| Source: Valley National Bank
Wayne, New Jersey, UNITED STATES
NEW YORK, April 28, 2022 (GLOBE NEWSWIRE) — Valley National Bancorp (NASDAQ:VLY), the holding company for Valley National Bank, today reported net income for the first quarter 2022 of $116.7 million, or $0.27 per diluted common share, as compared to the first quarter 2021 earnings of $115.7 million, or $0.28 per diluted common share, and net income of $115.0 million, or $0.27 per diluted common share, for the fourth quarter 2021. Excluding non-core charges, our adjusted net income (a non-GAAP measure) was $120.3 million, or $0.28 per diluted common share, for the first quarter 2022, $115.8 million, or $0.28 per diluted common share, for first quarter 2021, and $120.5 million, or $0.28 per diluted common share, for the fourth quarter 2021. See further details below, including a reconciliation of our adjusted net income in the “Consolidated Financial Highlights” tables.
Key financial highlights for the first quarter:
Ira Robbins, CEO and President commented, “Our first quarter results were highlighted by robust commercial loan growth, strong credit metrics, and a stable core net interest margin. The continued momentum on the lending side reflects our ability to attract and service new clients while simultaneously deepening our existing relationships. Excluding PPP loans, our net interest margin would have increased slightly from the fourth quarter despite the seasonal overhang of fewer days in the first quarter. Funding costs continued to decline, and we benefited from liquidity deployment into higher-yielding loans. For the third consecutive quarter, we recognized net recoveries or de minimis loan charge-offs. Valley’s credit quality remains a differentiating characteristic and reflects our strong underwriting standards.”
Mr. Robbins continued, “On April 1, 2022, we closed our acquisition of Bank Leumi USA. Leveraging Bank Leumi’s core business relationships is expected to provide additional differentiated growth opportunities for Valley. Bank Leumi further solidifies Valley as one of the nation’s premier full-service commercial banks. I am extremely excited about what the future holds for our associates and clients.”
Net Interest Income and Margin
Net interest income on a tax equivalent basis totaling $318.4 million for the first quarter 2022 increased $2.4 million as compared to the fourth quarter 2021 and increased $24.8 million from the first quarter 2021. Interest income on a tax equivalent basis in the first quarter 2022 increased $475 thousand to $341.2 million as compared to the fourth quarter 2021. The increase was mainly due to increases in average loans and taxable investments totaling $1.3 billion and $275.1 million, respectively, largely offset by a $10.1 million decrease in PPP loan related interest and fees during the first quarter 2022 caused by the significant wind down of our remaining PPP loan portfolio over the last several quarters. Interest expense of $22.8 million for the first quarter 2022 decreased $1.9 million as compared to the fourth quarter 2021 as we reduced our cost of funding from deposits and borrowings.
Our net interest margin on a tax equivalent basis of 3.16 percent for the first quarter 2022 decreased by 7 basis points and increased by 2 basis points from 3.23 percent and 3.14 percent for the fourth quarter 2021 and first quarter 2021, respectively. The yield on average interest earning assets decreased by 9 basis points on a linked quarter basis mostly due to the lower yield on loans and two less days in the first quarter 2022 as compared to the fourth quarter 2021. The yield on average loans decreased by 16 basis points to 3.67 percent for the first quarter 2022 as compared to the fourth quarter 2021 largely due to the decrease in PPP loan related interest and fees. The overall cost of average interest bearing liabilities decreased 4 basis points to 0.35 percent for the first quarter 2022 as compared to the fourth quarter 2021. The decrease was mainly due to a 22 basis point decrease in the cost of average long-term borrowings, the continued runoff of maturing higher cost time deposits, and the moderately lower costs of our average non-maturity interest bearing deposits. Our cost of total average deposits was 0.14 percent for the first quarter 2022 as compared to 0.15 percent for the fourth quarter 2021.
Loans, Deposits and Other Borrowings
Loans. Loans increased $1.2 billion to approximately $35.4 billion at March 31, 2022 from December 31, 2021 primarily due to growth in the commercial real estate, construction, non-PPP commercial and industrial and residential mortgage loan categories, despite a $232.3 million decrease in commercial and industrial PPP loans. Total commercial real estate loans (including construction loans) increased $1.1 billion, or 22.1 percent on an annualized basis, to $21.9 billion at March 31, 2022 as compared to December 31, 2021 reflecting continued strong organic loan production across most of our geographic footprints. Commercial and industrial non-PPP loans increased $176.2 million, or 13.0 percent on an annualized basis, during the first quarter 2022 mainly resulting from the solid new loan pipeline in most of our markets driven by direct calling efforts of our growing commercial lending team. Residential mortgage loans increased $146.9 million, or 12.9 percent on an annualized basis, during the first quarter 2022 mainly due to new loan activity in the purchased home market, and, to a lesser extent, refinance loan volumes. Additionally, we originated approximately $144 million of residential mortgage loans for sale rather than investment during the first quarter 2022 as compared to $229 million in the fourth quarter 2021. Residential mortgage loans held for sale at fair value totaled $77.6 million and $139.5 million at March 31, 2022 and December 31, 2021, respectively.
Deposits. Total deposits increased $14.9 million to approximately $35.6 billion at March 31, 2022 from December 31, 2021 due to increases of $271.3 million and $16.3 million in the non-interest bearing and non-maturity interest bearing deposit categories, respectively, mostly offset by a $272.7 million decrease in time deposits. The decrease in time deposits was driven by normal run-off of maturing retail CDs with some continued migration to the more liquid deposit product categories. Total brokered deposits (consisting of money market deposit accounts) decreased approximately $203 million to $1.2 billion at March 31, 2022 as compared to $1.4 billion at December 31, 2021 as our funding mix continued to shift to our commercial and retail deposit customers. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 33 percent, 57 percent and 10 percent of total deposits as of March 31, 2022, respectively.
Other Borrowings. Short-term borrowings decreased $171.5 million to $484.2 million at March 31, 2022 as compared to December 31, 2021 largely due to normal repayments of FHLB advances, partially offset by $125 million of federal funds purchased at March 31, 2022. Long-term borrowings totaled $1.4 billion at March 31, 2022 and remained relatively unchanged from December 31, 2021.
Credit Quality
Non-Performing Assets (NPAs). Total NPAs, consisting of non-accrual loans, other real estate owned (OREO) and other repossessed assets decreased $12.7 million to $232.7 million at March 31, 2022 as compared to December 31, 2021 mainly due to a $9.8 million decrease in non-accrual loans. Non-accrual loans decreased largely due to loan payoffs net of new activity in several loan categories during the first quarter 2022. Non-accrual loans represented 0.65 percent of total loans at March 31, 2022 compared to 0.70 percent at December 31, 2021.
Non-performing Taxi Medallion Loan Portfolio. We continue to closely monitor our non-performing taxi medallion loans totaling $85.3 million within the non-accrual commercial and industrial loan category at March 31, 2022. At March 31, 2022, all taxi medallion loans were on non-accrual status and had related reserves of $58.2 million, or 68.2 percent of such loans, within the allowance for loan losses.
Accruing Past Due Loans. Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) increased $36.9 million to $92.8 million, or 0.26 percent of total loans, at March 31, 2022 as compared to $55.9 million, or 0.16 percent of total loans at December 31, 2021. Commercial real estate loans past due 30 to 59 days and 60 to 89 days increased $16.4 million and $6.3 million, respectively, to $30.8 million and $6.3 million, respectively at March 31, 2022 as compared to December 31, 2021 mainly due to two loans totaling $13.2 million and $6.0 million included in these respective delinquency categories at March 31, 2022. Commercial and industrial loans past due 60 to 89 days and 90 days or more increased $6.6 million and $8.0 million, respectively, as compared to December 31, 2021 mainly due to a few additional loans that are considered well-secured and in the process of collection.
Forbearance. In response to the COVID-19 pandemic and its economic impact on certain customers, Valley implemented short-term loan modifications under the CARES Act such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment, when requested by customers. At March 31, 2022, Valley had approximately $23 million of outstanding loans remaining in their payment deferral period under short-term modifications, as compared to $28 million of loans in deferral at December 31, 2021.
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 March 31, 2022, December 31, 2021 and March 31, 2021:
Our loan portfolio, totaling $35.4 billion at March 31, 2022, had net recoveries of loan charge-offs totaling $50 thousand for the first quarter 2022 as compared to net recoveries of $624 thousand for the fourth quarter 2021 and net loan charge-offs of $6.1 million for the first quarter 2021. There were charge-offs of taxi medallion loans of $206 thousand in the first quarter 2022 as compared to $3.3 million during the first quarter 2021. There were no charge-offs of taxi medallion loans in the fourth quarter 2021.
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 1.07 percent at March 31, 2022 as compared to 1.10 percent and 1.08 percent at December 31, 2021 and March 31, 2021, respectively. During the first quarter 2022, we recorded a provision for credit losses for loans of $3.5 million as compared to a provision of $11.6 million and $9.0 million for the fourth quarter 2021 and first quarter 2021, respectively. The allocated reserves as a percentage of commercial real estate loans decreased 6 basis points to 0.96 percent at March 31, 2021 from December 31, 2021 mainly due to lower quantitative reserves for non-owner occupied loans caused by improvement in the expected loss rates at March 31, 2021.
Capital Adequacy
Valley’s regulatory capital ratios continue to reflect its well capitalized position. Valley’s total risk-based capital, common equity Tier 1 capital, Tier 1 capital and Tier 1 leverage capital ratios were 12.65 percent, 9.67 percent, 10.27 percent and 8.70 percent, respectively, at March 31, 2022.
Investor Conference Call
Valley will host a conference call with investors and the financial community at 11:00 AM Eastern Daylight Savings Time, today to discuss the first quarter 2022 earnings. Those wishing to participate in the call may dial toll-free 866-354-0432 Conference Id: 3674992. The teleconference will also be webcast live: https://edge.media-server.com/mmc/p/8n68sc23 and archived on Valley’s website through Monday, May 30, 2022. Investor presentation materials will be made available prior to the conference call at www.valley.com.
About Valley
As the principal subsidiary of Valley National Bancorp, Valley National Bank is a regional bank with approximately $50 billion in assets, including our recent acquisition of Bank Leumi USA. 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 “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 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, 2021.
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-
SELECTED FINANCIAL DATA
NOTES TO SELECTED FINANCIAL DATA
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(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 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.
