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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

For the Quarterly Period Ended March 31, 2004

For the transition period from              to             

Commission File Number 1-11277

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 07470

(Address of principal executive offices)

973-305-8800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x No¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock (no par value), of which 98,718,767 shares were outstanding as of May 5, 2004.

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TABLE OF CONTENTS

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PART I - FINANCIAL INFORMATION

VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(in thousands, except for share data)

See accompanying notes to consolidated financial statements.

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VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except for share data)

See accompanying notes to consolidated financial statements.

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VALLEY NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)

See accompanying notes to consolidated financial statements.

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VALLEY NATIONAL BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Consolidated Statements of Financial Condition as of March 31, 2004 and December 31, 2003, the Consolidated Statements of Income for the three month periods ended March 31, 2004 and 2003 and the Consolidated Statements of Cash Flows for the three month periods ended March 31, 2004 and 2003 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, 2004 and for all periods presented have been made. Share data reflects the 5 percent stock dividend declared on April 7, 2004 to be issued May 17, 2004 to shareholders of record on May 3, 2004.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. These consolidated financial statements are to be read in conjunction with the consolidated financial statements and notes thereto included in Valley’s December 31, 2003 report on Form 10-K. Certain prior period amounts have been reclassified to conform to 2004 financial presentations.

For Valley, the numerator of both the Basic and Diluted EPS is equivalent to net income. The weighted average number of shares outstanding used in the denominator for Diluted EPS is increased over the denominator used for Basic EPS by the effect of potentially dilutive common stock equivalents utilizing the treasury stock method. For Valley, common stock equivalents are common stock options outstanding.

The following table shows the calculation of both Basic and Diluted earnings per share for the three months ended March 31, 2004 and 2003.

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Common stock equivalents for the three months ended March 31, 2004 and 2003 exclude approximately 370 thousand and 459 thousand common stock options because the exercise prices exceeded the average market value. Inclusion of these common stock equivalents would be anti-dilutive to the diluted earnings per share calculation.

Valley adopted on a prospective basis the fair value provisions of Statement of Financial Accounting Standards No. 123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”), effective January 1, 2002. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model and is based on certain assumptions including dividend yield, stock volatility, risk free rate of return and the expected term. The fair value of each option is expensed over its vesting period.

For the three months ended March 31, 2004 and 2003, Valley recorded stock-based employee compensation expense for incentive stock options of $151 thousand and $77 thousand, respectively, net of tax and will continue to amortize the remaining cost of these grants of approximately $2.2 million, net of tax, over the vesting period of approximately five years. Stock-based employee compensation cost under the fair value method was measured using the following weighted-average assumptions for options granted in 2004 and 2003, respectively: dividend yield of 3.24 and 3.03 percent; risk-free interest rate of 3.67 and 3.94 percent; expected volatility of 22.96 and 19.97 percent; and expected term of 7.52 and 7.65 years. Prior to January 1, 2002, Valley applied APB Opinion No. 25 and related Interpretations in accounting for its stock options granted. Had compensation expense for the options issued prior to January 1, 2002, been recorded consistent with the fair value provisions of SFAS No. 123 for those periods, net income and earnings per share would have been reduced to the pro forma amounts indicated below:

On April 7, 2004, the Board of Directors approved a 5 percent stock dividend to be issued May 17, 2004 to shareholders of record on May 3, 2004 and also agreed to maintain the annual cash dividend at $0.90 per share, on an after-stock-dividend basis, representing an increase of 5 percent in the cash payout.

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Valley’s comprehensive income consists of unrealized gains (losses) on securities available for sale, net of tax. The following table shows each component of comprehensive income for the three months ended March 31, 2004 and 2003.

The information under the caption “Business Segments” in Management’s Discussion and Analysis is incorporated herein by reference.

Guarantees that have been entered into by Valley include standby letters of credit (“Standbys”) of $168 million as of March 31, 2004. Standbys represent the guarantee by Valley of the obligations or performance of a customer in the event the customer is unable to meet or perform its obligations to a third party. Seventy six percent of Standbys are secured and in the event of non performance by the customer, Valley has rights on the underlying collateral which includes commercial real estate, business assets (physical plant or property, inventory or receivables), marketable securities and cash in the form of bank savings accounts and certificates of deposit.

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Valley has a non-contributory benefit plan covering substantially all of its employees. The determination of the benefit obligation and pension expense is based upon actuarial assumptions used in calculating such amounts. Those assumptions include the discount rate, expected long-term rate of return on plan assets and the rate of increase in future compensation levels.

The following table sets forth the components of net periodic pension expense for each of the three months ended March 31, 2004 and 2003:

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Cautionary Statement Concerning Forward-Looking Statements

This Form 10-Q, both in the MD&A and elsewhere, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by an (*) or such forward-looking terminology as “expect,” “anticipate,” “look,” “view,” “opportunities,” “allow,” “continues,” “reflects,” “believe,” “may,” “will” or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking statements. Valley assumes no obligation for updating any such forward-looking statement at any time. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to, unanticipated changes in the direction of interest rates, changes in loan, investment and mortgage prepayment assumptions, changes in effective income tax rates, higher or lower cash flow levels than anticipated, slowdown in levels of deposit growth, a decline in the economy in New Jersey and/or New York, a decrease in loan origination volume, as well as a change in legal and regulatory barriers and the development of new tax strategies or the disallowance of prior tax strategies.

Critical Accounting Policies and Estimates

The accounting and reporting policies followed by Valley conform, in all material respects, to accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, management has made estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of condition and results of operations for the periods indicated. Actual results could differ significantly from those estimates.

Valley’s accounting policies are fundamental to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations. The most significant accounting policies followed by Valley are presented in Note 1 of the Notes to Consolidated Financial Statements included in Valley’s December 31, 2003 report on Form 10-K. Valley has identified its policies on the allowance for loan losses and income tax liabilities to be critical because management has to make subjective and/or complex judgments about matters that are inherently uncertain and could be most subject to revision as new information becomes available.

The allowance for loan losses represents management’s estimate of probable credit losses inherent in the loan portfolio. Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan portfolio also represents the largest asset type on the Consolidated Statements of Financial Condition. Note 1 of the Notes to Consolidated Financial Statements in Valley’s December 31, 2003 report on Form 10-K describes the methodology used to determine the allowance for loan losses and a discussion of the factors driving changes in the amount of the allowance for loan losses is included in this MD&A.

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The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in Valley’s consolidated financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could impact Valley’s consolidated financial condition or results of operations.* Notes 1 and 14 of the Notes to Consolidated Financial Statements in Valley’s December 31, 2003 report on Form 10-K include additional discussion on the accounting for income taxes.

Executive Summary²

For the three months ended March 31, 2004, net income was $0.39 per diluted share or $38.4 million compared with $0.38 per diluted share or $38.0 million for the same period in 2003. Diluted earnings per share and net income continued strong for the first quarter, compared with the same period in 2003, however, low interest rates continued to affect these results.

The annualized return on average shareholders’ equity was 23.22 percent for the three months ended March 31, 2004 compared with 24.06 percent for the same period in 2003 while the annualized return on average assets was 1.57 percent for the three months ended March 31, 2004 compared with 1.67 percent recorded in the first quarter of 2003.

Valley’s total assets exceeded $10 billion for the first time during the first quarter of 2004. Loans and deposits grew at an annualized rate of 6.9 percent and 5.2 percent, respectively, during the quarter due in part to increased calling and marketing efforts.

Despite lower interest rates, net interest income on a tax equivalent basis increased to $91.8 million for the first quarter of 2004 compared with $90.7 million for the same period in 2003 due to a combination of lower interest rates on deposits and borrowings, increased loan and investment volume offset by lower interest rates earned on loans and investments.

Net Interest Income ³

Net interest income continues to be the largest component of Valley’s operating income. For the three month period ended March 31, 2004, net interest income on a tax equivalent basis increased to $91.8 million compared with $90.7 million for the quarter ended March 31, 2003 and from $90.4 million for the fourth quarter of 2003. The increase over the prior year quarter was due to higher loan and investment volume and lower rates paid on deposits and borrowings, partly offset by lower interest rates earned on loans and investments. For the first quarter of 2004, average loans increased $373.3 million or 6.37 percent while average investments increased $272.9 million or 10.45 percent over the same period in 2003. Compared to the fourth quarter of 2003, loans grew during the first quarter of 2004 at an annualized rate of 6.90 percent.

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Despite the increase in loan volume, interest income on loans declined $1.7 million or 17 basis points for the three month period ended March 31, 2004 compared with the quarter ended December 31, 2003 and declined $4.0 million or 64 basis points over the three months ended March 31, 2003 due largely to the decline in interest rates.

Interest on taxable investments increased $1.1 million for the three month period ended March 31, 2004 compared with the quarter ended December 31, 2003 mainly due to higher volume and increased $940 thousand over the three months ended March 31, 2003 as a result of higher volume partially offset by declining interest rates.

The net interest margin increased slightly for the three months ended March 31, 2004 to 4.02 percent compared with 4.00 percent for the quarter ended December 31, 2003 and decreased from 4.28 percent for the three months ended March 31, 2003 primarily due to lower interest rates. The increase for the current quarter is mainly due to efforts by management to lower funding and borrowing costs.

The net interest margin and net interest income reflect the adoption of Financial Accounting Standards Board Interpretation No. 46 (“FIN 46”) that required Valley to de-consolidate VNB Capital Trust I, which issued $200 million of preferred securities. As a result of this de-consolidation, junior subordinated debentures issued by VNB Capital Trust I are now recorded as long-term debt and costs related to these junior subordinated debentures are included in interest expense. Prior periods have been adjusted to reflect this change.

Interest expense for the three months ended March 31, 2004 decreased $2.1 million compared with the fourth quarter of 2003 and decreased $3.9 million compared with the quarter ended March 31, 2003. These decreases were due to lower borrowing costs and interest paid on deposit accounts. Valley lowered some of its borrowing costs through variable rate sub-LIBOR based borrowings during the end of the fourth quarter of 2003 and in the first quarter of 2004. These borrowings have call provisions, but if not called, will convert to higher-cost fixed rate borrowings at the end of 2004 and into 2005. The declining trend in the cost of borrowings and deposits may not continue since interest rates have increased since March 31, 2004.

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The following table reflects the components of net interest income for each of the three months ended March 31, 2004 and 2003.

ANALYSIS OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY AND

NET INTEREST INCOME ON A TAX EQUIVALENT BASIS

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

CHANGE IN NET INTEREST INCOME ON A TAX EQUIVALENT BASIS

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Non-Interest Income

Non-interest income continues to represent a considerable source of income for Valley, representing 15.7 percent of total income for the three months ended March 31, 2004. For the three months ended March 31, 2004, non-interest income decreased $2.6 million or 10.3 percent primarily due to reduced title insurance premiums and lower gains on the sales of loans compared with the same period in 2003.

The following table presents the components of non-interest income for each of the three months ended March 31, 2004 and 2003.