UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 0-11179
----------------------
VALLEY NATIONAL BANCORP
(Exact name of registrant as specified in its charter)
New Jersey
(State or other Jurisdiction of
incorporation or organization)
22-2477875
(I.R.S. Employer Identification No.)
1455 Valley Road, Wayne, New Jersey 07474-0558
(Address of principal executive offices)
973-305-8800
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock (No par value), of which 57,751,503 shares were outstanding as of
May 3, 2000.
<PAGE>
TABLE OF CONTENTS
Page Number
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition (Unaudited)
March 31, 2000 and December 31, 1999 3
Consolidated Statements of Income (Unaudited)
Three Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 17
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
<PAGE>
PART I
Item 1. Financial Statements
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
<S> <C> <C>
Assets
Cash and due from banks $ 156,022 $ 161,561
Federal funds sold 58,000 123,000
Investment securities held to maturity, fair value
of $322,433 and $318,329 in 2000 and 1999,
respectively 356,652 351,501
Investment securities available for sale 966,543 1,005,419
Loans 4,585,888 4,542,567
Loans held for sale 9,676 12,185
Total loans 4,595,564 4,554,752
Less: Allowance for loan losses 55,311 (55,120)
Net loans 4,540,253 4,499,632
Premises and equipment, net 85,256 84,790
Accrued interest receivable 37,244 35,504
Other assets 92,774 98,987
Total assets 6,292,744 6,360,394
Liabilities
Deposits:
Non-interest bearing $ 963,723 $ 931,016
Interest bearing:
Savings 2,025,644 2,018,530
Time 2,028,901 2,101,709
Total deposits 5,018,268 5,051,255
Short-term borrowings 99,259 129,065
Long-term debt 591,863 564,881
Accrued expenses and other liabilities 55,220 61,693
Total liabilities 5,764,610 5,806,894
Shareholders' Equity
Common stock, no par value, authorized 103,359,375
shares; issued 60,618,950 shares in 2000 and
60,621,040 shares in 1999 25,947 25,943
Surplus 325,331 325,147
Retained earnings 255,778 244,605
Unallocated common stock held by employee
benefit plan (917) (965)
Accumulated other comprehensive loss (19,613) (16,733)
586,526 577,997
Treasury stock, at cost (2,300,858 shares in 2000
and 927,750 shares in 1999) (58,392) (24,497)
Total shareholders' equity 528,134 553,500
Total liabilities and shareholders' equity 6,292,744 6,360,394
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Interest Income
Interest and fees on loans $ 90,563 $ 81,822
Interest and dividends on investment securities:
Taxable 18,744 18,096
Tax-exempt 1,816 1,744
Dividends 685 594
Interest on federal funds sold and other short-term
investments 664 889
Total interest income 112,472 103,145
Interest Expense
Interest on deposits:
Savings deposits 12,074 10,006
Time deposits 26,371 24,915
Interest on short-term borrowings 1,259 580
Interest on long-term debt 8,447 4,060
Total interest expense 48,151 39,561
Net Interest Income 64,321 63,584
Provision for loan losses 1,500 2,000
Net Interest Income after Provision for Loan Losses 62,821 61,584
Non-Interest Income
Trust and investment services 720 542
Service charges on deposit accounts 3,626 3,520
Gains on securities transactions, net - 1,974
Fees from loan servicing 2,730 1,932
Credit card fee income 1,949 1,990
Gains on sales of loans, net 765 664
Other 1,839 2,101
Total non-interest income 11,629 12,723
Non-Interest Expense
Salary expense 15,223 14,418
Employee benefit expense 3,130 3,140
FDIC insurance premiums 263 314
Occupancy and equipment expense 5,199 4,741
Credit card expense 1,231 1,314
Amortization of intangible assets 1,659 1,324
Advertising 924 837
Other 5,957 6,177
Total non-interest expense 33,586 32,265
Income Before Income Taxes 40,864 42,042
Income tax expense 13,921 15,553
Net Income $ 26,943 $ 26,489
Earnings Per Share:
Basic $ 0.44 $ 0.41
Diluted 0.43 0.41
Weighted Average Number of Shares Outstanding:
Basic 61,921,667 64,560,832
Diluted 62,460,619 65,379,353
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income $ 26,943 $ 26,489
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,556 3,002
Amortization of compensation costs pursuant to
long-term stock incentive plan 311 225
Provision for loan losses 1,500 2,000
Net amortization of premiums and accretion of discounts 566 1,193
Net gains on securities transactions - (1,974)
Proceeds from sales of loans 14,626 17,513
Gain on sales of loans (765) (664)
Proceeds from recoveries of previously charged-off
loans 938 840
Net decrease(increase) in accrued interest receivable
and other assets 2,936 (7,117)
Net (decrease)increase in accrued expenses and other
liabilities (4,356) 15,409
Net cash provided by operating activities 46,255 56,916
Cash flows from investing activities:
Purchases and originations of mortgage servicing rights (145) (509)
Proceeds from sales of investment securities
available for sale - 11,116
Proceeds from maturing investment securities
available for sale 38,835 135,241
Purchases of investment securities available for sale (4,845) (149,871)
Purchases of investment securities held to maturity (11,719) (114,727)
Proceeds from maturing investment securities held
to maturity 6,335 18,248
Net decrease in federal funds sold and other
short-term investments 65,000 8,700
Net increase in loans made to customers (56,920) (108,599)
Purchases of premises and equipment, net of sales (2,305) (1,660)
Net cash provided by (used in) investing activities 34,236 (202,061)
Cash flows from financing activities:
Net (decrease)increase in deposits (32,987) 5,219
Net (decrease)increase in short-term borrowings (29,806) 1,334
Advances of long-term debt 30,000 131,000
Repayments of long-term debt (3,018) (16)
Dividends paid to common shareholders (15,720) (14,184)
Addition of common shares to treasury (35,045) --
Common stock issued, net of cancellations 546 763
Net cash (used in) provided by financing activities 86,030 124,116
Net decrease in cash and cash equivalents (5,539) (21,029)
Cash and cash equivalents at January 1 161,561 185,921
Cash and cash equivalents at March 31 $156,022 $164,892
Supplemental disclosure of cash flow information:
Cash paid during the year for interest on deposits
and borrowings $ 48,741 $ 38,929
Cash paid during the year for federal and state
income taxes 104 486
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
VALLEY NATIONAL BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Consolidated Financial Statements
The Consolidated Statements of Financial Condition as of March 31,
2000 and December 31, 1999, the Consolidated Statements of Income for the
three month periods ended March 31, 2000 and 1999 and the Consolidated
Statements of Cash Flows for the three month periods ended March 31, 2000 and
1999 have been prepared by Valley National Bancorp ("Valley") without audit.
In the opinion of management, all adjustments (which included only normal
recurring adjustments) necessary to present fairly Valley's financial position,
results of operations, and cash flows at March 31, 2000 and for all periods
presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. These consolidated financial statements are to
be read in conjunction with the financial statements and notes thereto
included in Valley's December 31, 1999 Annual Report to Shareholders. Certain
prior period amounts have been reclassified to conform to 2000 financial
presentations. The consolidated financial statements of Valley have been
restated to include Ramapo Financial Corporation, acquired on June 11,
1999 using the pooling of interests method of accounting.
2. Earnings Per Share
Earnings per share amounts and weighted average shares outstanding have been
restated to reflect the 5 percent stock dividend declared April 6, 2000 to
Shareholders of record on May 5, 2000 and to be issued May 16, 2000.
For Valley, the numerator of both the Basic and Diluted EPS is equivalent to
net income. The weighted average number of shares outstanding used in the
denominator for Diluted EPS is increased over the denominator used for
Basic EPS by the effect of potentially dilutive common stock equivalents
utilizing the treasury stock method. For Valley, common stock equivalents
are common stock options outstanding.
<PAGE>
The following table shows the calculation of both Basic and Diluted earnings
per share for the three months ended March 31, 2000 and 1999.
Three Months ended March 31,
(in thousands, except for share data)
2000 1999
<TABLE>
<CAPTION>
<S> <C> <C>
Net income $ 26,943 $ 26,489
Basic weighted-average number of shares
outstanding 61,921,667 64,560,832
Plus: Common stock equivalents 538,952 818,521
Diluted weighted-average number of shares
outstanding 62,460,619 65,379,353
Earnings per share:
Basic $ 0.44 $ 0.41
Diluted 0.43 0.41
</TABLE>
At March 31, 2000 there were 525 thousand stock options not included as common
stock equivalents because the exercise prices exceeded the average market
value.
3. Accumulated Other Comprehensive Income
Valley's accumulated other comprehensive income consists of foreign currency
translation adjustments and unrealized gains (losses) on securities. The
following table shows the related tax effects on each component of accumulated
other comprehensive income for the three months ended March 31, 2000 and 1999.
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Net income $26,943 $26,489
Accumulated other comprehensive income,
net of tax:
Foreign currency translation adjustments (13) 142
Unrealized gains(losses) on securities:
Unrealized holding losses arising during
period $(2,867) $(1,388)
Less: reclassification adjustment for
gains realized in net income -- 1,254
Net unrealized losses (2,867) (2,642)
Other comprehensive loss (2,880) (2,500)
Comprehensive income $24,063 $23,989
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary Statement Concerning Forward-Looking Statements
This Form 10-Q, both in the MD & A and elsewhere, contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are not historical facts and include expressions
about management's confidence and strategies and management's expectations
about new and existing programs and products, relationships, opportunities,
technology and market conditions. These statements may be identified by an
"asterisk" (*) or such forward-looking terminology as "expect," "look,"
"believe," "anticipate," "may," "will," or similar statements or variations
of such terms. Such forward-looking statements involve certain risks and
uncertainties. These include, but are not limited to, the direction of
interest rates, continued levels of loan quality and origination volume,
continued relationships with major customers including sources for loans, as
well as the effects of economic conditions and legal and regulatory barriers
and structure. Actual results may differ materially from such forward-looking
statements. Valley assumes no obligation for updating any such forward-looking
statement at any time.
Earnings Summary
Net income for the three months ended March 31, 2000 was $26.9 million, or
$0.43 per diluted share. These results compare with net income of $26.5
million, or $0.41 per diluted share for the same period in 1999 (1999 amounts
have been restated for the Ramapo Financial Corp. merger and earnings per
share amounts have been restated to give effect to a 5 percent stock dividend
to be issued May 16, 2000). The annualized return on average equity increased
to 19.88 percent from 17.81 percent, while the annualized return on average
assets decreased to 1.73 percent from 1.80 percent, for the three months
ended March 31, 2000 and 1999, respectively.
Net Interest Income
Net interest income continues to be the largest source of Valley's operating
income. Net interest income on a tax equivalent basis increased to $65.4
million compared to $64.6 million for the three months ended March 31, 1999.
The increase in net interest income is due to higher average balances of total
interest earning assets, primarily loans, combined with higher average
interest rates for these interest earning assets. This was offset by an
increase in both average balances, primarily long-term debt, and interest
rates of total interest bearing liabilities. The net interest margin
decreased to 4.38 percent for the three months ended March 31, 2000 compared to
4.60 percent for the same period in 1999. Assuming a rising interest rate
environment, the net interest margin is expected to continue to decline.*
While loans have been growing, the rates charged have increased less, due to
competition, than interest rates on funding costs.
Average interest earning assets increased $360.3 million or 6.4 percent
for the three months ended March 31, 2000 over the same period in 1999. This
was mainly the result of the increase in average balance of loans of $404.7
million or 9.8 percent offset partly by the decrease in average balance of
taxable investments of $23.9 million or 1.9 percent and federal funds sold
and other short-term investments of $28.4 million or 37.7 percent.
Average interest bearing liabilities for the three months ended March 31,
2000 increased $340.1 million or 7.7 percent from the same period in 1999.
Average savings deposits decreased $23.2 million or 1.1 percent while
average time deposits increased $38.6 million. Average short-term
borrowings increased $44.5 million or 77.9 percent and long-term debt, which
includes primarily FHLB advances, increased $280.1 million, or 97.8
percent. Average demand deposits increased $70.3 million or 8.1 percent
over 1999 balances.
Average interest rates, in all categories of interest earning assets, with the
exception of non-taxable investments, increased during the quarter ended
March 31, 2000 compared with the quarter ended March 31, 1999. The average
interest rate for loans increased 6 basis points to 7.98 percent. Average
interest rates on total interest earning assets increased 18 basis points
to 7.60 percent. Average interest rates also increased on total interest
bearing liabilities by 47 basis points to 4.07 percent from 3.60 percent.
Average interest rates on deposits increased by 33 basis points to 3.78
percent. The decline in the net interest margin from 4.60 percent for the
three months ended March 31, 1999 to 4.38 percent in 2000 resulted from an
increase in the volume and rates on total interest bearing liabilities offset
by an equal increase in the volume and a smaller increase in rates on total
interest earning assets.
<PAGE>
The following table reflects the components of net interest income for each of
the three months ended March 31, 2000 and 1999.
ANALYSIS OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND
NET INTEREST INCOME ON A TAX EQUIVALENT BASIS
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000 Three Months Ended March 31, 1999
Average Average Average Average
Balance Interest Rate Balance Interest Rate
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest
earning assets
Loans (1)(2) $4,543,732 $90,683 7.98% $ 4,139,019 $81,930 7.92%
Taxable
investments(3) 1,223,103 19,429 6.35 1,247,044 18,690 5.99
Tax-exempt
investments
(1)(3) 164,725 2,794 6.78 156,817 2,680 6.84
Federal funds
sold and other
short-term
investments 46,872 664 5.67 75,240 889 4.73
Total interest
earning assets 5,978,432 $113,570 7.60 5,618,120 $ 104,189 7.42
Allowance for
loan losses (55,691) (55,541)
Cash and due from
banks 146,157 149,862
Other assets 175,807 176,847
Unrealized (loss)
gain on securities
available for
sale (29,700) 5,755
Total assets $6,215,005 $5,895,043
Liabilities and
Shareholders' Equity
Interest bearing
liabilities
Savings
deposits $2,004,400 $12,074 2.41% $2,027,553 $ 10,006 1.97%
Time deposits 2,061,258 26,371 5.12 2,022,610 24,915 4.93
Total interest
bearing
deposits 4,065,658 38,445 3.78 4,050,163 34,921 3.45
Short-term
borrowings 101,497 1,259 4.96 57,038 580 4.07
Long-term debt 566,547 8,447 5.96 286,444 4,060 5.67
Total interest
bearing
liabilities 4,733,702 48,151 4.07 4,393,645 39,561 3.60
Demand deposits 933,208 862,901
Other liabilities 5,873 43,636
Shareholders'
equity 542,222 594,861
Total liabilities
and shareholders'
equity $6,215,005 $ 5,895,043
Net interest income
(tax equivalent basis) 65,419 64,628
Tax equivalent
adjustment (1,098) (1,044)
Net interest income $ 64,321 $63,584
Net interest rate
differential 3.53% 3.82%
Net interest margin (4) 4.38% 4.60%
(1 ) Interest income is presented on a tax equivalent basis using a 35 percent
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.
</TABLE>
<PAGE>
The following table demonstrates the relative impact on net interest
income of changes in volume of interest earning assets and interest bearing
liabilities and changes in rates earned and paid by Valley on such assets and
liabilities.
CHANGE IN NET INTEREST INCOME ON A TAX EQUIVALENT BASIS
<TABLE>
<CAPTION>
Three Months ended March 31,
2000 Compared to 1999
Increase(Decrease)(2)
Interest Volume Rate
(in thousands)
<S> <C> <C> <C>
Interest income:
Loans (1) $ 8,753 $ 8,072 $ 681
Taxable investments 739 (364) 1,103
Tax-exempt investments(1) 114 134 (20)
Federal funds sold and
other short-term
investments (225) (379) 154
9,381 7,463 1,918
Interest expense:
Savings deposits 2,068 (116) 2,184
Time deposits 1,456 482 974
Short-term borrowings 679 530 149
Long-term debt 4,387 4,166 221
8,590 5,062 3,528
Net interest income
(tax equivalent basis) $ 791 $ 2,401 $ (1,610)
(1) Interest income is adjusted to a tax equivalent basis using a 35 percent
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.
</TABLE>
Non-Interest Income
The following table presents the components of non-interest income for the
three months ended March 31, 2000 and 1999.
NON-INTEREST INCOME
<TABLE>
<CAPTION>
Three Months ended March 31,
2000 1999
(in thousands)
<S> <C> <C>
Trust and investment services $ 720 $ 542
Service charges on deposit accounts 3,626 3,520
Gains on securities transactions, net - 1,974
Fees from loan servicing 2,730 1,932
Credit card fee income 1,949 1,990
Gains on sales of loans, net 765 664
Other 1,839 2,101
Total non-interest income $11,629 $12,723
</TABLE>
Non-interest income continues to represent a considerable source of income
for Valley. Total non-interest income amounted to $11.6 million for the
three months ended March 31, 2000 while the comparable amount for the prior
year period, excluding security gains, was $10.7 million.
Trust and investment services includes income from trust operations,
brokerage commissions, and asset management fees. On July 30, 1999, VNB
acquired New Century Asset Management, Inc. ("New Century"), a NJ-based
money manager. The transaction was accounted for as a purchase. New Century
contributed additional fee income to the operations of Valley of $233
thousand in 2000 which is included in trust and investment services.
Included in fees from loan servicing are fees for servicing residential
mortgage loans and SBA loans. Fees from loan servicing increased by 41.3
percent from $1.9 million for the three months ended March 31, 1999 to $2.7
million for the three months ended March 31, 2000 due to an increase in the
size of the servicing portfolio. The increase in the servicing portfolio
was due to the acquisition of servicing of several residential mortgage
portfolios, the origination of new loans by VNB and their subsequent sale
with servicing retained, offset by principal paydowns and prepayments.
Residential mortgage servicing portfolios, with an unpaid principal balance
of approximately $668.2 million, were acquired at the end of 1999 which are
expected to increase loan servicing revenue during 2000.*
Gains on the sales of loans were $765 thousand for the three months ended
March 31, 2000 compared with $664 thousand for the three months ended
March 31, 1999. Gains in 2000 were recorded primarily from the sale of SBA
loans into the secondary market.
Other non-interest income decreased $262 thousand to $1.8 million for the
three months ended March 31, 2000 compared with $2.1 million for the three
months ended March 31, 1999. This decrease is primarily attributable to the
gain of $623 thousand realized on the sale of OREO properties during the
three months ended March 31, 1999 offset by the $394 thousand of commission
revenues from the sale of title insurance policies from the title insurance
business acquired by VNB in the second quarter of 1999.
Non-Interest Expense
The following table presents the components of non-interest expense for the
three months ended March 31, 2000 and 1999.
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
Three Months ended March 31,
2000 1999
(in thousands)
<S> <C> <C>
Salary expense $ 15,223 $ 14,418
Employee benefit expense 3,130 3,140
FDIC insurance premiums 263 314
Occupancy and equipment expense 5,199 4,741
Credit card expense 1,231 1,314
Amortization of intangible assets 1,659 1,324
Advertising 924 837
Other 5,957 6,177
Total non-interest expense $ 33,586 $ 32,265
</TABLE>
Non-interest expense totaled $33.6 million for the three months ended
March 31, 2000, an increase of $1.3 million or 4.1 percent from the 1999
level. The largest components of non-interest expense are salaries and
employee benefit expense which totaled $18.4 million for the three months
ended March 31, 2000 compared with $17.6 million in the comparable period of
1999. At March 31, 2000, full-time equivalent staff was 1,853 compared with
1,829 at March 31, 1999.
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 for the three months ended March 31, 2000 was
43.6 percent, one of the lowest in the industry, compared with an efficiency
ratio of 43.9 percent for the year ended December 31, 1999 and 41.8 percent
for the quarter ended March 31, 1999. Valley strives to control its
efficiency ratio and expenses as a means of producing increased earnings
for its shareholders.
Amortization of intangible assets increased to $1.7 million for the three
months ended March 31, 2000 from $1.3 million in 1999, representing an increase
of $335 thousand or 25.3 percent. The majority of this expense resulted from
the amortization of residential mortgage servicing rights totaling $1.3
million during 2000, compared with $937 thousand for 1999. An increase
in the servicing portfolio is responsible for the increase in amortization
expense. An impairment analysis is completed quarterly to determine the
adequacy of the mortgage servicing asset valuation allowance.
The significant components of other non-interest expense include data
processing, professional fees, postage, telephone and stationery expense
which totaled approximately $3.2 million and $3.0 million for the three
months ended March 31, 2000 and 1999 respectively.
Income Taxes
Income tax expense as a percentage of pre-tax income was 34.1 percent for the
three months ended March 31, 2000 compared with 37.0 percent for the same
period in 1999. The reduction in the effective tax rate is attributable
to a business plan implemented during the second quarter of 1999. The
effective tax rate for 2000 is expected to approximate 34 percent.*
Business Segments
VNB has four business segments it monitors and reports on to manage its
business operations. These segments are commercial lending, consumer
lending, investment management and corporate and other adjustments. Lines of
business and actual structure of operations determine each segment. Each is
reviewed routinely for its asset growth, contribution to pretax net income
and return on assets. Expenses related to the branch network, all other
components of retail banking, along with the back office departments of the
bank are allocated from the corporate and other adjustments segment to each
of the other three business segments. The financial reporting for each
segment contains allocations and reporting in line with VNB's operations,
which may not necessarily be compared to any other financial institution. The
accounting for each segment includes internal accounting policies designed to
measure consistent and reasonable financial reporting.
The following table represents the financial data for the three months ended
March 31, 2000 and 1999.
Three Months Ended March 31, 2000
(in thousands)
<TABLE>
<CAPTION>
Corporate
Consumer Commercial Investment and Other
Lending Lending Management Adjustments Total
<S> <C> <C> <C> <C> <C>
Average interest-
earning assets $2,792,176 $1,788,633 $ 1,397,623 $ -- $ 5,978,432
Income (loss) before
income taxes $ 18,272 $ 16,320 $ 7,233 $ (961) $ 40,864
Return on average
interest-earning
assets (pre-tax) 2.62% 3.65% 2.07% --% 2.73%
</TABLE>
Three Months Ended March 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Corporate
Consumer Commercial Investment and Other
Lending Lending Management Adjustments Total
<S> <C> <C> <C> <C> <C>
Average interest-
earning assets $2,531,715 $1,637,270 $ 1,449,135 $ -- $ 5,618,120
Income before
income taxes $ 18,222 $ 15,440 $ 7,327 $ 1,053 $ 42,042
Return on average
interest-earning
assets (pre-tax) 2.88% 3.77% 2.02% --% 2.99%
</TABLE>
Consumer Lending
The consumer lending segment had a return on average interest-earning
assets before taxes of 2.62 percent for the three months ended March 31, 2000
compared to 2.88 percent for the three months ended March 31, 1999.
Average interest-earning assets increased $260.5 million, attributable to an
increase in residential lending. Average interest rates on consumer loans
decreased by 10 basis points, while the cost of funds increased by 38 basis
points. Income before income taxes remained relatively unchanged.
Commercial Lending
The return on average interest-earning assets before taxes decreased 12
basis points to 3.65 percent for the three months ended March 31, 2000. Average
interest-earning assets increased $151.4 million as a result of an increased
volume of loans. Interest rates on commercial loans increased by 27 basis
points, offset by an increase in the cost of funds by 38 basis points. Income
before income taxes increased by $880 thousand as a result of an increase in
average interest-earning assets.
Investment Management
The return on average interest earning assets before taxes increased to
2.07 percent for the three months ended March 31, 2000 compared to 2.02 percent
for the three months ended March 31, 1999. The yield on interest earning
assets increased by 15 basis points to 6.30 percent, partially offset by an
increase in the cost of funds. Average interest-earning assets decreased by
$52 million and income before income taxes decreased $94 thousand.
Corporate Segment
The corporate segment represents income and expense items not directly
attributable to a specific segment which may include merger-related charges,
gains on sales of securities, service charges on deposit accounts, and
certain revenues and expenses recorded by acquired banks that could not be
allocated to a line of business. The loss before taxes was $961 thousand
for the three months ended March 31, 2000 compared to a gain of $1.1 million
for the three months ended March 31, 1999.
ASSET/LIABILITY MANAGEMENT
Interest Rate Sensitivity
Valley's success is largely dependent upon its ability to manage interest
rate risk. Interest rate risk can be defined as the exposure of Valley's net
interest income to the movement in interest rates. Valley does not currently
use derivatives to manage market and interest rate risks. Valley's interest
rate risk management is the responsibility of the Asset/Liability Management
Committee ("ALCO"), which reports to the Board of Directors. ALCO
establishes policies that monitor and coordinate Valley's sources, uses and
pricing of funds.
Valley uses a simulation model to analyze net interest income sensitivity to
movements in interest rates. The simulation model projects net interest
income based on various interest rate scenarios over a twelve and twenty-four
month period. The model is based on the actual maturity and repricing
characteristics of rate sensitive assets and liabilities. The model
incorporates assumptions regarding the impact of changing interest rates on the
prepayment rates of certain assets and liabilities.
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. Liquid assets amounted to $1.2 billion and $1.3 billion
at March 31, 2000 and December 31, 1999, respectively. This represents 22.0
percent and 20.4 percent of earning assets, and 20.9 percent and 19.4 percent
of total assets at March 31, 2000 and December 31, 1999, 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 $4.4 billion for both the three months ended March 31, 2000 and
for the year ended December 31, 1999, representing 73.5 percent and 73.3
percent of average earning assets. Short-term and long-term borrowings through
Federal funds lines, repurchase agreements, Federal Home Loan Bank ("FHLB")
advances and large dollar certificates of deposit, generally those over $100
thousand, are used as supplemental funding sources. Valley borrowed from
the FHLB as part of a leverage strategy and matched funding to increase
earning assets and net interest income. As of March 31, 2000, Valley had
outstanding advances of $461.5 million with the FHLB and repurchase agreements
of $130.0 million. Additional liquidity is derived from scheduled loan and
investment payments of principal and interest, as well as prepayments received.
For the three months ended March 31, 2000 there were no proceeds from the sales
of investment securities available for sale, and proceeds of $6.3 million were
generated from investment maturities. Purchases of investment securities
for the three months ended March 31, 2000 were $16.6 million. Short-term
borrowings and certificates of deposit over $100 thousand amounted to
$705.2 million and $637.1 million, on average, for the three months ended
March 31, 2000 and the year ended December 31, 1999, respectively.
Valley National Bancorp'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. In addition, Valley
National Bancorp may repurchase shares of its outstanding common stock. The
cash required for a purchase of shares can be met by using the Bancorp's own
funds, dividends received from its subsidiary bank as well as borrowed
funds. At March 31, 2000 Valley maintained a floating rate line of credit
in the amount of $25 million, of which $20 million was drawn. This line is
available for general corporate purposes and expires June 15, 2001.
Borrowings under this facility are collateralized by mortgage-backed
and equity securities.
As of March 31, 2000, Valley had $1.0 billion of securities available for
sale recorded at their fair value, unchanged from December 31, 1999. As of
March 31, 2000, the investment securities available for sale had an
unrealized loss of $19.2 million, net of deferred taxes, compared to an
unrealized loss of $16.3 million, net of deferred taxes, at December 31, 1999.
This change was primarily due to a decrease in prices resulting from an
increasing interest rate environment. These securities are not considered
trading account securities, which may be sold on a continuous basis, but
rather are securities which may be sold to meet the various liquidity and
interest rate requirements of Valley.
Loan Portfolio
As of March 31, 2000, total loans were $4.6 billion, unchanged from
December 31, 1999. The following table reflects the composition of the
loan portfolio as of March 31, 2000 and December 31, 1999.
LOAN PORTFOLIO
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(in thousands)
<S> <C> <C>
Commercial $ 543,237 $ 512,164
Total commercial loans 543,237 512,164
Construction 110,899 123,531
Residential mortgage 1,296,149 1,247,721
Commercial mortgage 1,172,406 1,164,065
Total mortgage loans 2,579,454 2,535,317
Home equity 275,559 276,261
Credit card 77,596 92,097
Automobile 1,039,606 1,053,457
Other consumer
80,112 85,456
Total consumer loans 1,472,873 1,507,271
Total loans $4,595,564 $ 4,554,752
As a percent of total loans:
Commercial loans 11.8 % 11.2 %
Mortgage loans 56.1 55.7
Consumer loans
32.1 33.1
Total 100.0 % 100.0 %
</TABLE>
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 totaled $8.3 million at March 31, 2000, compared with
$5.7 million at December 31, 1999, an increase of $2.5 million or 44.1 percent.
Non-performing assets at March 31, 2000 and December 31, 1999, respectively,
amounted to 0.18 percent and 0.13 percent of loans and OREO, respectively.
Loans 90 days or more past due and not included in the non-performing category
totaled $16.7 million at March 31, 2000, compared with $11.7 million at
December 31, 1999. These loans are primarily residential mortgage loans,
commercial mortgage loans and commercial loans which are generally
well-secured and in the process of collection. Also included are matured
commercial mortgage loans in the process of being renewed, which totaled
$2.2 million at March 31, 2000 and $175 thousand at December 31, 1999,
respectively.
The following table sets forth non-performing assets and accruing loans
which were 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>
March 31, December 31,
2000 1999
(in thousands)
<S> <C> <C>
Loans past due in excess of
90 days and still accruing $ 16,746 $ 11,698
Non-accrual loans $ 6,478 $ 3,482
Other real estate owned 1,791 2,256
Total non-performing assets $ 8,269 $ 5,738
Troubled debt restructured loans $ 4,804 $ 4,852
Non-performing loans as a % of
loans 0.14% 0.08%
Non-performing assets as a % of
loans plus other real estate owned 0.18% 0.13%
Allowance as a % of loans 1.20% 1.21%
</TABLE>
At March 31, 2000 the allowance for loan losses amounted to $55.3 million,
relatively unchanged from the $55.1 million at year-end 1999. The allowance
is adjusted by provisions charged against income and loans charged-off,
net of recoveries. Net loan charge-offs were $1.3 million for the three
months ended March 31, 2000 compared with $1.6 million for the three months
ended March 31, 1999.
The allowance for loan losses is maintained at a level estimated to absorb
loan losses inherent in the loan portfolio as well as other credit risk
related charge-offs. The allowance is based on ongoing evaluations of the
probable estimated losses inherent in the loan portfolio and unused commitments
to provide financing. VNB's methodology for evaluating the
appropriateness of the allowance consists of several significant elements,
which include the allocated allowance, specific allowances for identified
problem loans and portfolio segments and the unallocated allowance. The
allowance also incorporates the results of measuring impaired loans as
required for in Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan."
During the first quarter of 2000, 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 and net charge-off levels. The provision charged to operations was
$1.5 million during the first quarter of 2000 compared to $2.0 million during
the first quarter of 1999.
Capital Adequacy
A significant measure of the strength of a financial institution is its
shareholders' equity. At March 31, 2000, shareholders' equity totaled $528.1
million or 8.4 percent of total assets, compared with $553.5 million or 8.7
percent at year-end 1999.
On December 14, 1999 Valley's Board of Directors authorized the repurchase of
up to 3,000,000 shares of the company's outstanding common stock. As of
March 31, 2000 Valley had repurchased 2.2 million shares of its stock under
this plan. Reacquired shares are held in treasury and are expected to be used
for employee benefit programs, stock dividends and other corporate purposes.
Included in shareholders' equity as components of accumulated other
comprehensive income at March 31, 2000 was a $19.2 million unrealized loss on
investment securities available for sale, net of tax, and a translation
adjustment loss of $431 thousand related to the Canadian subsidiary of VNB,
compared to an unrealized loss of $16.3 million and a $418 thousand
translation adjustment loss at December 31, 1999.
Valley's capital position at March 31, 2000 under risk-based capital
guidelines was $543.0 million, or 11.1 percent of risk-weighted assets,
for Tier 1 capital and $598.3 million, or 12.2 percent for Total risk-based
capital. The comparable ratios at December 31, 1999 were 11.6 percent for
Tier 1 capital and 12.8 percent for Total risk-based capital. At March 31,
2000 and 1999, Valley was in compliance with the leverage requirement
having Tier 1 leverage ratios of 8.7 percent and 9.1 percent, respectively.
Valley's ratios at March 31, 2000 were above the "well capitalized"
requirements, which require Tier I capital to risk-adjusted assets of at least
6 percent, Total risk-based capital to risk-adjusted assets of 10 percent and
a minimum leverage ratio of 5 percent.
Book value per share amounted to $8.63 at March 31, 2000 compared with $9.27 per
share at December 31, 1999.
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 41.7 percent at March 31, 2000, compared to
46.5 percent at March 31, 1999. Cash dividends declared amounted to $0.26
per share, for the quarter ended March 31, 2000, equivalent to a dividend
payout ratio of 58.3 percent, compared to 53.5 percent for the year 1999.
Valley declared a five percent stock dividend on April 6, 2000 to
shareholders of record on May 5, 2000, to be issued May 16, 2000. The
annual dividend rate will be increased from $0.99 per share, on an after
stock dividend basis, to $1.04 per share. The increased cash dividend will be
payable quarterly beginning on July 3, 2000. 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.*
Recent Accounting Pronouncement
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"), was issued
by the FASB in June 1998. SFAS No. 133 standardizes the accounting for
derivative instruments, including certain derivative instruments embedded
in other contracts. Under the standard, entities are required to carry all
derivative instruments in the statement of financial condition at fair
value. Valley would have had to adopt SFAS No. 133 by January 1, 2000.
However, SFAS No. 137 extended the adoption of SFAS No. 133 to fiscal years
beginning after June 15, 2000. Upon adoption, the provisions of SFAS No. 133
must be applied prospectively. Valley anticipates that the adoption of SFAS
No. 133 will not have a material impact in the financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See page 13 for a discussion of interest rate sensitivity.
<PAGE>
PART II
Item 4. Submission of Matters to a Vote of Security Holders
a) On April 6, 2000 the Annual Meeting of Shareholders of Valley
National Bancorp was held. The Shareholders voted upon the election
of 18 persons, named in the Proxy Statement, to serve as directors
of the Corporation for the ensuing year. All directors were elected
and there was no solicitation in opposition to management's nominees
as listed in the Proxy Statement.
b) Shareholders also voted upon approval of the Valley National Bancorp
Executive Incentive Plan, which generally provides an incentive
mechanism to senior executives to maximize the performance of Valley
and its subsidiaries, and to attract and retain achievement-oriented
senior executives.
Number of Votes For Withheld Abstain
30,774,624 7,098,575 1,009,621
c) Shareholders also voted upon approval of the amendment to the
Certificate of Incorporation of Valley National Bancorp
authorizing the issuance of 30,000,000 shares of a new class of
"blank check" preferred stock to maximize Valley's ability
to expand its capital base.
Number of Votes For Withheld Abstain
30,245,811 9,898,804 805,719
Item 5. Other Information
a) The Board of Directors approved a five percent stock dividend on
April 6, 2000. The new stock will be issued May 16, 2000
to shareholders of record as of May 5, 2000.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(3) Articles of Incorporation and By-laws
A) Certificate of Incorporation of the Registrant
restated to show all changes through May 9, 2000.
B) By-laws as incorporated herein by reference to the
Registrant's Form 10-K Annual Report for the year
ended December 31, 1998.
(10) Material Contracts
A) "The Valley National Bancorp Executive Incentive
Plan" effective January 1, 2000.
b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALLEY NATIONAL BANCORP
(Registrant)
Date: May 12, 2000 /s/ PETER SOUTHWAY
PETER SOUTHWAY
VICE CHAIRMAN
Date: May 12, 2000 /s/ ALAN D. ESKOW
ALAN D. ESKOW
SENIOR VICE PRESIDENT AND CONTROLLER
FINANCIAL ADMINISTRATION
<PAGE>
EXHIBIT (3)A
RESTATED
CERTIFICATE OF INCORPORATION
OF
VALLEY NATIONAL BANCORP
The Board of Directors of Valley National Bancorp pursuant to the
provisions of Section 14A:95-5(2) has adopted this Restated Certificate of
Incorporation to restate and integrate in a single certificate the
provisions of its certificate of incorporation as heretofore amended. Valley
National Bancorp does hereby certify as follows:
ARTICLE I
CORPORATE NAME
The name of the Corporation is Valley National Bancorp (hereinafter
the "Corporation").
ARTICLE II
CURRENT REGISTERED OFFICE
AND CURRENT REGISTERED AGENT
The address of the Corporation's current registered office is 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
(A) The total authorized capital stock of the Corporation shall
be 138,527,344 shares, consisting of 108,527,344 shares of Common Stock and
30,000,000 shares of Preferred Stock which may be issued in one or more
classes or series. The shares of Common Stock shall constitute a single
class and shall be without nominal or par value. The shares of Preferred
Stock of each class or series shall be without nominal or par value, except
that the amendment authorizing the initial issuance of any class or series,
adopted by the Board of Directors as provided herein, may provide that shares
of any class or series shall have a specified par value per share, in which
event all of the shares of such class or series shall have the par value per
share so specified.
(B) The Board of Directors of the Corporation is expressly
authorized from time to time to adopt and to cause to be executed and filed
without further approval of the shareholders amendments to this Certificate
of Incorporation authorizing the issuance of one or more classes or series
of Preferred Stock for such consideration as the Board of Directors
may fix. In an amendment authorizing any class or series of Preferred Stock,
the Board of Directors is expressly authorized to determine:
(a) The distinctive designation of the class or series
and the number of shares which will constitute the class or series,
which number may be increased or decreased (but not below the number
of shares then outstanding in that class or above the total shares
authorized herein) from time to time by action of the Board of
Directors;
(b) The dividend rate on the shares of the class or
series, whether dividends will be cumulative, and, if so,
from what date or dates;
(c) The price or prices at which, and the terms and
conditions on which, the shares of the class or series may
be redeemed at the option of the Corporation;
(d) Whether or not the shares of the class or series will
be entitled to the benefit of a retirement or sinking fund to be
applied to the purchase or redemption of such shares and, if so
entitled, the amount of such fund and the terms and provisions
relative to the operation thereof;
(e) Whether or not the shares of the class or series will
be convertible into, or exchangeable for, any other shares of stock
of the Corporation or other securities, and if so convertible or
exchangeable, the conversion price or prices, or the rates of
exchange, and any adjustments thereof, at which such conversion
or exchange may be made, and any other terms and conditions of such
conversion or exchange;
(f) The rights of the shares of the class or series
in the event of voluntary or involuntary liquidation, dissolution
or winding up of the Corporation;
(g) Whether or not the shares of the class or series will
have priority over, parity with, or be junior to the shares of any
other class or series in any respect, whether or not the shares of
the class or series will be entitled to the benefit of limitations
restricting the issuance of shares of any other class or series
having priority over or on parity with the shares of such class or
series and whether or not the shares of the class or series are
entitled to restrictions on the payment of dividends on, the making
of other distributions in respect of, and the purchase or redemption
of shares of any other class or series of Preferred Stock or Common
Stock ranking junior to the shares of the class or series;
(h) Whether the class or series will have voting rights,
in addition to any voting rights provided by law, and if so, the terms
of such voting rights; and
(i) Any other preferences, qualifications, privileges,
options and other relative or special rights and limitations of
that class or series.
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.
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, as restated.
/s/ GERALD H. LIPKIN
Gerald H. Lipkin, Chairman
President & Chief Executive Officer
<PAGE>
EXHIBIT (10)A
VALLEY NATIONAL BANCORP
EXECUTIVE INCENTIVE PLAN
1. Purpose.
The purposes of this Valley National Bancorp Executive Incentive Plan
(the "Plan") are (i) to provide an incentive mechanism to senior executives to
maximize the performance of the Company and its subsidiaries, and (ii) to
attract and retain achievement oriented senior executives.
2. Definitions.
For purposes of the Plan, the following terms shall have the defined
meanings as set forth below:
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor thereto.
"Committee" shall mean the committee of the Board described in Section
4 hereof.
"Company" shall mean Valley National Bancorp, a corporation
organized under the laws of the State of New Jersey (or any
successor corporation).
"Disability" shall mean a physical or mental condition of a
Participant resulting from a bodily injury, disease, or mental
disorder which renders him or her incapable of continuing in the
employment of the Company. Such disability shall be determined by
the Committee, based upon appropriate medical advice and examination.
"Participant" shall mean an officer of the Company or a subsidiary
thereof who is awarded rights under the Plan.
"Performance Goal" shall mean the performance goal set by the Committee
in accordance with Section 6 of the Plan.
"Retirement" shall mean retirement from active employment with
the Company on or after attainment of age 62, unless an
earlier retirement is approved by the Committee.
3. Effective Date.
The Plan shall be effective on January 1, 2000, provided, however,
that the effectiveness of this Plan is conditioned on its approval by
an affirmative vote of the holders of Company stock represented at a
meeting duly held in accordance with applicable law within twelve
(12) months after the date this Plan is adopted by the Board. All
awards under this Plan shall be null and void if the Plan is not
approved by such stockholders within such twelve-month period.
4. Administration.
(a) The Plan shall be administered by the Compensation Committee
("Committee") of the Board, which shall consist solely of two
or more directors each of whom is an outside director within the
meaning of the applicable regulations under Section 162(m) of
the Code or any successor thereto. The members of the Committee
shall be appointed by, and may be changed from time to time at
the discretion of, the Board.
(b) The Committee shall have the authority (i) to exercise all of the
powers granted to it under the Plan; (ii) to construe, interpret, and
implement the Plan; (iii) to prescribe, amend and rescind rules and
regulations relating to the Plan; (iv) to make all determinations
necessary or advisable in administering the Plan; and (v) to correct any
defect, supply any omission, and reconcile any inconsistency in the Plan.
(c) The Committee shall maintain written minutes of its meetings, including
minutes regarding the Performance Goals established by the Committee
pursuant to Section 6 hereof, and any certification regarding the
satisfaction of Performance Goals made pursuant to Section 7 hereof.
(d) Solely for purposes of satisfying the shareholder approval requirement
of Section 162(m) of the Code, the Committee shall cause the material
terms under which awards are to be paid to be disclosed to shareholders for
approval by a majority of the vote in a separate shareholder vote before
the payment of the award. In order to prevent the disclosure of
confidential competitive information, such disclosure shall be limited
to the disclosure of only those material terms necessary to satisfy
the requirements of Section 162(m) of the Code and the regulations
thereunder.
(e) All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the
Company and Participants.
(f) No member of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan.
(g) To the extent allowable under the regulations under Section 162(m) of
the Code, the Committee may, in its sole discretion, revise the amount
payable under an award downward, if, in the business judgment of the
Committee, it is in the best interests of the Company and its
shareholders, and an unintended windfall, or inequitable payment will
otherwise result.
5. Eligibility and Participation.
The class of officers who are eligible to receive payments under the
Plan shall consist of such members of the officers of the Company or a
subsidiary thereof as the Committee shall in its sole discretion select. The
Committee annually shall determine the officers who shall be eligible to receive
awards under the Plan.
6. Awards.
The Committee shall, prior to or during the first quarter of each
calendar year, establish Performance Goals for determining the incentive
awards for such calendar year for Participants in the Plan. The Committee, in
determining such Performance Goals, may consider appropriate recommendations
made by the Compensation Committees of any subsidiary of the Company. In
establishing the Performance Goals, the Committee may, in its discretion,
consider one or more business criteria that apply to the Participant, the
Company as a whole, or any designated subsidiary or business unit of the
Company or a subsidiary thereof. Such business criteria may
include, inter alia, revenues of the Company or any subsidiary, pre-tax profits
of the Company or any subsidiary, stock price, market share, earnings per
share, return on equity, or costs, as well as projected Company and industry
performance, and such other factors it may deem appropriate, including
conditions in the general economy and in the industry.
As soon as practicable after the close of each calendar year, the
Committee shall determine the actual incentive awards to be made to the
Participants, provided, however, that prior to the close of such calendar
year, the Committee may estimate the actual incentive awards to be made to all
or certain of the Participants and may authorize the immediate distribution
of all or any portion thereof to such Participants, and provided further,
however, that during any such calendar year the Committee may, in its
discretion, determine incentive awards for the portion of the year preceding
such determination and may authorize the immediate distribution of such
awards to all or certain of the Participants.
In determining such awards, the Committee may consider, inter alia,
the following: (i) the salary of each Participant; (ii) the level of executive
or managerial responsibility; and (iii) the performance of each Participant.
7. Committee Certification.
Prior to the payment of the value of any award, the Committee will
certify in writing that the Performance Goals set forth in Section 6 and any
other material terms within the meaning of the regulations under Section
162(m) of the Code were in fact satisfied.
8. Payment of Awards.
As soon as practicable after the Committee certification pursuant
to Section 7 hereof, the Company shall pay to each Participant, in cash, a
lump sum equal to the value of his or her award.
9. Termination of Employment.
(a) If a Participant's employment with the Company terminates prior
to payment for any reason other than (i) death; (ii) Disability; or
(iii) Retirement, then the Participant shall not be entitled to any
payment with respect to any award granted, unless otherwise provided by
the terms of an employment contract.
(b) If a Participant's employment is terminated due to (i) death;
(ii) Disability; or (iii)Retirement, then within the twelve
months following such death, Disability or Retirement, the Committee, in
its sole discretion, may authorize payment to the estate of the Participant
of all or any portion of the amount attributable to awards granted to the
Participant.
10. Amendment of the Plan.
The Board may from time to time alter, amend, suspend, or
discontinue the Plan. However, no such amendment or modification
shall adversely affect any Participant's rights with regard to outstanding
awards.
11. Assignability.
No awards granted under the Plan shall be pledged, assigned or
transferred by any Participant except by a will or by the laws of descent and
distribution. Any estate of any Participant receiving any award under the Plan
shall be subject to the terms and conditions of the Plan.
12. Tax Withholding.
Under the Plan, payments made to Participants shall be made in
cash, except as otherwise provided in Section 8. However, such payments shall
be made net of any amounts necessary to satisfy federal, state and local
withholding tax requirements, where required by law.
13. No Contract of Employment.
Neither the action of the Company in establishing this Plan, nor any
provisions hereof, nor any action taken by the Company, nor the Committee or
Board pursuant to such provisions, shall be construed as giving to any
employee or participant the right to be retained in the employ of the Company.
14. Other Provisions.
The following miscellaneous terms and conditions are also in effect
under the Plan:
(a) Any expenses and liability incurred by the Board, the Committee or
the Company in administering the Plan shall be paid by the Company.
Any benefits received or amounts paid to a Participant with respect to
awards under the Plan shall have no effect on the level of benefits provided to
or received by such Participant, or the Participant's estate or
beneficiaries, as a part of any other employee benefit plan or similar
arrangement provided by the Company, except as provided under the terms of
such other employee benefit plan or similar arrangement.
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<NAME> DIANNE M. GRENZ
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