EXHIBIT 10.1 TO FORM 8-K

                             STOCK OPTION AGREEMENT

      THIS STOCK OPTION AGREEMENT  ("Agreement")  dated as of September 5, 2000,
is by  and  between  Valley  National  Bancorp,  a New  Jersey  corporation  and
registered  bank holding  company  ("Valley"),  and  Merchants New York Bancorp,
Inc., a Delaware corporation and registered bank holding company ("Merchants").

                                   BACKGROUND

      WHEREAS,  Valley and  Merchants,  as of the date  hereof,  are prepared to
execute a  definitive  agreement  and plan of merger  (the  "Merger  Agreement")
pursuant to which  Merchants will be merged with and into Valley (the "Merger");
and

      WHEREAS,  Valley has advised Merchants that it will not execute the Merger
Agreement unless Merchants executes this Agreement; and

      WHEREAS,  the Board of  Directors  of Merchants  has  determined  that the
Merger Agreement provides substantial benefits to the shareholders of Merchants;
and

      WHEREAS, as an inducement to Valley to enter into the Merger Agreement and
in consideration for such entry,  Merchants desires to grant to Valley an option
to purchase  authorized  but unissued  shares of common stock of Merchants in an
amount and on the terms and conditions hereinafter set forth.

                                    AGREEMENT

      In  consideration of the foregoing and the mutual covenants and agreements
set forth herein and in the Merger Agreement, Valley and Merchants, intending to
be legally bound hereby, agree:

1.  Grant of Option.  Merchants  hereby  grants to Valley an option to  purchase
4,663,741 shares of common stock,  $0.001 par value per share, of Merchants (the
"Common  Stock")  at a price of $16.98  per share (as the same may be reduced in
accordance  with  Section  5b  hereof,  the  "Option  Price"),  on the terms and
conditions set forth herein (the "Option").

2. Exercise of Option. This Option shall not be exercisable until the occurrence
of a Triggering Event (as such term is hereinafter  defined).  Upon or after the
occurrence of a Triggering Event (as such term is hereinafter  defined),  Valley
may exercise the Option,  in whole or in part, at any time or from time to time,
subject  to the  terms  and  conditions  set forth  herein  and the  termination
provisions of Section 19 of this Agreement.

      The term  "Triggering  Event" means the occurrence of any of the following
events:


                                        1
<PAGE>

a. A person or group (as such terms are defined in the  Securities  Exchange Act
of 1934,  as  amended  (the  "Exchange  Act"),  and the  rules  and  regulations
thereunder)  other  than  Valley or an  affiliate  of  Valley (a "third  party")
acquires  beneficial  ownership  (as  such  term is  defined  in Rule  13d-3  as
promulgated  under the  Exchange  Act) of at least  10% of the then  outstanding
shares of Common Stock,  provided,  however,  that the continuing ownership by a
person  or  group  which  as of  the  date  hereof  owns  more  than  10% of the
outstanding Common Stock shall not constitute a Triggering Event; or

b. A third party enters into a letter of intent or an agreement, whether oral or
written,  with Merchants  pursuant to which such third party or any affiliate of
such third  party  would (i) merge or  consolidate,  or enter  into any  similar
transaction,  with Merchants,  (ii) acquire all or a significant  portion of the
assets or liabilities  of Merchants,  or (iii) acquire  beneficial  ownership of
securities representing, or the right to acquire beneficial ownership or to vote
securities  representing,  10% or more of the then outstanding  shares of Common
Stock; or

c. A third  party  makes a filing  with any bank,  thrift or  financial  holding
company regulatory authorities with respect to or publicly announces a bona fide
proposal  (a  "Proposal")  for  (i)  any  merger  with,  consolidation  with  or
acquisition of all or a significant portion of all the assets or liabilities of,
Merchants  or any other  business  combination  involving  Merchants,  or (ii) a
transaction  involving  the  transfer  of  beneficial  ownership  of  securities
representing, or the right to acquire beneficial ownership or to vote securities
representing,  10% or more of the  outstanding  shares of Common  Stock,  and in
either case  thereafter,  if such Proposal has not been  Publicly  Withdrawn (as
such term is  hereinafter  defined)  at least 15 days  prior to the  meeting  of
stockholders  of  Merchants   called  to  vote  on  the  Merger  and  Merchants'
stockholders  fail to approve the Merger by the vote required by applicable  law
at the meeting of stockholders called for such purpose; or

d. A third  party makes a bona fide  Proposal  and  thereafter,  but before such
Proposal has been Publicly Withdrawn, Merchants willfully or intentionally takes
any action in any manner which would  materially  interfere  with its ability to
consummate  the  Merger or  materially  reduce the value of the  transaction  to
Valley; or

e. After the  execution of this  Agreement,  Merchants or any of its  directors,
senior  executive  officers,  investment  bankers or other person with actual or
apparent   authority  to  speak  for  the  Board  of  Directors,   willfully  or
intentionally takes any material direct or indirect action inviting, encouraging
or  soliciting  any proposal  (other than from Valley or an affiliate of Valley)
which has as its  purpose  a tender  offer for the  shares  of Common  Stock,  a
merger,  consolidation,  plan of exchange, plan of acquisition or reorganization
of Merchants, or a sale of a significant number of shares of Common Stock or any
significant portion of its assets or liabilities.

      The term  "significant  portion" means 10% of the assets or liabilities of
Merchants.  The term "significant number" means 10% of the outstanding shares of
Common Stock.

      Solely for purposes of Section 5b hereof, the date of a "Triggering Event"
under  clause (a) above is the date the third  party first  acquires  beneficial
ownership of at least 10% of the then  outstanding  shares of Common Stock;  the
date of a  "Triggering  Event"  under clause (b) above is the


                                       2
<PAGE>

date of entry into the letter of intent or agreement;  the date of a "Triggering
Event"  under clause (c) above is the earlier of the date of the filing (if any)
with a bank,  thrift or financial  holding  company  regulatory  authority  with
respect to the Proposal or the date of public announcement of the Proposal;  the
date of a "Triggering  Event" under clause (d) above is the date the third party
first makes the Proposal;  and the date of a "Triggering Event" under clause (e)
above is the first date on which a material  direct or indirect  action referred
to therein is taken.

      "Publicly  Withdrawn",  for  purposes of clauses (c) and (d) above,  shall
mean an unconditional bona fide withdrawal of the Proposal coupled with a public
announcement  of no further  interest in pursuing  such Proposal or in acquiring
any controlling  influence over Merchants or in soliciting or inducing any other
person (other than Valley or any affiliate) to do so.

      Notwithstanding the foregoing, the Option may not be exercised at any time
(i) in the  absence of any  required  governmental  or  regulatory  approval  or
consent (including any filing,  approval or consent required under the rules and
regulations of any securities exchange or the National Association of Securities
Dealers,  Inc.)  necessary  for  Merchants  to issue the shares of Common  Stock
covered by the Option (the "Option  Shares") or Valley to exercise the Option or
prior to the expiration or termination of any waiting period required by law, or
(ii) so long as any  injunction  or other order,  decree or ruling issued by any
federal or state court of competent  jurisdiction  is in effect which  prohibits
the sale or delivery of the Option Shares.

      Merchants shall notify Valley promptly in writing of the occurrence of any
Triggering Event known to it, it being understood that the giving of such notice
by  Merchants  shall not be a condition  to the right of Valley to exercise  the
Option.  Merchants  will not take any  action  which  would  have the  effect of
preventing or disabling  Merchants  from  delivering the Option Shares to Valley
upon exercise of the Option or otherwise  performing its obligations  under this
Agreement,  except to the extent  required by applicable  securities and banking
laws and regulations.

      In the event  Valley  wishes to exercise  the Option,  Valley shall send a
written notice to Merchants (the date of which is hereinafter referred to as the
"Notice  Date")  specifying  the  total  number  of  Option  Shares it wishes to
purchase and a place and date between two and ten business days  inclusive  from
the Notice  Date for the  closing of such a purchase  (a  "Closing");  provided,
however,  that a Closing  shall not occur  prior to two days  after the later of
receipt of any necessary  regulatory approvals and the expiration of any legally
required notice or waiting period, if any.

3. Payment and Delivery of  Certificates.  At any Closing  hereunder  (a) Valley
will make payment to Merchants of the  aggregate  price for the Option Shares so
purchased  by  wire  transfer  of  immediately  available  funds  to an  account
designated  by  Merchants;   (b)  Merchants  will  deliver  to  Valley  a  stock
certificate  or  certificates  representing  the  number  of  Option  Shares  so
purchased,  free and clear of all liens, claims, charges and encumbrances of any
kind or nature  whatsoever  created by or through  Merchants,  registered in the
name of Valley or its  designee,  in such  denominations  as were  specified  by
Valley in its notice of  exercise  and,  if  necessary,  bearing a legend as set
forth below;  and (c) Valley  shall pay any transfer or other taxes  required by
reason of the issuance of the Option Shares so purchased.

      If required  under  applicable  federal  securities  laws as


                                       3
<PAGE>

determined  by  Merchants'  counsel,  a  legend  will be  placed  on each  stock
certificate  evidencing  Option Shares issued pursuant to this Agreement,  which
legend will read substantially as follows:

      The shares of stock evidenced by this certificate have not been registered
      for sale under the Securities  Act of 1933 (the "1933 Act").  These shares
      may  not  be  sold,   transferred  or  otherwise   disposed  of  unless  a
      registration  statement  with  respect to the sale of such shares has been
      filed  under the 1933 Act and  declared  effective  or, in the  opinion of
      counsel reasonably acceptable to Merchants,  said transfer would be exempt
      from registration under the provisions of the 1933 Act and the regulations
      promulgated thereunder.

No such  legend  shall be  required  if a  registration  statement  is filed and
declared effective under Section 4 hereof.

4. Registration  Rights.  Upon or after the occurrence of a Triggering Event and
upon receipt of a written request from Valley, Merchants shall, if necessary for
the  resale of the Option or the Option  Shares by  Valley,  prepare  and file a
registration statement with the Securities and Exchange Commission and any state
securities bureau covering the Option and such number of Option Shares as Valley
shall specify in its request,  and Merchants shall use its best efforts to cause
such registration statement to be declared effective in order to permit the sale
or other  disposition of the Option and the Option Shares,  provided that Valley
shall  in no event  have  the  right  to have  more  than one such  registration
statement  become  effective,  and provided  further that Merchants shall not be
required to prepare and file any such registration  statement in connection with
any  proposed  sale with  respect to which  counsel  to  Merchants  delivers  to
Merchants and to Valley  (which is reasonably  acceptable to Valley) its opinion
to the  effect  that no such  filing  is  required  under  applicable  laws  and
regulations  with respect to such sale or disposition or any subsequent  sale or
disposition;   provided   further,   however,   that  Merchants  may  delay  any
registration  of Option  Shares above for a period not  exceeding 90 days in the
event that Merchants  shall in good faith  determine that any such  registration
would adversely effect an on-going offering of securities by Merchants for cash.
Valley shall  provide all  information  reasonable  requested  by Merchants  for
inclusion in any registration statement to be filed hereunder.

      In connection  with such filing,  Merchants  shall use its best efforts to
cause to be  delivered  to  Valley  such  certificates,  opinions,  accountant's
letters  and other  documents  as Valley  shall  reasonably  request  and as are
customarily  provided in connection with  registrations  of securities under the
Securities  Act of 1933,  as amended.  All  expenses  incurred by  Merchants  in
complying with the provisions of this Section 4, including  without  limitation,
all registration and filing fees,  printing expenses,  fees and disbursements of
counsel for Merchants and blue sky fees and expenses shall be paid by Merchants.
Underwriting  discounts and  commissions to brokers and dealers  relating to the
Option or Option  Shares,  fees and  disbursements  of counsel to Valley and any
other expenses incurred by Valley in connection with such registration  shall be
borne by Valley.  In connection with such filing,  Merchants shall indemnify and
hold harmless Valley against any losses, claims,  damages or liabilities,  joint
or several, to which Valley may become subject,  insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue  statement or alleged  untrue  statement  of any  material  fact
contained in any preliminary or final registration statement or any amendment or
supplement  thereto,  or arise  out of a  material  fact  required  to be stated
therein  or  necessary  to make  the  statements  therein  not  misleading;  and


                                       4
<PAGE>

Merchants  will  reimburse  Valley  for any  legal or other  expense  reasonably
incurred by Valley in connection with  investigating or defending any such loss,
claim, damage, liability or action;  provided,  however, that Merchants will not
be  liable  in any case to the  extent  that any such  loss,  claim,  damage  or
liability  arises out of or is based upon an untrue  statement or alleged untrue
statement  or omission or alleged  omission  made in such  preliminary  or final
registration  statement or such amendment or supplement thereto in reliance upon
and in conformity with written  information  furnished by or on behalf of Valley
specifically  for use in the  preparation  thereof with  respect to  information
about  the  selling  stockholders  or the  plan  of  distribution.  Valley  will
indemnify  and hold  harmless  Merchants  to the same extent as set forth in the
immediately  preceding  sentence but only with reference to written  information
specifically  furnished by or on behalf of Valley for use in the  preparation of
such preliminary or final registration statement or such amendment or supplement
thereto with respect to information  about the selling  stockholders or the plan
of  distribution;  and Valley will  reimburse  Merchants  for any legal or other
expense  reasonably  incurred by Merchants in connection with  investigating  or
defending any such loss,  claim,  damage,  liability or action.  Notwithstanding
anything to the contrary herein,  no indemnifying  party shall be liable for any
settlement effected without its prior written consent.

5. Adjustments.

      a. Adjustments Upon Changes in Capitalization.  In the event of any change
in  the  Common  Stock  by  reason  of  stock  dividends,   split-ups,  mergers,
recapitalizations,  combinations,  conversions, exchanges of shares or the like,
then  the  number  and kind of  Option  Shares  and the  Option  Price  shall be
appropriately adjusted.

      In the event any capital  reorganization or reclassification of the Common
Stock,  or any  consolidation,  merger or similar  transaction of Merchants with
another  entity,  or any  sale  of all or  substantially  all of the  assets  of
Merchants,  shall be  effected  in such a way that the  holders of Common  Stock
shall be entitled to receive  stock,  securities or assets with respect to or in
exchange  for  Common  Stock,  then,  as a  condition  of  such  reorganization,
reclassification,  consolidation, merger or sale, lawful and adequate provisions
(in form reasonably satisfactory to the holder hereof) shall be made whereby the
holder hereof shall  thereafter  have the right to purchase and receive upon the
basis and upon the  terms and  conditions  specified  herein  and in lieu of the
Common Stock immediately theretofore purchasable and receivable upon exercise of
the rights  represented  by this  Option,  such shares of stock,  securities  or
assets as may be issued or payable with respect to or in exchange for the number
of shares of Common Stock  immediately  theretofore  purchasable  and receivable
upon exercise of the rights represented by this Option had such  reorganization,
reclassification,  consolidation,  merger  or sale not  taken  place;  provided,
however,  that if such  transaction  results  in the  holders  of  Common  Stock
receiving only cash, the holder hereof shall be paid the difference  between the
Option  Price and such  cash  consideration  without  the need to  exercise  the
Option.

      b. Adjustments  Based Upon Changes in Market Price. If, on the date of the
first  occurrence of any  Triggering  Event under Section 2, the Average  Merger
Consideration  Equivalent is less than the Option  Price,  then the Option Price
automatically  shall be reduced to the amount of the  Discounted  Average Merger
Consideration  Equivalent. As used herein, the "Merger Consideration Equivalent"
on any trading day means the Closing  Price of Valley  Common  Stock on such day
multiplied by the Exchange  Ratio (with "Closing  Price,"


                                       5
<PAGE>

"Valley Common Stock" and "Exchange  Ratio" all having the meanings  assigned to
them in the Merger  Agreement).  The "Average Merger  Consideration  Equivalent"
means the average of the Merger Consideration Equivalents during the Measurement
Period.  The  "Discounted  Average Merger  Consideration  Equivalent"  means the
Average Merger  Consideration  Equivalent minus $3.06. The "Measurement  Period"
shall be determined  as follows:  (a) If there is at least one but less than ten
trading  days  between  the  date of the  Merger  Agreement  and the date of the
Triggering Event (calculated in this paragraph by excluding both the date of the
Merger  Agreement and the date of the Triggering  Event),  then the "Measurement
Period" is the entire  period  between the date of the Merger  Agreement and the
date of the Triggering Event. (b) If there are at least ten but not more than 60
trading  days  between  the  date of the  Merger  Agreement  and the date of the
Triggering Event, then the "Measurement  Period" is the ten consecutive  trading
day period falling between the date of the Merger  Agreement and the date of the
Triggering  Event  which  produces  the  lowest  Average  Merger   Consideration
Equivalent.  (c) If there are more than 60 trading  days between the date of the
Merger  Agreement and the date of the Triggering  Event,  then the  "Measurement
Period" is the ten consecutive  trading day period falling during the 60 trading
day period ending with the last trading day prior to the date of the  Triggering
Event which produces the lowest Average Merger Consideration  Equivalent. If the
Exchange Ratio is adjusted during or after the Measurement  Period,  the Average
Merger Consideration Equivalent shall be calculated or adjusted appropriately to
reflect the adjustment in the Exchange Ratio.

6. Filings and Consents.  Each of Valley and Merchants  will use its  reasonable
efforts to make all filings with,  and to obtain  consents of, all third parties
and governmental  authorities  necessary to the consummation of the transactions
contemplated by this Agreement.

      Exercise of the Option herein provided shall be subject to compliance with
all applicable  laws  including,  but not limited to, in the event Valley is the
holder hereof, approval of the Board of Governors of the Federal Reserve System,
the Federal Deposit Insurance Corporation, the New York Department of Banking or
the Securities and Exchange  Commission,  and Merchants agrees to cooperate with
and  furnish to the holder  hereof  such  information  and  documents  as may be
reasonably required to secure such approvals.

7. Representations and Warranties of Merchants.  Merchants hereby represents and
warrants to Valley as follows:

a. Due  Authorization.  Merchants  has full  corporate  power and  authority  to
execute,  deliver and perform this Agreement and all corporate  action necessary
for execution, delivery and performance of this Agreement has been duly taken by
Merchants.

b.  Authorized  Shares.  Merchants  has  taken  and,  as long as the  Option  is
outstanding,  will take all necessary  corporate action to authorize and reserve
for  issuance  all  shares of Common  Stock that may be issued  pursuant  to any
exercise of the Option.

c. No  Conflicts.  Neither the  execution  and  delivery of this  Agreement  nor
consummation of the transactions  contemplated  hereby (assuming all appropriate
regulatory  approvals)  will violate or result in any violation or default of or
be in conflict with or constitute a default under any term of the Certificate of
Incorporation  or Bylaws of Merchants or any  agreement,  instrument,  judgment,
decree or order applicable to Merchants.


                                       6
<PAGE>

8. Specific Performance. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement and that the obligations of the
parties hereto shall be specifically enforceable. Notwithstanding the foregoing,
Valley shall have the right to seek money damages against Merchants for a breach
of this Agreement.

9. Entire Agreement. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and  understandings,  both written and oral, among the parties or any
of them with respect to the subject matter hereof.

10. Assignment or Transfer.  Valley may not sell,  assign or otherwise  transfer
its  rights and  obligations  hereunder,  in whole or in part,  to any person or
group of persons other than to an affiliate of Valley, until the occurrence of a
Triggering Event. Valley represents that it is acquiring the Option for Valley's
own  account  and  not  with a view  to or  for  sale  in  connection  with  any
distribution  of the Option or the Option  Shares.  Valley is aware that neither
the Option  nor the Option  Shares is the  subject of a  registration  statement
filed with, and declared  effective by, the  Securities and Exchange  Commission
pursuant to Section 5 of the  Securities  Act, but instead each is being offered
in reliance upon the exemption  from the  registration  requirement  provided by
Section 4(2) thereof and the  representations  and warranties  made by Valley in
connection  therewith.  After the occurrence of a Triggering  Event,  Valley may
sell,  assign,   pledge,  or  otherwise  transfer  its  rights  and  obligations
hereunder,  in whole or in part,  to any  person,  subject  to  compliance  with
applicable law.

11.  Amendment of Agreement.  Upon mutual  consent of the parties  hereto,  this
Agreement may be amended in writing at any time, for the purpose of facilitating
performance  hereunder  or to  comply  with  any  applicable  regulation  of any
governmental  authority  or any  applicable  order of any court or for any other
purpose.

12.  Validity.  The  invalidity  or  unenforceability  of any  provision of this
Agreement  shall  not  affect  the  validity  or  enforceability  of  any  other
provisions of this Agreement, which shall remain in full force and effect.

13. Notices. All notices,  requests,  consents and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered personally,  or delivered by overnight delivery service, or
by registered or certified mail (postage prepaid,  return receipt  requested) to
the respective parties as follows:

       If to Valley:

                Valley National Bancorp
                1455 Valley Road
                Wayne, New Jersey 07470
                Attention:  Gerald H. Lipkin
                            Chairman, President and Chief
                            Executive Officer

       With a copy to:

                Pitney, Hardin, Kipp & Szuch LLP
                200 Campus Drive
                Florham Park, New Jersey  07932-0950


                                       7
<PAGE>

                Attention:  Ronald H. Janis, Esq.
                            Michael W. Zelenty, Esq.

       If to Merchants:

                Merchants New York Bancorp, Inc.
                275 Madison Avenue
                New York, New York 10022
                Attention:  William J. Cardew
                            Vice Chairman and Chief Financial Officer

       With a copy to:

                Rosenman & Colin LLP
                575 Madison Avenue
                New York, New York 10022-2585
                Attention: Robinson Markel, Esq.

or to such other  address  as the person to whom  notice is to be given may have
previously  furnished  to the others in  writing  in the manner set forth  above
(provided  that  notice of any change of address  shall be  effective  only upon
receipt thereof).

14.  Governing  Law.  This  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the State of New Jersey.

15.  Captions.  The captions in the Agreement are inserted for  convenience  and
reference purposes,  and shall not limit or otherwise affect any of the terms or
provisions hereof.

16. Waivers and Extensions.  The parties hereto may, by mutual  consent,  extend
the time for  performance  of any of the  obligations  or acts of  either  party
hereto.  Each party may waive (a)  compliance  with any of the  covenants of the
other party contained in this Agreement and/or (b) the other party's performance
of any of its obligations set forth in this Agreement.

17. Parties in Interest.  This Agreement  shall be binding upon and inure solely
to the benefit of each party hereto,  and nothing in this Agreement,  express or
implied,  is intended to confer upon any other  person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.

18.  Counterparts.  This Agreement may be executed in two or more  counterparts,
each of  which  shall  be  deemed  to be an  original,  but all of  which  shall
constitute one and the same agreement.

19.  Termination.  This Agreement shall terminate upon either the termination of
the Merger Agreement as provided therein or the consummation of the transactions
contemplated by the Merger Agreement;  provided, however, that if termination of
the Merger  Agreement  occurs after the  occurrence  of a  Triggering  Event (as
defined in Section 2 hereof), this Agreement shall not terminate until the later
of 18 months  following the date of the  termination of the Merger  Agreement or
the  consummation of any proposed  transactions  which constitute the Triggering
Event;  provided further, that if the holder has given notice of exercise of the
option and the exercise is awaiting any necessary  regulatory approval after the
holder has acted  reasonably to obtain such approval  this  Agreement  shall not
terminate  until  the  approvals  have  been  granted  and  reasonable  time  to
consummate has elapsed, or the approvals are denied.


                                       8
<PAGE>

      IN WITNESS  WHEREOF,  each of the parties hereto,  pursuant to resolutions
adopted by its Board of Directors,  has caused this Stock Option Agreement to be
executed by its duly authorized officer,  all as of the day and year first above
written.

                                 VALLEY NATIONAL BANCORP

                 By: /s/ Gerald H. Lipkin
                    --------------------------------------------
                      Gerald H. Lipkin, Chairman, President
                          Chief Executive Officer

                                 MERCHANTS NEW YORK BANCORP, INC.

                 By: /s/ James G. Lawrence
                    --------------------------------------------
                      James G. Lawrence, President and
                          Chief Executive Officer