Experts say N.J. banks faring better than average

Results of new FDIC data are ‘very heartening,’ insiders report.New Jersey banks, along with the rest of the nation, hit a rough patch in the second quarter of 2009, according to the latest data from the Federal Deposit Insurance Corp. But some results appeared to moderate, compared to the first quarter, said local experts, and banks in this state seem to be doing better than their national competitors.

The number of New Jersey banks fell to 124 at the end of June, from 126 according to the FDIC’s quarterly state profile report, without specifying if the drop was due to consolidation or failure. But the remaining institutions added a total of $2 billion in assets during the period, moving from $169.6 billion to $171.6 billion, according to the FDIC.

At the same time, more loans went bad, as past-due and nonperforming loans rose from 2.28 percent of all loans to 2.31 percent. Similarly, New Jersey banks’ Tier 1 leverage edged down from 9.4 in the first quarter to 9.2 in the second quarter, but the number was still well above the minimum 3.0 to 4.0 ratio established by the board of governors of the Federal Reserve System.

Tier 1 leverage is the ratio of equity and other capital to total assets, and is used by banking regulators to evaluate banks’ financial condition.

Despite some lingering effects of the economic meltdown, New Jersey banks “appear to be more profitable than the national average,” said Peter J. Ostrowski, a former analyst at the Federal Reserve Bank of Boston who is now a managing director at Ostrowski & Co. Inc., a Cranford-based bank consulting firm.

The uptick in bad bank loans is likely due to better analysis of existing loans “as the dust settles,” rather than a noteworthy increase in default activity, he noted.

“The Tier 1 ratios indicate that New Jersey banks have a good foundation,” he said. “They’re well above the minimums, and are also higher than the 6.0 level regarded as a ‘well capitalized’ institution.”

The numbers are “very heartening,” added Joel Naroff, president and chief economist of Naroff Economic Advisors Inc., in Holland, Pa.

“Bankers in New Jersey didn’t do the crazy things that some institutions did, so they’re doing better here,” he said. “We may see more bank consolidations as institutions with available capital buy up weaker ones, but I don’t think there’s a big threat of a spate of failures ahead in New Jersey.”

E-mail Martin C. Daks at [email protected]