Good day, ladies and gentlemen, and welcome to the Valley National Bank’s fourth quarter earnings conference call. As this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session. Instructions will be given at that time. (Operator instructions) As a reminder, today’s conference call is being recorded. And now, I’ll turn the conference over to your host, Miss Dianne Grenz. Please begin.

Thank you, Annie. I’d like to thank everyone for participating in Valley’s fourth quarter 2008 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 Web site at valleynationalbank.com, and then click on 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 relate to our SEC filings, including those found in Forms 8-K, 10-K, and 10-Q for a complete discussion of forward-looking statements. Now, I would like to turn the call over to the Valley’s Chairman, President, and CEO, Gerald Lipkin.

Thank you, Dianne, and good morning everyone. And welcome to our fourth quarter and full year 2008 earnings conference call. 2008 marked a challenging year for many within the banking industry, Valley not excluded. However, unlike many of our peers, 2008 was a profitable year for Valley. While our absolute net income is disappointing and the returns to our shareholders inadequate, from my perspective, our results must be viewed in the context of the environment, in which we operate as well as the quality and long term sustainability of each tower of net income. In our current operating environment, not every loss is equal. Credit losses attributable to poor underwriting decisions reflect tangible losses and an erosion of shareholder wealth. Conversely, many fair value losses based upon circumstantial market valuations enforced by the accounting industry create confusion within the investment community and significantly understate the true asset value and equity of each company impacted. As a testament to our time-proven underwriting standards and guidelines, in spite of the current economic conditions, Valley’s credit quality remain stable and stellar compared to our peers. Current period delinquencies and loan losses remain relatively low compared to industry norms. Our commercial loan and commercial real estate portfolios, each reported year-end 30-day plus delinquency rates of under 1%. Our residential real estate and home equity loan portfolios continue to outperform industry delinquency metrics by huge margins, and their delinquency levels remain under 1%. And finally, while our automobile portfolio showed increased losses, the portfolio continues to perform better than many analysts’ expectations. In part, as result of the tangible and paper accounting losses realized throughout the banking industry, during the fourth quarter of 2008, the Treasury Department created the TARP capital purchase program, in which Valley was a participant, designed to spur lending activity and…

Thank you, Gerry. The fourth quarter results, including a number of non-core items, which I will begin my discussion with. First, there were the – the following OTTI charges recorded in non-interest income, under net losses on securities transactions on the financial statements during the quarter totaling $17.5 million, of which the major items are, one, the write down of $3.3 million of Freddie Mac, Fannie Mae preferred securities as their values declined further form the third quarter and leave only a small balance of $1.3 million remaining after the write down. Two, we own two pooled trust preferred securities classified as healthy maturity and known as pretzels, for which we wrote down $7.8 million and are left with a small balance of $1.1 million. These are the only two pretzels we own. But we do own one other non-pretzel pool trust preferred security, which is currently rated AAA and classified as available for sale. Three, we also took a $6.4 million OTTI charge on a private label mortgage backed security classified as available for sale. This is a security, which is performing with only 2 % delinquencies and only a small possibility of loss. However, we calculated the fair market value of loss using matrix pricing from a third-party vendor for this illiquid security at 60% of book value. We believe, based upon pre-payment schemes, delinquencies, loan to value ratios, and performance of this pool over the last few years, that we will recover most of these write down. Also included in the non-interest income under the same line of the of the income statement, net losses on securities transactions, we recorded a gain of approximately $6 million on securities transactions, some of that coming from the sale of Freddie Mac, Fannie Mae securities being sold and reinvested into…

(Operator instructions) Our first question comes from John Pancari of JP Morgan. John Pancari – JP Morgan: Good morning.

Good morning. John Pancari – JP Morgan: Can you just give us a little bit more detail on the delinquency trends and the loss trends in your indirect auto book, and just the trajectory of that book during the quarter?

I think they were pretty much consistent. There was not a big increase over the prior quarter. We’ve done some chartings on our delinquency trends over many years. And it would appear that from that that delinquencies tend to come in the first two years that a loan is on the books. After that time, they tend to trail off very, very quickly. We began cutting back severely on our consumer credit lending and tightened up on some of our already tight standards about a year and a half ago. So I think that we are reaching the end point of where the loan losses in that portfolio will be of the magnitude they are. And I would expect that we will – as the 2009 progresses, the continuing decrease in the levels of delinquencies and losses. John Pancari – JP Morgan: Well, do you have the absolute amounts on the delinquency ratio for that book and the net charge off ratio? Because I know you indicated they remain well below peers, so do you have that number?

Yes. As of December 31st, the past due1.74% is probably about a third, a quarter, a tenth – that’s a total 30-day – that’s a total 30-day, 1.74% delinquent, not books. John Pancari – JP Morgan: Okay.

And that’s starting at 30 days. John Pancari – JP Morgan: Okay. And do you have the charge off ratio?

Just one second, we’ll pull it out. Why don’t we come back to that as soon as we – somebody can set it up. But obviously, the back said– John Pancari – JP Morgan: Okay. Yes. Actually, just one other question on credit. Can you give us a little bit of color in terms of the credit trends you’re seeing in your New York CNI [ph] portfolio?

Not with so far. It’s been holding up. We haven’t seen any trends, anything beyond pretty much the norm, which is very small. We have not seen an increase in any of the New York loans. John Pancari – JP Morgan: Including CRE?

Yes. That’s predominant – most of our New York lending is commercial – real estate, commercial lines. Both of them continue to remain very strong, most with 86 basis points. John Pancari – JP Morgan: Okay.

Which is probably around the best of industry norms. I mean, ours is usually a little bit less than that, but at 86 basis points, we’re not happy with it, but it’s still very low. John Pancari – JP Morgan: Okay. And then and one last question, on the margin, I know you indicated that you expect to rebound in the first quarter. Can you give us an idea of the magnitude that you are expecting in terms of your projections for such a rebound for the first quarter?

I would probably say that – at this point it’s a guess. It’s a little bit of a guess because I don’t know on the CDs exactly what’s going to re-price. But we would estimate about 50% of what we lost will come back to us during the quarter. John Pancari – JP Morgan: Okay. Thank you.

Now, just taken into account though that the six basis points I mentioned really – it’s really instead of being 30, 40, you should look at 28 basis points. And so I would say we should be looking about 50% of that number coming back, give or take a little bit. John Pancari – JP Morgan: Okay. Thanks.

(Operator instructions) Our next question comes from Collyn Gilbert of Stifel Nicolaus. Collyn Gilbert – Stifel Nicolaus: Thanks. Good morning, gentlemen.

Good morning. How are you?

Good morning. Collyn Gilbert – Stifel Nicolaus: Just a follow up on some of the questions in terms of commercial activity in the New York area. Could you guys give a little bit detail as to why you’re not seeing stresses or what it is about your underwriting process, whether it’s in terms of cash flows, or the collateral, or kind of how you go about that business that’s allowing you to not see negative trends because that’s certainly an anomaly?

I think, Collyn, I really have to give the credit to our lenders. We have a very, very tight lending policy, and our people are forced to adhere to that policy. We’ve always – take the residential market. Why did we not have problems? Well, we always insisted that people put money down on a house. We encourage a third but we will, on certain circumstances, do a 20% down. But when you look at the portfolio, you see that as a portfolio, we always – maybe 40% down. We kept out of speculative type of lending. If someone’s buying a commercial building in New York City, they had to have skin in the game. They had to put money into the building, just like we do here in New Jersey. The banks that felt that they could lend the 100% because inflation would put them in a good position was an approach that we never took.

Guarantees.

We get personal guarantees. Thank you, Bob Meyer’s with us. We get personal guarantees on almost all of our loans. You know there are exceptions in the personal guarantee but we do push for it. If we’re doing a piece of real estate without personal guarantees, today we’re looking for 50% or more that. Collyn Gilbert – Stifel Nicolaus: How about in terms of cash flow projections and–?

We do cash flow projections on all of our commercial loans. We–

Global cash flows.

We go get – I’ll let Bob speak.

We look at global cash flows. We look at contingent liabilities on projects that may be under construction within the family of borrowers that we are dealing with. We’re talking about the traditional commercial loans. We’ve seen virtually, knock on wood, but we’ve seen virtually no deterioration. The past due – the past due percentages in the commercial portfolio in New York or having a 30 basis point range. So we hope our underwriting standards will hold up. Obviously, this market is very challenging, but our clients so far have withstood it. Collyn Gilbert – Stifel Nicolaus: Okay, so–

Underwriting is really the key. And also, what we are experiencing today is a lot of banks that got themselves in trouble with their lending, have really been forced to pull way back. And a lot of their good customers are now coming to us. People who, they also would have gotten a guarantee or a large down payment from, and they’re coming to us so that’s why I think we’re seeing some good loan growth. Collyn Gilbert – Stifel Nicolaus: Yes. I guess I’m just thinking, underwriting gets you to a certain level. And then it just – the economic forces could be even more powerful than that, and just trying to decipher where the risk is just from the economic standpoint. And if you guys aren’t seeing stresses in your portfolio, are there areas or segments that you’re concerned about or that you’re pulling back on growth. I was actually surprised to see that you’re growing construction, more of the fact that there’s demand out there for construction loans, or maybe you could talk a little bit about that?

Yes, Collyn, let me just comment one thing on the construction. Included in our construction loans was a loan made during the most recent quarter. That was $60 million for the purchase of a building in New York City, a residential building in New York City. The loan was actually given for purposes of acquiring that $60 million property.

Hundred and somewhat million.

Well, I’m sorry; the loan was $60 million.

Right. We gained $60 million. The end result is that is going to end up being a condo conversion, our coops conversion – condo conversion. And they’re going to be using their own funds or other funds to do that conversion. It’s a fully rented out building right now. And they’re going to go through the process. So the point is, it really probably should not have been shown as a construction loan, but it's in there for the quarter. So when you say it's growing, I agree it's in the number, and we're reviewing that at the moment to decide the appropriate classification.

And that being said, there are some projects that were underway that we are – that are completing and selling out. A couple of projects that we expect to pay down significantly in the first quarter. And we would anticipate continued reductions on those loans as we go.

Yes. And then not to be too scared, I mean, this particular loan, while it's a large loan, the borrower's put in well over $40 million of their own money in front of us. And on a conversion basis, we had to do it today. We’re coming somewhere in New York City in the $300-a-foot range, way, way below market for– Collyn Gilbert – Stifel Nicolaus: What kind of pricing are you guys on these types of projects? I would think it'd be pretty good.

Well today, the pricing has been improving. As it was pointed out in Alan’s comments, I think it's important. We have been implementing floors on our interest rates on almost all of our loans. You can't do it when someone has a commitment for 12 months that we issued six months ago. We have to wait until that commitment comes due. But as our lines of credit come due, we're implementing floors on almost all of them, which will help our margin dramatically and prevent another crush if the Fed drops rates in the future. Collyn Gilbert – Stifel Nicolaus: Okay. Okay, that's good for now. Thanks.

Thank you. Our next question or comment comes from Gerard Cassidy of RBC. Gerard Cassidy – RBC: Gerry. Hi, Alan.

Yes, Gerard?

Hi, Gerard. Gerard Cassidy – RBC: Question for you, Gerry [ph], can you share with us what you're hearing about the Federal Home Loan Bank of New York or just the Federal Home Loan Bank system? It appears that different districts now seem to be having some problems potentially with capital. In your talks with different members of the Federal Home Loan Bank of New York, are they concerned about the conditions of some of their members?

I'm sure they're concerned about some of the conditions of their members. However, we deal with the Federal Reserve Bank and not the Federal Home Loan Bank of New York. And from the information that I've read in the press just last week, they are among the strongest. They do need all of their ratios. They are well run. I know Alfred DelliBovi quite well. He has always impressed me as a conservative individual.

Our understanding, I think, Gerard, is that you also own a lot less securities that are of concern from a write down standpoint than many of the other home loan banks. Gerard Cassidy – RBC: Okay.

And also, there was a good article in the paper yesterday about the application of the OTTI to them. And they point out that they had good performing assets, that they're being forced to write down under OTTI. Gerard Cassidy – RBC: Right.

The Home Loan Bank of New York had a problem a couple of years ago when all the capital issues were being raised for them. And New York came out of this very, very quickly. They had some manufactured housing homes of some kind. And they had to take some write downs, and they reduced dividend at that time as well. But they worked through that pretty quickly, and have built their capital back up quickly as well when returning to full-paying dividend. Gerard Cassidy – RBC: Okay, good. Can you also, Gerry, give us your views on this legislation that was introduced to Congress to allow banks to be judges to modify mortgages? What your thinking is there? And then, what kind of impact, if it does go through, what kind of impact this could have on, not just your first mortgages, but the fear of more people filing bankruptcy, and what that could do to just consumer lending in general?

I'm obviously not happy to see this type of legislation take place because I never like to see contract law altered. I think it only makes it more difficult for people to get home loans in the future because banks are going to be much more reluctant to lend, not being certain that their contract between themselves and the borrower is going to prevail. That all being said, it has very little impact, at least at this time, on us. Our delinquency levels in our residential mortgage portfolio are still very, very low. Our borrowers are performing. We aren't seeing a lot of foreclosures. So I don't know that it'd have that much of an impact on us. Gerard Cassidy – RBC: How about an indirect impact where you may not have the mortgage, but you have the auto loan of somebody that – and then might be here for all of you guys is this may encourage more people to file bankruptcy that would not normally–?

Of course, I agree with that. Gerard Cassidy – RBC: Then okay. All right, thank you very much.

Al right.

Okay.

I'm sorry. No further questions.

Al right. Well thank you all for tuning in. We'll look forward to speaking to you on the end of the next quarter. And hopefully, we'll have a lot brighter picture.

And ladies and gentlemen, this does conclude today's conference. Thank you for your participation and for using AT&T Executive Teleconferencing. You may now disconnect.