Valley National Bancorp(US:VLY)2021-11-08 17:12Financial Performance - Net income for the third quarter 2021 was $122.6 million, or $0.29 per diluted common share, compared to $102.4 million, or $0.25 per diluted common share, for the same quarter in 2020, representing a 19.7% increase in net income [180]. - Adjusted net income for Q3 2021 was $124.7 million, compared to $104.2 million in Q3 2020 [195]. - Net interest income for the nine months ended September 30, 2021 was $894.6 million, compared to $830.984 million for the same period in 2020 [207]. - Net interest income increased by $17.6 million (approximately 15.5%) for the three months ended September 30, 2021, compared to the same period in 2020, and by $63.1 million (approximately 7.6%) for the nine months ended September 30, 2021 [211]. - Non-interest income decreased by $6.8 million (approximately 13.8%) for the three months ended September 30, 2021, and by $18.7 million (approximately 13.8%) for the nine months ended September 30, 2021, compared to the same periods in 2020 [214]. Asset and Loan Portfolio - As of September 30, 2021, Valley National Bancorp had total assets of approximately $41.3 billion, total net loans of $32.3 billion, total deposits of $33.6 billion, and total shareholders' equity of $4.8 billion [172]. - Total loans increased by $149.4 million to $32.6 billion as of September 30, 2021, despite a $476.7 million decrease in PPP loans [186]. - Non-PPP loan portfolio rose by $626.0 million, or 8.0% on an annualized basis, reaching $31.7 billion [186]. - Commercial real estate loans increased by $399.9 million, or 9.1% on an annualized basis, reaching $17.9 billion as of September 30, 2021, driven by strong demand for non-owner occupied loans [292]. - Residential mortgage loans rose by $105.4 million, or 10.0% on an annualized basis, with total origination of new and refinanced loans at $622.1 million for Q3 2021 [293]. Deposits and Funding - Average deposits grew by $876.6 million to $33.6 billion, with non-interest bearing deposits at approximately 32% of total deposits [190]. - Actual ending balances for deposits increased by $437.8 million to approximately $33.6 billion, driven by increases in non-maturity interest bearing and non-interest bearing deposits [191]. - Total brokered deposits decreased by approximately $315 million to $1.7 billion as of September 30, 2021 [191]. - Average core deposits totaled approximately $29.2 billion for the nine months ended September 30, 2021, representing 77.6% of average earning assets [274]. Credit Quality and Loan Losses - Non-accrual loans increased by $31.8 million to $251.8 million, representing 0.77% of total loans [188]. - The allowance for loan losses as a percentage of non-accrual loans was 136.01% at September 30, 2021 [315]. - The provision for loan losses for the consumer lending segment decreased by $21.8 million to a credit provision of $6.5 million for the nine months ended September 30, 2021 [251]. - Net loan charge-offs for Q3 2021 totaled $293 thousand, significantly down from $9.4 million in Q2 2021 and $15.4 million in Q3 2020 [324]. Acquisitions and Growth Strategy - Valley extended a total of $3.2 billion in Paycheck Protection Program (PPP) loans, with $2.3 billion of these loans receiving forgiveness from the SBA as of September 30, 2021 [178]. - The company announced the acquisition of The Westchester Bank Holding Corporation, with Westchester having total assets of $1.3 billion and expected to close on December 1, 2021 [173]. - Valley is set to acquire Bank Leumi Le-Israel Corporation, which has total assets of $8.4 billion, with the acquisition expected to close in the first half of 2022 [175]. - Valley acquired Dudley Ventures for $11.3 million in cash and $3.8 million in future stock consideration, aimed at enhancing non-interest income sources [176]. Interest Rates and Economic Environment - The Federal Reserve maintained the federal funds rate between 0.00% and 0.25% to support economic recovery, with indications of a potential moderation in asset purchases [183]. - The 10-year U.S. Treasury note yield ended the third quarter at 1.52%, reflecting a 7 basis points increase from June 30, 2021 [184]. - The company expects moderate ongoing interest rate pressures on net interest margin for Q4 2021 and beyond due to low market rates [202]. Operational Efficiency - The efficiency ratio for the three months ended September 30, 2021, was 50.93%, compared to 48.20% for the same period in 2020, indicating a decline in operational efficiency [227]. - Non-interest expense increased by $14.7 million (approximately 9.2%) for the three months ended September 30, 2021, and by $34.0 million (approximately 7.2%) for the nine months ended September 30, 2021, compared to the same periods in 2020 [219]. Shareholder Equity and Capital Ratios - Shareholders' equity increased to approximately $4.8 billion as of September 30, 2021, up from $4.6 billion at the end of 2020, representing 11.7% of total assets [328]. - The company exceeded all regulatory capital requirements, maintaining a common equity Tier 1 capital to risk-weighted assets ratio of 4.5% [330]. - Valley's total risk-based capital as of December 31, 2020, was $3,802,223, with a ratio of 12.64% [333].