-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, cj9sQI4xgonmElRWi8AKr4Xe4IFHX5DWrFe7yMk46aEyeXSHEAWpIHMem6Fl7hSL nFFjhY/cK936AxCrC3CnMQ== 0000714310-94-000005.txt : 19940331 0000714310-94-000005.hdr.sgml : 19940331 ACCESSION NUMBER: 0000714310-94-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALLEY NATIONAL BANCORP CENTRAL INDEX KEY: 0000714310 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 222477875 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-11179 FILM NUMBER: 94519116 BUSINESS ADDRESS: STREET 1: 1445 VALLEY RD CITY: WAYNE STATE: NJ ZIP: 07474 BUSINESS PHONE: 2013058800 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1993 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ Commission File Number 0-11179 VALLEY NATIONAL BANCORP (Exact name of registrant as specified in its charter) New Jersey 22-2477875 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1445 Valley Road, Wayne, New Jersey 07470 (Address of principal executive offices) Registrant's telephone number including area code (201) 305-8800 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of class on which registered None None Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock (based upon the closing price of these shares as quoted by NYSE) held by non-affiliates of the registrant was approximately $649,811,000 on February 18, 1994. There were 24,427,274 shares of Common Stock outstanding at February 18, 1994. VALLEY NATIONAL BANCORP DOCUMENTS INCORPORATED BY REFERENCE PARTS I AND II: Certain portions of the Annual Report to Shareholders for the year ended December 31, 1993 as referenced on the pages listed below. PART III: Certain portions of the Proxy Statement for the Annual Meeting of Shareholders to be held March 22, 1994 as referenced on the pages listed below. PART IV: Certain exhibits from the registrant's FORM 10-K Annual Report for the fiscal periods ended December 31, 1990, December 31, 1991 and December 31, 1992. Page(s) in Form 10-K Heading(s) in Annual Report to Annual Item No. Shareholders for Year Ended December 31, 1993 Report* 1. Business Analysis of Average Assets, Liabilities, and Shareholders' Equity and Net Interest Earnings on a Tax Equivalent Basis...........................22 Change in Interest Income and Expense on a Tax Equivalent Basis....................................23 Maturity Distribution of Investment Securities......24 Selected Consolidated Financial Data - Financial Ratios..............................................45 2. Properties Commitments and Contingencies.......................40-41 5. Market for the Dividends...................................41 Registrant's Selected Consolidated Financial Data......45 Common Equity Price Range of Common Stock................45 and Related Stockholder Matters 6. Selected Selected Consolidated Financial Data........45 Financial Data 7. Management's Management's Discussion and Analysis of Financial Discussion and Condition and Results of Operations.......17-25 Analysis of Financial Condition and Results of Operations 8. Financial Consolidated Statements of Financial Condition...26 Statements and Consolidated Statements of Income................27 Supplementary Consolidated Statements of Changes in Shareholders' Data Equity...........................28 Consolidated Statements of Cash Flows...........29 Notes to Consolidated Financial Statements.....30-43 Independent Auditors' Report....................44 *Page numbers refer to pages in non-edgar version of Annual Report and Proxy Statement. Heading(s) in Proxy Statement for Annual Pages(s)in Form 10-K Meeting of Shareholders to be held Proxy Item No. March 22, 1994 Statement* 10. Directors and Election of Directors..................... 2-4 Executive Officers of the Registrant 11. Executive Executive Compensation................... 6-11 Compensation Compensation Committee Report........... 11-13 12. Security Stock Ownership of Management and Principal Ownership of Shareholders........................... 4-6 Certain Beneficial Owners and Management 13. Certain Certain Transactions with Management.......14 Relationships and Related Transactions *Page numbers refer to pages in non-edgar version of Annual Report and Proxy Statement. TABLE OF CONTENTS Item Page PART I. 1. Business a) General Description of Business........................ 5 - 7 b) Statistical Information and Analysis................... 8 - 12 2.Properties............................................. 12 3.Legal Proceeding....................................... 12 4.Submission of Matters to a Vote of Security Holders.... 12 PART II. 5. Market for the Registrant's Common Equity and Related Shareholder Matters.......................................13 6.Selected Financial Data..................................... 13 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.................................13 8.Financial Statements and Supplementary Data................. 13 9.Changes in or Disagreements with Accountants on Accounting and Financial Disclosure.................................. 13 PART III. 10. Directors and Executive Officers of the Registrant. 13 - 14 11.Executive Compensation............................ 14 12.Security Ownership of Certain Beneficial Owners and Managers..................................................14 13.Certain Relationships and Related Transactions.............. 14 PART IV. 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................................. 14 - 16 SIGNATURES........................................................ 17 - 18 *Page numbers correspond to non-edgar version of Form 10-K. PART I Item 1. BUSINESS a) GENERAL DESCRIPTION OF BUSINESS VALLEY NATIONAL BANCORP Valley National Bancorp (Valley) is a bank holding company organized on May 2, 1983, under the laws of the State of New Jersey and registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956. Its principal business activities are restricted to those permissible by Bank Holding Companies under the Bank Act of 1956, as amended, and include the management and control of Valley National Bank (VNB). As of December 31, 1993, Valley's subsidiaries operated 59 full service banking branches located throughout northern New Jersey. RECENT DEVELOPMENTS On June 18, 1993, Valley issued approximately 421,000 shares of its common stock at a cost of $10,962,000 in exchange for approximately 661,000 shares of common stock of PeoplesBancorp ("Peoples") of Fairfield, New Jersey, a New Jersey Corporation and a registered bank holding company of Peoples Bank, National Association, a banking association. The merger was accounted for under the purchase method of accounting. The acquisition of Peoples resulted in the following statement of condition increases as of the acquisition date: Investment securities.............................................$ 47,472,000 Loans, net of unearned income.....................................$138,459,000 Total deposits....................................................$204,825,000 SUBSIDIARIES VNB, a wholly-owned subsidiary of Valley, is a national association established in 1927 under the laws of the United States. VNB provides a full range of commercial and retail bank services, including the acceptance of demand, savings and time deposits; extension of consumer, real estate, S.B.A. and other commercial credits; and offers full personal and corporate trust services, as well as pension and other fiduciary services. VNB operates 59 full service branch offices in five (5) New Jersey Counties. Valley Investment Corporation, a wholly-owned subsidiary of VNB, was organized on December 27, 1984, under the laws of the State of Delaware. Its business activities include holding, maintaining, and managing tangible investment assets. These assets include a tax-exempt money market fund, state and municipal bonds, U.S. Treasury Notes, U.S. Agency Bonds,mortgage-backed securities and mortgages secured by real estate situated outside of the State of Delaware. VNB Mortgage Services, Inc., a wholly-owned subsidiary of VNB, was organized on March 28,1989, under the laws of the State of New Jersey. Its primary business activities include servicing residential mortgage loan portfolios for VNB and various investors. BNV Realty Incorporated, a wholly-owned subsidiary of VNB, was organized on August 16, 1991, under the laws of the state of New Jersey. Its primary business activities are limited to holding and disposing of real estate VNB may acquire as other real estate owned. VN Investment Inc., a wholly-owned subsidiary of VNB, was organized on October 28, 1993,under the laws of the State of New Jersey. Its business activities include holding,maintaining, and managing tangible investment assets. These assets include U.S. Agency Bonds and mortgage-backed securities. Mayflower Financial Corporation ("Mayflower") is a savings and loan holding company for Mayflower Savings Bank, S.L.A., (MSB) a New Jersey-chartered stock savings bank, which operated two (2) full-service offices located in Livingston, New Jersey. Mayflower was incorporated in April 1988, under the laws of the State of Delaware, as a stock corporation,at the direction of the Board of Directors of MSB for the purpose of becoming company which would own all of the outstanding capital stock of MSB upon its conversion from the mutual-to-stock form of organization. MSB was organized in 1921 as a New Jersey chartered mutual savings and loan association. MSB converted to the stock form of organization and sold all of its outstanding capital stock to Mayflower in August 1988. Valley acquired Mayflower and MSB as of December 31, 1990. As of the close of business, January 31, 1993, Mayflower Financial Corporation ("Mayflower") and its wholly-owned savings and loan subsidiary, Mayflower Savings Bank ("MSB") were merged into Valley and VNB, respectively. COMPETITION Vigorous competition for loans and deposit accounts exists in all the major areas where Valley, or any of its subsidiary companies are presently engaged in business. Competition for banking services is based on price, product type, service quality and convenience of location. VNB and its subsidiaries compete with other commercial banks, other financial institutions such as savings banks, savings and loan associations, mortgage companies, leasing companies, finance companies and a variety of financial service and advisory companies. EMPLOYEES At year-end 1993, VNB and its subsidiaries employed 1,081 full-time equivalent persons.Management considers relations with employees to be satisfactory. SUPERVISION AND REGULATION Valley and VNB are subject to regulation and supervision by federal bank regulatory agencies. Valley is regulated and examined by the Federal Reserve Board and VNB is regulated and examined by the Comptroller of the Currency. There are a variety of statutory and regulatory restrictions governing the relations among Valley and VNB. The payment of dividends by VNB to Valley is restricted under the National Bank Act. The approval of the Comptroller of the Currency is required if the dividends for the year exceed the net profits, as defined in the Act, of that year plus the retained net profits for the preceding two years. In addition, a national bank's capital surplus must be equal to or exceed the stated capital for its common stock, or else the bank must make certain transfers from retained earnings to capital surplus. The Banking Affiliates Act of 1982 severely restricts loans and extensions of credit by VNB to Valley and its affiliates (except affiliates which are banks). In general, such loans must be secured by collateral having a market value ranging from 100% to 130% of the loan, depending upon the type of collateral. Furthermore, the aggregate of all loans from VNB to Valley and its affiliates in the aggregate may not exceed 20% of VNB's capital stock and surplus and, singly to Valley or any affiliate, may not exceed 10% of VNB's capital stock and surplus. Similarly, the Banking Affiliates Act of 1982 also restricts VNB in the purchase of securities issued by, the acceptance as loan collateral of securities issued by, the purchase of assets from, and the issuance of a guarantee or standby letter-of-credit on behalf of, Valley or any of its affiliates. Under the Bank Holding Company Act, Valley may not acquire directly or indirectly more than 5% of the voting shares of, or substantially all of the assets of, any bank without the prior approval of the Federal Reserve Board. Valley cannot acquire any bank located outside New Jersey unless the law of such other state specifically permits the acquisition. As of January 1, 1988, New Jersey law permits New Jersey banking organizations to acquire or be acquired by banking organizations in other states on a "reciprocal" basis (i.e., provided the other state's laws permit New Jersey banking organizations to acquire banking organizations in that state on substantially the same terms and conditions applicable to banking acquisitions solely within the state). Generally, the Bank Holding Company Act limits the business of a bank holding company and its affiliates to banking, managing or controlling banks, and furnishing or performing services for banks controlled by the holding company. The major exception to this rule is that a bank holding company directly or through a subsidiary may engage in non-banking activities which the Federal Reserve Board has determined to be so closely related to banking or managing or controlling banks so as to be a proper incident thereto. The Federal Reserve under its Regulation "Y" has restricted such activities to things such as lease financing, mortgage banking, investment advice, certain data processing services and discount brokerage services and ownership of a savings and loan association. The Federal Reserve Board, the Office of the Comptroller of the Currency ("OCC") and the FDIC have issued risk-based capital guidelines for U.S. banking organizations. The objective of these efforts was to provide a more uniform capital framework that is sensitive to differences in risk profiles among banking companies. Below is a list of such requirements and shows Valley and VNB's ratios as of December 31, 1993. Valley regulatory VNB regulatory capital capital Regulatory ($ in thousands) Amount Percent(1) Amount Percent(1) capital percent(2) Risk based capital: Tier-one capital $258,622 13.93% $231,709 12.57% 6.00% Tier-one & Tier two capital $281,918 15.18% $254,904 13.83% 10.00% Tier-one leverage $260,269 7.62% $232,328 6.86% 3.00-5.00% (1) Ratio of qualifying capital to consolidated total risk-adjusted assets. (2) For qualification as a well-capitalized institution. On August 9, 1989, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") was enacted. FIRREA established new capital standards and enhanced regulatory oversight of the thrift industry. Under FIRREA, banks are now permitted to acquire all thrifts and may convert such acquired thrifts into commercial bank branches. In such a conversion the thrift may have to pay insurance fund exit and entrance fees to the FDIC. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was enacted in December 1991. FDICIA identifies the following capital standard categories for financial institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions depending on the category in which an institution is classified. Pursuant to FDICIA, undercapitalized institutions must submit recapitalization plans, and a company controlling a failing institution must guarantee such institutions's compliance with its plan. FDICIA also required the various regulatory agencies to prescribe certain non-capital standards for safety and soundness relating generally to operations and management, asset quality and executive compensation and permits regulatory action against a financial institution that does not meet such standards. The FDIC has adopted many of these regulations. The deposits of VNB are insured up to applicable limits by the FDIC. Accordingly, VNB is subject to deposit insurance assessments to maintain the Bank Insurance Fund (the "BIF") of the FDIC. Pursuant to FDICIA, the FDIC established a risk-based insurance assessment system. This approach is designed to ensure that a banking institution's insurance assessment is based on three factors: the probability that the applicable insurance fund will incur a loss from the institution; the likely amount of the loss; and the revenue needs of the insurance fund. Under the risk-based assessment system, each BIF member institution is assigned to one of nine assessment risk classifications based on its capital ratios and supervisory evaluations. The lowest risk institutions presently pay deposit insurance at a rate of .23% of domestic deposits while the highest risk institutions are assessed at the rate of .31% of domestic deposits. Each institution's classification under the system is reexamined semiannually. In addition, the FDIC is authorized to increase or decrease such rates on a semiannual basis. The Bank presently pays a premium of .23%. b) STATISTICAL INFORMATION AND ANALYSIS The following information is being presented pursuant to requirements of SEC Guide 3, "Statistical Disclosure by Bank Holding Companies". I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL A. AVERAGE BALANCE SHEETS - are incorporated by reference under the caption "Analysis of Average Assets, Liabilities and Shareholders' Equity and Net Interest Earnings on a Tax Equivalent Basis" on page 22 of the 1993 Annual Report to Shareholders. B. NET INTEREST EARNINGS AND INTEREST RATE ANALYSIS - are incorporated by reference under the caption "Analysis of Average Assets, Liabilities and Shareholders' Equity and Net Interest Earnings on a Tax Equivalent Basis" on page 22 of the 1993 Annual Report to Shareholders. C. ANALYSIS OF NET INTEREST EARNINGS, VOLUME AND RATE VARIANCE - are incorporated by reference under the caption "Change in Interest Income and Expense on a Tax Equivalent Basis" on page 23 of the 1993 Annual Report to Shareholders. II. INVESTMENT PORTFOLIO A. BOOK VALUE - The following tables set forth the book value of Valley's different types of investment securities over the last three years: INVESTMENT SECURITIES HELD TO MATURITY December 31 ($ in thousands) 1993 1992 1991 Government agencies and corporations... $ 75,106 $ 118,778 $ 353,645 Obligations of state and political subdivisions......................... 283,805 222,396 184,856 Mortgage-backed securities............. 579,839 744,625 667,364 Other securities....................... 1,243 1,954 10,223 INVESTMENT SECURITIES AVAILABLE FOR SALE December 31 ($ in thousands) 1993 1992 1991 U.S. Treasury securities and other government agencies and corporations....$ 184,019 $ 305,118 $ -- Mortgage-backed securities............... 256,417 24,783 -- Equity securities...................... 1,046 871 -- B. MATURITIES AND AVERAGE WEIGHTED YIELDS - are incorporated by reference under the caption "Maturity Distribution of Investment Securities" on page 24 of the 1993 Annual Report to Shareholders. C. SECURITIES OF A SINGLE ISSUER EXCEEDING TEN PERCENT OF SHAREHOLDERS' EQUITY - As of December 31, 1993, there were no securities, in the name of any one issuer, exceeding 10% of shareholders' equity, except for securities issued by the United States and its political subdivisions and agencies. III. LOAN PORTFOLIO A. TYPES OF LOANS - The following table sets forth Valley's different types of loans over the past five years: ($ in thousands) 1993 1992 1991 1990 1989 Commercial, financial and agricultural.............. $209,657 $ 218,789 $ 251,781 $ 320,778 $ 314,323 Real estate - construction.. 63,096 58,077 76,327 90,333 101,299 Real estate - commercial....387,503 306,167 290,038 262,848 262,970 Real estate - residential...597,423 508,308 373,884 368,676 269,620 Loans to individuals........528,616 428,828 389,293 410,443 404,684 1,786,295 1,520,169 1,381,323 1,453,078 1,352,896 Loans held for sale......... 16,905 -- -- -- -- Less: Unearned income...... (1,200) (226) (987) (1,339) (812) Loans, net of unearned income.............. 1,802,000 1,519,943 1,380,336 1,451,739 1,352,084 Less: Allowance for possible loan losses. (35,205) (28,772) (21,937) (15,921) (8,925) $1,766,795 $1,491,171 $1,358,399 $1,435,818 $1,343,159 Efforts are made to maintain a diversified portfolio as to type of borrower and loan to guard against a downward turn in any one economic sector. B. MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES - The following table sets forth Valley's commercial loans and real estate construction loans as of December 31, 1993: 1 Yr. Over 1 Over ($ in thousands) or less to 5 Yrs. 5 Yrs. Total Commercial, financial & agricultural-fixed rate....... $ 3,911 $ 27,545 $ 13,438 $ 44,894 Commercial, financial & agricultural-adjustable rate.. 64,054 32,422 68,287 164,763 Real estate construction - fixed rate.................... -- 194 -- 194 Real estate construction - adjustable rate............... 35 884 21,665 5,353 62,902 The majority of payments due after 1 year represent loans with floating interest rates. Prior to maturity of each loan, Valley generally conducts a review which normally includes an analysis of the borrower's financial condition and, if applicable, a review of the adequacy of collateral. A rollover of the loan at maturity may require a principal paydown. C. RISK ELEMENTS 1.NON ACCRUAL, PAST DUE AND RESTRUCTURED LOANS - The following table sets forth Valley's problem loans for each of the past five years: ($ in thousands) 1993 1992 1991 1990 1989 Loans on non-accrual basis...$ 18,535 $ 21,371 $ 25,837 $ 19,713 $ 2,414 Loans past due in excess of 90 days and still accruing. 8,498 11,096 10,506 7,640 6,205 $ 27,033 $ 32,467 $ 36,343 $ 27,353 $ 8,619 The amount of interest income that would have been recorded on non-accrual loans in 1993 had payments remained in accordance with the original contractual terms approximated $2,158,000, while the actual amount of interest income recorded on these types of assets in 1993 totalled $439,000, resulting in lost interest income of $1,719,000. Loans are generally placed on a non-accrual status when they become past due in excess of 90 days as to payment of principal or interest. Exceptions may be made if the loan is sufficiently collaterized and in the process of collection. Additionally, loans may be transferred to non-accrual before they are past due more than 90 days if, in management's judgment, the ultimate collectiblity of the interest is doubtful. A loan may only be restored to an accruing basis when it again becomes well secured and in the process of collection and all past due amounts have been collected. Generally, all accrued but unpaid interest at the date a loan is placed on a non-accrual status is reversed against current earnings unless the aggregate amount of the principal outstanding and accrued interest on the loan is sufficiently supported by the value of the underlying collateral. Subsequent payments received on non-accrual loans are applied as a reduction of principal amounts outstanding. 2. POTENTIAL PROBLEM LOANS - Although substantially all risk elements at December 31, 1993 have been disclosed in the categories presented above, Management believes that the current economic conditions may affect the ability of certain borrowers to comply with the contractual repayment terms on certain real estate and commercial loans. As part of the analysis of the loan portfolio by management, it has been determined that there are approximately $46.8 million in potential problem loans at December 31, 1993 which have not been classified as non-accrual, past due or restructured. Potential problem loans are defined as performing loans for which management believes that the borrower's ability to repay the loan may be impaired. Of this total $5.3 million of loans were acquired in the Peoples merger. $38.0 million of these loans are considered to be adequately collaterized and supported by personal guarantees. Approximately $3.1 million has been provided for in the allowance for loan losses for these potential problem loans. There can be no assurance that Valley has identified all of its problem loans. At December 31, 1992, Valley had identified approximately $30.7 million of problems loans. 3. FOREIGN OUTSTANDINGS - None. 4. LOAN CONCENTRATIONS - There were no loan concentrations at December 31, 1993 other than those disclosed in section III A. above. Valley's lending activities are primarily concentrated within the northern section of New Jersey. For additional information, see Loan Portfolio on page 25 of the 1993 Annual Report to Shareholders. D. OTHER INTEREST BEARING ASSETS - None. IV.SUMMARY OF LOAN LOSS EXPERIENCE - The following table sets forth the relationship amongloans, loans charged-off and loan recoveries, the provision for loan losses and the allowance for loan losses for the past five years: ($ in thousands) Years Ended December 31, 1993 1992 1991 1990 1989 Average loans outstanding,..... $1,665,545 $1,441,320 $1,405,446 $1,347,475 $1,256,571 Beginning balance - Allowance for loan losses.............. $ 28,772 $ 21,937 $ 15,921 $ 8,925 $ 8,339 Balance from acquisition....... 4,466 -- -- 355 -- Loans charged-off: Commercial................... 1,430 5,751 3,001 3,396 686 Construction................. 441 813 300 400 -- Mortgage-Commercial.......... 784 -- -- -- -- Mortgage-Residential......... 191 79 105 4 4 Installment.................. 2,496 3,676 4,052 2,507 1,429 5,342 10,319 7,458 6,307 2,119 Charge-off loans recovered: Commercial................... 438 238 511 171 244 Construction................. -- -- -- -- -- Mortgage-Commercial.......... -- -- -- -- -- Mortgage-Residential......... 1 -- -- -- -- Installment.................. 870 916 963 552 436 1,309 1,154 1,474 723 680 Net charge-offs................ 4,033 9,165 5,984 5,584 1,439 Provision charged to operations................... 6,000 16,000 12,000 12,225 2,025 Ending Balance - Allowance for loan losses.............. $ 35,205 $ 28,772 $ 21,937 $ 15,921 $ 8,925 Ratio of net charge offs during the period to average loans outstanding during the period....................... .24% .64% .43% .41% .11%
The allowance for possible loan losses is maintained at a level necessary to absorb potential loan losses and other credit risk related charge-offs. It is the result of an analysis which relates outstanding balances to expected reserve levels required to absorb future credit losses. Current economic problems are addressed through management's assessment of anticipated changes in the regional economic climate, changes in composition and volume of the loan portfolio and variances in levels of classified loans, non-performing assets and other past due amounts. Additional factors include consideration of exposure to loss including size of credit, existence and nature of collateral, credit record, profitability and general economic conditions. The following table summarizes the allocation of the allowance for loan losses to specific loan categories for the past five years: ($ in thousands) Years Ended December 31, 1993 1992 1991 Percent Percent Pecent of Loans of Loans of Loans Category Category Category Allowance to Total Allowance to Total Allowance to Total Allocation Loans Allocation Loans Allocation Loans Loan category: Commercial, financial and agricultural...... $ 10,352 16.9% $ 8,364 14.3% $ 9,850 18.1% Real estate............. 6,312 47.6% 5,054 57.4% 4,681 53.6% Consumer................ 6,562 35.5% 4,916 28.3% 3,967 28.3% Unallocated............... 11,979 N/A 10,438 N/A 3,439 N/A $ 35,205 100.0% $ 28,772 100.0% $ 21,937 100.0% 1990 1989 Percent Percent of Loan of Loan Category Category Allowance to Total Allowance to Total Allocation Loans Allocation Loans Loan category: Commercial, financial and agricultural......$ 7,791 22.1% $ 5,015 23.2% Real estate............. 3,679 49.6% 793 46.9% Consumer................ 2,749 28.3% 1,715 29.9% Unallocated............... 1,702 N/A 1,402 N/A $ 15,921 100.0% $ 8,925 100.0% For additional information, see Asset Quality and Risk Elements on page 20 of the 1993 Annual Report to Shareholders. Net charge-offs decreased during 1993 as a result of improved current economic conditions. The amount of anticipated charge-offs for 1994 is estimated to be consistent with 1993. V. DEPOSITS - The classification of average deposits is incorporated by reference under the caption "Analysis of Average Assets, Liabilities and Shareholders' Equity and Net Interest Earnings on a Tax Equivalent Basis" on page 22 of the 1993 Annual Report to Shareholders. The following table lists, by maturity, all certificates of deposit of $100,000 and over at December 31, 1993. These certificates of deposit are generated primarily from core deposit customers and are not brokered funds. ($ in thousands) Less than three months................................ $ 74,986 Three to six months................................... 21,708 Six to twelve months.................................. 16,083 More than twelve months............................... 22,821 VI.RETURN ON EQUITY AND ASSETS - The key ratios including return on equity and assets are incorporated by reference under the caption "Selected Financial Data" on page 45 of the 1993 Annual Report to Shareholders. The following table presents the ratio of average " on page 45 of the 1993 Annual Report to Shareholders. The following table presents the ratio of average equity to assets of Valley for each of the past three years. 1993 1992 1991 Average shareholders' equity as a % of average total assets.......... 7.46% 6.97% 8.28% VII. SHORT TERM BORROWINGS - Not applicable Item 2. Properties At present Valley owns no real property, but utilizes the offices and space provided by VNB at 615 Main Avenue, Passaic, New Jersey and 1445 Valley Road, Wayne, New Jersey. VNB operates from its administrative headquarters and three other locations, 59 branch offices and two warehouses. VNB owns the warehouses and 28 banking offices, including its main office and leases 31 branch offices, including the administrative headquarters. During 1993 VNB acquired a 62,000 square foot office building adjacent to its administrative headquarters in Wayne, New Jersey. As space becomes available, VNB will begin using the building, as early as 1994, to consolidate sections of its operations. OWNED PROPERTIES: County Square Feet Passaic 154,500 Bergen 94,260 Essex 67,959 Hudson 23,870 Morris -- 340,589 LEASED PROPERTIES: County Square Feet Passaic 90,435 Bergen 23,090 Essex 29,595 Hudson 2,520 Morris 10,800 156,440 Item 3. Legal Proceedings There were no material pending legal proceedings to which Valley, the subsidiary banks or companies were a party, other than ordinary routine litigations incidental to business and which had no material effect on the presentation of the financial statements contained in this report. Item 4. Submission of Matters to a Vote of Security Holders None PART II Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters Market information is incorporated by reference under the caption "Price Range of Common Stock" on page 45 of the 1993 Annual Report to Shareholders. Supervisory regulations regarding the maximum amount of cash dividends that VNB may declare annually are covered under the caption "Dividend Restrictions" on page 41 of the 1993 Annual Report to Shareholders. Cash dividends declared during the two year period ended December 31, 1993 are incorporated by reference under the caption "Consolidated Quarterly Financial Data" on page 42 of the 1993 Annual Report to Shareholders. Valley had approximately 4,406 shareholders of record at February 18, 1994. Valley's Board of Directors continues to believe that cash dividends are an important component of shareholder value and that if the current level of performance and capital strength continue, Valley expects to be able to continue its current dividend policy of a quarterly distribution of earnings to its shareholders. Item 6. Selected Financial Data Selected Financial Data for the past five years is incorporated by reference under the caption "Selected Consolidated Financial Data", on page 45 of the 1993 Annual Report to Shareholders. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - is incorporated by reference under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations", reported on pages 17 through 25 of the 1993 Annual Report to Shareholders. Item 8. Financial Statements and Supplementary Data The consolidated financial statements, notes to consolidated financial statements, and Independent Auditors' Report thereon are incorporated by reference on pages 26 through 44 of the 1993 Annual Report to Shareholders. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There was neither a change in accountants nor disagreement with accountants on accounting and financial disclosure during 1993. PART III Item 10. Directors and Executive Officers of the Registrant Information regarding directors of the registrant are incorporated by reference to the sections included under the primary heading " Proposal 1 -Election of Directors" on pages 2, 3 and 4 of the Proxy Statement for the Annual Meeting of Shareholders to be held on March 22, 1994 except for certain information on Executive Officers of the Registrant which is included in Part I of this report. Executive Officers of the Registrant AGE AT IN OFFICE NAMES 12/31/93 SINCE OFFICE Gerald H. Lipkin 52 1989 Chairman of the Board and Chief Executive Officer Peter Southway 59 1987 President and Chief Operating Officer Sam P. Pinyuh 61 1990 Executive Vice President Peter Crocitto 36 1992 First Senior Vice President Robert E. Farrell 47 1992 First Senior Vice President Richard P. Garber 50 1992 First Senior Vice President Robert Mulligan 46 1993First Senior Vice President Peter John Southway 33 1992 First Senior Vice President Jack M. Blackin 51 1993 Senior Vice President Ernest Bozzo 50 1992 Senior Vice President Stephen P. Cosgrove 49 1993 Senior Vice President Alan D. Eskow 45 1993 Senior Vice President Robert Farnon 55 1992 Senior Vice President John Harris 41 1993 Senior Vice President William O'B Kelly 63 1977 Senior Vice President Lucinda P. Long 47 1992 Senior Vice President Garret G. Nieuwenhuis 53 1983 Senior Vice President John H. Prol 56 1992 Senior Vice President Peter G. Verbout 50 1992 Senior Vice President All officers serve at the pleasure of the Board of Directors. Item 11. Executive Compensation - is incorporated by reference to the sections included under the primary headings "Executive Compensation" on pages 6 through 11 and "Compensation Committee Report" on pages 11 through 13 of the Proxy Statement for the Annual Meeting of Shareholders to be held March 22, 1994. Item 12. Security Ownership of Certain Beneficial Owners and Management - is incorporated by reference under the primary heading "Stock Ownership of Management and Principal Shareholders" on pages 4 through 6 of the Proxy Statement for the Annual Meeting of Shareholders to be held March 22, 1994. Item 13. Certain Relationships and Related Transactions - is incorporated by reference under the secondary heading "Certain Transactions with Management" on page 14 of the Proxy Statement for the Annual Meeting of Shareholders to be held March 22, 1994. The percentage of loans to directors, executive officers, and their affiliates as a percentage of shareholders' equity was 7.75 percent at December 31, 1993. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) The following documents are filed as part of this report: 1. Financial Statements: Consolidated Statements of Financial Condition - December 31, 1993 and 1992 Consolidated Statements of Income - for years ended December 31, 1993, 1992 and 1991 Consolidated Statements of Changes in Shareholders' Equity - for years ended December 1993, 1992 and 1991 Consolidated Statements of Cash Flows - for years ended December 1993, 1992 and 1991 Notes to Consolidated Financial Statements Independent Auditors' Report These statements are incorporated herein by reference to the Registrant's Annual Report to Shareholders for the year ended December 31, 1993, as noted on page 2 of this Form 10-K Annual Report. 2. Financial Statement Schedules: All schedules are omitted because they are either inapplicable or not required, or because the required information is included in the Consolidated Financial Statements or notes thereto. 3. Exhibits (numbered in accordance with Item 601 of Regulation S-K): (3) Articles of incorporation and bylaws: A.Restated Certificate of Incorporation of the registrant dated March 22, 1994. B.By-Laws of the Registrant adopted as of March 14, 1989 and amended March 19, 1991. (10) Material Contracts: *** A."Employment Agreements" dated June 6, 1986 between Valley, VNB and Gerald H. Lipkin and Sam P. Pinyuh. **** B."The Valley National Bancorp Long-term Stock Incentive Plan" dated January 18, 1994. * C.Warrant Agreement by and between Valley National Bancorp and Valley National Bank, Trust Department governing the terms of 450,000 warrants to purchase Valley National Bancorp common stock dated as of December 31, 1990. ** D.Amendment to "Employee Agreements" between Valley, VNB and Gerald H. Lipkin and Sam P. Pinyuh dated December 10, 1991. ** E."Employee Agreement" dated December 10, 1991 between Valley, VNB and Peter Southway. ** F."Severance Agreements" dated December 10, 1991 between Valley, VNB and Gerald H. Lipkin, Peter Southway, and Sam P. Pinyuh. * This document is incorporated herein by reference from the Registrant's Form 10-K Annual Report for the fiscal period ending December 31, 1990. ** This document is incorporated herein by reference from the Registrant's Form 10-K Annual Report for the fiscal period ending December 31, 1991. *** This document is incorporated herein by reference from the Registrant's Form 10-K Annual Report for the fiscal period ending December 31, 1992. ****This document is incorporated herein by reference from the Registrant's Notice of Annual Meeting of Shareholders and Proxy dated March 1, 1994. (13) 1993 Annual Report to Shareholders (21) List of Subsidiaries: (a) Subsidiary of Valley: Percentage of Voting Jurisdiction of Securities Owned by Name Incorporation the Parent Valley National Bank (VNB) United States 100% (b) Subsidiaries of VNB: Valley Investment Corp. Delaware 100% VNB Mortgage Services, Inc. New Jersey 100% BNV Realty Incorporated New Jersey 100% VN Investment, Inc. New Jersey 100% (22) Published Report Regarding Matters Submitted to Vote of Security Holders Notice of Annual Meeting of Shareholders to be held Tuesday, March 22, 1994 Proxy Statement dated March 1, 1994 (23) Consents of Experts and Counsel Consent of KPMG Peat Marwick dated March 22, 1994. (b) Reports on Form 8-K There were no reports on Form 8-K filed by Valley during the last quarter of the period covered by this report. SIGNATURES Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VALLEY NATIONAL BANCORP By:/s/Gerald H. Lipkin Gerald H. Lipkin, Chairman of the Board and Chief Executive Officer Dated: March 22, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. /s/Gerald H. Lipkin Chairman of the Board and March 22, 1994 GERALD H. LIPKIN Chief Executive Officer and Director /s/Peter Southway President and March 22, 1994 PETER SOUTHWAY Chief Operating Officer (Principal Financial Officer) and Director /s/Alan D. Eskow Senior Vice President March 22, 1994 ALAN D. ESKOW Financial Administration (Principal Accounting Officer) /s/Pamela Bronander Director March 22, 1994 PAMELA BRONANDER /s/Joseph Coccia, Jr. Director March 22, 1994 JOSEPH COCCIA, JR. /s/Austin C. Drukker Director March 22, 1994 AUSTIN C. DRUKKER /s/Thomas P. Infusino Director March 22, 1994 THOMAS P. INFUSINO /s/Gerald Korde Director March 22, 1994 GERALD KORDE /s/Robert L. Marcalus Director March 22, 1994 ROBERT L. MARCALUS /s/Robert E. McEntee Director March 22, 1994 ROBERT E. McENTEE /s/Sam P. Pinyuh Executive Vice President March 22, 1994 SAM P. PINYUH and Director /s/Rubin Rabinowitz Director March 22, 1994 RUBIN RABINOWITZ /s/Robert Rachesky Director March 22, 1994 ROBERT RACHESKY /s/Barnett Rukin Director March 22, 1994 BARNETT RUKIN /s/Richard F. Tice Director March 22, 1994 RICHARD F. TICE /s/Leonard Vorcheimer Director March 22, 1994 LEONARD VORCHEIMER /s/Joseph L. Vozza Director March 22, 1994 JOSEPH L. VOZZA EX-3 2 EXHIBIT (3) A RESTATED CERTIFICATE OF INCORPORATION OF VALLEY NATIONAL BANCORP The Board of Directors of Valley National Bancorp pursuant to the provisions of Section 14A:95-5(2) has adopted this Restated Certificate of Incorporation to restate and integrate in a single certificate the provisions of its certificate of incorporation as heretofore amended. Valley National Bancorp does hereby certify as follows: ARTICLE I CORPORATE NAME The name of the Corporation is Valley National Bancorp (hereinafter the "Corporation"). ARTICLE II CURRENT REGISTERED OFFICE AND CURRENT REGISTERED AGENT The address of the Corporation's current registered office is 1445 Valley Road, Wayne, New Jersey. The name of the current registered agent at that address is Gerald H. Lipkin. ARTICLE III NUMBER OF DIRECTORS The number of directors shall be governed by the by-laws of the Corporation. ARTICLE IV CORPORATE PURPOSE The purpose for which the Corporation is organized is to engage in any activities for which corporations may be organized under the New Jersey Business Corporation Act, subject to any restrictions which may be imposed from time to time by the laws of the United States or the State of New Jersey with regard to the activities of a bank holding company. ARTICLE V CAPITAL STOCK The Corporation is authorized to issue 34,125,000 shares of common stock without nominal or par value. ARTICLE VI INDEMNIFICATION The Corporation shall indemnify its officers, directors, employees and agents and former officers, directors, employees and agents, and any other persons serving at the request of the Corporation as an officer, director, employee or agent of another corporation, association, partnership, joint venture, trust, or other enterprise, against expenses (including attorney's fees, judgments, fines, and amounts paid in settlement) incurred in connection with any pending or threatened action, suit, or proceeding, whether civil, criminal, administrative or investigative, with respect to which such officer, director, employee, agent or other person is a party, or is threatened to be made a party, to the full extent permitted by the New Jersey Business Corporation Act. The indemnification provided herein shall not be deemed exclusive of any other right to which any person seeking indemnification may be entitled under any by-law, agreement, or vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity, and shall inure to the benefit of the heirs, executors, and the administrators of any such person. The Corporation shall have the power to purchase and maintain insurance on behalf of any persons enumerated above against any liability asserted against him and incurred by him in any such capacity, arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article. ARTICLE VII LIMITATION OF LIABILITY A director or officer of the Corporation shall not be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders, except that such provision shall not relieve a director or officer from liability for any breach of duty based upon an act or omission (i) in breach of such person's duty of loyalty to the Corporation or its shareholders, (ii) not in good faith or involving a knowing violation of law, or (iii) resulting in receipt by such person of an improper personal benefit. If the New Jersey Business Corporation Act is amended after approval by the shareholders of this provision to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director and/or officer of the Corporation shall be eliminated or limited to the fullest extent permitted by the New Jersey Business Corporation Act as so amended. Any repeal or modification of the foregoing paragraph by the shareholders of the Corporation or otherwise shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification. IN WITNESS WHEREOF, Gerald H. Lipkin, Chairman and Chief Executive Officer of the Valley National Bancorp, has executed this Restated Certificate of Incorporation on behalf of Valley National Bancorp on this 22nd day of March, 1994. EX-3 3 BY-LAWS EXHIBIT (3) B OF VALLEY NATIONAL BANCORP ARTICLE 1 SHAREHOLDERS MEETINGS 1. Annual Meeting. The annual meeting of shareholders for the election of directors and such other business as may properly come before the meeting shall be held upon not less than 10 nor more than 60 days written notice of the date, time, place and purposes of the meeting. The annual meeting shall be held at 3:00 p.m. on the fourth Tuesday of March each year at the principal place of business of the Corporation, 505 Allwood Road, Clifton, New Jersey, or at such other time and place as shall be fixed by the Board of Directors. 2. Nominations for Director. Nominations for election to the Board of Directors may be made by the Board of Directors or upon 90 days advance written notice to the Board of Directors by any shareholder of any outstanding class of stock of the Corporation entitled to vote for the election of directors. 3. Special Meetings. A special meeting of shareholders may be called for any purpose by the Chairman, Chief Executive Officer, the President or a majority of the Board of Directors. A special meeting shall be held upon not less than 10 nor more than 60 days written notice of the time, place and purpose of the meeting. 4. Quorum. The holders of a majority of the out- standing common stock represented in person or by proxy, shall constitute a quorum at any meeting of shareholders. The majority of the shareholders at a meeting, though less than a quorum, may adjourn any meeting. The corporation shall not be required to give notice of an adjourned meeting if the time and place of the meeting are announced at the meeting from which an adjournment is taken and the business transacted at the adjourned meeting is limited to that which might have been transacted at the original meeting. 5. Shareholder Action. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by the New Jersey Business Corporation Act, by the certificate of incorporation or by these By-Laws. 6. Record Date. The Board of Directors shall fix a record date for each meeting of shareholders and for other corporate action for purposes of determining the shareholders of the corporation who are entitled to: (i) notice of or to vote at any meeting of shareholders; (ii) give a written consent to any action without a meeting; or (iii) receive payment of any dividend, distribution, or allotment of any right. The recorded date may not be more than 60 days nor less than 10 days prior to the shareholders meeting, or other corporate action or event to which it relates. 7. Inspectors of Election. In advance of any shareholders' meeting, the Board of Directors may appoint one or more inspectors of election whose duty it shall be to determine the shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies. The inspectors shall receive and tabulate all votes, except voice votes, determine the results of all such votes, including the election of directors, and do such acts as are proper to conduct the election or vote, including hearing and determining all challenges and questions arising in connection with the right to vote. After any meeting, the inspectors shall file with the Secretary of the meeting a certificate under their hands, certifying the result of any vote or election, and in the case of an election, the names of the directors elected. 8. Proxies. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing. ARTICLE II DIRECTORS 1. Board of Directors. The Board of Directors (the "Board"), shall have power to manage and administer the business and affairs of the Corporation. Except as expressly limited by these By-Laws, all powers of the Corporation shall be vested in and may be exercised by the Board. 2. Number and Term of Office. The number of directors shall be not less than five and not more than 25. The exact number shall be determined by the Board. Directors shall be elected by the shareholders at each annual meeting and shall hold office until the next annual meeting of shareholders and until their successors shall have been elected and qualified. The Board shall have the right to increase the number of directors between annual meetings and to fill vacancies so created and other vacancies occurring for any reason. 3. Directors Emeritus and Honorary Directors. The Board may grant the title of Director Emeritus or Honorary Director to such former directors or other worthy individuals as it determines who will receive any fees, entitlements, duties and powers as may be conferred by the Board in its discretion. 4. Regular Meetings. A regular meeting of the Board shall be held without notice immediately following and at the same place as the annual shareholders' meeting for the purpose of electing officers and conducting any other business as may come before the meeting. The Board shall hold a regular meeting on the third Tuesday of each month and, by resolution, may provide for different or additional regular meetings. All regular meetings shall be held in the Main Office of Valley National Bank, 615 Main Avenue, Passaic, New Jersey, unless otherwise provided by the Board. All regular meetings may be held without notice to any director, except that a director not present at the time of the adoption of a resolution setting forth different or additional regular meeting dates shall be entitled to notice of those meetings. 5. Special Meetings. A special meeting of the Board may be called for any purpose at any time by the Chairman, Chief Executive Officer, the President or by a majority of the directors. The meeting shall be held upon not less than one day's notice if given by telegraph or orally (either by telephone or in person), or upon not less than three days notice if given by depositing the notice in the United States mails, postage prepaid. The notice shall specify the time and place of the meeting. 6. Action Without Meeting. The Board may act without a meeting if, prior or subsequent to the action, each member of the Board shall consent in writing to the action. The written consent or consents shall be filed in the minute book. 7. Quorum. A majority of the directors shall constitute a quorum at any meeting, except when otherwise provided by the New Jersey Business Corporation Act. However, a smaller number may adjourn any meeting and the meeting may be held, as adjourned, without further notice. The act of the majority present at a meeting at which a quorum is present shall be the act of the Board, unless otherwise provided by the New Jersey Business Corporation Act, the certificate of incorporation of these By-Laws. 8. Vacancies in Board of Directors. Any vacancy in the Board, including a vacancy caused by an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors. 9. Telephone Participation in Board Meetings. One or more directors may participate in a meeting of the Board, or of any committee thereof, by means of a speaker or conference telephone or similar communications equipment which permits all person participating in the meeting to hear each other. Any director who is unable to attend any meeting of the Board or any committee thereof shall have the right, upon prior written request, to participate in the meeting by such telephone hook-up if the means are reasonably available at the place where the meeting is to be held. ARTICLE III COMMITTEES OF THE BOARD 1. Executive Committee. The Board, by the vote of a majority of the entire Board, annually shall appoint an Executive Committee composed of at least five directors, among whom shall be the Chairman and the Chief Executive Officer of the Corporation. At least three members or a majority of the Committee shall not be employees of the Corporation or any of its subsidiaries. The Executive Committee shall have and may exercise all of the power of the Board except as otherwise provided in the New Jersey Business Corporation Act. As provided, in the New Jersey Business Corporation Act, the Executive Committee shall not (i) make, alter or repeal any of these By-Laws; (ii) elect or appoint any director, or remove any officer or director; (iii) submit to shareholders any action that requires shareholders' approval; and (iv) amend or repeal any resolution theretofore adopted by the Board which by its terms is amendable or repealable only by the Board. The Executive Committee shall keep minutes of its meetings, and such minutes shall be submitted to the next regular or special meeting of the Board at which a quorum is present, and any action taken by the Board with respect thereto shall be entered in the minutes of the Board. A majority of the directors on the Executive Committee shall constitute a quorum for the transaction of business. The Chairman shall serve as chairman of the Executive Committee. 2. Nominating Committee. The Board, by the vote of a majority of the entire Board, annually shall appoint a Nominating Committee composed of at least five directors, one of whom shall be the Chief Executive Officer of the Corporation, and the balance of whose members shall not be employees of the Corporation or any of its subsidiaries. The Nominating Committee shall identify and select candidates for nomination to the Board and recommend those selected to the entire Board for its approval. 3. Audit and Examining Committee. The Board, by the vote of a majority of the entire Board, annually shall appoint an Audit and Examining Committee composed of not less than three directors who shall not be active officers or employees of the Corporation. This Committee shall review significant audit and accounting principles, policies and practices, meet with the internal auditors of Valley National Bank (the "Bank"), review the report of the annual directors' examination of the Bank conducted by the outside auditors and review examination reports and other reports of federal regulatory agencies. 4. Compensation Committee. The Board, by the vote of a majority of the entire Board, annually shall appoint a Compensation Committee composed of at least five directors, none of whom shall be an officer of the Corporation. The Compensation Committee shall approve the salaries of Senior Officers of the Corporation and the Corporation's Profit Sharing, Pension, Long Term Stock Incentive and other compensation plans. 5. Other Committees. The Board may appoint, from time to time, from its own members, ad hoc and other committees of one or more directors, for such purposes and with such powers as the Board may determine. ARTICLE IV WAIVERS OF NOTICE Any notice required by these By-Laws, by the certificate of incorporation, or by the New Jersey Business Corporation Act may be waived in writing by any person entitled to notice. The waiver, or waivers, may be executed either before or after the event with respect to which the notice is waived. Each director or shareholder attending a meeting without protesting, prior to its conclusion, the lack of proper notice shall be deemed conclusively to have waived notice of the meeting. ARTICLE V OFFICERS 1. Election. At its regular meeting following the annual meeting of shareholders, the Board shall elect a Chief Executive Officer, a Chairman of the Board, a Vice Chairman, a President, a Vice President, a Treasurer, a Secretary, and such other officers as it shall deem necessary. One person may hold two or more offices. 2. Chief Executive Officer. The Board of Directors shall appoint one of its members to be Chief Executive Officer of the Corporation to serve at the pleasure of the Board. The Chief Executive Officer may also hold another office or offices in the Corporation. He shall have general authority over all the business and affairs of the Corporation. 3. Chairman of the Board. The Board shall appoint one of its members to be Chairman of the Board to serve at the pleasure of the Board. Such person shall preside at all meetings of the Board and of the shareholders, and shall also have and may exercise such further powers and duties as from time to time may be conferred or assigned by the Board or by the Chief Executive Officer. In the Chairman's absence, the Board will designate one of the senior officers who are members of the Board to serve as Chairman. 4. Vice Chairman. The Board of Directors shall appoint one or more of its members to be Vice Chairman to serve at the pleasure of the Board. Such person shall have such power and duties as may be assigned by these By-Laws, by the Board of Directors or by the Chief Executive Officer. 5. President. The Board shall appoint one of its members to be President of the Corporation. The President shall have and may exercise any and all powers and duties pertaining by law, regulation, or practice to the office of president, or imposed by these By-Laws. The President shall also have and may exercise such further powers and duties as from time to time may be conferred or assigned by the Board or the Chief Executive Officer. 6. Vice President. The Board may appoint one or more Executive Vice Presidents, one or more Senior Vice Presidents, and one or more Vice Presidents. Each Vice President shall perform the duties and have the authority as from time to time may be delegated to him by the Chief Executive Officer, by the Board of Directors, or by these By-Laws. 7. Secretary. The Board shall appoint a Secretary who shall be Secretary for meetings of the Board and of the Corporation, and shall keep accurate minutes of those meetings. The Secretary shall attend to the giving of all notices required by these By-Laws and shall be custodian of the corporate seal, records, documents and papers of the Corporation. The Secretary also shall have and may exercise any and all other powers and duties pertaining by law or practice to the office of Secretary, and shall also perform such other duties as may be assigned from time to time by the Board. 8. Treasurer. The Board shall appoint a Treasurer who shall have custody of the funds and securities of the Corporation and shall keep or cause to be kept regular books of the account for the Corporation. The Treasurer shall perform such other duties and possess such other powers as are incident to his office or as shall be assigned to him by the President or the Board. 9. Other Officers. The Board may appoint one or more Assistant Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as from time to time may appear to the Board to be required or desirable to transact the business of the Corporation. Such officers shall respectively exercise such powers and perform such duties as pertain to their several offices, or as may be conferred upon or assigned to them by the Board, the Chief Executive Officer, or the President. 10. Tenure of Office. The Chairman, the Chief Executive Officer, any Vice Chairman, the President, the Secretary, the Treasurer and all other officers shall hold office for the current year for which the Board was elected, unless they shall resign, become disqualified, or be removed. Any vacancy occurring in the office of Chief Executive Officer, Chairman, Vice Chairman, President, Secretary or Treasurer shall be filled promptly by the Board. ARTICLE VI STOCK AND STOCK CERTIFICATES 1. Transfers. Shares of stock shall be transferable on the books of the Corporation, and a transfer book shall be kept in which all transfers of stock shall be recorded. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all rights of the prior holder of such shares. 2. Share Certificates. The shares of the corporation shall be represented by certificates signed by or in the name of the Corporation, by the Chief Executive Officer, or the President or a Vice President, and by the Secretary, Treasurer, Assistant Secretary or Assistant Treasurer of the Corporation, and may be sealed with the seal of the Corporation. Any signature and the seal may be reproduced by facsimile. In case any officer who has signed or whose facsimile signature has been placed upon such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. ARTICLE VII AMENDMENTS TO AND EFFECT OF BY-LAWS; FISCAL YEAR 1. Force and Effect of By-Laws. These By-Laws are subject to the provisions of the New Jersey Business Act and the Corporation's certificate of incorporation, as it may be amended from time to time. If any provision in these By-Laws is inconsistent with a provision of the Act or the certificate of incorporation, the provisions of the Act or the certificate of incorporation shall govern. 2. Amendments to By-Laws. These By-Laws may be altered, amended, or repealed by the shareholders or by the Board. Any By-Law adopted, amended, or repealed by the shareholders may be amended or repealed by the Board, unless the resolution of the shareholders adopting such By-Law expressly reserves to the shareholders the right to amend or repeal it. 3. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January each year. 4. Records. The certificate of incorporation, the By- Laws and the proceedings of all meetings of the shareholders, the Board, and standing committees of the Board shall be recorded in appropriate minute books provided for the purpose. The minutes of each meeting shall be signed by the Secretary or other officer appointed to act as secretary of the meeting. 5. Inspection. A copy of the By-Laws, with all amendments thereto, shall at all times be kept in a convenient place at the principal place of business of the Corporation, and for a proper purpose shall be open for inspection to any shareholder during business hours. ARTICLE VII CORPORATE SEAL The Chairman, any Vice Chairman, the Chief Executive Officer, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer and any Assistant Treasurer, shall have authority to affix the corporate seal to any document requiring such seal, and to attest the same. Such seal shall be substantially in the following form: (Impression) ( of ) (Seal ) EX-13 4 ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The purpose of this analysis is to provide the reader with information relevant to understanding and assessing Valley National Bancorp's ("Valley") results of operations for each of the past three years and financial condition for each of the past two years. In order to fully appreciate this analysis the reader is encouraged to review the consolidated financial statements and statistical data found in the following pages of this annual report. In 1993, Valley achieved record growth in earnings due primarily to an improved net interest margin, a significant improvement in asset quality as non-performing assets declined, and continuation of its acquisition strategy by acquiring the $223.2 million, seven branch Peoples Bank, NA on June 18, 1993. Income for 1993, after the cumulative effect of a change in accounting principle, was $54.2 million, or $2.25 per share, reflecting growth of 28.6% on a per share basis when compared to $41.6 million, or $1.75 per share for 1992. The efficiency ratio measures a bank's gross operating expense as a percentage of fully-taxable equivalent net interest income and other non-interest income without taking into account security gains and losses and other non-recurring items. Valley's efficiency ratio as of December 31, 1993 is 43.8%, one of the lowest in the industry. This compares with an efficiency ratio for 1992 of 46.7%, which increased from the 1991 ratio of 44.7% due to the acquisitions during 1991 and 1992. Valley strives to control its efficiency ratio and expenses as a means of producing increased earnings for its shareholders. Earnings Summary Net income grew to $54.2 million, or $2.25 per share in 1993 compared with $41.6 million or $1.75 per share in 1992 (the 1992 per share amounts have been restated to give effect to a five for four stock split in 1993). This increase is largely attributable to an increase in net interest income of $21.3 million or 18.6%, and a decrease in the provision for loan losses of $10.0 million or 62.5% . This was offset by a decrease in other operating income of $3.8 million or 13.3% and was further offset by increased operating expenses in all non-interest expense categories, due partially to the acquisition of Peoples Bank in 1993. The return on average assets increased in 1993 to 1.64% from 1.38% in 1992, while the return on average equity increased to 22.0% in 1993 from 19.9% at year-end 1992. Net Interest Income Net interest income is the largest source of Valley's operating income. Net interest income on a tax equivalent basis increased to $143.8 million for 1993 as compared to $122.0 million for 1992. The increase in 1993 was due primarily to the significant decrease in interest rates on all interest bearing deposit accounts of 109 basis points, which was greater than the decline of 70 basis points on all interest earning assets. This caused the net interest margin to increase 30 basis points to 4.62% for 1993 compared to 4.32% for all of 1992. Average interest earning assets increased $287.4 million in 1993, or 10.2% over the 1992 amount. This increase was mainly the result of the acquisition of Peoples during June of 1993 with loans and investments acquired of approximately $185.9 million. The average balance of taxable investment securities held to maturity and available for sale increased by $21.3 million or 1.9% over the 1992 average balance. Non-taxable investments increased $50.0 million or 25.1% taking advantage of the increased yield available over taxable investments. Residential mortgage loans and automobile loans have increased steadily during 1993 and continue to be the largest source of loan volume. Average loans, including loans held for sale, increased $224.2 million or 15.6% in 1993 over 1992. The average rate on loans, including loans held for sale, decreased 77 basis points, but combined with the increase in average loan volume, interest income on loans for 1993 increased by $7.4 million over 1992. Average interest-bearing liabilities grew 8.3% or $203.4 million and was due mainly to the 1993 acquisition of Peoples. Falling deposit interest rates prompted many customers to switch their deposit funds into savings accounts from term certificates of deposit, which caused an increase in average savings deposit balances of 20.4% during 1993 over 1992, while average time deposits decreased 4.9% during the same period. Average demand deposits continued to grow and increased by $58.8 million or 19.2% over 1992 balances. The net interest margin increased to 4.62% in 1993 from 4.32% in 1992 which was substantially the result of changes in market interest rates. The increase in the net interest margin of 30 basis points, coupled with the increase in average earning assets over average interest-bearing liabilities, was the basis for the increase in net interest income. Non-Interest Income Non-interest income continues to represent a considerable source of income for Valley. Excluding gains on securities transactions and the one-time gain of $6.4 million on the sale of loans in 1992, total non-interest income amounted to $18.0 million in 1993 compared with $16.8 million in 1992, representing an increase of $1.2 million or 7.4% from year to year. Service charges on deposit accounts increased $1.4 million or 33.6% from 1992 to 1993. Increased volume due to the Peoples seven branch acquisition and increased fees charged on deposit accounts generated a majority of this increase. Fees from mortgage servicing decreased by 13.3% from $4.4 million in 1992 to $3.8 million in 1993. These fees represent gross servicing fees and related ancillary fees for servicing mortgage portfolios by VNB Mortgage Services, Inc. ("MSI"), VNB's mortgage servicing subsidiary. During 1992 additional servicing portfolios were acquired totalling $394.5 million, while two small portfolios totalling approximately $21.3 million were acquired during 1993. As of December 31, 1993 MSI serviced a total of $1.17 billion of loans, of which $467.0 million are serviced for VNB. The portfolio declined during 1993 as a result of large amounts of prepayments, which were partially offset by Valley's loan origination volume. Declining interest rates were responsible for the large amount of prepayments and the volume of originations. As a result of these prepayments, amortization expense was increased to reduce the unamortized balance of purchased mortgage servicing rights in line with the portfolio balance and the expected future cash flows. An analysis is completed quarterly to determine necessary amortization expense, based on all principal payments. Continued low interest rates may prompt further prepayments, producing a reduction of MSI's future net income as a result of additional amortization expense and reduced servicing fees. Gains on the sales of loans were $2.6 million for 1993 compared to $7.9 million for 1992. During 1993 Valley sold fixed rate 15-year and 30-year loans as part of its ongoing program to sell higher interest-rate risk, fixed rate loans, and as a result recorded gains of $2.6 million on these sales. During 1992 Valley sold loans acquired from the Resolution Trust Corporation ("RTC") in 1991 to a third party investor and recorded a $6.4 million gain from the sale of these loans. Also during 1992, Valley sold 30- year fixed rate mortgage loans and recorded a gain of $1.4 million. These loans were sold to help reduce interest rate risk by selling long term fixed rate assets. Loans are sold during the year based upon loan to value ratio and maturity, and are classified as loans held for sale on the consolidated statement of financial condition. It is expected that this sale activity will continue in the future. Other non-interest income totalled $5.5 million in 1993, compared with $6.2 million for 1992, a decrease of 10.6% resulting from the reduction of transactions with the RTC. Fee income on various services increased slightly in addition to the net rental income for a building purchased during 1993. Valley expects to generate additional fee income by offering annuity and mutual fund products in early 1994. Net gains on securities transactions in 1993 and 1992 amounted to $7.0 million and $5.7 million, respectively. This was the outcome of restructuring the investment portfolio to alter maturities, due to declining interest rates and heavy prepayment activity on mortgage backed securities. Non-Interest Expense Non-interest expense totalled $70.9 million for the year, $6.1 million, or 9.4% above the 1992 level. The branch staff and office facilities for the seven branches acquired from Peoples account for a large portion of the increase in non-interest expense. The largest component of non-interest expense is salaries and employee benefit expense which totalled $32.4 million in 1993 compared to $30.0 million in 1992, an increase of $2.4 million or 8.1%. At December 31, 1993, full-time equivalent staff was approximately 1,081, compared to approximately 973 at the end of 1992. The Financial Accounting Standards Board ("FASB") adopted FASB 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" effective for calendar year 1993. There is no effect on Valley's results of operations based on Valley's minimal payment of postretirement benefits. In addition, FASB 112, "Employers' Accounting for Postemployment Benefits" was issued in November 1992 and is effective for calendar year 1994. The statement provides standards for employers who provide benefits to former or inactive employees after employment, but before retirement. The effect of this statement is not expected to have a material impact on Valley's future results of operations. Insurance premiums assessed by the Federal Deposit Insurance Corporation ("FDIC") increased by $1.0 million, or 18.2% to $6.7 million in 1993, from $5.7 million in 1992. This resulted from the deposits acquired in connection with the Peoples acquisition. The current rate charged for insurance by the FDIC with respect to Valley, is .23% of deposits and has been at that level since September 1991. Overall, assessment rates can range from .23% for well capitalized institutions with no supervisory concerns to .31% for undercapitalized institutions with substantial supervisory concerns. Net occupancy expense increased to $6.3 million in 1993 from $5.4 million in 1992. The increase of $897 thousand represents additional rent, utilities, tax and maintenance expense on facilities acquired during 1993 and 1992. During the second quarter of 1993 Valley acquired a 62,000 square foot building for $3.3 million located adjacent to its current administrative headquarters in Wayne, New Jersey. This facility is currently occupied by various tenants and will initially result in net rental income to Valley. As space becomes available, Valley will begin using the building to consolidate sections of its operations into closer proximity with the administrative headquarters. As Valley's utilization of the space begins in 1994, the net income from rents will decrease and occupancy expense will increase. Furniture and equipment expense increased $438 thousand, or 11.9%, which is again indicative of the 1993 and 1992 acquisitions. This includes equipment depreciation, maintenance and repairs. Amortization of intangible assets increased to $5.0 million in 1993 from $4.1 million in 1992, representing an increase of $890 thousand, or 21.6%. The majority of this increase, as discussed previously in relation to fees from mortgage servicing represents amortization of purchased mortgage servicing rights of $3.7 million during 1993, compared with $2.8 million for 1992, an increase of $922 thousand, or 33.0%. Income Taxes Income tax expense as a percentage of pre-tax income rose to 35.2% in 1993 compared to 33.9% in 1992. This increase was attributable to the change in the federal income tax rate from 34% to 35% effective January 1, 1993. A new investment subsidiary was established during the latter part of 1993 to hold investment securities to maturity. This subsidiary is expected to have a positive effect on 1994 net income due to the lower tax rate presently imposed under state law on investment companies. Statement of Financial Accounting Standards No. 109,"Accounting for Income Taxes," was issued by the Financial Accounting Standards Board in February 1992. Statement 109 requires a change from the deferred method under APB Opinion 11 to the asset and liability method. Under the asset and liability method of Statement 109, deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valley adopted SFAS No. 109 prospectively as of January 1, 1993. The cumulative effect of this change in accounting for income taxes reduced net income by $402 thousand and is reported separately in the consolidated statement of income for the year ended December 31, 1993. FUNDS MANAGEMENT Interest Rate Sensitivity Managing net interest margin continues to be the single most important factor in maximizing earnings. Through its Asset/Liability Policy, Valley strives to maintain a consistent net interest rate differential by managing the sensitivity and repricing of its assets and liabilities to interest rate fluctuations. Valley seeks to achieve a sufficient level of rate sensitive assets to equal its rate sensitive liabilities, and analyzes the maturity and repricing of earning assets and sources of funds at various intervals. The level by which repricing earning assets exceed or are exceeded by repricing sources of funds is expressed as a ratio and dollar value (interest sensitivity gap) and is used as a measure of interest rate risk. At December 31, 1993, rate sensitive liabilities exceeded rate sensitive assets at the 90 day interval and resulted in a negative gap of $111 million or a ratio of .91:1. Rate sensitive assets exceeded rate sensitive liabilities at the 91 to 365 day interval by $1.5 million or a ratio of 1.0:1 and resulted in a small positive gap. The total negative gap repricing within 365 days as of December 31, 1993 is $109.4 million or .93:1. In view of the present economic climate, management does not view these amounts as presenting an unusually high risk potential, although no assurances can be given that Valley is not at risk from rate increases or decreases. The above gap results take into account repricing and maturities of assets and liabilities, but fails to consider the interest rate sensitivities of those asset and liability accounts. Management has prepared for its use an income simulation model to project future net interest income streams in light of the current gap position. Management has also prepared....... 13.93 13.34 11.76 12.18 -- Tier-one and Tier-two risk based.............. 15.18 14.60 13.09 12.20 -- (1) The Federal Reserve Board issued a new leverage capital ratio in August 1990 which replaced the primary capital ratio. PRICE RANGE OF COMMON STOCK Effective December 1, 1993, Valley National Bancorp common stock began trading on the New York Stock Exchange (NYSE) under the symbol VLY. Prior to December 1, 1993, Valley National Bancorp common stock was traded on the National Association of Security Dealers Automated Quotations System (NASDAQ) under the symbol VNBP. The following table sets forth for each quarter period indicated the high and low prices for the common stock of Valley National Bancorp. Year 1993 High Low First Quarter...... $28 $22 3/4 Second Quarter..... $27 3/4 $25 Third Quarter...... $26 1/2 $24 1/2 Fourth Quarter..... $26 $23 1/4 Year 1992 High Low First Quarter...... $20 1/4 $13 3/8 Second Quarter..... $20 $18 Third Quarter...... $20 3/8 $18 5/8 Fourth Quarter..... $23 5/8 $19 5/8 There were 4,372 shareholders of record as of December 31, 1993. -----END PRIVACY-ENHANCED MESSAGE-----