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What changed in VALLEY NATIONAL BANCORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of VALLEY NATIONAL BANCORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+912 added−866 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in VALLEY NATIONAL BANCORP's 2023 10-K

912 paragraphs added · 866 removed · 207 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

151 edited+75 added−279 removed57 unchanged
Biggest changeAs a result, Valley currently reports the results of its operations and manages its business through three operating segments: Commercial Banking, Consumer Banking and Treasury and Corporate Other. Valley’s Wealth Management and Insurance Services Division, comprised of trust, asset management, insurance and tax credit advisory services, is a reporting unit within the consumer banking segment.
Biggest changeValley’s Wealth Management and Insurance Services Division, comprised of asset management, brokerage, trust, insurance and tax credit advisory services, is a reporting unit within the Consumer Banking segment. See Note 21 to the consolidated financial statements for additional details, including the financial performance of our operating segments. 2023 Form 10-K 6 Commercial Banking Commercial and industrial loans .
Working capital advances are generally used to finance seasonal requirements and are repaid at the end of the cycle. Short-term commercial business loans may be collateralized by a lien on accounts receivable, inventory, equipment and/or partly collateralized by real estate. Short-term loans may also be made on an unsecured basis based on a borrower’s financial strength and past performance.
Working capital advances are generally used to finance seasonal requirements and are repaid at the end of the cycle. Short-term commercial business loans may be collateralized by a lien on accounts receivable, inventory or equipment and/or partly collateralized by real estate. Short-term loans may also be made on an unsecured basis based on a borrower’s financial strength and past performance.
Loan collateral, when required, may consist of any one or a combination of the following asset types depending upon the loan type and intended purpose: commercial or residential real estate; general business assets including working assets such as accounts receivable, inventory, or fixed assets such as equipment or rolling stock; marketable securities or other forms of liquid assets such as bank deposits or cash surrender value of life insurance; automobiles; or other assets wherein adequate protective value can be established and/or verified by reliable outside independent appraisers.
Loan collateral, when required, may consist of any one or a combination of the following asset types depending upon the loan type and intended purpose: commercial or residential real estate; general business assets including working assets such as accounts receivable or inventory, or fixed assets such as equipment or rolling stock; marketable securities or other forms of liquid assets such as bank deposits or cash surrender value of life insurance; automobiles; or other assets wherein adequate protective value can be established and/or verified by reliable outside independent appraisers.
We generally will not exceed a combined (i.e., first and second mortgage) loan-to-value ratio of 80 percent when originating a home equity loan. Other consumer loans include direct consumer term loans, both secured and unsecured, but are largely comprised of personal lines of credit secured by cash surrender value of life insurance.
We generally will not exceed a combined (i.e., first and second mortgage) loan-to-value ratio of 80 percent when originating a home equity loan. Other consumer loans include direct consumer term loans, both secured and unsecured, but are largely comprised of personal lines of credit secured by the cash surrender value of life insurance.
Under Basel III, both Valley and Valley National Bank are required to maintain a 2.5 percent “capital conservation buffer” on top of the minimum risk-weighted asset ratios, effectively resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7.0 percent, (ii) Tier 1 capital to risk-weighted assets of at least 8.5 percent, and (iii) total capital to risk-weighted assets of at least 10.5 percent.
Under Basel III, both Valley and the Bank are required to maintain a 2.5 percent “capital conservation buffer” on top of the minimum risk-weighted asset ratios, effectively resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7.0 percent, (ii) Tier 1 capital to risk-weighted assets of at least 8.5 percent, and (iii) total capital to risk-weighted assets of at least 10.5 percent.
In deciding whether to originate each residential mortgage, Valley considers the qualifications of the borrower, the value of the underlying property and other factors that we believe are predictive of future loan performance. Valley originated first mortgages include both fixed rate and adjustable rate mortgage (ARM) products with 10-year to 30-year maturities.
In deciding whether to originate each residential mortgage, Valley considers the qualifications of the borrower, the value of the underlying property and other factors that we believe are predictive of future loan performance. Valley originated first mortgages include both fixed rate and adjustable rate mortgage products with 10-year to 30-year maturities.
Our CECL methodology to estimate the allowance for loan losses has two components: (i) a collective reserve component for estimated lifetime expected credit losses for pools of loans that share common risk characteristics and (ii) an individual reserve component for loans that do not share risk characteristics, consisting of collateral dependent, TDR, and expected TDR loans.
Our CECL methodology to estimate the allowance for loan losses has two components: (i) a collective reserve component for estimated lifetime expected credit losses for pools of loans that share common risk characteristics and (ii) an individual reserve component for loans that do not share risk characteristics, consisting of collateral dependent loans.
Valley competes with other providers of financial services such as commercial and savings banks, savings and loan associations, credit unions, money market and mutual funds, mortgage companies, title agencies, asset managers, insurance companies, and a large list of other local, regional and national institutions which offer financial services.
Valley competes with other providers of financial services such as commercial and savings banks, savings and loan associations, credit unions, money market and mutual funds, mortgage companies, fintech companies, title agencies, asset managers, insurance companies, and a large list of other local, regional and national institutions which offer financial services.
Corporate Social and Environmental Responsibility Valley recognizes the social and environmental responsibility that arises from the impact of our activities on peoples’ lives and society as a whole. To comply with this responsibility, we established the Environmental, Social and Governance (ESG) Council in 2020 with respect to ESG issues and issued our first ESG report in 2021.
Corporate Social and Environmental Responsibility Valley recognizes the social and environmental responsibility that arises from the impact of our activities on peoples’ lives and society as a whole. To comply with this responsibility, we established the ESG Council in 2020 with respect to ESG issues and issued our first ESG report in 2021.
Community Reinvestment Under the Community Reinvestment Act (CRA), as implemented and overseen by federal banking regulators, a national bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low-and moderate-income neighborhoods.
Community Reinvestment Under the CRA, as implemented and overseen by federal banking regulators, a national bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low-and moderate-income neighborhoods.
Insurance regulation Valley’s insurance agency subsidiary (Valley Insurance Services, Inc.) provides property and casualty insurance, employee benefits, risk management, loss control and claims services to business clients, as well as home, auto, boat and life insurance to individuals. In addition, VFM is licensed as an insurance agency to provide life and health insurance in several states.
Insurance regulation Valley’s insurance agency subsidiary, Valley Insurance Services, provides property and casualty insurance, employee benefits, risk management, loss control and claims services to business clients, as well as home, auto, boat and life insurance to individuals. In addition, VFM is licensed as an insurance agency to provide life and health insurance in several states.
Valley National Bank is subject to federal consumer protection statutes and regulations promulgated under those laws, including, but not limited to the following: • Truth-In-Lending Act and Regulation Z, governing disclosures of credit terms to consumer borrowers; • Home Mortgage Disclosure Act and Regulation C, requiring financial institutions to provide certain information about home mortgage and refinanced loans; • Equal Credit Opportunity Act and Regulation B, prohibiting discrimination on the basis of race, creed, or other prohibited factors in extending credit; • Fair Credit Reporting Act and Regulation V, governing the provision of consumer information to credit reporting agencies and the use of consumer information; and • Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies.
The Bank is subject to federal consumer protection statutes and regulations promulgated under those laws, including, but not limited to the following: • Truth-In-Lending Act and Regulation Z, governing disclosures of credit terms to consumer borrowers; • Home Mortgage Disclosure Act and Regulation C, requiring financial institutions to provide certain information about home mortgage and refinanced loans; • Equal Credit Opportunity Act and Regulation B, prohibiting discrimination on the basis of race, creed, or other prohibited factors in extending credit; • Fair Credit Reporting Act and Regulation V, governing the provision of consumer information to credit reporting agencies and the use of consumer information; and • Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies.
These rules are applied to all loans originated for retention in our portfolio or for sale in the secondary market. Loan underwriting and loan documentation . Loan approvals are well documented in accordance with specific and detailed underwriting policies and verification procedures.
These rules are applied to all loans originated for retention in our portfolio or for sale in the secondary market. Loan underwriting and loan documentation . Loan approvals are documented in accordance with specific and detailed underwriting policies and verification procedures.
In addition, the bank regulatory agencies have the authority to prohibit us from paying dividends if the supervising agency determines that such payment would constitute an unsafe or unsound banking practice.
In addition, the bank regulatory agencies have the authority to prohibit us from paying dividends if the supervising agency determines that such payment would constitute an unsafe or unsound practice.
Overall, our customers are influenced by the convenience, solution-based service from our knowledgeable staff and personal contacts, as well as availability of products and services. We provide such convenience through our multi-channel delivery system, including more than 200 branch offices, an extensive ATM network, and our telephone, on-line and digital banking systems.
Overall, our customers are influenced by the convenience, solution-based service from our knowledgeable staff and personal contacts, as well as the robust availability of our diverse products and services. We provide such convenience through our multi-channel delivery system, including more than 200 branch offices, an extensive ATM network, and our telephone, on-line and digital banking systems.
These programs include base wages, performance-based bonus and incentive compensation, stock awards, a 401(k) Plan with a very competitive company match, healthcare and insurance benefits, voluntary benefits, commuter benefits, health savings account, flexible spending accounts, tuition reimbursement, paid time off, disability, family leave, wellness and employee assistance programs. Health and Safety.
These programs include base wages, performance-based bonus and incentive compensation, stock awards, a 401(k) Plan with a competitive company match, healthcare and insurance benefits, voluntary benefits, commuter benefits, a health savings account, flexible spending accounts, tuition and adoption reimbursement, paid time off, disability, family leave, wellness and employee assistance programs. Health and Safety.
Under Basel III, the minimum capital ratios for us and Valley National Bank are as follows: • 4.5 percent CET1 (common equity Tier 1) to risk-weighted assets. • 6.0 percent Tier 1 capital (i.e., CET1 plus Additional Tier 1) to risk-weighted assets. • 8.0 percent Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets. • 4.0 percent Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).
Under Basel III, the minimum capital ratios for Valley and the Bank are as follows: • 4.5 percent CET1 (common equity Tier 1) to risk-weighted assets. • 6.0 percent Tier 1 capital (i.e., CET1 plus Additional Tier 1) to risk-weighted assets. • 8.0 percent Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets. • 4.0 percent Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).
In addition to these types of collateral, we, in many cases, will obtain the personal guarantee of the borrower’s principals or an affiliated corporate entity to mitigate the risk of certain commercial and industrial loans and commercial real estate loans. Valley does not accept crypto assets as loan collateral.
In addition to these types of collateral, we, in many cases, will obtain the personal guarantee of the borrower’s principals or an affiliated corporate entity to mitigate the risk associated with certain commercial and industrial loans and commercial real estate loans. Valley does not accept crypto assets as loan collateral.
As part of the risk management framework, the Risk Committee reviews and recommends to the Board risk tolerances and limits for strategic, credit, interest rate, price, liquidity, compliance, operational (including cyber and information security risk), and reputation risks, oversees risk management within those tolerances and monitors compliance with applicable laws and regulations.
As part of the risk management framework, the Risk Committee reviews and recommends to the Board risk tolerances and limits for strategic, credit, interest rate, price, liquidity, compliance, operational (including information security and cybersecurity risk), and reputation risks, oversees risk management within those tolerances and monitors compliance with applicable laws and regulations.
Valley advertises and identifies itself under the trade names “Valley Bank” and “Valley”. Valley's principal subsidiary, Valley National Bank (commonly referred to as the “Bank” in this report), has been chartered as a national banking association under the laws of the United States since 1927.
Valley advertises and identifies itself under the trade names “Valley Bank” and “Valley.” Valley’s principal subsidiary, Valley National Bank (commonly referred to as the “Bank” in this Report), has been chartered as a national banking association under the laws of the United States since 1927.
Various laws and the regulations thereunder applicable to Valley and its bank subsidiary impose restrictions and requirements in many areas, including capital requirements, the maintenance of reserves, establishment of new offices, the making of loans and investments, consumer protection, employment practices, bank acquisitions and entry into new types of business.
Various laws and the regulations thereunder applicable to Valley and the Bank impose restrictions and requirements in many areas, including capital requirements, the maintenance of reserves, establishment of new offices, the making of loans and investments, consumer protection, employment practices, bank acquisitions and entry into new types of business.
Renewals, refinancings and other subsequent transactions that do not include the advancement of new funds (other than for reasonable closing costs) or, in the case of commercial loans, the extension of the amortization period beyond the original term, do not require a new appraisal unless management believes there has been a material change in market conditions or the physical aspects of the property which may negatively impact the collectability of our loan.
Renewals, re-financings and other subsequent transactions that do not include the advancement of new funds (other than for reasonable closing costs) or, in the case of commercial loans, the extension of the amortization period beyond the original term, do not require a new appraisal unless management believes there has been a material change in market conditions or the physical aspects of the property which may negatively impact the collectability of our loan.
Valley keeps the associate contribution to our health plans low and promotes incentives offered by our insurance carriers to stay healthy and prevent chronic illness. Valley partners with our 401(k) plan provider to educate associates on financial wellness solutions.
Valley also keeps the associate contribution to our health plans low and promotes incentives offered by our insurance carriers to stay healthy and prevent chronic illness. Valley partners with our 401(k) provider to educate associates on financial wellness solutions.
Under the National Bank Act, without consent, a national bank may declare, in any one year, dividends only in an amount aggregating not more than the sum of its net profits for such year and its retained net profits for the preceding two years.
Under the National Bank Act, without consent, a national bank may declare, in any one year, dividends only in an aggregate amount not more than the sum of its net profits for such year and its retained net profits for the preceding two years.
Valley introduced paid parental leave to all birth, adoptive and foster parents to support bonding. We continue to engage with associates who request a reasonable accommodation to perform their role and promote our Employee Assistance Program.
Valley introduced a paid parental leave to all birth, adoptive and foster parents to support bonding. We continue to engage with associates who request a reasonable accommodation to perform their roles and promote our Employee Assistance Program.
To measure the expected credit losses on held to maturity debt securities that have loss expectations, Valley estimates the expected credit losses using a discounted cash flow model developed by a third-party. The amount of ACL is based on ongoing, quarterly assessments by management. See Note 1 to the consolidated financial statements for further discussion regarding CECL methodology.
To measure the expected credit losses on HTM debt securities that have loss expectations, Valley estimates the expected credit losses using a discounted cash flow model developed by a third-party. The amount of ACL is based on ongoing, quarterly assessments by management. See Note 1 to the consolidated financial statements for further discussion regarding CECL methodology.
Valley remains committed to the safety, health and well-being of our associates. Valley recently increased the duration of our paid short-term disability benefit for eligible associates dealing with personal illness. Our bereavement leave was also revised to provide associates more flexibility when faced with the loss of a significant person in their life.
Valley remains committed to the safety, health and well-being of our associates. In January 2023, Valley increased the duration of our paid short-term disability benefit for eligible associates dealing with personal illness. Our bereavement leave was also revised to provide associates more flexibility when faced with the loss of a significant person in their life.
Under the Durbin Amendment contained in the Dodd-Frank Act, the FRB adopted rules applying to banks with more than $10 billion in assets which established a maximum permissible interchange fee equal to no more than 21 cents plus 5 basis points of the transaction value for many types of debit interchange transactions.
Under the Durbin Amendment contained in the Dodd-Frank Act, the Federal Reserve adopted rules applying to banks with more than $10 billion in assets which established a maximum permissible interchange fee equal to no more than 21 cents plus 5 basis points of the transaction value for many types of debit interchange transactions.
We and our Bank are responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence.
We and the Bank are responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence.
Among other things, these provisions require that extensions of 15 2022 Form 10-K credit to insiders (i) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features and (ii) not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the Bank’s capital.
Among other things, these provisions require that extensions of credit to insiders (i) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features and (ii) not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the Bank’s capital.
Valley and the Bank offer a full suite of national and regional banking solutions through various commercial, private banking, retail, insurance and wealth management financial services products. Valley provides personalized service and customized solutions to assist its customers with their financial service needs.
Valley, through the Bank and its subsidiaries, offers a full suite of national and regional banking solutions through various commercial, private banking, retail, insurance and wealth management financial services products. Valley provides personalized service and customized solutions to assist its customers with their financial service needs.
Valley re-evaluated its segment reporting during the second quarter 2022 to consider the Bank Leumi USA acquisition on April 1, 2022, along with other factors, including changes in the internal structure of operations, discrete financial information reviewed by key decision-makers, balance sheet management strategies and personnel.
In addition to our annual assessment, Valley re-evaluated its segment reporting during the second quarter 2022 to consider the Bank Leumi USA acquisition on April 1, 2022, along with other factors, including changes in the internal structure of operations, discrete financial information reviewed by key decision-makers, balance sheet management strategies and personnel.
The Bank’s 2022 Capital Stress Test included a climate related scenario that considered geographical climate events within the Bank’s diverse footprint. The results of the internal stress tests are considered in combination with other risk management and monitoring practices at Valley to maintain an overall risk management program. Cyber Security Information security is a significant operational risk for Valley.
The Bank’s 2023 Capital Stress Test included a climate related scenario that considered geographical climate events within the Bank’s diverse footprint. The results of the internal stress tests are considered in combination with other risk management and monitoring practices at Valley to maintain an overall risk management program. Information security is also a significant operational risk for Valley.
Among other things, consultation with the FRB supervisory staff is required in advance of our declaration or payment of a dividend to our shareholders that exceeds our earnings for the trailing four-quarter period in which the dividend is being paid.
Among other things, consultation with the Federal Reserve supervisory staff is required in advance of our declaration or payment of a dividend to our shareholders that exceeds our earnings for the trailing four-quarter period in which the dividend is being paid.
The BHC Act prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of five percent or more of the voting shares of any company which is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to subsidiary banks, except that it may, upon application, engage in, and may own shares of companies engaged in, certain businesses found by the FRB to be so closely related to banking “as to be a proper incident thereto.” As detailed further below, a bank holding company that has elected to be treated as a financial holding company, as Valley has, may engage in a broader range of non-banking activities that are “financial in nature.” The BHC Act requires prior approval by the FRB of the acquisition by Valley of five percent or more of the voting stock of any other bank.
The BHC Act prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of five percent or more of the voting shares of any company which is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to subsidiary banks, except that it may, upon 15 2023 Form 10-K application, engage in, and may own shares of companies engaged in, certain businesses found by the Federal Reserve to be so closely related to banking “as to be a proper incident thereto.” As detailed further below, a bank holding company that has elected to be treated as a financial holding company, as Valley has, may engage in a broader range of non-banking activities that are “financial in nature.” The BHC Act requires prior approval by the Federal Reserve of the acquisition by Valley of five percent or more of the voting stock of any other bank.
A significant proportion of Valley’s commercial and industrial loan portfolio is granted to long-standing customers of proven ability, strong repayment performance, and high character. Underwriting standards are designed to assess the borrower’s ability to generate recurring cash flow sufficient to meet the debt service requirements of loans granted.
A significant portion of Valley’s commercial and industrial loan portfolio consists of loans to long-standing customers of proven ability, strong repayment performance, and high character. Underwriting standards are designed to assess the borrower’s ability to generate recurring cash flow sufficient to meet the debt service requirements of loans granted.
The loan purchase decision is usually based on several factors, including current loan origination volumes, market interest rates, excess liquidity, our continuous efforts to meet the credit needs of certain borrowers under the Community Rein vestment Act (CRA), as well as other asset/liability management strategies.
The loan purchase decision is usually based on several factors, including current loan origination volumes, market interest rates, excess liquidity, our continuous efforts to meet the credit needs of certain borrowers under the CRA, as well as other asset/liability management strategies.
Loan portfolio diversification is an important factor utilized by us to manage the portfolio’s risk across business sectors, geographic markets and through cyclical economic circumstances. 7 2022 Form 10-K Our historical and current loan underwriting practice prohibits the origination of payment option adjustable residential mortgages which allow for negative interest amortization and subprime loans.
Loan portfolio diversification is an important factor utilized by us to manage the portfolio’s risk across business sectors, geographic markets and through cyclical economic circumstances. Our historical and current loan underwriting practice prohibits the origination of payment option adjustable residential mortgages which allow for negative interest amortization and subprime loans.
The OCC, along with other banking agencies, have strictly enforced various anti-money laundering and suspicious activity reporting requirements using formal and informal enforcement tools to cause banks to comply with these provisions. A bank that is issued a formal or informal enforcement requirement with respect to its Anti Money Laundering program will be prevented from making acquisitions.
The OCC, along with other banking agencies and FinCEN, have strictly enforced various anti-money laundering and suspicious activity reporting requirements using formal and informal enforcement tools to cause banks to comply with these provisions. A bank that is issued a formal or informal enforcement requirement with respect to its BSA/AML Program may be prevented from making acquisitions.
The adjustable rate loans have a fixed-rate, fixed payment, introductory period of 5 to 10 years that is selected by the borrower. Additionally, Valley originates jumbo residential mortgage loans, which are mostly fixed-rate with 30-year maturities. At December 31, 2022, fixed and adjustable rate jumbo residential mortgage loans totaled approximatel y $2.6 billion and $1.1 billion, respectively.
The adjustable rate loans have a fixed-rate, fixed payment, introductory period of 5 to 10 years that is selected by the borrower. Additionally, Valley originates jumbo residential mortgage loans, which are mostly fixed-rate with 30-year maturities. At December 31, 2023, fixed and adjustable rate jumbo residential mortgage loans totaled approximately $2.6 billion and $1.1 billion, respectively.
Valley's consolidated subsidiaries include the Bank, as well as subsidiaries with the following primary functions: an insurance agency offering property and casualty, life and health insurance; asset management advisers that are registered investment advisers with the Securities and Exchange Commission (SEC); registered securities broker-dealers with the SEC and members of the Financial Industry Regulatory Authority (FINRA); a title insurance agency in New York which also provides services in New Jersey; an advisory firm specializing in the investment and management of tax credits; and a subsidiary which specializes in health care equipment lending and other commercial equipment leases.
Valley’s consolidated subsidiaries include the Bank, as well as subsidiaries with the following primary functions: insurance agencies offering property and casualty, life and health insurance; asset management advisers that are registered as investment advisers with the SEC; registered securities broker-dealers with the SEC and members of FINRA; a title insurance agency in New York which also provides services in New Jersey; an advisory firm specializing in the investment and management of tax credits; and a subsidiary which specializes in health care equipment lending and other commercial equipment leases.
Valley also offers niche financial services, including loan and deposit products for homeowners associations, insurance premium financing, cannabis-related business banking and venture banking, which we offer nationally.
Valley also offers niche financial services, including loan and deposit products for homeowners associations, cannabis-related business banking and venture banking, which we offer nationally.
Risk Factors, the “Executive Summary” section of Item 7. MD&A, and elsewhere in this report may impact our ability to maintain the current composition of our loan portfolio. See the “Loan Portfolio” section in Item 7. MD&A in this report for further discussion of our loan composition and concentration risks.
MD&A, and elsewhere in this Report may impact our ability to maintain the current composition of our loan portfolio. See the “Loan Portfolio” section in Item 7. MD&A in this Report for further discussion of our loan composition and concentration risks.
Additionally, all loan types are assessed for full or partial 8 2022 Form 10-K charge-off when they are between 90 and 120 days past due (or sooner when the borrowers’ obligation has been released in bankruptcy) based upon their estimated net realizable value.
Additionally, all loan types are assessed for full or partial charge-off when they are between 90 and 120 days past due (or sooner when the borrowers’ obligation has been released in bankruptcy) based upon their estimated net realizable value.
Our broker-dealer subsidiaries are also subject to regulation by state securities commissions in those states in which they conduct business. Our primary U.S. broker-dealer, Valley Financial Management, Inc. (VFM), is currently registered as a broker-dealer in most U.S. states, the District of Columbia and Puerto Rico. Broker-dealer supervision .
Our broker-dealer subsidiaries are also subject to regulation by state securities commissions in those states in which they conduct business. Our primary U.S. broker-dealer, VFM, is currently registered as a broker-dealer in most U.S. states, the District of Columbia and Puerto Rico.
Reevaluation of collateral values . Commercial loan renewals, refinancings and other subsequent transactions that include the advancement of new funds or result in the extension of the amortization period beyond the original term, require a new or updated appraisal.
Reevaluation of collateral . Commercial loan renewals, re-financings and other subsequent transactions that include the advancement of new funds or result in the extension of the amortization period beyond the original term, require a new or updated appraisal.
This structure includes the DEI Leadership Advisory Council, chaired by our CEO, which is charged with maintaining Valley’s commitment to DEI and ensuring that these principles are part of Valley’s business practices and policies.
The DEI Governance Framework includes the DEI Leadership Advisory Council, chaired by our CEO, which is charged with maintaining Valley’s commitment to DEI and ensuring that these principles are part of Valley’s business practices and policies.
On January 1, 2022, the deferral amount totaling $47.3 million after-tax started to be phased-in by 25 percent and will increase by 25 percent per year until fully phased- 14 2022 Form 10-K in on January 1, 2025.
On January 1, 2022, the deferral amount totaling $47.3 million after-tax started to be phased-in by 25 percent and will increase by 25 percent per year until fully phased-in on January 1, 2025.
Home equity lending consists of both fixed and variable interest rate products 5 2022 Form 10-K mainly to provide home equity loans to our residential m ortgage customers or take a secondary position to another lender’s first lien position within the footprint of our primary lending territories.
Home equity lending consists of both fixed and variable interest rate products mainly to provide home equity loans to our residential m ortgage customers or take a secondary position to another lender’s first lien position within the footprint of our primary lending territories.
The estimate of expected credit losses under the current expected credit losses (CECL) methodology adopted on January 1, 2020 is based on relevant information about the past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.
The estimate of expected credit losses under the CECL methodology is based on relevant information about the past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.
Among its other provisions, the Anti Money Laundering Act requires each financial institution: (i) to establish an anti-money laundering program; (ii) to establish due diligence policies, procedures and controls that are reasonably designed to detect and report instances of money laundering in United States private banking accounts and correspondent accounts maintained for non-United States persons or their representatives; and (iii) to avoid establishing, maintaining, administering, or managing correspondent accounts in the United States for, or on behalf of, a foreign shell bank that does not have a physical presence in any country.
For example, the BSA, as amended by the Anti-Money Laundering Act, requires each financial institution to: (i) establish an anti-money laundering program; (ii) establish due diligence policies, procedures and controls that are reasonably designed to detect and report instances of money laundering in United States private banking accounts and correspondent accounts maintained for non-United States persons or their representatives; and (iii) avoid establishing, maintaining, administering, or managing correspondent accounts in the United States for, or on behalf of, a foreign shell bank that does not have a physical presence in any country.
Valley’s Board performs its risk oversight function primarily through several standing committees, including the Risk Committee, all of which report to the full Board. The full Board regularly engages in discussions of risk management and receives reports on risk factors from our executive management, other Company officers and the chair of the Risk Committee.
The Board performs its risk oversight function primarily through several standing committees, including its Risk Committee, all of which report to the Board. The Board regularly engages in discussions of risk management and receives reports on risk factors from our executive management, other members of management and the chair of the Risk Committee.
Interest-only (i.e., non-amortizing) residential mortgage loans within our jumbo portfolio totaled $193.3 million (or 3.60 percent of the total residential mortgage loan portfolio) at December 31, 2022. The Bank services certain residential mortgage portfolios, and it is compensated for loan administrative services performed for mortgage servicing rights related primarily to loans originated and sold by the Bank.
Interest-only (i.e., non-amortizing) residential mortgage loans within our jumbo portfolio totaled $191.4 million (or 3.44 percent of the total residential mortgage loan portfolio) at December 31, 2023. The Bank services certain residential mortgage portfolios, and it is compensated for loan administrative services performed for mortgage servicing rights related primarily to loans originated and sold by the Bank.
Residential mortgage loans totaled $5.4 billion and represented 11.4 percent of the total loan portfolio at December 31, 2022. Our residential mortgage loans include fixed and variable interest rate loans located mostly in New Jersey, New York and Florida.
Residential mortgage loans totaled $5.6 billion and represented 11.1 percent of the total loan portfolio at December 31, 2023. Our residential mortgage loans include fixed and variable interest rate loans located mostly in New Jersey, New York and Florida.
The underlying real property securing the loans is considered a secondary source of repayment, and normally such loans are also supported by guarantees of the legal entity members.
The underlying real property securing the loans is considered a secondary source of repayment, and normally such loans are also supported by guarantees of the legal entity 2023 Form 10-K 10 members.
Valley purchased approximately $36.6 million and $58.3 million of 1-4 family loans, qualifying for CRA purposes during 2022 and 2021, respectively. All purchased loans are selected using Valley’s normal underwriting criteria at the time of purchase, or in some cases guaranteed by third parties.
Valley purchased approximately $25.4 million an d $36.6 million of 1-4 family loans qualifying for CRA purposes during 2023 and 2022, respectively. All purchased loans are selected using Valley’s normal underwriting criteria at the time of purchase, or in some cases guaranteed by third parties.
In order to maintain our status as a financial holding company, we and the Bank are expected to be well capitalized and well managed, as defined in applicable regulations and determined in part by the results of regulatory examinations, and must comply with Community Reinvestment Act obligations.
In order to maintain our status as a financial holding company, we and the Bank are expected to be well capitalized and well managed, as defined in applicable regulations and determined by the results of examinations, and must comply with CRA obligations.
Transactions by the Bank with Related Parties Valley National Bank’s authority to extend credit to its directors, executive officers and 10 percent shareholders, as well as to entities controlled by such persons (insiders), is currently governed by the requirements of the National Bank Act, Sarbanes-Oxley Act and Regulation O of the FRB thereunder.
Transactions by the Bank with Related Parties The Bank’s authority to extend credit to its directors, executive officers and 10 percent shareholders, as well as to entities controlled by such persons (insiders), is governed by the requirements of the National Bank Act, the Sarbanes-Oxley Act of 2002 and Regulation O of the Federal Reserve.
As of December 31, 2022, our total investment securities and interest bearing deposits with banks were $5.2 billion and $503.6 million, respectively. See the “Investment Securities Portfolio” section of the MD&A and Note 4 to the consolidated financial statements for additional information concerning our investment securities.
As of December 31, 2023, our total investment securities and interest bearing deposits with banks were $5.1 billion and $607.1 million, respectively. See the “Investment Securities Portfolio” section of the MD&A and Note 4 to the consolidated financial statements for additional information concerning our investment securities.
Appraisals and valuations of real estate collateral are contracted through an approved appraisal management company. The appraisal management company adheres to all regulatory requirements. The Bank’s appraisal management policy and procedure is in accordance with regulatory requirements and guidance issued by the Bank’s primary regulator.
Appraisals and valuations of real estate collateral are contracted through an approved appraisal management company. The appraisal management company is required to adhere to all regulatory requirements. The Bank’s appraisal management policy and procedure complies with regulatory requirements and guidance issued by the Bank’s primary regulator.
Treasury and Corporate Other largely consists of the Treasury managed held to maturity and available for sale debt securities portfolios mainly utilized in the liquidity management needs of our lending segments and income and expense items resulting from support functions not directly attributable to a specific segment.
Treasury and Corporate Other largely consists of the Treasury managed HTM and AFS debt securities portfolios mainly utilized in the liquidity management needs of our lending segments and income and expense items resulting from support functions not directly attributable to a specific segment.
Valley ranked 16th in competitive ranking and market share based on the deposits reported by 162 FDIC-insured financial institutions in the New York, Northern New Jersey and Long Island deposit markets as of June 30, 2022.
Valley ranked 12th in competitive ranking and market share based on the deposits reported by 161 FDIC-insured financial institutions in the New York, Northern New Jersey and Long Island deposit markets as of June 30, 2023.
We continue to evolve our workplace strategies that center on the people experience with a breadth of development opportunities, including our flagship Leadership Development programs, to provide meaningful experiences that challenge our high potential and high performing associates.
We continue to center our workplace strategies on the people experience, offering a variety of development opportunities - including our flagship Leadership Development and mentorship programs - to provide meaningful experiences that challenge our high potential and high performing associates.
The following table presents the loan portfolio and loans held for sale by segments by state and our percentage of total loans by state at December 31, 2022.
The following table presents the loan portfolio and loans held for sale by state and the percentage of total loans by state at December 31, 2023.
See Notes 5 and 8 to the consolidated financial statements for further details. Other consumer loans . Other consumer loans totaled $3.3 billion and represented 7.1 percent of the total loan portfolio at December 31, 2022.
See Notes 5 and 8 to the consolidated financial statements for further details. Other consumer loans . Other consumer loans totaled $3.4 billion and represented 6.8 percent of the total loan portfolio at December 31, 2023.
As of December 31, 2022, approximately $11.8 million of the $47.3 million deferral amount was recognized as a reduction to regulatory capital and, as a result, reduced our risk-based capital ratios by approximately 3 basis points.
As of December 31, 2023, approximately $23.6 million of the $47.3 million deferral amount was recognized as a reduction to regulatory capital and, as a result, reduced our risk-based capital ratios by approximately 6 basis points.
Competition Valley National Bank is one of the largest commercial banks headquartered in New Jersey, with its top markets located in northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn and Queens, Long Island, Westchester County, New York, Florida and Alabama.
Competition for Deposits, Lending and Other Financial Services Valley National Bank is the largest commercial bank headquartered in New Jersey, with its top markets located in northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn and Queens, Long Island, Westchester County, New York, Florida and Alabama.
Management utilizes the enterprise-wide risk management framework to holistically manage and monitor risks across the organization and to aggregate and manage the risk appetite approved by the board.
Management utilizes the enterprise-wide risk 9 2023 Form 10-K management framework to holistically manage and monitor risks across the organization and to aggregate and manage the risk appetite approved by the Board.
Concessions rarely result in the forgiveness of principal or accrued interest. In addition, Valley frequently obtains additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms and Valley’s underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest.
In addition, Valley frequently obtains additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms and Valley’s underwriting process shows the borrower has the capacity to continue to perform under the modified terms, the loan will continue to accrue interest.
For regulatory capital purposes, in accordance with the Federal Reserve Board’s final interim rule as of April 3, 2020, w e 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.
For regulatory capital purposes, in accordance with the Federal Reserve’s final rule issued 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.
Business The disclosures set forth in this item are qualified by Item 1A.—Risk Factors and the section captioned “Cautionary Statement Concerning Forward-Looking Statements” in Item 7.—Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) of this Annual Report on Form 10-K (referred to as this “report”) and other cautionary statements set forth elsewhere in this report.
Item 1. Business The disclosures set forth in this item are qualified by Item 1A. Risk Factors and the section captioned “Cautionary Statement Concerning Forward-Looking Statements” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") of this Report and other cautionary statements set forth elsewhere in this Report.
Also available on our website, are Valley’s Code of Conduct and Ethics that applies to all of our employees, including our executive officers and directors, Valley’s Audit Committee Charter, Valley’s Compensation 12 2022 Form 10-K and Human Capital Management Committee Charter, Valley’s Nominating and Corporate Governance Committee Charter, and Valley’s Corporate Governance Guidelines.
Also available on our website are Valley’s Code of Conduct and Ethics that applies to all 2023 Form 10-K 14 of our employees, including our executive officers, as well as non-employee directors, Valley’s Audit Committee Charter, Valley’s Compensation and Human Capital Management Committee Charter, Valley’s Nominating, Governance, and Corporate Sustainability Committee Charter, and Valley’s Corporate Governance Guidelines.
Treasury, in consultation with the heads of other government agencies, to adopt special measures applicable to financial institutions such as banks, bank holding companies, broker-dealers and insurance companies.
In addition, the BSA, as amended, authorizes the Secretary of the U.S. Treasury, in consultation with the heads of other government agencies, to adopt special measures applicable to financial institutions such as banks, bank holding companies, broker-dealers and insurance companies.
However, the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (the “EGRRCPA”) and a joint interagency statement regarding the impact of the EGRRCPA resulted in Valley and the Bank being no longer subject to the stress testing requirements. However, under safety and soundness principles we continue to conduct stress testing of our own design.
However, the EGRRCPA and a joint interagency statement regarding the impact of the EGRRCPA resulted in Valley and the Bank being no longer subject to the stress testing requirements. However, under safety and soundness principles we continue to conduct stress testing of our own design.
The BHC Act does not place territorial restrictions on the activities of non-bank subsidiaries of bank holding companies. As a financial holding company, Valley may engage in a broader range of non-banking activities than permitted for bank holding companies and their subsidiaries that have not elected to become financial holding companies.
As a financial holding company, Valley may engage in a broader range of non-banking activities than permitted for bank holding companies and their subsidiaries that have not elected to become financial holding companies.
Statutory and regulatory controls increase a bank holding company’s cost of doing business and limit the options of its management to deploy assets and maximize income. The compliance cost for Valley is significant and subject to increase as new governmental regulations are enacted and/or the level of enforcement of those regulations increases.
Banking laws and regulations, as well as examination and supervision, increase a bank holding company’s cost of doing business and limit the options of its management to deploy assets and maximize income. The compliance cost for Valley is significant and subject to increase as new governmental regulations are enacted and/or the level and intensity of supervision and of enforcement increases.
The product is mainly originated through the Bank’s retail branch network and third party financial advisors. Unsecured consumer loans totaled approximately $63.8 million, including $16.8 million of credit card loans, at December 31, 2022. Wealth Management. Our Wealth Management and Insurance Services Division provides asset management advisory, brokerage, trust, commercial, personal and title insurance, and tax credit advisory services.
The product is mainly originated through the Bank’s retail branch network and third party financial advisors. Unsecured consumer loans totaled approximately $76.6 million, including $29.1 million of credit c ard loans, at December 31, 2023. Wealth Management. Our Wealth Management and Insurance Services Division provides asset management advisory, brokerage, trust, commercial, personal and title insurance, and tax credit advisory services.
Information about our Executive Officers Name Age at December 31, 2022 Executive Officer Since Office Principal occupation during last five years other than Valley Ira Robbins 48 2009 Chairman of the Board and Chief Executive Officer of Valley and Valley National Bank Thomas A. Iadanza 64 2015 President of Valley and Valley National Bank Michael D.
Information about our Executive Officers Name Age at December 31, 2023 Executive Officer Since Office Principal occupation during last five years other than Valley Ira Robbins 49 2009 Chairman of the Board and Chief Executive Officer of Valley and Valley National Bank Thomas A.
The CFPB examines Valley National Bank’s compliance with such laws and the regulations under them. Insurance of Deposit Accounts The Bank’s deposits are insured up to applicable limits by the FDIC.
The CFPB examines Valley National Bank’s compliance with such laws and the regulations under them. Insurance of Deposit Accounts The Bank’s deposits are insured by the FDIC up to applicable limits, which are generally $250,000 per account ownership type.
Valley prohibits the advancement of additional funds on non-accrual loans, TDRs and CARES Act loan modifications, except under certain workout plans if such extension of credit is intended to mitigate losses. Allowance for Credit Losses We maintain an allowance for credit losses (ACL) for financial assets measured at amortized cost.
Valley prohibits the advancement of additional funds on non-accrual loans, except under certain workout plans if such extension of credit is intended to mitigate losses. 11 2023 Form 10-K Allowance for Credit Losses We maintain an ACL for financial assets measured at amortized cost.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOver 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 (only nine loan repurchases in 2022 and five loan repurchases in 2021 ). None of the loan repurchases resulted in material loss.
Biggest changeThe aggregate principal balances of residential mortgage loans serviced by the Bank for others approximated $3.3 billion and $3.5 billion at December 31, 2023 and 2022, respectively. Over the past several years, we have experienced a nominal amount of repurchase requests that have actually resulted in repurchases by Valley.
In connection with loan sales, 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.
We engage in the origination of residential mortgages for sale into the secondary market, while typically retaining the loan servicing. In connection with such sales, 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 in respect of such loans.
At December 31, 2022, taxi medallion loans totaling $66.5 million had related reserves of $42.2 million, or 63.4 percent of such loans, within the allowance for loan losses as compared to $86.0 million of loans with related reserves of $58.5 million at December 31, 2021 .
Our non-accrual loans represented 0.58 percent of total loans at December 31, 2023, which included non-accrual taxi medallion loans totali ng $62.3 million that had related reserves of $37.7 million, or 60.5 percent of such loans, within the allowance for loan losses.
While we believe our commercial loan swap based product will remain attractive to borrowers in the current interest rate environment, we can provide no assurance that our swap fees will remain at the level reported for the year ended December 31, 2022.
Several factors, including, but not limited to, the actual and expected level of market interest rates, can impact the decisions of commercial loan customers to use such interest rate swap products. As a result, we can provide no assurance that our interest rate swap fees will remain at the level reported for the year ended December 31, 2023.
Valley’s ability, and any decision to issue and sell securities pursuant to the shelf registration statement, 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.
Additional equity offerings may dilute the holdings of our existing shareholders or reduce the market price of our common stock, or both. Holders of our common stock are not entitled to preemptive rights or other protections against dilution.
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Item 1A. Risk Factors" and the “Operating Environment” section of MD&A for more details.
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Item 1A. Risk Factors An investment in our securities is subject to risks inherent to our business. The material risks and uncertainties that management believes may affect Valley are described below.
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The Coronavirus Aid, Relief, and Economic Security (CARES) Act and additional legislation that followed including the Consolidated Appropriations Act and the American Rescue Plan Act of 2021 provided funding for the SBA's Paycheck Protection Program (PPP) and established rules for qualifying borrowers to receive loan forgiveness by the SBA under this program.
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Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this Report. The risks and uncertainties described below are not the only ones facing Valley.
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Valley extended a total of $3.2 billion PPP loans under the program and the vast majority of these loans received forgiveness from the SBA during 2022 and 2021. As o f December 31, 2022, we had only $33.6 million of PPP loans outstanding (including $6.9 million acquired from Bank Leumi USA). Annual Results .
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Additional risks and uncertainties that management is not aware of or that management currently believes are immaterial may also impair Valley’s business operations. The value or market price of our securities could decline due to any of these identified or other risks, and you could lose all or part of your investment.
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Net income for the year ended December 31, 2022 was $568.9 million, or $1.14 per diluted common share as compared to $473.8 million, or $1.12 per diluted common share for 2021.
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This Report is qualified in its entirety by these risk factors. Risks Related to the Operating Environment Our financial results and condition may be adversely impacted by changing economic conditions. Financial institutions are affected by changes in the economic environment, which may be impacted by changing interest rates, volatility in financial markets, and geopolitical instability or conflict.
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The $95.0 million increase in net income as compared to the same period one year ago was mainly due to the following changes: • a $445.7 million increase in net interest income mainly due to higher average loan balances driven by both acquired and organic loan volumes and increased yields on new and adjustable-rate loans; and • a $51.8 million increase in non-interest income driven by increases in wealth management and trust fees and service charges on deposit accounts totaling $19.8 million and $15.5 million, respectively, primarily related to brokerage fee and deposit growth resulting from the Bank Leumi USA acquisition, and a $11.7 million increase in other income related to higher swap fee income and growth due to the acquisition, partially offset by a decrease in net gains on sales of residential mortgage loans; These items were partially offset by: • a $24.2 million increase in our provision for credit losses; • a $333.4 million increase in non-interest e xpense largely due to increases in salary and employee benefits; technology, furniture and equipment expenses; and net occupancy caused by our expanded banking operations resulting from the acquisitions of Bank Leumi USA on April 1, 2022 and The Westchester Bank Holding Corporation (Westchester) on December 1, 2021; and • a $44.9 million increase in income tax expense mostly due to higher pre-tax income for the year ended December 31, 2022.
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Economic conditions, financial markets and monetary policies may be adversely affected by the impact of inflationary pressures, affected by the impact of current or anticipated fiscal and monetary policies, the potential for an economic recession, uncertainty regarding the U.S. debt ceiling, government shutdowns, or default by the U.S. government on its obligations, and actual or perceived instability in the U.S. 2023 Form 10-K 22 banking system.
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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 infrequent items, including merger related expenses, impacting our 2022 annual results. Operating Environment.
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Changes in global economic conditions and geopolitical matters, including the conflicts between Russia and Ukraine and Israel and Hamas, foreign currency exchange volatility, volatility in global capital markets, inflationary pressures, and higher interest rates may meaningfully impact loan production, net interest margin, the value of our securities portfolio, and the measurement of certain significant estimates such as the allowance for credit losses.
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The year ended December 31, 2022 was defined by volatile markets as a result of higher interest rates and inflation, Russia’s war in Ukraine, and fears of a recession. It was also a year of aggressive monetary tightening, with the Federal Reserve increasing rates by a cumulative 4.25 percent throughout the year.
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Moreover, in a period of economic contraction, we may experience elevated levels of credit losses, reduced interest income, impairment of goodwill and other financial assets, diminished access to capital markets and other funding sources, and reduced demand for our products and services.
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During 2022, real gross domestic product increased 2.1 percent compared to an increase of 5.9 percent in 2021. The increase in economic activity was driven in large part by household spending on goods and services, and a favorable mix of export activity outpacing imports.
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Volatility in the housing markets, real estate values and unemployment levels results in significant write-downs of asset values by financial institutions. The majority of Valley’s lending is in northern and central New Jersey, the New York City metropolitan area and Florida.
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Residential fixed investments declined as mortgage rates increased causing potential home buyers to hold back and wait for affordability to improve. Business fixed investment, inventory restocking and government spending increased at a tepid rate. During 2022, the Federal Reserve took unprecedented action to restrain inflation and improve the stability of the economy.
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As a result of this geographic concentration, a significant broad-based deterioration in economic conditions in these areas could have a material adverse impact on the quality of Valley’s loan portfolio, results of operations and future growth potential.
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The Federal Reserve raised the federal funds rate seven consecutive times ranging from 25 basis points in the beginning of the year to 75 basis points toward the end of the year and brought its benchmark interest rate up by a collective 4.25 percent.
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During 2022 and 2023, the Federal Reserve took unprecedented action to restrain inflation and improve the stability of the economy by raising the upper target federal funds rate from 0.25 percent to 5.50 percent.
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In addition, the Federal Reserve has continued to reduce its holdings of Treasury securities and agency residential and commercial mortgage-backed securities. The Federal Reserve is strongly committed to returning inflation to its 2 percent objective. The 10-year U.S. Treasury note yield ended 2022 at 3.88 percent, 236 basis points higher compared with December 31, 2021.
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As inflation increases and market interest rates rise, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments. In addition, inflation generally increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non-interest expenses.
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Meanwhile, the spread between the 2- and 10-year U.S. Treasury note yields ended the year at a negative (0.53) percent, 132 basis point lower compared to the end of 2021. For all commercial banks in the U.S., loans and leases increased approximately 11.3 percent from December 31, 2021 to December 31, 2022.
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Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their deposits and/or ability to repay their loans with us.
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For the industry, banks reported that demand for commercial and industrial loans, particularly among large and middle-market firms, had increased sharply compared to the prior year. Alternatively, demand for commercial real estate lending was challenged, particularly those related to construction and land development.
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Any of these effects, if sustained, may impair our capital and liquidity positions, require us to take capital actions, prevent us from satisfying our minimum regulatory capital ratios and other supervisory requirements, or result in downgrades in our credit ratings and the reduction or elimination of our common stock dividend in future periods.
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While overall industry loan growth 38 2022 Form 10-K was strong during the year, banks reported that demand for most commercial and consumer loan products had declined notably in the fourth quarter of 2022. Higher interest rates drove up cost of capital further constraining new construction and overall housing demand.
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The extent to which the economic environment has an impact on our business, results of operations, and financial condition, as well as the regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the current economic environment and actions taken by governmental authorities and other third parties in response to geopolitical conflicts, inflationary pressure and other changes in economic and political conditions.
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Additionally, the industry reported increasing underwriting standards across both commercial and consumer loan products.
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Our financial results and condition may be adversely impacted by banking failures or any future similar events.
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Further expected increases in market interest rates, persistently high inflation and geopolitical tensions, which continued to exacerbate supply chain issues, and tight labor market conditions, among other factors, have added a higher level of uncertainty to the future path of the U.S. economy and an elevated risk of a recession.
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Certain events impacting the banking industry, including the bank failures in March and April 2023, resulted in significant disruption and volatility in the capital markets, reduced valuations of bank securities, and decreased confidence in banks among certain depositors, other counterparties and investors during most of 2023.
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Additionally, further increases in the market interest rates may cause firms to restrain investment and related borrowings, and Valley and its financial results could be adversely impacted, as highlighted in the remaining MD&A discussion below. Loans.
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These events occurred in the context of rapidly rising interest rates which, among other things, resulted in unrealized losses in longer duration debt securities and loans held by banks, and increased competition for deposits. These events had, and may continue to have, an adverse impact on the market price of our common stock. While the U.S.
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Total loans increased $12.8 billion to $46.9 billion at December 31, 2022 as compared to December 31, 2021 largely due to a combination of $5.9 billion of acquired loans from Bank Leumi USA, strong commercial loan volumes and an increase in new residential mortgage loans originated for investment rather than sale, partially offset by a decline in PPP loans.
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Department of the Treasury, the Federal Reserve, and the FDIC took steps to ensure that depositors of the failed banks in early 2023 would have access to their insured and uninsured deposits, and to facilitate sales of certain failed banks, there is no assurance that these or similar actions will restore customer confidence in the banking system, and we may be further impacted by concerns regarding the soundness, real or perceived, of other financial institutions, or other future bank failures or disruptions.
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The PPP loans included within the commercial and industrial loan category decreased $476.0 million from December 31, 2021 as result of SBA loan forgiveness.
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The proliferation of social media may increase the likelihood that negative public opinion from any of the real or perceived events discussed above could impact our reputation and business. Any loss of client deposits or changes in our credit ratings could increase the cost of funding, limit access to capital markets or negatively impact our overall liquidity or capitalization.
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Excluding acquired loans from Bank Leumi USA, commercial real estate (including construction), non-PPP commercial and industrial, residential mortgage and automobile loans increased 24.5 percent, 20.0 percent, 17.7 percent, and 11.2 percent, respectively, during the year ended December 31, 2022. Loans held for sale totaled $18.1 million and $139.5 million at December 31, 2022 and 2021, respectively.
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The cost of resolving the recent bank failures has also prompted the FDIC to issue a special assessment to recover costs to the DIF. The special assessment for the Bank resulted in a $50.3 million pre-tax charge to earnings in the fourth quarter 2023.
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For 2023, we are targeting net loan growth in the range of 7 to 9 percent based on the gross loans of $46.9 billion at December 31, 2022.
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Among other things, the FDIC maintains the ability to impose an additional shortfall special assessment based on the difference between actual losses from the bank failures and the amounts collected. For additional information on the FDIC’s special assessment, see Item 1. Business—"Supervision and Regulation” and Item 7. MD&A—"Subsequent Events".
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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. of this Report. See further details on our loan activities under the “Loan Portfolio” section below. Asset Quality.
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The extent to which the shortfall special assessment will impact our future deposit insurance expense is currently uncertain.
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Total non-performing assets (NPAs), consisting of non-accrual loans, other real estate owned (OREO) and other repossessed assets increased $26.6 million, or 10.8 percent to $272.0 million at December 31, 2022 as compared to December 31, 2021.
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These recent events and any future similar events may also result in changes to laws or regulations governing bank holding companies and banks, including higher capital requirements, or the imposition of restrictions through supervisory or enforcement activities, which could materially impact our business. 23 2023 Form 10-K Risks Associated with Our Business Model Valley has incurred and could continue to incur significant costs related to its systems integration and technology roadmap.
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This increase was largely due to higher non-accrual construction loans (including acquired loans from Bank Leumi USA), partially offset by lower non-accrual commercial real estate loans and residential mortgage loans.
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In October 2023, Valley executed and completed its core conversion in connection with the acquisition of Bank Leumi USA. Valley has incurred and could continue to incur substantial costs in connection with the integration of Valley and Bank Leumi USA and implementation of its technology roadmap for the organization.
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Non-accrual loans totaled $269.8 million, or 0.57 percent of our entire loan portfolio of $46.9 billion, at December 31, 2022 as compared to $240.2 million, or 0.70 percent of total loans, at December 31, 2021. Net loan charge-offs totaled $19.1 million and $15.1 million for the years ended December 31, 2022 and 2021, respectively.
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While the core conversion is substantially complete, we continue to optimize a large number of processes, procedures, operations, and technologies related to our new single core banking system.
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Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) increased $35.0 million to $90.9 million, or 0.19 percent of total loans at December 31, 2022 as compared to $55.9 million, or 0.16 percent of total loans, at December 31, 2021.
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Valley has assumed that a certain level of costs will be incurred for these continued enhancements and the consolidation of back office functions, however, there are many factors beyond Valley’s control that could affect the total amount or the timing of the remaining costs, and the anticipated benefits and synergies, if any, resulting upon completion.
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The increase was largely due to increases in commercial and industrial, and commercial real estate loans in the 69 to 89 days past due and 90 or more days past due delinquency categories. See further details in the “Non-performing Assets” section below. Deposits and Borrowings .
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Several costs that will be incurred are, by their nature, difficult to estimate accurately. As a result, the remaining integration and technology enhancements may result in Valley taking larger than expected charges against its earnings.
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Overall, average deposits increased by $9.2 billion to $42.5 billion for the year ended December 31, 2022 as compared to 2021 largely due to $7.0 billion of deposits assumed from Bank Leumi USA, growth in average non-maturity deposits balances, as well as $1.2 billion in deposits assumed from Westchester Bank Holding Corporation (Westchester) on December 1, 2021.
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A significant portion of our loan portfolio is secured by commercial real estate, and events that negatively impact the real estate market could adversely affect our asset quality and profitability for those loans secured by real property and increase the number of defaults and the level of losses within our loan portfolio.
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The average non-interest bearing deposits and savings, NOW and money market account and time deposits balances increased by $4.3 billion, $4.4 billion, and $435.0 million, respectively, for the year ended December 31, 2022 as compared to 2021.
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As of December 31, 2023, total commercial real estate loans, including construction loans, represented 63.7 percent of our loan portfolio.
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Average non-interest-bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 35 percent, 53 percent and 12 percent of total deposits at December 31, 2022 , respectively.
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These types of loans generally expose a lender to a higher degree of credit risk of non-payment and loss than residential mortgage loans do because of several factors, including dependence on the successful operation of a business or a project for repayment, and loan terms with a balloon payment rather than full amortization over the loan term.
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Actual ending balances for deposits increased $12.0 billion to $47.6 billion at December 31, 2022 as compared to 2021 mostly due to the assumed deposits from Bank Leumi USA and Westchester, commercial customer deposit organic growth, and increased utilization of brokered deposits, consisting of money market and time deposit accounts, in our funding mix.
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In addition, commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one-to-four family residential mortgage loans. The value of the real estate collateral that provides an alternate source of repayment in the event of default by the borrower could deteriorate during the time the credit is extended.
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Non-interest bearing deposits increased $2.8 billion at December 31, 2022 as compared to 2021 largely due to deposits assumed from Bank Leumi USA, partially offset by some migration of both commercial and retail balances to interest bearing deposit products during the second half of 2022.
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Underwriting and portfolio management activities cannot completely eliminate all risks related to these loans. Any significant failure to pay on time by our clients or a significant default by our clients would materially and adversely affect us.
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Total brokered deposits increased to $5.9 billion at December 31, 2022 as compared to $1.4 billion to December 31, 2021 as we increased our utilization of such funds in the second half of 2022 as a favorable alternative to other borrowings.
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Concentrations in commercial real estate are closely monitored by regulatory agencies and subject to especially heightened scrutiny both on a public and confidential basis. Any formal or informal action by our supervisors may require us to increase our reserves on these loans and adversely impact our earnings.
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Non-interest bearing deposits; savings, NOW, money market deposits; and time deposits represented approximately 30 percent, 50 percent and 20 percent of total deposits as of December 31, 2022, respectively.
Added
A downturn in the real estate market in our primary market areas could result in an increase in the number of borrowers who default on their loans and a reduction in the value of the collateral securing their loans, which in turn could have an adverse effect on our profitability and asset quality.
Removed
While our overall deposit levels benefited from organic growth and acquired deposits during 2022, we believe the current operating environment will likely remain very challenging for Valley’s deposit gathering initiatives due to, among other factors, the high 39 2022 Form 10-K level of short-term interest rates and additional forecasted interest rate hikes by the Federal Reserve to tame inflation.
Added
If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and shareholders’ equity could be adversely affected. Any weakening of the commercial real estate market may increase the likelihood of default on these loans, which could negatively impact our loan portfolio’s performance and asset quality.
Removed
As a result, we cannot guarantee that we will be able to maintain deposit levels at or near those reported at December 31, 2022.
Added
For example, any declines in commercial real estate prices in the New Jersey, New York and Florida markets we primarily serve, along with the unpredictable long-term path of the economy, may result in increases in delinquencies and losses in our loan portfolios.
Removed
The following table presents average short-term and long-term borrowings for the years ended December 31, 2022 and 2021: 2022 2021 (in thousands) Average short-term borrowings: FHLB advances $ 531,020 $ 722,192 Securities sold under repurchase agreements 137,527 163,223 Federal funds purchased 355,805 6,493 Total $ 1,024,352 $ 891,908 Average long-term borrowings: FHLB advances $ 788,725 $ 1,136,661 Subordinated debt 658,798 533,754 Securities sold under repurchase agreements — 170,685 Junior subordinated debentures issued to capital trusts 56,588 56,243 Total $ 1,504,111 $ 1,897,343 Average short-term borrowings increased $132.4 million at December 31, 2022 as compared to 2021 mostly due to increased use of federal funds purchased as a part of our overall funding strategy, partially offset by lower utilization of FHLB advances.
Added
Unexpected decreases in commercial real estate prices coupled with slow economic growth and elevated levels of unemployment could drive losses beyond those which are provided for in our allowance for loan losses.
Removed
Average long-term borrowings (including junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition) decreased $393.2 million at December 31, 2022 as compared to 2021 largely due to the repayment of long-term repurchase agreements during the third quarter 2021 and, to a lesser extent, maturities of FHLB advances over the last 12 months.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table summarizes our leased and owned retail banking centers in each state: Leased Owned Number of banking centers % of Total New Jersey Northern 56 45 101 43.7 Central 13 14 27 11.7 Total New Jersey 69 59 128 55.4 New York Manhattan, Brooklyn and Queens 16 7 23 10.0 Long Island 9 3 12 5.2 Westchester County 7 0 7 3.0 Total New York 32 10 42 18.2 Florida 27 15 42 18.2 Alabama 4 12 16 6.9 California 2 0 2 0.9 Illinois 1 0 1 0.4 Total 135 96 231 100.0 % Our principal executive office is located at One Penn Plaza in Manhattan, New York.
Biggest changeThe following table summarizes our leased and owned retail banking centers in each state: Leased Owned Number of banking centers % of Total New Jersey Northern 56 45 101 44.1 Central 13 14 27 11.8 Total New Jersey 69 59 128 55.9 New York Manhattan, Brooklyn and Queens 15 7 22 9.6 Long Island 9 3 12 5.2 Westchester County 7 0 7 3.1 Total New York 31 10 41 17.9 Florida 26 15 41 17.9 Alabama 4 12 16 7.0 California 2 — 2 0.9 Illinois 1 — 1 0.4 Total 133 96 229 100.0 % Our principal executive office is located at One Penn Plaza in New York, New York.
Item 2. Properties We conduct our business at 231 retail banking centers locations in northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn and Queens, Long Island, Westchester County, New York, Florida, Alabama, California and Illinois. We own 96 of our banking center facilities and several non-branch operating facilities.
Item 2. Properties We conduct our business at 229 retail banking centers locations in northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn and Queens, Long Island, Westchester County, New York, Florida, Alabama, California and Illinois. We own 96 of our banking center facilities and several non-branch operating facilities.
Additionally, we acquired two leased offices in New York City from Bank Leumi USA that are primarily used for commercial lending and 31 2022 Form 10-K our broker-dealer, VFM. We also lease six non-bank office facilities in Florida, used for operational, executive and lending purposes. Additional information regarding Valley's leased locations and owned facilities can be found within Note 6.
During 2022 we acquired two leased offices in New York City from Bank Leumi USA that are primarily used for commercial lending and our broker-dealer, VFM. We also lease seven non-bank office facilities in Florida, used for operational, executive and lending purposes. Additional information regarding Valley’s leased locations and owned facilities can be found within Note 6 .
Many of our bank operations are located in Wayne, New Jersey, where we own five office buildings. Our New York City corporate headquarters are primarily used as a central hub for New York based lending activities of senior executives and other commercial lenders.
Our New York City corporate offices are primarily used as a central hub for New York based lending activities of senior executives and other commercial lenders.
Leases and Note 7. Premises and Equipment, Net in the Notes to the Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data, respectively.
“Leases” and Note 7 . “Premises and Equipment, Net,” respectively, in the Notes to the Consolidated Financial Statements contained in Item 8. Financial Statements and Supplementary Data. 37 2023 Form 10-K
Added
During the third quarter 2023, Valley completed the sale of two corporate office buildings located in Wayne, New Jersey and relocated its headquarters to a new leased location at 70 Speedwell Avenue in Morristown, New Jersey.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph shows how a $100 investment would increase or decrease in value over time based on dividends (stock or cash) and increases or decreases in the market price of the stock. 12/17 12/18 12/19 12/20 12/21 12/22 Valley $ 100.00 $ 82.21 $ 110.38 $ 99.27 $ 144.72 $ 123.58 KBW Regional Banking Index (KRX) 100.00 82.51 102.20 93.33 127.53 118.71 S&P 500 100.00 95.61 125.70 148.81 191.48 156.77 32 2022 Form 10-K The information under “Performance Graph” is not deemed to be “filed” with the SEC and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent specifically incorporated by reference into such a filing.
Biggest changeThe graph shows how a $100 investment would increase or decrease in value over time based on dividends (stock or cash) and increases or decreases in the market price of the stock. 12/18 12/19 12/20 12/21 12/22 12/23 Valley $ 100.00 $ 134.26 $ 120.76 $ 176.03 $ 150.33 $ 151.37 KRX 100.00 123.87 113.11 154.57 143.87 143.30 S&P 500 100.00 131.47 155.65 200.29 163.98 207.04 2023 Form 10-K 38 The information under “Performance Graph” is not deemed to be to be “soliciting material” or to be “filed” with the SEC or subject to Section 18 of the Exchange Act, and the information shall not be deemed to be incorporated by reference in any filing by us under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent specifically incorporated by reference into such a filing.
Performance Graph The following graph compares the cumulative total return on a hypothetical $100 investment made on December 31, 2017 in: (a) Valley’s common stock; (b) the KBW Regional Banking Index (KRX) and (c) the Standard and Poor’s (S&P) 500 Stock Index. The graph is calculated assuming that all dividends are reinvested during the relevant periods.
Performance Graph The following graph compares the cumulative total return on a hypothetical $100 investment made on December 31, 2018 in: (a) Valley’s common stock; (b) the KBW Regional Banking Index ("KRX"); and (c) the S&P 500 Stock Index ("S&P 500"). The graph is calculated assuming that all dividends are reinvested during the relevant periods.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Select Market under the ticker symbol "VLY". There were 7,183 shareholders of record as of December 31, 2022.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Select Market under the ticker symbol “VLY.” There were 6,872 shareholders of record as of December 31, 2023.
Issuer Repurchase of Equity Securities The following table presents the purchases of equity securities by the issuer and affiliated purchasers during the three months ended December 31, 2022: Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans (2) (3) Maximum Number of Shares that May Yet Be Purchased Under the Plans (3) October 1, 2022 to October 31, 2022 1,220 $ 10.95 — 25,000,000 November 1, 2022 to November 30, 2022 2,389 11.73 — 25,000,000 December 1, 2022 to December 31, 2022 5,734 11.94 — 25,000,000 Total 9,343 $ 11.76 — (1) Includes repurchases made in connection with the vesting of employee restricted stock awards.
Issuer Repurchase of Equity Securities The following table presents the repurchases of equity securities during the three months ended December 31, 2023: Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans (2) Maximum Number of Shares that May Yet Be Purchased Under the Plans (2) October 1, 2023 to October 31, 2023 3,956 $ 8.45 — 24,700,000 November 1, 2023 to November 30, 2023 7,642 7.86 — 24,700,000 December 1, 2023 to December 31, 2023 11,460 9.40 — 24,700,000 Total 23,058 $ 8.73 — (1) Includes repurchases made in connection with the vesting of employee restricted stock awards.
(3) On April 26, 2022, Valley publicly announced a stock repurchase program for up to 25 million shares of Valley common stock. The authorization to repurchase will expire on April 25, 2024. Recent Stock Issuance. On October 8, 2021, Valley acquired certain subsidiaries of Dudley Ventures, LLC (See Note 2 to the consolidated financial statements).
(2) On April 26, 2022, Valley publicly announced a stock repurchase program for up to 25 million shares of Valley common stock, which is set to expire on April 25, 2024. On February 21, 2024, Valley publicly announced a new stock repurchase program for up to 25 million shares of Valley common stock.
Removed
(2) On January 17, 2007, Valley publicly announced its intention to repurchase up to 4.7 million outstanding common shares in the open market or in privately negotiated transactions. On April 26, 2022, Valley terminated its 2007 stock repurchase plan.
Added
We declared cash dividends of $0.11 per share in each of the first, second, third and fourth quarters of 2023.
Removed
Per the terms of the merger agreement, we subsequently issued 327,083 shares of our common stock to the two former principals of Dudley Ventures on February 8, 2023 as partial consideration for the transaction. The value of the issued shares amounted to approximately $3.75 million.
Added
The declaration and payment of future dividends to holders of our common stock is at the discretion of our Board and depends upon many factors, including our financial condition, earnings, capital requirements, legal requirements, regulatory constraints and other factors that our Board deems relevant.
Removed
The shares were issued pursuant to and in accordance with exemption from registration under Section 4(a)(2) of the Securities Act for transactions by an issuer not involving a public offering. Item 6. [Reserved]
Added
The authorization to repurchase under the new repurchase program will be effective on April 26, 2024, replacing the current stock repurchase program, and is set to expire on April 26, 2026. Item 6. [Reserved]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements and Supplementary Data: 71 Valley National Bancorp and Subsidiaries: Consolidated Statements of Financial Condition 71 Consolidated Statements of Income 72 Consolidated Statements of Comprehensive Income 73 Consolidated Statements of Changes in Shareholders’ Equity 74 Consolidated Statements of Cash Flows 75 Notes to Consolidated Financial Statements 77 Report of Independent Registered Public Accounting Firm 142
Biggest changeFinancial Statements and Supplementary Data: 78 Consolidated Statements of Financial Condition 78 Consolidated Statements of Income 79 Consolidated Statements of Comprehensive Income 80 Consolidated Statements of Changes in Shareholders’ Equity 81 Consolidated Statements of Cash Flows 82 Notes to Consolidated Financial Statements 84 Report of Independent Registered Public Accounting Firm 151
Item 6. [Reserved] 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 70 Item 8.
Item 6. [Reserved] 39 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 77 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFactors that may cause actual results to differ materially from those contemplated by such forward-looking statements in addition to those risk factors listed under the “Risk Factors” section in Part1, Item 1A of this Annual Report on Form 10-K include, but are not limited to: • the impact of unfavorable macroeconomic conditions or downturns, instability or volatility in financial markets and other events and factors outside of our control, such as U.S. and global recession concerns, geopolitical concerns including the 33 2022 Form 10-K conflict between Russia and Ukraine, inflationary pressures, labor market volatility, supply chain issues, and the COVID-19 pandemic or other public health crisis; • risks associated with our acquisition of Bank Leumi USA, including the inability to realize expected cost savings and synergies from the acquisition in the amounts or timeframe anticipated, greater than expected costs or difficulties relating to integration matters, any inability to retain customers and qualified employees of Bank Leumi USA, and the potential for greater than expected non-recurring charges related to the acquisition; • the impact of COVID-19 and any future resurgences on the U.S. and global economies, including business disruptions, reductions in employment, supply chain interruptions, inflation, Federal Reserve actions impacting the level of market interest rates and increases in business failures, specifically among our clients, as well as on our business, our employees and our ability to provide services to our customers; • the loss of or decrease in lower-cost funding sources within our deposit base, including our inability to achieve deposit retention targets under Valley's branch transformation strategy; • the impact of forbearances or deferrals we are required to, or agree to as a result of customer requests and/or government actions, including, but not limited to our potential inability to recover fully deferred payments from the borrower or the collateral; • the risks related to the replacement of the London Interbank Offered Rate with Secured Overnight Financing Rate and other reference rates, including increased expenses and litigation and the effectiveness of hedging strategies; • 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 or trademark infringement, employment related claims, and other matters; • a prolonged downturn in the economy, mainly in New Jersey, New York, Florida, Alabama, California, and Illinois, as well as an unexpected decline in commercial real estate values within our market areas; • 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; • 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; • cyber-attacks, ransomware attacks, computer viruses or other malware that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems; • results of examinations by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank (FRB), the Consumer Financial Protection Bureau (CFPB) and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities; • our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements or a decision to increase capital by retaining more earnings; • 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; and • unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors.
Biggest changeGovernment shutdown, default by the U.S. government on its debt obligations, or related credit-rating downgrades, on economic activity in the markets in which we operate and, in general, on levels of end market demand in the economy; 39 2023 Form 10-K • the impact of unfavorable macroeconomic conditions or downturns, 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 geopolitical instabilities or events (including the Israel-Hamas war); 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, 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 FDIC insurance premiums, or adverse impact on our stock price, deposits or our ability to borrow or raise capital; • the impact of negative public opinion regarding Valley or banks in general that damages our reputation and adversely impacts business and revenues; • greater than expected costs or difficulties related to Valley's new core banking system implemented in the fourth quarter 2023 and continued enhancements to processes and systems under Valley's current technology roadmap; • 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 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; • 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; • 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; • results of examinations by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank, the Consumer Financial Protection Bureau (CFPB) and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities; • our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements or a decision to increase capital by retaining more earnings; • 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; and • unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors.
The accounting estimates relating to 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 gross domestic product (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.
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.
Management’s determination of the amount of the ACL is a critical accounting estimate as 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.
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.
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 2022.
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 2023.
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, 2021 and 2020, please refer to Item 7.
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, 2022 and 2021, please refer to Item 7.
Management has reviewed the application of these policies with the Audit Committee of Valley’s Board of Directors. The judgments 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.
Management has reviewed the application of these policies with the Audit Committee of the Board. The judgments 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.
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, 2021, filed with the SEC on February 28, 2022. 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.
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, 2022, filed with the SEC on March 1, 2023. 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.
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 held to maturity debt securities measured at amortized cost.
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.
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 34 2022 Form 10-K statements.
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.
Of our current 231 branch network, 55 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.
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.
During 2022, 2021 and 2020, our income tax expense reflected increases of $1.8 million, $1.2 million and $1.5 million, respectively, to our tax provision related to reserve for uncertain tax liability positions and/or accrued interest related to such positions at December 31, 2022, 2021 and 2020, respectively.
During 2023, 2022 and 2021, our income tax expense reflected increases of $3.0 million, $1.8 million and $1.2 million, respectively, to our tax provision related to reserve for uncertain tax liability positions and/or accrued interest related to such positions at December 31, 2023, 2022 and 2021, respectively.
Critical Accounting Estimates Our accounting and reporting policies conform, in all material respects, to U.S. 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.
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 2023 Form 10-K 40 liabilities as of the date of the consolidated statements of financial condition and results of operations for the periods indicated.
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, 2022 and 2021.
As discussed further in the “Allowance for Credit Losses” section in this MD&A, we incorpo rated a multi-scenario economic forecast for estimating lifetime expected credit losses at December 31, 2023 and 2022.
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.
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.
Factors that may materially affect the estimates include, among others, impact of the pandemic on macroeconomic variables 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.
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.
We have significant goodwill and other intangible assets related to our acquisitions totaling $1.9 billion and $197.5 million at December 31, 2022, respectively.
We have significant goodwill and other intangible assets related to our acquisitions totaling $1.9 billion and $160.3 million at December 31, 2023, respectively.
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 $483.3 million and $375.7 million at December 31, 2022 and 2021, respectively.
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 $465.6 million and $483.3 million at December 31, 2023 and 2022, respectivel y.
Other qualitative non-economic reserves, largely based upon management judgements about certain inherent factors in acquired loan portfolios not reflected in our quantitative reserves, increased to approximately 20 percent of total allowance for credit losses for loans at December 31, 2022 as compared to 10 percent at 35 2022 Form 10-K December 31, 2021.
Other qualitative non-economic reserves, largely based upon management judgements about certain inherent factors in acquired loan portfolios not reflected in our quantitative reserves, decreased $23.5 million to approximately 16 percent of total allowance for credit losses for loans at December 31, 2023 as compared to 20 percent at December 31, 2022.
These specific reserves include $42.2 million and $58.5 million at December 31, 2022 and 2021, respectively, related to New York City taxi medallion loan valuations based on the estimated value of the underlying medallions.
These specific reserves include $37.7 million and $42.2 million at December 31, 2023 and 2022, respectively, related to New York City tax i medallion loan valuations based on the estimated value of the underlying medallions.
Despite targeted branch consolidation activity, we have significantly grown both in asset size and locations over the past several years primarily both through organic efforts and through bank acquisitions. Our most recent bank acquisition is discussed below. Bank Leumi Le-Israel Corporation.
Despite targeted branch consolidation activity, we have grown significantly both in asset size and locations over the past several years through organic efforts and bank acquisitions, including our acquisition of Bank Leumi USA on April 1, 2022, which is discussed below. Bank Leumi Le-Israel Corporation.
The valuation of the underlying medallions could be adversely impacted by further illiquidity or dislocation in the market, resulting in depressed market valuations of the underlying collateral, thus leading to additional provisions for loan losses. See additional taxi medallion loan valuation sensitivity analysis under the “Non-performing Assets” section of this MD&A. Goodwill and Other Intangible Assets.
However, the valuation of the underlying medallions could be adversely impacted by numerous ride-sharing/taxi service market challenges and illiquidity that result in a lower market valuations of the underlying collateral, thus leading to additional provisions for loan losses. See additional taxi medallion loan valuation sensitivity analysis under the “Non-performing Assets” section of this MD&A. Goodwill and Other Intangible Assets.
In 2023, we will continue to monitor and evaluate the impact of the pandemic and 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.
Therefore, we concluded there were no triggering events that would require additional goodwill impairment test of the reporting units during 2023. In 2024, 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.
An uncertain tax position is measured based on the largest amount of benefit that management believes is more likely than not to be realized.
We also maintain 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.
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. 36 2022 Form 10-K Our interpretations may be subject to review during examination by taxing authorities and disputes may arise over the respective tax positions.
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.
To assist in assessing the impact of potential goodwill or other intangible assets impairment charges at December 31, 2022, the impact of a five percent impairment charge on these intangible assets would result in a reduction in pre-tax income of approximately $103.3 million. See Note 8 to the consolidated financial statements for additional information regarding goodwill and other intangible assets.
To assist in assessing the impact of potential goodwill or other intangible assets impairment charges at December 31, 2023, the impact of a five percent impairment charge on these intangible assets would result in a reduction in pre-tax income of approximately $101.5 million.
The increased level of reserves resulting from the higher percentage of these significant judgmental factors during 2022 was partly mitigated by decreases 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 net positive developments in these significant judgmental factors during 2023 were mostly offset by increases in 41 2023 Form 10-K 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.
In addition to the annual impairment test, we assessed the impact of the lingering effects of the COVID-19 pandemic and other factors on macroeconomic variables and economic forecasts and how those might impact the fair value of our reporting units each quarter end.
In addition to the annual impairment test, we assessed the immediate and long-term impact of significant events during 2023, including the bank failures and changes in bank regulation, on the macroeconomic variables and economic forecasts and how those might impact the fair value of our reporting units each quarter end.
On April 1, 2022, Valley completed its acquisition of Bank Leumi Le-Israel Corporation, the U.S. subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA, collectively referred to as “Bank Leumi USA”.
On April 1, 2022, Valley completed its acquisition of Bank Leumi Le-Israel Corporation, the U.S. subsidiary of Bank Leumi Le-Israel B.M., and parent company of Bank Leumi USA, collectively referred to as “Bank Leumi USA.” At the acquisition date, Bank Leumi USA had approximately $8.1 billion in assets, $5.9 billion of loans and $7.0 billion of deposits, after purchase accounting adjustments.
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.
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.
At December 31, 2022, Valley had consolidated total assets of $57.5 billion, total net loans of $46.5 billion, total deposits of $47.6 billion and total shareholders’ equity of $6.4 billion.
At December 31, 2023, Valley had consolidated total assets of $60.9 billion, total net loans of $49.8 billion, total deposits of $49.2 billion and total shareholders’ equity of $6.7 billion.
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.
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.
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.
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.
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, 2022 and 2021. We also maintain a reserve related to certain tax positions that management believes contain an element of uncertainty.
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, 2023 and 2022.
As a result, the qualitative economic component of our reserves at December 31, 2022 increased to approximately 16 percent of total allowance for credit losses for loans at December 31, 2022 as compared to 6 percent at December 31, 2021.
Despite general improvements in most economic indicators, including inflation, during the latter half of 2023, the qualitative economic component of our reserves at December 31, 2023 increased by $4.8 million to approximately 19 percent of total allowance for credit losses for loans at December 31, 2023 as compared to 17 percent at December 31, 2022.
At the acquisition date, Bank Leumi USA had approximately $8.1 billion in assets, $5.9 billion of loans and $7.0 billion of deposits, after purchase accounting adjustments. Valley issued approximately 85 million shares of common stock and paid $113.4 million in cash in the transaction. The consideration for the acquisition totaled approximately $1.2 billion, inclusive of the value of stock options.
Valley issued approximately 85 million shares of common stock and paid $113.4 million in cash in the transaction. The consideration for the acquisition totaled approximately $1.2 billion, inclusive of the value of stock options. The transaction resulted in $403.2 million of goodwill and $153.4 million of combined core deposit and other intangible assets subject to amortization.
Specific reserves totaling $86.6 million and $71.5 million, respectively, within the allowance at December 31, 2022 and 2021 are also largely based upon management's valuation of collateral for collateral dependent loans and the present value of expected cash flows for certain troubled debt restructured loans.
These reserves are based upon management's valuation of collateral for collateral dependent loans, and prior to the adoption of ASU No. 2022-02 on January 1, 2023, the present value of expected cash flows for certain troubled debt restructured loans.
On April 1, 2022, Valley recorded reserves of $70.3 million in the allowance for credit losses for loans related to purchased credit deteriorated (PCD) loans acquired from Bank Leumi USA, and an additional second quarter 2022 provision of $41.0 million related to non-PCD loans and unfunded credit commitments also acquired from Bank Leumi USA.
During 2022, the provision for credit losses for loans included $36.3 million and $4.7 million of provision related to non-PCD loans and unfunded credit commitments, respectively, acquired from Bank Leumi USA. See Note 5 to the consolidated financial statements for additional information regarding our allowance for credit losses for loans.
The transaction resulted in $403.2 million of goodwill and $153.4 million of combined core deposit and other intangible assets subject to amortization. See Note 2 to the consolidated financial statements for additional details regarding the acquisition of Bank Leumi USA and other recent acquisition activities. Impact of COVID-19.
As originally planned, Valley completed its conversion of the legacy Valley and Bank Leumi USA operating systems to a single core operating system in October 2023. See Note 2 to the consolidated financial statements for additional details regarding the acquisition of Bank Leumi USA and other recent acquisition activities. Subsequent Events.
Removed
Due to the building inflationary pressures during most of 2022, aggressive interest rate hikes by the Federal Reserve and other global political and economic factors, Valley's CECL model incorporated a more pessimistic economic outlook in terms of GDP growth, unemployment levels and potential near term negative economic impacts, given such uncertain economic conditions at December 31, 2022 as compared to December 31, 2021.
Added
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.
Removed
Therefore, we concluded there were no triggering events that would require additional goodwill impairment test of the reporting units during 2022. Based upon Valley’s 2022 annual goodwill impairment testing, the fair values of its three reporting units were in excess of their carrying values.
Added
Risk Factors of this Report include, but are not limited to: • the impact of monetary and fiscal policies of the federal government and its agencies, including in response to higher inflation, which could have a material adverse effect on our clients, as well as our business, our employees, and our ability to provide services to our customers; • the impact of a potential U.S.
Removed
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.
Added
The percentage increase was almost entirely due to changes in the expected impact of the economic forecast on our non-owner occupied commercial real estate portfolio as compared to December 31, 2022.
Removed
Over the last three years, the novel coronavirus (COVID-19) exposed the vulnerability of global supply chains and our dependence on countries like China for essential consumer goods. During 2022, the COVID-19 pandemic continued to have a severe disruptive impact on the U.S. and global economy, particularly due to supply chain disruptions and labor shortages.
Added
The decline was mostly due to the passage of time and better than expected performance of these portfolios.
Removed
While the U.S. experienced an economic rebound since 2021, partly due to the large scale vaccinations efforts, the first half of 2022 brought new global outbreaks of the COVID variants and a significant rise in inflation. As a result, worldwide inflationary concerns outweigh the other negative impacts of COVID-19 during the second half of 2022 and continued into 2023.
Added
The allowance for credit losses for loans also included specific reserves totaling $74.2 million and $86.6 million, respectively, at December 31, 2023 and 2022.
Removed
Additionally, the reversal of China's “zero COVID” policy in December 2022 resulted in a massive wave of new infections in China, which is expected to suppress economic growth. China's economy slowdown could have prolonged negative consequences for the global economy as China exports up to one-third of the world's intermediate goods.
Added
Our valuation of the underlying medallions at December 31, 2023 increased 20 percent from December 31, 2022 due to continued incremental improvements in the New York City medallion pricing levels of publicly available sale transactions during 2023.
Removed
We continue to closely monitor the impact of COVID-19 and the emergence of new variants, as well as its impact on our 37 2022 Form 10-K associates, customers, communities and results of operations and other government or Federal Reserve actions. See
Added
Additionally, we perform a market capitalization reconciliation to support the appropriateness of our reporting unit fair values and impairment test results.
Added
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.
Added
See Note 8 to the consolidated financial statements for additional information regarding goodwill and other intangible assets. 2023 Form 10-K 42 Income Taxes. We are subject to the income tax laws of the U.S., its states and municipalities.
Added
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.
Added
In January 2024, we entered into an agreement to sell our commercial premium finance lending business and a significant portion of its outstanding loan portfolio. This line of business represented $274.7 million, or 0.55 percent of our total loans outstanding, at December 31, 2023.
Added
Actual loans to be sold as part of this transaction will be identified shortly before the closing date of the transaction. Loans retained from this line of business are expected to mostly run-off at 43 2023 Form 10-K their normal maturity dates over the next 12 months.
Added
The pending transaction is expected to close during the first quarter 2024 and is not anticipated to materially impact our commercial lending operations or financial statements.
Added
On February 23, 2024, Valley received notification from the FDIC that the estimated loss attributable to the protection of uninsured depositors at Silicon Valley Bank and Signature Bank was $20.4 billion at December 31, 2023, an increase of approximately $4.1 billion from the estimate of $16.3 billion described in the final rule issued in November 2023.
Added
The FDIC plans to provide an updated estimate of each institution's quarterly and total special assessment expense with its first quarter 2024 special assessment invoice, to be released in June 2024. Valley will continue to evaluate new information as it becomes available. For additional information on the FDIC’s special assessment, see Item 1.
Added
Business—"Supervision and Regulation” and the "Non-Interest Expense" section of this MD&A. Industry Developments in 2023. The combination of rapidly rising interest rates, increased competition and economic uncertainty weighed on the banking industry in the wake of the bank failures in the first half of 2023.
Added
We have consistently operated the Bank with a focus on diversification to maintain stability through various economic cycles.
Added
During 2023, we continued to position our balance sheet to mitigate potential risks from the market uncertainty affecting the banking industry in general and Valley, its clients and communities in particular. • Total assets increased $3.5 billion , or 6.0 percent, to $60.9 billion at December 31, 2023 from December 31, 2022 primarily driven by loan growth.
Added
Our liquid assets totaled $2.4 billion at December 31, 2023, representing 4.3 percent of interest earning assets. We continue to maintain significant access to readily available, diverse funding sources to fulfill both short-term and long-term funding needs.
Added
See the “—Bank Liquidity” section for additional information. • Total deposits increased $1.6 billion, or 3.4 percent, to $49.2 billion at December 31, 2023 as compared to $47.6 billion at December 31, 2022 due to increases in both direct and indirect customer interest bearing deposits, partially offset by a $2.9 billion decrease in non-interest bearing deposits.
Added
See the “—Deposits and Other Borrowings” section for more details. • Capital remained strong with ratios of both Valley and the Bank exceeding all capital adequacy requirements at December 31, 2023. Total shareholders’ equity increased $300.6 million to $6.7 billion at December 31, 2023 as compared to December 31, 2022 .
Added
See the “—Capital Adequacy” section for additional details. • Total loans increased $3.3 billion, or 7.0 percent, to $50.2 billion at December 31, 2023 as compared to December 31, 2022 mainly due to well-controlled loan growth across most loan types in 2023.
Added
See further details on our loan activities under the “—Loan Portfolio” section below. • Asset quality continued to reflect our disciplined underwriting and lending practices during 2023. Non-performing assets (NPAs) as a percentage of total loans and NPAs totaled 0.58 percent at both December 31, 2023 and 2022.
Added
Our total net loan charge-offs to average loans was 0.13 percent and 0.05 percent for the years ended December 31, 2023 and 2022, respectively.
Added
See the “—Non-Performing Assets” section for additional information. • Total investment securities were $5.1 billion , or 8.4 percent of total assets, at December 31, 2023 and remained relatively unchanged as compared to December 31, 2022 . See the “—Investment Securities Portfolio” section for more details. Annual Results .
Added
Net income for the year ended December 31, 2023 was $498.5 million, or $0.95 per diluted common share as compared to $568.9 million, or $1.14 per diluted common share for 2022.
Added
The $70.3 million decrease in net income as compared to the same period one year ago was mainly due to the following changes: • a $137.7 million increase in non-interest expense due in part to organic and acquired growth in our bank operations, including a full year of normal and integration expenses related to the April 1, 2022 acquisition of Bank Leumi USA, inflationary pressures on our labor costs, increased charges for collateral liabilities related to derivative transactions and a $12.3 million increase in non-core items (highlighted in the “—Non-GAAP Financial Measures” section below); Which was partially offset by: • a $32.0 million decrease in income tax expense mostly due to lower pre-tax income and an increase in tax credits for the year ended December 31, 2023; • a $18.9 million increase in non-interest income that was primarily driven by higher wealth management and trust fees and net gains on sales of assets, partially offset by lower capital markets income; 2023 Form 10-K 44 • a $9.8 million increase in net interest income mostly due to higher yields on new loan originations and adjustable-rate loans and loan growth, partially offset by an increase in both the cost of deposits and average time deposits; and • a $6.6 million decrease in our provision for credit losses.
Added
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 infrequent non-core items impacting our 2023 annual results. Operating Environment. During 2023, real gross domestic product (GDP) increased at an annual rate of 2.5 percent as compared to an increase of 1.9 percent during 2022.
Added
The increase in real GDP was primarily driven by consumer spending, nonresidential fixed investment, exports, and government spending. The gains were partly offset by decreases in residential fixed investment, inventory restocking and imports.
Added
Inflation continued to wane with the consumer price index on a year over year basis decelerating from 6.4 percent at December 31, 2022 to 3.3 percent at December 31, 2023. In 2023, the Federal Reserve raised the target range for the federal funds rate from 4.25 - 4.50 percent to 5.25 - 5.50 percent.
Added
At its recent meeting in January 2024, the Committee indicated it does not expect to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.
Added
In addition, the Committee indicated it would continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The 10-year U.S. Treasury note yield ended 2023 at 3.88 percent unchanged from 2022 and the 2-year U.S.
Added
Treasury note yield ended 2023 at 4.23 percent, or 18 basis points lower as compared to 2022. Total loans and leases for U.S. commercial banks increased 2.3 percent in 2023 compared to 11.4 percent in 2022.
Added
Consumer and commercial real estate loans grew 3.5 and 3.2 percent, respectively from 2022 to 2023 while commercial and industrial loans decreased approximately 1.3 percent for the same period. Overall, commercial real estate lending continued to be stressed, particularly affecting regional and midsize banks that may be overexposed to office space lending.
Added
In light of higher uncertainty, inflated property prices, and concerns about debt repayments, most banks have become more selective in their new commercial real estate originations and continued to tighten standards related to real estate and commercial loans.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Information regarding Quantitative and Qualitative Disclosures About Market Risk is discussed in the “Interest Rate Sensitivity” section contained in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and it is incorporated herein by reference. 70 2022 Form 10-K
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Information regarding Quantitative and Qualitative Disclosures About Market Risk is discussed in the “Interest Rate Sensitivity” section contained in Item 7. MD&A and it is incorporated herein by reference. 77 2023 Form 10-K

Other VLYPP 10-K year-over-year comparisons