VALLEY NATIONAL BANCORP Q4 FY2024 earnings call

• Valley strengthened balance sheet in 2024, outperformed year-end targets set in April. - Focused on deposit growth via specialty verticals, commercial customer base, and branch growth. - On loans, expected run-off of transactional CRE offset by origination in C&I, owner occupied, and consumer; aim to reduce CRE concentration ratio in 2025. - Fee income progress: Treasury Solutions enhanced, deposit service revenue up 27% in H2 2024, FX fees up over 50% in H2 2024. - 2025 guidance: Net interest income momentum, fee income progress, expense control, and lower credit cost anticipated. - Tangible book value doubled in 7 years, focus on customer acquisition in commercial and consumer areas.

Deposits: Direct customer deposits grew $1.7 billion during the quarter, enabling a $2 billion reduction in higher-cost indirect deposits. Non-interest deposit balances increased to 23% of total deposits (up from 22% prior quarter), and over 25,000 new deposit accounts were opened. Loans: Managed runoff of transactional multifamily and investor CRE, with CRE concentration ratio improving to 362% from 421% prior quarter. C&I and owner-occupied CRE loans increased 17% in 2024, indirect auto loans up 17%, and loan portfolio yield impacted by fixed-rate component (40% of portfolio).

• 2025 net interest income guidance 9%-12%, with expectation to migrate towards upper end if interest rates remain elevated. - Anticipate net interest income growth, fee income progress, and expense control to underpin pre-provision profitability normalization. - Expect net charge-offs and provisions to decline significantly in 2025. - Tangible book value and capital ratios improved, with financial flexibility to execute strategic initiatives.

• Interest rate movements could impact net interest income outlook. - Volatility in loan charge-offs and provisions due to economic or market conditions. - External factors like wildfires in California, though minimal direct loan exposure to impacted areas.

Q: Update on what impact the shape of the yield curve is having on NII outlook?

A: Travis Lan stated the shape of the curve was more beneficial for NII outlook, stronger funding position at year-end, and better deposit cost reduction helped set up a better NII outlook for 2025.

Q: Can you talk about the cadence of the reserve build expected this year?

A: Mark Saeger anticipated a little more growth at the beginning of the year and tapering off through the end.

Q: Given actions to strengthen the balance sheet in 2024, how are you thinking about medium-term ROE potential?

A: Ira Robbins said long-term ROE should be north of 15% with a pathway towards achieving that.

Q: Update on deposit growth and retail branch banking?

A: Travis Lan discussed broad-based deposit growth across franchise, and Ira Robbins mentioned focus on New Jersey market and reinvestment in retail branches for growth.