Valley National Bancorp · NASDAQ:VLY
Valley National Bancorp — Piper Jaffray & Co. Management Meetings 2018
53 slides from Valley National Bancorp's conference presentation, Mar 12, 2018
Slide 1: Piper Jaffray & Co. - Management Meetings 3.12.2018
Piper Jaffray & Co. - Management Meetings 3.12.2018
Slide 2: Forward Looking Statements
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 n
Slide 3: The New Valley: Leadership Team
Ira Robbins President & CEO Alan Eskow SEVP & CFO Dianne Grenz SEVP & CCBO Tom Iadanza SEVP & CLO Ron Janis SEVP & General Counsel Bob Bardusch EVP & COO Kevin Chittenden EVP & CRLO Bernadette Mueller EVP & ECRAO Andrea Onorato EVP & CAO Melissa Scofield EVP & CRO Yvonne Surowiec EVP & CHRO Joseph V
Slide 4: Bob Bardusch, EVP & COO
Bob Bardusch, EVP & COO As COO, Mr. Bardusch plays a critical role working with Valley’s executive leadership team to deliver the Bank’s strategic vision. He focuses on integrating platforms, improving service delivery and efficiency, and fostering innovation to support the bank in operating with th
Slide 5: The New Valley: Driving Operations through Technology
The New Valley: Driving Operations through Technology Combining the roles of COO & CIO creates greater coherence between process and business segments Technology continues to drive the industry and Valley away from physical infrastructure Outdated and manual processes will continue to be replaced by
Slide 6: The New Valley: Technology Roadmap
▪ Delivering robust customer and employee experiences through frictionless interaction Modernize & Empower Customer Centric Digitally Powered Data Driven ▪ Enhancing customer touch points to drive improved customer capabilities ▪ Improving operating efficiency and agility by investing in continuous
Slide 7: The New Valley: Technology Roadmap Milestones
The New Valley: Technology Roadmap Milestones 2018 Cloud/Streamlined Loan Origination Innovation Culture & Fintech Enhance Treasury Services & Branch Transformation New Website Salesforce, nCino, Encompass Instant Issue Debit Card 2017 New Web/Social Media Storefront Journey to Cloud
Slide 8: Digital Workplace Initiatives
8 Digital Workplace Initiatives Embracing technology to build operating leverage and improve productivity of the workforce Big Data Enhanced Analytics Customer Insights Engine Platform for AI Credit Surveillance
Slide 9: Merger Closing & Integration
Closed USAmeriBank acquisition on January 1, 2018 Systems consolidation expected to occur in the first half of 2Q 2018 Long track record of successful conversions USAmeriBank timeline consistent with recent acquisitions Year Institution Name* Assets* ($mil) Days to Conversion 2018 USAmeriBan
Slide 10: The New Valley: Balanced Approach to Integration
The New Valley: Balanced Approach to Integration A practical approach to platform consolidation Historically, Valley has integrated acquired platforms onto our own Valley believes it will be able to offer all clients the best in treasury management solutions There are multiple benefits to Va
Slide 11: The Road to Retail Relevance
The Road to Retail Relevance Silent Gen Z Boomers Gen X Millennials 44% 31% 12.5% 11% 1.5% …and should inherit an estimated $30 trillion from Boomers over the next 30 years. Millennials are expected to be the largest generation in the workforce by 2022… 67% of Millennials want digital budgeting tool
Slide 12: Preference for mobile applies across age groups
Preference for mobile applies across age groups Source: Bain/Research Now NPS surveys Mobile Channel experience score relative to leading channel, indexed to zero 18-24 25-34 35-44 45-54 55-64 65+ Leading Score Lowest Score Trend in Technology Usage • 88% use the internet • 77% own a smartphone • 69
Slide 13: Transforming Delivery Methods
79% Transforming Delivery Methods Branches ATMs/ITMs Physical Signage Physical Mail Mobile Online Social Digital Ads Email Telephone Customers Want Advice-Driven Banking 54% 52% Consider their bank transactional Interested in locating discounts Want proactive recommendations Phys
Slide 14: A Mix of Digital & Physical Delivery is the most Effective
0 10 20 30 40 Branch-Only Digital-Only Low Medium High US Based Banks Net Promoter Score (%) A Mix of Digital & Physical Delivery is the most Effective Number of Total Interactions Omni-Users Deliver Higher NPS and Likelihood to Purchase Source: Bain/Research Now NPS surveys 8% 10% 22% 30% 31% % of
Slide 15: Improving Experience Levels Across All Age Groups
Improving Experience Levels Across All Age Groups 7.5 8.1 7.8 8.3 8.6 8.8 0 1 2 3 4 5 6 7 8 9 10 18-24 25-34 35-44 45-54 55-64 65-74 Banking at a Valley Branch 7 7.8 7.6 7.8 8.2 8.4 0 1 2 3 4 5 6 7 8 9 10 18-24 25-34 35-44 45-54 55-64 65-74 Understanding Valley’s Products & Services Avg: 8.5 Avg: 8.
Slide 16: Tailoring our Delivery Channels
Tailoring our Delivery Channels Industry Channel Interactions Valley Transactions by Channel Online Mobile Branch ATM Source: Accenture Industry research suggests Valley has meaningful opportunity to migrate customers to use alternative, lower-cost channels This presents an opportunity to ration
Slide 17: Targeting Higher Adoption Rates
Targeting Higher Adoption Rates 10.2% 10.5% 10.7% 10.9% 10.6% 11.0% 12.5% 12.9% 13.0% 13.2% 13.3% 13.5% 0.0% 4.0% 8.0% 12.0% 16.0% 20.0% July August September October November December Mobile Active Users - 2016 Mobile Active Users - 2017 VNB Mobile Users (% of Consumer Households) 31.1% 31.0% 31.2%
Slide 18: Leveraging Greater Technology to Address our Customers Needs
Improve Technology Improve Processes Leveraging Greater Technology to Address our Customers Needs In a 2017 Valley customer survey, the two largest areas of improvement cited were customer facing technology and process (speed and ease of use) Purposeful suite of products with differentiating featu
Slide 19: Rationalizing Our Branch Network
Rationalizing Our Branch Network Matured Solid & consistent Return profile but market opportunities appear limited for growth Moderate investment for renovation with the option of downsizing Higher Growth Growing profitability and placed in attractive demography; have yet to realize full potential O
Slide 20: Our Retention Experience Has Been Favorable
Our Retention Experience Has Been Favorable 100% 97.58% 96.38% 94.49% 92.29% 90.42% 88.90% 88.13% 100% 97% 94% 88% 86% 75% 80% 85% 90% 95% 100% 105% 110% -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 Retention Curves VLY retention rates following branch closure Benchmark retention rates Key Highlights from Stu
Slide 21: Case Study: The Burning Branch
Case Study: The Burning Branch 186 186 186 186 180 184 184 182 187 188 186 190 185 189 174 176 178 180 182 184 186 188 190 192 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Period-End Deposits M ill io ns Fair Lawn Branches Deposit Balances Fair Lawn Branch 1 Fair Lawn Branch 2 Lincoln Fire 2.1 m
Slide 22: Rethinking Locations: Micro-Market Strategy
177 Branches in NY/NJ Approximately 50 Micro-Markets Rethinking Locations: Micro-Market Strategy Example Full Service Branches Service Center Branches Branch Closures/Relocations Sales, Service & Transaction Focused Smaller Footprint (50-75%) Concierge Station Self-Serve Transaction ( 24 HR ATM/
Slide 23: Revitalizing Our Branches: New Concept(s)
23 Revitalizing Our Branches: New Concept(s)
Slide 24: Tom Iadanza and Joe Chillura
Tom Iadanza, SEVP & Chief Lending Officer Mr. Iadanza joined Valley National Bank in 2012 through the acquisition of State Bank of Long Island and brings over 35 years of experience to his position. As Senior Executive Vice President and Chief Lending Officer, Mr. Iadanza is responsible for Commerci
Slide 25: Current Operating Environment
Greater New York City1 9.7 Million Employed Current Operating Environment 5.6% 10.7% 10.8% 13.4% United States Florida New Jersey New York Annual Loan Growth (2012-2017)2 9,006 19,849 20,984 MA AZ WA VA NJ MI NC GA OH IL PA NY FL TX CA Resident Population (in thousands)3 203,317 460,895 473,846 AZ M
Slide 26: Commercial Bank: Northeast
Commercial Bank: Northeast 10.0% 10.0% 11.2% 11.7% 12.2% 15.5% 29.5% Management of Companies Construction Manufacturing Finance & Insurance Transportation & Warehousing Wholesale Trade Health Care & Social Assistance Commercial Real Estate Focus remains on dense, populated regions MF properties
Slide 27: Commercial Bank: Southeast
Commercial Bank: Southeast 5.6% 5.7% 6.8% 8.1% 8.8% 13.9% 23.8% Finance & Insurance Tranportation & Warehousing Construction Retail Trade Accommodation & Food Professional, Scientific & Technical Health Care & Social Assistance C&I Lending Strength: Top Industry Exposures1 C&I Portfolio December 31,
Slide 28: Case Study: Tampa Bay, Florida
Case Study: Tampa Bay, Florida Tampa Bay is the second largest MSA in Florida and 18th largest in the U.S. by population $61 billion of deposits Expected population growth of 6.5% by 2022 3.8% unemployment rate compares favorably to Florida (4.0%) and national (4.1%) levels Home to over 11
Slide 29: Broad Product Capabilities
Broad Product Capabilities Product ecosystem tailored to support our target customer segments Key Benefits: Attract targeted customer segments Deepen relationship with tailored products Enhance overall customer experience Ultimately improves retention Middle Market Commercial Customer Small
Slide 30: Evolve Consumer Business from Indirect to Direct-to-Consumer Model
21% <1% 77% 2% Consumer & Other Lending Evolve Consumer Business from Indirect to Direct-to-Consumer Model $1.1 $1.5 $1.6 $1.7 $1.9 2013 2014 2015 2016 2017 Total Consumer Loans (in billions) 13.6% CAGR Opportunity to extend consumer brand to Florida franchise Facilitate Development: Internally
Slide 31: Customer Onboarding
Customer Onboarding Enhancing end-to-end processing, speed of delivery and overall customer experience Key benefits from technology adoption Achieve greater operating leverage Reduce response times Enhance and promote transparency Improve customer experience ~45+ days Current Time to Close T
Slide 32: Housing Market
1Existing home sales via the National Association of Realtors, seasonally adjusted annual rate. 2Bulding permits via U.S. Census Bureau, seasonally adjusted. 3Labor force participation rate for those 25 to 54 years of age via U.S. Census Bureau, seasonally adjusted. 4Homeownership rates for the most
Slide 33: Building a Comparable Residential Mortgage Business
Building a Comparable Residential Mortgage Business 0.7% 3.1% 2.7% 4.7% 4.8% 4.8% 2015 2016 2017 VLY Peers Gain-on-sale of Loans to Operating Revenue (%) Peers – average ratio of $10-$50 billion in asset banks and thrifts according to SNL (S&P Global Market Intelligence.) We are building our gain-
Slide 34: Residential Mortgage Business
Residential Mortgage Business Agency & conforming mortgages poised to grow in Florida $351.2 $337.2 $324.1 Product Key Highlight FHA/VA Greater GOS Margin; Less hedging risk; Strong secondary market liquidity Jumbo Niche market provides opportunity for growth; Secondary market liquidity more limited
Slide 35: Implementing more Efficient Solutions
CRM Point of Sale Processing Underwriting Closing and Funding Post-Closing & Shipping Implementing more Efficient Solutions 35 Encompass is an all-in-one mortgage management solution that offers a digital mortgage experience covering the entire loan lifecycle so lenders can originate more loans, low
Slide 36: Ira Robbins and Alan Eskow
Ira Robbins, President & CEO Mr. Robbins joined Valley in 1996 as part of the Bank's Management Associate Program and held several key positions throughout the Bank over the past two decades. In 2009, he was awarded the title of First Senior Vice President and Treasurer. His ability to lead teams th
Slide 37: The New Valley
The New Valley Human Capital • Recent CEO succession • 7 out of our 13 Executives are new to Valley within the past 2 years • One VLY, One Culture Technology • The Valley Roadmap is a 3 year (2017-2019) infrastructure plan aimed at improving the Bank’s process across all segments • We expect gre
Slide 38: The New Valley: Cycle to Success
The New Valley: Cycle to Success 2020 Goals > 1.25% ROAA < 55% Eff. Ratio Updating Technology & Process Using Capital More Efficiently Enhancing Focus on Organic Growth Increasing Profitability Creating Greater Shareholder Returns Transform our digital brand through mobile, social media, and multi
Slide 39: Strength in Diversification Leads to Stability & Growth
Strength in Diversification Leads to Stability & Growth *Metro NY Peer Median is defined by the following companies; NYCB, SBNY, BKU, ISBC, STL, PFS, DCOM, FFIC, LBAI, PGC, ORIT, NFBK, FLIC. The median is based on MRQ available information. 1 Includes the proforma impact of USAmeriBank as of Decembe
Slide 40: 2017 Highlights
2017 Highlights 1Refer to the appendix regarding the reconciliation of certain non-GAAP financial measures. Reported Reported Adjusted1 Adjusted1 4Q17 3Q17 2017 2016 4Q17 3Q17 2017 2016 Return on Average Assets 0.44% 0.67% 0.69% 0.76% 0.84% 0.79% 0.82% 0.76% Efficiency Ratio 68.3% 69.4% 66.0% 66.0%
Slide 41: Deposit & Balance Sheet Funding
$8.8 $9.4 $5.1 $5.2 $3.4 $3.6 3Q 2017 4Q 2017 0.2% 2.1% 14.3% 0% 5% 10% 15% 20% 25% 30% 35% 40% 2017Florida New York New Jersey $734mm Reduction in short-term borrowings to $749mm Deposit & Balance Sheet Funding Solid Deposit Growth1 ($ in billions) Deposit Beta by Region for Current Cycle (3Q15 – 4
Slide 42: Loans & Loan Growth
$1.0 $1.1 $1.0 $1.3 3.75% 3.85% 3.79% 4.00% Q1 2017 Q2 2017 Q3 2017 Q4 2017 Origination Volume Yield on New Originations Loans & Loan Growth Yield & Volume of Loan Originations ($ in billions) Diversified Loan Portfolio by Product & Region1 2017 loan growth up 6.4%, including sale of residential m
Slide 43: Credit Quality
Taxi Medallion 9/30/17 12/31/17 Related Reserves as a % of Total Exposure 5.5% 7.7% Total Exposure $139 million $137 million 0.75 % $18.3 billion Total Loans Credit Quality Net Charge-offs and Non-accrual Loans Reflect Conservative Underwriting Standards Outstanding balance as of December 31, 2017 0
Slide 44: Net Interest Margin Stability in 2017
Net interest margin1 (ex-swap fee income) has been stabilizing Favorable balance sheet trends combined with promising new loan yield bode well for net interest income growth Anticipate 6 basis points of positive impact to NIM from USAmeriBank in 1Q18 Net Interest Income $164.7 $171.1 $166.9 $1
Slide 45: Noninterest Income Trends
Transforming Residential Mortgage gain-on sale business from refinance driven to home purchase focused More predictable origination volume to help drive gain-on-sale business towards peer levels We believe we are on track to achieve > $1.5 billion in residential originations in 2018 Noninteres
Slide 46: Expense Management
$476.1 $485.0 $400 $500 $600 2016 2017 "Base" 2018E 2019E Resi. Mortgage Commissions USAB Noninterest Expense Tax Act Impact USAB Merger Expense LIFT Related Expense "Base" Noninterest Expense Expense Management 66.0% 66.0% 61.2% 58.9% 2016 Reported 2017 Reported 2016 Adj. 2017 Adj. 2018E 2019E Long
Slide 47: Tax Act Implications & Capital
$1,595 $1,590 $733 $733 $210 $210 3Q17 4Q17 Common Equity Tier 1 Capital Ratio of 9.2% at December 31, 2017 (flat with previous quarter) Estimated go-forward effective tax rate in range of 21%- 23% Expect to earn-back our capital charge (total $23 million) related to Tax Reform within 2 quarte
Slide 48: Non-GAAP Disclosure Reconciliations
Non-GAAP Disclosure Reconciliations 48 December 31, September 30, December 31, December 31, December 31, ($ in thousands, except for share data) 2017 2017 2016 2017 2016 Adjusted net income available to common shareholders: Net income, as reported $26,098 $39,649 $50,090 $161,907 $168,146 Add: LIFT
Slide 49: Non-GAAP Disclosure Reconciliations
Non-GAAP Disclosure Reconciliations 49 December 31, September 30, December 31, December 31, December 31, ($ in thousands) 2017 2017 2016 2017 2016 Adjusted efficiency ratio: Non-interest expense $136,317 $132,565 $124,829 $509,073 $476,125 Less: LIFT program expenses (pre-tax) — 9,875 — 9,875 — Less
Slide 50: Appendix – Balance Sheet
Appendix – Balance Sheet 50 2017 2016 Assets Cash and due from banks 243,310$ 220,791$ Interest bearing deposits with banks 172,800 171,710 Investment securities: Held to maturity (fair value of $1,837,620 at December 31, 2017 and $1,924,597 at December 31, 2016) 1,842,691 1,925,572 Available for sa
Slide 51: Appendix – Income Statement
Appendix – Income Statement 2017 2016 2015 Interest Income Interest and fees on loans 742,739$ 685,911$ 633,199$ Interest and dividends on investment securities: Taxable 72,676 58,143 52,050 Tax-exempt 15,399 15,537 14,568 Dividends 9,812 6,206 6,557 Interest on federal funds sold and other short-te
Slide 52: Appendix – Asset Quality
Appendix – Asset Quality (1)Past due loans and non-accrual loans exclude purchased credit-impaired (PCI) loans. PCI loans are accounted for on a pooled basis under U.S. GAPP and are not subject to delinquency classifications in the same manner as loans originated by Valley. (2)Represent PCI loans me
Slide 53: For More Information
For More Information Log onto our web site: www.valleynationalbank.com E-mail requests to: rkraemer@valleynationalbank.com Call Rick Kraemer, Investor Relations Officer, at: (973) 686-4817 Write to: Valley National Bank 1455 Valley Road Wayne, New Jersey 07470 Attn: Rick Kraemer, Investor Rela
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