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Valley National Shares Jump 5.3% as Q3 Earnings Meet Estimates
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Shares of Valley National Bancorp (VLY - Free Report) gained 5.3% in response to third-quarter 2024 results. Its adjusted earnings per share of 18 cents met the Zacks Consensus Estimate. However, the bottom line plunged 30.8% on a year-over-year basis.
Stay up-to-date with all quarterly releases: See ZacksEarnings Calendar.
Higher non-interest income and a sequential increase in deposit balances support the results. On the other hand, a substantial rise in provisions, lower net interest income (NII) and loan balance and a slight rise in expenses act as spoilsports.
Results excluded non-core income and charges. After considering these, net income was $97.9 million, down 30.8% from the year-ago quarter.
Valley National’s Revenues Stable, Expenses Up Marginally
Quarterly total revenues were $471.2 million, relatively stable year over year. The top line beat the Zacks Consensus Estimate of $467.9 million.
NII (fully-taxable-equivalent or FTE basis) was $411.8 million, declining marginally. Net interest margin (FTE basis) was 2.86%, down 5 basis points (bps).
Non-interest income grew 3.4% to $60.7 million. The rise was driven by increase in all almost components.
Non-interest expenses of $269.5 million increased slightly. Meanwhile, adjusted non-interest expenses were stable at $263.6 million.
The adjusted efficiency ratio was 56.13%, down from 56.72% in the prior-year quarter. A decline in the efficiency ratio indicates an improvement in profitability.
VLY’s Loans & Deposits
As of Sept. 30, 2024, total loans were $49.4 billion, down 1.9% sequentially. The fall was mainly due to the transfer of commercial real estate (CRE) loans worth $823.1 million, net of unearned fees, to loans held for sale (HFS) and normal repayment activity mainly within CRE non-owner occupied and multi-family loans.
Further, on Oct. 23, 2024, Valley National agreed to sell the above-mentioned CRE loans at a nominal discount of roughly 1% to a single investor. The transaction is expected to close in the ongoing quarter.
As of Sept. 30, 2024, total deposits amounted to $50.4 billion, up almost 1% from the prior quarter.
Valley National’s Credit Quality Worsens
As of Sept. 30, 2024, total non-performing assets were $305.1 million, up 17.2% year over year. Provision for credit losses for loans was $75 million, rising substantially from $9.1 million.
Allowance for credit losses as a percentage of total loans was 1.14%, up 22 bps from the year-ago quarter.
VLY’s Profitability Ratios Deteriorate, Capital Ratios Rise
At the end of the third quarter, adjusted annualized return on average assets was 0.62%, down from 0.89% in the year-earlier quarter. Adjusted annualized return on average shareholders’ equity was 5.64%, down from 8.26%.
VLY's tangible common equity to tangible assets ratio was 7.68% as of Sept. 30, 2024, up from 7.40% in the corresponding period of 2023. Tier 1 risk-based capital ratio was 10.29%, up from 9.64%. Also, the common equity tier 1 capital ratio of 9.57% was up from 9.21% as of Sept. 30, 2023.
Our Take on Valley National
Valley National’s organic growth trajectory, strategic acquisitions and digitization efforts will support its financials. However, persistently increasing costs and weakening asset quality remain major concerns. Further, the company’s huge CRE loan exposure is worrisome.
Valley National Bancorp Price, Consensus and EPS Surprise
Prosperity Bancshares Inc.’s (PB - Free Report) third-quarter 2024 adjusted earnings per share of $1.34 beat the Zacks Consensus Estimate of $1.30. Moreover, the bottom line compared favorably with $1.21 in the prior-year quarter.
Results benefited from an increase in NII. Further, a rise in deposits and loans was another positive. During the quarter, provisions remained stable. Nevertheless, a fall in adjusted non-interest income and rising expenses were major headwinds for PB.
BankUnited, Inc.’s (BKU - Free Report) third-quarter 2024 earnings of 81 cents per share surpassed the Zacks Consensus Estimate of 73 cents. The bottom line compares favorably with 63 cents in the prior-year quarter.
BKU’s results were aided by growth in NII, lower provisions and a slight improvement in deposit balance. However, lower non-interest income, a fall in loan balance and a jump in expenses were the undermining factors.
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Valley National Shares Jump 5.3% as Q3 Earnings Meet Estimates
Shares of Valley National Bancorp (VLY - Free Report) gained 5.3% in response to third-quarter 2024 results. Its adjusted earnings per share of 18 cents met the Zacks Consensus Estimate. However, the bottom line plunged 30.8% on a year-over-year basis.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Higher non-interest income and a sequential increase in deposit balances support the results. On the other hand, a substantial rise in provisions, lower net interest income (NII) and loan balance and a slight rise in expenses act as spoilsports.
Results excluded non-core income and charges. After considering these, net income was $97.9 million, down 30.8% from the year-ago quarter.
Valley National’s Revenues Stable, Expenses Up Marginally
Quarterly total revenues were $471.2 million, relatively stable year over year. The top line beat the Zacks Consensus Estimate of $467.9 million.
NII (fully-taxable-equivalent or FTE basis) was $411.8 million, declining marginally. Net interest margin (FTE basis) was 2.86%, down 5 basis points (bps).
Non-interest income grew 3.4% to $60.7 million. The rise was driven by increase in all almost components.
Non-interest expenses of $269.5 million increased slightly. Meanwhile, adjusted non-interest expenses were stable at $263.6 million.
The adjusted efficiency ratio was 56.13%, down from 56.72% in the prior-year quarter. A decline in the efficiency ratio indicates an improvement in profitability.
VLY’s Loans & Deposits
As of Sept. 30, 2024, total loans were $49.4 billion, down 1.9% sequentially. The fall was mainly due to the transfer of commercial real estate (CRE) loans worth $823.1 million, net of unearned fees, to loans held for sale (HFS) and normal repayment activity mainly within CRE non-owner occupied and multi-family loans.
Further, on Oct. 23, 2024, Valley National agreed to sell the above-mentioned CRE loans at a nominal discount of roughly 1% to a single investor. The transaction is expected to close in the ongoing quarter.
As of Sept. 30, 2024, total deposits amounted to $50.4 billion, up almost 1% from the prior quarter.
Valley National’s Credit Quality Worsens
As of Sept. 30, 2024, total non-performing assets were $305.1 million, up 17.2% year over year. Provision for credit losses for loans was $75 million, rising substantially from $9.1 million.
Allowance for credit losses as a percentage of total loans was 1.14%, up 22 bps from the year-ago quarter.
VLY’s Profitability Ratios Deteriorate, Capital Ratios Rise
At the end of the third quarter, adjusted annualized return on average assets was 0.62%, down from 0.89% in the year-earlier quarter. Adjusted annualized return on average shareholders’ equity was 5.64%, down from 8.26%.
VLY's tangible common equity to tangible assets ratio was 7.68% as of Sept. 30, 2024, up from 7.40% in the corresponding period of 2023. Tier 1 risk-based capital ratio was 10.29%, up from 9.64%. Also, the common equity tier 1 capital ratio of 9.57% was up from 9.21% as of Sept. 30, 2023.
Our Take on Valley National
Valley National’s organic growth trajectory, strategic acquisitions and digitization efforts will support its financials. However, persistently increasing costs and weakening asset quality remain major concerns. Further, the company’s huge CRE loan exposure is worrisome.
Valley National Bancorp Price, Consensus and EPS Surprise
Valley National Bancorp price-consensus-eps-surprise-chart | Valley National Bancorp Quote
Valley National currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of VLY’s Peers
Prosperity Bancshares Inc.’s (PB - Free Report) third-quarter 2024 adjusted earnings per share of $1.34 beat the Zacks Consensus Estimate of $1.30. Moreover, the bottom line compared favorably with $1.21 in the prior-year quarter.
Results benefited from an increase in NII. Further, a rise in deposits and loans was another positive. During the quarter, provisions remained stable. Nevertheless, a fall in adjusted non-interest income and rising expenses were major headwinds for PB.
BankUnited, Inc.’s (BKU - Free Report) third-quarter 2024 earnings of 81 cents per share surpassed the Zacks Consensus Estimate of 73 cents. The bottom line compares favorably with 63 cents in the prior-year quarter.
BKU’s results were aided by growth in NII, lower provisions and a slight improvement in deposit balance. However, lower non-interest income, a fall in loan balance and a jump in expenses were the undermining factors.