DBRS Comments on Valley National Bancorp’s Two FDIC-assisted Transactions; Ratings Unaffected
DBRS has today commented that Valley National Bancorp’s (Valley or the Company) ratings, including its Issuer & Senior Debt rating of A (low), are unaffected by its assumption of all deposits and certain assets of LibertyPointe Bank (LibertyPointe) and all deposits except certain brokered CDs and certain assets of The Park Avenue Bank (Park Avenue) from the Federal Deposit Insurance Corporation (FDIC). The Trend on all ratings is Stable.
Under the LibertyPointe transaction, Valley assumed approximately $200 million in deposits, approximately $180 million of loans, which are subject to a loss-share agreement with the FDIC, as well as cash and other assets of about $20 million. Meanwhile, the Company assumed $450 million in deposits and $30 million in other borrowings and liabilities, and received approximately $370 million of loans, which are subject to a loss-share agreement with the FDIC and cash, investment securities and other assets totaling approximately $110 million from the Park Avenue transaction.
As part of the consideration for the Park Avenue Bank transaction, Valley issued an equity appreciation instrument to the FDIC. This instrument will be recorded as a liability with any subsequent changes in its estimated fair value recognized in earnings. The Company does not expect potential charges to earnings resulting from the change in this instrument's estimated fair value to materially impact Valley's capital position, which remains strong.
DBRS notes that both transactions are immediately accretive to earnings and helps bolster Valley’s presence in the New York City metropolitan area. Specifically, LibertyPointe adds three branches and Park Avenue adds five branches, where the Company now has 35 branches. The $680 million in acquired assets represents 4.8% of Valley’s total assets at December 31, 2009, which should limit integration risk for an experienced acquirer like Valley. Furthermore, the loss sharing agreements mitigates the significant credit risk embedded in the assumed commercial real estate-dominated loan portfolios.
Valley’s ratings are underpinned by its strong franchise, resilient earnings and a conservatively underwritten loan portfolio that has performed significantly better than most banking peers throughout the Company’s history. The ratings also reflect its solid deposit franchise in the demographically attractive northern and central New Jersey and Manhattan, Brooklyn and Queens regions.
Notes:
All figures are in U.S. dollars unless otherwise noted.
The applicable methodologies are Global Methodology for Rating Banks & Banking Organizations and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments which can be found on our website under Methodologies.
This is a Corporate (Financial Institutions) rating.