Investors Bancorp Inc. reported net interest margin expansion in the third quarter, and management said during an earnings call that they expect further improvement in the fourth quarter.

The bank's liability-sensitive balance sheet had been a problem in a rising-rate environment, limiting the bank's ability to deliver robust profits. The market has punished the bank with a valuation well below the sector average with a price-to-tangible book ratio of 120.6%, compared to 178.9% for an index of the company's peers. In November 2018, The Wall Street Journal reported Investors had hired an investment bank with plans to sell. That take-out premium dissipated after the bank announced the purchase of Gold Coast Bancorp Inc. in July.

With a dramatic change in the rate environment over the last six months, the bank's liability-sensitive balance sheet has been transformed into an asset, as the bank's profits benefit from lower rates at a time when the broader industry's preference for asset-sensitive balance sheets has threatened profit margins. In the third quarter, Investors reported NIM expansion of 6 basis points from the linked quarter, and management said they expect additional growth of 5 basis points in the fourth quarter.

"We're at an inflection point with respect to our net interest margin. I guess that's one of the advantages of being an outlier, being a liability-sensitive organization, but we're still on that journey to continue to evolve into a full-service commercial bank," Chairman and CEO Kevin Cummings said during the call.

Management said the bank plans to continue allowing low-yielding multifamily assets to run off the bank's balance sheet, which allows it to decrease the associated high-cost funding. Executives mentioned New York City rent control regulations and the state of the commercial real estate cycle as further support for drawing down its multifamily portfolio.