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Investors Bancorp, Inc. (ISBC-NASDAQ) |
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September 11, 2009 Issue |
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The Most Powerful Name In Corporate News and Information |
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CURRENT ISSUE | COVER ARCHIVES | INDEX | CONTACT | FINANCIALS | SERVICES | HOME PAGE |
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The Recent Banking Crisis Has Created Extraordinary Opportunity For A Well Capitalized Bank With Marginal Credit Exposure Like Investors Bancorp |
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Investors Bancorp, Inc. is the holding company for Investors Savings Bank, which operates from its corporate headquarters in Short Hills, New Jersey.
Investors Savings Bank has been serving New Jersey residents since 1926. With over $8 billion in assets and a network of 59 branches in ten Garden State counties, the Bank delivers personalized and friendly services and products tailored to the needs of its customers. The range of products includes mortgages, home equity loans and lines of credit, CDs, and a variety of checking and savings accounts.
Serving New Jersey’s business community, the Bank provides commercial real estate loans, lines of credit and structured financing as well as sweep accounts and checking, deposit and escrow services. Investors’ commercial banking services are offered to professional services firms, municipalities, small and middle market companies, commercial and industrial firms and other businesses. Investors Savings Bank is a member of the FDIC and an Equal Housing Lender.
For more information about
Investors Savings Bank, contact the Bank at 1.800.252.8119 or visit
www.isbnj.com.
Kevin Cummings was appointed
President and Chief Executive Officer of Investors Savings Bank effective
January 1, 2008 and was also appointed to serve on the Board of Directors of
Investors Savings Bank at that time. He previously served as Executive Vice
President and Chief Operating Officer of Investors Savings Bank since July
2003. Prior to joining Investors Savings Bank, Mr. Cummings had a 26-year
career with the independent accounting firm of KPMG LLP, where he had been
partner for 14 years. Immediately prior to joining Investors Savings Bank,
he was an audit partner in KPMG’s Financial Services practice in their New
York City office and lead partner on a major commercial banking client. |
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Interview conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published – September 11, 2009
CEOCFO: Mr. Cummings, what was your vision when you took on the CEO position at Investors Bancorp, and how has it changed? Mr. Cummings: “I have spoken to people about that and in my former career I became a partner at KPMG in 1989, right before the thrift crisis. I became the CEO of Investors Bancorp on January 1st of 2008, right before our current crisis, which is probably much more severe than it was in the early 1990’s, because it is a global crisis. It affects not just the thrift industry but the stability of the global financial structure. Investors set out on a mission to create a full-service bank. In many respects, the crisis has created opportunities for a bank that is well capitalized with marginal credit exposure. When you look at our situation in January of 2008 it was a great opportunity to grow the bank because many national players were pulling back and there were some dislocations in the markets. As a result, we are seeing transactions and lending opportunities that we never would have seen if the larger players were still actively involved.”
CEOCFO: How is your geographic area faring today? Mr. Cummings: “The northeast has held up relatively well, but we are seeing the impact of the unemployment in the financial services industry in Manhattan. Our market area is going to feel some pain today and will continue to feel some dislocation and discomfort over the next twelve to eighteen months.”
CEOCFO: How would you describe Investors Bancorp? Mr. Cummings: “Investors Bancorp is an eighty-three year old bank, but it is a transformation story. I have been with the Bank for six years, most of the managers and the senior executive team have been with the bank less than five years. In 2005, we did an IPO; we raised over $500 million, which was one of the largest IPOs in the thrift industry. We sold 45% of the company, so we are still 55% controlled by the mutual parent, meaning we can’t be acquired. Therefore, we control our destiny and are well positioned to serve the middle market and the $5 to $15 million loan customer that the larger regional and national banks are not paying attention to.”
CEOCFO: How do you divide up between consumer and commercial and would you like the mix to change? Mr. Cummings: “That is a good question because in the history of the Bank our mix was 100% consumer, but back in 2003 we were 80% mortgage-backed securities and only 20% residential loans. We had no business banking and no commercial real estate, construction, or any other types of lending outside of residential lending. It was what we call a wholesale model. We looked at that model in 2003 and said we cannot continue. We wanted to change the culture of the organization and become a full-service community bank serving the needs of the small businesses, middle-market customers, and moving into commercial lines of business. Now doing that at a $200 million bank is easy, but doing it at a $5 billion bank was the task at hand. So we hired commercial lenders, and entered the commercial real estate and the commercial lending business in the middle of 2005. From 2005 to today (2009) we probably created almost a $1.8 billion commercial bank as we speak. Right now commercial assets represent approximately 20% of our assets.”
CEOCFO: Is that a good balance, or would you like to see more? Mr. Cummings: “When we talk about things today we talk about a ratio, and we have strategic goals in the two, three and five-year range. We probably want to be 70% residential and 30% commercial over the next two to five years.”
CEOCFO: Are you well on your way? Mr. Cummings: “Yes, and we are making significant progress--a lot of it has been accelerated because of the opportunities in the market place.”
CEOCFO: Would you tell us about your merger with American Bancorp of New Jersey, and how are you taking advantage of the opportunities? Mr. Cummings: “Actually I have to go back a year and talk about our first merger with Summit Federal Savings Bank. Summit was similar to American Bancorp with five branches; we acquired them in June of 2008. We picked up five great locations that really fit our footprint. The significance of that transaction was that it was a pooling of interest; we just merged the two mutual companies together and then merged the two banks, so there was no consideration paid. The American Bancorp transaction came to us in late 2008. The average branch size as we speak is over $100 million, but when we looked at the acquisition, it was over $90 million. They were contiguous to our franchise and fit like a glove. When you look at the American transaction, one needs to look at the impact on tangible book value. The amount of goodwill in the American transaction was less than $20 million. We have the Summit franchise, five branches for nothing and the American Bancorp transaction for less than $20 million of goodwill. In our view, those acquisitions were smart acquisitions that increased our market presence and expanded our deposit franchise but did not hurt our tangible book value.”
CEOCFO: How many branches do you have today? Mr. Cummings: “Today we have 59 branches. We just opened a de novo branch, and we have another pending branch acquisition from Banco Popular, plus two additional de novo branches before the end of the year. So we expect to be 65 branches by December 2009.”
CEOCFO: Why are your customers coming to you? Mr. Cummings: “I think we are a fresh story, a high energy story. We have a charitable foundation that sponsors and supports the communities that we serve. Our branches are very involved in the communities. We treat people with respect and we try to give them the “Ritz Carlton” treatment every time they walk in the door.”
CEOCFO: How do you maintain the level of service you would like when you have so many branches? Mr. Cummings: “In real estate, the most important thing is “location, location, location”. In banking and the service industry it is “people, people, people”. It is very important for us to hire the right people. Banking is a service business, leadership is service, and we are here to serve the communities and our customers. It is not a self-serving attitude; it is a selfless attitude. That starts at the top and I ask our branch managers, our executive management, all the way through: Are you a leader that serves or a self-serving leader? It all comes down to people and how you treat people, because if you treat your employees well, they will treat our customers well.”
CEOCFO: What is the financial picture like for Investors Bancorp today? Mr. Cummings: “We just released earnings; for us it is our fourth quarter. Our fiscal year ended on June 30th 2009. We had a strong quarter where there was a lot of momentum in earnings. We had the charge for the FDIC assessment of $3.6 million and we had a securities OTTI (Other Than Temporary Impairment) charge of $1.3 million. Excluding those non-core operating items, we had one of our strongest quarters with over $8 million of profitability. In addition, we are well positioned with a decreasing cost of funds, growth in our loan portfolio and our continued ability to get market share on both the consumer and the commercial side. There is a lot of momentum at Investors Bancorp at this time.”
CEOCFO: Are there products and services that you are not offering now that you would like to add? Mr. Cummings: “Yes, for example American Bancorp had an annuity business and we are evaluating a rollout of those products. We are also expanding our cash management services to better serve our business customers. Our view now is we are on this journey to become a community bank, moving from a hedge fund or a fixed income fund, first to a thrift and then to a full service community bank. I want our branch employees and our sales staff to really focus on serving their consumer and business customers in their local communities.”
CEOCFO: What do you say to your clients that are worried; how do you reassure them about Investors Bancorp and about the situation in general? Mr. Cummings: “We let it be known that we were not recipients of the TARP or government money. We are one of the best capitalized banks in the state of New Jersey. We have a 10% capital ratio and continue to expand our retail franchise. We are doing transactions and this financial crisis is an extraordinary opportunity for well capitalized banks. Investors Savings Bank has grown from $5.8 billion at the end of 2007, to in excess of $8 billion, which is almost 40% growth. Customers know through word-of-mouth that we are in the business of lending. In addition, we have been recommended to customers by other lenders who are on the sidelines due to their capital constraints.”
CEOCFO: What is ahead for you? Mr. Cummings: “We continue to execute on our plan day-to-day. We need to make sure we have the management structure in place to continue to grow. We have grown over 40% in the last 18 months. I look at it as where we are today and what we must do to grow to $10 - $12 billion then to the next level. We have a strong management team and the bench support to continue to grow and improve our profitability going forward.”
CEOCFO: Is the investment community paying attention? Mr. Cummings: “Yes, we are followed by a number of analysts, certainly all the thrift analysts. We trade at a mutual holding company valuation level because we are 55% owned by the mutual parent. People outside the investment community do not really understand the ownership structure. There are some MHC investors whose view is to just buy back your stock. The problem with just buying back your stock is at the end of a period of time you haven’t improved your franchise. We try to balance what our current investors want with building a franchise that can perform as a full-service bank and eventually as a 100% public company. We look at three ways of managing our capital; treasury stock repurchases, smart acquisitions that are not heavily diluted to tangible book value and organic growth. Over the last three years, we have used all of these tools to manage our capital successfully.”
CEOCFO: Why should potential investors pick Investors Bancorp out of the crowd? Mr. Cummings: “Investors Bancorp is a high-energy organization in one of the most lucrative markets in the country. We are sandwiched between New York and Philadelphia. New Jersey is one of the wealthiest states in the United States. We have a tremendous franchise and our potential is unlimited. Right now, we have the capital to grow to $12 billion, if we do the second step capital offering we can grow to $20 to $25 billion.
CEOCFO: In closing, what should people remember most when reading about Investors Bancorp?
Mr. Cummings:
“We are a values driven bank whose purpose is to serve our communities and
our customers. We are confident that by following our vision with a
steadfast focus on our core values, we will make Investors the bank of
choice in New Jersey.” |
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“We let it be known that we were not recipients of the TARP or government money. We are one of the best capitalized banks in the state of New Jersey. We have a 10% capital ratio and continue to expand our retail franchise. We are doing transactions and this financial crisis is an extraordinary opportunity for well capitalized banks. Investors Savings Bank has grown from $5.8 billion at the end of 2007, to in excess of $8 billion, which is almost 40% growth. Customers know through word-of-mouth that we are in the business of lending. In addition, we have been recommended to customers by other lenders who are on the sidelines due to their capital constraints.” - Kevin Cummings |
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