What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2020-11-06 compared with 2020-08-07 · 39 added, 19 removed, 41 unchanged (59% of the section changed)

2 unchanged sentences

Except as presented below, there have been no material changes to these risk factors.

The COVID-19 pandemic is adversely affecting us and our customers, counterparties, employees, and third-party service providers, and the full extent of the adverse impacts on our business, financial position, results of operations, and prospects could be significant.

The spread of COVID-19 has created a global public-health crisis that has resulted in widespread volatility and deteriorations in business, economic, and market conditions and household incomes, including in the states of New

Jersey, New York, Florida and Alabama where we conduct nearly all of our business.

We anticipate that the COVID-19 pandemic will continue to adversely affect us and our customers, counterparties, employees, and third-party service providers.

The full extent and duration of the adverse impacts on our business, financial position, results of operations, and prospects are currently unknown and could be significant.

The spread of COVID-19 has created a global public-health crisis that has resulted in widespread volatility and deterioration in business, economic, and market conditions and household incomes, including in the states of New Jersey, New York, Florida and Alabama where we conduct nearly all of our business.

The extent of the 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:

1 unchanged sentence

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

The duration and severity of the pandemic, including the degree of resurgence after the initial containment, continue to be impossible to predict.

Following any containment, there is also substantial uncertainty surrounding the pace of economic recovery and the return of business and consumer confidence.

The duration and severity of the pandemic, including the degree of resurgence in the upcoming late fall and winter months and the timing of any vaccine, 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 .

1 unchanged sentence

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.

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.

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.

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

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 is unclear.

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.

During the first half of 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 expense was $75.8 million for the first half of 2020 as compared to $10.1 million for the first half of 2019.

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

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

During the first nine months of 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 expense was $106.1 million for the first nine months of 2020 as compared to $18.8 million for the same period in 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.

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

2 unchanged sentences

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.

The degree to which our actions and those of governments and others will directly or indirectly assist our customers, counterparties, and third-party service providers and advance our business and the economy generally is not yet clear.

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 may negatively impact our cash flows and results of operations at least in the near term, 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 accommodative monetary policy may benefit us to some degree by supporting economic activity among our customers, this policy and sudden shifts in it 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 temporarily closure of certain offices, restricting employee travel and directing employees to work from home whenever possible, temporary closure of

some branches and, in branches that remain open, offering only restricted drive-up service or lobby service by appointment, and have implemented our business continuity plans to the extent necessary.

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 in it may inhibit our ability to grow or sustain net interest income and effectively manage interest rate risk.

appointment, and have implemented our business continuity plans to the extent necessary.

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.

6 unchanged sentences

On April 16, 2020, the SBA notified lenders that the original $349.0 billion of funding under the PPP was exhausted, and on April 24, 2020, Congress allocated an additional $310.0 billion to the program.

We participated as a lender in both rounds of the PPP because of the short timeframe between the passing of the CARES Act and the opening of the PPP, there was and continues to be some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes us to risks relating to noncompliance with the PPP.

We participated as a lender in both rounds of the PPP.

Due to the short timeframe between the passing of the CARES Act and the opening of the PPP, there was and continues to be some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes us to risks relating to noncompliance with 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.

8 unchanged sentences

Although we have historically declared cash dividends on our common stock, we are not required to do so.

We may reduce or eliminate our common stock cash dividend in the future depending upon our results of operations, financial condition or other metrics which could be adversely impacted by the unknown full impact of COVID-19.

In July 2020, the FRB updated its supervisory guidance to provide greater clarity regarding the situations in which bank holding companies, like Valley, may expect an expedited consultation in connection with the declaration of dividends that exceed quarterly earnings.

dividends that exceed quarterly earnings.

To qualify, amongst other criteria, total commercial real estate loan concentrations cannot represent 300 percent or more of total capital and the outstanding balance of the commercial real estate loan portfolio cannot increase by 50 percent or more during the prior 36 months.

3 unchanged sentences

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

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

We recently implemented specialized deposit services intended for a limited number of state licensed medical-use (only) cannabis customers.

Currently, we provide this new service to one customer;

although we anticipate expanding this service to other customers in the future.

Medical-use cannabis 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.

In 2014, the U.S.

Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) published guidelines for financial institutions servicing state legal cannabis businesses.

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 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 is limited to depository products and 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.

While we believe our policies and procedures will allow us to operate in compliance with the FinCEN guidelines, there can be no assurance that compliance with the FinCEN guidelines will protect us from federal prosecution or other regulatory sanctions.

Federal prosecutors have significant discretion and there can be no assurance that the federal prosecutors will not choose to strictly enforce the federal laws governing cannabis.

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 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.

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-Q

Item 1A. Risk Factors