Trump loan probe casts spotlight on a small New Jersey lender

Register now

A new line of inquiry into President Trump's business dealings is thrusting a small New Jersey lender into a spotlight with Deutsche Bank, which for years has been better known as the real estate mogul's creditor of choice.

Investors Bancorp, based in Short Hills, was sent a subpoena by New York Attorney General Letitia James late Monday as her office looks into Trump's efforts to finance real-estate projects and a failed bid to buy the National Football League's Buffalo Bills, a person familiar with the matter said Tuesday. While Deutsche Bank, also subpoenaed, has long drawn attention for working with Trump, Investors Bank has drawn relatively little public scrutiny.

The lender traces its roots to 1926 and has quadrupled in size over the past decade, in part by acquiring nearby banks. It now ranks as its home state's third-largest by assets with about 150 branches there and in New York. While its $26 billion in assets pales in comparison to Deutsche Bank's more than $1.5 trillion, the bank is a player in the local property market, with most of its loan book tied to New York and New Jersey real estate.

Investors Bank' rapid growth was somewhat stalled in recent years as the Federal Deposit Insurance Corp. and the New Jersey Department of Banking and Insurance ordered the firm in 2016 to strengthen controls to ensure compliance with the Bank Secrecy Act and anti-money-laundering rules. That order, which the chief operating officer for Investors Bank referred to as "BSA jail," scuttled a deal to buy Bank of Princeton and brought costs of as much as $17 million in 2017.

The FDIC and state regulator freed the bank from the order in December. Investors Bank began working with advisers last year to potentially sell itself, a person with knowledge of the situation said at the time.

The bank provided a $23 million mortgage for the Trump Park Avenue building in 2010, according to documents filed with the city. Trump's financial disclosure forms show a loan from the bank that year had a 5.5 percent interest rate and matured in 2015. It was replaced with another five-year loan at a lower rate of 3.25 percent, the lowest fixed rate of any of Trump's loans, the forms show.

The subpoenas from James' office were prompted by congressional testimony last month by Trump's former lawyer and fixer, Michael Cohen, according to the person with knowledge of the inquiry, who asked not to be identified because the inquiry is confidential. Cohen said Trump inflated the value of his assets when it benefited him, such as when applying for loans and insurance. Documents Cohen brought to the hearing to back up his allegations showed the Park Avenue building to be valued at about $312 million.

The Trump Organization has received real estate loans from multiple banks over the years, and it wasn't immediately clear why authorities focused on Investors Bank for information. The company's press office didn't respond to messages seeking comment.

The subpoena comes as Investors Bank considers deals and growth without the overhang of its regulatory order. The lender says it wants to grow its commercial lending book to balance its mortgage exposure.

Expenses related to the order had put a strain on profits and made it harder to execute takeovers, said Austin Nicholas, an analyst at Stephens Inc. who covers the company. "It's a bank that has had headwinds over the past couple of years, but now there's tailwinds," he said.

Bloomberg News