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Valley National Bancorp Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 8, 2010 04:49PM
Valley National Bancorp (VLY) filed Quarterly Report for the period ended 2010-09-30. Valley National Bancorp has a market cap of $2.2 billion; its shares were traded at around $13.68 with a P/E ratio of 18.42 and P/S ratio of 2.81. The dividend yield of Valley National Bancorp stocks is 5.26%. Valley National Bancorp had an annual average earning growth of 0.1% over the past 10 years.VLY is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, Chuck Royce of Royce& Associates, Richard Snow of Snow Capital Management, L.P., Richard Snow of Snow Capital Management, L.P., Bruce Kovner of Caxton Associates, Mario Gabelli of GAMCO Investors.
Highlight of Business Operations:
Net income for the third quarter of 2010 was $32.6 million, or $0.20 per diluted common share, compared to $25.6 million, adjusted for preferred dividends and accretion of $6.0 million, or $0.17 per diluted common share for the third quarter of 2009. The increase in net income was largely due to: (i) a $3.4 million decline in the provision for credit losses as credit quality stabilized somewhat during the third quarter of 2010 and net loan charge-offs were $3.9 million less than the third quarter of 2009, (ii) a $2.7 million increase in net interest income mainly driven by a 34 basis point decline in the cost of average interest bearing liabilities and a reduction in high cost time deposit balances, partially offset by (iii) a $5.1 million increase in non-interest expense caused by increases in salary and employee benefits and net occupancy and equipment expense related to the FDIC-assisted acquisitions of LibertyPointe Bank and The Park Avenue Bank in March 2010, as well as from de novo branch openings over the twelve month period ended September 30, 2010.
Residential mortgage loan activity remained brisk as we originated over $280 million in new and refinanced residential mortgage loans during the three months ended September 30, 2010. Our residential originations increased as compared to the second quarter of 2010 due to the continued low level of interest rates and our successful one price refinancing program with total closing costs as low as $499 including title insurance fees. We transferred $83 million in conforming residential mortgage loans to loans held for sale during the third quarter of 2010 upon managements decision to sell such loans to Fannie Mae. Management believes these loans with 15 and 20 year fixed terms and an aggregate weighted average interest rate of 5.22 percent are likely to refinance in the near term due to the current low interest rate environment. The sale closed in October 2010 and resulted in a pre-tax gain of approximately $3.9 million which will be recognized in the fourth quarter of 2010.
Short-term borrowings increased $146.8 million to $331.3 million at September 30, 2010 from June 30, 2010 due to increases of $100 million and $50 million in overnight FHLB advances and Federal funds purchased, respectively, due to normal temporary liquidity needs caused by daily cash activity.
For the three months ended September 30, 2010, we reported an annualized return on average shareholders equity (ROE) of 10.24 percent and an annualized return on average assets (ROA) of 0.93 percent which includes intangible assets. Our annualized return on average tangible shareholders equity (ROATE) was 13.86 percent for the third quarter of 2010. The comparable ratios for the third quarter of 2009 were an annualized ROE of 9.35 percent, an annualized ROA of 0.89 percent, and an annualized ROATE of 12.25 percent. All of the above ratios were impacted by the change in fair value of our junior subordinated debentures carried at fair value. Net income included a non-cash charge of $2.1 million ($1.4 million, net of tax) for the third quarter of 2010, as compared to a non-cash charge of $2.8 million ($1.8 million, net of tax) for the same period of 2009 due to the change in fair value of the debentures.
For the third quarter of 2010, average loans and average federal funds sold decreased by $106.7 million and $205.1 million, respectively, while average investment securities increased $50.6 million as compared to the third quarter of 2009. Compared to the second quarter of 2010, average loans decreased by $69.6 million primarily due to a slowdown in most new loan activity caused by the weak economy. Average investment securities also declined $42.0 million as compared to the second quarter of 2010 mainly due to normal principal paydowns on securities and a lower level of reinvestment of such funds in securities by management due to the current level of interest rates.
Average interest bearing liabilities for the third quarter of 2010 decreased $110.5 million, or 1.1 percent compared with the same quarter of 2009 mainly due to the run-off of excess liquidity caused by lower loan demand. Compared to the second quarter of 2010, average interest bearing liabilities decreased $128.1 million or 1.2 percent during the third quarter of 2010. Average time deposits declined $265.9 million from the second quarter of 2010 mainly due to continued run-off of maturing high cost time deposits and the early redemption of time deposits assumed in FDIC-assisted transactions throughout the second quarter of 2010. Average savings, NOW, and money markets increased $126.3 million from the second quarter of 2010 due to, in part, higher municipal deposit balances.
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