• Net Income: $116 million for Q4 2024, compared to $98 million in the previous quarter.
• Diluted Earnings Per Share (EPS): $0.20 for Q4 2024, up from $0.18 in the previous quarter.
• Deposit Service Revenue: Increased by $11 million in the second half of 2024, a 27% increase year-over-year.
• Transaction Deposits: $1.7 billion or 5% higher at the end of 2024 compared to the previous year.
• FX Fees: Annualized run rate $4 million higher in the second half of 2024, over 50% growth year-over-year.
• Direct Customer Deposits: Grew by $1.7 billion during Q4 2024.
• Noninterest Deposit Balances: Increased to 23% of total deposits, up from 22% in the previous quarter.
• Cost of Deposits: Reduced by 31 basis points during Q4 2024.
• CRE Concentration Ratio: Reduced to 362% at the end of 2024 from 421% in the previous quarter.
• Net Interest Income Growth: Increased by 3% from Q3 2024 and 6% year-over-year.
• Adjusted Noninterest Income: $236 million annualized for the second half of 2024, a 13% increase from the second half of 2023.
• Adjusted Noninterest Expenses: $276 million for Q4 2024, 4.5% higher than Q3 2024 and approximately 1% higher than Q4 2023.
• Allowance Coverage Ratio: Increased to 1.17% at the end of 2024, the highest level in the past five years.

• Warning! GuruFocus has detected 8 Warning Signs with VLY.

Release Date: January 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Valley National Bancorp (NASDAQ:VLY) reported a significant increase in net income to $116 million, up from $98 million in the previous quarter.
• The company achieved a 27% increase in deposit service revenue in the second half of 2024 compared to the same period in 2023.
• Direct customer deposits grew by $1.7 billion during the quarter, enabling a $2 billion reduction in higher-cost indirect deposits.
• Valley National Bancorp (NASDAQ:VLY) successfully reduced deposit costs by 31 basis points, resulting in a strong deposit beta of 51%.
• The company anticipates continued net interest income momentum in 2025 due to earning asset growth and funding cost improvement.

Negative Points

• Valley National Bancorp (NASDAQ:VLY) faced elevated loan loss provisions due to higher loan charge-offs.
• The company experienced an $8 million loss associated with a CRE loan sale, primarily due to transaction costs.
• Nonaccrual loans increased due to a few larger criticized CRE relationships, although these loans are still performing as contractually obligated.
• Net loan charge-offs increased from the previous quarter, mainly due to two larger CRE and C&I credits.
• The company's allowance coverage ratio increased to 1.17%, indicating a higher level of reserves needed for potential loan losses.

Q & A Highlights

Q: Can you update us on what impact the shape of the yield curve is having on your NII outlook? A: Travis Lan, IR Contact Officer: We are more neutral to the front end of the curve and positively exposed to the longer end. The shape of the curve at year-end was more beneficial for our net interest income outlook. Our funding position at year-end was stronger, with $1.7 billion in direct deposit growth allowing us to pay off $2 billion in brokered deposits. We also successfully reduced deposit costs, setting us up for a better NII outlook for 2025.

Q: On the updated reserve target, should we interpret the range of 1.2 to 1.25 as a good normalized reserve ratio for Valley? A: Travis Lan, IR Contact Officer: Yes, the range reflects a slowdown in migration of criticized assets and our transition from CRE to C&I. The reserve target is slightly lower due to these factors.

Q: Can you talk about the cadence of the reserve build you expect this year? A: Mark Seager, Chief Credit Officer: We anticipate more growth in reserves at the beginning of the year, tapering off towards the end.

Q: Can you discuss the success in the direct customer deposit channel and if it will drive most of the deposit growth in 2025? A: Travis Lan, IR Contact Officer: The $1.7 billion growth was broad-based across the franchise, with branch deposits increasing around 4% and specialty niches around 5%. We see growth in international and technology sectors and positive outcomes from investments in technology and treasury solutions.

Q: Given the actions taken to strengthen the balance sheet in 2024, what is the medium-term ROE potential of the company? A: Ira Robbins, CEO: We aim for a long-term ROE north of 15% and an ROA above 120. This will be achieved through growing customer accounts, improving margins, enhancing noninterest income, and managing operating expenses.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.