Letter to our Shareholders

Letter to our Shareholders 2019

Dear shareholders, customers, and employees:

2018 marked the 91st year in Valley’s proud history. Last year we laid out several important themes that revolved around improving our relevance. This focus was designed to improve upon the rich traditions of the Bank, while enhancing the future trajectory of shareholder returns. We have made great strides towards improving efficiency, growth, and core profitability, all while sculpting a culture that enhances accountability and empowers our customers and employees. We are proud to share our progress with you and tell you about how we continue to shape a great future for all stakeholders.

Valley has always maintained a reputation for strong ethics, conservative lending practices and superior customer service. However, our company is much more than that. We are community members and business leaders driven to help people and businesses be successful. In 2018, we defined a new mission statement around this purpose—to give people and businesses the power to succeed.

On January 1, 2018, we closed the largest merger in Valley’s history, acquiring USAmeriBank, expanding our footprint in Florida and, for the first time, into Alabama. We advanced numerous projects within our technology roadmap, creating more intuitive customer experiences and enhancing the ability of our associates to serve our customers. We also launched a branch transformation initiative that will redefine the retail banking experience, while unveiling our new branding, designed to reflect our progress and direction forward.

We’ve been busy, but we’re just getting started. 

Financial achievments

For the full year 2018, we reported net income of $261.4 million and $0.75 per diluted share as compared to $161.9 million and $0.58, respectively, in 2017.

We made solid progress toward achieving our strategic goals over the past year. The actions we have taken are expected to provide shareholder value over the long-term and we are already seeing the results. In 2018, we achieved year-over-year reported diluted earnings per share growth of 29%. 

We reported record loan growth of 13.4% for the full year—far outpacing the industry and our stated goals of 8 to 10%, net of loan sales. This growth was achieved via the same stringent credit standards that have long been a hallmark of Valley. Product expansion, strong organic growth from newly acquired markets, and additions to our lending staff drove the impressive results. 

The return on average assets increased to 0.86% up from 0.69% in the prior year. Driving our returns higher remains a top priority and is achievable through a combination of higher operating leverage and smarter expense allocation. This coincides with our focus on improving efficiency across the entire company. In 2018, our reported efficiency ratio declined to 63.46%, down 2.50% from the prior year.  

Many of these metrics are even more impressive when we take into consideration several infrequent items highlighted in our Form 10-K and the reinvestment for the future that occurred over the course of 2018.

*Compounded annual growth rate based on diluted earnings per share  


Taking technology to the next level

We spent a lot of time over the past few years examining the typical customer experience and how technology can help redefine interaction with our customers. We built an enterprise-wide data hub that is allowing us to harness analytics in a meaningful way and empower our associates to deliver the customized solutions our customers need. To complement these efforts, we’ve made significant upgrades to our digital loan application platforms and streamlined credit approval processes so our customers can get the funding they need sooner to grow their business, purchase a home or plan for their future.
In January, we launched the new Valley.com. Our new website has an intuitive design that reflects our commitment to innovation and allows our customers to easily access their accounts, find relevant content and insight, and conduct banking on their terms. In tandem with our new website, we introduced new mobile banking capabilities (including biometric authorization and mobile wallet), migrated to a new commercial treasury solutions platform and launched a new online residential mortgage platform—all to provide a simpler and more convenient omni-channel experience.   

Redefining the traditional branch experience

In 2018, we embarked on Branch Transformation—a strategy to overhaul our retail network and be responsive to the evolving demands of customer behavior.

This multi-year effort is focused on improving the sales and advisory expertise within our retail branch network, combined with improving aesthetics, function, and performance of the branches.   

Through Branch Transformation, we’ve identified many branches within New Jersey and New York that did not meet certain internal performance measures.  While some of the identified branches have or will be consolidated as a result, the majority have been given customized strategies to improve performance and will be monitored for progress.  

In addition to creating efficiencies, Branch Transformation is about improving the service and experience we provide to our customers. One of the major changes we’re making is the transition from traditional tellers and platform roles to Universal Bankers—elite banking professionals who can serve a wide array of customer needs.

Finally, along with sculpting the footprint of branches, improving performance, and elevating staff expertise, comes aesthetic changes. 

Over the coming months and years, there will be many physical upgrades to Valley branches, reflective of our vision for creating an enhanced customer experience. 

Branch Transformation is essential to our long-term relevancy by providing an enhanced digital and in-branch banking experience while simultaneously improving productivity and operating efficiencies.

New branding. New exchange. New era.

As customer preferences and industry trends continue to revolutionize the business of banking, we felt a need to refresh our brand to show that we’re committed to staying ahead of the curve while still honoring our 
91-year legacy.  Our new logo signifies our commitment to innovation and forward-thinking solutions, while paying homage to our heritage of authenticity, high ethics, and dedication to our customers and communities.

2018 marked another noteworthy change, moving Valley’s common stock listing to the Nasdaq Global Select Market from the New York Stock Exchange. The Nasdaq trading platform and marketing initiatives offer Valley the most cost-effective listing option and are aligned with our goals to enhance operating efficiencies. Furthermore, the Nasdaq brand is one that evokes energy and innovation, much like the culture we’re fostering at Valley today.

Building a diverse, talented and unified corporate culture

Valley’s transformation truly comes from within our culture. We’re moving to become “one Valley” --— a collaborative organization focused on living up to our mission. As such, we’re making all the necessary changes to drive a culture that puts the customer and our local communities first. 

The vision for our organization is to be a local bank that’s committed to the success of every person, business and community we serve. That last component is so important —community success. We believe that if our communities don’t succeed, we don’t either. Through our Corporate Social Responsibility initiatives and our Community Impact work, we’re engaging and supporting causes important to our associates. We’re also giving our associates the power to do more by instilling a Volunteer Time Off policy and encouraging them to get more involved in their communities. 

When our associates know that their company is supporting them and united around a common purpose of helping our communities succeed, it creates a more proactive and productive workforce. 

We’re cultivating a culture that encourages performance and accountability throughout the organization. Accordingly, in 2018, we materially increased the component of compensation tied to relative stock performance for every single executive. We also tied greater levels of incentive to performance for all lending and deposit-gathering employees and continue to make VLY shares a greater portion of overall compensation. We believe driving increased ownership across a greater employee base is in the best interest for every Valley stakeholder over the long term.

The greater good of community banks

Community banks serve a vital role as contributors to the nation’s economic resilience. Their strength and stability have an incalculable impact on millions of lives. For us, being a community bank is about more than just business opportunities and opening branches on every Main Street. It’s about embracing our role as an advocate for our communities’ success. Our vision is to make a lasting and sustainable impact on our communities. We are proud of developing stronger relationships with organizations like Habitat for Humanity, Big Brothers Big Sisters, the Boys & Girls Club, and many others in 2018.
Helping business owners grow their businesses is another way that we support the growth of stronger communities. Small businesses are the backbone of our economy and the key drivers of community growth. And while we continue to serve larger business customers, we’re remaining committed to providing more opportunities to small businesses throughout our footprint by expanding our SBA program into New York and New Jersey in 2019. 

Being socially responsible isn’t just a “check the box” exercise for us, it’s about deepening our relationships with the communities we serve. We do this by knowing our communities and their needs, and being responsible, reliable and supportive. Ultimately, prosperity within the markets we serve translates to greater success for our Company.  

A new vision for our future

We’re excited about our organization and the direction we’re headed. Improving on the foundation of our company will position the Bank to be more successful for years to come.  As we move forward, we’re focused on acquiring new customers and deepening core deposit relationships. We’ll do this by engaging our customers and providing high-touch, personal service to fulfill the entire spectrum of their financial needs. This approach to relationship banking will strengthen loyalty by improving the customer experience and providing a wide range of convenient and innovative services. 

As we look ahead, we believe Valley will operate more efficiently and continue to enhance earnings. We believe Valley will represent a better experience for all our customers. And we believe Valley will continue to be a driving force that helps our customers and communities succeed. 

Your investment in Valley has enabled us to thrive for more than 90 years. Thank you for your continued trust and support.

Form 10-K & Proxy Statement

Annual Report 2018