VALLEY NATIONAL(VLYPP) - 2024 Q2 - Quarterly Report

Financial Performance - Net income for Q2 2024 was $70.4 million, a decrease of $68.6 million compared to $139.1 million in Q2 2023, primarily due to a $76.0 million increase in the provision for credit losses[181] - Adjusted net income for Q2 2024 was $71.6 million, down from $147.1 million in Q2 2023, with an adjusted return on average assets of 0.47%[199] - The efficiency ratio, as adjusted, was reported at 59.62% for Q2 2024, compared to 55.59% in Q2 2023[198] - Net interest income for Q2 2024 was $403.0 million, an increase of $8.1 million from Q1 2024 but a decrease of $18.3 million from Q2 2023[203] - Non-interest income decreased by $8.9 million for the three months ended June 30, 2024, totaling $51,213 thousand, compared to $60,075 thousand in the same period of 2023, representing a decline of 14.8%[219] - Total non-interest expense decreased by $5.5 million for the three months ended June 30, 2024, amounting to $277,497 thousand, compared to $282,971 thousand in the same period of 2023[225] Asset and Loan Growth - As of June 30, 2024, Valley's total assets increased to approximately $62.1 billion, total net loans reached $49.8 billion, and total deposits rose to $50.1 billion[178] - Total loans increased by $389.7 million, or 3.1 percent on an annualized basis, to $50.3 billion, driven by new commercial and industrial loan production[181] - The total loan portfolio increased by $389.7 million, or 3.1%, to $50.3 billion as of June 30, 2024, primarily due to a focus on new commercial and industrial loan production[288] - Commercial and industrial loans increased by $375.0 million to $9.5 billion as of June 30, 2024, driven by new loan production and organic growth[289] - Residential mortgage loans totaled $5.6 billion, with new and refinanced originations of $135.4 million in the second quarter 2024, a decrease from previous quarters[292] Credit Quality and Losses - Non-performing assets (NPAs) as a percentage of total loans increased to 0.62 percent at June 30, 2024, compared to 0.58 percent at March 31, 2024[181] - The allowance for credit losses for loans increased to $532.541 million from $487.269 million at March 31, 2024, reflecting a provision charged for credit losses of $82.111 million for the quarter[316] - Net loan charge-offs totaled $36.839 million for the second quarter of 2024, compared to $23.555 million in the first quarter of 2024 and $8.625 million in the second quarter of 2023[317] - The provision for credit losses for loans was $86.901 million for the second quarter of 2024, significantly higher than $46.723 million in the previous quarter[316] - The allowance for credit losses for loans as a percentage of total loans increased to 1.06% as of June 30, 2024, compared to 0.98% at March 31, 2024[316] Capital and Equity - Total shareholders' equity increased by $10.6 million to $6.7 billion at June 30, 2024, with regulatory capital ratios exceeding all capital adequacy requirements[181] - Valley's total risk-based capital was $5,954,925, with a ratio of 12.17% as of June 30, 2024, exceeding the minimum requirement of 10.50%[329] - The common equity Tier 1 capital ratio was 9.55% as of June 30, 2024, above the minimum requirement of 7.00%[329] - Valley issued 6.0 million shares of Series C preferred stock, generating net proceeds of $144.7 million to enhance regulatory capital[330] Economic Environment - The Federal Reserve maintained the federal funds rate target range between 5.25 and 5.50 percent, with expectations for a potential rate cut by the end of 2024[185] - The U.S. GDP increased at an annual rate of 2.8 percent in Q2 2024, driven by personal consumption and government spending[184] - The inflation rate was recorded at 3.3% in May 2024, primarily driven by increased shelter inflation[315] - The Moody's Baseline forecast projects GDP growth of approximately 2.1% in Q3 2024 and an unemployment rate of 4.0% in Q2 2024[315] Deposits and Borrowings - Total average deposits increased by $807.2 million to $49.4 billion in Q2 2024 compared to Q1 2024, driven by a $766.8 million increase in average interest-bearing deposits[189] - Actual ending balances for deposits rose by $1.0 billion to $50.1 billion as of June 30, 2024, primarily due to a $1.5 billion increase in time deposits[192] - Average long-term borrowings increased by $693.3 million to $3.3 billion in Q2 2024, mainly due to new FHLB advances totaling $1.0 billion issued in early March 2024[195] - Average short-term borrowings decreased by $1.4 billion in Q2 2024 compared to Q1 2024, primarily due to a shift from short-term FHLB advances to indirect customer time deposits[195] Interest Income and Margin - The net interest margin on a tax-equivalent basis for Q2 2024 was 2.84%, a 5 basis point increase from Q1 2024 but a 10 basis point decrease from Q2 2023[207] - The interest rate spread for the quarter was 1.73%, up from 1.67% in the previous quarter[209] - The company anticipates net interest income growth of 1.5% to 3.0% on a quarterly basis for Q3 and Q4 2024 compared to Q2 2024[208]