Will VLY's Providence Buyout Accelerate Growth in Chicago Franchise?

Valley National Bancorp’s VLY planned acquisition of Providence Financial Corporation, the parent company of Providence Bank & Trust, is expected to strengthen its Chicagoland franchise and help diversify deposits, loans, and fee income.

VLY will acquire Providence for approximately $247 million, with the consideration consisting of 4.3854 VLY shares and $21.47 in cash per Providence share, or approximately 74% stock and 26% cash. The transaction is expected to be closed in early 2027, subject to customary regulatory and shareholder approvals.

The deal is expected to generate approximately 2% 2028 EPS accretion, less than 1% tangible book value dilution at closing and a sub-three-year earn-back. Valley National also expects more than 20% internal rate of return (IRR) and a 30-basis-point return on average tangible common equity (ROATCE) accretion, along with approximately $10 million of pre-tax cost savings, 75% of which is expected to be phased in during 2027.

The acquisition supports VLY’s broader retail and small-business growth strategy. Providence CEO Steven G. Van Drunen will serve as market president for Chicago, helping oversee retail and small-business expansion while retaining local market expertise and customer relationships. The deal builds on the company’s solid merger and acquisition track record, with seven buyouts completed since 2012 and approximately $24.4 billion of assets acquired.

VLY-Providence Deal to Boost Chicago Franchise

Following the completion of the transaction, VLY’s Chicagoland presence will get a boost through Providence’s 14 full-service retail branches and approximately $1.35 billion of deposits and $1.09 billion of loans as of June 30, 2026. The transaction is expected to increase VLY’s deposits to approximately $1.6 billion and loans to $1.9 billion in the Chicagoland market.

Chicago Loans and Deposits

Image Source: Valley National Bancorp

The acquisition complements Valley National’s existing middle-market commercial banking operations by adding an established retail network. This will likely create opportunities to deepen relationships with retail and small-business customers while supporting commercial lending growth. The combined Chicago franchise is expected to have more than $2 billion in assets.

Chicago also offers significant growth potential, with 9.4 million residents, $886 billion in gross regional product and more than 400,000 local businesses. Valley National projects 13.1% median household-income growth from 2026 to 2031.

VLY-Providence Deal to Result in Lower Cost of Funding

Providence brings a relationship-driven, low-cost deposit franchise, with a 1.49% cost of total deposits, 99% of funding from deposits and 26% of deposits in non-interest-bearing accounts. Its average non-certificate of deposit account age exceeds 12 years, highlighting the strength and durability of its local customer relationships.

Cost of Total Deposits (Q2’26)

Image Source: Valley National Bancorp

With an approximately 81% loans-to-deposits ratio, Providence’s low-cost funding base should support faster commercial lending growth while strengthening VLY’s funding profile. The acquisition also adds approximately $800 million of wealth-management assets under management (AUM), providing opportunities to expand recurring fee income and diversify Valley National’s fee income streams.

Our Take on Valley National’s Buyout Plan

The impending Providence acquisition is strategically favorable for Valley National, as it adds a low-cost deposit base and expands its retail branch network. The deal also offers opportunities to drive commercial lending, deepen retail and small-business relationships and grow fee income in an attractive market. Successful integration and realization of synergies will remain key to maximizing the transaction’s long-term benefits.

Over the past year, Valley National shares have gained 34.4%, significantly outperforming the industry's 22.2% increase.

One-year Price Performance

Image Source: Zacks Investment Research

At present, Valley National carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inorganic Expansion Efforts by Other Financial Firms

Earlier this month, Banco Santander S.A. SAN completed the acquisition of Webster Financial, creating a larger and more diversified U.S. banking franchise. The $12.3 billion deal expands SAN’s scale, strengthens its Northeast presence, and enhances its commercial banking and deposit capabilities.

The acquisition supports Banco Santander’s strategy of expanding its U.S. franchise and is expected to generate around $800 million in annual pre-tax cost synergies and 7-8% EPS accretion by 2028.

Likewise, T. Rowe Price Group, Inc. TROW agreed to acquire F/m Investments LLC, a fixed-income asset manager and exchange-traded fund (ETF) specialist with approximately $19 billion in AUM. The deal will strengthen TROW’s fixed-income capabilities, expand its ETF and separately managed account offerings, and diversify its investment platform beyond traditional mutual funds.

The acquisition is expected to increase T. Rowe Price’s fixed-income AUM by nearly 9% and more than double its fixed-income ETF AUM, supporting its strategy to capture growing demand for ETFs and customized investment solutions.

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