Investors Bancorp (ISBC) 24 Oct 192019 Q3 Earnings call transcript

Good morning, and welcome to the Investors Bancorp Third Quarter 2019 Earnings Conference Call. [Operator Instructions].

We’ll begin this morning’s call with the company’s standard forward-looking statement disclosure. On this call, representatives of Investors Bancorp, Inc. may make some forward-looking statements with respect to its financial position, results of operations and business. are not uncertainties future of results and beyond Bancorp’s are subject and which to statements and these Investors risks, predict forward-looking those to other control, forecast differ forward-looking materially guarantees cause expressed performance of are are which from These can to or actual in difficult factors, some statements.

the that harbor disclosure into you to statement. In document safe this last and its presentation. night’s company included press incorporated That release, is refers

risks certain Factors, the uncertainties of Analysis recorded. discussion Investors complete more with SEC. the of Risk a Bancorp, Bancorp’s Investors entitled of Result the being see in Please Management and please set and For affecting and forth note, Operations filings is Financial this sections Conditions Discussion event

turn over Chairman call I’d And to Bancorp. go to now CEO and ahead. like Cummings, Please Investors of Kevin the

and of good conference in the Thanks, income net call. morning or the share ended share XXXX. the September $XX million diluted per million $X.XX quarter XXXX, night, for three Bancorp versus earnings its the $X.XX June Last for Gary, was the welcome or per company reported ended $X.XX per $XX or share months months and XXXX. $XX.X third release, three ended quarter diluted to This September XX, XX, XX, and for million press Investors

diluted or per totaled or $X.XX XX, million $X.XX $XXX.X per September for nine the income months to XX, ended months $XXX compared net For XXXX. the ended million XXXX, September share nine share

in our charge a adjustment we tax continue included shareholder expenses to had a tax our our million provision responsibilities litigation quarter. our the through compensation as million, litigation. assets deferred of to to of related employee that we which was XXXX, in the redefine and related severance $X flowed $X.X settlement branch for the Also system, settlement quarter for negative $X.X third During million to of

diluted per earnings were share. items, $X.XX $XX.X As million or of core these a result

of Fed Our net X.XX% by July the X.XX%, six interest for the which points, the quarter basis cuts. margin improved from impact to reflects

down put for rate gave increases. for swap quarter, the anticipated insurance the time that interest $X we of also closed of During rate books an XXXX at billion future which us August interest some on

the year. already a future on impact margin the quarter, or in cuts we two fourth positive With anticipated a that as rate in and the will third the place of move in this have near quarter into decision fourth our

rate quarter, that year, this forecast with year way, net and continue say a Last Today, is I to Either we on to loan another would continue bank. third call in a place portfolio. tailwind and potential leverage interest the headwind. that the our will interest for the for our the capital that, cut September diversify our we indicated forecast already was this margin for currently

During C&I the decreased multifamily and approximately loans we $XXX quarter, while construction and grew loans CRE $XXX million. million

XX basis down lending. curve more With margin. in at the basis inverted drives points higher-yielding This is point during slow to and and improvement lending lending a yield to profitable on focus period, decided multifamily our to and we’ve business the CRE XX yield flat the

there to the that cash It strategy that have especially the With out, of New after New associated York, non-New cycle, in respect especially in by York activity five the outpaced New all credit refinance relating this Pennsylvania. for revenues robust last reduction we the we’ve to market New believe York years. regulations, New York related and growth in portfolio, to the changes the a stages the is York. future appears rental in likely is and multifamily, latter New multifamily With CRE market York with values be experienced reduced and multifamily. a New the market conditions potential noise York City multifamily recent In our regulation relative to our good that and for reduce the to Jersey of properties were refinances the greatly in benefits to growth our

trend portfolio monitor an York our loan due to active New will situation to decline there in some for more market which reduction bank rates reduction proceeds. market for limiting may impacting the treasury continue which we’ll the loan Despite be conservative the refinance. to and have higher multifamily the allowed year activity Also rates pricing during was XXXX, decreased to in The loans. this need balances see lower, and to reset underwriting during in the though, this loan appears be mainly

As we to look transaction New likely is the the for will and the any does years. out – five in reverse significant could that short have lower either economic be in term. refinancing multifamily past in the that to forecast will regulatory remain appear not the over or trend compared than to volume there the next – It York the lower last in XX this the months, specially in past and changes

of Our in multifamily with the a asset July the quarter relationship million in improved quality the $XX payoffs for Pennsylvania market.

XX% other loans total or which our portfolios, lending. historically credit lower flat favorably in at remain which X.XX%, peers compares especially types have the the into billion when and multifamily our history portfolio take of to of a to reserve $XX is account residential loss where you Our

transition These a by current believe operating going had of of at on million discounting by value which net this net XX a on charge-off principally as we property York loan due recovery charge-offs net year. basing one a a income to we in multifamily quarter. During second this to a XX%. $XXX,XXX million quarter, view rental of at and $X.X New property million of on We valuation good through in $XX We and value $X.X conservative position a of September the are took condominium. Brooklyn, its with the charge-offs is a the are in a City versus

to small well-positioned credits we loan are With believe we a of of nonaccrual number in million. individual this and to the cycle. no point than lending, at the $X.X with remaining XX-day XX- respect there in greater are With loans XXX%, other ratio economic a at delinquencies commercial coverage nonaccruals category

side, deposit the for to York/New market. see New the deposits Jersey we fierce in On continue competition

Our the quarter. deposits X.XX% for X.XX% point quarter versus cost deposit is to basis were of of the month for September. as of last cost decreased trend But one improving the the

position, quarter, the to regional and these positions. our some manager centers, During administrative eliminating we Robbinsville employees, teams approximately positions Brooklyn XXX Iselin centers. operating functions moved the at branch branch to of XX reorganized eliminating by and retail assistant We thereby three

headcount our XX XX moving in manager This branch In positions them this XX of a addition, change reduction by net we another assistant are and creating more to was universal people. for bankers. to managers – of of staff opportunities change

Jersey. expand and in banking continue South and two teams in now New have more to our We hire, initiative one with York of XX business bankers to three

Our North Jersey is are and and moving with team markets we fully into the enthusiasm staffed, speed. great

who advisory advisory board Long up have board, team Island market. group a stronger Coast Long with have are will new the momentum York robust board, centers very entrepreneurial their Island. meetings. strong Island of boards both to along their We outreach advisory day in spent make and New and of and the Gold with increased very team, City Island knowledge The the is attending a on influence our with have Long Long Yesterday, I our and

working excited to their with mid-November. We to top are group and meet-and-greet very customers our for this event forward be look scheduled with

We year. next expect to early close first in this the transaction on quarter of

our company, a entered the retail service loans agreement team the lending fintech business small improve digital business for small OnDeck, will and million. into During expand the as under which with $X lending of a quarter, part customer platform

York an our have in access loan that space reworks We managers have core businesses relationship to agreement with New where City also.

expand have with City with Long in sales overall to in and deal lawyers Brooklyn our communities continue across our corridor. the our target engaging expand New CPAs brand a brand We – to and and expand coordinated and Lakewood customers Island, the to activities new York effort

hard, working our are and are the during sales teams activities previous Our year. up

resources to our our sound process and to of sales of This improve part our and diligently with Salesforce and we much in we the adding execute With training position critical for better respect being With XXXX are we technology control, a managing of CRM the and and plan, results. diligent system, need quarter. in this staff, invest to implementation the some cost Fed, to from last rates, than expenses. help control our believe a while we are is

Burke, further Sean that call to to give operating some results. commentary I’d pass who over good And will with news, like the on

Net with improvement. deposit for basis of increase nonaccrual an was Higher provision and the the costs loan negative credit higher the losses provision our the prepayment margin metrics, of from Thank portfolio improved quarter loan Kevin. $X.X coupled quality the yields, you, decline prior level balances. including for was million points X.XX%, The in quarter. fees and stable by was interest asset drove six impacted loans,

allowance the Our credit and peer allowance in ratios and amongst robust strongest remain our remains group. our

at Our was allowance as a ratio our XXX%, percent loans and was XX. loans allowance to September nonaccrual coverage of X.XX%

our an $X.X related basis. primarily totaled included was income the from Noninterest customer compensation the totaled swap employee shareholder quarter, settlement. was increase million, a Noninterest in The to for the the $XX.X of total million increase quarter to expenses litigation of expense program. and severance success attributable core the quarter on for expenses prior our of $X.X $XXX.X million million

In expenses efficiency. as products management $X improve addition, process our relatively as professional and fees items, treasury by were our online approximately consistent to commercial management million due noninterest cost to quarter-over-quarter. banking made enhancements elevated were these to Absent risk well

was Our rate with effective prior consistent tax quarter. XX.X%, the fairly

Kevin to remarks. over to concluding like it turn I’d any back Now for

risk I California been a we more is and We recently It and bank end to through enhance changes, sometimes, goal bank. and the XX% to to but us with driving that but improve maintain here to a Good. are strong more continue full is XXXX. the culture need our on potential our of not while in value. efficiently, shareholder by and a with equity Thanks, dedicated culture to trip matrices. road change results, I Sean. We returns with transition to satisfied have transition is on service shareholders Boston. focused our improving return and making the operating on investors the and bank our smarter a and certainly clear emphasize efficiently, our There to commercial at strong out our and on credit our work from a is necessary are of difficult that focus the need

quarter fourth feel And make We groups, good a commercial the to owners, customers bank is that execute have wants We for XXXX. price, we continue the into think after BSA shareholders you, order, communities tremendous with and difference There to in especially its being a these the the we and moving we are retail we and at but on strong out serve. size. about customers. our with a in that a rewarded. our going are will different to the a bank momentum if feel employees, It’s our and pretty plans, plan of the opportunity different with on both need our serve quarter, we marketplace forward our the and I execute be strategy

And We you support. your call you very turn questions. now I’d the thank some for like much. over to Thank to for

We question-and-answer comes Sandler ahead. with question Please will Fitzgibbon The + the O’Neill Instructions] first Mark Partners. [Operator begin now go session. from

morning. good guys, Hey

Good morning, Mark.

those online cost the I’m banking an of you expense management, the quarter? all assume should all associated projects be around costs those Sean, with out will in And fourth treasury $XXX we operating million? with rate this run did and risk, wondering, quarter,

Mark. to level, normalized to expect We it more return a

is $X minus So more guide appropriate, I plus play million million. or around area the would $XXX

Okay. us on And if maybe could I pipeline then is. secondly, share C&I the you what that average of with size the wondered and the rate

and is million pipeline It’s about yield of an average has Mark. C&I The XXX. Yes. Domenick. about $XXX

Okay. getting Or likely in to then we would quarters? say? And more are to that, coming negative you provisions the we’re see of end

Kevin this real and asset alluded depend that. to, commercial running cost residential quality fact estate And about from the off that growth. funding does loan quarter, strategy down, benefited lower-yielding high with multifamily, balances the as loan allowing were loans on and really associated that goes we and It along

so down, our trended that as So allowance. did

Okay.

seem Mark, $X.X it XX the then the in I horizon to Like to loans I doesn't that like loan on in major time. just there's add, no any margin pipeline, said, XX And like I’d pipeline; around the like mentioned, million.

future how And sense properly, I'm in of you margin's fourth reading looks if and the it the up significantly Okay. cuts margin a get to like going your is then tea help us how much rate that in be quarter. leaves impact the Can will XXXX?

regardless we on five in loans. some the in Fed the margin around but cuts There margin deposit quarter, by fourth trend to costs the October, forecast moving driven Sure. the higher-yielding expand higher in lower expect Mark, and will commercial emphasis are basis fourth points there, of our pieces quarter. We

of And that’s prepayment penalties? exclusive

what of when think regardless is a wild the I conservative that’s penalty. think gave, it to happens guidance penalties. I prepayment to prepayment card, that relatively we're being comes I but It

point to Approximately XX% a deposits to Sean's the are add just what tied Fed comments were. index. of to Mark, our fund's

fourth the will, occurred September. cuts quarter in for full rate a two benefit, will you quarter and So, that result in the in have if of July

you. Thank

a just point. Mark, clarification

our asking were you think I margin. core

costs deposit deposit costs margin and as lift our guidance higher-yielding a to and balance the continued sheet described, primarily, downward of to improvements remix also trend Kevin loans. giving to So a in commercial related or the I Domenick is was core

Thank you.

is Laurie with Please The ahead. Hunsicker Compass Point. from question next go

Really Yes. you look at your morning. you where a a just for help are? do Hi, expansion. the of I currently snapshot wondering like September margin good so that see you margin get to we if could month us, was have

not, do We Laurie.

Okay.

fourth have into We And Kevin think this prepayment trend I of saw we the we inflect. deposit that point trying fees. from were cost cost to going alluding expect more is we deposit benefited lower that And to us. see down. in make We're that quarter, We to slightly even the don’t quarter. front was

asking. lid on Mark Sure. was And what the close to just

extra margin XXX. prepays core was your So

fourth think that with in sort should Is for range correct? XXX we the everything of So about quarter. adjusted that the

about it Laurie. right, sounds

we can What sort particularly various because on cuts What's then And nicely, should terms docket? come the Okay. us deposit, you down that? just you in your help about making seen of How of savings. we've categories? are those think in

$XXX online think all portion accounts. the also. Fed lowered CD tied approximately down funds our benefiting – a deposit said, rates. Those is have had of our of I this cut significant the there million We million. cost primary million. at are Laurie, rate I which to $XXX were funds, a in were $XXX of as And to We've we of

your can just muni those you where running? us what and then And great. Okay, cost on deposits, that balances give is an update are

XX, at It’s of just about $X and billion cost under X%. as was running, September

looked just it income income then a item little Okay, line outsized. on BOLI a Great. And the Sean, quick was statement. like the

in So, that? is something nonrecurring there

little quarter in bit, there was debt A small benefit we that a picked up the of I think…

something? or XXX what, Around,

XXX,XXX it XXX,XXX, sounds but Maybe, right. or about

generally, could you thoughts of Kevin, post-CECL And so forward look this in Thank just great. on approaching how view what it you what Okay, I you're are, wondered your changes. we comment world, your and as then much. if M&A

allows mindful situations, And to it. filed us certainly the be where of continue Gold that trading We’re transaction. at to the stock focused We on opportunities and week. we on this look our S-X I to at Coast the we've think is continued but execute

marketplace. a there's activity discussion and the think lot in of I

a has to the organization, but opportunities provides it's consistent don't message, lot We continue because in book to think but and Coast pretty to our us. the prudent of on we're – I and that the Gold on – at think changed of going dilution. be mindful tangible that execute that, value deal things, look we'll we're of and I at very have approach opportunities anything

for Thanks taking Great. questions. my

Steven open Duong RBC your not with Mr. you perhaps go next Duong, on question yours. The hearing from comes muted Please line Markets. or Capital ahead. is

under I October hold should aside, the jumping just on yield loan been a But cut if up how already have in apologize an just questions fourth rate scenario? prepayment leaving late, I’m my So, quarter income asked. little

looking Steve. average hold CRE, it's up well, that should yield for – X.XX%. at of C&I They and the loan I'm and north

about X.XX% multifamily X.XX% – we are and C&I. multifamily on I'm where So, sorry, is and on on CRE,

the XXXX Great. the re-pricing color opportunity do at? just sort of that, in cost – your on on you Appreciate that we're borrowings, the what's FHLB and looking have

is is CD deposits those broker bigger re-pricing, of average, will our months book to our Steve, average and life an us I'd to significant to opportunity closer probably inside The remains re-price. of XXX of there around area. respect we're tremendous our lower CD for on and to as and that levels. six it highlight believe average, see I'd savings the with re-price re-price XXX opportunity the on to say CDs year those re-pricing, that There's – going down that we book. the a retail currently around and amount at see and we brokered the a what there area, is around

hear. to Yes. very nice That’s

So an much type top fees? pretty And to with tailwind professional to of the still your be just is Or on just guys on that. you moving potential the then then Are basically, borrowings consulting of there would additional more expenses. done come?

fees are done on use for, money we we think were those and one-time. We the were Yes. The we've expenses consulting pretty for – what year. specific the

in some the headcount. happen a employee we fourth will will reflected expense see change will We in reductions quarter. the that And be in additional – We've reduced that fourth And quarter. account. had

it. Got

the And rate a run expense, is advertising essentially this somewhere, your to promotional end year? good

No. this It’s elevated quarter.

$X approximately out. that fees estimate be million we professional will Steve, advertising expense taken and of of So,

just it. say lastly, I I for XXXX? for at got looking X those. apologize what that, meant you're share sized up Yes, you your opportunity, have it, And Got to repurchase then guys

the Gold absent Coast deal. Not

communicated stock repurchase first the equal in to issuing quarter, Gold the connection the Coast the I'd we stock what close and deal with to So transaction. have we're to our we're that the say is in expecting desire

to at back committed at And in stock to remain So guidance we'll outside continue back of terms levels. is especially of on would more quarter have these levels, and the report say fourth I buy we'll call. these buying that, we to do what our

All appreciate color, right. guys. the Thanks, I again.

Securities. comes next with The go question Wells from Shaw Jared Please Fargo ahead.

filling Jared. on a thoughts is color the are around the a months, of in mainly This is been New Or all in couple change environment this this potential has impact? York been for Appreciate credit Timur risk? as in that to we've any multifamily. for the actually Braziler thoughts there now still for just wondering, be volume-type I'm going

sure asking continue I'm our your see you decline? of going question. to to Are Tim, if multifamily portfolio not we're

volume of well? environment? as risk Just a in this it lower such has the is environment, credit broader that shifted the risk at there's in just still going environment Or

Right you're to is looking at other going – I always be going going credit, think to factors there value. always been and that, go But treasury this think an have that is rising get it's the people I because benign, to be and went reset an be down, always Kevin, and appraisal. you're reset not now, to the issue. impact are rates, it's could rates out

very haven't York refi So – we – little market haven't done the seen really course over we've of this past in done the we year. New

the because of an in reset So of appraisal and they just don't type interest that situation. get go and rates, they out

we property the is will in If taxes you a taxes. I CRE big if net that certainly your cash I be event space where up. that a today, issue flow, look go credit at are think property mean, impacts if

to impact, our could cash of But an billion that overall this $X – borrowers flows taxes and sudden, significant. all our and have don't the an change, bias the impact. are Of and is But the at know not of circumstances time. a on be majority event property resets reacting there's have the could impacted. in York or exposure have a in exposure $X space other in $XXX,XXX in this the that we And more the City seen. think $X make – with difficult some horizon should that multifamily, regulation, million we to and billion So today the we're NOIs in – change the factors credit to be change our the possibly if where it's would that New facts in our things looking at – to the way in this that we are point borrowers

Okay. That’s helpful.

market, credit the do X/X. curve X with and out shape you somewhere spread also a attempt deliberate the would in I pointed and X and has is X is sense what right. color What on of to it's to order the yield the be need that implications, That's to latest what to the Kevin X/X, reduce that just something showing. it out front the that the add asset, in at to of X/X so We're between because be in

NIM. the curve it With being as yield inverted is, to dilutive it's

we're being coming types those sheet. of the on So, careful balance about assets very

Okay. going we level forward? think rate see portfolio, Or run that quarter about good third And quarters? a in decline the accelerate of should balances we is declining and future as

Yes.

objective balance our is that steady. sheet think the to keep I

we in of to competitive about the a because bit So, the the want we weeks. sure have so frankly, the market. last will we're sheet it on cost if portion you few going coming transition volume rates the given our can increase I'm a continue commercial not that very liability little benefit to loans to decline. the the the quite C&I over book careful tell to We've of more side, more us be loans of I on in that's lowered just bank. balance that multifamily lower to got be But on opportunity in

at total expectation to other offset looking categories that be there the All declining multifamily the then going portfolio? able loan book, is C&I And right. to are like

of degree, we're some real hires, would we number have commercial expanded point, aspects that a estate request at build to we like through non-multifamily C&I, that one-for-one and multi Also, we of To between new going this it's a lending say construction not that and expect assets but up level. I assets. some can and

can pretty of fill the payoffs. amortization and gap we fill with multifamily categories C&I, think much the two negative we or and So up those the that

you shaking the for just where on the guide equity me, out ratio then XX% see capital return from And in Okay. one XXXX? one do last

to an X% about In equity have terms of tangible ratio to we a a tangible X.X% common talked ratio, assets. into common

Okay. Thank you.

you. Thank

remarks. like over would back any session. turn closing to I to question-and-answer management the our for concludes conference This

Again, feel I organization. point bank. Okay. I today. evolve interest an you full-service respect on with net being into being a commercial that guess thank But we at a journey advantages the continue strong a call quarter. one to for still the of margin. that's an inflection been outlier, want we're it's We're participating to on our liability-sensitive to of Well, to

credit strong. Our is

strong. is a capital look We've Thank technology forward Our on in to declared we want much. you $X.XX, to about and participating you management. of call, dividend on our continue our thank out and I infrastructure, and road. our risk for very the I improvements and make to seeing you the

The presentation. attending conference now has you concluded. for Thank today's

You may now disconnect.