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VALLEY NATIONAL BANCORP (VLY)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered improved profitability: net income $133.2M and diluted EPS $0.22, up from Q1 2025 ($106.1M, $0.18) and Q2 2024 ($70.4M, $0.13). Net interest margin expanded 5 bps sequentially to 3.01% and efficiency ratio improved to 55.20% .
  • Against S&P Global consensus, EPS modestly beat (actual $0.22 vs $0.216) and total revenue modestly exceeded (actual $495.0M vs $492.8M); estimate counts were 11 for EPS and 7 for revenue*.
  • Balance sheet trends were favorable: deposits +$759M to $50.7B, C&I loans +$720M (fund finance and healthcare verticals ~60% of growth), while CRE balances declined; CRE concentration fell to ~349% .
  • Credit normalization continued: provision for loan losses fell to $37.8M, net charge-offs declined sequentially; a spike in accruing past dues (0.40% of loans) related to three CRE credits, two of which were resolved in July .
  • Guidance updates: loan growth ~3% (maintained), net interest income growth refined to 8–10% (lowered), noninterest income 6–10% (unchanged), noninterest expense lowered to 2–4%, net charge-offs $100–$125M, provision ~ $150M; NIM expected to rise through 2025 into 2026 .

What Went Well and What Went Wrong

What Went Well

  • NIM expansion and funding mix: tax-equivalent NIM rose to 3.01%, supported by asset repricing and deposit cost discipline; efficiency ratio improved to 55.20% .
  • Relationship deposit growth: total deposits +$759M; CEO emphasized “over 105,000 new deposit accounts,” ~8% core growth YoY, and reduced reliance on indirect deposits (18%→13%), plus “over $1B of new deposits at a blended 2.77%” in Q2 .
  • Diversified C&I growth: C&I loans +$720M, with fund finance and healthcare contributing ~60%; management highlighted “never taken a loss” on Valley-originated healthcare and capital call loans .

What Went Wrong

  • Early-stage delinquencies: accruing past due loans rose to $199.2M (0.40% of loans), driven by three CRE credits; two resolved in July, but it briefly pressured asset quality optics .
  • Non-interest expense: +$7.5M sequentially to $284.1M, driven by professional/legal fees and higher incentive/severance; partially offset by lower payroll taxes .
  • Non-accrual loans ticked up: non-accruals increased to $354.4M (0.72% of loans), largely due to CRE; allowance coverage to loans edged down to 1.20% on loan growth .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Total revenue ($USD Millions)$452.9 $478.4 $495.0
Net interest income - FTE ($USD Millions)$403.0 $421.4 $433.7
Net income ($USD Millions)$70.4 $106.1 $133.2
Diluted EPS ($USD)$0.13 $0.18 $0.22
NIM (FTE) (%)2.84% 2.96% 3.01%
Efficiency ratio (%)59.62% 55.87% 55.20%

Segment/Lending Mix

Loans ($USD Billions)Q2 2024Q1 2025Q2 2025
Commercial & Industrial$9.48 $10.15 $10.87
Total CRE (incl. construction)$31.77 $29.11 $28.83
Residential mortgage$5.63 $5.64 $5.71
Automobile (consumer)$1.76 $2.04 $2.18
Other consumer + HE$1.67 + $0.57 $1.11 + $0.60 $1.17 + $0.63
Total loans$50.31 $48.66 $49.39

Key KPIs

KPIQ2 2024Q1 2025Q2 2025
Deposits ($USD Billions)$50.11 $49.97 $50.73
CRE concentration ratio (%)—353% ~349%
Non-accrual loans ($USD Millions)$303.3 $346.5 $354.4
Accruing past due loans ($USD Millions)$72.4 $51.7 $199.2
Net charge-offs ($USD Millions)$36.8 $41.9 $37.8
ACL as % of total loans (%)1.06% 1.22% 1.20%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Loan growthFY 20253–5% (low end) ~3% (maintained) Maintained at lower end
Net interest income growthFY 20259–12% 8–10% Lowered
Noninterest income growthFY 20256–10% (initial framework) 6–10% Maintained
Noninterest expense growthFY 2025Higher prior range (not specified)2–4% Lowered
Net charge-offsFY 2025~50% decline vs 2024 (201.6M) $100–$125M Tightened range
Provision for loan lossesFY 2025~50% decline vs 2024 (309.4M) ~$150M Refined numeric
NIM trajectoryFY 2025–2026Exit ~3.10% EOY 2025 Rise through 2025 into 2026 Maintained upward path
EPS vs consensusFY 2025—“Broadly in line with consensus” Informational
Dividend (common)Q3 2025$0.11 declared prior$0.11 declared, unchanged Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Funding transformation & depositsQ4: core deposits up, indirect down; NIM expansion outlook . Q1: core deposits +$600M; total beta down 53% since rate cuts .+$759M deposits; >$1B new deposits at 2.77% blended; indirect reliance reduced; efficiency ratio best since Q1’23 .Improving
NIM outlookQ4: NIM expansion expected in 2025 . Q1: ~3.10% by EOY .NIM +5 bps to 3.01%; expected to rise through 2025/2026 .Improving
CRE concentration & portfolioQ4: CRE conc. down to ~362%; selectivity; loan sales . Q1: further down to 353%; runoff slowing ahead .~349% concentration; CRE balances down; more relationship-driven origination .Improving/stabilizing
Specialty verticals (healthcare, fund finance, tech/international)Q4: diversification progress noted . Q1: pipeline building; nationwide businesses (healthcare, fund finance) .~60% of C&I growth from fund finance/healthcare; strong tech banking franchise (Israel link) .Expanding
Credit normalizationQ4: provision elevated; net charge-offs high; allowance up . Q1: provision lowest in 12 months; early-stage delinquencies at 11 bps .Provision down; net charge-offs down; accruing past dues spike idiosyncratic and largely resolved .Normalizing
Capital & buyback debateQ4: capital raised; ratios improved . Q1: very well positioned .Flexibility for buybacks but prioritizing organic growth; path to 1% ROA and 12–12.5% ROTCE in 2026–27 .Optionality rising

Management Commentary

  • CEO: “Over the past 12 months, we have added over 105,000 new deposit accounts… approximately 8% core deposit growth. As a result, our reliance on indirect deposits has declined from 18% down to 13%.”
  • CEO: “We have never taken a loss on any Valley-originated healthcare C&I loans… [and] never taken a loss on a capital call loan.”
  • CFO: “We originated net new deposits this quarter of $1.8 billion at a blended rate of 2.77%… we think we have a combination of tailwinds on the deposit side.”
  • CFO: “We continue to expect approximately 3% loan growth for the year… refining our net interest income growth estimate to a range of 8% to 10%… lowering noninterest expense growth guidance to 2% to 4%.”
  • CEO: “There remains a meaningful disconnect between the quality of our franchise and the valuation of our shares… continued execution of our strategy will close that gap over time.”

Q&A Highlights

  • Deposit pricing and NIM cadence: Management expects NIM to increase through 2025 and into 2026, supported by asset repricing and core deposit growth; $1.8B new deposits at 2.77% blended rate and brokered CDs repricing opportunities highlighted .
  • Credit outlook clarity: Accruing past dues increase driven by three CRE credits—one paid off ($39M) and one brought current ($60.6M) in July; criticized levels stabilizing and guidance tightened for net charge-offs ($100–$125M) .
  • Technology banking franchise: Valley’s acquired tech banking team with deep Israel link (>50% share of Israel-originating clients to US) provides scalable infrastructure to expand domestically .
  • Capital allocation: Buyback flexibility acknowledged; focus remains on organic growth with targets to reach ~1% ROA by year-end and ~12–12.5% ROTCE in 2026, trending toward ~15% in 2027 .
  • Pipeline strength: Commercial pipeline increased from ~$2.0B to >$2.7B heading into Q2/Q3/Q4, supporting sustained C&I growth .

Estimates Context

MetricQ2 2024Q1 2025Q2 2025
EPS consensus mean ($)0.138*0.190*0.216*
EPS actual ($)0.13 0.18 0.22
# EPS estimates11*10*11*
Revenue consensus mean ($USD)467,965,340*483,298,460*492,759,610*
Revenue actual ($USD)$474.2M $478.4M $495.0M
Target price consensus mean ($)13.67*13.67*13.67*

Values marked with * retrieved from S&P Global.

Interpretation:

  • Q2 EPS modestly beat consensus ($0.22 vs $0.216); revenue modestly exceeded ($495.0M vs $492.8M). Modest beats were driven by NIM expansion, deposit mix improvement, and stronger fee income (capital markets, deposit service charges) .
  • Prior quarter Q1 EPS slightly missed ($0.18 vs $0.190)* while revenue was essentially in-line; trajectory improved into Q2 with reduced provision, stronger NII and fee momentum .

Key Takeaways for Investors

  • Margin expansion is the core near-term earnings lever: NIM at 3.01% with management guiding continued expansion through 2025/2026 on asset repricing and deposit cost tailwinds—supportive of sequential NII growth and EPS beats .
  • Deposit franchise strengthening: sustained core growth and reduced indirect reliance should lower funding costs and stabilize NIM; Q2 added >$1B new deposits at 2.77% blended rate .
  • Loan mix shift lowers risk concentration: C&I growth (fund finance, healthcare) diversifies earnings while CRE balances decline; CRE concentration down to ~349% from 474% at YE 2023 .
  • Credit normalization intact despite transient delinquencies: provision fell, net charge-offs declined; the Q2 past-due spike was idiosyncratic and largely resolved in July, aligning with tightened net charge-off guidance .
  • Operating discipline: efficiency ratio improved to 55.20% and expense guidance lowered to 2–4%, reinforcing operating leverage as revenues rise .
  • Valuation catalyst: execution toward ~1% ROA by YE 2025 and ROTCE path into low-teens by 2026 could compress the valuation discount; buyback optionality exists but management favors organic growth .
  • Trading setup: modest estimate beats plus visible NIM trajectory and credit clarity are positive near-term catalysts; watch deposit costs, brokered CD repricing pace, and CRE stabilization in H2.

Additional Q2 2025 Press Releases

  • Common dividend declared: $0.11 per share (unchanged) for payment Oct 1, 2025; preferred dividends detailed .
  • Chicago expansion: doubled downtown office footprint to support Midwest growth; 2024 Chicago deposits +80%, commercial loans +64% .
  • New General Counsel: Lyndsey Sloan appointed Sr EVP, General Counsel, enhancing legal/regulatory leadership depth .

Appendix: Cross-Period Data Points

  • Deposit balances: $50.1B (Q4’24) → $50.0B (Q1’25) → $50.7B (Q2’25) .
  • NIM (FTE): 2.92% (Q4’24) → 2.96% (Q1’25) → 3.01% (Q2’25) .
  • Efficiency ratio: 57.21% (Q4’24) → 55.87% (Q1’25) → 55.20% (Q2’25) .
  • Allowance coverage (% loans): 1.17% (Q4’24) → 1.22% (Q1’25) → 1.20% (Q2’25) .
  • CRE concentration: 362% (Q4’24) → 353% (Q1’25) → ~349% (Q2’25) .

Footnotes:

  • All company-reported figures and commentary cited from Valley National Bancorp Q2 2025 press release and earnings call – –, with Q1 2025 and Q4 2024 documents for trend context – –.
  • S&P Global consensus data used for estimates comparisons; values marked with * retrieved from S&P Global.