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Member News — Valley Bank Reports Positive Q3 Earnings
October 25th, 2018

Valley National Bancorp (NASDAQ:VLY), the holding company
for Valley National Bank, today reported net income for the third quarter of 2018 of $69.6 million, or $0.20 per diluted common share, as compared to the third quarter of 2017 earnings of $39.6 million, or $0.14 per diluted common share, and net income of $72.8 million, or $0.21 per diluted common share,
for the second quarter of 2018. Net income for third quarter of 2018 included infrequent charges of $4.8 million ($3.4 million after-tax) mainly related to the impairment of branches selected for closure, merger expenses related to the USAmeriBancorp, Inc. (“USAB”) acquisition and litigation reserves. The third
quarter of 2017 included infrequent charges of $11.1 million ($6.8 million after-tax) that mostly related to our LIFT program, and the second quarter of 2018 included USAB merger charges of $3.2 million ($2.3 million after-tax). Excluding these charges and other non-core items, our adjusted net income was $73.1 million, or $0.21 per diluted common share, for the third quarter of 2018, $46.4 million, or $0.17 per diluted common share, for the third quarter of 2017, and $75.2 million, or $0.22 per diluted common share, for the second quarter of 2018. See further details below, including the “Consolidated Financial Highlights” tables.

Key financial highlights for the third quarter:
• Loan Portfolio: Loans increased $876.6 million, or 15.1 percent on an annualized basis, to approximately $24.1 billion at September 30, 2018 from June 30, 2018. The increase was largely due to solid organic loan growth within most loan categories. Additionally, we sold approximately $151 million of residential mortgage loans resulting in pre-tax gains of $3.7 million during the third quarter of 2018.
• Net Interest Income: Net interest income on a tax equivalent basis of $218.1 million for the third quarter of 2018 increased $5.9 million as compared to the second quarter of 2018 largely due to our new higher rate loan volumes and growth through the nine months ended September 30, 2018.
• Net Interest Margin: Our net interest margin on a tax equivalent basis of 3.12 percent for the third quarter of 2018 increased by 1 basis point from 3.11 percent for the second quarter of 2018. See the “Net Interest Income and Margin” section below for more details.
• Provision for Credit Losses: The provision for credit losses declined $590 thousand to $6.6 million for the third quarter of 2018 as compared to the second quarter of 2018.
• Credit Quality: Net loan charge-offs totaled only $231 thousand for the third quarter of 2018 as compared to $692 thousand for the second quarter of 2018. Net recoveries totaled $381 thousand for the nine months ended September 30, 2018. Non-accrual loans represented 0.33 percent of
total loans at September 30, 2018.
• Non-interest Income: Non-interest income decreased $9.0 million, or 23.7 percent, to $29.0 million for the third quarter of 2018 as compared to the second quarter of 2018 largely due to a $4.9 million decrease in other income driven by net expenses related to changes in our FDIC loss share receivable and $1.8 million of branch related asset impairments (included in net losses on
sale of assets within this line item), and a $3.9 million decline in net gains on sales of loans. See the “Branch Transformation” section below for more details on our branch network.
• Non-interest Expense: Non-interest expense increased $1.8 million, or 1.2 percent, to $151.7
million for the third quarter of 2018 as compared to the second quarter of 2018 primarily due to a $1.8 million increase in salary and employee benefits expense and litigation reserves totaling $1.7 million included in professional and legal expense for the third quarter of 2018, partially offset by moderate declines in several other expense categories.
• Performance Ratios: Annualized return on average assets (ROA), shareholders’ equity (ROE) and tangible ROE were 0.91 percent, 8.41 percent and 12.96 percent for the third quarter of 2018, respectively. Annualized ROA, ROE and tangible ROE, adjusted for infrequent charges, was 0.96 percent, 8.84 percent and 13.61 percent for the third quarter of 2018, respectively.
• Efficiency Ratio: Our efficiency ratio was 61.70 percent for the third quarter of 2018 as compared to 60.25 percent and 69.43 percent for the second quarter of 2018 and third quarter of 2017, respectively. Excluding merger expense, amortization of tax credit investments, litigation reserve
expense and branch related asset impairments, if applicable in the period, our adjusted efficiency ratio was 57.85 percent for the third quarter of 2018 as compared to 57.15 percent and 59.21 percent for the second quarter of 2018 and third quarter of 2017, respectively. See the “Consolidated Financial Highlights” tables below for additional information regarding this non-
GAAP measure.
• Income Tax Expense: The effective tax rate was 20.6 percent for the third quarter of 2018 as compared to 20.7 percent for the second quarter of 2018. The New Jersey surtax effective July 1, 2018 did not have a material impact on our reported income tax expense for the third quarter of 2018. For the remainder of 2018, we currently estimate that our effective tax rate will range
from 21 percent to 23 percent.

Ira Robbins, CEO and President commented, “We are pleased with the continued progress we have made in deepening client relationships as witnessed by both the loan and deposit growth in our balance sheet. Furthermore, the stability of the net interest margin is a testament to our ability to maintain pricing discipline. Our commitment to reinvestment into Valley should enable us to enjoy meaningful success
in years to come.”

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