Valley National Bancorp Reports Solid Fourth Quarter Earnings And Record Loan Originations

WAYNE, N.J., Jan. 30, 2013 /PRNewswire/ -- Valley National Bancorp (NYSE:VLY), the holding company for Valley National Bank, today reported net income for the fourth quarter of 2012 of $36.8 million, or $0.19 per diluted common share as compared to the fourth quarter of 2011 earnings of $24.5 million, or $0.14 per diluted common share.  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.

Net income for the year ended December 31, 2012 was $143.6 million, or $0.73 per diluted common share, compared to 2011 earnings of $132.5 million, or $0.74 per diluted common share.

Key highlights for the fourth quarter:

• Mortgage Banking Activities: Residential mortgage loan originations (including both new and refinanced loans) totaled a record high $531 million for the fourth quarter and were up almost 18 percent as compared to a strong third quarter of 2012.  Valley sold approximately $389 million of residential mortgages during the fourth quarter, up slightly from the third quarter of 2012. However, gains on sales of residential mortgage loans fell $9.5 million to $15.6 million for the fourth quarter of 2012 as compared to $25.1 million for the third quarter of 2012 mainly due to a decline in mark to market gains on our loans held for sale carried at fair value caused by changes in the volume of such loans held at the beginning and end of each quarter. We expect the mortgage loan pipeline to continue to be robust during the first quarter of 2013 due to the historically low market interest rates, a continued housing market recovery and the proven success of Valley's low fixed-price refinance programs.

• Trading Mark to Market: Net trading gains and losses mainly represent non-cash mark to market gains and losses on our junior subordinated debentures carried at fair value. Net trading gains recognized for the fourth quarter of 2012 were $2.2 million and increased approximately $2.2 million and $3.0 million from the third quarter of 2012 and the fourth quarter of 2011, respectively.

• Investments: We recognized no other-than-temporary impairment charges in earnings during the fourth quarter as compared to $4.7 million ($2.7 million after taxes, or $0.01 per common share) during the third quarter of 2012 and $19.1 million ($11.7 million after taxes, or $0.07 per common share) during the fourth quarter of 2011. Our net gains on securities transactions were immaterial for the fourth quarter of 2012 as compared to $1.5 million ($937 thousand after taxes, or less than $0.01 per common share) in the third quarter of 2012 and $12.0 million ($7.2 million after taxes, or $0.04 per common share) during the fourth quarter of 2011. 

• Loans: Total non-covered loans (i.e., loans which are not subject to our loss-sharing agreements with the FDIC) decreased by $99.3 million, or 3.6 percent on an annualized basis, to $10.8 billion at December 31, 2012 from September 30, 2012 largely due to our decision to sell the majority of our new and refinanced residential mortgage loans, some large repayments within the commercial loan portfolios and continued strong competition for high quality commercial borrowers.  Despite the strong competition and prepayments, the commercial and industrial loan portfolio had record loan originations of $244 million during the fourth quarter of 2012 and combined with the commercial real estate portfolio these two categories had record loan originations of $1.4 billion in 2012. Additionally, our other consumer loan portfolio experienced organic growth of $19.6 million, or 49 percent on an annualized basis, during the fourth quarter of 2012 mainly due to higher collateralized personal lines of credit balances. Total covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) decreased to $180.7 million, or 1.6 percent of our total loans, at December 31, 2012 as compared to $207.5 million at September 30, 2012, mainly due to normal collection activity.

• Asset Quality: Non-performing assets increased 5.5 percent from the third quarter of 2012 as total non-accrual loans increased to $131.8 million, or 1.20 percent of our entire loan portfolio of $11.0 billion, at December 31, 2012, compared to $121.4 million, or 1.09 percent, at September 30, 2012.  The increase in non-accruals was primarily due to the addition of two commercial loan relationships totaling $8.8 million and $4.6 million, respectively.  At December 31, 2012 and September 30, 2012, our non-accrual loans also included performing residential mortgage and home equity loans totaling $3.0 million, which were classified as non-accrual loans due to our adherence to newly issued Office of the Comptroller of the Currency (OCC) guidance during the third quarter of 2012. See "Credit Quality" section below for more details.

• 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 $5.2 million for the fourth quarter of 2012 as compared to $7.3 million for the third quarter of 2012 and $11.9 million for the fourth quarter of 2011. Net loan charge-offs on non-covered loans decreased to $4.3 million for the fourth quarter of 2012 (or 0.15 percent of average loans on an annualized basis), compared to $5.9 million for the third quarter of 2012 and $14.4 million for the fourth quarter of 2011.  At December 31, 2012, our allowance for losses on non-covered loans and unfunded letters of credit totaled $123.0 million and was 1.13 percent of non-covered loans, as compared to 1.12 percent and 1.29 percent at September 30, 2012 and December 31, 2011, respectively. 

• 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 fourth and third quarters of 2012 as compared to $3.4 million in the fourth quarter of 2011.  No net charge-offs of covered loans  were recognized during the fourth quarter of 2012 as compared to $2.3 million and $2.5 million for the third quarter of 2012 and fourth quarter of 2011, respectively.  Our allowance for losses on covered loans totaled $9.5 million at both December 31, 2012 and September 30, 2012, and $13.5 million at December 31, 2011.

• Net Interest Income and Margin: Net interest income totaling $118.5 million for the three months ended December 31, 2012 declined by $3.3 million as compared to the third quarter of 2012 and remained relatively unchanged from the fourth quarter of 2011.  On a tax equivalent basis, our net interest margin decreased 5 basis points to 3.41 percent in the fourth quarter of 2012 as compared to 3.46 percent for the third quarter of 2012, and decreased 33 basis points from 3.74 percent for the fourth quarter of 2011.  The decreases in both net interest income and margin as compared to the linked third quarter of 2012 were due to a decline in average loans and investments, as well as lower yields on new investment securities and loans caused by the current low level of market interest rates. See the "Net Interest Income and Margin" section below for more details.

• Income Tax Expense:  Our effective tax rate decreased to 28.5 percent for the fourth quarter of 2012 as compared to 36.2 percent for the third quarter of 2012, and increased from 23.0 percent for the fourth quarter of 2011. The 2012 linked quarter over quarter decline was largely the result of the change in the actual versus projected tax rates for the year ended December 31, 2012.  The increase from the fourth quarter of 2011 was mainly due to the higher pre-tax income for the fourth quarter of 2012.

• 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 ratios were 12.38 percent, 10.87 percent, and 8.09 percent, respectively, at December 31, 2012.

Gerald H. Lipkin, Chairman, President and CEO commented that "We are pleased to report solid earnings for the fourth quarter of 2012, which continued to be positively impacted by our residential mortgage refinance program, as well as the strong performance of our balance sheet despite a very difficult interest rate environment." Mr. Lipkin added, "Our loan originations continued at record levels during the quarter, even though we believe the level of refinanced loans was actually somewhat slowed due to the negative effects of Hurricane Sandy and consumer distractions related to the holidays and other political and economic concerns.  However, our mortgage banking business continues to experience significant application inflows at this time and loan originations are expected to remain at or near the current record levels during 2013. Additionally, the commercial and industrial loan portfolio had record loan originations during the fourth quarter and combined with the commercial real estate portfolio produced record commercial lending originations for 2012 in the face of very strong competition for borrowers who meet our high credit quality standards.  In 2013, we stand ready to compete across all of our lines of business and are committed to assisting in the continued economic recovery within our communities."

Net Interest Income and Margin

Net interest income on a tax equivalent basis decreased $3.3 million to $120.4 million for the fourth quarter of 2012 from the third quarter of 2012 and remained relatively unchanged as compared to the fourth quarter of 2011. Interest income on a tax equivalent basis decreased $4.3 million from the third quarter of 2012 mainly due to the combination of a $142.4 million decrease in average loans and lower yields on loans and investments. The decrease in interest income was partially offset by a $968 thousand decline in interest expense, which was mostly driven by lower average balances for time deposits and short-term borrowings as well as a 1 basis point decrease in the cost of average savings, NOW, and money market deposits.

The net interest margin on a tax equivalent basis was 3.41 percent for the fourth quarter of 2012, a decrease of 5 basis points from 3.46 percent in the linked third quarter of 2012, and a 33 basis point decline from 3.74 percent for the three months ended December 31, 2011. The yield on average interest earning assets decreased by seven basis points on a linked quarter basis mainly as a result of lower yields on average investment securities caused by the current low market yields on new securities and the continued repayment of higher yielding securities in the portfolio. The yield on average loans also decreased 3 basis points to 5.09 percent for the three months ended December 31, 2012 from the third quarter of 2012 mainly due to new volume at lower interest rates.  The aggregate net change in infrequent items that impact our loan yields from time to time, such as accelerated interest accretion recognized on certain purchased credit impaired (PCI) loan pools that were fully repaid and loan prepayment penalty fees, added approximately six basis points to our loan yield for the fourth quarter as compared to the third quarter of 2012.  However, the repayment volume of higher yielding non-PCI loans (with and without contractual prepayment penalties) remained elevated for the fourth quarter of 2012 and negatively impacted the overall yield on average loans. The overall cost of average interest bearing liabilities increased by approximately 1 basis point from 1.62 percent in the third quarter of 2012 mainly due to a slight change in mix of borrowings, as the individual yields for most categories declined during the fourth quarter.  Lower cost short-term borrowings (mainly consisting of FHLB advances) matured and were paid off during the fourth quarter, largely resulting in the average balance decline of $304.6 million for the category, while higher cost maturing time deposits contributed to a decline in average time deposits of only $110.6 million. Our cost of total deposits was 0.49 percent for the fourth quarter of 2012 compared to 0.52 percent for the three months ended September 30, 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

Total loan delinquencies (including loans past due 30 days or more and non-accrual loans) as a percentage of total loans were 1.73 percent at December 31, 2012 as compared to 1.53 percent at September 30, 2012 and 1.69 percent at December 31, 2011. 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 recorded in the acquisition of 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.

Loans past due 30 to 89 days increased $2.6 million to $49.7 million at December 31, 2012 compared to September 30, 2012 mainly due to higher delinquencies within commercial real estate and construction loans. Within this past due category, commercial real estate loans increased $7.0 million to $13.2 million at December 31, 2012 due to a few small loans and one impaired loan totaling $1.9 million with immaterial specific reserves included in our total allowance for loan losses.  Construction loans past due 30 to 89 days also increased to $6.7 million at December 31, 2012 mainly due to matured performing loans in the normal process of renewal totaling approximately $5.5 million. Valley believes the majority of all loan types in this past due category are well secured, in the process of collection and do not represent a material negative trend within the loan portfolio.

Loans past due 90 days or more and still accruing increased $6.2 million to $8.7 million, or 0.08 percent of total loans, at December 31, 2012 compared to $2.5 million, or 0.02 percent at September 30, 2012.  The increase in this  past due category was mostly due to matured performing loans in the normal process of renewal that totaled $2.9 million and $2.5 million within the commercial real estate and construction loan portfolios, respectively, at December 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 $195.5 million at December 31, 2012 compared to $185.3 million at September 30, 2012. The $10.2 million increase in NPAs from September 30, 2012 was largely caused by an increase in non-accrual loans, as the balances of the other components of our NPAs remained relatively unchanged at December 31, 2012.

Non-accrual loans increased $10.4 million to $131.8 million at December 31, 2012 as compared to $121.4 million at September 30, 2012 mainly due to a $10.1 million increase in non-accrual loans in the commercial and industrial loan category caused by two loans totaling $8.8 million and $2.9 million, respectively.  The first of the two loans is a previously impaired loan that was restructured subsequent to its non-accrual classification in the beginning of the fourth quarter.  This loan was performing to the new terms as of December 31, 2012. The second non-accrual loan was internally classified as substandard prior to being severely impacted by the hurricane during October 2012.  Additionally, a new $1.7 million non-accrual commercial real estate loan reported at December 31, 2012 relates to this same customer relationship negatively impacted by the hurricane. At December 31, 2012 and September 30, 2012, our non-accrual loans also included performing residential mortgage and home equity loans totaling $3.0 million, which were classified as non-accrual loans due to the OCC regulatory guidance issued during the third quarter of 2012.  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 $206.7 million at December 31, 2012 and had $31.0 million in related specific reserves included in our total allowance for loan losses.

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 $105.4 million at December 31, 2012 and consisted of 88 loans (primarily in the commercial and industrial loan and commercial real estate portfolios) as compared to 84 loans totaling $109.3 million at September 30, 2012.  On an aggregate basis, the $105.4 million in performing TDRs at December 31, 2012 had a modified weighted average interest rate of approximately 4.80 percent as compared to a pre-modification weighted average interest rate of 5.52 percent.

With a non-covered loan portfolio totaling $10.8 billion, net loan charge-offs on non-covered loans for the fourth quarter of 2012 totaled only $4.3 million as compared to $5.9 million for the third quarter of 2012 and $14.4 million for the fourth quarter of 2011.  The decrease from the third quarter of 2012 was largely due to lower net charge-offs in both the commercial and industrial loan and commercial real estate loan portfolios.  There were no charge-offs on loans in our covered loan pools for the fourth quarter of 2012 as compared to $2.3 million and $2.5 million of charge-offs in the third quarter of 2012 and the fourth quarter of 2011, respectively.  Charge-offs on 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 (including PCI loans) at December 31, 2012, September 30, 2012 and December 31, 2011:

The allowance for non-covered loans and unfunded letters of credit as a percentage of total non-covered loans was 1.13 percent at December 31, 2012 as compared to 1.12 percent and 1.29 percent at September 30, 2012 and December 31, 2011, respectively.  The allocation percentages for the construction loan category shown in the table above increased 1.02 percent from the third quarter of 2012 largely due to a $3.3 million increase in specific reserves for one previously impaired collateral dependent loan.  At December 31, 2012, Management discounted the appraisal of this loan's underlying collateral based upon specific market data and other new facts regarding the property that were unavailable prior to the fourth quarter of 2012. The allocation percentages for both the commercial and industrial loan and commercial real estate loan categories decreased from December 31, 2011 largely due to non-covered PCI loans acquired from State Bancorp on January 1, 2012 and PCI 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, 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 which may be used to absorb future losses on such loans before any allowance for loan losses is recognized subsequent to acquisition. The remaining credit discount that may be used for future losses totaled $56.2 million for non-covered PCI loans with carrying amounts of $987.0 million at December 31, 2012.  Additionally, the allocated reserves for auto and other consumer loans declined from December 31, 2011 as loss experience and the outlook for the automobile portfolio continued to improve throughout 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 $987.0 million) was 1.25 percent at December 31, 2012 as compared to 1.24 percent at September 30, 2012.

Loans and Deposits

Non-Covered Loans. Non-covered loans are loans not subject to loss-sharing agreements with the FDIC.  Non-covered loans decreased $99.3 million to approximately $10.8 billion at December 31, 2012 from September 30, 2012 mainly due to an elevated level of repayments primarily within the commercial loan categories of the PCI loan portfolio and refinance activity within the residential mortgage loan portfolio.

Total commercial and industrial loans decreased $34.0 million from September 30, 2012 to $2.1 billion at December 31, 2012 largely due to a $19.1 million decline in the PCI loans acquired during the first quarter of 2012.  Overall, we continued to experience some full loan repayments from a few large borrowers as well as the continued impact of strong market competition for quality credits.  Total commercial real estate loans (including construction loans) also declined $38.1 million from September 30, 2012 to $4.8 billion at December 31, 2012 due to a $59.8 million decrease in PCI loans.  The decline in PCI loans was due to normal payments, as well as prepayments caused by strong competition in the Long Island market and excess borrower liquidity.  However, the non-PCI loan portion of the commercial real estate loan portfolio totaling $4.2 billion increased $21.7 million largely due to a gradual improvement in demand across several segments of our New Jersey market.

Total residential mortgage loans decreased $37.1 million from September 30, 2012 mostly due to a high volume of fourth quarter refinancing activity, with many of the new loans either sold in the secondary market or held for sale at December 31, 2012. Loans held for sale carried at fair value decreased to $120.2 million (with $115.4 million in unpaid contractual balances) at December 31, 2012 as compared to $149.1 million (with $141.4 million in unpaid contractual balances) at September 30, 2012.  Our residential mortgage pipeline has remained very robust mainly due to the continued success of our low fixed-price refinance programs and the current low level of market interest rates.  During the fourth quarter of 2012, we originated over $531 million in new and refinanced residential mortgage loans and retained approximately 32 percent of these loans in our loan portfolio at December 31, 2012.  Loan servicing rights recognized for the retained servicing of the loans sold during the fourth quarter totaled $4.6 million at December 31, 2012.  We expect to continue an "originate and sell" model for a large portion of our mortgage loan originations during 2013 assuming that market conditions do not adversely change and we are able to maintain an appropriate mix of residential mortgage loans on our balance sheet.  During the early part of the first quarter of 2013, application volume continues to be very strong and we are optimistic that the refinance volume should remain strong at least into the foreseeable future. 

Automobile loans and home equity loans marginally declined to $786.5 million and $485.5 million, respectively, at December 31, 2012 as compared to September 30, 2012 due to normal repayment activity outpacing new loan origination volumes.  During the fourth quarter of 2012, we purchased approximately $6.6 million in auto loans as compared to $12.4 million in purchased loans during the third quarter of 2012.  From time to time, the Bank purchases automobile loans originated by, and sometimes serviced by, other financial institutions based on several factors, including current loan origination volumes, market interest rates, excess liquidity and other asset/liability management strategies.  All of the purchased automobile loans are selected using Valley's normal underwriting criteria at the time of purchase.

Other consumer loans increased $19.6 million to $179.7 million at December 31, 2012 as compared to $160.1 million at September 30, 2012 mainly due to higher collateralized personal lines of credit balances.

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 $180.7 million at December 31, 2012 as compared to $207.5 million at September 30, 2012.  Consistent with our PCI loans acquired and purchased during the first quarter of 2012, all of our covered loans are PCI loans accounted for on a pool basis.  For loan pools with better than originally expected cash flows, the forecasted increase in cash flows 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 fourth quarter of 2012, we reduced our FDIC loss-share receivable by $1.8 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, as compared to $2.1 million during the third quarter of 2012.  

Deposits. Total deposits increased $343.2 million to approximately $11.3 billion at December 31, 2012 from September 30, 2012 mostly due to higher non-interest bearing deposit balances.  Valley's non-interest bearing deposits totaling $3.6 billion at December 31, 2012 increased by $351.8 million from September 30, 2012 partly due to seasonal increases, the current low rates on our interest bearing deposit products, and additional customer liquidity due to year-end tax planning.  Savings, NOW and money market accounts also increased $204.5 million to approximately $5.2 billion at December 31, 2012 as compared to September 30, 2012 due to normal municipal account balance fluctuations and general increases in retail deposits. Valley's time deposits totaling $2.5 billion at December 31, 2012 decreased $213.0 million as compared to September 30, 2012 largely due to the continued run-off of maturing higher cost retail certificates of deposit and less attractive short-term time deposit rates offered by Valley during the period.

Non-Interest Income

Non-interest income for the fourth quarter of 2012 decreased $6.7 million from $40.5 million for the linked quarter ended September 30, 2012 largely due to a $9.5 million decrease in net gains on sales of residential mortgage loans mostly caused by lower mark to market gains due, in part, to the decrease in loans held for sale carried at fair value.  See "Loans and Deposits" section above for more details on our mortgage banking activities.  Other non-interest income decreased $2.2 million from $4.3 million for the third quarter of 2012 primarily due to net losses on other real estate owned totaling approximately $2.2 million related to both sales during the fourth quarter and valuation of properties at December 31, 2012.  Of the $2.2 million in net losses, $1.6 million is related to assets substantially covered by loss-sharing agreements with the FDIC. Net gains on securities transactions declined $1.5 million to just $44 thousand for the three months ended December 31, 2012 due to a lower volume of securities sales and calls during the period.  During the fourth quarter, we also recognized $812 thousand in net losses on sales of assets due to the disposal of approximately $949 thousand in impaired branch location assets caused by Hurricane Sandy.  Partially offsetting these decreases in non-interest income, net impairment losses on securities declined $4.7 million from the third quarter of 2012 and net trading gains increased to $2.2 million for the fourth quarter of 2012 from $6 thousand for the third quarter of 2012.

Non-Interest Expense

Non-interest expense for the fourth quarter of 2012 increased by $2.4 million from $93.2 million for the linked quarter ended September 30, 2012 mainly due to a $2.0 million increase in net occupancy and equipment expense.  The increase in net occupancy and equipment expense was largely caused by an additional $1.6 million in rental expense recorded to adjust the straight-line rental expense accrual on operating leases for certain branch locations.  Professional and legal fees also increased $1.1 million to $4.6 million for the fourth quarter of 2012 due to a general increase in corporate legal matters, while salary and employee benefits expense declined $806 thousand primarily due to lower major medical insurance and pension cost accruals, partially offset by higher salary expense as compared to the three months ended September 30, 2012.

Income Tax Expense

Income tax expense was $14.7 million for the three months ended December 31, 2012 reflecting an effective tax rate of 28.5 percent, as compared to $22.4 million for the third quarter of 2012, reflecting an effective tax rate of 36.2 percent and $7.3 million for the fourth quarter of 2011, reflecting an effective tax rate of 23.0 percent.  The decrease in rate and tax expense in the fourth quarter of 2012 compared to the third quarter was largely due to the actual tax rate being less than projected for the year ended December 31, 2012. The increase in rate and tax expense as compared to the fourth quarter of 2011 was primarily due to an increase in pre-tax income for the fourth quarter of 2012.

Income tax expense was $66.7 million for the year ended December 31, 2012, reflecting an effective tax rate of 31.7 percent, compared with $62.7 million for 2011, reflecting an effective tax rate of 32.1 percent.   The slight decrease in the 2012 effective tax rate was due, in part, to an increased investment in tax favored income for 2012 as compared to 2011.

For 2013, we anticipate that our effective tax rate will approximate 33 percent.

Prior Period Results

Previously reported results for the fourth quarter of 2011 and the year ended December 31, 2011 have been revised to reflect an increase in net occupancy and equipment expense related to an adjustment for the straight-line recognition of rental expense on operating leases.  The effect of these revisions was immaterial to each period (no change in basic and diluted earnings per share for the fourth quarter of 2011 and approximately a one cent reduction in basic and diluted earnings per share for the year ended December 31, 2011).  Net income for the fourth quarter of 2011 and for the year ended December 31, 2011 was reduced by $285 thousand and $1.1 million, respectively, reflecting the after-tax increases in net occupancy and equipment expense and total non-interest expense.

About Valley

Valley National Bancorp is a regional bank holding company headquartered in Wayne, New Jersey with $16 billion in assets. Its principal subsidiary, Valley National Bank, currently operates 210 branches in 146 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;
• higher than expected loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business from the recent damages to our primary markets by Hurricane Sandy;
• declines in value in our investment portfolio, including additional other-than-temporary impairment charges on our investment securities;
• unanticipated deterioration in our loan portfolio;
• an unanticipated reduction in our "originate and sell" residential mortgage strategy or a slowdown in residential mortgage loan refinance activity;
• 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 purchased credit impaired 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 Bank