Valley National Bank | Annual Report 2019

News | 4/13/2020

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Dear Shareholders, Customers and Associates,


There is always a sense of optimism that surrounds the start of a new year, but when you’re at the beginning of a new decade, you can’t help but envision the possibilities ahead. What we envision for the future of our organization is coming to fruition more and more with each passing day, month and year.

I’m proud to report that in 2019 we delivered another year of exceptional performance, and our organization has emerged stronger and more focused than ever. We made significant strides in transforming ourselves into a high-performance organization where our associates are empowered to make important decisions and are provided the tools and training to take their skills to the next level. We’ve enhanced our digital banking capabilities and made significant progress in changing the customer experience both online and at our branches. Most importantly, we stayed true to our commitment to our communities.

This letter is just one of the ways we’re sharing our accomplishments with our shareholders, customers and associates and I hope you’re as proud of the progress we made as I am.

Strong financial performance ​

Our 2019 results reflect our strong execution against our strategic initiatives. We continue to make significant strides toward delivering on our stated goals of consistent growth, improved operating efficiency and greater diversification of revenue.

Our ability to execute on stated initiatives was at the heart of our financial performance in 2019. We achieved significant growth in diluted earnings per common share and attained our highest return on average assets since 2011. Net revenues and after-tax earnings were records of $1.1 billion and $310 million, respectively, for Valley. Book value per common share and tangible book value per common share increased by 9 and 13 percent to $10.35 and $6.73, respectively, in 2019 as compared to one year ago.

Loan growth has consistently been above industry averages while maintaining the same prudent underwriting standards that have long been a hallmark of Valley. For the full year 2019, organic loan growth was approximately 9 percent. One measure of credit quality, non-accrual assets as a percentage of loans, declined favorably from 0.35 percent at the end of 2018 to 0.31 percent at December 31, 2019.

During the year, we maintained the strength and quality of Valley’s balance sheet and earnings while balancing our investments in infrastructure, technology and new products. We continued to leverage exciting new technologies in 2019 to improve our operating efficiency over the long-term. Our relentless focus on the operating efficiency across our organization and automation initiatives during the year were successful in driving down our operating expenses. For the year ended December 2019, our efficiency ratio was 56.77 percent representing a 6.69 percent absolute improvement compared to the year ended December 31, 2018.

As expenses remained virtually unchanged, we still generated growth in net revenues of $121.3 million or approximately 12 percent compared to 2018. Our ability to drive operating leverage is attributed to the initiatives we outlined over the past years and validates our ability to execute on them. Both net interest income and noninterest income grew at a solid pace as we produced strong loan growth and recognized a substantial gain from the sale and leaseback of several Valley properties in 2019.

Our 2019 earning per diluted common share of $0.87 was up 17 percent compared to 2018. We are proud of this accomplishment since we delivered these results in a challenging macroeconomic environment which has put pressure on net interest margins for the entire industry. Our return on average assets improved notably and represented our highest level of performance since 2011. Our return on average assets for 2019 increased 7 basis points to 0.93 percent as compared to 0.86 percent in the prior year.

One of the biggest stories for us in 2019 was our December acquisition of New Jersey-based Oritani Bank. Oritani had approximately $4.3 billion in assets, $3.4 billion in net loans, $2.9 billion in deposits, after purchase accounting adjustments, and a branch network of 26 locations. This acquisition doubled our market share in Bergen County, New Jersey – one of the most affluent markets in our footprint – and bolstered capital, providing greater balance sheet optionality and the acceleration of our strategic initiatives. Oritani’s conservative credit culture, combined with their customer focus mirrors Valley’s vision. The systems conversion in February 2020 and the integration of Oritani’s operations into Valley has progressed seamlessly.

The acquisition of Oritani played an important role in growing our bank. With approximately $37.5 billion in assets, Valley is now the 39th largest commercial bank in the country excluding banks that are based outside of the U.S. Shareholder value creation is a top priority. As previously noted, we delivered 13 percent tangible book value growth for the full year while announcing and closing the Oritani acquisition.  Our growth has continued while paying a meaningful cash dividend and reinvesting in our products, people and infrastructure.




1Percent change for 2017 reflects an adjustment to the ending balance of approximately $184 million in loans that were purchased during the year.
2Percent change for 2018 reflects an adjustment to the beginning balance of approximately $3.8 billion in loans that were acquired from USAmeriBank.
3Percent change for 2019 reflects an adjustment to the ending balance of approximately $3.4 billion in loans that were acquired from Oritani Bank and $0.8 billion of loans that were sold.


Relevancy in a new era

As the saying goes: the only constant is change. The customer experience is undergoing an evolution – one built on technology and innovation bringing change at an unprecedented pace. Digital tools are making banking faster and easier than ever. And with this disruption comes endless opportunities.

Our commitment to innovation has ignited a passion for creative thought and new ideas. In 2019, we expanded our focus on innovation aimed at: developing differentiated products and services for current and future customers; broadening our network of partnerships with the vast ecosystem of startups and fintechs; and encouraging an innovative culture across the organization.

Last year we met with financial service pioneers to introduce new and better ways to improve our customers’ banking experience. And these partnerships have already produced amazing results, helping us simplify processes, enhance security and add valuable digital functionality for both commercial and consumer customers.

Valley is even supporting the broader ecosystem of organizations that incubate and support early stage innovative companies. Over the last couple of years, we’ve developed strong relationships with organizations like the New Jersey Tech Council, the accelerator Tampa Bay Wave, Silicon Valley’s Plug and Play and Quesnay in New York City to sponsor and support programs that can help technology companies grow and develop.

Also, in 2019, we launched a new brand, Valley Direct, and the first product in that brand is an end-to-end digital savings account featuring one of the most competitive savings rates in the market. Valley Direct marks a major milestone in our strategic vision, helping us to grow deposits, enhance the digital experience and expand our customer base beyond our geographic footprint.

At the end of the day, innovation is about people and Valley is focused on empowering our associates to be part of the process. Through in-depth Design Thinking workshops, innovation challenges, hackathons and other opportunities, we’re challenging people to think creatively for solutions that can improve our operations and, most importantly, enhance the customer experience. This is our way forward to maintain relevancy in a rapidly evolving industry and a new era in banking.

Creating a better customer experience

Today’s banking experience looks nothing like it did 10 years ago – and in 10 years it will look nothing like it does today. We understand that people have different wants and needs, and we are consistently innovating to meet those expectations. Loyalty is hard won these days because customers are less attached to brands and more concerned about having an exceptional experience. That’s why the customer experience is so important to us.

As a result of our efforts, we received some very positive feedback. Our Net Promoter Score (NPS) – a widely used customer satisfaction metric that measures how likely customers are to recommend a business, has continued to improve consecutively year over year since 2017.

New Branch InteriorValley is committing more resources and investments to developing new solutions that leverage data, advanced analytics, digital technologies and new delivery platforms to improve the way we serve customers. To reinforce this commitment, we assembled a Customer Strategy Team focused entirely on improving the customer experience and making sure every product, service and method of banking is based on what our clients want and need.

As another part of our commitment to creating a better customer experience, we launched one of the most ambitious projects in our Bank’s history with Branch Transformation. Branches are being redesigned to integrate new digital services while creating more open space and less barriers between customers and Valley associates. In addition to the physical changes, we’re transforming the way we serve customers. Our new branches are staffed with talented professionals who are trained to perform everything from accepting deposits and cashing checks, to opening accounts, processing loans and providing financial guidance. This new banking model provides added convenience, flexibility and value to all customer interactions at Valley branches.

Shaping our culture for tomorrow

Everything we achieve comes from the hard work and dedication of our people. That’s why we’re making substantial investments in people and technology to make their jobs more efficient and to deliver both a better customer and employee experience. This means ensuring that our associates have access to better education and training, and opportunities to take on more leadership roles throughout the organization.

Employee engagement continues to be a key focus at Valley. In 2019, we designed a more insightful employee engagement survey to allow for transparent feedback that can help us make positive changes based on the needs of our associates. This invaluable feedback uncovers opportunities for improvement, areas of strength to leverage and gives guidance on actions required to enhance engagement and performance.

By fostering an inclusive work environment which embraces diverse perspectives and backgrounds, we’re able to attract and retain talented and dedicated individuals. Creating this type of work environment inspires collaboration and innovation – all key elements in our strategy for growth and relevancy.

In 2019, we also made a series of executive promotions, which further strengthens our leadership team and succession planning for the future of Valley. A key change was the appointment of Michael Hagedorn to join our executive leadership team as our Chief Financial Officer. A former President and CEO for a mid-size bank, Michael will lead all key finance and capital market strategies for the bank, while working closely with the Board and executive leadership to define and execute all corporate plans and initiatives. He is a highly successful leader who brings a wealth of knowledge to this critical role. His deep experience in banking and all facets of finance will be a tremendous asset to our organization.

Building stronger communities

We’ve always been passionate about addressing local community issues, expanding social awareness and making a positive and sustainable economic impact on people’s lives. We know that we play an essential role in creating stronger communities. That’s why we’ve built stronger relationships with organizations like Habitat for Humanity, Big Brothers Big Sisters and community food banks, across all the communities we serve. And our efforts haven’t gone unnoticed.

We’re proud to share that Valley received an Outstanding rating from the Office of the Comptroller of the Currency for exceeding the terms of the Community Reinvestment Act exam. This is an honor and distinction received by less than 10 percent of financial institutions last year. The Community Reinvestment Act requires banks to meet the credit needs of low- and moderate-income communities across America and rates institutions in three categories: lending, investment and services. To better define our commitment to corporate social responsibility we’ve identified four key pillars: promoting affordable homes; inspiring innovation through entrepreneurship; stimulating economic and community development; and living our commitment to impactful, local, leadership. Our commitment to these pillars reflects our belief that corporate social responsibility is fundamental to our culture and purpose.

Additionally, in our major markets, we established Community Advisory Boards. Our boards are in the New Jersey and New York-region, as well as Florida and Alabama and are comprised of highly qualified community leaders who provide valuable feedback to Valley’s management.

We’re cognizant of our role and impact on society as a responsible corporate citizen. That’s why we continue to integrate Environmental, Social and Governance (ESG) considerations in all aspects of our business – from lending, investments, policies and principles to corporate philanthropy and sustainability. These ESG factors align with our long-term strategy, strengthening our risk management framework and adding sustainable value to our organization.

In late 2019, we joined a consortium consisting of financial institutions, non-governmental organizations and law enforcement agencies that was tasked with disrupting and dismantling human trafficking networks operating in the Miami-Dade area during the 2020 professional football championship game. Human trafficking increases exponentially during national sporting events and we were proud to be part of this collaborative effort to fight human trafficking in all its forms.

For us, being a local bank is about more than just expanding business opportunities. It’s about embracing our role as a leader for our communities’ success. Because, at the end of the day, we know that we are only as strong as the communities we serve.

A vision for 2020

For all our many achievements and success, we know there’s still more to do.

Technology and seismic shifts in customer preferences continue to disrupt and revolutionize our industry. We’re embracing these changes and reimagining our vision of how banking is done with bold, new ideas. Our goal is to drive change and create a better experience for our customers and for the benefit of all our stakeholders. We’ve never been more excited about the direction of our bank and we hope you share our enthusiasm. It’s our mission to continue to prove it to you every day in everything we do.

As we look ahead to what we have planned in 2020 and beyond, we can’t help but be enthusiastic about making this new decade the best one in our organization’s great history. We’ll accomplish this goal by working together to remain relevant, innovative, efficient and by being the Bank people want to work for and bank with.

On behalf of our directors, the Valley management team and our valued associates, I thank you for your continued trust and support.


 Ira Robbins

  President & CEO