Valley National Bancorp Reports Second Quarter Earnings And Solid Loan Growth

WAYNE, N.J., July 26, 2012 /PRNewswire/ -- Valley National Bancorp (NYSE: VLY), the holding company for Valley National Bank, today reported net income for the second quarter of 2012 of $32.8 million, or $0.17 per diluted common share as compared to the second quarter of 2011 earnings of $36.9 million, or $0.21 per diluted common share. See the "Key highlights for the second quarter" section below for more details.

All common share data presented in this press release, including the earnings per diluted common share data above, were adjusted for a five percent stock dividend issued on May 25, 2012.

Key highlights for the second quarter:

• Loan Growth: Overall, our total loan portfolio grew by 9.8 percent on an annualized basis during the second quarter of 2012. Total non-covered loans (i.e., loans which are not subject to our loss-sharing agreements with the FDIC) increased by $300.0 million to $11.2 billion at June 30, 2012 from March 31, 2012.  Our residential mortgage and commercial real estate (excluding construction) loans experienced organic growth of $213.9 million and $93.5 million, or 33.8 percent and 8.6 percent, respectively, on an annualized basis, during the second quarter of 2012. Total covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) decreased to $226.5 million, or 2.0 percent of our total loans, at June 30, 2012 as compared to $252.2 million at March 31, 2012 mainly due to normal payment activity.
• Asset Quality: Total loans past due 30 days or more were 1.38 percent of the loan portfolio at June 30, 2012 compared to 1.52 percent at March 31, 2012.  Total non-accrual loans were $126.2 million, or 1.10 percent of our entire loan portfolio of $11.4 billion, at June 30, 2012. The residential mortgage and home equity loan portfolios totaling almost 26,000 individual loans had only 260 loans past due 30 days or more at June 30, 2012.  At June 30, 2012, residential mortgage and home equity loans delinquent 30 days or more totaled $45.5 million, or 1.40 percent of approximately $3.2 billion in total loans within these categories. See "Credit Quality" section below for more details.
• Net Interest Income and Margin: Net interest income decreased $5.4 million to $122.1 million for the quarter ended June 30, 2012 as compared to $127.5 million for the quarter ended March 31, 2012, and increased by $4.4 million from $117.7 million for the second quarter of 2011.  On a tax equivalent basis, our net interest margin decreased 18 basis points to 3.52 percent in the second quarter of 2012 as compared to 3.70 percent for the first quarter of 2012, and decreased 19 basis points from 3.71 percent for the second quarter of 2011.  The decreases in both net interest income and margin as compared to the linked first quarter of 2012 were mainly due to a decline in accretion recognized on purchased credit impaired (PCI) loans and lower yields on new loans and taxable investments caused by the current low level of market interest rates. See the "Net Interest Income and Margin" section below for more details.
• Rate Reduction on Long-Term Borrowings: Over the last three quarters, we actively reduced the costs associated with our borrowings. In June 2012, we modified the terms of $100 million in FHLB advances within our long-term borrowings.  The modifications resulted in a reduction of the interest rate on these funds, an extension of their maturity dates to 10 years from the date of modification, and a conversion of the debt to non-callable for period of 4 years.  We similarly modified the terms of $150 million and $435 million in FHLB advances and other borrowings during the three months ended March 31, 2012 and December 31, 2011, respectively.  After the modifications, the weighted average interest rate on these borrowings declined by 0.82 percent to 3.91 percent.  There were no gains, losses, penalties or fees incurred in the modification transactions.
• Provision for Losses on Non-Covered Loans and Unfunded Letters of Credit: The provision for losses on non-covered loans and unfunded letters of credit was $7.4 million for the second quarter of 2012 as compared to $5.7 million for the first quarter of 2012 and $6.8 million for the second quarter of 2011. Net loan charge-offs on non-covered loans increased to $8.7 million for the second quarter of 2012 compared to $6.3 million for the first quarter of 2012 and $6.2 million for the second quarter of 2011.  At June 30, 2012, our allowance for losses on non-covered loans and unfunded letters of credit totaled $120.8 million and was 1.08 percent of non-covered loans, as compared to 1.12 percent and 1.32 percent at March 31, 2012 and June 30, 2011, respectively.  The declines in the ratio from June 30, 2011 reflect the impact of the loans obtained in the acquisition of State Bancorp and the commercial real estate loans purchased during the first quarter of 2012 which U.S. GAAP requires to be initially recorded at fair value based on an amount estimated to be collectible.  The purchased loans were initially recorded net of fair valuation discounts related to credit totaling over $53 million and $5 million, respectively, which may be used to absorb potential future losses on such loans before any allowance for loan losses is recognized subsequent to acquisition.
• Provision for Losses on Covered Loans:  We recorded no provision for losses on covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) related to additional credit impairment of the loan pools during the first six months of 2012. Comparatively, we recorded a $788 thousand reduction in the covered loan provision during the second quarter of 2011 due to a lower level of estimated credit impairment with certain pools of covered loans.  Net charge-offs of covered loans totaled $1.8 million and $639 thousand for the second quarters of 2012 and 2011, respectively.  Our allowance for losses on covered loans totaled $11.8 million, $13.5 million, and $18.7 million at June 30, 2012, March 31, 2012 and June 30, 2011, respectively.
• Change in FDIC Loss-Share Receivable: Non-interest income reflected a $7.0 million reduction during the second quarter of 2012 as a result of a decrease in our FDIC loss-share receivable.  Of this amount, $6.0 million represents a reduction in the FDIC's portion of estimated losses related to unused lines of credit assumed in FDIC-assisted transactions which have expired.  The reversal of the liability (resulting from purchase accounting adjustments recorded at acquisition) for these unused lines of credit correspondingly resulted in an increase of our other non-interest income by $7.4 million for the three months ended June 30, 2012. 
• Investments: Other-than-temporary impairment charges recognized in earnings totaled $550 thousand during the second quarter of 2012 related to one previously impaired private mortgage-backed security, as compared to no credit impairment charges in the second quarter of 2011. We recorded net gains on securities transactions totaling $1.2 million ($754 thousand after taxes, or less than $0.01 per common share) in the second quarter of 2012 as compared to $16.5 million ($9.9 million, or $0.06 per common share) during the second quarter of 2011.  The net gains in the second quarter of 2012 mainly relate to the sale of $86.7 million in U.S. Treasury and government agency securities classified as available for sale.
• Trading Mark to Market Impact on Earnings: Net income for the second quarter of 2012 included net trading gains of $1.6 million ($1.1 million after taxes, or approximately $0.01 per common share) as compared to net trading losses of $1.0 million ($674 thousand after taxes, or less than $0.01 per common share) for the second quarter of 2011. Net trading gains and losses mainly represent non-cash mark to market gains and losses on our junior subordinated debentures carried at fair value.
• Income Tax Expense:  Our effective tax rate decreased to 30.4 percent for the second quarter of 2012 as compared to 30.7 percent for the first quarter of 2012, and 40.6 percent for the second quarter of 2011.  The decrease from the 2011 period was largely due to an incremental tax provision of $8.5 million ($0.05 per common share) in the second quarter of 2011.
• Capital Strength: Our regulatory capital ratios continue to reflect Valley's strong capital position. The Company's total risk-based capital, Tier 1 capital, and leverage capital were 12.16 percent, 10.53 percent, and 8.10 percent, respectively, at June 30, 2012.

Gerald H Lipkin, Chairman, President and CEO commented that "Valley's earnings for the second quarter of 2012 were negatively impacted by the prolonged low level of market interest rates and the higher costs associated with today's banking regulations. However, Valley's net interest margin and net interest income were positively impacted during the quarter by the large volume of new residential mortgage and commercial real estate loan originations. The increase in the mortgage volume is largely the result of our residential mortgage refinance program and our strong emphasis in the New York Metro area supported by our expanded network of 44 full service branches in the New York boroughs and Long Island after the acquisition of State Bancorp on January 1, 2012.  We believe the residential refinance activity should continue at or above the first and second quarter levels through the balance of 2012. The loan pipeline for both C&I and commercial real estate loans is also expected to remain quite strong.  Our extensive branch network, new executive offices recently opened in Manhattan, and Valley branding campaigns through television and radio should greatly assist us in meeting our loan production goals."  Mr. Lipkin added, "In the second half of 2012, we will maintain a focus on opportunities to increase our non-interest income as a percentage of our total revenues.  We believe one such opportunity is to increase the sales of refinanced residential loan originations, which we expect may add materially to our non-interest income while lessening our interest rate risk." 

Net Interest Income and Margin

Net interest income on a tax equivalent basis was $123.8 million for the second quarter of 2012, a $5.3 million decrease from the first quarter of 2012 and an increase of $4.9 million from the second quarter of 2011. The linked quarter decrease was mainly caused by a 33 basis point decline in the yield on average loans, partially offset by strong organic residential and commercial real estate mortgage loan growth, as well as lower costs on most of our interest-bearing liabilities during the second quarter of 2012. 

The net interest margin on a tax equivalent basis was 3.52 percent for the second quarter of 2012, a decrease of 18 basis points from 3.70 percent in the linked first quarter of 2012, and a 19 basis point decline from 3.71 percent for the quarter ended June 30, 2011. The yield on average interest earning assets decreased by 25 basis points on a linked quarter basis mainly as a result of a decline in accretion recognized on PCI loans and lower yields on both average loans and taxable investments caused by the historically low interest rate environment.  The accretion recognized on higher yielding PCI loans declined from the first quarter of 2012 as these loans continued to experience significant repayments.  The volume of refinance or prepayment of higher yielding non-PCI loans remained relatively high for the second quarter of 2012 and also negatively impacted the yield on average loans. The yield on average taxable investments declined quarter over quarter due to several factors, including prepayments of higher yielding securities, accelerated premium amortization on certain mortgage-backed securities, and new securities yielding lower market rates.  The cost of average interest bearing liabilities declined 6 basis points from 1.69 percent in the first quarter of 2012 mainly due to a 5 basis point decline in the cost of average savings, NOW and money market deposits caused by lower rates offered on such products and a $150.8 million decline in average time deposits mainly resulting from the run-off of maturing higher rate certificates of deposit. The cost of long-term borrowings also decreased 5 basis points to 4.18 percent for the second quarter of 2012 primarily due to the aforementioned interest rate modifications of $250 million in FHLB advances during the second and first quarters of 2012. Our cost of total deposits was 0.51 percent for the second quarter of 2012 compared to 0.57 percent for the three months ended March 31, 2012. 

We believe our margin may continue to face the risk of compression into the foreseeable future due to the current low level of interest rates on most interest earning asset alternatives.  However, we continue to tightly manage our balance sheet and our cost of funds to optimize our returns. 

Credit Quality

Our past due loans and non-accrual loans discussed below exclude PCI loans.  Valley's PCI loans consist of loans that were acquired as part of FDIC-assisted transactions (the "covered loans") in 2010 and loans subsequently acquired or purchased by Valley, primarily consisting of loans acquired from State Bancorp on January 1, 2012.  Under U.S. GAAP, the PCI loans (acquired at a discount that is due, in part, to credit quality) are accounted for on a pool basis and are not subject to delinquency classification in the same manner as loans originated by Valley.

Total loan delinquencies as a percentage of total loans were 1.38 percent at June 30, 2012 as compared to 1.52 percent at March 31, 2012 and 1.66 percent at June 30, 2011.  With a non-covered loan portfolio totaling $11.2 billion, net loan charge-offs on non-covered loans for the second quarter of 2012 totaled $8.7 million as compared to $6.3 million for the first quarter of 2012 and $6.2 million for the second quarter of 2011.  The increase in the second quarter of 2012 was largely due to a $4.6 million partial charge-off of one non-performing impaired commercial real estate loan based upon its lower collateral valuation at June 30, 2012. There were $1.8 million in charge-offs on loans in our impaired covered loan pools for the second quarter of 2012 as compared to no charge-offs in the first quarter of 2012 and charge-offs totaling $639 thousand for the second quarter of 2011.  Charge-offs on impaired covered loan pools are substantially covered by loss-sharing agreements with the FDIC.

The following table summarizes the allocation of the allowance for credit losses to specific loan categories and the allocation as a percentage of each loan category at June 30, 2012, March 31, 2012 and June 30, 2011:

The allowance for non-covered loans and unfunded letters of credit as a percentage of total non-covered loans was 1.08 percent at June 30, 2012 as compared to 1.12 percent and 1.32 percent at March 31, 2012 and June 30, 2011, respectively. The allocation percentages in the commercial and commercial real estate loan categories shown in the table above decreased from June 30, 2011 largely due to non-covered PCI loans acquired from State Bancorp on January 1, 2012 and commercial real estate loans purchased from another financial institution in March 2012. The PCI loans were recorded at fair value upon acquisition based on an initial estimate of expected cash flows, including a reduction for estimated credit losses and, in the case of State Bancorp, without carryover of the loan portfolio's historical allowance for loan losses. The PCI loans are accounted for on a pool basis and were initially recorded net of fair valuation discounts related to credit totaling over $53 million and $5 million, respectively, which may be used to absorb potential future losses on such loans before any allowance for loan losses is recognized subsequent to acquisition. Additionally, the allocated reserves for auto and other consumer loans declined from March 31, 2012 as loss experience and the outlook for the automobile portfolio continued to improve during the second quarter of 2012. Our allowance for non-covered loans and unfunded letters of credit as a percentage of total non-covered loans (excluding non-covered PCI loans with carrying values totaling approximately $1.1 billion) was 1.20 percent at June 30, 2012 as compared to 1.25 percent at March 31, 2012.

Total non-performing assets ("NPAs"), consisting of non-accrual loans, other real estate owned (OREO), other repossessed assets and non-accrual debt securities, totaled $195.4 million at June 30, 2012 compared to $179.6 million at March 31, 2012. The $15.8 million increase in NPAs from March 31, 2012 was largely due to one new non-accrual commercial real estate loan totaling $11.8 million (after the aforementioned partial charge-off totaling $4.6 million during the second quarter of 2012) and a $7.4 million increase in the estimated fair value of non-accrual debt securities (consisting of other-than-temporarily impaired trust preferred securities classified as available for sale) totaling $45.9 million at June 30, 2012.  The non-accrual debt securities had total combined unrealized losses of $5.8 million and $13.2 million at June 30, 2012 and March 31, 2012, respectively.

Non-accrual loans increased $1.0 million to $126.2 million at June 30, 2012 as compared to $125.2 million at March 31, 2012 mainly due to the new non-accrual commercial real estate loan with a recorded investment totaling $11.8 million, partially offset by the migration of two commercial loans secured by aircraft totaling $9.2 million prior to transfer to other repossessed assets during the second quarter of 2012 (See additional discussion below).  Although the timing of collection is uncertain, management believes that most of the non-accrual loans are well secured and largely collectible based on, in part, our quarterly review of impaired loans. Our impaired loans, mainly consisting of non-accrual and troubled debt restructured commercial and commercial real estate loans, totaled $201.4 million at June 30, 2012 and had $22.0 million in related specific reserves included in our total allowance for loan losses. OREO (which consists of 25 commercial and residential properties) and other repossessed assets, excluding OREO subject to loss-sharing agreements with the FDIC, totaled $14.7 million and $8.5 million, respectively, at June 30, 2012 as compared to $14.1 million and $1.8 million, respectively, at March 31, 2012.  The $6.7 million increase in other repossessed assets was due to the transfer of two aircraft at their estimated fair values (less selling costs) of $6.6 million that collateralized two non-accrual commercial loans.  The transfers resulted in partial loan charge-offs totaling $2.6 million to our allowance of loan losses. 

Loans past due 90 days or more and still accruing decreased $1.2 million to $1.5 million, or 0.01 percent of total loans, at June 30, 2012 compared to $2.7 million, or 0.02 percent at March 31, 2012.  The decrease was mainly due to declines in the residential mortgage and commercial real estate loan categories caused by loans that are no longer past due.   

Loans past due 30 to 89 days decreased $12.0 million to $30.0 million at June 30, 2012 compared to March 31, 2012 mainly due to lower delinquencies within construction loans and commercial and industrial loans.  Within this past due category, commercial real estate loans increased $2.6 million to $11.5 million at June 30, 2012 mainly due to the inclusion of two new potential problem loans totaling $6.5 million.  A potential problem loan is a performing loan for which management has concerns about the ability of the borrower to comply with the loan repayment terms and which may result in a non-performing loan.  Our decision to characterize such performing loans as potential problem loans does not necessarily mean that management expects losses to occur, but that management recognizes potential problem loans carry a higher probability of default.  Of the $6.5 million, approximately $2.1 million is estimated to be at risk after collateral values and guarantees are taken into consideration.

Troubled debt restructured loans ("TDRs") represent loan modifications for customers experiencing financial difficulties where a concession has been granted.  Performing TDRs (i.e., TDRs not reported as loans 90 days or more past due and still accruing or as non-accrual loans) totaled $113.6 million at June 30, 2012 and consisted of 85 loans (primarily in the commercial and industrial loan and commercial real estate portfolios) as compared to 71 loans totaling $96.2 million at March 31, 2012.  On an aggregate basis, the $113.6 million in performing TDRs at June 30, 2012 had a modified weighted average interest rate of approximately 4.73 percent as compared to a pre-modification weighted average interest rate of 5.72 percent.

Loans and Deposits

Non-Covered Loans. Non-covered loans are loans not subject to loss-sharing agreements with the FDIC.  Non-covered loans increased $300.0 million to approximately $11.2 billion at June 30, 2012 from March 31, 2012 mainly due to strong organic growth in the residential mortgage and commercial real estate loan portfolios.  Residential mortgage loans increased $213.9 million from March 31, 2012 mainly due to the continued success of our low fixed-price refinance programs and the current low level of market interest rates. During the second quarter of 2012, we originated over $478 million in new and refinanced residential mortgage loans and retained approximately 81 percent of these loans in our loan portfolio at June 30, 2012.  Commercial real estate loans (excluding construction loans) increased $93.5 million, or 8.6 percent on an annualized basis, from March 31, 2012.  The continued quarter over quarter growth in this loan category is largely a product of our strong business emphasis on co-op loan lending in the New York Metro area and increased new loan demand across a broad range of borrowers in our primary markets, including new activity generated from our acquisition of State Bancorp in January 2012.  Automobile loans increased by $14.1 million, or 7.4 percent on an annualized basis, during the second quarter as compared to March 31, 2012 largely due to strong consumer demand, expanded dealer relationships, and some improvement in market rate pricing that has allowed us to more effectively compete for quality credits during the quarter.  Commercial and industrial loans were relatively unchanged from March 31, 2012 as loan demand remained soft and the market competition for quality credits continued to challenge our ability to achieve significant loan growth in this category during the quarter. Home equity loan origination volumes continued to be outpaced by normal loan payments and prepayments during the second quarter of 2012 due to, among other factors, borrowers electing to rollover loan balances into refinanced first residential mortgages, high unemployment levels, as well as our strict underwriting standards.

Covered Loans. PCI loans for which Valley National Bank will share losses with the FDIC are referred to as "covered loans," and consist of loans acquired from LibertyPointe Bank and The Park Avenue Bank as a part of FDIC-assisted transactions during 2010.  Our covered loans consist primarily of commercial real estate loans and commercial and industrial loans and totaled $226.5 million at June 30, 2012 as compared to $252.2 million at March 31, 2012.  As required for our PCI loans acquired and purchased during the first quarter of 2012, all of our covered loans are accounted for on a pool basis.  For loan pools with better than originally expected cash flows, the forecasted increase is recorded as a prospective adjustment to our interest income on loans over future periods.  Additionally, on a prospective basis, we reduce the FDIC loss-share receivable by the guaranteed portion of the additional cash flows expected to be received from borrowers on those loan pools.  During the second quarter of 2012, we reduced our FDIC loss-share receivable by $2.2 million due to the prospective recognition of the effect of additional cash flows from pooled loans with a corresponding reduction in non-interest income for the period.  

Deposits. Total deposits decreased $85.5 million to approximately $10.9 billion at June 30, 2012 from March 31, 2012 mostly due to lower time deposit balances.  Valley's time deposits totaling $2.6 billion at June 30, 2012 declined $62.5 million as compared to March 31, 2012 largely due to the continued run-off of maturing higher cost certificates of deposit and the low level of interest rates currently offered on such products.    During the second quarter of 2012, savings, NOW and money market accounts also declined by $21.7 million due to lower municipal deposit balances, partially offset by growth in our retail deposits which continue to benefit from the migration of some maturing certificate of deposits to these account types.  Valley's non-interest bearing deposits totaling $3.2 billion at June 30, 2012 remained relatively unchanged as compared to March 31, 2012.

Non-Interest Income

Second quarter of 2012 compared with second quarter of 2011

Non-interest income for the second quarter of 2012 decreased $9.5 million to $24.0 million as compared to $33.5 million for the same period of 2011.   Net gains on securities transactions decreased $15.3 million to $1.2 million for the three months ended June 30, 2012 from $16.5 million for the same period of 2011.  During the second quarter of 2012, we sold $86.7 million in U.S. Treasury and government agency securities that were classified as available for sale as compared to the sale of $253.0 million in residential mortgage-backed securities, preferred securities, and U.S. Treasury securities classified as available for sale in the second quarter of 2011. The change in the FDIC loss-share receivable resulted in a $7.0 million and $2.7 million reduction in non-interest income for the second quarters of 2012 and 2011, respectively. The increase from 2011 was mainly due to a $6.0 million reduction in the FDIC's portion of estimated losses related to unused lines of credit assumed in FDIC-assisted transactions.  Other non-interest income increased $6.5 million to $11.3 million for the three months ended June 30, 2012 largely due to the corresponding reversal of $7.4 million in purchase accounting valuation liabilities related to expired and unused lines of credit assumed in FDIC-assisted transactions.  Net trading gains increased $2.6 million to $1.6 million for the second quarter of 2012 as compared to a net loss of $1.0 million for the second quarter of 2011 mainly due to non-cash mark to market gains on our trust preferred debentures carried at fair value.  Net gains on sales of loans also increased $1.6 million as compared to the second quarter of 2011 primarily due to a higher level of loan originations for sale in the second quarter of 2012.

Second quarter of 2012 compared with first quarter of 2012

Non-interest income for the second quarter of 2012 increased $1.4 million from $22.6 million for the quarter ended March 31, 2012.  Other non-interest income increased $6.9 million from $4.4 million for the three months ended March 31, 2012 largely due to the reversal of $7.4 million in liabilities related to expired and unused lines of credit assumed in FDIC-assisted transactions. Net trading gains increased $2.6 million from a net loss of $988 thousand for the first quarter of 2012 mainly due to non-cash mark to market gains on our trust preferred debentures carried at fair value during the second quarter of 2012.  Net gains on securities transactions increased $1.4 million from net losses totaling $157 thousand for the first quarter of 2012 due to the U.S. Treasury and government agency securities sold in the second quarter of 2012.  The reduction related to the change in the FDIC loss-share receivable increased $6.9 million from $90 thousand in the first quarter of 2012 primarily due to the expiration of unused lines of credit covered under loss-sharing agreements with the FDIC.  Insurance commissions declined $2.1 million to $3.3 million for the three months ended June 30, 2012 as compared to $5.4 million for the first quarter of 2012 due to a lower level of external business activity at our title insurance and all-line insurance agency subsidiaries.  

Non-Interest Expense

Second quarter of 2012 compared with second quarter of 2011

Non-interest expense increased $8.4 million to $91.5 million for the three months ended June 30, 2012 from $83.1 million for the same period of 2011 largely due to a $7.1 million increase in salary and employee benefits expense.  The increase was primarily due to additional staffing expense related to the State Bancorp acquisition on January 1, 2012, higher medical health insurance expense, and a $673 thousand increase in incentive stock compensation expense due to additional amortization from stock awards granted during 2012. Net occupancy and equipment expenses increased $1.4 million to $16.9 million for the second quarter of 2012 due to additional expenses associated with the 16 branches acquired from State Bancorp. Amortization of other intangible assets increased $736 thousand due to our recognition of net impairment charges totaling $401 thousand on certain loan servicing rights during the second quarter of 2012, as well as additional amortization expense related to core deposits assumed from State Bancorp.  Partially offsetting these increases, advertising expense decreased $862 thousand from $2.7 million for the second quarter of 2011 mainly due to a lower volume of promotional activity during the second quarter of 2012.

Second quarter of 2012 compared with first quarter of 2012

Non-interest expense decreased by $3.0 million from $94.5 million for the linked quarter ended March 31, 2012 mainly due to a $2.8 million decline in other non-interest expense. Other non-interest expense decreased during the second quarter of 2012 mainly due to general decreases in several areas due to stronger controls over expenditures, including the additional expenses related to the acquisition of State Bancorp, as well as a $701 thousand reduction in data processing conversion and other merger expenses as compared to the first quarter of 2012.

Income Tax Expense

Income tax expense was $14.4 million and $25.2 million for the three months ended June 30, 2012 and 2011, respectively.  The effective tax rate decreased by 10.2 percent to 30.4 percent for the second quarter of 2012 as compared to 40.6 percent for the second quarter of 2011 largely due to an incremental tax provision caused by a change in state tax law recognized in the second quarter of 2011.

Income tax expense was $29.6 million and $42.3 million for the six months ended June 30, 2012 and 2011, respectively.  The effective tax rate decreased by 5.9 percent to 30.6 percent for the six months ended June 30, 2012 as compared to 36.5 percent for the same period of 2011 mainly due to the aforementioned incremental tax provision in 2011 related to a change in state tax law.

For the remainder of 2012, we anticipate that our effective tax rate will approximate 32 percent.      

About Valley

Valley is a regional bank holding company headquartered in Wayne, New Jersey with $16 billion in assets. Its principal subsidiary, Valley National Bank, currently operates 211 branches in 147 communities serving 16 counties throughout northern and central New Jersey, Manhattan, Brooklyn, Queens and Long Island. Valley National Bank is one of the largest commercial banks headquartered in New Jersey and is committed to providing the most convenient service, the latest in product innovations and an experienced and knowledgeable staff with a high priority on friendly customer service 24 hours a day, 7 days a week. For more information about Valley National Bank and its products and services, please visit www.valleynationalbank.com or call Customer Service 24/7 at 800-522-4100.

Forward Looking Statements

The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements are not historical facts and include expressions about management's confidence and strategies and management's expectations about new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as "should," "expect," "believe," "view," "opportunity," "allow," "continues," "reflects," "typically," "usually," "anticipate," or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:

• A severe decline in the general economic conditions of New Jersey and the New York Metropolitan area;
• declines in value in our investment portfolio, including additional other-than-temporary impairment charges on our investment securities;
• Valley's inability to pay dividends at current levels, or at all, because of inadequate future earnings, regulatory restrictions or limitations, and changes in the composition of qualifying regulatory capital and minimum capital requirements (including those resulting from the U.S. implementation of Basel III requirements);
• higher than expected increases in our allowance for loan losses;
• higher than expected increases in loan losses or in the level of nonperforming loans;
• unexpected changes in interest rates;
• higher than expected tax rates, including increases resulting from changes in tax laws, regulations and case law;
• an unexpected decline in real estate values within our market areas;
• charges against earnings related to the change in fair value of our junior subordinated debentures;
• higher than expected FDIC insurance assessments;
• the failure of other financial institutions with whom we have trading, clearing, counterparty and other financial relationships;
• lack of liquidity to fund our various cash obligations;
• unanticipated reduction in our deposit base; 
• potential acquisitions that may disrupt our business;
• government intervention in the U.S. financial system and the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve;
• legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulations) subject us to additional regulatory oversight which may result in increased compliance costs and/or require us to change our business model;
• changes in accounting policies or accounting standards;
• our inability to promptly adapt to technological changes;
• our internal controls and procedures may not be adequate to prevent losses;
• claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;
• the inability to realize expected cost savings and revenue synergies from the merger of State Bancorp with Valley in the amounts or in the timeframe anticipated;
• inability to retain State Bancorp's customers and employees;
• lower than expected cash flows from PCI loans; and
• other unexpected material adverse changes in our operations or earnings.

A detailed discussion of factors that could affect our results is included in our SEC filings, including the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2011. 

We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. 

-Tables to Follow-

 

SOURCE Valley National Bancorp