Valley National Bancorp (NASDAQ:VLY) said its third-quarter 2026 performance put the company on track to finish the year at the high end of its previously issued guidance ranges, supported by core deposit growth, loan expansion, improved net interest margin and tighter expense control.
Chief Executive Officer Ira Robbins said the regional bank has continued its multiyear effort to strengthen its balance sheet and improve profitability following industry disruptions in 2023. As of Sept. 30, Valley’s commercial real estate concentration ratio had fallen more than 160 percentage points from its peak in the fourth quarter of 2023, while its common equity tier 1 ratio reached 10.7% of risk-weighted assets and its loan-to-deposit ratio improved to 96%.
“Funding optimization remains our top priority and will likely be the most significant driver of further profitability improvement and valuation expansion,” Robbins said.
Deposit Growth Supports Funding Strategy
Chief Financial Officer Travis Lan said direct core customer deposits rose $1.1 billion during the quarter, led by commercial non-maturity accounts, particularly within Valley’s technology vertical and metro New York market. Brokered deposits were unchanged, while the company used excess core deposit growth to repay about $400 million of maturing short-term debt.
Total deposit costs increased 5 basis points sequentially to 2.33%, though that remained below 2.69% a year earlier. Valley said it is working to contain further deposit-cost increases following the recent Federal Reserve rate increase and sees an opportunity to replace wholesale funding with core deposits.
The company expects its pending acquisitions of Providence Financial Corporation and Bluevine Inc. to add more than $3.5 billion of low-cost core deposits. Robbins said the transactions are intended to expand Valley’s small-business banking franchise through Providence’s Chicagoland physical network and Bluevine’s national digital reach.
Bluevine had approximately 185,000 active small-business customers and more than $2 billion in low-cost core deposits, according to Robbins. Lan later said Bluevine deposits totaled $2.3 billion as of Sept. 30, up $200 million during the quarter, and that the active-client count increased by 10,000.
Valley expects the Bluevine transaction to close around Jan. 1, 2027, with deposit onboarding assumed to begin around April 1. Until the deposits transition, Lan said Valley would receive economics from Bluevine’s existing partner-bank arrangement that should leave the business effectively break-even.
Margin, Loans and Efficiency Improve
Net interest income and net interest margin expanded during the quarter, driven primarily by higher average loan balances and rising yields, Lan said. Average yields on new loan originations increased 8 basis points, while the average cost of newly originated deposit relationships declined 9 basis points, mainly because of lower certificate-of-deposit originations compared with the second quarter.
Valley’s September exit net interest margin was 3.33%. Lan said the company expects another 5 to 7 basis points of margin expansion in the fourth quarter, citing the interest-rate environment and the bank’s ability to reprice assets while managing funding costs.
Loan growth was concentrated in strategic portfolios including commercial and industrial lending and owner-occupied commercial real estate. Growth was led by healthcare lending and broader activity across Valley’s geographic markets. The loan pipeline rebuilt toward $5 billion, Lan said, and remained tilted toward C&I and owner-occupied CRE lending.
For 2027, management indicated that a 4% to 6% loan-growth range—consistent with its starting 2026 outlook—could be a reasonable planning assumption, though it has not provided formal guidance. Valley expects core deposit growth to exceed loan growth organically, and management said the acquisitions should add about $3.5 billion in core deposits against roughly $1 billion of loans.
Adjusted non-interest expense fell $5 million from the second quarter, reflecting lower professional fees, FDIC assessment costs and technology expenses. The efficiency ratio dropped below 50%, reaching its lowest point since the third quarter of 2021 and achieving that milestone one quarter earlier than management had expected.
Management continues to target an efficiency ratio in the mid-40% range over the next several years. Robbins said Valley’s artificial-intelligence investments are expected to support both expense savings and revenue opportunities, estimating internally that the opportunity is roughly 65% expense-related and 35% revenue-related.
- Valley has deployed AI in customer care, fraud and anti-money-laundering reviews, auto-loan collections, credit underwriting and loan servicing.
- The company said Bluevine is expected to add AI engineering and developer talent.
- Treasury-management penetration has risen to nearly 60% of Valley’s C&I customers, according to Lan.
Credit Metrics Show Mixed but Improving Trends
Credit quality trends were generally favorable, although net charge-offs rose. Criticized and classified loans declined 2% sequentially and 12% year over year, representing 7.1% of total loans compared with 7.3% in the previous quarter and 8.8% a year earlier. Accruing past-due loans also declined, mainly due to lower early-stage CRE delinquencies.
Non-accrual loans increased to 0.96% of total loans, largely because of one well-secured construction-category loan. Chief Credit Officer Mark Saeger said the exposure was actually a land loan on which construction had not started. He said the borrower had made substantial paydowns in exchange for prior extensions, remains current on interest, and that current valuations and interest from prospective buyers support Valley’s expectation of exiting the loan “without issue.”
Net charge-offs increased to 28 basis points of average loans from 17 basis points in the second quarter, primarily due to one C&I charge-off. Year-to-date net charge-offs stood at 20 basis points, which Lan said was at the high end of Valley’s guidance range and is now a reasonable expectation for the full year.
The company recorded a $31 million provision, and its allowance coverage ratio declined to 1.13% from 1.16% at June 30. Management expects the allowance level to remain broadly stable as further improvement in criticized and classified loans is offset by continued C&I growth, which carries a higher allowance requirement.
Capital Returns and Longer-Term Targets
During the quarter, Valley returned about $96 million to shareholders through common dividends and the repurchase of 2.5 million shares. Lan said regulatory capital ratios were generally unchanged, with profitability supporting loan growth and buybacks.
Management said share repurchases remain discretionary, with organic loan growth its first capital-allocation priority. Robbins added that the bank faces no fixed deadline to bring its CRE concentration ratio below 300%, though it expects the ratio to trend lower over time.
Valley’s longer-term objectives include a 90% loan-to-deposit ratio, CRE concentration well below 300%, a mid-40% efficiency ratio and returns on tangible common equity in the high teens. Lan said Valley could reach a 15% return on average tangible common equity around the middle of 2027 and exceed that level by year-end, excluding the impact of its pending transactions.
About Valley National Bancorp (NASDAQ:VLY)
Valley National Bancorp is the bank holding company for Valley National Bank, a full-service regional bank headquartered in Wayne, New Jersey. The company provides banking and financial services to individuals, businesses, nonprofit organizations and government entities through a network of branches and digital banking channels.
Valley National Bank offers deposit accounts, residential and commercial real estate lending, business loans, consumer loans, mortgage banking, treasury management and other commercial banking services.
