KBRA Affirms Ratings for Valley National Bancorp

KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, the preferred stock rating of BBB-, and the short-term debt rating of K2 for Morristown, New Jersey based Valley National Bancorp (NASDAQ: VLY) (“the company”). Additionally, KBRA affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and the short-term deposit and debt ratings of K2 for lead subsidiary, Valley National Bank. The Outlook for all long-term ratings is Stable.

The ratings are supported by VLY’s long-standing credit performance, buoyed by an operating strategy that includes a heightened focus around risk management. VLY did experience some credit deterioration in recent years, primarily related to its elevated concentration in CRE loans, culminating in slightly above-average credit losses in 2024. However, VLY’s well-executed strategy to address areas of stress within the loan portfolio has resulted in meaningful improvements in credit metrics with credit losses decreasing to more historical levels, reflected by VLY’s NCO ratio that has tracked below 0.2% in each of the last three quarters. Additionally, VLY has managed to significantly reduce CRE concentration (332% at 1Q26, as compared to 473% at YE23) through strategic runoff, loan sales and increased equity position. The company's CRE concentration should continue to decrease, with a well-balanced loan origination mix further diluting CRE levels over time.

Coinciding with the improved credit trends and a more favorable interest rate environment, earnings have steadily increased with the company’s ROAA tracking above 1% in recent quarters. NIM expansion has largely mirrored that of the rated peer group, with modest upward momentum continuing over the near term as VLY continues to benefit from the replacement of maturing, lower-yielding, long-term assets. Capitalizing on its fairly robust retail branch network, as well as its various commercial and specialty banking segments, VLY has reported strong core deposit growth in recent periods (~9% annualized for 1Q26 and FY25). This growth has been a key factor in its recent NIM expansion with VLY meaningfully reducing its wholesale funding usage (brokered deposits fell below 10% of total deposits in 1Q26). As such, VLY’s funding costs have decreased significantly, tracking closer to rated peers in recent periods (VLY’s total cost of funds for 1Q26 was 2.41%). Finally, as part of its greater initiative to strengthen the balance sheet, buoyed by a common equity raise completed in 4Q24 (with net proceeds of approximately $449 million), VLY has operated with capital ratios that are more in line with other large regional banks, including a CET1 ratio ranging from 10.5% - 11.0%.

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