Valley earnings increased to $206.3 million, or $0.36 per diluted share, in the third quarter of 2026 as higher lending income and tighter expense control pushed the bank’s efficiency ratio below 50%. The October 22 results also showed mixed credit trends, while management outlined plans for pending acquisitions to bring more than $3.5 billion of low-cost core deposits.
Key Takeaways
- Net interest margin widened to 3.28%, and the efficiency ratio improved to 49.38%.
- Criticized and classified loans declined, but non-accrual loans and net charge-offs increased.
- Providence and Bluevine acquisitions remain pending, with closings expected in early 2027.
Table of Contents
- Valley earnings benefit from stronger lending income
- Efficiency improves, with tax credits also supporting profit
- Credit measures move in different directions
- Pending acquisitions shape the funding outlook
- Conclusion
Valley earnings benefit from stronger lending income
Valley National Bancorp’s third-quarter results announcement put net income above the $170.9 million earned in the second quarter and $163.4 million a year earlier. Adjusted net income, a non-GAAP measure excluding non-core items, was $206.4 million, also equivalent to $0.36 per diluted share.
Tax-equivalent net interest income reached $506.8 million, up $18.4 million sequentially. Net interest margin rose eight basis points from the second quarter and 23 basis points from a year earlier to 3.28%.
Higher yields on adjustable-rate loans, stronger pricing on new originations and an increase in average loans supported the improvement. Those gains more than offset higher funding costs: the average cost of total deposits rose to 2.33% from 2.28%, although it remained below the year-earlier 2.69%.
Total loans increased $722.7 million during the quarter to $53.2 billion. Commercial and industrial lending and commercial real estate loans accounted for most of the growth, with owner-occupied properties helping drive the latter.
| Item | Details |
|---|---|
| Third-quarter effective tax rate | 15.3%, compared with 22.5% in the second quarter |
| Full-year effective tax-rate outlook | Approximately 20%, management guidance |
| Common equity tier 1 capital ratio | 10.7% at quarter-end |
| Shareholder capital returns | Approximately $96 million through common dividends and repurchases of 2.5 million shares |
| Loan-to-deposit ratio | 96% at quarter-end |
Efficiency improves, with tax credits also supporting profit
The efficiency ratio fell to 49.38% from 52.11% in the second quarter, reaching management’s below-50% objective one quarter ahead of schedule. A lower ratio indicates that operating expenses absorb a smaller share of revenue.
Reported non-interest expense declined $1.2 million to $310.0 million. Lower professional and legal fees helped, although higher tax-credit investment amortization partly offset the reduction. On an adjusted basis, management said non-interest expenses fell approximately $5 million.
The effective tax rate also declined after Valley purchased additional tax credits. Chief Financial Officer Travis Lan cautioned that the quarterly tax benefit should be considered alongside the associated amortization expense, rather than viewed in isolation.
Credit measures move in different directions
Criticized and classified loans fell to 7.1% of total loans at September 30 from 7.3% at June 30. Valley’s commercial real estate concentration ratio also declined, to approximately 312% from 317%.
However, non-accrual loans increased to $511.4 million, or 0.96% of total loans, from $462.6 million, or 0.88%. A $30.1 million loan categorized as construction was the largest contributor. Valley considered it well-secured and did not establish a specific reserve against it based on estimated collateral value.
Net charge-offs increased to $37.1 million from $22.0 million in the second quarter. Management attributed much of the increase to a single commercial and industrial loan charge-off.
The provision for credit losses on loans was $30.7 million. Allowance coverage declined to 1.13% of total loans from 1.16%, underscoring that lower criticized-loan balances did not mean every credit indicator improved.
Pending acquisitions shape the funding outlook
Deposits increased $1.1 billion during the quarter to $55.2 billion. Beyond that organic growth, management expects the pending Providence Financial Corporation and Bluevine acquisitions to add more than $3.5 billion of low-cost core deposits.
Both transactions are expected to close in early 2027, subject to regulatory approvals and other closing conditions. Providence also requires shareholder approval. The expected deposits are therefore not part of Valley’s September balance sheet.
For Bluevine, Lan said planning assumed a January 1 closing followed by deposit onboarding around April 1, 2027. He identified approximately $1.5 billion of brokered deposits and $400 million of Federal Home Loan Bank borrowings maturing in the first quarter as opportunities to replace existing funding.
Before those transactions, management expects further margin improvement. Lan cited a September exit margin of 3.33% and forecast another five to seven basis points of expansion in the fourth quarter of 2026.
Conclusion
Valley’s next operating checkpoint is the fourth quarter of 2026, when results will show whether the expected margin expansion materializes. The early-2027 acquisition timetable and subsequent Bluevine deposit transition remain separate milestones, dependent on the transactions closing.
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