• Net Income: Approximately $98 million for Q3 2024.
• Diluted Earnings Per Share (EPS): $0.18 for Q3 2024.
• Net Interest Income Impact: Expected decline of approximately $5 million in Q4 2024 due to CRE loan sale.
• Deposit Growth: Total deposits increased by approximately $300 million compared to Q2 2024.
• New Deposit Accounts: Added roughly 25,000 new deposit accounts in Q3 2024.
• Allowance Coverage Ratio: Increased to 1.14% in Q3 2024, expected to reach 1.20% by year-end.
• Non-Interest Income: Adjusted non-interest income increased significantly compared to Q2 2024.
• Non-Interest Expenses: Approximately $270 million for Q3 2024, with adjusted expenses at $264 million.
• CRE Loan Sale: Expected sale of $800 million in performing CRE loans at a 1% discount in Q4 2024.
• Regulatory Capital Ratios: Expected to benefit by 16 to 20 basis points from the CRE loan sale.

• Warning! GuruFocus has detected 3 Warning Signs with VLY.

Release Date: October 24, 2024

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 $98 million and diluted earnings per share of $0.18, compared to $70 million and $0.13 in the previous quarter.
• The company successfully reduced its commercial real estate (CRE) concentration ratio by 53 percentage points year-to-date, enhancing balance sheet metrics.
• Valley National Bancorp (NASDAQ:VLY) plans to sell $800 million of performing CRE loans at a 1% discount, which is expected to improve regulatory capital ratios by 16 to 20 basis points.
• The company experienced strong growth in C&I loans, contributing to a rebound in pre-provision revenue and positioning for further profitability improvement.
• Valley National Bancorp (NASDAQ:VLY) achieved a $300 million increase in total deposits, with a notable rise in non-interest-bearing deposit accounts.

Negative Points

• Provision for loan losses exceeded third-quarter guidance due to growth in C&I loans and potential impacts from Hurricane Helene.
• Net interest income is expected to decline in the fourth quarter due to the anticipated CRE loan sale.
• Higher net charge-offs are anticipated in the fourth quarter due to lingering credit issues and hurricane impacts.
• The company faces a slower pace of reserve build, with allowance coverage expected to reach 1.25% by the end of 2025.
• Valley National Bancorp (NASDAQ:VLY) anticipates a decline in net interest income by approximately $5 million in the fourth quarter due to the CRE loan sale.

Q & A Highlights

Q: Can you elaborate on the expected normalization of provision and reserves in 2025? A: Ira Robbins, CEO, explained that the company anticipates a normalization of credit costs in 2025, with net charge-offs expected to be lower than current levels. The reserve build will be more about the mix of loans, particularly the growth in C&I loans, which require higher reserves than CRE loans.

Q: Are there any further adjustments expected to your targets for 2025, particularly regarding CRE ratios and capital levels? A: Ira Robbins, CEO, stated that the current intermediate targets are comfortable and achievable within the outlined timeframe. The adjustments made reflect the current strategic initiatives and market conditions.

Q: How has the market's appetite for assets changed given the recent rate movements, and how did you achieve a 1% discount on the CRE loan sale? A: Travis Lan, IR Contact Officer, noted consistent demand from private equity for core assets. The narrowing gap between the bank's valuation and private equity's view allowed for the attractive 1% discount, driven by rate factors rather than credit issues.

Q: What are your expectations for deposit costs and NII growth in the near term and into 2025? A: Travis Lan, IR Contact Officer, indicated that the bank expects to outperform its modeled deposit beta, with potential for mid-to-high single-digit NII growth in 2025. The reduction in deposit costs following the Fed rate cut supports this outlook.

Q: What is the outlook for loan growth, particularly after reaching the targeted CRE concentration? A: Thomas Iadanza, President, anticipates mid-single-digit loan growth, with continued emphasis on C&I growth in the low to mid-double digits, offset by managing CRE concentration.

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