Valley National Bancorp(US:VLY)2025-05-08 20:06PART I FINANCIAL INFORMATION This section covers the unaudited financial statements, management's discussion, market risk, and controls for Q1 2025 Financial Statements (Unaudited) This section provides Valley National Bancorp's unaudited consolidated financial statements and notes for the first quarter of 2025 Consolidated Statements of Financial Condition Total assets for Valley National Bancorp were $61.9 billion as of March 31, 2025, a slight decrease from year-end 2024 Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $61,865,655 | $62,491,691 | | Net Loans | $48,078,928 | $48,240,861 | | Total Investment Securities | $7,278,457 | $6,972,810 | | Goodwill | $1,868,936 | $1,868,936 | | Total Liabilities | $54,365,758 | $55,056,564 | | Total Deposits | $49,965,844 | $50,075,857 | | Long-term borrowings | $2,904,567 | $3,174,155 | | Total Shareholders' Equity | $7,499,897 | $7,435,127 | Consolidated Statements of Income Net income for Q1 2025 increased to $106.1 million from $96.3 million year-over-year, driven by higher net interest income Quarterly Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $420,105 | $393,548 | | Provision for credit losses for loans | $62,675 | $45,274 | | Total non-interest income | $58,294 | $61,415 | | Total non-interest expense | $276,618 | $280,310 | | Net Income | $106,058 | $96,280 | | Net Income Available to Common Shareholders | $99,103 | $92,161 | | Diluted EPS | $0.18 | $0.18 | Consolidated Statements of Cash Flows Net cash outflow for Q1 2025 was $666.4 million, a significant shift from a prior-year inflow, driven by financing activities Cash Flow Summary for the Three Months Ended March 31 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(17,122) | $99,511 | | Net cash (used in) provided by investing activities | $(175,310) | $91,985 | | Net cash used in financing activities | $(473,996) | $(141,888) | | Net change in cash and cash equivalents | $(666,428) | $49,608 | Notes to Consolidated Financial Statements The notes provide detailed explanations of accounting policies and financial data presented in the consolidated statements - The majority of assets and liabilities measured at fair value on a recurring basis, such as available-for-sale debt securities and derivatives, are valued using Level 2 inputs (observable but not quoted prices)3637 - The loan portfolio is primarily composed of Commercial Real Estate (59.8%) and Commercial & Industrial (20.9%) loans as of March 31, 202577267 - The allowance for credit losses for loans increased to $594.1 million (1.22% of total loans) at March 31, 2025, from $573.3 million (1.17% of total loans) at year-end 2024102298 - Goodwill remained unchanged at $1.87 billion, with the largest portion ($1.44 billion) allocated to the Commercial Banking reporting unit107 Management's Discussion and Analysis (MD&A) Management discusses Q1 2025 financial condition and results, focusing on balance sheet strengthening, capital ratios, and credit quality Executive Summary and Financial Condition In Q1 2025, Valley strengthened its balance sheet by reducing CRE loan concentration and improving capital ratios - The company is proactively reducing its CRE loan concentration, which declined from 362% to 353% of total risk-based capital during the quarter166 - The allowance for credit losses (ACL) for loans is expected to migrate towards approximately 1.25% of total loans by year-end 2025, up from 1.22% at quarter-end166 - Accruing past due loans decreased significantly to $51.7 million (0.11% of total loans) from $99.2 million (0.20% of total loans) at the end of 2024166 Q1 2025 vs Q1 2024 Performance Drivers | Driver | Impact on Net Income | Details | | :--- | :--- | :--- | | Net Interest Income | +$26.6M | Lower interest rates on deposits and income from security purchases | | Non-Interest Expense | +$3.7M | Decreases in tech and FDIC fees, offset by higher tax credit amortization | | Provision for Credit Losses | -$17.5M | Higher reserves for CRE and C&I loans | | Non-Interest Income | -$3.1M | Lower gains on asset sales and wealth management fees | Net Interest Income and Margin Net interest income increased to $421.4 million for Q1 2025, with net interest margin expanding to 2.96%, driven by lower deposit costs Net Interest Margin (Tax Equivalent) | Period | Net Interest Margin | | :--- | :--- | | Q1 2025 | 2.96% | | Q4 2024 | 2.92% | | Q1 2024 | 2.79% | - The cost of total average deposits decreased to 2.65% in Q1 2025, down from 2.94% in Q4 2024, which was a key driver of NIM expansion195 - Full-year 2025 net interest income growth is now expected to be at the low end of the 9% to 12% range, revised due to lower anticipated loan growth and spread compression196 Loan Portfolio and Credit Quality Total loans decreased slightly to $48.7 billion in Q1 2025, reflecting portfolio de-risking and improved credit quality, with NPAs decreasing Loan Portfolio Composition (in billions) | Loan Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Commercial and industrial | $10.2 | $9.9 | | Commercial real estate | $29.1 | $29.6 | | Residential mortgage | $5.6 | $5.6 | | Consumer | $3.8 | $3.6 | | Total Loans | $48.7 | $48.8 | - Non-performing assets (NPAs) decreased to $356.2 million (0.73% of assets) from $373.3 million (0.76% of assets) at year-end 2024278280 - Net loan charge-offs were $41.9 million (0.34% of average loans, annualized) in Q1 2025, down from $98.3 million in Q4 2024 but up from $23.6 million in Q1 2024295296 - The allowance for credit losses for loans as a percentage of total loans increased to 1.22% at March 31, 2025, from 1.17% at December 31, 2024298 Capital Adequacy Shareholders' equity increased by $64.8 million in Q1 2025 to $7.5 billion, driven by net income, maintaining strong regulatory capital ratios Regulatory Capital Ratios (Valley National Bancorp) | Ratio | March 31, 2025 | December 31, 2024 | Minimum Requirement* | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 | 10.80% | 10.82% | 7.00% | | Tier 1 Risk-based Capital | 11.53% | 11.55% | 8.50% | | Total Risk-based Capital | 13.91% | 13.87% | 10.50% | | Tier 1 Leverage | 9.41% | 9.16% | 4.00% | - Shareholders' equity increased by $64.8 million in Q1 2025, primarily due to net income of $106.1 million and other comprehensive income of $27.1 million, offset by dividends and share repurchases299300 - The company declared a cash dividend of $0.11 per common share for Q1 2025, consistent with the prior year's quarter306 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with simulations indicating net interest income sensitivity to rate changes Net Interest Income Sensitivity Analysis (as of March 31, 2025) | Change in Interest Rates (bps) | Estimated % Change in NII | | :--- | :--- | | +300 | 7.23% | | +200 | 4.90% | | +100 | 2.46% | | -100 | (2.54)% | | -200 | (5.21)% | | -300 | (7.60)% | Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period310 - No changes in internal control over financial reporting occurred in Q1 2025 that have materially affected, or are reasonably likely to materially affect, these controls311 PART II OTHER INFORMATION This section includes information on legal proceedings, risk factors, and issuer purchases of equity securities Legal Proceedings The company is involved in various legal actions, which management believes will not materially adversely affect its financial condition or results - Management does not expect current legal proceedings to have a material adverse effect on the company's financial condition or results314 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to risk factors were reported for the quarter315 Issuer Purchases of Equity Securities During Q1 2025, Valley repurchased 939,266 shares at an average price of $9.79, with 24.75 million shares remaining under the repurchase program Q1 2025 Share Repurchases | Month | Total Shares Purchased | Average Price Paid | Shares Purchased Under Plan | | :--- | :--- | :--- | :--- | | January 2025 | 1,527 | $8.93 | — | | February 2025 | 686,318 | $10.21 | — | | March 2025 | 251,421 | $8.65 | 250,000 | | Total | 939,266 | $9.79 | 250,000 | - As of March 31, 2025, 24.75 million shares may yet be purchased under the current stock repurchase program, which was announced in February 2024 and is effective until April 2026316318