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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
(Mark One)
☒Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2023
OR
☐Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission File Number 1-11277 
 Valley National Bancorp
(Exact name of registrant as specified in its charter)
New Jersey22-2477875
(State or other jurisdiction of
Incorporation or Organization)		(I.R.S. Employer
Identification Number)
One Penn Plaza
New York,NY10119
(Address of principal executive office)(Zip code)
973-305-8800
(Registrant’s telephone number, including area code) 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolsName of exchange on which registered
Common Stock, no par valueVLYThe Nasdaq Stock Market LLC
Non-Cumulative Perpetual Preferred Stock, Series A, no par valueVLYPPThe Nasdaq Stock Market LLC
Non-Cumulative Perpetual Preferred Stock, Series B, no par valueVLYPOThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer☒Accelerated filer
☐
Smaller reporting company
☐
Non-accelerated filer
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock (no par value), of which 507,634,731 shares were outstanding as of August 7, 2023.


TABLE OF CONTENTS
 
  Page
Number
PART I
Item 1.
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2023 and 2022
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.

1


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except for share data)
June 30,
2023		December 31,
2022
Assets(Unaudited)
Cash and due from banks$463,318 $444,325 
Interest bearing deposits with banks1,491,091 503,622 
Investment securities:
Equity securities61,010 48,731 
Trading debt securities3,409 13,438 
Available for sale debt securities1,236,946 1,261,397 
Held to maturity debt securities (net of allowance for credit losses of $1,351 at June 30, 2023 and $1,646 at December 31, 2022)
3,765,487 3,827,338 
Total investment securities5,066,852 5,150,904 
Loans held for sale, at fair value33,044 18,118 
Loans49,877,248 46,917,200 
Less: Allowance for loan losses(436,432)(458,655)
Net loans49,440,816 46,458,545 
Premises and equipment, net386,584 358,556 
Lease right of use assets359,751 306,352 
Bank owned life insurance717,681 717,177 
Accrued interest receivable225,918 196,606 
Goodwill1,868,936 1,868,936 
Other intangible assets, net177,946 197,456 
Other assets1,471,756 1,242,152 
Total Assets$61,703,693 $57,462,749 
Liabilities
Deposits:
Non-interest bearing$12,434,307 $14,463,645 
Interest bearing:
Savings, NOW and money market22,277,326 23,616,812 
Time14,908,182 9,556,457 
Total deposits49,619,815 47,636,914 
Short-term borrowings1,088,899 138,729 
Long-term borrowings2,443,533 1,543,058 
Junior subordinated debentures issued to capital trusts56,934 56,760 
Lease liabilities420,972 358,884 
Accrued expenses and other liabilities1,498,356 1,327,602 
Total Liabilities55,128,509 51,061,947 
Shareholders’ Equity
Preferred stock, no par value; 50,000,000 authorized shares:
Series A (4,600,000 shares issued at June 30, 2023 and December 31, 2022)
111,590 111,590 
Series B (4,000,000 shares issued at June 30, 2023 and December 31, 2022)
98,101 98,101 
Common stock (no par value, authorized 650,000,000 shares; issued 507,896,910 shares at June 30, 2023 and December 31, 2022)
178,187 178,185 
Surplus4,974,507 4,980,231 
Retained earnings1,379,534 1,218,445 
Accumulated other comprehensive loss(164,747)(164,002)
Treasury stock, at cost (277,480 common shares at June 30, 2023 and 1,522,432 common shares at December 31, 2022)
(1,988)(21,748)
Total Shareholders’ Equity6,575,184 6,400,802 
Total Liabilities and Shareholders’ Equity$61,703,693 $57,462,749 
See accompanying notes to consolidated financial statements.
2


VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except for per share data)
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
Interest Income
Interest and fees on loans$715,172 $415,577 $1,370,398 $732,942 
Interest and dividends on investment securities:
Taxable31,919 27,534 64,208 45,973 
Tax-exempt5,575 5,191 10,900 7,708 
Dividends7,517 3,076 12,702 4,752 
Interest on federal funds sold and other short-term investments27,276 1,569 49,481 2,030 
Total interest income787,459 452,947 1,507,689 793,405 
Interest Expense
Interest on deposits:
Savings, NOW and money market164,842 17,122 315,608 26,749 
Time125,764 3,269 206,062 6,100 
Interest on short-term borrowings50,208 4,083 84,156 4,889 
Interest on long-term borrowings and junior subordinated debentures26,880 10,313 46,078 19,838 
Total interest expense367,694 34,787 651,904 57,576 
Net Interest Income419,765 418,160 855,785 735,829 
(Credit) provision for credit losses for available for sale and held to maturity securities(282)286 4,705 343 
Provision for credit losses for loans6,332 43,712 15,782 47,212 
Net Interest Income After Provision for Credit Losses413,715 374,162 835,298 688,274 
Non-Interest Income
Wealth management and trust fees11,176 9,577 20,763 14,708 
Insurance commissions3,139 3,463 5,559 5,322 
Capital markets16,967 14,711 27,859 29,071 
Service charges on deposit accounts10,542 10,067 21,018 16,279 
Gains (losses) on securities transactions, net217 (309)595 (1,381)
Fees from loan servicing2,702 2,717 5,373 5,498 
Gains on sales of loans, net1,240 3,602 1,729 4,588 
Bank owned life insurance2,443 2,113 5,027 4,159 
Other11,649 12,592 26,451 19,559 
Total non-interest income60,075 58,533 114,374 97,803 
Non-Interest Expense
Salary and employee benefits expense149,594 154,798 294,580 262,531 
Net occupancy expense25,949 22,429 49,205 44,420 
Technology, furniture and equipment expense32,476 49,866 68,984 75,880 
FDIC insurance assessment10,426 5,351 19,581 9,509 
Amortization of other intangible assets9,812 11,400 20,331 15,837 
Professional and legal fees21,406 30,409 38,220 45,158 
Amortization of tax credit investments5,018 3,193 9,271 6,089 
Other28,290 22,284 54,965 37,646 
Total non-interest expense282,971 299,730 555,137 497,070 
Income Before Income Taxes190,819 132,965 394,535 289,007 
Income tax expense51,759 36,552 108,924 75,866 
Net Income139,060 96,413 285,611 213,141 
Dividends on preferred stock 4,030 3,172 7,904 6,344 
Net Income Available to Common Shareholders$135,030 $93,241 $277,707 $206,797 
Earnings Per Common Share:
Basic$0.27 $0.18 $0.55 $0.45 
Diluted0.27 0.18 0.55 0.44 
See accompanying notes to consolidated financial statements.
3


VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in thousands)
 
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
Net income$139,060 $96,413 $285,611 $213,141 
Other comprehensive loss, net of tax:
Unrealized gains and losses on available for sale securities
Net losses arising during the period(18,051)(52,269)(881)(91,161)
Less reclassification adjustment for net gains included in net income— — — (10)
Total(18,051)(52,269)(881)(91,171)
Unrealized gains and losses on derivatives (cash flow hedges)
Net (losses) gains on derivatives arising during the period(3,573)(23)(775)195 
Less reclassification adjustment for net losses (gains) included in net income516 (80)895 306 
Total(3,057)(103)120 501 
Defined benefit pension and postretirement benefit plans
Amortization of actuarial net loss8 133 16 265 
Total other comprehensive loss(21,100)(52,239)(745)(90,405)
Total comprehensive income$117,960 $44,174 $284,866 $122,736 
See accompanying notes to consolidated financial statements.

4


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the Six Months Ended June 30, 2023
Common StockAccumulated
Preferred StockSharesAmountSurplusRetained
Earnings		Other
Comprehensive
Loss		Treasury
Stock		Total
Shareholders’
Equity
 (in thousands)
Balance - December 31, 2022$209,691 506,374 $178,185 $4,980,231 $1,218,445 $(164,002)$(21,748)$6,400,802 
Adjustment due to the adoption of ASU 2022-02— — — — 990 — — 990 
Balance - January 1, 2023209,691 506,374 178,185 4,980,231 1,219,435 (164,002)(21,748)6,401,792 
Net income— — — — 146,551 — — 146,551 
Other comprehensive income, net of tax— — — — — 20,355 — 20,355 
Cash dividends declared:
Preferred stock, Series A, $0.39 per share
— — — — (1,797)— — (1,797)
Preferred stock, Series B, $0.52 per share
— — — — (2,077)— — (2,077)
Common stock, $0.11 per share
— — — — (56,488)— — (56,488)
Effect of stock incentive plan, net
— 1,061 1 (12,569)(3,994)— 16,057 (505)
Common stock issued— 327 — — (650)— 4,400 3,750 
Balance - March 31, 2023$209,691 507,762 $178,186 $4,967,662 $1,300,980 $(143,647)$(1,291)$6,511,581 
Net income— — — — 139,060 — — 139,060 
Other comprehensive loss, net of tax— — — — — (21,100)— (21,100)
Cash dividends declared:
Preferred stock, Series A, $0.39 per share
— — — — (1,797)— — (1,797)
Preferred stock, Series B, $0.56 per share
— — — — (2,233)— — (2,233)
Common stock, $0.11 per share
— — — — (56,474)— — (56,474)
Effect of stock incentive plan, net
— 157 1 6,845 (2)— 1,395 8,239 
Common stock repurchased—(300)————(2,092)(2,092)
Balance - June 30, 2023
$209,691 507,619 $178,187 $4,974,507 $1,379,534 $(164,747)$(1,988)$6,575,184 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) (continued)

5


For the Six Months Ended June 30, 2022
Common StockAccumulated
Preferred StockSharesAmountSurplusRetained
Earnings		Other
Comprehensive
Loss		Treasury
Stock		Total
Shareholders’
Equity
 (in thousands)
Balance - December 31, 2021$209,691 421,437 $148,482 $3,883,035 $883,645 $(17,932)$(22,855)$5,084,066 
Net income— — — — 116,728 — — 116,728 
Other comprehensive loss, net of tax— — — — — (38,166)— (38,166)
Cash dividends declared:
Preferred stock, Series A, $0.39 per share
— — — — (1,797)— — (1,797)
Preferred stock, Series B, $0.34 per share
— — — — (1,375)— — (1,375)
Common stock, $0.11 per share
— — — — (46,803)— — (46,803)
Effect of stock incentive plan, net— 972 — (10,799)(5,173)— 13,220 (2,752)
Common stock repurchased— (1,015)— — — — (13,517)(13,517)
Balance - March 31, 2022
$209,691 421,394 $148,482 $3,872,236 $945,225 $(56,098)$(23,152)$5,096,384 
Net income— — — — 96,413 — — 96,413 
Other comprehensive loss, net of tax— — — — — (52,239)— (52,239)
Cash dividends declared:
Preferred stock, Series A, $0.39 per share
— — — — (1,797)— — (1,797)
Preferred stock, Series B, $0.34 per share
— — — — (1,375)— — (1,375)
Common stock, $0.11 per share
— — — — (56,211)— — (56,211)
Effect of stock incentive plan, net— 72 1 5,125 (109)— 892 5,909 
Common stock issued— 84,863 29,702 1,088,127 — — — 1,117,829 
Balance - June 30, 2022
$209,691 506,329 $178,185 $4,965,488 $982,146 $(108,337)$(22,260)$6,204,913 

See accompanying notes to consolidated financial statements.
6


VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)

 Six Months Ended
June 30,
 20232022
Cash flows from operating activities:
Net income$285,611 $213,141 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization21,425 18,297 
Stock-based compensation16,773 13,420 
Provision for credit losses20,487 47,555 
Net amortization of premiums and accretion of discounts on securities and borrowings(639)9,680 
Amortization of other intangible assets20,331 15,837 
Losses (gains) on available for sale and held to maturity debt securities, net33 (69)
Proceeds from sales of loans held for sale72,925 331,298 
Gains on sales of loans, net(1,729)(4,588)
Originations of loans held for sale(76,943)(210,048)
(Gains) losses on sales of assets, net(286)265 
Net change in:
Fair value of borrowings hedged by derivative transactions(291)(20,194)
Trading debt securities10,029 39,580 
Lease right of use assets(53,412)521 
Cash surrender value of bank owned life insurance(5,722)(4,159)
Accrued interest receivable(29,312)(12,083)
Other assets(230,017)(191,597)
Accrued expenses and other liabilities233,419 558,675 
Net cash provided by operating activities282,682 805,531 
Cash flows from investing activities:
Net loan originations and purchases(3,009,649)(3,495,486)
Equity securities:
Purchases(9,662)(1,538)
Sales771 1,110 
Held to maturity debt securities:
Purchases(114,544)(545,934)
Maturities, calls and principal repayments175,492 294,052 
Available for sale debt securities:
Purchases(41,470)(38,000)
Sales17,910 12,846 
Maturities, calls and principal repayments44,534 150,262 
Death benefit proceeds from bank owned life insurance5,218 3,089 
Proceeds from sales of real estate property and equipment490 7,265 
Purchases of real estate property and equipment(49,468)(35,164)
Cash and cash equivalent acquired in acquisitions, net— 321,540 
Net cash used in investing activities(2,980,378)(3,325,958)
7


VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)
(in thousands)
 Six Months Ended
June 30,
 20232022
Cash flows from financing activities:
Net change in deposits$1,982,901 $1,218,642 
Net change in short-term borrowings950,170 763,284 
Proceeds from issuance of long-term borrowings, net1,250,000 — 
Repayments of long-term borrowings(350,000)— 
Cash dividends paid to preferred shareholders(7,904)(6,344)
Cash dividends paid to common shareholders(113,611)(92,618)
Purchase of common shares to treasury(11,133)(23,886)
Common stock issued, net3,750 106 
Other, net(15)(365)
Net cash provided by financing activities3,704,158 1,858,819 
Net change in cash and cash equivalents1,006,462 (661,608)
Cash and cash equivalents at beginning of year947,947 2,049,920 
Cash and cash equivalents at end of period$1,954,409 $1,388,312 
Supplemental disclosures of cash flow information:
Cash payments for:
Interest on deposits and borrowings$571,741 $57,151 
Federal and state income taxes122,130 77,285 
Supplemental schedule of non-cash investing activities:
Transfer of loans to other real estate owned$903 $— 
Transfer of loans to loans held for sale10,000 — 
Lease right of use assets obtained in exchange for operating lease liabilities81,727 24,745 
Acquisitions:
Non-cash assets acquired:
Equity securities — 6,239 
Investment securities available for sale— 505,928 
Investment securities held to maturity— 806,627 
Loans, net— 5,844,070 
Premises and equipment, net— 38,827 
Lease right of use assets— 49,434 
Bank owned life insurance— 126,861 
Accrued interest receivable— 25,717 
Goodwill— 407,522 
Other intangible assets, net— 159,587 
Other assets— 158,352 
Total non-cash assets acquired$— $8,129,164 
Liabilities assumed:
Deposits— 7,029,997 
Short-term borrowings— 103,794 
Lease liabilities— 79,844 
Accrued expenses and other liabilities— 119,240 
Total liabilities assumed$— $7,332,875 
Non-cash net assets acquired— 796,289 
Net cash and cash equivalents acquired in acquisition$— $321,540 
Common stock issued in acquisition$— $1,117,829 
See accompanying notes to consolidated financial statements.
8


VALLEY NATIONAL BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The unaudited consolidated financial statements of Valley National Bancorp, a New Jersey Corporation (Valley) include the accounts of Valley National Bank (the Bank) and all other entities in which Valley has a controlling financial interest. All inter-company transactions and balances have been eliminated. The accounting and reporting policies of Valley conform to U.S. generally accepted accounting principles (U.S. GAAP) and general practices within the financial services industry. In accordance with applicable accounting standards, Valley does not consolidate statutory trusts established for the sole purpose of issuing trust preferred securities and related trust common securities. Certain prior period amounts have been reclassified to conform to the current presentation.
In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly Valley’s financial position, results of operations, changes in shareholders' equity and cash flows at June 30, 2023 and for all periods presented have been made. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the entire fiscal year or any subsequent interim period.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP and industry practice have been condensed or omitted pursuant to rules and regulations of the SEC. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Valley’s Annual Report on Form 10-K for the year ended December 31, 2022.
Significant Estimates. In preparing the unaudited consolidated financial statements in conformity with U.S. GAAP, management has made estimates and assumptions 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. Material estimates that require application of management’s most difficult, subjective or complex judgment and are particularly susceptible to change include: the allowance for credit losses, the evaluation of goodwill and other intangible assets for impairment and income taxes. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual amounts or results could differ significantly from those estimates. The current economic environment has increased the degree of uncertainty inherent in these material estimates. Actual results may differ from those estimates. Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date.
Note 2. Business Combinations
Acquisitions
Bank Leumi Le-Israel Corporation. On April 1, 2022, Valley completed its acquisition of Bank Leumi Le-Israel Corporation, the U.S. subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA, collectively referred to as "Bank Leumi USA". Bank Leumi USA maintained its headquarters in New York City with commercial banking offices in Chicago, Los Angeles, Palo Alto, and Aventura, Florida. The common shareholders of Bank Leumi USA received 3.8025 shares of Valley common stock and $5.08 in cash for each Bank Leumi USA common share that they owned. As a result, Valley issued approximately 85 million shares of common stock and paid $113.4 million in cash in the transaction. Based on Valley’s closing stock price on March 31, 2022, the transaction was valued at $1.2 billion, inclusive of the value of options. As a result of the acquisition, Bank Leumi Le-Israel B.M. owned approximately 14 percent of Valley's common stock as of April 1, 2022.
Merger expenses, primarily consisting of salary and employee benefit expense, totaled $4.1 million for the six months ended June 30, 2023. There were no merger expenses for the three months ended June 30, 2023. Merger expenses totaled $54.5 million and $58.9 million for the three and six months ended June 30, 2022, respectively,
9


and largely consisted of salary and employee benefit expense, professional and legal fees and technology related costs within non-interest expense on the consolidated statements of income.
The following table sets forth assets acquired and liabilities assumed in the Bank Leumi USA acquisition, at their estimated fair values as of the closing date of the transaction:
April 1, 2022
(in thousands)
Assets acquired:
Cash and cash equivalents$443,588 
Equity securities6,239 
Available for sale debt securities505,928 
Held to maturity debt securities 806,627 
Loans5,914,389 
Allowance for loan losses (70,319)
Loans, net5,844,070 
Premises and equipment38,827 
Lease right of use assets49,273 
Bank owned life insurance126,861 
Accrued interest receivable 25,717 
Goodwill400,582 
Other intangible assets153,380 
Other assets160,921 
Total assets acquired$8,562,013 
Liabilities assumed:
Deposits:
Non-interest bearing$4,511,537 
Interest bearing:
Savings, NOW and money market2,224,834 
Time293,626 
Total deposits7,029,997 
Short-term borrowings103,794 
Lease liabilities79,683 
Accrued expense and other liabilities117,269 
Total liabilities assumed$7,330,743 
Common stock issued in acquisition1,117,829 
Cash paid in acquisition113,441 




10


Note 3. Earnings Per Common Share
The following table shows the calculation of both basic and diluted earnings per common share for the three and six months ended June 30, 2023 and 2022:
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
 (in thousands, except for share and per share data)
Net income available to common shareholders$135,030 $93,241 $277,707 $206,797 
Basic weighted average number of common shares outstanding
507,690,043 506,302,464 507,402,268 464,172,210 
Plus: Common stock equivalents952,982 2,176,742 1,674,035 2,148,473 
Diluted weighted average number of common shares outstanding
508,643,025 508,479,206 509,076,303 466,320,683 
Earnings per common share:
Basic$0.27 $0.18 $0.55 $0.45 
Diluted0.27 0.18 0.55 0.44 
Common stock equivalents represent the dilutive effect of additional common shares issuable upon the assumed vesting or exercise, if applicable, of restricted stock units and common stock options to purchase Valley’s common shares. Common stock options with exercise prices that exceed the average market price per share of Valley’s common stock during the periods presented may have an anti-dilutive effect on the diluted earnings per common share calculation and therefore are excluded from the diluted earnings per share calculation along with restricted stock units. Potential anti-dilutive weighted common shares totaled approximately 7.2 million and 2.2 million for the three months ended June 30, 2023 and 2022, respectively, and 3.0 million and 1.1 million for the six months ended June 30, 2023 and 2022, respectively.

Note 4. Accumulated Other Comprehensive Loss
The following tables present the after-tax changes in the balances of each component of accumulated other comprehensive loss for the three and six months ended June 30, 2023:

 Components of Accumulated Other Comprehensive LossTotal
Accumulated
Other
Comprehensive
Loss
Unrealized Gains
and Losses on
Available for Sale
(AFS) Securities		Unrealized Gains
and Losses on
Derivatives		Defined Benefit
Pension and Postretirement Benefit Plans
 (in thousands)
Balance at March 31, 2023$(110,648)$5,410 $(38,409)$(143,647)
Other comprehensive loss before reclassification (18,051)(3,573)— (21,624)
Amounts reclassified from other comprehensive loss— 516 8 524 
Other comprehensive (loss) income, net(18,051)(3,057)8 (21,100)
Balance at June 30, 2023$(128,699)$2,353 $(38,401)$(164,747)

11


 Components of Accumulated Other Comprehensive LossTotal
Accumulated
Other
Comprehensive
Loss
 Unrealized Gains
and Losses on
Available for Sale
(AFS) Securities		Unrealized Gains
and Losses on
Derivatives		Defined Benefit
Pension and Postretirement Benefit Plans
 (in thousands)
Balance at December 31, 2022$(127,818)$2,233 $(38,417)$(164,002)
Other comprehensive loss before reclassification (881)(775)— (1,656)
Amounts reclassified from other comprehensive loss— 895 16 911 
Other comprehensive (loss) income, net(881)120 16 (745)
Balance at June 30, 2023$(128,699)$2,353 $(38,401)$(164,747)
The following table presents amounts reclassified from each component of accumulated other comprehensive loss on a gross and net of tax basis for the three and six months ended June 30, 2023 and 2022:
Amounts Reclassified from
Accumulated Other Comprehensive Loss
Three Months Ended
June 30,		Six Months Ended
June 30,
Components of Accumulated Other Comprehensive Loss2023202220232022Income Statement Line Item
 (in thousands) 
Unrealized gains on AFS securities before tax$— $— $— $14 Gains (losses) on securities transactions, net
Tax effect— — — (4)
Total net of tax— — — 10 
Unrealized gains (losses) on derivatives (cash flow hedges) before tax(725)116 (1,256)(426)Interest income, interest expense
Tax effect209 (36)361 120 
Total net of tax(516)80 (895)(306)
Defined benefit pension and postretirement benefit plans:
Amortization of actuarial net loss(11)(184)(22)(367)*
Tax effect3 51 6 102 
Total net of tax(8)(133)(16)(265)
Total reclassifications, net of tax$(524)$(53)$(911)$(561)
*Amortization of actuarial net loss is included in the computation of net periodic pension cost recognized within other non-interest expense.
Note 5. New Authoritative Accounting Guidance
New Accounting Guidance Adopted in 2023
Accounting Standards Update (ASU) No. 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging –Portfolio Layer Method” expands and clarifies the current guidance on accounting for fair value hedge basis adjustments under the portfolio layer method for both single-layer and multiple-layer hedges. This method allows entities to designate multiple hedging relationships with a single closed portfolio, and therefore a larger portion of the interest rate risk associated with such a portfolio is eligible to be hedged. ASU No. 2022-01 also clarifies that no assets may be added to a closed portfolio once it is designated in a portfolio layer method hedge. Valley adopted ASU No. 2022-01 on January 1, 2023 and the guidance did not have a significant impact on Valley's consolidated financial statements.
ASU No. 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” eliminates the troubled debt restructuring (TDR) accounting model for creditors, such as Valley, that
12


have adopted Topic 326, “Financial Instruments – Credit Losses.” ASU No. 2022-02 requires all loan modifications to be accounted for under the general loan modification guidance in Subtopic 310-20. On a prospective basis, entities are subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty. Public business entities within the scope of the Topic 326 vintage disclosure requirements are also required to prospectively disclose current-period gross write-off information by vintage. Entities can elect to adopt the guidance on TDRs using either a prospective or modified retrospective transition method. Valley adopted ASU No. 2022-02 on January 1, 2023 and elected to apply the modified retrospective transition method. The adoption of ASU No. 2022-02 resulted in a $1.4 million decrease in the allowance for loan losses, and a $990 thousand increase to retained earnings, net of taxes. See Note 8 for required disclosures.
New Accounting Guidance Issued in 2023
ASU No. 2023-02, Investments –“Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method,” is intended to improve the accounting and disclosures for investments in certain tax credit structures. ASU No. 2023-02 allows the option to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met. ASU No. 2023-02 will be effective on January 1, 2024 and it can be early adopted in any interim period. The new guidance can also be applied either on a modified retrospective or a retrospective basis, with any adjustments resulting from adoption recognized in earnings on the date of adoption. Valley is currently evaluating the impact of ASU No. 2023-02, but it is not expected to have a significant impact on Valley's consolidated financial statements.
Note 6. Fair Value Measurement of Assets and Liabilities
ASC Topic 820, “Fair Value Measurement” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

•Level 1    - Unadjusted exchange quoted prices in active markets for identical assets or liabilities, or identical liabilities traded as assets that the reporting entity has the ability to access at the measurement date.
•Level 2 - Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly (i.e., quoted prices on similar assets) for substantially the full term of the asset or liability.
•Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
Assets and Liabilities Measured at Fair Value on a Recurring and Non-Recurring Basis
The following tables present the assets and liabilities that are measured at fair value on a recurring and non-recurring basis by level within the fair value hierarchy as reported on the consolidated statements of financial condition at June 30, 2023 and December 31, 2022. The assets presented under “non-recurring fair value measurements” in the tables below are not measured at fair value on an ongoing basis but are subject to fair value adjustments under certain circumstances (e.g., when an impairment loss is recognized). 
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 June 30,
2023		Fair Value Measurements at Reporting Date Using:
 Quoted Prices
in Active Markets
for Identical
Assets (Level 1)		Significant
Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
 (in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Equity securities$23,635 $23,635 $— $— 
Equity securities at net asset value (NAV)
12,328 — — — 
Trading debt securities3,409 3,409 — — 
Available for sale debt securities:
U.S. Treasury securities282,398 282,398 — — 
U.S. government agency securities24,192 — 24,192 — 
Obligations of states and political subdivisions171,043 — 171,043 — 
Residential mortgage-backed securities594,636 — 594,636 — 
Corporate and other debt securities164,677 — 164,677 — 
Total available for sale debt securities1,236,946 282,398 954,548 — 
Loans held for sale (1)
23,044 — 23,044 — 
Other assets (2)
571,620 — 571,620 — 
Total assets$1,870,982 $309,442 $1,549,212 $— 
Liabilities
Other liabilities (2)
$599,226 $— $599,226 $— 
Total liabilities$599,226 $— $599,226 $— 
Non-recurring fair value measurements:
Non-performing loans held for sale$10,000 $— $10,000 $— 
Collateral dependent loans 63,972 — — 63,972 
Foreclosed assets 2,132 — — 2,132 
Total$76,104 $— $10,000 $66,104 
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  Fair Value Measurements at Reporting Date Using:
 December 31,
2022		Quoted Prices
in Active Markets
for Identical
Assets (Level 1)		Significant
Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
 (in thousands)
Recurring fair value measurements:
Assets
Investment securities:
Equity securities $23,494 $23,494 $— $— 
Equity securities at net asset value (NAV)
10,099 — — — 
Trading debt securities13,438 3,282 10,156 — 
Available for sale debt securities:
U.S. Treasury securities279,498 279,498 — — 
U.S. government agency securities26,964 — 26,964 — 
Obligations of states and political subdivisions146,811 — 146,811 — 
Residential mortgage-backed securities629,818 — 629,818 — 
Corporate and other debt securities178,306 — 178,306 — 
Total available for sale debt securities1,261,397 279,498 981,899 — 
Loans held for sale (1)
18,118 — 18,118 — 
Other assets (2)
467,127 — 467,127 — 
Total assets$1,793,673 $306,274 $1,477,300 $— 
Liabilities
Other liabilities (2)
$607,237 $— $607,237 $— 
Total liabilities$607,237 $— $607,237 $— 
Non-recurring fair value measurements:
Collateral dependent loans $92,923 $— $— $92,923 
Foreclosed assets 1,937 — — 1,937 
Total$94,860 $— $— $94,860 
(1)Represents residential mortgage loans held for sale that are carried at fair value and had contractual unpaid principal balances totaling approximately $23.0 million and $17.9 million at June 30, 2023 and December 31, 2022, respectively.
(2)Derivative financial instruments are included in this category.

Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following valuation techniques were used for financial instruments measured at fair value on a recurring basis. All the valuation techniques described below apply to the unpaid principal balance, excluding any accrued interest or dividends at the measurement date. Interest income and expense are recorded within the consolidated statements of income depending on the nature of the instrument using the effective interest method based on acquired discount or premium.
Equity securities. The fair value of equity securities consists of a publicly traded mutual fund, a Community Reinvestment Act (CRA) investment fund and an investment related to the development of new financial technologies that are carried at quoted prices in active markets.
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Equity securities at NAV. Valley also has privately held CRA funds at fair value measured at NAV using the most recently available financial information from the investee. Investments measured at NAV (or its equivalent) as a practical expedient are excluded from fair value hierarchy levels in the tables above.
Trading debt securities. The fair value of trading debt securities, consisting of U.S. Treasury securities are reported at fair value utilizing Level 1 inputs at June 30, 2023. At December 31, 2022, trading debt securities consisted of U.S. Treasury securities and municipal bonds reported at fair value utilizing Level 1 and Level 2 inputs, respectively. The prices for municipal bonds investments were derived from market quotations and matrix pricing obtained through an independent pricing service. Management reviews the data and assumptions used in pricing the securities by its third-party provider to ensure the highest level of significant inputs are derived from market observable data.
Available for sale debt securities. U.S. Treasury securities are reported at fair value utilizing Level 1 inputs. The majority of other investment securities are reported at fair value utilizing Level 2 inputs. The prices for these instruments are obtained through an independent pricing service or dealer market participants with whom Valley has historically transacted both purchases and sales of investment securities. Prices obtained from these sources include prices derived from market quotations and matrix pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Management reviews the data and assumptions used in pricing the securities by its third-party provider to ensure the highest level of significant inputs are derived from market observable data. In addition, Valley reviews the volume and level of activity for all available for sale debt securities and attempts to identify transactions which may not be orderly or reflective of a significant level of activity and volume.
Loans held for sale. Residential mortgage loans originated for sale are reported at fair value using Level 2 inputs. The fair values were calculated utilizing quoted prices for similar assets in active markets. The market prices represent a delivery price, which reflects the underlying price each institution would pay Valley for an immediate sale of an aggregate pool of mortgages. Non-performance risk did not materially impact the fair value of mortgage loans held for sale at June 30, 2023 and December 31, 2022 based on the short duration these assets were held, and the credit quality of these loans.
Derivatives. Derivatives are reported at fair value utilizing Level 2 inputs. The fair values of Valley’s derivatives are determined using third-party prices that are based on discounted cash flow analysis using observed market inputs, such as the Overnight Index Swap and Secured Overnight Financing Rate (SOFR) curves. The fair value of mortgage banking derivatives, consisting of interest rate lock commitments to fund residential mortgage loans and forward commitments for the future delivery of such loans (including certain loans held for sale at June 30, 2023 and December 31, 2022), is determined based on the current market prices for similar instruments. The fair values of most of the derivatives incorporate credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, to account for potential nonperformance risk of Valley and its counterparties. The credit valuation adjustments were not significant to the overall valuation of Valley’s derivatives at June 30, 2023 and December 31, 2022.
Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
The following valuation techniques were used for certain non-financial assets measured at fair value on a non-recurring basis, including collateral dependent loans reported at the fair value of the underlying collateral and foreclosed assets, which are reported at fair value upon initial recognition or subsequent impairment as described below.
Non-performing loans held for sale. Valley transferred one non-performing construction loan totaling $10.0 million, net of charge-offs, to loans held for sale at June 30, 2023. The transfer at the loan's fair value resulted in a $4.2 million charge-off to the allowance of loan losses for the three months ended June 30, 2023. The fair value of the loan was determined using Level 2 inputs, including bids from a third party broker engaged to solicit interest from potential purchasers. The broker coordinated loan level due diligence with interested parties and established a
16


formal bidding process in which each participant was required to provide an indicative non-binding bid. Fair value was determined based on a non-binding sale agreement selected by Valley during the bidding process that is expected to close during the third quarter 2023.
Collateral dependent loans. Collateral dependent loans are loans when foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and substantially all of the repayment is expected from the collateral. Collateral dependent loans are reported at the fair value of the underlying collateral. Collateral values are estimated using Level 3 inputs, consisting of individual third-party appraisals that may be adjusted based on certain discounting criteria. Certain real estate appraisals may be discounted based on specific market data by location and property type. At June 30, 2023, collateral dependent loans were individually re-measured and reported at fair value through direct loan charge-offs to the allowance for loan losses based on the fair value of the underlying collateral. At June 30, 2023, collateral dependent loans with a total amortized cost of $125.0 million, including our taxi medallion loan portfolio, were reduced by specific allowance for loan losses allocations totaling $61.0 million to a reported total net carrying amount of $64.0 million.
Foreclosed assets. Certain foreclosed assets (consisting of other real estate owned and other repossessed assets included in other assets), upon initial recognition and transfer from loans, are re-measured and reported at fair value using Level 3 inputs, consisting of a third-party appraisal less estimated cost to sell. When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for loan losses. If further declines in the estimated fair value of the asset occur, an asset is re-measured and reported at fair value through a write-down recorded in non-interest expense. There were no adjustments to the appraisals of foreclosed assets at June 30, 2023 and December 31, 2022.
Other Fair Value Disclosures
ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.
The fair value estimates presented in the following table were based on pertinent market data and relevant information on the financial instruments available as of the valuation date. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire portfolio of financial instruments. Because no market exists for a portion of the financial instruments, fair value estimates may be based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For instance, Valley has certain fee-generating business lines (e.g., its mortgage servicing operations, trust and investment management departments) that were not considered in these estimates since these activities are not financial instruments. In addition, the tax implications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.
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The carrying amounts and estimated fair values of financial instruments not measured and not reported at fair value on the consolidated statements of financial condition at June 30, 2023 and December 31, 2022 were as follows: 
 Fair Value
Hierarchy		June 30, 2023December 31, 2022
 Carrying
Amount		Fair ValueCarrying
Amount		Fair Value
 (in thousands)
Financial assets
Cash and due from banksLevel 1$463,318 $463,318 $444,325 $444,325 
Interest bearing deposits with banksLevel 11,491,091 1,491,091 503,622 503,622 
Equity securities (1)
Level 325,047 25,047 15,138 15,138 
Held to maturity debt securities:
U.S. Treasury securitiesLevel 166,579 65,675 66,911 65,889 
U.S. government agency securitiesLevel 2261,197 215,039 260,392 212,712 
Obligations of states and political subdivisionsLevel 2465,115 438,991 480,298 453,195 
Residential mortgage-backed securitiesLevel 22,861,227 2,461,519 2,909,106 2,495,797 
Trust preferred securitiesLevel 237,052 29,344 37,043 31,106 
Corporate and other debt securitiesLevel 275,668 68,380 75,234 70,771 
Total held to maturity debt securities (2)
3,766,838 3,278,948 3,828,984 3,329,470 
Net loansLevel 349,440,816 47,472,065 46,458,545 44,910,049 
Accrued interest receivableLevel 1225,918 225,918 196,606 196,606 
Federal Reserve Bank and Federal Home Loan Bank stock (3)
Level 2326,959 326,959 238,056 238,056 
Financial liabilities
Deposits without stated maturitiesLevel 134,711,633 34,711,633 38,080,457 38,080,457 
Deposits with stated maturitiesLevel 214,908,182 14,783,271 9,556,457 9,443,253 
Short-term borrowingsLevel 11,088,899 1,066,450 138,729 138,729 
Long-term borrowingsLevel 22,443,533 2,340,324 1,543,058 1,395,991 
Junior subordinated debentures issued to capital trusts
Level 256,934 48,117 56,760 50,923 
Accrued interest payable (4)
Level 1125,873 125,873 45,617 45,617 
(1)Represents equity securities without a readily determinable fair value measured at cost less impairment, if any.
(2)The carrying amount is presented gross without the allowance for credit losses.
(3)Included in other assets.
(4)Included in accrued expenses and other liabilities.
Note 7. Investment Securities
Equity Securities
Equity securities totaled $61.0 million and $48.7 million at June 30, 2023 and December 31, 2022, respectively. See Note 6 for further details on equity securities.
Trading Debt Securities
The fair value of trading debt securities totaled $3.4 million and $13.4 million at June 30, 2023 and December 31, 2022, respectively. Net trading gains and losses were included in net gains and losses on securities transactions within non-interest income. We recorded net trading gains of $226 thousand and $628 thousand for the three and six months ended June 30, 2023, respectively. We recorded net trading losses of $387 thousand and $1.4 million for the three and six months ended June 30, 2022, respectively.
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Available for Sale Debt Securities
The amortized cost, gross unrealized gains and losses and fair value of available for sale debt securities at June 30, 2023 and December 31, 2022 were as follows: 
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value
 (in thousands)
June 30, 2023
U.S. Treasury securities$310,936 $— $(28,538)$282,398 
U.S. government agency securities26,799 19 (2,626)24,192 
Obligations of states and political subdivisions:
Obligations of states and state agencies9,425 — (776)8,649 
Municipal bonds193,920 — (31,526)162,394 
Total obligations of states and political subdivisions203,345 — (32,302)171,043 
Residential mortgage-backed securities681,513 20 (86,897)594,636 
Corporate and other debt securities192,087 — (27,410)164,677 
Total $1,414,680 $39 $(177,773)$1,236,946 
December 31, 2022
U.S. Treasury securities$308,137 $— $(28,639)$279,498 
U.S. government agency securities29,494 47 (2,577)26,964 
Obligations of states and political subdivisions:
Obligations of states and state agencies10,899 — (493)10,406 
Municipal bonds171,586 — (35,181)136,405 
Total obligations of states and political subdivisions182,485 — (35,674)146,811 
Residential mortgage-backed securities719,868 64 (90,114)629,818 
Corporate and other debt securities197,927 — (19,621)178,306 
Total$1,437,911 $111 $(176,625)$1,261,397 

Accrued interest on investments, which is excluded from the amortized cost of available for sale debt securities, totaled $4.9 million and $5.6 million at June 30, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition.
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The age of unrealized losses and fair value of the related available for sale debt securities at June 30, 2023 and December 31, 2022 were as follows: 
 Less than 12 MonthsMore than 12 MonthsTotal
 Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
 (in thousands)
June 30, 2023
U.S. Treasury securities$— $— $282,398 $(28,538)$282,398 $(28,538)
U.S. government agency securities— — 22,818 (2,626)22,818 (2,626)
Obligations of states and political subdivisions:
Obligations of states and state agencies
1,223 (20)7,426 (756)8,649 (776)
Municipal bonds1,405 (20)137,180 (31,506)138,585 (31,526)
Total obligations of states and political subdivisions
2,628 (40)144,606 (32,262)147,234 (32,302)
Residential mortgage-backed securities30,949 (1,919)562,383 (84,978)593,332 (86,897)
Corporate and other debt securities44,404 (7,239)120,273 (20,171)164,677 (27,410)
Total$77,981 $(9,198)$1,132,478 $(168,575)$1,210,459 $(177,773)
December 31, 2022
U.S. Treasury securities$279,498 $(28,639)$— $— $279,498 $(28,639)
U.S. government agency securities22,831 (2,538)1,116 (39)23,947 (2,577)
Obligations of states and political subdivisions:
Obligations of states and state agencies
2,943 (54)7,462 (439)10,405 (493)
Municipal bonds112,029 (26,044)24,127 (9,137)136,156 (35,181)
Total obligations of states and political subdivisions
114,972 (26,098)31,589 (9,576)146,561 (35,674)
Residential mortgage-backed securities311,836 (27,152)314,834 (62,962)626,670 (90,114)
Corporate and other debt securities144,924 (12,581)33,382 (7,040)178,306 (19,621)
Total$874,061 $(97,008)$380,921 $(79,617)$1,254,982 $(176,625)
Within the available for sale debt securities portfolio, the total number of security positions in an unrealized loss position was 725 and 730 at June 30, 2023 and December 31, 2022, respectively.
As of June 30, 2023, the fair value of available for sale debt securities that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law was $847.1 million.
The contractual maturities of available for sale debt securities at June 30, 2023 are set forth in the following table. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.
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 June 30, 2023
 Amortized
Cost		Fair
Value
 (in thousands)
Due in one year$2,350 $2,322 
Due after one year through five years282,534 265,870 
Due after five years through ten years175,056 148,811 
Due after ten years273,227 225,307 
Residential mortgage-backed securities681,513 594,636 
Total $1,414,680 $1,236,946 
Actual maturities of available for sale debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty.
The weighted average remaining expected life for residential mortgage-backed securities available for sale was 7.68 years at June 30, 2023.
Impairment Analysis of Available For Sale Debt Securities
Valley's available for sale debt securities portfolio includes corporate bonds and revenue bonds, among other securities. These types of securities may pose a higher risk of future impairment charges by Valley as a result of the changes in market interest rates, unpredictable nature of the U.S. economy and their potential negative effect on the future performance of the security issuers.
Available for sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis. Based on a comparison of the present value of expected cash flows to the amortized cost, Valley recognized a credit related impairment of one corporate bond issued by Signature Bank resulting in a provision for credit losses and full charge-off of the bond totaling $5.0 million during the three months ended March 31, 2023. Valley also evaluated available for sale debt securities that are in an unrealized loss position as of June 30, 2023 included in the table above and has determined that the declines in fair value are mainly attributable to interest rates, credit spreads, market volatility and liquidity conditions, not credit quality or other factors. There was no impairment recognized during the three months ended June 30, 2023 and the three and six months ended June 30, 2022.
The following table details the activity in the allowance for credit losses for the six months ended June 30, 2023.
Six Months Ended June 30, 2023
(in thousands)
Beginning balance$— 
Provision for credit losses5,000 
Charge-offs(5,000)
Ending balance$— 
Valley does not intend to sell any of its available for sale debt securities in an unrealized loss position prior to recovery of their 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 their amortized cost basis. None of the available for sale debt securities were past due as of June 30, 2023 and there was no allowance for credit losses for available for sale debt securities at June 30, 2023, December 31, 2022 and June 30, 2022.
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Held to Maturity Debt Securities
The amortized cost, gross unrealized gains and losses and fair value of debt securities held to maturity at June 30, 2023 and December 31, 2022 were as follows: 
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair ValueAllowance for Credit LossesNet Carrying Value
 (in thousands)
June 30, 2023
U.S. Treasury securities$66,579 $— $(904)$65,675 $— $66,579 
U.S. government agency securities261,197 — (46,158)215,039 — 261,197 
Obligations of states and political subdivisions:
Obligations of states and state agencies88,561 91 (5,112)83,540 409 88,152 
Municipal bonds376,554 27 (21,130)355,451 57 376,497 
Total obligations of states and political subdivisions465,115 118 (26,242)438,991 466 464,649 
Residential mortgage-backed securities2,861,227 906 (400,614)2,461,519 — 2,861,227 
Trust preferred securities37,052 1 (7,709)29,344 559 36,493 
Corporate and other debt securities75,668 — (7,288)68,380 326 75,342 
Total $3,766,838 $1,025 $(488,915)$3,278,948 $1,351 $3,765,487 
December 31, 2022
U.S. Treasury securities$66,911 $— $(1,022)$65,889 $— $66,911 
U.S. government agency securities260,392 — (47,680)212,712 — 260,392 
Obligations of states and political subdivisions:
Obligations of states and state agencies99,238 305 (3,869)95,674 252 98,986 
Municipal bonds381,060 76 (23,615)357,521 41 381,019 
Total obligations of states and political subdivisions480,298 381 (27,484)453,195 293 480,005 
Residential mortgage-backed securities2,909,106 1,723 (415,032)2,495,797 — 2,909,106 
Trust preferred securities37,043 1 (5,938)31,106 888 36,155 
Corporate and other debt securities75,234 — (4,463)70,771 465 74,769 
Total $3,828,984 $2,105 $(501,619)$3,329,470 $1,646 $3,827,338 
Accrued interest on investments, which is excluded from the amortized cost of held to maturity debt securities, totaled $13.6 million and $13.5 million at June 30, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition. Held to maturity debt securities are carried net of an allowance for credit losses.
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The age of unrealized losses and fair value of related debt securities held to maturity at June 30, 2023 and December 31, 2022 were as follows: 
 Less than 12 MonthsMore than 12 MonthsTotal
 Fair ValueUnrealized
Losses		Fair ValueUnrealized
Losses		Fair ValueUnrealized
Losses
 (in thousands)
June 30, 2023
U.S. Treasury securities$30,998 $(598)$34,677 $(306)$65,675 $(904)
U.S. government agency securities— — 213,885 (46,158)213,885 (46,158)
Obligations of states and political subdivisions:
Obligations of states and state agencies
25,298 (623)44,869 (4,489)70,167 (5,112)
Municipal bonds84,224 (1,437)200,924 (19,693)285,148 (21,130)
Total obligations of states and political subdivisions
109,522 (2,060)245,793 (24,182)355,315 (26,242)
Residential mortgage-backed securities
182,290 (6,756)2,107,464 (393,858)2,289,754 (400,614)
Trust preferred securities— — 28,343 (7,709)28,343 (7,709)
Corporate and other debt securities18,056 (1,194)50,324 (6,094)68,380 (7,288)
Total$340,866 $(10,608)$2,680,486 $(478,307)$3,021,352 $(488,915)
December 31, 2022
U.S. Treasury securities$65,889 $(1,022)$— $— $65,889 $(1,022)
U.S. government agency securities209,863 (47,508)1,673 (172)211,536 (47,680)
Obligations of states and political subdivisions:
Obligations of states and state agencies62,443 (2,020)18,231 (1,849)80,674 (3,869)
Municipal bonds251,970 (20,457)15,534 (3,158)267,504 (23,615)
Total obligations of states and political subdivisions
314,413 (22,477)33,765 (5,007)348,178 (27,484)
Residential mortgage-backed securities
962,690 (109,532)1,413,590 (305,500)2,376,280 (415,032)
Trust preferred securities— — 30,105 (5,938)30,105 (5,938)
Corporate and other debt securities
57,245 (2,989)13,525 (1,474)70,770 (4,463)
Total$1,610,100 $(183,528)$1,492,658 $(318,091)$3,102,758 $(501,619)

Within the held to maturity portfolio, the total number of security positions in an unrealized loss position was 811 and 802 at June 30, 2023 and December 31, 2022, respectively.
As of June 30, 2023, the fair value of debt securities held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law was $2.4 billion.






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The contractual maturities of investments in debt securities held to maturity at June 30, 2023 are set forth in the table below. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.
 June 30, 2023
 Amortized
Cost		Fair
Value
 (in thousands)
Due in one year$68,033 $67,619 
Due after one year through five years126,908 123,033 
Due after five years through ten years95,472 87,948 
Due after ten years615,198 538,829 
Residential mortgage-backed securities2,861,227 2,461,519 
Total$3,766,838 $3,278,948 
Actual maturities of held to maturity debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty.
The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was 10.05 years at June 30, 2023.
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Credit Quality Indicators
Valley monitors the credit quality of the held to maturity debt securities through the use of the most current credit ratings from external rating agencies. The following table summarizes the amortized cost of held to maturity debt securities by external credit rating at June 30, 2023 and December 31, 2022.
AAA/AA/A RatedBBB ratedNon-investment grade ratedNon-ratedTotal
 (in thousands)
June 30, 2023
U.S. Treasury securities$66,579 $— $— $— $66,579 
U.S. government agency securities261,197 — — — 261,197 
Obligations of states and political subdivisions:
Obligations of states and state agencies65,768 — 5,416 17,377 88,561 
Municipal bonds321,860 — — 54,694 376,554 
Total obligations of states and political subdivisions
387,628 — 5,416 72,071 465,115 
Residential mortgage-backed securities2,861,227 — — — 2,861,227 
Trust preferred securities— — — 37,052 37,052 
Corporate and other debt securities— 6,000 — 69,668 75,668 
Total $3,576,631 $6,000 $5,416 $178,791 $3,766,838 
December 31, 2022
U.S. Treasury securities$66,911 $— $— $— $66,911 
U.S. government agency securities260,392 — — — 260,392 
Obligations of states and political subdivisions:
Obligations of states and state agencies74,943 — 5,497 18,798 99,238 
Municipal bonds333,488 — — 47,572 381,060 
Total obligations of states and political subdivisions
408,431 — 5,497 66,370 480,298 
Residential mortgage-backed securities2,909,106 — — — 2,909,106 
Trust preferred securities— — — 37,043 37,043 
Corporate and other debt securities2,000 6,000 — 67,234 75,234 
Total$3,646,840 $6,000 $5,497 $170,647 $3,828,984 
Obligations of states and political subdivisions include municipal bonds and revenue bonds issued by various municipal corporations. At June 30, 2023, most of the obligations of states and political subdivisions were rated investment grade and a large portion of the "non-rated" category included tax exempt mortgage securities (TEMS) secured by Ginnie Mae securities. Trust preferred securities consist of non-rated single-issuer securities, issued by bank holding companies. Corporate and other debt securities in the non-rated category mostly consist of high quality foreign issued bonds.
Allowance for Credit Losses for Held to Maturity Debt Securities
Valley has a zero-loss expectation for certain securities within the held to maturity portfolio, and therefore it is not required to estimate an allowance for credit losses related to these securities under the CECL standard. After an evaluation of qualitative factors, Valley identified the following securities types which it believes qualify for this exclusion: U.S. Treasury securities, U.S. government agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and TEMS collateralized municipal bonds.

25


The following table details the activity in the allowance for credit losses for the three and six months ended June 30, 2023 and 2022: 
Three months ended June 30,Six months ended June 30,
2023202220232022
(in thousands)
Beginning balance$1,633 $1,222 $1,646 $1,165 
(Credit) provision for credit losses(282)286 (295)343 
Ending balance$1,351 $1,508 $1,351 $1,508 
There were no sales of available for sale and held to maturity debt securities during the three and six months ended June 30, 2023 and 2022, respectively.
Note 8. Loans and Allowance for Credit Losses for Loans
The detail of the loan portfolio as of June 30, 2023 and December 31, 2022 was as follows: 
 June 30, 2023December 31, 2022
 (in thousands)
Loans:
Commercial and industrial$9,287,309 $8,804,830 
Commercial real estate:
Commercial real estate27,793,072 25,732,033 
Construction3,815,761 3,700,835 
Total commercial real estate loans31,608,833 29,432,868 
Residential mortgage5,560,356 5,364,550 
Consumer:
Home equity535,493 503,884 
Automobile1,632,875 1,746,225 
Other consumer1,252,382 1,064,843 
Total consumer loans3,420,750 3,314,952 
Total loans$49,877,248 $46,917,200 
Total loans include net unearned discounts and deferred loan fees of $119.1 million and $120.5 million at June 30, 2023 and December 31, 2022, respectively.
Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $202.1 million and $175.9 million at June 30, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition.
During the three months ended June 30, 2023, Valley transferred a non-performing construction loan totaling $10.0 million, net of $4.2 million charge-offs from the held for investment loan portfolio to loans held for sale. See Note 6 for further details. There were no sales of loans from the held for investment portfolio during the three and six months ended June 30, 2023 and 2022.
Credit Risk Management
For all of its loan types, Valley adheres to a credit policy designed to minimize credit risk while generating the maximum income given the level of risk appetite. Management reviews and approves these policies and procedures on a regular basis with subsequent approval by the Board of Directors annually. Credit authority relating to a
26


significant dollar percentage of the overall portfolio is centralized and controlled by the Credit Risk Management Division and by the Credit Committee. A reporting system supplements the management review process by providing management with frequent reports concerning loan production, loan quality, internal loan classification, concentrations of credit, loan delinquencies, non-performing, and potential problem loans. Loan portfolio diversification is an important factor utilized by Valley to manage its risk across business sectors and through cyclical economic circumstances. Additionally, Valley does not accept crypto assets as loan collateral for any of its loan portfolio classes. See Valley’s Annual Report on Form 10-K for the year ended December 31, 2022 for further details.
Credit Quality
The following table presents past due, current and non-accrual loans without an allowance for loan losses by loan portfolio class at June 30, 2023 and December 31, 2022:
Past Due and Non-Accrual Loans
 30-59  Days 
Past Due Loans		60-89  Days 
Past Due Loans		90 Days or More
Past Due Loans		Non-Accrual Loans
Total Past Due Loans
Current Loans
Total Loans		Non-Accrual Loans Without Allowance for Loan Losses
 (in thousands)
June 30, 2023
Commercial and industrial
$6,229 $7,468 $6,599 $84,449 $104,745 $9,182,564 $9,287,309 $8,221 
Commercial real estate:
Commercial real estate
3,612 — 2,242 82,712 88,566 27,704,506 27,793,072 76,438 
Construction— — 3,990 63,043 67,033 3,748,728 3,815,761 15,476 
Total commercial real estate loans3,612 — 6,232 145,755 155,599 31,453,234 31,608,833 91,914 
Residential mortgage15,565 1,348 1,165 20,819 38,897 5,521,459 5,560,356 16,151 
Consumer loans:
Home equity959 46 — 2,737 3,742 531,751 535,493 — 
Automobile5,963 568 332 248 7,111 1,625,764 1,632,875 — 
Other consumer1,509 3,512 674 83 5,778 1,246,604 1,252,382 — 
Total consumer loans8,431 4,126 1,006 3,068 16,631 3,404,119 3,420,750 — 
Total$33,837 $12,942 $15,002 $254,091 $315,872 $49,561,376 $49,877,248 $116,286 

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 Past Due and Non-Accrual Loans  
 
30-59
Days
Past Due Loans		60-89 
Days
Past Due Loans		90 Days or More
Past Due Loans		Non-Accrual Loans
Total Past Due Loans
Current Loans		Total LoansNon-Accrual Loans Without Allowance for Loan Losses
(in thousands)
December 31, 2022
Commercial and industrial$11,664 $12,705 $18,392 $98,881 $141,642 $8,663,188 $8,804,830 $5,659 
Commercial real estate:
Commercial real estate6,638 3,167 2,292 68,316 80,413 25,651,620 25,732,033 66,066 
Construction— — 3,990 74,230 78,220 3,622,615 3,700,835 16,120 
Total commercial real estate loans6,638 3,167 6,282 142,546 158,633 29,274,235 29,432,868 82,186 
Residential mortgage16,146 3,315 1,866 25,160 46,487 5,318,063 5,364,550 14,224 
Consumer loans:
Home equity955 254 — 2,810 4,019 499,865 503,884 117 
Automobile5,974 630 1 271 6,876 1,739,349 1,746,225 — 
Other consumer2,158 695 46 93 2,992 1,061,851 1,064,843 — 
Total consumer loans9,087 1,579 47 3,174 13,887 3,301,065 3,314,952 117 
Total$43,535 $20,766 $26,587 $269,761 $360,649 $46,556,551 $46,917,200 $102,186 

Credit quality indicators. Valley utilizes an internal loan classification system as a means of reporting problem loans within commercial and industrial, commercial real estate, and construction loan portfolio classes. Under Valley’s internal risk rating system, loan relationships could be classified as "Pass," "Special Mention," "Substandard," "Doubtful," and "Loss." Substandard loans include loans that exhibit well-defined weakness and are characterized by the distinct possibility that Valley will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, based on currently existing facts, conditions and values, highly questionable and improbable. Loans classified as Loss are those considered uncollectible with insignificant value and are charged-off immediately to the allowance for loan losses, and, therefore, not presented in the table below. Loans that do not currently pose a sufficient risk to warrant classification in one of the aforementioned categories but pose weaknesses that deserve management’s close attention are deemed Special Mention. Pass rated loans do not currently pose any identified risk and can range from the highest to average quality, depending on the degree of potential risk. Risk ratings are updated any time the situation warrants.
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The following table presents the internal loan classification risk by loan portfolio class by origination year based on the most recent analysis performed at June 30, 2023 and December 31, 2022, as well as the gross loan charge-offs by year of origination for the six months ended June 30, 2023:
 Term Loans  
Amortized Cost Basis by Origination Year
June 30, 202320232022202120202019Prior to 2019Revolving Loans Amortized Cost BasisRevolving Loans Converted to Term LoansTotal
 (in thousands)
Commercial and industrial
Risk Rating:
Pass$978,383 $1,233,039 $987,984 $490,159 $267,719 $565,910 $4,420,712 $306 $8,944,212 
Special Mention16,582 43,260 3,257 19,948 4,125 7,005 131,677 1,488 227,342 
Substandard6,056 754 3,288 1,706 1,703 2,819 25,681 — 42,007 
Doubtful1,500 669 2,768 — 2,674 63,427 2,710 — 73,748 
Total commercial and industrial$1,002,521 $1,277,722 $997,297 $511,813 $276,221 $639,161 $4,580,780 $1,794 $9,287,309 
Commercial real estate
Risk Rating:
Pass$3,006,116 $6,675,372 $4,997,069 $3,073,019 $2,453,918 $6,040,604 $542,644 $3,310 $26,792,052 
Special Mention86,078 52,939 51,208 111,268 100,524 205,971 6,621 — 614,609 
Substandard10,972 30,664 35,577 27,280 36,320 237,578 7,830 — 386,221 
Doubtful— — — 190 — — — — 190 
Total commercial real estate$3,103,166 $6,758,975 $5,083,854 $3,211,757 $2,590,762 $6,484,153 $557,095 $3,310 $27,793,072 
Construction
Risk Rating:
Pass$390,550 $702,031 $342,403 $32,129 $18,878 $20,230 $2,251,552 $— $3,757,773 
Substandard8,538 12,969 7,427 — 955 17,668 3,501 — 51,058 
Doubtful— 6,930 — — — — — — 6,930 
Total construction$399,088 $721,930 $349,830 $32,129 $19,833 $37,898 $2,255,053 $— $3,815,761 
Gross loan charge-offs $— $7,288 $24,658 $6,479 $908 $2,524 $26 $— $41,883 


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 Term Loans  
Amortized Cost Basis by Origination Year
December 31, 202220222021202020192018Prior to 2018Revolving Loans Amortized Cost BasisRevolving Loans Converted to Term LoansTotal
 (in thousands)
Commercial and industrial
Risk Rating:
Pass$1,600,747 $1,089,386 $590,406 $322,564 $250,031 $386,085 $4,307,163 $144 $8,546,526 
Special Mention31,557 3,367 19,492 4,732 4,369 3,558 51,021 7 118,103 
Substandard288 1,734 4,121 1,412 4,256 4,879 31,698 — 48,388 
Doubtful886 20,844 — 2,692 — 64,158 3,233 — 91,813 
Total commercial and industrial$1,633,478 $1,115,331 $614,019 $331,400 $258,656 $458,680 $4,393,115 $151 $8,804,830 
Commercial real estate
Risk Rating:
Pass$6,815,115 $5,168,127 $3,246,885 $2,672,223 $1,536,327 $5,027,128 $452,461 $3,504 $24,921,770 
Special Mention93,286 48,007 60,169 45,447 62,111 125,414 8,188 — 442,622 
Substandard15,088 34,475 32,630 34,622 59,337 183,341 7,986 — 367,479 
Doubtful— — — — — 162 — — 162 
Total commercial real estate$6,923,489 $5,250,609 $3,339,684 $2,752,292 $1,657,775 $5,336,045 $468,635 $3,504 $25,732,033 
Construction
Risk Rating:
Pass$942,380 $512,046 $61,131 $22,845 $8,676 $20,599 $2,040,866 $— $3,608,543 
Special Mention— — — — — — 14,268 — 14,268 
Substandard12,969 12,601 — 974 — 17,599 20,138 — 64,281 
Doubtful— — — — — 13,743 — — 13,743 
Total construction$955,349 $524,647 $61,131 $23,819 $8,676 $51,941 $2,075,272 $— $3,700,835 
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For residential mortgages, automobile, home equity and other consumer loan portfolio classes, Valley also evaluates credit quality based on the aging status of the loan and by payment activity. The following table presents the amortized cost in those loan classes based on payment activity, by origination year as of June 30, 2023 and December 31, 2022, as well as the gross loan charge-offs by year of origination for the six months ended June 30, 2023:
 Term Loans  
Amortized Cost Basis by Origination Year
June 30, 202320232022202120202019Prior to 2019Revolving Loans Amortized Cost BasisRevolving Loans Converted to Term LoansTotal
 (in thousands)
Residential mortgage
Performing$369,607 $1,304,327 $1,524,988 $562,263 $455,463 $1,263,659 $73,983 $— $5,554,290 
90 days or more past due— 178 — — 797 5,091 — — 6,066 
Total residential mortgage $369,607 $1,304,505 $1,524,988 $562,263 $456,260 $1,268,750 $73,983 $— $5,560,356 
Consumer loans
Home equity
Performing$19,442 $45,601 $11,873 $4,326 $4,660 $17,396 $392,898 $38,391 $534,587 
90 days or more past due— — — — — — 263 643 906 
Total home equity19,442 45,601 11,873 4,326 4,660 17,396 393,161 39,034 535,493 
Automobile
Performing205,170 633,269 437,528 161,245 123,616 71,682 — — 1,632,510 
90 days or more past due47 105 73 — 9 131 — — 365 
Total automobile205,217 633,374 437,601 161,245 123,625 71,813 — — 1,632,875 
Other consumer
Performing17,973 20,979 (1,549)3,729 8,720 12,707 1,189,191 — 1,251,750 
90 days or more past due— — — — — 38 594 — 632 
Total other consumer17,973 20,979 (1,549)3,729 8,720 12,745 1,189,785 — 1,252,382 
Total consumer$242,632 $699,954 $447,925 $169,300 $137,005 $101,954 $1,582,946 $39,034 $3,420,750 
Gross loan charge-offs $11 $226 $206 $90 $428 $953 $103 $— $2,017 

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 Term Loans  
Amortized Cost Basis by Origination Year
December 31, 202220222021202020192018Prior to 2018Revolving Loans Amortized Cost BasisRevolving Loans Converted to Term LoansTotal
 (in thousands)
Residential mortgage
Performing$1,302,279 $1,502,622 $571,390 $500,197 $338,062 $1,073,995 $66,706 $— $5,355,251 
90 days or more past due— 197 217 1,835 2,876 4,174 — — 9,299 
Total residential mortgage $1,302,279 $1,502,819 $571,607 $502,032 $340,938 $1,078,169 $66,706 $— $5,364,550 
Consumer loans
Home equity
Performing$47,084 $12,432 $4,592 $5,024 $5,581 $13,007 $376,608 $38,570 $502,898 
90 days or more past due— — — — — — 276 710 986 
Total home equity47,084 12,432 4,592 5,024 5,581 13,007 376,884 39,280 503,884 
Automobile
Performing724,557 525,017 204,578 166,103 80,012 45,415 — — 1,745,682 
90 days or more past due38 116 36 180 101 72 — — 543 
Total automobile724,595 525,133 204,614 166,283 80,113 45,487 — — 1,746,225 
Other consumer
Performing24,140 10,144 8,206 7,435 7,406 15,736 991,737 — 1,064,804 
90 days or more past due— — — — — 38 1 — 39 
Total other consumer24,140 10,144 8,206 7,435 7,406 15,774 991,738 — 1,064,843 
Total consumer$795,819 $547,709 $217,412 $178,742 $93,100 $74,268 $1,368,622 $39,280 $3,314,952 

Loan modifications to borrowers experiencing financial difficulty. From time to time, Valley may extend, restructure, or otherwise modify the terms of existing loans, on a case-by-case basis, to remain competitive and retain certain customers, as well as assist other customers who may be experiencing financial difficulties. Prior to 2023, a loan was classified as a troubled debt restructuring (TDR) if the borrower was experiencing financial difficulties and a concession has been made at the time of such modification.
Effective January 1, 2023, Valley adopted ASU No. 2022-02 which eliminated the accounting guidance for TDR loans while enhancing disclosure requirements for certain loan modifications by creditors when a borrower is experiencing financial difficulty. Valley adopted ASU No. 2022-02 using the modified retrospective transition method. At the date of adoption, Valley was no longer required to utilize a loan-level discounted cash flow approach for determining the allowance for certain modified loans previously classified as TDR loans. As a result, Valley elected to utilize its collective reserve methodology for pools of loans that share common risk characteristic for determining the reserves for the modified loans formerly classified as TDR loans. This change resulted in the recognition of a cumulative-effect adjustment which decreased the allowance for loan losses with an offsetting entry to retained earnings, net of deferred taxes, at January 1, 2023.
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The following table shows the amortized cost basis of loans to borrowers experiencing financial difficulty at June 30, 2023 that were modified during the three and six months ended June 30, 2023, disaggregated by class of financing receivable and type of modification. Each of the types of modifications was less than one percent of their respective loan categories.
Three Months Ended
June 30, 2023		Six Months Ended
June 30, 2023
Term extensionTerm extension and interest rate reductionTotalTerm extensionTerm extension and interest rate reductionTotal
 ($ in thousands)
Commercial and industrial$37,762 $1,482 $39,244 $39,033 $2,003 $41,036 
Commercial real estate3,512 3,754 7,266 49,617 3,754 53,371 
Residential mortgage578 — 578 790 — 790 
Consumer— — — 53 — 53 
Total$41,852 $5,236 $47,088 $89,493 $5,757 $95,250 
The following table describes the types of modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023:
Types of Modifications
Commercial and industrial
12 month term extensions; and one 12 month term extension combined with a reduction in interest rate from 9.38 percent to 6.50 percent
Commercial real estate
6 to 36 month term extensions and one term extension combined with a reduction in interest rate from 8.75 percent to 6.00 percent
Residential mortgage
12 month term extensions
Consumer
60 month term extensions
Valley closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of modification efforts. All loans to borrowers experiencing financial difficulty that have been modified during the three and six months ended June 30, 2023 were current to their contractual payments as of June 30, 2023.
Valley did not extend any commitments to lend additional funds to borrowers experiencing financial difficulty whose loans had been modified during the three and six months ended June 30, 2023.
Troubled debt restructured loans. The following tables present the pre- and post-modification amortized cost of TDR loans by loan class during the three and six months ended June 30, 2022. Post-modification amounts are presented as of June 30, 2022 using the allowance methodology for TDRs prior to the adoption of ASU 2022-02.
Three Months Ended
June 30, 2022
Troubled Debt RestructuringsNumber
of
Contracts		Pre-Modification
Outstanding Recorded Investment		Post-Modification
Outstanding Recorded Investment
 ($ in thousands)
Commercial and industrial49 $82,120 $78,051 
Commercial real estate1 8,811 8,735 
Residential mortgage7 4,970 4,969 
Consumer1 125 124 
Total58 $96,026 $91,879 
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Six Months Ended
June 30, 2022
Troubled Debt RestructuringsNumber
of
Contracts		Pre-Modification
Outstanding Recorded Investment		Post-Modification
Outstanding Recorded Investment
 ($ in thousands)
Commercial and industrial60 $91,804 $87,685 
Commercial real estate3 14,072 13,986 
Residential mortgage8 5,090 5,087 
Consumer1 125 124 
Total72 $111,091 $106,882 
The total TDRs presented in the above tables had allocated allowance for loan losses of $56.0 million at June 30, 2022. There were $1.5 million in charge-offs related to TDRs for the three and six months ended June 30, 2022. Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the three and six months ended June 30, 2022.
Performing TDRs (not reported as non-accrual loans) and non-performing TDRs totaled $67.3 million and $154.4 million as of June 30, 2022.
Loans modified as TDRs within the previous 12 months and for which there was a payment default (90 or more days past due) for the three and six months ended June 30, 2022 were as follows:
 Three Months Ended
June 30, 2022		Six Months Ended
June 30, 2022
Troubled Debt Restructurings Subsequently DefaultedNumber of
Contracts		Recorded
Investment		Number of
Contracts		Recorded
Investment
 ($ in thousands)
Construction2 $17,599 2 $17,599 
Total2 $17,599 2 $17,599 
Loans in process of foreclosure. Other real estate owned (OREO) totaled $824 thousand and $286 thousand at June 30, 2023 and December 31, 2022, respectively. There were no foreclosed residential real estate properties included in OREO at June 30, 2023 and December 31, 2022. Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $454 thousand and $2.6 million at June 30, 2023 and December 31, 2022, respectively.
Collateral dependent loans. Loans are collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. When Valley determines that foreclosure is probable, the collateral dependent loan balances are written down to the estimated current fair value (less estimated selling costs) resulting in an immediate charge-off to the allowance, excluding any consideration for personal guarantees that may be pursued in the Bank’s collection process.
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The following table presents collateral dependent loans by class as of June 30, 2023 and December 31, 2022:
 June 30,
2023		December 31,
2022
 (in thousands)
Collateral dependent loans:
Commercial and industrial *$77,364 $94,433 
Commercial real estate138,032 130,199 
Residential mortgage16,151 33,865 
Home equity— 195 
Total $231,547 $258,692 
* Commercial and industrial loans presented in the table above are primarily collateralized by taxi medallions.
Allowance for Credit Losses for Loans
The allowance for credit losses (ACL) for loans consists of the allowance for loan losses and the allowance for unfunded credit commitments. The ACL for loans decreased $24.6 million at June 30, 2023 as compared to December 31, 2022.
The following table summarizes the ACL for loans at June 30, 2023 and December 31, 2022: 
June 30,
2023		December 31,
2022
 (in thousands)
Components of allowance for credit losses for loans:
Allowance for loan losses$436,432 $458,655 
Allowance for unfunded credit commitments22,244 24,600 
Total allowance for credit losses for loans$458,676 $483,255 
The following table summarizes the provision for credit losses for loans for the periods indicated:
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
 (in thousands)
Components of provision for credit losses for loans:
Provision for loan losses$8,159 $38,310 $18,138 $41,568 
(Credit) provision for unfunded credit commitments(1,827)5,402 (2,356)5,644 
Total provision for credit losses for loans$6,332 $43,712 $15,782 $47,212 
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The following table details the activity in the allowance for loan losses by loan portfolio segment for the three and six months ended June 30, 2023 and 2022: 
Commercial
and Industrial		Commercial
Real Estate		Residential
Mortgage		ConsumerTotal
 (in thousands)
Three Months Ended
June 30, 2023
Allowance for loan losses:
Beginning balance$127,992 $243,332 $41,708 $23,866 $436,898 
Loans charged-off(3,865)(6,273)(149)(1,040)(11,327)
Charged-off loans recovered 2,173 4 135 390 2,702 
Net charge-offs(1,692)(6,269)(14)(650)(8,625)
Provision for loan losses1,945 2,632 2,459 1,123 8,159 
Ending balance$128,245 $239,695 $44,153 $24,339 $436,432 
Three Months Ended
June 30, 2022
Allowance for loan losses:
Beginning balance$101,203 $219,949 $28,189 $13,169 $362,510 
Allowance for purchased credit deteriorated (PCD) loans *33,452 36,618 206 43 70,319 
Loans charged-off (4,540)— (1)(726)(5,267)
Charged-off loans recovered 1,952 224 74 697 2,947 
Net (charge-offs) recoveries(2,588)224 73 (29)(2,320)
Provision for loan losses12,472 20,436 1,421 3,981 38,310 
Ending balance$144,539 $277,227 $29,889 $17,164 $468,819 
Six Months Ended
June 30, 2023
Allowance for loan losses:
Beginning balance$139,941 $259,408 $39,020 $20,286 $458,655 
Impact of the adoption of ASU No. 2022-02
(739)(589)(12)(28)(1,368)
Beginning balance, adjusted$139,202 $258,819 $39,008 $20,258 $457,287 
Loans charged-off(29,912)(11,971)(149)(1,868)(43,900)
Charged-off loans recovered 3,572 28 156 1,151 4,907 
Net (charge-offs) recoveries(26,340)(11,943)7 (717)(38,993)
Provision (credit) for loan losses15,383 (7,181)5,138 4,798 18,138 
Ending balance$128,245 $239,695 $44,153 $24,339 $436,432 
Six Months Ended
June 30, 2022
Allowance for loan losses:
Beginning balance$103,090 $217,490 $25,120 $13,502 $359,202 
Allowance for PCD loans *33,452 36,618 206 43 70,319 
Loans charged-off (6,111)(173)(27)(1,551)(7,862)
Charged-off loans recovered 2,776 331 531 1,954 5,592 
Net (charge-offs) recoveries(3,335)158 504 403 (2,270)
Provision for loan losses11,332 22,961 4,059 3,216 41,568 
Ending balance$144,539 $277,227 $29,889 $17,164 $468,819 
*    Represents the allowance for acquired PCD loans, net of PCD loan charge-offs totaling $62.4 million in the second quarter 2022.
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The following table represents the allocation of the allowance for loan losses and the related loans by loan portfolio segment disaggregated based on the allowance measurement methodology at June 30, 2023 and December 31, 2022.
Commercial and IndustrialCommercial
Real Estate		Residential
Mortgage		ConsumerTotal
 (in thousands)
June 30, 2023
Allowance for loan losses:
Individually evaluated for credit losses$54,311 $6,749 $34 $— $61,094 
Collectively evaluated for credit losses73,934 232,946 44,119 24,339 375,338 
Total$128,245 $239,695 $44,153 $24,339 $436,432 
Loans:
Individually evaluated for credit losses$77,364 $138,032 $16,151 $— $231,547 
Collectively evaluated for credit losses9,209,945 31,470,801 5,544,205 3,420,750 49,645,701 
Total$9,287,309 $31,608,833 $5,560,356 $3,420,750 $49,877,248 
December 31, 2022
Allowance for loan losses:
Individually evaluated for credit losses$68,745 $13,174 $337 $4,338 $86,594 
Collectively evaluated for credit losses71,196 246,234 38,683 15,948 372,061 
Total$139,941 $259,408 $39,020 $20,286 $458,655 
Loans:
Individually evaluated for credit losses$117,644 $213,522 $28,869 $14,058 $374,093 
Collectively evaluated for credit losses8,687,186 29,219,346 5,335,681 3,300,894 46,543,107 
Total$8,804,830 $29,432,868 $5,364,550 $3,314,952 $46,917,200 
Note 9. Goodwill and Other Intangible Assets
The carrying amounts of goodwill allocated to Valley's business segments, or reporting units thereof, for goodwill impairment analysis at both June 30, 2023 and December 31, 2022 were as follows:
Business Segment / Reporting Unit *
Wealth
Management		Consumer
Banking		Commercial
Banking		Total
(in thousands)
$49,767 $284,873 $1,534,296 $1,868,936 
*    Valley’s Wealth Management and Insurance Division is comprised of trust, asset management, brokerage, insurance and tax credit advisory services. This reporting unit is included in the Consumer Banking segment for financial reporting purposes.
During the second quarter 2023, Valley performed the annual goodwill impairment test at its normal assessment date. The results of the 2023 annual impairment test resulted in no impairment of goodwill. During the six months ended June 30, 2023, there were no triggering events that would more likely than not reduce the fair value of any reporting unit below its carrying amount. There was no impairment of goodwill recognized during the three and six months ended June 30, 2022.
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The following table summarizes other intangible assets as of June 30, 2023 and December 31, 2022: 
Gross
Intangible
Assets		Accumulated
Amortization		Net
Intangible
Assets
 (in thousands)
June 30, 2023
Loan servicing rights$120,764 $(98,453)$22,311 
Core deposits215,620 (99,129)116,491 
Other50,393 (11,249)39,144 
Total other intangible assets$386,777 $(208,831)$177,946 
December 31, 2022
Loan servicing rights$119,943 $(96,136)$23,807 
Core deposits223,670 (92,486)131,184 
Other51,299 (8,834)42,465 
Total other intangible assets$394,912 $(197,456)$197,456 
Loan servicing rights are accounted for using the amortization method. Under this method, Valley amortizes the loan servicing assets over the period of the economic life of the assets arising from estimated net servicing revenues. On a quarterly basis, Valley stratifies its loan servicing assets into groupings based on risk characteristics and assesses each group for impairment based on fair value. Impairment charges on loan servicing rights are recognized in earnings when the book value of a stratified group of loan servicing rights exceeds its estimated fair value. There was no net impairment recognized during the three and six months ended June 30, 2023 and 2022.
Core deposits are amortized using an accelerated method over a period of 10.0 years. The line item labeled “Other” included in the table above primarily consists of customer lists, certain financial asset servicing contracts and covenants not to compete, which are amortized over their expected lives generally using a straight-line method and have a weighted average amortization period of approximately 13.4 years.
Valley evaluates core deposits and other intangibles for impairment when an indication of impairment exists. No impairment was recognized during the three and six months ended June 30, 2023 and 2022.
The following table presents the estimated future amortization expense of other intangible assets for the remainder of 2023 through 2027: 
YearLoan Servicing
Rights		Core
Deposits		Other
 (in thousands)
2023$1,579 $14,054 $3,201 
20242,863 24,897 5,951 
20252,506 21,048 5,380 
20262,181 17,223 4,805 
20271,890 13,544 4,205 
Valley recognized amortization expense on other intangible assets totaling approximately $9.8 million and $11.4 million for the three months ended June 30, 2023 and 2022, respectively and $20.3 million and $15.8 million for the six months ended June 30, 2023 and 2022, respectively.

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Note 10. Deposits
Included in time deposits are certificates of deposit over $250 thousand totaling $2.0 billion and $1.8 billion at June 30, 2023 and December 31, 2022, respectively. Interest expense on time deposits of $250 thousand or more totaled $5.1 million and $444 thousand for the three months ended June 30, 2023 and 2022, respectively and $7.5 million and $545 thousand for the six months ended June 30, 2023 and 2022, respectively.
The scheduled maturities of time deposits as of June 30, 2023 were as follows: 
YearAmount
 (in thousands)
20238,020,778 
20246,574,934 
202570,994 
2026160,144 
202741,691 
Thereafter39,641 
Total time deposits$14,908,182 
Note 11. Borrowed Funds
Short-Term Borrowings
Short-term borrowings at June 30, 2023 and December 31, 2022 consisted of the following:
June 30, 2023December 31, 2022
 (in thousands)
FHLB advances$1,000,000 $24,035 
Securities sold under agreements to repurchase88,899 114,694 
Total short-term borrowings$1,088,899 $138,729 
The weighted average interest rate for short-term FHLB advances was 5.30 percent and 1.60 percent at June 30, 2023 and December 31, 2022, respectively.
Long-Term Borrowings
Long-term borrowings at June 30, 2023 and December 31, 2022 consisted of the following:
June 30, 2023December 31, 2022
 (in thousands)
FHLB advances, net (1)
$1,688,311 $788,419 
Subordinated debt, net (2)
755,222 754,639 
Total long-term borrowings$2,443,533 $1,543,058 
(1)
FHLB advances are presented net of unamortized premiums totaling $311 thousand and $419 thousand at June 30, 2023 and December 31, 2022, respectively.
(2)
Subordinated debt is presented net of unamortized debt issuance costs totaling $6.0 million and $6.9 million at June 30, 2023 and December 31, 2022, respectively.
FHLB Advances. Long-term FHLB advances had a weighted average interest rate of 3.75 percent and 1.88 percent at June 30, 2023 and December 31, 2022, respectively. FHLB advances are secured by pledges of certain eligible collateral, including but not limited to, U.S. government and agency mortgage-backed securities and a blanket
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assignment of qualifying first lien mortgage loans, consisting of both residential mortgage and commercial real estate loans.

The long-term FHLB advances at June 30, 2023 are scheduled for contractual balance repayments as follows:
YearAmount
 (in thousands)
2024$165,000 
2025273,000 
2026350,000 
2027675,000 
Thereafter225,000 
Total long-term FHLB advances$1,688,000 
There are no FHLB advances reported in the table above, which are callable for early redemption by the FHLB during the next 12 months.
Subordinated debt. There were no new issuances of the subordinated debt during the six months ended June 30, 2023. See Note 10 in Valley’s Annual Report on Form 10-K for the year ended December 31, 2022 for details on the outstanding subordinated debt.
Note 12. Stock–Based Compensation
On April 25, 2023, Valley's shareholders approved the Valley National Bancorp 2023 Incentive Compensation Plan (the 2023 Plan). The purpose of the 2023 Plan is to provide additional long-term incentives to employees, directors and officers whose contributions are essential to the continued growth and success of Valley. Upon shareholder approval of the 2023 Plan, Valley ceased granting awards under the Valley National Bancorp 2021 Incentive Compensation Plan (the 2021 Plan). Under the 2023 Plan, Valley may issue awards to its officers, employees and non-employee directors in amounts up to 14.5 million shares of common stock, less one share for every share granted after December 31, 2022 under the 2021 Plan.
Restricted stock units are awarded as performance-based RSUs and time-based RSUs. The performance-based RSU awards are granted to certain officers and include RSUs with vesting conditions based upon certain levels of growth in Valley's tangible book value per share, plus dividends; and RSUs, with vesting conditions based upon Valley's total shareholder return as compared to its peer group.
The table below summarizes RSU awards granted and average grant date fair values for the three and six months ended June 30, 2023 and 2022:
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
(in thousands, except per share data)
Award shares granted:
Performance-based RSUs — 52 723 619 
Time-based RSUs178 937 1,731 2,104 
Average grant date fair value per share:
Performance-based RSUs $— $13.60 $12.80 $14.72 
Time-based RSUs$8.35 $12.85 $11.55 $13.51 
Stock award fair values are expensed over the shorter of the vesting or required service period. Valley recorded total stock-based compensation expense of $8.7 million and $6.2 million for the three months ended June 30, 2023
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and 2022, respectively and $16.8 million and $13.4 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, the unrecognized amortization expense for all stock-based employee compensation totaled approximately $49.4 million. This expense will be recognized over an average remaining vesting period of approximately 2.0 years. See Note 12 in Valley’s Annual Report on Form 10-K for the year ended December 31, 2022 for details on the stock-based compensation awards.
Note 13. Derivative Instruments and Hedging Activities
Valley enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest and currency rates.
Cash Flow Hedges of Interest Rate Risk. Valley’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, Valley uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the payment of either fixed or variable-rate amounts in exchange for the receipt of variable or fixed-rate amounts from a counterparty, respectively.
During the second quarter 2023, Valley terminated six interest rate swaps with a total notional amount of $600 million. The terminated swaps, originally maturing between November 2024 to November 2026, were used to hedge the changes in cash flows associated with certain variable rate loans. The transaction resulted in a pre-tax gain totaling $3.6 million reported in accumulated other comprehensive loss within shareholders' equity that will be amortized to interest income over the life of the previously hedged loans.
Fair Value Hedges of Fixed Rate Assets and Liabilities. Valley is exposed to changes in the fair value of fixed-rate subordinated debt due to changes in interest rates. Valley uses interest rate swaps to manage its exposure to changes in fair value on fixed rate debt instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the receipt of variable rate payments from a counterparty in exchange for Valley making fixed rate payments over the life of the agreements without the exchange of the underlying notional amount. For derivatives that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the loss or gain on the hedged item attributable to the hedged risk are recognized in earnings.
Non-designated Hedges. Derivatives not designated as hedges may be used to manage Valley’s exposure to interest rate movements or to provide a service to customers but do not meet the requirements for hedge accounting under U.S. GAAP. Derivatives not designated as hedges are not entered into for speculative purposes. Valley executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Valley executes with a third party, such that Valley minimizes its net risk exposure resulting from such transactions. As these interest rate swaps do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.
Valley sometimes enters into risk participation agreements with external lenders where the banks are sharing their risk of default on the interest rate swaps on participated loans. Valley either pays or receives a fee depending on the participation type. Risk participation agreements are credit derivatives not designated as hedges. Credit derivatives are not speculative and are not used to manage interest rate risk in assets or liabilities. Changes in the fair value in credit derivatives are recognized directly in earnings. At June 30, 2023, Valley had 36 credit swaps with an aggregate notional amount of $492.8 million related to risk participation agreements. 
At June 30, 2023, Valley had two “steepener” swaps, each with a current notional amount of $10.4 million where the receive rate on the swap mirrors the pay rate on the brokered deposits and the rates paid on these types of hybrid instruments are based on a formula derived from the spread between the long and short ends of the constant maturity swap (CMS) rate curve. Although these types of instruments do not meet the hedge accounting requirements, the change in fair value of both the bifurcated derivative and the stand alone swap tend to move in
41


opposite directions with changes in the three-month LIBOR rate (modified to the three-month Term SOFR rate effective July 1, 2023) and, therefore, provide an effective economic hedge.
Valley regularly enters into mortgage banking derivatives which are non-designated hedges. These derivatives include interest rate lock commitments provided to customers to fund certain residential mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. Valley enters into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rate on Valley's commitments to fund the loans as well as on its portfolio of mortgage loans held for sale.
Valley enters into foreign currency forward and option contracts, primarily to accommodate our customers, that are not designated as hedging instruments. Upon the origination of a certain foreign currency denominated transactions (including foreign currency holdings and non-U.S. dollar denominated loans) with a client, we enter into a respective hedging contract with a third party financial institution to mitigate the economic impact of foreign currency exchange rate fluctuation.
Amounts included in the consolidated statements of financial condition related to the fair value of Valley’s derivative financial instruments were as follows: 
 June 30, 2023December 31, 2022
 Fair ValueFair Value
Other AssetsOther LiabilitiesNotional AmountOther AssetsOther LiabilitiesNotional Amount
 (in thousands)
Derivatives designated as hedging instruments:
Cash flow hedge interest rate swaps
$— $— $— $3,971 $4 $600,000 
Fair value hedge interest rate swaps — 28,992 300,000 — 29,794 300,000 
Total derivatives designated as hedging instruments$— $28,992 $300,000 $3,971 $29,798 $900,000 
Derivatives not designated as hedging instruments:
Interest rate swaps and other contracts*
$548,592 $548,217 $15,837,195 $449,280 $564,678 $14,753,330 
Foreign currency derivatives22,635 21,710 1,331,575 13,709 12,604 1,273,735 
Mortgage banking derivatives393 307 105,948 167 157 31,299 
Total derivatives not designated as hedging instruments
$571,620 $570,234 $17,274,718 $463,156 $577,439 $16,058,364 
* Other derivative contracts include risk participation agreements.
During the second quarter 2023, certain cash flow hedges and other non-designated derivative hedging instruments previously cleared through the Chicago Mercantile Exchange and London Clearing House were no longer subject to the variation margin netting under the single-unit of account. At December 31, 2022, fair value of these non-designated derivative instruments were reported net of variation margin as settlements using a single-unit of account.


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Gains (losses) included in the consolidated statements of income and other comprehensive loss, on a pre-tax basis, related to interest rate derivatives designated as hedges of cash flows were as follows: 
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
 (in thousands)
Amount of (loss) gain reclassified from accumulated other comprehensive loss to interest income and expense$(725)$116 $(1,256)$(426)
Amount of (loss) gain recognized in other comprehensive loss(4,991)121 (1,093)441 
The accumulated after-tax gains related to effective cash flow hedges included in accumulated other comprehensive loss were $2.4 million and $2.2 million at June 30, 2023 and December 31, 2022, respectively.
Amounts reported in accumulated other comprehensive loss related to cash flow interest rate derivatives are reclassified to interest income and expense as interest payments are received and paid on the hedged variable interest rate assets and liabilities. Valley estimates that $1.2 million and $238 thousand (before tax) will be reclassified as an increase to interest income and a decrease to interest expense, respectively, over the next 12 months.
(Losses) gains included in the consolidated statements of income related to interest rate derivatives designated as hedges of fair value were as follows: 
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
 (in thousands)
Derivative - interest rate swap:
Interest expense$(3,790)$76 $902 $606 
Hedged item - subordinated debt
Interest expense$3,952 $(147)$(820)$(477)
The changes in the fair value of the hedged item designated as a qualifying hedge are captured as an adjustment to the carrying amount of the hedged item (basis adjustment). The following table presents the hedged item related to interest rate derivatives designated as fair value hedges and the cumulative basis fair value adjustment included in the net carrying amount of the hedged item at June 30, 2023 and December 31, 2022, respectively.
Line Item in the Statement of Financial Position in Which the Hedged Item is IncludedNet Carrying Amount of the Hedged Liability *Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
(in thousands)
June 30, 2023
Long-term borrowings$268,300 $(29,312)
December 31, 2022
Long-term borrowings$267,076 $(30,132)

*    Net carrying amount includes unamortized debt issuance costs of $2.4 million and $2.8 million at June 30, 2023 and December 31, 2022, respectively.
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The net (gains) losses included in the consolidated statements of income related to derivative instruments not designated as hedging instruments were as follows: 
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
 (in thousands)
Non-designated hedge interest rate swaps and credit derivatives
Other non-interest expense$(368)$1,143 $(160)$(1,654)
Capital markets income reported in non-interest income included fee income related to non-designated hedge derivative interest rate swaps executed with commercial loan customers and foreign exchange contracts (not designated as hedging instruments) with a combined total of $14.1 million and $13.2 million for the three months ended June 30, 2023 and 2022, respectively and $24.0 million and $27.6 million for the six months ended June 30, 2023 and 2022, respectively.
Collateral Requirements and Credit Risk Related Contingent Features. By using derivatives, Valley is exposed to credit risk if counterparties to the derivative contracts do not perform as expected. Management attempts to minimize counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral where appropriate. Credit risk exposure associated with derivative contracts is managed at Valley in conjunction with Valley’s consolidated counterparty risk management process. Valley’s counterparties and the risk limits monitored by management are periodically reviewed and approved by the Board of Directors.
Valley has agreements with its derivative counterparties providing that if Valley defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Valley could also be declared in default on its derivative counterparty agreements. Additionally, Valley has an agreement with several of its derivative counterparties that contains provisions that require Valley’s debt to maintain an investment grade credit rating from each of the major credit rating agencies from which it receives a credit rating. If Valley’s credit rating is reduced below investment grade, or such rating is withdrawn or suspended, then the counterparties could terminate the derivative positions and Valley would be required to settle its obligations under the agreements. As of June 30, 2023, Valley was in compliance with all of the provisions of its derivative counterparty agreements. The aggregate fair value of all derivative financial instruments with credit risk-related contingent features in a net liability position at June 30, 2023 was not material. Valley has derivative counterparty agreements that require minimum collateral posting thresholds for certain counterparties.
Note 14. Balance Sheet Offsetting
Certain financial instruments, including certain over-the-counter (OTC) derivatives (mostly interest rate swaps) and repurchase agreements (accounted for as secured long-term borrowings), may be eligible for offset in the consolidated statements of financial condition and/or subject to master netting arrangements or similar agreements. OTC derivatives include interest rate swaps executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house (presented in the table below). The credit risk associated with bilateral OTC derivatives is managed through obtaining collateral and enforceable master netting agreements.
Valley is party to master netting arrangements with its financial institution counterparties; however, Valley does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of cash or marketable investment securities, is posted by the counterparty with net liability positions in accordance with contract thresholds. Master repurchase agreements which include “right of set-off” provisions generally have a legally enforceable right to offset recognized amounts. In such cases, the collateral would be used to settle the fair value of the swap or repurchase agreement should Valley be in default. The total amount of collateral held or pledged cannot exceed the net derivative fair values with the counterparty.
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The table below presents information about Valley’s financial instruments eligible for offset in the consolidated statements of financial condition as of June 30, 2023 and December 31, 2022.
    Gross Amounts Not Offset 
 Gross Amounts
Recognized		Gross Amounts
Offset		Net Amounts
Presented		Financial
Instruments		Cash
Collateral *		Net
Amount
 (in thousands)
June 30, 2023
Assets
Interest rate swaps $548,592 $— $548,592 $9,929 $(468,200)$90,321 
Liabilities
Interest rate swaps$577,209 $— $577,209 $(9,929)$— $567,280 
December 31, 2022
Assets
Interest rate swaps$453,251 $— $453,251 $12,766 $(342,480)$123,537 
Liabilities
Interest rate swaps$594,476 $— $594,476 $(12,766)$(432)$581,278 
*    Cash collateral received from or pledged to our counterparties in relation to market value exposures of OTC derivative contacts in an asset/liability position.
Note 15. Tax Credit Investments
Valley’s tax credit investments are primarily related to investments promoting qualified affordable housing projects, and other investments related to community development and renewable energy sources. Some of these tax-advantaged investments support Valley’s regulatory compliance with the Community Reinvestment Act. Valley’s investments in these entities generate a return primarily through the realization of federal income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These tax credits and deductions are recognized as a reduction of income tax expense.
Valley’s tax credit investments are carried in other assets on the consolidated statements of financial condition. Valley’s unfunded capital and other commitments related to the tax credit investments are carried in accrued expenses and other liabilities on the consolidated statements of financial condition. Valley recognizes amortization of tax credit investments, including impairment losses, within non-interest expense in the consolidated statements of income using the equity method of accounting. After initial measurement, the carrying amounts of tax credit investments with non-readily determinable fair values are increased to reflect Valley's share of income of the investee and are reduced to reflect its share of losses of the investee, dividends received and impairments, if applicable.
The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at June 30, 2023 and December 31, 2022:
June 30,
2023		December 31,
2022
(in thousands)
Other Assets:
Affordable housing tax credit investments, net$21,427 $24,198 
Other tax credit investments, net80,145 56,551 
Total tax credit investments, net
$101,572 $80,749 
Other Liabilities:
Unfunded affordable housing tax credit commitments$1,327 $1,338 
    Total unfunded tax credit commitments$1,327 $1,338 
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The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and six months ended June 30, 2023 and 2022: 
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits$1,460 $1,614 $2,919 $2,358 
Other tax credit investment credits and tax benefits3,430 2,539 6,651 5,090 
Total reduction in income tax expense
$4,890 $4,153 $9,570 $7,448 
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses$938 $653 $1,875 $1,068 
Affordable housing tax credit investment impairment losses
448 363 896 625 
Other tax credit investment losses719 386 725 695 
Other tax credit investment impairment losses2,913 1,791 5,775 3,701 
Total amortization of tax credit investments recorded in non-interest expense$5,018 $3,193 $9,271 $6,089 

Note 16. Operating Segments
Valley manages its business operations under reportable segments consisting of Consumer Banking, Commercial Banking and Treasury and Corporate Other. Each operating segment is reviewed routinely for its asset growth, contribution to income before income taxes and 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 reportable segments and no changes to the reportable segments were determined necessary during the first half of 2023.
Consumer Banking is mainly comprised of residential mortgages and automobile loans, and to a lesser extent, secured personal lines of credit, home equity loans and other consumer loans. The duration of the residential mortgage loan portfolio is subject to movements in the market level of interest rates and forecasted prepayment speeds. The average weighted life of the automobile loans within the portfolio 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.
Commercial Banking is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as 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.
Treasury and Corporate Other largely consists of the Treasury managed held to maturity debt securities and available for sale 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 Federal Reserve Bank 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 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
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funding costs based on each segment's respective mix of average interest earning assets and or liabilities outstanding for the period.
The accounting for each segment 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 U.S. GAAP. The financial reporting for each segment contains allocations and reporting in line with Valley’s operations, which may not necessarily be comparable to 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 represent the financial data for Valley’s operating segments for the three and six months ended June 30, 2023 and 2022:
 Three Months Ended June 30, 2023
 Consumer
Banking		Commercial
Banking		Treasury and Corporate OtherTotal
 ($ in thousands)
Average interest earning assets
$8,904,483 $40,553,454 $7,893,871$57,351,808 
Interest income$90,602 $624,569 $72,288$787,459 
Interest expense55,198 250,871 61,625367,694 
Net interest income35,404 373,698 10,663419,765 
Provision (credit) for credit losses3,492 2,840 (282)6,050 
Net interest income after provision for credit losses31,912 370,858 10,945413,715 
Non-interest income25,529 14,361 20,18560,075 
Non-interest expense23,223 35,365 224,383282,971 
Internal transfer expense (income)22,018 102,395 (124,413)— 
Income (loss) before income taxes$12,200 $247,459 $(68,840)$190,819 
Return on average interest earning assets (pre-tax)
0.55 %2.44 %(3.49)%1.33 %
 Three Months Ended June 30, 2022
 Consumer
Banking		Commercial
Banking		Treasury and Corporate OtherTotal
 ($ in thousands)
Average interest earning assets
$7,967,305 $34,549,982 $6,373,943$48,891,230 
Interest income$63,137 $352,440 $37,370$452,947 
Interest expense4,723 19,735 10,32934,787 
Net interest income58,414 332,705 27,041418,160 
Provision for credit losses5,402 38,310 28643,998 
Net interest income after provision for credit losses53,012 294,395 26,755374,162 
Non-interest income17,086 14,425 27,02258,533 
Non-interest expense18,791 24,448 256,491299,730 
Internal transfer expense (income)37,629 157,365 (194,994)— 
Income (loss) before income taxes$13,678 $127,007 $(7,720)$132,965 
Return on average interest earning assets (pre-tax)
0.69 %1.47 %(0.48)%1.09 %
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 Six Months Ended June 30, 2023
 Consumer
Banking		Commercial
Banking		Treasury and Corporate OtherTotal
 ($ in thousands)
Average interest earning assets
$8,836,859 $39,826,630 $7,699,305$56,362,794 
Interest income$175,918 $1,194,479 $137,292$1,507,689 
Interest expense98,204 442,594 111,106651,904 
Net interest income77,714 751,885 26,186855,785 
Provision for credit losses9,936 5,846 4,70520,487 
Net interest income after provision for credit losses67,778 746,039 21,481835,298 
Non-interest income39,819 30,108 44,447114,374 
Non-interest expense41,472 71,088 442,577555,137 
Internal transfer expense (income)52,901 233,990 (286,891)— 
Income (loss) before income taxes$13,224 $471,069 $(89,758)$394,535 
Return on average interest earning assets (pre-tax)
0.30 %2.37 %(2.33)%1.40 %
 Six Months Ended June 30, 2022
 Consumer
Banking		Commercial
Banking		Treasury and Corporate OtherTotal
 ($ in thousands)
Average interest earning assets
$7,848,764 $30,743,387 $6,017,817$44,609,968 
Interest income$122,596 $610,346 $60,463$793,405 
Interest expense7,930 31,062 18,58457,576 
Net interest income114,666 579,284 41,879735,829 
Provision for credit losses7,275 39,937 34347,555 
Net interest income after provision for credit losses107,391 539,347 41,536688,274 
Non-interest income30,903 31,305 35,59597,803 
Non-interest expense35,359 49,533 412,178497,070 
Internal transfer expense (income)66,276 257,281 (323,557)— 
Income (loss) before income taxes$36,659 $263,838 $(11,490)$289,007 
Return on average interest earning assets (pre-tax)
0.93 %1.72 %(0.38)%1.30 %
Item 2. Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations
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 words "Valley," the "Company," "we," "our" and "us" refer to Valley National Bancorp and its subsidiaries, unless we indicate otherwise. Additionally, Valley’s principal subsidiary, Valley National Bank, is commonly referred to as the “Bank” in this MD&A.
The MD&A contains supplemental financial information, described in the sections that follow, which has been determined by methods other than U.S. generally accepted accounting principles (U.S. 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 U.S. GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.
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Cautionary Statement Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q, both in the MD&A and elsewhere, 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 Federal Reserve actions affecting the level of market interest rates and increases in business failures, specifically among our clients, as well as on our business, our employees and our ability to provide services to our customers;
•the impact of recent and possible future bank failures on the business environment in which we operate and resulting market volatility and reduced confidence in depository institutions, including impact on stock price, customer deposit withdrawals from Valley National Bank, or business disruptions or liquidity issues that have or may affect our customers;
•the impact of unfavorable macroeconomic conditions or downturns, instability or volatility in financial markets, unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by and factors outside of our control, such as geopolitical instabilities or events; natural and other disasters (including severe weather events) and health emergencies, acts of terrorism or other external events;
•risks associated with our acquisition of Bank Leumi Le-Israel Corporation (Bank Leumi USA), including (i) the inability to realize expected cost savings and synergies from the acquisition in the amounts or timeframe anticipated and (ii) greater than expected costs or difficulties relating to integration matters;
•the loss of or decrease in lower-cost funding sources within our deposit base;
•the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;
•the inability to attract new customer deposits to keep pace with loan growth strategies;
•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;
•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;
•the risks related to the replacement of the London Interbank Offered Rate with Secured Overnight Financing Rate and other reference rates, including increased expenses, risk of litigation and the effectiveness of hedging strategies;
•cyber-attacks, ransomware attacks, computer viruses or other malware that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems;
•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
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fiduciary responsibility, negligence, fraud, environmental laws, patent or trademark infringement, employment related claims, and other matters;
•changes to laws and regulations, including changes affecting oversight of the financial services industry; changes in the enforcement and interpretation of such laws and regulations; and changes in accounting and reporting standards;
•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;
•results of examinations by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank (FRB), the Consumer Financial Protection Bureau (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;
•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;
•a prolonged downturn in the economy, mainly in New Jersey, New York, Florida, Alabama, California, and Illinois, as well as an unexpected decline in commercial real estate values within our market areas; and
•unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, 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 the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, and in Part II, Item 1A of this Form 10-Q.
We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations. 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 June 30, 2023, 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 of Directors. Our critical accounting policies and estimates are described in detail in Part II, Item 7 in Valley’s Annual Report on Form 10-K for the year ended December 31, 2022, and there have been no material changes in such policies and estimates since the date of such report.
New Authoritative Accounting Guidance
See Note 5 to the consolidated financial statements for a description of new authoritative accounting guidance, including the respective dates of adoption and effects on results of operations and financial condition.

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Executive Summary
Company Overview. At June 30, 2023, Valley had consolidated total assets of approximately $61.7 billion, total net loans of $49.4 billion, total deposits of $49.6 billion and total shareholders’ equity of $6.6 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 230 branch network, 56 percent, 18 percent, and 18 percent of the branches are in New Jersey, New York and Florida, respectively, with the remaining 8 percent of the branches in Alabama, California, and Illinois combined. We have grown significantly both in asset size and locations over the past several years both through organic efforts and bank acquisitions, including our acquisition of Bank Leumi USA on April 1, 2022.
Industry Developments. The combination of rapidly rising interest rates, increased competition and economic uncertainty continues to weigh on the banking industry in the wake of the recent bank failures. We have consistently operated the Bank with a focus on diversification to maintain stability through various economic cycles. During the second quarter 2023, we continued to position our balance sheet to mitigate potential risks from the market uncertainty affecting the banking industry in general and Valley, its clients and communities in particular.
•Total assets decreased to $61.7 billion at June 30, 2023, a decrease of 4.1 percent from March 31, 2023. Liquidity remained strong with total liquid assets of approximately $13.1 billion at June 30, 2023, representing 6.0 percent of interest earning assets. We continue to maintain significant access to readily available, diverse funding sources to fulfill both short-term and long-term funding needs. See "Bank Liquidity" section for additional information.
•Total deposits increased $2.0 billion to $49.6 billion at June 30, 2023 as compared to $47.6 billion at March 31, 2023 largely due to higher CD balances. See the "Deposits and Other Borrowings" section for more details.
•Capital remained strong with ratios of both Valley and the Bank exceeding all capital adequacy requirements at June 30, 2023. Total shareholders' equity increased $63.6 million to $6.6 billion at June 30, 2023 as compared to March 31, 2023. See the "Capital Adequacy" section for additional details.
•Total loans increased $1.2 billion, or 10.0 percent on an annualized basis to $49.9 billion at June 30, 2023 from March 31, 2023 mainly due to continued organic loan growth in commercial loan categories and relatively low levels of prepayment activity during the second quarter 2023. See "Loan Portfolio" section for more information.
•Asset quality continued to reflect our disciplined underwriting and lending practices during the second quarter 2023. Non-performing assets (NPAs) as a percentage of total loans and NPAs totaled 0.51 percent and 0.50 percent at June 30, 2023 and March 31, 2023, respectively. See the "Non-Performing Assets" section for additional information.
•Total investment securities were $5.1 billion, or 8.2 percent of total assets, at June 30, 2023 and remained relatively unchanged as compared to March 31, 2023. See the "Investment Securities Portfolio" section for more details.
Quarterly Results. Net income for the second quarter 2023 was $139.1 million, or $0.27 per diluted common share as compared to $96.4 million, or $0.18 per diluted common share, for the second quarter 2022. The $42.6 million increase in quarterly net income as compared to the same quarter one year ago was mainly due to the following changes:
•a $37.9 million decrease in our provision for credit losses mainly due to a provision related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA in the second quarter 2022;
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•a $1.6 million increase in net interest income mainly due to increased yields on both new loan originations and adjustable-rate loans and higher average loan balances, largely offset by the increased cost of deposits;
•a $1.5 million increase in non-interest income primarily due to an increase in capital markets fees and wealth management and trust fees, partially offset by lower net gains on sales of loans; and
•a $16.8 million decrease in non-interest expense was due, in part, to a $40.2 million decrease in merger expenses, partially offset by a $11.2 million restructuring charge and various other increases;
These items were partially offset by:
•a $15.2 million increase in income tax expense mostly due to higher pre-tax income in the second quarter 2023.
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 on our second quarter 2023 results.
U.S. Economic Conditions. During the second quarter 2023, real gross domestic product (GDP) increased at an annual rate of 2.4 percent as compared to an increase of 2.0 percent during the first quarter 2023. The 2.4 percent increase in real GDP reflected robust consumer spending, private inventory investment, nonresidential fixed investment, and government spending, as well as improved supply chain. Inflation moderately cooled, but remained well above the Federal Reserve’s target of 2 percent in the second quarter 2023.
During the first quarter 2023, the Federal Reserve raised the target range for the federal funds rate by an additional 25 basis points in May 2023 and paused rate increases in June to observe the full impact of its changes over the past year. In July 2023, the Federal Reserve raised the target again by another 25 basis points to a range of 5.25 to 5.5 percent.
The 10-year U.S. Treasury note yield ended the second quarter 2023 at 3.81 percent, or 33 basis points higher as compared to the first quarter 2023, and the 2-year U.S. Treasury note yield ended the second quarter 2023 at 4.87 percent, or 81 basis points higher as compared to the first quarter 2023.
For all U.S. commercial banks, commercial and industrial loans decreased approximately by 1.3 percent at June 30, 2023 as compared to March 31, 2023, while consumer loans increased by 1.3 percent. Alternatively, demand for commercial real estate loans remained flat compared to the prior quarter. Overall the commercial real estate market was constricted by the financial environment this quarter as rising interest rates eroded investment profitability. Despite higher mortgage rates, demand for residential real estate remained steady, although sales were constrained by low inventories.
While many economic measures continue to defy recessionary concerns, further increases in market interest rates, the inverted yield curve, high inflation, and the potential for additional fallout from the recent banking crisis, including bank regulatory actions, among other factors, have added a higher level of uncertainty to the future path of the U.S. economy and created a challenging banking environment. Should economic conditions deteriorate, causing business activity, spending and investment to decline, it may adversely impact our financial results, as highlighted in this MD&A.
Deposits and Other Borrowings
Overall, average deposits increased by $311.6 million to $47.5 billion for the second quarter 2023 as compared to the first quarter 2023 mostly due to higher time deposits driven by successful retail CD generation and increased utilization of fully insured indirect customer (i.e., brokered) deposits, partially offset by a decrease in average non-interest bearing deposits. The decline in non-interest bearing deposits was largely due to a moderate shift in customer balances to our interest bearing deposit products in a rising interest rate environment and outflows due to attractive investment alternatives to deposits in the marketplace. Average non-interest-bearing deposits; savings,
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NOW and money market deposits; and time deposits represented approximately 27 percent, 47 percent and 26 percent of total deposits as of June 30, 2023, respectively.
Actual ending balances for deposits increased $2.0 billion to approximately $49.6 billion at June 30, 2023 from March 31, 2023 mainly due to a $3.8 billion increase in time deposits, partially offset by decreases in non-interest bearing deposits, and savings, NOW and money market deposits totaling $1.1 billion and $626.1 million, respectively. The increase in time deposits from March 31, 2023 was partially driven by higher fully-insured indirect customer CD balances at June 30, 2023. Total fully-insured indirect customer deposits, consisting of both brokered time deposit and money market accounts, increased $3.2 billion to $10.3 billion at June 30, 2023 from March 31, 2023. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 25 percent, 45 percent and 30 percent of total deposits as of June 30, 2023, respectively, as compared to 29 percent, 48 percent and 23 percent of total deposits as of March 31, 2023, respectively.
The following table lists, by maturity, uninsured certificates of deposit at June 30, 2023:
 (in thousands)
Less than three months$410,010 
Three to six months445,585 
Six to twelve months922,713 
More than twelve months261,279 
Total$2,039,587 
Total estimated uninsured deposits, excluding collateralized government deposits and intercompany deposits (i.e., deposits eliminated in consolidation), totaled approximately $12.1 billion, or 24 percent of total deposits, at June 30, 2023 as compared to $14.9 billion, or 31 percent of total deposits, at March 31, 2023.
While our diversified commercial and consumer deposit base has remained relatively stable during the early stages of the third quarter 2023, deposit gathering initiatives could remain challenging due to market competition, attractive investment alternatives, such as U.S. Treasury securities, and other factors. As a result, we cannot guarantee that we will be able to maintain deposit levels at or near those reported at June 30, 2023.
The following table presents average short-term and long-term borrowings for the periods indicated:
Three Months EndedSix Months Ended
June 30, 2023March 31, 2023June 30, 2022June 30, 2023June 30, 2022
(in thousands)
Average short-term borrowings:
FHLB advances$3,656,593 $2,513,983 $822,913 $3,088,445 $629,753 
Securities sold under repurchase agreements99,327 99,546 142,790 99,436 145,666 
Federal funds purchased122,537 190,214 637,495 156,188 326,116 
Total $3,878,457 $2,803,743 $1,603,198 $3,344,069 $1,101,535 
Average long-term borrowings:
FHLB advances$1,523,500 $875,053 $788,803 $1,201,068 $788,879 
Subordinated debt759,334 754,972 617,291 757,165 624,135 
Junior subordinated debentures issued to capital trusts56,893 56,805 56,544 56,848 56,501 
Total$2,339,727 $1,686,830 $1,462,638 $2,015,081 $1,469,515 
Average short-term borrowings increased $1.1 billion during the second quarter 2023 as compared to the first quarter 2023 mostly due to the higher utilization of FHLB advances in March 2023 to increase our excess liquidity
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position. Average long-term borrowings (including junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition) increased $652.9 million as compared to the first quarter 2023 mainly due to the new FHLB advances issued in March 2023 and the second quarter 2023.
Actual ending balances for short-term borrowings decreased $5.3 billion to $1.1 billion at June 30, 2023 as compared to March 31, 2023 mainly due to maturities and repayment of FHLB advances. In March 2023, we increased our short-term borrowings to bolster our liquidity position out of an abundance of caution in the wake of the two bank failures and subsequently managed these balances to a lower level during the second quarter 2023, partially through the greater use of time deposits. We continue to closely monitor changes in the current banking environment and have substantial access to additional liquidity. Actual ending balances for long-term borrowings totaled $2.4 billion at June 30, 2023 and remained relatively unchanged as compared to March 31, 2023. See the "Bank Liquidity" section for more details on our available funding sources.
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 its underlying operational performance, business, and performance trends, and may facilitate comparisons of 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 U.S. GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.



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The following table presents our annualized performance ratios:
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
Selected Performance Indicators($ in thousands)
GAAP measures:
Net income, as reported$139,060 $96,413 $285,611 $213,141 
Return on average assets0.90 %0.72 %0.94 %0.88 %
Return on average shareholders’ equity8.50 6.18 8.80 7.51 
Non-GAAP measures:
Net income, as adjusted$147,081 $165,803 $301,611 $286,116 
Return on average assets, as adjusted 0.95 %1.25 %0.99 %1.18 %
Return on average shareholders' equity, as adjusted 8.99 10.63 9.29 10.09 
Return on average tangible shareholders' equity (ROATE)12.37 9.33 12.87 11.07 
ROATE, as adjusted13.09 16.05 13.59 14.87 
Efficiency ratio55.59 50.78 54.69 51.81 
June 30,
2023		December 31,
2022
Common Equity Per Share Data:
Book value per common share (GAAP)$12.54 $12.23 
Tangible book value per common share (non-GAAP)8.51 8.15 
Non-GAAP Reconciliations to GAAP Financial Measures
Adjusted net income is computed as follows:
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
(in thousands)
Net income, as reported (GAAP)$139,060 $96,413 $285,611 $213,141 
Add: Losses (gains) on available for sale and held to maturity debt securities, net (net of tax) (a)
6 (56)23 (50)
Add: Restructuring charge (net of tax) (b)
8,015 — 8,015 — 
Add: Provision for credit losses for available for sale securities (c)
— — 5,000 — 
Add: Non-PCD provision for credit losses, (net of tax) (d)
— 29,282 — 29,282 
Add: Merger related expenses (net of tax) (e)
— 40,164 2,962 43,743 
Net income, as adjusted (non-GAAP)$147,081 $165,803 $301,611 $286,116 
(a)    Included in gains (losses) on securities transactions, net.
(b)    Represents severance expense related to workforce reductions within salary and employee benefits expense.
(c)    Included in provision for credit losses for available for sale and held to maturity securities (tax disallowed).
(d)    Represents provision for credit losses for non-PCD loans and unfunded credit commitments acquired during the period.
(e)    Included primarily within salary and employee benefits expense.



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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 fees, and swap fees recognized from commercial loan customer transactions reported in capital markets fees. These amounts can vary widely from period to period due to, among other factors, the amount of residential mortgage loans originated for sale, loan portfolio sales, brokerage fees, and commercial loan customer demand for certain 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:
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
($ in thousands)
Net income, as adjusted (non-GAAP)$147,081$165,803$301,611$286,116
Average assets$61,877,464$53,211,422$60,877,792$48,417,469
Annualized return on average assets, as adjusted (non-GAAP)0.95 %1.25 %0.99 %1.18 %
Adjusted annualized return on average shareholders' equity is computed by dividing adjusted net income by average shareholders' equity, as follows:
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
($ in thousands)
Net income, as adjusted (non-GAAP)$147,081$165,803$301,611$286,116
Average shareholders' equity$6,546,452$6,238,985$6,493,627$5,673,014
Annualized return on average shareholders' equity, as adjusted (non-GAAP)8.99 %10.63 %9.29 %10.09 %
ROATE and adjusted ROATE are computed by dividing net income and adjusted net income, respectively, by average shareholders’ equity less average goodwill and average other intangible assets, as follows:
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
 ($ in thousands)
Net income, as reported (GAAP)$139,060$96,413$285,611$213,141
Net income, as adjusted (non-GAAP)147,081165,803301,611286,116
Average shareholders’ equity (GAAP)$6,546,452$6,238,985$6,493,627$5,673,014
Less: Average goodwill and other intangible assets
2,051,5912,105,5852,056,4871,823,538
Average tangible shareholders’ equity (non-GAAP)$4,494,861$4,133,400$4,437,140$3,849,476
Annualized ROATE (non-GAAP)12.37 %9.33 %12.87 %11.07 %
Annualized ROATE, as adjusted (non-GAAP)13.09 %16.05 %13.59 %14.87 %
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The efficiency ratio is computed as follows:
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
 ($ in thousands)
Total non-interest expense, as reported (GAAP)$282,971 $299,730 $555,137 $497,070 
Less: Restructuring charge (pre-tax) (a)
11,182 — 11,182 — 
Less: Amortization of tax credit investments (pre-tax)5,018 3,193 9,271 6,089 
Less: Merger related expenses (pre-tax) (b)
— 54,496 4,133 59,124 
Total non-interest expense, as adjusted (non-GAAP)$266,771 $242,041 $530,551 $431,857 
Net interest income, as reported (GAAP)$419,765 $418,160 $855,785 $735,829 
Total non-interest income, as reported (GAAP)60,075 58,533 114,374 97,803 
Add: Losses (gains) on available for sale and held to maturity debt securities, net (pre-tax) (c)
9 (78)33 (69)
Total net interest income and non-interest income, as adjusted (non-GAAP)$479,849 $476,615 $970,192 $833,563 
Efficiency ratio (non-GAAP)55.59 %50.78 %54.69 %51.81 %
(a)    Represents severance expense related to workforce reductions within salary and employee benefits expense.
(b)    Included primarily within salary and employee benefits expense.
(c)    Included in gains (losses) on securities transactions, net.
Tangible book value per common share is computed by dividing shareholders’ equity less preferred stock, goodwill and other intangible assets by common shares outstanding, as follows: 
June 30,
2023		December 31,
2022
 ($ in thousands, except for share data)
Common shares outstanding507,619,430 506,374,478 
Shareholders’ equity (GAAP)$6,575,184 $6,400,802 
Less: Preferred stock209,691 209,691 
Less: Goodwill and other intangible assets2,046,882 2,066,392 
Tangible common shareholders’ equity (non-GAAP)$4,318,611 $4,124,719 
Book value per common share (GAAP)$12.54 $12.23 
Tangible book value per common share (non-GAAP)$8.51 $8.15 
Net Interest Income
Net interest income on a tax equivalent basis totaling $421.3 million for the second quarter 2023 decreased $16.2 million as compared to the first quarter 2023 and increased $1.7 million as compared to the second quarter 2022. The decrease as compared to the first quarter 2023 was mainly due to a $3.3 billion increase in average interest bearing liabilities and higher interest rates on most interest bearing deposit products and short-term borrowings, partially offset by higher loan yields. As a result, interest expense increased $83.5 million to $367.7 million for the second quarter 2023 as compared to the first quarter 2023. Interest income on a tax equivalent basis increased $67.3 million to $789.0 million in the second quarter 2023 as compared to the first quarter 2023. The increase was mostly due to higher yields on both new originations and adjustable rate loans in our portfolio and a $1.6 billion increase in average loan balances driven by organic new loan volumes and a continuation of slower loan prepayments.
Average interest earning assets increased $8.5 billion to $57.4 billion for the second quarter 2023 as compared to the second quarter 2022 mainly due to a $6.9 billion increase in average loan balances and $1.4 billion increase in average interest bearing cash balances largely due to higher excess cash held overnight as part of our prudent liquidity management navigating the fallout from the recent bank failures. Compared to the first quarter 2023,
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average interest earning assets increased by $2.0 billion during the second quarter 2023. The increase was primarily driven by a $1.6 billion increase in average loan balances mainly due to organic commercial loan growth and a $351.6 million increase in average interest bearing cash as compared to the prior linked quarter.
Average interest bearing liabilities increased $11.2 billion to $40.9 billion for the second quarter 2023 as compared to the second quarter 2022 mainly due to increases of $8.1 billion and $2.3 billion in average time deposits and short-term borrowings, respectively. The increases in average time deposits and short-term borrowings were largely due to the enhanced liquidity management efforts during the first half of 2023, including increased usage of fully FDIC-insured indirect customer CD and successful retail CD initiatives. As compared to the first quarter 2023, average interest bearing liabilities increased by $3.3 billion in the second quarter 2023 largely due to a $2.5 billion increase in average time deposits mainly driven by increased usage of fully FDIC-insured indirect customer CD and successful retail CD initiatives, as well as an increase in short-term borrowings, as part of our funding and liquidity sources. See additional information under "Deposits and Other Borrowings" in the Executive Summary section above.
Net interest margin on a tax equivalent basis of 2.94 percent for the second quarter 2023 decreased by 22 basis points and 49 basis points from 3.16 percent and 3.43 percent for the first quarter 2023 and the second quarter 2022, respectively. The decrease as compared to the first quarter 2023 was largely driven by higher interest rates on interest bearing deposits and short-term borrowings, partially offset by a 29 basis point increase in the yield on average interest earning assets. The yield on average loans increased by 30 basis points to 5.78 percent for the second quarter 2023 as compared to the first quarter 2023 largely due to higher interest rates on new originations and adjustable rate loans. The yields on average taxable and non-taxable investments also increased 13 basis points and 16 basis points, respectively, from the first quarter 2023 mostly due to investment maturities and prepayments redeployed into new higher yielding securities during the first half of 2023. Our cost of total average deposits increased to 2.45 percent for the second quarter 2023 from 1.96 percent and 0.19 percent for the first quarter 2023 and the second quarter 2022, respectively. The overall cost of average interest bearing liabilities also increased 57 basis points to 3.59 percent for the second quarter 2023 as compared to the first quarter 2023 primarily driven by the rising market interest rates on deposits during the first half of 2023.
Based upon our current estimates at June 30, 2023, we anticipate net interest income growth in the low single digits (i.e., less than 10 percent) for the full year of 2023, revised down from 16 to 18 percent previously estimated in the MD&A of Valley's Form 10-K for the year ended December 31, 2022. While we are seeing initial signs of stabilization in net interest income and margin as compared to the declines in both experienced in the first quarter 2023, we cannot provide any assurances with respect to the future trajectory of market interest rates or that our net interest margin or income will remain at the levels reported for the second quarter 2023.



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The following table reflects the components of net interest income for the three months ended June 30, 2023, March 31, 2023 and June 30, 2022:

Quarterly Analysis of Average Assets, Liabilities and Shareholders’ Equity and
Net Interest Income on a Tax Equivalent Basis
 Three Months Ended
 June 30, 2023March 31, 2023June 30, 2022
 Average
Balance		InterestAverage
Rate		Average
Balance		InterestAverage
Rate		Average
Balance		InterestAverage
Rate
 ($ in thousands)
Assets
Interest earning assets:
Loans (1)(2)
$49,457,937 $715,195 5.78 %$47,859,371 $655,250 5.48 %$42,517,287 $415,602 3.91 %
Taxable investments (3)
5,065,812 39,436 3.11 5,033,134 37,474 2.98 4,912,994 30,610 2.49 
Tax-exempt investments (1)(3)
629,342 7,062 4.49 623,145 6,739 4.33 684,471 6,571 3.84 
Interest bearing deposits with banks2,198,717 27,276 4.96 1,847,140 22,205 4.81 776,478 1,569 0.81 
Total interest earning assets57,351,808 788,969 5.50 55,362,790 721,668 5.21 48,891,230 454,352 3.72 
Allowance for credit losses(446,098)(466,837)(428,193)
Cash and due from banks415,075 445,005 426,187 
Other assets4,709,061 4,702,376 4,362,789 
Unrealized gains on securities available for sale, net(152,382)(176,332)(40,591)
Total assets$61,877,464 $59,867,002 $53,211,422 
Liabilities and shareholders’ equity
Interest bearing liabilities:
Savings, NOW and money market deposits$22,512,128 $164,843 2.93 %$23,389,569 $150,766 2.58 %$23,027,347 $17,122 0.30 %
Time deposits12,195,479 125,764 4.12 9,738,608 80,298 3.30 3,601,088 3,269 0.36 
Total interest bearing deposits34,707,607 290,607 3.35 33,128,177 231,064 2.79 26,628,435 20,391 0.31 
Short-term borrowings3,878,457 50,207 5.18 2,803,743 33,948 4.84 1,603,198 4,083 1.02 
Long-term borrowings (4)
2,339,727 26,880 4.60 1,686,830 19,198 4.55 1,462,638 10,313 2.82 
Total interest bearing liabilities40,925,791 367,694 3.59 37,618,750 284,210 3.02 29,694,271 34,787 0.47 
Non-interest bearing deposits12,756,862 14,024,742 16,267,946 
Other liabilities1,648,359 1,783,295 1,010,220 
Shareholders’ equity6,546,452 6,440,215 6,238,985 
Total liabilities and shareholders’ equity$61,877,464 $59,867,002 $53,211,422 
Net interest income/interest rate spread (5)
$421,275 1.91 %$437,458 2.19 %$419,565 3.25 %
Tax equivalent adjustment(1,510)(1,438)(1,405)
Net interest income, as reported$419,765 $436,020 $418,160 
Net interest margin (6)
2.93 %3.15 %3.42 %
Tax equivalent effect0.01 0.01 0.01 
Net interest margin on a fully tax equivalent basis (6)
2.94 %3.16 %3.43 %

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The following table reflects the components of net interest income for the six months ended June 30, 2023 and 2022:
Six Months Ended
June 30, 2023June 30, 2022
Average BalanceInterestAverage RateAverage BalanceInterestAverage Rate
($ in thousands)
Assets
Interest earning assets:
Loans (1)(2)
$48,663,070 $1,370,446 5.63 %$38,592,151 $732,991 3.80 %
Taxable investments (3)
5,049,563 76,910 3.05 4,377,990 50,725 2.32 
Tax-exempt investments (1)(3)
626,261 13,800 4.41 543,646 9,757 3.59 
Interest bearing deposits with banks2,023,900 49,481 4.89 1,096,181 2,030 0.37 
Total interest earning assets56,362,794 1,510,637 5.36 44,609,968 795,503 3.57 
Allowance for credit losses(456,410)(398,258)
Cash and due from banks429,957 354,433 
Other assets4,705,742 3,864,997 
Unrealized gains on securities available for sale, net(164,291)(13,671)
Total assets$60,877,792 $48,417,469 
Liabilities and shareholders’ equity
Interest bearing liabilities:
Savings, NOW and money market deposits$22,948,425 $315,608 2.75 %$21,781,907 $26,749 0.25 %
Time deposits10,973,830 206,062 3.76 3,577,933 6,100 0.34 
Total interest bearing deposits33,922,255 521,670 3.08 25,359,840 32,849 0.26 
Short-term borrowings3,344,069 84,156 5.03 1,101,535 4,889 0.89 
Long-term borrowings (4)
2,015,081 46,078 4.57 1,469,515 19,838 2.70 
Total interest bearing liabilities39,281,405 651,904 3.32 27,930,890 57,576 0.41 
Non-interest bearing deposits13,387,299 13,989,897 
Other liabilities1,715,461 823,668 
Shareholders’ equity6,493,627 5,673,014 
Total liabilities and shareholders’ equity$60,877,792 $48,417,469 
Net interest income/interest rate spread (5)
$858,733 2.04 %$737,927 3.16 %
Tax equivalent adjustment(2,948)(2,098)
Net interest income, as reported$855,785 $735,829 
Net interest margin (6)
3.04 %3.30 %
Tax equivalent effect0.01 0.01 
Net interest margin on a fully tax equivalent basis (6)
3.05 %3.31 %
_____________

(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 available for sale 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.

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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
 Three Months Ended June 30, 2023 Compared to June 30, 2022Six Months Ended June 30, 2023 Compared to June 30, 2022
 Change
Due to
Volume		Change
Due to
Rate		Total
Change		Change
Due to
Volume		Change
Due to
Rate		Total
Change
 (in thousands)
Interest Income:
Loans*$76,106 $223,487 $299,593 $223,680 $413,775 $637,455 
Taxable investments978 7,848 8,826 8,583 17,602 26,185 
Tax-exempt investments*(558)1,049 491 1,618 2,425 4,043 
Interest bearing deposits with banks6,755 18,952 25,707 3,078 44,373 47,451 
Total increase in interest income
83,281 251,336 334,617 236,959 478,175 715,134 
Interest Expense:
Savings, NOW and money market deposits(392)148,113 147,721 1,509 287,350 288,859 
Time deposits22,935 99,560 122,495 34,214 165,748 199,962 
Short-term borrowings11,897 34,227 46,124 24,064 55,203 79,267 
Long-term borrowings and junior subordinated debentures8,083 8,484 16,567 9,146 17,094 26,240 
Total increase in interest expense
42,523 290,384 332,907 68,933 525,395 594,328 
Total increase (decrease) in net interest income$40,758 $(39,048)$1,710 $168,026 $(47,220)$120,806 
*Interest income is presented on a tax equivalent basis using 21 percent as the federal tax rate.

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Non-Interest Income
Non-interest income increased $1.5 million and $16.6 million for the three and six months ended June 30, 2023, respectively, as compared to the same period of 2022. The following table presents the components of non-interest income for the three and six months ended June 30, 2023 and 2022:
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
 (in thousands)
Wealth management and trust fees$11,176 $9,577 $20,763 $14,708 
Insurance commissions3,139 3,463 5,559 5,322 
Capital markets16,967 14,711 27,859 29,071 
Service charges on deposit accounts10,542 10,067 21,018 16,279 
Gains (losses) on securities transactions, net217 (309)595 (1,381)
Fees from loan servicing2,702 2,717 5,373 5,498 
Gains on sales of loans, net1,240 3,602 1,729 4,588 
Bank owned life insurance2,443 2,113 5,027 4,159 
Other11,649 12,592 26,451 19,559 
Total non-interest income$60,075 $58,533 $114,374 $97,803 
Wealth management and trust fees income increased $1.6 million and $6.1 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. The increase as compared to the second quarter 2022 was mainly driven by higher revenues generated by our advisory firm, Dudley Ventures, LLC, specializing in the investment and management of tax credit investments. The increase for the six months ended June 30, 2023 was largely related to higher brokerage fees related to our broker dealer subsidiary, Valley Financial Management, Inc., acquired on April 1, 2022 from Bank Leumi USA. Brokerage fees totaled $9.7 million and $4.9 million for the six months ended June 30, 2023 and 2022, respectively.
Capital markets income increased $2.3 million and decreased $1.2 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022 mainly due to changes in volume of interest rate swap transactions executed for commercial loan customers.
Service charges on deposit accounts increased $4.7 million for the six months ended June 30, 2023 compared to the same period in 2022 largely due to the additional deposit accounts acquired from Bank Leumi USA on April 1, 2022.
Net gains on sales of loans decreased $2.4 million and $2.9 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022 mostly due to lower loan sale volumes as we continued to retain a higher percentage of new loan volumes during the first half of 2023. During the six months ended June 30, 2023, we sold $71.8 million of residential mortgage loans as compared to $326.2 million for same period in 2022.
Other non-interest income increased $6.9 million for the six months ended June 30, 2023 as compared to the same period in 2022. The increase for the six months ended June 30, 2023 was mostly due to incremental increases in several operating non-interest income categories caused by the acquisition of Bank Leumi USA and organic growth of our business operations over the last 12 months.


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Non-Interest Expense
Non-interest expense decreased $16.8 million and increased $58.1 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. The following table presents the components of non-interest expense for the three and six months ended June 30, 2023 and 2022:
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2023202220232022
 (in thousands)
Salary and employee benefits expense$149,594 $154,798 $294,580 $262,531 
Net occupancy expense25,949 22,429 49,205 44,420 
Technology, furniture and equipment expense32,476 49,866 68,984 75,880 
FDIC insurance assessment10,426 5,351 19,581 9,509 
Amortization of other intangible assets9,812 11,400 20,331 15,837 
Professional and legal fees21,406 30,409 38,220 45,158 
Amortization of tax credit investments5,018 3,193 9,271 6,089 
Other28,290 22,284 54,965 37,646 
Total non-interest expense$282,971 $299,730 $555,137 $497,070 
Salary and employee benefits expense decreased $5.2 million and increased $32.0 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. As compared to second quarter 2022, the decline was largely due to decreases in cash incentive compensation expense and Bank Leumi USA merger related costs (which totaled $28.0 million in the second quarter 2022), partially offset by higher salary expense and a restructuring charge of $11.2 million, consisting of severance expense related to recent workforce reductions. The increase for the six months ended June 30, 2023 was primarily driven by higher headcount from the Bank Leumi USA acquisition and organic growth in our operations, the aforementioned restructuring charge, and inflationary pressures on our overall labor costs. These increases were partially offset by lower cash incentive compensation expense and merger related costs. The merger related costs totaled $4.1 million for the six months ended June 30, 2023 as compared to $28.0 million for the same period in 2022.
Net occupancy expense increased $3.5 million and $4.8 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022 mainly driven by increased lease expense.
Technology, furniture and equipment expense decreased $17.4 million and $6.9 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. The second quarter 2023 decrease was largely due to Bank Leumi USA merger related expenses (largely consisting of technology related costs) totaling $15.3 million for the second quarter 2022. The decrease for the six months ended June 30, 2023 was mainly due to decline in merger related expense, partially offset by higher depreciation expense as compared to the same period in 2022.
FDIC insurance assessment expense increased $5.1 million and $10.1 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022 mainly due to growth in our balance sheet, as well as a two basis point increase in the initial base rate effective for 2023.
Amortization of other intangible assets increased $4.5 million for the six months ended June 30, 2023 as compared to the same period in 2022 mainly due to higher amortization expense of core deposits and other intangible assets resulting from Bank Leumi USA acquisition. See Note 9 to the consolidated financial statements for additional information.
Professional and legal fees decreased $9.0 million and $6.9 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022, largely due to declines in merger related expense, partially offset by higher technology transformation consulting and managed services. Within the category, merger
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related expenses (related to the Bank Leumi USA acquisition) totaled $11.4 million and $12.2 million for the three and six months ended June 30, 2023 and 2022, respectively.
Other non-interest expense increased $6.0 million and $17.3 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022 primarily due to general increases in several categories caused by our acquired and organic growth in operations, higher charitable contributions, and increased charges related to collateral liabilities in connection with derivative transactions.
We continuously monitor and closely manage our non-interest expense in an effort to optimize our operating efficiency. To offset the current headwinds impacting our net interest income and margin, we began the implementation of a new cost saving initiative in late June 2023. The identified cost savings are expected to primarily come from workforce reductions, more efficient third-party consulting and service usage, and specific technology cost reductions. As noted above, we incurred $11.2 million of severance expense associated with these efforts during the second quarter 2023. Overall, the new initiative is expected to generate more than $40 million of annual pre-tax cost savings and be realized over the next 12 months.
Income Taxes
Income tax expense totaled $51.8 million for the second quarter 2023 as compared to $57.2 million and $36.6 million for the first quarter 2023 and second quarter 2022, respectively. Our effective tax rate was 27.1 percent, 28.1 percent and 27.5 percent for the second quarter 2023, first quarter 2023 and second quarter 2022, respectively. The decline in the effective tax rate in the second quarter 2023 was primarily due to the release of a state valuation allowance related to New Jersey net operating loss carryforwards.
U.S. 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.
Operating Segments
Valley manages its business operations under reportable segments consisting of Consumer Banking, Commercial Banking and Treasury and Corporate Other. Each operating segment is reviewed routinely for its asset growth, contribution to income before income taxes and 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 reportable segments and no changes to the reportable segments were determined necessary during the first half of 2023.
The accounting for each segment 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 U.S. 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.

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The following tables present the financial data for Valley's operating segments for the three months ended June 30, 2023 and 2022:
 Three Months Ended June 30, 2023
 Consumer
Banking		Commercial
Banking		Treasury and Corporate OtherTotal
 ($ in thousands)
Average interest earning assets$8,904,483$40,553,454$7,893,871$57,351,808
Income (loss) before income taxes12,200247,459(68,840)190,819
Annualized return on average interest earning assets (before tax)
0.55 %2.44 %(3.49)%1.33 %
 Three Months Ended June 30, 2022
 Consumer
Banking		Commercial
Banking		Treasury and Corporate OtherTotal
 ($ in thousands)
Average interest earning assets$7,967,305$34,549,982$6,373,943$48,891,230
Income (loss) before income taxes13,678127,007(7,720)132,965
Annualized return on average interest earning assets (before tax)
0.69 %1.47 %(0.48)%1.09 %
See Note 16 to the consolidated financial statements for additional details.
Consumer Banking
Consumer Banking represented 18.0 percent of our loan portfolio at June 30, 2023, 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 11.1 percent of our loan portfolio at June 30, 2023) is subject to movements in the market level of interest rates and forecasted prepayment speeds. The weighted average life of the automobile loans (which represented 3.3 percent of total loans at June 30, 2023) 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.
Average interest earning assets within Consumer Banking increased $937.2 million to $8.9 billion for the three months ended June 30, 2023 as compared to the same period of 2022. The increase was largely due to new residential mortgage loan volumes originated for investment rather than sale over the last 12-month period, and, to a lesser extent, growth in home equity and secured personal lines of credit.
Income before income taxes for Consumer Banking decreased $1.5 million to $12.2 million for the second quarter 2023 as compared to the second quarter 2022 mainly driven by lower net interest income and, to a lesser extent, an increase in non-interest expense. Net interest income decreased $23.0 million in the second quarter 2023 as compared to the same period of 2022 due to additional interest expense generated from higher average deposit and other borrowing balances, as well as an increase in the cost of such interest bearing liabilities. The negative impact of these items was partially offset by an increase in non-interest income and lower internal transfer expense. Non-interest income increased $8.4 million mainly due to increases in wealth management and trust fees, capital markets and service charges on deposit accounts, partially offset by lower gains on sales of loans. Internal transfer expense decreased $15.6 million for the second quarter 2023 as compared to the second quarter 2022 due to the lower allocation of non-interest expense over the same period. The provision for loan losses decreased $1.9 million for the three months ended June 30, 2023 due to a decrease in non-economic qualitative factors as compared to one year ago. See further details in the “Allowance for Credit Losses” section of this MD&A.
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Net interest margin on the Consumer Banking portfolio decreased 134 basis points to 1.60 percent for the second quarter 2023 as compared to the second quarter 2022 mainly due to a 224 basis point increase in the costs associated with our funding sources, partially offset by a 90 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 commercial and retail deposit products, increased utilization of fully FDIC-insured indirect customer deposits and higher cost of other borrowings held during the second quarter 2023. The 90 basis point increase in loan yield was largely due to higher yielding new loan volumes and adjustable rate loans in our portfolio. 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 0.55 percent for the second quarter 2023 compared to 0.69 percent for the second quarter 2022.
Commercial Banking
Commercial Banking is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans. Due to the portfolio’s interest rate characteristics, Commercial Banking is Valley’s business segment that is most sensitive to movements in market interest rates. Commercial and industrial loans totaled approximately $9.3 billion and represented 18.6 percent of the total loan portfolio at June 30, 2023. Commercial real estate loans and construction loans totaled $31.6 billion and represented 63.4 percent of the total loan portfolio at June 30, 2023.
Average interest earning assets in Commercial Banking increased $6.0 billion to $40.6 billion for the three months ended June 30, 2023 as compared to the second quarter 2022 primarily due to strong organic loan growth concentrated in the commercial real estate loan portfolio.
Income before income taxes for Commercial Banking increased $120.5 million to $247.5 million for the three months ended June 30, 2023 as compared to the same period of 2022 mainly due to an increase in net interest income and decreases in the provision for credit losses and internal transfer expense, partially offset by higher non-interest expense. Net interest income for this segment increased $41.0 million to $373.7 million for the second quarter 2023 as compared to the same period in 2022 primarily due to higher average commercial loan balances and higher interest rates on new and adjustable loans. Internal transfer expense decreased $55.0 million to $102.4 million for the three months ended June 30, 2023 as compared to the second quarter 2022. The provision for credit losses decreased $35.5 million to $2.8 million as compared to the same period in 2022 mainly due to elevated provision for credit losses for the second quarter 2022 related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA. See details in the "Allowance for Credit Losses for Loans" section of this MD&A. Non-interest expense increased $10.9 million to $35.4 million for three months ended June 30, 2023 as compared to the second quarter 2022.
The net interest margin for this segment decreased 16 basis points to 3.69 percent for the second quarter 2023 as compared to the second quarter 2022 due to a 224 basis point increase in the cost of our funding sources, partially offset by a 208 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 2.44 percent for the three months ended June 30, 2023 compared to 1.47 percent for the same period in 2022.
Treasury and Corporate Other
Treasury and Corporate Other largely consists of the Treasury managed held to maturity and available for sale 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 Federal Reserve Bank 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
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expense and internal transfer expense (for general corporate expenses) are allocated to each business 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 this segment include net gains and losses on available for sale and held to maturity securities transactions, interest expense related to subordinated notes, amortization of tax credit investments, as well as other non-core items, including merger expenses.
Average interest earning assets within Treasury and Corporate Other increased $1.5 billion to $7.9 billion for the three months ended June 30, 2023 mainly due to a $1.4 billion increase in average overnight interest bearing deposits with banks as compared to the same period in 2022. Our average overnight cash levels increased in the second quarter 2023 as a cautionary liquidity management measure resulting from the bank failures in March and April 2023.
For the three months ended June 30, 2023, loss before income taxes in this segment totaled $68.8 million compared to $7.7 million for the same period in 2022. The $61.1 million increase in the pre-tax loss during the second quarter 2023 period was mainly due to lower internal transfer income and net interest income, partially offset by a decrease in non-interest expense. The internal transfer income decreased $70.6 million to $124.4 million for the three months ended June 30, 2023 as compared to the same period a year ago due to the lower allocation of non-interest expense over the same period. Non-interest expense decreased $32.1 million to $224.4 million during the three months ended June 30, 2023 as compared to the same period in 2022 mainly attributable to merger expenses incurred during the second quarter 2022 resulting from the Bank Leumi USA acquisition. See further details in the "Non-Interest Income" and "Non-Interest Expense" sections of this MD&A.
The net interest margin for this segment decreased 93 basis points to 1.19 percent for the second quarter 2023 as compared to the second quarter 2022 due to a 224 basis point increase in cost of our funding sources, partially offset by a 131 basis point increase in the yield on average investments. The increase in the yield on average investments as compared to the same period a year ago was largely driven by new higher yielding investments and a reduction in premium amortization expense mostly caused by slower principal repayments in the rising interest rate environment.
The following tables present the financial data for Valley's operating segments for the six months ended June 30, 2023 and 2022:
 Six Months Ended June 30, 2023
 Consumer
Banking		Commercial
Banking		Treasury and Corporate OtherTotal
 ($ in thousands)
Average interest earning assets$8,836,859$39,826,630$7,699,305$56,362,794
Income before income taxes13,224471,069(89,758)394,535
Annualized return on average interest earning assets (before tax)
0.30 %2.37 %(2.33)%1.40 %

 Six Months Ended June 30, 2022
 Consumer
Banking		Commercial
Banking		Treasury and Corporate OtherTotal
 ($ in thousands)
Average interest earning assets$7,848,764$30,743,387$6,017,817$44,609,968
Income (loss) before income taxes36,659263,838(11,490)289,007
Annualized return on average interest earning assets (before tax)
0.93 %1.72 %(0.38)%1.30 %



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Consumer Banking

Consumer Banking's average interest earning assets increased $988.1 million to $8.8 billion for the six months ended June 30, 2023 as compared to the same period in 2022. The increase was largely due to new residential mortgage loan volumes originated for investment rather than sale over the last 12-month period, as well as growth in home equity loans and secured personal lines of credit.

Income before income taxes generated by Consumer Banking decreased $23.4 million to $13.2 million for the six months ended June 30, 2023 as compared to the same period in 2022 mainly driven by lower net interest income, and, to a lesser extent, increases in non-interest expense and the provision for loan losses. Net interest income decreased $37.0 million for the six months ended June 30, 2023 as compared to the same period in 2022 mainly due to additional interest expense generated from higher average deposit balances, as well as an increase in interest rates on such balances. The provision for loan losses increased $2.7 million for the six months ended June 30, 2023 due to additional reserves related to residential loan growth, and changes in the economic forecast component within our CECL model as compared to one year ago. See further details in the “Allowance for Credit Losses” section of this MD&A. The negative impact of these items was partially offset by an $8.9 million increase in non-interest income coupled with a $13.4 million decrease in the internal transfer expense for the six months ended June 30, 2023 as compared to the same period in 2022. The increase in non-interest income was mainly driven by increases in wealth management and trust fees and service charges on deposit accounts.

Net interest margin on the Consumer Banking portfolio decreased 116 basis points to 1.76 percent for the six months ended June 30, 2023 as compared to the same period one year ago mainly due to a 202 basis point increase in the costs associated with our funding sources, partially offset by an 86 basis point increase in the yield on average loans. The 86 basis point increase in loan yield was largely due to higher yielding new loan volumes and adjustable rate loans in our portfolio. 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 0.30 percent for the six months ended June 30, 2023 compared to 0.93 percent as compared to the same period one year ago.
Commercial Banking

Average interest earning assets in Commercial Banking increased $9.1 billion to $39.8 billion for the six months ended June 30, 2023 as compared to the same period in 2022. This increase was primarily due to strong organic loan growth, especially in the commercial real estate portfolio over the 12-month period ended June 30, 2023, as well as loans acquired from Bank Leumi USA on April 1, 2022.

For the six months ended June 30, 2023, income before income taxes for Commercial Banking increased $207.2 million to $471.1 million as compared to the same period in 2022 mainly due to an increase in net interest income and a lower provision for credit losses, partially offset by higher non-interest expense. Net interest income increased $172.6 million to $751.9 million for the six months ended June 30, 2023 as compared to the same period in 2022 primarily due to higher average commercial loan balances and higher interest rates on new and adjustable loans. The provision for credit losses decreased $34.1 million to $5.8 million during the six months ended June 30, 2023 as compared to $39.9 million for the same period in 2022 mainly due to a provision for non-PCD loans and unfunded credit commitments acquired from Bank Leumi in the second quarter 2022. See details in the "Allowance for Credit Losses for Loans" section of this MD&A. Non-interest expense increased $21.6 million to $71.1 million for the six months ended June 30, 2023 as compared to the same period in 2022 mainly due to acquired and organic growth in our commercial operations. See further details in the "Non-Interest Income" and "Non-Interest Expense" sections of this MD&A.

The net interest margin for this segment increased 1 basis point to 3.78 percent for the six months ended June 30, 2023 as compared to the same period in 2022 due to a 203 basis point increase in yield on average loans, partially offset by a 202 basis point increase in the cost of our funding sources.
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The return on average interest earning assets before income taxes for the commercial banking segment was 2.37 percent for the six months ended June 30, 2023 compared to 1.72 percent for the same period in 2022.
Treasury and Corporate Other
Treasury and Corporate Other's average interest earning assets increased $1.7 billion during the six months ended June 30, 2023 as compared to the same period in 2022 mainly due to investment securities acquired from Bank Leumi USA, as well as other select new investment securities purchases over the last 12-month period. Average interest bearing deposits with banks increased $47.5 million as compared to the same period in 2022 due to additional cash held as a cautionary liquidity management measure starting in March 2023 and through most of the second quarter 2023.
The loss before income taxes for this segment totaled $89.8 million for the six months ended June 30, 2023 as compared to $11.5 million for the same period in 2022. The $78.3 million increase in pre-tax loss was mainly due to an increase in non-interest expense and decreases in both net interest income and internal transfer income, partially offset by higher non-interest income. Non-interest expense increased $30.4 million to $442.6 million for the six months ended June 30, 2023 as compared to the same period in 2022 largely due to expenses related to our expanded banking operations and organic business growth including higher salary and employee benefits expense, technology, furniture and equipment and professional and legal fees. Internal transfer income decreased $36.7 million to $286.9 million for the six months ended June 30, 2023 as compared to the same period in 2022 due to the higher allocation of non-interest expense over the same period. Non-interest income increased $8.9 million during the six months ended June 30, 2023 as compared to the same period in 2022 mostly due to incremental increases in several operating non-interest income categories caused by acquired and organic growth of our business operations over the last 12-month period. See further details in the "Non-Interest Income" and "Non-Interest Expense" sections of this MD&A. Provision for credit losses increased $4.4 million mainly due to a corporate bond issued by Signature Bank within our AFS debt securities portfolio that was fully charged-off during the first quarter 2023.

Treasury and Corporate Other's net interest margin decreased 46 basis points to 1.35 percent for the six months ended June 30, 2023 as compared to the same period in 2022 due to a 202 basis point increase in cost of our funding sources, partially offset by a 156 basis point increase in the yield on average investments. The increased yield on average investments as compared to the same period in 2022 was largely driven by new higher yielding investments and a reduction in premium amortization expense mostly caused by slower principal repayments in the rising interest rate environment.
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.
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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 and 24-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 and the prepayment assumptions of certain assets and liabilities as of June 30, 2023. 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 June 30, 2023. 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 June 30, 2023. Although the size of Valley’s balance sheet is forecasted to remain static as of June 30, 2023 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 second quarter 2023. The model also utilizes an immediate parallel shift in market interest rates at June 30, 2023.
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.
 Estimated Change in
Future Net Interest Income
Changes in Interest RatesDollar
Change		Percentage
Change
(in basis points)($ in thousands)
+300$215,671 12.16 %
+200143,021 8.06 
+10070,754 3.99 
–100(72,077)(4.06)
–200(143,067)(8.06)
–300(213,209)(12.02)
As noted in the table above, a 100 basis point immediate increase in interest rates combined with a static balance sheet where the size, mix, and proportions of assets and liabilities remain unchanged is projected to increase net
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interest income over the next 12-month period by 3.99 percent. Management believes the interest rate sensitivity of our balance sheet remains within an acceptable tolerance range at June 30, 2023. 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 two board committees. Among other actions, Treasury 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 loan to deposits and wholesale funding to total funding ratios at June 30, 2023 and December 31, 2022:
June 30,
2023		December 31,
2022
Loans to deposits100.5 %98.5 %
Wholesale funding to total funding24.8 13.8 
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 Federal Reserve Bank of New York) and other sources. The following table summarizes Valley's sources of liquid assets:
June 30,
2023		December 31,
2022
(in thousands)
Cash and due from banks$463,318 $444,325 
Interest bearing deposits with banks1,491,091 503,622 
Trading debt securities3,409 13,438 
Held to maturity debt securities (1)
182,280 177,614 
Available for sale debt securities (2)
1,236,946 1,261,397 
Loans held for sale33,044 18,118 
Total liquid assets$3,410,088 $2,418,514 
(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.
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(2)     Includes approximately $847 million and $333 million of various investment securities that were pledged to counterparties to support our earning asset funding strategies at June 30, 2023 and December 31, 2022, respectively.
Total liquid assets represented 6.0 percent and 4.6 percent of earning assets at June 30, 2023 and December 31, 2022, respectively.
Other sources of funds on the asset side are derived from scheduled loan payments of principal and interest, as well as prepayments received. At June 30, 2023, estimated cash inflows from total loans are projected to be approximately $14.7 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 $386.2 million in principal payments from securities in the total investment portfolio at June 30, 2023 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 $42.0 billion and $38.1 billion for the six months ended June 30, 2023 and for the year ended December 31, 2022, respectively, representing 74.6 percent and 79.2 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 ample access to readily available borrowing sources available to supplement its current and projected funding needs. The following table presents short-term borrowings outstanding at June 30, 2023 and December 31, 2022:
June 30, 2023December 31, 2022
 (in thousands)
FHLB advances$1,000,000 $24,035 
Securities sold under agreements to repurchase88,899 114,694 
Total short-term borrowings$1,088,899 $138,729 
The following table summarizes the Bank's estimated unused available non-deposit borrowing capacities at June 30, 2023 and December 31, 2022:
June 30, 2023December 31, 2022
(in thousands)
FHLB borrowing capacity*$13,093,000 $6,891,000 
Unused FRB discount window*7,684,000 2,099,000 
Unused federal funds lines available from commercial banks2,065,000 1,940,000 
Unencumbered investment securities1,326,000 3,502,000 
Total$24,168,000 $14,432,000 
*     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.
Additionally, the Federal Reserve established the Bank Term Funding Program on March 12, 2023 as a funding source for eligible depository institutions. The Program can provide short-term liquidity (up to one year) against the par value of certain high-quality collateral, such as U.S. Treasury securities, and eliminate the potential need for an
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institution to sell those securities in times of stress. Advances under the Program can be requested until March 11, 2024. This Program is currently another short-term liquidity source for Valley. Valley had no outstanding borrowings under the Program at June 30, 2023.
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 (including $125 million of 5.125 percent subordinated notes which are maturing on September 27, 2023). 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. 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.
Investment Securities Portfolio
As of June 30, 2023, we had $61.0 million, $1.2 billion, and $3.8 billion in equity, available for sale debt securities and held to maturity debt securities, respectively. The available for sale and held to maturity 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 available for sale 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 consisted of two publicly traded mutual funds, CRA investments and several other equity investments 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. We also had $3.4 million of trading debt securities at June 30, 2023 consisting of U.S. Treasury securities.
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 to. 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 available for sale and held to maturity debt securities portfolios.

Allowance for Credit Losses and Impairment Analysis
Available for sale debt securities. Available for sale 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,
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such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes.
We have evaluated all available for sale debt securities that are in an unrealized loss position as of June 30, 2023 and December 31, 2022 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. Based on a comparison of the present value of expected cash flows to the amortized cost, 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 during the six months ended June 30, 2023. There was no other impairment recognized within the available for sale debt securities portfolio during the three months ended June 30, 2023 and the three and six months ended June 30, 2022.
Valley does not intend to sell any of its available for sale 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 available for sale debt securities were past due as of June 30, 2023 and there was no allowance for credit losses for available for sale debt securities at June 30, 2023 and December 31, 2022.
Held to maturity debt securities. Valley estimates the expected credit losses on held to maturity 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 held to maturity 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 held to maturity debt securities that have loss expectations, Valley estimates the expected credit losses using a discounted cash flow model developed by a third party. 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. Held to maturity debt securities were carried net of an allowance for credit losses totaling approximately $1.4 million and $1.6 million at June 30, 2023 and December 31, 2022, 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.
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The following table presents the available for sale and held to maturity debt investment securities portfolios by investment grades at June 30, 2023:
 June 30, 2023
 Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value
(in thousands)
Available for sale investment grades: *
AAA Rated$1,052,295 $39 $(124,114)$928,220 
AA Rated149,623 — (27,011)122,612 
A Rated17,213 — (3,000)14,213 
BBB Rated69,905 — (8,598)61,307 
Non-investment grade5,000 — (1,222)3,778 
Not rated120,644 — (13,828)106,816 
Total$1,414,680 $39 $(177,773)$1,236,946 
Held to maturity investment grades: *
AAA Rated$3,333,395 $918 $(455,892)$2,878,421 
AA Rated237,338 105 (15,184)222,259 
A Rated5,898 1 (145)5,754 
BBB Rated6,000 — (780)5,220 
Non-investment grade5,416 — (872)4,544 
Not rated178,791 1 (16,042)162,750 
Total$3,766,838 $1,025 $(488,915)$3,278,948 
Allowance for credit losses1,351 — — 1,351 
Total, net of allowance for credit losses$3,765,487 $1,025 $(488,915)$3,277,597 
*Rated using external rating agencies. Ratings categories include the entire range. For example, “A rated” includes A+, A, and A-. Split rated securities with two ratings are categorized at the higher of the rating levels.
The unrealized losses in the AAA and AA rated categories of both the available for sale and held to maturity 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 continued to be driven by the rising interest rate environment during the last 12 months. The investment securities available for sale and held to maturity portfolio included $120.6 million and $178.8 million, respectively, of investments not rated by the rating agencies with aggregate unrealized losses of $13.8 million and $16.0 million, respectively, at June 30, 2023. The unrealized losses within non-rated available for sale 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 held to maturity debt
securities mostly related to four single-issuer bank trust preferred issuances with a combined amortized cost of $36.1 million and several corporate and other debt securities.
See Note 7 to the consolidated financial statements for additional information regarding our investment securities portfolio.
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Loan Portfolio
The following table reflects the composition of the loan portfolio as of the dates presented:
June 30,
2023		March 31,
2023		December 31,
2022
 ($ in thousands)
Loans
Commercial and industrial$9,287,309 $9,043,946 $8,804,830 
Commercial real estate:
Commercial real estate27,793,072 27,051,111 25,732,033 
Construction3,815,761 3,725,967 3,700,835 
Total commercial real estate31,608,833 30,777,078 29,432,868 
Residential mortgage5,560,356 5,486,280 5,364,550 
Consumer:
Home equity535,493 516,592 503,884 
Automobile1,632,875 1,717,141 1,746,225 
Other consumer1,252,382 1,118,929 1,064,843 
Total consumer loans3,420,750 3,352,662 3,314,952 
Total loans*
$49,877,248 $48,659,966 $46,917,200 
As a percent of total loans:
Commercial and industrial18.6 %18.6 %18.8 %
Commercial real estate63.4 63.2 62.7 
Residential mortgage11.1 11.3 11.4 
Consumer loans6.9 6.9 7.1 
Total100.0 %100.0 %100.0 %
*     Includes net unearned discount and deferred loan fees of $119.1 million, $125.4 million and $120.5 million at June 30, 2023, March 31, 2023 and December 31, 2022, respectively.
Total loans increased $1.2 billion, or 10.0 percent on an annualized basis to $49.9 billion at June 30, 2023 from March 31, 2023 mainly due to continued organic loan growth in commercial loan categories and relatively low levels of loan prepayment activity during the second quarter 2023. Residential mortgage loans held for sale at fair value totaled $23.0 million and $17.2 million at June 30, 2023 and March 31, 2023, respectively. At June 30, 2023, loans held for sale also included one non-performing construction loan totaling $10.0 million, net of charge-offs, transferred from the loan portfolio during the second quarter 2023.
Commercial and industrial loans increased $243.4 million to $9.3 billion at June 30, 2023 as compared to March 31, 2023. The organic and diverse growth was mainly a result of new loan volumes from our pre-existing long-term customer base.
Commercial real estate loans (excluding construction loans) increased $742.0 million to $27.8 billion at June 30, 2023 from March 31, 2023 reflecting solid organic growth mainly within non-owner occupied and multi-family loans across our geographic market areas. At June 30, 2023, commercial real estate loans collateralized by office buildings were approximately $3.2 billion of the $27.8 billion portfolio. These loans are geographically disbursed largely across Florida, Alabama, New Jersey, New York, and Manhattan with a combined weighted average loan to value ratio of 52 percent and debt service coverage ratio of 1.78.
Construction loans increased only $89.8 million to $3.8 billion at June 30, 2023 from March 31, 2023 and was largely due to advances on pre-existing construction loan projects in New Jersey, New York and Florida.
Residential mortgage loans increased $74.1 million, or 5.4 percent on an annualized basis, during the second quarter 2023 as we largely originated new loans for the held for investment portfolio rather than for sale. New and refinanced residential mortgage loan originations totaled $188.0 million for the second quarter 2023 as compared to
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$194.4 million and $540.7 million for the first quarter 2023 and second quarter 2022, respectively. Florida originations totaled $63.2 million and represented 33.61 percent of total residential mortgage loan originations in the quarter. During the second quarter 2023, we retained approximately 73.2 percent of the total residential mortgage originations in our held for investment loan portfolio. Of the total originations in the second quarter 2023, $50.4 million of residential mortgage loans were originated for sale rather than held for investment as compared to $61.9 million during the second quarter 2022. Additionally, the volume of both new and refinanced loan applications has remained relatively low in the early stages of the third quarter 2023 due to the high level of mortgage interest rates and tight housing inventories and may challenge our ability to grow this loan category.
Home equity loans increased by $18.9 million to $535.5 million at June 30, 2023 compared to March 31, 2023 as a result of lower new originations and line utilization in an unfavorable high interest rate environment.
Automobile loans decreased by $84.3 million, or 19.6 percent on an annualized basis, to $1.6 billion at June 30, 2023 as compared to March 31, 2023 largely due to continued low consumer demand for new and used vehicle financing because of the higher interest rate environment. During the second quarter 2023, the interest rates on new car loans reached the highest level since 2008. We originated $16.2 million in auto loans through our Florida dealership network during the second quarter 2023 as compared to $31.5 million in the first quarter 2023. Of the total originations, our Florida dealership network represented approximately 20 percent of new loans, during the second quarter 2023. Despite adequate new automobile inventories available to consumers, we anticipate that the impact of inflation on average new vehicle prices coupled with rising interest rates could continue to have a negative impact on our ability to grow this loan category during the third quarter 2023.
Other consumer loans increased $133.5 million to $1.3 billion at June 30, 2023 as compared to March 31, 2023 mainly due to moderate growth in our collateralized personal lines of credit portfolio.
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.
Annualized loan growth slowed to 10 percent during the second quarter 2023 from 16 percent in the first quarter 2023 as we worked through the majority of the strong loan pipeline that was present at the beginning of 2023. We will continue to be selective on the lending side and generally supportive of compelling projects led by our high quality and tenured customer base. Moving forward, we anticipate moderate levels of overall loan growth in the mid to high single digits on an annualized basis for the remainder of 2023.
Non-performing Assets
Non-performing assets (NPA) include non-accrual loans, other real estate owned (OREO), and other repossessed assets (which primarily consist of automobiles and taxi medallions) at June 30, 2023. 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 increased $11.2 million to $256.1 million at June 30, 2023 as compared to March 31, 2023 mostly due to increases in both non-accrual commercial real estate loans and commercial and industrial loans, partially offset by decreases in construction loans and residential mortgage loans. NPAs as a percentage of total loans and NPAs totaled 0.51 percent and 0.50 percent at June 30, 2023 and March 31, 2023, respectively (as shown in the table below). Our total NPAs has remained relatively low as a percentage of the total loan portfolio and the level of NPAs, which is reflective of our consistent approach to the loan underwriting criteria for both Valley originated loans and loans purchased from third parties. For additional details, see the "Credit quality indicators" section in Note 8 to the consolidated financial statements.
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Our lending strategy is based on underwriting standards designed to maintain high credit quality and we remain optimistic regarding the overall future performance of our loan portfolio. During the six months ended June 30, 2023, our overall credit trends have remained stable, and our business and borrowers continued to demonstrate resilience and growth despite the recent challenges across the banking system, slower economic growth, elevated inflation and the overall uncertain economy. However, management cannot provide assurance that the non-performing assets will not materially increase from the levels reported at June 30, 2023 due to the aforementioned or other factors potentially impacting our lending customers.
The following table sets forth by loan category accruing past due and non-performing assets at the dates indicated in conjunction with our asset quality ratios: 
June 30,
2023		March 31,
2023		December 31,
2022
 ($ in thousands)
Accruing past due loans:
30 to 59 days past due:
Commercial and industrial$6,229 $20,716 $11,664 
Commercial real estate3,612 13,580 6,638 
Residential mortgage15,565 12,599 16,146 
Total consumer8,431 7,845 9,087 
Total 30 to 59 days past due33,837 54,740 43,535 
60 to 89 days past due:
Commercial and industrial7,468 24,118 12,705 
Commercial real estate— — 3,167 
Residential mortgage1,348 2,133 3,315 
Total consumer4,126 1,519 1,579 
Total 60 to 89 days past due12,942 27,770 20,766 
90 or more days past due:
Commercial and industrial6,599 8,927 18,392 
Commercial real estate2,242 — 2,292 
Construction3,990 6,450 3,990 
Residential mortgage1,165 1,668 1,866 
Total consumer1,006 747 47 
Total 90 or more days past due15,002 17,792 26,587 
Total accruing past due loans$61,781 $100,302 $90,888 
Non-accrual loans:
Commercial and industrial$84,449 $78,606 $98,881 
Commercial real estate82,712 67,938 68,316 
Construction63,043 68,649 74,230 
Residential mortgage20,819 23,483 25,160 
Total consumer3,068 3,318 3,174 
Total non-accrual loans254,091 241,994 269,761 
Other real estate owned (OREO)824 1,189 286 
Other repossessed assets1,230 1,752 1,937 
Total non-performing assets (NPAs)$256,145 $244,935 $271,984 
Total non-accrual loans as a % of loans0.51 %0.50 %0.57 %
Total NPAs as a % of loans and NPAs0.51 0.50 0.58 
Total accruing past due and non-accrual loans as a % of loans
0.63 0.70 0.77 
Allowance for loan losses as a % of non-accrual loans
171.76 180.54 170.02 
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Loans past due 30 to 59 days decreased $20.9 million to $33.8 million at June 30, 2023 as compared to March 31, 2023 due, in part, to the commercial real estate loans totaling $10.2 million included in this delinquency category at March 31, 2023 that reclassified to non-accrual loans at June 30, 2023. Commercial and industrial loans 30 to 59 days past due decreased $14.5 million mainly due to improved performance during the second quarter 2023.
Loans past due 60 to 89 days decreased $14.8 million to $12.9 million at June 30, 2023 as compared to March 31, 2023 largely due to a commercial and industrial loan relationship totaling $21.2 million included in this delinquency category at March 31, 2023 that became current to all its contractual payments at June 30, 2023.
Loans 90 days or more past due and still accruing interest decreased $2.8 million to $15.0 million at June 30, 2023 as compared to March 31, 2023 mainly due to decreases in the commercial and industrial and construction loan categories, partially offset by one new matured commercial real estate loan of $2.2 million expected to be paid off in the near term. All loans 90 days or more past due and still accruing interest are well-secured and in the process of collection.
Non-accrual loans increased $12.1 million to $254.1 million at June 30, 2023 as compared to $242.0 million at March 31, 2023 mostly driven by an increase in the commercial real estate loan category. Non-accrual commercial real estate loans increased $14.8 million to $82.7 million at June 30, 2023 due, in part, to the aforementioned migration of two loans totaling $10.2 million from the 30 to 59 days past due delinquency category at March 31, 2023 and one new $4.5 million non-performing loan at June 30, 2023. Non-accrual construction loans decreased $5.6 million to $63.0 million at June 30, 2023 from March 31, 2023 primarily due to the $4.2 million partial charge-off of one loan, which was transferred to loans held for sale at June 30, 2023.
Although the timing of collection is uncertain, management believes that the majority of the non-accrual loans at June 30, 2023, are well secured and largely collectible based in part, on our quarterly review of collateral dependent loans and the valuation of the underlying collateral, if applicable. Any estimated shortfall in each collateral valuation results in an allocation of specific reserves within our allowance for credit losses for loans.
Non-performing taxi medallion loans totaled $65.8 million of the $84.4 million non-accrual commercial and industrial loans at June 30, 2023. At June 30, 2023, all taxi medallion loans in the loan portfolio were on non-accrual status and had related reserves of $41.7 million, or 63.4 percent of such loans, within the allowance for loan losses. Potential further declines in the market valuation of taxi medallions and the current operating environment mainly within New York City may negatively impact the performance of this portfolio.
OREO properties totaled $824 thousand at June 30, 2023 and decreased $365 thousand as compared to March 31, 2023. The sales of OREO properties and net gains on sales of OREO during the three and six months ended June 30, 2023 and 2022 were not material. The residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $454 thousand and $2.6 million at June 30, 2023 and December 31, 2022, respectively.
Allowance for Credit Losses for Loans
The allowance for credit losses (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 estimated 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
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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 is 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 June 30, 2023, Valley continued to maintain 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-4 adverse scenarios. However, the standalone Moody's Baseline scenario reflected a more pessimistic outlook as compared to March 31, 2023 in terms of GDP growth, unemployment levels and potential near term negative economic impacts given the present uncertain economic conditions.
At June 30, 2023, the Moody's Baseline forecast included the following specific assumptions:
•GDP expansion of approximately 0.6 percent in the third quarter 2023;
•Unemployment of 3.6 percent in the third quarter 2023 and 3.8 to 4.3 percent over the remainder of the forecast period ending in the second quarter 2025;
•Continued concerns about increased debt burden pushed by rising interest rates, high inflation, and elevated house prices;
•Consumer spending remained a source of growth and its contribution grew to the largest in nearly two years, as the cost-of-living adjusted boosted after-tax income adding another 2.5 percent to growth;
•The Federal Reserve opted to pause its rate hikes in June 2023, keeping the federal funds rate at 5 - 5.25 percent with possible additional reductions in 2023; and
•Inflation remains elevated but continues to trend downward, while reporting at approximately 4 percent in May 2023.
See more details regarding our allowance for credit losses for loans in Note 8 to the consolidated financial statements.
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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:
 Three Months EndedSix Months Ended
June 30,
2023		March 31,
2023		June 30,
2022		June 30,
2023		June 30,
2022
 ($ in thousands)
Allowance for credit losses for loans
Beginning balance$460,969$483,255$379,252$483,255$375,702
Impact of the adoption of ASU No. 2022-02 (1)
—(1,368)—(1,368)—
Allowance for purchased credit deteriorated (PCD) loans, net (2)
——70,319—70,319
Beginning balance, adjusted460,969481,887449,571481,887446,021
Loans charged-off:
Commercial and industrial(3,865)(26,047)(4,540)(29,912)(6,111)
Commercial real estate(2,065)——(2,065)(173)
Construction(4,208)(5,698)—(9,906)—
Residential mortgage(149)—(1)(149)(27)
Total consumer(1,040)(828)(726)(1,868)(1,551)
Total charge-offs(11,327)(32,573)(5,267)(43,900)(7,862)
Charged-off loans recovered:
Commercial and industrial2,1731,3991,9523,5722,776
Commercial real estate42422428331
Residential mortgage1352174156531
Total consumer3907616971,1511,954
Total recoveries2,7022,2052,9474,9075,592
Total net loan charge-offs(8,625)(30,368)(2,320)(38,993)(2,270)
Provision charged for credit losses6,3329,45043,71215,78247,212
Ending balance$458,676$460,969$490,963$458,676$490,963
Components of allowance for credit losses for loans:
Allowance for loan losses$436,432$436,898$468,819$436,432$468,819
Allowance for unfunded credit commitments22,24424,07122,14422,24422,144
Allowance for credit losses for loans$458,676$460,969$490,963$458,676$490,963
Components of provision for credit losses for loans:
Provision for credit losses for loans
$8,159$9,979$38,310$18,138$41,568
Provision for unfunded credit commitments
(1,827)(529)5,402(2,356)5,644
Total provision for credit losses for loans$6,332$9,450$43,712$15,782$47,212
Allowance for credit losses for loans as a % of total loans
0.92 %0.95 %1.13 %0.92 %1.13 %
(1) Represents the opening adjustment for the adoption of ASU No. 2022-02 effective January 1, 2023.
(2) Represents the allowance for acquired PCD loans, net of PCD loan charge-offs totaling $62.4 million in the second quarter 2022.


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The following table presents the relationship among net loans charged-off and recoveries, and average loan balances outstanding for the periods indicated:
 Three Months EndedSix Months Ended
 June 30, 2023March 31, 2023June 30, 2022June 30, 2023June 30, 2022
 ($ in thousands)
Net loan (charge-offs) recoveries
Commercial and industrial$(1,692)$(24,648)$(2,588)$(26,340)$(3,335)
Commercial real estate(2,061)24224(2,037)158
Construction(4,208)(5,698)—(9,906)—
Residential mortgage(14)21737504
Total consumer(650)(67)(29)(717)403
Total $(8,625)$(30,368)$(2,320)$(38,993)$(2,270)
Average loans outstanding
Commercial and industrial$9,043,832$8,754,853$8,304,822$8,304,822$7,017,820
Commercial real estate27,808,27826,555,42123,319,41926,735,38421,303,889
Construction3,787,1833,780,6152,925,7413,721,7352,421,678
Residential mortgage5,489,5015,363,4214,727,4815,337,3204,706,695
Total consumer3,329,1433,405,0613,239,8243,268,7123,142,069
Total$49,457,937$47,859,371$42,517,287$47,367,973$38,592,151
Annualized net loan charge-offs (recoveries) to average loans outstanding
Commercial and industrial0.07%1.13%0.12%0.63%0.10%
Commercial real estate0.030.000.000.020.00
Construction0.440.600.000.530.00
Residential mortgage0.000.00(0.01)0.00(0.02)
Total consumer0.080.010.000.04(0.03)
Total loans 0.070.250.020.160.01
Net loan charge-offs totaled $8.6 million for the second quarter 2023 as compared to $30.4 million and $2.3 million for the first quarter 2023 and the second quarter 2022, respectively. The decrease from the first quarter 2023 was mainly due to the elevated net loan charges-offs during the first quarter 2023 largely related to one commercial and industrial loan participation charged-off. Gross charge-offs totaled $11.3 million for the second quarter 2023 and included the $4.2 million partial charge-off related to the valuation of a non-performing construction loan transferred from the held for investment loan portfolio to loans held for sale at June 30, 2023. This construction loan had specific reserves of $5.2 million within the allowance for loan losses at March 31, 2023 and, as a result, the partial charge-off was fully reserved for prior to the second quarter 2023.
The amount of net loan charge-offs (as presented in the above table) and the low level of individual loan charge-offs for the second quarter 2023 continued to trend within management's expectations for the credit quality of the loan portfolio at June 30, 2023.


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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:
 June 30, 2023March 31, 2023June 30, 2022
 Allowance
Allocation		Allocation
as a % of
Loan
Category		Allowance
Allocation		Allocation
as a % of
Loan
Category		Allowance
Allocation		Allocation
as a % of
Loan
Category
 ($ in thousands)
Loan Category:
Commercial and industrial loans$128,245 1.38 %$127,992 1.42 %$144,539 1.70 %
Commercial real estate loans:
Commercial real estate194,177 0.70 190,420 0.70 227,457 0.97 
Construction45,518 1.19 52,912 1.42 49,770 1.47 
Total commercial real estate loans239,695 0.76 243,332 0.79 277,227 1.03 
Residential mortgage loans44,153 0.79 41,708 0.76 29,889 0.60 
Consumer loans:
Home equity4,020 0.75 4,417 0.86 3,907 0.91 
Auto and other consumer20,319 0.70 19,449 0.69 13,257 0.49 
Total consumer loans24,339 0.71 23,866 0.71 17,164 0.55 
Allowance for loan losses436,432 0.88 436,898 0.90 468,819 1.08 
Allowance for unfunded credit commitments
22,244 24,071 22,144 
Total allowance for credit losses for loans
$458,676 $460,969 $490,963 
Allowance for credit losses for loans as a % total loans0.92 %0.95 %1.13 %
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 0.92 percent at June 30, 2023 as compared to 0.95 percent and 1.13 percent at March 31, 2023 and June 30, 2022, respectively. During the second quarter 2023, the provision for credit losses for loans totaled $6.3 million as compared to $9.5 million and $43.7 million for the first quarter 2023 and second quarter 2022, respectively. At June 30, 2023, our allowance for credit losses for loans as a percentage of total loans decreased as compared to March 31, 2023 as higher economic forecast reserves driven by a more pessimistic Moody's Baseline outlook was more than offset by lower non-economic qualitative reserves for commercial loans. The net impact of other changes in quantitative reserves for each loan category was not significant to the total allowance for loan losses at June 30, 2023.
Capital Adequacy
A significant measure of the strength of a financial institution is its shareholders’ equity. At June 30, 2023 and December 31, 2022, shareholders’ equity totaled approximately $6.6 billion and $6.4 billion, which represented 10.7 percent and 11.1 percent of total assets, respectively.
During the six months ended June 30, 2023, total shareholders’ equity increased by approximately $174.4 million primarily due to the following:
•net income of $285.6 million,
•a $7.7 million increase attributable to the effect of our stock incentive plan,
•additional capital issued totaling $3.8 million,
•a $990 thousand net cumulative effect adjustment to retained earnings for the adoption of ASU 2022-02, partially offset by
•cash dividends declared on common and preferred stock totaling a combined $120.9 million,
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•repurchases of $2.1 million of our common stock with these shares held in treasury stock and
•other comprehensive loss of $745 thousand.
Valley and Valley National Bank are subject to the regulatory capital requirements administered by the Federal Reserve Bank and the OCC. Quantitative measures established by regulation to ensure capital adequacy require Valley and Valley National 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.
We are required to maintain 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 June 30, 2023 and December 31, 2022, 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 interim rule as of April 3, 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 June 30, 2023, approximately $23.6 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 6 basis points.

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The following table presents Valley’s and Valley National Bank’s actual capital positions and ratios under Basel III risk-based capital guidelines at June 30, 2023 and December 31, 2022:
 ActualMinimum Capital
Requirements		To Be Well Capitalized
Under Prompt Corrective
Action Provision
 AmountRatioAmountRatioAmountRatio
 
 ($ in thousands)
As of June 30, 2023
Total Risk-based Capital
Valley$5,735,239 11.52 %$5,227,963 10.50 %N/AN/A
Valley National Bank5,824,996 11.70 5,225,830 10.50 $4,976,981 10.00 %
Common Equity Tier 1 Capital
Valley4,497,984 9.03 3,485,309 7.00 N/AN/A
Valley National Bank5,446,582 10.94 3,483,887 7.00 3,235,038 6.50 
Tier 1 Risk-based Capital
Valley4,712,825 9.47 4,232,161 8.50 N/AN/A
Valley National Bank5,446,582 10.94 4,230,434 8.50 3,981,585 8.00 
Tier 1 Leverage Capital
Valley4,712,825 7.86 2,399,186 4.00 N/AN/A
Valley National Bank5,446,582 9.08 2,399,094 4.00 2,998,868 5.00 
As of December 31, 2022
Total Risk-based Capital
Valley$5,569,639 11.63 %$5,026,621 10.50 %N/AN/A
Valley National Bank5,659,511 11.84 5,018,129 10.50 $4,779,170 10.00 %
Common Equity Tier 1 Capital
Valley4,315,659 9.01 3,351,080 7.00 N/AN/A
Valley National Bank5,284,372 11.06 3,345,419 7.00 3,106,461 6.50 
Tier 1 Risk-based Capital
Valley4,530,500 9.46 4,069,169 8.50 N/AN/A
Valley National Bank5,284,372 11.06 4,062,295 8.50 3,823,336 8.00 
Tier 1 Leverage Capital
Valley4,530,500 8.23 2,200,822 4.00 N/AN/A
Valley National Bank5,284,372 9.60 2,200,891 4.00 2,751,114 5.00 
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 60.0 percent for the six months ended June 30, 2023 as compared to 61.4 percent for the year ended December 31, 2022.
Cash dividends declared amounted to $0.22 per common share for each of the six months ended June 30, 2023 and 2022. 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.
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 on Form 10-K for the year ended December 31, 2022 in the MD&A section - “Liquidity and Cash Requirements” and Notes 13 and 14 to the consolidated financial statements included in this report.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk
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 69 for a discussion of interest rate risk.

Item 4.Controls and Procedures
(a) Disclosure control and procedures. Valley maintains disclosure controls and procedures which, consistent with Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (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 Securities and Exchange Commission’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 June 30, 2023 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 controls 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.
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PART II - OTHER INFORMATION 
Item 1.Legal Proceedings
In the normal course of business, we are a party to various outstanding legal proceedings and claims. There have been no material changes in the legal proceedings, if any, previously disclosed under Part I, Item 3 of Valley’s Annual Report on Form 10-K for the year ended December 31, 2022.

Item 1A.Risk Factors
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 on Form 10-K for the year ended December 31, 2022, except as described below, and previously disclosed in Valley’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023:
Our financial results and condition may be adversely impacted by recent events in the banking industry or any future similar events.
Recent events impacting the banking industry, including the bank failures in March and April 2023, have resulted in significant disruption and volatility in the capital markets, reduced current valuations of bank securities, and decreased confidence in banks among depositors and other counterparties as well as investors. These events occurred in the context of rapidly rising interest rates which, among other things, have resulted in unrealized losses in longer duration debt securities and loans held by banks, increased competition for deposits and potentially increased the risk of recession. These events have had, and may continue to have, an adverse impact on the market price of our common stock.
While the Department of the Treasury, the Federal Reserve, and the FDIC took steps to ensure that depositors of recently failed banks would have access to their insured and uninsured deposits, and to facilitate sales of certain failed banks, there is no assurance that these or similar actions will restore customer confidence in the banking system, and we may be further impacted by concerns regarding the soundness of other financial institutions, or other future bank failures or disruptions. Any loss of client deposits or changes in our credit ratings could increase the cost of funding, limit access to capital markets or negatively impact our overall liquidity or capitalization. The cost of resolving the recent bank failures may also prompt the FDIC to increase its premiums above current levels or to issue additional special assessments.
These recent events and any future similar events may also result in changes to laws or regulations governing bank holding companies and banks, including higher capital requirements, or the imposition of restrictions through supervisory or enforcement activities, which could materially impact our business.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter, we did not sell any equity securities not registered under the Securities Act of 1933, as amended. Purchases of equity securities by the issuer and affiliated purchasers during the three months ended June 30, 2023 were as follows:

ISSUER PURCHASES OF EQUITY SECURITIES 
PeriodTotal  Number of
Shares  Purchased (1)		Average
Price Paid
Per Share		Total Number of Shares
Purchased as Part of
Publicly Announced
Plans		Maximum Number of
Shares that May Yet Be
Purchased Under the Plans (2)
April 1, 2023 to April 30, 202327,407 $9.24 — 25,000,000 
May 1, 2023 to May 31, 2023300,493 6.98 300,000 24,700,000 
June 1, 2023 to June 30, 202325,042 7.38 — 24,700,000 
Total352,942 $7.18 300,000 
(1)Includes repurchases made in connection with the vesting of employee restricted stock awards.
(2)On April 26, 2022, Valley publicly announced a stock repurchase program for up to 25 million shares of Valley common stock. The authorization to repurchase will expire on April 25, 2024.

Item 5. Other Information
a.None.
b.None.
c.None.

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Item 6.Exhibits

(3)Articles of Incorporation and By-laws:
(3.1)
(3.2)
(10)Material Contracts:
(10.1)
(10.2)
(31.1)
(31.2)
(32)
(101)Interactive Data File (XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) **
(104)Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Filed herewith.
**Furnished herewith.
+Management contract and compensatory plan or arrangement.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  VALLEY NATIONAL BANCORP
  (Registrant)
Date:  /s/ Ira Robbins
August 7, 2023  Ira Robbins
  Chairman of the Board and
  Chief Executive Officer
(Principal Executive Officer)
Date:   /s/ Michael D. Hagedorn
August 7, 2023  Michael D. Hagedorn
  Senior Executive Vice President and
  Chief Financial Officer
(Principal Financial Officer)
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