Valley National Bancorp Q2 Earnings Call Highlights

Key Points

• Valley National delivered solid Q2 2026 results, with net income of about $171 million and adjusted EPS of $0.30. Net interest income rose to $488 million and net interest margin expanded to 3.20%, helped by stronger loan balances and yields.
• Deposits and loans both grew strongly, with customer deposits up $1.1 billion and loans up $1.6 billion in the quarter. Growth was concentrated in commercial and industrial lending and owner-occupied CRE, while the bank kept deposit costs stable and reduced its CRE concentration ratio.
• Management said it remains positive on the 2026 outlook, expecting loan growth near the high end of guidance and fee income toward the high end of its range. The bank also highlighted improving efficiency, with the ratio down to 52.1%, and said AI and technology investments are already producing savings.

Valley National Bancorp NASDAQ: VLY reported second-quarter 2026 earnings that management said reflected continued progress in deposit gathering, relationship-based lending, fee income growth and operating efficiency.

Chief Executive Officer Ira Robbins said the bank generated “strong customer deposit growth,” including meaningful gains in non-interest-bearing balances, while loan growth remained concentrated in commercial and industrial lending and owner-occupied commercial real estate. The company reported net income of approximately $171 million, or $0.29 per diluted share. Excluding certain non-core items, adjusted net income was approximately $173 million, or $0.30 per diluted share.

Robbins said adjusted pre-provision net revenue rose 6% from the prior quarter and reached 1.64% of average assets, which he said was the highest level since the fourth quarter of 2022.

Deposits and Lending Drive Growth

Chief Financial Officer Travis Lan said direct customer deposits increased $1.1 billion during the quarter. That included nearly $300 million of non-interest-bearing deposit growth, $200 million of interest-bearing non-maturity deposits and $600 million of retail certificates of deposit.

Lan said Valley also used $200 million of incremental brokered deposits to fund a temporary timing mismatch tied to strong loan growth. The company also rotated nearly $700 million of floating-rate NOW balances into brokered CDs within its indirect deposit portfolio. Total deposit costs were effectively unchanged from the first quarter and remained below the 2.67% level from a year earlier, according to Lan.

Loans increased $1.6 billion during the quarter, or about 13% on an annualized basis. Lan said growth continued to focus on C&I and owner-occupied CRE loans, with strength in New York, Florida and Illinois, as well as the company’s healthcare vertical. Regulatory CRE, which excludes owner-occupied loans, grew less than $100 million during the quarter.

Valley’s CRE concentration ratio declined to approximately 317% at June 30 from 329% at March 31. Lan attributed the decline to organic capital generation and the company’s May 2026 subordinated debt issuance.

Net Interest Income and Fee Income Improve

Net interest income on a tax-equivalent basis increased to $488 million, up approximately $16 million from the first quarter and $55 million from the year-earlier period. Net interest margin expanded three basis points from the prior quarter to 3.20% and was up 19 basis points from the second quarter of 2025.

Lan said the increase reflected higher average loan balances and higher yields on new loan originations and investment securities. Those benefits were partly offset by the cost of carrying excess subordinated debt between Valley’s issuance of $500 million in May and the redemption of $300 million of callable notes in June, which he estimated reduced net interest income by about $2 million.

Non-interest income increased $4.9 million to $73.7 million and represented more than 13% of total revenue. The sequential increase was driven primarily by a $2.6 million rise in capital markets revenue and a $1.6 million increase in wealth management and trust fees. Lan said fee growth reflected higher transaction volumes in loan participations and syndications, as well as tax credit advisory services.

Management said fee income is expected to move toward the higher end of Valley’s previously announced 6% to 9% growth range for 2026. During the question-and-answer session, Lan said interest rate swap income within capital markets was “slightly elevated” in the quarter due to strong commercial real estate originations, potentially by $1 million to $2 million, but said other fee categories continued to show growth opportunities.

Expense Discipline and AI Strategy in Focus

Reported non-interest expense was $311 million, up approximately $1 million from the first quarter. Adjusted non-interest expense increased by $5 million, as lower compensation costs were offset by higher FDIC expense, third-party spending tied to operational transformation efforts and incremental costs related to growth and fee income results.

Valley’s efficiency ratio improved to 52.1% from 53.1% in the first quarter and 55.2% a year earlier. Lan said management expects the efficiency ratio to continue improving as revenue grows and expenses remain controlled.

Robbins highlighted technology and artificial intelligence as priorities for scaling the franchise. He said banks that effectively adopt AI could potentially lower efficiency ratios by around 500 basis points over time. Robbins pointed to Valley Ventures, the company’s international and technology banking business, and its relationship with Bank Leumi in Israel as structural advantages supporting its AI strategy.

In response to an analyst question, Robbins said Valley is already seeing returns from AI-related efforts. Lan said the company has generated about $15 million of savings in the expense run rate against approximately $3 million to $4 million of new AI-associated expenses, including headcount and vendor spending.

Lan also said Valley continues to expect its efficiency ratio to be 50% or lower as it exits 2026, with further improvement possible beyond that. Robbins said the company’s guidance for reaching a 15% return on tangible common equity around the beginning of 2028 remains unchanged and does not rely on AI benefits to achieve that target.

Credit Trends Show Mixed Signals

Valley reported a modest increase in non-accrual and past due loans during the quarter, but management emphasized improvement in criticized and classified assets. Lan said criticized and classified assets declined to 7.3% of total loans from 8.1% in the prior quarter and 9.0% a year earlier.

Mark Saeger, executive vice president and chief credit officer, said improvements in CRE reflected upgrades and payoffs tied to assets that had been in transition or lease-up. He said the company is seeing positive progress in office lease-up and that Valley expects continued positive movement in criticized assets.

Net charge-offs totaled $22 million, or 17 basis points of average loans, compared with $18 million, or 14 basis points, in the first quarter. The provision for credit losses on loans was $29 million, up from $21 million in the prior quarter. Lan said the higher provision was due in part to strong loan growth, particularly in C&I loans. The allowance for credit losses declined to 1.16% of total loans from 1.18% at March 31.

Outlook Remains Positive

Lan said Valley is maintaining its “strong outlook” for 2026 based on first-half results and continued business momentum. The bank now expects gross loan growth at or somewhat above the high end of its range, while fee income is expected to trend toward the high end of its prior range. Deposit growth and net interest income guidance were unchanged from the upward revision provided on the prior quarter’s call.

Valley returned approximately $81 million to shareholders during the quarter through common dividends and the repurchase of 1.5 million shares. Lan said buyback activity was lower because of exceptional loan growth and that the company will continue to adjust repurchases based on near-term loan growth expectations.

Robbins said Valley’s priorities remain focused on growing core deposits, deepening commercial relationships, generating more diversified loan and fee income growth, and improving operating efficiency. He said management expects continued execution in those areas to support stronger returns over time.

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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