The following MD&A should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. The words "Valley," "the Company," "we," "our" and "us" refer to Valley National Bancorp and its wholly owned subsidiaries, unless we indicate otherwise.

The MD&A contains supplemental financial information, described in the sections that follow, which has been determined by methods other than U.S. generally accepted accounting principles ("GAAP") that management uses in its analysis of our performance. Management believes these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance, our business and performance trends and facilitates comparisons with the performance of others in the financial services industry. These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with U.S. GAAP.

Cautionary Statement Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q, both in the MD&A and elsewhere, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management's confidence and strategies and management's expectations about new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as "expect," "anticipate," "look," "view," "opportunities," "allow," "continues," "reflects," "believe," "may," "should," "will," "estimates" or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to those risk factors disclosed in Valley's Annual Report on Form 10-K for the year ended December 31, 2008 and Part II Item 1A of this report. We assume no obligation for updating any such forward-looking statement at any time.

Critical Accounting Policies and Estimates

Our accounting and reporting policies conform, in all material respects, to U.S. GAAP. In preparing the consolidated financial statements, management has made estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of condition and results of operations for the periods indicated. Actual results could differ significantly from those estimates.

Valley's accounting policies are fundamental to understanding management's discussion and analysis of its financial condition and results of operations. Our significant accounting policies are presented in Note 1 to the consolidated financial statements included in Valley's Annual Report on Form 10-K for the year ended December 31, 2008. We identified our policies on the allowance for loan losses, security valuations, goodwill and other intangible assets, and income taxes to be critical because management has to make subjective and/or complex judgments about matters that are inherently uncertain and could be most subject to revision as new information becomes available. Management has reviewed the application of these policies with the Audit and Risk Committee of Valley's Board of Directors.

The judgments used by management in applying the critical accounting policies discussed below may be affected by a further and prolonged deterioration in the economic environment, which may result in changes to future financial results. Specifically, subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for loan losses in future periods, and the inability to collect on outstanding loans could result in increased loan losses. In addition, the valuation of certain securities in our investment portfolio could be negatively impacted by illiquidity or dislocation in marketplaces resulting in significantly depressed market prices thus leading to further impairment losses.

Allowance for Loan Losses. The allowance for loan losses represents management's estimate of probable loan losses inherent in the loan portfolio and is the largest component of the allowance for credit losses which also includes management's estimated reserve for unfunded commercial letters of credit. Determining the

amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. Various banking regulators, as an integral part of their examination process, also review the allowance for loan losses. Such regulators may require, based on their judgments about information available to them at the time of their examination, that certain loan balances be charged off or require that adjustments be made to the allowance for loan losses when their credit evaluations differ from those of management. Additionally, the allowance for loan losses is determined, in part, by the composition and size of the loan portfolio which represents the largest asset type on the consolidated statement of financial condition.

The allowance for loan losses consists of four elements: (1) specific reserves for individually impaired credits, (2) reserves for classified, or higher risk rated loans, (3) reserves for non-classified loans based on historical loss factors, and (4) reserves based on general economic conditions and other qualitative risk factors both internal and external to Valley, including changes in loan portfolio volume, the composition and concentrations of credit, new market initiatives, and the impact of competition on loan structuring and pricing. Note 1 of the consolidated financial statements included in Valley's Annual Report on Form 10-K for the year ended December 31, 2008 describes the methodology used to determine the allowance for loan losses and a discussion of the factors driving changes in the amount of the allowance for loan losses is included in this MD&A.

Security Valuations. Management utilizes various inputs to determine the fair value of its investment portfolio. To the extent they exist, unadjusted quoted market prices in active markets (Level 1) or quoted prices on similar assets (Level 2) are utilized to determine the fair value of each investment in the portfolio. In the absence of quoted prices in active markets, valuation techniques are used to determine fair value of investments that require inputs that are both significant to the fair value measurement and unobservable (Level
3). Valuation techniques are based on various assumptions, including, but not limited to, cash flows, discount rates, rate of return, adjustments for nonperformance and liquidity, and liquidation values. A significant degree of judgment is involved in valuing investments using Level 3 inputs. The use of different assumptions could have a positive or negative effect on our consolidated financial condition or results of operations.

Management must periodically evaluate if unrealized losses (as determined based on the securities valuation methodologies discussed above) on individual securities classified as held to maturity or available for sale in the investment portfolio are considered to be other-than-temporary. The analysis of other-than-temporary impairment requires the use of various assumptions, including, but not limited to, the length of time an investment's book value is greater than fair value, the severity of the investment's decline, as well as any credit deterioration of the investment. If the decline in value of an equity investment security is deemed to be other-than-temporary, the investment is written down to fair value and a non-cash impairment charge is recognized in earnings in the period of such evaluation. For debt investment securities deemed to be other-than-temporarily impaired, the investment is written down by a charge to earnings for the impairment related to the estimated credit loss and the non-credit related impairment is recognized as a charge to other comprehensive income. See Notes 7 and 9 to the consolidated financial statements and the "Investment Securities Portfolio" section in this MD&A below for additional information.

Goodwill and Other Intangible Assets. Valley records all assets, liabilities, and non-controlling interests in the acquiree in purchase acquisitions, including goodwill and other intangible assets, at fair value as of the acquisition date as required by ASC Topic 805, "Business Combinations." Goodwill totaling $295.7 million at September 30, 2009 is not amortized but is subject to annual tests for impairment or more often if events or circumstances indicate it may be impaired. Other intangible assets are amortized over their estimated useful lives and are subject to impairment tests if events or circumstances indicate a possible inability to realize the carrying amount. The initial recording of goodwill and other intangible assets requires subjective judgments concerning estimates of the fair value of the acquired assets.

The goodwill impairment test is performed in two phases. The first step compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, an additional procedure must be performed. That additional procedure compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value.

Income Taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity's financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could impact our consolidated financial condition or results of operations.

In connection with determining our income tax provision, we maintain a reserve related to certain tax positions and strategies that management believes contain an element of uncertainty. Periodically, we evaluate each of our tax positions and strategies to determine whether the reserve continues to be appropriate. Notes 1 and 14 to the consolidated financial statements in Valley's Annual Report on Form 10-K for the year ended December 31, 2008, and the "Income Taxes" section below include additional discussion on the accounting for income taxes.

Executive Summary

Net income for the third quarter of 2009 was $31.6 million, or $0.18 per diluted common share, compared to $3.6 million, or $0.03 per diluted common share, for the same period of 2008. The increase in net income was largely due to (i) a $64.8 million decrease in net impairment losses on securities mainly due to a $65.5 million loss on Fannie Mae and Freddie Mac perpetual preferred securities during the third quarter of 2008 resulting from the government's decision to place these issuers into conservatorship, partially offset by (ii) a $18.2 million increase in net trading losses which includes a $2.8 million non-cash charge related to the change in the fair value of our junior subordinated debentures carried at fair value in the third quarter of 2009 compared to a non-cash gain of $20.9 million on such debentures for the same period of 2008,
(iii) a $5.9 million increase in the provision of credit losses due to higher net charge-offs and loan deterioration resulting from the economic recession, and (iv) a $15.1 million increase in income taxes mainly caused by the tax benefit realized for net impairment losses on perpetual preferred securities in the third quarter of 2008. Accrued preferred dividends and accretion of the discount on Valley's preferred stock reduced diluted earnings per common share by $0.04 for the three months ended September 30, 2009.

Our credit quality performance ratios for the third quarter of 2009 deteriorated slightly as compared to the second quarter of 2009, reflecting the negative impact of the current economic recession. Mindful of the poor operating environment and the higher delinquency rates reported throughout the industry, management believes our loan portfolio's performance remains good. Total loans past due in excess of 30 days increased 0.11 percent to 1.60 percent of our total loan portfolio of $9.5 billion as of September 30, 2009 compared to 1.49 percent of total loans at June 30, 2009. Our non-accrual loans increased $16.3 million to $74.0 million, or 0.78 percent of total loans at September 30, 2009 as compared to $57.7 million, or 0.60 percent of total loans at June 30, 2009. The increase in non-accrual loans was mainly due to three construction loans and two commercial real estate loans totaling $14.4 million and an increase in non-performing residential mortgage loans. In general, we believe most of our non-accrual loans are well secured and, ultimately, collectible. Our lending strategy is based on underwriting standards designed to maintain high credit quality; however, due to the potential for future credit deterioration caused by a prolonged recession, management cannot provide assurance that our loan portfolio will not continue to decline from the levels reported as of September 30, 2009. See "Non-performing Assets" section at page 61 for further analysis of our credit quality.

We loaned over $500 million in new credits during the third quarter of 2009 despite a decline of 4.5 percent on an annualized basis in our overall loan portfolio due, in part, to continued declines in our automobile portfolio caused by the lack of consumer demand and our strict underwriting standards, management's decision to sell most refinanced and new residential mortgage loan originations in the secondary market, and declines in commercial and industrial loan demand and line of credit usage, partially offset by an increase in commercial real estate loans as we continue to find quality lending opportunities made available by the tight credit markets. Our deposits increased $122.0 million, or 5.2 percent on an annualized basis during the third quarter of 2009 as compared to the linked quarter as we experienced growth in savings, NOW, and money market accounts and time deposits generated from de novo branch locations. Our deposit mix remained unchanged from the second quarter of 2009 as non-interest bearing deposits and low cost savings, NOW, and money market accounts were approximately 66 percent of our total deposits at September 30, 2009. However, our cost of funds continued to benefit from maturing higher cost time deposits and lower interest rates on new and renewed time deposits. Management actively manages interest rate risk on the balance sheet for the long-term and used much of its

excess liquidity from the reduction in the loan portfolio to offset maturing high cost funding sources. Management may also allow the size of the balance sheet to contract based on, among other things, the current level of interest rates, the sale of residential mortgage loans and the decline in the automobile portfolio, as well as our ability to attract and maintain quality loan relationships in the current economic recession.

Management continues to assess the expected impact of the recession on our operations and our ability to maintain a well-capitalized position. Based on such an assessment, in September 2009, we repurchased 125,000 shares of our Series A Fixed Rate Cumulative Perpetual Preferred Stock from the U.S. Department of the Treasury for an aggregate purchase price of $125.7 million (including accrued and unpaid dividends). Including our repurchase of 75,000 shares in June 2009, we have repurchased $200 million of the $300 million in senior preferred share issued to the Treasury under the Capital Purchase Program during November 2008. The September 2009 repurchase resulted in an accelerated accretion charge of $3 million to retained earnings in the third quarter of 2009 based on the difference between the par value of $125 million and the carrying value of $122 million. The reduction in our preferred shares should increase net income available to common stockholders in future periods as preferred dividends payable will decline. Management will continue to assess the changes in the economic environment, our credit risk, capital position, and other factors prior to any future redemption requests.

During the third quarter of 2009, we completed our previously announced "at-the-market" common equity offering, consisting of the sale of 5.67 million shares of newly issued common stock for net proceeds totaling $71.6 million. All share transactions under the program occurred during the third quarter of 2009, except for 43 thousand shares totaling $401 thousand in net proceeds during the second quarter of 2009. Net proceeds raised from the shares issued under the offering may be used to redeem additional amounts of our preferred stock held by the Treasury.

On September 29, 2009, the FDIC proposed a rule that would require insured institutions to prepay their estimated quarterly assessments through December 31, 2012 to strengthen the cash position of the Federal Deposit Insurance Fund. Once final, the rule would require the cash prepayment on December 30, 2009. Management believes the estimated cash prepayment totaling approximately $48.5 million will not have a significant impact on our future cash position or operations. The prepaid assessment will be reduced by our actual assessments as a charge to expense over the applicable assessment periods until the prepaid assessment is exhausted. FDIC insurance assessment rates have increased substantially in 2009 and we may have to pay significantly higher assessments in the future and potentially prepay such assessments.

We participate in the Federal Deposit Insurance Corporation's ("FDIC") Temporary Liquidity Guarantee Program, or TLG, for non-interest bearing transaction deposit accounts. Banks that participate in the TLG's non-interest bearing transaction account guarantee are required to pay the FDIC an annual assessment of 10 basis points on the amounts in such accounts above the amounts covered by FDIC deposit insurance. To the extent that these TLG assessments are insufficient to cover any loss or expenses arising from the TLG program, the FDIC is authorized to impose an emergency special assessment on all FDIC-insured depository institutions. The FDIC has authority to impose charges for the TLG program upon the holding companies of such depository institutions as well. The TLG was scheduled to end December 31, 2009, but the FDIC extended the program to June 30, 2010. In announcing the extension, the FDIC indicated that it will charge a higher guarantee fee to banks that elect to participate in the extension to reflect each bank's risk. Management expects to participate in the TLG program through the new June 30, 2010 expiration date and has estimated that the guarantee fee for this program will approximate $1 million in additional FDIC insurance assessments during the first half of 2010.

As previously disclosed in Part I, Items 1 and 1A of Valley's Annual Report on Form 10-K for the year ended December 31, 2008, we are subject to regulation by several government agencies, including Comptroller of the Currency ("OCC"), the Federal Reserve and the FDIC, as well as legislative changes. Recently Congressman Barney Frank, working with President Obama's administration has introduced legislation to deal with the resolution of institutions which fall within the category often known as too big to fail. While we do not fall within that category, the legislation seeks to impose the cost of such resolutions not only on such large institutions but on smaller institutions, such as ours, which have more than $10 billion in assets. We can provide no assurances as to whether or when this proposal will be enacted into legislation, and if adopted, what additional costs or assessments will be imposed on us, if any.

However, if enacted, this legislation could require us to change certain of our business practices, impose additional costs on us, and potentially put us at a competitive disadvantage to institutions which are smaller than we are.

For the three months ended September 30, 2009, we reported an annualized return on average shareholders' equity ("ROE") of 9.35 percent and an annualized return on average assets ("ROA") of 0.89 percent which includes intangible assets. Our annualized return on average tangible shareholders' equity ("ROATE") was 12.25 percent for the third quarter of 2009. The comparable ratios for the third quarter of 2008 were an annualized ROE of 1.28 percent, an annualized ROA of 0.10 percent, and an annualized ROATE of 1.80 percent. All of the above ratios were impacted by the change in fair value of our junior subordinated debentures carried at fair value and net impairment losses on securities. Net income included a non-cash charge of $2.8 million ($1.8 million after-taxes) for the third quarter of 2009 compared to a non-cash gain of $20.9 million ($13.6 million after-taxes) for the same period of 2008 due to the change in fair value of the debentures. Net impairment losses on securities totaled $743 thousand ($465 thousand after-taxes) and $65.5 million ($44.1 million after-taxes) for the three months ended September 30, 2009 and 2008, respectively.

ROATE, which is a non-GAAP measure, is computed by dividing net income by average shareholders' equity less average goodwill and average other intangible assets, as follows:

                                            Three Months Ended                    Nine Months Ended
                                              September 30,                         September 30,
                                         2009               2008               2009               2008
                                                                ($ in thousands)

Net income                            $    31,582        $     3,595        $    83,963        $    76,661


Average shareholders' equity            1,351,745          1,120,011          1,359,440          1,013,113
Less: Average goodwill and other
intangible assets                        (320,284 )         (322,685 )         (319,720 )         (242,964 )

Average tangible shareholders'
equity                                $ 1,031,461        $   797,326        $ 1,039,720        $   770,149


Annualized ROATE                            12.25 %             1.80 %            10.77 %            13.27 %

Management believes the ROATE measure provides information useful to management and investors in understanding our underlying operational performance, our business and performance trends and the measure facilitates comparisons with the performance of others in the financial services industry. This non-GAAP financial measure should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with U.S. GAAP.

Net Interest Income

Net interest income on a tax equivalent basis was $116.4 million for the third quarter of 2009, relatively unchanged from the same quarter of 2008. For the third quarter of 2009, a $13.6 million, or 43 basis point decline in funding costs on average interest bearing liabilities and a $330.6 million decrease in average interest bearing liabilities as compared to the third quarter of 2008 was offset by a $13.8 million or 45 basis point decline in the yield on average interest earning assets. Both the declines in cost and yield resulted mainly from a decrease in short-term interest rates as the average target federal funds rate decreased approximately 200 basis points for the third quarter of 2009 compared to the same period in 2008.

For the third quarter of 2009, average federal funds sold and other interest bearing deposits and average investment securities increased $275.5 million and $187.1 million, respectively, while average loans decreased $407.4 million as compared to the third quarter of 2008. Compared to the second quarter of 2009, average loans decreased by $188.9 million primarily due to decreases in the automobile, residential mortgage, commercial and industrial, and construction loans, partially offset by an increase in the commercial real estate loans during the three months ended September 30, 2009. Our automobile loan portfolio has declined for five consecutive quarters mainly due to low consumer demand for new and used vehicles, as well as Valley's move to further strengthen its auto loan underwriting standards in light of the weakened economy. The decline in the residential mortgage loan portfolio continued during the third quarter of 2009 as expected by management

based on our secondary market sales of most refinanced loans and new loan originations. The decline in commercial and industrial loans is mainly due to a slowdown in new commercial and industrial loan activity and a decrease in line of credit usage by customers caused by the economy. Construction loans decreased due to normal incremental paydowns on existing loans coupled with lower new loan volume due to the slowdown in the housing market. Commercial real estate loans continued to modestly increase quarter over quarter as we benefited from the dislocation in the credit markets for new loans with quality borrowers meeting our credit standards.

Average interest bearing liabilities for the quarter ended September 30, 2009 decreased $330.6 million, or 3.1 percent compared with the same quarter of 2008. Compared to the second quarter of 2009, average interest bearing liabilities decreased $88.9 million, or 0.8 percent for the three months ended September 30, 2009. Average total interest bearing deposits decreased $40.2 million, or 0.6 percent from the second quarter of 2009 mainly due to a decrease in higher cost average time deposits partially offset by an increase in lower cost average savings, NOW, and money market deposits. Average time deposits declined $300.4 million, or 8.8 percent during the third quarter of 2009 as compared to the second quarter of 2009 as management chose to be less competitive on interest rates to retain maturing certificates of deposit due to growth in the other deposit categories and less funding needs as loan volumes declined during the period. The increases in average non-interest bearing and average savings, NOW, and money market deposits were due, in part, to additional deposits generated from de novo branch locations put in service over the last twelve months.

Interest on loans, on a tax equivalent basis, decreased $1.9 million, or 1.3 . . .