2009… In a year that most would use the words challenging, difficult, disastrous, or turmoil to describe, North Jersey Community Bank had the vision to see through the fog of the economic and financial collapse to record its finest year.

The highlights of our accomplishments are as follows:

Growth of our total Assets of $137 million to $515 million

Growth of our total loans of $93 million to $393 million

Growth of our total deposits of $115 million to $429 million

The acquisition of Citizen’s Community Bank in Ridgewood through the FDIC

The opening of our first Hudson County branch in West New York

The re-location of our Corporate Headquarters

Raising of  $10.5 million dollars in capital

 This was accomplished while earning over $2.2 million in profit or almost $1.00 per share. 

 Unlike many other struggling community banks, NJCB has been able to realize these results without the use of any TARP funds, or any other government assistance. Our model has been a simple one; we take in deposits, and make sound loans to qualified borrowers in the communities we serve. We have certainly taken advantage of the market place that is littered with the national banks that while being “Too Big to Fail” are also “Too Big to Serve” and have left many long term relationship customers twisting in the wind.  Our local community bank competitors have likewise frozen up in their ability to make any decisions, and have equally hurt their loyal customer base. These factors combined with our award winning customer service and technological prowess have created the best performing and fastest growing bank in the State.

 North Jersey Community Bank recently celebrated its Five Year Anniversary, and as we advance into 2010 look to take advantage of additional market opportunities.  Our network of customers spans the entire Northern part of NJ from Route 195 to the New York State Border, and beyond. We have developed some of the most robust product offerings in the industry, and have been recognized in the press and media for our proactive, innovative business plan.

 This has translated into value creation for our shareholders. Our Book Value per common share has increased from inception, an unprecedented 40 % to over $13.20 per share common. We appreciate all your support and look forward to continuing to serve you in 2010.

 Sincerely,

 Frank Sorrentino III

Chairman /CEO

Before we can seek to fix all the ills of the financial crises, we should first look to a simple task; define “what is a bank?”

The recent announcements and discussion about Glass/Steagall  by President Obama, and Paul Volker although soothing to the populist movement , only serve to confuse an issue that is poorly understand by the vast majority of people.  That populist rage has been further demonstrated recently by movements such as Arianna Huffington’s “Move Your Money” campaign.

There are many types of banks and financial institutions in the United States. The vast majority of them in number are the community oriented commercial banks and thrifts. They number over 5,000 strong and have never been the subject of any inquiry due to excessive compensation, risky trading activity, securitization issues, sub-prime loan funding or investing, or any of the issues we see in the newspapers each day. These banks should be placed in class all to themselves, and should not have to fight or pay for the sins of the other much riskier institutions.  This “A” class of banks should live in a world that encourages the lending required in the communities they serve. As for the rest, some difficult, expensive and bold decisions need to be made, namely:

• Definitive segregation of banks that use Federal Guarantees such as FDIC and borrowing capability at the Federal Reserve and those that do not
• The breakup or dissolution of any company determined to be Too Big to Fail, based not just on size, rather complexity and interconnectedness.
• An additional “FDIC” type of insurance fund for banks based on total assets that are not in the “A” Class and have riskier balance sheets
• An increasing capital structure for banks as they increase in size, and complexity
• A regulatory environment that creates tougher realistic stress testing
• The ability to wind down or place into receivership any company or bank
• An onerous tax to be levied on any company or bank that decides to undo or “giveback” any government assistance that was beneficial during the financial crises, which created a windfall profit

So, let’s first work to segregate what are called banks, and start to work on a regulatory environment which makes sense for each of these different classes. Only then can we move from the morass we are in, to an environment that encourages healthy growth in our economy and without people asking where to purchase a pitchfork.

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…