Branching out

Investors Bank has accelerated its expansion to transform itself from its roots as a small community bank just a decade ago into a full-fledged commercial bank and a dominant regional player in the industry.

"We want to be the premier franchise in the New York-New Jersey metropolitan area. We're not there yet," said Kevin Cummings, president and CEO of Investors. "There are other local players that have been at it in this business a little bit longer than us. We're only in it since, basically, when we went public in 2005."

Since 2007, the bank, based in the Short Hills section of Millburn, has grown its assets from $6 billion to more than $10.7 billion in 2011, with aspirations of becoming a $20 billion force in the regional economy, lending to businesses and grabbing market share from the big national and regional institutions such as TD Bank and Bank of America, and in-state banks like Valley National Bank and The Provident Bank, Cummings said.

Management and the board hope to continue the bank's course of explosive growth, which has been split 60 percent organic, adding branches and pushing expansion of its business lines, and 40 percent through acquisitions of whole banks and branches.

Investors decides on branch locations by focusing on population, demographics, and the competition in neighborhoods and towns where the bank thinks there are opportunities to gain market share, he said.

"We're interested in expanding our franchise in Manhattan, Brooklyn and Queens. We interested in expanding in Hudson County and eventually Bergen County; then it's also important for us to fill in, in parts of Middlesex, and certain sections of Monmouth and Morris and Somerset counties," said Cummings, who will take over as chairman of the New Jersey Bankers Association later this year.

The 86-year-old bank plans to follow an approach it has been using to strengthen its franchise in markets where it already does business and launch new efforts, Cummings said. Earlier this month, a new Investors' branch opened in Point Pleasant because the bank was filling a "hole" in its Ocean County presence. In Brick, the bank moved its branch down the street to what it considered a better location on a corner near a shopping center, and it opened the doors on its 10th branch in New York City's outer boroughs, concentrating on densely populated neighborhoods.

And the bank keeps a close watch on what the competition is doing. Recent reports of some large banks abandoning businesses and customers who have fewer assets and lower balances than more affluent ones has embolden the bank to pursue "underserved" markets, Cummings said.

"I think we can make a good living on New Jersey and New York residents, helping that type of customer with mortgages, small-business loans and retail products," Cummings said.

Investors has grown to more than 80 branches, from 51 branches in 2007, having bought six other banks or some of their branches since June 2008. Most recently, in December, it acquired Brooklyn Federal Savings Bank, with five branches and operations in Brooklyn and on Long Island, for $11 million.

"We're constantly looking at potential acquisition targets. It's part of our business," Cummings said. "Every bank in the state should be doing that, whether they want to sell or whether they want to buy."

Soon, Investors could have enough capital to buy a handful of other banks. In 2005, the bank sold about 42 percent of shares in its initial public offering, with the mutual holding company ownership retaining 58 percent in the "first step," as it's known in the industry, converting from a mutual institution to a full public company. The bank has said it's just a short matter of time before it takes the "second step" — selling the remaining shares held by the mutual holding company parent in a secondary public offering that could raise between $1 billion and $2 billion to fund more acquisitions and expansion, Cummings said.

According to Damon DelMonte, an analyst at New York investment bank Keefe, Bruyette & Woods Inc., current management has successfully transformed Investors from a thrift bank — taking deposits and making home loans — into more of a commercial bank, building up commercial lending operations and positioning the bank for growth.

Investors also has worked by educating its front-line people — tellers and branch managers — in an effort that has increased brand awareness and the bank's reputation in North Jersey's competitive banking environment, DelMonte said.

"While you operate in a very competitive environment, you have a strong reputation in that marketplace, which benefits you as a bank, because you're winning over customers and you're retaining customers," DelMonte said.

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