Valley National Bank in Pasaic, N.J., has tripled in size since 1984. Its return on assets has exceeded 1% since that time and is at 1.81% for the first quarter of 1993. Similarly, return on equity has never sunk below 15% and reached 25% in the first quarter. I asked Gerald H. Lipkin Lipkin, Valley's CEO, "How do you do it?"

"By being a super community bank," replied Gerry, "and paying attention to the farm." Gerry's philosophy is simple. At Valley National Bank, the president still signs all checks every day.

Gerry knows exactly how many employees the bank has and what its targets are. When people ran small community banks, they did all these things, and more. "All we are," says Gerry, "is a bigger community bank. I could tell you how many people work in my house, and the same is true at the bank. We run it like a community bank. only bigger."

Simple Formula

The logic is very simple. Every officer of the bank owns stock in the company, which gives every member of the team a major stake in the success of the bank as a whole.

Bank officers find that the bank's stock represents a significant portion of their net worth and, therefore, pay more attention to the farm, as Gerry says.

That, coupled with the fact that the president signs all the checks that come out ("It's only 20 to 30 checks," says Gerry), can explain the 0.42 efficiency ratio of Valley, a stellar ratio, especially given the level of service afforded at the company.

Easy Access to Executives

Senior bank management is fully accessible at Valley. The president still answers his own phone, and every customer can see the CEO within 24 hours of request. That includes calling the CEO at home and visiting on a Saturday.

Recently, a troubled customer needed to make an important business decision. Gerry visited with the customer on Saturday for 10 minutes and had lunch. He gave the customer his opinion on the new business venture that he was considering.

"It makes sense," says Gerry. I spend 20 minutes on a Saturday, and although the matter may be minor to me, it is the most important issue in my customer's life at that point. These 20 minutes cement our relationship forever. I, and the rest of the senior management team, must be approachable. If 1, as the CEO, am available, then the rest of the officers must be, of course.

Gerry is leading by example in every way. There are only three corporate cars at Valley. Gerry is at the office before seven in the morning, and usually stays until seven at night.

"Our philosophy is simple," he says. "Our money does the same thing as their money. The only difference is service."

Valley is therefore committed to giving unwavering service quality while maintaining its good efficiency ratio. The company has been successful in doing so and targets about $3.5 million of assets per employee.

Valley is also committed to sticking to its knitting. "Our business is simple, and we keep it that way," says Gerry.

Keeping Losses Low

All loans start with prime and go up. The highest lending authority of the bank, for both Gerry and the president, is $300,000 per person, but, together, they can approve a $3 million loan. The bank's philosophy and credit is extremely conservative and assumes that two heads are better than one in making a loan.

As a result, low losses have helped contribute to the bank's stellar performance , over the years.

Gerry says that the-bank is not doing anything special. This is just a commonsense bank. However, if you look at Valley, it is a super community bank that is achieving stellar performance year in and year out, thanks to superior asset quality, a conservative loan policy, continuous cost management, and leading by example.

"Our officers work half a day -- 7 a.m. to 7 p.m." says, Peter Southway, president and chief operating officer.

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