What changed in this filing

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Item 1A. Risk Factors

2021-02-26 compared with 2020-03-10 · 294 added, 220 removed, 86 unchanged (86% of the section changed)

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

We may fail to realize all of the anticipated benefits of the Oritani merger.

The success of our merger with Oritani (which was completed in the fourth quarter 2019) will depend, in part, on Valley’s ability to realize anticipated cost savings and to combine the businesses of Valley and Oritani in a manner that permits growth opportunities to be realized and does not materially disrupt the existing customer relationships of Oritani nor result in decreased revenues due to any loss of customers.

However, to realize these anticipated benefits, the businesses of Valley and Oritani must be successfully combined.

If the combined company is not able to 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.

The anticipated cost savings from the merger are largely expected to derive from the closure of certain Valley or Oritani branches and from the absorption by Valley of many of Oritani’s back-office administrative functions and the conversion of Oritani’s operating platform to Valley’s systems.

Valley completed the conversion of Oritani's operating platform and closed 6 of the 26 acquired branch offices during February 2020.

However, some normal post-systems integration matters involving back-office and other functions, as well as further planned branch consolidation efforts, were still underway at the filing date of this report.

Another expected benefit from the merger is an expected increase in the revenues of the combined company from anticipated sales of Valley’s wider variety of financial products, and from increased lending out of Valley’s substantially larger capital base, to Oritani’s existing customers and to new customers in Oritani’s market area who may be attracted by the combined company’s enhanced offerings.

An inability to successfully market Valley’s products to Oritani’s customer base could cause the earnings of the combined company to be less than anticipated.

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

Risks Related to the COVID-19 Pandemic

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 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 .

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.

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.

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.

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.

2020 Form 10-K

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.

Changes in interest rates driven by such factors could influence not only the interest Valley receives on loans and investment securities and the amount of interest it pays on deposits and borrowings, but such changes could also affect (i) Valley’s ability to originate loans and obtain deposits, (ii) the fair value of Valley’s financial assets, including the held to maturity and available for sale investment securities portfolios, and (iii) the average duration of Valley’s interest-earning assets and liabilities.

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).

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.

Our financial results and condition may be adversely impacted by changing economic conditions.

Financial institutions can be affected by changing conditions in the real estate and financial markets.

Weak economic conditions could result in financial stress on our borrowers that would adversely affect our financial condition and results of operations.

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 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.

General economic conditions, including inflation, unemployment and money supply fluctuations, also may adversely affect our profitability.

Our business, financial condition and results of operations could be adversely affected by the outbreak of pandemic disease, acts of terrorism, and other external events.

The emergence of widespread health emergencies or pandemics, such as the potential spread of the coronavirus, could lead to regional quarantines, business shutdowns, labor shortages, disruptions to supply chains, and overall economic instability.

Additionally, New York City and New Jersey remain central targets for potential acts of terrorism against the United States.

Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses.

Although we have established and regularly test disaster recovery policies and procedures, the occurrence of any such event in the future could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

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

For example, on March 27, 2020, the CARES Act was enacted to inject more than $2 trillion of financial assistance into the U.S.

The FRB has taken decisive and sweeping actions as well.

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.

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.

We are unable to estimate the near-term and ultimate impacts of COVID-19 on our business and operations at this time.

The pandemic could cause us to experience higher credit losses in our lending portfolio, additional increases in our allowance for credit losses, impairment of our goodwill and other financial assets, diminished access to capital markets and other funding sources, further reduced demand for our products and services, and other negative impacts on our financial position, results of operations, and prospects.

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.

2020 Form 10-K 20

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.

Holders of our common stock are only entitled to receive such cash dividends as our Board of Directors may declare out of funds legally available for such payments.

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 ultimate impact of the COVID-19 pandemic, which remains unknown.

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.

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.

Currently, we believe that Valley does not meet the standard for expedited consultation and approval of its dividend, should it be required.

As a result, Valley could be subject to a lengthier and possibly more burdensome review process by the FRB when considering paying dividends that exceed quarterly earnings.

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.

Risks Associated with Our Business Model

Our investments in certain tax-advantaged projects may not generate returns as anticipated and may have an adverse impact on our results of operations.

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The principals pled guilty to fraud in early 2020.

2019 Form 10-K

While we believe that Valley was fully reserved for the tax positions related to DC Solar at December 31, 2020, we continue to evaluate all our existing tax positions each quarter under U.S.

If we are required to recognize an increase to our uncertain tax position liability in our 2020 consolidated financial statements, the resulting charge to income tax expense may have an adverse impact on our results of operations and financial condition.

The replacement of the LIBOR benchmark interest rate may have an impact on Valley’s business, financial condition or results of operations.

On July 27, 2017, the Financial Conduct Authority (FCA), a regulator of financial services firms in the United Kingdom, announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.

The FCA and the submitting LIBOR banks have indicated they will support the LIBOR indices through 2021 to allow for an orderly transition to an alternative reference rate.

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

dollar reference interest rates include proposals by the Alternative Reference Rates Committee of the FRB.

Other financial services regulators and industry groups are evaluating the phase-out of LIBOR and the development of alternate reference rate indices or reference rates.

Many of Valley’s assets and liabilities are indexed to LIBOR.

We are evaluating the impact of the possible replacement of the LIBOR benchmark interest rate, and whether the alternative rates the FRB expects to publish will become market benchmarks in place of LIBOR, or what the impact of such a transition will have on Valley’s business, financial condition, or results of operations.

The proposed Secured Overnight Financing Rate (SOFR) is a “near risk-free" rate whereas LIBOR is credit related.

The future impact of changes to the Internal Revenue Code is uncertain and may adversely affect our business .

Congress passed significant reform of the Internal Revenue Code, known as the Tax Cuts and Jobs Act of 2017 (Tax Act) at the end of 2017.

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 2019 and 2018, 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 new provisions of the Tax Act, the $2.5 million and $3.3 million of the Bank's total FDIC insurance assessment for the years ended December 31, 2019 and 2018, respectively, was non-tax deductible based upon the asset size of the Bank.

The Tax Act also imposes limitations for individuals on the deductibility of interest and property tax expenses which may adversely impact the property values of real estate used to secure loans and create an additional tax burden for many borrowers, particularly in high tax jurisdictions such as New Jersey and New York where Valley operates.

These and other federal tax changes could significantly impact the level of lending activity and the financial health of our customers.

The negative impact to customers could potentially result in, among other things, an inability to repay loans or maintain deposits at Valley in states where Valley operates, especially New York and New Jersey.

Any negative financial impact to our customers resulting from tax reform could adversely impact our financial condition and earnings.

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

Claims and litigation could result in significant expenses, losses and damage to our reputation.

From time to time as part of Valley’s normal course of business, customers, bankruptcy trustees, former customers, contractual counterparties, third parties and current and former employees make claims and take legal action against Valley based on actions or inactions of Valley.

If such claims and legal actions are not resolved in a manner favorable to Valley, they may result in financial liability and/or adversely affect the market perception of Valley and its products and services.

This may also impact customer demand for Valley’s products and services.

Any financial liability could have a material adverse effect on Valley’s financial condition and results of operations.

Any reputation damage could have a material adverse effect on Valley’s business.

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.

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

In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on Valley’s behalf.

Information security risks have increased because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks.

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.

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.

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

2020 Form 10-K

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 gage 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.

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.

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.

More recently, the Bank has agreed to limited lending on real estate and expanded to licensed recreational dispensaries.

The Bank may offer additional banking products and services to such customers in the future.

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 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.

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.

Checking and savings, NOW, and money market deposit account balances and other forms of customer deposits can decrease when customers perceive alternative investments, such as the stock market or money market or fixed income mutual funds, as providing a better risk/return trade-off.

Additionally, our customers largely bank with us because of our local customer service and convenience.

For certain customers, this convenience could be negatively impacted by recent branch consolidation activity undergone as part of our branch transformation strategy.

If customers move money out of bank deposits and into other investments, Valley could lose a low cost source of funds, increasing its funding costs and reducing Valley’s net interest income and net income.

A significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could adversely affect our asset quality and profitability for those loans secured by real property and increase the number of defaults and the level of losses within our loan portfolio.

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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 reduced availability of mortgage credit, also may result in increases in delinquencies and losses in our loan portfolios.

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.

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.

In that event, our earnings could be adversely affected.

The secondary market for residential mortgage loans, for the most part, is limited to conforming Fannie Mae and Freddie Mac loans.

The effects of this limited mortgage market combined with another correction in residential real estate market prices and reduced levels of home sales, could result in price reductions in home values, adversely affecting the value of collateral securing mortgage loans held, mortgage loan originations and gains on sale of mortgage loans.

Declines in real estate values and home sales volumes, and financial stress on borrowers as a result of job losses or other factors, could have further adverse effects on borrowers that result in higher delinquencies and greater charge-offs in future periods, which could adversely affect our financial condition or results of operations.

For additional risks related to our sales of residential mortgages in the secondary market, see the “We may incur future losses in connection with repurchases and indemnification payments related to mortgages that we have sold into the secondary market” risk factor below.

We could incur future goodwill impairment.

If our estimates of the fair value of our goodwill change as a result of changes in our business or other factors, we may determine a goodwill impairment charge is necessary.

Estimates of the fair value of goodwill are determined using several factors and assumptions, including, but not limited to, industry pricing multiples and estimated cash flows.

Based upon Valley’s 2020 goodwill impairment testing, the fair values of its four reporting units, wealth management, consumer lending, commercial lending, and investment management, were in excess of their carrying values.

No assurance can be given that we will not record an impairment loss on goodwill in the future and any such impairment loss could have a material adverse effect on our results of operations and financial condition.

At December 31, 2020, our goodwill totaled $1.4 billion.

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

2020 Form 10-K 22

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.

Valley faces substantial competition in all areas of its 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.

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.

Regulatory changes may continue to allow new entrants into the markets in which we operate.

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.

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.

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.

Many of Valley’s competitors have substantially greater resources to invest in technological improvements.

Valley may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers.

Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on Valley’s business and, in turn, Valley’s financial condition and results of operations.

Failure to successfully implement our growth strategies could cause us to incur substantial costs and expenses which may not be recouped and adversely affect our future profitability.

From time to time, Valley may implement new lines of business or offer new products and services within existing lines of business.

There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed.

Valley may invest significant time and resources to develop and market new lines of business and/or products and services.

Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible.

External factors, such as compliance with regulations, competitive alternatives, and shifting customer preferences, may also impact the successful implementation of a new line of business or a new product or service.

Additionally, any new line of business and/or new product or service could have a significant impact on the effectiveness of Valley’s system of internal controls.

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

We are subject to environmental liability risk associated with lending activities which could have a material adverse effect on our financial condition and results of operations.

A significant portion of our loan portfolio is secured by real property.

During the ordinary course of business, we may foreclose on and take title to properties securing certain loans.

In doing so, there is a risk that hazardous or toxic substances could be found on these properties.

If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage.

Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property.

In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability.

Although we have policies and procedures to perform an environmental review prior to originating certain commercial real estate loans, as well as before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards.

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.

We engage in the origination of residential mortgages for sale into the secondary market, while typically retaining the loan servicing.

In connection with such sales, we make representations and warranties, which, if breached, may require us to repurchase such loans, substitute other loans or indemnify the purchasers of such loans for actual losses incurred in respect of such loans.

The aggregate principal balances of residential mortgage loans serviced by the Bank for others approximated $3.5 billion and $3.4 billion at December 31, 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 two and four loan repurchases in 2020 and 2019, respectively).

None of the loan repurchases resulted in a material loss.

As of December 31, 2020, no reserves pertaining to loans sold were established on our financial statements.

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.

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

Net gains on sales of residential mortgage loans represented approximately 23 percent and 9 percent of our non-interest income for the years ended December 31, 2020 and 2019, respectively.

Our net gains on sales of loans for each period are comprised of both gains on sales of residential mortgages and the net change in the mark to market gains and losses on our loans held for sale carried at fair value at each period end.

Our ability or decision to sell a portion of our mortgage loan production in the secondary market is dependent upon, amongst other factors, the levels of market interest rates, consumer demand marketable loans, our sales and pricing strategies, the economy and our need to maintain the appropriate level of interest rate risk on our balance sheet.

A change in one or more of these or other factors could significantly impact our ability to sell mortgage loans in the future and adversely impact the level of our non-interest income and financial results.

Our adoption of the CECL model for determining our allowance for credit losses expected to increase the level of our allowance and could add significant 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.

The CECL model requires the allowance for credit losses for certain financial assets, including loans, held to maturity securities and certain off-balance sheet credit exposures, to be calculated based on current expected credit losses over the lives of the assets rather than incurred losses as of a point in time.

The adoption of the CECL model is anticipated to increase our allowance for credit losses, which may have a material negative impact on our financial condition and results of operations.

Actual allowance for credit losses may be materially different than

We may not be able to attract and retain skilled people.

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.

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.

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.

Many areas in New Jersey, New York, Florida and Alabama in which our branches operate are subject to severe flooding from time to time and significant disruptions related to the weather may become common events in the future.

Heavy storms and hurricanes can also cause severe property damage and result in business closures, negatively impacting both the financial health of retail and commercial customers and our ability to operate our business.

The risk of significant disruption and potential losses from future storm activity exists in all of our primary markets.

Risks Related to Our Industry

We may not be able to detect money laundering and other illegal or improper activities fully or on a timely basis, which could expose us to additional liability and could have a material adverse effect on us.

We are required to comply with anti-money laundering, anti-terrorism and other laws and regulations in the United States.

These laws and regulations require us, among other things, to adopt and enforce “know-your-customer” policies and procedures and to report suspicious and large transactions to applicable regulatory authorities.

These laws 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.

While we have adopted policies and procedures aimed at detecting and preventing the use of our banking network for money laundering and related activities, those policies and procedures may not completely eliminate instances in which we may be used by customers to engage in money laundering and other illegal or improper activities.

To the extent we fail to fully comply with applicable laws and regulations, the OCC, along with other banking agencies, have the authority to impose fines and other penalties and sanctions on us.

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

2020 Form 10-K 24

the amounts reported due to the inherent uncertainty in the estimation process, including future loss estimates based upon reasonable and supportable economic forecasts.

Also, future amount could differ materially from 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.

Higher charge-offs and weak credit conditions could require us to increase our allowance for credit losses through a provision charge to earnings.

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.

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.

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

The replacement of the LIBOR benchmark interest rate may have an impact on Valley’s business, financial condition or results of operations.

Certain loans made by us and financing extended to us are made at variable rates that use LIBOR as a benchmark for establishing the interest rate.

In addition, we also have investments, interest rate derivatives and borrowings that reference LIBOR.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.

Subsequently, on November 30, 2020, the ICE Benchmark Administration announced its plan to extend the date most U.S.

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.

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).

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.

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.

Higher charge-offs and weak credit conditions could require us to further increase our allowance for credit losses through a provision charge to earnings.

The process for determining the amount of the allowance for credit losses is critical to our financial results and conditions.

It requires difficult, subjective and complex judgments about the future, including the impact of national and regional economic conditions on the ability of our borrowers to repay their loans.

If our judgment proves to be incorrect, our allowance for credit losses may not be sufficient to cover losses inherent in our loan and investment portfolios.

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.

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.

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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Any increase in our allowance for credit losses or loan charge-offs as required by the OCC or otherwise could have an adverse effect on our results of operations or financial condition.

2020 Form 10-K

An increase in our non-performing assets may reduce our interest income and increase our net loan charge-offs, provision for loan losses, and operating expenses.

Our non-accrual loans increased from 0.22 percent of total loans at December 31, 2016 to 0.31 percent of total loans at December 31, 2019 largely due to a significant increase in non-accrual taxi medallion loans within our commercial and industrial loan portfolio since 2016.

While most of the taxi medallion loans are currently performing to their contractual terms, continued negative trends in the market valuations of the underlying taxi medallion collateral caused by ride-sharing services could impact the future performance of such loans, the level of our loan charge-offs and the provision for credit losses.

Additionally, a downturn in economic or real estate market conditions could result in increased charge-offs to our allowance for credit losses and lost interest income relating to non-performing loans.

Non-performing assets (including non-accrual loans, other real estate owned, and other repossessed assets) totaled $194.6 million at December 31, 2020.

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.

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.

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.

These non-performing assets can adversely affect our net income mainly through decreased interest income and increased operating expenses incurred to maintain such assets or loss charges related to subsequent declines in the estimated fair value of foreclosed assets.

Adverse changes in the value of our non-performing assets, or the underlying collateral, or in the borrowers’ performance or financial conditions could adversely affect our business, results of operations and financial condition.

Potential further declines in the market valuation of taxi medallions and the stressed operating environment within both New York City and Chicago due to the COVID-19 pandemic could also negatively impact the future performance of this portfolio.

There can be no assurance that we will not experience increases in non-performing loans in the future, or that our non-performing assets will not result in lower financial returns in the future.

Additionally, our customers largely bank with us because of our local customer service and convenience.

For a certain percentage customers, this convenience could be negatively impacted by recent branch consolidation activity undergone as part of our branch transformation strategy.

We are required to comply with anti-money laundering, anti-terrorism and other laws and regulations in the United States.

To the extent we fail to fully comply with

2019 Form 10-K

applicable laws and regulations, the OCC, along with other banking agencies, have the authority to impose fines and other penalties and sanctions on us.

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

General Commercial, Operational and Financial and Regulatory Risks

Our controls and procedures may fail or be circumvented, which may result in a material adverse effect on our business, results of operations and financial condition.

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Any failure or circumvention of the controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.

We could incur future goodwill impairment.

If our estimates of the fair value of our goodwill change as a result of changes in our business or other factors, we may determine a goodwill impairment charge is necessary.

Estimates of the fair value of goodwill are determined using several factors and assumptions, including, but not limited to, industry pricing multiples and estimated cash flows.

Based upon Valley’s 2019 goodwill impairment testing, the fair values of its four reporting units, wealth management, consumer lending, commercial lending, and investment management, were in excess of their carrying values.

However, due to lower yields on our investment portfolio and reinvestment of normal repayments from investment securities into new loan originations, our investment management segment experienced downward pressure on its fair value.

While not expected at this time, we may be required to record a charge to earnings should there be a deficiency in our estimated fair value of the investment management and other reporting units during our subsequent impairment tests.

At December 31, 2019 , our goodwill totaled $1.4 billion .

See Note 9 to the consolidated financial statements for additional information.

We may reduce or eliminate the cash dividend on our common stock, which could adversely affect the market price of our common stock.

Holders of our common stock are only entitled to receive such cash dividends as our Board of Directors may declare out of funds legally available for such payments.

Although we have historically declared cash dividends on our common stock, we are not required to do so and may reduce or eliminate our common stock cash dividend in the future depending upon our results of operations, financial condition or other metrics.

This could adversely affect the market price of our common stock.

Additionally, as a bank holding company, our ability to declare and pay dividends is dependent on federal regulatory policies and regulations including the supervisory policies and guidelines of the OCC and the FRB regarding capital adequacy and dividends.

Among other things, consultation of the FRB supervisory staff is required in advance of our declaration or payment of a dividend that exceeds our earnings for a four-quarter period in which the dividend is being paid.

If our subsidiaries are unable to pay dividends or make distributions to us, we may be unable to make dividend payments to our preferred and common shareholders or interest payments on our long-term borrowings and junior subordinated debentures issued to capital trusts.

We are a separate and distinct legal entity from our banking and non-banking subsidiaries and depend on dividends, distributions, and other payments from the Bank and its non-banking subsidiaries to fund cash dividend payments on our preferred and common stock and to fund most payments on our other obligations.

Regulations relating to capital requirements affect the ability of the Bank to pay dividends and other distributions to us and to make loans to us.

Additionally, if our subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, we may not be able to make dividend payments to our preferred and common shareholders or interest payments on our long-term borrowings and junior subordinated debentures issued to capital trusts.

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.

We rely on our systems of controls and procedures, and if our system fails, our operations could be disrupted.

We face the risk that the design of our controls and procedures, including those to mitigate the risk of fraud by employees or outsiders, may prove to be inadequate or are circumvented, thereby causing delays in detection of errors or inaccuracies in data and information.

We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies and procedures.

Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.

Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.

We may also be subject to disruptions of our systems arising from events that are wholly or partially beyond our control (including, for example, electrical or telecommunications outages), which may give rise to losses in service to customers and to financial loss or liability.

We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as us) and to the risk that our (or our vendors’) business continuity and data security systems prove to be inadequate.

We maintain a system of comprehensive policies and a control framework designed to monitor vendor risks including, among other things, (i) changes in the vendor’s organizational structure or internal controls, (ii) changes in the vendor’s financial condition, (iii) changes in the vendor’s support for existing products and services and (iv) changes in the vendor’s strategic focus.

While we believe these policies and procedures help to mitigate risk, the failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements could be disruptive to our operations, which could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

Our financial results and condition may be adversely impacted by changing economic conditions.

Financial institutions can be affected by changing conditions in the real estate and financial markets.

Weak economic conditions could result in financial stress on our borrowers that would adversely affect our financial condition and results of operations.

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

2020 Form 10-K 26

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.

General economic conditions, including inflation, unemployment and money supply fluctuations, also may adversely affect our profitability.

Our business, financial condition and results of operations could be adversely affected by the outbreak of pandemic disease, acts of terrorism, and other external events.

The emergence of widespread health emergencies or pandemics, such as COVID-19, could lead to additional quarantines, business shutdowns, labor shortages, disruptions to supply chains, and overall economic instability.

Additionally, New York City and New Jersey remain central targets for potential acts of terrorism against the United States.

Our ability to make opportunistic acquisitions is subject to significant risks, including the risk that regulators will not provide the requisite approvals.

We may make opportunistic whole or partial acquisitions of other banks, branches, financial institutions, or related businesses from time to time that we expect may further our business strategy.

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.

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.

Competition for acquisitions can be intense, and we may not be able to acquire other institutions on attractive terms.

There can be no assurance that we will be successful in completing or will even pursue future acquisitions, or if such transactions are completed, that we will be successful in integrating acquired businesses into operations.

Ability to grow may be limited if we choose not to pursue or are unable to successfully make acquisitions in the future.

The future impact of changes to the Internal Revenue Code is uncertain and may adversely affect our business .

Congress passed significant reform of the Internal Revenue Code, known as the Tax Cuts and Jobs Act of 2017 (Tax Act) at the end of 2017.

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.

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.

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.

Our estimation process is subject to risks and uncertainties, including a reliance on historical loss and trend information that may not be representative of current conditions and indicative of future performance.

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

2020 Form 10-K

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.

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.

Liquidity risk is the potential that Valley will be unable to meet its obligations as they come due, capitalize on growth opportunities as they arise, or pay regular dividends on our common stock because of an inability to liquidate assets or obtain adequate funding on a timely basis, at a reasonable cost and within acceptable risk tolerances.

Liquidity is required to fund various obligations, including credit commitments to borrowers, mortgage and other loan originations, withdrawals by depositors, repayment of borrowings, dividends to shareholders, operating expenses and capital expenditures.

Liquidity is derived primarily from retail deposit growth and retention;

principal and interest payments on loans;

principal and interest payments on investment securities;

sale, maturity and prepayment of investment securities;

net cash provided from operations;

and access to other funding sources, such as the FHLB and certain brokered deposit channels established by the Bank.

Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general.

Factors that could have a detrimental impact to our access to liquidity sources include a decrease in the level of our business activity due to persistent weakness, or downturn, in the economy or adverse regulatory action against us.

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.

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

In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on Valley’s behalf.

Information security risks have increased because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks.

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.

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.

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.

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 customer identification.

Congress, state legislatures, and federal and state regulatory agencies continually review banking laws, regulations and policies

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

2020 Form 10-K 28

for possible changes.

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.

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Such actions could have a material adverse effect on our business, financial condition and results of operations.

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.

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.

Future offerings of common stock, preferred stock, debt or other securities may adversely affect the market price of our stock and dilute the holdings of existing shareholders.

In the future, we may increase our capital resources or, if our or the Bank’s actual or projected capital ratios fall below or near the current (Basel III) regulatory required minimums, we or the Bank could be forced to raise additional capital by making additional offerings of common stock, preferred stock or debt securities.

Additional equity offerings may dilute the holdings of our existing shareholders or reduce the market price of our common stock, or both.

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.

In August 2017, Valley issued 4.0 million shares of non-cumulative perpetual stock with a dividend at issuance of 5.50 percent and a liquidation preference of $25 per share.

See Note 19 to the consolidated financial statements for more details on our common and preferred stock.

Changes in accounting policies or accounting standards could cause us to change the manner in which we report our financial results and condition in adverse ways and could subject us to additional costs and expenses.

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Some of these policies require the use of estimates and assumptions that may affect the value of Valley’s assets or liabilities and financial results.

Valley identified its accounting policies regarding the allowance for loan losses, purchased credit-impaired loans, goodwill and other intangible assets, and income taxes to be critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain.

Valley identified its accounting policies regarding the allowance for credit losses, goodwill and other intangible assets, and income taxes to be critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain.

Under each of these policies, it is possible that materially different amounts would be reported under different conditions, using different assumptions, or as new information becomes available.

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GAAP may require costly technology changes, additional training and personnel, and other expenses that will negatively impact our results of operations.

2019 Form 10-K

Liquidity is derived primarily from retail deposit growth and retention;

principal and interest payments on loans;

principal and interest payments on investment securities;

sale, maturity and prepayment of investment securities;

net cash provided from operations;

and access to other funding sources, such as the FHLB and certain brokered deposit channels established by the Bank.

Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general.

Our market share and income may be adversely affected by our inability to successfully compete against larger and more diverse financial service providers and digital fintech start-up firms.

Additionally, the financial services industry is facing a wave of digital disruption from fintech companies that 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.

Mergers and acquisitions of financial institutions within New Jersey, the New York Metropolitan area and Florida may also occur given the current difficult banking environment and add more competitive pressure to a substantial portion of our marketplace.

Our profitability depends upon our continued ability to successfully compete in our market area.

If Valley is unable to compete effectively, it may lose market share and its income generated from loans, deposits, and other financial products may decline.

Our ability to make opportunistic acquisitions is subject to significant risks, including the risk that regulators will not provide the requisite approvals.

We may make opportunistic whole or partial acquisitions of other banks, branches, financial institutions, or related businesses from time to time that we expect may further our business strategy.

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.

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.

Competition for acquisitions can be highly competitive, and we may not be able to acquire other institutions on attractive terms.

Ability to grow may be limited if we choose not to pursue or are unable to successfully make acquisitions in the future.

Failure to successfully implement our growth strategies could cause us to incur substantial costs and expenses which may not be recouped and adversely affect our future profitability.

From time to time, Valley may implement new lines of business or offer new products and services within existing lines of business.

There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed.

Valley may invest significant time and resources to develop and market new lines of business and/or products and services.

Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible.

External factors, such as compliance with regulations, competitive alternatives, and shifting customer preferences, may also impact the successful implementation of a new line of

2019 Form 10-K

business or a new product or service.

Additionally, any new line of business and/or new product or service could have a significant impact on the effectiveness of Valley’s system of internal controls.

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

We may not keep pace with technological change within the financial services industry, negatively affecting our ability to remain competitive and profitable.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.

The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.

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

Many of Valley’s competitors have substantially greater resources to invest in technological improvements.

Valley may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers.

We rely on our systems, employees and certain service providers, and if our system fails, our operations could be disrupted.

We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies and procedures.

We may not be able to attract and retain skilled people.

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.

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

Many areas in New Jersey, New York, Florida and Alabama in which our branches operate are subject to severe flooding from time to time and significant weather related disruptions may become common events in the future.

The risk of significant disruption and potential losses from future storm activity exists in all of our primary markets.

We are subject to environmental liability risk associated with lending activities which could have a material adverse effect on our financial condition and results of operations.

A significant portion of our loan portfolio is secured by real property.

During the ordinary course of business, we may foreclose on and take title to properties securing certain loans.

In doing so, there is a risk that hazardous or toxic substances could

Claims and litigation could result in significant expenses, losses and damage to our reputation.

This may also impact customer demand for Valley’s products and services.

Any financial liability could have a material adverse effect on Valley’s financial condition and results of operations.

Any reputation damage could have a material adverse effect on Valley’s business.

2020 Form 10-K

be found on these properties.

If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage.

Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property.

In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability.

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.

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

We engage in the origination of residential mortgages for sale into the secondary market, while typically retaining the loan servicing.

The aggregate principal balances of residential mortgage loans serviced by the Bank for others approximated $3.4 billion and $3.2 billion at December 31, 2019 and 2018 , 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 four and five loan repurchases in 2019 and 2018 , respectively).

None of the loan repurchases resulted in material loss.

As of December 31, 2019 , no reserves pertaining to loans sold were established on our financial statements.

Risks Related to an Investment in our Securities

We may reduce or eliminate the cash dividend on our common stock, which could adversely affect the market price of our common stock.

Holders of our common stock are only entitled to receive such cash dividends as our Board of Directors may declare out of funds legally available for such payments.

This reduction or elimination of our dividend could adversely affect the market price of our common stock.