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

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

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

Key highlights for the fourth quarter:

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

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

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

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

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

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

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

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

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

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

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

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

Net Interest Income and Margin

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

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

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

Credit Quality

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

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

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

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

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

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

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

Loans and Deposits

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

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

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

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

Non-Interest Income

Fourth quarter of 2011 compared with fourth quarter of 2010

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

Fourth quarter of 2011 compared with third quarter of 2011

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

Non-Interest Expense

Fourth quarter of 2011 compared with fourth quarter of 2010

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

Fourth quarter of 2011 compared with third quarter of 2011

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

Income Tax Expense

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

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

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

About Valley

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

Forward Looking Statements

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

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

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

We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.