Dianne Grenz - Investor Relations Gerald Lipkin - Chairman, President and Chief Executive Officer Alan Eskow - Senior Vice President and Chief Financial Officer Rudy Schupp - CEO, 1st United Bancorp.

Steven Alexopoulos - JP Morgan Frank Schiraldi - Sandler O'Neill David Darst - Guggenheim Security Collyn Gilbert - KBW.

Ladies and gentlemen thank you for standing by and welcome to the Valley National Bancorp First Quarter Earnings Conference. At this time, phone lines are in a listen-only mode. Later on we will have an opportunity for question-and-answer session. [Operator Instructions] And as a reminder today’s conference is being recorded.

At this time, I’d like to turn the conference over to Dianne Grenz. Please go ahead..

Thank you, Nick. Good morning. Welcome to Valley’s first quarter 2015 earnings conference call. If you have not read the first quarter 2015 earnings release that we issued earlier this morning, you may access it from our Web site at valleynationalbank.com.

Comments made during this call may contain forward-looking statements relating to Valley National Bancorp and the banking industry. Valley encourages participants to refer to our SEC filings including those found in forms 8-K, 10-Q and 10-K for complete discussion of forward-looking statements.

And now, I’d like to turn the call over to Valley’s Chairman, President and CEO, Gerald Lipkin..

Thank you, Dianne. Good morning and welcome to our first quarter earnings conference call. For the quarter, Valley reported net income of $30.3 million or $0.13 per diluted common share reflecting an increase of $5.2 million in net income from the prior quarter.

And what is historically one of Valley’s most challenging quarters largely due to seasonality within the loan portfolio and increased linked quarter core non-interest expenses, we were pleased with the reported results and believe the bank is on solid footing for increased net income as the full year materialize.

Loan growth for the quarter was a bright spot throughout all categories and geographies. The total non-covered loan portfolio grew nearly $300 million during the quarter reflecting an annualized linked quarter growth rate of 8.7%.

Total commercial lending gross originations including both C&I and commercial real-estate exceeded $400 million for the quarter as the non-covered loan portfolio grew over 9% annualized on a sequential quarter basis.

Specifically the growth within this portfolio was largely weighted towards C&I as increased origination volume was deployed by expanded line usage. Similar to last quarter the growth in C&I activity was consistent across all of Valley’s geographies as each of the pipelines in New Jersey, New York and Florida continued to expand.

Commercial real-estate volume was subdued in comparison to C&I nevertheless, this portfolio expanded over 4% from the prior quarter. Competition within this asset class remains fierce.

From our perspective there continues to be an excessive amount of money chasing a limited supply of qualified borrowers and majority of activity within this base continues to be skewed towards refinances which we believe to be the result of the low interest rate environment rather than economic expansion.

We continue to believe that maintaining Valley’s diverse balance sheet comprised of both consumer and commercial loans remains the prudent approach for the long term success of Valley. Similar to my comments regarding commercial loan activity Valley’s consumer lending portfolio near that of the commercial portfolio.

For the quarter, Valley originated over $100 million of consumer loans largely automobile activity was less than that of the fourth quarter, but typical of the first quarter of last year. Volume was largely influence by weather conditions as oppose to consumer demand.

As we expand our Florida footprint, we believe some of the seasonality within Valley’s automobile portfolio should anticipate as the winter months are traditionally stronger volume periods in Florida. With the growth of automobile loan business in Florida as a goal, we build a staff focused on this challenge.

As a result, we have taken on nearly 50 new automobile dealerships in Florida and expect activity to continue to grow in the second quarter. Residential mortgage volume risk for the quarter as organic closings exceeded a $120 million nearly double the activity from the same period one year ago.

Origination volume continues to be heavily few towards refinance activity. However, we are guardedly optimistic of increased purchase activity in the coming month based on increase and increase in household information coupled with the commencement of the spring buying season in the Northeast.

Origination volume in Florida continues to expand as we have began to aggressively promote our $499 residential mortgage refinance program. In early April, the advertising campaign reach the Miami market and included our first filing will television promotion.

With the quarter Florida residential mortgage applications exceeded $27 million or nearly 10% of the entire banks application volume. We anticipate continued growth both within Florida and the New Jersey, New York residential mortgage portfolios. During the quarter, we sold approximately $31 million of residential mortgage volume we originated.

While simultaneously purchasing approximately 43 million of third-party originated floating rate mortgages.

As residential mortgage volume continues to expand our decision to portfolio or sell the loans will be largely dependent on the bank desire asset liability mix duration rate in terms of the loans originated or the collective size of the portfolio and relations to other loan category.

As stated earlier, maintaining a well diversified balance sheet, this critical to the long-term success of the bank in varying interest rate environments and economic cycles. Another highlights for the quarter was the successful operations and systems integration of first united onto our internal data platform.

Since February 23rd every former 1st United customer has been able to seamlessly access their accounts at any Valley range. Well, all of our Northeast customers are similarly able to transact banking business at any Valley 20 Florida location.

The integration was an important milestone in both accelerating the growth of the Florida franchise as well as recognizing a large portion of the cost saves we projected in connection with the acquisition. While we hesitate to provide forward guidance as the future earnings, we are enthusiastic as we enter the second quarter.

We anticipate continue contraction in our non-interest expense as the cost saves from expected with the First United begin to materialize.

In addition, the exploration of the commercial portion of our loss share agreement with the FDIC attributable to the sale bank supplied in 2010 should result in a significant reduction in the loss share in densification asset amortization expense.

We expect the combined sequential quarterly savings of just these two variables to exceed $7 million pre-tax per quarter. Further in both our New Jersey and New York footprints we are beginning to clearly witness increased signs of growth across all of our lending categories.

Our Florida franchise while presently smaller in scale compared to New Jersey or New York continues to generate annualized loan growth in excess of 10% and I might add an average interest rate of 50-75 basis points higher than we're getting in the New Jersey and New York markets.

Since we merged, the frontline commercial lending staff in Florida has increased by 25% and we have added eight consumer lending officers as partial lending synergies continue to materialize and our consumer lending advertising campaigns are implemented throughout the Florida footprints we expect to see continued growth prospect.

Obviously, our outlook for Florida remains very positive and we're focused on supporting growth in that footprint through to the aforementioned marketing and increased lending staff as well as other acquisitions or De Novo opportunities. Alan Eskow will now provide some more insight into the financial results. .

Thank you, Jerry. Valley's first quarter 2015 financial results reflect a full quarter of 1st United, compared to the prior length quarter which included only two months. As a result certain sequential quarter metrics may be skewed from a comparison perspective.

As Jerry indicated in his prepared remarks non-covered loan growth was a highlight of Valley during the quarter increased by 8.7% annualized. On average, a linked quarter increase result of 4%, 16% annualized of which approximately $350 million was attributable to the extra months of 1st United own balance.

Our expectation is that organic loan growth during the quarter will have a greater benefit to interest income in the second quarter. We anticipate continued strong loan growth into the second quarter. Valley's first quarter net interest income increased nearly $3.5 million from the fourth quarter in spite of a reduction of 2 calendar dates.

The growth in net interest income was largely the result of an extra month of 1st United's balance sheet coupled with a reduction in interest expense on long-term borrows.

The linked quarter decline in interest expense was mainly the product of the prepayment of $275 million in higher cost, long term borrowings, which occurred late in the prior quarter.

As we move forward and contemplate our funding strategies both in composition and the duration we intend to continuously reassess our opportunities in managing the long-term borrowing portfolio.

Our decision to possibly prepay a portion of the remaining debt will be conditioned on a multitude of variables including the time frame for stated maturity where there is negative impact to equity there is a linear with the prepayment.

The net interest margin for the quarter was 3.12% in line with both the prior quarter and the same period one year ago. We anticipate continued margin in pressure as we originate loans that deals with lower than the blended average rate of 4.44% for the first quarter.

Our focus continues to be on expanding net interest income in a manner that doesn’t adversely impact the banks duration the ration and asset liability mix.

During the quarter, we originated over $600 million of new loans of which approximately 20% of are floating and will re-price with the movement of interest rate and just over 40% will cash flow was within the first 24 months.

Our interests on maintaining a well-diversified balance sheet with a value on recurring consistent cash flow, is not only prudent from an interest rate risk profile but further provides the bank with consistent alternatives during various economic cycles.

We anticipate continued expansion in net interest income in spite of the likely margin compression due to market interest rate. The growth will be a function of expanded loan volume, the reallocation of cash flows from the investment portfolio if the loan growth and the reduction in cash liquidity.

Non- interest income in the quarter was $18.6 million, a contraction of 10.9 million from the prior quarter. The reduction is mostly the result of the decrease in the gain on sales of assets partly mitigated by a lower reduction in the FDIC loss share receivable and an increase gains on securities transactions.

The gains recorded on security sales was the result of restricting a portion of the investment portfolio to account for changes and risk rating and regulatory capital requirements of certain securities.

Further we anticipate the change in the FDIC loss share receivable to continue to contract into the second quarter as certain commercial loss share agreements with the FDIC terminated with March 2015 for select pools of loans.

Noninterest expense declined to a 108.1 million in the first quarter and 121.3 million, mainly attributable for the [indiscernible] in the fourth quarter on the extinguishment of debt as well as lower amortization expense of tax credits. Mitigating some of the decline was in the additional month of expenses captured with the first united merger.

With the successful systems integration having occurred the end of February we expect second quarter noninterest expense to reflect many of the cost saves originally identified. Further, the first quarter expense figure includes incremental seasonal expenses associated with snow plowing and payroll taxes equal to approximately $3 million.

In the aggregate, we anticipate continued contraction in the noninterest expense pace. Credit quality for the quarter was solid as nonperforming assets continue to decline reaching 73.2 million were 0.39% of total assets as of March 31.

Further, during the quarter the bank recognized 1.67 million of gross charge offs on loans which was more than offset by 1.94 million in gross recoveries. Over the trailing 12 months, Valley’s annualized non-covered net charge off ratio was on average less than 0.01% total non-covered loans as total net loss is equal to only $1.6 million.

The first quarter of 215 net recoveries continued the positive trend in loan loss experience seen in 2014 were annual net loan charge offs with the lowest level reported since 2007. As a result of this loss history and taking into account our loan growth as well as a merit of other factors a provision for losses was zero for the quarter.

We have four mentioned variables were principally influenced the future quarterly provision expense. This concludes my prepared remarks. And we will now open the conference call for questions. .

Operator:.

. :.

I just thought, can you talk about any plans to purchase additional multifamily loans in the second quarter, and maybe talk about the yields that you’re adding these into portfolio. .

We’re going to continue to look at the whole opportunities to get involved in acquiring loans, originating loans. Again, I indicated that we’re going to reallocate some of our cash flow coming out of our investment portfolio we look at duration and as you know duration on some of the investments can be quite substantial.

So, we’re looking at shorter duration assets and higher yield than working get on the investment portfolio. So, that being said we’re going to look at all opportunities to take advantage of loans in the market. .

Alan, could you give us a sense of the yield by these [indiscernible] quarter the multifamily loans. .

Yes. Probably that could be in 340 range. But they had shorter duration. So again I think that’s part of what I was trying to tell you guys that duration is a very key item for us. They’re under four years or four years, approximately. .

Okay. And Alan, relative to the 4.44 or four year loan yield we talked about, where is that new money loan yield in terms of new originations.

Where they’re coming into the portfolio at this stage?.

It’s coming in about 3.5% remember there is a big mix because of the auto loans that come on at such a very low rate which we’ve been talking about for a while, so that aims to drive down the average yield that’s coming in on the entire portfolio during the quarter.

It have a much shorter, as I indicated, duration and the cash flows on those are very substantial so they tend to flow through the system very quickly..

And then maybe a question for Gerry on M&A, would this deal now closed are you now officially looking for additional deals? Can you talk about how the opportunities in Florida compared to maybe Metro New York area?.

I’m restricted obviously. I can’t talk about anything specific, but we’re always looking. We are -- Rudy has been -- Rudy Schupp who is President of our Florida Operations has been very active in trying to meet with a number of individuals, banks in the Florida market trying to see if and even more interested in joining with Valley.

So we have been active in the marketplace..

We’ll now go to the line of Frank Schiraldi with Sandler O'Neill. Please go ahead..

Just on the -- first question on the nature of the C&I growth, can you just talk about at least portion of that being driven by some larger size credits and I think that was in New York area.

Could you just talk maybe a little about what’s driving that demand specifically?.

This is Gerry Lip. Part of that is coming from increased line usage. Line usage flows starting in the November, December period particularly in New York, and though that usually starts to come back again in the end of January, that’s a historical cyclical item with us.

So we have seen some of that coming back as well as some new credits entering and of course were being supported as well by the growth in Florida..

I just wonder when you talk about the new demand and then I guess new customers and you talk about maybe some of the larger size credits in terms of size maybe what were some of the larger size relationships put on the books in 1Q?.

There were a couple of larger credits, a few. I mean it was a mixed bag of credit, the [OEC][ph], but there were a couple of larger credits that was 10 million..

And then just on the Florida pipeline that you quantify actually in the release, how does that compare to the sequential quarter?.

Well Frank it’s Rudy Schupp, just a couple of things to say. The pipeline has been growing steadily just to reach back a little bit.

So at merger time -- at signing time last year for us, we were running at an $80 million - $90 million pipeline through which just directs itself now today to 180 million to 200 million depending on the day about a 120 million of which for example would be approved pending closing over a period of say up to 60 days.

So that’s [indiscernible] that we tend to see are in the 50 plus percent [indiscernible] for CRE, although this last quarter, it’s much as a third of it and was categorized in C&I comprised largely of revolvers if you will, to all form of professional practices and businesses.

Also we have as part of property management industry when we make loans to their clients, they tend to be booked -- they are booked in C&I..

Just one last to point too, we do a reasonably fair amount of medical practice lending as well and that would also flow in this C&I category..

And that would be in Florida or New York or both?.

Both..

And then just finally on, Alan, you mentioned 3.5% I think yield in terms of new origination in terms of the mix.

So is that in terms of what we saw in 1Q and then as auto picks up, we’d expect that’s coming further, is that sort of the number?.

No, I don’t think so, I think that’s probably the right number for the moment I don’t expect to decline below that..

We’ll go now to the line of David Darst with Guggenheim Security..

So just on your comment, with the two considerations are improved, earnings of 7 million.

So I guess that implies that there is a 3 million of cost saves that come out from the acquisition in the second quarter?.

Approximately, right..

And then the remaining FDIC indemnification aspect that’s 7 million, that’s consumer now, that would be with you for a while, right?.

Yes. That’s correct..

And then just as you look at your service charge income understand the seasonal decline. But what’s the context the service charges being down year-over-year.

And then just you can have any kind of industry level thoughts on consumer and your ability to grow the positive charges?.

A lot of that is customer behavior. People use to overdraw their account, get charged, and then all of a sudden everybody walkup to that, they stops overdrawing their accounts. Then it goes down. If that doesn’t comeback people realize it is going to cost the money.

The advent of service charges on checking accounts has been decreasing industry-wide for some time now. I don’t see that turning around as much as we all would like to see it turnaround. It's just not going to happen..

Do you think you’re reaching a stable level, or is there a further decline?.

It’s hard to predict at this point..

And then one more question. You said on the $97 million anticipation.

You just said your yield was 3.4%?.

Yes that 3.4..

Okay, what's the interest?.

Short duration loan still, they are with an interest reset, at relatively short interval..

Are they typically the five year or the five year reset?.

Yes, they were seasoned already, David..

Understand they’re seasoned, okay, because another bank for just a similar size participation, I think it’s a little bit new issue that was 3% only?.

These look better..

Okay. Thank you..

[Operator Instructions] And we’ll go the line of Collyn Gilbert with KBW..

Just Alan, in your comment you’d mentioned of the 600 million of loans that originated this quarter, you said 20% was floating.

What was the profile of the other 80%?.

Remember we have auto loans that came in represented, that’s the 40%. So the rest of them are fixed of various types that came on. So there would be residential mortgage that came on, we'd have other commercial mortgages that came on, so we had a whole mix of loans..

Okay, I apologize. I thought that the 40% was within the 20% of floating. So it’s 60% essentially that was more or less floating. .

Yes..

Got it, okay. And then I’m just curious what you guys see or how are you managing sort of the CD portfolio.

It looks like, it grew this quarter, just what’s the rate that you’re seeing on there and how are you thinking about pricing of deposits right now?.

That’s pretty much market driven Collyn. We intend to go out and offer market rates. We maybe couple of points higher than the competition. We’re really looking to grow that portion of our portfolio. But we don’t go out crazy, and we’re not going to pay 2% over the market to bring in money..

I mean, there wasn’t really much growth in term deposits this quarter. It was pretty small, Collyn. And actually on average and maybe part of that was due to the fact that we combined. We first united, I mean the yield, if you look at the margin analysis actually came down from 122 to 116 during the course of the quarter..

Yes, I just was trying to think, how you’re thinking about that funding.

I mean funding in general which kind of tied into my next question is, how or what your view is right now on interest rates and how you're sort of managing the balance sheet in this current rate environment?.

I think the one is, is that as loan growth continues we're obviously going to have to continue to raise deposits. Some of those are going to come in as you see non-interest bearings move very nicely during the quarter. But we're going to have to also go out and look at money markets time and see what we do to raise those to fund the loan growth..

The big benefit that we have of course is we've told you in the past. It is the borrowings that are over the next 30 months and then it all comes in 30 months, they comes in different periods, are going to be able to be replaced at a considerably lower cost in our estimate. And that should help our net interest margin going forward..

Yes. Okay. And Alan, just as you go through your budget process.

What are you guys assuming for interest rates through this process this year and then in the next year as you’re thinking about these -- the way these borrowings are going to re-price?.

I think it's -- right now we're looking at the hedges met yesterday. I don’t think we're looking at any major moves during the course of this year. I think per said we will only move slowly whenever they do begin to move, even if it is 25 basis points, we're not going to see a lot of movement here.

I think they are going to test the waters at best and see what happens if they try to move it. And in the long end, it's been pretty flat and we don't see it really going any place for the moment. So we are still looking though to keep our duration short. So that we don’t get beat up if the rates do happen to go up. .

[Operator Instructions] Thank you. There are no further questions in queue at this time. .

Thank you for joining us on our first quarter conference call, and have a great day..

With that, that does conclude our conference for today. We thank you for your participation, and for using AT&T's Teleconference. You may now disconnect..