Oct. 23--Valley National Bancorp reported Thursday an increase in third-quarter earnings while two smaller northern New Jersey lenders -- Lakeland Bancorp Inc. and Provident Financial Services Inc. -- said profit fell amid a sluggish economy, higher unemployment and continued problems with bad loans.

The Wayne-based holding company for Valley National Bank earned $31.6 million, more than an eightfold increase from the $3.6 million posted in the third quarter of 2008, when the lender recorded large losses on investments in Fannie Mae and Freddie Mac preferred stock. Earnings per share rose to 18 cents from 3 cents in the year-earlier period.

The company "continues to perform well in the face of one of the worst economic recessions in recent history," said Chief Executive Officer Gerald Lipkin in a statement.

The lender's net interest margin widened because low short-term interest rates helped it push down deposit costs. Its loan book shrank by $107 million to $9.5 billion between June 30 and Sept. 30 with decreases in the automobile, residential mortgage, commercial and industrial, and construction loan categories. Those declines were partially offset by a $74.1 million increase in commercial real estate loans.

Valley has more than $14 billion in assets and 199 branches in New Jersey and New York and is the dominant bank in Passaic County, with more than a 20 percent share of deposits, according to the latest Federal Deposit Insurance Corp. statistics.

The company said Thursday it has paid back two-thirds of the $300 million in federal Troubled Asset Relief Program funds it received last year to boost capital reserves.

Valley's net loan charge-offs for the third quarter were $10 million compared with $4.4 million for the third period of 2008. The bank added $12.7 million to its reserves to protect against possible future loan losses after adding $13.1 million in the second quarter.

"The economy's slow recovery from the recession continues to impact us," said Lipkin.

Earnings at Lakeland of Oak Ridge and at Jersey City-based Provident Financial fell as they, too, set aside larger amounts as a cushion against possible future loan losses.

Lakeland, which has $2.77 billion in assets and 48 offices in northern New Jersey, said its quarterly earnings slipped to $2 million from $5.9 million in the third quarter of 2008.

Provident, which has $6.82 billion in assets and 84 branches, said its profit fell to $8.7 million or 15 cents a share from $13.2 million or 23 cents in the year earlier period.

Christopher Martin, Provident's chief executive officer, said in a statement that despite the increased loan-loss provision, the company was able to retain some profits in the company's coffers and maintain its 11 cents a share quarterly dividend.

"While markets and the economy are showing signs of stabilization, the lingering effects of a prolonged recession remain," he said.

Valley shares jumped 57 cents, or 4.7 percent, to $12.83, Provident climbed 75 cents, or 7.6 percent, to $10.60 and Lakeland gained 48 cents, or 7.5 percent, to $6.90.

E-mail: newman@northjersey.com

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