VLY - Earnings call transcript Q4 2021 | Valley National Bancorp

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Operator

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2021 Valley National Bancorp Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Travis Lan, Head of Investor Relations. Please go ahead.

Travis Lan

Good morning, and welcome to Valley Fourth Quarter 2021 Earnings Conference Call. Valley Chief CEO, Financial of Tom Robbins; behalf and Iadanza; Officer, on today Ira are President, Presenting Mike Hagedorn.

measures. I of earnings from Please earnings documents to non-GAAP begin, that reported When discussing our results. we would which these we make valley.com. for to release Before refer results, everyone company our at quarterly today's be exclude release refer can supporting measures, non-GAAP to our and reconciliations found on like aware certain items

I highlight that earnings XX-K made contain Additionally, to banking presentation and Valley during participants may industry. SEC Robbins. our of to our like discussion X of the to to would I'll found Slide call Bancorp relating forward-looking filings, remind statements. comments forward-looking all and Valley With on National the you refer Ira statements this a XX-Q, to for call over that, complete those encourages and turn including Form X-K,

Ira Robbins

call. you And Travis. you, Thank the welcome those of on to

acquired $XXX X.XX%. from $X.XX of net income share after-tax which growth, Exclusive ROA and growth, and contributions the and As metrics million and exceptional and of detail. usual, reflecting more income the income million, ongoing adjusted and of been nearly preservation average associates segments. a our Bank. Loan during approximately discuss merger the $XX leading share in loan big across to results the XXXX. reported across before $XXX I Westchester over bank. net $X.XX XXXX per funded new income organic provision quarter loans and charges, results this would of quarter's strong Valley on $X.XX hires. Mike earnings X.XX%, non-PCD thoughts was was some from acquisitions to our our over operating of adjusted $XXX to have surrounding from markets, our of the strategic production call was Last spoke exclusive and net will Adjusted the to was reflect deposits, credit a fourth generated provide Valley geographies We EPS In of XXXX. both return of million I with include Growth respectively. generated turn We assets about per These evolution picture organic of or net year. in continued X% of core increase execution legacy These positive leverage. million I initiatives low-cost financial up quarter, XX% PPP regional business by associated

is I bank position banking comments, reiterate enhance bring opportunity will the landscape The for of to business Bank today's and and enhance capitalize access will partners acquisition the this should of geographies to position that recent ability our opportunity. tremendous not competitive the Valley those and These rehash billion In on this to stand-alone competitive a want won't new support capabilities value that Westchester of that that funded our very By assets be growth in we targets. and exceptional strong with high-quality end a balance our today's as banking $XX With over group core a sheet proposition. progress position. have be will capital pending I Leumi offers and service-oriented While well unique entity made us like Bank said, the Valley. acquisition overlooked. landscape, will XXXX,

growth. profitable improvement a XX stability basis is it dependent points Our reserve and level. releases, adjusted our not of of net ROA XXXX organic was This above upon X.XX% consistent XXXX interest nearly is result margin rather,

As XXXX, I our I'm of proud think on on. navigate ability to COVID early back uncertainty

quickly of proud just to average of a loan incredible significant pivot basis year. during which and merger equally enabled identify our ideal ability culture. offensive generate charge-offs, points net to During to X to organic the an we credit testament lending growth to and result near us I'm a the million recognized This year, loans. partners position $XX equating of is our

Looking perhaps, as ahead, on XXXX I Execution opportunities importantly, exist organic the on of growth us. that but expect acquisitions to for execution. the our integration be about

be forward. relationship-focused of tune commercial clients we originations provide Valley. an is a with pool a been an continue us, of This there disruption will for M&A growth our financial which potential new and As bank, will significant and organic additional support needs. strive clients' key consistently growth to in lever has driver around technology our recent increasing to going With

support these financial they excited highlights. the are technology Mike confident We With the over of on the call to I'll place right and are some quarter's and turn to that, to have opportunities. team by the capitalize in discuss we have now

Mike Hagedorn

you, Ira. Thank

Turning see with recent Valley's interest trends to can income you and Slide PPP. net the impacts without and of X, margin

net of During expense interest interest continued the the primarily a income of reported X and originations was quarter, Westchester to increased Exclusive basis, basis million PPP, margin approximately $XX of result points million from to net increased the margin reductions. throughout increased points $X net organic interest or This X%. the year, income X.XX%. interest X.XX%. On strong loan X basis

performed throughout the year very well despite has the excess cash. margin overhang Our of

throughout funding have illustrates the our We in improvement driven benefiting base. from the funding and strong year. actively Slide down organic are ongoing growth costs loan X

commercial reliance years, have our few reduced and niches introduced CDs This higher-cost deposit accelerated on growth. has and we last deposit the new Over borrowings.

borrowings year those third and quarter noninterest-bearing XX% a assumed total a increased versus CDs are from the ago. and X% comprised deposits, ago. up from XX% quarter, This including Meanwhile, of Westchester, XX% from year funding

points costs declined CD our and basis and X During respectively. points, the deposit basis X quarter, nonmaturity

in our during core of costs geographies Slide the quarter low-cost and well progresses. an the balances significant contributions classes. potential funding led growth from positions over our over $XXX to fourth us XXXX details for for our year key adjusting organic reduction basis, across strong has growth. of was loan rates rising of a over year. for Westchester as generation our Exclusive organic deposit and annualized XX% loans PPP asset commercial the X million with growth and runoff, acquired was X% drivers on On the focus and Our

can see On the by the right, bottom of our segment. growth diversity you

our modest consumer XX% relationships CRE While the channels and a C&I was but of at end key of XXXX. was new XX% uptick still well. a line at growth XX%, and driver of in utilization contributed as growth XX, business, C&I result At the utilization up was remains from XX level September the commercial strong below rates. December

somewhat Westchester combination another positions year. year acquisition of of transactional for not did hires space, contribute you new the growth our we organic As us know, in strong have XXXX. the The throughout multifamily deemphasized the of more during and growth which to XXXX

growth $X to well-diversified which single line Our in loan levels. XXXX with in pipeline billion, stands digits. anticipate high the We be is above September loan

expect, our As well asset markets. remain will diversified should may you contribute classes more commercial growth across residential but than consumer, and

charges quarter, less noninterest other was income Slide loan to our addition generated the was activity. Ventures Revenue as stable Trust Dudley income year. traditionally volatile The driven Deposit the We lines. October. the noninterest X. in of for and $XX of quarter. sequential lower sale million from normalized partially Moving throughout $X million also were service gains services strong the by reflected decline investment swap in

can number on rebound quarter. million million swaps Westchester XX, see $X expenses respectively. of in focused revenues going We for While were the the XXXX. the income that and banking over approximately positive operating operations $XXX This you leverage includes Dudley, for remain generating forward. our level, to quarter we mortgage environment rate On the adjusted fourth could Slide on from anticipate weigh

last the more years, X. X Over growth by our outpaced has expense revenue growth X to than

explore to our dependent revenue capabilities will investments, revenue to acquisition strong offsets in to and incremental continue expense operating leverage The Westchester and of and absorb ongoing is reach on and enhance future XXXX growth positive we While beyond. be to likely Leumi more contribute growth.

Turning to XX. Slide

credit last You trends the can quarters. see for our X

at million account losses growth. X.XX% credit declined $X XX from a primarily non-PPP X.XX% our provision to net quarter, realizing of for the for strong allowance to we loans Despite recognized XX. September recoveries during at Our loan December

was impacts our tangible X% commitments We nonaccrual the can the shouldn't preserve On our of balances potential primarily from the loan quarter credit to our XX. increased related in a were a basis COVID-XX, XX the XXXX of value for December book the slight improvement and at also be $X points around year. quarter, record uncertainty to for provision strong CRE After entering that It reserve Westchester. over overlooked that are in in XX, the Slide unfunded segment. year with The over acquired we benefit results you the without improved achieved non-PCD with release. and see expect to our the pleased third and a Despite strong million X% uptick performance XXXX. recorded track loans

Dudley the the in result the this of acquisitions. healthy proud payout of of extremely and and closing dividend are We context our Westchester

organic We are XX, commitment comfortable very we pipeline will base, year. are On book optimistic of earnings capital enhanced that XXXX. funding producing growth strong guides you heading value remain efforts. for we With guidance position, with core to that tangible believe strong process. the growth our continue and support ratios all performance to loan Page our our into our and reinstituting Our see select consistent will capital strategic our decision-making

year. net high anticipate for This a and interest PPP income loan absorb X% help between growth organic reduction in single-digit growth we mid-single-digit Specifically, drive should the to of X%. and income

With an that, Ira We turn to efficiency expect below I'll closing the for XXXX. call XX% some to in remarks. preserve back ratio

Ira Robbins

team's am results. Thanks, for I was our our busy It organization, an hard am XXXX Mike. extremely financial proud our and work commitment. and I for extremely of grateful year

begin about to it you. be With in really year us the like another call turn the now to opportunities the great that, ahead to Thank of believe for operator XXXX back are excited We Valley. and will Q&A. I'd

Operator

[Operator from Michael with Instructions] KBW. comes Perito Our question first

Michael Perito

doing little do the mind on But expanding I behind sorry us? assumptions for at too NII just once if admittedly guide, bit the that a over missed Mike, this rate much here. you

Mike Hagedorn

well. been question. many topic as Appreciate has a of that with Sure. know many our competitors this on I calls

will that is balance XX/XX, static feel 'XX in help a reflective our as increase we that previously a X.X% and Our we sheet on a with guiding drive Fed assumptions for disclosed XXX-basis incorporates clearly, as up to in won't you to. And better Ks, And basis have and point May, actually reminder, and NII in static points September, sheet. what our balance get in this it a of XX would guidance growth baked have a in growth December. But the the shock Qs loan of hikes occurring we're we've 'XX. in model

Michael Perito

it. Got

mean, there. kind to do I budgeting, the you mean, mean of the guess point I hikes year do it normalization is, you when carryover cash just makeup. So assume? specific, first out, portion cash of you being type sheet assume in least guys guys assuming what the are for the this deployed? some at here? question Or conservatively the look can't guys I through of I X balance as kind Or if you have get that you of you the that you carries of

Mike Hagedorn

'XX. Yes. of cash We do in the in reduction part modest early some the have

should more some the much I place more keep we the go a in thing likely is we saw think mind we're robust first that than you deposit that's attrition. if in would and economy

deposit mostly good company the we up as think. the expect So including in otherwise blow given we we new years, of which buffer would and the we built might I amount see the would kind have seen at rate a related the the of year, that the customers. you news across over as that both accounts fact, first early much reduction, that sources PPP we the in have the add use if is to not to business that, least last X in growth in take increases to have honestly, you checking way of that

Michael Perito

Mike. Okay. a That's more. then And helpful, couple just

On side. the expense

million you if pressures which expense come those Curious million some have bit curious bit probably commentary pieces. fair some there's you just $XXX pressure few take, us was range has a provide of more if a that assume know last little efficiency generally but were the guys little moving above about could for to some we the how acquisition, upward mean forward. seems move And is expense could provided you ex-Westchester, here it pending excluding $XXX pressures you you So or I is near-term guidance the guys quarter. upward. like as a it through? could I industry-wide give

Mike Hagedorn

industry, to the expenses, some I you Yes, as not overall in said, everybody least observing Mike, upward on is wages. which the of is think, pressure related

expense of And efficiency I'll so from marketplace, pressures. we'll in still probably those more XX%. us it expenses capitalize immune revenue at always or importantly, to that some be it's investments The willing remarks, we're growth of below as accept of we being we're lead are the to especially if right? we but But able to they and comfortable strategically prepared that say able don't we're of again, manage feel disciplined not line our that And And worth that growth. we some can noting on some cognizant our oftentimes it reality They're said the well. to as the the leads making. up,

we'll focused should our positive ratio principle But we're on is comfortable operating So hear guiding leverage. that. today with remain overall you from think the us and I efficiency that generating

Michael Perito

cannabis the couple lastly, bank question Got deals, And of launched you maybe then just it. Pay, XXXX, Obviously, Ira. in a guys Valley a sector. growth for

that should kind into onset of think kind your would mindful love this little Dudley of what of south, here? think tactical down that you bit from prepared begin we on you a think remarks, we XXXX touched bit just you here, as you fold. in of be standpoint just kind grew the the are You the or year guys the growth as maybe And significant a but we both There's opportunities brought quite of X at Ventures. a there's X

Ira Robbins

Yes.

established we've generate last been wonderful a for just that XXXX. geographies down growth believe capitalizes able what growth for to really off in significant organic to been really platforms And we're the and to in as organic the foundation national historically efforts we've the we've I not for There's the south a over as going think in few well strong I growth us years really on seeing of but organic some been that in, build. XXXX. take foundation that's

something the at on more income bit the X a us incorporate for fee like think acquisitions to well, having you execute I quicker periphery, really little I is to would going a to that have look when have from Dudley for well than going provide as ability alternative what XXXX. we to layer additive, for benefits in as bank and perspective But are Additionally, ability and be provide the us, Ventures of think, traditional the we anticipated.

realizing in of all So as exciting prepared remarks, that couldn't built my should moving looks what be I here said I just what excited about more like we've be on and XXXX really for forward us.

Operator

question comes with [Operator JPMorgan. Instructions] Steven Our next Alexopoulos from

Steven Alexopoulos

could on the expense wanted because from at commentary up I XX% follow or we or to here. look up guidance, if first the go lower implies down it

exactly expense be year? year? sure more with not the saying. Can you're a it growth us X% I'm you cited? pressure But So give it Is the a inflationary like magnitude Is you sense a from expense Can what X% this growth some helpful. side? would you us give

Mike Hagedorn

won't will I Well, on a I put it. number say this.

generated look X% operating numbers, you we quarter X%. fourth the revenue approximately of expense against If at growth

leverage below XXXX the we an impact basis, are a operating larger acquisitions earlier closing positive ratio acknowledging do in I X than albeit and previously those around full on or as combined operating of numbers, in committed quarter efficiency to we with that positive have still the closed which right? much question leverage noise that's so announced And Michael's numbers, is answered fourth acquisitions. the Leumi, X those year

Travis Lan

you guidance of that we for slide. will for range give then think, that the you to Travis. right? guidance drive I assumption revenue get say kind range growth, utilize of do a we I of expenses. you a help growth mean efficiency I is kind I just can, kind your on this gave So would Steven, mean that and NII

Steven Alexopoulos

income is and the the that. X% said in you interest below net rate outlook. outlook have X% loan The on to Well, actually you benefit following built some up because just

NII assuming So are the the deposits off? run you loan is why outlook? Is that outlook below

Travis Lan

No. again. Actually, Travis this Steven, is

right, Just income PPP $XX specific, in million to be we have XXXX. of

fees We that have in of $XX unearned left category. million about

growth, continued significant we our of a be that of a the bucket with to And benefits in rising of going income. balance of benefits benefits PPP Westchester, rates, sheet expense year save. there's the interest So our full decline the fill then

model. runoff we into not the do have So deposit baked

Steven Alexopoulos

XXXX? No deposit you grow Travis, you year, can think, Do run-off. deposits next

Travis Lan

Yes.

Steven Alexopoulos

Ira, Okay. year Does front. focus on this execution, you, XXXX? you And at M&A M&A for is you the plan pursue or obviously you've finally, said, the helpful. then as on That's been don't XXXX mean for you and look to active transactions

Ira Robbins

both, basis on incredible I of what to think I saw, acquired. ability about organization entire organic will across we and the the really you, we XXXX the you tell think we versus have X do an did Slide benefits from I when as talked on our

So we've foundation wonderful here. a established

a us. a plan That's just much the for what be don't so primary leveraging but that tremendous had here greater just is That on Bank think makes remiss consolidation. what I before. sense as really well that on may us. and I definitely as to I also a if I be but perspective, Leumi think said, opportunity, we the didn't done there's happening distract when and something and executing we're M&A we than we the executing be Westchester as offers perspective about thinking really The Bank what's from what upside there That internally, leverages from that. that from tremendous technology about us, be with about there's going tremendous but perspective, there acquisitions mentioned with think do focus focus before, periphery offers from opportunity to growth going not on a what for we want anyone strategic to us we've

Steven Alexopoulos

cannabis you do The those end growth in. And the Okay. fourth how balances squeeze did actually I year? deposit have in could if Where the guys business, lied one quarter? more I much

Ira Robbins

as hundreds well the today. over cannabis where the it's dollars to of of I millions business in is mean

I is opportunity the there operators. the think expanding biggest some of really multistate

states we're now up think I XX. XX with go in to ability to right an

we approved. what have think already I

the XX% just well. over portfolio pipeline of have current as We in the

multitude an at it us. area very I a it's growth our continued even with for opportunity I and whether tip of once toe think, of a business the enables of growth that it's as about. excited agility Pay, for the get lending to we're year, a perspectives, initiatives labeling, that into internally different well. payment growth there'll that space that us mentioned, lot the organization in bit the it's And opportunities really there's did Valley white us. We or to to So opportunity many platform think be a of from the and loop we're you from at look begin throughout of for as the that create end closed forth again, even trying and putting something be we're entire And

Operator

Ira I'm Robbins no And back call to I'd closing showing in the for turn further to questions remarks. queue. like the

Ira Robbins

I you. those and our we're just of want and to call Thank you looking participated in connecting forward you today, thank with again. that XXXX to

Operator

conference participating. for concludes you today's call. Thank This

You disconnect. may now

Valley National Bancorp (VLY) 27 Jan 222021 Q4 Earnings call transcript