Valley National Bancorp's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Valley National Bancorp (VLY)

Q1 2012 Earnings Call

April 26, 2012 11:00 AM ET

Executives

Dianne Grenz – IR

Gerald Lipkin – Chairman, President and CEO

Alan Eskow – CFO, SVP and Corporate Secretary

Analysts

Steven Alexopoulos – JPMorgan

Craig Siegenthaler – Credit Suisse

Kenneth – Morgan Stanley

Dan Werner – Morningstar Equity

Travis Lan – Stifel Nicolaus

Nancy Bush – NAB Research

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Valley National Bancorp First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions)

I would now like to hand the conference over Ms. Dianne Grenz. Please go ahead, madam.

Dianne Grenz

Good morning. Welcome to Valley’s first quarter 2012 earnings conference call. If you have not read the earnings release we issued earlier this morning, you may access it along with the financial tables and schedules for the first quarter from our website at valleynationalbank.com.

Comments made during this call may contain forward-looking statements relating to the Valley National Bancorp and the banking industry. Valley encourages participants to refer to our SEC filings including those found on Form 8-K, 10-K and 10-Q for a complete discussion of forward-looking statements.

And now, I’d like to turn the call over to Valley’s Chairman, President and CEO, Gerald Lipkin.

Gerald Lipkin

Thank you, Dianne. Good morning and welcome to our first quarter earnings conference call. Valley reported first quarter net income of $34.5 million compared to $24.8 million in the prior linked-quarter. We are pleased with the financial results for the period although net income was negatively impacted by both non-cash trading losses and non-recurring State Bank merger charges. Alan will provide a little more color on each of those shortly.

During the first quarter, we closed our State Bank acquisition and officially expanded the franchise into the Long Island market. We now operate 44 full service branches in the Boroughs and Long Island. Valley’s total deposits in this market now exceeds $2.8 billion and over one-third of the Valley’s entire C&I portfolio in summer sales in New York.

Long Island’s demographics are similar to our Northern New Jersey market, and will provide an excellent opportunity for our customer-focused sale rep to cultivate both new and current customers. Similar to our previous (inaudible) into the New York market with our Merchants Bank acquisition in 2001, State Bank offered very little consumer-based products. This will be an area of focus for Valley in the future.

We have begun to aggressively market Valley’s residential mortgage refinance program throughout the former State Bank branch network and anticipate introducing an enhanced low fixed-cost residential mortgage refinance program for your customers in the coming months. Currently, Valley’s New York residential mortgage refinance program reflects a flat fee of $1,999, which includes all Bank’s fees and titled insurance. Even at this price, we have begun to reduce initial consumer success on Long Island, as residential mortgage applications from that market exceeded 200 units in the first quarter. We anticipate a much expanded market penetration when we introduce Valley’s new lower-priced, enhanced product.

From a commercial lending perspective, early indications reinforce our belief that there will be significant opportunity to expand upon many of the former State Bank existing customer relationships. The Valley’s larger lending limit, coupled with an increased commercial product offering, will provide the catalyst for Valley to develop a larger market share on Long Island. Valley does not intend to whole its geographic expansion now that’s the State Bank transaction is complete. We believe we can enhance the shareholder value and improve earnings per share by continuing our eastward migration through New York City and onto Long Island. Preliminarily we have made arrangements to open by a de novo branch expansion, two offices in this market later this year. We are preparing plans to strategically open a minimum of five offices annually thereafter. We may elect to expand via acquisition or de novo, nevertheless moving the franchisee eastward will be our strategic trust in the coming years.

During the second quarter, we will be opening an executive office in Manhattan to spearhead this geographic expansion. Both our senior staff and I will be spending time each week at this location in order to make ourselves readily available to these growing segments of our customer base.

The Northern New Jersey, New York City and Long Island marketplace provides from our view the greatest demographic opportunities in the country as one of the longest standing middle market commercial lenders in the region, we have a history and stability to develop profitable relationships and promote the Valley brand while increasing both the earnings power and franchisee value of the organization.

The following comments surrounding loan growth and activity for the quarter do not include the impact of the $37 million short-term loan to State Bank Corp that was made in December of 2011, that loan was used to repay their TARP funds and was eliminated at closing on January 1. Total loan growth during the quarter adjustment for the acquisition of stake was extremely promising as non-covered loans grew nearly 15% annualized. Growth for the period was achieved two-fold as Valley originated nearly $1 billion of loans internally and acquired during the last week of March an additional $112 million portfolio of mostly commercial real estate loans within our geographic marketplace. We anticipate the purchase loans will be immediately accretive to our bottom line based on the underlying economics of each loan. In addition we will pursue additional relationships from the 185 commercial borrowers purchased. We conducted full credit due diligence on each and every loan prior to the purchase. Since we were quite selected in the loans we acquired, we will believe the transaction will add to our bottom line immediately.

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