EX-99 2 exhibit99earningsrelease20.htm EXHIBIT Exhibit 99 Earnings Release 2014.10.29
Exhibit 99
News Release



FOR IMMEDIATE RELEASE
Contact:
 
Alan D. Eskow
 
 
 
Senior Executive Vice President and
 
 
 
Chief Financial Officer
 
 
 
973-305-4003

VALLEY NATIONAL BANCORP REPORTS THIRD QUARTER EARNINGS,
SOLID LOAN GROWTH AND ASSET QUALITY

WAYNE, NJ – October 29, 2014 -- Valley National Bancorp (NYSE:VLY), the holding company for Valley National Bank, today reported net income for the third quarter of 2014 of $27.7 million, or $0.14 per diluted common share as compared to the third quarter of 2013 earnings of $27.1 million, or $0.14 per diluted common share.
Key financial highlights for the third quarter:
•
Loans: Total non-covered loans (i.e., loans which are not subject to our loss-sharing agreements with the FDIC) increased by $368.2 million, or 12.5 percent on an annualized basis, to $12.1 billion at September 30, 2014 from June 30, 2014 largely due to solid growth in both commercial real estate (including construction) loans and automobile loans of $290.3 million and $69.5 million, or 21.1 percent and 27.2 percent on an annualized basis, respectively. The continued organic growth within the commercial real estate portfolio was supplemented by a bulk purchase of third party originated loans totaling $101.9 million during late September 2014. Other consumer loans (primarily collateralized personal lines of credit) and commercial and industrial loans also increased $23.1 million and $11.8 million, or 36.5 percent and 2.3 percent on an annualized basis, respectively, during the third quarter of 2014. The increases were partially offset by declines within the residential mortgage loan and home equity loan portfolios largely due to normal repayments and the continued slowdown in the consumer refinance market. Total covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) decreased to $46.3 million, or 0.4 percent of our total loans, at September 30, 2014 as compared to $62.6 million at June 30, 2014 mainly due to normal collection and prepayment activity.
•
Asset Quality: Total non-PCI loan portfolio delinquencies (including loans past due 30 days or more and non-accrual loans) as a percentage of total loans declined to 0.75 percent at September 30, 2014 compared to 0.88 percent at June 30, 2014. Of the 0.75 percent in delinquencies at September 30, 2014, 0.11percent, or $13.0 million, represented performing matured loans in the normal process of renewal. Non-accrual loans (excluding non-performing loans held for sale) decreased to $59.9 million, or 0.49 percent of our entire loan portfolio of $12.2 billion, at September 30, 2014 as compared to $68.4 million, or 0.58 percent of total loans, at June 30, 2014. Overall, our non-performing assets (which include non-performing loans held for sale) decreased by 8.4 percent to $88.8 million at September 30, 2014 as compared to $96.9 million at June 30, 2014 largely due to the decline in non-accrual loans. See further details under the "Credit Quality" section below.

Valley National Bancorp (NYSE: VLY)
2014 Third Quarter Earnings
October 29, 2014



•
Provision for Losses on Non-Covered Loans and Unfunded Letters of Credit: During the third quarter of 2014, we recorded a negative (credit) provision for losses on non-covered loans and unfunded letters of credit totaling $423 thousand as compared to no provision for the second quarter of 2014 and a $5.3 million provision for the third quarter of 2013. For the third quarter of 2014, we recognized net non-covered loan charge-offs of $182 thousand as compared to net loan recoveries on non-covered loans totaling $2.3 million and net loan charge-offs of $9.1 million for the second quarter of 2014 and third quarter of 2013, respectively. The net recoveries during the second quarter largely related to two commercial and industrial loan recoveries with a combined total of $4.3 million. At September 30, 2014, our allowance for losses on non-covered loans and unfunded letters of credit totaled $103.9 million and was 0.86 percent of non-covered loans, as compared to 0.89 percent and 0.97 percent at June 30, 2014 and September 30, 2013, respectively.
•
Provision for Losses on Covered Loans: During the third quarters of 2014 and 2013, we recorded no provision for losses on covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) as compared to a negative provision of $5.7 million during the second quarter of 2014 related to a decrease in the estimated additional credit impairment of certain loan pools subsequent to acquisition. The negative provision during the second quarter of 2014 resulted in a partially offsetting $4.4 million decrease in other non-interest income and our FDIC loss-share receivable due to the change in the portion of the estimated losses covered by the loss-sharing agreements with the FDIC. Net charge-offs of covered loans totaled $433 thousand and $287 thousand during the third and second quarters of 2014, respectively, as compared to no net charge-offs recognized in the third quarter of 2013.
•
Net Interest Income and Margin: Net interest income for the fourth quarter of 2014 is expected to benefit from a large portion of our loan production closed late in the third quarter, combined with new originations from a solid pipeline of loans (primarily commercial real estate loans) seen in the early stages of the fourth quarter. Net interest income totaling $114.7 million for the three months ended September 30, 2014 decreased $2.8 million as compared to the second quarter of 2014, and increased $3.0 million as compared to the third quarter of 2013. On a tax equivalent basis, our net interest margin decreased 11 basis points to 3.16 percent in the third quarter of 2014 as compared to 3.27 percent for the second quarter of 2014, and decreased 4 basis points from 3.20 percent in the third quarter of 2013. The decline in both net interest income and margin from the second quarter of 2014 was largely due to lower yields on new and refinanced loans, as well as an increase in premium amortization recognized within the taxable investment security portfolio, partially offset by additional interest income from higher average loan balances. The decreased interest income on loans from the second quarter of 2014 was also partially driven by a $1.7 million decline in interest income related to both loan recovery income and prepayment penalty fees. The cost of interest bearing liabilities increased to 1.47 percent for the third quarter of 2014 as compared to 1.45 percent for the second quarter of 2014 due to one additional day during the third quarter, as well as slightly higher rates offered on the majority of our deposit products.
•
Non-Interest Income: Non-interest income increased $1.7 million to $14.1 million for the three months ended September 30, 2014 from $12.4 million for the second quarter of 2014. The increase was mostly due to a lower reduction to non-interest income related to the change in the FDIC

2

Valley National Bancorp (NYSE: VLY)
2014 Third Quarter Earnings
October 29, 2014



loss-share receivable during the third quarter of 2014. The aforementioned $5.7 million negative provision for losses on covered loans in the second quarter of 2014 resulted in a $4.4 million reduction to non-interest income reported as a component of the change in the FDIC loss-share receivable, as compared to no provision (and no related impact to non-interest income) during the third quarter of 2014. Declines in insurance commissions, gains on sales of loans, and other non-interest income partially offset the increase to non-interest income related to the change in the FDIC loss-share receivable during the third quarter of 2014. See the "Non-Interest Income" section below for additional information.
•
Non-Interest Expense: Non-interest expense decreased $3.4 million to $90.8 million for the third quarter of 2014 from $94.2 million for the second quarter of 2014. The decrease was mainly due to a decline in salary and employee benefits expense, net occupancy and equipment expense, and other non-interest expense as compared to the three months ended June 30, 2014. Additionally, we incurred merger expenses totaling $480 thousand and $619 thousand (primarily within professional and legal fees) during the third and second quarters of 2014, respectively, related to the previously announced acquisition of 1st United Bancorp, Inc ("1st United") scheduled to close effective November 1, 2014. See the "Non-Interest Expense" section below for additional information.
•
Capital Strength: Our regulatory capital ratios continue to reflect Valley’s strong capital position. Valley's total risk-based capital, Tier 1 capital, leverage capital, and Tier 1 common capital ratios were 11.44 percent, 9.58 percent, 7.39 percent and 9.22 percent, respectively, at September 30, 2014.

Gerald H. Lipkin, Chairman, President and CEO commented that, “Our earnings for third quarter of 2014 were positively impacted by annualized non-covered loan growth of over 12 percent and a 3.6 percent decline in our non-interest expense as compared to the second quarter of 2014. Additionally, a large portion of the loan production was closed late in the third quarter which combined with new originations from a solid pipeline of commercial real estate loans seen in the early stages of the fourth quarter should benefit our net interest income in the future. Overall, our net interest income and margin was, and will continue to be, challenged by the low level of market interest rates and a very competitive marketplace for both loans and deposits. Despite these obstacles, our net income should continue to benefit from our well-positioned balance sheet and strong credit quality that are reflective of Valley's commitment to prudent loan underwriting standards and long-term returns for its shareholders.”
Mr. Lipkin added, “As we noted in the past, we remain upbeat on our ability to reduce our overall funding cost as over $1.5 billion of high cost long-term borrowings mature beginning in 2015 through 2017.  We believe that these maturities, with an average cost of 4.13 percent, are likely to substantially decrease the level of our funding costs, which we anticipate will increase many of our key financial metrics in the future.
On October 20, 2014, we announced that we received all regulatory and shareholder approvals necessary to complete the merger of 1st United with and into Valley. The common shareholders of 1st United will receive 0.89 of a share of Valley common stock for each 1st United share they own, subject to adjustment in the event Valley’s average stock price falls below $8.09 or rises above $12.13 during a specified 20 trading day period prior to closing.


3

Valley National Bancorp (NYSE: VLY)
2014 Third Quarter Earnings
October 29, 2014



The acquisition of 1st United, its wholly-owned subsidiary, 1st United Bank, with approximately $1.7 billion in assets and a 20 branch network, and its experienced banking team provides us a tremendous opportunity within some of the most attractive urban banking market in Florida. The branch network includes locations throughout southeast Florida, the Treasure Coast, central Florida and central Gulf Coast regions. The transaction closing is scheduled to be effective as of November 1, 2014."
Net Interest Income and Margin
Net interest income on a tax equivalent basis totaling $116.6 million for the third quarter of 2014 decreased $2.8 million as compared to the second quarter of 2014 and increased $3.0 million as compared to the third quarter of 2013. Interest income on a tax equivalent basis decreased to $157.4 million for the third quarter of 2014 as compared to $159.2 million for the second quarter of 2014. The $1.8 million decrease from the second quarter of 2014 was mainly due to decreases of 10 basis points and 6 basis points in the yield on average loans and taxable investment securities, respectively, partially offset by a $161.5 million increase in average loans. Interest expense increased $1.0 million to $40.8 million for the three months ended September 30, 2014. The increase in interest expense from the second quarter of 2014 was primarily driven by one additional day during the third quarter, slightly higher interest rates offered on most of our deposit products, as well as a $205.7 million increase in average interest bearing deposits for the third quarter of 2014. The increase in average interest bearing deposits was largely due to higher brokered money market account balances, which are used as part of our low cost funding strategies for loan growth, as well as other liquidity needs.
The net interest margin on a tax equivalent basis was 3.16 percent for the third quarter of 2014, a decrease of 11 basis points and 4 basis points from 3.27 percent and 3.20 percent in the linked second quarter of 2014 and the three months ended September 30, 2013, respectively. The yield on average interest earning assets decreased by 9 basis points on a linked quarter basis. The lower yield was mainly a result of the aforementioned decrease in the yield on average loans largely caused by new and refinanced loan volumes at current interest rates that remain relatively low compared to the overall yield of our loan portfolio, combined with a total decrease of $1.7 million in interest income related to both loan recovery income and prepayment penalty fees. The level of yields on new loans has been negatively impacted by the low market interest rates caused not only from the Fed's current monetary policy, but also from intense competition in our markets for quality commercial customers. Additionally, our higher yielding PCI loan portfolio declined $45.9 million, or 6.8 percent from June 30, 2014 to $629.7 million at September 30, 2014 due to normal repayment and prepayment activity. During the third quarter, our yield on average taxable investment securities also declined largely due to a higher level of premium amortization on residential mortgage-backed securities issued by Ginnie Mae and government sponsored enterprises. The overall cost of average interest bearing liabilities increased by 2 basis point from 1.45 percent in the linked second quarter of 2014 primarily due to one additional day during the third quarter, as well as slightly higher rates offered on the majority of our deposit products. Our cost of total deposits was 0.41 percent for the third quarter of 2014 compared to 0.39 percent for the three months ended June 30, 2014.
Potential future loan growth from solid commercial real estate loan and automobile loan demand has continued into the early stages of the fourth quarter of 2014 and is anticipated to positively impact our future net interest income. However, our margin continues to face the risk of compression in the future due to the relatively low level of interest rates on most interest earning asset alternatives and further repayment of higher yielding interest earning assets. In the face of these significant challenges, we

4

Valley National Bancorp (NYSE: VLY)
2014 Third Quarter Earnings
October 29, 2014




continue to tightly manage our balance sheet and explore ways reduce our cost of funds to optimize our returns.
Loans and Deposits
Non-Covered Loans. Non-covered loans are loans not subject to loss-sharing agreements with the FDIC. Non-covered loans increased $368.2 million, or 12.5 percent on an annualized basis, to approximately $12.1 billion at September 30, 2014 from June 30, 2014, despite a $29.7 million decline in our non-covered PCI loan portion of this portfolio. The increase in total non-covered loans was mainly due to solid growth across several loan portfolios, except for residential mortgage and home equity loans (as discussed further below).
Total commercial and industrial loans moderately increased $11.8 million, or 2.3 percent on an annualized basis from June 30, 2014 to approximately $2.1 billion at September 30, 2014 due, in part, to new loan demand generally in our New York markets, as well as continued growth in new lending relationships moving to Valley from other financial institutions. While these new loan volumes more than offset our normal repayment and refinance activity, including a $18.7 million decline in our non-covered PCI loan portfolio, we did experience some normal seasonal softening of loan demand from existing customers over the summer months. At September 30, 2014, total commitments and usage (i.e., outstanding balances) of commercial lines of credit remained relatively unchanged as compared to June 30, 2014. Additionally, we continued to experience strong market competition for quality new and existing loan relationships during the third quarter.
Total commercial real estate loans (excluding construction loans) increased $246.4 million from June 30, 2014 to $5.3 billion at September 30, 2014. Loan origination volumes and demand were seen across many segments of commercial real estate borrowers. Although a component of our overall growth during the third quarter of 2014, new co-op building loans within our New York City markets remained a smaller percentage of the overall growth as compared to prior quarters. The continued organic growth within the commercial real estate portfolio was supplemented by a bulk purchase of a small number of third party originated loans totaling $101.9 million during the third quarter of 2014. Construction loans totaling $457.2 million at September 30, 2014 increased $43.9 million from June 30, 2014 largely due to a higher level of building activity during the summer months. Additionally, new loan demand for multi-family, apartment rental, and condominium property developments within New York City, Brooklyn and Queens was brisk during the third quarter of 2014.
Total residential mortgage loans decreased $25.5 million to approximately $2.4 billion at September 30, 2014 from June 30, 2014 mostly due to normal loan repayments and some lost refinance activity that outpaced our new and refinanced loans originated for investment during the third quarter of 2014. Despite some decline in mortgage interest rates, consumer demand for new and refinanced mortgage loans remained modest during the third quarter of 2014. Total residential mortgage loan originations totaled approximately $76.4 million for the third quarter of 2014 as compared to $54.3 million and $247.9 million for the second quarter of 2014 and the third quarter of 2013, respectively. During the third quarter of 2014, Valley sold approximately $18.6 million of residential mortgages originated for sale (including $8.2 million of residential mortgage loans held for sale at June 30, 2014). There were no purchases of residential mortgage loans from third party originators during the third quarter of 2014 and there were a total of $26.7 million in purchases for the nine months ended September 30, 2014.

5

Valley National Bancorp (NYSE: VLY)
2014 Third Quarter Earnings
October 29, 2014



Automobile loans increased by $69.5 million to $1.1 billion at September 30, 2014 as compared to June 30, 2014 as our new organic loan volumes continued to be solid due to the overall strength of the U.S. auto markets. Valley has not deviated from its conservative underwriting standards, nor participated in the subprime auto lending markets to achieve its growth in auto lending. Additionally, we made no auto loan purchases from third party originators during the three and nine months ended September 30, 2014.
Home equity loans totaling $435.5 million at September 30, 2014 moderately decreased by $910 thousand as compared to June 30, 2014. However, other consumer loans increased $23.0 million to $275.8 million at September 30, 2014 as compared to $252.8 million at June 30, 2014 mainly due to continued growth and customer usage of collateralized personal lines of credit.
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 in two FDIC-assisted transactions during 2010.  Our covered loans consist primarily of commercial real estate loans and commercial and industrial loans and totaled $46.3 million at September 30, 2014 as compared to $62.6 million at June 30, 2014. All of our covered loans, as well as non-covered PCI loans acquired in 2012, are accounted for on a pool basis. For loan pools with higher cash flows than originally estimated at the acquisition dates, 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 third quarter of 2014, we reduced our FDIC loss-share receivable by $4.5 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 $2.1 million during the second quarter of 2014.
Deposits. Total deposits increased $445.4 million to approximately $11.9 billion at September 30, 2014 from June 30, 2014 largely due to higher money market account balances. Valley’s savings, NOW and money market accounts totaling approximately $6.1 billion at September 30, 2014 increased $438.4 million, or 7.8 percent as compared to June 30, 2014 mostly due to new brokered money market account balances used as a funding source for loan growth and other liquidity needs. Non-interest bearing deposits totaling $3.6 billion at September 30, 2014 also increased by $15.2 million from June 30, 2014 primarily due to normal fluctuations in account activity for several larger customers. Partially offsetting the increases in the aforementioned categories, time deposits decreased by $8.2 million to $2.2 billion at September 30, 2014 as maturities moderately outpaced new deposits despite higher interest rates offered on all of our retail certificate of deposit products since April 2014.
Credit Quality
Total loan portfolio delinquencies (including loans past due 30 days or more and non-accrual loans) as a percentage of total loans were 0.75 percent at September 30, 2014 as compared to 0.88 percent at June 30, 2014 and 1.47 percent at September 30, 2013. Of the 0.75 percent in delinquencies at September 30, 2014, 0.11 percent, or $13.0 million, represented performing matured loans in the normal process of renewal. Our past due loans and non-accrual loans discussed further below exclude PCI loans. 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 59 days decreased $9.3 million to $14.3 million at September 30, 2014 compared to June 30, 2014 mainly due to decreases of $4.4 million, $4.0 million and $2.3 million in the commercial and industrial loans, construction loans and commercial real estate loans, respectively, partially offset by a $1.0 million increase in residential mortgage loans. The decrease within the commercial and industrial

6

Valley National Bancorp (NYSE: VLY)
2014 Third Quarter Earnings
October 29, 2014



loan category was mostly related to a troubled debt restructured loan modification totaling $3.2 million that was performing at September 30, 2014.
Loans past due 60 to 89 days decreased $4.2 million to $4.8 million at September 30, 2014 compared to June 30, 2014 largely due to a $5.2 million decrease in construction loan delinquencies in this category. The $5.2 million decrease in construction loans was entirely due to the migration of two performing matured loans in the normal process of renewal to the loans past due 90 days or more and still accruing category at September 30, 2014.
Loans past due 90 days or more and still accruing increased $9.1 million to $12.5 million at September 30, 2014 compared to $3.4 million at June 30, 2014. Within this past due category, construction loans and residential mortgage loans increased $9.8 million and $1.5 million, respectively. Construction loans totaling $9.8 million at September 30, 2014 was comprised of 4 performing matured loans in the normal process of renewal, of which 2 loans totaling $5.3 million migrated from loans reported as past due 60 to 89 days at June 30, 2014. Also within this past due category, commercial real estate loans declined $2.2 million to $52 thousand at September 30, 2014 as compared to June 30, 2014 almost entirely due to the completion of the renewal underwriting process for a $2.1 million performing matured loan during the third quarter of 2014.
Total non-performing assets (NPAs), consisting of non-accrual loans, non-performing loans held for sale, other real estate owned (OREO), other repossessed assets and non-accrual debt securities totaled $88.8 million at September 30, 2014 compared to $96.9 million at June 30, 2014. The $8.1 million decrease in NPAs from June 30, 2014 was largely due to a decline in non-accrual loans discussed further below.
Non-accrual loans decreased $8.5 million to $59.9 million at September 30, 2014 as compared to $68.4 million at June 30, 2014 mainly due to a $6.1 million decrease within the commercial real estate loan category primarily caused by a $3.9 million loan payoff and a $1.4 million loan transferred to OREO during the third quarter of 2014. Non-accrual residential mortgage loans also declined $1.9 million to $17.3 million at September 30, 2014 due, in part, to $1.3 million of loan foreclosures transferred to OREO during the third quarter of 2014.
Non-performing loans held for sale, consisting of one commercial real estate loan, decreased $500 thousand to approximately $7.4 million at September 30, 2014 from $7.9 million at June 30, 2014. The decrease was entirely due to the valuation write-down of the loan at September 30, 2014. Valuation write-downs of non-performing loans held for sale totaled $500 thousand and $2.3 million for the three months ended September 30, 2014 and June 30, 2014, respectively, and were recognized as a component of the net losses on sales of loans category of our non-interest income.
OREO properties increased $550 thousand to $15.5 million at September 30, 2014 from $15.0 million at June 30, 2014 primarily due to 7 new foreclosed properties totaling $2.7 million, partially offset by the sale of 11 properties with net carrying values of approximately $1.9 million and net valuation write-downs of approximately $289 thousand during the third quarter of 2014.
With a non-covered loan portfolio totaling $12.1 billion at September 30, 2014, net loan charge-offs on non-covered loans for the third quarter of 2014 totaled $182 thousand as compared to net loan recoveries of $2.3 million for the second quarter of 2014 and net loan charge-offs of $9.1 million for the third quarter of 2013. The net loan recoveries in the linked second quarter of 2014 were primarily due to aggregate loan charge-off recoveries totaling $4.3 million related to two commercial and industrial loans. During

7

Valley National Bancorp (NYSE: VLY)
2014 Third Quarter Earnings
October 29, 2014



the third quarter of 2014, we recorded a negative (credit) provision for losses on non-covered loans and unfunded letters of credit totaling $423 thousand as compared to no provision for the second quarter of 2014 and a $5.3 million provision for the third quarter of 2013.
For the covered loan pools, net loan charge-offs totaled $433 thousand during the third quarter of 2014 as compared to $287 thousand for the second quarter of 2014 and no net loan charge-offs recognized in third quarter of 2013. Charge-offs on covered loan pools, when incurred, are substantially covered by loss-sharing agreements with the FDIC. No provision for losses on covered loans was recognized during the third quarters of 2014 and 2013, as compared to a negative (credit) provision for losses on covered loans totaling $5.7 million in the three months ended June 30, 2014. The negative provision related to a decrease in the estimated additional credit impairment of certain loan pools subsequent to acquisition. As a result of the aforementioned net loan charge-offs and negative provision, our allowance for losses on covered loans was reduced from approximately $7.1 million at September 30, 2013 to $1.1 million and $678 thousand at June 30, 2014 and September 30, 2014, respectively (as shown in the table below).
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 September 30, 2014, June 30, 2014, and September 30, 2013:
 
 
September 30, 2014
 
June 30, 2014
 
September 30, 2013
 
 
 
 
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*
$
47,843

 
2.30
%
 
$
49,883

 
2.42
%
 
$
52,710

 
2.64
%
Commercial real estate loans:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
26,204

 
0.49
%
 
25,882

 
0.51
%
 
26,015

 
0.54
%
 
Construction
10,862

 
2.38
%
 
9,385

 
2.27
%
 
10,865

 
2.56
%
Total commercial real estate loans
37,066

 
0.64
%
 
35,267

 
0.64
%
 
36,880

 
0.70
%
Residential mortgage loans
6,147

 
0.25
%
 
6,989

 
0.28
%
 
7,904

 
0.31
%
Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
 
Home equity
1,365

 
0.31
%
 
1,188

 
0.27
%
 
1,253

 
0.28
%
 
Auto and other consumer
4,415

 
0.32
%
 
4,180

 
0.33
%
 
2,823

 
0.27
%
Total consumer loans
5,780

 
0.32
%
 
5,368

 
0.31
%
 
4,076

 
0.27
%
Unallocated
7,045

 
—

 
6,979

 
—

 
7,435

 
—

Allowance for non-covered loans
 
 
 
 
 
 
 
 
 
 
 
 
and unfunded letters of credit
103,881

 
0.86
%
 
104,486

 
0.89
%
 
109,005

 
0.97
%
Allowance for covered loans
678

 
1.46
%
 
1,111

 
1.78
%
 
7,070

 
5.82
%
Total allowance for credit losses
$
104,559

 
0.86
%
 
$
105,597

 
0.89
%
 
$
116,075

 
1.02
%
 
 
 
 
 
 
 
 
 
 
 
 
 
* 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 0.86 percent at September 30, 2014 as compared to 0.89 percent and 0.97 percent at June 30, 2014 and September 30, 2013, respectively. At September 30, 2014, our allowance allocations for losses as a percentage of total loans in most loan categories declined or did not significantly change as compared

8

Valley National Bancorp (NYSE: VLY)
2014 Third Quarter Earnings
October 29, 2014



to June 30, 2014 due to several favorable trends in our credit quality during the third quarter of 2014. Overall, levels of loan delinquencies and internally classified loans continued to trend downward during the third quarter, while net loan charge-offs also remained at a low level. These items as well as several other factors, including our cautiously optimistic outlook for the economy, positively impacted our estimate of the allowance for credit losses at September 30, 2014.
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 $583.4 million million) was 0.90 percent at September 30, 2014 as compared to 0.94 percent at June 30, 2014. 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 allowance reserves related to non-covered PCI loans at September 30, 2014, June 30, 2014 and September 30, 2013.
Non-Interest Income
Non-interest income increased $1.7 million to $14.1 million for the third quarter of 2014 from $12.4 million for the linked quarter ended June 30, 2014 largely due to a $3.9 million decrease in the reduction to non-interest income related to the change in the FDIC loss-share receivable during the third quarter of 2014. The larger reduction in the second quarter of 2014 was due, in part, to a $5.7 million credit to the provision for losses on covered loans which reduced the expected loss amounts receivable from the FDIC under the loss-share agreements. Partially offsetting this increase in non-interest income, insurance commissions declined $859 thousand to $3.6 million for the third quarter of 2014 as compared to $4.5 million in the linked second quarter of 2014 largely due to lower volumes at our all-line insurance agency subsidiary, as well as a decrease in external fees generated by our title insurance agencies due to the low level of residential mortgage activity. Net gains on sales of loans decreased to a net loss of $95 thousand for the three months ended September 30, 2014 as compared to a net gain of $679 thousand in the second quarter of 2014 largely due to a $500 thousand valuation write-down of one non-performing commercial real estate loan held for sale at September 30, 2014 and our decision to retain a greater percentage of our residential mortgage loan originations during the third quarter of 2014. Other non-interest income also decreased $742 thousand to $2.7 million for the third quarter of 2014 as compared to $3.4 million for the second quarter of 2014 due to an increase in net losses on the sales and valuation write-downs of OREO properties.
Non-Interest Expense
Non-interest expense decreased $3.4 million to $90.8 million for the third quarter of 2014 as compared to $94.2 million for the second quarter of 2014. Salary and employee benefits expense decreased $1.6 million to $45.5 million for the third quarter of 2014 as compared to $47.1 million for the second quarter of 2014 mostly due to lower payroll tax expense and a decrease in medical health insurance expense. Other non-interest expense declined $1.2 million from $18.5 million for the three months ended June 30, 2014 to $17.3 million for the third quarter of 2014 due, in part, to a decrease in the amortization of tax credit investments largely caused by valuation write-downs during the second quarter of 2014. Net occupancy and equipment expense decreased $962 thousand to $17.0 million for the third quarter of 2014 due to several incremental declines, including depreciation, rental, cleaning, repairs and maintenance expenses. Partially offsetting these decreases in non-interest expense, adverting expense increased $1.1 million to $1.7 million for the third quarter of 2014 as compared to $533 thousand in the second quarter of 2014 primarily due to new promotional campaigns related to certificates of deposit and residential
mortgage loans. Additionally, we incurred merger expenses totaling $480 thousand and $619 thousand (primarily within professional and legal fees) during the third and second quarters of 2014, respectively, related to the acquisition of 1st United scheduled to close effective November 1, 2014.
Income Tax Expense
Income tax expense was $10.7 million for the three months ended September 30, 2014 reflecting an effective tax rate of 27.8 percent, as compared to $11.8 million for the second quarter of 2014 reflecting an effective tax rate of 28.5 percent and $7.1 million for the third quarter of 2013 reflecting an effective tax rate of 20.8 percent.  The decrease in effective tax rate in the third quarter of 2014 compared to the second quarter of 2014 was largely due to lower pre-tax income. The increase in effective tax rate and tax expense as compared to the third quarter of 2013 was primarily due to higher pre-tax income during the third quarter of 2014, as well as the release of a reserve for tax uncertainties which reduced income tax expense for the three months ended September 30, 2013.

For the fourth quarter of 2014, we anticipate that our effective tax rate will range from 27 percent to 29 percent primarily reflecting the impacts of tax-exempt income, tax-advantaged investments and general business credits.
About Valley
Valley National Bancorp is a regional bank holding company headquartered in Wayne, New Jersey with approximately $16.7 billion in assets. Its principal subsidiary, Valley National Bank, currently operates 204 branches in 144 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, New York Metropolitan area and Florida;
•
unexpected changes in market interest rates for interest earning assets and/or interest bearing liabilities;
•
less than expected cost savings from long-term borrowings that mature from 2015 to 2017;

9

Valley National Bancorp (NYSE: VLY)
2014 Third Quarter Earnings
October 29, 2014



•
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;
•
claims and litigation pertaining to fiduciary responsibility, contractual issues, environmental laws and other matters;
•
our 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 loan losses within one or more segments of our loan portfolio;
•
declines in value in our investment portfolio, including additional other-than-temporary impairment charges on our investment securities;
•
unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments or other factors;
•
unanticipated credit deterioration in our loan portfolio;
•
unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather or other external events;
•
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;
•
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;
•
failure to close the merger transaction of 1st United with Valley within the proposed timeframe or to satisfy other conditions to the merger on the proposed terms;
•
the inability to realize expected revenue synergies from the 1st United merger in the amounts or in the timeframe anticipated;
•
costs or difficulties relating to the 1st United integration matters might be greater than expected;
•
inability to retain customers and employees, including those of 1st United;

10

Valley National Bancorp (NYSE: VLY)
2014 Third Quarter Earnings
October 29, 2014



•
lower than expected cash flows from purchased credit-impaired loans;
•
cyber attacks, computer viruses or other malware that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems; 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, 2013. 
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-

11

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)
2014
 
2014
 
2013
 
2014
 
2013
 
FINANCIAL DATA:
 
 
 
 
 
 
 
 
 
 
Net interest income
$
114,668

 
$
117,419

 
$
111,669

 
$
346,111

 
$
331,592

 
Net interest income - FTE (1)
116,639

 
119,417

 
113,597

 
352,072

 
337,569

 
Non-interest income (2)
14,055

 
12,410

 
22,390

 
45,987

 
86,580

 
Non-interest expense
90,810

 
94,229

 
94,461

 
279,922

 
285,246

 
Income tax expense
10,654

 
11,751

 
7,143

 
23,235

 
30,918

 
Net income
27,682

 
29,520

 
27,121

 
91,037

 
92,353

 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
 
 

Basic
200,614,091

 
200,472,592

 
199,445,874

 
200,406,801

 
199,206,945

 

Diluted
200,614,091

 
200,472,592

 
199,445,874

 
200,406,801

 
199,206,945

 
Per common share data:
 
 
 
 
 
 

 

 

Basic earnings
$
0.14

 
$
0.15

 
$
0.14

 
$
0.45

 
$
0.46

 

Diluted earnings
0.14

 
0.15

 
0.14

 
0.45

 
0.46

 

Cash dividends declared
0.11

 
0.11

 
0.16

 
0.33

 
0.49

 
Book value
7.89

 
7.85

 
7.62

 
7.89

 
7.62

 
Tangible book value (3)
5.61

 
5.55

 
5.28

 
5.61

 
5.28

 
Tangible common equity to tangible assets (3)
6.92
%
 
7.01
%
 
6.79
%
 
6.92
%
 
6.79
%
 
Closing stock price - high
$
10.12

 
$
10.80

 
$
10.65

 
$
10.80

 
$
10.65

 
Closing stock price - low
9.53

 
9.48

 
9.53

 
9.30

 
8.85

 
FINANCIAL RATIOS:
 
 
 
 
 
 

 
`

 
Net interest margin
3.11
%
 
3.22
%
 
3.14
%
 
3.16
%
 
3.12
%
 
Net interest margin - FTE (1)
3.16

 
3.27

 
3.20

 
3.21

 
3.18

 
Annualized return on average assets
0.67

 
0.72

 
0.68

 
0.74

 
0.77

 
Annualized return on average shareholders' equity
7.00

 
7.54

 
7.11

 
7.76

 
8.12

 
Annualized return on average tangible shareholders' equity (3)
9.86

 
10.68

 
10.24

 
11.00

 
11.71

 
Efficiency ratio (4)
70.55

 
72.58

 
70.46

 
71.39

 
68.21

 
AVERAGE BALANCE SHEET ITEMS:
 
 
 
 
 
 

 

 
Assets
$
16,483,336

 
$
16,288,368

 
$
15,965,600

 
$
16,325,651

 
$
15,903,499

 
Interest earning assets
14,763,834

 
14,601,380

 
14,203,103

 
14,611,371

 
14,175,183

 
Loans
11,907,275

 
11,745,817

 
11,209,929

 
11,757,957

 
11,082,306

 
Interest bearing liabilities
11,101,723

 
10,987,328

 
10,696,147

 
10,976,847

 
10,750,852

 
Deposits
11,640,611

 
11,382,118

 
11,220,558

 
11,423,860

 
11,251,722

 
Shareholders' equity
1,581,877

 
1,566,829

 
1,525,939

 
1,564,585

 
1,515,687

 



13

VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS



 
As Of
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
($ in thousands)
2014
 
2014
 
2014
 
2013
 
2013
BALANCE SHEET ITEMS:
 
 

 
 
 

 

Assets
$
16,726,410

 
$
16,335,967

 
$
16,344,464

 
$
16,156,541

 
$
15,976,943

Total loans
12,165,377

 
11,813,428

 
11,694,594

 
11,567,612

 
11,397,181

Non-covered loans
12,119,086

 
11,750,875

 
11,613,664

 
11,471,447

 
11,275,661

Deposits
11,861,487

 
11,416,052

 
11,267,985

 
11,319,262

 
11,120,111

Shareholders' equity
1,584,198

 
1,573,656

 
1,559,889

 
1,541,040

 
1,520,056

 
 
 
 
 
 
 
 
 
 
LOANS:
 
 
 
 
 
 
 
 
 
Non-covered Loans
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
2,076,512

 
$
2,064,751

 
$
2,019,099

 
$
1,995,084

 
$
1,997,353

Commercial real estate:
 
 
 
 
 
 
 
 
 
Commercial real estate
5,346,818

 
5,100,442

 
5,083,744

 
4,981,675

 
4,814,670

Construction
457,163

 
413,262

 
413,795

 
429,231

 
423,789

 Total commercial real estate
5,803,981

 
5,513,704

 
5,497,539

 
5,410,906

 
5,238,459

Residential mortgage
2,436,022

 
2,461,516

 
2,472,180

 
2,499,965

 
2,532,370

Consumer:
 
 
 
 
 
 
 
 
 
Home equity
435,450

 
436,360

 
440,006

 
449,009

 
449,309

Automobile
1,091,287

 
1,021,782

 
957,036

 
901,399

 
862,843

Other consumer
275,834

 
252,762

 
227,804

 
215,084

 
195,327

Total consumer loans
1,802,571

 
1,710,904

 
1,624,846

 
1,565,492

 
1,507,479

 Total non-covered loans
$
12,119,086

 
$
11,750,875

 
$
11,613,664

 
$
11,471,447

 
$
11,275,661

Covered loans*
46,291

 
62,553

 
80,930

 
96,165

 
121,520

Total loans
$
12,165,377

 
$
11,813,428

 
$
11,694,594

 
$
11,567,612

 
$
11,397,181

_________________________
 
 
 
 
 
 
 
 
 
* Loans that Valley National Bank will share losses with the FDIC are referred to as "covered loans".
 
 
 
 
 
 
 
 
 
 
 
 
CAPITAL RATIOS:
 
 
 
 
 
 
 
 
 
Tier 1 leverage ratio
7.39
%
 
7.41
%
 
7.37
%
 
7.27
%
 
8.03
%
Risk-based capital - Tier 1
9.58

 
9.80

 
9.72

 
9.65

 
10.64

Risk-based capital - Total Capital
11.44

 
11.89

 
11.85

 
11.87

 
12.87

Tier 1 common capital ratio (3)
9.22

 
9.43

 
9.35

 
9.28

 
9.17






14

VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS



 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
($ in thousands)
2014
 
2014
 
2013
 
2014
 
2013
 
ALLOWANCE FOR CREDIT LOSSES:
 
 
 
 
 
 
 
 
 
 
Beginning balance - Allowance for credit losses
$
105,597

 
$
109,253

 
$
119,880

 
$
117,112

 
$
132,495

 
Loans charged-off: (5)

 

 

 

 

 

Commercial and industrial
(1,852
)
 
(1,340
)
 
(8,556
)
 
(11,806
)
 
(17,322
)
 

Commercial real estate
(181
)
 
(862
)
 
(564
)
 
(4,894
)
 
(5,176
)
 

Construction
—

 
(1,170
)
 
(383
)
 
(1,809
)
 
(2,153
)
 

Residential mortgage
(240
)
 
(212
)
 
(780
)
 
(515
)
 
(3,338
)
 

Consumer
(72
)
 
(1,167
)
 
(1,723
)
 
(2,311
)
 
(4,092
)
 


Total loans charged-off
(2,345
)
 
(4,751
)
 
(12,006
)
 
(21,335
)
 
(32,081
)
 
Charged-off loans recovered: (5)
 
 
 
 
 
 
 
 
 
 

Commercial and industrial
1,190

 
4,420

 
1,103

 
6,154

 
3,043

 

Commercial real estate
26

 
556

 
21

 
1,919

 
86

 

Construction
—

 
912

 
875

 
912

 
875

 

Residential mortgage
8

 
157

 
230

 
244

 
368

 

Consumer
506

 
721

 
638

 
1,649

 
1,634

 


Total loans recovered
1,730

 
6,766

 
2,867

 
10,878

 
6,006

 
Net (charge-offs) recoveries (5)
(615
)
 
2,015

 
(9,139
)
 
(10,457
)
 
(26,075
)
 
Provision charged for credit losses
(423
)
 
(5,671
)
 
5,334

 
(2,096
)
 
9,655

 
Ending balance - Allowance for credit losses
$
104,559

 
$
105,597

 
$
116,075

 
$
104,559

 
$
116,075

 
Components of allowance for credit losses:
 
 
 
 
 
 
 
 
 
 

Allowance for non-covered loans
$
101,760

 
$
101,942

 
$
105,515

 
$
101,760

 
$
105,515

 

Allowance for covered loans
678

 
1,111

 
7,070

 
678

 
7,070

 


Allowance for loan losses
102,438

 
103,053

 
112,585

 
102,438

 
112,585

 

Allowance for unfunded letters of credit
2,121

 
2,544

 
3,490

 
2,121

 
3,490

 
Allowance for credit losses
$
104,559

 
$
105,597

 
$
116,075

 
$
104,559

 
$
116,075

 
Components of provision for credit losses:
 
 
 
 
 
 
 
 
 
 

Provision for losses on non-covered loans
$
—

 
$
—

 
$
4,280

 
$
4,949

 
$
10,736

 

Provision for losses on covered loans
—

 
(5,671
)
 
—

 
(5,671
)
 
(2,276
)
 

Provision for unfunded letters of credit
(423
)
 
—

 
1,054

 
(1,374
)
 
1,195

 
Provision for credit losses
$
(423
)
 
$
(5,671
)
 
$
5,334

 
$
(2,096
)
 
$
9,655

 
Annualized ratio of net charge-offs of
 
 
 
 
 
 
 
 
 
 

non-covered loans to average loans
0.01
%
 
(0.08
)%
 
0.33
%
 
0.11
%
 
0.31
%
 
Annualized ratio of total net charge-offs

 

 

 

 

 

to average loans
0.02
%
 
(0.07
)%
 
0.33
%
 
0.12
%
 
0.31
%
 
Allowance for non-covered loan losses as

 

 

 

 

 

a % of non-covered loans
0.84
%
 
0.87
 %
 
0.94
%
 
0.84
%
 
0.94
%
 
Allowance for credit losses as

 

 

 

 

 

a % of total loans
0.86
%
 
0.89
 %
 
1.02
%
 
0.86
%
 
1.02
%
 


15

VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS



 
 
 
As Of
 
($ in thousands)
September 30,
 
June 30,
 
December 31,
 
September 30,
 
ASSET QUALITY: (6)
2014
 
2014
 
2013
 
2013
 
Accruing past due loans:
 
 
 
 
 
 
 
 
30 to 59 days past due:
 
 
 
 
 
 
 
 

Commercial and industrial
$
476

 
$
4,918

 
$
6,398

 
$
3,065

 

Commercial real estate
1,194

 
3,493

 
9,142

 
6,276

 

Construction
—

 
3,988

 
1,186

 
—

 

Residential mortgage
8,871

 
7,865

 
6,595

 
8,221

 

Consumer
3,741

 
3,350

 
3,792

 
3,773

 
Total 30 to 59 days past due
14,282

 
23,614

 
27,113

 
21,335

 
60 to 89 days past due:
 
 
 
 
 
 
 
 

Commercial and industrial
629

 
783

 
571

 
957

 

Commercial real estate
788

 
57

 
2,442

 
23,828

 

Construction
154

 
5,332

 
4,577

 
—

 

Residential mortgage
2,304

 
1,989

 
1,939

 
1,857

 

Consumer
913

 
788

 
784

 
864

 
Total 60 to 89 days past due
4,788

 
8,949

 
10,313

 
27,506

 
90 or more days past due:
 
 
 
 
 
 
 
 

Commercial and industrial
256

 
450

 
233

 
342

 

Commercial real estate
52

 
2,212

 
7,591

 
232

 

Construction
9,833

 
—

 
—

 
—

 

Residential mortgage
2,057

 
546

 
1,549

 
1,980

 

Consumer
278

 
161

 
118

 
235

 
Total 90 or more days past due
12,476

 
3,369

 
9,491

 
2,789

 
Total accruing past due loans
$
31,546

 
$
35,932

 
$
46,917

 
$
51,630

 
Non-accrual loans:
 
 
 
 
 
 
 
 

Commercial and industrial
$
7,251

 
$
8,096

 
$
21,029

 
$
23,941

 

Commercial real estate
26,379

 
32,507

 
43,934

 
53,752

 

Construction
6,578

 
6,534

 
8,116

 
13,070

 

Residential mortgage
17,305

 
19,190

 
19,949

 
23,414

 

Consumer
2,380

 
2,106

 
2,035

 
1,906

 
Total non-accrual loans
59,893

 
68,433

 
95,063

 
116,083

 
Non-performing loans held for sale
7,350

 
7,850

 
—

 
—

 
Other real estate owned (7)
15,534

 
14,984

 
19,580

 
19,372

 
Other repossessed assets
1,260

 
1,104

 
6,447

 
6,378

 
Non-accrual debt securities (8)
4,725

 
4,527

 
3,771

 
52,334

 
Total non-performing assets ("NPAs")
$
88,762

 
$
96,898

 
$
124,861

 
$
194,167

 
Performing troubled debt restructured loans
$
107,134

 
$
108,538

 
$
107,037

 
$
116,852

 
Total non-accrual loans as a % of loans
0.49
%
 
0.58
%
 
0.82
%
 
1.02
%
 
Total accruing past due and non-accrual loans

 

 
 
 
 
 

as a % of loans
0.75
%
 
0.88
%
 
1.23
%
 
1.47
%
 
Allowance for losses on non-covered loans as a % of

 

 

 

 

non-accrual loans
169.90
%
 
148.97
%
 
112.08
%
 
90.90
%
 
Non-performing purchased credit-impaired loans: (9)

 

 
 
 
 
 

Non-covered loans
$
12,970

 
$
13,678

 
$
24,988

 
$
28,926

 

Covered loans
8,375

 
13,783

 
21,758

 
36,593

 



16

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.
(2)    Non-interest income includes net trading gains and losses:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
September 30,
(In thousands)
2014
 
2014
 
2013
 
2014
 
2013
Trading securities
$
(35
)
 
$
(34
)
 
$
100

 
$
(78
)
 
$
34

Junior subordinated debentures
—

 
—

 
2,131

 
—

 
(275
)
   Total trading (losses) gains, net
$
(35
)
 
$
(34
)
 
$
2,231

 
$
(78
)
 
$
(241
)

(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 material 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 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.

Tier 1 Common Capital and the Tier 1 Common Ratio are non-GAAP financial measures. Valley's management believes Tier 1 Common Capital and the Tier1 Common Ratio are useful because they are measures used by banking regulators in evaluating a company's financial condition and capital strength and thus investors desire to see this information. A reconciliation of Tier 1 Common to Valley's common stockholder's equity, and the Tier 1 Common Ratio to Valley's Tier1 Capital Ratio are included below. Tier 1 Common Capital and the Tier 1 Common Ratio were developed by the banking regulators. Tier 1 Common Capital is defined as Tier 1 Capital less non-common elements including qualifying trust preferred securities.
 
As of and For the Period Ended
 
September 30,
 
June 30,
 
December 31,
 
September 30,
($ in thousands)
2014
 
2014
 
2013
 
2013
Tier 1 common:
 
 
 
 
 
 
 
Total equity
$
1,584,198

 
$
1,573,656

 
$
1,541,040

 
$
1,520,056

Plus (less):

 

 

 

Net unrealized losses on securities available for sale, net of tax
7,543

 
7,194

 
21,661

 
13,436

Accumulated net losses on cash flow hedges, net of tax
10,633

 
12,857

 
6,271

 
10,547

Defined benefit pension plan, net of tax
10,210

 
10,247

 
10,320

 
14,187

Goodwill, net of tax
(427,392
)
 
(427,392
)
 
(427,392
)
 
(427,392
)
Disallowed other intangible assets
(10,570
)
 
(11,352
)
 
(13,122
)
 
(14,060
)
Disallowed deferred tax assets
(35,010
)
 
(37,031
)
 
(41,252
)
 
(45,719
)
Tier 1 common capital
1,139,612

 
1,128,179

 
1,097,526

 
1,071,055

Trust preferred securities
44,000

 
44,000

 
44,000

 
171,313

Total Tier 1 capital*
$
1,183,612

 
$
1,172,179

 
$
1,141,526

 
$
1,242,368

Risk-weighted assets (under Federal Reserve Board
 
 
 
 
 
 
 
Capital Regulatory Guidelines (RWA))
$
12,358,464

 
$
11,963,308

 
$
11,830,604

 
$
11,678,126

Tier 1 capital ratio (Total Tier 1 capital / RWA)
9.58
%
 
9.80
%
 
9.65
%
 
10.64
%
Tier 1 common capital ratio (Total Tier 1 common / RWA)
9.22
%
 
9.43
%
 
9.28
%
 
9.17
%
___________________
*
Tier 1 Capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair values, in accordance with regulatory risk-based capital guidelines. In arriving at Tier 1 Capital, institutions are required to deduct net unrealized losses on available-for-sale equity securities with readily determinable fair values, net of tax.

17

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)
2014
 
2014
 
2013
 
2014
 
2013
Tangible book value per common share:
 
 
 
 
 
 
 
 
 
Common shares outstanding
200,674,966

 
200,467,301

 
199,450,531

 
200,674,966

 
199,450,531

Shareholders' equity
$
1,584,198

 
$
1,573,656

 
$
1,520,056

 
$
1,584,198

 
$
1,520,056

Less: Goodwill and other intangible assets
(458,402
)
 
(460,369
)
 
(466,193
)
 
(458,402
)
 
(466,193
)
Tangible shareholders' equity
$
1,125,796

 
$
1,113,287

 
$
1,053,863

 
$
1,125,796

 
$
1,053,863

    Tangible book value
$5.61
 
$5.55

$5.28
 
$5.61
 
$5.28
Tangible common equity to tangible assets:
 
 
 
 
 
 

 

Tangible shareholders' equity
$
1,125,796

 
$
1,113,287

 
$
1,053,863

 
$
1,125,796

 
$
1,053,863

Total assets
16,726,410

 
16,335,967

 
15,976,943

 
16,726,410

 
15,976,943

Less: Goodwill and other intangible assets
(458,402
)
 
(460,369
)
 
(466,193
)
 
(458,402
)
 
(466,193
)
Tangible assets
$
16,268,008

 
$
15,875,598

 
$
15,510,750

 
$
16,268,008

 
$
15,510,750

    Tangible common equity to tangible assets
6.92
%
 
7.01
%

6.79
%
 
6.92
%
 
6.79
%
Annualized return on average tangible shareholders' equity:
 
 
 
 
 
 
Net income
$
27,682

 
$
29,520

 
$
27,121

 
$
91,037

 
$
92,353

Average shareholders' equity
1,581,877

 
1,566,829

 
1,525,939

 
1,564,585

 
1,515,687

Less: Average goodwill and other intangible assets
(459,210
)
 
(461,316
)
 
(466,495
)
 
(461,249
)
 
(463,798
)
    Average tangible shareholders' equity
$
1,122,667

 
$
1,105,513

 
$
1,059,444

 
$
1,103,336

 
$
1,051,889

    Annualized return on average tangible
 
 
 
 
 
 
 
 
 
    shareholders' equity
9.86
%
 
10.68
%
 
10.24
%
 
11.00
%
 
11.71
%
(4)
The efficiency ratio measures Valley's total non-interest expense as a percentage of net interest income plus total non-interest income. See the "Non-Interest Expense" section to this press release for additional information.
(5)
Total loans charged-off and recovered includes the following covered loans:
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
(In thousands)
September 30,
 
June 30,
 
September 30,
 
September 30,
Covered loans charged-off:
2014
 
2014
 
2013
 
2014

2013
Commercial and industrial
$
(433
)
 
$
(198
)
 
$
—

 
$
(631
)
 
$
(84
)
Commercial mortgage
—

 
(425
)
 
—

 
(425
)
 
—

Residential mortgage
—

 
(126
)
 
—

 
(126
)
 
(62
)
   Total covered loans charged-off
(433
)
 
(749
)
 
—

 
(1,182
)
 
(146
)
Charged-off loans recovered:
 
 
 
 
 
 
 
 
 
Construction
—

 
462

 
—

 
462

 
—

   Total covered loans recovered
—

 
462

 
—

 
462

 
—

Net charge-offs
$
(433
)
 
$
(287
)
 
$
—

 
$
(720
)
 
$
(146
)
 
 
 
 
 
 
 
 
 
 
 
(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 $6.2 million, $11.2 million, $12.3 million, and $9.3 million, at September 30, 2014, June 30, 2014, December 31, 2013 and September 30, 2013, 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 (losses) gains totaling ($625) thousand, ($823) thousand, ($1.6) million, and $5.2 million at September 30, 2014, June 30, 2014, December 31, 2013 and September 30, 2013, 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.


 
 
 
 
 
 
 
SHAREHOLDERS RELATIONS

Requests for copies of reports and/or other inquiries should be directed to Dianne Grenz, EVP, Director of Sales, Shareholder and Public Relations, Valley National Bancorp, 1455 Valley Road, Wayne, New Jersey, 07470, by telephone at (973) 305-4005, by fax at (973) 305-1364 or by e-mail at dgrenz@valleynationalbank.com.


18

VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(in thousands, except for share data)


 
September 30,
 
December 31,
 
2014
 
2013
Assets
 
 
 
Cash and due from banks
$
352,799

 
$
234,253

Interest bearing deposits with banks
60,655

 
134,915

Investment securities:
 
 
 
Held to maturity (fair value of $1,838,632 at September 30, 2014 and $1,711,427 at December 31, 2013)
1,813,312

 
1,731,737

Available for sale
758,421

 
829,692

Trading securities
14,186

 
14,264

Total investment securities
2,585,919

 
2,575,693

Loans held for sale, at fair value
10,701

 
10,488

Non-covered loans
12,119,086

 
11,471,447

Covered loans
46,291

 
96,165

Less: Allowance for loan losses
(102,438
)
 
(113,617
)
Net loans
12,062,939

 
11,453,995

Premises and equipment, net
273,857

 
270,138

Bank owned life insurance
348,616

 
344,023

Accrued interest receivable
53,545

 
53,964

Due from customers on acceptances outstanding
5,426

 
5,032

FDIC loss-share receivable
16,180

 
32,757

Goodwill
428,234

 
428,234

Other intangible assets, net
30,168

 
36,130

Other assets
497,371

 
576,919

Total Assets
$
16,726,410

 
$
16,156,541

Liabilities
 
 
 
Deposits:
 
 
 
Non-interest bearing
$
3,596,621

 
$
3,717,271

Interest bearing:
 
 
 
Savings, NOW and money market
6,081,538

 
5,422,722

Time
2,183,328

 
2,179,269

Total deposits
11,861,487

 
11,319,262

Short-term borrowings
297,719

 
281,455

Long-term borrowings
2,797,828

 
2,792,306

Junior subordinated debentures issued to capital trusts
41,211

 
41,089

Bank acceptances outstanding
5,426

 
5,032

Accrued expenses and other liabilities
138,541

 
176,357

Total Liabilities
15,142,212

 
14,615,501

Shareholders’ Equity
 
 
 
Preferred stock, (no par value, authorized 30,000,000 shares; none issued)
—

 
—

Common stock, (no par value, authorized 332,023,233 shares; issued 200,685,721 shares at September 30, 2014 and 199,629,268 shares at December 31, 2013)
70,204

 
69,941

Surplus
1,411,246

 
1,403,375

Retained earnings
131,241

 
106,340

Accumulated other comprehensive loss
(28,387
)
 
(38,252
)
Treasury stock, at cost (10,755 common shares at September 30, 2014 and 36,159 common shares at December 31, 2013)
(106
)
 
(364
)
Total Shareholders’ Equity
1,584,198

 
1,541,040

Total Liabilities and Shareholders’ Equity
$
16,726,410

 
$
16,156,541


19

VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except for share data)


 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
 
2014
 
2014
 
2013
 
2014
 
2013
 
Interest Income
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
135,108

 
$
136,338

 
$
134,160

 
$
402,525

 
$
401,125

 
Interest and dividends on investment securities:
 
 
 
 
 
 
 
 
 
 
Taxable
15,134

 
15,709

 
14,440

 
47,299

 
41,854

 
Tax-exempt
3,647

 
3,700

 
3,566

 
11,033

 
10,888

 
Dividends
1,522

 
1,390

 
1,517

 
4,702

 
4,701

 
Interest on federal funds sold and other short-term investments
48

 
27

 
96

 
102

 
614

 
Total interest income
155,459

 
157,164

 
153,779

 
465,661

 
459,182

 
Interest Expense
 
 
 
 
 
 
 
 
 
 
Interest on deposits:
 
 
 
 
 
 
 
 
 
 
Savings, NOW and money market
4,860

 
4,530

 
4,359

 
13,671

 
13,430

 
Time
6,981

 
6,683

 
7,279

 
20,196

 
23,184

 
Interest on short-term borrowings
218

 
304

 
94

 
840

 
378

 
Interest on long-term borrowings and junior subordinated debentures
28,732

 
28,228

 
30,378

 
84,843

 
90,598

 
Total interest expense
40,791

 
39,745

 
42,110

 
119,550

 
127,590

 
Net Interest Income
114,668

 
117,419

 
111,669

 
346,111

 
331,592

 
Provision for losses on non-covered loans and unfunded letters of credit
(423
)
 
—

 
5,334

 
3,575

 
11,931

 
Provision for losses on covered loans
—

 
(5,671
)
 
—

 
(5,671
)
 
(2,276
)
 
Net Interest Income After Provision for Credit Losses
115,091

 
123,090

 
106,335

 
348,207

 
321,937

 
Non-Interest Income
 
 
 
 
 
 
 
 
 
 
Trust and investment services
2,411

 
2,244

 
2,138

 
7,097

 
6,372

 
Insurance commissions
3,632

 
4,491

 
4,224

 
12,621

 
12,276

 
Service charges on deposit accounts
5,722

 
5,636

 
6,362

 
17,109

 
17,874

 
Gains on securities transactions, net
103

 
7

 
9

 
102

 
4,008

 
Trading (losses) gains, net
(35
)
 
(34
)
 
2,231

 
(78
)
 
(241
)
 
Fees from loan servicing
1,806

 
1,786

 
1,851

 
5,262

 
5,089

 
(Losses) gains on sales of loans, net
(95
)
 
679

 
2,729

 
1,497

 
32,155

 
Gains (losses) on sales of assets, net
83

 
276

 
(1,010
)
 
211

 
(600
)
 
Bank owned life insurance
1,571

 
1,614

 
1,553

 
4,593

 
4,318

 
Change in FDIC loss-share receivable
(3,823
)
 
(7,711
)
 
(2,005
)
 
(11,610
)
 
(7,180
)
 
Other
2,680

 
3,422

 
4,308

 
9,183

 
12,509

 
Total non-interest income
14,055

 
12,410

 
22,390

 
45,987

 
86,580

 
Non-Interest Expense
 
 
 
 
 
 
 
 
 
 
Salary and employee benefits expense
45,501

 
47,094

 
47,434

 
140,683

 
145,739

 
Net occupancy and equipment expense
17,011

 
17,973

 
18,430

 
55,708

 
55,498

 
FDIC insurance assessment
3,534

 
3,393

 
3,909

 
10,214

 
12,836

 
Amortization of other intangible assets
2,201

 
2,346

 
2,264

 
6,898

 
5,794

 
Professional and legal fees
3,609

 
4,384

 
4,112

 
11,671

 
12,289

 
Advertising
1,664

 
533

 
1,203

 
2,814

 
4,855

 
Other
17,290

 
18,506

 
17,109

 
51,934

 
48,235

 
Total non-interest expense
90,810

 
94,229

 
94,461

 
279,922

 
285,246

 
Income Before Income Taxes
38,336

 
41,271

 
34,264

 
114,272

 
123,271

 
Income tax expense
10,654

 
11,751

 
7,143

 
23,235

 
30,918

 
Net Income
$
27,682

 
$
29,520

 
$
27,121

 
$
91,037

 
$
92,353

 
Earnings Per Common Share:
 
 
 
 
 
 
 
 
 
 
Basic
$
0.14

 
$
0.15

 
$
0.14

 
$
0.45

 
$
0.46

 
Diluted
0.14

 
0.15

 
0.14

 
0.45

 
0.46

 
Cash Dividends Declared per Common Share
0.11

 
0.11

 
0.16

 
0.33

 
0.49

 
Weighted Average Number of Common Shares Outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
200,614,091

 
200,472,592

 
199,445,874

 
200,406,801

 
199,206,945

 
Diluted
200,614,091

 
200,472,592

 
199,445,874

 
200,406,801

 
199,206,945

 


20


VALLEY NATIONAL BANCORP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and
 
 
 
 
Net Interest Income on a Tax Equivalent Basis
 
 
 
 
Three Months Ended
 
 
 
 
September 30, 2014
 
June 30, 2014
 
September 30, 2013
 
 
 
 
 
 Average
 
 
 
Avg.
 
 Average
 
 
 
Avg.
 
 Average
 
 
 
Avg.
 
($ in thousands)
 Balance
 
 Interest
 
Rate
 
 Balance
 
 Interest
 
Rate
 
 Balance
 
 Interest
 
Rate
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans (1)(2)
$
11,907,275

 
$
135,115

 
4.54
%
 
$
11,745,817

 
$
136,344

 
4.64
%
 
$
11,209,929

 
$
134,168

 
4.79
%
 
Taxable investments (3)
2,203,431

 
16,656

 
3.02
%
 
2,223,374

 
17,099

 
3.08
%
 
2,271,825

 
15,957

 
2.81
%
 
Tax-exempt investments (1)(3)
548,548

 
5,611

 
4.09
%
 
564,123

 
5,692

 
4.04
%
 
568,420

 
5,486

 
3.86
%
 
Federal funds sold and other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
interest bearing deposits
104,580

 
48

 
0.18
%
 
68,066

 
27

 
0.16
%
 
152,929

 
96

 
0.25
%
 
Total interest earning assets
14,763,834

 
157,430

 
4.27
%
 
14,601,380

 
159,162

 
4.36
%
 
14,203,103

 
155,707


4.39
%
 
Other assets
1,719,502

 
 
 
 
 
1,686,988

 
 
 
 
 
1,762,497

 
 
 
 
 
Total assets
$
16,483,336

 
 
 
 
 
$
16,288,368

 
 
 
 
 
$
15,965,600

 
 
 
 
 
Liabilities and shareholders' equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Savings, NOW and money market deposits
$
5,830,967

 
$
4,860

 
0.33
%
 
$
5,648,655

 
$
4,530

 
0.32
%
 
$
5,393,914

 
$
4,359

 
0.32
%
 
 
Time deposits
2,169,590

 
6,981

 
1.29
%
 
2,146,171

 
6,683

 
1.25
%
 
2,274,061

 
7,279

 
1.28
%
 
 
Short-term borrowings
261,801

 
218

 
0.33
%
 
354,653

 
304

 
0.34
%
 
147,658

 
94

 
0.25
%
 
 
Long-term borrowings (4)
2,839,365

 
28,732

 
4.05
%
 
2,837,849

 
28,228

 
3.98
%
 
2,880,514

 
30,378

 
4.22
%
 
Total interest bearing liabilities
11,101,723

 
40,791

 
1.47
%
 
10,987,328

 
39,745

 
1.45
%
 
10,696,147

 
42,110

 
1.57
%
 
Non-interest bearing deposits
3,640,054

 
 
 
 
 
3,587,292

 
 
 
 
 
3,552,583

 
 
 
 
 
Other liabilities
159,682

 
 
 
 
 
146,919

 
 
 
 
 
190,931

 
 
 
 
 
Shareholders' equity
1,581,877

 
 
 
 
 
1,566,829

 
 
 
 
 
1,525,939

 
 
 
 
 
Total liabilities and shareholders' equity
$
16,483,336

 
 
 
 
 
$
16,288,368

 
 
 
 
 
$
15,965,600

 
 
 
 
 
Net interest income/interest rate spread (5)
 
 
$
116,639

 
2.80
%
 
 
 
$
119,417

 
2.91
%
 
 
 
$
113,597

 
2.82
%
 
Tax equivalent adjustment
 
 
(1,971
)
 
 
 
 
 
(1,998
)
 
 
 
 
 
(1,928
)
 
 
 
Net interest income, as reported
 
 
$
114,668

 
 
 
 
 
$
117,419

 
 
 
 
 
$
111,669

 
 
 
Net interest margin (6)




3.11
%





3.22
%


 


3.14
%
 
Tax equivalent effect
 
 
 
 
0.05
%
 
 
 
 
 
0.05
%
 
 
 
 
 
0.06
%
 
Net interest margin on a fully tax equivalent basis (6)
 
 
 
 
3.16
%
 
 
 
 
 
3.27
%
 
 
 
 
 
3.20
%
 
_________________________
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(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.

21