Valley National Bancorp targets 4–6% loan growth for 2026 amid accelerated deposit expansion and operating leverage

Earnings Call Insights: Valley National Bancorp (VLY) Q3 2025

MANAGEMENT VIEW

* CEO Ira Robbins announced, "Valley delivered strong results in the third quarter, reporting net income of approximately $163 million or $0.28 per diluted share. This is up from $133 million or $0.22 last quarter and represents our highest level of quarterly profitability since the end of 2022." Robbins emphasized robust core customer deposit growth, momentum in net interest income and fee income, expense control, and reduced credit costs. He added, "Our balance sheet remains extremely strong, and we have achieved many of our stated profitability goals ahead of schedule, including annualized return on average assets being above 1%."
* Robbins introduced Gino Martocci as President of Commercial Banking and Patrick Smith as President of Consumer Banking, highlighting their roles in accelerating Valley’s strategic initiatives and customer acquisition.
* Robbins stated, "Over the past 12 months, we've added nearly 110,000 new deposit accounts, which have contributed to nearly 10% core deposit growth." He noted indirect deposits dropped from 18% to 11% of total deposits, the lowest since Q3 2022, and the average cost of deposits fell by 56 basis points since Q3 2024.
* Robbins cited a 15% annualized growth rate in noninterest income since 2017, attributing recent success to treasury management and tax credit advisory, which contributed $3 million of incremental revenue in Q3. Upgraded technology and expanded sales teams drove nearly $16 million of incremental deposit service charge revenue on an annualized basis since Q3 2024.
* Robbins pointed to a "significant reduction in net charge-offs and provisions during the third quarter" and noted that cumulative commercial real estate (CRE) losses were just 57 basis points of average CRE loans over the last seven quarters.
* CFO Travis Lan reported, "We gathered about $1 billion of core deposits during the quarter, which enabled us to pay off approximately $700 million of maturing brokered deposits." Lan noted brokered deposits now comprise 11% of total deposits. He added, "NIM improved for the sixth consecutive quarter aided by asset repricing and sequential growth in average noninterest deposits."

OUTLOOK

* Management guided to continued deposit cost reductions, projecting further benefits in Q4 and into 2026. Lan stated, "We are on track to achieve our above 3.1% NIM target for the fourth quarter of 2025. We expect that net interest income will grow another 3% sequentially in the fourth quarter."
* Lan added, "We anticipate that fourth quarter fee income will be generally stable within the range of the last 2 quarters."
* On CRE, Lan said, "We are targeting growth in CRE. I think we're looking at low single-digit growth for 2026 and beyond."
* Lan provided a mid-single-digit loan growth expectation for 2026, "call it at a range of 4% to 6%."

FINANCIAL RESULTS

* Robbins reported net income of $163 million or $0.28 per diluted share for Q3, up from $133 million or $0.22 in Q2.
* Core customer deposits grew by $1 billion, enabling the paydown of $700 million of maturing brokered deposits.
* Brokered deposits comprised 11% of total deposits, the lowest since Q3 2022.
* Gross loans decreased modestly due to targeted runoff in transactional CRE and C&I commodity subsegments, while CRE loans made to core clients increased. Average loans rose 0.5% during the quarter.
* Noninterest income maintained strong momentum, with deposit service charges and wealth management performing well.
* Adjusted noninterest expenses declined modestly, attributed to lower compensation, occupancy, and FDIC assessments, partially offset by higher third-party spend.
* Tangible book value increased, with $12 million used to repurchase 1.3 million common shares.

Q&A

* David Smith, Truist Securities: Asked about C&I loan decline and competitive deposit environment. Lan responded that spot deposit cost declined and expects more opportunity as they head into 2026. Martocci added, "We continue to see very strong demand both in C&I and CRE. There is ample liquidity in the marketplace."
* Feddie Strickland, Hovde Group: Inquired about CRE/C&I geography. Martocci said originations are split evenly among Southeast, Northeast, and specialty businesses. Robbins highlighted Florida as a major growth driver.
* Anthony Elian, JPMorgan: Sought color on nonaccrual loans. Saeger said the increase was driven by a $35 million land loan, with no loss expected, and noted 50% of nonaccrual portfolio is current on payment.
* Manan Gosalia, Morgan Stanley: Asked about white space for growth. Martocci identified upmarket C&I and business banking as key opportunities. Smith highlighted small business and retail deposit growth potential.
* Chris McGratty, KBW: Queried on CRE book growth and lower rates. Lan said Valley is more insulated from payoff acceleration due to portfolio composition.
* David Rochester, Cantor Fitzgerald: Asked about normalized NIM. Lan projected a normalized NIM of 3.20% to 3.40% and confirmed continued hiring for upmarket C&I.
* Jonathan Rau, Barclays: Questioned CRE refinancing and nonaccrual timeline. Saeger said office market is improving, rent-stabilized multifamily is small, and no loss is anticipated on a specific land loan.
* Sun Young Lee, TD Cowen: Asked about deposit growth. Lan described broad-based growth, with specialty deposits contributing but not the only driver.

SENTIMENT ANALYSIS

* Analysts displayed a neutral to slightly positive tone, focusing on competitive pressures, loan growth, and strategic expansion, with few signs of skepticism or concern. Questions were detailed and forward-looking, reflecting confidence in management’s execution.
* Management maintained a confident and optimistic tone, frequently referencing momentum, strategic progress, and the ability to maintain positive operating leverage. Robbins said, "We have set ambitious goals for ourselves and are confident that continued execution of our strategic initiatives will deliver substantial value."
* Compared to the previous quarter, both analysts and management exhibited increased confidence, with management offering more specific forward-looking targets and analysts probing for long-term growth and profitability drivers.

QUARTER-OVER-QUARTER COMPARISON

* Q3 delivered higher net income and EPS versus Q2, with improved profitability metrics.
* Deposit growth accelerated, with a $1 billion increase in core customer deposits in Q3 compared to $600 million in Q2.
* Indirect deposits fell further to 11% of the deposit base from 13% last quarter.
* Management raised guidance language for NIM and projected higher net interest income growth, while offering more explicit loan growth targets (4–6% for 2026).
* Analyst focus shifted toward strategic hiring, upmarket expansion, and operating leverage, reflecting growing confidence in Valley’s execution.
* Management tone was more assertive on positive operating leverage and strategic hiring compared to the previous quarter.

RISKS AND CONCERNS

* Nonaccrual loans increased due to the migration of a $35 million construction loan, but management does not anticipate a loss.
* CRE charge-off rates in 2024 were higher than internal standards but remained below larger banks’ forecasts.
* Rent-stabilized New York multifamily remains stagnant but is a small portfolio segment.
* Professional fees are expected to remain elevated into the first half of 2026 due to temporary consulting costs related to efficiency initiatives.

FINAL TAKEAWAY

Valley National Bancorp reported its strongest quarterly profitability since 2022, driven by robust deposit growth, lower funding costs, and disciplined expense management. New leadership in commercial and consumer banking is already strengthening customer acquisition and strategic execution. The company targets mid-single-digit loan growth for 2026, continued improvement in net interest margin, and stable asset quality, positioning Valley for sustained operating leverage and shareholder value creation in the coming quarters.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/vly/earnings/transcripts]

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