To our shareholders, associates, clients, and community partners:
By all measures, 2023 was an extraordinary year. Not just in the challenges our industry, economy, and society faced, but in the way we remained resilient, committed, and focused on delivering results for all our stakeholders.
This past year, our industry was turned on its head as we faced the largest banking crisis in more than a decade. Our economy continues to shift under the weight of an inverted yield curve, recessionary fears, inflationary pressures, wavering consumer confidence, and slowing demand. We have been plagued with partisan political infighting as a country and the growing fears of global instability amidst wars in Europe and turmoil in the Middle East.
It is far from hyperbole to say that these events had a profound impact on our business strategy, the way we work, and our path forward. Despite these external variables, we were able to deliver on our mission and create opportunities for our stakeholders through a sustainable and predictable business model as we build towards our vision of becoming a premier relationship-based national bank.
Progress in the face of adversity
At our core, we are relationship bankers. This means we put our clients first and are committed to their long-term ambitions. Never was the value of this identity more evident than when the banking industry faced a liquidity crisis last March that shook the very foundations of our industry and resulted in several largescale bank failures.
We partnered closely with our clients during these troubling events to reassure them that, as a strong, stable, and well-capitalized financial institution with a fiscally conservative legacy dating back to 1927, their relationship was safe at Valley. We reminded them that we’ve weathered these economic cycles before and that we put our customers at the center of everything we do because we know just how much is at stake for them and our collective communities.
Our greatest achievement this past year, and certainly our most ambitious, was our core systems conversion. Last October, we updated our legacy core banking system which represented a major step forward for Valley, enabling us to provide a better banking experience for our customers for years to come. This conversion, which is the largest core bank conversion our industry has witnessed in the past few years, touched almost every single Valley employee and certainly every customer. As a result, we’ve established a new platform with enhanced features and upgrades that will allow us to deliver more valuable service at every touchpoint to meet our customers’ needs.
Another significant achievement for us was the opening of our new state-of-the-art headquarters in Morristown, New Jersey to accommodate the growth of our institution and to represent who we are as an organization. Valley’s new headquarters is a modern, hybrid building that promotes teamwork, innovation, and allows our associates to thrive. Like Valley’s success for nearly 100 years, we developed this building from the ground up, working together with our associates, partners, and community members to create a sustainable building that is not only welcoming and modern but also energy-efficient, LEED-certified, and designed to grow with us into the future.
Financial results reflect environmental headwinds
Valley’s service-oriented business model resulted in significant customer account growth during the year. This was broadbased across geographies and business lines, and occurred against a challenging backdrop. The ongoing addition of new deposit clients is critical as we drive franchise value and enhance our future earnings potential. That said, Valley was certainly not immune to the industry-wide profitability challenges resulting from the inverted yield curve and subsequent liquidity challenges that persisted throughout the year.
In 2023, we generated $1.8 billion of revenue and $499 million of net income. Rapidly increasing interest rates and the persistent yield curve inversion weighed on our net interest margin and profitability metrics. Our annualized return on average assets was 0.82%, or 0.91% on an adjusted basis,* as compared to 1.09%, or 1.25% on an adjusted basis* in 2022. Still, our tangible book value per share* as of the end of 2023 increased approximately 8% to $8.79 as compared to December 31, 2022. This continues an extended period of consistent tangible book value per share growth, which has increased 47% since 2018.
The first half of 2023 saw significant pressure on highly concentrated business models and deposit bases, which resulted in certain high-profile bank failures. Our funding base remains extremely diverse and granular, and our ability to provide consistent high-touch service to our customers was a key driver of our success during the year. In my tenure, we have built or acquired a variety of specialty funding niches which contribute nearly $10 billion of deposits to our bank today. This has reduced our reliance on branch deposits, particularly in the northeast, and enhances the efficiency of our delivery channels.
We continue to believe that over time these diverse niches will provide above-average growth opportunities to further enhance our funding mix. Total loans increased approximately 7% in 2023 with outstanding balances of $50.2 billion at year end. Growth slowed throughout the year as we managed originations amid an increasingly less certain economic outlook. Our loan portfolio remains incredibly diverse across geographies and asset classes, and our conservative underwriting approach continues to position us well. Strong credit quality performance has long been the hallmark of our organization, and we have a proven track record of limiting credit losses across economic cycles. Our comprehensive stress testing effort enables us to identify potential issues early and work with our experienced and knowledgeable borrower base to mitigate impacts to Valley. During the year, non-accrual loans were stable at 0.58% of total loans versus 0.57% on December 31, 2022.
Our balance sheet remains extremely strong and wellpositioned in the current environment. At December 31, 2023, our tangible common equity to tangible assets* and common equity tier 1 ratios were 7.58% and 9.29% respectively, up from 7.45% and 9.01% a year ago. We continue to organically accrete capital to further enhance our future strategic and balance sheet flexibility.
Our people tell our story
At our core, we’re a commercial bank built for growth; boldly helping clients of every size invest in their ambitions to grow and secure their legacies. We do this through the incredible contributions of almost 4,000 dedicated associates who embody the role of relationship bankers – including those who staff more than 200 full-service branches, customer care centers, and corporate offices across our growing national footprint.
Our culture of collaboration, empowerment, and diversity is driven by the connections we make, the experiences we share and the values we embrace across the entire organization.
These values are reflected in our progress in Diversity, Equity, and Inclusion (DEI) initiatives both internally and outside Valley. Our inclusive culture of belonging enhances our ability as individuals to widen our lens, share new perspectives, and strengthen our connection to the communities we serve.
Community is at the heart of everything we do
Valley’s commitment to the communities we serve is different from other banks — by design. Our commitment to making local connections and investments that create positive momentum truly sets us apart. We empower our people to make the bold decisions needed to grow local businesses and secure people’s legacies.
We see our role in the community as an important and special responsibility to support sustainability, equity, and growth. Creating a lasting, positive impact that drives meaningful change is the ethos of our Corporate Social Responsibility model as we continue to extend our reach into new communities, providing greater access to resources that will drive this change. For more than 95 years, we’ve been committed to strengthening communities through economic inclusion, workforce and community development, investment in local nonprofits, environmental stewardship, and a conscious commitment to our local partners.
In 2023, we provided approximately $4.9 million in donations and grants to nonprofit organizations and our associates delivered over 13,500 hours in community service. As a longtime participant in the Affordable Housing Program of the Federal Home Loan Bank of New York (FHLBNY), our recent submission of applications resulted in affordable housing projects awarded for a total of $4.5 million in grant subsidies received by nonprofits. This resulted in 500 affordable housing units across New Jersey, New York, and Valley’s first in Florida. We also participate in the FHLBNY’s Homeownership Dream Program, which offers down payment assistance to first-time homebuyers and the Small Business Recovery Grant Program. We found innovative ways to support small businesses during a challenging interest rate environment, by applying for the Zero Development Advance Program which provides FHLBNY member banks with subsidized funding in the form of interest rate credits, of up to $250,000. These credits allowed Valley the opportunity to provide flexible lending at a no-cost or a low-cost interest rate. As a result, we granted a three-year term loan of approximately $1.8 million to one of our non-profit partners at 0% interest which allowed them to support the purchase of a new headquarters and will help with renovations.
These are just a few examples of what we are doing to build stronger communities in the areas we serve. We invite you to learn more by visiting valley.com/community.
Our journey is just beginning
Our story is one of transformation and relevance. Five short years ago, Valley was a New Jersey/New York focused, transactional organization, heavily dependent on commercial real estate lending with $20 billion in assets.
Fast forward to 2024 and Valley is a culture-driven, relationship-focused, multi-state franchise, fueled by highly diversified commercial and consumer lines of business and backed by over $60 billion in assets.
We’re the leading commercial bank built for growth with almost 4,000 experts across real estate, commercial & industrial, healthcare, nonprofit, government contracting, and other industries. We power people’s ambitions: how to focus them, grow them, and most importantly, make them resilient for the future.
We have a tremendous opportunity ahead of us. An opportunity to become one of the strongest national banks in the country by developing meaningful relationships with our clients and building stronger communities across our expanding footprint. To realize this vision, we’ll continue to move forward in an ever-evolving industry and an unpredictable world, building off the momentum we’ve gained over the last few years. We’ll leverage the exceptional talent we’ve developed and acquired. We’ll lean into the partnerships we’ve built with clients and community partners. And we’ll forge a new path forward to relevance, prominence, and profitability that will benefit all our stakeholders.
On behalf of our Board of Directors, executive leadership team, and all Valley associates, thank you for your continued trust and confidence in us.
Ira Robbins
Chairman of the Board and Chief Executive Officer
Valley National Bancorp
*Represents a non-GAAP financial measure. See Appendix A to the Proxy Statement for reconciliations of non-GAAP measures and related information regarding these non-GAAP measures.
