SECURITIES AND EXCHANGE COMMISSION

450 Fifth Street, N.W.

Washington, D.C. 20549

Form 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2011

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission File No. 000-51557

Investors Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Delaware	22-3493930
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
101 JFK Parkway, Short Hills, New Jersey	07078
(Address of Principal Executive Offices)	Zip Code

(973) 924-5100

(Registrant’s telephone number)

Securities Registered Pursuant to Section 12(b) of the Act:

Common Stock, par value $0.01 per share	The NASDAQ Stock Market LLC
(Title of Class)	(Name of each exchange on which registered)

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  þ

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	þ		Accelerated filer	¨
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

As of February 21, 2012, the registrant had 118,020,280 shares of common stock, par value $0.01 per share, issued and 111,485,634 shares outstanding, of which 65,396,235 shares, or 58.7%, were held by Investors Bancorp, MHC, the registrant’s mutual holding company.

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sale price on June 30, 2011, as reported by the NASDAQ Global Select Market, was approximately $679.8 million.

DOCUMENTS INCORPORATED BY REFERENCE

1. Proxy Statement for the 2012 Annual Meeting of Stockholders of the Registrant (Part III).

INVESTORS BANCORP, INC.

2011 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

	Page
Part I
Item 1. Business		2
Item 1A. Risk Factors		41
Item 1B. Unresolved Staff Comments		47
Item 2. Properties		47
Item 3. Legal Proceedings		47
Item 4. Mine Safety Disclosures		47
Part II
Item  5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		48
Item 6. Selected Financial Data		50
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		52
Item 7A. Quantitative and Qualitative Disclosures about Market Risk		72
Item 8. Financial Statements and Supplementary Data		72
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		72
Item 9A. Controls and Procedures		73
Item 9B. Other Information		74
Part III
Item 10. Directors, Executive and Corporate Governance		74
Item 11. Executive Compensation		74
Item  12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		74
Item 13. Certain Relationships, Related Transactions and Director Independence		74
Item 14. Principal Accountant Fees and Services		74
Part IV
Item 15. Exhibits and Financial Statement Schedules		74
SIGNATURES		133

PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT

This Annual Report on Form 10-K contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements may be identified by the use of the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar terms and phrases, including references to assumptions.

Forward-looking statements are based on various assumptions and analyses made by us in light of our management’s experience and its perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond our control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following:

• the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control;

• there may be increases in competitive pressure among financial institutions or from non-financial institutions;

• changes in the interest rate environment may reduce interest margins or affect the value of our investments;

• changes in deposit flows, loan demand or real estate values may adversely affect our business;

• changes in accounting principles, policies or guidelines may cause our financial condition to be perceived differently;

• general economic conditions, either nationally or locally in some or all areas in which we do business, or conditions in the real estate or securities markets or the banking industry may be less favorable than we currently anticipate;

• legislative or regulatory changes may adversely affect our business;

• technological changes may be more difficult or expensive than we anticipate;

• success or consummation of new business initiatives may be more difficult or expensive than we anticipate;

• litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may be determined adverse to us or may delay the occurrence or non-occurrence of events longer than we anticipate;

• the risks associated with continued diversification of assets and adverse changes to credit quality;

• difficulties associated with achieving expected future financial results; and

• the risk of continued economic slowdown that would adversely affect credit quality and loan originations.

We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.

As used in this Form 10-K, “we,” “us” and “our” refer to Investors Bancorp, Inc. and its consolidated subsidiaries, principally Investors Bank.

1

PART I

ITEM 1. BUSINESS

Investors Bancorp, Inc.

Investors Bancorp, Inc. (the “Company”) is a Delaware corporation that was organized on January 21, 1997 for the purpose of being a holding company for Investors Bank (the “Bank”), a New Jersey chartered savings bank. On October 11, 2005, the Company completed its initial public stock offering in which it sold 51,627,094 shares, or 44.40% of its outstanding common stock, to subscribers in the offering, including 4,254,072 shares purchased by the Investors Bank Employee Stock Ownership Plan (the “ESOP”). Upon completion of the initial public offering, Investors Bancorp, MHC (the “MHC”), the Company’s New Jersey chartered mutual holding company parent, held 63,099,781 shares, or 54.27% of the Company’s outstanding common stock. Additionally, the Company contributed $5,163,000 in cash and issued 1,548,813 shares of common stock, or 1.33% of its outstanding shares, to the Investors Bank Charitable Foundation.

Since the formation of the Company in 1997, our primary business has been that of holding the common stock of the Bank and additionally since our stock offering, a loan to the ESOP. Investors Bancorp, Inc., as the holding company of Investors Bank, is authorized to pursue other business activities permitted by applicable laws and regulations for bank holding companies.

Our cash flow depends on dividends received from Investors Bank. Investors Bancorp, Inc. neither owns nor leases any property, but instead uses the premises, equipment and furniture of Investors Bank. At the present time, we employ as officers only certain persons who are also officers of Investors Bank and we use the support staff of Investors Bank from time to time. These persons are not separately compensated by Investors Bancorp, Inc. Investors Bancorp, Inc. may hire additional employees, as appropriate, to the extent it expands its business in the future.

On October 15, 2010, the Company completed its acquisition of Millennium bcpbank (“Millennium”) deposit franchise. In this transaction the Company acquired approximately $600.0 million of deposits and seventeen branches in New Jersey, New York and Massachusetts for a deposit premium of 0.11%. In addition, the Company purchased a portion of Millennium’s performing loan portfolio and entered into a loan servicing agreement to service those loans it did not purchase. The Company recorded a bargain purchase gain of $1.8 million in connection with the purchase of the Millennium deposit franchise and servicing of their loan portfolio. On May 6, 2011 the Company sold the Millennium branch locations in Massachusetts to Admirals Bank, headquartered in Cranston, Rhode Island which resulted in a gain of $72,000.

On October 16, 2009, the Company completed the acquisition of six New Jersey bank branches and approximately $227.0 million of deposits from Banco Popular North America. The Company did not purchase any loans as part of the transaction. The transaction generated approximately $4.9 million in goodwill.

On May 31, 2009, the Company completed the acquisition of American Bancorp of New Jersey, Inc. (“American Bancorp”), the holding company of American Bank of New Jersey (“American Bank”), a federal savings bank with approximately $680.0 million in assets and five full-service branches in northern New Jersey. The acquisition was accounted for under the purchase method of accounting as prescribed by Accounting Standard Codification (“ASC”) 805, “Business Combinations,” as amended. Accordingly, American Bancorp’s results of operations have been included in the Company’s results of operations since the date of acquisition. Under this method of accounting, the purchase price is allocated to the respective assets acquired and liabilities assumed based on their estimated fair values, net of applicable income tax effects. The excess cost over fair value of net assets acquired is recorded as goodwill. The purchase price of $98.2 million was paid through a combination of the Company’s common stock (6,503,897 shares) and cash of $47.5 million. The transaction generated approximately $17.6 million in goodwill and $3.9 million in core deposit intangibles subject to amortization beginning June 1, 2009. American Bank was merged into the Bank as of the acquisition date.

2

On June 6, 2008, Investors Bancorp, MHC, the Company’s New Jersey chartered mutual holding company, completed its merger of Summit Federal Bankshares, MHC, a federally chartered mutual holding company. The merger was a combination of mutual enterprises and therefore was accounted for using the pooling-of-interests method. All financial information prior to the merger date has been restated to include amounts for Summit Federal for all periods presented. At the merger date, Summit Federal had assets of $110.0 million and five full service branches in northern New Jersey. The effect of the merger on the Company’s consolidated financial condition and results of operations was immaterial. In connection with the merger, the Company, as required by the Office of Thrift Supervision (OTS) which regulated Summit Federal, issued 1,744,592 additional shares of its common stock to Investors Bancorp, MHC.

Subsequent to December 31, 2011, the Company completed the acquisition of Brooklyn Federal Bancorp.Inc. Brooklyn Federal Bancorp, Inc., BFS Bancorp, MHC and Brooklyn Federal Savings Bank, were merged with and into Investors Bancorp, Inc., Investors Bancorp, MHC and Investors Bank, respectively, on January 6, 2012. Brooklyn Federal had $440 million in assets, $381 million in deposits and five full-service branches in Brooklyn and Long Island. In a separate transaction, Investors Bancorp, Inc. sold most of Brooklyn Federal Bancorp, Inc.’s commercial real estate loan portfolio to a real estate investment fund on January 10, 2012. As these transactions took place in January 2012, they are not reflected in the balance sheet or results of operation for the periods presented in this document.

Investors Bank

General

Investors Bank, formerly Investors Savings Bank, is a New Jersey-chartered savings bank headquartered in Short Hills, New Jersey. Originally founded in 1926 as a New Jersey-chartered mutual savings and loan association, we have grown through acquisitions and internal growth, including de novo branching. In 1992, we converted our charter to a mutual savings bank, and in 1997 we converted our charter to a New Jersey-chartered stock savings bank. In September 2011 we launched our new name, logo and brand identity which reflects our continued evolution to a full service community bank and our financial commitment to the communities we serve throughout New Jersey and New York. We conduct business from our main office located at 101 JFK Parkway, Short Hills, New Jersey, and 81 branch offices located throughout northern and central New Jersey and New York. The telephone number at our main office is (973) 924-5100. At December 31, 2011, our assets totaled $10.70 billion and our deposits totaled $7.36 billion.

We are in the business of attracting deposits from the public through our branch network and borrowing funds in the wholesale markets to originate loans and to invest in securities. We originate mortgage loans secured by one- to four-family residential real estate loans, multi-family loans, commercial real estate loans, construction loans, commercial and industrial loans and consumer loans, the majority of which are home equity loans and home equity lines of credit. Securities, primarily U.S. Government and Federal Agency obligations, mortgage-backed and other securities represented 11.9% of our assets at December 31, 2011. We offer a variety of deposit accounts and emphasize quality customer service. Investors Bank is subject to comprehensive regulation and examination by both the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation and we are subject to regulations as a bank holding company by the Federal Reserve Board.

Our results of operations are dependent primarily on our net interest income, which is the difference between the interest earned on our assets, primarily our loan and securities portfolios, and the interest paid on our deposits and borrowings. Our net income is also affected by our provision for loan losses, non-interest income, non-interest expense and income tax expense. Non-interest income includes fees and service charges; income from bank owned life insurance, or BOLI; net gain on sales of mortgage loans; net gain on securities; and other income. Non-interest expense consists of compensation and benefits expense; advertising and promotional expense; office occupancy and equipment expense; federal deposit insurance premiums; stationary, printing, supplies and telephone expense; professional fees; data processing fees; and other operating expenses. Our earnings are significantly affected by general economic and competitive conditions, particularly changes in market interest rates and U.S. Treasury yield curves, government policies and actions of regulatory authorities.

3

Market Area

We are headquartered in Short Hills, New Jersey, and our primary deposit gathering area had been concentrated in the communities surrounding our headquarters and our branch offices located in the communities of Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Union and Warren Counties, New Jersey. In 2010, we entered the New York market with the opening of our New York City lending office and the acquisition of the Millennium branches. During 2011, we continued to expand our retail operations and geographic footprint by opening a de novo branch in Brooklyn and entering into a definitive agreement to purchase Brooklyn Federal Bancorp, Inc. That acquisition was completed on January 6, 2012 and added an additional 5 branches in the New York market. Our primary lending area is broader than our deposit-gathering area and includes 14 counties in New Jersey and 6 counties in New York. It is largely urban and suburban with a broad economic base as is typical for counties in and surrounding the New York metropolitan area. The market we operate in is considered one of the most attractive banking markets in the United States.

Many of the counties we serve are projected to experience strong to moderate population and household income growth through 2016. Though slower population growth is projected for some of the counties we serve, it is important to note that these counties represent some of the most densely populated counties. All of the counties we serve have a strong mature market with median household incomes greater than $47,000. The household incomes in the counties we serve are all expected to increase in a range from 8.54% to 21.25% through 2016. The December 2011 unemployment rates for New Jersey and New York were, 8.7% and 8.0%, respectively, while the national rate was 8.5%.

Competition

We face intense competition within our market area both in making loans and attracting deposits. Our market area has a high concentration of financial institutions, including large money center and regional banks, community banks and credit unions. Some of our competitors offer products and services that we currently do not offer, such as trust services and private banking. As of June 30, 2011, the latest date for which statistics are available, our market share of deposits was 2.7% of total deposits in the State of New Jersey.

Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms and credit unions. We face additional competition for deposits from short-term money market funds, brokerage firms, mutual funds and insurance companies. Our primary focus is to build and develop profitable customer relationships across all lines of business while maintaining our role as a community bank.

Lending Activities

Our loan portfolio is comprised primarily of residential real estate loans, multifamily loans, commercial loans, construction loans, commercial and industrial loans and consumer and other loans. In recent years we have focused on growing our commercial real estate portfolio. Residential mortgage loans represented $5.03 billion, or 56.6% of our total loans at December 31, 2011 compared to $3.18 billion, or 88.1% of our total loans at June 30, 2007. At December 31, 2011, multi-family loans totaled $1.82 billion, or 20.4% of our total loan portfolio, commercial real estate totaled $1.42 billion, or 16.0% of our total loan portfolio, construction loans totaled $277.6 million, or 3.1% of our total loan portfolio, and commercial and industrial loans totaled $106.3 million or 1.2% of our total loan portfolio. We also offer consumer loans, which consist primarily of home equity loans and home equity lines of credit. At December 31, 2011, consumer loans totaled $242.2 million or 2.7% of our total loan portfolio.

4

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan, at the dates indicated.

	December 31,																		June 30,
	2011						2010						2009						2009						2008						2007
	Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands )
Residential mortgage loans:
One- to four-family	$	5,018,806			56.42	%	$	4,922,901			61.58	%	$	4,756,042			71.50	%	$	4,690,335			76.00	%	$	3,989,334			85.54	%	$	3,159,484			87.51	%
FHA		15,355			0.17			16,343			0.2			17,514			0.26			18,564			0.3			20,229			0.43			22,624			0.63
Total residential mortgage loans		5,034,161			56.59			4,939,244			61.78			4,773,556			71.76			4,708,899			76.3			4,009,563			85.97			3,182,108			88.14
Multi-family		1,816,118			20.42			1,161,874			14.53			612,743			9.21			482,783			7.82			82,711			1.77			40,066			1.11
Commercial		1,418,636			15.95			1,225,256			15.33			730,012			10.97			433,204			7.02			142,396			3.06			69,282			1.92
Construction loans		277,625			3.12			347,825			4.35			334,480			5.03			346,967			5.62			260,177			5.58			153,420			4.25
Commercial and industrial loans		106,299			1.20			60,903			0.76			23,159			0.35			15,665			0.25			47			—			—			—
Consumer and other loans:
Home equity loans		121,134			1.36			147,540			1.84			104,864			1.58			119,193			1.93			139,587			2.99			139,524			3.86
Home equity credit lines		117,445			1.32			108,356			1.36			70,341			1.06			61,664			1.00			27,270			0.59			23,927			0.66
Other		3,648			0.04			3,861			0.05			2,972			0.04			3,341			0.06			1,962			0.04			1,993			0.06
Total consumer and other loans		242,227			2.72			259,757			3.25			178,177			2.68			184,198			2.99			168,819			3.62			165,444			4.58
Total loans	$	8,895,066			100.00	%	$	7,994,859			100.00	%	$	6,652,127			100.00	%	$	6,171,716			100.00	%	$	4,663,713			100.00	%	$	3,610,320			100.00	%
Premiums on purchased loans, net		29,927						22,021						22,958						21,313						22,622						23,587
Deferred loan fees, net		(13,540	)					(8,244	)					(4,574	)					(3,252	)					(2,620	)					(1,958	)
Allowance for loan losses		(117,242	)					(90,931	)					(55,052	)					(46,608	)					(13,565	)					(6,951	)
Net loans	$	8,794,211					$	7,917,705					$	6,615,459					$	6,143,169					$	4,670,150					$	3,624,998

Loan Portfolio Maturities. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2011. Overdraft loans are reported as being due in one year or less.

	At December 31, 2011
	Residential Mortgage		Multi-Family		Commercial Real Estate		Construction Loans		Commercial and Industrial loans		Consumer and Other Loans		Total
	(In thousands)
Amounts Due:
One year or less	$	9,995		22,805		15,507		203,195		44,739		2,092		298,332
After one year:
One to three years		7,332		128,066		240,644		72,142		8,607		8,562		465,353
Three to five years		6,037		244,319		151,473		2,288		20,709		14,708		439,534
Five to ten years		191,214		1,210,295		861,064		—		25,815		70,734		2,359,122
Ten to twenty years		9,400		28,697		2,625		—		6,429		727		47,878
Over twenty years		4,810,183		181,936		147,323		—		—		145,404		5,284,847
Total due after one year		5,024,166		1,793,313		1,403,129		74,430		61,560		240,135		8,596,733
Total loans	$	5,034,161	$	1,816,118	$	1,418,636	$	277,625	$	106,299	$	242,227		8,895,066
Premiums on purchased loans, net														29,927
Deferred loan fees, net														(13,540	)
Allowance for loan losses														(117,242	)
Net loans													$	8,794,211

5

The following table sets forth fixed- and adjustable-rate loans at December 31, 2011 that are contractually due after December 31, 2012.

	Due After December 31, 2012
	Fixed		Adjustable		Total
	(In thousands)
Residential mortgage loans	$	3,063,425		1,960,741		5,024,166
Multi-family loans		937,226		856,087		1,793,313
Commercial real estate loans		905,070		498,059		1,403,129
Construction loans		6,150		68,280		74,430
Commercial and industrial loans		46,017		15,543		61,560
Consumer and other loans:
Home equity loans		120,554		—		120,554
Home equity credit lines		—		116,057		116,057
Other		—		3,524		3,524
Total consumer and other loans		120,554		119,581		240,135
Total loans	$	5,078,442	$	3,518,291	$	8,596,733

Residential Mortgage Loans. One of our primary lending activities has been originating and purchasing residential mortgage loans, most of which are secured by properties located in our primary market area and most of which we hold in portfolio. At December 31, 2011, $5.03 billion, or 56.6%, of our loan portfolio consisted of residential mortgage loans. Residential mortgage loans are originated by our mortgage subsidiary, Investors Home Mortgage, for our loan portfolio and for sale to third parties. We also purchase mortgage loans from correspondent entities including other banks and mortgage bankers. Our agreements call for these correspondent entities to originate loans that adhere to our underwriting standards. In most cases we acquire the loans with servicing rights, but we have some arrangements in which the correspondent entity will sell us the loan without servicing rights. In addition, we purchase pools of mortgage loans in the secondary market on a “bulk purchase” basis from several well-established financial institutions. While some of these financial institutions retain the servicing rights for loans they sell to us, when presented with the opportunity to purchase the servicing rights as part of the loan, we may decide to purchase the servicing rights. This decision is generally based on the price and other relevant factors.

Generally, residential mortgage loans are originated in amounts up to 80% of the lesser of the appraised value or purchase price of the property to a maximum loan amount of $750,000. Loans over $750,000 require a lower loan to value ratio. Loans in excess of 80% of value require private mortgage insurance and cannot exceed $500,000. We will not make loans with a loan-to-value ratio in excess of 95% or 97% for programs to low or moderate-income borrowers. Fixed-rate mortgage loans are originated for terms of up to 30 years. Generally, all fixed-rate residential mortgage loans are underwritten according to Fannie Mae guidelines, policies and procedures. At December 31, 2011, we held $3.07 billion in fixed-rate residential mortgage loans which represented 61.0% of our residential mortgage loan portfolio.

We also offer adjustable-rate residential mortgage loans, which adjust annually after three, five, seven or ten year initial fixed-rate periods. Our adjustable rate loans usually adjust to an index plus a margin, based on the weekly average yield on U.S. Treasuries adjusted to a constant maturity of one year. Annual caps of 2% per adjustment apply, with a lifetime maximum adjustment of 5% on most loans. Our adjustable-rate mortgage loans amortize over terms of up to 30 years. In addition, we originate interest-only one-to four-family mortgage loans in which the borrower makes only interest payments for the first five, seven or ten years of the mortgage loan term. This feature will result in future increases in the borrower’s contractually required payments due to the required amortization of the principal amount after the interest-only period. The Company maintains stricter underwriting criteria for these interest-only loans than it does for its amortizing loans. Borrowers are qualified using the loan rate at the date of origination and the fully amortized payment amount.

6

Adjustable-rate mortgage loans decrease the Bank’s risk associated with changes in market interest rates by periodically re-pricing, but involve other risks because, as interest rates increase, the underlying payments by the borrower increase, which increases the potential for default by the borrower. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates or a decline in housing values. The maximum periodic and lifetime interest rate adjustments may limit the effectiveness of adjustable-rate mortgages during periods of rapidly rising interest rates. At December 31, 2011, we held $1.96 billion of adjustable-rate residential mortgage loans, of which $478.4 million were interest-only one-to four-family mortgages. Adjustable-rate residential mortgage loans represented 39.0% of our residential mortgage loan portfolio.

To provide financing for low-and moderate-income home buyers, we also offer various loan programs some of which include down payment assistance for home purchases. Through these programs, qualified individuals receive a reduced rate of interest on most of our loan programs and have their application fee refunded at closing, as well as other incentives if certain conditions are met.

All residential mortgage loans we originate include a “due-on-sale” clause, which gives us the right to declare a loan immediately due and payable if the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid. All borrowers are required to obtain title insurance, fire and casualty insurance and, if warranted, flood insurance on properties securing real estate loans.

Multi-family and Commercial Real Estate Loans. As part of our strategy to add to and diversify our loan portfolio, we offer mortgages on multi-family and commercial real estate properties. At December 31, 2011, $1.82 billion, or 20.4%, of our total loan portfolio was multi-family and $1.42 billion or 15.6% of our total loan portfolio was commercial real estate loans. Our policy generally has been to originate multi-family and commercial real estate loans in New Jersey, New York and surrounding states. Commercial real estate loans are secured by office buildings, mixed-use properties and other commercial properties. The multi-family and commercial real estate loans in our portfolio consist of both fixed-rate and adjustable-rate loans which were originated at prevailing market rates. Multi-family and commercial real estate loans are generally five to fifteen year term balloon loans amortized over fifteen to thirty years. The maximum loan-to-value ratio is 70% for our commercial real estate loans and 75% for multi-family loans. At December 31, 2011, our largest commercial real estate loan was $30.0 million and is on an industrial building in New Jersey. Our largest multi-family loan was $30.3 million and is on nine apartment buildings in New Jersey.

We consider a number of factors when we originate multi-family and commercial real estate loans. During the underwriting process we evaluate the business qualifications and financial condition of the borrower, including credit history, profitability of the property being financed, as well as the value and condition of the mortgaged property securing the loan. When evaluating the business qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, we consider the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service) to ensure it is at least 120% of the monthly debt service for apartment buildings and 130% for commercial income-producing properties. All commercial real estate loans are appraised by outside independent appraisers who have been approved by our Board of Directors. Personal guarantees are obtained from commercial real estate borrowers although we will consider waiving this requirement based upon the loan-to-value ratio of the proposed loan and other factors. All borrowers are required to obtain title, fire and casualty insurance and, if warranted, flood insurance.

Loans secured by commercial real estate generally are larger than residential mortgage loans and involve greater credit risk. Commercial real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, management annually evaluates the performance of all commercial loans in excess of $1.0 million.

7

Construction Loans. We offer loans directly to builders and developers on income-producing properties and residential for-sale housing units. At December 31, 2011, we held $277.6 million in construction loans representing 3.1% of our total loan portfolio. Construction loans are originated through our commercial lending department. If the loan applicant meets our criteria, we issue a letter of intent listing the terms and conditions of any potential loan. Primarily we offer adjustable-rate residential construction loans which can be structured with an option for permanent mortgage financing once the construction is completed. Generally, construction loans will be structured to be repaid over a three-year period and generally will be made in amounts of up to 70% of the appraised value of the completed property, or the actual cost of the improvements. Funds are disbursed based on inspections in accordance with a schedule reflecting the completion of portions of the project. Construction financing for sold units requires an executed sales contract.

Construction loans generally involve a greater degree of credit risk than residential mortgage loans. The risk of loss on a construction loan depends on the accuracy of the initial estimate of the property’s value when the construction is completed compared to the estimated cost of construction. For all loans, we use outside independent appraisers approved by our Board of Directors. We require all borrowers to obtain title insurance, fire and casualty insurance and, if warranted, flood insurance. A detailed plan and cost review by an outside engineering firm is required on loans in excess of $2.5 million.

At December 31, 2011, the Bank’s largest construction loan was a $34.0 million note on an apartment-rental project in New Jersey. The loan had an outstanding balance at December 31, 2011 of $15.6 million and was performing in accordance with contractual terms.

Commercial and Industrial Loans. We offer commercial and industrial loans. These loans include term loans, lines of credit and owner occupied commercial real estate loans. These loans are generally secured by real estate or business assets and include personal guarantees. The loan to value limit is 75% and businesses will typically have at least a 2 year history. At December 31, 2011, $106.3 million, or 1.2%, of our loan portfolio consisted of these types of loans.

Consumer Loans. We offer consumer loans, most of which consist of home equity loans and home equity lines of credit. Home equity loans and home equity lines of credit are secured by residences located in New Jersey and New York. At December 31, 2011, consumer loans totaled $242.2 million or 2.7% of our total loan portfolio. The underwriting standards we use for home equity loans and home equity lines of credit include a determination of the applicant’s credit history, an assessment of the applicant’s ability to meet existing credit obligations, the payment on the proposed loan and the value of the collateral securing the loan. The combined (first and second mortgage liens) loan-to-value ratio for home equity loans and home equity lines of credit is generally limited to a maximum of 80%. Home equity loans are offered with fixed rates of interest, terms up to 30 years and to a maximum of $500,000. Home equity lines of credit have adjustable rates of interest, indexed to the prime rate, as reported in The Wall Street Journal.

8

The following table shows our loan originations, loan purchases and repayment activities with respect to our portfolio of loans receivable for the periods indicated. Origination, sale and repayment activities with respect to our loans-held-for-sale are excluded from the table.

	Year Ended December 31,									Six Months Ended December 31,			Year Ended June 30,
	2011			2010			2009			2009			2009
	(In thousands)
Loan originations and purchases:
Loan originations:
Residential mortgage loans:
One- to four-family	$	767,241			800,497			548,880			359,118			407,381
FHA		—			—			—			—			244
Total residential mortgage loans		767,241			800,497			548,880			359,118			407,625
Multi-family		846,685			487,933			247,388			148,386			145,521
Commercial real estate		308,245			412,623			439,531			301,603			221,964
Construction loans		120,773			214,437			94,342			56,275			127,631
Commercial and industrial		104,120			59,636			21,579			14,637			9,961
Consumer and other loans:
Home equity loans		14,399			12,921			10,941			6,251			14,562
Home equity credit lines		64,630			59,731			46,064			26,018			32,190
Other		15,314			15,168			3,849			2,012			3,698
Total consumer and other loans		94,343			87,820			60,854			34,281			50,450
Total loan originations	$	2,241,407			2,062,946			1,412,574			914,300			963,152
Loan purchases:
Residential mortgage loans:
One- to four-family	$	710,880			862,311			794,989			452,295			1,063,616
FHA		—			—			—			—			274
Commercial real estate		—			120,546			—			—			—
Multi-family		—			—			100,000			—			200,914
Consumer and other loans:
Home equity loans		—			69,044			—			—			—
Home equity credit lines		—			18,302			—			—			—
Other		—			—			—			—			—
Total consumer and other loans		—			87,346			—			—			—
Total loan purchases		710,880			1,070,203			894,989			452,295			1,264,804
Loans sold and principal repayments		(2,042,461	)		(1,786,658	)		(1,743,647	)		(882,200	)		(1,190,114	)
Other items, net(1)		(33,319	)		(44,245	)		(37,417	)		(12,105	)		(35,598	)
Net loans acquired in acquisition		—			—			470,775			—			470,775
Net increase in loan portfolio	$	876,507			1,302,246			997,274			472,290			1,473,019

(1) Other items include charge-offs, loan loss provisions, loans transferred to other real estate owned, and amortization and accretion of deferred fees and costs and discounts and premiums.

Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by our Board of Directors. In the approval process for residential loans we assess the borrower’s ability to repay the loan and the value of the property securing the loan. To assess the borrower’s ability to repay, we review the borrower’s income and expenses and employment and credit history. In the case of commercial real estate loans we also review projected income, expenses and the viability of the project being financed. We generally require appraisals of all real property

9

securing loans, except for home equity loans and home equity lines of credit, in which case we may use the tax-assessed value of the property securing such loan or a lesser form of valuation, such as a home value estimator or by a drive-by value estimated performed by an approved appraisal company. Appraisals are performed by independent licensed appraisers who are approved by our Board of Directors. We require borrowers, except for home equity loans and home equity lines of credit, to obtain title insurance. All real estate secured loans require fire and casualty insurance and, if warranted, flood insurance in amounts at least equal to the principal amount of the loan or the maximum amount available.

Our loan approval policies and limits are also established by our Board of Directors. All residential mortgage loans including home equity loans and home equity lines of credit up to $250,000 may be approved by loan underwriters, provided the loan meets all of our underwriting guidelines. If the loan does not meet all of our underwriting guidelines, but can be considered for approval because of other compensating factors, the loan must be approved by an authorized member of management. Residential mortgage loans in excess of $250,000 and up to $1,000,000 must be approved by an authorized member of management. Residential mortgage loans in excess of $1,000,000 and up to $1,500,000 must be approved by three authorized members of management. Residential mortgage loans in excess of $1,500,000 and up to $3,000,000 must be approved by three authorized members of management, one of whom must be an Executive Officer.

All commercial real estate, multi-family and construction loan requests or total credit relationships in an amount up to $3,000,000 may be approved by the Chief Lending Officer. All commercial real estate loan requests or total credit relationships in excess of $3,000,000 and up to $5,000,000 must be approved by any two of the following — the Chief Lending Officer and the Chief Operating Officer or the Chief Executive Officer. All loan requests or total credit relationships in excess of $5,000,000 must be approved by the Commercial Loan Committee, consisting of the Chief Executive Officer, Chief Operating Officer, Chief Lending Officer, Chief Financial Officer, Executive Vice President-Retail Banking and the Senior Vice President- Lending.

All business loans in an amount up to $1,500,000 must be approved by the Senior Vice President- Business Lending, Chief Lending Officer, Chief Operating Officer or Chief Executive Officer. All loan requests or total credit relationships in excess of $1,500,000 and up to $3,000,000 must be approved by the Vice President- Business Lending and the Chief Lending Officer, Chief Operating Officer or Chief Executive Officer. All loan requests or total credit relationships in excess of $3,000,000 and up to $5,000,000 must be approved by the Vice President- Business Lending and two of the following — Chief Lending Officer and the Chief Operating Officer or the Chief Executive Officer. All loan requests or total credit relationships in excess of $5,000,000 must be approved the Commercial Loan Committee, consisting of the Chief Executive Officer, Chief Operating Officer, Chief Lending Officer, Chief Financial Officer, Executive Vice President-Retail Banking and the Senior Vice President- Lending.

Loans to One Borrower. The Bank’s regulatory limit on total loans to any borrower or attributed to any one borrower is 15% of unimpaired capital and surplus. As of December 31, 2011, the regulatory lending limit was $132.4 million. The Bank’s internal policy limit is $70.0 million, with the option to exceed that limit with the Board of Directors’ approval, on total loans to a borrower or related borrowers. The Bank reviews these group exposures on a monthly basis. The Bank also sets additional limits on size of loans by loan type. At December 31, 2011, the Bank’s largest relationship with an individual borrower and its related entities was $68.0 million, consisting of a multi-family loan, a construction loan on an apartment rental project and a commercial line of credit on properties located in the State of New Jersey. The relationship was approved by the Board of Directors and was performing in accordance with contractual terms as of December 31, 2011.

Asset Quality

One of the Bank’s key operating objectives has been, and continues to be, maintaining a high level of asset quality. The Bank maintains sound credit standards for new loan originations and purchases. We do not originate or purchase sub-prime loans, negative amortization loans or option ARM loans. In addition, the Bank uses proactive collection and workout processes in dealing with delinquent and problem loans.

10

The underlying credit quality of our loan portfolio is dependent primarily on each borrower’s ability to continue to make required loan payments and, in the event a borrower is unable to continue to do so, the value of the collateral securing the loan, if any. A borrower’s ability to pay typically is dependent, in the case of one-to-four family mortgage loans and consumer loans, primarily on employment and other sources of income, and in the case of multi-family and commercial real estate loans, on the cash flow generated by the property, which in turn is impacted by general economic conditions. Other factors, such as unanticipated expenditures or changes in the financial markets, may also impact a borrower’s ability to pay. Collateral values, particularly real estate values, are also impacted by a variety of factors including general economic conditions, demographics, maintenance and collection or foreclosure delays.

Collection Procedures. We send system-generated reminder notices to start collection efforts when a loan becomes fifteen days past due. Subsequent late charge and delinquency notices are sent and the account is monitored on a regular basis thereafter. Direct contact with the borrower is attempted early in the collection process as a courtesy reminder and later to determine the reason for the delinquency and to safeguard our collateral. We provide the Board of Directors with a summary report of loans 30 days or more past due on a monthly basis. When a loan is more than 60 days past due, the credit file is reviewed and, if deemed necessary, information is updated or confirmed and collateral re-evaluated. We make every effort to contact the borrower and develop a plan of repayment to cure the delinquency. Loans are placed on non-accrual status when they are 90 days delinquent, but may be placed on non-accrual status earlier if the timely collection of principal and/or income is doubtful. When loans are placed on non-accrual status, unpaid accrued interest is fully reserved, and additional income is recognized in the period collected unless the ultimate collection of principal is considered doubtful. If our effort to cure the delinquency fails and a repayment plan is not in place, the file is referred to counsel for commencement of foreclosure or other collection efforts. We also own loans serviced by other entities and we monitor delinquencies on such loans using reports the servicers send to us. When we receive these past due reports, we review the data and contact the servicer to discuss the specific loans and the status of the collection process. We add the information from the servicer’s delinquent loan reports to our own delinquent reports and provide a full summary report monthly to our Board of Directors.

Our collection procedure for non mortgage related consumer and other loans includes sending periodic late notices to a borrower once a loan is past due. We attempt to make direct contact with the borrower once a loan becomes 30 days past due. The Collection Manager reviews loans 60 days or more delinquent on a regular basis. If collection activity is unsuccessful after 90 days, we may refer the matter to our legal counsel for further collection efforts or we may charge-off the loan. Non real estate related consumer loans that are considered uncollectible are proposed for charge-off by the Collection Manager on a monthly basis.

11

Delinquent Loans. The following table sets forth our loan delinquencies by type and by amount at the dates indicated.

	Loans Delinquent For
	60-89 Days				90 Days and Over				Total
	Number		Amount		Number		Amount		Number		Amount
	(Dollars in thousands)
At December 31, 2011
Residential mortgage loans:
One- to four-family		27		9,748		268	$	78,328		295	$	88,076
FHA		1		99		22		2,704		23		2,803
Total residential mortgage loans		28		9,847		290		81,032		318		90,879
Multi-family		4		6,180		—		—		4		6,180
Commercial real estate		—		—		1		73		1		73
Construction loans		1		8,068		12		40,362		13		48,430
Commercial and industrial		—		—		—		—		—		—
Consumer and other loans:
Home equity loans		2		169		8		556		10		725
Home equity credit lines		—		—		6		434		6		434
Other		3		4		11		19		14		23
Total consumer and other loans		5		173		25		1,009		30		1,182
Total		38	$	24,268		328		122,476		366		146,744
At December 31, 2010
Residential mortgage loans:
One- to four-family		33	$	11,664		220	$	70,389		253	$	82,053
FHA		2		226		23		3261		25		3,487
Total residential mortgage loans		35		11,890		243		73,650		278		85,540
Multi-family		3		12,898		3		2,748		6		15,646
Commercial real estate		1		502		8		3899		9		4,401
Construction loans		1		7,850		26		82,735		27		90,585
Commercial and industrial		2		640		5		1829		7		2,469
Consumer and other loans:
Home equity loans		3		8		11		507		14		515
Home equity credit lines		1		188		3		518		4		706
Other		—		—		6		8		6		8
Total consumer and other loans		4		196		20		1033		24		1,229
Total		46	$	33,976		305	$	165,894		351	$	199,870
At December 31, 2009
Residential mortgage loans:
One- to four-family		47	$	13,273		143	$	47,582		190	$	60,855
FHA		4		384		19		2507		23		2,891
Total residential mortgage loans		51		13,657		162		50,089		213		63,746
Multi-family		—		—		4		553		4		553
Commercial real estate		—		—		10		3417		10		3,417
Construction loans		3		19,056		21		53,468		24		72,524
Commercial and industrial		3		734		—		—		3		734
Consumer and other loans:
Home equity loans		—		—		4		81		4		81
Home equity credit lines		5		191		11		1074		16		1,265
Other		7		7		8		11		15		18
Total consumer and other loans		12		198		23		1166		35		1,364
Total		69	$	33,645		220	$	108,693		289	$	142,338

12

	Loans Delinquent For
	60-89 Days				90 Days and Over				Total
	Number		Amount		Number		Amount		Number		Amount
	(Dollars in thousands)
At June 30, 2009
Residential mortgage loans:
One- to four-family		30	$	8,165		82	$	27,837		112	$	36,002
FHA		6		721		15		1904		21		2,625
Total residential mortgage loans		36		8,886		97		29,741		133		38,627
Multi-family		1		181		6		20,074		7		20,255
Commercial real estate		3		784		6		2820		9		3,604
Construction loans		3		11,263		17		58,550		20		69,813
Commercial and industrial		—		—		—		—		—		—
Consumer and other loans:
Home equity loans		1		2		2		60		3		62
Home equity credit lines		4		659		3		150		7		809
Other		4		4		10		15		14		19
Total consumer and other loans		9		665		15		225		24		890
Total		52	$	21,779		141	$	111,410		193	$	133,189

Non-Performing Assets. Non-performing assets include non-accrual loans, mortgage loans delinquent 90 days or more and still accruing interest and real estate owned, or REO. We did not have any mortgage loans delinquent 90 days or more and still accruing interest at December 31, 2011. At December 31, 2011, we had REO of $3.1 million consisting of thirteen properties. Non-accrual loans decreased $23.7 million to $142.2 million at December 31, 2011, from $165.9 million at December 31, 2010. During 2011, the Company elected to sell twenty-three non-accrual commercial real estate loans on a bulk basis for $10.0 million. Although we have resolved a number of non-performing loans, the continued deterioration of the housing and real estate markets, as well as the overall weakness in the economy, continue to impact our non-accrual loans. As a geographically concentrated residential lender, we have been affected by negative consequences arising from the ongoing economic recession and, in particular, the continued decline in the housing industry, as well as economic and housing industry weaknesses in the New Jersey/New York metropolitan area. We are particularly vulnerable to the impact of a severe job loss recession. We continue to closely monitor the local and regional real estate markets and other factors related to risks inherent in our loan portfolio. The ratio of non-performing loans to total loans decreased to 1.72% at December 31, 2011, from 2.08% at December 31, 2010. Our ratio of non-performing assets to total assets decreased to 1.48% at December 31, 2011, from 1.74% at December 31, 2010. The allowance for loan losses as a percentage of total non-performing loans increased to 76.79% at December 31, 2011, from 54.81% at December 31, 2010. For further discussion of our non-performing assets and non-performing loans and the allowance for loan losses, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

13

The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.

	December 31,			December 31,			December 31,			June 30,
	2011(1)			2010			2009(2)			2009(3)			2008(4)			2007
	(Dollars in thousands)
Non-accrual loans:
Residential mortgage loans:
One- to four-family	$	80,901		$	70,389		$	47,582		$	27,837		$	5,060		$	2,220
FHA		3,155			3,261			2,507			1,904			1,631			1,300
Total residential mortgage loans		84,056			73,650			50,089			29,741			6,691			3,520
Multi-family and commercial loans		73			6,647			3,970			22,894			1,600			452
Construction loans		57,070			82,735			64,968			68,826			10,960			1,146
Commercial and industrial loans		—			1,829			—			—			—			—
Consumer and other loans:
Home equity loans		556			507			81			60			88			28
Home equity credit lines		434			518			1,074			150			30			—
Other		19			8			11			15			2			3
Total consumer and other loans		1,009			1,033			1,166			225			120			31
Total non-accrual loans		142,208			165,894			120,193			121,686			19,371			5,149
Real estate owned		3,081			976			—			—			—			—
Total non-performing assets	$	145,289		$	166,870		$	120,193		$	121,686		$	19,371		$	5,149
Performing troubled debt restructurings		10,465			4,822			—			—			—			—
Total non-accrual loans to total loans		1.60	%		2.08	%		1.81	%		1.97	%		0.42	%		0.14	%
Total non-performing assets to total assets		1.48	%		1.74	%		1.44	%		1.50	%		0.30	%		0.09	%

(1) An $8.1 million construction loan that was 60-89 days delinquent at December 31, 2011 was classified as non-performing. There were also 6 residential troubled debt restructurings totaling $3.0 million and 2 construction troubled debt restructurings totaling $8.6 million that were current as of December 31, 2011 classified as non-accrual.

(2) An $11.5 million construction loan that was 60-89 days delinquent at December 31, 2009 was classified as non-accrual.

(3) Two construction loans totaling $10.3 million were 60-89 days delinquent at June 30, 2009 were classified as non-accrual.

(4) An $11.0 million construction loan that is 60-89 days delinquent at June 30, 2008 is classified as non-accrual.

At December 31, 2011, there were $22.3 million of loans deemed trouble debt restructurings, of which $10.5 million were accruing and $11.8 million were on non-accrual.

For the year ended December 31, 2011, interest income that would have been recorded had our non-accruing loans been current in accordance with their original terms amounted to $10.3 million. We recognized interest income of $3.4 million on such loans for the year ended December 31, 2011.

Real Estate Owned. Real estate we acquire as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until sold. When property is acquired it is recorded at fair value at the date of foreclosure, establishing a new cost basis. Holding costs and declines in fair value result in charges to expense after acquisition. At December 31, 2011, we had REO of $3.1 million consisting of thirteen properties. At December 31, 2010, we had REO of $976,000 consisting of two properties. At December 31, 2009, June 30, 2009, 2008 and 2007, we held no real estate owned.

14

Classified Assets. Federal regulations provide that loans and other assets of lesser quality should be classified as “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” we will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “un-collectible” and of such little value their continuance as assets without the establishment of a specific loss reserve is not warranted. We classify an asset as “special mention” if the asset has a potential weakness that warrants management’s close attention. While such assets are not impaired, management has concluded that if the potential weakness in the asset is not addressed, the value of the asset may deteriorate, adversely affecting the repayment of the asset.

We are required to establish an allowance for loan losses in an amount that management considers prudent for loans classified substandard or doubtful, as well as for other problem loans. General allowances represent loss allowances which have been established to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When we classify problem assets as “loss,” we are required either to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge off such amount. Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation, which can require that we establish additional general or specific loss allowances.

We review the loan portfolio on a quarterly basis to determine whether any loans require classification in accordance with applicable regulations. Not all classified assets constitute non-performing assets.

Impaired Loans. The Company defines an impaired loan as a loan for which it is probable, based on current information, that the lender will not collect all amounts due under the contractual terms of the loan agreement. The Company considers the population of loans in its impairment analysis to include commercial real estate, multi-family and construction loans with an outstanding balance greater than $1.0 million and on non-accrual status, loans modified in a troubled debt restructuring (“TDR”), and other loans if management has specific information of a collateral shortfall. Impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the fair value of the collateral or the present value of the expected future cash flows. Smaller balance homogeneous loans are evaluated for impairment collectively unless they are modified in a troubled debt restructure. Such loans include residential mortgage loans, installment loans, and loans not meeting the Company’s definition of impaired, and are specifically excluded from impaired loans. At December 31, 2011, loans meeting the Company’s definition of an impaired loan totaled $70.7 million. The allowance for loan losses related to loans classified as impaired at December 31, 2011, amounted to $7.4 million. Interest income received during the year ended December 31, 2011 on loans classified as impaired was $1.9 million. For further detail on our impaired loans, see Note 1 and Note 5 of Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

Allowance for Loan Losses

Our allowance for loan losses is maintained at a level necessary to absorb loan losses that are both probable and reasonably estimable. In determining the allowance for loan losses, management considers the losses inherent in our loan portfolio and changes in the nature and volume of loan activities, along with the general economic and real estate market conditions. A description of our methodology in establishing our allowance for loan losses is set forth in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Allowance for Loan Losses.” The allowance for loan losses as of December 31, 2011 is maintained at a level that represents management’s best estimate of losses inherent in the loan portfolio. However, this analysis process is subjective, as it requires us to make estimates that are

15

susceptible to revisions as more information becomes available. Although we believe we have established the allowance at levels to absorb probable and estimable losses, future additions may be necessary if economic or other conditions in the future differ from the current environment.

Furthermore, as an integral part of their examination processes, the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation will periodically review our allowance for loan losses. Such agencies may require us to recognize additions to the allowance based on their judgments of information available to them at the time of their examination.

Allowance for Loan Losses. The following table sets forth activity in our allowance for loan losses for the periods indicated.

	Year Ended December 31,						Six Months Ended December 31,			Year Ended June 30,
	2011			2010			2009			2009			2008			2007
	(Dollars in thousands)
Allowance balance (beginning of period)	$	90,931			55,052			46,608			13,565			6,951			6,369
Provision for loan losses		75,500			66,500			23,425			29,025			6,646			729
Charge-offs:
Residential mortgage loans:
One- to four-family		9,304			6,432			1,587			—			18			—
FHA		—			—			4			14			—			141
Total residential mortgage loans		9,304			6,432			1,591			14			18			141
Multi-family loans		363			829			—			—			—			—
Commercial loans		7,637			98			—			—			—			—
Construction loans		30,548			23,160			13,411			—			—			—
Commercial & industrial loans		1,621			269			—			—			—			—
Consumer and other loans		714			41			23			11			15			10
Total charge-offs		50,187			30,829			15,025			25			33			151
Recoveries:
Residential mortgage loans:
One- to four-family		388			124			—			—			—			—
FHA		—			—			44			—			—			—
Total residential mortgage loans		388			124			44			—			—			—
Multi-family loans		19			—			—			—			—			—
Commercial loans		—			—			—			—			—			—
Construction loans		576			83			—			—			—			—
Commercial & industrial loans		13			—			—			—			—			—
Consumer and other loans		2			1			—			—			1			4
Total recoveries		998			208			44			—			1			4
Net charge-offs		(49,189	)		(30,621	)		(14,981	)		(25	)		(32	)		(147	)
Allowance acquired in acquisition		—			—			—			4,043			—			—
Allowance balance (end of period)	$	117,242			90,931			55,052			46,608			13,565			6,951
Total loans outstanding	$	8,895,066		$	7,994,859		$	6,652,127		$	6,171,716		$	4,663,713		$	3,610,320
Average loans outstanding	$	8,461,031		$	7,197,608		$	6,370,350		$	5,482,009		$	4,043,398		$	3,305,807
Allowance for loan losses as a percent of total loans outstanding		1.32	%		1.14	%		0.83	%		0.76	%		0.29	%		0.19	%
Net loans charged off as a percent of average loans outstanding		0.58	%		0.43	%		0.24	%		—	%		—	%		—	%
Allowance for loan losses to non-accrual loans		82.44	%		54.81	%		45.80	%		38.30	%		70.03	%		135.00	%

16

Allocation of Allowance for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

	December 31,															June 30,
	2011					2010					2009					2009
	Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans
								(Dollars in thousands)
End of period allocated to:
Residential mortgage loans	$	32,447		56.59	%	$	20,489		61.78	%	$	13,741		71.76	%	$	10,841		76.30	%
Multi-family		13,863		20.42	%		10,454		14.53	%		3,227		9.21	%		1,518		7.82	%
Commercial real estate		30,947		15.95	%		16,432		15.33	%		10,208		10.97	%		6,223		7.02	%
Construction loans		22,839		3.12	%		34,669		4.35	%		25,194		5.03	%		23,437		5.62	%
Commercial and industrial		3,677		1.20	%		2,189		0.76	%		558		0.35	%		351		0.25	%
Consumer and other loans		1335		2.72	%		866		3.25	%		510		2.68	%		459		2.99	%
Unallocated		12,134					5,832					1,614					3,779
Total allowance	$	117,242		100.00	%	$	90,931		100.00	%	$	55,052		100.00	%	$	46,608		100.00	%

	June 30,
	2008					2007
	Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans
			(Dollars in thousands)
End of period allocated to:
Residential mortgage loans	$	4,585		85.97	%	$	3,444		88.14	%
Multi-family and commercial		1,677		4.83	%		956		3.03	%
Construction loans		4,836		5.58	%		1,896		4.25	%
Consumer and other loans		254		3.62	%		247		4.58	%
Unallocated		2,213					408
Total allowance	$	13,565		100.00	%	$	6,951		100.00	%

Security Investments

The Board of Directors has adopted our Investment Policy. This policy determines the types of securities in which we may invest. The Investment Policy is reviewed annually by management and changes to the policy are recommended to and subject to approval by the Board of Directors. The Board of Directors delegates operational responsibility for the implementation of the Investment Policy to the Interest Rate Risk Committee, which is comprised of senior officers. While general investment strategies are developed by the Interest Rate Risk Committee, the execution of specific actions rests primarily with our Chief Financial Officer. He is responsible for ensuring the guidelines and requirements included in the Investment Policy are followed and all securities are considered prudent for investment. He or his designee is authorized to execute transactions that fall within the scope of the established Investment Policy. Investment transactions are reviewed and ratified by the Board of Directors at their regularly scheduled meetings.

Our Investment Policy requires that investment transactions conform to Federal and New Jersey State investment regulations. Our investments include U.S. Treasury obligations, securities issued by various Federal

17

Agencies, mortgage-backed securities, certain certificates of deposit of insured financial institutions, overnight and short-term loans to other banks, investment grade corporate debt instruments, and Fannie Mae and Freddie Mac equity securities. In addition, Investors Bancorp may invest in equity securities subject to certain limitations.

The Investment Policy requires that securities transactions be conducted in a safe and sound manner. Purchase and sale decisions are based upon a thorough analysis of each security to determine it conforms to our overall asset/liability management objectives. The analysis must consider its effect on our risk-based capital measurement, prospects for yield and/or appreciation and other risk factors.

At December 31, 2011, our securities portfolio totaled $1.27 billion representing 11.9% of our total assets. Securities are classified as held-to-maturity or available-for-sale when purchased. At December 31, 2011, $287.7 million of our securities were classified as held-to-maturity and reported at amortized cost and $983.7 million were classified as available-for-sale and reported at fair value.

Mortgage-Backed Securities. We purchase mortgage-backed pass through and collateralized mortgage obligation (“CMO”) securities insured or guaranteed by Fannie Mae, Freddie Mac (government-sponsored enterprises) and Ginnie Mae (government agency), and to a lesser extent, a variety of federal and state housing authorities (collectively referred to below as “agency-issued mortgage-backed securities”). At December 31, 2011, agency-issued mortgage-backed securities including CMOs, totaled $1.19 billion, or 93.6%, of our total securities portfolio.

Mortgage-backed pass through securities are created by pooling mortgages and issuing a security with an interest rate less than the interest rate on the underlying mortgages. Mortgage-backed pass through securities represent a participation interest in a pool of single-family or multi-family mortgages. As loan payments are made by the borrowers, the principal and interest portion of the payment is passed through to the investor as received. CMOs are also backed by mortgages; however, they differ from mortgage-backed pass through securities because the principal and interest payments of the underlying mortgages are financially engineered to be paid to the security holders of pre-determined classes or tranches of these securities at a faster or slower pace. The receipt of these principal and interest payments which depends on the proposed average life for each class is contingent on a prepayment speed assumption assigned to the underlying mortgages. Variances between the assumed payment speed and actual payments can significantly alter the average lives of such securities. To quantify and mitigate this risk, we undertake a payment analysis before purchasing these securities. We primarily invest in CMO classes or tranches in which the payments on the underlying mortgages are passed along at a pace fast enough to provide an average life of two to four years with no change in market interest rates. The issuers of such securities, as noted above, pool and sell participation interests in security form to investors such as Investors Bank and guarantee the payment of principal and interest. Mortgage-backed securities and CMOs generally yield less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements. However, mortgage-backed securities are usually more liquid than individual mortgage loans and may be used to collateralize borrowings and other liabilities.

Mortgage-backed securities present a risk that actual prepayments may differ from estimated prepayments over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments that can change the net yield on such securities. There is also reinvestment risk associated with the cash flows from such securities or if such securities are redeemed by the issuer. In addition, the fair value of such securities may be adversely affected by changes in interest rates.

Our mortgage-backed securities portfolio had a weighted average yield of 3.6% at December 31, 2011. The estimated fair value of our mortgage-backed securities at December 31, 2011 was $1.24 billion, which is $28.9 million greater than the amortized cost of $1.21 billion.

We also invest in securities issued by non-agency or private mortgage originators, provided those securities are rated AAA by nationally recognized rating agencies at the time of purchase. Our non-agency mortgage-backed securities are not guaranteed by GSE entities and complied with the investment and credit standards set

18

forth in the investment policy of the Company at the time of purchase. At December 31, 2011, the significant portion of the portfolio was comprised of 15 non-agency mortgage-backed securities with an amortized cost of $34.9 million and an estimated fair value of $35.5 million. These securities were originated in the period 2002-2003 and all are performing in accordance with contractual terms. Management determined that no additional other-than-temporary impairment existed as of December 31, 2011.

Corporate and Other Debt Securities. Our corporate and other debt securities portfolio consists of collateralized debt obligations (CDOs) backed by pooled trust preferred securities (TruPS), principally issued by banks (80.6%) and to a lesser extent insurance companies (17.5%) and real estate investment trusts (1.9%). The interest rates on these securities reset quarterly in relation to the 3 month Libor rate. These securities have been classified in the held to maturity portfolio since their purchase and the Company has no intent to sell these securities until maturity.

At December 31, 2011, the portfolio consisted of 33 securities with an amortized cost of $25.5 million and a fair value of $36.7 million and are all rated below investment grade. For December 31, 2011, we engaged an independent valuation firm to value our TruPS portfolio and prepare our other-than temporary impairment, or OTTI, analysis. The valuation firm assisted us in evaluating the credit and performance for each remaining issuer to derive probabilities and assumptions for default, recovery and prepayment/amortization for the expected cashflows for each security. At December 31, 2011, management deemed that there was no deterioration in projected discounted cashflows since the prior period for each of its TruPS and did not recognize an OTTI charge for the year ended December 31, 2011. The Company has no intent to sell, nor is it more likely than not that the Company will be required to sell, the debt securities before the recovery of their amortized cost basis or maturity.

At December 31, 2008, we recorded a pre-tax $156.7 million OTTI charge to reduce the carrying amount of our investment in pooled trust preferred securities to the securities’ fair values totaling $20.7 million. The decision to recognize the OTTI charge was based on the severity of the decline in the fair values of these securities at that time and the unlikelihood of any near-term market value recovery. The significant decline in the fair value occurred primarily as a result of deteriorating national economic conditions, rapidly increasing amounts of non-accrual and delinquent loans at some of the underlying issuing banks, and credit rating downgrades by Moody’s.

The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 320-10, “Recognition and Presentation of Other-Than-Temporary Impairments,” which was incorporated into ASC 320, “Investments — Debt and Equity Securities,” on April 1, 2009. Under this guidance, the difference between the present value of the cash flows expected to be collected and the amortized cost basis is deemed to be the credit loss. The present value of the expected cash flows is calculated based on the contractual terms of each security, and is discounted at a rate equal to the effective interest rate implicit in the security at the date of acquisition. The guidance also required management to determine the amount of any previously recorded OTTI charges on the TruPS that were related to credit and all other non-credit factors. In accordance with ASC 320, management considered the deteriorating financial condition of the U.S. banking sector, the credit rating downgrades, the accelerating pace of banks deferring or defaulting on their trust preferred debt, and the increasing amounts of non-accrual and delinquent loans at the underlying issuing banks. The aforementioned analysis was incorporated into the present value of the cash flows expected to be collected for each of these securities and management determined that $35.6 million of the previously recorded pre-tax OTTI charge was due to other non-credit factors and, in accordance with ASC 320, the Company recognized a cumulative effect of initially applying ASC 320 as a $21.1 million after-tax adjustment to retained earnings with a corresponding adjustment to AOCI. At June 30, 2009, the Company recorded an additional $1.3 million pre-tax credit related OTTI charge on these securities.

We continue to closely monitor the performance of the securities we own as well as the events surrounding this segment of the market. The Company will continue to evaluate for other-than-temporary impairment, which could result in a future non-cash charge to earnings.

19

Government Sponsored Enterprises. At December 31, 2011, bonds issued by Government Sponsored Enterprises held in our security portfolio totaled $174,000 representing less than 0.1% of our total securities portfolio. While these securities may generally provide lower yields than other securities in our securities portfolio, we hold for liquidity purposes, as collateral for certain borrowings, to achieve positive interest rate spreads with minimal administrative expense, and to lower our credit risk as a result of the guarantees provided by these issuers.

Marketable Equity Securities. At December 31, 2011, we had $1.9 million in equity securities representing 0.2% of our total securities portfolio. Equity securities are not insured or guaranteed investments and are affected by market interest rates and stock market fluctuations. Such investments (when held) are carried at their fair value and fluctuations in the fair value of such investments, including temporary declines in value, directly affect our net capital position.

Securities Portfolios. The following table sets forth the composition of our investment securities portfolios at the dates indicated.

	At December 31,												At June 30,
	2011				2010				2009				2009
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
							(In thousands)
Available-for-sale:
Equity securities	$	1,941		1,965		2,025		2,232		1,832		2,053		1,583		1,598
GSE debt securities		—		—		—		—		25,013		25,039		30,051		30,079
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		389,295		395,482		248,403		248,335		206,877		209,522		151,450		152,718
Federal National Mortgage Association		557,746		567,918		306,745		308,957		158,678		160,427		94,967		96,617
Government National Mortgage Association		7,212		7,313		9,202		9,445		10,504		10,450		275		300
Non-agency securities		10,782		11,037		34,640		33,764		67,290		63,752		80,523		73,704
Total mortgage-backed securities available for sale		965,035		981,750		598,990		600,501		443,349		444,151		327,215		323,339
Total securities available-for-sale	$	966,976		983,715		601,015		602,733		470,194		471,243		358,849		355,016
Held-to-maturity:
Debt securities:
Government Sponsored Enterprises	$	174		175		15,200		15,446		15,226		15,956		18,238		19,161
Municipal bonds		18,001		18,847		13,951		13,907		10,259		10,451		10,420		10,624
Corporate and other debt securities		25,511		36,707		23,552		41,289		21,411		37,809		20,727		20,129
		43,686		55,729		52,703		70,642		46,896		64,216		49,385		49,914
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		112,540		117,396		210,544		218,230		358,998		369,404		429,969		440,088
Government National Mortgage Association		1,382		1,585		3,243		3,530		3,880		4,157		4,269		4,617
Federal National Mortgage Association		103,823		110,586		166,251		175,456		236,109		245,353		278,272		286,820
Federal housing authorities		2,077		2,137		2,324		2,476		2,549		2,780		2,654		2,908
Non-agency securities		24,163		24,426		43,471		43,889		69,009		67,495		81,494		76,955
Total mortgage-backed securities held-to-maturity		243,985		256,130		425,833		443,581		670,545		689,189		796,658		811,388
Total securities held-to-maturity	$	287,671		311,859		478,536		514,233		717,441		753,405		846,043		861,302
Total securities	$	1,254,647		1,295,574		1,079,551		1,116,956		1,187,635		1,224,648		1,204,892		1,216,318

20

At December 31, 2011, we had no investment in the securities of any issuer that had an aggregate book value in excess of 10% of our equity.

Portfolio Maturities and Yields. The composition and maturities of the securities portfolio at December 31, 2011 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. State and municipal securities yields have not been adjusted to a tax-equivalent basis.

	One Year or Less					More than One Year through Five Years					More than Five Years through Ten Years					More than Ten Years					Total Securities
	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in thousands)
Available-for-Sale:
Equity securities	$	—		—	%	$	—		—	%	$	—		—	%	$	1,941		—	%	$	1,941	$	1,965		—	%
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		—		—			1,057		4.00			73,394		3.56			314,844		3.25			389,295		395,482		3.31
Government National Mortgage Association		—		—			—		—			—		—			7,212		4.00			7,212		7,313		4.00
Federal National Mortgage Association		—		—			3,028		4.00			233,448		3.36			321,270		3.29			557,746		567,918		3.32
Non-agency securities		—		—			—		—			10,782		4.50			—		—			10,782		11,037		4.50
Total mortgage-backed securities		—		—			4,085		4.00			317,624		3.44			643,326		3.23			965,035		981,750		3.34
Total securities available-for- sale	$	—		—	%	$	4,085		4.00	%	$	317,624		3.44	%	$	645,267		3.22	%	$	966,976	$	983,715		3.33	%
Held-to-Maturity:
Debt securities:
Government sponsored enterprises	$	—		—	%	$	—		—	%	$	—		—		$	174		1.25		$	174	$	175		1.25
Municipal bonds		11,966		1.43			885		8.47			20		7.17			5,130		9.08			18,001		18,847		3.96
Corporate and other debt securities		—		—			—		—			—		—			25,511		1.55			25,511		36,707		1.55
		11,966		1.43			885		8.47	%		20		7.17			30,815		2.80			43,686		55,729		2.54
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation		—		—			1,678		4.00			60,395		4.26			50,467		3.70			112,540		117,396		4.04
Government National Mortgage Association		—		—			—		—			—		—			1,382		7.50			1,382		1,585		7.50
Federal National Mortgage Association		—		—			1,078		5.00			53,388		4.68			49,357		4.80			103,823		110,586		4.74
Federal and state housing authorities		—		—			2,077		8.88			—		—			—		—			2,077		2,137		—
Non-agency securities		—		—			—		—			24,163		4.85			—		—			24,163		24,426		4.85
Total mortgage-backed securities		—		—			4,833		6.32			137,946		4.52			101,206		4.33			243,985		256,130		4.48
Total securities held-to-maturity	$	11,966		—	%	$	5,718		6.65	%	$	137,966		4.53		$	132,021		3.98	%	$	287,671	$	311,859		4.13	%

Sources of Funds

General. Deposits, primarily certificates of deposit, had traditionally been the primary source of funds used for our lending and investment activities. Our strategy is to increase core deposit growth to fund these activities. In addition, we use a significant amount of borrowings, primarily advances from the Federal Home Loan Bank of New York (“FHLB”); to supplement cash flow needs, to lengthen the maturities of liabilities for interest rate risk management and to manage our cost

21

of funds. Additional sources of funds include principal and interest payments from loans and securities, loan and security prepayments and maturities, brokered certificates of deposit, income on other earning assets and retained earnings. While cash flows from loans and securities payments can be relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.

Deposits. At December 31, 2011, we held $7.36 billion in total deposits, representing 75.6% of our total liabilities. In recent years, we have focused on changing the mix of our deposits from one focused on attracting certificates of deposit to one focused on core deposits. The impact of these efforts has been a continuing shift in deposit mix to lower cost core products. We remain committed to our plan of attracting more core deposits because core deposits represent a more stable source of low cost funds and are less sensitive to changes in market interest rates. At December 31, 2011, we held $4.02 billion in core deposits, representing 54.6% of total deposits. This is an increase of $685.2 million, or 20.5%, when compared to December 31, 2010, when our core deposits were $3.33 billion. At December 31, 2011, $3.34 billion, or 45.4%, of our total deposit balances were certificates of deposit, which included $171.7 million of brokered deposits. We intend to continue to invest in branch staff training and to aggressively market and advertise our core deposit products and will attempt to generate our deposits from a diverse client group within our primary market area. We remain focused on attracting deposits from municipalities and commercial and industrial “C&I” businesses which operate in our marketplace.

We have a suite of commercial deposit products, designed to appeal to small business owners and non-profit organizations. The interest rates we pay, our maturity terms, service fees and withdrawal penalties are all reviewed on a periodic basis. Deposit rates and terms are based primarily on our current operating strategies, market rates, liquidity requirements, rates paid by competitors and growth goals. We also rely on personalized customer service, long-standing relationships with customers and an active marketing program to attract and retain deposits.

The flow of deposits is influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition. The variety of deposit accounts we offer allows us to respond to changes in consumer demands and to be competitive in obtaining deposit funds. Our ability to attract and maintain deposits and the rates we pay on deposits will continue to be significantly affected by market conditions.

The following table sets forth the distribution of total deposit accounts, by account type, at the dates indicated.

	At December 31,
	2011								2010
	Balance		Percent of Total Deposits			Weighted Average Rate			Balance		Percent of Total Deposits			Weighted Average Rate
	(Dollars in thousands)
Savings	$	1,270,197		17.25	%		0.64	%	$	1,135,091		16.75	%		0.93	%
Checking accounts		1,633,703		22.19			0.32			1,367,282		20.18			0.37
Money market deposits		1,116,205		15.16			0.67			832,514		12.29			0.81
Total transaction accounts		4,020,105		54.60			0.52			3,334,887		49.22			0.65
Certificates of deposit		3,341,898		45.40			1.57			3,440,043		50.78			1.78
Total deposits	$	7,362,003		100.00	%		1.00	%	$	6,774,930		100.00	%		1.22	%

22

	At December 31,								At June 30,
	2009								2009
	Balance		Percent of Total Deposits			Weighted Average Rate			Balance		Percent of Total Deposits			Weighted Average Rate
	(Dollars in thousands)
Savings	$	877,421		15.02	%		1.64	%	$	779,678		14.16	%		1.99	%
Checking		927,675		15.88			0.81			898,816		16.33			0.84
Money market deposits		742,618		12.72			1.26			521,425		9.47			1.76
Total transaction accounts		2,547,714		43.62			1.21			2,199,919		39.96			1.46
Certificates of deposit		3,292,929		56.38			2.18			3,305,828		60.04			2.80
Total deposits	$	5,840,643		100.00	%		1.77	%	$	5,505,747		100.00	%		2.27	%

The following table sets forth, by rate category, the amount of certificates of deposit outstanding as of the dates indicated.

	At December 31,						At June 30,
	2011		2010		2009		2009
			(Dollars in thousands)
Certificates of Deposits
1% or less	$	1,250,482		853,183		276,876		2,102
1.01% - 2.00%		1,143,778		1,447,556		1,595,292		596,657
2.01% - 3.00%		676,248		761,101		850,129		1,501,821
3.01% - 4.00%		77,158		95,106		267,519		866,050
4.01% - 5.00%		169,998		244,912		268,460		311,509
Over 5.00%		24,234		38,185		34,653		27,689
Total	$	3,341,898		3,440,043		3,292,929		3,305,828

The following table sets forth, by rate category, the remaining period to maturity of certificates of deposit outstanding at December 31, 2011

	With in Three Months		Over Three to Six Months		Over Six Months to One Year		Over One Year to Two Years		Over Two Years to Three Years		Over Three Years		Total
	(Dollars in thousands)
Certificates of Deposits
1% or less	$	376,166		374,470		390,971		106,128		2,706		41		1,250,482
1.01% - 2.00%		203,942		154,622		266,824		386,831		66,726		64,833		1,143,778
2.01% - 3.00%		155,545		134,303		29,652		37,194		24,438		295,116		676,248
3.01% - 4.00%		14,745		2,555		5,827		6,541		35,848		11,642		77,158
4.01% - 5.00%		42,980		83,241		8,565		17,107		13,343		4,762		169,998
Over 5.00%		347		8,399		5,176		849		5,516		3,947		24,234
Total	$	793,725		757,590		707,015		554,650		148,577		380,341		3,341,898

The following table sets forth the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 and the respective maturity of those certificates as of December 31, 2011.

	At December 31, 2011
	(In thousands)
Three months or less	$	356,773
Over three months through six months		308,601
Over six months through one year		251,447
Over one year		489,114
Total	$	1,405,935

23

Borrowings. We borrow directly from the FHLB and various financial institutions. Our FHLB borrowings, frequently referred to as advances, are collateralized by a blanket lien against our residential mortgage portfolio. The following table sets forth information concerning balances and interest rates on our advances from the FHLB and other financial institutions at the dates and for the periods indicated.

	At or for the Year Ended December 31,									At or for the Six Months Ended December 31,			At or for the Year Ended June 30,
	2011			2010			2009			2009			2009			2008
	(Dollars in thousands)
Balance at end of period	$	2,005,486		$	1,326,514		$	850,542		$	850,542		$	870,555		$	563,583
Average balance during period		1,793,958			1,168,808			861,388			819,585			989,855			208,866
Maximum outstanding at any month end		2,167,000			1,326,514			903,060			870,553			1,348,574			563,583
Weighted average interest rate at end of period		2.68	%		3.09	%		3.79	%		3.79	%		3.66	%		3.50	%
Average interest rate during period		2.88	%		3.53	%		3.69	%		3.82	%		3.34	%		4.41	%

We also borrow funds under repurchase agreements with the FHLB and various brokers. These agreements are recorded as financing transactions as we maintain effective control over the transferred or pledged securities. The dollar amount of the securities underlying the agreements continues to be carried in our securities portfolio while the obligations to repurchase the securities are reported as liabilities. The securities underlying the agreements are delivered to the party with whom each transaction is executed. Those parties agree to resell to us the identical securities we delivered to them at the maturity or call period of the agreement. The following table sets forth information concerning balances and interest rate on our securities sold under agreements to repurchase at the dates and for the periods indicated:

	At or for the Year Ended December 31,									At or for the Six Months Ended December 31,			At or for the Year Ended June 30,
	2011			2010			2009			2009			2009			2008
	(Dollars in thousands)
Balance at end of period	$	250,000		$	500,000		$	750,000		$	750,000		$	910,000		$	860,000
Average balance during period		333,333			611,397			857,017			823,620			894,348			902,326
Maximum outstanding at any month end		500,000			675,000			910,000			860,000			1,085,000			960,000
Weighted average interest rate at end of period		3.90	%		4.45	%		4.36	%		4.36	%		4.31	%		4.32	%
Average interest rate during period		4.26	%		4.46	%		4.36	%		4.43	%		4.43	%		4.38	%

Subsidiary Activities

Investors Bancorp, Inc. has two direct subsidiaries: ASB Investment Corp and Investors Bank.

ASB Investment Corp. ASB Investment Corp. is a New Jersey corporation, which was organized in June 2003 for the purpose of selling insurance and investment products, including annuities, to customers and the general public through a third party networking arrangement. This subsidiary was obtained in the acquisition of American Bancorp in May 2009. This subsidiary is currently inactive.

Investors Bank has the following subsidiaries.

Investors Home Mortgage. Investors Home Mortgage is a New Jersey limited liability company that was formed in 2001 for the purpose of originating loans for sale to both Investors Bank and third parties. During 2011, in conjunction with the rebranding of the Investors Bank, this subsidiary changed the name that it does business as from ISB Mortgage Company to Investors Home Mortgage. Investors Home Mortgage has served as Investors Bank’s retail lending production arm throughout the branch network. Investors Home Mortgage sells all loans that it originates either to Investors Bank or third parties.

24

American Savings Investment Corp. American Savings Investment Corp. is a New Jersey corporation that was formed in 2004 as an investment company subsidiary. The purpose of this subsidiary is to invest in stocks, bonds, notes and all types of equity, mortgages, debentures and other investment securities. This subsidiary was obtained in the acquisition of American Bancorp in May 2009.

Investors Commercial, Inc. Investors Commercial, Inc. is a New Jersey corporation that was formed in 2010 as an operating subsidiary of Investors Bank. The purpose of this subsidiary is to originate and purchase residential mortgage loans, commercial real estate and multi-family mortgage loans.

Investors Financial Group, Inc. Investors Financial Group, Inc. is a New Jersey corporation that was formed in 2011 as an operating subsidiary of the Bank. The purpose of the this subsidiary is to process sales of non-deposit investment products through third party service providers to customers and consumers as may be referred by Investors Bank.

Investors Bank has three additional subsidiaries which are inactive. The subsidiaries are My Way Development, LLC, Investors Financial Services, Inc., and Investors REO, Inc.

Personnel

As of December 31, 2011, we had 938 full-time employees and 44 part-time employees. The employees are not represented by a collective bargaining unit and we consider our relationship with our employees to be good.

25

SUPERVISION AND REGULATION

General

Investors Bank is a New Jersey-chartered savings bank, and its deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”) under the Deposit Insurance Fund (“DIF”). Investors Bank is subject to extensive regulation, examination and supervision by the Commissioner of the New Jersey Department of Banking and Insurance (the “Commissioner”) as the issuer of its charter, and, as a non-member state chartered savings bank, by the FDIC as the deposit insurer and its primary federal regulator. Investors Bank must file reports with the Commissioner and the FDIC concerning its activities and financial condition, and it must obtain regulatory approval prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions and opening or acquiring branch offices. The Commissioner and the FDIC each conduct periodic examinations to assess Investors Bank’s compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which a savings bank may engage and is intended primarily for the protection of the DIF and its depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.

Investors Bancorp, Inc. and Investors Bancorp, MHC, as bank holding companies controlling Investors Bank, are subject to the Bank Holding Company Act of 1956, as amended (“BHCA”), and the rules and regulations of the Federal Reserve Board under the BHCA and to the provisions of the New Jersey Banking Act of 1948 (the “New Jersey Banking Act”) and the regulations of the Commissioner under the New Jersey Banking Act applicable to bank holding companies. Investors Bank and Investors Bancorp, Inc. are required to file reports with, and otherwise comply with the rules and regulations of, the Federal Reserve Board, the Commissioner and the FDIC. The Federal Reserve Board and the Commissioner conduct periodic examinations to assess the Company’s compliance with various regulatory requirements. Investors Bancorp, Inc. files certain reports with, and otherwise complies with, the rules and regulations of the Securities and Exchange Commission under the federal securities laws and the listing requirements of NASDAQ.

Any change in such laws and regulations, whether by the Commissioner, the FDIC, the Federal Reserve Board or through legislation, could have a material adverse impact on Investors Bank and Investors Bancorp, Inc. and their operations and stockholders.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) made extensive changes in the regulation of depository institutions and their holding companies. Certain provisions of the Dodd-Frank Act are expected to have a near term impact on Investors Bank and Investors Bancorp, Inc. For example, the Dodd-Frank Act created a new Consumer Financial Protection Bureau as an independent bureau of the Federal Reserve Board. The Consumer Financial Protection Bureau will assume responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations that are identified in the Dodd-Frank Act that were previously assigned to prudential regulators, and will have authority to impose new requirements. Since Investors Bank has assets exceeding $10 billion, Investors Bank, will be examined for compliance with some consumer protection and fair lending laws and regulations by, and be subject to the enforcement authority of, their prudential regulator (the FDIC), and will also be examined for compliance with other consumer protection laws and regulations by, and subject to the enforcement authority of, the Consumer Financial Protection Bureau, which also has back-up authority to examine and enforce all consumer protection laws for all institutions, including institutions with less than $10 billion in assets.

In addition to creating the Consumer Financial Protection Bureau, the Dodd-Frank Act, among other things, directs changes in the way that institutions are assessed for deposit insurance, mandates the imposition of tougher consolidated capital requirements on holding companies, requires originators of securitized loans to retain a percentage of the risk for the transferred loans, imposes regulatory rate-setting for certain debit card interchange fees, repeals restrictions on the payment of interest on commercial demand deposits and contains a number of

26

reforms related to mortgage originations. Many of the provisions of the Dodd-Frank Act are subject to delayed effective dates and/or require the issuance of implementing regulations. Their impact on operations can not yet be fully assessed. However, there is significant possibility that the Dodd-Frank Act will, at a minimum, result in increased regulatory burden, compliance costs and interest expense for Investors Bank and Investors Bancorp, Inc.

Some of the laws and regulations applicable to Investors Bank and Investors Bancorp, Inc. including some of the changes made by the Dodd-Frank Act, are summarized below or elsewhere in this Form 10-K. These summaries do not purport to be complete and are qualified in their entirety by reference to such the actual laws and regulations.

New Jersey Banking Regulation

Activity Powers. Investors Bank derives its lending, investment and other powers primarily from the applicable provisions of the New Jersey Banking Act and its related regulations. Under these laws and regulations, savings banks, including Investors Bank, generally may invest in:

• real estate mortgages;

• consumer and commercial loans;

• specific types of debt securities, including certain corporate debt securities and obligations of federal, state and local governments and agencies;

• certain types of corporate equity securities; and

• certain other assets.

A savings bank may also invest pursuant to a “leeway” power that permits investments not otherwise permitted by the New Jersey Banking Act, subject to certain restrictions imposed by the FDIC. “Leeway” investments must comply with a number of limitations on the individual and aggregate amounts of “leeway” investments. A savings bank may also exercise trust powers upon approval of the Commissioner. New Jersey savings banks may exercise those powers, rights, benefits or privileges authorized for national banks or out-of-state banks or for federal or out-of-state savings banks or savings associations, provided that before exercising any such power, right, benefit or privilege, prior approval by the Commissioner by regulation or by specific authorization is required. The exercise of these lending, investment and activity powers are limited by federal law and the related regulations. See “Federal Banking Regulation — Activity Restrictions on State-Chartered Banks” below.

Loans-to-One-Borrower Limitations. With certain specified exceptions, a New Jersey-chartered savings bank may not make loans or extend credit to a single borrower or to entities related to the borrower in an aggregate amount that would exceed 15% of the bank’s capital funds. A savings bank may lend an additional 10% of the bank’s capital funds if secured by collateral meeting the requirements of the New Jersey Banking Act and § 5200 of the Revised Statutes (the National Bank Act). Investors Bank currently complies with applicable loans-to-one-borrower limitations.

Dividends. Under the New Jersey Banking Act, a stock savings bank may declare and pay a dividend on its capital stock only to the extent that the payment of the dividend would not impair the capital stock of the savings bank. In addition, a stock savings bank may not pay a dividend unless the savings bank would, after the payment of the dividend, have a surplus of not less than 50% of its capital stock, or alternatively, the payment of the dividend would not reduce the surplus. Federal law may also limit the amount of dividends that may be paid by Investors Bank. See “— Federal Banking Regulation — Prompt Corrective Action” below.

Minimum Capital Requirements. Regulations of the Commissioner impose on New Jersey-chartered depository institutions, including Investors Bank, minimum capital requirements similar to those imposed by the FDIC on insured state banks. See “— Federal Banking Regulation — Capital Requirements” below.

27

Examination and Enforcement. The New Jersey Department of Banking and Insurance may examine Investors Bank whenever it deems an examination advisable. The Department examines Investors Bank at least every two years. The Commissioner may order any savings bank to discontinue any violation of law or unsafe or unsound business practice, and may direct any director, officer, attorney or employee of a savings bank engaged in an objectionable activity, after the Commissioner has ordered the activity to be terminated, to show cause at a hearing before the Commissioner why such person should not be removed. The commission may also seek the appointment of receiver or conservator for a New Jersey saving bank under certain conditions.

Federal Banking Regulation

Capital Requirements. FDIC regulations require banks to maintain minimum levels of capital. The FDIC regulations define two tiers, or classes, of capital.

Tier 1 capital is comprised of the sum of:

• common stockholders’ equity, excluding the unrealized appreciation or depreciation, net of tax, from available for sale securities;

• non-cumulative perpetual preferred stock, including any related retained earnings; and

• minority interests in consolidated subsidiaries minus all intangible assets, other than qualifying servicing rights and any net unrealized loss on marketable equity securities.

The components of Tier 2 capital currently include:

• cumulative perpetual preferred stock;

• certain perpetual preferred stock for which the dividend rate may be reset periodically;

• hybrid capital instruments, including mandatory convertible securities;

• term subordinated debt;

• intermediate term preferred stock;

• allowance for loan losses; and

• up to 45% of pretax net unrealized holding gains on available for sale equity securities with readily determinable fair market values.

The allowance for loan losses includible in Tier 2 capital is limited to a maximum of 1.25% of risk-weighted assets (as discussed below). Overall, the amount of Tier 2 capital that may be included in total capital cannot exceed 100% of Tier 1 capital. The FDIC regulations establish a minimum leverage capital requirement for banks in the strongest financial and managerial condition, with a rating of 1 (the highest examination rating of the FDIC for banks) under the Uniform Financial Institutions Rating System, of not less than a ratio of 3.0% of Tier 1 capital to total assets. For all other banks, the minimum leverage capital requirement is 4.0%, unless a higher leverage capital ratio is warranted by the particular circumstances or risk profile of the depository institution.

The FDIC regulations also require that banks meet a risk-based capital standard. The risk-based capital standard requires the maintenance of a ratio of total capital, which is defined as the sum of Tier 1 capital and Tier 2 capital, to risk-weighted assets of at least 8% and a ratio of Tier 1 capital to risk-weighted assets of at least 4%. In determining the amount of risk-weighted assets, all assets, plus certain off balance sheet items, are multiplied by a risk-weight of 0% to 100%, based on the risks the FDIC believes are inherent in the type of asset or item.

The federal banking agencies, including the FDIC, have also adopted regulations to require an assessment of an institution’s exposure to declines in the economic value of a bank’s capital due to changes in interest rates

28

when assessing the bank’s capital adequacy. Under such a risk assessment, examiners evaluate a bank’s capital for interest rate risk on a case-by-case basis, with consideration of both quantitative and qualitative factors. Institutions with significant interest rate risk may be required to hold additional capital. According to the agencies, applicable considerations include:

• the quality of the bank’s interest rate risk management process;

• the overall financial condition of the bank; and

• the level of other risks at the bank for which capital is needed.

The following table shows Investors Bank’s Total capital, Tier 1 risk-based capital, and Total risk-based capital ratios as of December 31, 2011:

	As of December 31, 2011
	Capital		Percent of Assets(1)
	(Dollars in thousands)
Total capital (to risk-weighted assets)	$	947,615		12.90	%
Tier 1 risk-based capital (to risk-weighted assets)	$	855,538		11.65	%
Total risk-based capital (to average assets)	$	855,538		8.21	%

(1) For purposes of calculating Total capital, assets are based on adjusted total average assets. In calculating Tier 1 risk-based capital and Total risk-based capital, assets are based on total risk-weighted assets.

As of December 31, 2011, Investors Bank was considered “well capitalized” under FDIC guidelines.

Activity Restrictions on State-Chartered Banks. Federal law and FDIC regulations generally limit the activities and investments of state-chartered FDIC insured banks and their subsidiaries to those permissible for national banks and their subsidiaries, unless such activities and investments are specifically exempted by law or consented to by the FDIC.

Before making a new investment or engaging in a new activity that is not permissible for a national bank or otherwise permissible under federal law or FDIC regulations, an insured bank must seek approval from the FDIC to make such investment or engage in such activity. The FDIC will not approve the activity unless the bank meets its minimum capital requirements and the FDIC determines that the activity does not present a significant risk to the FDIC insurance funds. Certain activities of subsidiaries that are engaged in activities permitted for national banks only through a “financial subsidiary” are subject to additional restrictions.

Federal law permits a state-chartered savings bank to engage, through financial subsidiaries, in any activity in which a national bank may engage through a financial subsidiary and on substantially the same terms and conditions. In general, the law permits a national bank that is well-capitalized and well-managed to conduct, through a financial subsidiary, any activity permitted for a financial holding company other than insurance underwriting, insurance investments or development or merchant banking. The total assets of all such financial subsidiaries may not exceed the lesser of 45% of the bank’s total assets or $50 billion. The bank must have policies and procedures to assess the financial subsidiary’s risk and protect the bank from such risk and potential liability, must not consolidate the financial subsidiary’s assets with the bank’s and must exclude from its own assets and equity all equity investments, including retained earnings, in the financial subsidiary. State-chartered savings banks may retain subsidiaries in existence as of March 11, 2000 and may engage in activities that are not authorized under federal law. Although Investors Bank meets all conditions necessary to establish and engage in permitted activities through financial subsidiaries, it has not chosen to engage in such activities.

The Dodd-Frank Act removed the federal prohibition on the payment of interest on commercial demand deposit accounts, effective July 21, 2011.

29

Federal Home Loan Bank System. Investors Bank is a member of the Federal Home Loan Bank system, which consists of twelve regional Federal Home Loan Banks, each subject to supervision and regulation by the Federal Housing Finance Agency (“FHFA”). The Federal Home Loan Banks provide a central credit facility primarily for member thrift institutions as well as other entities involved in home mortgage lending. It is funded primarily from proceeds derived from the sale of consolidated obligations of the Federal Home Loan Banks. The Federal Home Loan Banks make loans to members (i.e., advances) in accordance with policies and procedures, including collateral requirements, established by the respective Boards of Directors of the Federal Home Loan Banks. These policies and procedures are subject to the regulation and oversight of the FHFA. All long-term advances are required to provide funds for residential home financing. The FHFA has also established standards of community or investment service that members must meet to maintain access to such long-term advances.

Investors Bank, as a member of the FHLB of New York is currently required to acquire and hold shares of FHLB Class B stock. The Class B stock has a par value of $100 per share and is redeemable upon five years notice, subject to certain conditions. The Class B stock has two subclasses, one for membership stock purchase requirements and the other for activity-based stock purchase requirements. The minimum stock investment requirement in the FHLB Class B stock is the sum of the membership stock purchase requirement, determined on an annual basis at the end of each calendar year, and the activity-based stock purchase requirement, determined on a daily basis. For Investors Bank, the membership stock purchase requirement is 0.2% of the Mortgage-Related Assets, as defined by the FHLB, which consists principally of residential mortgage loans and mortgage-backed securities, including CMOs, held by Investors Bank. The activity-based stock purchase requirement for Investors Bank is equal to the sum of: (1) 4.5% of outstanding borrowing from the FHLB; (2) 4.5% of the outstanding principal balance of Acquired Member Assets, as defined by the FHLB, and delivery commitments for Acquired Member Assets; (3) a specified dollar amount related to certain off-balance sheet items, for which Investors Bank is zero; and (4) a specified percentage ranging from 0 to 5% of the carrying value on the FHLB balance sheet of derivative contracts between the FHLB and its members, which for Investors Bank is also zero. The FHLB can adjust the specified percentages and dollar amount from time to time within the ranges established by the FHLB capital plan. At December 31, 2011, the amount of FHLB stock held by us satisfies these requirements.

Safety and Soundness Standards. Pursuant to the requirements of FDICIA, as amended by the Riegle Community Development and Regulatory Improvement Act of 1994, each federal banking agency, including the FDIC, has adopted guidelines establishing general standards relating to matters such as internal controls, information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director, or principal stockholder.

In addition, the FDIC adopted regulations to require a savings bank that is given notice by the FDIC that it is not satisfying any of such safety and soundness standards to submit a compliance plan to the FDIC. If, after being so notified, a savings bank fails to submit an acceptable compliance plan or fails in any material respect to implement an accepted compliance plan, the FDIC may issue an order directing corrective and other actions of the types to which a significantly undercapitalized institution is subject under the “prompt corrective action” provisions of FDICIA. If a savings bank fails to comply with such an order, the FDIC may seek to enforce such an order in judicial proceedings and to impose civil monetary penalties.

Enforcement. The FDIC has extensive enforcement authority over insured savings banks, including Investors Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease and desist orders and to remove directors and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations and to unsafe or unsound practices.

30

Prompt Corrective Action. The Federal Deposit Insurance Corporation Improvement Act also established a system of prompt corrective action to resolve the problems of undercapitalized institutions. The FDIC, as well as the other federal banking regulators, adopted regulations governing the supervisory actions that may be taken against undercapitalized institutions. The regulations establish five categories, consisting of “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” The FDIC’s regulations define the five capital categories as follows:

An institution will be treated as “well capitalized” if:

• its ratio of total capital to risk-weighted assets is at least 10%;

• its ratio of Tier 1 capital to risk-weighted assets is at least 6%; and

• its ratio of Tier 1 capital to total assets is at least 5%, and it is not subject to any order or directive by the FDIC to meet a specific capital level.

An institution will be treated as “adequately capitalized” if:

• its ratio of total capital to risk-weighted assets is at least 8%; or

• its ratio of Tier 1 capital to risk-weighted assets is at least 4%; and

• its ratio of Tier 1 capital to total assets is at least 4% (3% if the bank receives the highest rating under the Uniform Financial Institutions Rating System) and it is not a well-capitalized institution.

An institution will be treated as “undercapitalized” if:

• its total risk-based capital is less than 8%; or

• its Tier 1 risk-based-capital is less than 4%; and

• its leverage ratio is less than 4%.

An institution will be treated as “significantly undercapitalized” if:

• its total risk-based capital is less than 6%;

• its Tier 1 capital is less than 3%; or

• its leverage ratio is less than 3%.

An institution that has a tangible capital to total assets ratio equal to or less than 2% would be deemed to be “critically undercapitalized.”

The FDIC is required, with some exceptions, to appoint a receiver or conservator for an insured state bank if that bank is “critically undercapitalized.” For this purpose, “critically undercapitalized” means having a ratio of tangible capital to total assets of less than 2%. The FDIC may also appoint a conservator or receiver for a state bank on the basis of the institution’s financial condition or upon the occurrence of certain events, including:

• insolvency, or when a assets of the bank are less than its liabilities to depositors and others;

• substantial dissipation of assets or earnings through violations of law or unsafe or unsound practices;

• existence of an unsafe or unsound condition to transact business;

• likelihood that the bank will be unable to meet the demands of its depositors or to pay its obligations in the normal course of business; and

• insufficient capital, or the incurring or likely incurring of losses that will deplete substantially all of the institution’s capital with no reasonable prospect of replenishment of capital without federal assistance.

31

Investors Bank is in compliance with the Prompt Corrective Action rules.

Liquidity. Investors Bank maintains sufficient liquidity to ensure its safe and sound operation, in accordance with FDIC regulations.

Deposit Insurance. Investors Bank is a member of the Deposit Insurance Fund, which is administered by the FDIC. Deposit accounts in the Bank are insured by the FDIC, up to a maximum of $250,000 for each separately insured depositor. In addition, certain non-interest-bearing transaction accounts maintained with depository institutions are fully insured regardless of the dollar amount until December 31, 2012.

The FDIC imposes an assessment for deposit insurance against all insured depository institutions. That assessment is based on the risk category of the institution and, prior to 2009, ranged from five to 43 basis points of the institution’s deposits. On December 22, 2008, the FDIC issued a final rule that raised the deposit insurance assessment rates uniformly for all institutions by seven basis points (to a range from 12 to 50 basis points) effective for the first quarter of 2009. On February 27, 2009, the FDIC issued a final rule that altered the way it calculated federal deposit insurance assessment rates beginning in the second quarter of 2009 and thereafter.

Under the rule, the FDIC first establishes an institution’s initial base assessment rate. That initial base assessment rate ranges, depending on the risk category of the institution, from 12 to 45 basis points. The FDIC then adjusts the initial base assessment (higher or lower) to obtain the total base assessment rate. The adjustments to the initial base assessment rate are based upon an institution’s levels of unsecured debt, secured liabilities and brokered deposits. The total base assessment rate ranges, including adjustments, from 7 to 77.5 basis points of the institution’s assessable deposits.

On May 22, 2009, the FDIC issued a final rule that imposed a special five basis point assessment on each FDIC-insured depository institution’s assets, minus its Tier 1 capital on June 30, 2009, which was collected on September 30, 2009. That special assessment was deemed necessary in view of the stress on the Deposit Insurance Fund. The special assessment was capped at 10 basis points of an institution’s domestic deposits.

In lieu of further special assessments, the FDIC adopted a rule pursuant to which all insured depository institutions were required to prepay their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. Each institution’s base assessment rate for each period was calculated using its third quarter assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of 2012. The pre-payment has been recorded as a prepaid expense at December 31, 2009 and will be amortized to expense over three years.

Most recently, the Dodd-Frank Act required the FDIC to revise its assessment procedures to base it on average total assets less tangible capital, rather than deposits. The FDIC has issued a final rule that implemented that directive effective April 1, 2011.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not currently know of any practice, condition or violation that may lead to termin