VLY Q2 Deep Dive: Deposit Growth, Specialty Lending, and Efficiency Drive Solid Performance

July 25, 2025 at 01:32 AM EDT

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Regional banking company Valley National Bancorp (NASDAQ: VLY) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 9% year on year to $495 million. Its non-GAAP profit of $0.23 per share was 6.4% above analysts’ consensus estimates.

Is now the time to buy VLY? Find out in our full research report (it’s free).

Valley National Bank (VLY) Q2 CY2025 Highlights:

Revenue: $495 million vs analyst estimates of $492.5 million (9% year-on-year growth, 0.5% beat)
Adjusted EPS: $0.23 vs analyst estimates of $0.22 (6.4% beat)
Market Capitalization: $5.34 billion

StockStory’s Take

Valley National Bank’s second quarter results came in slightly above Wall Street’s expectations, with management crediting strong deposit growth and diversification in commercial lending as key drivers. CEO Ira Robbins highlighted the bank’s deliberate investments in talent and technology, noting, “Our ability to attract and retain relationship-based deposits in a competitive environment is a valuable differentiator.” The quarter also saw progress in building high-quality fee income and reducing reliance on higher-cost funding sources. Management reported further improvement in profitability ratios and efficiency, citing stability in credit quality despite industry headwinds. These factors contributed to the company’s momentum, even as competitive pressures in deposit pricing persisted.

Looking ahead, Valley National Bank’s guidance is anchored by expectations for continued net interest margin expansion, disciplined expense management, and selective growth in commercial and industrial (C&I) lending. CFO Travis Lan stated, “We anticipate loan growth to moderate, but deposit tailwinds and asset repricing will support further margin improvement.” Management expects noninterest income to remain supported by capital markets and treasury services, while ongoing investments in specialty verticals are aimed at deepening client relationships. The outlook also reflects confidence in credit quality normalization and a measured approach to capital allocation, including the potential for organic growth and share repurchases.

Key Insights from Management’s Remarks

Management pointed to targeted investments in deposit channels, specialized lending, and fee-generating services as the primary contributors to the latest quarter’s performance and ongoing strategic transformation.

Deposit momentum and mix shift: Valley National Bank reported over 105,000 new deposit accounts added in the past year, driving approximately 8% growth in core deposits and a reduction in reliance on indirect deposit funding. Management attributed this to investments in digital channels and expansion of specialty verticals.
C&I lending diversification: The bank’s commercial and industrial loan portfolio grew nearly 15% year-over-year, with robust contributions from health care and fund finance verticals. These specialty segments, described as having attractive risk-adjusted returns, accounted for about 60% of quarterly net C&I loan growth.
Fee income quality upgrade: Noninterest income, including revenue from capital markets, treasury management, and tax credit advisory, has grown at a 12% annual rate since 2017. Management emphasized a shift away from volatile residential loan sale gains toward more durable, client-focused services.
Efficiency improvements: The adjusted efficiency ratio improved to 55.2%, the best level since early 2023, benefiting from disciplined expense management and strong revenue growth. Salary increases and normalized professional fees were cited as modest headwinds.
Stable credit and capital position: Asset quality remained generally stable, with nonaccrual loans flat and criticized asset levels plateauing. The bank’s capital position was described as “extremely well capitalized” relative to its risk profile, providing flexibility for growth initiatives.

Drivers of Future Performance

Valley National Bank’s outlook is shaped by expectations for sustained margin expansion, balanced loan growth, and continued diversification of revenue streams.

Deposit pricing and margin tailwinds: Management anticipates net interest margin will continue to expand, supported by repricing opportunities on both assets and liabilities. CFO Travis Lan noted ongoing efforts to replace higher-cost brokered deposits with lower-cost core funding, emphasizing the unique position created by the current interest rate environment.
Moderating loan growth: While C&I lending pipelines remain strong, management expects overall loan growth to slow to around 1% per quarter in the second half, reflecting both market conditions and a deliberate approach to credit risk. Specialty verticals, including technology and health care, are expected to be primary contributors.
Expense and credit discipline: The company plans to keep noninterest expense growth in check, targeting 2% to 4% for the year. Management also expects credit costs to normalize, with net charge-offs and provision levels projected to decline in the coming quarters, barring significant changes in the economic backdrop.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the pace of core deposit growth and Valley’s ability to maintain a lower average funding cost, (2) the performance and credit quality of specialty lending verticals such as health care and fund finance, and (3) progress in expanding fee-based businesses like treasury management and capital markets. Updates on Valley’s capital allocation strategy and any new developments in competitive banking markets will also be important to track.

Valley National Bank currently trades at $9.62, in line with $9.70 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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