Valley National Bancorp(US:VLY)2021-08-06 16:50Financial Performance - Net income for Q2 2021 was $120.5 million, or $0.29 per diluted common share, compared to $95.6 million, or $0.23 per diluted common share in Q2 2020, reflecting a $24.9 million increase[180]. - The increase in net income was primarily due to an $18.3 million rise in net interest income and a $32.4 million decrease in the provision for credit losses[180]. - Adjusted net income for Q2 2021 was $126.6 million, compared to $95.9 million for Q2 2020[196]. - Return on average assets was 1.17% for Q2 2021, up from 0.92% for Q2 2020[195]. - Non-interest income decreased by $1.7 million and $11.9 million for the three and six months ended June 30, 2021, respectively, compared to the same periods in 2020, totaling $43.126 million for the three months[217]. Loan Portfolio - Total loans decreased by $229 million to $32.5 billion at June 30, 2021, primarily due to a $1.0 billion decrease in PPP loans, while non-PPP loans increased by $785 million, or 10.4% on an annualized basis[187]. - Valley extended a total of $3.2 billion in PPP loans, with $1.8 billion forgiven by the SBA as of June 30, 2021, leaving approximately $1.4 billion outstanding[176]. - The total loan portfolio amounted to $32.46 billion as of June 30, 2021, with commercial and industrial loans making up 18.7% and commercial real estate loans comprising 59.4%[287]. - Commercial and industrial loans decreased by $1.1 billion, or 59.5%, to $6.1 billion as of June 30, 2021, primarily due to $1.0 billion of PPP loans being forgiven[288]. - Residential mortgage loans rose by $166.5 million, or 16.4%, during Q2 2021, with total originations reaching approximately $753.2 million[290]. Asset Quality - Total non-performing assets increased by $16.1 million to $226.6 million at June 30, 2021[188]. - Non-accrual loans increased by $16.0 million to $220.0 million, representing 0.68% of total loans as of June 30, 2021, compared to 0.62% at March 31, 2021[189]. - The allowance for credit losses for loans was $353.7 million as of June 30, 2021, representing 1.09% of total loans, compared to 1.08% in the first quarter of 2021 and 0.99% in the second quarter of 2020[321]. - The provision for credit losses was $8.8 million in the second quarter of 2021, down from $9.0 million in the first quarter of 2021 and significantly lower than $41.1 million in the second quarter of 2020[321]. - The company identified approximately $2.1 billion, or 6.8% of total loans, as higher risk credit exposures in industries affected by COVID-19[309]. Deposits and Funding - Average deposits increased by $887.9 million to $32.7 billion for Q2 2021 compared to Q1 2021, with non-interest bearing deposits, savings, NOW, and money market deposits representing approximately 32%, 54%, and 14% of total deposits, respectively[191]. - Actual ending balances for deposits increased by $609.6 million to approximately $33.2 billion at June 30, 2021, largely due to increases in non-maturity interest bearing and non-interest bearing deposits[192]. - Average core deposits totaled approximately $29.4 billion for the six months ended June 30, 2021, representing 77.7 percent of average earning assets[272]. - Short-term borrowings decreased by approximately $293.6 million to $854.4 million at June 30, 2021, compared to December 31, 2020, due to normal repayments[274]. - Valley redeemed $60 million of callable subordinated notes and issued $300 million of 3.00 percent subordinated notes during the second quarter of 2021[276]. Capital and Ratios - Shareholders' equity increased to approximately $4.7 billion as of June 30, 2021, representing 11.5% of total assets, up from 11.3% at the end of 2020[324]. - The company maintained a common equity Tier 1 capital ratio of 4.5% and exceeded all regulatory capital requirements as of June 30, 2021[326]. - Valley's total risk-based capital was $4,196,323, representing a ratio of 13.36%, exceeding the minimum requirement of 10.50%[329]. - The tangible book value per common share increased to $7.59 as of June 30, 2021, compared to $7.25 as of December 31, 2020[329]. - The annualized ratio of net charge-offs to average loans outstanding was 0.11% for the second quarter of 2021, compared to 0.07% in the first quarter of 2021[323]. Economic Environment - The economic environment showed a 6.5% growth in real GDP for Q2 2021, driven by personal consumption, although the pace of growth is expected to moderate[182]. - The Federal Reserve maintained the federal funds rate target range between 0% and 0.25% to support economic recovery[183]. - The company maintained a higher weighting on Moody's Baseline scenario, projecting GDP expansion of over 6.7% in Q3 2021 and unemployment improving to 3.5% by Q2 2023[316]. Strategic Initiatives - Valley announced the acquisition of The Westchester Bank Holding Corporation, which has approximately $1.3 billion in assets and is expected to close in Q4 2021[174]. - The company expects the majority of the remaining $1.4 billion of PPP loans to qualify for forgiveness, impacting future loan growth[288]. - The company remains cautiously optimistic about non-PPP loan growth as economic recovery continues, with robust loan origination pipelines[295].