VALLEY NATIONAL BANCORP 
By WAYNE, N.J., Jan. 26, 2012 /PRNewswire/ -- Valley National Bancorp (NYSE: VLY), the holding company for Valley National Bank, today reported net income for the fourth quarter of 2011 of $24.8 million, or $0.15 per diluted common share, after non-cash impairment charges on investment securities and merger expenses totaling $13.4 million after taxes ($0.08 per common share), as compared to the fourth quarter of 2010 earnings of $38.2 million, or $0.23 per diluted common share. See the "Key highlights for the fourth quarter" section below for more details.
Net income for the year ended December 31, 2011 was $133.7 million, or $0.79 per diluted common share, compared to 2010 earnings of $131.2 million, or $0.78 per diluted common share.
Key highlights for the fourth quarter:
-- Loan Growth: Total non-covered loans (i.e., loans which are not subject
to our loss-sharing agreements with the FDIC) increased by $210.1
million to $9.5 billion at December 31, 2011 from September 30, 2011.
Our residential mortgage and commercial real estate (including
construction) loans grew by $113.0 million and $59.0 million, or 20.8
percent and 6.0 percent, respectively, on an annualized basis, during
the fourth quarter of 2011. Commercial and industrial loans increased
by $45.2 million at December 31, 2011 compared to September 30, 2011;
however, most of the increase in this portfolio was due to a $37.0
million short-term loan to State Bancorp, Inc. (used to repurchase
State's Series A Preferred Stock from the Treasury), which was acquired
by Valley effective January 1, 2012. The loan was subsequently
eliminated as of the acquisition date. Total covered loans (i.e., loans
subject to our loss-sharing agreements with the FDIC) decreased to
$271.8 million, or 2.8 percent of our total loans, at December 31, 2011
as compared to $282.4 million at September 30, 2011 mainly due to normal
payment activity. Excluding the loan to State Bancorp, our total loan
portfolio grew by 6.8 percent on an annualized basis during the fourth
quarter of 2011.
-- Net Interest Income and Margin: Net interest income decreased $3.6
million to $118.3 million for the quarter ended December 31, 2011 as
compared to $121.9 million for the quarter ended September 30, 2011. On
a tax equivalent basis, our net interest margin decreased 12 basis
points to 3.74 percent in the fourth quarter of 2011 as compared to 3.86
percent for the third quarter of 2011, and was 11 basis points higher
than the 3.63 percent net interest margin for the fourth quarter of
2010. The decreases in the net interest income and margin as compared
to the linked third quarter of 2011 were mainly due to lower yields on
taxable investments and loans. See the "Net Interest Income and Margin"
section below for more details.
-- Rate Reduction on Long-Term Borrowings: In November and December 2011,
we modified the terms of $435 million in FHLB advances within our
long-term borrowings. The modifications resulted in a reduction of the
interest rate on these funds, an extension of their maturity dates to 10
years from the date of modification, and a conversion of the advances to
non-callable for periods ranging from 3 to 4 years. We similarly
modified the terms of an additional $150 million in FHLB advances during
January 2012. After the modifications, the weighted average interest
rate on these borrowings declined by 0.86 percent to 3.99 percent.
There were no penalties or fees incurred in the modification
transactions.
-- Asset Quality: Total loans past due 30 days or more were 1.69 percent of
the loan portfolio at December 31, 2011 compared to 1.73 percent at
September 30, 2011. Total non-accrual loans were $124.3 million, or
1.27 percent of our entire loan portfolio of $9.8 billion, at December
31, 2011. The residential mortgage and home equity loan portfolios
totaling over 23,000 individual loans had only 272 loans past due 30
days or more at December 31, 2011. At December 31, 2011, residential
mortgage and home equity loans delinquent 30 days or more totaled $44.6
million, or 1.62 percent of the $2.8 billion in total loans within these
categories. See "Credit Quality" section below for more details.
-- Provision for Losses on Non-Covered Loans and Unfunded Letters of
Credit: The provision for losses on non-covered loans and unfunded
letters of credit was $11.9 million for the fourth quarter of 2011 as
compared to $7.8 million for the third quarter of 2011 and $8.7 million
for the fourth quarter of 2010. Net loan charge-offs on non-covered
loans increased to $14.4 million for the fourth quarter of 2011 compared
to $4.8 million for the third quarter of 2011 and $4.3 million for the
fourth quarter of 2010. Two new impaired loan relationships contributed
$6.5 million to the increase in net loan charge-offs during the fourth
quarter of 2011 (See further detail under the "Credit Quality" section
below). At December 31, 2011, our allowance for losses on non-covered
loans and unfunded letters of credit totaled $122.7 million and was 1.29
percent of non-covered loans, as compared to 1.34 percent and 1.33
percent at September 30, 2011 and December 31, 2010, respectively.
-- Provision for Losses on Covered Loans: We recorded a $3.4 million
provision for losses on covered loans (i.e., loans subject to our
loss-sharing agreements with the FDIC) during the fourth quarter of 2011
as compared to no provision for the third quarter of 2011 and $6.4
million in the fourth quarter of 2010. The provisions were recognized
due to credit impairment caused by subsequent declines in the expected
cash flows within certain pools of covered loans at the acquisition date
and/or decreases in the additional cash flows expected to be collected
due to changes in estimate after acquisition. The negative impact of the
provisions was partially offset by the recognition in other non-interest
income of the FDIC's applicable portion of the impairment under the
loss-sharing agreements. Loan charge-offs on covered loans (impaired
subsequent to acquisition) were $2.5 million for the fourth quarter of
2011 as compared to $6.1 million for third quarter of 2011 and no
charge-offs in the fourth quarter of 2010. Our allowance for losses on
covered loans totaled $13.5 million at December 31, 2011 as compared to
$12.6 million at September 30, 2011 and $6.4 million at December 31,
2010.
-- Investments: We recognized $12.0 million in net gains on securities
transactions during the fourth quarter of 2011 as compared to $7.0
million in net gains during the fourth quarter of 2010 as we continued
to reduce our holdings of certain residential mortgage-backed securities
issued by Freddie Mac and Fannie Mae with increased prepayment risk.
Other-than-temporary impairment charges attributable to credit totaling
$19.1 million ($11.7 million after taxes, or $0.07 per common share)
were recognized in earnings during the fourth quarter of 2011 mainly
related to trust preferred securities issued by one bank holding
company. The issuer of the trust preferred securities has deferred
interest payments on these securities since late 2009 as required by an
operating agreement with its bank regulators. While the issuer has
reported reasonably consistent financial performance in its recent
regulatory filings, we have lengthened our estimate of the timeframe
over which Valley could reasonably anticipate receiving the expected
cash flows and, as a result, we concluded that the securities were
other-than-temporarily impaired at December 31, 2011. The total
impairment loss of $41.2 million on these securities consisted of $18.3
million attributable to credit and $22.9 million attributable to factors
other than credit. After the credit impairment charges, the trust
preferred securities had a combined adjusted amortized cost of $46.4
million and a fair value of $23.5 million at December 31, 2011.
Subsequent to the impairment analysis, management no longer had a
positive intent to hold these securities to their maturity due to the
significant deterioration in the securities' value caused by the credit
of the issuer. Accordingly, we transferred the securities from held to
maturity to the available for sale portfolio at December 31, 2011.
-- Trading Mark to Market Impact on Earnings: Net income for the fourth
quarter of 2011 included net trading losses of $839 thousand (less than
$0.01 per common share) as compared to net trading losses of $2.1
million ($0.01 per common share) for the fourth quarter of 2010. Net
trading losses mainly represent non-cash mark to market losses on our
junior subordinated debentures carried at fair value.
-- Merger Expenses: We incurred approximately $2.3 million ($1.7 million
after taxes, or $0.01 per common share) in merger expenses during the
fourth quarter of 2011 related to our acquisition of State Bancorp,
Inc., which was completed effective January 1, 2012. Professional and
legal fees, salary and employee benefits expense, and other non-interest
expense included $1.3 million, $640 thousand, and $290 thousand,
respectively, of merger related expenses for the three months ended
December 31, 2011.
-- Capital Strength: Our regulatory capital ratios continue to reflect
Valley's strong capital position. The Company's total risk-based
capital, Tier 1 capital, and leverage capital were 12.75 percent, 10.92
percent, and 8.07 percent, respectively, at December 31, 2011.
Gerald H. Lipkin, Chairman, President and CEO commented that, "With a few exceptions, we are pleased with Valley's operating performance for the fourth quarter given the current environment. Most notable, we had solid loan growth in our commercial real estate loan portfolio during the quarter, combined with the continued residential mortgage loan growth reflective of our very successful mortgage refinance program." Mr. Lipkin added, "In January 2012, we completed our acquisition of State Bancorp, Inc. and its principal subsidiary, State Bank of Long Island with approximately $1.6 billion in assets. We are very excited about the benefits that are expected from integrating the two companies. Our expansion into this attractive area of the Long Island market should provide many additional lending, retail, and wealth management service opportunities to further strengthen our New York Metropolitan operations in 2012. Given the expected synergies from the acquisition, strengthening commercial loan demand, and the recent signs of a steadily improving economy, we are optimistic about the year ahead and our ability to grow the Valley Brand to further benefit our shareholders."
State Bank of Long Island, a commercial bank with 16 branches located in Nassau, Suffolk, Queens and Manhattan, was merged into Valley National Bank. Full systems integration is expected to be completed during the latter half of the first quarter of 2012 and is anticipated to be a relatively seamless transition for all former State Bank customers.
Net Interest Income and Margin
Net interest income on a tax equivalent basis was $120.1 million for the fourth quarter of 2011, a $3.6 million decrease from the third quarter of 2011 and an increase of $5.6 million from the fourth quarter of 2010. The linked quarter decrease was mainly driven by lower yields on average taxable investments and loans, as well as a $130.2 million decline in average taxable investment balances for the fourth quarter of 2011. Average taxable investment balances declined due to normal repayment activity on higher yielding securities and lower reinvestment in new securities. Alternatively, we used the security repayments to fund higher yielding loan growth and maintained additional excess balances in overnight interest bearing deposits with correspondent banks. Interest income on loans declined during the fourth quarter mainly due to lower rates on refinanced loans and a decrease in loan prepayment fees and interest recoveries on non-accrual loans.
The net interest margin on a tax equivalent basis was 3.74 percent for the fourth quarter of 2011, a decrease of 12 basis points from 3.86 percent in the linked third quarter of 2011, and an 11 basis point increase from 3.63 percent for the quarter ended December 31, 2010. The yield on average interest earning assets decreased by 17 basis points on a linked quarter basis mainly as a result of lower yields on both average taxable investments and loans caused by the activity described above. The cost of average interest bearing liabilities declined three basis points from the third quarter of 2011 mainly due to a $197.3 million decline in average time deposits caused principally by maturing deposits that were not renewed by customers due to lower rates offered on most of our certificates of deposit products. The maturing deposits contributed to a seven basis point decrease in the cost of the average time deposits during the fourth quarter of 2011. Our cost of total deposits was 0.66 percent for the fourth quarter of 2011 compared to 0.71 percent for the three months ended September 30, 2011.
We believe our margin may continue to face the risk of compression into the foreseeable future due to the current low level of interest rates on most interest earning asset alternatives. However, we continue to tightly manage our balance sheet and our cost of funds to optimize our returns. During the fourth quarter of 2011, we continued to reduce the interest rates on many of our deposit products, including time deposits, and lower the interest rates paid on certain modified long-term FHLB borrowings. We have yet to fully realize the benefits of these recent reductions. We believe these actions and other asset/liability strategies will partially temper the negative impact of the current interest rate environment.
Credit Quality
Total loan delinquencies as a percentage of total loans were 1.69 percent at December 31, 2011 as compared to 1.73 percent at September 30, 2011 and 1.77 percent at December 31, 2010. With a non-covered loan portfolio totaling $9.5 billion, net loan charge-offs on non-covered loans for the fourth quarter of 2011 totaled $14.4 million as compared to $4.8 million for the third quarter of 2011 and $4.3 million for the fourth quarter of 2010. Charge-offs on loans in our impaired covered loan pools totaled $2.5 million and $6.1 million for the fourth and third quarters of 2011, respectively, and are substantially covered by loss-sharing agreements with the FDIC.
The following table summarizes the allocation of the allowance for credit losses to specific loan categories and the allocation as a percentage of each loan category at December 31, 2011, September 30, 2011 and December 31, 2010:
December 31, 2011 September 30, 2011 December 31, 2010
----------------- ------------------ -----------------
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* $65,076 3.46% $62,717 3.44% $58,229 3.19%
Commercial
real
estate
loans:
Commercial
real
estate 19,222 0.54% 20,079 0.58% 15,755 0.47%
Construction 12,905 3.14% 14,614 3.53% 14,162 3.31%
------ ------ ------
Total
commercial
real
estate
loans 32,127 0.81% 34,693 0.89% 29,917 0.79%
Residential
mortgage
loans 9,058 0.40% 10,158 0.47% 9,128 0.47%
Consumer
loans:
Home
equity 2,214 0.47% 2,794 0.58% 2,345 0.46%
----- ----- -----
Auto
and
other
consumer 6,463 0.71% 7,297 0.79% 12,154 1.29%
----- ----- ------
Total
consumer
loans 8,677 0.63% 10,091 0.72% 14,499 1.00%
Covered
loans 13,528 4.98% 12,587 4.08% 6,378 1.79%
Unallocated 7,719 NA 7,455 NA 8,353 NA
----- ----- -----
Allowance
for
credit
losses $136,185 1.39% $137,701 1.44% $126,504 1.35%
======== ======== ========
*
Includes
the
reserve
for
unfunded
letters
of
credit.
Total non-performing assets ("NPAs"), consisting of non-accrual loans, other real estate owned (OREO), other repossessed assets and non-accrual debt securities, totaled $167.4 million at December 31, 2011 compared to $122.6 million at September 30, 2011. The $44.8 million increase in NPAs from September 30, 2011 was mainly due to non-accrual debt securities (consisting of other-than-temporarily impaired trust preferred securities classified as available for sale) totaling $27.2 million and three additional non-accrual loan relationships (one included in each of the commercial and industrial, commercial real estate, and construction loan categories) totaling $22.5 million. Two of the additional non-accrual loan relationships were also responsible for $6.5 million of the $14.4 million in total net loan charge-offs recognized during the fourth quarter of 2011 due to partial charge-offs resulting from valuation of their collateral at December 31, 2011.
Non-accrual loans increased $16.6 million to $124.3 million at December 31, 2011 as compared to $107.7 million at September 30, 2011 mainly due to the aforementioned additional loan relationships classified as non-accrual loans. Although the timing of collection is uncertain, management believes that most of the non-accrual loans are well secured and largely collectible based on, in part, our quarterly review of impaired loans. Our impaired loans, mainly consisting of non-accrual and troubled debt restructured commercial and commercial real estate loans, totaled $184.1 million at December 31, 2011 and had $23.2 million in related specific reserves included in our total allowance for loan losses. OREO (which consists of 17 commercial and residential properties) and other repossessed assets, excluding OREO subject to loss-sharing agreements with the FDIC, totaled a combined $16.0 million at December 31, 2011 as compared to $14.9 million at September 30, 2011.
Loans past due 90 days or more and still accruing increased $164 thousand to $4.0 million, or 0.04 percent of total loans at December 31, 2011 compared to $3.9 million, or 0.04 percent at September 30, 2011 primarily due to a modest increase in commercial and industrial loans within this delinquency category.
Loans past due 30 to 89 days decreased $16.5 million to $37.6 million at December 31, 2011 compared to September 30, 2011 partly due to the migration of a $7.3 million commercial real estate loan to non-accrual status (reported as a potential problem loan last quarter), as well as improved performance of commercial and industrial and residential mortgage loans within this delinquency category.
Troubled debt restructured loans ("TDRs") represent loan modifications for customers experiencing financial difficulties where a concession has been granted. Performing TDRs (i.e., TDRs not reported as loans 90 days or more past due and still accruing or as non-accrual loans) totaled $101.0 million at December 31, 2011 and consisted of 60 loans (primarily in the commercial and industrial loan and commercial real estate portfolios) as compared to 58 loans totaling $103.7 million at September 30, 2011. On an aggregate basis, the $101.0 million in performing TDRs at December 31, 2011 had a modified weighted average interest rate of approximately 4.93 percent as compared to a pre-modification weighted average interest rate of 6.11 percent.
Loans and Deposits
Total loans increased by $199.6 million to $9.8 billion at December 31, 2011 as compared to September 30, 2011. See discussion below for a complete analysis of the change in mix between each loan category.
Non-Covered Loans. Non-covered loans are loans not subject to loss-sharing agreements with the FDIC. Non-covered loans increased $210.1 million to approximately $9.5 billion at December 31, 2011 from September 30, 2011. The linked quarter increase was mainly comprised of increases in residential mortgage, commercial real estate (including construction) and commercial and industrial loans of $113.0 million, $59.0 million and $45.2 million, respectively, partially offset by a decrease of $13.0 million in automobile loans. Residential mortgage loans increased due to the continued success of our $499 refinance program and the current low level of market interest rates. During the fourth quarter of 2011, we originated over $380 million in new and refinanced residential mortgage loans and retained approximately 79 percent of these loans in our loan portfolio at December 31, 2011. Commercial real estate loans continued to increase quarter over quarter due to our stronger business emphasis on co-op and multifamily loan lending in our primary markets during 2011, as well as a slight increase in new loan demand mainly from our current borrowers. Commercial and industrial loans increased largely due to a $37.0 million short-term loan to State Bancorp. The funds were used by State Bancorp to repurchase all of its Series A Preferred Stock issued under the Treasury's Capital Purchase Program prior to being acquired by Valley effective January 1, 2012. Exclusive of the merger related loan, soft loan demand coupled with strong competition for quality credits continued to challenge our ability to achieve significant loan growth in this category during the quarter. Automobile loan balances have continued to decline due to several factors, including our high credit standards, acceptable loan to collateral value levels, and high unemployment levels. Additionally, in an attempt to build market share, some large competitors continue to offer rates and terms that we have elected not to match. These factors may continue to constrain the levels of our auto loan originations during the first quarter of 2012 and the foreseeable future.
Covered Loans. Loans for which Valley National Bank will share losses with the FDIC are referred to as "covered loans," and consist of loans acquired from LibertyPointe Bank and The Park Avenue Bank as a part of FDIC-assisted transactions during the first quarter of 2010. Our covered loans consist primarily of commercial real estate loans and commercial and industrial loans and totaled $271.8 million at December 31, 2011 as compared to $282.4 million at September 30, 2011. These loans are accounted for on a pool basis. For loan pools with better than originally expected cash flows, the forecasted increase is recorded as a prospective adjustment to our interest income on loans over future periods. Additionally, on a prospective basis, we reduce the FDIC loss-share receivable by the guaranteed portion of the additional cash flows expected to be received from borrowers on those loan pools. During the fourth and third quarters of 2011, we reduced our FDIC loss-share receivable by $2.4 million and $2.9 million, respectively, due to the prospective recognition of the effect of additional cash flows from pooled loans with a corresponding reduction in non-interest income for the periods.
Deposits. Total deposits increased $52.8 million to approximately $9.7 billion at December 31, 2011 from September 30, 2011. Non-interest bearing deposits increased $168.5 million to $2.8 billion during the fourth quarter mainly due to general increases in commercial and retail deposits caused by seasonal business activity and the low level of interest rates on alternative investment and savings products. Savings, NOW and money market deposits increased $77.5 million to $4.4 billion at December 31, 2011 as compared to September 30, 2011 partly due to the low level of interest rates on time deposits and the migration of some maturing certificate of deposits to these account types. However, time deposits declined $193.2 million to $2.5 billion at December 31, 2011 primarily due to lower interest rates offered on most of our certificate of deposit products.
Non-Interest Income
Fourth quarter of 2011 compared with fourth quarter of 2010
Non-interest income for the fourth quarter of 2011 decreased $22.0 million to $13.8 million as compared to $35.8 million for the same period of 2010 primarily due to a $19.1 million increase in other-than-temporary impairment charges. The impairment charges recognized in earnings during the fourth quarter of 2011 mainly related to trust preferred securities issued by one bank holding company, as previously discussed, but also included a charge for one private label mortgage-backed security found to be other-than-temporarily impaired at December 31, 2011. Gains on sales of loans decreased $4.9 million to $2.6 million for the fourth quarter of 2011 as compared to the fourth quarter of 2010 mainly due to lower sales volumes of our new and refinanced residential mortgage loan originations and a $3.9 million gain recognized in the fourth quarter of 2010 on the sale of $83 million in conforming residential mortgage loans transferred to loans held for sale. Non-interest income recognized due to changes in the FDIC loss-share receivable also declined $4.9 million as compared to the fourth quarter of 2010 largely due to a lower level of additional estimated credit losses on covered loans at December 31, 2011 as compared to one year ago. However, net gains on securities transactions increased $5.1 million as compared to the 2010 period due to an increase in the amount of residential mortgage-backed securities sold in the fourth quarter of 2011. Additionally, insurance commissions increased by $1.2 million and net trading losses declined by $1.2 million as compared to the three months ended December 31, 2010.
Fourth quarter of 2011 compared with third quarter of 2011
Non-interest income for the fourth quarter of 2011 decreased $6.4 million from $20.2 million for the quarter ended September 30, 2011 mainly due to the aforementioned $19.1 million in other-than-temporary impairment charges recognized during the fourth quarter. Net trading losses increased $1.6 million primarily due to non-cash mark to market losses in the fourth quarter on our trust preferred debentures carried at fair value. Partially offsetting the negative impact of these items, net gains on securities transactions increased $11.2 million from $863 thousand during the third quarter of 2011 to $12.0 million in the fourth quarter. Non-interest income recognized due to the change in the FDIC loss-share receivable increased $3.0 million as compared to the third quarter of 2011 largely due to additional estimated credit losses on covered loans at December 31, 2011 as compared to September 30, 2011.
Non-Interest Expense
Fourth quarter of 2011 compared with fourth quarter of 2010
Non-interest expense increased $4.0 million to $84.4 million for the three months ended December 31, 2011 from $80.4 million for the same period of 2010. Professional and legal fees increased $1.9 million to $4.9 million for the three months ended December 31, 2011 primarily due to increased fees related to our acquisition of State Bancorp on January 1, 2012, assets acquired in the FDIC-assisted transactions and other general corporate matters. Net occupancy and equipment expense increased $1.6 million to $16.1 million for the fourth quarter of 2011 mainly due to general increases in real estate taxes, repairs and maintenance, and depreciation expense. Amortization of other intangible assets increased $1.2 million to $2.2 million during the fourth quarter of 2011 mainly due to a $945 thousand recovery of impairment charges on certain loan servicing rights in the fourth quarter of 2010 as compared to $27 thousand in impairment charges recognized during the fourth quarter of 2011. Other non-interest expense also increased $964 thousand to $13.2 million for the three months ended December 31, 2011 partly due to merger related expenses as well as OREO and other expenses related to assets acquired in FDIC-assisted transactions. Partially offsetting these increases, salary and employee benefits expense decreased $2.4 million to $42.9 million for the three months ended December 31, 2011 mainly due to lower cash incentive accruals during the 2011 period.
Fourth quarter of 2011 compared with third quarter of 2011
Non-interest expense decreased by $925 thousand from $85.3 million for the linked quarter ended September 30, 2011. Salary and employee benefits expense decreased $2.2 million from $45.1 million for the third quarter of 2011 mainly due to lower cash incentive accruals during the fourth quarter of 2011. Amortization of other intangible assets decreased approximately $1.1 million mainly due to our recognition of a $1.6 million impairment charge on certain loan servicing rights during the third quarter of 2011 as compared to a $27 thousand impairment charge during the fourth quarter of 2011. Professional and legal fees increased $1.2 million from $3.7 million for the three months ended September 30, 2011 primarily due to $1.3 million in fees recognized during the fourth quarter related to our acquisition of State Bancorp. Other non-interest expense also increased $851 thousand from $12.3 million for the three months ended September 30, 2011 partly due to merger related expenses and expenses related to assets acquired in FDIC-assisted transactions.
Income Tax Expense
Income tax expense was $7.5 million for the three months ended December 31, 2011, reflecting an effective tax rate of 23.3 percent compared to $15.3 million for the same period of 2010, reflecting an effective tax rate of 28.6 percent. The 5.3 percent decrease in the effective tax rate as compared to the fourth quarter of 2010 was largely due to our lower pre-tax book income caused, in part, by other-than-temporary impairment charges, and our increased investment in additional tax credits during 2011.
Income tax expense was $63.5 million for the year ended December 31, 2011, reflecting an effective tax rate of 32.2 percent compared to $55.8 million for 2010, reflecting an effective tax rate of 29.8 percent. The effective tax rate increased by 2.4 percent as compared to 2010 largely due to a one-time tax provision of $8.5 million related to a change in tax law during 2011, partially offset by our increased investment in additional tax credits during 2011.
For the first quarter of 2012, we anticipate that our effective tax rate will approximate 32 percent.
About Valley
Valley is a regional bank holding company headquartered in Wayne, New Jersey with nearly $16 billion in assets after the acquisition of State Bancorp. Its principal subsidiary, Valley National Bank, currently operates 211 branches in 147 communities serving 16 counties throughout northern and central New Jersey, Manhattan and Long Island. Valley National Bank is one of the largest commercial banks headquartered in New Jersey and is committed to providing the most convenient service, the latest in product innovations and an experienced and knowledgeable staff with a high priority on friendly customer service 24 hours a day, 7 days a week. For more information about Valley National Bank and its products and services, please visit www.valleynationalbank.com or call Customer Service 24/7 at 800-522-4100.
Forward Looking Statements
The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management's confidence and strategies and management's expectations about new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as "should," "expect," "believe," "view," "opportunity," "allow," "continues," "reflects," "typically," "usually," "anticipate," or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:
-- A severe decline in the general economic conditions of New Jersey and
the New York Metropolitan area;
-- declines in value in our investment portfolio, including additional
other-than-temporary impairment charges on our investment securities;
-- higher than expected increases in our allowance for loan losses;
-- higher than expected increases in loan losses or in the level of
nonperforming loans;
-- unexpected changes in interest rates;
-- higher than expected tax rates, including increases resulting from
changes in tax laws, regulations and case law;
-- a continued or unexpected decline in real estate values within our
market areas;
-- charges against earnings related to the change in fair value of our
junior subordinated debentures;
-- higher than expected FDIC insurance assessments;
-- the failure of other financial institutions with whom we have trading,
clearing, counterparty and other financial relationships;
-- lack of liquidity to fund our various cash obligations;
-- unanticipated reduction in our deposit base;
-- potential acquisitions that may disrupt our business;
-- government intervention in the U.S. financial system and the effects of
and changes in trade and monetary and fiscal policies and laws,
including the interest rate policies of the Federal Reserve;
-- legislative and regulatory actions (including the impact of the
Dodd-Frank Wall Street Reform and Consumer Protection Act and related
regulations) subject us to additional regulatory oversight which may
result in increased compliance costs and/or require us to change our
business model;
-- changes in accounting policies or accounting standards;
-- our inability to promptly adapt to technological changes;
-- our internal controls and procedures may not be adequate to prevent
losses;
-- claims and litigation pertaining to fiduciary responsibility,
environmental laws and other matters;
-- the inability to realize expected cost savings and revenue synergies
from the merger of State Bancorp with Valley in the amounts or in the
timeframe anticipated;
-- costs or difficulties relating to the integration of State Bancorp's
systems might be greater than expected;
-- inability to retain State Bancorp's customers and employees;
-- lower than expected cash flows from covered loan pools acquired in
FDIC-assisted transactions; and
-- other unexpected material adverse changes in our operations or earnings.
A detailed discussion of factors that could affect our results is included in our SEC filings, including the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2010 and our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011.
We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
SELECTED FINANCIAL DATA
Three Months Ended Years Ended
------------------
December 31, September 30, December 31, December 31,
($ in thousands, except for share data) 2011 2011 2010 2011 2010
---- ---- ---- ---- ----
FINANCIAL DATA:
---------------
Net interest income $118,314 $121,935 $113,141 $474,811 $462,752
Net interest income - FTE (4) 120,055 123,611 114,478 480,888 468,342
Non-interest income (2) 13,772 20,203 35,846 112,297 91,327
Non-interest expense 84,377 85,302 80,408 336,588 317,682
Income tax expense 7,528 13,696 15,322 63,532 55,771
Net income 24,817 35,357 38,158 133,653 131,170
Weighted average number of common shares outstanding: (5)
Basic 170,185,439 170,007,399 169,426,058 169,928,460 169,112,901
Diluted 170,185,880 170,007,983 169,428,992 169,929,590 169,121,584
Per common share data: (5)
Basic earnings $0.15 $0.21 $0.23 $0.79 $0.78
Diluted earnings 0.15 0.21 0.23 0.79 0.78
Cash dividends declared 0.17 0.17 0.17 0.69 0.69
Book value 7.44 7.69 7.64 7.44 7.64
Tangible book value (1) 5.45 5.69 5.61 5.45 5.61
Tangible common equity to tangible assets(1) 6.67 % 6.96 % 6.90 % 6.67 % 6.90 %
Closing stock price - high $12.69 $14.09 $13.73 $14.20 $15.19
Closing stock price - low 10.14 9.89 12.01 9.89 11.83
CORE ADJUSTED FINANCIAL DATA: (1)
---------------------------------
Net income, as adjusted $36,508 $35,357 $38,158 $145,861 $134,075
Basic earnings per share, as adjusted 0.21 0.21 0.23 0.86 0.79
Diluted earnings per share, as adjusted 0.21 0.21 0.23 0.86 0.79
FINANCIAL RATIOS: `
-----------------
Net interest margin 3.68 % 3.80 % 3.59 % 3.71 % 3.65 %
Net interest margin - FTE (4) 3.74 3.86 3.63 3.75 3.69
Annualized return on average assets 0.69 0.99 1.08 0.94 0.93
Annualized return on average shareholders'
equity 7.57 10.74 11.85 10.20 10.32
Annualized return on average tangible
shareholders' equity (1) 10.21 14.52 16.06 13.80 13.97
Efficiency ratio (6) 63.88 60.01 53.97 57.33 57.34
CORE ADJUSTED FINANCIAL RATIOS: (1)
-----------------------------------
Annualized return on average assets, as
adjusted 1.02 % 0.99 % 1.08 % 1.02 % 0.95 %
Annualized return on average shareholders'
equity as adjusted 11.13 10.74 11.85 11.13 10.55
Annualized return on average tangible
shareholders' equity, as adjusted 15.02 14.52 16.06 15.06 14.28
Efficiency ratio, as adjusted 55.79 60.01 53.97 55.44 56.86
AVERAGE BALANCE SHEET ITEMS:
----------------------------
Assets $14,306,673 $14,283,783 $14,099,979 $14,270,289 $14,119,230
Interest earning assets 12,845,931 12,821,312 12,621,007 12,814,236 12,679,756
Loans 9,710,251 9,642,366 9,458,332 9,608,480 9,474,994
Interest bearing liabilities 10,145,279 10,295,144 10,217,104 10,284,332 10,363,969
Deposits 9,835,527 9,788,550 9,421,254 9,738,592 9,497,664
Shareholders' equity 1,311,498 1,316,733 1,288,140 1,310,939 1,270,778
As Of
-----
December 31, September 30, December 31,
($ in thousands) 2011 2011 2010
---- ---- ----
BALANCE SHEET ITEMS:
--------------------
Assets $14,244,507 $14,231,155 $14,143,826
Total loans 9,799,641 9,600,087 9,365,795
Non-covered loans 9,527,797 9,317,691 9,009,140
Deposits 9,673,102 9,620,339 9,363,614
Shareholders' equity 1,266,248 1,307,102 1,295,205
CAPITAL RATIOS:
---------------
Tier 1 leverage ratio 8.07 % 8.10 % 8.31%
Risk-based capital - Tier 1 10.92 10.82 10.94
Risk-based capital - Total
Capital 12.75 12.65 12.91
Three Months Ended Years Ended
------------------
December 31, September 30, December 31, December 31,
($ in thousands) 2011 2011 2010 2011 2010
---- ---- ---- ---- ----
ALLOWANCE FOR CREDIT LOSSES:
----------------------------
Beginning balance - Allowance for credit losses $137,701 $140,893 $115,715 $126,504 $103,655
Loans charged-off: (3)
Commercial and industrial (10,204) (9,297) (1,593) (29,229) (15,475)
Commercial real estate (1,132) (719) (100) (6,305) (1,823)
Construction (3,533) (520) (1,314) (4,053) (1,738)
Residential mortgage (1,727) (269) (730) (3,222) (3,741)
Consumer (1,542) (1,251) (2,009) (5,906) (10,882)
------ ------ ------ ------ -------
Total loans charged-off (18,138) (12,056) (5,746) (48,715) (33,659)
------- ------- ------ ------- -------
Charged-off loans recovered:
Commercial and industrial 617 559 804 2,365 4,121
Commercial real estate 106 2 17 134 156
Construction - - - 197 -
Residential mortgage 23 16 17 129 97
Consumer 512 504 598 2,236 2,678
--- --- --- ----- -----
Total loans recovered 1,258 1,081 1,436 5,061 7,052
----- ----- ----- ----- -----
Net charge-offs (16,880) (10,975) (4,310) (43,654) (26,607)
Provision charged for credit losses 15,364 7,783 15,099 53,335 49,456
------ ----- ------
Ending balance - Allowance for credit losses $136,185 $137,701 $126,504 $136,185 $126,504
======== ======== ======== ======== ========
Components of allowance for credit losses:
Allowance for non-covered loans $120,274 $122,775 $118,326 $120,274 $118,326
Allowance for covered loans 13,528 12,587 6,378 13,528 6,378
------ ------ ----- ------ -----
Allowance for loan losses 133,802 135,362 124,704 133,802 124,704
Allowance for unfunded letters of credit 2,383 2,339 1,800 2,383 1,800
----- ----- ----- ----- -----
Allowance for credit losses $136,185 $137,701 $126,504 $136,185 $126,504
======== ======== ======== ======== ========
Components of provision for credit losses:
Provision for losses on non-covered loans $11,904 $7,711 $8,850 $31,242 $42,943
Provision for losses on covered loans 3,416 - 6,378 21,510 6,378
Provision for unfunded letters of credit 44 72 (129) 583 135
--- --- ---- --- ---
Provision for credit losses $15,364 $7,783 $15,099 $53,335 $49,456
======= ====== ======= ======= =======
Annualized ratio of net charge-offs of
non-covered loans to average loans 0.59 % 0.20 % 0.18 % 0.30 % 0.28 %
Annualized ratio of total net charge-offs
to average loans 0.70 0.46 0.18 0.45 0.28
Allowance for non-covered loan losses as
a % of non-covered loans 1.26 1.32 1.31 1.26 1.31
Allowance for credit losses as a % of total loans 1.39 1.43 1.35 1.39 1.35
As Of
-----
($ in thousands) December 31, September 30, December 31,
ASSET QUALITY (NON-COVERED ASSETS): (7) 2011 2011 2010
--------------------------------------- ---- ---- ----
Accruing past due loans:
30 to 89 days past due:
Commercial and industrial $4,347 $9,866 $13,852
Commercial real estate 13,115 22,220 14,563
Construction 2,652 - 2,804
Residential mortgage 8,496 12,556 12,682
Consumer 8,975 9,456 14,638
----- ----- ------
Total 30 to 89 days past due 37,585 54,098 58,539
90 or more days past due:
Commercial and industrial 657 164 12
Commercial real estate 422 268 -
Construction 1,823 2,216 196
Residential mortgage 763 721 1,556
Consumer 351 483 723
--- --- ---
Total 90 or more days past due 4,016 3,852 2,487
----- ----- -----
Total accruing past due loans $41,601 $57,950 $61,026
======= ======= =======
Non-accrual loans:
Commercial and industrial $26,648 $16,737 $13,721
Commercial real estate 42,186 41,453 32,981
Construction 19,874 14,449 27,312
Residential mortgage 31,646 31,401 28,494
Consumer 3,910 3,645 2,547
----- ----- -----
Total non-accrual loans 124,264 107,685 105,055
Other real estate owned (8) 15,227 14,091 10,498
Other repossessed assets 796 822 1,707
Non-accrual debt securities (9) 27,151 - -
------ --- ---
Total non-performing assets ("NPAs") $167,438 $122,598 $117,260
======== ======== ========
Performing troubled debt restructured loans $100,992 $103,690 $89,696
Total non-accrual loans as a % of loans 1.27% 1.12% 1.12%
Total accruing past due and non-accrual loans as a % of loans 1.69 1.73 1.77
Allowance for losses on non-covered
loans as a % of non-accrual loans 96.79 114.01 112.63
NOTES TO SELECTED FINANCIAL DATA
--------------------------------
This press release contains certain supplemental financial information, described in Notes (1) -(4), which has been
(1) determined by methods other
than U.S. Generally Accepted Accounting Principles ("GAAP") that management uses in its analysis of Valley's performance. Management
believes
these non-GAAP financial measures provide information useful to investors in understanding Valley's financial results. Specifically,
Valley provides
measures based on what it believes are its operating earnings on a consistent basis and excludes non-core operating items which
affect the GAAP
reporting of results of operations. Management utilizes these measures for internal planning and forecasting purposes. Management
believes that
Valley's presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors
and trends affecting
Valley's business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be
considered
a substitute for GAAP basis measures and results and Valley strongly encourages investors to review its consolidated financial
statements in their
entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be
possible to
compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.
Three Months Ended Years Ended
------------------
December 31, September 30, December 31, December 31,
($ in thousands, except for share data) 2011 2011 2010 2011 2010
---- ---- ---- ---- ----
Tangible book value per common share:
-------------------------------------
Common shares outstanding 170,174,314 170,025,364 169,533,626 170,174,314 169,533,626
----------- ----------- ----------- ----------- -----------
Shareholders' equity $1,266,248 $1,307,102 $1,295,205 $1,266,248 $1,295,205
Less: Goodwill and other intangible assets (338,780) (339,850) (343,541) (338,780) (343,541)
-------- -------- -------- -------- --------
Tangible shareholders' equity $927,468 $967,252 $951,664 $927,468 $951,664
Tangible book value $5.45 $5.69 $5.61 $5.45 $5.61
NOTES TO SELECTED FINANCIAL DATA - CONTINUED
Three Months Ended Years Ended
------------------
December 31, September 30, December 31, December 31,
($ in thousands, except for share data) 2011 2011 2010 2011 2010
---- ---- ---- ---- ----
Annualized return on average tangible equity:
---------------------------------------------
Net income $24,817 $35,357 $38,158 $133,653 $131,170
------- ------- ------- -------- --------
Average shareholders' equity 1,311,498 1,316,733 1,288,140 1,310,939 1,270,778
Less: Average goodwill and other intangible
assets (339,528) (342,506) (337,662) (342,122) (331,667)
-------- -------- -------- -------- --------
Average tangible shareholders' equity $971,970 $974,227 $950,478 $968,817 $939,111
Annualized return on average tangible
shareholders' equity 10.21% 14.52% 16.06% 13.80% 13.97%
Adjusted net income available to common stockholders:
-----------------------------------------------------
Net income, as reported $24,817 $35,357 $38,158 $133,653 $131,170
Net impairment losses on securities recognized in
earnings (net of tax) 11,691 - - 12,208 2,905
------ --- --- ------ -----
Net income, as adjusted 36,508 35,357 38,158 145,861 134,075
Adjusted per common share data:
-------------------------------
Net income, as adjusted $36,508 $35,357 $38,158 $145,861 $134,075
Average number of basic shares outstanding 170,185,439 170,007,399 169,426,058 169,928,460 169,112,901
Basic earnings, as adjusted $0.21 $0.21 $0.23 $0.86 $0.79
Average number of diluted shares outstanding 170,185,880 170,007,983 169,428,992 169,929,590 169,121,584
Diluted earnings, as adjusted $0.21 $0.21 $0.23 $0.86 $0.79
Adjusted annualized return on average assets:
---------------------------------------------
Net income, as adjusted $36,508 $35,357 $38,158 $145,861 $134,075
Average assets 14,306,673 14,283,783 14,099,979 14,270,289 14,119,230
Annualized return on average assets, as adjusted 1.02% 0.99% 1.08% 1.02% 0.95%
Adjusted annualized return on average shareholders' equity:
-----------------------------------------------------------
Net income, as adjusted $36,508 $35,357 $38,158 $145,861 $134,075
Average shareholders' equity 1,311,498 1,316,733 1,288,140 1,310,939 1,270,778
Annualized return on average shareholders'
equity, as adjusted 11.13% 10.74% 11.85% 11.13% 10.55%
Adjusted annualized return on average tangible shareholders' equity:
--------------------------------------------------------------------
Net income, as adjusted $36,508 $35,357 $38,158 $145,861 $134,075
Average tangible shareholders' equity 971,970 974,227 950,478 968,817 939,111
Annualized return on average tangible
shareholders' equity, as adjusted 15.02% 14.52% 16.06% 15.06% 14.28%
Adjusted efficiency ratio:
--------------------------
Non-interest expense $84,377 $85,302 $80,408 $336,588 $317,682
------- ------- ------- -------- --------
Net interest income 118,314 121,935 113,141 474,811 462,752
Non-interest income 13,772 20,203 35,846 112,297 91,327
Add: Net impairment losses on securities
recognized in earnings 19,143 - - 19,968 4,642
------ --- --- ------ -----
Gross operating income, as adjusted $151,229 $142,138 $148,987 $607,076 $558,721
Efficiency ratio, as adjusted 55.79% 60.01% 53.97% 55.44% 56.86%
Tangible common equity to tangible assets:
------------------------------------------
Tangible shareholders' equity $927,468 $967,252 $951,664 $927,468 $951,664
-------- -------- -------- -------- --------
Total assets 14,244,507 14,231,155 14,143,826 14,244,507 14,143,826
Less: Goodwill and other intangible assets (338,780) (339,850) (343,541) (338,780) (343,541)
-------- -------- -------- -------- --------
Tangible assets $13,905,727 $13,891,305 $13,800,285 $13,905,727 $13,800,285
Tangible common equity to tangible assets 6.67% 6.96% 6.90% 6.67% 6.90%
NOTES TO SELECTED FINANCIAL DATA - CONTINUED
Three Months Ended Years Ended
------------------
December 31, September 30, December 31, December 31,
2011 2011 2010 2011 2010
---- ---- ---- ---- ----
(2) Non-interest income includes net trading (losses) gains:
Trading securities $492 $136 $(194) $1,015 $(1,056)
Junior subordinated debentures (1,331) 640 (1,884) 1,256 (5,841)
Total trading (losses) gains, net $(839) $776 $(2,078) $2,271 $(6,897)
------
(3) Total loans charged-off includes the following covered loan charge-offs:
Commercial and industrial $(2,476) $(6,131) $- $(14,212) $-
Commercial real estate - - - (38) -
Residential mortgage - - - (110) -
---
Total covered loans charged-off $(2,476) $(6,131) $- $(14,360) $-
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
(4) and tax-exempt sources and is consistent with industry practice and SEC rules.
(5) Share data reflects the five percent common stock dividend issued on May 20, 2011.
The efficiency ratio measures Valley's total non-interest expense as a percentage of net interest income plus total non-
(6) interest income.
Past due loans and non-accrual loans excludes loans that were acquired as part of the Liberty Pointe Bank and The Park Avenue
(7) Bank transactions. These loans are accounted for on a pool basis.
Excludes OREO properties related to the LibertyPointe Bank and The Park Avenue Bank FDIC-assisted transactions totaling $6.4
million, $6.2 million, and $7.8 million at December 31, 2011, September 30, 2011, and December 31, 2010, respectively. These
(8) assets are covered by the loss-sharing agreements with the FDIC.
Includes other-than temporarily impaired trust preferred securities classified as available for sale, which are presented at
(9) carrying value (not of unrealized losses totaling $24.5 million) at December 31, 2011.
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)
December 31,
------------
2011 2010
---- ----
Assets
Cash and due from banks $372,566 $302,629
Interest bearing deposits with banks 6,483 63,657
Investment securities:
Held to maturity, fair value of $2,027,197 at December 31, 2011 and
$1,898,872 at December 31, 2010 1,958,916 1,923,993
Available for sale 566,520 1,035,282
Trading securities 21,938 31,894
------ ------
Total investment securities 2,547,374 2,991,169
--------- ---------
Loans held for sale, at fair value 25,169 58,958
Non-covered loans 9,527,797 9,009,140
Covered loans 271,844 356,655
Less: Allowance for loan losses (133,802) (124,704)
-------- --------
Net loans 9,665,839 9,241,091
--------- ---------
Premises and equipment, net 265,475 265,570
Bank owned life insurance 303,867 304,956
Accrued interest receivable 52,527 59,126
Due from customers on acceptances outstanding 5,903 6,028
FDIC loss-share receivable 74,390 89,359
Goodwill 317,962 317,891
Other intangible assets, net 20,818 25,650
Other assets 586,134 417,742
------- -------
Total Assets $14,244,507 $14,143,826
=========== ===========
Liabilities
Deposits:
Non-interest bearing $2,781,597 $2,524,299
Interest bearing:
Savings, NOW and money market 4,390,121 4,106,464
Time 2,501,384 2,732,851
--------- ---------
Total deposits 9,673,102 9,363,614
--------- ---------
Short-term borrowings 212,849 192,318
Long-term borrowings 2,726,099 2,933,858
Junior subordinated debentures issued to capital trusts (includes
fair value of $160,478
at December 31, 2011 and $161,734 at December 31, 2010 for VNB
Capital Trust I) 185,598 186,922
Bank acceptances outstanding 5,903 6,028
Accrued expenses and other liabilities 174,708 165,881
------- -------
Total Liabilities 12,978,259 12,848,621
---------- ----------
Shareholders' Equity*
Preferred stock, no par value, authorized 30,000,000 shares; none
issued - -
Common stock, no par value, authorized 220,974,508 shares; issued
170,209,090 shares
at December 31, 2011 and 170,131,085 shares at December 31, 2010 59,955 57,041
Surplus 1,179,135 1,178,325
Retained earnings 90,011 79,803
Accumulated other comprehensive loss (62,441) (5,719)
Treasury stock, at cost (34,776 common shares at December 31, 2011
and 597,459
common shares at December 31, 2010) (412) (14,245)
---- -------
Total Shareholders' Equity 1,266,248 1,295,205
Total Liabilities and Shareholders' Equity $14,244,507 $14,143,826
=========== ===========
Share data reflects the five percent common stock dividend issued
* on May 20, 2011.
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Years Ended
(in thousands, except for share data) December 31, December 31,
------------ ------------
2011 2010 2011 2010
---- ---- ---- ----
Interest Income
Interest and fees on loans $138,355 $133,478 $547,365 543,009
Interest and dividends on investment securities:
Taxable 23,395 26,732 108,129 115,593
Tax-exempt 3,230 2,480 11,273 10,366
Dividends 1,443 2,275 6,655 7,428
Interest on federal funds sold and other short-term investments 149 125 402 416
--- --- ---
Total interest income 166,572 165,090 673,824 676,812
Interest Expense
Interest on deposits:
Savings, NOW and money market 5,154 4,742 19,876 19,126
Time 11,085 12,247 48,291 55,798
Interest on short-term borrowings 244 350 1,154 1,345
Interest on long-term borrowings and junior subordinated debentures 31,775 34,610 129,692 137,791
------ ------ -------
Total interest expense 48,258 51,949 199,013 214,060
Net Interest Income 118,314 113,141 474,811 462,752
Provision for losses on non-covered loans and unfunded letters of
credit 11,948 8,721 31,825 43,078
Provision for losses on covered loans 3,416 6,378 21,510 6,378
----- ----- ------
Net Interest Income After Provision for Credit Losses 102,950 98,042 421,476 413,296
------- ------ -------
Non-Interest Income
Trust and investment services 1,779 1,913 7,523 7,665
Insurance commissions 4,131 2,917 15,627 11,334
Service charges on deposit accounts 5,702 6,204 22,610 25,691
Gains on securities transactions, net 12,034 6,967 32,068 11,598
Other-than-temporary impairment losses on securities (42,775) - (42,775) (1,393)
Portion recognized in other comprehensive income
(before taxes) 23,632 - 22,807 (3,249)
Net impairment losses on securities recognized in
earnings (19,143) - (19,968) (4,642)
Trading (losses) gains, net (839) (2,078) 2,271 (6,897)
Fees from loan servicing 981 1,285 4,337 4,919
Gains on sales of loans, net 2,639 7,504 10,699 12,591
Gains on sales of assets, net 44 237 426 619
Bank owned life insurance 1,805 1,158 7,380 6,166
Change in FDIC loss-share receivable 1,414 6,268 13,403 6,268
Other 3,225 3,471 15,921 16,015
Total non-interest income 13,772 35,846 112,297 91,327
Non-Interest Expense
Salary and employee benefits expense 42,948 45,332 176,307 176,106
Net occupancy and equipment expense 16,055 14,495 64,364 61,765
FDIC insurance assessment 3,135 3,246 12,759 13,719
Amortization of other intangible assets 2,206 974 9,315 7,721
Professional and legal fees 4,853 2,945 15,312 10,137
Advertising 2,003 1,203 8,373 4,052
Other 13,177 12,213 50,158 44,182
Total non-interest expense 84,377 80,408 336,588 317,682
Income Before Income Taxes 32,345 53,480 197,185 186,941
Income tax expense 7,528 15,322 63,532 55,771
----- ------ ------
Net Income $24,817 $38,158 $133,653 $131,170
======= ======= ======== ========
Earnings Per Common Share*:
Basic $0.15 $0.23 $0.79 $0.78
Diluted 0.15 0.23 0.79 0.78
Cash Dividends Declared per Common Share* 0.17 0.17 0.69 0.69
Weighted Average Number of Common Shares Outstanding*:
Basic 170,185,439 169,426,058 169,928,460 169,112,901
Diluted 170,185,880 169,428,992 169,929,590 169,121,584
____________
* Share data reflects the five percent common stock dividend issued on May 20, 2011.
VALLEY NATIONAL BANCORP
LOAN PORTFOLIO
(in thousands)
12/31/2011 09/30/2011 06/30/2011 03/31/2011 12/31/2010
Non-covered Loans
Commercial and industrial $1,878,387 $1,833,211 $1,825,782 $1,859,626 $1,825,066
Commercial real estate:
Commercial real estate 3,574,089 3,524,891 3,486,597 3,457,768 3,378,252
Construction 411,003 401,166 413,951 418,304 428,232
-------
Total commercial real estate 3,985,092 3,926,057 3,900,548 3,876,072 3,806,484
Residential mortgage 2,285,590 2,172,601 2,147,362 2,047,898 1,925,430
Consumer:
Home equity 469,604 477,517 484,812 492,328 512,745
Automobile 772,490 785,443 807,489 827,485 850,801
Other consumer 136,634 122,862 116,606 106,184 88,614
-------
Total consumer loans 1,378,728 1,385,822 1,408,907 1,425,997 1,452,160
--------- --------- --------- --------- ---------
Total non-covered loans $9,527,797 $9,317,691 $9,282,599 $9,209,593 $9,009,140
Covered loans* 271,844 282,396 308,424 336,576 356,655
------- ------- ------- ------- -------
Total loans $9,799,641 $9,600,087 $9,591,023 $9,546,169 $9,365,795
========== ========== ========== ========== ==========
_________________________
* Loans that Valley National Bank will share losses with the FDIC are referred to as "covered loans".
Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and
Net Interest Income on a Tax Equivalent Basis
---------------------------------------------
Quarter End - 12/31/2011 Quarter End - 09/30/2011 Quarter End - 06/30/2011 Quarter End - 03/31/2011 Quarter End - 12/31/2010
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Average Avg. Average Avg. Average Avg. Average Avg. Average Avg.
($ in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ---- ------- -------- ---- ------- -------- ---- ------- -------- ----
Assets
Interest earning assets
Loans (1)(2) $9,710,251 $138,356 5.70% $9,642,366 $140,305 5.82% $9,619,959 $135,085 5.62% $9,458,201 $133,625 5.65% $9,458,332 $133,480 5.64%
Taxable investments (3) 2,406,927 24,838 4.13% 2,537,173 28,117 4.43% 2,698,706 30,193 4.48% 2,823,185 31,636 4.48% 2,567,952 29,007 4.52%
Tax-exempt investments (1)(3) 477,841 4,970 4.16% 464,873 4,783 4.12% 372,002 3,737 4.02% 400,049 3,854 3.85% 401,511 3,815 3.80%
Federal funds sold and other
interest bearing deposits 250,912 149 0.24% 176,900 110 0.25% 137,372 88 0.26% 79,208 55 0.28% 193,212 125 0.26%
Total interest earning assets 12,845,931 168,313 5.24% 12,821,312 173,315 5.41% 12,828,039 169,103 5.27% 12,760,643 169,170 5.30% 12,621,007 166,427 5.27%
Other assets 1,460,742 1,462,471 1,447,244 1,453,613 1,478,972
Total assets $14,306,673 $14,283,783 $14,275,283 $14,214,256 $14,099,979
=========== =========== =========== =========== ===========
Liabilities and shareholders' equity
Interest bearing liabilities:
Savings, NOW and money market
deposits $4,463,682 $5,154 0.46% $4,395,239 $4,961 0.45% $4,431,929 $5,082 0.46% $4,303,555 $4,679 0.43% $4,198,511 $4,742 0.45%
Time deposits 2,584,980 11,085 1.72% 2,782,254 12,424 1.79% 2,815,223 12,616 1.79% 2,731,981 12,166 1.78% 2,693,056 12,247 1.82%
Short-term borrowings 185,091 244 0.53% 175,636 293 0.67% 167,864 276 0.66% 241,786 341 0.56% 207,027 350 0.68%
Long-term borrowings (4) 2,911,526 31,775 4.37% 2,942,015 32,026 4.35% 2,933,165 32,150 4.38% 3,073,543 33,741 4.39% 3,118,510 34,610 4.44%
Total interest bearing liabilities 10,145,279 48,258 1.90% 10,295,144 49,704 1.93% 10,348,181 50,124 1.94% 10,350,865 50,927 1.97% 10,217,104 51,949 2.03%
Non-interest bearing deposits 2,786,865 2,611,057 2,554,909 2,488,726 2,529,687
Other liabilities 63,031 60,849 59,692 71,802 65,048
Shareholders' equity 1,311,498 1,316,733 1,312,501 1,302,863 1,288,140
Total liabilities and shareholders' equity $14,306,673 $14,283,783 $14,275,283 $14,214,256 $14,099,979
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Net interest income/interest rate spread (5) $120,055 3.34% $123,611 3.48% $118,979 3.33% $118,243 3.33% $114,478 3.24%
Tax equivalent adjustment (1,741) (1,676) (1,309) (1,351) (1,337)
Net interest income, as reported $118,314 $121,935 $117,670 $116,892 $113,141
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Net interest margin (6) 3.68% 3.80% 3.67% 3.66% 3.59%
Tax equivalent effect 0.06% 0.06% 0.04% 0.05% 0.04%
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Net interest margin on a fully tax equivalent basis (6) 3.74% 3.86% 3.71% 3.71% 3.63%
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(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
