Archive for May, 2009

The Responsibility of Lending….

Monday, May 18th, 2009

The news these days is filled with concern that banks may not be lending enough, as if it is the banks responsibility to seek out and discover new lending opportunities whether they are needed or not. While it is true that lending plays a very important part of our economic fabric, prudent lending has become passé to some…

 In fact, some of our customers at North Jersey Community Bank would tell you that we have consistently been a conservative, prudent, but understanding lender, and in many cases counseled them to borrow less, by demonstrating that their ability to repay should determine the level of indebtedness, which may have been one of the reasons for their survival in these financially strained times. Some learned that “the best transaction may have been, the one they didn’t do.” Others appreciated the fact that they could rely on us even through these times, as it is better to have a smaller line of credit that can be counted on, as opposed to having a much bigger line of credit which would ultimately and indiscriminately, be pulled because you should not have received it in the first place, or discontinue funding a project because the bank needs to shrink its balance sheet without regard for you the customer,  as some of our  competitors have done.

Equally as compelling is the number of potential customers who chose to go to other banks and financial institutions because the lending was cheaper, looser, without advise, and truly created “a be careful for what you wish for” scenario that has jeopardized their businesses, and may ultimately be the reason for their demise. It is these same individuals who now return to seek our counsel on how to unwind the onerous debt position that they have created.

Both of these groups now understand that part of their banker’s job is to be the “trusted advisor” that we so proudly advertise. We look not just to complete banking transactions, but to create long lasting customer relationships, and as in any good relationship, that sometimes means saying no…

This is a lesson that I believe everyone needs to understand… We have just come though a time when “no” was not an accepted alternative.. People bought houses they couldn’t afford, bought TV’s on credit, went on vacation on their credit cards, dined at restaurants too expensive because they could charge it, and for the most part, spent more than they could ever afford.

Banks, borrowers, and the economy in general, will benefit much more with a sustainable amount of debt supplied to the economy.  It is the responsibility of the banks, all banks, to understand the role that they must play in order to support the economy, and businesses or consumers should seek out banks that look to share, and have a vested interest, in their growth and success…

Both will be much better off…

We live in a Parallel Universe…

Monday, May 11th, 2009

The Stress Tests are over, and now it is time to get back to business…

For the “Too Big to Fail”, the world has been a place where excessive risk taking mistakes are rewarded, or at least not punished, where regulators only suggest, and where the rules are changed so no one gets hurt.

As we move past the recently released Stress Tests, let’s understand that although the world has sighed a breath of relief that the system is not going to fail, we must insist that this uncompetitive, government supported network of “Too Big to Fail” institutions must somehow be made accountable for their actions, pay a price for the intervention, and be forced to conform to a system where the rules apply to all.

There are many changes that need to occur in this post – Stress Test world… Certainly a tiered FDIC fee structure, and a tiered capital structure based on the risk taking of an institution, a closer look at the separation between banks and commercial entities, more responsibility for all phases of mortgage products, and the ability for the FDIC to regulate all institutions regardless of size.

It is also important to understand that it is the Community Banks, who operate every day by working within the framework of the regulators that regulate them, have understood that prudent risk taking is rewarded, and excessive risk taking is punished, have not been treated fairly in these strained times. 

Community Banks have not needed a dollar of taxpayer money, have maintained proper capital ratios, and have continued to lend throughout this crises. In fact, they are the only group in the banking sector that has increased lending, and have been there to protect the “little guy” on Main Street.

Any relief given to Community Banks will certainly find its way to the communities in which they serve, and not into the excessive pay packages that have been all too common at the “Too Big to Fail.”

There are a number of regulatory and accounting improvements that could be made to support the Community Banking system. These include, Tiered Regulation, Gov’t Assisted Insurance Program for classified assets, SBA enhancements, and differentiating the Community Banks when regulators perform their examinations.

Let’s not allow those with the enormous lobbying efforts to dictate the framework of this new environment…

We need to be heard…

So this is how it works….

Monday, May 4th, 2009

On Friday, May 1st at 5PM, North Jersey Community Bank acquired the deposits and certain assets of Citizens Community Bank in Ridgewood, New Jersey.  This was the first New Jersey bank failure since the current economic crises started, and demonstrated how the process of winding down a failed institution really works.

First, let me say that working with the FDIC exceeded any expectation that I could ever have had in working with a government entity. The professionalism, focus, preparedness, and team spirit was a site to be seen…

Citizens Community Bank failed after five years of operation due to lax management, improper underwriting of loans, and an inability to integrate the bank into the market in which it was to serve.

Once the destruction of capital reached a critical level, The State Department of Banking, along with the FDIC began the process of putting the bank into receivership. A bid process was established, qualifications were reviewed, bidders were invited to the table, and a successful successor institution was selected. In this particular case, the successor institution was North Jersey Community Bank.

As a strong, stable and growing bank, NJCB was able to capitalize on the unfortunate failure of a neighboring institution, and will bring the same simple plan of taking in deposits, and making loans to people we know, in this new market area, with the same exemplary customer service that we are renowned for.

One bank fails, another gets stronger… The depositors are all made whole, the community gets a better, stronger bank for its businesses and residents, and the FDIC oversees a process that makes it all work, seamlessly, without interruption, and at no cost to the taxpayer. This is how it is suppose to work…

However, this is very much in contrast with what we are experiencing every day recently with the “Too big to fail” institutions that are so unwieldy that the FDIC, or any other government entity for that matter are unable to manage the failure of.

Let’s make sure that we do what is necessary to return our financial system to one where the regulators can regulate, the shareholders bear the risk, as well as the rewards, and failure is not something that requires the intervention of the will of the American people, but rather an accepted outcome for poor decisions and excessive risk taking., Let’s return to a capitalist system that encourages, supports, and allows for the entrepreneurial spirit that has made this country great…