DESPITE CRANFORD LENDER’S FAILURE, N.J.-BASED BANKS STILL STRONG, OBSERVERS SAY
By Beth Fitzgerald/NJBIZ
October 17, 2011
The failure Friday of the two-branch First State Bank, in Cranford, and its takeover by Northfield Bank was the 79th nationwide for the Federal Deposit Insurance Corp., but the first this year for New Jersey.
The $201.2 million deposit First State Bank was state chartered. Marshall McKnight, spokesman for the state Department of Banking and Insurance, said “the state-chartered financial institutions that this department regulates are largely well capitalized and operating normally. The department continues to closely monitor our state-chartered financial institutions for safety and soundness.”
John E. McWeeney Jr., CEO of the New Jersey Bankers Association, echoed that sentiment. “By and large, the New Jersey banks are in a strong position, and have weathered the recession and the financial crisis quite well, compared to other regions around the country” like Florida, Nevada and California.
“Our banks are well capitalized,” McWeeney said, citing recent figures from the FDIC that put the total capital of the 117 banks with New Jersey headquarters at $16.6 billion, compared to $14.9 billion on Dec. 31, 2008. He said since 2008, the number of New Jersey-based banks has declined from 126 to 117, though “the capital levels have increased.”
He said a significant share of New Jersey bank deposits are held by large banks based outside the state, like Bank of America and Wells Fargo.
“What you are seeing is consolidation, and we anticipate there will be continued consolidation as we go forward,” McWeeney said. “If you go back to the ’80s, there were about 20,000 banks (nationwide), and now you have about 7,800. That trend will continue, and it concerns us because it’s really important to have community banks be part of the system. They play a vital role.”