VALLEY NATIONAL BANCORP, 10-K405, 1997-02-28

VALLEY NATIONAL BANCORP
10-K405, 1997-02-28
NATIONAL COMMERCIAL BANKS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
------------------------

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-11179

VALLEY NATIONAL BANCORP

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
NEW JERSEY 22-2477875
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1455 VALLEY ROAD
WAYNE, NEW JERSEY 07474
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
</TABLE>

201-305-8800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
---------------------------- -------------------------------------------------------
<S> <C>
Common Stock, no par value New York Stock Exchange, Inc.
</TABLE>

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 Registrant's 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. [X]

The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $844,879,000 on December 31, 1996.

There were 36,407,574 shares of Common Stock outstanding at January 31,
1997.

DOCUMENTS INCORPORATED BY REFERENCE:

Certain portions of the Registrant's Definitive Proxy Statement (the "1997
Proxy Statement") for the 1997 Annual Meeting of shareholders to be held April
2, 1997 will be incorporated by reference in Part III.
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<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business.................................................................. 1
Item 2. Properties................................................................ 5
Item 3. Legal Proceedings......................................................... 6
Item 4. Submission of Matters to a Vote of Security Holders....................... 6
Item 4A. Executive Officers of the Registrant...................................... 6

PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters..... 7
Item 6. Selected Financial Data................................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 8
Item 8. Financial Statements and Supplementary Data:
Valley National Bancorp and Subsidiaries:
Consolidated Statements of Income......................................... 26
Consolidated Statements of Financial Condition............................ 27
Consolidated Statements of Changes in Shareholders' Equity................ 28
Consolidated Statements of Cash Flows..................................... 29
Notes to Consolidated Financial Statements................................ 30
Independent Auditors' Report.............................................. 52
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.............................................................. 52

PART III
Item 10. Directors and Executive Officers of the Registrant........................ 53
Item 11. Executive Compensation.................................................... 53
Item 12. Security Ownership of Certain Beneficial Owners and Management............ 53
Item 13. Certain Relationships and Related Transactions............................ 53

PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......... 53
Signatures............................................................................ 55
</TABLE>
<PAGE> 3

PART I

ITEM 1. BUSINESS

Valley National Bancorp ("Valley") is a New Jersey corporation incorporated
as a bank holding company under the Bank Holding Company Act of 1956, as amended
("Holding Company Act"). At December 31, 1996, Valley had consolidated total
assets of $4.7 billion, total deposits of $4.2 billion, and total shareholders'
equity of $396.5 million. Its principal subsidiary is Valley National Bank
("VNB").

VNB is a national banking association chartered in 1927 under the laws of
the United States. VNB provides a full range of commercial and retail banking
services through 81 branch offices located in northern New Jersey. These
services include the acceptance of demand, savings and time deposits; extension
of consumer, real estate, Small Business Administration and other commercial
credits; and full personal and corporate trust services, as well as pension and
fiduciary services.

VNB has seven wholly-owned subsidiaries which include a mortgage servicing
company, a real estate company which holds and disposes of real estate which VNB
may acquire through foreclosure, an investment company which holds, maintains
and manages investment assets for VNB, an investment banking company which
offers investment banking services to middle market companies, a subsidiary
which owns and manages residential mortgage loans, a subsidiary which owns and
services auto loans and an Edge Act Corporation which is the holding company for
a wholly-owned finance company located in Toronto, Canada. The mortgage
servicing company services loans for others as well as VNB.

RECENT DEVELOPMENTS

During the second quarter of 1996, Valley announced and began issuing a
co-branded credit card, the ShopRite Mastercard. Of the $148.9 million of credit
card balances outstanding at December 31, 1996, approximately $129.1 million are
the result of this co-branded credit card program.

On September 13, 1996 Valley signed a definitive merger agreement with
Midland Bancorporation, Inc. ("Midland"), parent of The Midland Bank and Trust
Company ("Midland Bank"), headquartered in Paramus, New Jersey. At December 31,
1996 Midland had total assets of $438.9 million and deposits of $401.6 million,
with 13 branches located in Bergen County, New Jersey. The transaction is
expected to be consummated on or about March 1, 1997. The transaction will be
accounted for using the pooling of interests method of accounting, and will
result in the issuance of approximately 3,775,000 shares of Valley common stock.
Each share of common stock of Midland will be exchanged for 30 shares of Valley
common stock.

VNB established a finance company in Toronto, Canada. The new finance
company, which became operational in the first quarter of 1996, makes consumer
loans, primarily auto loans, in several provinces in Canada.

During March of 1996, VNB established a new subsidiary to which VNB
contributed a significant portion of its residential real estate mortgages. The
subsidiary owns and manages residential mortgage loans.

VNB formed a new subsidiary in New York State during the fourth quarter of
1996 to which VNB contributed a substantial amount of its automobile loans. This
subsidiary owns and manages automobile loans.

COMPETITION

The market for banking and bank related services is highly competitive.
Valley and its subsidiary compete with other providers of financial services
such as other bank holding companies, commercial and savings banks, savings and
loan associations, credit unions, money market and mutual funds, mortgage
companies, and a growing list of other local, regional and national institutions
which offer financial services. Mergers between financial institutions within
New Jersey and in neighboring states have added competitive pressure.
Competition is expected to intensify as a consequence of interstate banking laws
now in effect or that may be in effect in the future. Valley and its subsidiary
compete by offering quality products and convenient services at competitive
prices. In order to maintain and enhance its competitive position, Valley
regularly reviews its

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products, locations and various acquisition prospects and periodically engages
in discussions regarding such possible acquisitions.

EMPLOYEES

At year-end 1996, VNB and its subsidiaries employed 1,396 full-time
equivalent persons. Management considers relations with employees to be
satisfactory.

SUPERVISION AND REGULATION

The banking industry is highly regulated. Statutory and regulatory controls
increase a bank holding company's cost of doing business and limit the options
of its management to deploy assets and maximize income. The following discussion
is not intended to be a complete list of all the activities regulated by the
banking laws or of the impact of such laws and regulations on the bank. It is
intended only to briefly summarize some material provisions.

BANK HOLDING COMPANY REGULATION

Valley is a bank holding company within the meaning of the Holding Company
Act. As a bank holding company, Valley is supervised by the Board of Governors
of the Federal Reserve System ("FRB") and is required to file reports with the
FRB and provide such additional information as the FRB may require.

The Holding Company Act prohibits Valley, with certain exceptions, from
acquiring direct or indirect ownership or control of more than five percent of
the voting shares of any company which is not a bank and from engaging in any
business other than that of banking, managing and controlling banks or
furnishing services to subsidiary banks, except that it may, upon application,
engage in, and may own shares of companies engaged in, certain businesses found
by the FRB to be so closely related to banking "as to be a proper incident
thereto." The Holding Company Act requires prior approval by the FRB of the
acquisition by Valley of more than five percent of the voting stock of any
additional bank. Under current law, a New Jersey based bank holding company,
like Valley, is permitted to acquire banks located in New Jersey and in certain
other states if the states had enacted laws specifically to permit acquisitions
of banks by out-of-state bank holding companies having the largest proportion of
their deposits in New Jersey. Satisfactory capital ratios and Community
Reinvestment Act ratings are generally prerequisites to obtaining federal
regulatory approval to make acquisitions. Acquisitions through Valley National
Bank require approval of the Comptroller of the Currency of the United States
("OCC"). Statewide branching is permitted in New Jersey. The Holding Company Act
does not place territorial restrictions on the activities of non-bank
subsidiaries of bank holding companies.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Banking and Branching Act") passed by Congress and signed into
law on September 29, 1994, significantly changed interstate banking rules.
Pursuant to the Interstate Banking and Branching Act, bank holding companies are
able to acquire banks in states other than its home state effective September
29, 1995, regardless of applicable state law.

The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, thereby creating interstate branches, beginning June 1,
1997. Under such legislation, each state has the opportunity either to "opt out"
of this provision, thereby prohibiting interstate branching in such states, or
to "opt in" at an earlier time, thereby allowing interstate branching within
that state prior to June 1, 1997. Furthermore, a state may "opt-in" with respect
to de novo branching, thereby permitting a bank to open new branches in a state
in which the bank does not already have a branch. Without de novo branching, an
out-of-state bank can enter the state only by acquiring an existing bank.

On April 17, 1996, New Jersey enacted legislation to opt-in with respect to
earlier interstate banking and branching and the entry into New Jersey of
foreign country banks. New Jersey did not authorize de novo branching into the
state.

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<PAGE> 5

Proposals to change the laws and regulations governing the banking industry
are frequently introduced in Congress, in the state legislatures and before the
various bank regulatory agencies. The likelihood and timing of any such changes
and the impact such changes might have on Valley cannot be determined at this
time.

The policy of the FRB provides that a bank holding company is expected to
act as a source of financial strength to its subsidiary bank and to commit
resources to support such subsidiary bank in circumstances in which it might not
do so absent such policy.

REGULATION OF BANK SUBSIDIARY

VNB is subject to the supervision of, and to regular examination by, the
OCC.

Various laws and the regulations thereunder applicable to Valley and its
bank subsidiary impose restrictions and requirements in many areas, including
capital requirements, the maintenance of reserves, establishment of new offices,
the making of loans and investments, consumer protection, employment practices
and other matters. There are various legal limitations, including Sections 23A
and 23B of the Federal Reserve Act, to the extent which a bank subsidiary may
finance or otherwise supply funds to its holding company or its holding
company's non-bank subsidiaries. Under federal law, no bank subsidiary may,
subject to certain limited exceptions, make loans or extensions of credit to, or
investments in the securities of, its parent or the non-bank subsidiaries of its
parent (other than direct subsidiaries of such bank) or take their securities as
collateral for loans to any borrower. Each bank subsidiary is also subject to
collateral security requirements for any loans or extensions of credit permitted
by such exceptions.

DIVIDEND LIMITATIONS

Valley is a legal entity separate and distinct from its subsidiaries.
Valley's revenues (on a parent company only basis) result in part from dividends
paid to Valley by VNB. Payment of dividends to the Company by its subsidiary
bank, without prior regulatory approval, is subject to regulatory limitations.
Under the National Bank Act, dividends may be declared only if, after payment
thereof, capital would be unimpaired and remaining surplus would equal 100
percent of capital. Moreover, a national bank may declare, in any one year,
dividends only in an amount aggregating not more than the sum of its net profits
for such year and its retained net profits for the preceding two years. Under
this limitation, VNB could declare dividends in 1997 without prior approval of
the OCC of up to $27,879,000 plus an amount equal to VNB's net profits for 1997
to the date of such dividend declaration. In addition, the bank regulatory
agencies have the authority to prohibit a bank subsidiary from paying dividends
or otherwise supplying funds to Valley if the supervising agency determines that
such payment would constitute an unsafe or unsound banking practice.

TRANSACTIONS WITH RELATED PARTIES

VNB's authority to extend credit to its directors, executive officers and
10% stockholders, as well as to entities controlled by such persons, is
currently governed by the requirements of 12 U.S.C. 375 of the National Bank Act
and Regulation O of the FRB thereunder. Among other things, these provisions
require that extensions of credit to insiders (i) be made on terms that are
substantially the same as, and follow credit underwriting procedures that are
not less stringent than, those prevailing for comparable transactions with
unaffiliated persons and that do not involve more than the normal risk of
repayment or present other unfavorable features and (ii) not exceed certain
limitations on the amount of credit extended to such persons, individually and
in the aggregate, which limits are based, in part, on the amount of the bank's
capital. In addition, extensions of credit in excess of certain limits must be
approved by the bank's board of directors.

COMMUNITY REINVESTMENT

Under the Community Reinvestment Act ("CRA"), as implemented by OCC
regulations, a national bank has a continuing and affirmative obligation
consistent with its safe and sound operation to help meet the credit needs of
its entire community, including low and moderate income neighborhoods. The CRA
does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the types
of products and services that it believes are best suited to its particular

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community, consistent with the CRA. The CRA requires the OCC, in connection with
its examination of a national bank, to assess the association's record of
meeting the credit needs of its community and to take such record into account
in its evaluation of certain applications by such association. The CRA also
requires all institutions to make public disclosure of their CRA ratings. VNB
received a "Satisfactory" CRA rating in its most recent examination.

In April 1995, the OCC and the other federal banking agencies adopted
amendments revising their CRA regulations. Among other things, the amended CRA
regulations substitute for the prior process-based assessment factors a new
evaluation system that would rate an institution based on its actual performance
in meeting community needs. In particular, the proposed system would focus on
three tests: (i) a lending test, to evaluate the institution's record of making
loans in its service areas; (ii) an investment test, to evaluate the
institution's record of investing in community development projects, affordable
housing and programs benefiting low or moderate income individuals and
businesses; and (iii) a service test, to evaluate the institution's delivery of
services through its branches, ATMs and other offices. The amended CRA
regulations also clarify how an institution's CRA performance would be
considered in the application process.

RESTRICTIONS ON ACTIVITIES OUTSIDE THE UNITED STATES

The Corporation's activities in Canada are subject to Section 25 and 25A of
the Federal Reserve Act, certain regulations under the National Bank Act and,
primarily, Regulation K promulgated by the FRB. Under these provisions, VNB may
invest no more than 10% of its capital in foreign banking operations. In
addition to investments, VNB may extend credit or guarantee loans for these
entities and such loans or guarantees are generally not subject to the loans to
one person limitation, although they are subject to prudent banking limitations.
The foreign banking operations are subject to supervision by the FRB, as well as
the OCC. Regulation K generally restricts activities by United States banks
outside of the United States to activities that are permitted for banks within
the United States. As a consequence, activities by VNB through its subsidiaries
outside of the United States would generally be limited to banking and
activities closely related to banking.

FIRREA

Under the Financial Institutions Reform, Recovery, and Enforcement Act of
1989 ("FIRREA"), a depository institution insured by the FDIC can be held liable
for any loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to a commonly controlled
FDIC-insured depository institution in danger of default. These provisions have
commonly been referred to as FIRREA's "cross guarantee" provisions. Further,
under FIRREA the failure to meet capital guidelines could subject a bank to a
variety of enforcement remedies available to federal regulatory authorities.

FIRREA also imposes certain independent appraisal requirements upon a
bank's real estate lending activities and further imposes certain loan-to-value
restrictions on a bank's real estate lending activities. The bank regulators
have promulgated regulations in these areas.

FDICIA

The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") required each federal banking agency to revise its risk-based capital
standards to ensure that those standards take adequate account of interest rate
risk, concentration of credit risk and the risks of non-traditional activities.
In addition, pursuant to FDICIA, each federal banking agency has promulgated
regulations, specifying the levels at which a financial institution would be
considered "well capitalized", "adequately capitalized", "undercapitalized",
"significantly undercapitalized", or "critically undercapitalized", and to take
certain mandatory and discretionary supervisory actions based on the capital
level of the institution.

The OCC's regulations implementing these provisions of FDICIA provide that
an institution will be classified as "well capitalized" if it (i) has a total
risk-based capital ratio of at least 10.0 percent, (ii) has a Tier 1 risk-based
capital ratio of at least 6.0 percent, (iii) has a Tier 1 leverage ratio of at
least 5.0 percent, and

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(iv) meets certain other requirements. An institution will be classified as
"adequately capitalized" if it (i) has a total risk-based capital ratio of at
least 8.0 percent, (ii) has a Tier 1 risk-based capital ratio of at least 4.0
percent, (iii) has Tier 1 leverage ratio of (a) at least 4.0 percent or (b) at
least 3.0 percent if the institution was rated 1 in its most recent examination,
and (iv) does not meet the definition of "well capitalized". An institution will
be classified as "undercapitalized" if it (i) has a total risk-based capital
ratio of less than 8.0 percent, (ii) has a Tier 1 risk-based capital ratio of
less than 4.0 percent, or (iii) has a Tier 1 leverage ratio of (a) less than 4.0
percent or (b) less than 3.0 percent if the institution was rated 1 in its most
recent examination. An institution will be classified as "significantly
undercapitalized" if it (i) has a total risk-based capital ratio of less than
6.0 percent, (ii) has a Tier 1 risk-based capital ratio of less than 3.0
percent, or (iii) has a Tier 1 leverage ratio of less than 3.0 percent. An
institution will be classified as "critically undercapitalized" if it has a
tangible equity to total assets ratio that is equal to or less than 2.0 percent.
An insured depository institution may be deemed to be in a lower capitalization
category if it receives an unsatisfactory examination.

In addition, significant provisions of FDICIA required federal banking
regulators to draft standards in a number of other important areas to assure
bank safety and soundness, including internal controls, information systems and
internal audit systems, credit underwriting, asset growth, compensation, loan
documentation and interest rate exposure.

BIF PREMIUMS AND RECAPITALIZATION OF SAIF

VNB is a member of the Bank Insurance Fund ("BIF") of the FDIC. The FDIC
also maintains another insurance fund, the Savings Association Insurance Fund
("SAIF"), which primarily covers savings and loan association deposits but also
covers deposits that are acquired by a BIF-insured institution from a savings
and loan association ("Oakar deposits"). VNB has approximately $1.2 billion of
deposits at December 31, 1996, with respect to which VNB pays SAIF insurance
premiums.

For the first three quarters of 1995, both SAIF-member institutions and
BIF-member institutions paid deposit insurance premiums based on a schedule from
$0.23 to $0.31 per $100 of deposits. In August, 1995, the FDIC, in anticipation
of the BIF's imminent achievement of a required 1.25% reserve ratio, reduced the
deposit insurance premium rates paid by BIF-insured banks from a range of $0.23
to $0.31 per $100 of deposits to a range of $0.04 to $0.31 per $100 of deposits.
The new rate schedule for the BIF was made effective June 1, 1995. On November
14, 1995, the FDIC voted to reduce annual assessments for the semi-annual period
beginning January 1, 1996 to the legal minimum of $2,000 for BIF insured
institutions, except for institutions that are not well capitalized and are
assigned to the higher supervisory risk categories.

The Economic Growth and Regulatory Reduction Act of 1996 (the "1996 Act")
signed into law on September 30, 1996, included the Deposit Insurance Funds Act
of 1996 (the "Funds Act") under which the FDIC was required to impose a special
assessment on SAIF-assessable deposits to recapitalize the SAIF. As a result of
the Funds Act, Valley paid a special assessment of $6.4 million for its SAIF
deposits which it accrued in the third quarter of 1996. Under the Funds Act, the
FDIC also will charge assessments for SAIF and BIF deposits in a 5 to 1 ratio to
pay Financing Corp. ("FICO") bonds until January 1, 2000, at which time the
assessment will be equal. A FICO rate of approximately 1.29 basis points will be
charged on BIF deposits, and approximately 6.44 basis points will be charged on
SAIF deposits. Oaker deposits will be treated as SAIF deposits for purposes of
the FICO bond assessment. The 1996 Act instituted a number of other regulatory
relief provisions.

ITEM 2. PROPERTIES

VNB's corporate headquarters consist of three office buildings located
adjacent to each other in Wayne, New Jersey. These headquarters encompass
commercial and retail lending, the operations and data processing center, and
the executive offices of both Valley and VNB. Two of the three buildings are
owned by VNB and the other building is leased.

VNB provides banking services at 81 locations of which 41 locations are
owned and 40 locations are leased.

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ITEM 3. LEGAL PROCEEDINGS

There were no material pending legal proceedings to which Valley, or any of
its direct or indirect subsidiaries were a party, or to which their property was
subject, 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.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
AGE AT
DECEMBER 31, EXECUTIVE OFFICER
NAMES 1996 SINCE OFFICE
- ------------------------------ ----------------- ----------------- -------------------------------------
<S> <C> <C> <C>
Gerald H. Lipkin.............. 55 1975 Chairman of the Board, President and
Chief Executive Officer of Valley and
VNB
Peter Southway................ 62 1965 Vice Chairman of Valley and VNB
Peter Crocitto................ 39 1991 Executive Vice President of Valley
and VNB
Sam P. Pinyuh................. 64 1978 Executive Vice President of Valley
and VNB
Peter John Southway........... 36 1989 Executive Vice President of Valley
and VNB
Robert E. Farrell............. 50 1990 First Senior Vice President of VNB
Richard P. Garber............. 53 1992 First Senior Vice President of VNB
Alan D. Lipsky................ 52 1994 First Senior Vice President of VNB
Robert Mulligan............... 49 1991 First Senior Vice President of VNB
John H. Prol.................. 59 1992 First Senior Vice President of VNB
Jack M. Blackin............... 54 1993 Senior Vice President of Valley and
VNB
Alan D. Eskow................. 48 1993 Senior Vice President of Valley and
VNB
</TABLE>

All officers serve at the pleasure of the Board of Directors.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Valley's common stock trades on the New York Stock Exchange (NYSE) under
the symbol VLY. The following table sets forth for each quarter period indicated
the high and low sales prices for the common stock of Valley, as reported by the
NYSE, and the dividends paid per share for each quarter. The amounts shown in
the table below have been adjusted for all stock dividends.

<TABLE>
<CAPTION>
YEAR 1996 YEAR 1995
-------------------------- --------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
First Quarter........................... $26 3/8 $22 5/8 $ 0.24 $26 1/2 $22 3/4 $ 0.22
Second Quarter.......................... $29 5/8 $25 1/2 $ 0.25 $25 $21 3/4 $ 0.24
Third Quarter........................... $27 7/8 $24 3/8 $ 0.25 $24 3/4 $21 7/8 $ 0.24
Fourth Quarter.......................... $27 1/4 $24 3/4 $ 0.25 $24 1/4 $22 3/8 $ 0.24
</TABLE>

Federal laws and regulations contain restrictions on the ability of Valley
and VNB to pay dividends. For information regarding restrictions on dividends,
see Part I, Item 1, "Business -- Dividend Limitations" and Part II, Item 8,
"Financial Statements and Supplementary Data -- Note 15 of the Notes to
Consolidated Financial Statements".

There were 6,412 registered shareholders of record as of December 31, 1996.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
Valley's Consolidated Financial Statements and the accompanying notes presented
elsewhere herein.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income (taxable
equivalent)........................ $ 331,889 $ 325,098 $ 301,366 $ 288,471 $ 281,308
Interest expense..................... 145,522 143,271 117,465 114,021 133,690
---------- ---------- ---------- ---------- ----------
Net interest income (taxable
equivalent)........................ 186,367 181,827 183,901 174,450 147,618
Less: tax equivalent adjustment...... 7,605 8,448 8,783 7,778 7,385
---------- ---------- ---------- ---------- ----------
Net interest income........ 178,762 173,379 175,118 166,672 140,233
Provision for possible loan losses... 2,446 2,669 5,197 7,966 18,855
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for possible
loan losses.............. 176,316 170,710 169,921 158,706 121,378
Gains on securities transactions..... 781 1,471 5,974 7,494 7,319
Non-interest income.................. 25,498 19,497 17,993 20,496 25,273
Non-interest expense................. 101,168 90,203 90,594 85,671 79,947
---------- ---------- ---------- ---------- ----------
Income before income taxes and
cumulative effect of accounting
change............................. 101,427 101,475 103,294 101,025 74,023
Income tax expense................... 33,932 38,879 38,723 35,638 25,272
---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
accounting change.................. 67,495 62,596 64,571 65,387 48,751
Cumulative effect of accounting
change, net of tax(1).............. -- -- -- (402) 473
---------- ---------- ---------- ---------- ----------
Net income................. $ 67,495 $ 62,596 $ 64,571 $ 64,985 $ 49,224
========== ========== ========== ========== ==========
</TABLE>

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<PAGE> 10

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
PER COMMON SHARE(2):
Income before cumulative effect of
accounting change.................. $ 1.84 $ 1.67 $ 1.74 $ 1.79 $ 1.36
Cumulative effect of accounting
change............................. -- -- -- (.01) .01
Net income........................... 1.84 1.67 1.74 1.78 1.37
Dividends............................ 0.99 0.94 0.90 0.70 0.64
Book value........................... 10.89 10.66 9.43 9.19 7.90
Weighted average shares
outstanding........................ 36,690,090 37,396,106 37,067,458 36,473,116 35,956,203
RATIOS:
Return on average assets............. 1.47% 1.40% 1.48% 1.58% 1.33%
Return on average shareholders'
equity............................. 17.23 16.60 18.66 20.95 18.33
Average shareholders' equity to
average assets..................... 8.55 8.45 7.96 7.56 7.28
Dividend payout...................... 53.69 56.48 51.94 38.81 43.74
Risk-based capital:
Tier 1 capital..................... 12.31 13.89 13.96 14.55 14.17
Total capital...................... 13.56 15.14 15.21 15.80 15.42
Leverage ratio....................... 8.40 8.41 8.23 7.70 7.47
FINANCIAL CONDITION AT YEAR-END:
Assets............................... $4,686,660 $4,585,811 $4,418,586 $4,257,739 $3,937,660
Loans, net of allowance.............. 3,135,996 2,753,505 2,550,732 2,230,647 1,901,127
Deposits............................. 4,176,206 4,083,873 3,880,002 3,770,228 3,532,996
Shareholders' equity................. 396,522 400,237 350,616 333,240 280,376
</TABLE>

- ---------------
(1) Represents cumulative effect of adopting SFAS 109 "Accounting for Income
Taxes."

(2) All per share amounts have been restated for stock dividends and splits.

ITEM 7. 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's 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 presented in this
document.

Recent Developments

On September 13, 1996 Valley signed a definitive merger agreement with
Midland Bancorporation, Inc. ("Midland"), parent of The Midland Bank and Trust
Company ("Midland Bank"), headquartered in Paramus, New Jersey. On December 31,
1996 Midland had total assets of $438.9 million and deposits of $401.6 million,
with 13 branches located in Bergen County, New Jersey. The transaction is
expected to be consummated on or about March 1, 1997. The transaction will be
accounted for using the pooling of interests method of accounting and will
result in the issuance of approximately 3,775,000 shares of Valley common stock.
Each share of common stock of Midland will be exchanged for 30 shares of Valley
common stock.

8
<PAGE> 11

VNB formed a new subsidiary during the fourth quarter of 1996 to which VNB
contributed a substantial amount of automobile loans. The subsidiary owns and
manages automobile loans.

Earnings Summary

Net income was $67.5 million, or $1.84 per share in 1996 compared with
$62.6 million or $1.67 per share in 1995 (1995 per share amounts have been
restated to give effect to a 5% stock dividend issued in May 1996). Return on
average assets increased in 1996 to 1.47% from 1.40% in 1995, while the return
on average equity also increased to 17.23% in 1996 from 16.60% in 1995.

Net operating income, defined as net income before merger expenses,
one-time FDIC assessment, and securities gains, increased $3.8 million, net of
tax, to $70.9 million for 1996 from $67.0 million in 1995, and impacted earnings
per share by $0.09 and $0.12, net of tax, for 1996 and 1995, respectively. This
increase in net operating income is largely attributable to an increase in net
interest income of $5.4 million and an increase in non-interest income of $6.0
million, which was offset by a increase in non-interest expense of $6.9 million.
Net operating income produced a return on average assets of 1.56% in 1996
compared to 1.50% in 1995, and a return on average equity of 18.09% in 1996
compared to 17.78% in 1995.

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 $186.4 million for 1996
as compared to $181.8 million for 1995. The increase in net interest income is
due primarily to the movement of earning assets out of the investment portfolio
and into higher yielding loans, partially offset by the shifting of deposits
into higher yielding time deposits. The net interest margin remained relatively
unchanged at 4.30% for 1996 compared to 4.27% for 1995.

Average interest earning assets increased $73.0 million in 1996, or 1.7%
over the 1995 amount. This increase was mainly the result of increased volume of
credit card loans, automobile loans, commercial mortgages and commercial loans.
Average loans increased by $209.9 million or 7.7% over the 1995 amount. The
average rate on loans remained flat from 1995. The increase in average loan
volume caused interest income on loans for 1996 to increase by $17.6 million
over 1995. Offsetting this increase, was a decline in average taxable and tax
exempt investment securities of $161.4 million or 10.8% from the amount in the
portfolio during 1995.

The yield on loans was negatively impacted by the introductory below market
interest rates offered on co-branded credit cards. Additionally, a significant
portion of the average balances were not earning interest during the initial
generation of the portfolio.

Average interest-bearing liabilities grew 1.71% or $61.1 million. Deposit
growth, similar to the past few years, was held to a small increase due to
competitive factors and alternative investment opportunities for consumers.
Average demand deposits continued to grow and increased by $48.8 million or
10.1% over 1995 balances. Average savings deposits decreased by $58.1 million or
3.4%, while average time deposits increased $143.7 million or 8.3%.

The following table reflects the components of net interest income, for
each of the three years ended December 31, 1996.

9
<PAGE> 12

ANALYSIS OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND NET
INTEREST EARNINGS ON A TAX EQUIVALENT BASIS

<TABLE>
<CAPTION>
1996 1995 1994
----------------------------- ----------------------------- -----------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
---------- -------- ------- ---------- -------- ------- ---------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets
Loans(1)(2)............... $2,931,338 $243,881 8.32% $2,721,443 $226,260 8.31% $2,433,167 $196,278 8.07%
Taxable investments(3).... 1,051,310 65,353 6.22 1,188,464 75,470 6.35 1,313,169 80,558 6.13
Tax-exempt
investments(1)(3)....... 286,457 19,439 6.79 310,688 21,473 6.91 325,017 22,580 6.95
Federal funds sold and
other short-term
investments(1).......... 60,982 3,216 5.27 36,513 1,895 5.19 45,934 1,950 4.25
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest earning
assets.................. 4,330,087 $331,889 7.66% 4,257,108 $325,098 7.64% 4,117,287 $301,366 7.32%
-------- ---- -------- ---- -------- ----
Allowance for possible
loan losses............. (41,671) (41,544) (43,136)
Cash and due from banks... 137,109 146,467 140,929
Other assets.............. 158,004 100,777 134,152
---------- ---------- ----------
Total assets.............. $4,583,529 $4,462,808 $4,349,232
========== ========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest bearing
liabilities
Savings deposits.......... $1,668,791 $ 40,075 2.40% $1,726,888 $ 45,975 2.66% $1,915,596 $ 48,646 2.54%
Time deposits............. 1,876,589 101,466 5.41 1,732,902 91,986 5.31 1,466,092 63,411 4.33
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest bearing
deposits................ 3,545,380 141,541 3.99 3,459,790 137,961 3.99 3,381,688 112,057 3.31
Federal funds purchased
and securities sold
under repurchase
agreements.............. 25,611 1,102 4.30 52,718 2,833 5.37 78,425 3,114 3.97
Other borrowings.......... 52,311 2,879 5.50 49,727 2,477 4.98 50,028 2,294 4.59
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest bearing
liabilities............. 3,623,302 145,522 4.02 3,562,235 143,271 4.02 3,510,141 117,465 3.35
-------- ---- -------- ---- -------- ----
Demand deposits........... 530,256 481,477 459,434
Other liabilities......... 38,154 42,099 33,642
Shareholders' equity...... 391,817 376,997 346,015
---------- ---------- ----------
Total liabilities and
shareholders' equity.... $4,583,529 $4,462,808 $4,349,232
========== ========== ==========
Net interest income (tax
equivalent basis)....... 186,367 181,827 183,901
Tax equivalent
adjustment.............. (7,605) (8,448) (8,783)
-------- -------- --------
Net interest income....... $178,762 $173,379 $175,118
-------- -------- --------
Net interest rate
differential............ 3.64% 3.62% 3.97%
---- ---- ----
Net interest margin(4).... 4.30% 4.27% 4.47%
---- ---- ----
</TABLE>

- ---------------
(1) Interest income is presented on a tax equivalent basis using a 35% tax rate.

(2) Loans are stated net of unearned income, and include non-accrual loans.

(3) The yield for securities that are classified as available for sale is based
on the average historical amortized cost.

(4) Net interest income on a tax equivalent basis as a percentage of earning
assets.

10
<PAGE> 13

The following table demonstrates the relative impact on net interest income
of changes in volume of earning assets and interest bearing liabilities and
changes in rates earned and paid by Valley on such assets and liabilities.

CHANGE IN INTEREST INCOME AND EXPENSE ON A TAX EQUIVALENT BASIS

<TABLE>
<CAPTION>
1996 COMPARED TO 1995 1995 COMPARED TO 1994
----------------------------- -----------------------------
INCREASE (DECREASE)(2) INCREASE (DECREASE)(2)
----------------------------- -----------------------------
INTEREST VOLUME RATE INTEREST VOLUME RATE
-------- -------- ------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans(1).......................... $ 17,621 $ 17,463 $ 158 $ 29,982 $23,821 $ 6,161
Taxable investments............... (10,117) (8,367) (1,750) (5,088) (7,662) 2,574
Tax-exempt investments(1)......... (2,034) (1,582) (452) (1,107) (957) (150)
Federal funds sold and other short
term investments............... 1,321 1,386 (65) (55) (443) 388
-------- -------- ------- -------- -------- -------
6,791 8,900 (2,109) 23,732 14,759 8,973
-------- -------- ------- -------- -------- -------
Interest expense:
Savings deposits.................. (5,900) (1,508) (4,392) (2,670) (4,948) 2,278
Time deposits..................... 9,480 7,743 1,737 28,574 12,706 15,868
Federal funds purchased and
securities sold under
repurchase agreements.......... (1,731) (1,062) (669) (281) (1,194) 913
Other borrowings.................. 402 133 269 183 (14) 197
-------- -------- ------- -------- -------- -------
2,251 5,306 (3,055) 25,806 6,550 19,256
-------- -------- ------- -------- -------- -------
Net interest income................. $ 4,540 $ 3,594 $ 946 $ (2,074) $ 8,209 $(10,283)
======== ======== ======= ======== ======== =======
</TABLE>

- ---------------
(1) Interest income is adjusted to a tax equivalent basis using a 35% tax rate.

(2) Variances resulting from a combination of changes in volume and rates are
allocated to the categories in proportion to the absolute dollar amounts of
the change in each category.

Non-Interest Income

The following table presents the components of non-interest income for the
years ended December 31, 1996, 1995 and 1994.

NON-INTEREST INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Trust income...................................................... $ 1,080 $ 950 $ 805
Service charges on deposit accounts............................... 8,007 7,957 7,303
Gains on securities transactions, net............................. 781 1,471 5,974
Fees from mortgage servicing...................................... 4,116 3,776 3,320
Credit card income................................................ 5,549 1,753 2,003
Gains on sales of loans........................................... 1,839 846 539
Other............................................................. 4,907 4,215 4,023
------- ------- -------
Total................................................... $26,279 $20,968 $23,967
======= ======= =======
</TABLE>

Non-interest income continues to represent a considerable source of income
for Valley. Excluding gains on securities transactions, total non-interest
income amounted to $25.5 million in 1996 compared with $19.5 million in 1995.

11
<PAGE> 14

Fees from mortgage servicing increased by 9.0% from $3.8 million in 1995 to
$4.1 million in 1996. 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, after eliminating in consolidation
mortgage servicing fees earned by MSI on loans serviced for VNB and its
subsidiary. MSI serviced a total of $1.92 billion and $1.69 billion of loans as
of December 31, 1996 and 1995, respectively, of which $813.9 million and $816.5
million, respectively, are serviced for VNB and its subsidiary. The increase in
the servicing portfolio was due to the acquisition of several portfolios
totalling approximately $361.3 million, the new origination of loans by VNB of
$121.7 million, less principal paydowns and prepayments totaling $256.0 million.
Amortization expense on servicing rights increased during 1996 to $2.1 million
from $1.8 million in 1995, reflecting the increase in the size of the serviced
portfolio. An analysis is completed quarterly to determine amortization expense,
based on all expected future cash flows.

Included in credit card income is merchant discount income and net
interchange fees. The increase in credit card income is the result of a
co-branded credit card program that began during the second quarter of 1996.

Gains on the sales of loans were $1.8 million for 1996 compared to $846
thousand for 1995. The gains recorded are primarily from the sale of the
guaranteed portion of SBA loans. The increase reflects the growth of VNB's
origination of SBA loans.

The significant components of other non-interest income include automatic
teller machine ("ATM") fees, safe deposit rentals, and gain on the sale of REO
property. Other non-interest income increased $692 thousand to $4.9 million for
the year ended December 31, 1996 in comparison to the same period in 1995. ATM
fees increased 23% to $722 thousand as a result of an increase in the number of
transactions. Safe deposit rentals increased 6% to a total of $730 thousand.
Gains recorded on the sale of REO property during 1996 approximated $975
thousand compared to $430 thousand in 1995.

Non-Interest Expense

The following table presents the components of non-interest expense for the
years ended December 31, 1996, 1995 and 1994.

NON-INTEREST EXPENSE

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Salary expense............................................... $ 36,988 $35,030 $34,098
Employee benefit expense..................................... 8,097 8,145 9,266
FDIC insurance premiums...................................... 8,657 5,884 8,473
Net occupancy expense........................................ 9,270 8,191 7,757
Furniture and equipment expense.............................. 5,477 5,661 5,646
Credit card expense.......................................... 7,518 1,948 1,934
Amortization of intangible assets............................ 3,009 2,812 3,147
Other........................................................ 22,152 22,532 20,273
-------- ------- -------
Total.............................................. $101,168 $90,203 $90,594
======== ======= =======
</TABLE>

Non-interest expense totalled $101.2 million for 1996, an increase of 12.2%
from the 1995 level. The largest component of non-interest expense is salaries
and employee benefit expense which totalled $45.1 million in 1996 compared to
$43.2 million in 1995. At December 31, 1996, full-time equivalent staff was
1,396, compared to 1,304 at the end of 1995.

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, 1996 is
44.7%, one of the lowest in the industry, compared with an efficiency ratio for
1995 and 1994 of 43.6% and 43.2%, respectively. The increase

12
<PAGE> 15

in the efficiency ratio for 1996 is the result of costs incurred to implement
the new co-branded credit card program. Valley strives to control its efficiency
ratio and expenses as a means of producing increased earnings for its
shareholders.

The Savings Association Insurance Fund ("SAIF") was recapitalized in the
third quarter of 1996 pursuant to the Funds Act. Congress mandated a one-time
special assessment. Included in the 1996 FDIC insurance premiums is a $6.4
million one-time required payment. VNB had about $1.2 billion of Oaker deposits
at December 31, 1996, which are treated as SAIF deposits. Under the Funds Act,
the SAIF was recapitalized and SAIF rates have been reduced. However, under the
Funds Act the FDIC will collect premiums to pay interest on FICO bonds from both
SAIF and BIF deposits in a relationship of 5 to 1. VNB previously paid the FICO
assessment only on its Oakar deposits. See "Supervision and Regulation -- BIF
Premiums and Recapitalization of SAIF." However, Valley expects that its overall
FDIC insurance premiums in 1997 will be less than recorded in 1996 before the
one-time SAIF assessment. Excluding this one time payment, insurance premiums
decreased by $3.6 million for the year ended December 31, 1996 in comparison to
the same period in 1995. This reflects the reduction in insurance rates charged
on Bank Insurance Fund ("BIF") deposits by the FDIC which began June 1, 1995.

Net occupancy expense increased to $9.3 million in 1996 from $8.2 million
in 1995. The increase of $1.1 million represents additional rent, utilities, tax
and maintenance expense on facilities utilized by Valley. During the first
quarter of 1996 Valley acquired an 89,000 square foot building located across
the street from its administrative headquarters in Wayne, New Jersey in order to
continue consolidating its operations. Renovations were made to prepare the
building for Valley's use.

Credit card expense includes cardmember rebates, processing expenses, and
fraud losses. The increase in credit card expenses is directly attributable to
the co-branded credit card that VNB began issuing during the second quarter of
1996.

Amortization of intangible assets increased to $3.0 million in 1996 from
$2.8 million in 1995, representing an increase of $197 thousand or 7.0%. The
majority of this increase resulted from the amortization of purchased mortgage
servicing rights totaling $2.1 million during 1996, compared with $1.8 million
for 1995.

The significant components of other non-interest expense include
advertising, professional fees, postage, telephone expense and REO expense which
total approximately $12.2 million for 1996.

In May 1995 the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights." The Statement requires capitalization of the value of rights
to service mortgage loans for others, whether those rights were acquired through
purchase or origination. SFAS No. 122 also requires that capitalized mortgage
servicing rights be evaluated for impairment based on their fair value with any
adjustments recognized through a valuation allowance. Effective January 1, 1996,
SFAS No. 122 was adopted and capitalization of originated mortgage servicing
rights began. All capitalized mortgage servicing rights, both originated and
purchased, are evaluated for impairment on a quarterly basis. The impact of
adopting SFAS No. 122 was not material.

On January 1, 1996, Valley adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). This
Statement encourages use of a fair value based method of accounting for
stock-based compensation plans while allowing continued use of the intrinsic
value method of accounting prescribed by Accounting Principles Board Opinion
(APB) No. 25. The continued use of APB No. 25 requires pro forma disclosures of
net income and earnings per share as if the fair value based method of
accounting, as defined is SFAS No. 123, had been applied. Valley has continued
accounting for stock-based compensation under APB No. 25 and included the pro
forma disclosures required by SFAS No. 123 in note 12 to these consolidated
financial statements.

13
<PAGE> 16

In June, 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. These standards are based
on consistent application of a financial components approach that focuses on
control. Under this approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. SFAS No. 125 provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. SFAS No. 125 is effective for transfers
that occur after December 31, 1996, and will be applied prospectively. Valley
does not expect the adoption of SFAS No. 125 to have a material effect on its
future financial position or results of operation.

Income Taxes

Income tax expense as a percentage of pre-tax income was 33.5% for the year
ended December 31, 1996. During the second quarter of 1995 VNB recorded a
one-time tax expense of approximately $3.0 million for the recapture of the bad
debt deduction upon the merger with Lakeland. Excluding this one-time tax
expense, income tax expense as a percentage of pre-tax income was 35.4% for the
year ended December 31, 1995. The decreased percentage from 1995 to 1996 is
attributable to non-deductible merger expenses in 1995 as well as a reduction in
state income taxes.

14
<PAGE> 17

ASSET/LIABILITY MANAGEMENT

Interest Rate Sensitivity

The following table illustrates the projected maturity and repricing
schedule of earning assets and interest-bearing liabilities.

INTEREST RATE SENSITIVITY ANALYSIS

<TABLE>
<CAPTION>
TOTAL
0-3 3-6 6-12 WITHIN OVER
MONTHS MONTHS MONTHS 1 YEAR 1 YEAR TOTAL
---------- --------- --------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Federal funds sold....... $ 75,000 $ -- $ -- $ 75,000 $ -- $ 75,000
Investments held to
maturity.............. 4,063 20,256 18,789 43,108 166,445 209,553
Investments available for
sale.................. 950,192 -- -- 950,192 -- 950,192
Loans.................... 1,289,372 49,702 178,411 1,517,485 1,659,665 3,177,150
---------- --------- --------- ---------- ---------- ----------
Total earning
assets......... $2,318,627 $ 69,958 $ 197,200 $2,585,785 $1,826,110 $4,411,895
---------- --------- --------- ---------- ---------- ----------
Interest-bearing
liabilities
Savings deposits......... 697,813 -- -- 697,813 993,260 1,691,073
Time deposits............ 738,637 371,456 288,058 1,398,151 493,621 1,891,772
Federal funds purchased
and securities sold
under repurchase
agreements............ 23,339 -- -- 23,339 -- 23,339
Other short-term
borrowings............ 16,418 -- -- 16,418 -- 16,418
Other borrowings......... 2,002 2,003 4,505 8,510 26,160 34,670
---------- --------- --------- ---------- ---------- ----------
Total
interest-bearing
liabilities.... $1,478,209 $ 373,459 $ 292,563 $2,144,231 $1,513,041 $3,657,272
---------- --------- --------- ---------- ---------- ----------
Interest sensitivity gap... $ 840,418 $(303,501) $ (95,363) $ 441,554 $ 313,069 $ 754,623
---------- --------- --------- ---------- ---------- ----------
Cumulative interest
sensitivity gap.......... $ 840,418 $ 536,917 $ 441,554 $ 441,554 $ 754,623 $ 754,623
---------- --------- --------- ---------- ---------- ----------
Ratio of earning assets to
interest-bearing
liabilities.............. 1.57:1 (.19:1) (.67:1) 1.21:1 1.21:1 1.21:1
---------- --------- --------- ---------- ---------- ----------
Cumulative ratio of earning
assets to
interest-bearing
liabilities.............. 1.57:1 1.29:1 1.21:1 1.21:1 1.21:1 1.21:1
---------- --------- --------- ---------- ---------- ----------
</TABLE>

Managing net interest margin continues to be one of the most important
factors 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.

The above table takes into account the repricing and maturities of earning
assets and interest-bearing liabilities. Investments held to maturity and loans
are categorized based upon stated maturity and historical prepayment experience.
Investments available for sale are reflected in a repricing category shorter
than their actual maturity because they can be sold at any time. Savings
deposits have been classified in both the 0-3

15
<PAGE> 18

month category and over 1 year category because while these accounts are subject
to immediate withdrawal, experience has shown them to be relatively rate
insensitive.

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 for its use alternative scenarios to measure levels
of net interest income associated with various changes in interest rates.
According to the model, an interest rate increase or decrease of 100 basis
points resulted in an impact on net interest income over the next twelve months
of less than 1%, while an increase in interest rates of 300 basis points would
impact net interest income by about 2 1/2%. These amounts are consistent with
the target levels contained in Valley's Asset/Liability Policy, which is a
maximum impact in a rising or falling interest rate scenario of plus or minus 5%
of net interest income. Management cannot provide any assurance about the actual
effect of changes in interest rates on Valley's net interest income.

At December 31, 1996, rate sensitive assets exceeded rate sensitive
liabilities at the 0-3 month interval and resulted in a positive gap of $840.4
million or a ratio of 1.57:1. The total positive gap repricing within 1 year as
of December 31, 1996 is $441.6 million or 1.21:1. 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.

Liquidity

Liquidity measures the ability to satisfy current and future cash flow
needs as they become due. Maintaining a level of liquid funds through
asset-liability management seeks to ensure that these needs are met at a
reasonable cost. On the asset side, liquid funds are maintained in the form of
cash and due from banks, federal funds sold, investments securities held to
maturity maturing within one year, securities available for sale and loans held
for sale. At December 31, 1996, liquid assets amounted to $1.2 billion, as
compared to $1.5 billion at December 31, 1995. This represents 27.5% and 34.1%
of earning assets, and 25.9% and 32.1% of total assets at December 31, 1996 and
year-end 1995, respectively.

On the liability side, the primary source of funds available to meet
liquidity needs is Valley's core deposit base, which generally excludes
certificates of deposit over $100 thousand. Core deposits averaged approximately
$2.98 billion and $3.05 billion for the year ended December 31, 1996 and 1995,
respectively, representing 67.5% and 70.6% of average earning assets. Short term
borrowings through Federal funds lines and Federal Home Loan Bank advances and
large dollar certificates of deposit, generally those over $100 thousand, are
used as supplemental funding sources. As of December 31, 1996, Valley had
outstanding advances of $34.5 million with the FHLB. Additional liquidity is
derived from scheduled loan and investment payments of principal and interest,
as well as prepayments received. Proceeds from the sales of investment
securities available for sale were $143.6 million, and proceeds of $304.1
million were generated from investment maturities. Purchases of investment
securities were $203.6 million. Short term borrowings and certificates of
deposit over $100 thousand amounted to $607.6 million and $465.8 million, on
average, for the year ending December 31, 1996 and 1995, respectively.

During 1996 a substantial amount of loan growth was funded from maturities
and normal payments of the investment portfolio. Deposit growth other than large
certificates of deposit lagged behind loan growth. Valley anticipates using
funds from the investment portfolio as well as deposit inflows to fund loan
growth during 1997.

16
<PAGE> 19

The following table lists, by maturity, all certificates of deposit of
$100,000 and over at December 31, 1996. These certificates of deposit are
generated primarily from core deposit customers and are not brokered funds.

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Less than three months................................................. $414,146
Three to six months.................................................... 94,922
Six to twelve months................................................... 40,176
More than twelve months................................................ 1,999
--------
$551,243
========
</TABLE>

Valley's cash requirements consist primarily of dividends to shareholders.
This cash need is routinely satisfied by dividends collected from its subsidiary
bank. Projected cash flows from this source are expected to be adequate to pay
dividends, given the current capital levels and current profitable operations of
its subsidiary.

Investment Securities

The amortized cost of securities held to maturity at December 31, 1996,
1995 and 1994 were as follows:

INVESTMENT SECURITIES HELD TO MATURITY

<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. Treasury securities and other government agencies and
corporations............................................. $ -- $ 6,742 $ 16,288
Obligations of states and political subdivisions........... 82,339 106,748 328,659
Mortgage-backed securities................................. 110,050 144,642 501,120
Other debt securities...................................... 463 479 779
-------- -------- --------
Total debt securities.................................... 192,852 258,611 846,846
FRB & FHLB stock........................................... 15,969 6,936 6,539
Other securities........................................... 732 807 598
-------- -------- --------
Total investment securities held to maturity..... $209,553 $266,354 $853,983
======== ======== ========
</TABLE>

The fair value of securities available for sale at December 31, 1996, 1995
and 1994 were as follows:

INVESTMENT SECURITIES AVAILABLE FOR SALE

<TABLE>
<CAPTION>
1996 1995 1994
-------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. Treasury securities and other government agencies and
corporations............................................ $120,933 $ 176,362 $185,021
Obligations of states and political subdivisions.......... 177,505 203,993 --
Mortgage-backed securities................................ 640,961 758,134 505,937
-------- ---------- --------
Total debt securities................................... 939,399 1,138,489 690,958
Equity securities......................................... 10,793 7,796 5,480
-------- ---------- --------
Total investment securities available for
sale.......................................... $950,192 $1,146,285 $696,438
======== ========== ========
</TABLE>

17
<PAGE> 20

MATURITY DISTRIBUTION OF INVESTMENT SECURITIES HELD TO MATURITY AT DECEMBER 31,
1996

<TABLE>
<CAPTION>
OBLIGATIONS OF
STATES AND MORTGAGE-
POLITICAL BACKED OTHER DEBT
SUBDIVISIONS SECURITIES SECURITIES TOTAL(4)
------------------ ----------------- ----------------- -----------------
AMORTIZED YIELD AMORTIZED YIELD AMORTIZED YIELD AMORTIZED YIELD
COST(1) (2)(3) COST(1) (2) COST(1) (2) COST(1) (2)
--------- ------ --------- ----- --------- ----- --------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-1 years.................. $30,723 5.29% $ 12,066 5.02% $ 318 7.40% $ 43,107 5.23%
1-5 years.................. 50,840 7.10 96,443 7.60 145 5.50 147,428 7.42
5-10 years................. -- -- -- -- -- -- -- --
Over 10 years.............. 776 7.94 1,541 6.47 -- -- 2,317 6.96
------- ---- -------- ---- ---- ---- -------- ----
Total
securities..... $82,339 6.43% $ 110,050 7.30% $ 463 6.81% $ 192,852 6.93%
------- ---- -------- ---- ---- ---- -------- ----
</TABLE>

MATURITY DISTRIBUTION OF INVESTMENT SECURITIES AVAILABLE FOR SALE AT DECEMBER
31, 1996

<TABLE>
<CAPTION>
US TREASURY
SECURITIES AND OBLIGATIONS OF
OTHER GOVERNMENT STATES AND MORTGAGE-
AND AGENCIES AND POLITICAL BACKED
CORPORATIONS SUBDIVISIONS SECURITIES TOTAL(4)
----------------- ------------------ ----------------- -----------------
AMORTIZED YIELD AMORTIZED YIELD AMORTIZED YIELD AMORTIZED YIELD
COST(1) (2) COST(1) (2)(3) COST(1) (2) COST(1) (2)
--------- ----- --------- ------ --------- ----- --------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0-1 years............... $ 19,998 4.76% $ 38,884 6.37% $ 4,331 3.92% $ 63,213 5.70%
1-5 years............... 101,691 5.38 125,140 6.72 278,793 6.57 505,624 6.37
5-10 years.............. -- -- 8,830 7.58 356,120 6.69 364,950 6.71
Over 10 years........... -- -- 2,891 11.21 4,769 6.29 7,660 8.14
-------- ----- -------- ----- -------- ---- -------- ----
Total
securities... $ 121,689 5.28% $ 175,745 6.76% $ 644,013 6.62% $ 941,447 6.47%
-------- ----- -------- ----- -------- ---- -------- ----
</TABLE>

- ---------------
(1) Maturities are stated at cost less principal reductions, if any, and
adjusted for accretion of discounts and amortization of premiums.

(2) Average yields are calculated on a yield-to-maturity basis.

(3) Average yields on obligations of states and political subdivisions are
generally tax-exempt and calculated on a tax-equivalent basis using a
statutory federal income tax rate of 35%.

(4) Excludes equity securities which have indefinite maturities.

Valley's investment portfolio is comprised of U.S. government and federal
agency securities, tax-exempt issues of states and municipalities, mortgage
backed securities and equity and other securities. 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. The portfolio generates substantial cash flow. The decision to
purchase or sell securities is based upon the current assessment of long and
short term economic and financial conditions, including the interest rate
environment and other statement of financial condition components.

At December 31, 1996 Valley had $110.1 million of mortgaged-backed
securities classified as held to maturity and $644.0 million of mortgage-backed
securities classified as available for sale. Substantially all the mortgage
backed securities held by Valley are issued or backed by Federal agencies. The
mortgage backed securities portfolio is a source of significant liquidity to
Valley through the monthly cash flow of principal and interest. Mortgage backed
securities, like any security, are sensitive to changes in the interest rate
environment, increasing and decreasing in value as interest rates fall and rise.
As interest rates fall, the increase in prepayments can reduce the yield on the
mortgage backed securities portfolio, and reinvestment of the proceeds will be
at lower interest rates.

18
<PAGE> 21

Included in the mortgage backed securities portfolio at December 31, 1996
were $52.0 million of collateralized mortgage obligations ("CMO") of which $4.4
million were privately issued. CMO's had a yield of 6.51% and an unrealized loss
of $965 thousand at December 31, 1996.

As of December 31, 1996 Valley has $950 million of securities available for
sale compared with $1.1 billion at December 31, 1995. Those securities are
recorded at their fair value on an aggregate basis. As of December 31, 1996 the
investment securities available for sale had an unrealized gain of $328
thousand, net of deferred taxes, compared to an unrealized gain of $3.7 million,
net of deferred taxes, at December 31, 1995. This change was primarily due to an
decrease in prices, resulting from a increasing interest rate environment. These
securities are not considered trading account securities, which may be sold on a
continuous basis, but rather securities which may be sold to meet the various
liquidity and interest rate requirements of Valley.

Pursuant to the provisions and implementation guidance contained within the
special report "A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities", on December 29, 1995 Valley
reassessed the classification of all securities within its portfolio and
transferred $516.9 million from its held to maturity investment portfolio to its
available for sale portfolio. These securities had a market value of $521.9
million which resulted in Valley recording an unrealized gain on securities
available for sale, net of tax, within shareholders' equity of $3.0 million.

Loan Portfolio

As of December 31, 1996, total loans were $3.2 billion, compared to $2.8
billion at December 31, 1995, an increase of 13.7%. The following table reflects
the composition of the loan portfolio for the five years ended December 31,
1996.

LOAN PORTFOLIO

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial....................... $ 402,143 $ 351,885 $ 298,337 $ 240,412 $ 238,860
---------- ---------- ---------- ---------- ----------
Total commercial loans...... 402,143 351,885 298,337 240,412 238,860
---------- ---------- ---------- ---------- ----------
Construction..................... 86,207 73,664 70,192 81,584 74,735
Residential mortgage............. 852,563 854,715 864,011 801,755 663,216
Commercial mortgage.............. 685,237 619,326 571,596 472,073 381,588
---------- ---------- ---------- ---------- ----------
Total mortgage loans........ 1,624,007 1,547,705 1,505,799 1,355,412 1,119,539
---------- ---------- ---------- ---------- ----------
Home equity...................... 158,978 162,738 140,477 153,892 151,989
Credit card...................... 148,855 21,617 22,403 22,863 27,628
Automobile....................... 764,224 650,300 563,315 456,140 363,337
Other consumer................... 79,151 59,855 64,326 45,632 36,408
---------- ---------- ---------- ---------- ----------
Total consumer loans........ 1,151,208 894,510 790,521 678,527 579,362
---------- ---------- ---------- ---------- ----------
Less: unearned income............ (208) (925) (1,901) (2,360) (1,783)
---------- ---------- ---------- ---------- ----------
Loans, net of unearned
income............... $3,177,150 $2,793,175 $2,592,756 $2,271,991 $1,935,978
========== ========== ========== ========== ==========
As a percent of total loans:
Commercial loans................. 12.7% 12.6% 11.5% 10.6% 12.3%
Mortgage loans................... 51.1 55.4 58.0 59.6 57.8
Consumer loans................... 36.2 32.0 30.5 29.8 29.9
---------- ---------- ---------- ---------- ----------
Total loans............ 100.0% 100.0% 100.0% 100.0% 100.0%
========== ========== ========== ========== ==========
</TABLE>

The increase in loans for 1996 was diversified between commercial, mortgage
and consumer loans.

19
<PAGE> 22

Commercial lending and commercial mortgage loans have continued their
steady increase. Valley targets small-to-medium size businesses within the
market area of the bank. Commercial loans are generally made for working capital
or expansion purposes, and often have collateral and/or guarantees as security.

During the second quarter of 1996, Valley announced and began issuing a
co-branded credit card, the ShopRite Mastercard. Of the $148.9 million of credit
card loans outstanding at December 31, 1996, approximately $129.1 million are
the result of this co-branded credit card program. Cardmembers can earn a rebate
on all purchases and the expense associated with this rebate is included in
non-interest expense.

Automobile loans comprise 24.1% of total loans at December 31, 1996.
Automobile loans increased 17.5% during 1996 as a result of increased loan
demand and market penetration. Approximately 55.6% of the automobile loan
portfolio and 13.4% of the total loan portfolio at December 31, 1996 represent
loans originated by VNB through referrals from a major insurance company. These
loans are subject to Valley's underwriting criteria.

VNB extended this program during the first quarter of 1996 by establishing
a finance company in Toronto, Canada to make auto loans. This Canadian
subsidiary had interest income of approximately $400 thousand for the year ended
December 31, 1996, and auto loans of $8.4 million at December 31, 1996. These
loans are funded by a capital investment by VNB of $7.5 million, with additional
funding requirements satisfied by bank lines of credit. Any foreign exchange
risk is limited to the capital investment by VNB as operations of this
subsidiary are in Canadian dollars.

Much of Valley's lending is in northern New Jersey. However, 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.

The following table reflects the maturity distribution of the commercial
and construction loan portfolio as of December 31, 1996:

<TABLE>
<CAPTION>
OVER 1
1 YR. TO 5 OVER
OR LESS YRS. 5 YRS. TOTAL
-------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial -- fixed rate............................ $ 16,549 $ 52,090 $42,139 $110,778
Commercial -- adjustable rate....................... 239,475 41,556 10,334 291,365
Real estate construction -- fixed rate.............. 800 8,532 249 9,581
Real estate construction -- adjustable rate......... 21,409 46,990 8,227 76,626
-------- -------- ------- --------
$278,233 $149,168 $60,949 $488,350
======== ======== ======= ========
</TABLE>

Prior to maturity of each loan with a balloon payment and if the borrower
requests an extension, 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.

VNB is a preferred Small Business Administration ("SBA") lender with
authority to make loans without the prior approval of the SBA. VNB currently has
approval to make SBA loans in New Jersey, Pennsylvania, New York, Delaware and
Maryland. Approximately 80% of each loan is guaranteed by the SBA and may be
sold into the secondary market, with the balance retained in VNB's portfolio.
VNB intends to continue expanding this area of lending as it provides a solid
source of fee income and loans with floating interest rates tied to the prime
lending rate.

During 1996, VNB originated approximately $25.2 million of SBA loans and
sold $22.3 million. At December 31, 1996, $23.5 million of SBA loans were held
in VNB's portfolio and VNB serviced approximately $54.2 million of SBA loans.

It is not known if the trend of increased lending will continue. VNB
continues to take advantage of loan demand in those sectors of the economy where
it is most prevalent.

20
<PAGE> 23

Non-Performing Assets

Non-performing assets include non-accrual loans and other real estate owned
(OREO). 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 to
the non-accrual policy may be permitted if the loan is sufficiently
collateralized and in the process of collection. OREO is acquired through
foreclosure on loans secured by land or real estate. OREO is reported at the
lower of cost or fair value at the time of acquisition and at the lower of fair
value, less estimated costs to sell, or cost thereafter.

Non-performing assets continued to decrease, and totalled $15.1 million at
December 31, 1996 compared with $18.8 million at December 31, 1995, a decrease
of $3.7 million, or 19.7%. Non-performing assets at December 31, 1996 and 1995,
respectively, amounted to 0.47% and 0.67% of loans and other real estate owned.
Non-performing assets totalled $12.7 million at September 30, 1996, 0.41% of
loans and other real estate owned.

The following table sets forth non-performing assets and accruing loans
which are 90 days or more past due as to principal or interest payments on the
dates indicated, in conjunction with asset quality ratios for Valley.

LOAN QUALITY

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loans past due in excess of 90 days and
still accruing......................... $ 7,761 $ 8,117 $ 8,695 $ 8,718 $11,192
------- ------- ------- ------- -------
Non-performing loans..................... $11,403 $11,795 $22,622 $27,542 $34,667
Other real estate owned.................. 3,697 7,015 7,638 6,628 7,020
------- ------- ------- ------- -------
Total non-performing assets.... $15,100 $18,810 $30,260 $34,170 $41,687
------- ------- ------- ------- -------
Troubled debt restructured loans......... $ 5,363 $ 5,209 $ -- $ -- $ 5,900
------- ------- ------- ------- -------
Non-performing loans as a % of loans..... 0.36% 0.42% 0.87% 1.21% 1.79%
------- ------- ------- ------- -------
Non-performing assets as a % of loans
plus other real estate owned........... 0.47% 0.67% 1.16% 1.50% 2.15%
------- ------- ------- ------- -------
Allowance as a % of loans................ 1.30% 1.42% 1.62% 1.82% 1.80%
------- ------- ------- ------- -------
Allowance as a % of non-performing
assets................................. 272.54% 210.90% 138.88% 121.00% 83.60%
------- ------- ------- ------- -------
</TABLE>

During 1996, the net recovery of lost interest on non-accrual loans
amounted to $318 thousand, compared with lost interest of $806 thousand in 1995.

Although substantially all risk elements at December 31, 1996 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 $2.7 million in potential
problem loans at December 31, 1996 which have not been classified as
non-accrual, past due or restructured. Potential problem loans are defined as
performing loans for which management has serious doubts as to the ability of
such borrowers to comply with the present loan repayment terms and which may
result in a nonperforming loan. Approximately $457 thousand 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, 1995, Valley had identified approximately $5.5 million of potential
problem loans which were not classified as non-accrual, past due or
restructured.

Asset Quality and Risk Elements

Lending is one of the most important functions performed by Valley, and by
its very nature, lending is also the most complicated, risky and profitable part
of Valley's business. For commercial loans, construction loans and commercial
mortgage loans, a separate credit department is responsible for risk assessment,
credit

21
<PAGE> 24

file maintenance and periodically evaluating overall creditworthiness of a
borrower. Additionally, efforts are made to limit concentrations of credit so as
to minimize the impact of a downturn in any one economic sector. These loans are
diversified as to type of borrower and loan, however, most of these loans are in
northern New Jersey, presenting a geographical and credit risk if there were a
significant downturn of the economy within the region.

Residential mortgage loans are secured primarily by 1-4 family properties
located mainly within northern New Jersey. Conservative underwriting policies
are adhered to and loan to value ratios are generally less than 80 percent.

Consumer loans are comprised of home equity loans, credit card loans and
automobile loans. Home equity and automobile loans are secured loans and are
made based on an evaluation of the collateral and the borrower's
creditworthiness. Those automobile loans referred through a major insurance
company whose customer base has a good credit profile, result in lower
delinquencies and charge-offs than that typically experienced from traditional
indirect sources.

The co-branded credit card portfolio was generated through a pre-approved
mailing to Shop-Rite's existing customer base utilizing automated credit scoring
techniques and additional conservative underwriting standards.

Management realizes that some degree of risk must be expected in the normal
course of lending activities. Reserves are maintained to absorb such potential
loan and off-balance sheet credit losses. The allowance for loan losses and
related provision are an expression of management's evaluation of the credit
portfolio and economic climate.

22
<PAGE> 25

The following table sets forth the relationship among loans, loans
charged-off and loan recoveries, the provision for loan losses and the allowance
for loan losses for the past five years:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average loans outstanding.... $2,931,338 $2,721,443 $2,433,167 $2,110,804 $1,832,367
---------- ---------- ---------- ---------- ----------
Beginning
balance -- Allowance for
loan losses................ $ 39,670 $ 42,024 $ 41,344 $ 34,852 $ 25,904
---------- ---------- ---------- ---------- ----------
Balance from acquisition..... -- -- -- 4,466 --
---------- ---------- ---------- ---------- ----------
Loans charged-off:
Commercial................. 412 1,212 1,805 2,899 5,797
Construction............... -- 2,498 835 441 813
Mortgage-Commercial........ 434 646 1,359 1,136 --
Mortgage-Residential....... 709 499 76 366 802
Consumer................... 3,863 2,787 2,645 2,510 3,696
---------- ---------- ---------- ---------- ----------
5,418 7,642 6,720 7,352 11,108
---------- ---------- ---------- ---------- ----------
Charged-off loans recovered:
Commercial................. 2,584 1,321 595 454 267
Construction............... -- -- 603 -- --
Mortgage-Commercial........ 920 83 61 -- --
Mortgage-Residential....... 67 23 12 83 --
Consumer................... 885 1,192 932 875 934
---------- ---------- ---------- ---------- ----------
4,456 2,619 2,203 1,412 1,201
---------- ---------- ---------- ---------- ----------
Net charge-offs.............. 962 5,023 4,517 5,940 9,907
Provision charged to
operations................. 2,446 2,669 5,197 7,966 18,855
---------- ---------- ---------- ---------- ----------
Ending Balance -- Allowance
for loan losses............ $ 41,154 $ 39,670 $ 42,024 $ 41,344 $ 34,852
---------- ---------- ---------- ---------- ----------
Ratio of net charge offs
during the period to
average loans outstanding
during the period.......... .03% .18% .19% .28% .54%
</TABLE>

The allowance for possible loan losses is maintained at a level management
believes is necessary to absorb the potential loan losses and other credit risk
related charge-offs perceived by management. 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 underwriting, growth and delinquency experience in the credit card
portfolio will dictate the level of allowance needed to absorb future losses.
Although credit card loans are generally considered more risky than other types
of lending, a higher interest rate is charged to compensate for this increased
risk. VNB will continue to closely monitor the need for additions to the
allowance.

During the year, continued emphasis was placed on the current economic
climate and the condition of the real estate market in the northern New Jersey
area. Management addressed these economic conditions and applied that
information to changes in the composition of the loan portfolio. The decline in
non-performing assets and net charge-offs, among other things, was responsible
for the decision to maintain the provision at $2.4 million in 1996 compared to
$2.7 million in 1995.

23
<PAGE> 26

The following table summarizes the allocation of the allowance for loan
losses to specific loan categories for the past five years:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------- -------------------- -------------------- -------------------- --------------------
PERCENT PERCENT PERCENT PERCENT PERCENT
OF LOAN OF LOAN OF LOAN OF LOAN OF LOAN
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
ALLOWANCE TO TOTAL ALLOWANCE TO TOTAL ALLOWANCE TO TOTAL ALLOWANCE TO TOTAL ALLOWANCE TO TOTAL
ALLOCATION LOANS ALLOCATION LOANS ALLOCATION LOANS ALLOCATION LOANS ALLOCATION LOANS
---------- -------- ---------- -------- ---------- -------- ---------- -------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loan category:
Commercial... $ 15,313 12.7% $ 12,593 12.6% $ 10,717 11.5% $ 11,257 10.6% $ 9,167 12.3%
Mortgage..... 9,464 51.1 8,664 55.4 10,667 58.0 9,490 59.6 9,067 57.8
Consumer..... 6,774 36.2 7,084 32.0 7,441 30.5 7,604 29.8 5,378 29.9
Unallocated... 9,603 N/A 11,329 N/A 13,199 N/A 12,993 N/A 11,240 N/A
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$ 41,154 100.0% $ 39,670 100.0% $ 42,024 100.0% $ 41,344 100.0% $ 34,852 100.0%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
</TABLE>

At December 31, 1996 the allowance for loan losses amounted to $41.2
million or 1.30% of loans, net of unearned income, as compared to $39.7 million
or 1.42% at year-end 1995.

The allowance is adjusted by provisions charged against income and loans
charged-off, net of recoveries. Net loan charge-offs were $962 thousand for the
year ended December 31, 1996 compared with $5.0 million for the year ended
December 31, 1995. Charge-offs from the Lakeland merger added approximately $2.7
million to total net charge-offs during 1995. The ratio of net charge-offs to
average loans declined to 0.03% for 1996 compared with 0.18% for 1995.

Valley adopted Statement of Financial Accounting Standard No. 114,
"Accounting by Creditors for Impairment of a Loan" and Statement of Financial
Accounting Standard No. 118 "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosure" on January 1, 1995. These Statements
require that impaired loans be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or at the fair value
of the collateral if the loan is collateral dependent. The adoption of these
statements did not affect the level of the overall allowance or operating
results of Valley. Income recognition and charge-off policies were not changed
as a result of these statements. The impaired loan portfolio is primarily
collateral dependent as defined under SFAS 114. Impaired loans and their related
specific and general allocations to the allowance for loan losses totaled $21.9
million and $8.7 million, respectively, at December 31, 1996 and $24.4 million
and $7.0 million, respectively, at December 31, 1995. The average balance of
impaired loans during 1996 and 1995 was approximately $23.1 million and $30.2
million, respectively. The amount of cash basis interest income that was
recognized on impaired loans during 1996 and 1995 was $1.6 million and $2.1
million, respectively.

Capital Adequacy

A significant measure of the strength of a financial institution is its
shareholders' equity, which should expand in close proportion to asset growth.
At December 31, 1996, shareholders' equity totalled $396.5 million or 8.5% of
total assets, compared with $400.2 million or 8.7% at year-end 1995. Valley has
achieved steady internal capital generation throughout the past five years.

This decrease in shareholders' equity resulted from the repurchase of
Valley common stock. During 1996, Valley's Board of Directors rescinded its
repurchase program after 1,207,700 shares of Valley common stock were
repurchased in 1996 and 563,160 shares were repurchased in 1995. As of December
31, 1996, Valley had reissued approximately 1,620,463 shares for its employee
benefit program, an expired warrant program and a 5% stock dividend issued May
17, 1996.

24
<PAGE> 27

Also contributing to this decrease in shareholders' equity was a change in
the market value of securities available for sale. Included in shareholders
equity at December 31, 1996 is a $328 thousand unrealized gain on investment
securities available for sale, net of tax, compared to an unrealized gain of
$3.7 million at December 31, 1995.

Risk-based guidelines define a two-tier capital framework. Tier 1 capital
consists of common shareholders' equity less disallowed intangibles, while Total
risk-based capital consists of Tier 1 capital and the allowance for loan losses
up to 1.25% of risk-adjusted assets. Risk-adjusted assets are determined by
assigning various levels of risk to different categories of assets and
off-balance sheet activities.

Valley's capital position at December 31, 1996 under risk-based capital
guidelines was $391.7 million, or 12.3% of risk-weighted assets, for Tier 1
capital and $431.5 million, or 13.6% for Total risked-based capital. The
comparable ratios at December 31, 1995 were 13.9.% for Tier 1 capital and 15.1%
for Total risk-based capital. Valley's ratios at December 31, 1996 are above the
"well capitalized" requirements, which require Tier I capital of at least 6% and
Total risk-based capital of 10%. The Federal Reserve Board requires "well
capitalized" bank holding companies to maintain a minimum leverage ratio of
5.0%. At December 31, 1996 and 1995, Valley was in compliance with the leverage
requirement having a Tier 1 leverage ratio of 8.4%.

The decrease in the risk-based capital ratios is a result of the increase
in loans mainly funded from the investment portfolio.

Book value per share amounted to $10.89 at December 31, 1996 compared with
$10.66 per share at December 31, 1995.

The primary source of capital growth is through retention of earnings.
Valley's rate of earnings retention, derived by dividing undistributed earnings
by net income, was 46.3% at December 31, 1996, compared to 43.5% at December 31,
1995. Cash dividends declared amounted to $.99 per share, equivalent to a
dividend payout ratio of 53.7% for 1996, compared to 56.5% for the year 1995.
The current quarterly dividend rate of $.25 per share provides for an annual
rate of $1.00 per share. Valley's Board of Directors continues to believe that
cash dividends are an important component of shareholder value and that at its
current level of performance and capital, Valley expects to continue its current
dividend policy of a quarterly distribution of earnings to its shareholders.

Results of Operations -- 1995 Compared to 1994

Valley reported net income for 1995 of $62.6 million, or $1.67 per share,
compared to the $64.6 million, or $1.74 per share earned in 1994 (the per share
amounts have been restated to give effect to a 5% stock dividend in 1996 and
1995, and a 10% stock dividend in 1994).

Net interest income on a tax equivalent basis decreased $2.1 million, or
1.1% to $181.8 million in 1995. The decrease in 1995 was due primarily to an
increase in the average rate on interest bearing liabilities of 67 basis points,
partially offset by an increase in rates of 31 basis points on interest earning
assets and an increase of $139.8 million in the average balance of interest
earning assets. The net interest margin decreased to 4.27% for 1995, compared to
4.47% for 1994.

The provision for loan losses totaled $2.7 million in 1995 compared with
$5.2 million in 1994. The decline in non-performing assets coupled with the
continued recovery of the economy among other things was responsible for the
decrease.

Non-interest income in 1995 amounted to $21.0 million, a decrease of $3.0
million, or 12.5% compared with 1994. Excluding securities gains of $1.5 million
in 1995 and $6.0 million in 1994, total non-interest income totaled $19.5 in
1995 compared with $18.0 in 1994. The increase in non-interest income resulted
primarily from an increase in mortgage servicing fee income of $456 thousand and
an increase in service charges on deposit accounts of $654 thousand.

Non-interest expense totalled $90.2 million in 1995, and decreased $391
thousand from 1994. FDIC insurance premiums decreased by $2.6 million. This
reduction reflects the refund received from the FDIC and the decrease in premium
rate on BIF deposits.

25
<PAGE> 28

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans (Note 5)....................... $ 243,080 $ 225,346 $ 195,398
Interest and dividends on investment securities:
Taxable................................................. 64,428 74,779 79,858
Tax-exempt.............................................. 12,635 13,939 14,677
Dividends............................................... 925 691 700
Interest on federal funds sold and other short-term
investments............................................. 3,216 1,895 1,950
---------- ---------- ----------
Total interest income........................... 324,284 316,650 292,583
---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits:
Savings deposits........................................ 40,075 45,975 48,646
Time deposits (Note 10)................................. 101,466 91,986 63,411
Interest on federal funds purchased and securities sold
under repurchase agreements............................. 1,102 2,833 3,114
Interest on other short-term borrowings................... 646 698 227
Interest on other borrowings.............................. 2,233 1,779 2,067
---------- ---------- ----------
Total interest expense.......................... 145,522 143,271 117,465
---------- ---------- ----------
NET INTEREST INCOME....................................... 178,762 173,379 175,118
Provision for possible loan losses (Note 6)............... 2,446 2,669 5,197
---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN
LOSSES.................................................. 176,316 170,710 169,921
---------- ---------- ----------
NON-INTEREST INCOME
Trust income.............................................. 1,080 950 805
Service charges on deposit accounts....................... 8,007 7,957 7,303
Gains on securities transactions, net (Note 4)............ 781 1,471 5,974
Fees from mortgage servicing (Note 7)..................... 4,116 3,776 3,320
Credit card income........................................ 5,549 1,753 2,003
Gains on sales of loans................................... 1,839 846 539
Other..................................................... 4,907 4,215 4,023
---------- ---------- ----------
Total non-interest income....................... 26,279 20,968 23,967
---------- ---------- ----------
NON-INTEREST EXPENSE
Salary expense (Note 12).................................. 36,988 35,030 34,098
Employee benefit expense (Note 12)........................ 8,097 8,145 9,266
FDIC insurance premiums................................... 8,657 5,884 8,473
Net occupancy expense (Notes 8 and 14).................... 9,270 8,191 7,757
Furniture and equipment expense (Note 8).................. 5,477 5,661 5,646
Credit card expense....................................... 7,518 1,948 1,934
Amortization of intangible assets (Note 7)................ 3,009 2,812 3,147
Other..................................................... 22,152 22,532 20,273
---------- ---------- ----------
Total non-interest expense...................... 101,168 90,203 90,594
---------- ---------- ----------
INCOME BEFORE INCOME TAXES................................ 101,427 101,475 103,294
Income tax expense (Note 13).............................. 33,932 38,879 38,723
---------- ---------- ----------
NET INCOME................................................ $ 67,495 $ 62,596 $ 64,571
========== ========== ==========
NET INCOME PER SHARE...................................... $ 1.84 $ 1.67 $ 1.74
Weighted average number of shares outstanding............. 36,690,090 37,396,106 37,067,458
</TABLE>

See accompanying notes to consolidated financial statements.

26
<PAGE> 29

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
---------- ----------
(IN THOUSANDS, EXCEPT
FOR SHARE DATA)
<S> <C> <C>
ASSETS
Cash and due from banks (Note 14)................................... $ 162,872 $ 167,349
Federal funds sold.................................................. 75,000 108,500
Investment securities held to maturity, fair value of $211,534 and 209,553 266,354
$270,622 in 1996 and 1995, respectively (Note 3)..................
Investment securities available for sale (Note 4)................... 950,192 1,146,285
Loans, net of unearned income (Note 5).............................. 3,177,150 2,793,175
Less: Allowance for possible loan losses (Note 6)................. (41,154) (39,670)
---------- ----------
Net loans......................................................... 3,135,996 2,753,505
---------- ----------
Premises and equipment (Note 8)..................................... 63,922 58,053
Due from customers on acceptances outstanding....................... 940 838
Accrued interest receivable......................................... 27,095 30,450
Other assets (Notes 7, 9 and 13).................................... 61,090 54,477
---------- ----------
Total assets.............................................. $4,686,660 $4,585,811
========== ==========
LIABILITIES
Deposits (Note 10):
Non-interest bearing.............................................. $ 593,361 $ 542,229
Interest bearing:
Savings........................................................ 1,691,073 1,699,871
Time........................................................... 1,891,772 1,841,773
---------- ----------
Total deposits............................................ 4,176,206 4,083,873
---------- ----------
Federal funds purchased and securities sold under repurchase 23,339 26,921
agreements (Note 3)...............................................
Treasury tax and loan account and other short-term borrowings (Note 16,418 10,524
3)................................................................
Other borrowings (Note 11).......................................... 34,670 28,679
Bank acceptances outstanding........................................ 940 838
Accrued expenses and other liabilities (Note 12).................... 38,565 34,739
---------- ----------
Total liabilities......................................... 4,290,138 4,185,574
---------- ----------

Commitments and Contingencies (Note 14)

SHAREHOLDERS' EQUITY (Notes 2, 12 and 15) 20,433 20,025
Common stock, no par value, authorized 75,000,000 shares; issued
36,675,191 shares in 1996 and 35,889,721 shares in 1995...........
Surplus............................................................. 238,286 216,377
Retained earnings................................................... 145,064 162,012
Unrealized gain on investment securities available for sale, net of 328 3,733
tax...............................................................
---------- ----------
404,111 402,147
Treasury stock, at cost (272,093 shares in 1996 and (7,589) (1,910)
107,413 shares in 1995)...........................................
---------- ----------
Total shareholders' equity..................................... 396,522 400,237
---------- ----------
Total liabilities and shareholders' equity................ $4,686,660 $4,585,811
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

27
<PAGE> 30

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON INVESTMENT
SECURITIES TOTAL
COMMON RETAINED AVAILABLE TREASURY SHAREHOLDERS'
STOCK SURPLUS EARNINGS FOR SALE STOCK EQUITY
------- -------- -------- ------------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE -- DECEMBER 31, 1993.... $12,188 $ 93,743 $229,473 $ -- $ (2,164) $ 333,240
Net income...................... -- -- 64,571 -- -- 64,571
Cash dividends.................. -- -- (33,535) -- -- (33,535)
Warrants exercised.............. 396 2,178 -- -- -- 2,574
Effect of stock incentive plan,
net........................... 156 1,452 -- -- -- 1,608
Stock dividend.................. 6,129 74,948 (81,077) -- -- --
Unrealized gain on investment
securities available for sale
as of January 1, 1994......... -- -- -- 4,100 -- 4,100
Net change in unrealized gain
(loss) on investment
securities available for
sale.......................... -- -- -- (21,942) -- (21,942)
------- -------- -------- -------- -------- ---------
BALANCE -- DECEMBER 31, 1994.... 18,869 172,321 179,432 (17,842) (2,164) 350,616
Net income...................... -- -- 62,596 -- -- 62,596
Cash dividends.................. -- -- (35,324) -- -- (35,324)
Warrants exercised.............. 33 771 (5,506) -- 11,944 7,242
Effect of stock incentive plan,
net........................... 30 327 (1,149) -- 1,980 1,188
Stock dividend.................. 949 37,802 (38,831) -- -- (80)
Purchase of treasury stock...... -- -- -- -- (13,670) (13,670)
Acquisition of American Union... 154 5,345 (1,076) -- -- 4,423
Tax benefit from exercise of
stock options................. -- 508 -- -- -- 508
Adjustment for the pooling of a
company with a different
fiscal year end............... (10) (697) 1,870 -- -- 1,163
Net change in unrealized gain
(loss) on investment
securities available for
sale.......................... -- -- -- 21,575 -- 21,575
------- -------- -------- -------- -------- ---------
BALANCE -- DECEMBER 31, 1995.... 20,025 216,377 162,012 3,733 (1,910) 400,237
Net income...................... -- -- 67,495 -- -- 67,495
Cash dividends.................. -- -- (36,166) -- -- (36,166)
Effect of stock incentive plan,
net........................... (1) (887) (1,104) -- 2,743 751
Stock dividend.................. 409 22,796 (47,173) -- 23,845 (123)
Purchase of treasury stock...... -- -- -- -- (32,267) (32,267)
Net change in unrealized gain
(loss) on investment
securities available for
sale.......................... -- -- -- (3,405) -- (3,405)
------- -------- -------- -------- -------- ---------
BALANCE -- DECEMBER 31, 1996.... $20,433 $238,286 $145,064 $ 328 $ (7,589) $ 396,522
======= ======== ======== ======== ======== =========
</TABLE>

See accompanying notes to consolidated financial statements.

28
<PAGE> 31

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................. $ 67,495 $ 62,596 $ 64,571
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of intangible assets..................... 8,956 8,039 8,699
Amortization of compensation costs pursuant to long term stock
incentive plan........................................................ 448 322 254
Provision for possible loan losses..................................... 2,446 2,669 5,197
Net amortization of premiums and discounts............................. 3,702 5,095 6,907
Net deferred income tax expense (benefit).............................. (585) 1,549 (492)
Net gains on securities transactions................................... (781) (1,471) (5,974)
Proceeds from sales of loans........................................... 34,950 6,954 22,304
Gain on sale of loans.................................................. (1,839) (846) (539)
Proceeds from recoveries on previously charged-off loans............... 4,456 2,619 2,203
Net decrease (increase) in accrued interest receivables and other
assets................................................................ 2,930 (3,789) (3,964)
Net increase in accrued expenses and other liabilities................. 3,608 991 6,814
Net increase in shareholders' equity due to acquisition of American
Union Bank............................................................ -- 4,423 --
Adjustment for the pooling of a company with a different fiscal year
end................................................................... -- 1,163 --
--------- --------- ---------
Net cash provided by operating activities.............................. 125,786 90,314 105,980
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases and originations of mortgage servicing rights.................... (6,167) (3,902) (1,390)
Proceeds from sales of investment securities available for sale............ 143,605 105,336 190,472
Proceeds from maturing investment securities available for sale............ 221,808 119,475 86,170
Purchases of investment securities available for sale...................... (177,423) (115,348) (267,581)
Purchases of investment securities held to maturity........................ (26,195) (84,675) (169,676)
Proceeds from maturing investment securities held to maturity.............. 82,326 146,284 286,188
Net decrease (increase) in federal funds sold and other short-term
investments.............................................................. 33,500 (108,500) 95,182
Net increase in loans made to customers.................................... (422,504) (214,169) (347,098)
Purchases of premises and equipment, net of sales.......................... (11,815) (12,353) (6,588)
Net (increase) decrease in acceptances..................................... (102) 660 (306)
--------- --------- ---------
Net cash used in investing activities...................................... (162,967) (167,192) (134,627)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits................................................... 92,333 203,871 107,746
Net increase(decrease) in federal funds purchased and other short-term
borrowings............................................................... 2,312 (80,908) 41,812
Advances of other borrowings............................................... 20,000 -- --
Repayments of other borrowings............................................. (14,009) (6,888) (9,344)
Net increase(decrease) in acceptances...................................... 102 (660) 306
Dividends paid to common shareholders...................................... (35,983) (33,618) (31,695)
Addition of common shares to treasury...................................... (32,267) (13,670) --
Common stock issued, net of cancellations.................................. 216 8,028 3,925
--------- --------- ---------
Net cash provided by financing activities.................................. 32,704 76,155 112,750
--------- --------- ---------
Net (decrease)increase in cash and cash equivalents........................ (4,477) (723) 84,103
Cash and cash equivalents at beginning of year............................. 167,349 168,072 83,969
--------- --------- ---------
Cash and cash equivalents at end of year................................... $ 162,872 $ 167,349 $ 168,072
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest on deposits and borrowings...................................... $ 145,550 $ 139,178 $ 116,123
Federal and state income taxes........................................... 34,658 38,021 37,291
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfer of investment securities held to maturity to investment securities
available for sale....................................................... $ -- $ 516,854 $ 23,577
</TABLE>

See accompanying notes to consolidated financial statements.

29
<PAGE> 32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Note 1)

BASIS OF PRESENTATION

The consolidated financial statements of Valley National Bancorp and its
wholly-owned subsidiary ("Valley") include the accounts of its principal
commercial bank subsidiary, Valley National Bank ("VNB") and its wholly-owned
subsidiaries. All material intercompany transactions and balances have been
eliminated.

In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the statements of condition and results of
operations for the periods indicated. Actual results could differ significantly
from those estimates. Material estimates that are particularly susceptible to
significant change in the near-term relate to the determination of the allowance
for possible loan losses and the valuation of other real estate owned. In
connection with the determination of the allowance for other real estate owned,
management generally obtains independent appraisals.

STATEMENT OF CASH FLOWS

The Consolidated Statements of Cash Flows are presented using the indirect
method. Cash and cash equivalents are defined as cash and due from banks.

INVESTMENT SECURITIES

Valley adopted prospectively on January 1, 1994 Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investment in
Debt and Equity Securities". Under the provisions of SFAS 115, investments are
classified into three categories: held to maturity, available for sale and
trading. Valley's investment portfolio consists of investments held to maturity
and investments available for sale.

Investment securities held to maturity, except for equity securities, are
carried at cost and adjusted for amortization of premiums and accretion of
discounts by using the interest method over the term of the investment.

Management has identified those investment securities which may be sold
prior to maturity. These investment securities are classified as available for
sale on the accompanying consolidated statements of financial condition and are
recorded at fair value on an aggregate basis and unrealized holding gains and
losses on such securities are excluded from earnings, but are included as a
separate component of shareholders' equity, net of deferred tax.

Realized gains or losses on the sale of investment securities available for
sale are recognized by the specific identification method and shown as a
separate component of non-interest income.

LOANS AND LOAN FEES

Loans are stated net of unearned income. Unearned income on discounted
loans is recognized based upon methods which approximate a level yield. Loan
origination and commitment fees, net of related costs, are deferred and
amortized as an adjustment of loan yield over the estimated lives of the loans
approximating the effective interest method.

On January 1, 1995, Valley adopted Statement of Financial Accounting
Standards No. 118 "Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosures," ("SFAS 118"). Valley has chosen to maintain its
existing income recognition policies with respect to non-accrual loans.

Interest income is not accrued on loans where interest or principal is 90
days or more past due or if in management's judgement the ultimate
collectibility of the interest is doubtful. Exceptions may be made if the loan
is sufficiently collateralized and in the process of collection. When a loan is
placed on non-accrual, interest accruals cease and uncollected accrued interest
is reversed and charged against current income. Payments received on non-accrual
loans are applied against principal. A loan may only be restored to an

30
<PAGE> 33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

accruing basis when it again becomes well secured and in the process of
collection and all past due amounts have been collected.

On January 1, 1995, Valley adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS
114"). SFAS 114 requires that the value of an impaired loan be measured based
upon the present value of expected future cash flows discounted at the loans
effective interest rate, or the fair value of the collateral if the loan is
collateral dependent. Smaller balance homogeneous loans that are collectively
evaluated for impairment, such as residential mortgage loans and installment
loans, are specifically excluded from the impaired loan portfolio. Valley has
defined the population of impaired loans to be all non-accrual loans and other
loans considered to be impaired as to principal and interest, consisting
primarily of commercial real estate loans. The impaired loan portfolio is
primarily collateral dependent, as defined by SFAS 114. Impaired loans are
individually assessed to determine that each loan's carrying value is not in
excess of the fair value of the related collateral or the present value of the
expected future cash flows.

Valley originates loans guaranteed by the Small Business
Administration("SBA"). The principal amount of these loans is guaranteed by the
SBA up to 80%, subject to certain dollar limitations. Valley generally sells the
guaranteed portions of these loans and retains the unguaranteed portions as well
as the rights to service the loans. Gains are recorded on loan sales based on
premiums paid by the purchasers.

Credit card loans represent primarily revolving MasterCard credit card
loans. Interest on credit card loans is recognized based on the balances
outstanding according to the related cardmember agreements. Net direct
origination costs are deferred and amortized over 24 months, the term of the
cardmember agreement, on a straight-line basis. Direct origination costs include
costs associated with credit card originations that are incurred in transactions
with independent third parties and certain costs relating to loan origination
programs and the preparation and processing of loan documents, net of fees
received. Ineligible direct origination costs are expensed as incurred.

ALLOWANCE FOR POSSIBLE LOAN LOSSES

The allowance for possible loan losses ("allowance") is increased through
provisions charged against current earnings and additionally by crediting
amounts of recoveries received, if any, on previously charged-off loans. The
allowance is reduced by charge-offs on loans which are determined to be a loss,
in accordance with established policies when all efforts of collection have been
exhausted.

The allowance 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 and 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 loans and other past due amounts.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated depreciation
computed using the straight-line method over the estimated useful lives of the
related assets. Leasehold improvements are stated at cost less accumulated
amortization computed on a straight-line basis over the term of the lease or
estimated useful life of the asset, whichever is shorter. Major improvements are
capitalized, while repairs and maintenance costs are charged to operations as
incurred. Upon retirement or disposition, any gain or loss is credited or
charged to operations.

OTHER REAL ESTATE OWNED

Other real estate owned (OREO), acquired through foreclosure on loans
secured by real estate, is reported at the lower of cost or fair value, as
established by a current appraisal, less estimated costs to sell, and

31
<PAGE> 34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

is included in other assets. Any write-downs at the date of foreclosure are
charged to the allowance for possible loan losses.

An allowance for OREO has been established to record subsequent declines in
estimated net realizable value. Expenses incurred to maintain these properties
and realized gains and losses upon sale of the properties are included in other
non-interest expense and other non-interest income, as appropriate.

INTANGIBLE ASSETS

Intangible assets resulting from acquisitions under the purchase method of
accounting consist of goodwill and core deposit intangibles. Goodwill, which was
recorded prior to 1987, is being amortized on a straight-line basis over 25
years. Core deposit intangibles are amortized on accelerated methods over the
estimated lives of the assets. Goodwill and core deposit intangibles are
included in other assets.

MORTGAGE SERVICING

Servicing fee income, representing reimbursement for loan administrative
services performed on contractually serviced mortgages, is credited to income as
earned.

Effective January 1, 1996, Valley adopted Statement of Accounting Standards
No. 122, "Accounting for Mortgage Servicing Rights" (SFAS 122). SFAS 122
requires the recognition of separate assets for the rights to service mortgage
loans for others that have been acquired through purchase or origination. These
rights are amortized over the estimated net servicing income of the loans and
are evaluated for impairment based on their fair value on a quarterly basis. The
fair value of the rights is estimated using the present value of future cash
flows and assumptions regarding prepayment estimates, cost of servicing,
discount rates and loan terms. Quoted prepayment speeds from brokers are
utilized to estimate prepayment assumptions and any impact on amortization. Any
impairments to the value of the rights are recognized as a direct effect to
amortization. The impact of adopting SFAS 122 was not material.

STOCK-BASED COMPENSATION

Valley accounts for its stock option plan in accordance with Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB
25"). In accordance with APB 25, no compensation expense is recognized for stock
options issued to employees since the options have an exercise price equal to
the market value of the common stock on the day of the grant. In October 1995,
the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which
is effective for fiscal years beginning after December 15, 1995. Under SFAS No.
123, Valley may elect to recognize stock-based compensation expense based on the
fair value of the awards or continue to account for stock-based compensation
under APB 25 and disclose in the financial statements the effects of SFAS No.
123 as if the recognition provisions were adopted. Valley has evaluated its
alternatives available under the provisions of SFAS No. 123 and has determined
it will not adopt the recognition provisions of the statement, but has provided
the required footnote disclosure. Therefore, the adoption of SFAS No. 123 has no
impact on Valley's consolidated financial statements.

INCOME TAXES

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. The effect on deferred taxes of a change in tax rates
is recognized in income in the period that includes the enactment date.

32
<PAGE> 35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EARNINGS PER SHARE

Earnings per share is calculated by dividing net income by the weighted
average number of shares outstanding during each period. All share and per share
amounts have been restated to reflect the five percent stock dividend issued on
May 17, 1996 and May 2, 1995. Shares issuable upon exercise of options are not
included in the calculation of earnings per share since their effect is not
material.

TREASURY STOCK

Treasury stock is recorded using the cost method and accordingly is
presented as an unallocated reduction of shareholders' equity.

IMPACT OF FUTURE ACCOUNTING CHANGES

In June 1996 the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." The statement
provides standards for distinguishing transfers of financial assets that are
sales from those that are secured borrowings, and provides guidance on the
recognition and measurement of asset servicing contracts and on debt
extinguishments. As issued, SFAS No. 125 is effective for transactions occurring
after December 31, 1996. However, as a result of an amendment to SFAS No. 125
issued by the FASB in December 1996, certain provisions of SFAS No. 125 are
deferred for an additional year. Adoption of the new accounting standard is not
expected to have a material impact on Valley.

ACQUISITIONS (Note 2)

On June 30, 1995, Valley acquired by merger the $671 million asset Lakeland
First Financial Group, Inc. ("LFG"), based in Succasunna, New Jersey and its
sixteen branch subsidiary, Lakeland Savings Bank ("Lakeland"). Each share of LFG
common stock outstanding was converted into 1.286 shares of Valley common stock,
resulting in the issuance by Valley of 5,136,446 shares of Valley common stock.
The acquisition has been accounted for as a pooling of interests. Prior to the
merger, Lakeland's fiscal year ended on June 30th. In recording the pooling of
interests combination, LFG's financial statements as of June 30, 1995 were
combined with Valley's financial statements. LFG's financial statements for the
year ended June 30, 1995 was combined with Valley's financial statements for the
year ended December 31, 1994. An adjustment has been made to shareholders'
equity to eliminate the effect of including LFG's results of operations for the
six months ended June 30, 1995 in both the year ended December 31, 1995 and the
year ended December 31, 1994. The consolidated financial statements of Valley
include the accounts of LFG for all periods presented.

On February 28, 1995, Valley acquired American Union Bank ("American"),
headquartered in Union, New Jersey, with two branches and approximately $58
million in assets. The transaction resulted in the issuance of 288,734 shares of
Valley common stock and was accounted for using the pooling of interests method
of accounting. The financial statements for Valley have not been restated as
they would not have been materially different from those presented. American's
financial statements are included in Valley's consolidated financial statements
as of January 1, 1995. Each share of common stock of American was exchanged for
0.50 shares of Valley common stock.

33
<PAGE> 36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On November 30, 1994, Valley acquired approximately $190 million in assets
of Rock Financial Corporation ("RFC"), based in North Plainfield, New Jersey and
its five branch subsidiary, Rock Bank. Each share of RFC common stock
outstanding was converted into 1.85 shares of Valley common stock for a total of
approximately 1.7 million shares. The acquisition was accounted for as a pooling
of interests.

INVESTMENT SECURITIES HELD TO MATURITY (Note 3)

The amortized cost, fair value and unrealized gains and losses of
securities held to maturity at December 31, 1996 and 1995 were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and other government
agencies and corporations..................... $ -- $ -- $ -- $ --
Obligations of states and political
subdivisions.................................. 82,339 953 (85) 83,207
Mortgage-backed securities...................... 110,050 1,463 (352) 111,161
Other debt securities........................... 463 2 -- 465
-------- ------ ----- --------
Total debt securities................. 192,852 2,418 (437) 194,833
FRB & FHLB stock................................ 15,969 -- -- 15,969
Other securities................................ 732 -- -- 732
-------- ------ ----- --------
Total investment securities held to
maturity............................ $209,553 $2,418 $ (437) $211,534
======== ====== ===== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and other government
agencies and corporations..................... $ 6,742 $ 44 $ (18) $ 6,768
Obligations of states and political
subdivisions.................................. 106,748 1,425 (132) 108,041
Mortgage-backed securities...................... 144,642 3,301 (360) 147,583
Other debt securities........................... 479 8 -- 487
-------- ------ ----- --------
Total debt securities................. 258,611 4,778 (510) 262,879
FRB & FHLB stock................................ 6,936 -- -- 6,936
Other securities................................ 807 -- -- 807
-------- ------ ----- --------
Total investment securities held to
maturity............................ $266,354 $4,778 $ (510) $270,622
======== ====== ===== ========
</TABLE>

34
<PAGE> 37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The contractual maturities of investments in debt securities held to
maturity at December 31, 1996 are set forth in the following table:

<TABLE>
<CAPTION>
AMORTIZED COST FAIR VALUE
-------------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in one year............................................ $ 31,041 $ 31,126
Due after one year thru five years......................... 50,985 51,738
Due after five years thru ten years........................ -- --
Due after ten years........................................ 776 808
-------- --------
82,802 83,672
Mortgage-backed securities................................. 110,050 111,161
-------- --------
Total debt securities............................ 192,852 194,833
FRB & FHLB stock........................................... 15,969 15,969
Other securities........................................... 732 732
-------- --------
Total investment securities held to maturity..... $209,553 $ 211,534
======== ========
</TABLE>

Actual maturities of debt securities may differ from those presented above
as certain obligations provide the issuer the right to call or prepay the
obligation prior to scheduled maturity without penalty. FRB and FHLB stock and
other securities do not have contractual maturities.

The weighted-average remaining life for mortgage-backed securities held to
maturity was 3.7 years at December 31, 1996 and 1995.

The amortized cost of securities pledged to secure public deposits,
treasury tax and loan deposits, repurchase agreements and for other purposes
required by law approximated $115,430,000 and $159,261,000 at December 31, 1996
and 1995, respectively.

INVESTMENT SECURITIES AVAILABLE FOR SALE (Note 4)

The amortized cost, fair value and unrealized gains and losses of
securities available for sale at December 31, 1996 and 1995 were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and other government
agencies and corporations..................... $121,689 $ 42 $ (798) $120,933
Obligations of states and political
subdivisions.................................. 175,745 1,955 (195) 177,505
Mortgage-backed securities...................... 644,013 4,154 (7,206) 640,961
-------- ------ ------- --------
Total debt securities................. 941,447 6,151 (8,199) 939,399
Equity securities............................... 8,370 2,484 (61) 10,793
-------- ------ ------- --------
Total investment securities available
for sale............................. $949,817 $8,635 $ (8,260) $950,192
======== ====== ======= ========
</TABLE>

35
<PAGE> 38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ------- ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and other government
agencies and corporations.................. $ 175,990 $ 547 $ (175) $ 176,362
Obligations of states and political
subdivisions............................... 201,650 2,687 (344) 203,993
Mortgage-backed securities................... 755,347 7,286 (4,499) 758,134
---------- ------- ------- ----------
Total debt securities................... 1,132,987 10,520 (5,018) 1,138,489
Equity securities............................ 6,624 1,176 (4) 7,796
---------- ------- ------- ----------
Total investment securities
available for sale............... $1,139,611 $11,696 $(5,022) $1,146,285
========== ======= ======= ==========
</TABLE>

The contractual maturities of investments in debt securities available for
sale at December 31, 1996 are set forth in the following table:

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Due in one year.............................................. $ 58,882 $ 58,997
Due after one year thru five years........................... 226,831 227,218
Due after five years thru ten years.......................... 8,830 8,965
Due after ten years.......................................... 2,891 3,258
-------- --------
297,434 298,438
Mortgage-backed securities................................... 644,013 640,961
-------- --------
Total debt securities................................... 941,447 939,399
Equity securities............................................ 8,370 10,793
-------- --------
Total investment securities available for sale..... $949,817 $950,192
======== ========
</TABLE>

Actual maturities on debt securities may differ from those presented above
as certain obligations provide the issuer the right to call or prepay the
obligation prior to scheduled maturity without penalty. Equity securities do not
have contractual maturities.

The weighted-average remaining life for mortgage-backed securities
available for sale at December 31, 1996 and 1995 was 5.4 years and 5.1 years,
respectively.

Gross gains(losses) realized on sales, maturities and other securities
transactions for the years ended December 31, 1996, 1995 and 1994 were as
follows:

<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales transactions:
Gross gains.......................................... $1,214 $1,674 $6,081
Gross losses......................................... (522) (209) (185)
---- ------ ------
692 1,465 5,896
---- ------ ------
Maturities and other securities transactions:
Gross gains.......................................... 89 6 78
Gross losses......................................... -- -- --
---- ------ ------
89 6 78
---- ------ ------
Net gains on securities transactions................. $ 781 $1,471 $5,974
==== ====== ======
</TABLE>

Cash proceeds from sales transactions approximated $143,605,000,
$105,336,000 and $190,472,000 for the years ended 1996, 1995 and 1994,
respectively.

36
<PAGE> 39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LOANS (Note 5)

The detail of the loan portfolio as of December 31, 1996 and 1995 was as
follows:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Commercial................................................ $ 402,143 $ 351,885
--------- ---------
Total commercial loans.......................... 402,143 351,885
--------- ---------
Construction.............................................. 86,207 73,664
Residential mortgage...................................... 852,563 854,715
Commercial mortgage....................................... 685,237 619,326
--------- ---------
Total mortgage loans............................ 1,624,007 1,547,705
--------- ---------
Home equity............................................... 158,978 162,738
Credit card............................................... 148,855 21,617
Automobile................................................ 764,224 650,300
Other consumer............................................ 79,151 59,855
--------- ---------
Total consumer loans............................ 1,151,208 894,510
--------- ---------
Less: unearned income..................................... (208) (925)
--------- ---------
Loans, net of unearned income........................... $3,177,150 $2,793,175
========= =========
</TABLE>

VNB grants loans in the ordinary course of business to their directors,
executive officers and their affiliates, on the same terms and under the same
risk conditions as those prevailing for comparable transactions with outside
borrowers.

The following table summarizes the change in the total amounts of loans and
advances to directors, executive officers, and their affiliates during the year
1996:

<TABLE>
<CAPTION>
1996
--------------
(IN THOUSANDS)
<S> <C>
Outstanding at beginning of year....................................... $ 27,048
New loans and advances................................................. 9,716
Repayments............................................................. (12,258)
--------
Outstanding at end of year............................................. $ 24,506
========
</TABLE>

The outstanding balances of loans which are 90 days or more past due as to
principal or interest payments and still accruing and non-performing assets at
December 31, 1996 and 1995 were as follows:

<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Loans past due in excess of 90 days and still accruing......... $ 7,761 $ 8,117
======== ========
Non-accrual loans.............................................. $ 11,403 $ 11,795
Other real estate owned........................................ 3,697 7,015
-------- --------
Total non-performing assets.......................... $ 15,100 $ 18,810
======== ========
Troubled debt restructured loans............................... $ 5,363 $ 5,209
======== ========
</TABLE>

The amount of interest income that would have been recorded on non-accrual
loans in 1996, 1995 and 1994 had payments remained in accordance with the
original contractual terms approximated $1,352,000, $1,569,000 and $2,742,000
while the actual amount of interest income recorded on these types of assets in
1996, 1995 and 1994 totalled $1,670,000, $763,000 and $996,000, resulting in
(recovered)/lost interest income of $(318,000), $806,000, and $1,746,000,
respectively.

37
<PAGE> 40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1996, there were two loans which were restructured at below
market interest rates and accounted for as troubled debt restructured loans
amounting to $5,363,000.

At December 31, 1996, there were no commitments to lend additional funds to
borrowers whose loans were non-accrual or contractually past due in excess of 90
days and still accruing interest.

SFAS 114 and SFAS 118 were adopted prospectively on January 1, 1995. The
adoption of these statements did not affect the level of the overall allowance
or operating results of Valley. Income recognition and charge-off policies were
not changed as a result of these statements. The impaired loan portfolio is
primarily collateral dependent as defined under SFAS 114. Impaired loans and
their related specific and general allocations to the allowance for loan losses
totaled $21.9 million and $8.7 million, respectively, at December 31, 1996 and
$24.4 million and $7.0 million, respectively, at December 31, 1995. The average
balance of impaired loans during 1996 and 1995 was approximately $23.1 million
and $30.2 million, respectively. The amount of cash basis interest income that
was recognized on impaired loans during 1996 and 1995 was $1.6 million and $2.1.
million, respectively.

ALLOWANCE FOR POSSIBLE LOAN LOSSES (Note 6)

Transactions in the allowance for possible loan losses during 1996, 1995
and 1994 were as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year.......................... $39,670 $42,024 $41,344
Provision charged to operating expense................ 2,446 2,669 5,197
------- ------- -------
42,116 44,693 46,541
------- ------- -------
Less net loan charge-offs
Loans charged-off................................... (5,418) (7,642) (6,720)
Less recoveries on loan charge-offs................. 4,456 2,619 2,203
------- ------- -------
Net loan charge-offs.................................. (962) (5,023) (4,517)
------- ------- -------
Balance at end of year................................ $41,154 $39,670 $42,024
======= ======= =======
</TABLE>

MORTGAGE SERVICING (Note 7)

VNB Mortgage Services, Inc. ("MSI"), a subsidiary of VNB, is a servicer of
residential mortgage loan portfolios. MSI is compensated for loan administrative
services performed for mortgage servicing rights purchased in the secondary
market and originated by VNB.

The aggregate principal balances of mortgage loans serviced by MSI
approximated $1,916,796,000, $1,690,080,000 and $1,204,980,000 at December 31,
1996, 1995 and 1994, respectively. These amounts included $813,858,000,
$816,513,000 and $536,601,000 as of December 31, 1996, 1995 and 1994,
respectively, of loans serviced on behalf of VNB and its subsidiary. The
outstanding balance of loans serviced for others is not included in the
consolidated statements of financial condition.

The costs associated with acquiring and originating mortgage servicing
rights are included in other assets in the consolidated financial statements and
are being amortized over the estimated net servicing income.

38
<PAGE> 41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the change in mortgage servicing rights
during the years ended December 31, 1996, 1995 and 1994:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year........................ $ 8,094 $ 5,998 $ 6,193
Purchases and originations of mortgage servicing
rights............................................ 6,167 3,902 1,390
Amortization expense................................ (2,074) (1,806) (1,585)
-------- -------- -------
Balance at end of year.............................. $12,187 $ 8,094 $ 5,998
======== ======== =======
</TABLE>

Amortization expense is included in amortization of intangible assets.

PREMISES AND EQUIPMENT (Note 8)

At December 31, 1996 and 1995, premises and equipment consisted of:

<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................... $ 15,280 $ 14,144
Buildings...................................................... 39,509 36,130
Leasehold improvements......................................... 6,646 5,717
Furniture and equipment........................................ 45,833 39,462
-------- --------
107,268 95,453
Less: Accumulated depreciation and amortization................ (43,346) (37,400)
-------- --------
Premises and equipment.................................... $ 63,922 $ 58,053
======== ========
</TABLE>

Depreciation and amortization included in non-interest expense for the
years ended December 31, 1996, 1995 and 1994 amounted to approximately
$5,947,000, $5,695,000 and $5,551,000, respectively.

OTHER ASSETS (Note 9)

At December 31, 1996 and 1995, other assets consisted of the following:

<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Mortgage servicing rights........................................ $12,187 $ 8,094
Goodwill......................................................... 3,171 3,420
Core deposits.................................................... 2,459 3,146
Other real estate owned.......................................... 3,697 7,015
Deferred tax asset............................................... 16,322 13,292
Other............................................................ 23,254 19,510
------- -------
Total other assets..................................... $61,090 $54,477
======= =======
</TABLE>

DEPOSITS (Note 10)

Included in time deposits at December 31, 1996 and 1995 are certificates of
deposit over $100,000 of $551,243,000 and $500,939,000, respectively.

Interest expense on certificates of deposit of $100,000 or more totaled
approximately $22,919,000, $20,157,000 and $14,881,000 in 1996, 1995 and 1994,
respectively.

39
<PAGE> 42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The scheduled maturities of time deposits of December 31, 1996 are as
follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997................................................................... $1,398,151
1998................................................................... 216,188
1999................................................................... 180,215
2000................................................................... 71,994
2001................................................................... 12,985
Thereafter............................................................. 12,239
----------
$1,891,772
==========
</TABLE>

OTHER BORROWINGS (Note 11)

At December 31, 1996 and 1995, other borrowings consisted of the following:

<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
FHLB advances.................................................... $34,500 $28,500
Mortgage note.................................................... 170 179
------- -------
Total other borrowings................................. $34,670 $28,679
======= =======
</TABLE>

The Federal Home Loan Bank (FHLB) advances have a weighted average interest
rate of 5.70% at December 31, 1996 and 5.11% at December 31, 1995. These
advances are secured by pledges of FHLB stock, mortgage-backed securities and a
blanket assignment of qualifying mortgage loans. The advances are scheduled for
repayment as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997................................................................... $ 8,500
1998................................................................... 6,000
1999................................................................... --
2000................................................................... 3,000
2001................................................................... 2,000
Thereafter............................................................. 15,000
-------
$ 34,500
=======
</TABLE>

Interest expense of $2,220,000, $1,735,000, and $2,001,000 was recorded on
FHLB advances during the years ended December 31, 1996, 1995 and 1994,
respectively.

BENEFIT PLANS (Note 12)

PENSION PLAN

VNB has a non-contributory benefit plan covering substantially all of its
employees. The benefits are based upon years of credited service, primary social
security benefits and the employee's highest average compensation as defined. It
is VNB's funding policy to contribute annually the maximum amount that can be
deducted for federal income tax purposes. In 1996, 1995 and 1994, contributions
totaling $235,000, $502,000 and $1,363,000 were made. In addition, VNB has a
supplemental non-qualified, non-funded retirement plan which is designed to
supplement the pension plan for key officers.

40
<PAGE> 43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the funded status of the plans and amounts
recognized in Valley's financial statements at December 31, 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Plan assets at fair value, primarily government and corporate bonds,
corporate stocks, certificates of deposit and other miscellaneous
assets................................................................. $16,776 $15,074
------- -------
Actuarial present value of benefit obligations:
Accumulated benefit obligation for service rendered to date, including
vested benefits of $11,884 in 1996 and $11,469 in 1995.............. $13,055 $12,521
Additional future benefits based on estimated salary levels............ 3,162 3,684
------- -------
Projected benefit obligations............................................ $16,217 $16,205
------- -------
Excess (deficiency) of plan assets over projected benefit obligations.... $ 559 $(1,131)
Unrecognized net (gain) loss from past experience different from that
assumed and effects of changes in assumptions.......................... (4,187) (1,688)
Unrecognized net asset at January 1, being recognized over an average
of 15.5 years.......................................................... (49) 7
Prior service cost not yet recognized in net periodic pension cost....... 576 681
------- -------
Accrued pension cost included in other liabilities....................... $(3,101) $(2,131)
======= =======
</TABLE>

Net periodic pension expense for 1996, 1995 and 1994 included the following
components:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during the period................. $ 1,239 $ 1,221 $1,253
Interest cost on projected benefit obligations................. 1,070 1,048 969
Actual return on plan assets................................... (2,065) (2,866) (804)
Net amortization and deferral.................................. 970 1,810 (78)
------- ------- ------
Total net periodic pension expense................... $ 1,214 $ 1,213 $1,340
======= ======= ======
</TABLE>

The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of benefit
obligations for the plan were 7.25% and 5.00%, respectively, for 1996 and 7.00%
and 5.00% for 1995. The expected long term rate of return on assets was 9.00%
for both 1996 and 1995 and the weighted average discount rate used in computing
pension cost was 7.00% and 8.00% for 1996 and 1995, respectively.

BONUS PLAN

VNB and its subsidiaries award incentive and merit bonuses to its officers
and employees based upon a percentage of the covered employees compensation and
determined by the achievement of certain performance objectives. Amounts charged
to salaries expense during 1996, 1995 and 1994 were $1,445,000, $1,265,000 and
$1,495,000, respectively.

SAVINGS PLAN

VNB maintains a contribution matching 401K Savings and Investment Plan.
This plan covers eligible employees of VNB and its subsidiaries. The 401K plan
allows employees to contribute from 1% to 12% of their salary with VNB matching
a certain percentage out of its current years earnings with the distribution of
VNB's contributions subject to a vesting schedule. 401K expense for 1996, 1995
and 1994 amounts to $597,000, $396,000 and $586,000, respectively.

41
<PAGE> 44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK OPTION PLAN

At December 31, 1996, Valley has a stock option plan which is described
below. Valley applies APB Opinion No. 25 and related Interpretations in
accounting for its plan. Had compensation cost for the plan been determined
consistent with FASB Statement No. 123, net income and earnings per share would
have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS,
EXCEPT FOR PER SHARE
DATA)
<S> <C> <C>
Net income
As Reported.................................................. $67,495 $62,596
Pro forma.................................................... 67,361 62,538
Earnings per share
As Reported.................................................. $ 1.84 $ 1.67
Pro forma.................................................... 1.84 1.67
</TABLE>

Under the Employee Stock Option Plan, Valley may grant options to its
employees for up to 1,913,037 shares of common stock in the form of stock
options, stock appreciation rights and restricted stock awards. The exercise
price of qualified and non-qualified options equal 100 percent and 80 percent,
respectively, of the market price of Valley's stock on the date of grant, and an
option's maximum term is ten years. The options granted under this plan are
exercisable not earlier than one year after the date of grant, and expire not
more than ten years after the date of the grant, and are subject to a vesting
schedule.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions: dividend
yield of 4.36 percent for 1996 and 4.23 percent for 1995, weighted-average
risk-free interest rate of 6.5 percent for 1996 and 1995, and expected
volatility of 24.3 percent for 1996 and 1995. The effects of applying SFAS 123
on the pro forma net income may not be representative of the effects on pro
forma net income for future years.

A summary of the status of the qualified stock options as of December 31,
1996, 1995 and 1994 and changes during the years ended on those dates is
presented below:

<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
QUALIFIED STOCK EXERCISE EXERCISE EXERCISE
OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
- ----------------- -------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of
year........... 524,857 $18 536,902 $16 714,684 $12
Granted.......... 109,670 25 92,323 23 94,457 23
Exercised........ (63,122) 12 (88,454) 11 (256,977) 6
Forfeited........ (12,759) 21 (15,914) 20 (15,262) 14
------- ------- ---------
Outstanding at
end of year.... 558,646 $21 524,857 $18 536,902 $16
======= ======= =========
Options
exercisable at
year-end....... 248,519 228,856 198,031
Weighted-average
fair value of
options granted
during the
year........... $ 6.38 $ 5.47
</TABLE>

42
<PAGE> 45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about qualified stock options
outstanding at December 31, 1996:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- -----------------------------
RANGE NUMBER WEIGHTED-AVG. WEIGHTED- AVG. NUMBER WEIGHTED- AVG.
OF OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICES AT 12/31/96 CONTRACTUAL LIFE PRICE AT 12/31/96 PRICE
- --------------- ----------- ---------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$ 4-12 60,603 3.7years $10 60,603 $10
13-19 86,579 5.2 17 62,304 18
20-25 411,464 8.0 23 125,612 22
------- -------
$ 4-25 558,646 7.1 21 248,519 18
======= =======
</TABLE>

During 1996 and 1995 there were 1,048 and 1,837 stock appreciation rights
granted in tandem with qualified stock options.

There are 7,353 and 21,272 stock appreciation rights outstanding as of
December 31, 1996 and 1995. These were granted in tandem with qualified stock
options.

Non-Qualified Stock Options

<TABLE>
<CAPTION>
1996 1995 1994
----------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........ 33,064 $ 18 12,279 $ 9 12,279 $ 9
Granted................................. 19,592 23 20,785 24 -- --
Exercised............................... (1,000) 9 -- -- -- --
-- -- -
------ ------ ------ ---- -- ------
Outstanding at end of year.............. 51,656 $ 20 33,064 $18 12,279 $ 9
-- -- -
------ ------ ------ ---- -- ------
Options exercisable at year-end......... 15,436 12,279 12,279
Weighted-average fair value of options
granted during the year............... $5.54 $5.20
</TABLE>

The following table summarizes information about non-qualified stock
options outstanding at December 31, 1996:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- -----------------------------
RANGE NUMBER WEIGHTED-AVG. WEIGHTED-AVG. NUMBER WEIGHTED-AVG.
OF OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICES AT 12/31/96 CONTRACTUAL LIFE PRICE AT 12/31/96 PRICE
- --------------- ----------- ---------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$ 8-9 11,273 3.1years $ 9 11,273 $ 9
23-26 40,387 8.7 24 4,156 24
------ ------
8-26 51,656 7.5 20 15,429 13
====== ======
</TABLE>

During 1996 and 1995, 9,445 and 9,185 stock appreciation rights were
granted in tandem with non-qualified stock options. There were 21,720 and 13,275
stock appreciation rights outstanding as of December 31, 1996 and 1995,
respectively.

Restricted stock is awarded to key employees providing for the immediate
award of Valley's common stock subject to certain vesting and restrictions. The
awards are recorded at fair market value and amortized into salaries expense
over the vesting period. The following table sets forth the changes in
restricted stock awards outstanding at December 31, 1996, 1995 and 1994.

43
<PAGE> 46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Restricted Stock Awards

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Outstanding at beginning of year.............................. 70,686 56,169 55,006
Granted....................................................... 31,675 31,815 19,461
Vested........................................................ (20,483) (16,245) (17,995)
Forfeited..................................................... (2,490) (1,053) (303)
------- ------- -------
Outstanding at end of year.................................... 79,388 70,686 56,169
======= ======= =======
</TABLE>

The amount of compensation costs related to restricted stock awards
included in salary expense in 1996, 1995 and 1994 amounted to $448,000, $322,000
and $254,000, respectively.

INCOME TAXES (Note 13)

Income tax expense(benefit) included in the financial statements consisted
of the following:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax from operations:
Current:
Federal.................................................. $31,630 $31,230 $32,131
State.................................................... 2,887 6,100 7,084
------- ------- -------
34,517 37,330 39,215
Deferred:
Federal & State.......................................... (585) 1,549 (492)
------- ------- -------
Total income tax from operations.................... $33,932 $38,879 $38,723
======= ======= =======
</TABLE>

The tax effects of temporary differences that give rise to deferred tax
assets and liabilities as of December 31, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Allowance for possible loan losses..................................... $16,622 $16,205
State privilege year taxes............................................. 1,011 1,738
Non-accrual loan interest.............................................. 552 927
Other.................................................................. 3,483 1,644
------- -------
Total deferred tax assets...................................... 21,668 20,514
------- -------
Deferred tax liabilities:
Tax over book depreciation............................................. 2,837 2,753
Purchase accounting adjustments........................................ 633 888
Unearned discount on investments....................................... 724 701
Investment securities available for sale............................... 47 2,492
Other.................................................................. 1,105 388
------- -------
Total deferred tax liabilities................................. 5,346 7,222
------- -------
Net deferred tax assets................................................ $16,322 $13,292
======= =======
</TABLE>

Included in shareholders' equity are income tax expense attributable to net
unrealized gains on investment securities available for sale in the amounts of
$47,000 and $2,492,000 for the years ended December 31, 1996 and 1995,
respectively.

44
<PAGE> 47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation between the reported income tax expense from operations
and the amount computed by multiplying income before taxes by the statutory
federal income tax rate is as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax at statutory federal income tax rate.............. $35,499 $35,516 $36,153
Increases (decreases) resulted from:
Tax-exempt interest, net of interest incurred to
carry tax-exempts................................ (4,490) (4,921) (5,241)
State income tax, net of federal tax benefit........ 2,301 4,187 3,860
Provision for recapture of bad debt deduction upon
merger........................................... -- 3,115 3,115
Other, net.......................................... 622 982 836
------- ------- -------
Income tax expense.................................. $33,932 $38,879 $38,723
======= ======= =======
</TABLE>

COMMITMENTS AND CONTINGENCIES (Note 14)

CASH RESERVES

At December 31, 1996, cash reserves maintained in accordance with Federal
Reserve regulations amounted to $25,269,000.

LEASE COMMITMENTS

Certain bank facilities are occupied under non-cancelable long term
operating leases which expire at various dates through 2027. Certain lease
agreements provide for renewal options and increases in rental payments based
upon increases in the consumer price index or the lessor's cost of operating the
facility. Minimum aggregate lease payments for the remainder of the lease terms
are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997................................................................... $ 2,846
1998................................................................... 2,583
1999................................................................... 2,359
2000................................................................... 1,143
2001................................................................... 1,001
2002-2027.............................................................. 4,072
-------
Total lease commitments...................................... $ 14,004
=======
</TABLE>

Net occupancy expense for 1996, 1995 and 1994 includes approximately
$1,803,000, $2,163,000 and $2,053,000, respectively, of rental expenses for
leased bank facilities.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In the ordinary course of business of meeting the financial needs of its
customers, Valley, through its subsidiary VNB, is a party to various financial
instruments which are properly not reflected in the consolidated financial
statements. These financial instruments include standby and commercial letters
of credit, unused portions of lines of credit and commitments to extend various
types of credit. These instruments involve, to varying degrees, elements of
credit risk in excess of the amounts recognized in the consolidated financial
statements. The commitment or contract amount of these instruments is an
indicator of VNB's level of involvement in each type of instrument as well as
the exposure to credit loss in the event of non-performance by the other party
to the financial instrument. VNB seeks to limit any exposure of credit loss by
applying the same credit underwriting standards, including credit review,
interest rates and collateral requirements or personal guarantees, as for
on-balance sheet lending facilities.

45
<PAGE> 48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table provides a summary of financial instruments with
off-balance sheet risk at December 31, 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
---------- --------
(IN THOUSANDS)
<S> <C> <C>
Standby and commercial letters of credit..................... $ 35,351 $ 29,210
Commitments under unused lines of credit-credit card......... 961,562 95,549
Commitments under unused lines of credit-other............... 352,273 331,451
Outstanding loan commitments................................. 208,127 182,874
---------- --------
Total financial instruments with off-balance sheet
risk............................................. $1,557,313 $639,084
========== ========
</TABLE>

Standby letters of credit represent the guarantee by VNB of the obligations
or performance of a customer in the event the customer is unable to meet or
perform its obligations to a third party. Obligations to advance funds under
commitments to extend credit, including commitments under unused lines of
credit, are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have specified
expiration dates, which may be extended upon request, or other termination
clauses and generally require payment of a fee.

The amounts set forth above do not necessarily represent future cash
requirements as it is anticipated that many of these commitments will expire
without being fully drawn upon. Most of VNB's lending activity is to customers
within the state of New Jersey.

LITIGATION

In the normal course of business, Valley may be a party to various
outstanding legal proceedings and claims. In the opinion of management, the
consolidated financial position or results of operations of Valley will not be
materially affected by the outcome of such legal proceedings and claims.

SHAREHOLDERS' EQUITY (Note 15)

CAPITAL REQUIREMENTS

Valley is subject to the regulatory capital requirements administered by
the Federal Reserve Bank. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on Valley's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, Valley 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 to maintain minimum amounts and ratios of total and Tier I
capital to risk-weighted assets, and of Tier I capital to average assets, as
defined in the regulations. As of December 31, 1996, Valley exceeds all capital
adequacy requirements to which it is subject.

As of December 31, 1996, the most recent notification from the Federal
Reserve Bank categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized
Valley must maintain minimum total risk-based, Tier I risk-based, Tier I
leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the institution's
category.

46
<PAGE> 49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Valley's actual capital amounts and ratios as of December 31, 1996 and 1995
are presented in the following table.

<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED
UNDER
PROMPT
MINIMUM CORRECTIVE
CAPITAL ACTION
ACTUAL REQUIREMENTS PROVISIONS
---------------- ---------------- ----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ----- -------- ----- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital........................... $431,482 13.6 % $254,523 8.0% $318,153 10.0 %
Tier I Capital.......................... 391,696 12.3 127,261 4.0 190,892 6.0
Tier I Capital.......................... 391,696 8.4 186,755 4.0 233,443 5.0
As of December 31, 1995
Total Capital........................... 427,428 15.1 225,896 8.0 282,370 10.0
Tier I Capital.......................... 392,118 13.9 112,948 4.0 169,422 6.0
Tier I Capital.......................... 392,118 8.4 186,532 4.0 233,165 5.0
</TABLE>

DIVIDEND RESTRICTIONS

VNB, a national banking association, is subject to a limitation in the
amount of dividends it may pay to Valley, VNB's only shareholder. Prior approval
by the Comptroller of the Currency ("OCC") is required to the extent the total
of all dividends to be declared by VNB in any calendar year exceeds net profits,
as defined, for that year combined with its retained net profits from the
preceding two calendar years, less any transfers to capital surplus. Under this
limitation, VNB could declare dividends in 1997 without prior approval of the
OCC of up to $27,879,000 plus an amount equal to VNB's net profits for 1997 to
the date of such dividend declaration.

SHARES OF COMMON STOCK

The following table summarizes the share transactions for the three years
ended December 31, 1996:

<TABLE>
<CAPTION>
SHARES SHARES IN
ISSUED TREASURY
---------- ----------
<S> <C> <C>
Balance, December 31, 1993.......................................... 30,553,199 (121,696)
Warrants exercised................................................ 188,344 --
Effect of stock incentive plan, net............................... 218,609 --
Stock dividend (10%).............................................. 2,888,723 --
---------- ----------
Balance, December 31, 1994.......................................... 33,848,875 (121,696)
Warrants exercised................................................ 61,108 494,674
Effect of stock incentive plan, net............................... 11,848 82,769
Stock dividend (5%)............................................... 1,692,925 --
Purchase of treasury stock........................................ -- (563,160)
Acquisition of American Union Bank................................ 274,965 --
---------- ----------
Balance, December 31, 1995.......................................... 35,889,721 (107,413)
Stock dividend (5%)............................................... 801,620 942,994
Effect of stock incentive plan, net............................... (16,150) 100,026
Purchase of treasury stock........................................ -- (1,207,700)
---------- ----------
Balance, December 31, 1996.......................................... 36,675,191 (272,093)
========== ==========
</TABLE>

47
<PAGE> 50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

TREASURY STOCK

During 1996, Valley's Board of Directors rescinded its repurchase program
after 1,207,700 shares of Valley common stock were repurchased in 1996 and
563,160 shares were repurchased in 1995. As of December 31, 1996, Valley has
reissued approximately 1,620,463 shares for its employee benefit program, an
expired warrant program and a 5% stock dividend issued May 17, 1996.

CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED) (Note 16)

<TABLE>
<CAPTION>
QUARTERS ENDED 1996
-----------------------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income............................. $ 80,273 $ 79,827 $ 82,204 $ 81,980
Interest expense............................ 35,603 35,688 36,809 37,422
Net interest income......................... 44,670 44,139 45,395 44,558
Provision for possible loan losses.......... 700 1,050 345 351
Non-interest income......................... 6,352 5,214 6,892 7,821
Non-interest expense........................ 21,872 23,538 30,863 24,895
Income before income taxes.................. 28,450 24,765 21,079 27,133
Income tax expense.......................... 10,081 7,959 6,707 9,185
Net income.................................. 18,369 16,806 14,372 17,948
Net income per share........................ 0.49 0.46 0.40 0.49
Cash dividends per share.................... 0.24 0.25 0.25 0.25
Average shares outstanding.................. 37,385,010 36,639,990 36,377,502 36,385,311
</TABLE>

<TABLE>
<CAPTION>
QUARTERS ENDED 1995
-----------------------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income............................. $ 78,647 $ 79,711 $ 79,204 $ 79,088
Interest expense............................ 34,590 37,056 35,844 35,781
Net interest income......................... 44,057 42,655 43,360 43,307
Provision for possible loan losses.......... 826 650 600 593
Non-interest income......................... 5,103 4,737 5,935 5,193
Non-interest expense........................ 22,238 24,702 20,898 22,365
Income before income taxes.................. 26,096 22,040 27,797 25,542
Income tax expense.......................... 8,731 11,459 9,687 9,002
Net income.................................. 17,365 10,581 18,110 16,540
Net income per share........................ .47 .28 .48 .44
Cash dividends per share.................... .22 .24 .24 .24
Average shares outstanding.................. 37,473,201 37,558,752 37,525,374 37,491,705
</TABLE>

48
<PAGE> 51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PARENT COMPANY INFORMATION (Note 17)

CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income
Dividends from subsidiary................................... $67,000 $36,000 $31,800
Interest from subsidiary.................................... 798 1,398 647
Gains on securities transactions, net....................... 219 1,374 2,111
Other interests and dividends............................... 261 153 715
------- ------- -------
68,278 38,925 35,273
Expenses...................................................... 2,127 2,334 2,778
------- ------- -------
Income before income taxes and equity in undistributed
earnings of subsidiary...................................... 66,151 36,591 32,495
Income tax (benefit) expense.................................. (141) 672 790
------- ------- -------
Income before equity in undistributed earnings of
subsidiary.................................................. 66,292 35,919 31,705
Equity in undistributed earnings of subsidiary................ 1,203 26,677 32,866
------- ------- -------
Net income.................................................... $67,495 $62,596 $64,571
======= ======= =======
</TABLE>

CONDENSED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash................................................................. $ 266 $ 4,228
Interest bearing deposits with banks................................. 27,500 26,500
Investment securities available for sale............................. 10,793 7,796
Investment in subsidiary............................................. 363,346 366,380
Other assets......................................................... 5,126 5,276
-------- --------
Total assets................................................. $407,031 $410,180
======== ========
LIABILITIES
Dividends payable to shareholders.................................... $ 9,101 $ 8,946
Other liabilities.................................................... 1,408 997
-------- --------
Total liabilities............................................ 10,509 9,943
-------- --------
SHAREHOLDERS' EQUITY
Common stock......................................................... 20,433 20,025
Surplus.............................................................. 238,286 216,377
Retained earnings.................................................... 145,064 162,012
Unrealized gain on investment securities available for sale, net
of tax........................................................... 328 3,733
-------- --------
404,111 402,147
Treasury stock at cost............................................ (7,589) (1,910)
-------- --------
Total shareholders' equity........................................ 396,522 400,237
-------- --------
Total liabilities and shareholders' equity................... $407,031 $410,180
======== ========
</TABLE>

49
<PAGE> 52

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................... $ 67,495 $ 62,596 $ 64,571
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in undistributed earnings of subsidiary............ (1,203) (26,677) (32,866)
Depreciation and amortization of intangible assets........ 434 460 920
Amortization of compensation costs on non-qualified stock
options and restricted stock awards..................... 448 322 254
Net deferred income tax benefit........................... 482 51 73
Net amortization of premiums and discounts................ -- -- 35
Net gains on securities transactions...................... (219) (1,374) (2,111)
Net (increase) decrease in other assets................... (285) 65 402
Net (decrease) increase in other liabilities.............. (553) 357 (169)
Other..................................................... -- 1,798 --
-------- -------- --------
Net cash provided by operating activities............ 66,599 37,598 31,109
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturing investment securities................. -- -- 12,000
Proceeds from sales of investment securities available for
sale...................................................... 715 3,796 9,613
Purchases of investment securities........................... (2,242) (5,003) (4,478)
Net (increase) decrease in short-term investments............ (1,000) 6,155 (19,794)
-------- -------- --------
Net cash (used in) provided by investment
activities......................................... (2,527) 4,948 (2,659)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of common shares added to treasury................. (32,267) (13,670) --
Dividends paid to shareholders............................... (35,983) (33,618) (31,694)
Common stock issued.......................................... 216 8,028 3,925
-------- -------- --------
Net cash used in financing activities................ (68,034) (39,260) (27,769)
-------- -------- --------
Net (decrease) increase in cash................................ (3,962) 3,286 681
Cash at beginning of year...................................... 4,228 942 261
-------- -------- --------
Cash at end of year............................................ $ 266 $ 4,228 $ 942
======== ======== ========
</TABLE>

FAIR VALUES OF FINANCIAL INSTRUMENTS (NOTE 18)

Limitations: The fair value estimates made at December 31, 1996 and 1995
were based on pertinent market data and relevant information on the financial
instrument at that time. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the entire portion of the
financial instruments. Because no market exists for a portion of the financial
instruments, fair value estimates may be based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For instance, Valley has certain fee-generating business
lines (e.g. its mortgage servicing operation and trust department) that were not
considered in these estimates since these activities are not financial
instruments. In addition, the tax implications related to the realization of the

50
<PAGE> 53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in many of the estimates.

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments and mortgage servicing rights:

Cash and short-term investments: For such short-term investments, the
carrying amount is considered to be a reasonable estimate of fair value.

Investment securities held to maturity and investment securities available
for sale: Fair values are based on quoted market prices.

Loans: Fair values were estimated by obtaining quoted market prices, when
available. The fair value of other loans were estimated by discounting the
future cash flows using market discount rates that reflect the credit and
interest-rate risk inherent in the loan.

Mortgage servicing rights: The fair value of the rights is estimated using
the present value of future cash flows and assumptions regarding prepayment
estimates cost of servicing, discount rates and loan terms. Quoted prepayment
speeds from brokers are utilized to estimate prepayment assumptions and any
impact on amortization. Any impairments to the value of the rights are
recognized as a direct effect to amortization.

Deposit liabilities: Current carrying amounts approximate estimated fair
value of demand deposits and savings accounts. The fair value of time deposits
was based on the discounted value of contractual cash flows using estimated
rates currently offered for deposits of similar remaining maturity.

Short-term liabilities: Current carrying amounts approximate estimated
fair value.

Other borrowings: The fair value was estimated by discounting future cash
flows based on rates currently available for debt with similar terms and
remaining maturity.

The carrying amounts and estimated fair values of financial instruments
were as follows at December 31, 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks................. $ 162,872 $ 162,872 $ 167,349 $ 167,349
Federal funds sold...................... 75,000 75,000 108,500 108,500
Investment securities held to
maturity............................. 209,553 211,534 266,354 270,622
Investment securities available for
sale................................. 950,192 950,192 1,146,285 1,146,285
Net loans............................... 3,135,996 3,129,739 2,753,505 2,761,926
Due from customers on acceptances
outstanding.......................... 940 940 838 838
Mortgage servicing rights............... 12,187 14,270 8,094 9,031
Financial liabilities:
Deposits with no stated maturity........ 2,284,434 2,284,434 2,242,100 2,242,100
Deposits with stated maturities......... 1,891,772 1,902,513 1,841,773 1,963,170
Short-term borrowings................... 39,757 39,757 37,445 37,445
Other borrowings........................ 34,670 33,733 28,679 28,565
Bank acceptances outstanding............ 940 940 838 838
</TABLE>

The estimated fair value of financial instruments with off-balance sheet
risk, consisting of unamortized fee income at December 31, 1996 and 1995 is not
material.

51
<PAGE> 54

INDEPENDENT AUDITORS' REPORT

LOGO

KPMG Peat Marwick LLP
Certified Public Accountants

New Jersey Headquarters
150 John F. Kennedy Parkway
Short Hills, NJ 07078

THE BOARD OF DIRECTORS AND SHAREHOLDERS
VALLEY NATIONAL BANCORP:

We have audited the accompanying consolidated statements of financial
condition of Valley National Bancorp and subsidiaries as of December 31, 1996
and 1995 and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Valley
National Bancorp and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996 in conformity with generally accepted
accounting principles.

As discussed in Note 1 to the consolidated financial statements, Valley
National Bancorp and subsidiaries adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" in 1994.

/s/ KPMG PEAT MARWICK LLP

January 22, 1997

LOGO

52
<PAGE> 55

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information which will be set forth under the caption "Director
Information" in the 1997 Proxy Statement is incorporated herein by reference.
Certain information on Executive Officers of the registrant is included in Part
I, Item 4A of this report, which is also incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information which will be set forth under the caption "Executive
Compensation" in the 1997 Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information which will be set forth under the caption "Stock Ownership
of Management and Principal Shareholders" in the 1997 Proxy Statement is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information which will be set forth under the captions "Certain
Transactions with Management" and "Personnel and Compensation Committee
Interlocks and Insider Participation" in the 1997 Proxy Statement is
incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements and Schedules:

The financial statements listed on the index of this Annual Report on
Form 10-K are filed as part of this Annual Report.

All financial statement 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.

(b) Current Reports on Form 8-K during the quarter ended December 31, 1996

None

(3) Articles of Incorporation and Bylaws:

A. Restated Certificate of Incorporation of the Registrant as in
effect on February 12, 1997.

B. By-Laws of the Registrant adopted as of March 14, 1989 and
amended March 19, 1991 is incorporated herein by reference to the
Registrant's Form 10-K Annual Report for the fiscal period ending
December 31, 1993.

(10) Material Contracts:

A. "Change in Control Agreements" dated January 1, 1995 between
Valley, VNB and Gerald H. Lipkin, Peter Southway, Sam P. Pinyuh, Peter
Crocitto, Alan Eskow, Robert Farrell, Richard Garber, Robert Mulligan
and Peter John Southway are incorporated herein by reference to the
Registrant's Form 10-K Annual Report for the period ending December 31,
1994.

B. "Change in Control Agreement" dated February 1, 1996 between
Valley, VNB and Jack Blackin.

C. "Change in Control Agreement" dated April 15, 1996 between
Valley, VNB and John Prol.

53
<PAGE> 56

D. "The Valley National Bancorp Long-term Stock Incentive Plan"
dated January 18, 1994 is incorporated herein by reference to the
Registrant's Notice of Annual Meeting of Shareholders and Proxy dated
March 1, 1994.

E. "Severance Agreements" dated August 17, 1994 between Valley, VNB
and Gerald H. Lipkin, Peter Southway, and Sam P. Pinyuh are incorporated
by reference to Registrant's Registration Statement on Form S-4 (No.
33-55765) filed with the Securities and Exchange Commission on October
4, 1994.

F. "Stock Option Agreement" dated April 1, 1992 between Valley and
Michael Guilfoile is incorporated by reference to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994.

G. "Split-Dollar Agreement" dated July 7, 1995 between Valley, VNB,
and Gerald H. Lipkin is incorporated herein by reference to Registrant's
Report on Form 10-K for the year ended December 31, 1995.

H. "Employment Arrangement" dated June 6, 1996 between Valley, VNB
and Peter Southway.

I. "Agreement and Plan of Merger" dated September 13, 1996 between
Valley, VNB, Midland Bancorporation, Inc. and The Midland Bank and Trust
Company is incorporated herein by reference to the Registrant's Form 8-K
filed September 20, 1996.

J. "Stock Option Agreement" dated September 13, 1996 between Valley
and Midland Bancorporation, Inc. is incorporated herein by reference to
the Registrant's Form 8-K filed September 20, 1996.

(21) List of Subsidiaries:

(a) Subsidiary of Valley:

<TABLE>
<CAPTION>
PERCENTAGE OF VOTING
JURISDICTION OF SECURITIES OWNED BY
NAME INCORPORATION THE PARENT
- --------------------------------------- --------------- --------------------
<S> <C> <C>
Valley National Bank (VNB) United States 100%
(b) Subsidiaries of VNB:
VNB Mortgage Services, Inc. New Jersey 100%
BNV Realty Incorporated New Jersey 100%
VN Investment, Inc. New Jersey 100%
VNB Financial Advisors, Inc. New Jersey 100%
GAP Realty Delaware 100%
VNB Loan Services, Inc. New York 100%
VNB International Services, Inc. (ISI) New Jersey 100%
(c) Subsidiary of ISI:
VNB Financial Services, Inc. Canada 100%
</TABLE>

(23) Consents of Experts and Counsel

Consent of KPMG Peat Marwick LLP.

(24) Power of Attorney of Certain Directors and Officers of Valley

(27) Financial Data Schedule

54
<PAGE> 57

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,
President and Chief Executive Officer

Dated: February 27, 1997

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 indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------------ -------------------
<S> <C> <C>

/s/ GERALD H. LIPKIN Chairman, President and Chief February 27, 1997
- ----------------------------------- Executive Officer and Director
Gerald H. Lipkin

/s/ PETER SOUTHWAY Vice Chairman (Principal Financial February 27, 1997
- ----------------------------------- Officer) and Director
Peter Southway
/s/ ALAN D. ESKOW Corporate Secretary and Senior Vice February 27, 1997
- ----------------------------------- President (Principal Accounting
Alan D. Eskow Officer)

ANDREW ABRAMSON* Director February 27, 1997
- -----------------------------------
Andrew Abramson

PAMELA BRONANDER* Director February 27, 1997
- -----------------------------------
Pamela Bronander

JOSEPH COCCIA, JR.* Director February 27, 1997
- -----------------------------------
Joseph Coccia, Jr.

AUSTIN C. DRUKKER* Director February 27, 1997
- -----------------------------------
Austin C. Drukker

WILLARD L. HEDDEN* Director February 27, 1997
- -----------------------------------
Willard L. Hedden

THOMAS P. INFUSINO* Director February 27, 1997
- -----------------------------------
Thomas P. Infusino

GERALD KORDE* Director February 27, 1997
- -----------------------------------
Gerald Korde
</TABLE>

55
<PAGE> 58

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------------ -------------------
<S> <C> <C>

JOLEEN J. MARTIN* Director February 27, 1997
- -----------------------------------
Joleen J. Martin

ROBERT E. MCENTEE* Director February 27, 1997
- -----------------------------------
Robert E. McEntee

WILLIAM MCNEAR* Director February 27, 1997
- -----------------------------------
William McNear

SAM P. PINYUH* Director February 27, 1997
- -----------------------------------
Sam P. Pinyuh

ROBERT RACHESKY* Director February 27, 1997
- -----------------------------------
Robert Rachesky

BARNETT RUKIN* Director February 27, 1997
- -----------------------------------
Barnett Rukin

RICHARD F. TICE* Director February 27, 1997
- -----------------------------------
Richard F. Tice

LEONARD VORCHEIMER* Director February 27, 1997
- -----------------------------------
Leonard Vorcheimer

JOSEPH L. VOZZA* Director February 27, 1997
- -----------------------------------
Joseph L. Vozza
</TABLE>

* By Gerald H. Lipkin, as attorney-in-fact.

56
<PAGE> 59
VALLEY NATIONAL BANCORP
12/31/96 FORM 10-K

EXHIBIT INDEX

EXHIBIT NUMBER EXHIBIT DESCRIPTION
- -------------- -------------------
(3)A RESTATED CERTIFICATE OF INCORPORATION
(10)B CHANGE IN CONTROL AGREEMENT - JACK BLACKIN
(10)C CHANGE IN CONTROL AGREEMENT - JOHN PROL
(10)H EMPLOYMENT AGREEMENT - PETER SOUTHWAY
(23) CONSENT OF KPMG PEAT MARWICK LLP
(24) POWER OF ATTORNEY
(27) FINANCIAL DATA SCHEDULE

<PAGE> 1
EXHIBIT(c)(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 1455
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 75,000,000 shares of common
stock without nominal or par value.

<PAGE> 2
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 provision
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.

<PAGE> 3
IN WITNESS WHEREOF, Gerald H. Lipkin, Chairman, President and Chief
Executive Officer of the Valley National Bancorp, has executed this Restated
Certificate of Incorporation on behalf of Valley National Bancorp on this 12th
day of February, 1997.

/s/Gerald H. Lipkin
---------------------------
Gerald H. Lipkin, Chairman

<PAGE> 1
EXHIBIT (c)(10)(B)

CHANGE-IN-CONTROL AGREEMENT
(SENIOR VICE PRESIDENT)

THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made as of this first
day of February, 1996, among VALLEY NATIONAL BANK ("Bank"), a national banking
association with its principal office at 615 Main Avenue, Passaic, New Jersey,
VALLEY NATIONAL BANCORP ("Valley"), a New Jersey Corporation which maintains its
principal office at 1455 Valley Road, Wayne, New Jersey (Valley and the Bank
collectively are the "Company") and Jack Blackin (the "Executive").

BACKGROUND

WHEREAS, the Executive has been continuously employed by the Bank for
at least three full years;

WHEREAS, the Executive throughout his tenure has worked diligently in
his position in the business of the Bank and Valley;

WHEREAS, the Board of Directors of the Bank and Valley believe that the
future services of the Executive are of great value to the Bank and Valley and
that it is important for the growth and development of the Bank that the
Executive continue in his position;

WHEREAS, if the Company receives any proposal from a third person
concerning a possible business combination with, or acquisition of equities
securities of, the Company, the Board of Directors of the Company (the "Board")
believes it is imperative that the Company and the Board be able to rely upon
the Executive to continue in his position, and that they be able to receive and

-1-

<PAGE> 2
rely upon his advice, if they request it, as to the best interests of the
Company and its shareholders, without concern that the Executive might be
distracted by the personal uncertainties and risks created by such a proposal;

WHEREAS, to achieve that goal, and to retain the Executive's
services prior to any such activity, the Board of Directors and the Executive
have agreed to enter into this Agreement to govern the Executive's termination
benefits in the event of a Change in Control of the Company, as hereinafter
defined.

NOW, THEREFORE, to assure the Company that it will have the
continued dedication of the Executive and the availability of his advice and
counsel notwithstanding the possibility, threat or occurrence of a bid to take
over control of the Company, and to induce the Executive to remain in the employ
of the Company, and for other good and valuable consideration, the Company and
the Executive, each intending to be legally bound hereby agree as follows:

1. Definitions

a. Base Salary. "Base Salary", as used in Section 9 hereof,
means the annual cash base salary (excluding any bonus and the value of any
fringe benefits) paid to the Executive at the time of the termination of
employment unless such amount has been reduced after a Change in Control, in
which case such amount shall be the highest base salary in effect during the 18
months prior to the Change in Control.

-2-
<PAGE> 3
b. Cause. For purposes of this Agreement "Cause" with respect
to the termination by the Company of Executive's employment shall mean (i)
willful and continued failure by the Executive to perform his duties for the
Company under this Agreement after at least one warning in writing from the
Company's Board of Directors identifying specifically any such failure; (ii) the
willful engaging by the Executive in misconduct which causes material injury to
the Company as specified in a written notice to the Executive from the Board of
Directors; or (iii) conviction of a crime, other than a traffic violation,
habitual drunkenness, drug abuse, or excessive absenteeism other than for
illness, after a warning (with respect to drunkenness or absenteeism only) in
writing from the Board of Directors to refrain from such behavior. No act or
failure to act on the part of the Executive shall be considered willful unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the action or omission was in the best interest of the
Company.

-3-
<PAGE> 4
(25%) of the combined voting power of Valley's then outstanding securities (a
"Control Person"), (ii) upon the first purchase of Valley's common stock
pursuant to a tender or exchange offer (other than a tender or exchange offer
made by Valley, a Subsidiary or an employee benefit plan established or
maintained by Valley, a Subsidiary or any of their respective affiliates), (iii)
upon the approval by Valley's stockholders of (A) a merger or consolidation of
Valley with or into another corporation (other than a merger or consolidation
which is approved by at least two-thirds of the Continuing Directors (as
hereinafter defined) or the definitive agreement for which provides that at
least two-thirds of the directors of the surviving or resulting corporation
immediately after the transaction are Continuing Directors (in either case, a
"Non-Control Transaction")), (B) a sale or disposition of all or substantially
all of Valley's assets or (C) a plan of liquidation or dissolution of Valley,
(iv) if during any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board (the "Continuing Directors") cease
for any reason to constitute at least two-thirds thereof or, following a
Non-Control Transaction, two-thirds of the board of directors of the surviving
or resulting corporation; provided that any individual whose election or
nomination for election as a member of the Board (or, following a Non-Control
Transaction, the board of directors of the surviving or resulting corporation)
was approved by a vote of at least two-thirds of the Continuing Directors then
in office shall be considered a Continuing Director, or (v) upon a

-4-
<PAGE> 5
sale of (A) common stock of the Bank if after such sale any person (as such term
is used in Section 13(d) and 14(d)(2) of the Exchange Act) other than Valley, an
employee benefit plan established or maintained by Valley or a Subsidiary, or an
affiliate of Valley or a Subsidiary, owns a majority of the Bank's common stock
or (B) all or substantially all of the Bank's assets (other than in the ordinary
course of business). No person shall be considered a Control Person for purposes
of clause (i) above if (A) such person is or becomes the beneficial owner,
directly or indirectly, of more than ten percent (10%) but less than twenty-five
percent (25%) of the combined voting power of Valley's then outstanding
securities if the acquisition of all voting securities in excess of ten percent
(10%) was approved in advance by a majority of the Continuing Directors then in
office or (B) such person acquires in excess of ten percent (10%) of the
combined voting power of Valley's then outstanding voting securities in
violation of law and by order of a court of competent jurisdiction, settlement
or otherwise, disposes or is required to dispose of all securities acquired in
violation of law.

d. Continuously Employed. "Continuously employed", as used in
Section 9, means continuously employed by the Bank but excludes any period of
employment by a bank or financial institution acquired by or merged into the
Bank and excludes any period of employment by the Bank if such period is
separated from the current employment with the Bank by a break in service (other

-5-
<PAGE> 6
a break in service resulting solely from illness, disability or family leave).

e. Contract Period. "Contract Period" shall mean the period
commencing the day immediately preceding a Change in Control and ending on the
earlier of (i) the first anniversary of the Change in Control or (ii) the date
the Executive would attain age 65 or (iii) the death of the Executive. For the
purpose of this Agreement, a Change in Control shall be deemed to have occurred
at the date specified in the definition of Change-in-Control.

f. Exchange Act. "Exchange Act" means the Securities Exchange
Act of 1934, as amended.

g. Good Reason. When used with reference to a voluntary
termination by Executive of his employment with the Company, "Good Reason" shall
mean any of the following, if taken without Executive's express written consent:

(1) The assignment to Executive of any duties inconsistent
with, or the reduction of powers or functions associated with, Executive's
position, duties, responsibilities and status with the Company immediately prior
to a Change in Control. A change in title or positions resulting merely from a
merger of the Company into or with another bank or company which does not
downgrade in any way the Executive's powers, duties and responsibilities shall
not meet the requirements of this paragraph;

(2) A reduction by the Company in Executive's annual base
compensation as in effect immediately prior to a Change

-6-
<PAGE> 7
in Control or the failure to award Executive annual increases in accordance
herewith;

(3) A failure by the Company to continue any bonus plan in
which Executive participated immediately prior to the Change in control or a
failure by the Company to continue Executive as a participant in such plan on at
least the same basis as Executive participated in such plan prior to the Change
in Control;

(4) The Company's transfer of Executive to another
geographic location more than 35 miles from his present office location, except
for required travel on the Company's business to an extent substantially
consistent with Executive's business travel obligations immediately prior to
such Change in Control;

(5) The failure by the Company to continue in effect any
employee benefit plan, program or arrangement (including, without limitation the
Company's retirement plan, life insurance plan, health and accident plan,
disability plan, or long term stock incentive plan) in which Executive is
participating immediately prior to a Change in Control (except that the Company
may institute or continue plans, programs or arrangements providing Executive
with substantially similar benefits); the taking of any action by the Company
which would adversely affect Executive's participation in or materially reduce
Executive's benefits under, any of such plans, programs or arrangements; the
failure to continue, or the taking of any action which would deprive

-7-

<PAGE> 8
Executive, of any material fringe benefit enjoyed by Executive immediately prior
to such Change in Control; or the failure by the Company to provide Executive
with the number of paid vacation days to which Executive was entitled
immediately prior to such Change in Control;

(6) The failure by the Company to obtain an assumption in
writing of the obligations of the Company to perform this Agreement by any
successor to the Company and to provide such assumption to the Executive prior
to any Change in Control; or

(7) Any purported termination of Executive's employment by
the Company during the term of this Agreement which is not effected pursuant to
all of the requirements of this Agreement; and, for purposes of this Agreement,
no such purported termination shall be effective.

h. Pro-rata Bonus Amount. "Pro-rata Bonus Amount", as used in
Section 9, means an amount equal to a "portion" of the highest cash bonus paid
to the Executive in the three calendar years immediately prior to the Change in
Control. The "portion" of such cash bonus shall be a fraction, the numerator of
which is the number of calendar months or part thereof which the Executive has
worked in the calendar year in which the termination occurs and the denominator
of which is 12.

i. Subsidiary. "Subsidiary" means any corporation in an
unbroken chain of corporations, beginning with Valley, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total

-8-
<PAGE> 9
combined voting power of all classes of stock in one of the other corporations
in such chain.

2. Employment. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts employment, during the Contract
Period upon the terms and conditions set forth herein.

3. Position. During the Contract Period the Executive shall
be employed as a Senior Officer by the bank, or such other corporate or
divisional profit center as shall then be the principal successor to the
business, assets and properties of the Company, with substantially the same
title and the same duties and responsibilities as before the Change in Control.
The Executive shall devote his full time and attention to the business of the
Company, and shall not during the Contract Period be engaged in any other
business activity. This paragraph shall not be construed as preventing the
Executive from managing any investments of his which do not require any service
on his part in the operation of such investments.

4. Cash Compensation. The Company shall pay to the
Executive compensation for his services during the Contract Period as follows:

a. Base Salary. A base annual salary equal to the annual
salary in effect as of the Change in Control. The annual salary shall be payable
in installments in accordance with the Company's usual payroll method.

b. Annual Bonus. An annual cash bonus equal to at least the
average of the bonuses paid to the Executive in the three

-9-

<PAGE> 10
years prior to the Change in Control. The bonus shall be payable at the time and
in the manner which the Company paid such bonuses prior to the Change in
Control.

c. Annual Review. The Board of Directors of the Company during
the Contract Period shall review annually, or at more frequent intervals which
the Board determines is appropriate, the Executive's compensation and shall
award him additional compensation to reflect the Executive's performance, the
performance of the Company and competitive compensation levels, all as
determined in the discretion of the Board of Directors.

5. Expenses and Fringe Benefits.

a. Expenses. During the Contract Period, the Executive shall
be entitled to reimbursement for all business expenses incurred by him with
respect to the business of the Company in the same manner and to the same extent
as such expenses were previously reimbursed to him immediately prior to the
Change in Control.

b. Other Benefits. The Executive also shall be entitled to
vacations and sick days, in accordance with the practices and procedures of the
Company, as such existed immediately prior to the Change in Control. During the
Contract Period, the Executive also shall be entitled to hospital, health,
medical and life insurance, and any other benefits enjoyed, from time to time,
by senior officers of the Company, all upon terms as favorable as those enjoyed
by other senior officers of the Company. Notwithstanding anything in this
paragraph 5(b) to the contrary, if

-10-
<PAGE> 11
the Company adopts any change in the benefits provided for senior officers of
the Company, and such policy is uniformly applied to all officers of the Company
(and any successor or acquiror of the Company, if any), then no such change
shall be deemed to be contrary to this paragraph.

6. Termination for Cause. The Company shall have the right to
terminate the Executive for Cause, upon written notice to him of the termination
which notice shall specify the reasons for the termination. In the event of
termination for Cause the Executive shall not be entitled to any further
benefits under this Agreement.

7. Disability. During the Contract Period if the Executive
becomes permanently disabled, or is unable to perform his duties hereunder for 4
consecutive months in any 12 month period, the Company may terminate the
employment of the Executive. In such event, the Executive shall not be entitled
to any further benefits under this Agreement.

8. Death Benefits. Upon the Executive's death during the
Contract Period, his estate shall not be entitled to any further benefits under
this Agreement.

-11-
<PAGE> 12
to the Company specifying facts and circumstances claimed to support the Good
Reason. The Executive shall be entitled to give a Notice of Termination that his
or her employment is being terminated for Good Reason at any time during the
Contract Period, not later than twelve months after any occurrence of an event
stated to constitute Good Reason. If the Company terminates the Executive's
employment during the Contract Period without Cause or if the Executive Resigns
for Good Reason, the Company shall, subject to section 12 hereof:

a. Within 20 business days of the termination of employment
pay the Executive a lump sum equal to: (i), if the Executive has been
continuously employed by the Bank for 6 full years or more, one (1) year of Base
Salary plus a Pro-rata Bonus Amount or (ii), if the Executive has been
continuously employed by the Bank for less than 6 full years but more than 3
years, then six (6) months of Base Salary plus a Pro-rata Bonus Amount; and

b. Continue to provide the Executive with medical, dental and
life insurance for the period equal to the equivalent of lump sum payment (e.g.
6 months or 1 year) as were provided at the time of the termination of his
employment with the Company, at the Company's cost. Upon expiration of benefit
coverages, full COBRA benefits (18 months) will be made available to Executive.

-12-
<PAGE> 13
with the health, hospitalization and insurance benefits due under this section,
the Executive, after giving 10 days' written notice to the Company identifying
the Company's failure, shall be entitled to recover from the Company all of his
reasonable legal fees and expenses incurred in connection with his enforcement
against the Company of the terms of this Agreement. The Executive shall be
denied payment of his legal fees and expenses only if a court finds that the
Executive sought payment of such fees without reasonable cause.

10. Resignation Without Good Reason. The Executive shall be
entitled to resign from the employment of the Company at any time during the
Contact Period without Good Reason, but upon such resignation the Executive
shall not be entitled to any additional compensation for the time after which he
ceases to be employed by the Company, and shall not be entitled to any of the
other benefits provided hereunder. No such resignation shall be effective unless
in writing with four weeks' notice thereof.

11. Non-Disclosure of Confidential Information.

a. Non-Disclosure of Confidential Information. Except in the
course of his employment with the Company and in the pursuit of the business of
the Company or any of its subsidiaries or affiliates, the Executive shall not,
at any time during or following the Contract Period, disclose or use, any
confidential information or proprietary data of the Company or any of its
subsidiaries or affiliates. The Executive agrees that, among other

-13-
<PAGE> 14
things, all information concerning the identity of and the Company's relations
with its customers is confidential information.

b. Specific Performance. Executive agrees that the Company
does not have an adequate remedy at law for the breach of this section and
agrees that he shall be subject to injunctive relief and equitable remedies as a
result of the breach of this section. The invalidity or unenforceability of any
provision of this Agreement shall not affect the force and effect of the
remaining valid portions.

c. Survival. This section shall survive the termination of the
Executive's employment hereunder and the expiration of this Agreement.

12. Certain Reduction of Payments by the Company.

a. Anything in this Agreement to the contrary notwithstanding,
prior to the payment of any lump sum amount payable hereunder, the certified
public accountants of the Company immediately prior to a Change of Control (the
"Certified Public Accountants") shall determine as promptly as practical and in
any event within 20 business days following the termination of employment of
Executive whether any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
"Payment") would more likely than not be nondeductible by the Company for
Federal income purposes because of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), and if it is then the aggregate present value

-14-
<PAGE> 15
of amounts payable or distributable to or for the benefit of Executive pursuant
to this Agreement (such payments or distributions pursuant to this Agreement are
thereinafter referred to as "Agreement Payments") shall be reduced (but not
below zero) to the reduced Amount. For purposes of this paragraph, the "Reduced
Amount" shall be an amount expressed in present value which maximizes the
aggregate present value of Agreement Payments without causing any Payment to be
nondeductible by the Company because of said Section 280G of the Code.

b. If under paragraph (a) of this section the Certified Public
Accountants determine that any Payment would more likely than not be
nondeductible by the Company because of Section 280G of the Code, the Company
shall promptly give the Executive notice to that effect and a copy of the
detailed calculation thereof and of the Reduced Amount, and the Executive may
then elect, in his sole discretion, which and how much of the Agreement Payments
shall be eliminated or reduced (as long as after such election the aggregate
present value of the Agreement Payments equals the Reduced Amount), and shall
advise the Company in writing of his election within 20 business days of his
receipt of notice. If no such election is made by the Executive within such
20-day period, the Company may elect which and how much of the Agreement
Payments shall be eliminated or reduced (as long as after such election the
Aggregate present Value of the Agreement Payments equals the Reduced Amount) and
shall notify the Executive promptly of such election. For purposes of this
paragraph, present Value

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<PAGE> 16
shall be determined in accordance with Section 280G(d)(4) of the Code. All
determinations made by the Certified Public Accountants shall be binding upon
the Company and Executive shall be made within 20 business days of a termination
of employment of Executive. With the consent of the Executive, the Company may
suspend part or all of the lump sum payment due under Section 9 hereof and any
other payments due to the Executive hereunder until the Certified Public
Accountants finish the determination and the Executive (or the Company, as the
case may be) elect how to reduce the Agreement Payments, if necessary. As
promptly as practicable following such determination and the elections
hereunder, the Company shall pay to or distribute to or for the benefit of
Executive such amounts as are then due to Executive under this Agreement and
shall promptly pay to or distribute for the benefit of Executive in the future
such amounts as become due to Executive under this Agreement.

c. As a result of the uncertainty in the application of
Section 280G of the Code, it is possible that Agreement Payments may have been
made by the Company which should not have been made ("Overpayment") or that
additional Agreement Payments which will have not been made by the Company could
have been made ("Underpayment"), in each case, consistent with the calculation
of the Reduced Amount hereunder. In the event that the Certified Public
Accountants, based upon the assertion of a deficiency by the Internal Revenue
Service against the Company or Executive which said Certified Public Accountants
believe has a

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<PAGE> 17
high probability of success, determines that an Overpayment has been made, any
such Overpayment shall be treated for all purposes as a loan to Executive which
Executive shall repay to the Company together with interest at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Code; provided,
however, that no amount shall be payable by Executive to the Company in and for
the extent such payment would not reduce the amount which is subject to taxation
under Section 4999 of the Code. In the event that the Certified Public
Accountants, based upon controlling precedent, determine that an Underpayment
has occurred, any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive together with interest at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Code.

13. Term and Effect Prior to Change in Control.

a. Term. Except as otherwise provided for hereunder, this
Agreement shall commence on the date hereof and shall remain in effect for a
period of 3 years from the date hereof (the "Initial Term") or until the end of
the Contract Period, whichever is later. The Initial Term shall be automatically
extended for an additional one year period on the anniversary date hereof (so
that the Initial Term is always 3 years) unless, prior to a Change in Control,
the Chief Executive Officer of the Bank notifies the Executive in writing at any
time that the Contract is not so extended, in which case the Initial Term shall
end upon the later of (i) 3 years after the date hereof, or (ii) nine months
after the date of such written notice. Notwithstanding anything to

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<PAGE> 18
the contrary contained herein, the Initial Term shall cease when the Executive
attains age 65.

b. No Effect Prior to Change in Control. This Agreement shall
not effect any rights of the Company to terminate the Executive prior to a
Change in Control or any rights of the Executive granted in any other agreement
or contract or plan with the Company. The rights, duties and benefits provided
hereunder shall only become effective upon and after a Change in Control. If the
full-time employment of the Executive by the Company is ended for any reason
prior to a Change in Control, this Agreement shall thereafter be of no further
force and effect.

14. Severance Compensation and Benefits Not in Derogation of Other
Benefits. Anything to the contrary herein contained notwithstanding, the payment
or obligation to pay any monies, or granting of any benefits, rights or
privileges to Executive as provided in this Agreement shall not be in lieu or
derogation of the rights and privileges that the Executive now has or will have
under any plans or programs of or agreements with the Company, except that if
the Executive received any payment hereunder, he shall not be entitled to any
payment under the Company's severance policy for officers and directors.

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<PAGE> 19
respect to the matters covered hereby, including expressly any prior agreement
with the Company concerning change in control benefits. The amendment or
termination of this Agreement may be made only in a writing executed by the
Company and the Executive, and no amendment or termination of this Agreement
shall be effective unless and until made in such a writing. This Agreement shall
be binding upon any successor (whether direct or indirect, by purchase, merge,
consolidation, liquidation or otherwise) to all or substantially all of the
assets of the Company. This Agreement is personal to the Executive and the
Executive may not assign any of his rights or duties hereunder but this
Agreement shall be enforceable by the Executive's legal representatives,
executors or administrators. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.

IN WITNESS WHEREOF, Valley National Bank and Valley National
Bancorp each have caused this Agreement to be signed by their duly authorized
representatives pursuant to the authority of

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<PAGE> 20
their Boards of Directors, and the Executive has personally executed this
Agreement, all as of the day and year first written above.

ATTEST: VALLEY NATIONAL BANCORP

/s/ ALAN D. ESKOW By: /s/ GERALD H. LIPKIN
- --------------------------------- ---------------------------------
, Secretary Gerald H. Lipkin, Chairman
and Chief Executive Officer

ATTEST: VALLEY NATIONAL BANK

/s/ ALAN D. ESKOW By: /s/ GERALD H. LIPKIN
- --------------------------------- ---------------------------------
, Secretary Gerald H. Lipkin, Chairman
and Chief Executive Officer

WITNESS:

/s/ PETER VERBOUT /s/ JACK BLACKIN
- --------------------------------- ---------------------------------
Jack Blackin, Executive

2/1/93
- ---------------------------------
"Executive" Valley
National Bank
Service Date

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<PAGE> 1
EXHIBIT (c)(10)(C)

CHANGE-IN-CONTROL AGREEMENT
(FIRST SENIOR VICE PRESIDENT)

THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made as of this 15th
day of April, 1996, among VALLEY NATIONAL BANK ("Bank"), a national banking
association with its principal office at 1455 Valley Road, Wayne, New Jersey,
VALLEY NATIONAL BANCORP ("Valley"), a New Jersey Corporation which maintains its
principal office at 1445 Valley Road, Wayne, New Jersey (Valley and the Bank
collectively are the "Company") and John H. Prol (the "Executive").

BACKGROUND

WHEREAS, the Executive has been continuously employed by the Bank for
at least three full years;

WHEREAS, the Executive throughout his tenure has worked diligently in
his position in the business of the Bank and Valley;

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<PAGE> 2
WHEREAS, if the Company receives any proposal from a third
person concerning a possible business combination with, or acquisition of
equities securities of, the Company, the Board of Directors of the Company (the
"Board") believes it is imperative that the Company and the Board be able to
rely upon the Executive to continue in his position, and that they be able to
receive and rely upon his advice, if they request it, as to the best interests
of the Company and its shareholders, without concern that the Executive might be
distracted by the personal uncertainties and risks created by such a proposal;

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<PAGE> 3
for other good and valuable consideration, the Company and the Executive, each
intending to be legally bound hereby agree as follows:

1. Definitions

b. Cause. For purposes of this Agreement "Cause" with respect
to the termination by the Company of Executive's employment shall mean (i)
willful and continued failure by the Executive to perform his duties for the
Company under this Agreement after at least one warning in writing from the
Company's Board of Directors identifying specifically any such failure; (ii) the
willful engaging by the Executive in misconduct which causes material injury to
the Company as specified in a written notice to the Executive from the Board of
Directors; or (iii) conviction of a crime, other than a traffic violation,
habitual drunkenness, drug

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<PAGE> 4
abuse, or excessive absenteeism other than for illness, after a warning (with
respect to drunkenness or absenteeism only) in writing from the Board of
Directors to refrain from such behavior. No act or failure to act on the part of
the Executive shall be considered willful unless done, or omitted to be done, by
the Executive not in good faith and without reasonable belief that the action or
omission was in the best interest of the Company.

c. Change in Control. "Change in Control" means any of the
following events: (i) when Valley or a Subsidiary acquires actual knowledge that
any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act), other than an affiliate of Valley or a Subsidiary or an employee benefit
plan established or maintained by Valley, a Subsidiary or any of their
respective affiliates, is or becomes the beneficial owner (as defined in Rule
13d-3 of the Exchange Act) directly or indirectly, of securities of Valley
representing more than twenty-five percent (25%) of the combined voting power of
Valley's then outstanding securities (a "Control Person"), (ii) upon the first
purchase of Valley's common stock pursuant to a tender or exchange offer (other
than a tender or exchange offer made by Valley, a Subsidiary or an employee
benefit plan established or maintained by Valley, a

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<PAGE> 5
Subsidiary or any of their respective affiliates), (iii) upon the approval by
Valley's stockholders of (A) a merger or consolidation of Valley with or into
another corporation (other than a merger or consolidation which is approved by
at least two-thirds of the Continuing Directors (as hereinafter defined) or the
definitive agreement for which provides that at least two-thirds of the
directors of the surviving or resulting corporation immediately after the
transaction are Continuing Directors (in either case, a "Non-Control
Transaction")), (B) a sale or disposition of all or substantially all of
Valley's assets or (C) a plan of liquidation or dissolution of Valley, (iv) if
during any period of two (2) consecutive years, individuals who at the beginning
of such period constitute the Board (the "Continuing Directors") cease for any
reason to constitute at least two-thirds thereof or, following a Non-Control
Transaction, two-thirds of the board of directors of the surviving or resulting
corporation; provided that any individual whose election or nomination for
election as a member of the Board (or, following a Non-Control Transaction, the
board of directors of the surviving or resulting corporation) was approved by a
vote of at least two-thirds of the Continuing Directors then in office shall be
considered a Continuing Director, or (v) upon a

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<PAGE> 6
sale of (A) common stock of the Bank if after such sale any person (as such term
is used in Section 13(d) and 14(d)(2) of the Exchange Act) other than Valley, an
employee benefit plan established or maintained by Valley or a Subsidiary, or an
affiliate of Valley or a Subsidiary, owns a majority of the Bank's common stock
or (B) all or substantially all of the Bank's assets (other than in the ordinary
course of business). No person shall be considered a Control Person for purposes
of clause (i) above if (A) such person is or becomes the beneficial owner,
directly or indirectly, of more than ten percent (10%) but less than twenty-five
percent (25%) of the combined voting power of Valley's then outstanding
securities if the acquisition of all voting securities in excess of ten percent
(10%) was approved in advance by a majority of the Continuing Directors then in
office or (B) such person acquires in excess of ten percent (10%) of the
combined voting power of Valley's then outstanding voting securities in
violation of law and by order of a court of competent jurisdiction, settlement
or otherwise, disposes or is required to dispose of all securities acquired in
violation of law.

d. Continuously Employed. "Continuously employed", as used in
Section 9, means continuously employed by the Bank but

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<PAGE> 7
excludes any period of employment by a bank or financial institution acquired by
or merged into the Bank and excludes any period of employment by the Bank if
such period is separated from the current employment with the Bank by a break in
service (other a break in service resulting solely from illness, disability or
family leave).

f. Exchange Act. "Exchange Act" means the Securities Exchange
Act of 1934, as amended.

-7-

<PAGE> 8
(1) The assignment to Executive of any duties inconsistent
with, or the reduction of powers or functions associated with, Executive's
position, duties, responsibilities and status with the Company immediately prior
to a Change in Control. A change in title or positions resulting merely from a
merger of the Company into or with another bank or company which does not
downgrade in any way the Executive's powers, duties and responsibilities shall
not meet the requirements of this paragraph;

(2) A reduction by the Company in Executive's annual base
compensation as in effect immediately prior to a Change in Control or the
failure to award Executive annual increases in accordance herewith;

(4) The Company's transfer of Executive to another geographic
location more than 35 miles from his present office location, except for
required travel on the Company's business to an extent substantially consistent
with Executive's

-8-

<PAGE> 9
business travel obligations immediately prior to such Change in Control;

(5) The failure by the Company to continue in effect any
employee benefit plan, program or arrangement (including, without limitation the
Company's retirement plan, benefit equalization plan, life insurance plan,
health and accident plan, disability plan, deferred compensation plan or long
term stock incentive plan) in which Executive is participating immediately prior
to a Change in Control (except that the Company may institute or continue plans,
programs or arrangements providing Executive with substantially similar
benefits); the taking of any action by the Company which would adversely affect
Executive's participation in or materially reduce Executive's benefits under,
any of such plans, programs or arrangements; the failure to continue, or the
taking of any action which would deprive Executive, of any material fringe
benefit enjoyed by Executive immediately prior to such Change in Control; or the
failure by the Company to provide Executive with the number of paid vacation
days to which Executive was entitled immediately prior to such Change in
Control;

-9-

<PAGE> 10
(6) The failure by the Company to obtain an assumption in
writing of the obligations of the Company to perform this Agreement by any
successor to the Company and to provide such assumption to the Executive prior
to any Change in Control; or

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<PAGE> 11
combined voting power of all classes of stock in one of the other corporations
in such chain.

2. Employment. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts employment, during the Contract
Period upon the terms and conditions set forth herein.

3. Position. During the Contract Period the Executive shall be
employed by the bank as a Senior Officer, or such other corporate or divisional
profit center as shall then be the principal successor to the business, assets
and properties of the Company, with substantially the same title and the same
duties and responsibilities as before the Change in Control. The Executive shall
devote his full time and attention to the business of the Company, and shall not
during the Contract Period be engaged in any other business activity. This
paragraph shall not be construed as preventing the Executive from managing any
investments of his which do not require any service on his part in the operation
of such investments.

4. Cash Compensation. The Company shall pay to the Executive
compensation for his services during the Contract Period as follows:

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<PAGE> 12
a. Base Salary. A base annual salary equal to the annual
salary in effect as of the Change in Control. The annual salary shall be payable
in installments in accordance with the Company's usual payroll method.

b. Annual Bonus. An annual cash bonus equal to at least the
average of the bonuses paid to the Executive in the three years prior to the
Change in Control. The bonus shall be payable at the time and in the manner
which the Company paid such bonuses prior to the Change in Control.

5. Expenses and Fringe Benefits.

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<PAGE> 13
were previously reimbursed to him immediately prior to the Change in Control.

b. Benefit Equalization Plan. During the Contract Period, if
the Executive was entitled to benefits under the Company's Benefit Equalization
Plan ("BEP") prior to the Change in Control, the Executive shall be entitled to
continued benefits under the BEP after the Change in Control and such BEP may
not be modified to reduce or eliminate such benefits during the Contract Period.

c. Club Membership and Automobile. If prior to the Change in
Control, the Executive was entitled to membership in a country club and/or the
use of an automobile, he shall be entitled to the same membership and/or use of
an automobile at least comparable to the automobile provided to him prior to the
Change in Control.

d. Other Benefits. The Executive also shall be entitled to
vacations and sick days, in accordance with the practices and procedures of the
Company, as such existed immediately prior to the Change in Control. During the
Contract Period, the Executive also shall be entitled to hospital, health,
medical and life insurance, and any other benefits enjoyed, from

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<PAGE> 14
time to time, by senior officers of the Company, all upon terms as favorable as
those enjoyed by other senior officers of the Company. Notwithstanding anything
in this paragraph 5(d) to the contrary, if the Company adopts any change in the
benefits provided for senior officers of the Company, and such policy is
uniformly applied to all officers of the Company (and any successor or acquiror
of the Company, if any), then no such change shall be deemed to be contrary to
this paragraph.

Executive shall not be entitled to any further benefits under this Agreement.

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<PAGE> 15
8. Death Benefits. Upon the Executive's death during the
Contract Period, his estate shall not be entitled to any further benefits under
this Agreement.

9. Termination Without Cause or Resignation for Good Reason.
The Company may terminate the Executive without Cause during the Contract Period
by written notice to the Executive providing four weeks notice. The Executive
may resign for Good Reason during the Contract Period upon four weeks' written
notice to the Company specifying facts and circumstances claimed to support the
Good Reason. The Executive shall be entitled to give a Notice of Termination
that his or her employment is being terminated for Good Reason at any time
during the Contract Period, not later than twelve months after any occurrence of
an event stated to constitute Good Reason. If the Company terminates the
Executive's employment during the Contract Period without Cause or if the
Executive Resigns for Good Reason, the Company shall, subject to section 12
hereof:

a. Within 20 business days of the termination of employment
pay the Executive a lump sum equal to: (i), if the Executive has been
continuously employed by the Bank for 6 full years or more, two (2) years of
Base Salary plus a Pro-rata Bonus Amount or (ii), if the Executive has been
continuously employed by

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<PAGE> 16
the Bank for less than 6 full years but more than three years, then one (1) year
of Base Salary plus a Pro-rata Bonus Amount; and

b. Continue to provide the Executive with medical, dental and
life insurance for the period equal to the equivalent lump sum payment (e.g. 1
or 2 years) as were provided at the time of termination of his employment with
the Company, at the Company's cost. Upon expiration of benefit coverages, full
COBRA benefits (18 months) will be made available to Executive.

The Executive shall not have a duty to mitigate the damages suffered by
him in connection with the termination by the Company of his employment without
Cause or a resignation for Good Reason during the Contract Period. If the
Company fails to pay the Executive the lump sum amount due him hereunder or to
provide him with the health, hospitalization and insurance benefits due under
this section, the Executive, after giving 10 days' written notice to the Company
identifying the Company's failure, shall be entitled to recover from the Company
all of his reasonable legal fees and expenses incurred in connection with his
enforcement against the Company of the terms of this Agreement. The Executive
shall be denied payment of his legal fees and expenses only if a court finds
that the Executive sought payment of such fees without reasonable cause.

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<PAGE> 17
10. Resignation Without Good Reason. The Executive shall be
entitled to resign from the employment of the Company at any time during the
Contact Period without Good Reason, but upon such resignation the Executive
shall not be entitled to any additional compensation for the time after which he
ceases to be employed by the Company, and shall not be entitled to any of the
other benefits provided hereunder. No such resignation shall be effective unless
in writing with four weeks' notice thereof.

11. Non-Disclosure of Confidential Information.

a. Non-Disclosure of Confidential Information. Except in
the course of his employment with the Company and in the pursuit of the business
of the Company or any of its subsidiaries or affiliates, the Executive shall
not, at any time during or following the Contract Period, disclose or use, any
confidential information or proprietary data of the Company or any of its
subsidiaries or affiliates. The Executive agrees that, among other things, all
information concerning the identity of and the Company's relations with its
customers is confidential information.

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<PAGE> 18
section. The invalidity or unenforceability of any provision of this Agreement
shall not affect the force and effect of the remaining valid portions.

c. Survival. This section shall survive the termination of the
Executive's employment hereunder and the expiration of this Agreement.

12. Certain Reduction of Payments by the Company.

a. Anything in this Agreement to the contrary notwithstanding,
prior to the payment of any lump sum amount payable hereunder, the certified
public accountants of the Company immediately prior to a Change of Control (the
"Certified Public Accountants) shall determine as promptly as practical and in
any event within 20 business days following the termination of employment of
Executive whether any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
"Payment") would more likely than not be nondeductible by the Company for
Federal income purposes because of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), and if it is then the aggregate present value of
amounts payable or distributable to or for the benefit of Executive pursuant to
this Agreement (such payments or

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<PAGE> 19
distributions pursuant to this Agreement are thereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero) to the reduced
Amount. For purposes of this paragraph, the "Reduced Amount" shall be an amount
expressed in present value which maximizes the aggregate present value of
Agreement Payments without causing any Payment to be nondeductible by the
Company because of said Section 280G of the Code.

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<PAGE> 20
equals the Reduced Amount) and shall notify the Executive promptly of such
election. For purposes of this paragraph, present Value shall be determined in
accordance with Section 280G(d)(4) of the Code. All determinations made by the
Certified Public Accountants shall be binding upon the Company and Executive
shall be made within 20 business days of a termination of employment of
Executive. With the consent of the Executive, the Company may suspend part or
all of the lump sum payment due under Section 9 hereof and any other payments
due to the Executive hereunder until the Certified Public Accountants finish the
determination and the Executive (or the Company, as the case may be) elect how
to reduce the Agreement Payments, if necessary. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
to or distribute to or for the benefit of Executive such amounts as are then due
to Executive under this Agreement and shall promptly pay to or distribute for
the benefit of Executive in the future such amounts as become due to Executive
under this Agreement.

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<PAGE> 21
Payments which will have not been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculation of the Reduced
Amount hereunder. In the event that the Certified Public Accountants, based upon
the assertion of a deficiency by the Internal Revenue Service against the
Company or Executive which said Certified Public Accountants believe has a high
probability of success, determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to Executive which
Executive shall repay to the Company together with interest at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Code; provided,
however, that no amount shall be payable by Executive to the Company in and for
the extent such payment would not reduce the amount which is subject to taxation
under Section 4999 of the Code. In the event that the Certified Public
Accountants, based upon controlling precedent, determine that an Underpayment
has occurred, any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive together with interest at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Code.

13. Term and Effect Prior to Change in Control.

a. Term. Except as otherwise provided for hereunder, this
Agreement shall commence on the date hereof and

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<PAGE> 22
shall remain in effect for a period of 3 years from the date hereof (the
"Initial Term") or until the end of the Contract Period, whichever is later. The
Initial Term shall be automatically extended for an additional one year period
on the anniversary date hereof (so that the Initial Term is always 3 years)
unless, prior to a Change in Control, the Personnel and Compensation Committee
of the Bank notifies the Executive in writing at any time that the Contract is
not so extended, in which case the Initial Term shall end upon the later of (i)
3 years after the date hereof, or (ii) twenty-four months after the date of such
written notice. Notwithstanding anything to the contrary contained herein, the
Initial Term shall cease when the Executive attains age 65.

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<PAGE> 23
14. Severance Compensation and Benefits Not in Derogation of
Other Benefits. Anything to the contrary herein contained notwithstanding, the
payment or obligation to pay any monies, or granting of any benefits, rights or
privileges to Executive as provided in this Agreement shall not be in lieu or
derogation of the rights and privileges that the Executive now has or will have
under any plans or programs of or agreements with the Company, except that if
the Executive received any payment hereunder, he shall not be entitled to any
payment under the Company's severance policy for officers and directors.

15. Miscellaneous. This Agreement is the joint and several
obligation of the Bank and Valley. The terms of this Agreement shall be governed
by, and interpreted and construed in accordance with the provisions of, the laws
of New Jersey. This Agreement supersedes all prior agreements and understandings
with respect to the matters covered hereby, including expressly any prior
agreement with the Company concerning change in control benefits. The amendment
or termination of this Agreement may be made only in a writing executed by the
Company and the Executive, and no amendment or termination of this Agreement
shall be effective unless and until made in such a writing. This Agreement shall
be binding upon any successor (whether direct or indirect, by

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<PAGE> 24
purchase, merge, consolidation, liquidation or otherwise) to all or
substantially all of the assets of the Company. This Agreement is personal to
the Executive and the Executive may not assign any of his rights or duties
hereunder but this Agreement shall be enforceable by the Executive's legal
representatives, executors or administrators. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.

IN WITNESS WHEREOF, Valley National Bank and Valley National
Bancorp each have caused this Agreement to be signed by

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<PAGE> 25
their duly authorized representatives pursuant to the authority of
their Boards of Directors, and the Executive has personally
executed this Agreement, all as of the day and year first written
above.

ATTEST: VALLEY NATIONAL BANCORP

/s/ ALAN D. ESKOW By: /s/ GERALD H. LIPKIN
- --------------------------------- ----------------------------------
, Secretary Gerald H. Lipkin, Chairman
and Chief Executive Officer

ATTEST: VALLEY NATIONAL BANK

/s/ ALAN D. ESKOW By: /s/ GERALD H. LIPKIN
- --------------------------------- ----------------------------------
, Secretary Gerald H. Lipkin, Chairman
and Chief Executive Officer

WITNESS:

/s/ PETER VERBOUT /s/ JOHN H. PROL
- --------------------------------- ----------------------------------
John H. Prol, Executive

1/10/92
- ---------------------------------
"Executive" Valley
National Bank
Service Date

This contract dated 4/15/96 supersedes previously issued change of control
contract for Senior Vice Presidents to John H. Prol.

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<PAGE> 1
EXHIBIT (c)(10)H

EMPLOYMENT ARRANGEMENT
PETER SOUTHWAY 6/6/96

The Board of Directors of Valley National Bank and Valley National
Bancorp have extended to Mr. Peter Southway employment arrangements as
outlined in this letter. This agreement amends all employment
arrangements between Peter Southway and Valley National Bank and Valley
National Bancorp.

1. New Title - Vice Chairman

2. New Base Salary - $250,000.

3. Eligible for Annual Executive Incentive Bonus Plan.

4. Continue participation in all VNB Benefit plans until retirement. Long
Term Disability benefit will be based on 60% of new base salary. Group
Life Insurance benefit will continue at current level.

5. Continue special executive benefits including bank car, country club
membership and annual executive medical evaluation program.

6. Continue participation in the VNB Benefit Equalization Plan.

7. Mr. Southway will be eligible for a minimum pension of $164,036.
annually should he retire anytime after age 65. This amount is based on
a joint and survivor option and includes the total benefits from the
VNB Pension Plan and the VNB Pension Benefits Equalization Plan.

8. Subject to amending the position title, current Severance and Change in
Control agreements remain in effect with the 1995 annual base salary to
be used for calculations in these agreements.

9. Subject to annual appointment and election, Mr. Southway will continue
as a member of the VNB Board of Directors and Executive Committee as
well as other Board Committees and will be required to attend a minimum
of 75% of these meetings.

<PAGE> 2
10. Mr. Southway will continue to report directly to Gerald H. Lipkin,
Chairman, President and CEO. He will be responsible for management of
financial and investment departments and such additional duties as may
be assigned by the CEO.

11. Mr. Southway will continue to be a full time employee with a flexible
work schedule to include 12 weeks of paid vacation per calendar year,
no more than three weeks consecutive. He will continue to be provided
with the same Valley office and secretarial support.

12. Effective date of this employment arrangement is May 8, 1996. The VNB
Personnel and Compensation Committee is responsible to the Board of
Directors for the review of this agreement on an annual basis,
coincident with the review of other officers/directors.

/s/ Peter Southway /s/ Gerald H. Lipkin
- ---------------------------------- ---------------------------------
Agreed Agreed
Peter Southway Gerald H. Lipkin
Vice Chairman Chairman, President and
CEO

/s/ Peter G. Verbout /s/ Robert McEntee
- ---------------------------------- ---------------------------------
Witness Robert McEntee
Peter G. Verbout Chairman VNB Personnel
Senior Vice President and Compensation Committee

<PAGE> 1
EXHIBIT (C)(23)

[KPMG Peat Marwick LLP Logo]

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Valley National Bancorp:

We consent to incorporation by reference in the registration statements No.
33-52809, No. 33-56933 and No. 33-61547 on Forms S-8 of Valley National Bancorp
of our report dated January 22, 1997 relating to the consolidated statements of
financial condition of Valley National Bancorp and subsidiaries as of December
31, 1996 and 1995 and the related consolidated statements of income, changes in
shareholders equity, and cash flows for each of the years in the three-year
period ended December 31, 1996, which report appears in the December 31, 1996
annual report on Form 10-K of Valley National Bancorp.

Our report refers to a change in accounting for investments in debt and equity
securities in 1994.

/s/ KPMG Peat Marwick LLP

Short Hills, New Jersey
February 27, 1997

<PAGE> 1
POWER OF ATTORNEY EXHIBIT(c)(24)

KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Gerald H. Lipkin and Peter Southway and each of
them, his attorney-in-fact, each with power of substitution, for him in any and
all capacities, to sign the Annual Report on Form 10-K of Valley National
Bancorp for the fiscal year ended December 31, 1996 and any and all amendments,
and to file the same, with exhibits thereto with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue thereof.

Signature Date
- --------- ----

/s/ ANDREW B. ABRAMSON
- ---------------------------------- January 28, 1997
Andrew B. Abramson, Director

/s/ PAMELA BRONANDER
- ---------------------------------- February 18, 1997
Pamela Bronander, Director

/s/ JOSEPH, COCCIA, JR.
- ---------------------------------- February 18, 1997
Joseph Coccia, Jr., Director

/s/ AUSTIN C. DRUKKER
- ---------------------------------- January 28, 1997
Austin C. Drukker, Director

/s/ WILLARD L. HEDDEN
- ---------------------------------- February 18, 1997
Willard L. Hedden, Director

/s/ THOMAS P. INFUSINO
- ---------------------------------- February 18, 1997
Thomas P. Infusino, Director

/s/ GERALD KORDE
- ---------------------------------- February 18, 1997
Gerald Korde, Director

<PAGE> 2
/s/ JOLEEN J. MARTIN
- ---------------------------------- February 18, 1997
Joleen J. Martin, Director

/s/ ROBERT E. MCENTEE
- ---------------------------------- January 28, 1997
Robert E. McEntee, Director

/s/ WILLIAM MCNEAR
- ---------------------------------- January 28, 1997
William McNear, Director

/s/ SAM P. PINYUH
- ---------------------------------- February 18 , 1997
Sam P. Pinyuh, Director

/s/ ROBERT RACHESKY
- ---------------------------------- January 28, 1997
Robert Rachesky, Director

/s/ BARNETT RUKIN
- ---------------------------------- February 18, 1997
Barnett Rukin, Director

/s/ RICHARD F. TICE
- ---------------------------------- January 28, 1997
Richard F. Tice, Director

/s/ LEONARD VORCHEIMER
- ---------------------------------- February 18, 1997
Leonard Vorcheimer, Director

/s/ JOSEPH L. VOZZA
- ---------------------------------- February 18, 1997
Joseph L. Vozza, Director

<ARTICLE> 9

<S> <C>
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