Valley National Bancorp(US:VLY)2020-11-06 21:42Financial Position - As of September 30, 2020, Valley National Bancorp had total assets of approximately $40.7 billion, total net loans of $32.1 billion, total deposits of $31.2 billion, and total shareholders' equity of $4.5 billion[197]. - Total shareholders' equity increased to approximately $4.5 billion as of September 30, 2020, representing 11.1% of total assets[356]. - The common equity Tier 1 capital ratio was 9.71% for Valley as of September 30, 2020, exceeding the minimum requirement of 4.5%[358]. - The total allowance for loan losses was $325.0 million, representing 1.00% of total loans as of September 30, 2020[354]. - Cash and cash equivalents totaled $930.7 million at September 30, 2020, down from $1.9 billion at June 30, 2020, due to a managed reduction of excess liquidity[296]. Loan Portfolio and Credit Quality - Valley facilitated approximately 13,000 SBA-approved Paycheck Protection Program loans totaling $2.3 billion, with expectations that the majority will be forgiven[199]. - As of September 30, 2020, approximately 1,400 loans with total unpaid principal balances of $1.1 billion were in payment deferral, representing about 3.3% of the total loan portfolio, down from 8.4% at the start of the third quarter[201]. - The provision for credit losses for the nine months ended September 30, 2020 was significantly increased due to economic stress from COVID-19, with approximately 32% of the provision reflecting adverse economic forecasts[194]. - The company recorded a negative provision of $112 thousand during the third quarter 2020, mainly due to modest improvement in expected default rates[310]. - The allowance for credit losses for loans increased by $99.6 million upon the adoption of the CECL standard on January 1, 2020[341]. Income and Earnings - Net income for Q3 2020 was $102.4 million, or $0.25 per diluted share, up from $81.9 million, or $0.24 per diluted share in Q3 2019, representing a 25.1% increase year-over-year[204]. - Adjusted net income for Q3 2020 was $104.2 million, compared to $83.1 million in Q3 2019, reflecting a 25.3% increase year-over-year[217]. - Income before income taxes for the consumer lending segment increased by $16.3 million to $34.6 million for Q3 2020 compared to Q3 2019, driven by increases in net interest income and non-interest income of $10.2 million and $8.4 million, respectively[262]. - Income before income taxes for the commercial lending segment increased by $29.7 million to $121.4 million for Q3 2020 compared to Q3 2019, with net interest income rising by $54.6 million to $218.6 million[266]. - The corporate segment reported a pre-tax net loss of $36.8 million for the nine months ended September 30, 2020, a negative change of $75.3 million from a net income of $38.5 million in the same period of 2019[285]. Interest Income and Margin - Net interest income on a tax-equivalent basis for Q3 2020 was $284.1 million, a rise of 28.1% from $221.7 million in Q3 2019[220]. - The net interest margin on a tax-equivalent basis was 3.01% for Q3 2020, an increase of 1 basis point from Q2 2020[224]. - The yield on average loans decreased by 13 basis points to 3.89% in Q3 2020 compared to Q2 2020, attributed to lower yield on new loans[224]. - The company expects continued pressure on net interest margin due to the Federal Reserve's indication of maintaining low interest rates for several years[225]. - The simulation model projects a 2.97% increase in net interest income over the next 12 months with a 100 basis point increase in interest rates[293]. Deposits and Borrowings - Average deposits increased by $552.7 million to $31.4 billion in Q3 2020 compared to Q2 2020, with a shift from time deposits to non-interest bearing and lower-cost transaction accounts[211]. - Average short-term borrowings decreased by $784.7 million to $1.5 billion in Q3 2020, while average long-term borrowings increased by $73.7 million to $3.0 billion, primarily due to a $115 million subordinated note issuance[213]. - Short-term borrowings increased by approximately $337.4 million to $1.4 billion at September 30, 2020, primarily driven by increased liquidity levels in response to the COVID-19 pandemic[301]. Non-Interest Income and Expenses - Non-interest income decreased by $40.9 million for the nine months ended September 30, 2020, totaling $135.499 million compared to $176.426 million in 2019[237]. - Service charges on deposit accounts decreased by $4.4 million for the nine months ended September 30, 2020, primarily due to waived fees related to COVID-19[238]. - Non-interest expense increased by $14.3 million (9.8%) and $37.6 million (8.6%) for the three and nine months ended September 30, 2020, compared to the same periods in 2019, totaling $160.2 million and $473.0 million respectively[243][251]. Economic Environment and Future Outlook - The company anticipates that the ongoing COVID-19 pandemic may continue to affect economic activity and financial results in the fourth quarter and beyond[207]. - The economic environment is expected to impact loan portfolio growth, with low market interest rates putting pressure on loan yields and net margin[206]. - Valley had outstanding loans of approximately $2.2 billion to higher risk industries, representing about 7.4% of total outstanding loans, with active deferrals totaling $158 million or 7.1% of total loans[340].