Regulators say failed NJ bank had ‘deficient management,’ poor lending policies

By AP
Tuesday, May 5, 2009

Closed NJ bank was cited for ‘unsafe’ practices

TRENTON, N.J. — A small bank in northern New Jersey has been shut down by state banking regulators, and an industry advocate says he cannot rule out future failures.

Citizens Community Bank was shuttered Friday night. Banking regulators had ordered the Bergen County bank to stop a range of “unsafe or unsound” business practices, saying it had violated several state and federal regulations.

Among other problems, the 4½-year-old bank had deficient management, an “unrealistic” budget plan and poor lending policies, officials say.

All of Citizens’ deposits were transferred to North Jersey Community Bank. Officials with the Federal Deposit Insurance Corp. are working out of Citizens’ former office in Ridgewood to sell off its assets. The office is now a branch of North Jersey Community.

Dennis Trimper, the federal official leading the liquidation, said the main reason for Citizens’ closure was its failing loan portfolio. Many customers, he noted, weren’t making their payments.

It was the first time since 1992 that a state-chartered bank had been shuttered, said Ed Rogan, a spokesman for the New Jersey Department of Banking and Insurance. He said the closure was “an isolated situation,” as banks in the state are generally healthy.

At least one industry advocate says future bank failures are always possible.

“When you’ve got a deep recession, that affects banks that otherwise would be fine,” said James Silkensen, co-chief of the New Jersey Bankers Association.

Silkensen said he was not aware of any banks that could soon be shuttered, but said closures can happen in good and bad economic times.

The banking industry has been taking a beating. Layoffs have swept the industry, and several once powerful firms have been toppled, in part, by risky investments that soured, such as mortgage-backed securities. More than 30 banks nationwide have been shuttered this year.

Meanwhile, New Jersey’s community banks largely avoided those risky ventures, making simple, traditional loans to their customers, state and private sector officials have said.

At a state Assembly hearing in February, bankers association co-chief John McWeeney said some of New Jersey’s community banks faced a grim future of loan defaults and thinned profits, despite performing well during the economic crisis.

Closing Citizens did not mean officials came to padlock the bank. Trimper and eight state and federal officials walked into its only branch, on East Ridgewood Avenue, around 4:15 p.m. Friday to say the bank had lost its charter.

Trimper said the bank was given no advance warning of the closure, which is normal procedure. However, state and federal officials had been openly monitoring the bank since September, when they issued Citizens a 39-page “cease and desist” order for a host of allegedly bad banking practices.

“They have this suspicion, all right, and they see us all walking in around 4:15 on Friday, they can draw their conclusions,” Trimper said.

YOUR VIEW POINT
NAME : (REQUIRED)
MAIL : (REQUIRED)
will not be displayed
WEBSITE : (OPTIONAL)
YOUR
COMMENT :