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Valley National Bancorp Reports Increased First Quarter Net Income, Solid Loan Growth and Operational Efficiency

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

Key financial highlights for the first quarter:

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

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

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

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

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

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

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

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

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

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

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

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

Sale Leaseback Transaction

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

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

Branch Transformation and Other Operational Improvements

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

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

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

Investment in DC Solar Funds

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

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

Loans, Deposits and Other Borrowings

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

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

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

Credit Quality

Non-Performing Assets. Our past due loans and non-accrual loans discussed further below exclude PCI loans. Under U.S. GAAP, the PCI loans (acquired at a discount that is due, in part, to credit quality) are accounted for on a pool basis and are not subject to delinquency classification in the same manner as loans originated by Valley. Our PCI loan portfolio totaled $4.0 billion, or 15.8 percent, of our total loan portfolio at March 31, 2019.

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

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

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

Allowance for Credit Losses. The following table summarizes the allocation of the allowance for credit losses to specific loan categories and the allocation as a percentage of each loan category (including PCI loans) at March 31, 2019, December 31, 2018, and March 31, 2018:

    March 31, 2019   December 31, 2018   March 31, 2018
        Allocation       Allocation       Allocation
        as a % of       as a % of       as a % of
    Allowance   Loan   Allowance   Loan   Allowance   Loan
  Allocation   Category   Allocation   Category   Allocation   Category
  ($ in thousands)
Loan Category:                      
Commercial and industrial loans* $ 99,210        2.20 %   $ 95,392        2.20 %   $ 70,388        1.94 %
Commercial real estate loans:                      
  Commercial real estate 24,261     0.19 %   26,482     0.21 %   36,109     0.31 %
  Construction 23,501     1.62 %   23,168     1.56 %   20,570     1.50 %
Total commercial real estate loans 47,762     0.34 %   49,650     0.36 %   56,679     0.43 %
Residential mortgage loans 5,139     0.13 %   5,041     0.12 %   4,100     0.12 %
Consumer loans:                      
  Home equity 523     0.10 %   598     0.12 %   547     0.10 %
  Auto and other consumer 6,327     0.29 %   5,614     0.26 %   4,990     0.25 %
Total consumer loans 6,850     0.25 %   6,212     0.23 %   5,537     0.22 %
Total allowance for credit losses $ 158,961     0.63 %   $ 156,295     0.62 %   $ 136,704     0.61 %
Allowance for credit losses as a %                      
of non-PCI loans     0.74 %       0.75 %       0.78 %
                         
                         
* Includes the reserve for unfunded letters of credit.                

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

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

Capital Adequacy

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

Investor Conference Call

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

About Valley

As the principal subsidiary of Valley National Bancorp, Valley National Bank is a regional bank with approximately $32 billion in assets. Valley is committed to giving people and businesses the power to succeed. Valley operates over 200 branches across New Jersey, New York, Florida and Alabama, and is committed to providing the most convenient service, the latest innovations and an experienced and knowledgeable team dedicated to meeting customer needs. Helping communities grow and prosper is the heart of Valley’s corporate citizenship philosophy. To learn more about Valley, go to www.valley.com or call our Customer Service Center at 800-522-4100.

Forward Looking Statements

The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “typically,” “usually,” “anticipate,” or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:

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

A detailed discussion of factors that could affect our results is included in our SEC filings, including the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2018.

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


-Tables to Follow-

VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS

SELECTED FINANCIAL DATA

  Three Months Ended
  March 31,   December 31,   March 31,
($ in thousands, except for share data) 2019   2018   2018
FINANCIAL DATA:          
Net interest income $ 218,648     $ 222,053     $ 207,598  
Net interest income - FTE (1) 219,925     223,414     209,120  
Non-interest income 107,673     34,694     32,251  
Non-interest expense 147,795     153,712     173,752  
Income tax expense 57,196     18,074     13,184  
Net income 113,330     77,102     41,965  
Dividends on preferred stock 3,172     3,172     3,172  
Net income available to common shareholders $ 110,158     $ 73,930     $ 38,793  
Weighted average number of common shares outstanding:          
Basic 331,601,260     331,492,648     330,727,416  
Diluted 332,834,466     332,856,385     332,465,527  
Per common share data:          
Basic earnings $ 0.33     $ 0.22     $ 0.12  
Diluted earnings 0.33     0.22     0.12  
Cash dividends declared 0.11     0.11     0.11  
Closing stock price - high 10.73     11.51     13.38  
Closing stock price - low 9.00     8.45     11.19  
CORE ADJUSTED FINANCIAL DATA: (2)          
Net income available to common shareholders, as adjusted $ 71,764     $ 69,478     $ 58,549  
Basic earnings per share, as adjusted 0.22     0.21     0.18  
Diluted earnings per share, as adjusted 0.22     0.21     0.18  
FINANCIAL RATIOS:          
Net interest margin 2.96 %   3.08 %   3.10 %
Net interest margin - FTE (1) 2.98     3.10     3.13  
Annualized return on average assets 1.40     0.98     0.57  
Annualized return on avg. shareholders' equity 13.35     9.23     5.10  
Annualized return on avg. tangible shareholders' equity (2) 20.29     14.17     7.90  
Efficiency ratio (3) 45.29     59.87     72.44  
CORE ADJUSTED FINANCIAL RATIOS: (2)          
Annualized return on average assets, as adjusted 0.93 %   0.93 %   0.84 %
Annualized return on average shareholders' equity, as adjusted 8.83     8.70     7.50  
Annualized return on average tangible shareholders' equity, as adjusted 13.42     13.36     11.61  
Efficiency ratio, as adjusted 54.79     56.68     60.03  
AVERAGE BALANCE SHEET ITEMS:        
Assets $ 32,296,070     $ 31,328,729     $ 29,291,703  
Interest earning assets 29,562,907     28,806,620     26,750,806  
Loans 25,254,733     24,530,919     22,302,991  
Interest bearing liabilities 22,344,028     21,515,197     19,690,165  
Deposits 24,782,759     23,702,885     21,882,034  
Shareholders' equity 3,394,688     3,340,411     3,289,815  



VALLEY NATIONAL BANCORP

CONSOLIDATED FINANCIAL HIGHLIGHTS

  As Of
BALANCE SHEET ITEMS: March 31,   December 31,   September 30,   June 30,   March 31,
(In thousands) 2019   2018   2018   2018   2018
Assets $ 32,476,991     $ 31,863,088     $ 30,881,948     $ 30,182,979     $ 29,464,357  
Total loans 25,423,118     25,035,469     24,111,290     23,234,716     22,552,767  
Non-PCI loans 21,418,778     20,845,383     19,681,255     18,587,015     17,636,934  
Deposits 24,907,496     24,452,974     22,588,272     21,640,772     21,959,846  
Shareholders' equity 3,444,879     3,350,454     3,302,936     3,277,312     3,245,003  
                   
LOANS:                  
(In thousands)                  
Commercial and industrial $ 4,504,927     $ 4,331,032     $ 4,015,280     $ 3,829,525     $ 3,631,597  
Commercial real estate:                  
Commercial real estate 12,665,425     12,407,275     12,251,231     11,913,830     11,706,228  
Construction 1,454,199     1,488,132     1,416,259     1,376,732     1,372,508  
 Total commercial real estate 14,119,624     13,895,407     13,667,490     13,290,562     13,078,736  
Residential mortgage 4,071,237     4,111,400     3,782,972     3,528,682     3,321,560  
Consumer:                  
Home equity 513,066     517,089     521,797     520,849     549,329  
Automobile 1,347,759     1,319,571     1,288,902     1,281,735     1,222,721  
Other consumer 866,505     860,970     834,849     783,363     748,824  
Total consumer loans 2,727,330     2,697,630     2,645,548     2,585,947     2,520,874  
Total loans $ 25,423,118     $ 25,035,469     $ 24,111,290     $ 23,234,716     $ 22,552,767  
                   
CAPITAL RATIOS:                  
Book value per common share $ 9.75     $ 9.48     $ 9.33     $ 9.26     $ 9.16  
Tangible book value per common share (2) 6.26     5.97     5.81     5.75     5.65  
Tangible common equity to tangible assets (2) 6.63 %   6.45 %   6.48 %   6.56 %   6.61 %
Tier 1 leverage capital 7.58     7.57     7.63     7.72     7.71  
Common equity tier 1 capital 8.53     8.43     8.56     8.71     8.77  
Tier 1 risk-based capital 9.38     9.30     9.46     9.65     9.73  
Total risk-based capital 11.37     11.34     11.55     11.77     11.89  



VALLEY NATIONAL BANCORP

CONSOLIDATED FINANCIAL HIGHLIGHTS

  Three Months Ended
ALLOWANCE FOR CREDIT LOSSES: March 31,   December 31,   March 31,
($ in thousands) 2019   2018   2018
Beginning balance - Allowance for credit losses $ 156,295     $ 149,475     $ 124,452  
Loans charged-off:          
Commercial and industrial (4,282 )   (909 )   (131 )
Commercial real estate         (310 )
Construction          
Residential mortgage (15 )   (56 )   (68 )
Total Consumer (2,028 )   (1,194 )   (1,211 )
Total loans charged-off (6,325 )   (2,159 )   (1,720 )
Charged-off loans recovered:          
Commercial and industrial 483     566     2,107  
Commercial real estate 21     21     369  
Construction          
Residential mortgage 1     3     80  
Total Consumer 486     530     468  
Total loans recovered 991     1,120     3,024  
Net (charge-offs) recoveries (5,334 )   (1,039 )   1,304  
Provision for credit losses 8,000     7,859     10,948  
Ending balance - Allowance for credit losses $ 158,961     $ 156,295     $ 136,704  
Components of allowance for credit losses:          
Allowance for loan losses $ 154,381     $ 151,859     $ 132,862  
Allowance for unfunded letters of credit 4,580     4,436     3,842  
Allowance for credit losses $ 158,961     $ 156,295     $ 136,704  
Components of provision for credit losses:          
Provision for loan losses $ 7,856     $ 7,935     $ 10,702  
Provision for unfunded letters of credit 144     (76 )   246  
Provision for credit losses $ 8,000     $ 7,859     $ 10,948  
Annualized ratio of total net charge-offs (recoveries) to average loans 0.08 %   0.02 %   (0.02 )%
Allowance for credit losses as a % of non-PCI loans 0.74 %   0.75 %   0.78 %
Allowance for credit losses as a % of total loans 0.63 %   0.62 %   0.61 %



VALLEY NATIONAL BANCORP

CONSOLIDATED FINANCIAL HIGHLIGHTS

  As of
ASSET QUALITY: (4) March 31,   December 31,   September 30,   June 30,   March 31,
($ in thousands) 2019   2018   2018   2018   2018
Accruing past due loans:                  
30 to 59 days past due:                  
Commercial and industrial $ 5,120     $ 13,085     $ 9,462     $ 6,780     $ 5,405  
Commercial real estate 39,362     9,521     3,387     4,323     3,699  
Construction 1,911     2,829     15,576     175     532  
Residential mortgage 15,856     16,576     10,058     7,961     6,460  
Total Consumer 6,647     9,740     7,443     6,573     5,244  
Total 30 to 59 days past due 68,896     51,751     45,926     25,812     21,340  
60 to 89 days past due:                  
Commercial and industrial 1,756     3,768     1,431     1,533     804  
Commercial real estate 2,156     530     2,502          
Construction         36         1,099  
Residential mortgage 3,635     2,458     3,270     1,978     4,081  
Total Consumer 990     1,386     1,249     860     1,489  
Total 60 to 89 days past due 8,537     8,142     8,488     4,371     7,473  
90 or more days past due:                  
Commercial and industrial 2,670     6,156     1,618     560     653  
Commercial real estate     27     27     27     27  
Construction                  
Residential mortgage 1,402     1,288     1,877     2,324     3,361  
Total Consumer 523     341     282     198     372  
Total 90 or more days past due 4,595     7,812     3,804     3,109     4,413  
Total accruing past due loans $ 82,028     $ 67,705     $ 58,218     $ 33,292     $ 33,226  
Non-accrual loans:                  
Commercial and industrial $ 76,270     $ 70,096     $ 52,929     $ 53,596     $ 25,112  
Commercial real estate 2,663     2,372     7,103     7,452     8,679  
Construction 378     356         1,100     732  
Residential mortgage 11,921     12,917     16,083     19,303     22,694  
Total Consumer 2,178     2,655     2,248     3,003     3,104  
Total non-accrual loans 93,410     88,396     78,363     84,454     60,321  
Other real estate owned (OREO) 7,317     9,491     9,863     11,760     13,773  
Other repossessed assets 2,628     744     445     864     858  
Total non-performing assets $ 103,355     $ 98,631     $ 88,671     $ 97,078     $ 74,952  
Performing troubled debt restructured loans $ 73,081     $ 77,216     $ 81,141     $ 83,694     $ 116,414  
Total non-accrual loans as a % of loans 0.37 %   0.35 %   0.33 %   0.36 %   0.27 %
Total accruing past due and non-accrual loans as a % of loans 0.69 %   0.62 %   0.57 %   0.51 %   0.41 %
Allowance for losses on loans as a % of non-accrual loans 165.27 %   171.79 %   184.99 %   164.30 %   220.26 %
Non-performing purchased credit-impaired loans (5) $ 56,182     $ 56,125     $ 75,422     $ 57,311     $ 62,857  


VALLEY NATIONAL BANCORP

CONSOLIDATED FINANCIAL HIGHLIGHTS

NOTES TO SELECTED FINANCIAL DATA

(1 Net interest income and net interest margin are presented on a tax equivalent basis using a 21 percent federal tax rate. Valley believes that this presentation provides comparability of net interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice and SEC rules.
(2 ) This press release contains certain supplemental financial information, described in the Notes below, which has been determined by methods other than U.S. Generally Accepted Accounting Principles ("GAAP") that management uses in its analysis of Valley's performance.  Management believes these non-GAAP financial measures provide information useful to investors in understanding Valley's financial results. Specifically, Valley provides measures based on what it believes are its operating earnings on a consistent basis and excludes material non-core operating items which affect the GAAP reporting of results of operations.  Management utilizes these measures for internal planning and forecasting purposes. Management believes that Valley's presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting Valley's business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results and Valley strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure.  Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.


  Three Months Ended
  March 31,   December 31,   March 31,
($ in thousands, except for share data) 2019   2018   2018
Adjusted net income available to common shareholders:          
Net income, as reported $ 113,330     $ 77,102     $ 41,965  
Less: Gain on sale leaseback transactions (net of tax)(a) (55,707 )        
Less: Gain on the sale of Visa Class B shares (net of tax) (b)     (4,677 )    
Add: Losses on securities transaction (net of tax) 23     1,047     548  
Add: Severance expense (net of tax)(c) 3,433     1,907      
Add: Tax credit investment impairment (net of tax)(d) 1,757          
Add: Legal expenses (litigation reserve impact only, net of tax)         7,520  
Add: Merger related expenses (net of tax)(e)     (455 )   9,688  
Add: Income tax expense (benefit)(f) 12,100     (2,274 )   2,000  
Net income, as adjusted $ 74,936     $ 72,650     $ 61,721  
Dividends on preferred stock 3,172     3,172     3,172  
Net income available to common shareholders, as adjusted $ 71,764     $ 69,478     $ 58,549  
__________          
(a) The gain on sale leaseback transactions is included in gains on the sales of assets within other non-interest income.
(b) The gain from the sale of non-marketable securities in included within other non-interest income.
(c)  Severance expense is included in salary and employee benefits expense.
(d) Impairment is included in the amortization of tax credit investments.
(e)  Merger related expenses are primarily within salary and employee benefits and other expense.
(f)  Income tax expense (benefit) related to reserves for uncertain tax positions in 2019 and USAB and the Tax Act in the 2018 periods.
Adjusted per common share data:          
Net income available to common shareholders, as adjusted $ 71,764     $ 69,478     $ 58,549  
Average number of shares outstanding 331,601,260     331,492,648     330,727,416  
Basic earnings, as adjusted $ 0.22     $ 0.21     $ 0.18  
Average number of diluted shares outstanding 332,834,466     332,856,385     332,465,527  
Diluted earnings, as adjusted $ 0.22     $ 0.21     $ 0.18  
Adjusted annualized return on average tangible shareholders' equity:          
Net income, as adjusted $ 74,936     $ 72,650     $ 61,721  
Average shareholders' equity 3,394,688     3,340,411     3,289,815  
Less: Average goodwill and other intangible assets 1,160,510     1,164,638     1,164,230  
Average tangible shareholders' equity $ 2,234,178     $ 2,175,773     $ 2,125,585  
Annualized return on average tangible shareholders' equity, as adjusted 13.42 %   13.36 %   11.61 %
Adjusted annualized return on average assets:          
Net income, as adjusted $ 74,936     $ 72,650     $ 61,721  
Average assets $ 32,296,070     $ 31,328,729     $ 29,291,703  
Annualized return on average assets, as adjusted 0.93 %   0.93 %   0.84 %


VALLEY NATIONAL BANCORP

CONSOLIDATED FINANCIAL HIGHLIGHTS

  Three Months Ended
  March 31,   December 31,   March 31,
($ in thousands) 2019   2018   2018
Adjusted annualized return on average shareholders' equity:          
Net income, as adjusted $ 74,936     $ 72,650     $ 61,721  
Average shareholders' equity $ 3,394,688     $ 3,340,411     $ 3,289,815  
Annualized return on average shareholders' equity, as adjusted 8.83 %   8.70 %   7.50 %
Annualized return on average tangible shareholders' equity:          
Net income, as reported $ 113,330     $ 77,102     $ 41,965  
Average shareholders' equity 3,394,688     3,340,411     3,289,815  
Less: Average goodwill and other intangible assets 1,160,510     1,164,638     1,164,230  
Average tangible shareholders' equity $ 2,234,178     $ 2,175,773     $ 2,125,585  
Annualized return on average tangible shareholders' equity 20.29 %   14.17 %   7.90 %
Adjusted efficiency ratio:          
Non-interest expense, as reported $ 147,795     $ 153,712     $ 173,752  
Less: Severance expense (pre-tax) 4,838     2,662      
Less: Legal expenses (litigation reserve impact only, pre-tax)         10,500  
Less: Merger-related expenses (pre-tax)     (635 )   13,528  
Less: Amortization of tax credit investments (pre-tax) 7,173     9,044     5,274  
Non-interest expense, as adjusted $ 135,784     $ 142,641     $ 144,450  
Net interest income 218,648     222,053     207,598  
Non-interest income, as reported 107,673     34,694     32,251  
Add: Losses on securities transactions, net (pre-tax) 32     1,462     765  
Less: Gain on sale leaseback transaction (pre-tax) 78,505          
Less: Gain on Sale of Visa Class B shares (pre-tax)     6,530      
Non-interest income, as adjusted $ 29,200     $ 29,626     $ 33,016  
Gross operating income, as adjusted $ 247,848     $ 251,679     $ 240,614  
Efficiency ratio, as adjusted 54.79 %   56.68 %   60.03 %


VALLEY NATIONAL BANCORP

CONSOLIDATED FINANCIAL HIGHLIGHTS

  As of
  March 31,   December 31,   September 30,   June 30,   March 31,
($ in thousands, except for share data) 2019   2018   2018   2018   2018
Tangible book value per common share:                  
Common shares outstanding 331,732,636     331,431,217     331,501,424     331,454,025     331,189,859  
Shareholders' equity $ 3,444,879     $ 3,350,454     $ 3,302,936     $ 3,277,312     $ 3,245,003  
Less: Preferred stock 209,691     209,691     209,691     209,691     209,691  
Less: Goodwill and other intangible assets 1,158,245     1,161,655     1,166,481     1,162,858     1,165,379  
Tangible common shareholders' equity $ 2,076,943     $ 1,979,108     $ 1,926,764     $ 1,904,763     $ 1,869,933  
Tangible book value per common share $ 6.26     $ 5.97     $ 5.81     $ 5.75     $ 5.65  
Tangible common equity to tangible assets:                
Tangible common shareholders' equity $ 2,076,943     $ 1,979,108     $ 1,926,764     $ 1,904,763     $ 1,869,933  
Total assets 32,476,991     31,863,088     30,881,948     30,182,979     29,464,357  
Less: Goodwill and other intangible assets 1,158,245     1,161,655     1,166,481     1,162,858     1,165,379  
Tangible assets $ 31,318,746     $ 30,701,433     $ 29,715,467     $ 29,020,121     $ 28,298,978  
Tangible common equity to tangible assets 6.63 %   6.45 %   6.48 %   6.56 %   6.61 %


(3 The efficiency ratio measures Valley's total non-interest expense as a percentage of net interest income plus total non-interest income.
(4 ) Past due loans and non-accrual loans exclude purchased credit-impaired (PCI) loans.  PCI loans are accounted for on a pool basis under U.S. GAAP and are not subject to delinquency classification in the same manner as loans originated by Valley.
(5 ) Represent PCI loans meeting Valley's definition of non-performing loan (i.e., non-accrual loans), but are not subject to such classification under U.S. GAAP because the loans are accounted for on a pooled basis and are excluded from the non-accrual loans in the table above.

SHAREHOLDERS RELATIONS
Requests for copies of reports and/or other inquiries should be directed to Tina Zarkadas, Assistant Vice President, Shareholder Relations Specialist, Valley National Bancorp, 1455 Valley Road, Wayne, New Jersey, 07470, by telephone at (973) 305-3380, by fax at (973) 305-1364 or by e-mail at tzarkadas@valley.com.


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

  March 31,   December 31,
  2019   2018
   (Unaudited)    
Assets      
Cash and due from banks $ 282,250     $ 251,541  
Interest bearing deposits with banks 184,347     177,088  
Investment securities:      
Held to maturity (fair value of $2,066,970 at March 31, 2019 and $2,034,943 at
     December 31, 2018)
2,074,399     2,068,246  
Available for sale 1,723,106     1,749,544  
          Total investment securities 3,797,505     3,817,790  
Loans held for sale, at fair value 31,903     35,155  
Loans 25,423,118     25,035,469  
Less: Allowance for loan losses (154,381 )   (151,859 )
          Net loans 25,268,737     24,883,610  
Premises and equipment, net 312,677     341,630  
Lease right-of-use assets 289,669      
Bank owned life insurance 440,845     439,602  
Accrued interest receivable 100,722     95,296  
Goodwill 1,084,665     1,084,665  
Other intangible assets, net 73,580     76,990  
Other assets 610,091     659,721  
          Total Assets $ 32,476,991     $ 31,863,088  
Liabilities      
Deposits:      
Non-interest bearing $ 6,352,135     $ 6,175,495  
Interest bearing:      
     Savings, NOW and money market 11,447,043     11,213,495  
     Time 7,108,318     7,063,984  
          Total deposits 24,907,496     24,452,974  
Short-term borrowings 2,062,576     2,118,914  
Long-term borrowings 1,499,727     1,654,268  
Junior subordinated debentures issued to capital trusts 55,457     55,370  
Lease liabilities 313,525     3,125  
Accrued expenses and other liabilities 193,331     227,983  
          Total Liabilities 29,032,112     28,512,634  
Shareholders’ Equity      
Preferred stock, no par value; 50,000,000 authorized shares:      
Series A (4,600,000 shares issued at March 31, 2019 and December 31, 2018) 111,590     111,590  
Series B (4,000,000 shares issued at March 31, 2019 and December 31, 2018) 98,101     98,101  
Common stock (no par value, authorized 450,000,000 shares; issued 332,062,473 shares at
     March 31, 2019 and 331,634,951 shares at December 31, 2018)
116,466     116,240  
Surplus 2,799,434     2,796,499  
Retained earnings 375,983     299,642  
Accumulated other comprehensive loss (53,257 )   (69,431 )
Treasury stock, at cost (329,837 common shares at March 31, 2019 and 203,734 common
     shares at December 31, 2018)
(3,438 )   (2,187 )
     Total Shareholders’ Equity 3,444,879     3,350,454  
     Total Liabilities and Shareholders’ Equity $ 32,476,991     $ 31,863,088  



VALLEY NATIONAL BANCORP

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

  Three Months Ended
  March 31,   December 31,   March 31,
  2019   2018   2018
Interest Income          
Interest and fees on loans $ 288,277     $ 282,847     $ 237,586  
Interest and dividends on investment securities:          
Taxable 22,876     22,399     21,323  
Tax-exempt 4,804     5,121     5,721  
Dividends 3,174     3,561     1,939  
Interest on federal funds sold and other short-term investments 1,093     666     926  
Total interest income 320,224     314,594     267,495  
Interest Expense          
Interest on deposits:          
Savings, NOW and money market 36,283     32,546     22,317  
Time 38,171     30,599     14,616  
Interest on short-term borrowings 12,549     14,092     5,732  
Interest on long-term borrowings and junior subordinated debentures 14,573     15,304     17,232  
Total interest expense 101,576     92,541     59,897  
Net Interest Income 218,648     222,053     207,598  
Provision for credit losses 8,000     7,859     10,948  
Net Interest Income After Provision for Credit Losses 210,648     214,194     196,650  
Non-Interest Income          
Trust and investment services 2,904     2,998     3,230  
Insurance commissions 2,525     3,720     3,821  
Service charges on deposit accounts 5,903     6,288     7,253  
Losses on securities transactions, net (32 )   (1,462 )   (765 )
Fees from loan servicing 2,430     2,478     2,223  
Gains on sales of loans, net 4,576     2,372     6,753  
Gains (losses) on sales of assets, net 77,720     (280 )   (97 )
Bank owned life insurance 1,887     1,731     1,763  
Other 9,760     16,849     8,070  
Total non-interest income 107,673     34,694     32,251  
Non-Interest Expense          
Salary and employee benefits expense 83,105     80,802     93,292  
Net occupancy and equipment expense 27,886     27,643     27,924  
FDIC insurance assessment 6,121     7,303     5,498  
Amortization of other intangible assets 4,311     4,809     4,293  
Professional and legal fees 5,271     5,119     17,047  
Amortization of tax credit investments 7,173     9,044     5,274  
Telecommunication expense 2,268     2,166     3,594  
Other 11,660     16,826     16,830  
Total non-interest expense 147,795     153,712     173,752  
Income Before Income Taxes 170,526     95,176     55,149  
Income tax expense 57,196     18,074     13,184  
Net Income 113,330     77,102     41,965  
Dividends on preferred stock 3,172     3,172     3,172  
Net Income Available to Common Shareholders $ 110,158     $ 73,930     $ 38,793  
Earnings Per Common Share:          
Basic $ 0.33     $ 0.22     $ 0.12  
Diluted 0.33     0.22     0.12  
Cash Dividends Declared per Common Share 0.11     0.11     0.11  
Weighted Average Number of Common Shares Outstanding:          
Basic 331,601,260     331,492,648     330,727,416  
Diluted 332,834,466     332,856,385     332,465,527  


VALLEY NATIONAL BANCORP
Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and
Net Interest Income on a Tax Equivalent Basis
 
  Three Months Ended
  March 31, 2019   December 31, 2018   March 31, 2018
   Average       Avg.    Average       Avg.    Average       Avg.
($ in thousands)  Balance   Interest   Rate    Balance   Interest   Rate    Balance   Interest   Rate
Assets                                  
Interest earning assets:                              
Loans (1)(2) $ 25,254,733     $ 288,277     4.57 %   $ 24,530,919     $ 282,847     4.61 %   $ 22,302,991     $ 237,587     4.26 %
Taxable investments (3) 3,390,609     26,050     3.07 %   3,398,396     25,960     3.06 %   3,401,743     23,262     2.74 %
Tax-exempt investments (1)(3) 689,675     6,081     3.53 %   713,552     6,482     3.63 %   741,001     7,242     3.91 %
Interest bearing deposits with banks 227,890     1,093     1.92 %   163,753     666     1.63 %   305,071     926     1.21 %
Total interest earning assets 29,562,907     321,501     4.35 %   28,806,620     315,955     4.39 %   26,750,806     269,017     4.02 %
Other assets 2,733,163             2,522,109             2,540,897          
Total assets $ 32,296,070             $ 31,328,729             $ 29,291,703          
Liabilities and shareholders' equity                                  
Interest bearing liabilities:                                  
Savings, NOW and money market deposits $ 11,450,943     $ 36,283     1.27 %   $ 11,186,180     $ 32,546     1.16 %   $ 11,175,982     $ 22,317     0.80 %
Time deposits 7,214,863     38,171     2.12 %   6,245,803     30,599     1.96 %   4,594,368     14,616     1.27 %
Short-term borrowings 2,011,428     12,549     2.50 %   2,316,020     14,092     2.43 %   1,487,272     5,732     1.54 %
Long-term borrowings (4) 1,666,794     14,573     3.50 %   1,767,194     15,304     3.46 %   2,432,543     17,232     2.83 %
Total interest bearing liabilities 22,344,028     101,576     1.82 %   21,515,197     92,541     1.72 %   19,690,165     59,897     1.22 %
Non-interest bearing deposits 6,116,953             6,270,902             6,111,684          
Other liabilities 440,401             202,219             200,039          
Shareholders' equity 3,394,688             3,340,411             3,289,815          
Total liabilities and shareholders' equity $ 32,296,070             $ 31,328,729             $ 29,291,703          
                                   
Net interest income/interest rate spread (5)     $ 219,925     2.53 %       $ 223,414     2.67 %       $ 209,120     2.80 %
Tax equivalent adjustment     (1,277 )           (1,361 )           (1,522 )    
Net interest income, as reported     $ 218,648             $ 222,053             $ 207,598      
Net interest margin (6)         2.96 %           3.08 %           3.10 %
Tax equivalent effect         0.02 %           0.02 %           0.03 %
Net interest margin on a fully tax equivalent basis (6)         2.98 %           3.10 %           3.13 %

          

(1)     Interest income is presented on a tax equivalent basis using a 21 percent federal tax rate.
(2)     Loans are stated net of unearned income and include non-accrual loans.
(3)     The yield for securities that are classified as available for sale is based on the average historical amortized cost.
(4)     Includes junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of condition.
(5)     Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.
(6)     Net interest income as a percentage of total average interest earning assets.
       


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