First N.J. bank fails, becomes 32nd closure in U.S. in '09 | Economy | -- Your State. Your News.

Jan 30th
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First N.J. bank fails, becomes 32nd closure in U.S. in '09


bankv_opt_copyThe current recession has claimed its first casualty among New Jersey banks, as regulators shuttered a struggling Ridgewood institution.

But the May 1 action by the state Department of Banking and Insurance contained good news for customers of the failed Citizens Community Bank. Its the state-chartered institution's sole branch has been absorbed by North Jersey Community Bank, based in Englewood Cliffs.

All deposits at CCB will be safe, even if they exceed the maximum $250,000 federal protection limit, according to David Barr, a spokesman for the Federal Deposit Insurance Corp., appointed receiver by the state.

Former CCB customers are now able to use their original office and the other branches of North Jersey Community Bank, based in Englewood Cliffs.

As of Dec. 31, 2008, Citizens Community Bank had total assets of approximately $45.1 million and total deposits of $43.7 million, according to the FDIC. NJCB paid a premium of 0.67 percent to acquire the deposits.

In addition to acquiring the failed bank's deposits, North Jersey Community Bank agreed to purchase approximately $11.5 million in assets, according to the FDIC, which will retain any remaining assets for later disposition.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $18.1 million. North Jersey Community Bank's acquisition of the deposits of Citizens Community Bank was the “least costly” resolution for the fund, according to regulators.

Coupled with Friday's other seizures, Silverton Bank in Atlanta and American West Bank in Layton, Utah, the action means 32 banks have failed so far this year, compared to 25 in 2008.

Most have occurred in the West and the Southeast, areas where housing and construction bubbles led to increasingly risky investment practices. Georgia leads with six failures, but Silverton was unusual. Known until last year as Banker's Bank, it did not take deposits from the general public but served other financial institutions.

The last FDIC-insured bank to fail in New Jersey was Dollar Savings Bank of Newark, which went under in February 2004.

But state and federal regulators had their eyes on Citizens Community Bank for months, according to a statement issued by the banking department. Since September, the closely held company had been operating under a cease-and-desist order issued by the department and the FDIC for inadequate management oversight, violations of the federal Bank Secrecy Act and other problems, according to the state.

Steven Goldman, state banking and insurance commissioner, called CCB's failure an “isolated case” among New Jersey institutions. The bank never reported a profitable year and has been hurt by commercial and residential loans, according to analysts.

“They have suffered from deficient management and poor asset quality,” Goldman said in a statement. “The Department repeatedly demanded the bank’s management take corrective action, but its failure to adequately address these problems made today’s action necessary to protect consumers.”


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