Valley National Bancorp : 1Q25 Basel III Regulatory Capital Disclosures Report

Published: 2025-05-09 09:33:15 ET VLY

Published on 05/09/2025 at 09:33

VALLEY NATIONAL BANCORP

BASEL III REGULATORY CAPITAL DISCLOSURES REPORT

March 31, 2025

800-522-4100 • Valley.com

© 2025 Valley National Bank. Member FDIC. All Rights Reserved. For Internal Use Only.

Contents 2

Introduction 3

Background 3

Forward-Looking Statements3

Scope of Application4

General 4

Basis of Consolidation4

Restrictions on the Transfer of Funds or Total Capital 4

Capital Requirements4

Capital Structure4

Summary of Capital4

Regulatory Capital Tiers5

Capital Adequacy5

Internal Capital Adequacy Process 5

Components of Risk-Weighted Assets 6

Capital Conservation Buffer and Capital Ratios 6

Capital Conservation Buffer6

Regulatory Capital Ratios7

Credit Risk: General Disclosures 7

Credit Risk Management 7

Credit Risk Exposures 8

General Disclosures for Counterparty Credit Risk-Related Exposures 12

Counterparty Credit Risk Management 12

Derivative Financial Instruments 13

Credit Risk Mitigation 14

General Credit Risk Mitigation 14

Credit Concentrations 14

Securitization 16

Equities Not Subject to Market Risk Rule 16

Equity Risk 16

Book Value and Fair Value of Equity Exposures Not Subject to the Market Risk Rule 16

Capital Requirements of Equity Investment Exposures by Risk-Weighting 17

Interest Rate Risk for Non-Trading Activities 17

Appendix 21

Valley National Bancorp, headquartered in Morristown, New Jersey, is a New Jersey corporation organized in 1983 and is registered as a bank holding company and a financial holding company with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended (Holding Company Act). As of March 31, 2025, Valley had consolidated total assets of $61.9 billion, total net loans of $48.1 billion, total deposits of

$50.0 billion and total shareholders' equity of $7.5 billion.

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, through the Bank and its subsidiaries, offers a full suite of national and regional banking solutions through various commercial, private banking, retail, insurance, capital markets, and wealth management financial services products. Valley provides personalized service and customized solutions to assist its customers with their financial service needs. Our solutions include, but are not limited to, traditional consumer and commercial deposit and lending products, commercial real estate financing, asset-based loans, small business loans, equipment financing, insurance and wealth management solutions, and personal financing solutions, such as residential mortgages, home equity loans and automobile financing. 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.

The Bank also provides convenient account access to customers through a number of account management services, including access to more than 200 branch locations across New Jersey, New York, Florida, Alabama, California and Illinois; online, mobile and telephone banking; drive-in and night deposit services; ATMs; remote deposit capture; and safe deposit facilities. In addition, certain international banking services are available to customers, including standby letters of credit, documentary letters of credit and related products, and certain ancillary services, such as foreign exchange transactions, documentary collections, and foreign wire transfers.

In addition to the Bank, Valley's consolidated subsidiaries include, but are not limited to: an insurance agency offering property and casualty, life and health insurance; an asset management adviser that is a registered investment adviser with the SEC; a registered securities broker-dealer with the SEC and member of FINRA, which is also licensed as an insurance agency to provide life and health insurance; 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.

This document, along with Valley's public filings, present the Regulatory Capital Disclosures in compliance with Basel III1as set forth in 12 CFR 217.63 - Disclosures (Pillar III) by institutions regulated by the Federal Reserve Board (Federal Reserve). The information presented in this document should be read jointly with Valley's Annual Report, Quarterly Report for the quarter ending March 31, 2025 and the FR Y-9C for March 31, 2025.

The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management's confidence and strategies and management's expectations about our business, new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as "intend," "should," "expect," "believe," "view," "opportunity," "allow," "continues," "reflects," "would," "could," "typically," "usually," "anticipate," "may," "estimate," "outlook," "project" or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking statements.

Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include but are not limited to those risk factors disclosed under the "Risk Factors" section in Part I, Item 1A on Valley's Annual Report.

1 Basel III or "the Capital Rule"

The Capital Rule applies to Valley, the Bank and all other entities in which Valley has controlling interest. 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; an asset management adviser that is a registered investment adviser with the SEC; a registered securities broker-dealer with the SEC and member of the 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 Financial Management, Inc. and Valley Insurance Services, Inc. are subsidiaries for which the total capital requirement is deducted.

The consolidated financial statements of Valley include the accounts of the Bank and all other entities in which Valley has a controlling financial interest. The accounting and reporting policies of Valley conform to GAAP and general practices within the financial services industry. In accordance with applicable accounting standards, Valley does not consolidate statutory trusts established for the sole purpose of issuing trust preferred securities and related trust common securities.

This section does not apply to Valley, as it does not have restrictions on the transfer of funds or capital as of March 31, 2025.

Regulatory capital ratios for Valley and the Bank were above the regulatory requirement ratios under the Capital Rule at March 31, 2025. For more information see Note 17 to the consolidated financial statements of Valley's Annual Report and the "Capital Adequacy" section in Part I, Item 2 of its Quarterly Report for the quarter ended March 31, 2025.

Valley and the Bank are subject to the regulatory capital requirements administered by the Federal Reserve Bank and the OCC. Valley manages its capital to meet its internal capital targets with the objective of maintaining capital levels that exceed the regulatory requirements and are sufficient to support the Bank's business activities, growth objectives, and risk appetite. Valley's capital structure includes the following elements: (1) Common Equity Tier 1 (CET1) capital, which primarily includes common shareholders' equity, subject to certain regulatory adjustments and deductions; (2) Additional Tier 1 capital, which includes perpetual preferred stock and certain other qualifying capital instruments; and (3) Tier 2 capital, includes primarily qualifying subordinated debt and qualifying ACL, as well as, among other things, certain trust preferred securities.

The following table presents Valley's and Valley National Bank's total risk-based capital and the components of capital used in calculating CET1 capital, Additional Tier 1 capital, and Tier 2 capital at March 31, 2025.

Table 1: Regulatory Capital Components

Common Equity Tier 1 Capital

Common stock and surplus (net of treasury stock)

$ 5,639,114

$ 5,892,422

Retained earnings

1,634,690

2,261,997

Accumulated other comprehensive loss, net

(128,252)

(127,883)

Regulatory adjustments and deductions made to CET1

(1,884,247)

(1,877,074)

Total Common Equity Tier 1 Capital

5,261,305

6,149,462

Additional Tier 1 Capital

Preferred Stock

354,345

-

Total Additional Tier 1 Capital

(278)

-

Tier 1 Capital

5,615,372

6,149,462

Total Tier 2 Capital

Qualifying subordinated debt

565,000

-

Qualifying allowance for loan and lease losses

536,303

536,265

Non-qualifying capital instruments subject to phase out from Tier 2 59,000 - Capital

Valley exercises prudent capital management to maintain capital levels that adequately support its strategic initiatives and business activities.

Valley's Board performs its risk oversight function through several standing committees, including the Board Risk Committee. The Board Risk Committee supports the Board's oversight of management's enterprise-wide risk management framework and risk culture, which are each intended to align with Valley's strategic plan. The Board Risk Committee also determines the appropriateness of Valley's capital levels in consideration of its business activities, growth objectives, and risk appetite.

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. The Board Risk Committee also recommends to the Board acceptable risk tolerances related to strategic, credit, interest rate, price, liquidity, compliance, operational (including cybersecurity risk), and reputation risks, oversees risk management within those tolerances and monitors compliance with applicable laws and regulations. With guidance from and oversight by the Board Risk Committee, management continually refines and enhances its risk management policies, procedures, and monitoring programs to adapt to changing risks.

While Valley is no longer required to publish Company-run annual stress tests under the Dodd-Frank Act, it continues to internally run stress tests of its capital position that are subject to review by Valley's primary regulators in efforts to appropriately monitor capital adequacy under stressful environments. Further, Valley makes every effort to ensure

that its capital ratios will remain in excess of required minimums and at levels that adequately protect Valley during times of potential stress.

The following table presents Valley's standardized approach risk-weighted assets as of March 31, 2025, using the categorization based on the standardized definitions and per the Pillar III requirements. Currently, Valley has no risk-weighted assets exposure for supranational entities and multilateral development banks, default fund contributions, unsettled transactions, and securitization exposures.

Table 2: Standardized Approach Risk-Weighted Assets

Standardized Approach Risk-Weighted Assets

Valley

Exposures to sovereign entities

569,415

Exposures to depository institutions, foreign banks, and credit unions

264,115

Exposures to public sector entities

146,443

Corporate exposures

32,723,555

Residential mortgage exposures

3,683,320

Statutory multifamily mortgages and pre-sold construction loans

6,409,017

High volatility commercial real estate loans

24,029

Past due loans

461,291

Other assets

4,370,164

Equity exposures

61,034

Total Risk-Weighted Assets

$ 48,712,383

The Basel III rules require Valley and the Bank to have a minimum Capital Conservation Buffer (CCB) of 2.5% in addition to the minimum required risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of (i) CET1 to risk-weighted assets, (ii) Tier 1 capital to risk-weighted assets or (iii) Total capital to risk-weighted assets above the respective minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases and discretionary bonus payments to executive officers based on the amount of the shortfall. Basel III also requires deductions from and adjustments to its various capital components. The CCB is calculated as the lowest of the (i) CET1 ratio less the CET1 stated minimum ratio requirement, (ii) Tier 1 ratio less the Tier 1 stated minimum ratio requirement, and (iii) Total capital ratio less the Total capital stated minimum ratio requirement. Valley and the Bank both surpass the CCB requirements. Valley's capital ratios were all above the minimum levels required to be considered a "well-capitalized" financial institution as of March 31, 2025, under the "prompt corrective action" regulations. For reference see Note 17 to the consolidated financial statements of Valley's Annual Report and the "Capital Adequacy" section in Part I, Item 2 of to its Quarterly Report for the quarter ended March 31, 2025.

The maximum dollar amount that a banking organization can pay in the form of discretionary bonus payments or capital distributions during the current quarter is equal to the maximum payout ratio multiplied by the banking organization's eligible retained income. Eligible retained income is defined for Basel III as the greater of a banking organization's net income (as reported in the banking organization's quarterly regulatory reports) for the four quarters preceding the current quarter, net of any capital distributions and associated tax effects not already reflected in net income or the average of the most recent four quarters' net income. Valley had $128 million of eligible retained income as of March 31, 2025.

Valley is not subject to any limitations on its capital distributions or discretionary bonus payments to executive officers, as its capital levels exceeded defined minimums, inclusive of the CCB, at March 31, 2025.

The following table presents the regulatory capital ratios and related capital requirements for Valley and the Bank at March 31, 2025.

Table 3: Regulatory Capital Ratios

Valley

CET1 Capital

10.80%

7.00%

6.30%

2.50%

Tier 1 Risk-based Capital

11.53

8.50

5.53

*

2.50

Total Risk-based Capital

13.91

10.50

5.91

2.50

Valley National Bank

CET1 Capital

12.63%

7.00%

8.13%

2.50%

Tier 1 Risk-based Capital

12.63

8.50

6.63

2.50

Total Risk-based Capital

13.74

10.50

5.74

*

2.50

* The CCBs for Valley and the Bank are 5.53% and 5.74%, respectively, at March 31, 2025.

.

For all of its loan types, Valley adheres to a credit policy designed to minimize credit risk while generating the maximum income given the level of risk appetite. Management reviews and approves these policies and procedures on a regular basis with subsequent approval by the Board annually. Credit authority relating to a significant dollar percentage of the overall portfolio is centralized and controlled by the Credit Risk Management Division and by the Credit Committee. A reporting system supplements the management review process by providing management with frequent reports concerning loan production, loan quality, internal loan classification, concentrations of credit, loan delinquencies, non-performing, and potential problem loans. Loan portfolio diversification is an important factor utilized by Valley to manage its risk across business sectors and through cyclical economic circumstances. Additionally, Valley does not accept crypto assets as loan collateral for any of its loan portfolio classes.

Valley's historical and current loan underwriting practice prohibits the origination of payment option adjustable residential mortgages which allow for negative interest amortization and subprime loans. Virtually all of our residential mortgage loan originations in recent years have conformed to rules requiring documentation of income, assets sufficient to close the transactions and debt to income ratios that support the borrower's ability to repay under the loan's proposed terms and conditions. These rules are applied to all loans originated for retention in our portfolio or for sale in the secondary market.

See Item 1 "Business" and Note 5 to the consolidated financial statements of Valley's Annual Report and Note 7 to its Quarterly Report for the quarter ended March 31, 2025, respectively, for additional information.

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

Valley estimates the collective ACL using a current expected credit losses methodology which is based on relevant information about historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the loan balances. In estimating the component of the allowance on a collective basis, we use a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by using

probability of default and loss given default metrics. The probability of default and loss given default metrics are adjusted using a scaling factor to incorporate a full economic cycle.

The expected life of loan loss percentages are determined by analyzing the migration of loans within the commercial and industrial loan categories from performing to loss by credit quality rating or delinquency categories using historical life-of-loan data for each loan portfolio pool, and by assessing the severity of loss based on the aggregate net lifetime losses incurred. The expected credit losses based on loss history are adjusted for qualitative factors. Among other things, these adjustments include and account for differences in: (i) the impact of the reasonable and supportable economic forecast, relative probability weightings and economic variables under each scenario and reversion period, (ii) other asset specific risks to the extent that they do not exist in the historical loss information, and (iii) net expected recoveries of charged-off loan balances. These adjustments are based on qualitative factors not reflected in the transition matrix but are likely to impact the measurement of estimated credit losses. The expected lifetime loss rate is the life of loan loss percentage from the transition matrix model plus the impact of the adjustments for qualitative factors. The expected credit losses are the product of multiplying the model's expected lifetime loss rate by the exposure at default at period end on an undiscounted basis.

For further discussion regarding CECL methodology and information regarding Valley's policy for determining past due or delinquency status, placing loans on non-accrual, returning loans to accrual status, and charging-off uncollectible amounts, refer to "Allowance for Credit Losses for Loans" section in Note 1 to the consolidated financial statements of Valley's Annual Report and the "Allowance for Credit Losses for Loans" section in Part I, Item 2 to its Quarterly Report for the quarter ended March 31, 2025.

The following tables provide the exposure information for the credit portfolios including on- and off-balance sheet exposures, debt securities, and derivatives as of March 31, 2025. On-balance sheet exposures include the spot exposure as of March 31, 2025, and the weekly average for the first quarter 2025 exposure amount.

Table 4: On-Balance Sheet Credit Risk Exposures

On-Balance Sheet Exposures Type

Total

Average

Commercial and industrial

$ 10,150,205

$ 9,996,024

Commercial real estate

26,087,621

26,328,971

Construction

3,045,885

3,054,230

Residential Mortgage

5,644,834

5,639,313

Consumer

3,755,960

3,636,383

Total on-balance sheet

$ 48,684,505

$ 48,654,921

Less: Loans held for sale

27,377

18,496

Total loan portfolio

$ 48,657,128

$ 48,636,425

Table 5: Off-Balance Sheet, Investment Securities, and Derivatives Credit Risk Exposures

Exposures

($ in thousands)

Total

Total on-balance sheet

$ 48,684,505

Commitments under commercial loans and lines of credit

10,363,383

Home equity and other revolving lines of credit

2,233,615

Standby letters of credit

557,641

Outstanding residential mortgage loan commitments

117,904

Commitments under unused lines of credit-credit card

150,125

Commitments to sell loans

15,553

Commercial letters of credit

30,278

Total off-balance sheet

13,468,499

Total investment securities

7,278,457

Derivatives

692,350

Total credit risk exposure

$ 70,123,811

The following table presents the distribution of credit exposure by geography as of March 31, 2025. For the tables below, geography is considered as the location of the collateral for exposures collateralized by real estate.

Table 6: Credit Exposures by Geography

New York

$ 2,469,306

$ 9,472,183

$ 1,508,915

$ 1,044,083

$ 14,494,487

Florida

2,863,040

8,215,650

1,477,738

646,053

13,202,481

New Jersey

1,995,332

5,749,953

1,896,629

1,198,763

10,840,677

California

521,545

1,056,571

101,994

35,946

1,716,056

Illinois

423,735

342,618

4,581

14,204

785,138

Alabama

72,885

359,466

31,870

101,226

565,447

Other

1,804,362

3,937,065

623,107

715,685

7,080,219

Total

10,150,205

29,133,506

5,644,834

3,755,960

48,684,505

Less: Loans held for sale

-

18,950

8,427

-

27,377

Total loan portfolio

$ 10,150,205

$ 29,114,556

$ 5,636,407

$ 3,755,960

$ 48,657,128

The following table presents the distribution of credit exposure by industry as of March 31, 2025.

Table 7: Credit Exposure by Industry

Commercial and industrial

10,150,205

21%

Commercial real estate:

Non owner-occupied

11,945,222

25%

Multifamily

8,420,385

17%

Owner occupied

5,722,014

12%

Total

26,087,621

54%

Construction

3,026,935

6%

Total commercial real estate loans

29,114,556

60%

Residential mortgage

5,636,407

12%

Consumer

Home equity

602,161

1%

Automobile

2,041,227

4%

Other consumer

1,112,572

2%

Total consumer loans

3,755,960

7%

Total loan portfolio

$ 48,657,128

100%

The following table presents the allowance reconciliation by exposure type from December 31, 2024 to March 31, 2025.

Table 8: Allowance Reconciliation

Beginning at December 31, 2024

$ 173,002

$ 304,148

$ 58,895

$ 22,805

$ 558,850

Loans charged-off

(28,456)

(13,423)

-

(2,140)

(44,019)

Charged-off loans recovered

810

249

168

843

2,070

Net (charge-offs) recoveries

(27,646)

(13,174)

168

(1,297)

(41,949)

Provision (credit) for loan losses

39,344

30,688

(10,157)

1,424

61,299

Balance at March 31, 2025

$ 184,700

$ 321,662

$ 48,906

$ 22,932

$ 578,200

Net loan charge-offs totaled $41.9 million for the first quarter 2025 as compared to $98.3 million and $23.6 million for the fourth quarter 2024 and first quarter 2024, respectively. Gross loan charge-offs for the first quarter 2025 included $24.1 million of partial and full charge-offs related to two non-performing commercial and industrial loan relationships with combined allocated reserves of $16.0 million at December 31, 2024.

Net loan charge-offs declined from the fourth quarter 2024 and continued to trend within management's expectations for the credit quality of the loan portfolio at March 31, 2025.

Disclaimer

Valley National Bancorp published this content on May 09, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 09, 2025 at 13:26 UTC.