Valley National Bancorp (VLY -1.05%), a leading regional commercial bank with a strong presence in the Northeast and Florida, reported earnings on July 24, 2025. The headline: Both non-GAAP earnings and GAAP revenue exceeded Wall Street estimates. Adjusted diluted EPS (non-GAAP) came in at $0.23 versus an expected $0.22, while GAAP revenue totaled $495.0 million, topping estimates by about $2.3 million. the quarter showed steady momentum on several strategic fronts. However, concerns around commercial real estate exposure and rising past-due loans remain in focus for the bank and its stakeholders.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS – Diluted (Non-GAAP) | $0.23 | $0.22 | $0.13 | 76.9 % |
| Revenue (GAAP) | $495.0 million | $492.8 million | $452.9 million | 9.3 % |
| Net Interest Income (GAAP) | $432.4 million | $401.7 million | 7.6 % | |
| Net Interest Margin | 3.01 % | 2.83 % | 0.18 pp | |
| Efficiency Ratio | 55.20 % | 59.62 % | (4.42 pp) |
Source: Analyst estimates for the quarter provided by FactSet.
About Valley National Bancorp and Its Strategic Focus
Valley National Bancorp is the parent company of Valley National Bank, which is the largest commercial bank headquartered in New Jersey. Its core business includes commercial and retail banking, with a significant footprint in New Jersey, New York, Florida, Alabama, California, and Illinois. The company focuses on business clients—namely commercial real estate lending, commercial and industrial (C&I) lending, and consumer banking products such as residential mortgages and auto loans.
In recent years, Valley has emphasized reducing its dependence on commercial real estate lending, specifically non-owner occupied and multifamily properties. This is a deliberate pivot, as the bank aims to diversify into C&I lending and other business lines that can improve risk-adjusted returns and make its loan portfolio more resilient. Other key strategic imperatives include expense discipline, efficiency gains, innovation in banking services, and maintaining a strong regulatory capital position.
Quarterly Highlights: Improvement and Notable Changes
For the quarter, Valley posted adjusted non-GAAP diluted EPS of $0.23, up nearly 77% from Q2 2024, while reported (GAAP) diluted EPS was $0.22. Revenue (GAAP) hit $495.0 million, climbing 9.3% from Q2 2024. Net interest income, the bank’s primary source of revenue from lending and deposit activities, rose to $432.4 million, and net interest margin—a key metric showing how profitably the bank lends compared to its funding costs—increased to 3.01%. This net interest margin rise reflects higher loan yields, growth in business loans, and improved pricing on new originations, despite slight increases in funding costs.
Commercial and industrial loans—the bank’s main non-real estate business lending—grew by $719.8 million, reaching $10.87 billion. This represents a 28.4% annualized growth rate. Automobile loans, which are indirect consumer lending products, also grew sharply by $137.6 million. By contrast, Commercial real estate loans declined by $288.6 million. This reduced their share of the overall loan portfolio to 58.4% as of June 30, 2025. While the bank has made clear progress in broadening its lending mix, CRE exposure remains elevated and continues to be a central theme for risk in the business going forward.
Total deposits rose by $759.4 million, ending at $50.7 billion. Growth was led by time deposits—such as certificates of deposit (CDs)—many of which were boosted by retail promotions and brokered CDs. This helped maintain funding for loan growth. The deposit mix at quarter-end was 23% in non-interest bearing accounts, 52% in savings and money market products, and 25% in time deposits.
Credit quality trends were mixed. There was a large increase in accruing past due loans (up to $199.2 million, or 0.40% of loans), which management attributed mainly to three commercial real estate credits, two of which were brought current in July 2025. Net charge-offs, or loans that were written off as uncollectible, came in at $37.8 million. Provision expense for potential loan losses (GAAP) dropped sharply year over year. Management pointed out that its allowance for credit losses (reserves set aside for bad loans) remained steady at $594.0 million, or 1.20% of total loans, while overall non-accrual loans rose slightly to $354.4 million.
The bank’s efficiency ratio—an industry measure of operating expense efficiency that shows how much it spends to generate a dollar of revenue—improved to 55.2% (non-GAAP). Capital and regulatory ratios remained strong and above required levels, even after an early redemption of subordinated notes.
Non-interest income, including service charges, capital markets fees, and other fee-based revenue, saw solid growth, supported by new product offerings and higher activity in deposit services and interest rate swaps.
Business Lines: Loan Breakdown and Product Detail
The bank’s commercial and industrial lending portfolio saw the largest dollar increase over the quarter, contributing most to total loan growth and aligning well with risk diversification aims. C&I lending includes business loans to small and medium-sized enterprises across various industries.
Indirect automobile lending continues to expand, fueled by the bank’s indirect auto dealer network. Residential mortgage lending, another core product, grew moderately.
Commercial real estate, which includes lending on office buildings, multifamily housing, and construction, remains the by far the largest segment of Valley’s loan portfolio. However, Recent quarters have shown only modest reduction in overall balances and concentration, as both repayments and lower origination volumes in CRE have tempered the pace of portfolio change. Within the Non-interest income line, capital markets products (services related to interest rate swaps and syndications) and traditional service charges both posted higher results, providing a diversified revenue base beyond core lending.
Looking Ahead: Guidance and Investor Considerations
The bank forecasts net interest margin, a key profitability measure, to trend toward 3.05% for the year and reach 3.10% by Q4, driven by continued deposit mix improvement and possible reductions in funding costs. Regarding credit metrics, Future risks remain around the bank’s CRE exposure—still high even after recent reductions—and the recent surge in past due loans, which will be closely watched in subsequent quarters. The deposit mix, especially the portion supported by CDs and brokered deposits, could challenge funding costs if competition intensifies for deposits. Operating in a highly regulated and competitive financial services environment, Valley’s ability to further diversify its portfolio, keep credit quality stable, and manage funding costs will be crucial for sustaining recent improvements in profitability and risk-adjusted returns. The quarterly dividend was held steady at $0.11 per share.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
