Investors Bank’s Plan for Growth
Carl Gaines April 26, 2012, 12:15 p.m.
About nine years ago right around St. Patrick’s Day, Kevin Cummings did something he always told people he mentored never to do.
“I changed my career because I took a call from a headhunter,” he said.
Mr. Cummings, who had spent 26 years at the independent accounting firm KPMG LLP, was asked if he could refer anyone for a chief operating officer position at Investors Savings Bank. Familiar as he was with the bank—it was one of his clients during his time as an audit partner in KPMG’s financial services practice and in the New Jersey community bank practice—he decided the best candidate he could nominate would be himself.
After the events of 9/11 and reflecting on his career, which included 14 years as a partner at KPMG, he had an epiphany.
“My attitude changed, and I thought going to a smaller organization where you can be more of an impact player and spend more time working in the community would be the right move,” he said recently at the bank’s Short Hills, N.J. headquarters.
This year, Mr. Cummings was celebrating again on St. Patrick’s Day—this time as the grand marshal of Newark’s parade, part of his latest step in an effort to transform a small community bank into one of the biggest players in the region.
Investors Bank, founded in 1926, has long been a staple in many New Jersey towns and communities. But when Mr. Cummings rose from COO to president and CEO of the bank in 2008, he had hopes for something more.
So far, the bank’s long-standing role has performed well—it has expanded from 46 branches to 87 branches, from more than $1 billion in core deposits to more than $4 billion today.
However, the bank was still primarily a residential lender, and following its 2005 IPO and a few personal changes, Investors entered the commercial real estate market, albeit in an inauspicious debut.
“Well I had black hair,” Mr. Cummings said with a laugh as he pointed to his hair today, more of a light gray.
Between 2006 and 2007, the bank had issued $379 million in commercial real estate loans—9 percent of its total loan portfolio—with between $250 and $270 million of that going to construction loans, Mr. Cummings said. It was a large volume for the bank and, unfortunately, an ill-timed one.
“The good thing is we started in 2006,” he explained. And then: “The bad thing is, we started in 2006.” According to Mr. Cummings, most of the bank’s non-performing loans were in fact originated during that time period.
However, Investors followed those loan originations up with a much better decision—investing heavily in the multifamily market. “That’s our bread and butter,” Mr. Cummings explained. At the end of 2007, the bank had $44 million in loans and today the bank has more than $2 billion.
“Delinquencies are very low, and it’s a hot asset class right now,” he said. “Our timing couldn’t have been better.”
Mr. Cummings has installed a set of core principles during his time as president and CEO of the bank. They’re all aimed to provide value to all customers, regardless of size—something that’s led the bank to prosper in the current market.
“We think we can service that real estate entrepreneur who has maybe 8 buildings,” Mr. Cummings explained. “He’s not sexy—he’s just a regular guy.”
“Our average loan is that $3 million to $10 million space—a lot of people aren’t playing in that space,” he said. “We’re just trying to be more of a relationship banker to that middle market borrower.”
The bank closed on eight mortgage transactions at the end of 2011, each valued at $10 million or more for a total of $137.5 million. The deals included a $13 million adjustable rate mortgage to refinance the loan on one multifamily housing property with 80 units in Jamaica, N.Y. and an $11.5 million fixed-rate mortgage to refinance multifamily structures on Leonard and Scholes streets in the booming Williamsburg section of Brooklyn.
Hoping to further reach clients in the five boroughs was one of the main impetuous for the bank’s acquisition of Brooklyn Federal last year, an acquisition that allowed it to pick up five new branches, as well as Brooklyn Federal’s commercial real estate loan portfolio.
However, Mr. Cummings and Investors didn’t stand still for that long, flipping the majority of the portfolio for $200 million to a real estate investment fund less than six months later.
“It was close to 25 percent of non-performing loans—so why have any guesswork on what other problems they might have in the portfolio?” Mr. Cummings said of the deal.
Investors kept the cleanest of the bunch—$88 million in residential loans—but admittedly might have given up on some other good ones to stick to its principles.
“We probably gave someone a great opportunity, but at the end of the day it let us put our time where it’s more important,” he said.
Growing the bank in a way that continues to provide value to its customers and clients has always been goal number one for Mr. Cummings, who learned many of the lessons he uses today during his studies at Middlebury College and while getting his MBA at Rutgers.
“Accounting is the liberal arts education for business,” he said. “It taught me the importance of business development, mentoring and client development.”
The son of an ironworker, Mr. Cummings was raised in Jersey City, where he played basketball as a child. The sport is still a passion for him today.
“I play every weekend with a bunch of old guys,” he said with a laugh. “Ugly basketball.”
He lives less than a mile away from Investor Bank’s main office and said that his commute, short as it is, doesn’t even allow him to hear a whole Billy Joel song unless he hits a traffic light.
His office is on the second floor of the a rather nondescript building in Short Hills, a town best known for the large shopping mall that sits directly across from the entrance to the office. Just outside his office, a green sign hangs with a quote from Mr. Cummings similar to one once spoken by New York Yankee Joe DiMaggio: “I’d like to thank the Good Lord for making me an Investors Bank employee.”
It goes without saying that Mr. Cummings believes in the change that has been ongoing at the bank under his watch.
Since the new management took over, 37 of the top 40 people are new to the bank, in what Mr. Cummings called “evolution, not revolution.” His real estate group is currently made up of 14 people, a figure he’s like to increase by 50 percent over the short term.
“It’s more important to know what you don’t know, then trying to be the smartest guy in the room,” he said. Mr. Cummings praised a number of his employees for the success the company has seen, including Richard Spengler, the company’s executive vice president and chief lending officer, who joined from First Savings Bank in 2003, when Mr. Cummings was still COO.
That praise goes both ways. Reached by phone, Mr. Spengler used terms like “amazing” and “high energy” to describe his boss.
“He’s a unique CEO in the sense that when we talk, he doesn’t ask me to do more for him, he asks me what can I do to make your life easier—what can I do to help you originate more loans?”
Mr. Spengler went on to add that Mr. Cummings is more dialed in that any other CEO he knows, jumping into the trenches with his employees and focusing on better utilizing their talents.
Asked about trends in the real estate market, Mr. Cummings didn’t even have to look farther than his own home.
“My kids—they don’t want to buy a house,” he said. “All they’ve seen since they’ve graduated college in the last 10 years is real estate prices flat or declining, so they don’t see it as an investment. They see it just as a place to live.”
Mr. Cummings sees plenty of growth opportunities even within the multifamily sector, as the density of population and demographics continue to push growth within New Jersey and New York.
“What’s amazing is the competition coming back into the marketplace right now,” he said.
However, he did say there has been some semblance of a bubble in certain areas.
“There’s some irrational pricing out there, even on some construction loans,” he said. “We went through the worst construction cycle, residential real estate still in the doldrums, and we’re losing deals with a 4 percent handle? We think that’s irrational pricing.”
Mr. Cummings has been surprised about how well office space has held up in
Manhattan though, even with the continuing levels of unemployment. “We didn’t have the glut in overbuilding that we had in the recession of the late 80s/90s on the office side, so the pain hasn’t been as great as people had predicted.”
“Back three to four years ago, there was talk about what we were going to do when all these CMBS’ come due, what’s going to happen? The other shoe hasn’t fallen yet,” he said.
Still, despite tepid thoughts on the future of the economy, Mr. Cummings is sure about one thing: the success of Investors Bank.
“We want to be the most significant, premier banking organization headquartered in the New York and New Jersey metropolitan area,” he said of his future goals.
Mr. Cummings hopes to raise another $1 billion in capital over the next two years, develop a middle market business lending team and double the size of the commercial real estate group.
“We’ll make a great living serving the underserved, we’ll work on the middle to lower end of the market and we’ll give them service that they won’t get at the large banks,” he vowed.
In order to achieve these goals, he’s drawing some lessons from another successful manager in New Jersey: New York Giants’ head coach Tom Coughlin.
“You look at their team, and how they lost two games to Washington, Seattle and Philadelphia, but they ended up accomplishing what they did,” he said. “If we can get people, all in, on the same page, working together, that’s a good lesson for business.”
Mr. Cummings might often sound like a football coach. He described his current position as one of a motivational speaker and instructor and he makes a point to meet every employee within the company at least once a year to hear their thoughts and ways in which Investors Bank might improve to better serve customers.
His passion and drive to make the bank a success go all the way to the training of new employees. During orientation speeches he and the rest of the management staff give to all new hires, he tells them “If you don’t want to put your heart and soul into this, I’ll offer you $1,000 to leave.”
“The last thing we want is people who are just here to suck air out of the room,” he said. “We want people who want to make a difference.”