Valley's Net Interest Margin Expands Again

The Tip Desk · October 22, 2026 · 3 min read

Tax-equivalent net interest income reached $506.8 million as the margin widened 8 bps to 3.28% and the efficiency ratio fell to 49.38%.

Valley National Bancorp (VLY), the holding company for Valley National Bank, reported net income of $206.3 million, or $0.36 a diluted common share, for the third quarter of 2026, up from $170.9 million, or $0.29 a share, in the second quarter.

The regional lender’s tax-equivalent net interest margin expanded 8 bps to 3.28% after a 3 bps expansion to 3.20% in the second quarter. Tax-equivalent net interest income rose $18.4 million to $506.8 million. The company said the increase from the second quarter was mainly due to upward repricing of adjustable-rate loans, higher yields on new originations, an increase in average loans and one additional day, partially offset by higher average time deposits and a higher cost of certain non-maturity deposits.

The yield on average interest-earning assets rose 11 bps to 5.55% on a linked-quarter basis. The cost of average interest-bearing liabilities increased 6 bps to 3.16%. The cost of total average deposits was 2.33%, up from 2.28% in the second quarter.

Total loans increased $722.7 million, or 5.5% on an annualized basis, to $53.2 billion at September 30, 2026, after a $1.6 billion, or 12.9% annualized, increase to $52.5 billion at June 30. Commercial and industrial loans rose $363.0 million, or 12.1% annualized, to $12.3 billion, which the company attributed to new originations from relationship-driven small- and midsize clients, with particularly strong production in New York, Florida, California and Arizona. Total commercial real estate loans increased $343.5 million to $30.7 billion, after a $638.9 million increase in the second quarter. Non-owner occupied CRE loans decreased $145.7 million as targeted runoff of transactional and non-relationship loans outpaced limited new originations. The CRE concentration ratio, excluding owner-occupied loans, declined to about 312% of risk-based capital from 317% at June 30.

Total deposit balances increased $1.1 billion to $55.2 billion at September 30, after a $1.3 billion increase to $54.1 billion at June 30. Non-interest bearing deposits declined $102.8 million in the third quarter after a $298.6 million increase in the second quarter. Savings, NOW and money market deposits rose $730.9 million and time deposits rose $482.1 million. Indirect customer deposits totaled $5.3 billion at both quarter-ends.

Non-accrual loans increased $48.8 million to $511.4 million, or 0.96% of total loans, from $462.6 million, or 0.88%, at June 30. The company said the increase was primarily attributable to a $30.1 million construction loan placed on non-accrual, which it considered well-secured and did not require a specific reserve, as well as higher non-accrual C&I loans. Net loan charge-offs totaled $37.1 million, up from $22.0 million in the second quarter. The provision for credit losses for loans was $30.7 million. The allowance for credit losses for loans was $600.5 million, or 1.13% of total loans, at September 30.

The efficiency ratio improved to 49.38% from 52.11% in the second quarter. Non-interest expense decreased $1.2 million to $310.0 million, including $3.1 million of merger-related expenses tied to pending acquisitions of Providence Financial Corporation and Bluevine Inc. Annualized return on average tangible common equity was 14.24%. Chief executive Ira Robbins said the company remains on track to achieve, and likely exceed, a previously stated 15% return on average tangible common equity goal by the end of 2027.

Common equity tier 1 capital was 10.71% at September 30, unchanged from June 30, after Valley repurchased 2.5 million shares at an average price of $13.86.