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Valley National Bancorp Reports a 25 Percent Increase in Second Quarter 2020 Net Income and Strong Operational Efficiency

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NEW YORK, July 23, 2020 (GLOBE NEWSWIRE) -- Valley National Bancorp (NASDAQ:VLY), the holding company for Valley National Bank, today reported net income for the second quarter 2020 of $95.6 million, or $0.23 per diluted common share, as compared to the second quarter 2019 earnings of $76.5 million, or $0.22 per diluted common share, and net income of $87.3 million, or $0.21 per diluted common share, for the first quarter 2020.

Key financial highlights for the second quarter:

  • Loan Portfolio: Loans increased $1.9 billion to $32.3 billion at June 30, 2020 from March 31, 2020. The increase was largely due to approximately $2.2 billion of SBA Paycheck Protection Program (PPP) loans originated under the CARES Act to aid small- and medium-sized businesses in the second quarter. We also sold approximately $237 million of residential mortgage loans originated for sale rather than investment, resulting in total pre-tax gains of $8.3 million in the second quarter 2020, as compared to $196 million of residential mortgage loans sold in the linked quarter with total pre-tax gains of $4.6 million. See the "Loans" section below for more details.

  • Net Interest Income and Margin: Net interest income on a tax equivalent basis of $283.5 million for the second quarter 2020 increased $17.2 million as compared to the first quarter 2020. The increase was driven by several factors in the second quarter 2020 including, a 46 basis point decline in our funding costs largely resulting from the lower interest rate environment and a $2.0 billion increase in average loan balances mostly due to the PPP loan originations. Our net interest margin on a tax equivalent basis of 3.00 percent for the second quarter 2020 decreased by 7 basis points from 3.07 percent for the first quarter 2020. See the "Net Interest Income and Margin" section below for additional information.

  • Allowance and Provision for Credit Losses for Loans: Our allowance for credit losses for loans totaled $319.7 million and $293.4 million at June 30, 2020 and March 31, 2020, respectively. During the second quarter 2020, the provision for credit losses for loans was $41.1 million as compared to $33.9 million for the first quarter 2020 and a pre-CECL provision of $2.1 million for the second quarter 2019. The reserve build in the second quarter 2020 mainly reflects deterioration in Valley's view of the macroeconomic outlook since the end of the first quarter, higher specific reserves associated with our taxi medallion loan portfolio and additional qualitative management adjustments to reflect the potential for higher levels of credit stress related to COVID-19 impacted borrowers.

  • Credit Quality: Net loan charge-offs totaled $14.8 million for the second quarter 2020 as compared to $4.8 million for the first quarter 2020 primarily due to the partial charge-off of one impaired commercial loan relationship and lower collateral valuations related to non-performing taxi medallion loans. Non-accrual loans increased $4.7 million during the second quarter 2020 as compared to the first quarter 2020 and represented 0.65 percent and 0.68 percent of total loans at June 30, 2020 and March 31, 2020, respectively. See the "Credit Quality" Section below for more details.

  • Non-interest Income: Non-interest income increased $3.4 million to $44.8 million for the second quarter 2020 as compared to the first quarter 2020. The increase was largely due to a $3.8 million increase in net gains on sales of residential mortgage loans and a $2.7 million increase in BOLI income, partially offset by a $2.1 million decline in service charges mostly caused by waived fees related to COVID-19 customer relief efforts.

  • Non-interest Expense: Non-interest expense increased $1.5 million to $157.2 million for the second quarter 2020 as compared to the first quarter 2020 partly due to moderate increases in technology transformation consulting services, pension, cash incentive compensation and FDIC insurance assessment expenses. Merger related expenses totaled $366 thousand and $1.3 million for the second quarter 2020 and first quarter 2020, respectively. COVID-19 related expenses also totaled $2.2 million and $2.1 million for second quarter 2020 and first quarter 2020, respectively. During the second quarter 2020, these expenses consisted of certain PPP loan costs, such as advertising, additional remote work readiness costs, special cleaning and other COVID-19 safety related costs, while the first quarter 2020 expense was largely a special bonus for hourly employees.

  • Efficiency Ratio: Our efficiency ratio was 48.01 percent for the second quarter 2020 as compared to 50.75 percent and 57.19 percent for the first quarter 2020 and second quarter 2019, respectively. Our adjusted efficiency ratio was 46.84 percent for the second quarter 2020 as compared to 49.26 percent and 54.57 percent for the first quarter 2020 and second quarter 2019, respectively. See the "Consolidated Financial Highlights" tables below for additional information regarding our non-GAAP measures.

  • Performance Ratios: Annualized return on average assets (ROA), average shareholders’ equity (ROE) and average tangible shareholders' equity (ROTE) were 0.92 percent, 8.54 percent, and 12.66 percent for the second quarter 2020, respectively. Annualized ROA, ROE and ROTE, adjusted for non-core charges, was 0.92 percent, 8.57 percent, and 12.70 percent for the second quarter 2020, respectively. See the "Consolidated Financial Highlights" tables below for additional information regarding our non-GAAP measures.

Ira Robbins, CEO and President commented, "While the uncertain economic environment is less than ideal, I am very pleased with our second quarter earnings, especially on a pre-provision net revenue basis, and the quality of our balance sheet. Our second quarter net interest margin and income reflected this quality and our ability to significantly reduce the cost of our funding sources. As a result of the strong performance of our margin and laser-focus on managing operating expenses, the adjusted efficiency ratio was below 50 percent for the second consecutive quarter." Robbins continued, "During the quarter, we remained deeply committed to being a trusted partner and solution provider for our customers, originating over $2 billion in PPP loans, providing loan forbearances and waiving fees when appropriate for those significantly impacted by the COVID-19 pandemic. I’m extremely proud of Valley's tireless commitment, flexibility and drive to make a difference for our customers, employees and communities."

Net Interest Income and Margin

Net interest income on a tax equivalent basis totaling $283.5 million for the second quarter 2020 increased $62.1 million as compared to the second quarter 2019 and increased $17.2 million as compared to the first quarter 2020. The increase as compared to the first quarter 2020 was largely driven by our ability to significantly reduce our deposit and other funding costs in the current low interest rate environment and a $2.0 billion increase in average loan balances largely resulting from PPP loan originations. Interest expense of $66.0 million for the second quarter 2020 decreased $32.5 million as compared to the first quarter 2020 largely due to the overall lower cost of funds, partially offset by the interest cost associated with higher average interest-bearing deposits without stated maturities and other borrowings. However, interest income on a tax equivalent basis decreased $15.3 million to $349.5 million for the second quarter 2020 as compared to the first quarter 2020. The decrease was mainly due to overall lower loan yields caused, in part, by normal repayments of higher yielding loans, variable rate loan resets and a $3.1 million decline in loan discount accretion in second quarter 2020 due to lower prepayments for certain loans.

Our net interest margin on a tax equivalent basis of 3.00 percent for the second quarter 2020 increased by 4 basis points from 2.96 percent in second quarter 2019 and decreased by 7 basis from 3.07 percent for the first quarter 2020. The yield on average interest earning assets decreased by 51 basis points on a linked quarter basis mostly due to the impact of the lower interest rate environment. The yield on average loans decreased by 42 basis points to 4.02 percent for the second quarter 2020 as compared to the first quarter 2020 largely due to the repayment of higher yielding loans, lower yielding variable and new loans, including the origination of $2.2 billion of PPP loans in second quarter 2020, and an increase in excess liquidity held in low yield overnight investments. The overall cost of average interest bearing liabilities decreased 54 basis points to 0.96 percent for the second quarter 2020 as compared to the linked first quarter 2020 due to the significantly lower interest rates paid on deposits and borrowings. During the first half of 2020, we also benefited from the prepayment of $635 million high cost FHLB advances in December 2019. Our cost of total average deposits was 0.60 percent for the second quarter 2020 as compared to 1.07 percent for the first quarter 2020.

Loans, Deposits and Other Borrowings

Loans. Loans increased $1.9 billion to approximately $32.3 billion at June 30, 2020 from March 31, 2020 largely due to approximately $2.2 billion of SBA PPP loan originations within the commercial and industrial loan category during the second quarter 2020. Commercial real estate loans increased $181.6 million, or 4.4 percent on an annualized basis, to $16.6 billion at June 30, 2020 as compared to March 31, 2020 mainly due to our strong loan commitment pipeline at March 31, 2020 and slower repayment activity in the second quarter. Residential mortgage and the consumer loan categories all experienced moderate declines in the second quarter due to the impact of COVID-19 and our normal mortgage banking sales activity. During the second quarter 2020, we originated $296 million of residential mortgage loans for sale rather than held for investment and sold approximately $237 million of these loans. Residential mortgage loans held for sale at fair value totaled $120.6 million and $58.9 million at June 30, 2020 and March 31, 2020, respectively.

Deposits. Total deposits increased $2.4 billion to approximately $31.4 billion at June 30, 2020 from March 31, 2020 largely due to increases of $2.0 billion and $666.6 million in non-interest bearing deposits and interest-bearing deposits without stated maturities, respectively. The increases were mostly driven by deposits from PPP loan customers, higher depositor balances due to the uncertain financial markets, as well as a partial shift to more liquid funds for maturing retail CD customers. As a result, time deposits decreased $294.3 million at June 30, 2020 as compared to March 31, 2020. Total brokered deposits (consisting of both time and money market deposit accounts) were $3.6 billion at June 30, 2020 as compared to $3.4 billion at March 31, 2020. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 29 percent, 45 percent and 26 percent of total deposits as of June 30, 2020, respectively.

Other Borrowings. Long-term borrowings increased $101.9 million to $2.9 billion at June 30, 2020 as compared to March 31, 2020 mainly due to our recent $115.0 million issuance of 5.25 percent fixed-to-floating rate subordinated notes with a stated maturity of June 15, 2030. Short-term borrowings decreased by $12.8 million to $2.1 billion at June 30, 2020 as compared to March 31, 2020.

Credit Quality

Non-Performing Assets (NPAs). Total NPAs, consisting of non-accrual loans, other real estate owned (OREO), other repossessed assets and non-accrual debt securities increased $3.7 million to $224.2 million at June 30, 2020 as compared to March 31, 2020 mainly due to a $4.7 million increase in non-accrual loans, partially offset by a decline in OREO during the second quarter 2020. The increase in non-accrual loans was partially due to one commercial real estate loan which moved to non-accrual status during the second quarter 2020, as well as a moderately higher level of non-accrual consumer loans at June 30, 2020. Non-accrual loans represented 0.65 percent of total loans at June 30, 2020 compared to 0.68 percent at March 31, 2020.

Non-performing Taxi Medallion Loan Portfolio. We continue to closely monitor our non-performing New York City and Chicago taxi medallion loans totaling $99.8 million and $7.0 million, respectively, within the commercial and industrial loan portfolio at June 30, 2020. At June 30, 2020, the non-accrual taxi medallion loans totaling $106.8 million had related reserves of $61.6 million within the allowance for loan losses.

Accruing Past Due Loans. Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) decreased $66.3 million to $93.1 million, or 0.29 percent of total loans, at June 30, 2020 as compared to $159.4 million, or 0.52 percent of total loans, at March 31, 2020 due to a decline in early stage delinquencies for all loan categories. Commercial real estate loans past due 30 to 59 days and 60 to 89 days decreased by $27.8 million and $14.4 million, respectively, as compared to March 31, 2020. The improved performance within the 30 to 59 day category was mainly due to restored customer payments delayed by business disruptions caused by COVID-19 related factors at the end of the first quarter 2020. Commercial real estate loans past due 60 to 90 days at June 30, 2020 declined primarily due to the normal renewal of a $13.8 million performing matured loan reported in this category at March 31, 2020.

Loan Forbearance. In response to the COVID-19 pandemic and its economic impact to certain customers, Valley implemented short-term loan modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant, when requested by customers. Generally, the modification terms allow for a deferral of payments for up to 90 days, which Valley may extend for an additional 90 days, for a maximum of 180 days on a cumulative and successive basis. To date, Valley has granted over 10,000 loan forbearances totaling approximately $4.6 billion in support of our customers. Of these, approximately 5,000 loans totaling $1.9 billion have completed the contractual deferral period and returned to regularly scheduled payments.

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 June 30, 2020, March 31, 2020, and June 30, 2019:

June 30, 2020

March 31, 2020

June 30, 2019

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

$

132,039

1.92

%

$

127,437

2.55

%

$

94,384

2.11

%

Commercial real estate loans:

Commercial real estate

117,743

0.71

%

97,876

0.60

%

23,796

0.19

%

Construction

13,959

0.81

%

13,709

0.79

%

25,182

1.65

%

Total commercial real estate loans

131,702

0.72

%

111,585

0.62

%

48,978

0.34

%

Residential mortgage loans

29,630

0.67

%

29,456

0.66

%

5,219

0.13

%

Consumer loans:

Home equity

4,766

1.01

%

4,463

0.93

%

505

0.10

%

Auto and other consumer

11,477

0.51

%

10,401

0.44

%

6,019

0.26

%

Total consumer loans

16,243

0.59

%

14,864

0.52

%

6,524

0.23

%

Allowance for loan losses

309,614

0.96

%

283,342

0.93

%

155,105

0.60

%

Allowance for unfunded credit commitments

10,109

10,019

2,974

Total allowance for credit losses for loans

$

319,723

$

293,361

$

158,079

Allowance for credit losses for

loans as a % loans

0.99

%

0.96

%

0.61

%

*

CECL was adopted January 1, 2020. Prior periods reflect the allowance for credit losses for loans under the incurred loss model.


Our loan portfolio, totaling $32.3 billion at June 30, 2020, had net loan charge-offs totaling $14.8 million for the second quarter 2020 as compared to $4.8 million and $3.0 million for the first quarter 2020 and second quarter 2019, respectively. The increase in net loan charge-offs was largely due to the partial charge-off of one commercial and industrial loan totaling $7.8 million for the second quarter 2020. Additionally, gross loan charge-offs related to taxi medallion loans totaled $3.2 million, $1.3 million and $2.3 million for the second quarter 2020, first quarter 2020 and second quarter 2019, respectively.

During the second quarter 2020, we recorded a $41.1 million provision for credit losses for loans as compared to $33.9 million and $2.1 million for the first quarter 2020 and the second quarter 2019, respectively. The second quarter 2020 provision mainly reflects the reserve build caused by deterioration in Valley's view of the macroeconomic outlook since the end of the first quarter, higher specific reserves associated with our taxi medallion loan portfolio and additional qualitative management adjustments to reflect the potential for higher levels of credit stress for COVID-19 impacted borrowers.

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 0.99 percent, 0.96 percent and 0.61 percent at June 30, 2020, March 31, 2020 and June 30, 2019, respectively. At June 30, 2019, the allowance allocations for credit losses as a percentage of total loans increased for most loan categories as compared to March 31, 2020. However, the allocated reserves as a percentage of commercial and industrial loans declined by 0.63 percent due to $2.2 billion of SBA PPP loans with no related allowance at June 30, 2020. The allowance for credit losses for loans at June 30, 2020 as compared to June 30, 2019 increased largely due to the reserves related to PCD loans included in the Day 1 CECL adoption adjustment and the reserve build under CECL during the first six months of 2020 related to the impact of COVID-19 on lifetime expected credit losses.

Capital Adequacy

Valley's regulatory capital ratios continue to reflect its well capitalized position. Valley's total risk-based capital, common equity Tier 1 capital, Tier 1 capital and Tier 1 leverage capital ratios were 12.19 percent, 9.51 percent, 10.23 percent and 7.70 percent, respectively, at June 30, 2020.

For regulatory capital purposes, in connection with the Federal Reserve Board’s final interim rule as of April 3, 2020, 100 percent of the CECL Day 1 impact to shareholders' equity equaling $28.2 million after-tax will be deferred over a two-year period ending January 1, 2022, at which time it will be phased in on a pro-rata basis over a three-year period ending January 1, 2025. Additionally, 25 percent of the reserve build (i.e., provision for credit losses less net charge-offs) for the six months ended June 30, 2020 will be phased in over the same time frame.

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 second quarter 2020 earnings. Those wishing to participate in the call may dial toll-free (866) 354-0432 Conference ID: 2150739. The teleconference will also be webcast live: https://edge.media-server.com/mmc/p/z4qssb75/edge.media-server.com and archived on Valley's website through Friday, August 28, 2020. 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 $42 billion in assets. Valley is committed to giving people and businesses the power to succeed. Valley operates many convenient branch locations 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, including the potential effects of the COVID-19 pandemic on our businesses and financial results and conditions. 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:

  • the impact of COVID-19 on the U.S. and the global economies, including business disruptions, reductions in employment and an increase in business failures, specifically the consequences among our commercial and consumer customers;

  • the impact of COVID-19 on our employees and our ability to provide services to our customers and respond to their needs as more cases of COVID-19 arise in various locations, including Florida and Alabama;

  • potential judgments, claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory and government actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic or as a result of our action, or failure to implement or effectively implement, federal, state and local laws, rules or executive orders requiring that we grant forbearances or not act to collect our loans;

  • the impact of forbearances or deferrals we are required or agree to as a result of customer requests and/or government actions, including, but not limited to our potential inability to recover fully deferred payments from the borrower or the collateral;

  • 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;

  • a prolonged downturn 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;

  • 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;

  • the inability to grow customer deposits to keep pace with loan growth;

  • 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;

  • the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;

  • 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;

  • 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, the COVID-19 pandemic 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, 2019 and in Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS

SELECTED FINANCIAL DATA

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

($ in thousands, except for share data)

2020

2020

2019

2020

2019

FINANCIAL DATA:

Net interest income - FTE (1)

$

283,540

$

266,383

$

221,392

$

549,923

$

441,317

Net interest income

$

282,559

$

265,339

$

220,234

$

547,898

$

438,882

Non-interest income

44,830

41,397

27,603

86,227

135,276

Total revenue

327,389

306,736

247,837

634,125

574,158

Non-interest expense

157,166

155,656

141,737

312,822

289,532

Pre-provision net revenue

170,223

151,080

106,100

321,303

284,626

Provision for credit losses

41,156

34,683

2,100

75,839

10,100

Income tax expense

33,466

29,129

27,532

62,595

84,728

Net income

95,601

87,268

76,468

182,869

189,798

Dividends on preferred stock

3,172

3,172

3,172

6,344

6,344

Net income available to common shareholders

$

92,429

$

84,096

$

73,296

$

176,525

$

183,454

Weighted average number of common shares outstanding:

Basic

403,790,242

403,519,088

331,748,552

403,654,665

331,675,313

Diluted

404,631,845

405,424,123

332,959,802

405,043,183

332,929,359

Per common share data:

Basic earnings

$

0.23

$

0.21

$

0.22

$

0.44

$

0.55

Diluted earnings

0.23

0.21

0.22

0.44

0.55

Cash dividends declared

0.11

0.11

0.11

0.22

0.22

Closing stock price - high

9.60

11.46

10.78

11.46

10.78

Closing stock price - low

6.29

6.37

9.75

6.29

9.00

CORE ADJUSTED FINANCIAL DATA: (2)

Net income available to common shareholders, as adjusted

$

92,721

$

85,061

$

75,614

$

177,782

$

147,378

Basic earnings per share, as adjusted

0.23

0.21

0.23

0.44

0.44

Diluted earnings per share, as adjusted

0.23

0.21

0.23

0.44

0.44

FINANCIAL RATIOS:

Net interest margin

2.99

%

3.06

%

2.95

%

3.02

%

2.95

%

Net interest margin - FTE (1)

3.00

3.07

2.96

3.04

2.97

Annualized return on average assets

0.92

0.92

0.94

0.92

1.17

Annualized return on avg. shareholders' equity

8.54

7.92

8.79

8.23

11.04

Annualized return on avg. tangible shareholders' equity (2)

12.66

11.84

13.16

12.26

16.65

Efficiency ratio (3)

48.01

50.75

57.19

49.33

50.43

CORE ADJUSTED FINANCIAL RATIOS: (2)

Annualized return on average assets, as adjusted

0.92

%

0.93

%

0.96

%

0.93

%

0.95

%

Annualized return on average shareholders' equity, as adjusted

8.57

8.01

9.05

8.29

8.94

Annualized return on average tangible shareholders' equity, as adjusted

12.70

11.97

13.56

12.34

13.49

Efficiency ratio, as adjusted

46.84

49.26

54.57

48.01

54.68

As Of

AVERAGE BALANCE SHEET ITEMS:

June 30,

March 31,

December 31,

September 30,

June 30,

(In thousands)

2020

2020

2019

2019

2019

Assets

$

41,503,514

$

38,097,364

$

32,707,144

$

39,800,441

$

32,502,744

Interest earning assets

37,778,387

34,674,075

29,877,384

36,226,232

29,721,015

Loans

32,041,200

29,999,428

25,552,415

31,020,314

25,404,396

Interest bearing liabilities

27,578,741

26,215,578

22,328,544

26,897,161

22,336,243

Deposits

30,837,963

28,811,932

24,699,238

29,824,948

24,740,767

Shareholders' equity

4,477,446

4,408,585

3,481,519

4,443,016

3,438,344


BALANCE SHEET ITEMS:

(In thousands)

Assets

$

41,717,265

$

39,120,629

$

37,436,020

$

33,765,539

$

33,027,741

Total loans

32,314,611

30,428,067

29,699,208

26,567,159

25,802,162

Deposits

31,428,005

29,016,988

29,185,837

25,546,122

24,773,929

Shareholders' equity

4,474,488

4,420,998

4,384,188

3,558,075

3,504,118

LOANS:

(In thousands)

Commercial and industrial

$

6,884,689

$

4,998,731

$

4,825,997

$

4,695,608

$

4,615,765

Commercial real estate:

Commercial real estate

16,571,877

16,390,236

15,996,741

13,365,454

12,798,017

Construction

1,721,352

1,727,046

1,647,018

1,537,590

1,528,968

Total commercial real estate

18,293,229

18,117,282

17,643,759

14,903,044

14,326,985

Residential mortgage

4,405,147

4,478,982

4,377,111

4,133,331

4,072,450

Consumer:

Home equity

471,115

481,751

487,272

489,808

501,646

Automobile

1,369,489

1,436,734

1,451,623

1,436,608

1,362,466

Other consumer

890,942

914,587

913,446

908,760

922,850

Total consumer loans

2,731,546

2,833,072

2,852,341

2,835,176

2,786,962

Total loans

$

32,314,611

$

30,428,067

$

29,699,208

$

26,567,159

$

25,802,162

CAPITAL RATIOS:

Book value per common share

$

10.56

$

10.43

$

10.35

$

10.09

$

9.93

Tangible book value per common share (2)

6.96

6.82

6.73

6.62

6.45

Tangible common equity to tangible assets (2)

6.98

%

7.31

%

7.54

%

6.73

%

6.71

%

Tier 1 leverage capital

7.70

8.24

8.76

7.61

7.62

Common equity tier 1 capital

9.51

9.24

9.42

8.49

8.59

Tier 1 risk-based capital

10.23

9.95

10.15

9.30

9.43

Total risk-based capital

12.19

11.53

11.72

11.03

11.39


Three Months Ended

Six Months Ended

ALLOWANCE FOR CREDIT LOSSES

June 30,

March 31,

June 30,

June 30,

($ in thousands)

2020

2020

2019

2020

2019

Allowance for credit losses for loans

Beginning balance

$

293,361

$

164,604

$

158,961

$

164,604

$

156,295

Impact of the adoption of ASU 2016-13 (4)

37,989

37,989

Allowance for purchased credit deteriorated (PCD) loans

61,643

61,643

Beginning balance, adjusted

293,361

264,236

158,961

264,236

156,295

Loans charged-off (5):

Commercial and industrial

(14,024

)

(3,360

)

(3,073

)

(17,384

)

(7,355

)

Commercial real estate

(27

)

(44

)

(71

)

Residential mortgage

(5

)

(336

)

(341

)

(15

)

Total Consumer

(2,602

)

(2,565

)

(1,752

)

(5,167

)

(3,780

)

Total loans charged-off

(16,658

)

(6,305

)

(4,825

)

(22,963

)

(11,150

)

Charged-off loans recovered(5):

Commercial and industrial

799

569

1,195

1,368

1,678

Commercial real estate

31

73

22

104

43

Construction

20

20

40

Residential mortgage

545

50

9

595

10

Total Consumer

509

794

617

1,303

1,103

Total loans recovered

1,904

1,506

1,843

3,410

2,834

Net charge-offs

(14,754

)

(4,799

)

(2,982

)

(19,553

)

(8,316

)

Provision for credit losses for loans

41,116

33,924

2,100

75,040

10,100

Ending balance

$

319,723

$

293,361

$

158,079

$

319,723

$

158,079

Components of allowance for credit losses for loans:

Allowance for loan losses

$

309,614

$

283,342

$

155,105

$

309,614

$

155,105

Allowance for unfunded credit commitments

10,109

10,019

2,974

10,109

2,974

Allowance for credit losses for loans

$

319,723

$

293,361

$

158,079

$

319,723

$

158,079

Components of provision for credit losses for loans:

Provision for credit losses for loans

$

41,026

$

33,851

$

3,706

$

74,877

$

11,562

Provision for unfunded credit commitments (6)

90

73

(1,606

)

163

(1,462

)

Total provision for credit losses for loans

$

41,116

$

33,924

$

2,100

$

75,040

$

10,100

Annualized ratio of total net charge-offs to average loans

0.18

%

0.06

%

0.05

%

0.13

%

0.07

%

Allowance for credit losses for loans as a % of total loans

0.99

0.96

0.61

0.99

0.61


As of

ASSET QUALITY: (7)

June 30,

March 31,

December 31,

September 30,

June 30,

($ in thousands)

2020

2020

2019

2019

2019

Accruing past due loans:

30 to 59 days past due:

Commercial and industrial

$

6,206

$

9,780

$

11,700

$

5,702

$

14,119

Commercial real estate

13,912

41,664

2,560

20,851

6,202

Construction

7,119

1,486

11,523

Residential mortgage

35,263

38,965

17,143

12,945

19,131

Total Consumer

12,962

19,508

13,704

13,079

11,932

Total 30 to 59 days past due

68,343

117,036

46,593

64,100

51,384

60 to 89 days past due:

Commercial and industrial

4,178

7,624

2,227

3,158

4,135

Commercial real estate

1,543

15,963

4,026

735

354

Construction

49

1,343

7,129

1,342

Residential mortgage

4,169

9,307

4,192

4,417

3,635

Total Consumer

3,786

2,309

2,527

1,577

1,484

Total 60 to 89 days past due

13,676

35,252

14,315

17,016

10,950

90 or more days past due:

Commercial and industrial

5,220

4,049

3,986

4,133

3,298

Commercial real estate

161

579

1,125

Residential mortgage

3,812

1,798

2,042

1,347

1,054

Total Consumer

2,082

1,092

711

756

359

Total 90 or more days past due

11,114

7,100

7,318

7,361

4,711

Total accruing past due loans

$

93,133

$

159,388

$

68,226

$

88,477

$

67,045

Non-accrual loans:

Commercial and industrial

$

130,876

$

132,622

$

68,636

$

75,311

$

76,216

Commercial real estate

43,678

41,616

9,004

9,560

6,231

Construction

3,308

2,972

356

356

Residential mortgage

25,776

24,625

12,858

13,772

12,069

Total Consumer

6,947

4,095

2,204

2,050

1,999

Total non-accrual loans

210,585

205,930

93,058

101,049

96,515

Other real estate owned (OREO)

8,283

10,198

9,414

6,415

7,161

Other repossessed assets

3,920

3,842

1,276

2,568

2,358

Non-accrual debt securities

1,365

531

680

680

680

Total non-performing assets

$

224,153

$

220,501

$

104,428

$

110,712

$

106,714

Performing troubled debt restructured loans

$

53,936

$

48,024

$

73,012

$

79,364

$

74,385

Total non-accrual loans as a % of loans

0.65

%

0.68

%

0.31

%

0.38

%

0.37

%

Total accruing past due and non-accrual loans as a % of loans

0.94

%

1.20

%

0.54

%

0.71

%

0.63

%

Allowance for losses on loans as a % of non-accrual loans

147.03

%

137.59

%

173.83

%

160.17

%

160.71

%


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

Six Months Ended

June 30,

March 31,

June 30,

June 30,

($ in thousands, except for share data)

2020

2020

2019

2020

2019

Adjusted net income available to common shareholders:

Net income, as reported

$

95,601

$

87,268

$

76,468

$

182,869

$

189,798

Less: Gain on sale leaseback transactions (net of tax)(a)

(55,707

)

Add: Net impairment losses on securities (net of tax)

2,078

2,078

Add: Losses (gains) on securities transaction (net of tax)

29

29

(8

)

58

15

Add: Severance expense (net of tax)(b)

3,433

Add: Tax credit investment impairment (net of tax)(c)

1,757

Add: Merger related expenses (net of tax)(d)

263

936

25

1,199

25

Add: Income tax expense (e)

223

12,323

Net income, as adjusted

$

95,893

$

88,233

$

78,786

$

184,126

$

153,722

Dividends on preferred stock

3,172

3,172

3,172

6,344

6,344

Net income available to common shareholders, as adjusted

$

92,721

$

85,061

$

75,614

$

177,782

$

147,378

__________

(a) The gain on sale leaseback transactions is included in gains on the sales of assets within other non-interest income.

(b) Severance expense is included in salary and employee benefits expense.

(c) Impairment is included in the amortization of tax credit investments.

(d) Merger related expenses are primarily within salary and employee benefits expense, professional and legal fees, and other expense.

(e) Income tax expense related to reserves for uncertain tax positions.

Adjusted per common share data:

Net income available to common shareholders, as adjusted

$

92,721

$

85,061

$

75,614

$

177,782

$

147,378

Average number of shares outstanding

403,790,242

403,519,088

331,748,552

403,654,665

331,675,313

Basic earnings, as adjusted

$

0.23

$

0.21

$

0.23

$

0.44

$

0.44

Average number of diluted shares outstanding

404,631,845

405,424,123

332,959,802

405,043,183

332,929,359

Diluted earnings, as adjusted

$

0.23

$

0.21

$

0.23

$

0.44

$

0.44

Adjusted annualized return on average tangible shareholders' equity:

Net income, as adjusted

$

95,893

$

88,233

$

78,786

$

184,126

$

153,722

Average shareholders' equity

4,477,446

4,408,585

3,481,519

4,443,016

3,438,344

Less: Average goodwill and other intangible assets

1,456,781

1,460,988

1,156,703

1,458,885

1,158,596

Average tangible shareholders' equity

$

3,020,665

$

2,947,597

$

2,324,816

$

2,984,131

$

2,279,748

Annualized return on average tangible shareholders' equity, as adjusted

12.70

%

11.97

%

13.56

%

12.34

%

13.49

%

Adjusted annualized return on average assets:

Net income, as adjusted

$

95,893

$

88,233

$

78,786

$

184,126

$

153,722

Average assets

$

41,503,514

$

38,097,364

$

32,707,144

$

39,800,441

$

32,502,744

Annualized return on average assets, as adjusted

0.92

%

0.93

%

0.96

%

0.93

%

0.95

%


Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

($ in thousands)

2020

2020

2019

2020

2019

Adjusted annualized return on average shareholders' equity:

Net income, as adjusted

$

95,893

$

88,233

$

78,786

$

184,126

$

153,722

Average shareholders' equity

$

4,477,446

$

4,408,585

$

3,481,519

$

4,443,016

$

3,438,344

Annualized return on average shareholders' equity, as adjusted

8.57

%

8.01

%

9.05

%

8.29

%

8.94

%

Annualized return on average tangible shareholders' equity:

Net income, as reported

$

95,601

$

87,268

$

76,468

$

182,869

$

189,798

Average shareholders' equity

4,477,446

4,408,585

3,481,519

4,443,016

3,438,344

Less: Average goodwill and other intangible assets

1,456,781

1,460,988

1,156,703

1,458,885

1,158,596

Average tangible shareholders' equity

$

3,020,665

$

2,947,597

$

2,324,816

$

2,984,131

$

2,279,748

Annualized return on average tangible shareholders' equity

12.66

%

11.84

%

13.16

%

12.26

%

16.65

%

Adjusted efficiency ratio:

Non-interest expense, as reported

$

157,166

$

155,656

$

141,737

$

312,822

$

289,532

Less: Severance expense (pre-tax)

4,838

Less: Merger-related expenses (pre-tax)

366

1,302

35

1,668

35

Less: Amortization of tax credit investments (pre-tax)

3,416

3,228

4,863

6,644

12,036

Non-interest expense, as adjusted

$

153,384

$

151,126

$

136,839

$

304,510

$

272,623

Net interest income

282,559

265,339

220,234

547,898

438,882

Non-interest income, as reported

44,830

41,397

27,603

86,227

135,276

Add: Net impairment losses on securities (pre-tax)

2,928

2,928

Add: Losses (gains) on securities transactions, net (pre-tax)

41

40

(11

)

81

21

Less: Gain on sale leaseback transaction (pre-tax)

78,505

Non-interest income, as adjusted

$

44,871

$

41,437

$

30,520

$

86,308

$

59,720

Gross operating income, as adjusted

$

327,430

$

306,776

$

250,754

$

634,206

$

498,602

Efficiency ratio, as adjusted

46.84

%

49.26

%

54.57

%

48.01

%

54.68

%


As of

June 30,

March 31,

December 31,

September 30,

June 30,

($ in thousands, except for share data)

2020

2020

2019

2019

2019

Tangible book value per common share:

Common shares outstanding

403,795,699

403,744,148

403,278,390

331,805,564

331,788,149

Shareholders' equity

$

4,474,488

$

4,420,998

$

4,384,188

$

3,558,075

$

3,504,118

Less: Preferred stock

209,691

209,691

209,691

209,691

209,691

Less: Goodwill and other intangible assets

1,453,330

1,458,095

1,460,397

1,152,815

1,155,250

Tangible common shareholders' equity

$

2,811,467

$

2,753,212

$

2,714,100

$

2,195,569

$

2,139,177

Tangible book value per common share

$

6.96

$

6.82

$

6.73

$

6.62

$

6.45

Tangible common equity to tangible assets:

Tangible common shareholders' equity

$

2,811,467

$

2,753,212

$

2,714,100

$

2,195,569

$

2,139,177

Total assets

41,717,265

39,120,629

37,436,020

33,765,539

33,027,741

Less: Goodwill and other intangible assets

1,453,330

1,458,095

1,460,397

1,152,815

1,155,250

Tangible assets

$

40,263,935

$

37,662,534

$

35,975,623

$

32,612,724

$

31,872,491

Tangible common equity to tangible assets

6.98

%

7.31

%

7.54

%

6.73

%

6.71

%


(3

)

The efficiency ratio measures Valley's total non-interest expense as a percentage of net interest income plus total non-interest income.

(4

)

The adjustment represents an increase in the allowance for credit losses for loans as a result of the adoption of ASU 2016-13 effective January 1, 2020.

(5

)

Charge-offs and recoveries presented for periods prior to March 31, 2020 exclude loans formerly known as Purchased Credit-Impaired (PCI) loans.

(6

)

Periods prior to March 31, 2020 represent allowance and provision for letters of credit only.

(7

)

Past due loans and non-accrual loans presented in periods prior to March 31, 2020 exclude PCI loans. PCI loans were accounted for on a pool basis and are were not subject to delinquency classification.

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)

June 30,

December 31,

2020

2019

(Unaudited)

Assets

Cash and due from banks

$

388,753

$

256,264

Interest bearing deposits with banks

1,521,572

178,423

Investment securities:

Equity securities

54,379

41,410

Available for sale debt securities

1,689,388

1,566,801

Held to maturity debt securities (net of allowance for credit losses of $1,593 at June 30, 2020)

2,131,834

2,336,095

Total investment securities

3,875,601

3,944,306

Loans held for sale, at fair value

120,599

76,113

Loans

32,314,611

29,699,208

Less: Allowance for loan losses

(309,614

)

(161,759

)

Net loans

32,004,997

29,537,449

Premises and equipment, net

329,889

334,533

Lease right of use assets

273,811

285,129

Bank owned life insurance

535,383

540,169

Accrued interest receivable

122,807

105,637

Goodwill

1,375,409

1,373,625

Other intangible assets, net

77,921

86,772

Other assets

1,090,523

717,600

Total Assets

$

41,717,265

$

37,436,020

Liabilities

Deposits:

Non-interest bearing

$

8,989,818

$

6,710,408

Interest bearing:

Savings, NOW and money market

14,165,415

12,757,484

Time

8,272,772

9,717,945

Total deposits

31,428,005

29,185,837

Short-term borrowings

2,082,880

1,093,280

Long-term borrowings

2,907,535

2,122,426

Junior subordinated debentures issued to capital trusts

55,891

55,718

Lease liabilities

299,260

309,849

Accrued expenses and other liabilities

469,206

284,722

Total Liabilities

37,242,777

33,051,832

Shareholders’ Equity

Preferred stock, no par value; 50,000,000 authorized shares:

Series A (4,600,000 shares issued at June 30, 2020 and December 31, 2019)

111,590

111,590

Series B (4,000,000 shares issued at June 30, 2020 and December 31, 2019)

98,101

98,101

Common stock (no par value, authorized 650,000,000 shares; issued 403,823,728 shares at June 30, 2020 and 403,322,773 shares at December 31, 2019)

141,667

141,423

Surplus

3,628,792

3,622,208

Retained earnings

499,511

443,559

Accumulated other comprehensive loss

(4,938

)

(32,214

)

Treasury stock, at cost (28,029 common shares at June 30, 2020 and 44,383 common shares at December 31, 2019)

(235

)

(479

)

Total Shareholders’ Equity

4,474,488

4,384,188

Total Liabilities and Shareholders’ Equity

$

41,717,265

$

37,436,020

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

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

2020

2020

2019

2020

2019

Interest Income

Interest and fees on loans

$

321,883

$

333,068

$

296,934

$

654,951

$

585,211

Interest and dividends on investment securities:

Taxable

19,447

21,933

22,489

41,380

45,365

Tax-exempt

3,692

3,926

4,356

7,618

9,160

Dividends

3,092

3,401

2,795

6,493

5,969

Interest on federal funds sold and other short-term investments

411

1,465

1,168

1,876

2,261

Total interest income

348,525

363,793

327,742

712,318

647,966

Interest Expense

Interest on deposits:

Savings, NOW and money market

16,627

34,513

38,020

51,140

74,303

Time

29,857

42,814

40,331

72,671

78,502

Interest on short-term borrowings

1,980

4,707

14,860

6,687

27,409

Interest on long-term borrowings and junior subordinated debentures

17,502

16,420

14,297

33,922

28,870

Total interest expense

65,966

98,454

107,508

164,420

209,084

Net Interest Income

282,559

265,339

220,234

547,898

438,882

Provision for credit losses for held to maturity securities

41

759

800

Provision for credit losses for loans

41,115

33,924

2,100

75,039

10,100

Net Interest Income After Provision for Credit Losses

241,403

230,656

218,134

472,059

428,782

Non-Interest Income

Trust and investment services

2,826

3,413

3,096

6,239

6,000

Insurance commissions

1,659

1,951

2,649

3,610

5,174

Service charges on deposit accounts

3,557

5,680

5,827

9,237

11,730

(Losses) gains on securities transactions, net

(41

)

(40

)

11

(81

)

(21

)

Other-than-temporary impairment losses on securities

(2,928

)

(2,928

)

Fees from loan servicing

2,227

2,748

2,367

4,975

4,797

Gains on sales of loans, net

8,337

4,550

3,930

12,887

8,506

(Losses) gains on sales of assets, net

(299

)

121

(564

)

(178

)

77,156

Bank owned life insurance

5,823

3,142

2,205

8,965

4,092

Other

20,741

19,832

11,010

40,573

20,770

Total non-interest income

44,830

41,397

27,603

86,227

135,276

Non-Interest Expense

Salary and employee benefits expense

78,532

85,728

76,183

164,260

159,288

Net occupancy and equipment expense

33,217

32,441

29,700

65,658

57,586

FDIC insurance assessment

6,135

3,876

4,931

10,011

11,052

Amortization of other intangible assets

6,681

5,470

4,170

12,151

8,481

Professional and legal fees

7,797

6,087

4,145

13,884

9,416

Amortization of tax credit investments

3,416

3,228

4,863

6,644

12,036

Telecommunication expense

2,866

2,287

2,351

5,153

4,619

Other

18,522

16,539

15,394

35,061

27,054

Total non-interest expense

157,166

155,656

141,737

312,822

289,532

Income Before Income Taxes

129,067

116,397

104,000

245,464

274,526

Income tax expense

33,466

29,129

27,532

62,595

84,728

Net Income

95,601

87,268

76,468

182,869

189,798

Dividends on preferred stock

3,172

3,172

3,172

6,344

6,344

Net Income Available to Common Shareholders

$

92,429

$

84,096

$

73,296

$

176,525

$

183,454


Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

2020

2020

2019

2020

2019

Earnings Per Common Share:

Basic

$

0.23

$

0.21

$

0.22

$

0.44

$

0.55

Diluted

0.23

0.21

0.22

0.44

0.55

Cash Dividends Declared per Common Share

0.11

0.11

0.11

0.22

0.22

Weighted Average Number of Common Shares Outstanding:

Basic

403,790,242

403,519,088

331,748,552

403,654,665

331,675,313

Diluted

404,631,845

405,424,123

332,959,802

405,043,183

332,929,359


VALLEY NATIONAL BANCORP

Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and

Net Interest Income on a Tax Equivalent Basis

Three Months Ended

June 30, 2020

March 31, 2020

June 30, 2019

Average

Avg.

Average

Avg.

Average

Avg.

($ in thousands)

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

Assets

Interest earning assets:

Loans (1)(2)

$

32,041,200

$

321,883

4.02

%

$

29,999,428

$

333,068

4.44

%

$

25,552,415

$

296,934

4.65

%

Taxable investments (3)

3,673,090

22,539

2.45

%

3,557,913

25,334

2.85

%

3,453,676

25,284

2.93

%

Tax-exempt investments (1)(3)

562,172

4,673

3.32

%

585,987

4,970

3.39

%

658,727

5,514

3.35

%

Interest bearing deposits with banks

1,501,925

411

0.11

%

530,747

1,465

1.10

%

212,566

1,168

2.20

%

Total interest earning assets

37,778,387

349,506

3.70

%

34,674,075

364,837

4.21

%

29,877,384

328,900

4.40

%

Other assets

3,725,127

3,423,289

2,829,760

Total assets

$

41,503,514

$

38,097,364

$

32,707,144

Liabilities and shareholders' equity

Interest bearing liabilities:

Savings, NOW and money market deposits

$

13,788,951

$

16,627

0.48

%

$

13,219,896

$

34,513

1.04

%

$

11,293,885

$

38,020

1.35

%

Time deposits

8,585,782

29,857

1.39

%

8,897,934

42,814

1.92

%

7,047,319

40,331

2.29

%

Short-term borrowings

2,317,992

1,980

0.34

%

1,322,699

4,707

1.42

%

2,380,294

14,860

2.50

%

Long-term borrowings (4)

2,886,016

17,502

2.43

%

2,775,049

16,420

2.37

%

1,607,046

14,297

3.56

%

Total interest bearing liabilities

27,578,741

65,966

0.96

%

26,215,578

98,454

1.50

%

22,328,544

107,508

1.93

%

Non-interest bearing deposits

8,463,230

6,694,102

6,358,034

Other liabilities

984,097

779,099

539,047

Shareholders' equity

4,477,446

4,408,585

3,481,519

Total liabilities and shareholders' equity

$

41,503,514

$

38,097,364

$

32,707,144

Net interest income/interest rate spread (5)

$

283,540

2.74

%

$

266,383

2.71

%

$

221,392

2.47

%

Tax equivalent adjustment

(981

)

(1,044

)

(1,158

)

Net interest income, as reported

$

282,559

$

265,339

$

220,234

Net interest margin (6)

2.99

%

3.06

%

2.95

%

Tax equivalent effect

0.01

%

0.01

%

0.01

%

Net interest margin on a fully tax equivalent basis (6)

3.00

%

3.07

%

2.96

%


(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:

Michael D. Hagedorn

Senior Executive Vice President and

Chief Financial Officer

973-872-4885