VALLEY NATIONAL BANCORP (VLY) stock intrinsic value fair value estimate & owner earnings analysis

Valley National Bancorp is a bank holding company with more than $60 billion of assets, $50.1 billion of loans and deposits that reached $52.2 billion at the end of 2025 and $54.1 billion by June 30, 2026. It lends and gathers deposits mainly in New Jersey, the New York metropolitan area and Florida. Commercial real estate is the core of the loan book: $29.2 billion, or 58.3 percent of loans at year-end 2025. How we measured earnings. For a bank we start from operating cash flow, strip out the swings in loans held for sale, accrued interest, other assets and other liabilities, and then deduct stock compensation, the maintenance share of capital spending, the provision for credit losses (treated as a recurring cost of lending) and the dividends owed to preferred shareholders. We do not add back the provision. We do add back non-cash charges such as the roughly $30 million a year of amortization of intangibles from past acquisitions, because that cost is already sunk; the fact that acquired intangibles waste away is reflected by crediting no growth, not by lowering the earnings level. The result per diluted common share was: 2016 $0.86, 2017 $1.08, 2018 $0.89, 2019 $1.01, 2020 $1.17, 2021 $1.35, 2022 $1.21, 2023 $0.94, 2024 $0.76, 2025 $1.07. These sit close to, but not identical to, reported earnings per share ($1.01 in 2025), mainly because of non-cash items. The window. Valley was a different bank before the January 2018 USAmeriBancorp acquisition (diluted shares jumped from about 265 million to 333 million) and has since added Oritani (2019) and Bank Leumi USA (2022). We measure from 2018 through 2025. That window holds both the 2020 pandemic provisions ($125.7 million) and the 2024 commercial real estate problems ($308.8 million), so it is a full credit cycle. The median is $1.04 per share. Preferred dividends have risen from about $12.7 million a year (2018-2021) to $29.0 million in 2025; restating every year at today's preferred burden gives a median of about $1.01, which is the earnings level we use. The central fact is share count. Diluted shares more than doubled from 255 million in 2016 to 564 million in 2025, yet earnings per share on our measure rose only from $0.86 to $1.07, about 2.4 percent a year. Net income grew from $168 million in 2016 to $598 million in 2025, but acquisitions were paid for largely with new shares, so per-share growth was far smaller; we credit none going forward. Dividends are $0.44 a share a year. Growth check. Earnings per share on our measure rebounded 40 percent in 2025 ($0.76 to $1.07) after the 2024 trough, but that is a return to a level Valley had already reached, not growth. Year one of our base case is $1.01, below 2025's actual, and stays there. Net income in the first half of 2026 was $334.8 million against $239.2 million a year earlier, and management expects net charge-offs of 0.15 to 0.20 percent of loans in 2026 against 0.24 percent in 2025. Two strong quarters in a row support the level but do not lift it; margin expansion and lower credit costs are the kind of improvement we leave out of the base case. Base case: about $16.91 a share. Earnings stay at $1.01 a share indefinitely. What keeps them going: a $54 billion deposit franchise built over decades, and in every year of 2016-2025 earnings per share stayed between $0.76 and $1.35. Because the 2018-2025 window already contains two credit-stress years, we do not add a further downturn. Nothing is subtracted for borrowings: for a bank, deposits and borrowings are the raw material and interest is already a cost inside the earnings. Bear case: about $12.15 a share. This is a full credit cycle of the 2008-2010 kind, when industry-wide loan losses peaked at roughly 2.5 percent of loans (FDIC industry data, approximate). We size Valley at roughly half that, about 1.1 percent of its $50 billion book ($550 million a year) for two to three years, against 0.24 percent in 2025 and 0.40 percent in 2024, given 58 percent commercial real estate exposure. Credit costs above normal run about $850 million pre-tax in year two, $550 million in year three and $300 million in year four, partly reversed ($150 million) in year six. After tax that is about $1.1 billion, roughly $2 a share in total. From year one, earnings per share run $0.90, then negative $0.10, $0.29, $0.62, $0.74, $1.00, and settle at $0.80 (the average of Valley's weakest recent years, 2018 and 2024) instead of the $1.01 base level, because the commercial real estate book is permanently smaller. The cycle would take roughly two points off the 10.99 percent common equity Tier 1 ratio (our estimate), so we do not assume an emergency share issue. This case is worth more than tangible book value of $9.85 because after the cycle the franchise still earns about $445 million a year on roughly $5.5 billion of tangible common equity, around 8 percent. Bull case: $20.00 a share. Earnings per share reach $1.20 and stay there, which is the first-half 2026 run rate (about $670 million of net income annualized, plus roughly $34 million of non-cash items as in 2025, less $29 million of preferred dividends, spread over 557 million shares) and sits inside the $1.13 to $1.31 range of 2020-2022 on today's preferred burden. The named levers: net charge-offs guided down to 0.15 to 0.20 percent and a commercial real estate concentration ratio that has fallen from 474 percent of capital in 2023 to 333 percent in 2025 (management targets about 300 percent by 2027). We credit no buybacks (6.1 million shares in 2025 is too short a record) and no further acquisitions. What was left out and why. No loan growth, margin expansion, fee growth or buybacks: none is secured or a many-year repeatable process for this bank. Valley's own history shows growth through issuing shares, which has raised per-share earnings only about 2.4 percent a year. Stress test of the base case. Non-accrual loans rose $74.4 million in 2025 to $433.9 million and non-performing assets rose to 0.87 percent of loans from 0.76 percent, even as earnings recovered. Our earnings level embeds an average provision of about $96 million a year (2018-2025). If provisions stayed at 2025's $139.8 million, the base case would fall to about $15.94 a share. We also checked that maintenance capital spending ($18 million in 2025) is below depreciation ($38 million); each year's own spending is used in the median, and the 2018-2025 average is about $37 million. Margin-of-safety price: $9.00. We are reasonably, not highly, sure of the earnings level: it has ranged from $0.76 to $1.35 a share in eight years, and the 2025 rebound has only a short record. The worst plausible outcome is a real-estate credit cycle in the heart of the New York and New Jersey market; Valley's capital (common equity Tier 1 of 10.99 percent) and funding (deposits of $52.2 billion, liquid assets of $6.1 billion) would survive it, but a dividend cut and slower growth would follow, and Valley's habit of issuing shares to acquire banks could dilute owners further. If we are wrong about credit costs normalizing, value is about $16; if the cycle hits, about $12; the share count risk is in neither number. The price assumes a three-to-four-year holding period, with $0.44 a share a year in dividends (nearly 5 percent of $9.00). At $9.00 the price is below tangible book value of $9.85, for a franchise worth well over that in the downturn case, and the hard capital cushions a mistake. Above that price, the margin of safety for a leveraged real-estate lender is too thin to support a 20 percent return. Our earlier estimates (bear $7.24, base $11.70, bull $18.06) were built on a different basis and are not comparable to these figures.