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Valley National Bancorp Reports First Quarter Earnings, Solid Asset Quality And Record Mortgage Loan Originations


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Valley National Bancorp

Apr 24, 2013, 08:00 ET

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WAYNE, N.J., April 24, 2013 /PRNewswire/ -- Valley National Bancorp (NYSE: VLY), the holding company for Valley National Bank, today reported net income for the first quarter of 2013 of $31.3 million, or $0.16 per diluted common share as compared to the first quarter of 2012 earnings of $34.5 million, or $0.18 per diluted common share. 

Key highlights for the first quarter:

  • Mortgage Banking Activities: Residential mortgage loan originations (including both new and refinanced loans) totaled a record high $577 million for the first quarter and were up almost 9 percent as compared to a strong fourth quarter of 2012.  Valley sold approximately $437 million of residential mortgages during the first quarter, up approximately 13 percent from the fourth quarter of 2012. Gains on sales of residential mortgage loans declined by $576 thousand to approximately $15.1 million for the first quarter of 2013 as compared to $15.6 million for the fourth quarter of 2012 mainly due to lower pricing caused, in part, by changes in market interest rates during the first quarter. We expect the mortgage loan pipeline to remain strong during the second quarter of 2013 due to the historically low market interest rates, the success of Valley's low fixed-price refinance programs and the continued housing market recovery.
  • Asset Quality: As a result of a $7.8 million increase in the fair value of non-accrual debt securities at March 31, 2013, our non-performing assets increased by 2.4 percent to $200.3 million at March 31, 2013 as compared to $195.5 million at December 31, 2012.  The number of non-accrual debt securities remained unchanged from December 31, 2012. Total non-accrual loans decreased to $125.6 million, or 1.16 percent of our entire loan portfolio of $10.8 billion, at March 31, 2013, compared to $131.8 million, or 1.20 percent of total loans, at December 31, 2012.  The $6.2 million decrease in non-accruals was due to declines in all loan categories. Total loan delinquencies (including loans past due 30 days or more and non-accrual loans) as a percentage of total loans were 1.70 percent at March 31, 2013.  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 $3.9 million for the first quarter of 2013 as compared to $5.2 million for the fourth quarter of 2012 and $5.7 million for the first quarter of 2012. Net loan charge-offs on non-covered loans increased to $9.8 million for the first quarter of 2013 (or 0.36 percent of average loans on an annualized basis), compared to $4.3 million for the fourth quarter of 2012 and $6.3 million for the first quarter of 2012.  The increase in net charge-offs was largely due to a $5.0 million charge related to one impaired loan relationship (resulting from fraudulent activities by the borrower). At March 31, 2013, our allowance for losses on non-covered loans and unfunded letters of credit totaled $117.2 million and was 1.10 percent of non-covered loans, as compared to 1.13 percent and 1.12 percent at December 31, 2012 and March 31, 2012, respectively. 
  • Provision for Losses on Covered Loans:  During the first quarter of 2013, we recorded a $2.2 million credit to the provision for losses on covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) related to a decrease in the estimated additional credit impairment of certain loan pools subsequent to acquisition as compared to no provision recorded for both the fourth and first quarters of 2012.  Net charge-offs of covered loans totaled $146 thousand during the first quarter of 2013 as compared to no net charge-offs recognized in the fourth and first quarters of 2012.  Our allowance for losses on covered loans totaled $7.2 million, $9.5 million, and $13.5 million at March 31, 2013, December 31, 2012 and March 31, 2012, respectively.
  • Investments: We recognized no other-than-temporary impairment charges in earnings during the first quarter of 2013, fourth quarter of 2012, and the first quarter of 2012. Our net gains on securities transactions were approximately $4.0 million ($2.3 million after taxes, or $0.01 per common share) for the first quarter of 2013 and were immaterial for both the three months ended December 31, 2012 and March 31, 2012.  The net gains for the first quarter were primarily recognized on the sale of zero percent yielding Freddie Mac and Fannie Mae perpetual preferred stock with amortized cost totaling $941 thousand.
  • Trading Mark to Market: Net trading gains and losses mainly represent non-cash mark to market gains and losses on our junior subordinated debentures carried at fair value. Net trading gains declined $4.4 million from the fourth quarter of 2012 to a net trading loss of $2.2 million for the first quarter of 2013 as compared to net gains of $2.2 million in the fourth quarter of 2012.  Net trading losses totaled $988 thousand for the three months ended March 31, 2012.
  • Loans: Total non-covered loans (i.e., loans which are not subject to our loss-sharing agreements with the FDIC) decreased by $191.9 million, or 7.1 percent on an annualized basis, to $10.7 billion at March 31, 2013 from December 31, 2012 largely due to our decision to sell the majority of our new and refinanced residential mortgage loans, some large repayments and reduced line usage within the commercial loan portfolios, and continued strong competition for high quality commercial borrowers.  Despite the strong competition and prepayments, the commercial and industrial loan portfolio combined with the commercial real estate portfolio had loan originations of approximately $305 million during the three months ended March 31, 2013 as compared to a strong linked fourth quarter of 2012 totaling $354 million (the highest quarterly amount since 2008). Additionally, our automobile and other consumer loan portfolios increased $24.5 million and $9.1 million, or 12.5 percent and 20.2 percent on an annualized basis, respectively, during the first quarter of 2013. Total covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) decreased to $161.3 million, or 1.5 percent of our total loans, at March 31, 2013 as compared to $180.7 million at December 31, 2012, mainly due to normal collection activity.
  • Net Interest Income and Margin: Net interest income totaling $110.0 million for the three months ended March 31, 2013 declined by $8.5 million as compared to the fourth quarter of 2012 and decreased $17.4 million from the first quarter of 2012.  On a tax equivalent basis, our net interest margin decreased 23 basis points to 3.18 percent in the first quarter of 2013 as compared to 3.41 percent for the fourth quarter of 2012, and decreased 52 basis points from 3.70 percent for the first quarter of 2012.  The decreases in both net interest income and margin as compared to the linked fourth quarter of 2012 were mainly due to lower yields on new loans and investment securities caused by the prolonged low level of market interest rates, as well as a decline in average loans.  The net interest margin was also negatively impacted by two less days during the first quarter as compared to the linked fourth quarter of 2012. See the "Net Interest Income and Margin" section below for more details.
  • Income Tax Expense:  Our effective tax rate increased moderately to 29.0 percent for the first quarter of 2013 as compared to 28.5 percent for the fourth quarter of 2012, and decreased from 30.7 percent for the first quarter of 2012. The decrease from the first quarter of 2012 was mainly due to the lower pre-tax income for the first quarter of 2013 and an increase in tax credit investments.
  • 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 ratios were 12.53 percent, 11.08 percent, and 8.16 percent, respectively, at March 31, 2013.

Gerald H. Lipkin, Chairman, President and CEO commented that, "Our earnings for the first quarter of 2013 were negatively impacted by the less than ideal operating environment.  However, our residential mortgage refinance program and the quality of our balance sheet continue to provide us a strong foundation in a difficult economy." Mr. Lipkin added, "Our total loan originations continued at near record levels during the quarter, even though we believe the level of refinanced mortgage loan closings was actually somewhat slowed due to delays in the start of the application process for many homeowners caused by Hurricane Sandy in the prior quarter.  Our outlook, although guarded, remains positive for the housing recovery and our continued success in expanding our mortgage production during 2013."

Net Interest Income and Margin

Net interest income on a tax equivalent basis decreased $8.4 million to $112.1 million for the first quarter of 2013 from the fourth quarter of 2012 and declined $17.1 million as compared to the first quarter of 2012. Interest income on a tax equivalent basis decreased $9.8 million from the fourth quarter of 2012 mainly due to the combination of lower yields on loans and investments and a $228.2 million decrease in average loans. The decrease in interest income was partially offset by a $1.4 million decline in interest expense, which was mostly driven by lower average balances for time deposits as well as a 5 basis point decrease in the cost of average deposits and a 6 basis point decline in the cost of average long-term borrowings.

The net interest margin on a tax equivalent basis was 3.18 percent for the first quarter of 2013, a decrease of 23 basis points from 3.41 percent in the linked fourth quarter of 2012, and a 52 basis point decline from 3.70 percent for the three months ended March 31, 2012. The yield on average interest earning assets decreased by 27 basis points on a linked quarter basis mainly as a result of lower yields on average loans and investment securities caused by the current and prolonged low level of market yields on new loans and securities, the continued refinance and repayment of higher yielding interest earning assets, and two less days during the first quarter of 2013. The yield on average loans also decreased 27 basis points to 4.82 percent for the three months ended March 31, 2013 from the fourth quarter of 2012.  The aggregate net change in infrequent items that impact our loan yields from time to time (such as accelerated interest accretion recognized on certain purchased credit impaired (PCI) loan pools that were fully repaid and loan prepayment penalty fees) accounted for approximately 6 basis points of the 27 basis point decline in our loan yield for the first quarter as compared to the fourth quarter of 2012.  Additionally, the repayment volume of higher yielding non-PCI loans (with and without contractual prepayment penalties) remained elevated for the first quarter of 2013 and negatively impacted the overall yield on average loans. The overall cost of average interest bearing liabilities decreased by approximately 3 basis points from 1.63 percent in the linked fourth quarter of 2012 mainly due to declines ranging from 1 to 6 basis points for borrowing costs across all of our interest bearing liability categories during the first quarter of 2013, partly caused by two less days during the first quarter of 2013.  Higher cost maturing time deposits largely contributed to the decline in deposit costs and resulted in a $132.4 million decrease in average time deposits as compared to the fourth quarter of 2012. Our cost of total deposits was 0.46 percent for the first quarter of 2013 compared to 0.49 percent for the three months ended December 31, 2012. 

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. 

Credit Quality

Total loan delinquencies (including loans past due 30 days or more and non-accrual loans) as a percentage of total loans were 1.70 percent at March 31, 2013 as compared to 1.73 percent at December 31, 2012 and 1.52 percent at March 31, 2012. Our past due loans and non-accrual loans discussed further below exclude PCI loans.  Valley's PCI loans consist of loans that were acquired as part of FDIC-assisted transactions (the "covered loans") in 2010 and loans subsequently acquired or purchased by Valley, primarily consisting of loans recorded in the acquisition of State Bancorp on January 1, 2012.  Under U.S. GAAP, the PCI loans (acquired at a discount that is due, in part, to credit quality) are accounted for on a pool basis and are not subject to delinquency classification in the same manner as loans originated by Valley.

Loans past due 30 to 89 days increased $6.0 million to $55.7 million at March 31, 2013 compared to December 31, 2012 mainly due to higher delinquencies within commercial real estate loans. Within this past due category, commercial real estate loans increased $8.4 million to $21.7 million at March 31, 2013 largely due to one $6.4 million impaired loan (which subsequently paid down to $4.6 million and became current to all contractually past due payments during April 2013), and $3.1 million in matured performing loans in the normal process of renewal.  Commercial and industrial loans and construction loans past due 30 to 89 days also included matured performing loans in the normal process of renewal totaling approximately $3.3 million and $3.9 million, respectively, at March 31, 2013. Valley believes the majority of all loan types in this past due category are well secured, in the process of collection and do not represent a material negative trend within the loan portfolio.

Loans past due 90 days or more and still accruing decreased $6.3 million to $2.4 million, or 0.02 percent of total loans, at March 31, 2013 compared to $8.7 million, or 0.08 percent at December 31, 2012.  The decrease in this  past due category was mostly due to matured performing loans in the normal process of renewal within the commercial real estate and construction loan portfolios at December 31, 2012 that were subsequently renewed and performing as of March 31, 2013.

Total non-performing assets ("NPAs"), consisting of non-accrual loans, other real estate owned (OREO), other repossessed assets and non-accrual debt securities, totaled $200.3 million at March 31, 2013 compared to $195.5 million at December 31, 2012. The $4.7 million increase in NPAs from December 31, 2012 was largely due to a $7.8 million increase in the fair value of non-accrual debt securities at March 31, 2013. The number of non-accrual debt securities remained unchanged from December 31, 2012.

Non-accrual loans decreased $6.2 million to $125.6 million at March 31, 2013 as compared to $131.8 million at December 31, 2012 due, in part, to $3.0 million in loan charge-offs related to the valuation of collateral dependent impaired loans, $2.4 million of transfers to OREO, as well as $1.8 million of commercial impaired loans paid off during the first quarter of 2013. At March 31, 2013 and December 31, 2012, our non-accrual loans also included performing residential mortgage and home equity loans totaling $6.0 million and $3.0 million, respectively, which were classified as non-accrual loans due to the Office of the Comptroller of the Currency guidelines on borrowers in Chapter 7 bankruptcy issued during 2012.  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 $208.7 million at March 31, 2013 and had $28.1 million in related specific reserves included in our total allowance for loan losses.

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 $108.7 million at March 31, 2013 and consisted of 98 loans (primarily in the commercial and industrial loan and commercial real estate portfolios) as compared to 88 loans totaling $105.4 million at December 31, 2012.  On an aggregate basis, the $108.7 million in performing TDRs at March 31, 2013 had a modified weighted average interest rate of approximately 4.88 percent as compared to a pre-modification weighted average interest rate of 5.54 percent.

With a non-covered loan portfolio totaling $10.7 billion, net loan charge-offs on non-covered loans for the first quarter of 2013 totaled $9.8 million as compared to $4.3 million and $6.3 million for the fourth and first quarters of 2012, respectively.  The increase from the fourth quarter of 2012 was largely the result of a $5.0 million loss related to one commercial loan participation (caused by the borrower's bankruptcy precipitated by fraudulent employee activities), as well as higher charge-offs related to the normal quarterly valuation of collateral dependent impaired loans.  Additionally, there were charge-offs totaling $146 thousand on loans in our covered loan pools for the first quarter of 2013 as compared to no charge-offs during both the three months ended December 31, 2012 and March 31, 2012.  Charge-offs on covered loan pools 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 (including PCI loans) at March 31, 2013, December 31, 2012 and March 31, 2012:



March 31, 2013


December 31, 2012


March 31, 2012





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*

$      57,740


2.82%


$      59,260


2.84%


$      65,061


3.00%














Commercial real estate loans:













Commercial real estate

25,910


0.60%


24,651


0.56%


18,568


0.43%


Construction

11,853


2.70%


17,393


4.09%


13,337


3.10%

Total commercial real estate loans

37,763


0.79%


42,044


0.87%


31,905


0.67%














Residential mortgage loans

9,098


0.39%


9,361


0.38%


9,775


0.39%














Consumer loans:













Home equity

1,695


0.37%


1,807


0.37%


2,245


0.44%


Auto and other consumer

3,762


0.38%


3,735


0.39%


5,695


0.63%

Total consumer loans

5,457


0.37%


5,542


0.38%


7,940


0.56%














Unallocated

7,126


-


6,796


-


7,367


-

Allowance for non-covered loans













and unfunded letters of credit

117,184


1.10%


123,003


1.13%


122,048


1.12%














Allowance for covered loans

7,180


4.45%


9,492


5.25%


13,528


5.36%














Total allowance for credit losses

$    124,364


1.15%


$    132,495


1.20%


$    135,576


1.22%














* Includes the reserve for unfunded letters of credit.





















The allowance for non-covered loans and unfunded letters of credit as a percentage of total non-covered loans was 1.10 percent at March 31, 2013 as compared to 1.13 percent and 1.12 percent at December 31, 2012 and March 31, 2012, respectively.  The allocation percentages for the construction loan category at March 31, 2013 shown in the table above decreased 1.39 percent from the fourth quarter of 2012 largely due to improved expected loss experience and outlook for this portfolio, as well as a $3.0 million decline in specific reserves for one impaired collateral dependent loan.  Of the $3.0 million decrease in specific reserves, $1.6 million was due to an increase in the valuation of the loan's underlying collateral based upon a current appraisal and the remaining $1.4 million was charged-off during the three months ended March 31, 2013.  The impaired loan had a carrying value of $5.8 million at March 31, 2013.

Our allowance for non-covered loans and unfunded letters of credit as a percentage of total non-covered loans (excluding non-covered PCI loans with carrying values totaling approximately $909.8 million) was 1.20 percent at March 31, 2013 as compared to 1.25 percent at December 31, 2012.  PCI loans are accounted for on a pool basis and initially recorded net of fair valuation discounts related to credit which may be used to absorb future losses on such loans before any allowance for loan losses is recognized subsequent to acquisition.  There were no allocated reserves for non-covered PCI loans at March 31, 2013 and December 31, 2012.

Loans and Deposits

Non-Covered Loans. Non-covered loans are loans not subject to loss-sharing agreements with the FDIC.  Non-covered loans decreased $191.9 million to approximately $10.7 billion at March 31, 2013 from December 31, 2012 mainly due to refinance activity within the residential mortgage loan portfolio and an elevated level of repayments primarily within the commercial loan categories of the PCI loan portfolio.

Total commercial and industrial loans decreased $39.3 million from December 31, 2012 to $2.0 billion at March 31, 2013 as we continued to experience some full loan repayments from a few large borrowers, strong market competition for quality credits, as well as a reduction in line of credit usage during the first quarter. Total commercial real estate loans (including construction loans) also declined $53.2 million from December 31, 2012 to $4.8 billion at March 31, 2013 due to a $52.0 million decrease in PCI loans.  The decline in PCI loans was due to normal payments, as well as prepayments caused by strong competition in the Long Island market and excess borrower liquidity.  However, construction loans within the non-PCI loan portion of the commercial real estate loan portfolio increased $13.2 million largely due to draw downs on existing construction loans, as well as gradual improvements in demand in our New Jersey market.

Total residential mortgage loans decreased $109.9 million from December 31, 2012 mostly due to a high volume of first quarter refinancing activity, with many of the new loans either sold in the secondary market or held for sale at March 31, 2013. Loans held for sale carried at fair value increased to $135.1 million (with $131.5 million in unpaid contractual balances) at March 31, 2013 as compared to $120.2 million (with $115.4 million in unpaid contractual balances) at December 31, 2012.  Our residential mortgage pipeline has remained very robust mainly due to the continued success of our low fixed-price refinance programs and the current low level of market interest rates.  During the first quarter of 2013, we originated over $577 million in new and refinanced residential mortgage loans and retained approximately 21 percent of these loans in our loan portfolio at March 31, 2013.  Loan servicing rights recognized for the retained servicing of the loans sold during the first quarter totaled $5.5 million at March 31, 2013.  We expect to continue an "originate and sell" model for a large portion of our mortgage loan originations during 2013 assuming that market conditions do not adversely change and we are able to maintain an appropriate mix of residential mortgage loans on our balance sheet.  During the early part of the second quarter of 2013, application volume continues to be brisk and we are optimistic that the refinance volume should remain strong at least into the foreseeable future. 

Automobile loans increased by $24.5 million to $811.1 million at March 31, 2013 as compared to December 31, 2012 largely due to increased new loan volumes as compared to the fourth quarter of 2012. During the first quarter of 2013, we also purchased approximately $10.5 million in auto loans as compared to $6.6 million in purchased loans during the fourth quarter of 2012.  From time to time, the Bank purchases automobile loans originated by, and sometimes serviced by, other financial institutions based on several factors, including current loan origination volumes, market interest rates, excess liquidity and other asset/liability management strategies.  All of the purchased automobile loans are selected using Valley's normal underwriting criteria at the time of purchase.

Home equity loans declined $23.2 million to $462.3 million at March 31, 2013 as compared to December 31, 2012 due to normal repayment activity outpacing new loan origination volumes. Other consumer loans increased $9.1 million to $188.8 million at March 31, 2013 as compared to $179.7 million at December 31, 2012 mainly due to higher collateralized personal lines of credit balances. Despite the growth in other consumer loans, overall consumer demand has remained somewhat soft as borrowers' appetite for additional debt continues to be tempered by the uncertain sustainability of a slowly improving economy.

Covered Loans. PCI 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 2010.  Our covered loans consist primarily of commercial real estate loans and commercial and industrial loans and totaled $161.3 million at March 31, 2013 as compared to $180.7 million at December 31, 2012.  Consistent with our PCI loans acquired and purchased during the first quarter of 2012, all of our covered loans are PCI loans accounted for on a pool basis.  For loan pools with better than originally expected cash flows, the forecasted increase in cash flows 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 first quarter of 2013, we reduced our FDIC loss-share receivable by $1.5 million 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, as compared to $1.8 million during the fourth quarter of 2012.  

Deposits. Total deposits increased $38.6 million to $11.3 billion at March 31, 2013 from December 31, 2012 mostly due to higher savings, NOW and money market account balances.  Savings, NOW and money market accounts increased $61.8 million to approximately $5.3 billion at March 31, 2013 as compared to December 31, 2012 due to normal municipal account balance fluctuations and continued general increases in retail deposits. Valley's non-interest bearing deposits totaling $3.6 billion at March 31, 2013 moderately increased by $17.7 million from December 31, 2012 partly due to the current low interest rates on investment alternatives.  Valley's time deposits totaling approximately $2.5 billion at March 31, 2013 decreased $40.9 million as compared to December 31, 2012 largely due to the continued run-off of maturing higher cost retail certificates of deposit and less attractive short-term time deposit rates offered by Valley during the period.

Non-Interest Income

Non-interest income for the first quarter of 2013 decreased $2.5 million from $33.8 million for the linked quarter ended December 31, 2012 largely due to a $4.4 million decrease in net trading gains (primarily related to the mark to market gains and losses on our junior subordinated debentures carried at fair value).  Additionally, the reduction in non-interest income attributable to the change in the FDIC loss-share receivable was $3.2 million in the first quarter of 2013 compared to additional income of $43 thousand for the fourth quarter of 2012.  The reduction is in large part attributable to a decrease in the estimated additional credit impairment of certain loan pools subsequent to acquisition during the first quarter of 2013, which also reduced our provision for losses on covered loans by $2.2 million.  Partially offsetting these decreases in non-interest income, net gains on securities transactions increased to $4.0 million for the first quarter of 2013 from just $44 thousand for the three months ended December 31, 2012 primarily due to the sale of Freddie Mac and Fannie Mae perpetual preferred stock classified as available for sale with amortized cost totaling $941 thousand. Other non-interest income also increased $1.3 million to $3.4 million for the first quarter of 2013 from $2.1 million for the fourth quarter of 2012 primarily due to a $1.7 million decrease in net losses on other real estate owned (related to both sales and valuation of properties).

Non-Interest Expense

Non-interest expense decreased $184 thousand to $95.4 million for the first quarter of 2013 as compared to $95.6 million for the fourth quarter of 2012.  Amortization of other intangibles decreased $994 thousand as compared to the fourth quarter of 2012 mainly due to the net recovery of impairment charges totaling $1.3 million on certain loan servicing rights during the first quarter of 2013, partially offset by higher amortization expense caused, in part, by additional loan servicing rights recorded since we implemented an "originate and sell" model for a large portion of our mortgage loan originations starting in the second half of 2012.  Professional and legal expense and net occupancy and equipment expense also moderately decreased $673 thousand and $625 thousand, respectively, as compared to the fourth quarter of 2012 due to general and seasonal declines.  Partially offsetting the decreases in non-interest expense, salary and employee benefits expense increased $2.1 million primarily due to higher pension costs, seasonal increases in payroll taxes and additional incentive stock compensation expense related to stock awards granted during the first quarter of 2013.

Income Tax Expense

Income tax expense was $12.8 million for the three months ended March 31, 2013 reflecting an effective tax rate of 29.0 percent, as compared to $14.7 million for the fourth quarter of 2012, reflecting an effective tax rate of 28.5 percent and $15.3 million for the first quarter of 2012, reflecting an effective tax rate of 30.7 percent.  The increase in rate in the first quarter of 2013 compared to the fourth quarter of 2012 was largely due to a fourth quarter adjustment resulting from the actual tax rate being less than projected for the year ended December 31, 2012. The decrease in rate and tax expense as compared to the first quarter of 2012 was primarily due to a decrease in pre-tax income for the first quarter of 2013 and an increase in tax credit investments.

For the remainder of 2013, we anticipate that our effective tax rate will approximate 29 percent.

About Valley

Valley National Bancorp is a regional bank holding company headquartered in Wayne, New Jersey with $16 billion in assets. Its principal subsidiary, Valley National Bank, currently operates 209 branches in 145 communities serving 16 counties throughout northern and central New Jersey, Manhattan, Brooklyn, Queens 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;
  • higher than expected loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business from the recent damages to our primary markets by Hurricane Sandy;
  • declines in value in our investment portfolio, including additional other-than-temporary impairment charges on our investment securities;
  • unanticipated deterioration in our loan portfolio;
  • an unanticipated reduction in our "originate and sell" residential mortgage strategy or a slowdown in new and refinanced residential mortgage loan activity;
  • Valley's inability to pay dividends at current levels, or at all, because of inadequate future earnings, regulatory restrictions or limitations, and changes in the composition of qualifying regulatory capital and minimum capital requirements (including those resulting from the U.S. implementation of Basel III requirements);
  • 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 market interest rates for interest earning assets and/or interest bearing liabilities;
  • 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;
  • higher than expected tax rates, including increases resulting from changes in tax laws, regulations and case law;
  • an 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;
  • 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 higher 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 revenue synergies from recent acquisitions in the amounts or in the timeframe anticipated;
  • inability to retain customers and employees;
  • lower than expected cash flows from purchased credit impaired loans; 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, 2012. 

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





March 31,


December 31,


March 31,


($ in thousands, except for share data)

2013


2012


2012


FINANCIAL DATA:







Net interest income

$              110,036


$              118,529


$              127,459


Net interest income - FTE (1)

112,056


120,409


129,149


Non-interest income (2)

31,296


33,825


22,595


Non-interest expense

95,439


95,623


94,548


Income tax expense

12,814


14,702


15,278


Net income

31,310


36,829


34,531


Weighted average number of common shares outstanding:







     Basic

198,924,995


197,795,817


196,930,733


     Diluted

198,924,995


197,795,817


196,961,915


Per common share data:







     Basic earnings

$                    0.16


$                    0.19


$                    0.18


     Diluted earnings

0.16


0.19


0.18


     Cash dividends declared

0.16


0.16


0.16


Book value

7.58


7.57


7.58


Tangible book value (3)

5.25


5.26


5.30


Tangible common equity to tangible assets (3)

6.71

%

6.71

%

6.74

%

Closing stock price - high

$                  10.43


$                  10.20


$                  12.59


Closing stock price - low

9.62


8.72


11.35


FINANCIAL RATIOS:







Net interest margin

3.12

%

3.36

%

3.65

%

Net interest margin - FTE (1)

3.18


3.41


3.70


Annualized return on average assets

0.79


0.93


0.88


Annualized return on average shareholders' equity

8.31


9.71


9.34


Annualized return on average tangible







     shareholders' equity (3)

11.97


13.82


13.43


Efficiency ratio (5)

67.53


62.76


63.01


AVERAGE BALANCE SHEET ITEMS:







Assets

$         15,821,220


$         15,835,049


$         15,713,145


Interest earning assets

14,097,974


14,115,272


13,959,777


Loans

11,048,612


11,276,804


10,956,666


Interest bearing liabilities

10,780,932


10,874,993


11,040,905


Deposits

11,202,150


11,171,248


10,996,972


Shareholders' equity

1,506,968


1,516,675


1,478,133


VALLEY NATIONAL BANCORP

CONSOLIDATED FINANCIAL HIGHLIGHTS

SELECTED FINANCIAL DATA




As Of



March 31,


December 31,


March 31,


($ in thousands)

2013


2012


2012


BALANCE SHEET ITEMS:







Assets

$          16,028,703


$          16,012,646


$          15,950,054


Total loans

10,811,499


11,022,799


11,149,522


Non-covered loans

10,650,223


10,842,125


10,897,337


Deposits

11,302,591


11,264,018


10,957,184


Shareholders' equity

1,507,999


1,502,377


1,493,454


CAPITAL RATIOS:







Tier 1 leverage ratio

8.16

%

8.09

%

8.08

%

Risk-based capital - Tier 1

11.08


10.87


10.59


Risk-based capital - Total Capital

12.53


12.38


12.27


VALLEY NATIONAL BANCORP

CONSOLIDATED FINANCIAL HIGHLIGHTS

SELECTED FINANCIAL DATA




Three Months Ended





March 31,


December 31,


March 31,


($ in thousands)

2013


2012


2012


ALLOWANCE FOR CREDIT LOSSES:







Beginning balance - Allowance for credit losses

$               132,495


$               131,597


$               136,185


Loans charged-off: (4)








Commercial and industrial

(7,325)


(2,241)


(4,807)



Commercial real estate

(598)


(917)


(570)



Construction

(1,395)


(576)


(510)



Residential mortgage

(892)


(889)


(1,176)



Consumer

(1,509)


(1,730)


(1,483)




Total loans charged-off

(11,719)


(6,353)


(8,546)


Charged-off loans recovered:








Commercial and industrial

1,338


1,565


1,005



Commercial real estate

15


20


120



Construction

-


-


-



Residential mortgage

70


63


514



Consumer

396


403


601




Total loans recovered

1,819


2,051


2,240


Net charge-offs

(9,900)


(4,302)


(6,306)


Provision charged for credit losses

1,769


5,200


5,697


Ending balance - Allowance for credit losses

$               124,364


$               132,495


$               135,576


Components of allowance for credit losses:








Allowance for non-covered loans

$               114,664


$               120,708


$               119,342



Allowance for covered loans

7,180


9,492


13,528




Allowance for loan losses 

121,844


130,200


132,870



Allowance for unfunded letters of credit

2,520


2,295


2,706


Allowance for credit losses

$               124,364


$               132,495


$               135,576


Components of provision for credit losses:








Provision for losses on non-covered loans

$                   3,710


$                   5,255


$                   5,374



Provision for losses on covered loans

(2,166)


-


-



Provision for unfunded letters of credit

225


(55)


323


Provision for credit losses

$                   1,769


$                   5,200


$                   5,697


Annualized ratio of net charge-offs of








non-covered loans to average loans

0.35

%

0.15

%

0.23

%

Annualized ratio of total net charge-offs








to average loans

0.36


0.15


0.23


Allowance for non-covered loan losses as








a % of non-covered loans

1.08


1.11


1.10


Allowance for credit losses as








a % of total loans

1.15


1.20


1.22


VALLEY NATIONAL BANCORP

CONSOLIDATED FINANCIAL HIGHLIGHTS

SELECTED FINANCIAL DATA




As Of


($ in thousands)

March 31,


December 31,


March 31,


ASSET QUALITY: (6)

2013


2012


2012


Accruing past due loans:







30 to 89 days past due:








Commercial and industrial

$                   7,656


$                   3,578


$                   5,531



Commercial real estate

21,665


13,245


8,897



Construction

8,812


6,685


9,312



Residential mortgage

12,424


18,951


12,988



Consumer

5,096


7,227


5,330


Total 30 to 89 days past due

55,653


49,686


42,058


90 or more days past due:








Commercial and industrial

31


283


-



Commercial real estate

259


2,950


711



Construction

-


2,575


-



Residential mortgage

1,885


2,356


1,749



Consumer

229


501


214


Total 90 or more days past due

2,404


8,665


2,674


Total accruing past due loans

$                 58,057


$                 58,351


$                 44,732


Non-accrual loans:








Commercial and industrial

$                 21,692


$                 22,424


$                 24,196



Commercial real estate

56,042


58,625


47,433



Construction

13,199


14,805


17,704



Residential mortgage

31,905


32,623


32,291



Consumer

2,766


3,331


3,583


Total non-accrual loans

125,604


131,808


125,207


Other real estate owned (7)

18,463


15,612


14,119


Other repossessed assets

8,053


7,805


1,769


Non-accrual debt securities (8)

48,143


40,303


38,502


Total non-performing assets ("NPAs")

$               200,263


$               195,528


$               179,597


Performing troubled debt restructured loans

$               108,654


$               105,446


$                 96,152


Total non-accrual loans as a % of loans

1.16

%

1.20

%

1.12

%

Total accruing past due and non-accrual loans








as a % of loans

1.70


1.73


1.52


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








non-accrual loans

91.29


91.58


95.32


Non-performing purchased credit-impaired loans: (9)








Non-covered loans

$                 18,033


$                 24,028


$                   9,961



Covered loans

51,089


47,831


71,179


VALLEY NATIONAL BANCORP

CONSOLIDATED FINANCIAL HIGHLIGHTS



NOTES TO SELECTED FINANCIAL DATA


(1)

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.










Three Months Ended






March 31,


December 31,


March 31,




(In thousands)

2013


2012


2012



(2)

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










Trading securities

$                      (30)


$                       53


$                     252





Junior subordinated debentures

(2,170)


2,113


(1,240)





   Total trading (losses) gains, net

$                 (2,200)


$                  2,166


$                    (988)













(3)

This press release contains certain supplemental financial information, described in the Notes below, 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






March 31,


December 31,


March 31,




($ in thousands, except for share data)

2013


2012


2012




Tangible book value per common share:









Common shares outstanding

199,045,938


198,438,271


197,069,110




Shareholders' equity 

$           1,507,999


$           1,502,377


$           1,493,454




Less: Goodwill and other intangible assets

(463,206)


(459,357)


(448,814)




Tangible shareholders' equity

$           1,044,793


$           1,043,020


$           1,044,640




    Tangible book value

$5.25


$5.26


$5.30




Tangible common equity to tangible assets:









Tangible shareholders' equity

$           1,044,793


$           1,043,020


$           1,044,640




Total assets

16,028,703


16,012,646


15,950,054




Less: Goodwill and other intangible assets

(463,206)


(459,357)


(448,814)




Tangible assets

$         15,565,497


$         15,553,289


$         15,501,240




    Tangible common equity to tangible assets

6.71%


6.71%


6.74%




Annualized return on average tangible equity:









Net income 

$                31,310


$                36,829


$                34,531




Average shareholders' equity

1,506,968


1,516,675


1,478,133




Less: Average goodwill and other intangible assets

(460,502)


(450,948)


(449,285)




    Average tangible shareholders' equity

$           1,046,466


$           1,065,727


$           1,028,848




    Annualized return on average tangible









    shareholders' equity

11.97%


13.82%


13.43%



(4)

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








Commercial and industrial

$                       84


$                          -


$                          -




Residential mortgage

62


-


-





   Total covered loans charged-off

$                     146


$                        -


$                          -



(5)

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



(6)

Past due loans and non-accrual loans exclude loans that were acquired as part of FDIC-assisted transactions (covered loans) and acquired or

purchased loans during 2012. These loans are accounted for on a pool basis under U.S. GAAP and are not subject to 

delinquency classification in the same manner as loans originated by Valley.


(7)

Excludes OREO properties related to FDIC-assisted transactions totaling $11.1 million, $8.9 million and $11.0 million, at March 31, 2013,

December 31, 2012  and March 31, 2012, respectively.  These assets are covered by the loss-sharing agreements with the FDIC. 


(8)

Includes other-than-temporarily impaired trust preferred securities classified as available for sale, which are presented at carrying value (net of

unrealized gains (losses) totaling $965 thousand, ($6.9) million and ($13.2) million) at March 31, 2013,

December 31, 2012 and March 31, 2012, respectively, after recognition of all credit impairments.


(9)

Represent acquired and purchased loans meeting Valley's definition of non-performing loan (i.e., non-accrual loans), but are not subject to such

classification under U.S. GAAP because the loans are accounted for on a pooled basis and are excluded

from the non-accrual loans in the table above.


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 


[email protected].








VALLEY NATIONAL BANCORP





CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)




(in thousands, except for share data)








March 31,


December 31,






2013


2012

Assets





Cash and due from banks


$           381,880


$           390,078

Interest bearing deposits with banks


588,156


463,022

Investment securities:






Held to maturity, fair value of $1,614,712 at March 31, 2013 and $1,657,950 at December 31, 2012


1,565,607


1,599,707


Available for sale


955,270


807,816


Trading securities


22,127


22,157


     Total investment securities


2,543,004


2,429,680

Loans held for sale, at fair value


135,052


120,230

Non-covered loans


10,650,223


10,842,125

Covered loans


161,276


180,674


Less: Allowance for loan losses


(121,844)


(130,200)


     Net loans


10,689,655


10,892,599

Premises and equipment, net


276,664


278,615

Bank owned life insurance


341,217


339,876

Accrued interest receivable


54,174


52,375

Due from customers on acceptances outstanding


2,778


3,323

FDIC loss-share receivable


43,413


44,996

Goodwill


428,234


428,234

Other intangible assets, net


34,972


31,123

Other assets


509,504


538,495


     Total Assets


$      16,028,703


$      16,012,646









Liabilities 





Deposits:






Non-interest bearing


$        3,575,768


$        3,558,053


Interest bearing:






     Savings, NOW and money market


5,258,989


5,197,199


     Time


2,467,834


2,508,766


          Total deposits


11,302,591


11,264,018

Short-term borrowings


147,260


154,323

Long-term borrowings 


2,696,003


2,697,299

Junior subordinated debentures issued to capital trusts (includes fair value of $149,767






at March 31, 2013 and $147,595 at December 31, 2012 for VNB Capital Trust I)


190,734


188,522

Bank acceptances outstanding


2,778


3,323

Accrued expenses and other liabilities


181,338


202,784


     Total Liabilities


14,520,704


14,510,269

Shareholders' Equity





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


-


-

Common stock, no par value, authorized 232,023,233 shares; issued 199,096,457 shares 






  at March 31, 2013 and 198,499,275 shares at December 31, 2012


69,601


69,494

Surplus


1,394,079


1,390,851

Retained earnings


92,451


93,495

Accumulated other comprehensive loss


(47,626)


(50,909)

Treasury stock, at cost (50,519 common shares at March 31, 2013 and 61,004






common shares at December 31, 2012)


(506)


(554)


     Total Shareholders' Equity


1,507,999


1,502,377


     Total Liabilities and Shareholders' Equity


$      16,028,703


$      16,012,646

VALLEY NATIONAL BANCORP







CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


Three Months Ended

(in thousands, except for share data)


March 31,


December 31,


March 31,






2013


2012


2012

Interest Income







Interest and fees on loans


$               132,999


$               143,413


$               148,460

Interest and dividends on investment securities:







     Taxable



14,489


14,100


20,751

     Tax-exempt



3,649


3,387


3,119

     Dividends



1,680


1,816


1,751

Interest on federal funds sold and other short-term investments


216


253


55

     Total interest income


153,033


162,969


174,136

Interest Expense







Interest on deposits:







     Savings, NOW and money market



4,702


4,995


5,354

     Time



8,111


8,779


10,185

Interest on short-term borrowings


144


209


253

Interest on long-term borrowings and junior subordinated debentures

30,040


30,457


30,885

     Total interest expense


42,997


44,440


46,677

Net Interest Income


110,036


118,529


127,459

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

3,935


5,200


5,697

Provision for losses on covered loans


(2,166)


-


-

Net Interest Income After Provision for Credit Losses


108,267


113,329


121,762

Non-Interest Income







Trust and investment services


1,977


1,985


1,774

Insurance commissions


3,990


3,547


5,436

Service charges on deposit accounts


5,690


6,207


5,946

Gains on securities transactions, net


3,958


44


(157)

Trading (losses) gains, net


(2,202)


2,166


(988)

Fees from loan servicing


1,517


1,362


1,159

Gains on sales of loans, net


15,060


15,636


3,166

(Losses) gains on sales of assets, net


(268)


(812)


32

Bank owned life insurance


1,341


1,590


1,959

Change in FDIC loss-share receivable


(3,175)


43


(90)

Other


3,408


2,057


4,358

     Total non-interest income


31,296


33,825


22,595

Non-Interest Expense







Salary and employee benefits expense


50,572


48,461


51,026

Net occupancy and equipment expense


18,889


19,514


17,362

FDIC insurance assessment


3,353


3,550


3,619

Amortization of other intangible assets


1,603


2,597


1,958

Professional and legal fees


3,892


4,565


3,624

Advertising


1,802


1,851


1,688

Other


15,328


15,085


15,271

     Total non-interest expense


95,439


95,623


94,548

Income Before Income Taxes


44,124


51,531


49,809

Income tax expense 


12,814


14,702


15,278

Net Income


$                 31,310


$                 36,829


$                 34,531

Earnings Per Common Share:







     Basic


$                     0.16


$                     0.19


$                     0.18

     Diluted


0.16


0.19


0.18

Cash Dividends Declared per Common Share


0.16


0.16


0.16

Weighted Average Number of Common Shares Outstanding:







     Basic


198,924,995


197,795,817


196,930,733

     Diluted


198,924,995


197,795,817


196,961,915

VALLEY NATIONAL BANCORP









LOAN PORTFOLIO










(in thousands)












03/31/2013


12/31/2012


09/30/2012


06/30/2012


03/31/2012

Non-covered Loans










Commercial and industrial

$      2,045,514


$      2,084,826


$      2,118,870


$     2,165,656


$      2,170,378

Commercial real estate:











Commercial real estate

4,351,291


4,417,709


4,445,338


4,441,026


4,347,542


Construction

438,674


425,444


435,939


411,639


430,906

 Total commercial real estate 

4,789,965


4,843,153


4,881,277


4,852,665


4,778,448

Residential mortgage

2,352,560


2,462,429


2,499,554


2,745,101


2,531,166

Consumer:











Home equity

462,297


485,458


492,338


499,749


507,560


Automobile

811,060


786,528


789,248


778,181


764,082


Other consumer

188,827


179,731


160,118


155,963


145,703

Total consumer loans

1,462,184


1,451,717


1,441,704


1,433,893


1,417,345

 Total non-covered loans 

$    10,650,223


$    10,842,125


$    10,941,405


$   11,197,315


$    10,897,337

Covered loans*

161,276


180,674


207,533


226,537


252,185

Total loans

$    10,811,499


$    11,022,799


$    11,148,938


$   11,423,852


$    11,149,522

_________________________










*

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




VALLEY NATIONAL BANCORP


































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





Net Interest Income on a Tax Equivalent Basis





Quarter End - 03/31/2013


Quarter End - 12/31/2012


Quarter End - 09/30/2012


Quarter End - 06/30/2012


Quarter End - 03/31/2012





 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)

$    11,048,612


$ 133,054


4.82%


$ 11,276,804


$         143,470


5.09%


$   11,419,251


$  146,051


5.12%


$   11,297,942


$  143,837


5.09%


$   10,956,666


$  148,470


5.42%

Taxable investments (3)

2,091,866


16,169


3.09%


1,931,717


15,916


3.30%


2,016,878


17,599


3.49%


2,263,054


19,788


3.50%


2,469,057


22,502


3.65%

Tax-exempt investments (1)(3)

568,827


5,614


3.95%


505,156


5,210


4.13%


505,010


5,268


4.17%


464,681


4,965


4.27%


439,927


4,799


4.36%

Federal funds sold and other






























     interest bearing deposits

388,669


216


0.22%


401,595


253


0.25%


342,723


196


0.23%


52,348


31


0.24%


94,127


55


0.23%

Total interest earning assets

14,097,974


155,053


4.40%


14,115,272


164,849


4.67%


14,283,862


169,114


4.74%


14,078,025


168,621


4.79%


13,959,777


175,826


5.04%

Other assets

1,723,246






1,719,777






1,711,111






1,713,023






1,753,368





Total assets

$    15,821,220






$ 15,835,049






$   15,994,973






$   15,791,048






$   15,713,145






































Liabilities and shareholders' equity






























Interest bearing liabilities:































Savings, NOW and money market deposits

$      5,260,535


$     4,702


0.36%


$   5,163,073


$             4,995


0.39%


$     5,079,279


$      5,051


0.40%


$     5,064,315


$      4,690


0.37%


$     5,072,431


$      5,354


0.42%


Time deposits

2,493,288


8,111


1.30%


2,625,681


8,779


1.34%


2,736,233


9,226


1.35%


2,661,794


9,276


1.39%


2,812,582


10,185


1.45%


Short-term borrowings

140,600


144


0.41%


197,442


209


0.42%


502,016


556


0.44%


376,150


369


0.39%


237,676


253


0.43%


Long-term borrowings (4)

2,886,509


30,040


4.16%


2,888,797


30,457


4.22%


2,896,160


30,575


4.22%


2,916,670


30,452


4.18%


2,918,216


30,885


4.23%

Total interest bearing liabilities

10,780,932


42,997


1.60%


10,874,993


44,440


1.63%


11,213,688


45,408


1.62%


11,018,929


44,787


1.63%


11,040,905


46,677


1.69%

Non-interest bearing deposits

3,448,327






3,382,494






3,212,515






3,204,242






3,111,959





Other liabilities

84,993






60,887






59,367






68,361






82,148





Shareholders' equity

1,506,968






1,516,675






1,509,403






1,499,516






1,478,133





Total liabilities and shareholders' equity

$    15,821,220






$ 15,835,049






$   15,994,973






$   15,791,048






$   15,713,145





Net interest income/interest rate spread (5)



$ 112,056


2.80%




$         120,409


3.04%




$  123,706


3.12%




$  123,834


3.16%




$  129,149


3.35%

Tax equivalent adjustment



(2,020)






(1,880)






(1,884)






(1,763)






(1,690)



Net interest income, as reported



$ 110,036






$         118,529






$  121,822






$  122,071






$  127,459



Net interest margin (6)





3.12%






3.36%






3.41%






3.47%






3.65%

Tax equivalent effect





0.06%






0.05%






0.05%






0.05%






0.05%

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





3.18%






3.41%






3.46%






3.52%






3.70%































(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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