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Item 2 — Management's Discussion and Analysis
Valley National Bancorp · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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The following MD&A should be read in conjunction with the consolidated financial statements and notes thereto appearing in Part I, Item 1 of this report. The MD&A contains supplemental financial information, described in the sections that follow, which has been determined by methods other than GAAP that management uses in its analysis of our performance. Management believes these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance, our business and performance trends and facilitate comparisons with the performance of others in the financial services industry. These non-GAAP financial measures should not be considered in isolation, as a substitute for or superior to financial measures calculated in accordance with GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.
Cautionary Statement Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q, both in the MD&A and elsewhere, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about our business, new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by forward-looking terminology such as “intend,” “should,” “expect,” “believe,” “position,” “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 in these forward-looking statements include, but are not limited to:
•the impact of market interest rates and monetary and fiscal policies of the U.S. federal government and its agencies in connection with prolonged inflationary pressures, which could have a material adverse effect on our clients, our business, our employees, and our ability to provide services to our customers;
•the impact of unfavorable macroeconomic conditions or downturns, including instability or volatility in financial markets resulting from the impact of tariffs/import fees and other trade policies and practices, any retaliatory actions, changes in energy commodity prices, related market uncertainty, or other factors; U.S. government debt default or rating downgrade; 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 new legislation and policy changes under the current U.S. presidential administration, any shutdown of the U.S. federal government, geopolitical instabilities or events, including ongoing conflicts in the Middle East, natural and other disasters, including severe weather events and other climate-related risks, health emergencies, acts of terrorism, or other external events;
•the impact of any potential instability within the U.S. financial sector or future bank failures, including the possibility of a run on deposits by a coordinated deposit base, and the impact of any actual or perceived concerns regarding the soundness, or creditworthiness, of other financial institutions, including any resulting disruption within the financial markets, increased expenses, including FDIC insurance assessments, 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;
•changes in the statutes, regulations, policies, enforcement priorities, or composition of the federal bank regulatory agencies;
•the loss of or decrease in lower-cost funding sources within our deposit base;
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•investigations, damage verdicts, settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent, trademark or other intellectual property infringement, misappropriation or other violation, employment-related claims, and other matters;
•a prolonged downturn and contraction in the economy, as well as any 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 the level of loan growth;
•a material change in our allowance for credit losses due to forecasted economic conditions and/or unexpected credit deterioration in our loan and investment portfolios;
•the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;
•changes in our business, strategy, market conditions or other factors that may negatively impact the estimated fair value of our goodwill and other intangible assets and result in future impairment charges;
•greater than expected technology-related costs due to, among other factors, prolonged or failed implementations, additional project staffing and obsolescence caused by continuous and rapid market innovations;
•increased competitive challenges and competitive pressure on pricing of our products and services;
•our ability to stay current with rapid technological changes and evolving legal and regulatory requirements in the financial services industry, including developments relating to the use of artificial intelligence, blockchain, and related regulatory developments, as well as our ability to effectively assess and monitor the effects of, and risks associated with, the implementation and use of such technology;
•cyberattacks, ransomware attacks, computer viruses, malware or other cybersecurity incidents that may breach the security of our or our third-party service providers’ websites or other systems or networks to obtain unauthorized access to personal, confidential, proprietary or sensitive information, destroy data, disable or degrade service, or sabotage our systems or networks, and the increasing sophistication of such attacks and use of targeted tactics against the financial services industry;
•any disruption of our systems and network, or those of our third-party service providers, resulting from events that are wholly or partially beyond our control, including, for example, electrical, telecommunications, or other major service outages, or actions by employees, which may give rise to financial loss or liability;
•results of examinations by the OCC, the FRB, the CFPB and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;
•application of heightened regulatory standards for certain large insured national banks, and the expenses we will incur to develop policies, programs, and systems that comply with the enhanced standards applicable to us;
•our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements, or a decision to increase capital by retaining more earnings;
•unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather and other climate-related risks, pandemics or other public health crises, acts of terrorism or other external events;
•our ability to successfully execute our business plan and strategic initiatives; and
•unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, risk mitigation strategies, changes in regulatory lending guidance or other factors.
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A detailed discussion of factors that could affect our results is included in our SEC filings, including Item 1A. “Risk Factors” of Valley's Annual Report.
We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations, except as required by law. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Critical Accounting Estimates
Valley’s accounting policies are fundamental to understanding management’s discussion and analysis of its financial condition and results of operations. In preparing the consolidated financial statements, management has made estimates, judgments and assumptions in accordance with these policies 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. At June 30, 2026, we identified our policies on the allowance for credit losses, goodwill and other intangible assets, and income taxes to be critical accounting policies because management has to make subjective and/or complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Management has reviewed the application of these policies and estimates with the Audit Committee of Valley’s Board. Our critical accounting policies and estimates are described in detail in Part II, Item 7 in Valley’s Annual Report, and there have been no material changes in such policies and estimates since the date of Valley’s Annual Report.
New Authoritative Accounting Guidance
See Note 4 to the consolidated financial statements for a description of new authoritative accounting guidance, including the dates of adoption and effects on results of operations and financial condition.
Executive Summary
Company Overview. At June 30, 2026, Valley had consolidated total assets of approximately $66.3 billion, total net loans of $51.9 billion, total deposits of $54.1 billion and total shareholders’ equity of $7.9 billion. Valley operates many convenient branch and commercial banking office locations nationwide and serves clients across New Jersey, New York, Florida, Alabama, California, Illinois, Pennsylvania and Arizona. Of our current network of 228 branches, 55 percent, 18 percent, and 19 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.
Financial Condition. During the second quarter 2026, we continued to expand our business and grow the balance sheet in a responsible manner to best perform in the current economic environment, while also prudently managing the overall risk of our loan portfolio. The following items are highlights at June 30, 2026.
•Deposits: Total deposit balances increased $1.3 billion to $54.1 billion at June 30, 2026 as compared to $52.9 billion at March 31, 2026. Direct customer deposits increased $1.1 billion during the second quarter 2026 mainly due to inflows from retail CD offerings and growth in our commercial customer deposits. Non-interest bearing deposits increased $298.6 million reflecting continued expansion of relationships with commercial banking customers during the second quarter 2026. See the “Deposits and Other Borrowings” section for more details.
•Loans: Total loans increased $1.6 billion, or 12.9 percent on an annualized basis, to $52.5 billion at June 30, 2026 from March 31, 2026 mostly due to increases of $857.2 million and $638.9 million in commercial and industrial loans and total commercial real estate loans, respectively. Loan originations from a range of relationship-driven small to midsize clients continued to drive the growth in commercial and industrial loans during the second quarter 2026, while new owner occupied and select multifamily loan originations were the primary contributors to the growth in the commercial real estate loan portfolio at
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June 30, 2026. Our CRE loan concentration ratio (defined as total commercial real estate loans held for investment and held for sale, excluding owner occupied loans, as a percentage of total risk-based capital) continued to decline to 317 percent at June 30, 2026 from 329 percent at March 31, 2026 largely due to organic capital accretion and a $200 million increase in (Tier 2) total risk-based capital related to our issuance of subordinated notes during the second quarter 2026. Based on our current loan growth and regulatory capital targets, we expect a continued gradual reduction of the CRE loan concentration ratio over the second half of 2026. See further details of our loan activities under the “Loan Portfolio” section below.
•Allowance for Credit Losses for Loans: The ACL for loans totaled $606.9 million and $599.8 million at June 30, 2026 and March 31, 2026, respectively, representing 1.16 percent and 1.18 percent of total loans at each respective date. During the second quarter 2026, we recorded a provision for credit losses for loans of $29.2 million as compared to $21.2 million and $37.8 million for the first quarter 2026 and second quarter 2025, respectively. See the “Allowance for Credit Losses for Loans” section for additional information.
•Credit Quality: Net loan charge-offs totaled $22.0 million for the second quarter 2026 as compared to $17.5 million and $37.8 million for the first quarter 2026 and second quarter 2025, respectively. Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) increased $52.3 million to $180.2 million, or 0.34 percent of total loans, at June 30, 2026 as compared to $127.9 million, or 0.25 percent of total loans, at March 31, 2026. The increase was mainly due to a few larger CRE loans within the 30 to 59 days past due delinquency category. Non-accrual loans totaled $462.6 million, or 0.88 percent of total loans, at June 30, 2026 as compared to $432.6 million, or 0.85 percent of total loans, at March 31, 2026. See the “Non-Performing Assets” section for additional information.
•Liquid Assets: Our liquid assets totaled $5.6 billion at both June 30, 2026 and March 31, 2026, representing 9.1 percent and 9.4 percent of interest earning assets at each respective period end. We continue to maintain significant access to readily available, diverse funding sources to fulfill both short-term and long-term funding needs. See the “Bank Liquidity” section for additional information.
•Regulatory Capital and Shareholders' Equity: Total shareholders' equity increased $88.7 million to $7.9 billion at June 30, 2026 as compared to March 31, 2026. Valley's total risk-based capital, CET1 (common equity Tier 1) capital, Tier 1 capital and Tier 1 leverage capital ratios were 13.77 percent, 10.71 percent, 11.37 percent, and 9.49 percent, respectively, at June 30, 2026 as compared to 13.66 percent, 10.91 percent, 11.60 percent and 9.56 percent, respectively, at March 31, 2026. During the second quarter 2026, we repurchased a total of 1.5 million shares of our common stock at an average price of $13.40 under our current stock repurchase plan. Currently, we expect that Valley's CET1 capital ratio will remain near the midpoint of the 10.50 to 11.00 percent range previously disclosed in Valley's Annual Report through December 31, 2026. See the “Capital Adequacy” section below for more information.
Quarterly Results. Net income for the second quarter 2026 was $170.9 million, or $0.29 per diluted common share, as compared to $133.2 million, or $0.22 per diluted common share, for the second quarter 2025. The $37.7 million increase in quarterly net income as compared to the same quarter one year ago was mainly due to the following changes:
•a $54.6 million increase in net interest income mainly driven by lower interest rates on most interest bearing deposit products and higher average loan and investment securities balances for the second quarter 2026, partially offset by lower yields largely on adjustable-rate loans;
•an $11.1 million increase in non-interest income that was largely generated by strong transactional income from the capital markets, service charges on deposit accounts, and wealth management and trust fee categories; and
•an $8.6 million decrease in our provision for credit losses mostly due to lower commercial and industrial loan charge-offs as compared to one year ago and a decline in quantitative reserves largely within certain commercial real estate loan categories; which were partially offset by:
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•a $27.0 million increase in non-interest expense primarily due to increased investments in talent (largely focused in the commercial and consumer banking and technology areas) and enhancements in our business model and technology transformation efforts, as well as higher tax credit amortization; and
•a $9.6 million increase in income taxes mainly due to higher pre-tax income, partially offset by increased investments in tax credits.
See the “Net Interest Income,” “Non-Interest Income,” “Non-Interest Expense” and “Income Taxes” sections below for more details on the impact of the items above and other infrequent non-core items impacting our second quarter 2026 results.
U.S. Economic Conditions. During the second quarter 2026, real GDP increased at an estimated annual rate of 1.5 percent as compared to an increase of 2.1 percent during the first quarter 2026. The decrease from the first quarter 2026 was mainly driven by a decline in government spending, exports, and gross private domestic investment, partly offset by an increase in consumer spending. Imports increased more in the second quarter than in the first quarter. Inflation increased to 4.2 percent in the second quarter 2026 as compared to 2.7 percent for the first quarter 2026, primarily driven by higher energy and gasoline prices associated with ongoing geopolitical tensions.
In June and July 2026, the FOMC maintained the target range for the federal funds rate at 3.50 - 3.75 percent, unchanged since December 2025. However, the prolonged high level of inflation remains a central focus and could result in future monetary policy actions by the FOMC.
The 10-year U.S. Treasury note yield ended the second quarter 2026 at 4.42 percent, or 12 basis points higher as compared to the first quarter 2026, and the 2-year U.S. Treasury note yield ended the second quarter 2026 at 4.14 percent, or 35 basis points higher as compared to the first quarter 2026.
Total loans and leases for U.S. commercial banks increased 2.0 percent in the second quarter 2026 compared to 2.1 percent in the first quarter 2026. Commercial and industrial loans increased by 3.6 percent, while commercial real estate loans increased 0.8 percent from the first quarter 2026 to second quarter 2026. Overall, most banks reported tightening of underwriting standards on commercial real estate loans and commercial and industrial loans.
The economic outlook during the second quarter of 2026 was characterized by moderating economic growth, a gradually softening labor market, continuing geopolitical tensions, and ongoing uncertainty regarding U.S. fiscal, trade and monetary policy. While consumer spending and business activity generally remained resilient, concerns regarding slower employment growth, elevated government deficits, and the potential economic effects of evolving trade policies and global conflicts contributed to increased caution among businesses and investors. Inflationary pressures continued to moderate; however, volatility in energy markets and other external factors created uncertainty regarding the timing and extent of future interest rate adjustments. These macroeconomic conditions have contributed to a more uncertain operating environment for banking institutions and may affect loan demand, credit performance, deposit trends, and capital markets activity. Should economic conditions weaken or financial market volatility increase, our customers, business operations, and financial results could be adversely affected, as discussed elsewhere in this MD&A.
Deposits and Other Borrowings
We define cumulative deposit beta as the change in our cost of total deposits relative to the change in the average Fed Funds (upper bound) rate. The Federal Reserve started an interest rate decrease cycle during the third quarter 2024. Our cumulative deposit beta in this current interest rate decrease cycle (between June 30, 2024 and June 30, 2026) was 51 percent. The deposit beta in the second quarter 2026 was mainly driven by the mix shift of our deposit balances discussed further below. See the “Net Interest Income” section for additional details on the changes in our cost of deposits during the second quarter 2026.
Total average deposits increased by $801.1 million to $53.2 billion for the second quarter 2026 as compared to the first quarter 2026. Average time deposit balances increased $654.4 million from the first quarter 2026 mainly due to
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deposits generated from targeted retail CD offerings throughout the second quarter 2026, as well as higher balances of brokered CDs. Average non-interest bearing deposits also increased $430.7 million to $12.4 billion for the second quarter 2026 as compared to the first quarter 2026 mostly due to the continued successful expansion of our commercial banking customer relationships. Average savings, NOW and money market deposits decreased $283.9 million to $28.9 billion for the second quarter 2026 as compared to the first quarter 2026 mainly due to repayments of floating rate sweep account balances within brokered deposits, partially offset by additional deposits generated from commercial deposit accounts. Average non-interest-bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 23 percent, 55 percent, and 22 percent of total deposits for the second quarter 2026, respectively, as compared to 23 percent, 56 percent, and 21 percent of total deposits for the first quarter 2026, respectively.
Actual ending balances for deposits increased $1.3 billion to $54.1 billion at June 30, 2026 from March 31, 2026 mainly due to increases of $1.5 billion and $298.6 million in time and non-interest bearing deposits, respectively, partially offset by a $506.1 million decline in the savings, NOW and money market deposit category. The increase in time deposits was largely driven by our targeted retail CD offerings and higher indirect customer CD balances at June 30, 2026. The increase in non-interest bearing deposits was mainly due to continued deposit inflows from commercial banking customers during the second quarter 2026. The decrease in savings, NOW and money market deposits from March 31, 2026 was mainly driven by lower brokered sweep and governmental account balances at June 30, 2026. Total indirect customer deposits (mainly consisting of brokered time and money market deposits) totaled $5.3 billion and $5.1 billion at June 30, 2026 and March 31, 2026, respectively. During the second quarter 2026, we entered into fair value interest rate swap transactions with a combined notional value of $204.3 million that effectively converted a portion of our fixed rate brokered time deposits to variable interest rates through their contractual maturity dates. See Note 12 to the consolidated financial statements for additional information. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 23 percent, 53 percent and 24 percent of total deposits at June 30, 2026 as compared to 23 percent, 55 percent and 22 percent at March 31, 2026.
The following table summarizes CDs included in time deposits in excess of the FDIC insurance limit by maturity at June 30, 2026:
June 30, 2026
(in thousands)
Less than three months $ 1,059,816
Three to six months 666,650
Six to twelve months 1,084,996
More than twelve months 150,143
Total $ 2,961,605
Total estimated uninsured deposits, excluding collateralized government deposits and intercompany deposits (i.e., deposits eliminated in consolidation), totaled approximately $15.0 billion, or 28 percent of total deposits, at both June 30, 2026 and March 31, 2026.
We currently expect total deposit growth for the full-year 2026 to be near the high end of the 5 to 7 percent range previously disclosed in Valley's Annual Report. While we maintained a diversified commercial and consumer deposit base at June 30, 2026, deposit gathering initiatives and our current deposit base could be challenged due to increased market competition, changes in customer behavior, including attractive non-deposit investment alternatives, and other factors. As a result, we cannot guarantee that we will be able to increase or maintain deposit levels at or near those reported at June 30, 2026. Management continuously monitors liquidity and all available funding sources, including non-deposit borrowings discussed below. See the “Liquidity and Cash Requirements” section of this MD&A for additional information.
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The following table presents average short-term and long-term borrowings for the periods indicated:
Three Months Ended Six Months Ended
June 30, 2026 March 31, 2026 June 30, 2025 June 30, 2026 June 30, 2025
(in thousands)
Average short-term borrowings:
FHLB advances $ 584,890 $ — $ 128,846 $ 294,061 $ 185,083
Securities sold under repurchase agreements 66,677 70,698 61,052 68,676 60,873
Federal funds purchased 22,527 1,111 6,593 11,879 5,801
Total $ 674,094 $ 71,809 $ 196,491 $ 374,616 $ 251,757
Average long-term borrowings:
FHLB advances $ 1,970,747 $ 2,345,826 $ 2,456,681 $ 2,157,250 $ 2,378,819
Subordinated debt 656,100 445,806 632,166 551,534 640,407
Junior subordinated debentures issued to capital trusts 57,934 57,847 57,587 57,891 57,544
Total $ 2,684,781 $ 2,849,479 $ 3,146,434 $ 2,766,675 $ 3,076,770
Average short-term borrowings for the second quarter 2026 increased $602.3 million from the first quarter 2026 and increased $477.6 million from the second quarter 2025. The increases were mainly driven by the issuance of new FHLB advances primarily used as a short-term funding source for loan originations during the second quarter 2026.
Average long-term borrowings (including junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition) decreased $164.7 million and $461.7 million as compared to the first quarter 2026 and second quarter 2025, respectively. The decrease from the first quarter 2026 was mainly due to contractual maturities and repayments of the FHLB advances and, to a lesser extent, Valley's full early redemption of $300 million of its 3.00 percent fixed-to-floating rate subordinated notes on June 15, 2026, partially offset by Valley's issuance of $500 million of 6.219 percent fixed-to-floating rate subordinated notes in May 2026.
Actual ending balances of short-term borrowings increased $369.6 million to $433.5 million at June 30, 2026 from March 31, 2026 due to $375 million of short-term FHLB advances outstanding at June 30, 2026, partially offset by a modest decline in securities sold under repurchase agreements. Long-term borrowings totaled $2.6 billion at June 30, 2026 and increased $46.3 million as compared to March 31, 2026. The increase was mainly attributable to the aforementioned issuance of $500 million of subordinated notes and $100 million of long-term FHLB advances, partially offset by the redemption of the 3.00 percent subordinated notes and the repayment of matured FHLB advances during the second quarter 2026. See Note 10 to the consolidated financial statements for additional information.
Non-GAAP Financial Measures
The table below presents selected performance indicators, their comparative non-GAAP measures and the (non-GAAP) efficiency ratio for the periods indicated. Valley believes that the non-GAAP financial measures provide useful supplemental information to both management and investors in understanding Valley's underlying operational performance, business, and performance trends, and may facilitate comparisons of our current and prior performance with the performance of others in the financial services industry. Management utilizes these measures for internal planning, forecasting, and analysis purposes. Management believes that Valley’s presentation and discussion of this supplemental information, together with the accompanying reconciliations to the GAAP financial measures, also allows investors to view performance in a manner similar to management. These non-GAAP financial measures should not be considered in isolation, as a substitute for or superior to financial measures calculated in accordance with GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.
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The following table presents our annualized performance ratios:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Selected Performance Indicators ($ in thousands)
GAAP measures:
Net income, as reported $ 170,885 $ 133,167 $ 334,798 $ 239,225
Return on average assets 1.04 % 0.86 % 1.03 % 0.77 %
Return on average shareholders’ equity 8.65 7.08 8.50 6.39
Non-GAAP measures:
Net income, as adjusted $ 172,846 $ 134,415 $ 341,736 $ 240,481
Return on average assets, as adjusted 1.05 % 0.87 % 1.05 % 0.78 %
Return on average shareholders' equity, as adjusted 8.75 7.15 8.67 6.42
Return on average tangible common shareholders' equity (ROATCE) 11.91 10.02 11.74 9.07
ROATCE, as adjusted 12.05 10.12 11.98 9.12
Efficiency ratio, as adjusted 52.11 55.20 52.60 55.53
June 30, 2026 December 31, 2025
Common Equity Per Share Data:
Book value per common share (GAAP) $ 13.67 $ 13.39
Tangible book value per common share (non-GAAP) 10.13 9.85
Non-GAAP Reconciliations to GAAP Financial Measures
Adjusted net income is computed as follows:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
(in thousands)
Net income, as reported (GAAP) $ 170,885 $ 133,167 $ 334,798 $ 239,225
Non-GAAP adjustments:
Add: Restructuring charge (1) 2,513 800 8,202 800
Add: Litigation reserve (2) 230 — 1,492 —
Add: Losses on available for sale and held to maturity debt securities, net (3) — — 10 11
Add: Loss on extinguishment of debt — 922 — 922
Total non-GAAP adjustments to net income $ 2,743 $ 1,722 $ 9,704 $ 1,733
Income tax adjustments related to non-GAAP adjustments (4) (782) (474) (2,766) (477)
Net income, as adjusted (non-GAAP) $ 172,846 $ 134,415 $ 341,736 $ 240,481
(1) Represents severance expense related to workforce reductions within salary and employee benefits expense.
(2) Represents the change in legal reserves and settlement charges included in professional and legal fees.
(3) Included in gains (losses) on securities transactions, net.
(4) Calculated using the appropriate blended statutory tax rate for the applicable period.
In addition to the items used to calculate net income, as adjusted, in the table above, our net income is, from time to time, impacted by fluctuations in the overall level of capital markets income, wealth management and trust fees, and net gains on sales of loans. These amounts can vary widely from period to period due to, among other factors, commercial loan customer demand for certain interest rate swap products, brokerage and tax credit investment
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advisory activities and the amount and timing of residential mortgage loans originated for sale. See the “Non-Interest Income” section below for more details.
Adjusted annualized return on average assets is computed by dividing adjusted net income by average assets, as follows:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
($ in thousands)
Net income, as adjusted (non-GAAP) $ 172,846 $ 134,415 $ 341,736 $ 240,481
Average assets (GAAP) $ 65,584,823 $ 62,106,945 $ 64,891,306 $ 61,806,614
Annualized return on average assets, as adjusted (non-GAAP) 1.05 % 0.87 % 1.05 % 0.78 %
Adjusted annualized return on average shareholders' equity is computed by dividing adjusted net income by average shareholders' equity as follows:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
($ in thousands)
Net income, as adjusted (non-GAAP) $ 172,846 $ 134,415 $ 341,736 $ 240,481
Average shareholders' equity (GAAP) $ 7,901,688 $ 7,524,231 $ 7,878,746 $ 7,491,395
Annualized return on average shareholders' equity, as adjusted (non-GAAP) 8.75 % 7.15 % 8.67 % 6.42 %
ROATCE and adjusted ROATCE are computed by dividing net income and adjusted net income (excluding intangible amortization, net of tax), respectively, by average tangible common shareholders’ equity calculated as follows:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
($ in thousands)
Net income available to common shareholders, as reported (GAAP) $ 163,569 $ 126,219 $ 320,265 $ 225,322
Add: Amortization of other intangible assets (net of tax), other than loan servicing rights 4,247 5,120 8,993 10,739
Net income available to common shareholders excluding intangible amortization (non-GAAP) 167,816 131,339 329,258 236,061
Average shareholders’ equity (GAAP) $ 7,901,688 $ 7,524,231 $ 7,878,746 $ 7,491,395
Less: Average preferred shareholders equity 354,345 354,345 354,345 354,345
Less: Average goodwill (net of deferred tax liability) 1,858,851 1,859,614 1,858,851 1,859,614
Less: Average intangible assets (net of deferred tax liability), other than loan servicing rights 51,387 69,367 54,218 72,748
Average tangible common shareholders' equity (non-GAAP) $ 5,637,105 $ 5,240,905 $ 5,611,332 $ 5,204,688
ROATCE (non-GAAP) 11.91 % 10.02 % 11.74 % 9.07 %
Net income available to common shareholders, as adjusted (non-GAAP) $ 165,530 $ 127,467 $ 327,203 $ 226,578
Add: Amortization of other intangible assets (net of tax), other than loan servicing rights 4,247 5,120 8,993 10,739
Net income available to common shareholders excluding intangible amortization (non-GAAP) 169,777 132,587 336,196 237,317
Average tangible common shareholders' equity (non-GAAP) $ 5,637,105 $ 5,240,905 $ 5,611,332 $ 5,204,688
ROATCE, as adjusted (non-GAAP) 12.05 % 10.12 % 11.98 % 9.12 %
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The efficiency ratio is computed as follows:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
($ in thousands)
Total non-interest expense, as reported (GAAP) $ 311,123 $ 284,122 $ 621,049 $ 560,740
Less: Restructuring charge (pre-tax) (1) 2,513 800 8,202 800
Less: Amortization of tax credit investments (pre-tax) 16,157 9,134 32,171 18,454
Less: Litigation reserve (pre-tax) (2) 230 — 1,492 —
Less: Loss on extinguishment of debt (pre-tax) — 922 — 922
Total non-interest expense, as adjusted (non-GAAP) $ 292,223 $ 273,266 $ 579,184 $ 540,564
Net interest income, as reported (GAAP) 487,024 432,408 958,549 852,513
Total non-interest income, as reported (GAAP) 73,711 62,604 142,547 120,898
Add: Losses on available for sale and held to maturity debt securities, net (pre-tax) (3) — — 10 11
Gross operating income, as adjusted (non-GAAP) $ 560,735 $ 495,012 $ 1,101,106 $ 973,422
Efficiency ratio (non-GAAP) 52.11 % 55.20 % 52.60 % 55.53 %
(1) Represents severance expense related to workforce reductions within salary and employee benefits expense.
(2) Represents the change in legal reserves and settlement charges included in professional and legal fees.
(3) Included in gains (losses) on securities transactions, net.
Tangible book value per common share is computed by dividing shareholders’ equity less preferred stock, goodwill and other intangible assets by common shares outstanding, as follows:
June 30, 2026 December 31, 2025
($ in thousands, except for share data)
Common shares outstanding 553,069,100 556,618,021
Shareholders’ equity (GAAP) $ 7,917,144 $ 7,807,698
Less: Preferred stock 354,345 354,345
Less: Goodwill and other intangible assets 1,958,135 1,969,811
Tangible common shareholders’ equity (non-GAAP) $ 5,604,664 $ 5,483,542
Book value per common share (GAAP) $ 13.67 $ 13.39
Tangible book value per common share (non-GAAP) $ 10.13 $ 9.85
Net Interest Income
Net interest income on a tax equivalent basis of $488.4 million for the second quarter 2026 increased $15.6 million and $54.7 million compared to the first quarter 2026 and the second quarter 2025, respectively. Interest income on a tax equivalent basis increased $26.7 million to $830.7 million for the second quarter 2026 as compared to the first quarter 2026. The increase was mostly due to (i) increased average loan balances largely driven by growth in commercial and industrial loans and owner occupied commercial real estate loans during the first half of 2026, (ii) additional interest income from purchases of higher-yielding taxable investments and (iii) one additional day in the second quarter 2026. Total interest expense increased $11.2 million to $342.4 million for the second quarter 2026 as compared to the first quarter 2026. The increase was mainly the result of (i) higher average time deposits and short-term borrowings balances during the second quarter 2026, (ii) the higher cost of certain non-maturity deposit
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products and short-term borrowings, (iii) the cost of carrying excess subordinated debt for a portion of the quarter, as well as (iv) the aforementioned increase in day count as compared to the first quarter 2026.
Average interest earning assets increased $3.5 billion to $61.1 billion for the second quarter 2026 as compared to the second quarter 2025 largely due to growth in our loan and investment securities portfolios over the last 12 month period. Compared to the first quarter 2026, average interest earning assets increased by $1.3 billion during the second quarter 2026. The increase was primarily driven by the commercial loan growth and higher average taxable investments balances, partially offset by lower levels of overnight interest bearing cash balances during the second quarter 2026.
Average interest bearing liabilities increased $2.2 billion to $44.2 billion for the second quarter 2026 as compared to the second quarter 2025 primarily due to strong deposit inflows from commercial customers over the last 12 months within the savings, NOW and money market deposits category, partially offset by lower indirect customer deposit balances. Compared to the first quarter 2026, average interest bearing liabilities increased by $808.1 million during the second quarter 2026, mostly due to increases within time deposits and short-term borrowings. See additional information under “Deposits and Other Borrowings” in the Executive Summary section above.
Net interest margin on a tax equivalent basis of 3.20 percent for the second quarter 2026 increased 3 basis points from 3.17 percent for the first quarter 2026 and 19 basis points from 3.01 percent for the second quarter 2025. The yield on average interest earning assets increased by 5 basis points to 5.44 percent on a linked quarter basis largely due to higher yields on new loan originations and investment securities purchased during the second quarter 2026. The overall cost of average interest bearing liabilities increased by 4 basis points to 3.10 percent for the second quarter 2026 as compared to the first quarter 2026 largely due to the higher cost of non-maturity deposits and short-term borrowings, as well as carrying excess subordinated debt for a portion of the quarter. Our cost of total average deposits was 2.28 percent for the second quarter 2026 as compared to 2.27 percent and 2.67 percent for the first quarter 2026 and second quarter 2025, respectively.
We currently anticipate net interest income growth for the full year of 2026 to be at the high end of the 11 to 13 percent range previously disclosed in Valley's Annual Report. While we are optimistic about the projected net interest income for the remainder of 2026, our forecasts include several uncertain assumptions, including projected loan growth and funding costs over the next six months. Therefore, we cannot provide any assurances that our future net interest income or margin will meet our current estimates or remain near the levels reported for the second quarter 2026. For a detailed discussion on the risks related to interest rates please refer to Part I, Item 1A. “Risk Factors” in Valley's Annual Report.
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The following table reflects the components of net interest income for the three months ended June 30, 2026, March 31, 2026 and June 30, 2025:
Quarterly Analysis of Average Assets, Liabilities and Shareholders’ Equity and
Net Interest Income on a Tax Equivalent Basis
Three Months Ended
June 30, 2026 March 31, 2026 June 30, 2025
Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate
($ in thousands)
Assets
Interest earning assets:
Loans (1)(2) $ 51,884,173 $ 736,082 5.67 % $ 50,265,383 $ 708,662 5.64 % $ 49,032,637 $ 720,305 5.88 %
Taxable investments (3) 7,928,555 81,884 4.13 7,732,330 78,608 4.07 7,350,792 72,692 3.96
Tax-exempt investments (1)(3) 544,950 6,390 4.69 542,177 5,972 4.41 544,302 5,925 4.35
Interest bearing deposits with banks 699,684 6,383 3.65 1,178,997 10,758 3.65 625,893 7,357 4.70
Total interest earning assets 61,057,362 830,739 5.44 59,718,887 804,000 5.39 57,553,624 806,279 5.60
Allowance for credit losses (597,243) (595,508) (593,858)
Cash and due from banks 351,715 347,912 427,930
Other assets 4,887,652 4,803,608 4,863,028
Unrealized losses on securities available for sale, net (114,663) (84,815) (143,779)
Total assets $ 65,584,823 $ 64,190,084 $ 62,106,945
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Savings, NOW and money market deposits $ 28,920,057 $ 190,973 2.64 % $ 29,203,978 $ 190,785 2.61 % $ 26,451,349 $ 203,390 3.08 %
Time deposits 11,881,270 112,693 3.79 11,226,874 106,678 3.80 12,119,461 129,324 4.27
Total interest bearing deposits 40,801,327 303,666 2.98 40,430,852 297,463 2.94 38,570,810 332,714 3.45
Short-term borrowings 674,094 6,047 3.59 71,809 236 1.31 196,491 1,736 3.53
Long-term borrowings (4) 2,684,781 32,638 4.86 2,849,479 33,500 4.70 3,146,434 38,154 4.85
Total interest bearing liabilities 44,160,202 342,351 3.10 43,352,140 331,199 3.06 41,913,735 372,604 3.56
Non-interest bearing deposits 12,372,974 11,942,322 11,336,314
Other liabilities 1,149,959 1,040,072 1,332,665
Shareholders’ equity 7,901,688 7,855,550 7,524,231
Total liabilities and shareholders’ equity $ 65,584,823 $ 64,190,084 $ 62,106,945
Net interest income/interest rate spread (5) $ 488,388 2.34 % $ 472,801 2.33 % $ 433,675 2.04 %
Tax equivalent adjustment (1,364) (1,276) (1,267)
Net interest income, as reported $ 487,024 $ 471,525 $ 432,408
Net interest margin (6) 3.19 % 3.16 % 3.01 %
Tax equivalent effect 0.01 0.01 —
Net interest margin on a fully tax equivalent basis (6) 3.20 % 3.17 % 3.01 %
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The following table reflects the components of net interest income for the six months ended June 30, 2026 and 2025:
Six Months Ended
June 30, 2026 June 30, 2025
Average Balance Interest Average Rate Average Balance Interest Average Rate
($ in thousands)
Assets
Interest earning assets:
Loans (1)(2) $ 51,079,250 $ 1,444,744 5.66 % $ 48,844,823 $ 1,423,936 5.83 %
Taxable investments (3) 7,830,983 160,492 4.10 7,226,565 142,254 3.94
Tax-exempt investments (1)(3) 543,572 12,362 4.55 548,274 11,877 4.33
Interest bearing deposits with banks 938,016 17,141 3.65 604,824 14,236 4.71
Total interest earning assets 60,391,821 1,634,739 5.41 57,224,486 1,592,303 5.57
Allowance for credit losses (596,380) (585,749)
Cash and due from banks 349,824 423,393
Other assets 4,845,862 4,906,634
Unrealized losses on securities available for sale, net (99,821) (162,150)
Total assets $ 64,891,306 $ 61,806,614
Liabilities and shareholders’ equity
Interest bearing liabilities:
Savings, NOW and money market deposits $ 29,061,233 $ 381,758 2.63 % $ 26,399,580 $ 403,611 3.06 %
Time deposits 11,555,879 219,371 3.80 11,846,625 254,393 4.29
Total interest bearing deposits 40,617,112 601,129 2.96 38,246,205 658,004 3.44
Short-term borrowings 374,616 6,283 3.35 251,757 4,682 3.72
Long-term borrowings (4) 2,766,675 66,138 4.78 3,076,770 74,565 4.85
Total interest bearing liabilities 43,758,403 673,550 3.08 41,574,732 737,251 3.55
Non-interest bearing deposits 12,158,837 11,279,752
Other liabilities 1,095,320 1,460,735
Shareholders’ equity 7,878,746 7,491,395
Total liabilities and shareholders’ equity $ 64,891,306 $ 61,806,614
Net interest income/interest rate spread (5) $ 961,189 2.33 % $ 855,052 2.02 %
Tax equivalent adjustment (2,640) (2,539)
Net interest income, as reported $ 958,549 $ 852,513
Net interest margin (6) 3.17 % 2.98 %
Tax equivalent effect 0.01 0.01
Net interest margin on a fully tax equivalent basis (6) 3.18 % 2.99 %
____________
(1)Interest income is presented on a tax equivalent basis using a 21 percent federal tax rate.
(2)Loans are stated net of unearned income and include non-accrual loans.
(3)The yield for securities that are classified as AFS is based on the average historical amortized cost.
(4)Includes junior subordinated debentures issued to capital trusts which are presented separately on the consolidated
statements of financial condition.
(5)Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.
(6)Net interest income as a percentage of total average interest earning assets.
The following table demonstrates the relative impact on net interest income of changes in the volume of interest earning assets and interest bearing liabilities and changes in rates earned and paid by Valley on such assets and liabilities. Variances resulting from a combination of changes in volume and rates are allocated to the categories in proportion to the absolute dollar amounts of the change in each category.
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Change in Net Interest Income on a Tax Equivalent Basis
Three Months Ended June 30, 2026 Compared to June 30, 2025 Six Months Ended June 30, 2026 Compared to June 30, 2025
Change Due to Volume Change Due to Rate Total Change Change Due to Volume Change Due to Rate Total Change
(in thousands)
Interest Income:
Loans* $ 40,987 $ (25,210) $ 15,777 $ 63,964 $ (43,156) $ 20,808
Taxable investments 5,876 3,316 9,192 12,226 6,012 18,238
Tax-exempt investments* 7 458 465 (103) 588 485
Federal funds sold and other interest bearing deposits 800 (1,774) (974) 6,595 (3,690) 2,905
Total increase (decrease) in interest income 47,670 (23,210) 24,460 82,682 (40,246) 42,436
Interest Expense:
Savings, NOW and money market deposits 17,916 (30,333) (12,417) 38,302 (60,155) (21,853)
Time deposits (2,499) (14,132) (16,631) (6,117) (28,905) (35,022)
Short-term borrowings 4,284 27 4,311 2,098 (497) 1,601
Long-term borrowings and junior subordinated debentures (5,612) 96 (5,516) (7,425) (1,002) (8,427)
Total increase (decrease) in interest expense 14,089 (44,342) (30,253) 26,858 (90,559) (63,701)
Total increase in net interest income $ 33,581 $ 21,132 $ 54,713 $ 55,824 $ 50,313 $ 106,137
*Interest income is presented on a tax equivalent basis using 21 percent as the federal tax rate.
Non-Interest Income
Non-interest income represented 13.1 percent and 12.6 percent of total net interest income plus non-interest income for the three months ended June 30, 2026 and 2025, respectively, and 12.9 percent and 12.4 percent of total net interest income plus non-interest income for the six months ended June 30, 2026 and 2025, respectively. For the three and six months ended June 30, 2026, non-interest income increased $11.1 million and $21.6 million, respectively, as compared to the same periods in 2025. See further details below.
The following table presents the components of non-interest income for the three and six months ended June 30, 2026 and 2025:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
(in thousands)
Wealth management and trust fees $ 17,655 $ 14,056 $ 33,661 $ 29,087
Insurance commissions 3,770 3,430 6,637 6,832
Capital markets 12,933 9,767 23,314 16,707
Service charges on deposit accounts 18,728 14,705 36,932 27,431
Gains (losses) on securities transactions, net 50 (1) 71 45
Fees from loan servicing 3,268 3,671 6,486 6,886
Gains on sales of loans, net 1,742 2,025 4,832 4,222
Bank owned life insurance 5,913 6,019 11,748 10,796
Other 9,652 8,932 18,866 18,892
Total non-interest income $ 73,711 $ 62,604 $ 142,547 $ 120,898
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Wealth management and trust fees income increased $3.6 million and $4.6 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. The increases in both periods were mainly driven by higher asset management fees and increased brokerage commissions from stronger trading volume. Brokerage fees increased $1.6 million and $3.3 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025.
Capital markets income increased $3.2 million and $6.6 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. The increase in both periods was mostly due to fee income growth from higher volumes of interest rate swap transactions related to commercial lending activities, as well as higher fees from loan participation and syndication transactions. Swap fee income increased $1.6 million and $4.9 million for the three and six months ended June 30, 2026, respectively as compared to the same periods in 2025.
Service charges on deposit accounts increased $4.0 million and $9.5 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025 mainly due to additional treasury management service related fees generated from commercial deposit accounts.
We are encouraged by the growth of our non-interest income during the first half of 2026. Moving forward, we plan to further leverage our treasury management platform, capital markets capabilities, tax credit advisory services and broader commercial product set to deepen our customer relationships and generate additional high-quality, sustainable non-interest income.
Non-Interest Expense
Non-interest expense increased $27.0 million and $60.3 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025 mainly due to increases in salary and employee benefits expense, professional and legal fees, amortization of tax credit investments and net occupancy expense. See further details below.
The following table presents the components of non-interest expense for the three and six months ended June 30, 2026 and 2025:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
(in thousands)
Salary and employee benefits expense $ 150,432 $ 145,422 $ 306,147 $ 288,040
Net occupancy expense 27,179 25,483 54,361 51,371
Technology, furniture and equipment expense 33,247 30,667 65,125 60,563
FDIC insurance assessment 11,691 12,192 22,167 25,059
Amortization of other intangible assets 6,268 7,427 13,187 15,446
Professional and legal fees 29,533 19,970 54,675 35,640
Amortization of tax credit investments 16,157 9,134 32,171 18,454
Loss on extinguishment of debt — 922 — 922
Other 36,616 32,905 73,216 65,245
Total non-interest expense $ 311,123 $ 284,122 $ 621,049 $ 560,740
Salary and employee benefits expense increased $5.0 million and $18.1 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. The increase for the three months ended June 30, 2026 was mainly due to increases in severance, stock-based compensation, and medical insurance expenses. The increase for the six months ended June 30, 2026 was mostly due to increases in severance, cash incentive and stock-based compensation, and medical insurance expenses, as well as annual salary increases. Severance expense related to workforce reductions totaled $2.5 million and $8.2 million for the three and six
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months ended June 30, 2026, respectively, as compared to $800 thousand for both the three and six months ended June 30, 2025.
Net occupancy expense increased $1.7 million and $3.0 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025 mainly due to incrementally higher property tax, building repairs and utilities expenses, partially offset by lower rent expense.
Technology, furniture and equipment expense increased $2.6 million and $4.6 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025 mostly driven by increases in data processing fees and software licensing costs, partially offset by lower depreciation expense.
FDIC insurance assessment expense decreased $2.9 million for the six months ended June 30, 2026 as compared to the same period in 2025 due to a lower assessment rate mostly resulting from a decline in our internally criticized and classified assets.
Professional and legal fees increased $9.6 million and $19.0 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. The increases for both periods were largely due to higher third party managed services and consulting fees related to enhancing our business operating model and other transformation efforts. Additionally, the increase for the six months ended June 30, 2026 included $1.5 million of expense related to litigation reserves and settlement charges during the first half of 2026. Overall, we expect the level of professional and legal fees to remain generally elevated during the third quarter 2026 due to ongoing business transformation activities.
Amortization of other intangibles decreased $1.2 million and $2.3 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods of 2025 mainly due to a normal decline in amortization expense related to core deposits.
Amortization of tax credit investments increased $7.0 million and $13.7 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025 mainly due to additional purchases of tax-advantaged investments over the last 12 month period. See Note 14 for more details regarding our tax credit investments.
Other non-interest expense increased $3.7 million and $8.0 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. The increases for both periods were mainly due to an increase in advertising expense related to Valley's brand campaign, higher travel and entertainment expenses, as well as incremental increases in other operating expenses due to growth in our business.
Income Taxes
Income tax expense totaled $49.6 million for the second quarter 2026 as compared to $45.3 million for the first quarter 2026 and $39.9 million for the second quarter 2025. Our effective tax rate was 22.5 percent, 21.6 percent and 23.1 percent for the second quarter 2026, first quarter 2025 and second quarter 2025, respectively. The increase in our effective tax rate for the second quarter 2026 as compared to the linked quarter was primarily attributable to the impact of discrete tax benefits realized in the first quarter 2026 related to vesting of stock awards. The decrease in the effective tax rate for the second quarter 2026 as compared to second quarter 2025 was primarily due to larger investment in tax credits.
GAAP requires that any change in judgment or change in measurement of a tax position taken in a prior annual period be recognized as a discrete event in the quarter in which it occurs, rather than being recognized as a change in effective tax rate for the current year. Our adherence to these tax guidelines may result in volatile effective income tax rates in future quarterly and annual periods. Factors that could impact management’s judgment include changes in income, tax laws and regulations, and tax planning strategies. Based on the current information available, we anticipate that our effective tax rate will be at the low end of the 23 to 24 percent range previously disclosed in Valley's Annual Report for the remainder of 2026.
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Operating Segments
Valley manages its business operations under operating segments consisting of Consumer Banking and Commercial Banking. Activities not assigned to the operating segments are included in Treasury and Corporate Other. The accounting for each operating segment and Treasury and Corporate Other includes internal accounting policies designed to measure consistent and reasonable financial reporting and may result in income and expense measurements that differ from amounts under GAAP. The financial reporting for each segment contains allocations and reporting in line with Valley’s operations, which may not necessarily be comparable to those of any other financial institution. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. See Note 15 to the consolidated financial statements for additional details.
The following tables present the financial data for Valley's operating segments, and Treasury and Corporate Other for the three months ended June 30, 2026 and 2025:
Three Months Ended June 30, 2026
Consumer Banking Commercial Banking Treasury and Corporate Other Total
($ in thousands)
Average interest earning assets $ 11,449,774 $ 40,434,399 $ 9,173,189 $ 61,057,362
Interest income $ 138,739 $ 595,979 $ 94,657 $ 829,375
Interest expense 64,199 226,717 51,435 342,351
Net interest income 74,540 369,262 43,222 487,024
Provision (credit) for credit losses 1,291 27,875 (2) 29,164
Net interest income after provision for credit losses 73,249 341,387 43,224 457,860
Non-interest income 34,409 33,572 5,730 73,711
Non-interest expense
Salary and employee benefits expense 33,216 101,271 15,945 150,432
Net occupancy expense 5,178 17,952 4,049 27,179
Technology, furniture and equipment expense 6,884 22,055 4,308 33,247
FDIC insurance assessment 2,581 9,110 — 11,691
Professional and legal fees 5,791 19,616 4,126 29,533
Other segment items * 22,274 14,993 21,774 59,041
Total non-interest expense 75,924 184,997 50,202 311,123
Income (loss) before income taxes $ 31,734 $ 189,962 $ (1,248) $ 220,448
Return on average interest earning assets (pre-tax) 1.11 % 1.88 % (0.05) % 1.44 %
Net interest margin 2.61 % 3.66 % 1.89 % 3.19 %
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Three Months Ended June 30, 2025
Consumer Banking Commercial Banking Treasury and Corporate Other Total
($ in thousands)
Average interest earning assets $ 10,428,625 $ 38,604,012 $ 8,520,987 $ 57,553,624
Interest income $ 130,616 $ 588,422 $ 85,974 $ 805,012
Interest expense 68,915 248,524 55,165 372,604
Net interest income 61,701 339,898 30,809 432,408
Provision for credit losses 717 37,078 4 37,799
Net interest income after provision for credit losses 60,984 302,820 30,805 394,609
Non-interest income 32,192 24,999 5,413 62,604
Non-interest expense
Salary and employee benefits expense 32,294 99,173 13,955 145,422
Net occupancy expense 4,772 16,960 3,751 25,483
Technology, furniture and equipment expense 6,266 20,469 3,932 30,667
FDIC insurance assessment 2,650 9,542 — 12,192
Professional and legal fees 3,344 14,191 2,435 19,970
Loss on extinguishment of debt — — 922 922
Other segment items * 12,021 17,337 20,108 49,466
Total non-interest expense 61,347 177,672 45,103 284,122
Income (loss) before income taxes $ 31,829 $ 150,147 $ (8,885) $ 173,091
Return on average interest earning assets (pre-tax) 1.22 % 1.56 % (0.42) % 1.20 %
Net interest margin 2.37 % 3.52 % 1.45 % 3.01 %
* Other segment items include amortization of intangible assets, amortization of tax credit investments and other general operating expenses.
Consumer Banking Segment
The Consumer Banking segment represented 19.4 percent of our loan portfolio at June 30, 2026, and was mainly comprised of residential mortgage loans and automobile loans, and to a lesser extent, business purpose loans to wealth management clients, home equity loans, secured personal lines of credit and other consumer loans (including credit card loans). The duration of the residential mortgage loan portfolio (which represented 11.4 percent of our loan portfolio at June 30, 2026) is subject to movements in the market level of interest rates and forecasted prepayment speeds. The weighted average life of the automobile loans portfolio (which represented 4.1 percent of total loans at June 30, 2026) is relatively unaffected by movements in the market level of interest rates. However, the average life may be impacted by new loans as a result of the availability of credit within the automobile marketplace and consumer demand for purchasing new or used automobiles. Consumer Banking also includes the Wealth Management and Insurance Services Division, comprised of asset management advisory, brokerage, trust, personal and title insurance, tax credit advisory services, and our international and domestic private banking businesses.
Consumer Banking’s average interest earning assets increased $1.0 billion to $11.4 billion for the second quarter 2026 as compared to the same period of 2025. The increase was mostly due to the steady growth in both the residential mortgage and targeted growth in lending to private banking clients over the last 12-month period. See additional details in the “Loan Portfolio” section of this MD&A.
Income before income taxes generated by the Consumer Banking segment decreased $95 thousand to $31.7 million for the second quarter 2026 as compared to the second quarter 2025. Net interest income for this segment increased $12.8 million mainly due to additional interest income for higher average loan balances coupled with a decline in our funding costs compared to one year ago. Non-interest income increased $2.2 million as compared to the second quarter 2025 largely due to higher wealth management and trust fees. Non-interest expense increased $14.6 million
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for the second quarter 2026 mostly due to higher professional and legal fees related to business transformation efforts. See further details in the “Non-Interest Income” and “Non-Interest Expense” section of this MD&A.
Net interest margin on the Consumer Banking portfolio increased 24 basis points to 2.61 percent for the second quarter 2026 as compared to the second quarter 2025 mainly due to a 40 basis point decrease in the costs associated with our funding sources, partially offset by a 16 basis point decrease in the yield on average loans. The decrease in our funding costs was mainly the result of lower interest rates on most deposit products during the second quarter 2026 as compared to one year ago, as well as the repayment of maturing higher cost time deposits over the last 12-month period. See the “Net Interest Income” section above for more details on our net interest margin and funding sources.
Commercial Banking Segment
The Commercial Banking segment is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as adjustable and fixed rate owner occupied and commercial real estate loans. Due to the portfolio’s interest rate characteristics, Commercial Banking is Valley’s operating segment that is most sensitive to movements in market interest rates. Commercial and industrial loans totaled approximately $12.0 billion and represented 22.8 percent of the total loan portfolio at June 30, 2026. Commercial real estate and construction loans totaled $30.3 billion and represented 57.8 percent of the total loan portfolio at June 30, 2026.
Average interest earning assets in the Commercial Banking segment increased $1.8 billion to $40.4 billion for the second quarter 2026 as compared to the second quarter 2025. The increase was mostly due to strong growth in commercial and industrial loans and owner occupied commercial real estate loans, partially offset by our strategic runoff of certain non-relationship/transactional loans within the commercial real estate portfolio over the last 12-month period. See additional details in the “Loan Portfolio” section of this MD&A.
Income before income taxes for Commercial Banking increased $39.8 million to $190.0 million for the second quarter 2026 as compared to the same quarter in 2025 mainly due to higher net interest income and non-interest income combined with a decrease in the provision for credit losses. Net interest income increased $29.4 million
as compared to the same period a year ago largely due to lower funding costs and additional interest income from higher average loan balances. Non-interest income increased $8.6 million during the second quarter 2026 mainly due to higher service charges on deposit accounts related to treasury management services and an increase in capital markets income from higher commercial loan swap fee transaction volumes. The provision for credit losses decreased $9.2 million to $27.9 million as compared to the same period in 2025 mostly due to lower commercial and industrial loan charge-offs as compared to one year ago and a decline in quantitative reserves largely within certain commercial real estate loan categories. See more information in the “Allowance for Credit Losses for Loans” section of this MD&A. The positive impact of these items was partially offset by a $7.3 million increase in non-interest expense mainly driven by higher professional and legal expenses and incremental increases in other segment items. See further details in the “Non-Interest Income” and “Non-Interest Expense” sections of this MD&A.
The net interest margin for this segment increased 14 basis points to 3.66 percent for the second quarter 2026 as compared to the second quarter 2025 due to a 35 basis point decrease in the cost of our funding sources, partially offset by a 21 basis point decrease in the yield on average loans caused, in part, by the lower repricing of adjustable interest rate loans.
Treasury and Corporate Other
Treasury and Corporate Other largely consists of the Treasury managed HTM debt securities and AFS debt securities portfolios mainly utilized for the liquidity management needs of our lending segments and income and expense items resulting from support functions not directly attributable to a specific segment. Interest income is generated through investments in various types of securities (mainly comprised of fixed rate securities) and interest-bearing deposits with other banks (primarily the Federal Reserve Bank of New York). Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are
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allocated from Treasury and Corporate Other to operating segments. Other non-interest income items and general expenses are allocated from Treasury and Corporate Other to each operating segment utilizing a methodology that involves an allocation of operating and funding costs based on each segment's respective mix of average interest earning assets outstanding for the period, number of deposits, or direct allocations to the segments based on the nature of income and expense. Unallocated items included in Treasury and Corporate Other mainly consist of net gains and losses on AFS and HTM securities transactions, amortization of tax credit investments, as well as non-core items, such as corporate restructuring charges and loss on extinguishment of debt.
Treasury and Corporate Other's average interest earning assets increased $652.2 million to $9.2 billion for the second quarter 2026 compared to the same quarter in 2025 mostly due to a $577.8 million increase in average taxable investments largely resulting from additional purchases of residential mortgage-backed securities classified as AFS over the last 12-month period combined with a $73.8 million increase in average interest bearing cash held in overnight accounts.
For the second quarter 2026, loss before income taxes totaled $1.2 million compared to $8.9 million for the same quarter in 2025. The $7.6 million decrease in the pre-tax loss from the second quarter 2025 was mainly driven by an increase in net interest income, partially offset by higher non-interest expense. Net interest income increased $12.4 million for the second quarter 2026 as compared to the same period of 2025 primarily due to additional interest income from higher average taxable investment balances. Non-interest expense increased $5.1 million to $50.2 million for the second quarter 2026 as compared to the same quarter in 2025 mainly due to increases in the amortization of tax credit investments, salary and employee benefits expense, including severance charges, and professional and legal fees. See further details in the “Non-Interest Expense” section of this MD&A.
Treasury and Corporate Other's net interest margin increased 44 basis points to 1.89 percent for the second quarter 2026 as compared to the second quarter 2025 due to a 35 basis point decrease in the cost of our funding sources and a 9 basis point increase in the yield on average interest earning assets.
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The following tables present the financial data for Valley's operating segments and Treasury and Corporate Other for the six months ended June 30, 2026 and 2025:
Six Months Ended June 30, 2026
Consumer Banking Commercial Banking Treasury and Corporate Other Total
($ in thousands)
Average interest earning assets $ 11,358,861 $ 39,720,389 $ 9,312,571 $ 60,391,821
Interest income $ 274,302 $ 1,167,802 $ 189,995 $ 1,632,099
Interest expense 126,685 443,002 103,863 673,550
Net interest income 147,617 724,800 86,132 958,549
Provision for credit losses 2,497 47,913 10 50,420
Net interest income after provision for credit losses 145,120 676,887 86,122 908,129
Non-interest income 65,602 64,795 12,150 142,547
Non-interest expense
Salary and employee benefits expense 65,925 204,100 36,122 306,147
Net occupancy expense 10,371 35,660 8,330 54,361
Technology, furniture and equipment expense 13,677 42,793 8,655 65,125
FDIC insurance assessment 4,929 17,238 — 22,167
Professional and legal fees 10,373 35,713 8,589 54,675
Other segment items * 36,261 37,287 45,026 118,574
Total non-interest expense 141,536 372,791 106,722 621,049
Income (loss) before income taxes $ 69,186 $ 368,891 $ (8,450) $ 429,627
Return on average interest earning assets (pre-tax) 1.22 % 1.86 % (0.18) % 1.42 %
Net interest margin 2.60 % 3.65 % 1.85 % 3.17 %
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Six Months Ended June 30, 2025
Consumer Banking Commercial Banking Treasury and Corporate Other Total
($ in thousands)
Average interest earning assets $ 10,428,621 $ 38,416,202 $ 8,379,663 $ 57,224,486
Interest income $ 253,079 $ 1,168,318 $ 168,367 $ 1,589,764
Interest expense 134,357 494,934 107,960 737,251
Net interest income 118,722 673,384 60,407 852,513
Credit (provision) for credit losses (8,016) 108,486 (10) 100,460
Net interest income after provision for credit losses 126,738 564,898 60,417 752,053
Non-interest income 66,546 44,001 10,351 120,898
Non-interest expense
Salary and employee benefits expense 64,268 202,163 21,609 288,040
Net occupancy expense 9,477 34,417 7,477 51,371
Technology, furniture and equipment expense 12,503 40,322 7,738 60,563
FDIC insurance assessment 5,350 19,709 — 25,059
Professional and legal fees 6,243 25,134 4,263 35,640
Loss on extinguishment of debt — — 922 922
Other segment items * 26,307 32,780 40,058 99,145
Total non-interest expense 124,148 354,525 82,067 560,740
Income (loss) before income taxes $ 69,136 $ 254,374 $ (11,299) $ 312,211
Return on average interest earning assets (pre-tax) 1.33 % 1.32 % (0.27) % 1.09 %
Net interest margin 2.27 % 3.50 % 1.44 % 2.98 %
* Other segment items include amortization of intangible assets, amortization of tax credit investments and other general operating expenses.
Consumer Banking Segment
The Consumer Banking segment's average interest earning assets increased $930.2 million to $11.4 billion for the six months ended June 30, 2026 as compared to the same period in 2025. The increase was mostly due to strong growth in our residential mortgage loan portfolio and targeted growth in lending to private banking clients over the last 12-month period.
Income before income taxes generated by Consumer Banking for the six months ended June 30, 2026 was $69.2 million and remained relatively unchanged as compared to the same period in 2025. Net interest income for this segment increased $28.9 million largely due to the aforementioned growth in average loans coupled with lower funding costs. Non-interest expense increased $17.4 million for the six months ended June 30, 2026 as compared to the same period in 2025 mostly due to increases in professional and legal fees. The provision for credit losses increased $10.5 million for the six months ended June 30, 2026 as compared to the same period in 2025 due, in part, to loan growth and higher qualitative reserves. See further details in the “Non-Interest Expense” and “Allowance for Credit Losses for Loans” sections of this MD&A.
Net interest margin on the Consumer Banking portfolio increased 33 basis points to 2.60 percent for the six months ended June 30, 2026 as compared to the same period in 2025 mainly due to a 35 basis point decrease in the costs associated with our funding sources, partially offset by a 2 basis point decrease in the yield on average loans. The decrease in our funding costs was mainly caused by lower interest rates on most deposit products during the six months ended June 30, 2026, as well as the repayment of maturing higher cost time deposits over the last 12-month period. See the “Net Interest Income” section above for more details on our net interest margin.
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The return on average interest earning assets before income taxes for the Consumer Banking segment was 1.22 percent for the six months ended June 30, 2026 compared to 1.33 percent for the same period in 2025.
Commercial Banking Segment
Average interest earning assets in the Commercial Banking segment increased $1.3 billion to $39.7 billion for the six months ended June 30, 2026 as compared to the same period in 2025. This increase was mostly due to our focused growth in commercial and industrial loans and owner occupied commercial real estate loans, partially offset by our strategic runoff of certain non-relationship/transactional loans within the commercial real estate portfolio over the last 12-month period. See additional details in the “Loan Portfolio” section of this MD&A.
Income before income taxes for Commercial Banking increased $114.5 million to $368.9 million for the six months ended June 30, 2026 as compared to the same period in 2025 largely attributable to a lower provision for credit losses combined with an increase in net interest income. The provision for credit losses decreased $60.6 million to $47.9 million for the six months ended June 30, 2026 as compared to the same period in 2025 mainly due to stronger actual and expected credit performance within the commercial loan portfolios reflected by, among other factors, the significant decline in net loan charge-offs as compared to the 2025 period, as well as an overall improvement in our economic outlook at June 30, 2026 as compared to June 30, 2025. Net interest income for this segment increased $51.4 million to $724.8 million for the six months ended June 30, 2026 as compared to the same period in 2025 mainly due to lower cost of funding combined with additional interest income from higher average loan balances. Non-interest income increased $20.8 million as compared to the same period in 2025 mostly due to growth in treasury management service fees on commercial deposit accounts and an increase in capital markets income due to higher commercial loan swap fee transaction volumes. The positive impact of these items was partially offset by an $18.3 million increase in non-interest expense mainly driven by higher professional and legal expenses and incremental increases in other segment items. See details in the “Allowance for Credit Losses for Loans” and “Non-Interest Income” and “Non-Interest Expense” sections of this MD&A.
The net interest margin for this segment increased 15 basis points to 3.65 percent for the six months ended June 30, 2026 as compared to the same period in 2025 mainly due to a 35 basis point decrease in the cost of our funding sources that was partially offset by a 20 basis point decrease in the yield on average loans.
The return on average interest earning assets before income taxes for the commercial banking segment was 1.86 percent for the six months ended June 30, 2026 compared to 1.32 percent for the same period in 2025.
Treasury and Corporate Other
Treasury and Corporate Other's average interest earning assets increased $932.9 million during the six months ended June 30, 2026 primarily due to increases of $599.7 million and $333.2 million in average investment securities and interest bearing cash held in overnight accounts, respectively.
The loss before income taxes totaled $8.5 million for the six months ended June 30, 2026 as compared to $11.3 million for the same period in 2025. The $2.8 million decrease in pre-tax loss was due to an increase in net interest income mostly resulting from additional interest income from growth in our investment securities portfolio, largely offset by higher non-interest expense. Non-interest expense increased $24.7 million to $106.7 million for the six months ended June 30, 2026 as compared to the same period in 2025 primarily due to increases in salary and employee benefits expense, including higher severance expenses, amortization of tax credit investments, and professional and legal fees. See further details in the “Non-Interest Expense” section of this MD&A.
Treasury and Corporate Other's net interest margin increased 41 basis points to 1.85 percent for the six months ended June 30, 2026 as compared to the same period in 2025 due to a 35 basis point decrease in the cost of our funding sources coupled with a 6 basis point increase in the yield on average investments. The increase in the yield on average investments as compared to the same period in 2025 was largely driven by the purchases of new higher-yielding investments over the last 12-month period.
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ASSET/LIABILITY MANAGEMENT
Interest Rate Risk
Our success is largely dependent upon our ability to manage interest rate risk. Interest rate risk can be defined as the exposure of our interest rate sensitive assets and liabilities to the movement in interest rates. Our Asset and Liability Management Committee is responsible for managing such risks and establishing policies that monitor and coordinate our sources and uses of funds. Asset/Liability management is a continuous process due to the constant change in interest rate risk factors. In assessing the appropriate interest rate risk levels for us, management weighs the potential benefit of each risk management activity within the desired parameters of liquidity, capital levels and management’s tolerance for exposure to income fluctuations. Many of the actions undertaken by management utilize fair value analysis and attempt to achieve consistent accounting and economic benefits for financial assets and their related funding sources. We have predominantly focused on managing our interest rate risk by attempting to match the inherent risk and cash flows of financial assets and liabilities. Specifically, management employs multiple risk management activities, such as optimizing the level of new residential mortgage originations retained in our mortgage portfolio through increasing or decreasing loan sales in the secondary market, product pricing levels, the desired maturity levels for new originations, the composition levels of both our interest earning assets and interest bearing liabilities, as well as several other risk management activities.
We use a simulation model to analyze net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on various interest rate scenarios over a 12-month period. The model is based on the actual maturity and re-pricing characteristics of rate sensitive assets and liabilities. The model incorporates certain assumptions which management believes to be reasonable regarding the impact of changing interest rates, non-maturity deposit betas, and the prepayment assumptions of certain assets and liabilities as of June 30, 2026. The model assumes immediate changes in interest rates without any proactive change in the composition or size of the balance sheet, or other future actions that management might undertake to mitigate this risk. In the model, the forecasted shape of the yield curve remains static as of June 30, 2026. The impact of interest rate derivatives, such as interest rate swaps, is also included in the model.
Our simulation model is based on market interest rates and prepayment speeds prevalent in the market as of June 30, 2026. Although the size of Valley’s balance sheet is forecast to remain static as of June 30, 2026, in our model, the composition is adjusted to reflect new interest earning assets and funding originations coupled with rate spreads utilizing our actual originations during the second quarter 2026. The model utilizes an immediate parallel shift in market interest rates at June 30, 2026.
The assumptions used in the net interest income simulation are inherently uncertain. Actual results may differ significantly from those presented in the table below, due to the frequency and timing of changes in interest rates and changes in spreads between maturity and re-pricing categories. Overall, our net interest income is affected by changes in interest rates and cash flows from our loan and investment portfolios. We actively manage these cash flows in conjunction with our liability mix, duration, and interest rates to optimize the net interest income, while structuring the balance sheet in response to actual or potential changes in interest rates. Additionally, our net interest income is impacted by the level of competition within our marketplace. Competition can negatively impact the level of interest rates attainable on loans and increase the cost of deposits, which may result in downward pressure on our net interest margin in future periods. Other factors, including, but not limited to, the slope of the yield curve and projected cash flows will impact our net interest income results and may increase or decrease the level of asset sensitivity of our balance sheet.
Convexity is a measure of how the duration of a financial instrument changes as market interest rates change. Potential movements in the convexity of bonds held in our investment portfolio, as well as the duration of the loan portfolio may have a positive or negative impact on our net interest income in varying interest rate environments. As a result, the increase or decrease in forecast net interest income may not have a linear relationship to the results reflected in the table below. Management cannot provide any assurance about the actual effect of changes in interest rates on our net interest income.
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The following table reflects management’s expectations of the change in our net interest income over the next 12- month period considering the aforementioned assumptions. While an instantaneous and severe shift in interest rates was used in this simulation model, we believe that any actual shift in interest rates would likely be more gradual and would therefore have a more modest impact than shown in the table below.
Estimated Change in Future Net Interest Income
Changes in Interest Rates Dollar Change Percentage Change
(in basis points) ($ in thousands)
+300 $ 71,543 3.50 %
+200 48,920 2.39
+100 24,559 1.20
–100 (22,703) (1.11)
–200 (39,806) (1.94)
–300 (30,223) (1.48)
As noted in the table above, a 100 basis point immediate decrease in interest rates combined with a static balance sheet where the size, mix, and proportions of assets and liabilities remain unchanged, is projected to decrease net interest income over the next 12-month period by 1.11 percent. Management believes the interest rate sensitivity of our balance sheet remains within an expected tolerance range at June 30, 2026. However, the level of net interest income sensitivity may increase or decrease in the future as a result of several factors, including potential changes in our balance sheet strategies, the slope of the yield curve and projected cash flows.
Liquidity and Cash Requirements
Bank Liquidity
Liquidity measures Valley's ability to satisfy its current and future cash flow needs. Our objective is to have liquidity available to fulfill loan demands, repay deposits and other liabilities, and execute balance sheet strategies in all market conditions while adhering to internal controls and income targets. Valley's liquidity program is managed by the Treasury Department and routinely monitored by the Asset and Liability Management Committee and Board Risk Committee. Among other actions, the Treasury Department actively monitors Valley's current liquidity profile, sources and stability of funding, availability of assets for pledging or sale, opportunities to gather additional funds, and anticipated future funding needs, including the level of unfunded commitments.
The Bank adheres to certain internal liquidity measures including ratios of loans to deposits below 105.0 percent and wholesale funding to total funding below 22.5 percent. Management maintains flexibility to temporarily exceed these internal limits in certain operating environments, but also strives to outperform these limits when possible. The Bank was in compliance with the foregoing policies at June 30, 2026 and December 31, 2025, as summarized in the table below.
The following table presents Valley's loans to deposits and wholesale funding to total funding ratios at June 30, 2026 and December 31, 2025:
June 30, 2026 December 31, 2025
Loans to deposits 96.9 % 96.1 %
Wholesale funding to total funding 14.8 15.3
Valley's short- and long-term cash requirements include contractual obligations under borrowings, deposits, payments related to leases, capital expenditures and other purchase commitments. In the ordinary course of operations, the Bank also enters into various financial obligations, including contractual obligations that may require future cash payments. Management believes the Bank has the ability to generate and obtain adequate amounts of
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cash to meet its short-term and long-term obligations as they come due by utilizing various cash resources described below.
On the asset side of the balance sheet, the Bank has numerous sources of liquid funds in the form of cash and due from banks, interest bearing deposits with banks (including the FRB of New York) and other sources. The following table summarizes Valley's liquid assets:
June 30, 2026 December 31, 2025
(in thousands)
Cash and due from banks $ 388,741 $ 315,166
Interest bearing deposits with banks 578,148 1,268,399
Trading debt securities 26,493 —
Held to maturity debt securities (1) 263,874 260,743
Available for sale debt securities (2) 4,292,148 4,202,218
Loans held for sale 13,690 26,236
Total liquid assets $ 5,563,094 $ 6,072,762
(1) Represents securities that are maturing within 90 days or would otherwise qualify as maturities if sold (i.e., 85 percent of original cost basis has been repaid) within the held to maturity debt security portfolio.
(2) Includes approximately $1.0 billion and $1.3 billion of various investment securities that were pledged to counterparties to support our earning asset funding strategies at June 30, 2026 and December 31, 2025, respectively.
Total liquid assets represented 9.1 percent and 10.3 percent of interest earning assets at June 30, 2026 and December 31, 2025, respectively. The level of cash liquidity on the balance sheet (as shown in the table above) decreased from December 31, 2025 to a more normalized level at June 30, 2026 partially due to our management of expected period end funding activities in the first half of 2026.
Other sources of funds on the asset side are derived from scheduled loan payments of principal and interest, as well as prepayments received. At June 30, 2026, estimated cash inflows from total loans are projected to be approximately $14.2 billion over the next 12-month period. As a contingency plan for any liquidity constraints, liquidity could also be derived from the sale of conforming residential mortgages from our loan portfolio or alleviated from the temporary curtailment of lending activities. We anticipate the receipt of approximately $962.7 million in principal payments from securities in the total investment portfolio at June 30, 2026 over the next 12-month period due to normally scheduled principal repayments and expected prepayments of certain securities, primarily residential mortgage-backed securities.
On the liability side of the balance sheet, we utilize multiple sources of funds to meet liquidity needs, including commercial and consumer deposits, fully FDIC-insured indirect customer deposits, collateralized municipal deposits, and short-term and long-term borrowings. Our core deposit base, which generally excludes all fully insured indirect customer deposits, as well as retail certificates of deposit over $250 thousand, represents the largest of these sources. Average core deposits totaled approximately $46.0 billion and $42.4 billion for the six months ended June 30, 2026 and for the year ended December 31, 2025, respectively, representing 76.2 percent and 73.1 percent of average interest earning assets for the respective periods. The level of interest bearing deposits is affected by interest rates offered, which is often influenced by our need for funds, rates prevailing in the capital markets, competition, and the need to manage interest rate risk sensitivity.
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In addition to customer deposits, the Bank has access to readily available borrowing sources to supplement its current and projected funding needs. The following table presents short-term borrowings by type outstanding at June 30, 2026 and December 31, 2025:
June 30, 2026 December 31, 2025
(in thousands)
FHLB advances $ 375,000 $ —
Securities sold under agreements to repurchase 58,484 91,475
Total short-term borrowings $ 433,484 $ 91,475
The following table summarizes the Bank's estimated unused available non-deposit borrowing capacities at June 30, 2026 and December 31, 2025:
June 30, 2026 December 31, 2025
(in thousands)
FHLB borrowing capacity* $ 5,525,802 $ 6,020,343
Unused FRB discount window* 10,528,000 10,145,000
Unused federal funds lines available from commercial banks 1,610,000 1,610,000
Unencumbered investment securities 5,787,101 4,694,183
Total $ 23,450,903 $ 22,469,526
* Used and unused FHLB and FRB borrowings are collateralized by certain pledged securities, including but not limited to U.S. government and agency mortgage-backed securities and a blanket qualifying first lien on certain real estate and residential mortgage secured loans.
Corporation Liquidity
Valley’s recurring cash requirements primarily consist of dividends to preferred and common shareholders and interest expense on subordinated notes and junior subordinated debentures issued to capital trusts. As part of our ongoing asset/liability management strategies, Valley could also use cash to repurchase shares of its outstanding common stock under its share repurchase program or redeem its callable junior subordinated debentures and subordinated notes. Valley's cash needs are routinely satisfied by dividends collected from the Bank. Projected cash flows from the Bank are expected to be adequate to pay preferred and common dividends, if declared, and interest expense payable to subordinated note holders and capital trusts, given the current capital levels and current profitable operations of the Bank. In addition to dividends received from the Bank, Valley can satisfy its cash requirements by utilizing its own cash and potential new funds borrowed from outside sources or capital issuances. Valley also has the right to defer interest payments on the junior subordinated debentures, and therefore distributions on its trust preferred securities for consecutive quarterly periods of up to five years, but not beyond the stated maturity dates, and subject to other conditions.
During the second quarter 2026, Valley issued $500 million of 6.219 percent fixed-to-floating rate subordinated notes and fully redeemed $300 million of callable subordinated notes originally due in June 2031. See Note 10 to consolidated financial statements for further details.
Investment Securities Portfolio
As of June 30, 2026, we had $88.5 million, $26.5 million, $4.3 billion and $3.8 billion in equity, trading debt, AFS debt and HTM debt securities, respectively. The AFS and HTM debt securities portfolios, which comprise the majority of the securities we own, include: U.S. Treasury securities, U.S. government agency securities, tax-exempt and taxable issuances of states and political subdivisions, residential mortgage-backed securities, single-issuer trust preferred securities principally issued by bank holding companies and high quality corporate bonds. Among other securities, our AFS debt securities include securities such as bank issued and other corporate bonds, as well as
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municipal special revenue bonds, which may pose a higher risk of future impairment charges to us as a result of the uncertain economic environment and its potential negative effect on the future performance of the security issuers. The equity securities consist of two publicly traded mutual funds, CRA investments and several other equity investments that we have made in companies that develop new financial technologies and in partnerships that invest in such companies. Our CRA and other equity investments are a mix of both publicly traded entities and privately held entities. Trading debt securities consisted of U.S. Treasury securities at June 30, 2026.
The primary purpose of our AFS and HTM investment portfolios is to provide a source of earnings and liquidity, as well as serve as a tool for managing interest rate risk. The decision to purchase or sell securities is based upon the current assessment of long- and short-term economic and financial conditions, including the interest rate environment and other components of statement of financial condition. See additional information under “Interest Rate Risk,” “Liquidity and Cash Requirements” and “Capital Adequacy” sections elsewhere in this MD&A.
We continually evaluate our investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, and the level of interest rate risk to which we are exposed. These evaluations may cause us to change the level of funds we deploy into investment securities, change the composition of our investment securities portfolio, and change the proportion of investments primarily made into the AFS and HTM debt securities portfolios.
Allowance for Credit Losses and Impairment Analysis
Available for sale debt securities. AFS debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. In assessing whether a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes.
We have evaluated all AFS debt securities that are in an unrealized loss position as of June 30, 2026 and December 31, 2025 and determined that the declines in fair value were mainly attributable to interest rates, credit spreads, market volatility and liquidity conditions, but not credit quality or other factors. There was no impairment recognized within the AFS debt securities portfolio during the three and six months ended June 30, 2026 and 2025.
We do not intend to sell any of the AFS debt securities in an unrealized loss position prior to recovery of our amortized cost basis, and we believe it is more likely than not that Valley will not be required to sell any of its securities prior to recovery of our amortized cost basis. None of the AFS debt securities were past due as of June 30, 2026 and there was no allowance for credit losses for AFS debt securities at June 30, 2026 and December 31, 2025.
Held to maturity debt securities. Valley estimates the expected credit losses on HTM debt securities that have loss expectations using a discounted cash flow model developed by a third party. Valley has a zero-loss expectation for certain securities within the HTM portfolio, including U.S. Treasury securities, U.S. government agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and collateralized municipal bonds. To measure the expected credit losses on HTM debt securities that have loss expectations, we utilize a third party discounted cash flow model. The assumptions used in the model for pools of securities with common risk characteristics include the historical lifetime probability of default and severity of loss in the event of default, with the model incorporating several economic cycles of loss history data to calculate expected credit losses given default at the individual security level. HTM debt securities were carried net of an allowance for credit losses totaling $744 thousand and $734 thousand at June 30, 2026 and December 31, 2025, respectively. There were no net charge-offs of HTM debt securities during the three and six months ended June 30, 2026 and 2025.
Investment grades. The investment grades in the table below reflect the most current independent analysis performed by third parties of each security as of the date presented and not necessarily the investment grades at the date of our purchase of the securities. For many securities, the rating agencies may not have performed an
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independent analysis of the tranches owned by us, but rather an analysis of the entire investment pool. For this and other reasons, we believe the assigned investment grades may not accurately reflect the actual credit quality of each security and should not be viewed in isolation as a measure of the quality of our investment portfolio.
The following table presents the available for sale and held to maturity debt investment securities portfolios by investment grades at June 30, 2026:
June 30, 2026
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
(in thousands)
Available for sale investment grades: *
AAA/AA/A Rated $ 4,157,521 $ 14,357 $ (136,530) $ 4,035,348
BBB Rated 122,388 591 (1,652) 121,327
Non-investment grade 2,377 — (509) 1,868
Not rated 135,299 1,444 (3,138) 133,605
Total $ 4,417,585 $ 16,392 $ (141,829) $ 4,292,148
Held to maturity investment grades: *
AAA/AA/A Rated $ 3,540,152 $ 5,874 $ (382,288) $ 3,163,738
Not rated 217,792 4 (13,184) 204,612
Total $ 3,757,944 $ 5,878 $ (395,472) $ 3,368,350
Allowance for credit losses 744 — — 744
Total, net of allowance for credit losses $ 3,757,200 $ 5,878 $ (395,472) $ 3,367,606
* Rated using external rating agencies. Ratings categories include entire range. For example, “A Rated” includes A+, A, and A-. Split rated securities with two ratings are categorized at the higher of the rating levels.
The unrealized losses in the AAA/AA/A rated categories of both the AFS and HTM debt securities portfolios (in the above table) were largely related to residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac and continue to be driven by the higher level of market interest rates. The investment securities AFS and HTM portfolios included investments with carrying values of $133.6 million and $217.8 million, respectively, at June 30, 2026 not rated by the rating agencies with aggregate unrealized losses of $3.1 million and $13.2 million, respectively. The unrealized losses within non-rated AFS debt securities mostly related to several large corporate bonds negatively impacted by rising interest rates and not changes in underlying credit. The unrealized losses within non-rated HTM debt securities included, but were not limited to, municipal bonds with a combined amortized cost of $39.3 million and $5.8 million of gross unrealized losses and four single-issuer bank trust preferred issuances with a combined amortized cost of $36.1 million and $4.4 million of gross unrealized losses. These HTM debt securities were negatively impacted by a higher level of market interest rates, and not changes in their underlying credit.
See Note 6 to the consolidated financial statements for additional information regarding our investment securities portfolio.
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Loan Portfolio
The following table reflects the composition of the loan portfolio as of the dates presented:
June 30, 2026 March 31, 2026 December 31, 2025
($ in thousands)
Loans
Commercial and industrial $ 11,961,242 $ 11,104,079 $ 10,961,519
Commercial real estate:
Non-owner occupied 11,146,663 11,503,874 11,571,127
Multifamily (1) 9,034,186 8,588,462 8,571,713
Owner occupied 7,692,877 7,132,254 6,629,909
Total 27,873,726 27,224,590 26,772,749
Construction 2,475,109 2,485,387 2,471,233
Total commercial real estate 30,348,835 29,709,977 29,243,982
Residential mortgage 5,982,941 5,869,070 5,826,192
Consumer:
Home equity 728,623 701,136 687,680
Automobile 2,150,089 2,198,102 2,184,600
Other consumer 1,295,521 1,246,456 1,232,755
Total consumer loans 4,174,233 4,145,694 4,105,035
Total loans (2) $ 52,467,251 $ 50,828,820 $ 50,136,728
As a percentage of total loans:
Commercial and industrial 22.8 % 21.8 % 21.9 %
Commercial real estate:
Non-owner occupied 21.2 22.6 23.1
Multifamily 17.2 16.9 17.1
Owner occupied 14.7 14.0 13.2
Construction 4.7 4.9 4.9
Total commercial real estate 57.8 58.4 58.3
Residential mortgage 11.4 11.5 11.6
Consumer loans 8.0 8.3 8.2
Total 100.0 % 100.0 % 100.0 %
(1) Includes loans collateralized by properties that are greater than 50 percent rent regulated totaling approximately $559 million, $583 million and $601 million at June 30, 2026, March 31, 2026 and December 31, 2025, respectively.
(2) Includes net unearned discounts and deferred loan fees of $19.9 million, $15.9 million and $17.4 million at June 30, 2026, March 31, 2026 and December 31, 2025, respectively.
Total loans increased $1.6 billion, or 12.9 percent on an annualized basis, to $52.5 billion at June 30, 2026 from March 31, 2026 mostly due to increases of $857.2 million and $638.9 million in commercial and industrial loans and total commercial real estate loans, respectively. See more details below.
Commercial and industrial loans. Commercial and industrial loans increased by $857.2 million, or 30.9 percent on an annualized basis, to $12.0 billion at June 30, 2026 from March 31, 2026. The increase was largely driven by broad-based growth across relationship-based small and middle-market commercial clients, primarily in New York, Florida, and Chicago, and loan originations within the Bank's specialty healthcare and fund finance lending.
Commercial real estate loans. Commercial real estate loans (excluding construction loans) increased $649.1 million to $27.9 billion at June 30, 2026 from March 31, 2026 mainly driven by new owner occupied and select multifamily loan originations. Owner occupied loans increased $560.6 million, or 31.4 percent on an annualized basis as compared to March 31, 2026 and continued to drive the growth within the commercial real estate loan
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portfolio during the second quarter 2026 as a result of our strategic focus on this category. Multifamily loans increased $445.7 million, or 20.8 percent on an annualized basis as compared to March 31, 2026. Non-owner occupied loans decreased $357.2 million at June 30, 2026 from March 31, 2026 mainly due to our continued targeted runoff of transactional/non-relationship loans, which outpaced limited new originations in this category during the second quarter 2026. Overall, commercial real estate loans are well-diversified mainly across our footprint areas in New York (including Manhattan), Florida, and New Jersey with a combined weighted average loan to value ratio of 59 percent and debt service coverage ratio of 1.67 at June 30, 2026.
Construction loans. Construction loans decreased $10.3 million to $2.5 billion at June 30, 2026 from March 31, 2026 as we remained highly selective with new loan originations in this category.
Residential mortgage loans. Residential mortgage loans increased $113.9 million to $6.0 billion at June 30, 2026 from March 31, 2026 mainly due to continued retention of most new loan origination activity and modest levels of prepayments. New and refinanced residential mortgage loan originations totaled $254.0 million for the second quarter 2026 as compared to $194.8 million and $204.1 million for the first quarter 2026 and second quarter 2025, respectively. In addition, we purchased $30.7 million and $42.6 million of loans from unrelated third-party lenders for qualifying CRA purposes during the three and six months ended June 30, 2026, respectively.
Consumer loans. Consumer loans increased $28.5 million, or 2.8 percent on an annualized basis, to $4.2 billion at June 30, 2026 as compared to March 31, 2026 primarily due to the combined growth in home equity loans and other collateralized personal lines of credit, partially offset by a $48.0 million decrease in automobile loans. Within this portfolio, home equity loans increased $27.5 million, or 15.7 percent on an annualized basis as compared to March 31, 2026, mostly due to higher line usage and, to a lesser extent, new originations as compared to the first quarter 2026. Automobile loans decreased by $48.0 million, or 8.7 percent on an annualized basis, to $2.2 billion at June 30, 2026 as compared to March 31, 2026 mainly due to lower indirect auto loan origination volumes from our dealership network combined with higher repayment activity. Auto loan originations totaled $217.1 million for the second quarter 2026 as compared to $275.0 million for the first quarter 2026. Other consumer loans increased $49.1 million to $1.3 billion at June 30, 2026 as compared to March 31, 2026 primarily due to increased originations and usage of collateralized personal lines of credit.
A significant part of our lending is in northern and central New Jersey, New York City, Long Island and Florida. To mitigate our geographic risks, we maintain a diversified portfolio across borrower types and loans to protect against potential downturns in any single sector.
Based on our current projections, we expect the total loan growth for the full year of 2026 to be at or above the high end of the 4 to 6 percent range previously disclosed in Valley's Annual Report. However, there can be no assurance that we will achieve such growth levels given the potential for unforeseen changes in the market and other conditions detailed in our risk factors set forth under Item 1A. Risk Factors of Valley's Annual Report.
Non-performing Assets
NPAs include non-accrual loans, OREO, and other repossessed assets (which consist of automobiles and taxi medallions) at June 30, 2026. Loans are generally placed on non-accrual status when they become past due more than 90 days as to payment of principal or interest and/or the full and timely collection of principal and interest becomes uncertain. Exceptions to the non-accrual policy may be permitted if the loan is sufficiently collateralized and in the process of collection. OREO is acquired through foreclosure on loans secured by land or real estate. OREO and other repossessed assets are reported at the lower of cost or fair value, less estimated cost to sell.
Our NPAs increased $28.2 million to $467.8 million at June 30, 2026 as compared to March 31, 2026. NPAs as a percentage of total loans and NPAs totaled 0.88 percent and 0.86 percent at June 30, 2026 and March 31, 2026, respectively (as shown in the table below). Management believes that total NPAs at June 30, 2026 remain within credit quality expectations for the loan portfolio and continue to reflect Valley's consistent application of underwriting standards to both originated loans and loans purchased from third parties. For additional details, see the “Credit Quality Indicators” section in Note 7 to the consolidated financial statements.
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Our lending strategy is based on underwriting standards designed to maintain high credit quality, and we remain optimistic regarding the overall future performance of our loan portfolio. During the six months ended June 30, 2026, the majority of our borrowers continued to demonstrate resilience despite the impact of elevated borrowing costs, inflation, labor costs and other factors. We continue to proactively monitor our commercial loans for potential negative trends and borrower weakness due to the current operating environment, including the potential negative impact of volatile energy prices and tariffs/import fees, and internally risk rate them accordingly. Based on our most recent portfolio review, we believe that we have relatively modest direct exposure to customer businesses most influenced by changing tariff/import fee policies and moderate periods of elevated energy prices. However, management cannot provide assurance that the NPAs will not increase from the levels reported at June 30, 2026 due to the aforementioned or other factors potentially impacting our lending customers.
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The following table sets forth by loan category accruing past due and NPAs on the dates indicated in conjunction with our asset quality ratios:
June 30, 2026 March 31, 2026 December 31, 2025
($ in thousands)
Accruing past due loans:
30 to 59 days past due:
Commercial and industrial $ 5,083 $ 5,285 $ 11,177
Commercial real estate 106,034 69,494 72,810
Construction 1,752 — —
Residential mortgage 22,154 20,534 21,615
Total consumer 15,974 13,112 14,420
Total 30 to 59 days past due 150,997 108,425 120,022
60 to 89 days past due:
Commercial and industrial 2,748 1,015 1,274
Residential mortgage 6,495 4,285 10,181
Total consumer 3,904 3,506 5,269
Total 60 to 89 days past due 13,147 8,806 16,724
90 or more days past due:
Commercial and industrial 3,527 3,499 —
Commercial real estate 5,454 — 212
Residential mortgage 5,223 5,894 3,300
Total consumer 1,862 1,309 1,070
Total 90 or more days past due 16,066 10,702 4,582
Total accruing past due loans $ 180,210 $ 127,933 $ 141,328
Non-accrual loans:
Commercial and industrial $ 147,731 $ 145,804 $ 138,321
Commercial real estate 256,081 225,417 236,221
Construction 9,139 9,148 9,140
Residential mortgage 42,992 45,988 44,424
Total consumer 6,686 6,289 5,832
Total non-accrual loans 462,629 432,646 433,938
Other real estate owned (OREO) 4,126 5,161 4,531
Other repossessed assets 1,020 1,758 1,286
Total non-performing assets (NPAs) $ 467,775 $ 439,565 $ 439,755
Total non-accrual loans as a % of loans 0.88 % 0.85 % 0.87 %
Total NPAs as a % of loans and NPAs 0.88 0.86 0.87
Total accruing past due and non-accrual loans as a % of loans 1.23 1.10 1.15
Allowance for loan losses as a % of non-accrual loans 127.66 135.10 134.44
Loans 30 to 59 days past due increased $42.6 million to $151.0 million at June 30, 2026 as compared to March 31, 2026 mainly due to certain larger commercial real estate loans, partially offset by the migration of three commercial real estate loans totaling $49.6 million that migrated from this past due category at March 31, 2026 to non-accrual loans at June 30, 2026.
Loans 60 to 89 days past due increased $4.3 million to $13.1 million at June 30, 2026 as compared to March 31, 2026 mainly due to moderate increases in the residential mortgage and commercial and industrial loan categories.
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Loans 90 days or more past due and still accruing interest increased $5.4 million to $16.1 million at June 30, 2026 as compared to March 31, 2026 primarily due to the second quarter 2026 migration of a $5.5 million commercial real estate loan previously reported in the 30 to 59 days past due delinquency category at March 31, 2026. All loans 90 days or more past due and still accruing interest are well-secured and in the process of collection.
Non-accrual loans increased $30.0 million to $462.6 million, or 0.88 percent of total loans at June 30, 2026 as compared to $432.6 million, or 0.85 percent of total loans, at March 31, 2026. The increase was mainly attributable to the aforementioned migration of commercial real estate loans from the 30 to 59 days past due delinquency category at March 31, 2026. These three collateral dependent non-accrual commercial real estate loans totaled $49.6 million, net of partial charge-offs of $1.3 million during the second quarter 2026, and had no related allocated reserves within our allowance for credit losses for loans at June 30, 2026.
Although the timing of collection is uncertain, management believes that the majority of the non-accrual loans at June 30, 2026 are well secured and largely collectable, based in part on our quarterly review of collateral dependent loans and the valuation of the underlying collateral, if applicable. Any estimated shortfall in the net realizable value for collateral dependent loans is charged-off when a loan is 90 or 120 days past due or sooner if it is probable that a loan may not be fully collectable. For performing non-accrual loans, the collateral valuation shortfall may result in an allocation of specific reserves within our allowance for credit losses for loans.
Allowance for Credit Losses for Loans
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 weighted asset specific risks to the extent that they do not exist in the historical loss information, and (iii) net expected recoveries of charged-off loan balances. These adjustments are based on qualitative factors not reflected in the transition matrix but are likely to impact the measurement of estimated credit losses. The expected lifetime loss rate is the life of loan loss percentage from the transition matrix model plus the impact of the adjustments for qualitative factors. The expected credit losses are the product of multiplying the model’s expected lifetime loss rate by the exposure at default at period end on an undiscounted basis.
Valley utilizes a two-year reasonable and supportable forecast period followed by a one-year period over which estimated losses revert to historical loss experience on a straight-line basis for the remaining life of the loan. The forecast consists of multi-scenario economic forecasts to estimate future credit losses and are governed by a cross-functional committee. The committee meets each quarter to determine which economic scenarios developed by Moody's will be incorporated into the model, as well as the relative probability weightings of the selected scenarios, based upon all readily available information. The model projects economic variables under each scenario based on
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detailed statistical analyses. We have identified and selected key variables that most closely correlate to our historical credit performance, which include GDP, unemployment and the Case-Shiller Home Price Index.
At June 30, 2026, Valley continued to maintain the majority of its probability weighting used in the economic forecast to the Moody’s Baseline scenario with slightly more emphasis on the S-3 downside scenario and a smaller percentage weighting on the S-1 upside scenario as compared to December 31, 2025. At June 30, 2026, the standalone Moody's Baseline scenario reflected a slightly more optimistic outlook as compared to December 31, 2025 for several metrics, including a few highlighted below.
At June 30, 2026, Moody's Baseline forecast included the following specific assumptions:
•GDP growth: GDP is expected to remain positive, but moderate, with annual average growth of approximately 2.1 percent for the remainder of 2026 before trending down slightly to 2.0 percent in the second quarter 2028.
•Unemployment Rate: The outlook for the labor market projects slower job growth over the remainder of 2026, with the unemployment rate expected to be at approximately 4.5 percent by December 31, 2026 and remain near that level through the second quarter 2028.
•Federal funds: The current target federal funds rate range of 3.5 - 3.75 percent at June 30, 2026 is projected to remain unchanged until the second quarter 2028.
•Inflation: Inflation is expected to average 3.4 percent in the second half of 2026 and decline to 2.3 percent in the second quarter 2028.
See more details regarding our allowance for credit losses for loans in Note 7 to the consolidated financial statements.
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The table below summarizes the relationship among loans, loans charged-off, loan recoveries, the provision for credit losses and the allowance for credit losses for loans for the periods indicated:
Three Months Ended Six Months Ended
June 30, 2026 March 31, 2026 June 30, 2025 June 30, 2026 June 30, 2025
($ in thousands)
Allowance for credit losses for loans
Beginning balance $ 599,800 $ 596,100 $ 594,054 $ 596,100 $ 573,328
Loans charged-off:
Commercial and industrial (9,838) (2,782) (25,189) (12,620) (53,645)
Commercial real estate (14,434) (13,756) (14,623) (28,190) (26,883)
Construction — — — — (1,163)
Residential mortgage — — (46) — (46)
Total consumer (3,354) (3,263) (2,213) (6,617) (4,353)
Total loans charged-off (27,626) (19,801) (42,071) (47,427) (86,090)
Charged-off loans recovered:
Commercial and industrial 1,669 1,398 2,789 3,067 3,599
Commercial real estate 2,790 347 188 3,137 437
Construction — — 455 — 455
Residential mortgage 41 83 37 124 205
Total consumer 1,080 429 773 1,509 1,616
Total loans recovered 5,580 2,257 4,242 7,837 6,312
Total net loan charge-offs (22,046) (17,544) (37,829) (39,590) (79,778)
Provision charged for credit losses 29,166 21,244 37,795 50,410 100,470
Ending balance $ 606,920 $ 599,800 $ 594,020 $ 606,920 $ 594,020
Components of allowance for credit losses for loans:
Allowance for loan losses $ 590,600 $ 584,500 $ 579,500 $ 590,600 $ 579,500
Allowance for unfunded credit commitments 16,320 15,300 14,520 16,320 14,520
Allowance for credit losses for loans $ 606,920 $ 599,800 $ 594,020 $ 606,920 $ 594,020
Components of provision for credit losses for loans:
Provision for credit losses for loans $ 28,146 $ 18,644 $ 39,129 $ 46,790 $ 100,428
Provision (credit) for unfunded credit commitments 1,020 2,600 (1,334) 3,620 42
Total provision for credit losses for loans $ 29,166 $ 21,244 $ 37,795 $ 50,410 $ 100,470
Allowance for credit losses for loans as a % of total loans 1.16 % 1.18 % 1.20 % 1.16 % 1.20 %
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The following table presents the relationship among net loans charged-off and recoveries, and average loan balances outstanding for the periods indicated:
Three Months Ended Six Months Ended
June 30, 2026 March 31, 2026 June 30, 2025 June 30, 2026 June 30, 2025
($ in thousands)
Net loan (charge-offs) recoveries
Commercial and industrial $ (8,169) $ (1,384) $ (22,400) $ (9,553) $ (50,046)
Commercial real estate (11,644) (13,409) (14,435) (25,053) (26,446)
Construction — — 455 — (708)
Residential mortgage 41 83 (9) 124 159
Total consumer (2,274) (2,834) (1,440) (5,108) (2,737)
Total $ (22,046) $ (17,544) $ (37,829) $ (39,590) $ (79,778)
Average loans outstanding
Commercial and industrial $ 11,903,449 $ 11,015,736 $ 10,507,438 $ 11,316,306 $ 10,253,144
Commercial real estate 27,664,538 26,898,522 26,000,837 27,283,646 26,163,998
Construction 2,491,229 2,470,225 2,982,733 2,480,785 3,018,284
Residential mortgage 5,919,569 5,850,295 5,671,792 5,885,124 5,655,642
Total consumer 3,905,388 4,030,605 3,869,837 4,113,389 3,753,755
Total $ 51,884,173 $ 50,265,383 $ 49,032,637 $ 51,079,250 $ 48,844,823
Annualized net loan charge-offs (recoveries) to average loans outstanding
Commercial and industrial 0.27% 0.05% 0.85% 0.17% 0.98%
Commercial real estate 0.17 0.20 0.22 0.18 0.20
Construction — — (0.06) — 0.05
Residential mortgage — (0.01) — — (0.01)
Total consumer 0.23 0.28 0.15 0.25 0.15
Total annualized net loan charge-offs to total average loans outstanding 0.17 0.14 0.31 0.16 0.33
Net loan charge-offs totaled $22.0 million for the second quarter 2026 as compared to $17.5 million and $37.8 million for the first quarter 2026 and the second quarter 2025, respectively. Gross loan charge-offs totaled $27.6 million for the second quarter 2026 and were largely due to partial charge-offs of non-performing commercial real estate and commercial and industrial loans.
Net loan charge-offs for the second quarter 2026 (as presented in the above table) increased from the first quarter 2026, but continued to trend within management's expectations for the credit quality of the loan portfolio at June 30, 2026. While we currently expect the level of total net loan charge-offs to average loans outstanding to range from 0.15 to 0.20 percent for the full year of 2026, we can make no assurances that actual net loan charge-offs will not be higher than anticipated for 2026.
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The following table summarizes the allocation of the allowance for credit losses for loans to loan portfolio categories and the allocations as a percentage of each loan category:
June 30, 2026 March 31, 2026 June 30, 2025
Allowance Allocation Allocation as a % of Loan Category Allowance Allocation Allocation as a % of Loan Category Allowance Allocation Allocation as a % of Loan Category
($ in thousands)
Loan Category:
Commercial and industrial loans $ 198,910 1.66 % $ 186,143 1.68 % $ 173,415 1.60 %
Commercial real estate loans:
Commercial real estate 268,445 0.96 269,847 0.99 270,937 1.04
Construction 50,623 2.05 54,946 2.21 64,042 2.24
Total commercial real estate loans 319,068 1.05 324,793 1.09 334,979 1.16
Residential mortgage loans 48,905 0.82 51,700 0.88 48,830 0.86
Consumer loans:
Home equity 4,333 0.59 4,120 0.59 3,689 0.58
Auto and other consumer 19,384 0.56 17,744 0.52 18,587 0.55
Total consumer loans 23,717 0.57 21,864 0.53 22,276 0.56
Allowance for loan losses 590,600 1.13 584,500 1.15 579,500 1.17
Allowance for unfunded credit commitments 16,320 15,300 14,520
Total allowance for credit losses for loans $ 606,920 $ 599,800 $ 594,020
Allowance for credit losses for loans as a % of total loans 1.16 % 1.18 % 1.20 %
The allowance for credit losses for loans, comprised of our allowance for loan losses and unfunded credit commitments, as a percentage of total loans was 1.16 percent at June 30, 2026, 1.18 percent at March 31, 2026, and 1.20 percent at June 30, 2025. For the second quarter 2026, the provision for credit losses for loans totaled $29.2 million as compared to $21.2 million and $37.8 million for the first quarter 2026 and second quarter 2025, respectively. The second quarter 2026 provision was mainly impacted by (i) higher specific reserves associated with collateral dependent loans, (ii) an increase in the economic forecast component of our reserve and (iii) strong commercial loan growth, partially offset by a decline in quantitative reserves largely within certain commercial real estate loan categories at June 30, 2026.
Capital Adequacy
A significant measure of the strength of a financial institution is its shareholders’ equity. Shareholders' equity of $7.9 billion and $7.8 billion at June 30, 2026 and December 31, 2025, respectively, represented 11.9 percent and 12.2 percent of total assets at each respective period end.
During the six months ended June 30, 2026, total shareholders’ equity increased by approximately $109.5 million primarily due to the following:
•net income of $334.8 million and
•a $10.3 million increase attributable to the effect of our stock incentive plan,
partially offset by
•cash dividends declared on common and preferred stock totaling a combined $138.0 million,
•repurchases of $72.4 million of common stock held in treasury stock, and
•other comprehensive loss of $25.2 million.
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Valley and the Bank are subject to the regulatory capital requirements administered by the FRB and the OCC. Quantitative measures established by regulation to ensure capital adequacy require Valley and the Bank to maintain minimum amounts and ratios of CET1, total and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets, as defined in the regulations.
Valley and the Bank are required to maintain minimum ratios, including a 2.5 percent capital conservation buffer, of (i) CET1 to risk-weighted assets of 7.0 percent or greater, (ii) Tier 1 capital to risk-weighted assets of 8.5 percent or greater, and (iii) total capital to risk-weighted assets of 10.5 percent or greater, as well as a minimum leverage ratio of 4.0 percent for capital adequacy purposes. As of June 30, 2026 and December 31, 2025, Valley and Valley National Bank exceeded all capital adequacy requirements (see table below).
The following table presents Valley’s and Valley National Bank’s actual capital positions and ratios under Basel III risk-based capital guidelines at June 30, 2026 and December 31, 2025:
Actual Minimum Capital Requirements To Be Well Capitalized Under Prompt Corrective Action Provision
Amount Ratio Amount Ratio Amount Ratio
($ in thousands)
As of June 30, 2026
Total Risk-based Capital
Valley $ 7,327,837 13.77 % $ 5,587,914 10.50 % N/A N/A
Valley National Bank 7,092,812 13.34 5,581,661 10.50 $ 5,315,868 10.00 %
Common Equity Tier 1 Capital
Valley 5,698,396 10.71 3,725,276 7.00 N/A N/A
Valley National Bank 6,527,141 12.28 3,721,107 7.00 3,455,314 6.50
Tier 1 Risk-based Capital
Valley 6,052,638 11.37 4,523,550 8.50 N/A N/A
Valley National Bank 6,527,141 12.28 4,518,487 8.50 4,252,694 8.00
Tier 1 Leverage Capital
Valley 6,052,638 9.49 2,549,951 4.00 N/A N/A
Valley National Bank 6,527,141 10.25 2,546,875 4.00 3,183,594 5.00
As of December 31, 2025
Total Risk-based Capital
Valley $ 6,965,724 13.77 % $ 5,311,534 10.50 % N/A N/A
Valley National Bank 6,841,494 13.54 5,306,493 10.50 $ 5,053,803 10.00 %
Common Equity Tier 1 Capital
Valley 5,558,508 10.99 3,541,023 7.00 N/A N/A
Valley National Bank 6,297,558 12.46 3,537,662 7.00 3,284,972 6.50
Tier 1 Risk-based Capital
Valley 5,912,750 11.69 4,299,813 8.50 N/A N/A
Valley National Bank 6,297,558 12.46 4,295,733 8.50 4,043,042 8.00
Tier 1 Leverage Capital
Valley 5,912,750 9.63 2,455,946 4.00 N/A N/A
Valley National Bank 6,297,558 10.27 2,453,670 4.00 3,067,088 5.00
Typically, our primary source of capital growth is through retention of earnings. Our rate of earnings retention is calculated by dividing undistributed earnings per common share by earnings (or net income available to common shareholders) per common share. Our retention ratio was 61.4 percent for the six months ended June 30, 2026 as compared to 56.4 percent for the full year ended December 31, 2025.
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Cash dividends declared amounted to $0.22 per common share for each of the six months ended June 30, 2026 and 2025. The Board is committed to examining and weighing relevant facts and considerations, including its commitment to shareholder value, each time it makes a cash dividend decision. See Item 1A. Risk Factors of Valley's Annual Report for additional information regarding factors that could adversely impact our ability to declare future cash dividends.
Off-Balance Sheet Arrangements, Contractual Obligations and Other Matters
For a discussion of Valley’s off-balance sheet arrangements and contractual obligations see information included in Valley’s Annual Report in the MD&A section “Liquidity and Cash Requirements” and Notes 12 and 13 to the consolidated financial statements included in this report.