An plunge in income tax expenses and organic loan growth helped propel Valley National Bancorp (VLY) in Wayne, N.J., to a solid first quarter.
The $16.3 billion-asset company's profit rose 8% from a year earlier, to $33.8 million. Earnings per share of 17 cents were 3 cents higher than the average estimate of analysts polled by Bloomberg.
Valley National slashed its income tax expense to just $830,000 because of an $8.3 million reduction in its reserve for unrecognized tax benefits following a recent income tax examination. By comparison, Valley National paid $12.8 million in income taxes a year earlier.
The company's net interest income rose 4%, to $114 million. Valley National reported organic growth in its commercial real estate, automobile and commercial-and-industrial loan portfolios. The company's net interest margin expanded by 2 basis points, to 3.20%.
These events helped offset a dramatic decline in noninterest income, which fell 38%, to $19.5 million. Valley National's reported just $913,000 in gains from selling residential mortgage loans, compared to $15.1 million a year earlier. The company said that it expects income from the sale of residential mortgage loans to remain around the same low level in the second quarter.
Noninterest expense fell slightly, to $94.9 million, because of lower advertising and compensation costs. Those improvements were offset by unusually high snow removal expenses.
Valley National's loan-loss provision rose 3%, to $4 million. Net loan chargeoffs climbed 21%, to $11.8 million. The company sold $8.3 million in nonperforming loans at the end of the quarter "based on the favorable economics of a pooled analysis, including the reduction in future collections and other operating costs," Gerald Lipkin, the company's chairman, president and chief executive, said in a press release Thursday.
"We believe the current and long-term benefit of the sale outweighs the short-term bump to our credit losses, and will allow us to focus more on our strong customer relationships and the other quality loan demand in the marketplace," Lipkin added.