Investors Bancorp's latest buyout deal provides more proof that the Short Hills, N.J., company is eager to make a push into the Philadelphia suburbs.
Investors (ISBC) is also hiring in the region, Kevin Cummings, the company's president and CEO, said during a conference call Monday. Investors just hired Timothy Touhey, a former CEO of the New Jersey Homebuilders Association, to run a new commercial real estate finance unit in Robbinsville. "We're looking for ways to add to our team and enhance our firepower in this region," Cummings said.
Gateway has just four branches and $310 million in assets, but it is the fifth-biggest financial institution in Gloucester County, with $280 million in deposits. Cummings said the deal would add as much as $22 million in capital and boost the appraised value of Investors' planned second-step conversion by up to $50 million.
Investors' planned purchase of the $1.8 billion-asset Roma provided an incentive for Cummings to move ahead with a small deal, Kevin Fitzgibbon, an analyst at Sandler O'Neill, said Monday. Absent Roma, "Gateway would have been an orphan franchise in the greater Philly market," he said.
Cummings gave no update for Investors' conversion, which is widely expected to take place this year. Investors will no longer be able to buy mutuals once it converts.
The company could announce plans for a second-step this summer, said Fitzgibbon, who took Investors' executives to Texas last week to meet with investors.
Investors has inked four deals in the last 18 months, initially focusing on New York by buying Brooklyn Federal Bancorp and Marathon Banking. Investors is preparing for its newfound heft, Cummings said. The company will upgrade core processing systems after it converts; it is also hiring to focus on enterprise risk management.
Gateway had its share of problems in recent years. It postponed plans for an initial public offering in August 2007, eventually scrapping the IPO as demand for financial stocks remained cool.
The Office of the Comptroller of the Currency hit the company with an enforcement order over issues with private-label securities, Cummings said during Monday's call. Gateway decided to sell in the aftermath of the order, which required it to hire a new CEO and chief financial officer, and turnover elsewhere. Its GCF Bank lost $4.3 million last year, according to regulatory filings.
Investors will record a $2 million mark against Gateway's securities portfolio, largely because of private-label securities. It will also record a gross loan mark of $6 million on the company's $211 million loan book. About two-thirds of GCF's loans involve residential real estate; another 16% are associated with commercial real estate. Cummings said 10% of total loans involve atypical businesses such as aircraft, manufactured homes and classic cars.
Those issues seem manageable to Fitzgibbon, who called the Gateway deal "as risk-free as you can get."