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Valley National Bancorp Reports Increased Second Quarter Net Income And Strong Organic Loan Growth

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Valley National Bancorp Reports Increased Second Quarter Net Income And Strong Organic Loan Growth

PR Newswire

WAYNE, N.J., July 26, 2018 /PRNewswire/ -- Valley National Bancorp (NYSE:VLY), the holding company for Valley National Bank, today reported net income for the second quarter of 2018 of $72.8 million, or $0.21 per diluted common share, as compared to the second quarter of 2017 earnings of $50.1 million, or $0.18 per diluted common share, and net income of $42.0 million, or $0.12 per diluted common share, for the first quarter of 2018.  Net income for second quarter of 2018 included merger charges of $3.2 million ($2.3 million after-tax) related to our acquisition of USAmeriBancorp, Inc. ("USAB") effective January 1, 2018. The first quarter of 2018 results also included infrequent charges of $26.0 million ($19.2 million after-tax) which mainly consisted of $13.5 million of USAB merger expenses and a $10.5 million increase in litigation reserves. Excluding these charges and other non-core items, our adjusted net income was $75.2 million, or $0.22 per diluted common share, for the second quarter of 2018, and $61.7 million, or $0.18 per diluted common share, for the first quarter of 2018. See further details below, including the "Consolidated Financial Highlights" tables.

Key financial highlights for the second quarter:

  • Loan Portfolio: Loans increased $681.9 million, or 12.1 percent on an annualized basis, to approximately $23.2 billion at June 30, 2018 from March 31, 2018. The increase was largely due to solid organic loan growth within most loan categories. Additionally, we sold approximately $195 million of residential mortgage loans resulting in pre-tax gains of $7.6 million during the second quarter of 2018.
  • Net Interest Income: Net interest income on a tax equivalent basis of $212.3 million for the second quarter of 2018 increased $3.1 million as compared to the first quarter of 2018 largely due to our new loan volumes and growth through the first six months of 2018.
  • Provision for Credit Losses: The provision for credit losses declined $3.8 million to $7.1 million for the second quarter of 2018 as compared to the first quarter of 2018. For the second quarter of 2018, the level of the provision was mainly driven by the organic loan growth and a $3.3 million increase in reserves related to impaired taxi medallion loans at June 30, 2018.
  • Credit Quality: Net loan charge-offs totaled only $692 thousand for the second quarter of 2018 as compared to net recoveries in the three consecutive prior quarters.  Net recoveries totaled $612 thousand for the six months ended June 30, 2018. Non-accrual loans represented 0.36 percent of total loans at June 30, 2018.
  • Net Interest Margin: Our net interest margin on a tax equivalent basis of 3.11 percent for the second quarter of 2018 decreased by 2 basis points from 3.13 percent for the first quarter of 2018.  See the "Net Interest Income and Margin" section below for more details.
  • Non-interest Income: Non-interest income increased $5.8 million, or 18.0 percent, to $38.1 million for the second quarter of 2018 as compared to the first quarter of 2018 largely due to increased fee income from derivative interest rate swaps executed with commercial loan customers and higher net gains on sales of loans.
  • Non-interest Expense: Non-interest expense decreased $23.8 million, or 13.7 percent, to $149.9 million for the second quarter of 2018 as compared to the first quarter of 2018 primarily due to lower merger charges and litigation reserve related expenses.
  • Performance Ratios: Annualized return on average assets (ROA), shareholders' equity (ROE) and tangible ROE were 0.98 percent, 8.88 percent and 13.76 percent for the second quarter of 2018, respectively. Annualized ROA, ROE and tangible ROE, adjusted for infrequent charges, was 1.01 percent, 9.17 percent and 14.21 percent for the second quarter of 2018, respectively.
  • Efficiency Ratio: Our efficiency ratio was 60.25 percent for the second quarter of 2018 as compared to 72.44 percent and 61.57 percent for the first quarter of 2018 and second quarter of 2017, respectively. Excluding merger expense, amortization of tax credit investments and litigation reserve expense, if applicable, included in non-interest expense, our adjusted efficiency ratio was 57.15 percent for the second quarter of 2018 as compared to 60.23 percent and 57.58 percent for the first quarter of 2018 and second 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 20.7 percent for the second quarter of 2018 as compared to 23.9 percent for the first quarter of 2018.  The decline in the effective tax rate was largely attributable to a $2 million charge included in income tax expense for the first quarter of 2018 related to effect of the USAB acquisition on our state deferred tax assets.  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 continue to make significant progress towards reshaping the future of Valley. Our many efforts to enhance growth at the Bank are taking hold and we are seeing greater traction in obtaining new clientele and talent alike. We successfully completed the USAB systems conversion during the quarter and fully integrated the USAmeriBank operations into Valley National Bank. I am proud of the incredible amount of progress that Valley and its employees have achieved over the past six months, and I look forward to what the future brings."

Net Interest Income and Margin

Net interest income on a tax equivalent basis totaling $212.3 million for the second quarter of 2018 increased $45.3 million and $3.1 million as compared to the second quarter of 2017 and first quarter of 2018, respectively.  The increase as compared to the second quarter of 2017 was largely due to the USAB acquisition effective January 1, 2018. Interest income on a tax equivalent basis increased $12.6 million to $281.6 million for the second quarter of 2018 as compared to the first quarter of 2018 mainly due to a $537.2 million increase in average loans and an 8 basis point increase in the yield on average loans. Interest expense of $69.4 million for the second quarter of 2018 increased $9.5 million as compared to the first quarter of 2018 largely due to higher interest rates on many of our interest bearing deposit products and short-term borrowings, as well as a $679.6 million increase in average short-term borrowings.

Our net interest margin on a tax equivalent basis of 3.11 percent for the second quarter of 2018 decreased by 1 basis point and 2 basis points from 3.12 percent and 3.13 percent for the second quarter of 2017 and first quarter of 2018, respectively.  The yield on average interest earning assets increased by 11 basis points on a linked quarter basis mostly due to higher yields on both average loans and taxable investments, as well as one more day during the second quarter of 2018. The yield on average loans increased by 8 basis points to 4.34 percent for the second quarter of 2018 as compared to the first quarter of 2018 due to the high volume of new loan originations at current market rates. The yield on average taxable securities increased 28 basis points to 3.02 percent for the second quarter of 2018 as compared to the first quarter of 2018.  The overall cost of average interest bearing liabilities increased 16 basis points to 1.38 percent for the second quarter of 2018 as compared to the linked first quarter of 2018 due to 12 and 47 basis point increases in the cost of average interest bearing deposits and short-term borrowings, respectively, largely driven by higher market interest rates. Our cost of total average deposits was 0.76 percent for the second quarter of 2018 as compared to 0.68 percent for the first quarter of 2018.

Branch Transformation

Over the past six months, Valley has embarked on a strategy to overhaul its retail network. The Bank is striving to create a branch infrastructure that is more reflective of current and future activity within our target markets. Our new model is going to place greater emphasis on service, sales, advisory and efficiency. We are in the process of upgrading many staff and training components, as well as placing greater importance on mobile and digital implementation and customer education and encouragement of those products. Valley's branch transformation will also include the repositioning, re-branding, functionality, aesthetics, and in many cases, reducing the square footage of our branches.

With that, we have updated our internal branch profitability and growth requirements, initially analyzing our New Jersey and New York network. We have identified 74 branches out of 177 within NJ and NY that presently do not meet our minimum hurdles for success. Of the 74 identified we expect to consolidate about 20 branches by the end of the first quarter 2019, resulting in an approximate estimated annual operating expense savings of $9 million.

For the remaining 54 branches, we are implementing tailored action plans focused on improving profitability and deposit levels as well as upgrades in staffing and training, within a defined timeline. Should the remaining branches not experience improvement within the associated timeline, they will be reviewed for potential consolidation as well.

While we expect the consolidation process, repositioning and renovations to be mostly complete by the end of 2020, it is important to recognize the evolving retail banking landscape combined with the Bank's renewed expectation regarding profitability will make this activity a more permanent piece of Valley's strategy.

Loans, Deposits and Other Borrowings

Loans. Loans increased $681.9 million to approximately $23.2 billion at June 30, 2018 from March 31, 2018. The increase was mainly due to strong quarter over quarter organic growth in total commercial real estate loans, commercial and industrial loans and residential mortgage loans.  During the second quarter of 2018, Valley also originated $219 million of residential mortgage loans for sale rather than held for investment.  Residential mortgage loans held for sale totaled $32.7 million and $15.1 million at June 30, 2018 and March 31, 2018, respectively.

Deposits. Total deposits decreased $319.1 million to approximately $21.6 billion at June 30, 2018 from March 31, 2018 largely due to decreases in NOW and money market deposits partially caused by normal fluctuations in municipal and other escrow accounts.  Additionally, time deposits decreased $104.4 million due to maturities and strong competition for such deposits in our primary markets.  Valley implemented several new deposit gathering campaigns and strategies in the later part of the second quarter of 2018 and July 2018 to better position its deposit offerings for both consumers and businesses. Non-interest bearing deposits; savings, NOW, money market deposits; and time deposits represented approximately 29 percent, 50 percent and 21 percent of total deposits as of June 30, 2018, respectively.

Other Borrowings. Short-term borrowings increased $1.3 billion to approximately $2.9 billion at June 30, 2018 as compared to March 31, 2018 largely due to new FHLB advances used for normal loan funding activity and liquidity purposes during the second quarter of 2018. Long-term borrowings decreased  $249.6 million to $2.1 billion at June 30, 2018 as compared to March 31, 2018 mostly due to maturities of FHLB advances and a partial shift in funding to shorter term borrowings.

Credit Quality

Non-Performing Assets. Our past due loans and non-accrual loans discussed further below exclude PCI loans. Under U.S. GAAP, the PCI loans (acquired at a discount that is due, in part, to credit quality) are accounted for on a pool basis and are not subject to delinquency classification in the same manner as loans originated by Valley. Our PCI loan portfolio totaled $4.6 billion, or 20.0 percent, of our total loan portfolio at June 30, 2018 and included all of the loans acquired from USAB on January 1, 2018.

Total non-performing assets (NPAs), consisting of non-accrual loans, other real estate owned (OREO) and other repossessed assets increased $22.1 million to $97.1 million at June 30, 2018 as compared to March 31, 2018 mainly due to an increase of $24.1 million in non-accrual loans, partially offset by a $2.0 million decline in OREO during the second quarter of 2018. The increase in non-accrual loans was primarily related to taxi medallion loans totaling $31.1 million (See further discussion of our taxi medallion lending below).  As a result, non-accrual loans increased to 0.36 percent of total loans at June 30, 2018 as compared to 0.27 percent of total loans at March 31, 2018.

Total accruing past due loans (i.e., loans past due 30 days or more and still accruing interest) were $33.3 million, or 0.14 percent of total loans, at June 30, 2018 and remained relatively unchanged as compared to $33.2 million, or 0.15 percent of total loans, at March 31, 2018.

During the second quarter of 2018, we continued to closely monitor our NYC and Chicago taxi medallion loans totaling $125.9 million and $9.0 million, respectively, within the commercial and industrial loan portfolio at June 30, 2018.  While the vast majority of the taxi medallion loans are currently performing, negative trends in the market valuations of the underlying taxi medallion collateral could impact the future performance and internal classification of this portfolio.  At June 30, 2018, the medallion portfolio included impaired loans totaling $64.7 million with related reserves of $23.2 million within the allowance for loan losses as compared to impaired loans totaling $65.0 million with related reserves of $19.9 million at March 31, 2018. At June 30, 2018, the impaired medallion loans largely consisted of performing troubled debt restructured (TDR) loans classified as substandard loans, as well as $44.7 million of non-accrual taxi cab medallion loans classified as doubtful.   Our non-accrual taxi medallion loans increased from $13.9 million at March 31, 2018 primarily due to weakened levels of cash flow, collateral and guarantor support in relation to several previously impaired TDR loans, and not due to actual loan performance.

Allowance for Credit Losses. The following table summarizes the allocation of the allowance for credit losses to specific loan categories and the allocation as a percentage of each loan category (including PCI loans) at June 30, 2018, March 31, 2018, and June 30, 2017:



June 30, 2018


March 31, 2018


June 30, 2017





Allocation




Allocation




Allocation





as a % of




as a % of




as a % of



Allowance


Loan


Allowance


Loan


Allowance


Loan


Allocation


Category


Allocation


Category


Allocation


Category


($ in thousands)

Loan Category:












Commercial and industrial loans*

$

78,649



2.05

%


$

70,388



1.94

%


$

53,792



2.04

%

Commercial real estate loans:













Commercial real estate

33,234



0.28

%


36,109



0.31

%


37,180



0.40

%


Construction

20,578



1.49

%


20,570



1.50

%


18,275



2.07

%

Total commercial real estate loans

53,812



0.40

%


56,679



0.43

%


55,455



0.55

%

Residential mortgage loans

4,624



0.13

%


4,100



0.12

%


4,186



0.15

%

Consumer loans:













Home equity

604



0.12

%


547



0.10

%


582



0.13

%


Auto and other consumer

5,465



0.26

%


4,990



0.25

%


4,606



0.26

%

Total consumer loans

6,069



0.23

%


5,537



0.22

%


5,188



0.23

%

Total allowance for credit losses

$

143,154



0.62

%


$

136,704



0.61

%


$

118,621



0.67

%

Allowance for credit losses as a %












of non-PCI loans



0.77

%




0.78

%




0.73

%














* Includes the reserve for unfunded letters of credit.











Our loan portfolio, totaling $23.2 billion at June 30, 2018, had net loan charge-offs totaling $692 thousand for the second quarter of 2018 as compared to net charge-offs of $2.7 million for the second quarter of 2017 and $1.3 million of net recoveries of loan charge-offs during the first quarter of 2018.

During the second quarter of 2018, we recorded a $7.1 million provision for credit losses as compared to $10.9 million and $3.6 million for the first quarter of 2018 and the second quarter of 2017, respectively. The elevated provision during the first half of 2018 was mainly due to higher specific reserves allocated to impaired taxi medallion loans, as well as organic loan growth.

The allowance for credit losses, comprised of our allowance for loan losses and reserve for unfunded letters of credit, as a percentage of total loans was 0.62 percent, 0.61 percent and 0.67 percent at June 30, 2018, March 31, 2018 and June 30, 2017, respectively.  At June 30, 2018, our allowance allocations for losses as a percentage of total loans remained relatively unchanged as compared to March 31, 2018 for most loan categories, except for commercial and industrial loans which increased 0.11 percent largely due to higher specific reserves for impaired taxi medallion loans and, to a much lesser extent, internally classified loans.

Our allowance for credit losses as a percentage of total non-PCI loans (excluding PCI loans with carrying values totaling approximately $4.6 billion) was 0.77 percent, 0.78 percent and 0.73 percent at June 30, 2018, March 31, 2018 and June 30, 2017, respectively. PCI loans are accounted for on a pool basis and initially recorded net of fair valuation discounts related to credit which may be used to absorb future losses on such loans before any allowance for loan losses is recognized subsequent to acquisition.  Due to the adequacy of such discounts, there were no allowance reserves related to PCI loans at June 30, 2018, March 31, 2018 and June 30, 2017.

Capital Adequacy

Valley's regulatory capital ratios continue to reflect its strong capital position. Valley's total risk-based capital, Tier 1 capital, Tier 1 leverage capital, and common equity Tier 1 capital ratios were 11.77 percent, 9.65 percent, 7.72 percent and 8.71 percent, respectively, at June 30, 2018.

Investor Conference Call

Valley will host a conference call with investors and the financial community at 11:00 AM Eastern Standard Time, today to discuss the second quarter 2018 earnings.  Those wishing to participate in the call may dial toll-free (800) 230-1059.  Investor presentation materials will be made available prior to the conference call at www.valleynationalbank.com.

About Valley

Valley National Bancorp is a regional bank holding company headquartered in Wayne, New Jersey with approximately $30 billion in assets. Its principal subsidiary, Valley National Bank, currently operates over 230 branch locations in northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn, Queens and Long Island, Florida and Alabama. Valley National Bank is one of the largest commercial banks headquartered in New Jersey and is committed to providing the most convenient service, the latest in product innovations and an experienced and knowledgeable staff with a high priority on friendly customer service. For more information about Valley National Bank and its products and services, please visit www.valleynationalbank.com or call our Customer Service Center at 800-522-4100.

Forward Looking Statements

The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements are not historical facts and include expressions about management's confidence and strategies and management's expectations about new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as "should," "expect," "believe," "view," "opportunity," "allow," "continues," "reflects," "typically," "usually," "anticipate," or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to:

  • weakness or a decline in the economy, mainly in New Jersey, New York, Florida and Alabama, as well as an unexpected decline in commercial real estate values within our market areas;
  • the diversion of management's time on any remaining issues related to the USAB merger integration;
  • the inability to realize expected cost savings and synergies from the merger of USAB with Valley in the amounts or in the timeframe anticipated;
  • the inability to retain USAB's customers and employees;
  • less than expected cost reductions and revenue enhancement from Valley's cost reduction plans including its earnings enhancement program called "LIFT";
  • higher or lower than expected income tax expense or tax rates, including increases or decreases resulting from the impact of the Tax Cuts and Jobs Act and other changes in tax laws, regulations and case law;
  • damage verdicts or settlements or restrictions related to existing or potential litigations arising from claims of breach of fiduciary responsibility, negligence, fraud, contractual claims, environmental laws, patent or trade mark infringement, employment related claims, and other matters;
  • the loss of or decrease in lower-cost funding sources within our deposit base may adversely impact our net interest income and net income;
  • cyber attacks, computer viruses or other malware that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems;
  • results of examinations by the OCC, the FRB, the CFPB and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;
  • changes in accounting policies or accounting standards, including the new authoritative accounting guidance (known as the current expected credit loss (CECL) model) which may increase the required level of our allowance for credit losses after adoption on January 1, 2020;
  • our inability or determination not to pay dividends at current levels, or at all, because of inadequate future earnings, regulatory restrictions or limitations, changes in our capital requirements or a decision to increase capital by retaining more earnings;
  • higher than expected loan losses within one or more segments of our loan portfolio;
  • unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather or other external events;
  • unexpected significant declines in the loan portfolio due to the lack of economic expansion, increased competition, large prepayments, changes in regulatory lending guidance or other factors; and
  • the failure of other financial institutions with whom we have trading, clearing, counterparty and other financial relationships.

A detailed discussion of factors that could affect our results is included in our SEC filings, including the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2017.

We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

 

VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS


SELECTED FINANCIAL DATA



Three Months Ended


Six Months Ended


June 30,


March 31,


June 30,


June 30,

($ in thousands, except for share data)

2018


2018


2017


2018


2017

FINANCIAL DATA:










Net interest income

$

210,752



$

207,598



$

164,820



$

418,350



$

326,688


Net interest income - FTE (1)

212,252



209,120



166,946



421,372



330,987


Non-interest income

38,069



32,251



28,830



70,320



54,550


Non-interest expense

149,916



173,752



119,239



323,668



240,191


Income tax expense

18,961



13,184



20,714



32,145



38,785


Net income

72,802



41,965



50,065



114,767



96,160


Dividends on preferred stock

3,172



3,172



1,797



6,344



3,594


Net income available to common shareholders

$

69,630



$

38,793



$

48,268



$

108,423



$

92,566


Weighted average number of common shares outstanding:










Basic

331,318,381



330,727,416



263,958,292



331,024,531



263,878,103


Diluted

332,895,483



332,465,527



264,778,242



332,599,991



264,662,863


Per common share data:










Basic earnings

$

0.21



$

0.12



$

0.18



$

0.33



$

0.35


Diluted earnings

0.21



0.12



0.18



0.33



0.35


Cash dividends declared

0.11



0.11



0.11



0.22



0.22


Closing stock price - high

13.26



13.38



12.23



13.38



12.76


Closing stock price - low

11.91



11.19



11.28



11.19



11.28


CORE ADJUSTED FINANCIAL DATA: (2)










Net income available to common shareholders, as adjusted

$

71,982



$

58,549



$

48,255



$

130,531



$

92,567


Basic earnings per share, as adjusted

0.22



0.18



0.18



$

0.39



$

0.35


Diluted earnings per share, as adjusted

0.22



0.18



0.18



0.39



0.35


FINANCIAL RATIOS:










Net interest margin

3.09

%


3.10

%


3.08

%


3.10

%


3.08

%

Net interest margin - FTE (1)

3.11



3.13



3.12



3.12



3.12


Annualized return on average assets

0.98



0.57



0.86



0.78



0.83


Annualized return on avg. shareholders' equity

8.88



5.10



8.27



6.99



7.98


Annualized return on avg. tangible shareholders' equity (2)

13.76



7.90



11.88



10.82



11.48


Efficiency ratio (3)

60.25



72.44



61.57



66.23



63.00


CORE ADJUSTED FINANCIAL RATIOS: (2)










Annualized return on average assets, as adjusted

1.01

%


0.84

%


0.86

%


0.93

%


0.83

%

Annualized return on average shareholders' equity, as adjusted

9.17



7.50



8.27



8.33



7.98


Annualized return on average tangible shareholders' equity, as adjusted

14.21



11.61



11.87



12.91



11.48


Efficiency ratio, as adjusted

57.15



60.23



57.58



58.66



59.58


AVERAGE BALANCE SHEET ITEMS:









Assets

$

29,778,210



$

29,291,703



$

23,396,259



$

29,536,301



$

23,197,377


Interest earning assets

27,256,959



26,750,806



21,416,747



27,005,281



21,184,485


Loans

22,840,235



22,302,991



17,701,676



22,573,097



17,508,461


Interest bearing liabilities

20,129,492



19,690,165



15,610,935



19,911,043



15,448,953


Deposits

21,846,582



21,882,034



17,288,487



21,864,210



17,327,411


Shareholders' equity

3,279,616



3,289,815



2,420,848



3,284,687



2,410,063


 

 

VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS




As Of

BALANCE SHEET ITEMS:

June 30,


March 31,


December 31,


September 30,


June 30,

(In thousands)

2018


2018


2017


2017


2017

Assets

$

30,182,979



$

29,464,357



$

24,002,306



$

23,780,661



$

23,449,350


Total loans

23,234,716



22,552,767



18,331,580



18,201,462



17,710,760


Non-PCI loans

18,587,015



17,636,934



16,944,365



16,729,607



16,169,291


Deposits

21,640,772



21,959,846



18,153,462



17,312,766



17,250,018


Shareholders' equity

3,277,312



3,245,003



2,533,165



2,537,984



2,423,901












LOANS:










(In thousands)










Commercial and industrial

$

3,829,525



$

3,631,597



$

2,741,425



$

2,706,912



$

2,631,312


Commercial real estate:










Commercial real estate

11,913,830



11,706,228



9,496,777



9,351,068



9,230,514


Construction

1,376,732



1,372,508



851,105



903,640



881,073


 Total commercial real estate

13,290,562



13,078,736



10,347,882



10,254,708



10,111,587


Residential mortgage

3,528,682



3,321,560



2,859,035



2,941,435



2,724,777


Consumer:










Home equity

520,849



549,329



446,280



448,842



450,510


Automobile

1,281,735



1,222,721



1,208,902



1,171,685



1,150,343


Other consumer

783,363



748,824



728,056



677,880



642,231


Total consumer loans

2,585,947



2,520,874



2,383,238



2,298,407



2,243,084


Total loans

$

23,234,716



$

22,552,767



$

18,331,580



$

18,201,462



$

17,710,760












CAPITAL RATIOS:










Book value per common share

$

9.26



$

9.16



$

8.79



$

8.81



$

8.76


Tangible book value per common share (2)

5.75



5.65



6.01



6.04



5.98


Tangible common equity to tangible assets (2)

6.56

%


6.61

%


6.83

%


6.92

%


6.95

%

Tier 1 leverage capital

7.72



7.71



8.03



8.13



7.69


Common equity tier 1 capital

8.71



8.77



9.22



9.22



9.18


Tier 1 risk-based capital

9.65



9.73



10.41



10.42



9.81


Total risk-based capital

11.77



11.89



12.61



12.61



11.99


 


 

VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS




Three Months Ended


Six Months Ended

ALLOWANCE FOR CREDIT LOSSES:

June 30,


March 31,


June 30,


June 30,

($ in thousands)

2018


2018


2017


2018


2017

Beginning balance - Allowance for credit losses

$

136,704



$

124,452



$

117,696



$

124,452



$

116,604


Loans charged-off:










Commercial and industrial

(642)



(131)



(2,910)



(773)



(4,624)


Commercial real estate

(38)



(310)



(139)



(348)



(553)


Construction










Residential mortgage

(99)



(68)



(229)



(167)



(359)


Total Consumer

(1,422)



(1,211)



(1,011)



(2,633)



(2,132)


Total loans charged-off

(2,201)



(1,720)



(4,289)



(3,921)



(7,668)


Charged-off loans recovered:










Commercial and industrial

819



2,107



312



2,926



1,160


Commercial real estate

15



369



346



384



488


Construction





294





294


Residential mortgage

180



80



235



260



683


Total Consumer

495



468



395



963



958


Total loans recovered

1,509



3,024



1,582



4,533



3,583


Net (charge-offs) recoveries

(692)



1,304



(2,707)



612



(4,085)


Provision for credit losses

7,142



10,948



3,632



18,090



6,102


Ending balance - Allowance for credit losses

$

143,154



$

136,704



$

118,621



$

143,154



$

118,621


Components of allowance for credit losses:










Allowance for loan losses

$

138,762



$

132,862



$

116,446



$

138,762



$

116,446


Allowance for unfunded letters of credit

4,392



3,842



2,175



4,392



2,175


Allowance for credit losses

$

143,154



$

136,704



$

118,621



$

143,154



$

118,621


Components of provision for credit losses:










Provision for loan losses

$

6,592



$

10,702



$

3,710



$

17,294



$

6,112


Provision for unfunded letters of credit

550



246



(78)



796



(10)


Provision for credit losses

$

7,142



$

10,948



$

3,632



$

18,090



$

6,102


Annualized ratio of total net charge-offs (recoveries) to average loans

0.01

%


(0.02)

%


0.06

%


(0.01)

%


0.05

%

Allowance for credit losses as a % of non-PCI loans

0.77

%


0.78

%


0.73

%


0.77

%


0.73

%

Allowance for credit losses as a % of total loans

0.62

%


0.61

%


0.67

%


0.62

%


0.67

%

 


 

VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS




As of

ASSET QUALITY: (4)

June 30,


March 31,


December 31,


September 30,


June 30,

($ in thousands)

2018


2018


2017


2017


2017

Accruing past due loans:










30 to 59 days past due:










Commercial and industrial

$

6,780



$

5,405



$

3,650



$

1,186



$

2,391


Commercial real estate

4,323



3,699



11,223



4,755



6,983


Construction

175



532



12,949






Residential mortgage

7,961



6,460



12,669



7,942



4,677


Total Consumer

6,573



5,244



8,409



5,205



4,393


Total 30 to 59 days past due

25,812



21,340



48,900



19,088



18,444


60 to 89 days past due:










Commercial and industrial

1,533



804



544



3,043



2,686


Commercial real estate







626



8,233


Construction



1,099



18,845



2,518



854


Residential mortgage

1,978



4,081



7,903



1,604



1,721


Total Consumer

860



1,489



1,199



1,019



1,007


Total 60 to 89 days past due

4,371



7,473



28,491



8,810



14,501


90 or more days past due:










Commercial and industrial

560



653





125




Commercial real estate

27



27



27



389



2,315


Construction









2,879


Residential mortgage

2,324



3,361



2,779



1,433



3,353


Total Consumer

198



372



284



301



275


Total 90 or more days past due

3,109



4,413



3,090



2,248



8,822


Total accruing past due loans

$

33,292



$

33,226



$

80,481



$

30,146



$

41,767


Non-accrual loans:










Commercial and industrial

$

53,596



$

25,112



$

20,890



$

11,983



$

11,072


Commercial real estate

7,452



8,679



11,328



13,870



15,514


Construction

1,100



732



732



1,116



1,334


Residential mortgage

19,303



22,694



12,405



12,974



12,825


Total Consumer

3,003



3,104



1,870



1,844



1,409


Total non-accrual loans

84,454



60,321



47,225



41,787



42,154


Other real estate owned (OREO)

11,760



13,773



9,795



10,770



10,182


Other repossessed assets

864



858



441



480



342


Non-accrual debt securities (5)







2,115



1,878


Total non-performing assets

$

97,078



$

74,952



$

57,461



$

55,152



$

54,556


Performing troubled debt restructured loans

$

111,571



$

116,414



$

117,176



$

113,677



$

109,802


Total non-accrual loans as a % of loans

0.36

%


0.27

%


0.26

%


0.23

%


0.24

%

Total accruing past due and non-accrual loans as a % of loans

0.51

%


0.41

%


0.70

%


0.40

%


0.47

%

Allowance for losses on loans as a % of non-accrual loans

164.30

%


220.26

%


255.92

%


284.70

%


276.24

%

Non-performing purchased credit-impaired loans (6)

$

57,311



$

62,857



$

38,088



$

25,413



$

33,715


 

 

VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS


NOTES TO SELECTED FINANCIAL DATA


(1)

Net interest income and net interest margin are presented on a tax equivalent basis using a 21 percent and 35 percent federal tax rate for periods ending in 2018 and 2017, respectively.  Valley believes that this presentation provides comparability of net interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice and SEC rules.

(2)

This press release contains certain supplemental financial information, described in the Notes below, which has been determined by methods other than U.S. Generally Accepted Accounting Principles ("GAAP") that management uses in its analysis of Valley's performance.  Management believes these non-GAAP financial measures provide information useful to investors in understanding Valley's financial results. Specifically, Valley provides measures based on what it believes are its operating earnings on a consistent basis and excludes material non-core operating items which affect the GAAP reporting of results of operations.  Management utilizes these measures for internal planning and forecasting purposes. Management believes that Valley's presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting Valley's business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results and Valley strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure.  Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.





Three Months Ended


Six Months Ended



June 30,


March 31,


June, 30


June 30,


($ in thousands, except for share data)

2018


2018


2017


2018


2017


Adjusted net income available to common shareholders:











Net income, as reported

$

72,802



$

41,965



$

50,065



$

114,767



$

96,160



Add: Losses (gains) on securities transactions (net of tax)

26



548



(13)



574



1



Add: Legal expenses (litigation reserve impact only, net of tax)



7,520





7,520





Add:  Merger related expenses (net of tax)*

2,326



9,688





12,014





Add: Income Tax Expense (USAB charge impact only)



2,000





2,000





Net income, as adjusted

$

75,154



$

61,721



$

50,052



$

136,875



$

96,161



Dividends on preferred stock

3,172



3,172




1,797



6,344



3,594



Net income available to common shareholders, as adjusted

$

71,982



$

58,549



$

48,255



$

130,531



$

92,567














*  Merger related expenses are primarily within salary and employee benefits and other expense.


Adjusted per common share data:











Net income available to common shareholders, as adjusted

$

71,982



$

58,549



$

48,255



$

130,531



$

92,567



Average number of shares outstanding

331,318,381



330,727,416



263,958,292



331,024,531



263,878,103



Basic earnings, as adjusted

$

0.22



$

0.18



$

0.18



$

0.39



$

0.35



Average number of diluted shares outstanding

332,895,483



332,465,527



264,778,242



332,599,991



264,662,863



Diluted earnings, as adjusted

$

0.22



$

0.18



$

0.18



$

0.39



$

0.35



Adjusted annualized return on average tangible shareholders' equity:











Net income, as adjusted

$

75,154



$

61,721



$

50,052



$

136,875



$

96,161



Average shareholders' equity

3,279,616



3,289,815



2,420,848



3,284,687



2,410,063



Less: Average goodwill and other intangible assets

(1,163,575)



(1,164,230)



(734,616)



(1,163,901)



(735,393)



Average tangible shareholders' equity

$

2,116,041



$

2,125,585



$

1,686,232



$

2,120,786



$

1,674,670



Annualized return on average tangible shareholders' equity, as adjusted

14.21

%


11.61

%


11.87

%


12.91

%


11.48

%


Adjusted annualized return on average assets:











Net income, as adjusted

$

75,154



$

61,721



$

50,052



$

136,875



$

96,161



Average assets

$

29,778,210



$

29,291,703



$

23,396,259



$

29,536,301



$

23,197,377



Annualized return on average assets, as adjusted

1.01

%


0.84

%


0.86

%


0.93

%


0.83

%


Adjusted annualized return on average shareholders' equity:











Net income, as adjusted

$

75,154



$

61,721



$

50,052



$

136,875



$

96,161



Average shareholders' equity

$

3,279,616



$

3,289,815



$

2,420,848



$

3,284,687



$

2,410,063



Annualized return on average shareholders' equity, as adjusted

9.17

%


7.50

%


8.27

%


8.33

%


7.98

%























 

 

VALLEY NATIONAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS




Three Months Ended


Six Months Ended


June 30,


March 31,


June 30,


June 30,

($ in thousands)

2018


2018


2017


2018


2017

Annualized return on average tangible shareholders' equity:










Net income, as reported

$

72,802



$

41,965



$

50,065



$

114,767



$

96,160


Average shareholders' equity

3,279,616



3,289,815



2,420,848



3,284,687



2,410,063


Less: Average goodwill and other intangible assets

(1,163,575)



(1,164,230)



(734,616)



(1,163,901)



(735,393)


Average tangible shareholders' equity

$

2,116,041



$

2,125,585



$

1,686,232



$

2,120,786



$

1,674,670


Annualized return on average tangible shareholders' equity

13.76

%


7.90

%


11.88

%


10.82

%


11.48

%

Adjusted efficiency ratio:










Non-interest expense

$

149,916



$

173,752



$

119,239



$

323,668



$

240,191


Less:  Legal expenses (litigation reserve impact only, pre-tax)



(10,500)





(10,500)




Less:  Merger-related expenses (pre-tax)

(3,248)



(13,528)





(16,776)




Less:  Amortization of tax credit investments (pre-tax)

(4,470)



(5,274)



(7,732)



(9,744)



(13,056)


Non-interest expense, as adjusted

$

142,198



$

144,450



$

111,507



$

286,648



$

227,135


Net interest income

210,752



207,598



164,820



418,350



326,688


Non-interest income

38,069



32,251



28,830



70,320



54,550


Gross operating income

$

248,821



$

239,849



$

193,650



488,670



381,238


Efficiency ratio, as adjusted

57.15

%


60.23

%


57.58

%


58.66

%


59.58

%





















As of


June 30,


March 31,


December 31,


September 30,


June 30,

($ in thousands, except for share data)

2018


2018


2017


2017


2017

Tangible book value per common share:










Common shares outstanding

331,454,025



331,189,859



264,468,851



264,197,172



263,971,766


Shareholders' equity

$

3,277,312



$

3,245,003



$

2,533,165



$

2,537,984



$

2,423,901


Less: Preferred stock

(209,691)



(209,691)



(209,691)



(209,691)



(111,590)


Less: Goodwill and other intangible assets

(1,162,858)



(1,165,379)



(733,144)



(733,498)



(734,337)


Tangible common shareholders' equity

$

1,904,763



$

1,869,933



$

1,590,330



$

1,594,795



$

1,577,974


Tangible book value per common share

$

5.75



$

5.65



$

6.01



$

6.04



$

5.98


Tangible common equity to tangible assets:









Tangible common shareholders' equity

$

1,904,763



$

1,869,933



$

1,590,330



$

1,594,795



$

1,577,974


Total assets

30,182,979



29,464,357



24,002,306



23,780,661



23,449,350


Less: Goodwill and other intangible assets

(1,162,858)



(1,165,379)



(733,144)



(733,498)



(734,337)


Tangible assets

$

29,020,121



$

28,298,978



$

23,269,162



$

23,047,163



$

22,715,013


Tangible common equity to tangible assets

6.56

%


6.61

%


6.83

%


6.92

%


6.95

%





(3)

The efficiency ratio measures Valley's total non-interest expense as a percentage of net interest income plus total non-interest income.

(4)

Past due loans and non-accrual loans exclude purchased credit-impaired (PCI) loans.  PCI loans are accounted for on a pool basis under U.S. GAAP and are not subject to delinquency classification in the same manner as loans originated by Valley.

(5)

Includes other-than-temporarily impaired trust preferred securities classified as available for sale, which are presented at carrying value (net of unrealized losses totaling $637 thousand and $875 thousand at September 30, 2017 and June 30, 2017, respectively) after recognition of all credit impairments.  There were no non-accrual debt securities at June 30, 2018, March 31, 2018 and December 31, 2017.

(6)

Represent PCI loans meeting Valley's definition of non-performing loan (i.e., non-accrual loans), but are not subject to such classification under U.S. GAAP because the loans are accounted for on a pooled basis and are excluded from the non-accrual loans in the table above.

SHAREHOLDERS RELATIONS
Requests for copies of reports and/or other inquiries should be directed to Tina Zarkadas, Assistant Vice President, Shareholder Relations Specialist, Valley National Bancorp, 1455 Valley Road, Wayne, New Jersey, 07470, by telephone at (973) 305-3380, by fax at (973) 305-1364 or by e-mail at tzarkadas@valleynationalbank.com.

 

 


VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except for share data)




June 30,


December 31,


2018


2017


 (Unaudited)



Assets




Cash and due from banks

$

307,428



$

243,310


Interest bearing deposits with banks

164,838



172,800


Investment securities:




Held to maturity (fair value of $1,988,782 at June 30, 2018 and $1,837,620 at
December 31, 2017)

2,030,194



1,842,691


Available for sale

1,833,467



1,493,905


Total investment securities

3,863,661



3,336,596


Loans held for sale, at fair value

32,670



15,119


Loans

23,234,716



18,331,580


Less: Allowance for loan losses

(138,762)



(120,856)


Net loans

23,095,954



18,210,724


Premises and equipment, net

348,396



287,705


Bank owned life insurance

437,037



386,079


Accrued interest receivable

88,155



73,990


Goodwill

1,078,892



690,637


Other intangible assets, net

83,966



42,507


Other assets

681,982



542,839


Total Assets

$

30,182,979



$

24,002,306


Liabilities




Deposits:




Non-interest bearing

$

6,217,420



$

5,224,928


Interest bearing:




Savings, NOW and money market

10,769,940



9,365,013


Time

4,653,412



3,563,521


Total deposits

21,640,772



18,153,462


Short-term borrowings

2,877,912



748,628


Long-term borrowings

2,103,993



2,315,819


Junior subordinated debentures issued to capital trusts

55,196



41,774


Accrued expenses and other liabilities

227,794



209,458


Total Liabilities

26,905,667



21,469,141


Shareholders' Equity




Preferred stock, no par value; authorized 50,000,000:




Series A (4,600,000 shares issued at June 30, 2018 and December 31, 2017)

111,590



111,590


Series B (4,000,000 shares issued at June 30, 2018 and December 31, 2017)

98,101



98,101


Common stock (no par value, authorized 450,000,000 shares; issued 331,538,971 shares at 
     June 30, 2018 and 264,498,643 shares at December 31, 2017)

116,027



92,727


Surplus

2,789,190



2,060,356


Retained earnings

232,593



216,733


Accumulated other comprehensive loss

(69,124)



(46,005)


Treasury stock, at cost (84,946 common shares at June 30, 2018 and 29,792 common 
     shares at December 31, 2017)

(1,065)



(337)


Total Shareholders' Equity

3,277,312



2,533,165


Total Liabilities and Shareholders' Equity

$

30,182,979



$

24,002,306



 

 

VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except for share data)




Three Months Ended


Six Months Ended


June 30,


March 31,


June 30,


June 30,


2018


2018


2017


2018


2017

Interest Income










Interest and fees on loans

$

247,690



$

237,586



$

181,720



$

485,276



$

356,073


Interest and dividends on investment securities:










Taxable

22,222



21,323



18,928



43,545



36,517


Tax-exempt

5,639



5,721



3,943



11,360



7,974


Dividends

3,728



1,939



2,137



5,667



4,288


Interest on federal funds sold and other short-term investments

839



926



279



1,765



610


Total interest income

280,118



267,495



207,007



547,613



405,462


Interest Expense










Interest on deposits:










Savings, NOW and money market

24,756



22,317



12,714



47,073



22,897


Time

16,635



14,616



10,166



31,251



19,719


Interest on short-term borrowings

10,913



5,732



5,516



16,645



9,417


Interest on long-term borrowings and junior subordinated debentures

17,062



17,232



13,791



34,294



26,741


Total interest expense

69,366



59,897



42,187



129,263



78,774


Net Interest Income

210,752



207,598



164,820



418,350



326,688


Provision for credit losses

7,142



10,948



3,632



18,090



6,102


Net Interest Income After Provision for Credit Losses

203,610



196,650



161,188



400,260



320,586


Non-Interest Income










Trust and investment services

3,262



3,230



2,800



6,492



5,544


Insurance commissions

4,026



3,821



4,358



7,847



9,419


Service charges on deposit accounts

6,679



7,253



5,342



13,932



10,578


(Losses) gains on securities transactions, net

(36)



(765)



22



(801)



(1)


Fees from loan servicing

2,045



2,223



1,831



4,268



3,646


Gains on sales of loans, net

7,642



6,753



4,791



14,395



8,919


Bank owned life insurance

2,652



1,763



1,701



4,415



4,164


Other

11,799



7,973



7,985



19,772



12,281


Total non-interest income

38,069



32,251



28,830



70,320



54,550


Non-Interest Expense










Salary and employee benefits expense

78,944



93,292



63,564



172,236



129,491


Net occupancy and equipment expense

26,901



27,924



22,609



54,825



45,644


FDIC insurance assessment

8,044



5,498



4,928



13,542



10,055


Amortization of other intangible assets

4,617



4,293



2,562



8,910



5,098


Professional and legal fees

5,337



17,047



4,302



22,384



8,997


Amortization of tax credit investments

4,470



5,274



7,732



9,744



13,056


Telecommunication expense

3,015



3,594



2,707



6,609



5,366


Other

18,588



16,830



10,835



35,418



22,484


Total non-interest expense

149,916



173,752



119,239



323,668



240,191


Income Before Income Taxes

91,763



55,149



70,779



146,912



134,945


Income tax expense

18,961



13,184



20,714



32,145



38,785


Net Income

72,802



41,965



50,065



114,767



96,160


Dividends on preferred stock

3,172



3,172



1,797



6,344



3,594


Net Income Available to Common Shareholders

$

69,630



$

38,793



$

48,268



$

108,423



$

92,566


Earnings Per Common Share:










Basic

$

0.21



$

0.12



$

0.18



$

0.33



$

0.35


Diluted

0.21



0.12



0.18



0.33



0.35


Cash Dividends Declared per Common Share

0.11



0.11



0.11



0.22



0.22


Weighted Average Number of Common Shares Outstanding:










Basic

331,318,381



330,727,416



263,958,292



331,024,531



263,878,103


Diluted

332,895,483



332,465,527



264,778,242



332,599,991



264,662,863


 

 

VALLEY NATIONAL BANCORP

Quarterly Analysis of Average Assets, Liabilities and Shareholders' Equity and

Net Interest Income on a Tax Equivalent Basis



Three Months Ended


June 30, 2018


March 31, 2018


June 30, 2017


 Average




Avg.


 Average




Avg.


 Average




Avg.

($ in thousands)

 Balance


Interest


Rate


 Balance


Interest


Rate


 Balance


Interest


Rate

Assets


















Interest earning assets:
















Loans (1)(2)

$

22,840,235



$

247,691



4.34

%


$

22,302,991



$

237,587



4.26

%


$

17,701,676



$

181,723



4.11

%

Taxable investments (3)

3,438,842



25,950



3.02

%


3,401,743



23,262



2.74

%


2,967,805



21,065



2.84

%

Tax-exempt investments (1)(3)

750,896



7,138



3.80

%


741,001



7,242



3.91

%


581,263



6,066



4.17

%

Federal funds sold and other  interest

bearing deposits

226,986



839



1.48

%


305,071



926



1.21

%


166,003



279



0.67

%

Total interest earning assets

27,256,959



281,618



4.13

%


26,750,806



269,017



4.02

%


21,416,747



209,133



3.91

%

Other assets

2,521,251







2,540,897







1,979,512






Total assets

$

29,778,210







$

29,291,703







$

23,396,259






Liabilities and shareholders' equity


















Interest bearing liabilities:


















Savings, NOW and money market deposits

$

10,978,067



$

24,756



0.90

%


$

11,175,982



$

22,317



0.80

%


$

8,803,028



$

12,715



0.58

%

Time deposits

4,700,456



16,635



1.42

%


4,594,368



14,616



1.27

%


3,290,407



10,166



1.24

%

Short-term borrowings

2,166,837



10,913



2.01

%


1,487,272



5,732



1.54

%


1,837,809



5,516



1.20

%

Long-term borrowings (4)

2,284,132



17,062



2.99

%


2,432,543



17,232



2.83

%


1,679,691



13,790



3.28

%

Total interest bearing liabilities

20,129,492



69,366



1.38

%


19,690,165



59,897



1.22

%


15,610,935



42,187



1.08

%

Non-interest bearing deposits

6,168,059







6,111,684







5,195,052






Other liabilities

201,043







200,039







169,424






Shareholders' equity

3,279,616







3,289,815







2,420,848






Total liabilities and shareholders' equity

$

29,778,210







$

29,291,703







$

23,396,259
























Net interest income/interest rate spread (5)



$

212,252



2.75

%




$

209,120



2.80

%




$

166,946



2.83

%

Tax equivalent adjustment



(1,500)







(1,522)







(2,126)




Net interest income, as reported



$

210,752







$

207,598







$

164,820




Net interest margin (6)





3.09

%






3.10

%






3.08

%

Tax equivalent effect





0.02

%






0.03

%






0.04

%

Net interest margin on a fully tax equivalent basis (6)





3.11

%






3.13

%






3.12

%












(1)

Interest income is presented on a tax equivalent basis using a 21 percent and 35 percent federal tax rate for 2018 and 2017, respectively.

(2)

Loans are stated net of unearned income and include non-accrual loans.

(3)

The yield for securities that are classified as available for sale is based on the average historical amortized cost.

(4)

Includes junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of condition.

(5)

Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.

(6)

Net interest income as a percentage of total average interest earning assets.

 

 

Cision View original content:http://www.prnewswire.com/news-releases/valley-national-bancorp-reports-increased-second-quarter-net-income-and-strong-organic-loan-growth-300686765.html

SOURCE Valley National Bank

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