# VALLEY NATIONAL BANCORP (VLY) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from VALLEY NATIONAL BANCORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/714310/000071431025000068/vly-20241231.htm
Accession: 0000714310-25-000068
Filing date: 2025-02-28
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/VLY/
All MD&A years: /company/VLY/mda/
Previous year: /company/VLY/mda/fy2023/ (FY 2023)
Next year: /company/VLY/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations

The purpose of this analysis is to provide the reader with information relevant to understanding and assessing Valley’s results of operations and financial condition for each of the past two years. In order to fully appreciate this analysis, the reader is encouraged to review the consolidated financial statements and accompanying notes thereto appearing under Item 8 of this Report, and statistical data presented in this document. For comparison of our results of operations for the years ended December 31, 2023 and 2022, please refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024.

Cautionary Statement Concerning Forward-Looking Statements

This Report, both in 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 in addition to those risk factors listed under Item 1A. Risk Factors of this Report include, but are not limited to:

•the impact of market interest rates and monetary and fiscal policies of the U.S. federal government and its agencies in connection with prolonged inflationary pressures, which could have a material adverse effect on our clients, our business, our employees, and our ability to provide services to our customers;

•the impact of unfavorable macroeconomic conditions or downturns, including an actual or threatened U.S. government shutdown, debt default or rating downgrade, instability or volatility in financial markets, unanticipated loan delinquencies, loss of collateral, decreased service revenues, increased business disruptions or failures, reductions in employment, and other potential negative effects on our business, employees or clients caused by factors outside of our control, such as future legislation and policy changes under the new U.S. presidential administration, geopolitical instabilities or events; natural and other disasters, including severe weather events, health emergencies, acts of terrorism; or other external events;

•the impact of potential instability within the U.S. financial sector in the aftermath of the banking failures in 2023 and continued volatility thereafter, including the possibility of a run on deposits by a coordinated deposit base, and the impact of the actual or perceived soundness, or concerns about the creditworthiness of other financial institutions, including any resulting disruption within the financial markets, increased expenses, including Federal Deposit Insurance Corporation insurance assessments, or adverse impact on our stock price, deposits or our ability to borrow or raise capital;

[[GREPCENT_TABLE]]
[["","41","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

•the impact of negative public opinion regarding Valley or banks in general that damages our reputation and adversely impacts business and revenues;

•changes in the statutes, regulations, policy, or enforcement priorities of the federal bank regulatory agencies;

•the loss of or decrease in lower-cost funding sources within our deposit base;

•damage verdicts or settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent, trademark or other intellectual property infringement, misappropriation or other violation, employment related claims, and other matters;

•a prolonged downturn and contraction in the economy, as well as an unexpected decline in commercial real estate values collateralizing a significant portion of our loan portfolio;

•higher or lower than expected income tax expense or tax rates, including increases or decreases resulting from changes in uncertain tax position liabilities, tax laws, regulations, and case law;

•the inability to grow customer deposits to keep pace with loan growth;

•a material change in our allowance for credit losses under CECL due to forecasted economic conditions and/or unexpected credit deterioration in our loan and investment portfolios;

•the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;

•changes in our business, strategy, market conditions or other factors that may negatively impact the estimated fair value of our goodwill and other intangible assets and result in future impairment charges;

•greater than expected technology related costs due to, among other factors, prolonged or failed implementations, additional project staffing and obsolescence caused by continuous and rapid market innovations;

•increased competitive challenges, including our ability to stay current with rapid technological changes in the financial services industry;

•cyberattacks, ransomware attacks, computer viruses, malware or other cybersecurity incidents that may breach the security of our websites or other systems or networks to obtain unauthorized access to personal, confidential, proprietary or sensitive information, destroy data, disable or degrade service, or sabotage our systems or networks, and the increasing sophistication of such attacks;

•results of examinations by the OCC, the FRB, the CFPB and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;

•application of the OCC heightened regulatory standards for certain large insured national banks, and the expenses we will incur to develop policies, programs, and systems that comply with the enhanced standards applicable to us;

•our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements, or a decision to increase capital by retaining more earnings;

•unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other public health crises, acts of terrorism or other external events;

•our ability to successfully execute our business plan and strategic initiatives; and

•unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, risk mitigation strategies, changes in regulatory lending guidance or other factors.

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

[[GREPCENT_TABLE]]
[["2024 Form 10-K","42"]]
[[/GREPCENT_TABLE]]

Critical Accounting Estimates

Our accounting and reporting policies conform, in all material respects, to GAAP. In preparing the consolidated financial statements, management has made estimates, judgments 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. Actual results could differ materially from those estimates.

Valley’s accounting policies are fundamental to understanding management’s discussion and analysis of its financial condition and results of operations. Our significant accounting policies are presented in Note 1 to the consolidated financial statements. We identified our policies for the allowance for credit losses, goodwill and other intangible assets, and income taxes to be critical 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 with the Audit Committee of the Board.

The judgments and estimates used by management in applying the critical accounting policies discussed below may be affected by significant changes in the economic environment, which may result in changes to future financial results. Specifically, subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in material changes in the allowance for credit losses in future periods, and the inability to collect on outstanding loans could result in increased loan losses.

Allowance for Credit Losses. Determining the allowance for credit losses for loans has historically been identified as a critical accounting estimate. We estimate and recognize an allowance for lifetime expected credit losses for loans, unfunded credit commitments and HTM debt securities measured at amortized cost. See Notes 1, 4 and 5 to the consolidated financial statements for further discussion of our accounting policies and methodologies for establishing the allowance for credit losses.

The accounting estimate of the allowance for credit losses is a “critical accounting estimate” for the following reasons:

•Changes in the provision for credit losses can materially affect our financial results;

•Estimates relating to the allowance for credit losses require us to project future borrower performance, delinquencies and charge-offs, along with, when applicable, collateral values, based on a reasonable and supportable forecast period utilizing forward-looking economic scenarios in order to estimate probability of default and loss given default;

•The allowance for credit losses is influenced by factors outside of our control such as industry and business trends, geopolitical events and the effects of laws and regulations as well as economic conditions such as trends in GDP, unemployment, housing prices, interest rates, inflation, and energy prices; and

•Judgment is required to determine whether the models used to generate the allowance for credit losses produce an estimate that is sufficient to encompass the current view of lifetime expected credit losses.

Additionally, management’s determination of the amount of the ACL is a critical accounting estimate because it requires significant reliance on the credit risk we ascribe to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows on individually evaluated loans, significant reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Changes in such estimates could significantly impact our allowance and provision for credit losses. Accordingly, our actual credit loss experience may not be in line with our expectations.

Changes in Our Allowance for Credit Losses for Loans

Valley considers it difficult to quantify the impact of changes in the economic forecast on its allowance for credit losses for loans. However, management believes the following discussion may enable investors to better understand the variables that drive the allowance for credit losses for loans, which totaled $573.3 million and $465.6 million at December 31, 2024 and 2023, respectively.

As discussed further in the “Allowance for Credit Losses” section in this MD&A, we incorporated a multi-scenario economic forecast for estimating lifetime expected credit losses at December 31, 2024 and 2023. The qualitative economic component of our reserves at December 31, 2024 decreased by $43.8 million to approximately 8 percent of total allowance for credit losses for loans at December 31, 2024 as compared to 19 percent at December 31, 2023 largely due to gradual improvements in most economic indicators, including inflation, during 2024 and a higher level of previously expected losses transitioning as realized losses (i.e., charge-offs) through our ACL model in 2024. Other qualitative non-economic reserves, largely based upon management judgements about certain inherent factors in acquired loan portfolios not reflected in our

[[GREPCENT_TABLE]]
[["","43","2024 Form 10-K"]]
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quantitative reserves, also decreased $48.0 million to approximately 4 percent of total allowance for credit losses for loans at December 31, 2024 as compared to 16 percent at December 31, 2023. The decline was mostly due to the passage of time and better than expected performance of these portfolios. The net positive developments in these significant judgmental factors during 2024 were more than offset by increases in the quantitative portion of our allowance based upon a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by generating probability of default and loss given default metrics.

The allowance for credit losses for loans also included specific reserves totaling $75.9 million and $74.2 million, respectively, at December 31, 2024 and 2023. These reserves are based upon management's valuation of collateral for collateral dependent loans. These specific reserves include $25.8 million and $37.7 million at December 31, 2024 and 2023, respectively, related to New York City taxi medallion loan valuations based on the estimated value of the underlying medallions. See additional details regarding our non-performing taxi medallion loan portfolio under the “Non-performing Assets” section of this MD&A.

Goodwill and Other Intangible Assets. We have significant goodwill and other intangible assets related to our acquisitions totaling $1.9 billion and $128.7 million at December 31, 2024, respectively. We record all acquired assets, including goodwill and other intangible assets, and assumed liabilities in purchase acquisitions at fair value as of the acquisition date, and expense all acquisition related costs as incurred as required by ASC Topic 805, “Business Combinations.” The initial recording of goodwill and other intangible assets requires subjective judgments concerning estimates of the fair value of the acquired assets and assumed liabilities. Goodwill is subject to annual tests for impairment or more often, if events or circumstances indicate it may be impaired. Our determination of whether or not goodwill is impaired requires us to make significant judgments and to use significant estimates and assumptions regarding estimated future cash flows. If we change our strategy or if market conditions shift, our judgments may change, which may result in adjustments to the recorded goodwill balance. Other intangible assets are amortized over their estimated useful lives and are subject to impairment tests if events or circumstances indicate a possible inability to realize the carrying amount. Such evaluation of other intangible assets is based on undiscounted cash flow projections.

An impairment loss is recognized if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill recorded. We perform our annual goodwill impairment test in the second quarter of each year, or more often if events or circumstances warrant. In addition to the annual impairment test, we assessed the immediate and long-term impact of significant market and bank regulatory changes, if applicable, on the macroeconomic variables and economic forecasts and how those might impact the fair value of our reporting units each quarter end. After consideration of these variables and other possible triggering events or circumstances, as well as our operating results, we determined it was more-likely-than-not that the fair values of our three reporting units, Wealth Management, Consumer Banking, and Commercial Banking, were in excess of their carrying values during 2024. Therefore, we concluded there were no triggering events that would require additional goodwill impairment test of the reporting units during 2024.

In 2025, we will continue to monitor and evaluate the overall economic conditions that may impact our market capitalization and any triggering events that may indicate a possible impairment of goodwill allocated to our reporting units. While not expected at this time, we may be required to record a charge to earnings should there be a deficiency in our estimated fair value of one or more of our reporting units during our subsequent annual (or more frequent) impairment tests. See the “Operating Segments” section in this MD&A for more information regarding our business segments/reporting units.

Fair value is determined using certain discounted cash flow and market multiple methods. Estimated cash flows may extend far into the future and, by their nature, are difficult to determine over an extended timeframe. Factors that may materially affect the estimates include, among others, macroeconomic conditions such as a deterioration in general economic conditions and economic forecasts, competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures and technology, and changes in discount rates, growth rate, terminal values, and specific industry or market sector conditions. Additionally, we perform a market capitalization reconciliation to support the appropriateness of our reporting unit fair values and impairment test results. In performing this reconciliation, we compare the sum of fair value of the reporting units to our market capitalization, adjusted for the present value of estimated synergies which a market participant acquirer could reasonably expect to realize from a hypothetical acquisition of Valley.

To assist in assessing the impact of potential goodwill or other intangible assets impairment charges at December 31, 2024, the impact of a five percent impairment charge on these intangible assets would result in a reduction in pre-tax income of approximately $99.9 million. See Note 8 to the consolidated financial statements for additional information regarding goodwill and other intangible assets.

[[GREPCENT_TABLE]]
[["2024 Form 10-K","44"]]
[[/GREPCENT_TABLE]]

Income Taxes. We are subject to the income tax laws of the U.S., its states and municipalities. The income tax laws of the jurisdictions in which we operate are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently complex tax laws to our business activities, as well as the timing of when certain items may affect taxable income.

Our interpretations may be subject to review during examination by taxing authorities and disputes may arise over the respective tax positions. We attempt to resolve these disputes during the tax examination and audit process and ultimately through the court systems when applicable. We monitor relevant tax authorities and revise our estimate of accrued income taxes due to changes in income tax laws and their interpretation by the courts and regulatory authorities on a quarterly basis. Revisions of our estimate of accrued income taxes also may result from our own income tax planning and from the resolution of income tax controversies. Such revisions in our estimates may be material to our operating results for any given quarter.

The provision for income taxes is composed of current and deferred taxes. Deferred taxes arise from differences between assets and liabilities measured for financial reporting versus income tax return purposes. Deferred tax assets are recognized if, in management’s judgment, their realizability is determined to be more likely than not. We perform regular reviews to ascertain the realizability of our deferred tax assets. These reviews include management’s estimates and assumptions regarding future taxable income, which also incorporate various tax planning strategies. In connection with these reviews, if we determine that a portion of the deferred tax asset is not realizable, a valuation allowance is established. Management determined it is more likely than not that Valley will realize its net deferred tax assets, except for immaterial valuation allowances, as of December 31, 2024 and 2023.

We also maintain, when necessary, a reserve related to certain tax positions that management believes contain an element of uncertainty. An uncertain tax position is measured based on the largest amount of benefit that management believes is more likely than not to be realized. Our income tax expense reflected a decrease of $46.4 million in 2024 and increases of $3.0 million and $1.8 million in 2023 and 2022, respectively, to our tax provision related to reserve for uncertain tax liability positions and/or accrued interest related to such positions at December 31, 2024, 2023 and 2022, respectively.

See Notes 1 and 13 to the consolidated financial statements and the “Executive Summary” and “Income Taxes” sections in this MD&A for an additional discussion on the accounting for income taxes.

New Authoritative Accounting Guidance. See Note 1 of the consolidated financial statements for a description of recent accounting pronouncements including the dates of adoption and the anticipated effect on our results of operations and financial condition.

Executive Summary

Company Overview. At December 31, 2024, Valley had consolidated total assets of $62.5 billion, total net loans of $48.2 billion, total deposits of $50.1 billion and total shareholders’ equity of $7.4 billion. Our commercial bank operations include branch office locations 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 229 branch network, 56 percent, 18 percent, and 18 percent of the branches are located in New Jersey, New York, and Florida, respectively, with the remaining 8 percent of the branches in Alabama, California and Illinois combined. Over the past several years, we have grown significantly through organic efforts and our bank acquisition of Bank Leumi USA on April 1, 2022.

Weather Related Events. In early January 2025, destructive wildfires broke out in the Pacific Palisades area of Los Angeles, California. At this time, we have minimal direct loan exposure to this area, however, we continue to closely monitor the ongoing impact of these and other regional wildfires on our California client base and, where appropriate, we will work constructively with individual borrowers. We are committed to the greater Los Angeles market, and recently opened a branch location in Beverly Hills in August 2024. At December 31, 2024, approximately $1.7 billion, or 3.5 percent, of our $48.8 billion loan portfolio is located in California and mostly consists of commercial real estate loans. We also have a relatively small amount of California municipal bond issuers within our AFS and HTM investment securities portfolios at December 31, 2024 and we do not expect any impairment of these securities at this time.

As of December 31, 2024, the credit quality of our Florida loan portfolio has also remained resilient in the aftermath of Hurricanes Helene and Milton, which hit Florida in September and October 2024, respectively. At this time, there have been relatively few loan concessions (mostly in the form of loan payment deferrals up to 90 days) for distressed borrowers impacted by the hurricanes. At December 31, 2024, the hurricanes did not have a significant impact on the level of reserves or expected loan charge-offs within our allowance for loan losses. As a result, our provision for loan losses for the fourth quarter 2024 was net of an $8.0 million release of qualitative reserves for estimated losses related to the hurricanes in our allowance at September 30, 2024.

[[GREPCENT_TABLE]]
[["","45","2024 Form 10-K"]]
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Financial Condition. During 2024, we continued to strengthen the position of our balance sheet to best perform in the current economic environment, while also prudently managing and reducing the overall risk of our loan portfolio. The following items, including key balance sheet initiatives, are highlights at December 31, 2024.

•Commercial Real Estate Loan Concentration: Total commercial real estate loans (including construction loans) totaled $29.6 billion, or 60.7 percent of total loans at December 31, 2024 as compared to $32.0 billion, or 63.7 percent of total loans at December 31, 2023. While commercial real estate lending remains a key pillar of the success of our relationship banking model and our lending expertise, we continue to proactively diversify our loan portfolio by reducing new originations of certain types of transactional commercial real estate lending, such as non-owner occupied and multifamily loans to single-product borrowers. We remain focused on growing our commercial and industrial, owner occupied commercial real estate, and consumer loan portfolios. As a result, we have a current balance sheet goal to reduce our CRE loan concentration ratio to below 350 percent by December 31, 2025. At December 31, 2024, our CRE loan concentration ratio declined to 362 percent as compared to 421 percent and 474 percent at September 30, 2024 and December 31, 2023, respectively. The decline in the ratio was largely due to (1) bulk sales of commercial real estate and construction loans completed in the first half of 2024 and the fourth quarter 2024, (2) our preferred and common stock issuances in the second half of 2024, and (3) loan repayment activity in 2024, which outpaced new and refinanced loan volumes due to the planned lower production within the non-owner occupied and multifamily loan categories. See further details of our loan activities under the “Loan Portfolio” section below.

•Regulatory Capital and Shareholders' Equity: Total shareholders' equity increased $733.7 million to $7.4 billion at December 31, 2024 as compared to December 31, 2023 largely due to net proceeds of $448.9 million and $144.7 million from the issuances of common stock and Series C preferred stock through registered public offerings in November and August 2024, respectively, and retained earnings generated from our 2024 net income. Valley's total risk-based capital, common equity Tier 1 capital, Tier 1 capital and Tier 1 leverage capital ratios were 13.87 percent, 10.82 percent, 11.55 percent, and 9.16 percent, respectively, at December 31, 2024 as compared to 11.76 percent, 9.29 percent, 9.72 percent and 8.16 percent, respectively, at December 31, 2023. Currently, we expect that Valley's common equity Tier 1 capital will gradually increase to approximately 11 percent by December 31, 2025 largely through projected growth in our retained earnings and continuous management of the overall regulatory risk weighted asset profile of our balance sheet, including the goal to reduce our commercial real estate loan concentration. See the "Capital Adequacy" section below for more information.

•Allowance for Credit Losses: The ACL for loans totaled $573.3 million and $465.6 million at December 31, 2024 and December 31, 2023, respectively, representing 1.17 percent and 0.93 percent of total loans at each respective date. The increase reflects, among other factors, an increase in quantitative reserves across most of our commercial loan categories driven by higher net loan charge-offs and nearly 8 percent loan growth in our commercial and industrial loan portfolio in 2024. Given our current projections for continued growth in our commercial and industrial loan portfolio and credit trends within our loan portfolio, we anticipate the ACL will migrate towards approximately 1.25 percent of total loans at December 31, 2025. However, we can provide no assurance that our actual future ACL for loans required under our CECL methodology will not exceed this current projection due to the uncertain nature of our assumptions. See the “Allowance for Credit Losses" section for additional information.

•Credit Quality: Non-performing assets (NPAs) as a percentage of total loans and NPAs increased to 0.76 percent at December 31, 2024 as compared to 0.58 percent at December 31, 2023. Total net loan charge-offs to average loans were 0.40 percent for the fourth quarter 2024 as compared with 0.13 percent for the fourth quarter 2023. See the “Non-Performing Assets” section for additional information.

•Liquid Assets: Our liquid assets totaled $5.5 billion at December 31, 2024, representing 9.6 percent of interest earning assets as compared with $2.4 billion, or 4.3 percent of interest earning assets at December 31, 2023. We continue to maintain significant access to readily available, diverse funding sources to fulfill both short-term and long-term funding needs. Currently, we have a strategic goal to maintain a ratio of loans to deposits at or below 97 percent in 2025, which is relatively unchanged as compared with our actual ratio of loans to deposits of 97.5 percent at December 31, 2024. See the “Bank Liquidity” section for additional information.

•Deposits: Total deposits increased $833.0 million to $50.1 billion at December 31, 2024 as compared to $49.2 billion at December 31, 2023 mainly due to higher direct commercial customer money market and NOW deposits, partially offset by a decrease in both brokered and retail time deposits. Total indirect customer deposits (including both brokered money market and time deposits) totaled $7.1 billion at December 31, 2024 and declined $397.2 million as compared with December 31, 2023. During the fourth quarter 2024, we used a significant portion of the net proceeds from the sale of commercial real estate loans held for sale to repay maturing indirect customer deposits. See the “Deposits and Other Borrowings” section for more details.

[[GREPCENT_TABLE]]
[["2024 Form 10-K","46"]]
[[/GREPCENT_TABLE]]

•Investment Securities: Total investment securities increased $1.9 billion to $7.0 billion, or 11.2 percent of total assets, at December 31, 2024 as compared to December 31, 2023 mainly due to targeted purchases of residential mortgage backed securities primarily issued by Ginnie Mae (with a risk-weighting of zero for regulatory capital purposes) in the second half of 2024 that were classified as AFS. See the “Investment Securities Portfolio” section for more details.

Annual Results. Net income for the year ended December 31, 2024 was $380.3 million, or $0.69 per diluted common share as compared to $498.5 million, or $0.95 per diluted common share for 2023. The $118.2 million decrease in net income as compared to 2023 was mainly due to the following changes:

•a $258.6 million increase in our provision for credit losses driven by higher quantitative reserves for commercial loans;

•a $36.8 million decrease in net interest income mostly due to a higher cost of deposits, partially offset by an increase in loan yield; and

•a $1.2 million decrease in non-interest income;

Which was partially offset by:

•a $121.6 million decrease in income tax expense mostly due to lower pre-tax income and a fourth quarter 2024 tax benefit resulting from a $46.4 million total reduction in uncertain tax liability positions and related accrued interest; and

•a $56.8 million decrease in non-interest expense mainly due to a $67.1 million decrease in non-core items, including a $41.5 million reduction in the FDIC special assessment expense related to certain bank failures (highlighted in the “—Non-GAAP Financial Measures” section below);

See the “Net Interest Income,” “Non-Interest Income,” “Non-Interest Expense,” and “Income Taxes” sections in this MD&A for more details on the items above and other non-core items impacting our 2024 annual results.

Operating Environment. Real gross domestic product (GDP) increased at an annual rate of 2.8 percent as compared to 2.9 percent during 2023. The increase in 2024 was primarily driven by gross private domestic investment and personal consumption. The gains were partly offset by decreases in government consumption expenditures and net exports. Inflation continued to modestly improve with the consumer price index on a year over year basis decelerating from 3.3 percent at December 31, 2023 to 2.9 percent at December 31, 2024.

Starting in mid-September 2024 at its Federal Open Market Committee meeting, the Federal Reserve began to incrementally lower the target range for the federal funds rate at three consecutive meetings from 5.25 - 5.50 percent to the current target of 4.25 - 4.50 percent in December 2024. In December 2024, the Committee indicated it expects just two 25 basis points cuts in 2025. At its recent meeting in January 2025, the Committee left the current target federal funds rate unchanged largely due to a healthy labor market, elevated inflation and an uncertain economic outlook caused by several factors, including the unknown impact of potential new policies implemented by the U.S. presidential administration. In addition, the Committee indicated it would continue reducing its holdings of Treasury securities and agency debt and mortgage-backed securities, as described in its previously announced plans.

The 10-year U.S. Treasury note yield increased to 4.58 at December 31, 2024 from 3.88 percent one year ago, and the 2-year U.S. Treasury note yield ended 2024 increased 2 basis points to 4.25 percent at December 31, 2024 as compared to 2023.

Total loans and leases for U.S. commercial banks increased 2.9 percent in 2024 compared to 2.2 percent in 2023. Consumer loans grew by 3.0 percent, while commercial and industrial and commercial real estate loans increased 1.3 percent and 1.2 percent, respectively, from 2023 to 2024. Overall, most banks reported easing of underwriting standards on commercial loans. Throughout the year of 2024, the combination of relatively high mortgage interest rates and tight inventories kept residential mortgage loan activity low.

After yield curve inversion of more than two years, the normalization of interest rates in late 2024 should set the stage for a more benign operating environment for banks in 2025. The outlook for economic growth, and general optimism around easing bank regulation in the wake of the U.S. presidential election further supports the expectation for an improved operating environment. However, several other factors, including those recently noted by the Federal Reserve, have made the future direction of the economy uncertain, and should economic conditions deteriorate, causing business activity, spending and investment to decline, these and other factors may adversely impact our financial results, as highlighted in the remaining MD&A discussion below.

Deposits and Other Borrowings. We define cumulative deposit beta as the change in our cost of total deposits relative to the change in the average Fed Funds (upper bound) rate. We differentiate between the cumulative deposit beta during the rate

[[GREPCENT_TABLE]]
[["","47","2024 Form 10-K"]]
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increase cycle, which began in the first quarter of 2022 and ended in the second quarter of 2024, and the cumulative deposit beta during the rate decrease cycle which started in the third quarter of 2024. Our cumulative deposit beta in the interest rate increase cycle (between December 31, 2021 and June 30, 2024) was approximately 58 percent. The Federal Reserve started an interest rate decrease cycle during the third quarter 2024. Our cumulative deposit beta in this current interest rate decrease cycle (between June 30, 2024 and December 31, 2024) was 34 percent. Our cumulative deposit beta for the fourth quarter 2024 was 51 percent. The beta in the fourth quarter was mainly driven by a full quarter’s impact of the Federal Reserve's initial rate cut, and our ability to broadly reduce costs of interest bearing deposit products coupled with an overall increase in non-interest bearing deposit balances from customers and a reduction of higher cost, indirect customer CDs. See the "Net Interest Income" section for additional details on the changes in our cost of deposits during the fourth quarter 2024.

Total average deposits increased by $1.3 billion to $49.8 billion for the year ended December 31, 2024 as compared to 2023. Average savings, NOW and money market deposit balances increased $1.9 billion largely due to our strong focus on deposit generation from both direct commercial customers and national specialized deposits, as well as continuing to benefit from some inflows from the non-interest bearing deposit category. Average time deposits balances increased $716.5 million primarily due to our increased use of fully insured indirect customer (i.e., brokered) CDs as an alternate and attractively priced funding source (mainly compared to similar term FHLB borrowings) starting in the second quarter 2024. These increases were partially offset by a $1.4 billion decrease in average non-interest bearing deposits caused by the level of market interest rates and a continued shift in customer preference to interest bearing deposit products and other attractive investment alternatives to deposits during most of 2024. Average non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 23 percent, 51 percent and 27 percent of total deposits at December 31, 2024, respectively, as compared to 26 percent, 48 percent and 26 percent of total deposits at December 31, 2023, respectively.

Actual ending balances for deposits increased $833.0 million to $50.1 billion at December 31, 2024 as compared to 2023 mostly due to an increase of $1.8 billion in savings, NOW and money market deposits, partially offset by decreases of $834.2 million and $110.8 million in time and non-interest bearing deposits, respectively. The increase in savings, NOW and money market deposits was largely due to broad-based direct commercial deposits and, to a lesser extent, consumer customer inflows, as well as increases in digital and national specialized deposit accounts at December 31, 2024. The decrease in time deposits was mostly due to maturity and repayment of both indirect and direct customer CDs, as we elected to pay down these higher cost funding sources with excess cash liquidity during the fourth quarter 2024. As a result, total indirect customer deposits (primarily brokered CDs and, to a lesser extent, money market deposits) decreased to $7.1 billion at December 31, 2024 as compared to $9.1 billion and $7.5 billion at September 30, 2024 and December 31, 2023, respectively. While non-interest bearing balances continued to be challenged by the level of market interest rates and the aforementioned changes in customer behavior during most of 2024, we did experience solid non-interest bearing deposit inflows from both commercial and consumer customers during the fourth quarter 2024 resulting in a $274.9 million increase to $11.4 billion at December 31, 2024 from September 30, 2024. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 23 percent, 53 percent and 25 percent of total deposits as of December 31, 2024, respectively, as compared to 23 percent, 50 percent and 27 percent as of December 31, 2023, respectively.

The following table summarizes CDs included in time deposits in excess of the FDIC insurance limit by maturity at December 31, 2024:

[[GREPCENT_TABLE]]
[["","","2024"],["","","(in thousands)"],["Less than three months","","$","944,311"],["Three to six months","","491,200"],["Six to twelve months","","721,818"],["More than twelve months","","209,319"],["Total","","$","2,366,648"]]
[[/GREPCENT_TABLE]]

Total estimated uninsured deposits, excluding collateralized government deposits and intercompany deposits (i.e., deposits eliminated in consolidation), totaled approximately $12.6 billion, or 25 percent of total deposits, at December 31, 2024 as compared to $12.2 billion, or 25 percent of total deposits, at December 31, 2023.

While we maintained a diversified commercial and consumer deposit base at December 31, 2024, deposit gathering initiatives and our current deposit base could be challenged due to market competition, attractive non-deposit investment alternatives in the financial markets and other factors. As a result, we cannot guarantee that we will be able to maintain deposit levels at or near those reported at December 31, 2024. Management continuously monitors liquidity and all available funding sources including non-deposit borrowings discussed below. See the "Liquidity and Cash Requirements" section of this MD&A for additional information.

[[GREPCENT_TABLE]]
[["2024 Form 10-K","48"]]
[[/GREPCENT_TABLE]]

The following table presents average short-term and long-term borrowings for the years ended December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","2024","","2023"],["","(in thousands)"],["Average short-term borrowings:"],["FHLB advances","$","375,505","","","$","1,713,448"],["Securities sold under repurchase agreements","64,946","","","89,430"],["Federal funds purchased","4,809","","","78,822"],["Total","$","445,260","","","$","1,881,700"],["Average long-term borrowings:"],["FHLB advances","$","2,428,428","","","$","1,446,790"],["Subordinated debt","641,206","","","723,852"],["Junior subordinated debentures issued to capital trusts","57,283","","","56,936"],["Total","$","3,126,917","","","$","2,227,578"]]
[[/GREPCENT_TABLE]]

Average short-term borrowings decreased $1.4 billion at December 31, 2024 as compared to 2023 mostly due to a shift from the use of short-term FHLB advances to primarily indirect customer money market and time deposits in our average mix of funding sources and $1.0 billion of new long-term FHLB advances issued in the first quarter 2024.

Average long-term borrowings (including junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition) increased $899.3 million at December 31, 2024 as compared to 2023. The increase was mainly due to the new FHLB advances totaling $1.0 billion issued in early March 2024. The new long-term FHLB borrowings have a weighted average rate of 4.54 percent and a weighted average remaining contractual term of 2.8 years at December 31, 2024.

Actual ending balances for short-term borrowings decreased $845.1 million to $72.7 million at December 31, 2024 as compared to 2023 mainly due to a moderate decline in securities sold under repurchase agreements. Long-term borrowings increased $845.8 million to $3.2 billion at December 31, 2024 as compared to $2.3 billion at December 31, 2023 primarily due to the new FHLB advances issued during the first half of 2024. See the “Net Interest Income” section below and Note 10 to the consolidated financial statements for additional details on our borrowed funds.

Non-GAAP Financial Measures. The table below presents selected performance indicators, their comparative non-GAAP measures and the (non-GAAP) efficiency ratio for the periods indicated. Valley believes that the non-GAAP financial measures provide useful supplemental information to both management and investors in understanding Valley’s underlying operational performance, business, and performance trends, and may facilitate comparisons of our current and prior performance with the performance of others in the financial services industry. Management utilizes these measures, on a consolidated basis, 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 our overall performance in a manner similar to management. These non-GAAP financial measures should not be considered in isolation, as a substitute for or superior to financial measures calculated in accordance with GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.

[[GREPCENT_TABLE]]
[["","49","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

The following table presents our annualized performance ratios for the three years ended December 31, 2024, 2023 and 2022:

[[GREPCENT_TABLE]]
[["","2024","","2023","","2022"],["Selected Performance Indicators","($ in thousands, except for %)"],["GAAP measures:"],["Net income, as reported","$","380,271","","","$","498,511","","","$","568,851"],["Return on average assets","0.61","%","","0.82","%","","1.09","%"],["Return on average shareholders\u2019 equity","5.51","","","7.60","","","9.50"],["Non-GAAP measures:"],["Net income, as adjusted","$","343,559","","","$","554,271","","","$","650,452"],["Return on average assets, as adjusted","0.55","%","","0.91","%","","1.25","%"],["Return on average shareholders\u2019 equity, as adjusted","4.98","","","8.45","","","10.87"],["Return on average tangible shareholders\u2019 equity (ROATE)","7.78","","","11.05","","","14.08"],["ROATE, as adjusted","7.03","","","12.29","","","16.10"],["Efficiency ratio, as adjusted","57.98","%","","56.62","%","","50.55","%"],["","As of December 31,"],["Common Equity Per Share Data:","2024","","2023","","2022"],["Book value per common share (GAAP)","$","12.67","","","$","12.79","","","$","12.23"],["Tangible book value per common share (non-GAAP)","9.10","","","8.79","","","8.15"]]
[[/GREPCENT_TABLE]]

Non-GAAP Reconciliations to GAAP Financial Measures

Adjusted net income for the three years ended December 31, 2024, 2023 and 2022 is computed as follows:

[[GREPCENT_TABLE]]
[["","2024","","2023","","2022"],["","(in thousands)"],["Net income, as reported (GAAP)","$","380,271","","","$","498,511","","","$","568,851"],["Non-GAAP adjustments:"],["Add: FDIC Special assessment (1)","8,757","","","50,297","","","\u2014"],["Add: Restructuring charge (2)","2,039","","","9,969","","","\u2014"],["Add: Provision for credit losses for available for sale securities (3)","\u2014","","","5,000","","","\u2014"],["Add: Non-PCD provision for credit losses (4)","\u2014","","","\u2014","","","41,012"],["Add: Merger related expenses (5)","\u2014","","","14,133","","","71,203"],["Add: Litigation reserve (6)","\u2014","","","3,540","","","\u2014"],["Add: Net losses on the sale of commercial real estate loans (7)","13,660","","","\u2014","","","\u2014"],["Add: Losses (gains) on available for sale and held to maturity debt securities, net (8)","15","","","(401)","","","(95)"],["Less: Gain on sale of commercial premium finance lending division (9)","(3,629)","","","\u2014","","","\u2014"],["Less: Net gains on sales of office buildings (9)","\u2014","","","(6,721)","","","\u2014"],["Less: Litigation settlements (10)","(7,334)","","","\u2014","","","\u2014"],["Less: Income tax benefit (11)","(46,431)","","","\u2014","","","\u2014"],["Total non-GAAP adjustments to net income","(32,923)","","","75,817","","","112,120"],["Income tax adjustments related to non-GAAP adjustments (12)","(3,789)","","","(20,057)","","","(30,519)"],["Net income, as adjusted (non-GAAP)","$","343,559","","","$","554,271","","","$","650,452"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["2024 Form 10-K","50"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1) Included in the FDIC insurance assessment."],["(2) Represents severance expense related to workforce reductions within salary and employee benefits expense."],["(3) Included in provision for credit losses for available for sale and held to maturity securities (tax disallowed)."],["(4) Represents provision for credit losses for non-PCD assets and unfunded credit commitments acquired during the period."],["(5) Primarily represents data processing termination costs within technology, furniture and equipment expense for 2023. Merger related"],["expenses were primarily salary and employee benefits expense for 2022."],["(6) Represents legal reserves and settlement charges included in professional and legal fees."],["(7) Represents actual and mark to market losses on commercial real estate loan sales included in (losses) gains on sales of loans, net."],["(8) Included in gains (losses) on securities transactions, net."],["(9) Included in gains on sale of assets, net."],["(10) Represents recoveries from legal settlements included in other income."],["(11) Represents the income tax benefit from the reduction in uncertain tax liability positions and accrued interest and penalties due to statute"],["of limitation expirations included in income tax expense."],["(12) Calculated using the appropriate blended statutory tax rate for the applicable period."]]
[[/GREPCENT_TABLE]]

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 overall level of net gains on sales of loans, wealth management and trust fees, and capital markets fees. These amounts can vary widely from period to period due to, among other factors, the amount and timing of residential mortgage loans originated for sale, brokerage and tax credit investment advisory activities and commercial loan customer demand for certain interest rate swap products. See the “Non-Interest Income” section below for more details.

Adjusted annualized return on average assets for the three years ended December 31, 2024, 2023 and 2022 is computed by dividing adjusted net income by average assets, as follows:

[[GREPCENT_TABLE]]
[["","2024","","2023","","2022"],["","($ in thousands)"],["Net income, as adjusted (non-GAAP)","$","343,559","","$","554,271","","$","650,452"],["Average assets (GAAP)","$","61,973,902","","$","61,065,897","","$","52,182,310"],["Annualized return on average assets, as adjusted (non-GAAP)","0.55","%","","0.91","%","","1.25","%"]]
[[/GREPCENT_TABLE]]

Adjusted annualized return on average shareholders' equity for the three years ended December 31, 2024, 2023 and 2022 is computed by dividing adjusted net income by average shareholders' equity, as follows:

[[GREPCENT_TABLE]]
[["","2024","","2023","","2022"],["","($ in thousands)"],["Net income, as adjusted (non-GAAP)","$","343,559","","$","554,271","","$","650,452"],["Average shareholders' equity (GAAP)","$","6,900,204","","$","6,558,768","","$","5,985,236"],["Annualized return on average shareholders' equity, as adjusted (non-GAAP)","4.98","%","","8.45","%","","10.87","%"]]
[[/GREPCENT_TABLE]]

ROATE and adjusted ROATE for the three years ended December 31, 2024, 2023 and 2022 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:

[[GREPCENT_TABLE]]
[["","2024","","2023","","2022"],["","($ in thousands)"],["Net income, as reported (GAAP)","$","380,271","","$","498,511","","$","568,851"],["Net income, as adjusted (non-GAAP)","$","343,559","","$","554,271","","$","650,452"],["Average shareholders\u2019 equity (GAAP)","$","6,900,204","","$","6,558,768","","$","5,985,236"],["Less: Average goodwill and other intangible assets (GAAP)","2,012,713","","2,047,172","","1,944,503"],["Average tangible shareholders\u2019 equity (non-GAAP)","$","4,887,491","","$","4,511,596","","$","4,040,733"],["Annualized ROATE (non-GAAP)","7.78","%","","11.05","%","","14.08","%"],["Annualized ROATE, as adjusted (non-GAAP)","7.03","%","","12.29","%","","16.10","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","51","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

The efficiency ratio for the years ended December 31, 2024, 2023 and 2022 is computed as follows:

[[GREPCENT_TABLE]]
[["","2024","","2023","","2022"],["","($ in thousands)"],["Total non-interest expense, as reported (GAAP)","$","1,105,860","","","$","1,162,691","","","$","1,024,949"],["Less: FDIC Special assessment (1)","8,757","","","50,297","","","\u2014"],["Less: Restructuring charge (2)","2,039","","","9,969","","","\u2014"],["Less: Merger related expenses (3)","\u2014","","","14,133","","","71,203"],["Less: Litigation reserve (4)","\u2014","","","3,540","","","\u2014"],["Less: Amortization of tax credit investments","18,946","","","18,009","","","12,407"],["Total non-interest expense, as adjusted (non-GAAP)","1,076,118","","","1,066,743","","","941,339"],["Net interest income, as reported (GAAP)","1,628,708","","","1,665,478","","","1,655,640"],["Total non-interest income, as reported (GAAP)","224,501","","","225,729","","","206,793"],["Add: Net losses on the sale of commercial real estate loans (5)","13,660","","","\u2014","","","\u2014"],["Less: Net gains on sales of office buildings (6)","\u2014","","","(6,721)","","","\u2014"],["Less: Gain on sale of commercial premium finance lending division (6)","(3,629)","","","\u2014","","","\u2014"],["Less: Losses (gains) on available for sale and held to maturity debt securities transactions, net (7)","15","","","(401)","","","(95)"],["Less: Litigation settlements (8)","(7,334)","","","\u2014","","","\u2014"],["Total net interest income and non-interest income, as adjusted (non-GAAP)","$","227,213","","","$","218,607","","","$","206,698"],["Gross operating income, as adjusted (non-GAAP)","$","1,855,921","","","$","1,884,085","","","$","1,862,338"],["Efficiency ratio, (non-GAAP)","57.98","%","","56.62","%","","50.55","%"]]
[[/GREPCENT_TABLE]]

(1)Included in the FDIC insurance expense.

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

(3)Primarily represents data processing termination costs within technology, furniture and equipment expense for 2023. Merger related expenses were primarily salary and employee benefits expense for 2022.

(4)Included in professional and legal fees.

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

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

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

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

Tangible book value per common share is computed by dividing shareholders’ equity less preferred stock, goodwill and other intangible assets by common shares outstanding for the two years ended December 31, 2024 and 2023, as follows:

[[GREPCENT_TABLE]]
[["","2024","","2023"],["","($ in thousands, except for share data)"],["Common shares outstanding","558,786,093","","507,709,927"],["Shareholders\u2019 equity (GAAP)","$","7,435,127","","$","6,701,391"],["Less: Preferred stock","354,345","","209,691"],["Less: Goodwill and other intangible assets","1,997,597","","2,029,267"],["Tangible common shareholders\u2019 equity (non-GAAP)","$","5,083,185","","$","4,462,433"],["Tangible book value per common share (non-GAAP)","$","9.10","","$","8.79"],["Book value per common share (GAAP)","12.67","","12.79"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["2024 Form 10-K","52"]]
[[/GREPCENT_TABLE]]

Net Interest Income

Net interest income consists of interest income and dividends earned on interest earning assets less interest expense on interest bearing liabilities and represents the main source of income for Valley. The net interest margin on a fully tax equivalent basis is calculated by dividing tax equivalent net interest income by average interest earning assets and is a key measurement used in the banking industry to measure income from interest earning assets.

Annual Period 2024. Net interest income on a tax equivalent basis decreased by $37.1 million to $1.6 billion for 2024 as compared to 2023. Interest income on a tax equivalent basis increased $218.3 million to $3.4 billion for 2024 as compared to 2023. The increase was mostly due to higher yields on both new originations and adjustable rate loans for most of 2024 and a $678.7 million increase in average loan balances driven by organic new loan volumes and, to a lesser extent, a continuation of slower loan prepayments in 2024. The increase in interest income was offset by an increase of $255.4 million in total interest expense to $1.7 billion for 2024 as compared to 2023 mainly due to higher costs on most interest bearing deposit products during the first nine months of 2024 coupled with an increase in average interest bearing deposit balances.

Average interest earning assets totaling $57.3 billion for the year ended December 31, 2024 increased $817.4 million, or 1.4 percent, as compared to 2023 mainly due to a $678.7 million increase in average loan balances driven by organic growth concentrated mostly in the commercial and industrial, commercial real estate non-owner occupied and automobile loan categories of our portfolio during 2024. Average taxable investments also increased $750.6 million largely due to additional purchases of residential mortgage-backed securities classified as available for sale during year ended December 31, 2024. These increases were partially offset by a $568.9 million decrease in average interest bearing cash balances as compared to 2023, as we significantly reduced the level of excess cash held overnight in the latter half of 2023 and the full year of 2024. The average interest bearing cash balances were prudently held at elevated levels for an extended period of time during 2023 as part of our liquidity management navigating the fallout from the banking failures in the first half of 2023.

Average interest bearing liabilities increased $2.1 billion to $42.1 billion for the year ended December 31, 2024 as compared to 2023 mainly due to increases of $2.6 billion and $899.3 million in average interest bearing deposits and long-term borrowings, respectively, offset by a $1.4 billion decrease in average short-term borrowings. The increase in average interest bearing deposits was largely due to strong inflows from direct commercial customer and specialized national deposits during 2024, as well as greater use of indirect customer CDs as an alternate funding source. Average long-term borrowings increased as compared to 2023 mostly due to new FHLB advances totaling $1.0 billion issued in early March 2024. The decrease in average short-term borrowings was mostly the result of a significant shift from the use of short-term FHLB advances to indirect customer CDs in our mix of liquidity funding sources during 2024. See additional information under "Deposits and Other Borrowings" in the Executive Summary section above.

Net interest margin on a tax equivalent basis was 2.85 percent for the year ended December 31, 2024 and decreased 11 basis points as compared to 2023. The decrease as compared to 2023 was mostly driven by a 42 basis point increase in the cost of average interest-bearing liabilities which outpaced a 30 basis point increase in the yield on average interest earning assets primarily due to the higher level of short-term market interest rates and a prolonged inverted yield curve during most of 2024. The cost of total average deposits increased 9 basis points to 3.13 percent for 2024 as compared to 2023. The yield on average loans increased 31 basis points to 6.16 percent for 2024 as compared to 5.85 percent in 2023 largely due to higher interest rates on new originations and adjustable rate loans for most of 2024. The yield on average taxable investments increased 50 basis points as compared to 2023 largely due to higher yielding investment securities purchased during 2024. The yield on interest bearing deposits with banks (mainly overnight cash balances held at the FRB of New York) also increased 32 basis points as compared to 2023 due to the high level of short-term interest rates during most of 2024.

Fourth Quarter 2024. Net interest income on a tax equivalent basis of $424.3 million for the fourth quarter 2024 increased $12.5 million and $25.7 million as compared to the third quarter 2024 and fourth quarter 2023, respectively. Interest income on a tax equivalent basis decreased $25.7 million to $836.1 million for the fourth quarter 2024 as compared to the third quarter 2024. The decrease was mostly driven by lower interest income on adjustable rate loans caused by downward repricing and lost interest income related to the commercial real estate loan sales during the fourth quarter 2024, partially offset by higher interest income from targeted purchases of taxable investments within the available for sale securities portfolio and higher yields on new and renewed loan originations. Total interest expense decreased $38.2 million to $411.8 million for the fourth quarter 2024 as compared to the third quarter 2024 mainly due to lower costs on most interest bearing deposit products and a $702.2 million decrease in average time deposit balances primarily related to the repayment of indirect customer CDs throughout the fourth quarter.

Net interest margin on a tax equivalent basis of 2.92 percent for the fourth quarter 2024 increased 6 basis points and 10 basis points from 2.86 percent and 2.82 percent, respectively, for the third quarter 2024 and fourth quarter 2023. The increase as compared to the third quarter 2024 was mostly due to the 31 basis point decline in our cost of total average deposit, partially

[[GREPCENT_TABLE]]
[["","53","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

offset by the lower yield on average interest earning assets. The yield on average interest earning assets decreased by 23 basis points to 5.75 on a linked quarter basis largely due to downward repricing of our adjustable rate loans and a higher amount of our average earning assets held in relatively lower-yielding cash and investment securities, partially offset by higher yielding investment purchases. The overall cost of average interest bearing liabilities decreased by 37 basis points to 3.85 percent for the fourth quarter 2024 as compared to the linked third quarter 2024 largely due to lower interest rates on deposits. Our cost of total average deposits was 2.94 percent for the fourth quarter 2024 as compared to 3.25 percent and 3.13 percent for the third quarter 2024 and fourth quarter 2023, respectively.

Based upon our latest model estimates, we anticipate net interest income growth of approximately 9 to 12 percent for the full year of 2025 as compared to 2024. While we are optimistic about the projected net interest income for 2025, our forecasts include several uncertain assumptions, including an expected incremental decrease in our funding costs over the next 12-months and stability in yield from our fixed rate loan portfolio. As such, we cannot provide any assurances that our net interest income or margin will remain at the levels reported for the fourth quarter 2024.

[[GREPCENT_TABLE]]
[["2024 Form 10-K","54"]]
[[/GREPCENT_TABLE]]

The following table reflects the components of net interest income for each of the three years ended December 31, 2024, 2023 and 2022:

ANALYSIS OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY AND

NET INTEREST INCOME ON A TAX EQUIVALENT BASIS

[[GREPCENT_TABLE]]
[["","2024","","2023","","2022"],["","Average Balance","","Interest","","Average Rate","","Average Balance","","Interest","","Average Rate","","Average Balance","","Interest","","Average Rate"],["","($ in thousands)"],["Assets"],["Interest earning assets:"],["Loans (1)(2)","$","50,030,586","","","$","3,079,958","","","6.16","%","","$","49,351,861","","","$","2,887,026","","","5.85","%","","$","41,930,353","","","$","1,828,576","","","4.36","%"],["Taxable investments (3)","5,741,591","","","206,898","","","3.60","","","4,990,942","","","154,847","","","3.10","","","4,628,353","","","117,184","","","2.53"],["Tax-exempt investments (1)(3)","573,491","","","24,371","","","4.25","","","616,555","","","25,703","","","4.17","","","586,956","","","22,687","","","3.87"],["Interest bearing deposits with banks","972,258","","","51,482","","","5.30","","","1,541,170","","","76,809","","","4.98","","","921,719","","","13,064","","","1.42"],["Total interest earning assets","57,317,926","","","3,362,709","","","5.87","","","56,500,528","","","3,144,385","","","5.57","","","48,067,381","","","1,981,511","","","4.12"],["Allowance for loan losses","(502,236)","","","","","","","(452,713)","","","","","","","(442,068)"],["Cash and due from banks","429,075","","","","","","","395,895","","","","","","","386,399"],["Other assets","4,882,916","","","","","","","4,805,711","","","","","","","4,254,389"],["Unrealized gains (losses) on securities available for sale, net","(153,779)","","","","","","","(183,524)","","","","","","","(83,791)"],["Total assets","$","61,973,902","","","","","","","$","61,065,897","","","","","","","$","52,182,310"],["Liabilities and Shareholders\u2019 Equity"],["Interest bearing liabilities:"],["Savings, NOW and money market deposits","$","25,148,637","","","$","913,963","","","3.63","%","","$","23,228,453","","","$","739,025","","","3.18","%","","$","22,652,502","","","$","186,709","","","0.82","%"],["Time deposits","13,421,273","","","644,964","","","4.81","","","12,704,775","","","535,749","","","4.22","","","5,009,302","","","69,691","","","1.39"],["Total interest bearing deposits","38,569,910","","","1,558,927","","","4.04","","","35,933,228","","","1,274,774","","","3.55","","","27,661,804","","","256,400","","","0.93"],["Short-term borrowings","445,260","","","22,047","","","4.95","","","1,881,700","","","94,869","","","5.04","","","1,024,352","","","17,453","","","1.70"],["Long-term borrowings","3,126,917","","","147,815","","","4.73","","","2,227,578","","","103,770","","","4.66","","","1,504,111","","","47,190","","","3.14"],["Total interest bearing liabilities","42,142,087","","","1,728,789","","","4.10","","","40,042,506","","","1,473,413","","","3.68","","","30,190,267","","","321,043","","","1.06"],["Non-interest bearing deposits","11,208,053","","","","","","","12,558,441","","","","","","","14,789,661"],["Other liabilities","1,723,558","","","","","","","1,906,182","","","","","","","1,217,146"],["Shareholders\u2019 equity","6,900,204","","","","","","","6,558,768","","","","","","","5,985,236"],["Total liabilities and shareholders\u2019 equity","$","61,973,902","","","","","","","$","61,065,897","","","","","","","$","52,182,310"],["Net interest income/interest rate spread (5)","","","1,633,920","","","1.77","%","","","","1,670,972","","","1.89","%","","","","1,660,468","","","3.06","%"],["Tax equivalent adjustment","","","(5,212)","","","","","","","(5,494)","","","","","","","(4,828)"],["Net interest income, as reported","","","$","1,628,708","","","","","","","$","1,665,478","","","","","","","$","1,655,640"],["Net interest margin (6)","","","","","2.84","%","","","","","","2.95","%","","","","","","3.44","%"],["Tax equivalent effect","","","","","0.01","","","","","","","0.01","","","","","","","0.01"],["Net interest margin on a fully tax equivalent basis (6)","","","","","2.85","%","","","","","","2.96","%","","","","","","3.45","%"]]
[[/GREPCENT_TABLE]]

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

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

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

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

[[GREPCENT_TABLE]]
[["","55","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

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 Valley 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

[[GREPCENT_TABLE]]
[["","2024 Compared to 2023","","2023 Compared to 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*","$","40,137","","","$","152,795","","","$","192,932","","","$","361,377","","","$","697,073","","","$","1,058,450"],["Taxable investments","25,103","","","26,948","","","52,051","","","9,714","","","27,949","","","37,663"],["Tax-exempt investments*","(1,822)","","","490","","","(1,332)","","","1,179","","","1,837","","","3,016"],["Federal funds sold and other interest bearing deposits","(29,868)","","","4,541","","","(25,327)","","","13,437","","","50,308","","","63,745"],["Total increase in interest income","33,550","","","184,774","","","218,324","","","385,707","","","777,167","","","1,162,874"],["Interest expense:"],["Savings, NOW and money market deposits","64,286","","","110,652","","","174,938","","","4,867","","","547,448","","","552,315"],["Time deposits","31,428","","","77,787","","","109,215","","","200,705","","","265,353","","","466,058"],["Short-term borrowings","(71,155)","","","(1,667)","","","(72,822)","","","23,174","","","54,242","","","77,416"],["Long-term borrowings and junior subordinated debentures","42,492","","","1,553","","","44,045","","","28,178","","","28,402","","","56,580"],["Total increase in interest expense","67,051","","","188,325","","","255,376","","","256,924","","","895,445","","","1,152,369"],["(Decrease) increase in net interest income","$","(33,501)","","","$","(3,551)","","","$","(37,052)","","","$","128,783","","","$","(118,278)","","","$","10,505"]]
[[/GREPCENT_TABLE]]

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

Non-Interest Income

Non-interest income represented 6.3 percent and 6.7 percent of total interest income plus non-interest income for 2024 and 2023, respectively. For the year ended December 31, 2024, non-interest income decreased $1.2 million as compared to the year ended December 31, 2023. See further details below.

The following table presents the components of non-interest income for the years ended December 31, 2024, 2023, and 2022:

[[GREPCENT_TABLE]]
[["","2024","","2023","","2022"],["","(in thousands)"],["Wealth management and trust fees","$","62,616","","","$","44,158","","","$","34,709"],["Insurance commissions","12,794","","","11,116","","","11,975"],["Capital markets","27,221","","","41,489","","","52,362"],["Service charges on deposit accounts","48,276","","","41,306","","","36,930"],["Gains (losses) on securities transactions, net","100","","","1,104","","","(1,230)"],["Fees from loan servicing","12,393","","","10,670","","","11,273"],["(Losses) gains on sales of loans, net","(5,840)","","","6,054","","","6,418"],["Gains on sales of assets, net","3,727","","","6,809","","","897"],["Bank owned life insurance","16,942","","","11,843","","","8,040"],["Other","46,272","","","51,180","","","45,419"],["Total non-interest income","$","224,501","","","$","225,729","","","$","206,793"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["2024 Form 10-K","56"]]
[[/GREPCENT_TABLE]]

Wealth management and trust fees income increased by $18.5 million for the year ended December 31, 2024 as compared to 2023. The increase was mainly driven by stronger fee production from tax credit advisory services and, to a lesser extent, increased brokerage commissions due to stronger customer trading volume at our broker dealer subsidiary during 2024. Brokerage fees totaled $23.4 million and $19.1 million for the years ended December 31, 2024 and 2023, respectively.

Capital markets income decreased $14.3 million for the year ended December 31, 2024 as compared to 2023 mainly due to a decline in the volume of interest rate swap transactions executed for commercial customers, as well as a $2.1 million decrease in loan syndication and participation fees. Swap fee income totaled $13.3 million and $28.4 million December 31, 2024 and 2023, respectively. These decreases were partially offset by a $3.4 million increase in foreign exchange fees for the year ended December 31, 2024 as compared to 2023.

Service charges on deposit accounts increased $7.0 million for the year ended December 31, 2024 as compared to 2023 mainly due to additional treasury service related fees for commercial deposit accounts. In addition, the level of our 2023 service charges on deposit accounts was modestly impacted by waived transactional fees for customers around the time of our core system conversion in October 2023.

The net gains on securities transactions for the year ended December 31, 2023 included an $869 thousand gain on the sale of a previously impaired corporate bond issued by Signature Bank and net gains related to municipal bond trading activities. See Note 4 for additional details.

Net gains on sales of assets for the year ended December 31, 2024 includes a $3.6 million net gain realized on the sale of our commercial premium finance lending business in the first quarter 2024. Net gains on sales of assets for the year ended December 31, 2023 were mainly attributable to a $6.7 million net gain on the sale of non-branch offices located in Wayne, New Jersey in the third quarter 2023.

Net losses on sales of loans were $5.8 million for the year ended December 31, 2024 as compared to net gains of $6.1 million for 2023 mostly due to $13.7 million of realized losses resulting from the sale of performing commercial real estate loans in the fourth quarter 2024. These losses were partially offset by net gains on sales of residential mortgage loans originated for sale and a gain of $944 thousand related to $75.5 million of seasoned residential mortgage loans sold during the fourth quarter 2024. Overall, our ability to generate net gains on sales of residential mortgage loans originated for sale continues to be challenged by several factors, including the higher level of mortgage interest rates, lower customer demand for conforming loan products, and our decision to not originate certain residential mortgage loans for sale. This decision can be influenced by many factors, including our current goal to reduce our commercial real estate loan concentration and further diversify our loan portfolio. See further discussions of our residential mortgage loan origination activity under the “Loan Portfolio” section of this MD&A below.

Bank owned life insurance income increased $5.1 million for the year ended December 31, 2024 as compared to 2023 due to income and increases in market value of the underlying investment securities.

Other non-interest income decreased $4.9 million for the year ended December 31, 2024 as compared to 2023 largely due to a $2.9 million decrease in the fair value of equity securities and a $1.2 million decrease in credit card fee income.

Through organic and acquisitive efforts, we have developed a robust suite of fee income product and service offerings for our growing customer base, including our treasury management services to commercial banking customers expected to help us generate additional fee income and attract new customers. During 2025, we plan to further leverage the investments that we have made in our treasury solutions, foreign exchange and syndication platforms, and continue to focus on growing revenues from interest rate swap transactions and our broker dealer subsidiary.

Non-Interest Expense

Non-interest expense decreased $56.8 million to $1.1 billion for the year ended December 31, 2024 as compared to 2023 mainly driven by decreases in the FDIC insurance assessment expense, technology, furniture and equipment expense and professional and legal fees. See further details below.

[[GREPCENT_TABLE]]
[["","57","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

The following table presents the components of non-interest expense for the years ended December 31, 2024, 2023 and 2022:

[[GREPCENT_TABLE]]
[["","2024","","2023","","2022"],["","","","(in thousands)"],["Salary and employee benefits expense","$","558,595","","","$","563,591","","","$","526,737"],["Net occupancy expense","102,124","","","101,470","","","94,352"],["Technology, furniture and equipment expense","135,109","","","150,708","","","161,752"],["FDIC insurance assessment","61,476","","","88,154","","","22,836"],["Amortization of other intangible assets","35,045","","","39,768","","","37,825"],["Professional and legal fees","70,315","","","80,567","","","82,618"],["Amortization of tax credit investments","18,946","","","18,009","","","12,407"],["Other","124,250","","","120,424","","","86,422"],["Total non-interest expense","$","1,105,860","","","$","1,162,691","","","$","1,024,949"]]
[[/GREPCENT_TABLE]]

Salary and employee benefits expense decreased $5.0 million for the year ended December 31, 2024 as compared to 2023. The decrease was mainly attributable a $7.9 million reduction in restructuring charges, consisting of severance expense related to workforce reductions, in 2024. Merger costs related to the acquisition of Bank Leumi USA, primarily consisting of severance and retention compensation, totaled $4.1 million during the year ended December 31, 2023. The effect of these items was partially offset by normal increases in labor costs during 2024.

Technology, furniture and equipment expense decreased $15.6 million for the year ended December 31, 2024 as compared to 2023 primarily due to decreases in merger related expense, equipment maintenance and repair expense, and telecommunication expense in 2024. Merger expenses related to the termination of certain technology contracts totaled $10 million in 2023.

FDIC insurance assessment expense decreased $26.7 million for the year ended December 31, 2024 as compared to 2023 mainly due to $41.5 million decrease in the special assessment applied to us to recover losses in the Deposit Insurance Fund from protecting uninsured depositors following the Silicon Valley Bank and Signature Bank failures. The decrease in the special assessment charge was primarily offset by normal increases in our FDIC assessment due to the overall growth of our balance sheet, as well as an increase in our internally classified loans as compared to 2023.

Amortization of other intangibles decreased $4.7 million for the year ended December 31, 2024 as compared to 2023 mainly due to lower amortization expense of core deposits and other intangible assets. See Note 8 to the consolidated financial statements for additional information.

Professional and legal fees decreased $10.3 million for the year ended December 31, 2024 as compared to 2023 mainly due to lower technology managed services and consulting expenses. In addition, legal fees included a $3.5 million charge for legal settlements for the year ended December 31, 2023.

Other non-interest expense increased $3.8 million for the year ended December 31, 2024 as compared to 2023 was due, in part, to additional costs related to a loan credit risk transfer transaction, consisting of a credit default swap, executed in June 2024. The premium expense and other transaction costs associated with this credit protection totaled $6.8 million for the year ended December 31, 2024. This and other moderate general increases within this category were partially offset by decreases in advertising expense and interest charges on collateral held related to derivative transactions as compared to 2023.

Income Taxes

Income tax expense was $58.2 million for the years ended December 31, 2024, reflecting an effective tax rate of 13.3 percent, as compared to $179.8 million for the year ended December 31, 2023, reflecting an effective tax rate of 26.5 percent. The decrease in both income tax expense and the effective rate during 2024 was mostly due to a $46.4 million tax benefit realized on the total reduction in our uncertain tax liability positions and related accrued interest due to statute of limitation expirations during the fourth quarter 2024, as well as lower pre-tax income as compared to 2023. The uncertain tax liability positions solely 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.

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

[[GREPCENT_TABLE]]
[["2024 Form 10-K","58"]]
[[/GREPCENT_TABLE]]

annual periods. Factors that could impact management’s judgment include changes in income, tax laws and regulations, and tax planning strategies. Based on the current information available, we anticipate that our effective tax rate will be approximately within the 23 to 25 percent range for 2025.

See additional information regarding our income taxes under our “—Critical Accounting Estimates” section above, as well as Note 13 to the consolidated financial statements.

Operating Segments

Valley manages its business operations under operating segments consisting of Consumer Banking and Commercial Banking. Activities not assigned to the operating segments are included in Treasury and Corporate Other.

The CEO of Valley is the CODM who assesses performance of each operating segment to better understand their cost, opportunity value and impact to Valley's consolidated earnings. Each operating segment is reviewed routinely for its asset growth, contribution to our income before income taxes, return on average interest earning assets and impairment (if events or circumstances indicate a possible inability to realize the carrying amount). Valley regularly assesses its strategic plans, operations, and reporting structures to identify its reportable segments.

The accounting for each operating segment and Treasury and Corporate Other includes internal accounting policies designed to measure consistent and reasonable financial reporting and may result in income and expense measurements that differ from amounts under GAAP. The financial reporting for each segment contains allocations and reporting in line with Valley’s operations, which may not necessarily be comparable to those of any other financial institution. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. Certain prior period amounts have been reclassified to conform to the current presentation for each operating segment and Treasury and Corporate Other. See Note 21 to the consolidated financial statements for additional information.

The following tables present the financial data for Valley's operating segments, and Treasury and Corporate Other for the years ended December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","2024"],["","Consumer Banking","","Commercial Banking","","","","Treasury and Corporate Other","","Total"],["","($ in thousands)"],["Average interest earning assets","$","9,914,917","","","$","40,115,669","","","","","$","7,287,340","","$","57,317,926"],["Interest income","$","478,680","","","$","2,596,066","","","","","$","282,751","","$","3,357,497"],["Interest expense","299,048","","","1,209,945","","","","","219,796","","1,728,789"],["Net interest income","179,632","","","1,386,121","","","","","62,955","","1,628,708"],["Provision for credit losses","24,561","","","284,827","","","","","(558)","","308,830"],["Net interest income after provision for credit losses","155,071","","","1,101,294","","","","","63,513","","1,319,878"],["Non-interest income","135,331","","","77,690","","","","","11,480","","224,501"],["Non-interest expense"],["Salary and employee benefits expense","118,953","","","389,622","","","","","50,020","","558,595"],["Net occupancy expense","18,003","","","71,360","","","","","12,761","","102,124"],["Technology, furniture, and equipment expense","25,681","","","93,811","","","","","15,617","","135,109"],["FDIC insurance assessment","10,448","","","42,271","","","","","8,757","","61,476"],["Professional and legal fees","11,254","","","52,666","","","","","6,395","","70,315"],["Other segment items *","58,282","","","54,007","","","","","65,952","","178,241"],["Total non-interest expense","$","242,621","","","$","703,737","","","","","$","159,502","","$","1,105,860"],["Income (loss) before income taxes","$","47,781","","","$","475,247","","","","","$","(84,509)","","","$","438,519"],["Return on average interest earning assets (pre-tax)","0.48","%","","1.18","%","","","","(1.16)","%","","0.77","%"],["Net interest margin","1.81","%","","3.45","%","","","","0.86","%","","2.84","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","59","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2023"],["","Consumer Banking","","Commercial Banking","","","","Treasury and Corporate Other","","Total"],["","($ in thousands)"],["Average interest earning assets","$","9,620,508","","","$","39,731,353","","","","","$","7,148,667","","$","56,500,528"],["Interest income","$","415,585","","","$","2,471,345","","","","","$","251,961","","$","3,138,891"],["Interest expense","250,882","","","1,036,109","","","","","186,422","","1,473,413"],["Net interest income","164,703","","","1,435,236","","","","","65,539","","1,665,478"],["Provision for credit losses","6,162","","","39,463","","","","","4,559","","50,184"],["Net interest income after provision for credit losses","158,541","","","1,395,773","","","","","60,980","","1,615,294"],["Non-interest income","105,282","","","93,618","","","","","26,829","","225,729"],["Non-interest expense"],["Salary and employee benefits expense","111,748","","","389,666","","","","","62,177","","563,591"],["Net occupancy expense","19,313","","","69,780","","","","","12,377","","101,470"],["Technology, furniture, and equipment expense","25,661","","","98,716","","","","","26,331","","150,708"],["FDIC insurance assessment","7,380","","","30,477","","","","","50,297","","88,154"],["Professional and legal fees","13,016","","","56,755","","","","","10,796","","80,567"],["Other segment items *","48,650","","","56,188","","","","","73,363","","178,201"],["Total non-interest expense","$","225,768","","","$","701,582","","","","","$","235,341","","$","1,162,691"],["Income (loss) before income taxes","$","38,055","","","$","787,809","","","","","$","(147,532)","","","$","678,332"],["Return on average interest earning assets (pre-tax)","0.40","%","","1.98","%","","","","(2.06)","%","","1.20","%"],["Net interest margin","1.71","%","","3.61","%","","","","0.91","%","","2.95","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["*","Other segment items include amortization of intangible assets, amortization of tax credit investments and other general operating expenses."]]
[[/GREPCENT_TABLE]]

Consumer Banking Segment. The Consumer Banking segment represented 18.9 percent of the total loan portfolio at December 31, 2024, and was mainly comprised of residential mortgage loans and automobile loans, and to a lesser extent, home equity loans, secured personal lines of credit and other consumer loans (including credit card loans). The duration of the residential mortgage loan portfolio (which represented 11.5 percent of our total loan portfolio at December 31, 2024) is subject to movements in the market level of interest rates and forecasted prepayment speeds. The weighted average life of the automobile loans portfolio (representing 3.9 percent of total loans at December 31, 2024) is relatively unaffected by movements in the market level of interest rates. However, the average life may be impacted by new loans as a result of the availability of credit within the automobile marketplace and consumer demand for purchasing new or used automobiles. Consumer Banking also includes the Wealth Management and Insurance Services Division, comprised of asset management advisory, brokerage, trust, personal and title insurance, tax credit advisory services, and our international and domestic private banking businesses.

Consumer Banking’s average interest earning assets increased $294.4 million to $9.9 billion for the year ended December 31, 2024 as compared to 2023. The increase was largely due to strong origination volumes and steady growth in our indirect automobile loan portfolio over the last 12-month period, new residential mortgage loan volumes originated for investment rather than sale and a moderate uptick in home equity loan balances, partially offset by a decline in secured personal lines of credit balances during 2024.

For the year ended December 31, 2024 income before income taxes generated by the Consumer Banking segment increased $9.7 million to $47.8 million for the year ended December 31, 2024 as compared to $38.1 million for the year ended December 31, 2023. The increase was mainly driven by higher non-interest income and net interest income, partially offset by higher provision for loan losses and non-interest expense. The non-interest income increased $30.0 million as compared to 2023 mainly due to a higher volume of transaction and other related fees generated by both our tax credit advisory and brokerage subsidiaries, as well as an uptick in service charges on deposit accounts. Net interest income increased $14.9 million as compared to 2023 mainly due to the increase in overall yield of the loan portfolio during 2024. The provision for loan losses increased $18.4 million for the year ended December 31, 2024 from $6.2 million for 2023 mainly due to loan growth in 2024 and higher quantitative reserves at December 31, 2024. See further details in the “Allowance for Credit Losses” section of this MD&A. Non-interest expense increased $16.9 million to $242.6 million for the year ended December 31, 2024 as compared to

[[GREPCENT_TABLE]]
[["2024 Form 10-K","60"]]
[[/GREPCENT_TABLE]]

2023 largely driven by increases in salaries and employee benefits, other expense (including $6.8 million of premium fees associated with a credit risk transfer transaction, consisting of a credit default swap, executed in 2024 for a portion of our auto portfolio) and the FDIC insurance assessment during 2024. See more details in the "Non-Interest Expense" section of this MD&A.

Net interest margin on the Consumer Banking portfolio increased 10 basis points to 1.81 percent for the year ended December 31, 2024 as compared to 2023 mainly due to a 51 basis point increase in the yield on average loans, partially offset by a 41 basis point increase in the costs associated with our funding sources. The increase in loan yield was largely due to higher yielding new loan volumes and adjustable rate loans (for the majority of 2024) in our portfolio. The increase in our funding costs was mainly driven by higher interest rates on most of our interest bearing deposit products and indirect customer deposits during 2024. See more details in the “Net Interest Income” section of this MD&A.

Commercial Banking Segment. The Commercial Banking segment is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans. Due to the portfolio’s interest rate characteristics, Commercial Banking is Valley’s operating segment that is most sensitive to movements in market interest rates. Commercial and industrial loans totaled approximately $9.9 billion and represented 20.4 percent of the total loan portfolio at December 31, 2024. Commercial real estate and construction loans totaled $29.6 billion and represented 60.7 percent of the total loan portfolio at December 31, 2024.

Average interest earning assets in Commercial Banking segment increased $384.3 million to $40.1 billion for the year ended December 31, 2024 as compared to the same period in 2023. This increase was due to our continued focus on organic loan growth largely within the commercial and industrial loan portfolio over the 12-month period ended December 31, 2024, partially offset by normal runoff scheduled maturities and sales of certain commercial real estate loans.

For the year ended December 31, 2024, income before income taxes for Commercial Banking decreased $312.6 million to $475.2 million as compared to 2023. The decrease was mainly attributable to a $245.4 million increase in the provision for loan losses. The increase in the provision for loan losses was mainly due to higher than expected loan charge-offs, increased quantitative reserves allocated to commercial real estate loans and the reserve build resulting from commercial and industrial loan growth in 2024. See details in the “Allowance for Credit Losses for Loans” section of this MD&A. Net interest income decreased $49.1 million in 2024 as compared to 2023 mainly due to the higher cost of funding, which outpaced the yield on the loan portfolio. Non-interest income decreased $15.9 million in 2024 as compared to 2023 primarily driven by a $15.1 million decrease in swap fees generated in 2024 due to a decline in the volume of interest rate swap transactions executed for commercial loan customers. See further details in the "Non-Interest Income" section of this MD&A.

The net interest margin for this segment decreased 16 basis points to 3.45 percent for the year ended December 31, 2024 as compared to the same period in 2023 due to a 41 basis point increase in the cost of our funding sources, partially offset by a 25 basis point increase in the yield on average loans.

Treasury and Corporate Other. Treasury and Corporate Other largely consists of the Treasury managed HTM debt securities and AFS debt securities portfolios mainly utilized for 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 operating segments. Other non-interest income items and general expenses are allocated from Treasury and Corporate Other to each operating segment utilizing a methodology that involves an allocation of operating and funding costs based on each segment's respective mix of average interest earning assets outstanding for the period, number of deposits, or direct allocations to the segments based on the nature of income and expense. Unallocated items included in Treasury and Corporate Other mainly consist of net gains and losses on AFS and HTM securities transactions, amortization of tax credit investments, as well as other non-core items, including merger, restructuring and FDIC special assessment charges and income from litigation settlements.

Treasury and Corporate Other's average interest earning assets increased $138.7 million to $7.3 billion for the year ended December 31, 2024 as compared to 2023 primarily due to higher average AFS investment securities balances driven by additional purchases of residential mortgage-backed securities during 2024. The increase in average investment securities was partially offset by a $568.9 million decline in average interest bearing cash held overnight, as our excess liquidity returned to more normalized levels in 2024 after being prudently elevated by management during a portion of 2023 in response to the uncertain operating environment caused by a few large bank failures.

For the year ended December 31, 2024, net loss before taxes in this segment totaled $84.5 million for the year ended December 31, 2024 compared to $147.5 million for 2023. The $63.0 million decrease in pre-tax loss was largely driven by

[[GREPCENT_TABLE]]
[["","61","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

decreases in non-interest expense and provision for credit losses, partially offset by lower non-interest income. Non-interest expense decreased $75.8 million to $159.5 million for the year ended December 31, 2024 as compared to 2023 largely due to: (i) a $41.5 million decrease in the FDIC insurance special assessment allocated to Treasury and Other, (ii) a $10 million decrease in technology, furniture and equipment expense related to the termination of certain technology contracts during 2023, and (iii) a decrease in salaries and employee benefits expense mainly caused by certain 2023 merger expenses related to the acquisition of Bank Leumi USA. Non-interest income decreased $15.3 million for the year ended December 31, 2024 as compared to 2023 mainly due to an aggregate realized net loss of $13.7 million on the sales of commercial real estate loans during 2024. See more details in the "Non-Interest Income" and "Non-Interest Expense" sections of this MD&A. The provision for credit losses decreased $5.1 million in 2024 mainly due to a $5 million charge-off in 2023 related to a corporate bond issued by one failed bank within our AFS debt securities portfolio.

Treasury and Corporate Other's net interest margin decreased 5 basis points to 0.86 percent for the year ended December 31, 2024 as compared to the same period in 2023 due to a 41 basis point increase in cost of our funding source, largely offset by a 36 basis point increase in the yield on average investments. The increased yield on average investments as compared to 2023 was largely driven by new higher yielding investments.

ASSET/LIABILITY MANAGEMENT

Interest Rate Sensitivity

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

We use a simulation model to analyze net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on various interest rate scenarios over a 12-month period. The model is based on the actual maturity and re-pricing characteristics of rate sensitive assets and liabilities. The model incorporates certain assumptions which management believes to be reasonable regarding the impact of changing interest rates, non-maturity deposit betas, and the prepayment assumptions of certain assets and liabilities as of December 31, 2024. The model assumes immediate changes in interest rates without any proactive change in the composition or size of the balance sheet, or other future actions that management might undertake to mitigate this risk. In the model, the forecasted shape of the yield curve remains static as of December 31, 2024. The impact of interest rate derivatives, such as interest rate swaps, is also included in the model.

Our simulation model is based on market interest rates and prepayment speeds prevalent in the market as of December 31, 2024. Although the size of Valley’s balance sheet is forecasted to remain static as of December 31, 2024, in our model, the composition is adjusted to reflect new interest earning assets and funding originations coupled with rate spreads utilizing our actual originations during the fourth quarter 2024. The model utilizes an immediate parallel shift in market interest rates at December 31, 2024.

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

[[GREPCENT_TABLE]]
[["2024 Form 10-K","62"]]
[[/GREPCENT_TABLE]]

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.

[[GREPCENT_TABLE]]
[["","","Estimated Change in Future Net Interest Income"],["Changes in Interest Rates","","Dollar Change","","Percentage Change"],["(in basis points)","","($ in thousands)"],["+300","","$","155,505","","","8.48","%"],["+200","","105,300","","","5.75"],["+100","","53,232","","","2.90"],["- 100","","(59,207)","","","(3.23)"],["- 200","","(120,217)","","","(6.56)"],["- 300","","(180,067)","","","(9.82)"]]
[[/GREPCENT_TABLE]]

As noted in the table above, a 100 basis point immediate decrease in interest rates combined with a static balance sheet where the size, mix, and proportions of assets and liabilities remain unchanged is projected to decrease net interest income over the next 12-month period by 3.23 percent. Management believes the interest rate sensitivity of our balance sheet remains within an expected tolerance range at December 31, 2024. However, the level of net interest income sensitivity may increase or decrease in the future as a result of several factors, including potential changes in our balance sheet strategies, the slope of the yield curve and projected cash flows.

The following table sets forth the amounts of interest earning assets and interest bearing liabilities that were outstanding at December 31, 2024. The expected cash flows are categorized based on each financial instrument’s anticipated maturity or interest rate reset date in each of the future periods presented.

INTEREST RATE SENSITIVITY ANALYSIS

[[GREPCENT_TABLE]]
[["","","2025","","2026","","2027","","2028","","2029","","Thereafter","","Total Balance"],["","","($ in thousands)"],["Interest sensitive assets:"],["Available for sale debt securities","","$","540,303","","","$","302,276","","","$","474,316","","","$","246,545","","","$","244,718","","","$","1,561,566","","","$","3,369,724"],["Held to maturity debt securities","","335,887","","","280,231","","","207,244","","","205,392","","","181,998","","","2,321,468","","","3,532,220"],["Loans and loans held for sale","","15,423,061","","","7,768,632","","","5,706,127","","","3,829,515","","","3,366,178","","","12,731,879","","","48,825,392"],["Interest bearing deposits with banks","","1,478,713","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","1,478,713"],["Total interest sensitive assets","","$","17,777,964","","","$","8,351,139","","","$","6,387,687","","","$","4,281,452","","","$","3,792,894","","","$","16,614,913","","","$","57,206,049"],["Interest sensitive liabilities:"],["Deposits:"],["Savings, NOW and money market","","$","26,304,639","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","26,304,639"],["Time","","9,240,979","","","1,781,725","","","1,257,252","","","22,548","","","28,710","","","11,330","","","12,342,544"],["Short-term borrowings","","72,718","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","72,718"],["Long-term borrowings","","373,000","","","1,528,604","","","\u2014","","","822,551","","","\u2014","","","450,000","","","3,174,155"],["Junior subordinated debentures","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","57,455","","","57,455"],["Total interest sensitive liabilities","","$","35,991,336","","","$","3,310,329","","","$","1,257,252","","","$","845,099","","","$","28,710","","","$","518,785","","","$","41,951,511"],["Interest sensitivity gap","","$","(18,213,372)","","","$","5,040,810","","","$","5,130,435","","","$","3,436,353","","","$","3,764,184","","","$","16,096,128","","","$","15,254,538"],["Ratio of interest sensitive assets to interest sensitive liabilities","","0.49:1","","2.52:1","","5.08:1","","5.07:1","","132.11:1","","32.03:1","","1.36:1"]]
[[/GREPCENT_TABLE]]

The above table provides an approximation of the projected re-pricing of assets and liabilities at December 31, 2024 based on the contractual maturities, adjusted for anticipated prepayments of principal and scheduled rate adjustments. The

[[GREPCENT_TABLE]]
[["","63","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

prepayment experience reflected herein is based on historical experience combined with market consensus expectations derived from independent external sources. The actual repayments of these instruments could vary substantially if future prepayments differ from historical experience or current market expectations. While all non-maturity deposit liabilities are reflected in the year 2025 column in the table above, management controls the re-pricing of the vast majority of the interest-bearing instruments within these liabilities.

The total gap re-pricing within one year as of December 31, 2024 was a negative $18.2 billion, representing a ratio of interest sensitive assets to interest sensitive liabilities of 0.49:1. The total gap re-pricing position, as reported in the table above, reflects the projected interest rate sensitivity of our principal cash flows based on market conditions as of December 31, 2024. As the market level of interest rates and associated prepayment speeds move, the total gap re-pricing position will change accordingly, but not likely in a linear relationship. Management does not view our one-year gap position as of December 31, 2024 as presenting an unusually high risk potential, although no assurances can be given that we are not at risk from interest rate increases or decreases or liquidity and cash requirements (discussed in the section below).

Liquidity and Cash Requirements

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

The Bank adheres to certain internal liquidity measures including ratios of loans to deposits below 110 percent and wholesale funding to total funding below 25 percent, as summarized in the table below. Management maintains flexibility to temporarily exceed these internal limits in certain operating environments, but also strives to outperform these limits when possible. The Bank was in compliance with the foregoing policies at December 31, 2024.

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

[[GREPCENT_TABLE]]
[["","","2024","","2023"],["Loans to deposits","","97.5","%","","102.0","%"],["Wholesale funding to total funding","","18.7","","","19.5"]]
[[/GREPCENT_TABLE]]

At December 31, 2024, the Bank had various contractual obligations totaling $16.2 billion and $9.8 billion of maturing liabilities due in 12 months or less and greater than 1 year included in the table below.

The following table summarizes maturities of contractual obligations of the Bank at December 31, 2024:

[[GREPCENT_TABLE]]
[["","One Year or Less","","One to Three Years","","Three to Five Years","","Over Five Years","","Total"],["","(in thousands)"],["Time deposits","$","9,240,979","","","$","3,038,977","","","$","51,258","","","$","11,330","","","$","12,342,544"],["Short-term borrowings","72,718","","","\u2014","","","\u2014","","","\u2014","","","72,718"],["Long-term borrowings","373,000","","","1,528,604","","","840,000","","","450,000","","","3,191,604"],["Junior subordinated debentures issued to capital trusts","\u2014","","","\u2014","","","\u2014","","","60,827","","","60,827"],["Lease obligations","52,066","","","99,305","","","91,351","","","145,581","","","388,303"],["Capital expenditures","21,134","","","\u2014","","","\u2014","","","\u2014","","","21,134"],["Other purchase obligations","51,876","","","38,487","","","22,452","","","337","","","113,152"],["Total","$","9,811,773","","","$","4,705,373","","","$","1,005,061","","","$","668,075","","","$","16,190,282"]]
[[/GREPCENT_TABLE]]

In the ordinary course of operations, the Bank enters into various financial obligations, including contractual obligations that may require future cash payments. As a financial services provider, we routinely enter into commitments to extend credit, including loan commitments, standby and commercial letters of credit. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Bank. We enter 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

[[GREPCENT_TABLE]]
[["2024 Form 10-K","64"]]
[[/GREPCENT_TABLE]]

future changes in interest rates on the Bank's commitments to fund the loans, as well as on its portfolio of mortgage loans held for sale. Commitments to extend credit and standby letters of credit are subject to change since many of these commitments are expected to expire unused or only partially used based upon our historical experience; as such, the total amounts of these commitments do not necessarily reflect future cash requirements. At December 31, 2024, our off-balance sheet commitments totaled $13.1 billion, inclusive of commitments of $7.8 billion with a remaining term of 12 months or less. See Note 15 to the consolidated financial statements for further details.

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 at December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","","2024","","2023"],["","","(in thousands)"],["Cash and due from banks","","$","411,412","","","$","284,090"],["Interest bearing deposits with banks","","1,478,713","","","607,135"],["Trading debt securities","","\u2014","","","3,973"],["Held to maturity debt securities (1)","","220,056","","","194,094"],["Available for sale debt securities (2)","","3,369,724","","","1,296,576"],["Loans held for sale","","25,681","","","30,640"],["Total liquid assets","","$","5,505,586","","","$","2,416,508"]]
[[/GREPCENT_TABLE]]

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

(2)     Includes approximately $1.8 billion and $840.3 million of various investment securities that were pledged to counterparties to support our earning asset funding strategies at December 31, 2024 and 2023, respectively.

Total liquid assets represented 9.6 percent and 4.3 percent of interest earning assets at December 31, 2024 and 2023, respectively.

While not part of our liquidity management strategy, we executed certain asset sales (largely under an initiative to reduce our commercial real estate loan concentration risk and the sale of a small specialized commercial lending business) and the issuance of common and preferred stock in registered public offerings with the primary goal to bolster our regulatory capital. These transactions benefited the Bank's liquidity and cash position during the year ended December 31, 2024, including the following:

•net cash proceeds of $1.2 billion related to targeted sales of performing commercial real estate and construction loans to reduce our CRE loan concentration during 2024;

•additional capital contributions totaling $545 million to the Bank from Valley during the second half of 2024 related to the combined net cash proceeds of $593.6 million from Valley's issuance of common stock and Series C preferred stock in registered public offerings;

•net cash proceeds of $98.1 million from the sale of our commercial premium finance lending division, mostly consisting of commercial and industrial loans, in the first quarter 2024; and

•Valley also sold a relatively modest amount of performing residential mortgage loans from the held for investment loan portfolio during the fourth quarter 2024.

While not isolated from the mix of our other sources of funds, these discrete transactions contributed to funding primarily used to grow our available for sale debt securities portfolio during the year ended December 31, 2024 and repay higher cost maturing indirect customer CDs during the fourth quarter 2024. At December 31, 2024, the level of cash liquidity on the balance sheet was elevated as compared to one year ago (as noted in the table above) largely due to the timing of certain transactions highlighted above. We anticipate that our cash balances will decline to more normalized levels during the first quarter 2025, as part of our liquidity management, including the level of our wholesale and indirect customer deposit funding sources, and our expected loan growth in 2025 noted elsewhere in this MD&A.

[[GREPCENT_TABLE]]
[["","65","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

Other sources of funds on the asset side are derived from scheduled loan payments of principal and interest, as well as prepayments received. At December 31, 2024, estimated cash inflows from total loans are projected to be approximately $15.2 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 $876.0 million in principal payments from securities in the total investment portfolio at December 31, 2024 over the next 12-month period due to normally scheduled principal repayments and expected prepayments of certain securities, primarily residential mortgage-backed securities.

On the liability side of the balance sheet, we utilize multiple sources of funds to meet liquidity needs, including commercial and consumer 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 $39.1 billion and $37.6 billion for the years ended December 31, 2024 and 2023, respectively, representing 68.3 percent and 66.6 percent of average interest earning assets for the respective periods. The level of interest bearing deposits is affected by interest rates offered, which is often influenced by our need for funds, rates prevailing in the capital markets, competition, and the need to manage interest rate risk sensitivity.

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

[[GREPCENT_TABLE]]
[["","2024","","2023"],["","(in thousands)"],["FHLB advances","$","\u2014","","","$","850,000"],["Securities sold under agreements to repurchase","72,718","","","67,834"],["Total short-term borrowings","$","72,718","","","$","917,834"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","2024","","2023"],["","(in thousands)"],["FHLB borrowing capacity*","$","5,853,596","","","$","13,604,000"],["Unused FRB discount window*","11,509,000","","","8,530,000"],["Unused federal funds lines available from commercial banks","2,140,000","","","2,140,000"],["Unencumbered investment securities","3,415,834","","","1,129,000"],["Total","$","22,918,430","","","$","25,403,000"]]
[[/GREPCENT_TABLE]]

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

Corporation Liquidity. Valley’s recurring cash requirements primarily consist of dividends to preferred and common shareholders and interest expense on subordinated notes and junior subordinated debentures issued to capital trusts. As part of our ongoing asset/liability management strategies, Valley could also use cash to repurchase shares of its outstanding common stock under its share repurchase program or redeem its callable junior subordinated debentures and subordinated notes. Valley's cash needs are routinely satisfied by dividends collected from the Bank. Projected cash flows from the Bank are expected to be adequate to pay preferred and common dividends, if declared, and interest expense payable to subordinated note holders and capital trusts, given the current capital levels and current profitable operations of the Bank. In addition to dividends received from the Bank, Valley can satisfy its cash requirements by utilizing its own cash and potential new funds borrowed from outside sources or capital issuances, such as the undistributed net proceeds of our common stock and Series C preferred stock offerings in November and August 2024, respectively (see Note 18 to the consolidated financial statements for more details). 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.

[[GREPCENT_TABLE]]
[["2024 Form 10-K","66"]]
[[/GREPCENT_TABLE]]

Investment Securities Portfolio

As of December 31, 2024, our investment securities portfolio consisted of equity and debt securities, with the debt securities classified as either trading, AFS or HTM. The AFS and HTM debt securities portfolios, which comprise the majority of the securities we own, include U.S. Treasury securities, U.S. government agency securities, tax-exempt and taxable issuances of states and political subdivisions, residential mortgage-backed securities, single-issuer trust preferred securities principally issued by bank holding companies, and high quality corporate bonds. Among other securities, our AFS debt securities include securities such as bank issued and other corporate bonds, as well as municipal special revenue bonds, which may pose a higher risk of future impairment charges to us as a result of the uncertain economic environment and its potential negative effect on the future performance of the security issuers. The equity securities consist of two publicly traded mutual funds, CRA investments and several other equity investments that we have made in companies that develop new financial technologies and in partnerships that invest in such companies. Our CRA and other equity investments are a mix of both publicly traded entities and privately held entities. We had no trading securities at December 31, 2024.

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

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

[[GREPCENT_TABLE]]
[["","67","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

Investment securities at December 31, 2024 and 2023 were as follows:

[[GREPCENT_TABLE]]
[["","2024","","2023"],["","(in thousands)"],["Equity securities","$","71,513","","","$","64,464"],["Trading debt securities","\u2014","","","3,973"],["Available for sale debt securities"],["U.S. Treasury securities","291,549","","","288,157"],["U.S. government agency securities","22,543","","","23,702"],["Obligations of states and political subdivisions:"],["Obligations of states and state agencies","45,529","","","47,695"],["Municipal bonds","146,980","","","143,995"],["Total obligations of states and political subdivisions","192,509","","","191,690"],["Residential mortgage-backed securities","2,681,076","","","626,572"],["Corporate and other debt securities","182,047","","","166,455"],["Total available for sale debt securities","3,369,724","","","1,296,576"],["Total investment securities (fair value)","$","3,441,237","","","$","1,365,013"],["Held to maturity debt securities"],["U.S. Treasury securities","$","25,480","","","$","26,232"],["U.S. government agency securities","301,315","","","305,996"],["Obligations of states and political subdivisions:"],["Obligations of states and state agencies","68,025","","","88,556"],["Municipal bonds","304,464","","","316,914"],["Total obligations of states and political subdivisions","372,489","","","405,470"],["Residential mortgage-backed securities","2,710,642","","","2,885,303"],["Trust preferred securities","36,081","","","37,062"],["Corporate and other debt securities","86,213","","","80,350"],["Total investment securities held to maturity (amortized cost)","$","3,532,220","","","$","3,740,413"],["Allowance for credit losses","647","","","1,205"],["Total investment securities held to maturity, net of allowance for credit losses","3,531,573","","","3,739,208"],["Total investment securities","$","6,972,810","","","$","5,104,221"]]
[[/GREPCENT_TABLE]]

During the year ended 2024, we purchased approximately $2.5 billion of residential mortgage backed securities mainly issued by Ginnie Mae within the AFS portfolio. The purchases were largely to utilize a portion of our excess cash liquidity partly generated from loan sales, higher average deposits, and issuances of both preferred and common stock, as well as our normal reinvest continued repayments and prepayments within both the available for sale and held to maturity portfolios. Approximately 54.5 percent, 30.0 percent, and 15.5 percent of our total residential mortgage-backed securities portfolio were issued and guaranteed by Ginnie Mae, Fannie Mae, and Freddie Mac, respectively, at December 31, 2024.

[[GREPCENT_TABLE]]
[["2024 Form 10-K","68"]]
[[/GREPCENT_TABLE]]

The following table presents the weighted-average yields, calculated on a yield-to-maturity basis, on the remaining contractual maturities (unadjusted for expected prepayments) of HTM debt securities at December 31, 2024:

[[GREPCENT_TABLE]]
[["","0-1 year","","1-5 years","","5-10 years","","Over 10 years","","Total"],["Held to maturity debt securities"],["U.S. Treasury securities","3.71","%","","\u2014","%","","\u2014","%","","\u2014","%","","3.71","%"],["U.S. government agency securities","\u2014","","","\u2014","","","4.45","","","3.34","","","3.57"],["Obligations of states and political subdivisions: (1)"],["Obligations of states and state agencies","\u2014","","","\u2014","","","4.17","","","4.53","","","4.46"],["Municipal bonds","3.81","","","3.86","","","3.74","","","4.31","","","4.14"],["Total obligations of states and political subdivisions","3.81","","","3.86","","","3.81","","","4.36","","","4.20"],["Residential mortgage-backed securities (2)","2.92","","","4.78","","","3.49","","","2.86","","","2.88"],["Trust preferred securities","\u2014","","","\u2014","","","6.75","","","7.45","","","7.13"],["Corporate and other debt securities","4.20","","","3.69","","","4.94","","","\u2014","","","4.08"],["Total","3.81","%","","3.97","%","","4.30","%","","3.05","%","","3.16","%"]]
[[/GREPCENT_TABLE]]

(1)Average yields on obligations of states and political subdivisions are generally tax-exempt and calculated on a tax-equivalent basis using a statutory federal income tax rate of 21 percent.

(2)Residential mortgage-backed securities yields are shown using stated contractual maturity dates.

The residential mortgage-backed securities portfolio is a significant source of our liquidity through the monthly cash flow of principal and interest. Mortgage-backed securities, like all securities, are sensitive to changes in the interest rate environment, increasing and decreasing in value as interest rates fall and rise. As interest rates fall, the potential increase in prepayments can reduce the yield on the mortgage-backed securities portfolio and reinvestment of the proceeds will be at lower yields. Conversely, rising interest rates may reduce cash flows from prepayments and extend anticipated duration of these assets. We monitor the changes in interest rates, cash flows and duration, in accordance with our investment policies. Management seeks out investment securities with an attractive spread over our cost of funds.

Allowance for Credit Losses and Impairment Analysis

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

We have evaluated all AFS debt securities that are in an unrealized loss position as of December 31, 2024 and December 31, 2023 and determined that the declines in fair value are mainly attributable to changes in market volatility, due to factors such as interest rates and spread factors, but not attributable to credit quality or other factors. During the first quarter 2023, Valley recognized a credit related impairment of one corporate bond issued by Signature Bank resulting in both a provision for credit losses and full charge-off of the security totaling $5.0 million based on a comparison of the present value of expected cash flows to the amortized cost. The bond was subsequently sold, and the sale resulted in a $869 thousand gain during the fourth quarter 2023. There was no other impairment recognized within the AFS debt securities portfolio during the years ended December 31, 2024, 2023 and 2022.

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

Held to maturity debt securities. As discussed further in Note 4 to the consolidated financial statements, Valley estimates the expected credit losses on HTM debt securities that have loss expectations using a discounted cash flow model developed by a third party. Valley has a zero-loss expectation for certain securities within the HTM portfolio, including U.S. Treasury securities, U.S. agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and collateralized municipal bonds. To measure the expected credit losses on HTM debt securities that have loss

[[GREPCENT_TABLE]]
[["","69","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

expectations, we utilize a third party discounted cash flow model. The assumptions used in the model for pools of securities with common risk characteristics include the historical lifetime probability of default and severity of loss in the event of default, with the model incorporating several economic cycles of loss history data to calculate expected credit losses given default at the individual security level. HTM debt securities were carried net of an allowance for credit losses totaling $647 thousand and $1.2 million at December 31, 2024 and 2023, respectively. There were no net charge-offs of HTM debt securities during the years ended December 31, 2024, 2023 and 2022.

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

The following table presents available for sale and held to maturity debt investment securities by investment grades at December 31, 2024.

[[GREPCENT_TABLE]]
[["","2024"],["","Amortized Cost","","Gross Unrealized Gains","","Gross Unrealized Losses","","Fair Value"],["","(in thousands)"],["Available for sale investment grades:*"],["AAA/AA/A Rated","$","3,331,220","","","$","3,816","","","$","(173,870)","","","$","3,161,166"],["BBB Rated","91,157","","","\u2014","","","(2,894)","","","88,263"],["Not rated","129,896","","","247","","","(9,848)","","","120,295"],["Total","$","3,552,273","","","$","4,063","","","$","(186,612)","","","$","3,369,724"],["Held to maturity investment grades:*"],["AAA/AA/A Rated","$","3,368,128","","","$","2,097","","","$","(493,482)","","","$","2,876,743"],["BBB Rated","6,000","","","\u2014","","","(186)","","","5,814"],["Not rated","158,092","","","10","","","(12,375)","","","145,727"],["Total","$","3,532,220","","","$","2,107","","","$","(506,043)","","","$","3,028,284"]]
[[/GREPCENT_TABLE]]

*    Rated using external rating agencies. Ratings categories include 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/AA/A rated categories of both the AFS and HTM debt securities portfolios (in the above table) were largely related to residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac and continue to be driven by the higher market interest rate environment. The investment securities AFS and HTM debt securities included $129.9 million and $158.1 million, respectively, of investments not rated by the rating agencies with aggregate unrealized losses of $9.8 million and $12.4 million, respectively, at December 31, 2024. The unrealized losses within non-rated AFS debt securities mostly related to several large corporate bonds negatively impacted by higher interest rates during 2024, and not changes in underlying credit. The unrealized losses within non-rated HTM debt securities mainly related to four single-issuer bank trust preferred issuances with a combined amortized cost of $36.1 million with $6.9 million gross unrealized losses and several corporate debt securities that were negatively impacted by rising interest rates, and not changes in their underlying credit.

See Note 4 to the consolidated financial statements for additional information regarding our investment securities portfolio.

[[GREPCENT_TABLE]]
[["2024 Form 10-K","70"]]
[[/GREPCENT_TABLE]]

Loan Portfolio

The following table reflects the composition of the loan portfolio at December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","2024","","2023"],["","($ in thousands)"],["Commercial and industrial","$","9,931,400","","","$","9,230,543"],["Commercial real estate:"],["Non-owner occupied (1)","12,344,355","","","15,078,464"],["Multifamily (2)","8,299,250","","","8,860,219"],["Owner occupied (1)","5,886,620","","","4,304,556"],["Total","26,530,225","","","28,243,239"],["Construction","3,114,733","","","3,726,808"],["Total commercial real estate","29,644,958","","","31,970,047"],["Residential mortgage","5,632,516","","","5,569,010"],["Consumer:"],["Home equity","604,433","","","559,152"],["Automobile","1,901,065","","","1,620,389"],["Other consumer","1,085,339","","","1,261,154"],["Total consumer loans","3,590,837","","","3,440,695"],["Total loans (3)","$","48,799,711","","","$","50,210,295"],["As a percent of total loans:"],["Commercial and industrial","20.4","%","","18.4","%"],["Commercial real estate:"],["Non-owner occupied","25.2","","","30.0"],["Multifamily","17.0","","","17.7"],["Owner occupied","12.1","","","8.6"],["Construction","6.4","","","7.4"],["Total commercial real estate","60.7","","","63.7"],["Residential mortgage","11.5","","","11.1"],["Consumer loans","7.4","","","6.8"],["Total","100.0","%","","100.0","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","During the second quarter 2024, approximately $1.1 billion of non-owner occupied loans reclassified to owner occupied loans based upon Valley's re-assessment of such loans under the applicable bank regulatory guidance."],["(2)","Includes loans collateralized by properties that are greater than 50 percent rent regulated totaling approximately $553 million and $531 million at December 31, 2024 and 2023, respectively."],["(3)","Includes net unearned discount and deferred loan fees of $45.3 million and $85.4 million at December 31, 2024 and 2023, respectively."]]
[[/GREPCENT_TABLE]]

Total loans decreased by $1.4 billion, or 2.8 percent to $48.8 billion at December 31, 2024 from December 31, 2023 mainly as a result of bulk sales of commercial real estate and construction loans completed in the first half of 2024 and the fourth quarter 2024 and commercial real estate loans repayment activity in 2024, which outpaced new and refinanced loan volumes due to the planned lower production within the non-owner occupied and multifamily loan categories. Loans held for sale are presented separately from total loans on the consolidated statements of financial condition totaled $25.7 million and $30.6 million at December 31, 2024 and 2023, respectively. During the year ended December 31, 2024, we transferred and subsequently sold performing commercial real estate and construction loans from the held for investment loan portfolio to loans held for sale. See Note 3 for additional information regarding loans held for sale.

Commercial and industrial loans increased $700.9 million to $9.9 billion at December 31, 2024 from December 31, 2023. The organic growth during 2024 was largely due to our continued multi-year strategic initiative to expand new loan production from diverse relationship-driven middle market businesses in our primary markets, as well as nationwide businesses. The increase with this category was partially offset by the sale of $93.6 million of loans associated with the sale of our premium finance lending division in the first quarter 2024, and the subsequent run-off of the vast majority of the retained premium finance loan portfolio. See Note 5 for additional information regarding this transaction.

[[GREPCENT_TABLE]]
[["","71","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

Commercial real estate loans (excluding construction loans) decreased $1.7 billion to $26.5 billion at December 31, 2024 from December 31, 2023 primarily due to our strategic efforts to reduce our CRE loan concentration. As part of these efforts, we sold $64.5 million of multifamily loans and $89.3 million of non-owner occupied loans through loan participation agreements at par value with a related party, Bank Leumi Le-Israel B.M. (BLITA), during the first quarter 2024. During the fourth quarter 2024, we sold $257.5 million of multifamily loans and $662.8 million of non-owner occupied loans to an unrelated party. In addition, we continued to be highly selective with new loan originations, which were outpaced by runoff from normal repayment activity within the non-owner occupied and multifamily loan categories. At December 31, 2024, our CRE loan concentration ratio declined to 362 percent as compared to 421 percent and 474 percent at September 30, 2024 and December 31, 2023, respectively. During the second quarter 2024, we reassessed the loan classification of skilled nursing facility loans based on the qualifying criteria for owner occupied loans outlined in the applicable bank regulatory reporting guidance. As a result, we reclassified loans totaling approximately $1.1 billion from non-owner occupied to owner occupied loans during the second quarter 2024. Overall, commercial real estate loans are well-diversified across our footprint areas in Florida, Alabama, New Jersey, New York and Manhattan with a combined weighted average loan to value ratio of 58 percent and debt service coverage ratio of 1.66 at December 31, 2024 as compared to 57 percent and debt service coverage ratio of 1.67 at December 31, 2023.

Construction loans decreased $612.1 million to $3.1 billion at December 31, 2024 from December 31, 2023 mostly due to the migration of completed projects to both internal and external permanent financing (mostly owner occupied) and a low level of new advances on existing projects during 2024. We also sold approximately $79.7 million of construction loan participations at par value to BLITA during the first half of 2024, and $14.2 million of construction loans to an unrelated party during fourth quarter 2024.

Residential mortgage loans totaled $5.6 billion at December 31, 2024 and increased $63.5 million from December 31, 2023 largely due to lower prepayment activity and continued retention of a higher percentage of new loan volumes for investment rather than for sale. During 2024, we retained approximately 67 percent of the total residential mortgages originations in our held for investment loan portfolio. In addition, during 2024, we purchased $41.3 million of 1-4 family residential mortgage loans from an unrelated third party lender for qualifying CRA purposes. Our new and refinanced residential mortgage loan originations totaled $611.7 million for the year ended December 31, 2024 as compared to $649.9 million in 2023. The volume of residential mortgage loan applications remained relatively low during 2024 largely due to the stubbornly high level of mortgage interest rates, as well as declines in new home purchase activity which may continue to challenge our ability to grow this loan category in 2025. Valley also sold $75.5 million of residential mortgage loans during the fourth quarter 2024.

Consumer loans increased $150.1 million to $3.6 billion at December 31, 2024 from December 31, 2023 mainly due to increases in automobile and home equity loans, partially offset by lower other consumer loans. Automobile loans increased $280.7 million, or 17.3 percent to $1.9 billion at December 31, 2024 from December 31, 2023 mainly due to continued consumer demand generated by our indirect auto dealer network and low prepayment activity within the portfolio. Home equity loans increased $45.3 million to $604.4 million at December 31, 2024 from $559.2 million at December 31, 2023 largely due to moderate increases in pre-existing line utilization, while new home equity loan originations remain challenged due to the unfavorable high interest rate environment. Other consumer loans decreased $175.8 million to $1.1 billion at December 31, 2024 as compared to 2023 primarily due to the negative impact of high market interest rates on the demand and usage of collateralized personal lines of credit, however, the usage of collateralized personal lines of credit showed a slight increase during the fourth quarter 2024.

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

Looking forward to 2025, we continue to proactively diversify our loan portfolio by reducing new originations of certain types of commercial real estate lending, such as non-owner occupied and multifamily loans through highly selective new loan origination. We also intend to focus greater efforts on commercial and industrial loan products. For 2025, we expect an overall loan growth, net of continued runoff from scheduled maturities of commercial real estate non-owner occupied and multifamily loans, in the range of 3 to 5 percent based on total loans at December 31, 2024. However, there can be no assurance that we will achieve such levels given the potential for unforeseen changes in the market and other conditions detailed in our risk factors set forth under Item 1A. Risk Factors of this Report.

[[GREPCENT_TABLE]]
[["2024 Form 10-K","72"]]
[[/GREPCENT_TABLE]]

The following table presents the contractual maturity distribution of loans by category at December 31, 2024:

[[GREPCENT_TABLE]]
[["","1 Year or Less","","1 to 5 Years","","5 to 15 Years","","Over 15 Years","","Total"],["","(in thousands)"],["Commercial and industrial","$","2,208,501","","","$","4,638,823","","","$","2,793,268","","","$","290,808","","","$","9,931,400"],["Commercial real estate","3,117,541","","","10,527,207","","","10,348,661","","","2,536,816","","","26,530,225"],["Construction","1,270,952","","","1,212,507","","","403,598","","","227,676","","","3,114,733"],["Residential mortgage","16,893","","","229,038","","","435,125","","","4,951,460","","","5,632,516"],["Consumer","103,265","","","968,457","","","2,440,404","","","78,711","","","3,590,837"],["Total loans","$","6,717,152","","","$","17,576,032","","","$","16,421,056","","","$","8,085,471","","","$","48,799,711"]]
[[/GREPCENT_TABLE]]

We may renew loans at maturity when requested by a customer. In such instances, we generally conduct a review which includes an analysis of the borrower’s financial condition and, if applicable, a review of the adequacy of collateral via a new appraisal from an independent, bank approved, certified or licensed property appraiser or readily available market resources. A rollover of the loan at maturity may require a principal reduction or other modified terms.

The following table presents the contractual maturities after one year for fixed and adjustable rate loans within each loan category at December 31, 2024:

[[GREPCENT_TABLE]]
[["","Loans Maturing After One Year"],["","Fixed Rate","","Adjustable Rate","","Total"],["","(in thousands)"],["Commercial and industrial","$","2,847,150","","","$","4,875,749","","","$","7,722,899"],["Commercial real estate","12,359,346","","","11,053,338","","","23,412,684"],["Construction","274,189","","","1,569,592","","","1,843,781"],["Residential mortgage","4,372,803","","","1,242,820","","","5,615,623"],["Consumer","2,397,017","","","1,090,555","","","3,487,572"],["Total loans","$","22,250,505","","","$","19,832,054","","","$","42,082,559"]]
[[/GREPCENT_TABLE]]

Non-performing Assets

NPAs include non-accrual loans, OREO, and other repossessed assets (which consist of automobiles and taxi medallions) at December 31, 2024. Loans are generally placed on non-accrual status when they become past due in excess of 90 days as to payment of principal or interest and/or the full and timely collection of principal and interest becomes uncertain. 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 $79.9 million, or 27.2 percent, to $373.3 million at December 31, 2024 as compared to December 31, 2023 mainly due to higher non-accrual commercial and industrial and commercial real estate loan balances. NPAs as a percentage of total loans and NPAs totaled 0.76 percent and 0.58 percent at December 31, 2024 and 2023, respectively, (as shown in the table below). While our total NPAs have increased from one year ago due, in part, to a few larger commercial loan relationships in our New York market, we believe our total NPAs have remained relatively low as a percentage of the total loan portfolio and NPAs, which is reflective of our consistent approach to the loan underwriting criteria for both Valley originated loans and loans purchased from third parties. For additional details, see the “Credit quality indicators” section in Note 5 to the consolidated financial statements.

Our lending strategy is based on underwriting standards designed to maintain high credit quality, and we remain optimistic regarding the overall future performance of our loan portfolio. During the year ended December 31, 2024, the majority of our borrowers continued to demonstrate resilience despite the impact of higher borrowing costs, inflation, labor costs and other factors. We continue to proactively monitor our commercial loans for potential negative trends/borrower weakness due to the current operating environment and internally risk rate them accordingly. However, management cannot provide assurance that the non-performing assets will not increase from the levels reported at December 31, 2024 due to the aforementioned or other factors potentially impacting our lending customers.

[[GREPCENT_TABLE]]
[["","73","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

The following table sets forth by loan category, accruing past due and non-performing assets on the dates indicated in conjunction with our asset quality ratios at December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","2024","","2023"],["","($ in thousands)"],["Accruing past due loans"],["30 to 59 days past due:"],["Commercial and industrial","$","2,389","","","$","9,307"],["Commercial real estate","20,902","","","3,008"],["Residential mortgage","21,295","","","26,345"],["Total consumer","12,552","","","20,554"],["Total 30 to 59 days past due","57,138","","","59,214"],["60 to 89 days past due:"],["Commercial and industrial","1,007","","","5,095"],["Commercial real estate","24,903","","","1,257"],["Residential mortgage","5,773","","","8,200"],["Total consumer","4,484","","","4,715"],["Total 60 to 89 days past due","36,167","","","19,267"],["90 or more days past due:"],["Commercial and industrial","1,307","","","5,579"],["Construction","\u2014","","","3,990"],["Residential mortgage","3,533","","","2,488"],["Total consumer","1,049","","","1,088"],["Total 90 or more days past due","5,889","","","13,145"],["Total accruing past due loans","$","99,194","","","$","91,626"],["Non-accrual loans:"],["Commercial and industrial","$","136,675","","","$","99,912"],["Commercial real estate","157,231","","","99,739"],["Construction","24,591","","","60,851"],["Residential mortgage","36,786","","","26,986"],["Total consumer","4,215","","","4,383"],["Total non-accrual loans","359,498","","","291,871"],["Other real estate owned (OREO)","12,150","","","71"],["Other repossessed assets","1,681","","","1,444"],["Total non-performing assets (NPAs)","$","373,329","","","$","293,386"],["Total non-accrual loans as a % of loans","0.74","%","","0.58","%"],["Total NPAs as a % of loans and NPAs","0.76","","","0.58"],["Total accruing past due and non-accrual loans as a % of loans","0.94","","","0.76"],["Allowance for loan losses as a % of non-accrual loans","155.45","","","152.83"]]
[[/GREPCENT_TABLE]]

Loans past due 30 to 59 days decreased $2.1 million to $57.1 million at December 31, 2024 as compared to December 31, 2023 due to declines in most loan categories, except for an increase in commercial real estate loans which was largely driven by a $15.1 million loan included in this early stage delinquency category at December 31, 2024. While this commercial real estate loan is internally classified as substandard, management believes it is well secured and in the process of collection.

Loans past due 60 to 89 days increased $16.9 million to $36.2 million at December 31, 2024 as compared to December 31, 2023 due to higher commercial real estate loan delinquencies, partially offset by decreases in all other loan types within this delinquency category. Commercial real estate loan delinquencies included an $18.6 million matured performing loan in the process of its renewal.

Loans 90 days or more past due and still accruing decreased $7.3 million to $5.9 million at December 31, 2024 as compared to December 31, 2023 largely due to the full repayment of a $4.0 million construction loan that was included in this

[[GREPCENT_TABLE]]
[["2024 Form 10-K","74"]]
[[/GREPCENT_TABLE]]

delinquency category at December 31, 2023, as well as a decline in commercial and industrial loan delinquencies within this category. All the loans past due 90 days or more and still accruing are considered to be well secured and in the process of collection.

Non-accrual loans increased $67.6 million to $359.5 million at December 31, 2024 as compared to December 31, 2023. Non-accrual commercial and industrial loans increased $36.8 million at December 31, 2024 as compared to December 31, 2023 mainly due to a few additional large non-performing loan relationships, including one matured substandard loan totaling $19.6 million with specific reserves of $2.5 million within our allowance for loan losses at December 31, 2024. Non-accrual commercial real estate loans increased $57.5 million at December 31, 2024 as compared to December 31, 2023 driven by additional non-performing loan relationships, including two loan relationships totaling $38.3 million included in this category at December 31, 2024. Non-accrual construction loans decreased $36.3 million to $24.6 million at December 31, 2024 compared to December 31, 2023 mainly due to full repayments and partial loan charge-offs totaling $23.8 million and $12.2 million, respectively, related to three loan relationships.

Non-performing taxi medallion loans included in non-accrual commercial and industrial loans totaled $49.5 million at December 31, 2024 and had related reserves of $25.8 million, or 52.1 percent of such loans, within the allowance for loan losses as compared to $63.3 million of loans with related reserves of $37.7 million at December 31, 2023. During 2024, we closely monitored the performance of our taxi medallion loans (primarily collateralized by New York City medallions). Due to the challenging operating environment for ride services and uncertain borrower performance, all of the taxi medallion loans remain on non-accrual status at December 31, 2024. Further potential 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 totaled $12.2 million at December 31, 2024 as compared to $71 thousand at December 31, 2023. The December 31, 2024 balance is primarily comprised of two commercial real estate properties transferred to OREO during 2024. Sales of OREO properties and the related gains or losses were not material for the years ended December 31, 2024 and 2023. The foreclosed residential real estate properties included in OREO totaled $152 thousand and $71 thousand at December 31, 2024 and 2023, respectively. See Notes 1 and 3 to the consolidated financial statements for additional information regarding OREO.

Although the timing of collection is uncertain, management believes that the majority of the non-accrual loans at December 31, 2024, 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 the net realizable value for collateral dependent loans is charged-off when a loan is 90 or 120 days past due or sooner if it is probable that a loan may not be fully collectible. If interest on non-accrual loans had been accrued in accordance with the original contractual terms, such interest income would have amounted to approximately $32.5 million, $28.8 million and $21.7 million for the years ended December 31, 2024, 2023 and 2022, respectively; none of these amounts were included in interest income during these periods.

Asset Concentration and Risk Elements

Most of our lending is within our primary markets located in northern and central New Jersey, New York City, Long Island, Westchester County, New York and Florida, and, to a lesser extent, Alabama, California and Illinois. As part of our business strategy, we have provided commercial lending to new customers in a few targeted states beyond our geographic footprint. In addition to our primary markets, automobile loans are mostly originated in several other contiguous states. 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. Due to the level of our underwriting standards applied to all loans, management believes the out of market loans generally present no more risk than those made within the market. However, each loan or group of loans made outside of our primary markets poses different geographic risks based upon the economy of that particular region.

For our commercial loan portfolio, comprised of commercial and industrial loans, commercial real estate loans, and construction loans, a separate credit department is responsible for risk assessment and periodically evaluating overall creditworthiness of a borrower. Additionally, efforts are made to limit concentrations of credit to minimize the impact of a downturn in any one economic sector. We believe our loan portfolio is diversified as to type of borrower and loan. However, loans collateralized by either commercial or residential real estate represented approximately 73 percent of total loans at December 31, 2024. Most of the loans collateralized by real estate are in New Jersey, New York and Florida presenting a geographical credit risk if there was significant broad-based deterioration in economic conditions within these regions. See Item 1A. Risk Factors—“Risks Related to the Operating Environment.”

Additionally, our commercial real estate portfolio includes credit risk exposures to loans collateralized by office buildings and multifamily properties in Manhattan and other markets. At December 31, 2024, total commercial real estate loans

[[GREPCENT_TABLE]]
[["","75","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

collateralized by office buildings were approximately $3.1 billion (including approximately $218.1 million located in Manhattan) of the total $26.5 billion portfolio. The majority of the office space loans are multi-tenant and dispersed geographically in Florida, Alabama, New Jersey and New York. Multifamily loans within the portfolio totaled $8.3 billion at December 31, 2024, and included $553 million of loans exposures to greater than 50 percent rent regulated buildings located mainly in Manhattan. We continue to closely monitor these loan types for elevated risks or weaknesses, and internally risk rate and reserve for them in our allowance for loan losses accordingly.

Consumer loans are comprised of residential mortgage loans, home equity loans, automobile loans and other consumer loans. Residential mortgage loans are secured by 1-4 family properties mostly located in New Jersey, New York and Florida. We do provide mortgage loans secured by homes beyond this primary geographic area; however, lending outside this primary area has generally consisted of loans made in support of existing customer relationships, as well as targeted purchases of certain loans guaranteed by third parties. Our mortgage loan originations are comprised of both jumbo (i.e., loans with balances above conventional conforming loan limits) and conventional loans based on underwriting standards that generally comply with Fannie Mae and/or Freddie Mac requirements. The weighted average loan-to-value ratio of all residential mortgage originations in 2024 was 73.5 percent while FICO® (independent objective criteria measuring the creditworthiness of a borrower) scores averaged 758. Home equity and automobile loans are secured loans and are made based on an evaluation of the collateral and the borrower’s creditworthiness.

Management realizes that some degree of risk must be expected in the normal course of lending activities. Allowances are maintained to absorb such lifetime expected credit losses inherent in the portfolio. See the “Loan Portfolio Risk Elements and Credit Risk Management” section in Note 5 to the consolidated financial statements for additional information.

Allowance for Credit Losses

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

Valley estimates the collective ACL using a current expected credit losses methodology which is based on relevant information about historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the loan balances. In estimating the component of the allowance on a collective basis, we use a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by using probability of default and loss given default metrics. The probability of default and loss given default metrics are adjusted using a scaling factor to incorporate a full economic cycle.

The expected life of loan loss percentages are determined by analyzing 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 data for each loan portfolio pool, and by assessing the severity of loss based on the aggregate net lifetime losses incurred. The expected credit 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 economic variables under each scenario 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 transition matrix 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 on a straight-line basis for the remaining life of the loan. The forecast consists of multi-scenario economic forecasts to estimate future credit losses and are governed by a cross-functional committee. The committee meets each quarter to determine which economic scenarios developed by Moody's will be incorporated into the model, as well as the relative probability weightings of the selected scenarios, based upon all readily available information. The model projects economic variables under each scenario based on detailed statistical analyses. We have identified and selected key variables that most closely correlated to our historical credit performance, which include GDP, unemployment and the Case-Shiller Home Price Index.

[[GREPCENT_TABLE]]
[["2024 Form 10-K","76"]]
[[/GREPCENT_TABLE]]

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

At December 31, 2024, the Moody's Baseline forecast included the following specific assumptions:

•GDP expansion by about 2.2 percent in the first quarter 2025;

•Unemployment of 4.1 percent in the first quarter 2025 and over the remainder of the forecast period ending in the fourth quarter 2026;

•The Federal Reserve range was 4.25 - 4.50 percent with two possible cuts totaling 0.25 percent in 2025; and

•Inflation was at 2.9 percent in the fourth quarter 2024 driven by elevated shelter inflation. The inflation rate is expected to continue decreasing to reach the target rate of 2 percent around 2027.

The allowance for credit losses for loans methodology and accounting policy are fully described in Note 1 to the consolidated financial statements.

The following table summarizes the relationship among loans, loans charged-off, loan recoveries, the provision for credit losses and the allowance for credit losses for the years ended December 31, 2024, 2023 and 2022:

[[GREPCENT_TABLE]]
[["","2024","","2023","","2022"],["Allowance for credit losses for loans","($ in thousands)"],["Beginning balance","$","465,550","","$","483,255","","$","375,702"],["Impact of the adoption of ASU No. 2022-02 (1)","\u2014","","(1,368)","","\u2014"],["Allowance for purchased credit deteriorated (PCD) loans (2)","\u2014","","\u2014","","70,319"],["Beginning balance, adjusted","465,550","","481,887","","446,021"],["Loans charged-off:"],["Commercial and industrial","(68,299)","","(48,015)","","(33,250)"],["Commercial real estate","(125,858)","","(11,134)","","(4,561)"],["Construction","(12,637)","","(11,812)","","\u2014"],["Residential mortgage","(29)","","(194)","","(28)"],["Total Consumer","(8,289)","","(4,298)","","(4,057)"],["Total loan charge-offs","(215,112)","","(75,453)","","(41,896)"],["Charged-off loans recovered:"],["Commercial and industrial","6,038","","11,270","","17,081"],["Commercial real estate","3,595","","34","","2,073"],["Construction","1,535","","\u2014","","\u2014"],["Residential mortgage","140","","201","","711"],["Total Consumer","2,194","","1,986","","2,929"],["Total loans recovered","13,502","","13,491","","22,794"],["Total net loan charge-offs","(201,610)","","(61,962)","","(19,102)"],["Provision for credit losses for loans","309,388","","45,625","","56,336"],["Ending balance","$","573,328","","$","465,550","","$","483,255"],["Components of allowance for credit losses for loans:"],["Allowance for loan losses","$","558,850","","$","446,080","","$","458,655"],["Allowance for unfunded credit commitments","14,478","","19,470","","24,600"],["Allowance for credit losses for loans","$","573,328","","$","465,550","","$","483,255"],["Components of provision for credit losses for loans:"],["Provision for credit losses for loans","$","314,380","","$","50,755","","$","48,236"],["(Credit) provision for unfunded credit commitments","(4,992)","","(5,130)","","8,100"],["Total provision for credit losses for loans","$","309,388","","$","45,625","","$","56,336"],["Allowance for credit losses for loans as a % of total loans","1.17","%","","0.93","%","","1.03","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","77","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(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. For 2022, the allowance for acquired PCD loans is net of PCD loan charge-offs totaling $62.4 million in the second quarter 2022."]]
[[/GREPCENT_TABLE]]

The following table presents the relationship among net loans charged-off and recoveries, and average loan balances outstanding for the years ended December 31, 2024, 2023 and 2022:

[[GREPCENT_TABLE]]
[["","2024","","2023","","2022"],["","($ in thousands)"],["Net loan (charge-offs) recoveries"],["Commercial and industrial","$","(62,261)","","$","(36,745)","","$","(16,169)"],["Commercial real estate","(122,263)","","(11,100)","","(2,488)"],["Construction","(11,102)","","(11,812)","","\u2014"],["Residential mortgage","111","","7","","683"],["Total consumer","(6,095)","","(2,312)","","(1,128)"],["Total","$","(201,610)","","$","(61,962)","","$","(19,102)"],["Average loans outstanding"],["Commercial and industrial","$","9,448,128","","$","8,999,783","","$","7,691,496"],["Commercial real estate","27,838,032","","27,610,042","","23,127,504"],["Construction","3,642,785","","3,849,473","","2,977,688"],["Residential mortgage","5,642,067","","5,498,563","","4,899,854"],["Total consumer","3,459,574","","3,394,000","","3,233,811"],["Total","$","50,030,586","","$","49,351,861","","$","41,930,353"],["Net loan charge-offs (recoveries) to average loans outstanding"],["Commercial and industrial","0.66%","","0.41%","","0.21%"],["Commercial real estate","0.44","","0.04","","0.01"],["Construction","0.30","","0.31","","0.00"],["Residential mortgage","0.00","","0.00","","(0.01)"],["Total consumer","0.18","","0.07","","0.03"],["Total net loan charge-offs to total average loans outstanding","0.40","","0.13","","0.05"]]
[[/GREPCENT_TABLE]]

Net loan charge-offs increased $139.6 million to $201.6 million in 2024 as compared to $62.0 million in 2023 primarily due to higher gross loan charge-offs within commercial loan categories.

Gross commercial and industrial loan charge-offs totaling $68.3 million for the year ended December 31, 2024 included (i) partial charge-offs totaling $9.5 million related to one non-performing taxi medallion loan relationship that was fully reserved for in our allowance for loan losses (ii) an $11.0 million of partial loan charge-offs related to one commercial and industrial loan (with prior reserves within the allowance for loan losses totaling $8.0 million, and (iii) a few larger partial loan charge-offs. Gross commercial real estate loan charge-offs totaling $125.9 million for the year ended December 31, 2024 included (i) full charge-off of $54.1 million non-performing loan relationship, (ii) partial charge-offs of $20.6 million related to a single non-performing commercial real estate loan relationship and (iii) a few larger partial loan charge-offs that had combined specific reserves of $25.9 million within the allowance for loan losses. Gross construction loan charge-offs totaling $12.6 million for the year ended December 31, 2024 included partial charge-offs of four construction loans with total allocated specific reserves of $4.9 million.

While elevated as compared with the low levels of net charge-offs experienced in 2023 and 2022, the overall level of net loan charge-offs (as presented in the above table) for the year ended December 31, 2024 continued to largely trend within management's expectations for the credit quality of the loan portfolio during 2024.

[[GREPCENT_TABLE]]
[["2024 Form 10-K","78"]]
[[/GREPCENT_TABLE]]

The following table summarizes the allocation of the allowance for credit losses to specific loan portfolio categories at December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","2024","","2023"],["","Allowance Allocation","","Percent of Loan Category to Total Loans","","Allowance Allocation","","Percent of Loan Category to Total Loans"],["","($ in thousands)"],["Loan Category:"],["Commercial and industrial","$","173,002","","","20.4","%","","$","133,359","","","18.4","%"],["Commercial real estate:"],["Commercial real estate","251,351","","","54.4","","","194,820","","","56.2"],["Construction","52,797","","","6.3","","","54,778","","","7.4"],["Total commercial real estate","304,148","","","60.7","","","249,598","","","63.6"],["Residential mortgage","58,895","","","11.5","","","42,957","","","11.1"],["Total consumer","22,805","","","7.4","","","20,166","","","6.9"],["Total allowance for loan losses","558,850","","","100.0","%","","446,080","","","100.0","%"],["Allowance for unfunded credit commitments","14,478","","","","","19,470"],["Total allowance for credit losses for loans","$","573,328","","","","","$","465,550"]]
[[/GREPCENT_TABLE]]

The allowance for credit losses for loans, comprised of our allowance for loan losses and unfunded credit commitments (including letters of credit), as a percentage of total loans was 1.17 percent at December 31, 2024 and 0.93 percent at December 31, 2023. The allowance for credit losses for loans increased $107.8 million at December 31, 2024 as compared to December 31, 2023.

The provision for credit losses for loans totaled $309.4 million and $45.6 million for the year ended December 31, 2024 and 2023, respectively. The increase in the 2024 provision was mainly due to: (i) higher quantitative reserves related to criticized and classified loans within the commercial real estate, (ii) commercial and industrial loan growth, (iii) additional specific reserves and charge-offs associated with the revaluation of collateral dependent commercial loans (iv) the impact of loan charge-offs, was partially offset by lower economic forecast and other qualitative reserves.

As of December 31, 2024, the credit quality of our Florida loan portfolio has also remained resilient in the aftermath of Hurricanes Helene and Milton, which hit Florida in September and October 2024, respectively. At this time, there have been relatively few loan concessions (mostly in the form of loan payment deferrals up to 90 days) for distressed borrowers impacted by the hurricanes. At December 31, 2024, the hurricanes did not have a significant impact on the level of reserves or expected loan charge-offs within our allowance for loan losses. As a result, our provision for loan losses for the fourth quarter 2024 was net of an $8.0 million release of qualitative reserves for estimated losses related to the hurricanes in our allowance at September 30, 2024.

We expect our provision for credit losses to decrease from the elevated level experienced in 2024 and increasingly normalize throughout 2025. However, there can be no assurance that we will achieve lower provision levels due to several other factors, including, but not limited to, the impact of future changes in the overall performance of our loan portfolio, potential downgrades in the internal risk classification of commercial loans and the composition of our loan portfolio, including targeted growth in loan categories not secured by real estate such as commercial and industrial loans.

See Note 5 to the consolidated financial statements for additional information regarding our allowance for credit losses for loans.

Loan Repurchase Contingencies

We engage in the origination of residential mortgages for sale into the secondary market. Our sales of residential mortgage loans originated for sale totaled approximately $203.8 million, $202.5 million and $385.5 million for 2024, 2023 and 2022, respectively. The level of loan sales is impacted by several factors, including consumer demand and preferences for certain mortgage products and our management of the interest rate risk and the mix of the interest earning assets on our balance sheet. Residential mortgage loan sales during the last three years were significantly lower than 2021 largely due to a reduction in our conforming new and refinanced loan originations caused by the higher level of mortgage interest rates and reduced consumer demand.

[[GREPCENT_TABLE]]
[["","79","2024 Form 10-K"]]
[[/GREPCENT_TABLE]]

In connection with our loan sales, including both residential mortgage loans originated for sale and less frequent transfers and sales from our loans held for investment portfolio, we make representations and warranties, which, if breached, may require us to repurchase such loans, substitute other loans or indemnify the purchasers of such loans for actual losses incurred due to such loans. However, the performance of our loans sold has been historically strong due to our strict underwriting standards and procedures. Over the past several years, we have experienced a nominal amount of repurchase requests, only a few of which have actually resulted in repurchases by Valley (there were no loan repurchases in 2024 and only three loan repurchases in 2023). None of the loan repurchases resulted in material loss. Accordingly, no reserves pertaining to loans sold were established on our consolidated financial statements at December 31, 2024 and 2023. See Item 1A. Risk Factors —“We may incur future losses in connection with repurchases and indemnification payments related to mortgages that we have sold into the secondary market” for additional information.

Capital Adequacy

A significant measure of the strength of a financial institution is its shareholders’ equity. At December 31, 2024 and 2023, shareholders’ equity totaled approximately $7.4 billion and $6.7 billion, or 11.9 percent and 11.0 percent of total assets, respectively.

During 2024, total shareholders’ equity increased by $733.7 million, primarily due to the following:

•net proceeds from the issuance of common stock totaling $448.9 million,

•net income of $380.3 million,

•net proceeds from the issuance of Series C preferred stock of $144.7 million, and

•a $22.4 million increase attributable to the effect of share issuances under our stock incentive plan.

These positive changes were partially offset by:

•cash dividends declared on common and preferred stock totaling a combined $253.6 million, and

•other comprehensive loss of $8.9 million.

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

The following table presents the capital guidelines and actual ratios applicable to Valley as of December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","","","","","","","","Actual Ratio"],["","","Minimum Ratio","","Minimum Ratio plus Capital Conservation Buffer","","","","2024","","2023"],["Total Risk-based Capital","","8.0","%","","10.5","%","","","","13.87","%","","11.76","%"],["Common Equity Tier 1 Capital","","4.5","","","7.0","","","","","10.82","","","9.29"],["Tier 1 Risk-based Capital","","6.0","","","8.5","","","","","11.55","","","9.72"],["Tier 1 Leverage Capital","","4.0","","","N/A","","","","9.16","","","8.16"]]
[[/GREPCENT_TABLE]]

As of December 31, 2024 and 2023, Valley and the Bank exceeded all capital adequacy requirements. See Note 17 to the consolidated financial statements for Valley’s and the Bank’s regulatory capital positions and capital ratios.

The increases in the total risk-based capital, common equity Tier 1 capital, and Tier 1 capital ratios at December 31, 2024 as compared to December 31, 2023 were largely due to several factors, including (1) the net proceeds from Valley's issuances of common stock and Series C preferred stock during the third and fourth quarter 2024, respectively, (2) a credit risk transfer transaction executed in the second quarter 2024 related to a portion of the automobile loan portfolio and (3) our sales of commercial real estate and construction loans during 2024. See Notes 5, 15 and 18 to the consolidated financial statements for more details on loan sales, the credit risk transfer transaction and the common and preferred stock issuances, respectively.

For regulatory capital purposes, in accordance with the Federal Reserve’s final rule issued on August 26, 2020, we deferred 100 percent of the CECL Day 1 impact to shareholders' equity plus 25 percent of the reserve build (i.e., provision for credit losses less net charge-offs) for a two-year period ending January 1, 2022. On January 1, 2022, the deferral amount totaling $47.3 million after-tax started to be phased-in by 25 percent and will increase 25 percent per year until fully phased-in on January 1, 2025. As of December 31, 2024, approximately $35.5 million of the $47.3 million deferral amount was recognized as a reduction to regulatory capital and, as a result, decreased our risk-based capital ratios by approximately 9 basis

[[GREPCENT_TABLE]]
[["2024 Form 10-K","80"]]
[[/GREPCENT_TABLE]]

points. The full deferral amount of $47.3 million was phased-in on January 1, 2025 and expected to result in an additional 3 basis point reduction in our risk-based capital ratios during the first quarter 2025.

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 36.2 percent and 53.7 percent for the years ended December 31, 2024 and 2023, respectively. The decline in the retention ratio for 2024 was largely due to the significant increase in our provision for credit losses and the resulting decline in our level of earnings before dividends as compared to the year ended December 31, 2023.

Cash dividends declared amounted to $0.44 per common share for both years ended December 31, 2024 and 2023. The Board is committed to examining and weighing relevant facts and considerations, including its commitment to shareholder value, each time it makes a cash dividend decision. The Federal Reserve has cautioned all bank holding companies about distributing dividends which may reduce the level of capital or not allow capital to grow considering the increased capital levels required under the Basel III rules. Prior to the date of this filing, Valley has received no objection or adverse guidance from the Federal Reserve or the OCC regarding the current level of its quarterly common stock dividend. However, the Federal Reserve has reiterated its long-standing guidance in recent years that banking organizations should consult them before declaring dividends in excess of earnings for the corresponding quarter.

We may from time to time offer and sell in one or more offerings, individually or in any combination, our common stock, preferred stock and other non-equity securities in order to pursue growth opportunities that may become available in the future and comply with any changes in the regulatory environment that call for increased capital requirements. Valley’s ability, and any decision to issue and sell securities, is subject to market conditions and Valley’s capital needs at such time. Additional equity offerings may dilute the holdings of our existing shareholders or reduce the market price of our common stock, or both. Such offerings may be necessary in the future due to several reasons beyond management’s control, including numerous external factors that could negatively impact the strength of the U.S. economy or our ability to maintain or increase the level of our net income. See Note 18 to the consolidated financial statements for additional information on Valley’s common and preferred stock, including new issuances during 2024.