Valley National Navigates Headwinds with Strategic Deposit Growth and AI Focus

NEW YORK, NY – April 23, 2026 – Valley National Bancorp (NASDAQ: VLY) demonstrated a resilient start to the year, reporting solid first-quarter 2026 earnings that underscored the success of its strategic focus on strengthening its balance sheet and investing in technology. Despite a sequential dip in net income common in the first quarter, the bank posted significant year-over-year growth and showcased a stable financial footing through disciplined deposit management and targeted loan expansion.

The New York-based holding company for Valley National Bank announced net income of $163.9 million, or $0.28 per diluted common share. While this was down from the $195.4 million reported in the fourth quarter of 2025, it marked a substantial 55% increase from the $106.1 million, or $0.18 per share, earned in the first quarter of 2025. The bank's adjusted net income, which excludes non-core items, landed at $168.9 million, or $0.29 per diluted share.

The results reflect a financial institution executing a clear, long-term plan in a complex economic landscape. "We continue to execute on our strategic priorities by growing low-cost core deposits and further diversifying our loan portfolio," said CEO Ira Robbins in the earnings release. "These efforts have strengthened our balance sheet metrics and enhanced the sustainability of our earnings and profitability."

The Balance Sheet Blueprint: Deposits and Discipline

A standout element of Valley's first-quarter performance was its adept management of its funding base. At a time when many regional banks are grappling with intense competition for deposits and rising funding costs, Valley successfully shifted its deposit mix toward more stable, lower-cost sources.

Total deposits grew by a healthy $676.5 million to reach $52.9 billion. More importantly, this growth was fueled by a nearly $1 billion increase in direct customer deposits, sourced from new commercial and online clients. This influx allowed the bank to shed $278.5 million in higher-cost indirect and brokered deposits. The strategic move didn't stop there; the strong organic deposit growth also enabled Valley to pay down $350 million in higher-cost Federal Home Loan Bank (FHLB) advances, further optimizing its liability structure.

This "disciplined deposit pricing" was a key driver behind the bank's stable net interest margin (NIM), a critical measure of lending profitability. The NIM on a tax-equivalent basis held firm at 3.17%, unchanged from the previous quarter and up a significant 21 basis points from the prior year. The cost of total average deposits consequently fell 18 basis points during the quarter to 2.27%, a testament to the bank's proactive funding strategy. This ability to attract and retain core deposits while managing costs provides a durable foundation for future profitability.

Loan Growth and Prudent Risk Management

On the asset side of the ledger, Valley continued its measured expansion, growing its total loan portfolio by $692.1 million, an annualized rate of 5.5%, to $50.8 billion. The growth was not indiscriminate but rather targeted toward specific relationship-driven segments.

Commercial and industrial (C&I) loans increased by $142.6 million, while the total commercial real estate (CRE) portfolio grew by $466.0 million. Within CRE, the bank emphasized its focus on owner-occupied properties, a category that generally carries a lower risk profile than speculative development. This aligns with the bank's stated strategy of exiting lower-return transactional relationships to focus on higher-value, relationship-based clients, particularly in business banking and affluent markets. Management indicated a strong pipeline for C&I and healthcare loans, suggesting this targeted growth is poised to continue.

Crucially, this loan growth was achieved alongside a marked improvement in credit quality. Net loan charge-offs—loans deemed uncollectible—fell to just $17.5 million, or 0.14% of total loans. This figure is a significant improvement from both the $22.6 million in the prior quarter and the $41.9 million in the same quarter last year. Non-accrual loans remained stable at 0.85% of total loans, and the bank’s allowance for credit losses stood at a solid 1.18%, indicating a robust buffer against potential future losses.

Banking on the Future: Valley's AI Advantage

Beyond the traditional metrics of banking performance, CEO Ira Robbins drew attention to the rapidly evolving technological landscape, positioning Valley as a forward-thinking institution prepared for the next wave of innovation.

"We simultaneously acknowledge that the banking landscape is evolving rapidly as artificial intelligence adoption accelerates," Robbins stated. "I believe that Valley is well-positioned to differentiate itself as a beneficiary from these changes. We invested early in AI talent, and continue to devote resources and focus to solutions that can augment the capabilities of our associates."

This is more than just industry rhetoric. The bank's early and ongoing investments in AI and advanced analytics are being integrated across its operations. These technologies are being deployed to enhance client outreach, improve fraud detection, and streamline complex processes like underwriting and risk monitoring. The goal, as Robbins emphasized, is to enhance the client experience and improve efficiency, not replace the relationship-led model that sits at the bank's core. In an industry where over 90% of banks are now investing in AI, Valley's narrative of being an early adopter with an established AI talent base could provide a meaningful competitive edge in both operational efficiency and customer service.

Capital Strength and Shareholder Returns

Valley's strong quarter was underpinned by a solid capital position, providing the flexibility to both invest in growth and return value to shareholders. The bank’s Common Equity Tier 1 (CET1) capital ratio, a key measure of financial strength, stood at 10.91% at the end of the quarter. While slightly down from the previous quarter, it remains comfortably above regulatory requirements and near the top end of the bank's target range.

This position of strength allowed the bank to continue its share repurchase program, buying back 4.0 million shares of its common stock at an average price of $12.95 during the quarter. This action, which returns capital to shareholders and can boost earnings per share, demonstrates management's confidence in the bank's valuation and future prospects. While management has indicated buybacks may moderate to preserve capital for strong loan growth opportunities, the program reflects a balanced approach to capital deployment, ensuring the bank remains well-capitalized while actively managing shareholder returns. The tangible book value per share continued to climb, increasing by approximately 1% during the quarter, providing another indicator of underlying value creation.