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Valley National Bancorp Announces First Quarter 2023 Results

NEW YORK, April 27, 2023 (GLOBE NEWSWIRE) -- Valley National Bancorp (NASDAQ:VLY), the holding company for Valley National Bank, today reported net income for the first quarter 2023 of $146.6 million, or $0.28 per diluted common share, as compared to the first quarter 2022 net income of $116.7 million, or $0.27 per diluted common share, and net income of $177.6 million, or $0.34 per diluted common share, for the fourth quarter 2022. Excluding all non-core charges, our adjusted net income (a non-GAAP measure) was $154.5 million, or $0.30 per diluted common share, for the first quarter 2023, $120.3 million, or $0.28 per diluted common share, for first quarter 2022, and $182.9 million, or $0.35 per diluted common share, for the fourth quarter 2022. See further details below, including a reconciliation of our non-GAAP adjusted net income in the “Consolidated Financial Highlights” tables.

Key financial highlights for the first quarter:

  • Loan Portfolio: Total loans increased $1.7 billion, or 15 percent on an annualized basis, to $48.7 billion at March 31, 2023 from December 31, 2022 mainly as a result of new commercial loan production from our well-established loan pipelines at the end of 2022 and the continuation of slower prepayment activity within the loan portfolio. See the “Loans” section below for more details.
  • Allowance and Provision for Credit Losses for Loans: The allowance for credit losses for loans totaled $461.0 million and $483.3 million at March 31, 2023 and December 31, 2022, respectively, representing 0.95 percent and 1.03 percent of total loans at each respective date. During the first quarter 2023, the provision for credit losses for loans totaled $9.5 million as compared to $7.3 million and $3.5 million for the fourth quarter 2022 and first quarter 2022, respectively.
  • Provision for Credit Losses for Available for Sale (AFS) Securities: We recorded a $5.0 million provision related to credit losses on one corporate bond issued by Signature Bank within our AFS debt securities portfolio and fully charged-off the bond during the first quarter 2023.
  • Deposits: Total deposits were $47.6 billion at March 31, 2023 and remained relatively unchanged as compared to December 31, 2022. Our deposit base is highly diversified with 625 thousand commercial and retail deposit customers, an average account size of $58 thousand and an average customer relationship with Valley exceeding 10 years. See the “Deposits” section below for more details.
  • Credit Quality: Non-accrual loans represented 0.50 percent and 0.57 percent of total loans at March 31, 2023 and December 31, 2022, respectively. Net loan charge-offs totaled $30.4 million for the first quarter 2023 as compared to $22.4 million for the fourth quarter 2022. The charge-offs in both periods primarily related to one commercial and industrial loan that was fully reserved for within our allowance for loan losses at December 31, 2022. The remaining loan balance, net of charge-offs, was immaterial at March 31, 2023. Total accruing past due loans increased $9.4 million to $100.3 million, or 0.21 percent of total loans, at March 31, 2023 as compared to $90.9 million, or 0.19 percent of total loans, at December 31, 2022. See the “Credit Quality” section below for more details.
  • Net Interest Income and Margin: Net interest income on a tax equivalent basis of $437.5 million for the first quarter 2023 decreased $29.8 million compared to the fourth quarter 2022 and increased $119.1 million as compared to the first quarter 2022. Our net interest margin on a tax equivalent basis decreased by 41 basis points to 3.16 percent in the first quarter 2023 as compared to 3.57 percent for the fourth quarter 2022. The decline in both net interest income and margin as compared to the linked fourth quarter reflects the impact of rising market interest rates on incremental short-term borrowings and interest bearing deposits, excess cash liquidity held during March 2023, as well as two fewer days in the first quarter 2023. See the “Net Interest Income and Margin” section below for more details.
  • Non-Interest Income: Non-interest income increased $1.5 million to $54.3 million for the first quarter 2023 as compared to the fourth quarter 2022 mainly due to increases in other income and capital markets fees. The increase in capital markets fees was driven by both higher fee income from interest rate swap transactions executed for commercial loan customers and foreign exchange fees.
  • Non-Interest Expense: Non-interest expense increased $5.9 million to $272.2 million for the first quarter 2023 as compared to the fourth quarter 2022. The overall increase in non-interest expense was mostly due to normal seasonal increases within salary and employee benefits, as well as an increase in the FDIC insurance assessment. These increases were partially offset by lower merger related expenses within technology, furniture and equipment expense and a decline in consulting and managed service fees within the professional and legal fees category. Merger related expense totaled $4.1 million for the first quarter 2023 (mainly reported within salary and employee benefits) and $7.4 million for the fourth quarter 2022 (mainly reported in technology, furniture and equipment expense).
  • Efficiency Ratio: Our efficiency ratio was 53.79 percent for the first quarter 2023 as compared to 49.30 percent and 53.18 percent for the fourth quarter 2022 and first quarter 2022, respectively. See the “Consolidated Financial Highlights” tables below for additional information regarding our non-GAAP measures.
  • Income Tax Expense: The effective tax rate was 28.1 percent for the first quarter 2023. Income tax expense totaled $57.2 million for the first quarter 2023 and included a $1.4 million provision for unrealizable tax benefits related to the charge-off of the $5.0 million AFS security.
  • Performance Ratios: Annualized return on average assets (ROA), shareholders’ equity (ROE) and tangible ROE were 0.98 percent, 9.10 percent and 13.39 percent for the first quarter 2023, respectively. Annualized ROA, ROE, and tangible ROE, adjusted for non-core charges, were 1.03 percent, 9.60 percent and 14.12 percent for the first quarter 2023, respectively. See the “Consolidated Financial Highlights” tables below for additional information regarding our non-GAAP measures.

Ira Robbins, CEO commented, “I am extremely proud of our team’s ability to navigate the recent market turmoil and operate the Bank from a position of balance sheet diversification, stability and strength. We have a prudent and industry-leading risk management culture that has enabled us to successfully operate through various economic cycles over several decades and today’s fast-paced transactional environment. Our core deposit base performed very well in recent weeks, as we proactively assist our clients and communities to work towards their own financial goals.”

Mr. Robbins continued, “Since 1927, Valley has supported the financial well-being of the individuals and businesses in our local communities. In times of market stress, our long-standing focus on relationship-based commercial and retail banking helps differentiate our organization. Our set of customers across business lines and geographies, on both sides of the balance sheet, positions us for relative stability during adverse market conditions.”

Net Interest Income and Margin

Net interest income on a tax equivalent basis totaling $437.5 million for the first quarter 2023 decreased $29.8 million as compared to the fourth quarter 2022 and increased $119.1 million as compared to the first quarter 2022. The decrease as compared to the fourth quarter 2022 was mainly due to (i) the negative impact of the significant increase in our excess cash liquidity and other borrowings resulting from prudent and cautionary measures taken by us during the market turmoil of March 2023, (ii) higher interest rates on our average interest bearing deposits and other borrowings, as well as (iii) fewer days in the first quarter. Interest expense increased $103.5 million to $284.2 million for the first quarter 2023 as compared to the fourth quarter 2022 largely due to a $4.0 billion increase in average interest bearing liabilities, including increases of $2.1 billion and $1.9 billion in average time deposits and short-term borrowings, respectively. Interest income on a tax equivalent basis increased $73.7 million to $721.7 million in the first quarter 2023 as compared to the fourth quarter 2022. The increase was mostly due to higher average loan balances driven by our organic new loan volumes, slowing loan prepayments, and increased yields on both new originations and adjustable rate loans in our portfolio.

Net interest margin on a tax equivalent basis of 3.16 percent for the first quarter 2023 decreased by 41 basis points from 3.57 percent for the fourth quarter 2022 and remained unchanged from the first quarter 2022. The decrease as compared to the fourth quarter was largely driven by (i) the net impact of the excess liquidity measures taken in March 2023 and (ii) two fewer days during the first quarter 2023, partially offset by higher yields on average interest earning assets. The yield on average interest earning assets increased by 26 basis points on a linked quarter basis mostly due to the aforementioned higher yields on new and adjustable rate loans in the first quarter 2023 as compared to the fourth quarter 2022. The yield on average loans increased by 28 basis points to 5.48 percent for the first quarter 2023 as compared to the fourth quarter 2022 largely due to the higher level of market interest rates. The yields on average taxable and non-taxable investments also increased 12 basis points and 9 basis points, respectively, from the fourth quarter 2022, largely due to investment maturities and prepayments redeployed into new higher yielding securities, as well as lower premium amortization expense caused by a decline in prepayments on mortgage-backed securities during the first quarter 2023. Our cost of total average deposits increased to 1.96 percent for the first quarter 2023 from 1.36 percent for the fourth quarter 2022. The overall cost of average interest bearing liabilities also increased 87 basis points to 3.02 percent for the first quarter 2023 as compared to the fourth quarter 2022 largely due to a 148 basis point increase in cost of average short-term borrowings.

Loans, Deposits and Other Borrowings

Loans. Loans increased $1.7 billion to approximately $48.7 billion at March 31, 2023 from December 31, 2022 mainly due to continued strong organic loan growth in commercial loan categories and low levels of prepayment activity during the first quarter 2023. Total commercial real estate (including construction) and commercial and industrial loans increased $1.3 billion, or 18.3 percent and $239.1 million, or 10.9 percent, respectively, on an annualized basis during the first quarter 2023. Residential mortgage loans increased $121.7 million during the first quarter 2023 as we largely originated new portfolio loans held for investment. During the first quarter 2023, we sold only $27.3 million of residential mortgage loans. Residential mortgage loans held for sale at fair value totaled $17.2 million and $18.1 million at March 31, 2023 and December 31, 2022, respectively.

Deposits. Total deposits were $47.6 billion at March 31, 2023 and remained relatively unchanged as compared to December 31, 2022. Within the deposit categories, non-interest bearing deposits, and savings, NOW and money market deposits decreased $887.5 million and $713.4 million, respectively, and were mostly offset by an increase in time deposits. Time deposits increased $1.6 billion to $11.1 billion within our overall deposit mix at March 31, 2023 from December 31, 2022, largely due to higher fully-insured brokered CD balances at March 31, 2023. Total fully-insured brokered deposits, consisting of time deposit and money market accounts, increased $1.2 billion to $7.1 billion at March 31, 2023 as compared to $5.9 billion at December 31, 2022. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 29 percent, 48 percent and 23 percent of total deposits as of March 31, 2023, respectively, as compared to 30 percent, 50 percent and 20 percent of total deposits as of December 31, 2022, respectively.

Other Borrowings. Short-term borrowings increased $6.3 billion to $6.4 billion at March 31, 2023 as compared to December 31, 2022. In March 2023, we increased our short-term borrowings, mostly consisting of FHLB advances, to bolster our liquidity position out of an abundance of caution in the wake of the two recent bank failures. Since March 31, 2023, many of our short-term FHLB advances have matured and been repaid, resulting in a more normal liquidity position. We continue to closely monitor changes in the current banking environment and have substantial access to additional liquidity. Long-term borrowings increased to approximately $2.2 billion at March 31, 2023 as compared to $1.5 billion at December 31, 2022 mainly due to new FHLB advances issued during the first quarter 2023.

Credit Quality

Non-Performing Assets (NPAs). Total NPAs, consisting of non-accrual loans, other real estate owned (OREO) and other repossessed assets, decreased $27.0 million to $244.9 million at March 31, 2023 as compared to December 31, 2022 due to a decline in non-accrual loans. Non-accrual commercial and industrial loans decreased $20.3 million to $78.6 million at March 31, 2023 primarily due to a $19.7 million charge-off a loan participation that was reserved for in our allowance of loan losses at December 31, 2022. Non-accrual construction loans also decreased $5.6 million to $68.6 million at March 31, 2023 due to the partial charge-off of one loan relationship during the first quarter 2023 that had related allowance reserves totaling $4.3 million at December 31, 2022. Non-accrual loans represented 0.50 percent of total loans at March 31, 2023 compared to 0.57 percent at December 31, 2022.

Accruing Past Due Loans. Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) increased $9.4 million to $100.3 million, or 0.21 percent of total loans, at March 31, 2023 as compared to $90.9 million, or 0.19 percent of total loans at December 31, 2022.

Loans 30 to 59 days past due increased $11.2 million at March 31, 2023 as compared to December 31, 2022 mainly due to higher commercial and industrial, and commercial real estate loan delinquencies, partially offset by an improved performance within the residential mortgage and consumer loan categories. Loans 60 to 89 days past due increased $7.0 million to $27.8 million at March 31, 2023 as compared to December 31, 2022 primarily due to an increase in commercial and industrial loan delinquencies. Loans 90 days or more past due and still accruing interest decreased $8.8 million to $17.8 million at March 31, 2023 as compared to December 31, 2022 mainly due to the renewals in the normal course of two matured loans during the first quarter that were previously included in this delinquency category at December 31, 2022. All loans 90 days or more past due and still accruing interest are well-secured and in the process of collection.

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 March 31, 2023, December 31, 2022 and March 31, 2022:

  March 31, 2023 December 31, 2022 March 31, 2022
    Allocation   Allocation   Allocation
    as a % of   as a % of   as a % of
  Allowance Loan Allowance Loan Allowance Loan
 Allocation Category Allocation Category Allocation Category
 ($ in thousands)
Loan Category:           
Commercial and industrial loans$127,992 1.42% $140,008 1.59% $101,203 1.75%
Commercial real estate loans:           
 Commercial real estate 190,420 0.70   200,248 0.78   189,927 0.96 
 Construction 52,912 1.42   58,987 1.59   30,022 1.38 
Total commercial real estate loans 243,332 0.79   259,235 0.88   219,949 1.00 
Residential mortgage loans 41,708 0.76   39,020 0.73   28,189 0.60 
Consumer loans:           
 Home equity 4,417 0.86   4,332 0.86   3,656 0.93 
 Auto and other consumer 19,449 0.69   16,060 0.57   9,513 0.37 
Total consumer loans 23,866 0.71   20,392 0.62   13,169 0.45 
Allowance for loan losses 436,898 0.90   458,655 0.98   362,510 1.03 
Allowance for unfunded credit commitments 24,071    24,600    16,742  
Total allowance for credit losses for loans$460,969   $483,255   $379,252  
 Allowance for credit losses for loans as a % total loans   0.95%   1.03%   1.07%
               

Our loan portfolio, totaling $48.7 billion at March 31, 2023, had net loan charge-offs totaling $30.4 million for the first quarter 2023 as compared to $22.4 million for the fourth quarter 2022 and net recoveries of loan charge-offs of $50 thousand for the first quarter 2022. The net charge-offs for both the first quarter 2023 and fourth quarter 2022 mainly related to partial charge-offs of one commercial and industrial loan participation. This loan was fully reserved for in our allowance of loan losses as of December 31, 2022 and its remaining balance, net of charge-offs, was immaterial at March 31, 2023.

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 0.95 percent at March 31, 2023 as compared to 1.03 percent and 1.07 percent at December 31, 2022 and March 31, 2022, respectively. During the first quarter 2023, the provision for credit losses for loans totaled $9.5 million as compared to $7.3 million and $3.5 million for the fourth quarter 2022 and first quarter 2022, respectively. At March 31, 2023, our allowance for credit losses for loans as a percentage of total loans decreased as compared to December 31, 2022 largely due to the impact of the first quarter 2023 loan charge-offs with prior allocated reserves. The reduction in allocated reserves for specific loans was partially offset by a moderate uptick in non-economic qualitative reserves for commercial and industrial loans within our CECL model at March 31, 2023. The economic component of our current CECL model was relatively stable as compared to December 31, 2022.

Capital Adequacy

Valley’s total risk-based capital, common equity Tier 1 capital, Tier 1 capital and Tier 1 leverage capital ratios were 11.58 percent, 9.02 percent, 9.46 percent and 7.96 percent, respectively, at March 31, 2023.

Investor Conference Call

Valley will host a conference call with investors and the financial community at 11:00 AM Eastern Daylight Savings Time, today to discuss the first quarter 2023 earnings and related matters.

Interested parties should preregister using this link: https://register.vevent.com/register to receive the dial-in number and a personal PIN, which are required to access the conference call. The teleconference will also be webcast live: https://edge.media-server.com and archived on Valley’s website through Monday, May 29, 2023.

About Valley

As the principal subsidiary of Valley National Bancorp, Valley National Bank is a regional bank with nearly $64 billion in assets. Valley is committed to giving people and businesses the power to succeed. Valley operates many convenient branch locations and commercial banking offices across New Jersey, New York, Florida, Alabama, California, and Illinois, and is committed to providing the most convenient service, the latest innovations and an experienced and knowledgeable team dedicated to meeting customer needs. Helping communities grow and prosper is the heart of Valley’s corporate citizenship philosophy. To learn more about Valley, go to www.valley.com or call our Customer Care Center at 800-522-4100.

Forward Looking Statements

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

  • the impact of Federal Reserve actions impacting the level of market interest rates and increases in business failures, specifically among our clients, as well as on our business, our employees and our ability to provide services to our customers;
  • the potential impact of recent and possible future bank failures on the business environment in which we operate, including potential customer deposit withdrawals from Valley National Bank or business disruptions or liquidity issues that may affect our customers;
  • the impact of unfavorable macroeconomic conditions or downturns, instability or volatility in financial markets, unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by and factors outside of our control, such as geopolitical instabilities or events; natural and other disasters (including severe weather events) and health emergencies, acts of terrorism or other external events;
  • risks associated with our acquisition of Bank Leumi USA, including (i) the inability to realize expected cost savings and synergies from the acquisition in the amounts or timeframe anticipated and (ii) greater than expected costs or difficulties relating to integration matters;
  • the loss of or decrease in lower-cost funding sources within our deposit base;
  • the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;
  • the inability to attract new customer deposits to keep pace with loan growth strategies;
  • a material change in our allowance for credit losses under CECL due to forecasted economic conditions and/or unexpected credit deterioration in our loan and investment portfolios;
  • greater than expected technology related costs due to, among other factors, prolonged or failed implementations, additional project staffing and obsolescence caused by continuous and rapid market innovations;
  • the risks related to the replacement of the London Interbank Offered Rate with Secured Overnight Financing Rate and other reference rates, including increased expenses, risk of litigation and the effectiveness of hedging strategies;
  • cyber-attacks, ransomware attacks, computer viruses or other malware that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems;
  • damage verdicts or settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent or trademark infringement, employment related claims, and other matters;
  • changes to laws and regulations, including changes affecting oversight of the financial services industry; changes in the enforcement and interpretation of such laws and regulations; and changes in accounting and reporting standards;
  • higher or lower than expected income tax expense or tax rates, including increases or decreases resulting from changes in uncertain tax position liabilities, tax laws, regulations and case law;
  • results of examinations by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank (FRB), the Consumer Financial Protection Bureau (CFPB) and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;
  • our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements or a decision to increase capital by retaining more earnings;
  • a prolonged downturn in the economy, mainly in New Jersey, New York, Florida, Alabama, California, and Illinois, as well as an unexpected decline in commercial real estate values within our market areas; and
  • unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors.

A detailed discussion of factors that could affect our results is included in our SEC filings, including the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022.

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.

Contact: Michael D. Hagedorn
  Senior Executive Vice President and
  Chief Financial Officer
  973-872-4885
   

-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 and per share data and stock price)2023 2022 2022
FINANCIAL DATA:     
Net interest income - FTE (1)$437,458  $467,233  $318,363 
Net interest income$436,020  $465,819  $317,669 
Non-interest income 54,299   52,796   39,270 
Total revenue 490,319   518,615   356,939 
Non-interest expense 272,166   266,240   197,340 
Pre-provision net revenue 218,153   252,375   159,599 
Provision for credit losses 14,437   7,239   3,557 
Income tax expense 57,165   67,545   39,314 
Net income 146,551   177,591   116,728 
Dividends on preferred stock 3,874   3,630   3,172 
Net income available to common shareholders$142,677  $173,961  $113,556 
Weighted average number of common shares outstanding:     
Basic 507,111,295   506,359,704   421,573,843 
Diluted 509,656,430   509,301,813   423,506,550 
Per common share data:     
Basic earnings$0.28  $0.34  $0.27 
Diluted earnings 0.28   0.34   0.27 
Cash dividends declared 0.11   0.11   0.11 
Closing stock price - high 12.59   12.92   15.02 
Closing stock price - low 9.06   10.96   12.91 
FINANCIAL RATIOS:     
Net interest margin 3.15%  3.56%  3.15%
Net interest margin - FTE (1) 3.16   3.57   3.16 
Annualized return on average assets 0.98   1.25   1.07 
Annualized return on avg. shareholders’ equity 9.10   11.23   9.15 
NON-GAAP FINANCIAL DATA AND RATIOS: (2)     
Basic earnings per share, as adjusted$0.30  $0.35  $0.28 
Diluted earnings per share, as adjusted 0.30   0.35   0.28 
Annualized return on average assets, as adjusted 1.03   1.29%  1.10%
Annualized return on average shareholders’ equity, as adjusted 9.60%  11.56   9.43 
Annualized return on avg. tangible shareholders’ equity 13.39   16.70%  13.09%
Annualized return on average tangible shareholders’ equity, as adjusted 14.12   17.20   13.49 
Efficiency ratio 53.79   49.30   53.18 
      
AVERAGE BALANCE SHEET ITEMS:     
Assets$59,867,002  $56,913,215  $43,570,251 
Interest earning assets 55,362,790   52,405,601   40,283,048 
Loans 47,859,371   46,086,363   34,623,402 
Interest bearing liabilities 37,618,750   33,596,874   26,147,915 
Deposits 47,152,919   46,234,857   35,763,683 
Shareholders’ equity 6,440,215   6,327,970   5,104,709 


 As Of
BALANCE SHEET ITEMS:March 31, December 31, September 30, June 30, March 31,
(In thousands)2023 2022 2022 2022 2022
Assets$64,309,573  $57,462,749  $55,927,501  $54,438,807  $43,551,457 
Total loans 48,659,966   46,917,200   45,185,764   43,560,777   35,364,405 
Deposits 47,590,916   47,636,914   45,308,843   43,881,051   35,647,336 
Shareholders’ equity 6,511,581   6,400,802   6,273,829   6,204,913   5,096,384 
          
LOANS:         
(In thousands)         
Commercial and industrial loans:         
Commercial and industrial$9,043,946  $8,804,830  $8,701,377  $8,514,458  $5,791,390 
Commercial real estate:         
Commercial real estate 27,051,111   25,732,033   24,493,445   23,535,086   19,763,202 
Construction 3,725,967   3,700,835   3,571,818   3,374,373   2,174,542 
Total commercial real estate 30,777,078   29,432,868   28,065,263   26,909,459   21,937,744 
Residential mortgage 5,486,280   5,364,550   5,177,128   5,005,069   4,691,935 
Consumer:         
Home equity 516,592   503,884   467,135   431,455   393,538 
Automobile 1,717,141   1,746,225   1,711,086   1,673,482   1,552,928 
Other consumer 1,118,929   1,064,843   1,063,775   1,026,854   996,870 
Total consumer loans 3,352,662   3,314,952   3,241,996   3,131,791   2,943,336 
Total loans$48,659,966  $46,917,200  $45,185,764  $43,560,777  $35,364,405 
          
CAPITAL RATIOS:         
Book value per common share$12.41  $12.23  $11.98  $11.84  $11.60 
Tangible book value per common share (2) 8.36   8.15   7.87   7.71   7.93 
Tangible common equity to tangible assets (2) 6.82%  7.45%  7.40%  7.46%  7.96%
Tier 1 leverage capital 7.96   8.23   8.31   8.33   8.70 
Common equity tier 1 capital 9.02   9.01   9.09   9.06   9.67 
Tier 1 risk-based capital 9.46   9.46   9.56   9.54   10.27 
Total risk-based capital 11.58   11.63   11.84   11.53   12.65 


 Three Months Ended
ALLOWANCE FOR CREDIT LOSSES:March 31, December 31, March 31,
($ in thousands)2023 2022 2022
Allowance for credit losses for loans     
Beginning balance$483,255  $498,408  $375,702 
Impact of the adoption of ASU No. 2022-02 * (1,368)      
Beginning balance, adjusted 481,887   498,408   375,702 
Loans charged-off:     
Commercial and industrial (26,047)  (22,106)  (1,571)
Commercial real estate    (388)  (173)
Construction (5,698)      
Residential mortgage    (1)  (26)
Total consumer (828)  (1,544)  (825)
Total loans charged-off (32,573)  (24,039)  (2,595)
Charged-off loans recovered:     
Commercial and industrial 1,399   1,069   824 
Commercial real estate 24   13   107 
Residential mortgage 21   17   457 
Total consumer 761   498   1,257 
Total loans recovered 2,205   1,597   2,645 
Total net (charge-offs) recoveries (30,368)  (22,442)  50 
Provision for credit losses for loans 9,450   7,289   3,500 
Ending balance$460,969  $483,255  $379,252 
Components of allowance for credit losses for loans:     
Allowance for loan losses$436,898  $458,655  $362,510 
Allowance for unfunded credit commitments 24,071   24,600   16,742 
Allowance for credit losses for loans$460,969  $483,255  $379,252 
Components of provision for credit losses for loans:     
Provision for credit losses for loans$9,979  $5,353  $3,258 
(Credit) provision for unfunded credit commitments (529)  1,936   242 
Total provision for credit losses for loans$9,450  $7,289  $3,500 
Annualized ratio of total net charge-offs (recoveries) to total average loans 0.25%  0.19%  0.00%
Allowance for credit losses for loans as a % of total loans 0.95%  1.03%  1.07%
            
_______________           
            
* Represents adjustment of the adoption of ASU No. 2022-02 effective January 1, 2023.  


 As of
ASSET QUALITY:March 31, December 31, September 30, June 30, March 31,
($ in thousands)2023 2022 2022 2022 2022
Accruing past due loans:         
30 to 59 days past due:         
Commercial and industrial$20,716  $11,664  $19,526  $7,143  $6,723 
Commercial real estate 13,580   6,638   6,196   10,516   30,807 
Construction          9,108   1,708 
Residential mortgage 12,599   16,146   13,045   12,326   9,266 
Total consumer 7,845   9,087   6,196   6,009   5,862 
Total 30 to 59 days past due 54,740   43,535   44,963   45,102   54,366 
60 to 89 days past due:         
Commercial and industrial 24,118   12,705   2,188   3,870   14,461 
Commercial real estate    3,167   383   630   6,314 
Construction       12,969   3,862   3,125 
Residential mortgage 2,133   3,315   5,947   2,410   2,560 
Total consumer 1,519   1,579   1,174   702   554 
Total 60 to 89 days past due 27,770   20,766   22,661   11,474   27,014 
90 or more days past due:         
Commercial and industrial 8,927   18,392   15,072   15,470   9,261 
Commercial real estate    2,292   15,082       
Construction 6,450   3,990          
Residential mortgage 1,668   1,866   550   1,188   1,746 
Total consumer 747   47   421   267   400 
Total 90 or more days past due 17,792   26,587   31,125   16,925   11,407 
Total accruing past due loans$100,302  $90,888  $98,749  $73,501  $92,787 
Non-accrual loans:         
Commercial and industrial$78,606  $98,881  $135,187  $148,404  $96,631 
Commercial real estate 67,938   68,316   67,319   85,807   79,180 
Construction 68,649   74,230   61,098   49,780   17,618 
Residential mortgage 23,483   25,160   26,564   25,847   33,275 
Total consumer 3,318   3,174   3,227   3,279   3,754 
Total non-accrual loans 241,994   269,761   293,395   313,117   230,458 
Other real estate owned (OREO) 1,189   286   286   422   1,024 
Other repossessed assets 1,752   1,937   1,122   1,200   1,176 
Total non-performing assets$244,935  $271,984  $294,803  $314,739  $232,658 
Total non-accrual loans as a % of loans 0.50%  0.57%  0.65%  0.72%  0.65%
Total accruing past due and non-accrual loans as a % of loans 0.70%  0.77%  0.87%  0.89%  0.91%
Allowance for losses on loans as a % of non-accrual loans 180.54%  170.02%  162.15%  149.73%  157.30%
                    

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)Non-GAAP Reconciliations. This press release contains certain supplemental financial information, described in the Notes below, which has been determined by methods other than U.S. Generally Accepted Accounting Principles ("GAAP") that management uses in its analysis of Valley’s performance. The Company believes that the non-GAAP financial measures provide useful supplemental information to both management and investors in understanding Valley’s underlying operational performance, business and performance trends, and may facilitate comparisons of our current and prior performance with the performance of others in the financial services industry. Management utilizes these measures for internal planning, forecasting and analysis purposes. Management believes that Valley’s presentation and discussion of this supplemental information, together with the accompanying reconciliations to the GAAP financial measures, also allows investors to view performance in a manner similar to management. These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with U.S. GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.


Non-GAAP Reconciliations to GAAP Financial Measures
 Three Months Ended
 March 31, December 31, March 31,
($ in thousands, except for share data)2023 2022 2022
Adjusted net income available to common shareholders (non-GAAP):     
Net income, as reported (GAAP)$146,551  $177,591  $116,728 
Add: Losses on available for sale and held to maturity securities transactions (net of tax)(a) 17   5   6 
Add: Provision for credit losses for available for sale securities (b) 5,000       
Add: Merger related expenses (net of tax)(c) 2,962   5,285   3,579 
Net income, as adjusted (non-GAAP)$154,530  $182,881  $120,313 
Dividends on preferred stock 3,874   3,630   3,172 
Net income available to common shareholders, as adjusted (non-GAAP)$150,656  $179,251  $117,141 
_______________     
(a) Included in gains (losses) losses on securities transactions, net.
(b) Provision relates to one security fully charged off with no resulting tax benefit during the three months ended March 31, 2023.
(c) Merger related expenses are primarily within salary and employee benefits expense for the three months ended March 31, 2023.
      
Adjusted per common share data (non-GAAP):     
Net income available to common shareholders, as adjusted (non-GAAP)$150,656  $179,251  $117,141 
Average number of shares outstanding 507,111,295   506,359,704   421,573,843 
Basic earnings, as adjusted (non-GAAP)$0.30  $0.35  $0.28 
Average number of diluted shares outstanding 509,656,430   509,301,813   423,506,550 
Diluted earnings, as adjusted (non-GAAP)$0.30  $0.35  $0.28 
Adjusted annualized return on average tangible shareholders’ equity (non-GAAP):     
Net income, as adjusted (non-GAAP)$154,530  $182,881  $120,313 
Average shareholders’ equity$6,440,215  $6,327,970  $5,104,709 
Less: Average goodwill and other intangible assets 2,061,361   2,074,367   1,538,356 
Average tangible shareholders’ equity$4,378,854  $4,253,603  $3,566,353 
Annualized return on average tangible shareholders’ equity, as adjusted (non-GAAP) 14.12%  17.20%  13.49%
Adjusted annualized return on average assets (non-GAAP):     
Net income, as adjusted (non-GAAP)$154,530  $182,881  $120,313 
Average assets$59,867,002  $56,913,215  $43,570,251 
Annualized return on average assets, as adjusted (non-GAAP) 1.03%  1.29%  1.10%
            


Non-GAAP Reconciliations to GAAP Financial Measures (Continued)
 Three Months Ended
 March 31, December 31, March 31,
($ in thousands)2023 2022 2022
Adjusted annualized return on average shareholders’ equity (non-GAAP):     
Net income, as adjusted (non-GAAP)$154,530  $182,881  $120,313 
Average shareholders’ equity$6,440,215  $6,327,970  $5,104,709 
Annualized return on average shareholders’ equity, as adjusted (non-GAAP) 9.60%  11.56%  9.43%
Annualized return on average tangible shareholders’ equity (non-GAAP):     
Net income, as reported (GAAP)$146,551  $177,591  $116,728 
Average shareholders’ equity$6,440,215  $6,327,970  $5,104,709 
Less: Average goodwill and other intangible assets 2,061,361   2,074,367   1,538,356 
Average tangible shareholders’ equity$4,378,854  $4,253,603  $3,566,353 
Annualized return on average tangible shareholders’ equity (non-GAAP) 13.39%  16.70%  13.09%
Efficiency ratio (non-GAAP):      
Non-interest expense, as reported (GAAP)$272,166  $266,240  $197,340 
Less: Merger-related expenses (pre-tax) 4,133   7,372   4,628 
Less: Amortization of tax credit investments (pre-tax) 4,253   3,213   2,896 
Non-interest expense, as adjusted (non-GAAP)$263,780  $255,655  $189,816 
Net interest income, as reported (GAAP) 436,020   465,819   317,669 
Non-interest income, as reported (GAAP) 54,299   52,796   39,270 
Add: Losses on available for sale and held to maturity securities transactions, net (pre-tax) 24   7   9 
Non-interest income, as adjusted (non-GAAP)$54,323  $52,803  $39,279 
Gross operating income, as adjusted (non-GAAP)$490,343  $518,622  $356,948 
Efficiency ratio (non-GAAP) 53.79%  49.30%  53.18%


 As of
 March 31, December 31, September 30, June 30, March 31,
($ in thousands, except for share data)2023 2022 2022 2022 2022
Tangible book value per common share (non-GAAP):         
Common shares outstanding 507,762,358   506,374,478   506,351,502   506,328,526   421,394,277 
Shareholders’ equity (GAAP)$6,511,581  $6,400,802  $6,273,829  $6,204,913  $5,096,384 
Less: Preferred stock 209,691   209,691   209,691   209,691   209,691 
Less: Goodwill and other intangible assets 2,056,107   2,066,392   2,079,731   2,090,147   1,543,238 
Tangible common shareholders’ equity (non-GAAP)$4,245,783  $4,124,719  $3,984,407  $3,905,075  $3,343,455 
Tangible book value per common share (non-GAAP)$8.36  $8.15  $7.87  $7.71  $7.93 
Tangible common equity to tangible assets (non-GAAP):         
Tangible common shareholders’ equity (non-GAAP)$4,245,783  $4,124,719  $3,984,407  $3,905,075  $3,343,455 
Total assets (GAAP)$64,309,573  $57,462,749  $55,927,501  $54,438,807  $43,551,457 
Less: Goodwill and other intangible assets 2,056,107   2,066,392   2,079,731   2,090,147   1,543,238 
Tangible assets (non-GAAP)$62,253,466  $55,396,357  $53,847,770  $52,348,660  $42,008,219 
Tangible common equity to tangible assets (non-GAAP) 6.82%  7.45%  7.40%  7.46%  7.96%


    
VALLEY NATIONAL BANCORP   
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION   
(in thousands, except for share data)   
    
 March 31, December 31,
  2023   2022 
  (Unaudited)  
Assets   
Cash and due from banks$444,690  $444,325 
Interest bearing deposits with banks 5,260,998   503,622 
Investment securities:   
Equity securities 50,152   48,731 
Trading debt securities 6,855   13,438 
Available for sale debt securities 1,259,236   1,261,397 
Held to maturity debt securities (net of allowance for credit losses of $1,633 at March 31, 2023 and $1,646 at December 31, 2022) 3,845,579   3,827,338 
Total investment securities 5,161,822   5,150,904 
Loans held for sale, at fair value 17,218   18,118 
Loans 48,659,966   46,917,200 
Less: Allowance for loan losses (436,898)  (458,655)
Net loans 48,223,068   46,458,545 
Premises and equipment, net 365,313   358,556 
Lease right of use assets 302,740   306,352 
Bank owned life insurance 717,339   717,177 
Accrued interest receivable 223,608   196,606 
Goodwill 1,868,936   1,868,936 
Other intangible assets, net 187,171   197,456 
Other assets 1,536,670   1,242,152 
Total Assets$64,309,573  $57,462,749 
Liabilities   
Deposits:   
Non-interest bearing$13,576,116  $14,463,645 
Interest bearing:   
Savings, NOW and money market 22,903,424   23,616,812 
Time 11,111,376   9,556,457 
Total deposits 47,590,916   47,636,914 
Short-term borrowings 6,413,056   138,729 
Long-term borrowings 2,197,656   1,543,058 
Junior subordinated debentures issued to capital trusts 56,847   56,760 
Lease liabilities 355,020   358,884 
Accrued expenses and other liabilities 1,184,497   1,327,602 
Total Liabilities 57,797,992   51,061,947 
Shareholders’ Equity   
Preferred stock, no par value; 50,000,000 authorized shares:   
Series A (4,600,000 shares issued at March 31, 2023 and December 31, 2022) 111,590   111,590 
Series B (4,000,000 shares issued at March 31, 2023 and December 31, 2022) 98,101   98,101 
Common stock (no par value, authorized 650,000,000 shares; issued 507,896,910 shares at March 31, 2023 and December 31, 2022) 178,186   178,185 
Surplus 4,967,662   4,980,231 
Retained earnings 1,300,980   1,218,445 
Accumulated other comprehensive loss (143,647)  (164,002)
Treasury stock, at cost (134,552 common shares at March 31, 2023 and 1,522,432 common shares at December 31, 2022) (1,291)  (21,748)
Total Shareholders’ Equity 6,511,581   6,400,802 
Total Liabilities and Shareholders’ Equity$64,309,573  $57,462,749 


VALLEY NATIONAL BANCORP 
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) 
(in thousands, except for share data) 
  
 Three Months Ended
 March 31, December 31, March 31,
 2023  2022   2022 
Interest Income     
Interest and fees on loans$655,226 $599,015  $317,365 
Interest and dividends on investment securities:     
Taxable 32,289  31,300   18,439 
Tax-exempt 5,325  5,219   2,517 
Dividends 5,185  3,978   1,676 
Interest on federal funds sold and other short-term investments 22,205  7,038   461 
Total interest income 720,230  646,550   340,458 
Interest Expense     
Interest on deposits:     
Savings, NOW and money market 150,766  109,286   9,627 
Time 80,298  48,417   2,831 
Interest on short-term borrowings 33,948  7,404   806 
Interest on long-term borrowings and junior subordinated debentures 19,198  15,624   9,525 
Total interest expense 284,210  180,731   22,789 
Net Interest Income 436,020  465,819   317,669 
Provision for credit losses for available for sale and held to maturity securities 4,987  (50)  57 
Provision for credit losses for loans 9,450  7,289   3,500 
Net Interest Income After Provision for Credit Losses 421,583  458,580   314,112 
Non-Interest Income     
Wealth management and trust fees 9,587  10,720   5,131 
Insurance commissions 2,420  2,903   1,859 
Capital markets 10,892  10,120   14,360 
Service charges on deposit accounts 10,476  10,313   6,212 
Gains (losses) on securities transactions, net 378  (172)  (1,072)
Fees from loan servicing 2,671  2,637   2,781 
Gains on sales of loans, net 489  908   986 
Bank owned life insurance 2,584  2,200   2,046 
Other 14,802  13,167   6,967 
Total non-interest income 54,299  52,796   39,270 
Non-Interest Expense     
Salary and employee benefits expense 144,986  129,634   107,733 
Net occupancy expense 23,256  23,446   21,991 
Technology, furniture and equipment expense 36,508  46,507   26,015 
FDIC insurance assessment 9,155  6,827   4,158 
Amortization of other intangible assets 10,519  10,900   4,437 
Professional and legal fees 16,814  19,620   14,749 
Amortization of tax credit investments 4,253  3,213   2,896 
Other 26,675  26,093   15,361 
Total non-interest expense 272,166  266,240   197,340 
Income Before Income Taxes 203,716  245,136   156,042 
Income tax expense 57,165  67,545   39,314 
Net Income 146,551  177,591   116,728 
Dividends on preferred stock 3,874  3,630   3,172 
Net Income Available to Common Shareholders$142,677 $173,961  $113,556 


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, 2023 December 31, 2022 March 31, 2022
  Average   Avg.  Average   Avg.  Average   Avg.
($ in thousands) Balance Interest Rate  Balance Interest Rate  Balance Interest Rate
Assets                 
Interest earning assets:               
Loans (1)(2)$47,859,371 $655,250  5.48% $46,086,363 $599,040  5.20% $34,623,402 $317,390  3.67%
Taxable investments (3) 5,033,134  37,474  2.98   4,934,084  35,278  2.86   3,838,468  20,115  2.10 
Tax-exempt investments (1)(3) 623,145  6,739  4.33   623,322  6,608  4.24   401,742  3,186  3.17 
Interest bearing deposits with banks 1,847,140  22,205  4.81   761,832  7,038  3.70   1,419,436  461  0.13 
Total interest earning assets 55,362,790  721,668  5.21   52,405,601  647,964  4.95   40,283,048  341,152  3.39 
Other assets 4,504,212      4,507,614      3,287,203    
Total assets$59,867,002     $56,913,215     $43,570,251    
Liabilities and shareholders’ equity                 
Interest bearing liabilities:                 
Savings, NOW and money market deposits$23,389,569 $150,766  2.58% $23,476,111 $109,286  1.86% $20,522,629 $9,627  0.19%
Time deposits 9,738,608  80,298  3.30   7,641,769  48,417  2.53   3,554,520  2,831  0.32 
Short-term borrowings 2,803,743  33,948  4.84   880,615  7,404  3.36   594,297  806  0.54 
Long-term borrowings (4) 1,686,830  19,198  4.55   1,598,379  15,624  3.91   1,476,469  9,525  2.58 
Total interest bearing liabilities 37,618,750  284,210  3.02   33,596,874  180,731  2.15   26,147,915  22,789  0.35 
Non-interest bearing deposits 14,024,742      15,116,977      11,686,534    
Other liabilities 1,783,295      1,871,394      631,093    
Shareholders’ equity 6,440,215      6,327,970      5,104,709    
Total liabilities and shareholders’ equity$59,867,002     $56,913,215     $43,570,251    
                  
Net interest income/interest rate spread (5)  $437,458  2.19%   $467,233  2.80%   $318,363  3.04%
Tax equivalent adjustment   (1,438)      (1,414)      (694)  
Net interest income, as reported  $436,020      $465,819      $317,669   
Net interest margin (6)    3.15      3.56      3.15 
Tax equivalent effect    0.01      0.01      0.01 
Net interest margin on a fully tax equivalent basis (6)    3.16%     3.57%     3.16%
                     
_______________
 
(1)          Interest income is presented on a tax equivalent basis using a 21 percent federal tax rate.
(2)          Loans are stated net of unearned income and include non-accrual loans.
(3)          The yield for securities that are classified as available for sale is based on the average historical amortized cost.
(4)          Includes junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of condition.
(5)          Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.
(6)          Net interest income as a percentage of total average interest earning assets.


SHAREHOLDERS RELATIONS
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.

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