Valley National (VLY) Q4 2025 Earnings Transcript

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DATE

Thursday, January 29, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Ira Robbins
• Chief Financial Officer — Travis Lan
• Chief Risk Officer — Mark Sager
• Chief Banking Officer — Gina Martocci

TAKEAWAYS

• Net Income -- $195,000,000 reported, or $0.33 per diluted share, while adjusted net income was $180,000,000, or $0.31 per share.
• Annual Net Income -- $598,000,000 reported, with adjusted net income of $585,000,000.
• Core Deposit Growth -- Rose by nearly $4,000,000,000, or 9%, year over year.
• Owner-Occupied Commercial Real Estate Loans -- Grew sequentially for the first time since 2024, mainly through specialty healthcare and Southeast franchise activity.
• Loan Pipeline -- Up over $1,000,000,000, or nearly 70%, compared to the prior year, driven by $600,000,000 C&I and $700,000,000 CRE pipeline increases (figures do not sum due to segment overlap).
• Deposit Gathering (Q4) -- Core deposits increased by approximately $1,500,000,000, enabling payoff of almost $500,000,000 in maturing high-cost brokered deposits (subtotal notes $1,000,000,000 net of offset).
• Noninterest Deposits -- Annualized growth exceeded 15%, with late quarter activity flagged as likely to moderate in early 2026.
• Total Loan Growth (Q4) -- Increased $800,000,000, or 7% annualized, reflecting accelerating CRE origination and sustained C&I momentum.
• 2026 Loan Growth Guidance -- Management guides mid-single-digit growth overall, with roughly 10% C&I, low-single-digit CRE, and mid-single-digit consumer and residential growth.
• Deposit Growth Expectation (2026) -- Management projects deposit growth will outpace loan growth, aiding further loan-to-deposit ratio reduction.
• Net Interest Income Guidance (2026) -- Anticipated to grow 11%-13%, with guidance assuming two rate cuts and neutral position to the front end of the yield curve.
• Net Interest Margin -- Q4 NIM of 3.17%; management expects further 15-20bps expansion by Q4 2026, supported by lower funding costs, higher loan yields, and favorable repricing events.
• Fee Income (Q4) -- Grew 18% quarter over quarter, with two thirds of the sequential growth from swap fees and fintech equity gains, flagged as episodic and not expected to recur at this pace.
• 2026 Fee Income Guidance -- High-single-digit growth expected, with Q4 elevated by abnormal swaps and equity gains.
• Expense Growth -- Full-year operating expenses increased just 2.6%, well below 9% revenue growth, with management projecting low-single-digit expense growth for 2026 and efficiency ratio declining toward 50%.
• Share Repurchases -- 6,000,000 shares bought back in 2025 using over $60,000,000 in organically generated capital; 4,000,000 of these were repurchased in Q4 alone.
• Tangible Book Value -- Increased nearly 3% in the quarter due to retained earnings and favorable OCI from the available-for-sale portfolio.
• Asset Quality -- Criticized and classified loans declined by over $350,000,000 (8%) sequentially; net charge-offs for 2025 were 24bps of average loans, down from 40bps in 2024.
• Allowance Coverage Ratio -- Declined by 2bps during the quarter; management expects coverage ratio to remain stable with further credit cost normalization in 2026.
• Capital Position -- CET1 ratio expected to remain within 10.5%-11%; cash dividends and share buybacks together returned $109,000,000 in Q4, with “significant flexibility” for continued capital deployment.
• Deposit Cost Trends -- Portfolio spot deposit rate was 2.32%, below the 2.45% quarterly average; newly originated deposits in Q4 blended at 2.17%, improved from 2.91% in Q3.
• Brokered/FHLB Funding -- $600,000,000 of FHLB advances at 4.7% and $1,200,000,000 brokered deposits at roughly 4.5% are set to mature in 2026, providing repricing benefit as they roll off.
• Loan Mix Target (2026) -- Expected net loan growth to come 40% from C&I, 40% from CRE, and the remainder from consumer and residential segments (figures given as management guidance, do not sum to 100%).

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RISKS

• Travis Lan said, "first quarter tends to be somewhat softer as a result of lower day count, elevated payroll taxes within operating expenses, and seasonal headwinds on both sides of the balance sheet," which could dampen reported earnings and deposit levels sequentially.
• Fourth quarter fee income was "benefited from abnormally high commercial loan swap activity, and, to a lesser extent, valuation gains on fintech equity investments, which may not recur," implying less repeatability of recent noninterest income performance.
• There is explicit guidance from management that "results may not be linear," signaling elevated volatility in quarterly loan growth, fee income, and expense patterns through 2026.
• Allowance coverage ratio declined modestly, and rising C&I exposure may increase portfolio risk if credit conditions weaken, though management currently expects stability.

SUMMARY

Valley National Bancorp (NASDAQ:VLY) reported record profitability for the quarter and year, driven by robust core deposit increases and disciplined expense management. Management communicated specific 2026 guidance for mid-single-digit loan growth, with C&I expected to grow 10%, and stated that deposit growth should outpace lending, supporting further reductions in loan-to-deposit ratios. Net interest income is forecasted to rise 11%-13% in 2026, and NIM is expected to expand by 15-20 basis points by year-end, despite projected near-term headwinds in the first quarter. Fee income growth is projected in the high-single digits, after a quarter with extraordinary swap and fintech gains flagged as unlikely to recur. Asset quality improved, with lower criticized/classified loan balances and declining net charge-offs, and management sees continued credit normalization in 2026, while reserving for increased C&I mix. Capital deployment remains a priority, with active share repurchases and dividend payout planned in line with earned capital and maintaining CET1 ratios within target ranges.

• Commercial real estate loan originations resumed sequential growth for the first time since 2024, with the origination engine "fully pick back up." and $1,000,000,000 in net CRE growth expected, partially offset by $500,000,000 in transactional CRE runoff.
• Management stated if you untangle kind of the loan growth guidance, it's about $1,000,000,000 C and I, $1,000,000,000 of net CRE and a half billion of Resi and Consumer. for 2026, providing detailed composition expectations for loan book expansion.
• The new branding campaign and hiring initiatives are intended to drive further core deposit capture and franchise growth, with full-year expense growth targeted below revenue trends and further declines anticipated for the efficiency ratio.
• Repricing of funding sources should further improve margin: $600,000,000 of FHLB advances and $1,200,000,000 of brokered deposits will roll off in 2026, potentially lowering average funding cost as they are replaced with lower-cost deposits.
• Tangible book value advanced nearly 3% in the quarter, bolstering capital base and providing further capacity for share repurchases and organic investment.

INDUSTRY GLOSSARY

• CRE (Commercial Real Estate): Loans secured by income-generating properties, including office, retail, industrial, and multi-family properties; includes regulatory distinctions between owner-occupied and transactional CRE portfolios.
• CET1 (Common Equity Tier 1 Capital Ratio): A measure of a bank’s core equity capital compared with its risk-weighted assets, used to assess regulatory capital adequacy.
• FHLB Advances: Short- to intermediate-term borrowings from Federal Home Loan Banks, typically used for liquidity and funding management.
• NIM (Net Interest Margin): The ratio of net interest income to average earning assets, indicating the profitability of a bank's core lending and deposit-taking activities.
• Allowance Coverage Ratio: The ratio of loan loss reserves to total loans, used to measure credit risk protection relative to loan portfolio size.
• Beta (Deposit Beta): The proportion of change in deposit interest rates relative to changes in benchmark interest rates, impacting overall funding cost sensitivity.
• NIB (Non-Interest-Bearing Deposits): Deposit accounts that do not accrue interest, such as corporate checking and demand deposit accounts.

Full Conference Call Transcript

Ira Robbins: Thank you, Andrew. Valley delivered record earnings in the 2025. With net income of approximately $195,000,000 or $0.33 per diluted share. Excluding certain non core items, adjusted net income was $180,000,000 or $0.31 per diluted share. An increase from 28¢ on both the reported and adjusted basis in the 2025. Our adjusted return on average assets of 1.14% represents the highest level since the 2022. For the full year of 2025, we produced $598,000,000 of net income or $585,000,000 on an adjusted basis. This material improvement versus 2024 reflects disciplined balance sheet management, a stronger funding mix, and continued benefits from strategic investments in talent, technology, and our operating model.

We enter 2025 with a fortified balance sheet and clear profitability targets, tied to sustained funding improvement and credit cost normalization. By year end, we had exceeded these expectations across all major metrics, while further strengthening our capital and liquidity positions. This performance underscores both the resilience of our franchise and the depth of our customer relationships.

Our improved profitability has accelerated retained earnings growth and enabled us to return more capital to investors through share buybacks and regular cash dividends. Our substantial core deposit growth stands out as one of our major significant achievements of the past year and is the key underpinning of our profitability improvement in 2025. On a year over year basis, we grew core deposit by nearly $4,000,000,000 or 9%. Past strategic investments in talent and technology have deepened customer engagement, increased operating account wins, and driven momentum across our diverse delivery channels. We continue to recruit experienced commercial bankers who are focused on both loan and deposit opportunities in their geographies or areas of focus.

While future growth is not likely to be linear, we have a high degree of confidence in our ability to further enhance funding profile over the next twelve months.

The course loan growth was strong, diverse, and tightly aligned with our relationship focused strategy. For the first time since the 2024, total commercial real estate loans grew on a sequential basis. This growth was primarily in the owner occupied category and was partially funded by strategic runoff of nonrelationship commercial real estate. During the quarter, owner occupied CRE and C and I growth was driven primarily by activity in our specialty health care vertical and Southeast franchise. Loan growth is well positioned to accelerate further in 2026. Our immediate and late stage pipelines are exceptionally strong, up over $1,000,000,000 or nearly 70% from just a year ago.

Driven by a $600,000,000 increase in C and I, and $700,000,000 increase in commercial real estate.

Past investments in data analytics, artificial intelligence, and sales effectiveness are making our bankers more productive across the franchise. These investments also ensure that newly onboarded relationship bankers have the tools necessary to hit the ground running and contribute more quickly to our consolidated results. To this end, recent additions to our teams, New Jersey, California, and Florida have already generated loan and deposit activity and directly support the aforementioned expansion in our pipelines. Our recruiting efforts remain active, which we expect will continue to accelerate the growth in our relationship business model.

Most importantly, increased activity from both legacy and new hires is the result of our strategic focus on attracting profitable holistic banking relationships, which align with our risk appetite.

Our improved balance sheet position and profitability metrics reflect the cumulative benefits of a variety of multiyear initiatives. We have focused on geographic and business line diversification across the franchise and have invested in high caliber commercial talent to achieve our goals. Our twenty three core systems conversion set the stage for our expanded treasury management offering. Which improved our ability to win operating accounts, and deepen commercial relationships. This has directly supported additional growth in both core deposits and fee income. And has been further augmented by specialty funding niches that have produced above average deposit growth. Our strategic priorities for 2026 remain generally consistent and focused on sustained value creation.

To support our deposit ambitions, we are igniting our small business sales efforts, improving branch productivity, and exploring new growth oriented deposit niches. Additionally, there is an opportunity to further expand the customer adoption of our treasury platform. Recent investments in branding artificial intelligence solutions, and service model improvements have been designed to accelerate customer acquisition and elevate the client experience which we believe will contribute to future revenue growth and increased franchise value. At the same time, we are always working to identify and execute on expense offsets to help fund these initiatives. Our strong momentum in 2025 directly supports our 2026 outlook. Which Travis will detail shortly.

From a high level, we expect continued benefits from repricing opportunities on both the funding side of the balance sheet and in the lower yielding fixed rate segment of our loan portfolio.

While Travis will describe some of the traditional seasonal headwinds that we face in the first quarter of each year, we anticipate an additional 15 to 20 basis points of margin expansion from the 4Q 2025 to the 4Q 2026. All else equal. This combined with continued fee income growth, credit stability, and expense management, should result in further profitability improvement in 2026. I am extremely proud of what our team accomplished in 2025. We have built undeniable momentum with respect to customer growth, funding diversification, loan quality, talent acquisition, and ultimately, financial performance. Our strategy is paying off, our teams are executing, and we remain focused on delivering additional long term value for our associates, shareholders, and clients.

With that, I will now turn the call over to Travis to discuss our financial results. After his remarks, Gina Martocci, Patrick Smith, Mark Sager, Travis, and I will be available for your comments.

Travis Lan: Thank you, Ira. Continuing the discussion on 2026 expectations, we have provided our guidance for the year on slide nine. We expect mid single digit loan growth supported by roughly 10% C and I growth, low single digit CRE growth, and mid single digit consumer and residential growth. While results may not be linear, we anticipate deposit growth will outpace loans throughout the year, allowing us to further reduce our loan to deposit ratio. We expect CET1 will remain in the previously guided 10.5% to 11% range, as we continue to execute our capital deployment strategy. As a result of expected balance sheet growth and continued repricing tailwinds, we anticipate that net interest income will grow between 11-13% in 2026.

Our forecast assumes two rate cuts in 2026 that we remain generally neutral to the front end of the yield curve.

While fourth quarter fee income benefited from abnormally high commercial loan swap activity, and, to a lesser extent, valuation gains on fintech equity investments, which may not recur, we anticipate high single digit growth in 2026. Ira discussed the investments we have made and will continue to make in talent, branding, technology, and capability expansion. These are incorporated into our operating expense guidance, and any incremental investments would be expected to further enhance our growth potential. Finally, we expect further credit cost improvement in 2026. We anticipate general stability in our allowance coverage ratio, and further normalization in net charge offs. These factors would combine to imply a 2026 loan loss provision of around $100,000,000 give or take.

While quarterly trends naturally vary, I would remind you that our first quarter tends to be somewhat softer as a result of lower day count, elevated payroll taxes within operating expenses, and seasonal headwinds on both sides of the balance sheet. These dynamics may be more evident in the 2026 as we saw a late year spike in both fee income and noninterest deposits which are likely to moderate early in the year. That said, our 2026 guidance reflects the strong momentum that we have and our expectation for further profitability improvement throughout the year. We added slide 10 to provide a clearer view of our capital deployment strategy, which continues to balance organic growth with meaningful capital returns.

In the fourth quarter, we generated $188,000,000 of net income to common shareholders. Of which we returned $109,000,000 of that in the form of cash dividends and share repurchases. Our earnings generated about 38 basis points of CET1 during the quarter, and we used about half of that to support organic loan growth while returning the other half to shareholders and preserving capital ratios well within our target range. At the upper end of that range, we believe we have significant flexibility and anticipate preserving this balanced approach to capital deployment going forward. Slide 11 illustrates the continued momentum in our deposit gathering efforts.

During the quarter, we increased core deposits by about $1,500,000,000 enabling us to pay off almost $500,000,000 of maturing higher cost brokered deposits.

Our core deposit growth is primarily concentrated in non interest and transactional accounts. Noninterest deposits grew over 15% on an annualized basis, but benefited from late quarter activity, which is likely to moderate. Still, total deposit costs came down by 24 basis points sequentially, implying a 55% quarterly deposit beta. Turning to slide 14. Total loans grew about $800,000,000 or 7% on an annualized basis. This was the result of accelerating commercial real estate originations, continued C and I momentum, and complementary residential and consumer growth. We continue to fund relationship based CRE growth with transactional CRE runoff.

For the year, we anticipate 40% of our net loan growth will come from C and I, 40% from CRE, and the remainder from consumer and residential.

Our loan yield data continues to meaningfully lag our deposit data, as the replacement of low yielding fixed rate loans with higher yielding originations slows the rate base compression. Slide 17 tells our net interest income and margin expansion story as we benefit from loan growth and repricing dynamics on both sides of the balance sheet. Net interest income increased 4% quarter over quarter or 10% year over year. We also saw our margin expand to 3.17% well beyond our fourth quarter target of above 3.1%. We continue to see the repricing dynamic playing out, supporting our expectations for an additional 15 to 20 basis points of margin expansion from the 4Q 2025 to the 4Q 2026.

We saw exceptional 18% growth in noninterest income during the quarter. Roughly two thirds of the sequential growth was from swap fees and unrealized gains on certain fintech investments. Some of this activity was episodic and is not likely to recur. That said, we continue to have strong momentum from a deposit service charge and wealth management perspective. Quarterly fee income in the mid to high $60,000,000 range is likely a reasonable starting point for 2026, with anticipated growth throughout the year. Similar to fee income, fourth quarter adjusted expenses were elevated by a few discrete and infrequent items.

Roughly half of the quarterly expense growth was due to our new branding campaign, and performance based accruals tied to the execution of certain operational initiatives and milestones in 2025.

Even with these items, expenses for the full year increased just 2.6% well below our 9% revenue growth. We continue to project low single digit expense growth in 2026 as ongoing investments in talent, technology, branding, and capabilities are partially funded by efficiencies from other parts of the organization. As a result of these efforts, we anticipate that our efficiency ratio continue to decline towards 50% throughout the year. Slides twenty one and twenty two illustrate our asset quality and reserve trends. Criticized and classified loans declined by over $350,000,000 or 8% during the quarter. And total nonaccrual loans to total loans were effectively unchanged.

Quarterly net charge offs were 18 basis points of average loans, bringing twenty five net charge offs down to 24 basis points of average loans versus 40 basis points in twenty four.

Our allowance coverage ratio declined by two basis points during the quarter, as lower quantitative reserves more than offset higher specific and qualitative factors. We remain confident in the performance of our loan portfolio and expect further normalization of credit costs in 2026. Turning to slide 24. Tangible book value increased nearly 3% during the quarter, as a result of retained earnings and a favorable OCI impact associated with our available for sale portfolio. Regulatory capital ratios remain generally stable as we support our loan growth and utilize excess capital to repurchase stock. We utilized over $60,000,000 of organically generated capital to repurchase 6,000,000 shares in 2025.

4,000,000 of these shares were bought back in the 4Q 2025 alone, and we anticipate continued repurchase activity going forward. With that, I will turn the call back to the operator to begin Q and A. Thank you.

Operator: Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you'll need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. And our first question comes from the line of David Chiaverini of Jefferies. Your line is now open.

David Chiaverini: So wanted to start on net interest margin, you mentioned about 15 to 20 basis points 4Q twenty five versus 4Q 'twenty six. Can you talk about some of the drivers behind that on both sides, the loan side? As well as the deposit side in terms of betas?

Travis Lan: Yes. This is Travis, David, and thanks for the question. The benefits between now and the 4Q 2026 will be fairly balanced between the loan and deposit sides of the balance sheet. So from a deposit perspective, you know, we continue to work customer deposit rates lower and then we have the additional benefit of replacing higher cost brokered with lower cost core. In 2026, we also have one... excuse me, $600,000,000 of FHLB advances at about 4.7% that will come due and will be replaced lower as well. That's another benefit that we anticipate to play out on the margin.

We have $1,800,000,000 of fixed rate loans that are going to mature in 2026 at a rate of around 4.7%. Those are coming back on, 150 to 200 basis points higher. And so while, you know, as rates fall yields may fall, you know, we slowed the rate of compression of that fixed rate repricing dynamic.

David Chiaverini: And in terms of kind of the cadence, you mentioned a couple times about results not being linear through the year. How should we think about the net interest margin as we kind of progress through the year?

Travis Lan: Yes. So in the first quarter, I anticipate the margin comes down a little from the 3.17% that we put up this quarter. And then grows from that level back to that kind of mid-three 30s that we talked about by the fourth quarter. The drivers of that, again, I mentioned that we had some late December spikes in noninterest bearing balances. I would expect that's closer to the average noninterest deposit balance for the fourth quarter, at 3.17. And then we also get the headwind from day count. So each day, we accrue about $5,000,000 of NII. So two fewer days in the first quarter is a slight headwind.

We'll offset some of that with growth and the rate dynamics, but that's the way that we think about it.

David Chiaverini: Thanks very much.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Freddie Strickland of Hovde Group. Your line is now open.

Freddie Strickland: Hey, thanks for taking my question. Good morning, guys. Just great to see the trend down in classifieds again this quarter. And as you look at workouts in progress and you mentioned declining credit costs, is the implication that we could see adversely classified assets continue to fall over the course of 'twenty six?

Mark Sager: Hey, Freddie. This is Mark Sager. We absolutely, if the economy stays in the situation that it is today, which we expect, we expect this trend to continue in 2026 and into 2027. We've seen it for the past three quarters now, improvement, and this was a substantive decrease.

Ira Robbins: I would just add, Freddie, that the reduction quarter over quarter is a combination of payoffs and net upgrades. So it's both factors that drove that improvement. We would anticipate that to continue.

Freddie Strickland: Got it. And then just the loan growth outlook, it seems like you're going to have CRE concentration continue to decline in 2026 if you had higher growth rates of C and I, consumer and resi? Is that the case? Or is it maybe relatively flat as you look to deploy some capital?

Travis Lan: I think it's a modest improvement or further decline in the CRE concentration. So if you untangle kind of the loan growth guidance, it's about $1,000,000,000 C and I, $1,000,000,000 of net CRE and a half billion of Resi and Consumer. Now that billion dollars of CRE will be split between owner occupied and regulatory CRE. And the way that we factor it with the capital growth that we anticipate, you'd still see CRE concentration improve throughout the year.

Freddie Strickland: Alright. Great. Thanks. That's it for me.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Anthony Elian of JPMorgan. Your line is now open.

Anthony Elian: Hi. Your adjusted ROE was over 13% in 4Q, which is above your guide of 11% for '25. Ira, I know last quarter, you pointed to achieving the 15% goal by late twenty seven or early 'twenty eight. But any update to that time line just given the tailwinds you have and you outlined on Slide nine for NIM, operating leverage, and provision?

Ira Robbins: I don't think we're going to update what that guide looks like. We feel really, really strong about sort of where the lift off is for us in the 2026. And a lot of tailwind for us. We think we're well on our way to achieve that 15% target.

Anthony Elian: Thank you. And then on expense, so I get the low single digit guide for the full year. But, Travis, how are you thinking about expense specifically for 1Q, just given some of the elevated items you mentioned around payroll taxes? Thank you.

Travis Lan: Yeah. Appreciate it. I mean, I think, as I mentioned, the fourth quarter also included some elevated items. As those normalize and then you typically have about a $7,000,000 or $8,000,000 headwind in the first quarter from payroll taxes, things probably roughly balance out. And so you'd see, I'd say, general stability in operating expenses in the first quarter due to that, whereas normally, it would be kind of a straight uptick. Again, you have some offsets with some of these more onetime items that occurred in the fourth quarter.

Anthony Elian: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Janet Lee of TD Cowen. Your line is now open.

Janet Lee: Good morning. Thank you. So you guys said you're neutral to the front end of the curve. And I know there's a lot of fixed rate asset repricing benefits that are flowing through for Valley. Does your... how does your prediction around 15 to 20 basis point NIM expansion change if we assume no rate cuts?

Travis Lan: Yeah, Janet. This is Travis. If you assume that, as I said, we are generally neutral. If you assume no rate cuts, you would actually, you know, you'd look at kind of a half percent to a percent of headwind from NII. The reality though is the implied forward curve assumes some modest increase in the two, five, and ten year points, which are more impact to our margins. So, in a vacuum, no Fed cuts would be a slight, very slight headwind. But, you know, as the rest of the curve plays out, I think we offset that. The other component to think about is we're structurally neutral to the front end of the curve.

But we've outperformed our beta assumptions in the wake of Fed cuts. So that's, you know, something that's improved the margin.

Janet Lee: Got it. Thank you. And just to follow-up on buyback. Looks like $19,000,000 that's remaining in authorization that expires in April. And with their current capital generation, looks like you could maintain the 4Q pace of buyback while still pretty comfortably staying in that CET1 target range, perhaps even at the higher end. Could you comment around the pace of buyback? I know you're gonna be opportunistic, but just would love to hear your response. Thanks.

Travis Lan: Yeah. Absolutely. So if you kind of play out our guidance, CET1 on a gross basis would increase 130 basis to 140 basis points next year. About 50 basis points of that would be used to support loan growth. 50 basis points will be paid out in the dividend. And it would leave you with 30 or 40 basis points of excess CET1 for the buyback. That would kind of back into $150,000,000 to $200,000,000 worth of stock. Which, if you think about the pace of the fourth quarter when we used about $48,000,000 of equity in the buyback, it's pretty consistent. So that's the way that we're thinking about it.

To your point, our authorization expires in April, I mean, obviously, we would, you know, plan on re upping that, as we would traditionally.

Janet Lee: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Manan Gosalia of Morgan Stanley. Your line is now open.

Manan Gosalia: Hey, good morning. On the strategic growth slide, you have a bullet in there that talks about contemplating geographic expansion. Any specific markets you'd highlight? And, I guess, how should we think about the scale of that build out?

Ira Robbins: I think just from a broad perspective, we've had real success as we think about growing into different geographies whether it be through acquisition or just from an organic perspective. On the back end of our Leumi deal, we were able to enter into Chicago and Los Angeles markets and have seen strong growth come out of those areas. We recently expanded our team in the Philadelphia area and have seen real positive momentum and traction out of that. So I think we feel very comfortable, whether it be contiguous to where we sit today or where there's other opportunities in strong markets. Gina, maybe you can comment about...

Gina Martocci: Well, I think you phrased that well. We have had some success with our senior leaders that we've hired in bringing in additional producers. And we are really focused on adjacent markets, but also opportunistically on teams that we can... we can bring in and quickly start producing.

Manan Gosalia: Got it. Okay. Great. And then as we think about the 3.30 plus NIM guide for FY 2026, how important are loan spreads there? You know, we've heard from some banks that they're seeing more competition on both spread and structure. I guess the question is what are you seeing in your markets, and what are you baking into that guide?

Travis Lan: Thanks, Manan. This is Travis. The reality is we hear the same from our bankers on the street. When you look at the data, the spreads have been fairly consistent now. Based on the feedback, we are conservatively assuming modest spread compression in the NII forecast that we gave you. So I think we, you know, we hear it on the ground as well, and we're trying to factor that in appropriately.

Manan Gosalia: Got it. So that's already baked in. Thanks.

Travis Lan: Yes.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jared Shaw of Barclays. Your line is now open.

Jared Shaw: Good morning. Maybe just on the DDA, the non interest bearing deposit discussion, great growth this quarter. Were you saying we should expect average DDA to stay flat but EOP potentially to go down? Or how should we think about the seasonality that you saw this quarter and the seasonality in the first quarter?

Travis Lan: Yes. I mean, first, I think it's reflective of a lot of wonderful activity, in terms of our bankers' ability to generate operating accounts and utilize our treasury management platform to generate business. My commentary, though, was that we were at $11,900,000,000 of average NIB for the quarter. And the end of period was $12,200,000,000. I would anticipate that at the end of the first quarter, we're kind of at that $11,900,000,000 level on an end of period basis and generally flat from an average perspective.

Jared Shaw: Okay. Alright. Thanks. And then, you know, maybe just credit overall, like you said, is stable and looks good. Any more color you can give on the growth in the C and I NPLs?

Mark Sager: Sure, Jared. This is Mark again. C and I growth was really driven by one credit in the portfolio, a larger credit that we've had within the portfolio for over ten years, an in-market syndicated credit, unique business segment, that's supported by structural payments over a ten year period. Because of the length of that payback, combined with the recent modification of the loan, we did move that to nonaccrual and established what we feel is an adequate specific reserve on that loan.

Jared Shaw: Okay. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Steve Moss of Raymond James. Your line is now open.

Steve Moss: Good morning. Maybe just going back to the loan pipeline here you highlighted, Ira. Just kind of curious good to hear the strong pipeline. And I guess also with the kind of decline in the runoff on CRE, just curious if you guys are thinking potential upside to your loan growth guidance here or maybe what are some of the offsets you see?

Travis Lan: Maybe I'll start, Steve. This is Travis. So our 5%, right, if you took the midpoint of our loan growth guide, it would be 5%. The reality is that also includes $500,000,000 of runoff in our Tier three transactional CRE portfolio. So absent that, you'd be at certainly above the higher end of the range that we gave. So I think there is a lot of good dynamics in the pipeline that Gina can talk about, but wanted to throw that out as well.

Gina Martocci: Yeah. We've got a really very strong pipeline. I mean, we finished 12/25 at a billion 2, actually higher than 12/24. And also, since 12/25, we've grown the pipeline by another $300,000,000. And that is despite closing about half a billion dollars worth of loans so far. So we feel very good. It's geographically distributed. It's both CRE and C and I with slight concentration in C and I. So our clients continue to be very confident and we're booking the loans.

Steve Moss: Okay. Appreciate that color there. And then just on credit here with the decline in criticized and classifieds, just kind of curious as to how you're thinking about the reserve kind of settling out over time. If we see that come down towards, like, a more normal level, like 4, 5%, could we see a pretty meaningful reserve decline over time?

Travis Lan: This is Travis. I think that directionally makes sense. The offset though is C and I will be an increasing portion of the portfolio. So I think that helps balance out the benefit hypothetically that you get from lower criticized and classified. So that's why we kind of guided to general stability in the allowance coverage ratio.

Steve Moss: Okay. Great. Appreciate all the color. Thank you very much, guys.

Ira Robbins: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Matthew Breese of Stephens. Your line is now open.

Matthew Breese: Hey, good morning. Yeah. I was hoping to get a little bit more color on loan growth this quarter and then the pipeline from a geography perspective? So how much of the C and I and CRE activity is coming from Florida? You know, up here in the Mid-Atlantic Northeast, and then from the Leumi lines. And I'm curious if you're seeing any major notable differences in origination trends, activity or spreads across these kind of categories and geographies?

Gina Martocci: It's Gina. I'll take that. As I just mentioned, it's really well balanced across the spectrum. There is a pretty good pipeline or a strong pipeline, I should say, in health care. And we saw that last year, and we're seeing it again this quarter. But New York, New Jersey, Florida all are contributing. And then even as Ira mentioned, our Philly market has already built a very strong pipeline. And as far as spread trends, it's pretty consistent across the markets as well. There is a minor bit of compression and competition, but all in all, it's fairly well balanced.

Matthew Breese: Got it. Okay. And then Travis, you know, time deposit cost CDs are still a bit elevated north of 4%. As stuff matures and rolls and maybe you can talk about some of the promotional activity, what is kind of the new blended rate of CDs? And is that a decent proxy for where CD cost could go over the next six, nine, twelve months?

Travis Lan: Yeah. I think where our new rates or our rates that are available from a rollover perspective are in the kinda 3.50% range, which would imply some opportunity to reprice lower in the CD portfolio more broadly. And the elements that really keep that average cost elevated continue to be the brokered deposits. And so in the coming year, you know, we have a billion 2 of brokered coming off close to 4.50%. So you know, there's upside there.

Matthew Breese: Got it. And do you have the cost of deposits at period end or more recently so we get a sense of trend?

Travis Lan: Yeah. For sure. So the total portfolio spot deposit rate was 2.32. So below the $2.45 average for the quarter. Our core rate is about 2.10 and then brokered is 4.20 or so, give or take. So gives you a little bit more insight into the dynamics there and the opportunity to replace brokered with core. I'd say in the fourth quarter, we originated $1,000,000,000 of new deposit relationships at a blended rate of 2.17. That was, from a balance perspective, pretty consistent with the third quarter, but the third quarter origination was 2.91. So we're seeing some very good tailwinds in terms of the new deposits that we're bringing to the bank at a much lower blended cost.

Matthew Breese: Understood. And then just last one. Loans past due, thirty to fifty nine days picked up, think, by about $56,000,000. Is there anything administrative about that timing related? I know end of year can get a little bit hairy. Or is there a sense that might migrate into NPLs? And that's all I had. Thank you.

Mark Sager: Yeah, Matt. It was really driven... there's three loans in their unique situations. We don't view this as a trend at all, but related to three specific loans. One, we have a contract for sale, and we expect that to be completed and be done. We've recently signed a modification for another loan and anticipate interest being current. And the third, where we believe it's gonna linger in delinquency thirty to sixty day bucket, but gradually catch up and potentially be current, in the second quarter. So not seeing a trend really in the portfolio in any means, really just a couple specific transactions.

Matthew Breese: That's all I had. Thanks for taking my questions.

Ira Robbins: Thanks, Matt.

Operator: Thank you. One moment for our next question. Our next question comes from the line of John Arfstrom of RBC. Your line is now open.

John Arfstrom: Hey, thanks. Good morning.

Ira Robbins: Morning, John.

John Arfstrom: Yeah. Just a couple of follow ups. But maybe obvious, but you mentioned you know, CRE growth for the first time in a long time. What changed there? Is it just less runoff on your balance sheet, or are you actually seeing stronger growth and stronger pipelines there?

Travis Lan: It's stronger originations, John. Entering 2025, we were turning the CRE origination engine back on, from a very disciplined perspective, both in terms of requiring deposits to come with those loans and obviously, the consistent conservatism on the credit side. But it took a couple of quarters, I think, for the origination engine to fully pick back up. We saw it in the fourth quarter. Origination trends were very strong. Again, as we look forward to 2026, you know, we're contemplating about a billion and a half of new tier one and tier two CRE. That'll be offset by about a half billion dollars of runoff in our transactional CRE portfolio. You net to about $1,000,000,000.

And that's, I think, just consistent with the general strong activity we're seeing across our geographies.

John Arfstrom: Yep. Okay. And then just some subtleties on expenses. I'm just curious, Ira, how aggressive you wanna be on the commercial banker recruiting efforts. And then also, if you can maybe comment on the branding investments and how much you wanna allocate there?

Ira Robbins: Yeah. Look. I honestly believe there's a lot of opportunity within our geographies and as we think about different verticals, for us to enter into as well. So from a hiring perspective, you know, it's a really good market for us. I think, you know, Valley has a very unique value proposition based on the size of organization we are. Our focus on relationship banking. And then when you look across product set and the capabilities that we have, very few organizations our size have breadth of capital markets, FX, and everything else that we do across the entire organization. The treasury platform here, the data and analytics, I mean, it's phenomenal, really on a relative basis.

So we have bankers that are really attracted to us, which is a phenomenal place for us to be in.

That said, you know, the p and l is very important. And managing the new hires that we bring into the organization to not just blow up the expense basis. Some of that we're very focused on. Obviously, making sure that we provide internal opportunities to really think about where we can reshift expenses across the organization. So it's not just growth in expenses. We think about some of the opportunities. Now we talked in the prepared comments about some of the AI initiatives that we have in place, with regard to machine learning and other things to really focus on the expenses. And we continue to really look at cost to serve across the entire organization.

When I took over CEO, we were 3,351 employees and about $20,000,000,000 in size. Today, we're 3,634 and $60,000,000,000 in size. So 280 plus or minus employees and triple the size of the organization. So we've done a really nice job, I think, leveraging technology and thinking about how we can support growth within the organization without bloating on the expense side. And I really do believe we have a great team in place, we'll be able to continue that.

John Arfstrom: Mhmm. Okay. And just to comment on branding, how extensive is that?

Ira Robbins: It's been a real, long term effort for us, I think, in thinking about who our target client was, especially after what happened with SVB and making sure that we were focused on building a whole relationship, internal branding within our bankers to make sure that we understood what a relationship banker should do across the organization. And we're now, very, very comfortable that we have the right ability to execute with the branding campaign that we put out there. We think it'll really enhance the ability to grow some of the consumer and small business within our geography right now. We hired Patrick Smith to come into the organization during this past year.

A really strong, proven leader within that space, and we wanna make sure that we have a branding campaign to complement a lot of what Patrick is able to really bring to the organization. So for me, it's a holistic approach. You can't have branding without the people. And I think what we're doing on the branding side really, really complement what Patrick's able to bring to Valley.

John Arfstrom: Okay. Alright. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Chris McGratty of KBW. Your line is now open.

Chris McGratty: Great. Good morning. Travis, just going back to deposit growth beyond... I hear you on the first quarter on the average EOP to NIB. But on the full year, how do you break out the 5% to 7% growth by mix? Like, how much contribution from NIB versus yeah.

Travis Lan: Yep. So if you take the midpoint, you're at 6% total deposit growth. We conservatively model NIB growth of 5%. So all of the margin guide that we've talked about and the deposit growth that we're talking about, it's not over indexed on some assumption that NIB significantly outgrows total deposits. It's pretty consistent. So 5% NIB growth, about 7% savings, now, and money market growth, then pretty modest CD growth.

Chris McGratty: Okay. And then what's the beta you're assuming on these... I think you talked about 55% in the fourth quarter, what are you assuming for '26 on the betas?

Travis Lan: Yeah. We've been consistently assuming 50% total deposit beta. For the full year of 2025, it was actually 60% in terms of the actual result, but we continue to model a 50% total deposit cost beta.

Chris McGratty: Okay. Great. And then Ira, last quarter you were asked this kind of about strategic options and long term planning. Is there a scenario where you might entertain buying a bank this year?

Ira Robbins: Look. I think M&A is an interesting dynamic as to how you think about sort of where the market looks today. For me, really, there's sort of three levers that you really need to think about. One, it just starts with shareholders. Like, what are you doing for your shareholders, are you really prioritizing your shareholders? I think the second, as you think about M&A, really sticks to what are the financial constraints. We spend a lot of time and a lot of focus across the organization as we've done M&A historically and not diluting the current shareholders. I think M&A, partially, is focused on the target shareholders, which I think is crazy.

You have a strong shareholder base and to sit there and solely focus on the target doesn't make any kind of sense in my mind.

I think that M&A really then has to be aligned with what the strategic objectives of the organization look like. Travis and his team did a wonderful job on slide eight laying out sort of what the focus is for us in 2026. So if we see an opportunity to accelerate some of those things, based on an M&A deal, that's something we may consider. But to your point, you know, there's an unbelievable organic story that's really unraveling here at Valley. We brought in tremendous leaders across the organization, starting with Gina, Patrick, and a real complement of individuals to help support them. And then we've really been able to continue to bring in people below them.

So we feel really excited about the organic. And there would have to be something that would make a lot of sense for us to really divert any kind of attention away from that.

Chris McGratty: Okay. Great. Thank you very much.

Operator: Thank you. One moment for our next question. Our next question comes from the line of David Smith of Truist Securities. Your line is now open.

David Smith: Hey, good morning. On the funding cost side, you know, you've obviously been able to pay down a lot of brokered this year. You mentioned being able to take some FHLB funding lower next year. Is there a minimum level of brokered and borrowings that you would still want to maintain? You know, through the long term or as core organic deposit growth keeps outperforming, do those go more or less to zero over time?

Travis Lan: Yes. David, this is Travis. I think the reality is both brokered CDs and FHLB advances play a very important role in terms of interest rate risk management and the certainty that you can get with some of those instruments. And so I don't anticipate that it would go to zero. You know, but there is a level certainly lower than where we are today that probably makes more sense.

David Smith: Thank you. And then, you know, the regulatory backdrop is changing a lot for the banking industry right now, but you can also say that about pretty much any industry. I'm wondering, given that you have some pretty niche industries and commercial clients that you bank, are there any regulatory changes to your client base that you're watching with particular interest either from the risk or opportunity side?

Gina Martocci: Hi, it's Gina. I think generally speaking the reduced regulation is driving confidence in our entrepreneurial borrowers. And I think it's increasing their level of confidence and their willingness to invest. But no specific industry, I would say, at least we're pretty well generalists here.

David Smith: Alright. Thank you.

Operator: Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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