52
VALLEY NATIONAL BANCORP ANNUAL FORECAST MODEL ($ in thousands, except per share data) 2006A 12/31/2006 BALANCE SHEET Assets Cash and due from banks Interest bearing deposits with banks Investment securities Loans held for sale at fair value Gross loans Less - Allowance for loan losses Net loans Premises and equipment net Bank owned life insurance Accrued interest receivable Due from customers on acceptances outstanding FDIC loss-share receivable Goodwill Other intangible assets net Other assets Total Assets Liabilities Total deposits Short-term borrowings Long-term borrowings Junior subordinated debentures issued to capital trusts Bank acceptances outstanding Accrued expenses and other liabilities Total Liabilities Total Shareholders' Equity Total Liabilities and Shareholders' Equity Balance Check INVESTMENT SECURITIES Investment securities % growth LOANS Gross loans (Covered and non-covered) 8,331,685 % growth Loans held for sale Loans held for sale as % of gross loans CREDIT LOSS RESERVE Allowance for credit losses - BOP 75,188 Plus: Net charge-offs (enter as -) (9,740) Plus: Provision for credit losses (enter as +) 9,270 Plus: Acquisitions 0 Allowance for loan losses (reserves) - EOP 74,718 Plus: Allowance for letter of credit

Sample Bank Modeling Template

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Page 1: Sample Bank Modeling Template

VALLEY NATIONAL BANCORP ANNUAL FORECAST MODEL($ in thousands, except per share data)

2006A 2007A12/31/2006 12/31/2007

BALANCE SHEETAssetsCash and due from banksInterest bearing deposits with banksInvestment securitiesLoans held for sale at fair valueGross loans Less - Allowance for loan lossesNet loansPremises and equipment netBank owned life insuranceAccrued interest receivableDue from customers on acceptances outstandingFDIC loss-share receivableGoodwillOther intangible assets netOther assetsTotal AssetsLiabilitiesTotal depositsShort-term borrowingsLong-term borrowingsJunior subordinated debentures issued to capital trustsBank acceptances outstandingAccrued expenses and other liabilitiesTotal LiabilitiesTotal Shareholders' EquityTotal Liabilities and Shareholders' EquityBalance Check

INVESTMENT SECURITIESInvestment securities% growth

LOANSGross loans (Covered and non-covered) 8,331,685 8,496,221 % growth 1.97%

Loans held for saleLoans held for sale as % of gross loans

CREDIT LOSS RESERVEAllowance for credit losses - BOP 75,188 74,718 Plus: Net charge-offs (enter as -) (9,740) (11,658)Plus: Provision for credit losses (enter as +) 9,270 11,875 Plus: Acquisitions 0 0 Allowance for loan losses (reserves) - EOP 74,718 74,935 Plus: Allowance for letter of credit 2,271

C10
Wall Street Prep: Aggregate all investment securities into one line item
C12
Wall Street Prep: Include 2010 covered loans
C37
WSP: Historical balances from p.57 VLY 10K
C41
Wall Street Prep: Historical data: VLY 10K p.63
C48
Wall Street Prep: Historical data: VLY 10K p. 70
C53
Wall Street Prep: Historical data: VLY 10K p. 70
Page 2: Sample Bank Modeling Template

Reported Allowance 74,718 72,664

DriversNCO to prior year provision 125.76% Average loans 8,262,739 8,261,111 NCO / average loans (includes loans held for sale) (0.12%) (0.14%)

FDIC LOSS SHARE RECEIVABLEFDIC loss share receivable - BOPNet reimbursementFDIC loss share receivable - EOP

DEPOSITSGross loans - EOP 8,331,685 8,496,221 Deposits - EOP 8,487,651 8,091,004 Ratio of gross loans / deposits 98.16% 105.01%

DEBTLong-term borrowingsas a % of gross loans

NET INTEREST INCOME (NII)Balance sheet itemsLoans - EOPInvestments - EOPFederal funds sold and other interest bearing deposits - EOPTotal interest earning assets - EOPTotal interest earning assets - Average

% of total deposits that are interest bearing 74% Interest earning deposits - EOPST borrowings - EOPLT borrowings - EOPJunior subordinated debentures issued to capital trustsTotal interest bearing liabilities - EOPTotal interest bearing liabilities - Average

Growth rates Investments- EOPDeposits - EOPST borrowings - EOPLT borrowings - EOP

NII driversInterest earning asset yield (IEA yield)Interest bearing liability cost (IBL cost)Net interest spread (IEA yield - IBL cost)

Net interest income (NII) calculationTotal interest incomeTotal interest expenseNet Interest Income (NII) - reported Tax equivalent adjustment

C58
Wall Street Prep: Historical balances from VLY 10K, p. 43 and/or p. 70
C62
Wall Street Prep: Historical balance, VLY 10K p.124
C68
Wall Street Prep: Historical balances from VLY 10k, p. 30
C81
Wall Street Prep: Historical IEA averages disclosed in VLY's 10K p.42. Caution: Reported average IEA will not equal model-calculated IEA on a historical basis because reported averages are computed daily.
D83
WSP: Based on 2010 ratio of interest bearing deposits to total deopsits, VLY 10k p. 43
C89
Wall Street Prep: Historical IBL averages disclosed in VLY's 10K p.42. Caution: Reported average IBL will not equal model-calculated IBL on a historical basis because reported averages are computed daily.
C106
Wall Street Prep: VLY 10k p.43
Page 3: Sample Bank Modeling Template

NII - tax equivalent basis

Net interest margin (NIM) - NII/Average IEA

INCOME STATEMENTInterest incomeTotal interest incomeTotal interest expense Net Interest Income

Provision for credit losses

Non-Interest IncomeTrust and investment servicesInsurance commissionsService charges on deposit accountsSecurities gains/lossesTrading (losses) gains netFees from loan servicingBank owned life insuranceChange in FDIC loss-share receivableOther income, including gains on sale of loans, assets, and Total non-interest income

Non-Interest ExpenseSalary and employee benefits expenseNet occupancy and equipment expenseAmortization of other intangible assetsOtherTotal non-interest expense

Income Before Income TaxesIncome tax expenseNet IncomeDividends on preferred stock and accretionNet Income Available to Common Stockholders

Weighted Average Number of Common Shares OutstandingBasic (#)Diluted (#)

Earnings Per Common ShareBasic (actual)Diluted (actual)

Cash dividends per common shareCash dividends

Income Statement drivers% growth (year-over-year)Trust and investment services Insurance commissionsBank owned life insurance

Page 4: Sample Bank Modeling Template

Other non-interest income

Other driversService charges on deposit accounts / BOP depositsFees from loan servicing / BOP gross loans

As % of NIISalary and employee benefits expenseNet occupancy and equipment expenseAmortization of other intangible assetsOther non-interest expense

Tax rate

CASH, DEPOSITS WITH BANKS, AND SHORT TERM BORROWINGSCash and due from banksCash as % of deposits

Total assets (including prior year interest bearing deposits)Total liabilities & equity (including prior year ST borrowings)Funding needs (surplus)

CIRCULARITY

1=Use beginning balance to calculate NII 12=Use average balance to calculate NII (creates circularity)

Circularity breaker: Off (Default)

CAPITAL REQUIREMENTSTier 1 CapitalTotal stockholders' equityLess: GoodwillPlus: Junior subordinated debentures issued to capital trustsPlus: OtherTier 1 Capital

Total CapitalTier 1 capitalPlus: Allowance for credit losses - EOPPlus: Qualifying sub debtTotal capital

Risk weighted assets (RWA)Average Interest earning assets (IEA)Average total assets

DriversRWA / IEAAverage total assets / IEA

Tier 1 capital ratio (Tier 1 / RWA) 10.56% 9.55% Total capital ratio (Total capital / RWA) 12.44% 11.35%

D184
Wall Street Prep: NII is calculated using the average IEA and IBL balances during the period. However, this creates a circularity because then NII affects retain earnings, which in turn, affects the model balancers (interest bearing deposits and ST borrowings), which, in turn affect the NII, creating the circularity. You can avoid this by calculating NII using BOP IEA and IBL balances (select 1 from the dropdown menu). In an annual model, this can be dangerous if balances are expected to change substantially during the year. In this event, use average balances and employ a circularity breaker.
D187
Wall Street Prep: Whenever you intentionally introduce circularity in the model, you need to include a circuit “breaker” in the event that your model becomes unstable and “blows up”. A circularity breaker ensures that if the model becomes unstable because of the circularity, you can "reset" the model to its prior state, by selecting ‘On’ from the dropdown menu. Through the use of an IF statement, this has the effect of zeroing out the cells that are creating the circularity, in this case, interest income, and interest expense. Once the instability is flushed out, the circularity breaker should be placed back to the ‘Off (Default)’ position.
C193
Wall Street Prep: historical balance per VLY's 2010 10K p.137
C195
Wall Street Prep: historical balance per VLY's 2010 10K p.153
C201
Wall Street Prep: historical balance per VLY's 2010 10K p.153
C211
Wall Street Prep: historical ratios per VLY's 2010 10K p.30
C212
Wall Street Prep: historical ratios per VLY's 2010 10K p.30
Page 5: Sample Bank Modeling Template

Leverage ratio (Tier 1 / average total assets) 8.10% 7.62%

Capital checkTier 1 capital ratio (Tier 1 / RWA) Well capitalized Well capitalized

Total capital ratio (Total capital / RWA) Well capitalized Well capitalized

Leverage ratio (Tier 1 / average total assets) Well capitalized Well capitalized

C213
Wall Street Prep: historical ratios per VLY's 2010 10K p.30
Page 6: Sample Bank Modeling Template

2008A 2009A 2010A 2011E 2012E 2013E 2014E12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014

305,678 302,629 308,601 317,761 327,193 336,904 355,659 63,657 63,657 63,657 63,657 63,657

2,969,819 2,991,169 3,140,727 3,297,764 3,462,652 3,635,785 25,492 58,958 38,575 39,720 40,899 42,113

9,370,071 9,365,795 9,643,787 9,930,030 10,224,769 10,528,256 (101,990) (124,704) (120,085) (116,085) (113,085) (113,085)

9,268,081 9,241,091 9,523,702 9,813,945 10,111,684 10,415,172 266,401 265,570 265,570 265,570 265,570 265,570 304,031 304,956 304,956 304,956 304,956 304,956

56,245 59,126 59,126 59,126 59,126 59,126 6,985 6,028 6,028 6,028 6,028 6,028

0 89,359 69,359 49,359 29,359 9,359 296,424 317,891 317,891 317,891 317,891 317,891

24,305 25,650 25,650 25,650 25,650 25,650 405,033 417,742 417,742 417,742 417,742 417,742

14,284,153 14,143,826 14,541,585 14,979,169 15,432,407 15,899,952

9,547,285 9,363,614 9,643,787 9,930,030 10,224,769 10,528,256 216,147 192,318 229,407 253,916 272,615 286,930

2,946,320 2,933,858 2,989,574 3,078,309 3,169,678 3,263,759 181,150 186,922 186,922 186,922 186,922 186,922

6,985 6,028 6,028 6,028 6,028 6,028 133,412 165,881 165,881 165,881 165,881 165,881

13,031,299 12,848,621 13,221,599 13,621,086 14,025,894 14,437,777 1,252,854 1,295,205 1,319,986 1,358,083 1,406,513 1,462,175

14,284,153 14,143,826 14,541,585 14,979,169 15,432,407 15,899,952 0 0 0 0 0 0

2,624,415 2,969,819 2,991,169 3,140,727 3,297,764 3,462,652 3,635,785 13.16% 0.72% 5.00% 5.00% 5.00% 5.00%

10,143,690 9,370,071 9,365,795 9,643,787 9,930,030 10,224,769 10,528,256 19.39% (7.63%) (0.05%) 2.97% 2.97% 2.97% 2.97%

25,492 58,958 38,575 39,720 40,899 42,113 0.27% 0.63% 0.40% 0.40% 0.40% 0.40%

74,935 94,738 103,655 126,504 121,885 117,885 114,885 (19,889) (39,075) (26,607) (34,619) (24,000) (18,000) (15,000)28,282 47,992 49,456 30,000 20,000 15,000 15,000 11,410 0 0 0 0 0 0 94,738 103,655 126,504 121,885 117,885 114,885 114,885

1,494 1,665 1,800 1,800 1,800 1,800 1,800

Page 7: Sample Bank Modeling Template

93,244 101,990 124,704 120,085 116,085 113,085 113,085

167.49% 138.16% 55.44% 70.00% 80.00% 90.00% 100.00%9,386,987 9,705,909 9,474,994 9,553,557 9,826,056 10,117,709 10,418,019

(0.21%) (0.40%) (0.28%) (0.36%) (0.24%) (0.18%) (0.14%)

0 108,000 89,359 69,359 49,359 29,359 (18,641) (20,000) (20,000) (20,000) (20,000)

0 89,359 69,359 49,359 29,359 9,359

10,143,690 9,370,071 9,365,795 9,643,787 9,930,030 10,224,769 10,528,256 9,232,923 9,547,285 9,363,614 9,643,787 9,930,030 10,224,769 10,528,256

109.86% 98.14% 100.02% 100.00% 100.00% 100.00% 100.00%

2,946,320 2,933,858 2,989,574 3,078,309 3,169,678 3,263,759 31.44% 31.33% 31.00% 31.00% 31.00% 31.00%

9,395,563 9,424,753 9,682,362 9,969,750 10,265,668 10,570,369 2,969,819 2,991,169 3,140,727 3,297,764 3,462,652 3,635,785

355,659 63,657 63,657 63,657 63,657 63,657 12,721,041 12,479,579 12,886,746 13,331,171 13,791,977 14,269,811

12,384,625 13,031,646 12,679,756 12,683,163 13,108,959 13,561,574 14,030,894

7,106,510 6,969,795 7,178,341 7,391,406 7,610,795 7,836,695 216,147 192,318 229,407 253,916 272,615 286,930

2,946,320 2,933,858 2,989,574 3,078,309 3,169,678 3,263,759 181,150.0 186,922.0 186,922.0 186,922.0 186,922.0 186,922.0

10,450,127 10,282,893 10,584,245 10,910,553 11,240,010 11,574,307 10,355,760 10,585,800 10,363,969 10,433,569 10,747,399 11,075,282 11,407,159

10,366,510.2 10,433,568.9

0.72% 5.00% 5.00% 5.00% 5.00% (1.92%) 2.99% 2.97% 2.97% 2.97%

(11.02%) 19.29% 10.68% 7.36% 5.25% (0.42%) 1.90% 2.97% 2.97% 2.97%

5.94% 5.51% 5.38% 5.40% 5.65% 5.90% 6.15%2.98% 2.48% 2.07% 2.10% 2.40% 2.70% 3.00%2.96% 3.03% 3.31% 3.30% 3.25% 3.20% 3.15%

729,694 712,184 676,812 673,897 728,101 786,539 848,207 308,895 262,870 214,060 215,941 254,022 294,585 337,200 420,799 449,314 462,752 457,957 474,079 491,954 511,006

5,459 5,227 5,590 5,500 5,500 5,500 5,500

Page 8: Sample Bank Modeling Template

426,258 454,541 468,342 463,457 479,579 497,454 516,506

3.44% 3.49% 3.69% 3.65% 3.66% 3.67% 3.68%

729,694 712,184 676,812 673,897 728,101 786,539 848,207 308,895 262,870 214,060 215,941 254,022 294,585 337,200 420,799 449,314 462,752 457,957 474,079 491,954 511,006

28,282 47,992 49,456 30,000 20,000 15,000 15,000

7,161 6,906 7,665 8,125 8,612 9,129 9,677 10,053 10,224 11,334 12,014 12,735 13,499 14,309 28,274 26,778 25,691 25,282 26,038 26,811 27,607

(79,815) 1,653 6,956 0 0 0 0 3,166 (10,434) (6,897) 0 0 0 0 5,236 4,839 4,919 4,683 4,822 4,965 5,112

10,167 5,700 6,166 6,474 6,798 7,138 7,495 0 0 6,268 0 0 0 0

19,014 26,585 29,225 30,686 32,221 33,832 35,523 3,256 72,251 91,327 87,264 91,226 95,374 99,723

157,876 163,746 176,106 174,023 180,150 186,943 194,182 54,042 58,974 61,765 59,534 61,630 63,954 66,431

7,224 6,887 7,721 7,327 7,585 7,871 8,176 66,106 76,421 72,090 73,273 75,853 78,713 81,761

285,248 306,028 317,682 314,158 325,218 337,481 350,550

110,525 167,545 186,941 201,062 220,087 234,847 245,179 16,934 51,484 55,771 60,319 66,026 70,454 73,554 93,591 116,061 131,170 140,744 154,061 164,393 171,625

2,090 19,524 0 0 0 0 0 91,501 96,537 131,170 140,744 154,061 164,393 171,625

143,805,528 151,675,691 161,059,906 161,059,906 161,059,906 161,059,906 161,059,906143,884,683 151,676,409 161,068,175 161,068,175 161,068,175 161,068,175 161,068,175

0.64 0.64 0.81 0.87 0.96 1.02 1.070.64 0.64 0.81 0.87 0.96 1.02 1.07

0.72 0.72 0.72 0.72 0.72 0.72 0.72102,517 109,005 115,190 115,963 115,963 115,963 115,963

(3.56%) 10.99% 6.00% 6.00% 6.00% 6.00%1.70% 10.86% 6.00% 6.00% 6.00% 6.00%

(43.94%) 8.18% 5.00% 5.00% 5.00% 5.00%

Page 9: Sample Bank Modeling Template

39.82% 9.93% 5.00% 5.00% 5.00% 5.00%

0.35% 0.29% 0.27% 0.27% 0.27% 0.27% 0.27%0.06% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%

37.52% 36.44% 38.06% 38.00% 38.00% 38.00% 38.00%12.84% 13.13% 13.35% 13.00% 13.00% 13.00% 13.00%

1.72% 1.53% 1.67% 1.60% 1.60% 1.60% 1.60%15.71% 17.01% 15.58% 16.00% 16.00% 16.00% 16.00%

15.32% 30.73% 29.83% 30.00% 30.00% 30.00% 30.00%

305,678 302,629 308,601 317,761 327,193 336,904 3.20% 3.23% 3.20% 3.20% 3.20% 3.20%

14,541,585 14,979,169 15,432,407 15,899,952 14,504,495 14,954,661 15,413,707 15,885,638

37,089 24,508 18,700 14,315

1,252,854 1,295,205 1,319,986 1,358,083 1,406,513 1,462,175 (296,424) (317,891) (317,891) (317,891) (317,891) (317,891)176,313 176,313 176,313 176,313 176,313 176,313

5,545 (10,299) - - - - 1,138,288 1,143,328 1,178,408 1,216,505 1,264,935 1,320,597

1,138,288 1,143,328 1,178,408 1,216,505 1,264,935 1,320,597 103,655 126,504 121,885 117,885 114,885 114,885 100,000 80,000 90,000 90,000 90,000 90,000

1,341,943 1,349,832 1,390,292 1,424,390 1,469,820 1,525,482

10,698,195 10,450,896 10,400,193 10,749,346 11,120,491 11,505,333 12,384,625 13,031,646 12,679,756 12,683,163 13,108,959 13,561,574 14,030,894

13,983,882 13,758,460 13,697,816 14,157,675 14,646,500 15,153,366

0.82 0.82 0.82 0.82 0.82 0.82 1.07 1.09 1.08 1.08 1.08 1.08

11.44% 10.64% 10.94% 11.33% 11.32% 11.37% 11.48% 13.18% 12.54% 12.91% 13.37% 13.25% 13.22% 13.26%

Page 10: Sample Bank Modeling Template

9.10% 8.14% 8.31% 8.60% 8.59% 8.64% 8.71%

Well capitalized Well capitalized Well capitalized Well capitalized Well capitalized Well capitalized Well capitalized

Well capitalized Well capitalized Well capitalized Well capitalized Well capitalized Well capitalized Well capitalized

Well capitalized Well capitalized Well capitalized Well capitalized Well capitalized Well capitalized Well capitalized

Page 11: Sample Bank Modeling Template

Notes

See scheduleSee schedule. Primarily with the NY Fed; model balancerSee scheduleSee scheduleSee scheduleSee scheduleSee scheduleStraight-line (SL) projection assumes new purchases equal depreciation/salesSL. Assume appreciation offset by benefit proceeds. BOLI BOP + Change in surrender value (IS income) - Benefit proceeds (CFS investing inflow) = BOLI EOP. SL. Argument can be made to grow as % of total interest income (as interest increases, so would the associated receivables).SL. Primarily used in the trade of goods. For example, a manufacturer needs to be paid by a retailer: The retailer's bank, under certain financial conditions between the bank and its customer, accepts to pay for the goods. The bank is substituting its creditworthiness for that of its customer in order to assure the manufacturer of payment after shipping the goods. The acceptance is then sent to the manufacturer. The bank records a liability (it owes the manufacturer $ now, but it records a corresponding asset that will be paid back by its customer, the retailer.See schedule. SL. No amortization of GW; assume no substantial new purchases or impairmentsSL. Assume new purchases equal amortization/salesSL. Comprised primarily of net deferred tax assets, federal reserve and federal home loan bank stock, derivatives, foreclosed and other assets. (The Federal Reserve Banks issue shares of stock to member banks. However, owning Federal Reserve Bank stock is quite different from owning stock in a private company. The Federal Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the system. The stock may not be sold or traded or pledged as security for a loan; dividends are, by law, limited to 6 percent per year)

See scheduleSee schedule; Primarily repos for VLY; model balancerSee scheduleSL. Holding company debt.SL. See corresponding asset description above.SL. Argument can be made to grow as % of non-interest expense on IS

BOP + Net income - dividends = EOP

Comprised of held to maturity; available for sale; and trading securities. Banks always disclose their investment composition in the footnotes; a large portion of VLY's securities are RMBS. Difficult to project growth rates definitively. We use historical rates as guide,

2010 gross loans include loans covered by the FDIC in a 2010 loss-share arrangement. We use a historical cagr to project loan growth. This projection will also affect our deposit liabilities, which are needed to support loan volume. VLY discloses the composition of its loan portfolio in the footnotes, so if analysts have conviction about particular loan portfolios (residential vs. commercial loans) as more detailed analysis can be performed.

Use the historical relationship as a guide

Reference prior period ending balanceProject based on ratio of NCO/prior year provision. NCO are comprised of charge-offs, net of recoveries of previously charged off loans. Our assumption for reduction in provision assumes continued normalization of credit environment to pre-crisis levels. Assume 0

Straight-line

Page 12: Sample Bank Modeling Template

During credit crisis in 2008 and 2009, NCOs were higher than prior period provisions. Larger provisions were then taken in 2009 and 2010, while NCOs declined as environment normalized. We are assuming normalization of provisions, and thus the relationship between NCOs and prior period provisions are also expected to increase to historical, pre-crisis levels.

Although not used directly in our analysis, the "NCO ratio" is a sanity-check

We use historical reimbursement as a guide.BOP + accretion and increase due to impairment of covered loans - FDIC reimbursements = EOP.

Deposits drive the amount of loans a bank can make, and VLY maintains an internal limitation on loans at 120% of deposits. For projection purposes, we use the historical relationship, to project deposits.

Reference LHFS and Gross Loans from schedule above.Reference Investment Securities from schedule above.Reference from the BS; projections will be zero until this balance sheet item is filled out later

Adjust total BS deposits by interest earning deposits assumption. Reference from the BS; projections will be zero until this balance sheet item is projected later.Reference from the LT Debt schedule above.Reference from the BS; projections will be zero until this balance sheet item is filled out later

Sum of NIS and IBL cost. Implies higher LT rates but at lower rate of increase than ST ratesThesis: Fed rate hikes will lead to higher ST rates, which will translate to higher deposit rates for VLY. While VLY can determine its own deposit rates, competition ties it to market conditions.Thesis: Expectations of an economic slowdown will lead to slight flattening of the yield curve (spreads between LT and ST rates will contract). Given that deposits are ST while loans are LT, this will lead to contraction in NII margin.

Reference to IS Reference to IS Reference to IS Many banks have tax exempt investments, which, due to lower yields (but lower taxes) can obfuscate comparability of NII and NIM. Accordingly, VLY, like most banks and consistent with SEC rules, disclose amounts related to NII and NIM on a tax equivalent basis using a 35 percent tax rate for the purposes of comparability.

Page 13: Sample Bank Modeling Template

Reference from scheduleReference from schedule

Reference from schedule

See IS drivers scheduleSee IS drivers scheduleSee IS drivers scheduleGains/Losses on securities transactions, less impairment losses on securities recognized in earnings; can't predictUnder US GAAP, unrealized trading gains/losses are recorded in IS; can't predictSee IS drivers scheduleSee IS drivers scheduleChange in impairment / accretion of FDIC covered loans; can't predictSee IS drivers schedule

See IS drivers scheduleSee IS drivers scheduleSee IS drivers scheduleSee IS drivers schedule

See IS drivers schedule

Historical payments associated with TARP - VLY has repaid its obligation. Assume 0.

SLSL

Historical trendsHistorical trendsAssumption

Page 14: Sample Bank Modeling Template

Assumption

Declining due to stricter regulations. VLY expects trend to stabilize and possibly reverse. We use BOP to avoid circularity.Historical trends. We use BOP to avoid circularity.

Historical trendsHistorical trendsHistorical trendsHistorical trends

Historical trends

Project as % of depositsHistorical trends

If A>L+E, our model has projected more assets than L+E to support them. As a result, ST borrowings must increase to meet funding needs. Conversely, if A<L, our model is projecting larger sources of capital (L+E) than we are using. As a result, interest-bearing deposits must increase to put the excess capital "somewhere".

Tier 1 capital consists of common shareholders’ equity excluding goodwill, plus eligible long-term borrowing related to VNB CapitalReference from balance sheetReference from balance sheetUse the face value of the securities (as opposed to the carring value of the debentures) for Tier I capital calculations. Under the Dodd-Frank Act (signed 7/10), VLY's outstanding trust preferred securities will continue to count as Tier 1 capital but VLY will be unable to issue replacement or additional trust preferred securities, which would count as Tier 1 capital.Assume 0

Total capital = Tier 1 capital, "qualifying" subordinated debt and the allowance for credit losses (up to 1.25% of RWA).

Reference from credit loss reserve scheduleCalculate historicals as a plug. Forecast by using historical trends.

Does not equal average balance sheet assets because of minor adjustments for regulatory capital calculation purposes

Use historical trends as a guideUse historical trends as a guide

Page 15: Sample Bank Modeling Template

Adequacy tableWell capitali Adequate Undercapital Significant Critically Undercapitalized6% 4% 4% 3%10% 8% 8% 6%5% 4% 4% 3% 2%

Page 16: Sample Bank Modeling Template

SL. Assume appreciation offset by benefit proceeds. BOLI BOP + Change in surrender value (IS income) - Benefit proceeds (CFS investing inflow) = BOLI EOP. SL. Argument can be made to grow as % of total interest income (as interest increases, so would the associated receivables).SL. Primarily used in the trade of goods. For example, a manufacturer needs to be paid by a retailer: The retailer's bank, under certain financial conditions between the bank and its customer, accepts to pay for the goods. The bank is substituting its creditworthiness for that of its customer in order to assure the manufacturer of payment after shipping the goods. The acceptance is then sent to the manufacturer. The bank records a liability (it owes the manufacturer $ now, but it records a corresponding asset that will be paid back by its customer, the retailer.

SL. Comprised primarily of net deferred tax assets, federal reserve and federal home loan bank stock, derivatives, foreclosed and other assets. (The Federal Reserve Banks issue shares of stock to member banks. However, owning Federal Reserve Bank stock is quite different from owning stock in a private company. The Federal Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the system. The stock may not be sold or traded or pledged as security for a loan; dividends are, by law, limited to 6 percent per year)

Comprised of held to maturity; available for sale; and trading securities. Banks always disclose their investment composition in the footnotes; a large portion of VLY's securities are RMBS.

We use a historical cagr to project loan growth. This projection will also affect our deposit liabilities, which are needed to support loan volume. VLY discloses the composition of its loan portfolio in the footnotes, so if analysts have conviction about particular loan portfolios (residential vs. commercial loans) as more detailed analysis can be performed.

Project based on ratio of NCO/prior year provision. NCO are comprised of charge-offs, net of recoveries of previously charged off loans. Our assumption for reduction in provision assumes continued normalization of credit environment to pre-crisis levels.

Page 17: Sample Bank Modeling Template

During credit crisis in 2008 and 2009, NCOs were higher than prior period provisions. Larger provisions were then taken in 2009 and 2010, while NCOs declined as environment normalized. We are assuming normalization of provisions, and thus the relationship between NCOs and prior period provisions are also expected to increase to historical, pre-crisis levels.

Deposits drive the amount of loans a bank can make, and VLY maintains an internal limitation on loans at 120% of deposits. For projection purposes, we use the historical relationship, to project deposits.

Thesis: Fed rate hikes will lead to higher ST rates, which will translate to higher deposit rates for VLY. While VLY can determine its own deposit rates, competition ties it to market conditions.Thesis: Expectations of an economic slowdown will lead to slight flattening of the yield curve (spreads between LT and ST rates will contract). Given that deposits are ST while loans are LT, this will lead to contraction in NII margin.

Many banks have tax exempt investments, which, due to lower yields (but lower taxes) can obfuscate comparability of NII and NIM. Accordingly, VLY, like most banks and consistent with SEC rules, disclose amounts related to NII and NIM on a tax equivalent basis using a 35 percent tax rate for the purposes of comparability.

Page 18: Sample Bank Modeling Template

Gains/Losses on securities transactions, less impairment losses on securities recognized in earnings; can't predict

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Declining due to stricter regulations. VLY expects trend to stabilize and possibly reverse. We use BOP to avoid circularity.

If A>L+E, our model has projected more assets than L+E to support them. As a result, ST borrowings must increase to meet funding needs. Conversely, if A<L, our model is projecting larger sources of capital (L+E) than we are using. As a result, interest-bearing deposits must increase to put the excess capital "somewhere".

Tier 1 capital consists of common shareholders’ equity excluding goodwill, plus eligible long-term borrowing related to VNB Capital

Use the face value of the securities (as opposed to the carring value of the debentures) for Tier I capital calculations. Under the Dodd-Frank Act (signed 7/10), VLY's outstanding trust preferred securities will continue to count as Tier 1 capital but VLY will be unable to issue replacement or additional trust preferred securities, which would count as Tier 1 capital.

Total capital = Tier 1 capital, "qualifying" subordinated debt and the allowance for credit losses (up to 1.25% of RWA).

Does not equal average balance sheet assets because of minor adjustments for regulatory capital calculation purposes

Page 20: Sample Bank Modeling Template

SL. Primarily used in the trade of goods. For example, a manufacturer needs to be paid by a retailer: The retailer's bank, under certain financial conditions between the bank and its customer, accepts to pay for the goods. The bank is substituting its creditworthiness for that of its customer in order to assure the manufacturer of payment after shipping the goods. The acceptance is then sent to the manufacturer. The bank records a liability (it owes the manufacturer $ now, but it records a corresponding asset that will be paid back by its customer, the retailer.

SL. Comprised primarily of net deferred tax assets, federal reserve and federal home loan bank stock, derivatives, foreclosed and other assets. (The Federal Reserve Banks issue shares of stock to member banks. However, owning Federal Reserve Bank stock is quite different from owning stock in a private company. The Federal Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the system. The stock may not be sold or traded or pledged as security for a loan; dividends are, by law, limited to 6 percent per year)

We use a historical cagr to project loan growth. This projection will also affect our deposit liabilities, which are needed to support loan volume. VLY discloses the composition of its loan portfolio in the footnotes, so if analysts have conviction about particular loan portfolios (residential vs. commercial loans) as more detailed analysis can be performed.

Page 21: Sample Bank Modeling Template

During credit crisis in 2008 and 2009, NCOs were higher than prior period provisions. Larger provisions were then taken in 2009 and 2010, while NCOs declined as environment normalized. We are assuming normalization of provisions, and thus the relationship between NCOs and prior period provisions are also expected to increase to historical, pre-crisis levels.

Thesis: Expectations of an economic slowdown will lead to slight flattening of the yield curve (spreads between LT and ST rates will contract). Given that deposits are ST while loans are LT, this will lead to contraction in NII margin.

Many banks have tax exempt investments, which, due to lower yields (but lower taxes) can obfuscate comparability of NII and NIM. Accordingly, VLY, like most banks and consistent with SEC rules, disclose amounts related to NII and NIM on a tax equivalent basis using a 35 percent tax rate for the purposes of comparability.

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If A>L+E, our model has projected more assets than L+E to support them. As a result, ST borrowings must increase to meet funding needs. Conversely, if A<L, our model is projecting larger sources of capital (L+E) than we are using. As a result, interest-bearing deposits must increase to put the excess capital "somewhere".

Use the face value of the securities (as opposed to the carring value of the debentures) for Tier I capital calculations. Under the Dodd-Frank Act (signed 7/10), VLY's outstanding trust preferred securities will continue to count as Tier 1 capital but VLY will be unable to issue replacement or additional trust preferred securities, which would count as Tier 1 capital.

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SL. Primarily used in the trade of goods. For example, a manufacturer needs to be paid by a retailer: The retailer's bank, under certain financial conditions between the bank and its customer, accepts to pay for the goods. The bank is substituting its creditworthiness for that of its customer in order to assure the manufacturer of payment after shipping the goods. The acceptance is then sent to the manufacturer. The bank records a liability (it owes the manufacturer $ now, but it records a corresponding asset that will be paid back by its customer, the retailer.

SL. Comprised primarily of net deferred tax assets, federal reserve and federal home loan bank stock, derivatives, foreclosed and other assets. (The Federal Reserve Banks issue shares of stock to member banks. However, owning Federal Reserve Bank stock is quite different from owning stock in a private company. The Federal Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the system. The stock may not be sold or traded or pledged as security for a loan; dividends are, by law, limited to 6 percent per year)

We use a historical cagr to project loan growth. This projection will also affect our deposit liabilities, which are needed to support loan volume. VLY discloses the composition of its loan portfolio in the footnotes, so if analysts have conviction about particular loan portfolios (residential vs. commercial loans) as more detailed analysis can be performed.

Page 24: Sample Bank Modeling Template

During credit crisis in 2008 and 2009, NCOs were higher than prior period provisions. Larger provisions were then taken in 2009 and 2010, while NCOs declined as environment normalized. We are assuming normalization of provisions, and thus the relationship between NCOs and prior period provisions are also expected to increase to historical, pre-crisis levels.

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Use the face value of the securities (as opposed to the carring value of the debentures) for Tier I capital calculations. Under the Dodd-Frank Act (signed 7/10), VLY's outstanding trust preferred securities will continue to count as Tier 1 capital but VLY will be unable to issue replacement or additional trust preferred securities, which would count as Tier 1 capital.

Page 26: Sample Bank Modeling Template

SL. Primarily used in the trade of goods. For example, a manufacturer needs to be paid by a retailer: The retailer's bank, under certain financial conditions between the bank and its customer, accepts to pay for the goods. The bank is substituting its creditworthiness for that of its customer in order to assure the manufacturer of payment after shipping the goods. The acceptance is then sent to the manufacturer. The bank records a liability (it owes the manufacturer $ now, but it records a corresponding asset that will be paid back by its customer, the retailer.

SL. Comprised primarily of net deferred tax assets, federal reserve and federal home loan bank stock, derivatives, foreclosed and other assets. (The Federal Reserve Banks issue shares of stock to member banks. However, owning Federal Reserve Bank stock is quite different from owning stock in a private company. The Federal Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the system. The stock may not be sold or traded or pledged as security for a loan; dividends are, by law, limited to 6 percent per year)

Page 27: Sample Bank Modeling Template

SL. Comprised primarily of net deferred tax assets, federal reserve and federal home loan bank stock, derivatives, foreclosed and other assets. (The Federal Reserve Banks issue shares of stock to member banks. However, owning Federal Reserve Bank stock is quite different from owning stock in a private company. The Federal Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the system. The stock may not be sold or traded or pledged as security for a loan; dividends are, by law, limited to 6 percent per year)

Page 28: Sample Bank Modeling Template

VALLEY NATIONAL BANCORP DDM MODEL($ in thousands, except per share data)

DDM GENERAL ASSUMPTIONSDDM model type 3 stageValuation date 12/31/2010 <-- For simplicity of calculating present values, model assumes valuation date = last fiscal year end date. Analysts should adjust the present value calculations to handle other dates .

Cost of equity 9.0%

DDM - MATURITY PHASE ASSUMPTIONSROE 9.0% <-- Should converge with cost of equity as company reaches maturity. When ROE is significantly higher than cost of equity at the maturity phase, analyst needs to justify or change

RWA growth 4.0% Capital ratio (Tier 1 capital / RWA) 10.0%

DDM BUILDUP2006A 2007A 2008A 2009A

12/31/2006 12/31/2007 12/31/2008 12/31/2009Historicals

Net income to common 91,501 96,537 % growth 5.5%

Dividends 102,517 109,005 % growth 6.3% % payout 112.0% 112.9%

Total stockholder's equity - BOPPlus: Net income to commonLess: DividendsTotal stockholders' equity - EOP 1,252,854

Less: Goodwill (296,424)Plus: Junior subordinated debentures issued to capital trusts 176,313 Plus: Other 5,545 Tier 1 Capital - EOP 1,138,288

ROE (Net income to common / Shareholders' equity)Average RWA 10,698,195

% growthCapital ratio (Tier 1 capital / RWA) 10.64%

Minimum capital ratio

DDM PV CALCS - DEVELOPMENT AND MATURITY PHASESDividends

Discount factor (assumes midyear adjustment)PV of dividends

DDM TERMINAL VALUE CALCS SHARES OUTSTANDINGBasic shares outstanding

Long term dividends growth rate 0.27% Current share priceTerminal year dividends (t+1) 129,459 Cost of equity 9.03% OptionsTerminal value (TV) 1,477,094 # exercisable

772,348 Tranche 1 115 Tranche 2 467

<-- The 3 stage is common for bank DDM models, 1)

PV of TV - Perpetuity approach

C47
Wall Street Prep: Instead of arbitrarily inputting a long term perpetuity growth rate, we can arrive at it logically, based on the projections we have already made, and keeping in mind the following: growth rate = reinvestment rate (RR) x ROE RR = (1 - payout ratio) Assuming a constant payout ratio thus enables us to calculate the perpetual g.
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Exit multiple (P/BV) 1.3x Tranche 3 490 Terminal value (TV) 1,920,222 Tranche 4 508

961,575 Tranche 5 1,145 Total options 2,724

"Intrinsic" Exit P/BV: 1.0x Treasury stock method

VALUATION Option proceedsRepurchased shares

Perpetuity approach Dilutive impact of stock optionsEquity value of VLY 1,513,769 Implied P/BV 1.2x VLY diluted shares outstanding:Implied P/TBV 1.3x VLY value / share $9.37

Exit multiple approachEquity value of VLY 1,702,997 P/BV 1.3x P/TBV 1.5x VLY value / share $10.54

DDM SENSITIVITY

Share price sensitivity to cost of equity (vertical) and ROE (horizontal)ROE

$9.37 7.0% 8.0% 9.0%

Cost of equity

10.0% $7.28 $7.87 $8.45 9.5% $7.63 $8.26 $8.89 9.0% $8.02 $8.70 $9.38 8.5% $8.45 $9.19 $9.93 8.0% $8.94 $9.74 $10.55

Share price sensitivity to cost of equity (vertical) and perpetuity growth rate (horizontal)Perpetuity growth rate

$9.37 0.0% 1.0% 2.0%

Cost of equity

10.0% $8.90 $9.43 $10.10 9.5% $9.06 $9.64 $10.37 9.0% $9.23 $9.86 $10.67 8.5% $9.39 $10.08 $10.99 8.0% $9.56 $10.32 $11.34

Share price sensitivity to cost of equity (vertical) and exit multiple (horizontal)Exit multiple

$10.54 1.00x 1.25x 1.50x

Cost of equity

10.0% $8.82 $9.89 $10.96 9.5% $9.00 $10.10 $11.21 9.0% $9.18 $10.32 $11.47 8.5% $9.36 $10.55 $11.74 8.0% $9.55 $10.79 $12.02

PV of TV - Exit multiple approach

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<-- For simplicity of calculating present values, model assumes valuation date = last fiscal year end date. Analysts should adjust the present value calculations to handle other dates .

<-- Should converge with cost of equity as company reaches maturity. When ROE is significantly higher than cost of equity at the maturity phase, analyst needs to justify or change

2010A 2011E 2012E 2013E 2014E 2015E 2016E 2017E12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017

Historicals Development phase (from op model) Maturity phase131,170 140,744 154,061 164,393 171,625 164,225 153,856 143,462

35.9% 7.3% 9.5% 6.7% 4.4% (4.3%) (6.3%) (6.8%)115,190 115,963 115,963 115,963 115,963 160,788 150,153 139,596

5.7% 0.7% 0.0% 0.0% 0.0% 38.7% (6.6%) (7.0%)87.8% 82.4% 75.3% 70.5% 67.6% 97.9% 97.6% 97.3%

1,252,854 1,295,205 1,319,986 1,358,083 1,406,513 1,462,175 1,465,613 1,469,316 131,170 140,744 154,061 164,393 171,625 164,225 153,856 143,462

(115,190) (115,963) (115,963) (115,963) (115,963) (160,788) (150,153) (139,596)1,295,205 1,319,986 1,358,083 1,406,513 1,462,175 1,465,613 1,469,316 1,473,182 (317,891) (317,891) (317,891) (317,891) (317,891) (317,891) (317,891) (317,891)176,313 176,313 176,313 176,313 176,313 176,313 176,313 176,313 (10,299) 0 0 0 0 0 0 0

1,143,328 1,178,408 1,216,505 1,264,935 1,320,597 1,324,035 1,327,738 1,331,604

10.3% 10.8% 11.5% 11.9% 12.0% 11.2% 10.5% 9.8% 10,450,896 10,400,193 10,749,346 11,120,491 11,505,333 11,919,007 12,363,625 12,841,500

(2.3%) (0.5%) 3.4% 3.5% 3.5% 3.6% 3.7% 3.9% 10.94% 11.33% 11.32% 11.37% 11.48% 11.11% 10.74% 10.37%

11.11% 10.74% 10.37%

115,963 115,963 115,963 115,963 160,788 150,153 139,596

96% 88% 81% 74% 68% 62% 57% 741,421.1

SHARES OUTSTANDING 1=Use beginning balance to calculate NII161,589 Front cover of latest filing 2=Use average balance to calculate NII (creates circularity)

$13.70 Share price as of valuation date

exercise price # in the $

$15 0 $17 0

<-- The 3 stage is common for bank DDM models, 1) Development: Reference the operating model, 2) Maturity: Mature ROE and RWA assumptions, and 3) Terminal: A final phase

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$18 0 $19 0 $21 0

0

$0 0

Dilutive impact of stock options 0

VLY diluted shares outstanding: 161,589

ROE10.0% 11.0% 12.0% $9.03 $9.61 $10.20 $9.52 $10.14 $10.77

$10.06 $10.74 $11.41 $10.66 $11.40 $12.14 $11.35 $12.15 $12.95

Share price sensitivity to cost of equity (vertical) and perpetuity growth rate (horizontal)Perpetuity growth rate

3.0% 4.0% 5.0% $10.95 $12.09 $13.68 $11.33 $12.63 $14.52 $11.75 $13.27 $15.54 $12.23 $14.01 $16.82 $12.77 $14.91 $18.47

Exit multiple1.75x 2.00x 2.25x

$12.02 $13.09 $14.15 $12.31 $13.42 $14.53 $12.62 $13.76 $14.91 $12.93 $14.12 $15.31 $13.26 $14.49 $15.72

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2018E12/31/2018

Maturity phase133,028 NI = Average Equity * ROE. Circularity created because NI affects equity, which in turn determines NI.

(7.3%)129,116 Forecast as the excess of available capital over a minimum capital base defined by the Tier I capital ratio

(7.5%)97.1%

1,473,182 133,028

(129,116)1,477,094 (317,891)176,313

0 1,335,516 Tier 1 capital sets the base floor for capital in this model. Dividends will be distributed until the tier I capital level reaches its minimum assumption.

9.0% Maturity phase formula "smooths" shift to the maturity phase assumption.

13,355,160 4.0% Maturity phase formula "smooths" shift to the maturity phase assumption.

10.00% 10.00% Maturity phase formula "smooths" shift to the maturity phase assumption.

129,116

52%

12=Use average balance to calculate NII (creates circularity)

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Tier 1 capital sets the base floor for capital in this model. Dividends will be distributed until the tier I capital level reaches its minimum assumption.

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VALLEY NATIONAL BANCORP RESIDUAL INCOME MODEL($ in thousands, except per share data)

RI GENERAL ASSUMPTIONSRI model type 3 stageValuation date 12/31/2010 <-- For simplicity of calculating present values, model assumes valuation date = last fiscal year end date. Analysts should adjust the present value calculations to handle other dates .

Cost of equity 9.0%

RI - MATURITY PHASE ASSUMPTIONSROE 9.0% <-- Should converge with cost of equity as company reaches maturity. When ROE is significantly higher than cost of equity at the maturity phase, analyst needs to justify or change

RWA growth 4.0% Capital ratio (Tier 1 capital / RWA) 10.0%

RI BUILDUP2006A 2007A 2008A 2009A

12/31/2006 12/31/2007 12/31/2008 12/31/2009Historicals

Net income to common 91,501 96,537 % growth 5.5%

Dividends 102,517 109,005 % growth 6.3% % payout 112.0% 112.9%

Total stockholder's equity - BOPPlus: Net income to commonLess: DividendsTotal stockholders' equity - EOP 1,252,854

Less: Goodwill (296,424)Plus: Junior subordinated debentures issued to capital trusts 176,313 Plus: Other 5,545 Tier 1 Capital - EOP 1,138,288

ROE (Net income to common / Shareholders' equity)Average RWA 10,698,195

% growthCapital ratio (Tier 1 capital / RWA) 10.64%

Minimum capital ratio

RI PV CALCS - DEVELOPMENT AND MATURITY PHASES

Residual Income

Discount factor (assumes midyear adjustment)PV of RI

TERMINAL VALUE (TV) SHARES OUTSTANDINGTerminal year net income (t+1) 133,382 Basic shares outstandingTerminal year RI 0 Current share priceCost of equity 9.03%Long term RI growth rate 0.00% OptionsTerminal value (TV) 0 # exercisable

PV of TV 0.0 Tranche 1 115

<-- The 3 stage is common for bank RI models, 1)

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Tranche 2 467 VALUATION Tranche 3 490 Book value of equity (last historical year) 1,295,205 Tranche 4 508 PV of RI 154,747 Tranche 5 1,145 PV of TV 0 Total options 2,724 Fair equity value of VLY 1,449,952 Implied P/BV 1.1x Treasury stock method Implied P/TBV 1.3x Option proceedsVLY value / share $8.97 Repurchased shares

Dilutive impact of stock options

VLY diluted shares outstanding:

DDM SENSITIVITY

Share price sensitivity to cost of equity (vertical) and ROE (horizontal)ROE

$8.97 7.0% 8.0% 9.0%

Cost of equity

10.0% $6.89 $7.46 $8.03 9.5% $7.25 $7.87 $8.48 9.0% $7.66 $8.32 $8.99 8.5% $8.11 $8.83 $9.55 8.0% $8.61 $9.39 $10.17

Share price sensitivity to cost of equity (vertical) and perpetuity growth rate (horizontal)Perpetuity growth rate

$8.97 (2.0%) (1.0%) 0.0%

Cost of equity

10.0% $8.99 $9.53 $10.21 9.5% $9.16 $9.75 $10.49 9.0% $9.33 $9.97 $10.80 8.5% $9.50 $10.21 $11.13 8.0% $9.68 $10.46 $11.50

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<-- For simplicity of calculating present values, model assumes valuation date = last fiscal year end date. Analysts should adjust the present value calculations to handle other dates .

<-- Should converge with cost of equity as company reaches maturity. When ROE is significantly higher than cost of equity at the maturity phase, analyst needs to justify or change

2010A 2011E 2012E 2013E 2014E 2015E 2016E 2017E12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017

Historicals Development phase (from op model) Maturity phase131,170 140,744 154,061 164,393 171,625 164,225 153,856 143,462

35.9% 7.3% 9.5% 6.7% 4.4% (4.3%) (6.3%) (6.8%)115,190 115,963 115,963 115,963 115,963 160,788 150,153 139,596

5.7% 0.7% 0.0% 0.0% 0.0% 38.7% (6.6%) (7.0%)87.8% 82.4% 75.3% 70.5% 67.6% 97.9% 97.6% 97.3%

1,252,854 1,295,205 1,319,986 1,358,083 1,406,513 1,462,175 1,465,613 1,469,316 131,170 140,744 154,061 164,393 171,625 164,225 153,856 143,462

(115,190) (115,963) (115,963) (115,963) (115,963) (160,788) (150,153) (139,596)1,295,205 1,319,986 1,358,083 1,406,513 1,462,175 1,465,613 1,469,316 1,473,182 (317,891) (317,891) (317,891) (317,891) (317,891) (317,891) (317,891) (317,891)176,313 176,313 176,313 176,313 176,313 176,313 176,313 176,313 (10,299) 0 0 0 0 0 0 0

1,143,328 1,178,408 1,216,505 1,264,935 1,320,597 1,324,035 1,327,738 1,331,604

10.3% 10.8% 11.5% 11.9% 12.0% 11.2% 10.5% 9.8% 10,450,896 10,400,193 10,749,346 11,120,491 11,505,333 11,919,007 12,363,625 12,841,500

(2.3%) (0.5%) 3.4% 3.5% 3.5% 3.6% 3.7% 3.9% 10.94% 11.33% 11.32% 11.37% 11.48% 11.11% 10.74% 10.37%

11.11% 10.74% 10.37%

22,668 33,146 39,572 42,104 32,036 21,344 10,608

96% 88% 81% 74% 68% 62% 57% 154,747.4

1=Use beginning balance to calculate NIISHARES OUTSTANDING 2=Use average balance to calculate NII (creates circularity)

161,589 Front cover of latest filing

$13.70 Share price as of valuation date

exercise price # in the $

$15 0

<-- The 3 stage is common for bank RI models, 1) Development: Reference the operating model, 2) Maturity: Mature ROE and RWA assumptions, and 3) Terminal: A final phase

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$17 0 $18 0 $19 0 $21 0

0

$0 0

Dilutive impact of stock options 0

VLY diluted shares outstanding: 161,589

ROE10.0% 11.0% 12.0% $8.60 $9.17 $9.74 $9.10 $9.71 $10.32 $9.65 $10.31 $10.97

$10.26 $10.98 $11.70 $10.95 $11.73 $12.51

Share price sensitivity to cost of equity (vertical) and perpetuity growth rate (horizontal)Perpetuity growth rate

1.0% 2.0% 3.0% $11.07 $12.23 $13.85 $11.47 $12.79 $14.71 $11.90 $13.45 $15.76 $12.39 $14.21 $17.07 $12.95 $15.13 $18.77

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2018E12/31/2018

Maturity phase133,028 NI = Average Equity * ROE. Circularity created because NI affects equity, which in turn determines NI.

(7.3%)129,116 Forecast as the excess of available capital over a minimum capital base defined by the Tier I capital ratio

(7.5%)97.1%

1,473,182 133,028

(129,116)1,477,094 (317,891)176,313

0 1,335,516 Tier 1 capital sets the base floor for capital in this model. Dividends will be distributed until the tier I capital level reaches its minimum assumption.

9.0% Maturity phase formula "smooths" shift to the maturity phase assumption.

13,355,160 4.0% Maturity phase formula "smooths" shift to the maturity phase assumption.

10.00% 10.00% Maturity phase formula "smooths" shift to the maturity phase assumption.

(177)

52%

12=Use average balance to calculate NII (creates circularity)

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Tier 1 capital sets the base floor for capital in this model. Dividends will be distributed until the tier I capital level reaches its minimum assumption.

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VALLEY NATIONAL BANCORP COST OF EQUITY($ in thousands, except per share data)

Date10-Year US Treasury (Risk-Free Rate): 3.50% 3/1/2011Market risk premium 7.00% 3/1/2011Beta 0.79 3/1/2011Cost of equity (using VLY's historical beta) 9.03%

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SourceBloombergMorningstar - Ibbotson and Sinquefield YearbookBloomberg

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Building a football fieldLow Average High Low

52 week high/low $12.01 $13.60 $15.19 $12.01 DDM - 7%-12% ROE $8.02 $9.72 $11.41 $8.02 DDM - 8%-10% Cost of equity $8.45 $9.50 $10.55 $8.45 DDM - 1-2.25x exit P/B multiple $9.18 $12.04 $14.91 $9.18 RI - 8-10% cost of equity $8.03 $9.10 $10.17 $8.03 RI - (2%) to 2% perpetuity growth $9.33 $12.54 $15.76 $9.33 Trading comparables - P/BV $13.12 $14.84 $16.56 $13.12

52 week high/low DDM - 7%-12% ROE

DDM - 8%-10% Cost of equity

DDM - 1-2.25x exit P/B multiple

RI - 8-10% cost of equity

RI - (2%) to 2% perpetuity

growth

Trading com-parables - P/BV

$5.00

$7.00

$9.00

$11.00

$13.00

$15.00

$17.00

$19.00 VLY Football Field

Page 46: Sample Bank Modeling Template

0-50th perc50-100th percentile$1.59 $1.59 $1.70 $1.70 $1.05 $1.05 $2.87 $2.87 $1.07 $1.07 $3.22 $3.22 $1.72 $1.72

52 week high/low DDM - 7%-12% ROE

DDM - 8%-10% Cost of equity

DDM - 1-2.25x exit P/B multiple

RI - 8-10% cost of equity

RI - (2%) to 2% perpetuity

growth

Trading com-parables - P/BV

$5.00

$7.00

$9.00

$11.00

$13.00

$15.00

$17.00

$19.00 VLY Football Field

CommentsThe football field is a valuation matrix that identifies a value range across multiple valuation methods. In addition to the RI and DDM methods, we also include a 52 week trading high and low range, as well as a peer-group derived valuation using an LTM P/B range.

To create a football field, we reference the valuation ranges from the appropriate areas of the model and calculate an average valuation for each valuation method.

Next, we lay out the ranges in a way that will be Excel chart friendly: Starting with the low valuation as a baseline, we calculate two percentiles:0-50% and 50-100%, representing the tails around the average value.

We can now insert a stacked column bar chart. Remove the fill from the low valuation stack and you have a football field.

Page 47: Sample Bank Modeling Template

CommentsThe football field is a valuation matrix that identifies a value range across multiple valuation methods. In addition to the RI and DDM methods, we also include a 52 week trading high and low range, as well as a peer-group derived valuation using an LTM P/B range.

To create a football field, we reference the valuation ranges from the appropriate areas of the model and calculate an average valuation for each valuation method.

Next, we lay out the ranges in a way that will be Excel chart friendly: Starting with the low valuation as a baseline, we calculate two percentiles:0-50% and 50-100%, representing the tails around the average value.

We can now insert a stacked column bar chart. Remove the fill from the low valuation stack and you have a football field.