VALLEY NATIONAL BANCORP WAYNE, N.J., Jan. 29, 2015 /PRNewswire/ -- Valley National Bancorp (NYSE: VLY), the holding company for Valley National Bank, today reported net income for the fourth quarter of 2014 of $25.1 million, or $0.11 per diluted common share as compared to the fourth quarter of 2013 earnings of $39.6 million, or $0.20 per diluted common share. The 2014 fourth quarter earnings included several infrequent items highlighted in the section below.
Net income for the year ended December 31, 2014 was $116.2 million, or $0.56 per diluted common share, compared to 2013 earnings of $132.0 million, or $0.66 per diluted common share.
Key financial highlights for the fourth quarter:
-- Acquisition of 1st United Bancorp, Inc.: On November 1, 2014, Valley
acquired 1st United Bancorp, Inc. ("1st United") and its wholly-owned
subsidiary, 1st United Bank, a commercial bank with approximately $1.7
billion in assets, $1.2 billion in loans, and $1.4 billion in deposits,
after purchase accounting adjustments. The 1st United acquisition brings
to Valley a 20 branch network covering some of the most attractive urban
banking markets in Florida, including locations throughout southeast
Florida, the Treasure Coast, central Florida and central Gulf Coast
regions. The common shareholders of 1st United received 0.89 of a share
of Valley common stock for each 1st United share they owned prior to the
merger. The total consideration for the acquisition was approximately
$300 million, consisting of 30.7 million shares of Valley common stock
and $8.9 million of cash consideration paid to 1st United stock option
holders. The transaction generated approximately $147.7 million in
goodwill and $11.5 million in core deposit intangible assets subject to
amortization.
-- Merger Expenses and Deferred Tax Asset Valuation Charge: Merger expenses
related to our acquisition of 1st United totaled approximately $1.5
million for the fourth quarter of 2014 as compared to $480 thousand
during the third quarter of 2014 (primarily within professional and
legal fees). We also recorded a $7.6 million charge within income tax
expense for the fourth quarter of 2014 which mostly related to the
effect of the 1st United acquisition in Florida on the valuation of our
state deferred tax assets. See the "Income Tax Expense" section below
for more information regarding our income tax expense during the fourth
quarter.
-- Gain on Sale of Branch Location: In connection with Valley's on-going
efforts to right-size a number of its branches, we sold a branch located
at 62 West 47th Street in Manhattan for a pre-tax gain of approximately
$17.8 million and entered into a long-term lease with an unrelated third
party for a new location directly across the street. Valley plans to
complete its branch relocation in the first half of 2015. Valley
continues to own 104 of its 224 branch network locations and several
other non-branch operating facilities. Many of these properties have net
carrying values below their estimated fair market value at December 31,
2014.
-- Loss on Extinguishment of Debt: In late December 2014, we elected to use
a portion of our low yielding excess liquidity to prepay $275 million of
our long-term borrowings, which had a combined weighted average interest
rate of 4.52 percent and contractual maturity dates in November 2015.
The debt extinguishment resulted in a loss consisting of prepayment
penalties totaling approximately $10.1 million.
-- Loans: Total non-covered loans (i.e., loans which are not subject to our
loss-sharing agreements with the FDIC) increased by $1.1 billion to
$13.3 billion at December 31, 2014 from September 30, 2014 primarily due
to $954.3 million in non-covered PCI loans acquired from 1st United in
the fourth quarter. Valley also continued to experience solid quarter
over quarter organic loan growth within commercial real estate
(including construction) loans, automobile loans and other consumer
loans (primarily collateralized personal lines of credit) during the
three months ended December 31, 2014. During the fourth quarter, total
commercial real estate loans grew by $100.8 million, or 6.9 percent on
an annualized basis, excluding $657.4 million of loans acquired from 1st
United within this portfolio. The commercial real estate loan growth
included $14.3 million of new loans generated by our Florida Division
since November 1, 2014. Automobile loans and other consumer loans
increased $53.5 million and $22.7 million (excluding $11.8 million of
loans acquired), or 19.6 percent and 32.9 percent on an annualized
basis, respectively, as compared to September 30, 2014. Total covered
loans (i.e., loans subject to our loss-sharing agreements with the FDIC)
increased to $211.9 million, or 1.6 percent of our total loans, at
December 31, 2014 as compared to $46.3 million at September 30, 2014 due
to $180.7 million in covered loans acquired from 1st United, partially
offset by normal collection and prepayment activity.
-- Net Interest Income and Margin: Net interest income totaling $128.6
million for the three months ended December 31, 2014 increased $14.0
million and $12.5 million as compared to the third quarter of 2014, and
fourth quarter of 2013, respectively. On a tax equivalent basis, our net
interest margin increased 4 basis points to 3.20 percent in the fourth
quarter of 2014 as compared to 3.16 percent for the third quarter of
2014, and decreased 7 basis points from 3.27 percent in the fourth
quarter of 2013. The increase in both net interest income and margin
from the third quarter of 2014 was largely due to higher yielding loans
acquired from 1st United, increased loan averages due to significant
organic loan volumes since the end of the third quarter of 2014, and
additional accretion from our PCI loan portfolio due to increased cash
flows from certain loan pools since the date of acquisition. The cost of
interest bearing liabilities decreased 10 basis points to 1.37 percent
for the fourth quarter of 2014 as compared to 1.47 percent for the third
quarter of 2014 mostly due to a 7 basis point decline in the cost of
time deposits caused by $256.5 million in time deposits assumed in the
1st United acquisition and maturing higher cost time deposits, partially
offset by slightly higher rates offered on the majority of our deposit
products.
-- 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 decreased to 0.65 percent at December 31, 2014 compared to
0.75 percent at September 30, 2014. Of the 0.65 percent in delinquencies
at December 31, 2014, 0.02 percent, or $3.0 million, represented
performing matured loans in the normal process of renewal. Non-accrual
loans (excluding non-performing loans held for sale) decreased to $55.8
million, or 0.41 percent of our entire loan portfolio of $13.5 billion,
at December 31, 2014 as compared to $59.9 million, or 0.49 percent of
total loans, at September 30, 2014. Overall, our non-performing assets
(which include non-performing loans held for sale) decreased by 6.4
percent to $83.1 million at December 31, 2014 as compared to $88.8
million at September 30, 2014 largely due to the declines in non-accrual
loans, as well as other real estate owned. See further details under the
"Credit Quality" section below.
-- Provision for Losses on Non-Covered Loans and Unfunded Letters of
Credit: During the fourth quarter of 2014, we recorded a provision for
losses on non-covered loans and unfunded letters of credit totaling $4.2
million as compared to a negative (credit) provision of $423 thousand
for the third quarter of 2014 and a $6.4 million provision for the
fourth quarter of 2013. For the fourth quarter of 2014, we recognized
net non-covered loan charge-offs of $4.0 million as compared to net
charge-offs of $182 thousand and $5.4 million for the third quarter of
2014 and fourth quarter of 2013, respectively. At December 31, 2014, our
allowance for losses on non-covered loans and unfunded letters of credit
totaled $104.1 million and was 0.78 percent of non-covered loans, as
compared to 0.86 percent and 0.96 percent at September 30, 2014 and
December 31, 2013, respectively. The quarter over quarter decline in
this ratio was largely due to $954.3 million in non-covered PCI loans
acquired from 1st United in November 2014 (which were initially recorded
net of fair valuation discounts related to credit which are expected to
be used to absorb future losses). See the "Credit Quality" section below
for additional discussion and analysis of our allowance for credit
losses.
-- Provision for Losses on Covered Loans: During the fourth quarter of
2014, we recorded a negative (credit) provision for losses on covered
loans (i.e., loans subject to our loss-sharing agreements with the FDIC)
of $201 thousand related to a decrease in the estimated additional
credit impairment of certain loan pools subsequent to acquisition as
compared to no provisions during the third quarter of 2014 and fourth
quarter of 2013. The negative provision during the fourth quarter of
2014 resulted in a partially offsetting 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 $277 thousand
and $433 thousand during the fourth and third quarters of 2014,
respectively, as compared to no net charge-offs recognized in the fourth
quarter of 2013.
-- Non-Interest Income: Non-interest income increased $14.8 million to
$29.6 million for the three months ended December 31, 2014 from $14.8
million for the third quarter of 2014 mainly due to the aforementioned
$17.8 million gain on sale of the branch asset. Partially offsetting the
increase was a $9.2 million reduction to non-interest income related to
the change in the FDIC loss-share receivable during the fourth quarter
of 2014. Our remaining FDIC loss-share receivable totaled $13.8 million
at December 31, 2014, including $6.9 million acquired from 1st United
during the fourth quarter of 2014. See the "Non-Interest Income" section
below for additional information.
-- Non-Interest Expense: Non-interest expense increased $29.8 million to
$121.3 million for the fourth quarter of 2014 from $91.5 million for the
third quarter of 2014 largely due to the aforementioned $10.1 million
loss on the prepayment of $275 million in long-term borrowings, a $5.4
million increase in the amortization of tax credit investments
(primarily caused by additional purchases of such investments during the
fourth quarter of 2014), as well as additional operating expenses
(including merger charges) related to the acquisition of 1st United. 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
11.42 percent, 9.73 percent, 7.46 percent and 9.40 percent,
respectively, at December 31, 2014.
Gerald H. Lipkin, Chairman, President and CEO commented that, "While tempered by some infrequent charges, including costs related to the acquisition of 1st United and prepayment of borrowings, our earnings for fourth quarter of 2014 reflected the solid organic loan growth experienced since the latter part of the third quarter of 2014, strong credit quality, and the positive impact of our new Florida operations since the acquisition date. As a result, net interest income increased $14.0 million during the fourth quarter as compared to the third quarter of 2014. As we look forward to 2015, the low interest rate environment and the improving economy are expected to enhance loan growth opportunities and our net interest income. However, the current interest rate environment will continue to challenge the level of our net interest margin."
Mr. Lipkin added, "The increased revenues from the gain of the sale of a branch location during the quarter presented us an opportunity to explore and execute the prepayment of 4.52 percent long-term borrowings, and absorb the prepayment penalty costs associated with them without negatively impacting our stated capital position. Additionally, we anticipate future opportunities to reduce our overall funding cost, as $1.7 billion of high cost long-term borrowings begin to mature in the third quarter of 2015 through the end of 2018. We believe that these maturities, with an average cost of 3.89 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.
In November 2014, we completed our acquisition of 1st United, and expanded our operations into some of the most attractive markets in Florida. The 20 branch network is currently serving the new customer base well with an extensive range of Valley services and products, and the acquired systems are expected to be fully integrated into Valley during February 2015. The strong retail and lending teams have already demonstrated an ability to leverage off the Valley platform as seen through the success of our initial deposit initiatives in the Florida market and the increased size of the commercial loan pipeline since the acquisition date. Additionally, we are keenly aware of the untapped retail banking opportunities in our Florida markets, and we are focused on the expansion of our retail lending and wealth management programs, including our $499 Refinance Program, to these areas. These initiatives and other synergies expected from our recent transaction should begin to pay us additional dividends in the latter half of 2015."
Net Interest Income and Margin
Net interest income on a tax equivalent basis totaling $130.6 million for the fourth quarter of 2014 increased $14.0 million and $12.6 million as compared to the third quarter of 2014 and fourth quarter of 2013, respectively. Interest income on a tax equivalent basis increased to $172.9 million for the fourth quarter of 2014 as compared to $157.4 million for the third quarter of 2014. The $15.5 million increase from the third quarter of 2014 was mainly due to a $1.1 billion increase in average loans largely caused by $1.2 billion of loans acquired from 1st United on November 1, 2014 coupled with strong organic loan growth over the second half of 2014, and a 7 basis point increase in the yield on average loans. Interest expense increased $1.5 million to $42.3 million for the three months ended December 31, 2014. The increase in interest expense from the third quarter of 2014 was primarily driven by a $1.3 billion increase in average interest bearing deposits for the fourth quarter of 2014 and higher interest rates offered on most of our deposit products. The increase in average interest bearing deposits was largely due to $848.3 million in interest bearing deposits assumed from 1st United, new retail time deposit campaigns including Florida and higher average brokered money market account balances in the fourth quarter of 2014.
The net interest margin on a tax equivalent basis was 3.20 percent for the fourth quarter of 2014, an increase of 4 basis points from 3.16 percent in the linked third quarter of 2014 and 7 basis points decrease from 3.27 percent for the three months ended December 31, 2013. The yield on average interest earning assets decreased by 3 basis points on a linked quarter basis. The lower yield was mainly a result of the $340.9 million increase in average federal funds sold and other interest bearing deposits and this category's higher percentage of the total composition of average interest earnings assets, as well as a 9 basis point decline in the yield on average taxable investments, partially offset by a 7 basis point increase in the yield on average loans. The increase in average federal funds sold and other interest bearing deposits largely resulted from excess liquidity caused, in part, by the timing of new loan originations, lower than expected seasonal declines in government deposits and our very successful retail time deposit campaign during the fourth quarter of 2014. The yield on average taxable investment securities declined largely due to a higher level of premium amortization on residential mortgage-backed securities issued by Ginnie Mae and government sponsored enterprises. The yield on average loans benefited from higher yielding PCI loans acquired from 1st United and additional accretion on our other PCI loan portfolios largely due to better than expected cash flows on certain loan pools since the date of acquisition. However, these items were partially offset by new and refinanced loan volumes at current interest rates that remain relatively low compared to the overall yield of our loan portfolio and a moderate decline in late fees during the fourth quarter of 2014. 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. The overall cost of average interest bearing liabilities decreased by 10 basis point from 1.47 percent in the linked third quarter of 2014 primarily due to a 7 basis point decrease in the cost of average time deposits largely caused by the time deposits assumed from 1st United, and, to a much lesser extent, maturing higher cost time deposits. Our cost of total deposits totaled 0.41 percent for the fourth quarter of 2014 and remained unchanged as compared to the three months ended September 30, 2014.
Potential future loan growth from solid commercial real estate loan and automobile loan demand has continued into the early stages of the first quarter of 2015 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 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 $1.1 billion to approximately $13.3 billion at December 31, 2014 from September 30, 2014 mainly due to $954.3 million in non-covered loans acquired from 1st United. The remaining $188.6 million increase (6.2 percent on an annualized basis) was largely due to solid quarter over quarter organic growth in the total commercial real estate and automobile loan portfolios (as discussed further below).
Total commercial and industrial loans increased $160.8 million from September 30, 2014 to approximately $2.2 billion at December 31, 2014 largely due to $143.3 million in loans acquired from 1st United. The remaining $17.5 million increase was primarily from new loan demand in our New York markets, as well as $5.6 million of new loan volume contributed by our Florida Division since the acquisition date. While these new loan volumes more than offset our normal repayment and refinance activity, we continue to experience seasonal softening of loan demand from existing customers as compared to the summer months of 2014. At December 31, 2014, total commitments and usage (i.e., outstanding balances) of commercial lines of credit moderately declined as compared to September 30, 2014. Additionally, we continued to experience strong market competition for quality new and existing loan relationships during the fourth quarter.
Total commercial real estate loans (excluding construction loans) increased $685.4 million from September 30, 2014 to $6.0 billion at December 31, 2014 mostly due to $619.4 million in loans acquired from 1st United. The remaining $66.0 million increase was the result of new loan origination volumes and demand seen across many segments of commercial real estate borrowers, including $14.3 million of new loans generated by our Florida Division. Construction loans totaling $530.0 million at December 31, 2014 increased $72.8 million from September 30, 2014 due, in part, to $38.0 million in loans acquired from 1st United. During the fourth quarter, new loan demand has remained brisk for multi-family and condominium property developments mainly within the New York City boroughs of Manhattan, Brooklyn and Queens.
Total residential mortgage loans increased $79.7 million to approximately $2.5 billion at December 31, 2014 from September 30, 2014. However, new and refinanced loan originations were outpaced by normal loan repayments during the fourth quarter of 2014, as non-covered PCI loans acquired from 1st United totaled $84.3 million at December 31, 2014 and accounted for a large percentage of the increase in loan volume since September 30, 2014. Despite the low level of mortgage interest rates, consumer demand for new and refinanced mortgage loans remained relatively modest during the fourth quarter of 2014. Total residential mortgage loan originations totaled approximately $115.3 million for the fourth quarter of 2014 as compared to $76.4 million and $95.7 million for the third quarter of 2014 and the fourth quarter of 2013, respectively. During the fourth quarter of 2014, Valley sold approximately $10.3 million of residential mortgages originated for sale (including $3.4 million of residential mortgage loans held for sale at September 30, 2014). There were no purchases of residential mortgage loans from third party originators during the fourth quarter of 2014 and there were a total of $26.7 million in purchases during the year ended December 31, 2014.
Automobile loans increased by $53.5 million to $1.1 billion at December 31, 2014 as compared to September 30, 2014 as our new organic loan volumes continued to be solid due to the overall strength of the U.S. auto markets driven, in part, by declining gas prices, low interest rates and other steadily improving economic indicators. Valley has not deviated from its conservative underwriting standards, nor participated in the subprime auto lending markets to achieve its growth in auto lending. During the fourth quarter of 2014, automobile loans acquired from 1st United were immaterial.
Home equity loans totaling $491.7 million at December 31, 2014 increased by $56.3 million as compared to September 30, 2014 due to $57.5 million in loans acquired from 1st United. New home equity volumes continue to be weak, despite the low level of market interest rates. Other consumer loans increased $34.5 million to $310.3 million at December 31, 2014 as compared to $275.8 million at September 30, 2014 mainly due to continued growth and customer usage of collateralized personal lines of credit, as well as $11.8 million of loans acquired from 1st United.
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 and certain FDIC covered loans acquired from 1st United on November 1, 2014. Our covered loans consist primarily of commercial real estate loans and residential mortgage loans and totaled $211.9 million at December 31, 2014 (including $180.7 million in covered loans acquired from 1st United) as compared to $46.3 million at September 30, 2014. All of our covered loans, as well as non-covered PCI loans, 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 fourth quarter of 2014, we reduced our FDIC loss-share receivable by $7.3 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 $4.5 million during the third quarter of 2014.
Deposits. Total deposits increased $2.2 billion to approximately $14.0 billion at December 31, 2014 from September 30, 2014 largely due to $1.4 billion in deposits assumed from the 1st United acquisition and organic growth in several deposit products due to competitive pricing and promotional campaigns. Valley's savings, NOW and money market accounts totaling approximately $7.1 billion at December 31, 2014 increased $974.6 million, or 16.0 percent as compared to September 30, 2014 mostly due to $591.7 million in deposits assumed from 1st United as well as organic growth caused, in part, by slightly higher rates on most retail deposits and increased deposits from a few large customers. Time deposits increased by $559.1 million to $2.7 billion at December 31, 2014 from September 30, 2014 due to organic growth from new retail time deposit campaigns in New Jersey, New York and Florida, as well as $256.5 million in deposits assumed from 1st United during the fourth quarter. Non-interest bearing deposits totaling $4.2 billion at December 31, 2014 also increased by $638.9 million from September 30, 2014 primarily due to $566.5 million in deposits assumed from 1st United and normal fluctuations in account activity for several larger customers.
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 0.65 percent at December 31, 2014 as compared to 0.75 percent at September 30, 2014 and 1.23 percent at December 31, 2013. Of the 0.65 percent in delinquencies at December 31, 2014, 0.02 percent, or $3.0 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. In November 2014, we acquired loans totaling $1.2 billion, after purchase accounting adjustments, from the acquisition of 1st United. All of these loans are accounted for as PCI loans.
Loans past due 30 to 59 days increased $5.9 million to $20.2 million at December 31, 2014 compared to September 30, 2014 mainly due to increases of $7.7 million and $1.2 million in the commercial real estate loans and commercial and industrial loans, respectively, partially offset by a $2.7 million decrease in residential mortgage loans. The increase within the commercial real estate loan category was mostly related to a $4.0 million potential problem loan and performing matured loans in the normal process of renewal totaling $3.0 million at December 31, 2014.
Loans past due 60 to 89 days increased $766 thousand to $5.6 million at December 31, 2014 compared to September 30, 2014 largely due to a $1.3 million increase in residential mortgage loan delinquencies in this category.
Loans past due 90 days or more and still accruing decreased $7.0 million to $5.5 million at December 31, 2014 compared to $12.5 million at September 30, 2014. Within this past due category, construction and residential mortgage loans decreased $5.8 million and $994 thousand, respectively. The decrease in construction loans past due 90 days or more was largely caused by the completion of the renewal underwriting process for $9.8 million of performing matured loans reported in this category at September 30, 2014, partially offset by a potential problem loan totaling $4.0 million at December 31, 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 $83.1 million at December 31, 2014 compared to $88.8 million at September 30, 2014. The $5.7 million decrease in NPAs from September 30, 2014 was largely due to declines in non-accrual loans and OREO discussed further below.
Non-accrual loans decreased $4.1 million to $55.8 million at December 31, 2014 as compared to $59.9 million at September 30, 2014 mainly due to a $4.3 million decrease within the commercial real estate loan category primarily caused by loan collections, including the full payoff of three non-accrual loans totaling $3.3 million during the fourth quarter of 2014.
OREO properties decreased $1.3 million to $14.2 million at December 31, 2014 from $15.5 million at September 30, 2014 due, in part, to a $1.4 million valuation write-down on one OREO property at December 31, 2014. The net carrying value of this OREO property was $3.5 million at December 31, 2014 based upon a current third party appraisal completed during the fourth quarter of 2014.
Our non-covered loan portfolio, totaling $13.3 billion at December 31, 2014, had net loan charge-offs of $4.0 million for the fourth quarter of 2014 as compared to $182 thousand and $5.4 million for the third quarter of 2014 and fourth quarter of 2013, respectively. The quarter over quarter increase in net loan charge-offs was in largely due to a $2.7 million collateral valuation write-down related to one impaired construction loan relationship at December 31, 2014. During the fourth quarter of 2014, we recorded a $4.2 million provision for losses on non-covered loans and unfunded letters of credit as compared to a negative (credit) provision of $423 thousand for the third quarter of 2014 and a $6.4 million provision for the fourth quarter of 2013.
For the covered loan pools, net loan charge-offs totaled $277 thousand during the fourth quarter of 2014 as compared to $433 thousand for the third quarter of 2014 and no net loan charge-offs recognized in fourth quarter of 2013. Charge-offs on covered loan pools, when incurred, are substantially covered by loss-sharing agreements with the FDIC. We recognized a $201 thousand negative (credit) provision for losses on covered loans during the four quarter of 2014 as compared to no provision for losses on covered loans for the three months ended September 30, 2014 and December 31, 2013, respectively. The negative provision during the fourth quarter of 2014 related to a decrease in the estimated additional credit impairment of certain loan pools subsequent to acquisition caused by the continued positive trend in actual cash flows received from such loan pools. As a result of the aforementioned net loan charge-offs and negative provision, our allowance for losses on covered loans was reduced from $678 thousand at September 30, 2014 to $200 thousand at December 31, 2014.
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 December 31, 2014, September 30, 2014, and December 31, 2013:
December 31, 2014 September 30, 2014 December 31, 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* $45,440 2.03% $47,843 2.30% $54,534 2.73%
Commercial real estate loans:
Commercial real estate 27,426 0.45% 26,204 0.49% 25,570 0.51%
Construction 15,414 2.91% 10,862 2.38% 10,341 2.41%
------------
Total commercial real
estate loans 42,840 0.65% 37,066 0.64% 35,911 0.66%
Residential mortgage
loans 5,063 0.20% 6,147 0.25% 7,663 0.31%
Consumer loans:
Home equity 1,200 0.24% 1,365 0.31% 1,244 0.28%
Auto and other consumer 3,979 0.27% 4,415 0.32% 3,112 0.28%
-------------
Total consumer loans 5,179 0.27% 5,780 0.32% 4,356 0.28%
Unallocated 5,565 - 7,045 - 7,578 -
----- ----- -----
Allowance for non-covered loans
and unfunded letters of credit 104,087 0.78% 103,881 0.86% 110,042 0.96%
Allowance for covered
loans 200 0.09% 678 1.46% 7,070 7.35%
--- --- -----
Total allowance for
credit losses $104,287 0.77% $104,559 0.86% $117,112 1.01%
======== ======== ========
* 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 0.78 percent at December 31, 2014 as compared to 0.86 percent and 0.96 percent at September 30, 2014 and December 31, 2013, respectively. At December 31, 2014, our allowance allocations for losses as a percentage of total loans in most loan categories, except for construction loans, declined or did not significantly change as compared to September 30, 2014 due to several favorable trends in our credit quality which continued during the fourth quarter of 2014. Overall, levels of loan delinquencies and internally classified loans continued to trend downward during the fourth quarter as both categories reflect the strengthening economy and significant repayments within our impaired loan portfolio. Additionally, our net loan charge-offs also remained at an acceptable level during the fourth quarter, and largely related to one construction loan relationship. 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 December 31, 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 $1.5 billion) was 0.89 percent at December 31, 2014 as compared to 0.90 percent at September 30, 2014. PCI loans, including all of the loans acquired from 1st United during the fourth quarter of 2014, 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. Due to the adequacy of such discounts, there were no allowance reserves related to non-covered PCI loans at December 31, 2014, September 30, 2014 and December 31, 2013.
Non-Interest Income
Non-interest income increased $14.8 million to $29.6 million for the fourth quarter of 2014 from $14.8 million for the linked quarter ended September 30, 2014 largely due to a $17.8 million increase in gains on sales of assets almost entirely related to the sale of a Manhattan branch location in December 2014. The increase was partially offset by a $5.4 million increase in the reduction to non-interest income related to the change in the FDIC loss-share receivable during the fourth quarter of 2014. The larger reduction in the fourth quarter of 2014, which totaled $9.2 million, was mostly due to the prospective recognition of decreases in the receivable attributable to better than originally estimated cash flows on certain covered loan pools, as well as reductions related to the FDIC's portion of loan recoveries from closed (or "zero-balance") loan pools. There were no other significant fluctuations within the non-interest income categories during the fourth quarter of 2014 as compared to the third quarter of 2014.
Non-Interest Expense
Non-interest expense increased $29.7 million to $121.3 million for the fourth quarter of 2014 as compared to $91.5 million for the third quarter of 2014 partially due to the $10.1 million prepayment penalty paid on the extinguishment of $275 million in long-term borrowings during the fourth quarter. Amortization of tax credit investments increased $5.4 million to $10.0 million in the fourth quarter as compared to the third quarter of 2014 mostly due to additional purchases of such investments, which positively impacted our income tax expense and net income through tax credits recognized during the fourth quarter. Salary and employee benefits increased $7.3 million as compared to the third quarter of 2014 primarily due to the additional staffing related to the 1st United acquisition, as well as a $2.5 million increase in cash incentive accruals. Other expense increased $2.2 million to $15.6 million for the three months ended December 31, 2014 as compared to the third quarter of 2014 largely due to additional operating costs related to the 1st United acquisition and a $760 thousand loss on the other real estate owned caused mostly by valuation write-downs at December 31, 2014. Also during the fourth quarter of 2014, net occupancy and equipment expense increased $1.8 million due, in part, to the additional costs associated with the 20 branch network acquired from 1st United, and professional and legal fees increased $1.6 million mostly due to merger transaction costs paid to our third party advisors. Total merger related expenses (primarily within professional and legal fees) were approximately $1.5 million for the fourth quarter of 2014 as compared to $480 thousand during the third quarter of 2014.
We do not expect a material amount of cost reductions from the consolidation of 1st United's operations prior to the systems integration scheduled for late February 2015.
Income Tax Expense
Income tax expense was $7.8 million for the three months ended December 31, 2014 reflecting an effective tax rate of 23.7 percent, as compared to $10.7 million for the third quarter of 2014 reflecting an effective tax rate of 27.8 percent and $16.1 million for the fourth quarter of 2013 reflecting an effective tax rate of 28.9 percent. The decrease in effective tax rate in the fourth quarter of 2014 compared to the third quarter of 2014 was primarily the result of: (1) a $7.6 million charge mostly caused by the effect of the 1st United acquisition in Florida on the valuation of our state deferred tax assets, offset by (2) an increase of $7.1 million in tax credits, (3) a $2.7 million release from the reserve for tax uncertainties due to the expiration of the statute of limitations and (4) lower pre-tax income. The decrease in effective tax rate and tax expense as compared to the fourth quarter of 2013 was also primarily due to the aforementioned items.
For 2015, 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 $18.8 billion in assets. Its principal subsidiary, Valley National Bank, currently operates 224 branch locations serving northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn, Queens and Long Island, and southeast and central Florida. 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 2018;
-- 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;
-- 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;
-- 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.
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) 2014 2014 2013 2014 2013
---- ---- ---- ---- ----
FINANCIAL DATA:
---------------
Net interest income $128,646 $114,668 $116,128 $474,757 $447,720
Net interest income -
FTE (1) 130,618 116,639 118,040 482,690 455,609
Non-interest income
(2) 29,563 14,781 42,073 77,616 128,653
Non-interest expense 121,267 91,536 96,092 403,255 381,338
Income tax expense 7,827 10,654 16,061 31,062 46,979
Net income 25,135 27,682 39,608 116,172 131,961
Weighted average number of common
shares outstanding:
Basic 221,471,635 200,614,091 199,613,524 205,716,293 199,309,425
Diluted 221,471,635 200,614,091 199,613,524 205,716,293 199,309,425
Per common share data:
Basic
earnings $0.11 $0.14 $0.20 $0.56 $0.66
Diluted
earnings 0.11 0.14 0.20 0.56 0.66
Cash
dividends
declared 0.11 0.11 0.11 0.44 0.60
Book value 8.03 7.89 7.72 8.03 7.72
Tangible book value
(3) 5.38 5.61 5.39 5.38 5.39
Tangible common
equity to tangible
assets (3) 6.87% 6.92% 6.86% 6.87% 6.86%
Closing stock price -
high $10.04 $10.12 $10.51 $10.80 $10.65
Closing stock price -
low 9.21 9.53 9.70 9.21 8.85
FINANCIAL RATIOS: `
-----------------
Net interest margin 3.15% 3.11% 3.22% 3.16% 3.14%
Net interest margin -
FTE (1) 3.20 3.16 3.27 3.21 3.20
Annualized return on
average assets 0.55 0.67 0.98 0.69 0.83
Annualized return on
average
shareholders' equity 5.65 7.00 10.35 7.18 8.69
Annualized return on
average tangible
shareholders' equity
(3) 8.26 9.86 14.88 10.26 12.51
Efficiency ratio (4) 76.65 70.71 60.74 73.00 66.16
AVERAGE BALANCE SHEET ITEMS:
----------------------------
Assets $18,307,999 $16,483,336 $16,188,170 $16,825,312 $15,975,253
Interest earning
assets 16,315,016 14,763,834 14,441,073 15,040,783 14,242,202
Loans 13,042,303 11,907,275 11,501,510 12,081,683 11,187,968
Interest bearing
liabilities 12,319,782 11,101,723 10,760,706 11,315,340 10,753,334
Deposits 13,388,911 11,640,611 11,317,584 11,919,161 11,268,322
Shareholders' equity 1,780,334 1,581,877 1,530,019 1,618,965 1,519,299
VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
As Of
-----
BALANCE SHEET ITEMS: December 31, September 30, June 30, March 31, December 31,
--------------------
(In thousands) 2014 2014 2014 2014 2013
---- ---- ---- ---- ----
Assets $18,793,855 $16,726,410 $16,335,967 $16,344,464 $16,156,541
Total loans 13,473,913 12,165,377 11,813,428 11,694,594 11,567,612
Non-covered loans 13,262,022 12,119,086 11,750,875 11,613,664 11,471,447
Deposits 14,034,116 11,861,487 11,416,052 11,267,985 11,319,262
Shareholders' equity 1,863,017 1,584,198 1,573,656 1,559,889 1,541,040
LOANS:
------
(In thousands)
Non-covered Loans
Commercial and industrial $2,237,298 $2,076,512 $2,064,751 $2,019,099 $1,995,084
Commercial real estate:
Commercial real estate 6,032,190 5,346,818 5,100,442 5,083,744 4,981,675
Construction 529,963 457,163 413,262 413,795 429,231
------- ------- ------- ------- -------
Total commercial real estate 6,562,153 5,803,981 5,513,704 5,497,539 5,410,906
Residential mortgage 2,515,675 2,436,022 2,461,516 2,472,180 2,499,965
Consumer:
Home equity 491,745 435,450 436,360 440,006 449,009
Automobile 1,144,831 1,091,287 1,021,782 957,036 901,399
Other consumer 310,320 275,834 252,762 227,804 215,084
------- ------- ------- ------- -------
Total consumer loans 1,946,896 1,802,571 1,710,904 1,624,846 1,565,492
--------- --------- --------- --------- ---------
Total non-covered loans $13,262,022 $12,119,086 $11,750,875 $11,613,664 $11,471,447
Covered loans* 211,891 46,291 62,553 80,930 96,165
------- ------ ------ ------ ------
Total loans $13,473,913 $12,165,377 $11,813,428 $11,694,594 $11,567,612
=========== =========== =========== =========== ===========
_________________________
* Loans that Valley National Bank will share losses with the FDIC are referred to as "covered loans".
CAPITAL RATIOS:
---------------
Tier 1 leverage ratio 7.46% 7.39% 7.41% 7.37% 7.27%
Risk-based capital - Tier 1 9.73 9.58 9.80 9.72 9.65
Risk-based capital - Total Capital 11.42 11.44 11.89 11.85 11.87
Tier 1 common capital ratio (3) 9.40 9.22 9.43 9.35 9.28
VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
Three Months Ended Years Ended
------------------
ALLOWANCE FOR CREDIT LOSSES: December 31, September 30, December 31, December 31,
---------------------------- ------------
($ in thousands) 2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Beginning balance -Allowance
for credit losses $104,559 $105,597 $116,075 $117,112 $132,495
Loans charged-off: (5)
Commercial and
industrial (916) (1,852) (2,515) (12,722) (19,837)
Commercial real
estate - (181) (1,884) (4,894) (7,060)
Construction (2,767) - (1,633) (4,576) (3,786)
Residential
mortgage (489) (240) (1,108) (1,004) (4,446)
Consumer (1,391) (72) (1,028) (3,702) (5,120)
-------
Total loans charged-off (5,563) (2,345) (8,168) (26,898) (40,249)
------ ------ ------ ------- -------
Charged-off loans recovered:
(5)
Commercial and
industrial 720 1,190 1,176 6,874 4,219
Commercial real
estate 279 26 730 2,198 816
Construction - - 54 912 929
Residential
mortgage 4 8 400 248 768
Consumer 308 506 405 1,957 2,039
---
Total loans recovered 1,311 1,730 2,765 12,189 8,771
----- ----- ----- ------ -----
Net charge-offs (5) (4,252) (615) (5,403) (14,709) (31,478)
Provision for credit losses 3,980 (423) 6,440 1,884 16,095
----- ---- ----- ----- ------
Ending balance -Allowance for
credit losses $104,287 $104,559 $117,112 $104,287 $117,112
======== ======== ======== ======== ========
Components of allowance for
credit losses:
Allowance for
non-covered
loans $102,153 $101,760 $106,547 $102,153 $106,547
Allowance for
covered loans 200 678 7,070 200 7,070
---
Allowance for loan losses 102,353 102,438 113,617 102,353 113,617
Allowance for
unfunded
letters of
credit 1,934 2,121 3,495 1,934 3,495
-----
Allowance for credit losses $104,287 $104,559 $117,112 $104,287 $117,112
======== ======== ======== ======== ========
Components of provision for
credit losses:
Provision for
losses on non-
covered loans $4,368 $ - $6,435 $9,317 $17,171
Provision for
losses on
covered loans (201) - - (5,872) (2,276)
Provision for
unfunded
letters of
credit (187) (423) 5 (1,561) 1,200
-----
Provision for credit losses $3,980 $(423) $6,440 $1,884 $16,095
====== ===== ====== ====== =======
Annualized ratio of net charge-
offs of
non-covered
loans to
average loans 0.12% 0.01% 0.19% 0.11% 0.28%
Annualized ratio of total net
charge-offs
to average
loans 0.13% 0.02% 0.19% 0.12% 0.28%
Allowance for non-covered loan
losses as
a % of non-
covered loans 0.77% 0.84% 0.93% 0.77% 0.93%
Allowance for credit losses as
a % of total
loans 0.77% 0.86% 1.01% 0.77% 1.01%
VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
As Of
-----
ASSET QUALITY: (6) December 31, September 30, December 31,
-----------------
($ in thousands) 2014 2014 2013
---- ---- ----
Accruing past due loans:
30 to 59 days past due:
Commercial and industrial $1,630 $476 $6,398
Commercial real estate 8,938 1,194 9,142
Construction 448 - 1,186
Residential mortgage 6,200 8,871 6,595
Consumer 2,982 3,741 3,792
-----
Total 30 to 59 days past
due 20,198 14,282 27,113
60 to 89 days past due:
Commercial and industrial 1,102 629 571
Commercial real estate 113 788 2,442
Construction - 154 4,577
Residential mortgage 3,575 2,304 1,939
Consumer 764 913 784
---
Total 60 to 89 days past
due 5,554 4,788 10,313
90 or more days past due:
Commercial and industrial 226 256 233
Commercial real estate 49 52 7,591
Construction 3,988 9,833 -
Residential mortgage 1,063 2,057 1,549
Consumer 152 278 118
---
Total 90 or more days
past due 5,478 12,476 9,491
----- ------ -----
Total accruing past due
loans $31,230 $31,546 $46,917
======= ======= =======
Non-accrual loans:
Commercial and industrial $8,467 $7,251 $21,029
Commercial real estate 22,098 26,379 43,934
Construction 5,223 6,578 8,116
Residential mortgage 17,760 17,305 19,949
Consumer 2,209 2,380 2,035
-----
Total non-accrual loans 55,757 59,893 95,063
Non-performing loans
held for sale 7,130 7,350 -
Other real estate owned
(7) 14,249 15,534 19,580
Other repossessed assets 1,232 1,260 6,447
Non-accrual debt
securities (8) 4,729 4,725 3,771
----- ----- -----
Total non-performing
assets ("NPAs") $83,097 $88,762 $124,861
======= ======= ========
Performing troubled debt
restructured loans $97,743 $107,134 $107,037
Total non-accrual loans
as a % of loans 0.41% 0.49% 0.82%
Total accruing past due
and non-accrual loans
as a % of loans 0.65% 0.75% 1.23%
Allowance for losses on
non-covered loans as a
% of
non-accrual loans 183.21% 169.90% 112.08%
Non-performing purchased
credit-impaired loans:
(9)
Non-covered loans $32,774 $12,970 $24,988
Covered loans 14,939 8,375 21,758
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 Years Ended
------------------
December 31, September 30, December 31, December 31,
------------
(In thousands) 2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Trading
securities $47 $(35) $(6) $(31) $28
Junior
subordinated
debentures - - 1,156 - 881
--- --- ----- --- ---
Total trading
gains (losses),
net $47 $(35) $1,150 $(31) $909
--- ---- ------ ---- ----
(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
------------------------------
December 31, September 30, December 31,
($ in thousands) 2014 2014 2013
---- ---- ----
Tier 1 common:
--------------
Total equity $1,863,017 $1,584,198 $1,541,040
Plus (less):
Net unrealized losses
on securities
available for sale,
net of tax 1,643 7,543 21,661
Accumulated net losses
on cash flow hedges,
net of tax 14,533 10,633 6,271
Defined benefit pension
plan, net of tax 26,218 10,210 10,320
Goodwill, net of tax (575,050) (427,392) (427,392)
Disallowed other
intangible assets (20,906) (10,570) (13,122)
Disallowed deferred tax
assets (34,989) (35,010) (41,252)
------- ------- -------
Tier 1 common capital 1,274,466 1,139,612 1,097,526
Trust preferred
securities 44,000 44,000 44,000
------ ------ ------
Total Tier 1 capital* $1,318,466 $1,183,612 $1,141,526
---------- ---------- ----------
Risk-weighted assets
(under Federal Reserve
Board
Capital Regulatory
Guidelines (RWA)) $13,555,991 $12,358,464 $11,830,604
Tier 1 capital ratio
(Total Tier 1 capital
/RWA) 9.73% 9.58% 9.65%
Tier 1 common capital
ratio (Total Tier 1
common /RWA) 9.40% 9.22% 9.28%
Tier 1 Capital excludes net
unrealized gains (losses) on
available-for-sale debt
securities and net unrealized
gains on available-for-sale
equity securities with readily
determinable fair values, in
accordance with regulatory
risk-based capital guidelines.
In arriving at Tier 1 Capital,
institutions are required to
deduct net unrealized losses on
available-for-sale equity
securities with readily
determinable fair values, net
* of tax.
VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
NOTES TO SELECTED FINANCIAL DATA-CONTINUED
Three Months Ended Years Ended
------------------
December 31, September 30, December 31, December 31,
($ in thousands, except for share data) 2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Tangible book value per common share:
-------------------------------------
Common shares outstanding 232,110,975 200,674,966 199,593,109 232,110,975 199,593,109
----------- ----------- ----------- ----------- -----------
Shareholders' equity $1,863,017 $1,584,198 $1,541,040 $1,863,017 $1,541,040
Less: Goodwill and other intangible assets (614,667) (458,402) (464,364) (614,667) (464,364)
-------- -------- -------- -------- --------
Tangible shareholders' equity $1,248,350 $1,125,796 $1,076,676 $1,248,350 $1,076,676
Tangible book value $5.38 $5.61 $5.39 $5.38 $5.39
Tangible common equity to tangible assets:
------------------------------------------
Tangible shareholders' equity $1,248,350 $1,125,796 $1,076,676 $1,248,350 $1,076,676
---------- ---------- ---------- ---------- ----------
Total assets $18,793,855 $16,726,410 $16,156,541 $18,793,855 $16,156,541
Less: Goodwill and other intangible assets (614,667) (458,402) (464,364) (614,667) (464,364)
-------- -------- -------- -------- --------
Tangible assets $18,179,188 $16,268,008 $15,692,177 $18,179,188 $15,692,177
Tangible common equity to tangible assets 6.87% 6.92% 6.86% 6.87% 6.86%
Annualized return on average tangible shareholders' equity:
-----------------------------------------------------------
Net income $25,135 $27,682 $39,608 $116,172 $131,961
Average shareholders' equity 1,780,334 1,581,877 1,530,019 1,618,965 1,519,299
Less: Average goodwill and other intangible assets (562,497) (459,210) (464,939) (486,769) (464,085)
-------- -------- -------- -------- --------
Average tangible shareholders' equity $1,217,837 $1,122,667 $1,065,080 $1,132,196 $1,055,214
Annualized return on average tangible
shareholders' equity 8.26% 9.86% 14.88% 10.26% 12.51%
(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.
Total loans
charged-
off and
recovered
includes
the
following
covered
(5) loans:
Three Months Ended Years Ended
------------------
(In thousands) December 31, September 30, December 31, December 31,
------------
Covered loans charged-off: 2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Commercial and industrial $(277) $(433) $ - $(908) $(84)
Commercial mortgage - - - (425) -
Residential mortgage - - - (126) (62)
--- --- --- ---- ---
Total covered loans charged-off (277) (433) - (1,459) (146)
Charged-off loans recovered:
Construction - - - 462 -
--- --- --- --- ---
Total covered loans recovered - - - 462 -
--- --- --- --- ---
Net charge-offs $(277) $(433) $ - $(997) $(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 and 2014.
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 $9.2
million, $6.2 million and
$12.3 million, at December
31, 2014, September 30, 2014
and December 31, 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 totaling
$621 thousand, $625 thousand
and $1.6 million at December
31, 2014, September 30, 2014
and December 31, 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.
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(in thousands, except for share data)
December 31,
------------
2014 2013
---- ----
Assets
Cash and due from banks $462,569 $234,253
Interest bearing deposits with banks 367,838 134,915
Investment securities:
Held to maturity (fair value of $1,815,976 at December
31, 2014 and $1,711,427 at December 31, 2013) 1,778,316 1,731,737
Available for sale 886,970 829,692
Trading securities 14,233 14,264
------ ------
Total investment securities 2,679,519 2,575,693
--------- ---------
Loans held for sale, at fair value 24,295 10,488
Non-covered loans 13,262,022 11,471,447
Covered loans 211,891 96,165
Less: Allowance for loan losses (102,353) (113,617)
-------- --------
Net loans 13,371,560 11,453,995
---------- ----------
Premises and equipment, net 282,997 270,138
Bank owned life insurance 375,640 344,023
Accrued interest receivable 57,333 53,964
Due from customers on acceptances outstanding 4,197 5,032
FDIC loss-share receivable 13,848 32,757
Goodwill 575,892 428,234
Other intangible assets, net 38,775 36,130
Other assets 539,392 576,919
------- -------
Total Assets $18,793,855 $16,156,541
=========== ===========
Liabilities
Deposits:
Non-interest bearing $4,235,515 $3,717,271
Interest bearing:
Savings, NOW and money market 7,056,133 5,422,722
Time 2,742,468 2,179,269
--------- ---------
Total deposits 14,034,116 11,319,262
---------- ----------
Short-term borrowings 146,781 281,455
Long-term borrowings 2,526,408 2,792,306
Junior subordinated debentures issued to capital trusts 41,252 41,089
Bank acceptances outstanding 4,197 5,032
Accrued expenses and other liabilities 178,084 176,357
------- -------
Total Liabilities 16,930,838 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 232,127,098 shares at December 31, 2014
and 199,629,268 shares at December 31, 2013) 81,072 69,941
Surplus 1,693,752 1,403,375
Retained earnings 130,845 106,340
Accumulated other comprehensive loss (42,495) (38,252)
Treasury stock, at cost (16,123 common shares at
December 31, 2014 and 36,159 common shares at December
31, 2013) (157) (364)
---- ----
Total Shareholders' Equity 1,863,017 1,541,040
--------- ---------
Total Liabilities and Shareholders' Equity $18,793,855 $16,156,541
=========== ===========
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except for share data)
Three Months Ended Years Ended
------------------
December 31, September 30, December 31, December 31,
------------
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Interest Income
Interest and fees on
loans $150,296 $135,108 $136,176 $552,821 $537,301
Interest and
dividends on
investment
securities:
Taxable 15,159 15,134 15,538 62,458 57,392
Tax-exempt 3,650 3,647 3,538 14,683 14,426
Dividends 1,570 1,522 1,539 6,272 6,240
Interest on federal
funds sold and other
short-term
investments 267 48 124 369 738
--- --- --- --- ---
Total interest income 170,942 155,459 156,915 636,603 616,097
------- ------- ------- ------- -------
Interest Expense
Interest on deposits:
Savings, NOW and
money market 6,000 4,860 4,433 19,671 17,863
Time 7,686 6,981 6,744 27,882 29,928
Interest on short-
term borrowings 132 218 212 972 590
Interest on long-
term borrowings and
junior subordinated
debentures 28,478 28,732 29,398 113,321 119,996
------ ------ ------ ------- -------
Total interest
expense 42,296 40,791 40,787 161,846 168,377
------ ------ ------ ------- -------
Net Interest Income 128,646 114,668 116,128 474,757 447,720
Provision for losses
on non-covered
loans and unfunded
letters of credit 4,181 (423) 6,440 7,756 18,371
Provision for losses
on covered loans (201) - - (5,872) (2,276)
---- --- --- ------ ------
Net Interest Income
After Provision for
Credit Losses 124,666 115,091 109,688 472,873 431,625
------- ------- ------- ------- -------
Non-Interest Income
Trust and investment
services 2,415 2,411 2,238 9,512 8,610
Insurance commissions 4,232 3,632 3,631 16,853 15,907
Service charges on
deposit accounts 5,662 5,722 6,241 22,771 24,115
Gains on securities
transactions, net 643 103 10,670 745 14,678
Trading gains
(losses), net 47 (35) 1,150 (31) 909
Fees from loan
servicing 1,751 1,806 1,931 7,013 7,020
Gains (losses) on
sales of loans, net 234 (95) 1,540 1,731 33,695
Gains on sales of
assets, net 17,876 83 11,547 18,087 10,947
Bank owned life
insurance 1,799 1,571 1,644 6,392 5,962
Change in FDIC loss-
share receivable (9,182) (3,823) (1,247) (20,792) (8,427)
Other 4,086 3,406 2,728 15,335 15,237
----- ----- ----- ------ ------
Total non-interest
income 29,563 14,781 42,073 77,616 128,653
------ ------ ------ ------ -------
Non-Interest Expense
Salary and employee
benefits expense 52,806 45,501 48,671 193,489 194,410
Net occupancy and
equipment expense 18,784 17,011 16,136 74,492 71,634
FDIC insurance
assessment 3,837 3,534 3,931 14,051 16,767
Amortization of other
intangible assets 3,021 2,201 2,464 9,919 8,258
Professional and
legal fees 5,188 3,609 4,202 16,859 16,491
Loss on
extinguishment of
debt 10,132 - - 10,132
-
Amortization of tax
credit investments 10,048 4,630 7,914 24,196 14,352
Advertising 1,852 1,664 1,272 4,666 6,127
Other 15,599 13,386 11,502 55,451 53,299
------ ------ ------ ------ ------
Total non-interest
expense 121,267 91,536 96,092 403,255 381,338
------- ------ ------ ------- -------
Income Before Income
Taxes 32,962 38,336 55,669 147,234 178,940
Income tax expense 7,827 10,654 16,061 31,062 46,979
----- ------ ------ ------ ------
Net Income $25,135 $27,682 $39,608 $116,172 $131,961
======= ======= ======= ======== ========
Earnings Per Common
Share:
Basic $0.11 $0.14 $0.20 $0.56 $0.66
Diluted 0.11 0.14 0.20 0.56 0.66
Cash Dividends
Declared per Common
Share 0.11 0.11 0.11 0.44 0.60
Weighted Average
Number of Common
Shares Outstanding:
Basic 221,471,635 200,614,091 199,613,524 205,716,293 199,309,425
Diluted 221,471,635 200,614,091 199,613,524 205,716,293 199,309,425
VALLEY NATIONAL BANCORP
Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and
Net Interest Income on a Tax Equivalent Basis
Three Months Ended
------------------
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Average Avg. Average Avg. Average Avg.
($ in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ---- ------- -------- ----
Assets
Interest earning assets
Loans (1)(2) $13,042,303 $150,302 4.61% $11,907,275 $135,115 4.54% $11,501,510 $136,183 4.74%
Taxable investments (3) 2,284,183 16,729 2.93% 2,203,431 16,656 3.02% 2,169,989 17,077 3.15%
Tax-exempt investments (1)(3) 543,005 5,616 4.14% 548,548 5,611 4.09% 561,370 5,443 3.88%
Federal funds sold and other
interest bearing deposits 445,525 267 0.24% 104,580 48 0.18% 208,204 124 0.24%
Total interest earning assets 16,315,016 172,914 4.24% 14,763,834 157,430 4.27% 14,441,073 158,827 4.40%
------- ------- -------
Other assets 1,992,983 1,719,502 1,747,097
Total assets $18,307,999 $16,483,336 $16,188,170
=========== =========== ===========
Liabilities and shareholders' equity
Interest bearing liabilities:
Savings, NOW and money market deposits $6,799,900 $6,000 0.35% $5,830,967 $4,860 0.33% $5,452,246 $4,433 0.33%
Time deposits 2,515,621 7,686 1.22% 2,169,590 6,981 1.29% 2,187,372 6,744 1.23%
Short-term borrowings 169,396 132 0.31% 261,801 218 0.33% 249,493 212 0.34%
Long-term borrowings
(4) 2,834,865 28,478 4.02% 2,839,365 28,732 4.05% 2,871,595 29,398 4.10%
Total interest bearing liabilities 12,319,782 42,296 1.37% 11,101,723 40,791 1.47% 10,760,706 40,787 1.52%
------ ------ ------
Non-interest bearing deposits 4,073,390 3,640,054 3,677,966
Other liabilities 134,493 159,682 219,479
Shareholders' equity 1,780,334 1,581,877 1,530,019
---------
Total liabilities and shareholders' equity $18,307,999 $16,483,336 $16,188,170
=========== =========== ===========
Net interest income/interest rate spread (5) $130,618 2.87% $116,639 2.80% $118,040 2.88%
Tax equivalent adjustment (1,972) (1,971) (1,912)
------
Net interest income, as reported $128,646 $114,668 $116,128
======== ======== ========
Net interest margin (6) 3.15% 3.11% 3.22%
Tax equivalent effect 0.05% 0.05% 0.05%
Net interest margin on a fully tax equivalent basis
(6) 3.20% 3.16% 3.27%
==== ==== ====
_________________________
(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.
Includes junior subordinated
debentures issued to capital
trusts which are presented
separately on the consolidated
(4) statements of condition.
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
(5) a fully tax equivalent basis.
(6) Net interest income as a
percentage of total average
interest earning assets.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/valley-national-bancorp-reports-fourth-quarter-earnings-solid-organic-loan-growth-and-asset-quality-300027476.html
SOURCE Valley National Bancorp
