This Regional Banking Dividend Stock Could Be One of the Year’s Best Plays

Valley National Bancorp (NASDAQ: VLY) isn’t dominating headlines, but its quietly resilient performance this year is drawing attention in regional banking circles.

The stock has climbed over 35% in the past 12 months, now trading at just over $9 and yielding nearly 4.8%—a yield that is tough to find among Tier 2 banks.

Under the surface, however, a deeper story is unfolding: improving margins, strengthening capital, and a cautious pivot away from high-risk lending that could point to more upside ahead.

Curious? Here’s why we think VLY is a sleeper hit worth exploring.

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What's Behind the 35% Rally—and Why It May Not Be Done

VLY rallied off its 17-month low of $6.47 thanks to a sharp rebound in net interest margins and a more disciplined balance sheet.

In Q1, net interest margin rose to 2.96%, up 4 bps sequentially and 17 bps annually.

Despite the headwinds of fewer days and a repricing environment, the bank sustained strong loan and deposit momentum, all while reducing interest expense via cheaper funding.

The result was that net interest income increased by $26.5 million year-over-year, despite total revenue falling short of some forecasts.

Although EPS was slightly below expectations, bank executives still managed to prevent major downside: Q1 net income of $106.1M was not far off, and credit costs actually improved.

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Balance Sheet Shift: Safer, Stronger, More Strategic

A key aspect of the story is Valley’s shift away from CRE risk.

CRE-driven provisions are easing: Q1 NPLs fell to 0.71% of loans, and the CRE concentration dropped to approximately 353% of risk-based capital, down from 362% in Q4.

That’s progress, although the ratio remains higher than that of our peers.

A recent equity raise (and strategic redemption of $115M in subordinated notes) further reinforces the bank's capital position—CET1 now sits near 10.8%.

Meanwhile, core deposit growth is gaining traction: VLY added $600 million in core deposits, reducing its reliance on brokered deposits by approximately $700 million in the first quarter.

Efficiency continues to improve, with expenses down and an efficiency ratio now under 56%. It's a classic recipe: reducing risk, boosting capital, and driving revenue.

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Why This Looks Like a Dividend Play Set for More Growth

As of June 10, VLY pays $0.11 per share quarterly, translating to a 4.84% annualized yield, sitting atop a P/E of 13.2x and P/B under 0.7.

But it’s not a broken stock. It's generating consistent income with tangible upside.

Analysts agree. KBW retained a Buy stance with a $11 target (~20% upside) and highlighted both capital progress and margin expansion.

Truist, Piper, and Barclays peg VLY between $10 and $11, with expectations that operating leverage and normalized credit trends could drive earnings higher.

Looking to the rest of 2025, management has forecasted a return on assets (ROA) rising from ~0.63% to 1.0%, indicating mid-single-digit EPS growth.

That aligns well with a payout ratio likely in the 50–60% range, even as a buffer for balance sheet builds.

Risks Still Require Caution

VLY is not without risks. Its CRE concentration, while reduced, remains elevated. Future weakness here could trigger fresh loan loss provisions.

EPS and revenue came in slightly light in Q1, with 4 analysts cutting forecasts after revising guidance lower.

If credit conditions deteriorate or interest rates shift unfavorably, VLY would be more exposed than larger banks.

Final Word: Disruption Brewing Under the Surface

Valley National is quietly executing a turnaround—cleaning up its balance sheet, boosting net interest margins, and rewarding yield-seeking shareholders.

It's not a flashy story, but for income-focused investors seeking a yield of approximately 5% plus upside, it represents one of the more compelling value plays in regional banking today.