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Study: 35% of NJ banks are takeover bait


The CBD was once filled with banks

Study: 35% of NJ banks are takeover bait

APRIL 6, 2014    LAST UPDATED: SUNDAY, APRIL 6, 2014, 1:21 AM

* More than three dozen in New Jersey may be too weak to make it on their own

More than 1,400 U.S. community banks, including more than three dozen in New Jersey, may be too weak to make it on their own and are ripe, or near ripe, to be acquired by stronger institutions, a study says.

Despite an improving economy, at least one-fifth of the more than 6,700 U.S. banks with less than $10 billion in assets are candidates to be sold, mainly because of inadequate capital levels and poor earnings potential, says the study, called “Bleeders and Leaders: Redefining the 2014 U.S. M&A Banking Market,” released Thursday by New York City-based Invictus Consulting Group LLC.

The 10 states with the highest percentage of banks that fall into the consulting firm’s “must sell” or “should sell” categories are Vermont, Connecticut, Massachusetts, New Hampshire, New Jersey, Florida, Washington, Michigan, Colorado and South Carolina.

38 banks

In New Jersey, 38 of 107 banks with less than $10 billion in assets fall into one or the other of those “must sell” or “should sell” groups, with 25 labeled “must sell” and 13 as “should sell.”

“Must sell” means the bank has “low capital levels and poor earnings, plus limited strategic options,” Invictus said. The “should sell” banks have “poor earnings, but better capital adequacy.”

The report, which is intended mainly for bankers, does not identify individual banks.

Invictus CEO Kamal Mustafa, one of the authors of the study, said Thursday in a phone interview that Invictus performed stress tests on the banks, similar to those regulators require of the country’s largest banks, to come up with the rankings, taking into account individual bank’s capital levels and such factors as whether they have a lot of the riskier types of loans on their books, such as construction loans and home equity lines of credit.

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