Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter 2009 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). Also as a reminder, this teleconference is being recorded. At this time, I’ll turn the conference call over to your host, Miss Dianne Grenz. Please go ahead.

Thank you, Tony. Good morning, I'd like to thank everyone for participating in Valley’s fourth quarter 2009 earnings conference call both by telephone and through the webcast. If you have not read the earnings release we issued early this morning, you may access it along with the financial tables and schedules from our website at valleynationalbank.com, and by clicking on the Shareholders Relation link. Also, before we start, I’d like to mention that comments made during this call may contain forward-looking statements relating to the banking industry and to Valley National Bancorp. Valley encourages participants to refer to our SEC filings including those found in Form 8-K, 10-K and 10-Q for a 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, Tony. Good morning, I'd like to thank everyone for participating in Valley’s fourth quarter 2009 earnings conference call both by telephone and through the webcast. If you have not read the earnings release we issued early this morning, you may access it along with the financial tables and schedules from our website at valleynationalbank.com, and by clicking on the Shareholders Relation link. Also, before we start, I’d like to mention that comments made during this call may contain forward-looking statements relating to the banking industry and to Valley National Bancorp. Valley encourages participants to refer to our SEC filings including those found in Form 8-K, 10-K and 10-Q for a 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 fourth quarter and year-end 2009 earnings conference call. 2009 marked the challenging year for all of us within the banking industry. The low interest rate environment coupled with a weak economic growth and high unemployment levels created an atmosphere where every banker was forced to be more cognizant of each and every strategic decision. At Valley our traditional Community banking approached focusing on sustained and recurring earnings, coupled with a consistent and conservative approach to underwriting credits, differentiates us from many of our competitors. Valley is a super-community bank with a [dual] ambition of providing outstanding returns to its shareholders while simultaneously facilitating the expansion and development of each community in which we operate. At Valley, it is our goal to provide appropriate lending facilities to creditworthy customers in our communities. Our long-term approach and focus on the economic well being of our customers is one of the reasons we did not originate negative amortizing residential mortgages. (Inaudible) rate mortgage loans or other alternative lending products. As always we have the consumer's long-term best interest in mind. Our customers are the white blood of the bank by establishing a banking environment in which each can prosper both the community and Valley win. During late 2008, and throughout the course of 2009, we took measures to ensure the long term viability of our organization. We entered into the government's capital purchase program as an insurance policy at a time when there was great uncertainty about the economy. During 2009 this insurance policy reduced net income available to common shareholders by $19.5 million and negatively impacted diluted earnings per share by $0.14. While entering it through TARP was an appropriate response at the time the cost was extremely expensive to Valley both from…

Thank you, Gerry. For the fourth quarter, Valley reported net income available to common shareholders were $28.6 million or $0.19 per share. During the quarter, Valley existed the government’s capital purchase program by redeeming our remaining $100 million of preferred stock. As a result of the repurchase, fourth quarter net income available for common shareholders was negatively impacted by an acceleration of the original discounts including dividends and accretion of the discount, the impact on the fourth quarter was $3.5 million. For the year totaled, total TARP expense exceeded $19 million and negatively impacted 2009 earnings per share by $0.14. On a sequential quarter basis, net income of $32.1 million excluding preferred dividends and accretion increased approximately $500,000 largely the result of increased gains on security transactions. The sale of investment securities and subsequent reinvestment of the proceeds in short term 100% government guarantees financial instruments reflects management’s desire to shorten the duration on the portfolio while simultaneously improving the credit quality and reducing the regulatory capital required for each asset. Long-term we view this strategy to be beneficial as many expect interest rates to rise and the regulators to impose new stricter capital requirements. However, this strategy coupled with Valley’s investment approach during the third and fourth quarters of 2009 negatively impacted the current period net interest margin as compared to the sequential quarter of 2009. The linked quarter decline in net interest income was nearly $3.5 million. Although Valley's cost of funds including non-interest bearing deposits declined to 1.84% from 1.96% in the prior quarter. However, the 25 basis points contractions in earning asset yield outweighed the decline in funding cost. Valley is an asset sensitive institution with tremendous cash flow due to scheduled amortization and maturities. During the fourth quarter, this cash flow in conjunction with the…

Thank you. (Operator Instructions). Your first question will come from Craig Siegenthaler in New York, your line is open.

Hi, yes. Good morning. This is actually Vaibhav Bajpai filling in for Craig. Just a couple of questions. First around the reserve decline, I just wanted some clarity. Does this imply that we've seen a peak in reserves for this cycle or is that it mostly because of the partial specific reserves in the $4.4 million charge-off?

Yeah, no, I don’t know that we've necessarily seen a peak in charge-offs at this point but I think that they seem to have been relatively stable. Actually if you look at the charge-offs in the current quarter compared to the prior quarter while they were higher, many of those once again were actually loans that we had provided for in the prior period.

And then second, just want to get a sense of what your outlook is on M&A. I know there was some commentary in the press release but are you seeing any assisted deals coming through the pipeline? And if not, do you have any interest in non-FDIC assisted deals? And how do you think about that when you're in the context of kind of de novo expansion? I know you commented that you are slowing it down in the next year.

As I said in my remarks, we have built our capital position to the point where we are poised to do M&A acquisitions. We'd be receptive to it. There I believe will be some opportunities coming up within the next 12 months, within our general footprint. But I have nobody specific at this time.

Next question (inaudible) comes from Matthew Clark in New York and your line is open.

Just a few questions, first on the margin and the 14 basis point drop here incrementally. Can you try to quantify how much of that came from interest income reversals? How much from de-risk in the portfolio, the securities portfolio? How much from access liquidity and maybe how much from the loan shrinkage. I know some of that’s going to be partly offset by low deposit cost but just trying to get a sense. I don’t know if you've gone through that exercise or not?

Well we have gone through some of it we had about $900,000 of reversal of both the loans interest ad some investment interest that accounted for about 3 basis point decline in the margin. 18 basis points were really the impact of dollars coming out of the loan portfolio, enter our investment at higher rates and going into lower rates so that was about 18 basis point and then positively, we saw about a 10 basis point pick up based on the decline in the cost of deposits.

And then can you talk through some of these headwinds going forward, some of these pressure that you’ve witnessed this quarter. I guess what’s left in an investment portfolio, I mean I know what's in there, but what's left in terms of your desire to de-risk that portfolio as it relates to private label MBS maybe or just some of the troughs and then just as a follow on to that, if you would continue with your expectation for what the balance sheet might look like in the next couple of quarters if we see a slow recovery, a desire to hold excess liquidity and I think we already got a comment of the CD side on the deposit cycle going into this quarter, but just trying to get a sense for how you think about this things going forward?

We had a lot of questions there, but we'll try to answer some of them. In terms of investment portfolio, we have some PMBS as we’ve indicated that before. We see them paying down quite a bit quarter-over-quarter, we see some very nice pay downs in those and we don’t see a lot of risk remaining. There may be some potential OTTI and those going forward but we continue to monitor every quarter. It's not going to decline other than based on the fact that we see pay downs. So there is some risk. We do continue to take some small amounts of OTTI. It has been declining but that’s not a guarantee for the future.

You might point out that we did see pay downs in the last calendar year of approximately $40 million on a portfolio that started the year at $185 - $186 million. So it is coming down rather rapidly. And I think it speaks to some degree as to the quality of the private label mortgages that we hold. They are in a position to take advantage of the refinance market. In terms of the regular trust preferred most of those are to the largest institutions around the country, values have come back dramatically and you know we continue to be satisfied with what we hold the most for the trust preferred that we have. But then I lost all your other questions. There was a lot of other…

Just thinking about the balance sheet on the loan book side. I think it sounds like we might see some continued shrinkage here. I guess how much are your expectation for growth is dependent on kind of a macro economic recovery here in the second half may be.

Yeah, we are doing a full court community press to grow the portfolio but as I commented in my remarks the volume of credit worthy borrowers who are actually seeking to expand their businesses at this time has shrunk dramatically. We do see a lot of credits and probably turned down at least two or three for every one we approve on the commercial side. That doesn’t mean we are not anxiously looking to grow the commercial side just that you want to make sure that you are on Terra Firma before you put your foot down today when you are making a loan. I mean we got to a very, very difficult economic period with relatively low levels of losses. We don’t want to create a problem now that we're coming out of this cycle.

Okay. And then lastly if I may on the serious losses that we saw this quarter. Can you give us a better sense of what that related to? Was it more of a performance issue I assume rather than a refinance issue?

It comes to an issue of appraisals more than anything else. The appraisers in the past were I think they were little too liberal and today the pendulum has swung 180 degrees where they are actually coming in with ridiculous appraisals. And nevertheless under the current guidelines from the regulators you have to live with those appraisals and that causes write downs on properties that we believe are not really necessary. However, if the appraisal comes in with that level, we are going to have to live with that appraisal and we write those properties down accordingly. I'll give you an example; we have a particular building that has had recently robust sales that he sold a dozen units in the last six to eight months. Not one of the units came in with an appraisal equal to the purchase price. Every appraisal on every unit sold came in below the purchase price. It seems a little ridiculous to me that people are willing to pay one price for a building and the appraisal comes in at 10%, 15% lower than the purchase price. But nevertheless, that’s what we have to go by if the loan becomes delinquent. We have to go by that appraisal and write down the property accordingly. Actual loses on sale we really haven’t seen at this point these are against the prices.

Yeah I think we kind of said this last quarter when we went through this FAS 114 analysis and continued on in to this quarter and that is that you do need to do as Gerry said, write these down to appraise value but in many cases, I think I specifically used an example last quarter of a project where we're writing it down to a value as is, not necessarily as completed and in many cases, these projects will be completing and we will come out of these hole. However, the requirements are such that today you may have to take a write down in that project, that doesn’t mean its going to be a loss and I think that’s what both Gerry and I have been trying to say get across to everybody is that just because we've taken some charge-offs doesn’t necessarily mean we're going to have loses. We have a lot of personal guarantees, we have a lot of collateral value out there and we're doing what the requirements of the regulators etcetera are out there but in the end we believe we're adequately reserved and our loses will likely be less than we seem to be taking right now.

Thank you and our next question in queue that will come from the line is Steven (inaudible) aided by the company.

Hi Gerry, hi Alan, this is Gerard. How are you? Alan can you share with us the duration of the investment portfolio or the [amateur] life? Would you have that?

Yeah the duration is four years at this point. Not a lot, the average life's about 5.9. Again, it's going to show longer numbers than what we have been telling you and a lot of the reason for that is based on obviously interest rate movements but largely the trust preferreds that we hold which have 30 year durations. So that being said its going to always make our portfolio look a lot longer.

If you carve this trust preferreds out for a second, what would the duration about be excluding the trust preferreds.

No we don’t really have it broken out, that will be a lot shorter.

Yeah. In fact if you could remind us, I know it’s in your queue but what was the total of trust preferred portfolio at the end of the year in terms of dollar size?

It's probably close to $400 million.

And out of the $400 million, how much of this single issue for trust preferreds versus pools or is it all single issue?

Almost all of them are single issues. I think we've disclosed they only had three pool trust preferreds, I don’t know, they probably are maybe $20-$25 million in the aggregate. By the way, I am seeing here that it looks like a duration without those trust preferreds maybe down around two years.

In terms of the trust preferred portfolio, the single issues about how much of that portfolio would you define is investment grade versus non-investment grade?

It's in our 10-Q I don’t have that in front of me at the moment. We disclose that each quarter what it is. I don’t have it front of me right now Gerard.

Okay, that’s fine. It's interesting because some of it appears or in the regional banks are reporting big increases in the net interest margin and I am suspicious of the increase because I think they are taking interest rate risk in keeping your duration down, and the securities portfolio is of course very defensive, I think based on the rising rates which I think everybody expects so…

May be we could…

Yeah. It's interesting right in for everybody else listening in. there was an article this morning in the New York Times on page two of the business section which John Stumpf from Wells Fargo talked exactly about that issue and about how they're really aren’t a lot of great loans out there at the moment and by extending your maturities and in a timeframe, where we have a steep yield curve may or may not be the best thing to do if in fact interest rates begin to rise in a shorter period than later than on the road.

Sure and Gerry you mentioned in your remarks as well as in the press release that the auto loan portfolio continued to shrink. Is it a matter of we need to see the economy start to grow and employment come back before you really get to see a growth in that portfolio, do you think?

I think so, Gerard. The demand has been weak. The volume of applications that come in through over the door are way, way down from prior levels two, three years ago. That begins the story, and second of all, we learn that it isn’t necessarily the FICO that determines whether or not a person pays you back. It has more to do with how much money they have into the car, and if you are lending a 125% or a 150% of the purchase price because they are taking what they are underwater on a car they are trading in and they are adding that into the loan. If you start learning that way, you have a great deal of risk in the portfolio, and you know Valley, we're risk adverse, so we just tighten the bar belt a little bit. I think you're going to have to see the economy get stronger before we can get the volumes we want.

Sure. I noticed you saw a little bit of growth in the commercial real estate mortgage portfolio and there's obviously been much written about the second shoe being commercial real estate problems. I found it interesting in that same wonderful newspaper Alan in New York Times about two weeks ago. There is a story about New Jersey where the suburban office market and I forget which area of New Jersey was actually picking up in commercial real estate and maybe the second shoe may not be as big as people think. Do you guys have any thoughts on what you're seeing in the commercial real estate markets that you're lending into?

Our delinquencies still remain very, very low right from 30 days on out. So that’s usually an indication of what's coming down the road. As you know Gerard in the late 80's there was a lot of speculative office building that took place in the Northern New Jersey marketplace and a lot of banks got burned very badly by it. Subsequent to that over the last 20 years is perpetually zero in the way of speculative office building taking place here. So I think that helped us. I know a lot of the banks in the Southeast got burned pretty badly this time on speculative real estate but they didn’t get burned 20 years. So maybe our people finally did learn a lesson when it comes to that speculative real estate. We are seeing our real estate developers; they seem to be doing pretty well. Look at their cash flow. We only lend on projects that have a reasonable cash flow and that seems to be holding up.

I think one of the things Gerard relative to what Gerry just mentioned, let us not throw out this statistics. In our CRE portfolio, our delinquencies are now running at just under 1%. Its 0.99% and that’s lower than it was last quarter on 1.05%. So, I think as Gerry is saying in our particular case, I think both the way we lend the liquidity that many of our borrowers have, the types of projects that we lend on really are still showing a lot of strength.

Not to put you guys on the spot too much, but I know commercial real estate's location and New York City versus New Jersey etcetera. Do you think there is a possibility that the whole field and commercial real estate being a debacle of the nature of what happened with the residential market, maybe over blown in certain cases?

I think it’s been over blown to some degree. The big hesitation on my part is I can't speak for the rest of the country, you know that geographically we only operate in the Northern New Jersey, New York City area but the one area that seems to be helpful to us is somehow this speculation by the doomsayers that this market is going to collapse and as a result we're getting some opportunities on commercial real estate that are really very, very appealing to us. Where the borrower has a really strong tenant, could be a state agency or state government is renting when I’m thinking of one particular loan that we made, where it was a very low loan to value and he was having difficulty finding anybody who just would lend the money on real estate period. Well that’s an opportunity that we like to take advantage of and that’s one of the reasons we're seeing some growth in there is because we are seeing some of those opportunities.

You have to change those, calling the state of New Jersey a strong tenant though?

I didn’t say, I said estate agency. I didn’t say (inaudible)

Okay, you’re right. You're right. You're right. You're right. Gerry thank you for your insights though.

Thank you our next question in queue that will come from Erika Penala in New York and your line is open

Hello, this is Ashley [Laney] sitting in for Erica.

Just really quick question I know you guys earlier speaking to interest rate risk so is it safe to assume moving forward with your excess liquidity that you'll probably keep it in lower yielding short duration security?

The (inaudible) probably be the bulk of our investments going forward, we are not going to start pumping all of our liquidity into 30 year paper, we are sure with that. Yeah I mean we made some investments during the year that, I think we talked about, we on a (inaudible) managing these securities that we bought that are providing low yields at the moments because there are higher coupons so we are writing off premiums there so right now what we are seeing is we are seeing lower returns on those however if and when interest rates rise those will go back closer to the coupon rate of security which will be in the 5% or so range, so that will help us as rates begin to rise, hence a little bit of natural hedge there in addition, right now we are seeing huge cash flow out of that which is exactly what we anticipated to keep our asset sensitivity, its really a matter of when will interest rate rise and what this does, is it places us for a interest rate movements both into the long portfolio as well as into the investment portfolio.

And one really quick question, is it safe to assume about a $77 million run-rate per quarter for expenses?

No that number I think we indicated was high right of the bat there were some unusual items in there this quarter, the two that I can think of is there was an airplane write off of $1.4 million that went through was already (inaudible) where other repossessed asset if you will. And the other was there was a high cost for the, not a high cost, but a additional cost and therefore restricted stock awards that was a large you have to recognize a large part all of that expense for retirement eligible people in the quarter in which its given out. That was about $1 million number that number normally would have been spread out over a number of years. So and in addition to that we saw some rise in our medical expense. The only one I could say that might stay up there would be more than medical, but I think the you got about $2.5 million in there that is not, should not be included in an annual run rate.

Okay, so about 75 then.

Sounds more like it.

Okay, great. Thank you.

Thank you. Our next question in queue that will come from Jason O'Donnell in Philadelphia. Please go ahead.

Just going back on the margin given the run out you are seeing in the taxable investment portfolio do you think we can see another 50 basis points drop in the yield in the first quarter or is that something that you just don’t expect going forward.

No we don’t expect it.

Okay, so the run off in the first quarter versus the fourth quarter is moderated somewhat.

Yeah, well I think you know we had some sales in the fourth quarter. So the sales are not there going forward. So that moderates it right off the bat.

Okay, great and then what are the current rates on your most popular time deposit products and do you think the average yield that you have on your time deposits will get below 2% in the near term.

Yes. We are right now we are at 1% ---

Well, our longer term CDs are over 2% but that gets into the three to five year range, everything else is way underneath that 2% range. Under one and many.

Yeah, our most popular product is the one year CD and that’s under 1%.

Okay, great. And then just one more question on the going back to the private label [NBS] portfolio, you just tell us what the remaining amortized cost is maybe I missed it and then how much of that portfolio is currently related below investment grade?

It’s about $140 million of principle remaining on that. How much is in below investment grade there was couple of issues that are I don’t think I know the answer to that. I don’t want to give you the wrong information, so right now just [not on that] be the answer.

Thank you next in queue in the line of Collyn Gilbert from New Jersey. Please go ahead.

Just a macro question. Gerry to your point and Alan you said it as well that your expectations for 2010 is that a stronger economic environment is that being driven by what we are seeing just kind of macro metrics or you seeing something going on with in the bank and within your customers that give you that confidence?

I am seeing it and when I talk about the economy Collyn I really only speak about the greater metropolitan New York, New Jersey areas.

Yes.

So, I mean I can’t talk about what’s happening in Florida, California I don’t know. But we are seeing development and you listen, I know you live in (inaudible) I have seen you drive around some of you can see several projects that are coming up there are people who are building they have confidence to get in the economy by the real estate I dropped my son off the other day these are large apartments house that too large (inaudible) complexes going on. There is in [large] where we have a large relatively large pent house project going up in some I mean a year ago nobody would have even been talking about this and today they're actually doing it so

Okay but I'm sorry go ahead.

I think there's a lot more competence in the market place.

Okay so you're saying but Alan I think you mentioned that line usage is so flat right so you're not

Right now it is I mean

Okay

We have very-very strong clients at least the bulk of our client base is very strong and they have a lot of their own money, they don’t like to leverage themselves and when there is a lot of economical uncertainty they tend to deleverage.

Yeah, okay I guess I'm just putting together what the strategy on the securities portfolio is that is it a much in interest rate call or is it a bullish call to suggest that you really do anticipate the need for liquidity to be there to just try and engage sort of what the motivating factor was.

Well remember one of the big issues is the credit issue I think Gerry mentioned that before about and I know I said it we're coming through a cycle in which it’s the wrong time to be putting money in to things that you're not going to guarantee you're getting your money back I mean we've all been through a pretty harsh time out here and I think so we've been very cautious about where we are putting money today, I think on the borrowing side the same think we want to make sure we're going to get repaid, so that’s a big thing that we're looking at.

Okay and more specifically Alan on the [nim] I mean it seems like this question has sort of been asked in a number of different ways but can you give us specific guidance as to a potential [nim] range?

We don’t give that Collyn you know that.

Well I can ask again Alan. And then just one other question on the credit quality front did you say Alan that the non-accruals a lot of what was driving that was just the timing of the collection so

Yeah absolutely.

So we could see a reversal of those numbers then in the first quarter?

No that’s not what my point is and I think we talked about this. To the extent lets just use residential loans, you know residential loans we may know that we have sufficient collateral to get paid back however if you go through a foreclosure part in New Jersey it could take 1-3 years.

Oh I see you are talking on the mortgage side.

You are not allowed to carry it as a performing loan if it's going to take two years to get your money back. You know we can have a loan and I'll use the example that we believe (inaudible) has an appraisal of $800,000 the borrower owes you a $100,000 the borrower dies and the children have to sell the house and then they going to pay you off and they decide well when I sell the house I will pay you up there is plenty of equity here. We are going to get paid we are going to get all our accrued interest meantime that’s carried as a non-performing loan today.

Thank you and next in queue is the line of Whitney Young in New York and your line is open.

Actually all my questions were surrounding the margin so I think I am just going to spare you guys.

(Operator Instructions). And next in queue is Laura [Line] in Barkeyville, Pennsylvania. Please go ahead.

Two questions. Why is the stock off so much today? Is it because of the tax situation that President Obama spoke about this morning?

No idea. And your guess should be as good as mine.

Okay. And what about the tax, will that affect the price of the stock?

Well, in our case based upon the initial read that we had on the tax, we would not be one of the recipients of the blow.

Okay. All right, that is I've had I don't know if you remember my husband or not Charlie (inaudible), they were on the board for many years.

Sure.

Well, I'm Charlie's widow, and I've a few shares of Valley National and I've stuck with it for 30 years so

We appreciate that.

It's always done well by me and I know it will continue.

All right, thank you.

Thank you. Bye.

Thank you. At this time, there are no additional questions in queue. Please continue.

Okay, thank you Tony and thank you everyone for attending our fourth quarter conference call. Have a good day.