WAYNE, N.J., April 25, 2019 (GLOBE NEWSWIRE) -- Valley National Bancorp (NASDAQ:VLY), the holding company for Valley National Bank, today reported net income for the first quarter of 2019 of $113.3 million, or $0.33 per diluted common share, as compared to the first quarter of 2018 earnings of $42.0 million, or $0.12 per diluted common share, and net income of $77.1 million, or $0.22 per diluted common share, for the fourth quarter of 2018. Net income for first quarter of 2019 included net non-core income of $59.1 million ($38.4 million after-tax) mainly related to a $78.5 million gain on the sale (and leaseback) of several locations, partially offset by additional income tax expense related to reserves for uncertain tax liabilities, severance charges and the impairment of certain tax credit investments. Comparatively, net income for the first quarter of 2018 and fourth quarter of 2018 included net non-core charges totaling $26.8 million ($19.8 million after-tax) and $5.3 million ($4.5 million after-tax), respectively. Excluding all non-core items, our adjusted net income was $74.9 million, or $0.22 per diluted common share, for the first quarter of 2019, $61.7 million, or $0.18 per diluted common share, for the first quarter of 2018, and $72.7 million, or $0.21 per diluted common share, for the fourth quarter of 2018. See further details below, including the "Consolidated Financial Highlights" tables.

Key financial highlights for the first quarter:

  • Loan Portfolio: Loans increased $387.6 million, or 6.2 percent on an annualized basis, to approximately $25.4 billion at March 31, 2019 from December 31, 2018. The increase was largely due to solid organic loan growth within the commercial and industrial loan and commercial real estate loan categories. Additionally, we sold approximately $193 million of residential mortgage loans and a small retail credit card portfolio resulting in total pre-tax gains of $4.6 million during the first quarter of 2019.

  • Non-interest Income: Non-interest income increased $73.0 million to $107.7 million for the first quarter of 2019 as compared to the fourth quarter of 2018 largely due to a $78.5 million gain on the sale leaseback of 25 branches and 1 corporate location recognized during the first quarter, partially offset by a decline in other income caused by a $6.5 million gain realized on the sale of our Visa Class B shares during the fourth quarter of 2018. See "Sale Leaseback" section below for more details.

  • Non-interest Expense: Non-interest expense decreased $5.9 million, or 3.8 percent, to $147.8 million for the first quarter of 2019 as compared to the fourth quarter of 2018 primarily due to declines in several expense categories due, in part, to our continued focus on operational efficiencies. Infrequent charges related to severance expense and other than temporary impairment of certain tax credit investments totaled $4.8 million and $2.4 million, respectively, within non-interest expense for the first quarter of 2019.

  • Efficiency Ratio: Our efficiency ratio was 45.29 percent for the first quarter of 2019 as compared to 59.87 percent and 72.44 percent for the fourth quarter of 2018 and first quarter of 2018, respectively. Excluding the gain on the sale leaseback, severance charges, merger expense, amortization and impairment of tax credit investments, and litigation reserve expense, if applicable in the period, our adjusted efficiency ratio was 54.79 percent for the first quarter of 2019 as compared to 56.68 percent and 60.03 percent for the fourth quarter of 2018 and first quarter of 2018, respectively. See the "Consolidated Financial Highlights" tables below for additional information regarding this non-GAAP measure.

  • Income Tax Expense: The effective tax rate was 33.5 percent for the first quarter of 2019 as compared to 19.0 percent for the fourth quarter of 2018. The increase as compared to the fourth quarter of 2018 was mainly due to an additional provision for income taxes of $12.1 million related to uncertain tax liability positions at March 31, 2019, as well as a $2.3 million tax benefit recognized in the fourth quarter of 2018 related to the adjustment of the Tax Cuts and Jobs Act provisional amounts in our final 2017 tax returns. See the "Investment in DC Solar Funds" section below for additional information on the uncertain tax liability positions. For the remainder of 2019, we currently estimate that our effective tax rate will range from 25.5 percent to 27.5 percent.

  • Net Interest Income and Margin: Net interest income on a tax equivalent basis of $219.9 million for the first quarter of 2019 decreased $3.5 million as compared to the fourth quarter of 2018. Our net interest margin on a tax equivalent basis of 2.98 percent for the first quarter of 2019 decreased by 12 basis points from 3.10 percent for the fourth quarter of 2018. Both net interest income and the margin were negatively impacted by lower interest recovery income and other fees, two less days as compared to the fourth quarter of 2018 and an increase in funding cost. See the "Net Interest Income and Margin" section below for more details.

  • Provision for Credit Losses: The provision for credit losses modestly increased to $8.0 million for the first quarter of 2019 as compared to $7.9 million for the fourth quarter of 2018.

  • Credit Quality: Net loan charge-offs totaled $5.3 million for the first quarter of 2019 as compared to $1.0 million for the fourth quarter of 2018. The first quarter 2019 net charge-offs increased largely due to partial charge-offs related to two impaired commercial loan relationships and a modest uptick in consumer loan charge-offs. Non-accrual loans represented 0.37 percent of total loans at March 31, 2019 as compared to 0.35 percent at December 31, 2018.

  • Performance Ratios: Annualized return on average assets (ROA), shareholders’ equity (ROE) and tangible ROE were 1.40 percent, 13.35 percent, and 20.29 percent for the first quarter of 2019, respectively. Annualized ROA, ROE and tangible ROE, adjusted for infrequent income and charges, was 0.93 percent, 8.83 percent, and 13.42 percent for the first quarter of 2019, respectively.

Ira Robbins, CEO and President commented, "We are very pleased with the progress made during the quarter towards achieving our long-term operating efficiency goals. Furthermore, we are seeing solid loan and strong core deposit growth from both new and existing client relationships. While net interest income and the margin experienced some compression quarter over quarter, we believe we are still on track to achieve our previously stated 2019 targets."

Net Interest Income and Margin
Net interest income on a tax equivalent basis totaling $219.9 million for the first quarter of 2019 increased $10.8 million as compared to the first quarter of 2018 and decreased $3.5 million as compared to the fourth quarter of 2018. The decrease as compared to the fourth quarter of 2018 was largely due to a combination of higher costs of deposits, a slight decline in yield on loans (mostly caused by a decline in interest recovery income and other loan fees) and two less days in the first quarter. Interest income on a tax equivalent basis increased $5.5 million to $321.5 million for the first quarter of 2019 as compared to the fourth quarter of 2018 mainly due to an $723.8 million increase in average loans, partially offset by 4 basis point decrease in the yield on average loans. Interest expense of $101.6 million for the first quarter of 2019 increased $9.0 million as compared to the fourth quarter of 2018 largely due to higher costs and average balances for both money market and certificate of deposit accounts, partially offset by decreases of $304.6 million and $100.4 million in average short-term and long-term borrowings, respectively. The decreases were mostly driven by the repayment of maturing FHLB advances made possible by increased liquidity from deposits, as well as the net proceeds from our recent sale leaseback transaction.

Our net interest margin on a tax equivalent basis of 2.98 percent for the first quarter of 2019 decreased by 15 basis points and 12 basis points from 3.13 percent and 3.10 percent for the first quarter of 2018 and fourth quarter of 2018, respectively. The yield on average interest earning assets decreased by 4 basis points on a linked quarter basis mostly due to a decline in the yield on loans. The yield on average loans decreased by 4 basis points to 4.57 percent for the first quarter of 2019 as compared to the fourth quarter of 2018 largely due to the decline in interest recovery income and other loan fees and two less days in the first quarter of 2019. The overall cost of average interest bearing liabilities increased 10 basis points to 1.82 percent for the first quarter of 2019 as compared to the linked fourth quarter of 2018 due to 15, 7, and 4 basis point increases in the cost of average interest bearing deposits, short-term borrowings, and long-term borrowings, respectively, largely driven by higher market interest rates. Our cost of total average deposits was 1.20 percent for the first quarter of 2019 as compared to 1.07 percent for the fourth quarter of 2018.

Sale Leaseback Transaction

Valley closed a sale-leaseback transaction for 26 of the previously announced 29 properties in March 2019. The properties, consisting of 25 branches and 1 corporate location, were sold for an aggregate purchase price of $100.5 million. The pre-tax net gain associated with the 26 properties was $78.5 million (after transaction-related expenses) for the first quarter of 2019.

Valley expects to close the sale of the remaining three properties during the second quarter of 2019, which remain subject to due diligence. The remaining properties are expected to result in a pre-tax net gain of more than $3 million.

Branch Transformation and Other Operational Improvements

As previously disclosed, Valley has embarked on a strategy to overhaul its retail network. During 2018, we identified several branches that did not meet certain internal performance measures. Of those identified, we closed 7 branches in 2018 and 13 additional branches during the first quarter of 2019. The estimated annual operating expense savings from the 20 branch closures is expected to be approximately $9 million. During the fourth quarter of 2018, we recognized severance costs of $2.7 million related to the branch closures and branch staff reductions.

For the remaining branch network, we continue to monitor the operating performance of each branch and implement tailored action plans focused on improving profitability and deposit levels for those branches that underperform.

In addition, Valley recently announced a plan to improve its operating efficiencies. The annualized salary and benefit expense savings associated with the plan is expected to exceed $5 million, excluding $4.8 million of severance charges recognized in the first quarter of 2019. Valley expects to implement the majority of cost saves by the end of the second quarter of 2019.

Investment in DC Solar Funds

From 2013 to 2015, Valley invested in three federal renewable energy tax credit funds sponsored by DC Solar and claimed the related federal tax credit benefits of approximately $22.8 million in its consolidated financial statements during same period. In late February 2019, we learned of allegations of fraudulent conduct by DC Solar, including information about asset seizures of DC Solar property and assets of its principals and ongoing federal investigations. We referred to these matters in our Annual Report on Form 10-K for 2018. Since learning of the allegations, Valley has conducted an ongoing investigation coordinated with 10 other DC Solar fund investors, investors' outside counsel and a third party specialist. The facts uncovered to date by the investor group impact each investor differently, affecting their likelihood of loss and the ultimate amount of tax benefit likely to be recaptured.

Given the circumstances that we are aware of at the time of this release and management's best judgments regarding the settlement of the tax positions that it would ultimately accept with the IRS, we currently expect a partial loss and tax benefit recapture. As a result of this assessment, our first quarter of 2019 net income includes an increase to our provision for income taxes of $12.1 million, reflecting the reserve for uncertain tax liability positions related to renewable energy tax credits and other tax benefits previously recognized from the investments in the DC Solar funds plus interest. Additionally, we recognized a full write down of the related unamortized investments totaling $2.4 million (previously presented in other assets) due to other than temporary impairment losses during the first quarter of 2019. We can provide no assurance that we will not recognize additional tax provisions related to this uncertain tax liability as we learn additional facts and information, or that we will not ultimately incur a complete loss on the related tax positions, which is currently estimated to be $28.8 million (inclusive of the $12.1 million provision for the first quarter of 2019).

Loans, Deposits and Other Borrowings

Loans. Loans increased $387.6 million to approximately $25.4 billion at March 31, 2019 from December 31, 2018. The increase was mainly due to continued strong quarter over quarter organic growth in commercial and industrial loans and commercial real estate loans, partially offset by moderate declines in construction and residential mortgage loans. During the first quarter of 2019, we originated $89.6 million of residential mortgage loans for sale rather than held for investment and we also sold approximately $100 million of pre-existing loans from our residential mortgage loan portfolio. Residential mortgage loans held for sale totaled $31.9 million and $35.2 million at March 31, 2019 and December 31, 2018, respectively.

Deposits. Total deposits increased $454.5 million to approximately $24.9 billion at March 31, 2019 from December 31, 2018 largely due to increases in money market and NOW deposits driven by the continued success of commercial and consumer deposit initiatives commenced in the second half of 2018. Non-interest bearing deposits also increased by $176.6 million to $6.4 billion at March 31, 2019 from December 31, 2018 due to strong retail and commercial volumes, including one substantial commercial loan customer account. Brokered deposits totaling $3.2 billion (consisting of both time and money market deposit accounts) at March 31, 2019 remained relatively unchanged from December 31, 2018. Non-interest bearing deposits; savings, NOW, money market deposits; and time deposits represented approximately 25 percent, 46 percent and 29 percent of total deposits as of March 31, 2019, respectively.

Other Borrowings. Short-term and long-term borrowings decreased $56.3 million and $154.5 million, respectively, at March 31, 2019 as compared to December 31, 2018 largely due to the repayment of matured FHLB advances and our ability to reduce wholesale funding because of deposit growth and the net proceeds from the sale leaseback transaction in the first quarter of 2019.

Credit Quality

Non-Performing Assets. 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. Our PCI loan portfolio totaled $4.0 billion, or 15.8 percent, of our total loan portfolio at March 31, 2019.

Total non-performing assets (NPAs), consisting of non-accrual loans, other real estate owned (OREO) and other repossessed assets increased $4.7 million to $103.4 million at March 31, 2019 as compared to December 31, 2018 mainly due to increases of $5.0 million and $1.9 million in non-accrual loans and other repossessed assets, respectively, during the first quarter of 2019, partially offset by a decline in OREO balances largely caused by sale activity. The increase in non-accrual loans was mainly due to taxi medallion loans within the commercial and industrial loan, while other repossessed assets increased due to our repossession of eight New York City (NYC) medallions from one non-performing loan relationship during the first quarter of 2019. Non-accrual loans increased to 0.37 percent of total loans at March 31, 2019 as compared to 0.35 percent of total loans at December 31, 2018.

Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) were $82.0 million, or 0.32 percent of total loans, at March 31, 2019 as compared to $67.7 million, or 0.27 percent of total loans, at December 31, 2018. The $14.3 million increase from December 31, 2018 was partially due to a matured performing commercial real estate loan in the normal process of renewal totaling $15.0 million within the loans 30 - 59 days past due category, as well as a few other large commercial real estate loans within this past due category that are now current to their contractual payments.

During the first quarter of 2019, we continued to closely monitor our NYC and Chicago taxi medallion loans totaling $118.8 million and $8.1 million, respectively, within the commercial and industrial loan portfolio at March 31, 2019. While the vast majority of the taxi medallion loans are currently performing, continued negative trends in the market valuations of the underlying taxi medallion collateral due to competing car service providers and other external factors could impact the future performance and internal classification of this portfolio. At March 31, 2019, the medallion portfolio included impaired loans totaling $79.6 million with related reserves of $29.6 million within the allowance for loan losses as compared to impaired loans totaling $73.7 million with related reserves of $27.9 million at December 31, 2018. At March 31, 2019, the impaired medallion loans largely consisted of $68.8 million of non-accrual taxi cab medallion loans classified as doubtful and $10.8 million of performing troubled debt restructured (TDR) loans classified as substandard loans. Additionally, Valley currently has $13.9 million of performing non-impaired taxi medallion loans which are scheduled to mature in 2019, and $19.2 million that mature between 2023 and 2028. If all of the loans with 2019 maturities became TDRs upon maturity and renewal, an additional reserve of $7.3 million would be required based on the allowance methodology at March 31, 2019.

Allowance for Credit Losses. 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 March 31, 2019, December 31, 2018, and March 31, 2018:

  March 31, 2019 December 31, 2018 March 31, 2018
    Allocation   Allocation   Allocation
    as a % of   as a % of   as a % of
  Allowance Loan Allowance Loan Allowance Loan
 Allocation Category Allocation Category Allocation Category
 ($ in thousands)
Loan Category:           
Commercial and industrial loans*$99,210     2.20% $95,392     2.20% $70,388     1.94%
Commercial real estate loans:           
 Commercial real estate24,261  0.19% 26,482  0.21% 36,109  0.31%
 Construction23,501  1.62% 23,168  1.56% 20,570  1.50%
Total commercial real estate loans47,762  0.34% 49,650  0.36% 56,679  0.43%
Residential mortgage loans5,139  0.13% 5,041  0.12% 4,100  0.12%
Consumer loans:           
 Home equity523  0.10% 598  0.12% 547  0.10%
 Auto and other consumer6,327  0.29% 5,614  0.26% 4,990  0.25%
Total consumer loans6,850  0.25% 6,212  0.23% 5,537  0.22%
Total allowance for credit losses$158,961  0.63% $156,295  0.62% $136,704  0.61%
Allowance for credit losses as a %           
of non-PCI loans  0.74%   0.75%   0.78%
             
             
* Includes the reserve for unfunded letters of credit.        

Our loan portfolio, totaling $25.4 billion at March 31, 2019, had net loan charge-offs totaling $5.3 million and $1.0 million for the first quarter of 2019 and fourth quarter of 2018, respectively, as compared to net recoveries of loan charge-offs totaling $1.3 million for the first quarter of 2018. During the first quarter of 2019, we recorded a $8.0 million provision for credit losses as compared to $7.9 million and $10.9 million for the fourth quarter of 2018 and the first quarter of 2018, respectively. The first quarter of 2019 provision was largely due to additional allocated reserves for impaired taxi medallion loans, loan growth, and the moderate increase in charge-offs.

The allowance for credit losses, comprised of our allowance for loan losses and reserve for unfunded letters of credit, as a percentage of total loans was 0.63 percent, 0.62 percent and 0.61 percent at March 31, 2019, December 31, 2018 and March 31, 2018, respectively. At March 31, 2019, the allowance allocations for losses as a percentage of total loans remained relatively stable as compared to December 31, 2018 for most loan categories.

Capital Adequacy

Valley's regulatory capital ratios continue to reflect its well capitalized position. Valley's total risk-based capital, Tier 1 capital, Tier 1 leverage capital, and common equity Tier 1 capital ratios were 11.37 percent, 9.38 percent, 7.58 percent and 8.53 percent, respectively, at March 31, 2019.

Investor Conference Call

Valley will host a conference call with investors and the financial community at 11:00 AM Eastern Daylight Time, today to discuss the first quarter 2019 earnings. Those wishing to participate in the call may dial toll-free (866) 354-0432. The teleconference will also be webcast live: https://edge.media-server.com/m6/p/pqcrcbis and archived on Valley's website through Friday, May 24, 2019.  Investor presentation materials will be made available prior to the conference call at www.valley.com.

About Valley

As the principal subsidiary of Valley National Bancorp, Valley National Bank is a regional bank with approximately $32 billion in assets. Valley is committed to giving people and businesses the power to succeed. Valley operates over 200 branches across New Jersey, New York, Florida and Alabama, and is committed to providing the most convenient service, the latest innovations and an experienced and knowledgeable team dedicated to meeting customer needs. Helping communities grow and prosper is the heart of Valley’s corporate citizenship philosophy. To learn more about Valley, go to www.valley.com or call our Customer Service Center 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:

  • due diligence issues or other matters prevent the expected sale and leaseback of three branch properties or expenses that reduce the additional pre-tax net gain expected to be recognized in the second quarter of 2019;
  • developments in the DC Solar bankruptcy and federal investigations that could require the recognition of additional tax provision charges related to uncertain tax liability positions;
  • higher or lower than expected income tax expense or tax rates, including increases or decreases resulting from changes in uncertain tax position liabilities, tax laws, regulations and case law;
  • weakness or a decline in the economy, mainly in New Jersey, New York, Florida and Alabama, as well as an unexpected decline in commercial real estate values within our market areas;
  • the inability to grow customer deposits to keep pace with loan growth;
  • an increase in our allowance for credit losses due to higher than expected loan losses within one or more segments of our loan portfolio;
  • less than expected cost savings from Valley's branch transformation strategy and cost reduction plans;
  • greater than expected technology related costs due to, among other factors, prolonged or failed implementations, additional project staffing and obsolescence caused by continuous and rapid market innovations;
  • the loss of or decrease in lower-cost funding sources within our deposit base, including our inability to achieve deposit retention targets under Valley's branch transformation strategy;
  • 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;
  • results of examinations by the OCC, the FRB, the CFPB and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;
  • damage verdicts or settlements or restrictions related to existing or potential litigations arising from claims of breach of fiduciary responsibility, negligence, fraud, contractual claims, environmental laws, patent or trade mark infringement, employment related claims, and other matters;
  • changes in accounting policies or accounting standards, including the new authoritative accounting guidance (known as the current expected credit loss (CECL) model) which may increase the required level of our allowance for credit losses after adoption on January 1, 2020;
  • our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements or a decision to increase capital by retaining more earnings;
  • 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;
  • unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors; and
  • the failure of other financial institutions with whom we have trading, clearing, counterparty and other financial relationships.

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, 2018.

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
 March 31, December 31, March 31,
($ in thousands, except for share data)2019 2018 2018
FINANCIAL DATA:     
Net interest income$218,648  $222,053  $207,598 
Net interest income - FTE (1)219,925  223,414  209,120 
Non-interest income107,673  34,694  32,251 
Non-interest expense147,795  153,712  173,752 
Income tax expense57,196  18,074  13,184 
Net income113,330  77,102  41,965 
Dividends on preferred stock3,172  3,172  3,172 
Net income available to common shareholders$110,158  $73,930  $38,793 
Weighted average number of common shares outstanding:     
Basic331,601,260  331,492,648  330,727,416 
Diluted332,834,466  332,856,385  332,465,527 
Per common share data:     
Basic earnings$0.33  $0.22  $0.12 
Diluted earnings0.33  0.22  0.12 
Cash dividends declared0.11  0.11  0.11 
Closing stock price - high10.73  11.51  13.38 
Closing stock price - low9.00  8.45  11.19 
CORE ADJUSTED FINANCIAL DATA: (2)     
Net income available to common shareholders, as adjusted$71,764  $69,478  $58,549 
Basic earnings per share, as adjusted0.22  0.21  0.18 
Diluted earnings per share, as adjusted0.22  0.21  0.18 
FINANCIAL RATIOS:     
Net interest margin2.96% 3.08% 3.10%
Net interest margin - FTE (1)2.98  3.10  3.13 
Annualized return on average assets1.40  0.98  0.57 
Annualized return on avg. shareholders' equity13.35  9.23  5.10 
Annualized return on avg. tangible shareholders' equity (2)20.29  14.17  7.90 
Efficiency ratio (3)45.29  59.87  72.44 
CORE ADJUSTED FINANCIAL RATIOS: (2)     
Annualized return on average assets, as adjusted0.93% 0.93% 0.84%
Annualized return on average shareholders' equity, as adjusted8.83  8.70  7.50 
Annualized return on average tangible shareholders' equity, as adjusted13.42  13.36  11.61 
Efficiency ratio, as adjusted54.79  56.68  60.03 
AVERAGE BALANCE SHEET ITEMS:    
Assets$32,296,070  $31,328,729  $29,291,703 
Interest earning assets29,562,907  28,806,620  26,750,806 
Loans25,254,733  24,530,919  22,302,991 
Interest bearing liabilities22,344,028  21,515,197  19,690,165 
Deposits24,782,759  23,702,885  21,882,034 
Shareholders' equity3,394,688  3,340,411  3,289,815 



VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS

 As Of
BALANCE SHEET ITEMS:March 31, December 31, September 30, June 30, March 31,
(In thousands)2019 2018 2018 2018 2018
Assets$32,476,991  $31,863,088  $30,881,948  $30,182,979  $29,464,357 
Total loans25,423,118  25,035,469  24,111,290  23,234,716  22,552,767 
Non-PCI loans21,418,778  20,845,383  19,681,255  18,587,015  17,636,934 
Deposits24,907,496  24,452,974  22,588,272  21,640,772  21,959,846 
Shareholders' equity3,444,879  3,350,454  3,302,936  3,277,312  3,245,003 
          
LOANS:         
(In thousands)         
Commercial and industrial$4,504,927  $4,331,032  $4,015,280  $3,829,525  $3,631,597 
Commercial real estate:         
Commercial real estate12,665,425  12,407,275  12,251,231  11,913,830  11,706,228 
Construction1,454,199  1,488,132  1,416,259  1,376,732  1,372,508 
 Total commercial real estate14,119,624  13,895,407  13,667,490  13,290,562  13,078,736 
Residential mortgage4,071,237  4,111,400  3,782,972  3,528,682  3,321,560 
Consumer:         
Home equity513,066  517,089  521,797  520,849  549,329 
Automobile1,347,759  1,319,571  1,288,902  1,281,735  1,222,721 
Other consumer866,505  860,970  834,849  783,363  748,824 
Total consumer loans2,727,330  2,697,630  2,645,548  2,585,947  2,520,874 
Total loans$25,423,118  $25,035,469  $24,111,290  $23,234,716  $22,552,767 
          
CAPITAL RATIOS:         
Book value per common share$9.75  $9.48  $9.33  $9.26  $9.16 
Tangible book value per common share (2)6.26  5.97  5.81  5.75  5.65 
Tangible common equity to tangible assets (2)6.63% 6.45% 6.48% 6.56% 6.61%
Tier 1 leverage capital7.58  7.57  7.63  7.72  7.71 
Common equity tier 1 capital8.53  8.43  8.56  8.71  8.77 
Tier 1 risk-based capital9.38  9.30  9.46  9.65  9.73 
Total risk-based capital11.37  11.34  11.55  11.77  11.89 



VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS

 Three Months Ended
ALLOWANCE FOR CREDIT LOSSES:March 31, December 31, March 31,
($ in thousands)2019 2018 2018
Beginning balance - Allowance for credit losses$156,295  $149,475  $124,452 
Loans charged-off:     
Commercial and industrial(4,282) (909) (131)
Commercial real estate—  —  (310)
Construction—  —  — 
Residential mortgage(15) (56) (68)
Total Consumer(2,028) (1,194) (1,211)
Total loans charged-off(6,325) (2,159) (1,720)
Charged-off loans recovered:     
Commercial and industrial483  566  2,107 
Commercial real estate21  21  369 
Construction—  —  — 
Residential mortgage1  3  80 
Total Consumer486  530  468 
Total loans recovered991  1,120  3,024 
Net (charge-offs) recoveries(5,334) (1,039) 1,304 
Provision for credit losses8,000  7,859  10,948 
Ending balance - Allowance for credit losses$158,961  $156,295  $136,704 
Components of allowance for credit losses:     
Allowance for loan losses$154,381  $151,859  $132,862 
Allowance for unfunded letters of credit4,580  4,436  3,842 
Allowance for credit losses$158,961  $156,295  $136,704 
Components of provision for credit losses:     
Provision for loan losses$7,856  $7,935  $10,702 
Provision for unfunded letters of credit144  (76) 246 
Provision for credit losses$8,000  $7,859  $10,948 
Annualized ratio of total net charge-offs (recoveries) to average loans0.08% 0.02% (0.02)%
Allowance for credit losses as a % of non-PCI loans0.74% 0.75% 0.78%
Allowance for credit losses as a % of total loans0.63% 0.62% 0.61%



VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS

 As of
ASSET QUALITY: (4)March 31, December 31, September 30, June 30, March 31,
($ in thousands)2019 2018 2018 2018 2018
Accruing past due loans:         
30 to 59 days past due:         
Commercial and industrial$5,120  $13,085  $9,462  $6,780  $5,405 
Commercial real estate39,362  9,521  3,387  4,323  3,699 
Construction1,911  2,829  15,576  175  532 
Residential mortgage15,856  16,576  10,058  7,961  6,460 
Total Consumer6,647  9,740  7,443  6,573  5,244 
Total 30 to 59 days past due68,896  51,751  45,926  25,812  21,340 
60 to 89 days past due:         
Commercial and industrial1,756  3,768  1,431  1,533  804 
Commercial real estate2,156  530  2,502  —  — 
Construction—  —  36  —  1,099 
Residential mortgage3,635  2,458  3,270  1,978  4,081 
Total Consumer990  1,386  1,249  860  1,489 
Total 60 to 89 days past due8,537  8,142  8,488  4,371  7,473 
90 or more days past due:         
Commercial and industrial2,670  6,156  1,618  560  653 
Commercial real estate—  27  27  27  27 
Construction—  —  —  —  — 
Residential mortgage1,402  1,288  1,877  2,324  3,361 
Total Consumer523  341  282  198  372 
Total 90 or more days past due4,595  7,812  3,804  3,109  4,413 
Total accruing past due loans$82,028  $67,705  $58,218  $33,292  $33,226 
Non-accrual loans:         
Commercial and industrial$76,270  $70,096  $52,929  $53,596  $25,112 
Commercial real estate2,663  2,372  7,103  7,452  8,679 
Construction378  356  —  1,100  732 
Residential mortgage11,921  12,917  16,083  19,303  22,694 
Total Consumer2,178  2,655  2,248  3,003  3,104 
Total non-accrual loans93,410  88,396  78,363  84,454  60,321 
Other real estate owned (OREO)7,317  9,491  9,863  11,760  13,773 
Other repossessed assets2,628  744  445  864  858 
Total non-performing assets$103,355  $98,631  $88,671  $97,078  $74,952 
Performing troubled debt restructured loans$73,081  $77,216  $81,141  $83,694  $116,414 
Total non-accrual loans as a % of loans0.37% 0.35% 0.33% 0.36% 0.27%
Total accruing past due and non-accrual loans as a % of loans0.69% 0.62% 0.57% 0.51% 0.41%
Allowance for losses on loans as a % of non-accrual loans165.27% 171.79% 184.99% 164.30% 220.26%
Non-performing purchased credit-impaired loans (5)$56,182  $56,125  $75,422  $57,311  $62,857 


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 21 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)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 entirety and not to rely on any single financial measure.  Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.


 Three Months Ended
 March 31, December 31, March 31,
($ in thousands, except for share data)2019 2018 2018
Adjusted net income available to common shareholders:     
Net income, as reported$113,330  $77,102  $41,965 
Less: Gain on sale leaseback transactions (net of tax)(a)(55,707) —  — 
Less: Gain on the sale of Visa Class B shares (net of tax) (b)—  (4,677) — 
Add: Losses on securities transaction (net of tax)23  1,047  548 
Add: Severance expense (net of tax)(c)3,433  1,907  — 
Add: Tax credit investment impairment (net of tax)(d)1,757  —  — 
Add: Legal expenses (litigation reserve impact only, net of tax)—  —  7,520 
Add: Merger related expenses (net of tax)(e)—  (455) 9,688 
Add: Income tax expense (benefit)(f)12,100  (2,274) 2,000 
Net income, as adjusted$74,936  $72,650  $61,721 
Dividends on preferred stock3,172  3,172  3,172 
Net income available to common shareholders, as adjusted$71,764  $69,478  $58,549 
__________     
(a) The gain on sale leaseback transactions is included in gains on the sales of assets within other non-interest income.
(b) The gain from the sale of non-marketable securities in included within other non-interest income.
(c)  Severance expense is included in salary and employee benefits expense.
(d) Impairment is included in the amortization of tax credit investments.
(e)  Merger related expenses are primarily within salary and employee benefits and other expense.
(f)  Income tax expense (benefit) related to reserves for uncertain tax positions in 2019 and USAB and the Tax Act in the 2018 periods.
Adjusted per common share data:     
Net income available to common shareholders, as adjusted$71,764  $69,478  $58,549 
Average number of shares outstanding331,601,260  331,492,648  330,727,416 
Basic earnings, as adjusted$0.22  $0.21  $0.18 
Average number of diluted shares outstanding332,834,466  332,856,385  332,465,527 
Diluted earnings, as adjusted$0.22  $0.21  $0.18 
Adjusted annualized return on average tangible shareholders' equity:     
Net income, as adjusted$74,936  $72,650  $61,721 
Average shareholders' equity3,394,688  3,340,411  3,289,815 
Less: Average goodwill and other intangible assets1,160,510  1,164,638  1,164,230 
Average tangible shareholders' equity$2,234,178  $2,175,773  $2,125,585 
Annualized return on average tangible shareholders' equity, as adjusted13.42% 13.36% 11.61%
Adjusted annualized return on average assets:     
Net income, as adjusted$74,936  $72,650  $61,721 
Average assets$32,296,070  $31,328,729  $29,291,703 
Annualized return on average assets, as adjusted0.93% 0.93% 0.84%


VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS

 Three Months Ended
 March 31, December 31, March 31,
($ in thousands)2019 2018 2018
Adjusted annualized return on average shareholders' equity:     
Net income, as adjusted$74,936  $72,650  $61,721 
Average shareholders' equity$3,394,688  $3,340,411  $3,289,815 
Annualized return on average shareholders' equity, as adjusted8.83% 8.70% 7.50%
Annualized return on average tangible shareholders' equity:     
Net income, as reported$113,330  $77,102  $41,965 
Average shareholders' equity3,394,688  3,340,411  3,289,815 
Less: Average goodwill and other intangible assets1,160,510  1,164,638  1,164,230 
Average tangible shareholders' equity$2,234,178  $2,175,773  $2,125,585 
Annualized return on average tangible shareholders' equity20.29% 14.17% 7.90%
Adjusted efficiency ratio:     
Non-interest expense, as reported$147,795  $153,712  $173,752 
Less: Severance expense (pre-tax)4,838  2,662  — 
Less: Legal expenses (litigation reserve impact only, pre-tax)—  —  10,500 
Less: Merger-related expenses (pre-tax)—  (635) 13,528 
Less: Amortization of tax credit investments (pre-tax)7,173  9,044  5,274 
Non-interest expense, as adjusted$135,784  $142,641  $144,450 
Net interest income218,648  222,053  207,598 
Non-interest income, as reported107,673  34,694  32,251 
Add: Losses on securities transactions, net (pre-tax)32  1,462  765 
Less: Gain on sale leaseback transaction (pre-tax)78,505  —  — 
Less: Gain on Sale of Visa Class B shares (pre-tax)—  6,530  — 
Non-interest income, as adjusted$29,200  $29,626  $33,016 
Gross operating income, as adjusted$247,848  $251,679  $240,614 
Efficiency ratio, as adjusted54.79% 56.68% 60.03%


VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS

 As of
 March 31, December 31, September 30, June 30, March 31,
($ in thousands, except for share data)2019 2018 2018 2018 2018
Tangible book value per common share:         
Common shares outstanding331,732,636  331,431,217  331,501,424  331,454,025  331,189,859 
Shareholders' equity$3,444,879  $3,350,454  $3,302,936  $3,277,312  $3,245,003 
Less: Preferred stock209,691  209,691  209,691  209,691  209,691 
Less: Goodwill and other intangible assets1,158,245  1,161,655  1,166,481  1,162,858  1,165,379 
Tangible common shareholders' equity$2,076,943  $1,979,108  $1,926,764  $1,904,763  $1,869,933 
Tangible book value per common share$6.26  $5.97  $5.81  $5.75  $5.65 
Tangible common equity to tangible assets:        
Tangible common shareholders' equity$2,076,943  $1,979,108  $1,926,764  $1,904,763  $1,869,933 
Total assets32,476,991  31,863,088  30,881,948  30,182,979  29,464,357 
Less: Goodwill and other intangible assets1,158,245  1,161,655  1,166,481  1,162,858  1,165,379 
Tangible assets$31,318,746  $30,701,433  $29,715,467  $29,020,121  $28,298,978 
Tangible common equity to tangible assets6.63% 6.45% 6.48% 6.56% 6.61%


(3) The efficiency ratio measures Valley's total non-interest expense as a percentage of net interest income plus total non-interest income.
(4)Past due loans and non-accrual loans exclude purchased credit-impaired (PCI) loans.  PCI 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.
(5)Represent PCI 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 Tina Zarkadas, Assistant Vice President, Shareholder Relations Specialist, Valley National Bancorp, 1455 Valley Road, Wayne, New Jersey, 07470, by telephone at (973) 305-3380, by fax at (973) 305-1364 or by e-mail at tzarkadas@valley.com.


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

 March 31, December 31,
 2019 2018
  (Unaudited)  
Assets   
Cash and due from banks$282,250  $251,541 
Interest bearing deposits with banks184,347  177,088 
Investment securities:   
Held to maturity (fair value of $2,066,970 at March 31, 2019 and $2,034,943 at
     December 31, 2018)		2,074,399  2,068,246 
Available for sale1,723,106  1,749,544 
          Total investment securities3,797,505  3,817,790 
Loans held for sale, at fair value31,903  35,155 
Loans25,423,118  25,035,469 
Less: Allowance for loan losses(154,381) (151,859)
          Net loans25,268,737  24,883,610 
Premises and equipment, net312,677  341,630 
Lease right-of-use assets289,669  — 
Bank owned life insurance440,845  439,602 
Accrued interest receivable100,722  95,296 
Goodwill1,084,665  1,084,665 
Other intangible assets, net73,580  76,990 
Other assets610,091  659,721 
          Total Assets$32,476,991  $31,863,088 
Liabilities   
Deposits:   
Non-interest bearing$6,352,135  $6,175,495 
Interest bearing:   
     Savings, NOW and money market11,447,043  11,213,495 
     Time7,108,318  7,063,984 
          Total deposits24,907,496  24,452,974 
Short-term borrowings2,062,576  2,118,914 
Long-term borrowings1,499,727  1,654,268 
Junior subordinated debentures issued to capital trusts55,457  55,370 
Lease liabilities313,525  3,125 
Accrued expenses and other liabilities193,331  227,983 
          Total Liabilities29,032,112  28,512,634 
Shareholders’ Equity   
Preferred stock, no par value; 50,000,000 authorized shares:   
Series A (4,600,000 shares issued at March 31, 2019 and December 31, 2018)111,590  111,590 
Series B (4,000,000 shares issued at March 31, 2019 and December 31, 2018)98,101  98,101 
Common stock (no par value, authorized 450,000,000 shares; issued 332,062,473 shares at
     March 31, 2019 and 331,634,951 shares at December 31, 2018)		116,466  116,240 
Surplus2,799,434  2,796,499 
Retained earnings375,983  299,642 
Accumulated other comprehensive loss(53,257) (69,431)
Treasury stock, at cost (329,837 common shares at March 31, 2019 and 203,734 common
     shares at December 31, 2018)		(3,438) (2,187)
     Total Shareholders’ Equity3,444,879  3,350,454 
     Total Liabilities and Shareholders’ Equity$32,476,991  $31,863,088 



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

 Three Months Ended
 March 31, December 31, March 31,
 2019 2018 2018
Interest Income     
Interest and fees on loans$288,277  $282,847  $237,586 
Interest and dividends on investment securities:     
Taxable22,876  22,399  21,323 
Tax-exempt4,804  5,121  5,721 
Dividends3,174  3,561  1,939 
Interest on federal funds sold and other short-term investments1,093  666  926 
Total interest income320,224  314,594  267,495 
Interest Expense     
Interest on deposits:     
Savings, NOW and money market36,283  32,546  22,317 
Time38,171  30,599  14,616 
Interest on short-term borrowings12,549  14,092  5,732 
Interest on long-term borrowings and junior subordinated debentures14,573  15,304  17,232 
Total interest expense101,576  92,541  59,897 
Net Interest Income218,648  222,053  207,598 
Provision for credit losses8,000  7,859  10,948 
Net Interest Income After Provision for Credit Losses210,648  214,194  196,650 
Non-Interest Income     
Trust and investment services2,904  2,998  3,230 
Insurance commissions2,525  3,720  3,821 
Service charges on deposit accounts5,903  6,288  7,253 
Losses on securities transactions, net(32) (1,462) (765)
Fees from loan servicing2,430  2,478  2,223 
Gains on sales of loans, net4,576  2,372  6,753 
Gains (losses) on sales of assets, net77,720  (280) (97)
Bank owned life insurance1,887  1,731  1,763 
Other9,760  16,849  8,070 
Total non-interest income107,673  34,694  32,251 
Non-Interest Expense     
Salary and employee benefits expense83,105  80,802  93,292 
Net occupancy and equipment expense27,886  27,643  27,924 
FDIC insurance assessment6,121  7,303  5,498 
Amortization of other intangible assets4,311  4,809  4,293 
Professional and legal fees5,271  5,119  17,047 
Amortization of tax credit investments7,173  9,044  5,274 
Telecommunication expense2,268  2,166  3,594 
Other11,660  16,826  16,830 
Total non-interest expense147,795  153,712  173,752 
Income Before Income Taxes170,526  95,176  55,149 
Income tax expense57,196  18,074  13,184 
Net Income113,330  77,102  41,965 
Dividends on preferred stock3,172  3,172  3,172 
Net Income Available to Common Shareholders$110,158  $73,930  $38,793 
Earnings Per Common Share:     
Basic$0.33  $0.22  $0.12 
Diluted0.33  0.22  0.12 
Cash Dividends Declared per Common Share0.11  0.11  0.11 
Weighted Average Number of Common Shares Outstanding:     
Basic331,601,260  331,492,648  330,727,416 
Diluted332,834,466  332,856,385  332,465,527 


VALLEY NATIONAL BANCORP
Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and
Net Interest Income on a Tax Equivalent Basis
 
 Three Months Ended
 March 31, 2019 December 31, 2018 March 31, 2018
  Average   Avg.  Average   Avg.  Average   Avg.
($ in thousands) Balance Interest Rate  Balance Interest Rate  Balance Interest Rate
Assets                 
Interest earning assets:               
Loans (1)(2)$25,254,733  $288,277  4.57% $24,530,919  $282,847  4.61% $22,302,991  $237,587  4.26%
Taxable investments (3)3,390,609  26,050  3.07% 3,398,396  25,960  3.06% 3,401,743  23,262  2.74%
Tax-exempt investments (1)(3)689,675  6,081  3.53% 713,552  6,482  3.63% 741,001  7,242  3.91%
Interest bearing deposits with banks227,890  1,093  1.92% 163,753  666  1.63% 305,071  926  1.21%
Total interest earning assets29,562,907  321,501  4.35% 28,806,620  315,955  4.39% 26,750,806  269,017  4.02%
Other assets2,733,163      2,522,109      2,540,897     
Total assets$32,296,070      $31,328,729      $29,291,703     
Liabilities and shareholders' equity                 
Interest bearing liabilities:                 
Savings, NOW and money market deposits$11,450,943  $36,283  1.27% $11,186,180  $32,546  1.16% $11,175,982  $22,317  0.80%
Time deposits7,214,863  38,171  2.12% 6,245,803  30,599  1.96% 4,594,368  14,616  1.27%
Short-term borrowings2,011,428  12,549  2.50% 2,316,020  14,092  2.43% 1,487,272  5,732  1.54%
Long-term borrowings (4)1,666,794  14,573  3.50% 1,767,194  15,304  3.46% 2,432,543  17,232  2.83%
Total interest bearing liabilities22,344,028  101,576  1.82% 21,515,197  92,541  1.72% 19,690,165  59,897  1.22%
Non-interest bearing deposits6,116,953      6,270,902      6,111,684     
Other liabilities440,401      202,219      200,039     
Shareholders' equity3,394,688      3,340,411      3,289,815     
Total liabilities and shareholders' equity$32,296,070      $31,328,729      $29,291,703     
                  
Net interest income/interest rate spread (5)  $219,925  2.53%   $223,414  2.67%   $209,120  2.80%
Tax equivalent adjustment  (1,277)     (1,361)     (1,522)  
Net interest income, as reported  $218,648      $222,053      $207,598   
Net interest margin (6)    2.96%     3.08%     3.10%
Tax equivalent effect    0.02%     0.02%     0.03%
Net interest margin on a fully tax equivalent basis (6)    2.98%     3.10%     3.13%

          

(1)  Interest income is presented on a tax equivalent basis using a 21 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.
    


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

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