Valley National Bancorp(VLY)2024-10-24 20:41Financial Data and Key Metrics Changes - Valley National Bancorp reported net income of approximately $98 million and diluted earnings per share of $0.18 for Q3 2024, compared to net income of $70 million and EPS of $0.13 in the previous quarter, indicating significant improvement driven by revenue expansion and expense management [4][5] - The provision for loan losses declined during the quarter but exceeded guidance due to growth in commercial and industrial (C&I) loans and reserves for Hurricane Helene [4][11] Business Line Data and Key Metrics Changes - C&I loan growth remained in the mid-teens on an annualized basis for the second consecutive quarter, while multifamily and investor commercial real estate (CRE) loans declined by $700 million due to increased prepayment activity [13][14] - The company plans to sell upwards of $800 million of performing CRE loans at a 1% discount, which is expected to enhance balance sheet metrics and regulatory capital ratios [6][8] Market Data and Key Metrics Changes - Total deposits increased by approximately $300 million compared to the second quarter, largely due to higher direct customer deposits, with a notable addition of roughly 25,000 new deposit accounts [12][13] - The company has reduced customer deposit costs by approximately 22 basis points since the September Fed rate cut, resulting in a total deposit beta of 44% [12][30] Company Strategy and Development Direction - The company is focused on managing CRE concentration and enhancing C&I loan growth, with expectations to achieve a CRE concentration ratio of approximately 375% by the end of 2025 [8][9] - Valley National Bancorp anticipates further profitability improvement in 2025, reflecting net interest income growth and normalization of credit costs [5][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the normalization of credit costs and a return to more typical provision levels in 2025, with expectations for lower net charge-offs [22][23] - The company remains optimistic about deposit growth and the overall health of the commercial real estate market, despite some lingering credit issues [15][19] Other Important Information - The company expects to achieve its near-term CET1 goal of approximately 9.8% by the end of 2024, aided by the anticipated sale of CRE loans [8][21] - Non-interest income increased significantly compared to the previous quarter, driven by tax credit advisory and service charges on deposits [18][19] Q&A Session Summary Question: What does the normalization of provisions and reserves look like for 2025? - Management indicated that provisions would return to levels more in line with historical averages, with lower net charge-offs expected [22][23] Question: Are there any further adjustments anticipated beyond the current targets? - Management expressed confidence in achieving the outlined intermediate targets and did not foresee additional adjustments at this time [25] Question: What is the outlook for net interest income and deposit costs? - Management expects mid-to-high single-digit NII growth in 2025, with opportunities to outperform deposit beta [30][31] Question: What is the expected loan growth once the CRE concentration is managed? - Management anticipates mid-single-digit loan growth moving forward, with continued C&I growth expected [49][48] Question: What are the drivers of growth in the C&I portfolio? - Growth is primarily driven by relationship-based middle market business banking, particularly in Florida [52] Question: What is the appetite for additional loan sales? - Management indicated that while they are open to opportunities, they do not anticipate more presales in the near term [44] Question: How is the company managing technology and equipment expenses? - Management noted ongoing investments in technology while successfully reducing core operating expenses [45]