UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1993
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 0-11179
VALLEY NATIONAL BANCORP
(Exact name of registrant as specified in its charter)
New Jersey 22-2477875
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1445 Valley Road, Wayne, New Jersey 07470
(Address of principal executive offices)
Registrant's telephone number including area code (201) 305-8800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock (based upon the closing price
of these shares as quoted by NYSE) held by non-affiliates of the registrant
was approximately $649,811,000 on February 18, 1994.
There were 24,427,274 shares of Common Stock outstanding at February 18, 1994.
VALLEY NATIONAL BANCORP
DOCUMENTS INCORPORATED BY REFERENCE
PARTS I AND II: Certain portions of the Annual Report to Shareholders for
the year ended December 31, 1993 as referenced on the pages
listed below.
PART III: Certain portions of the Proxy Statement for the Annual
Meeting of Shareholders to be held March 22, 1994 as
referenced on the pages listed below.
PART IV: Certain exhibits from the registrant's FORM 10-K Annual
Report for the fiscal periods ended December 31, 1990,
December 31, 1991 and December 31, 1992.
Page(s) in
Form 10-K Heading(s) in Annual Report to Annual
Item No. Shareholders for Year Ended December 31, 1993 Report*
1. Business Analysis of Average Assets, Liabilities, and
Shareholders' Equity and Net Interest Earnings
on a Tax Equivalent Basis...........................22
Change in Interest Income and Expense on a Tax
Equivalent Basis....................................23
Maturity Distribution of Investment Securities......24
Selected Consolidated Financial Data - Financial
Ratios..............................................45
2. Properties Commitments and Contingencies.......................40-41
5. Market for the Dividends...................................41
Registrant's Selected Consolidated Financial Data......45
Common Equity Price Range of Common Stock................45
and Related
Stockholder
Matters
6. Selected Selected Consolidated Financial Data........45
Financial Data
7. Management's Management's Discussion and Analysis of Financial
Discussion and Condition and Results of Operations.......17-25
Analysis of
Financial
Condition and
Results of
Operations
8. Financial Consolidated Statements of Financial Condition...26
Statements and Consolidated Statements of Income................27
Supplementary Consolidated Statements of Changes in Shareholders'
Data Equity...........................28
Consolidated Statements of Cash Flows...........29
Notes to Consolidated Financial Statements.....30-43
Independent Auditors' Report....................44
*Page numbers refer to pages in non-edgar version of Annual Report and Proxy
Statement.
Heading(s) in Proxy Statement for Annual Pages(s)in
Form 10-K Meeting of Shareholders to be held Proxy
Item No. March 22, 1994 Statement*
10. Directors and Election of Directors..................... 2-4
Executive
Officers of the
Registrant
11. Executive Executive Compensation................... 6-11
Compensation Compensation Committee Report........... 11-13
12. Security Stock Ownership of Management and Principal
Ownership of Shareholders........................... 4-6
Certain
Beneficial
Owners and
Management
13. Certain Certain Transactions with Management.......14
Relationships
and Related
Transactions
*Page numbers refer to pages in non-edgar version of Annual Report and Proxy
Statement.
TABLE OF CONTENTS
Item Page
PART I. 1. Business
a) General Description of Business........................ 5 - 7
b) Statistical Information and Analysis................... 8 - 12
2.Properties............................................. 12
3.Legal Proceeding....................................... 12
4.Submission of Matters to a Vote of Security Holders.... 12
PART II. 5. Market for the Registrant's Common Equity and Related
Shareholder Matters.......................................13
6.Selected Financial Data..................................... 13
7.Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................13
8.Financial Statements and Supplementary Data................. 13
9.Changes in or Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 13
PART III. 10. Directors and Executive Officers of the Registrant. 13 - 14
11.Executive Compensation............................ 14
12.Security Ownership of Certain Beneficial Owners and
Managers..................................................14
13.Certain Relationships and Related Transactions.............. 14
PART IV. 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................. 14 - 16
SIGNATURES........................................................ 17 - 18
*Page numbers correspond to non-edgar version of Form 10-K.
PART I
Item 1. BUSINESS
a) GENERAL DESCRIPTION OF BUSINESS
VALLEY NATIONAL BANCORP
Valley National Bancorp (Valley) is a bank holding company organized on
May 2, 1983, under the laws of the State of New Jersey and registered with
the Board of Governors of the Federal Reserve System under the Bank Holding
Company Act of 1956. Its principal business activities are restricted to
those permissible by Bank Holding Companies under the Bank
Act of 1956, as amended, and include the management and control of Valley
National Bank (VNB).
As of December 31, 1993, Valley's subsidiaries operated 59 full service
banking branches located throughout northern New Jersey.
RECENT DEVELOPMENTS
On June 18, 1993, Valley issued approximately 421,000 shares of its
common stock at a cost of $10,962,000 in exchange for approximately
661,000 shares of common stock of PeoplesBancorp ("Peoples") of
Fairfield, New Jersey, a New Jersey Corporation and a registered bank
holding company of Peoples Bank, National Association, a banking
association. The merger was accounted for under the purchase method of
accounting.
The acquisition of Peoples resulted in the following statement of condition
increases as of the acquisition date:
Investment securities.............................................$ 47,472,000
Loans, net of unearned income.....................................$138,459,000
Total deposits....................................................$204,825,000
SUBSIDIARIES
VNB, a wholly-owned subsidiary of Valley, is a national association
established in 1927 under the laws of the United States. VNB provides a full
range of commercial and retail bank services, including the acceptance of
demand, savings and time deposits; extension of
consumer, real estate, S.B.A. and other commercial credits; and offers full
personal and corporate trust services, as well as pension and other fiduciary
services. VNB operates 59 full service branch offices in five (5) New Jersey
Counties.
Valley Investment Corporation, a wholly-owned subsidiary of VNB, was
organized on December 27, 1984, under the laws of the State of Delaware. Its
business activities include holding, maintaining, and managing tangible
investment assets. These assets include a tax-exempt
money market fund, state and municipal bonds, U.S. Treasury Notes, U.S. Agency
Bonds,mortgage-backed securities and mortgages secured by real estate
situated outside of the State of Delaware.
VNB Mortgage Services, Inc., a wholly-owned subsidiary of VNB, was organized
on March 28,1989, under the laws of the State of New Jersey. Its primary
business activities include servicing residential mortgage loan portfolios for
VNB and various investors.
BNV Realty Incorporated, a wholly-owned subsidiary of VNB, was organized on
August 16, 1991, under the laws of the state of New Jersey. Its primary
business activities are limited to holding and disposing of real estate VNB
may acquire as other real estate owned.
VN Investment Inc., a wholly-owned subsidiary of VNB, was organized on
October 28, 1993,under the laws of the State of New Jersey. Its business
activities include holding,maintaining, and managing tangible investment
assets. These assets include U.S. Agency Bonds
and mortgage-backed securities.
Mayflower Financial Corporation ("Mayflower") is a savings and loan holding
company for Mayflower Savings Bank, S.L.A., (MSB) a New Jersey-chartered
stock savings bank, which operated two (2) full-service offices located in
Livingston, New Jersey. Mayflower was incorporated in April 1988, under the
laws of the State of Delaware, as a stock corporation,at the direction of
the Board of Directors of MSB for the purpose of becoming
company which would own all of the outstanding capital stock of MSB upon its
conversion from the mutual-to-stock form of organization.
MSB was organized in 1921 as a New Jersey chartered mutual savings and loan
association. MSB converted to the stock form of organization and sold all of
its outstanding capital stock to Mayflower in August 1988. Valley acquired
Mayflower and MSB as of December 31, 1990. As of
the close of business, January 31, 1993, Mayflower Financial Corporation
("Mayflower") and its wholly-owned savings and loan subsidiary, Mayflower
Savings Bank ("MSB") were merged into
Valley and VNB, respectively.
COMPETITION
Vigorous competition for loans and deposit accounts exists in all the major
areas where Valley, or any of its subsidiary companies are presently engaged
in business. Competition for banking services is based on price, product
type, service quality and convenience of
location. VNB and its subsidiaries compete with other commercial banks, other
financial institutions such as savings banks, savings and loan associations,
mortgage companies, leasing companies, finance companies and a variety of
financial service and advisory companies.
EMPLOYEES
At year-end 1993, VNB and its subsidiaries employed 1,081 full-time equivalent
persons.Management considers relations with employees to be satisfactory.
SUPERVISION AND REGULATION
Valley and VNB are subject to regulation and supervision by federal bank
regulatory agencies. Valley is regulated and examined by the Federal
Reserve Board and VNB is regulated and
examined by the Comptroller of the Currency. There are a variety of
statutory and regulatory restrictions governing the relations among
Valley and VNB.
The payment of dividends by VNB to Valley is restricted under the National Bank
Act. The approval of the Comptroller of the Currency is required if the
dividends for the year exceed the net profits, as defined in the Act, of
that year plus the retained net profits for the
preceding two years. In addition, a national bank's capital surplus must be
equal to or exceed the stated capital for its common stock, or else the bank
must make certain transfers from retained earnings to capital surplus.
The Banking Affiliates Act of 1982 severely restricts loans and extensions
of credit by VNB to Valley and its affiliates (except affiliates which are
banks). In general, such loans
must be secured by collateral having a market value ranging from 100% to 130%
of the loan, depending upon the type of collateral.
Furthermore, the aggregate of all loans from VNB to Valley and its affiliates in
the aggregate may not exceed 20% of VNB's capital stock and surplus and,
singly to Valley or any affiliate, may not exceed 10% of VNB's capital stock
and surplus. Similarly, the Banking Affiliates Act of 1982 also restricts
VNB in the purchase of securities issued by, the
acceptance as loan collateral of securities issued by, the purchase of assets
from, and the issuance of a guarantee or standby letter-of-credit on behalf of,
Valley or any of its affiliates.
Under the Bank Holding Company Act, Valley may not acquire directly or
indirectly more than
5% of the voting shares of, or substantially all of the assets of, any bank
without the prior
approval of the Federal Reserve Board. Valley cannot acquire any bank located
outside New
Jersey unless the law of such other state specifically permits the acquisition.
As of January 1, 1988, New Jersey law permits New Jersey banking organizations
to acquire or
be acquired by banking organizations in other states on a "reciprocal" basis
(i.e., provided
the other state's laws permit New Jersey banking organizations to acquire
banking
organizations in that state on substantially the same terms and conditions
applicable to
banking acquisitions solely within the state).
Generally, the Bank Holding Company Act limits the business of a bank holding
company and its
affiliates to banking, managing or controlling banks, and furnishing or
performing services
for banks controlled by the holding company. The major exception to this rule
is that a bank
holding company directly or through a subsidiary may engage in non-banking
activities which
the Federal Reserve Board has determined to be so closely related to banking or
managing or
controlling banks so as to be a proper incident thereto. The Federal Reserve
under its
Regulation "Y" has restricted such activities to things such as lease financing,
mortgage
banking, investment advice, certain data processing services and discount
brokerage services
and ownership of a savings and loan association.
The Federal Reserve Board, the Office of the Comptroller of the Currency ("OCC")
and the FDIC
have issued risk-based capital guidelines for U.S. banking organizations. The
objective of
these efforts was to provide a more uniform capital framework that is
sensitive to
differences in risk profiles among banking companies. Below is a list of such
requirements
and shows Valley and VNB's ratios as of December 31, 1993.
Valley regulatory VNB regulatory
capital capital Regulatory
($ in thousands) Amount Percent(1) Amount Percent(1) capital percent(2)
Risk based capital:
Tier-one capital $258,622 13.93% $231,709 12.57% 6.00%
Tier-one & Tier
two capital $281,918 15.18% $254,904 13.83% 10.00%
Tier-one leverage $260,269 7.62% $232,328 6.86% 3.00-5.00%
(1) Ratio of qualifying capital to consolidated total risk-adjusted assets.
(2) For qualification as a well-capitalized institution.
On August 9, 1989, the Financial Institutions Reform, Recovery and Enforcement
Act of 1989
("FIRREA") was enacted. FIRREA established new capital standards and enhanced
regulatory
oversight of the thrift industry. Under FIRREA, banks are now permitted to
acquire all
thrifts and may convert such acquired thrifts into commercial bank branches.
In such a
conversion the thrift may have to pay insurance fund exit and entrance fees to
the FDIC.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was
enacted in
December 1991. FDICIA identifies the following capital standard categories for
financial
institutions: well capitalized, adequately capitalized, undercapitalized,
significantly
undercapitalized and critically undercapitalized. FDICIA imposes progressively
more
restrictive constraints on operations, management and capital distributions
depending on the
category in which an institution is classified. Pursuant to FDICIA,
undercapitalized
institutions must submit recapitalization plans, and a company controlling a
failing
institution must guarantee such institutions's compliance with its plan.
FDICIA also
required the various regulatory agencies to prescribe certain non-capital
standards for
safety and soundness relating generally to operations and management, asset
quality and
executive compensation and permits regulatory action against a financial
institution that
does not meet such standards. The FDIC has adopted many of these regulations.
The deposits of VNB are insured up to applicable limits by the FDIC.
Accordingly, VNB is
subject to deposit insurance assessments to maintain the Bank Insurance Fund
(the "BIF") of
the FDIC. Pursuant to FDICIA, the FDIC established a risk-based insurance
assessment system.
This approach is designed to ensure that a banking institution's insurance
assessment is
based on three factors: the probability that the applicable insurance fund
will incur a loss
from the institution; the likely amount of the loss; and the revenue needs of
the insurance
fund.
Under the risk-based assessment system, each BIF member institution is assigned
to one of
nine assessment risk classifications based on its capital ratios and supervisory
evaluations.
The lowest risk institutions presently pay deposit insurance at a rate of .23%
of domestic
deposits while the highest risk institutions are assessed at the rate of .31% of
domestic
deposits. Each institution's classification under the system is reexamined
semiannually.
In addition, the FDIC is authorized to increase or decrease such rates on a
semiannual basis.
The Bank presently pays a premium of .23%.
b) STATISTICAL INFORMATION AND ANALYSIS
The following information is being presented pursuant to requirements of
SEC Guide 3,
"Statistical Disclosure by Bank Holding Companies".
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES
AND INTEREST
DIFFERENTIAL
A. AVERAGE BALANCE SHEETS - are incorporated by reference under the caption
"Analysis
of Average Assets, Liabilities and Shareholders' Equity and Net Interest
Earnings on
a Tax Equivalent Basis" on page 22 of the 1993 Annual Report to
Shareholders.
B. NET INTEREST EARNINGS AND INTEREST RATE ANALYSIS - are incorporated by
reference
under the caption "Analysis of Average Assets, Liabilities and
Shareholders' Equity
and Net Interest Earnings on a Tax Equivalent Basis" on page 22 of the
1993 Annual
Report to Shareholders.
C. ANALYSIS OF NET INTEREST EARNINGS, VOLUME AND RATE VARIANCE - are
incorporated by
reference under the caption "Change in Interest Income and Expense on a
Tax
Equivalent Basis" on page 23 of the 1993 Annual Report to
Shareholders.
II. INVESTMENT PORTFOLIO
A. BOOK VALUE - The following tables set forth the book value of Valley's
different
types of investment securities over the last three years:
INVESTMENT SECURITIES HELD TO MATURITY December 31
($ in thousands) 1993 1992 1991
Government agencies and corporations... $ 75,106 $ 118,778 $ 353,645
Obligations of state and political
subdivisions......................... 283,805 222,396 184,856
Mortgage-backed securities............. 579,839 744,625 667,364
Other securities....................... 1,243 1,954 10,223
INVESTMENT SECURITIES AVAILABLE FOR SALE December 31
($ in thousands)
1993 1992 1991
U.S. Treasury securities and other
government agencies and corporations....$ 184,019 $ 305,118 $ --
Mortgage-backed securities............... 256,417 24,783 --
Equity securities...................... 1,046 871 --
B. MATURITIES AND AVERAGE WEIGHTED YIELDS - are incorporated by reference under
the
caption "Maturity Distribution of Investment Securities" on page 24 of the
1993
Annual Report to Shareholders.
C. SECURITIES OF A SINGLE ISSUER EXCEEDING TEN PERCENT OF SHAREHOLDERS'
EQUITY - As of
December 31, 1993, there were no securities, in the name of any one
issuer, exceeding
10% of shareholders' equity, except for securities issued by the United
States and
its political subdivisions and agencies.
III. LOAN PORTFOLIO
A. TYPES OF LOANS - The following table sets forth Valley's different types
of loans
over the past five years:
($ in thousands) 1993 1992 1991 1990 1989
Commercial, financial and
agricultural.............. $209,657 $ 218,789 $ 251,781 $ 320,778 $ 314,323
Real estate - construction.. 63,096 58,077 76,327 90,333 101,299
Real estate - commercial....387,503 306,167 290,038 262,848 262,970
Real estate - residential...597,423 508,308 373,884 368,676 269,620
Loans to individuals........528,616 428,828 389,293 410,443 404,684
1,786,295 1,520,169 1,381,323 1,453,078 1,352,896
Loans held for sale......... 16,905 -- -- -- --
Less: Unearned income...... (1,200) (226) (987) (1,339) (812)
Loans, net of unearned
income.............. 1,802,000 1,519,943 1,380,336 1,451,739 1,352,084
Less: Allowance for
possible loan losses. (35,205) (28,772) (21,937) (15,921) (8,925)
$1,766,795 $1,491,171 $1,358,399 $1,435,818 $1,343,159
Efforts are made to maintain a diversified portfolio as to type
of borrower and loan to
guard against a downward turn in any one economic sector.
B. MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES - The
following
table sets forth Valley's commercial loans and real estate construction
loans as of
December 31, 1993:
1 Yr. Over 1 Over
($ in thousands) or less to 5 Yrs. 5 Yrs. Total
Commercial, financial &
agricultural-fixed rate....... $ 3,911 $ 27,545 $ 13,438 $ 44,894
Commercial, financial &
agricultural-adjustable rate.. 64,054 32,422 68,287 164,763
Real estate construction -
fixed rate.................... -- 194 -- 194
Real estate construction -
adjustable rate............... 35 884 21,665 5,353 62,902
The majority of payments due after 1 year represent loans with floating
interest rates.
Prior to maturity of each loan, Valley generally conducts a review which
normally includes an analysis of the borrower's financial condition and, if
applicable, a
review of the adequacy of collateral. A rollover of the loan at maturity may
require a principal paydown.
C. RISK ELEMENTS
1.NON ACCRUAL, PAST DUE AND RESTRUCTURED LOANS - The following table sets
forth Valley's problem loans for each of the past five years:
($ in thousands) 1993 1992 1991 1990 1989
Loans on non-accrual basis...$ 18,535 $ 21,371 $ 25,837 $ 19,713 $ 2,414
Loans past due in excess of
90 days and still accruing. 8,498 11,096 10,506 7,640 6,205
$ 27,033 $ 32,467 $ 36,343 $ 27,353 $ 8,619
The amount of interest income that would have been recorded on non-accrual
loans in 1993 had payments remained in accordance with the original
contractual terms approximated $2,158,000, while the actual amount of
interest income recorded on these
types of assets in 1993 totalled $439,000, resulting in lost interest
income of $1,719,000.
Loans are generally placed on a non-accrual status when they become past due in
excess of 90 days as to payment of principal or interest. Exceptions may be
made if
the loan is sufficiently collaterized and in the process of collection.
Additionally, loans may be transferred to non-accrual before they are past due
more
than 90 days if, in management's judgment, the ultimate collectiblity of the
interest
is doubtful. A loan may only be restored to an accruing basis when it again
becomes
well secured and in the process of collection and all past due amounts have been
collected. Generally, all accrued but unpaid interest at the date a loan is
placed on a non-accrual status is reversed against current earnings unless
the aggregate amount of the principal outstanding and accrued interest on the
loan is sufficiently supported by the value of the underlying
collateral. Subsequent payments received
on non-accrual loans are applied as a reduction of principal amounts
outstanding.
2. POTENTIAL PROBLEM LOANS - Although substantially all risk elements at
December 31, 1993 have been disclosed in the categories presented above,
Management believes that the current economic conditions may affect the
ability of certain borrowers to comply with the contractual repayment terms
on certain real estate and commercial loans. As part of the analysis of
the loan portfolio by
management, it has been determined that there are approximately $46.8 million in
potential problem loans at December 31, 1993 which have not been classified as
non-accrual, past due or restructured. Potential problem loans are defined as
performing loans for which management believes that the borrower's ability to
repay the loan may be impaired. Of this total $5.3 million of loans were
acquired in the Peoples merger. $38.0 million of these loans are considered to
be adequately collaterized and supported by personal guarantees. Approximately
$3.1 million has been provided for in the allowance for loan losses for these
potential problem loans. There can be no assurance that Valley has identified
all of its problem loans. At December 31, 1992, Valley had identified
approximately $30.7 million of problems loans.
3. FOREIGN OUTSTANDINGS - None.
4. LOAN CONCENTRATIONS - There were no loan concentrations at December 31, 1993
other than those disclosed in section III A. above. Valley's lending activities
are primarily concentrated within the northern section of New Jersey. For
additional information, see Loan Portfolio on page 25 of the 1993 Annual Report
to Shareholders.
D. OTHER INTEREST BEARING ASSETS - None.
IV.SUMMARY OF LOAN LOSS EXPERIENCE - The following table sets forth the
relationship amongloans, loans charged-off and loan recoveries,
the provision for loan losses and the
allowance for loan losses for the past five years:
<TABLE>
($ in thousands) Years Ended December 31,
1993 1992 1991 1990
1989
<C> <C> <C> <C>
<C>
Average loans outstanding,..... $1,665,545 $1,441,320 $1,405,446 $1,347,475
$1,256,571
Beginning balance - Allowance
for loan losses.............. $ 28,772 $ 21,937 $ 15,921 $ 8,925
$ 8,339
Balance from acquisition....... 4,466 -- -- 355
--
Loans charged-off:
Commercial................... 1,430 5,751 3,001 3,396
686
Construction................. 441 813 300 400
--
Mortgage-Commercial.......... 784 -- -- --
--
Mortgage-Residential......... 191 79 105 4
4
Installment.................. 2,496 3,676 4,052 2,507
1,429
5,342 10,319 7,458 6,307
2,119
Charge-off loans recovered:
Commercial................... 438 238 511 171
244
Construction................. -- -- -- --
--
Mortgage-Commercial.......... -- -- -- --
--
Mortgage-Residential......... 1 -- -- --
--
Installment.................. 870 916 963 552
436
1,309 1,154 1,474 723
680
Net charge-offs................ 4,033 9,165 5,984 5,584
1,439
Provision charged to
operations................... 6,000 16,000 12,000 12,225
2,025
Ending Balance - Allowance
for loan losses.............. $ 35,205 $ 28,772 $ 21,937 $ 15,921
$ 8,925
Ratio of net charge offs
during the period to average
loans outstanding during the
period....................... .24% .64% .43% .41%
.11%
</TABLE>
The allowance for possible loan losses is maintained at a level necessary to
absorb potential loan losses and other credit risk related charge-offs.
It is the result of an analysis which relates outstanding balances to
expected reserve levels required to
absorb future credit losses. Current economic problems are addressed
through management's assessment of anticipated changes in the regional
economic climate, changes in composition and volume of the loan portfolio
and variances in levels of classified loans, non-performing assets and
other past due amounts. Additional factors
include consideration of exposure to loss including size of credit,
existence and
nature of collateral, credit record, profitability and general economic
conditions.
The following table summarizes the allocation of the allowance for loan
losses to specific loan categories for the past five years:
($ in thousands) Years Ended December 31,
1993 1992 1991
Percent Percent Pecent
of Loans of Loans of Loans
Category Category Category
Allowance to Total Allowance to Total Allowance to Total
Allocation Loans Allocation Loans Allocation Loans
Loan category:
Commercial, financial
and agricultural......
$ 10,352 16.9% $ 8,364 14.3% $ 9,850 18.1%
Real estate.............
6,312 47.6% 5,054 57.4% 4,681 53.6%
Consumer................
6,562 35.5% 4,916 28.3% 3,967 28.3%
Unallocated...............
11,979 N/A 10,438 N/A 3,439 N/A
$ 35,205 100.0% $ 28,772 100.0% $ 21,937 100.0%
1990 1989
Percent Percent
of Loan of Loan
Category Category
Allowance to Total Allowance to Total
Allocation Loans Allocation Loans
Loan category:
Commercial, financial
and agricultural......$ 7,791 22.1% $ 5,015 23.2%
Real estate............. 3,679 49.6% 793 46.9%
Consumer................ 2,749 28.3% 1,715 29.9%
Unallocated............... 1,702 N/A 1,402 N/A
$ 15,921 100.0% $ 8,925 100.0%
For additional information, see Asset Quality and Risk Elements on
page 20 of the 1993
Annual Report to Shareholders.
Net charge-offs decreased during 1993 as a result of improved current
economic
conditions. The amount of anticipated charge-offs for 1994 is estimated
to be
consistent with 1993.
V. DEPOSITS - The classification of average deposits is incorporated by
reference under
the caption "Analysis of Average Assets, Liabilities and Shareholders'
Equity and Net
Interest Earnings on a Tax Equivalent Basis" on page 22 of the 1993
Annual Report to
Shareholders.
The following table lists, by maturity, all certificates of deposit of $100,000
and over at December 31, 1993. These certificates of deposit are generated
primarily from core deposit customers and are not brokered funds.
($ in thousands)
Less than three months................................ $ 74,986
Three to six months................................... 21,708
Six to twelve months.................................. 16,083
More than twelve months............................... 22,821
VI.RETURN ON EQUITY AND ASSETS - The key ratios including return on equity
and assets are
incorporated by reference under the caption "Selected Financial Data"
on page 45 of the
1993 Annual Report to Shareholders. The following table presents the
ratio of average
" on page 45 of the
1993 Annual Report to Shareholders. The following table presents the
ratio of average
equity to assets of Valley for each of the past three years.
1993 1992 1991
Average shareholders' equity as a
% of average total assets.......... 7.46% 6.97% 8.28%
VII. SHORT TERM BORROWINGS - Not applicable
Item 2. Properties
At present Valley owns no real property, but utilizes the offices and space
provided by VNB at 615 Main Avenue, Passaic, New Jersey and 1445 Valley
Road, Wayne, New Jersey.
VNB operates from its administrative headquarters and three other locations, 59
branch offices and two warehouses. VNB owns the warehouses and 28 banking
offices, including its main office and leases 31 branch offices,
including the administrative
headquarters. During 1993 VNB acquired a 62,000 square foot office
building adjacent
to its administrative headquarters in Wayne, New Jersey. As space
becomes available,
VNB will begin using the building, as early as 1994, to consolidate
sections of its operations.
OWNED PROPERTIES:
County Square Feet
Passaic 154,500
Bergen 94,260
Essex 67,959
Hudson 23,870
Morris --
340,589
LEASED PROPERTIES:
County Square Feet
Passaic 90,435
Bergen 23,090
Essex 29,595
Hudson 2,520
Morris 10,800
156,440
Item 3. Legal Proceedings
There were no material pending legal proceedings to which Valley, the subsidiary
banks or companies were a party, other than ordinary routine litigations
incidental to business and which had no material effect on the presentation
of the financial statements contained in this report.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters Market information is incorporated by reference under
the caption "Price Range of
Common Stock" on page 45 of the 1993 Annual Report to Shareholders.
Supervisory regulations regarding the maximum amount of cash
dividends that VNB may declare annually are covered under the
caption "Dividend Restrictions" on page 41 of the 1993 Annual Report to
Shareholders.
Cash dividends declared during the two year period ended December 31, 1993 are
incorporated by reference under the caption "Consolidated Quarterly Financial
Data" on page 42 of the 1993 Annual Report to Shareholders.
Valley had approximately 4,406 shareholders of record at February 18, 1994.
Valley's Board of Directors continues to believe that cash dividends are an
important component of shareholder value and that if the current level of
performance and capital strength continue, Valley expects to be able to continue
its current dividend policy of a quarterly distribution of earnings to its
shareholders.
Item 6. Selected Financial Data
Selected Financial Data for the past five years is incorporated by reference
under the caption "Selected Consolidated Financial Data", on
page 45 of the 1993 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - is incorporated by reference under the
caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations", reported
on pages 17 through 25 of the 1993 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements, notes to consolidated
financial statements,
and Independent Auditors' Report thereon are incorporated by
reference on pages 26
through 44 of the 1993 Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There was neither a change in accountants nor disagreement with
accountants on accounting and financial disclosure during 1993.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding directors of the registrant are incorporated
by reference to the sections included under the primary heading
" Proposal 1 -Election of Directors" on pages 2, 3 and 4 of the Proxy
Statement for the Annual Meeting of Shareholders to be held on
March 22, 1994 except for certain information on Executive Officers of
the Registrant which is included in Part I of this report.
Executive Officers of the Registrant
AGE AT IN OFFICE
NAMES 12/31/93 SINCE OFFICE
Gerald H. Lipkin 52 1989 Chairman of the Board and
Chief Executive Officer
Peter Southway 59 1987 President and
Chief Operating Officer
Sam P. Pinyuh 61 1990 Executive Vice President
Peter Crocitto 36 1992 First Senior Vice President
Robert E. Farrell 47 1992 First Senior Vice President
Richard P. Garber 50 1992 First Senior Vice President
Robert Mulligan 46 1993First Senior Vice President
Peter John Southway 33 1992 First Senior Vice President
Jack M. Blackin 51 1993 Senior Vice President
Ernest Bozzo 50 1992 Senior Vice President
Stephen P. Cosgrove 49 1993 Senior Vice President
Alan D. Eskow 45 1993 Senior Vice President
Robert Farnon 55 1992 Senior Vice President
John Harris 41 1993 Senior Vice President
William O'B Kelly 63 1977 Senior Vice President
Lucinda P. Long 47 1992 Senior Vice President
Garret G. Nieuwenhuis 53 1983 Senior Vice President
John H. Prol 56 1992 Senior Vice President
Peter G. Verbout 50 1992 Senior Vice President
All officers serve at the pleasure of the Board of Directors.
Item 11. Executive Compensation - is incorporated by reference to the
sections included under the primary headings "Executive Compensation" on
pages 6 through 11 and "Compensation Committee Report" on pages 11 through
13 of the Proxy Statement for the Annual Meeting of Shareholders to be held
March 22, 1994.
Item 12. Security Ownership of Certain Beneficial Owners and Management - is
incorporated by reference under the primary heading "Stock Ownership of
Management and Principal Shareholders" on pages 4 through 6 of the Proxy
Statement for the Annual Meeting
of Shareholders to be held March 22, 1994.
Item 13. Certain Relationships and Related Transactions - is incorporated by
reference under the secondary heading "Certain Transactions with
Management" on page 14 of the Proxy Statement for the Annual
Meeting of Shareholders to be held March 22, 1994.
The percentage of loans to directors, executive officers, and their
affiliates as a percentage of shareholders' equity was 7.75
percent at December 31, 1993.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements:
Consolidated Statements of Financial Condition -
December 31, 1993 and 1992
Consolidated Statements of Income - for years ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Changes in Shareholders' Equity -
for years ended December 1993, 1992 and 1991
Consolidated Statements of Cash Flows -
for years ended December 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Independent Auditors' Report
These statements are incorporated herein by reference to the Registrant's
Annual Report to Shareholders for the year ended December 31, 1993, as noted
on page 2 of this Form 10-K Annual Report.
2. Financial Statement Schedules:
All schedules are omitted because they are either inapplicable or not
required, or because the required information is included in the Consolidated
Financial Statements or notes thereto.
3. Exhibits (numbered in accordance with Item 601 of Regulation S-K):
(3) Articles of incorporation and bylaws:
A.Restated Certificate of Incorporation of the registrant dated March 22,
1994.
B.By-Laws of the Registrant adopted as of March 14, 1989 and amended
March 19, 1991.
(10) Material Contracts:
*** A."Employment Agreements" dated June 6, 1986 between Valley, VNB and
Gerald H. Lipkin and Sam P. Pinyuh.
**** B."The Valley National Bancorp Long-term Stock Incentive Plan" dated
January 18, 1994.
* C.Warrant Agreement by and between Valley National Bancorp and Valley
National Bank, Trust Department governing the terms of 450,000 warrants
to purchase Valley National Bancorp common stock dated as of December
31, 1990.
** D.Amendment to "Employee Agreements" between Valley, VNB and Gerald H.
Lipkin and Sam P. Pinyuh dated December 10, 1991.
** E."Employee Agreement" dated December 10, 1991 between Valley, VNB and
Peter Southway.
** F."Severance Agreements" dated December 10, 1991 between Valley, VNB
and Gerald H. Lipkin, Peter Southway, and Sam P. Pinyuh.
* This document is incorporated herein by reference from the Registrant's
Form 10-K Annual Report for the fiscal period ending December 31, 1990.
** This document is incorporated herein by reference from the Registrant's
Form 10-K Annual Report for the fiscal period ending December 31, 1991.
*** This document is incorporated herein by reference from the Registrant's
Form 10-K Annual Report for the fiscal period ending December 31, 1992.
****This document is incorporated herein by reference from the Registrant's
Notice of Annual Meeting of Shareholders and Proxy dated March 1, 1994.
(13) 1993 Annual Report to Shareholders
(21) List of Subsidiaries:
(a) Subsidiary of Valley:
Percentage of Voting
Jurisdiction of Securities Owned by
Name Incorporation the Parent
Valley National Bank (VNB) United States 100%
(b) Subsidiaries of VNB:
Valley Investment Corp. Delaware 100%
VNB Mortgage Services, Inc. New Jersey 100%
BNV Realty Incorporated New Jersey 100%
VN Investment, Inc. New Jersey 100%
(22) Published Report Regarding Matters Submitted to Vote of Security Holders
Notice of Annual Meeting of Shareholders to be held Tuesday, March 22, 1994
Proxy Statement dated March 1, 1994
(23) Consents of Experts and Counsel
Consent of KPMG Peat Marwick dated March 22, 1994.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by Valley during the last quarter of
the period covered by this report.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
VALLEY NATIONAL BANCORP
By:/s/Gerald H. Lipkin
Gerald H. Lipkin, Chairman
of the Board and Chief
Executive Officer
Dated: March 22, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and
on the date indicated.
/s/Gerald H. Lipkin Chairman of the Board and March 22, 1994
GERALD H. LIPKIN Chief Executive Officer
and Director
/s/Peter Southway President and March 22, 1994
PETER SOUTHWAY Chief Operating Officer
(Principal Financial Officer)
and Director
/s/Alan D. Eskow Senior Vice President March 22, 1994
ALAN D. ESKOW Financial Administration
(Principal Accounting Officer)
/s/Pamela Bronander Director March 22, 1994
PAMELA BRONANDER
/s/Joseph Coccia, Jr. Director March 22, 1994
JOSEPH COCCIA, JR.
/s/Austin C. Drukker Director March 22, 1994
AUSTIN C. DRUKKER
/s/Thomas P. Infusino Director March 22, 1994
THOMAS P. INFUSINO
/s/Gerald Korde Director March 22, 1994
GERALD KORDE
/s/Robert L. Marcalus Director March 22, 1994
ROBERT L. MARCALUS
/s/Robert E. McEntee Director March 22, 1994
ROBERT E. McENTEE
/s/Sam P. Pinyuh Executive Vice President March 22, 1994
SAM P. PINYUH and Director
/s/Rubin Rabinowitz Director March 22, 1994
RUBIN RABINOWITZ
/s/Robert Rachesky Director March 22, 1994
ROBERT RACHESKY
/s/Barnett Rukin Director March 22, 1994
BARNETT RUKIN
/s/Richard F. Tice Director March 22, 1994
RICHARD F. TICE
/s/Leonard Vorcheimer Director March 22, 1994
LEONARD VORCHEIMER
/s/Joseph L. Vozza Director March 22, 1994
JOSEPH L. VOZZA
EXHIBIT (3) A
RESTATED
CERTIFICATE OF INCORPORATION
OF
VALLEY NATIONAL BANCORP
The Board of Directors of Valley National Bancorp pursuant to
the provisions of Section 14A:95-5(2) has adopted this Restated
Certificate of Incorporation to restate and integrate in a single
certificate the provisions of its certificate of incorporation as
heretofore amended. Valley National Bancorp does hereby certify as
follows:
ARTICLE I
CORPORATE NAME
The name of the Corporation is Valley National Bancorp
(hereinafter the "Corporation").
ARTICLE II
CURRENT REGISTERED OFFICE
AND CURRENT REGISTERED AGENT
The address of the Corporation's current registered office is
1445 Valley Road, Wayne, New Jersey. The name of the current
registered agent at that address is Gerald H. Lipkin.
ARTICLE III
NUMBER OF DIRECTORS
The number of directors shall be governed by the by-laws of
the Corporation.
ARTICLE IV
CORPORATE PURPOSE
The purpose for which the Corporation is organized is to
engage in any activities for which corporations may be organized
under the New Jersey Business Corporation Act, subject to any
restrictions which may be imposed from time to time by the laws of
the United States or the State of New Jersey with regard to the
activities of a bank holding company.
ARTICLE V
CAPITAL STOCK
The Corporation is authorized to issue 34,125,000 shares of
common stock without nominal or par value.
ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify its officers, directors,
employees and agents and former officers, directors, employees and
agents, and any other persons serving at the request of the
Corporation as an officer, director, employee or agent of another
corporation, association, partnership, joint venture, trust, or
other enterprise, against expenses (including attorney's fees,
judgments, fines, and amounts paid in settlement) incurred in
connection with any pending or threatened action, suit, or
proceeding, whether civil, criminal, administrative or
investigative, with respect to which such officer, director,
employee, agent or other person is a party, or is threatened to be
made a party, to the full extent permitted by the New Jersey
Business Corporation Act. The indemnification provided herein
shall not be deemed exclusive of any other right to which any
person seeking indemnification may be entitled under any by-law,
agreement, or vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to
action in another capacity, and shall inure to the benefit of the
heirs, executors, and the administrators of any such person. The
Corporation shall have the power to purchase and maintain insurance
on behalf of any persons enumerated above against any liability
asserted against him and incurred by him in any such capacity,
arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under
the provisions of this Article.
ARTICLE VII
LIMITATION OF LIABILITY
A director or officer of the Corporation shall not be
personally liable to the Corporation or its shareholders for
damages for breach of any duty owed to the Corporation or its
shareholders, except that such provision shall not relieve a
director or officer from liability for any breach of duty based
upon an act or omission (i) in breach of such person's duty of
loyalty to the Corporation or its shareholders, (ii) not in good
faith or involving a knowing violation of law, or (iii) resulting
in receipt by such person of an improper personal benefit. If the
New Jersey Business Corporation Act is amended after approval by
the shareholders of this provision to authorize corporate action
further eliminating or limiting the personal liability of directors
or officers, then the liability of a director and/or officer of the
Corporation shall be eliminated or limited to the fullest extent
permitted by the New Jersey Business Corporation Act as so amended.
Any repeal or modification of the foregoing paragraph by the
shareholders of the Corporation or otherwise shall not adversely
affect any right or protection of a director or officer of the
Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, Gerald H. Lipkin, Chairman and Chief
Executive Officer of the Valley National Bancorp, has executed this
Restated Certificate of Incorporation on behalf of Valley National
Bancorp on this 22nd day of March, 1994.
BY-LAWS EXHIBIT (3) B
OF
VALLEY NATIONAL BANCORP
ARTICLE 1
SHAREHOLDERS MEETINGS
1. Annual Meeting. The annual meeting of shareholders
for the election of directors and such other business as may
properly come before the meeting shall be held upon not less than
10 nor more than 60 days written notice of the date, time, place
and purposes of the meeting. The annual meeting shall be held at
3:00 p.m. on the fourth Tuesday of March each year at the principal
place of business of the Corporation, 505 Allwood Road, Clifton,
New Jersey, or at such other time and place as shall be fixed by
the Board of Directors.
2. Nominations for Director. Nominations for election
to the Board of Directors may be made by the Board of Directors or
upon 90 days advance written notice to the Board of Directors by
any shareholder of any outstanding class of stock of the
Corporation entitled to vote for the election of directors.
3. Special Meetings. A special meeting of shareholders
may be called for any purpose by the Chairman, Chief Executive
Officer, the President or a majority of the Board of Directors. A
special meeting shall be held upon not less than 10 nor more than
60 days written notice of the time, place and purpose of the
meeting.
4. Quorum. The holders of a majority of the out-
standing common stock represented in person or by proxy, shall
constitute a quorum at any meeting of shareholders. The majority
of the shareholders at a meeting, though less than a quorum, may
adjourn any meeting. The corporation shall not be required to give
notice of an adjourned meeting if the time and place of the meeting
are announced at the meeting from which an adjournment is taken and
the business transacted at the adjourned meeting is limited to that
which might have been transacted at the original meeting.
5. Shareholder Action. A majority of the votes cast
shall decide every question or matter submitted to the shareholders
at any meeting, unless otherwise provided by the New Jersey
Business Corporation Act, by the certificate of incorporation or by
these By-Laws.
6. Record Date. The Board of Directors shall fix a
record date for each meeting of shareholders and for other
corporate action for purposes of determining the shareholders of
the corporation who are entitled to: (i) notice of or to vote at
any meeting of shareholders; (ii) give a written consent to any
action without a meeting; or (iii) receive payment of any
dividend, distribution, or allotment of any right. The recorded
date may not be more than 60 days nor less than 10 days prior to
the shareholders meeting, or other corporate action or event to
which it relates.
7. Inspectors of Election. In advance of any
shareholders' meeting, the Board of Directors may appoint one or
more inspectors of election whose duty it shall be to determine the
shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, and the
validity and effect of proxies. The inspectors shall receive and
tabulate all votes, except voice votes, determine the results of
all such votes, including the election of directors, and do such
acts as are proper to conduct the election or vote, including
hearing and determining all challenges and questions arising in
connection with the right to vote. After any meeting, the
inspectors shall file with the Secretary of the meeting a
certificate under their hands, certifying the result of any vote or
election, and in the case of an election, the names of the
directors elected.
8. Proxies. Shareholders may vote at any meeting of
the shareholders by proxies duly authorized in writing.
ARTICLE II
DIRECTORS
1. Board of Directors. The Board of Directors (the
"Board"), shall have power to manage and administer the business
and affairs of the Corporation. Except as expressly limited by
these By-Laws, all powers of the Corporation shall be vested in and
may be exercised by the Board.
2. Number and Term of Office. The number of directors
shall be not less than five and not more than 25. The exact number
shall be determined by the Board. Directors shall be elected by
the shareholders at each annual meeting and shall hold office until
the next annual meeting of shareholders and until their successors
shall have been elected and qualified. The Board shall have the
right to increase the number of directors between annual meetings
and to fill vacancies so created and other vacancies occurring for
any reason.
3. Directors Emeritus and Honorary Directors. The
Board may grant the title of Director Emeritus or Honorary Director
to such former directors or other worthy individuals as it
determines who will receive any fees, entitlements, duties and
powers as may be conferred by the Board in its discretion.
4. Regular Meetings. A regular meeting of the Board
shall be held without notice immediately following and at the same
place as the annual shareholders' meeting for the purpose of
electing officers and conducting any other business as may come
before the meeting. The Board shall hold a regular meeting on the
third Tuesday of each month and, by resolution, may provide for
different or additional regular meetings. All regular meetings
shall be held in the Main Office of Valley National Bank, 615 Main
Avenue, Passaic, New Jersey, unless otherwise provided by the
Board. All regular meetings may be held without notice to any
director, except that a director not present at the time of the
adoption of a resolution setting forth different or additional
regular meeting dates shall be entitled to notice of those
meetings.
5. Special Meetings. A special meeting of the Board
may be called for any purpose at any time by the Chairman, Chief
Executive Officer, the President or by a majority of the directors.
The meeting shall be held upon not less than one day's notice if
given by telegraph or orally (either by telephone or in person), or
upon not less than three days notice if given by depositing the
notice in the United States mails, postage prepaid. The notice
shall specify the time and place of the meeting.
6. Action Without Meeting. The Board may act without
a meeting if, prior or subsequent to the action, each member of the
Board shall consent in writing to the action. The written consent
or consents shall be filed in the minute book.
7. Quorum. A majority of the directors shall
constitute a quorum at any meeting, except when otherwise provided
by the New Jersey Business Corporation Act. However, a smaller
number may adjourn any meeting and the meeting may be held, as
adjourned, without further notice. The act of the majority present
at a meeting at which a quorum is present shall be the act of the
Board, unless otherwise provided by the New Jersey Business
Corporation Act, the certificate of incorporation of these By-Laws.
8. Vacancies in Board of Directors. Any vacancy in the
Board, including a vacancy caused by an increase in the number of
directors, may be filled by the affirmative vote of a majority of
the remaining directors.
9. Telephone Participation in Board Meetings. One or
more directors may participate in a meeting of the Board, or of any
committee thereof, by means of a speaker or conference telephone or
similar communications equipment which permits all person
participating in the meeting to hear each other. Any director who
is unable to attend any meeting of the Board or any committee
thereof shall have the right, upon prior written request, to
participate in the meeting by such telephone hook-up if the means
are reasonably available at the place where the meeting is to be
held.
ARTICLE III
COMMITTEES OF THE BOARD
1. Executive Committee. The Board, by the vote of a
majority of the entire Board, annually shall appoint an Executive
Committee composed of at least five directors, among whom shall be
the Chairman and the Chief Executive Officer of the Corporation.
At least three members or a majority of the Committee shall not be
employees of the Corporation or any of its subsidiaries. The
Executive Committee shall have and may exercise all of the power of
the Board except as otherwise provided in the New Jersey Business
Corporation Act. As provided, in the New Jersey Business
Corporation Act, the Executive Committee shall not (i) make, alter
or repeal any of these By-Laws; (ii) elect or appoint any director,
or remove any officer or director; (iii) submit to shareholders any
action that requires shareholders' approval; and (iv) amend or
repeal any resolution theretofore adopted by the Board which by its
terms is amendable or repealable only by the Board. The Executive
Committee shall keep minutes of its meetings, and such minutes
shall be submitted to the next regular or special meeting of the
Board at which a quorum is present, and any action taken by the
Board with respect thereto shall be entered in the minutes of the
Board. A majority of the directors on the Executive Committee
shall constitute a quorum for the transaction of business. The
Chairman shall serve as chairman of the Executive Committee.
2. Nominating Committee. The Board, by the vote of a
majority of the entire Board, annually shall appoint a Nominating
Committee composed of at least five directors, one of whom shall be
the Chief Executive Officer of the Corporation, and the balance of
whose members shall not be employees of the Corporation or any of
its subsidiaries. The Nominating Committee shall identify and
select candidates for nomination to the Board and recommend those
selected to the entire Board for its approval.
3. Audit and Examining Committee. The Board, by the
vote of a majority of the entire Board, annually shall appoint an
Audit and Examining Committee composed of not less than three
directors who shall not be active officers or employees of the
Corporation. This Committee shall review significant audit and
accounting principles, policies and practices, meet with the
internal auditors of Valley National Bank (the "Bank"), review the
report of the annual directors' examination of the Bank conducted
by the outside auditors and review examination reports and other
reports of federal regulatory agencies.
4. Compensation Committee. The Board, by the vote of
a majority of the entire Board, annually shall appoint a
Compensation Committee composed of at least five directors, none of
whom shall be an officer of the Corporation. The Compensation
Committee shall approve the salaries of Senior Officers of the
Corporation and the Corporation's Profit Sharing, Pension, Long
Term Stock Incentive and other compensation plans.
5. Other Committees. The Board may appoint, from time
to time, from its own members, ad hoc and other committees of one
or more directors, for such purposes and with such powers as the
Board may determine.
ARTICLE IV
WAIVERS OF NOTICE
Any notice required by these By-Laws, by the certificate
of incorporation, or by the New Jersey Business Corporation Act may
be waived in writing by any person entitled to notice. The waiver,
or waivers, may be executed either before or after the event with
respect to which the notice is waived. Each director or
shareholder attending a meeting without protesting, prior to its
conclusion, the lack of proper notice shall be deemed conclusively
to have waived notice of the meeting.
ARTICLE V
OFFICERS
1. Election. At its regular meeting following the
annual meeting of shareholders, the Board shall elect a Chief
Executive Officer, a Chairman of the Board, a Vice Chairman, a
President, a Vice President, a Treasurer, a Secretary, and such
other officers as it shall deem necessary. One person may hold two
or more offices.
2. Chief Executive Officer. The Board of Directors
shall appoint one of its members to be Chief Executive Officer of
the Corporation to serve at the pleasure of the Board. The Chief
Executive Officer may also hold another office or offices in the
Corporation. He shall have general authority over all the business
and affairs of the Corporation.
3. Chairman of the Board. The Board shall appoint one
of its members to be Chairman of the Board to serve at the pleasure
of the Board. Such person shall preside at all meetings of the
Board and of the shareholders, and shall also have and may exercise
such further powers and duties as from time to time may be
conferred or assigned by the Board or by the Chief Executive
Officer. In the Chairman's absence, the Board will designate one
of the senior officers who are members of the Board to serve as
Chairman.
4. Vice Chairman. The Board of Directors shall appoint
one or more of its members to be Vice Chairman to serve at the
pleasure of the Board. Such person shall have such power and
duties as may be assigned by these By-Laws, by the Board of
Directors or by the Chief Executive Officer.
5. President. The Board shall appoint one of its
members to be President of the Corporation. The President shall
have and may exercise any and all powers and duties pertaining by
law, regulation, or practice to the office of president, or imposed
by these By-Laws. The President shall also have and may exercise
such further powers and duties as from time to time may be
conferred or assigned by the Board or the Chief Executive Officer.
6. Vice President. The Board may appoint one or more
Executive Vice Presidents, one or more Senior Vice Presidents, and
one or more Vice Presidents. Each Vice President shall perform the
duties and have the authority as from time to time may be delegated
to him by the Chief Executive Officer, by the Board of Directors,
or by these By-Laws.
7. Secretary. The Board shall appoint a Secretary who
shall be Secretary for meetings of the Board and of the
Corporation, and shall keep accurate minutes of those meetings.
The Secretary shall attend to the giving of all notices required by
these By-Laws and shall be custodian of the corporate seal,
records, documents and papers of the Corporation. The Secretary
also shall have and may exercise any and all other powers and
duties pertaining by law or practice to the office of Secretary,
and shall also perform such other duties as may be assigned from
time to time by the Board.
8. Treasurer. The Board shall appoint a Treasurer who
shall have custody of the funds and securities of the Corporation
and shall keep or cause to be kept regular books of the account for
the Corporation. The Treasurer shall perform such other duties and
possess such other powers as are incident to his office or as shall
be assigned to him by the President or the Board.
9. Other Officers. The Board may appoint one or more
Assistant Vice Presidents, one or more Assistant Secretaries, one
or more Assistant Treasurers, and such other officers as from time
to time may appear to the Board to be required or desirable to
transact the business of the Corporation. Such officers shall
respectively exercise such powers and perform such duties as
pertain to their several offices, or as may be conferred upon or
assigned to them by the Board, the Chief Executive Officer, or the
President.
10. Tenure of Office. The Chairman, the Chief Executive
Officer, any Vice Chairman, the President, the Secretary, the
Treasurer and all other officers shall hold office for the current
year for which the Board was elected, unless they shall resign,
become disqualified, or be removed. Any vacancy occurring in the
office of Chief Executive Officer, Chairman, Vice Chairman,
President, Secretary or Treasurer shall be filled promptly by the
Board.
ARTICLE VI
STOCK AND STOCK CERTIFICATES
1. Transfers. Shares of stock shall be transferable on
the books of the Corporation, and a transfer book shall be kept in
which all transfers of stock shall be recorded. Every person
becoming a shareholder by such transfer shall, in proportion to his
shares, succeed to all rights of the prior holder of such shares.
2. Share Certificates. The shares of the corporation
shall be represented by certificates signed by or in the name of
the Corporation, by the Chief Executive Officer, or the President
or a Vice President, and by the Secretary, Treasurer, Assistant
Secretary or Assistant Treasurer of the Corporation, and may be
sealed with the seal of the Corporation. Any signature and the
seal may be reproduced by facsimile. In case any officer who has
signed or whose facsimile signature has been placed upon such
certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer at the date of its issue.
ARTICLE VII
AMENDMENTS TO AND EFFECT OF BY-LAWS; FISCAL YEAR
1. Force and Effect of By-Laws. These By-Laws are
subject to the provisions of the New Jersey Business Act and the
Corporation's certificate of incorporation, as it may be amended
from time to time. If any provision in these By-Laws is
inconsistent with a provision of the Act or the certificate of
incorporation, the provisions of the Act or the certificate of
incorporation shall govern.
2. Amendments to By-Laws. These By-Laws may be
altered, amended, or repealed by the shareholders or by the Board.
Any By-Law adopted, amended, or repealed by the shareholders may be
amended or repealed by the Board, unless the resolution of the
shareholders adopting such By-Law expressly reserves to the
shareholders the right to amend or repeal it.
3. Fiscal Year. The fiscal year of the Corporation
shall begin on the first day of January each year.
4. Records. The certificate of incorporation, the By-
Laws and the proceedings of all meetings of the shareholders, the
Board, and standing committees of the Board shall be recorded in
appropriate minute books provided for the purpose. The minutes of
each meeting shall be signed by the Secretary or other officer
appointed to act as secretary of the meeting.
5. Inspection. A copy of the By-Laws, with all
amendments thereto, shall at all times be kept in a convenient
place at the principal place of business of the Corporation, and
for a proper purpose shall be open for inspection to any
shareholder during business hours.
ARTICLE VII
CORPORATE SEAL
The Chairman, any Vice Chairman, the Chief Executive
Officer, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer and any Assistant Treasurer,
shall have authority to affix the corporate seal to any document
requiring such seal, and to attest the same. Such seal shall be
substantially in the following form:
(Impression)
( of )
(Seal )
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of this analysis is to provide the reader with
information relevant to understanding and assessing Valley National
Bancorp's ("Valley") results of operations for each of the past
three years and financial condition for each of the past two years.
In order to fully appreciate this analysis the reader is encouraged
to review the consolidated financial statements and statistical
data found in the following pages of this annual report.
In 1993, Valley achieved record growth in earnings due primarily to
an improved net interest margin, a significant improvement in asset
quality as non-performing assets declined, and continuation of its
acquisition strategy by acquiring the $223.2 million, seven branch
Peoples Bank, NA on June 18, 1993. Income for 1993, after the
cumulative effect of a change in accounting principle, was $54.2
million, or $2.25 per share, reflecting growth of 28.6% on a per
share basis when compared to $41.6 million, or $1.75 per share for
1992.
The efficiency ratio measures a bank's gross operating expense as
a percentage of fully-taxable equivalent net interest income and
other non-interest income without taking into account security
gains and losses and other non-recurring items. Valley's efficiency
ratio as of December 31, 1993 is 43.8%, one of the lowest in the
industry. This compares with an efficiency ratio for 1992 of 46.7%,
which increased from the 1991 ratio of 44.7% due to the
acquisitions during 1991 and 1992. Valley strives to control its
efficiency ratio and expenses as a means of producing increased
earnings for its shareholders.
Earnings Summary
Net income grew to $54.2 million, or $2.25 per share in 1993
compared with $41.6 million or $1.75 per share in 1992 (the 1992
per share amounts have been restated to give effect to a five for
four stock split in 1993). This increase is largely attributable
to an increase in net interest income of $21.3 million or 18.6%,
and a decrease in the provision for loan losses of $10.0 million or
62.5% . This was offset by a decrease in other operating income of
$3.8 million or 13.3% and was further offset by increased operating
expenses in all non-interest expense categories, due partially to
the acquisition of Peoples Bank in 1993. The return on average
assets increased in 1993 to 1.64% from 1.38% in 1992, while the
return on average equity increased to 22.0% in 1993 from 19.9% at
year-end 1992.
Net Interest Income
Net interest income is the largest source of Valley's operating
income. Net interest income on a tax equivalent basis increased to
$143.8 million for 1993 as compared to $122.0 million for 1992.
The increase in 1993 was due primarily to the significant decrease
in interest rates on all interest bearing deposit accounts of 109
basis points, which was greater than the decline of 70 basis points
on all interest earning assets. This caused the net interest margin
to increase 30 basis points to 4.62% for 1993 compared to 4.32% for
all of 1992.
Average interest earning assets increased $287.4 million in 1993,
or 10.2% over the 1992 amount. This increase was mainly the result
of the acquisition of Peoples during June of 1993 with loans and
investments acquired of approximately $185.9 million. The average
balance of taxable investment securities held to maturity and
available for sale increased by $21.3 million or 1.9% over the 1992
average balance. Non-taxable investments increased $50.0 million
or 25.1% taking advantage of the increased yield available over
taxable investments. Residential mortgage loans and automobile
loans have increased steadily during 1993 and continue to be the
largest source of loan volume. Average loans, including loans held
for sale, increased $224.2 million or 15.6% in 1993 over 1992. The
average rate on loans, including loans held for sale, decreased 77
basis points, but combined with the increase in average loan
volume, interest income on loans for 1993 increased by $7.4 million
over 1992.
Average interest-bearing liabilities grew 8.3% or $203.4 million
and was due mainly to the 1993 acquisition of Peoples. Falling
deposit interest rates prompted many customers to switch their
deposit funds into savings accounts from term certificates of
deposit, which caused an increase in average savings deposit
balances of 20.4% during 1993 over 1992, while average time
deposits decreased 4.9% during the same period. Average demand
deposits continued to grow and increased by $58.8 million or 19.2%
over 1992 balances.
The net interest margin increased to 4.62% in 1993 from 4.32% in
1992 which was substantially the result of changes in market
interest rates. The increase in the net interest margin of 30
basis points, coupled with the increase in average earning assets
over average interest-bearing liabilities, was the basis for the
increase in net interest income.
Non-Interest Income
Non-interest income continues to represent a considerable source of
income for Valley. Excluding gains on securities transactions and
the one-time gain of $6.4 million on the sale of loans in 1992,
total non-interest income amounted to $18.0 million in 1993
compared with $16.8 million in 1992, representing an increase of
$1.2 million or 7.4% from year to year.
Service charges on deposit accounts increased $1.4 million or 33.6%
from 1992 to 1993. Increased volume due to the Peoples seven
branch acquisition and increased fees charged on deposit accounts
generated a majority of this increase.
Fees from mortgage servicing decreased by 13.3% from $4.4 million
in 1992 to $3.8 million in 1993. These fees represent gross
servicing fees and related ancillary fees for servicing mortgage
portfolios by VNB Mortgage Services, Inc. ("MSI"), VNB's mortgage
servicing subsidiary. During 1992 additional servicing portfolios
were acquired totalling $394.5 million, while two small portfolios
totalling approximately $21.3 million were acquired during 1993.
As of December 31, 1993 MSI serviced a total of $1.17 billion of
loans, of which $467.0 million are serviced for VNB. The portfolio
declined during 1993 as a result of large amounts of prepayments,
which were partially offset by Valley's loan origination volume.
Declining interest rates were responsible for the large amount of
prepayments and the volume of originations. As a result of these
prepayments, amortization expense was increased to reduce the
unamortized balance of purchased mortgage servicing rights in line
with the portfolio balance and the expected future cash flows. An
analysis is completed quarterly to determine necessary amortization
expense, based on all principal payments. Continued low interest
rates may prompt further prepayments, producing a reduction of
MSI's future net income as a result of additional amortization
expense and reduced servicing fees.
Gains on the sales of loans were $2.6 million for 1993 compared to
$7.9 million for 1992. During 1993 Valley sold fixed rate 15-year
and 30-year loans as part of its ongoing program to sell higher
interest-rate risk, fixed rate loans, and as a result recorded
gains of $2.6 million on these sales. During 1992 Valley sold
loans acquired from the Resolution Trust Corporation ("RTC") in
1991 to a third party investor and recorded a $6.4 million gain
from the sale of these loans. Also during 1992, Valley sold 30-
year fixed rate mortgage loans and recorded a gain of $1.4 million.
These loans were sold to help reduce interest rate risk by selling
long term fixed rate assets. Loans are sold during the year based
upon loan to value ratio and maturity, and are classified as loans
held for sale on the consolidated statement of financial condition.
It is expected that this sale activity will continue in the future.
Other non-interest income totalled $5.5 million in 1993, compared
with $6.2 million for 1992, a decrease of 10.6% resulting from the
reduction of transactions with the RTC. Fee income on various
services increased slightly in addition to the net rental income
for a building purchased during 1993. Valley expects to generate
additional fee income by offering annuity and mutual fund products
in early 1994.
Net gains on securities transactions in 1993 and 1992 amounted to
$7.0 million and $5.7 million, respectively. This was the outcome
of restructuring the investment portfolio to alter maturities, due
to declining interest rates and heavy prepayment activity on
mortgage backed securities.
Non-Interest Expense
Non-interest expense totalled $70.9 million for the year, $6.1
million, or 9.4% above the 1992 level. The branch staff and office
facilities for the seven branches acquired from Peoples account for
a large portion of the increase in non-interest expense. The
largest component of non-interest expense is salaries and employee
benefit expense which totalled $32.4 million in 1993 compared to
$30.0 million in 1992, an increase of $2.4 million or 8.1%. At
December 31, 1993, full-time equivalent staff was approximately
1,081, compared to approximately 973 at the end of 1992. The
Financial Accounting Standards Board ("FASB") adopted FASB 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" effective for calendar year 1993. There is no effect on
Valley's results of operations based on Valley's minimal payment of
postretirement benefits. In addition, FASB 112, "Employers'
Accounting for Postemployment Benefits" was issued in November 1992
and is effective for calendar year 1994. The statement provides
standards for employers who provide benefits to former or inactive
employees after employment, but before retirement. The effect of
this statement is not expected to have a material impact on
Valley's future results of operations.
Insurance premiums assessed by the Federal Deposit Insurance
Corporation ("FDIC") increased by $1.0 million, or 18.2% to $6.7
million in 1993, from $5.7 million in 1992. This resulted from the
deposits acquired in connection with the Peoples acquisition. The
current rate charged for insurance by the FDIC with respect to
Valley, is .23% of deposits and has been at that level since
September 1991. Overall, assessment rates can range from .23% for
well capitalized institutions with no supervisory concerns to .31%
for undercapitalized institutions with substantial supervisory
concerns.
Net occupancy expense increased to $6.3 million in 1993 from $5.4
million in 1992. The increase of $897 thousand represents
additional rent, utilities, tax and maintenance expense on
facilities acquired during 1993 and 1992. During the second
quarter of 1993 Valley acquired a 62,000 square foot building for
$3.3 million located adjacent to its current administrative
headquarters in Wayne, New Jersey. This facility is currently
occupied by various tenants and will initially result in net rental
income to Valley. As space becomes available, Valley will begin
using the building to consolidate sections of its operations into
closer proximity with the administrative headquarters. As Valley's
utilization of the space begins in 1994, the net income from rents
will decrease and occupancy expense will increase.
Furniture and equipment expense increased $438 thousand, or 11.9%,
which is again indicative of the 1993 and 1992 acquisitions. This
includes equipment depreciation, maintenance and repairs.
Amortization of intangible assets increased to $5.0 million in 1993
from $4.1 million in 1992, representing an increase of $890
thousand, or 21.6%. The majority of this increase, as discussed
previously in relation to fees from mortgage servicing represents
amortization of purchased mortgage servicing rights of $3.7 million
during 1993, compared with $2.8 million for 1992, an increase of
$922 thousand, or 33.0%.
Income Taxes
Income tax expense as a percentage of pre-tax income rose to 35.2%
in 1993 compared to 33.9% in 1992. This increase was attributable
to the change in the federal income tax rate from 34% to 35%
effective January 1, 1993. A new investment subsidiary was
established during the latter part of 1993 to hold investment
securities to maturity. This subsidiary is expected to have a
positive effect on 1994 net income due to the lower tax rate
presently imposed under state law on investment companies.
Statement of Financial Accounting Standards No. 109,"Accounting for
Income Taxes," was issued by the Financial Accounting Standards
Board in February 1992. Statement 109 requires a change from the
deferred method under APB Opinion 11 to the asset and liability
method. Under the asset and liability method of Statement 109,
deferred income taxes are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities, and
their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the
effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date.
Valley adopted SFAS No. 109 prospectively as of January 1, 1993.
The cumulative effect of this change in accounting for income taxes
reduced net income by $402 thousand and is reported separately in
the consolidated statement of income for the year ended December
31, 1993.
FUNDS MANAGEMENT
Interest Rate Sensitivity
Managing net interest margin continues to be the single most
important factor in maximizing earnings. Through its
Asset/Liability Policy, Valley strives to maintain a consistent net
interest rate differential by managing the sensitivity and
repricing of its assets and liabilities to interest rate
fluctuations.
Valley seeks to achieve a sufficient level of rate sensitive assets
to equal its rate sensitive liabilities, and analyzes the maturity
and repricing of earning assets and sources of funds at various
intervals. The level by which repricing earning assets exceed or
are exceeded by repricing sources of funds is expressed as a ratio
and dollar value (interest sensitivity gap) and is used as a
measure of interest rate risk.
At December 31, 1993, rate sensitive liabilities exceeded rate
sensitive assets at the 90 day interval and resulted in a negative
gap of $111 million or a ratio of .91:1. Rate sensitive assets
exceeded rate sensitive liabilities at the 91 to 365 day interval
by $1.5 million or a ratio of 1.0:1 and resulted in a small
positive gap. The total negative gap repricing within 365 days as
of December 31, 1993 is $109.4 million or .93:1. In view of the
present economic climate, management does not view these amounts as
presenting an unusually high risk potential, although no assurances
can be given that Valley is not at risk from rate increases or
decreases.
The above gap results take into account repricing and maturities of
assets and liabilities, but fails to consider the interest rate
sensitivities of those asset and liability accounts. Management
has prepared for its use an income simulation model to project
future net interest income streams in light of the current gap
position. Management has also prepared....... 13.93 13.34 11.76
12.18
--
Tier-one and Tier-two
risk based.............. 15.18 14.60 13.09 12.20
--
(1) The Federal Reserve Board issued a new leverage capital ratio in August
1990 which replaced the primary capital ratio.
PRICE RANGE OF COMMON STOCK
Effective December 1, 1993, Valley National Bancorp common stock began
trading on the New York Stock Exchange (NYSE) under the symbol VLY. Prior to
December 1, 1993, Valley National Bancorp common stock was traded on the
National Association of Security Dealers Automated Quotations System (NASDAQ)
under the symbol VNBP. The following table sets forth for each quarter
period indicated the high and low prices for the common stock of Valley
National Bancorp.
Year 1993
High Low
First Quarter...... $28 $22 3/4
Second Quarter..... $27 3/4 $25
Third Quarter...... $26 1/2 $24 1/2
Fourth Quarter..... $26 $23 1/4
Year 1992
High Low
First Quarter...... $20 1/4 $13 3/8
Second Quarter..... $20 $18
Third Quarter...... $20 3/8 $18 5/8
Fourth Quarter..... $23 5/8 $19 5/8
There were 4,372 shareholders of record as of December 31, 1993.
