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Valley National Bancorp Reports Fourth Quarter 2023 Results
المصدر: Nasdaq GlobeNewswire / 25 يناير 2024 07:00:43 America/New_York
NEW YORK, Jan. 25, 2024 (GLOBE NEWSWIRE) -- Valley National Bancorp (NASDAQ:VLY), the holding company for Valley National Bank, today reported net income for the fourth quarter 2023 of $71.6 million, or $0.13 per diluted common share, as compared to the fourth quarter 2022 net income of $177.6 million, or $0.34 per diluted common share, and net income of $141.3 million, or $0.27 per diluted common share, for the third quarter 2023. Excluding all non-core items, our adjusted net income (a non-GAAP measure) was $116.3 million, or $0.22 per diluted common share, for the fourth quarter 2023, $182.9 million, or $0.35 per diluted common share, for the fourth quarter 2022, and $136.4 million, or $0.26 per diluted common share, for the third quarter 2023. See further details below, including a reconciliation of our adjusted net income in the "Consolidated Financial Highlights" tables.
Key Financial Highlights for the Fourth Quarter 2023:
- Loan Portfolio: Loan growth in most categories remained at modest levels during the fourth quarter 2023 due to the ongoing impact of elevated market interest rates and other factors. Total loans increased $112.8 million, or 1.0 percent on an annualized basis, to $50.2 billion at December 31, 2023 from September 30, 2023, mainly as a result of well-controlled organic loan growth in the commercial real estate and consumer loan categories. Annualized loan growth totaled 7.0 percent for the year ended December 31, 2023. See the "Loans" section below for more details.
- Allowance and Provision for Credit Losses for Loans: The allowance for credit losses for loans totaled $465.6 million and $462.3 million at December 31, 2023 and September 30, 2023, respectively, representing 0.93 percent and 0.92 percent of total loans at each respective date. During the fourth quarter 2023, the provision for credit losses for loans was $20.7 million as compared to $9.1 million and $7.3 million for the third quarter 2023 and fourth quarter 2022, respectively. See the "Credit Quality" section below for more details.
- Credit Quality: Net loan charge-offs totaled $17.5 million for the fourth quarter 2023 as compared to $5.5 million and $22.4 million for the third quarter 2023 and fourth quarter 2022, respectively. The loan charge-offs in the fourth quarter 2023 were primarily due to partial charge-offs of certain non-performing loan relationships in the commercial loan categories. Total accruing past due loans increased $12.1 million to $91.6 million, or 0.18 percent of total loans, at December 31, 2023 as compared to $79.5 million, or 0.16 percent of total loans, at September 30, 2023. Non-accrual loans represented 0.58 percent and 0.52 percent of total loans at December 31, 2023 and September 30, 2023, respectively. See the "Credit Quality" section below for more details.
- Deposits: Total deposits decreased $642.5 million to $49.2 billion at December 31, 2023 as compared to $49.9 billion at September 30, 2023. During the fourth quarter 2023, a $2.4 billion reduction in indirect customer time deposits was partially offset by $1.7 billion of direct customer deposit inflows across the franchise. See the "Deposits" section below for more details.
- Net Interest Income and Margin: Net interest income on a tax equivalent basis of $398.6 million for the fourth quarter 2023 decreased $15.1 million and $68.7 million as compared to the third quarter 2023 and fourth quarter 2022, respectively. Our net interest margin on a tax equivalent basis decreased by 9 basis points to 2.82 percent in the fourth quarter 2023 as compared to 2.91 percent for the third quarter 2023. The decline in both net interest income and margin as compared to the linked third quarter reflects the ongoing repricing of our interest bearing deposits, net of a 7 basis point increase in the yield of average interest earnings assets for the fourth quarter 2023. See the "Net Interest Income and Margin" section below for more details.
- Non-Interest Income: Non-interest income decreased $6.0 million to $52.7 million for the fourth quarter 2023 as compared to the third quarter 2023 mainly due to a $6.8 million decrease in net gains on sales of assets (primarily caused by the net gain on sale of non-branch offices during the third quarter 2023).
- Non-Interest Expense: Non-interest expense increased $73.3 million to $340.4 million for the fourth quarter 2023 as compared to the third quarter 2023 largely due to non-core charges of $50.3 million and $10.0 million related to the FDIC special assessment and the termination of certain technology contracts, respectively, during the fourth quarter 2023. Professional and legal fees increased $8.1 million as compared to the third quarter 2023 due, in part, to elevated consulting expenses related to our new core banking system implemented in early October 2023, as well as additional non-core legal reserves and settlement charges totaling a combined $3.5 million during the fourth quarter 2023.
- Income Tax Expense: Our effective tax rate was 19.6 percent for the fourth quarter 2023 as compared to 27.5 percent for the third quarter 2023. The decrease was mostly due to an increase in tax credits caused by additional tax credit investments during the fourth quarter 2023.
- Efficiency Ratio: Our efficiency ratio was 60.70 percent for the fourth quarter 2023 as compared to 56.72 percent and 49.30 percent for the third quarter 2023 and fourth quarter 2022, respectively. See the "Consolidated Financial Highlights" tables below for additional information regarding our non-GAAP measures.
- Performance Ratios: Annualized return on average assets (ROA), shareholders’ equity (ROE), and tangible ROE were 0.47 percent, 4.31 percent, and 6.21 percent for the fourth quarter 2023, respectively. Annualized ROA, ROE, and tangible ROE, adjusted for non-core items, were 0.76 percent, 7.01 percent, and 10.10 percent for the fourth quarter 2023, respectively. See the "Consolidated Financial Highlights" tables below for additional information regarding our non-GAAP measures.
In January 2024, we entered an agreement to sell our commercial premium finance lending business and a significant portion of its outstanding loan portfolio. This line of business represented $274.7 million, or 0.55 percent of our total loans outstanding at December 31, 2023. Actual loans to be sold as part of this transaction will be identified shortly before the close date. Loans retained from this line of business are expected to mostly run-off at their normal maturity dates over the next 12 months. The pending transaction is expected to close during the first quarter 2024 and is not anticipated to be material to our operations or financial statements.
Ira Robbins, CEO, commented, "The year of 2023 presented significant challenges for most of the banking industry and Valley. That said, I am pleased with our ability to respond to the challenges early in the year, and find opportunities to enhance our funding and capital position as the year progressed. This, along with our asset quality, is a testament to our dedicated associates and diversified business model."
Mr. Robbins continued, "As we look forward to 2024, we will continue our efforts to build the value of our franchise with a focus on our key strategic priorities, including further diversifying our loan portfolio, enhancing our core funding base, and lastly improving our non-interest income sources. We believe that these initiatives, and a continued emphasis on providing premier relationship banking services, will further differentiate Valley as a leading regional bank."
Net Interest Income and Margin
Net interest income on a tax equivalent basis totaling $398.6 million for the fourth quarter 2023 decreased $15.1 million and $68.7 million as compared to the third quarter 2023 and fourth quarter 2022, respectively. The decrease as compared to the third quarter 2023 was mainly due to increased interest rates on most interest bearing deposit products, partially offset by higher loan yields and a decline in average time deposit balances. As a result of the higher cost of deposits, total interest expense increased $20.3 million to $420.9 million for the fourth quarter 2023 as compared to the third quarter 2023. Interest income on a tax equivalent basis increased $5.2 million to $819.5 million for the fourth quarter 2023 as compared to the third quarter 2023. The increase in the fourth quarter 2023 was mostly due to higher yields on both new originations and adjustable rate loans in our portfolio, as well as higher yields on investments, partially offset by a decline in average interest bearing deposits with banks as overnight excess cash liquidity was reduced as compared to the third quarter 2023.
Net interest margin on a tax equivalent basis of 2.82 percent for the fourth quarter 2023 decreased 9 basis points and 75 basis points from 2.91 percent and 3.57 percent, respectively, for the third quarter 2023 and fourth quarter 2022. The decrease as compared to the third quarter 2023 was largely driven by higher interest rates on interest bearing deposits, partially offset by an increase in the yield on average interest earning assets. Our cost of total average deposits was 3.13 percent for the fourth quarter 2023 as compared to 2.94 percent for the third quarter 2023. The overall cost of average interest-bearing liabilities increased by 21 basis points to 4.13 percent for the fourth quarter 2023 as compared to the linked third quarter 2023 primarily driven by the continued rise in market interest rates on deposits. The yield on average interest earning assets increased by 7 basis points to 5.80 basis points on a linked quarter basis largely due to the increased yield of the loan portfolio. The yield on average loans increased to 6.10 percent for the fourth quarter 2023 from 6.03 percent for the third quarter 2023 mostly due to the higher level of market interest rates on new originations and adjustable rate loans.
Loans, Deposits and Other Borrowings
Loans. Total loans modestly increased to approximately $112.8 million to $50.2 billion at December 31, 2023 from September 30, 2023 mainly due to well-controlled organic loan growth in the commercial real estate and consumer loan categories. Total commercial real estate (including construction) loans increased $95.7 million or 1.2 percent on an annualized basis during the fourth quarter 2023. Automobile loans increased by $34.4 million, or 8.7 percent on an annualized basis during the fourth quarter 2023 partly due to an uptick in demand for commercial vehicle financing. At December 31, 2023, the residential mortgage loan portfolio totaled $5.6 billion and remained relatively unchanged as compared to September 30, 2023. During the fourth quarter 2023, we sold $49.9 million of residential mortgage loans originated for sale as compared to $80.8 million in the third quarter 2023.
Deposits. Total deposits decreased $642.5 million to approximately $49.2 billion at December 31, 2023 from September 30, 2023 mainly due to a decline of $1.9 billion in time deposits, partially offset by a $1.4 billion increase in savings, NOW and money market deposits. The decrease in time deposits was largely due to maturities of indirect customer time deposits, which were partially offset by the origination of new direct time deposits. The increase in savings, NOW and money market deposits was mostly broad-based, reflecting strong customer inflows from both our physical branch and online delivery channels, as well as our niche deposit businesses. Non-interest bearing balances remained relatively stable as compared to September 30, 2023, as outflows slowed significantly during the fourth quarter 2023. Non-interest bearing deposits; savings, NOW, and money market deposits; and time deposits represented approximately 23 percent, 50 percent and 27 percent of total deposits as of December 31, 2023, respectively, as compared to 24 percent, 46 percent and 30 percent of total deposits as of September 30, 2023, respectively.
Other Borrowings. Short-term borrowings increased $828.0 million to approximately $917.8 million at December 31, 2023 as compared to September 30, 2023 mainly due to greater utilization of FHLB advances as part of our liquidity management strategies as of December 31, 2023 and a corresponding decline in indirect customer time deposits (see the "Deposits" section above). Long-term borrowings totaled $2.3 billion at December 31, 2023 and remained relatively unchanged as compared to September 30, 2023.
Credit Quality
Non-Performing Assets (NPAs). Total NPAs, consisting of non-accrual loans, other real estate owned (OREO) and other repossessed assets increased $33.1 million to $293.4 million at December 31, 2023 compared to $260.3 million at September 30, 2023 largely due to higher non-accrual loan balances within commercial loans categories. Non-accrual commercial real estate and commercial and industrial loans increased $16.4 million and $12.3 million, respectively, as compared to September 30, 2023. These increases were mostly driven by a few new non-performing loan relationships, partially offset by full repayments of two non-accrual commercial real estate loans totaling $12.7 million during the fourth quarter 2023. Non-accrual loans represented 0.58 percent of total loans at December 31, 2023 as compared to 0.52 percent of total loans at September 30, 2023. Within non-accrual commercial real estate loans at December 31, 2023, one loan totaling $9.1 million, net of partial charge-offs of $1.5 million during the fourth quarter 2023, was paid off in early January 2024.
Accruing Past Due Loans. Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) increased $12.1 million to $91.6 million, or 0.18 percent of total loans, at December 31, 2023 as compared to $79.5 million, or 0.16 percent of total loans, at September 30, 2023. Loans 30 to 59 days past due increased $11.8 million to $59.2 million at December 31, 2023 as compared to September 30, 2023 largely due to higher residential mortgage delinquencies, partially offset by declines in commercial real estate and commercial and industrial loans within this early stage delinquency category. Loans 90 days or more past due totaled $13.1 million at December 31, 2023 as compared to $12.4 million at September 30, 2023. All loans 90 days or more past due and still accruing interest are well-secured and in the process of collection.
Allowance for Credit Losses for Loans and Unfunded Commitments. The following table summarizes the allocation of the allowance for credit losses to loan categories and the allocation as a percentage of each loan category at December 31, 2023, September 30, 2023, and December 31, 2022:
December 31, 2023 September 30, 2023 December 31, 2022 Allocation Allocation Allocation as a % of as a % of as a % of Allowance Loan Allowance Loan Allowance Loan Allocation Category Allocation Category Allocation Category ($ in thousands) Loan Category: Commercial and industrial loans $ 133,359 1.44 % $ 133,988 1.44 % $ 139,941 1.59 % Commercial real estate loans: Commercial real estate 194,820 0.69 191,562 0.68 200,421 0.78 Construction 54,778 1.47 53,485 1.40 58,987 1.59 Total commercial real estate loans 249,598 0.78 245,047 0.77 259,408 0.88 Residential mortgage loans 42,957 0.77 44,621 0.80 39,020 0.73 Consumer loans: Home equity 3,429 0.61 3,689 0.67 4,333 0.86 Auto and other consumer 16,737 0.58 14,830 0.52 15,953 0.57 Total consumer loans 20,166 0.59 18,519 0.55 20,286 0.61 Allowance for loan losses 446,080 0.89 442,175 0.88 458,655 0.98 Allowance for unfunded credit commitments 19,470 20,170 24,600 Total allowance for credit losses for loans $ 465,550 $ 462,345 $ 483,255 Allowance for credit losses for loans as a % loans 0.93 % 0.92 % 1.03 % Our loan portfolio, totaling $50.2 billion at December 31, 2023, had net loan charge-offs totaling $17.5 million for the fourth quarter 2023 as compared to $5.5 million and $22.4 million for the third quarter 2023 and the fourth quarter 2022, respectively. Gross charge-offs totaled $22.6 million for the fourth quarter 2023 and largely consisted of partial loan charge-offs in the commercial loan categories, including approximately $4.7 million of gross loan charge-offs related to our premium finance lending business expected to be sold during the first quarter 2024.
The allowance for credit losses for loans, comprised of our allowance for loan losses and unfunded credit commitments, as a percentage of total loans was 0.93 percent at December 31, 2023, 0.92 percent at September 30, 2023 and 1.03 percent at December 31, 2022. During the fourth quarter 2023, the provision for credit losses for loans totaled $20.7 million as compared to $9.1 million for the third quarter 2023 and $7.3 million for the fourth quarter 2022. The provision for credit losses for the fourth quarter 2023 reflects, among other factors, an increase in quantitative reserves largely related to classified loans within the commercial portfolios and higher specific reserves associated with collateral dependent loans, partially offset by lower qualitative and economic forecast reserves at December 31, 2023.
Capital Adequacy
Valley's regulatory capital ratios continue to reflect its well-capitalized position. Valley's total risk-based capital, Tier 1 capital, common equity Tier 1 capital, and Tier 1 leverage capital ratios were 11.76 percent, 9.72 percent, 9.29 percent, and 8.16 percent, respectively, at December 31, 2023.
Investor Conference Call
Valley will host a conference call with investors and the financial community at 11:00 A.M. Eastern Standard Time, today to discuss the fourth quarter 2023 earnings and related matters. Interested parties should pre-register using this link: https://register.vevent.com/register to receive the dial-in number and a personal PIN, which are required to access the conference call. The teleconference will also be webcast live: https://edge.media-server.com/ and archived on Valley’s website through February 29, 2024.
About Valley
As the principal subsidiary of Valley National Bancorp, Valley National Bank is a regional bank with approximately $61 billion in assets. Valley is committed to giving people and businesses the power to succeed. Valley operates many convenient branch locations and commercial banking offices across New Jersey, New York, Florida, Alabama, California, and Illinois, and is committed to providing the most convenient service, the latest innovations and an experienced and knowledgeable team dedicated to meeting customer needs. Helping communities grow and prosper is the heart of Valley’s corporate citizenship philosophy. To learn more about Valley, go to www.valley.com or call our Customer Care Center 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 our business, 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 “intend,” “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “typically,” “usually,” “anticipate,” “may,” “estimate,” “outlook,” “project” 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:
- the impact of monetary and fiscal policies of the federal government and its agencies, including in response to higher inflation, which could have a material adverse effect on our clients, as well as our business, our employees, and our ability to provide services to our customers;
- the impact of a potential U.S. Government shutdown, default by the U.S. government on its debt obligations, or related credit-rating downgrades, on economic activity in the markets in which we operate and, in general, on levels of end market demand in the economy;
- the impact of unfavorable macroeconomic conditions or downturns, instability or volatility in financial markets, unanticipated loan delinquencies, loss of collateral, decreased service revenues, increased business disruptions or failures, reductions in employment, and other potential negative effects on our business, employees or clients caused by factors outside of our control, such as geopolitical instabilities or events (including the Israel-Hamas war); natural and other disasters (including severe weather events); health emergencies; acts of terrorism or other external events;
- risks associated with our acquisition of Bank Leumi Le-Israel Corporation (Bank Leumi USA), including (i) the inability to realize expected cost savings and synergies from the acquisition in the amounts or timeframe anticipated and (ii) greater than expected costs or difficulties relating to integration as part of Valley's new core banking system implemented in the fourth quarter 2023;
- the impact of potential instability within the U.S. financial sector in the aftermath of the banking failures in 2023, including the possibility of a run on deposits by a coordinated deposit base, and the impact of the actual or perceived soundness, or concerns about the creditworthiness of other financial institutions, including any resulting disruption within the financial markets, increased expenses, including FDIC insurance premiums, or adverse impact on our stock price, deposits or our ability to borrow or raise capital;
- the impact of negative public opinion regarding Valley or banks in general that damages our reputation and adversely impacts business and revenues;
- the loss of or decrease in lower-cost funding sources within our deposit base;
- damage verdicts or settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent, trademark or other intellectual property infringement, misappropriation or other violation, employment related claims, and other matters;
- a prolonged downturn in the economy, as well as an unexpected decline in commercial real estate values collateralizing a significant portion of our loan portfolio;
- higher or lower than expected income tax expense or tax rates, including increases or decreases resulting from changes in uncertain tax position liabilities, tax laws, regulations and case law;
- the inability to grow customer deposits to keep pace with loan growth;
- a material change in our allowance for credit losses under CECL due to forecasted economic conditions and/or unexpected credit deterioration in our loan and investment portfolios;
- the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;
- greater than expected technology related costs due to, among other factors, prolonged or failed implementations, additional project staffing and obsolescence caused by continuous and rapid market innovations;
- cyberattacks, ransomware attacks, computer viruses, malware or other cybersecurity incidents that may breach the security of our websites or other systems or networks to obtain unauthorized access to personal, confidential, proprietary or sensitive information, destroy data, disable or degrade service, or sabotage our systems or networks;
- results of examinations by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank, the Consumer Financial Protection Bureau (CFPB) and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;
- our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements or a decision to increase capital by retaining more earnings;
- unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other public health crises, acts of terrorism or other external events; and
- unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors.
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, 2022 and in Item 1A of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.
The financial results and disclosures reported in this release are preliminary. Final 2023 financial results and other disclosures will be reported in our Annual Report on Form 10-K for the year ended December 31, 2023, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.
We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations, except as required by law. 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.
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SELECTED FINANCIAL DATA
Three Months Ended Years Ended December 31, September 30, December 31, December 31, ($ in thousands, except for share data) 2023 2023 2022 2023 2022 FINANCIAL DATA: Net interest income - FTE (1) $ 398,581 $ 413,657 $ 467,233 $ 1,670,973 $ 1,660,468 Net interest income 397,275 412,418 465,819 1,665,478 1,655,640 Non-interest income 52,691 58,664 52,796 225,729 206,793 Total revenue 449,966 471,082 518,615 1,891,207 1,862,433 Non-interest expense 340,421 267,133 266,240 1,162,691 1,024,949 Pre-provision net revenue 109,545 203,949 252,375 728,516 837,484 Provision for credit losses 20,580 9,117 7,239 50,184 56,817 Income tax expense 17,411 53,486 67,545 179,821 211,816 Net income 71,554 141,346 177,591 498,511 568,851 Dividends on preferred stock 4,104 4,127 3,630 16,135 13,146 Net income available to common stockholders $ 67,450 $ 137,219 $ 173,961 $ 482,376 $ 555,705 Weighted average number of common shares outstanding: Basic 507,683,229 507,650,668 506,359,704 507,532,365 485,434,918 Diluted 509,714,526 509,256,599 509,301,813 509,245,768 487,817,710 Per common share data: Basic earnings $ 0.13 $ 0.27 $ 0.34 $ 0.95 $ 1.14 Diluted earnings 0.13 0.27 0.34 0.95 1.14 Cash dividends declared 0.11 0.11 0.11 0.44 0.44 Closing stock price - high 11.10 10.30 12.92 12.59 15.02 Closing stock price - low 7.71 7.63 10.96 6.59 10.14 FINANCIAL RATIOS: Net interest margin 2.81 % 2.90 % 3.56 % 2.95 % 3.44 % Net interest margin - FTE (1) 2.82 2.91 3.57 2.96 3.45 Annualized return on average assets 0.47 0.92 1.25 0.82 1.09 Annualized return on avg. shareholders' equity 4.31 8.56 11.23 7.60 9.50 NON-GAAP FINANCIAL DATA AND RATIOS: (3) Basic earnings per share, as adjusted $ 0.22 $ 0.26 $ 0.35 $ 1.06 $ 1.31 Diluted earnings per share, as adjusted 0.22 0.26 0.35 1.06 1.31 Annualized return on average assets, as adjusted 0.76 % 0.89 % 1.29 % 0.91 % 1.25 % Annualized return on average shareholders' equity, as adjusted 7.01 8.26 11.56 8.45 10.87 Annualized return on avg. tangible shareholders' equity 6.21 % 12.39 % 16.70 % 11.05 % 14.08 % Annualized return on average tangible shareholders' equity, as adjusted 10.10 11.95 17.20 12.29 16.10 Efficiency ratio 60.70 56.72 49.30 56.62 50.55 AVERAGE BALANCE SHEET ITEMS: Assets $ 61,113,553 $ 61,391,688 $ 56,913,215 $ 61,065,897 $ 52,182,310 Interest earning assets 56,469,468 56,802,565 52,405,601 56,500,528 48,067,381 Loans 50,039,429 50,019,414 46,086,363 49,351,861 41,930,353 Interest bearing liabilities 40,753,313 40,829,078 33,596,874 40,042,506 30,190,267 Deposits 49,460,571 49,848,446 46,234,857 48,491,669 42,451,465 Shareholders' equity 6,639,906 6,605,786 6,327,970 6,558,768 5,985,236 As of BALANCE SHEET ITEMS: December 31, September 30, June 30, March 31, December 31, (In thousands) 2023 2023 2023 2023 2022 Assets $ 60,934,974 $ 61,183,352 $ 61,703,693 $ 64,309,573 $ 57,462,749 Total loans 50,210,295 50,097,519 49,877,248 48,659,966 46,917,200 Deposits 49,242,829 49,885,314 49,619,815 47,590,916 47,636,914 Shareholders' equity 6,701,391 6,627,299 6,575,184 6,511,581 6,400,802 LOANS: (In thousands) Commercial and industrial $ 9,230,543 $ 9,274,630 $ 9,287,309 $ 9,043,946 $ 8,804,830 Commercial real estate: Commercial real estate 28,243,239 28,041,050 27,793,072 27,051,111 25,732,033 Construction 3,726,808 3,833,269 3,815,761 3,725,967 3,700,835 Total commercial real estate 31,970,047 31,874,319 31,608,833 30,777,078 29,432,868 Residential mortgage 5,569,010 5,562,665 5,560,356 5,486,280 5,364,550 Consumer: Home equity 559,152 548,918 535,493 516,592 503,884 Automobile 1,620,389 1,585,987 1,632,875 1,717,141 1,746,225 Other consumer 1,261,154 1,251,000 1,252,382 1,118,929 1,064,843 Total consumer loans 3,440,695 3,385,905 3,420,750 3,352,662 3,314,952 Total loans $ 50,210,295 $ 50,097,519 $ 49,877,248 $ 48,659,966 $ 46,917,200 CAPITAL RATIOS: Book value per common share $ 12.79 $ 12.64 $ 12.54 $ 12.41 $ 12.23 Tangible book value per common share (3) 8.79 8.63 8.51 8.36 8.15 Tangible common equity to tangible assets (3) 7.58 % 7.40 % 7.24 % 6.82 % 7.45 % Tier 1 leverage capital 8.16 8.08 7.86 7.96 8.23 Common equity tier 1 capital 9.29 9.21 9.03 9.02 9.01 Tier 1 risk-based capital 9.72 9.64 9.47 9.46 9.46 Total risk-based capital 11.76 11.68 11.52 11.58 11.63 Three Months Ended Years Ended ALLOWANCE FOR CREDIT LOSSES: December 31, September 30, December 31, December 31, ($ in thousands) 2023 2023 2022 2023 2022 Allowance for credit losses for loans Beginning balance $ 462,345 $ 458,676 $ 498,408 $ 483,255 $ 375,702 Impact of the adoption of ASU No. 2022-02 — — — (1,368 ) — Allowance for purchased credit deteriorated (PCD) loans, net (2) — — — — 70,319 Beginning balance, adjusted 462,345 458,676 498,408 481,887 446,021 Loans charged-off: Commercial and industrial (10,616 ) (7,487 ) (22,106 ) (48,015 ) (33,250 ) Commercial real estate (8,814 ) (255 ) (388 ) (11,134 ) (4,561 ) Construction (1,906 ) — — (11,812 ) — Residential mortgage (25 ) (20 ) (1 ) (194 ) (28 ) Total consumer (1,274 ) (1,156 ) (1,544 ) (4,298 ) (4,057 ) Total loans charged-off (22,635 ) (8,918 ) (24,039 ) (75,453 ) (41,896 ) Charged-off loans recovered: Commercial and industrial 4,655 3,043 1,069 11,270 17,081 Commercial real estate 1 5 13 34 2,073 Residential mortgage 15 30 17 201 711 Total consumer 473 362 498 1,986 2,929 Total loans recovered 5,144 3,440 1,597 13,491 22,794 Total net charge-offs (17,491 ) (5,478 ) (22,442 ) (61,962 ) (19,102 ) Provision for credit losses for loans 20,696 9,147 7,289 45,625 56,336 Ending balance $ 465,550 $ 462,345 $ 483,255 $ 465,550 $ 483,255 Components of allowance for credit losses for loans: Allowance for loan losses $ 446,080 $ 442,175 $ 458,655 $ 446,080 $ 458,655 Allowance for unfunded credit commitments 19,470 20,170 24,600 19,470 24,600 Allowance for credit losses for loans $ 465,550 $ 462,345 $ 483,255 $ 465,550 $ 483,255 Components of provision for credit losses for loans: Provision for credit losses for loans $ 21,396 $ 11,221 $ 5,353 $ 50,755 $ 48,236 (Credit) provision for unfunded credit commitments (700 ) (2,074 ) 1,936 (5,130 ) 8,100 Total provision for credit losses for loans $ 20,696 $ 9,147 $ 7,289 $ 45,625 $ 56,336 Annualized ratio of total net charge-offs to average loans 0.14 % 0.04 % 0.19 % 0.13 % 0.05 % Allowance for credit losses as a % of total loans 0.93 % 0.92 % 1.03 % 0.93 % 1.03 % As of ASSET QUALITY: December 31, September 30, June 30, March 31, December 31, ($ in thousands) 2023 2023 2023 2023 2022 Accruing past due loans: 30 to 59 days past due: Commercial and industrial $ 9,307 $ 10,687 $ 6,229 $ 20,716 $ 11,664 Commercial real estate 3,008 8,053 3,612 13,580 6,638 Residential mortgage 26,345 13,159 15,565 12,599 16,146 Total consumer 20,554 15,509 8,431 7,845 9,087 Total 30 to 59 days past due 59,214 47,408 33,837 54,740 43,535 60 to 89 days past due: Commercial and industrial 5,095 5,720 7,468 24,118 12,705 Commercial real estate 1,257 2,620 — — 3,167 Residential mortgage 8,200 9,710 1,348 2,133 3,315 Total consumer 4,715 1,720 4,126 1,519 1,579 Total 60 to 89 days past due 19,267 19,770 12,942 27,770 20,766 90 or more days past due: Commercial and industrial 5,579 6,629 6,599 8,927 18,392 Commercial real estate — — 2,242 — 2,292 Construction 3,990 3,990 3,990 6,450 3,990 Residential mortgage 2,488 1,348 1,165 1,668 1,866 Total consumer 1,088 391 1,006 747 47 Total 90 or more days past due 13,145 12,358 15,002 17,792 26,587 Total accruing past due loans $ 91,626 $ 79,536 $ 61,781 $ 100,302 $ 90,888 Non-accrual loans: Commercial and industrial $ 99,912 $ 87,655 $ 84,449 $ 78,606 $ 98,881 Commercial real estate 99,739 83,338 82,712 67,938 68,316 Construction 60,851 62,788 63,043 68,649 74,230 Residential mortgage 26,986 21,614 20,819 23,483 25,160 Total consumer 4,383 3,545 3,068 3,318 3,174 Total non-accrual loans 291,871 258,940 254,091 241,994 269,761 Other real estate owned (OREO) 71 71 824 1,189 286 Other repossessed assets 1,444 1,314 1,230 1,752 1,937 Total non-performing assets $ 293,386 $ 260,325 $ 256,145 $ 244,935 $ 271,984 Total non-accrual loans as a % of loans 0.58 % 0.52 % 0.51 % 0.50 % 0.57 % Total accruing past due and non-accrual loans as a % of loans 0.76 % 0.68 % 0.63 % 0.70 % 0.77 % Allowance for losses on loans as a % of non-accrual loans 152.83 % 170.76 % 171.76 % 180.54 % 170.02 % NOTES TO SELECTED FINANCIAL DATA
(1 ) Net interest income and net interest margin are presented on a tax equivalent basis using a 21 percent federal tax rate. Valley believes that this presentation provides comparability of net interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice and SEC rules. (2 ) Represents the allowance for acquired PCD loans, net of PCD loan charge-offs totaling $62.4 million in the second quarter 2022. (3 ) Non-GAAP Reconciliations. This press release contains certain supplemental financial information, described in the Notes below, which has been determined by methods other than U.S. Generally Accepted Accounting Principles ("GAAP") that management uses in its analysis of Valley's performance. The Company believes that the non-GAAP financial measures provide useful supplemental information to both management and investors in understanding Valley’s underlying operational performance, business and performance trends, and may facilitate comparisons of our current and prior performance with the performance of others in the financial services industry. Management utilizes these measures for internal planning, forecasting and analysis purposes. Management believes that Valley’s presentation and discussion of this supplemental information, together with the accompanying reconciliations to the GAAP financial measures, also allows investors to view performance in a manner similar to management. These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with U.S. GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies. Non-GAAP Reconciliations to GAAP Financial Measures
Three Months Ended Years Ended December 31, September 30, December 31, December 31, ($ in thousands, except for share data) 2023 2023 2022 2023 2022 Adjusted net income available to common shareholders (non-GAAP): Net income, as reported (GAAP) $ 71,554 $ 141,346 $ 177,591 $ 498,511 $ 568,851 Add: FDIC Special assessment (net of tax)(a) 36,053 — — 36,053 — Less: Net (gains) losses on available for sale and held to maturity securities transactions (net of tax)(b) (629 ) 318 5 (288 ) (69 ) Add: Restructuring charge (net of tax)(c) (386 ) (484 ) — 7,145 — Add: Provision for credit losses for available for sale securities (d) — — — 5,000 — Add: Non-PCD provision for credit losses (net of tax)(e) — — — — 29,282 Add: Merger related expenses (net of tax)(f) 7,168 — 5,285 10,130 52,388 Less: Net gains on sales of office buildings (net of tax)(g) — (4,817 ) — (4,817 ) — Add: Litigation reserve (net of tax)(h) 2,537 — — 2,537 — Net income, as adjusted (non-GAAP) $ 116,297 $ 136,363 $ 182,881 $ 554,271 $ 650,452 Dividends on preferred stock 4,104 4,127 3,630 16,135 13,146 Net income available to common shareholders, as adjusted (non-GAAP) $ 112,193 $ 132,236 $ 179,251 $ 538,136 $ 637,306 _____________ (a) Included in FDIC insurance assessment. (b) Included in gains (losses) on securities transactions, net. (c) Represents severance (credit adjustments) expense related to workforce reductions within salary and employee benefits expense. (d) Included in provision for credit losses for available for sale and held to maturity securities (tax disallowed). (e) Represents provision for credit losses for non-PCD assets and unfunded credit commitments acquired during the period. (f) Represents data processing termination costs within technology, furniture and equipment expense and severance within salary and employee benefits expense for the 2023 periods. The merger related expense for the 2022 periods were mainly salary and employee benefits expense. (g) Included in net (losses) gains on sale of assets within non-interest income. (h) Represents legal reserves and settlement charges included in professional and legal fees. Adjusted per common share data (non-GAAP): Net income available to common shareholders, as adjusted (non-GAAP) $ 112,193 $ 132,236 $ 179,251 $ 538,136 $ 637,306 Average number of shares outstanding 507,683,229 507,650,668 506,359,704 507,532,365 485,434,918 Basic earnings, as adjusted (non-GAAP) $ 0.22 $ 0.26 $ 0.35 $ 1.06 $ 1.31 Average number of diluted shares outstanding 509,714,526 509,256,599 509,301,813 509,245,768 487,817,710 Diluted earnings, as adjusted (non-GAAP) $ 0.22 $ 0.26 $ 0.35 $ 1.06 $ 1.31 Adjusted annualized return on average tangible shareholders' equity (non-GAAP): Net income, as adjusted (non-GAAP) $ 116,297 $ 136,363 $ 182,881 $ 554,271 $ 650,452 Average shareholders' equity 6,639,906 6,605,786 6,327,970 6,558,768 5,985,236 Less: Average goodwill and other intangible assets 2,033,656 2,042,486 2,074,367 2,047,172 1,944,503 Average tangible shareholders' equity $ 4,606,250 $ 4,563,300 $ 4,253,603 $ 4,511,596 $ 4,040,733 Annualized return on average tangible shareholders' equity, as adjusted (non-GAAP) 10.10 % 11.95 % 17.20 % 12.29 % 16.10 % Non-GAAP Reconciliations to GAAP Financial Measures (Continued)
Three Months Ended Years Ended December 31, September 30, December 31, December 31, ($ in thousands) 2023 2023 2022 2023 2022 Adjusted annualized return on average assets (non-GAAP): Net income, as adjusted (non-GAAP) $ 116,297 $ 136,363 $ 182,881 $ 554,271 $ 650,452 Average assets 61,113,553 61,391,688 56,913,215 61,065,897 52,182,310 Annualized return on average assets, as adjusted (non-GAAP) 0.76 % 0.89 % 1.29 % 0.91 % 1.25 % Adjusted annualized return on average shareholders' equity (non-GAAP): Net income, as adjusted (non-GAAP) $ 116,297 $ 136,363 $ 182,881 $ 554,271 $ 650,452 Average shareholders' equity 6,639,906 6,605,786 6,327,970 6,558,768 5,985,236 Annualized return on average shareholders' equity, as adjusted (non-GAAP) 7.01 % 8.26 % 11.56 % 8.45 % 10.87 % Annualized return on average tangible shareholders' equity (non-GAAP): Net income, as reported (GAAP) $ 71,554 $ 141,346 $ 177,591 $ 498,511 $ 568,851 Average shareholders' equity 6,639,906 6,605,786 6,327,970 6,558,768 5,985,236 Less: Average goodwill and other intangible assets 2,033,656 2,042,486 2,074,367 2,047,172 1,944,503 Average tangible shareholders' equity $ 4,606,250 $ 4,563,300 $ 4,253,603 $ 4,511,596 $ 4,040,733 Annualized return on average tangible shareholders' equity (non-GAAP) 6.21 % 12.39 % 16.70 % 11.05 % 14.08 % Efficiency ratio (non-GAAP): Non-interest expense, as reported (GAAP) $ 340,421 $ 267,133 $ 266,240 $ 1,162,691 $ 1,024,949 Less: FDIC Special assessment (pre-tax) 50,297 — — 50,297 — Less: Restructuring charge (pre-tax) (538 ) (675 ) — 9,969 — Less: Merger-related expenses (pre-tax) 10,000 — 7,372 14,133 71,203 Less: Amortization of tax credit investments (pre-tax) 4,547 4,191 3,213 18,009 12,407 Less: Litigation reserve (pre-tax) 3,540 — — 3,540 — Non-interest expense, as adjusted (non-GAAP) 272,575 263,617 255,655 1,066,743 941,339 Net interest income, as reported (GAAP) 397,275 412,418 465,819 1,665,478 1,655,640 Non-interest income, as reported (GAAP) 52,691 58,664 52,796 225,729 206,793 Less: Net (gains) losses on available for sale and held to maturity securities transactions, net (pre-tax) (877 ) 443 7 (401 ) (95 ) Less: Net gains on sales of office buildings (pre-tax) — (6,721 ) — (6,721 ) — Non-interest income, as adjusted (non-GAAP) $ 51,814 $ 52,386 $ 52,803 $ 218,607 $ 206,698 Gross operating income, as adjusted (non-GAAP) $ 449,089 $ 464,804 $ 518,622 $ 1,884,085 $ 1,862,338 Efficiency ratio (non-GAAP) 60.70 % 56.72 % 49.30 % 56.62 % 50.55 % As of December 31, September 30, June 30, March 31, December 31, ($ in thousands, except for share data) 2023 2023 2023 2023 2022 Tangible book value per common share (non-GAAP): Common shares outstanding 507,709,927 507,660,742 507,619,430 507,762,358 506,374,478 Shareholders' equity (GAAP) $ 6,701,391 $ 6,627,299 $ 6,575,184 $ 6,511,581 $ 6,400,802 Less: Preferred stock 209,691 209,691 209,691 209,691 209,691 Less: Goodwill and other intangible assets 2,029,267 2,038,202 2,046,882 2,056,107 2,066,392 Tangible common shareholders' equity (non-GAAP) $ 4,462,433 $ 4,379,406 $ 4,318,611 $ 4,245,783 $ 4,124,719 Tangible book value per common share (non-GAAP) $ 8.79 $ 8.63 $ 8.51 $ 8.36 $ 8.15 Tangible common equity to tangible assets (non-GAAP): Tangible common shareholders' equity (non-GAAP) $ 4,462,433 $ 4,379,406 $ 4,318,611 $ 4,245,783 $ 4,124,719 Total assets (GAAP) $ 60,934,974 $ 61,183,352 $ 61,703,693 $ 64,309,573 $ 57,462,749 Less: Goodwill and other intangible assets 2,029,267 2,038,202 2,046,882 2,056,107 2,066,392 Tangible assets (non-GAAP) $ 58,905,707 $ 59,145,150 $ 59,656,811 $ 62,253,466 $ 55,396,357 Tangible common equity to tangible assets (non-GAAP) 7.58 % 7.40 % 7.24 % 6.82 % 7.45 % December 31, 2023 2022 (Unaudited) Assets Cash and due from banks $ 284,090 $ 444,325 Interest bearing deposits with banks 607,135 503,622 Investment securities: Equity securities 64,464 48,731 Trading debt securities 3,973 13,438 Available for sale debt securities 1,296,576 1,261,397 Held to maturity debt securities (net of allowance for credit losses of $1,205 at December 31, 2023 and $1,646 at December 31, 2022) 3,739,208 3,827,338 Total investment securities 5,104,221 5,150,904 Loans held for sale (includes fair value of $20,640 at December 31, 2023 and $18,118 at December 31, 2022 for loans originated for sale) 30,640 18,118 Loans 50,210,295 46,917,200 Less: Allowance for loan losses (446,080 ) (458,655 ) Net loans 49,764,215 46,458,545 Premises and equipment, net 381,081 358,556 Lease right of use assets 343,461 306,352 Bank owned life insurance 723,799 717,177 Accrued interest receivable 245,498 196,606 Goodwill 1,868,936 1,868,936 Other intangible assets, net 160,331 197,456 Other assets 1,421,567 1,242,152 Total Assets $ 60,934,974 $ 57,462,749 Liabilities Deposits: Non-interest bearing $ 11,539,483 $ 14,463,645 Interest bearing: Savings, NOW and money market 24,526,622 23,616,812 Time 13,176,724 9,556,457 Total deposits 49,242,829 47,636,914 Short-term borrowings 917,834 138,729 Long-term borrowings 2,328,375 1,543,058 Junior subordinated debentures issued to capital trusts 57,108 56,760 Lease liabilities 403,781 358,884 Accrued expenses and other liabilities 1,283,656 1,327,602 Total Liabilities 54,233,583 51,061,947 Shareholders’ Equity Preferred stock, no par value; authorized 50,000,000 shares authorized: Series A (4,600,000 shares issued at December 31, 2023 and December 31, 2022) 111,590 111,590 Series B (4,000,000 shares issued at December 31, 2023 and December 31, 2022) 98,101 98,101 Common stock (no par value, authorized 650,000,000 shares; issued 507,896,910 shares at December 31, 2023 and December 31, 2022) 178,187 178,185 Surplus 4,989,989 4,980,231 Retained earnings 1,471,371 1,218,445 Accumulated other comprehensive loss (146,456 ) (164,002 ) Treasury stock, at cost (186,983 common shares at December 31, 2023 and 1,522,432 common shares at December 31, 2022) (1,391 ) (21,748 ) Total Shareholders’ Equity 6,701,391 6,400,802 Total Liabilities and Shareholders’ Equity $ 60,934,974 $ 57,462,749 Three Months Ended Years Ended December 31, September 30, December 31, December 31, 2023 2023 2022 2023 2022 Interest Income Interest and fees on loans $ 762,894 $ 753,638 $ 599,015 $ 2,886,930 $ 1,828,477 Interest and dividends on investment securities: Taxable 34,117 32,383 31,300 130,708 105,716 Tax-exempt 4,820 4,585 5,219 20,305 17,958 Dividends 6,138 5,299 3,978 24,139 11,468 Interest on federal funds sold and other short-term investments 10,215 17,113 7,038 76,809 13,064 Total interest income 818,184 813,018 646,550 3,138,891 1,976,683 Interest Expense Interest on deposits: Savings, NOW and money market 221,501 201,916 109,286 739,025 186,709 Time 165,351 164,336 48,417 535,749 69,691 Interest on short-term borrowings 5,524 5,189 7,404 94,869 17,453 Interest on long-term borrowings and junior subordinated debentures 28,533 29,159 15,624 103,770 47,190 Total interest expense 420,909 400,600 180,731 1,473,413 321,043 Net Interest Income 397,275 412,418 465,819 1,665,478 1,655,640 (Credit) provision for credit losses for available for sale and held to maturity securities (116 ) (30 ) (50 ) 4,559 481 Provision for credit losses for loans 20,696 9,147 7,289 45,625 56,336 Net Interest Income After Provision for Credit Losses 376,695 403,301 458,580 1,615,294 1,598,823 Non-Interest Income Wealth management and trust fees 11,978 11,417 10,720 44,158 34,709 Insurance commissions 3,221 2,336 2,903 11,116 11,975 Capital Markets 6,489 7,141 10,120 41,489 52,362 Service charges on deposit accounts 9,336 10,952 10,313 41,306 36,930 Gains (losses) on securities transactions, net 907 (398 ) (172 ) 1,104 (1,230 ) Fees from loan servicing 2,616 2,681 2,637 10,670 11,273 Gains on sales of loans, net 2,302 2,023 908 6,054 6,418 (Losses) gains on sales of assets, net (129 ) 6,653 1,269 6,809 897 Bank owned life insurance 4,107 2,709 2,200 11,843 8,040 Other 11,864 13,150 11,898 51,180 45,419 Total non-interest income 52,691 58,664 52,796 225,729 206,793 Non-Interest Expense Salary and employee benefits expense 131,719 137,292 129,634 563,591 526,737 Net occupancy expense 27,590 24,675 23,446 101,470 94,352 Technology, furniture and equipment expense 44,404 37,320 46,507 150,708 161,752 FDIC insurance assessment 60,627 7,946 6,827 88,154 22,836 Amortization of other intangible assets 9,696 9,741 10,900 39,768 37,825 Professional and legal fees 25,238 17,109 19,620 80,567 82,618 Amortization of tax credit investments 4,547 4,191 3,213 18,009 12,407 Other 36,600 28,859 26,093 120,424 86,422 Total non-interest expense 340,421 267,133 266,240 1,162,691 1,024,949 Income Before Income Taxes 88,965 194,832 245,136 678,332 780,667 Income tax expense 17,411 53,486 67,545 179,821 211,816 Net Income 71,554 141,346 177,591 498,511 568,851 Dividends on preferred stock 4,104 4,127 3,630 16,135 13,146 Net Income Available to Common Shareholders $ 67,450 $ 137,219 $ 173,961 $ 482,376 $ 555,705 Three Months Ended December 31, 2023 September 30, 2023 December 31, 2022 Average Avg. Average Avg. Average Avg. ($ in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets Interest earning assets: Loans (1)(2) $ 50,039,429 $ 762,918 6.10 % $ 50,019,414 $ 753,662 6.03 % $ 46,086,363 $ 599,040 5.20 % Taxable investments (3) 4,950,773 40,255 3.25 4,915,778 37,682 3.07 4,934,084 35,278 2.86 Tax-exempt investments (1)(3) 593,577 6,101 4.11 620,439 5,800 3.74 623,322 6,608 4.24 Interest bearing deposits with banks 885,689 10,215 4.61 1,246,934 17,113 5.49 761,832 7,038 3.70 Total interest earning assets 56,469,468 819,489 5.80 56,802,565 814,257 5.73 52,405,601 647,964 4.95 Other assets 4,644,085 4,589,123 4,507,614 Total assets $ 61,113,553 $ 61,391,688 $ 56,913,215 Liabilities and shareholders' equity Interest bearing liabilities: Savings, NOW and money market deposits $ 23,991,093 $ 221,500 3.69 % $ 23,016,737 $ 201,916 3.51 % $ 23,476,111 $ 109,286 1.86 % Time deposits 13,934,683 165,351 4.75 14,880,311 164,336 4.42 7,641,769 48,417 2.53 Short-term borrowings 449,831 5,524 4.91 436,518 5,189 4.75 880,615 7,404 3.36 Long-term borrowings (4) 2,377,706 28,533 4.80 2,495,512 29,159 4.67 1,598,379 15,624 3.91 Total interest bearing liabilities 40,753,313 420,908 4.13 40,829,078 400,600 3.92 33,596,874 180,731 2.15 Non-interest bearing deposits 11,534,795 11,951,398 15,116,977 Other liabilities 2,185,539 2,005,426 1,871,394 Shareholders' equity 6,639,906 6,605,786 6,327,970 Total liabilities and shareholders' equity $ 61,113,553 $ 61,391,688 $ 56,913,215 Net interest income/interest rate spread (5) $ 398,581 1.67 % $ 413,657 1.81 % $ 467,233 2.80 % Tax equivalent adjustment (1,305 ) (1,239 ) (1,414 ) Net interest income, as reported $ 397,276 $ 412,418 $ 465,819 Net interest margin (6) 2.81 % 2.90 % 3.56 % Tax equivalent effect 0.01 0.01 0.01 Net interest margin on a fully tax equivalent basis (6) 2.82 % 2.91 % 3.57 % (1) Interest income is presented on a tax equivalent basis using a 21 percent federal tax rate.
(2) Loans are stated net of unearned income and include non-accrual loans.
(3) The yield for securities that are classified as available for sale is based on the average historical amortized cost.
(4) Includes junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition.
(5) Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.
(6) Net interest income as a percentage of total average interest earning assets.SHAREHOLDERS RELATIONS
Requests for copies of reports and/or other inquiries should be directed to Tina Zarkadas, Assistant Vice President, Shareholder Relations Specialist, Valley National Bancorp, 70 Speedwell Avenue, Morristown, New Jersey, 07960, by telephone at (973) 305-3380, by fax at (973) 305-1364 or by e-mail at tzarkadas@valley.com.Contact: Michael D. Hagedorn Senior Executive Vice President and Chief Financial Officer 973-872-4885 
