REGULATORY AND CAPITAL REQUIREMENTS (Note 17)

Valley’s primary source of cash is dividends from the Bank. Valley National Bank, a national banking association, is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval. In addition, the dividends declared cannot be in excess of the amount which would cause the subsidiary bank to fall below the minimum required for capital adequacy purposes.

Valley and Valley National Bank are subject to the regulatory capital requirements administered by the Federal Reserve Bank and the OCC. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct significant impact on Valley’s consolidated financial statements. Under capital adequacy guidelines Valley and Valley National Bank must meet specific capital guidelines that involve quantitative measures of Valley’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require Valley and Valley National Bank to maintain minimum amounts and ratios of common equity Tier 1 capital, total and Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets, as defined in the regulations.

Effective January 1, 2015, Valley implemented the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). Basel III final rules require a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5 percent, Tier 1 capital to risk-weighted assets of 6.0 percent, ratio of total capital to risk-weighted assets of 8.0 percent, and minimum leverage ratio of 4.0 percent. The new rule includes a capital conservation buffer that is added to the minimum requirements for capital adequacy purposes. The capital conservation buffer was subject to a three-year phase-in period that started on January 1, 2016, at 0.625 percent of risk-weighted assets and increased each subsequent year by 0.625 percent until reaching its final level of 2.5 percent when fully phased-in on January 1, 2019. As of December 31, 2018 and 2017, Valley and Valley National Bank exceeded all capital adequacy requirements with the capital conservation buffer required to be phased in at these dates under the Basel III Capital Rules (see table below).

The following table presents Valley’s and Valley National Bank’s actual capital positions and ratios under the Basel III risk-based capital guidelines at December 31, 2018 and 2017:



	Actual				Minimum Capital Requirements				To Be Well Capitalized Under Prompt Corrective Action Provision
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	($ in thousands)
As of December 31, 2018
Total Risk-based Capital
Valley	$	2,786,971	11.34	%	$	2,426,975	9.875	%	N/A		N/A
Valley National Bank	2,698,654		10.99		2,424,059		9.875		$	2,454,743	10.00	%
Common Equity Tier 1 Capital
Valley	2,071,871		8.43		1,566,781		6.375		N/A		N/A
Valley National Bank	2,442,359		9.95		1,564,899		6.375		1,595,583		6.50
Tier 1 Risk-based Capital
Valley	2,286,676		9.30		1,935,435		7.875		N/A		N/A
Valley National Bank	2,442,359		9.95		1,933,110		7.875		1,963,794		8.00
Tier 1 Leverage Capital
Valley	2,286,676		7.57		1,208,882		4.00		N/A		N/A
Valley National Bank	2,442,359		8.09		1,207,039		4.00		1,508,798		5.00

As of December 31, 2017
Total Risk-based Capital
Valley	$	2,258,044	12.61	%	$	1,656,575	9.250	%	N/A		N/A
Valley National Bank	2,185,967		12.23		1,653,088		9.250		$	1,787,122	10.00	%
Common Equity Tier 1 Capital
Valley	1,651,849		9.22		1,029,763		5.750		N/A		N/A
Valley National Bank	1,961,316		10.97		1,027,595		5.750		1,161,629		6.50
Tier 1 Risk-based Capital
Valley	1,864,279		10.41		1,298,397		7.250		N/A		N/A
Valley National Bank	1,961,316		10.97		1,295,663		7.250		1,429,698		8.00
Tier 1 Leverage Capital
Valley	1,864,279		8.03		928,484		4.00		N/A		N/A
Valley National Bank	1,961,316		8.47		926,459		4.00		1,158,074		5.00