What changed in this filing

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Item 1A. Risk Factors

2022-02-28 compared with 2021-02-26 · 161 added, 90 removed, 290 unchanged (46% of the section changed)

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This report is qualified in its entirety by these risk factors.

Risks Related to our Pending Merger with Bank Leumi USA

Valley is expected to incur significant costs related to the merger and integration.

Valley has incurred and expects to incur certain non-recurring costs associated with the pending merger.

These costs include legal, financial advisory, accounting, consulting and other advisory fees, severance/employee benefit-related costs, public company filing fees and other regulatory fees, printing costs and other related costs.

Some of these costs are payable by Valley regardless of whether or not the merger is completed.

Valley is expected to incur substantial costs in connection with the integration of Valley and Bank Leumi USA.

There are a large number of processes, policies, procedures, operations, technologies and systems that may need to be integrated, including purchasing, accounting and finance, payroll, compliance, treasury management, vendor management, risk management, lines of business, pricing and benefits.

Valley has assumed that a certain level of costs will be incurred, however, there are many factors beyond Valley’s control that could affect the total amount or the timing of the integration costs.

Moreover, many of the costs that will be incurred are, by their nature, difficult to estimate accurately.

These integration costs may result in Valley taking charges against earnings following the completion of the merger, and the amount and timing of such charges are uncertain at present.

While Valley provided an assumption about the amount and timing of "cost synergies" when it announced the merger, those assumptions have not been updated and the amount of actual cost synergies may differ from amounts previously disclosed.

Combining Valley and Bank Leumi USA may be more difficult, costly or time consuming than expected and Valley may fail to realize the anticipated benefits of the merger.

To realize the anticipated benefits and synergies from the merger, Valley and Bank Leumi USA must successfully integrate and combine their businesses in a manner that permits those synergies to be realized.

If Valley and Bank Leumi USA are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.

In addition, the actual synergies and anticipated benefits of the merger could be less than anticipated, and integration may result in additional unforeseen expenses.

Valley and Bank Leumi USA have operated and, until the completion of the merger, will continue to operate, independently.

The success of the merger will depend, in part, on Valley’s ability to successfully combine and integrate the businesses of both companies in a manner that does not materially disrupt existing customer relations or result in decreased revenue or reputational harm.

It is possible that the integration process could result in the loss of key employees, the disruption of either company’s ongoing businesses, difficulties in integrating operations and systems, including communications systems, administrative and information technology infrastructure and financial reporting and internal control systems, or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the merger.

Any disruption to either company’s business could cause its customers to remove their accounts and move their business to a competing financial institution.

Integration efforts between the two companies may also divert management attention and resources.

These integration matters could have an adverse effect on each of Valley and Bank Leumi USA during this transition period and for an undetermined period after completion of the merger on Valley.

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Valley may be unable to retain Valley or Bank Leumi USA personnel successfully while the merger is pending or after the merger is completed.

The success of the merger will depend in part on Valley’s ability to retain the talents and dedication of key employees currently employed by Valley and Bank Leumi USA.

It is possible that these employees may decide not to remain with Valley or Bank Leumi USA, as applicable, while the merger is pending or with Valley after the merger is consummated.

If Valley and Bank Leumi USA are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, Valley and Bank Leumi USA could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs.

In addition, if key employees terminate their employment, Valley’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating Valley and Bank Leumi USA to hiring suitable replacements, all of which may cause Valley’s or Bank Leumi USA’s businesses to suffer.

In addition, Valley and Bank Leumi USA may not be able to locate or retain suitable replacements for any key employees who leave either company.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on Valley following the merger.

Various consents, approvals and authorizations must be obtained from certain governmental authorities, as a condition to closing of the merger.

These approvals could be delayed or not obtained at all, including due to any or all of the following:

an adverse development in either party’s or its affiliates’ regulatory standing, or any other factors considered by regulators in granting such approvals;

governmental, political or community group inquiries, investigations or opposition;

or changes in legislation or the political environment, including as a result of changes in regulatory agency leadership.

Even if the specified regulatory approvals are granted, they may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of Valley’s business or require changes to the terms of the transactions contemplated by the merger agreement.

There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger Agreement, imposing additional material costs on or materially limiting the revenues of Valley following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe.

In addition, there can be no assurance that any such conditions, limitations, obligations or restrictions will not result in the delay or abandonment of the merger.

The market price of Valley Common Stock after the merger may be affected by factors different from those affecting the shares of Valley Common Stock currently.

Valley’s business differs from that of Bank Leumi USA.

Accordingly, the results of operations of Valley and the market price of Valley Common Stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of each of Valley and Bank Leumi USA.

The future results of Valley following the merger may suffer if Valley does not effectively manage its expanded operations.

Following the merger, the size of the business of Valley will increase beyond its current size.

Valley’s future success will depend, in part, upon its ability to manage this expanded business, which may pose challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity.

Valley may also face increased scrutiny from governmental authorities as a result of the increase in the size of its business.

There can be no assurances that Valley will be successful or that it will realize the expected operating efficiencies, cost savings, revenue enhancements or other benefits currently anticipated from the merger.

Bank Leumi USA is subject to regulatory risks in connection with its international private banking business, and these risks may adversely affect Valley after completion of the merger.

Bank Leumi USA operates a private banking business with domestic clients and international clients primarily domiciled in Latin America.

The risk of noncompliance with the USA PATRIOT Act, the Bank Secrecy Act and other anti-money laundering laws and regulations (collectively, “AML laws”) and the rules of the U.S.

Treasury Department’s Office of Foreign Assets Control (“OFAC”) can be heightened for financial institutions that have a significant number of international customers, and can be particularly acute for financial institutions that have a significant number of customers from, or do business in, Latin America.

AML laws and OFAC rules and regulations have become increasingly complex and detailed, require improved systems and sophisticated monitoring and compliance personnel and have become the subject of enhanced government supervision.

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Following the completion of the merger, Valley will be responsible for maintaining a compliance program that is effective in combating the increased legal and regulatory risks associated with Bank Leumi USA’s international private banking business.

Valley will evaluate on an ongoing basis whether enhancements are appropriate so that Valley continues to maintain an effective compliance program following the completion of the merger, Valley may not be able to eliminate all attempts by customers to use Valley to engage in money laundering and other illegal or improper activities.

If Valley’s policies, procedures and systems are deemed deficient or fail to prevent violations of applicable laws or regulations, the OCC, along with other banking agencies, have the authority to impose fines and other penalties and sanctions on Valley, and Valley’s business and reputation could suffer.

Failure to successfully manage these risks could have a material adverse effect on Valley’s business, results of operations and financial condition.

Bank Leumi USA and its subsidiaries are currently involved in a number of legal proceedings, the results of which could have an adverse effect on Valley after completion of the merger.

Bank Leumi USA and its subsidiaries are currently involved in a number of legal proceedings and may from time to time be involved in government and regulatory investigations and inquiries, relating to matters that arise in connection with the conduct of their businesses.

For example, Bank Leumi USA is a defendant in a lawsuit filed in the United States District Court for the District of Columbia, captioned Bassem Al-Tamimi, et al v.

Sheldon Adelson, et al., Docket No.

1:16-cv-00445.

The plaintiffs, both Palestinian nationals and Palestinian Americans, generally allege that the defendants engaged in a conspiracy to expel all non-Jews from a territory in the Middle East.

Bank Leumi USA believes that this lawsuit is without merit and intends to defend against this action vigorously.

However, the ultimate outcome of this matter, any future similar matters, and any other legal proceedings in which Bank Leumi USA is or may become involved cannot be predicted with certainty.

Adverse judgments, fines or penalties in one or more of the legal proceedings in which Bank Leumi USA and its subsidiaries are or may become involved could have a material adverse effect on Valley’s business, financial condition, or results of operations.

Risks Related to the COVID-19 Pandemic

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The extent of the continuing impact of the COVID-19 pandemic on our capital and liquidity, and on our business, results of operations, financial position and prospects generally will depend on a number of evolving factors, including:

The duration, extent, and severity of the pandemic .

T he duration, extent, and severity of the pandemic .

COVID-19 has not yet been contained and could affect significantly more households and businesses.

The duration and severity of the pandemic, future resurgences of COVID-19 in our primary market areas, the efficacy of new approved vaccines and the timing of the distribution of such vaccines, continue to be impossible to predict.

The duration and severity of the pandemic, future resurgences of COVID-19 (including the Delta and Omicron variants and any future variants) in our primary market areas, the efficacy of vaccines and the timing of the distribution and public acceptance of such vaccines or other treatments, continue to be impossible to predict.

There remains substantial uncertainty surrounding the pace of economic recovery and the return of business and consumer confidence.

The response of governmental and nongovernmental authorities.

Many responsive measures have been directed toward curtailing household and business activity to contain COVID-19 while simultaneously deploying fiscal- and monetary-policy measures to partially mitigate the adverse effects on individual households and businesses.

These actions are not always coordinated or consistent across jurisdictions but, in general, have rapidly expanded in scope and intensity, contributing to substantial market volatility.

While many responsive measures, such as curtailing household and business activity to contain COVID-19 and deploying fiscal- and monetary-policy measures to partially mitigate the adverse effects on individual households and businesses, have been eliminated or curtailed due to the availability of vaccines, we cannot predict whether such measures will be reintroduced.

Furthermore, vaccine and mask mandates throughout our market areas are inconsistent and may inhibit our ability to attract and retain qualified personnel.

These measures are not always coordinated or consistent across jurisdictions.

We cannot predict whether and to what extent governmental and nongovernmental authorities will continue to implement policy measures to assist us and our customers and the failure to do so could have adverse effects on our business.

The effect on our customers, counterparties, employees, and third-party service providers.

COVID-19 and its associated consequences and uncertainties, including increased unemployment rates, are affecting individuals, households, and businesses differently and unevenly and we anticipate will continue to do so.

Many, however, have already changed their behavior in response to governmental mandates and advisories to sharply restrain commercial and social interactions and discretionary spending.

COVID-19 and its associated consequences and uncertainties, including inflationary pressure, supply chain challenges, unemployment, labor market shortages and vaccine mandates, are affecting individuals, households, and businesses differently and unevenly and we anticipate will continue to do so.

As a result, our credit, operational, and other risks have generally increased and, for the foreseeable future, are expected to remain elevated or increase further.

The effect on economies and markets.

Whether the actions of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 in the future is unclear.

National, regional, and local economies (including the local economies in the markets areas which we serve) and markets could suffer disruptions that are lasting.

Governmental actions are meaningfully influencing the interest-rate environment and financial-market activity, which could adversely affect our results of operations and financial condition.

We can provide no assurance that governmental or non-governmental mitigation efforts will continue or be effective in the future.

In 2020, the most notable impacts to our results of operations were a higher provision expense for credit losses, which we expect to continue.

Our provision for credit losses for loans was $125.1 million for 2020 as compared to $24.2 million for 2019.

With recent increases in COVID-19 infection rates in our market areas, our forecast of macroeconomic conditions and operating results, including expected lifetime credit losses on our loan portfolio, remains subject to meaningful uncertainty.

We have also entered into forbearance agreements (short-term loan modifications) with respect to approximately 600 loans with outstanding balances of approximately $361 million as of December 31, 2020.

If these borrowers are unable to resume payments on their loans, our loan charge-offs may increase.

Whether current and/or future actions of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 in the future is unclear.

National, regional, and local economies (including the local economies in the markets areas which we serve) recovered in 2021 but could deteriorate in

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2022 and beyond due to the Delta and Omicron variants and any future variants.

Markets could suffer disruptions that are lasting.

Governmental actions could adversely affect our results of operations and financial condition.

We can provide no assurance that governmental or non-governmental mitigation efforts will continue or be effective in the future.

In 2021, our provision expense for credit losses decreased significantly as compared to 2020.

However, with recent increases in COVID-19 infection rates in our market areas, the level of our provision expense remains subject to meaningful uncertainty.

Governments have taken unprecedented steps to partially mitigate the adverse effects of their containment measures.

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Since March 15, 2020, these have included a reduction in the target range for the federal funds rate to 0 to 0.25 percent, a program to purchase an indeterminate amount of Treasury securities and agency mortgage-backed securities, and numerous facilities to support the flow of credit to households and businesses.

While there is evidence that our actions and those of governments and others have assisted our customers, counterparties, and third-party service providers and advanced our business and the economy generally it is uncertain how much, if at all, these actions will be effective in the future.

For example, while our short-term loan modifications granted to certain customers impacted by COVID-19 may better position them to resume their regular payments to us in the future and enhance our brand and customer loyalty, these modifications have and may continue to negatively impact our cash flows and results of operations, may produce a higher degree of requests for extensions and rewrites than we have anticipated, and may not be as successful as we expect in managing our credit risk.

In addition, while the FRB’s monetary policy may benefit us to some degree by supporting economic activity among our customers, this policy and sudden shifts may inhibit our ability to grow or sustain net interest income and effectively manage interest rate risk.

In order to safeguard the health and wellness of our customers and employees, and to comply with applicable government directives, we have modified our business practices, including temporary closure of certain non-branch offices, restricting employee travel and directing employees to work from home whenever possible, and have implemented our business continuity plans to the extent necessary.

However, given the increase in inflation in 2021, it is expected that the FRB will raise interest rates and wind down U.S.

Treasury securities purchases in 2022.

While there is evidence that our actions and those of governments and others have assisted our customers, counterparties, and third-party service providers and advanced our business and the economy generally it is uncertain what the effect will be once those policies are discontinued.

For example, while the FRB’s monetary policy may benefit us to some degree by supporting economic activity among our customers, this policy and sudden shifts may inhibit our ability to grow or sustain net interest income and effectively manage interest rate risk.

In order to safeguard the health and wellness of our customers and employees, and to comply with applicable government directives, we modified our business practices.

While many of these restrictions were lifted in 2021, we still have not lifted all safeguards and we may choose, or be required, to implement new restrictions in the future including vaccine and mask mandates.

These measures, and further actions we may take as required by government authorities or that we otherwise determine are in the best interests of our customers and employees, could increase certain risks, including cybersecurity risks, impair our ability to perform critical functions and adversely impact our results of operations.

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In addition, sustained adverse effects may impair our capital and liquidity positions, require us to take capital actions, prevent us from satisfying our minimum regulatory capital ratios and other supervisory requirements, result in downgrades in our credit ratings, and the reduction or elimination of our common stock dividend in future periods.

As a participating lender in the SBA Paycheck Protection Program, we are subject to additional risks of litigation from our customers or other parties regarding our processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties, which could have a significant adverse impact on our business, financial position, results of operations, and prospects.

The CARES Act included a $349 billion loan program administered through the SBA referred to as the PPP.

Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria.

On April 16, 2020, the SBA notified lenders that the original $349 billion of funding under the PPP was exhausted, and on April 24, 2020, Congress allocated an additional $310 billion to the program.

The Consolidated Appropriations Act, 2021, which was signed into law on December 27, 2020, provides approximately $900 billion in new COVID-19 stimulus relief partly comprised of additional funding under the PPP.

The amendment to the PPP also expands borrowers eligibility to certain second draws under the program.

We participated as a lender in each round of the PPP.

Since the opening of the PPP, banks have been subject to class action litigation regarding the process and procedures that such banks used in processing applications for the PPP and their refusal to pay agent fees.

Class action litigation was filed against us, along with many other banks claiming the banks are obligated to pay agent fees.

The litigation against us was dismissed by the plaintiffs without prejudice.

Any financial liability, litigation costs or reputational damage caused by PPP-related litigation could have a material adverse impact on our business, financial position, results of operations and prospects.

We may have a credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by us, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP.

In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by us, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from us, which could adversely impact our business, financial position, results of operations and prospects.

Valley's outstanding PPP loans totaled $2.2 billion as of December 31, 2020.

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We may be required to consult with the Federal Reserve Bank (FRB) before declaring cash dividends on our common stock, which ultimately may delay, reduce, or eliminate such dividends and adversely affect the market price of our common stock.

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The delay, reduction or elimination of our quarterly dividend could adversely affect the market price of our common stock.

See additional information regarding our quarterly cash dividend and the current rate of earnings retention at the "Capital Adequacy" section of the MD&A.

See additional information regarding our quarterly cash dividend and the current rate of earnings retention in the "Capital Adequacy" section of the MD&A.

2021 Form 10-K

Risks Associated with Our Business Model

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The principals pled guilty to fraud in early 2020.

During 2021, the Internal Revenue Service commenced an audit connected with our investment in DC Solar.

While we believe that Valley was fully reserved for the tax positions related to DC Solar at December 31, 2021, we continue to evaluate all our existing tax positions each quarter under U.S.

We recently implemented new deposit services for businesses in the state licensed marijuana industry which could expose us to additional liabilities and regulatory compliance costs.

In 2020, we implemented specialized deposit services intended for a limited number of state licensed medical-use marijuana business customers.

Medical use marijuana, as well as recreational use businesses are legal in numerous states and the District of Columbia, including our primary markets of New Jersey, New York, and Florida.

We recently implemented new deposit services for businesses in the state licensed cannabis industry which could expose us to additional liabilities and regulatory compliance costs.

In 2020, we implemented specialized deposit services intended for a limited number of state licensed medical-use cannabis business customers.

Medical use cannabis, as well as recreational use businesses are legal in numerous states and the District of Columbia, including our primary markets of New Jersey, New York, and Florida.

However, such businesses are not legal at the federal level and cannabis remains a Schedule I drug under the Controlled Substances Act of 1970.

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We have implemented a comprehensive control framework that includes written policies and procedures related to the on-boarding of such businesses and the monitoring and maintenance of such business accounts that comports with the FinCEN guidance.

Additionally, our policies call for due diligence review of the cannabis business before the business is on-boarded, including confirmation that the business is properly licensed and maintains

2020 Form 10-K

the license in good standing in the applicable state.

Additionally, our policies call for due diligence review of the cannabis business before the business is on-boarded, including confirmation that the business is properly licensed and maintains the license in good standing in the applicable state.

Throughout the relationship, our policies call for continued monitoring of the business, including site visits, to determine if the business continues to meet our requirements, including maintenance of required licenses and calls for undertaking periodic financial reviews of the business.

The Bank’s program originally was limited to offering depository products to medical marijuana businesses.

The Bank’s program originally was limited to offering depository products to medical cannabis businesses.

Deposit transactions are monitored for compliance with the applicable state medical program rules and other regulations before approval and acceptance by the Bank’s BSA/AML Department.

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Any change in the federal government’s enforcement position, could potentially subject us to criminal prosecution and other regulatory sanctions.

While we also believe our BSA/AML policies and programs for this new business are sufficient, the medical and recreational marijuana business is considered high-risk, thus increasing the risk of a regulatory action against our BSA/AML program that has adverse consequences, including but not limited to, preventing us from undertaking mergers, acquisitions and other expansion activities.

While we also believe our BSA/AML policies and programs for this new business are sufficient, the medical and recreational cannabis business is considered high-risk, thus increasing the risk of a regulatory action against our BSA/AML program that has adverse consequences, including but not limited to, preventing us from undertaking mergers, acquisitions and other expansion activities.

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The loss of or decrease in lower-cost funding sources within our deposit base, including our inability to achieve deposit retention targets under our branch transformation strategy, may adversely impact our net interest income and net income.

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If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and shareholders’ equity could be adversely affected.

The declines in home or commercial real estate prices in the New Jersey, New York and Florida markets we primarily serve, along with the unpredictable long-term impact and path of the economic recovery from the COVID-19 pandemic, also may result in increases in delinquencies and losses in our loan portfolios.

Any declines in home or commercial real estate prices in the New Jersey, New York and Florida markets we primarily serve, along with the unpredictable long-term impact and path of the economic recovery from the COVID-19 pandemic, also may result in increases in delinquencies and losses in our loan portfolios.

Unexpected decreases in home or commercial real estate prices coupled with slow economic growth and elevated levels of unemployment could drive losses beyond those which are provided for in our allowance for loan losses.

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See Note 8 to the consolidated financial statements for additional information.

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Our market share and income may be adversely affected by our inability to successfully compete against larger and more diverse financial service providers, digital fintech start-up firms and other financial services providers which have advanced technological capabilities.

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The result of these regulatory changes will likely cause other non-traditional financial services companies to compete directly with Valley.

Many of the companies have stronger operating efficiencies and fewer regulatory burdens than their traditional bank counterparts, including Valley.

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of the companies have stronger operating efficiencies and fewer regulatory burdens than their traditional bank counterparts, including Valley.

Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations.

As a result of COVID-19, customers have become more reliant on, and their expectations have increased with respect to, this technology.

We may not be able to effectively implement new, technology-driven products and services or be successful in marketing these products and services to our customers and service interruptions, transaction processing errors and system conversion delays and may cause us to fail to comply with applicable laws.

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The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our financial condition and results of operations.

2020 Form 10-K

We may incur future losses in connection with repurchases and indemnification payments related to mortgages that we have sold into the secondary market.

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The aggregate principal balances of residential mortgage loans serviced by the Bank for others approximated $3.6 billion and $3.5 billion at December 31, 2021 and 2020, respectively.

Over the past several years, we have experienced a nominal amount of repurchase requests, and only a few of which have actually resulted in repurchases by Valley (only two and four loan repurchases in 2020 and 2019, respectively).

Over the past several years, we have experienced a nominal amount of repurchase requests, and only a few of which have actually resulted in repurchases by Valley (only five and two loan repurchases in 2021 and 2020, respectively).

None of the loan repurchases resulted in a material loss.

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While we currently believe our repurchase risk remains low based upon our careful loan underwriting and documentation standards, it is possible that requests to repurchase loans could occur in the future and such requests may have a negative financial impact on us.

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Net gains on sales of residential mortgage loans are a significant component of our non-interest income and could fluctuate in future periods.

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Our success depends, in large part, on our ability to attract and retain key people.

Competition for the best people in most activities in which we engage can be intense and we may not be able to hire people or to retain them.

Competition for the best people in most activities in which we engage can be intense and we may not be able to hire people or to retain them, in particular due to an increasingly competitive labor market.

The unexpected loss of services of one or more of our key personnel, including, but not limited to, the executive officers disclosed in Item 1 of this Annual Report, could have a material adverse impact on our business because we would lose the employees’ skills, knowledge of the market, and years of industry experience and may have difficulty promptly finding qualified replacement personnel.

Climate change and severe weather could significantly impact our ability to conduct our business.

There is an increasing concern over the risks of climate change and related environmental sustainability matters.

The physical risks of climate change include discrete events, such as flooding and wildfires, and longer-term shifts in climate patterns, such as extreme heat, seal level rise, and more frequent and prolonged drought.

Such events could disrupt our operations or those of our customers or third parties on which we rely, including through direct damage to assets and indirect impacts from market volatility.

Additionally, transitioning to a low-carbon economy may entail extensive policy, legal, technology and market initiatives.

A significant portion of our primary markets is located near coastal waters which could generate naturally occurring severe weather, or in response to climate change, that could have a significant impact on our ability to conduct business.

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In addition, our business and reputation could suffer if customers use our banking network for money laundering or illegal or improper purposes.

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Changes in interest rates could reduce our net interest income and earnings.

Valley’s earnings and cash flows are largely dependent upon its net interest income.

Net interest income is the difference between interest income earned on interest-earning assets, such as loans and investment securities, and interest expense paid on interest-bearing liabilities, such as deposits and borrowed funds.

Net interest income is the difference between interest income earned on interest-earning assets, such as loans and investment securities, and interest expense paid on

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interest-bearing liabilities, such as deposits and borrowed funds.

Interest rates are sensitive to many factors that are beyond Valley’s control, including general economic conditions, competition, and policies of various governmental and regulatory agencies and, in particular, the policies of the FRB.

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This also includes the risk that interest-earning assets may be more responsive to changes in interest rates than interest-bearing liabilities, or vice versa (repricing risk), the risk that the individual interest rates or rate indices underlying various interest-earning assets and interest-bearing liabilities may not change in the same degree over a given time period (basis risk), and the risk of changing interest rate relationships across the spectrum of interest-earning asset and interest-bearing liability maturities (yield curve risk).

The FRB has acted to decrease targeted short-term interest rates to 0%-.25%, and it is anticipated that short-term interest rates could remain at these low rates for an extended time period.

A period of extended low interest rates could have a negative impact on Valley's net interest income, and any substantial or unexpected change in market interest rates could have a material adverse effect on Valley’s financial condition and results of operations.

The FRB has maintained the target range for the federal funds rate between 0.00 and 0.25 percent during 2021.

Although, the FRB is expected to increase the target federal funds rate and effectively increase interest rates in 2022, we can give no assurances that market interest rates will increase, decrease or remain unchanged.

Any substantial or unexpected change in market interest rates could have a material adverse effect on Valley’s financial condition and results of operations.

See additional information in the “Net Interest Income” and “Interest Rate Sensitivity” sections of our MD&A.

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dollar LIBOR values would cease being computed to June 30, 2023.

On the same date, the FRB.

FDIC and OCC issued a joint statement instructing banks to cease entering into new LIBOR-based loan agreements by no later than December 31, 2021.

On the same date, the FRB, FDIC and OCC issued a joint statement instructing banks to cease entering into new LIBOR-based loan agreements by no later than December 31, 2021.

In the United States, efforts to identify a set of alternative U.S.

dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee (ARRC) has recommended the use of a Secured Overnight Funding Rate (SOFR).

dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee (ARRC) has recommended the use of a SOFR.

On April 6, 2021, the State of New York enacted legislation which provides that any contract governed by New York law and which references LIBOR and which does not contain effective “fallback provisions” will be deemed to be replaced by the“recommended benchmark replacement.” Under the statute, the “recommended benchmark replacement” should be based on the SOFR.

Similar legislation, which would cover all U.S.

contracts, was passed by the U.S.

House of Representatives in December 2021.

SOFR is different from LIBOR in that it is a backward-looking secured rate rather than a forward-looking unsecured rate.

These differences could lead to a greater disconnect between the Bank's costs to raise funds for SOFR as compared to LIBOR.

The implementation of a substitute index or indices for the calculation of interest rates under our loan agreements with our borrowers may incur significant expenses in effecting the transition, may result in reduced loan balances if borrowers do not accept the substitute index or indices, and may result in disputes or litigation with customers over the appropriateness or comparability to LIBOR of the substitute index or indices, which could have an adverse effect on our results of operations.

These reforms may cause LIBOR to cease to exist, new methods of calculating LIBOR to be established or the establishment of multiple alternative reference rates.

The implementation of a substitute index or indices for the calculation of interest rates under our loan agreements with our borrowers may cause us to incur significant expenses in effecting the transition, may result in reduced loan balances if borrowers do not accept the substitute index or indices, and may result in disputes or litigation with customers over the appropriateness or comparability to LIBOR of the substitute index or indices, any of which could have an adverse effect on our results of operations.

These reforms may cause new methods of calculating LIBOR to be established or the establishment of multiple alternative reference rates.

These consequences cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us.

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If our judgment proves to be incorrect, our allowance for credit losses may not be sufficient to cover the lifetime credit losses inherent in our loan and held to maturity debt securities portfolios, as well as unfunded credit commitments.

Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for credit losses in addition to the increase in our loan allowance in 2020 due to the effects of the COVID-19 pandemic.

Additionally, bank regulators review the classification of our loans in their examination of us and we may be required in the future to change the internal classification on certain loans, which may require us to increase our provision for credit losses or loan charge-offs.

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Non-performing assets (including non-accrual loans, other real estate owned, and other repossessed assets) totaled $245.4 million at December 31, 2021.

Our non-accrual loans increased from 0.22 percent of total loans at December 31, 2016 to 0.58 percent of total loans at December 31, 2020 largely due to a significant increase in non-accrual taxi medallion loans within our commercial and industrial loan portfolio.

Our non-accrual loans increased from 0.26 percent of total loans at December 31, 2016 to 0.70 percent of total loans at December 31, 2021 partially due to a significant increase in non-accrual taxi medallion loans within our commercial and industrial loan portfolio.

Due to continued negative trends in estimated fair valuations of the underlying taxi medallion collateral, a weak operating environment for ride services and uncertain borrower performance, the remainder of our previously accruing taxi medallion loans were placed on non-accrual status during the first quarter 2020.

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Volatility in the housing markets, real estate values and unemployment levels could result in significant write-downs of asset values by financial institutions.

The majority of Valley’s lending is in northern and central New Jersey, the New York City metropolitan area, Florida and Alabama.

As a result of this geographic concentration, a significant broad-based deterioration in economic conditions in these areas could have a material adverse impact on the quality of Valley’s loan

The majority of Valley’s lending is in northern and central New Jersey, the New

2021 Form 10-K

portfolio, results of operations and future growth potential.

York City metropolitan area, Florida and Alabama.

As a result of this geographic concentration, a significant broad-based deterioration in economic conditions in these areas could have a material adverse impact on the quality of Valley’s loan portfolio, results of operations and future growth potential.

Adverse economic conditions in our market areas can reduce our rate of growth, affect our customers’ ability to repay loans and adversely impact our financial condition and earnings.

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Any possible acquisition will be subject to regulatory approval, and there can be no assurance that we will be able to obtain such approval in a timely manner or at all.

Even if we obtain regulatory approval, these acquisitions could involve numerous risks, including lower than expected performance or higher than expected costs, difficulties related to integration, diversion of management's attention from other business activities, changes in relationships with customers, and the potential loss of key employees.

Even if we obtain regulatory approval, these acquisitions, including our recent acquisition of The Westchester Bank and pending acquisition of Bank Leumi USA, could involve numerous risks, including lower than expected performance or higher than expected costs, difficulties related to integration, diversion of management's attention from other business activities, changes in relationships with customers, and the potential loss of key employees.

In addition, we may not be successful in identifying acquisition candidates, integrating acquired institutions, or preventing deposit erosion or loan quality deterioration at acquired institutions.

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While the decline in the federal corporate tax rate from 35 percent to 21 percent lowered Valley’s income tax expense as a percentage of its taxable income in 2018 and subsequent years, other provisions of the Tax Act negatively impacted Valley's consolidated financial statements and it may adversely affect Valley in the future.

For example, under the provisions of the Tax Act, the $3.3 million and $2.5 million of the Bank's total FDIC insurance assessment for the years ended December 31, 2020 and 2019, respectively, was non-tax deductible based upon the asset size of the Bank.

If Valley's total assets were to exceed $50 billion at any year-end, its entire FDIC insurance assessment would be non-tax deductible in that fiscal year.

For example, under the provisions of the Tax Act, the $2.5 million, $3.3 million and $2.5 million of the Bank's total FDIC insurance assessment for the years ended December 31, 2021, 2020 and 2019, respectively, was non-tax deductible based upon the asset size of the Bank.

If Valley's total assets were to exceed $50 billion at any year-end which is likely at the end of 2022 due to the pending acquisition of Bank Leumi USA, its entire FDIC insurance assessment would be non-tax deductible in that fiscal year.

The future impact of the Tax Act or subsequent amendments to the tax rates and laws on our business may be adverse.

The new Biden presidential administration has indicated an intention to increase corporate taxes which would reduce our net income.

Our adoption of the CECL model for determining our allowance for credit losses has added volatility, could add additional volatility, to our provision for credit losses and earnings.

Our adoption of the CECL model for determining our allowance for credit losses has added volatility and could add additional volatility, to our provision for credit losses and earnings.

Effective January 1, 2020, Valley adopted the FASB's new accounting guidance on the impairment of financial instruments, commonly known as the current expected credit loss (CECL) model.

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Changes in such estimates could significantly impact our allowance and provision for credit losses.

Accordingly, our actual allowance for credit losses may be materially different than the amounts reported due to the inherent uncertainty in the estimation process, including future loss estimates based upon our reasonable and supportable economic forecasts.

Also, future amount could differ materially from

Accordingly, our actual allowance for credit losses may be materially different than the amounts reported due to the inherent uncertainty in the estimation process, including future loss

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those estimates due to changes in values and circumstances after the balance sheet date.

See Note 1 to the consolidated financial statements for additional information regarding the impact of the adoption of the CECL model.

estimates based upon our reasonable and supportable economic forecasts.

Also, the future amount could differ materially from those estimates due to changes in values and circumstances after the balance sheet date.

We may be unable to adequately manage our liquidity risk, which could affect our ability to meet our obligations as they become due, capitalize on growth opportunities, or pay regular dividends on our common stock.

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Our ability to borrow could also be impaired by factors that are not necessarily specific to us, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole.

Cyber-attacks could compromise our information or result in the data of our customers being improperly divulged, which could expose us to liability, losses and escalating operating costs.

Cyber attacks could compromise our information or result in the data of our customers being improperly divulged or our systems being disrupted which could expose us to liability, losses and escalating operating costs.

Valley regularly collects, processes, transmits and stores confidential information regarding its customers, employees and others for whom it services loans.

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Many financial institutions and companies engaged in data processing have reported significant breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, denial-of-service, or sabotage systems, often through the introduction of computer viruses or malware, cyber attacks and other means.

Although Valley frequently experiences attempted cybersecurity attacks against its systems, to date, none of these incidents have resulted in material losses, known breaches of customer data or significant disruption of services to Valley’s customers.

However, there can be no assurance that Valley will not incur such issues in the future, exposing us to significant on-going operational costs and reputational harm.

Additionally, risk exposure to cyber security matters will remain elevated or increase in the future due to, among other things, the increasing size and prominence of Valley in the financial services industry, our expansion of Internet and mobile banking tools and products based on customer needs, and the system and customer account conversions associated with the integration of merger targets.

In managing our cyber risks, when entering a new vendor relationship, we review and gauge the cyber security risk of such third-party service providers.

A successful attack on one of our third-party service providers could adversely affect our business and result in the disclosure or misuse of our confidential information.

While we believe we are taking reasonable, risk-based precautions to manage the risk of cyber-attacks against third-party service providers, there can be no assurance that our third-party service providers will not suffer a cyber-attack that exposes us to significant operational costs and damages.

While we believe we have risk based technology reasonably capable of discovering cyber-attacks, and personnel who are qualified to monitor our technology and systems to detect cyber-attacks, we can offer no assurance that we will be able to identify and prevent cyber-attacks when they occur.

Significant damage may occur if Valley fails to identify, or there is a delay in identifying, a cyber-attack on our systems, or those of our third-party service providers.

In addition, recently there have been well-publicized “ransomware” attacks against various U.S.

companies with the intent to materially disrupt their computer network and services.

Valley frequently experiences attempted cybersecurity attacks against its systems.

In 2021, there was a breach by a threat actor of a legacy network from an acquired bank.

The breach resulted in the unauthorized access of certain data stored on the legacy network.

The legacy network was isolated from Valley’s network, which was not affected by the incident.

There can be no assurances that Valley will not incur breaches of our systems or that of our vendors which may expose the data of our customers or disrupt our services, exposing us to significant damage, on-going operational costs and/or reputational harm.

Cyber risk exposure will remain elevated or increase in the future due to, among other things, the increasing size and prominence of Valley in the financial services industry, our expansion of internet and mobile banking tools and new products based on customer needs, and the system and customer account conversions associated with the integration of merger targets.

Successful attacks on any one of many our third-party service providers may adversely affect our business and result in the disclosure or misuse of our confidential information or that of our customers.

There can be no assurance that we or our third-party service providers will not suffer a cyber attack that exposes us to significant damages, operational costs, or reputational harm.

Extensive regulation and supervision have a negative impact on our ability to compete in a cost-effective manner and may subject us to material compliance costs and penalties.

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Many laws and regulations affect Valley’s lending practices, capital structure, investment practices, dividend policy and growth, among other things.

They encourage Valley to ensure a satisfactory level of lending in defined areas and establish and maintain comprehensive programs relating to anti-money laundering and

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customer identification.

They encourage Valley to ensure a satisfactory level of lending in defined areas and establish and maintain comprehensive programs relating to anti-money laundering and customer identification.

Congress, state legislatures, and federal and state regulatory agencies continually review banking laws, regulations and policies for possible changes.

Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect Valley in substantial and unpredictable ways.

Such changes could subject Valley to additional costs, limit the types of financial services and products it may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things.

Such changes could subject Valley to additional costs, limit the types of financial services and products it may offer and/or

2021 Form 10-K

increase the ability of non-banks to offer competing financial services and products, among other things.

Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on Valley’s business, financial condition and results of operations.

Valley’s compliance with certain of these laws will be considered by banking regulators when reviewing bank merger and bank holding company acquisitions.

In addition, we may be subject to increased regulatory scrutiny from the current presidential and congressional administrations as compared to prior administrations.

Changes in key personnel at our federal regulators may result in differing interpretations of existing rules and guidelines and potentially more stringent enforcement and more severe penalties than was previously the case.

We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.

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generally accepted accounting principles (U.S.

GAAP), such as the FASB, SEC, banking regulators and Valley’s independent registered public accounting firm, may change or even reverse their previous interpretations or positions on how these standards should be applied.

GAAP), such as the FASB, SEC and banking regulators may change or even reverse their previous interpretations or positions on how these standards should be applied.

Such changes are expected to continue and may accelerate dependent upon the FASB and International Accounting Standards Board commitments to achieving convergence between U.S.

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Furthermore, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors.

Future acquisitions may dilute shareholder value, especially tangible book value per share.

Valley’s shareholders will have a reduced ownership and voting interest in and will exercise less influence over management of Valley after the acquisition of Bank Leumi USA.

Valley’s shareholders currently have the right to vote in the election of the Valley board and on other matters affecting Valley.

Upon completion of the merger, Valley anticipates that shares of Valley common stock held by former Bank Leumi USA shareholders will represent approximately 16.8 percent of the outstanding shares of Valley common stock expected to be issued and outstanding as of immediately following and giving effect to the completion of the merger, with Bank Leumi Le-Israel B.M.

and its subsidiaries beneficially owning approximately 14.2 percent of the outstanding shares of Valley common stock expected to be issued and outstanding as of immediately following and giving effect to the completion of the merger, and the shares of Valley common stock held by existing Valley shareholders will represent approximately 83.2 percent of the outstanding shares of Valley common stock expected to be issued and outstanding as of immediately following and giving effect to the completion of the merger, in each case based on the number of shares outstanding as of December 31, 2021.

Accordingly, Valley’s shareholders may have less influence on the management and policies of Valley after completion of the merger than they now have on the management and policies of Valley.

The Bank Leumi USA acquisition, and future acquisitions, may dilute shareholder value, especially tangible book value per share.

We regularly evaluate opportunities to acquire other financial institutions.

As a result, merger and acquisition discussions and, in some cases, negotiations may take place and future mergers or acquisitions involving cash, debt, or equity securities may occur at any time.

If the Bank Leumi USA acquisition is completed, we will issue approximately 84.9 million shares of Valley common stock.

While there are many variables, we anticipate that tangible book value will be diluted by 1 percent with an earn back period expected to be approximately one year or longer depending on the speed of achieving cost savings and the amount of savings.

Future mergers or acquisitions involving cash, debt, or equity securities may occur at any time.

Acquisitions typically involve the payment of a premium over book and market values, and therefore, some dilution of our tangible book value per common share may occur in connection with any future acquisitions.

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Holders of our common stock are not entitled to preemptive rights or other protections against dilution.

Upon liquidation, holders of our debt securities and shares of preferred stock, and lenders with respect to other borrowings will receive distributions of our available assets prior to the holders of our common stock.

Upon liquidation, holders of our debt securities and shares of preferred stock, and lenders with respect to other borrowings will receive distributions of our available assets prior to the

2021 Form 10-K

holders of our common stock.

See Note 18 to the consolidated financial statements for more details on our common and preferred stock.

Unresolved Staff Comments

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors