Exclusive: Liberty Bank of New Jersey files for charter

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In an effort to fill a banking void in the Garden State, a group has joined together to launch Liberty Bank of New Jersey.

The founders announced March 11 that they filed with the Federal Deposit Insurance Corp. and the New Jersey Department of Banking and Insurance for approval to open a de novo bank, which is a newly chartered bank or branch of an existing bank.

Pending regulatory approval, Liberty Bank of New Jersey plans to launch its first branch in Verona. It will establish its corporate headquarters in Short Hills. The bank hopes to be open for operation in the fourth quarter of this year.

Richard Spengler will lead Liberty Bank of New Jersey. The 40-year New Jersey banking veteran most recently served as senior executive vice president and chief lending officer of Investors Bank. There, where he oversaw significant growth and helped the transition process when Citizens Bank acquired Investors. Key organizers of the venture include Keith Banks, Ryan Peene and Thomas Scrivo.

The Liberty Bank of New Jersey stakeholders describe the venture as crucial given the declining number of community banks. They said that in 2003 there were over 130 banks in the state, down to just 51 headquartered across the state now.

“The establishment of Liberty Bank of New Jersey is happening at a critical time in the banking industry,” said Spengler, who will serve as president and CEO of Liberty Bank of New Jersey, in a March 11 news release. “There has been significant consolidation across the industry, and we are optimistic that the bank will deliver much-needed banking services for local businesses to flourish right here in the Garden State.”

A year in the making

Spengler stressed that access to capital has been choked.

“We think it is right time to go back to the basics and serve the banking needs of our communities,” said Spengler. “The State of New Jersey needs this.”

NJBIZ caught up with Spengler to discuss the venture further.

Asked about the genesis of this new bank, Spengler reflected on his career, which began at a small savings bank in Perth Amboy before his tenure at Investors Bank and lasted two decades until the merger with Citizens. Spengler noted that after helping with the integration, he was spending some down time in Florida playing pickleball and golf when his phone started buzzing from former colleagues and others about a new potential venture. He also recognized the void in this sector and noticed many people looking for banking solutions.

Spengler said he and others have been discussing such a move but the timing was not right coming out of the pandemic. As the interest rates have stabilized, the stars have aligned for the team to launch the effort.

“They had kind of started on the project – were looking at some preliminary stuff,” said Spengler. “And they came to me and said – would you join us and become president and CEO?”

That was just over a year ago. “Everything aligned,” said Spengler. “And I was impressed with this group. I’m looking at the demand that’s coming in. And I’m looking at the way that small businesses are treated here in New Jersey by the existing banks.”

Filling a need

He pointed at that recent downward trend in the number of banks serving New Jersey – despite the population being up some 1 million people over the same period.

“It’s not like the state is shrinking – but the number of banks serving everyone is,” he stressed.

It’s not like the state is shrinking – but the number of banks serving everyone is.
– Richard Spengler, Liberty Bank of New Jersey, president and CEO

So and his fellow founders saw a need. “And the whole board does. The board are all very active businesspeople in New Jersey in the community,” he explained. “Whether it’s lawyers, CPAs, whoever they may be – they all see it. We all hear the horror stories about how either they’re being treated, or their clients are being treated. We’re looking at that saying – the state can’t be down 60% of its banks. It’s not healthy. It’s not a good thing.”

Spengler also described the group’s approach. “We get to roll out today’s technology,” he explained. “We’re not subject to a 20-year-old core system operating the bank – that it’s too expensive and too painful to try and convert 100,000 customers off of. A lot of other banks are kind of married to an older technology and an older core – and they’re trying to make it work and to modernize it as best they can, piecemeal. But we get to buy a brand-new system today and not convert and hurt any customers by instituting it. That’s a great thing. We get today’s web-based technology.”

Starting fresh

And the other big point he noted was on the financial side. “The last financial crisis was really caused by the rate shock of 5% – assets on the books,” said Spengler, pointing to the difference in rates pre-, during- and post-COVID.

“They made great loans five years ago, but the problem is the rates were 2% and 3% – and now money markets are 4% and 4.5%. So, they’re bleeding money right now – and that’s a problem. That’s what caused some of the problems, some of the crisis in the banks a year-and-a-half ago, was that they had investments that were at very low interest rates. And when their cost of funds went up, they became upside down.”

Spengler said Liberty Bank of New Jersey does not have those legacy assets. “We don’t have any vacant office buildings; we don’t have any apartment building loans that were great loans, but they were written at a 3.25% interest rate and their 150 basis points under market today. We don’t have any 30-year fixed residential mortgages with a 2% interest rate. And you know if we come out today and we start lending money, our first loans are going to have rates of 5% and 6% on them. We don’t have all that 2% and 3% paper on our books.”

What’s next?

According to Spengler, a de novo has not started in New Jersey in some 17 years. “There’s a more stringent first three-year-regulation on it. You get the term of de novo with the FDIC – and they just keep a closer watch on you because you’re in your first three years,” said Spengler. “We’re going through the approval process now. We started it in November. They asked us for a draft application, which was a newer process for the FDIC. It hasn’t been around long, but they wanted us to go that route. So, we did. And we went back-and-forth with them. We responded to questions and concerns that they had and then we finalized and gave them the last parts of the application last month.

“So, we’re just waiting now for the FDIC approval,” he continued. “Then we’ll do an additional capital raise. We have commitments for another $15 million in capital – and we probably want to raise about another $20 million on top of that. That will happen in late spring. And we’ve targeted an open in the fourth quarter – late fall.”