Valley National Bancorp (VLY) Earnings & Analysis

Latest quarter

Valley National reported second-quarter revenue of $903.1 million, up from $867.6 million a year earlier, and diluted earnings per share of $0.29, compared with $0.22. For the separate quarter ended September 30, Valley’s adjusted EPS was $0.36 against a consensus of $0.33, while revenue as counted by the consensus was $585.5 million against an estimate of $577.6 million; both exceeded consensus.

The filing said second-quarter net income rose to $170.9 million from $133.2 million a year earlier. Valley attributed the increase partly to higher net interest income, helped by lower rates on most interest-bearing deposits and higher average loan and securities balances. Noninterest income also rose, including revenue from capital markets, deposit service charges and wealth management.

The filing said higher investments in staff and technology contributed to increased noninterest expense. Valley’s operating margin was 24.4%, compared with 20.0% a year earlier, while free cash flow was $160.2 million versus $156.1 million. Net loan charge-offs were $22.0 million, down from $37.8 million a year earlier, according to the filing.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Ira Robbins said Valley’s commercial banking hires and greater use of its treasury platform contributed to nearly $300 million of noninterest-bearing deposit growth in the second quarter. CFO Travis Lan said direct customer deposits rose $1.1 billion, while Valley also used $200 million of additional brokered deposits to bridge the timing gap between loan and deposit growth.

Lan said loan growth was concentrated in commercial and industrial and owner-occupied commercial real estate lending. Asked about the pace ahead, he said some second-quarter closings had been pulled forward and the loan pipeline had fallen by about $1 billion from March 31 to June 30, although it remained above its level at the start of the year.

On pricing, Lan said deposit competition was intensifying particularly on the consumer side. He said commercial and industrial originations had offset some commercial real estate spread compression. He also pointed to $2 billion of brokered CDs and $1.4 billion of fixed-rate loans due to mature during the remainder of 2026, which he said supported his confidence in the margin outlook.

Asked about artificial intelligence, Robbins said Valley was using it to improve efficiency and develop revenue opportunities. Lan said the company had $15 million of expense run-rate savings against $3 million or $4 million of new AI-related expenses. He added that automation did not remove human oversight and governance.

Lan said Valley reduced repurchases during the quarter because of loan growth and would consider being more active in the following quarter if lending growth eased. On credit, he said criticized and classified assets had declined as commercial real estate loans were upgraded or paid off, although nonaccrual and past-due loans had increased.

Guidance

Lan said Valley now expects 2026 gross loan growth at or somewhat above the high end of its previously stated 4% to 6% range. He also said fee income growth should be toward the high end of its 6% to 9% range. In its filing, Valley said it expects full-year deposit growth near the high end of its previously disclosed 5 to 7 percent range.