A spike in costs weighed on quarterly results at Valley National Bancorp, as the Wayne, N.J., company embarked on a two-year effort to become more efficient.

The $23.8 billion-asset company said in a press release Wednesday that its third-quarter profit fell 7% from a year earlier to $39.6 million. Earnings per share of 14 cents were 4 cents lower than the mean estimate of analysts compiled by FactSet Research Systems.

Noninterest expenses jumped 17% to $132.6 million, because of severance costs tied to an ongoing efficiency plan, along with expenses tied to Valley’s pending purchase of USAmeriBancorp. The efficiency ratio was 69.43%.

Valley National, led by CEO Gerald Lipkin, reported lower quarterly profit that reflected efforts to improve long-term efficiency.

Valley in July began implementing a program designed to boost annual earnings by roughly $22 million over the next two years through a mix of layoffs and new revenue. The effort was announced in December.

Net interest income rose 7% to $164.9 million. Total loans increased by 8% because of higher residential real estate and commercial lending balances. The net interest margin compressed by 5 basis points to 3.05%.

The loan-loss provision fell by 72% to $1.6 million.

Noninterest income increased by 5% to $26.1 million, reflecting higher gains from the sale of residential mortgages.

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Kristin Broughton

Kristin Broughton

Kristin Broughton is a reporter for American Banker, where she writes about the business of national and regional banking.