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VALLEY NATIONAL BANCORP (VLY)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 GAAP EPS was $0.20; adjusted EPS was $0.13. Net interest margin (FTE) expanded to 2.92% and net interest income (FTE) rose to $424.3M; results benefited from a $46.4M tax reserve reversal while provision and net charge-offs were elevated .
  • Deposits mix improved: direct customer deposits rose $1.7B, enabling a $2.0B reduction in higher-cost brokered CDs; noninterest-bearing deposits increased to 23% of total, and average deposit cost fell to 2.94% (December average 2.87%) .
  • Balance-sheet de-risking accelerated: CRE concentration ratio fell to ~362% from 421% in Q3; allowance coverage increased to 1.17% as net charge-offs rose to $98.3M on a handful of CRE and C&I relationships .
  • 2025 outlook raised: management now guides to 9–12% NII growth in 2025 (was mid-to-high single digits), expects NIM to rise, ROA to exceed 1% exiting 2025, and reserves to end 2025 at 1.20–1.25% as credit costs taper through the year .
  • Strategic initiatives in Q4 included branch expansion (Staten Island, Beverly Hills) and leadership planning; President Tom Iadanza announced retirement effective June 30, 2025, with transition underway .

What Went Well and What Went Wrong

What Went Well

  • Net interest momentum: NII (FTE) +3% q/q and +6% y/y; NIM (FTE) +6 bps q/q to 2.92% on lower deposit costs and securities yield contribution .
  • Deposit growth and repricing: +$1.7B direct customer deposits; deposit costs reduced by 31 bps in Q4 with a 51% downside deposit beta; December average cost was 2.87% (partial Fed cut benefit) .
  • De-risking progress: CRE concentration down to ~362% (from 421%); noninterest-bearing deposits up to 23%; allowance coverage up to 1.17% .
    • Quote: “Direct customer deposits grew $1.7 billion…which enabled a $2 billion reduction in higher cost indirect deposits…we reduced deposit costs by 31 basis points…deposit beta of 51%” .
    • Quote: “We anticipate continued net interest income momentum…fee income progress…and maintenance of our expense control” .

What Went Wrong

  • Elevated credit costs: Provision rose to $106.5M; net charge-offs increased to $98.3M driven by four non-performing CRE and C&I relationships; nonaccrual loans increased to 0.74% of loans .
  • Interest income headwind: Interest income decreased q/q due to CRE loan sales and adjustable loan repricing; asset yields fell 23 bps q/q to 5.75% .
  • Noninterest income softness: Down $9.5M q/q (absence of prior litigation settlement gains and loan sale costs), partially offset by capital markets and wealth fees .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Revenue ($USD Millions)$452.9 $471.2 $474.2
Net Interest Income - FTE ($USD Millions)$403.0 $411.8 $424.3
Net Interest Margin - FTE (%)2.84% 2.86% 2.92%
Diluted EPS ($USD)$0.13 $0.18 $0.20
Adjusted Diluted EPS ($USD)$0.13 $0.18 $0.13
Provision for Credit Losses ($USD Millions)$82.1 $75.0 $106.5
Net Charge-offs ($USD Millions)$36.8 $42.9 $98.3

Segment loan composition (period-end balances):

Loans ($USD Billions)Q2 2024Q3 2024Q4 2024
Commercial & Industrial (C&I)$9.48 $9.80 $9.93
CRE – Non-owner occupied$13.71 $12.65 $12.34
CRE – Multifamily$8.98 $8.61 $8.30
CRE – Owner-occupied$5.54 $5.65 $5.89
Construction$3.55 $3.49 $3.11
Residential Mortgage$5.63 $5.68 $5.63
Consumer (Auto + Other + HE)$3.44 $3.47 $3.59
Total Loans$50.31 $49.36 $48.80

Key performance indicators:

KPIQ2 2024Q3 2024Q4 2024
Allowance / Loans (%)1.06% 1.14% 1.17%
Nonaccrual Loans / Loans (%)0.60% 0.60% 0.74%
Accruing Past Due Loans / Loans (%)0.14% 0.35% 0.20%
Avg Cost of Total Deposits (%)3.18% 3.25% 2.94%
Noninterest-bearing Deposits (% of total)22% 22% 23%
CRE Concentration Ratio (%)—421% 362%

Note: December average cost of deposits was 2.87% (partial Fed cut benefit) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Income growthFY 2025Mid-to-high single-digit NII growth 9–12% NII growth; upside if rates stay elevated Raised
Allowance coverage ratioFY 2025 YE~1.25% target 1.20–1.25% target range Clarified lower bound
ROA exit rateQ4 2025“Back above 1%” targeted (tone in Q3) Expects >1% ROA exiting 2025 Affirmed
Deposit beta assumption2025 modeling~50% overall (noninterest included) 60% on interest-bearing nonmaturity; ~50% incl. NIB; outperformed 51% downside beta in Q4 Detailed parameters
Net charge-offs/provision cadence2025Elevated near term; normalization in 2025 (Q3 tone) Higher in H1, taper through year; provision down as year progresses Timing specified
Securities portfolio growthFY 2025Not specified~$500M growth planned New
CRE concentrationFY 2025~375% by YE 2025 Continuing methodical reduction; entered 2025 clean slate Maintained trajectory
DividendQuarterly$0.11 per share $0.11 per share Maintained

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
Deposit costs & betaPricing control; avg cost 3.18%; direct vs broker mix 22 bps reduction post-Fed cut; beta ~44%; NIB trough at 22% 31 bps reduction; downside beta 51%; December avg cost 2.87%; NIB 23% Improving cost, mix rising NIB
CRE concentration & de-riskingCRT on auto; reserve build to ~1.10% by YE Announced ~$800M CRE sale; target ~375% by YE 2025 Ratio down to ~362%; most CRE charge-offs behind; entering 2025 cleaner De-risking ahead of plan
C&I growth & pipeline+16.5% annualized; reclass to owner-occupied; pipeline rising C&I +$320M; pipeline up; guidance low single-digit total loans C&I high single-digit to low-teens; pipeline +$600M y/y; owner-occupied growth Sustained multi-line momentum
NII/NIM outlook & curveNIM inflected; guidance +1.5–3% quarterly NII NIM expansion; curve steepening supports upper-end 2025 NII +9–12%; neutral front-end, positive long-end Raised, curve-friendly
Reserves & credit costsPeak provision; ACL ~1.10% YE; charge-offs concentrated Elevated Q4 charge-offs expected; ACL ~1.20% YE ACL 1.17%; reserves to 1.20–1.25% YE 2025; NCOs/provision taper Normalizing trajectory

Management Commentary

  • “Net interest income increased 3% from the third quarter and is now 6% higher than a year ago…strong core deposit growth enabled the repayment of nearly $2 billion of higher cost maturing indirect CDs” .
  • “Direct customer deposits grew $1.7 billion…Noninterest deposit balances…now comprise 23% of total deposits…we reduced deposit costs by 31 basis points…deposit beta of 51%” .
  • “On an annualized basis, deposit service revenue in the second half of 2024 was…$11 million higher…FX fees…$4 million higher…over 50% growth” .
  • “We anticipate continued net interest income momentum…fee income progress…and…expense control will underpin…profitability…we…laid out preliminary 2025 guidance” .
  • “Our guidance of 9% to 12% net interest income growth in 2025…we would expect to migrate towards or beyond the upper end…if interest rates…remain elevated” .
  • “We believe that most of the CRE charge-offs are now behind us” .
  • “December average cost of total deposits was 2.87%…model assumes a 60% downside beta…about 50% including noninterest…we’ve outperformed that” .
  • Medium-term returns: “We should definitely be operating north of 15% [ROTCE] with an ROA above 120 basis points long term” .

Q&A Highlights

  • Yield curve impact and NII: Neutral to front end; positively exposed to longer end; stronger funding after Q4 supports higher NII outlook .
  • Reserve targets and cadence: YE 2025 ACL guided to 1.20–1.25%; more build early 2025, taper later .
  • Deposits growth drivers: Broad-based across branches (+4%) and specialties (+~5%), strong Treasury Solutions adoption (+$0.5B balances) .
  • Loan growth and pipeline: C&I guide high single-digit to low-teens; pipeline +$600M y/y at 12/31; healthcare and fund finance strong .
  • ROA >1% by Q4 2025: NII expansion and provision reduction underpin >1% exit; deposit betas modeled conservatively; confident given Q4 execution .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q4 2024 EPS and revenue were unavailable due to data access limits; therefore, a formal beat/miss assessment versus consensus cannot be provided at this time. Values retrieved from S&P Global were unavailable due to request limits.
  • Notable non-GAAP adjustments: Q4 included a $46.4M tax reserve reversal, $7.9M loan sale transaction costs, and balance-sheet repositioning effects; adjusted EPS was $0.13 vs GAAP $0.20 .

Key Takeaways for Investors

  • Balance-sheet recalibration is advancing faster than plan (CRE concentration down to ~362%, ACL 1.17%), reducing structural risk while preserving profitability trajectory into 2025 .
  • Deposit mix and cost are turning into tailwinds (NIB at 23%; average deposit cost 2.94% with downside beta ~51%), supporting further NIM expansion as funding reprices .
  • 2025 guidance is more constructive (NII +9–12%; ROA >1% exit; ACL 1.20–1.25%), with upside if long rates stay higher and deposit beta outperformance persists .
  • Near-term headwind remains credit normalization (Q4 NCOs $98.3M; provision $106.5M), but management expects tapering through 2025 as identified issues resolve .
  • Fee income engines (Treasury Solutions, FX, wealth/capital markets) are scaling, offsetting capital markets lumpiness and prior one-offs; branch expansion supports core deposit growth .
  • Strategic leadership transition is planned and orderly (President retirement June 2025), minimizing execution risk while sustaining growth initiatives .
  • Trading lens: Watch for continued NIM expansion and deposit-cost declines, evidence of credit cost tapering, and confirmation of NII trajectory against rate path—key drivers for multiple re-rating .