REGULATORY AND CAPITAL REQUIREMENTS (Note 16)

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 Office of the Comptroller of the Currency of the United States ("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 total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets, as defined in the regulations. As of December 31, 2011, Valley exceeded all capital adequacy requirements to which it was subject.

At December 31, 2011, all of Valley National Bank's ratios were above the minimum levels required to be considered "well capitalized," under the regulatory framework for prompt corrective action, which require Tier 1 capital to risk adjusted assets of at least 6 percent, total risk based capital to risk adjusted assets of 10 percent and a minimum leverage ratio of 5 percent. To be categorized as well capitalized under the capital adequacy guidelines set by the federal regulators, Valley and Valley National Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below.

Valley's Tier 1 capital position included $176.3 million of its outstanding trust preferred securities issued by capital trusts as of December 31, 2011 and 2010. Valley does not consolidate its capital trusts based on U.S. GAAP. The junior subordinated debentures issued to the capital trusts were included in Valley's liabilities. See Note 12 for additional information on the debentures and the trust preferred securities.

Valley's and Valley National Bank's actual capital positions and ratios as of December 31, 2011 and 2010 are presented in the following table:


	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, 2011
Total Risk-based Capital
Valley	$	1,312,945		12.8	%	$	823,705		8.0	%	$	N/A		N/A	%
Valley National Bank		1,255,714		12.3			819,274		8.0			1,024,092		10.0
Tier 1 Risk-based Capital
Valley		1,124,833		10.9			411,853		4.0			N/A		N/A
Valley National Bank		1,067,602		10.4			409,637		4.0			614,455		6.0
Tier 1 Leverage Capital
Valley		1,124,833		8.1			557,210		4.0			N/A		N/A
Valley National Bank		1,067,602		7.7			555,785		4.0			694,731		5.0
As of December 31, 2010
Total Risk-based Capital
Valley	$	1,349,832		12.9	%	$	836,268		8.0	%	$	N/A		N/A	%
Valley National Bank		1,291,928		12.4			834,728		8.0			1,043,410		10.0
Tier 1 Risk-based Capital
Valley		1,143,328		10.9			418,134		4.0			N/A		N/A
Valley National Bank		1,085,424		10.4			417,364		4.0			626,046		6.0
Tier 1 Leverage Capital
Valley		1,143,328		8.3			550,665		4.0			N/A		N/A
Valley National Bank		1,085,424		7.9			549,860		4.0			687,325		5.0