Investors Bancorp

Shares of Investors Bancorp ( ISBC) Short Hills, N.J., closed at $18.04 Friday, returning 34% year-to-date, following a 3% return during 2011.

The shares trade for 2.1 times tangible book value, according to Thomson Reuters Bank insight, and for 18 times the consensus 2013 earnings estimate of 99 cents a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is 87 cents.

For the 12-month period ended June 30, the company's operating return on average assets (ROA) was 0.75%, while its return on average equity (ROE) was 8.42%, according to Thomson Reuters Bank insight.

Sterne Agee analyst Matthew Kelley rates Investors Bancorp a "Buy," and on Thursday raised his price target for the shares by a dollar to $19, saying that "after recently meeting with management, we are incrementally more positive on the fundamental outlook for the company," and "now expect a second step conversion will be announced in Q1 of 2013."

Investors Bancorp is part of a mutual holding company structure, with Investors Bancorp MHC holding 58.4% of outstanding common shares as of Aug. 1.

During the second quarter, Investors Bancorp repurchased 2,000 shares, and as of June 30 was authorized by its board of directors to buy back 2,194,239 additional shares.

Kelley said that "the company is expected to continue to report high-single digit loan growth, strong mortgage banking gains and steadily improving credit trends in Q3 and Q4 of 2012," which the analyst expects "to be partially offset by ongoing pressure on the net interest margin (NIM)." He said that his firm is "looking for 9% and 7% loan growth in 2013 and 2014," and that "the NIM is expected to contract by 13 and 7 bp in 2013 and 2014."

Investors Bancorp's second-quarter net interest margin -- the difference between the average yield on loans and investments and the average cost for loans and deposits -- was 3.40% during the second quarter, expanding from 3.33% the previous quarter, but narrowing from 3.46% a year earlier.

The year-over-year decline in the net interest margin is in line with the industry trend, with the Federal Reserve's target federal funds rate in a range of zero to 0.25% since late 2008, while the central bank recently increased its purchases of long-term mortgage-backed securities, in an effort to push long-term rates down from their already historically low levels.

Kelley also said he expects Investors Bancorp to announce a dividend on common shares before the end of the year. "We have updated our model to include a $0.20 per share annual dividend," he said, "which would represent a 19% payout on our 2013 earnings estimate," of $1.04 a share.

ISBC Chart ISBC data by YCharts

Interested in more on Investors Bancorp? See TheStreet Ratings' report card for this stock.

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