Investors Bank Pays Off $1B Loan; Street is Cautiously Optimistic

Investors Bancorp, Inc. has announced the extinguishment of a $1 billion loan with an average rate of 2.01%. A portion of the debt was extinguished in October, as previously disclosed, while the remainder was extinguished on December 22, 2020.

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Investors Bancorp, Inc. (ISBC) is the holding company for Investors Bank and has approximately $26.6 billion in assets under management and 155 branches across New York and New Jersey.

The early retirement of the loan has resulted in a $24 million pre-tax loss, which was partially offset by two sale leaseback transactions in the fourth quarter that generated pre-tax gains of approximately $23 million. These transactions should improve the net interest margin of the company and have a positive effect on its EPS moving forward.

ISBC has announced a once-off, pre-tax expense of approximately $11 million in the fourth quarter as it prepares to consolidate ten branch offices in 2021. The consolidation is expected to save the company roughly $3 million to $4 million per annum.

ISBC has also sold its portfolio of $328 million Paycheck Protection Program (PPP) loans, which it says is not expected to have any significant impact on its financial statements. (See ISBC stock analysis on TipRanks)

RBC Capital analyst Steven Duong reiterated his Buy rating on ISBC shares three weeks ago and raised his price target from $11 to $13.

Following the release of ISBC’s third quarter earnings, Duong asked Chief Operating Officer, Domenick Cama, on an earnings call, whether there were any particular segments that Cama was more optimistic about in the fourth quarter. Cama noted that the Commercial and Industrial (C&I) loan book was looking promising and that he projected closing about $500 million in the fourth quarter.

Duong is the only analyst that has offered a rating update in the last three months. His price target of $13 implies upside potential of around 25% over the next 12 months.