New Jersey has first bank failure in two years
10/17/2011
First State Bank, Cranford, New Jersey, located south of Newark, closed on Friday,
October 14, and was the first bank to be closed by New Jersey state regulators in two
years. The institution had $204.4 million in assets at June 30 and was rated E-
(“Very Weak”) by Weiss at the time of failure. It was first identified as “Weak” in March
2006. It reported a loss of more than $948,000 through the six months ending June 30.
First State had below-FDIC-mandated Tier 1 (5%) and risk-based capital (6%) ratios of 0.96%
and 2.95%, respectively. Nonperforming loans represented almost 10% of its loan portfolio.
Northfield Bank, located in Staten Island, with assets of $2.3 billion and a Weiss
Financial Strength Rating of B- (“Good”), assumed the deposits of First State Bank.
Northfield has very strong capital with a Tier 1 ratio of 13.57% and risk-based capital of
27.51%, both well above industry averages of 10.65% and 19.17%, respectively. However,
the bank has nonperforming loans to total loans of 6.43%, which is almost double the
industry standard of 3.29%.
Profitability remains strong with $9.1 million in net income through June 30 and
a ROA of 0.80%.