8-K
VALLEY NATIONAL BANCORP (VLY)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 26, 2023
Valley National Bancorp
(Exact Name of Registrant as Specified in Charter)
| New Jersey | 1-11277 | 22-2477875 | |||||
|---|---|---|---|---|---|---|---|
| (State or Other Jurisdiction<br><br>of Incorporation) | (Commission File Number) | (I.R.S. Employer<br><br>Identification Number) | One Penn Plaza, | New York, | New York | 10119 | |
| --- | --- | --- | --- | ||||
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code (973) 305-8800
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of exchange on which registered |
|---|---|---|
| Common Stock, no par value | VLY | The Nasdaq Stock Market LLC |
| Non-Cumulative Perpetual Preferred Stock, Series A, no par value | VLYPP | The Nasdaq Stock Market LLC |
| Non-Cumulative Perpetual Preferred Stock, Series B, no par value | VLYPO | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On October 26, 2023, Valley National Bancorp (“Valley”), issued a press release announcing Valley’s financial results for the third quarter 2023. A copy of the press release is furnished herewith as Exhibit 99.1.
The information in this Item 2.02, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, as amended (the "Securities Act"), except as shall be expressly set forth by specific reference in such a filing.
| Item 7.01 | Regulation FD Disclosure. |
|---|
Valley is furnishing presentation materials attached hereto as Exhibit 99.2 pursuant to Item 7.01 of Form 8-K. Valley is not undertaking to update these presentation materials. The information in this Item 7.01, including Exhibit 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act, except as shall be expressly set forth by specific reference in such a filing. This report will not be deemed an admission as to the materiality of any information herein (including Exhibit 99.2).
| Item 9.01 | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits. |
| Exhibit No. | Description |
| 99.1 | Press Releaseof Valley National Bancorp,datedOctober26, 2023, announcing third quarter 2023 financial results. |
| 99.2 | Valley National Bancorpa3q23earningspresentatio.htmpresentation materials used in connection withthird quarter 2023investorconference. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: October 26, 2023 | VALLEY NATIONAL BANCORP | |
|---|---|---|
| By: | /s/ Michael D. Hagedorn | |
| Michael D. Hagedorn | ||
| Senior Executive Vice President and | ||
| Chief Financial Officer<br><br>(Principal Financial Officer) |
Document
Exhibit 99.1
| News Release | ||
|---|---|---|
| FOR IMMEDIATE RELEASE | Contact: | Michael D. Hagedorn |
| --- | --- | --- |
| Senior Executive Vice President and | ||
| Chief Financial Officer | ||
| 973-872-4885 |
VALLEY NATIONAL BANCORP ANNOUNCES THIRD QUARTER 2023 RESULTS
NEW YORK, NY – October 26, 2023 -- Valley National Bancorp (NASDAQ:VLY), the holding company for Valley National Bank, today reported net income for the third quarter 2023 of $141.3 million, or $0.27 per diluted common share, as compared to the second quarter 2023 net income of $139.1 million, or $0.27 per diluted common share, and net income of $178.1 million, or $0.34 per diluted common share, for the third quarter 2022. Excluding all non-core income and charges, our adjusted net income (a non-GAAP measure) was $136.4 million, or $0.26 per diluted common share, for the third quarter 2023, $147.1 million, or $0.28 per diluted common share, for the second quarter 2023, and $181.5 million, or $0.35 per diluted common share, for the third quarter 2022. See further details below, including a reconciliation of our non-GAAP adjusted net income, in the "Consolidated Financial Highlights" tables.
Key financial highlights for the third quarter 2023:
•Loan Portfolio: Loan growth in most categories slowed as expected during third quarter 2023 largely due to the impact of higher market interest rates. Total loans increased $220.3 million, or 1.8 percent on an annualized basis, to $50.1 billion at September 30, 2023 from June 30, 2023 mainly as a result of select new loan originations in the commercial real estate loan portfolio. Annualized loan growth for the nine months ended September 30, 2023 totaled 9.0 percent. See the "Loans" section below for more details.
•Allowance and Provision for Credit Losses for Loans: The allowance for credit losses for loans totaled $462.3 million and $458.7 million at September 30, 2023 and June 30, 2023, respectively, representing 0.92 percent of total loans at each respective date. For the third quarter 2023, the provision for credit losses for loans totaled $9.1 million as compared to $6.3 million and $1.8 million for the second quarter 2023 and third quarter 2022, respectively.
•Credit Quality: Net loan charge-offs totaled $5.5 million for the third quarter 2023 as compared to $8.6 million for the second quarter 2023 and net recoveries of loan charge-offs of $5.6 million for the third quarter 2022. Total accruing past due loans increased $17.8 million to $79.5 million, or 0.16 percent of total loans, at September 30, 2023 as compared to $61.8 million, or 0.12 percent of total loans, at June 30, 2023. Non-accrual loans represented 0.52 percent and 0.51 percent of total loans at September 30, 2023 and June 30, 2023, respectively. See the "Credit Quality" section below for more details.
•Deposits: Total deposits increased $265.5 million to $49.9 billion at September 30, 2023 as compared to $49.6 billion at June 30, 2023 largely due to increases in direct customer interest bearing deposits, partially offset by a net decrease of $338.5 million in indirect customer deposits driven by maturity of certain indirect CDs. See the "Deposits" section below for more details.
Valley National Bancorp (NASDAQ: VLY)
Third Quarter 2023 Earnings
October 26, 2023
•Net Interest Income and Margin: Net interest income on a tax equivalent basis of $413.7 million for the third quarter 2023 decreased $7.6 million compared to the second quarter 2023 and decreased $41.7 million as compared to the third quarter 2022. Our net interest margin on a tax equivalent basis decreased by 3 basis points to 2.91 percent in the third quarter 2023 as compared to 2.94 percent for the second quarter 2023. The decline in both net interest income and margin as compared to the linked second quarter reflects the impact of rising market interest rates on interest bearing deposits, net of a 23 basis point increase in the yield of average interest earnings assets for the third quarter 2023. See the "Net Interest Income and Margin" section below for more details.
•Non-Interest Income: Non-interest income decreased $1.4 million to $58.7 million for the third quarter 2023 as compared to the second quarter 2023 mainly due to a $9.8 million decrease in capital market fees, largely offset by an increase of $6.5 million in net gains on sales of assets (mostly related to the sale of non-branch offices located in Wayne, New Jersey) and higher card fee income. The decrease in capital market fees was largely driven by the lower volume of interest rate swap transactions executed for new commercial loan customers during the third quarter 2023.
•Non-Interest Expense: Non-interest expense decreased $15.8 million to $267.1 million for the third quarter 2023 as compared to the second quarter 2023 largely due to $11.2 million of severance expense (non-core charges) recorded within salary and employee benefits expense in the second quarter 2023 and third quarter declines in both professional and legal fees and our FDIC insurance assessment. Technology, furniture and equipment expense increased $4.8 million for the third quarter 2023 largely due to higher data processing costs.
•Efficiency Ratio: Our efficiency ratio was 56.72 percent for the third quarter 2023 as compared to 55.59 percent and 49.76 percent for the second quarter 2023 and third quarter 2022, respectively. See the "Consolidated Financial Highlights" tables below for additional information regarding our non-GAAP measures.
•Performance Ratios: Annualized return on average assets (ROA), shareholders’ equity (ROE) and tangible ROE were 0.92 percent, 8.56 percent and 12.39 percent for the third quarter 2023, respectively. Annualized ROA, ROE, and tangible ROE, adjusted for non-core income and charges, were 0.89 percent, 8.26 percent and 11.95 percent for the third quarter 2023, respectively. See the "Consolidated Financial Highlights" tables below for additional information regarding our non-GAAP measures.
Ira Robbins, CEO commented, "I am extremely proud of the strength, stability, and resiliency reflected in our balance sheet during the third quarter. Our asset quality remains exceptional, and slower loan growth during the quarter contributed to improved capital ratios. Higher customer deposit balances enabled an incremental reduction in indirect CDs, while we paid off short-term borrowings to normalize our overnight cash position which was elevated in the second quarter."
Mr. Robbins continued, "In early October we completed our transformational core conversion. This was an incredible accomplishment for our organization against a challenging backdrop. We now have the appropriate technology infrastructure to support sustainable growth and better efficiency going forward. In my tenure we have built our robust service capabilities and have a significant opportunity to leverage these new technologies."
Valley National Bancorp (NASDAQ: VLY)
Third Quarter 2023 Earnings
October 26, 2023
Net Interest Income and Margin
Net interest income on a tax equivalent basis totaling $413.7 million for the third quarter 2023 decreased $7.6 million and $41.7 million as compared to the second quarter 2023 and third quarter 2022, respectively. The decrease as compared to the second quarter 2023 was mainly due to increased interest rates on most interest bearing deposit products, partially offset by higher loan yields and a reduction in average short-term borrowings. As a result of the higher cost of deposits, total interest expense increased $32.9 million to $400.6 million for the third quarter 2023 as compared to the second quarter 2023. Interest income on a tax equivalent basis increased $25.3 million to $814.3 million in the third quarter 2023 as compared to the second quarter 2023. The increase was mostly due to higher yields on both new originations and adjustable rate loans in our portfolio and a $561.5 million increase in average loan balances driven by organic new loan volumes over the last six months and a continuation of slower loan prepayments in the third quarter 2023.
Net interest margin on a tax equivalent basis of 2.91 percent for the third quarter 2023 decreased by 3 basis points and 69 basis points from 2.94 percent and 3.60 percent, respectively, for the second quarter 2023 and third quarter 2022. The decrease as compared to the second quarter 2023 was largely driven by higher interest rates on interest bearing deposits, partially offset by a 23 basis point increase in the yield on average interest earning assets. The yield on average loans increased by 25 basis points to 6.03 percent for the third quarter 2023 as compared to the second quarter 2023 largely due to higher interest rates on new originations and adjustable rate loans. Our cost of total average deposits was 2.94 percent for the third quarter 2023 as compared to 2.45 percent and 0.59 percent for the second quarter 2023 and the third quarter 2022, respectively. The overall cost of average interest bearing liabilities also increased 33 basis points to 3.92 percent for the third quarter 2023 as compared to the second quarter 2023 primarily driven by the continued rise in the market interest rates on deposits.
Loans, Deposits and Other Borrowings
Loans. Loans increased $220.3 million to approximately $50.1 billion at September 30, 2023 from June 30, 2023 mainly due to slower, but continued organic loan growth in the commercial real estate loan category and low levels of prepayment activity during the third quarter 2023. Total commercial real estate (including construction) increased $265.5 million, or 3.4 percent on an annualized basis during the third quarter 2023. Home equity loans also increased $13.4 million or 10.0 percent on an annualized basis during the third quarter 2023 due to higher utilization of lines of credit. Automobile loans decreased by $46.9 million, or 11.5 percent on an annualized basis during the third quarter 2023 largely due to continued low demand for vehicle financing because of the high interest rate environment. During the third quarter 2023, we sold $80.8 million of residential mortgage loans originated for sale as compared to $44.5 million in the second quarter 2023.
Deposits. Total deposits increased $265.5 million to $49.9 billion at September 30, 2023 from June 30, 2023 mainly due to increases of $833.5 million in savings, NOW and money market deposits and $194.8 million in time deposits, partially offset by a $762.8 million decrease in non-interest bearing deposits. The increase in savings, NOW and money market deposits was driven by increases in digital and national specialized deposits, as well as some shift in customer balances from non-interest bearing deposits during the third quarter 2023. The increase in time deposits was largely due to successful
Valley National Bancorp (NASDAQ: VLY)
Third Quarter 2023 Earnings
October 26, 2023
retail deposit campaigns, partially offset by the maturity of indirect time deposits. Non-interest bearing balances continued to be challenged by the high level of market interest rates which has caused some customers to pursue attractive investment alternatives, including our interest bearing products, or use cash in place of financing. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 24 percent, 46 percent and 30 percent of total deposits as of September 30, 2023, respectively, as compared to 25 percent, 45 percent and 30 percent of total deposits as of June 30, 2023, respectively.
Other Borrowings. Short-term borrowings decreased $1.0 billion to $89.8 million at September 30, 2023 as compared to June 30, 2023 mainly due to maturities and repayment of FHLB advances and a decrease in our excess overnight cash positions as part of our liquidity management strategies during the third quarter 2023. Long-term borrowings totaled $2.3 billion at September 30, 2023 as compared to $2.4 billion at June 30, 2023. The decrease was largely due to the maturity and repayment of $125.0 million of 5.125 percent subordinated notes issued in September 2013 and due on September 27, 2023, which had already been fully disallowed from a regulatory capital perspective.
Credit Quality
Non-Performing Assets (NPAs). Total NPAs, consisting of non-accrual loans, other real estate owned (OREO) and other repossessed assets, increased $4.2 million to $260.3 million at September 30, 2023 as compared to June 30, 2023 mostly driven by an increase in non-accrual loans. Non-accrual commercial and industrial loans increased $3.2 million to $87.7 million at September 30, 2023 mainly due to one new non-performing loan relationship totaling $4.2 million at September 30, 2023. Non-accrual loans represented 0.52 percent of total loans at September 30, 2023 compared to 0.51 percent at June 30, 2023.
Accruing Past Due Loans. Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) increased $17.8 million to $79.5 million, or 0.16 percent of total loans, at September 30, 2023 as compared to $61.8 million, or 0.12 percent of total loans at June 30, 2023.
Loans 30 to 59 days past due increased $13.6 million to $47.4 million at September 30, 2023 as compared to June 30, 2023 mainly due to increases in commercial and (secured) consumer loans within this early stage delinquency category.
Loans 60 to 89 days past due increased $6.8 million to $19.8 million at September 30, 2023 as compared to June 30, 2023 largely due to higher residential mortgage delinquencies and a $2.3 million commercial real estate loan that migrated from the 30-59 days past due category reported at June 30, 2023.
Loans 90 days or more past due and still accruing interest decreased $2.6 million to $12.4 million at September 30, 2023 as compared to June 30, 2023. All loans 90 days or more past due and still accruing interest are well-secured and in the process of collection.
Valley National Bancorp (NASDAQ: VLY)
Third Quarter 2023 Earnings
October 26, 2023
Allowance for Credit Losses for Loans and Unfunded Commitments. The following table summarizes the allocation of the allowance for credit losses to loan categories and the allocation as a percentage of each loan category at September 30, 2023, June 30, 2023 and September 30, 2022:
| September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | 1.44 | % | $ | 128,245 | 1.38 | % | $ | 154,051 | 1.77 | % | ||
| Commercial real estate loans: | ||||||||||||
| Commercial real estate | 191,562 | 0.68 | 194,177 | 0.70 | 217,124 | 0.89 | ||||||
| Construction | 53,485 | 1.40 | 45,518 | 1.19 | 50,656 | 1.42 | ||||||
| Total commercial real estate loans | 245,047 | 0.77 | 239,695 | 0.76 | 267,780 | 0.95 | ||||||
| Residential mortgage loans | 44,621 | 0.80 | 44,153 | 0.79 | 36,157 | 0.70 | ||||||
| Consumer loans: | ||||||||||||
| Home equity | 3,689 | 0.67 | 4,020 | 0.75 | 4,083 | 0.87 | ||||||
| Auto and other consumer | 14,830 | 0.52 | 20,319 | 0.70 | 13,673 | 0.49 | ||||||
| Total consumer loans | 18,519 | 0.55 | 24,339 | 0.71 | 17,756 | 0.55 | ||||||
| Allowance for loan losses | 442,175 | 0.88 | 436,432 | 0.88 | 475,744 | 1.05 | ||||||
| Allowance for unfunded credit commitments | 20,170 | 22,244 | 22,664 | |||||||||
| Total allowance for credit losses for loans | $ | 458,676 | $ | 498,408 | ||||||||
| Allowance for credit losses for loans as a % total loans | 0.92 | % | 0.92 | % | 1.10 | % |
All values are in US Dollars.
Our loan portfolio, totaling $50.1 billion at September 30, 2023, had net loan charge-offs totaling $5.5 million for the third quarter 2023 as compared to $8.6 million for the second quarter 2023 and net recoveries of loan charge-offs of $5.6 million for the third quarter 2022. Gross charge-offs totaled $8.9 million for the third quarter 2023 and included a $4.0 million partial charge-off of one commercial and industrial loan relationship.
The allowance for credit losses for loans, comprised of our allowance for loan losses and unfunded credit commitments, as a percentage of total loans was 0.92 percent at both September 30, 2023 and June 30, 2023, and 1.10 percent at September 30, 2022. During the third quarter 2023, the provision for credit losses for loans totaled $9.1 million as compared to $6.3 million and $1.8 million for the second quarter 2023 and third quarter 2022, respectively. The provision for credit losses for the third quarter 2023 reflects, among other factors, higher quantitative reserves related to classified loans within the commercial portfolios and specific reserves associated with collateral dependent loans, partially offset by a negative (credit) provision for unfunded credit commitments driven by a decline in these obligations at September 30, 2023. Our economic forecast related reserves at September 30, 2023 remained relatively unchanged from June 30, 2023.
Valley National Bancorp (NASDAQ: VLY)
Third Quarter 2023 Earnings
October 26, 2023
Capital Adequacy
Valley's total risk-based capital, common equity Tier 1 capital, Tier 1 capital and Tier 1 leverage capital ratios were 11.68 percent, 9.21 percent, 9.64 percent and 8.08 percent, respectively, at September 30, 2023.
Investor Conference Call
Valley will host a conference call with investors and the financial community at 11:00 AM Eastern Daylight Savings Time, today to discuss the third quarter 2023 earnings and related matters. Interested parties should preregister using this link: https://register.vevent.com to receive the dial-in number and a personal PIN, which are required to access the conference call. The teleconference will also be webcast live: https://edge.media-server.com and archived on Valley’s website through Monday, November 27, 2023.
About Valley
As the principal subsidiary of Valley National Bancorp, Valley National Bank is a regional bank with $61 billion in assets. Valley is committed to giving people and businesses the power to succeed. Valley operates many convenient branch locations and commercial banking offices across New Jersey, New York, Florida, Alabama, California, and Illinois, 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 Care 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 our business, 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 “intend,” “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “would,” “could,” “typically,” “usually,” “anticipate,” “may,” “estimate,” “outlook,” “project,” 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:
•the impact of Federal Reserve actions affecting the level of market interest rates and increases in business failures, specifically among our clients, as well as on our business, our employees and our ability to provide services to our customers;
•the impact of a potential U.S. Government shutdown on economic activity in the markets in which we operate and, in general, on levels of end market demand in the economy;
Valley National Bancorp (NASDAQ: VLY)
Third Quarter 2023 Earnings
October 26, 2023
•the impact of possible future bank failures on the business environment in which we operate and resulting market volatility and reduced confidence in depository institutions, including impact on stock price, customer deposit withdrawals from Valley National Bank, or business disruptions or liquidity issues that have or may affect our customers;
•the impact of unfavorable macroeconomic conditions or downturns, instability or volatility in financial markets, unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by and factors outside of our control, such as geopolitical instabilities or events (including the recent conflict in Israel and Gaza); natural and other disasters (including severe weather events) and health emergencies, acts of terrorism or other external events;
•risks associated with our acquisition of Bank Leumi Le-Israel Corporation (Bank Leumi USA), including (i) the inability to realize expected cost savings and synergies from the acquisition in the amounts or timeframe anticipated and (ii) greater than expected costs or difficulties relating to integration matters;
•the loss of or decrease in lower-cost funding sources within our deposit base;
•the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;
•the inability to attract new customer deposits to keep pace with loan growth strategies;
•a material change in our allowance for credit losses under CECL due to forecasted economic conditions and/or unexpected credit deterioration in our loan and investment portfolios;
•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;
•cyber-attacks, ransomware 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;
•damage verdicts or settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent or trademark infringement, employment related claims, and other matters;
•changes to laws and regulations, including changes affecting oversight of the financial services industry; changes in the enforcement and interpretation of such laws and regulations; and changes in accounting and reporting standards;
•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;
•results of examinations by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank (FRB), the Consumer Financial Protection Bureau (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;
•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;
Valley National Bancorp (NASDAQ: VLY)
Third Quarter 2023 Earnings
October 26, 2023
•a prolonged downturn in the economy, as well as an unexpected decline in commercial real estate values collateralizing a significant portion of our loan portfolio; and
•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.
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, 2022 and in Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.
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
GAAP Reconciliations to GAAP Financial Measures (Continued)
SELECTED FINANCIAL DATA
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | September 30, | ||||||||||||
| ($ in thousands, except for share data and stock price) | 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||
| FINANCIAL DATA: | |||||||||||||||
| Net interest income - FTE (1) | $ | 413,657 | $ | 421,275 | $ | 455,308 | $ | 1,272,390 | $ | 1,193,235 | |||||
| Net interest income | $ | 412,418 | $ | 419,765 | $ | 453,992 | $ | 1,268,203 | $ | 1,189,821 | |||||
| Non-interest income | 58,664 | 60,075 | 56,194 | 173,038 | 153,997 | ||||||||||
| Total revenue | 471,082 | 479,840 | 510,186 | 1,441,241 | 1,343,818 | ||||||||||
| Non-interest expense | 267,133 | 282,971 | 261,639 | 822,270 | 758,709 | ||||||||||
| Pre-provision net revenue | 203,949 | 196,869 | 248,547 | 618,971 | 585,109 | ||||||||||
| Provision for credit losses | 9,117 | 6,050 | 2,023 | 29,604 | 49,578 | ||||||||||
| Income tax expense | 53,486 | 51,759 | 68,405 | 162,410 | 144,271 | ||||||||||
| Net income | 141,346 | 139,060 | 178,119 | 426,957 | 391,260 | ||||||||||
| Dividends on preferred stock | 4,127 | 4,030 | 3,172 | 12,031 | 9,516 | ||||||||||
| Net income available to common shareholders | $ | 137,219 | $ | 135,030 | $ | 174,947 | $ | 414,926 | $ | 381,744 | |||||
| Weighted average number of common shares outstanding: | |||||||||||||||
| Basic | 507,650,668 | 507,690,043 | 506,342,200 | 507,580,197 | 478,383,342 | ||||||||||
| Diluted | 509,256,599 | 508,643,025 | 508,690,997 | 509,204,051 | 480,625,357 | ||||||||||
| Per common share data: | |||||||||||||||
| Basic earnings | $ | 0.27 | $ | 0.27 | $ | 0.35 | $ | 0.82 | $ | 0.80 | |||||
| Diluted earnings | 0.27 | 0.27 | 0.34 | 0.81 | 0.79 | ||||||||||
| Cash dividends declared | 0.11 | 0.11 | 0.11 | 0.33 | 0.33 | ||||||||||
| Closing stock price - high | 10.30 | 9.38 | 12.95 | 12.59 | 15.02 | ||||||||||
| Closing stock price - low | 7.63 | 6.59 | 10.14 | 6.59 | 10.14 | ||||||||||
| FINANCIAL RATIOS: | |||||||||||||||
| Net interest margin | 2.90 | % | 2.93 | % | 3.59 | % | 2.99 | % | 3.40 | % | |||||
| Net interest margin - FTE (1) | 2.91 | 2.94 | 3.60 | 3.00 | 3.41 | ||||||||||
| Annualized return on average assets | 0.92 | 0.90 | 1.30 | 0.93 | 1.03 | ||||||||||
| Annualized return on avg. shareholders' equity | 8.56 | 8.50 | 11.39 | 8.72 | 8.89 | ||||||||||
| NON-GAAP FINANCIAL DATA AND RATIOS: (3) | |||||||||||||||
| Basic earnings per share, as adjusted | $ | 0.26 | $ | 0.28 | $ | 0.35 | $ | 0.84 | $ | 0.96 | |||||
| Diluted earnings per share, as adjusted | 0.26 | 0.28 | 0.35 | 0.84 | 0.95 | ||||||||||
| Annualized return on average assets, as adjusted | 0.89 | % | 0.95 | % | 1.32 | % | 0.96 | % | 1.23 | % | |||||
| Annualized return on average shareholders' equity, as adjusted | 8.26 | 8.99 | 11.60 | 8.94 | 10.62 | ||||||||||
| Annualized return on avg. tangible shareholders' equity | 12.39 | % | 12.37 | % | 17.21 | % | 12.71 | % | 13.20 | % | |||||
| Annualized return on average tangible shareholders' equity, as adjusted | 11.95 | 13.09 | 17.54 | 13.04 | 15.77 | ||||||||||
| Efficiency ratio | 56.72 | 55.59 | 49.76 | 55.34 | 51.03 | ||||||||||
| AVERAGE BALANCE SHEET ITEMS: | |||||||||||||||
| Assets | $ | 61,391,688 | $ | 61,877,464 | $ | 54,858,306 | $ | 61,050,973 | $ | 50,588,010 | |||||
| Interest earning assets | 56,802,565 | 57,351,808 | 50,531,242 | 56,510,997 | 46,605,417 | ||||||||||
| Loans | 50,019,414 | 49,457,937 | 44,341,894 | 49,120,153 | 40,529,794 | ||||||||||
| Interest bearing liabilities | 40,829,078 | 40,925,791 | 31,228,739 | 39,802,966 | 29,042,253 | ||||||||||
| Deposits | 49,848,446 | 47,464,469 | 44,770,368 | 48,165,152 | 41,176,472 | ||||||||||
| Shareholders' equity | 6,605,786 | 6,546,452 | 6,256,767 | 6,531,424 | 5,869,736 |
VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
GAAP Reconciliations to GAAP Financial Measures (Continued)
| As Of | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| BALANCE SHEET ITEMS: | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||
| (In thousands) | 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||
| Assets | $ | 61,183,352 | $ | 61,703,693 | $ | 64,309,573 | $ | 57,462,749 | $ | 55,927,501 | |||||
| Total loans | 50,097,519 | 49,877,248 | 48,659,966 | 46,917,200 | 45,185,764 | ||||||||||
| Deposits | 49,885,314 | 49,619,815 | 47,590,916 | 47,636,914 | 45,308,843 | ||||||||||
| Shareholders' equity | 6,627,299 | 6,575,184 | 6,511,581 | 6,400,802 | 6,273,829 | ||||||||||
| LOANS: | |||||||||||||||
| (In thousands) | |||||||||||||||
| Commercial and industrial | $ | 9,274,630 | $ | 9,287,309 | $ | 9,043,946 | $ | 8,804,830 | $ | 8,701,377 | |||||
| Commercial real estate: | |||||||||||||||
| Commercial real estate | 28,041,050 | 27,793,072 | 27,051,111 | 25,732,033 | 24,493,445 | ||||||||||
| Construction | 3,833,269 | 3,815,761 | 3,725,967 | 3,700,835 | 3,571,818 | ||||||||||
| Total commercial real estate | 31,874,319 | 31,608,833 | 30,777,078 | 29,432,868 | 28,065,263 | ||||||||||
| Residential mortgage | 5,562,665 | 5,560,356 | 5,486,280 | 5,364,550 | 5,177,128 | ||||||||||
| Consumer: | |||||||||||||||
| Home equity | 548,918 | 535,493 | 516,592 | 503,884 | 467,135 | ||||||||||
| Automobile | 1,585,987 | 1,632,875 | 1,717,141 | 1,746,225 | 1,711,086 | ||||||||||
| Other consumer | 1,251,000 | 1,252,382 | 1,118,929 | 1,064,843 | 1,063,775 | ||||||||||
| Total consumer loans | 3,385,905 | 3,420,750 | 3,352,662 | 3,314,952 | 3,241,996 | ||||||||||
| Total loans | $ | 50,097,519 | $ | 49,877,248 | $ | 48,659,966 | $ | 46,917,200 | $ | 45,185,764 | |||||
| CAPITAL RATIOS: | |||||||||||||||
| Book value per common share | $ | 12.64 | $ | 12.54 | $ | 12.41 | $ | 12.23 | $ | 11.98 | |||||
| Tangible book value per common share (3) | 8.63 | 8.51 | 8.36 | 8.15 | 7.87 | ||||||||||
| Tangible common equity to tangible assets (3) | 7.40 | % | 7.24 | % | 6.82 | % | 7.45 | % | 7.40 | % | |||||
| Tier 1 leverage capital | 8.08 | 7.86 | 7.96 | 8.23 | 8.31 | ||||||||||
| Common equity tier 1 capital | 9.21 | 9.03 | 9.02 | 9.01 | 9.09 | ||||||||||
| Tier 1 risk-based capital | 9.64 | 9.47 | 9.46 | 9.46 | 9.56 | ||||||||||
| Total risk-based capital | 11.68 | 11.52 | 11.58 | 11.63 | 11.84 |
VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
GAAP Reconciliations to GAAP Financial Measures (Continued)
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ALLOWANCE FOR CREDIT LOSSES: | September 30, | June 30, | September 30, | September 30, | |||||||||||
| ($ in thousands) | 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||
| Allowance for credit losses for loans | |||||||||||||||
| Beginning balance | $ | 458,676 | $ | 460,969 | $ | 490,963 | $ | 483,255 | $ | 375,702 | |||||
| Impact of the adoption of ASU No. 2022-02 | — | — | — | (1,368) | — | ||||||||||
| Allowance for purchased credit deteriorated (PCD) loans, net (2) | — | — | — | — | 70,319 | ||||||||||
| Beginning balance, adjusted | 458,676 | 460,969 | 490,963 | 481,887 | 446,021 | ||||||||||
| Loans charged-off: | |||||||||||||||
| Commercial and industrial | (7,487) | (3,865) | (5,033) | (37,399) | (11,144) | ||||||||||
| Commercial real estate | (255) | (2,065) | (4,000) | (2,320) | (4,173) | ||||||||||
| Construction | — | (4,208) | — | (9,906) | — | ||||||||||
| Residential mortgage | (20) | (149) | — | (169) | (27) | ||||||||||
| Total consumer | (1,156) | (1,040) | (962) | (3,024) | (2,513) | ||||||||||
| Total loans charged-off | (8,918) | (11,327) | (9,995) | (52,818) | (17,857) | ||||||||||
| Charged-off loans recovered: | |||||||||||||||
| Commercial and industrial | 3,043 | 2,173 | 13,236 | 6,615 | 16,012 | ||||||||||
| Commercial real estate | 5 | 4 | 1,729 | 33 | 2,060 | ||||||||||
| Residential mortgage | 30 | 135 | 163 | 186 | 694 | ||||||||||
| Total consumer | 362 | 390 | 477 | 1,513 | 2,431 | ||||||||||
| Total loans recovered | 3,440 | 2,702 | 15,605 | 8,347 | 21,197 | ||||||||||
| Total net (charge-offs) recoveries | (5,478) | (8,625) | 5,610 | (44,471) | 3,340 | ||||||||||
| Provision for credit losses for loans | 9,147 | 6,332 | 1,835 | 24,929 | 49,047 | ||||||||||
| Ending balance | $ | 462,345 | $ | 458,676 | $ | 498,408 | $ | 462,345 | $ | 498,408 | |||||
| Components of allowance for credit losses for loans: | |||||||||||||||
| Allowance for loan losses | $ | 442,175 | $ | 436,432 | $ | 475,744 | $ | 442,175 | $ | 475,744 | |||||
| Allowance for unfunded credit commitments | 20,170 | 22,244 | 22,664 | 20,170 | 22,664 | ||||||||||
| Allowance for credit losses for loans | $ | 462,345 | $ | 458,676 | $ | 498,408 | $ | 462,345 | $ | 498,408 | |||||
| Components of provision for credit losses for loans: | |||||||||||||||
| Provision for credit losses for loans | $ | 11,221 | $ | 8,159 | $ | 1,315 | $ | 29,359 | $ | 42,883 | |||||
| (Credit) provision for unfunded credit commitments | (2,074) | (1,827) | 520 | (4,430) | 6,164 | ||||||||||
| Total provision for credit losses for loans | $ | 9,147 | $ | 6,332 | $ | 1,835 | $ | 24,929 | $ | 49,047 | |||||
| Annualized ratio of total net charge-offs (recoveries) to total average loans | 0.04 | % | 0.07 | % | (0.05) | % | 0.12 | % | (0.01) | % | |||||
| Allowance for credit losses for loans as a % of total loans | 0.92 | % | 0.92 | % | 1.10 | % | 0.92 | 1.10 |
VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
GAAP Reconciliations to GAAP Financial Measures (Continued)
| As Of | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSET QUALITY: | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||
| ($ in thousands) | 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||
| Accruing past due loans: | |||||||||||||||
| 30 to 59 days past due: | |||||||||||||||
| Commercial and industrial | $ | 10,687 | $ | 6,229 | $ | 20,716 | $ | 11,664 | $ | 19,526 | |||||
| Commercial real estate | 8,053 | 3,612 | 13,580 | 6,638 | 6,196 | ||||||||||
| Residential mortgage | 13,159 | 15,565 | 12,599 | 16,146 | 13,045 | ||||||||||
| Total consumer | 15,509 | 8,431 | 7,845 | 9,087 | 6,196 | ||||||||||
| Total 30 to 59 days past due | 47,408 | 33,837 | 54,740 | 43,535 | 44,963 | ||||||||||
| 60 to 89 days past due: | |||||||||||||||
| Commercial and industrial | 5,720 | 7,468 | 24,118 | 12,705 | 2,188 | ||||||||||
| Commercial real estate | 2,620 | — | — | 3,167 | 383 | ||||||||||
| Construction | — | — | — | — | 12,969 | ||||||||||
| Residential mortgage | 9,710 | 1,348 | 2,133 | 3,315 | 5,947 | ||||||||||
| Total consumer | 1,720 | 4,126 | 1,519 | 1,579 | 1,174 | ||||||||||
| Total 60 to 89 days past due | 19,770 | 12,942 | 27,770 | 20,766 | 22,661 | ||||||||||
| 90 or more days past due: | |||||||||||||||
| Commercial and industrial | 6,629 | 6,599 | 8,927 | 18,392 | 15,072 | ||||||||||
| Commercial real estate | — | 2,242 | — | 2,292 | 15,082 | ||||||||||
| Construction | 3,990 | 3,990 | 6,450 | 3,990 | — | ||||||||||
| Residential mortgage | 1,348 | 1,165 | 1,668 | 1,866 | 550 | ||||||||||
| Total consumer | 391 | 1,006 | 747 | 47 | 421 | ||||||||||
| Total 90 or more days past due | 12,358 | 15,002 | 17,792 | 26,587 | 31,125 | ||||||||||
| Total accruing past due loans | $ | 79,536 | $ | 61,781 | $ | 100,302 | $ | 90,888 | $ | 98,749 | |||||
| Non-accrual loans: | |||||||||||||||
| Commercial and industrial | $ | 87,655 | $ | 84,449 | $ | 78,606 | $ | 98,881 | $ | 135,187 | |||||
| Commercial real estate | 83,338 | 82,712 | 67,938 | 68,316 | 67,319 | ||||||||||
| Construction | 62,788 | 63,043 | 68,649 | 74,230 | 61,098 | ||||||||||
| Residential mortgage | 21,614 | 20,819 | 23,483 | 25,160 | 26,564 | ||||||||||
| Total consumer | 3,545 | 3,068 | 3,318 | 3,174 | 3,227 | ||||||||||
| Total non-accrual loans | 258,940 | 254,091 | 241,994 | 269,761 | 293,395 | ||||||||||
| Other real estate owned (OREO) | 71 | 824 | 1,189 | 286 | 286 | ||||||||||
| Other repossessed assets | 1,314 | 1,230 | 1,752 | 1,937 | 1,122 | ||||||||||
| Total non-performing assets | $ | 260,325 | $ | 256,145 | $ | 244,935 | $ | 271,984 | $ | 294,803 | |||||
| Total non-accrual loans as a % of loans | 0.52 | % | 0.51 | % | 0.50 | % | 0.57 | % | 0.65 | % | |||||
| Total accruing past due and non-accrual loans as a % of loans | 0.68 | 0.63 | 0.70 | 0.77 | 0.87 | ||||||||||
| Allowance for losses on loans as a % of non-accrual loans | 170.76 | 171.76 | 180.54 | 170.02 | 162.15 |
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) | Represents the allowance for acquired PCD loans, net of PCD loan charge-offs totaling $62.4 million in the second quarter 2022. |
| (3) | Non-GAAP Reconciliations. This press release contains certain supplemental financial information, described in the Notes below, which has been determined by methods other than U.S. Generally Accepted Accounting Principles ("GAAP") that management uses in its analysis of Valley's performance. The Company believes that the non-GAAP financial measures provide useful supplemental information to both management and investors in understanding Valley’s underlying operational performance, business and performance trends, and may facilitate comparisons of our current and prior performance with the performance of others in the financial services industry. Management utilizes these measures for internal planning, forecasting and analysis purposes. Management believes that Valley’s presentation and discussion of this supplemental information, together with the accompanying reconciliations to the GAAP financial measures, also allows investors to view performance in a manner similar to management. These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with U.S. GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies. |
Non-GAAP Reconciliations to GAAP Financial Measures
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | September 30, | ||||||||||||
| ($ in thousands, except for share data) | 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||
| Adjusted net income available to common shareholders (non-GAAP): | |||||||||||||||
| Net income, as reported (GAAP) | $ | 141,346 | $ | 139,060 | $ | 178,119 | $ | 426,957 | $ | 391,260 | |||||
| Add: Losses (gains) on available for sale and held to maturity securities transactions (net of tax)(a) | 318 | 6 | (24) | 341 | (74) | ||||||||||
| Add: Restructuring charge (net of tax)(b) | (484) | 8,015 | — | 7,531 | — | ||||||||||
| Add: Provision for credit losses for available for sale securities (c) | — | — | — | 5,000 | — | ||||||||||
| Add: Non-PCD provision for credit losses (net of tax)(d) | — | — | — | — | 29,282 | ||||||||||
| Add: Merger related expenses (net of tax)(e) | — | — | 3,360 | 2,962 | 47,103 | ||||||||||
| Add: Net gains on sales of office buildings (net of tax)(f) | (4,817) | — | — | (4,817) | — | ||||||||||
| Net income, as adjusted (non-GAAP) | $ | 136,363 | $ | 147,081 | $ | 181,455 | $ | 437,974 | $ | 467,571 | |||||
| Dividends on preferred stock | 4,127 | 4,030 | 3,172 | 12,031 | 9,516 | ||||||||||
| Net income available to common shareholders, as adjusted (non-GAAP) | $ | 132,236 | $ | 143,051 | $ | 178,283 | $ | 425,943 | $ | 458,055 | |||||
| __________ | |||||||||||||||
| (a) Included in gains (losses) on securities transactions, net. | |||||||||||||||
| (b) Represents severance expense related to workforce reductions within salary and employee benefits expense. | |||||||||||||||
| (c) Included in provision for credit losses for available for sale and held to maturity securities (tax disallowed). | |||||||||||||||
| (d) Represents provision for credit losses for non-PCD assets and unfunded credit commitments acquired during the period. | |||||||||||||||
| (e) Included primarily within salary and employee benefits expense. | |||||||||||||||
| (f) Included in net gains (losses) on sale of assets within non-interest income. | |||||||||||||||
| Adjusted per common share data (non-GAAP): | |||||||||||||||
| Net income available to common shareholders, as adjusted (non-GAAP) | $ | 132,236 | $ | 143,051 | $ | 178,283 | $ | 425,943 | $ | 458,055 | |||||
| Average number of shares outstanding | 507,650,668 | 507,690,043 | 506,342,200 | 507,580,197 | 478,383,342 | ||||||||||
| Basic earnings, as adjusted (non-GAAP) | $ | 0.26 | $ | 0.28 | $ | 0.35 | $ | 0.84 | $ | 0.96 | |||||
| Average number of diluted shares outstanding | 509,256,599 | 508,643,025 | 508,690,997 | 509,204,051 | 480,625,357 | ||||||||||
| Diluted earnings, as adjusted (non-GAAP) | $ | 0.26 | $ | 0.28 | $ | 0.35 | $ | 0.84 | $ | 0.95 | |||||
| Adjusted annualized return on average tangible shareholders' equity (non-GAAP): | |||||||||||||||
| Net income, as adjusted (non-GAAP) | $ | 136,363 | $ | 147,081 | $ | 181,455 | $ | 437,974 | $ | 467,571 | |||||
| Average shareholders' equity | $ | 6,605,786 | $ | 6,546,452 | $ | 6,256,767 | 6,531,424 | 5,869,736 | |||||||
| Less: Average goodwill and other intangible assets | 2,042,486 | 2,051,591 | 2,117,818 | 2,051,727 | 1,917,217 | ||||||||||
| Average tangible shareholders' equity | $ | 4,563,300 | $ | 4,494,861 | $ | 4,138,949 | $ | 4,479,697 | $ | 3,952,519 | |||||
| Annualized return on average tangible shareholders' equity, as adjusted (non-GAAP) | 11.95 | % | 13.09 | % | 17.54 | % | 13.04 | % | 15.77 | % | |||||
| Adjusted annualized return on average assets (non-GAAP): | |||||||||||||||
| Net income, as adjusted (non-GAAP) | $ | 136,363 | $ | 147,081 | $ | 181,455 | $ | 437,974 | $ | 467,571 | |||||
| Average assets | $ | 61,391,688 | $ | 61,877,464 | $ | 54,858,306 | $ | 61,050,973 | $ | 50,588,010 | |||||
| Annualized return on average assets, as adjusted (non-GAAP) | 0.89 | % | 0.95 | % | 1.32 | % | 0.96 | % | 1.23 | % |
VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
GAAP Reconciliations to GAAP Financial Measures (Continued)
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | September 30, | ||||||||||||
| ($ in thousands, except for share data) | 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||
| Adjusted annualized return on average shareholders' equity (non-GAAP): | |||||||||||||||
| Net income, as adjusted (non-GAAP) | $ | 136,363 | $ | 147,081 | $ | 181,455 | $ | 437,974 | $ | 467,571 | |||||
| Average shareholders' equity | $ | 6,605,786 | $ | 6,546,452 | $ | 6,256,767 | $ | 6,531,424 | $ | 5,869,736 | |||||
| Annualized return on average shareholders' equity, as adjusted (non-GAAP) | 8.26 | % | 8.99 | % | 11.60 | % | 8.94 | % | 10.62 | % | |||||
| Annualized return on average tangible shareholders' equity (non-GAAP): | |||||||||||||||
| Net income, as reported (GAAP) | $ | 141,346 | $ | 139,060 | $ | 178,119 | $ | 426,957 | $ | 391,260 | |||||
| Average shareholders' equity | $ | 6,605,786 | $ | 6,546,452 | $ | 6,256,767 | 6,531,424 | 5,869,736 | |||||||
| Less: Average goodwill and other intangible assets | 2,042,486 | 2,051,591 | 2,117,818 | 2,051,727 | 1,917,217 | ||||||||||
| Average tangible shareholders' equity | $ | 4,563,300 | $ | 4,494,861 | $ | 4,138,949 | $ | 4,479,697 | $ | 3,952,519 | |||||
| Annualized return on average tangible shareholders' equity (non-GAAP) | 12.39 | % | 12.37 | % | 17.21 | % | 12.71 | % | 13.20 | % | |||||
| Efficiency ratio (non-GAAP): | |||||||||||||||
| Non-interest expense, as reported (GAAP) | $ | 267,133 | $ | 282,971 | $ | 261,639 | $ | 822,270 | $ | 758,709 | |||||
| Less: Restructuring charge (pre-tax) | (675) | 11,182 | — | 10,507 | — | ||||||||||
| Less: Merger-related expenses (pre-tax) | — | — | 4,707 | 4,133 | 63,831 | ||||||||||
| Less: Amortization of tax credit investments (pre-tax) | 4,191 | 5,018 | 3,105 | 13,462 | 9,194 | ||||||||||
| Non-interest expense, as adjusted (non-GAAP) | $ | 263,617 | $ | 266,771 | $ | 253,827 | $ | 794,168 | $ | 685,684 | |||||
| Net interest income, as reported (GAAP) | 412,418 | 419,765 | 453,992 | 1,268,203 | 1,189,821 | ||||||||||
| Non-interest income, as reported (GAAP) | 58,664 | 60,075 | 56,194 | 173,038 | 153,997 | ||||||||||
| Add: Losses (gains) on available for sale and held to maturity securities transactions, net (pre-tax) | 443 | 9 | (33) | 476 | (102) | ||||||||||
| Less: Net gains on sales of office buildings (pre-tax) | (6,721) | — | — | (6,721) | — | ||||||||||
| Non-interest income, as adjusted (non-GAAP) | $ | 52,386 | $ | 60,084 | $ | 56,161 | $ | 166,793 | $ | 153,895 | |||||
| Gross operating income, as adjusted (non-GAAP) | $ | 464,804 | $ | 479,849 | $ | 510,153 | $ | 1,434,996 | $ | 1,343,716 | |||||
| Efficiency ratio (non-GAAP) | 56.72 | % | 55.59 | % | 49.76 | % | 55.34 | % | 51.03 | % | |||||
| As of | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| ($ in thousands, except for share data) | 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||
| Tangible book value per common share (non-GAAP): | |||||||||||||||
| Common shares outstanding | 507,660,742 | 507,619,430 | 507,762,358 | 506,374,478 | 506,351,502 | ||||||||||
| Shareholders' equity (GAAP) | $ | 6,627,299 | $ | 6,575,184 | $ | 6,511,581 | $ | 6,400,802 | $ | 6,273,829 | |||||
| Less: Preferred stock | 209,691 | 209,691 | 209,691 | 209,691 | 209,691 | ||||||||||
| Less: Goodwill and other intangible assets | 2,038,202 | 2,046,882 | 2,056,107 | 2,066,392 | 2,079,731 | ||||||||||
| Tangible common shareholders' equity (non-GAAP) | $ | 4,379,406 | $ | 4,318,611 | $ | 4,245,783 | $ | 4,124,719 | $ | 3,984,407 | |||||
| Tangible book value per common share (non-GAAP) | $ | 8.63 | $ | 8.51 | $ | 8.36 | $ | 8.15 | $ | 7.87 | |||||
| Tangible common equity to tangible assets (non-GAAP): | |||||||||||||||
| Tangible common shareholders' equity (non-GAAP) | $ | 4,379,406 | $ | 4,318,611 | $ | 4,245,783 | $ | 4,124,719 | $ | 3,984,407 | |||||
| Total assets (GAAP) | $ | 61,183,352 | $ | 61,703,693 | $ | 64,309,573 | $ | 57,462,749 | $ | 55,927,501 | |||||
| Less: Goodwill and other intangible assets | 2,038,202 | 2,046,882 | 2,056,107 | 2,066,392 | 2,079,731 | ||||||||||
| Tangible assets (non-GAAP) | $ | 59,145,150 | $ | 59,656,811 | $ | 62,253,466 | $ | 55,396,357 | $ | 53,847,770 | |||||
| Tangible common equity to tangible assets (non-GAAP) | 7.40 | % | 7.24 | % | 6.82 | % | 7.45 | % | 7.40 | % |
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except for share data)
| September 30, | December 31, | |||
|---|---|---|---|---|
| 2023 | 2022 | |||
| (Unaudited) | ||||
| Assets | ||||
| Cash and due from banks | $ | 444,857 | $ | 444,325 |
| Interest bearing deposits with banks | 698,966 | 503,622 | ||
| Investment securities: | ||||
| Equity securities | 63,191 | 48,731 | ||
| Trading debt securities | 3,441 | 13,438 | ||
| Available for sale debt securities | 1,186,524 | 1,261,397 | ||
| Held to maturity debt securities (net of allowance for credit losses of $1,321 at September 30, 2023 and $1,646 at December 31, 2022) | 3,797,388 | 3,827,338 | ||
| Total investment securities | 5,050,544 | 5,150,904 | ||
| Loans held for sale, at fair value | 33,834 | 18,118 | ||
| Loans | 50,097,519 | 46,917,200 | ||
| Less: Allowance for loan losses | (442,175) | (458,655) | ||
| Net loans | 49,655,344 | 46,458,545 | ||
| Premises and equipment, net | 387,981 | 358,556 | ||
| Lease right of use assets | 352,104 | 306,352 | ||
| Bank owned life insurance | 719,691 | 717,177 | ||
| Accrued interest receivable | 237,786 | 196,606 | ||
| Goodwill | 1,868,936 | 1,868,936 | ||
| Other intangible assets, net | 169,266 | 197,456 | ||
| Other assets | 1,564,043 | 1,242,152 | ||
| Total Assets | $ | 61,183,352 | $ | 57,462,749 |
| Liabilities | ||||
| Deposits: | ||||
| Non-interest bearing | $ | 11,671,504 | $ | 14,463,645 |
| Interest bearing: | ||||
| Savings, NOW and money market | 23,110,840 | 23,616,812 | ||
| Time | 15,102,970 | 9,556,457 | ||
| Total deposits | 49,885,314 | 47,636,914 | ||
| Short-term borrowings | 89,802 | 138,729 | ||
| Long-term borrowings | 2,318,294 | 1,543,058 | ||
| Junior subordinated debentures issued to capital trusts | 57,021 | 56,760 | ||
| Lease liabilities | 413,021 | 358,884 | ||
| Accrued expenses and other liabilities | 1,792,601 | 1,327,602 | ||
| Total Liabilities | 54,556,053 | 51,061,947 | ||
| Shareholders’ Equity | ||||
| Preferred stock, no par value; 50,000,000 authorized shares: | ||||
| Series A (4,600,000 shares issued at September 30, 2023 and December 31, 2022) | 111,590 | 111,590 | ||
| Series B (4,000,000 shares issued at September 30, 2023 and December 31, 2022) | 98,101 | 98,101 | ||
| Common stock (no par value, authorized 650,000,000 shares; issued 507,896,910 shares at September 30, 2023 and December 31, 2022) | 178,187 | 178,185 | ||
| Surplus | 4,982,748 | 4,980,231 | ||
| Retained earnings | 1,460,284 | 1,218,445 | ||
| Accumulated other comprehensive loss | (201,892) | (164,002) | ||
| Treasury stock, at cost (236,168 common shares at September 30, 2023 and 1,522,432 common shares at December 31, 2022) | (1,719) | (21,748) | ||
| Total Shareholders’ Equity | 6,627,299 | 6,400,802 | ||
| Total Liabilities and Shareholders’ Equity | $ | 61,183,352 | $ | 57,462,749 |
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except for share data)
| Three Months Ended | Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | September 30, | |||||||
| 2023 | 2023 | 2022 | 2023 | 2022 | ||||||
| Interest Income | ||||||||||
| Interest and fees on loans | $ | 753,638 | $ | 715,172 | $ | 496,520 | $ | 2,124,036 | $ | 1,229,462 |
| Interest and dividends on investment securities: | ||||||||||
| Taxable | 32,383 | 31,919 | 28,264 | 96,591 | 74,416 | |||||
| Tax-exempt | 4,585 | 5,575 | 5,210 | 15,485 | 12,739 | |||||
| Dividends | 5,299 | 7,517 | 2,738 | 18,001 | 7,490 | |||||
| Interest on federal funds sold and other short-term investments | 17,113 | 27,276 | 3,996 | 66,594 | 6,026 | |||||
| Total interest income | 813,018 | 787,459 | 536,728 | 2,320,707 | 1,330,133 | |||||
| Interest Expense | ||||||||||
| Interest on deposits: | ||||||||||
| Savings, NOW and money market | 201,916 | 164,842 | 50,674 | 517,524 | 77,423 | |||||
| Time | 164,336 | 125,764 | 15,174 | 370,398 | 21,274 | |||||
| Interest on short-term borrowings | 5,189 | 50,208 | 5,160 | 89,345 | 10,049 | |||||
| Interest on long-term borrowings and junior subordinated debentures | 29,159 | 26,880 | 11,728 | 75,237 | 31,566 | |||||
| Total interest expense | 400,600 | 367,694 | 82,736 | 1,052,504 | 140,312 | |||||
| Net Interest Income | 412,418 | 419,765 | 453,992 | 1,268,203 | 1,189,821 | |||||
| (Credit) provision for credit losses for available for sale and held to maturity securities | (30) | (282) | 188 | 4,675 | 531 | |||||
| Provision for credit losses for loans | 9,147 | 6,332 | 1,835 | 24,929 | 49,047 | |||||
| Net Interest Income After Provision for Credit Losses | 403,301 | 413,715 | 451,969 | 1,238,599 | 1,140,243 | |||||
| Non-Interest Income | ||||||||||
| Wealth management and trust fees | 11,417 | 11,176 | 9,281 | 32,180 | 23,989 | |||||
| Insurance commissions | 2,336 | 3,139 | 3,750 | 7,895 | 9,072 | |||||
| Capital markets | 7,141 | 16,967 | 13,171 | 35,000 | 42,242 | |||||
| Service charges on deposit accounts | 10,952 | 10,542 | 10,338 | 31,970 | 26,617 | |||||
| (Losses) gains on securities transactions, net | (398) | 217 | 323 | 197 | (1,058) | |||||
| Fees from loan servicing | 2,681 | 2,702 | 3,138 | 8,054 | 8,636 | |||||
| Gains on sales of loans, net | 2,023 | 1,240 | 922 | 3,752 | 5,510 | |||||
| Gains (losses) on sales of assets, net | 6,653 | 161 | (106) | 6,938 | (372) | |||||
| Bank owned life insurance | 2,709 | 2,443 | 1,681 | 7,736 | 5,840 | |||||
| Other | 13,150 | 11,488 | 13,696 | 39,316 | 33,521 | |||||
| Total non-interest income | 58,664 | 60,075 | 56,194 | 173,038 | 153,997 | |||||
| Non-Interest Expense | ||||||||||
| Salary and employee benefits expense | 137,292 | 149,594 | 134,572 | 431,872 | 397,103 | |||||
| Net occupancy expense | 24,675 | 25,949 | 26,486 | 73,880 | 70,906 | |||||
| Technology, furniture and equipment expense | 37,320 | 32,476 | 39,365 | 106,304 | 115,245 | |||||
| FDIC insurance assessment | 7,946 | 10,426 | 6,500 | 27,527 | 16,009 | |||||
| Amortization of other intangible assets | 9,741 | 9,812 | 11,088 | 30,072 | 26,925 | |||||
| Professional and legal fees | 17,109 | 21,406 | 17,840 | 55,329 | 62,998 | |||||
| Amortization of tax credit investments | 4,191 | 5,018 | 3,105 | 13,462 | 9,194 | |||||
| Other | 28,859 | 28,290 | 22,683 | 83,824 | 60,329 | |||||
| Total non-interest expense | 267,133 | 282,971 | 261,639 | 822,270 | 758,709 | |||||
| Income Before Income Taxes | 194,832 | 190,819 | 246,524 | 589,367 | 535,531 | |||||
| Income tax expense | 53,486 | 51,759 | 68,405 | 162,410 | 144,271 | |||||
| Net Income | 141,346 | 139,060 | 178,119 | 426,957 | 391,260 | |||||
| Dividends on preferred stock | 4,127 | 4,030 | 3,172 | 12,031 | 9,516 | |||||
| Net Income Available to Common Shareholders | $ | 137,219 | $ | 135,030 | $ | 174,947 | $ | 414,926 | $ | 381,744 |
VALLEY NATIONAL BANCORP
Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and
Net Interest Income on a Tax Equivalent Basis
| Three Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||||||
| Average | Avg. | Average | Avg. | Average | Avg. | |||||||||||||
| ($ in thousands) | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||
| Assets | ||||||||||||||||||
| Interest earning assets: | ||||||||||||||||||
| Loans (1)(2) | $ | 50,019,414 | $ | 753,662 | 6.03 | % | $ | 49,457,937 | $ | 715,195 | 5.78 | % | $ | 44,341,894 | $ | 496,545 | 4.48 | % |
| Taxable investments (3) | 4,915,778 | 37,682 | 3.07 | 5,065,812 | 39,436 | 3.11 | 4,815,181 | 31,002 | 2.58 | |||||||||
| Tax-exempt investments (1)(3) | 620,439 | 5,800 | 3.74 | 629,342 | 7,062 | 4.49 | 635,795 | 6,501 | 4.09 | |||||||||
| Interest bearing deposits with banks | 1,246,934 | 17,113 | 5.49 | 2,198,717 | 27,276 | 4.96 | 738,372 | 3,996 | 2.16 | |||||||||
| Total interest earning assets | 56,802,565 | 814,257 | 5.73 | 57,351,808 | 788,969 | 5.50 | 50,531,242 | 538,044 | 4.26 | |||||||||
| Other assets | 4,589,123 | 4,525,656 | 4,327,064 | |||||||||||||||
| Total assets | $ | 61,391,688 | $ | 61,877,464 | $ | 54,858,306 | ||||||||||||
| Liabilities and shareholders' equity | ||||||||||||||||||
| Interest bearing liabilities: | ||||||||||||||||||
| Savings, NOW and money market deposits | $ | 23,016,737 | $ | 201,916 | 3.51 | % | $ | 22,512,128 | $ | 164,843 | 2.93 | % | $ | 23,541,694 | $ | 50,674 | 0.86 | % |
| Time deposits | 14,880,311 | 164,336 | 4.42 | 12,195,479 | 125,764 | 4.12 | 5,192,896 | 15,174 | 1.17 | |||||||||
| Short-term borrowings | 436,518 | 5,189 | 4.75 | 3,878,457 | 50,207 | 5.18 | 1,016,240 | 5,160 | 2.03 | |||||||||
| Long-term borrowings (4) | 2,495,512 | 29,159 | 4.67 | 2,339,727 | 26,880 | 4.60 | 1,477,909 | 11,728 | 3.17 | |||||||||
| Total interest bearing liabilities | 40,829,078 | 400,600 | 3.92 | 40,925,791 | 367,694 | 3.59 | 31,228,739 | 82,736 | 1.06 | |||||||||
| Non-interest bearing deposits | 11,951,398 | 12,756,862 | 16,035,778 | |||||||||||||||
| Other liabilities | 2,005,426 | 1,648,359 | 1,337,022 | |||||||||||||||
| Shareholders' equity | 6,605,786 | 6,546,452 | 6,256,767 | |||||||||||||||
| Total liabilities and shareholders' equity | $ | 61,391,688 | $ | 61,877,464 | $ | 54,858,306 | ||||||||||||
| Net interest income/interest rate spread (5) | $ | 413,657 | 1.81 | % | $ | 421,275 | 1.91 | % | $ | 455,308 | 3.20 | % | ||||||
| Tax equivalent adjustment | (1,239) | (1,510) | (1,316) | |||||||||||||||
| Net interest income, as reported | $ | 412,418 | $ | 419,765 | $ | 453,992 | ||||||||||||
| Net interest margin (6) | 2.90 | 2.93 | 3.59 | |||||||||||||||
| Tax equivalent effect | 0.01 | 0.01 | 0.01 | |||||||||||||||
| Net interest margin on a fully tax equivalent basis (6) | 2.91 | % | 2.94 | % | 3.60 | % |
(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.
| SHAREHOLDERS RELATIONS<br>Requests for copies of reports and/or other inquiries should be directed to Tina Zarkadas, Assistant Vice President, Shareholder Relations Specialist, Valley National Bancorp, 70 Speedwell Avenue, Morristown, New Jersey, 07960, by telephone at (973) 305-3380, by fax at (973) 305-1364 or by e-mail at tzarkadas@valley.com. |
|---|
17
a3q23earningspresentatio
3 Q 2 3 E a r n i n g s P r e s e n t a t i o n O c t o b e r 2 6 , 2 0 2 3 Exhibit 99.2
Forward Looking Statements This presentation 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 our business, 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 “intend,” “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “would,” “could,” “typically,” “usually,” “anticipate,” “may,” “estimate,” “outlook,” “project,” 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: the impact of Federal Reserve actions affecting the level of market interest rates and increases in business failures, specifically among our clients, as well as on our business, our employees and our ability to provide services to our customers; the impact of a potential U.S. Government shutdown on economic activity in the markets in which we operate and, in general, on levels of end market demand in the economy; the impact of possible future bank failures on the business environment in which we operate and resulting market volatility and reduced confidence in depository institutions, including impact on stock price, customer deposit withdrawals from Valley National Bank, or business disruptions or liquidity issues that have or may affect our customers; the impact of unfavorable macroeconomic conditions or downturns, instability or volatility in financial markets, unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by and factors outside of our control, such as geopolitical instabilities or events (including the recent conflict in Israel and Gaza); natural and other disasters (including severe weather events) and health emergencies, acts of terrorism or other external events; risks associated with our acquisition of Bank Leumi Le-Israel Corporation (Bank Leumi USA), including (i) the inability to realize expected cost savings and synergies from the acquisition in the amounts or timeframe anticipated and (ii) greater than expected costs or difficulties relating to integration matters; the loss of or decrease in lower-cost funding sources within our deposit base; the need to supplement debt or equity capital to maintain or exceed internal capital thresholds; the inability to attract new customer deposits to keep pace with loan growth strategies; a material change in our allowance for credit losses under CECL due to forecasted economic conditions and/or unexpected credit deterioration in our loan and investment portfolios; 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; cyber-attacks, ransomware 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; damage verdicts or settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent or trademark infringement, employment related claims, and other matters; changes to laws and regulations, including changes affecting oversight of the financial services industry; changes in the enforcement and interpretation of such laws and regulations; and changes in accounting and reporting standards; 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; results of examinations by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank (FRB), the Consumer Financial Protection Bureau (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; 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; a prolonged downturn in the economy, as well as an unexpected decline in commercial real estate values collateralizing a significant portion of our loan portfolio; and 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. 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, 2022 and in Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023. 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.
3 3Q23 2Q23 3Q22 3Q23 2Q23 3Q22 Net Income ($mm) $141.3 $139.1 $178.1 $136.4 $147.1 $181.5 Return on Average Assets Annualized 0.92% 0.90% 1.30% 0.89% 0.95% 1.32% Efficiency Ratio (Non-GAAP) -- -- -- 56.7% 55.6% 49.8% Diluted Earnings Per Share $0.27 $0.27 $0.34 $0.26 $0.28 $0.35 Pre-Provision Net Revenue 2 ($mm) $203.9 $196.9 $248.5 $201.2 $213.1 $256.3 PPNR / Average Assets 2 Annualized 1.33% 1.27% 1.81% 1.31% 1.38% 1.87% GAAP Reported Non-GAAP Adjusted 1 1 Please refer to the Non-GAAP Disclosure Reconciliation in Appendix. 2 Pre-provision net revenue (“PPNR”) equals net interest income plus total non-interest income less total non-interest expense. 3Q 2023 Financial Highlights Slower loan growth contributed to improved regulatory capital ratios. Signs of net interest income troughing on a monthly basis. Strong and stable asset quality across the loan portfolio. Sequential reduction in adjusted operating expenses.
4 22.3 23.1 12.4 11.7 14.9 15.1 $49.6 $49.9 6/30/2023 9/30/2023 Time Non-Interest Savings, NOW and money market 24% 45% 25% 30% 0.15% 1.36% 1.96% 2.45% 2.94% 0.25% 3.82% 4.69% 5.16% 5.43% 4Q21 4Q22 1Q23 2Q23 3Q23 Total Deposits Average Fed Funds (Upper) Total Deposits Remain Stable Deposit Balance Trends ($bn) 30% 46% Avg. Fed Funds vs. Deposit Costs (%) Cumulative Beta (Current Cycle) 1 1 Cumulative Beta is measured as the change in Valley’s quarterly average deposit costs since the quarter preceding the rate hike cycle (4Q21) as a percentage of the change in the average quarterly Fed Funds Upper Bound over the same period. Avg. Fed Funds (Upper) Total Cost of Deposits Cumulative Beta 4Q21 0.25% 0.15% -- 4Q22 3.82% 1.36% 34% 1Q23 4.69% 1.96% 41% 2Q23 5.16% 2.45% 47% 3Q23 5.43% 2.94% 54%
5 Customer Deposit Base Diversified by Geography and Source Traditional Branch Deposits $31.3 63% Specialized Deposits $8.7 17% Fully FDIC-Insured Indirect Customer $9.9 20% Nat'l Deposits, Cannabis & Online $3.2 International Corporate $0.7 Technology $1.2 Private Banking & Wealth $1.6 Other Commercial $2.0 $49.9bn $8.7bn New Jersey $17.3 New York $4.8 Florida $7.7 Alabama $1.5 $31.3bn Total Deposit Breakdown ($bn, as of 9/30/23) Specialized Deposits by Business Line ($bn, as of 9/30/23)Traditional Branch Deposits 3 ($bn, as of 9/30/23) Uninsured Deposit & Liquidity ($bn, as of 9/30/23) 1 Adjusted for collateralized government deposits in excess of FDIC $250k limit and intercompany deposits eliminated in consolidation. 2 “High Quality Available Liquidity” includes the following off balance sheet sources of potential liquidity: FHLB, unencumbered investment securities, FRBNY Discount Window Availability, and Uncommitted Fed Funds Lines. 3 Traditional Branch Deposits Include Commercial (inclusive of $1bn of HOA deposits), Consumer and Government. Totals may not sum due to rounding. $11.7 $1.1 $24.6 $25.8 Adjusted Uninsured Deposits Cash & Available Liquidity Cash on Balance Sheet High Quality Available Liquidity 2 Cash & Available Liquidity Stands at 2.2x of Adjusted Uninsured Deposits 1 128 branches 16 branches 42 branches 42 branches Adjusted Uninsured Deposits 1 23%
6 NJ $2.3 NY $0.5 FL $0.8 PA $0.7 Other $0.7 Highly Granular Deposits – 9/30/2023 Customer Type Deposits ($bn) % of Total Deposits Commercial $17.9 36% Consumer $17.0 34% Fully FDIC-Insured Indirect $9.9 20% Fully-Collateralized Government 1 $5.0 10% Top 10 Commercial Industries 2 Deposits ($bn) % of Total Deposits Real Estate / Rental / Leasing $3.4 7% Finance & Insurance $3.3 7% Professional, Scientific, Technical Services $2.2 4% Other Services $1.7 3% Construction $1.5 3% Health Care & Social Assistance $1.0 2% Manufacturing $1.0 2% Wholesale Trade $0.9 2% Retail Trade $0.7 1% Arts, Entertainment & Recreation $0.5 1% 1 Fully-collateralized to relevant state requirements. 2 Commercial industries determined by NAICS Sector / Industry. $5.0bn Fully-Collateralized Government Deposits by State 1
7 Multifamily 18% Non Owner-Occupied CRE 25% Healthcare CRE 4% Owner-Occupied CRE 9% C&I 18% Consumer 7% Residential R.E. 11% Construction 8% CRE 47% C&I 27%Other 26% New Loan Originations ($bn) 1 CRE includes multifamily, non-owner occupied CRE and healthcare CRE; C&I includes owner-occupied CRE and C&I; Other includes construction, residential RE and Consumer. 2 Cumulative Beta is measured as the change in Valley’s quarterly average loan yield since the quarter preceding the rate hike cycle (4Q21) as a percentage of the change in the average quarterly Fed Funds Upper Bound over the same period. Diversified Loan Portfolio Gross Loans ($bn) $46.9 $48.7 $49.9 $50.1 12/31/2022 3/31/2023 6/30/2023 9/30/2023 9/30/2023 Loan Composition 1 YTD Annualized Growth: $2.7 $2.6 $2.5 $2.5 $1.8 5.21% 6.20% 6.61% 7.35% 7.91% 4.48% 5.20% 5.48% 5.78% 6.03% 3Q22 4Q22 1Q23 2Q23 3Q23 Origination Volume (Gross) New Origination Rate Avg. Portfolio Yield Cumulative Loan Beta (Current Cycle) 2 Avg. Fed Funds (Upper) Avg. Loan Yield Cumulative Beta 4Q21 0.25% 3.83% -- 4Q22 3.82% 5.20% 38% 1Q23 4.69% 5.48% 37% 2Q23 5.16% 5.78% 40% 3Q23 5.43% 6.03% 43% +14.9% +12.6% +9.0%
8 CRE Detail as of 9/30/2023 Portfolio by Collateral Type Apartment & Residential 31% Retail 18% Mixed Use 11% Office 10% Healthcare Office 2% Industrial 11% Healthcare 8% Specialty & Other 9% Portfolio by Geography Florida 25.0% New Jersey 20.3% Other 22.2% Other NYC Boroughs 14.2% Manhattan (Multifamily) 5.6% Manhattan (Other) 4.0% New York (ex. NYC) 8.7% Geography Outstanding ($bn) % of Total Wtd. Avg. LTV Wtd. Avg. DSCR Florida $7.0 25.0% 61% 1.80x New Jersey $5.7 20.3% 62% 1.71x Other NYC Boroughs $4.0 14.2% 55% 1.50x Manhattan $2.7 9.6% 39% (53% ex Co-Ops) 1.72x New York (ex. NYC) $2.4 8.7% 54% 1.82x Other $6.2 22.2% 64% 1.76x Total $28.0 100.0% 58% 1.69x $28.0bn $28.0bn Sums may be inconsistent due to rounding. $4.4bn of CRE Portfolio (16%) is Owner-Occupied.
9 Office 10% Healthcare Office 2% Granular & Diverse Office Portfolio CRE Portfolio $3.2bn Office Portfolio by Geography ($bn) $3.2bn Geography Outstanding ($bn) Avg. Size ($mm) % of Total Office Wtd. Avg. LTV Wtd. Avg. DSCR Florida & Alabama $1.2bn $2mm 37% 51% 1.76x New Jersey $0.8 $2mm 25% 55% 1.51x New York (ex. Manhattan) $0.5 $4mm 19% 52% 1.63x Manhattan $0.3 $6mm 6% 55% 1.30x Other $0.4 $6mm 13% 56% 1.68x Total $3.2bn $2mm 100% 53% 1.63x ▪ $138,000 of non-accruals (0.01% of office). ▪ No charge-offs in recent history. ▪ 72% of portfolio is multi-tenant. ~20% of Office Portfolio is Owner-Occupied. Florida & Alabama $1.2 37% New Jersey $0.8 25%Other $0.4 13% New York (ex. Manhattan) $0.5 16% Manhattan $0.3 9%
10 Net Interest Income ($mm) and Margin Net Interest Margin $455 $467 $437 $421 $414 3.60% 3.57% 3.16% 2.94% 2.91% 3Q22 4Q22 1Q23 2Q23 3Q23 Net Interest Income ($mm) NIM All metrics are represented on a fully tax equivalent basis. Continued improvement in yields on new and existing loans. Non-interest bearing deposit run-off has slowed. Cash and short-term borrowing balances had normalized by quarter-end.
11 $18.7 $17.0 $18.5 $13.2 $17.0 $7.1 $13.0 $14.3 $13.8 $0.9 $1.2 $2.0 $10.3 $10.5 $11.0 $6.3 $56.2 $60.1 $58.7 3Q22 2Q23 3Q23 Other Non-Interest Income Capital Markets Wealth, Trust & Insurance Gain on Sale of Loans Deposit Service Charges Net non-core income Other $15.8 30% Wealth, Trust & Insurance $13.8 26% Capital Markets $7.1 14% Service Charges $11.0 21% Gain-on-Sale of Loans, net $2.0 4% Loan Servicing $2.7 5% 3Q23 Adjusted Non-Interest Income ($mm) 1 Diverse Fee Income Sources $52.4mm Non-Interest Income ($mm) 1 Please refer to the Non-GAAP Disclosure Reconciliation in Appendix. 1
12 266.8 263.6 16.2 3.5 283.0 267.1 2Q23 3Q23 Adjusted Reported 1 Please refer to the Non-GAAP Disclosure Reconciliation in Appendix. Sums may be inconsistent due to rounding. Non-Interest Expense Non-Interest Expenses ($mm) 1 Efficiency Ratio Trend 1 55.6% 56.7% 2Q23 3Q23 1.85% 1.72% 1.72% 3Q22 2Q23 3Q23 Adj. Non-Interest Expenses 1 / Avg. Assets
13 0.65% 0.57% 0.50% 0.51% 0.52% 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 Asset Quality Non-Accrual Loans / Total Loans Loan Loss Provision ($mm) Allowance for Credit Losses for Loans / Total Loans 0.99% 1.03% 1.10% 1.03% 0.95% 0.92% 0.92% 9/30/2022 12/31/22 3/31/23 6/30/23 9/30/23 Net Loan Charge-offs ($mm) $(6) $22 $30 $9 $6 (0.05%) 0.19% 0.25% 0.07% 0.04% 3Q22 4Q22 1Q23 2Q23 3Q23 Net Charge-offs (Recoveries) NCOs / Avg. Loans $1.8 $7.3 $9.5 $6.3 $9.1 3Q22 4Q22 1Q23 2Q23 3Q23
14 Equity & Capitalization $7.87 $8.15 $8.36 $8.51 $8.63 $11.98 $12.23 $12.41 $12.54 $12.64 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 TBV per share Book Value per share Book Value and Tangible Book Value per Share 1 Equity Capitalization Level 1 1 Please refer to the Non-GAAP Disclosure Reconciliation in Appendix. 7.40% 7.45% 6.82% 7.24% 7.40% 11.22% 11.14% 10.12% 10.66% 10.83% 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 Tangible Common Equity / Tangible Assets Equity / Assets Holding Company Capital Ratios 9/30/22 6/30/23 9/30/23 Tier 1 Leverage 8.31 7.86 8.08 Common Equity Tier 1 9.09 9.03 9.21 Tier 1 Risk-Based 9.56 9.47 9.64 Total Risk-Based 11.84 11.52 11.68 1
A p p e n d i x
16 September 30, June 30, September 30, ($ in thousands, except for share data) 2023 2023 2022 Adjusted net income avai lable to common shareholders (Non-GAAP): Net income, as reported (GAAP) $141,346 $139,060 $178,119 Add: Losses (gains) on available for sale and held to maturity securities transactions (net of tax) (a) 318 6 (24) Add: Restructuring charge (net of tax) (b) (484) 8,015 — Add: Branch related asset impairment (net of tax) (c) 1,004 — — Add: Net gains on sales of office buildings (net of tax) (d) (5,821) — — Add: Merger related expenses (net of tax) (e) — — 3,360 Net income, as adjusted (Non-GAAP) $136,363 $147,081 $181,455 Dividends on preferred stock 4,127 4,030 3,172 Net income available to common shareholders, as adjusted (Non-GAAP) $132,236 $143,051 $178,283 (a) Included in gains (losses) on securities transactions, net. (b) Represents severance expense related to workforce reductions within salary and employee benefits expense. (c) Branch related asset impairment is included in net gains (losses) on sale of assets within non-interest income. (d) Included in net gains (losses) on sales of assets within non-interest income. (e) Included primarily within salary and employee benefits expense. Adjusted per common share data (Non-GAAP): Net income available to common shareholders, as adjusted (Non-GAAP) $132,236 $143,051 $178,283 Average number of shares outstanding 507,650,668 507,690,043 506,342,200 Basic earnings, as adjusted (Non-GAAP) $0.26 $0.28 $0.35 Average number of diluted shares outstanding 509,256,599 508,643,025 508,690,997 Diluted earnings, as adjusted (Non-GAAP) $0.26 $0.28 $0.35 Adjusted annual ized return on average tangible shareholders' equi ty (Non-GAAP): Net income, as adjusted (Non-GAAP) $136,363 $147,081 $181,455 Average shareholders' equity 6,605,786 6,546,452 6,256,767 Less: Average goodwill and other intangible assets 2,042,486 2,051,591 2,117,818 Average tangible shareholders' equity 4,563,300 4,494,861 4,138,949 Annualized return on average tangible shareholders' equity, as adjusted (Non-GAAP) 11.95% 13.09% 17.54% Adjusted annual ized return on average assets (Non-GAAP): Net income, as adjusted (Non-GAAP) $136,363 $147,081 $181,455 Average assets $61,391,688 $61,877,464 $54,858,306 Annualized return on average assets, as adjusted (Non-GAAP) 0.89% 0.95% 1.32% Adjusted annual ized return on average shareholders' equi ty (Non-GAAP): Net income, as adjusted (Non-GAAP) $136,363 $147,081 $181,455 Average shareholders' equity 6,605,786 6,546,452 6,256,767 Annualized return on average shareholders' equity, as adjusted (Non-GAAP) 8.26% 8.99% 11.60% Three Months Ended Non-GAAP Reconciliations to GAAP Financial Measures
17 September 30, June 30, September 30, ($ in thousands) 2023 2023 2022 Annual ized return on average tangible shareholders' equi ty (Non-GAAP): Net income, as reported (GAAP) $141,346 $139,060 $178,119 Average shareholders' equity 6,605,786 6,546,452 6,256,767 Less: Average goodwill and other intangible assets 2,042,486 2,051,591 2,117,818 Average tangible shareholders' equity 4,563,300 4,494,861 4,138,949 Annualized return on average tangible shareholders' equity (Non-GAAP): 12.39% 12.37% 17.21% Effic iency rat io (Non-GAAP): Non-interest expense, as reported (GAAP) $267,133 $282,971 $261,640 Less: Restructuring charge (pre-tax) (675) 11,182 Less: Merger-related expenses (pre-tax) — — 4,707 Less: Amortization of tax credit investments (pre-tax) 4,191 5,018 3,105 Non-interest expense, as adjusted (Non-GAAP) $263,617 $266,771 $253,828 Net interest income, as reported (GAAP) 412,418 419,765 453,992 Non-interest income, as reported (GAAP) 58,664 60,075 56,194 Add: Losses on available for sale and held to maturity securities transactions, net (pre-tax) 443 9 (33) Add: Net gains on sales of office buildings (pre-tax) (6,721) — — Non-interest income, as adjusted (Non-GAAP) 52,386 $60,084 $56,161 Gross operating income, as adjusted (Non-GAAP) 464,804 479,849 510,153 Efficiency ratio (Non-GAAP) 56.72% 55.59% 49.76% Annual ized pre-provision net revenue / average assets Net interest income, as reported (GAAP) $412,418 $419,765 $453,992 Non-interest income, as reported (GAAP) 58,664 60,075 56,194 Less: Non-interest expense, as reported (GAAP) 267,133 282,971 261,640 Pre-provision net revenue (GAAP) $203,949 $196,869 $248,546 Average assets $61,391,688 $61,877,464 $54,858,306 Annualized pre-provision net revenue / average assets (GAAP) 1.33% 1.27% 1.81% Annual ized pre-provision net revenue / average assets, as adjusted Pre-provision net revenue (GAAP) $203,949 $196,869 $248,546 Add: Restructuring charge (pre-tax) ($675) $11,182 Add: Merger-related expenses (pre-tax) — — 4,707 Add: Amortization of tax credit investments (pre-tax) 4,191 5,018 3,105 Add: Losses (gains) on available for sale and held to maturity securities transactions, net (pre-tax) 443 9 (33) Add: Net gain on sale of asset (pre-tax) (6,721) — — Pre-provision net revenue, as adjusted (Non-GAAP) 201,187 213,078 256,325 Average assets $61,391,688 $61,877,464 $54,858,306 Annualized pre-provision net revenue / average assets, as adjusted (Non-GAAP) 1.31% 1.38% 1.87% Three Months Ended Non-GAAP Reconciliations to GAAP Financial Measures
18 September 30, June 30, March 31, December 31, September 30, ($ in thousands, except for share data) 2023 2023 2023 2022 2022 Tangible book value per common share (Non-GAAP): Common shares outstanding 507,660,742 507,619,430 507,762,358 506,374,478 506,351,502 Shareholders' equity $6,627,299 $6,575,184 $6,511,581 $6,400,802 $6,273,828 Less: Preferred Stock 209,691 209,691 209,691 209,691 209,691 Less: Goodwill and other intangible assets 2,038,202 2,046,882 2,056,107 2,066,392 2,079,731 Tangible common shareholders' equity (Non-GAAP) $4,379,406 $4,318,611 $4,245,783 $4,124,719 $3,984,406 Tangible book value per common share (Non-GAAP): $8.63 $8.51 $8.36 $8.15 $7.87 Tangible common equi ty to tangible assets (Non-GAAP): Tangible common shareholders' equity (Non-GAAP) $4,379,406 $4,318,611 $4,245,783 $4,124,719 $3,984,406 Total assets 61,183,352 61,703,693 64,319,460 57,466,232 55,927,501 Less: Goodwill and other intangible assets 2,038,202 2,046,882 2,056,107 2,066,392 2,079,731 Tangible assets (Non-GAAP) 59,145,150 59,656,811 62,263,353 55,399,840 53,847,770 Tangible common equity to tangible assets (Non-GAAP) 7.40% 7.24% 6.82% 7.45% 7.40% As of Non-GAAP Reconciliations to GAAP Financial Measures
19 ▪ Log onto our website: www.valley.com ▪ Email requests to: tlan@valley.com ▪ Call Travis Lan in Investor Relations, at: (973) 686-5007 ▪ Log onto our website above or www.sec.gov to obtain free copies of documents filed by Valley with the SEC For More Information