Valley National Bancorp Q3 FY2025 earnings call

• Core deposit growth: Added nearly 110,000 new deposit accounts over 12 months, core deposits up nearly 10%, indirect deposits as a percent of total deposits dropped to 11%, average cost of deposits reduced by 56 basis points since Q3 2024.
• Noninterest income: Treasury management and tax credit advisory initiatives contributed to incremental revenue, with deposit service charge revenue up annualized $16 million since Q3 2024.
• Credit performance: Significant reduction in net charge-offs and provisions, CRE losses remained far below larger banks' stress test forecasts, nonaccrual loans increased but total past dues and nonaccrual loans as a percentage of total loans declined.
• New leadership: Gino Martocci joined as President of Commercial Banking in March, Patrick Smith as President of Consumer Banking in September; their expertise is expected to accelerate growth.

Valley National Bancorp reported net income of approximately $163 million or $0.28 per diluted share in the third quarter, an increase from the previous quarter. Core customer deposits grew nearly 10% over 12 months with nearly 110,000 new deposit accounts added. Noninterest income showed momentum, with deposit service charges growing due to treasury management platform expansion. Net interest income had 3% growth for the second consecutive quarter, and credit costs were significantly reduced. The balance sheet remained strong with regulatory capital ratios increasing and tangible book value up. Net interest margin (NIM) improved for the sixth consecutive quarter, and core deposits saw a 56 basis point reduction in average cost since Q3 2024.

• Net interest income expected to grow another 3% sequentially in Q4 2025, aiming for above 3.1% NIM in Q4 2025 and further expansion in 2026.
• Fee income expected to be generally stable in Q4 2025 within the range of the last 2 quarters.
• Anticipate general stability in credit costs in Q4 2025, with improved 2025 guidance relative to prior expectations.
• Expect low single-digit growth in CRE balances in 2026 and beyond, with the CRE concentration ratio expected to continue declining.

• Competitive environment in deposit acquisition and loan origination, with continued competition for new deposit relationships and loan spreads.
• Potential impact of interest rate changes on CRE loan payoffs and origination volume.
• Continued monitoring of the small portion of rent-stabilized multifamily loans in the CRE portfolio.

Q: Could you speak to the competitive backdrop, just given the decline in C&I loans?

A: Travis Lan discussed deposit cost decline, competitive environment for new deposit relationships, and continued opportunity on repricing the back book. Gino Martocci noted strong demand in C&I and CRE with ample liquidity in the marketplace.

Q: Just wanted to ask on the geography of CRE and C&I. I think you've got a majority of C&I outside the Northeast at this point. As you look at your pipeline today, do you expect to continue to have more business coming from outside the Northeast than inside the legacy Northeast footprint?

A: Gino Martocci said originations were 1/3 in Southeast, 1/3 in Northeast, 1/3 in specialty businesses; Florida franchise strong with expected slightly more originations there. Ira Robbins added focus on Florida footprint with significant organic growth.