The first bank closing of the year in New Jersey occurred today with the failure of Fort Lee Federal Savings Bank, Fort Lee, New Jersey. The total number of bank failures in New Jersey has been very small since the beginning of the financial crisis in 2008. New Jersey has accounted for only 5 of the 431 bank failures that have occurred nationwide since 2008.
Fort Lee Federal Savings Bank was closed by the Office of the Comptroller of the Currency which named the FDIC as receiver. The FDIC sold the failed bank to Alma Bank, Astoria, New York, which will assume all deposits of failed Fort Lee Federal Savings.
Customers of failed Fort Lee Federal will have full access to their money over the weekend through checking accounts, ATM and debit cards. The single branch of Fort Lee Federal will reopen on Saturday as a branch of Alma Bank and all depositors will automatically become depositors of Alma Bank.
Fort Lee Federal Savings was a small bank with assets of only $51.9 million at December 31, 2011. The Bank, which was established on December 15, 2000, has been under regulatory scrutiny since the middle of 2010 when the Office of Thrift Supervision issued a Cease and Desist order against Fort Lee Federal Savings. The Bank was ordered to cease and desist “unsafe or unsound banking practices.” Numerous operational and financial deficiencies were cited by regulators including operating with inadequate capital, poor underwriting procedures, lack of effective risk management and inadequate compliance programs.
Fort Lee Federal Savings borrowed $1.3 million under the TARP program in May 2009 which was never repaid.
At December 31, 2011, Fort Lee had total deposits of $50.7. Alma Bank agreed to pay the FDIC a premium of 1.85% to acquire all the deposits of Fort Lee Federal Savings but agreed to purchase only $15.7 million of the failed bank’s total assets of $51.9 million. The FDIC will retain the $36.2 million of assets that Alma Bank refused to buy and dispose of them at a later date.
The loss to the FDIC Deposit Insurance Fund for the failure of Fort Lee Federal Savings is $14.0 million or 27% of total assets. Fort Lee Federal becomes the nation’s 17th banking failure of the year and the first in the State of New Jersey.