Investors Bancorp in Short Hills, N.J., chased deposits in the third quarter, a move that drove up interest expenses and lowered profits.

The $25 billion-asset company’s net income fell 8% to $45.8 million from a year earlier. Earnings per share of 16 cents was 3 cents better than the mean estimate of analysts compiled by FactSet Research Systems.

Net interest income after loan-loss provisions rose 9% to $169.2 million while total interest expenses increased 42% to $54.9 million due to higher levels of costs tied to both deposits and borrowed funds.

Kevin Cummings, CEO of Investors Bancorp
“Positive trends for the quarter include declining expenses, improved asset quality, deposit growth, stable margin and improved funding metrics,” said Investors CEO Kevin Cummings.

Investors Bank ran a deposit promotion during the third quarter. As a result, average interest-bearing deposits rose 14% to $14.3 billion. The average rate paid on those deposits increased 25 basis points to 0.90%.

“Positive trends for the quarter include declining expenses, improved asset quality, deposit growth, stable margin and improved funding metrics,” CEO Kevin Cummings said in a news release.

Cummings also emphasized the improvement from the second quarter of this year.

"After a challenging second quarter, we are pleased to report strong third quarter results, highlighted by robust earnings per share growth of 14% over the prior quarter," he said.

Compared with a year earlier, noninterest income fell 1% to $8.4 million on lower gains from the sale of loans and reduced income from bank-owned life insurance.

Noninterest expense climbed 13% to $103.3 million. The total included $5 million for professional fees related to the company’s remediation of its anti-money-laundering program. Advertising expenses also increased, nearly tripling to $4.4 million. FDIC insurance premiums increased by $900,000 during the quarter.

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Andy Peters

Andy Peters

Andy Peters writes about regional banks, consumer finance and debt collections for American Banker.