VALLEY NATIONAL BANCORP 
By WAYNE, N.J., Jan. 30, 2013 /PRNewswire/ -- Valley National Bancorp (NYSE:VLY), the holding company for Valley National Bank, today reported net income for the fourth quarter of 2012 of $36.8 million, or $0.19 per diluted common share as compared to the fourth quarter of 2011 earnings of $24.5 million, or $0.14 per diluted common share. All common share data presented in this press release, including the earnings per diluted common share data above, were adjusted for a five percent stock dividend issued on May 25, 2012.
Net income for the year ended December 31, 2012 was $143.6 million, or $0.73 per diluted common share, compared to 2011 earnings of $132.5 million, or $0.74 per diluted common share.
Key highlights for the fourth quarter:
-- Mortgage Banking Activities: Residential mortgage loan originations
(including both new and refinanced loans) totaled a record high $531
million for the fourth quarter and were up almost 18 percent as compared
to a strong third quarter of 2012. Valley sold approximately $389
million of residential mortgages during the fourth quarter, up slightly
from the third quarter of 2012. However, gains on sales of residential
mortgage loans fell $9.5 million to $15.6 million for the fourth quarter
of 2012 as compared to $25.1 million for the third quarter of 2012
mainly due to a decline in mark to market gains on our loans held for
sale carried at fair value caused by changes in the volume of such loans
held at the beginning and end of each quarter. We expect the mortgage
loan pipeline to continue to be robust during the first quarter of 2013
due to the historically low market interest rates, a continued housing
market recovery and the proven success of Valley's low fixed-price
refinance programs.
-- Trading Mark to Market: Net trading gains and losses mainly represent
non-cash mark to market gains and losses on our junior subordinated
debentures carried at fair value. Net trading gains recognized for the
fourth quarter of 2012 were $2.2 million and increased approximately
$2.2 million and $3.0 million from the third quarter of 2012 and the
fourth quarter of 2011, respectively.
-- Investments: We recognized no other-than-temporary impairment charges in
earnings during the fourth quarter as compared to $4.7 million ($2.7
million after taxes, or $0.01 per common share) during the third quarter
of 2012 and $19.1 million ($11.7 million after taxes, or $0.07 per
common share) during the fourth quarter of 2011. Our net gains on
securities transactions were immaterial for the fourth quarter of 2012
as compared to $1.5 million ($937 thousand after taxes, or less than
$0.01 per common share) in the third quarter of 2012 and $12.0 million
($7.2 million after taxes, or $0.04 per common share) during the fourth
quarter of 2011.
-- Loans: Total non-covered loans (i.e., loans which are not subject to our
loss-sharing agreements with the FDIC) decreased by $99.3 million, or
3.6 percent on an annualized basis, to $10.8 billion at December 31,
2012 from September 30, 2012 largely due to our decision to sell the
majority of our new and refinanced residential mortgage loans, some
large repayments within the commercial loan portfolios and continued
strong competition for high quality commercial borrowers. Despite the
strong competition and prepayments, the commercial and industrial loan
portfolio had record loan originations of $244 million during the fourth
quarter of 2012 and combined with the commercial real estate portfolio
these two categories had record loan originations of $1.4 billion in
2012. Additionally, our other consumer loan portfolio experienced
organic growth of $19.6 million, or 49 percent on an annualized basis,
during the fourth quarter of 2012 mainly due to higher collateralized
personal lines of credit balances. Total covered loans (i.e., loans
subject to our loss-sharing agreements with the FDIC) decreased to
$180.7 million, or 1.6 percent of our total loans, at December 31, 2012
as compared to $207.5 million at September 30, 2012, mainly due to
normal collection activity.
-- Asset Quality: Non-performing assets increased 5.5 percent from the
third quarter of 2012 as total non-accrual loans increased to $131.8
million, or 1.20 percent of our entire loan portfolio of $11.0 billion,
at December 31, 2012, compared to $121.4 million, or 1.09 percent, at
September 30, 2012. The increase in non-accruals was primarily due to
the addition of two commercial loan relationships totaling $8.8 million
and $4.6 million, respectively. At December 31, 2012 and September 30,
2012, our non-accrual loans also included performing residential
mortgage and home equity loans totaling $3.0 million, which were
classified as non-accrual loans due to our adherence to newly issued
Office of the Comptroller of the Currency (OCC) guidance during the
third quarter of 2012. 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 $5.2 million for the fourth quarter of 2012 as
compared to $7.3 million for the third quarter of 2012 and $11.9 million
for the fourth quarter of 2011. Net loan charge-offs on non-covered
loans decreased to $4.3 million for the fourth quarter of 2012 (or 0.15
percent of average loans on an annualized basis), compared to $5.9
million for the third quarter of 2012 and $14.4 million for the fourth
quarter of 2011. At December 31, 2012, our allowance for losses on
non-covered loans and unfunded letters of credit totaled $123.0 million
and was 1.13 percent of non-covered loans, as compared to 1.12 percent
and 1.29 percent at September 30, 2012 and December 31, 2011,
respectively.
-- Provision for Losses on Covered Loans: We recorded no provision for
losses on covered loans (i.e., loans subject to our loss-sharing
agreements with the FDIC) related to additional credit impairment of the
loan pools during the fourth and third quarters of 2012 as compared to
$3.4 million in the fourth quarter of 2011. No net charge-offs of
covered loans were recognized during the fourth quarter of 2012 as
compared to $2.3 million and $2.5 million for the third quarter of 2012
and fourth quarter of 2011, respectively. Our allowance for losses on
covered loans totaled $9.5 million at both December 31, 2012 and
September 30, 2012, and $13.5 million at December 31, 2011.
-- Net Interest Income and Margin: Net interest income totaling $118.5
million for the three months ended December 31, 2012 declined by $3.3
million as compared to the third quarter of 2012 and remained relatively
unchanged from the fourth quarter of 2011. On a tax equivalent basis,
our net interest margin decreased 5 basis points to 3.41 percent in the
fourth quarter of 2012 as compared to 3.46 percent for the third quarter
of 2012, and decreased 33 basis points from 3.74 percent for the fourth
quarter of 2011. The decreases in both net interest income and margin
as compared to the linked third quarter of 2012 were due to a decline in
average loans and investments, as well as lower yields on new investment
securities and loans caused by the current low level of market interest
rates. See the "Net Interest Income and Margin" section below for more
details.
-- Income Tax Expense: Our effective tax rate decreased to 28.5 percent
for the fourth quarter of 2012 as compared to 36.2 percent for the third
quarter of 2012, and increased from 23.0 percent for the fourth quarter
of 2011. The 2012 linked quarter over quarter decline was largely the
result of the change in the actual versus projected tax rates for the
year ended December 31, 2012. The increase from the fourth quarter of
2011 was mainly due to the higher pre-tax income for the fourth quarter
of 2012.
-- 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 ratios were 12.38 percent,
10.87 percent, and 8.09 percent, respectively, at December 31, 2012.
Gerald H. Lipkin, Chairman, President and CEO commented that "We are pleased to report solid earnings for the fourth quarter of 2012, which continued to be positively impacted by our residential mortgage refinance program, as well as the strong performance of our balance sheet despite a very difficult interest rate environment." Mr. Lipkin added, "Our loan originations continued at record levels during the quarter, even though we believe the level of refinanced loans was actually somewhat slowed due to the negative effects of Hurricane Sandy and consumer distractions related to the holidays and other political and economic concerns. However, our mortgage banking business continues to experience significant application inflows at this time and loan originations are expected to remain at or near the current record levels during 2013. Additionally, the commercial and industrial loan portfolio had record loan originations during the fourth quarter and combined with the commercial real estate portfolio produced record commercial lending originations for 2012 in the face of very strong competition for borrowers who meet our high credit quality standards. In 2013, we stand ready to compete across all of our lines of business and are committed to assisting in the continued economic recovery within our communities."
Net Interest Income and Margin
Net interest income on a tax equivalent basis decreased $3.3 million to $120.4 million for the fourth quarter of 2012 from the third quarter of 2012 and remained relatively unchanged as compared to the fourth quarter of 2011. Interest income on a tax equivalent basis decreased $4.3 million from the third quarter of 2012 mainly due to the combination of a $142.4 million decrease in average loans and lower yields on loans and investments. The decrease in interest income was partially offset by a $968 thousand decline in interest expense, which was mostly driven by lower average balances for time deposits and short-term borrowings as well as a 1 basis point decrease in the cost of average savings, NOW, and money market deposits.
The net interest margin on a tax equivalent basis was 3.41 percent for the fourth quarter of 2012, a decrease of 5 basis points from 3.46 percent in the linked third quarter of 2012, and a 33 basis point decline from 3.74 percent for the three months ended December 31, 2011. The yield on average interest earning assets decreased by seven basis points on a linked quarter basis mainly as a result of lower yields on average investment securities caused by the current low market yields on new securities and the continued repayment of higher yielding securities in the portfolio. The yield on average loans also decreased 3 basis points to 5.09 percent for the three months ended December 31, 2012 from the third quarter of 2012 mainly due to new volume at lower interest rates. The aggregate net change in infrequent items that impact our loan yields from time to time, such as accelerated interest accretion recognized on certain purchased credit impaired (PCI) loan pools that were fully repaid and loan prepayment penalty fees, added approximately six basis points to our loan yield for the fourth quarter as compared to the third quarter of 2012. However, the repayment volume of higher yielding non-PCI loans (with and without contractual prepayment penalties) remained elevated for the fourth quarter of 2012 and negatively impacted the overall yield on average loans. The overall cost of average interest bearing liabilities increased by approximately 1 basis point from 1.62 percent in the third quarter of 2012 mainly due to a slight change in mix of borrowings, as the individual yields for most categories declined during the fourth quarter. Lower cost short-term borrowings (mainly consisting of FHLB advances) matured and were paid off during the fourth quarter, largely resulting in the average balance decline of $304.6 million for the category, while higher cost maturing time deposits contributed to a decline in average time deposits of only $110.6 million. Our cost of total deposits was 0.49 percent for the fourth quarter of 2012 compared to 0.52 percent for the three months ended September 30, 2012.
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.
Credit Quality
Total loan delinquencies (including loans past due 30 days or more and non-accrual loans) as a percentage of total loans were 1.73 percent at December 31, 2012 as compared to 1.53 percent at September 30, 2012 and 1.69 percent at December 31, 2011. Our past due loans and non-accrual loans discussed below exclude PCI loans. Valley's PCI loans consist of loans that were acquired as part of FDIC-assisted transactions (the "covered loans") in 2010 and loans subsequently acquired or purchased by Valley, primarily consisting of loans recorded in the acquisition of State Bancorp on January 1, 2012. Under U.S. GAAP, the PCI loans (acquired at a discount that is due, in part, to credit quality) are accounted for on a pool basis and are not subject to delinquency classification in the same manner as loans originated by Valley.
Loans past due 30 to 89 days increased $2.6 million to $49.7 million at December 31, 2012 compared to September 30, 2012 mainly due to higher delinquencies within commercial real estate and construction loans. Within this past due category, commercial real estate loans increased $7.0 million to $13.2 million at December 31, 2012 due to a few small loans and one impaired loan totaling $1.9 million with immaterial specific reserves included in our total allowance for loan losses. Construction loans past due 30 to 89 days also increased to $6.7 million at December 31, 2012 mainly due to matured performing loans in the normal process of renewal totaling approximately $5.5 million. Valley believes the majority of all loan types in this past due category are well secured, in the process of collection and do not represent a material negative trend within the loan portfolio.
Loans past due 90 days or more and still accruing increased $6.2 million to $8.7 million, or 0.08 percent of total loans, at December 31, 2012 compared to $2.5 million, or 0.02 percent at September 30, 2012. The increase in this past due category was mostly due to matured performing loans in the normal process of renewal that totaled $2.9 million and $2.5 million within the commercial real estate and construction loan portfolios, respectively, at December 31, 2012.
Total non-performing assets ("NPAs"), consisting of non-accrual loans, other real estate owned (OREO), other repossessed assets and non-accrual debt securities, totaled $195.5 million at December 31, 2012 compared to $185.3 million at September 30, 2012. The $10.2 million increase in NPAs from September 30, 2012 was largely caused by an increase in non-accrual loans, as the balances of the other components of our NPAs remained relatively unchanged at December 31, 2012.
Non-accrual loans increased $10.4 million to $131.8 million at December 31, 2012 as compared to $121.4 million at September 30, 2012 mainly due to a $10.1 million increase in non-accrual loans in the commercial and industrial loan category caused by two loans totaling $8.8 million and $2.9 million, respectively. The first of the two loans is a previously impaired loan that was restructured subsequent to its non-accrual classification in the beginning of the fourth quarter. This loan was performing to the new terms as of December 31, 2012. The second non-accrual loan was internally classified as substandard prior to being severely impacted by the hurricane during October 2012. Additionally, a new $1.7 million non-accrual commercial real estate loan reported at December 31, 2012 relates to this same customer relationship negatively impacted by the hurricane. At December 31, 2012 and September 30, 2012, our non-accrual loans also included performing residential mortgage and home equity loans totaling $3.0 million, which were classified as non-accrual loans due to the OCC regulatory guidance issued during the third quarter of 2012. 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 $206.7 million at December 31, 2012 and had $31.0 million in related specific reserves included in our total allowance for loan losses.
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 $105.4 million at December 31, 2012 and consisted of 88 loans (primarily in the commercial and industrial loan and commercial real estate portfolios) as compared to 84 loans totaling $109.3 million at September 30, 2012. On an aggregate basis, the $105.4 million in performing TDRs at December 31, 2012 had a modified weighted average interest rate of approximately 4.80 percent as compared to a pre-modification weighted average interest rate of 5.52 percent.
With a non-covered loan portfolio totaling $10.8 billion, net loan charge-offs on non-covered loans for the fourth quarter of 2012 totaled only $4.3 million as compared to $5.9 million for the third quarter of 2012 and $14.4 million for the fourth quarter of 2011. The decrease from the third quarter of 2012 was largely due to lower net charge-offs in both the commercial and industrial loan and commercial real estate loan portfolios. There were no charge-offs on loans in our covered loan pools for the fourth quarter of 2012 as compared to $2.3 million and $2.5 million of charge-offs in the third quarter of 2012 and the fourth quarter of 2011, respectively. Charge-offs on covered loan pools 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 (including PCI loans) at December 31, 2012, September 30, 2012 and December 31, 2011:
December 31, 2012 September 30, 2012
December 31, 2011
-----------------
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* $59,260 2.84% $60,463 2.85% $65,076 3.46%
Commercial real estate loans:
Commercial real estate 24,651 0.56% 25,872 0.58% 19,222 0.54%
Construction 17,393 4.09% 13,373 3.07% 12,905 3.14%
------
Total commercial real estate loans 42,044 0.87% 39,245 0.80% 32,127 0.81%
Residential mortgage loans 9,361 0.38% 9,795 0.39% 9,058 0.40%
Consumer loans:
Home equity 1,807 0.37% 1,666 0.34% 2,214 0.47%
Auto and other consumer 3,735 0.39% 3,997 0.42% 6,463 0.71%
-----
Total consumer loans 5,542 0.38% 5,663 0.39% 8,677 0.63%
Unallocated 6,796 - 6,939 - 7,719 -
----- ----- -----
Allowance for non-covered loans
and unfunded letters of credit 123,003 1.13% 122,105 1.12% 122,657 1.29%
Allowance for covered loans 9,492 5.25% 9,492 4.57% 13,528 4.98%
----- ----- ------
Total allowance for credit losses $132,495 1.20% $131,597 1.18% $136,185 1.39%
======== ======== ========
* 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 1.13 percent at December 31, 2012 as compared to 1.12 percent and 1.29 percent at September 30, 2012 and December 31, 2011, respectively. The allocation percentages for the construction loan category shown in the table above increased 1.02 percent from the third quarter of 2012 largely due to a $3.3 million increase in specific reserves for one previously impaired collateral dependent loan. At December 31, 2012, Management discounted the appraisal of this loan's underlying collateral based upon specific market data and other new facts regarding the property that were unavailable prior to the fourth quarter of 2012. The allocation percentages for both the commercial and industrial loan and commercial real estate loan categories decreased from December 31, 2011 largely due to non-covered PCI loans acquired from State Bancorp on January 1, 2012 and PCI commercial real estate loans purchased from another financial institution in March 2012. The PCI loans were recorded at fair value upon acquisition based on an initial estimate of expected cash flows, including a reduction for estimated credit losses, without carryover of the loan portfolio's historical allowance for loan losses. The PCI loans are accounted for on a pool basis and were 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. The remaining credit discount that may be used for future losses totaled $56.2 million for non-covered PCI loans with carrying amounts of $987.0 million at December 31, 2012. Additionally, the allocated reserves for auto and other consumer loans declined from December 31, 2011 as loss experience and the outlook for the automobile portfolio continued to improve throughout 2012. 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 $987.0 million) was 1.25 percent at December 31, 2012 as compared to 1.24 percent at September 30, 2012.
Loans and Deposits
Non-Covered Loans. Non-covered loans are loans not subject to loss-sharing agreements with the FDIC. Non-covered loans decreased $99.3 million to approximately $10.8 billion at December 31, 2012 from September 30, 2012 mainly due to an elevated level of repayments primarily within the commercial loan categories of the PCI loan portfolio and refinance activity within the residential mortgage loan portfolio.
Total commercial and industrial loans decreased $34.0 million from September 30, 2012 to $2.1 billion at December 31, 2012 largely due to a $19.1 million decline in the PCI loans acquired during the first quarter of 2012. Overall, we continued to experience some full loan repayments from a few large borrowers as well as the continued impact of strong market competition for quality credits. Total commercial real estate loans (including construction loans) also declined $38.1 million from September 30, 2012 to $4.8 billion at December 31, 2012 due to a $59.8 million decrease in PCI loans. The decline in PCI loans was due to normal payments, as well as prepayments caused by strong competition in the Long Island market and excess borrower liquidity. However, the non-PCI loan portion of the commercial real estate loan portfolio totaling $4.2 billion increased $21.7 million largely due to a gradual improvement in demand across several segments of our New Jersey market.
Total residential mortgage loans decreased $37.1 million from September 30, 2012 mostly due to a high volume of fourth quarter refinancing activity, with many of the new loans either sold in the secondary market or held for sale at December 31, 2012. Loans held for sale carried at fair value decreased to $120.2 million (with $115.4 million in unpaid contractual balances) at December 31, 2012 as compared to $149.1 million (with $141.4 million in unpaid contractual balances) at September 30, 2012. Our residential mortgage pipeline has remained very robust mainly due to the continued success of our low fixed-price refinance programs and the current low level of market interest rates. During the fourth quarter of 2012, we originated over $531 million in new and refinanced residential mortgage loans and retained approximately 32 percent of these loans in our loan portfolio at December 31, 2012. Loan servicing rights recognized for the retained servicing of the loans sold during the fourth quarter totaled $4.6 million at December 31, 2012. We expect to continue an "originate and sell" model for a large portion of our mortgage loan originations during 2013 assuming that market conditions do not adversely change and we are able to maintain an appropriate mix of residential mortgage loans on our balance sheet. During the early part of the first quarter of 2013, application volume continues to be very strong and we are optimistic that the refinance volume should remain strong at least into the foreseeable future.
Automobile loans and home equity loans marginally declined to $786.5 million and $485.5 million, respectively, at December 31, 2012 as compared to September 30, 2012 due to normal repayment activity outpacing new loan origination volumes. During the fourth quarter of 2012, we purchased approximately $6.6 million in auto loans as compared to $12.4 million in purchased loans during the third quarter of 2012. From time to time, the Bank purchases automobile loans originated by, and sometimes serviced by, other financial institutions based on several factors, including current loan origination volumes, market interest rates, excess liquidity and other asset/liability management strategies. All of the purchased automobile loans are selected using Valley's normal underwriting criteria at the time of purchase.
Other consumer loans increased $19.6 million to $179.7 million at December 31, 2012 as compared to $160.1 million at September 30, 2012 mainly due to higher collateralized personal lines of credit balances.
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 from LibertyPointe Bank and The Park Avenue Bank as a part of FDIC-assisted transactions during 2010. Our covered loans consist primarily of commercial real estate loans and commercial and industrial loans and totaled $180.7 million at December 31, 2012 as compared to $207.5 million at September 30, 2012. Consistent with our PCI loans acquired and purchased during the first quarter of 2012, all of our covered loans are PCI loans accounted for on a pool basis. For loan pools with better than originally expected cash flows, 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 2012, we reduced our FDIC loss-share receivable by $1.8 million due to the prospective recognition of the effect of additional cash flows from pooled loans with a corresponding reduction in non-interest income for the period, as compared to $2.1 million during the third quarter of 2012.
Deposits. Total deposits increased $343.2 million to approximately $11.3 billion at December 31, 2012 from September 30, 2012 mostly due to higher non-interest bearing deposit balances. Valley's non-interest bearing deposits totaling $3.6 billion at December 31, 2012 increased by $351.8 million from September 30, 2012 partly due to seasonal increases, the current low rates on our interest bearing deposit products, and additional customer liquidity due to year-end tax planning. Savings, NOW and money market accounts also increased $204.5 million to approximately $5.2 billion at December 31, 2012 as compared to September 30, 2012 due to normal municipal account balance fluctuations and general increases in retail deposits. Valley's time deposits totaling $2.5 billion at December 31, 2012 decreased $213.0 million as compared to September 30, 2012 largely due to the continued run-off of maturing higher cost retail certificates of deposit and less attractive short-term time deposit rates offered by Valley during the period.
Non-Interest Income
Non-interest income for the fourth quarter of 2012 decreased $6.7 million from $40.5 million for the linked quarter ended September 30, 2012 largely due to a $9.5 million decrease in net gains on sales of residential mortgage loans mostly caused by lower mark to market gains due, in part, to the decrease in loans held for sale carried at fair value. See "Loans and Deposits" section above for more details on our mortgage banking activities. Other non-interest income decreased $2.2 million from $4.3 million for the third quarter of 2012 primarily due to net losses on other real estate owned totaling approximately $2.2 million related to both sales during the fourth quarter and valuation of properties at December 31, 2012. Of the $2.2 million in net losses, $1.6 million is related to assets substantially covered by loss-sharing agreements with the FDIC. Net gains on securities transactions declined $1.5 million to just $44 thousand for the three months ended December 31, 2012 due to a lower volume of securities sales and calls during the period. During the fourth quarter, we also recognized $812 thousand in net losses on sales of assets due to the disposal of approximately $949 thousand in impaired branch location assets caused by Hurricane Sandy. Partially offsetting these decreases in non-interest income, net impairment losses on securities declined $4.7 million from the third quarter of 2012 and net trading gains increased to $2.2 million for the fourth quarter of 2012 from $6 thousand for the third quarter of 2012.
Non-Interest Expense
Non-interest expense for the fourth quarter of 2012 increased by $2.4 million from $93.2 million for the linked quarter ended September 30, 2012 mainly due to a $2.0 million increase in net occupancy and equipment expense. The increase in net occupancy and equipment expense was largely caused by an additional $1.6 million in rental expense recorded to adjust the straight-line rental expense accrual on operating leases for certain branch locations. Professional and legal fees also increased $1.1 million to $4.6 million for the fourth quarter of 2012 due to a general increase in corporate legal matters, while salary and employee benefits expense declined $806 thousand primarily due to lower major medical insurance and pension cost accruals, partially offset by higher salary expense as compared to the three months ended September 30, 2012.
Income Tax Expense
Income tax expense was $14.7 million for the three months ended December 31, 2012 reflecting an effective tax rate of 28.5 percent, as compared to $22.4 million for the third quarter of 2012, reflecting an effective tax rate of 36.2 percent and $7.3 million for the fourth quarter of 2011, reflecting an effective tax rate of 23.0 percent. The decrease in rate and tax expense in the fourth quarter of 2012 compared to the third quarter was largely due to the actual tax rate being less than projected for the year ended December 31, 2012. The increase in rate and tax expense as compared to the fourth quarter of 2011 was primarily due to an increase in pre-tax income for the fourth quarter of 2012.
Income tax expense was $66.7 million for the year ended December 31, 2012, reflecting an effective tax rate of 31.7 percent, compared with $62.7 million for 2011, reflecting an effective tax rate of 32.1 percent. The slight decrease in the 2012 effective tax rate was due, in part, to an increased investment in tax favored income for 2012 as compared to 2011.
For 2013, we anticipate that our effective tax rate will approximate 33 percent.
Prior Period Results
Previously reported results for the fourth quarter of 2011 and the year ended December 31, 2011 have been revised to reflect an increase in net occupancy and equipment expense related to an adjustment for the straight-line recognition of rental expense on operating leases. The effect of these revisions was immaterial to each period (no change in basic and diluted earnings per share for the fourth quarter of 2011 and approximately a one cent reduction in basic and diluted earnings per share for the year ended December 31, 2011). Net income for the fourth quarter of 2011 and for the year ended December 31, 2011 was reduced by $285 thousand and $1.1 million, respectively, reflecting the after-tax increases in net occupancy and equipment expense and total non-interest expense.
About Valley
Valley National Bancorp is a regional bank holding company headquartered in Wayne, New Jersey with $16 billion in assets. Its principal subsidiary, Valley National Bank, currently operates 210 branches in 146 communities serving 16 counties throughout northern and central New Jersey, Manhattan, Brooklyn, Queens and Long Island. Valley National Bank is one of the largest commercial banks headquartered in New Jersey and is committed to providing the most convenient service, the latest in product innovations and an experienced and knowledgeable staff with a high priority on friendly customer service 24 hours a day, 7 days a week. For more information about Valley National Bank and its products and services, please visit www.valleynationalbank.com or call Customer Service, 24/7 at 800-522-4100.
Forward Looking Statements
The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management's confidence and strategies and management's expectations about new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as "should," "expect," "believe," "view," "opportunity," "allow," "continues," "reflects," "typically," "usually," "anticipate," or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:
-- a severe decline in the general economic conditions of New Jersey and
the New York Metropolitan area;
-- higher than expected loan delinquencies, loss of collateral, decreased
service revenues, and other potential negative effects on our business
from the recent damages to our primary markets by Hurricane Sandy;
-- declines in value in our investment portfolio, including additional
other-than-temporary impairment charges on our investment securities;
-- unanticipated deterioration in our loan portfolio;
-- an unanticipated reduction in our "originate and sell" residential
mortgage strategy or a slowdown in residential mortgage loan refinance
activity;
-- Valley's 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 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;
-- an 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;
-- inability to retain State Bancorp's customers and employees;
-- lower than expected cash flows from purchased credit impaired loans; 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, 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.
-Tables to Follow-
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) 2012 2012 2011 (1) 2012 2011 (1)
---- ---- ------- ---- -------
FINANCIAL DATA:
---------------
Net interest income $118,529 $121,822 $118,314 $489,881 $474,811
Net interest income - FTE (5) 120,409 123,706 120,055 497,098 480,888
Non-interest income (3) 33,825 40,496 13,772 120,946 112,297
Non-interest expense 95,623 93,219 84,869 374,900 338,556
Income tax expense 14,702 22,402 7,321 66,748 62,706
Net income 36,829 39,447 24,532 143,627 132,511
Weighted average number of common shares outstanding: (6)
Basic 197,795,817 197,437,988 178,694,711 197,354,159 178,424,883
Diluted 197,795,817 197,437,988 178,695,174 197,354,372 178,426,070
Per common share data: (6)
Basic earnings $0.19 $0.20 $0.14 $0.73 $0.74
Diluted earnings 0.19 0.20 0.14 0.73 0.74
Cash dividends declared 0.16 0.16 0.16 0.65 0.66
Book value 7.57 7.67 7.02 7.57 7.02
Tangible book value (2) 5.26 5.39 5.13 5.26 5.13
Tangible common equity to tangible assets (2) 6.71% 6.94% 6.58% 6.71% 6.58%
Closing stock price - high $10.20 $10.93 $12.09 $12.59 $13.52
Closing stock price - low 8.72 9.17 9.66 8.72 9.42
CORE ADJUSTED FINANCIAL DATA: (2)
--------------------------------
Net income, as adjusted $36,829 $42,171 $36,223 $146,670 $144,719
Basic earnings per share, as adjusted 0.19 0.21 0.20 0.74 0.81
Diluted earnings per share, as adjusted 0.19 0.21 0.20 0.74 0.81
FINANCIAL RATIOS: `
-----------------
Net interest margin 3.36% 3.41% 3.68% 3.47% 3.71%
Net interest margin - FTE (5) 3.41 3.46 3.74 3.52 3.75
Annualized return on average assets 0.93 0.99 0.69 0.91 0.93
Annualized return on average shareholders' equity 9.71 10.45 7.48 9.57 10.11
Annualized return on average tangible
shareholders' equity (2) 13.82 14.86 10.10 13.65 13.68
Efficiency ratio (7) 62.76 57.43 64.25 61.38 57.67
CORE ADJUSTED FINANCIAL RATIOS: (2)
----------------------------------
Annualized return on average assets, as adjusted 0.93% 1.05% 1.01% 0.93% 1.01%
Annualized return on average shareholders'
equity as adjusted 9.71 11.18 11.05 9.77 11.04
Annualized return on average tangible
shareholders' equity, as adjusted 13.82 15.89 14.91 13.94 14.94
Efficiency ratio, as adjusted 62.76 55.81 56.12 60.85 55.77
AVERAGE BALANCE SHEET ITEMS:
----------------------------
Assets $15,835,049 $15,994,973 $14,306,673 $15,833,998 $14,270,289
Interest earning assets 14,115,272 14,283,862 12,845,931 14,109,728 12,814,236
Loans 11,276,804 11,419,251 9,710,251 11,238,269 9,608,480
Interest bearing liabilities 10,874,993 11,213,688 10,145,279 11,037,169 10,284,332
Deposits 11,171,248 11,028,027 9,835,527 11,032,021 9,738,592
Shareholders' equity 1,516,675 1,509,403 1,311,498 1,500,997 1,310,939
As Of
-----
December 31, September 30, December 31,
($ in
thousands) 2012 2012 2011 (1)
---- ---- -------
BALANCE
SHEET
ITEMS:
-------
Assets $16,012,646 $15,771,134 $14,252,755
Total
loans 11,022,799 11,148,938 9,799,641
Non-
covered
loans 10,842,125 10,941,405 9,527,797
Deposits 11,264,018 10,920,800 9,673,102
Shareholders'
equity 1,502,377 1,513,323 1,254,836
CAPITAL
RATIOS:
--------
Tier 1
leverage
ratio 8.09% 8.07% 7.99%
Risk-
based
capital -
Tier 1 10.87 10.87 10.81
Risk-
based
capital -
Total
Capital 12.38 12.36 12.63
Three Months Ended Years Ended
------------------
December 31, September 30, December 31, December 31,
------------
($ in thousands) 2012 2012 2011 2012 2011
---- ---- ---- ---- ----
ALLOWANCE FOR CREDIT LOSSES:
----------------------------
Beginning balance - Allowance for credit losses $131,597 $132,536 $137,701 $136,185 $126,504
Loans charged-off: (4)
Commercial and industrial (2,241) (3,649) (10,204) (16,103) (29,229)
Commercial real estate (917) (3,214) (1,132) (9,596) (6,305)
Construction (576) (522) (3,533) (2,092) (4,053)
Residential mortgage (889) (870) (1,727) (3,518) (3,222)
Consumer (1,730) (1,111) (1,542) (5,339) (5,906)
Total loans charged-off (6,353) (9,366) (18,138) (36,648) (48,715)
------ ------ ------- ------- -------
Charged-off loans recovered:
Commercial and industrial 1,565 601 617 4,475 2,365
Commercial real estate 20 16 106 222 134
Construction - 0 - 50 197
Residential mortgage 63 13 23 701 129
Consumer 403 547 512 1,958 2,236
Total loans recovered 2,051 1,177 1,258 7,406 5,061
----- ----- ----- ----- -----
Net charge-offs (4,302) (8,189) (16,880) (29,242) (43,654)
Provision charged for credit losses 5,200 7,250 15,364 25,552 53,335
----- ----- ------ ------ ------
Ending balance - Allowance for credit losses $132,495 $131,597 $136,185 $132,495 $136,185
======== ======== ======== ======== ========
Components of allowance for credit losses:
Allowance for non-covered loans $120,708 $119,755 $120,274 $120,708 $120,274
Allowance for covered loans 9,492 9,492 13,528 9,492 13,528
-----
Allowance for loan losses 130,200 129,247 133,802 130,200 133,802
Allowance for unfunded letters of
credit 2,295 2,350 2,383 2,295 2,383
-----
Allowance for credit losses $132,495 $131,597 $136,185 $132,495 $136,185
======== ======== ======== ======== ========
Components of provision for credit losses:
Provision for losses on non-covered
loans $5,255 $7,582 $11,904 $25,640 $31,242
Provision for losses on covered
loans - - 3,416 - 21,510
Provision for unfunded letters of
credit (55) (332) 44 (88) 583
----
Provision for credit losses $5,200 $7,250 $15,364 $25,552 $53,335
====== ====== ======= ======= =======
Annualized ratio of net charge-offs of
non-covered loans to average loans 0.15% 0.21% 0.59% 0.22% 0.30%
Annualized ratio of total net charge-offs
to average loans 0.15 0.29 0.70 0.26 0.45
Allowance for non-covered loan losses as
a % of non-covered loans 1.11 1.09 1.26 1.11 1.26
Allowance for credit losses as
a % of total loans 1.20 1.18 1.39 1.20 1.39
As Of
-----
($ in thousands) December 31, September 30, December 31,
ASSET QUALITY: (8) 2012 2012 2011
----------------- ---- ---- ----
Accruing past due loans:
30 to 89 days past due:
Commercial and industrial $3,578 $17,459 $4,347
Commercial real estate 13,245 6,236 13,115
Construction 6,685 - 2,652
Residential mortgage 18,951 16,961 8,496
Consumer 7,227 6,463 8,975
Total 30 to 89 days past due 49,686 47,119 37,585
90 or more days past due:
Commercial and industrial 283 - 657
Commercial real estate 2,950 221 422
Construction 2,575 1,024 1,823
Residential mortgage 2,356 1,051 763
Consumer 501 197 351
Total 90 or more days past due 8,665 2,493 4,016
----- ----- -----
Total accruing past due loans $58,351 $49,612 $41,601
======= ======= =======
Non-accrual loans:
Commercial and industrial $22,424 $12,296 $26,648
Commercial real estate 58,625 58,541 42,186
Construction 14,805 15,139 19,874
Residential mortgage 32,623 31,564 31,646
Consumer 3,331 3,831 3,910
Total non-accrual loans 131,808 121,371 124,264
Other real estate owned (9) 15,612 15,403 15,227
Other repossessed assets 7,805 7,733 796
Non-accrual debt securities (10) 40,303 40,779 27,151
Total non-performing assets ("NPAs") $195,528 $185,286 $167,438
======== ======== ========
Performing troubled debt restructured loans $105,446 $109,282 $100,992
Total non-accrual loans as a % of loans 1.20% 1.09% 1.27%
Total accruing past due and non-accrual loans
as a % of loans 1.73 1.53 1.69
Allowance for losses on non-covered loans as a % of
non-accrual loans 91.58 98.67 96.79
Non-performing purchased credit-impaired loans: (11)
Non-covered loans $24,028 $19,124 $ -
Covered loans 47,831 59,526 76,701
NOTES TO SELECTED FINANCIAL DATA
(1) Previously reported results for the three months ended December 31, 2011 and the year ended December 31, 2011 have been revised to reflect an
increase in net occupancy and equipment expense, which after taxes, reduced net income by $285 thousand and $1.1 million, respectively. Basic
and diluted earnings per share were reduced by $0.01 for the year ended December 31, 2011 (no change for the three months ended December 31,
2011). Certain statistical data and other per common share data have been revised accordingly.
This press release contains certain supplemental financial information, described in the Notes below, which has been determined by methods
other than U.S. Generally Accepted Accounting Principles ("GAAP") that management uses in its analysis of Valley's performance. Management
believes these non-GAAP financial measures provide information useful to investors in understanding Valley's financial results.
Specifically, Valley provides measures based on what it believes are its operating earnings on a consistent basis and excludes non-core
operating items which affect the GAAP reporting of results of operations. Management utilizes these measures for internal planning and
forecasting purposes. Management believes that Valley's presentation and discussion, together with the accompanying reconciliations, provides
a complete understanding of factors and trends affecting Valley's business and allows investors to view performance in a manner similar to
management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results and Valley strongly encourages
investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-
GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP
(2) financial measures having the same or similar names.
Three Months Ended Years Ended
------------------
December 31, September 30, December 31, December 31,
------------
($ in thousands, except for share data) 2012 2012 2011 (1) 2012 2011 (1)
---- ---- ------- ---- -------
Tangible book value per common share:
-------------------------------------
Common shares outstanding 198,438,271 197,429,718 178,683,030 198,438,271 178,683,030
----------- ----------- ----------- ----------- -----------
Shareholders' equity $1,502,377 $1,513,323 $1,254,836 $1,502,377 $1,254,836
Less: Goodwill and other intangible assets (459,357) (449,315) (338,780) (459,357) (338,780)
-------- -------- -------- -------- --------
Tangible shareholders' equity $1,043,020 $1,064,008 $916,056 $1,043,020 $916,056
Tangible book value $5.26 $5.39 $5.13 $5.26 $5.13
Tangible common equity to tangible assets:
------------------------------------------
Tangible shareholders' equity $1,043,020 $1,064,008 $916,056 $1,043,020 $916,056
---------- ---------- -------- ---------- --------
Total assets 16,012,646 15,771,134 14,252,755 16,012,646 14,252,755
Less: Goodwill and other intangible assets (459,357) (449,315) (338,780) (459,357) (338,780)
-------- -------- -------- -------- --------
Tangible assets $15,553,289 $15,321,819 $13,913,975 $15,553,289 $13,913,975
Tangible common equity to tangible assets 6.71% 6.94% 6.58% 6.71% 6.58%
Annualized return on average tangible equity:
---------------------------------------------
Net income $36,829 $39,447 $24,532 $143,627 $132,511
------- ------- ------- -------- --------
Average shareholders' equity 1,516,675 1,509,403 1,311,498 1,500,997 1,310,939
Less: Average goodwill and other intangible
assets (450,948) (447,622) (339,528) (449,078) (342,122)
-------- -------- -------- -------- --------
Average tangible shareholders' equity $1,065,727 $1,061,781 $971,970 $1,051,919 $968,817
Annualized return on average tangible
shareholders' equity 13.82% 14.86% 10.10% 13.65% 13.68%
Adjusted net income available to common
stockholders:
----------------------------------------
Net income, as reported $36,829 $39,447 $24,532 $143,627 $132,511
Net impairment losses on securities recognized
in earnings (net of tax) - 2,724 11,691 3,043 12,208
--- ----- ------ ----- ------
Net income, as adjusted 36,829 42,171 36,223 146,670 144,719
Adjusted per common share data:
-------------------------------
Net income, as adjusted $36,829 $42,171 $36,223 $146,670 $144,719
Average number of basic shares outstanding 197,795,817 197,437,988 178,694,711 197,354,159 178,424,883
Basic earnings, as adjusted $0.19 $0.21 $0.20 $0.74 $0.81
Average number of diluted shares outstanding 197,795,817 197,437,988 178,695,174 197,354,372 178,426,070
Diluted earnings, as adjusted $0.19 $0.21 $0.20 $0.74 $0.81
Adjusted annualized return on average assets:
---------------------------------------------
Net income, as adjusted $36,829 $42,171 $36,223 $146,670 $144,719
Average assets 15,835,049 15,994,973 14,306,673 15,833,998 14,270,289
Annualized return on average assets, as
adjusted 0.93% 1.05% 1.01% 0.93% 1.01%
Adjusted annualized return on average
shareholders' equity:
--------------------------------------
Net income, as adjusted $36,829 $42,171 $36,223 $146,670 $144,719
Average shareholders' equity 1,516,675 1,509,403 1,311,498 1,500,997 1,310,939
Annualized return on average shareholders'
equity, as adjusted 9.71% 11.18% 11.05% 9.77% 11.04%
Adjusted annualized return on average tangible
shareholders' equity:
-----------------------------------------------
Net income, as adjusted $36,829 $42,171 $36,223 $146,670 $144,719
Average tangible shareholders' equity 1,065,727 1,061,781 971,970 1,051,919 968,817
Annualized return on average tangible
shareholders'
equity, as adjusted 13.82% 15.89% 14.91% 13.94% 14.94%
Adjusted efficiency ratio:
--------------------------
Non-interest expense $95,623 $93,219 $84,869 $374,900 $338,556
------- ------- ------- -------- --------
Net interest income 118,529 121,822 118,314 489,881 474,811
Non-interest income 33,825 40,496 13,772 120,946 112,297
Add: Net impairment losses on securities
recognized in earnings - 4,697 19,143 5,247 19,968
--- ----- ------ ----- ------
Gross operating income, as adjusted $152,354 $167,015 $151,229 $616,074 $607,076
Efficiency ratio, as adjusted 62.76% 55.81% 56.12% 60.85% 55.77%
(3) Non-interest income includes net trading gains
(losses):
Trading securities $53 $65 $492 $219 $1,015
Junior subordinated debentures 2,113 (59) (1,331) 2,574 1,256
Total trading gains, net $2,166 $6 $(839) $2,793 $2,271
------ --- ----- ------ ------
(4) Total loans charged-off includes the following
covered loan charge-offs:
Commercial and industrial $ - $(2,278) $(2,476) $(3,551) $(14,212)
Commercial real estate - - - - (38)
Construction - - - (484) -
Residential mortgage - - - - (110)
Total covered loans charged-off $ - $(2,278) $(2,476) $(4,035) $(14,360)
----------------------- ------- ------- ------- --------
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(in thousands, except for share data)
December 31,
------------
2012 2011
---- ----
Assets
Cash and due from banks $390,078 $372,566
Interest bearing deposits with banks 463,022 6,483
Investment securities:
Held to maturity, fair value of $1,657,950 at December 31, 2012 and
$2,027,197 at December 31, 2011 1,599,707 1,958,916
Available for sale 807,816 566,520
Trading securities 22,157 21,938
Total investment securities 2,429,680 2,547,374
--------- ---------
Loans held for sale, at fair value 120,230 25,169
Non-covered loans 10,842,125 9,527,797
Covered loans 180,674 271,844
Less: Allowance for loan losses (130,200) (133,802)
Net loans 10,892,599 9,665,839
---------- ---------
Premises and equipment, net 278,615 265,475
Bank owned life insurance 339,876 303,867
Accrued interest receivable 52,375 52,527
Due from customers on acceptances outstanding 3,323 5,903
FDIC loss-share receivable 44,996 74,390
Goodwill 428,234 317,962
Other intangible assets, net 31,123 20,818
Other assets 538,495 594,382
Total Assets $16,012,646 $14,252,755
=========== ===========
Liabilities
Deposits:
Non-interest bearing $3,558,053 $2,781,597
Interest bearing:
Savings, NOW and money market 5,197,199 4,390,121
Time 2,508,766 2,501,384
Total deposits 11,264,018 9,673,102
---------- ---------
Short-term borrowings 154,323 212,849
Long-term borrowings 2,697,299 2,726,099
Junior subordinated debentures issued to capital trusts (includes fair value of $147,595
at December 31, 2012 and $160,478 at December 31, 2011 for VNB Capital
Trust I) 188,522 185,598
Bank acceptances outstanding 3,323 5,903
Accrued expenses and other liabilities 202,784 194,368
Total Liabilities 14,510,269 12,997,919
---------- ----------
Shareholders' Equity*
Preferred stock, no par value, authorized 30,000,000 shares; none issued - -
Common stock, no par value, authorized 232,023,233 shares; issued 198,499,275 shares
at December 31, 2012 and 178,717,806 shares at December 31, 2011 69,494 59,955
Surplus 1,390,851 1,179,135
Retained earnings 93,495 78,599
Accumulated other comprehensive loss (50,909) (62,441)
Treasury stock, at cost (61,004 common shares at December 31, 2012 and 34,776
common shares at December 31, 2011) (554) (412)
Total Shareholders' Equity 1,502,377 1,254,836
Total Liabilities and Shareholders' Equity $16,012,646 $14,252,755
=========== ===========
____________
* Share data reflects the five percent common stock dividend issued on May 25, 2012.
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Years Ended
------------------
(in thousands, except for share data) December 31, September 30, December 31, December 31,
------------
2012 2012 2011 2012 2011
---- ---- ---- ---- ----
Interest Income
Interest and fees on loans $143,413 $146,011 $138,355 $581,696 $547,365
Interest and dividends on investment securities:
Taxable 14,100 15,733 23,395 68,698 108,129
Tax-exempt 3,387 3,424 3,230 13,157 11,273
Dividends 1,816 1,866 1,443 7,107 6,655
Interest on federal funds sold and other short-term investments 253 196 149 535 402
Total interest income 162,969 167,230 166,572 671,193 673,824
------- -------
Interest Expense
Interest on deposits:
Savings, NOW and money market 4,995 5,051 5,154 20,090 19,876
Time 8,779 9,226 11,085 37,466 48,291
Interest on short-term borrowings 209 556 244 1,387 1,154
Interest on long-term borrowings and junior subordinated debentures 30,457 30,575 31,775 122,369 129,692
Total interest expense 44,440 45,408 48,258 181,312 199,013
------ ------
Net Interest Income 118,529 121,822 118,314 489,881 474,811
Provision for losses on non-covered loans and unfunded letters of credit 5,200 7,250 11,948 25,552 31,825
Provision for losses on covered loans - - 3,416 - 21,510
--- --- ----- --- ------
Net Interest Income After Provision for Credit Losses 113,329 114,572 102,950 464,329 421,476
------- ------- ------- ------- -------
Non-Interest Income
Trust and investment services 1,985 1,947 1,779 7,690 7,523
Insurance commissions 3,547 3,228 4,131 15,494 15,627
Service charges on deposit accounts 6,207 6,513 5,702 24,752 22,610
Gains on securities transactions, net 44 1,496 12,034 2,587 32,068
Other-than-temporary impairment losses on securities - - (42,775) - (42,775)
Portion recognized in other comprehensive
income (before taxes) - (4,697) 23,632 (5,247) 22,807
--- ------
Net impairment losses on securities
recognized in earnings - (4,697) (19,143) (5,247) (19,968)
Trading gains (losses), net 2,166 6 (839) 2,793 2,271
Fees from loan servicing 1,362 1,173 981 4,843 4,337
Gains on sales of loans, net 15,636 25,055 2,639 46,998 10,699
(Loss) Gains on sales of assets, net (812) 195 44 (329) 426
Bank owned life insurance 1,590 1,674 1,805 6,855 7,380
Change in FDIC loss-share receivable 43 (390) 1,414 (7,459) 13,403
Other 2,057 4,296 3,225 21,969 15,921
Total non-interest income 33,825 40,496 13,772 120,946 112,297
------ ------
Non-Interest Expense
Salary and employee benefits expense 48,461 49,267 42,948 199,968 176,307
Net occupancy and equipment expense 19,514 17,466 16,547 71,245 66,332
FDIC insurance assessment 3,550 3,915 3,135 14,292 12,759
Amortization of other intangible assets 2,597 2,696 2,206 9,783 9,315
Professional and legal fees 4,565 3,471 4,853 15,005 15,312
Advertising 1,851 1,723 2,003 7,103 8,373
Other 15,085 14,681 13,177 57,504 50,158
Total non-interest expense 95,623 93,219 84,869 374,900 338,556
------ ------
Income Before Income Taxes 51,531 61,849 31,853 210,375 195,217
Income tax expense 14,702 22,402 7,321 66,748 62,706
------ ------ ----- ------ ------
Net Income $36,829 $39,447 $24,532 $143,627 $132,511
======= ======= ======= ======== ========
Earnings Per Common Share*:
Basic $0.19 $0.20 $0.14 $0.73 $0.74
Diluted 0.19 0.20 0.14 0.73 0.74
Cash Dividends Declared per Common Share* 0.16 0.16 0.16 0.65 0.66
Weighted Average Number of Common Shares Outstanding*:
Basic 197,795,817 197,437,988 178,694,711 197,354,159 178,424,883
Diluted 197,795,817 197,437,988 178,695,174 197,354,372 178,426,070
____________
* Share data reflects the five percent common stock dividend issued on May 25, 2012.
VALLEY NATIONAL BANCORP
LOAN PORTFOLIO
(in thousands)
12/31/2012 9/30/2012 6/30/2012 3/31/2012 12/31/2011
Non-covered Loans
Commercial and industrial $2,084,826 $2,118,870 $2,165,656 $2,170,378 $1,878,387
Commercial real estate:
Commercial real estate 4,417,709 4,445,338 4,441,026 4,347,542 3,574,089
Construction 425,444 435,939 411,639 430,906 411,003
------------
Total commercial real estate 4,843,153 4,881,277 4,852,665 4,778,448 3,985,092
Residential mortgage 2,462,429 2,499,554 2,745,101 2,531,166 2,285,590
Consumer:
Home equity 485,458 492,338 499,749 507,560 469,604
Automobile 786,528 789,248 778,181 764,082 772,490
Other consumer 179,731 160,118 155,963 145,703 136,634
Total consumer loans 1,451,717 1,441,704 1,433,893 1,417,345 1,378,728
--------- --------- --------- --------- ---------
Total non-covered loans $10,842,125 $10,941,405 $11,197,315 $10,897,337 $9,527,797
Covered loans* 180,674 207,533 226,537 252,185 271,844
------- ------- ------- ------- -------
Total loans $11,022,799 $11,148,938 $11,423,852 $11,149,522 $9,799,641
=========== =========== =========== =========== ==========
_________________________
* Loans that Valley National Bank will share losses with the FDIC are referred to as "covered loans".
Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and
Net Interest Income on a Tax Equivalent Basis
---------------------------------------------
Quarter End - 12/31/2012 Quarter End - 09/30/2012 Quarter End - 06/30/2012 Quarter End - 03/31/2012 Quarter End - 12/31/2011
------------------------ ------------------------ ------------------------ ------------------------ ------------------------
Average Avg. Average Avg. Average Avg. Average Avg. Average Avg.
($ in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ---- ------- -------- ---- ------- -------- ---- ------- -------- ----
Assets
Interest earning assets
Loans (1)(2) $11,276,804 $143,470 5.09% $11,419,251 $146,051 5.12% $11,297,942 $143,837 5.09% $10,956,666 $148,470 5.42% $9,710,251 $138,356 5.70%
Taxable investments (3) 1,931,717 15,916 3.30% 2,016,878 17,599 3.49% 2,263,054 19,788 3.50% 2,469,057 22,502 3.65% 2,406,927 24,838 4.13%
Tax-exempt investments (1)(3) 505,156 5,210 4.13% 505,010 5,268 4.17% 464,681 4,965 4.27% 439,927 4,799 4.36% 477,841 4,970 4.16%
Federal funds sold and other
interest bearing deposits 401,595 253 0.25% 342,723 196 0.23% 52,348 31 0.24% 94,127 55 0.23% 250,912 149 0.24%
----------------
Total interest earning assets 14,115,272 164,849 4.67% 14,283,862 169,114 4.74% 14,078,025 168,621 4.79% 13,959,777 175,826 5.04% 12,845,931 168,313 5.24%
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Other assets 1,719,777 1,711,111 1,713,023 1,753,368 1,460,742
Total assets $15,835,049 $15,994,973 $15,791,048 $15,713,145 $14,306,673
=========== =========== =========== =========== ===========
Liabilities and shareholders' equity
Interest bearing liabilities:
Savings, NOW and money market
deposits $5,163,073 $4,995 0.39% $5,079,279 $5,051 0.40% $5,064,315 $4,690 0.37% $5,072,431 $5,354 0.42% $4,463,682 $5,154 0.46%
Time deposits 2,625,681 8,779 1.34% 2,736,233 9,226 1.35% 2,661,794 9,276 1.39% 2,812,582 10,185 1.45% 2,584,980 11,085 1.72%
Short-term borrowings 197,442 209 0.42% 502,016 556 0.44% 376,150 369 0.39% 237,676 253 0.43% 185,091 244 0.53%
Long-term borrowings (4) 2,888,797 30,457 4.22% 2,896,160 30,575 4.22% 2,916,670 30,452 4.18% 2,918,216 30,885 4.23% 2,911,526 31,775 4.37%
----------------
Total interest bearing liabilities 10,874,993 44,440 1.63% 11,213,688 45,408 1.62% 11,018,929 44,787 1.63% 11,040,905 46,677 1.69% 10,145,279 48,258 1.90%
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Non-interest bearing deposits 3,382,494 3,212,515 3,204,242 3,111,959 2,786,865
Other liabilities 60,887 59,367 68,361 82,148 63,031
Shareholders' equity 1,516,675 1,509,403 1,499,516 1,478,133 1,311,498
Total liabilities and shareholders' equity $15,835,049 $15,994,973 $15,791,048 $15,713,145 $14,306,673
=========== =========== =========== =========== ===========
Net interest income/interest rate spread (5) $120,409 3.04% $123,706 3.12% $123,834 3.16% $129,149 3.35% $120,055 3.34%
Tax equivalent adjustment (1,880) (1,884) (1,763) (1,690) (1,741)
Net interest income, as reported $118,529 $121,822 $122,071 $127,459 $118,314
======== ======== ======== ======== ========
Net interest margin (6) 3.36% 3.41% 3.47% 3.65% 3.68%
Tax equivalent effect 0.05% 0.05% 0.05% 0.05% 0.06%
---- ---- ---- ---- ----
Net interest margin on a fully tax equivalent basis (6) 3.41% 3.46% 3.52% 3.70% 3.74%
==== ==== ==== ==== ====
_________________________
(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 Bank
