Investors Bank Corp., Wayzata, Minn., is being lauded by one Midwest bank analyst for its mortgage-servicing operation and its ability to compete in Minneapolis, the home of several strong regional banks.
"It's one of my favorite companies," said Wayne R. Bopp, an analyst with Stifel, Nicolaus & Co., St. Louis, who rates the company a "buy."
The $1 billion-asset thrift company has developed a strong mortgage operation and sizable loan-servicing portfolio since it debuted 10 years ago. Its loan-servicing portfolio totaled $2 billion at March 31, and servicing income increased 59% in the first quarter.
This from a relatively new player in a land of financial institutions giants.
"They're competing in Minneapolis-St. Paul, which is Norwest and First Bank System's home turf," Mr. Bopp said.
In 1983, one of the thrift company's founders, Jim Burkholder, saw room for a community bank. "In this marketplace ... there were several large players," said Mr. Burkholder, president and chief executive.
"Most of the small players were being gobbled up," he said. "We figured if we could develop a financial institution that would ... put a lot of emphasis on community banking, then we should have the capacity to grow very rapidly."
Today, Investors has 12 retail banking offices in the Minneapolis-St. Paul area, as well as 12 residential mortgage offices in Minnesota, Illinois, Indiana, and Wisconsin. A new retail office is slated for next year in St. Paul.
Investors targets continued growth in fee income from its mortgage-servicing portfolio. The company originates mortgages and sells its fixed-rate mortgages, but continues to service the loans.
The company posted first-quarter return on assets of 1.11% and return on equity of 22.06%.
The mortgage-servicing business helps ROE because it reduces interest-rate risk and adds fee income, Mr. Bopp said.
Mr. Bopp added that the ROE is high because equity, while adequate, is low.