Valley National Bancorp(VLY) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Valley National Bancorp's unaudited consolidated financial statements for the quarter ended March 31, 2023, including the statements of financial condition, income, comprehensive income, changes in shareholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial instrument details Consolidated Statements of Financial Condition Consolidated Statements of Financial Condition (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Assets | | | | Total Assets | $64,309,573 | $57,462,749 | | Interest bearing deposits with banks | $5,260,998 | $503,622 | | Net loans | $48,223,068 | $46,458,545 | | Liabilities | | | | Total Liabilities | $57,797,992 | $51,061,947 | | Total deposits | $47,590,916 | $47,636,914 | | Short-term borrowings | $6,413,056 | $138,729 | | Long-term borrowings | $2,197,656 | $1,543,058 | | Shareholders' Equity | | | | Total Shareholders' Equity | $6,511,581 | $6,400,802 | - Total Assets increased by $6.8 billion (11.9%) from December 31, 2022, to March 31, 2023, primarily driven by a significant increase in interest-bearing deposits with banks and net loans[10] - Short-term borrowings saw a substantial increase from $138.7 million to $6.4 billion, reflecting increased liquidity measures[10] Consolidated Statements of Income Consolidated Statements of Income (in thousands, except per share data) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Total interest income | $720,230 | $340,458 | | Total interest expense | $284,210 | $22,789 | | Net Interest Income | $436,020 | $317,669 | | Provision for credit losses for available for sale and held to maturity securities | $4,987 | $57 | | Provision for credit losses for loans | $9,450 | $3,500 | | Total non-interest income | $54,299 | $39,270 | | Total non-interest expense | $272,166 | $197,340 | | Net Income | $146,551 | $116,728 | | Net Income Available to Common Shareholders | $142,677 | $113,556 | | Basic Earnings Per Common Share | $0.28 | $0.27 | | Diluted Earnings Per Common Share | $0.28 | $0.27 | - Net income increased by $29.8 million (25.5%) year-over-year, primarily driven by a significant increase in net interest income[12] - Total interest income more than doubled, increasing by $379.8 million, while total interest expense increased substantially by $261.4 million, reflecting the rising interest rate environment[12] Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income (in thousands) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income | $146,551 | $116,728 | | Other comprehensive income (loss), net of tax | $20,355 | $(38,166) | | Total comprehensive income | $166,906 | $78,562 | - Total comprehensive income significantly increased from $78.6 million in Q1 2022 to $166.9 million in Q1 2023, largely due to a positive shift in other comprehensive income from a loss of $38.2 million to a gain of $20.4 million[13] Consolidated Statements of Changes in Shareholders' Equity Consolidated Statements of Changes in Shareholders' Equity (in thousands) | Item | Balance - December 31, 2022 | Balance - March 31, 2023 | | :------------------------------------------ | :-------------------------- | :----------------------- | | Total Shareholders' Equity | $6,400,802 | $6,511,581 | | Net income | — | $146,551 | | Other comprehensive income, net of tax | — | $20,355 | | Cash dividends declared (Preferred & Common) | — | $(60,362) | | Effect of stock incentive plan, net | — | $(505) | | Common stock issued | — | $3,750 | - Total Shareholders' Equity increased by $110.8 million from December 31, 2022, to March 31, 2023, primarily driven by net income and other comprehensive income, partially offset by cash dividends[15] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(269,682) | $496,003 | | Net cash used in investing activities | $(1,784,558) | $(1,585,293) | | Net cash provided by (used in) financing activities | $6,811,981 | $(229,710) | | Net change in cash and cash equivalents | $4,757,741 | $(1,319,000) | | Cash and cash equivalents at end of period | $5,705,688 | $730,920 | - A significant shift occurred in cash flows from financing activities, moving from a net use of $229.7 million in Q1 2022 to a net provision of $6.8 billion in Q1 2023, primarily due to a large increase in short-term borrowings[20] - Net cash used in operating activities was $(269.7) million in Q1 2023, a substantial decrease from $496.0 million provided in Q1 2022[18] Notes to Consolidated Financial Statements Note 1. Basis of Presentation - The unaudited consolidated financial statements conform to U.S. GAAP and include Valley National Bank and all controlled entities, with inter-company transactions eliminated[23] - Management's estimates, particularly for allowance for credit losses, goodwill, other intangible assets, and income taxes, are susceptible to change and reviewed periodically[26] Note 2. Business Combinations - On April 1, 2022, Valley completed the acquisition of Bank Leumi Le-Israel Corporation (Bank Leumi USA) for $1.2 billion, issuing approximately 85 million common shares and paying $113.4 million in cash[27] Bank Leumi USA Acquisition: Assets Acquired and Liabilities Assumed (in thousands) | Item | April 1, 2022 | | :-------------------------------- | :------------ | | Total assets acquired | $8,562,013 | | Total liabilities assumed | $7,330,743 | | Common stock issued in acquisition | $1,117,829 | | Cash paid in acquisition | $113,441 | - Merger expenses totaled $4.1 million and $4.4 million for the three months ended March 31, 2023 and 2022, respectively[28] Note 3. Earnings Per Common Share Earnings Per Common Share (in thousands, except per share data) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income available to common shareholders | $142,677 | $113,556 | | Basic weighted average number of common shares outstanding | 507,111,295 | 421,573,84