Third Quarter 2024 Results Overview Financial and Strategic Highlights Valley National Bancorp reported Q3 2024 net income of $97.9 million, marked by strategic CRE loan sales and sequential financial improvements Quarterly Earnings Summary | Metric | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Net Income | $97.9 million | $70.4 million | $141.3 million | | Diluted EPS | $0.18 | $0.13 | $0.27 | | Adjusted Net Income (Non-GAAP) | $96.8 million | $71.6 million | $136.4 million | | Adjusted Diluted EPS (Non-GAAP) | $0.18 | $0.13 | $0.26 | - The company entered into an agreement to sell over $800 million of performing commercial real estate loans at a modest discount of approximately 1%, expected to close in Q4 2024, strengthening the balance sheet and enhancing financial flexibility3 - Quarterly results indicate early stages of normalized profitability, with both net interest income and non-interest income improving from Q2 2024, while operating expenses were effectively unchanged year-over-year3 - The provision for credit losses was affected by recent weather events, specifically an $8.0 million qualitative reserve for the estimated impact of Hurricane Helene, as the company is committed to supporting affected communities35 Financial Performance Analysis Net Interest Income and Margin Net interest income increased to $411.8 million in Q3 2024, with net interest margin improving to 2.86% due to higher asset yields Net Interest Income and Margin Performance | Metric | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income (Tax Equivalent) | $411.8 million | $403.0 million | $413.7 million | | Net Interest Margin (Tax Equivalent) | 2.86% | 2.84% | 2.91% | - The increase in NII from Q2 2024 was mainly due to higher yields on new and adjustable-rate loans, along with targeted purchases of higher-yielding taxable investment securities7 - The cost of total average deposits increased to 3.25% in Q3 2024, up from 3.18% in Q2 2024 and 2.94% in Q3 2023, reflecting the higher interest rate environment10 Loans, Deposits and Other Borrowings Total loans decreased to $49.4 billion due to CRE loan transfers, while deposits increased by $283.8 million to $50.4 billion - Total loans decreased by 7.6% on an annualized basis, largely due to the transfer of $823.1 million of performing CRE loans to loans held for sale511 - Commercial and industrial loans grew by $320.1 million (13.5% annualized), reflecting a strategic focus on expanding this category511 - Total deposits increased by $283.8 million, with growth in savings, NOW, and money market accounts ($358.3 million) and non-interest bearing deposits ($36.0 million), partially offset by a decline in time deposits ($110.5 million)12 - Short-term and long-term borrowings remained relatively unchanged compared to the previous quarter13 Credit Quality Credit quality showed mixed results with a $75.0 million provision for credit losses, a decrease in non-accrual loans, but a significant increase in accruing past due loans - The company is assessing the impact of Hurricanes Helene and Milton on its Florida loan portfolio, with an initial $8.0 million qualitative reserve recorded for Hurricane Helene51422 - Non-accrual loans decreased by $7.0 million to $296.3 million (0.60% of total loans) at September 30, 2024, compared to $303.3 million at June 30, 2024516 - Accruing past due loans increased by $102.3 million to $174.7 million (0.35% of total loans), mainly due to two large, well-secured commercial real estate loans in early-stage delinquency or modification processes517 Allowance for Credit Losses & Net Charge-Offs | Metric | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Provision for Credit Losses for Loans | $75.0 million | $82.1 million | $9.1 million | | Net Loan Charge-offs | $42.9 million | $36.8 million | $5.5 million | | Allowance for Credit Losses / Total Loans | 1.14% | 1.06% | 0.92% | Capital Adequacy Capital Ratios Valley's capital ratios improved in Q3 2024, with the total risk-based capital ratio increasing to 12.56% due to preferred stock issuance Key Capital Ratios Comparison | Ratio | September 30, 2024 | June 30, 2024 | | :--- | :--- | :--- | | Total Risk-Based Capital | 12.56% | 12.18% | | Common Equity Tier 1 (CET1) Capital | 9.57% | 9.55% | | Tier 1 Capital | 10.29% | 9.99% | | Tier 1 Leverage Capital | 8.40% | 8.19% | - The improvement in capital ratios was largely due to the issuance of 6.0 million shares of 8.250% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series C, which generated net proceeds of approximately $144.7 million23 Consolidated Financial Statements and Highlights Consolidated Financial Highlights This section summarizes Valley's Q3 2024 financial data, including income statement, per-share, performance ratios, and balance sheet figures Selected Financial Data (Three Months Ended, $ in thousands, except per share data) | Metric | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Net interest income | $410,498 | $401,685 | $412,418 | | Provision for credit losses | $75,024 | $82,070 | $9,117 | | Net income | $97,856 | $70,424 | $141,346 | | Diluted earnings per share | $0.18 | $0.13 | $0.27 | Selected Balance Sheet Data (As Of, $ in thousands) | Metric | Sep 30, 2024 | Jun 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Total Assets | $62,092,332 | $62,058,974 | $61,183,352 | | Total Loans | $49,355,319 | $50,311,702 | $50,097,519 | | Deposits | $50,395,966 | $50,112,177 | $49,885,314 | | Shareholders' Equity | $6,972,380 | $6,737,737 | $6,627,299 | Allowance for Credit Losses The allowance for credit losses increased to $564.7 million in Q3 2024, driven by a $75.0 million provision, reaching 1.14% of total loans Allowance for Credit Losses Roll-Forward (Q3 2024, $ in thousands) | Metric | Amount | | :--- | :--- | | Beginning Balance (Jun 30, 2024) | $532,541 | | Total Loans Charged-off | ($48,221) | | Total Loans Recovered | $5,313 | | Total Net Charge-offs | ($42,908) | | Provision for Credit Losses for Loans | $75,038 | | Ending Balance (Sep 30, 2024) | $564,671 | Asset Quality Asset quality showed a significant increase in accruing past due loans to $174.7 million, while non-accrual loans remained stable at $296.3 million Asset Quality Summary ($ in thousands) | Metric | Sep 30, 2024 | Jun 30, 2024 | | :--- | :--- | :--- | | Total Accruing Past Due Loans | $174,696 | $72,395 | | Total Non-Accrual Loans | $296,319 | $303,279 | | Total Non-Performing Assets | $305,102 | $312,945 | | Non-Accrual Loans as a % of Loans | 0.60% | 0.60% | Non-GAAP Reconciliations This section reconciles GAAP to non-GAAP measures, showing Q3 2024 adjusted net income of $96.8 million and an improved efficiency ratio of 56.13% Reconciliation of Net Income to Adjusted Net Income (Q3 2024, $ in thousands) | Metric | Amount | | :--- | :--- | | Net Income, as reported (GAAP) | $97,856 | | Add: Mark to market loss on CRE loans | $5,794 | | Less: Litigation settlements | ($7,334) | | Other minor adjustments | ($1,976) | | Net Income, as adjusted (non-GAAP) | $96,754 | Key Non-GAAP Ratios (Q3 2024) | Ratio | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Diluted EPS, as adjusted | $0.18 | $0.13 | $0.26 | | Efficiency Ratio | 56.13% | 59.62% | 56.72% | | Tangible Book Value per Common Share | $9.06 | $8.87 | $8.63 | Consolidated Statements of Financial Condition The balance sheet as of September 30, 2024, shows total assets of $62.1 billion, with total deposits at $50.4 billion and shareholders' equity at $7.0 billion Consolidated Balance Sheet Highlights (Unaudited, $ in thousands) | Metric | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $62,092,332 | $60,934,974 | | Net Loans | $48,806,992 | $49,764,215 | | Total Investment Securities | $6,253,287 | $5,104,221 | | Total Liabilities | $55,119,952 | $54,233,583 | | Total Deposits | $50,395,966 | $49,242,829 | | Total Shareholders' Equity | $6,972,380 | $6,701,391 | Consolidated Statements of Income For Q3 2024, Valley reported net interest income of $410.5 million and a net income of $97.9 million, a significant increase from Q2 2024 Consolidated Income Statement (Unaudited, Q3 2024, $ in thousands) | Metric | Q3 2024 | | :--- | :--- | | Net Interest Income | $410,498 | | Provision for credit losses for loans | $75,038 | | Net Interest Income After Provision | $335,474 | | Total non-interest income | $60,671 | | Total non-interest expense | $269,471 | | Income Before Income Taxes | $126,674 | | Net Income | $97,856 | Quarterly Analysis of Average Balances and Net Interest Income This analysis details net interest margin components, showing Q3 2024 average yield on interest-earning assets at 5.98% and NIM at 2.86% Net Interest Margin Analysis (Q3 2024 vs Q2 2024) | Metric | Q3 2024 | Q2 2024 | | :--- | :--- | :--- | | Avg. Yield on Interest Earning Assets | 5.98% | 5.88% | | Avg. Cost of Interest Bearing Liabilities | 4.22% | 4.15% | | Net Interest Spread (Tax Equivalent) | 1.76% | 1.73% | | Net Interest Margin (Tax Equivalent) | 2.86% | 2.84% |
Valley National Bancorp Series C Pfd(VLYPN) - 2024 Q3 - Quarterly Results