WAYNE, N.J., Jan. 24 /PRNewswire-FirstCall/ -- Valley National Bancorp
(NYSE: VLY) ("Valley"), the holding company for Valley National Bank,
announced today fourth quarter and annual results for 2007. Net income for
the fourth quarter of 2007 was $27.7 million as compared to $38.1 million
in the fourth quarter of 2006. The results of the fourth quarter of 2007
include impairment charges on available for sale securities and goodwill
totaling $11.9 million after taxes, or $0.10 per diluted share. Fully
diluted earnings per common share were $0.23 for the fourth quarter of 2007
as compared to $0.31 for the same quarter of 2006. All common share data is
adjusted to reflect a five percent stock dividend issued on May 25, 2007.
Net income for the year ended December 31, 2007 was $153.2 million
compared to $163.7 million for the same period in 2006. Fully diluted
earnings per common share were $1.27 for the year ended December 31, 2007
compared to $1.33 per common share for the year ended December 31, 2006.
Set forth below are highlights of several significant events that
occurred during the fourth quarter of 2007:
-- As part of its regular quarterly review for impairment of marketable
securities, Valley recognized an other-than-temporary impairment
charge of $10.4 million after-taxes on Federal Home Loan Mortgage
Corporation ("FHLMC" or Freddie Mac) and on Federal National Mortgage
Association ("FNMA" or Fannie Mae) government sponsored, investment
grade perpetual callable preferred securities. The other-than-
temporary-impairment charge was recorded on 8 perpetual preferred
stock issues classified as available for sale investment securities
with a total book value (prior to recognition of the impairment
charge) of $81.7 million. Valley decided to reclassify the unrealized
mark-to-market loss on these investment grade securities to an other-
than-temporary impairment charge because of the recent significant
decline in the market value of these securities and because it is
unlikely that these securities will recover their original book value
in the next six to nine months. Both FHLMC and FNMA securities were
investment grade at the time of purchase and remain investment grade
with ratings of AA- by S&P and Aa3 by Moody's. The securities
continue to perform according to their contractual terms and all
dividend payments are current. Historically, market value fluctuations
were recorded as an unrealized mark-to-market loss on securities
available for sale and reflected as a reduction to shareholders'
equity through other comprehensive income. Accordingly, the
reclassification of the unrealized after tax loss to an other-than-
temporary impairment non-cash charge did not affect shareholders'
equity, or tangible shareholders' equity.
-- Valley recorded a goodwill impairment charge of $1.5 million after
taxes due to its decision to sell its wholly owned
broker-dealer subsidiary, Glen Rauch Securities, Inc. The subsequent
close of the transaction is expected to occur during the first quarter
of 2008, subject to regulatory approval. This transaction will not
materially impact Valley's financial position or results of operations
in 2008.
-- The net interest margin on a fully tax equivalent basis was 3.41
percent, one basis point greater than the third quarter of 2007
primarily due to lower funding costs on deposits.
-- Net interest income on a tax equivalent basis increased $866 thousand
to $96.8 million compared to the third quarter of 2007 as the decline
in Valley's funding costs more than mitigated the lower yield
on loans.
Chairman's Comments
Gerald H. Lipkin, Chairman, President and CEO noted, "We are pleased
with our core operating results for the fourth quarter. Our net interest
income for the first time in many quarters increased by almost $900
thousand and the net interest margin also increased. Continued growth in
the residential and automobile portfolios when combined with higher loan
volumes in the commercial mortgage and commercial loan portfolios was very
encouraging.
Our performance is a reflection of Valley's longstanding commitment to
credit quality and the fundamentals of long-term performance for its
shareholders. Valley's traditional loan underwriting and non-participation
in the subprime residential mortgage lending and negative amortization loan
markets, in both our lending and investment portfolio, has proved sensible
during this time of market turbulence for so many consumers and financial
institutions caught in the subprime and mortgage debacle. Additionally,
Valley's straight-forward lending practices are its strength, and
management has never jeopardized this through the use of off-balance sheet
financing, that has forced many financial institutions to use precious
capital to prevent solvency and liquidity issues in recent months.
During this stage of the economic cycle, we are quite pleased with our
credit quality ratios. We are obviously not immune to the declines seen in
the economy, but we are satisfied with our delinquencies and non-performing
asset results thus far in this downward cycle. Our favorable loan to value
ratios in the residential mortgage portfolio are anticipated to offset
declines in real estate values in our market, which to date have not been
as severe as many other parts of the country mainly as a result of the
demand for housing and wealth in our primary markets. Valley's residential
mortgage portfolio delinquencies for the quarter were 0.37 percent and
continue to compare quite favorably to the most recent OCC peer group
delinquency data at September 30, 2007 of 1.27 percent. Additionally, our
home equity delinquencies declined during the fourth quarter. This
portfolio continues to perform well as a result of our sound underwriting
standards, low loan to values and the relative strength of our primary
markets. Valley's automobile portfolio grew by almost 17 percent during the
full year. Automobile delinquency and net charge offs were within our
expected range considering both loan growth and the new markets we entered
during the year.
Overall loan volumes improved during the fourth quarter as compared to
the third quarter of 2007 primarily due to an increase in prime residential
mortgage loans of $130.0 million, or 26.9 percent on an annualized basis,
and an increase in commercial mortgage loans of $87.7 million, or 15.4
percent on an annualized basis, as well as continued growth in Valley's
dealer auto loan originations which increased $14.7 million, or 4.1 percent
on an annualized basis. The increase in residential mortgage loans is
largely the result of organic growth during the period as well as targeted
loan purchases in the prime grade, jumbo loan markets totaling
approximately $56 million. Commercial loan volume was also strong during
the quarter, however, this growth was offset by the scheduled payoff, early
in the fourth quarter, of one $141.1 million short-term loan which was
originated in the third quarter of 2007. Excluding the impact of this
short-term loan maturity, commercial loans would have increased by $39.1
million, or 9.4 percent on an annualized basis during the fourth quarter of
2007 and on a consolidated basis, total loans would have increased 13.0
percent on an annualized basis during the quarter.
Interest rates continued to decline as the Federal Reserve reduced the
target Federal Funds rate by 50 basis points during the quarter, affecting
the prime rate and short-term treasury rates. However, the competition for
high cost deposits continued as many financial institutions kept rates
artificially high. As evidenced by a decline in Valley's total linked
quarter deposits, Valley intentionally did not retain some short-term
maturing, higher cost certificates of deposit. As a substitute, we utilized
alternative funding sources which allowed us to better match the duration
of our loans originated during the quarter, at a lower cost, thus helping
our net interest income, margin and asset liability management.
During 2007, Valley opened its first two de novo branches in Brooklyn
and four additional offices in New Jersey. Our customers now have the
convenience of 175 Valley branch locations throughout northern and central
New Jersey and New York City. Valley's branch expansion plan entails
finding attractive building sites and expanding our presence in the New
Jersey counties and towns neighboring our current office locations, as well
as in Kings and Queens Counties in New York and in Manhattan. In January
2008, Valley has already opened four new branch locations and anticipates
opening approximately eight more de novo branches throughout the year. The
12 new branches include six additional locations in Brooklyn and Queens and
two offices in Manhattan. Generally, new branches can add immediate
franchise value, however the additional operating costs and capital
requirement will have a negative impact on non-interest expense and net
income for several years as the branch operations become individually
profitable."
Credit Quality
Credit quality remains very strong with delinquencies and losses
remaining relatively low, despite the difficulties being reported by many
other financial institutions. As previously stated, Valley has avoided
originating subprime, Alt-A and option arm mortgage loans. With a loan
portfolio totaling approximately $8.5 billion, net loan charge-offs for the
fourth quarter of 2007 were $4.6 million. This compares to $3.9 million for
the fourth quarter of 2006, and $2.9 million for the third quarter of 2007.
The increase in net loan charge-offs from the linked quarter is mainly due
to one commercial loan and one commercial mortgage loan with partial
charge-offs totaling $2.0 million in the fourth quarter of 2007. The
provision for loan losses was $4.9 million for the fourth quarter of 2007
compared to $3.2 million for the fourth quarter of 2006, and $2.7 million
for the third quarter of 2007. The increased provision during the quarter
is the result of Valley's quarterly analyses of the loan portfolio and,
among other factors, reflects the increase in the size and rate of growth
of the loan portfolio, the level of net loan charge-offs, delinquencies and
the current economic environment. Total non-performing assets, consisting
of non-accrual loans, other real estate owned and other repossessed assets,
totaled $32.7 million, or 0.38 percent of loans at December 31, 2007,
almost unchanged from $32.3 million, or 0.39 percent at September 30, 2007.
Loans past due 90 days or more and still accruing at December 31, 2007
were $8.5 million, or 0.10 percent of total loans, compared to $3.8
million, or 0.05 percent at December 31, 2006 and $5.4 million, or 0.06
percent at September 30, 2007. Loans past due 90 days or more and still
accruing include matured loans in the normal process of renewal which
totaled approximately $2.7 million and $1.5 million at December 31, 2007
and September 30, 2007, respectively. Total loans past due in excess of 30
days were 1.00 percent of total loans at December 31, 2007 compared with
0.79 percent at September 30, 2007 and include matured loans in the normal
process of renewal totaling approximately $7.5 million and $4.3 million at
December 31, 2007 and September 30, 2007, respectively.
Loans and Deposits
During the quarter, loans increased $125.8 million to approximately
$8.5 billion at December 31, 2007. The linked quarter increase in loans is
mainly comprised of increases in residential mortgage, commercial mortgage
and consumer loans of $129.9 million, $87.7 million and $16.3 million,
respectively, partially offset by a $102.0 million decrease in commercial
loans. Commercial loan volume was also strong during the quarter and
excluding the impact of one $141.1 million short-term loan maturity,
commercial loans would have increased by $39.1 million, or 9.4 percent on
an annualized basis during the fourth quarter of 2007. While on a
consolidated basis, total loans would have increased 13.0 percent on an
annualized basis during the quarter.
During the quarter, deposits decreased $348.7 million from $8.4 billion
at September 30, 2007 primarily due to a $395.8 million decrease in time
deposits, and partially offset by an $88.5 million increase in non-interest
bearing deposits. Time deposits declined primarily due to the normal
maturity of higher cost deposits and Valley's decision to remain less
competitive on its market pricing for new time deposits, as well as the
maturity of one $142.7 million certificate of deposit held as collateral
for a matured short- term commercial loan originated in the third quarter
of 2007. At the same time, Valley increased its long-term borrowings in
lower cost Federal Home Loan Bank advances during the fourth quarter. The
increase in non-interest bearing deposits is primarily due to seasonal
growth generally seen from our New York commercial customers in the fourth
quarter.
Future deposit growth is expected to be dependent on earning asset
demand combined with the rates dictated by market competition versus the
cost of alternative funding sources.
Net Interest Income and Margin
Net interest income on a tax equivalent basis was $96.8 million for the
fourth quarter of 2007, a $1.5 million decrease from the same quarter of
2006 and an increase of $866 thousand from the linked quarter ended
September 30, 2007. The linked quarter increase was mainly a result of a
decline in funding costs of $2.5 million, or 12 basis points, partially
offset by a 10 basis point decrease in yield on interest earning assets.
The net interest margin on a tax equivalent basis was 3.41 percent for
the fourth quarter of 2007, an increase of 1 basis point from 3.40 percent
for the linked quarter ended September 30, 2007 and a decrease of 1 basis
point from 3.42 percent for the prior year fourth quarter. The cost of
average interest bearing liabilities decreased 12 basis points from the
third quarter of 2007, mainly due to a decrease in the cost of deposits.
The yield on average interest earning assets also decreased by 10 basis
points on a linked quarter basis mainly due to a 17 basis point decrease in
yield on average total loans as compared to the three months ended
September 30, 2007, partially offset by a 6 basis point increase in yield
on average total investment securities.
Valley's cost of total deposits remained relatively low by industry
standards at 2.49 percent for the fourth quarter of 2007 compared to 2.63
percent for the three months ended September 30, 2007. The decrease of 14
basis points was primarily due to lower rates on saving, NOW and money
market accounts, an increase in the total funding composition of
non-interest bearing deposits and normal time deposit maturities with
higher interest rates during the quarter.
Non-Interest Income
Fourth quarter of 2007 compared with fourth quarter of 2006
Non-interest income for the fourth quarter of 2007 decreased $14.6
million, or 73.8 percent from $19.8 million for the quarter ended December
31, 2006 primarily due to an increase in net losses on securities
transactions of $13.6 million from a year ago. This was mainly due to a
$17.9 million ($10.4 million after taxes) other-than-temporary impairment
charge on perpetual preferred securities net of gains totaling $2.1 million
on the sale of other investments. The fourth quarter of 2006 included net
losses of approximately $2.3 million on trust preferred securities called
for redemption prior to their scheduled maturity date. Net gains on the
sale of assets also decreased $3.7 million from the same quarter last year.
In the fourth quarter of 2006, Valley recognized a $3.8 million gain on the
sale of a Manhattan office building, which we decided not to pursue as a
branch location. Partially offsetting these decreases, bank owned life
insurance income increased $1.2 million primarily due to income generated
from an additional investment of $75 million during the second quarter of
2007 to offset rising employee benefit costs. Service charges on deposit
accounts increased $1.1 million mainly due to initiatives to increase
non-interest income throughout Valley's branch network operations
implemented during the second quarter of 2007.
Fourth quarter of 2007 compared with third quarter of 2007
Non-interest income for the fourth quarter of 2007 decreased $15.2
million, or 74.5 percent from $20.4 million for the quarter ended September
30, 2007 primarily due to an increase in net losses on securities
transactions which increased $15.9 million from the third quarter of 2007.
This decrease was mainly due to the other-than-temporary impairment charge
noted above. The decrease was partially offset by net gains on the sale of
assets, which increased $738 thousand from the third quarter of 2007.
Non-Interest Expense
Fourth quarter of 2007 compared with fourth quarter of 2006
Non-interest expense decreased approximately $182 thousand to $61.9
million for the quarter ended December 31, 2007 from $62.0 million for the
quarter ended December 31, 2006. Professional and legal fees decreased $1.8
million from the linked quarter mainly due to a $1.7 million reduction in
contingencies. Advertising expense declined $1.3 million from the fourth
quarter of 2006 as Valley decreased name branding promotions in the fourth
quarter of 2007. Other non-interest expense declined $1.2 million from the
third quarter of 2007 mainly due to an offset of $1.5 million in net
unrealized gains on trust preferred securities and Federal Home Loan Bank
advances held at fair value during the fourth quarter of 2007. Offsetting
these decreases, Valley recognized a $2.3 million ( $1.5 million after
taxes) goodwill impairment charge due to its decision to sell its wholly
owned broker-dealer subsidiary. Net occupancy and equipment expense also
increased $1.2 million from the same quarter one year ago mainly due to the
addition of six de novo branches to Valley's branch network over the last
twelve month period.
Fourth quarter of 2007 compared with third quarter of 2007
Non-interest expense decreased $2.3 million, or 3.7 percent to $61.9
million for the fourth quarter of 2007 from $64.2 million for the linked
quarter ended September 30, 2007. Professional and legal fees decreased
$2.0 million from the linked quarter mainly due to a $1.7 million reduction
in contingencies. Other non-interest expense declined $1.7 million from the
third quarter of 2007 mainly due to $1.5 million in net unrealized gains on
trust preferred securities and Federal Home Loan Bank advances held at fair
value during the fourth quarter of 2007 as compared to a net loss of $57
thousand on the same financial liabilities in the third quarter of 2007.
Salary and employee benefits also declined $1.1 million in the fourth
quarter when compared to the third quarter of 2007 due to higher accruals
for health care insurance, payroll taxes and pension costs during the third
quarter. Offsetting the decreases, Valley recognized a $2.3 million ($1.5
million after taxes) goodwill impairment charge due to its decision to sell
Glen Rauch Securities, Inc.
Income Tax Expense
Income tax expense was $6.1 million for the fourth quarter of 2007,
reflecting an effective tax rate of 18.1 percent, compared with $13.1
million for the fourth quarter of 2006, reflecting an effective tax rate of
25.6 percent. The decrease compared to the prior comparable quarter was
primarily due to the tax benefit recorded on the other-than-temporary
impairment charge on available for sale investment securities during the
fourth quarter of 2007.
Income tax expense was $51.7 million for the year ended December 31,
2007, reflecting an effective tax rate of 25.2 percent, compared with $39.9
million for the year ended December 31, 2006, reflecting an effective tax
rate of 19.6 percent. The increase in 2007 income tax expense reflects a
$13.5 million tax benefit recognized during the comparable 2006 period due
to management's reassessment of required tax accruals.
Management expects that Valley's adherence to FIN 48 will continue to
result in increased volatility in Valley's future quarterly and annual
effective income tax rates because FIN 48 requires that any change in
judgment or change in measurement of a tax position taken in a prior annual
period be recognized as a discrete event in the period in which it occurs.
Factors that could impact management's judgment include changes in income,
tax laws and regulations, and tax planning strategies. For 2008, Valley
anticipates an effective tax rate of 28.0 percent, compared to 25.2 percent
for 2007.
Valley National Bancorp is a regional bank holding company with over
$12.7 billion in assets, headquartered in Wayne, New Jersey. Its principal
subsidiary, Valley National Bank, currently operates 175 branches in 116
communities serving 14 counties throughout northern and central New Jersey
and New York City. Valley is one of the largest commercial banks
headquartered in New Jersey and is committed to providing the most
convenient service, the latest in product innovations and an experienced
and knowledgeable staff with a high priority on friendly customer service
24 hours a day, 7 days a week. Valley offers a wide range of deposit
products, mortgage loans and cash management services to consumers and
businesses including products tailored for the medical, insurance and
leasing business. Valley's comprehensive delivery channels enable customers
to bank in person, by telephone or online.
For more information about Valley National Bank and its products and
services, please visit http://www.valleynationalbank.com or call Customer Service
24/7 at 1-800-522-4100.
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, relationships, opportunities, taxation, technology
and market conditions. These statements may be identified by such
forward-looking terminology as "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 from those contemplated by such
forward-looking statements include, among others, the following:
-- unanticipated changes in the direction of interest rates or severity
of such changes;
-- volatility in earnings due to certain financial assets and liabilities
held at fair value;
-- the occurrence of an other-than-temporary impairment to investment
securities classified as available for sale or held to maturity;
-- stronger competition from banks, other financial institutions and
other companies;
-- changes in loan, investment and mortgage prepayment assumptions;
-- insufficient allowance for credit losses;
-- a higher level of net loan charge-offs and delinquencies than
anticipated;
-- a decline in the economy in Valley's primary market areas, mainly in
New Jersey and New York;
-- changes in relationships with major customers;
-- changes in effective income tax rates;
-- higher or lower cash flow levels than anticipated;
-- inability to hire and retain qualified employees;
-- a decline in the levels of deposits or loss of alternate funding
sources;
-- a decrease in loan origination volume;
-- a change in legal and regulatory barriers including issues related to
compliance with anti-money laundering ("AML") and bank secrecy act
("BSA") laws;
-- adoption, interpretation and implementation of new accounting
pronouncements;
-- the development of new tax strategies or the disallowance of prior tax
strategies;
-- operational risks, including the risk of fraud by employees or
outsiders and unanticipated litigation pertaining to Valley's
fiduciary responsibility; and
-- the inability to successfully implement new lines of business or new
products and services.
Valley assumes no obligation for updating any such forward-looking
statement at any time.
Valley National Bancorp
Consolidated Financial Highlights
SELECTED FINANCIAL DATA
Three Months Ended Twelve Months Ended
December 31, December 31,
(in thousands, except
for share data) 2007 2006 2007 2006
FINANCIAL DATA:
Net income $27,661 $38,112 $153,228 $163,691
Net interest income 95,318 96,686 381,685 391,121
Net interest income -
FTE (2) 96,791 98,292 387,866 397,680
Weighted Average
Number of Shares
Outstanding (3):
Basic 119,903,861 121,324,769 120,259,919 122,369,411
Diluted 120,077,734 121,907,067 120,616,056 122,868,646
Per share data (3):
Basic earnings $0.23 $0.31 $1.27 $1.34
Diluted earnings 0.23 0.31 1.27 1.33
Cash dividends declared 0.21 0.20 0.83 0.81
Book value 7.92 7.84 7.92 7.84
Tangible book value (1) 6.21 6.09 6.21 6.09
Closing stock price - high 23.46 25.33 25.18 25.71
Closing stock price - low 17.73 24.01 17.73 21.01
CORE ADJUSTED FINANCIAL
DATA (1):
Net income, as adjusted $39,543 $38,112 $165,110 $166,424
Basic earnings per share,
as adjusted 0.33 0.31 1.37 1.36
Diluted earnings per share,
as adjusted 0.33 0.31 1.37 1.35
FINANCIAL RATIOS:
Net interest margin 3.36% 3.37% 3.37% 3.40%
Net interest margin -
FTE (2) 3.41 3.42 3.43 3.46
Annualized return on
average assets 0.89 1.24 1.25 1.33
Annualized return on
average shareholders'
equity 11.68 15.89 16.43 17.24
Annualized return on
average tangible
shareholders' equity (1) 14.94 20.40 21.17 22.26
Efficiency ratio (4) 61.54 53.26 53.67 54.05
CORE ADJUSTED FINANCIAL
RATIOS (1):
Annualized return on
average assets, as
adjusted 1.28% 1.24% 1.34% 1.35%
Annualized return on
average shareholders'
equity, as adjusted 16.69 15.89 17.70 17.53
Annualized return on
average tangible
shareholder equity, as
adjusted 21.35 20.40 22.81 22.63
Efficiency ratio 50.27 53.26 51.21 53.50
Valley National Bancorp
Consolidated Financial Highlights
SELECTED FINANCIAL DATA
Three Months Ended Twelve Months Ended
December 31, December 31,
(Dollars in thousands) 2007 2006 2007 2006
AVERAGE BALANCE
SHEET ITEMS:
Assets $12,380,543 $12,322,751 $12,304,814 $12,299,281
Interest earning
assets 11,343,372 11,489,327 11,312,253 11,492,790
Loans 8,362,192 8,346,362 8,261,111 8,262,739
Interest bearing
liabilities 9,413,844 9,410,401 9,353,296 9,393,111
Deposits 8,306,622 8,472,082 8,353,273 8,462,193
Shareholders' equity 947,444 959,663 932,637 949,613
ALLOWANCE FOR
CREDIT LOSSES:
Beginning of period $74,624 $75,362 $74,718 $75,188
Provision for
credit losses 4,864 3,241 11,875 9,270
Charge-offs 5,455 4,441 15,135 12,088
Recoveries 902 556 3,477 2,348
End of period $74,935 $74,718 $74,935 $74,718
Components:
Allowance for
loan losses $72,664 $74,718 $72,664 $74,718
Reserve for unfunded
letters of credit (5) 2,271 0 2,271 0
Allowance for
credit losses $74,935 $74,718 $74,935 $74,718
As of December 31,
2007 2006
BALANCE SHEET ITEMS:
Assets $12,748,959 $12,395,027
Loans 8,496,221 8,331,685
Deposits 8,091,004 8,487,651
Shareholders' equity 949,060 949,590
CAPITAL RATIOS:
Tier 1 leverage ratio 7.62% 8.10%
Risk-based capital - Tier 1 9.55 10.56
Risk-based capital - Total Capital 11.35 12.44
ASSET QUALITY:
Non-accrual loans $30,623 $27,244
Other real estate owned 609 779
Other repossessed assets 1,466 844
Total non-performing assets $32,698 $28,867
Loans past due 90 days or more and still accruing $8,462 $3,775
ASSET QUALITY RATIOS:
Non-performing assets to total loans 0.38% 0.35%
Allowance for loan losses to total loans 0.86 0.90
Allowance for credit losses to total loans 0.88 0.90
Net charge-offs to average loans 0.14 0.12
Valley National Bancorp
Consolidated Financial Highlights
NOTES TO SELECTED FINANCIAL DATA
(1) This press release contains certain supplemental financial
information, described in the following notes, which has been
determined by methods other than 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
exclude 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 Twelve Months Ended
(Dollars in thousands, December 31, December 31,
except for share data) 2007 2006 2007 2006
Tangible Book Value
Common shares
outstanding 119,851,499 121,125,131 119,851,499 121,125,131
Shareholders' equity $949,060 $949,590 $949,060 $949,590
Less: Goodwill and
other intangible
assets 204,547 211,355 204,547 211,355
Tangible
shareholders' equity $744,513 $738,235 $744,513 $738,235
Tangible book value $6.21 $6.09 $6.21 $6.09
Return on Average
Tangible Equity
Net income $27,661 $38,112 $153,228 $163,691
Average shareholders'
equity $947,444 $959,663 $932,637 $949,613
Less: Average
goodwill and other
intangible assets 206,672 212,332 208,797 214,338
Average tangible
shareholders'
equity $740,772 $747,331 $723,840 $735,275
Annualized return
on average
tangible
shareholders'
equity 14.94% 20.40% 21.17% 22.26%
Adjusted Net Income
Net income, as
reported $27,661 $38,112 $153,228 $163,691
Add: Impairment
charges on available
for sale securities $10,417 $0 $10,417 $2,733
Add: Impairment
charges on goodwill $1,465 $0 $1,465 $0
Net Income, as
adjusted $39,543 $38,112 $165,110 $166,424
Adjusted per share data
Net Income, as adjusted $39,543 $38,112 $165,110 $166,424
Average number of
basic shares
outstanding 119,903,861 121,324,769 120,259,919 122,369,411
Basic earnings, as
adjusted $0.33 $0.31 $1.37 $1.36
Average number of
diluted shares
outstanding 120,077,734 121,907,067 120,616,056 122,868,646
Diluted earnings,
as adjusted $0.33 $0.31 $1.37 $1.35
Valley National Bancorp
Consolidated Financial Highlights
NOTES TO SELECTED FINANCIAL DATA
Three Months Ended Twelve Months Ended
December 31, December 31,
(Dollars in thousands) 2007 2006 2007 2006
Adjusted annualized
return on average
assets
Net Income, as
adjusted $39,543 $38,112 $165,110 $166,424
Average assets 12,380,543 12,322,751 12,304,814 12,299,281
Annualized return
on average assets,
as adjusted 1.28% 1.24% 1.34% 1.35%
Adjusted annualized
return on average
shareholders' equity
Net Income, as
adjusted $39,543 $38,112 $165,110 $166,424
Average shareholders'
equity 947,444 959,663 932,637 949,613
Annualized return on
average shareholder
equity, as adjusted 16.69% 15.89% 17.70% 17.53%
Adjusted annualized
return on average
tangible shareholders'
equity
Net Income, as
adjusted $39,543 $38,112 $165,110 $166,424
Average tangible
shareholders' equity 740,772 747,331 723,840 735,275
Annualized return on
average tangible
shareholder equity,
as adjusted 21.35% 20.40% 22.81% 22.63%
Adjusted efficiency
ratio
Gross operating
expenses $61,851 $62,033 $251,164 $250,340
Less: Impairment
charges on goodwill 2,310 0 2,310 0
Gross operating
expenses, as
adjusted $59,541 $62,033 $248,854 $250,340
Gross operating income $100,504 $116,481 $467,965 $463,185
Add: Impairment
charges on available
for sale securities 17,949 0 17,949 4,712
Gross operating
income, as adjusted $118,453 $116,481 $485,914 $467,897
Efficiency ratio,
as adjusted 50.27% 53.26% 51.21% 53.50%
(2) Net interest income and net interest margin are presented on a tax
equivalent basis using a 35 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.
(3) Share data reflects a five percent common stock dividend issued on May
25, 2007.
(4) The efficiency ratio measures Valley's total non-interest expense as a
percentage of net interest income plus total non-interest income.
(5) On January 1, 2007, Valley transferred the portion of the allowance
for loan losses related commercial lending letters of credit to other
liabilities.
SHAREHOLDER RELATIONS
Requests for copies of reports and/or other inquiries should be directed
to Dianne Grenz, Director of Shareholder and Public Relations, Valley
National Bancorp, 1455 Valley Road, Wayne, New Jersey, 07470, by telephone
at (973) 305-3380, by fax at (973) 696-2044 or by e-mail at
dgrenz@valleynationalbank.com.
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(in thousands, except for share data)
December 31,
Assets 2007 2006
Cash and due from banks $218,896 $236,354
Interest bearing deposits with banks 9,569 7,795
Federal funds sold 9,000 175,000
Investment securities:
Held to maturity, fair value of
$548,353 at December 31, 2007 and
$991,413 at December 31, 2006 556,113 1,009,415
Available for sale 1,606,410 1,769,981
Trading securities 722,577 4,655
Total investment securities 2,885,100 2,784,051
Loans held for sale, at fair value as
of December 31, 2007 2,984 4,674
Loans 8,496,221 8,331,685
Less: Allowance for loan losses (72,664) (74,718)
Net loans 8,423,557 8,256,967
Premises and equipment, net 227,553 209,397
Bank owned life insurance 273,613 189,157
Accrued interest receivable 56,578 63,356
Due from customers on acceptances outstanding 8,875 9,798
Goodwill 179,835 181,497
Other intangible assets, net 24,712 29,858
Other assets 428,687 247,123
Total assets $12,748,959 $12,395,027
Liabilities
Deposits:
Non-interest bearing $1,929,555 $1,996,237
Interest bearing:
Savings, NOW and money market 3,382,474 3,561,807
Time 2,778,975 2,929,607
Total deposits 8,091,004 8,487,651
Short-term borrowings 605,154 362,615
Long-term borrowings (includes fair value of
$41,359 for a Federal Home Loan Bank advance
at December 31, 2007) 2,801,195 2,278,728
Junior subordinated debentures issued
to capital trust, at fair value
as of December 31, 2007 163,233 206,186
Bank acceptances outstanding 8,875 9,798
Accrued expenses and other liabilities 130,438 100,459
Total liabilities 11,799,899 11,445,437
Shareholders' Equity*
Preferred stock, no par value,
authorized 30,000,000 shares; none issued --- ---
Common stock, no par value,
authorized 181,796,274 shares;
issued 122,510,719 shares at December 31,
2007 and 122,658,486 at December 31, 2006 43,185 41,212
Surplus 879,892 881,022
Retained earnings 104,225 97,639
Accumulated other comprehensive loss (12,982) (30,873)
Less: Treasury stock, at cost,
2,659,220 common shares at December
31, 2007 and 1,533,355 common shares
at December 31, 2006 (65,260) (39,410)
Total shareholders' equity 949,060 949,590
Total liabilities and
shareholders' equity $12,748,959 $12,395,027
* Share data reflects a five percent common stock dividend issued on May
25, 2007.
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except for share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
Interest Income
Interest and fees on
loans $140,354 $143,023 $560,066 $544,440
Interest and dividends
on investment
securities:
Taxable 35,585 33,858 134,969 140,979
Tax-exempt 2,716 2,913 11,268 11,886
Dividends 2,099 1,626 8,002 5,896
Interest on federal
funds sold and
other short-term
investments 809 2,063 10,702 4,170
Total interest
income 181,563 183,483 725,007 707,371
Interest Expense
Interest on
deposits:
Savings, NOW and
money market 17,825 20,048 75,695 75,822
Time 33,876 33,265 134,674 112,654
Interest on short-
term borrowings 4,489 4,340 17,645 18,211
Interest on long-
term borrowings and
junior subordinated
debentures 30,055 29,144 115,308 109,563
Total interest
expense 86,245 86,797 343,322 316,250
Net Interest Income 95,318 96,686 381,685 391,121
Provision for credit
losses 4,864 3,241 11,875 9,270
Net Interest Income
After Provision for
Credit Losses 90,454 93,445 369,810 381,851
Non-Interest Income
Trust and investment
services 1,863 1,701 7,381 7,108
Insurance premiums 2,438 2,763 10,711 11,074
Service charges on
deposit accounts 7,028 5,943 26,803 23,242
Losses on securities
transactions, net (15,894) (2,259) (15,810) (5,464)
Gains on trading
securities, net 1,279 206 4,651 1,208
Fees from loan
servicing 1,323 1,433 5,494 5,970
Gains sale of loans, net 161 143 4,785 1,516
Gains on sale of
assets, net 93 3,781 16,051 3,849
Bank owned life insurance 3,291 2,076 11,545 8,171
Other 3,604 4,008 14,669 15,390
Total non-interest
income 5,186 19,795 86,280 72,064
Non-Interest Expense
Salary expense 29,250 28,097 116,389 109,775
Employee benefit
expense 6,480 6,792 29,261 28,592
Net occupancy and
equipment expense 12,571 11,335 49,570 46,078
Amortization of other
intangible assets 1,820 2,151 7,491 8,687
Goodwill impairment 2,310 0 2,310 0
Professional and
legal fees 40 1,795 5,110 8,878
Advertising 510 1,818 2,917 8,469
Other 8,870 10,045 38,116 39,861
Total non-interest
expense 61,851 62,033 251,164 250,340
Income Before Income
Taxes 33,789 51,207 204,926 203,575
Income tax expense 6,128 13,095 51,698 39,884
Net Income $27,661 $38,112 $153,228 $163,691
Earnings Per Common
Share:*
Basic $0.23 $0.31 $1.27 $1.34
Diluted 0.23 0.31 1.27 1.33
Cash Dividends
Declared Per Common
Share* 0.21 0.20 0.83 0.81
Weighted Average
Number of Common Shares
Outstanding:*
Basic 119,903,861 121,324,769 120,259,919 122,369,411
Diluted 120,077,734 121,907,067 120,616,056 122,868,646
* Share data reflects a five percent common stock dividend issued on May
25, 2007.
Valley National Bancorp
(dollars in thousands)
Loan Portfolio
For the periods ended
12/31/2007 9/30/2007 6/30/2007 3/31/2007 12/31/2006
Commercial
Loans $1,563,150 $1,665,169 $1,517,184 $1,447,165 $1,466,862
Construction 402,806 408,969 470,592 493,095 526,318
Residential
Mortgage 2,063,242 1,933,321 1,873,943 1,849,069 2,106,306
Commercial
Mortgage 2,370,345 2,282,669 2,262,290 2,281,871 2,309,217
Total Mortgage
Loans 4,836,393 4,624,959 4,606,825 4,624,035 4,941,841
Home Equity 554,830 554,859 555,306 560,577 571,138
Credit Card 10,077 9,290 9,105 8,498 8,764
Automobile 1,447,838 1,433,178 1,391,801 1,280,809 1,238,145
Other Consumer 83,933 83,009 99,920 119,313 104,935
Total Consumer
Loans 2,096,678 2,080,336 2,056,132 1,969,197 1,922,982
Total Loans $8,496,221 $8,370,464 $8,180,141 $8,040,397 $8,331,685
Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and
Net Interest Income on a Tax Equivalent Basis
Quarter End - 12/31/07 Quarter End - 9/30/07
Average Avg. Average Avg.
Balance Interest Rate Balance Interest Rate
Assets
Interest earning
assets:
Loans (1)(2) $8,362,192 $140,365 6.71% $8,207,941 $141,210 6.88%
Taxable
investments(3) 2,649,378 37,684 5.69% 2,549,294 35,732 5.61%
Tax-exempt
investments
(1)(3) 262,269 4,178 6.37% 260,094 4,223 6.49%
Federal funds
sold and other
interest bearing
deposits 69,533 809 4.65% 267,262 3,505 5.25%
Total interest
earning assets 11,343,372 183,036 6.45% 11,284,591 184,670 6.55%
Other assets 1,037,171 931,828
Total assets $12,380,543 $12,216,419
Liabilities and
shareholders'
equity
Interest bearing
liabilities:
Savings, NOW and
money market
deposits $3,407,805 $17,825 2.09% $3,430,218 $19,236 2.24%
Time deposits 2,969,684 33,876 4.56% 3,055,620 35,891 4.70%
Short-term
borrowings 487,852 4,489 3.68% 441,227 4,656 4.22%
Long-term
borrowings (4) 2,548,503 30,055 4.72% 2,453,424 28,962 4.72%
Total interest
bearing
liabilities 9,413,844 86,245 3.66% 9,380,489 88,745 3.78%
Non-interest
bearing
deposits 1,929,133 1,903,502
Other
liabilities 90,122 1,069
Shareholders'
equity 947,444 931,359
Total liabilities
and
shareholders'
equity $12,380,543 $12,216,419
Net interest
income/interest
rate spread (5) 96,791 2.79% 95,925 2.77%
Tax equivalent
adjustment (1,473) (1,511)
Net interest
income, as
reported $95,318 $94,414
Net interest
margin (6) 3.36% 3.35%
Tax equivalent
effect 0.05% 0.05%
Net interest
margin on a
fully tax
equivalent
basis (6) 3.41% 3.40%
Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and
Net Interest Income on a Tax Equivalent Basis
Quarter End - 6/30/07 Quarter End - 3/31/07
Average Avg. Average Avg.
Balance Interest Rate Balance Interest Rate
Assets
Interest
earning assets:
Loans (1)(2) $8,181,248 $139,622 6.83% $8,292,884 $138,983 6.70%
Taxable
investments(3) 2,525,972 34,470 5.46% 2,580,236 35,085 5.44%
Tax-exempt
investments
(1)(3) 277,274 4,477 6.46% 279,176 4,457 6.39%
Federal funds
sold and other
interest bearing
deposits 315,440 4,188 5.31% 168,873 2,200 5.21%
Total interest
earning assets 11,299,934 182,757 6.47% 11,321,169 180,725 6.39%
Other assets 895,856 837,820
Total assets $12,195,790 $12,158,989
Liabilities
and
shareholders'
equity
Interest bearing
liabilities:
Savings, NOW
and money market
deposits $3,503,061 $19,216 2.19% $3,559,302 $19,418 2.18%
Time deposits 2,898,393 33,143 4.57% 2,894,086 31,764 4.39%
Short-term
borrowings 419,937 4,522 4.31% 371,911 3,978 4.28%
Long-term
borrowings (4) 2,483,966 28,494 4.59% 2,486,780 27,797 4.47%
Total interest
bearing
liabilities 9,305,357 85,375 3.67% 9,312,079 82,957 3.56%
Non-interest
bearing
deposits 1,938,035 1,924,645
Other
liabilities 17,671 5,572
Shareholders'
equity 934,727 916,693
Total
liabilities and
shareholders'
equity $12,195,790 $12,158,989
Net interest
income/interest
rate spread (5) 97,382 2.80% 97,768 2.83%
Tax equivalent
adjustment (1,601) (1,596)
Net interest
income, as
reported $95,781 $96,172
Net interest
margin (6) 3.39% 3.40%
Tax equivalent
effect 0.06% 0.05%
Net interest
margin on a
fully tax
equivalent
basis (6) 3.45% 3.45%
Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and
Net Interest Income on a Tax Equivalent Basis
Quarter End - 12/31/06
Average Avg.
Balance Interest Rate
Assets
Interest earning assets:
Loans (1)(2) $8,346,362 $143,060 6.86%
Taxable investments (3) 2,709,053 35,484 5.24%
Tax-exempt investments (1)(3) 281,366 4,482 6.37%
Federal funds sold and other
interest bearing deposits 152,546 2,063 5.41%
Total interest earning assets 11,489,327 185,089 6.44%
Other assets 833,424
Total assets $12,322,751
Liabilities and shareholders' equity
Interest bearing liabilities:
Savings, NOW and money
market deposits $3,603,822 $20,048 2.23%
Time deposits 2,938,977 33,265 4.53%
Short-term borrowings 373,838 4,340 4.64%
Long-term borrowings (4) 2,493,764 29,144 4.67%
Total interest bearing liabilities 9,410,401 86,797 3.69%
Non-interest bearing deposits 1,929,283
Other liabilities 23,404
Shareholders' equity 959,663
Total liabilities and
shareholders' equity $12,322,751
Net interest income/interest
rate spread (5) 98,292 2.75%
Tax equivalent adjustment (1,606)
Net interest income, as reported $96,686
Net interest margin (6) 3.37%
Tax equivalent effect 0.05%
Net interest margin on a
fully tax equivalent basis (6) 3.42%
(1) Interest income is presented on a tax equivalent basis using a 35
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.
SOURCE Valley National Bancorp
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Related links:
http://www.valleynationalbank.com
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CONTACT:
Alan D. Eskow, Executive Vice President and
Chief Financial Officer, +1-973-305-4003, or Dianne Grenz,
Director of Shareholder and Public Relations, Valley National
Bancorp, +1-973-305-3380, fax +1-973-696-2044,
dgrenz@valleynationalbank.com
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