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Tax Credit Investments
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Tax Credit Investments
INCOME TAXES (Note 13)
Income tax expense for the years ended December 31, 2024, 2023 and 2022 consisted of the following:
202420232022
 (in thousands)
Current expense:
Federal$26,308 $123,569 $132,060 
State38,079 65,611 72,271 
64,387 189,180 204,331 
Deferred (benefit) expense:
Federal(6,966)(8,035)7,263 
State827 (1,324)222 
(6,139)(9,359)7,485 
Total income tax expense$58,248 $179,821 $211,816 
The tax effects of temporary differences that gave rise to the significant portions of the deferred tax assets and liabilities as of December 31, 2024 and 2023 were as follows:
20242023
 (in thousands)
Deferred tax assets:
Allowance for credit losses$157,629 $128,717 
Employee benefits41,808 41,190 
Investment securities48,652 42,361 
Net operating loss carryforwards9,078 11,037 
Purchase accounting42,637 53,980 
FDIC special assessment10,673 13,894 
Other23,744 24,362 
Total deferred tax assets334,221 315,541 
Deferred tax liabilities:
Pension plans52,783 37,194 
Depreciation12,314 20,963 
Other investments17,088 11,175 
Core deposit intangibles21,287 28,237 
Other25,876 22,319 
Total deferred tax liabilities129,348 119,888 
Valuation allowance1,263 424 
Net deferred tax asset (included in other assets)$203,610 $195,229 
Valley's federal net operating loss carryforwards totaled $31.8 million at December 31, 2024, and expire during the period from 2029 through 2034. State net operating loss carryforwards totaled $55.3 million at December 31, 2024, and expire during the period from 2029 through 2038.
Valley's capital loss carryforwards totaled $4.8 million, net of a valuation allowance of $1.3 million at December 31, 2024, and expire during the period from 2028 to 2029.
Based upon taxes paid and projections of future taxable income over the periods in which the net deferred tax assets are deductible, management believes that it is more likely than not that Valley will realize the benefits of these deductible differences and loss carryforwards.
Reconciliation between the reported income tax expense and the amount computed by multiplying consolidated income before taxes by the statutory federal income tax rate of 21 percent for the years ended December 31, 2024, 2023, and 2022 were as follows:
202420232022
AmountPercentAmountPercentAmountPercent
 (in thousands)
U.S. federal statutory tax rate$92,089 21.0 %$142,450 21.0 %$163,940 21.0 %
Increase (decrease) due to:
State income tax expense, net of federal tax effect *
30,736 7.0 %50,787 7.5 %57,276 7.3 %
Tax credits(32,104)(7.3)%(23,008)(3.4)%(12,872)(1.6)%
Nontaxable or non-deductible items
Disallowed FDIC Insurance Premiums11,071 2.5 %7,950 1.2 %4,796 0.6 %
Other nontaxable or non-deductible(1,075)(0.2)%(1,291)(0.2)%156 — %
Changes in unrecognized tax benefits(46,431)(10.6)%— — %— — %
Other adjustments3,962 0.9 %2,933 0.4 %(1,480)(0.2)%
 Income tax expense$58,248 13.3 %$179,821 26.5 %$211,816 27.1 %
*State taxes in New York, New York City, and New Jersey made up the majority (greater than 50 percent) of the tax effect in this category.
Valley had $30.4 million in reserve for tax liability positions at December 31, 2023 and 2022 related to certain tax credits and other tax benefits previously recognized by Valley, where, subsequently, a third-party fraud was uncovered by the U.S. Department of Justice in 2018. During the fourth quarter 2024, the statute of limitations with respect to the matter expired and the tax authority closed its examination resulting in no changes to the originally filed tax returns. Based on the timing of the events and expiration of the statute of limitations during the fourth quarter 2024, Valley reassessed its positions and fully reduced its previous balance of unrecognized tax benefits.
A reconciliation of Valley’s gross unrecognized tax benefits for the years ended December 31, 2024, 2023 and 2022 is presented in the table below:
202420232022
 (in thousands)
Beginning balance$30,359 $30,359 $30,359 
Reductions due to expiration of statute of limitations(30,359)— — 
Ending balance$— $30,359 $30,359 
The entire balance of unrecognized tax benefits was recognized and had a favorable effect on Valley's effective income tax rate for the year ended December 31, 2024.
Valley’s policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Valley accrued approximately $13.4 million and $10.5 million of interest expense associated with Valley's uncertain tax positions at December 31, 2023 and 2022, respectively.
Valley monitors its tax positions for the underlying facts, circumstances, and information available including changes in tax laws, case law, and regulations that may necessitate subsequent de-recognition of previous tax benefits.
The following table presents income taxes paid for the years ended December 31, 2024, 2023 and 2022:
202420232022
 (in thousands)
Federal taxes paid$54,227 $162,502 $121,000 
State and city taxes paid:
New York 12,447 25,718 18,626 
New Jersey7,475 19,006 12,010 
New York City8,407 13,307 12,141 
Other7,145 15,970 8,325 
Total state and city taxes paid35,474 74,001 51,102 
Total income taxes paid$89,701 $236,503 $172,102 
Valley files income tax returns in U.S. federal and various state jurisdictions. With few exceptions, Valley is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2018. Valley is under examination by the IRS and also under routine examination by various state jurisdictions, and we expect the examinations to be completed within the next 12 months. Valley has considered, for all open audits, any potential adjustments in establishing our reserve for unrecognized tax benefits as of December 31, 2024.
TAX CREDIT INVESTMENTS (Note 14)
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 CRA. 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. See the “Impairment Analysis” section below.
The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at December 31, 2024 and 2023:
20242023
(in thousands)
Other assets:
Affordable housing tax credit investments, net$22,742 $22,158 
Other tax credit investments, net278,468 117,659 
Total tax credit investments, net
$301,210 $139,817 
Other liabilities:
Unfunded affordable housing tax credit commitments$— $1,305 
    Total unfunded tax credit commitments$— $1,305 

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the years ended December 31, 2024, 2023 and 2022:
202420232022
(in thousands)
Components of income tax expense:
Affordable housing tax credits and other tax benefits$5,319 $5,872 $4,748 
Other tax credit investment credits and tax benefits32,091 20,069 11,617 
Total reduction in income tax expense
$37,410 $25,941 $16,365 
Amortization of tax credit investments:
Affordable housing tax credit investment losses$3,501 $3,198 $2,311 
Affordable housing tax credit investment impairment losses983 2,466 1,187 
Other tax credit investment losses5,143 1,266 1,254 
Other tax credit investment impairment losses9,319 11,079 7,655 
Total amortization of tax credit investments recorded in non-interest expense
$18,946 $18,009 $12,407 
Impairment Analysis
An impairment loss is recognized when the fair value of the tax credit investment is less than its carrying value. The determination of whether a decline in value of a tax credit investment is other-than-temporary requires significant judgment and is performed separately for each investment. The tax credit investments are reviewed for impairment quarterly, or whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. These circumstances can include, but are not limited to, the following factors:
•Evidence that Valley does not have the ability to recover the carrying amount of the investment;
•The inability of the investee to sustain earnings;
•A current fair value of the investment based upon cash flow projections that is less than the carrying amount; and
•Change in the economic or technological environment that could adversely affect the investee’s operations.
On a periodic basis, Valley obtains financial reporting on its underlying tax credit investment assets for each fund. The financial reporting is reviewed for deterioration in the financial condition of the fund, the level of cash flows and any significant losses or impairment charges. Valley also regularly reviews the condition and continuing prospects of the underlying operations of the investment with the fund manager, including any observations from site visits and communications with the Fund Sponsor, if available. Annually, Valley obtains the audited financial statements prepared by an independent accounting firm for each investment, as well as the annual tax returns. Generally, none of the aforementioned review factors are individually conclusive and the relative importance of each factor varies based on facts and circumstances. However, the longer the expected period of recovery, the stronger and more objective the positive evidence needs to be in order to overcome the presumption that
the impairment is other than temporary. If management determines that a decline in value is other than temporary as a result of its quarterly and annual reviews, including current probable cash flow projections, the applicable tax credit investment is written down to its estimated fair value through an impairment charge to earnings, which establishes the new cost basis of the investment.