Valley National Bancorp (NASDAQ: VLY) has emerged as one of the stronger-performing regional bank stocks in 2026. VLY stock closed at $14.95 on July 17, representing a year-to-date price gain of approximately 27.1% from its December 31, 2025, closing price of $11.68. By comparison, the S&P 500 index had advanced 10.6% during the same period.
The rally has raised an important question among investors: Has the easy money already been made, or does Valley National Bancorp still have meaningful upside remaining?
The answer is not as straightforward as the recent share-price performance may suggest. Valley National has delivered impressive operating improvements across several key financial metrics. At the same time, the company continues to face meaningful risks that investors cannot afford to ignore.
Here is a detailed look at what is driving the VLY stock rally, what could fuel future gains, and why some investors may still prefer to wait before buying.
Why Is VLY Stock Rising?
The biggest catalyst behind Valley National Bancorp’s strong performance has been its impressive first-quarter 2026 results.
The bank reported net income of $163.9 million, or $0.28 per diluted share. Excluding non-core items, adjusted net income reached $168.9 million, or $0.29 per diluted share.
Net interest income increased for the fourth consecutive quarter. On a fully taxable-equivalent basis, net interest income reached $472.8 million, rising by $6.7 million from the previous quarter and $51.4 million from the same period last year.
Valley’s net interest margin remained at 3.17% compared with the fourth quarter of 2025 but improved by 21 basis points from 2.96% a year earlier. The improvement was primarily driven by lower deposit costs, reduced reliance on expensive brokered deposits, and the repayment of higher-cost borrowings.
Several additional positives strengthened investor confidence.
Total deposits increased by $676.5 million during the quarter to $52.9 billion. More importantly, direct customer deposits rose by $955 million, allowing Valley to reduce indirect and brokered deposits by $278.5 million.
Total loans increased by $692.1 million to $50.8 billion, representing annualized growth of 5.5%. Net loan charge-offs also declined to $17.5 million, compared with $22.6 million in the previous quarter and $41.9 million one year earlier.
The bank’s efficiency ratio improved to 53.10%, down from 53.49% in the fourth quarter of 2025 and 55.87% in the first quarter of last year.
Together, these results reinforced investor confidence that Valley National is developing a healthier funding profile while maintaining steady loan growth and improving credit performance.
VLY Stock Is Outperforming the Broader Market
VLY stock’s approximately 27% year-to-date gain has comfortably exceeded the S&P 500’s 10.6% advance through July 15.
The stock has also moved close to its 52-week high. VLY traded as high as $15.06 during early trading on July 16, compared with a 52-week low of approximately $8.95.
That performance reflects growing confidence that Valley National’s earnings momentum has accelerated following a difficult period for regional banks.
However, the strong rally also changes the risk-to-reward calculation. Investors buying near a 52-week high are paying more for Valley’s improving fundamentals than they would have several months ago.
Future gains will therefore require continued earnings growth rather than sentiment alone.
Strong Organic Growth Continues to Support Revenue
One of Valley National Bancorp’s biggest strengths remains its history of organic expansion.
Between 2020 and 2025, net revenue increased at a compound annual growth rate of approximately 9.2%. Loan growth was also a major contributor to the bank’s expansion during this period.
That momentum continued in the first quarter of 2026 as both revenue and loan balances increased.
Valley is also investing in businesses designed to generate additional fee income. These include treasury management services, capital markets operations, syndicated lending, foreign exchange services, swaps, tax-credit advisory services, and wealth management.
These initiatives could reduce Valley’s dependence on traditional lending income while creating additional recurring revenue streams.
Management entered 2026 expecting net interest income to increase between 11% and 13%. Following the first-quarter performance, executives indicated that net interest income growth was tracking toward the upper end of that range. Adjusted non-interest income was still expected to increase between 6% and 9%.
The expansion of fee-generating businesses will be important because Valley continues to rely heavily on net interest income. S&P Global Ratings estimated that non-interest income contributed only around 13% of the bank’s total revenue during 2025.
Strategic Acquisitions Have Expanded Valley’s Business
Organic growth is only one part of Valley National Bancorp’s expansion strategy. The company has steadily strengthened its franchise through acquisitions.
In 2022, Valley completed its acquisition of Bank Leumi USA. The transaction expanded the bank’s commercial banking capabilities and strengthened its presence in major markets, including New York, California, Florida, and Illinois.
Valley also completed its acquisition of Westchester Bank in 2021 and acquired the Arizona-based tax-credit advisory firm Dudley Ventures that same year.
These transactions expanded Valley’s geographic reach, customer relationships, and fee-generating capabilities.
Although future acquisitions remain possible, management must carefully balance expansion with capital requirements, integration costs, and the need to reduce concentration risks within the existing loan portfolio.
Margin Expansion Is Becoming a Major Earnings Driver
Net interest margin is one of the most closely watched profitability measures for any bank.
Rising funding costs pressured Valley’s margins during 2023 and 2024, but that trend has now reversed. Margins improved throughout 2025 and remained considerably higher year over year during the first quarter of 2026.
Valley’s cost of total average deposits declined to 2.27% in the first quarter, compared with 2.45% in the previous quarter and 2.65% one year earlier. The overall cost of average interest-bearing liabilities also declined by 24 basis points sequentially to 3.06%.
Several factors could support additional margin improvement:
- Continued repricing of customer deposits.
- Further reductions in higher-cost brokered deposits.
- Replacement of Federal Home Loan Bank advances with lower-cost funding.
- Continued growth in direct customer deposits.
- Higher yields on newly originated loans and investment securities.
Valley repaid approximately $347.7 million of long-term borrowings during the first quarter, primarily due to the maturity and repayment of certain Federal Home Loan Bank advances.
If funding costs continue declining while loan balances expand, net interest income could remain a major earnings driver throughout 2026.
Shareholders Continue Receiving Capital Returns
Valley National Bancorp continues returning capital to shareholders through dividends and share repurchases.
The company currently pays a quarterly common dividend of $0.11 per share, equivalent to an annualized payment of $0.44. At a share price of $14.84, the annualized dividend yields approximately 3%.
Contrary to the original claim that Valley introduced regular dividends in 2018, the company’s official dividend history shows that it was already paying quarterly dividends of $0.11 per share in 2016 and 2017. The payment has remained unchanged for many years.
The unchanged payout provides consistency but very little dividend growth. Investors primarily benefit from the current yield rather than regular increases in the amount paid per share.
Share repurchases also remain part of management’s capital-allocation strategy.
Valley’s previous authorization to repurchase up to 25 million shares expired on April 26, 2026. A new authorization covering up to 25 million shares became effective on April 27, 2026, and is scheduled to remain in effect through April 27, 2028.
During the first quarter of 2026, Valley repurchased four million shares at an average price of $12.95. The company ended the quarter with an estimated common equity Tier 1 capital ratio of 10.91%.
Repurchases made below the stock’s intrinsic value could improve per-share earnings. However, buybacks become less attractive as the share price rises, particularly if the bank needs capital to support loan growth or to protect against future credit losses.
Why Some Investors Are Still Being Careful
Despite the improving outlook, Valley National Bancorp is not without meaningful challenges.
The first concern is expenses.
Operating expenses increased at a compound annual rate of approximately 12.1% between 2020 and 2025, outpacing the company’s revenue growth during that period.
That trend continued during the first quarter of 2026. Non-interest expenses increased to $309.9 million, rising by $10.5 million from the previous quarter and approximately 12% from the same period last year.
The sequential increase was largely driven by an $11.1 million rise in salaries and employee benefits, normal payroll-tax seasonality, higher severance charges, and increased Federal Deposit Insurance Corporation assessment expenses.
Management continues investing in technology, artificial intelligence, new products, and operational improvements. These investments may support long-term growth, but they could keep expenses elevated over the near term.
Higher costs could limit earnings growth even if revenue and net interest income continue improving.
Commercial Real Estate Remains the Biggest Risk
The most closely watched risk involves Valley National Bancorp’s commercial real estate portfolio.
Total commercial real estate loans, including construction loans, reached $29.7 billion at the end of the first quarter. That represented approximately 58.4% of Valley’s $50.8 billion loan portfolio.
Residential mortgage loans accounted for another approximately 11.5% of total loans.
Valley has tightened its approach toward non-owner-occupied and transactional commercial real estate lending. Non-owner-occupied CRE loans declined by $67.3 million during the first quarter, while much of the portfolio’s new growth came from owner-occupied properties.
The bank’s regulatory CRE concentration ratio also declined to approximately 329% of total risk-based capital, compared with 333% at the end of 2025. S&P Global Ratings reported in March that Valley had reduced regulatory CRE loans by approximately $4.5 billion since 2023.
These improvements are encouraging, but the overall concentration remains significant.
Weakness in office properties, multifamily housing, or other commercial real estate markets could increase delinquencies, charge-offs, and credit-loss provisions. A weakening economy or a prolonged period of high borrowing costs would increase those risks.
Commercial real estate exposure, therefore, remains the strongest argument against treating the recent VLY stock rally as risk-free.
The July 23 Earnings Report Is the Next Major Test
Valley National Bancorp is scheduled to report its second-quarter 2026 results before the market opens on Thursday, July 23. CEO Ira Robbins will host the company’s earnings call at 8:30 a.m. Eastern Time.
The report will give investors a clearer view of whether the first-quarter momentum continued.
Several metrics will be especially important:
- Net interest margin and deposit costs.
- Direct customer deposit growth.
- Loan growth and lending demand.
- Commercial real estate credit quality.
- Net charge-offs and loan-loss provisions.
- Operating expenses and efficiency.
- Updated full-year guidance.
A strong second-quarter report could support another move higher, particularly if management maintains or raises its expectations for net interest income.
However, weaker margins, higher expenses, or renewed concerns about commercial real estate could trigger profit-taking after the stock’s strong year-to-date rally.
Is VLY Stock Still Undervalued?
Valuation remains one of the more complicated parts of the investment case.
At approximately $15 per share, VLY trades at roughly 13.5 times trailing earnings and offers a dividend yield close to 3%. The average Wall Street price target recently stood near $16.40, implying more modest upside than the stock offered at the beginning of the year.
Some excess-return valuation models have produced significantly higher estimates of intrinsic value. However, it would be misleading to describe a stock that a model considers “47.7% undervalued” as automatically offering exactly 47.7% upside.
The result of an excess-return model can change materially based on assumptions about future earnings, return on equity, capital requirements, discount rates, and long-term growth.
Investors should therefore treat such models as one valuation reference rather than a dependable price forecast.
What’s Next for VLY Stock?
Valley National Bancorp has delivered one of the stronger performances among regional bank stocks during 2026.
The company has expanded its loan portfolio, strengthened direct customer deposits, reduced higher-cost funding, improved its efficiency ratio, lowered net charge-offs, and maintained consistent shareholder returns.
Its first-quarter results also showed that lower funding costs are supporting stronger net interest income and healthier margins.
Even so, investors should not ignore the risks.
Commercial real estate represents a large portion of total loans, operating expenses continue rising, and the stock is trading near its 52-week high after gaining approximately 27% since the beginning of the year.
For existing shareholders, VLY stock still looks like a reasonable long-term holding as long as margins continue improving and credit quality remains stable.
For new investors, the decision is more difficult. The company’s fundamentals are improving, but the current price provides a smaller margin of safety than it did several months ago.
Investors may prefer to wait for either a market pullback or confirmation from the July 23 earnings report before establishing a full position.
Valley National Bancorp still has the potential to deliver additional long-term gains. However, the next major move in VLY stock will likely depend on whether earnings growth can keep pace with the expectations already reflected in its rising share price.
This article is for informational purposes only and does not constitute financial or investment advice.
