Core Insights - Valley National Bancorp reported record earnings in Q4 2025, with net income of approximately $195 million, or $0.33 per diluted share, and adjusted net income of $180 million, or $0.31 per diluted share, reflecting a growth from $0.28 in Q3 2025 [3][4][7] - The company achieved a 9% year-over-year growth in core deposits, amounting to nearly $4 billion, which was a key factor in profitability gains [1][6] - Valley's adjusted return on average assets reached 1.14%, the highest since Q4 2022, attributed to disciplined balance sheet management and investments in talent and technology [2][7] Financial Performance - For the full year 2025, Valley produced $598 million in net income, or $585 million on an adjusted basis, showing improvement from 2024 [2][4] - Net interest income increased by 4% quarter-over-quarter and 10% year-over-year, with net interest margin expanding to 3.17% [11] - Non-interest income grew by 18% during the quarter, driven by swap fees and unrealized gains on fintech investments [15] Loan and Deposit Growth - Total loans grew by about $800 million in Q4 2025, reflecting a 7% annualized growth rate, with significant contributions from commercial real estate and consumer loans [9][10] - The company expects mid-single-digit loan growth in 2026, including approximately 10% growth in commercial and industrial loans [13][14] - Core deposits increased by about $1.5 billion during the quarter, allowing the bank to pay off nearly $500 million of maturing higher-cost brokered deposits [7] Funding and Margin Outlook - Total deposit costs fell by 24 basis points sequentially, supporting net interest margin expansion, with expectations for an additional 15-20 basis points of margin expansion into Q4 2026 [6][8][11] - Management anticipates further funding repricing opportunities, including replacing $600 million of Federal Home Loan Bank advances at lower rates [8][11] Credit Quality and Provisioning - Criticized and classified loans declined by over $350 million, or 8%, during the quarter, indicating improving asset quality [18][20] - The company expects a loan loss provision of around $100 million for 2026, with a stable allowance coverage ratio anticipated [19][20] Capital Management - Valley generated $188 million of net income to common shareholders in Q4 2025 and returned $109 million through dividends and share repurchases [17] - The company repurchased over 6 million shares in 2025, including 4 million in Q4 [17]

Financial Data and Key Metrics Changes - The company finished the year strong with robust loan and core deposit growth, net interest margin expansion, and higher fee income [4] - Net interest margin expanded by 12 basis points to 2.75%, with net interest income increasing by 5% during the quarter [6][11] - Core deposits grew by 9% in the fourth quarter and 8% for the full year, while loans grew at an 11% pace [7] - Tangible book value per share grew 16.5% annualized and was up 15.3% year-over-year [7] Business Line Data and Key Metrics Changes - The construction sector was the largest driver of loan growth, particularly in affordable housing, which saw a 27% annualized increase in the fourth quarter [22] - Non-interest income rebounded in the fourth quarter, driven by increases in swap fees and letter of credit fees [16] - The company reported a 9.5% annualized increase in expenses during the fourth quarter, aligning more closely with expected asset growth [17] Market Data and Key Metrics Changes - The company is now the second-largest locally led bank in the Twin Cities, positioning itself well amid M&A disruptions in the market [9] - Core deposit growth was strong, with an annualized growth of 8.8% in the fourth quarter [18] - Loan balances increased by 8.9% annualized in the fourth quarter and 11.4% for the year, indicating robust demand across the market [19] Company Strategy and Development Direction - The company aims to optimize profitable growth while aligning loan growth with core deposit growth and expanding net interest margin [30] - There is a focus on gaining market share in the Twin Cities and expanding expertise in targeted verticals such as nonprofits and SBA [31] - The company plans to enhance its affordable housing vertical and leverage technology investments to support growth and efficiency [31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ability to continue driving net interest income growth and achieving a 3% net interest margin by the end of 2026 [12][29] - The company is monitoring the impact of recent events in the Twin Cities on team members and clients, emphasizing support for the community [9] - Management remains confident in the strength of the asset quality profile despite a modest uptick in non-performing assets and net charge-offs [24] Other Important Information - The company closed one of the two branches added through the First Minnetonka City Bank acquisition due to proximity to other branches, with minimal deposit attrition post-merger [8] - The CET1 ratio increased slightly from 9.08% to 9.17%, indicating a comfortable capital position [27] Q&A Session Summary Question: Can you unpack some of the deposit growth in the quarter? - Management noted that Q4 tends to be a seasonally high watermark for deposit growth, with expectations for modest growth in Q1 and Q2 [36][39] Question: What is the cadence of loan repricing? - Management indicated that loan repricing is well spread out, contributing to the target of achieving a 3% margin [40][41] Question: What are the expectations for expenses in 2026? - Management expects expenses to grow in line with asset growth, targeting high single-digit growth [42] Question: What is the company's appetite for potential acquisitions? - Management continues to engage with local bank owners for potential acquisitions but emphasizes organic growth as the primary focus [55] Question: How does the company view the affordable housing vertical's growth potential? - Management expressed confidence in the affordable housing space, indicating plans for continued growth without specific caps on size [59][60]