VLY - Earnings call 4 2023 | Valley National Bancorp

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Operator

Thank you for standing by, and welcome to the Q4 2023 Valley National Bancorp Earnings Conference Call. [Operator Instructions]. Pease be advised that today's call is being recorded. I would now like to turn the call over to your host, Mr. Travis Lan, please begin.

Travis Lan

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

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

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

Ira Robbins

$XXX earnings Thank and of share to you, the of and quarter Valley of million net bank failures, FDIC year's Travis. the and income the million were $XX $X.XX, $X.XX. income fourth reported Exclusive one-time including EPS noncore of tied items, XXXX, special In per assessment net adjusted respectively.

trends, the I'm pleased shortly. with and sheet I'm metrics, quarter's will disappointed balance which discuss While with the profitability earnings I

accrete and funding enhancing On to originations. while enabled curtailing capital the growth commercial reduce C&I both estate progress This made we real us needs. positive side, organic

critical our same franchise year earnings a and potential. relates it net deposit in relationships of addition new commercial year. deposit the The represents clients during future new relationships and a Valley's consumer value growth added commercial On the ago. and ongoing as from new is directly we in deposit remarkable households growth X.X% X,XXX This XX.X% the households period to consumer XX,XXX side, net

our geographies, customer of Our new midsized growth was add, might page a was against often banks backdrop environment like too I undertaken and external news. with difficult all of across Valley were front broad-based the

our enabled customer to helped generate significantly strong During reduce us to the on which broker inflows, our deposit relationships new reliance quarter, deposits.

efforts While a subsequent There deposit these led we balance will negatively on likely us few organization return additional exceptional, inflows have factors going a impacted core few opposed relative and were eyes ball will also quarter. balance. as costs that is customer holistic perspective, was income conversion our some the are to that in doubt Mike impacted calling off the by the we take ensuring on strategic no consideration in worth forward. customer minutes, to this during October illustrate profitability deposit refocusing net manage like just return And The From pricing. to deposits the a to out. quarter to successful of and undertaken in focus interest pricing deposit a of

quarterly to to of weighed enacted were These acknowledge first ensure will an the in taken costs associated the of support, that to response our to core amounts the customer supplement pleased our proactive conversion of experience as the well. customer customer with that abundance out service system. with support waste some First, efforts of smoothly excess our an our but share. new efforts earnings transitions equaling charges I'm amount core quarter on per $X.XX conversion and cost both approximately estimated persist by

in commercial this of to has after-tax place $X.XX loan premium was during be the Secondly, as line per This charge-off finance business. in agreement approximately partially as $XXX The our approximately well. first business result share of outstanding have associated a business is a was elevated a quarter portion and of provision million premium in to the impact outstanding modest XXXX. our the of expected we sell a an balances, loans and provision

quarter's satisfactory, in positions our we this to evolving earnings I continue financial last few consistency landscape. results. in book over strategic progress the well that tangible value believe evolution this us are support in While The banking is not years achieved have growth the that strategic evident of our

peers book at Our since XXXX, more our double which increased has XX% stated XX%. value tangible is than proxy

our From XX% by perspective, new deposits branches deposits to diversified of in just Our branch just of XX%. network. tangible XXXX. end of Today, the were since paid deposit totaled Northeast value were to successfully approximately peer By base. our and is expand than funding the out branch balance XX% XXXX, median our our reduced From our delivery utilizing total our in geographic book held that a or down proxy of growth-oriented in value channels measured deposits. dividends have XX% to sheet our we deposits technology perspective, number we have X.Xx plus creation XXXX and XX% we At verticals, a as of have reliance on total more transformed establishing the today. XX%

continues in Florida $XX our business composition New technology relationship has focus XX% That of $X just portfolio New XX% has strategic billion of loan to Jersey opportunities of had today. declined First organic targeted billion. expanded Through total footprint. acquisition In proactive diversity The in market, available with loan of and a evolution just the we across geographic equally has in and significant is tangible for to as There was loans. acquisitions our York. Bank, additional holistic on commercial over benefited well. in In entered less this growth-oriented significant which the Florida Our efforts us United asset growth our dynamic XXXX, entire and and our diverse banking our side XXXX, achievement organization. infrastructure our but to be beyond Florida portfolio

to positions us the helped in advancements and space. infrastructure further on modernize be edge developed technology pool of to We have strong of recruited and leading which banking our a talent, the has us

limited franchise headcount $XX XXXX, our increase to near us with a adoption XX% have scale in technology billion from Since to with doubled net Our base headcount. $XX nearly asset billion has this growth. allowed we

Our recent which and provides look additional forward technology company our our aligned across to capabilities, conversion core for we clients. leveraging

As conversion, we that move efficiencies the further also we anticipate past emerge. will

now An and begin react on to has the imperatives working and us We enhancing us focused strategic have been AI execute market quickly our group cases potential I also to established pivot to related on internal allows determine for to more infrastructure, to to which data a year. uniform purposefully dynamics. use changing help to want coming appropriate opportunities.

these long that While none we are shareholder of drive over Valley, a continue new to would value time. initiatives believe for they

need we drive bank. continue core First, to deposits to the to

We have branch across service-oriented an our incredible geographic network dynamic footprint.

We activity locations will commercial these consumer XXXX. of out in generate more and

leverage curve will half further existing that have we the normalizes, niches As for increasingly we the will of our and second the established specialty XXXX. on momentum build

to continue commercial CRE. of investor in deemphasize will real favor lending estate C&I we Secondly, and owner-occupied

restructured in markets have better lines. commercial our align opportunities and experience with expertise We to business and our organization banking

side. us and enhanced share and product our will commercial to base among management on Our the wallet capabilities treasury acquire support help expanded customers new offerings customer

strategic deposit programs in organization. goals, our alignment have the lending also and entire our support drive adjusted across which of We incentive further gathering will

continue management revenue Through developed recent will our The grow and XXXX. we efforts, help year. long-term service and robust offering noninterest differentiated XXXX income this a base. year towards undertaken businesses offerings with performance will progress challenges our treasury diversify our fee-income we will in to revenues mature. to continue industry organic as me that Finally, customer pleased ability of to our suite products initiatives the with past we our be strategy, about capital difficult acquisitive for confirmed our improving market strategic achieving enhancements to our The swap-related associated lower to offset of and certain the of have growing our to headwinds and navigate right have base. accelerating I'm we

these growth time, we Mike to book I call value With financial value and we drive in quarter's want and initiatives, growth believe on expect I metric. would to the that, this tangible to and the We turn book over value outperform continue that discuss continue over that to our As reiterate growth. consistent prioritize tangible execute we shareholder on peers to results. Tom to will

Thomas Iadanza

wholesale cost the moment, pace have We a of key generation by Still, expense control go-forward the increases in acknowledge pleased the transaction said, quarter's interest basis. we slowed highlight next in That interest-bearing undertaken portfolio Traditional slide tools on runoff. noninterest the spread our we Michael $X.X you, interest the On geographic deposits X, see a $X.X and on deposit customer Thank deposit deposits. was in approximately which Direct $XXX increased reliance deposits reduction quarter. during reduction our meaningful billion quarter. of on our billion you significant was channel slowdown increased This quarter. line. deposit during a to that approximately business trends. across indirect used rate generated the more strong The in competitive million can the outlined deposit to support Ira. one The efforts efforts, of detail Slide and accounts, by largely footprint. growth delivery branch our the offset composition in of to a we're and provides our deposits is the growth

delivery online billion and $X as specialty deposit channel well team. with Our key technology approximately from our niches contributions increased

Turning to next the slide.

continued see for the No deposit commercial X% granularity our industry single our and accounts more can than You diversity deposits. of base. of

the changing achieved target our of the composition. our the the and to growth you top fully loan as laid type slowdown, X% responsive low growth government following portfolio an the The remains dynamics. consistently our provides across Our at slide progressed, occurred requirements. left, collateral diversified estate of we end real out down our relative that XXXX. can and collateralized to be year. year by footprint X throughout loan Slide market geography. to slowed proactive ability of Ultimately, start breaks which had collateral commercial to growth is we overview At portfolio Annualized X% the illustrating growth and see state the portfolio

an As type by loan geography. extremely and granular which diversified reminder, is we collateral portfolio, a have well

Our debt service remain coverage metrics very loan-to-value attractive. and

at is conservative and borrowers are co-op believe efforts consistent details the perspective, underwriting monitor a continue to resetting extremely at cap significant stress and $X of is rates billion our column We the in attractive the reflects last of X Exclusive Hagedorn coverage ratio sizes million, portfolio slides portfolios. pools loan I call table. office additional that low This which next billion discipline around you includes to origination. to rates. an that, diversified our Manhattan co-op remainder maturing across and average higher over $X.X pass-through and of With our loan-to-value and loans the will testing and additional well well-positioned footprint turn our our financials. a the provide the provide see near of debt absorb multifamily with insight From loans $XXX exposure our multifamily The low The portfolio, into closely portfolio with service metrics. Mike loan-to-value. quarter's multifamily of of can to

Michael Hagedorn

recent Thank trends. you, illustrates XX Slide and net Valley's income margin quarterly Tom. interest

deposits interest-bearing been in cost While end-of-period CDs, have The undertaken quarterly side right income basis. manage transaction growth on weighed direct the our was and of more decline we the replaced $X costs the a approximately stabilized, of this basis precisely promotional net quarter. customer deposits retail noninterest Throughout with CDs by on high-yielding average during indirect noninterest-bearing which our to relatively page the interest efforts go-forward quarter, million. outlines significant deposit accounts on maturing that funding an and

competitive. the in savings cut rate back but high-yield remain our online have We channel

reduced recent which that also to significantly rate, have during CD quarter. will mitigate repricing faced X-year We the the our issue help we

context are profitability. Finally, products price customer deposit our rates a following the quarters, balance deposit In rebounded. ensure that to the reasonable of in industry's challenges few of ensure bankers we to relationship with that customer we has are March, holistic working direct

price move profitability. more products with consideration challenges, and will of continue past a balances these even to we we As

quarter of that noninterest revenues. strong the XXXX. The of basis see transactional waived stable Turning third conversion. on quarter than was next the sequentially declined our an adjusted slide, we service time the trends from charges for Other certain swap relatively were core to as this, income the the headwind of can Deposit you growth despite fees generally around

The costs controlled. customer for slide, our following that and increase our noninterest other for primarily FDIC continue with in merger of our can special portion other the Compensation approximately nonrecurring expenses increase Adjusting the seasonal million traditional uptick adjusted consulting expenses system were expense A expenses, business well development and quarter's litigation consulting charges, $XXX associated approximately million very be and the On noninterest certain and sequential $XXX expense initiatives costs, quarter. was and the you support million see an due basis. to $XX on assessment FDIC were expenses. in October. costs, occupancy associated conversion higher to certain core was with advertising assessment

experience extremely the these the our will quarter. While customer first into conversion costs with been associated tail positive, a of some has have

know, quarter As seasonal you payroll headwinds taxes. the traditional has first associated also with

We pleased to associated throughout expenses are with and our ability very control headcount proactively compensation XXXX.

X XX quarters. a anticipate expect shortly, of mid-single-digit asset growth We expense will our as expense for year. more the trajectory. normal be And we illustrates see terms that trends in you year quality coming last in Slide XXXX the will

flat year-over-year charge-offs $X million and commercial the which under quarter during the premium during ticked up associated our an business, year. finance relatively during on with While agreement $XX approximately nonaccrual were the the million a remained quarter quarter, Net first they sell basis. to included loans is somewhat of

As allowance sequential increased our the to from impact quarter the increase for benefited with nearly capital The X.XX% losses in tangible value reduction loans. value of a and of ratios. point a book next available-for-sale loans our illustrates and provision, in of increased quarter from third basis result slide OCI X for book securities during the the credit higher total Tangible XXXX portfolio. our our X% associated

are XX. a we accrete income that should capital. loan X%. would coming the with on our and our interest enhanced EPS approximately We growth this to from lay growth business to anticipate call Slide Based guidance real by in our our well we in as grow our XXXX, in initiatives. XXXX, capabilities. the advisory inflationary X% were benefits over by in pleased Noninterest expectations Based regulatory support offset strong estimate organically on year, come growth core expectations than between I'll higher we We loan than wealth, the expenses continued XXXX revenue, net trend income on as just interest together, management previously slightly basis and swap and Q&A. the our announced commercial rate tax an loan line as in our FDIC C&I and of lower are growth we would on scale mid-single-digit treasury XXXX. We consensus businesses more and existing expense back our expected to during the continue. recently X% conversion savings With able insurance, Factoring pressures out anticipate of annual this Noninterest XXXX costs year continued estate you. and Thank for operator expect generating consensus to focus noninvestor for anticipate begin X% headwinds grow with between offset that, should and $X.XX. turn the are to on in

Operator

Instructions]. [Operator you. Thank

of line Schiraldi the comes of question from first Frank Sandler. Our Piper

Frank Schiraldi

the at in NII curve the most the sort What or annualized guide. cuts of either guys rate NII NIM -- pickup get the and cut? I of annualized recognize in or point here follow basis the or market terms are you those XX year. from forward assumption? do given What's basis a backloaded on assumed Just you of

Ira Robbins

to want sure So I question. the I understand make

of be a single the point want would to increase, impact what know just basis I'm sorry? You XX

Frank Schiraldi

average -- modeling. assume does if NIM or get just for get we mean, NII points of sense cuts, in Basically, I'm XX as your basis Yes. a get you what the X trying or or X I to on

Ira Robbins

to around X% So direct back to X%. guidance to I'm our going you

will inversion basis as get points start of does that curve in what now March. we're you curve. end And XXXX expecting most first the end in short the the less is in roughly So affect XXX right that increase of

the in correct, are cuts the much quarter more get on of But don't quarter. backloaded the they XXXX. you You into first fourth are

a exactly sources upon mix on question of the going answer at I'm the because prepared what to cut depend point So to a time. basis that not is it's funding XX

that the a in higher a expecting drive to full X% NIM And For slightly year, NII. should increase X% we're year-over-year.

Thomas Iadanza

conceptually, Frank, of neutrally the positioned we're to And short curve. the end relatively

significant a the if the to we'll cuts get more reprice. don't move not based much longer fixed benefit our mature there's that on exposed and those impacts end as So we're rate it materialize, as loans

Frank Schiraldi

Okay.

over full So but I front still guess the curve, liability you're sensitive, end. more the to neutral

Thomas Iadanza

Yes. That's correct.

Frank Schiraldi

the What more Valley over of margin which continue sort normally curve. a And the of in years changed in the Okay. opportunity -- of a sort yield bit sort I balance on business of here? more you just sloped is to mix kind side, in terms a theoretical sheet of see In built a here NIMs you C&I deposit specialized question know, the with XXXX. you've guys the way has think normalized normal don't the do a a in opportunity, for

Ira Robbins

Yes. This is Ira.

and I organization. stance approach appropriate mean, back we we really said, we We've a as expansion really That the And appropriate as of organization. sheet inverted little focus, really margin will for gets think take environment. help We've back pricing lot mentioned, been good an curve XX% CAGR a X balance more does in shifting us. an diversification that C&I a significant done bit us to deposit the the commercial the time. as normal, obviously, to within period the get a we I a funding to curve running where across to of the a we curve base can an running job growth more get of you the do extended growth on a get it's we years, neutral challenging It's for try as anticipate environment for can. much as as do, being which higher. an normalized

Frank Schiraldi

one just in one of I Okay. on kind sneak then front. And if Great. that last could

In your specialized the of book, obviously board the given the in branch. on environment? specialized and the quarter, help there. maybe rate degree national in on through a growth the would the you deposit And Are deposits versus betas here, terms thinking great the businesses, expanding the down coming to help the in betas that just deposits you a

Ira Robbins

beta of of I of we Travis have businesses. neutral the it's refers those to right bit bit that think off to what back when those in higher that a said datings have going mean impacted bat. some national And a I more a be that curve some

of really the us course impacted I the shift think out from noninterest-bearing mix during the of year.

a deposits right? of asset-liability, more now running that's sitting changed on downside So the XX% when to we the noninterest-bearing little as those are bit interest-bearing on have XX% sensitivity we in So were do deposit the cost deposits.

to benefit But us. what we're really the granular is that a to So as excited within it's the is. that and going think be sits deposit diversity opportunity the mentioned, book you that in that about really I

mentioned us a said, believe As earlier the call, we core conversion. fix. I bit more on an were away got it's That pricing deposit as on I definitely do think easy little the we from focused

XXXX it that on back make would to focus will and gets We expect that from sure the results you us.

Operator

next Moss of of Steve the comes Our James. from line question Raymond

Stephen Moss

side business. up Just of here on the following liability the

and much rate securities of Just with your to in regard loans reprice XXXX. curious how fixed

Thomas Iadanza

in so we've necessarily Steve, the $XX talked billion of fixed-rate past, linear. loans. It's we have not Yes.

$X total, our it's between do $X year. of than But half. backloaded. the second billion relatively and more that the But loans half in billion reprice we that's the in contain -- year in more of So would repriced have again, this first

Stephen Moss

minimal flows there's year? the I then security upcoming cash And on the assume for Okay. just probably side,

Thomas Iadanza

extended get years, securities in It's portfolio year. hundred We of billion really take. couple it's portfolio. dollars the to or a minimis. -- Yes. yes, It's a million $X Duration X on has de give

Stephen Moss

types just C&I quarter. more loan credit as off on then to from charged But curious And just incremental of sounds NKs. curious and get little the are it's in finance CRE premium on you the this It some what to color kind that color Okay. and of a can here, give. you any the uptick like

Thomas Iadanza

on-balance million, in nonaccrual repaid. due over on $XX XX% past uptick that, loan-to-value the at Tom. loss. and see it's any increase We residential When in the charge-offs CRE a million XX%. our our since any, don't in on little, you average color dues, that performing will ran XX-day expect the portfolio, you if peer was portfolio an accruing the looking very commercial against sheet primarily our The has Historically, real bucket. There side Steve, of that business, about Yes. side. our And is a estate it's that been past banks. XX-year in jumbo $XX decline period, of at look on

We continue. expect that trend to

seeing are board. across We the really improvement

side. solid, remain commercial especially metrics on Our the

Stephen Moss

you Okay. And in assets. text curious, just an refer the in know that I uptick guys to did classified

and where assets did criticized in Just here? kind the of curious, classified quarter

Thomas Iadanza

you'll the quarter, have especially we in in the below category loans repayment. the in contractual on at reprice was number. repricing right a terms or we to? during they of number resetting. not review There coverage. the mention XXXX or of a into ones loans forward the uptick, remind That, the early of migration different I I'm our those special repriced step third that looking But our portfolio, modifications all have referring that that Xx want loan a no there is are any everyone, the Travis, and XXXX that just review of of might at primarily the resulted to do But that of where total service year fallen or to the is

Travis Lan

resulted was have just the so increase, classified fourth would more Yes, I that stress In it the much was a significant. referenced a me, process service but Tom shake impression third significant it increase would additional criticized an and way quarter, not we the not that quarter, more test coverages front but the see don't in I of number in loans. Again, in out. in that that debt losses, say normal

Michael Hagedorn

more have in would extreme Mike. mention credits, ratings. is mostly this not increase the been That And special

Stephen Moss

to up maybe point. following Okay. just that Got it. And

close and what it's ratios, you color debt NPA what whether As the curious -- XXXX. service borrower's see here seeing ability what down you're potential to kind on get around Just you're loan? can seeing a process, pay the give you just could formations maybe borrowers in coverage workout of some

Michael Hagedorn

were Typically, which modify our underwrite cash to use borrowers standards, where And future -- cap to peers current underwrite again, terms year, flow. repricing probably any don't the we use. start underwriting in those haven't cash past We a the we years. had level X.X than our We we flow. to higher

to Our about average lower be in leverage in, XX%. loan-to-value going our tends that real is estate portfolio

our course, all Of of asset classes.

So wherewithal. refinance there we'll existing an the or it's the appropriate lot multifamily up is collateral with quarter. And a of the want do flexibility. They any business to level. support activity, add, customers. either especially in fourth We I in funding the piece down other tight, additional below picked to If or Yes. at have reserve get pay

did nonrelationship it allow So us to noncore exit those loans.

Operator

KBW. Our of Michael comes of next the from Perito question line

Michael Perito

around and the to, you but of trying I a to part and of of cadence understand of NIM I have of understand some in benefit start profitability something the guide rationalization, the bigger year. the think, targets guys some I'm will which middle kind isn't to this expense the

look of ROE of give cadence indications current guide what Just mean bit little exit to the budget the that able the or if But just return 'XX? wondering like kind as be depressed. half about the will feels qualitatively profile willing relative you're thinking to talk you of kind how I can around you to you are year guys kind that in like it might you just provided? first any the a of continue about

Travis Lan

Yes.

I think your pretty Mike, perspective, is accurate.

built side, NII side, tax lack the and the that's kind quarter generally of on first budget mean, in industry count implied margin, a it's the based the in getting day other second I somewhat environment. curve. then say, way I year, more So quarter projected the think of in the on expansion fourth anticipate on things payroll of headwind quarter, quarter. the third improving now the the It's of first in and and whether the I'd expense the or in the is We kind and change forward the stable of

if year, $X I was In taxes. payroll related we there mean, back pickup last have terms the first in of to to -- expenses, a quarter you look million

you're there. looking something similar So at

on first reduction on side. in here we think we, or As from stand beyond, out related the as to other an annualized saves $X that costs then some from in an talked million things. saves is here of into take, basis, efforts should We the June. personnel these some that of get so, headcount another conversion, with expense was give And there support $XX annualized enacted to December, we second core further got or million perspective the in there and elevated quarter and quarter related the be the we've about customer actions

the headwind, X but So first I at quarters looking think stability over expense following. then you're seasonal general the quarter, there some will be

I'd improves does do goes you ROA year, it improve achieved throughout you all you we've again, we the but year. puts to an say get to together, $X.XX, blend at at midpoint the year of what it profitability think this range, the the similar on. that as $X.XX that is When So our level

Michael Perito

should margin? you're that's And ROA Yes. benefit more back improve carry the 'XX really that kind specialty on right, and going what it into improvements kind to some you from guys other leverage of dollar in some love I a grows territory for you kind exit. mean is will of is positive scale? guess the mean there that the operating of there. Is of unit the growing can it the get of XXs put forward I not gives those I dollar, see on additional revenue continue in would kind much. you color beyond, what I 'XX. outlook question to that's I maybe and in to economics just confidence But is the guess for if in businesses 'XX. that expense

Thomas Iadanza

I lot opportunity for of think us. there's a

for that impact if curve think sitting right, is much it net income an not that in longer, interest hopefully in an definitely you look the us. has but one I on sit at inverted side, we

what I APIs looks every think to core really is of think entire core as looks put top core That understated the that client that scale said, We conversion organization. the a our we we about about XXX clients sitting the one new experience think platform us. of what single into to changed on in ability like. conversion for different like across

opening go up Valley. Valley, account You a in the one same when branches. you that It's you sitting you're into at of up do exact platform open checking account a our digital

in I very the to So how we we infrastructure the smart, took approach as and base. that were to think, going leverage technology were we

for like from us, have the everyone So technology are and our per even here somewhere. is perspective, to midsized to will some that's infrastructure scalability about experience on not paying a conversion talked hated of growth definitely those drive open core we're a numbers, provider during that banks. an growth focused and really household unit what We up individual commercial done that's when outsized was growth. growth we numbers, scalable numbers the client account I consumer look core individual When going accounts. a That not individual

franchise what positive a of lot think we there's we're that we So from value I about perspective. have think when tailwinds a doing

expense side to really I side the think begin excited on accelerate opportunity definitely as is well. about the book, revenue the to going I'm So the of what but is

Michael Perito

X% you kind 'XX, had to... of growth to trying of line then guys same just lastly, obviously, X% on loan for the still target the And Helpful. questioning,

Thomas Iadanza

were originations, $X.X fourth moment... [Technical our at One billion Look quarter they difficulty].

your hearing you on Mike. loan out it dropped Sorry, growth, were We said when that... but question

Michael Perito

the just No same line asking, questioning. problem. And more was it of kind it's of

impacts? to were lag think of be think on and pricing the growth, the than on a kind with coming incremental of is that et some of cetera, customers dynamic? how they Just to focus loans it loan kind growth we changes, should of fair profit more pricing about on, better that 'XX? will at you're as guys some et that assume holistic in deposit cetera, there customer the those of profitability, bringing is Or Or the kind would guys loan margins you customer and of you

Thomas Iadanza

will continue little around those and on to spreads it. increase context our give widen that expect should and you You a

seen line. health care of and represents that an fund of all high our our probably portfolio. that in was, banking point especially it's total And pipeline in across in XX% uptick business business is We its and lines, XX% what have C&I it

we So see starting improvement holding. and to the are spreads are

Michael Hagedorn

think how some we we is to that $X.XX, The and The going put new just from perspective value of go perspective. talked reflects adding to new loans with we that client on we've to associated about an is on, the seen as significant ability rates you perspective. when other be really that we've us. able benefit pricing margin $X.XX we're amount to put from shift seem the going function, and that there from a either or bring equal profitability from that, really some which have a to to But which funding a repricing been we've of it about a mix the a stabilize, as compression they down, about of the margin the largely is have in on

So of broker it's not the out if even market. as we're

stabilization, originations, which on shift, positive that fact new anticipate based the the mix $X on billion mentioned, that a that came upside for do we margin what get some once X.XX for having there on us. as really at like Tom spread looks So we of is

Michael Perito

make I just, correctly. I step I'll and wanted clarify to can Mike, But it Helpful. some just then I quick back. just sure -- just want repeat you heard And to

then funds. around NII Fed it on cuts, assumptions be actually cuts, rate of clear, basically end, that guide it's X been to focus, whether I the short huge saying that doesn't dynamics the you're a to want Just It's the baked we've make book just the Travis, into other discussing. then I back and impact sure right. heard end the just to some all have and more long And XXXX. that

Travis Lan

XX Fed basis but I on that And points, we tell and correct. cut we to expect is on. amount the day, while they first-rate as we year accelerate laid cut haven't specifically out this That's the anticipate can goes the this you

quarters. why come. some quarter maturing away So the prepare about, as the just were money Tom reduction to of market or had Hence, deposits be And balance from they and or in talked the curve funding accounts. and in our was to to we the our the quarter around sheet a for biggest on fourth we that cost interest our our us whether FHLB and this that the liabilities we rates. of done to indirect to direct third And cuts mix short-term moving the CDs and get rate again, larger Fed took purposely transaction all a in benefit the lessening generally, fourth shorten inversion in duration would the of

Operator

Capital next comes of line the Markets. RBC John Our question of Arfstrom from

Jon Arfstrom

on guys that, this follow-up shortening? liability that you for is the complete Is largely a Just Mike, at point?

Michael Hagedorn

There's to complete. quarter the largely another still come. big piece first It's in

we for loaded these Just back duration to the loaded, were we last first front-end going on it putting because quarter when of with preparing liabilities were this was year.

a first it that, So bit. off quarter. piece there's And in then another the tails after quite

Jon Arfstrom

Okay. rate December, the quarter. the in this the where reprice? say, maturing on you repricing? liability Good. what Or more is reaction is well? And coming and deposits in CD maturing liabilities first Slide topic, reductions about same pieces XX, And CD can the on then have that What talked some as And the you that was then that? in

Travis Lan

it be on but to the So impact to is yet I expect don't be extreme. seen, customer it

impact So [indiscernible] CD X-year really of that to be roll. about rate. The clear majority will that the be of

those CD most back you And in our XX. on put if XX-month things we rolling several remember specials, from comments are duration. around at 'XX, now So notably a previous

reducing in the generally we're the when We average CDs retention to XX% market. role. the we're so between And XX% of

there big be should there. pretty tailwind think a So I

Jon Arfstrom

talked promotional deposits. curious against in decision maybe about that. that a I pressure kind bring at and the some of like maybe maybe maybe the deposit me, also growth that you guys bottom on accounts -- look Can gather deposit the than then made? you question, did little margin you to Ira, But to of we're it pricing earlier about trade-off Okay. about it's but numbers so And think bit a the And curious the about you then trade-off of little it new Good. a bit the about expected. was I pricing decision not, feels talk but more or and and you margin at things

Ira Robbins

conscious a I made our a think couple variables. shorter, on to right, from of a liability were decision One, big-picture perspective, side. there we go

So curve we started bit sort a where even we where end, of short when on extended the earlier the or kept some a the November sort the expectations same having little of maybe shorter. But see bit to that in duration movement was we moved as forward we little of were and were before. definitely

what impact out, a So maybe we that expense on for looking ours, look, Signature, of full-year definitely probably like the macro of negatively perspective, a the there'll for the with challenging as others. a about said, from sort were And do beginning what with that think I really And organization very the year be a were though, think interest We positive impacted that comes the happened at result XXXX we quarter. as period. and SCB, an the of for year, the And to think we of it where that happened was deposits. off requests. with And just probably retention focused conversations and their with were We to that. up even fourth clients quarter bit to our the that to going conversion the and competing to I have lot reengaging right third quarter, money even moved had distracted, we we're so do the of That of acquiescing Today clients. need in necessarily sure we're clients, some with our Again, in some bat. the a core really based rate we we think, treasuries that. that the back conversion. not core leading that with of a in on lenient X said, I'm that,

have the an was did getting I us, conversion important. done We X e-mail complaints. unbelievable. core For

it from out client entire base. clients an There's really nothing. So of that's

beta I our it retention think a should numbers. all clients should there's just look pricing when We what put to and comes appropriate retained even appropriate I through the to back our clients, lot commercial think We deposits XX.X% are did mean importantly, on, year. to So look that a through during which unbelievable what core of actually and I doesn't of But having conversion. again, happen. said, get I back those conversion. conversion, we conversations on to appropriate get we'll as necessarily household conversations it the now growth Once focus we grew clients. like. an clients in We as an this core like, with unbelievable most core

quarter with fourth I while so happy So the where once big ended again, up, not picture, that not I'm concerned. said I'm

Jon Arfstrom

too at interest Do about run guys $XXX fourth implies on up million guide, step at You rate net much. more earlier, kind the incremental income yourself just that the not thing a I had But net think income. like it this shouldn't near terrible. we're It's bottom from your you interest on up quarter. the in one decent point? or the you asked bottom but be of this

Thomas Iadanza

So close. we're certainly getting

is at basis the quarters a you'll going in do me had really and XX%. let because at quarter, XX And quarter-over-quarter basis off XX the started the points. points, we fourth increase Slide cost everybody to we So that I'm third deposits, it's direct when see look only to this consecutive or that know I in X quarter at important X this. topic. you And

we some cost plays now that to capture our with deposits, that's like we the going fact all to total of you noninterest-bearing. as noninterest-bearing of out. why of see rate the So the of cuts noninterest-bearing NIM, direction to there's Leumi, and combined we summer funding we're closed in feel we we our the feel see mean do combine The XX% NIM why additional starting stabilization. increase stabilization some that in opportunity. mainly to I Fed rotation, to had and starting need better it's Obviously, accounts. deceleration overall some XXXX in come about when that, the on with sources XX% That's back maybe in that our down

Operator

Our line next of JPMorgan. the Steven question of Alexopoulos comes from

Steven Alexopoulos

want I to start.

I'm But because when one CEO, cetera. to see is and rates surprised, as top you bit you? like at felt this was are And for with NIM efficiency over where Is look this of I took the imperatives improvement what you a your et rough goalpost was right? pressure, year? it the top when know on I for priority So year still not I there. very everybody improving ratio, priorities the we that And strategic XXXX, moved a expect should happened of for improving we a

Ira Robbins

some $XX saw the Look, We've back get think what Yes. result X,XXX definitely NIM better diversification as down Stephen, core NIM, or were were largely X,XXX then contraction efficiency around I that sitting ratio today, focused better expand the get that we as and funding to over. of the as We're back we in what employees definitely looks technology definitely at plus will in think we billion, when in think like. a We just within to we function we're that. I And class, is took -- here. I on $XX we've I back billion of right? a the efficiency minus asset of $XX today. embedded the And billion sits

that's not today. out it's even just as who are called we the me, something in strategic the For imperative sort of of core is

obviously, on efficiency very I is. what focused, that think we're

technology place the which we for that's important to put that infrastructure allows As something us. scalability, is into I mentioned earlier,

the that and the what drag, is to before. for cost what was isn't going technology, the be So nearly it

it's for something isn't calling want So definitely to out a us. take say, not want focusing not to and away that it on hey, it I as priority

it's the to in, number you'll dip out day we you'll that that And a do. appropriate I where I as we think think back be, day happy back NIM it number what just an should with. see be think to to down gets level

Steven Alexopoulos

right. All Okay.

XQ the in expenses, look system much me that quarter? called the XQ? we the fourth what you comes related out -- to in in how elevated, expected if What's was out at so conversion, and were Let ask which

Michael Hagedorn

In anticipate be around And will that million from should In quarter, declined Yes. first the expense it out. million, maybe so there core million. be was the conversion. then we on, $X with $X operating number, $X the there associated you

Thomas Iadanza

which being have do those the Steve. was XX% back if to our year. platforms the those want want keep right quarter. look And we're and go you this of noninterest to well. back expenses assets, in we average infrequent their running really or one-time fourth But you're as in as place, period. as. pretty the items mind, refer eliminated them a relative better Once expenses in are to there think you those going mean much your But dual on just to multiple get as was whatever efficiency 'XX, I year verge to comment, same to I of, efficiency operating a I ratio quarter to ago, XX% that well declined

it seen, that asset put to I is the obviously, think reductions growth headcount mean environment described. I that years relative you But limited X talked the directly directly mean, the I So we've revenue on. -- it's about the tied we headcount over that we've to growth the

structurally does but efficiency what good can tend just tied the control, be job. more and I we a things, we've dynamics done very ratio market So to think to

Steven Alexopoulos

Okay.

you out What's pricing the that got from away conversion. deposit bit system the Let the guys the ask connection of you called X? a because between me

Thomas Iadanza

which relationship lot a have of we organization should Look, size clients, have. our an

pricing at I have look we we deposits. models internal as to think how

distracted based frontline be largely new clients, going engaging clients, certain retention with our as just reaching want on clients, was from confident the of how focus retaining probably hand. we on That bit been clients and that perspective, how the should direct be. based exception that we client a to were the there was pricing to the they of to said, within we rates out staff get on very deposit what That think regard conveying think metrics I with very said, our should conversations. on our have as and approach sure to little how got And making there targeted out what was about think some to profitability to systems. that We're I pricing focus we'll soon. to certain necessarily guidelines the different I'm that on

Steven Alexopoulos

times, NIM multiple that where short expand. neutral the run, you said So in but said Ira the trying to it's drives, I'm should your NIM

we cutting year, talking? I sooner towards how would confused a get much just later, Like normal? it a we nicely, if think would looks you are the very the back is XXXX lag? to than be what's positively the end deposits. given normal. long Fed the paying said sloped curve curve rates How your more think I what's this of it I'm before look NIM you're on more starts why story but

higher short one run? in the the You guys are Isn't pairs. more beneficial of

Ira Robbins

tied think, is thinking the to we have to coming pretty a to lot to tailwind front-end I definitely net where as to. be curve, for Jeff significant where more it's us is us, I think be but impactful It's down. a there's to going end that's interest going the go. income how about the long going we're

count day that I into first was well quarter change as issues commentary goes quarter really along, within we're think the first there's that the not expecting more as some as much well.

that to really change to the count there that well. normalize, pressure said, -- until anything not right off the well. So as net as income interest day begin once we the the margin does end there's right really bat impact believe curve do that tail going forecasting That some is or in that be asking and of and from to they're quarter, the the positive to first

Operator

Group. next of Hovde Our from question the comes line Nick Cucharale,

Nicholas Cucharale

back to a reversion the noninterest expecting are X% to X% the income What half? half the of swap growth? drivers the year-over-year of first Just primary you a And 'XX opposed question as activity closer outlook. the of on are to

Thomas Iadanza

be, deposit driver biggest our I net interest biggest the income... said Adjusted of the would driver But earlier, stabilization was noninterest-bearing income. balances. So that in as noninterest

interest income? missed said that. I You

Sorry that. about

that see I repeat it look that in when feel XX% of we aren't But in swap the we Keep revenue at replaced it can sometimes in a income expect to And we very related project like put we going recognition IP because on income, lower will as totality wealth at growth FX, XXXX, of have prior as that. contribute revenue, mind the you But you where the with C&I management. on we as more our think business, given that do in lays we're be out fee only any some events in strong that had to well. have, that think And So very our some things in as management also lost. one be I treasury and one-time well loan deck about the total about good the company. to challenged somewhat would year. we going increases category will our our of generates portions get

Okay.

Nicholas Cucharale

base, at looking some you just some reduction then throughout the expense And mentioned investments and opportunities XXXX.

leg focused core of growth the that drive complete, investments for Now is conversion the you the are on company? what most next to

Michael Hagedorn

lot some line we have, the that the C&I the That right? of with place, in think but aligned already imperatives when and that I entities really I forth. put stuff. the talked of technology the of that this about, the point enhancements of what in said, it's about we think on growth definitely think foundation a that specialty strategic C&I in strategic on mean I mostly a largely for lot it we've we and put at some there's investments with we from some things a talked focused is perspective just already were there, about some side,

Operator

Morgan from Our the Stanley. next of Manan question Gosalia line of comes

Manan Gosalia

maybe come and as talk certain how once talk how down deposits deposit deposit a just you're you expand versus cuts? to we rate rates? down? and and there deposit get level costs lag deposit still in rebound yields on cuts that Can few how you're rates about thinking to start you do rates thinking a yes, as come the can next about first-rate about Is down if NIB about betas through mix So in come the

Travis Lan

this Yes, Manan, Travis. is

think the way beta do there I the some side on down. on So is lag

on down. the way assumes model around Our XX% beta

the remains I way percentage point a our see a expand we as budget initiatives date noninterest the total deposits stable actually is XX%. it around you that do Relative at do in management, terminal budget. was cycle our as can rates continue forecast you what in of As think C&I But XX% grow to and there are that to continue place up. treasury on backup. our we noninterest-bearing, is I assumes faster include to that and to that strategic obviously, are to those than build deposits mean, rates And with relatively

So thoughts that. some around that's

Manan Gosalia

helpful. Very

away mix from On to the know growth X% the X%, loan of shift guide I CRE. investor that includes

loan you that customer help what having talk you Is from Or of do environment is And can on And conversations today degree and the cadence confidence more some like? does a loaded? growth also, that high of accelerate about as we will look based this there's that that some get So there? through drivers? the year? the of need back-end you're

Michael Hagedorn

based It quarter, of is the on Yes. and seeing of far XX% uptick into quarter now our the $X.X share is up in our pointing pipeline, pipeline the it in confidence so with the out again, the from and the that quarter, C&I's to customers in on to conversation pipelines fourth in the lion's originations billion to from the experienced billion, fourth that in and uptick third And requests pipeline. have us that that in and January. we've the their build and $X.X contribution we

business is statements a activity. Typically, your you slow and people quarter financial more are we So first the as get the progressively on. as seeing start quarter roll quarters that seeing place in

Manan Gosalia

Got of about between levels should to loan-to-deposit XX% it. at XXX%? stay these the And ratio

Thomas Iadanza

Yes.

Operator

Stephens. of of question Matthew line next Breese comes Our from the

Matthew Breese

scenario context, be would minimum no how provide the is, on First, estimate guide you the the guide. sense a for the or what love hoping I rate cut for under it guide Could of year. would be was dynamic NII or would I what a just

Ira Robbins

exposure rates provided. would still range that we to It's we Again, there and is would levels. to end. then we in that upside flat, X% rates the margin our lower effectively captured If think on have the be NII long from in X% most stayed significantly current

that rate most in up we provided. absent would the So interest kind scenarios that, of end other guide

Matthew Breese

Got it.

detail we provide alluded I started stabilization, see in you stabilization how quarter as started to to first to NIM Could some basis a stabilization has some also already the throughout And fourth provides NIM that already? Okay. the on show monthly you think if and that quarter. the hopefully, the

Ira Robbins

back We NII low generally I at When did. we say, November basis. consecutive looked we stable monthly a on the of last the would and call margin. on months was were point, time, X

shortening things November. in at about liabilities that again, would already margin, low that Some talked of up the the in the point fourth of the its of But quarter. was and a factors we've in say terms other little provided I pressure bit

what at look yields deposit in actually origination you -- loan back the deposit November originated costs and throughout yields If loan we bottomed new bounced declined origination December, also in quarter. -- but

deposit origination origination declined X yields feeds declined in XX points they which kind was the the the in out thing was So basis high deck our loan was December costs quarter, spreads. lower lower it provide, than even quarter, basis point there, and are throw on I what points One would into new in do November October of the but the too, in we've that we that. commentary provided obviously,

helpful. somewhat point the better margin. So again low if on that's was December was November a

Matthew Breese

frame low to was Yes, what any of the difference reference for high?

Ira Robbins

significant, to you. It wasn't with that honest be

points I think was X December. lower X, November basis than

Matthew Breese

Got it.

Okay. charges quick line quarter-to-quarter I driven noticed like deposit accounts A other to its ones. million by conversion? on of level? normal to Was a back $XX.X quite bit expect come kind were XX%. that that And we service lower the that couple should edge of

Travis Lan

Yes.

fees. the a So transactional have month certain for would conversion, we around about

that's at about look million, you was. if it So exactly $X what $X.X that was the decline, million,

customer otherwise, Obviously, on of put have fourth we it quarter, deposits. deposits the lot a would So been flat. throughout

as well generates stuff be about. that management revenue going talked That supplemented by deposit area. treasury to That should the the forward. that also deposit continue service income will charges noninterest we in So drive

Matthew Breese

struck balance happened a the or then XX cash cash of average at sheet, And Fed categories? in basis What with substantially interest balances I bank deposits Okay. it odd, down as kind that yields to there? look down me drove was quarter-to-quarter proxy. like on What as points usually X.X%. so funds

Ira Robbins

generally think I right. you're

SEDAR. little bit. do around move to payments process accrual an from what the actual received through The a to go estimate the cash payments tend we So

are can with in you so reserves. interest align have overnight there go not certain and out that a directly that there So yield on credits may the

Matthew Breese

Okay. But a back setons. model that generally speaking, we should see to

Ira Robbins

think right. I that's Yes, generally

Matthew Breese

that in number have weighted showed the of risky given those you we presentation, multifamily happen I'm the sub of to a XX Page portfolio, is ratio, origination? the service coverage And at set good geographies service do pretty they On me two, book ratios, Okay. average this loan Should what know little updated? struck was X.Xx. Or detail. coverage What these the those repricing you yield on existing are dynamics? curious, then a versus debt feel So one, updated? are bit

Ira Robbins

are to loan recent reprices user of They're average have weighted any tell you, to loan we if update I rent don't XX not that we'll don't that The the basis. But Yes. repricing, had in have yield terms that forward I the up. on and to you regular me. a look next where But months, we've the Travis. look expect results. the current. front modify we have based over coverage will again, know that and assess of same I look the when on it, our each loan we on repricing, values at our We rolls.

Travis Lan

Yes. you try and give some I'll in front I have that but full the helpful. don't color me, may of portfolio be

of segment, would lowest-yielding X.X% rent-controlled page, loans. Matt, fully and show as yield. $XXX million had on we we be that's that Those So the

I'd exposure have yields say, to another, properties of billion, them, portfolio X.XX%. have that some of We that $X.X rent call amount it, control in and

So in or I to multifamily, that you're total think when be $XXX to broadly you take. give at look going closer deal,

Matthew Breese

XXX those And the well.? billion through rent, rent-regulated of testing those the stress pure we some $X.X buckets, the pass as of went and

Ira Robbins

is partial, and million rent-regulated. is which less $XXX Yes. pure Yes. XX% X.X rent-regulated, And are it's the

Matthew Breese

X% here, And ROA when maybe as call bank? ROTC? or better be is level with we us the is the a last mentioned we you'd I for for had And think forward Okay. ROA one. back you measured my let's can Can define I'm you know you being about to, this model long-winded, which by but think overall Ira, profitability-wise, some satisfied get levels. profitability it, frustration at do

Ira Robbins

begin guidance But I where think level there. tangible pretty against should the generating back we get has were of we I'm on about the I right? that's of last go appropriate We end don't an I that target, XXXX. in and at be year. to think to going optimistic return provided, And want to Chad XX% should that we're common

Operator

no I showing over to Ira any Robbins remarks. further turn will closing this time. call at I'm back questions the for

Ira Robbins

just I to and in today, want talking for to dialing say to next you we thank you quarter. forward look

Operator

Thank and participating. you this conclude Thank you. all gentlemen, does conference. today's Ladies for

day. disconnect. now Have may a You great

Valley National Bancorp (VLY) 25 Jan 242023 Q4 Earnings call transcript