Valley National Bancorp NASDAQ: VLY reported first-quarter 2026 net income of approximately $164 million, or $0.28 per diluted share, as management pointed to continued progress on funding, loan growth and operating efficiency initiatives. Excluding “certain non-core items,” CEO Ira Robbins said adjusted net income was $169 million, or $0.29 per diluted share.
Robbins said the quarter included “traditional first quarter headwinds,” including elevated payroll taxes and a lower day count, but noted that adjusted pre-provision net revenue increased to $253 million. He framed the quarter as further evidence that multi-year changes to Valley’s balance sheet and operating model are beginning to show up in financial results and day-to-day execution.
Strategic priorities: deposits, relationship-based lending and operating leverage
Robbins outlined three strategic priorities he said are consistent across the company’s plan: strengthening the funding franchise, pursuing “diverse relationship focused loan growth,” and improving scalability and operating leverage.
On funding, Robbins said Valley is focused on core deposit generation not simply for near-term pricing advantages, but to win primary operating relationships, deepen customer engagement and build a stable funding base across cycles. He cited the combination of specialty deposit verticals, enhancements to treasury management, and improvements to the client experience as areas helping Valley compete.
On lending, Robbins said the bank is intentionally allocating capital to business lines, geographies and verticals where it sees “durable demand and strong risk-adjusted returns,” including business banking, middle market, and healthcare. He also said the company has stayed disciplined by selectively exiting lower-return transactional clients that do not align with its strategic focus.
On operating leverage, Robbins said prior investments such as core conversion work, data infrastructure and organizational redesign were made “with a long-term lens,” enabling Valley to grow deposits, loans and revenue faster than fixed costs “and without adding unnecessary complexity.”
AI initiatives emphasized as productivity and client-service tool
Robbins spent a portion of his remarks discussing Valley’s efforts around artificial intelligence, describing AI as a potential inflection point for the banking industry. He said prior work to improve data granularity and consistency has supported Valley’s ability to apply AI tools, and noted the bank invested early in AI talent and advanced analytics.
Robbins cited several examples of AI use cases already in place, including:
- A customer-facing voice AI agent that contacts past-due auto loan customers to motivate payment.
- Fraud tools to verify transaction legitimacy and prioritize suspicious-activity alerts.
- AI enhancements to sales processes to optimize the “next best product offer.”
He also said Valley has used AI to improve access to an internal knowledge base and to rethink certain back-office processes, including card service requests, as well as elements of underwriting and risk monitoring and “to accelerate data analytics and software development.”
In response to an analyst question about expense implications, Robbins said Valley has been mindful of maintaining an efficient organization while “self-fund[ing]” investments. He said the company has spent about $450 million on CapEx over the last seven to eight years compared with about $50 million in the prior seven to eight-year period. Robbins added that Valley has reduced headcount by about 100 employees over the last year and said it is reinvesting some of that into AI.
Outlook: NII toward high end of range, loan and deposit growth tracking higher
CFO Travis Lan opened with an update on 2026 expectations, saying that continued core deposit growth, solid loan demand and a favorable yield curve backdrop are expected to push annual net interest income growth toward the higher end of previously provided guidance, with “more meaningful acceleration in the second half of the year.” With no significant change to expectations for non-interest income, expenses, or credit costs, Lan said the company sees “modest upside” to the prior guidance range and existing consensus estimates.
On the rate backdrop, Lan told Morgan Stanley that Valley had assumed two Federal Reserve cuts as of Dec. 31, but those cuts are no longer in the forecast. He said Valley is “neutral to the front end of the curve,” making the elimination of those cuts “not overly impactful” to net interest income, while higher rates in the “belly and longer end” of the curve have been incrementally helpful. He also pointed to a “structural rotation of higher cost wholesale funding into lower cost core” deposits as a tailwind to funding costs even without additional rate cuts.
Lan said Valley expects total deposit growth toward the high end of its 5% to 7% annual guidance range. During the quarter, he said direct customer deposits increased by over $900 million, enabling the bank to pay off nearly $300 million of maturing higher-cost brokered deposits and $350 million of higher-cost FHLB advances. Loans to non-brokered deposits improved to 106% from 107% in the prior quarter and 112% a year ago.
Lan said total deposit costs declined 18 basis points during the quarter, reflecting reductions in core deposit costs and the funding mix shift. He also provided spot-rate detail in Q&A, saying interest-bearing spot deposit cost was 295 basis points at March 31 versus 302 basis points at Dec. 31, while the all-in spot deposit cost was 226 basis points versus 232 basis points at year-end.
On loans, Lan said total loans grew nearly $700 million, or 5.5% annualized, during the quarter, with owner-occupied CRE—particularly in the healthcare specialty vertical—contributing to growth as regulatory CRE declined modestly. C&I loans increased nearly $150 million, supported by existing geographies, business lines, and newly onboarded talent. For the year, Lan said the bank anticipates loan growth between the midpoint and high end of its previously provided 4% to 6% range.
Commercial banking president Gino Martocci added that the C&I pipeline is up $1 billion since year-end, attributing expected growth to investments in new talent and what he characterized as robust economic conditions in Valley’s markets. Robbins also said the overall pipeline is “basically double what it was a year ago,” concentrated primarily in C&I and healthcare.
Margin, fees, expenses and credit trends
Lan said Valley posted its fourth consecutive quarter of net interest income expansion, despite first-quarter day-count headwinds. Net interest margin was flat versus the fourth quarter, and Lan said the company remains positioned to reach its year-end margin guidance. In response to a JPMorgan question, Lan said the bank entered the year expecting to build to a 3.30% margin by the fourth quarter of 2026; given a better starting point, he said he anticipates “some upside” to that 3.30% target.
Non-interest income normalized from the fourth quarter, Lan said, but increased 18% year over year, driven mainly by capital markets and deposit service charges. In Q&A, Lan said capital markets fees of about $10 million are “a good starting point” and that he anticipates growth through the rest of the year. He also noted that the company had previously flagged fourth-quarter fee income as about $7 million elevated, including $4 million to $5 million of swap-related elevation that normalized in the first quarter.
Reported non-interest expense increased to $310 million from $299 million in the fourth quarter, though Lan said that on an adjusted basis expenses were effectively flat as seasonal payroll tax pressure was largely offset by modest reductions in other compensation costs, professional and legal fees, and adjusted FDIC insurance expense. Valley’s efficiency ratio improved to 53.1% from 53.5% in the prior quarter and 55.9% a year ago, and Lan said the company expects positive operating leverage to accelerate, with the efficiency ratio trending toward 50% by the end of 2026.
On second-quarter expense cadence, Lan told Stephens that the first-quarter payroll tax impact was about a $7 million headwind that declines by about $4 million in the second quarter, while merit increases implemented mid-March will show up more in the second quarter. He said those two factors “effectively balance out,” and added that higher insurance costs affected the first-quarter compensation line.
Credit metrics were described as stable. Lan said non-accrual and accruing past-due loans declined modestly, driven primarily by “positive migration of CRE.” Net charge-offs declined to 14 basis points of total loans from 18 basis points in the prior quarter, and Lan said a modest increase in provision expense reflected strong loan growth. Allowance coverage remained around 1.2%, which Lan said is not expected to change materially during the year.
Chief Credit Officer Mark Saeger told TD Cowen that a stabilization of criticized loans in the first quarter was a “normal phenomenon” tied to year-end financial collection and migration, but he said the bank still expects criticized loans to decline over the course of the year after a “big decline” in the third and fourth quarters.
On commercial real estate risk, Saeger told Stephens that non-owner occupied multifamily is “never been a big portion” of the portfolio, at about 2.6% compared with 7% for peers, and highlighted capital call facilities within fund finance as “exceptionally well-structured.” On office, he said Valley remains granular and geographically diversified, skewing more suburban than urban, and added that the bank is seeing “more rational transactions” and signs that if the sector “hasn't hit bottom in all markets, it's close.” Martocci added that recent quarters have seen record leasing in New York City at record rents in Class A properties.
Capital and buybacks
Lan said Valley generated over 30 basis points of regulatory capital in the quarter. He said more than half of the capital generation supported “well-funded organic loan growth,” while roughly a third was used for stock repurchases. Valley bought back 4 million shares during the quarter, using about $52 million of capital, Lan said.
Looking ahead, Lan reiterated Valley’s 10.5% to 11% CET1 target range and said the bank expects to remain toward the high end throughout 2026. He said loan growth is the top capital priority, and he expects buybacks could be “a little bit less” than the first quarter to preserve capacity for anticipated loan growth, though he said the company expects to remain active. Addressing Basel III, Lan said preliminary analysis indicates regulatory capital ratios would increase 80 to 100 basis points under the proposed standardized approach, but Valley is waiting for rules to be formalized.
On M&A, Robbins said nothing has changed in the company’s approach and reiterated the importance of remaining shareholder-friendly and doing what is in shareholders’ best interests.
About Valley National Bancorp NASDAQ: VLY
Valley National Bancorp NASDAQ: VLY is a regional bank holding company headquartered in Wayne, New Jersey, offering a comprehensive suite of commercial and consumer banking products and services. Through its banking subsidiary, Valley National Bank, the company provides deposit accounts, residential and commercial lending, mortgage services, treasury and cash management, foreign exchange and trade finance solutions. Complementary wealth management and insurance offerings round out its financial services platform, catering to individual, small-business and corporate clients.
Tracing its roots to the establishment of Wayne National Bank in 1927, Valley has grown into one of the largest banks in New Jersey by both assets and deposit share.
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