VALLEY NATIONAL(US:VLYPP)2024-11-12 21:35Financial Performance - The company's net income for the third quarter 2024 was $97.9 million, or $0.18 per diluted common share, a decrease of $43.5 million compared to $141.3 million, or $0.27 per diluted common share, for the same quarter in 2023[183]. - Net income for Q3 2024 was reported at $97,856 thousand, a decrease of 30.7% compared to $141,346 thousand in Q3 2023[201]. - Adjusted net income for Q3 2024 was $96,754 thousand, down from $136,363 thousand in Q3 2023, reflecting a decline of 29%[202]. - Return on average assets for Q3 2024 was 0.63%, down from 0.92% in Q3 2023[201]. - Return on average shareholders' equity for Q3 2024 was 5.70%, compared to 8.56% in Q3 2023[201]. - Efficiency ratio for Q3 2024 was 56.13%, slightly improved from 56.72% in Q3 2023[205]. Asset and Loan Portfolio - As of September 30, 2024, the company reported total assets of approximately $62.1 billion, total net loans of $48.8 billion, total deposits of $50.4 billion, and total shareholders' equity of $7.0 billion[176]. - Total commercial real estate loans amounted to $30.4 billion, representing 61.6% of total loans, down from 63.2% at June 30, 2024, with a strategic goal to reduce the CRE loan concentration ratio to approximately 400% by December 31, 2024[181]. - As of September 30, 2024, total loans decreased by $956.4 million, or 7.6%, to $49.4 billion from June 30, 2024, primarily due to the transfer of $823.1 million of commercial real estate loans to loans held for sale[304]. - Commercial and industrial loans increased by $320.1 million to $9.8 billion at September 30, 2024, driven by a strategic initiative to expand new loan production[305]. - Residential mortgage loans totaled $5.7 billion at September 30, 2024, with new and refinanced originations of $179.3 million for the third quarter 2024[308]. Credit Quality and Allowance for Loan Losses - The company's allowance for loan losses included an $8.0 million qualitative reserve for estimated losses due to Hurricane Helene, with potential increases expected from Hurricane Milton[178]. - Allowance for Credit Losses (ACL) for loans increased to $564.7 million, representing 1.14% of total loans as of September 30, 2024, with projections to rise to approximately 1.20% and 1.25% by December 31, 2024, and 2025, respectively[184]. - The allowance for credit losses for loans increased to $564.7 million as of September 30, 2024, up from $532.5 million at June 30, 2024, and $462.3 million at September 30, 2023[332]. - The total provision for credit losses remained elevated due to higher reserves allocated to commercial real estate loans and an $8.0 million qualitative reserve related to Hurricane Helene[336]. Deposits and Funding - Total deposits rose by $283.8 million to $50.4 billion at September 30, 2024, driven by higher commercial customer deposits[184]. - Average deposits increased by $1.0 billion to $50.4 billion for the third quarter 2024 compared to the second quarter 2024[193]. - Cumulative deposit beta remained stable at 60% as of September 30, 2024, reflecting a modestly higher cost of interest-bearing deposits[192]. - Average interest bearing liabilities rose by $1.8 billion to $42.7 billion for Q3 2024 compared to Q3 2023, primarily due to a $1.4 billion increase in average interest bearing deposits[209]. Interest Income and Expense - Net interest income for Q3 2024 was $411.8 million, an increase of $8.8 million from Q2 2024, but a decrease of $1.8 million from Q3 2023[206]. - Total interest expense for Q3 2024 increased to $450.1 million, up $18.3 million from Q2 2024, primarily due to higher average time deposit balances[207]. - The net interest margin on a tax equivalent basis for Q3 2024 was 2.86%, a 2 basis point increase from Q2 2024 but a 5 basis point decrease from Q3 2023[210]. - The yield on average interest earning assets increased by 10 basis points to 5.98% for Q3 2024, attributed to higher yielding investment purchases and new loan originations[210]. Capital and Shareholder Equity - Total shareholders' equity increased by $234.6 million to $7.0 billion at September 30, 2024, largely due to net proceeds from the issuance of Series C preferred stock and net income for the third quarter[182]. - The company's regulatory capital ratios were 12.56% for total risk-based capital and 9.57% for common equity Tier 1 capital as of September 30, 2024, compared to 12.17% and 9.55% respectively at June 30, 2024[182]. - Valley is required to maintain a common equity Tier 1 capital to risk-weighted assets ratio of 4.5%, and as of September 30, 2024, it exceeded all capital adequacy requirements[340]. - Total risk-based capital for Valley was $6,194.8 million with a ratio of 12.56% as of September 30, 2024, compared to $5,855.6 million and 11.76% as of December 31, 2023[343]. Economic Outlook - The Moody's Baseline forecast predicts GDP expansion of approximately 2.0% in Q4 2024 and unemployment of 4.1% in Q3 2024[331]. - The Federal Reserve lowered the federal funds rate by 50 basis points to a range of 4.75 - 5.00% with potential for an additional cut during Q4 2024[331].