VLY » Topics » INCREASED NET INTEREST INCOME AND NET INTEREST MARGIN GROWTH

This excerpt taken from the VLY 8-K filed Jul 23, 2009.

INCREASED NET INTEREST INCOME AND NET INTEREST MARGIN GROWTH

WAYNE, NJ – July 23, 2009 — Valley National Bancorp (NYSE:VLY), the holding company for Valley National Bank, today reported net income for second quarter of $15.0 million, $0.06 per diluted common share, compared to second quarter of 2008 earnings of $41.5 million, or $0.31 per diluted common share. Diluted earnings per common share were impacted by a $24.4 million ($0.11 per common share) non-cash charge due to the change in the fair value of junior subordinated debentures carried at fair value, a $6.5 million ($0.03 per common share) industry-wide FDIC special assessment, and accrued preferred stock dividends and accretion totaling $5.8 million ($0.04 per common share) for the second quarter of 2009. All common per share data presented was adjusted to reflect the stock dividend issued on May 22, 2009.

The following performance highlights and significant events occurred during the second quarter of 2009:

 

   

The net interest margin on a fully tax equivalent basis increased by 17 basis points to 3.52 percent mainly due to a $3.6 million increase in net interest income on a fully tax equivalent basis. Net interest income improved over the linked quarter as our cost of funds declined $5.8 million. See “Net Interest Income and Margin” section below for more details.

 

   

Total loans past due 30 days or more on our entire loan portfolio of $9.6 billion were 1.49 percent at June 30, 2009 compared to 1.34 percent at March 31, 2009. Our commercial mortgage portfolio had loans past due 30 days or more totaling 1.24 percent at June 30, 2009 compared to 1.35 percent at March 31, 2009.

 

   

At June 30, 2009, our home equity and residential mortgage loan portfolios totaling approximately 23,000 individual loans had only 134 loans past due 30 days or more compared to 123 loans at March 31, 2009. These delinquencies totaled $31.3 million, or 1.18 percent of $2.6 billion in total home equity and residential mortgage loans at June 30, 2009. See “Credit Quality” section below for more details.

 

   

On June 3, 2009, we repurchased from the U.S. Department of the Treasury 75,000 out of the 300,000 shares of our Series A Fixed Rate Cumulative Perpetual Preferred Stock that were issued to the Treasury on November 14, 2008 under the Capital Purchase Program. The aggregate purchase price for the repurchased preferred shares was approximately $75.2 million (including accrued and unpaid dividends) and resulted in an accelerated accretion charge of $1.9 million to retained earnings in the second quarter of 2009 based on the difference between the par value of $75 million and the carrying value of $73.1 million.


Valley National Bancorp (NYSE: VLY)

2009 Second Quarter Earnings

July 23, 2009

 

   

Our regulatory capital ratios continue to reflect Valley’s strong capital position. The Company’s total risk-based capital, Tier I capital, and leverage capital were 12.94 percent, 11.09 percent, and 8.74 percent, respectively at June 30, 2009.

 

   

Valley extended over $450 million in new credit to quality existing and new customers during the second quarter. However, the overall loan portfolio declined 8.9 percent on an annualized basis mainly due to management’s decision to sell most refinanced and new residential mortgage loan originations in the secondary market, as well as continued declines in our automobile portfolio caused by the lack of consumer demand and our high underwriting standards.

 

   

Valley engaged in minimal trading activities during the period. Net income included net trading losses of $18.6 million for the second quarter of 2009 mainly consisting of a $24.4 million non-cash charge on the change in the fair value of the junior subordinated debentures carried at fair value, partially offset by $4.2 million in mark to market gains on the fair value of trading securities and $1.6 million in realized gains on sales of trading securities. As of June 30, 2009, the junior subordinated debentures carried at fair value had a carrying value of $150.7 million and an unpaid contractual principal balance of $157.0 million.

 

   

We accrued and expensed a $6.5 million FDIC special assessment equal to 5 basis points of our total assets minus Tier 1 capital as of June 30, 2009. The FDIC indicated an additional special assessment in 2009 is probable, but the amount is uncertain at this time.

 

   

Valley recorded other-than-temporary impairment charges totaling $2.4 million ($1.5 million after taxes) for estimated credit losses on four private label mortgage backed securities classified as available for sale during the second quarter of 2009. After the write downs, these four securities had a combined book value and carrying value of $46.9 million and $41.6 million, respectively, at June 30, 2009.

 

   

On June 8, 2009, we entered into an equity distribution agreement to sell from time to time up to 5.67 million shares of our no par value common stock. Under the agreement, we issued approximately 43 thousand shares at a weighted average price of $12.29 during June 2009. From June 8, 2009 to June 30, 2009, Valley’s common stock traded at prices between $12.64 and $10.81 as reported by the New York Stock Exchange.

 

   

Effective June 26, 2009, Valley’s Dividend Reinvestment Plan was enhanced to allow our common stockholders to purchase additional shares of Valley National Bancorp common stock utilizing optional cash payments up to $100,000 per quarter, in addition to the reinvestment of all or part of their cash dividends. Shares purchased under this plan will be issued directly from Valley or in open market transactions as directed by Valley. No new common shares were issued under this plan during the second quarter of 2009.

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