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Valley National Bancorp Reports a 45 Percent Increase in Third Quarter 2022 Earnings With Strong Net Interest Income and Margin
ソース: Nasdaq GlobeNewswire / 27 10 2022 07:00:02 America/New_York
NEW YORK, Oct. 27, 2022 (GLOBE NEWSWIRE) -- Valley National Bancorp (NASDAQ:VLY), the holding company for Valley National Bank, today reported net income for the third quarter 2022 of $178.1 million, or $0.34 per diluted common share, as compared to the third quarter 2021 earnings of $122.6 million, or $0.29 per diluted common share, and net income of $96.4 million, or $0.18 per diluted common share, for the second quarter 2022. Excluding all non-core charges, our adjusted net income (a non-GAAP measure) was $181.5 million, or $0.35 per diluted common share, for the third quarter 2022, $124.7 million, or $0.30 per diluted common share, for third quarter 2021, and $165.8 million, or $0.32 per diluted common share, for the second quarter 2022. See further details below, including a reconciliation of our non-GAAP adjusted net income in the "Consolidated Financial Highlights" tables.
Key financial highlights for the third quarter:
- Net Interest Income and Margin: Net interest income on a tax equivalent basis of $455.3 million for the third quarter 2022 increased $35.7 million and $153.6 million as compared to the second quarter 2022 and third quarter 2021, respectively, reflecting a well-positioned balance sheet and continued organic loan growth in the current rising interest rate environment. Our net interest margin on a tax equivalent basis remained strong and increased by 17 basis points to 3.60 percent in the third quarter 2022 as compared to 3.43 percent for the second quarter 2022. See the "Net Interest Income and Margin" section below for more details.
- Loan Portfolio: Total loans increased $1.6 billion to $45.2 billion at September 30, 2022 from June 30, 2022 primarily due to strong organic loan growth. Our loan portfolio increased 15 percent on an annualized basis during the third quarter 2022 from the second quarter 2022 as a result of solid commercial loan volumes and a continued increase in new residential mortgage loans originated for investment rather than sale. During the third quarter 2022, we sold only $48.4 million of residential mortgage loans. See the "Loans, Deposits and Other Borrowings" section below for more details.
- Allowance and Provision for Credit Losses for Loans: The allowance for credit losses for loans totaled $498.4 million and $491.0 million at September 30, 2022 and June 30, 2022, respectively, representing 1.10 percent and 1.13 percent of total loans at each respective date. During the third quarter 2022, the provision for credit losses for loans totaled $1.8 million as compared to $43.7 million and $3.5 million for the second quarter 2022 and third quarter 2021, respectively. The second quarter 2022 provision included $41.0 million related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi Le-Israel Corporation (Bank Leumi USA) on April 1, 2022.
- Credit Quality: Non-accrual loans represented 0.65 percent and 0.72 percent of total loans at September 30, 2022 and June 30, 2022, respectively. Net recoveries of loan charge-offs totaled $5.6 million for the third quarter 2022 as compared to net loan charge-offs of $2.3 million for the second quarter 2022. Total accruing past due loans increased $25.2 million to $98.7 million, or 0.22 percent of total loans, at September 30, 2022 as compared to $73.5 million, or 0.17 percent of total loans, at June 30, 2022. See the "Credit Quality" section below for more details.
- Non-Interest Income: Non-interest income decreased $2.3 million to $56.2 million for the third quarter 2022 as compared to the second quarter 2022 primarily due to the decline in sales of residential mortgage loans. Net gains on sales of loans decreased $2.7 million to $922 thousand for the third quarter 2022 as compared to $3.6 million for the second quarter 2022.
- Non-Interest Expense: Non-interest expense decreased $38.1 million to $261.6 million for the third quarter 2022 as compared to the second quarter 2022. The decrease was largely due to $54.5 million of merger expenses incurred during the second quarter 2022 as compared to only $4.7 million during the third quarter 2022 resulting from the Bank Leumi USA acquisition. Salary and employee benefits expense included $1.3 million and $28.0 million of the merger expenses for the third quarter 2022 and second quarter 2022, respectively. Within salary and employee benefits expense, non-merger related expense increased $6.5 million in the third quarter 2022 as compared to the second quarter 2022 partially due to the impact of competitive labor markets and higher incentive compensation accruals. The third quarter 2022 also included a $2.0 million contribution to the Valley Bank Charitable Fund which will enable Valley to further support local nonprofit and community organizations.
- Efficiency Ratio: Our efficiency ratio was 49.76 percent for the third quarter 2022 as compared to 50.78 percent and 49.16 percent for the second quarter 2022 and third quarter 2021, respectively. See the "Consolidated Financial Highlights" tables below for additional information regarding our non-GAAP measures.
- Performance Ratios: Annualized return on average assets (ROA), shareholders’ equity (ROE) and tangible ROE were 1.30 percent, 11.39 percent, and 17.21 percent for the third quarter 2022, respectively. Annualized ROA, ROE, and tangible ROE, adjusted for non-core charges, were 1.32 percent, 11.60 percent and 17.54 percent for the third quarter 2022, respectively. See the "Consolidated Financial Highlights" tables below for additional information regarding our non-GAAP measures.
Ira Robbins, CEO commented, “The third quarter’s exceptional results were highlighted by continued profitability improvement and very strong credit quality metrics. Our asset sensitive balance sheet continues to grow and benefit from rising interest rates despite the increased funding pressure that is evident across the industry. We are pleased with our ongoing net interest margin enhancement and consistent net interest income growth. Despite a reduction in origination activity, loan growth remained strong as payoffs slowed meaningfully during the quarter. Additionally, a handful of positive credit resolutions led to approximately $6 million of net loan recoveries during the third quarter 2022 and a reduction in non-accrual loan balances at September 30, 2022. Valley’s asset quality and consistent underwriting criteria remain a hallmark of our organization and have driven solid performance across various economic environments.”
Mr. Robbins continued, “While the environment around us is uncertain and rapidly changing, I am incredibly proud of Valley’s ability to continually execute on strategic growth opportunities. As Valley continues to evolve, our unique relationship-focused commercial bank stands out in an increasingly commoditized financial service landscape.”
Net Interest Income and Margin
Net interest income on a tax equivalent basis totaling $455.3 million for the third quarter 2022 increased $35.7 million as compared to the second quarter 2022 and increased $153.6 million from the third quarter 2021. Interest income on a tax equivalent basis in the third quarter 2022 increased $83.7 million to $538.0 million as compared to the second quarter 2022. The increase was mostly due to higher average loan balances driven by our organic loan growth and increased yields on both new originations and adjustable rate loans in our portfolio. Interest expense of $82.7 million for the third quarter 2022 increased $47.9 million as compared to the second quarter 2022 largely due to higher interest rates on both non-maturity deposits and short-term borrowings, as well as a $1.5 billion increase in average interest bearing liabilities.
Our net interest margin on a tax equivalent basis of 3.60 percent for the third quarter 2022 increased by 17 basis points and 45 basis points from 3.43 percent and 3.15 percent for the second quarter 2022 and third quarter 2021, respectively. The yield on average interest earning assets increased by 54 basis points on a linked quarter basis mostly due to the aforementioned higher yields on new and adjustable rate loans in the third quarter 2022 as compared to the second quarter 2022. The yield on average loans increased by 57 basis points to 4.48 percent for the third quarter 2022 as compared to the second quarter 2022 largely due to the higher level of market interest rates. The yields on average taxable and non-taxable investments also increased 9 basis points and 25 basis points, respectively, from the second quarter 2022 largely due to investment maturities and prepayments redeployed into new higher yielding securities, as well as lower premium amortization expense caused by a decline in prepayments on mortgage-backed securities during the third quarter 2022. Our cost of total average deposits increased to 0.59 percent for the third quarter 2022 from 0.19 percent for the second quarter 2022. The overall cost of average interest bearing liabilities also increased 59 basis points to 1.06 percent for the third quarter 2022 as compared to the second quarter 2022. The increased cost of funds was mainly due to higher interest rates on most of our interest bearing deposit products combined with greater utilization of brokered and retail CDs in our funding mix during the third quarter 2022.
Loans, Deposits and Other Borrowings
Loans. Loans increased $1.6 billion to approximately $45.2 billion at September 30, 2022 from June 30, 2022 largely due to strong organic loan growth and slower paydowns of existing loans. Commercial and industrial, total commercial real estate (including construction), and residential mortgage increased 9 percent, 17 percent and 14 percent, respectively, on an annualized basis during the third quarter 2022. SBA Paycheck Protection Program (PPP) loans within the commercial and industrial category totaled $85.8 million at September 30, 2022 compared to $136.0 million at June 30, 2022. Solid organic commercial loan production continued to be experienced across most of our geographic footprints and supported by our market expansion efforts resulting from the Bank Leumi USA acquisition in the second quarter 2022. Residential mortgage loans increased $172.1 million during the third quarter 2022 almost entirely due to new loan activity in the purchased home market and higher levels of such loans originated for investment rather than sale. Residential mortgage loans held for sale at fair value totaled only $6.1 million and $18.3 million at September 30, 2022 and June 30, 2022, respectively.
Deposits. Total deposits increased $1.4 billion to approximately $45.3 billion at September 30, 2022 from June 30, 2022 largely due to growth in our retail and brokered CD portfolios. Total brokered deposits, consisting of money market and time deposit accounts, increased to $3.7 billion at September 30, 2022 as compared to $2.3 billion at June 30, 2022. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 34 percent, 52 percent and 14 percent of total deposits as of September 30, 2022, respectively, as compared to 37 percent, 54 percent and 9 percent of total deposits as of June 30, 2022, respectively. The increase in time deposits within our overall deposit mix is a result of strategic retail CD campaigns and higher brokered CDs at September 30, 2022.
Other Borrowings. Short-term borrowings decreased $603.5 million to $919.3 million at September 30, 2022 as compared to June 30, 2022 largely due to the maturity of FHLB advances during the third quarter 2022 and our increased utilization of brokered deposits, as a favorable funding alternative at September 30, 2022. Long-term borrowings increased to approximately $1.5 billion at September 30, 2022 as compared to $1.4 billion at June 30, 2022 primarily due to the issuance of new subordinated notes during the third quarter 2022. On September 20, 2022, Valley issued $150 million of 6.25 percent fixed-to-floating rate subordinated notes due September 30, 2032. At September 30, 2022, the subordinated notes had a carrying value of $147.5 million, net of unamortized debt issuance costs.
Credit Quality
Non-Performing Assets (NPAs). Total NPAs, consisting of non-accrual loans, other real estate owned (OREO) and other repossessed assets decreased $19.9 million to $294.8 million at September 30, 2022 as compared to June 30, 2022 mostly due to declines in non-accrual commercial and industrial and commercial real estate loans mainly caused by a few large loan repayments, and, to a lesser extent, loan charge-offs during the third quarter 2022. Non-accrual loans represented 0.65 percent of total loans at September 30, 2022 compared to 0.72 percent at June 30, 2022.
Non-performing Taxi Medallion Loan Portfolio. Our non-performing taxi medallion loans within the non-accrual commercial and industrial loan category decreased $4.1 million to $76.3 million at September 30, 2022 from June 30, 2022 mostly due to partial loan charge-offs related to one borrower during the third quarter 2022. At September 30, 2022, all taxi medallion loans were on non-accrual status and had related reserves of $51.4 million, or 67.3 percent of such loans, within the allowance for loan losses.
Accruing Past Due Loans. Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) increased $25.2 million to $98.7 million, or 0.22 percent of total loans, at September 30, 2022 as compared to $73.5 million, or 0.17 percent of total loans at June 30, 2022.
Loans 60 to 89 days past due increased $11.2 million as compared to June 30, 2022 mostly due to two construction loan relationships totaling $13.0 million included in this delinquency category at September 30, 2022.
Loans 90 days or more past due and still accruing interest increased $14.2 million as compared to June 30, 2022 mainly due to two commercial real estate loan relationships totaling $9.7 million and $5.4 million, respectively, included in this delinquency category at September 30, 2022. All loans 90 days or more past due and still accruing interest are well-secured and in the process of collection.
Allowance for Credit Losses for Loans and Unfunded Commitments. The following table summarizes the allocation of the allowance for credit losses to loan categories and the allocation as a percentage of each loan category at September 30, 2022, June 30, 2022 and September 30, 2021:
September 30, 2022 June 30, 2022 September 30, 2021 Allocation Allocation Allocation as a % of as a % of as a % of Allowance Loan Allowance Loan Allowance Loan Allocation Category Allocation Category Allocation Category ($ in thousands) Loan Category: Commercial and industrial loans $ 154,051 1.77 % $ 144,539 1.70 % $ 103,877 1.84 % Commercial real estate loans: Commercial real estate 217,124 0.89 227,457 0.97 178,206 0.99 Construction 50,656 1.42 49,770 1.47 21,515 1.19 Total commercial real estate loans 267,780 0.95 277,227 1.03 199,721 1.01 Residential mortgage loans 36,157 0.70 29,889 0.60 24,732 0.57 Consumer loans: Home equity 4,083 0.87 3,907 0.91 4,110 1.02 Auto and other consumer 13,673 0.49 13,257 0.49 10,087 0.40 Total consumer loans 17,756 0.55 17,164 0.55 14,197 0.49 Allowance for loan losses 475,744 1.05 468,819 1.08 342,527 1.05 Allowance for unfunded credit commitments 22,664 22,144 14,400 Total allowance for credit losses for loans $ 498,408 $ 490,963 $ 356,927 Allowance for credit losses for loans as a % total loans 1.10 % 1.13 % 1.09 % Our loan portfolio, totaling $45.2 billion at September 30, 2022, had net recoveries of loan charge-offs totaling $5.6 million for the third quarter 2022 as compared to net loan charge-offs of $2.3 million (excluding $62.4 million of immediate PCD loan charge-offs related to the Bank Leumi USA acquisition) and $293 thousand for the second quarter 2022 and third quarter 2021, respectively. Gross loan charge-offs of taxi medallion loans totaled $3.8 million for the third quarter 2022 as compared to $143 thousand and $2.7 million during the third quarter 2021 and the second quarter 2022, respectively.
The allowance for credit losses for loans, comprised of our allowance for loan losses and unfunded credit commitments, as a percentage of total loans was 1.10 percent at September 30, 2022 as compared to 1.13 percent and 1.09 percent at June 30, 2022 and September 30, 2021, respectively. During the third quarter 2022, the provision for credit losses for loans totaled $1.8 million as compared to $43.7 million and $3.5 million for the second quarter 2022 and third quarter 2021, respectively. The second quarter 2022 provision was largely elevated due to $41 million of provision related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA. Overall, an increased economic forecast reserve component of our CECL model was largely offset by lower expected quantitative loss experience at September 30, 2022.
Capital Adequacy
Valley's total risk-based capital, common equity Tier 1 capital, Tier 1 capital and Tier 1 leverage capital ratios were 11.84 percent, 9.09 percent, 9.56 percent, and 8.31 percent, respectively, at September 30, 2022.
Investor Conference Call
Valley will host a conference call with investors and the financial community at 11:00 AM Eastern Daylight Savings Time, today to discuss the third quarter 2022 earnings and related matters.
Those wishing to participate in the call may dial toll-free 800-715-9871 Conference Id: 9870349. The teleconference will also be webcast live: https://edge.media-server.com/mmc/p/ybx28825 and archived on Valley’s website through Monday, November 28, 2022. Investor presentation materials will be made available prior to the conference call at www.valley.com and archived on Valley’s website through Monday, November 28, 2022.
About Valley
As the principal subsidiary of Valley National Bancorp, Valley National Bank is a regional bank with nearly $56 billion in assets. Valley is committed to giving people and businesses the power to succeed. Valley operates many convenient branch locations and commercial banking offices across New Jersey, New York, Florida, Alabama, California, and Illinois, and is committed to providing the most convenient service, the latest innovations and an experienced and knowledgeable team dedicated to meeting customer needs. Helping communities grow and prosper is the heart of Valley’s corporate citizenship philosophy. To learn more about Valley, go to www.valley.com or call our Customer Care Center at 800-522-4100.
Forward Looking Statements
The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about our business, new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as “intend,” “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “would,” “could,” “typically,” “usually,” “anticipate,” “may,” “estimate,” “outlook,” “project,” or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:
- the inability to realize expected cost savings and synergies from the Bank Leumi USA acquisition in the amounts or timeframe anticipated;
- greater than expected costs or difficulties relating to Bank Leumi USA integration matters;
- the inability to retain customers and qualified employees of Bank Leumi USA;
- greater than expected non-recurring charges related to the Bank Leumi USA acquisition;
- the continued impact of COVID-19 on the U.S. and global economies, including business disruptions, reductions in employment, supply chain interruptions, inflation, Federal Reserve actions impacting the level of market interest rates and an increase in business failures, specifically among our clients;
- the continued impact of COVID-19 on our employees and our ability to provide services to our customers and respond to their needs as more cases and new variants of COVID-19 may arise in our primary markets;
- continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets;
- the impact of forbearances or deferrals we are required or agree to as a result of customer requests and/or government actions, including, but not limited to our potential inability to recover fully deferred payments from the borrower or the collateral;
- the risks related to the discontinuation of the London Interbank Offered Rate and other reference rates, including increased expenses and litigation and the effectiveness of hedging strategies;
- damage verdicts or settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent or trademark infringement, employment related claims, and other matters;
- a prolonged downturn in the economy, mainly in New Jersey, New York, Florida, Alabama, California, and Illinois, as well as an unexpected decline in commercial real estate values within our market areas;
- higher or lower than expected income tax expense or tax rates, including increases or decreases resulting from changes in uncertain tax position liabilities, tax laws, regulations and case law;
- the inability to grow customer deposits to keep pace with loan growth;
- a material change in our allowance for credit losses under CECL due to forecasted economic conditions and/or unexpected credit deterioration in our loan and investment portfolios;
- the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;
- greater than expected technology related costs due to, among other factors, prolonged or failed implementations, additional project staffing and obsolescence caused by continuous and rapid market innovations;
- the loss of or decrease in lower-cost funding sources within our deposit base, including our inability to achieve deposit retention targets under Valley's branch transformation strategy;
- cyber-attacks, ransomware attacks, computer viruses or other malware that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems;
- results of examinations by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Bank (FRB), the Consumer Financial Protection Bureau (CFPB) and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;
- our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements or a decision to increase capital by retaining more earnings;
- unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, the COVID-19 pandemic or other external events; and
- unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors.
A detailed discussion of factors that could affect our results is included in our SEC filings, including the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2021.
We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Contact: Michael D. Hagedorn Senior Executive Vice President and Chief Financial Officer 973-872-4885 -Tables to Follow-
VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTSSELECTED FINANCIAL DATA
Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, ($ in thousands, except for share data) 2022 2022 2021 2022 2021 FINANCIAL DATA: Net interest income - FTE(1) $ 455,308 $ 419,565 $ 301,744 $ 1,193,235 $ 897,115 Net interest income $ 453,992 $ 418,160 $ 301,026 $ 1,189,821 $ 894,600 Non-interest income 56,194 58,533 42,431 153,997 116,790 Total revenue 510,186 476,693 343,457 1,343,818 1,011,390 Non-interest expense 261,639 299,730 174,922 758,709 507,028 Pre-provision net revenue 248,547 176,963 168,535 585,109 504,362 Provision for credit losses 2,023 43,998 3,531 49,578 20,934 Income tax expense 68,405 36,552 42,424 144,271 124,626 Net income 178,119 96,413 122,580 391,260 358,802 Dividends on preferred stock 3,172 3,172 3,172 9,516 9,516 Net income available to common shareholders $ 174,947 $ 93,241 $ 119,408 $ 381,744 $ 349,286 Weighted average number of common shares outstanding: Basic 506,342,200 506,302,464 406,824,160 478,383,342 405,986,114 Diluted 508,690,997 508,479,206 409,238,001 480,625,357 408,509,767 Per common share data: Basic earnings $ 0.35 $ 0.18 $ 0.29 $ 0.80 $ 0.86 Diluted earnings 0.34 0.18 0.29 0.79 0.86 Cash dividends declared 0.11 0.11 0.11 0.33 0.33 Closing stock price - high 12.95 13.04 13.61 15.02 14.63 Closing stock price - low 10.14 10.34 11.80 10.14 9.74 FINANCIAL RATIOS: Net interest margin 3.59 % 3.42 % 3.14 % 3.41 % 3.15 % Net interest margin - FTE(1) 3.60 3.43 3.15 3.41 3.16 Annualized return on average assets 1.30 0.72 1.18 1.03 1.16 Annualized return on avg. shareholders' equity 11.39 6.18 10.23 8.89 10.14 NON-GAAP FINANCIAL DATA AND RATIOS:(3) Basic earnings per share, as adjusted $ 0.35 $ 0.32 $ 0.30 $ 0.96 $ 0.88 Diluted earnings per share, as adjusted 0.35 0.32 0.30 0.95 0.88 Annualized return on average assets, as adjusted 1.32 1.25 1.20 1.23 1.19 Annualized return on average shareholders' equity, as adjusted 11.60 % 10.63 % 10.41 % 10.62 % 10.37 % Annualized return on avg. tangible shareholders' equity 17.21 9.33 14.64 13.20 14.63 Annualized return on average tangible shareholders' equity, as adjusted 17.54 16.05 14.90 15.77 14.97 Efficiency ratio 49.76 50.78 49.16 51.03 48.12 AVERAGE BALANCE SHEET ITEMS: Assets $ 54,858,306 $ 53,211,422 $ 41,543,930 $ 50,588,010 $ 41,144,375 Interest earning assets 50,531,242 48,891,230 38,332,874 46,605,417 37,902,547 Loans 44,341,894 42,517,287 32,698,382 40,529,794 32,641,362 Interest bearing liabilities 31,228,739 29,694,271 25,354,160 29,042,253 25,588,185 Deposits 44,770,368 42,896,381 33,599,820 41,176,472 32,731,459 Shareholders' equity 6,256,767 6,238,985 4,794,843 5,869,736 4,718,960 As Of BALANCE SHEET ITEMS: September 30, June 30, March 31, December 31, September 30, (In thousands) 2022 2022 2022 2021 2021 Assets $ 55,927,501 $ 54,438,807 $ 43,551,457 $ 43,446,443 $ 41,278,007 Total loans 45,185,764 43,560,777 35,364,405 34,153,657 32,606,814 Deposits 45,308,843 43,881,051 35,647,336 35,632,412 33,632,605 Shareholders' equity 6,273,829 6,204,913 5,096,384 5,084,066 4,822,498 LOANS: (In thousands) Commercial and industrial loans: Commercial and industrial $ 8,615,557 $ 8,378,454 $ 5,587,781 $ 5,411,601 $ 4,761,227 Commercial and industrial PPP loans 85,820 136,004 203,609 435,950 874,033 Total commercial and industrial 8,701,377 8,514,458 5,791,390 5,847,551 5,635,260 Commercial real estate: Commercial real estate 24,493,445 23,535,086 19,763,202 18,935,486 17,912,070 Construction 3,571,818 3,374,373 2,174,542 1,854,580 1,804,580 Total commercial real estate 28,065,263 26,909,459 21,937,744 20,790,066 19,716,650 Residential mortgage 5,177,128 5,005,069 4,691,935 4,545,064 4,332,422 Consumer: Home equity 467,135 431,455 393,538 400,779 402,658 Automobile 1,711,086 1,673,482 1,552,928 1,570,036 1,563,698 Other consumer 1,063,775 1,026,854 996,870 1,000,161 956,126 Total consumer loans 3,241,996 3,131,791 2,943,336 2,970,976 2,922,482 Total loans $ 45,185,764 $ 43,560,777 $ 35,364,405 $ 34,153,657 $ 32,606,814 CAPITAL RATIOS: Book value per common share $ 11.98 $ 11.84 $ 11.60 $ 11.57 $ 11.32 Tangible book value per common share(3) 7.87 7.71 7.93 7.94 7.78 Tangible common equity to tangible assets(3) 7.40 % 7.46 % 7.96 % 7.98 % 7.95 % Tier 1 leverage capital 8.31 8.33 8.70 8.88 8.63 Common equity tier 1 capital 9.09 9.06 9.67 10.06 10.06 Tier 1 risk-based capital 9.56 9.54 10.27 10.69 10.73 Total risk-based capital 11.84 11.53 12.65 13.10 13.24 Three Months Ended Nine Months Ended ALLOWANCE FOR CREDIT LOSSES: September 30, June 30, September 30, September 30, ($ in thousands) 2022 2022 2021 2022 2021 Allowance for credit losses for loans Beginning balance $ 490,963 $ 379,252 $ 353,724 $ 375,702 $ 351,354 Allowance for purchased credit deteriorated (PCD) loans, net(2) — 70,319 — 70,319 — Loans charged-off: Commercial and industrial (5,033 ) (4,540 ) (1,248 ) (11,144 ) (19,283 ) Commercial real estate (4,000 ) — — (4,173 ) (382 ) Residential mortgage — (1 ) — (27 ) (139 ) Total consumer (962 ) (726 ) (771 ) (2,513 ) (3,389 ) Total loans charged-off (9,995 ) (5,267 ) (2,019 ) (17,857 ) (23,193 ) Charged-off loans recovered: Commercial and industrial 13,236 1,952 514 16,012 2,781 Commercial real estate 1,729 224 29 2,060 759 Construction — — — — 4 Residential mortgage 163 74 228 694 576 Total consumer 477 697 955 2,431 3,359 Total loans recovered 15,605 2,947 1,726 21,197 7,479 Net recoveries (charge-offs) 5,610 (2,320 ) (293 ) 3,340 (15,714 ) Provision for credit losses for loans 1,835 43,712 3,496 49,047 21,287 Ending balance $ 498,408 $ 490,963 $ 356,927 $ 498,408 $ 356,927 Components of allowance for credit losses for loans: Allowance for loan losses $ 475,744 $ 468,819 $ 342,527 $ 475,744 $ 342,527 Allowance for unfunded credit commitments 22,664 22,144 14,400 22,664 14,400 Allowance for credit losses for loans $ 498,408 $ 490,963 $ 356,927 $ 498,408 $ 356,927 Components of provision for credit losses for loans: Provision for credit losses for loans $ 1,315 $ 38,310 $ 3,496 $ 42,883 $ 17,998 Provision for unfunded credit commitments 520 5,402 — 6,164 3,289 Total provision for credit losses for loans $ 1,835 $ 43,712 $ 3,496 $ 49,047 $ 21,287 Annualized ratio of total net (recoveries) charge-offs to average loans (0.05) % 0.02 % 0.00 % (0.01) % 0.06 % Allowance for credit losses for loans as a % of total loans 1.10 1.13 1.09 1.10 1.09 As of ASSET QUALITY: September 30, June 30, March 31, December 31, September 30, ($ in thousands) 2022 2022 2022 2021 2021 Accruing past due loans: 30 to 59 days past due: Commercial and industrial $ 19,526 $ 7,143 $ 6,723 $ 6,717 $ 2,677 Commercial real estate 6,196 10,516 30,807 14,421 22,956 Construction — 9,108 1,708 1,941 — Residential mortgage 13,045 12,326 9,266 10,999 9,293 Total consumer 6,196 6,009 5,862 6,811 5,463 Total 30 to 59 days past due 44,963 45,102 54,366 40,889 40,389 60 to 89 days past due: Commercial and industrial 2,188 3,870 14,461 7,870 985 Commercial real estate 383 630 6,314 — 5,897 Construction 12,969 3,862 3,125 — — Residential mortgage 5,947 2,410 2,560 3,314 974 Total consumer 1,174 702 554 1,020 1,617 Total 60 to 89 days past due 22,661 11,474 27,014 12,204 9,473 90 or more days past due: Commercial and industrial 15,072 15,470 9,261 1,273 2,083 Commercial real estate 15,082 — — 32 1,942 Residential mortgage 550 1,188 1,746 677 1,002 Total consumer 421 267 400 789 325 Total 90 or more days past due 31,125 16,925 11,407 2,771 5,352 Total accruing past due loans $ 98,749 $ 73,501 $ 92,787 $ 55,864 $ 55,214 Non-accrual loans: Commercial and industrial $ 135,187 $ 148,404 $ 96,631 $ 99,918 $ 100,614 Commercial real estate 67,319 85,807 79,180 83,592 95,843 Construction 61,098 49,780 17,618 17,641 17,653 Residential mortgage 26,564 25,847 33,275 35,207 33,648 Total consumer 3,227 3,279 3,754 3,858 4,073 Total non-accrual loans 293,395 313,117 230,458 240,216 251,831 Other real estate owned (OREO) 286 422 1,024 2,259 3,967 Other repossessed assets 1,122 1,200 1,176 2,931 1,896 Total non-performing assets $ 294,803 $ 314,739 $ 232,658 $ 245,406 $ 257,694 Performing troubled debt restructured loans $ 69,748 $ 67,274 $ 56,538 $ 71,330 $ 64,832 Total non-accrual loans as a % of loans 0.65 % 0.72 % 0.65 % 0.70 % 0.77 % Total accruing past due and non-accrual loans as a % of loans 0.87 % 0.89 % 0.91 % 0.87 % 0.94 % Allowance for losses on loans as a % of non-accrual loans 162.15 % 149.73 % 157.30 % 149.53 % 136.01 % NOTES TO SELECTED FINANCIAL DATA
(1) Net interest income and net interest margin are presented on a tax equivalent basis using a 21 percent federal tax rate. Valley believes that this presentation provides comparability of net interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice and SEC rules. (2) Represents the allowance for acquired PCD loans, net of PCD loan charge-offs totaling $62.4 million in the second quarter 2022. (3) Non-GAAP Reconciliations. This press release contains certain supplemental financial information, described in the Notes below, which has been determined by methods other than U.S. Generally Accepted Accounting Principles ("GAAP") that management uses in its analysis of Valley's performance. The Company believes that the non-GAAP financial measures provide useful supplemental information to both management and investors in understanding Valley’s underlying operational performance, business and performance trends, and may facilitate comparisons of our current and prior performance with the performance of others in the financial services industry. Management utilizes these measures for internal planning, forecasting and analysis purposes. Management believes that Valley’s presentation and discussion of this supplemental information, together with the accompanying reconciliations to the GAAP financial measures, also allows investors to view performance in a manner similar to management. These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with U.S. GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies. Non-GAAP Reconciliations to GAAP Financial Measures
Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, ($ in thousands, except for share data) 2022 2022 2021 2022 2021 Adjusted net income available to common shareholders (non-GAAP): Net income, as reported (GAAP) $ 178,119 $ 96,413 $ 122,580 $ 391,260 $ 358,802 Add: Loss on extinguishment of debt (net of tax) — — — — 6,024 Less: Gains on available for sale and held to maturity securities transactions (net of tax)(a) (24 ) (56 ) (565 ) (74 ) (399 ) Add: Provision for credit losses (net of tax)(b) — 29,282 — 29,282 — Add: Merger related expenses (net of tax)(c) 3,360 40,164 1,207 47,103 1,207 Add: Litigation reserve (net of tax)(d) — — 1,505 — 1,505 Net income, as adjusted (non-GAAP) $ 181,455 $ 165,803 $ 124,727 $ 467,571 $ 367,139 Dividends on preferred stock 3,172 3,172 3,172 9,516 9,516 Net income available to common shareholders, as adjusted (non-GAAP) $ 178,283 $ 162,631 $ 121,555 $ 458,055 $ 357,623 __________ (a) Included in gains (losses) on securities transactions, net. (b) Primarily represents provision for credit losses for non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA. (c) Merger related expenses are primarily within salary and employee benefits expense, technology, furniture and equipment expense and professional and legal fees for the nine months ended September 30, 2022.. (d) Included in professional and legal fees. Adjusted per common share data (non-GAAP): Net income available to common shareholders, as adjusted (non-GAAP) $ 178,283 $ 162,631 $ 121,555 $ 458,055 $ 357,623 Average number of shares outstanding 506,342,200 506,302,464 406,824,160 478,383,342 405,986,114 Basic earnings, as adjusted (non-GAAP) $ 0.35 $ 0.32 $ 0.30 $ 0.96 $ 0.88 Average number of diluted shares outstanding 508,690,997 508,479,206 409,238,001 480,625,357 408,509,767 Diluted earnings, as adjusted (non-GAAP) $ 0.35 $ 0.32 $ 0.30 $ 0.95 $ 0.88 Adjusted annualized return on average tangible shareholders' equity (non-GAAP): Net income, as adjusted (non-GAAP) $ 181,455 $ 165,803 $ 124,727 $ 467,571 $ 367,139 Average shareholders' equity $ 6,256,767 $ 6,238,985 $ 4,794,843 5,869,736 4,718,960 Less: Average goodwill and other intangible assets 2,117,818 2,105,585 1,446,760 1,917,217 1,449,285 Average tangible shareholders' equity $ 4,138,949 $ 4,133,400 $ 3,348,083 $ 3,952,519 $ 3,269,675 Annualized return on average tangible shareholders' equity, as adjusted (non-GAAP) 17.54 % 16.05 % 14.90 % 15.77 % 14.97 % Adjusted annualized return on average assets (non-GAAP): Net income, as adjusted (non-GAAP) $ 181,455 $ 165,803 $ 124,727 $ 467,571 $ 367,139 Average assets $ 54,858,306 $ 53,211,422 $ 41,543,930 $ 50,588,010 $ 41,144,375 Annualized return on average assets, as adjusted (non-GAAP) 1.32 % 1.25 % 1.20 % 1.23 % 1.19 % Non-GAAP Reconciliations to GAAP Financial Measures (Continued)
Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, ($ in thousands) 2022 2022 2021 2022 2021 Adjusted annualized return on average shareholders' equity (non-GAAP): Net income, as adjusted (non-GAAP) $ 181,455 $ 165,803 $ 124,727 $ 467,571 $ 367,139 Average shareholders' equity $ 6,256,767 $ 6,238,985 $ 4,794,843 $ 5,869,736 $ 4,718,960 Annualized return on average shareholders' equity, as adjusted (non-GAAP) 11.60 % 10.63 % 10.41 % 10.62 % 10.37 % Annualized return on average tangible shareholders' equity (non-GAAP): Net income, as reported (GAAP) $ 178,119 $ 96,413 $ 122,580 $ 391,260 $ 358,802 Average shareholders' equity $ 6,256,767 $ 6,238,985 $ 4,794,843 5,869,736 4,718,960 Less: Average goodwill and other intangible assets 2,117,818 2,105,585 1,446,760 1,917,217 1,449,285 Average tangible shareholders' equity $ 4,138,949 $ 4,133,400 $ 3,348,083 $ 3,952,519 $ 3,269,675 Annualized return on average tangible shareholders' equity (non-GAAP) 17.21 % 9.33 % 14.64 % 13.20 % 14.63 % Efficiency ratio (non-GAAP): Non-interest expense, as reported (GAAP) $ 261,639 $ 299,730 $ 174,922 $ 758,709 $ 507,028 Less: Loss on extinguishment of debt (pre-tax) — — — — 8,406 Less: Merger-related expenses (pre-tax) 4,707 54,496 1,287 63,831 1,287 Less: Amortization of tax credit investments (pre-tax) 3,105 3,193 3,079 9,194 8,795 Less: Litigation reserve (pre-tax) — — 2,100 — 2,100 Non-interest expense, as adjusted (non-GAAP) $ 253,827 $ 242,041 $ 168,456 $ 685,684 $ 486,440 Net interest income, as reported (GAAP) 453,992 418,160 301,026 1,189,821 894,600 Non-interest income, as reported (GAAP) 56,194 58,533 42,431 153,997 116,790 Less: Gains on available for sale and held to maturity securities transactions, net (pre-tax) (33 ) (78 ) (788 ) (102 ) (557 ) Non-interest income, as adjusted (non-GAAP) $ 56,161 $ 58,455 $ 41,643 $ 153,895 $ 116,233 Gross operating income, as adjusted (non-GAAP) $ 510,153 $ 476,615 $ 342,669 $ 1,343,716 $ 1,010,833 Efficiency ratio (non-GAAP) 49.76 % 50.78 % 49.16 % 51.03 % 48.12 % As of September 30, June 30, March 31, December 31, September 30, ($ in thousands, except for share data) 2022 2022 2022 2021 2021 Tangible book value per common share (non-GAAP): Common shares outstanding 506,351,502 506,328,526 421,437,068 421,437,068 407,313,664 Shareholders' equity (GAAP) $ 6,273,829 $ 6,204,913 $ 5,096,384 $ 5,084,066 $ 4,822,498 Less: Preferred stock 209,691 209,691 209,691 209,691 209,691 Less: Goodwill and other intangible assets 2,079,731 2,090,147 1,543,238 1,529,394 1,444,967 Tangible common shareholders' equity (non-GAAP) $ 3,984,407 $ 3,905,075 $ 3,343,455 $ 3,344,981 $ 3,167,840 Tangible book value per common share (non-GAAP) $ 7.87 $ 7.71 $ 7.93 $ 7.94 $ 7.78 Tangible common equity to tangible assets (non-GAAP): Tangible common shareholders' equity (non-GAAP) $ 3,984,407 $ 3,905,075 $ 3,343,455 $ 3,344,981 $ 3,167,840 Total assets (GAAP) $ 55,927,501 $ 54,438,807 $ 43,551,457 $ 43,446,443 $ 41,278,007 Less: Goodwill and other intangible assets 2,079,731 2,090,147 1,543,238 1,529,394 1,444,967 Tangible assets (non-GAAP) $ 53,847,770 $ 52,348,660 $ 42,008,219 $ 41,917,049 $ 39,833,040 Tangible common equity to tangible assets (non-GAAP) 7.40 % 7.46 % 7.96 % 7.98 % 7.95 % SHAREHOLDERS RELATIONS
Requests for copies of reports and/or other inquiries should be directed to Tina Zarkadas, Assistant Vice President, Shareholder Relations Specialist, Valley National Bancorp, 1455 Valley Road, Wayne, New Jersey, 07470, by telephone at (973) 305-3380, by fax at (973) 305-1364 or by e-mail at tzarkadas@valley.com.VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except for share data)September 30, December 31, 2022 2021 (Unaudited) Assets Cash and due from banks $ 431,471 $ 205,156 Interest bearing deposits with banks 686,877 1,844,764 Investment securities: Equity securities 43,318 36,473 Trading debt securities 4,100 38,130 Available for sale debt securities 1,271,854 1,128,809 Held to maturity debt securities (net of allowance for credit losses of $1,696 at September 30, 2022 and $1,165 at December 31, 2021) 3,720,324 2,667,532 Total investment securities 5,039,596 3,870,944 Loans held for sale, at fair value 6,073 139,516 Loans 45,185,764 34,153,657 Less: Allowance for loan losses (475,744 ) (359,202 ) Net loans 44,710,020 33,794,455 Premises and equipment, net 362,203 326,306 Lease right of use assets 314,511 259,117 Bank owned life insurance 714,649 566,770 Accrued interest receivable 159,406 96,882 Goodwill 1,871,505 1,459,008 Other intangible assets, net 208,226 70,386 Other assets 1,422,964 813,139 Total Assets $ 55,927,501 $ 43,446,443 Liabilities Deposits: Non-interest bearing $ 15,420,625 $ 11,675,748 Interest bearing: Savings, NOW and money market 23,559,662 20,269,620 Time 6,328,556 3,687,044 Total deposits 45,308,843 35,632,412 Short-term borrowings 919,283 655,726 Long-term borrowings 1,541,097 1,423,676 Junior subordinated debentures issued to capital trusts 56,673 56,413 Lease liabilities 367,428 283,106 Accrued expenses and other liabilities 1,460,348 311,044 Total Liabilities 49,653,672 38,362,377 Shareholders’ Equity Preferred stock, no par value; 50,000,000 authorized shares: Series A (4,600,000 shares issued at September 30, 2022 and December 31, 2021) 111,590 111,590 Series B (4,000,000 shares issued at September 30, 2022 and December 31, 2021) 98,101 98,101 Common stock (no par value, authorized 650,000,000 shares; issued 507,896,910 and 423,034,027 at September 30, 2022 and December 31, 2021) 178,185 148,482 Surplus 4,972,732 3,883,035 Retained earnings 1,100,838 883,645 Accumulated other comprehensive loss (165,557 ) (17,932 ) Treasury stock, at cost (1,545,408 shares at September 30, 2022 and 1,596,959 common shares at December 31, 2021) (22,060 ) (22,855 ) Total Shareholders’ Equity 6,273,829 5,084,066 Total Liabilities and Shareholders’ Equity $ 55,927,501 $ 43,446,443 VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except for share data)Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Interest Income Interest and fees on loans $ 496,520 $ 415,577 $ 309,753 $ 1,229,462 $ 938,248 Interest and dividends on investment securities: Taxable 28,264 27,534 14,292 74,416 40,174 Tax-exempt 5,210 5,191 2,609 12,739 9,181 Dividends 2,738 3,076 1,505 7,490 5,543 Interest on federal funds sold and other short-term investments 3,996 1,569 642 6,026 1,101 Total interest income 536,728 452,947 328,801 1,330,133 994,247 Interest Expense Interest on deposits: Savings, NOW and money market 50,674 17,122 10,605 77,423 32,896 Time 15,174 3,269 4,394 21,274 21,766 Interest on short-term borrowings 5,160 4,083 1,464 10,049 4,390 Interest on long-term borrowings and junior subordinated debentures 11,728 10,313 11,312 31,566 40,595 Total interest expense 82,736 34,787 27,775 140,312 99,647 Net Interest Income 453,992 418,160 301,026 1,189,821 894,600 Provision (credit) for credit losses for held to maturity securities 188 286 35 531 (353 ) Provision for credit losses for loans 1,835 43,712 3,496 49,047 21,287 Net Interest Income After Provision for Credit Losses 451,969 374,162 297,495 1,140,243 873,666 Non-Interest Income Wealth management and trust fees 9,281 9,577 3,550 23,989 10,411 Insurance commissions 3,750 3,463 1,610 9,072 5,805 Service charges on deposit accounts 10,338 10,067 5,428 26,617 15,614 Gains (losses) on securities transactions, net 323 (309 ) 787 (1,058 ) 1,263 Fees from loan servicing 3,138 2,717 2,894 8,636 8,980 Gains on sales of loans, net 922 3,602 6,442 5,510 20,016 Bank owned life insurance 1,681 2,113 2,018 5,840 6,824 Other 26,761 27,303 19,702 75,391 47,877 Total non-interest income 56,194 58,533 42,431 153,997 116,790 Non-Interest Expense Salary and employee benefits expense 134,572 154,798 93,992 397,103 273,190 Net occupancy expense 26,486 22,429 19,941 70,906 59,171 Technology, furniture and equipment expense 39,365 49,866 21,007 115,245 64,956 FDIC insurance assessment 6,500 5,351 3,644 16,009 10,294 Amortization of other intangible assets 11,088 11,400 5,298 26,925 16,753 Professional and legal fees 17,840 30,409 13,492 62,998 27,250 Loss on extinguishment of debt — — — — 8,406 Amortization of tax credit investments 3,105 3,193 3,079 9,194 8,795 Other 22,683 22,284 14,469 60,329 38,213 Total non-interest expense 261,639 299,730 174,922 758,709 507,028 Income Before Income Taxes 246,524 132,965 165,004 535,531 483,428 Income tax expense 68,405 36,552 42,424 144,271 124,626 Net Income 178,119 96,413 122,580 391,260 358,802 Dividends on preferred stock 3,172 3,172 3,172 9,516 9,516 Net Income Available to Common Shareholders $ 174,947 $ 93,241 $ 119,408 $ 381,744 $ 349,286 Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, 2022 2022 2021 2022 2021 Earnings Per Common Share: Basic $ 0.35 $ 0.18 $ 0.29 $ 0.80 $ 0.86 Diluted 0.34 0.18 0.29 0.79 0.86 Cash Dividends Declared per Common Share 0.11 0.11 0.11 0.33 0.33 Weighted Average Number of Common Shares Outstanding: Basic 506,342,200 506,302,464 406,824,160 478,383,342 405,986,114 Diluted 508,690,997 508,479,206 409,238,001 480,625,357 408,509,767 VALLEY NATIONAL BANCORP
Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and
Net Interest Income on a Tax Equivalent BasisThree Months Ended September 30, 2022 June 30, 2022 September 30, 2021 Average Avg. Average Avg. Average Avg. ($ in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets Interest earning assets: Loans(1)(2) $ 44,341,894 $ 496,545 4.48 % $ 42,517,287 $ 415,602 3.91 % $ 32,698,382 $ 309,778 3.79 % Taxable investments(3) 4,815,181 31,002 2.58 4,912,994 30,610 2.49 3,302,803 15,797 1.91 Tax-exempt investments(1)(3) 635,795 6,501 4.09 684,471 6,571 3.84 429,941 3,302 3.07 Interest bearing deposits with banks 738,372 3,996 2.16 776,478 1,569 0.81 1,901,748 642 0.14 Total interest earning assets 50,531,242 538,044 4.26 48,891,230 454,352 3.72 38,332,874 329,519 3.44 Other assets 4,327,064 4,320,192 3,211,056 Total assets $ 54,858,306 $ 53,211,422 $ 41,543,930 Liabilities and shareholders' equity Interest bearing liabilities: Savings, NOW and money market deposits $ 23,541,694 $ 50,674 0.86 % $ 23,027,347 $ 17,122 0.30 % $ 18,771,619 $ 10,605 0.23 % Time deposits 5,192,896 15,174 1.17 3,601,088 3,269 0.36 4,126,253 4,394 0.43 Short-term borrowings 1,016,240 5,160 2.03 1,603,198 4,083 1.02 860,474 1,464 0.68 Long-term borrowings(4) 1,477,909 11,728 3.17 1,462,638 10,313 2.82 1,595,814 11,312 2.84 Total interest bearing liabilities 31,228,739 82,736 1.06 29,694,271 34,787 0.47 25,354,160 27,775 0.44 Non-interest bearing deposits 16,035,778 16,267,946 10,701,948 Other liabilities 1,337,022 1,010,220 692,979 Shareholders' equity 6,256,767 6,238,985 4,794,843 Total liabilities and shareholders' equity $ 54,858,306 $ 53,211,422 $ 41,543,930 Net interest income/interest rate spread(5) $ 455,308 3.20 % $ 419,565 3.25 % $ 301,744 3.00 % Tax equivalent adjustment (1,316 ) (1,405 ) (718 ) Net interest income, as reported $ 453,992 $ 418,160 $ 301,026 Net interest margin(6) 3.59 3.42 3.14 Tax equivalent effect 0.01 0.01 0.01 Net interest margin on a fully tax equivalent basis(6) 3.60 % 3.43 % 3.15 % ____________
(1) Interest income is presented on a tax equivalent basis using a 21 percent federal tax rate.
(2) Loans are stated net of unearned income and include non-accrual loans.
(3) The yield for securities that are classified as available for sale is based on the average historical amortized cost.
(4) Includes junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of condition.
(5) Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.
(6) Net interest income as a percentage of total average interest earning assets.
