Valley National Bancorp's Mortgage Refinance Program Propels Solid Third Quarter Earnings

WAYNE, N.J., Oct. 25, 2012 /PRNewswire/ -- Valley National Bancorp (NYSE: VLY), the holding company for Valley National Bank, today reported net income for the third quarter of 2012 of $39.4 million, or $0.20 per diluted common share as compared to the third quarter of 2011 earnings of $35.4 million, or $0.20 per diluted common share and second quarter of 2012 earnings of $32.8 million, or $0.17 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.

Key highlights for the third quarter:

• Mortgage Banking Activities:  Residential mortgage loan origination volumes remained strong during the period due to the historically low market interest rates and the continued success of Valley's low fixed-price refinance programs.  Valley shifted the majority of its residential mortgage production to an "originate and sell" model during the third quarter of 2012. As a result, Valley's gains on sales of residential mortgage loans (originated for sale) totaled $25.1 million for the third quarter of 2012 as compared to $3.1 million for the second quarter of 2012 and $2.9 million for the third quarter of 2011.  See the "Loans and Deposits" section below for more details.
• Asset Quality: Non-performing assets declined 5.2 percent from the second quarter of 2012 as total non-accrual loans decreased to $121.4 million, or 1.09 percent of our entire loan portfolio of $11.1 billion, at September 30, 2012, compared to $126.2 million, or 1.10 percent, at June 30, 2012.  At September 30, 2012, our non-performing assets included 27 performing residential mortgage and home equity loans totaling $3.0 million that were reclassified to non-accrual status due to the implementation of newly issued Office of the Comptroller of the Currency (OCC) guidance.  Loan charge-offs related to the reclassified loans were immaterial for the third quarter of 2012. At September 30, 2012, residential mortgage and home equity loans delinquent 30 days or more totaled $52.9 million, or 1.77 percent of approximately $3.0 billion in total loans within these categories. Commercial real estate (excluding construction) loans delinquent 30 days or more decreased to 1.46 percent of the loan portfolio at September 30, 2012 as compared to 1.65 percent at June 30, 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 $7.3 million for the third quarter of 2012 as compared to $7.4 million for the second quarter of 2012 and $7.8 million for the third quarter of 2011. Net loan charge-offs on non-covered loans decreased to $5.9 million for the third quarter of 2012 compared to $8.7 million for the second quarter of 2012 and increased from $4.8 million for the third quarter of 2011.  At September 30, 2012, our allowance for losses on non-covered loans and unfunded letters of credit totaled $122.1 million and was 1.12 percent of non-covered loans, as compared to 1.08 percent and 1.34 percent at June 30, 2012 and September 30, 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 third quarter of 2012, second quarter of 2012 and third quarter of 2011.  Net charge-offs of covered loans totaled $2.3 million, $1.8 million and $6.1 million for the third quarter of 2012, second quarter of 2012 and third quarter of 2011, respectively.  Our allowance for losses on covered loans totaled $9.5 million, $11.8 million, and $12.6 million at September 30, 2012, June 30, 2012 and September 30, 2011, respectively.
• Net Interest Income and Margin: Net interest income totaling $121.8 million for the three months ended September 30, 2012 remained relatively unchanged as compared to both the second quarter of 2012 and the third quarter of 2011.  On a tax equivalent basis, our net interest margin decreased 6 basis points to 3.46 percent in the third quarter of 2012 as compared to 3.52 percent for the second quarter of 2012, and decreased 40 basis points from 3.86 percent for the third quarter of 2011.  The decrease in margin as compared to the linked second quarter of 2012 was mainly due to lower yields on new investment securities and loans caused by the current low level of market interest rates, partially offset by higher accretion recognized on purchased credit impaired (PCI) loans during the third quarter of 2012. See the "Net Interest Income and Margin" section below for more details.
• Loans: Total non-covered loans (i.e., loans which are not subject to our loss-sharing agreements with the FDIC) decreased by $255.9 million, or 9.1 percent on an annualized basis, to $10.9 billion at September 30, 2012 from June 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, as well as continued strong competition for high quality commercial borrowers.  However, our commercial real estate (including construction) loans and automobile loan portfolios experienced organic growth of $28.6 million and $11.1 million, or 2.4 percent and 5.7 percent on an annualized basis, respectively, during the third quarter of 2012. Total covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) decreased to $207.5 million, or 1.9 percent of our total loans, at September 30, 2012 as compared to $226.5 million at June 30, 2012, mainly due to normal payment activity.
• Investments: Other-than-temporary impairment charges recognized in earnings totaled $4.7 million ($2.7 million after taxes, or $0.01 per common share) during the third quarter of 2012 and related to previously impaired trust preferred securities issued by one bank holding company and one previously impaired private label mortgage-backed security. We recorded net gains on securities transactions totaling $1.5 million ($937 thousand after taxes, or less than $0.01 per common share) in the third quarter of 2012 as compared to $1.2 million ($754 thousand after taxes, or less than $0.01 per common share) and $863 thousand ($541 thousand after taxes, or less than $0.01 per common share) during the second quarter of 2012 and third quarter of 2011, respectively.  The net gains in the third quarter of 2012 mainly relate to the gains on sales of $100.2 million in U.S. government and agency mortgage-backed securities and $19.4 million of corporate debt securities classified as available for sale, as well as net gains recognized due to the early issuer redemption of $75.7 million in trust preferred securities.
• 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 third quarter of 2012 were immaterial and decreased $1.6 million and $770 thousand from the second quarter of 2012 and the third quarter of 2011, respectively.
• Income Tax Expense:  Our effective tax rate increased to 36.2 percent for the third quarter of 2012 as compared to 30.4 percent for the second quarter of 2012, and 27.9 percent for the third quarter of 2011.  The increase from these prior periods was largely due to the increase in pre-tax income for the third quarter of 2012 and its impact on the projected income and tax rate for the full year 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 were 12.36 percent, 10.87 percent, and 8.07 percent, respectively, at September 30, 2012.

Gerald H. Lipkin, Chairman, President and CEO commented that "We are pleased to report the solid earnings growth for the third quarter of 2012, which was led by the strength of our residential mortgage refinance program, as well as the overall credit quality of our balance sheet.  Our mortgage banking business continues to experience significant application inflows mainly through our low fixed-price refinance programs. Widening loan spreads and the current Federal Reserve monetary policies contributed to our increased focus on mortgage banking revenues during the quarter, while still maintaining the acceptable interest rate risk and mix of the loan categories within our $11.1 billion loan portfolio. During the fourth quarter of 2012 and into 2013, we expect the application pipeline and sales of new and refinanced mortgage loans to continue at a brisk pace as long as interest rates remain at current levels." Mr. Lipkin added, "We have the operating capacity and a knowledgeable team in place to continue to take full advantage of the mortgage origination opportunities within our markets." 

Net Interest Income and Margin

Net interest income on a tax equivalent basis was $123.7 million for the third quarter of 2012 and remained relatively unchanged as compared to the second quarter of 2012 and the third quarter of 2011. Interest income on a tax equivalent basis increased $493 thousand from the second quarter of 2012 mainly due to a $121.3 million increase in average loans and higher accretion on PCI loans, partially offset by a $246.2 million decline in average taxable investment securities.  The increase in interest income was more than offset by a $621 thousand increase in interest expense, which was mostly driven by a 3 basis point increase in the cost of average savings, NOW, and money market deposits and a $74.4 million increase in average time deposits.

The net interest margin on a tax equivalent basis was 3.46 percent for the third quarter of 2012, a decrease of 6 basis points from 3.52 percent in the linked second quarter of 2012, and a 40 basis point decline from 3.86 percent for the quarter ended September 30, 2011. The yield on average interest earning assets decreased by five 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 calls and sales of higher yielding securities. The yield on average loans increased 3 basis points to 5.12 percent for the three months ended September 30, 2012 from the second quarter of 2012.  However, interest income on loans included $2.1 million in accelerated interest accretion recognized on certain PCI loan pools that were fully repaid during the third quarter of 2012.  Additionally, the repayment volume of higher yielding non-PCI loans remained elevated for the third quarter of 2012 and negatively impacted the overall yield on average loans. The cost of average interest bearing liabilities declined only one basis point from 1.63 percent in the second quarter of 2012 mainly due to a 4 basis point decline in the cost of average time deposits mainly resulting from the run-off of maturing higher rate certificates of deposit.  The matured time deposits were largely replaced by lower rate retail certificates of deposit obtained through promotional campaigns in the third quarter.  The cost of average savings, NOW and money market deposits increased 3 basis points from 0.37 percent in the second quarter of 2012 due, in part, to additional interest expense related to interest rate swaps hedging certain prime rate money market deposits. The swaps, with payments commencing in July 2012, require pay fixed/receive variable-rate amounts and have an aggregate notional amount of $100 million. The cost of short-term borrowings also increased 5 basis points to 0.44 percent for the third quarter of 2012 primarily due to the slightly higher costs of average short-term FHLB advances as compared to the second quarter of 2012. Our cost of total deposits was 0.52 percent for the third quarter of 2012 compared to 0.51 percent for the three months ended June 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 1.53 percent at September 30, 2012 as compared to 1.38 percent at June 30, 2012 and 1.73 percent at September 30, 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 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.

Loans past due 30 to 89 days increased $17.1 million to $47.1 million at September 30, 2012 compared to June 30, 2012 mainly due to higher delinquencies within commercial and industrial loans and residential mortgage loans. Within this past due category, commercial and industrial loans increased $15.2 million to $17.5 million at September 30, 2012 due, in part, to an $8.9 million impaired loan with $3.7 million in related specific reserves included in our total allowance for loan losses and a $4.6 million matured performing loan in the normal process of renewal.  Residential mortgage loans past due 30 to 89 days also increased $7.0 million to $17.1 million at September 30, 2012. Valley believes the mortgage loans in this past due category are well secured, in the process of collection and do not represent a material negative trend within the residential mortgage portfolio.

Loans past due 90 days or more and still accruing increased $1.0 million to $2.5 million, or 0.02 percent of total loans, at September 30, 2012 compared to $1.5 million, or 0.01 percent at June 30, 2012.  The increase was mainly due to one matured performing construction loan in the normal process of renewal that totaled approximately $1.0 million at September 30, 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 $185.3 million at September 30, 2012 compared to $195.4 million at June 30, 2012. The $10.1 million decrease in NPAs from June 30, 2012 was largely due to a $4.8 million decline in non-accrual loans, mainly within the commercial real estate and construction loan categories caused, in part, by several full payoffs of impaired loans, as well as a $5.1 million decrease 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 $40.8 million at September 30, 2012.  The non-accrual debt securities had total combined unrealized losses (non-credit impairment) of $6.4 million and $5.8 million at September 30, 2012 and June 30, 2012, respectively.  Of the $4.7 million in other-than-temporary impairment charges recognized in earnings during the third quarter of 2012, $4.5 million related to trust preferred securities within the non-accrual debt securities category.

Non-accrual loans decreased $4.8 million to $121.4 million at September 30, 2012 as compared to $126.2 million at June 30, 2012 mainly due to the aforementioned declines in the commercial real estate and construction loan categories, and despite the addition of $3.0 million of reclassified performing residential and home equity loans to non-accrual status due to the implementation of new OCC guidance 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 $200.3 million at September 30, 2012 and had $23.9 million in related specific reserves included in our total allowance for loan losses. OREO (which consists of 27 commercial and residential properties) and other repossessed assets, excluding OREO subject to loss-sharing agreements with the FDIC, totaled $15.4 million and $7.7 million, respectively, at September 30, 2012 as compared to $14.7 million and $8.5 million, respectively, at June 30, 2012.  Loan foreclosure transfers to OREO totaled approximately $2.6 million (net of partial charge-offs to the allowance for loan losses totaling $494 thousand) during the third quarter of 2012.

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 $109.3 million at September 30, 2012 and consisted of 84 loans (primarily in the commercial and industrial loan and commercial real estate portfolios) as compared to 85 loans totaling $113.6 million at June 30, 2012.  On an aggregate basis, the $109.3 million in performing TDRs at September 30, 2012 had a modified weighted average interest rate of approximately 4.85 percent as compared to a pre-modification weighted average interest rate of 5.64 percent.

With a non-covered loan portfolio totaling $10.9 billion, net loan charge-offs on non-covered loans for the third quarter of 2012 totaled $5.9 million as compared to $8.7 million for the second quarter of 2012 and $4.8 million for the third quarter of 2011.  The decrease from the second quarter of 2012 was largely due to a decline in the partial charge-offs related to collateral valuations of impaired loans.  There were $2.3 million in charge-offs on loans in our impaired covered loan pools for the third quarter of 2012 as compared to $1.8 million and $6.1 million of charge-offs in the second quarter of 2012 and the third quarter of 2011, respectively.  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 September 30, 2012, June 30, 2012 and September 30, 2011:

The allowance for non-covered loans and unfunded letters of credit as a percentage of total non-covered loans was 1.12 percent at September 30, 2012 as compared to 1.08 percent and 1.34 percent at June 30, 2012 and September 30, 2011, respectively.  The allocation percentages for the commercial and industrial loan category shown in the table above declined from the second quarter of 2012 as loss experience and the outlook for the portfolio improved during the third quarter of 2012, while allocations for commercial real estate loans increased mainly due to higher charge-off activity. The allocation percentage in both the commercial and commercial real estate loan categories decreased from September 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 which may be used to absorb potential 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 $52.9 million for non-covered PCI loans with carrying amounts of $1.1 billion at September 30, 2012. Additionally, the allocated reserves for auto and other consumer loans declined from September 30, 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 $1.1 billion) was 1.24 percent at September 30, 2012 as compared to 1.20 percent at June 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 $255.9 million to approximately $10.9 billion at September 30, 2012 from June 30, 2012 mainly due to refinance activity within the residential mortgage loan portfolio. Residential mortgage loans decreased $245.5 million from June 30, 2012 mostly due to a large amount of refinance activity within our loans held for investment portfolio during the third quarter, of which many of the new loans were either sold in the secondary market or held for sale at September 30, 2012. Loans held for sale carried at fair value increased to $149.1 million (with $141.4 million in unpaid contractual balances) at September 30, 2012 as compared to $30.0 million (with $28.7 million in unpaid contractual balances) at June 30, 2012.  Our residential origination 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 third quarter of 2012, we originated over $451 million in new and refinanced residential mortgage loans and only retained approximately 18 percent of these loans in our loan portfolio at September 30, 2012.  Loan servicing rights recognized for the retained servicing of the loans sold during the third quarter totaled $4.4 million at September 30, 2012.  We expect to continue an "originate and sell" model for a large portion of our mortgage loan originations during the fourth quarter and into 2013 assuming that market conditions do not adversely change.  During the early part of the fourth quarter of 2012, application volume continues to be very strong.  Our residential mortgage refinance activity in New York is beginning to take hold and we are optimistic that the refinance volume should remain strong at least into the foreseeable future.  Commercial and industrial loans decreased $46.8 million from June 30, 2012 mainly due to soft loan demand, full loan repayments from a few large borrowers, including loans which were internally criticized, as well as the continued impact of strong market competition for quality credits on our ability to achieve growth in this loan category. Home equity loans declined $7.4 million from June 30, 2012 as origination volumes continued to be outpaced by normal loan payments and prepayments. Commercial real estate loans (including construction loans) increased $28.6 million, or 2.4 percent on an annualized basis, from June 30, 2012 to $4.9 billion at September 30, 2012.  The quarter over quarter growth in this loan category is largely a product of improved single-family housing and apartment building construction loan demand within certain areas of our New Jersey market.  Automobile loans also increased by $11.1 million, or 5.7 percent on an annualized basis, to $789.2 million at September 30, 2012 as compared to June 30, 2012 due, in part, to $12.4 million in purchased loans during the third quarter.  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.

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 $207.5 million at September 30, 2012 as compared to $226.5 million at June 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 third quarter of 2012, we reduced our FDIC loss-share receivable by $2.1 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 $2.2 million during the second quarter of 2012.  

Deposits. Total deposits increased $49.1 million to approximately $10.9 billion at September 30, 2012 from June 30, 2012 mostly due to higher time deposit balances.  Valley's time deposits totaling $2.7 billion at September 30, 2012 increased $73.6 million as compared to June 30, 2012 largely due to the success of retail promotional campaigns for short-term certificates of deposit, partially offset by the continued run-off of maturing higher cost certificates of deposit. Valley's non-interest bearing deposits totaling $3.2 billion at September 30, 2012 moderately declined by $25.4 million from June 30, 2012 partly due to the better short-term time deposit rates offered by Valley. Savings, NOW and money market accounts remained relatively unchanged at September 30, 2012 as compared to June 30, 2012.

Non-Interest Income

Non-interest income for the third quarter of 2012 increased $16.5 million from $24.0 million for the linked quarter ended June 30, 2012 largely due to a $21.9 million increase in net gains on sales of residential mortgage loans. The increase was primarily due to a higher level of loan originations for sale, resulting strong mortgage loan demand due to the current low level of interest rates, our success with low fixed-price refinance programs, and our shift to an "originate and sell" model during the third quarter of 2012.  See "Loans and Deposits" section above for more details. The reduction in non-interest income attributable to the change in the FDIC loss-share receivable was $390 thousand compared to $7.0 million for the second quarter of 2012. The smaller reduction in non-interest income was primarily due to the reversal of the FDIC loss-share receivable related to the expiration of unused lines of credit covered under loss-sharing agreements during the second quarter of 2012. Other non-interest income decreased $7.0 million from $11.3 million for the three months ended June 30, 2012 largely due to the reversal of $7.4 million in liabilities related to these same expired and unused lines of credit assumed in FDIC-assisted transactions during the second quarter of 2012. Partially offsetting these increases in non-interest income, net impairment losses on securities increased $4.1 million from $550 thousand in the second quarter of 2012 and net trading gains decreased $1.6 million to $6 thousand for the third quarter of 2012 compared to the second quarter of 2012.

Non-Interest Expense

Non-interest expense increased by $1.7 million from $91.5 million for the linked quarter ended June 30, 2012 mainly due to a $2.2 million increase in other non-interest expense caused, in part, by higher OREO expenses during the third quarter of 2012, as well as increases in several general expense categories.  The FDIC insurance assessment and net occupancy and equipment expenses also increased $707 thousand and $563 thousand, respectively, as compared to the linked quarter. Partially offsetting the increases to non-interest expense, salary and employee benefit expense decreased $1.9 million from $51.2 million for the second quarter of 2012 mainly due to lower payroll taxes and cash incentive compensation accruals.

Income Tax Expense

Income tax expense was $22.4 million and $13.7 million for the three months ended September 30, 2012 and 2011, respectively.  The effective tax rate increased by 8.3 percent to 36.2 percent for the third quarter of 2012 as compared to 27.9 percent for the third quarter of 2011 largely due to the significant increase in pre-tax income during the third quarter of 2012 and its impact on the projected income and tax rate for the full year of 2012.

Income tax expense was $52.0 million and $56.0 million for the nine months ended September 30, 2012 and 2011, respectively.  The effective tax rate decreased by 1.2 percent to 32.8 percent for the nine months ended September 30, 2012 as compared to 34.0 percent for the same period of 2011 mainly due to an $8.5 million incremental tax provision in 2011 related to a change in state tax law, partially offset by the aforementioned increase in pre-tax income during the third quarter of 2012.

For the fourth quarter of 2012, we anticipate that our effective tax rate will approximate 33 percent.      

About Valley

Valley National Bancorp is a regional bank holding company headquartered in Wayne, New Jersey with approximately $15.8 billion in assets. Its principal subsidiary, Valley National Bank, currently operates 210 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;
• 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. 

SOURCE Valley National Bancorp