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Investors Bancorp

Shares of Investors Bancorp (ISBC) of Short Hills, N.J., closed at $18.40 Tuesday, returning 4% year-to-date after a 32% advance in 2012.

The shares trade for 2.1 times tangible book value, and for 18.8 times the consensus 2014 EPS estimate of $0.98. The consensus 2013 EPS estimate is $0.86.

Based on a quarterly payout of $0.05, the shares have a dividend yield of 1.09%.

Investors Bancorp had $12.7 billion in total assets as of Dec. 31, with assets growing 19% from a year earlier, reflecting in part the acquisition of Brooklyn Federal Bancorp in January 2012 and Marathon National Bank of New York in October.

The company reported fourth-quarter net income of $21.4 million, or $0.20 a share, declining from $24.5 million, or $0.23 a share, in the third quarter, but increasing slightly from $21.1 million, or $0.20, in the fourth quarter of 2011. Results in the most recent quarter included one-time acquisition-related expenses of $4.4 million, after tax.

Fourth-quarter net interest income was $101.5 million, increasing from $91.9 million the previous quarter, and $84.8 million a year earlier. The increase in net interest income of course reflected the acquisition of Marathon National Bank, but also reflected a widening of the net interest margin.

The fourth-quarter net interest margin was 3.51%, expanding from 3.35% in the third quarter and 3.36% in the fourth quarter of 2011. Kelley said in a report on Feb. 1 that "the core margin expanded by 12 bp sequentially to 3.39% and prepayment penalty income was double what we had been expecting (12 bp margin impact vs. 6 bp estimate)."

The company's 2012 ROA was 0.77%.

Kelley says that Investors Bancorp "has now rolled-up six transactions that have expanded their presence in the New York and New Jersey marketplace in a very affordable manner." The analyst also expects the acquisitions to continue.

Investors Bancorp is part of a mutual holding company structure, with Investors Bancorp MHC holding 58.4% of the common shares as of Sept. 30. Kelley said in a report on Feb. 1 that he expected the company to undergo a second-step conversion to full stock ownership in the second half of 2013. "In our view, the company can complete a deal in the 96%-100% of [tangible book value, or TBV] range. Based on year end 2013 balance sheet estimates, this would produce fully converted TBV's in current terms of $18.44-$19.30 per share."

Kelley's price target for Investors Bancorp is $20 and he estimates the company will earn $0.90 a share this year, with EPS increasing to $0.92 in 2014.

ISBC data by YCharts

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