Established in 1839, the Bank is a New Jersey-chartered capital stock savings
bank currently operating 87 full-service branch offices in the New Jersey counties
of Hudson, Bergen, Essex, Mercer, Hunterdon, Middlesex, Monmouth, Morris, Ocean,
Passaic, Somerset, Union and Warren, as well as in Bucks, Lehigh and Northampton
counties in Pennsylvania. As a community- and customer-oriented institution,
the Bank emphasizes personal service and customer convenience in serving the
financial needs of the individuals, families and businesses residing in its
primary market areas. The Bank attracts deposits from the general public and
businesses primarily in the areas surrounding its banking offices and uses those
funds, together with funds generated from operations and borrowings, to originate
commercial real estate loans, commercial business loans, residential mortgage
loans, and consumer loans. The Bank also invests in mortgage-backed securities
and other permissible investments.
The Bank originates commercial real estate loans, commercial business loans,
fixed-rate and adjustable-rate mortgage loans collateralized by one- to four-family
residential real estate and other consumer loans, for borrowers generally located
within its primary market area.
Residential mortgage loans are primarily underwritten to standards that allow
the sale of the loans to the secondary markets, primarily to the Federal Home
Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”),
the Federal National Mortgage Association (“FNMA” or “Fannie
Mae”) and the Federal Home Loan Bank of New York ("FHLBNY").
To manage interest rate risk, the Bank generally sells fixed-rate residential
mortgages that it originates with terms greater than 15 years. The Bank commonly
retains biweekly payment fixed-rate residential mortgage loans with a maturity
of 30 years or less and a majority of the originated adjustable rate mortgages
for its portfolio.
The Bank originates commercial real estate loans that are secured by income-producing
properties such as multi-family apartment buildings, office buildings, and retail
and industrial properties. Generally, these loans have maturities of either
5 or 10 years. For loans greater than $5.0 million originated with maturities
in excess of 7 years, the Bank generally requires loan-level interest rate swaps.
The Bank has historically provided construction loans for both single family
and condominium projects intended for sale and commercial projects, including
residential for rent projects, that will be retained as investments by the borrower.
The Bank underwrites most construction loans for a term of three years or less.
The majority of these loans are underwritten on a floating rate basis. The Bank
recognizes that there is higher risk in construction lending than permanent
lending. As such, the Bank takes certain precautions to mitigate this risk,
including the retention of an outside engineering firm to perform plan and cost
reviews and to review all construction advances made against work in place and
a limitation on how and when loan proceeds are advanced. In most cases, for
the single family and condominium projects, the Bank limits its exposure against
houses or units that are not under contract. Similarly, commercial construction
loans usually have commitments for significant pre-leasing, or funds are held
back until the leases are finalized. Funding requirements and loan structure
for residential for-rent projects vary depending on whether such projects are
vertical or horizontal constructio
The Bank originates consumer loans that are secured, in most cases, by a borrower’s
assets. Home equity loans and home equity lines of credit that are secured by
a first or second mortgage lien on the borrower’s residence comprise the
largest category of the Bank’s consumer loan portfolio.
The Board of Directors annually approves the Investment Policy for the Bank
and the Company. The Chief Financial Officer and the Treasurer are authorized
by the Board to implement the Investment Policy and establish investment strategies.
Each of the Chief Executive Officer, Chief Financial Officer, Treasurer and
Assistant Treasurer is authorized to make investment decisions consistent with
the Investment Policy. Investment transactions for the Bank are reported to
the Board of Directors of the Bank on a monthly basis.
The Investment Policy is designed to generate a favorable rate of return, consistent
with established guidelines for liquidity, safety, duration and diversification,
and to complement the lending activities of the Bank. Investment decisions are
made in accordance with the policy and are based on credit quality, interest
rate risk, balance sheet composition, market expectations, liquidity, income
and collateral needs.
The Investment Policy does not currently permit the purchase of any securities
that are below investment grade.
The investment strategy is to maximize the return on the investment portfolio
consistent with the Investment Policy. The investment strategy considers the
Bank’s and the Company’s interest rate risk position as well as
liquidity, loan demand and other factors. Acceptable investment securities include
U.S. Treasury and Agency obligations, collateralized mortgage obligations (“CMOs”),
corporate debt obligations, municipal bonds, mortgage-backed securities, commercial
paper, mutual funds, bankers’ acceptances and Federal funds. Securities
purchased for the investment portfolio require a minimum credit rating of “A”
by Moody’s or Standard & Poor’s at the time of purchase.
Securities in the investment portfolio are classified as held to maturity, available
for sale or held for trading. Securities that are classified as held to maturity
are securities that the Bank or the Company has the intent and ability to hold
until their contractual maturity date and are reported at cost. Securities that
are classified as available for sale are reported at fair value. Available for
sale securities include U.S. Treasury and Agency obligations, U.S. Agency and
privately-issued CMOs, corporate debt obligations and equities. Sales of securities
may occur from time to time in response to changes in market rates and liquidity
needs and to facilitate balance sheet reallocation to effectively manage interest
rate risk. At the present time, there are no securities that are classified
as held for trading.
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