UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarter Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Period Ended June 30, 1995
[ ] 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) (Zip Code)
(201)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
for 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 XXX 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 35,907,189
shares were outstanding as of August 1, 1995.
VALLEY NATIONAL BANCORP
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition 3
June 30, 1995 and December 31, 1994
(Unaudited)
Consolidated Statements of Income 4
Six and Three Months Ended June 30, 1995 and 1994
(Unaudited)
Consolidated Statements of Cash Flows 5
Six Months Ended June 30, 1995 and 1994
(Unaudited)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 7 - 11
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 12
SIGNATURES 13
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VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(Unaudited)
($ in thousands)
June 30, December 31,
1995 1994
Assets
Cash and due from banks.......................... $ 155,345 $ 168,071
Federal funds sold............................... -- --
Investment securities held to maturity, fair value of
$788,690 and $812,143 in 1995 and 1994,
respectively................................... 788,864 848,465
Investment securities available for sale......... 720,615 701,956
Loans, net of unearned income.................... 2,689,498 2,592,756
Less: Allowances for possible loan losses....... (42,438) (42,024)
Loans, net....................................... 2,647,060 2,550,732
Premises and equipment, net...................... 55,661 51,123
Due from customers on acceptances outstanding.... 2,103 1,498
Accrued interest receivable...................... 28,258 29,545
Other assets..................................... 61,337 63,826
Total assets................................... $4,459,243 $4,415,216
Liabilities
Deposits:
Non-interest bearing deposits.................. $ 500,353 $ 509,457
Interest bearing:
Savings...................................... 1,727,940 1,833,326
Time......................................... 1,680,004 1,537,219
Total deposits............................. 3,908,297 3,880,002
Federal funds purchased and securities sold under
repurchase agreements.......................... 72,603 102,804
Treasury tax and loan account.................... 25,754 15,549
Other borrowings................................. 35,368 35,567
Bank acceptances outstanding..................... 2,103 1,498
Accrued expenses and other liabilities........... 32,296 29,180
Total liabilities.............................. 4,076,421 4,064,600
Shareholders' Equity
Common stock, no par value, authorized 39,414,375 shares,
issued 35,907,261 shares in 1995 and 33,842,750
in 1994........................................ 20,030 18,869
Surplus.......................................... 216,484 172,321
Retained earnings................................ 151,142 179,432
Unrealized loss on investment securities available
for sale, net of tax........................... (2,670) (17,842)
384,986 352,780
Treasury stock, at cost (121,696 common shares in
1995 and 1994)................................. (2,164) (2,164)
Total shareholders' equity..................... 382,822 350,616
Total liabilities and shareholders' equity... $4,459,243 $4,415,216
See accompanying notes to consolidated financial statements.
- - 3 -
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME(Unaudited)
($ in thousands, except for per share data)
Six Months Ended Three Months Ended
June 30, June 30,
1995 1994 1995 1994
Interest Income
Interest and fees on loans.......$ 110,907 $ 92,730 $ 56,182 $ 47,106
Interest and dividends on
investment securities:
Taxable........................ 39,111 40,755 19,404 20,169
Tax-exempt..................... 7,118 7,146 3,478 3,717
Dividends...................... 343 317 169 160
Interest on federal funds sold
and other short term
investments.................... 880 755 478 409
Total Interest Income.......... 158,359 141,703 79,711 71,561
Interest Expense
Interest on deposits:
Savings........................ 24,207 23,695 12,113 12,015
Time........................... 44,321 28,333 23,455 14,720
Interest on federal funds
purchased and securities sold
under repurchase agreements.... 1,757 1,397 837 743
Interest on other short-term
borrowings..................... 1,361 1,166 651 567
Total Interest Expense......... 71,646 54,591 37,056 28,045
Net interest income.............. 86,713 87,112 42,655 43,516
Provision for possible loan
losses......................... 1,476 3,239 650 1,547
Net interest income after
provision for possible
loan losses.................... 85,237 83,873 42,005 41,969
Non-Interest Income
Trust income..................... 440 374 220 194
Service charges on deposit
accounts....................... 3,979 3,639 2,009 1,859
Gains on securities transactions
net............................ 551 3,888 14 547
Fees from mortgage servicing..... 1,686 1,696 879 851
Other............................ 3,184 3,240 1,615 1,466
Total Non-Interest Income...... 9,840 12,837 4,737 4,917
Non-Interest Expense
Salaries expense................. 17,045 16,642 8,393 8,329
Employee benefit expense......... 4,725 4,542 2,274 2,289
FDIC insurance premiums.......... 4,386 4,214 2,193 2,108
Occupancy and equipment expense.. 6,722 6,501 3,312 3,229
Amortization of intangible
assets......................... 1,204 1,770 598 757
Other............................ 12,859 10,387 7,932 5,385
Total Non-Interest Expense..... 46,941 44,056 24,702 22,097
Income before income taxes....... 48,136 52,654 22,040 24,789
Income tax expense............... 20,190 17,834 11,459 8,304
Net Income.......................$ 27,946 $ 34,820 $ 10,581 $ 16,485
Net income per share.............$ 0.79 $ 0.99 $ 0.30 $ 0.47
Weighted average shares
outstanding....................35,506,484 35,174,898 35,770,240 35,228,586
See accompanying notes to consolidated financial statements.
- - 4 -
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)
($ in thousands)
Six Months Ended
June 30,
1995 1994
Cash flows from operating activities:
Net income..................................... $ 27,946 $ 34,820
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of intangible
assets..................................... 3,489 4,390
Amortization of compensation costs pursuant to
long term stock incentive plan............. 159 143
Provision for possible loan losses........... 1,476 3,239
Net amortization (accretion) of premiums
and discounts.............................. 2,446 4,025
Net gains on securities transactions......... (551) (3,888)
Net deferred income tax benefit.............. (416) (4,300)
Gains on sales of loans...................... -- (555)
Proceeds from recoveries on charged-off loans 1,608 783
Other........................................ (1,378) --
Net decrease in accrued interest receivable
and other assets........................... (3,387) 2,702
Net decrease in accrued expenses and other
liabilities................................ 4,838 1,456
Net increase in shareholders' equity due to
acquisition of American Union Bank......... 4,425 --
Net cash provided by operating activities: 40,655 42,815
Cash flows from investing activities:
Proceeds from maturing investment securities held
to maturity.................................. 70,907 178,912
Purchases of investment securities held to
maturity..................................... (13,257) (148,205)
Proceeds from sales of investment securities
available for sale........................... 19,218 160,529
Proceeds from maturing investment securities
available for sale........................... 14,380 70,117
Purchases of investment securities available
for sale..................................... (26,590) (195,933)
Purchases of mortgage servicing rights......... (3,867) (556)
Net increase in other short term investments... -- 461
Net decrease in federal funds sold and other
short term investments....................... -- 41,450
Net increase in loans made to customers........ (99,412) (180,289)
Purchases of premises and equipment, net of
sales........................................ (7,019) (2,626)
Net increase in due from customers on acceptances
outstanding.................................. (605) (402)
Net cash used in investing activities: (46,245) (76,542)
Cash flows from financing activities:
Net increase in deposits....................... 28,295 65,578
Net increase(decrease) in federal funds purchased
and other short term borrowings.............. (19,996) 19,135
Proceeds from other borrowings................. -- 7,500
Repayments of other borrowings................. (2,384) (205)
Net increase in bank acceptances outstanding... 605 402
Dividends paid to common shareholders.......... (14,491) (16,239)
Purchase of treasury stock..................... (1,332) --
Common stock issued, net of cancellations...... 2,167 1,891
Net cash provided by (used in) financing
activities: (7,136) 78,062
Net increase(decrease) in cash and due from banks. (12,726) 44,335
Cash and due from banks at beginning of period.... 168,071 88,856
Cash and due from banks at end of period.......... $ 155,345 $ 133,191
Cash paid during the period for:
Interest on deposits and other borrowings...... $ 71,001 $ 54,645
Federal and state income taxes................. $ 22,278 $ 20,226
See accompanying notes to consolidated financial statements.
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VALLEY NATIONAL BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Consolidated Financial Statements
The Consolidated Statements of Financial Condition as of June 30, 1995
and December 31, 1994, the Consolidated Statements of Income for the six
and three month periods ended June 30, 1995 and 1994 and the
Consolidated Statements of Cash Flows for the six month periods ended
June 30, 1995 and 1994 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 June 30, 1995 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, 1994 Annual Report
to Shareholders.
2. Acquisition
On June 30, 1995, Valley acquired by merger the $671 million Lakeland
First Financial Group, Inc. ("LFG"), based in Succasunna, New Jersey and
its sixteen branch subsidiary, Lakeland Savings Bank ("Lakeland"). Each
share of LFG common stock outstanding was converted into 1.286 shares of
Valley common stock, resulting in the issuance by Valley of 5,136,446
shares of Valley common stock. The acquisition has been accounted for
as a pooling of interests. Prior to the merger, Lakeland's fiscal year
ended on June 30th. In recording the pooling of interests for June 30,
1995, Lakeland's financial statements were combined with Valley's for
the same periods. Valley's December 31, 1994 statement of financial
condition was combined with Lakeland's June 30, 1995 statement of
financial condition. Valley's statement of income for the six month
period ended June 30, 1994 was combined with Lakeland's statement of
income for the six month period ended December 31, 1994. An adjustment
has been made to stockholders' equity to eliminate the effect of
Lakeland's results of operations for the six month period ended
June 30, 1995 included in both the December 31, 1994 and June 30, 1995
financial statements. The consolidated financial statements of Valley
include the accounts of LFG for all periods presented. Separate results
of the combining companies are as follows:
Six months Three months
ended ended
June 30, 1995 June 30, 1994
Net interest income after
provision for possible loan losses:
Valley $ 72,677 $ 35,605
LFG 12,560 6,400
$ 85,237 $ 42,005
Net income
Valley $ 27,341 $ 12,487
LFG 605 (1,906)
$ 27,946 $ 10,581
3. All share and per share amounts have been restated to reflect the 5%
stock dividend declared March 23, 1995 to shareholders of record on
April 14, 1995 and payable May 2, 1995.
- - 6 -
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Recent Acquisitions
On February 28, 1995, Valley acquired American Union Bank ("American"),
headquartered in Union, New Jersey, with approximately $58 million in assets
and two branches. The transaction resulted in the issuance of 288,734 shares
and was accounted for using the pooling of interests method of accounting.
However the 1994 financial statements for Valley have not been restated as
they would not have been materially different from those presented. Each
share of common stock of American was exchanged for 0.50 shares of Valley
common stock.
On June 30, 1995 Valley acquired the $671 million Lakeland First
Financial Group, Inc. ("LFG"), the holding company for Lakeland Savings Bank
("Lakeland"), a state chartered saving bank headquartered in Succasunna, New
Jersey, with sixteen branches in Morris, Sussex and Warren counties, New
Jersey. The transaction resulted in the issuance of 5,136,446 shares of
Valley common stock and was accounted for using the pooling of interests
method of accounting. Each share of common stock of LFG was exchanged for
1.286 shares of common stock of Valley common stock.
Earnings Summary
Net income for the three and six month period ending June 30, 1995 was
$10.6 million and $27.9 million, or $0.30 and $0.79 per share, respectively.
This compares with $16.5 million and $34.8 million or $0.47 and $0.99 per
shares for the same periods in 1994 (all amounts have been restated for the
Lakeland First Financial Group, Inc. merger and per share amounts have been
restated to give effect to a 5% stock dividend in 1995). Net income before
security gains and non-recurring merger expenses was $33.0 million for the
six months June 30, 1995 as compared to $32.6 million for the first six
months of 1994, a 1.2% increase. The first six months of 1994 was positively
impacted by securities gains of $3.9 million, compared to only $551 thousand
of securities gains in the first six months of 1995. In addition, one time
merger expenses amounted to $5.4 million or $0.15 per share. The annualized
return on average assets (ROA) before one-time merger expenses and securities
gains decreased to 1.49% from 1.62%, while the annualized return on average
equity (ROE) also decreased to 18.10% from 20.16% for the six months ended
June 30, 1995 and 1994, respectively. After one-time merger expenses and
securities gains the ROA decreased to 0.95% from 1.52% and ROE decreased to
15.16% from 20.16%. Book value per share amounted to $10.70 at June 30, 1995
compared with $9.80 per share at June 30, 1994.
Net Interest Income
Net interest income on a fully tax equivalent basis decreased by $369
thousand and $969 thousand or 0.40% and 2.12%, respectively, for the six
months and quarter ended June 30, 1995 as compared to the same periods in
1994. The net interest margin decreased 20 and 24 basis points to 4.31% and
4.24% for the six month period and quarter ended June 30, 1995 compared to
4.51% and 4.48% for the same periods in 1994.
The decrease in net interest margin was caused substantially by the
upward movement in interest rates during 1994. This increase in rates caused
depositors to shift funds from short term savings accounts to longer term
certificates of deposit. Deposit rates increased faster than loan rates in
1994, leading to a decline in the net interest margin into 1995.
Average interest earning assets increased $165.6 million during the six
months ended June 30, 1995, or 4.1% over the same period in 1994. This
increase was mainly the result of increased automobile loan and commercial
mortgage loan volume. Average loans increased by $303.2 million or 12.9%
over the 1994 six months. Approximately $33.9 million of the increase was
the result of the American Union merger of February 28, 1995 accounted for as
a pooling of interests. The average rate on loans increased 46 basis points
and combined with the increase in average loan volume, interest income on
loans for the first six months of 1995 increased by $18.2 million over the
same period in 1994. The average balance of investment securities for the
six months ended June 30, 1995 decreased by $123.5 million or 7.4% from the
amount in the portfolio for the same period in 1994, net of the amount from
American Union of $23.3 million. The average balance of taxable investment
securities decreased by $123.4 million or 9.2% over the 1994 average balance.
Tax-exempt investments remained almost unchanged for the six month period in
1995 over the same period in 1994.
- - 7 -
Average interest-bearing liabilities for the quarter ended June 30, 1995
as compared to June 30, 1994 grew 3.9% or $136.5 million of which $43.5
million was due to the acquisition of American Union Bank. Time deposits
increased by $315.3 million or 22.8%, while savings deposits decreased by
$184.5 million or 9.5%.
The net interest margin decreased to 4.24% and 4.31% for the second
quarter and six months ended June 30, 1995 from 4.48% and 4.51% during the
same periods in 1994. The decrease mainly resulted from the increase in the
cost of average interest bearing liabilities for those periods shown. The
cost of those liabilities increased 83 basis points between the six month
periods ended June 30, 1994 and June 30, 1995. The decrease in the net
interest margin of 20 basis points during those same periods was offset by
the increase in average earning assets over average interest-bearing
liabilities, causing the slight decrease in net interest income.
Non-Interest Income
The following table presents the components of non-interest income for
the six and three months ended June 30, 1995 and 1994.
Six months ended Three months ended
June 30, June 30,
1995 1994 1995 1994
(in thousands)
Trust income..........................$ 440 $ 374 $ 220 $ 194
Service charges on deposit accounts... 3,979 3,639 2,009 1,859
Gains on securities transactions, net. 551 3,888 14 547
Fees from mortgage servicing.......... 1,686 1,696 879 851
Other................................. 3,184 3,240 1,615 1,466
Total..........................$ 9,840 $ 12,837 $ 4,737 $ 4,917
Non-interest income continues to represent a considerable source of
income for Valley. Excluding gains on securities transactions, total non-
interest income increased $340 thousand and $353 thousand to $4.7 and $9.3
million for the six and three months ended June 30, 1995 and 1994.
Service charges on deposit accounts increased $340 thousand or 9.3%
and $150 thousand or 8.1% for the six month and three month periods ended June
30, 1995. A majority of this increase is due to the expansion of account
volume and increased fees charged on deposit accounts.
Net gains on securities transactions for the six months ended June 30,
1995 was $551 thousand compared to $3.9 million at June 30, 1994.
Other income decreased $56 thousand for the six months ended June 30,
1994 over the same period in 1995. This was the result of decreased credit
card fees and decreased application fees for residential mortgages.
Non-Interest Expense
The following table presents the components of non-interest expense for
the six and three months ended June 30, 1995 and 1994.
Six months ended Three months ended
June 30, June 30,
1995 1994 1995 1994
(in thousands)
Salary expense.................$ 17,045 $ 16,642 $ 8,393 $ 8,329
Employee benefit expense....... 4,725 4,542 2,274 2,289
FDIC insurance premiums........ 4,386 4,214 2,193 2,108
Occupany and equipment expense. 6,722 6,501 3,312 3,229
Amortization of intangible
assets....................... 1,204 1,770 598 757
Other..........................* 12,859 10,387 * 7,932 5,385
Total...................$ 46,941 $ 44,056 $ 24,702 $ 22,097
*Includes $2.4 million of one-time merger expenses.
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Non-interest expense before one-time merger expense of $2.4 million
totalled $44.5 million and $22.3 million for the six months and three months
ended June 30, 1995, $485 thousand and $205 thousand, or 1.1% and 1.0% above
the same 1994 six and three month periods. The largest component of non-
interest expense is salaries and employee benefit expense which totalled
$21.8 million for the six months ended June 30, 1995 compared to $21.2
million for the six months ended 1994, an increase of $586 thousand or 2.8%.
At June 30, 1995, full-time equivalent staff was 1,244 compared to 1,289 at
June 30, 1994.
Amortization of intangible assets decreased to $1.2 million for the six
months ended June 30, 1995 from $1.8 million for the same period in 1994,
representing a decrease of $566 thousand, or 32.0%. The majority of this
decrease resulted from the reduction of amortization of purchased mortgage
servicing rights and core deposit intangibles totaling $404 thousand during
the six months ended June 30, 1995.
Income Taxes
Income tax expense before the one-time tax expense of $3.0 million as a
percentage of pre-tax income increased to 35.7% for the six months ended June
30, 1995 compared to 33.0% in 1994. This increase was attributable to a
higher amount of non-deductable merger expenses during the period of $2.4
million.
ASSET/LIABILITY MANAGEMENT
Interest Rate Sensitivity
At June 30, 1995, rate sensitive assets exceeded rate sensitive
liabilities at the 90 day interval and resulted in a positive gap of $96
million or a ratio of 1.07:1. Rate sensitive liabilities exceeded rate
sensitive assets at the 91 to 365 day interval by $389 million or a ratio of
.33:1 and resulted in a negative gap. The total negative gap repricing
within 365 days as of June 30, 1995 is $293 million or .85.1. Management is
attempting to reduce this negative gap, and 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 for its use
alternative scenarios to measure levels of net interest income associated
with various factors including changes in interest rates. According to this
computer model, an interest rate increase of 300 basis points and a decrease
of 100 basis points resulted in an impact on future net interest income which
is not material. Management cannot provide any assurance about the actual
effect of changes in interest rates on Valley's net interest income.
Liquidity
Liquidity measures the ability to satisfy current and future cash flow
needs as they become due. Maintaining a level of liquid funds through asset-
liability management seeks to ensure that these needs are met at a reasonable
cost. On the asset side, liquid funds are maintained in the form of cash and
due from banks, federal funds sold, investments securities held to maturity
maturing within one year, securities available for sale and loans held for
sale. At June 30, 1995, liquid assets amounted to $959.6 million, as
compared to $950.0 million at December 31, 1994. This represents 22.9% of
earning assets and 21.5% of total assets at June 30, 1995 and December 31,
1994, 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 $3.1 billion at June 30, 1995 and December 31, 1994,
respectively, representing 73.7% and 76.3% of average earning assets. Short
term borrowings and large dollar certificates of deposit, generally those
over $100 thousand, are used as supplemental funding sources during periods
when growth in the core deposit base does not keep pace with that of earning
assets. Additional liquidity is derived from scheduled loan and investment
payments of principal and interest, as well as prepayments received.
Proceeds from the sales of investment securities were $19.2 million, and
proceeds of $85.3 million were generated from investment maturities and
prepayments. Purchases of investment securities during the same period were
$39.8 million. Short term borrowings and certificates of deposit over $100
thousand amounted to $454.6 million and $337.7 million, on average, at June
30, 1995 and December 31, 1994, respectively.
- - 9 -
The parent company's cash requirements consist primarily of dividends to
shareholders. This cash need is routinely satisfied by dividends collected
from its subsidiary bank. Projected cash flows from this source are expected
to be adequate to pay dividends, given the current capital levels and current
profitable operations of its subsidiary.
Investment Securities
The securities portfolio on June 30, 1995 consisted of securities held
to maturity totaling $788.9 million and securities available for sale
totaling $720.6 million, compared to $848.5 million and $702.0 million,
respectively, on December 31, 1994. The balances at June 30, 1995 included
approximately $22.0 million of investment securities from the acquisition of
American Union.
Unrealized loss on investment securities available for sale reduced
shareholders' equity by $2.7 million June 30, 1995 compared to a reduction of
$17.8 million on December 31, 1994. This change was primarily due to an
increase in prices and a corresponding decline in interest rates.
Loan Portfolio
The following table reflects the composition of the loan portfolio as of
June 30, 1995 and December 31, 1994.
June 30, December 31,
1995 1994
(in thousands)
Commercial.................. $ 330,207 $ 298,337
Construction................. 84,020 70,192
Commercial mortgage......... 589,383 571,596
Residential mortgage........ 1,022,691 1,004,203
Installment................. 665,367 650,329
2,691,668 2,594,657
Less: Unearned income....... (2,170) (1,901)
Total loans............. $2,689,498 $2,592,756
Total loans increased $96.7 million or 3.7% during the six month period
ended June 30, 1995. Residential mortgage loans increased by 1.8% or
$18.5 million to a total of $1,022.7 million at June 30, 1995, and represents
38.0% of the loan portfolio. Installment loans, including predominantly
automobile and credit card loans, totalled $665.4 million at June 30, 1995,
representing 24.7% of the loan portfolio. Commercial mortgages increased
3.1% or $17.8 million from December 1994 to June 30, 1995.
Loan balances at June 30, 1995 included approximately $32 million of
loans from the acquisition of American Union, which is comprised of $8.6
million of residential mortgage loans, $8.2 million of commercial mortgage
loans, $6.4 million of commercial loans, and $5.9 million of installment
loans.
Non-Performing Assets
Non-performing assets include non-accrual loans and other real estate
owned (OREO). Non-performing assets decreased $513 thousand to $29.7 million
at June 30, 1995 as compared to December 31, 1994.
- - 10 -
The following table sets forth non-performing assets and accruing
loans which are 90 days or more past due as to principal or interest payments on
the dates indicated.
June 30, December 31,
1995 1994
(in thousands)
Loans past due in excess of
90 days and still accruing..... $ 9,885 $ 8,695
Non-performing loans............. $ 19,157 $ 22,554
Other real estate owned.......... 10,584 7,700
Total non-performing assets.... $ 29,741 $ 30,254
Non-performing loans as
a % of loans................... 0.71% 1.17%
Non-performing assets as a %
of loans plus other real
estate owned................... 1.10% 1.16%
Allowance as a % of loans........ 1.58% 1.62%
Allowance as a % of
non-performing assets.......... 143% 139%
Asset Quality and Risk Elements
Valley's allowance for loan loss remained relatively stable since
December 31, 1994. At June 30, 1995 the allowance for loan losses amounted
to $42.4 million or 1.58% of loans, as compared to $42.0 million or 1.73% at
December 31, 1994.
The allowance is adjusted by provisions charged against income and loans
charged-off, net of recoveries. Net loan charge-offs were $1.1 million for
the six months ended June 30, 1995 compared with $2.1 million for the six
months ended June 30, 1994. The ratio of net charge-offs to average loans
amounted to 0.10% for the six months ended June 30, 1995 compared with 0.18%
for 1994.
Capital Adequacy
A significant measure of the strength of a financial institution is its
shareholders' equity, which must expand in close proportion to asset growth.
At June 30, 1995, shareholders' equity totalled $382.8 million or 8.6% of
total assets, compared with $350.6 million or 7.9% at year-end 1994. Valley
has achieved steady internal capital generation throughout the past five
years.
Valley's capital position at June 30, 1995 under risk-based capital
guidelines was $379.4 million, or 14.0% of risk-weighted assets, for Tier 1
capital and $413.3 million, or 15.3% for Total risked-based capital. The
comparable ratios at December 31, 1994 were 13.9% for Tier 1 capital and
15.1% for Total risk-based capital. Valley's ratios at June 30, 1995 are
above the "well capitalized" requirements, which require Tier 1 capital of at
least 6% and Total risk-based capital of 10%. The Federal Reserve Board
requires each "well capitalized" holding company to maintain a minimum
leverage ratio of 5.0%. At June 30, 1995 and December 31, 1994, Valley was
in compliance with the leverage requirement having a Tier 1 leverage ratio of
8.5% and 8.3%, respectively.
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 55.1% at June 30, 1995 before one-time merger
expense of $5.4 million and 62.4% after merger expenses, compared to 53.4%
for the six months ended June 30, 1994. Cash dividends declared amounted to
$0.49 per share, equivalent to a dividend payout ratio of 44.9%, down from
the 46.7% for the six months in 1994. Valley declared at 5% common stock
dividend on March 23, 1995 to shareholders of record on April 14, 1995,
payable May 2, 1995. Valley maintained the cash dividend at $1.00 per share
per annum after the payment of the stock dividend. 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.
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PART II
Item 6. Exhibits and Reports on Form 8-K
b) Reports on Form 8-K
1) Filed April 25, 1995 to report the filing of an application
with the Federal Reserve Bank of New York to establish a
finance company in Toronto, Canada, and to report financial
results for the first quarter of 1995.
2) Filed April 26, 1995 to report the authorization to purchase
up to 500,000 shares of its outstanding common stock to be
used for the exercise of employee stock options and the
exercise of outstanding warrants.
3) Filed March 30, 1995 to report a five percent common stock
dividend issued May 2, 1995.
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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: August 11, 1995 /s/PETER SOUTHWAY
PETER SOUTHWAY
PRESIDENT AND CHIEF
OPERATING OFFICER
Date: August 11, 1995 /s/ALAN D. ESKOW
ALAN D. ESKOW
SENIOR VICE PRESIDENT
FINANCIAL ADMINISTRATION
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