Valley National Bancorp(US:VLY)2020-08-07 18:32Financial Performance - Net income for Q2 2020 was $95.6 million, or $0.23 per diluted common share, compared to $76.5 million, or $0.22 per diluted common share, for Q2 2019, reflecting a $19.1 million increase [206]. - The increase in net income was driven by a $62.3 million rise in net interest income due to loan growth and reduced funding costs, alongside a $17.2 million increase in non-interest income [206]. - Adjusted net income for Q2 2020 was $95,893 thousand, compared to $78,786 thousand in Q2 2019 [219]. - Net income for Q2 2020 was $95,601 thousand, an increase from $76,468 thousand in Q2 2019, but a decrease from $182,869 thousand in the first half of 2019 [222]. - Non-interest income decreased by $75.7 million to $13.6 million for the six months ended June 30, 2020, primarily due to a $78.5 million gain on the sale of bank locations recognized in the first half of 2019 [288]. Asset and Loan Growth - As of June 30, 2020, Valley National Bancorp had total assets of approximately $41.7 billion, total net loans of $32.0 billion, total deposits of $31.4 billion, and total shareholders' equity of $4.5 billion [199]. - Total loans increased by $1.9 billion to approximately $32.3 billion at June 30, 2020, largely due to $2.2 billion of SBA PPP loan originations [321]. - Loans increased by $1.9 billion to approximately $32.3 billion at June 30, 2020, largely due to $2.2 billion of SBA PPP loan originations [210]. - Average interest earning assets increased by $7.9 billion to $37.8 billion in Q2 2020 compared to Q2 2019, driven by $3.8 billion from Oritani acquisition and $2.2 billion of PPP loans [226]. - Total investment securities available for sale amounted to $1.689 billion at June 30, 2020, with unrealized losses of $1.874 million [317]. Credit Quality and Loss Provisions - The provision for credit losses increased by $39.1 million due to the adoption of CECL and the impact of COVID-19 on the economic outlook [206]. - The allowance for loan losses increased to $270.430 million as of June 30, 2020, compared to $154.864 million in June 2019, indicating a rise in provisions for potential loan defaults [233]. - The total allowance for credit losses for loans was $319.7 million as of June 30, 2020, compared to $293.4 million at the end of Q1 2020 [358]. - The annualized ratio of net charge-offs to average loans outstanding was 0.18% for Q2 2020, up from 0.06% in Q1 2020 [354]. - Non-performing assets increased by $3.7 million to $224.2 million at June 30, 2020, primarily due to a $4.7 million increase in non-accrual loans [332]. Economic Impact and Response - The economic impact of COVID-19 has created significant uncertainties, affecting loan volumes and asset values serving as collateral [200]. - Valley facilitated over 12,800 SBA-approved Paycheck Protection Program loans, totaling over $2.2 billion outstanding as of June 30, 2020, with expectations for the majority to be forgiven [201]. - The company granted over 10,000 loan forbearances totaling approximately $4.6 billion, with about 5,000 loans totaling $1.9 billion having completed the deferral period [203]. - Management remains cautious about potential future credit deterioration due to the economic impact of COVID-19 [333]. - Valley's economic forecast model incorporates a probability-weighted three-scenario approach, including severe assumptions related to the ongoing COVID-19 crisis [351]. Capital and Equity - Shareholders' equity increased to approximately $4.5 billion as of June 30, 2020, representing 10.7% of total assets, compared to $4.4 billion and 11.7% of total assets as of December 31, 2019 [360]. - The total risk-based capital ratio for Valley was 12.19% as of June 30, 2020, exceeding the minimum requirement of 10.50% [365]. - The common equity Tier 1 capital ratio for Valley National Bank was 11.24% as of June 30, 2020, above the minimum requirement of 7.00% [365]. - The total shareholders' equity increased by $90.3 million during the six months ended June 30, 2020, primarily due to net income of $182.9 million [360]. - The retention ratio for earnings was approximately 50.0% for the six months ended June 30, 2020, compared to 49.4% for the year ended December 31, 2019 [367]. Operational Efficiency - The efficiency ratio improved to 48.01% for the three months ended June 30, 2020, compared to 57.19% in the same period of 2019, indicating better operational performance [255]. - Non-interest expense increased by $15.4 million (10.9%) and $23.3 million (8.0%) for the three and six months ended June 30, 2020, compared to the same periods in 2019, totaling $157.2 million and $312.8 million respectively [247]. - Salary and employee benefits expense rose by $2.3 million (3.0%) and $5.0 million (3.1%) for the three and six months ended June 30, 2020, largely due to additional salaries from the Oritani acquisition [247]. - Professional and legal fees rose by $3.7 million (89.0%) and $4.5 million (47.7%) for the three and six months ended June 30, 2020, mainly due to technology transformation consulting services [250]. - The company incurred higher expenses for equipment and COVID-19 related costs, including additional cleaning services for facilities [248].