DBRS: VLY Reports Improved 1Q Results; Strong Loan Growth & Pipelines Remain Solid

Summary:
• Valley reported net income of $30.3 million, up substantially sequentially primarily reflecting strong loan growth and the absence of one-time items that negatively impacted 4Q earnings by approximately $6.6 million.
• Valley successfully completed the operations and systems integration of 1St United Bancorp, Inc. (1st United), which should benefit expenses going forward.
• DBRS rates Valley National Bancorp Issuer & Senior Debt at A (low) with a Stable trend.

DBRS, Inc. (DBRS) views Valley National Bancorp’s (Valley or the Company) 1Q15 results favorably. Highlights of the quarter include broad based loan growth, a stable net interest margin, and the successful operations and systems integration of 1st United. Moreover, loan pipelines in each of Valley’s markets continue to expand, including the Florida market, where loan yields are higher.

Net interest income increased a solid 3% driven by solid organic loan growth, the first full quarter impact of the 1st United, and a stable net interest margin. Positively, loan growth was broad based by geography and product with the exception of home equity lending. Commercial and industrial lending was particularly strong, primarily from Valley’s New York customers. While stable this quarter, management indicated that margin pressure should return given asset yield pressures. Meanwhile, excluding securities gains, the 4Q branch sale gain, and the change in the FDIC loss-share receivable, non-interest income was down modestly sequentially.

Expenses were well managed considering seasonally higher 1Q expenses and the first full quarter impact of the 1st United acquisition. Specifically, expenses excluding amortization and 4Q’s loss on the extinguishment of debt, increased approximately 5%. With the integration now complete expenses should trend downward in 2015, as synergies are realized.

Asset quality remains sound. Indeed, nonperforming assets declined primarily from the sale of one large loan at an immaterial gain and Valley also had modest net recoveries. Evidencing Valley’s strong underwriting culture, as well as the benign credit environment, the Company has had only $1.6 million of net charge-offs over the past twelve months representing less than 0.01% of average non-covered loans.

DBRS rates Valley National Bancorp Issuer & Senior Debt at A (low) with a Stable trend.

Note:
All figures are in U.S. dollars unless otherwise noted.