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: March 31, 2009

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 No.)

101 JFK Parkway, Short Hills, New Jersey 07078
(Address of principal executive offices)

(973) 924-5100
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all the reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

      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 o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company o

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

     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 o No o

     As of April 30, 2009 there were 109,052,929 shares of the Registrant’s common stock, par value $0.01 per share, outstanding, of which 64,844,373 shares, or 59.46% of the Registrant’s outstanding common stock, were held by Investors Bancorp, MHC, the Registrant’s mutual holding company.

 

 

Investors Bancorp, Inc.
FORM 10-Q

Index

		Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2009 (unaudited) and June 30, 2008			3
Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2009 and 2008 (unaudited)			4
Consolidated Statements of Stockholders’ Equity for the Nine Months Ended March 31, 2009 and 2008 (unaudited)			5
Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2009 and 2008 (unaudited)			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3. Quantitative and Qualitative Disclosures About Market Risk			33
Item 4. Controls and Procedures			35
Part II. Other Information
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 3. Defaults upon Senior Securities			36
Item 4. Submission of Matters to a Vote of Security Holders			36
Item 5. Other Information			37
Item 6. Exhibits			37
Signature Page
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

Part I. Financial Information

Item 1. Financial Statements

INVESTORS BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets

March 31, 2009 (Unaudited) and June 30, 2008

		March 31,				June 30,
		2009				2008
		(In thousands)
Assets
Cash and cash equivalents		$	322,469				22,823
Securities available-for-sale, at estimated fair value			166,584				203,032
Securities held-to-maturity, net (estimated fair value of $948,896 and $1,198,053 at March 31, 2009 and June 30, 2008, respectively)			930,349				1,255,054
Loans receivable, net			5,560,678				4,670,150
Loans held-for-sale			37,220				9,814
Stock in the Federal Home Loan Bank			69,574				60,935
Accrued interest receivable			32,535				27,716
Office properties and equipment, net			34,894				29,710
Net deferred tax asset			108,214				40,702
Bank owned life insurance contract			98,409				96,170
Other assets			5,907				3,036
Total assets		$	7,366,833				6,419,142
Liabilities and Stockholders’ Equity
Liabilities:
Deposits		$	4,770,178				3,970,275
Borrowed funds			1,755,562				1,563,583
Advance payments by borrowers for taxes and insurance			24,015				21,829
Other liabilities			50,219				34,917
Total liabilities			6,599,974				5,590,604
Stockholders’ 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; 118,020,280 issued; 109,052,929 and 109,010,756 outstanding at March 31, 2009 and June 30, 2008, respectively			532				532
Additional paid-in capital			522,126				514,613
Retained earnings			415,612				486,244
Treasury stock, at cost; 8,967,351 and 9,009,524 shares at March 31, 2009 and June 30, 2008, respectively			(128,121	)			(128,977	)
Unallocated common stock held by the employee stock ownership plan			(36,514	)			(37,578	)
Accumulated other comprehensive loss			(6,776	)			(6,296	)
Total stockholders’ equity			766,859				828,538
Total liabilities and stockholders’ equity		$	7,366,833				6,419,142

See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Operations

(Unaudited)

		For the Three Months								For the Nine Months
		Ended March 31,								Ended March 31,
		2009				2008				2009				2008
		(Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable and loans held-for-sale		$	76,723				57,605				225,494				168,262
Securities:
Government-sponsored enterprise obligations			304				1,119				1,295				4,024
Mortgage-backed securities			11,946				15,346				38,219				48,717
Equity securities available-for-sale			1				68				64				224
Municipal bonds and other debt			2,986				2,627				7,372				8,773
Interest-bearing deposits			119				258				158				814
Repurchase agreements			—				162				—				162
Federal Home Loan Bank stock			670				975				2,094				2,375
Total interest and dividend income			92,749				78,160				274,696				233,351
Interest expense:
Deposits			33,900				38,395				96,837				118,206
Borrowings			17,691				12,887				55,053				41,414
Total interest expense			51,591				51,282				151,890				159,620
Net interest income			41,158				26,878				122,806				73,731
Provision for loan losses			8,000				997				21,000				2,946
Net interest income after provision for loan losses			33,158				25,881				101,806				70,785
Non-interest income (loss) :
Fees and service charges			906				780				2,358				2,348
Income on bank owned life insurance contracts			256				950				2,239				3,016
Gain on sales of mortgage loans, net			2,163				234				2,229				466
Gain (loss) on securities transactions, net			2				(17	)			(157,969	)			(241	)
Other income			90				188				302				366
Total non-interest income (loss)			3,417				2,135				(150,841	)			5,955
Non-interest expenses:
Compensation and fringe benefits			15,670				13,998				45,413				40,268
Advertising and promotional expense			640				643				2,400				1,890
Office occupancy and equipment expense			2,998				2,685				8,540				8,052
Federal deposit insurance premiums			1,800				115				3,157				335
Stationery, printing, supplies and telephone			488				494				1,523				1,388
Legal, audit, accounting, and supervisory examination fees			599				580				1,789				1,616
Data processing service fees			1,113				1,197				3,348				3,375
Other operating expenses			1,147				922				3,466				3,175
Total non-interest expenses			24,455				20,634				69,636				60,099
Income (loss) before income tax expense (benefit)			12,120				7,382				(118,671	)			16,641
Income tax expense (benefit)			5,042				2,847				(48,281	)			6,091
Net income (loss)		$	7,078				4,535				(70,390	)			10,550
Basic earnings (loss) per share		$	0.07				0.04				(0.68	)			0.10
Diluted earnings per share		$	0.07				0.04				n/a				0.10
Weighted average shares outstanding
Basic			104,192,971				104,697,317				103,977,771				105,809,536
Diluted			104,228,891				104,780,465				103,977,771				105,953,418

See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Stockholders’ Equity

Nine months ended March 31, 2009 and 2008

(Unaudited)

																						Accumulated
						Additional												Unallocated				other				Total
		Common				paid-in				Retained				Treasury				Common Stock				comprehensive				stockholders’
		stock				capital				earnings				stock				Held by ESOP				loss				equity
		(In thousands)
Balance at June 30, 2007		$	532				506,026				470,205				(70,973	)			(38,996	)			(7,935	)			858,859
Comprehensive income:
Net income			—				—				10,550				—				—				—				10,550
Change in funded status of postretirement plan due to plan curtailment and settlement, net of tax expense of $891			—				—				—				—				—				1,337				1,337
Change in funded status of retirement obligations, net of tax expense of $54			—				—				—				—				—				80				80
Unrealized gain on securities available- for-sale, net of tax expense of $1,520			—				—				—				—				—				2,175				2,175
Reclassification adjustment for losses included in net income			—				—				—				—				—				242				242
Total comprehensive income																											14,384
Cummulative effect adjustment upon adoption of FIN-48			—				—				300				—				—				—				300
Purchase of treasury stock (3,470,200 shares)			—				—				—				(47,920	)			—				—				(47,920	)
Treasury stock allocated to restricted stock plan			—				(1,830	)			(289	)			2,119				—				—				—
Compensation cost for stock options and restricted stock			—				7,215				—				—				—				—				7,215
ESOP shares allocated or committed to be released			—				449				—				—				1,064				—				1,513
Balance at March 31, 2008		$	532				511,860				480,766				(116,774	)			(37,932	)			(4,101	)			834,351
Balance at June 30, 2008		$	532				514,613				486,244				(128,977	)			(37,578	)			(6,296	)			828,538
Comprehensive income:
Net income			—				—				(70,390	)			—				—				—				(70,390	)
Change in funded status of retirement obligations, net of tax benefit of $81			—				—				—				—				—				(116	)			(116	)
Unrealized loss on securities available- for-sale, net of tax benefit of $303			—				—				—				—				—				(821	)			(821	)
Reclassification adjustment for losses included in net income			—				—				—				—				—				457				457
Total comprehensive income																											(70,870	)
Purchase of treasury stock (82,827 shares)			—				—				—				(1,097	)			—				—				(1,097	)
Treasury stock allocated to restricted stock plan			—				(1,711	)			(242	)			1,953				—				—				—
Compensation cost for stock options and restricted stock			—				8,953				—				—				—				—				8,953
ESOP shares allocated or committed to be released			—				271				—				—				1,064				—				1,335
Balance at March 31, 2009		$	532				522,126				415,612				(128,121	)			(36,514	)			(6,776	)			766,859

See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

		For the Nine Months Ended
		March 31,
		2009				2008
		(In thousands)
Cash flows from operating activities:
Net (loss) income		$	(70,390	)			10,550
Adjustments to reconcile net income to net cash used in operating activities:
ESOP and stock-based compensation expense			10,288				8,728
Amortization of premiums and accretion of discounts on securities, net			(895	)			800
Amortization of premium and accretion of fees and costs on loans, net			3,755				1,549
Provision for loan losses			21,000				2,946
Depreciation and amortization of office properties and equipment			1,629				2,090
Loss on securities, net			157,969				241
Mortgage loans originated for sale			(437,142	)			(59,982	)
Proceeds from mortgage loan sales			411,965				57,136
Gain on sales of mortgage loans, net			(2,229	)			(466	)
Increase in bank owned life insurance contract			(2,239	)			(3,016	)
Increase in accrued interest			(4,819	)			(1,718	)
Deferred tax benefit			(67,131	)			(1,639	)
Increase in other assets			(2,871	)			(29	)
Increase in other liabilities			15,107				3,072
Total adjustments			104,387				9,713
Net cash provided by operating activities			33,997				20,263
Cash flows from investing activities:
Purchases of loans receivable			(973,835	)			(467,362	)
Net originations (pay down) of loans receivable			58,552				(22,647	)
Purchases of debt securities held-to-maturity			—				(23,117	)
Purchases of other investments available-for-sale			(100	)			(1,400	)
Proceeds from paydowns/maturities on mortgage-backed securities held-to-maturity			149,079				178,178
Proceeds from calls/maturities on debt securities held-to-maturity			19,643				73,508
Proceeds from paydowns/maturities on mortgage-backed securities available-for-sale			33,928				43,087
Redemption of equity securities available-for-sale			863				—
Proceeds from redemptions of Federal Home Loan Bank stock			50,762				21,323
Purchases of Federal Home Loan Bank stock			(59,401	)			(29,282	)
Purchases of office properties and equipment			(6,813	)			(2,869	)
Net cash used in investing activities			(727,322	)			(230,581	)
Cash flows from financing activities:
Net increase in deposits			799,903				215,148
Net decrease in funds borrowed under short-term repurchase agreements			(25,000	)			(160,000	)
Proceeds from funds borrowed under other repurchase agreements			55,000				590,000
Repayments of funds borrowed under other repurchase agreements			(145,000	)			(80,000	)
Net increase (decrease) in other borrowings			306,979				(233,121	)
Net increase in advance payments by borrowers for taxes and insurance			2,186				1,690
Purchase of treasury stock			(1,097	)			(47,920	)
Net cash provided by financing activities			992,971				285,797
Net increase in cash and cash equivalents			299,646				75,478
Cash and cash equivalents at beginning of the period			22,823				35,582
Cash and cash equivalents at end of the period		$	322,469				111,060
Supplemental cash flow information:
Cash paid during the period for:
Interest		$	150,747				156,942
Income taxes			10,415				2,194

See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

1. Basis of Presentation

The consolidated financial statements are comprised of the accounts of Investors Bancorp, Inc. and its wholly owned subsidiary, Investors Savings Bank (Bank) (collectively, the Company) and the Bank’s wholly-owned significant subsidiaries, ISB Mortgage Company LLC and ISB Asset Corporation.

On June 6, 2008, the Company completed its merger of Summit Federal Bankshares, Inc. (Summit Federal). This transaction involved the combination of mutual enterprises and, therefore, was accounted for as a pooling of interests. All financial information has been restated to include amounts for Summit Federal, based on historical costs, for all periods presented.

In the opinion of management, all the adjustments (consisting of normal and recurring adjustments) necessary for the fair presentation of the consolidated financial condition and the consolidated results of operations for the unaudited periods presented have been included. The results of operations and other data presented for the three-month period ended March 31, 2009 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending June 30, 2009.

Certain information and note disclosures usually included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for the preparation of the Form 10-Q. The consolidated financial statements presented should be read in conjunction with the Company’s audited consolidated financial statements and notes to consolidated financial statements included in the Company’s June 30, 2008 Annual Report on Form 10-K.

2. Mergers and Acquisitions

On December 15, 2008, the Company announced the signing of a definitive agreement under which the Company will acquire American Bancorp of New Jersey, a community bank with $667 million in assets, $499 million in deposits and five branches in Essex and Passaic Counties. On April 14, 2009 the Company announced it received all of the necessary regulatory approvals to proceed with the acquisition of American Bancorp. American Bancorp’s annual meeting of shareholders, at which their shareholders will vote on the acquisition, is scheduled to be held on May 19, 2009. If shareholder approval is received, the merger is scheduled to close on or about May 29, 2009.

3. Earnings Per Share

The following is a summary of our earnings per share calculations and reconciliation of basic to diluted earnings per share.

		For the Three Months Ended March 31,
		2009												2008
										Per												Per
										Share												Share
		Income				Shares				Amount				Income				Shares				Amount
		(In thousands, except per share data)
Net Income		$	7,078											$	4,535
Basic earnings per share:
Income available to common stockholders		$	7,078				104,192,971			$	0.07			$	4,535				104,697,317			$	0.04
Effect of dilutive common stock equivalents			—				35,920								—				83,148
Diluted earnings per share:
Income available to common stockholders		$	7,078				104,228,891			$	0.07			$	4,535				104,780,465			$	0.04

		For the Nine Months Ended March 31,
		2009												2008
										Per												Per
										Share												Share
		Loss				Shares				Amount				Income				Shares				Amount
		(In thousands, except per share data)
Net (Loss) Income		$	(70,390	)										$	10,550
Basic (loss) earnings per share:
(Loss) income available to common stockholders		$	(70,390	)			103,977,771			$	(0.68	)		$	10,550				105,809,536			$	0.10
Effect of dilutive common stock equivalents			—				—								—				143,882
Diluted (loss) earnings per share:
(Loss) income available to common stockholders		$	(70,390	)			103,977,771				n/a			$	10,550				105,953,418			$	0.10

4. Loans Receivable, Net

Loans receivable, net are summarized as follows:

		March 31,				June 30,
		2009				2008
		(In thousands)
Residential mortgage loans		$	4,605,008				4,009,563
Multi-family and commercial			496,308				225,154
Construction loans			315,151				260,177
Consumer and other loans			158,258				168,819
Total loans			5,574,725				4,663,713
Premiums on purchased loans, net			23,462				22,622
Deferred loan fees, net			(2,968	)			(2,620	)
Allowance for loan losses			(34,541	)			(13,565	)
Net loans		$	5,560,678				4,670,150

5. Deposits

Deposits are summarized as follows:

		March 31,				June 30,
		2009				2008
		(In thousands)
Savings acounts		$	611,750				417,196
Checking accounts			886,264				401,100
Money market accounts			315,357				229,018
Total core deposits			1,813,371				1,047,314
Certificates of deposit			2,956,807				2,922,961
		$	4,770,178				3,970,275

6. Equity Incentive Plan

During the nine months ended March 31, 2009, the Company recorded $9.0 million of share-based expense, comprised of stock option expense of $3.7 million and restricted stock expense of $5.2 million.

During the nine months ended March 31, 2009, 365,000 options with an exercise price of $13.69 and a grant date fair value of $4.07 were granted and 7,500 options with an exercise price of $15.35 and a grant date fair value of $4.10 were forfeited. At March 31, 2009, 5,136,752 options, with a weighted average exercise price of $15.02 and a weighted average grant date fair value of $4.11, were outstanding, of which 3,037,149 were unvested. Expected future expense relating to the 3.0 million non-vested options outstanding as of March 31, 2009 is $10.8 million over a weighted average period of 2.98 years.

During the nine months ended March 31, 2009, 125,000 shares of restricted stock with a grant date fair value of $13.69 were granted and 465,249 shares with a

weighted average grant date fair value of $15.08 were vested. At March 31, 2009, 1,130,063 shares of restricted stock, with a weighted average grant date fair value of $14.92, are unvested. Expected future compensation expense relating to the 1.1 million restricted shares at March 31, 2009 is $14.5 million over a weighted average period of 3.0 years.

7. Net Periodic Benefit Plans Expense

The Company has a Supplemental Employee Retirement Plan (SERP). The SERP is a nonqualified, defined benefit plan which provides benefits to all employees of the Company if their benefits and/or contributions under the pension plan are limited by the Internal Revenue Code. The Company also has a nonqualified, defined benefit plan which provides benefits to its directors. The SERP and the Directors’ plan are unfunded and the costs of the plans are recognized over the period that services are provided. Effective December 31, 2006, the Company limited participation in the Directors’ plan to the current participants and placed a cap on director’s fees for plan purposes at the December 31, 2006 rate.

The Company also provided (i) postretirement health care benefits to retired employees hired prior to April 1991 who attained at least ten years of service and (ii) certain life insurance benefits to all retired employees. During the year ended June 30, 2008, the Company curtailed the benefits to current employees and settled its obligations to retired employees.

The components of net periodic benefit expense are as follows:

		Three months ended March 31,
		SERP and Directors’ Plan								Other Benefits
		2009				2008				2009				2008
						(In thousands)
Service cost		$	112				114			$	—				12
Interest cost			257				239				11				61
Amortization of:
Transition obligation			—				—				8				19
Prior service cost			25				25				—				—
Net loss			32				29				(3	)			(3	)
Total net periodic benefit expense		$	426				407			$	16				89

		Nine months ended March 31,
		SERP and Directors’ Plan								Other Benefits
		2009				2008				2009				2008
						(In thousands)
Service cost		$	337				342			$	—				35
Interest cost			769				718				33				182
Amortization of:
Transition obligation			—				—				26				56
Prior service cost			74				74				—				—
Net loss			96				86				(11	)			(7	)
Total net periodic benefit expense		$	1,276				1,220			$	48				266

Due to the unfunded nature of these plans, no contributions are expected to be made to the SERP and Directors’ plans and other benefit plans in the fiscal year ending June 30, 2009.

The Company also maintains a defined benefit pension plan. Since it is a multiemployer plan, costs of the pension plan are based on contributions required to be made to the pension plan. The Company contributed $1,151,000 to the defined benefit pension plan during the first nine months of fiscal year 2009. We anticipate contributing funds to the plan to meet any minimum funding requirements.

Summit Federal, at the time of merger, had a funded non-contributory defined benefit pension plan covering all eligible employees, an unfunded non-qualified defined benefit SERP for the benefit of certain key employees and a postretirement life insurance benefit plan for the benefit of key employees. At March 31, 2009, the pension plan, SERP plan and postretirement life insurance plan had an accrued liability of $868,000, $951,000 and $352,000, respectively. At March 31, 2009, the charges recognized in accumulated other comprehensive loss for the pension plan, the SERP plan and the postretirement life insurance plan were $1,208,000, $215,000 and $173,000, respectively. For the nine months ended March 31, 2009 and 2008, the expense related to these plans was $263,000 and $170,000, respectively.

8. Income Taxes

Effective July 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109,” or FIN 48, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are to be applied to all tax positions upon initial adoption of this standard. Tax positions must meet the more-likely-than-not recognition threshold at the effective date in order for the related tax benefits to be recognized or continue to be recognized upon adoption of FIN 48. As a result of the adoption of FIN 48, the Company recognized a $300,000 decrease in the liability for unrecognized tax benefits, which was accounted for as an addition to the July 1, 2007, balance of retained earnings. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, where applicable, in income tax expense.

The Company files income tax returns in the United States federal jurisdiction and in the state of New Jersey jurisdiction. With few exceptions, we are no longer subject to federal and state income tax examinations by tax authorities for years prior to 2003. Currently, the Company is not under examination by any taxing authority.

9. Fair Value Measurements

Effective July 1, 2008, we adopted Statement of Financial Accounting Standards, or SFAS, No. 157 “Fair Value Measurements” and related interpretations, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 applies only to fair value measurements already required or permitted by other accounting standards and does not impose requirements for additional fair value measures. SFAS No. 157 was issued to increase consistency and comparability in reporting fair values. Our adoption of SFAS No. 157 did not have a material impact on our financial condition or results of operations.

The following disclosures, which include certain disclosures which are generally not required in interim period financial statements, are included herein as a result of our adoption of SFAS No. 157.

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Our securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets or liabilities on a non-recurring basis, such as held-to-maturity securities, mortgage servicing rights, or MSR, loans receivable and real estate owned, or REO. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets. Additionally, in connection with our mortgage banking activities we have commitments to fund loans held for sale and commitments to sell loans, which are considered free-standing derivative instruments, the fair values of which are not material to our financial condition or results of operations.

In accordance with SFAS No. 157, we group our assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

•		Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.
•		Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.
•		Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

We base our fair values on the price that would likely be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following is a description of valuation methodologies used for assets measured at fair value on a recurring basis.

Securities available-for-sale

Our available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income/loss in stockholders’ equity. Approximately 99% of our securities available-for-sale portfolio consists of mortgage-backed securities. The fair values of these securities are obtained from an independent nationally recognized pricing service. Our independent pricing service provides us with prices which are categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the majority of securities in our portfolio. Various modeling techniques are used to determine pricing for our mortgage-backed securities, including option pricing and discounted cash flow models. The inputs to these models include benchmark

yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. The remaining 1% of our securities available-for-sale portfolio is comprised primarily of private fund investments for which the issuer provides us prices which are categorized as Level 2, as quoted prices in active markets for identical assets are generally not available.

The following table provides the level of valuation assumptions used to determine the carrying value of our assets measured at fair value on a recurring basis at March 31, 2009.

		Carrying Value at March 31, 2009
		Total				Level 1				Level 2				Level 3
						(In thousands)
Securities available for sale:
Mortgage-backed securities		$	165,172				—				165,172				—
Equity securities			1,412				—				1,412				—
		$	166,584				—				166,584				—

The following is a description of valuation methodologies used for assets measured at fair value on a non-recurring basis.

Securities held-to-maturity

Our held-to-maturity portfolio, consisting primarily of mortgage backed securities and other debt securities for which we have a positive intent and ability to hold to maturity, is carried at amortized cost. We conduct a periodic review and evaluation of the held-to-maturity portfolio to determine if the value of any security has declined below its cost or amortized cost, and whether such decline is other-than-temporary. Management utilizes various inputs to determine the fair value of the portfolio.  To the extent they exist, unadjusted quoted market prices in active markets (level 1) or quoted prices on similar assets (level 2) are utilized to determine the fair value of each investment in the portfolio.  In the absence of quoted prices and in an illiquid market, valuation techniques, which require inputs that are both significant to the fair value measurement and unobservable (level 3), are used to determine fair value of the investment. Valuation techniques are based on various assumptions, including, but not limited to cash flows, discount rates, rate of return, adjustments for nonperformance and liquidity, and liquidation values. If such decline is deemed other-than-temporary, we would adjust the cost basis of the security by writing down the security to fair market value through a charge to current period operations.

Mortgage Servicing Rights, net

Mortgage Servicing Rights are carried at the lower of cost or estimated fair value. The estimated fair value of MSR is obtained through independent third party valuations through an analysis of future cash flows, incorporating estimates of assumptions market participants would use in determining fair value including market discount rates, prepayment speeds, servicing income, servicing costs, default rates and other market driven data, including the market’s perception of future interest rate movements and, as such, are classified as Level 3.

Loans Receivable

Loans which meet certain criteria are evaluated individually for impairment. A loan is deemed to be impaired if it is a commercial real estate, multi-family or construction loan with an

outstanding balance greater than $3.0 million and on non-accrual status. Our impaired loans are generally collateral dependent and, as such, are carried at the estimated fair value of the collateral less estimated selling costs. Fair value is estimated through current appraisals, and adjusted as necessary, by management, to reflect current market conditions and, as such, are generally classified as Level 3.

The following table provides the level of valuation assumptions used to determine the carrying value of our assets measured at fair value on a non-recurring basis at March 31, 2009.

		Carrying Value at March 31, 2009
		Total				Level 1				Level 2				Level 3
						(In thousands)
Securities held-to-maturity		$	20,800				—				20,800				—
MSR, net			961				—				—				961
Impaired loans			25,523				—				—				25,523
		$	47,284				—				20,800				26,484

10. Recent Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board (“FASB”) issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements,” when the volume and level of activity for the asset or liability have significantly decreased and includes guidance on identifying circumstances that indicate a transaction is not orderly. Under FSP FAS 157-4, if the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, transactions or quoted prices may not be determinative of fair value. Further analysis is required and significant adjustments to the transactions or quoted prices may be necessary. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009. The Company is currently evaluating the impact the adoption of FSP FAS 157-4 may have on its financial condition, results of operations and financial statement disclosures.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments.” FSP FAS 115-2 and FAS 124-2 changes the amount of an other-than-temporary impairment that is recognized in earnings when there are non-credit losses on a debt security which management does not intend to sell and for which it is more-likely-than-not that the entity will not be required to sell the security prior to the recovery of the non-credit impairment. In those situations, the portion of the total impairment that is attributable to the credit loss would be recognized in earnings, and the remaining difference between the debt security’s amortized cost basis and its fair value would be included in other comprehensive income. FSP FAS 115-2 and FAS 124-2 also requires additional disclosures about investments in an unrealized loss position and the methodology and significant inputs used in determining the recognition of other-than-temporary impairment. FSP FAS 115-2 and FAS 124-2 are effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this accounting pronouncement could result in a significant reclass to the components within stocholders’ equity. In addition, this pronouncement will eliminate accretion income recognition

pertaining to securities previously written down through an OTTI charge. The Company is currently evaluating the impact the adoption of FSP FAS 115-2 and FAS 124-2 will have on its financial condition, results of operations and financial statement disclosures.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” requiring disclosures about fair value of financial instruments for interim reporting periods of publicly traded company as well as in annual financial statements. The disclosure requirements are effective for interim reporting periods ending after June 15, 2009.

In June 2008, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 08-3, “Accounting by Lessees for Nonrefundable Maintenance Deposits”. EITF Issue No. 08-3 requires that all nonrefundable maintenance deposits be accounted for as a deposit with the deposit expensed or capitalized in accordance with the lessee’s maintenance accounting policy when the underlying maintenance is performed. Once it is determined that an amount on deposit is not probable of being used to fund future maintenance expense, it is to be recognized as additional expense at the time such determination is made. EITF Issue No. 08-3 is effective for fiscal years beginning after July 1, 2009. The adoption of EITF Issue No. 08-3 is not expected to have a material impact on its financial condition, results of operations or financial statement disclosures.

In February 2008, FSP No. 157-2, “Effective Date of FASB Statement No. 157,” was issued. FSP No. 157-2 delayed the application of SFAS No. 157 for non-financial assets and non-financial liabilities until July 1, 2009. The Company does not expect that the adoption of FSP No. 157-2 will have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No.141R, “Business Combinations.” SFAS 141R requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at “full fair value.” SFAS No. 141R applies to all business combinations, including combinations among mutual entities and combinations by contract alone. Under SFAS No. 141R, all business combinations will be accounted for by applying the acquisition method. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date. The Company does not expect that the adoption of SFAS No. 141R will have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” SFAS No. 160 will require noncontrolling interests (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. SFAS No. 160 applies to the accounting for noncontrolling interests and transactions with noncontrolling interest holders in consolidated financial statements. SFAS No. 160 is effective for periods beginning on or after December 15, 2008. The adoption of SFAS No. 160 did not have a material impact on the consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. SFAS No. 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows.

SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.  The adoption of SFAS No. 161 did not have a material impact on the consolidated financial statements.

In June 2008, EITF 03-6-1 was issued which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share.  The Statement is effective for financial statements issued for fiscal years beginning after December 15, 2008.  The Company does not expect that the adoption of EITF 03-6-1 will have a material impact on its consolidated financial statements.

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

Certain statements contained herein are not based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which Investors Bancorp, Inc. operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations or interpretations of regulations affecting financial institutions, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the result of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Executive Summary

Investors Bancorp’s fundamental business strategy is to be a well capitalized, full service, community bank and to provide high quality customer service and competitively priced products and services to individuals and businesses in the communities we serve.

Our results of operations depend primarily on net interest income, which is directly impacted by the market interest rate environment. Net interest income is the difference between the interest income we earn on our interest-earning assets, primarily mortgage loans and investment securities, and the interest we pay on our interest-bearing liabilities, primarily time deposits,

interest-bearing transaction accounts and borrowed funds. Net interest income is affected by the shape of the market yield curve, the timing of the placement and re-pricing of interest-earning assets and interest-bearing liabilities on our balance sheet, non-performing loans and the prepayment rate on our mortgage-related assets. The Company’s results of operations are also significantly affected by general economic conditions.

The financial services industry continues to face highly volatile and adverse economic conditions. The significant contributors to the disruptions include widespread subprime mortgage lending, illiquidity in the capital and credit markets, rising national and local unemployment, the continued decline of property values in real estate markets, and recent bank failures. While the government indicates it will continue to support the financial services industry it is difficult to determine the full impact of the various government support programs.

The Company previously announced that after careful consideration, it decided not to participate in the Treasury Department’s Capital Purchase Program which is part of the broader Troubled Asset Relief Program (TARP). In reaching this decision, the Company felt its strong capital position and conservative lending practices would allow it to continue originating loans to qualified individuals and businesses in its local market and navigate through this difficult economic environment. In addition, the Company’s mutual holding company parent, Investors Bancorp MHC, currently owns approximately 60% of the Company’s outstanding stock. The Company therefore has the ability to raise additional capital through a second step stock offering. The Company maintains a strong tangible capital ratio of 10.48% and is considered well capitalized under regulatory guidelines. We believe we are well positioned to deal with this economic uncertainty and take advantage of opportunities to enhance our franchise.

At December 31, 2008, the Company recognized a $152.8 million pre-tax, ($90.6 million after-tax), non-cash other-than-temporary impairment (“OTTI”) charge related to our portfolio of pooled bank trust preferred collateralized debt obligations (“CDOs”). The portfolio is comprised of 31 securities whose book value of $173.6 million was reduced to $20.8 million as a result of this charge. The impairment was recognized because the market value of these securities continued to decline during the quarter and we do not believe the market value of these securities will recover within the foreseeable future. Management is analyzing the new accounting guidance issued by the Financial Accounting Standards Board (FASB) in April 2009 regarding OTTI impairment which must be adopted in the June 2009 quarter. The adoption of this accounting pronouncement could result in a significant reclass to the components within stocholders’ equity. In addition, this pronouncement will eliminate accretion income recognition pertaining to securities previously written down through an OTTI charge.

Although we have suffered some of the negative consequences of the current state of the financial services industry, we have also been able to take advantage of opportunities within the market. The Company has benefited from the current interest rate environment. The yield on our interest-earning assets decreased by 11 basis points compared to the cost of our interest-bearing liabilities decreasing 85 basis points for the three months ended March 31, 2009 compared to the same period prior year. This was due to our interest-bearing liabilities repricing at a faster pace than interest-earning assets. This resulted in a $14.3 million increase in our net interest income to $41.2 million for the three months ended March 31, 2009 from $26.9 million for the three months ended March 31, 2008.

The interest rate environment is important to our net interest income as is the composition of our balance sheet. The recent turmoil in the financial markets has created uncertainty and volatility

for many financial institutions. This created an opportunity for us to add more loans and increase the size of our balance sheet. While we have increased the size of out balance sheet in this difficult environment we have remained focused on maintaining our loan underwriting standards. We have never originated or purchased, and our portfolio does not include, any sub-prime loans or option ARM loans.

Total loans increased to $5.57 billion at March 31, 2009 from $4.66 billion at June 30, 2008, an increase of 19.5%. The majority of the growth came from residential mortgage loans which grew 14.9% or $595.4 million to $4.61 billion. In order to diversify our loan portfolio we have continued our expansion into commercial real estate lending. During the nine months ended March 31, 2009 commercial real estate, construction and multi-family loans increased $326.1 million or 67.2%. We believe this may provide us with an opportunity to increase net interest income and improve our interest rate risk position.

During the nine months ended March 31, 2009, we recorded a $21.0 million provision for loan losses. This reflected the growth in our loan portfolio; internal downgrades of certain loans in the commercial real estate portfolio resulting in specific reserves; an increase in specific reserves on a previously disclosed impaired loan; the increased inherent credit risk in our overall portfolio, particularly the credit risk associated with commercial real estate lending; an increase in loan delinquency and non-performing loans; and the continued adverse economic conditions in our lending area. Net charge-offs were immaterial at $25,000 for the nine month period.

While our nonperforming loans have increased, we believe they remain at a manageable level. At March 31, 2009, nonperforming loans were $80.1 million, or 1.44% of total loans, compared to $19.4 million, or 0.42% of total loans at June 30, 2008. Additionally, we are mindful of potential problem loans as these loans may eventually be placed on non-accrual status. At March 31, 2009, there are 7 loans totaling $19.2 million that the Company has deemed as potential problems. Management is actively monitoring these loans.

Total deposits increased by $799.9 million to $4.77 billion at March 31, 2009. Core deposits increased as we were successful in attracting new municipal deposit accounts, opened our newest branch during the quarter and added business from existing customer relationships, most notably the branches acquired in the Summit Federal merger in June 2008.

As a result of strong loan growth that exceeded the available cash flows from the investment, loan and deposit portfolios, borrowed funds increased $192.0 million, or 12.3%, to $1.76 billion at March 31, 2009 from $1.56 billion at June 30, 2008.

Comparison of Financial Condition at March 31, 2009 and June 30, 2008

Total Assets. Total assets increased by $947.7 million, or 14.8%, to $7.37 billion at March 31, 2009 from $6.42 billion at June 30, 2008. This increase was largely the result of the growth in our loan portfolio partially offset by the decrease in our securities portfolio.

Net Loans. Net loans, including loans held for sale, increased by $917.9 million, or 19.6%, to $5.60 billion at March 31, 2009 from $4.68 billion at June 30, 2008. As many financial institutions have curtailed their lending operations, we have taken advantage of this opportunity to increase our loan portfolio without compromising our underwriting standards. The loans we originate and purchase are on properties in New Jersey and states in close proximity to New

Jersey. We do not originate or purchase and our loan portfolio does not include any sub-prime loans or option ARMs.

We originate residential mortgage loans directly and through our mortgage subsidiary, ISB Mortgage Co. During the nine months ended March 31, 2009 we originated $300.4 million in residential mortgage loans. In addition, we purchase mortgage loans from correspondent entities including other banks and mortgage bankers. Our agreements with these correspondent entities require them to originate loans that adhere to our underwriting standards. During the nine months ended March 31, 2009, we purchased loans totaling $670.0 million from these entities. We also purchase pools of mortgage loans in the secondary market on a “bulk purchase” basis from several well-established financial institutions. During the nine months ended March 31, 2009, we took advantage of several opportunities to purchase $303.8 million of residential mortgage loans that met our underwriting criteria on a “bulk purchase” basis.

For the nine months ended March 31, 2009, we originated $58.5 million in multi-family loans, $117.8 million in commercial real estate loans and $111.6 million in construction loans. We also purchased $100.9 million of multi-family loans in the secondary market on a “bulk purchase” basis. This activity is consistent with our strategy to diversify our loan portfolio by adding more multi-family, commercial real estate and construction loans.

The Company also originates 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 loan repayment when the contractually required repayments increase due to the required amortization of the principal amount.  These payment increases could affect the borrower’s ability to repay the loan.  The amount of interest-only one-to four-family mortgage loans at March 31, 2009 was $511.8 million compared to $450.0 million at June 30, 2008.  The ability of borrowers to repay their obligations are dependent upon various factors including the borrowers’ income and net worth, cash flows generated by the underlying collateral, value of the underlying collateral and priority of the Company’s lien on the property.  Such factors are dependent upon various economic conditions and individual circumstances beyond the Company’s control. The Company is, therefore, subject to risk of loss. The Company maintains stricter underwriting criteria for these interest-only loans than it does for its amortizing loans. The Company believes these criteria adequately lessen the potential exposure to such risks and that adequate provisions for loan losses are provided for all known and inherent risks. 

The allowance for loan losses increased by $21.0 million to $34.5 million at March 31, 2009 from $13.6 million at June 30, 2008. The increase in our allowance reflects the continued growth in the loan portfolio; internal downgrades of certain loans in the commercial real estate portfolio resulting in specific reserves; an increase in specific reserves on a previously disclosed impaired loan; the increased inherent credit risk in our overall portfolio, particularly the credit risk associated with commercial real estate lending; an increase in loan delinquency and non-performing loans; and the adverse economic conditions in our lending area. The comparative table below details non-performing loans and allowance for loan loss coverage ratios over the last four quarters.

		March 31,								December 31,								September 30,								June 30,
		2009								2008								2008								2008
		# of								# of								# of								# of
		loans				Amount				loans				Amount				loans				Amount				loans				Amount
														(Dollars in millions)
Residential and consumer			66			$	17.5				46			$	10.4				34			$	6.9				39			$	6.8
Multi-family			4				19.8				4				19.8				4				19.8				3				0.5
Commercial			2				1.9				1				0.6				1				0.6				0				0
Construction			9				40.9				5				17.0				4				14.8				2				12.1
Total Non-Performing Loans			81			$	80.1				56			$	47.8				43			$	42.1				44			$	19.4
Non-performing loans to total loans							1.44	%							0.85	%							0.79	%							0.42	%
Allowance for loan loss as a percent of non-performing loans							43.10	%							55.53	%							44.05	%							70.03	%
Allowance for loan losses as a percent of total loans							0.62	%							0.47	%							0.35	%							0.29	%

A non-performing multifamily loan for $19.4 million has a current loan to value of approximately 55% and management believes that the probability of loss on this loan is low.

In addition to non-performing loans we continue to monitor our portfolio for potential problem loans. Potential problem loans are defined as loans about which we have concerns as to the ability of the borrower to comply with the present loan repayment terms and which may cause the loan to be placed on non-accrual status. As of March 31, 2009, the Company has six construction loans totaling $17.1 million that it deemed potential problem loans. Three of the loans are current, one loan is 30 days delinquent and three loans are 60 days delinquent. Management is actively monitoring these loans.

Future increases in the allowance for loan losses may be necessary based on the growth of the loan portfolio, the change in composition of the loan portfolio, possible future increases in non-performing loans and charge-offs, and the impact the deterioration of the real estate and economic environments in our lending area. Although we use the best information available, the level of allowance for loan losses remains an estimate that is subject to significant judgment and short-term change. See “Critical Accounting Policies.”

Securities. Securities, in the aggregate, decreased by $361.2 million, or 24.8%, to $1.10 billion at March 31, 2009, from $1.46 billion at June 30, 2008. The decrease is the result of the run-off of the securities portfolio in addition to the writedown of the book value of pooled bank trust preferred CDOs through a $156.7 million pre-tax non-cash OTTI charge during the prior quarter. During the current quarter the Company recognized $1.3 million in accretion income related to our expected cashflows relating to these securities. The cash flows from our securities portfolio are being used to help fund our loan growth. This is consistent with our strategic plan to change our mix of assets by reducing the size of our securities portfolio and increasing the size of our loan portfolio.

The securities portfolio also includes private label mortgage backed securities with an amortized cost of $178.3 million and a fair value of $166.0 million. Of these securities, $169.2 million in amortized cost, $158.7 million in fair value, are AAA rated and were originated in the period 2002-2004 and are performing in accordance with contractual terms. The decrease in fair value for these securities is attributed to changes in market interest rates. One security with an

amortized cost of $8.0 million, $6.3 million fair value, was downgraded to BBB in April 2009. Management will continue to monitor these securities for possible OTTI.

Net Deferred Tax Asset. Net deferred tax asset increased by $67.5 million from $40.7 million at June 30, 2008 to $108.2 million at March 31, 2009 which is primarily attributed to the tax benefit recorded as a result of the OTTI charge on our pooled bank trust preferred CDOs.

Stock in the Federal Home Loan Bank, Bank Owned Life Insurance and Other Assets. The amount of stock we own in the Federal Home Loan Bank (FHLB) increased by $8.6 million from $60.9 million at June 30, 2008 to $69.6 million at March 31, 2009 as a result of an increase in our level of borrowings at March 31, 2009. There was also an increase in accrued interest receivable of $4.8 million resulting from an increase in the average balance of our interest-earning assets. Additionally, bank owned life insurance increased by $2.2 million from $96.2 million at June 30, 2008 to $98.4 million at March 31, 2009.

Deposits. Deposits increased by $799.9 million, or 20.1%, to $4.77 billion at March 31, 2009 from $3.97 billion at June 30, 2008. Checking account deposits, savings account deposits, money market account deposits and certificates of deposits increased by $485.2 million, $194.6 million, $86.3 million and $33.8 million, respectively. Deposits increased as we were successful in attracting new municipal deposit accounts, opened our newest branch during the quarter and added business from existing customer relationships, most notably the branches acquired in the Summit Federal merger in June 2008.

Borrowed Funds. Borrowed funds increased $192.0 million, or 12.3%, to $1.76 billion at March 31, 2009 from $1.56 billion at June 30, 2008. We utilized wholesale borrowings to fund a portion of our loan growth because of the lower rates available in the wholesale markets.

Stockholders’ Equity. Stockholders’ equity decreased $61.7 million to $766.9 million at March 31, 2009 from $828.5 million at June 30, 2008 primarily due to net loss of $70.4 million for the nine months ended March 31, 2009. The decrease was partially offset by an increase in additional paid-in capital for compensation costs associated with stock options and restricted stock.

Average Balance Sheets for the Three Months ended March 31, 2009 and 2008

The following table presents certain information regarding Investors Bancorp, Inc.’s financial condition and net interest income for the three and nine months ended March 31, 2009 and 2008. The table presents the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities. We derived the yields and costs by dividing annualized income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. We derived average balances from daily balances over the periods indicated. Interest income includes fees that we consider adjustments to yields.

		For the three months ended
		March 31, 2009												March 31, 2008
		Average												Average
		Outstanding				Interest				Average				Outstanding				Interest				Average
		Balance				Earned/Paid				Yield/Rate				Balance				Earned/Paid				Yield/Rate
		(Dollars in thousands)
Interest-earning assets:
Interest-bearing deposits		$	205,083			$	119				0.23	%		$	41,718			$	258				2.47	%
Repurchase agreements			—				—				—			$	23,626			$	162				2.74	%
Securities available-for-sale(1)			179,298				2,083				4.65	%			227,877				2,625				4.61	%
Securities held-to-maturity			960,946				13,154				5.48	%			1,405,903				16,535				4.70	%
Net loans			5,631,836				76,723				5.45	%			4,053,804				57,605				5.68	%
Stock in FHLB			73,062				670				3.67	%			44,270				975				8.81	%
Total interest-earning assets			7,050,225				92,749				5.26	%			5,797,198				78,160				5.39	%
Non-interest earning assets			258,737												185,045
Total assets		$	7,308,962											$	5,982,243
Interest-bearing Liabilities:
Savings		$	555,319			$	3,242				2.34	%		$	389,507			$	2,075				2.13	%
Interest-bearing checking			711,075				4,082				2.30	%			345,902				1,608				1.86	%
Money market accounts			294,927				1,558				2.11	%			208,798				1,225				2.35	%
Certificates of deposit			3,025,100				25,018				3.31	%			2,923,675				33,487				4.58	%
Borrowed funds			1,836,931				17,691				3.85	%			1,190,571				12,887				4.33	%
Total interest-bearing liabilities			6,423,352				51,591				3.21	%			5,058,453				51,282				4.06	%
Non-interest bearing liabilities			134,248												97,722
Total liabilities			6,557,600												5,156,175
Stockholders’ equity			751,362												826,068
Total liabilities and stockholders’ equity		$	7,308,962											$	5,982,243
Net interest income						$	41,158											$	26,878
Net interest rate spread(2)											2.05	%											1.33	%
Net interest earning assets(3)		$	626,873											$	738,745
Net interest margin(4)											2.34	%											1.85	%
Ratio of interest-earning assets to total interest- bearing liabilities			1.10	X											1.15	X