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      Valley National Bancorp Reports Fourth Quarter Earnings, Solid Loan Growth and Net Interest Margin


      News provided by

      Valley National Bancorp

      Jan 26, 2012, 07:00 ET

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      WAYNE, N.J., Jan. 26, 2012 /PRNewswire/ -- Valley National Bancorp (NYSE: VLY), the holding company for Valley National Bank, today reported net income for the fourth quarter of 2011 of $24.8 million, or $0.15 per diluted common share, after non-cash impairment charges on investment securities and merger expenses totaling $13.4 million after taxes ($0.08 per common share), as compared to the fourth quarter of 2010 earnings of $38.2 million, or $0.23 per diluted common share. See the “Key highlights for the fourth quarter” section below for more details.

      Net income for the year ended December 31, 2011 was $133.7 million, or $0.79 per diluted common share, compared to 2010 earnings of $131.2 million, or $0.78 per diluted common share.

      Key highlights for the fourth quarter:

      • Loan Growth: Total non-covered loans (i.e., loans which are not subject to our loss-sharing agreements with the FDIC) increased by $210.1 million to $9.5 billion at December 31, 2011 from September 30, 2011.  Our residential mortgage and commercial real estate (including construction) loans grew by $113.0 million and $59.0 million, or 20.8 percent and 6.0 percent, respectively, on an annualized basis, during the fourth quarter of 2011.  Commercial and industrial loans increased by $45.2 million at December 31, 2011 compared to September 30, 2011; however, most of the increase in this portfolio was due to a $37.0 million short-term loan to State Bancorp, Inc. (used to repurchase State’s Series A Preferred Stock from the Treasury), which was acquired by Valley effective January 1, 2012.  The loan was subsequently eliminated as of the acquisition date.  Total covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) decreased to $271.8 million, or 2.8 percent of our total loans, at December 31, 2011 as compared to $282.4 million at September 30, 2011 mainly due to normal payment activity.  Excluding the loan to State Bancorp, our total loan portfolio grew by 6.8 percent on an annualized basis during the fourth quarter of 2011.

      • Net Interest Income and Margin: Net interest income decreased $3.6 million to $118.3 million for the quarter ended December 31, 2011 as compared to $121.9 million for the quarter ended September 30, 2011.  On a tax equivalent basis, our net interest margin decreased 12 basis points to 3.74 percent in the fourth quarter of 2011 as compared to 3.86 percent for the third quarter of 2011, and was 11 basis points higher than the 3.63 percent net interest margin for the fourth quarter of 2010.  The decreases in the net interest income and margin as compared to the linked third quarter of 2011 were mainly due to lower yields on taxable investments and loans. See the “Net Interest Income and Margin” section below for more details.

      • Rate Reduction on Long-Term Borrowings: In November and December 2011, we modified the terms of $435 million in FHLB advances within our long-term borrowings.  The modifications resulted in a reduction of the interest rate on these funds, an extension of their maturity dates to 10 years from the date of modification, and a conversion of the advances to non-callable for periods ranging from 3 to 4 years.  We similarly modified the terms of an additional $150 million in FHLB advances during January 2012.  After the modifications, the weighted average interest rate on these borrowings declined by 0.86 percent to 3.99 percent.  There were no penalties or fees incurred in the modification transactions.

      • Asset Quality: Total loans past due 30 days or more were 1.69 percent of the loan portfolio at December 31, 2011 compared to 1.73 percent at September 30, 2011.  Total non-accrual loans were $124.3 million, or 1.27 percent of our entire loan portfolio of $9.8 billion, at December 31, 2011. The residential mortgage and home equity loan portfolios totaling over 23,000 individual loans had only 272 loans past due 30 days or more at December 31, 2011.  At December 31, 2011, residential mortgage and home equity loans delinquent 30 days or more totaled $44.6 million, or 1.62 percent of the $2.8 billion in total loans within these categories. See “Credit Quality” section below for more details.

      • Provision for Losses on Non-Covered Loans and Unfunded Letters of Credit: The provision for losses on non-covered loans and unfunded letters of credit was $11.9 million for the fourth quarter of 2011 as compared to $7.8 million for the third quarter of 2011 and $8.7 million for the fourth quarter of 2010. Net loan charge-offs on non-covered loans increased to $14.4 million for the fourth quarter of 2011 compared to $4.8 million for the third quarter of 2011 and $4.3 million for the fourth quarter of 2010.  Two new impaired loan relationships contributed $6.5 million to the increase in net loan charge-offs during the fourth quarter of 2011 (See further detail under the “Credit Quality” section below).  At December 31, 2011, our allowance for losses on non-covered loans and unfunded letters of credit totaled $122.7 million and was 1.29 percent of non-covered loans, as compared to 1.34 percent and 1.33 percent at September 30, 2011 and December 31, 2010, respectively.

      • Provision for Losses on Covered Loans:  We recorded a $3.4 million provision for losses on covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) during the fourth quarter of 2011 as compared to no provision for the third quarter of 2011 and $6.4 million in the fourth quarter of 2010.  The provisions were recognized due to credit impairment caused by subsequent declines in the expected cash flows within certain pools of covered loans at the acquisition date and/or decreases in the additional cash flows expected to be collected due to changes in estimate after acquisition. The negative impact of the provisions was partially offset by the recognition in other non-interest income of the FDIC’s applicable portion of the impairment under the loss-sharing agreements.  Loan charge-offs on covered loans (impaired subsequent to acquisition) were $2.5 million for the fourth quarter of 2011 as compared to $6.1 million for third quarter of 2011 and no charge-offs in the fourth quarter of 2010.  Our allowance for losses on covered loans totaled $13.5 million at December 31, 2011 as compared to $12.6 million at September 30, 2011 and $6.4 million at December 31, 2010.  

      • Investments: We recognized $12.0 million in net gains on securities transactions during the fourth quarter of 2011 as compared to $7.0 million in net gains during the fourth quarter of 2010 as we continued to reduce our holdings of certain residential mortgage-backed securities issued by Freddie Mac and Fannie Mae with increased prepayment risk. Other-than-temporary impairment charges attributable to credit totaling $19.1 million ($11.7 million after taxes, or $0.07 per common share) were recognized in earnings during the fourth quarter of 2011 mainly related to trust preferred securities issued by one bank holding company.  The issuer of the trust preferred securities has deferred interest payments on these securities since late 2009 as required by an operating agreement with its bank regulators.  While the issuer has reported reasonably consistent financial performance in its recent regulatory filings, we have lengthened our estimate of the timeframe over which Valley could reasonably anticipate receiving the expected cash flows and, as a result, we concluded that the securities were other-than-temporarily impaired at December 31, 2011.  The total impairment loss of $41.2 million on these securities consisted of $18.3 million attributable to credit and $22.9 million attributable to factors other than credit.  After the credit impairment charges, the trust preferred securities had a combined adjusted amortized cost of $46.4 million and a fair value of $23.5 million at December 31, 2011.  Subsequent to the impairment analysis, management no longer had a positive intent to hold these securities to their maturity due to the significant deterioration in the securities’ value caused by the credit of the issuer.  Accordingly, we transferred the securities from held to maturity to the available for sale portfolio at December 31, 2011.    

      • Trading Mark to Market Impact on Earnings: Net income for the fourth quarter of 2011 included net trading losses of $839 thousand (less than $0.01 per common share) as compared to net trading losses of $2.1 million ($0.01 per common share) for the fourth quarter of 2010. Net trading losses mainly represent non-cash mark to market losses on our junior subordinated debentures carried at fair value.

      • Merger Expenses:  We incurred approximately $2.3 million ($1.7 million after taxes, or $0.01 per common share) in merger expenses during the fourth quarter of 2011 related to our acquisition of State Bancorp, Inc., which was completed effective January 1, 2012.  Professional and legal fees, salary and employee benefits expense, and other non-interest expense included $1.3 million, $640 thousand, and $290 thousand, respectively, of merger related expenses for the three months ended December 31, 2011.

      • Capital Strength: Our regulatory capital ratios continue to reflect Valley’s strong capital position. The Company's total risk-based capital, Tier 1 capital, and leverage capital were 12.75 percent, 10.92 percent, and 8.07 percent, respectively, at December 31, 2011.

      Gerald H. Lipkin, Chairman, President and CEO commented that, “With a few exceptions, we are pleased with Valley’s operating performance for the fourth quarter given the current environment.  Most notable, we had solid loan growth in our commercial real estate loan portfolio during the quarter, combined with the continued residential mortgage loan growth reflective of our very successful mortgage refinance program.” Mr. Lipkin added, “In January 2012, we completed our acquisition of State Bancorp, Inc. and its principal subsidiary, State Bank of Long Island with approximately $1.6 billion in assets. We are very excited about the benefits that are expected from integrating the two companies. Our expansion into this attractive area of the Long Island market should provide many additional lending, retail, and wealth management service opportunities to further strengthen our New York Metropolitan operations in 2012.  Given the expected synergies from the acquisition, strengthening commercial loan demand, and the recent signs of a steadily improving economy, we are optimistic about the year ahead and our ability to grow the Valley Brand to further benefit our shareholders.”  

      State Bank of Long Island, a commercial bank with 16 branches located in Nassau, Suffolk, Queens and Manhattan, was merged into Valley National Bank. Full systems integration is expected to be completed during the latter half of the first quarter of 2012 and is anticipated to be a relatively seamless transition for all former State Bank customers.  

      Net Interest Income and Margin

      Net interest income on a tax equivalent basis was $120.1 million for the fourth quarter of 2011, a $3.6 million decrease from the third quarter of 2011 and an increase of $5.6 million from the fourth quarter of 2010. The linked quarter decrease was mainly driven by lower yields on average taxable investments and loans, as well as a $130.2 million decline in average taxable investment balances for the fourth quarter of 2011.  Average taxable investment balances declined due to normal repayment activity on higher yielding securities and lower reinvestment in new securities.  Alternatively, we used the security repayments to fund higher yielding loan growth and maintained additional excess balances in overnight interest bearing deposits with correspondent banks.  Interest income on loans declined during the fourth quarter mainly due to lower rates on refinanced loans and a decrease in loan prepayment fees and interest recoveries on non-accrual loans.

      The net interest margin on a tax equivalent basis was 3.74 percent for the fourth quarter of 2011, a decrease of 12 basis points from 3.86 percent in the linked third quarter of 2011, and an 11 basis point increase from 3.63 percent for the quarter ended December 31, 2010. The yield on average interest earning assets decreased by 17 basis points on a linked quarter basis mainly as a result of lower yields on both average taxable investments and loans caused by the activity described above.  The cost of average interest bearing liabilities declined three basis points from the third quarter of 2011 mainly due to a $197.3 million decline in average time deposits caused principally by maturing deposits that were not renewed by customers due to lower rates offered on most of our certificates of deposit products.  The maturing deposits contributed to a seven basis point decrease in the cost of the average time deposits during the fourth quarter of 2011.  Our cost of total deposits was 0.66 percent for the fourth quarter of 2011 compared to 0.71 percent for the three months ended September 30, 2011.  

      We believe our margin may continue to face the risk of compression into the foreseeable future due to the current low level of interest rates on most interest earning asset alternatives.  However, we continue to tightly manage our balance sheet and our cost of funds to optimize our returns.  During the fourth quarter of 2011, we continued to reduce the interest rates on many of our deposit products, including time deposits, and lower the interest rates paid on certain modified long-term FHLB borrowings.  We have yet to fully realize the benefits of these recent reductions. We believe these actions and other asset/liability strategies will partially temper the negative impact of the current interest rate environment.

      Credit Quality

      Total loan delinquencies as a percentage of total loans were 1.69 percent at December 31, 2011 as compared to 1.73 percent at September 30, 2011 and 1.77 percent at December 31, 2010.  With a non-covered loan portfolio totaling $9.5 billion, net loan charge-offs on non-covered loans for the fourth quarter of 2011 totaled $14.4 million as compared to $4.8 million for the third quarter of 2011 and $4.3 million for the fourth quarter of 2010.  Charge-offs on loans in our impaired covered loan pools totaled $2.5 million and $6.1 million for the fourth and third quarters of 2011, respectively, and are substantially covered by loss-sharing agreements with the FDIC.

      The following table summarizes the allocation of the allowance for credit losses to specific loan categories and the allocation as a percentage of each loan category at December 31, 2011, September 30, 2011 and December 31, 2010:



      December 31, 2011


      September 30, 2011


       December 31, 2010 





      Allocation




      Allocation




      Allocation





      as a % of




      as a % of




      as a % of



      Allowance


      Loan


      Allowance


      Loan


      Allowance


      Loan



      Allocation


      Category


      Allocation


      Category


      Allocation


      Category

      Loan Category:

























      Commercial and Industrial loans*

      $      65,076


      3.46%


      $      62,717


      3.44%


      $      58,229


      3.19%














      Commercial real estate loans:













      Commercial real estate

      19,222


      0.54%


      20,079


      0.58%


      15,755


      0.47%


      Construction

      12,905


      3.14%


      14,614


      3.53%


      14,162


      3.31%

      Total commercial real estate loans

      32,127


      0.81%


      34,693


      0.89%


      29,917


      0.79%














      Residential mortgage loans

      9,058


      0.40%


      10,158


      0.47%


      9,128


      0.47%














      Consumer loans:













      Home equity

      2,214


      0.47%


      2,794


      0.58%


      2,345


      0.46%


      Auto and other consumer

      6,463


      0.71%


      7,297


      0.79%


      12,154


      1.29%

      Total consumer loans

      8,677


      0.63%


      10,091


      0.72%


      14,499


      1.00%














      Covered loans

      13,528


      4.98%


      12,587


      4.08%


      6,378


      1.79%














      Unallocated

      7,719


      NA


      7,455


      NA


      8,353


      NA














      Allowance for credit losses

      $    136,185


      1.39%


      $    137,701


      1.44%


      $    126,504


      1.35%














      * Includes the reserve for unfunded letters of credit.













      Total non-performing assets (“NPAs”), consisting of non-accrual loans, other real estate owned (OREO), other repossessed assets and non-accrual debt securities, totaled $167.4 million at December 31, 2011 compared to $122.6 million at September 30, 2011. The $44.8 million increase in NPAs from September 30, 2011 was mainly due to non-accrual debt securities (consisting of other-than-temporarily impaired trust preferred securities classified as available for sale) totaling $27.2 million and three additional non-accrual loan relationships (one included in each of the commercial and industrial, commercial real estate, and construction loan categories) totaling $22.5 million. Two of the additional non-accrual loan relationships were also responsible for $6.5 million of the $14.4 million in total net loan charge-offs recognized during the fourth quarter of 2011 due to partial charge-offs resulting from valuation of their collateral at December 31, 2011.

      Non-accrual loans increased $16.6 million to $124.3 million at December 31, 2011 as compared to $107.7 million at September 30, 2011 mainly due to the aforementioned additional loan relationships classified as non-accrual loans.  Although the timing of collection is uncertain, management believes that most of the non-accrual loans are well secured and largely collectible based on, in part, our quarterly review of impaired loans. Our impaired loans, mainly consisting of non-accrual and troubled debt restructured commercial and commercial real estate loans, totaled $184.1 million at December 31, 2011 and had $23.2 million in related specific reserves included in our total allowance for loan losses. OREO (which consists of 17 commercial and residential properties) and other repossessed assets, excluding OREO subject to loss-sharing agreements with the FDIC, totaled a combined $16.0 million at December 31, 2011 as compared to $14.9 million at September 30, 2011.

      Loans past due 90 days or more and still accruing increased $164 thousand to $4.0 million, or 0.04 percent of total loans at December 31, 2011 compared to $3.9 million, or 0.04 percent at September 30, 2011 primarily due to a modest increase in commercial and industrial loans within this delinquency category.  

      Loans past due 30 to 89 days decreased $16.5 million to $37.6 million at December 31, 2011 compared to September 30, 2011 partly due to the migration of a $7.3 million commercial real estate loan to non-accrual status (reported as a potential problem loan last quarter), as well as improved performance of commercial and industrial and residential mortgage loans within this delinquency category.

      Troubled debt restructured loans (“TDRs”) represent loan modifications for customers experiencing financial difficulties where a concession has been granted.  Performing TDRs (i.e., TDRs not reported as loans 90 days or more past due and still accruing or as non-accrual loans) totaled $101.0 million at December 31, 2011 and consisted of 60 loans (primarily in the commercial and industrial loan and commercial real estate portfolios) as compared to 58 loans totaling $103.7 million at September 30, 2011.  On an aggregate basis, the $101.0 million in performing TDRs at December 31, 2011 had a modified weighted average interest rate of approximately 4.93 percent as compared to a pre-modification weighted average interest rate of 6.11 percent.

      Loans and Deposits

      Total loans increased by $199.6 million to $9.8 billion at December 31, 2011 as compared to September 30, 2011. See discussion below for a complete analysis of the change in mix between each loan category.

      Non-Covered Loans. Non-covered loans are loans not subject to loss-sharing agreements with the FDIC.  Non-covered loans increased $210.1 million to approximately $9.5 billion at December 31, 2011 from September 30, 2011.  The linked quarter increase was mainly comprised of increases in residential mortgage, commercial real estate (including construction) and commercial and industrial loans of $113.0 million, $59.0 million and $45.2 million, respectively, partially offset by a decrease of $13.0 million in automobile loans.  Residential mortgage loans increased due to the continued success of our $499 refinance program and the current low level of market interest rates. During the fourth quarter of 2011, we originated over $380 million in new and refinanced residential mortgage loans and retained approximately 79 percent of these loans in our loan portfolio at December 31, 2011.  Commercial real estate loans continued to increase quarter over quarter due to our stronger business emphasis on co-op and multifamily loan lending in our primary markets during 2011, as well as a slight increase in new loan demand mainly from our current borrowers.  Commercial and industrial loans increased largely due to a $37.0 million short-term loan to State Bancorp.  The funds were used by State Bancorp to repurchase all of its Series A Preferred Stock issued under the Treasury’s Capital Purchase Program prior to being acquired by Valley effective January 1, 2012. Exclusive of the merger related loan, soft loan demand coupled with strong competition for quality credits continued to challenge our ability to achieve significant loan growth in this category during the quarter. Automobile loan balances have continued to decline due to several factors, including our high credit standards, acceptable loan to collateral value levels, and high unemployment levels.  Additionally, in an attempt to build market share, some large competitors continue to offer rates and terms that we have elected not to match.  These factors may continue to constrain the levels of our auto loan originations during the first quarter of 2012 and the foreseeable future.

      Covered Loans. Loans for which Valley National Bank will share losses with the FDIC are referred to as “covered loans,” and consist of loans acquired from LibertyPointe Bank and The Park Avenue Bank as a part of FDIC-assisted transactions during the first quarter of 2010.  Our covered loans consist primarily of commercial real estate loans and commercial and industrial loans and totaled $271.8 million at December 31, 2011 as compared to $282.4 million at September 30, 2011.  These loans are accounted for on a pool basis.  For loan pools with better than originally expected cash flows, the forecasted increase is recorded as a prospective adjustment to our interest income on loans over future periods.  Additionally, on a prospective basis, we reduce the FDIC loss-share receivable by the guaranteed portion of the additional cash flows expected to be received from borrowers on those loan pools.  During the fourth and third quarters of 2011, we reduced our FDIC loss-share receivable by $2.4 million and $2.9 million, respectively, due to the prospective recognition of the effect of additional cash flows from pooled loans with a corresponding reduction in non-interest income for the periods.  

      Deposits. Total deposits increased $52.8 million to approximately $9.7 billion at December 31, 2011 from September 30, 2011. Non-interest bearing deposits increased $168.5 million to $2.8 billion during the fourth quarter mainly due to general increases in commercial and retail deposits caused by seasonal business activity and the low level of interest rates on alternative investment and savings products. Savings, NOW and money market deposits increased $77.5 million to $4.4 billion at December 31, 2011 as compared to September 30, 2011 partly due to the low level of interest rates on time deposits and the migration of some maturing certificate of deposits to these account types.  However, time deposits declined $193.2 million to $2.5 billion at December 31, 2011 primarily due to lower interest rates offered on most of our certificate of deposit products.

      Non-Interest Income

      Fourth quarter of 2011 compared with fourth quarter of 2010

      Non-interest income for the fourth quarter of 2011 decreased $22.0 million to $13.8 million as compared to $35.8 million for the same period of 2010 primarily due to a $19.1 million increase in other-than-temporary impairment charges.  The impairment charges recognized in earnings during the fourth quarter of 2011 mainly related to trust preferred securities issued by one bank holding company, as previously discussed, but also included a charge for one private label mortgage-backed security found to be other-than-temporarily impaired at December 31, 2011. Gains on sales of loans decreased $4.9 million to $2.6 million for the fourth quarter of 2011 as compared to the fourth quarter of 2010 mainly due to lower sales volumes of our new and refinanced residential mortgage loan originations and a $3.9 million gain recognized in the fourth quarter of 2010 on the sale of $83 million in conforming residential mortgage loans transferred to loans held for sale. Non-interest income recognized due to changes in the FDIC loss-share receivable also declined $4.9 million as compared to the fourth quarter of 2010 largely due to a lower level of additional estimated credit losses on covered loans at December 31, 2011 as compared to one year ago. However, net gains on securities transactions increased $5.1 million as compared to the 2010 period due to an increase in the amount of residential mortgage-backed securities sold in the fourth quarter of 2011.  Additionally, insurance commissions increased by $1.2 million and net trading losses declined by $1.2 million as compared to the three months ended December 31, 2010.

      Fourth quarter of 2011 compared with third quarter of 2011

      Non-interest income for the fourth quarter of 2011 decreased $6.4 million from $20.2 million for the quarter ended September 30, 2011 mainly due to the aforementioned $19.1 million in other-than-temporary impairment charges recognized during the fourth quarter.  Net trading losses increased $1.6 million primarily due to non-cash mark to market losses in the fourth quarter on our trust preferred debentures carried at fair value.  Partially offsetting the negative impact of these items, net gains on securities transactions increased $11.2 million from $863 thousand during the third quarter of 2011 to $12.0 million in the fourth quarter. Non-interest income recognized due to the change in the FDIC loss-share receivable increased $3.0 million as compared to the third quarter of 2011 largely due to additional estimated credit losses on covered loans at December 31, 2011 as compared to September 30, 2011.

      Non-Interest Expense

      Fourth quarter of 2011 compared with fourth quarter of 2010

      Non-interest expense increased $4.0 million to $84.4 million for the three months ended December 31, 2011 from $80.4 million for the same period of 2010.  Professional and legal fees increased $1.9 million to $4.9 million for the three months ended December 31, 2011 primarily due to increased fees related to our acquisition of State Bancorp on January 1, 2012, assets acquired in the FDIC-assisted transactions and other general corporate matters.  Net occupancy and equipment expense increased $1.6 million to $16.1 million for the fourth quarter of 2011 mainly due to general increases in real estate taxes, repairs and maintenance, and depreciation expense.  Amortization of other intangible assets increased $1.2 million to $2.2 million during the fourth quarter of 2011 mainly due to a $945 thousand recovery of impairment charges on certain loan servicing rights in the fourth quarter of 2010 as compared to $27 thousand in impairment charges recognized during the fourth quarter of 2011. Other non-interest expense also increased $964 thousand to $13.2 million for the three months ended December 31, 2011 partly due to merger related expenses as well as OREO and other expenses related to assets acquired in FDIC-assisted transactions.  Partially offsetting these increases, salary and employee benefits expense decreased $2.4 million to $42.9 million for the three months ended December 31, 2011 mainly due to lower cash incentive accruals during the 2011 period.

      Fourth quarter of 2011 compared with third quarter of 2011

      Non-interest expense decreased by $925 thousand from $85.3 million for the linked quarter ended September 30, 2011.  Salary and employee benefits expense decreased $2.2 million from $45.1 million for the third quarter of 2011 mainly due to lower cash incentive accruals during the fourth quarter of 2011. Amortization of other intangible assets decreased approximately $1.1 million mainly due to our recognition of a $1.6 million impairment charge on certain loan servicing rights during the third quarter of 2011 as compared to a $27 thousand impairment charge during the fourth quarter of 2011. Professional and legal fees increased $1.2 million from $3.7 million for the three months ended September 30, 2011 primarily due to $1.3 million in fees recognized during the fourth quarter related to our acquisition of State Bancorp. Other non-interest expense also increased $851 thousand from $12.3 million for the three months ended September 30, 2011 partly due to merger related expenses and expenses related to assets acquired in FDIC-assisted transactions.

      Income Tax Expense

      Income tax expense was $7.5 million for the three months ended December 31, 2011, reflecting an effective tax rate of 23.3 percent compared to $15.3 million for the same period of 2010, reflecting an effective tax rate of 28.6 percent.  The 5.3 percent decrease in the effective tax rate as compared to the fourth quarter of 2010 was largely due to our lower pre-tax book income caused, in part, by other-than-temporary impairment charges, and our increased investment in additional tax credits during 2011.

      Income tax expense was $63.5 million for the year ended December 31, 2011, reflecting an effective tax rate of 32.2 percent compared to $55.8 million for 2010, reflecting an effective tax rate of 29.8 percent.   The effective tax rate increased by 2.4 percent as compared to 2010 largely due to a one-time tax provision of $8.5 million related to a change in tax law during 2011, partially offset by our increased investment in additional tax credits during 2011.

      For the first quarter of 2012, we anticipate that our effective tax rate will approximate 32 percent.    

      About Valley

      Valley is a regional bank holding company headquartered in Wayne, New Jersey with nearly $16 billion in assets after the acquisition of State Bancorp. Its principal subsidiary, Valley National Bank, currently operates 211 branches in 147 communities serving 16 counties throughout northern and central New Jersey, Manhattan and Long Island. Valley National Bank is one of the largest commercial banks headquartered in New Jersey and is committed to providing the most convenient service, the latest in product innovations and an experienced and knowledgeable staff with a high priority on friendly customer service 24 hours a day, 7 days a week. For more information about Valley National Bank and its products and services, please visit www.valleynationalbank.com or call Customer Service 24/7 at 800-522-4100.


      Forward Looking Statements

      The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “typically,” “usually,” “anticipate,” or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:

      • A severe decline in the general economic conditions of New Jersey and the New York Metropolitan area;
      • declines in value in our investment portfolio, including additional other-than-temporary impairment charges on our investment securities;
      • higher than expected increases in our allowance for loan losses;
      • higher than expected increases in loan losses or in the level of nonperforming loans;
      • unexpected changes in interest rates;
      • higher than expected tax rates, including increases resulting from changes in tax laws, regulations and case law;
      • a continued or unexpected decline in real estate values within our market areas;
      • charges against earnings related to the change in fair value of our junior subordinated debentures;
      • higher than expected FDIC insurance assessments;
      • the failure of other financial institutions with whom we have trading, clearing, counterparty and other financial relationships;
      • lack of liquidity to fund our various cash obligations;
      • unanticipated reduction in our deposit base;  
      • potential acquisitions that may disrupt our business;
      • government intervention in the U.S. financial system and the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve;
      • legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulations) subject us to additional regulatory oversight which may result in increased compliance costs and/or require us to change our business model;
      • changes in accounting policies or accounting standards;
      • our inability to promptly adapt to technological changes;
      • our internal controls and procedures may not be adequate to prevent losses;
      • claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;
      • the inability to realize expected cost savings and revenue synergies from the merger of State Bancorp with Valley in the amounts or in the timeframe anticipated;
      • costs or difficulties relating to the integration of State Bancorp’s systems might be greater than expected;
      • inability to retain State Bancorp’s customers and employees;
      • lower than expected cash flows from covered loan pools acquired in FDIC-assisted transactions; and
      • other unexpected material adverse changes in our operations or earnings.

      A detailed discussion of factors that could affect our results is included in our SEC filings, including the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2010 and our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011. 

      We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations.  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. 

      VALLEY NATIONAL BANCORP

      CONSOLIDATED FINANCIAL HIGHLIGHTS

      SELECTED FINANCIAL DATA 







      Three Months Ended


      Years Ended





      December 31,


      September 30,


      December 31,


      December 31,


      ($ in thousands, except for share data)

      2011


      2011


      2010


      2011


      2010


      FINANCIAL DATA:











      Net interest income

      $      118,314


      $      121,935


      $      113,141


      $      474,811


      $      462,752


      Net interest income - FTE (4)

      120,055


      123,611


      114,478


      480,888


      468,342


      Non-interest income (2)

      13,772


      20,203


      35,846


      112,297


      91,327


      Non-interest expense

      84,377


      85,302


      80,408


      336,588


      317,682


      Income tax expense

      7,528


      13,696


      15,322


      63,532


      55,771


      Net income

      24,817


      35,357


      38,158


      133,653


      131,170


      Weighted average number of common shares outstanding: (5)











      Basic

      170,185,439


      170,007,399


      169,426,058


      169,928,460


      169,112,901



      Diluted

      170,185,880


      170,007,983


      169,428,992


      169,929,590


      169,121,584


      Per common share data: (5)












      Basic earnings

      $              0.15


      $              0.21


      $              0.23


      $              0.79


      $              0.78



      Diluted earnings

      0.15


      0.21


      0.23


      0.79


      0.78



      Cash dividends declared

      0.17


      0.17


      0.17


      0.69


      0.69


      Book value

      7.44


      7.69


      7.64


      7.44


      7.64


      Tangible book value (1)

      5.45


      5.69


      5.61


      5.45


      5.61


      Tangible common equity to tangible assets(1)

      6.67

      %

      6.96

      %

      6.90

      %

      6.67

      %

      6.90

      %

      Closing stock price - high

      $          12.69


      $          14.09


      $          13.73


      $          14.20


      $          15.19


      Closing stock price - low

      10.14


      9.89


      12.01


      9.89


      11.83













      CORE ADJUSTED FINANCIAL DATA: (1)











      Net income, as adjusted

      $        36,508


      $        35,357


      $        38,158


      $      145,861


      $      134,075


      Basic earnings per share, as adjusted

      0.21


      0.21


      0.23


      0.86


      0.79


      Diluted earnings per share, as adjusted

      0.21


      0.21


      0.23


      0.86


      0.79













      FINANCIAL RATIOS:









      `


      Net interest margin

      3.68

      %

      3.80

      %

      3.59

      %

      3.71

      %

      3.65

      %

      Net interest margin - FTE (4)

      3.74


      3.86


      3.63


      3.75


      3.69


      Annualized return on average assets

      0.69


      0.99


      1.08


      0.94


      0.93


      Annualized return on average shareholders' equity

      7.57


      10.74


      11.85


      10.20


      10.32


      Annualized return on average tangible











         shareholders' equity (1)

      10.21


      14.52


      16.06


      13.80


      13.97


      Efficiency ratio (6)

      63.88


      60.01


      53.97


      57.33


      57.34













      CORE ADJUSTED FINANCIAL RATIOS: (1)











      Annualized return on average assets, as adjusted

      1.02

      %

      0.99

      %

      1.08

      %

      1.02

      %

      0.95

      %

      Annualized return on average shareholders' equity as adjusted

      11.13


      10.74


      11.85


      11.13


      10.55


      Annualized return on average tangible











         shareholders' equity, as adjusted

      15.02


      14.52


      16.06


      15.06


      14.28


      Efficiency ratio, as adjusted

      55.79


      60.01


      53.97


      55.44


      56.86













      AVERAGE BALANCE SHEET ITEMS:











      Assets

      $  14,306,673


      $  14,283,783


      $  14,099,979


      $  14,270,289


      $  14,119,230


      Interest earning assets

      12,845,931


      12,821,312


      12,621,007


      12,814,236


      12,679,756


      Loans

      9,710,251


      9,642,366


      9,458,332


      9,608,480


      9,474,994


      Interest bearing liabilities

      10,145,279


      10,295,144


      10,217,104


      10,284,332


      10,363,969


      Deposits

      9,835,527


      9,788,550


      9,421,254


      9,738,592


      9,497,664


      Shareholders' equity

      1,311,498


      1,316,733


      1,288,140


      1,310,939


      1,270,778














































      As Of





      December 31,


      September 30,


      December 31,


      ($ in thousands)

      2011


      2011


      2010


      BALANCE SHEET ITEMS:







      Assets

      $   14,244,507


      $   14,231,155


      $   14,143,826


      Total loans

      9,799,641


      9,600,087


      9,365,795


      Non-covered loans

             9,527,797


             9,317,691


      9,009,140


      Deposits

      9,673,102


      9,620,339


      9,363,614


      Shareholders' equity

      1,266,248


      1,307,102


      1,295,205











      CAPITAL RATIOS:







      Tier 1 leverage ratio

      8.07

      %

      8.10

      %

      8.31

      %

      Risk-based capital - Tier 1

      10.92


      10.82


      10.94


      Risk-based capital - Total Capital

      12.75


      12.65


      12.91

























      Three Months Ended


      Years Ended





      December 31,


      September 30,


      December 31,


      December 31,


      ($ in thousands)

      2011


      2011


      2010


      2011


      2010


      ALLOWANCE FOR CREDIT LOSSES:











      Beginning balance - Allowance for credit losses

      $        137,701


      $        140,893


      $        115,715


      $        126,504


      $        103,655


      Loans charged-off: (3)












      Commercial and industrial

      (10,204)


      (9,297)


      (1,593)


      (29,229)


      (15,475)



      Commercial real estate

      (1,132)


      (719)


      (100)


      (6,305)


      (1,823)



      Construction

      (3,533)


      (520)


      (1,314)


      (4,053)


      (1,738)



      Residential mortgage

      (1,727)


      (269)


      (730)


      (3,222)


      (3,741)



      Consumer

      (1,542)


      (1,251)


      (2,009)


      (5,906)


      (10,882)




      Total loans charged-off

      (18,138)


      (12,056)


      (5,746)


      (48,715)


      (33,659)


      Charged-off loans recovered:












      Commercial and industrial

      617


      559


      804


      2,365


      4,121



      Commercial real estate

      106


      2


      17


      134


      156



      Construction

      -


      -


      -


      197


      -



      Residential mortgage

      23


      16


      17


      129


      97



      Consumer

      512


      504


      598


      2,236


      2,678




      Total loans recovered

      1,258


      1,081


      1,436


      5,061


      7,052


      Net charge-offs

      (16,880)


      (10,975)


      (4,310)


      (43,654)


      (26,607)


      Provision charged for credit losses

      15,364


      7,783


      15,099


      53,335


      49,456


      Ending balance - Allowance for credit losses

      $        136,185


      $        137,701


      $        126,504


      $        136,185


      $        126,504


      Components of allowance for credit losses:












      Allowance for non-covered loans

      $        120,274


      $        122,775


      $        118,326


      $        120,274


      $        118,326



      Allowance for covered loans

      13,528


      12,587


      6,378


      13,528


      6,378




      Allowance for loan losses

      133,802


      135,362


      124,704


      133,802


      124,704



      Allowance for unfunded letters of credit

      2,383


      2,339


      1,800


      2,383


      1,800


      Allowance for credit losses

      $        136,185


      $        137,701


      $        126,504


      $        136,185


      $        126,504


      Components of provision for credit losses:












      Provision for losses on non-covered loans

      $          11,904


      $            7,711


      $            8,850


      $          31,242


      $          42,943



      Provision for losses on covered loans

      3,416


      -


      6,378


      21,510


      6,378



      Provision for unfunded letters of credit

      44


      72


      (129)


      583


      135


      Provision for credit losses

      $          15,364


      $            7,783


      $          15,099


      $          53,335


      $          49,456


      Annualized ratio of net charge-offs of












      non-covered loans to average loans

      0.59

      %

      0.20

      %

      0.18

      %

      0.30

      %

      0.28

      %

      Annualized ratio of total net charge-offs












      to average loans

      0.70


      0.46


      0.18


      0.45


      0.28


      Allowance for non-covered loan losses as












      a % of non-covered loans

      1.26


      1.32


      1.31


      1.26


      1.31


      Allowance for credit losses as a % of total loans

      1.39


      1.43


      1.35


      1.39


      1.35














































      As Of




      ($ in thousands)



      December 31,


      September 30,


      December 31,




      ASSET QUALITY (NON-COVERED ASSETS): (7)



      2011


      2011


      2010




      Accruing past due loans:











      30 to 89 days past due:












      Commercial and industrial



      $           4,347


      $           9,866


      $         13,852





      Commercial real estate



      13,115


      22,220


      14,563





      Construction



      2,652


      -


      2,804





      Residential mortgage



      8,496


      12,556


      12,682





      Consumer



      8,975


      9,456


      14,638




      Total 30 to 89 days past due



      37,585


      54,098


      58,539




      90 or more days past due:












      Commercial and industrial



      657


      164


      12





      Commercial real estate



      422


      268


      -





      Construction



      1,823


      2,216


      196





      Residential mortgage



      763


      721


      1,556





      Consumer



      351


      483


      723




      Total 90 or more days past due



      4,016


      3,852


      2,487




      Total accruing past due loans



      $         41,601


      $         57,950


      $         61,026




      Non-accrual loans:












      Commercial and industrial



      $         26,648


      $         16,737


      $         13,721





      Commercial real estate



      42,186


      41,453


      32,981





      Construction



      19,874


      14,449


      27,312





      Residential mortgage



      31,646


      31,401


      28,494





      Consumer



      3,910


      3,645


      2,547




      Total non-accrual loans



      124,264


      107,685


      105,055




      Other real estate owned (8)



      15,227


      14,091


      10,498




      Other repossessed assets



      796


      822


      1,707




      Non-accrual debt securities (9)



      27,151


      -


      -

















      Total non-performing assets ("NPAs")



      $       167,438


      $       122,598


      $       117,260




      Performing troubled debt restructured loans



      $       100,992


      $       103,690


      $         89,696




      Total non-accrual loans as a % of loans



      1.27

      %

      1.12

      %

      1.12

      % 



      Total accruing past due and non-accrual loans as a % of loans


      1.69


      1.73


      1.77




      Allowance for losses on non-covered












      loans as a % of non-accrual loans



      96.79


      114.01


      112.63




























      NOTES TO SELECTED FINANCIAL DATA











      (1)

      This press release contains certain supplemental financial information, described in Notes (1) - (4), which has been determined by methods other



      than U.S. Generally Accepted Accounting Principles ("GAAP") that management uses in its analysis of Valley's performance.  Management believes


      these non-GAAP financial measures provide information useful to investors in understanding Valley's financial results. Specifically, Valley provides


      measures based on what it believes are its operating earnings on a consistent basis and excludes non-core operating items which affect the GAAP


      reporting of results of operations.  Management utilizes these measures for internal planning and forecasting purposes. Management believes that



      Valley's presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting


      Valley's business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered


      a substitute for GAAP basis measures and results and Valley strongly encourages investors to review its consolidated financial statements in their


      entirety and not to rely on any single financial measure.  Because non-GAAP financial measures are not standardized, it may not be possible to



      compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.












      Three Months Ended


      Years Ended





      December 31,


      September 30,


      December 31,


      December 31,



      ($ in thousands, except for share data)

      2011


      2011


      2010


      2011


      2010



      Tangible book value per common share:












      Common shares outstanding

      170,174,314


      170,025,364


      169,533,626


      170,174,314


      169,533,626



      Shareholders' equity

      $     1,266,248


      $     1,307,102


      $     1,295,205


      $     1,266,248


      $     1,295,205



      Less: Goodwill and other intangible assets

      (338,780)


      (339,850)


      (343,541)


      (338,780)


      (343,541)



      Tangible shareholders' equity

      $        927,468


      $        967,252


      $        951,664


      $        927,468


      $        951,664



         Tangible book value

      $5.45


      $5.69


      $5.61


      $5.45


      $5.61














      NOTES TO SELECTED FINANCIAL DATA - CONTINUED













      Three Months Ended


      Years Ended





      December 31,


      September 30,


      December 31,


      December 31,



      ($ in thousands, except for share data)

      2011


      2011


      2010


      2011


      2010



      Annualized return on average tangible equity:











      Net income

      $          24,817


      $          35,357


      $          38,158


      $        133,653


      $        131,170



      Average shareholders' equity

      1,311,498


      1,316,733


      1,288,140


      1,310,939


      1,270,778



      Less: Average goodwill and other intangible assets

      (339,528)


      (342,506)


      (337,662)


      (342,122)


      (331,667)



         Average tangible shareholders' equity

      $        971,970


      $        974,227


      $        950,478


      $        968,817


      $        939,111



         Annualized return on average tangible












         shareholders' equity

      10.21%


      14.52%


      16.06%


      13.80%


      13.97%



      Adjusted net income available to common stockholders:











      Net income, as reported

      $          24,817


      $          35,357


      $          38,158


      $        133,653


      $        131,170



      Net impairment losses on securities recognized in earnings (net of tax)

      11,691


      -


      -


      12,208


      2,905



      Net income, as adjusted

      36,508


      35,357


      38,158


      145,861


      134,075



      Adjusted per common share data:












      Net income, as adjusted

      $          36,508


      $          35,357


      $          38,158


      $        145,861


      $        134,075



      Average number of basic shares outstanding

      170,185,439


      170,007,399


      169,426,058


      169,928,460


      169,112,901



         Basic earnings, as adjusted

      $              0.21


      $              0.21


      $              0.23


      $              0.86


      $              0.79



      Average number of diluted shares outstanding

      170,185,880


      170,007,983


      169,428,992


      169,929,590


      169,121,584



         Diluted earnings, as adjusted

      $              0.21


      $              0.21


      $              0.23


      $              0.86


      $              0.79



      Adjusted annualized return on average assets:











      Net income, as adjusted

      $          36,508


      $          35,357


      $          38,158


      $        145,861


      $        134,075



      Average assets

      14,306,673


      14,283,783


      14,099,979


      14,270,289


      14,119,230



         Annualized return on average assets, as adjusted

      1.02%


      0.99%


      1.08%


      1.02%


      0.95%



      Adjusted annualized return on average shareholders' equity:










      Net income, as adjusted

      $          36,508


      $          35,357


      $          38,158


      $        145,861


      $        134,075



      Average shareholders' equity

      1,311,498


      1,316,733


      1,288,140


      1,310,939


      1,270,778



         Annualized return on average shareholders' equity, as adjusted

      11.13%


      10.74%


      11.85%


      11.13%


      10.55%



      Adjusted annualized return on average tangible shareholders' equity:









      Net income, as adjusted

      $          36,508


      $          35,357


      $          38,158


      $        145,861


      $        134,075



      Average tangible shareholders' equity

      971,970


      974,227


      950,478


      968,817


      939,111



         Annualized return on average tangible shareholders' equity, as adjusted

      15.02%


      14.52%


      16.06%


      15.06%


      14.28%



      Adjusted efficiency ratio:












      Non-interest expense

      $          84,377


      $          85,302


      $          80,408


      $        336,588


      $        317,682



      Net interest income

      118,314


      121,935


      113,141


      474,811


      462,752



      Non-interest income

      13,772


      20,203


      35,846


      112,297


      91,327















      Add: Net impairment losses on securities recognized in earnings

      19,143


      -


      -


      19,968


      4,642



         Gross operating income, as adjusted

      $        151,229


      $        142,138


      $        148,987


      $        607,076


      $        558,721



         Efficiency ratio, as adjusted

      55.79%


      60.01%


      53.97%


      55.44%


      56.86%



      Tangible common equity to tangible assets:












      Tangible shareholders' equity

      $        927,468


      $        967,252


      $        951,664


      $        927,468


      $        951,664



      Total assets

      14,244,507


      14,231,155


      14,143,826


      14,244,507


      14,143,826



      Less: Goodwill and other intangible assets

      (338,780)


      (339,850)


      (343,541)


      (338,780)


      (343,541)



      Tangible assets

      $   13,905,727


      $   13,891,305


      $   13,800,285


      $   13,905,727


      $   13,800,285



         Tangible common equity to tangible assets

      6.67%


      6.96%


      6.90%


      6.67%


      6.90%















      NOTES TO SELECTED FINANCIAL DATA - CONTINUED













      Three Months Ended


      Years Ended





      December 31,


      September 30,


      December 31,


      December 31,





      2011


      2011


      2010


      2011


      2010


      (2)

      Non-interest income includes net trading (losses) gains:












      Trading securities

      $            492


      $            136


      $            (194)


      $          1,015


      $         (1,056)




      Junior subordinated debentures

      (1,331)


      640


      (1,884)


      1,256


      (5,841)




        Total trading (losses) gains, net

      $            (839)


      $            776


      $         (2,078)


      $          2,271


      $         (6,897)















      (3)

      Total loans charged-off includes the following covered loan charge-offs:









      Commercial and industrial

      $         (2,476)


      $         (6,131)


      $                 -


      $       (14,212)


      $                 -



      Commercial real estate

      -


      -


      -


      (38)


      -



      Residential mortgage

      -


      -


      -


      (110)


      -




        Total covered loans charged-off

      $         (2,476)


      $         (6,131)


      $                 -


      $       (14,360)


      $                 -















      (4)

      Net interest income and net interest margin are presented on a tax equivalent basis using a 35 percent federal tax rate.  Valley believes that this presentation provides comparability of net interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice and SEC rules.

      (5)

      Share data reflects the five percent common stock dividend issued on May 20, 2011. 

      (6)

      The efficiency ratio measures Valley's total non-interest expense as a percentage of net interest income plus total non-interest income. 

      (7)

      Past due loans and non-accrual loans excludes loans that were acquired as part of the Liberty Pointe Bank and The Park Avenue Bank transactions.  These loans are accounted for on a pool basis. 

      (8)

      Excludes OREO properties related to the LibertyPointe Bank and The Park Avenue Bank FDIC-assisted transactions totaling $6.4 million, $6.2 million, and $7.8 million at December 31, 2011, September 30, 2011, and December 31, 2010, respectively.  These assets are covered by the loss-sharing agreements with the FDIC.

      (9)

      Includes other-than temporarily impaired trust preferred securities classified as available for sale, which are presented at carrying value (not of unrealized losses totaling $24.5 million) at December 31, 2011.


      SHAREHOLDER RELATIONS

      Requests for copies of reports and/or other inquiries should be directed to Dianne Grenz, Director of Shareholder and Public Relations, Valley National Bancorp,

      1455 Valley Road, Wayne, New Jersey, 07470, by telephone at (973) 305-3380, by fax at (973) 696-2044 or by e-mail at dgrenz@valleynationalbank.com.




      VALLEY NATIONAL BANCORP







      CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)







      (in thousands, except for share data)










      December 31,







      2011



      2010

      Assets








      Cash and due from banks



      $      372,566



      $      302,629

      Interest bearing deposits with banks



      6,483



      63,657

      Investment securities:








      Held to maturity, fair value of $2,027,197 at December 31, 2011 and $1,898,872 at December 31, 2010



      1,958,916



      1,923,993


      Available for sale



      566,520



      1,035,282


      Trading securities



      21,938



      31,894




      Total investment securities



      2,547,374



      2,991,169

      Loans held for sale, at fair value



      25,169



      58,958

      Non-covered loans



      9,527,797



      9,009,140

      Covered loans



      271,844



      356,655


      Less: Allowance for loan losses



      (133,802)



      (124,704)




      Net loans



      9,665,839



      9,241,091

      Premises and equipment, net



      265,475



      265,570

      Bank owned life insurance



      303,867



      304,956

      Accrued interest receivable



      52,527



      59,126

      Due from customers on acceptances outstanding



      5,903



      6,028

      FDIC loss-share receivable



      74,390



      89,359

      Goodwill



      317,962



      317,891

      Other intangible assets, net



      20,818



      25,650

      Other assets



      586,134



      417,742




      Total Assets



      $ 14,244,507



      $  14,143,826











      Liabilities







      Deposits:








      Non-interest bearing



      $   2,781,597



      $   2,524,299


      Interest bearing:









      Savings, NOW and money market



      4,390,121



      4,106,464



      Time



      2,501,384



      2,732,851




      Total deposits



      9,673,102



      9,363,614

      Short-term borrowings



      212,849



      192,318

      Long-term borrowings



      2,726,099



      2,933,858

      Junior subordinated debentures issued to capital trusts (includes fair value of $160,478








      at December 31, 2011 and $161,734 at December 31, 2010 for VNB Capital Trust I)



      185,598



      186,922

      Bank acceptances outstanding



      5,903



      6,028

      Accrued expenses and other liabilities



      174,708



      165,881




      Total Liabilities



      12,978,259



      12,848,621

      Shareholders' Equity*







      Preferred stock, no par value, authorized 30,000,000 shares; none issued



      -



      -

      Common stock, no par value, authorized 220,974,508 shares; issued 170,209,090 shares








       at December 31, 2011 and 170,131,085 shares at December 31, 2010



      59,955



      57,041

      Surplus




      1,179,135



      1,178,325

      Retained earnings



      90,011



      79,803

      Accumulated other comprehensive loss



      (62,441)



      (5,719)

      Treasury stock, at cost (34,776 common shares at December 31, 2011 and 597,459








      common shares at December 31, 2010)



      (412)



      (14,245)




      Total Shareholders' Equity



      1,266,248



      1,295,205




      Total Liabilities and Shareholders' Equity



      $ 14,244,507



      $ 14,143,826








      *

      Share data reflects the five percent common stock dividend issued on May 20, 2011.









      VALLEY NATIONAL BANCORP









      CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


      Three Months Ended


      Years Ended

      (in thousands, except for share data)


      December 31,


      December 31,






      2011


      2010


      2011


      2010

      Interest Income









      Interest and fees on loans


      $           138,355


      $           133,478


      $           547,365


                   543,009

      Interest and dividends on investment securities:










      Taxable


      23,395


      26,732


      108,129


                   115,593


      Tax-exempt


      3,230


      2,480


      11,273


                     10,366


      Dividends


      1,443


      2,275


      6,655


                       7,428

      Interest on federal funds sold and other short-term investments


      149


      125


      402


                          416


      Total interest income


      166,572


      165,090


      673,824


                   676,812

      Interest Expense









      Interest on deposits:










      Savings, NOW and money market


      5,154


      4,742


      19,876


                     19,126


      Time



      11,085


      12,247


      48,291


                     55,798

      Interest on short-term borrowings


      244


      350


      1,154


                       1,345

      Interest on long-term borrowings and junior subordinated debentures


      31,775


      34,610


      129,692


                   137,791


      Total interest expense


      48,258


      51,949


      199,013


                   214,060

      Net Interest Income


      118,314


      113,141


      474,811


                   462,752

      Provision for losses on non-covered loans and unfunded letters of credit


      11,948


      8,721


      31,825


                     43,078

      Provision for losses on covered loans


      3,416


      6,378


      21,510


                       6,378

      Net Interest Income After Provision for Credit Losses


      102,950


      98,042


      421,476


                   413,296

      Non-Interest Income









      Trust and investment services


      1,779


      1,913


      7,523


                       7,665

      Insurance commissions


      4,131


      2,917


      15,627


                     11,334

      Service charges on deposit accounts


      5,702


      6,204


      22,610


                     25,691

      Gains on securities transactions, net


      12,034


      6,967


      32,068


                     11,598

      Other-than-temporary impairment losses on securities


      (42,775)


      -


      (42,775)


                     (1,393)


      Portion recognized in other comprehensive income (before taxes)


      23,632


      -


      22,807


                     (3,249)


      Net impairment losses on securities recognized in earnings


      (19,143)


      -


      (19,968)


                     (4,642)

      Trading (losses) gains, net


      (839)


      (2,078)


      2,271


                     (6,897)

      Fees from loan servicing


      981


      1,285


      4,337


                       4,919

      Gains on sales of loans, net


      2,639


      7,504


      10,699


                     12,591

      Gains on sales of assets, net


      44


      237


      426


                          619

      Bank owned life insurance


      1,805


      1,158


      7,380


                       6,166

      Change in FDIC loss-share receivable


      1,414


      6,268


      13,403


                       6,268

      Other



      3,225


      3,471


      15,921


                     16,015


      Total non-interest income


      13,772


      35,846


      112,297


                     91,327

      Non-Interest Expense









      Salary and employee benefits expense


      42,948


      45,332


      176,307


                   176,106

      Net occupancy and equipment expense


      16,055


      14,495


      64,364


                     61,765

      FDIC insurance assessment


      3,135


      3,246


      12,759


                     13,719

      Amortization of other intangible assets


      2,206


      974


      9,315


                       7,721

      Professional and legal fees


      4,853


      2,945


      15,312


                     10,137

      Advertising


      2,003


      1,203


      8,373


                       4,052

      Other



      13,177


      12,213


      50,158


                     44,182


      Total non-interest expense


      84,377


      80,408


      336,588


                   317,682

      Income Before Income Taxes


      32,345


      53,480


      197,185


                   186,941

      Income tax expense


      7,528


      15,322


      63,532


                     55,771

      Net Income


      $             24,817


      $             38,158


      $           133,653


      $           131,170

      Earnings Per Common Share*:










      Basic


      $                 0.15


      $                 0.23


      $                 0.79


      $                 0.78


      Diluted


      0.15


      0.23


      0.79


                         0.78

      Cash Dividends Declared per Common Share*


      0.17


      0.17


      0.69


                         0.69

      Weighted Average Number of Common Shares Outstanding*:










      Basic


      170,185,439


      169,426,058


      169,928,460


      169,112,901


      Diluted


      170,185,880


      169,428,992


      169,929,590


      169,121,584

      ____________









      *  Share data reflects the five percent common stock dividend issued on May 20, 2011.




      VALLEY NATIONAL BANCORP 


      LOAN PORTFOLIO


      (in thousands)



































      12/31/2011




      09/30/2011




      06/30/2011




      03/31/2011




      12/31/2010














      Non-covered Loans































      Commercial and industrial

      $               1,878,387




      $               1,833,211




      $               1,825,782




      $             1,859,626




      $               1,825,066














      Commercial real estate:
































      Commercial real estate

      3,574,089




      3,524,891




      3,486,597




      3,457,768




      3,378,252















      Construction

      411,003




      401,166




      413,951




      418,304




      428,232














      Total commercial real estate

      3,985,092




      3,926,057




      3,900,548




      3,876,072




      3,806,484














      Residential mortgage

      2,285,590




      2,172,601




      2,147,362




      2,047,898




      1,925,430














      Consumer:
































      Home equity

      469,604




      477,517




      484,812




      492,328




      512,745















      Automobile

      772,490




      785,443




      807,489




      827,485




      850,801















      Other consumer

      136,634




      122,862




      116,606




      106,184




      88,614














      Total consumer loans

      1,378,728




      1,385,822




      1,408,907




      1,425,997




      1,452,160














      Total non-covered loans

      $               9,527,797




      $               9,317,691




      $               9,282,599




      $             9,209,593




      $               9,009,140














      Covered loans*

      271,844




      282,396




      308,424




      336,576




      356,655














      Total loans

      $               9,799,641




      $               9,600,087




      $               9,591,023




      $             9,546,169




      $               9,365,795














      _________________________































      * Loans that Valley National Bank will share losses with the FDIC are referred to as "covered loans". 














































      Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and






      Net Interest Income on a Tax Equivalent Basis






      Quarter End - 12/31/2011


      Quarter End - 09/30/2011


      Quarter End - 06/30/2011


      Quarter End - 03/31/2011


      Quarter End - 12/31/2010






      Average




      Avg.


      Average




      Avg.


      Average




      Avg.


      Average




      Avg.


      Average




      Avg.


      ($ in thousands)

      Balance


      Interest


      Rate


      Balance


      Interest


      Rate


      Balance


      Interest


      Rate


      Balance


      Interest


      Rate


      Balance


      Interest


      Rate


      Assets
































      Interest earning assets































      Loans (1)(2)

      $               9,710,251


      $       138,356


      5.70%


      $           9,642,366


      $                  140,305


      5.82%


      $             9,619,959


      $        135,085


      5.62%


      $             9,458,201


      $        133,625


      5.65%


      $             9,458,332


      $        133,480


      5.64%


      Taxable investments (3)

                       2,406,927


                 24,838


      4.13%


                   2,537,173


                            28,117


      4.43%


      2,698,706


      30,193


      4.48%


      2,823,185


      31,636


      4.48%


      2,567,952


      29,007


      4.52%


      Tax-exempt investments (1)(3)

                          477,841


                   4,970


      4.16%


                      464,873


                              4,783


      4.12%


      372,002


      3,737


      4.02%


      400,049


      3,854


      3.85%


      401,511


      3,815


      3.80%


      Federal funds sold and other
































      interest bearing deposits

                          250,912


                      149


      0.24%


                      176,900


                                 110


      0.25%


      137,372


      88


      0.26%


      79,208


      55


      0.28%


      193,212


      125


      0.26%


      Total interest earning assets

                     12,845,931


               168,313


      5.24%


                 12,821,312


                          173,315


      5.41%


      12,828,039


      169,103


      5.27%


      12,760,643


      169,170


      5.30%


      12,621,007


      166,427


      5.27%


      Other assets

                       1,460,742






                   1,462,471






      1,447,244






      1,453,613






      1,478,972






      Total assets

      $             14,306,673






      $         14,283,783






      $           14,275,283






      $           14,214,256






      $           14,099,979








































      Liabilities and shareholders' equity































      Interest bearing liabilities:
































      Savings, NOW and money market deposits

      $               4,463,682


      $           5,154


      0.46%


      $           4,395,239


      $                      4,961


      0.45%


      $             4,431,929


      $            5,082


      0.46%


      $             4,303,555


      $            4,679


      0.43%


      $             4,198,511


      $            4,742


      0.45%



      Time deposits

                       2,584,980


                 11,085


      1.72%


                   2,782,254


                            12,424


      1.79%


      2,815,223


      12,616


      1.79%


      2,731,981


      12,166


      1.78%


      2,693,056


      12,247


      1.82%



      Short-term borrowings

                          185,091


                      244


      0.53%


                      175,636


                                 293


      0.67%


      167,864


      276


      0.66%


      241,786


      341


      0.56%


      207,027


      350


      0.68%



      Long-term borrowings (4)

                       2,911,526


                 31,775


      4.37%


                   2,942,015


                            32,026


      4.35%


      2,933,165


      32,150


      4.38%


      3,073,543


      33,741


      4.39%


      3,118,510


      34,610


      4.44%


      Total interest bearing liabilities

                     10,145,279


                 48,258


      1.90%


                 10,295,144


                            49,704


      1.93%


      10,348,181


      50,124


      1.94%


      10,350,865


      50,927


      1.97%


      10,217,104


      51,949


      2.03%


      Non-interest bearing deposits

                       2,786,865






                   2,611,057






      2,554,909






      2,488,726






      2,529,687






      Other liabilities

                            63,031






                        60,849






      59,692






      71,802






      65,048






      Shareholders' equity

                       1,311,498






                   1,316,733






      1,312,501






      1,302,863






      1,288,140






      Total liabilities and shareholders' equity

      $             14,306,673






      $         14,283,783






      $           14,275,283






      $           14,214,256






      $           14,099,979






      Net interest income/interest rate spread (5)



      $       120,055


      3.34%




      $                  123,611


      3.48%




      $        118,979


      3.33%




      $        118,243


      3.33%




      $        114,478


      3.24%


      Tax equivalent adjustment



                 (1,741)






                            (1,676)






      (1,309)






      (1,351)






      (1,337)




      Net interest income, as reported



      $       118,314






      $                  121,935






      $        117,670






      $        116,892






      $        113,141




      Net interest margin (6)





      3.68%






      3.80%






      3.67%






      3.66%






      3.59%


      Tax equivalent effect





      0.06%






      0.06%






      0.04%






      0.05%






      0.04%


      Net interest margin on a fully tax equivalent basis (6)





      3.74%






      3.86%






      3.71%






      3.71%






      3.63%


      _________________________































      (1) Interest income is presented on a tax equivalent basis using a 35 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 available for sale 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 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.



      SOURCE Valley National Bancorp

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