Valley Natl Bcp has a market cap of $2.11 billion; its shares were traded at around $12.4 with a P/E ratio of 14.3 and P/S ratio of 2.7. The dividend yield of Valley Natl Bcp stocks is 5.6%.
Highlight of Business Operations:Effective January 1, 2007, we elected to carry the junior subordinated debentures issued to VNB Capital Trust I at fair value. We measure the fair value of these junior subordinated debentures using exchange quoted prices in active markets for similar assets, specifically the trust preferred securities issued by VNB Capital Trust I, which contain identical terms as our junior subordinated debentures (see Note 12 to the consolidated financial statements). As a result, any increase in the market quoted price, or fair market value, of our trust preferred securities will result in a commensurate increase in the liability required to be recorded for the junior subordinated debentures with an offsetting non-cash charge against our earnings. Conversely, a decrease in the market quoted price of such securities will result in a decrease in the liability recorded for the debentures with an offsetting non-cash gain recognized in earnings. We recognized non-cash gains of $1.3 million ($816 thousand after taxes) during 2011 as compared to non-cash charges totaling $5.8 million ($3.8 million after taxes) and $15.8 million ($10.3 million after taxes) during 2010 and 2009, respectively, due to the change in the fair value of the junior subordinated debentures determined by the market price of the trust preferred securities. The non-cash gains and charges against our earnings do not impact our liquidity or our regulatory capital. We cannot predict whether or to what extent we would be required to take a non-cash charge against earnings related to the change in fair value of our junior subordinated debentures in future periods. Furthermore, changes in the law and regulations or other factors could require us to redeem the junior subordinated debentures at par value. If we are carrying the junior subordinated debentures at a fair value below par value when such redemption occurs, we will be required to record a charge against earnings in the period in which the redemption occurred.
Net gains on sales of loans decreased $1.9 million to $10.7 million during the year ended December 31, 2011 as compared to $12.6 million in gains recognized during 2010. The decrease was primarily due to a total gain of $3.9 million recognized on the sale of approximately $83 million of conforming residential mortgage loans transferred from our loan portfolio to loans held for sale during the third quarter of 2010. The decision to sell these loans was based on the likelihood that such loans would prepay in the short-term due to the low level of market interest rates. Additionally, we elected to hold a greater percentage of our mortgage loan originations for investment purposes rather than selling them in the secondary market during 2011, reducing our ability to generate gains on sales of loans during the period. See further discussion of our 2011 residential mortgage loan origination activity under Loans in the executive summary section of this MD&A above.
For the year ended December 31, 2011, income before income taxes for the investment management segment decreased $9.2 million to $42.1 million compared to $51.3 million for the same period of 2010 primarily due to a $10.1 million decline in net interest income, partially offset by a $1.2 million increase in non-interest income. The segments net interest income was negatively impacted by normal principal paydowns and sales of certain higher yielding securities mostly replaced with lower yielding residential mortgage-backed securities and other taxable securities which were only partially offset by higher yielding municipal security purchases.
As of December 31, 2011, our investment securities classified as available for sale decreased $468.8 million to $566.5 million as compared to December 31, 2010. The decrease was mainly driven by sales of certain residential mortgage-backed securities issued by Ginnie Mae and government sponsored enterprises totaling $320.7 million and $257.4 million, respectively, as well as maturities and sales of all U.S Treasury securities classified as available for sale that were previously held at December 31, 2010. During 2011, many of the residential mortgage-backed securities were sold due to increased prepayment risk that may result from the low level of mortgage interest rates and the U.S. Governments modification and extension of the HARP program through December 31, 2013. The HARP program is designed to allow many homeowners to refinance into low mortgage interest rates even if their property has decreased in value, and to help bolster the economic recovery. The HARP program was also extended until December 31, 2013. Additionally, we continued to lower our exposure to Freddie Mac and Fannie Mae during 2011, as it is an asset class we are currently not interested in maintaining, and increased our holdings of residential mortgage-backed securities issued by Ginnie Mae, which are fully guaranteed by the U.S. Government.
Average loans totaling $9.5 billion for the year ended December 31, 2010 decreased $230.9 million as compared to 2009 mainly due to declines in our commercial real estate and automobile loan portfolios. Average investment securities increased $74.3 million, or 2.5 percent in 2010 as compared to the year ended December 31, 2009 due to reinvestment of excess liquidity from the decline in loan demand. The decline in average loan balances during 2010 and a 5 basis point decline in yield on such loans contributed to an $18.2 million decrease in interest income on a tax equivalent basis for loans for the year ended December 31, 2010 compared with 2009. Interest income on a tax equivalent basis for investment securities also decreased $16.2 million due to a 66 basis point decline in yield caused by normal principal paydowns and sales of higher yield securities which were mainly reinvested in shorter term and lower yield securities as we continued to reduce our repricing risk during 2010 and maintain an acceptable level of asset sensitivity on our balance sheet in the event of a rise in market interest rates. The decline in yield on investment securities was partially mitigated by the increase in average investment securities during 2010 as we reallocated some of our excess liquidity from loan principal paydowns and interest bearing cash balances at the Federal Reserve.
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