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 March 31, 1996
[ ] 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 36,684,065
shares were outstanding as of May 1, 1996.
VALLEY NATIONAL BANCORP
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition 3
March 31, 1996 and December 31, 1995
(Unaudited)
Consolidated Statements of Income 4
Three Months Ended March 31, 1996 and 1995
(Unaudited)
Consolidated Statements of Cash Flows 5
Three Months Ended March 31, 1996 and 1995
(Unaudited)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 7-12
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 5. Other Matters 13
Item 6. Exhibits and Reports on Form 8-K. 14
SIGNATURES 15
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VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(Unaudited)
($ in thousands)
March 31, December 31,
1996 1995
Assets
Cash and due from banks.......................... $ 144,903 $ 167,349
Federal funds sold............................... 77,000 108,500
Investment securities held to maturity, fair value of
$260,622 and $270,622 in 1996 and 1995, respectively.....
258,794 266,354
Investment securities available for sale......... 1,104,389 1,146,285
Loans, net of unearned income.................... 2,836,912 2,793,175
Less: Allowances for possible loan losses....... (41,010) (39,670)
Loans, net....................................... 2,795,902 2,753,505
Premises and equipment, net...................... 60,572 58,053
Due from customers on acceptances outstanding.... 912 838
Accrued interest receivable...................... 28,596 30,450
Other assets..................................... 53,761 54,477
Total assets................................... $4,524,829 $4,585,811
Liabilities
Deposits:
Non-interest bearing deposits.................. $ 513,764 $ 542,229
Interest bearing:
Savings...................................... 1,709,938 1,699,871
Time......................................... 1,791,248 1,841,773
Total deposits............................. 4,014,950 4,083,873
Federal funds purchased and securities sold under
repurchase agreements.......................... 20,139 26,921
Treasury tax and loan account.................... 12,050 10,524
Other borrowings................................. 48,676 28,679
Bank acceptances outstanding..................... 912 838
Accrued expenses and other liabilities........... 42,019 34,739
Total liabilities.............................. 4,138,746 4,185,574
Shareholders' Equity
Common stock, no par value, authorized 39,414,375 shares,
issued 35,889,047 shares in 1996 and 35,889,721 in 1995..
20,024 20,025
Surplus.......................................... 216,156 216,377
Retained earnings................................ 171,350 162,012
Unrealized gain(loss) on investment securities available
for sale, net of tax........................... (3,650) 3,733
Translation adjustment........................... 11 --
403,891 402,147
Treasury stock, at cost (736,497 shares in 1996 and
107,413 shares in 1995)........................ (17,808) (1,910)
Total shareholders' equity..................... 386,083 400,237
Total liabilities and shareholders' equity... $4,524,829 $4,585,811
See accompanying notes to consolidated financial statements.
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VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME(Unaudited)
($ in thousands, except for per share data)
Three Months Ended
March 31,
1996 1995
Interest Income
Interest and fees on loans....................... $ 58,625 $ 54,724
Interest and dividends on investment securities:
Taxable........................................ 16,858 19,707
Tax-exempt..................................... 3,336 3,641
Dividends...................................... 186 173
Interest on federal funds sold and other short term
investments.................................... 1,268 402
Total Interest Income.......................... 80,273 78,647
Interest Expense
Interest on deposits:
Savings........................................ 9,546 12,094
Time........................................... 25,051 20,866
Interest on federal funds purchased and securities sold
under repurchase agreements.................... 283 920
Interest on other short-term borrowings.......... 160 193
Interest on other borrowings..................... 563 517
Total Interest Expense......................... 35,603 34,590
Net interest income.............................. 44,670 44,057
Provision for possible loan losses............... 700 819
Net interest income after provision for possible
loan losses.................................... 43,970 43,238
Non-Interest Income
Trust income..................................... 260 220
Service charges on deposit accounts.............. 1,976 1,970
Gains on securities transactions, net............ 331 537
Fees from mortgage servicing..................... 1,015 806
Gains on sales of loans.......................... 662 373
Other............................................ 2,108 1,197
Total Non-Interest Income...................... 6,352 5,103
Non-Interest Expense
Salaries expense................................. 8,926 8,651
Employee benefit expense......................... 2,461 2,450
FDIC insurance premiums.......................... 716 2,193
Occupancy and equipment expense.................. 3,678 3,409
Amortization of intangible assets................ 763 606
Other............................................ 5,328 4,936
Total Non-Interest Expense..................... 21,872 22,245
Income before income taxes....................... 28,450 26,096
Income tax expense............................... 10,081 8,731
Net Income....................................... $ 18,369 $ 17,365
Net income per share............................. $ 0.49 $ 0.46
Weighted average shares outstanding.............. 37,385,010 37,473,201
See accompanying notes to consolidated financial statements.
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VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)
($ in thousands)
Three Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net income..................................... $ 18,369 $ 17,365
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of intangible
assets....................................... 2,366 1,907
Amortization of compensation costs pursuant to
long term stock incentive plan............. 108 82
Provision for possible loan losses........... 700 819
Net amortization of premiums and discounts... 1,306 1,349
Net gains on securities transactions......... (331) (537)
Gains on sales of loans...................... (662) (373)
Proceeds from recoveries on charged-off loans 1,864 1,153
Net increase in shareholders' equity due to
acquisition of American Union Bank......... -- 4,425
Net decrease(increase) in accrued interest receivable
and other assets........................... 7,435 (2,362)
Net decrease in accrued expenses and other
liabilities................................ 7,372 3,749
Net cash provided by operating activities: 38,527 27,577
Cash flows from investing activities:
Proceeds from maturing investment securities held
to maturity.................................. 8,313 42,740
Purchases of investment securities held to
maturity..................................... (998) (20,251)
Proceeds from sales of investment securities
available for sale........................... 23,667 1,042
Proceeds from maturing investment securities
available for sale........................... 97,559 4,955
Purchases of investment securities available
for sale..................................... (92,551) (15,508)
Purchases of mortgage servicing rights......... (438) (796)
Net (increase)decrease in federal funds sold and other
short term investments....................... 31,500 (40,000)
Net increase in loans made to customers........ (44,299) (65,223)
Purchases of premises and equipment, net of
sales........................................ (4,182) (5,192)
Net increase in due from customers on acceptances
outstanding.................................. (74) (2,267)
Net cash provided by (used in) investing
activities: 18,497 (100,500)
Cash flows from financing activities:
Net (decrease)increase in deposits............. (68,923) 104,864
Net decrease in federal funds purchased
and other short term borrowings.............. (5,256) (52,072)
Advances of other borrowings................... 20,000 --
Repayments of other borrowings................. (3) (121)
Net increase in bank acceptances outstanding... 74 2,267
Dividends paid to common shareholders.......... (8,946) (7,793)
Addition of common shares to treasury.......... (16,442) --
Common stock issued, net of cancellations...... 26 576
Net cash provided by(used in) financing
activities: (79,470) 47,721
Net decrease in cash and due from banks.......... (22,446) (25,202)
Cash and due from banks at January 1............. 167,349 169,604
Cash and due from banks at March 31.............. $ 144,903 $ 144,402
Cash paid during the period for:
Interest on deposits and other borrowings...... $ 35,215 $ 32,750
Federal and state income taxes................. $ 550 1,658
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 March 31, 1996
and December 31, 1995, the Consolidated Statements of Income for the
three month periods ended March 31, 1996 and 1995 and the Consolidated
Statements of Cash Flows for the three month periods ended March 31,
1996 and 1995 have been prepared by Valley National Bancorp ("Valley"),
without audit. In the opinion of management, all adjustments (which
included only normal recurring adjustments) necessary to present fairly
Valley's financial position, results of operations, and cash flows at
March 31, 1996 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, 1995 Annual Report
to Shareholders.
The Consolidated Statements of Income and Cash Flows for the three month
period ended March 31, 1995 have been restated to include Lakeland First
Financial Group which was acquired on June 30, 1995 in a transaction
accounted for as a pooling of interest.
2. Earnings Per Share
Earnings per share amounts and weighted average shares outstanding have
been restated to reflect the 5% stock dividend declared April 2, 1996 to
Shareholders of record on April 26, 1996 and payable May 17, 1996.
Balances and share amounts included in Shareholders' Equity on the
Statement of Financial Condition have not been restated for the 5% stock
dividend or the increase in authorized common stock.
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Management's Discussion and Analysis of Financial Condition and
Results of Operations
Earnings Summary
Net income was $18.4 million, or $0.49 per share for the three
month period ended March 31, 1996 compared with $17.4 million or
$0.46 per share for the three month period ended March 31, 1995
(1995 amounts have been restated for the Lakeland First Financial
Group merger and earnings per share amounts have been restated to
give effect to a 5% stock dividend payable May 17, 1996). The
annualized return on average assets increased to 1.62% from 1.55%,
while the annualized return on average shareholders' equity
decreased to 18.36% from 19.11% for the quarters ended March 31,
1996 and 1995, respectively. The increase in net income is
largely attributable to an increase in non-interest income of $1.2
million and an increase in net interest income of $613 thousand or
1.4%.
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
$46.7 million from $46.3 million for the quarter ended March 31,
1996 as compared to the quarter ended March 31, 1995. The increase
in 1996 was due primarily to the increase in average balances of
interest earning assets, partially offset by an increase in rates
on interest bearing liabilities of 12 basis points in the same
period. The net interest margin decreased 4 basis points to 4.35%
for the quarter ended March 31, 1996 compared to 4.39% for the same
quarter in 1995.
The decrease in net interest margin was partially due to the upward
movement in interest rates. This increase in rates caused
depositors to shift funds from short term savings accounts to
longer term certificates of deposit. Rates on interest-bearing
deposits were higher in the quarter ended March 31, 1996 as
compared to the same quarter in 1995, while rates on interest
earning assets remained unchanged.
Average interest earning assets increased $74.3 million during the
quarter ended March 31, 1996, or 1.8% over the same quarter in
1995. This increase was mainly the result of increased volume of
automobile loans, commercial mortgages and commercial loans. The
average rate on loans increased 11 basis points, combined with the
increase in average loan volume of $149.8 million or 5.7% over the
1995 quarter. Interest income on loans for the first quarter of
1996 increased by $3.9 million over the same period in 1995.
Offsetting this increase, was a decline in average taxable
investment securities of $133.1 million or 10.8% from the amount in
the portfolio during the first quarter of 1995.
Average interest-bearing liabilities remained almost unchanged
during the first quarter of 1996 as compared to the same period in
1995. Deposit growth, similar to the past few years, was held to
a small increase due to competitive factors and alternative
investment opportunities for consumers. Average demand deposits
continued to grow and increased by $35.8 million or 7.6% over 1995
balances. Average savings deposits decreased by $158.2 million or
8.7%, while average time deposits increased $194.1 million or
11.7%.
Non-Interest Income
The following table presents the components of non-interest income
for the three months ended March 31, 1996 and 1995.
Three months ended
March 31,
1996 1995
Trust income........................... $ 260 $ 220
Service charges on deposit accounts.... 1,976 1,970
Gains on securities transactions, net.. 331 537
Fees from mortgage servicing........... 1,015 806
Gains on sales of loans................ 662 373
Other income........................... 2,108 1,197
Total............................. $ 6,352 $ 5,103
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Non-interest income continues to represent a considerable source of
income for Valley. Excluding gains on securities transactions,
total non-interest income amounted to $6.0 million for the quarter
ended March 31, 1996 compared with $4.6 million for the same period
in 1995.
Fees from mortgage servicing increased by 25.9% from $806 thousand
for the quarter ended March 31, 1995 to $1.0 million for the three
months ended March 31, 1996. This reflects the increase in the
size of the serviced portfolio.
Gains on the sales of loans were $662 thousand for the first
quarter of 1996 compared to $373 thousand for the first quarter of
1995. The gains recorded in 1996 are primarily from the sale of
SBA loans. In addition, Valley has begun selling its newly
originated fixed-rate residential mortgage loans, with the
exception of its bi-weekly fixed rate mortgages.
Non-Interest Expense
The following table presents the components of non-interest expense
for the three months ended March 31, 1996 and 1995.
Three months ended
March 31,
1996 1995
Salary expense......................... $ 8,926 $ 8,651
Employee benefit expense............... 2,461 2,450
FDIC insurance premiums................ 716 2,193
Occupancy and equipment expense........ 3,678 3,409
Amortization of intangible assets...... 763 606
Other.................................. 5,328 4,936
Total............................. $ 21,872 $ 22,245
Non-interest expense totalled $21.9 million for the quarter ended
March 31, 1996, a decrease of $373 thousand from the comparable
period in 1995. The largest component of non-interest expense is
salaries and employee benefit expense which totalled $11.4 million
for the three months ended March 31, 1996 compared to $11.1 million
for the same period of 1995. At March 31, 1996, full-time
equivalent staff was 1,330, compared to 1,262 at March 31, 1995.
Insurance premiums assessed by the Federal Deposit Insurance
Corporation ("FDIC") decreased by $1.5 million, or $67.4% to $716
thousand for the three months ended March 31, 1996. This reflects
the reduction in insurance rates charged on bank insurance fund
("BIF") deposits by the FDIC beginning June 1, 1995. It is
expected that the savings insurance fund ("SAIF") will be
recapitalized during 1996 and that Valley will be required to pay
a one-time special assessment. After this payment, it is
anticipated that future premiums on these deposits will also be
reduced from $0.23 to the legal minimum of $2,000. The one-time
payment to the FDIC and the anticipated future reduction in
premiums are based upon the legislative process from which Valley
has no control over the effective date or final payments or
reduction of premiums.
The efficiency ratio measures a bank's gross operating expense as
a percentage of fully-taxable equivalent net interest income and
other non-interest income without taking into account security
gains and losses and other non-recurring items. Valley's
efficiency ratio for the quarter ended March 31, 1996 is 41.5%, one
of the lowest in the industry, compared with an efficiency ratio of
43.6% for 1995. Valley strives to control its efficiency ratio and
expenses as a means of producing increased earnings for its
shareholders.
Income Taxes
Income tax expense as a percentage of pre-tax income increased to
35.4% for the three months ended March 31,1996 compared to 33.5%
for the same period in 1995. This increase was attributable to a
decrease in tax-exempt interest income and an increase in state tax
expense.
- - 8 -
ASSET/LIABILITY MANAGEMENT
Interest Rate Sensitivity
At March 31, 1996, rate sensitive assets exceeded rate sensitive
liabilities at the 90 day interval and resulted in a positive gap
of $737.2 million or a ratio of 1.45:1. Rate sensitive liabilities
exceeded rate sensitive assets at the 91 to 365 day interval by
$444.2 million or a ratio of .27:1 and resulted in a negative gap.
The total positive gap repricing within 365 days as of March 31,
1996 is $293.0 million or 1.13:1. Management does not view these
amounts as presenting an unusually high risk potential, although no
assurances can be give 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 fail 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 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 consistent with target levels contained in Valley's
Asset/Liability Policy. 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 fund
sold, investment securities held to maturity maturing within one
year, securities available for sale and loans held for sale. At
March 31, 1996, liquid assets amounted to $1.4 billion, as compared
to $1.5 billion at December 31, 1995. This represents 32.3% and
34.1% of earning assets, and 30.5% and 32.1% of total assets at
March 31, 1996 and year-end 1995, respectively.
On the liability side, the primary source of funds available to
meet liquidity needs is Valley's core deposit base, which generally
excludes certificates of deposit over $100 thousand. Core deposits
averaged approximately $3.05 billion at March 31, 1996 and year-end
1995, respectively, representing 71.3% and 70.6% 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. For the three month period ending March 31, 1996,
proceeds from the sales of investment securities available for sale
were $23.7 million, and proceeds of $105.9 million were generated
from investment maturities. Purchases of investment securities for
the same period were $93.5 million. Short term borrowings and
certificates of deposit over $100 thousand amounted to $504.6
million and $465.8 million, on average, for the three months ended
March 31, 1996 and year ending December 31, 1995, respectively.
VNB also utilizes borrowings from the Federal Home Loan Bank of New
York ("FHLB") as a source of funds for its asset growth and
asset/liability management. These advances are collateralized by
pledges of FHLB stock and blanket assignment of qualifying mortgage
loans. As of March 31, 1996, Valley had outstanding advances of
$48.5 million.
Valley's cash requirements consist primarily of dividends to
shareholders. This cash need is routinely satisfied by dividends
collected from its subsidiary bank. Projected cash flows from this
source are expected to be adequate to pay dividends, given the
current capital levels and current profitable operations of its
subsidiary.
- - 9 -
Investment Securities
The investment portfolio as of March 31, 1996 consisted of
securities held to maturity of $258.8 million and $1.1 billion of
securities available for sale, relatively unchanged from December
31, 1995. As of March 31, 1996 the investment securities available
for sale had an unrealized loss of $3.7 million, net of deferred
taxes, compared to an unrealized gain of $3.7 million, net of
deferred taxes, at December 31, 1995. This change was primarily
due to a decrease in prices, resulting from an increasing interest
rate environment.
Loan Portfolio
The following table reflects the composition of the loan portfolio
as of March 31, 1996 and December 31, 1995.
March 31, December 31,
1996 1995
Commercial...................... $ 367,976 $ 351,885
Construction.................... 72,564 73,664
Commercial mortgage............. 632,438 619,326
Residential mortgage............ 1,016,174 1,017,453
Installment..................... 748,532 731,772
2,837,684 2,794,100
Less: unearned income........... (772) (925)
Total loans................... $ 2,836,912 $ 2,793,175
Residential mortgage loans represent 35.8% of the loan portfolio.
Installment loans, including predominantly automobile and credit
card loans, represent 26.4% of the loan portfolio.
Installment loans outstanding at year end include automobile loans
referred to VNB by a major insurance company, which are subject to
Valley's underwriting criteria. VNB has extended this program by
establishing a finance company in Toronto, Canada. The new finance
company, which became operational in the first quarter of 1996,
makes consumer loans, primarily auto loans, in several provinces in
Canada.
VNB is a credit card issuer and has initiated several successful
affinity programs during 1994 and 1995, primarily with local
municipalities in New Jersey. In late 1995, VNB signed a letter of
intent with a proposed partner for a substantial co-branding credit
card program. VNB anticipates this program, if it occurs, could
add a significant number of credit card accounts to VNB within two
years. The program is subject to the execution of a definitive
agreement and if the parties reach a definitive agreement, VNB
anticipates this program will begin in the second quarter of 1996.
Management can offer no assurance that VNB and its proposed partner
will enter into a definitive agreement.
During March of 1996, VNB established a new subsidiary to which VNB
contributed a significant portion of its residential real estate
mortgages. The subsidiary will hold and purchase residential
mortgages and the utilization of this operating subsidiary is
expected to provide expense savings to VNB.
Non-Performing Assets
Non-performing assets include non-accrual loans and other real
estate owned (OREO). Non-performing assets continued to decrease,
and totalled $12.4 million at March 31, 1996 compared with $18.8
million at December 31, 1995, a decrease of $6.4 million or 34.0%.
Non-performing assets at March 31, 1996 and December 31, 1995,
respectively, amounted to 0.44% and .67% of loans and other real
estate owned.
Loans 90 days or more past due and not included in the non-
performing category totaled $12.4 million at March 31, 1996,
compared to $8.1 million at December 31, 1995. These loans are
primarily residential mortgage loans, commercial mortgage loans and
commercial loans which are generally well-secured and in the
process of collection.
- - 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, in conjunction with asset
quality ratios for Valley.
March 31, December 31,
1996 1995
Loans past due in excess of
90 days and still accruing...... $ 12,426 $ 8,117
Non-performing loans.............. $ 7,865 $ 11,795
Other real estate owned........... 4,556 7,015
Total non-performing assets..... $ 12,421 $ 18,810
Troubled debt restructured loans.. $ 5,445 $ 5,209
Non-performing loans as a
% of loans...................... 0.28% 0.42%
Non-performing assets as a %
of loans plus other real
estate owned.................... 0.44% 0.67%
Allowance as a % of loans......... 1.45% 1.42%
Allowance as a % of
non-performing loans............ 521.42% 336.33%
Asset Quality and Risk Elements
At March 31, 1996 the allowance for loan losses amounted to $41.0
million or 1.45% of loans, net of unearned income, as compared to
$39.7 million or 1.42% at year-end 1995.
The allowance is adjusted by provisions charged against income and
loan charged-off, net of recoveries. Net loan recoveries were $640
thousand for the three months ended March 31, 1996 compared with
net loan charge-offs of $222 thousand for the three months ended
March 31, 1995.
Capital Adequacy
A significant measure of the strength of a financial institution is
its shareholders' equity, which should expand in close proportion
to asset growth. At March 31, 1996, shareholders' equity totalled
$386.1 million or 8.5% of total assets, compared with $400.2
million or 8.7% at year-end 1995.
This decrease in shareholders' equity resulted from the repurchase
of approximately 651,000 shares of Valley common stock for treasury
purposes. Valley repurchased approximately 563,000 shares during
1995. The shares held in treasury at March 31, 1996 will be used
for the five percent stock dividend, payable May 17, 1996.
Also contributing to this decrease in shareholder's equity was a
change in the market value of securities available for sale.
Included in shareholders equity at March 31, 1996 is a $3.7 million
unrealized loss on investment securities available for sale, net of
tax, compared to an unrealized gain of $3.7 million at December 31,
1995.
- - 11 -
Valley's capital position at March 31, 1996 under risk-based
capital guidelines was $389.9 million, or 13.7% of risk weighted
assets, for Tier 1 capital and $425.5 million, or 14.9% for Total
risk-based capital. The comparable ratios at December 31, 1995
were 13.9% for Tier 1 capital and 15.1% for Total risk-based
capital. Valley's ratios at March 31, 1996 are above the "well
capitalized" requirements, which require Tier I capital of at least
6% and Total risk-based capital of 10%. The Federal Reserve Board
requires "well capitalized" bank holding companies to maintain a
minimum leverage ratio of 5.0%. At March 31, 1996 and December 31,
1995, Valley was in compliance with the leverage requirement having
a Tier I leverage ratio of 8.5% and 8.4%, 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 51.5% at March 31, 1996,
compared to 54.7% for the three month period ended March 31, 1995.
Cash dividends declared amounted to $.24 per share, equivalent to
a dividend payout ratio of 48.5%, up from the 45.3% for the same
quarter in 1995. Valley declared a 5% common stock dividend on
April 2, 1996 to shareholders of record on April 26, 1996, payable
May 17, 1996. Valley plans to maintain 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 it current dividend policy of a quarterly distribution of
earnings to its shareholders.
Recent Accounting Pronouncements
In May 1995 the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights." The Statement requires capitalization of the
value of rights to service mortgage loans for others, whether those
rights were acquired through purchase or origination. SFAS No. 122
also requires that capitalized mortgage servicing rights be
evaluated for impairment based on their fair value with any
adjustments recognized through a valuation allowance. Effective
January 1, 1996, SFAS No. 122 was adopted and capitalization of
originated mortgage servicing rights began. All capitalized
mortgage servicing rights, both originated and purchased, will be
evaluated for impairment on a quarterly basis. The impact of
adopting SFAS No. 122 is not material.
In October 1995 the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." This Statement encourages use of a fair
value based method of accounting for stock-based compensation plans
while allowing continued use of the intrinsic value method of
accounting prescribed by Accounting Principles Board Opinion (APB)
No. 25 method of accounting must make pro forma disclosures of net
income and earnings per shares as if the fair value based method of
accounting, as defined is SFAS No. 123, had been applied.
Valley adopted SFAS No. 123 effective January 1, 1996 and will
continue accounting for stock-based compensation under APB No. 25
and include the pro forma disclosures required by SFAS No. 123 in
annual financial statements beginning in the year ended December
31, 1996.
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PART II
Item 4. Submission of Matters to a Vote of Security Holders
a) On April 2, 1996 the Annual Meeting of Shareholders of
Valley National Bancorp was held. The Shareholders voted
upon the election of 19 persons, named in the Proxy
Statement, to serve as directors of the Corporation for
the ensuing year. All directors were elected and there
was no solicitation in opposition to management's
nominees as listed in the proxy statement. The following
is a list of directors elected at the Annual Meeting with
the number of votes "For" and "Withheld". There were no
abstentions.
Number of Votes
Name For Withheld
Andrew Abramson 27,911,360 264,644
Pamela Bronander 27,911,416 264,588
Joseph Coccia, Jr. 27,912,836 263,168
Austin C. Drukker 27,900,845 275,160
Michael D. Francis 27,911,482 264,523
Willard L. Hedden 27,878,189 297,816
Thomas P. Infusino 27,907,538 268,467
Gerald Korde 27,917,259 258,745
Gerald H. Lipkin 27,914,043 261,962
Joleen Martin 27,917,993 258,011
Robert E. McEntee 27,917,875 258,130
William McNear 27,886,437 289,567
Sam P. Pinyuh 27,918,043 257,962
Robert Rachesky 27,907,920 268,084
Barnett Rukin 27,898,043 277,962
Peter Southway 27,837,382 338,623
Richard F. Tice 27,912,983 263,022
Leonard J. Vorcheimer 27,893,253 282,752
Joseph L. Vozza 27,918,282 257,724
b) On April 2, 1996 at the Annual Meeting of Shareholders,
the Shareholders voted for the approval of an amendment
to Article V of the Corporations Certificate of Incorpo-
ration to increase the authorized common stock of the
Corporation to 75 million shares.
Item 5. Other Matters
a) The Board of Directors approved a five percent common
stock dividend on April 2, 1996. The new stock will be
issued May 17, 1996 to shareholders of record as of April
26, 1996.
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Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(10)Material Contracts
No material contracts entered into or becoming
effective in the Reporting Period.
(27)Financial Data Schedule
b) Reports on Form 8-K
1) Filed February 22, 1996 to report the authorization
to purchase up to 1,000,000 shares of its outstand-
ing common stock to be used for employee benefit
programs and other general corporate purposes
including stock dividends.
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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: May 15, 1996 /s/ Peter Southway
PETER SOUTHWAY
VICE CHAIRMAN
Date: May 15, 1996 /s/ Alan D. Eskow
ALAN D. ESKOW
SENIOR VICE PRESIDENT
FINANCIAL ADMINISTRATION
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