 2024 related to net cash proceeds of $144.7 million from Valley's issuance of Series C preferred stock;
- net cash proceeds of $230.7 million related to the sales of commercial real estate and construction loans during the first half of 2024; and
- net cash proceeds of $98.1 million from the sale of our commercial premium finance lending division, mostly consisting of commercial and industrial loans, in the first quarter 2024.

While not isolated from the mix of our other sources of funds, these discrete transactions contributed to funding primarily used to grow our available for sale debt securities portfolio during the nine months ended September 30, 2024, while we maintained a relatively consistent level of cash liquidity on the balance sheet (as noted in the table above). As noted in the "Executive Summary" section and elsewhere in this MD&A, we also expect to complete the sale of approximately $823.1 million of commercial real estate loans held for sale in the fourth quarter 2024 and use a significant portion of net cash proceeds to repay maturing indirect customer deposits.

Other sources of funds on the asset side are derived from scheduled loan payments of principal and interest, as well as prepayments received. At September 30, 2024, estimated cash inflows from total loans are projected to be approximately $14.5 billion over the next 12-month period. As a contingency plan for any liquidity constraints, liquidity could also be derived from the sale of conforming residential mortgages from our loan portfolio or alleviated from the temporary curtailment of lending activities. We anticipate the receipt of approximately $520.0 million in principal payments from securities in the total investment portfolio at September 30, 2024 over the next 12-month period due to normally scheduled principal repayments and expected prepayments of certain securities, primarily residential mortgage-backed securities.

On the liability side of the balance sheet, we utilize multiple sources of funds to meet liquidity needs, including retail and commercial deposits, fully FDIC-insured indirect customer deposits, collateralized municipal deposits, and short-term and long-term borrowings. Our core deposit base, which generally excludes all fully insured indirect customer deposits, as well as retail certificates of deposit over $250 thousand, represents the largest of these sources. Average core deposits totaled approximately $38.5 billion and $37.6 billion for the nine months ended September 30, 2024 and for the year ended December 31, 2023, respectively, representing 67.6 percent and 66.6 percent of average interest earning assets for the respective periods. The level of interest bearing deposits is affected by interest rates offered, which is often influenced by our need for funds, rates prevailing in the capital markets, competition, and the need to manage interest rate risk sensitivity.

In addition to customer deposits, the Bank has access to readily available borrowing sources to supplement its current and projected funding needs. The following table presents short-term borrowings outstanding at September 30, 2024 and December 31, 2023:

*(in thousands)*

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| FHLB advances | $— | $850,000 |
| Securities sold under agreements to repurchase | 58,268 | 67,834 |
| Total short-term borrowings | $58,268 | $917,834 |

The following table summarizes the Bank's estimated unused available non-deposit borrowing capacities at September 30, 2024 and December 31, 2023:

*(in thousands)*

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| FHLB borrowing capacity\* | $8,215,805 | $13,604,000 |
| Unused FRB discount window\* | 11,109,000 | 8,530,000 |
| Unused federal funds lines available from commercial banks | 2,140,000 | 2,140,000 |
| Unencumbered investment securities | 1,040,482 | 1,129,000 |
| Total | $22,505,287 | $25,403,000 |

\* Used and unused FHLB and FRB borrowings are collateralized by certain pledged securities, including but not limited to U.S. government and agency mortgage-backed securities and blanket qualifying first lien on certain real estate and residential mortgage secured loans.

### Corporation Liquidity

Valley’s recurring cash requirements primarily consist of dividends to preferred and common shareholders and interest expense on subordinated notes and junior subordinated debentures issued to capital trusts. As part of our ongoing asset/liability management strategies, Valley could also use cash to repurchase shares of its outstanding common stock under its share repurchase program or redeem its callable junior subordinated debentures and subordinated notes. Valley's cash needs are routinely satisfied by dividends collected from the Bank. Projected cash flows from the Bank are expected to be adequate to pay preferred and common dividends, if declared, and interest expense payable to subordinated note holders and capital trusts, given the current capital levels and current profitable operations of the Bank. In addition to dividends received from the Bank, Valley can satisfy its cash requirements by utilizing its own cash and potential new funds borrowed from outside sources or capital issuances, such as the undistributed net proceeds of our Series C preferred stock in August 2024. Valley also has the right to defer interest payments on the junior subordinated debentures, and therefore distributions on its trust preferred securities for consecutive quarterly periods of up to five years, but not beyond the stated maturity dates, and subject to other conditions.

On November 12, 2024, Valley issued and sold 49,197,860 shares of its common stock in a registered public offering. The net proceeds of the offering were $448.9 million and are expected to be used for general corporate purposes and investments in the Bank as regulatory capital. See the "Executive Summary" and "Capital Adequacy" sections and Note 1 to the consolidated financial statements for more details.

### Investment Securities Portfolio

As of September 30, 2024, we had $73.1 million, $2.6 billion, and $3.6 billion in equity, AFS debt and HTM debt securities, respectively. We also had $4.0 million of trading debt securities, consisting of U.S. Treasury securities, at September 30, 2024. The AFS and HTM debt securities portfolios, which comprise the majority of the securities we own, include: U.S. Treasury securities, U.S. government agency securities, tax-exempt and taxable issuances of states and political subdivisions, residential mortgage-backed securities, single-issuer trust preferred securities principally issued by bank holding companies and high quality corporate bonds. Among other securities, our AFS debt securities include securities such as bank issued and other corporate bonds, as well as municipal special revenue bonds, which may pose a higher risk of future impairment charges to us as a result of the uncertain economic environment and its potential negative effect on the future performance of the security issuers. The equity securities consist of two publicly traded mutual funds, CRA investments and several other equity investments that we have made in companies that develop new financial technologies and in partnerships that invest in such companies. Our CRA and other equity investments are a mix of both publicly traded entities and privately held entities.

The primary purpose of the HTM and AFS debt securities portfolios is to provide a source of earnings and liquidity, as well as serve as a tool for managing interest rate risk. The decision to purchase or sell securities is based upon the current assessment of long and short-term economic and financial conditions, including the interest rate environment and other components of statement of financial condition. See additional information under “Interest Rate Sensitivity,” “Liquidity and Cash Requirements” and “Capital Adequacy” sections elsewhere in this MD&A.

We continually evaluate our investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, and the level of interest rate risk to which we are exposed. These evaluations may cause us to change the level of funds we deploy into investment securities, change the composition of our investment securities portfolio, and change the proportion of investments primarily made into the AFS and HTM debt securities portfolios.

### Allowance for Credit Losses and Impairment Analysis

**Available for sale debt securities.** AFS debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. In assessing whether a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes.

We have evaluated all AFS debt securities that are in an unrealized loss position as of September 30, 2024 and December 31, 2023 and determined that the declines in fair value were mainly attributable to changes in market volatility, due to factors such as interest rates and spread factors, but not attributable to credit quality or other factors. During the first quarter 2023, Valley recognized a credit related impairment of one corporate bond issued by Signature Bank resulting in both a provision for credit losses and full charge-off of the security totaling $5.0 million based on a comparison of the present value of expected cash flows to the amortized cost. The bond was subsequently sold and the sale resulted in a $869 thousand gain during the fourth quarter 2023. There was no other impairment recognized within the AFS debt securities portfolio during the three and nine months ended September 30, 2024 and September 30, 2023.

Valley does not intend to sell any of its AFS debt securities in an unrealized loss position prior to recovery of our amortized cost basis, and it is more likely than not that Valley will not be required to sell any of its securities prior to recovery of our amortized cost basis. None of the AFS debt securities were past due as of September 30, 2024 and there was no allowance for credit losses for AFS debt securities at September 30, 2024 and December 31, 2023.

**Held to maturity debt securities.** Valley estimates the expected credit losses on HTM debt securities that have loss expectations using a discounted cash flow model developed by a third party. Valley has a zero-loss expectation for certain securities within the HTM portfolio, including U.S. Treasury securities, U.S. agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and collateralized municipal bonds. To measure the expected credit losses on HTM debt securities that have loss expectations, we utilize a third party discounted cash flow model. The assumptions used in the model for pools of securities with common risk characteristics include the historical lifetime probability of default and severity of loss in the event of default, with the model incorporating several economic cycles of loss history data to calculate expected credit losses given default at the individual security level. HTM debt securities were carried net of an allowance for credit losses totaling approximately $1.1 million and $1.2 million at September 30, 2024 and December 31, 2023, respectively.

**Investment grades.** The investment grades in the table below reflect the most current independent analysis performed by third parties of each security as of the date presented and not necessarily the investment grades at the date of our purchase of the securities. For many securities, the rating agencies may not have performed an independent analysis of the tranches owned by us, but rather an analysis of the entire investment pool. For this and other reasons, we believe the assigned investment grades may not accurately reflect the actual credit quality of each security and should not be viewed in isolation as a measure of the quality of our investment portfolio.

The following table presents the available for sale and held to maturity debt investment securities portfolios by investment grades at September 30, 2024:

*(in thousands)*

| Available for sale investment grades: | September 30, 2024 Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value |
| --- | ---: | ---: | ---: | ---: |
| AAA/AA/A Rated | $2,489,124 | $17,317 | $(116,186) | $2,390,255 |
| BBB Rated | 83,861 | — | (2,302) | 81,559 |
| Not rated | 143,135 | 54 | (12,743) | 130,446 |
| Total | $2,716,120 | $17,371 | $(131,231) | $2,602,260 |
| **Held to maturity investment grades:** |  |  |  |  |
| AAA/AA/A Rated | $3,404,208 | $7,272 | $(365,197) | $3,046,283 |
| BBB Rated | 6,000 | — | (318) | 5,682 |
| Non-investment grade | 5,190 | — | (464) | 4,726 |
| Not rated | 159,638 | 35 | (11,868) | 147,805 |
| Total | $3,575,036 | $7,307 | $(377,847) | $3,204,496 |
| Allowance for credit losses | 1,076 | — | — | 1,076 |
| Total, net of allowance for credit losses | $3,573,960 | $7,307 | $(377,847) | $3,203,420 |

The unrealized losses in the AAA/AA/A rated categories of both the AFS and HTM debt securities portfolios (in the above table) were largely related to residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac and continue to be driven by the higher market interest rate environment. The investment securities AFS and HTM portfolios included investments with carrying values of $130.4 million and $159.6 million, respectively, at September 30, 2024 not rated by the rating agencies with aggregate unrealized losses of $12.7 million and $11.9 million, respectively. The unrealized losses within non-rated AFS debt securities mostly related to several large corporate bonds negatively impacted by rising interest rates, and not changes in underlying credit. The unrealized losses within non-rated HTM debt securities mostly related to four single-issuer bank trust preferred issuances with a combined amortized cost of $36.1 million with $7.3 million gross unrealized losses and several corporate debt securities that were negatively impacted by rising interest rates, and not changes in their underlying credit.

See Note 6 to the consolidated financial statements for additional information regarding our investment securities portfolio.

### Loan Portfolio

The following table reflects the composition of the loan portfolio as of the dates presented:

*($ in thousands)*

| Loans | September 30, 2024 | June 30, 2024 | December 31, 2023 |
| --- | ---: | ---: | ---: |
| Commercial and industrial | $9,799,287 | $9,479,147 | $9,230,543 |
| Commercial real estate: |  |  |  |
| Non-owner occupied (1) | 12,647,649 | 13,710,015 | 15,078,464 |
| Multifamily (2) | 8,612,936 | 8,976,264 | 8,860,219 |
| Owner occupied (1) | 5,654,147 | 5,536,844 | 4,304,556 |
| Total | 26,914,732 | 28,223,123 | 28,243,239 |
| Construction | 3,487,464 | 3,545,723 | 3,726,808 |
| Total commercial real estate | 30,402,196 | 31,768,846 | 31,970,047 |
| Residential mortgage | 5,684,079 | 5,627,113 | 5,569,010 |
| Consumer: |  |  |  |
| Home equity | 581,181 | 566,467 | 559,152 |
| Automobile | 1,823,738 | 1,762,852 | 1,620,389 |
| Other consumer | 1,064,838 | 1,107,277 | 1,261,154 |
| Total consumer loans | 3,469,757 | 3,436,596 | 3,440,695 |
| Total loans (3) | $49,355,319 | $50,311,702 | $50,210,295 |
| As a percentage of total loans: |  |  |  |
| Commercial and industrial | 19.9% | 18.8% | 18.4% |
| Non-owner occupied | 25.6 | 27.3 | 30.0 |
| Multifamily | 17.5 | 17.9 | 17.7 |
| Owner occupied | 11.5 | 11.0 | 8.6 |
| Construction | 7.1 | 7.0 | 7.4 |
| Total Commercial real estate | 61.6 | 63.2 | 63.7 |
| Residential mortgage | 11.5 | 11.2 | 11.1 |
| Consumer loans | 7.0 | 6.8 | 6.8 |
| Total | 100.0% | 100.0% | 100.0% |

(1) Reflects the reclassification of approximately $1.1 billion of non-owner occupied loans to owner occupied loans at June 30, 2024 based upon Valley's re-assessment of such loans under the applicable bank regulatory guidance during the second quarter 2024.

(2) Includes loans collateralized by properties that are greater than 50 percent rent regulated totaling approximately $566 million, $528 million and $545 million at September 30, 2024, June 30, 2024 and December 31, 2023, respectively.

(3) Includes net unearned discount and deferred loan fees of $48.1 million, $61.6 million and $85.4 million at September 30, 2024, June 30, 2024 and December 31, 2023, respectively.

Total loans decreased $956.4 million, or 7.6 percent on an annualized basis, to $49.4 billion at September 30, 2024 from June 30, 2024 mostly due to the transfer of performing commercial real estate loans totaling $823.1 million, net of unearned fees, to loans held for sale at September 30, 2024 and normal repayment activity mainly within commercial real estate non-owner occupied and multi-family loans, as we continue to actively reduce these loan categories. Loans held for sale are presented separately from total loans on the consolidated statements of financial condition and totaled $843.2 million and $19.9 million at September 30, 2024 and June 30, 2024, respectively.

Commercial and industrial loans increased $320.1 million to $9.8 billion at September 30, 2024 from June 30, 2024 largely due to our continued multi-year strategic initiative to expand new loan production within this category. The solid organic growth during the third quarter 2024 remained broad-based mainly from relationship-driven middle market businesses in our primary markets.

Commercial real estate loans (excluding construction loans) decreased $1.3 billion to $26.9 billion at September 30, 2024 from June 30, 2024 primarily due to our strategic balance sheet goals to reduce our CRE loan concentration ratio to approximately 400 percent and 375 percent by December 31, 2024 and 2025, respectively. As part of these efforts, we transferred $823.1 million of commercial real estate loans to loans held for sale at September 30, 2024 and remained selective with new loan originations, which were outpaced by runoff from normal repayment activity within the non-owner occupied and multifamily loan categories during the third quarter 2024. The commercial real estate loan portfolio had a combined weighted average loan to value ratio of 58 percent and debt service coverage ratio of 1.62 at September 30, 2024, which both remained relatively unchanged from June 30, 2024. Commercial real estate collateralized by office buildings totaled approximately $3.2 billion at September 30, 2024 as compared to $3.3 billion at June 30, 2024. Our loans collateralized by office buildings had a combined weighted average loan to value rate of 58 percent and debt service coverage ratio of 1.68 at September 30, 2024 as compared to 55 percent and 1.63, respectively, at June 30, 2024.

Construction loans decreased $58.3 million to $3.5 billion at September 30, 2024 from June 30, 2024 partly due to the migration of completed projects to both internal and external permanent financing, a low level of new advances on both existing and select new projects.

Residential mortgage loans totaled $5.7 billion at September 30, 2024 and increased $57.0 million from June 30, 2024. New and refinanced residential mortgage loan originations totaled $179.3 million for the third quarter 2024 as compared to $135.4 million and $150.2 million for the second quarter 2024 and third quarter 2023, respectively. We retained approximately 67.0 percent and 61.9 percent of the total residential mortgage originations in our held for investment loan portfolio during the third quarter 2024 and the second quarter 2024, respectively. During the three and nine months ended 2024, Valley also purchased $15.2 million and $33.5 million, respectively, of 1-4 family residential mortgage loans from an unrelated third party lender for qualifying CRA purposes. The volume of residential mortgage loan applications remained relatively low in the early stages of the fourth quarter 2024 largely due to the stubbornly high level of mortgage interest rates, as well as normal seasonal declines in new home purchase activity which may continue to challenge our ability to grow this loan category.

Home equity loans increased $14.7 million to $581.2 million at September 30, 2024 compared to June 30, 2024. Despite the modest increase in loans, growth from new home equity loan originations and customer utilization of lines of credit remained challenged by high market interest rates.

Automobile loans increased by $60.9 million, or 13.8 percent on an annualized basis, to $1.8 billion at September 30, 2024 as compared to June 30, 2024 mainly due to continued consumer demand generated by our indirect auto dealer network and low prepayment activity within the portfolio.

Other consumer loans decreased $42.4 million to $1.1 billion at September 30, 2024 as compared to June 30, 2024, primarily due to the negative impact of high market interest rates on the demand and usage of collateralized personal lines of credit.

A significant part of our lending is in northern and central New Jersey, New York City, Long Island and Florida. To mitigate our geographic risks, we make efforts to maintain a diversified portfolio as to type of borrower and loan to guard against a potential downward turn in any one economic sector.

Looking forward to fourth quarter 2024 and beyond, we continue to execute on our strategic initiative to enhance commercial and industrial loan production and de-emphasize non-owner occupied and multifamily originations in efforts to reduce our commercial real estate concentration level. Our current pipeline for commercial and industrial loan originations has remained strong in the fourth quarter and continues to be broad-based across our geographies and business lines. For the fourth quarter of 2024, we currently expect low single digits annualized loan growth as compared to total loans of $49.4 billion at September 30, 2024. See additional information regarding our initiative to reduce our commercial real estate loan concentration in the "Executive Summary" section.

### Non-performing Assets

NPAs include non-accrual loans, OREO, and other repossessed assets (which primarily consist of automobiles and taxi medallions) at September 30, 2024. Loans are generally placed on non-accrual status when they become past due in excess of 90 days as to payment of principal or interest. Exceptions to the non-accrual policy may be permitted if the loan is sufficiently collateralized and in the process of collection. OREO is acquired through foreclosure on loans secured by land or real estate. OREO and other repossessed assets are reported at lower of cost or fair value, less estimated cost to sell.

Our NPAs decreased $7.8 million to $305.1 million at September 30, 2024 as compared to June 30, 2024 mainly due to lower non-accrual construction and commercial real estate loan balances, partially offset by an increase in non-accrual commercial and industrial loans. NPAs as a percentage of total loans and NPAs totaled 0.61 percent and 0.62 percent at September 30, 2024 and June 30, 2024, respectively (as shown in the table below). We believe our total NPAs have remained relatively low as a percentage of the total loan portfolio and NPAs, which is reflective of our consistent approach to the loan underwriting criteria for both Valley originated loans and loans purchased from third parties. For additional details, see the “Credit quality indicators” section in Note 7 to the consolidated financial statements.

Our lending strategy is based on underwriting standards designed to maintain high credit quality, and we remain optimistic regarding the overall future performance of our loan portfolio. During the nine months ended September 30, 2024, most of our credit trends have remained generally stable, and the majority of our borrowers continued to demonstrate resilience despite the impact of higher borrowing costs, inflation, labor costs and other factors. We continue to proactively monitor our commercial loans for potential negative trends/borrower weakness due to the current operating environment and internally risk rate them accordingly. However, management cannot provide assurance that the non-performing assets will not increase from the levels reported at September 30, 2024 due to the aforementioned or other factors potentially impacting our lending customers.

The following table sets forth by loan category accruing past due and non-performing assets at the dates indicated in conjunction with our asset quality ratios:

*($ in thousands)*

| Accruing past due loans: 30 to 59 days past due: | September 30, 2024 | June 30, 2024 | December 31, 2023 |
| --- | ---: | ---: | ---: |
| Commercial and industrial | $4,537 | $5,086 | $9,307 |
| Commercial real estate | 76,370 | 1,879 | 3,008 |
| Residential mortgage | 19,549 | 17,389 | 26,345 |
| Total consumer | 14,672 | 21,639 | 20,554 |
| Total 30 to 59 days past due | 115,128 | 45,993 | 59,214 |
| 60 to 89 days past due: |  |  |  |
| Commercial and industrial | 1,238 | 1,621 | 5,095 |
| Commercial real estate | 43,926 | — | 1,257 |
| Residential mortgage | 6,892 | 6,632 | 8,200 |
| Total consumer | 2,732 | 3,671 | 4,715 |
| Total 60 to 89 days past due | 54,788 | 11,924 | 19,267 |
| 90 or more days past due: |  |  |  |
| Commercial and industrial | 1,786 | 2,739 | 5,579 |
| Commercial real estate | — | 4,242 | — |
| Construction | — | 3,990 | 3,990 |
| Residential mortgage | 1,931 | 2,609 | 2,488 |
| Total consumer | 1,063 | 898 | 1,088 |
| Total 90 or more days past due | 4,780 | 14,478 | 13,145 |
| Total accruing past due loans | $174,696 | $72,395 | $91,626 |
| **Non-accrual loans:** |  |  |  |
| Commercial and industrial | $120,575 | $102,942 | $99,912 |
| Commercial real estate | 113,752 | 123,011 | 99,739 |
| Construction | 24,657 | 45,380 | 60,851 |
| Residential mortgage | 33,075 | 28,322 | 26,986 |
| Total consumer | 4,260 | 3,624 | 4,383 |
| Total non-accrual loans | 296,319 | 303,279 | 291,871 |
| Other real estate owned (OREO) | 7,172 | 8,059 | 71 |
| Other repossessed assets | 1,611 | 1,607 | 1,444 |
| Total non-performing assets (NPAs) | $305,102 | $312,945 | $293,386 |
| Total non-accrual loans as a % of loans | 0.60% | 0.60% | 0.58% |
| Total NPAs as a % of loans and NPAs | 0.61 | 0.62 | 0.58 |
| Total accruing past due and non-accrual loans as a % of loans | 0.95 | 0.75 | 0.76 |
| Allowance for loan losses as a % of non-accrual loans | 185.05 | 171.23 | 152.83 |

Loans 30 to 59 days past due increased $69.1 million to $115.1 million at September 30, 2024 as compared to June 30, 2024 mainly due to a $74.5 million increase in commercial real estate loans, partially offset by a $7.0 million decline in consumer loan delinquencies. The increase in commercial real estate loans 30 to 59 days past due was mostly due to one new delinquent loan totaling $40.9 million, which is expected to be fully repaid, subject to the borrower's pending sale of certain collateral, as well as a few smaller new loan delinquencies.

Loans 60 to 89 days past due increased $42.9 million to $54.8 million at September 30, 2024 as compared to June 30, 2024 mostly due to one well-secured commercial real estate loan totaling $43.9 million currently in the process of loan modification.

Loans 90 days or more past due and still accruing interest decreased $9.7 million to $4.8 million at September 30, 2024 as compared to June 30, 2024 largely due to one $4.0 million construction loan that was fully repaid and one $4.2 million commercial real estate loan that migrated from this past due category to non-accrual loans during the third quarter 2024. All loans 90 days or more past due and still accruing interest are well-secured and in the process of collection.

Non-accrual loans decreased $7.0 million to $296.3 million at September 30, 2024 as compared to $303.3 million at June 30, 2024. Non-accrual construction and commercial real estate loans decreased $20.7 million and $9.3 million, respectively, to $24.7 million and $113.8 million, respectively, at September 30, 2024 as compared to June 30, 2024 mainly due to loan payoffs during the third quarter 2024. The decreases in these loan categories were partially offset by two new non-accrual commercial and industrial loans totaling $19.0 million, as well as moderate increases in non-accrual residential mortgage and consumer loans at September 30, 2024.

Non-performing taxi medallion loans included in non-accrual commercial and industrial loans totaled $52.2 million at September 30, 2024 and had related reserves of $27.8 million, or 53.3 percent of such loans, within the allowance for loan losses as compared to $52.6 million of loans with related reserves of $28.0 million at June 30, 2024. Potential further declines in the market valuation of taxi medallions and the current operating environment mainly within New York City may further negatively impact the performance of this portfolio.

OREO decreased $887 thousand at September 30, 2024 from June 30, 2024 mostly due to the sale of one commercial property, which resulted in the recognition of a $311 thousand loss for the third quarter 2024. Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $4.2 million and $1.6 million at September 30, 2024 and December 31, 2023, respectively.

Although the timing of collection is uncertain, management believes that the majority of the non-accrual loans at September 30, 2024, are well secured and largely collectable, based in part on our quarterly review of collateral dependent loans and the valuation of the underlying collateral, if applicable. Any estimated shortfall in the net realizable value for collateral dependent loans is charged-off when a loan is 90 or 120 days past due or sooner if it is probable that a loan may not be fully collectable. For performing non-accrual loans, the collateral valuation shortfall results in an allocation of specific reserves within our allowance for credit losses for loans.

### Allowance for Credit Losses for Loans

The ACL for loans includes the allowance for loan losses and the reserve for unfunded credit commitments. Under CECL, our methodology to establish the allowance for loan losses has two basic components: (i) a collective reserve component for estimated expected credit losses for pools of loans that share common risk characteristics and (ii) an individual reserve component for loans that do not share risk characteristics, consisting of collateral dependent loans. Valley also maintains a separate allowance for unfunded credit commitments mainly consisting of undisbursed non-cancellable lines of credit, new loan commitments and commercial standby letters of credit.

Valley estimates the collective ACL using a current expected credit losses methodology which is based on relevant information about historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the loan balances. In estimating the component of the allowance on a collective basis, we use a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by generating probability of default and loss given default metrics. The metrics are based on the migration of loans within the commercial and industrial loan categories from performing to loss by credit quality rating or delinquency categories using historical life-of-loan analysis periods for each loan portfolio pool and the severity of loss based on the aggregate net lifetime losses. The model's expected losses based on loss history are adjusted for qualitative factors. Among other things, these adjustments include and account for differences in: (i) the impact of the reasonable and supportable economic forecast, relative probability weightings and reversion period, (ii) other asset specific risks to the extent that they do not exist in the historical loss information, and (iii) net expected recoveries of charged-off loan balances. These adjustments are based on qualitative factors not reflected in the quantitative model but are likely to impact the measurement of estimated credit losses. The expected lifetime loss rate is the life of loan loss percentage from the transition matrix model plus the impact of the adjustments for qualitative factors. The expected credit losses are the product of multiplying the model’s expected lifetime loss rate by the exposure at default at period end on an undiscounted basis.

Valley utilizes a two-year reasonable and supportable forecast period followed by a one-year period over which estimated losses revert to historical loss experience for the remaining life of the loan on a straight-line basis. The forecasts consist of a multi-scenario economic forecast model to estimate future credit losses and are governed by a cross-functional committee. The committee meets each quarter to determine which economic scenarios developed by Moody's will be incorporated into the model, as well as the relative probability weightings of the selected scenarios, based upon all readily available information. The model projects economic variables under each scenario based on detailed statistical analyses. We have identified and selected key variables that most closely correlated to our historical credit performance, which include GDP, unemployment and the Case-Shiller Home Price Index.

At September 30, 2024, Valley maintained the majority of its probability weighting used in the economic forecast to the Moody’s Baseline scenario with less emphasis on the S-3 downside and S-1 upside scenarios. The probability weightings were unchanged from June 30, 2024 and December 31, 2023. At September 30, 2024, all three scenarios reflected a slightly more optimistic outlook as compared to June 30, 2024 in terms of most economic metrics.

At September 30, 2024, the Moody's Baseline forecast included the following specific assumptions:

- GDP expansion of approximately 2.0 percent in the fourth quarter 2024;
- Unemployment of 4.1 percent in the third quarter 2024 and approximately 4.0 to 4.1 percent over the remainder of the forecast period ending in the third quarter 2026;
- Inflation continues to slow, but at a slower than expected rate. The inflation rate was at 2.9 percent in July 2024 and is expected to continue decreasing to 2.7 percent by the fourth quarter 2024;
- The Federal Reserve lowered the federal funds rate by 50 pts to a range of 4.75 - 5.00 percent with potential rate cut of an additional 0.50 percent during the fourth quarter of 2024.

See more details regarding our allowance for credit losses for loans in Note 7 to the consolidated financial statements.

The table below summarizes the relationship among loans, loans charged-off, loan recoveries, the provision for credit losses and the allowance for credit losses for loans for the periods indicated:

*($ in thousands)*

| Allowance for credit losses for loans | Three Months Ended September 30, 2024 | June 30, 2024 | September 30, 2023 | Nine Months Ended September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Beginning balance | $532,541 | $487,269 | $458,676 | $465,550 | $483,255 |
| Impact of the adoption of ASU No. 2022-02 (1) | — | — | — | — | (1,368) |
| Beginning balance, adjusted | 532,541 | 487,269 | 458,676 | 465,550 | 481,887 |
| Loans charged-off: |  |  |  |  |  |
| Commercial and industrial | (7,501) | (14,721) | (7,487) | (36,515) | (37,399) |
| Commercial real estate | (33,292) | (22,144) | (255) | (56,640) | (2,320) |
| Construction | (4,831) | (212) | — | (12,637) | (9,906) |
| Residential mortgage | — | — | (20) | — | (169) |
| Total consumer | (2,597) | (1,262) | (1,156) | (5,668) | (3,024) |
| Total loans charged-off | (48,221) | (38,339) | (8,918) | (111,460) | (52,818) |
| Charged-off loans recovered: |  |  |  |  |  |
| Commercial and industrial | 3,162 | 742 | 3,043 | 4,586 | 6,615 |
| Commercial real estate | 66 | 150 | 5 | 457 | 33 |
| Construction | 1,535 | — | — | 1,535 | — |
| Residential mortgage | 29 | 5 | 30 | 59 | 186 |
| Total consumer | 521 | 603 | 362 | 1,521 | 1,513 |
| Total loans recovered | 5,313 | 1,500 | 3,440 | 8,158 | 8,347 |
| Total net loan charge-offs | (42,908) | (36,839) | (5,478) | (103,302) | (44,471) |
| Provision charged for credit losses | 75,038 | 82,111 | 9,147 | 202,423 | 24,929 |
| Ending balance | $564,671 | $532,541 | $462,345 | $564,671 | $462,345 |
| **Components of allowance for credit losses for loans:** |  |  |  |  |  |
| Allowance for loan losses | $548,327 | $519,310 | $442,175 | $548,327 | $442,175 |
| Allowance for unfunded credit commitments | 16,344 | 13,231 | 20,170 | 16,344 | 20,170 |
| Allowance for credit losses for loans | $564,671 | $532,541 | $462,345 | $564,671 | $462,345 |
| **Components of provision for credit losses for loans:** |  |  |  |  |  |
| Provision for credit losses for loans | $71,925 | $86,901 | $11,221 | $205,549 | $29,359 |
| Provision (credit) for unfunded credit commitments | 3,113 | (4,790) | (2,074) | (3,126) | (4,430) |
| Total provision for credit losses for loans | $75,038 | $82,111 | $9,147 | $202,423 | $24,929 |
| Allowance for credit losses for loans as a % of total loans | 1.14% | 1.06% | 0.92% | 1.14% | 0.92% |

(1) Represents the opening adjustment for the adoption of ASU No. 2022-02 effective January 1, 2023.

The following table presents the relationship among net loans charged-off and recoveries, and average loan balances outstanding for the periods indicated:

*($ in thousands)*

| Net loan (charge-offs) recoveries | Three Months Ended September 30, 2024 | June 30, 2024 | September 30, 2023 | Nine Months Ended September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Commercial and industrial | $(4,339) | $(13,979) | $(4,444) | $(31,929) | $(30,784) |
| Commercial real estate | (33,226) | (21,994) | (250) | (56,183) | (2,287) |
| Construction | (3,296) | (212) | — | (11,102) | (9,906) |
| Residential mortgage | 29 | 5 | 10 | 59 | 17 |
| Total consumer | (2,076) | (659) | (794) | (4,147) | (1,511) |
| Total | $(42,908) | $(36,839) | $(5,478) | $(103,302) | $(44,471) |
| Average loans outstanding |  |  |  |  |  |
| Commercial and industrial | $9,470,003 | $9,173,875 | $9,072,476 | $9,293,840 | $8,989,877 |
| Commercial real estate | 28,018,815 | 28,237,513 | 28,053,134 | 28,171,450 | 27,476,718 |
| Construction | 3,570,743 | 3,526,421 | 3,952,692 | 3,596,741 | 3,781,566 |
| Residential mortgage | 5,650,543 | 5,631,214 | 5,548,257 | 5,627,382 | 5,527,145 |
| Total consumer | 3,416,859 | 3,451,878 | 3,392,855 | 3,442,055 | 3,344,847 |
| Total | $50,126,963 | $50,020,901 | $50,019,414 | $50,131,468 | $49,120,153 |
| Annualized net loan charge-offs to average loans outstanding |  |  |  |  |  |
| Commercial and industrial | 0.18% | 0.61% | 0.20% | 0.46% | 0.46% |
| Commercial real estate | 0.47 | 0.31 | 0.00 | 0.27 | 0.01 |
| Construction | 0.37 | 0.02 | 0.00 | 0.41 | 0.35 |
| Residential mortgage | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Total consumer | 0.24 | 0.08 | 0.09 | 0.16 | 0.06 |
| Total annualized net loan charge-offs to total average loans outstanding | 0.34 | 0.29 | 0.04 | 0.27 | 0.12 |

Net loan charge-offs totaled $42.9 million for the third quarter 2024 as compared to $36.8 million and $5.5 million for the second quarter 2024 and third quarter 2023, respectively. Gross loan charge-offs for the third quarter 2024 included partial charge-offs totaling $30.1 million related to two non-performing commercial real estate loan relationships that had combined specific reserves of $25.9 million within the allowance for loan losses at June 30, 2024, and partial charge-offs of two construction loans totaling $4.8 million. One of the two partially charged-off construction loans had specific reserves of $1.7 million at June 30, 2024.

While the amount of net loan charge-offs (as presented in the above table) has increased in the third quarter 2024, the relatively low level of individual loan charge-offs has continued to trend within management's expectations for the credit quality of the loan portfolio at September 30, 2024.

The following table summarizes the allocation of the allowance for credit losses for loans to loan portfolio categories and the allocations as a percentage of each loan category:

*($ in thousands)*

| Loan Category: | September 30, 2024 Allowance Allocation | Allocation as a % of Loan Category | June 30, 2024 Allowance Allocation | Allocation as a % of Loan Category | September 30, 2023 Allowance Allocation | Allocation as a % of Loan Category |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial and industrial loans | $166,365 | 1.70% | $149,243 | 1.57% | $133,988 | 1.44% |
| Commercial real estate loans: |  |  |  |  |  |  |
| Commercial real estate | 249,608 | 0.93 | 246,316 | 0.87 | 191,562 | 0.68 |
| Construction | 59,420 | 1.70 | 54,777 | 1.54 | 53,485 | 1.40 |
| Total commercial real estate loans | 309,028 | 1.02 | 301,093 | 0.95 | 245,047 | 0.77 |
| Residential mortgage loans | 51,545 | 0.91 | 47,697 | 0.85 | 44,621 | 0.80 |
| Consumer loans: |  |  |  |  |  |  |
| Home equity | 3,303 | 0.57 | 3,077 | 0.54 | 3,689 | 0.67 |
| Auto and other consumer | 18,086 | 0.63 | 18,200 | 0.63 | 14,830 | 0.52 |
| Total consumer loans | 21,389 | 0.62 | 21,277 | 0.62 | 18,519 | 0.55 |
| Allowance for loan losses | 548,327 | 1.11 | 519,310 | 1.03 | 442,175 | 0.88 |
| Allowance for unfunded credit commitments | 16,344 |  | 13,231 |  | 20,170 |  |
| Total allowance for credit losses for loans | $564,671 |  | $532,541 |  | $462,345 |  |
| Allowance for credit losses for loans as a % of total loans |  | 1.14% |  | 1.06% |  | 0.92% |

The allowance for credit losses for loans, comprised of our allowance for loan losses and unfunded credit commitments, as a percentage of total loans was 1.14 percent at September 30, 2024, 1.06 percent at June 30, 2024, and 0.92 percent at September 30, 2023. For the third quarter 2024, the provision for credit losses for loans totaled $75.0 million as compared to $82.1 million and $9.1 million for the second quarter 2024 and third quarter 2023, respectively. The provision for credit losses remained somewhat elevated for the third quarter 2024 largely due to higher quantitative reserves allocated to commercial real estate loans, commercial and industrial loan growth and an $8.0 million qualitative reserve related to the estimated impact of Hurricane Helene.

The allowance for unfunded credit commitments increased to $16.3 million at September 30, 2024 from $13.2 million at June 30, 2024 mainly due to increases in both non-cancellable construction commitments and commercial and industrial standby letters of credit.

As previously noted, we are currently evaluating the impact of Hurricane Milton, and we also continue to evaluate any further impact of Hurricane Helene, on our loan portfolio. While not anticipated based on information currently available, Hurricane Milton and/or greater than expected losses from Hurricane Helene could result in a significant increase to the current hurricane related reserves within the allowance, loan charge-offs and our provision for the fourth quarter 2024. Our provision for credit losses could also remain elevated during the fourth quarter 2024 due to several other factors, including, but not limited to, the impact of future changes in (1) our economic outlook, (2) the overall performance of our loan portfolio, (3) potential downgrades in the internal risk classification of commercial loans and (4) the composition of our loan portfolio, including targeted growth in loan categories not secured by real estate such as commercial and industrial loans.

### Capital Adequacy

A significant measure of the strength of a financial institution is its shareholders’ equity. At both September 30, 2024 and December 31, 2023, shareholders' equity totaled approximately $7.0 billion which represented 11.2 percent and 11.0 percent of total assets, respectively.

During the nine months ended September 30, 2024, total shareholders’ equity increased by approximately $271.0 million primarily due to the following:

- net income of $264.6 million,
- net proceeds from the issuance of our Series C preferred stock of $144.7 million,
- a $14.6 million increase attributable to the effect of our stock incentive plan,
- other comprehensive income of $31.7 million, partially offset by
- cash dividends declared on common and preferred stock totaling a combined $184.6 million.

Valley and the Bank are subject to the regulatory capital requirements administered by the FRB and the OCC. Quantitative measures established by regulation to ensure capital adequacy require Valley and the Bank to maintain minimum amounts and ratios of common equity Tier 1 capital, total and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets, as defined in the regulations.

Valley is required to maintain a common equity Tier 1 capital to risk-weighted assets ratio of 4.5 percent, Tier 1 capital to risk-weighted assets ratio of 6.0 percent, ratio of total capital to risk-weighted assets of 8.0 percent, and a minimum leverage ratio of 4.0 percent, plus a 2.5 percent capital conservation buffer added to the minimum requirements for capital adequacy purposes. As of September 30, 2024 and December 31, 2023, Valley and Valley National Bank exceeded all capital adequacy requirements (see table below).

For regulatory capital purposes, in accordance with the Federal Reserve Board’s final rule as of August 26, 2020, we deferred 100 percent of the CECL Day 1 impact to shareholders' equity plus 25 percent of the reserve build (i.e., provision for credit losses less net charge-offs) for a two-year period ending January 1, 2022. On January 1, 2022, the deferral amount totaling $47.3 million after-tax started to be phased-in by 25 percent and will increase 25 percent per year until fully phased-in on January 1, 2025. As of September 30, 2024, approximately $35.5 million of the $47.3 million deferral amount was recognized as a reduction to regulatory capital and, as a result, decreased our risk-based capital ratios by approximately 9 basis points.

The following table presents Valley’s and Valley National Bank’s actual capital positions and ratios under Basel III risk-based capital guidelines at September 30, 2024 and December 31, 2023:

*($ in thousands)*

| As of September 30, 2024 Total Risk-based Capital | Actual Amount | Ratio | Minimum Capital Requirements Amount | Ratio | To Be Well Capitalized Under Prompt Corrective Action Provision Amount | Ratio |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Valley | $6,194,835 | 12.56% | $5,180,157 | 10.50% | N/A | N/A |
| Valley National Bank | 6,076,899 | 12.32 | 5,179,788 | 10.50 | $4,933,131 | 10.00% |
| Common Equity Tier 1 Capital |  |  |  |  |  |  |
| Valley | 4,723,219 | 9.57 | 3,453,438 | 7.00 | N/A | N/A |
| Valley National Bank | 5,583,510 | 11.32 | 3,453,192 | 7.00 | 3,206,535 | 6.50 |
| Tier 1 Risk-based Capital |  |  |  |  |  |  |
| Valley | 5,077,405 | 10.29 | 4,193,460 | 8.50 | N/A | N/A |
| Valley National Bank | 5,583,510 | 11.32 | 4,193,162 | 8.50 | 3,946,505 | 8.00 |
| Tier 1 Leverage Capital |  |  |  |  |  |  |
| Valley | 5,077,405 | 8.40 | 2,416,579 | 4.00 | N/A | N/A |
| Valley National Bank | 5,583,510 | 9.24 | 2,416,027 | 4.00 | 3,020,033 | 5.00 |
| **As of December 31, 2023** |  |  |  |  |  |  |
| Total Risk-based Capital |  |  |  |  |  |  |
| Valley | $5,855,633 | 11.76% | $5,228,447 | 10.50% | N/A | N/A |
| Valley National Bank | 5,794,213 | 11.64 | 5,228,403 | 10.50 | $4,979,431 | 10.00% |
| Common Equity Tier 1 Capital |  |  |  |  |  |  |
| Valley | 4,623,473 | 9.29 | 3,485,631 | 7.00 | N/A | N/A |
| Valley National Bank | 5,420,894 | 10.89 | 3,485,602 | 7.00 | 3,236,630 | 6.50 |
| Tier 1 Risk-based Capital |  |  |  |  |  |  |
| Valley | 4,838,314 | 9.72 | 4,232,552 | 8.50 | N/A | N/A |
| Valley National Bank | 5,420,894 | 10.89 | 4,232,517 | 8.50 | 3,983,545 | 8.00 |
| Tier 1 Leverage Capital |  |  |  |  |  |  |
| Valley | 4,838,314 | 8.16 | 2,372,129 | 4.00 | N/A | N/A |
| Valley National Bank | 5,420,894 | 9.14 | 2,372,322 | 4.00 | 2,965,403 | 5.00 |

The increases in the total risk-based capital, common equity Tier 1 capital, and Tier 1 capital ratios at September 30, 2024 as compared to December 31, 2023 were largely due to the credit risk transfer transaction related to a portion of the automobile loan portfolio executed in June 2024 and the net proceeds from Valley's issuance of Series C preferred stock in August 2024. See Notes 1 and 12 to the consolidated financial statements for more details on the Series C preferred stock issuance and credit risk transfer transaction, respectively.

On November 12, 2024, Valley issued and sold 42,780,748 shares of its common stock in a registered public offering. The net proceeds of the offering were $448.9 million and are expected to be used for general corporate purposes and investments in the Bank as regulatory capital. The following table sets forth Valley’s (1) actual capital positions and ratios under Basel III risk-based capital guidelines at September 30, 2024 and (2) on an as adjusted basis to give effect to the November 2024 common stock issuance, net of issuance costs.

*($ in thousands)*

| As of September 30, 2024 | Actual Amount | Ratio | As Adjusted Amount | Ratio |
| --- | ---: | ---: | ---: | ---: |
| Total Risk-based Capital | $6,194,835 | 12.56% | $6,643,730 | 13.47% |
| Common Equity Tier 1 Capital | 4,723,219 | 9.57 | 5,172,114 | 10.48 |
| Tier 1 Risk-based Capital | 5,077,405 | 10.29 | 5,526,300 | 11.20 |
| Tier 1 Leverage Capital | 5,077,405 | 8.40 | 5,526,300 | 9.08 |

See Note 1 to the consolidated financial statements for more details on the common stock issuance.

Typically, our primary source of capital growth is through retention of earnings. Our rate of earnings retention is derived by dividing undistributed earnings per common share by earnings (or net income available to common shareholders) per common share. Our retention ratio was approximately 32.7 percent for the nine months ended September 30, 2024 as compared to 53.7 percent for the year ended December 31, 2023. The decline in the retention ratio during the first nine months of 2024 was largely due to the significant increase in our provision for credit losses and resulting decline in our level of earnings before dividends as compared to the year ended December 31, 2023.

Cash dividends declared amounted to $0.33 per common share for each of the nine months ended September 30, 2024 and 2023. The Board is committed to examining and weighing relevant facts and considerations, including its commitment to shareholder value, each time it makes a cash dividend decision. The Federal Reserve has cautioned all bank holding companies about distributing dividends which may reduce the level of capital or not allow capital to grow considering the increased capital levels as required under the Basel III rules. Prior to the date of this filing, Valley has received no objection or adverse guidance from the Federal Reserve or the OCC regarding the current level of its quarterly common stock dividend. However, the Federal Reserve has reiterated its long-standing guidance in recent years that banking organizations should consult them before declaring dividends in excess of earnings for the corresponding quarter. See Item 1A. Risk Factors of Valley's Annual Report for additional information.

### Off-Balance Sheet Arrangements, Contractual Obligations and Other Matters

For a discussion of Valley’s off-balance sheet arrangements and contractual obligations see information included in Valley’s Annual Report in the MD&A section “Liquidity and Cash Requirements” and Notes 12 and 13 to the consolidated financial statements included in this report.

## Market risk

As filed, 257 characters.

Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices, and commodity prices. Valley’s market risk is composed primarily of interest rate risk. See page 72 for a discussion of interest rate risk.

## Controls and procedures

As filed, 3,135 characters.

(a) Disclosure control and procedures. Valley maintains disclosure controls and procedures which, consistent with Rule 13a-15(e) under the Exchange Act, are defined to mean controls and other procedures that are designed to ensure that information required to be disclosed in the reports that Valley files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that such information is accumulated and communicated to Valley’s management, including Valley’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

Valley’s CEO and CFO, with the assistance of other members of Valley’s management, have evaluated the effectiveness of Valley’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, Valley’s CEO and CFO have concluded that Valley’s disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) Changes in internal control over financial reporting. Valley’s CEO and CFO have also concluded that there have not been any changes in Valley’s internal control over financial reporting in the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, Valley’s internal control over financial reporting.

Valley’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A system of internal control, no matter how well conceived and operated, provides reasonable, not absolute, assurance that the objectives of the system of internal control are met. The design of a system of internal control reflects resource constraints and the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Valley have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns occur because of a simple error or mistake. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of internal control is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions; over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

## Risk factors

As filed, 159 characters.

There have been no material changes in the risk factors previously disclosed in the section titled “Risk Factors” in Part I, Item 1A of Valley’s Annual Report.

Filed Nov 12, 2024.
Source: SEC EDGAR, the filing index for accession 0000714310-24-000164. Last ingested by Listed: Nov 3, 2026, 06:05 ET. No prices; not investment advice.