NJ Banks are Open for Business in 2024, but Economic Outlook is Being Challenged by Fiscal Policy and Legislation RICK KRAEMER, EVP & CHIEF BANKING OFFICER, VALLEY BANK OVER THE PAST 12 MONTHS THERE HAS BEEN A DELUGE OF PRESS REGARDING THE HEALTH OF THE REGIONAL AND COMMUNITY BANKING INDUSTRY. THE REALITY IS THAT NEW JERSEY HAS AN EXTREMELY ROBUST AND HEALTHY COMMUNITY BANKING SECTOR. AT YEAR-END 2023, NEW JERSEY BASED BANKS CARRIED HIGHER REGULATORY CAPITAL LEVELS THAN THE INDUSTRY AND HAD LOSS RATIOS THAT WERE ALMOST HALF OF THE INDUSTRY; A TESTAMENT TO CONSERVATIVE UNDERWRITING AND STRONG COLLATERAL. THIS IS NOT A PRODUCT OF MERE LUCK; MUCH OF THE CONSERVATIVE NATURE OF NEW JERSEY BASED BANKS COMES AS A RESULT OF MANAGING THROUGH DECADES OF DIFFICULT BUSINESS ENVIRONMENTS SPURRED BY UNINTENDED CONSEQUENCES OF STATE FISCAL POLICIES. Take into consideration, over the course of the past 30+ years, business establishments in New Jersey have grown at a total rate of 36%, while a more business-friendly state like Florida has grown at over 137%. Tax rates are an obvious catalyst. New Jersey sits among the top five highest corporate tax rates (ranking the 47th and 46th highest state in terms of top marginal personal income tax rate and top marginal corporate tax rate, respectively). While higher taxation has been a primary policy tool to manage escalating budget deficits, it almost always comes at the expense of business formation and population trends. As a result, New Jersey ranked 34th in cumulative GDP growth from 2011–2021 and 47th in cumulative domestic migration over the same period. Having said that, New Jersey still ranks as the 10th largest GDP by state in the country, driven by diverse industries, an attractive geography, and generational businesses and wealth. 10 feature
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