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. Additionally, Valley's principal subsidiary, Valley National Bank, is commonly referred as the "Bank" in this MD&A.

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 (" U.S. 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 "should," "expect," "believe," "view," "opportunity," "allow," "continues," "reflects," "typically," "usually," "anticipate," or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties and our 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 in addition to those risk factors disclosed in Valley's Annual Report on Form 10-K for the year ended December 31, 2011 include, but are not limited to:

• A severe decline in the general economic conditions of New Jersey and the New York Metropolitan area;

• declines in value in our investment portfolio, including additional other-than-temporary impairment charges on our investment securities;

• unanticipated deterioration in our loan portfolio;

• Valley's inability to pay dividends at current levels, or at all, because of inadequate future earnings, regulatory restrictions or limitations, and changes in the composition of qualifying regulatory capital and minimum capital requirements (including those resulting from the U.S. implementation of Basel III requirements);

• higher than expected increases in our allowance for loan losses;

• higher than expected increases in loan losses or in the level of nonperforming loans;

• unexpected changes in interest rates;

• higher than expected tax rates, including increases resulting from changes in tax laws, regulations and case law;

• an unexpected decline in real estate values within our market areas;

• charges against earnings related to the change in fair value of our junior subordinated debentures;

• higher than expected FDIC insurance assessments;

• the failure of other financial institutions with whom we have trading, clearing, counterparty and other financial relationships;

• lack of liquidity to fund our various cash obligations;

• unanticipated reduction in our deposit base;

• potential acquisitions that may disrupt our business;

• government intervention in the U.S. financial system and the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve;

• legislative and regulatory actions (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulations) subject us to additional regulatory oversight which may result in increased compliance costs and/or require us to change our business model;

• changes in accounting policies or accounting standards;

• our internal controls and procedures may not be adequate to prevent losses;

• claims and litigation pertaining to fiduciary responsibility, environmental laws and other matters;

• the inability to realize expected cost savings and revenue synergies from the merger of State Bancorp with Valley in the amounts or in the timeframe anticipated;

• inability to retain State Bancorp's customers and employees;

• lower than expected cash flows from purchased credit impaired loans; and

• other unexpected material adverse changes in our operations or earnings.

We assume no obligation for updating such forward-looking statements at any time.

Critical Accounting Policies and 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, 2011. We identified our policies on the allowance for loan losses, security valuations and impairments, 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 because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Management has reviewed the application of these policies with the Audit Committee of Valley's Board of Directors. Our critical accounting policies are described in detail in

New Authoritative Accounting Guidance

See Note 4 to the consolidated financial statements for a description of new authoritative accounting guidance including the respective dates of adoption and effects on results of operations and financial condition.

Executive Summary

Company Overview. At June 30, 2012, Valley had consolidated total assets of $16.0 billion, total net loans of $11.0 billion, total deposits of $11.0 billion and total shareholders' equity of $1.5 billion. Our commercial bank operations include branch office locations in northern and central New Jersey and the New York City Boroughs of Manhattan, Brooklyn and Queens, as well as Long Island, New York. Of our current 211 branch network, 79 percent and 21 percent of the branches are located in New Jersey and New York, respectively. We have grown both in asset size and locations significantly over the past several years primarily through both bank acquisitions and de novo branch expansion, including our most recent bank transaction discussed below. See Item 1 of Valley's Annual Report on Form 10-K for the year ended December 31, 2011 for more details regarding our past merger activity.

Acquisition of State Bancorp, Inc. ("State Bancorp"). On January 1, 2012, Valley acquired State Bancorp, the holding company for State Bank of Long Island, a commercial bank with $1.7 billion in assets, $1.1 billion in loans and $1.4 billion in deposits, after purchase accounting adjustments, and 16 branches in Nassau, Suffolk, Queens, and Manhattan. We believe our expansion into this attractive area of the Long Island market has already provided additional lending, retail, and wealth management service opportunities to further strengthen our New York Metropolitan operations and will continue to grow Valley brand recognition in these markets. During February 2012, we integrated State Bancorp's systems into Valley with minimal disruption to our customer service and operations. Our ability to put this integration quickly behind us and our management team's clear focus on this new market opportunity should help us effectively compete and benefit from this transaction during the remainder of 2012. Additionally, we diligently look for future opportunities to support our new efforts in the Long Island market both through gradual de novo branch expansion and other potential bank acquisitions.

The shareholders of State Bancorp received a fixed one- for- one exchange ratio for Valley National Bancorp common stock. The total consideration for the acquisition totaled $208.4 million (approximately 17.7 million shares of Valley common stock). The transaction generated approximately $102.0 million in goodwill and $8.1 million in core deposit

intangible assets subject to amortization. As a condition to the closing of the merger, State Bancorp redeemed $36.8 million of its outstanding Fixed Rate Cumulative Series A Preferred Stock from the U.S. Treasury. The stock redemption was funded by a $37.0 million short-term loan from Valley to State Bancorp. The loan, included in Valley's consolidated financial statements at December 31, 2011, was subsequently eliminated as of the acquisition date and is no longer outstanding. See additional details in Note 3 to the consolidated financial statements.

Quarterly Results. Net income for the second quarter of 2012 was $32.8 million, or $0.17 per diluted common share, compared to $36.9 million, or $0.21 per diluted common share for the second quarter of 2011. The $4.1 million decrease in quarterly net income as compared to the same quarter one year ago was largely due to: (i) a $9.5 million decline in non-interest income mainly caused by a $15.3 million decrease in net gains on securities transactions as we sold $157.2 million more investment securities classified as available for sale during the second quarter of 2011 as compared to the same period in 2012, partially offset by an increase in net trading gains related to mark to market gains on our junior subordinated debentures carried at fair value, higher net gains on sales of loans and the recognition of other income related to certain infrequent FDIC-assisted transaction items (discussed in more detail in the "Other Income" section below), and (ii) a $8.4 million increase in non-interest expense primarily due to increases in salary and employee benefits resulting from the acquisition of State Bancorp, higher medical health insurance expense and stock award compensation, partially offset by (iii) a 10.2 percent decrease in our effective tax rate largely due to an incremental tax provision recorded in the second quarter of 2011 caused by a change in state tax law, and (iv) a $3.0 million increase in net interest income after provision for credit losses attributable to lower funding costs and loan growth (both through acquisition and organic production) partly offset by declining taxable investment security income due to lower rates and average balances. See the "Net Interest Income," "Other Income," "Other Expense" and "Loan Portfolio" sections below for more details on the items above impacting our second quarter of 2012 results.

Economic Overview and Indicators. During the second quarter of 2012, the U.S. economy has shown discouraging signs of weakness through many of the common macroeconomic indicators used to assess its health, particularly job growth. Many questions about the recovery remain as economic growth has slowed and is deemed likely to remain slow based on some of the most recent comments from the Federal Reserve. Additionally, fear of the so-called fiscal cliff (i.e., the combination of scheduled tax increases and cuts in federal spending) set for the end of 2012 combined with the economic challenges of the European Union may tip the U.S. economy back into a recession and negatively impact the job market. However, many economists feel that the U.S. recovery will continue at a moderate pace despite these on-going recessionary risks.

The U.S. housing market showed some positive signs during the quarter, but remains choppy due to a weak job market and slower economic growth. The Commerce Department reported in July that housing starts rose 6.9 percent in June 2012 to a seasonally adjusted annual rate of 760,000 units, the highest rate since October 2008. However, permits for new construction, which are considered a gauge of future demand, declined 3.7 percent in June to an annual rate of 755,000 and new home sales declined in June after sales jumped to a two-year high in May. Additionally, the National Association of Realtors recently reported that existing home sales fell 5.4 percent in June 2012 as compared to the prior linked month of May, but that inventory (including distressed properties) continues to shrink and home prices are rising as a result. Despite the declines in June from a strong May, many economists expect housing will add to economic growth this year for the first time since 2005. We are optimistic that the housing trends will remain relatively positive going forward due, in part, to the Fed's sustained support of the historical low level of mortgage interest rates, but we remain cautious as the percentage of consumers with new foreclosures and bankruptcies in New Jersey and New York also remain at historically high levels as last reported during the second quarter of 2012.

Unemployment, one of the primary economic deterrents to our ability to sustain loan growth and asset quality, has ranged from a low of 8.2 percent in December 2011 to a high of 8.9 percent in March 2012 for the New York City Metropolitan area over the last twelve month period and was 8.8 percent for June 2012. From a national perspective, the latest U.S. unemployment figure of 8.3 percent in July 2012 increased slightly from 8.1 percent reported in April 2012 (which was the lowest level of unemployment reported since early 2009). Monthly job growth figures remained disappointing during the second quarter, and despite higher than expected job growth during July 2012, the Federal Reserve has expressed a view that the unemployment rate may not improve further in 2012. The Fed has maintained support of a target range of zero to 0.25 percent for the federal funds rates in the first half of 2012 and has indicated that the anticipated economic conditions will likely warrant these exceptionally low levels for the federal funds rate through and potentially beyond the end of 2014. We believe a low-rate, high unemployment environment, which is reflective of our current operating environment, will continue to challenge our business operations and results in many ways during the remainder of 2012 and the foreseeable future, as highlighted throughout the remaining MD&A discussion below.

The following economic indicators are just a few of many factors that may be used to assess the market conditions in our primary markets of northern and central New Jersey and the New York City metropolitan area, Long Island, New York. Generally, market conditions have improved from one year ago, however, as outlined above, economic uncertainty, persistent unemployment, as well as high vacancy rates may continue to put pressure on the performance of some borrowers and the level of new loan demand within our area.

                                                                    For the Month Ended
                                      June 30,        March 31,       December 31,       September 30,       June 30,
Key Economic Indicators:                2012            2012              2011               2011              2011
Unemployment rate:
U.S.                                     8.20%           8.20%              8.50%               9.00%           9.10%
New York Metro Region*                   8.80%           8.90%              8.20%               8.60%           8.60%
New Jersey                               9.60%           9.00%              9.10%               9.40%           9.40%
New York                                 8.90%           8.50%              8.20%               8.30%           8.20%




                                                                                  Three Months Ended
                                               June 30,         March 31,         December 31,        September 30,         June 30,
                                                 2012             2012                2011                2011                2011
                                                                                   ($ in millions)
Personal income:
New Jersey                                         NA         $   475,702         $   474,531         $   470,405         $   467,296
New York                                           NA         $   999,909         $   993,931         $   985,581         $   979,226
New consumer bankruptcies:
New Jersey                                         NA                 0.15%               0.16%               0.15%               0.17%
New York                                           NA                 0.08%               0.10%               0.09%               0.12%
Change in home prices:
U.S.                                               NA                -2.00%              -3.80%               0.10%               4.00%
New York Metro Region*                             NA                -1.78%              -3.70%               0.72%               0.01%
New consumer foreclosures:
New Jersey                                         NA                 0.08%               0.04%               0.07%               0.06%
New York                                           NA                 0.06%               0.05%               0.06%               0.06%
Rental vacancy rates:
New Jersey                                       10.50%              11.60%              10.80%               9.50%               7.90%
New York                                          5.60%               6.30%               6.30%               7.40%               6.40%

NA - not available

* As reported by the Bureau of Labor Statistics for the NY-NJ-PA Metropolitan Statistical Area.

Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, Federal Reserve Bank of New York, S&P Indices, and the U.S. Census Bureau.

Loans. Overall, our total loan portfolio grew by 9.8 percent on an annualized basis during the second quarter of 2012. Total non-covered loans (i.e., loans which are not subject to our loss-sharing agreements with the FDIC) increased by $300.0 million to $11.2 billion at June 30, 2012 from March 31, 2012. Our residential mortgage and commercial real estate (excluding construction) loans experienced solid organic growth of $213.9 million and $93.5 million, or 33.8 percent and 8.6 percent, respectively, on an annualized basis, during the second quarter of 2012 as compared to March 31, 2012. Total covered loans (i.e., loans subject to our loss-sharing agreements with the FDIC) decreased to $226.5 million, or 2.0 percent of our total loans, at June 30, 2012 as compared to $252.2 million at March 31, 2012 mainly due to normal payment activity.

During the six months ended June 30, 2012, we have originated over $1.0 billion in new and refinanced residential mortgage loans and retained approximately 81 percent of these loans in our portfolio. The mortgage volume has increased approximately 82 percent compared to the same six month period of 2011 and is largely the result of the historically low interest rate environment, the success of our low-fixed price residential mortgage refinance programs and our strong emphasis in the New York Metro area supported by our expanded network of 44 full service branches in the New York boroughs and Long Island after the acquisition of State Bancorp on January 1, 2012. We believe the residential refinance activity should continue at or above the first half of 2012 levels through the remainder of 2012 assuming that market conditions do not adversely change. Mindful of the increased interest rate risk associated with extending the duration of our overall earning assets, we intend to increase the amount of mortgage loan originations for sale into the secondary market during the second half of 2012. We believe this decision should materially increase gains on the sale of loans recognized in our non-interest income during the third quarter of 2012, while allowing us to maintain the appropriate mix of earning assets on our balance sheet. See further details on our loan activities, including the covered loan portfolio, under the "Loan Portfolio" section below.

Asset Quality. Given the slow economic recovery, elevated unemployment levels, higher delinquency rates reported throughout the banking industry, and the declines in property values we believe our loan portfolio's credit performance remained at an acceptable level at June 30, 2012. Our past due loans and non-accrual loans, discussed further below, exclude purchased credit-impaired ("PCI") loans. PCI loans include loans that were acquired as part of FDIC-assisted transactions in 2010 ("covered loans") and all loans acquired in the merger with State Bancorp on January 1, 2012 and loans purchased by Valley in March 2012. Under U.S. GAAP, the PCI loans (acquired at a discount that is due, in part, to credit quality) are accounted for on a pool basis and are not subject to delinquency classification in the same manner as loans originated by Valley.

Total loans (excluding PCI loans) past due in excess of 30 days were $157.8 million, or 1.38 percent of our total loan portfolio of $11.4 billion as of June 30, 2012 compared to $169.9 million, or 1.52 percent of total loans of $11.1 billion at March 31, 2012. The decrease of $12.1 million in delinquent loan balances was mainly due to declines in construction and residential mortgage loans within the 30 to 89 days past due loan category, partially offset by higher commercial real estate loans within the same past due category. Non-accrual loans increased $1.0 million to $126.2 million at June 30, 2012 as compared to $125.2 million at March 31, 2012 mainly due to a new non-accrual commercial real estate loan with a recorded investment totaling $11.8 million, partially offset by the migration of two commercial loans secured by aircraft totaling $9.2 million prior to transfer to other repossessed assets during the second quarter of 2012. Based upon our quarterly review of the portfolio, we do not believe the increase in the past due commercial real estate loans represents a material trend, however, there were two new potential problems loans accounting for approximately $6.5 million of the $11.5 million commercial real estate loans within the 30 to 89 days past due category at June 30, 2012. Commercial real estate loans delinquent 30 days or more totaled $73.3 million, or 1.65 percent of the $4.4 billion in total non-covered commercial real estate loans at June 30, 2012.

Although the timing of collection is uncertain, 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 and we remain optimistic regarding the overall future performance of our loan portfolio. However, due to the potential for future credit deterioration caused by the unpredictable direction of the economy and high levels of unemployment, management cannot provide assurance that our non-performing assets will not increase from the levels reported as of June 30, 2012. See the "Non-performing Assets" section below for further discussion and analysis of our credit quality.

Deposits and Other Borrowings. Total deposits decreased $85.5 million to approximately $10.9 billion at June 30, 2012 from March 31, 2012 mostly due to lower time deposit balances. Valley's time deposits totaling $2.6 billion at June 30, 2012 declined $62.5 million as compared to March 31, 2012 largely due to the continued run-off of maturing higher cost certificates of deposit and the low level of interest rates currently offered on such products. During the second quarter of 2012, savings, NOW and money market accounts also declined by $21.7 million due to lower municipal deposit balances, partially offset by growth in our retail deposits which continue to benefit from the migration of some maturing certificate of deposits to these account types. Valley's non-interest bearing deposits totaling $3.2 billion at June 30, 2012 remained relatively unchanged as compared to March 31, 2012.

Over the last three consecutive quarters, we actively reduced the costs associated with our borrowings. In June 2012, we modified the terms of $100 million in FHLB advances within our long-term borrowings. The modifications resulted

in a reduction of the interest rate on these funds, an extension of their maturity dates to 10 years from the date of modification, and a conversion of the debt to non-callable for period of 4 years. We similarly modified the terms of $150 million and $435 million in FHLB advances and other borrowings during the three months ended March 31, 2012 and December 31, 2011, respectively. After the modifications, the weighted average interest rate on these borrowings declined by 0.82 percent to 3.91 percent. There were no gains, losses, penalties or fees incurred in the modification transactions. Additionally, Valley redeemed $10.3 million of the principal face amount of its outstanding junior subordinated debentures issued to VNB Capital Trust I and $10.0 million of the face value of the related trust preferred securities during January 2012.

Selected Performance Indictors. The following table presents our annualized performance ratios for the periods indicated:

                                                 Three Months Ended June 30,             Six Months Ended June 30,
                                                  2012                 2011               2012               2011
Return on average assets                              0.83%               1.03%              0.86%              1.03%
Return on average shareholders' equity               8.75               11.24               9.05              11.24
Return on average tangible shareholders'
equity ("ROATE")                                    12.49               15.22              12.95              15.24

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                           Six Months Ended
                                                          June 30,                                    June 30,
                                                 2012                  2011                  2012                  2011
                                                                            ($ in thousands)
Net income                                  $      32,820         $      36,894         $      67,351         $      73,479

Average shareholders' equity                    1,499,516             1,312,501             1,488,825             1,307,708
. . .