The third quarter of 2009 continued to show great growth for our bank.  In the quarter, we continued to demonstrate the strength and stability of our bank with profits of $612 thousand, as compared to $480 thousand in the same period of 2008. Also impressive is the growth of our year to date profit of $1.486 million in 2009 from $805 thousand in 2008.  This was clearly the most profitable quarter in our existence, and comes in conjunction with growing our assets from $473 million to $491 million, our loans $343 million to $371 million, and our deposits $398 million to $415 million, quarter over quarter. Equally as important, this growth in profitability and size was accomplished while increasing our loan loss allowance.  While, expecting not to have to tap into loan loss reserves in any meaningful way, the Bank’s management and Board of Directors thought it was important and prudent to build our reserves in anticipation of a further worsening of the credit market. Additionally, and perhaps most importantly, we are very proud of recently achieving and exceeding the $500 Million in Assets milestone.

The continuing freeze up at the national bank level continues to present great opportunities for us.  We have been quite successful in winning business from our local community bank competitors that have “buried their head in the sand” in the hope of waiting out this economic crises. We understand that this is the new normal, and are searching out quality, profitable banking relationships.

Our Residential Mortgage Division is very busy and provides a new source of business development that has positively affected the bank. If you are in the market for a new mortgage or interested in refinancing your existing mortgage, please give us a call.

Our new Headquarter facility is nearing completion, and provides us with the ability to continue to expand, as well as the addition of new services such as a drive-thru and drive-up ATM. We will keep you updated on the progress and timing of this exciting move.

In keeping up with our motto of being “A Better Place To Be” we are working hard to help those who are less fortunate by sponsoring a food drive for the Center for Food Action. Please stop by one our branches for information or call us to see how you might be able to participate. It is times like this that we can truly see the quality of our employees as they volunteer to help in this time of need.

In closing, we are working hard to produce all of these extraordinary results, and we appreciate all the help that our shareholders have provided.

In the aftermath of what appears to be the biggest financial catastrophe of this century, it has become commonplace to call for more regulation, more capital, less diversity and less risk. The implications of these calls will have far reaching consequences that may not produce the results that were intended.

In trying to save the financial system, Regulators have forced the mergers and acquisitions of Too Big to Fail institutions which have actually created even larger, and more systemically important institutions.  Expect that membership in the Trillion-Dollar-Plus balance sheets to rise even further, even though there is a cap on national deposits at 10%.

Regulation meant to protect consumers may actually cause higher fees, less options, and the destruction of many smaller community banks that cannot function under the cost burden of all the additional regulation.

The call for additional capital for financial institutions which may be needed for riskier companies, would also serve to reduce lending, and cause the forced mergers of many smaller banks. This mass consolidation will withdraw lending from many businesses and communities that are not attractive to the national banks, and will stifle the entrepreneurial enterprises that need a banking relationship which cannot be described on a standard loan form.

So while the big get bigger, the forces at work are conspiring to stall the formation of new community banks, and make all community banks under $1 Billion in size uneconomical to operate… This is a very serious state of affairs. Ninety two percent of the 8200 banks in the United States are under $1 billion in assets… For small businesses on Main Street’s all across this country, this situation could be disastrous. 

Existing banks will need to absorb most of the products and services previously provided by the shadow banking system, and this may not occur in a smooth and stable process. It is important however to keep in perspective that we will never be able to regulate for every future problem that may arise. In some cases, the failure we are experiencing was not due to lack of regulation, as much as the lack of application of existing regulations…

There are a great number of community banks that have played by the rules, and provide a sorely needed service to our vast majority of businesses on Main Street. Let’s be careful in how we seek to rectify the problems mostly created by the non-bank banks, and not over-burden the banks that will be needed to restart our economy…

As we move through the mid-point of 2009, a time when many banks have lost their way, and most banks are reeling from mismanagement, NJCB continues set the example for the nation…

Our smart, stable and strong growth has continued to produce impressive results…

• Our Assets have grown $50 million dollars to $473 million dollars over the first quarter
• Our Deposits have grown $52 million dollars to $396 million dollars over the first quarter
• Our Loans have grown $21 million dollars to $343 million dollars over the first quarter

Understanding that our objective is always healthy and smart profit growth, NJCB has posted its most profitable quarter since our inception. Coming at time of continuing expansion, and after paying a significant one time FDIC assessment levied on all banks, we continue to not only preserve capital, with no non-performing loans, but we have consistently increased our book value per share…This distinction is significant and sets us apart from most of our competitors.

The second quarter saw some exciting developments, including the acquisition of Citizens Community Bank in Ridgewood, now our seventh branch, and the starting of Residential Mortgage Division.  The Ridgewood location has created a logical geographic expansion into a vibrant, affluent and business friendly neighborhood.  Our new Mortgage Division, which is also headquartered in Ridgewood and run by Thomas Cosentino, has already begun to generate new business, fee income, and broaden our relationship with our customers.

Internally we continue to expand our product set with new additions such as Positive Pay, International Currency Transactions, ACH origination, Lockbox, Secured Credit Cards, and many more… For more information on these or any of our products please stop in or call us.

While, we still see many challenges in this marketplace, we are continuing to find ways to convert these challenges into new opportunities for NJCB. We appreciate the support and business from our shareholders, customers, and friends, and all the help in continuing to make a NJCB “A Better Place to Be.”

President Obama has announced a comprehensive plan for the regulatory reform of our financial system, and has made use of the term “Rules of the Road” to quantify the depth and resolve of this plan. I applaud the President, and the Administration for taking this much needed step to address the serious state of our economic crises, and to address:

• The significant risk posed by the “Too big to Fail” Institutions, and the requirement that those firms are subject to a strong consolidated supervisor, and regulation.
• A tiered capital structure which will increase capital standards as the level of risk increases.
• Strengthening consumer protection regulation and oversight.
• Providing the government with the proper tools to manage a financial failure, and the ability to resolve any size institution.
• Creating cooperation between and with our international neighbors on the subject of regulation, oversight and capital standards.

“Rules of the Road” should provide an understandable framework with which to operate, and create the ability for all institutions to pilot and navigate through the waters of our capitalist system. 

“Rules of the Road” do not, and should not dictate who is in the pilot house, what direction the captain should take, or guarantee the safe arrival of any vessel to any port.

The plan as discussed by the President lays out the proper groundwork for financial reform. The details however, require careful consideration, as they will be the most dramatic changes in our system since the Great Depression.

The expansion of the powers at the Federal Reserve requires another look, in order to maintain the independence of the Fed. Resolution authority has been proven to be effective at the FDIC, and so it would seem logical that this should also extend to systemic organizations. It would also seem to me, that this should be a temporary issue as we should be working to prevent any institution from ever becoming systemically important.

The creation of accountability at all levels of the financial system from banking to mortgages to securitization seems to be rooted in the right direction. It was certainly the lack of accountability that created the mess we are currently enduring.

The creation of a new Consumer Protection Regulator which although sounds like a good idea on the surface, could in fact be counter-intuitive and possesses the greatest challenge to sticking to just  ”Rules of the Road.” This portion of the reform package would un-necessarily burden banks, directly dictate what products can, and must be sold, threaten state regulators, create onerous and complex regulations, and stifle any innovation in the financial space.

We should be looking to be “evolutionary” in our quest for regulatory reform and not “revolutionary” as we hold the ability at this juncture to either overburden all institutions because of the mischief of a few, or support the vast majority of financial companies and banks that played by the rules, created jobs, and continue to provide the financing for Main Street America.

Since the founding of this country, the banking system has had its roots firmly planted in the individual States. While the dual banking system actually started with the National Bank Act of 1864, the Federal Banking system as we know it today had its start in the Great Depression, when the FDIC was founded. For over seventy years, we have lived in a dual banking system that has allowed for innovation and competition not only between the banks themselves, but also between the regulators, whether they are State or Federal regulators.

One group of regulators watched over and regulated those institutions that wanted a national presence, and  another group of more nimble regulators, together with the FDIC,  gave smaller community banks a more streamlined regulatory environment, and one in which local conditions could influence policy, and guidance. This system has provided enormous benefits, from competition between the states, regulatory innovation, the allowance for new and alternative ways of thinking, and the determination of what works on a state by state basis.

Because of the recent calamity of events that was spawned by the “Too Big To Fail,” our current administration is proposing a single super regulator for all banks…  This direction is one that needs to be studied carefully, not rushed into, and examined for the flaws that it contains.

The Administration states that it does not look to undermine the dual banking system with a single federal regulator that would have two divisions; one for national charters and one for state charters. That is functionally not workable. What would be the value of maintaining a State Charter? If 80% of deposits are currently held with national charters, what voice would the remaining 20% deposit share of state chartered banks receive?

In the rush to deal with problems caused by the systemically important institutions we need to be careful to not create regulatory monopoly that will stifle any innovation, and could in fact cause a credit crunch. We should all remember that during the real estate decline of the 90’s, Office of Thrift Supervision regulators used their negative experience in New England to mold their regulatory imperatives as they crossed the country, and either hastened the demise of many banks in places where there was not a real estate issue, or created a drought of lending due to their overzealous oversight… We have also seen the value of a system of checks and balances recently with the trepidation by the FDIC to accept the Basel II standards. Had the Fed had its way, we would have allowed for the lowering of capital standards at just the time that the financial meltdown occurred, which would have only exacerbated our current situation.

The combination of the Office of the Comptroller of the Currency with the Office of Thrift Supervision by itself would not pose any significant issue in this modern day banking environment. The FDIC should remain as the Federal Regulator for State Chartered institutions, and a new council of regulators should be established to oversee and advise on any systemically important institutions.

The administration should bolster the ability of the OCC and the FDIC in conjunction with the individual State’s Department of Banking to be in the position to regulate, and administer the failure of “any” institution, and not seek to create the path by which the extinction of all Community Banking is certain.

We should also not underestimate the complexity of this issue…