VALLEY NATIONAL(VLYPP) - 2025 Q1 - Quarterly Report

FORM 10-Q TABLE OF CONTENTS Glossary of Defined Terms PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Valley National Bancorp's unaudited consolidated financial statements, including financial condition, income, comprehensive income, equity changes, and cash flows, for the quarter ended March 31, 2025 Consolidated Statements of Financial Condition | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | :-------------------- | | Total Assets | $61,865,655 | $62,491,691 | $(626,036) | | Total Liabilities | $54,365,758 | $55,056,564 | $(690,806) | | Total Shareholders' Equity | $7,499,897 | $7,435,127 | $64,770 | | Total Deposits | $49,965,844 | $50,075,857 | $(110,013) | | Net Loans | $48,078,928 | $48,240,861 | $(161,933) | Consolidated Statements of Income | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | | Net Income | $106,058 | $96,280 | $9,778 | | Net Interest Income | $420,105 | $393,548 | $26,557 | | Provision for Credit Losses for Loans | $62,675 | $45,274 | $17,401 | | Total Non-Interest Income | $58,294 | $61,415 | $(3,121) | | Total Non-Interest Expense | $276,618 | $280,310 | $(3,692) | | Basic Earnings Per Common Share | $0.18 | $0.18 | $0.00 | | Diluted Earnings Per Common Share | $0.18 | $0.18 | $0.00 | Consolidated Statements of Comprehensive Income | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | | Net income | $106,058 | $96,280 | $9,778 | | Unrealized gains and losses on AFS securities (Net gains (losses) arising during the period) | $27,212 | $(10,205) | $37,417 | | Total other comprehensive income (loss) | $27,082 | $(10,392) | $37,474 | | Total comprehensive income | $133,140 | $85,888 | $47,252 | Consolidated Statements of Changes in Shareholders' Equity | Item | Three Months Ended March 31, 2025 (in thousands) | | :------------------------------------ | :----------------------------------------------- | | Balance - December 31, 2024 | $7,435,127 | | Net income | $106,058 | | Other comprehensive income, net of tax | $27,082 | | Cash dividends declared: Preferred stock | $(6,956) | | Cash dividends declared: Common stock | $(62,460) | | Effect of stock incentive plan, net | $3,208 | | Purchase of treasury stock | $(2,162) | | Balance - March 31, 2025 | $7,499,897 | Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | | Net cash (used in) provided by operating activities | $(17,122) | $99,511 | $(116,633) | | Net cash (used in) provided by investing activities | $(175,310) | $91,985 | $(267,295) | | Net cash used in financing activities | $(473,996) | $(141,888) | $(332,108) | | Net change in cash and cash equivalents | $(666,428) | $49,608 | $(716,036) | | Cash and cash equivalents at end of period | $1,223,697 | $940,833 | $282,864 | Notes to Consolidated Financial Statements This section provides detailed disclosures for consolidated financial statements, covering accounting policies, estimates, fair value, investments, loans, credit losses, and operating segments Note 1. Basis of Presentation - The unaudited consolidated financial statements conform to GAAP and include Valley National Bank and all other entities in which Valley has a controlling financial interest[25] - Management's material estimates, such as the allowance for credit losses, goodwill, and income taxes, are subject to significant judgment and potential change, with actual results possibly differing from estimates[28] Note 2. Earnings Per Common Share | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income available to common shareholders | $99,103 thousand | $92,161 thousand | | Basic weighted average number of common shares outstanding | 559,613,272 | 508,340,719 | | Diluted weighted average number of common shares outstanding | 563,305,525 | 510,633,945 | | Basic Earnings Per Common Share | $0.18 | $0.18 | | Diluted Earnings Per Common Share | $0.18 | $0.18 | Note 3. Accumulated Other Comprehensive Loss | Component | December 31, 2024 (in thousands) | March 31, 2025 (in thousands) | Change (in thousands) | | :------------------------------------------ | :------------------------------- | :---------------------------- | :-------------------- | | Unrealized Gains and Losses on AFS Securities | $(133,898) | $(106,686) | $27,212 | | Unrealized Gains and Losses on Derivatives | $1,245 | $1,027 | $(218) | | Defined Benefit Pension and Postretirement Benefit Plans | $(22,681) | $(22,593) | $88 | | Total Accumulated Other Comprehensive Loss | $(155,334) | $(128,252) | $27,082 | - Net other comprehensive income (loss) for the three months ended March 31, 2025, was $27,082 thousand, a significant improvement compared to a loss of $(10,392) thousand for the same period in 2024[31] Note 4. New Authoritative Accounting Guidance - ASU No. 2024-03 requires disaggregation of certain income statement expenses in footnotes, with an amended effective date for public business entities for annual periods beginning after December 15, 2026[32] - Valley is currently evaluating the impact of ASU No. 2024-03 on its consolidated financial statements[32] Note 5. Fair Value Measurement of Assets and Liabilities This note details the fair value hierarchy (Level 1, 2, 3) for assets and liabilities, distinguishing recurring and non-recurring measurements and valuation techniques Assets and Liabilities Measured at Fair Value on a Recurring and Non-Recurring Basis | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :------------------------------ | :------------------------------- | | Total recurring fair value assets | $4,028,268 | $3,865,560 | | Total recurring fair value liabilities | $332,888 | $454,200 | | Total non-recurring fair value measurements | $110,191 | $162,026 | Assets and Liabilities Measured at Fair Value on a Recurring Basis - Equity securities and U.S. Treasury securities are reported at fair value utilizing Level 1 inputs (unadjusted exchange quoted prices in active markets)[40][42] - The majority of other available for sale debt securities, residential mortgage loans held for sale, and derivatives are reported at fair value utilizing Level 2 inputs (quoted prices in inactive markets or observable inputs)[42][43][44] Assets and Liabilities Measured at Fair Value on a Non-recurring Basis - Non-performing commercial real estate loans held for sale are valued using Level 2 inputs, based on bids from third-party brokers[46][47] - Collateral dependent loans are reported at the fair value of the underlying collateral, estimated using Level 3 inputs (individual third-party appraisals, potentially adjusted)[48] - Foreclosed assets are re-measured and reported at fair value using Level 3 inputs, consisting of a third-party appraisal less estimated cost to sell[49] Other Fair Value Disclosures - Fair value estimates are based on pertinent market data and relevant information, but do not reflect any premium or discount from selling the entire portfolio or the value of non-financial instruments[51][52] | Financial Instrument | March 31, 2025 Carrying Amount (in thousands) | March 31, 2025 Fair Value (in thousands) | | :--------------------------------- | :------------------------------------------ | :--------------------------------------- | | Net loans | $48,078,928 | $46,833,553 | Note 6. Investment Securities This note details the composition, fair value, unrealized gains/losses, and credit quality of Valley's equity, AFS, and HTM debt securities portfolios Equity Securities | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------- | :------------------------------ | :------------------------------- | | Equity securities | $74,425 | $71,513 | Available for Sale Debt Securities | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Fair Value | $3,658,704 | $3,369,724 | | Gross Unrealized Gains | $16,574 | $4,063 | | Gross Unrealized Losses | $(162,030) | $(186,612) | - The declines in fair value for AFS debt securities are mainly attributable to interest rates, credit spreads, market volatility, and liquidity conditions, not credit quality[64] - No impairment was recognized for AFS debt securities in Q1 2025 or Q1 2024, as Valley does not intend to sell them prior to recovery of their amortized cost basis[64][65] Held to Maturity Debt Securities | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Net Carrying Value | $3,545,328 | $3,531,573 | | Gross Unrealized Gains | $5,057 | $2,107 | | Gross Unrealized Losses | $(453,384) | $(506,043) | | Allowance for Credit Losses | $633 | $647 | - The majority of obligations of states and political subdivisions were rated investment grade, and residential mortgage-backed securities were AAA/AA/A rated at March 31, 2025[74][264] - Valley has a zero-loss expectation for certain HTM securities, including U.S. Treasury, U.S. government agency, and Ginnie Mae/Fannie Mae/Freddie Mac residential mortgage-backed securities[75] Note 7. Loans and Allowance for Credit Losses for Loans This note details the loan portfolio breakdown, credit quality, loan modifications, and allowance for credit losses (ACL) methodology and activity Loan Portfolio Details | Loan Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------- | | Commercial and industrial | $10,150,205 | $9,931,400 | | Commercial real estate | $29,114,556 | $29,644,958 | | Residential mortgage | $5,636,407 | $5,632,516 | | Consumer loans | $3,755,960 | $3,590,837 | | Total loans | $48,657,128 | $48,799,711 | - Commercial real estate loans (including construction) constituted 59.8% of total loans at March 31, 2025[77] Loans Portfolio Sales and Transfers to Loans Held for Sale - During Q1 2025, Valley transferred a non-performing construction loan totaling $10.2 million (net of $638 thousand charge-offs) from the held for investment portfolio to loans held for sale[80] - In Q1 2024, Valley sold its commercial premium finance lending business for $96.8 million, generating a $3.6 million net gain[81] Credit Risk Management - Valley's credit policy aims to minimize credit risk through centralized authority, regular Board review, and loan portfolio diversification across business sectors[82] - Valley does not accept crypto assets as loan collateral for any of its loan portfolio classes[82] Credit Quality | Loan Status | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Total Past Due Loans (30+ days) | $51,697 | $99,194 | | Non-Accrual Loans | $346,451 | $359,498 | | Total Past Due and Non-Accrual Loans | $398,148 | $458,692 | - Valley utilizes an internal loan classification system (Pass, Special Mention, Substandard, Doubtful, Loss) to report problem loans within commercial and industrial, commercial real estate, and construction categories[84] Loan Modifications to Borrowers Experiencing Financial Difficulty | Loan Class | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Commercial and industrial | $7,805 | $34,414 | | Commercial real estate | $28,617 | $16,284 | | Home equity | — | $91 | | Total | $36,422 | $50,789 | - One commercial real estate loan received $17.5 million in principal forgiveness in Q1 2025, following a partial charge-off in Q4 2024[95] - The amortized cost basis of loans modified within the previous 12 months that were current at March 31, 2025, totaled $359,413 thousand[97] Allowance for Credit Losses for Loans | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------ | :------------------------------ | :------------------------------- | | Allowance for loan losses | $578,200 | $558,850 | | Allowance for unfunded credit commitments | $15,854 | $14,478 | | Total allowance for credit losses for loans | $594,054 | $573,328 | | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Provision for loan losses | $61,299 | $46,723 | | Provision (credit) for unfunded credit commitments | $1,376 | $(1,449) | | Total provision for credit losses for loans | $62,675 | $45,274 | - Net charge-offs for Q1 2025 were $(41,949) thousand, compared to $(23,555) thousand in Q1 2024[104] Note 8. Goodwill and Other Intangible Assets | Asset | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------- | | Goodwill | $1,868,936 | $1,868,936 | | Net Other Intangible Assets | $121,340 | $128,661 | - No impairment of goodwill or other intangible assets was recognized during the three months ended March 31, 2025, or 2024[108][111] - Amortization expense on other intangible assets totaled $8.0 million for Q1 2025, down from $9.4 million for Q1 2024, mainly due to a decline in amortization related to core deposits and loan servicing rights[111][215] Note 9. Deposits | Deposit Type | March 31, 2025 (in thousands) | | :------------------------------------ | :------------------------------ | | Total time deposits | $11,924,008 | | Certificates of deposit over $250 thousand | $2,400,000 | | Scheduled maturities of time deposits in 2025 | $7,611,465 | Note 10. Borrowed Funds | Borrowing Type | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :------------------------------ | :------------------------------- | | Short-term borrowings | $59,026 | $72,718 | | Long-term borrowings | $2,904,567 | $3,174,155 | | Junior subordinated debentures | $57,542 | $57,455 | - Long-term borrowings decreased by $269.6 million from December 31, 2024, primarily due to the repayment of FHLB advances in January 2025[183] - Long-term FHLB advances had a weighted average interest rate of 4.47 percent at March 31, 2025[115] Note 11. Stock–Based Compensation | RSU Type | Award Shares Granted Q1 2025 (in thousands) | Award Shares Granted Q1 2024 (in thousands) | | :-------------------- | :---------------------------------------- | :---------------------------------------- | | Performance-based RSUs | 649 | 958 | | Time-based RSUs | 2,506 | 2,794 | - Total stock-based compensation expense was approximately $6.8 million for Q1 2025, down from $8.1 million for Q1 2024[120] - As of March 31, 2025, unrecognized amortization expense for all stock-based compensation totaled approximately $51.7 million, to be recognized over an average remaining vesting period of 2.4 years[120] Note 12. Derivative Instruments and Hedging Activities - Valley uses interest rate derivatives for cash flow hedges (to stabilize interest expense) and fair value hedges (to manage exposure to interest rate changes in fixed-rate assets/liabilities)[122][123] - A credit default swap related to approximately $1.5 billion in automobile loans was entered into in June 2024 to enhance the risk profile for regulatory capital purposes, incurring $2.0 million in premium amortization expense in Q1 2025[131] | Derivative Type | March 31, 2025 Notional Amount (in thousands) | December 31, 2024 Notional Amount (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :----------------------------------------------- | | Derivatives designated as hedging instruments | $780,322 | $780,322 | | Derivatives not designated as hedging instruments | $19,111,754 | $19,085,615 | | Total derivative financial instruments | $19,892,076 | $19,865,937 | Note 13. Balance Sheet Offsetting - Valley is party to master netting arrangements with financial institution counterparties for OTC derivatives and repurchase agreements, but does not offset assets and liabilities under these arrangements for financial statement presentation[140][141] | Item | March 31, 2025 Gross Amounts Recognized (in thousands) | March 31, 2025 Net Amounts Presented (in thousands) | March 31, 2025 Cash Collateral (in thousands) | | :------------------------------------ | :--------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Interest rate swaps and other contracts (Assets) | $311,399 | $311,399 | $(248,322) | | Interest rate swaps and other contracts (Liabilities) | $317,725 | $317,725 | — | Note 14. Tax Credit Investments | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :------------------------------ | :------------------------------- | | Total tax credit investments, net | $351,677 | $301,210 | | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Total reduction in income tax expense | $12,114 | $7,741 | | Total amortization of tax credit investments | $9,320 | $5,562 | - The increase in amortization of tax credit investments is mainly due to large purchases of tax-advantaged investments over the last twelve months[216] Note 15. Operating Segments This note describes Valley's Consumer Banking, Commercial Banking, and Treasury and Corporate Other segments, detailing their financial performance and asset composition Consumer Banking Segment | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Average interest earning assets | $10,210,226 | $9,796,681 | | Income before income taxes | $37,307 | $11,574 | | Net interest margin | 2.24% | 1.57% | - Income before income taxes for Consumer Banking increased $25.7 million in Q1 2025 compared to Q1 2024, driven by increased net interest income and a lower provision for loan losses[225] - The net interest margin for this segment increased 67 basis points to 2.24% in Q1 2025, primarily due to a 16 basis point increase in loan yield and a 51 basis point decrease in funding costs[227] Commercial Banking Segment | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Average interest earning assets | $38,444,695 | $40,449,910 | | Income before income taxes | $104,226 | $149,369 | | Net interest margin | 3.47% | 3.43% | - Income before income taxes for Commercial Banking decreased $45.1 million in Q1 2025 compared to Q1 2024, mainly due to lower net interest income and a higher provision for credit losses[230] - The net interest margin for this segment increased 4 basis points to 3.47% in Q1 2025, driven by a 51 basis point decrease in funding costs, largely offset by a 47 basis point decrease in loan yield[231] Treasury and Corporate Other | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Average interest earning assets | $8,236,770 | $6,372,206 | | Income (loss) before income taxes | $(2,413) | $(31,490) | | Net interest margin | 1.44% | 0.51% | - Loss before income taxes improved by $29.1 million to $(2.4) million in Q1 2025 compared to Q1 2024, mainly due to a $21.5 million increase in net interest income and a $7.9 million decrease in non-interest expense (FDIC assessment)[235] - The net interest margin increased 93 basis points to 1.44% in Q1 2025, due to a 42 basis point increase in investment yields and a 51 basis point decrease in funding costs[236] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Valley's financial condition, operations, liquidity, key components, risk management, and capital adequacy Cautionary Statement Concerning Forward-Looking Statements - The report contains forward-looking statements subject to various risks and uncertainties, including market interest rates, macroeconomic conditions, financial sector instability, regulatory changes, and cybersecurity threats[158][159] - Valley undertakes no duty to update any forward-looking statement, and actual results may differ materially from expectations[161] Critical Accounting Estimates - Critical accounting policies include the allowance for credit losses, goodwill and other intangible assets, and income taxes, which involve subjective and complex judgments[162] - There have been no material changes in critical accounting policies and estimates since Valley's Annual Report on Form 10-K for the year ended December 31, 2024[162] New Authoritative Accounting Guidance - Refers to Note 4 for details on new authoritative accounting guidance, specifically ASU No. 2024-03 regarding disaggregation of income statement expenses[163] Executive Summary This section provides a high-level overview of Valley's financial position, balance sheet initiatives, quarterly performance, and U.S. economic conditions Company Overview | Metric | March 31, 2025 (approximate) | | :-------------------- | :--------------------------- | | Total assets | $61.9 billion | | Total net loans | $48.1 billion | | Total deposits | $50.0 billion | | Total shareholders' equity | $7.5 billion | - Valley operates 229 branch offices, with 55% in New Jersey, 18% in New York, 18% in Florida, and 9% combined in Alabama, California, and Illinois[164] Financial Condition Highlights - Commercial Real Estate Loan Concentration: Declined to approximately 353% at March 31, 2025, from 362% at December 31, 2024, with a goal to reduce it below 350% by December 31, 2025[166] - Regulatory Capital: Common Equity Tier 1 capital ratio was 10.80% at March 31, 2025, with an expectation to gradually increase to approximately 11% by December 31, 2025[166] - Allowance for Credit Losses for Loans: Increased to $594.1 million (1.22% of total loans) at March 31, 2025, from $573.3 million (1.17% of total loans) at December 31, 2024, and is anticipated to migrate towards approximately 1.25% of total loans by December 31, 2025[166] Quarterly Results - Net income for Q1 2025 was $106.1 million, or $0.18 per diluted common share, an increase of $9.8 million compared to $96.3 million ($0.18 diluted EPS) for Q1 2024[167] - The increase in net income was mainly due to a $26.6 million increase in net interest income and a $3.7 million decrease in non-interest expense, partially offset by a $17.5 million increase in the provision for credit losses[173] U.S. Economic Conditions - Real gross GDP decreased at an estimated annual rate of 0.3% in Q1 2025, a contraction from a 2.5% increase in Q4 2024, primarily due to increased imports and reduced government spending[169] - The Federal Reserve lowered the target range for the federal funds rate from 5.25–5.50% to 4.25–4.50% over the last four months of 2024, with two rate cuts projected for 2025[170] - Market analysts have increased the likelihood of a recession due to new tariff policies, strict immigration enforcement, government spending cuts, a potentially weakening job market, and continued elevated market interest rates[175] Deposits and Other Borrowings - The cumulative deposit beta in the current interest rate decrease cycle (June 30, 2024, to March 31, 2025) was 53%, up from 34% in the prior quarter, driven by reduced costs of interest-bearing deposits and a reduction of higher-cost indirect customer CDs[176] - Total average deposits decreased by $1.6 billion to $49.1 billion for Q1 2025 compared to Q4 2024, mainly due to a $2.0 billion decrease in average time deposits[177] - Actual ending deposit balances decreased $110.0 million to $50.0 billion at March 31, 2025, primarily due to a $661 million decline in indirect customer CDs, partially offset by increases in non-interest bearing and savings/money market deposits[178] - Total estimated uninsured deposits, excluding collateralized government deposits and intercompany deposits, totaled approximately $13.0 billion, or 26% of total deposits, at March 31, 2025, up from $12.6 billion, or 25%, at December 31, 2024[179] - Long-term borrowings decreased $269.6 million to $2.9 billion at March 31, 2025, compared to December 31, 2024, due to the repayment of FHLB advances in January 2025[183] Non-GAAP Financial Measures | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net income, as adjusted (non-GAAP) | $106,066 | $99,448 | | Annualized ROATE (non-GAAP) | 7.76% | 8.19% | | Annualized ROATE, as adjusted (non-GAAP) | 7.76% | 8.46% | | Efficiency ratio, as adjusted (non-GAAP) | 55.87% | 59.10% | | Metric | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Tangible book value per common share (non-GAAP) | $9.21 | $9.10 | Net Interest Income - Net interest income on a tax equivalent basis increased $26.5 million to $421.4 million for Q1 2025 compared to Q1 2024, but decreased $2.9 million compared to Q4 2024[191][204] - Average interest earning assets decreased by $1.3 billion during Q1 2025 compared to Q4 2024, mainly due to decreases in average loans and overnight interest-bearing cash balances, partially offset by an increase in average taxable investments[192] - Net interest margin on a tax equivalent basis increased 4 basis points to 2.96% for Q1 2025 compared to Q4 2024, and increased 17 basis points compared to Q1 2024[194] - The cost of total average deposits decreased to 2.65% for Q1 2025, compared to 2.94% for Q4 2024 and 3.16% for Q1 2024[195] - Net interest income growth for 2025 is now expected to be at the low-end of the 9-12% range, largely due to lower anticipated loan growth and continued lending spread compression[196] Non-Interest Income | Non-Interest Income Component | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | | Total non-interest income | $58,294 | $61,415 | $(3,121) | | Wealth management and trust fees | $15,031 | $17,930 | $(2,899) | | Capital markets | $6,940 | $5,670 | $1,270 | | Service charges on deposit accounts | $12,726 | $11,249 | $1,477 | | Gains on sales of assets, net | $43 | $3,694 | $(3,651) | | Bank owned life insurance | $4,777 | $3,235 | $1,542 | | Other | $9,917 | $12,531 | $(2,614) | - The decrease in wealth management and trust fees was mainly due to a $3.0 million decrease in tax credit advisory service fees[208] - The decrease in net gains on sales of assets was primarily a result of a $3.6 million net gain realized on the sale of the commercial premium finance lending business during Q1 2024[210] Non-Interest Expense | Non-Interest Expense Component | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | | Total non-interest expense | $276,618 | $280,310 | $(3,692) | | Technology, furniture and equipment expense | $29,896 | $35,462 | $(5,566) | | FDIC insurance assessment | $12,867 | $18,236 | $(5,369) | | Amortization of tax credit investments | $9,320 | $5,562 | $3,758 | | Other | $32,340 | $29,019 | $3,321 | - FDIC insurance assessment expense decreased $5.4 million primarily due to $7.4 million in special assessment expenses recorded in Q1 2024[215] - Other non-interest expense increased $3.3 million, largely due to a $2.9 million loss from the sale of a commercial real estate OREO property and $2.0 million in costs related to a credit default swap[217] Income Taxes | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------- | :----------------------------------------------- | :----------------------------------------------- | | Income tax expense | $33,062 | $33,173 | | Effective tax rate | 23.8% | 25.6% | - The decrease in the effective tax rate from Q1 2024 was primarily due to a higher level of investment in tax credits[218] - Valley anticipates its effective tax rate will be approximately within the 23% to 25% range for the remainder of 2025[219] Operating Segments This section provides detailed financial breakdown and performance analysis for Valley's Consumer, Commercial, and Treasury segments Consumer Banking Segment - Income before income taxes for the Consumer Banking segment increased $25.7 million to $37.3 million for Q1 2025 compared to Q1 2024, driven by increased net interest income and a lower provision for loan losses[225] - Net interest margin for this segment increased 67 basis points to 2.24% for Q1 2025 compared to Q1 2024, due to a 16 basis point increase in loan yield and a 51 basis point decrease in funding costs[227] Commercial Banking Segment - Income before income taxes for the Commercial Banking segment decreased $45.1 million to $104.2 million for Q1 2025 compared to Q1 2024, mainly due to lower net interest income and a higher provision for credit losses[230] - The net interest margin for this segment increased 4 basis points to 3.47% for Q1 2025 compared to Q1 2024, due to a 51 basis point decrease in funding costs, largely offset by a 47 basis point decrease in loan yield[231] Treasury and Corporate Other - Loss before income taxes for Treasury and Corporate Other improved by $29.1 million to $(2.4) million for Q1 2025 compared to Q1 2024, driven by increased net interest income from higher average taxable investments and lower FDIC assessment[235] - The net interest margin increased 93 basis points to 1.44% for Q1 2025 compared to Q1 2024, due to a 42 basis point increase in investment yields and a 51 basis point decrease in funding costs[236] ASSET/LIABILITY MANAGEMENT This section discusses Valley's strategies for managing interest rate risk, including simulation modeling for net interest income sensitivity Interest Rate Risk - Valley uses a simulation model to analyze net interest income sensitivity to movements in interest rates over a 12-month period, based on actual maturity and re-pricing characteristics of assets and liabilities[238] | Changes in Interest Rates (in basis points) | Estimated Change in Future Net Interest Income (in thousands) | Percentage Change | | :---------------------------------------- | :---------------------------------------------------------- | :---------------- | | +300 | $129,311 | 7.23% | | +200 | $87,591 | 4.90% | | +100 | $43,924 | 2.46% | | –100 | $(45,444) | (2.54)% | | –200 | $(93,092) | (5.21)% | | –300 | $(135,960) | (7.60)% | - Management believes the interest rate sensitivity of the balance sheet remains within an expected tolerance range at March 31, 2025, but future changes in balance sheet strategies and the slope of the yield curve could impact it[243] Liquidity and Cash Requirements This section outlines Valley's liquidity management objectives, fund sources, and compliance, distinguishing bank-level and corporation-level liquidity Bank Liquidity | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Loans to deposits | 97.4% | 97.5% | | Wholesale funding to total funding | 17.7% | 18.7% | | Liquid Asset Source | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :------------------------------ | :------------------------------- | | Total liquid assets | $5,136,553 | $5,505,586 | | Unused FHLB borrowing capacity | $5,861,000 | $5,853,596 | | Unused FRB discount window | $10,224,000 | $11,509,000 | | Unencumbered investment securities | $4,727,166 | $3,415,834 | | Total unused available non-deposit borrowing capacities | $22,422,166 | $22,918,430 | Corporation Liquidity - Valley's recurring cash requirements, primarily dividends and interest expense on subordinated debt, are routinely satisfied by dividends collected from the Bank[254] - Valley has the right to defer interest payments on junior subordinated debentures for consecutive quarterly periods of up to five years, subject to certain conditions[254] Investment Securities Portfolio This section describes Valley's AFS and HTM investment securities portfolios, their role in earnings, liquidity, interest rate risk, and credit loss assessment Allowance for Credit Losses and Impairment Analysis - AFS debt securities in unrealized loss positions are evaluated quarterly for impairment related to credit losses; no impairment was recognized in Q1 2025 or Q1 2024, as declines were mainly due to interest rates, not credit quality[258][259] - HTM debt securities were carried net of an allowance for credit losses totaling $633 thousand at March 31, 2025, with no net charge-offs during Q1 2025 or Q1 2024[261] - Unrealized losses in both AFS and HTM portfolios are largely related to residential mortgage-backed securities and continue to be driven by the higher market interest rate environment[264][265] Loan Portfolio - Total loans decreased $142.6 million, or 1.2% on an annualized basis, to $48.7 billion at March 31, 2025, primarily due to normal repayment activity and selective originations within the commercial real estate loan portfolio[267] - Commercial and industrial loans grew by $218.8 million, or 8.8% on an annualized basis, to $10.2 billion at March 31, 2025, reflecting a continued strategic focus on growth in this category[269] - The commercial real estate (CRE) loan concentration ratio declined to approximately 353% at March 31, 2025, from 362% at December 31, 2024, as Valley proactively diversifies its portfolio by reducing new originations of certain CRE lending types[270][275] - Total loan growth for 2025 is now expected to be at the low-end of the 3-5% range, due to competition for high-quality commercial loans, an expected decline in business investment, and other factors[276] Non-performing Assets | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :------------------------------ | :------------------------------- | | Total non-performing assets (NPAs) | $356,219 | $373,329 | | Total non-accrual loans | $346,451 | $359,498 | | Other real estate owned (OREO) | $7,714 | $12,150 | | NPAs as a % of loans and NPAs | 0.73% | 0.76% | - Non-accrual loans decreased $13.0 million to $346.5 million, largely driven by partial charge-offs of two non-performing commercial and industrial loan relationships[283] - Non-performing taxi medallion loans included in non-accrual commercial and industrial loans totaled $49.2 million at March 31, 2025, with related reserves of $25.6 million[284] Allowance for Credit Losses for Loans | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :------------------------------ | :------------------------------- | | Total allowance for credit losses for loans | $594,054 | $573,328 | | Allowance for credit losses for loans as a % of total loans | 1.22% | 1.17% | | Provision charged for credit losses | $62,675 | $106,965 | | Total net loan charge-offs | $(41,949) | $(98,308) | - Valley estimates the collective ACL using a current expected credit losses (CECL) methodology based on historical experience, current conditions, and reasonable and supportable forecasts, utilizing a transition matrix model[288] - The Moody's Baseline forecast for March 31, 2025, included GDP expansion by 1.7% in Q2 2025, unemployment of 4.0% in Q2 2025, and two possible 25 basis point federal funds rate cuts in 2025[294] Capital Adequacy - Shareholders' equity increased by approximately $64.8 million to $7.5 billion at March 31, 2025, representing 12.1% of total assets[299] - Valley and Valley National Bank exceeded all Basel III regulatory capital requirements at March 31, 2025[302] | Capital Ratio | Valley March 31, 2025 | Valley December 31, 2024 | | :-------------------------- | :-------------------- | :----------------------- | | Total Risk-based Capital | 13.91% | 13.87% | | Common Equity Tier 1 Capital | 10.80% | 10.82% | | Tier 1 Risk-based Capital | 11.53% | 11.55% | | Tier 1 Leverage Capital | 9.41% | 9.16% | - The full CECL deferral amount was recognized as a reduction to regulatory capital at March 31, 2025, decreasing risk-based capital ratios by approximately 11 basis points[303][304] Off-Balance Sheet Arrangements, Contractual Obligations and Other Matters - For a discussion of Valley's off-balance sheet arrangements and contractual obligations, refer to Valley's Annual Report in the MD&A section 'Liquidity and Cash Requirements' and Notes 12 and 13 to the consolidated financial statements[307] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section identifies Valley's primary market risk as interest rate risk, with detailed discussion referenced to page 65 - Valley's market risk is primarily composed of interest rate risk[308] Item 4. Controls and Procedures This section details the evaluation of Valley's disclosure controls and internal control over financial reporting, concluding their effectiveness - Valley's CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[310] - There have not been any material changes in Valley's internal control over financial reporting in the quarter ended March 31, 2025[311] - Management acknowledges that internal control systems provide reasonable, not absolute, assurance against errors and fraud due to inherent limitations[312] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section states Valley is involved in legal actions, but management believes their resolution will not materially adversely affect financial condition - Management believes the ultimate resolution of current claims and legal actions will not have a material adverse effect on Valley's financial condition, results of operations, or liquidity[314] Item 1A. Risk Factors This section states no material changes to risk factors previously disclosed in Valley's Annual Report on Form 10-K - There have been no material changes in the risk factors previously disclosed in Valley's Annual Report on Form 10-K for the year ended December 31, 2024[315] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities This section reports no unregistered equity sales and details the issuer's common stock repurchase activities during Q1 2025 - No equity securities not registered under the Securities Act of 1933 were sold during the three months ended March 31, 2025[316] | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------------- | :------------------------------- | :--------------------------- | | January 1, 2025 to March 31, 2025 | 939,266 | $9.79 | - 250,000 shares were purchased as part of a publicly announced stock repurchase program, leaving 24,750,000 shares that may yet be purchased under the plan[316][318] Item 5. Other Information This section states no other information is reported under this item - No other information is reported under this item[319] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including certifications, articles of incorporation, and interactive data files - Exhibits include certifications from the CEO and CFO pursuant to Securities Exchange Rule 13a-14(a) and 18 U.S.C. Section 1350[321] - The filing includes an Interactive Data File (XBRL Instance Document) and Cover Page Interactive Data File[321] SIGNATURES Signatures This section contains the official signatures of Valley National Bancorp's Chairman/CEO and Senior EVP/CFO, certifying the report - The report was signed by Ira Robbins, Chairman of the Board and Chief Executive Officer, and Travis Lan, Senior Executive Vice President and Chief Financial Officer, on May 8, 2025[324]