##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: December 31, 2006
 Commission file number: 0-51557
 Investors Bancorp, Inc.
  Delaware
    
    22-3493930(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 101 JFK Parkway, Short Hills, New Jersey 07078
 (973) 924-5100
 þ o
  o o o o þ o
 o þ




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##### 



Investors Bancorp, Inc.
FORM 10-Q
 Index
 PagePart I. Financial InformationItem 1.
    
    Financial StatementsConsolidated Balance Sheets as of December 31, 2006 (unaudited) and June 30, 2006
    
    
    1Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2006 and 2005 (unaudited)
    
    
    2Consolidated Statements of Stockholders Equity for the Six Months Ended December 31, 2006 and 2005 (unaudited)
    
    
    3Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2006 and 2005 (unaudited)
    
    
    4Notes to Consolidated Financial Statements
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    30Part II. Other InformationItem 1.
    
    Legal Proceedings
    
    
    31Item 1A.
    
    Risk Factors
    
    
    31Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3.
    
    Defaults upon Senior Securities
    
    
    31Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    32Item 5.
    
    Other Information
    
    
    32Item 6.
    
    Exhibits
    
    
    33Signature Page
    
    
    34EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATIONS




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Financial Statements
 INVESTORS BANCORP, INC. AND SUBSIDIARY
 
   December 31,
    
    
    June 30,2006
    
    
    2006(In thousands)AssetsCash and cash equivalents
    
    $
    36,382
    
    
    
    39,824Securities available-for-sale, at estimated fair value
    
    
    323,719
    
    
    
    528,876Securities held-to-maturity, net (estimated fair value of
$1,558,560 and $1,695,975 at December 31, 2006
and June 30, 2006, respectively)
    
    
    1,595,238
    
    
    
    1,763,032Loans receivable, net
    
    
    3,274,207
    
    
    
    2,960,583Loans held-for-sale
    
    
    3,589
    
    
    
    974Stock in the Federal Home Loan Bank
    
    
    40,545
    
    
    
    46,125Accrued interest receivable
    
    
    22,435
    
    
    
    21,053Office properties and equipment, net
    
    
    27,310
    
    
    
    27,911Net deferred tax asset
    
    
    35,448
    
    
    
    28,176Bank owned life insurance contract
    
    
    86,186
    
    
    
    78,903Other assets
    
    
    1,960
    
    
    
    1,789Total assets
    
    $
    5,447,019
    
    
    
    5,497,246Liabilities and Stockholders EquityLiabilities:Deposits
    
    $
    3,451,066
    
    
    
    3,302,043Borrowed funds
    
    
    1,046,725
    
    
    
    1,245,740Advance payments by borrowers for taxes and insurance
    
    
    14,591
    
    
    
    15,337Other liabilities
    
    
    33,342
    
    
    
    33,939Total liabilities
    
    
    4,545,724
    
    
    
    4,597,059Stockholders equity:Preferred stock, $0.01 par value, 50,000,000 authorized shares;
none issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 200,000,000 shares authorized;
116,275,688 issued; 115,970,059 and 116,275,688 outstanding
at December 31, 2006 and June 30, 2006, respectively
    
    
    532
    
    
    
    532Additional paid-in capital
    
    
    500,962
    
    
    
    524,962Unallocated common stock held by the employee stock
ownership plan
    
    
    (39,705
    )
    
    
    (40,414
    )Treasury stock, at cost; 305,629 shares at December 31, 2006
    
    
    (4,769
    )
    
    
    Retained earnings
    
    
    447,856
    
    
    
    426,233Accumulated other comprehensive loss:Net unrealized loss on securities available for sale, net of tax
    
    
    (3,213
    )
    
    
    (10,758
    )Minimum pension liability, net of tax
    
    
    (368
    )
    
    
    (368
    )(3,581
    )
    
    
    (11,126
    )Total stockholders equity
    
    
    901,295
    
    
    
    900,187Total liabilities and stockholders equity
    
    $
    5,447,019
    
    
    
    5,497,246
  1




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##### Table of Contents



INVESTORS BANCORP, INC. AND SUBSIDIARY
 
   For the Three Months
    
    
    For the Six MonthsEnded December 31,
    
    
    Ended December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005(Dollars in thousands, except per share data)Interest and dividend income:Loans receivable and loans held-for-sale
    
    $
    44,126
    
    
    
    29,827
    
    
    
    86,038
    
    
    
    56,377Securities:Government-sponsored enterprise obligations
    
    
    1,339
    
    
    
    2,490
    
    
    
    2,678
    
    
    
    4,164Mortgage-backed securities
    
    
    20,649
    
    
    
    24,680
    
    
    
    42,702
    
    
    
    50,664Equity securities available-for-sale
    
    
    472
    
    
    
    455
    
    
    
    927
    
    
    
    910Municipal bonds and other debt
    
    
    2,412
    
    
    
    1,701
    
    
    
    4,818
    
    
    
    2,415Interest-bearing deposits
    
    
    222
    
    
    
    1,658
    
    
    
    391
    
    
    
    2,491Repurchase agreements
    
    
    
    
    
    
    351
    
    
    
    
    
    
    
    613Federal Home Loan Bank stock
    
    
    753
    
    
    
    763
    
    
    
    1,450
    
    
    
    1,491Total interest and dividend income
    
    
    69,973
    
    
    
    61,925
    
    
    
    139,004
    
    
    
    119,125Interest expense:Deposits
    
    
    34,044
    
    
    
    23,055
    
    
    
    64,794
    
    
    
    44,771Secured borrowings
    
    
    14,935
    
    
    
    11,141
    
    
    
    30,749
    
    
    
    22,059Total interest expense
    
    
    48,979
    
    
    
    34,196
    
    
    
    95,543
    
    
    
    66,830Net interest income
    
    
    20,994
    
    
    
    27,729
    
    
    
    43,461
    
    
    
    52,295Provision for loan losses
    
    
    100
    
    
    
    100
    
    
    
    325
    
    
    
    200Net interest income after provision
for loan losses
    
    
    20,894
    
    
    
    27,629
    
    
    
    43,136
    
    
    
    52,095Non-interest (loss) income:Fees and service charges
    
    
    659
    
    
    
    669
    
    
    
    1,319
    
    
    
    1,288Income on bank owned life insurance contract
    
    
    924
    
    
    
    1,257
    
    
    
    1,719
    
    
    
    1,130(Loss) gain on sales of mortgage loans, net
    
    
    (129
    )
    
    
    62
    
    
    
    (46
    )
    
    
    139Loss on securities transactions
    
    
    (3,666
    )
    
    
    
    
    
    
    (3,666
    )
    
    
    Gain on sale of other real estate owned, net
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Other non-interest income
    
    
    21
    
    
    
    21
    
    
    
    42
    
    
    
    41Total non-interest (loss) income
    
    
    (2,191
    )
    
    
    2,014
    
    
    
    (632
    )
    
    
    2,603Non-interest expense:Compensation and fringe benefits
    
    
    12,258
    
    
    
    10,987
    
    
    
    22,701
    
    
    
    20,627Advertising and promotional expense
    
    
    858
    
    
    
    483
    
    
    
    1,758
    
    
    
    1,086Office occupancy and equipment expense
    
    
    2,515
    
    
    
    2,625
    
    
    
    4,938
    
    
    
    5,269Federal insurance premiums
    
    
    108
    
    
    
    109
    
    
    
    218
    
    
    
    218Stationery, printing, supplies and telephone
    
    
    380
    
    
    
    416
    
    
    
    773
    
    
    
    908Legal, audit, accounting, and supervisory examination fees
    
    
    257
    
    
    
    450
    
    
    
    1,032
    
    
    
    799Data processing service fees
    
    
    972
    
    
    
    929
    
    
    
    1,908
    
    
    
    1,816Contribution to charitable foundation
    
    
    
    
    
    
    20,651
    
    
    
    
    
    
    
    20,651Other operating expenses
    
    
    899
    
    
    
    912
    
    
    
    2,006
    
    
    
    1,787Total non-interest expense
    
    
    18,247
    
    
    
    37,562
    
    
    
    35,334
    
    
    
    53,161Income (loss) before income tax (benefit) expense
    
    
    456
    
    
    
    (7,919
    )
    
    
    7,170
    
    
    
    1,537Income tax (benefit) expense
    
    
    (11,564
    )
    
    
    (2,980
    )
    
    
    (9,201
    )
    
    
    515Net income (loss)
    
    $
    12,020
    
    
    
    (4,939
    )
    
    
    16,371
    
    
    
    1,022Earnings (loss) per share  basic and diluted (1)
    
    $
    0.11
    
    
    
    (0.06
    )
    
    
    0.15
    
    
    
    N/AWeighted average shares outstanding (1):Basic
    
    
    111,746,704
    
    
    
    112,024,104
    
    
    
    111,783,846
    
    
    
    N/ADiluted
    
    
    111,748,993
    
    
    
    112,024,104
    
    
    
    111,783,846
    
    
    
    N/A
 
 (1)
    
    Earnings per share and weighted average shares for 2005 are from date of initial stock offering.  2




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##### Table of Contents



INVESTORS BANCORP, INC. AND SUBSIDIARY
 
    Accumulated othercomprehensive lossAdditional
    
    
    Unallocated
    
    
    
    
    
    
    
    
    
    
    Unrealized
    
    
    Minimum
    
    
    TotalCommon
    
    
    paid-in
    
    
    Common Stock
    
    
    Treasury
    
    
    Retained
    
    
    gain (loss) on
    
    
    pension
    
    
    stockholders'stock
    
    
    capital
    
    
    Held by ESOP
    
    
    stock
    
    
    earnings
    
    
    securities
    
    
    liability
    
    
    equity(In thousands)Balance at June 30, 2005
    
    $
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    411,219
    
    
    
    (2,316
    )
    
    
    (1,101
    )
    
    
    407,827Comprehensive loss:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,022
    
    
    
    
    
    
    
    
    
    
    
    1,022Unrealized loss on securities available-
for-sale, net of tax benefit of $3,675
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,598
    )
    
    
    
    
    
    
    (5,598
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,576
    )Sale of 53,175,907 shares of common
stock in the initial public offering
and issuance of 63,099,781 shares to
the mutual holding company
    
    
    532
    
    
    
    524,642
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    525,174Purchase of common stock by the ESOP
    
    
    
    
    
    
    
    
    
    
    (42,541
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,541
    )Allocation of ESOP stock
    
    
    
    
    
    
    84
    
    
    
    1,418
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,502Balance at December 31, 2005
    
    $
    532
    
    
    
    524,751
    
    
    
    (41,123
    )
    
    
    
    
    
    
    412,241
    
    
    
    (7,914
    )
    
    
    (1,101
    )
    
    
    887,386Balance at June 30, 2006
    
    $
    532
    
    
    
    524,962
    
    
    
    (40,414
    )
    
    
    
    
    
    
    426,233
    
    
    
    (10,758
    )
    
    
    (368
    )
    
    
    900,187Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,371
    
    
    
    
    
    
    
    
    
    
    
    16,371Unrealized gain on securities available-
for-sale, net of tax expense of $6,210
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,496
    
    
    
    
    
    
    
    9,496Reclassification adjustment for losses on
securities transactions included in net
income, net of tax benefit of $1,347
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,951
    )
    
    
    
    
    
    
    (1,951
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,916Cummulative effect of change
in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,564
    
    
    
    
    
    
    
    
    
    
    
    5,564Purchase of treasury stock (1,972,588 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,502
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,502
    )Treasury stock allocated to restricted stock plan
    
    
    
    
    
    
    (25,421
    )
    
    
    
    
    
    
    25,733
    
    
    
    (312
    )
    
    
    
    
    
    
    
    
    
    
    Compensation cost for stock options and restricted stock
    
    
    
    
    
    
    1,096
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,096Allocation of ESOP stock
    
    
    
    
    
    
    325
    
    
    
    709
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,034Balance at December 31, 2006
    
    $
    532
    
    
    
    500,962
    
    
    
    (39,705
    )
    
    
    (4,769
    )
    
    
    447,856
    
    
    
    (3,213
    )
    
    
    (368
    )
    
    
    901,295
  3




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##### Table of Contents



INVESTORS BANCORP, INC. AND SUBSIDIARY
 
   For the Six Months EndedDecember 31,2006
    
    
    2005(In thousands)Cash flows from operating activities:Net income
    
    $
    16,371
    
    
    
    1,022Adjustments to reconcile net income to net cash provided by operating activities:Contribution of stock to charitable foundation
    
    
    
    
    
    
    15,488ESOP and stock-based compensation expense
    
    
    2,130
    
    
    
    1,502Amortization of premiums and accretion of discounts on securities, net
    
    
    891
    
    
    
    395Provision for loan losses
    
    
    325
    
    
    
    200Depreciation and amortization of office properties and equipment
    
    
    1,453
    
    
    
    1,555Loss on securities transactions
    
    
    3,666
    
    
    
    Mortgage loans originated for sale
    
    
    (21,833
    )
    
    
    (13,270
    )Proceeds from mortgage loan sales
    
    
    19,411
    
    
    
    15,420Loss (gain) on sales of mortgage loans, net
    
    
    46
    
    
    
    (139
    )Increase in bank owned life insurance contract
    
    
    (1,719
    )
    
    
    (1,130
    )Increase in accrued interest receivable
    
    
    (1,382
    )
    
    
    (1,211
    )Deferred tax benefit
    
    
    (12,135
    )
    
    
    (2,484
    )(Increase) decrease in other assets
    
    
    (171
    )
    
    
    343Decrease in other liabilities
    
    
    (597
    )
    
    
    (2,258
    )Total adjustments
    
    
    (9,915
    )
    
    
    14,411Net cash provided by operating activities
    
    
    6,456
    
    
    
    15,433Cash flows from investing activities:Originations of loans
    
    
    (132,025
    )
    
    
    (229,908
    )Purchases of loans
    
    
    (371,575
    )
    
    
    (388,650
    )Payments on loans
    
    
    189,412
    
    
    
    188,680Purchases of mortgage-backed securities held-to-maturity
    
    
    (8,933
    )
    
    
    (24,865
    )Purchases of debt securities held-to-maturity
    
    
    (3,500
    )
    
    
    (333,406
    )Proceeds from paydowns/maturities on mortgage-backed
securities held-to-maturity
    
    
    154,410
    
    
    
    294,856Proceeds from calls/maturities on debt securities held-to-maturity
    
    
    1,639
    
    
    
    225,167Proceeds from paydowns/maturities on mortgage-backed
securities available-for-sale
    
    
    53,132
    
    
    
    76,082Proceeds from sale of mortgage-backed securities held-to-maturity
    
    
    22,942
    
    
    
    Proceeds from sale of mortgage-backed securities available-for-sale
    
    
    161,112
    
    
    
    Proceeds from redemptions of Federal Home Loan Bank stock
    
    
    22,230
    
    
    
    51,836Purchases of Federal Home Loan Bank stock
    
    
    (16,650
    )
    
    
    (43,427
    )Purchases of office properties and equipment
    
    
    (852
    )
    
    
    (572
    )Net cash provided by investing activities
    
    
    71,342
    
    
    
    (184,207
    )Cash flows from financing activities:Net increase in deposits
    
    
    149,023
    
    
    
    29,626Net proceeds from sale of common stock
    
    
    
    
    
    
    509,686Loan to ESOP
    
    
    
    
    
    
    (42,541
    )Net (decrease) increase in funds borrowed under short-term repurchase agreements
    
    
    (250,000
    )
    
    
    40,000Proceeds from funds borrowed under other repurchase agreements
    
    
    260,000
    
    
    
    Repayments of funds borrowed under other repurchase agreements
    
    
    (235,000
    )
    
    
    (515,000
    )Net increase in Federal Home Loan Bank advances
    
    
    25,985
    
    
    
    101,486Net (decrease) increase in advance payments by borrowers for taxes and insurance
    
    
    (746
    )
    
    
    114Purchase of treasury stock
    
    
    (30,502
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (81,240
    )
    
    
    123,371Net (decrease) increase in cash and cash equivalents
    
    
    (3,442
    )
    
    
    (45,403
    )Cash and cash equivalents at beginning of period
    
    
    39,824
    
    
    
    81,329Cash and cash equivalents at end of period
    
    $
    36,382
    
    
    
    35,926Supplemental cash flow information:Cash paid during the period for:Interest
    
    
    96,104
    
    
    
    69,560Income taxes
    
    
    7,615
    
    
    
    400
  4




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##### Table of Contents



INVESTORS BANCORP, INC. AND SUBSIDIARY
 
 Notes to Consolidated Financial Statements
 1. Basis of Presentation
    2. Bank Owned Life Insurance
    5




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##### Table of Contents



3. Earnings (Loss) Per Share
  For the Three Months Ended December 31,2006
    
    
    2005 (1)Per Share
    
    
    
    
    
    
    
    
    
    
    Per ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Loss
    
    
    Shares
    
    
    Amount(Dollars in thousands, except per share data)Net Income (loss)
    
    $
    12,020
    
    
    
    
    
    
    
    
    
    
    $
    (4,939
    )Basic earnings per share:Income (loss) attributable to common
stockholders
    
    $
    12,020
    
    
    
    111,746,704
    
    
    $
    0.11
    
    
    $
    (6,625
    )
    
    
    112,024,104
    
    
    $
    (0.06
    )Effect of dilutive common stock
equivalents
    
    
    
    
    
    
    2,289
    
    
    
    
    
    
    
    
    
    
    
    Diluted earnings per share:Income attributable to common
stockholders
    
    $
    12,020
    
    
    
    111,748,993
    
    
    $
    0.11
    
    
    $
    
    
    
    
    112,024,104
    
    
    $
    
 
 (1)
    
    Loss attributable to common stockholders and weighted average shares for 2005 are from
date of initial stock offering. 6




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##### Table of Contents



For the Six Months Ended December 31,2006Per ShareIncome
    
    
    Shares
    
    
    Amount(Dollars in thousands, except per share data)Net Income
    
    $
    16,371Basic earnings per share:Income attributable to
common stockholders
    
    $
    16,371
    
    
    
    111,783,846
    
    
    $
    0.15Effect of dilutive common stock
equivalents
    
    
    
    
    
    
    Diluted earnings per share:Income attributable to
common stockholders
    
    $
    16,371
    
    
    
    111,783,846
    
    
    $
    0.15
 4. Loans Receivable, Net
  December 31,
    
    
    June 30,2006
    
    
    2006(In thousands)Residential mortgage loans
    
    $
    2,938,307
    
    
    
    2,666,559Multi-family and commercial
    
    
    83,161
    
    
    
    76,976Construction loans
    
    
    83,793
    
    
    
    65,459Consumer and other loans
    
    
    154,854
    
    
    
    139,336Total loans
    
    
    3,260,115
    
    
    
    2,948,330Premiums on purchased loans
    
    
    22,416
    
    
    
    20,327Deferred loan fees, net
    
    
    (1,798
    )
    
    
    (1,734
    )Allowance for loan losses
    
    
    (6,526
    )
    
    
    (6,340
    )$
    3,274,207
    
    
    
    2,960,583
 5. Deposits
  December 31,
    
    
    June 30,2006
    
    
    2006(In thousands)Savings accounts
    
    $
    257,994
    
    
    
    226,245Checking accounts
    
    
    340,308
    
    
    
    349,014Money market accounts
    
    
    178,321
    
    
    
    212,200Total core deposits
    
    
    776,623
    
    
    
    787,459Certificates of deposit
    
    
    2,674,443
    
    
    
    2,514,584$
    3,451,066
    
    
    
    3,302,043
 7




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##### Table of Contents



6. Equity Incentive Plan
      8




---



##### Table of Contents



WeightedWeighted
    
    Average
    
    AggregateNumber of
    
    Average
    
    Remaining
    
    IntrinsicStock Options
    
    Exercise Price
    
    Contractual Life
    
    ValueOutstanding at June 30, 2006
    
    
    
    
    
    
    Granted
    
    
    4,447,401
    
    
    $
    15.26Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at December 31, 2006
    
    
    4,447,401
    
    
    $
    15.26
    
    
    9.9 years
    
    $
    2,090,278Exercisable at December 31, 2006
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/A
  WeightedNumber of
    
    AverageStock
    
    Grant DateOptions
    
    Fair ValueNon-vested at June 30, 2006
    
    
    
    
    
    
    Granted
    
    
    4,447,401
    
    
    $
    4.17Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Non-vested at December 31, 2006
    
    
    4,447,401
    
    
    $
    4.17
   9




---



##### Table of Contents



Number of
    
    WeightedStock
    
    AverageAwards
    
    Grant DateShares
    
    Fair ValueNon-vested at June 30, 2006
    
    
    
    
    
    
    Granted
    
    
    1,666,959
    
    
    $
    15.25Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Non-vested at December 31, 2006
    
    
    1,666,959
    
    
    $
    15.25
  7. Income Taxes
  10




---



##### Table of Contents



For the Three
    
    
    For the SixMonths ended
    
    
    Months endedDecember 31, 2006
    
    
    December 31, 2006(In thousands)Expected federal income tax expense
    
    $
    160
    
    
    $
    2,510Change in valuation allowance for
deferred tax assets  Federal and State
    
    
    (10,717
    )
    
    
    (10,717
    )Other State tax benefit, net
    
    
    (663
    )
    
    
    (315
    )Bank owned life insurance
    
    
    (323
    )
    
    
    (602
    )Dividend received deduction
    
    
    (116
    )
    
    
    (227
    )Other
    
    
    95
    
    
    
    150Total income tax benefit
    
    $
    (11,564
    )
    
    $
    (9,201
    )
 8. Net Periodic Benefit Plans Expense
    Three months ended December 31,SERP and Directors Plan
    
    
    Other Benefits2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)Service cost
    
    
    313
    
    
    
    345
    
    
    
    44
    
    
    
    49Interest cost
    
    
    240
    
    
    
    200
    
    
    
    132
    
    
    
    124Amortization of:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transition obligation
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    50Prior service cost
    
    
    47
    
    
    
    47
    
    
    
    
    
    
    
    Net loss
    
    
    40
    
    
    
    81
    
    
    
    
    
    
    
    24Total net periodic
benefit expense
    
    $
    640
    
    
    
    673
    
    
    $
    226
    
    
    
    247
 11




---



##### Table of Contents



Six months ended December 31,SERP and Directors Plan
    
    
    Other Benefits2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)Service cost
    
    
    627
    
    
    
    691
    
    
    
    88
    
    
    
    98Interest cost
    
    
    479
    
    
    
    400
    
    
    
    264
    
    
    
    249Amortization of:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transition obligation
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    100Prior service cost
    
    
    94
    
    
    
    93
    
    
    
    
    
    
    
    Net loss
    
    
    79
    
    
    
    163
    
    
    
    
    
    
    
    47Total net periodic
benefit expense
    
    $
    1,279
    
    
    
    1,347
    
    
    $
    452
    
    
    
    494
   9. Stock Repurchase Program
  10. Recent Accounting Pronouncements
   12




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
  13




---



##### Table of Contents



Executive Summary
    14




---



##### Table of Contents



Securities Comparison of Financial
Condition at December 31, 2006 and June 30, 2006 Deferred Tax Asset Comparison of Financial Condition at
December 31, 2006 and June 30, 2006.
   Net Loans Comparison of Financial Condition at
December 31, 2006 and June 30, 2006.
  Comparison of Financial Condition at December 31, 2006 and June 30, 2006
 Total Assets .
 Securities.
 15




---



##### Table of Contents



Net Loans.
      16




---



##### Table of Contents



Deferred Tax Asset.
    17




---



##### Table of Contents



Bank Owned Life Insurance, Stock in the Federal Home Loan Bank and Other Assets
 Deposits .
 Borrowed Funds .
 Stockholders Equity .
  Average Balance Sheets for the Three and Six Months ended December 31, 2006 and 2005
  18




---



##### Table of Contents



For Three Months EndedDecember 31, 2006
    
    
    December 31, 2005Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    Interest
    
    
    Average
    
    
    Outstanding
    
    
    Interest
    
    
    AverageBalance
    
    
    Earned/Paid
    
    
    Yield/Rate
    
    
    Balance
    
    
    Earned/Paid
    
    
    Yield/Rate(Dollars in thousands)Interest-earning assets:Due from banks
    
    $
    22,758
    
    
    $
    222
    
    
    
    3.90
    %
    
    $
    176,800
    
    
    $
    1,658
    
    
    
    3.75
    %Repurchase agreements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,810
    
    
    
    351
    
    
    
    4.03
    %Securities available-for-sale
    
    
    470,134
    
    
    
    5,175
    
    
    
    4.40
    %
    
    
    620,622
    
    
    
    6,554
    
    
    
    4.22
    %Securities held-to-maturity
    
    
    1,648,891
    
    
    
    19,697
    
    
    
    4.78
    %
    
    
    2,042,733
    
    
    
    22,772
    
    
    
    4.46
    %Net loans
    
    
    3,217,045
    
    
    
    44,126
    
    
    
    5.49
    %
    
    
    2,309,963
    
    
    
    29,827
    
    
    
    5.16
    %Stock in FHLB
    
    
    45,252
    
    
    
    753
    
    
    
    6.66
    %
    
    
    58,729
    
    
    
    763
    
    
    
    5.20
    %Total interest-earning assets
    
    
    5,404,080
    
    
    
    69,973
    
    
    
    5.18
    %
    
    
    5,243,657
    
    
    
    61,925
    
    
    
    4.72
    %Non-interest earning assets
    
    
    154,837
    
    
    
    
    
    
    
    
    
    
    
    135,011Total assets
    
    $
    5,558,917
    
    
    
    
    
    
    
    
    
    
    $
    5,378,668Interest-bearing Liabilities:Savings
    
    $
    243,693
    
    
    
    907
    
    
    
    1.49
    %
    
    $
    374,737
    
    
    
    830
    
    
    
    0.89
    %Interest-bearing checking
    
    
    298,288
    
    
    
    1,790
    
    
    
    2.40
    %
    
    
    312,438
    
    
    
    1,484
    
    
    
    1.90
    %Money market accounts
    
    
    186,335
    
    
    
    929
    
    
    
    1.99
    %
    
    
    268,122
    
    
    
    897
    
    
    
    1.34
    %Certificates of deposit
    
    
    2,633,188
    
    
    
    30,418
    
    
    
    4.62
    %
    
    
    2,397,206
    
    
    
    19,844
    
    
    
    3.31
    %Borrowed funds
    
    
    1,210,038
    
    
    
    14,935
    
    
    
    4.94
    %
    
    
    1,141,045
    
    
    
    11,141
    
    
    
    3.91
    %Total interest-bearing liabilities
    
    
    4,571,542
    
    
    
    48,979
    
    
    
    4.29
    %
    
    
    4,493,548
    
    
    
    34,196
    
    
    
    3.04
    %Non-interest bearing liabilities
    
    
    83,732
    
    
    
    
    
    
    
    
    
    
    
    59,747Total liabilities
    
    
    4,655,274
    
    
    
    
    
    
    
    
    
    
    
    4,553,295Stockholders equity
    
    
    903,643
    
    
    
    
    
    
    
    
    
    
    
    825,373Total liabilities and
stockholders equity
    
    $
    5,558,917
    
    
    
    
    
    
    
    
    
    
    $
    5,378,668Net interest income
    
    
    
    
    
    $
    20,994
    
    
    
    
    
    
    
    
    
    
    $
    27,729Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    0.89
    %
    
    
    
    
    
    
    
    
    
    
    1.68
    %Net interest earning assets
    
    $
    832,538
    
    
    
    
    
    
    
    
    
    
    $
    750,109Net interest margin
    
    
    
    
    
    
    
    
    
    
    1.55
    %
    
    
    
    
    
    
    
    
    
    
    2.12
    %Ratio of interest-earning assets to total interest-
bearing liabilities
    
    
    1.18
    X
    
    
    
    
    
    
    
    
    
    
    1.17
    X
 19




---



##### Table of Contents



For Six Months EndedDecember 31, 2006
    
    
    December 31, 2005Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    Interest
    
    
    Average
    
    
    Outstanding
    
    
    Interest
    
    
    AverageBalance
    
    
    Earned/Paid
    
    
    Yield/Rate
    
    
    Balance
    
    
    Earned/Paid
    
    
    Yield/Rate(Dollars in thousands)Interest-earning assets:Due from banks
    
    $
    21,398
    
    
    $
    391
    
    
    
    3.65
    %
    
    $
    144,479
    
    
    $
    2,491
    
    
    
    3.45
    %Repurchase agreements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,773
    
    
    
    613
    
    
    
    3.74
    %Securities available-for-sale
    
    
    502,636
    
    
    
    10,897
    
    
    
    4.34
    %
    
    
    641,141
    
    
    
    13,499
    
    
    
    4.21
    %Securities held-to-maturity
    
    
    1,688,919
    
    
    
    40,228
    
    
    
    4.76
    %
    
    
    2,033,956
    
    
    
    44,654
    
    
    
    4.39
    %Net loans
    
    
    3,149,672
    
    
    
    86,038
    
    
    
    5.46
    %
    
    
    2,202,165
    
    
    
    56,377
    
    
    
    5.12
    %Stock in FHLB
    
    
    46,531
    
    
    
    1,450
    
    
    
    6.23
    %
    
    
    58,228
    
    
    
    1,491
    
    
    
    5.12
    %Total interest-earning assets
    
    
    5,409,156
    
    
    
    139,004
    
    
    
    5.14
    %
    
    
    5,112,742
    
    
    
    119,125
    
    
    
    4.66
    %Non-interest earning assets
    
    
    152,013
    
    
    
    
    
    
    
    
    
    
    
    135,726Total assets
    
    $
    5,561,169
    
    
    
    
    
    
    
    
    
    
    $
    5,248,468Interest-bearing Liabilities:Savings
    
    $
    233,447
    
    
    
    1,433
    
    
    
    1.23
    %
    
    $
    424,205
    
    
    
    1,835
    
    
    
    0.87
    %Interest-bearing checking
    
    
    302,959
    
    
    
    3,635
    
    
    
    2.40
    %
    
    
    297,582
    
    
    
    2,644
    
    
    
    1.78
    %Money market accounts
    
    
    196,799
    
    
    
    1,802
    
    
    
    1.83
    %
    
    
    287,510
    
    
    
    1,927
    
    
    
    1.34
    %Certificates of deposit
    
    
    2,594,289
    
    
    
    57,924
    
    
    
    4.47
    %
    
    
    2,402,719
    
    
    
    38,365
    
    
    
    3.19
    %Borrowed funds
    
    
    1,246,699
    
    
    
    30,749
    
    
    
    4.93
    %
    
    
    1,161,966
    
    
    
    22,059
    
    
    
    3.80
    %Total interest-bearing liabilities
    
    
    4,574,193
    
    
    
    95,543
    
    
    
    4.18
    %
    
    
    4,573,982
    
    
    
    66,830
    
    
    
    2.92
    %Non-interest bearing liabilities
    
    
    83,478
    
    
    
    
    
    
    
    
    
    
    
    59,813Total liabilities
    
    
    4,657,671
    
    
    
    
    
    
    
    
    
    
    
    4,633,795Stockholders equity
    
    
    903,498
    
    
    
    
    
    
    
    
    
    
    
    614,673Total liabilities and
stockholders equity
    
    $
    5,561,169
    
    
    
    
    
    
    
    
    
    
    $
    5,248,468Net interest income
    
    
    
    
    
    $
    43,461
    
    
    
    
    
    
    
    
    
    
    $
    52,295Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    0.96
    %
    
    
    
    
    
    
    
    
    
    
    1.74
    %Net interest earning assets
    
    $
    834,963
    
    
    
    
    
    
    
    
    
    
    $
    538,760Net interest margin
    
    
    
    
    
    
    
    
    
    
    1.61
    %
    
    
    
    
    
    
    
    
    
    
    2.05
    %Ratio of interest-earning assets to total interest-bearing liabilities
    
    
    1.18
    X
    
    
    
    
    
    
    
    
    
    
    1.12
    X
 Comparison of Operating Results for the Three Months Ended December 31, 2006 and 2005
 Net Income .
 20




---



##### Table of Contents



Net Interest Income .
 Interest and Dividend Income .
   Interest Expense.
  21




---



##### Table of Contents



Provision for Loan Losses. Comparison of
Financial Condition at December 31, 2006 and June 30, 2006.
 Non-Interest Income .
 Non-Interest Expense .
 Income Taxes.
 22




---



##### Table of Contents



Comparison of Financial Condition at December
31, 2006 and June 30, 2006.
 Comparison of Operating Results for the Six Months Ended December 31, 2006 and 2005
 Net Income .
 Net Interest Income .
 Interest and Dividend Income.
   Interest Expense.
 23




---



##### Table of Contents



Provision for Loan Losses. Comparison of Financial Condition at December 31, 2006 and June
30, 2006
 Non-Interest Income .
 Non-Interest Expense .
 24




---



##### Table of Contents



Income
Taxes. Comparison of Financial Condition at December
31, 2006 and June 30, 2006.
 Liquidity and Capital Resources
      25




---



##### Table of Contents



As of December 31, 2006Actual
    
    RequiredAmount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)Total capital (to risk-weighted assets)
    
    $
    684,098
    
    
    
    26.3
    %
    
    $
    208,000
    
    
    
    8.0
    %Tier I capital (to risk-weighted assets)
    
    
    677,572
    
    
    
    26.1
    
    
    
    104,000
    
    
    
    4.0Tier I capital (to average assets)
    
    
    677,572
    
    
    
    12.2
    
    
    
    222,705
    
    
    
    4.0
 Critical Accounting Policies
  Allowance for Loan Losses.
   26




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##### Table of Contents



27




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##### Table of Contents



Deferred Income Taxes.
 Asset Impairment Judgments.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Qualitative Analysis
 28




---



##### Table of Contents



29




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##### Table of Contents



Quantitative Analysis
 Net Portfolio Value (2)
    
    Net Interest IncomeChange in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Increase (Decrease) in EstimatedInterest Rates
    
    
    
    
    
    Estimated Increase (Decrease)
    
    Estimated Net
    
    Net Interest Income(basis points) (1)
    
    Estimated NPV
    
    Amount
    
    Percent
    
    Interest Income
    
    Amount
    
    Percent(Dollars in thousands)+200bp
    
    $
    601,078
    
    
    $
    (276,356
    )
    
    
    (31.50
    )%
    
    $
    74,523
    
    
    $
    (11,175
    )
    
    
    (13.04
    )%0bp
    
    
    877,434
    
    
    
    
    
    
    
    
    
    
    
    85,698
    
    
    
    
    
    
    
    -200bp
    
    
    958,145
    
    
    
    80,711
    
    
    
    9.20
    %
    
    
    96,942
    
    
    
    11,244
    
    
    
    13.12
    %
 
 (1)
    
    Assumes an instantaneous uniform change in interest rates at all maturities.(2)
    
    NPV is the discounted present value of expected cash flows from assets, liabilities and
off-balance sheet contracts.   
 Item 4. Controls and Procedures
  30




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##### Table of Contents



Part II  Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number of
    
    
    Maximum NumberShares Purchased as
    
    
    of Shares that MayTotal Number of
    
    
    
    
    
    
    Part of Publicly
    
    
    Yet Be PurchasedShares
    
    
    Average price
    
    
    Announced Plans or
    
    
    Under the Plans orPeriod
    
    Purchased (1)
    
    
    Paid per Share
    
    
    Programs
    
    
    ProgramsOctober 1, 2006 through October 31, 2006
    
    
    0
    
    
    
    
    
    
    
    0
    
    
    
    5,317,590November 1, 2006 through November 30, 2006
    
    
    322,088
    
    
    
    14.87
    
    
    
    322,088
    
    
    
    4,995,502December 1, 2006 through December 31, 2006
    
    
    1,650,500
    
    
    
    15.58
    
    
    
    1,650,500
    
    
    
    3,345,002Total
    
    
    1,972,588
    
    
    
    15.46
    
    
    
    1,972,588
 
 (1)
    
    On September 25, 2006, the Company announced its intention to repurchase up
to 10% of its publicly-held outstanding shares of common stock, or 5,317,590
shares. 
 Item 3. Defaults Upon Senior Securities
  31




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  Proposal 1:
 Patrick J. Grant
    
    For: 108,108,388
    
    Withheld: 2,700,567John A. Kirkpartrick
    
    For: 107,982,373
    
    Withheld: 2,826,582Joseph H. Shepard III
    
    For: 107,992,062
    
    Withheld: 2,816,893
 Proposal 2:
 For:
    
    
    93,400,709Against:
    
    
    4,277,913Abstain:
    
    
    349,347Non vote:
    
    
    12,780,986
 Proposal 3:
 For:
    
    
    110,111,735Against:
    
    
    453,763Abstain:
    
    
    243,457
 
 Item 5.
Other Information
  32




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##### Table of Contents



Item 6. Exhibits
  3.1
    
    Certificate of Incorporation of Investors Bancorp, Inc.*3.2
    
    Bylaws of Investors Bancorp, Inc.*4
    
    Form of Common Stock Certificate of Investors Bancorp, Inc.*10.1
    
    Form of Employment Agreement between Investors Bancorp, Inc. and certain
executive officers*10.2
    
    Form of Change in Control Agreement between Investors Bancorp, Inc. and certain
executive officers *10.3
    
    Investors Savings Bank Director Retirement Plan*10.4
    
    Investors Savings Bank Supplemental Retirement Plan*10.5
    
    Investors Bancorp, Inc. Supplemental Wage Replacement Plan*31.1
    
    Certification of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232
    
    Certification of Principal Executive Officer and Principal
Financial and Accounting Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed as exhibits to the Companys Registration Statement on Form S-1, and any amendments
thereto, with the Securities and Exchange Commission (Registration No. 333-125703) 33




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##### Table of Contents



SIGNATURES
  Investors Bancorp, Inc.Dated:   February 9, 2007
    /s/ Robert M. CashillRobert M. CashillPresident and Chief Executive
Officer(Principal Executive Officer)Dated:   February 9, 2007
    /s/ Domenick A. CamaDomenick A. CamaExecutive
Vice President and Chief Financial Officer(Principal Financial
and Accounting Officer) 34