Ladies and gentlemen, thank you for standing by. Welcome to the Valley National Bancorp Third Quarter Earnings Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session instructions will be given at that time. [Operator Instructions] And as a reminder this call is being recorded. I would now like to turn the conference over to Dianne Grenz.

Good morning. Welcome to Valley’s third quarter 2013 earnings conference call. If you’ve not read the earnings release we issued early this morning, you may access it along with the financial statements and schedules for the third quarter from our website at valleynationalbank.com. Comments made during this call may contain forward-looking statements related to Valley National Bancorp and the banking industry. Valley encourages participants to refer to our SEC filings, including those found on Forms 8-K, 10-K and 10-Q for a complete discussion 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 third quarter earnings conference call. We are pleased with the third quarter results as the core earnings, non-accrual loans, non-performing assets and criticized assets of the Valley all show signs of improvement. Unfortunately, we did recognize a large charge-off totaling $8.9 million relating to a bankruptcy of a long-time commercial borrower. Exclusive of this loss, aggregate net charge-offs for the entire bank would have been less than $300,000 for the quarter. While we are optimistic regarding future recoveries from this borrower, the amounts and timing are very uncertain due to the bankruptcy filing. Although, we are disappointing with this one incident during the quarter, we are encouraged by a litany of positive activities and events throughout the bank. During the quarter, we originated nearly $1.1 billion of new loans. For the first nine months of 2013, we have originated approximately $3.4 billion in total loans compared to approximately $3.7 billion all of last year. Origination volumes during the quarter was skewed towards commercial as residential activity declined significantly from the prior quarter. During the quarter, we closed $295 million of residential mortgage loans compared to $573 million in the prior quarter. The decline was largely attributable to the 73 basis point increase in the average 10-year treasury rates between the second and third quarters. Application volumes similar to the actual closings weakened between the linked quarters dropping to $254 million in the third quarter from $669 million in the second quarter. The decline in application activity was prevalent in Valley’s New Jersey and New York marketplaces, although slightly heavier in New Jersey. Based on month-to-date application and projected closing levels, we anticipate a continued lower volume in applications and loan closings during the fourth quarter. During the third quarter as a…

Thank you, Jerry. The tax equivalent net interest margin improved from 3.15% in the second quarter to 3.20% in the third quarter. This marks the first linked quarter improvement in the margin in over two years. Net interest income during the same period increased approximately $1.8 million to $111.7 million. The expansion of the margin in net interest income is largely attributable to strong loan growth coupled with a decline in premium amortization on our taxable investment securities portfolio and a decline in interest expense on time deposits. Earning asset yields increased 5 basis points from the second quarter to 4.39%. In part as loan growth enables the Bank to deploy excess liquidity, which had been earning 25 basis points into higher yielding loans. Although total loans grew over $500 million for the quarter, average loans expanded only $223 million as many of the new originations closed in the later half of the quarter. The increase in the interest income on new loan originations was partly mitigated by a continued contraction in Valley’s purchase credit impaired portfolios. The decline in these asset portfolios negatively impacts both the margin and income, as the loans maturing or paying off are at levels far greater than the rates are in that new originations. In the aggregate, Valley originated over $1 billion of new loans during the quarter in which the average yield was a little north of 3.5%. While the yield is accretive to net interest income, it is less than the collective yield on total loans. On so such time, when market level interest rates begin to rise, we anticipate continued pressure on the average loan rate. The expansion of earning asset yields for the quarter was attributable to a reduction in premium amortization within the securities portfolio. The increase in interest…

(Operator Instructions) And we will begin with the line of Steven Alexopoulos with JPMorgan. Please go ahead. Steven A. Alexopoulos – JPMorgan Securities, LLC: Hey good morning everyone.

Morning, Steve.

Morning, Steve. Steven A. Alexopoulos – JPMorgan Securities, LLC: A few questions on the commercial real estate, with balance is being pretty flat over the past few quarters, can you give a bit more color on what’s behind the jump driving more volumes? We’re seeing this from other newer players as well.

Well, one thing the increase in interest rates, a slight increase but an increase makes them more attractive to us, so we would become more aggressive in going after them. I think a lot of our borrowers and then I’m sure that of other banks as well, who have been sitting on the sidelines fear that rates at least during the exit of the last quarter feared that rates were going to rise. So they wanted to jump on the bandwagon and refinance their projects before that rate rise fully set in. So I think that that attributes for most of the activity increasing. Steven A. Alexopoulos – JPMorgan Securities, LLC: So Gerry what does that imply for future growth here that rates have backed down a bit?

I don’t know. We have been telling people, I don’t know how long those stay low where our pipeline is still pretty strong in that area of – Bob Meyer would heads up that area.

C&I pipeline is well over a couple hundred million right now of improved and accepted loans and the C&I pipeline is in excess of &100 million in improved and accepted, they were now closed but we anticipate the bulk of them as well.

And that’s only in the first two weeks or the three weeks of the quarter. Steven A. Alexopoulos – JPMorgan Securities, LLC: All right. And Gerry when you said that commercial real estate loan yields were above the NIM, are you seeing it a loan yield is above the NIM or is that the new NIM on those loans is above the current portfolio NIM?

See I said the interest rate that we’re getting on those loans is above our net interest margin. It does I didn’t say that the net interest margin on those loans are higher. Steven A. Alexopoulos – JPMorgan Securities, LLC: Got you. And what was prepayment penalty income in the quarter?

Wasn’t that significant.

Very insignificant. Steven A. Alexopoulos – JPMorgan Securities, LLC: Insignificant, okay.

Yeah. Steven A. Alexopoulos – JPMorgan Securities, LLC: And Gerry just a final one related to capital. Historically, you paid out I guess around half of earnings with the dividend, earnings now are running about half they were pre-crisis, what’s your hesitancy here to reset the dividend to a level that at least gives you more capital flexibility.

The dividend as I said at every call, first of all, our historic is more than half. Our historic has been closer to 60% to 65%, number one. Number two, our board looks at that every quarter sets as what our current estimated earnings are going to be for the remainder of the year, where that is going to place our dividend in relation to our earnings for the year, where else we could deploy the capital if we didn’t put it into – if we didn’t pay it out to the shareholders and then they make their decision every quarter as to whether or not they should keep the dividend the same increase it or decrease it. All those factors will be looked at by the board I’m sure in November when they renew the dividend. Steven A. Alexopoulos – JPMorgan Securities, LLC: Okay, fair enough. Thanks for all the color.

Okay.

The line of Ken Zerbe with Morgan Stanley. Please go ahead. Ken Zerbe – Morgan Stanley: Great, thanks. I think I have more of a conceptual question. When I look at the trajectory of earnings, obviously you’re still under sort of mid-90s on expenses, fees have certainly come down. When you plan ahead right because you don’t have the mortgage banking income to rely on anymore, it seems that you’re still facing certain material headwind in terms of how do you grow earnings. And I heard the comments about closing branches but when you think ahead over the next year or two years, where does the material earnings growth come from if there is any. I mean, can you be more aggressive on cutting expenses. You’re now from 94% to 93% but like from 94% to 84%. Is there some number like that or other revenue streams that we can start looking towards?

Well there are a couple of things. For one thing loan growth is the best source of revenue for the Bank and we have added some lenders to our staff. We are aggressively going out, looking for credit that meets our criteria. It makes a little bit more difficult for us because we do believe we keep a criteria that’s somewhat more stringent than a lot of the competition. And I think when you look at our historical loan losses and that’s reflected in that. There’re a lots of things that we try to do. We’re always looking for new areas to expand the Bank. We look to increase our footprint. We’re looking for new products. We have some new loan products that we’ve introduced in the last year that is starting to take hold and I think will help to generate future earnings for the Bank. We intend to be somewhat opportunistic. I think we were opportunistic when it came to the mortgage banking activities and while that market existed we think we did quite well. I’m still somewhat perplexed as to why it was almost like a light switch going off and in the refinance activity when rates moved up a 100 basis points, it just shut the market down. Even though, historically, the 30-year and the 15-year are at very, very low levels, I think it may reflect and I know interest rates have dropped a little bit although we haven’t really seen much of a reversal. But with the recent small drop in interest rates, that may come back a little bit, comes back a little bit, couple back with the other loan growth we have seen, I think our revenues will show a good future. Ken Zerbe – Morgan Stanley: Understood, okay, because I guess, I was just getting out of, if you posted the $0.14 and I understand there was some positives and negatives in the number, but it seems that you’re looking for ways to improve earnings, but borrowing, finding something material or getting a material increase in mortgage banking, the $0.14 is probably not that bad of a run rate going forward at least in the near-term. Rhetorical question. All right, I’m now done. Thank you very much.

Thank you. We don’t give guidance, so, but I think we gave you lots of indications in Alan’s report and in my report on some of the good things that we expect to happen in the fourth quarter. Ken Zerbe – Morgan Stanley: I’m done till you did and I appreciate it. Thank you.

We will go to line of Dan Werner with Morningstar. Please go ahead. Dan Werner – Morningstar Research: Hi, good morning.

Good morning, Dan. Dan Werner – Morningstar Research: Going forward, are you looking for the loan loss provision to approach closer to the net charge-off levels going forward here, given with the allowances and as well as to kind of account for the loan growth that you’re talking about?

Dan, I think we’ve said it pretty much in the last couple of quarters in a row, we have a methodology, not best based on charge-offs, it’s based on the overall portfolio. I think as Jerry mentioned, criticized went down, classified went down, non-performings overall went down, the impaired loan requirement went down, all of those things went down based on what we’re seeing in our portfolio. So we are not gearing it towards anything other than what the methodology really shows us. Dan Werner – Morningstar Research: Okay. And then, second question, is there going to be any significant staffing changes with regards to the mortgage business that would be impactful to expenses?

We have already cut the staff in the mortgage area by about a third, if it continues to not show growth, there will be further reductions in that department in accordance with what the levels of production are. Dan Werner – Morningstar Research: Okay. And then in terms of the mortgage production, is it primarily 3.1, 5.1 that you’re adding on right now and not much in the way of fixed-rate?

We are doing both fixed-rate and adjust of all.

Yes.

But again, I think as I indicated we are still seeing some low 15-year fixed-rate loans coming on that we’re going to look at very closely in terms of whether or not we are going to add into our portfolio, we want to sell them. Dan Werner – Morningstar Research: Okay.

Yes, it’s really, I personally don’t like to see us build a portfolio of long-term very low interest rate loans. Dan Werner – Morningstar Research: Okay. All right thank you. Operator Next we will go to line of Nancy Bush with NAB Research. Please go ahead. Nancy Bush – NAB Research LLC: Good morning guys, how are you?

Good morning, Nancy.

Good morning, Nancy. Nancy Bush – NAB Research LLC: Couple of questions, Gerry does the implementation of the qualified mortgage will make any difference in your outlook for the business or the kinds of mortgage is you are going to be doing, is it consequential I guess is my question?

I don’t think it’s going to be consequential at Valley because our underwriting criteria closely resembled – historically closely resembled that in qualified mortgage. We never did subprime mortgage lending, because that wouldn’t have fallen within that overview, did they make it difficult in a handful of loans that we went about in the past, some interest only in certain circumstances, but for the most part the bulk of our loans well into the 90 percentile, which should make no difference. Nancy Bush – NAB Research LLC: Okay. And secondly I noted your comment when you said about your mortgage apps declining and you said the decline was slightly heavier in New Jersey than in New York. Could you just kind of speak to the whole sort of economic situation in our state and are you seeing any lift or?

Well, let me start out by saying we did very little activity in New York State up until about two years ago. When we acquired State Bank, we became a lot more aggressive in New York. So that market I think is more a low hanging fruit than there is in New Jersey, so the decline while it is there isn’t as great as it is in New Jersey. New Jersey is suffering in many areas. It is not seeing the growth. We just at our Board meeting this week, we had a presentation on the economic conditions that are prevalent both nationwide and in our region and then a breakdown in our region and it showed the statistics that were presented to us indicated that the growth in New York City, Long Island was stronger than that in New Jersey. So we do monitor those statistics and we try to focus our attention if loan growth, if the economy is growing stronger in Long Island, the benefit of are having a franchise that that extends itself both over New Jersey and New York, we’ll focus more into that New York area. Nancy Bush – NAB Research LLC: Well I mean our tax situation still has not improved that much and we’re still losing business that’s a problem.

Gerry gets the folks [indiscernible] to recognize that is an impediment to grow. Nancy Bush – NAB Research LLC: Okay, all right, thank you.

Thank you, Nancy. Any others?

Craig, Your line is open. Nicholas Karzon – Craig Siegenthaler: Good morning this is Nick Karzon for Craig Siegenthaler this morning.

Good Morning. Nicholas Karzon – Craig Siegenthaler: I guess first just with the upcoming stress test, can you talk about what preparations if any you’ve made for that or how that’s changed your outlook looking forward?

We have a fairly large in-house group that’s working on this stress testing before it’s an out side people in terms of consulting a little bit with us. And we’re working very hard on meeting the requirements, so that we’ll be ready for the filings as is required by the law. So it’s taking a lot of time and effort of a lot of different people and we are mainly doing it on the inside although we are using outside people to assist us in the preparation or to validate what we’re doing. Nicholas Karzon – Craig Siegenthaler: Thanks, and I guess as a follow-up, you mentioned earlier this year that you’d expected to see increased M&A activity. I’m just wondering to what extent that that has occurred or that outlook has changed at all?

: Nicholas Karzon – Craig Siegenthaler: Yeah, thanks for taking my questions this morning.

All right.

Next we’ll go to the line of Collyn Gilbert with KBW. Please go ahead. Collyn B. Gilbert – Keefe, Bruyette & Woods, Inc.: Thanks. Good morning, guys.

Good morning, Collyn. Collyn B. Gilbert – Keefe, Bruyette & Woods, Inc.: : : :

We have added a couple of new lenders, which have in this situation, but for the most part, it’s a lot of our existing customers as I said earlier that pretty much sat on the sidelines came to the conclusions that interest rates had bottomed out or we’re close to bottoming out, and they felt this was the time they could lock in some longer-term money at lower rates. We did hard on adjustable basis for the most part, so that it was good for them and it’s good for us and we saw a lot of activity. We actually started seeing that activity; loan activity takes a lot longer between the borrower approaching the bank and are closing the loans than what might be. Meaning all of the regulatory requirements and underwriting requirements, it usually takes many weeks if not a couple of months for our loan to close. So some of this activity actually started at the latter part of the second quarter, we started seeing, I think I gave some indication in the end of the second quarter that we were starting to see a lot of activity building up, that activity did build up. As I pointed out in my comments, if you look at the average loans that went on the book, that we had on the books and where we are at the end of the quarter, a lot of the loans didn’t close until the latter part of the third quarter and some of the pipeline that we are sitting with today, will be closing into the fourth quarter. They may have actually started though some time early in the third quarter. Collyn B. Gilbert – Keefe, Bruyette & Woods, Inc.: Okay.

It seems like a light switch, this just suddenly happens once in a year, but yes… Collyn B. Gilbert – Keefe, Bruyette & Woods, Inc.: So – but it seems like again, just kind of following your commentary in the second quarter. So it seems like the move on your borrower base, maybe was more rate driven than economic driven because I thought you said in the second quarter that your borrowers are still not feeling good about the economy, which is why the C&I was is – you are less optimistic about the C&I loan growth.

That is correct. Collyn B. Gilbert – Keefe, Bruyette & Woods, Inc.: Could we – I mean, as we think about I guess, I mean you’re not asking for specific guidance, but as we think about kind of that growth trajectory from here. So there is certain dynamics that are going on in the third and fourth quarter that could pull some of that demand forward. I mean, are you – or do you think given your sort of appetite for growth at this point and the dynamic in the market that we’ll see double-digit loan growth in 2014 from you guys?

2014? Actually that question is, in another month or two; I’ll have a better feel for it. Collyn B. Gilbert – Keefe, Bruyette & Woods, Inc: …:

I mean, I – listen, I believe what I like to see double-digit loan growth. I would like to see double-digit loan growth. I mean that will be – will we see it? I don’t know. Collyn B. Gilbert - Keefe, Bruyette & Woods, Inc.: Okay, and then just the next question on the loan yield, these would be average yield on that billion of originations was about just a little bit higher than 350. And I guess just thinking about the split of that is, if you are putting on revenue mortgages, if it’s the fixed rate 30 products. And I know Alan you said, you are doing some arms and stuff, but I guess what I’m saying, is that implies a pretty low CRE yield?

Well, as I pointed out, they’re adjustable. Most of the – over a large portion of that, we put on at one rate that is 36 months re-adjust to a predetermined higher rates and in 72 months from now would adjust to a predetermined higher rate yet. Collyn B. Gilbert - Keefe, Bruyette & Woods, Inc.: Okay, okay.

So we are not locking ourselves in as we would already to a fixed rate, low rate and these are ultimately only 10-year loans. They are not 30-year; they are not even 15-year loans. So I think from a structure standpoint, their excellence of the bank and the way we’ve got it structured I think the client is pretty happy with it. Collyn B. Gilbert - Keefe, Bruyette & Woods, Inc.: Okay.

The other thing Collyn is that – that’s the average of all loans in the bank. So for example, we do put on a fairly large volume of order loans. Order loans are historically and certainly today at a much lower rate than where our commercial real estate loans are et cetera. And of course they are at such a low rate, they tend to bring the overall average down. So wasn’t that, it was CRE loans that were that low, it was the average of all of those and these days order rates are in the tools [ph]. Collyn B. Gilbert - Keefe, Bruyette & Woods, Inc.: Okay, all right, well that leads to my last final question and then I’ll hop out. I guess again kind of big picture, just thinking about the balance sheet and if we see and I guess where I’m going with this is kind the trajectory on the NIM because if we see this, the asset yield likely migrate into the 4% range maybe even lower given the dynamics of the loan yield that we may see here in the next year or two. And the difference that you all have relative to maybe some of the peers that are getting more aggressive on loan growth, as you still there sort of settled by that the high cost borrowings. So if we’ve got a 4% loan yield and then the funding cost that can’t move much below. I would guess that 150 and I’m – then that’s a 250 NIM. I mean am I crazy to think that there is a lot – still a lot more downward pressure to go on this NIM.

We’ve got to keep one thing in mind Collyn, like you just said, you said over the next couple of years, but over the next couple of years, those borrowings are going to start to go away by themselves. Collyn B. Gilbert - Keefe, Bruyette & Woods, Inc.: Well, but just wondered – right I’m talking the dynamics you are seeing now in 2018 when those borrowings go away…

Well, we’ll start before that. Collyn B. Gilbert - Keefe, Bruyette & Woods, Inc.: Or 2016, so in the next three years?

Well we are up the 2014 already. Listen well it is what it is, by putting more emphasis on some of the higher yielding products that are out there that’s fine. The certain things still that we don’t do and that I don’t want to do, and I won’t – when we don’t try to do the purchasing of securitized the loan participations, lots of companies get involved with and they can show huge loan growth and in sometimes at a higher yield from a credit quality standpoints, I know how I feel on it, I know I’ve had conversations for deals and see about things like that. And I think they feel like I do. I don’t know how you do but… Collyn B. Gilbert - Keefe, Bruyette & Woods, Inc.: Okay, I said that was my last question. One more quick question, the securities, how much do you think you can take securities down to sort of fund the loan growth. Basically went up, how much longer can you see this benefit of this mix shift going on?

I think the cash flow is showing somewhere between $25 million and $35 million a month. So whenever that comes down, if we don’t see a region to put it into securities roof on loan growth. Collyn B. Gilbert - Keefe, Bruyette & Woods, Inc.: Okay.

We just got $52 million. Collyn B. Gilbert - Keefe, Bruyette & Woods, Inc.: Okay, all right thanks guys.

Okay, all right.

Next we’ll go to the line of Matthew Kelley with Sterne Agee. Please go ahead. Matthew Kelley – Sterne Agee & Leach, Inc.: Yeah hi, just a follow-up on one of Collyn’s question there. During the three to six year fixed-rate period on these kind of resetting commercial real estate loans, what are the coupons during that fixed-rate period? So if I could have three years fixed and seven years arm, what am I paying in that first three years?

All over the place. Matthew Kelley – Sterne Agee & Leach, Inc.: What would…

There is a variance of perhaps as much as 40 basis points, 50 basis points between loans. Matthew Kelley – Sterne Agee & Leach, Inc.: Okay. Well let me ask you this of the $380 million of commercial real estate originations during the quarter, how much was multi family, net growth I should say.

A fair amount…

Fair amount of multifamily, not necessarily what you might be thinking of a lot of them were New Jersey, garden apartments, some of them were co-op type loans, they were not necessarily New York City apartment loans, so if that’s what your thinking off. Underlying mortgage is on co-ops...

Yeah, underlying…

All right.

(Operator Instructions) We have a question from [indiscernible]. Please go ahead.

Hello, can you hear me?

Yes.

Yes.

Good. Jerry, I mean when asked before about the dividend, you said the board reviews its decision every quarter. I mean you are the Chairman and you are in a public forum and I think you should tell your investors how you feel about it. I mean you guys came through the financial crisis so much better than peers and your stock performed so much better from peers, but has underperformed somewhat dramatically here and a lot of it frankly is because you’re chewing up all your capital with the dividend and you’d would probably get some multiple expansion if you would led your capital base grow. And so I think your board is a little bit of sleep and perhaps has been a sleep and maybe it’s time to start thinking about that.

That issue has been discussed at the board. How I feel as one member of the board will be inappropriate even though you said this is a public forum for me to comment on my feelings, it’s up to the board to decide that what they’re doing on the dividend. I hear what you’re saying and I understand and I think the board hears what you’re saying; we’ll discuss this at the meeting.

I mean look, look if you were to do $0.10 a quarter, your dividend yield would still be among the highest of 90% of all peer companies, that’s still pretty respectable and let’s your capital base grow, I mean it’s time to do something.

I hear what you’re saying.

Thank you.

And there are no further questions at this time.