Valley National Bancorp Reports Increase in Third Quarter Earnings, Net Interest Margin Growth and Stable Asset Quality

Oct 21, 2010, 07:00 ET from Valley National Bancorp

WAYNE, N.J., Oct. 21 /PRNewswire-FirstCall/ -- Valley National Bancorp (NYSE: VLY), the holding company for Valley National Bank, today reported net income for the third quarter of 2010 of $32.6 million, $0.20 per diluted common share, as compared to the third quarter of 2009 earnings of $25.6 million, after $6.0 million in dividends and accretion on Valley preferred stock, or $0.17 per diluted common share.

Gerald H. Lipkin, Chairman, President and CEO commented that, “During the third quarter, we continued to combat a slow-growth, low-rate environment that has impacted new loan demand.  In the face of these challenges, we were able to produce strong third quarter 2010 results and expand our net interest margin, while increasing our allowance for credit losses as a percentage of loans. Although our non-accrual loans modestly increased during the quarter, Valley’s overall credit quality, a hallmark of our institution, remains both stable and better than many of our competitors.”  

Third Quarter 2010 Performance Highlights

  • Increased Net Interest Margin: Net interest margin on a tax equivalent basis was 3.78 percent in the third quarter of 2010 versus 3.72 percent in the second quarter of 2010 and 3.61 percent in the third quarter of 2009.
  • Stable Asset Quality: Total loans past due 30 days or more on our entire loan portfolio of $9.4 billion were 1.70 percent at September 30, 2010 compared to 1.71 percent at June 30, 2010. Our commercial real estate loan portfolio had loans past due 30 days or more totaling 1.13 percent at September 30, 2010 as compared to 1.12 percent at June 30, 2010. The residential mortgage and home equity loan portfolios totaling nearly 22,000 individual loans had only 248 loans past due 30 days or more at September 30, 2010.  At September 30, 2010, the residential mortgage and home equity loan delinquencies totaled $44.5 million, or 1.84 percent of $2.4 billion in total loans within these categories. See “Credit Quality” section below for more details.
  • Lower Provision for Credit Losses: The provision for credit losses totaled $9.3 million for the third quarter of 2010 as compared to $12.4 million for the second quarter of 2010 and $12.7 million for the third quarter of 2009. Net loan charge-offs were $3.2 million lower than the provision for credit losses during the third quarter of 2010.  Net loan charge-offs increased $880 thousand from the second quarter of 2010 mainly due to a lower level of loan recoveries. At September 30, 2010, our allowance for credit losses as a percentage of non-covered loans was 1.28 percent as compared to 1.24 percent at June 30, 2010.
  • Strong Commercial Loan Growth in a Difficult Lending Environment: Commercial and Industrial loans increased $63.9 million, or 14.5 percent on an annualized basis during the third quarter of 2010 from the second quarter of 2010 mainly due to higher line of credit usage by our existing customers in our New York metropolitan markets. Overall, total loans remained unchanged at $9.4 billion at September 30, 2010 compared to June 30, 2010.
  • Residential Mortgage Loan Activity: We originated over $280 million in new and refinanced residential mortgage loans during the three months ended September 30, 2010.  Our residential volumes increased as compared to the second quarter of 2010 due to the continued low level of interest rates and our very successful $499 refinance program.  Additionally, we transferred $83 million in conforming residential mortgage loans to loans held for sale during the third quarter of 2010 upon management’s decision to sell such loans to Fannie Mae.  Management believes these loans with 15 and 20 year fixed terms and an aggregate weighted average interest rate of 5.22 percent are likely to refinance in the near term due to the current low interest rate environment. The sale closed in October 2010 and resulted in a pre-tax gain of approximately $3.9 million which will be recognized in the fourth quarter of 2010.  
  • Investments: No impairment charges were recognized on securities in earnings during the third quarter of 2010, as compared to $2.0 million in the second quarter of 2010 and $743 thousand during the third quarter of 2009.  
  • Trading Mark to Market Impact on Earnings: Net income for the third quarter of 2010 included net trading losses totaling $2.6 million ($0.01 per common share).  These trading losses consisted of $2.1 million and $517 thousand in non-cash mark to market losses on our junior subordinated (“trust preferred”) debentures carried at fair value, and the fair value of our trading securities portfolio, respectively. The third quarter of 2009 included net trading losses of $3.5 million ($0.01 per common share) mainly due to change in market value of the trust preferred debentures.

Net Interest Income and Margin

Net interest income on a tax equivalent basis was $119.2 million for the third quarter of 2010, a $786 thousand increase from the second quarter of 2010 and an increase of $2.8 million from the third quarter of 2009. The linked quarter increase was primarily due to lower interest expense caused by maturing high cost time deposits and higher interest income from loans caused, in part, by discount accretion recognized on pooled loans acquired in the FDIC-assisted acquisitions of LibertyPointe Bank and The Park Avenue Bank in the first quarter of 2010, partially offset by lower rates on taxable investments purchased and a decline in average loans during the third quarter of 2010.

The net interest margin on a tax equivalent basis was 3.78 percent for the third quarter of 2010, an increase of 17 basis points from the third quarter of 2009, and an increase of 6 basis points from 3.72 percent for the linked quarter ended June 30, 2010. The yield on average interest earning assets increased by 4 basis points on a linked quarter basis mainly due to a 10 basis point increase in the yield on average loans resulting mainly from accretion recognized on pooled loans, partially offset by a 21 basis point decline in taxable investments as principal paydowns and interest on higher yielding investments are reinvested primarily in lower yielding securities and non-taxable investments. The cost of average interest bearing liabilities declined three basis points from the second quarter of 2010 mainly due to a three basis point decrease in the cost of average time deposits caused by run-off of higher cost deposits, and a two basis point decline in the cost of average savings, NOW, and money market accounts resulting mostly from a change in the mix of the balances outstanding in these products. Our cost of total deposits was 0.76 percent for the third quarter of 2010 compared to 0.81 percent for the three months ended June 30, 2010.  

Credit Quality

Total loan delinquencies as a percent of total loans were 1.70 percent at September 30, 2010 as compared to 1.71 percent at June 30, 2010 and 1.60 percent at September 30, 2009.  With a loan portfolio totaling approximately $9.4 billion, net loan charge-offs for the third quarter of 2010 were $6.1 million compared to $5.2 million for the second quarter of 2010, and $10.0 million for the third quarter of 2009.

The following table summarizes the allocation of the allowance for credit losses to specific loan categories and the allocation as a percentage of each loan category at September 30, 2010, June 30, 2010 and December 31, 2009:

September 30, 2010

June 30, 2010

December 31, 2009 

Allocation as a % of Non-Covered Loan Category

Allocation as a % of Non-Covered Loan Category

Allocation as a % of Non-Covered Loan Category

Allowance Allocation

Allowance Allocation

Allowance Allocation

Non-Covered Loan Category:

($ in thousands)

Commercial and Industrial loans*

$      55,346

3.03%

$      55,662

3.16%

$      50,932

2.83%

Mortgage:

Construction

14,485

3.29%

15,000

3.43%

15,263

3.47%

Residential mortgage

8,196

0.43%

6,412

0.34%

5,397

0.28%

Commercial real estate

15,980

0.47%

15,097

0.44%

10,253

0.29%

Total mortgage loans

38,661

0.67%

36,509

0.63%

30,913

0.53%

Consumer:

Home equity

1,628

0.31%

1,667

0.31%

1,680

0.30%

Other consumer

11,952

1.24%

11,649

1.23%

13,800

1.23%

Total consumer loans

13,580

0.91%

13,316

0.89%

15,480

0.92%

Unallocated

8,128

NA

7,017

NA

6,330

NA

$    115,715

1.28%

$    112,504

1.24%

$    103,655

1.11%

* Includes the reserve for unfunded letters of credit.

Total non-performing assets (“NPAs”), consisting of non-accrual loans, other real estate owned (OREO) and other repossessed assets, totaled $112.1 million, or 1.18 percent of loans and NPAs at September 30, 2010 compared to $109.8 million, or 1.15 percent of loans and NPAs at June 30, 2010.  The increase was mainly due to non-accrual loans which increased to $105.6 million at September 30, 2010 as compared to $103.5 million at June 30, 2010. Although the timing of collection is uncertain, management believes 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 $115.3 million at September 30, 2010 and had $14.0 million in related specific reserves included in our total allowance for loan losses. OREO and other repossessed assets, excluding OREO subject to loss-sharing agreements with the FDIC, totaled a combined $6.5 million at September 30, 2010 as compared to $6.3 million at June 30, 2010.

Loans past due 90 days or more and still accruing decreased to $4.4 million, or 0.05 percent of total loans at September 30, 2010 compared to $6.1 million, or 0.06 percent at June 30, 2010 primarily due to a $1.5 million decrease in construction loans within this delinquency category.  

Troubled debt restructured loans, with modified terms and not reported as loans 90 days or more past due and still accruing or non-accrual, are restructured loans to customers experiencing financial difficulties where a concession has been granted.  All loan modifications are made on a case-by-case basis.  However, we typically lower the monthly payments on such loans through either a reduction in interest rate, an extension of the maturity date, or a combination of these two methods.  At September 30, 2010, accruing troubled debt restructured loans, that are performing in accordance with their modified terms, consisted of 17 loans (primarily in the commercial and industrial loan and mortgage loan portfolios) totaling $48.2 million as compared to the same 17 loans totaling $48.0 million at June 30, 2010.  On an aggregate basis, the $48.2 million in restructured loans at September 30, 2010 had a weighted average modified interest rate of approximately 4.6 percent.

Loans and Deposits

Total loans remained unchanged at $9.4 billion at September 30, 2010 as compared to June 30, 2010 despite the transfer of approximately $83 million in residential mortgage loans to loans held for sale during the third quarter of 2010.

Non-Covered Loans. Non-covered loans are loans not subject to loss-sharing agreements with the FDIC.  Non-covered loans increased $9.0 million to approximately $9.1 billion at September 30, 2010 from June 30, 2010.  The linked quarter increase was mainly comprised of increases in commercial and industrial, and automobile loans of $63.9 million and $11.0 million, respectively, partially offset by decreases of $38.1 million, $21.0 million, and $14.4 million in commercial real estate, residential mortgage, and home equity, respectively. The commercial and industrial loan portfolio increased by approximately 14.5 percent during the third quarter of 2010 mainly due to an increase in loan demand from our New York City customers, including higher existing line of credit usage by customers.  Automobile loans increased mainly due to the purchase of approximately $37 million in prime indirect auto loans during the third quarter of 2010.  Commercial real estate loans continued to decline during 2010 due to the economic conditions and a lack of new quality loan opportunities. Home equity loans declined quarter over quarter as many borrowers continue to refinance their first mortgages at historically low rates and roll home equity balances into the new mortgage and customer line usage declined over concerns about the economy.

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 $377.0 million at September 30, 2010 as compared to $385.3 million at June 30, 2010. These loans are accounted for on a pool basis, and the pools are considered to be performing loans.

We may experience declines in the loan portfolio during the remainder of 2010 and beyond due to a slow economic recovery cycle, increased competition for quality borrowers, or a change in asset/liability management strategy.

Deposits. Total deposits decreased $151.7 million to approximately $9.3 billion at September 30, 2010 from June 30, 2010 as we continue to keep interest rates low on most interest bearing deposit products in response to the low level of loan demand caused by the economy. During the quarter ended September 30, 2010, time deposits declined $211.0 million due to run-off of higher cost maturing certificates of deposit.  However, savings, NOW, and money market deposits increased $66.8 million as compared to June 30, 2010 largely due to higher municipal deposit balances.

Non-Interest Income

Third quarter of 2010 compared with third quarter of 2009

Non-interest income totaled $17.3 million for the three months ended September 30, 2010 and remained relatively unchanged from the same period one year ago. However, net gains on sales of loans decreased $1.1 million to $1.5 million for the quarter ended September 30, 2010 mainly due to lower sales volume during the quarter. Net impairment losses on securities decreased $743 thousand as compared to the third quarter of 2009 as no credit impairment losses on securities were recognized during the quarter ended September 30, 2010.

Third quarter of 2010 compared with second quarter of 2010

Non-interest income decreased $5.1 million or 22.9 percent to $17.3 million for the quarter ended September 30, 2010 from $22.5 million for the linked quarter.  Net gains on securities transactions decreased $3.5 million to $112 thousand in the third quarter, primarily due to the gain recognized on the sale of $73.9 million in U.S. Treasury securities during the second quarter of 2010. Net trading losses increased $3.5 million to $2.6 million from a net trading gain of $838 thousand in the second quarter of 2010.  The decrease in net trading gains was mainly due to the negative impact of the change in the fair value of our junior subordinated debentures carried at fair value as compared to the linked quarter. The above decreases were partially offset by a $2.0 million decline in net impairment losses on securities as compared to the second quarter of 2010 as no credit impairment losses on securities were recognized during the quarter ended September 30, 2010.

Non-Interest Expense

Third quarter of 2010 compared with third quarter of 2009

Non-interest expense increased $5.1 million or 6.84 percent to $78.9 million for the quarter ended September 30, 2010 from $73.8 million for the same quarter of 2009.  Salary and employee benefits expense, and net occupancy and equipment expense increased $3.1 million and $789 thousand, respectively, in part, due to additional expenses related to the FDIC-assisted transactions in March 2010, as well as from de novo branch openings over the twelve month period ended September 30, 2010. Amortization of other intangible assets increased $892 thousand as compared to the quarter ended September 30, 2009 mainly due to $150 thousand of additional amortization expense related to core deposit intangibles acquired in the FDIC-assisted transactions in March 2010 and the recognition of a $810 thousand impairment charge on certain loan servicing rights in the third quarter of 2010 as compared to a $32 thousand recovery during the third quarter of 2009. Professional and legal fees increased $404 thousand due to general increases caused by the FDIC-assisted transactions and other corporate matters.

Third quarter of 2010 compared with second quarter of 2010

Non-interest expense decreased by $1.0 million from $79.9 million for the linked quarter ended June 30, 2010, mainly due to a decrease in net occupancy and equipment expense of $847 thousand.  This decline was primarily due to a full quarter of expense reductions related to the closure of five of seven branches acquired in FDIC-assisted transactions in the second quarter of 2010.

Income Tax Expense

Income tax expense was $14.2 million and $14.0 million for the third quarter of 2010 and 2009, respectively.  The effective tax rate for both periods was relatively unchanged at 30.3 percent for the three months ended September 30, 2010 compared to 30.6 percent for the same period of 2009.  

Income tax expense was $40.4 million and $36.7 million for the nine months ended September 30, 2010 and 2009, respectively.  However, the effective tax rate for both periods was relatively unchanged at 30.3 percent for the nine months ended September 30, 2010 compared to 30.4 percent for the same period of 2009.  For the remainder of 2010, we anticipate that our effective tax rate will approximate 30 percent.  

About Valley

Valley is a regional bank holding company with over $14 billion in assets, headquartered in Wayne, New Jersey. Its principal subsidiary, Valley National Bank, currently operates 200 branches in 135 communities serving 14 counties throughout northern and central New Jersey, Manhattan, Brooklyn and Queens. Valley National Bank is the largest commercial bank headquartered in New Jersey and is committed to providing the most convenient service, the latest in product innovations and an experienced and knowledgeable staff with a high priority on friendly customer service 24 hours a day, 7 days a week. Valley National Bank offers a wide range of deposit products, mortgage loans and cash management services to consumers and businesses including products tailored for the medical, insurance and leasing business. Valley National Bank’s comprehensive delivery channels enable customers to bank in person, by telephone or online.

For more information about Valley National Bank and its products and services, please visit www.valleynationalbank.com or call Customer Service 24/7 at 1-800-522-4100.

Forward Looking Statements

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

  • a continued or unexpected decline in the economy, in particular in New Jersey and the New York Metropolitan area;
  • 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;
  • a continued or unexpected decline in real estate values within our market areas;
  • declines in value in our investment portfolio;
  • charges against earnings related to the change in fair value of our junior subordinated debentures;
  • higher than expected FDIC insurance assessments;
  • the failure of other financial institutions with whom we have trading, clearing, counterparty and other financial relationships;
  • lack of liquidity to fund our various cash obligations;
  • unanticipated reduction in our deposit base;  
  • potential acquisitions 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 increased compliance costs and/or require us to change our business model;
  • changes in accounting policies or accounting standards;
  • we may be unable to adapt to technological changes;
  • our internal controls and procedures may not be adequate to prevent losses;
  • claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;
  • the possibility that the expected benefits of the LibertyPointe Bank and The Park Avenue Bank acquisitions will not be fully realized;
  • expected cost synergies and other benefits from our acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters may arise; and
  • other unexpected material adverse changes in our operations or earnings.

A detailed discussion of these and other factors that could affect our results is included in our SEC filings, including our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 and our Annual Report on Form 10-K for the year ended December 31, 2009.  We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. 

-Tables to Follow-

Valley National Bancorp

Consolidated Financial Highlights

SELECTED FINANCIAL DATA

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

($ in thousands, except for share data)

2010

2010

2009

2010

2009

FINANCIAL DATA:

Net interest income

$             117,734

$             117,026

$             115,068

$             349,611

$             337,745

Net interest income - FTE (3)

119,213

118,427

116,371

353,863

341,619

Non-interest income(2)

17,328

22,476

17,078

55,481

47,674

Non-interest expense

78,947

79,973

73,892

237,274

228,944

Income tax expense

14,168

14,081

13,950

40,449

36,745

Net income

32,639

33,010

31,582

93,012

83,963

Dividends on preferred stock and accretion

-

-

5,983

-

15,996

Net income available to common stockholders

32,639

33,010

25,599

93,012

67,967

Weighted average number of common shares outstanding: (4)

   Basic

161,121,214

160,961,240

152,305,288

160,959,399

150,033,851

   Diluted

161,122,351

160,965,366

152,305,671

160,960,742

150,034,407

Per common share data: (4)

   Basic earnings

$                   0.20

$                   0.21

$                   0.17

$                   0.58

$                   0.45

   Diluted earnings

0.20

0.21

0.17

0.58

0.45

   Cash dividends declared

0.18

0.18

0.18

0.54

0.54

Book value

7.93

7.88

7.65

7.93

7.65

Tangible book value (1)

5.84

5.81

5.59

5.84

5.59

Tangible common equity to tangible assets (1)

6.84

%

6.78

%

6.23

%

6.84

%

6.23

%

Closing stock price - high

$                 14.88

$                 15.95

$                 12.91

$                 15.95

$                 18.01

Closing stock price - low

12.42

13.62

10.39

12.42

7.98

CORE ADJUSTED FINANCIAL DATA: (1)

Net income available to common stockholders, as adjusted

$               32,639

$               34,292

$               26,064

$               95,917

$               71,313

Basic earnings per share, as adjusted

0.20

0.21

0.17

0.60

0.48

Diluted earnings per share, as adjusted

0.20

0.21

0.17

0.60

0.48

FINANCIAL RATIOS:

Net interest margin

3.73

%

3.68

%

3.57

%

3.67

%

3.45

%

Net interest margin - FTE (3)

3.78

3.72

3.61

3.72

3.49

Annualized return on average assets

0.93

0.93

0.89

0.88

0.78

Annualized return on average shareholders' equity

10.24

10.44

9.35

9.80

8.24

Annualized return on average tangible shareholders' equity (1)

13.86

14.16

12.25

13.26

10.77

Efficiency ratio (5)

58.45

57.33

55.92

58.57

59.40

CORE ADJUSTED FINANCIAL RATIOS: (1)

Annualized return on average assets, as adjusted

0.93

%

0.97

%

0.91

%

0.91

%

0.82

%

Annualized return on average shareholders' equity, as adjusted

10.24

10.85

9.48

10.11

8.56

Annualized return on avg tangible shareholders' equity, as adj

13.86

14.71

12.43

13.67

11.20

Efficiency ratio, as adjusted

58.45

56.50

55.60

57.91

58.59

AVERAGE BALANCE SHEET ITEMS:

Assets

$        14,050,659

$        14,200,681

$        14,133,543

$        14,125,719

$        14,271,759

Interest earning assets

12,615,556

12,737,298

12,876,771

12,699,554

13,038,485

Loans

9,474,723

9,544,364

9,581,388

9,480,609

9,787,331

Interest bearing liabilities

10,302,898

10,430,980

10,413,440

10,413,462

10,583,670

Deposits

9,454,380

9,612,818

9,341,766

9,523,414

9,363,356

Shareholders' equity

1,274,742

1,264,633

1,351,745

1,264,926

1,359,440

As of and For the Period Ended

September 30,

June 30,

December 31,

September 30,

($ in thousands)

2010

2010

2009

2009

BALANCE SHEET ITEMS:

Assets

$        14,087,611

$        14,112,481

$  14,284,153

$  14,231,870

Total loans

9,431,697

9,430,976

9,370,071

9,511,413

Non-covered loans

9,054,661

9,045,650

9,370,071

9,511,413

Deposits

9,268,703

9,420,421

9,547,285

9,442,471

Shareholders' equity

1,278,019

1,268,667

1,252,854

1,284,102

CAPITAL RATIOS:

Tier 1 leverage ratio

8.27

%

8.16

%

8.14

%

8.46

%

Risk-based capital - Tier 1

10.73

10.72

10.64

10.77

Risk-based capital - Total Capital

12.77

12.74

12.54

12.66

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

ALLOWANCE FOR CREDIT LOSSES:

2010

2010

2009

2010

2009

Beginning balance - Allowance for credit losses

$             112,504

$             105,283

$             102,317

$       103,655

$         94,738

Loans charged-off:

Commercial and industrial

(3,223)

(1,978)

(5,302)

(13,882)

(11,886)

Construction

(5)

-

-

(424)

-

Residential mortgage

(844)

(1,632)

(1,008)

(3,011)

(1,757)

Commercial real estate

(307)

(760)

(177)

(1,723)

(302)

Consumer

(2,485)

(2,515)

(4,324)

(8,873)

(14,109)

(6,864)

(6,885)

(10,811)

(27,913)

(28,054)

Charged-off loans recovered:

Commercial and industrial

187

768

100

3,317

226

Construction

-

-

-

-

-

Residential mortgage

28

47

16

80

28

Commercial real estate

19

26

15

139

45

Consumer

533

827

695

2,080

2,304

767

1,668

826

5,616

2,603

Net charge-offs

(6,097)

(5,217)

(9,985)

(22,297)

(25,451)

Provision charged for credit losses

9,308

12,438

12,722

34,357

35,767

Ending balance - Allowance for credit losses

$             115,715

$             112,504

$             105,054

$       115,715

$       105,054

Components of allowance for credit losses:

Allowance for loan losses

$             113,786

$             110,645

$             103,446

$       113,786

$       103,446

Reserve for unfunded letters of credit

1,929

1,859

1,608

1,929

1,608

Allowance for credit losses

$             115,715

$             112,504

$             105,054

$       115,715

$       105,054

Components of provision for credit losses:

Provision for loan losses

$                 9,238

$               12,376

$               12,671

$         34,093

$         35,653

Provision for unfunded letters of credit

70

62

51

264

114

Provision for credit losses

$                 9,308

$               12,438

$               12,722

$         34,357

$         35,767

Annualized ratio of net charge-offs to average loans outstanding

0.26

%

0.22

%

0.42

%

0.31

%

0.35

%

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

1.26

1.22

1.09

1.26

1.09

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

1.28

1.24

1.10

1.28

1.10

As of and For the Period Ended

September 30,

June 30,

December 31,

September 30,

ASSET QUALITY: (6)

2010

2010

2009

2009

($ in thousands)

Accruing past due loans:

30 to 89 days past due:

Commercial and industrial

$                 9,917

$               14,262

$              11,949

$              11,552

Construction

3,750

5,810

1,834

-

Residential mortgage

13,426

8,421

12,462

11,425

Commercial real estate

7,281

6,001

4,539

11,659

Consumer

15,937

17,088

22,835

20,883

Total 30 to 89 days past due

50,311

51,582

53,619

55,519

90 or more days past due:

Commercial and industrial

722

502

2,191

2,329

Construction

-

1,507

-

2,795

Residential mortgage

1,297

1,676

1,421

13,034

Commercial real estate

1,424

1,608

250

2,563

Consumer

924

786

1,263

2,373

Total 90 or more days past due

4,367

6,079

5,125

23,094

Total accruing past due loans

$               54,678

$               57,661

$              58,744

$              78,613

Non-accrual loans:

Commercial and industrial

$               16,967

$               16,240

$              17,424

$              18,375

Construction

29,535

28,581

19,905

19,093

Residential mortgage

27,198

25,916

22,922

13,599

Commercial real estate

29,833

30,798

29,844

22,191

Consumer

2,069

1,975

1,869

787

Total non-accrual loans

105,602

103,510

91,964

74,045

Other real estate owned (7)

4,698

4,633

3,869

3,816

Other repossessed assets

1,849

1,666

2,565

4,931

Total non-performing assets ("NPAs")

$             112,149

$             109,809

$              98,398

$              82,792

Troubled debt restructured loans (performing)

$               48,229

$               47,959

$              19,072

$              19,406

Total non-accrual loans as a % of loans

1.12

%

1.10

%

0.98

%

0.78

%

Total NPAs as a % of loans and NPAs

1.18

1.15

1.04

0.86

Total accruing past due and non-accrual loans as a % of loans (7)

1.70

1.71

1.61

1.60

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

107.75

106.89

110.90

139.71

NOTES TO SELECTED FINANCIAL DATA

(1)  This press release contains certain supplemental financial information, described in the following notes, which has been determined by methods other  

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

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

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

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

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

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

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

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

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

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

($ in thousands, except for share data)

2010

2010

2009

2010

2009

Tangible book value per common share:

Common shares outstanding

161,123,404

160,973,896

155,053,584

161,123,404

155,053,584

Shareholders' equity

$          1,278,019

$          1,268,667

$          1,284,102

$    1,278,019

$    1,284,102

Less: Preferred stock

-

-

(97,625)

-

(97,625)

Less: Goodwill and other intangible assets

(337,431)

(333,836)

(320,063)

(337,431)

(320,063)

Tangible shareholders' equity

$             940,588

$             934,831

$             866,414

$       940,588

$       866,414

   Tangible book value

5.84

5.81

5.59

5.84

5.59

Valley National Bancorp

Consolidated Financial Highlights

NOTES TO SELECTED FINANCIAL DATA - CONTINUED

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

($ in thousands, except for share data)

2010

2010

2009

2010

2009

Annualized return on average tangible equity:

Net income

$               32,639

$               33,010

$               31,582

$         93,012

$         83,963

Average shareholders' equity

1,274,742

1,264,633

1,351,745

1,264,926

1,359,440

Less: Average goodwill and other intangible assets

(333,091)

(332,273)

(320,284)

(329,647)

(319,720)

Average tangible shareholders' equity

$             941,651

$             932,360

$          1,031,461

$       935,279

$    1,039,720

Annualized return on average tangible shareholders' equity

13.86%

14.16%

12.25%

13.26%

10.77%

Adjusted net income available to common stockholders:

Net income, as reported

$               32,639

$               33,010

$               31,582

$         93,012

$         83,963

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

-

1,282

465

2,905

3,346

Net income, as adjusted

32,639

34,292

32,047

95,917

87,309

Dividends on preferred stock and accretion

-

-

5,983

-

15,996

Net income available to common stockholders, as adjusted

$               32,639

$               34,292

$               26,064

$         95,917

$         71,313

Adjusted per common share data:

Net income available to common stockholders, as adjusted

$               32,639

$               34,292

$               26,064

$         95,917

$         71,313

Average number of basic shares outstanding

161,121,214

160,961,240

152,305,288

160,959,399

150,033,851

   Basic earnings, as adjusted

$                   0.20

$                   0.21

$                   0.17

$             0.60

$             0.48

Average number of diluted shares outstanding

161,122,351

160,965,366

152,305,671

160,960,742

150,034,407

   Diluted earnings, as adjusted

$                   0.20

$                   0.21

$                   0.17

$             0.60

$             0.48

Adjusted annualized return on average assets:

Net income, as adjusted

$               32,639

$               34,292

$               32,047

$         95,917

$         87,309

Average assets

$        14,050,659

$        14,200,681

$        14,133,543

14,125,719

14,271,759

Annualized return on average assets, as adjusted

0.93%

0.97%

0.91%

0.91%

0.82%

Adjusted annualized return on average shareholders' equity:

Net income, as adjusted

$               32,639

$               34,292

$               32,047

$         95,917

$         87,309

Average shareholders' equity

1,274,742

1,264,633

1,351,745

1,264,926

1,359,440

Annualized return on average shareholders' equity, as adjusted

10.24%

10.85%

9.48%

10.11%

8.56%

Adjusted annualized return on average tangible shareholders' equity:

Net income, as adjusted

$               32,639

$               34,292

$               32,047

$         95,917

$         87,309

Average tangible shareholders' equity

941,651

932,360

1,031,461

935,279

1,039,720

Annualized ret. on avg. tangible shareholders' equity, as adjusted

13.86%

14.71%

12.43%

13.67%

11.20%

Adjusted efficiency ratio:

Non-interest expense

$               78,947

$               79,973

$               73,892

$       237,274

$       228,944

Net interest income

117,734

117,026

115,068

349,611

337,745

Non-interest income

17,328

22,476

17,078

55,481

47,674

Add: Net impairment losses on securities recognized in earnings

-

2,049

743

4,642

5,348

Gross operating income, as adjusted

$             135,062

$             141,551

$             132,889

$       409,734

$       390,767

Efficiency ratio, as adjusted

58.45%

56.50%

55.60%

57.91%

58.59%

Tangible common equity to tangible assets:

Tangible shareholders' equity

$             940,588

$             934,831

$             866,414

$       940,588

$       866,414

Total assets

14,087,611

14,112,481

14,231,870

14,087,611

14,231,870

Less: Goodwill and other intangible assets

(337,431)

(333,836)

(320,063)

(337,431)

(320,063)

Tangible assets

$        13,750,180

$        13,778,645

$        13,911,807

$  13,750,180

$  13,911,807

Tangible common equity to tangible assets

6.84%

6.78%

6.23%

6.84%

6.23%

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

   Trading securities

$                  (517)

$                  (581)

$                  (648)

$             (862)

$           4,618

   Junior subordinated debentures

(2,110)

1,419

(2,826)

(3,957)

(13,504)

Total trading (losses) gains, net

$               (2,627)

$                    838

$               (3,474)

$          (4,819)

$         (8,886)

(3)  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.  

(4)  Share data reflects the five percent common stock dividend issued on May 21, 2010.  

(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 excludes loans that were acquired as part of the Liberty Pointe Bank and The Park Avenue Bank transactions.  Fair value of these loans as of acquisition includes estimates of credit losses. These loans are accounted for on a pool basis, and the pools are considered to be performing.  

(7)  Excludes OREOs that is related to the Liberty Pointe Bank and The Park Avenue Bank FDIC-assisted transactions.  OREOs related to the FDIC-assisted transactions, which totaled $12.5 million at September 30, 2010, is subject to the loss-sharing agreements with the FDIC.    

SHAREHOLDER RELATIONS

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

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

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(in thousands, except for share data)

September 30,

December 31,

2010

2009

Assets

Cash and due from banks

$        256,194

$        305,678

Interest bearing deposits with banks

4,677

355,659

Investment securities:

Held to maturity, fair value of $1,766,179 at September 30, 2010 and $1,548,006 at December 31, 2009

1,776,856

1,584,388

Available for sale

1,089,603

1,352,481

Trading securities

32,088

32,950

Total investment securities

2,898,547

2,969,819

Loans held for sale (includes fair value of $25,293 at September 30, 2010 and $25,492 at December 31, 2009

for loans originated for sale)

108,455

25,492

Non-covered loans

9,054,661

9,370,071

Less: Allowance for loan losses

(113,786)

(101,990)

Covered loans

377,036

-

Net loans

9,317,911

9,268,081

Premises and equipment, net

265,661

266,401

Bank owned life insurance

307,709

304,031

Accrued interest receivable

61,643

56,245

Due from customers on acceptances outstanding

6,023

6,985

FDIC loss-share receivable

109,682

-

Goodwill

315,975

296,424

Other intangible assets, net

21,456

24,305

Other assets

413,678

405,033

Total Assets

$   14,087,611

$   14,284,153

Liabilities

Deposits:

Non-interest bearing

$     2,461,532

$     2,420,006

Interest bearing:

Savings, NOW and money market

4,131,273

4,044,912

Time

2,675,898

3,082,367

Total deposits

9,268,703

9,547,285

Short-term borrowings

331,265

216,147

Long-term borrowings

2,884,547

2,946,320

Junior subordinated debentures issued to capital trusts (includes fair value of $159,850

at September 30, 2010 and $155,893 at December 31, 2009 for VNB Capital Trust I)

185,055

181,150

Bank acceptances outstanding

6,023

6,985

Accrued expenses and other liabilities

133,999

133,412

Total Liabilities

12,809,592

13,031,299

Shareholders' Equity*

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

-

-

Common stock, no par value, authorized 210,451,912 shares; issued 162,058,055 shares

 at September 30, 2010 and 162,042,502 shares at December 31, 2009

57,067

54,293

Surplus

1,178,720

1,178,992

Retained earnings

74,733

73,592

Accumulated other comprehensive loss

(9,843)

(19,816)

Treasury stock, at cost (934,651 common shares at September 30, 2010 and 1,405,204

common shares at December 31, 2009)

(22,658)

(34,207)

Total Shareholders' Equity

1,278,019

1,252,854

Total Liabilities and Shareholders' Equity

$   14,087,611

$   14,284,153

____________

* Share data reflects the five percent common stock dividend issued on May 21, 2010.

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except for share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

Interest Income

Interest and fees on loans

$           137,742

$           139,506

$           409,531

$           424,719

Interest and dividends on investment securities:

    Taxable

28,361

32,670

88,861

102,162

    Tax-exempt

2,743

2,414

7,886

7,175

    Dividends

1,679

2,493

5,153

6,475

Interest on federal funds sold and other short-term investments

61

198

291

646

    Total interest income

170,586

177,281

511,722

541,177

Interest Expense

Interest on deposits:

    Savings, NOW and money market

4,711

6,638

14,384

18,321

    Time 

13,233

19,833

43,551

76,118

Interest on short-term borrowings

334

487

995

3,617

Interest on long-term borrowings and junior subordinated debentures

34,574

35,255

103,181

105,376

    Total interest expense

52,852

62,213

162,111

203,432

Net Interest Income

117,734

115,068

349,611

337,745

Provision for credit losses

9,308

12,722

34,357

35,767

Net Interest Income After Provision for Credit Losses

108,426

102,346

315,254

301,978

Non-Interest Income

Trust and investment services

1,930

1,811

5,752

5,048

Insurance commissions

2,561

2,504

8,417

8,074

Service charges on deposit accounts

6,562

6,871

19,487

20,071

Gains (losses) on securities transactions, net

112

(5)

4,631

246

Other-than-temporary impairment losses on securities

-

-

(1,393)

(5,905)

    Portion recognized in other comprehensive income (pre-tax)

-

(743)

(3,249)

557

    Net impairment losses on securities recognized in earnings

-

(743)

(4,642)

(5,348)

Trading losses, net

(2,627)

(3,474)

(4,819)

(8,886)

Fees from loan servicing

1,187

1,216

3,634

3,585

Gains on sales of loans, net

1,548

2,699

5,087

7,275

Gains on sales of assets, net

78

128

382

477

Bank owned life insurance

1,697

1,421

5,008

4,189

Other

4,280

4,650

12,544

12,943

    Total non-interest income

17,328

17,078

55,481

47,674

Non-Interest Expense

Salary and employee benefits expense

43,566

40,490

130,774

121,542

Net occupancy and equipment expense

15,241

14,452

47,270

44,347

FDIC insurance assessment

3,497

3,355

10,473

16,786

Amortization of other intangible assets

2,602

1,710

6,747

5,537

Professional and legal fees

2,460

2,056

7,192

6,295

Advertising

826

701

2,849

1,868

Other

10,755

11,128

31,969

32,569

    Total non-interest expense

78,947

73,892

237,274

228,944

Income Before Income Taxes

46,807

45,532

133,461

120,708

Income tax expense

14,168

13,950

40,449

36,745

Net Income

32,639

31,582

93,012

83,963

Dividends on preferred stock and accretion

-

5,983

-

15,996

Net Income Available to Common Stockholders

$             32,639

$             25,599

$            93,012

$            67,967

Earnings Per Common Share*:

     Basic

$                 0.20

$                 0.17

$                0.58

$                0.45

     Diluted

0.20

0.17

0.58

0.45

Cash Dividends Declared per Common Share*

0.18

0.18

0.54

0.54

Weighted Average Number of Common Shares Outstanding*:

     Basic

161,121,214

152,305,288

160,959,399

150,033,851

     Diluted

161,122,351

152,305,671

160,960,742

150,034,407

____________

* Share data reflects the five percent common stock dividend issued on May 21, 2010.

Valley National Bancorp

Loan Portfolio

(in thousands)

As Of

9/30/2010

6/30/2010

3/31/2010

12/31/2009

9/30/2009

Non-covered Loans:

Commercial and industrial loans

$             1,824,014

$         1,760,071

$        1,765,431

$             1,801,251

$           1,804,822

Mortgage:

Construction

440,929

437,115

433,999

440,046

446,662

Residential mortgage

1,890,439

1,911,466

1,893,279

1,943,249

2,011,532

Commercial real estate

3,406,089

3,444,169

3,483,378

3,500,419

3,473,628

Total Mortgage Loans

5,737,457

5,792,750

5,810,656

5,883,714

5,931,822

Consumer Loans:

Home Equity

531,168

545,607

553,951

566,303

575,332

Credit Card

9,462

9,571

9,526

10,025

9,916

Automobile

877,298

866,313

934,118

1,029,958

1,114,070

Other Consumer

75,262

71,338

70,988

78,820

75,451

Total Consumer Loans

1,493,190

1,492,829

1,568,583

1,685,106

1,774,769

Total non-covered loans

9,054,661

9,045,650

9,144,670

9,370,071

9,511,413

Covered Loans *

377,036

385,326

425,042

-

-

Total Loans

$             9,431,697

$         9,430,976

$        9,569,712

$             9,370,071

$           9,511,413

______________________

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

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

Net Interest Income on a Tax Equivalent Basis

Quarter End - 09/30/2010

Quarter End - 06/30/2010

Quarter End - 03/31/2010

Quarter End - 12/31/2009

Quarter End - 9/30/2009

Average

Avg.

Average

Avg.

Average

Avg.

Average

Avg.

Average

Avg.

($ in thousands)

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

Assets

Interest earning assets:

Loans (1)(2)

$             9,474,723

$        137,744

5.82%

$             9,544,364

$           136,422

5.72%

$             9,422,162

$        135,371

5.75%

$             9,464,300

$        136,536

5.77%

$             9,581,388

$        139,509

5.82%

Taxable investments (3)

2,610,933

30,040

4.60%

2,670,495

32,094

4.81%

2,720,110

31,880

4.69%

2,752,892

31,668

4.60%

2,731,907

35,163

5.15%

Tax-exempt investments (1)(3)

433,559

4,219

3.89%

415,978

3,996

3.84%

371,234

3,917

4.22%

328,375

3,857

4.70%

262,016

3,714

5.67%

Federal funds sold and other

     interest bearing deposits

96,341

61

0.25%

106,461

76

0.29%

233,750

154

0.26%

463,690

299

0.26%

301,460

198

0.26%

     Total interest earning assets

12,615,556

172,064

5.46%

12,737,298

172,588

5.42%

12,747,256

171,322

5.38%

13,009,257

172,360

5.30%

12,876,771

178,584

5.55%

Other assets

1,435,103

1,463,383

1,379,392

1,287,089

1,256,772

     Total assets

$           14,050,659

$           14,200,681

$           14,126,648

$           14,296,346

$           14,133,543

Liabilities and shareholders' equity

Interest bearing liabilities:

Savings, NOW and money market deposits

$             4,270,386

$            4,711

0.44%

$             4,144,113

$               4,813

0.46%

$             4,071,641

$            4,860

0.48%

$             4,111,471

$            6,573

0.64%

$             3,961,327

$            6,638

0.67%

Time deposits

2,761,018

13,233

1.92%

3,026,929

14,720

1.95%

3,116,322

15,598

2.00%

3,135,131

17,285

2.21%

3,111,150

19,833

2.55%

Short-term borrowings

198,938

334

0.67%

179,677

330

0.73%

192,498

331

0.69%

215,019

409

0.76%

198,459

487

0.98%

Long-term borrowings (4)

3,072,556

34,574

4.50%

3,080,261

34,298

4.45%

3,128,309

34,309

4.39%

3,130,498

35,171

4.49%

3,142,504

35,255

4.49%

     Total interest bearing liabilities

10,302,898

52,852

2.05%

10,430,980

54,161

2.08%

10,508,770

55,098

2.10%

10,592,119

59,438

2.24%

10,413,440

62,213

2.39%

Non-interest bearing deposits

2,422,976

2,441,776

2,315,621

2,318,841

2,269,289

Other liabilities

50,043

63,292

47,068

92,006

99,069

Shareholders' equity

1,274,742

1,264,633

1,255,189

1,293,380

1,351,745

     Total liabilities and shareholders' equity

$           14,050,659

$           14,200,681

$           14,126,648

$           14,296,346

$           14,133,543

Net interest income/interest rate spread (5)

$        119,212

3.41%

$           118,427

3.34%

$        116,224

3.28%

$        112,922

3.05%

$        116,371

3.16%

Tax equivalent adjustment

(1,478)

(1,401)

(1,373)

(1,353)

(1,303)

Net interest income, as reported

$        117,734

$           117,026

$        114,851

$        111,569

$        115,068

Net interest margin (6)

3.73%

3.68%

3.60%

3.43%

3.57%

Tax equivalent effect

0.05%

0.04%

0.05%

0.04%

0.04%

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

3.78%

3.72%

3.65%

3.47%

3.61%

______________________

(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



RELATED LINKS

http://www.valleynationalbank.com