What changed in this filing

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Item 1. Business

2021-02-26 compared with 2020-03-10 · 179 added, 113 removed, 340 unchanged (46% of the section changed)

The disclosures set forth in this item are qualified by Item 1A—Risk Factors and the section captioned “Cautionary Statement Concerning Forward-Looking Statements” in Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report and other cautionary statements set forth elsewhere in this report.

The disclosures set forth in this item are qualified by Item 1A—Risk Factors and the section captioned “Cautionary Statement Concerning Forward-Looking Statements” in Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K (referred to as this "report") and other cautionary statements set forth elsewhere in this report.

Valley National Bancorp, headquartered in Wayne, New Jersey, is a New Jersey corporation organized in 1983 and is registered as a bank holding company with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended (“Holding Company Act”).

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See Note 11 to the consolidated financial statements.

Valley advertises and identifies itself under the trade names "Valley Bank" and "Valley".

Valley National Bank is a national banking association chartered in 1927 under the laws of the United States.

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In addition, certain international banking services are available to customers including standby letters of credit, documentary letters of credit and related products, and certain ancillary services such as foreign exchange transactions, documentary collections, foreign wire transfers, as well as transaction accounts for non-resident aliens.

Our primary focus is to build and develop profitable customer relationships across all lines of business and create a convenient and innovative omni-channel customer experience beyond our traditional branch footprint, including our recent launch of ValleyDirect on-line savings account.

Valley National Bank’s wholly-owned subsidiaries are all included in the consolidated financial statements of Valley (See Exhibit 21 at Part IV, Item 15 for a list of subsidiaries).

Our primary focus is to build and develop profitable customer relationships across all lines of business and create a convenient and innovative omni-channel customer experience beyond our traditional branch footprint, including through the use and promotion of our mobile and online service offerings, such as our ValleyDirect on-line savings account.

Valley National Bank’s subsidiaries are all included in the consolidated financial statements of Valley (See Exhibit 21 at Part IV, Item 15 for a list of subsidiaries).

These subsidiaries include, but are not limited to:

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The Bank’s subsidiaries also include real estate investment trust subsidiaries (the "REIT" subsidiaries), which own real estate related investments and a REIT subsidiary, which owns some of the real estate utilized by the Bank and related real estate investments.

Except for Valley’s REIT subsidiaries, all subsidiaries mentioned above are directly or indirectly wholly owned by the Bank.

Because each REIT must have 100 or more shareholders to qualify as a REIT, each REIT has issued less than 20 percent of its outstanding non-voting preferred stock to individuals, most of whom are current and former (non-executive officer) Bank employees.

Except for Valley’s REIT subsidiaries and Valley's insurance agency (10% of which is owned by the insurance agency's co-CEOs), all subsidiaries mentioned above are directly or indirectly wholly owned by the Bank.

The Bank owns the remaining preferred stock and all the common stock of the REITs.

2020 Form 10-K

Recent Acquisitions

Valley has grown significantly in the past five years primarily through bank acquisitions that expanded our branch footprint into Florida.

Valley has grown significantly in the past several years primarily through bank acquisitions that expanded our branch footprint in New Jersey and Florida.

Recent bank transactions are discussed further below.

2019 Form 10-K

Oritani Financial Corp.

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Oritani had approximately $4.3 billion in assets, $3.4 billion in net loans, $2.9 billion in deposits, after purchase accounting adjustments, and a branch network of 26 locations.

The acquisition represents a significant addition to Valley's New Jersey franchise, and will meaningfully enhance its presence in the Bergen County market.

The common shareholders of Oritani received 1.60 shares of Valley common stock for each Oritani share that they owned prior to merger.

The acquisition represented a significant addition to Valley's New Jersey franchise, and meaningfully enhanced its presence in the Bergen County market.

The common shareholders of Oritani received 1.60 shares of Valley common stock for each Oritani share that they owned prior to the merger.

The total consideration for the acquisition was approximately $835 million, consisting of approximately 71.1 million shares of Valley common stock and the outstanding Oritani stock-based awards.

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(USAB) headquartered in Clearwater, Florida.

USAB, largely through its wholly-owned subsidiary, USAmeriBank, had approximately $5.1 billion in assets, $3.7 billion in net loans and $3.6 billion in deposits, after purchase accounting adjustments, and maintained a branch network of 29 offices at December 31, 2018.

The acquisition represents a significant addition to Valley’s Florida presence, primarily in the Tampa Bay market.

The acquisition represented a significant addition to Valley’s Florida presence, primarily in the Tampa Bay market.

The acquisition also brought Valley to the Birmingham, Montgomery, and Tallapoosa areas in Alabama, where USAB maintained 15 of its branches.

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The total consideration for the acquisition was approximately $737 million, consisting of 64.9 million shares of Valley common stock and the outstanding USAB stock based awards.

CNLBancshares, Inc .

On December 1, 2015, Valley completed its acquisition of CNLBancshares, Inc.

(CNL) and its wholly-owned subsidiary, CNLBank, headquartered in Orlando, Florida, a commercial bank with approximately $1.6 billion in assets, $825 million in loans, $1.2 billion in deposits and 16 branch offices on the date of its acquisition by Valley.

The acquired branches allowed us to service Florida's west coast markets of Naples, Bonita Springs, Fort Myers and Sarasota.

We also added three offices in the Jacksonville area and expanded our presence in the Orlando market.

The common shareholders of CNL received 0.705 of a share of Valley common stock for each CNL share they owned prior to the merger.

The total consideration for the acquisition was approximately $230 million, consisting of 20.6 million shares of Valley common stock.

Impact of COVID-19

Valley's primary market areas within New Jersey, New York, Florida and Alabama have all experienced significant outbreaks and resurgences of the disease caused by the novel coronavirus (COVID-19) and disruptions from the pandemic.

The COVID-19 pandemic and any preventative or protective actions that Valley or its customers have taken or may take in response resulted and may continue to result in extended periods of disruption to Valley, its customers, service providers, and third parties.

The full extent and duration of the adverse impacts of COVID-19 pandemic on Valley's business, financial position, results of operations, and prospects are currently unknown, but could be significant.

As of the date of this report, the banking and financial services industries have been deemed essential businesses in the jurisdictions in which Valley operates.

Although our branches are now open, we continue to implement various protocols and practices imposed to safeguard the health and wellness of customers and employees and to comply with applicable government directives.

However, the imposition and the extent of any further restrictions on our operations, and compliance therewith could have a material effect on Valley’s business.

Valley cannot predict whether and to what extent governmental and nongovernmental authorities will continue to implement policy measures or further legislative relief to assist Valley and its customers and the failure to do so could have adverse effects on Valley's business.

The Paycheck Protection Program (PPP) provided for in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as supplemented by the Paycheck Protection Program and Health Care Enhancement Act (Enhancement Act), was designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks.

These loans were intended to offset payroll and other costs to help those businesses remain viable and allow their workers to pay their bills.

Valley National Bank is a certified Small Business Administration (SBA) lender and facilitated approximately 13,000 SBA-approved PPP loans with balances totaling $2.2 billion as of December 31, 2020.

While difficult to accurately predict, we expect the majority of these loans to be forgiven in accordance with rules, application and documentation requirements for this program.

Business Segments

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Commercial and industrial loans totaled approximately $6.9 billion and represented 21.3 percent of the total loan portfolio at December 31, 2020.

We make commercial loans to small and middle market businesses most often located in New Jersey, New York, Florida and Alabama.

Loans originated from Florida accounted for approximately 30 percent of total commercial and industrial loans at December 31, 2019 as compared to 28 percent of such loans at December 31, 2018 .

We make commercial loans to small and middle market

2020 Form 10-K 4

businesses most often located in New Jersey, New York, Florida and Alabama.

Loans originated from Florida accounted for approximately 28 percent of total commercial and industrial loans at both, December 31, 2020 and 2019.

A significant proportion of Valley’s commercial and industrial loan portfolio is granted to long-standing customers of proven ability, strong repayment performance, and high character.

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Unsecured loans, when made, are generally granted to the Bank’s most creditworthy borrowers.

Unsecured commercial and industrial loans totaled $606.1 million at December 31, 2019 .

Unsecured commercial and industrial loans totaled $2.7 billion (including $2.2 billion of SBA guaranteed PPP loans) at December 31, 2020.

In addition, we provide financing to the health care and industrial equipment leasing market through our leasing subsidiary, Highland Capital Corp.

2019 Form 10-K

The commercial portfolio also includes approximately $107.5 million and $7.3 million of New York City and Chicago taxi medallion loans at December 31, 2019 , respectively, which we continue to closely monitor due to the weakness exhibited in the taxi industry caused by strong competition from alternative ride-sharing services.

At December 31, 2019 , the medallion portfolio included impaired loans totaling $87.1 million with related reserves of $35.5 million within the allowance for loan losses.

While most of the taxi medallion loans within the portfolio at December 31, 2019 are currently performing to their contractual terms, negative trends in the market valuations of the underlying taxi medallion collateral and a decline in borrower cash flows, among other factors, could impact the future performance of this portfolio.

The commercial portfolio also includes approximately $90.6 million and $6.9 million of New York City and Chicago taxi medallion loans at December 31, 2020, respectively.

All of these loans are on non-accrual status due to ongoing weakness exhibited in the taxi industry caused by strong competition from alternative ride-sharing services and the economic stress caused by COVID-19.

At December 31, 2020, the non-accrual taxi medallion loans totaling $97.5 million had related reserves of $66.4 million, or 68.1 percent of such loans, within the allowance for loan losses.

We continue to closely monitor this portfolio and negative trends in the market valuations of the underlying taxi medallion collateral and a decline in borrower cash flows, among other factors, could result in additional charges to increase the reserves associated with this loan portfolio.

See the “Non-performing Assets” section of “Item 7.

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These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

2020 Form 10-K

Consumer Lending Segment

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Residential mortgage loans totaled $4.2 billion and represented 13.0 percent of the total loan portfolio at December 31, 2020.

Our residential mortgage loans include fixed and variable interest rate loans mostly located in New Jersey, New York and Florida.

Our residential mortgage loans include fixed and variable interest rate loans located mostly in New Jersey, New York and Florida.

Valley’s ability to be repaid on such loans is closely linked to the economic and real estate market conditions in our lending markets.

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The adjustable rate loans have a fixed-rate, fixed payment, introductory period of 5 to 10 years that is selected by the borrower.

The adjustable rate residential mortgage loans totaled approximately $1.0 billion and $898 million at December 31, 2019 and 2018 , respectively.

Additionally, Valley began to originate interest-only (i.e., non-amortizing) residential mortgage loans during 2017 due to demand for this type of loan product in the New York City and northern New Jersey markets.

Valley's interest-only residential mortgage loans have 15-year to 30-year maturities and totaled $54.6 million (or 1.3 percent of the total residential mortgage loan portfolio) at December 31, 2019 .

2019 Form 10-K

Bank is also a servicer of residential mortgage portfolios, and it is compensated for loan administrative services performed for mortgage servicing rights related primarily to loans originated and sold by the Bank.

Additionally, Valley originates jumbo residential mortgage loans, which are mostly fixed-rate with 30-year maturities.

At December 31, 2020, fixed and adjustable rate jumbo residential mortgage loans totaled approximately $2.5 billion.

Interest-only (i.e., non-amortizing) residential mortgage loans within our jumbo portfolio tota led $39.4 million (or 0.94 percent of the total residential mortgage loan portfolio) at December 31, 2020.

The Bank is also a servicer of residential mortgage portfolios, and it is compensated for loan administrative services performed for mortgage servicing rights related primarily to loans originated and sold by the Bank.

See Note 5 to the consolidated financial statements for further details.

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Valley acquired an immaterial amount of automobile loans from its bank acquisitions in Florida since 2014, as auto lending was not a focus of the acquired operations.

However, we implemented our indirect auto lending model in Florida during 2015, and Alabama in 2018 using our New Jersey based underwriting and loan servicing platform.

The relatively new Florida auto dealer network generated over $169 million and $154 million of auto loans in 2019 and 2018 , respectively, while the auto loans originated from Alabama totaled $39.4 million in 2019 as compared to $5.4 million in 2018.

Home equity lending consists of both fixed and variable interest rate products mainly to provide home equity loans to our residential mortgage customers or take a secondary position to another lender’s first lien position within the footprint of our primary lending territories.

However, we implemented our indirect auto lending model in Florida in 2015, and in Alabama in 2018 using our New Jersey based underwriting and loan servicing platform.

The relatively new Florida auto dealer network generated approximately $85 million and $169 million of auto loans in 2020 and 2019, respectively, while the auto loans originated from Alabama totaled $22 million in 2020 as compared to $39 million in 2019.

Home equity lending consists of both fixed and variable interest rate produc ts mainly to provide home equity loans to our residential mortgage customers or take a secondary position to another lender’s first lien position within the footprint of our primary lending territories.

We generally will not exceed a combined (i.e., first and second mortgage) loan-to-value ratio of 80 percent when originating a home equity loan.

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Although we are primarily focused on our lending and wealth management services, a large portion of our income is generated through investments in various types of securities, and depending on our liquid cash position, interest-bearing deposits with banks (primarily the Federal Reserve Bank of New York), as part of our asset/liability management strategies.

As of December 31, 2019 , our total investment securities and interest bearing deposits with banks were $3.9 billion and $178.4 million , respectively.

As of December 31, 2020, our total investment securities and interest bearing deposits with banks were $3.5 billion and $1.1 billion, respectively.

See the “Investment Securities Portfolio” section of the MD&A and Note 4 to the consolidated financial statements for additional information concerning our investment securities.

2020 Form 10-K 6

Changes in Loan Portfolio Composition

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Valley has no internally planned changes that would significantly impact the current composition of our loan portfolio by loan type.

However, we have continued to diversify the geographic concentrations in the New Jersey and New York City Metropolitan area within our loan portfolio primarily through our bank acquisitions in Florida since 2014, including our acquisition of USAB on January 1, 2018.

However, we have continued to diversify the geographic concentrations in the New Jersey and New York City Metropolitan area within our loan portfolio primarily through our bank acquisitions and expanded lending teams in Florida since 2014, including our acquisition of USAB on January 1, 2018.

Many external factors outlined in Item 1A.

Risk Factors”, the “Executive Summary” section of our MD&A, and elsewhere in this report may impact our ability to maintain the current composition of our loan portfolio.

See the “Loan Portfolio” section of Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in this report for further discussion of our loan composition and concentration risks.

2019 Form 10-K

Risk Factors, the “Executive Summary” section of Item 7.

MD&A, and elsewhere in this report may impact our ability to maintain the current composition of our loan portfolio.

See the “Loan Portfolio” section in Item 7.

MD&A in this report for further discussion of our loan composition and concentration risks.

The following table presents the loan portfolio segments by state as an approximate percentage of each applicable segment and our percentage of total loans by state at December 31, 2020.

Percentage of Loan Portfolio Segment:

Commercial and Industrial

Commercial and Industrial Commercial

Real Estate Residential Consumer % of Total

New Jersey 31 % 27 % 41 % 35 % 30 %

New York 24 38 29 29 33

Florida 28 26 21 17 25

Pennsylvania 1 2 1 7 2

Alabama 2 2 1 2 2

California 1 1 3 1 1

Connecticut 1 * 1 2 1

Other 12 4 3 7 6

Total 100 % 100 % 100 % 100 % 100 %

* Represents less than one percent of the loan portfolio segment.

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Valley’s Board performs its risk oversight function primarily through several standing committees, including the Risk Committee, all of which report to the full Board.

The Risk Committee assists the Board by, among other things, establishing an enterprise-wide risk management framework that is appropriate for Valley’s capital, business activities, size and risk appetite.

The Risk Committee also reviews and recommends to the Board appropriate risk tolerances and limits for strategic, credit, interest rate, liquidity, compliance, operational (including information security risk), reputation and price risk (and ensures that risks are managed within those tolerances), and monitors compliance with applicable laws and regulations.

With guidance from and oversight by the Risk Committee, management continually refines and enhances its risk management policies, procedures and monitoring programs to maintain risk management programs and processes.

The full Board regularly engages in discussions of risk management and receives reports on risk factors from our executive management, other Company officers and the chairman of the Risk Committee.

The Risk Committee assists the Board by, among other things, establishing an enterprise-wide risk management framework and risk culture that is aligned with Valley’s strategic plan and is appropriate for Valley’s capital, business activities, size and risk appetite.

Management applies the enterprise-wide risk management framework to holistically manage and monitor risks across the organization and to aggregate and manage the risk appetite approved by the board.

As part of the risk management framework, the Risk Committee reviews and recommends to the Board appropriate risk tolerances and limits for strategic, credit, interest rate, price, liquidity, compliance, operational (including cyber and information security risk), and reputation risks, oversees that risks are managed within those tolerances, and monitors compliance with applicable laws and regulations.

With guidance from and oversight by the Risk Committee, management continually refines and enhances its risk management policies, procedures and monitoring programs to be able to adapt to changing risks.

In May 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “EGRRCPA”) was signed into law.

On July 6, 2018, the Board of Governors of the Federal Reserve System (FRB), Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) issued a joint interagency statement regarding the impact of the EGRRCPA.

2020 Form 10-K

As a result of this statement and the EGRRCPA, Valley and the Bank are no longer subject to Dodd-Frank Act stress testing requirements.

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Senior management is briefed on information and cyber security matters, preparedness and any incidents requiring a response.

2019 Form 10-K

Valley’s Board, through its Risk Committee, has primary oversight responsibility for information security and receives regular updates and reporting from management on information and cyber security matters, including information related to any third-party assessments of Valley’s cyber program.

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As a result, cyber security and the continued development and enhancement of the controls and processes designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access is a high priority for us.

While we have faith in our cyber security practices and personnel, we also know we are not immune from a costly and successful attack.

While we have confidence in our cyber security practices and personnel, we also know we are not immune from a costly and successful attack.

Credit Risk Management and Underwriting Approach

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A reporting system supplements the review process by providing management with frequent reports concerning loan production, loan quality, internal loan classifications, concentrations of credit, loan delinquencies, non-performing, and potential problem loans.

Loan portfolio diversification is an important factor utilized by us to manage the portfolio’s risk across business sectors and through cyclical economic circumstances.

Loan portfolio diversification is an important factor utilized by us to manage the portfolio’s risk across business sectors, geographic markets and through cyclical economic circumstances.

Our historical and current loan underwriting practice prohibits the origination of payment option adjustable residential mortgages which allow for negative interest amortization and subprime loans.

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Credit worthiness is generally verified using personal or business credit reports from independent credit reporting agencies.

Capital support is determined by acquisition of independent verifications of deposits, investments or other assets.

Capacity to repay the loan is based on verifiable liquidity and earnings capacity as shown on financial statements and/or tax returns, banking activity levels, operating statements, rent rolls or independent verification of employment.

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or other assets wherein adequate protective value can be established and/or verified by reliable outside independent appraisers.

In addition to these types of collateral, we, in many cases, will obtain the personal guarantee of the borrower’s principals or an affiliated corporate entity to mitigate the risk of certain commercial and industrial loans and commercial real estate loans.

In addition to

2020 Form 10-K 8

these types of collateral, we, in many cases, will obtain the personal guarantee of the borrower’s principals or an affiliated corporate entity to mitigate the risk of certain commercial and industrial loans and commercial real estate loans.

Many times, we will underwrite loans to legal entities formed for the limited purpose of the business which is being financed.

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Commercial loan renewals, refinancings and other subsequent transactions that include the advancement of new funds or result in the extension of the amortization period beyond the original term, require a new or updated appraisal.

Renewals, refinancings and other subsequent transactions that do not include the advancement of new funds (other than for reasonable closing costs) or, in the case of commercial loans, the extension of the amortization period beyond the original term, do not require a new appraisal unless management believes there has been a material change in market conditions

2019 Form 10-K

or the physical aspects of the property which may negatively impact the collectability of our loan.

In general, the period of time an appraisal continues to be relevant will vary depending upon the circumstances affecting the property and the marketplace.

Examples of factors that could cause material changes to reported values include the passage of time, the volatility of the local market, the availability of financing, the inventory of competing properties, new improvements to, or lack of maintenance of, the subject or competing surrounding properties, changes in zoning and environmental contamination.

Certain impaired loans are reported at the fair value of the underlying collateral (less estimated selling costs) if repayment is expected solely from the collateral and are commonly referred to as “collateral dependent impaired loans.” Collateral values for such loans are typically estimated using individual appraisals performed every 12 months (or 18 months for impaired loans no greater than $1.0 million with current loan to value ratios less than 75 percent).

Certain collateral-dependent loans are reported at the fair value of the underlying collateral (less estimated selling costs) if repayment is expected solely from the collateral and are commonly referred to as “collateral dependent loans.” Commercial real estate loans are collateralized by real estate and construction loans are generally secured by the real estate to be developed and may also be secured by additional real estate to mitigate the risk.

Residential and home equity loans are collateralized by residential real estate.

Collateral values for such loans are typically estimated using individual appraisals performed every 12 months (or 18 months for impaired loans no greater than $1.0 million with current loan to value ratios less than 75 percent).

Between scheduled appraisals, property values are monitored within the commercial portfolio by reference to recent trends in commercial property sales as published by leading industry sources.

Property values are monitored within the residential mortgage portfolio by reference to available market indicators, including real estate price indices within Valley’s primary lending areas.

All refinanced residential mortgage loans require new appraisals for loans held in our loan portfolio.

All refinanced residential mortgage loans to be held in our loan portfolio require either a new appraisal or a new evaluation in accordance with our appraisal policy.

However, certain residential mortgage loans may be originated for sale and sold without new appraisals when the investor (Fannie Mae or Freddie Mac) presents a refinance of an existing government sponsored enterprise loan without the benefit of a new appraisal.

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Additionally, on a case-by-case basis, we may extend, restructure, or otherwise modify the terms of existing loans from time to time to remain competitive and retain certain profitable customers, as well as assist customers who may be experiencing financial difficulties.

If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan (TDR).

The majority of the concessions made for TDRs involve lowering the monthly payments on loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods.

If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan (TDR), except as explained below.

The majority of the concessions made for TDRs involve an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, lowering the monthly payments on loans through either a reduction in interest rate below a market rate or a combination of these two methods.

The concessions rarely result in the forgiveness of principal or accrued interest.

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Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

2020 Form 10-K

CARES Act Loan Modifications

In response to the COVID-19 pandemic and its economic impact to certain customers, Valley implemented short-term loan modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that were insignificant, when requested by customers.

These modifications complied with the CARES Act to provide temporary payment relief to those borrowers directly impacted by the COVID-19 pandemic who were not more than 30 days past due as of December 31, 2019.

Generally, the modification terms allow for a deferral of payments for up to 90 days, which Valley may extend for an additional 90 days.

Any extensions beyond this period were made in accordance with applicable regulatory guidance.

As of December 31, 2020, Valley had approximately $361 million of outstanding loans remaining in their payment deferral period under short-term modifications.

Under the CARES Act and the Enhancement Act and other applicable guidance, none of these loans were considered TDRs as of December 31, 2020.

Extension of Credit to Past Due Borrowers

Loans are placed on non-accrual status generally when they become 90 days past due and the full and timely collection of principal and interest becomes uncertain.

Valley prohibits the advancement of additional funds on non-accrual and TDR loans, except under certain workout plans if such extension of credit is intended to mitigate losses.

Valley prohibits the advancement of additional funds on non-accrual loans, TDRs and CARES Act loan modifications, except under certain workout plans if such extension of credit is intended to mitigate losses.

Allowance for Credit Losses

We maintain an allowance for credit losses (ACL) for financial assets measured at amortized cost.

The ACL consists of the allowance for loan losses and unfunded loan commitments (combined the "allowance of credit losses for loans"), and the allowance for credit losses for held to maturity securities.

The estimate of expected credit losses under the current expected credit losses (CECL) methodology adopted on January 1, 2020 is based on relevant information about the past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.

CECL methodology to estimate the allowance for loan losses has two components:

(i) a collective reserve component for estimated lifetime expected credit losses for pools of loans that share common risk characteristics and (ii) an individual reserve component for loans that do not share common risk characteristics.

The allowance for unfunded credit commitments mainly consists of undisbursed non-cancellable lines of credit, new loan commitments and commercial letters of credit valued using a similar methodology as used for loans.

Management's estimate of expected losses inherent in these off-balance sheet credit exposures also incorporates estimated utilization rate over the commitment's contractual period or an expected pull-through rate for new loan commitments.

To measure the expected credit losses on held to maturity debt securities that have loss expectations, Valley estimates the expected credit losses using a discounted cash flow model developed by a third-party.

The amount of ACL is based on ongoing, quarterly assessments by management.

See Note 1 to the consolidated financial statements for further discussion regarding CECL methodology.

Loans Originated by Third Parties

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Valley purchased approximately $24 million and $35 million of 1-4 family loans, qualifying for CRA purposes during 2020 and 2019, respectively.

All of the purchased loans are selected using Valley’s normal underwriting criteria at the time of purchase, or in some cases guaranteed by third parties.

All purchased loans are selected using Valley’s normal underwriting criteria at the time of purchase, or in some cases guaranteed by third parties.

Purchased commercial and industrial, and commercial real estate participation loans are generally seasoned loans with expected shorter durations.

Additionally, each purchased participation loan is stress-tested by Valley to assure its credit quality.

2019 Form 10-K

Purchased commercial loans (including commercial and industrial and commercial real estate loans) and residential mortgage loans totaled approximately $855.5 million and $722.7 million, respectively, at December 31, 2020 representing 3.63 percent, and 17.27 percent of our total commercial and residential mortgage loans, respectively.

At December 31, 2019 , the commercial real estate loans originated by third parties had loans past due 30 days or more totaling 1.51 percent as compared to 0.12 percent for our total commercial real estate portfolio, including all delinquencies.

Residential mortgage loans originated by third parties had loans past due 30 days or more totaling 1.85 percent of these loans at December 31, 2019 as compared to 0.53 percent for our total residential mortgage portfolio.

At December 31, 2020, 5.66 percent of commercial loans originated by third parties were past due 30 days or more, which represented 0.88 percent of our total commercial loan portfolio, and 9.16 percent of residential mortgage loans originated by third parties were past due 30 days or more which represented 1.36 percent of our total residential mortgage portfolio.

Additionally, Valley has performed credit due diligence on the majority of the loans acquired in our bank acquisitions (disclosed under the "Recent Acquisitions" section above) in determining the estimated cash flows receivable from such loans.

See the "Loan Portfolio" section of our MD&A of this report below for additional information.

2020 Form 10-K 10

Valley National Bank is one of the largest commercial banks headquartered in New Jersey, with its primary markets located in northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn and Queens, Long Island, Florida and Alabama.

Valley ranked 15th in competitive ranking and market share based on the deposits reported by 180 FDIC-insured financial institutions in the New York, Northern New Jersey and Long Island deposit markets as of June 30, 2020.

The FDIC also ranked Valley 7th, 37th, 22nd, and 16th in the states of New Jersey, New York, Florida, and Alabama, respectively, based on deposit market share as of June 30, 2019 .

In addition to the FDIC-insured commercial banks in our principal metropolitan markets, we also compete with other providers of financial services such as savings institutions, credit unions, mutual funds, captive finance companies, mortgage companies, title agencies, asset managers, insurance companies and a growing list of other local, regional and national companies which offer various financial services.

The FDIC also ranked Valley 6th, 38th, 21st, and 18th in the states of New Jersey, New York, Florida, and Alabama, respectively, based on deposit market share as of June 30, 2020.

While our FDIC rankings reflect a solid foundation in our primary markets, the market for banking and bank-related services is highly competitive and we face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources than Valley to deal with the potential negative changes in the financial markets and regulatory landscape.

Many of these competitors may have fewer regulatory constraints, broader geographic service areas, greater capital, and, in some cases, lower cost structures.

In addition, competition has further intensified as a result of recent changes in regulation, and advances in technology and product delivery systems.

We face strong competition for our borrowers, depositors, and other customers from financial technology (fintech) companies that provide innovative web-based solutions to traditional retail banking services and products.

Valley competes with other providers of financial services such as commercial and savings banks, savings and loan associations, credit unions, money market and mutual funds, mortgage companies, title agencies, asset managers, insurance companies, and a large list of other local, regional and national institutions which offer financial services.

Additionally, the financial services industry is facing a wave of digital disruption from fintech companies and other large financial services providers.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new, technology-driven products and services which increases efficiency and enables financial institutions to better serve customers and to reduce costs.

These competitors provide innovative web-based solutions to traditional retail banking services and products.

Fintech companies tend to have stronger operating efficiencies and fewer regulatory burdens than their traditional bank counterparts, including Valley.

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We continually review our pricing, products, locations, alternative delivery channels and various acquisition prospects, and periodically engage in discussions regarding possible acquisitions to maintain and enhance our competitive position.

At December 31, 2019 , Valley National Bank and its subsidiaries employed 3,174 full-time equivalent persons.

Human Capital

At Valley, our goal is to give people and businesses the power to succeed.

We strive to build an inclusive, diverse, and high-performing culture where empowered associates, innovation and collaboration thrive.

Demographics.

At December 31, 2020, Valley National Bank and its subsidiaries employed 3,155 full-time equivalent persons across our multi-state footprint.

Management considers relations with its employees to be satisfactory.

During the year 2020, we hired 384 employees and our voluntary turnover rate was 13 percent.

Our average tenure was approximately 8.6 years.

Diversity, Equity and Inclusion.

We believe that the diversity of our associates helps us to become stronger.

Thus, we strive to foster a strong and inclusive culture that is committed to providing the quality service to our customers, the communities in which we operate and each other.

2020 Form 10-K

As of December 31, 2020, the population of our workforce broken down by gender and diversity was as follows:

Total Rewards.

We offer market competitive compensation programs to attract, engage, retain, and motivate talent across our footprint.

These programs include base wages, performance-based bonus and incentive compensation, stock awards, a 401(k) Plan with a company match, healthcare and insurance benefits, voluntary benefits, commuter benefits, health savings account, flexible spending accounts, tuition reimbursement, paid time off, disability, family leave, wellness and employee assistance programs.

Health and Safety.

We are committed to the health, safety and wellbeing of our associates.

In 2020, we embraced safety protocols that have become the new way of life in this pandemic era.

Maintaining alignment with state and local COVID-19 mandates and recommendations, Valley implemented remote work, where functional roles allowed, moving approximately 90 percent of our non-retail associates from the office until safety strategies could be implemented.

Return to the workplace protocols and tools have allowed us to return critical workers to Valley facilities.

Within both our Talent Acquisition and Talent Development teams, our goal of attracting, developing, and retaining the most qualified people is crucial to all aspects of Valley's activities and long-term success and is central to our long-term strategy.

We actively engage our senior business leaders in reviewing their critical roles in coordination with their strategic talent initiatives.

Our annual Talent Review and Succession Planning process has created a broader understanding of our key talent and our flagship Leadership Development programs provide meaningful development and experiences that challenge our high potential associates.

Additional information regarding Valley's human capital management can be found under Item 1:

Election of Directors of its 2021 Proxy Statement.

2020 Form 10-K 12

Information about our Executive Officers

Principal occupation during last five years other than Valley

Chairman of the Board, President, and Chief Executive Officer of Valley and Valley National Bank

Senior Executive Vice President, Chief Financial Officer of Valley and Valley National Bank.

2015 - 2018 Vice Chairman, UMB Financial Corporation, President and CEO, UMB Bank n.a.

Senior Executive Vice President of Valley and Chief Banking Officer of Valley National Bank

Senior Executive Vice President, General Counsel, and Corporate Secretary of Valley and Valley National Bank

1992 - 2016 Partner, SEC, Banking and Merger & Acquisitions, Day Pitney LLP

Senior Executive Vice President of Valley and Chief Operating Officer of Valley National Bank

2014 - 2016 Executive Vice President, Chief Information Officer, Head of Technology and Operations, MVB Financial Corp.

Executive Vice President of Valley and Chief Risk Officer of Valley National Bank

2015 Assistant Deputy Comptroller, National Bank Examiner and Federal Thrift Regulator, Office of the Comptroller of the Currency, New York Metro.

Senior Executive Vice President of Valley and Chief Human Resources Officer of Valley National Bank

2014 - 2016 Executive Vice President and Chief Human Resources Officer, CDK Global

Executive Vice President of Valley and Chief Credit Officer of Valley National Bank

2012 - 2015 Managing Director of Credit, Santander Bank, N.A.

Executive Vice President, Chief Accounting Officer of Valley and Valley National Bank

2020 Executive

Since Office Principal occupation during last five years other than Valley

Ira Robbins 46 2009 Chairman of the Board, President, and Chief Executive Officer of Valley and Valley National Bank

Hagedorn 54 2019 Senior Executive Vice President, Chief Financial Officer of Valley and Valley National Bank 2015 - 2018 Vice Chairman, UMB Financial Corporation, President and CEO, UMB Bank n.a.

Iadanza 62 2015 Senior Executive Vice President of Valley and Chief Banking Officer of Valley National Bank

Joseph Chillura 54 2020 Senior Executive Vice President of Valley and Chief Customer Officer of Valley National Bank

Janis 72 2017 Senior Executive Vice President, General Counsel, and Corporate Secretary of Valley and Valley National Bank 1992 - 2016 Partner, SEC, Banking and Merger & Acquisitions, Day Pitney LLP

Bardusch 55 2016 Senior Executive Vice President of Valley and Chief Operating Officer of Valley National Bank 2014 - 2016 Executive Vice President, Chief Information Officer, Head of Technology and Operations, MVB Financial Corp.

Scofield 61 2015 Executive Vice President of Valley and Chief Risk Officer of Valley National Bank

Surowiec 60 2017 Senior Executive Vice President of Valley and Chief People Officer of Valley National Bank 2014 - 2016 Executive Vice President and Chief Human Resources Officer, CDK Global

Mark Saeger 56 2018 Executive Vice President of Valley and Chief Credit Officer of Valley National Bank

Crandell 50 2007 Executive Vice President, Chief Accounting Officer of Valley and Valley National Bank

All officers serve at the pleasure of the Board of Directors.

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Shareholder Relations, 1455 Valley Road, Wayne, NJ 07470.

2020 Form 10-K

SUPERVISION AND REGULATION

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Statutory and regulatory controls increase a bank holding company’s cost of doing business and limit the options of its management to deploy assets and maximize income.

The compliance cost for Valley is significant and subject to increase as new governmental regulations are enacted and/or the level of enforcement of those regulators increases.

In particular, Valley employs specialists and retains outside advisors to ensure that Valley has sufficient resources to comply with the regulations to which it is subject.

Certain of Valley's competitors, including credit unions, fintech companies, and others, are not regulated to the extent that Valley and other banks are, which may place Valley at a competitive disadvantage.

The following discussion is not intended to be a complete list of all the activities regulated by the banking laws or of the impact of such laws and regulations on Valley or Valley National Bank.

It is intended only to briefly summarize some material provisions.

2019 Form 10-K

Bank Holding Company Regulation

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Each bank subsidiary is also subject to collateral security requirements for any loans or extensions of credit permitted by such exceptions.

With the approval of the OCC, and subject to certain legal requirements, a bank may establish financial subsidiaries which may act as insurance agents, securities brokers and perform other non-banking functions.

Capital Requirements

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• 8.0 percent Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets.

2020 Form 10-K 14

• 4.0 percent Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).

As of January 1, 2019, Basel III required us and Valley National Bank to also maintain a 2.5 percent “capital conservation buffer” on top of the minimum risk-weighted asset ratios, effectively resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7.0 percent, (ii) Tier 1 capital to risk-weighted assets of at least 8.5 percent, and (iii) total capital to risk-weighted assets of at least 10.5 percent.

Under Basel III, both Valley and Valley National Bank are required to maintain a 2.5 percent “capital conservation buffer” on top of the minimum risk-weighted asset ratios, effectively resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7.0 percent, (ii) Tier 1 capital to risk-weighted assets of at least 8.5 percent, and (iii) total capital to risk-weighted assets of at least 10.5 percent.

The capital conservation buffer is designed to absorb losses during periods of economic stress.

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With respect to Valley National Bank, Basel III also revised the “prompt corrective action” regulations of FDICIA, by (i) introducing a CET1 ratio requirement at each capital quality level (other than critically undercapitalized);

(ii) increasing the

2019 Form 10-K

minimum Tier 1 capital ratio requirement for each category;

(ii) increasing the minimum Tier 1 capital ratio requirement for each category;

and (iii) requiring a leverage ratio of 5 percent to be well-capitalized.

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Valley National Bank’s capital ratios were all above the minimum levels required for it to be considered a “well capitalized” financial institution at December 31, 2020, under the “prompt corrective action” regulations.

In December 2018, the Federal Banking Agencies issued a final rule to address regulatory capital treatment of credit loss allowances under the current expected credit loss (“CECL”) model.

The CECL model was effective for Valley as of January 1, 2020.

The final rule revised the Federal Banking Agencies’ regulatory capital rules to identify which credit loss allowances under the CECL model are eligible for inclusion in regulatory capital and to provide banking organizations the option to phase in over three years any day-one adverse effects on regulatory capital that may result from the adoption of the CECL model.

For regulatory capital purposes, in connection with the Federal Reserve Board’s final interim rule as of April 3, 2020, 100 percent of the CECL Day 1 impact to shareholders' equity equaling $28.2 million after-tax will be deferred for a two-year period ending January 1, 2022, at which time it will be phased in on a pro-rata basis over a three-year period ending January 1, 2025.

Additionally, 25 percent of the reserve build (i.e., provision for credit losses less net charge-offs) for the year ended December 31, 2020 will be phased in over the same time frame.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act)

The Dodd-Frank Act was signed into law on July 21, 2010.

The Dodd-Frank Act significantly changed the bank regulatory landscape and has impacted the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies.

The Dodd-Frank Act significantly changed the bank regulatory landscape and impacted the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies.

Some of the effects are discussed below.

The Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB) and shifted most of the federal consumer protection rules applicable to banks and the enforcement power with respect to such rules to the CFPB.

Under the Durbin Amendment contained in the Dodd-Frank Act, the Federal Reserve Board (FRB) adopted rules applying to banks with more than $10 billion in assets which established a maximum permissible interchange fee equal to no more than 21 cents plus 5 basis points of the transaction value for many types of debit interchange transactions.

Under the Durbin Amendment contained in the Dodd-Frank Act, the FRB adopted rules applying to banks with more than $10 billion in assets which established a maximum permissible interchange fee equal to no more than 21 cents plus 5 basis points of the transaction value for many types of debit interchange transactions.

The FRB also adopted a rule to allow a debit card issuer to recover 1 cent per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements required by the FRB.

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Because we exceed $10 billion in assets, we are subject to the interchange fee cap.

On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “EGRRCPA”) was signed into law.

On July 6, 2018, the Fed, the OCC and the FDIC issued a joint interagency statement regarding the impact of the EGRRCPA.

As a result of this statement and the EGRRCPA, Valley and the Bank are no longer subject to Dodd-Frank Act stress testing requirements.

However, under safety and soundness requirements we will continue to conduct stress testing of our own design.

2020 Form 10-K

The Dodd-Frank Act also imposed stress testing on Valley and the Bank.

However, the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (the “EGRRCPA”) and a joint interagency statement regarding the impact of the EGRRCPA resulted in Valley and the Bank being no longer subject to the stress testing requirements.

However, under safety and soundness principles we will continue to conduct stress testing of our own design.

The Volcker Rule (contained in the Dodd-Frank Act) prohibits an insured depository institution and its affiliates from:

(i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain types of funds (Covered Funds).

(i) engaging in certain “proprietary trading” and (ii) investing in or sponsoring certain types of funds (Covered Funds).

The Rule also effectively prohibits most short-term trading strategies investments and prohibits the use of some hedging strategies.

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The Dodd-Frank Act requires the federal bank regulators and the SEC to maintain guidelines prohibiting incentive-based payment arrangements at specified regulated entities, including us and our Bank, having at least $1 billion in total assets that encourage inappropriate risks by providing an executive officer, employee, director or principal stockholder with excessive compensation, fees, or benefits or that could lead to material financial loss to the entity.

2019 Form 10-K

The Federal Reserve reviews, as part of the regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as us, that are not “large, complex banking organizations.” These reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements.

The FRB and the OCC review, as part of their regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as us, that are not “large, complex banking organizations.” These reviews are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements.

Dividend Limitations

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The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community.

The CRA requires the OCC, in connection with its examination of a national bank, to assess the association’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such association.

2020 Form 10-K 16

evaluation of certain applications by such association.

The CRA also requires all institutions to make public disclosure of their CRA ratings.

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Regulations implementing the due diligence requirements require minimum standards to verify customer identity and maintain accurate records, encourage cooperation among financial institutions, federal banking agencies, and law enforcement authorities regarding possible money laundering or terrorist activities, prohibit the anonymous use of “concentration accounts,” and require all covered financial institutions to have in place an anti-money laundering compliance program.

2019 Form 10-K

The OCC, along with other banking agencies, have strictly enforced various anti-money laundering and suspicious activity reporting requirements using formal and informal enforcement tools to cause banks to comply with these provisions.

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• Equal Credit Opportunity Act and Regulation B, prohibiting discrimination on the basis of race, creed, or other prohibited factors in extending credit;

2020 Form 10-K

• Fair Credit Reporting Act and Regulation V, governing the provision of consumer information to credit reporting agencies and the use of consumer information;

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Under the FDIC’s risk-based system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors with less risky institutions paying lower assessments on their deposits.

As required by the Dodd-Frank Act, the FDIC has adopted rules that revise the assessment base to consist of average consolidated total assets during the assessment period minus the average tangible equity during the assessment period.

As required by the Dodd-Frank Act, the FDIC adopted rules that revise the assessment base to consist of average consolidated total assets during the assessment period minus the average tangible equity during the assessment period.

In addition, the rules eliminated the adjustment for secured borrowings, including Federal Home Loan Bank (FHLB) advances, and made certain other changes to the impact of unsecured borrowings and brokered deposits on an institution’s deposit insurance assessment.

2019 Form 10-K

The rules also revised the assessment rate schedule to provide initial base assessment rates ranging from 5 to 35 basis points and total base assessment rates ranging from 2.5 to 45 basis points after adjustment.

The Dodd-Frank Act made permanent a $250 thousand limit for federal deposit insurance.

In 2016, the FDIC added a surcharge to the insurance assessments for banks with over $10 billion in assets, which became effective in July 2016 and continued until the Bank's December 2018 assessment invoice, which covered the assessment period from July 1, 2018 through September 30, 2018.

After that invoice, the FDIC assessment no longer included a quarterly surcharge.

London Interbank Offered Rate

Central banks around the world, including the Fed, have commissioned working groups of market participants and official sector representatives with the goal of finding suitable replacements for the London Interbank Offered Rate (“LIBOR”) based on observable market transactions because of the probable phase out of LIBOR.

It is expected that a transition away from the widespread use of LIBOR to alternative rates will occur over the course of the next year.

This change may have an adverse impact on the value of, return on and trading markets for a broad array of financial products, including any LIBOR-based securities, loans and derivatives that are included in our financial assets and liabilities.

Central banks around the world, including the FRB, have commissioned working groups of market participants and official sector representatives with the goal of finding suitable replacements for the London Interbank Offered Rate (“LIBOR”) based on observable market transactions because of the phase out of LIBOR.

Most tenors of LIBOR are expected to cease being published on June 30, 2023 with some tenors expected to cease being published earlier.

The FRB has stated that financial institutions should stop writing contacts using LIBOR by the end of 2021 at the latest.

This change away from LIBOR and transition to other benchmarks may have an adverse impact on the value of, return on and trading markets for a broad array of financial products, including any LIBOR-based securities, loans and derivatives that are included in our financial assets and liabilities.

A transition away from LIBOR also requires extensive changes to the contracts that govern these LIBOR-based products, as well as our systems and processes.

A number of the Bank's commercial loans, certain residential loans, derivative positions, trust preferred securities issued to our capital trusts, and the reset provisions for our preferred stock issuances are based upon LIBOR.

The Bank has established a working group to identify and prepare replacement provisions.

A number of the Bank's commercial loans, certain residential mortgage loans, derivative positions, trust preferred securities issued to our capital trusts, and the reset provisions for our preferred stock issuances are based upon LIBOR.

The Bank will also be subject to changes to models and systems that currently use LIBOR reference rates, as well as market and strategic risks that could arise from the use of alternative reference rates.

The Bank has established a working group to identify and prepare fall back language and replacement provisions, as well as ensure our systems readiness for a change in reference rate.

Regulators have expressed concern about litigation that could arise due to the change from LIBOR to another rate.

Prohibitions Against Tying Arrangements

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Section 1972 on certain tying arrangements.

A depository institution is prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

A depository institution is prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the

2020 Form 10-K 18

consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

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 1. Business