The colonies' first bank of issue opened in Gloucester in 1682. New Jersey's first chartered bank, the Newark Banking and Insurance Co., was the first of many banks to open in that city. By the mid-l800s, Newark was indisputably the financial center of the state. For the most part, commercial banking in New Jersey is overshadowed by the great financial centers of New York City and Philadelphia.
In 2002, there were 152 insured banks having their principal office in New Jersey. Deposits of these banks exceeded $132 billion. Fifty-nine of these banks were state-chartered.
Regulation of all state chartered banks, savings banks, savings and loan associations and limited purpose trust companies is the responsibility of the Department of Banking and Insurance. National banks are regulated by the Office of Comptroller of the Currency. The principal regulator of federally chartered savings and loan associations is the Office of Thrift Supervision.
During 2001/02, the Federal Reserve lowered interest rates considerably, causing fluctuations in net interest margins (NIMs) (the difference between the lower rates offered to savers and the higher rates charged on loans). Long-term interest rates neared historic lows by the end of 2002, and short-term interest rates stabilized, leading to a decline in banks' asset yields greater than the decline in funding costs. A large number of New Jersey's banks are residential lenders, and the widespread use of long-term mortgages in 2002 resulted in higher concentrations of long-term assets in New Jersey—twice that reported by other banks elsewhere in the nation.
As of September 2002, 40% of the state's insured banks held high concentrations of higher-risk loans. Almost 50% of these institutions were chartered during the 1990s expansion, and until the early 2000s, had not experienced an economic slowdown. Loan delinquency rates remained low in 2002.