Valley National Bancorp Reports Increase in Third Quarter Earnings, Solid Net Interest Margin and Strong Capital Position

27 Oct, 2011, 07:00 ET from Valley National Bancorp

WAYNE, N.J., Oct. 27, 2011 /PRNewswire/ -- Valley National Bancorp (NYSE: VLY), the holding company for Valley National Bank, today reported net income for the third quarter of 2011 of $35.4 million, or $0.21 per diluted common share, as compared to the third quarter of 2010 earnings of $32.6 million, or $0.19 per diluted common share.  

Key highlights for the third quarter:

  • Net Interest Income and Margin: Net interest income increased $4.2 million to $121.9 million for the quarter ended September 30, 2011 as compared to $117.7 million for the quarter ended June 30, 2011.  On a tax equivalent basis, our net interest margin increased 15 basis points to 3.86 percent in the third quarter of 2011 as compared to 3.71 percent for the second quarter of 2011, and was 8 basis points higher than the 3.78 percent net interest margin for the third quarter of 2010.  The increases in the net interest income and margin were mainly due to additional cash flows on covered loan pools and an increase in non-covered loan prepayment fees and recovered interest on non-accrual loans. See the “Net Interest Income and Margin” section below for more details.
  • Loan Growth: Total non-covered loans (i.e., loans which are not subject to our loss-sharing agreements with the FDIC) increased by $35.1 million to $9.3 billion at September 30, 2011 from June 30, 2011.  Our commercial real estate and residential mortgage loans grew by $38.3 million and $25.2 million, or 4.4 percent and 4.7 percent, respectively, on an annualized basis, during the third quarter of 2011.  However, auto, construction and home equity loans continued to decline during the third quarter. Total covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) decreased to $282.4 million, or 2.9 percent of our total loans, at September 30, 2011 as compared to $308.4 million at June 30, 2011 mainly due to normal payment activity.
  • Asset Quality: Total loans past due 30 days or more were 1.73 percent of the loan portfolio at September 30, 2011 compared to 1.66 percent at June 30, 2011.  Total non-accrual loans were $107.7 million, or 1.12 percent of our entire loan portfolio of $9.6 billion, at September 30, 2011. The residential mortgage and home equity loan portfolios totaling approximately 23,000 individual loans had only 269 loans past due 30 days or more at September 30, 2011.  At September 30, 2011, residential mortgage and home equity loans delinquent 30 days or more totaled $47.6 million, or 1.80 percent of the $2.7 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 increased to $7.8 million for the third quarter of 2011 as compared to $6.8 million for the second quarter of 2011 and declined from $9.3 million for the third quarter of 2010. Net loan charge-offs on non-covered loans declined to $4.8 million for the three months ended September 30, 2011 compared to $6.2 million for the second quarter of 2011 and $6.1 million for the third quarter of 2010. At September 30, 2011, our allowance for losses on non-covered loans and unfunded letters of credit totaled $125.1 million and was 1.34 percent of non-covered loans, as compared to 1.32 percent and 1.28 percent at June 30, 2011 and September 30, 2010, respectively.
  • Allowance for Losses on Covered Loans:  Our allowance for losses on covered loans totaled $12.6 million at September 30, 2011 as compared to $18.7 million at June 30, 2011 and was reduced by loan charge-offs totaling $6.1 million in impaired loan pools during the third quarter of 2011.  
  • Change in FDIC Loss-Share Receivable:  We recognized a $1.6 million reduction in non-interest income during the third quarter of 2011 due to a decrease in our FDIC loss-share receivable primarily caused by a $2.9 million adjustment attributable to the effect of increased cash flows from certain covered loan pools in excess of originally forecasted cash flows, all of which is recognized on a prospective basis. The $2.9 million adjustment was partially offset by income from reimbursable expenses under the loss sharing agreements and accretion of the receivable discount recorded upon acquisition.
  • Other Intangible Assets: We recognized a $1.6 million ($0.01 per common share) impairment charge on certain loan servicing rights during the third quarter of 2011 as compared to an $810 thousand charge in the third quarter of 2010.  The impairment charges are mainly the result of higher expected prepayments caused by the low interest rate environment.  Loan servicing rights totaled $10.4 million at September 30, 2011, net of a $2.6 million valuation allowance.
  • Trading Mark to Market Impact on Earnings: Net income for the third quarter of 2011 included net trading gains of $776 thousand (less than $0.01 per common share) as compared to net trading losses of $2.6 million ($0.01 per common share) for the third quarter of 2010. Trading gains and losses mainly represent non-cash mark to market gains and losses on our junior subordinated debentures carried at fair value.
  • 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 12.65 percent, 10.82 percent, and 8.10 percent, respectively, at September 30, 2011.

Gerald H. Lipkin, Chairman, President and CEO commented that, “Given the current sluggish operating environment, we believe our performance continued to be very solid during the third quarter.  Overall, our loan growth remained somewhat tempered by the weakened economy, as well as our decision to sell approximately 45 percent of our new and renewed residential mortgage originations during the quarter. Our very successful one price mortgage refinancing program continues to be one of several bright spots in our operations and especially for our refinance customers who have benefited from significant cost savings on their mortgage loans in this low rate environment.

As previously announced in April 2011, we entered into a merger agreement with State Bancorp, Inc. and its principal subsidiary, State Bank of Long Island with approximately $1.6 billion in assets and a 17 branch network. We are excited about the merger’s potential to expand the Valley brand into this attractive new market and build new customer relationships in these communities.  The Office of the Comptroller of the Currency and the Federal Reserve Bank of New York have granted their approval of the merger.  We anticipate the closing of the merger to occur after the close of business on December 31, 2011 with an effective date of January 1, 2012, contingent upon receiving the approval of the State Bancorp shareholders, the purchase from the Treasury Department of State Bancorp’s Series A Preferred Stock and other customary closing conditions.”  

Net Interest Income and Margin

Net interest income on a tax equivalent basis was $123.6 million for the third quarter of 2011, a $4.6 million increase from the second quarter of 2011 and an increase of $4.4 million from the third quarter of 2010. The linked quarter increase was mainly driven by higher interest income on loans, which included the effect of additional cash flows on covered loan pools totaling $3.9 million and an increase in non-covered loan prepayment fees and interest received in the payoff of a non-accrual construction loan totaling a combined $2.1 million in the third quarter of 2011. The increase in interest income on loans was partially offset by lower interest income on investment securities caused by a decline in average taxable investments and a slight decrease in the yield on such securities.

The net interest margin on a tax equivalent basis was 3.86 percent for the third quarter of 2011, an increase of 15 basis points from 3.71 percent in the linked second quarter of 2011, and an 8 basis point increase from 3.78 percent for the quarter ended September 30, 2010. The yield on average interest earning assets increased by 14 basis points on a linked quarter basis mainly as a result of a higher yield on average loans due to the aforementioned increases in interest income, partially offset by both a decrease in average taxable investments and the yield on such investments.  The cost of average interest bearing liabilities declined one basis point from the second quarter of 2011 mainly due to a three basis point decrease in the cost of average long-term borrowings caused, in part, by the maturity of $90 million in FHLB borrowings during late April 2011 and a decline in average interest-bearing deposits.  Our cost of total deposits was 0.71 percent for the third quarter of 2011 compared to 0.72 percent for the three months ended June 30, 2011.  

Although our net interest margin experienced growth during the third quarter of 2011 primarily due to the infrequent loan income items described above, we believe our margin will continue to face strong headwinds 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 third quarter of 2011, we reduced the interest rates on many of our deposit products, including time deposits, and 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 1.73 percent at September 30, 2011 as compared to 1.66 percent at June 30, 2011 and 1.70 percent at September 30, 2010.  With a non-covered loan portfolio totaling $9.3 billion, net loan charge-offs on non-covered loans for the third quarter of 2011 totaled $4.8 million as compared to $6.2 million for the second quarter of 2011 and $6.1 million for the third quarter of 2010.  Charge-offs on loans in our impaired covered loan pools totaled $6.1 million and $639 thousand for the third and second 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 September 30, 2011, June 30, 2011 and September 30, 2010:

September 30, 2011

June 30, 2011

September 30, 2010

Allowance Allocation

Allocation as a % of Loan Category

Allowance Allocation

Allocation as a % of Loan Category

Allowance Allocation

Allocation as a % of Loan Category

Loan Category:

Commercial and Industrial loans*

$62,717

3.44%

$59,919

3.28%

$55,346

3.03%

Commercial real estate loans:

Commercial real estate

20,079

0.58%

18,310

0.53%

15,980

0.47%

Construction

14,614

3.53%

13,863

3.35%

14,485

3.29%

Total commercial real estate loans

34,693

0.89%

32,173

0.82%

30,465

0.79%

Residential mortgage loans

10,158

0.47%

10,913

0.51%

8,196

0.43%

Consumer loans:

Home equity

2,794

0.58%

2,791

0.58%

1,628

0.31%

Auto and other consumer

7,297

0.79%

8,284

0.90%

11,952

1.24%

Total consumer loans

10,091

0.72%

11,075

0.79%

13,580

0.91%

Covered loans

12,587

4.08%

18,719

6.07%

-

0.00%

Unallocated

7,455

NA

8,094

NA

8,128

NA

Allowance for credit losses

$137,701

1.44%

$140,893

1.47%

$115,715

1.23%

* Includes the reserve for unfunded letters of credit.

Total non-performing assets (“NPAs”), consisting of non-accrual loans, other real estate owned (OREO) and other repossessed assets, totaled $122.6 million, or 1.26 percent of loans and NPAs at September 30, 2011 compared to $125.5 million, or 1.29 percent of loans and NPAs at June 30, 2011. The $2.9 million decrease in non-performing assets was mostly due to a $4.5 million payoff of one non-accrual construction loan during the third quarter, partially offset by moderate increases in non-accrual commercial and industrial, residential mortgage, and consumer loans.

Non-accrual loans decreased $6.1 million to $107.7 million at September 30, 2011 as compared to $113.8 million at June 30, 2011 mainly due to the aforementioned $4.5 million construction loan payoff, and the transfer to OREO of a $3.5 million commercial property collateralizing a construction loan.  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 $170.4 million at September 30, 2011 and had $19.8 million in related specific reserves included in our total allowance for loan losses. OREO (which consists of 13 commercial and residential properties) and other repossessed assets, excluding OREO subject to loss-sharing agreements with the FDIC, totaled a combined $14.9 million at September 30, 2011 as compared to $11.7 million at June 30, 2011.

Loans past due 90 days or more and still accruing increased $1.2 million to $3.9 million, or 0.04 percent of total loans at September 30, 2011 compared to $2.7 million, or 0.03 percent at June 30, 2011 primarily due to the addition of one performing, but matured construction loan totaling $2.2 million, partly offset by a decline in commercial real estate loans within this delinquency category.  

Loans past due 30 to 89 days increased $11.3 million to $54.1 million at September 30, 2011 compared to June 30, 2011 primarily due to the inclusion of two potential problem loans totaling $12.6 million within the commercial real estate portfolio. Potential problem loans are performing loans about which management has serious doubts as to the ability of the borrowers to comply with the present loan repayment terms and which may result in a loan becoming non-performing.  Our decision to characterize such performing loans as potential problem loans does not necessarily mean that management expects losses to occur, but that management recognizes potential problem loans carry a higher probability of default.  Of the $12.6 million, an immaterial amount is estimated to be at risk after collateral values and guarantees are taken into consideration.

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 $103.7 million at September 30, 2011 and consisted of 58 loans (primarily in the commercial and industrial loan and commercial real estate portfolios) as compared to 50 loans totaling $101.4 million at June 30, 2011.  On an aggregate basis, the $103.7 million in performing TDRs at September 30, 2011 had a modified weighted average interest rate of approximately 5.14 percent as compared to a pre-modification weighted average interest rate of 6.07 percent.  During the third quarter of 2011, we adopted the provisions of Accounting Standard’s Update No. 2011-02, “Receivables (Topic 310) – A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.”  The adoption did not materially impact the number of TDRs identified by us, or the specific reserves for such loans included in our allowance for loan losses at September 30, 2011.

Loans and Deposits

Total loans moderately increased by $9.1 million as compared to June 30, 2011 and remained at approximately $9.6 billion as of 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 $35.1 million, or 1.5 percent on an annualized basis, to approximately $9.3 billion at September 30, 2011 from June 30, 2011.  The linked quarter increase was mainly comprised of increases in commercial real estate, residential mortgage, and commercial and industrial loans of $38.3 million, $25.2 million and $7.4 million, respectively, partially offset by decreases of $22.0 million and $12.8 million in automobile and construction loans, respectively.  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 the first nine months of 2011, as well as a slight increase in new loan demand mainly from our current borrowers.  Residential mortgage loans increased due to the continued success of our $499 refinance program (including our television and radio ad campaigns) and the current low level of market interest rates. During the third quarter of 2011, we originated over $225 million in new and refinanced residential mortgage loans and retained approximately 55 percent of these loans in our loan portfolio at September 30, 2011.  Commercial and industrial loans remained relatively unchanged as soft loan demand coupled with strong competition for quality credits challenged 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 fourth quarter of 2011 and the foreseeable future.  Construction loans also continue to paydown as loan demand has remained tepid due to the current state of the U.S. economy and housing markets.

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 $282.4 million at September 30, 2011 as compared to $308.4 million at June 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 will reduce the FDIC loss-share receivable by the guaranteed portion of the additional cash flows expected to be received on those loan pools.  During the third and second quarters of 2011, we reduced our FDIC loss-share receivable by $2.9 million each period 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 period.  

Deposits. Total deposits decreased $86.1 million to approximately $9.6 billion at September 30, 2011 from June 30, 2011. Time deposits decreased $133.6 million during the third quarter mainly due to lower interest rates offered on our shorter term certificate of deposit products. Non-interest bearing deposits increased $51.6 million as compared to June 30, 2011 mainly due to general increases in both commercial and retail deposits. Savings, NOW and money market deposits totaled approximately $4.3 billion at September 30, 2011 and remained relatively unchanged from June 30, 2011.

Non-Interest Income

Third quarter of 2011 compared with third quarter of 2010

Non-interest income for the third quarter of 2011 increased $2.9 million to $20.2 million as compared to $17.3 million for the same period of 2010.  Net trading gains increased to $776 thousand for the third quarter of 2011 as compared to a net trading loss of $2.6 million for the third quarter of 2010 mainly due to non-cash mark to market losses on our trust preferred debentures carried at fair value.  Net gains on sales of loans also increased $1.3 million to $2.9 million for the third quarter of 2011 as compared to the third quarter of 2010 mainly due to higher sales volumes of our new and refinanced residential mortgage loan originations.  However, the change in the FDIC loss-share receivable resulted in a $1.6 million reduction in non-interest income as compared to the third quarter of 2010 mainly due to the effect of better than originally expected cash flows on certain covered loan pools, partially offset by income from reimbursable expenses under the loss sharing agreements and accretion of the receivable discount recognized on the FDIC-assisted transaction dates.

Third quarter of 2011 compared with second quarter of 2011

Non-interest income for the third quarter of 2011 decreased $13.3 million from $33.5 million for the quarter ended June 30, 2011.  Net gains on securities transactions decreased $15.6 million from $16.5 million during the second quarter of 2011 to $863 thousand in the third quarter. During the second quarter of 2011, we elected to sell $253.0 million in residential mortgage-backed securities issued by government agencies, perpetual preferred securities issued by Freddie Mac and Fannie Mae, and U.S. Treasury securities classified as available for sale. We reinvested the net proceeds mainly in Ginnie Mae mortgage-backed securities, which are fully guaranteed by the federal government and do not require related regulatory capital to be held by our bank subsidiary. Net trading gains increased $1.8 million from a net trading loss of $1.0 million for the second quarter of 2011 mainly due to non-cash mark to market gains in the third quarter on our trust preferred debentures carried at fair value.  Net gains on sales of loans also increased $1.3 million from $1.6 million in the second quarter of 2011 mainly due to higher sales volumes as we held a lower percentage of our new and refinanced residential mortgage loan originations for investment.  

Non-Interest Expense

Third quarter of 2011 compared with third quarter of 2010

Non-interest expense increased $6.4 million to $85.3 million for the three months ended September 30, 2011 from $78.9 million for the same period of 2010.  Other non-interest expense increased $1.6 million to $12.3 million largely due to an increase in OREO and other expenses related to assets acquired in the two FDIC-assisted transactions in March 2010. Salary and employee benefits expense also increased $1.6 million to $45.1 million for the three months ended September 30, 2011 mainly due to normal annual increases in salary expense, higher major medical expense, and an increase in stock-based compensation expense mostly related to accelerated expensing of stock awards to retirement eligible employees. Advertising expense increased $1.4 million to $2.2 million for the third quarter of 2011 mainly due to an increase in promotional campaigns, including television and radio.  Professional and legal fees increased $1.2 million to $3.7 million for the three months ended September 30, 2011 primarily due to increases in legal expenses related to assets acquired in the FDIC-assisted transactions, as well as expenses related to our pending acquisition of State Bancorp, Inc. and other general corporate matters.    

Third quarter of 2011 compared with second quarter of 2011

Non-interest expense increased by $2.2 million from $83.1 million for the linked quarter ended June 30, 2011.  Amortization of other intangible assets increased approximately $1.6 million 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 $49 thousand net valuation allowance recovery on the fair value of previously impaired loan servicing rights during the second quarter of 2011. The impairment charge was mainly the result of higher expected prepayments caused by the low interest rate environment.  Salary and employee benefit expense increased $1.0 million from $44.1 million for the second quarter of 2011 mainly due to an increase in stock-based compensation expense mostly related to accelerated expensing of stock awards to retirement eligible employees and higher major medical insurance expense.

Income Tax Expense

Income tax expense was $13.7 million for the three months ended September 30, 2011, reflecting an effective tax rate of 27.9 percent, compared with $14.2 million for the third quarter of 2010, reflecting an effective tax rate of 30.3 percent.  The effective tax rate decreased by 2.4 percent to 27.9 percent for the third quarter of 2011 largely due to our increased and planned investment in additional tax credits during 2011.

Income tax expense was $56.0 million for the nine months ended September 30, 2011, reflecting an effective tax rate of 34.0 percent, compared with $40.4 million for the same period of 2010, reflecting an effective tax rate of 30.3 percent.   The effective tax rate increased by 3.7 percent to 34.0 percent for the nine months ended September 30, 2011, largely due to a one-time tax provision of $8.5 million related to a change in tax law during the second quarter of 2011, partially offset by our increased and planned investment in additional tax credits during 2011.

For the fourth quarter of 2011, we anticipate that our effective tax rate will approximate 29 percent.    

About Valley

Valley is a regional bank holding company with over $14 billion in assets, headquartered in Wayne, New Jersey. Its principal subsidiary, Valley National Bank, currently operates 197 branches in 135 communities serving 14 counties throughout northern and central New Jersey, Manhattan, Brooklyn and Queens. 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. Valley National Bank offers a wide range of deposit products, mortgage loans and cash management services to consumers and businesses including products tailored for the medical, insurance and leasing business. Valley National Bank’s comprehensive delivery channels enable customers to bank in person, by telephone or online.

For more information about Valley National Bank and its products and services, please visit www.valleynationalbank.com or call the local 24/7 Customer Service 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 continued weakness or unexpected decline in the U.S. economy, in particular in New Jersey and the New York Metropolitan area;
  • 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;
  • declines in value in our investment portfolio;
  • 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 possibility that the expected benefits of acquisitions will not be fully realized, including lower than expected cash flows from covered loan pools acquired in FDIC-assisted transactions;
  • failure to obtain shareholder approval for the merger of State Bancorp with Valley or to satisfy other conditions to the merger on the proposed terms and within the proposed timeframe including, without limitation, the purchase from the United States Department of the Treasury of each share of State Bancorp’s Series A Preferred Stock issued under the Treasury’s Capital Purchase Program; 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 June 30, 2011 and our Form 10-Q/A for such period.  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. 

-Tables to Follow-

VALLEY NATIONAL BANCORP

CONSOLIDATED FINANCIAL HIGHLIGHTS

SELECTED FINANCIAL DATA

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

($ in thousands, except for share data)

2011

2011

2010

2011

2010

FINANCIAL DATA:

Net interest income

$          121,935

$          117,670

$          117,734

$          356,497

$          349,611

Net interest income - FTE (4)

123,611

118,979

119,212

360,833

353,863

Non-interest income (2)

20,203

33,535

17,328

98,525

55,481

Non-interest expense

85,302

83,080

78,947

252,211

237,274

Income tax expense

13,696

25,205

14,168

56,004

40,449

Net income

35,357

36,894

32,639

108,836

93,012

Weighted average number of common shares outstanding: (5)     

Basic

170,007,399

169,843,354

169,177,275

169,841,859

169,007,369

Diluted

170,007,983

169,852,912

169,178,469

169,846,010

169,008,779

Per common share data: (5)

Basic earnings

$                0.21

$                0.22

$                0.19

$                0.64

$                0.55

Diluted earnings

0.21

0.22

0.19

0.64

0.55

Cash dividends declared

0.17

0.17

0.17

0.52

0.52

Book value

7.69

7.72

7.55

7.69

7.55

Tangible book value (1)

5.69

5.71

5.56

5.69

5.56

Tangible common equity to tangible assets (1)

6.96

%

6.86

%

6.84

%

6.96

%

6.84

%

Closing stock price - high

$              14.09

$              13.72

$              14.17

$              14.20

$              15.19

Closing stock price - low

9.89

12.82

11.83

9.89

11.83

CORE ADJUSTED FINANCIAL DATA: (1)

Net income, as adjusted

$            35,357

$            36,894

$            32,639

$          109,353

$            95,917

Basic earnings per share, as adjusted

0.21

0.22

0.19

0.64

0.57

Diluted earnings per share, as adjusted

0.21

0.22

0.19

0.64

0.57

FINANCIAL RATIOS:

`

Net interest margin

3.80

%

3.67

%

3.73

%

3.71

%

3.67

%

Net interest margin - FTE (4)

3.86

3.71

3.78

3.76

3.72

Annualized return on average assets

0.99

1.03

0.93

1.02

0.88

Annualized return on average shareholders' equity              

10.74

11.24

10.24

11.07

9.80

Annualized return on average tangible shareholders' equity (1)

14.52

15.22

13.86

14.99

13.26

Efficiency ratio (6)

60.01

54.95

58.45

55.43

58.57

CORE ADJUSTED FINANCIAL RATIOS: (1)

Annualized return on average assets, as adjusted

0.99

%

1.03

%

0.93

%

1.02

%

0.91

%

Annualized return on average shareholders' equity as adjusted

10.74

11.24

10.24

11.12

10.11

Annualized return on average tangible shareholders' equity, as adjusted     

14.52

15.22

13.86

15.07

13.67

Efficiency ratio, as adjusted

60.01

54.95

58.45

55.33

57.91

AVERAGE BALANCE SHEET ITEMS:

Assets

$     14,283,783

$     14,275,283

$     14,050,659

$     14,258,029

$     14,125,719

Interest earning assets

12,821,312

12,828,039

12,615,556

12,803,553

12,699,554

Loans

9,642,366

9,619,959

9,474,723

9,574,183

9,480,609

Interest bearing liabilities

10,295,144

10,348,181

10,302,898

10,331,193

10,413,462

Deposits

9,788,550

9,802,061

9,454,380

9,705,926

9,523,414

Shareholders' equity

1,316,733

1,312,501

1,274,742

1,310,750

1,264,926

As Of

September 30,

June 30,

December 31,

September 30,

($ in thousands)

2011

2011

2010

2010

BALANCE SHEET ITEMS:

Assets

$     14,231,155

$     14,469,776

$      14,143,826

$     14,087,611

Total loans

9,600,087

9,591,023

9,365,795

9,431,697

Non-covered loans

9,317,691

9,282,599

9,009,140

9,054,661

Deposits

9,620,339

9,706,447

9,363,614

9,268,703

Shareholders' equity

1,307,102

1,311,218

1,295,205

1,278,019

CAPITAL RATIOS:

Tier 1 leverage ratio

8.10 

%

8.37 

%

8.31 

%

8.27 

%

Risk-based capital - Tier 1

10.82

11.07

10.94

10.73

Risk-based capital - Total Capital

12.65

13.09

12.91

12.58

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

($ in thousands)

2011

2011

2010

2011

2010

ALLOWANCE FOR CREDIT LOSSES:

Beginning balance - Allowance for credit losses

$          140,893

$        141,722

$          112,504

$        126,504

$        103,655

Loans charged-off: (3)

Commercial and industrial

(9,297)

(3,056)

(3,223)

(19,025)

(13,882)

Commercial real estate

(719)

(3,631)

(307)

(5,173)

(1,723)

Construction

(520)

-

(5)

(520)

(424)

Residential mortgage

(269)

(443)

(844)

(1,495)

(3,011)

Consumer

(1,251)

(1,355)

(2,485)

(4,364)

(8,873)

Total loans charged-off

(12,056)

(8,485)

(6,864)

(30,577)

(27,913)

Charged-off loans recovered:

Commercial and industrial

559

741

187

1,748

3,317

Commercial real estate

2

5

19

28

139

Construction

-

197

-

197

-

Residential mortgage

16

69

28

106

80

Consumer

504

618

533

1,724

2,080

Total loans recovered

1,081

1,630

767

3,803

5,616

Net charge-offs

(10,975)

(6,855)

(6,097)

(26,774)

(22,297)

Provision charged for credit losses

7,783

6,026

9,308

37,971

34,357

Ending balance - Allowance for credit losses

$          137,701

$          140,893

$          115,715

$          137,701

$          115,715

Components of allowance for credit losses:

Allowance for non-covered loans

$          122,775

$          119,907

$          113,786

$          122,775

$          113,786

Allowance for covered loans

12,587

18,719

-

12,587

-

Allowance for loan losses

135,362

138,626

113,786

135,362

113,786

Allowance for unfunded letters of credit

2,339

2,267

1,929

2,339

1,929

Allowance for credit losses

$          137,701

$          140,893

$          115,715

$          137,701

$          115,715

Components of provision for credit losses:

Provision for losses on non-covered loans

$              7,711

$              6,422

$              9,238

$            19,338

$            34,093

Provision for losses on covered loans

-

(788)

-

18,094

-

Provision for unfunded letters of credit

72

392

70

539

264

Provision for credit losses

$              7,783

$              6,026

$              9,308

$            37,971

$            34,357

Annualized ratio of net charge-offs of     non-covered loans to average loans       

0.20 

%

0.26 

%

0.26 

%

0.21 

%

0.31 

%

Annualized ratio of total net charge-offs     to average loans

0.46

0.29

0.26

0.37

0.31

Allowance for non-covered loan losses as a %     of non-covered loans

1.32

1.29

1.26

1.32

1.26

Allowance for credit losses as a % of total loans

1.43

1.47

1.23

1.43

1.23

As Of

($ in thousands)

September 30,

June 30,

December 31,

September 30,

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

2011

2011

2010

2010

Accruing past due loans:

30 to 89 days past due:

Commercial and industrial

$              9,866

$            10,915

$            13,852

$              9,917

Commercial real estate

22,220

7,710

14,563

7,281

Construction

-

1,710

2,804

3,750

Residential mortgage

12,556

13,819

12,682

13,426

Consumer

9,456

8,661

14,638

15,937

Total 30 to 89 days past due

54,098

42,815

58,539

50,311

90 or more days past due:

Commercial and industrial

164

12

12

722

Commercial real estate

268

1,682

-

1,424

Construction

2,216

-

196

-

Residential mortgage

721

687

1,556

1,297

Consumer

483

319

723

924

Total 90 or more days past due

3,852

2,700

2,487

4,367

Total accruing past due loans

$            57,950

$            45,515

$            61,026

$            54,678

Non-accrual loans:

Commercial and industrial

$            16,737

$            15,882

$            13,721

$            16,967

Commercial real estate

41,453

43,041

32,981

29,833

Construction

14,449

22,004

27,312

29,535

Residential mortgage

31,401

29,815

28,494

27,198

Consumer

3,645

3,009

2,547

2,069

Total non-accrual loans

107,685

113,751

105,055

105,602

Other real estate owned (8)

14,091

10,797

10,498

4,698

Other repossessed assets

822

929

1,707

1,849

Total non-performing assets ("NPAs")

$          122,598

$          125,477

$          117,260

$          112,149

Performing troubled debt     restructured loans

$          103,690

$          101,444

$            89,696

$            48,229

Total non-accrual loans as a % of loans

1.12

%

1.19

%

1.12

%

1.12

%

Total NPAs as a % of loans and NPAs

1.26

1.29

1.24

1.18

Total accruing past due and non-accrual     loans as a % of loans (8)

1.73

1.66

1.77

1.70

Allowance for losses on non-covered loans as a     % of non-accrual loans

114.01

105.41

112.63

107.75

NOTES TO SELECTED FINANCIAL DATA 

(1) This press release contains certain supplemental financial information, described in the following notes, 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

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

($ in thousands, except for share data)

    2011

    2011

    2010

    2011

    2010

Tangible book value per common share:

Common shares outstanding

170,025,364

169,851,372

169,179,574

170,025,364

169,179,574

Shareholders' equity

$       1,307,102

$       1,311,218

$       1,278,019

$       1,307,102

$       1,278,019

Less: Goodwill and other     intangible assets

(339,850)

(341,893)

(337,431)

(339,850)

(337,431)

Tangible shareholders' equity

$          967,252

$          969,325

$          940,588

$          967,252

$          940,588

   Tangible book value

$5.69

$5.71

$5.56

$5.69

$5.56

NOTES TO SELECTED FINANCIAL DATA - CONTINUED

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

($ in thousands, except for share data)

    2011

    2011

    2010

    2011

    2010

Annualized return on average tangible equity:

Net income

$            35,357

$            36,894

$            32,639

$          108,836

$            93,012

Average shareholders' equity

1,316,733

1,312,501

1,274,742

1,310,750

1,264,926

Less: Average goodwill and other intangible assets

(342,506)

(342,590)

(333,091)

(342,996)

(329,647)

   Average tangible shareholders' equity

$          974,227

$          969,911

$          941,651

$          967,754

$          935,279

   Annualized return on average tangible      shareholders' equity

14.52%

15.22%

13.86%

14.99%

13.26%

Adjusted net income available to common stockholders:

Net income, as reported

$            35,357

$            36,894

$            32,639

$          108,836

$            93,012

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

-

-

-

517

2,905

Net income, as adjusted

35,357

36,894

32,639

109,353

95,917

Adjusted per common share data:

Net income, as adjusted

$            35,357

$            36,894

$            32,639

$          109,353

$            95,917

Average number of basic shares     outstanding

170,007,399

169,843,354

169,177,275

169,841,859

169,007,369

   Basic earnings, as adjusted

$                0.21

$                0.22

$                0.19

$                0.64

$                0.57

Average number of diluted shares outstanding

170,007,983

169,852,912

169,178,469

169,846,010

169,008,779

   Diluted earnings, as adjusted

$                0.21

$                0.22

$                0.19

$                0.64

$                0.57

Adjusted annualized return on average assets:

Net income, as adjusted

$            35,357

$            36,894

$            32,639

$          109,353

$            95,917

Average assets

14,283,783

14,275,283

14,050,659

14,258,029

14,125,719

   Annualized return on average          assets, as adjusted

0.99%

1.03%

0.93%

1.02%

0.91%

Adjusted annualized return on average shareholders' equity:

Net income, as adjusted

$            35,357

$            36,894

$            32,639

$          109,353

$            95,917

Average shareholders' equity

1,316,733

1,312,501

1,274,742

1,310,750

1,264,926

   Annualized return on average shareholders'      equity, as adjusted

10.74%

11.24%

10.24%

11.12%

10.11%

Adjusted annualized return on average tangible shareholders' equity:

Net income, as adjusted

$            35,357

$            36,894

$            32,639

$          109,353

$            95,917

Average tangible shareholders' equity

974,227

969,911

941,651

967,754

935,279

   Annualized return on average tangible         shareholders' equity, as adjusted

14.52%

15.22%

13.86%

15.07%

13.67%

Adjusted efficiency ratio:

Non-interest expense

$            85,302

$            83,080

$            78,947

$          252,211

$          237,274

Net interest income

121,935

117,670

117,734

356,497

349,611

Non-interest income

20,203

33,535

17,328

98,525

55,481

Add: Net impairment losses on     securities recognized in earnings

-

-

-

825

4,642

   Gross operating income,        as adjusted

$          142,138

$          151,205

$          135,062

$          455,847

$          409,734

   Efficiency ratio, as adjusted

60.01%

54.95%

58.45%

55.33%

57.91%

Tangible common equity to tangible assets:

Tangible shareholders' equity

$          967,252

$          969,325

$          940,588

$          967,252

$          940,588

Total assets

14,231,155

14,469,776

14,087,611

14,231,155

14,087,611

Less: Goodwill and other     intangible assets

(339,850)

(341,893)

(337,431)

(339,850)

(337,431)

Tangible assets

$     13,891,305

$     14,127,883

$     13,750,180

$     13,891,305

$     13,750,180

   Tangible common equity to tangible assets

6.96%

6.86%

6.84%

6.96%

6.84%

NOTES TO SELECTED FINANCIAL DATA - CONTINUED 

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

2011

2011

2010

2011

2010

(2)

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

Trading securities

$                 136

$               (106)

$               (517)

$                 523

$               (862)

Junior subordinated debentures

640

(942)

(2,110)

2,587

(3,957)

  Total trading gains (losses), net

$                 776

$            (1,048)

$            (2,627)

$              3,110

$            (4,819)

(3)

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

Commercial and industrial

$            (6,131)

$               (639)

$                      -

$          (11,736)

$                      -

Commercial real estate

-

-

-

(38)

-

Construction

-

-

-

-

-

Residential mortgage

-

-

-

(110)

-

  Total covered loans charged-off      

$            (6,131)

$               (639)

$                      -

$          (11,884)

$                      -

(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 OREOs that is related to the LibertyPointe Bank and The Park Avenue Bank FDIC-assisted transactions.  OREOs related to the

FDIC-assisted transactions, which totaled $6.2 million, $6.7 million $7.8 million and $12.5 million at September 30, 2011, June 30, 2011,

December 31, 2010 and September 30, 2010, respectively, is subject to the loss-sharing agreements with the FDIC.

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)

September 30,

December 31,

2011

2010

Assets

Cash and due from banks

$          354,625

$        302,629

Interest bearing deposits with banks

40,603

63,657

Investment securities:

Held to maturity, fair value of $2,100,562 at September 30, 2011 and $1,898,872 at December 31, 2010

2,084,446

1,923,993

Available for sale

770,142

1,035,282

Trading securities

21,446

31,894

Total investment securities

2,876,034

2,991,169

Loans held for sale, at fair value

34,350

58,958

Non-covered loans

9,317,691

9,009,140

Covered loans

282,396

356,655

Less: Allowance for loan losses

(135,362)

(124,704)

Net loans

9,464,725

9,241,091

Premises and equipment, net

265,294

265,570

Bank owned life insurance

305,142

304,956

Accrued interest receivable

62,516

59,126

Due from customers on acceptances outstanding

6,916

6,028

FDIC loss-share receivable

78,602

89,359

Goodwill

317,962

317,891

Other intangible assets, net

21,888

25,650

Other assets

402,498

417,742

Total Assets

$     14,231,155

$   14,143,826

Liabilities

Deposits:

Non-interest bearing

$       2,613,128

$     2,524,299

Interest bearing:

Savings, NOW and money market

4,312,605

4,106,464

Time

2,694,606

2,732,851

Total deposits

9,620,339

9,363,614

Short-term borrowings

222,574

192,318

Long-term borrowings

2,727,290

2,933,858

Junior subordinated debentures issued to capital trusts (includes fair value of $159,147

at September 30, 2011 and $161,734 at December 31, 2010 for VNB Capital Trust I)

184,283

186,922

Bank acceptances outstanding

6,916

6,028

Accrued expenses and other liabilities

162,651

165,881

Total Liabilities

12,924,053

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 170,146,143 shares

 at September 30, 2011 and 170,131,085 shares at December 31, 2010

59,919

57,041

Surplus

1,177,701

1,178,325

Retained earnings

96,101

79,803

Accumulated other comprehensive loss

(23,802)

(5,719)

Treasury stock, at cost (120,779 common shares at September 30, 2011 and 597,459

common shares at December 31, 2010)

(2,817)

(14,245)

Total Shareholders' Equity

1,307,102

1,295,205

Total Liabilities and Shareholders' Equity

$     14,231,155

$   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

Nine Months Ended

(in thousands, except for share data)

September 30,

September 30,

2011

2010

2011

2010

Interest Income

Interest and fees on loans

$   140,303

$   137,742

$   409,010

409,531

Interest and dividends on investment securities:

    Taxable

26,552

28,361

84,734

88,861

    Tax-exempt

3,109

2,743

8,043

7,886

    Dividends

1,565

1,679

5,212

5,153

Interest on federal funds sold and other short-term investments

110

61

253

291

Total interest income

171,639

170,586

507,252

511,722

Interest Expense

Interest on deposits:

    Savings, NOW and money market

4,961

4,711

14,722

14,384

    Time

12,424

13,233

37,206

43,551

Interest on short-term borrowings

293

334

910

995

Interest on long-term borrowings and junior subordinated debentures

32,026

34,574

97,917

103,181

Total interest expense

49,704

52,852

150,755

162,111

Net Interest Income

121,935

117,734

356,497

349,611

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

7,783

9,308

19,877

34,357

Provision for losses on covered loans

-

-

18,094

-

Net Interest Income After Provision for Credit Losses

114,152

108,426

318,526

315,254

Non-Interest Income

Trust and investment services

1,769

1,930

5,744

5,752

Insurance commissions

3,416

2,561

11,496

8,417

Service charges on deposit accounts

5,616

6,562

16,908

19,487

Gains on securities transactions, net

863

112

20,034

4,631

Other-than-temporary impairment losses on securities

-

-

-

(1,393)

Portion recognized in other comprehensive income (before taxes)

-

-

(825)

(3,249)

Net impairment losses on securities recognized in earnings

-

-

(825)

(4,642)

Trading gains (losses), net

776

(2,627)

3,110

(4,819)

Fees from loan servicing

989

1,187

3,356

3,634

Gains on sales of loans, net

2,890

1,548

8,060

5,087

Gains on sales of assets, net

179

78

382

382

Bank owned life insurance

1,989

1,697

5,575

5,008

Change in FDIC loss-share receivable

(1,577)

-

11,989

-

Other

3,293

4,280

12,696

12,544

Total non-interest income

20,203

17,328

98,525

55,481

Non-Interest Expense

Salary and employee benefits expense

45,125

43,566

133,359

130,774

Net occupancy and equipment expense

15,656

15,241

48,309

47,270

FDIC insurance assessment

2,993

3,497

9,624

10,473

Amortization of other intangible assets

3,351

2,602

7,109

6,747

Professional and legal fees

3,666

2,460

10,459

7,192

Advertising

2,185

826

6,370

2,849

Other

12,326

10,755

36,981

31,969

Total non-interest expense

85,302

78,947

252,211

237,274

Income Before Income Taxes

49,053

46,807

164,840

133,461

Income tax expense

13,696

14,168

56,004

40,449

Net Income

$     35,357

$     32,639

$   108,836

$     93,012

Earnings Per Common Share*:

Basic

$         0.21

$         0.19

$         0.64

$         0.55

Diluted

0.21

0.19

0.64

0.55

Cash Dividends Declared per Common Share*

0.17

0.17

0.52

0.52

Weighted Average Number of Common Shares Outstanding*:

Basic

170,007,399

169,177,275

169,841,859

169,007,369

Diluted

170,007,983

169,178,469

169,846,010

169,008,779

____________

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

VALLEY NATIONAL BANCORP

LOAN PORTFOLIO

(in thousands)

09/30/2011

06/30/2011

03/31/2011

12/31/2010

09/30/2010

Non-covered Loans

Commercial and industrial

$   1,833,211

$ 1,825,782

$ 1,859,626

$   1,825,066

$ 1,824,014

Commercial real estate:

Commercial real estate

3,524,891

3,486,597

3,457,768

3,378,252

3,406,089

Construction

401,166

413,951

418,304

428,232

440,929

Total commercial real estate

3,926,057

3,900,548

3,876,072

3,806,484

3,847,018

Residential mortgage

2,172,601

2,147,362

2,047,898

1,925,430

1,890,439

Consumer:

Home equity

477,517

484,812

492,328

512,745

531,168

Automobile

785,443

807,489

827,485

850,801

877,298

Other consumer

122,862

116,606

106,184

88,614

84,724

Total consumer loans

1,385,822

1,408,907

1,425,997

1,452,160

1,493,190

Total non-covered loans

$   9,317,691

$ 9,282,599

$ 9,209,593

$   9,009,140

$ 9,054,661

Covered loans*

282,396

308,424

336,576

356,655

377,036

Total loans

$   9,600,087

$ 9,591,023

$ 9,546,169

$   9,365,795

$ 9,431,697

_________________________

* 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 - 09/30/2011

Quarter End - 06/30/2011

Quarter End - 03/31/2011

Quarter End - 12/31/2010

Quarter End - 09/30/2010

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)

$   9,642,366

$ 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%

$   9,474,723

$ 137,744

5.82%

Taxable investments (3)

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%

2,610,933

30,040

4.60%

Tax-exempt investments (1)(3)

464,873

4,783

4.12%

372,002

3,737

4.02%

400,049

3,854

3.85%

401,511

3,815

3.80%

433,559

4,219

3.89%

Federal funds sold and other

interest bearing deposits

176,900

110

0.25%

137,372

88

0.26%

79,208

55

0.28%

193,212

125

0.26%

96,341

61

0.25%

Total interest earning assets

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%

12,615,556

172,064

5.46%

Other assets

1,462,471

1,447,244

1,453,613

1,478,972

1,435,103

Total assets

$ 14,283,783

$ 14,275,283

$ 14,214,256

$ 14,099,979

$ 14,050,659

Liabilities and shareholders' equity

Interest bearing liabilities:

Savings, NOW and money market deposits

$   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%

$   4,270,386

$     4,711

0.44%

Time deposits

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%

2,761,018

13,233

1.92%

Short-term borrowings

175,636

293

0.67%

167,864

276

0.66%

241,786

341

0.56%

207,027

350

0.68%

198,938

334

0.67%

Long-term borrowings (4)

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%

3,072,556

34,574

4.50%

Total interest bearing liabilities

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%

10,302,898

52,852

2.05%

Non-interest bearing deposits

2,611,057

2,554,909

2,488,726

2,529,687

2,422,976

Other liabilities

60,849

59,692

71,802

65,048

50,043

Shareholders' equity

1,316,733

1,312,501

1,302,863

1,288,140

1,274,742

Total liabilities and shareholders' equity

$ 14,283,783

$ 14,275,283

$ 14,214,256

$ 14,099,979

$ 14,050,659

Net interest income/interest rate spread (5)

$ 123,611

3.48%

$    118,979

3.33%

$ 118,243

3.33%

$ 114,478

3.24%

$ 119,212

3.41%

Tax equivalent adjustment

(1,676)

(1,309)

(1,351)

(1,337)

(1,478)

Net interest income, as reported

$ 121,935

$    117,670

$ 116,892

$ 113,141

$ 117,734

Net interest margin (6)

3.80%

3.67%

3.66%

3.59%

3.73%

Tax equivalent effect

0.06%