10-K 1 isbc-12312012x10k.htm 10-K ISBC - 12.31.2012 - 10K
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, 2012 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 20, 2013, the registrant had 118,020,280 shares of common stock, par value $0.01 per share, issued and 111,915,882 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, 2012, as reported by the NASDAQ Global Select Market, was approximately $614.3 million.
 
DOCUMENTS INCORPORATED BY REFERENCE
1. Proxy Statement for the 2013 Annual Meeting of Stockholders of the Registrant (Part III).




INVESTORS BANCORP, INC.
2012 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
 
 
 
 
 
Page
Part I.
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II.
Item 5.
Item6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV.
Item 15.
 
 
 
 




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.


PART I


ITEM 1.
BUSINESS
Investors Bancorp, Inc.
Investors Bancorp, Inc. (the “Company” or "Investors Bancorp") 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 64,844,373 shares, or 54.94% of the Company’s outstanding common stock (shares restated to include shares issued in a business combination subsequent to initial public offering). 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. At December 31, 2012, our assets totaled $12.72 billion and our deposits totaled $8.77 billion.

1


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 September 28, 2012, the Company declared its first quarterly cash dividend of $0.05 per share, which was paid November 1, 2012 to stockholders of record as of October 15, 2012. It was the first dividend since completing its initial public stock offering in October 2005. On January 31, 2013, the Company declared its second cash dividend of $0.05 per share to stockholders of record as of February 11, 2013, which was paid on February 25, 2013.
Acquisitions
On December 19, 2012, we announced our seventh acquisition with the definitive merger agreement with Roma Financial Corporation, the federally-chartered holding company for Roma Bank and RomAsia Bank. Under the terms of the merger agreement, 100% of the shares of Roma Financial will be converted into Investors Bancorp common stock. As of September 30, 2012, Roma Financial Corporation operated 26 branches in Burlington, Ocean, Mercer, Camden and Middlesex counties, New Jersey, and had assets of $1.84 billion, deposits of $1.49 billion and stockholders' equity of $218.8 million. The merger agreement has been approved by the boards of directors of each company. Subject to the required approvals of Investors Bancorp and Roma Financial shareholders, requisite regulatory approvals, the effectiveness of the registration statement to be filed by Investors Bancorp with respect to the stock to be issued in the transaction and other customary closing conditions, the Merger is expected to be completed in the second quarter of 2013. As the merger has not been completed, the transaction is not reflected in the balance sheet or results of operation for the periods presented in this document.
On October 15, 2012, we completed the acquisition of Marathon Banking Corporation, the holding company of Marathon National Bank of New York ("Marathon Bank"), a federally chartered bank with 13 full-service branches in the New York metropolitan area. After the purchase accounting adjustments, the Company assumed $777.5 million in customer deposits and acquired $558.5 million in loans. This transaction resulted in $38.4 million of goodwill and generated $5.0 million in core deposit intangibles. Under this method of accounting, the purchase price has been 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 has been recorded as goodwill. The purchase price of $135.0 million was paid using available cash. The acquisition was accounted for under the acquisition method of accounting as prescribed by Accounting Standard Codification (“ASC”) 805 “Business Combinations”, as amended.
On January 6, 2012, the Company completed the acquisition of Brooklyn Federal Bancorp, Inc. (“BFSB”), the holding company of Brooklyn Federal Savings Bank, a federally chartered savings bank with five full-service branches in Brooklyn and Long Island. After the purchase accounting adjustments, we assumed $385.9 million in customer deposits and acquired $177.5 million in loans. This transaction resulted in $16.7 million of goodwill and generated $218,000 in core deposit intangibles. Under this method of accounting, the purchase price has been 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 has been recorded as goodwill. The purchase price of $10.3 million was paid through a combination of our common stock (551,862 shares), issued to Investors Bancorp, MHC, and cash of $2.9 million. Brooklyn Federal Savings Bank was merged into the Bank as of the acquisition date. In a separate transaction, we sold most of Brooklyn Federal Savings Bank’s commercial real estate loan portfolio to a real estate investment fund on January 10, 2012. The acquisition was accounted for under the acquisition method of accounting as prescribed by Accounting Standard Codification (“ASC”) 805 “Business Combinations”, as amended.

Investors Bank
General
Investors 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.
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 1-4 family residential 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 12.3% of our assets at December 31, 2012. 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.

2


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.
We conduct business from our main office located at 101 JFK Parkway, Short Hills, New Jersey and 101 branch offices located throughout northern and central New Jersey and New York. In addition, the Company has a commercial real estate loan production office in Manhattan, New York and an operation center in Iselin, New Jersey. The telephone number at our main office is (973) 924-5100.

Market Area

Our primary deposit gathering area had been concentrated in the communities surrounding our headquarters and our branch offices located in the New Jersey communities of Bergen, Burlington, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Union and Warren Counties.  Within the last two years we have expanded our branch locations to include the New York communities of Nassau, Queens, Kings, Richmond, Suffolk and New York counties. Our corporate headquarters are located in Short Hills, New Jersey with an operation center located in Iselin, New Jersey and a lending office in New York City.

During 2012, we continued our penetration into the New York market by finalizing our Brooklyn Federal Bancorp and Marathon acquisitions and now have branch offices located in New York county, Richmond county and Suffolk county.  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 $39,000. The household incomes in the counties we serve are all expected to increase in a range from 8.54% to 26.30% through 2016. The December 2012 unemployment rates for New Jersey and New York were 9.3% and 8.2%, respectively, while the national rate was 7.8%.
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, 2012, 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, multi-family 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 $4.84 billion, or 46.4% of our total loans at December 31, 2012. At December 31, 2012, multi-family loans totaled $3.00 billion, or 28.7% of our total loan portfolio, commercial real estate loans totaled $1.97 billion, or 18.9% of our total loan portfolio, construction loans totaled $224.8 million, or 2.15% of our total loan portfolio, and commercial and industrial loans totaled $169.3 million or 1.62% 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, 2012, consumer loans totaled $238.9 million or 2.29% of our total loan portfolio.

3


Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan, including Purchased Credit-Impaired ("PCI") loans at the dates indicated.

 
December 31,
 
June 30,
 
2012
 
2011
 
2010
 
2009
 
2009
 
2008
 
Amount
%
 
Amount
%
 
Amount
%
 
Amount
%
 
Amount
%
 
Amount
%
 
 
 
 
(Dollars in thousands )
Residential mortgage loans
$
4,838,315

46.35
%
 
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
%
Multi-family
2,995,471

28.70

 
1,816,118

20.42

 
1,161,874

14.53

 
612,743

9.21

 
482,783

7.82

 
82,711

1.77

Commercial
1,971,689

18.89

 
1,418,636

15.95

 
1,225,256

15.33

 
730,012

10.97

 
433,204

7.02

 
142,396

3.06

Construction loans
224,816

2.15

 
277,625

3.12

 
347,825

4.35

 
334,480

5.03

 
346,967

5.62

 
260,177

5.58

Commercial and industrial loans
169,258

1.62

 
106,299

1.20

 
60,903

0.76

 
23,159

0.35

 
15,665

0.25

 
47


Consumer and other loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity loans
101,163

0.97

 
121,134

1.36

 
147,540

1.84

 
104,864

1.58

 
119,193

1.93

 
139,587

2.99

Home equity credit lines
131,808

1.26

 
117,445

1.32

 
108,356

1.36

 
70,341

1.06

 
61,664

1.00

 
27,270

0.59

Other
5,951

0.06

 
3,648

0.04

 
3,861

0.05

 
2,972

0.04

 
3,341

0.06

 
1,962

0.04

Total consumer and other loans
238,922

2.29

 
242,227

2.72

 
259,757

3.25

 
178,177

2.68

 
184,198

2.99

 
168,819

3.62

Total loans
$
10,438,471

100.00
%
 
$
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
%
Premiums on purchased loans, net
$
43,023

 
 
29,927

 
 
22,021

 
 
22,958

 
 
21,313

 
 
22,622

 
Deferred loan fees, net
(32,536
)
 
 
(13,540
)
 
 
(8,244
)
 
 
(4,574
)
 
 
(3,252
)
 
 
(2,620
)
 
Allowance for loan losses
(142,172
)
 
 
(117,242
)
 
 
(90,931
)
 
 
(55,052
)
 
 
(46,608
)
 
 
(13,565
)
 
Net loans
$
10,306,786

 
 
$
8,794,211

 
 
$
7,917,705

 
 
$
6,615,459

 
 
$
6,143,169

 
 
$
4,670,150

 



4


Portfolio Maturities. The following table summarizes the scheduled repayments of our loan portfolio, including PCI loans at December 31, 2012. Overdraft loans are reported as being due in one year or less.
 
 
At December 31, 2012
 
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
$
13,206

 
31,459

 
78,856

 
181,254

 
74,633

 
87,177

 
466,585

After one year:
 
 
 
 
 
 
 
 
 
 
 
 
 
One to three years
10,432

 
225,340

 
369,518

 
41,273

 
22,009

 
16,442

 
685,014

Three to five years
39,667

 
329,308

 
319,893

 

 
33,937

 
17,112

 
739,917

Five to ten years
195,560

 
1,884,929

 
958,171

 
2,289

 
30,539

 
53,216

 
3,124,704

Ten to twenty years
1,311,303

 
521,109

 
242,397

 

 
5,839

 
39,106

 
2,119,754

Over twenty years
3,268,147

 
3,326

 
2,854

 

 
2,301

 
25,869

 
3,302,497

Total due after one year
4,825,109

 
2,964,012

 
1,892,833

 
43,562

 
94,625

 
151,745

 
9,971,886

Total loans
$
4,838,315

 
2,995,471

 
1,971,689

 
224,816

 
169,258

 
238,922

 
10,438,471

Premiums on purchased loans, net
 
 
 
 
 
 
 
 
 
 
 
 
43,023

Deferred loan fees, net
 
 
 
 
 
 
 
 
 
 
 
 
(32,536
)
Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
(142,172
)
Net loans
 
 
 
 
 
 
 
 
 
 
 
 
$
10,306,786


The following table sets forth fixed- and adjustable-rate loans at December 31, 2012 that are contractually due after December 31, 2013.
 
 
Due After December 31, 2013
 
Fixed
 
Adjustable
 
Total
 
(In thousands)
Residential mortgage loans
$
2,995,039

 
1,830,070

 
4,825,109

Multi- family loans
1,380,287

 
1,583,725

 
2,964,012

Commercial loans
1,088,129

 
804,704

 
1,892,833

Construction loans
1,448

 
42,114

 
43,562

Commercial and industrial loans
66,615

 
28,010

 
94,625

Consumer and other loans:
 
 
 
 
 
Home equity loans
97,161

 

 
97,161

Home equity credit lines

 
51,524

 
51,524

Other
3,060

 

 
3,060

Total consumer and other loans
100,221

 
51,524

 
151,745

Total loans
$
5,631,739

 
4,340,147

 
9,971,886

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, 2012, $4.84 billion, or 46.4%, 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.

5


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 $1,250,000. Loans over $1,250,000 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, 2012, we held $3.01 billion in fixed-rate residential mortgage loans which represented 62.2% 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. We maintain 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.

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, 2012, we held $1.83 billion of adjustable-rate residential mortgage loans, of which $384.9 million were interest-only one- to four-family mortgages. Adjustable-rate residential mortgage loans represented 37.8% 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, 2012, $3.00 billion, or 28.7% of our total loan portfolio was multi-family and $1.97 billion or 18.9%, 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, 2012, our largest commercial real estate loan was $40.0 million and is on an office 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.

6


Multi-family loans are generally lower credit risk than other types of commercial real estate lending due to the diversification of cash flows to service the debt over multiple tenants. Loans secured by multi-family and commercial real estate generally are larger than residential mortgage loans and can 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.

Construction Loans. We offer loans directly to builders and developers on income-producing properties and residential for-sale housing units. At December 31, 2012, we held $224.8 million in construction loans representing 2.2%, of our total loan portfolio. Construction loans are originated through our commercial lending department. 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 either residential mortgage loans or other commercial 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, 2012, the Bank’s largest construction loan was a $34.0 million note with an outstanding balance of $20.9 million on an apartment-rental project in New Jersey. At December 31, 2012, the loan 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. The Company's 2012 acquisitions and de novo branch expansion has provided a larger market area to leverage new products. We have expanded and increased our New York market lending presence by hiring experienced consumer and industrial team members as well as expanding our business lending into the healthcare industry to focus on this segment of the market. At December 31, 2012, consumer and industrial loans totaled $169.3 million, or 1.6%, of our loan portfolio.
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 primarily located in New Jersey and New York. At December 31, 2012, consumer loans totaled $238.9 million or 2.3%, 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 75%. 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.

7


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,
 
2012
 
2011
 
2010
 
(In thousands)
Loan originations and purchases
 
 
 
 
 
Loan originations:
 
 
 
 
 
Residential mortgage loans
$
693,996

 
767,241

 
800,497

Multi-family
1,285,775

 
846,685

 
487,933

Commercial real estate
458,847

 
308,245

 
412,623

Construction loans
32,219

 
120,773

 
214,437

Commercial and industrial
139,833

 
104,120

 
59,636

Consumer and other loans:
 
 
 
 
 
Home equity loans
13,674

 
14,399

 
12,921

Home equity credit lines
55,295

 
64,630

 
59,731

Other
838

 
15,314

 
15,168

Total consumer and other loans
69,807

 
94,343

 
87,820

Total loan originations
2,680,477

 
2,241,407

 
2,062,946

Loan purchases:
 
 
 
 
 
Residential mortgage loans
638,788

 
710,880

 
862,311

Commercial real estate

 

 
120,546

Multi-family

 

 

Construction loans

 

 

Commercial and industrial

 

 

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
638,788

 
710,880

 
1,070,203

Loans sold and principal repayments
(2,508,908
)
 
(2,042,462
)
 
(1,786,658
)
Other items, net(1)
(33,784
)
 
(33,319
)
 
(44,245
)
Net loans acquired in acquisition
736,003

 

 

Net increase in loan portfolio
$
1,512,576

 
876,506

 
1,302,246

 
(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 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 equals to the principal amount of the loan or the maximum amount available.

8


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 $500,000 may be approved by loan underwriters, provided the loan meets all of our underwriting guidelines. Residential mortgage loans up to $750,000 may be approved by an Underwriting Supervisor, 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 $750,000 and up to $1,500,000 must be approved by an authorized member of management. Residential mortgage loans in excess of $1,500,000 and up to $2,000,000 must be approved by three authorized members of management. Residential mortgage loans in excess of $2,000,000 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 without policy exceptions or total credit relationships in an amount up to $1,000,000 shall be approved by the Vice President/Team Leader. All commercial real estate, multi-family and construction loan requests without policy exceptions or total credit relationships in an amount up to $2,000,000 shall be approved by the Vice President/ Team Leader and either; Senior Vice President -CRE, Chief Executive Officer, Chief Operating Officer or Chief Lending Officer. All commercial real estate loan requests without policy exceptions or total credit relationships in excess of $5,000,000 shall be approved by the Vice President/ Team Leader or Sr Vice President-Lending and either Chief Lending Officer, Chief Operating Officer or Chief Executive Officer. All commercial real estate, multi-family and construction requests or total credit relationships in excess of $5,000,000 or any loan with a policy exception shall require the approval of the Commercial Loan Committee consisting of the Chief Executive Officer, Chief Operating Officer, Chief Lending Officer, Chief Financial Officer, Executive Vice President-Retail Banking, the Senior Vice President- Lending Administration, Senior Vice President -CRE (cannot approve CRE loans), and the Senior Vice President- Business Lending(cannot approve Business loans).
All business loans without policy exceptions or total credit relationships in an amount up to $1,500,000 shall be approved by either the Senior Vice President- Business Lending, Chief Lending Officer, Chief Operating Officer or Chief Executive Officer. All loan requests without policy exceptions or total credit relationships up to $3,000,000 shall be approved by the Senior 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 or any loan with a policy exception shall require the approval of the Commercial Loan Committee, consisting of the Chief Executive Officer, Chief Operating Officer, Chief Lending Officer, Chief Financial Officer, Executive Vice President-Retail Banking, Senior Vice President- Lending Administration, Senior Vice President of CRE (cannot approve CRE Loans) and the Senior Vice President- Business Lending (cannot approve Business loans).
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, 2012, the regulatory lending limit was $160.0 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, 2012, the Bank’s largest relationship with an individual borrower and its related entities was $93.0 million, consisting of seven multi-family loans, a construction loan and a commercial loan. The relationship was approved by the Board of Directors and was performing in accordance with contractual terms as of December 31, 2012.
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.

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.
Purchased Credit-Impaired Loans. Purchased Credit-Impaired ("PCI") loans are loans acquired through acquisition or purchased at a discount that is due, in part, to credit quality. In conjunction with the Marathon acquisition, there were 9 PCI loans totaling $6.1 million at December 31, 2012. PCI loans are accounted for in accordance with ASC Subtopic 310-30 and are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance (i.e., the allowance for loan losses). The difference between the undiscounted cash flows expected at acquisition and the initial carrying

9


amount (fair value) of the covered loans, or the “accretable yield,” is recognized as interest income utilizing the level-yield method over the life of the loans. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non-accretable difference,” are not recognized as a yield adjustment, as a loss accrual or a valuation allowance. Reclassifications of the non-accretable difference to the accretable yield may occur subsequent to the loan acquisition dates due to increases in expected cash flows of the loans and results in an increase in yield on a prospective basis.

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 90 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 quarterly basis.


10


Delinquent Loans. The following table sets forth our loan delinquencies by type and by amount at the dates indicated, excluding the PCI loans.
 
 
Loans Delinquent For
 
 
 
 
 
60-89 Days
 
90 Days and Over
 
Total
 
Number
 
Amount
 
Number
 
Amount
 
Number
 
Amount
 
(Dollars in thousands)
At December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage loans
37

 
$
11,715

 
310

 
$
76,088

 
347

 
$
87,803

Multi-family
3

 
3,950

 
5

 
11,143

 
8

 
15,093

Commercial real estate
4

 
3,016

 
4

 
753

 
8

 
3,769

Construction loans
0

 

 
6

 
18,876

 
6

 
18,876

Commercial and industrial
2

 
2,639

 
2

 
375

 
4

 
3,014

Consumer and other loans
8

 
196

 
23

 
1,238

 
31

 
1,434

Total
54

 
$
21,516

 
350

 
$
108,473

 
404

 
$
129,989

At December 31, 2011
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage loans
28

 
$
9,847

 
288

 
$
80,703

 
316

 
$
90,550

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
5

 
173

 
25

 
1,009

 
30

 
1,182

Total
38

 
$
24,268

 
326

 
$
122,147

 
364

 
$
146,415

At December 31, 2010
 
 
 
 
 
 
 
 
 
 
 
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

 
3,899

 
9

 
4,401

Construction loans
1

 
7,850

 
26

 
82,735

 
27

 
90,585

Commercial and industrial
2

 
640

 
5

 
1,829

 
7

 
2,469

Consumer and other loans
4

 
196

 
20

 
1,033

 
24

 
1,229

Total
46

 
$
33,976

 
305

 
$
165,894

 
351

 
$
199,870

Non-Performing Assets. Non-performing assets include non-accrual loans, loans delinquent 90 days or more and still accruing interest and real estate owned, or REO. We did not have any loans delinquent 90 days or more and still accruing interest at December 31, 2012. At December 31, 2012, we had REO of $8.1 million consisting of thirty three properties. Non-accrual loans decreased $21.6 million to $120.6 million at December 31, 2012, from $142.2 million at December 31, 2011. In connection with the BFSB acquisition, the Company sold approximately $106.2 million of the commercial real estate loan portfolio to a real estate investment fund on January 10, 2012. 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 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 lender, we have been affected by negative consequences arising from the ongoing economic recession and, in particular, the 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-accrual loans to total loans decreased to 1.16% at December 31, 2012, from 1.60% at December 31, 2011. Our ratio of non-performing assets to total assets decreased to 1.14% at December 31, 2012, from 1.48% at December 31, 2011. The allowance for loan losses as a percentage of total non-performing loans increased to 117.92% at December 31, 2012, from 76.79% at December 31, 2011. 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.” The table below sets forth the amounts and categories of our non-performing assets excluding PCI loans at the dates indicated.
 

11


 
December 31,
 
June 30,
 
2012 (1)
 
2011(2)
 
2010
 
2009(3)
 
2009(4)
 
2008(5)
 
(Dollars in thousands)
Non-accrual loans:
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage loans
$
81,295

 
84,056

 
73,650

 
50,089

 
29,741

 
6,691

Multi-family and Commercial loans
11,896

 
73

 
6,647

 
3,970

 
22,894

 
1,600

Construction loans
25,764

 
57,070

 
82,735

 
64,968

 
68,826

 
10,960

Commercial and industrial loans
375

 

 
1,829

 

 

 

Consumer and other loans
1,238

 
1,009

 
1,033

 
1,166

 
225

 
120

Total non-accrual loans
120,568

 
142,208

 
165,894

 
120,193

 
121,686

 
19,371

Real estate owned
8,093

 
3,081

 
976

 

 

 

Total non-performing assets
$
128,661

 
145,289

 
166,870

 
120,193

 
121,686

 
19,371

Performing troubled debt restructurings
15,756

 
10,465

 
4,822

 

 

 

Total non-accrual loans to total loans
1.16
%
 
1.60
%
 
2.08
%
 
1.81
%
 
1.97
%
 
0.42
%
Total non-performing assets to total assets
1.14
%
 
1.48
%
 
1.74
%
 
1.44
%
 
1.50
%
 
0.30
%
 
(1)
There were three construction troubled debt restructuring loans totaling $6.9 million and 21 residential and consumer loans totaling $5.1 million classified as non-accrual as of December 31, 2012.
(2)
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.
(3)
An $11.5 million construction loan that was 60-89 days delinquent at December 31, 2009 was classified as non-accrual.
(4)
Two construction loans totaling $10.3 million were 60-89 days delinquent at June 30, 2009 were classified as non-accrual.
(5)
An $11.0 million construction loan that is 60-89 days delinquent at June 30, 2008 is classified as non-accrual.
At December 31, 2012, there were $27.7 million of loans deemed trouble debt restructurings, of which $15.8 million were accruing and $11.9 million were on non-accrual.
For the year ended December 31, 2012, interest income that would have been recorded had our non-accruing loans been current in accordance with their original terms amounted to $11.5 million. We recognized interest income of $3.6 million on such loans for the year ended December 31, 2012.
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, ("REO") until sold. When property is acquired it is recorded at fair value at the date of foreclosure less estimated costs to sell the property. Holding costs and declines in fair value result in charges to expense after acquisition. At December 31, 2012, we had REO of $8.1 million consisting of thirty three properties. 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 and 2008, we held no real estate owned.
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

12


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 commercial real estate loans with an outstanding balance greater than $1.0 million 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, 2012, loans meeting the Company’s definition of an impaired loan totaled $57.4 million. The allowance for loan losses related to loans classified as impaired at December 31, 2012, amounted to $2.1 million. Interest income received during the year ended December 31, 2012 on loans classified as impaired was $1.6 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, 2012 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 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.
In late October 2012, the Company's primary market area was adversely impacted by superstorm Sandy. The storm disrupted operations for many businesses in the area and caused substantial property damage in our lending area. In response to the storm, the Company waived late fees and provided payment deferrals to borrowers impacted by the storm. The Company has evaluated the impact of the storm relative to the adequacy of the allowance for loan losses. Based on the Company's evaluation, there were no loan charge-offs or specific losses identified to date. For further discussion of the allowance for loan losses, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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.

13


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,
 
2012
 
2011
 
2010
 
2009
 
2009
 
2008
 
(Dollars in thousands)
Allowance balance (beginning of period)
$
117,242

 
90,931

 
55,052

 
46,608

 
13,565

 
6,951

Provision for loan losses
65,000

 
75,500

 
66,500

 
23,425

 
29,025

 
6,646

Charge-offs:
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage loans:
20,180

 
9,304

 
6,432

 
1,591

 
14

 
18

Multi-family loans
9,058

 
363

 
829

 

 

 

Commercial loans
479

 
7,637

 
98

 

 

 

Construction loans
13,227

 
30,548

 
23,160

 
13,411

 

 

Commercial & industrial loans
99

 
1,621

 
269

 

 

 

Consumer and other loans
1,107

 
714

 
41

 
23

 
11

 
15

Total charge-offs
44,150

 
50,187

 
30,829

 
15,025

 
25

 
33

Recoveries:
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage loans:
593

 
388

 
124

 
44

 

 

Multi-family loans

 
19

 

 

 

 

Commercial loans
43

 

 

 

 

 

Construction loans
3,387

 
576

 
83

 

 

 

Commercial & industrial loans
23

 
13

 

 

 

 

Consumer and other loans
34

 
2

 
1

 

 

 
1

Total recoveries
4,080

 
998

 
208

 
44

 

 
1

Net charge-offs
(40,070
)
 
(49,189
)
 
(30,621
)
 
(14,981
)
 
(25
)
 
(32
)
Allowance acquired in acquisition

 

 

 

 
4,043

 

Allowance balance (end of period)
$
142,172

 
117,242

 
90,931

 
55,052

 
46,608

 
13,565

Total loans outstanding
$
10,438,471

 
8,895,066

 
7,994,859

 
6,652,127

 
6,171,716

 
4,663,713

Average loans outstanding
$
9,271,550

 
8,461,031

 
7,197,608

 
6,370,350

 
5,482,009

 
4,043,398

Allowance for loan losses as a percent of total loans outstanding
1.36
%
 
1.32
%
 
1.14
%
 
0.83
%
 
0.76
%
 
0.29
%
Net loans charged off as a percent of average loans outstanding
0.43
%
 
0.58
%
 
0.43
%
 
0.24
%
 

 

Allowance for loan losses to non-performing loans
117.92
%
 
76.79
%
 
54.81
%
 
45.80
%
 
38.30
%
 
70.03
%

14


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,
 
2012
 
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
 
Allowance
for Loan
Losses
 
Percent of
Loans in
Each
Category to
Total  Loans
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
End of period allocated to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage loans
$
45,369

 
46.35
%
 
$
32,447

 
56.59
%
 
$
20,489

 
61.78
%
 
$
13,741

 
71.76
%
 
$
10,841

 
76.30
%
Multi-family
29,853

 
28.70
%
 
13,863

 
20.42
%
 
10,454

 
14.53
%
 
3,227

 
9.21
%
 
1,518

 
7.82
%
Commercial real estate
33,347

 
18.89
%
 
30,947

 
15.95
%
 
16,432

 
15.33
%
 
10,208

 
10.97
%
 
6,223

 
7.02
%
Construction loans
16,062

 
2.15
%
 
22,839

 
3.12
%
 
34,669

 
4.35
%
 
25,194

 
5.03
%
 
23,437

 
5.62
%
Commercial and industrial
4,094

 
1.62
%
 
3,677

 
1.20
%
 
2,189

 
0.76
%
 
558

 
0.35
%
 
351

 
0.25
%
Consumer and other loans
2,086

 
2.29
%
 
1,335

 
2.72
%
 
866

 
3.25
%
 
510

 
2.68
%
 
459

 
2.99
%
Unallocated
11,361

 


 
12,134

 
 
 
5,832

 
 
 
1,614

 
 
 
3,779

 
 
Total allowance
$
142,172

 
100.00
%
 
$
117,242

 
100.00
%
 
$
90,931

 
100.00
%
 
$
55,052

 
100.00
%
 
$
46,608

 
100.00
%
 
 
June 30,
 
2008
 
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
%
Multi-family and commercial
1,677

 
4.83
%
Construction loans
4,836

 
5.58
%
Consumer and other loans
254

 
3.62
%
Unallocated
2,213

 
 
Total allowance
$
13,565

 
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 Asset Liability Committee, which is primarily comprised of senior officers. While general investment strategies are developed by the Asset Liability 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

15


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, but are not limited to, U.S. Treasury obligations, securities issued by various Federal Agencies, State and Municipal subdivisions, 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 mutual funds. 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 pre-purchase 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, 2012, our securities portfolio totaled $1.57 billion representing 12.3% of our total assets. Securities are classified as held-to-maturity or available-for-sale when purchased. At December 31, 2012, $179.9 million of our securities were classified as held-to-maturity and reported at amortized cost and $1.39 billion 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, 2012, agency-issued mortgage-backed securities including CMOs, totaled $1.51 billion, or 96.3%, 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 three to five 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 2.44% at December 31, 2012. The estimated fair value of our mortgage-backed securities at December 31, 2012 was $1.52 billion, which is $32.1 million greater than the amortized cost of $1.48 billion.
We also may 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 forth in the investment policy of the Company at the time of purchase. During the year ended December 31, 2012, the Company sold all its non-agency or privately originated mortgage backed securities.
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 and to a lesser extent insurance companies, real estate investment trusts, and collateralized debt obligation. The interest rates on these securities reset quarterly in

16


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, 2012, the portfolio consisted of 36 securities with an amortized cost of $29.5 million and a fair value of $39.3 million and all but two are rated below investment grade. The two investment grades have an amortized cost of $2.9 million with fair value of $5.4 million. For December 31, 2012, 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, 2012, 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, 2012. 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.

Government Sponsored Enterprises. At December 31, 2012, bonds issued by Government Sponsored Enterprises held in our security portfolio totaled $3.2 million representing less than 1.0% of our total securities portfolio. While these securities may generally provide lower yields than other securities in our securities portfolio; they are held 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, 2012, we had $4.2 million in equity securities representing less than 1.0% 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.
Municipal Bonds At December 31, 2012, we had $21.2 million of municipal bonds which represent 1.4% of our total securities portfolio. These bonds are comprised of $15.4 million in short-term Bond Anticipation or Tax Anticipation notes and $5.7 million of longer term New Jersey Revenue Bonds. These purchases were made to diversify the securities portfolio and are designated as held to maturity.


17


Securities Portfolios. The following table sets forth the composition of our investment securities portfolios at the dates indicated
 
 
At December 31,
 
 
2012
2011
 
2010
 
 
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
 
 
 
(In thousands)
Available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
 
$
3,306

 
4,161

 
1,941

 
1,965

 
2,025

 
2,232

 
GSE debt securities
 
3,038

 
3,035

 

 

 

 

 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal Home Loan Mortgage Corporation
 
660,095

 
667,517

 
389,295

 
395,482

 
248,403

 
248,335

 
Federal National Mortgage Association
 
689,587

 
706,128

 
557,746

 
567,918

 
306,745

 
308,957

 
Government National Mortgage Association
 
4,414

 
4,487

 
7,212

 
7,313

 
9,202

 
9,445

 
Non-agency securities
 

 

 
10,782

 
11,037

 
34,640

 
33,764

 
Total mortgage-backed securities available for sale
 
1,354,096

 
1,378,132

 
965,035

 
981,750

 
598,990

 
600,501

 
Total securities available-for-sale
 
$
1,360,440

 
1,385,328

 
966,976

 
983,715

 
601,015

 
602,733

 
Held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Government Sponsored Enterprises
 
$
147

 
149

 
174

 
175

 
15,200

 
15,446

 
Municipal bonds
 
21,156

 
22,294

 
18,001

 
18,847

 
13,951

 
13,907

 
Corporate and other debt securities
 
29,503

 
39,295

 
25,511

 
36,706

 
23,552

 
41,289

 
 
 
50,806

 
61,738

 
43,686

 
55,728

 
52,703

 
70,642

 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal Home Loan Mortgage Corporation
 
63,033

 
66,223

 
112,540

 
117,397

 
210,544

 
218,230

 
Government National Mortgage Association
 

 

 
1,382

 
1,585

 
3,243

 
3,530

 
Federal National Mortgage Association
 
64,278

 
69,121

 
103,823

 
110,587

 
166,251

 
175,456

 
Federal housing authorities
 
1,805

 
1,811

 
2,077

 
2,137

 
2,324

 
2,476

 
Non-agency securities
 

 

 
24,163

 
24,426

 
43,471

 
43,889

 
Total mortgage-backed securities held-to-maturity
 
129,116

 
137,155

 
243,985

 
256,132

 
425,833

 
443,581

 
Total securities held-to-maturity
 
$
179,922

 
198,893

 
287,671

 
311,860

 
478,536

 
514,233

 
Total securities
 
$
1,540,362

 
1,584,221

 
1,254,647

 
1,295,575

 
1,079,551

 
1,116,956

 

At December 31, 2012, we had no investment in the securities of any issuer that had an aggregate book value in excess of 10% of our equity.

18


Portfolio Maturities and Yields. The composition and maturities of the securities portfolio at December 31, 2012 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
 
$

 

 
$

 

 
$

 

 
$
3,306

 

 
$
3,306

 
$
4,161

 
%
Debt Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government sponsored enterprises
 

 

 
3,038

 
0.11
%
 

 

 

 

 
3,038

 
3,035

 
0.11
%
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal Home Loan Mortgage Corporation
 


 


 
5,706

 
3.50
%
 
41,443

 
2.77
%
 
612,946

 
1.99
%
 
660,095

 
667,517

 
2.05
%
Government National Mortgage Association
 

 
%
 

 
%
 

 
%
 
4,414

 
3.28
%
 
4,414

 
4,487

 
3.28
%
Federal National Mortgage Association
 
853

 
8.01
%
 

 
%
 
162,441

 
2.72
%
 
526,293

 
2.38
%
 
689,587

 
706,128

 
2.46
%
Total mortgage-backed securities
 
853

 
8.01
%
 
5,706

 
3.50
%
 
203,884

 
2.73
%
 
1,143,653

 
2.16
%
 
1,354,096

 
1,378,132

 
2.26
%
Total securities available-for- sale
 
$
853

 
8.01
%
 
$
8,744

 
3.61
%
 
$
203,884

 
2.73
%
 
$
1,146,959

 
2.15
%
 
$
1,360,440

 
$
1,385,328

 
2.25
%
Held-to-Maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government sponsored enterprises
 
$

 
%
 
$

 
%
 
$
147

 
1.25
%
 
$

 
%
 
$
147

 
$
149

 
1.25
%
Municipal bonds
 
15,421

 
1.42
%
 
585

 
8.07
%
 
20

 
7.17
%
 
5,130

 
9.08
%
 
21,156

 
22,294

 
3.46
%
Corporate and other debt securities
 

 
%
 

 
%
 

 
%
 
29,503

 
1.42
%
 
29,503

 
39,295

 
1.42
%
 
 
15,421

 
1.42
%
 
585

 
8.07
%
 
167

 
1.96
%
 
34,633

 
2.56
%
 
50,806

 
61,738

 
2.27
%
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal Home Loan Mortgage Corporation
 

 
%
 
4,045

 
7.57
%
 
27,871

 
4.07
%
 
31,117

 
3.51
%
 
63,033

 
66,223

 
4.02
%
Federal National Mortgage Association
 


 
%
 
8,891

 
3.65
%
 
24,062

 
4.30
%
 
31,325

 
4.78
%
 
64,278

 
69,121

 
4.44
%
Federal and state housing authorities
 
1,262

 
8.88
%
 
543

 
8.90
%
 

 
%
 

 
%
 
1,805

 
1,811

 
8.88
%
Total mortgage-backed securities
 
1,262

 
8.88
%
 
13,479

 
5.04
%
 
51,933

 
4.18
%
 
62,442

 
4.15
%
 
129,116

 
137,155

 
4.30