VLYPP - Valley National Bancorp (VLY) Q1 2024 Earnings Call Transcript
2024-04-25 17:12:03 ET
Valley National Bancorp (VLY)
Q1 2024 Results Conference Call
April 25, 2024 11:00 AM ET
Company Participants
Travis Lan - IR
Ira Robbins - CEO
Tom Iadanza - President
Mike Hagedorn - CFO
Mark Saeger - Chief Credit Officer
Conference Call Participants
Steven Alexopoulos - JPMorgan
Matthew Breese - Stephens Inc
Frank Schiraldi - Piper Sandler
Jon Arfstrom - RBC Capital Markets
Manan Gosalia - Morgan Stanley
Jared Shaw - Barclays
Steve Moss - Raymond James
David Chiaverini - Wedbush Securities
Ben Gerlinger - Citi
Presentation
Operator
Welcome to the Valley National Bancorp Earnings Conference Call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question-and-answer session [Operator Instructions]. Please be advised that today's conference is being recorded. I would like to turn the call over to your first speaker today, Travis Lan. Please begin.
Travis Lan
Good morning. And welcome to Valley's First Quarter 2024 Earnings Conference Call. Presenting on behalf of Valley today are CEO, Ira Robbins; President, Tom Iadanza; and Chief Financial Officer, Mike Hagedorn. Before we begin, I would like to make everyone aware that our quarterly earnings release and supporting documents can be found on our company Web site at valley.com. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to today's earnings release for reconciliations of these non-GAAP measures. Additionally, I would like to highlight Slide 2 of our earnings presentation and remind you that comments made during this call may contain forward-looking statements relating to Valley National Bancorp and the banking industry. Valley encourages all participants to refer to our SEC filings, including those found on Forms 8-K, 10-Q and 10-K for a complete discussion of forward-looking statements and the factors that could cause actual results to differ from those statements. With that, I’ll turn the call over to Ira Robbins.
Ira Robbins
Thank you, Travis. During the first quarter of 2024, Valley reported net income of $96 million and earnings per share of $0.18. Exclusive of noncore items, adjusted net income and adjusted earnings per share were $99 million and $0.19 respectively. The quarter's results were impacted by an outsized provision for loan losses, which I will discuss shortly. On a pretax pre-provision basis, we saw a positive inflection this quarter. The sequential downward trend in net interest income slowed meaningfully despite the lower day count during the quarter. This reflects the benefit of asset pricing and our efforts to better control funding costs. Fee income results were strong, supported by certain unique businesses, including tax credit advisory. Finally, noninterest expenses were extremely well controlled despite the seasonal headwind associated with higher payroll taxes. Despite the continuation of the inverted yield curve and other environmental challenges, I am pleased with the stronger pretax pre-provision earnings results this quarter. I'm also pleased with the quarter's balance sheet strength and credit quality performance.
On Slide 4, we outlined certain efforts made to curtail loan growth, enhance reserve coverage where needed in the portfolio and incrementally optimize our funding base. Total loans declined nearly $300 million during the quarter as a result of our proactive efforts to participate out a portion of certain commercial real estate and construction loans, and the sale of our commercial premium finance business. These sale transactions each occurred at or above par and incrementally benefit our commercial real estate concentration, capital ratios and reserve levels. Our allowance for credit losses for loans as a percentage of total loans increased 5 basis points to 0.98% during the quarter. Meanwhile, our past due and nonaccrual loans both declined as compared to December 31, 2023. The higher provision and associated reserve coverage reflects internal risk rating migrations resulting from our continuous monitoring and rigorous stress testing of the commercial loan portfolio. During the quarter, an additional 1% of loans transitioned into either our criticized or classified loan buckets. While we remain comfortable with the sponsorship, collateral, support and potential loss content of these loans, criticized loans require elevated reserve coverage under CECL. We are comfortable with the current reserve coverage levels but anticipate that the allowance could trend slightly higher over the next few quarters.
Our focus on and expertise in commercial real estate lending has generated strong and stable risk adjusted financial results throughout our history. The strength of our commercial real estate underwriting and the consistently industry leading loss content of our portfolio has contributed to significant shareholder value creation through above average tangible book value growth. Our strong network of borrowers have banked with Valley for decades and have performed very well in other periods rising interest rates. We remain very confident with our capital allocation and in future credit performance of our commercial real estate portfolio. That said, I acknowledge that our perceived concentration in commercial real estate has recently amplified the volatility in our company's valuation. This volatility is based purely on perception and is not reflective of our financial results nor the strength of our credit quality and balance sheet. Still, we exist to serve our key stakeholders. And while I'm proud of our ability to exceed the expectations of our clients, communities and employees, I acknowledge that the volatility experienced by our shareholders is not sustainable. Commercial real estate is a wonderful asset class and one in which our differentiated approach continues to create incredible value. We will remain active in this space but we'll manage our concentration more efficiently going forward. Our diversifying C&I initiatives will continue to accelerate and we will further enhance our financial flexibility. These efforts are consistent with our established strategic plan, and I believe that accelerating them will help to reduce the volatility in our valuation....
Valley National Bancorp (VLY) Q1 2024 Earnings Call Transcript