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

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 reports), 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		Smaller reporting company o
		(Do not check if a smaller reporting company)

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

     As of January 31, 2008 there were 116,275,688 shares of the Registrant’s common stock, par value $0.01 per share, issued and 108,088,923 outstanding, of which 63,099,781 shares, or 58.38% of the Registrant’s outstanding common stock, were held by Investors Bancorp, MHC, the Registrant’s mutual holding company parent.

 

 

Investors Bancorp, Inc.
FORM 10-Q

Index

				Page
		Part I. Financial Information
Item 1.		Financial Statements
		Consolidated Balance Sheets as of December 31, 2007 (unaudited) and June 30, 2007			1
		Consolidated Statements of Income for the Three and Six Months Ended December 31, 2007 and 2006 (unaudited)			2
		Consolidated Statements of Stockholders’ Equity for the Six Months Ended December 31, 2007 and 2006 (unaudited)			3
		Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2007 and 2006 (unaudited)			4
		Notes to Consolidated Financial Statements			5
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			12
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			26
Item 4.		Controls and Procedures			28
		Part II. Other Information
Item 1.		Legal Proceedings			29
Item 1A.		Risk Factors			29
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			29
Item 3.		Defaults upon Senior Securities			29
Item 4.		Submission of Matters to a Vote of Security Holders			29
Item 5.		Other Information			30
Item 6.		Exhibits			30
		Signature Page			32
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
December 31, 2007 (Unaudited) and June 30, 2007

		December 31,				June 30,
		2007				2007
		(In thousands)
Assets
Cash and cash equivalents		$	14,588				24,810
Securities available-for-sale, at estimated fair value			224,749				251,970
Securities held-to-maturity, net (estimated fair value of $1,374,358 and $1,472,385 at December 31, 2007 and June 30, 2007, respectively)			1,401,088				1,517,664
Loans receivable, net			3,996,885				3,589,373
Loans held-for-sale			7,143				3,410
Stock in the Federal Home Loan Bank			46,148				33,887
Accrued interest receivable			26,383				24,300
Office properties and equipment, net			27,926				27,155
Net deferred tax asset			37,055				39,399
Bank owned life insurance contract			89,995				88,018
Other assets			1,509				1,102
Total assets		$	5,873,469				5,601,088
Liabilities and Stockholders’ Equity
Liabilities:
Deposits		$	3,793,972				3,664,966
Borrowed funds			1,211,195				1,038,710
Advance payments by borrowers for taxes and insurance			17,798				17,671
Other liabilities			32,684				36,376
Total liabilities			5,055,649				4,757,723
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; 116,275,688 issued; 108,399,923 and 111,468,952 outstanding at December 31, 2007 and June 30, 2007, respectively			532				532
Additional paid-in capital			511,026				506,016
Retained earnings			460,860				453,751
Treasury stock, at cost; 7,875,765 and 4,806,736 shares at December 31, 2007 and June 30, 2007, respectively			(113,349	)			(70,973	)
Unallocated common stock held by the employee stock ownership plan			(38,287	)			(38,996	)
Accumulated other comprehensive loss			(2,962	)			(6,965	)
Total stockholders’ equity			817,820				843,365
Total liabilities and stockholders’ equity		$	5,873,469				5,601,088

See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)

		For the Three Months								For the Six Months
		Ended December 31,								Ended December 31,
		2007				2006				2007				2006
		(Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable and loans held-for-sale		$	56,688				44,126				109,654				86,038
Securities:
Government-sponsored enterprise obligations			1,335				1,339				2,672				2,678
Mortgage-backed securities			15,783				20,649				32,439				42,702
Equity securities available-for-sale			—				472				—				927
Municipal bonds and other debt			3,050				2,412				6,146				4,818
Interest-bearing deposits			141				222				301				391
Federal Home Loan Bank stock			800				753				1,393				1,450
Total interest and dividend income			77,797				69,973				152,605				139,004
Interest expense:
Deposits			39,617				34,044				78,919				64,794
Secured borrowings			14,424				14,935				28,527				30,749
Total interest expense			54,041				48,979				107,446				95,543
Net interest income			23,756				20,994				45,159				43,461
Provision for loan losses			1,750				100				1,950				325
Net interest income after provision for loan losses			22,006				20,894				43,209				43,136
Non-interest income (loss)
Fees and service charges			768				659				1,479				1,319
Income on bank owned life insurance contract			1,045				924				1,977				1,719
Gain (loss) on sales of mortgage loans, net			151				(129	)			232				(46	)
Gain (loss) on securities transactions			18				(3,666	)			18				(3,666	)
Other income			66				21				130				42
Total non-interest income (loss)			2,048				(2,191	)			3,836				(632	)
Non-interest expense
Compensation and fringe benefits			11,361				12,258				24,351				22,558
Advertising and promotional expense			728				858				1,230				1,758
Office occupancy and equipment expense			2,590				2,515				5,138				4,938
Federal insurance premiums			109				108				214				218
Stationery, printing, supplies and telephone			439				380				840				773
Legal, audit, accounting, and supervisory examination fees			545				257				974				1,047
Data processing service fees			975				972				1,985				1,908
Other operating expenses			1,153				899				2,165				2,134
Total non-interest expenses			17,900				18,247				36,897				35,334
Income before income tax expense (benefit)			6,154				456				10,148				7,170
Income tax expense (benefit)			2,197				(11,564	)			3,339				(9,201	)
Net income		$	3,957				12,020				6,809				16,371
Earnings per share
Basic			0.04				0.11				0.07				0.15
Diluted			0.04				0.11				0.06				0.15
Weighted average shares outstanding
Basic			104,168,521				110,985,701				104,617,202				111,403,344
Diluted			104,349,612				110,988,728				104,829,316				111,403,344

See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders’ Equity
Six months ended December 31, 2007 and 2006
(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, 2006		$	532				524,962				426,233				—				(40,414	)			(11,126	)			900,187
Comprehensive income:
Net income			—				—				16,371				—				—				—				16,371
Unrealized gain on securities available- for-sale, net of tax expense of $6,210			—				—				—				—				—				9,496				9,496
Reclassification adjustment for losses included in net income, net of tax benefit of $1,347			—				—				—				—				—				(1,951	)			(1,951	)
Total comprehensive income																											23,916
Cummulative effect of change in accounting for bank owned life insurance			—				—				5,564				—				—				—				5,564
Purchase of treasury stock (1,972,588 shares)			—				—				—				(30,502	)			—				—				(30,502	)
Treasury stock allocated to restricted stock plan			—				(25,421	)			(312	)			25,733				—				—				—
Compensation cost for stock options and restricted stock			—				1,096				—				—				—				—				1,096
ESOP shares allocated or committed to be released			—				325				—				—				709				—				1,034
Balance at December 31, 2006		$	532				500,962				447,856				(4,769	)			(39,705	)			(3,581	)			901,295
Balance at June 30, 2007		$	532				506,016				453,751				(70,973	)			(38,996	)			(6,965	)			843,365
Comprehensive income:
Net income			—				—				6,809				—				—				—				6,809
Change in funded status of postretirement plan due to plan curtailment and settlement, net of tax expense of $969			—				—				—				—				—				1,450				1,450
Amortization related to post-retirement obligations, net of tax expense of $47			—				—				—				—				—				69				69
Unrealized gain on securities available- for-sale, net of tax expense of $1,716			—				—				—				—				—				2,484				2,484
Total comprehensive income																											10,812
Cummulative effect adjustment upon adoption of FIN 48			—				—				300				—				—				—				300
Purchase of treasury stock (3,069,029 shares)			—				—				—				(42,376	)			—				—				(42,376	)
Compensation cost for stock options and restricted stock			—				4,725				—				—				—				—				4,725
ESOP shares allocated or committed to be released			—				285				—				—				709				—				994
Balance at December 31, 2007		$	532				511,026				460,860				(113,349	)			(38,287	)			(2,962	)			817,820

See accompanying notes to consolidated financial statements

INVESTORS BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

		For the Six Months Ended
		December 31,
		2007				2006
		(In thousands)
Cash flows from operating activities:
Net income		$	6,809				16,371
Adjustments to reconcile net income to net cash provided by operating activities:
ESOP and stock-based compensation expense			5,719				2,130
Amortization of premiums and accretion of discounts on securities, net			565				891
Amortization of premium and accretion of fees and costs on loans, net			778				933
Provision for loan losses			1,950				325
Depreciation and amortization of office properties and equipment			1,415				1,453
(Gain) loss on securities transactions			(18	)			3,666
Mortgage loans originated for sale			(34,116	)			(21,833	)
Proceeds from mortgage loan sales			30,615				19,411
(Gain) loss on sales of mortgage loans, net			(232	)			46
Income on bank owned life insurance contract			(1,977	)			(1,719	)
Increase in accrued interest receivable			(2,083	)			(1,382	)
Deferred tax benefit			(388	)			(12,135	)
Increase in other assets			(407	)			(171	)
Decrease in other liabilities			(857	)			(597	)
Total adjustments			964				(8,981	)
Net cash provided by operating activities			7,773				7,390
Cash flows from investing activities:
Purchases of loans receivable			(346,336	)			(375,208	)
Net (originations) repayments of loans receivable			(63,904	)			60,087
Purchases of mortgage-backed securities held-to-maturity			—				(8,933	)
Purchases of debt securities held-to-maturity			(10,000	)			(3,500	)
Proceeds from paydowns/maturities on mortgage-backed securities held-to-maturity			116,413				154,410
Proceeds from calls/maturities on debt securities held-to-maturity			9,569				1,639
Proceeds from paydowns/maturities on mortgage-backed securities available-for-sale			31,468				53,132
Proceeds from sale of mortgage-backed securities held-to-maturity			—				22,942
Proceeds from sale of equity securities available-for-sale			—				161,112
Proceeds from redemptions of Federal Home Loan Bank stock			11,036				22,230
Purchases of Federal Home Loan Bank stock			(23,297	)			(16,650	)
Purchases of office properties and equipment			(2,186	)			(852	)
Net cash (used in) provided by investing activities			(277,237	)			70,409
Cash flows from financing activities:
Net increase in deposits			129,006				149,023
Net decrease in funds borrowed under short-term repurchase agreements			(28,500	)			(250,000	)
Proceeds from funds borrowed under other repurchase agreements			395,000				260,000
Repayments of funds borrowed under other repurchase agreements			(50,000	)			(235,000	)
Net (decrease) increase in other borrowings			(144,015	)			25,985
Net increase (decrease) in advance payments by borrowers for taxes and insurance			127				(746	)
Purchase of treasury stock			(42,376	)			(30,502	)
Net cash provided by (used in) financing activities			259,242				(81,240	)
Net decrease in cash and cash equivalents			(10,222	)			(3,442	)
Cash and cash equivalents at beginning of the period			24,810				39,824
Cash and cash equivalents at end of the period		$	14,588				36,382
Supplemental cash flow information:
Cash paid during the period for:
Interest			104,449				96,104
Income taxes			2,194				7,615

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 composed 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.

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 and six month periods ended December 31, 2007 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending June 30, 2008.

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, 2007 Annual Report on Form 10-K.

2. 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 December 31,
		2007												2006
										Per												Per
										Share												Share
		Income				Shares				Amount				Income				Shares				Amount
		(In thousands, except per share data)
Net Income		$	3,957											$	12,020
Basic earnings per share:
Income available to common stockholders		$	3,957				104,168,521			$	0.04			$	12,020				110,985,701			$	0.11
Effect of dilutive common stock equivalents			—				181,091								—				3,027
Diluted earnings per share:
Income available to common stockholders		$	3,957				104,349,612			$	0.04			$	12,020				110,988,728			$	0.11

		For the Six Months Ended December 31,
		2007												2006
										Per												Per
										Share												Share
		Income				Shares				Amount				Income				Shares				Amount
		(In thousands, except per share data)
Net Income		$	6,809											$	16,371
Basic earnings per share:
Income available to common stockholders		$	6,809				104,617,202			$	0.07			$	16,371				111,403,344			$	0.15
Effect of dilutive common stock equivalents			—				212,114								—				—
Diluted earnings per share:
Income available to common stockholders		$	6,809				104,829,316			$	0.06			$	16,371				111,403,344			$	0.15

3. Loans Receivable, Net

Loans receivable, net are summarized as follows:

		December 31,				June 30,
		2007				2007
		(In thousands)
Residential mortgage loans		$	3,434,549				3,153,212
Multi-family and commercial			147,702				107,350
Construction loans			228,621				152,670
Consumer and other loans			170,159				161,395
Total loans			3,981,031				3,574,627
Premiums and deferred costs			27,105				23,587
Deferred loan fees			(2,393	)			(1,924	)
Allowance for loan losses			(8,858	)			(6,917	)
Net loans		$	3,996,885				3,589,373

4. Deposits

Deposits are summarized as follows:

		December 31,				June 30,
		2007				2007
		(In thousands)
Savings accounts		$	309,911				320,880
Checking accounts			374,105				388,215
Money market accounts			219,103				182,274
Total core deposits			903,119				891,369
Certificates of deposit			2,890,853				2,773,597
		$	3,793,972				3,664,966

5. Equity Incentive Plan

During the six months ended December 31, 2007 and 2006, the Company recorded $4.7 million and $1.1 million, respectively, of share-based expense, comprised of stock option expense of $2.0 million and $462,000, respectively, and restricted stock expense of $2.7 million and $634,000, respectively.

The following is a summary of the Company’s stock option activity and related information for its option plans for the six months ended December 31, 2007 and 2006:

		Six months ended December 31,
		2007								2006
						Weighted								Weighted
		Number of				Average				Number of				Average
		Stock				Exercise				Stock				Exercise
		Options				Price				Options				Price
Outstanding at beginning of period			4,437,401			$	15.26				—			$	—
Granted			—				—				4,447,401				15.26
Exercised			—				—				—				—
Forfeited			—				—				—				—
Outstanding at end of period			4,437,401			$	15.26				4,447,401			$	15.26
Exercisable at end of period			887,480			$	15.26				—			$	—

The following is a summary of the status of the Company’s non-vested options as of December 31, 2007 and 2006 and changes therein during the six months then ended:

		Six months ended December 31,
		2007								2006
						Weighted								Weighted
		Number of				Average				Number of				Average
		Stock				Grant Date				Stock				Grant Date
		Options				Fair Value				Options				Fair Value
Non-vested at the beginning of period			4,437,401			$	4.17				—			$	—
Granted			—				—				4,447,401				4.17
Vested			(887,480	)			4.17				—				—
Forfeited			—				—				—				—
Non-vested at end of period			3,549,921			$	4.17				4,447,401			$	4.17

Expected future expense relating to the 3.5 million non-vested options outstanding as of December 31, 2007 is $14.1 million over a weighted average period of 3.9 years.

Upon exercise of vested options, management expects to draw on treasury stock as the source of the shares.

The following is a summary of the status of the Company’s restricted shares as of December 31, 2007 and 2006 and changes therein during the six months then ended:

		Six months ended December 31,
		2007								2006
						Weighted								Weighted
		Number of				Average				Number of				Average
		Shares				Grant Date				Shares				Grant Date
		Awarded				Fair Value				Awarded				Fair Value
Non-vested at the beginning of period			1,666,959			$	15.25				—			$	—
Granted			—				—				1,666,959				15.25
Vested			(333,389	)			15.25				—				—
Forfeited			—				—				—				—
Non-vested at end of period			1,333,570			$	15.25				1,666,959			$	15.25

Expected future compensation expense relating to the 1.3 million restricted shares at December 31, 2007 is $19.3 million over a weighted average period of 3.9 years.

At the January 2008 Compensation and Benefits Committee meeting, the Committee approved the issuance of an additional 136,742 restricted stock awards and 341,851 stock options to the independent directors of the Board. The awards were made pursuant to the shareholder approved 2006 Equity Incentive Plan.

6. 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’ retirement 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 quarter ended December 31, 2007, the Company curtailed the benefits to current employees and settled its obligations to retired employees related to the postretirement benefit plan and recognized a pre-tax gain of $2.3 million as a reduction of compensation and fringe benefits expense in the consolidated statements of income.

The components of net periodic benefit expense are as follows:

		Three months ended December 31,
		SERP and directors’ plan								Other Benefits
		2007				2006				2007				2006
		(In thousands)
Service cost		$	135				296				4				40
Interest cost			252				225				77				135
Amortization of:
Transition obligation			—				—				7				50
Prior service cost			(25	)			5				—				—
Net loss			49				37				1				—
Total net periodic benefit expense		$	411				563				89				225

		Six months ended December 31,
		SERP and directors’ plan								Other Benefits
		2007				2006				2007				2006
		(In thousands)
Service cost		$	270				592				47				80
Interest cost			505				449				217				270
Amortization of:
Transition obligation			—				—				57				100
Prior service cost			(49	)			10				—				—
Net loss			107				75				1				—
Total net periodic benefit expense		$	833				1,126				322				450

Due to the unfunded nature of these plans, no contributions are expected to be made to the SERP and Directors’ plans and Other Benefits plan in fiscal year 2008.

The Company also maintains a defined benefit pension plan for employees. 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 $1.0 million to the defined benefit pension plan during the first six months of fiscal year 2008. We anticipate contributing funds to the plan to meet any minimum funding requirements.

7. Income Taxes

Effective July 1, 2007, the Company adopted Financial Accounting Standards Board (“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 Statement of Financial Accounting Standards (“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.

A deferred tax asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred tax assets is reduced by the amount of any tax benefits that, based on available evidence, are more likely than not to be realized. On a quarterly basis the Company assesses the realizability of its deferred tax assets. During the three months ended December 31, 2006, the Company performed an assessment of its ability to realize certain deferred tax assets and concluded that, based on current facts and circumstances a portion of the associated valuation allowance was no longer required. Those facts and circumstances included, but were not limited to, the projected amount of taxable income the Company and its subsidiaries are expected to generate in future years, the Company’s ability to generate capital gains, and the decision to discontinue the operations of the Company’s Real Estate Investment Trust’s (“REIT”) operations and transfer the REIT’s assets to the Bank due to legislation passed in the State of New Jersey. As a result, the Company recognized a deferred tax benefit of $10.7 million during the three months ended December 31, 2006 primarily related to the reversal of the previously established deferred tax asset valuation allowance.

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 2002. Currently, the Company is not under examination by any taxing authority.

8. Stock Repurchase Program

The Board of Directors approved a second share repurchase program at its April 2007 meeting, which authorized the repurchase of an additional 10% of the Company’s publicly-held outstanding common stock. The second share repurchase program commenced upon completion of the first program in May 2007. Under this program, up to 10% of its publicly-held outstanding shares of common stock, or 4,785,831 shares of Investors Bancorp, Inc. common stock, may be purchased in the open market and through other privately negotiated transactions in accordance with applicable federal securities laws. During the six month period ended December 31, 2007, the Company repurchased 3,069,029 shares of its common stock at an average cost of $13.77 per share. Under the current share repurchase program, 560,697 shares remain available for repurchase. As of December 31, 2007, a total of 9,542,724 shares have been purchased, at a weighted average cost of $14.57 per share, under Board authorized share repurchase programs, of which 1,666,959 shares were allocated to fund the restricted stock portion of the Company’s 2006 Equity Incentive Plan. The remaining shares are held for general corporate use, including stock option excercises.

At its January 2008 meeting, the Board of Directors approved a third stock repurchase program which authorizes the repurchase of an additional 10% of the Company’s publicly-held

outstanding common stock, or 4,307,248 shares. The newly approved stock repurchase program will commence immediately upon completion of the current program.

9. Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140.” This statement permits fair value remeasurement of certain hybrid financial instruments, clarifies the scope of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” regarding interest-only and principal-only strips, and provides further guidance on certain issues regarding beneficial interests in securitized financial assets, concentrations of credit risk and qualifying special purpose entities. SFAS No. 155 is effective as of the beginning of the first fiscal year that begins after September 15, 2006. The adoption of SFAS No. 155 on July 1, 2007 did not impact the Company’s financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies to other accounting pronouncements that require or permit fair value measurements, but does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company does not expect that the adoption of SFAS No. 157 will have a material impact on its financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007 with early adoption permitted as of the beginning of a fiscal year that begins on or before November 15, 2007. The Company did not elect early adoption. The Company does not expect that the adoption of SFAS No. 159 will have a material impact on its 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 is effective for periods beginning on or after December 15, 2008. Earlier application is prohibited. SFAS No. 141R will be applied to business combinations occurring after the effective date.

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.

Earlier application is prohibited. SFAS No. 160 will be applied prospectively to all noncontrolling interests.

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. (the Company) 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. An integral part of this strategy is to continue to reposition the assets and liabilities on our balance sheet by adding more loans and deposits. Over the past few years we have been successful in this repositioning effort and remain committed to this strategy.

Total loans have increased from $3.57 billion at June 30, 2007 to $3.98 billion at December 31, 2007, an increase of 11.4%. The majority of that growth came from residential mortgage loans which grew 8.9%, or $281.3 million, from June 30, 2007 to $3.43 billion at December 31, 2007. As our loan portfolio grows we continue our expansion into commercial real estate lending because it may help increase net interest income, diversify our loan portfolio and improve our interest rate risk position. During the six months ended December 31, 2007 commercial real estate, construction and multi-family loans increased $116.3 million or 45%. This quarter we recorded a $1.8 million provision for loan losses reflecting the growth in our commercial real estate loan portfolio, the risk of this type of lending and an internal downgrade of two

construction loans. Nonperforming assets to total loans increased three basis points from the prior quarter to 0.14%.

There continues to be significant disruption in the credit markets due primarily to the subprime mortgage crisis. While we do not originate or purchase subprime loans or option ARMs nor do we have those types of loans in our portfolio, we are closely monitoring the effect this turmoil may have on our borrowers.

Total deposits increased by $129.0 million to $3.79 billion at December 31, 2007, an increase of 3.5%. We continue to focus our attention on increasing core deposits, which remains difficult given the extreme competition in the New Jersey marketplace.

As a result of strong loan growth and stock repurchases, borrowed funds increased $172.5 million, or 16.6%, to $1.21 billion at December 31, 2007 from $1.04 billion at June 30, 2007, as funds needed exceeded the available cash flows from the investment and deposit portfolios. We may continue to use wholesale borrowings as replacement funding, rather than higher cost certificates of deposit, given the lower cost for this type of funding.

Since September 2007, the Federal Reserve Board of Governors has lowered rates by 225 basis points including the surprise 75 basis point rate cut on January 22, 2008. These recent rate reductions have helped stabilize net interest income and we believe will continue to improve both net interest margin and net interest spread. However, we remain concerned that the higher deposit rates being paid by some bank and non-bank competitors may offset the benefits of the interest rate reductions.

As part of our continued effort to control costs and reduce our efficiency ratio we curtailed the benefit to current employees and settled our obligation to retired employees related to our postretirement benefit plan. The changes to the plan resulted in the recognition of a $2.3 million pre-tax gain this quarter.

In August 2007, we announced the definitive agreement to acquire Summit Federal Bankshares, MHC, the parent company of Summit Federal Bankshares and Summit Federal Savings Bank (Summit). In this acquisition of a mutual thrift, we will acquire five new branch locations that complement our current geographic markets. This transaction will be accounted for using the pooling of interest method. As of December 31, 2007, Summit Federal Savings Bank had $114 million in assets. This transaction is expected to close during fiscal 2008.

Comparison of Financial Condition at December 31, 2007 and June 30, 2007

Total Assets. Total assets increased by $272.4 million, or 4.9%, to $5.87 billion at December 31, 2007 from $5.60 billion at June 30, 2007. This increase was largely the result of an increase in our loan portfolio partially offset by the decrease in the securities portfolio.

Securities. Securities, in aggregate, decreased by $143.8 million, or 8.1%, to $1.63 billion at December 31, 2007, from $1.77 billion at June 30, 2007. This decrease was a result of utilizing the cash flow from investments to fund the loan growth, rather than reinvest in securities, which is consistent with our strategic plan.

Net Loans. Net loans, including loans held for sale, increased by $411.2 million, or 11.4%, to $4.00 billion at December 31, 2007 from $3.59 billion at June 30, 2007. This increase in loans reflects our continued focus on loan originations and purchases. The loans we originate and purchase are made primarily on properties in New Jersey. To a lesser degree we originate and purchase loans in states contiguous to New Jersey as a way to geographically diversify our residential loan portfolio.

We originate residential mortgage loans directly and through our mortgage subsidiary, ISB Mortgage Co. During the six months ended December 31, 2007 we originated $118.7 million in residential mortgage loans. In addition, we purchase residential 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 six months ended December 31, 2007 we purchased residential mortgage loans totaling $332.0 million from these entities. We also purchase pools of residential mortgage loans in the secondary market on a “bulk purchase” basis from several well-established financial institutions. During the six months ended December 31, 2007, we purchased residential mortgage loans totaling $14.3 million on a “bulk purchase” basis.

Additionally, for the six months ended December 31, 2007, we originated $45.6 million in multi-family and commercial real estate loans and $101.6 million in construction loans. This is consistent with our strategy to diversify our loan portfolio.

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 borrowers ability to repay the loan. The amount of interest-only one-to four-family mortgage loans at December 31, 2007 was $299.9 million compared to $287.9 million at June 30, 2007. 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 minimize 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 $1.9 million to $8.9 million at December 31, 2007 from $6.9 million at June 30, 2007. The increase in the allowance reflects the overall growth in the loan portfolio, particularly commercial real estate growth, and two potential problem construction loans internally downgraded this quarter. The construction loans total $12.5 million and involve two separate developers; one of whom is being adversely affected by the current real estate market and the other who is experiencing cost overruns. Payments on these loans are current and continue to perform in accordance with their contractual loan agreements. The allowance for loan losses also reflects the overall inherent credit risk in our loan portfolio, the level of our non-performing loans and our charge-off experience.

Total non-performing loans, defined as non-accruing loans, increased by $469,000 to $5.6 million at December 31, 2007 from $5.1 million at June 30, 2007. The ratio of non-performing loans to total loans was 0.14% at both December 31, 2007 and June 30, 2007. The allowance for loan losses as a percentage of non-performing loans was 157.67% at December 31, 2007 compared with 134.33% at June 30, 2007. At December 31, 2007 our allowance for loan losses as a percentage of total loans was 0.22% compared to 0.19% at June 30, 2007.

Although we believe we have established and maintained an adequate level of allowance for loan losses, additions may be necessary based on growth of the loan portfolio, change in composition of the loan portfolio, and the impact the deterioration of the real estate and economic environments have on the area in which we lend. 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.”

Deferred Tax Asset. The Company’s net deferred tax asset decreased by $2.3 million to $37.1 million at December 31, 2007 from $39.4 million at June 30, 2007. This decrease is primarily the result of the curtailment of the postretirement benefit plan. (See discussion in “Comparison of Operating Results — Non-interest Expense”.)

Bank Owned Life Insurance, Stock in the Federal Home Loan Bank and Other Assets. Bank owned life insurance increased by $2.0 million from $88.0 million at June 30, 2007 to $90.0 million at December 31, 2007. There was also an increase in accrued interest receivable of $2.1 million resulting from an increase in the yield on interest-earning assets and the timing of certain cash flows resulting from the change in the mix of our assets. The amount of stock we own in the Federal Home Loan Bank (FHLB) increased by $12.3 million from $33.9 million at June 30, 2007 to $46.1 million at December 31, 2007 as a result of an increase in our level of borrowings at December 31, 2007.

Deposits. Deposits increased by $129.0 million, or 3.5%, to $3.79 billion at December 31, 2007 from $3.66 billion at June 30, 2007. The increase was due primarily to an increase in certificates of deposits and to a lesser extent an increase in our money market account deposits. This was partially offset by the decrease in savings deposits and checking account deposits.

Borrowed Funds. Borrowed funds increased $172.5 million, or 16.6%, to $1.21 billion at December 31, 2007 from $1.04 billion at June 30, 2007. This increase in borrowed funds was the result of strong loan growth that exceeded the available cash flows from the investment and deposit portfolios.

Stockholders’ Equity. Stockholders’ equity decreased $25.5 million to $817.8 million at December 31, 2007 from $843.4 million at June 30, 2007. This decrease is attributed to the repurchase of our common stock totaling $42.4 million during the six months ended December 31, 2007, which was partially offset by $6.8 million in net income for the period, $4.7 million in stock-based compensation cost credited to paid-in capital and a decrease of $4.0 million in the accumulated other comprehensive loss.

Average Balance Sheets for the Three and Six Months ended December 31, 2007 and 2006

The following tables present certain information regarding Investors Bancorp, Inc.’s financial condition and net interest income for the three and six months ended December 31, 2007 and 2006. The tables present 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 Three Months Ended
		December 31, 2007																December 31, 2006
		Average Outstanding																Average Outstanding
		Balance				Interest Earned/Paid				Average Yield/Rate								Balance				Interest Earned/Paid				Average Yield/Rate
		(Dollars in thousands)
Interest-earning assets:
Interest-bearing deposits		$	14,097			$	141				4.00	%						$	22,758			$	222				3.90	%
Securities available-for-sale (1)			234,917				2,693				4.59	%							470,134				5,175				4.40	%
Securities held-to-maturity			1,433,401				17,475				4.88	%							1,648,891				19,697				4.78	%
Net loans			3,940,812				56,688				5.75	%							3,217,045				44,126				5.49	%
Stock in FHLB			45,850				800				6.98	%							45,252				753				6.66	%
Total interest-earning assets			5,669,077				77,797				5.49	%							5,404,080				69,973				5.18	%
Non-interest-earning assets			178,738																154,837
Total assets		$	5,847,815															$	5,558,917
Interest-bearing liabilities:
Savings		$	306,873				1,642				2.14	%						$	243,693				907				1.49	%
Interest-bearing checking			331,306				1,877				2.27	%							298,288				1,790				2.40	%
Money market accounts			207,385				1,425				2.75	%							186,335				929				1.99	%
Certificates of deposit			2,880,878				34,673				4.81	%							2,633,188				30,418				4.62	%
Borrowed funds			1,201,523				14,424				4.80	%							1,210,038				14,935				4.94	%
Total interest-bearing liabilities			4,927,965				54,041				4.39	%							4,571,542				48,979				4.29	%
Non-interest-bearing liabilities			100,018																83,732
Total liabilities			5,027,983																4,655,274
Stockholders’ equity			819,832																903,643
Total liabilities and stockholders’ equity		$	5,847,815															$	5,558,917
Net interest income						$	23,756															$	20,994
Net interest rate spread (2)											1.10	%															0.89	%
Net interest-earning assets (3)		$	741,112															$	832,538
Net interest margin (4)											1.68	%															1.55	%
Ratio of interest-earning assets to total interest- bearing liabilities			1.15	X															1.18	X

		For Six Months Ended
		December 31, 2007																December 31, 2006
		Average Outstanding																Average Outstanding
		Balance				Interest Earned/Paid				Average Yield/Rate								Balance				Interest Earned/Paid				Average Yield/Rate
		(Dollars in thousands)
Interest-earning assets:
Interest-bearing deposits		$	15,152			$	301				3.97	%						$	21,398			$	391				3.65	%
Securities available-for-sale (1)			243,094				5,573				4.59	%							502,636				10,897				4.34	%
Securities held-to-maturity			1,464,307				35,684				4.87	%							1,688,919				40,228				4.76	%
Net loans			3,829,687				109,654				5.73	%							3,149,672				86,038				5.46	%
Stock in FHLB			42,674				1,393				6.53	%							46,531				1,450				6.23	%
Total interest-earning assets			5,594,914				152,605				5.46	%							5,409,156				139,004				5.14	%
Non-interest-earning assets			176,406																152,013
Total assets		$	5,771,320															$	5,561,169
Interest-bearing liabilities:
Savings		$	310,505				3,457				2.23	%						$	233,447				1,433				1.23	%
Interest-bearing checking			342,535				4,325				2.53	%							302,959				3,635				2.40	%
Money market accounts			197,475				2,664				2.70	%							196,799				1,802				1.83	%
Certificates of deposit			2,837,637				68,473				4.83	%							2,594,289				57,924				4.47	%
Borrowed funds			1,160,360				28,527				4.92	%							1,246,699				30,749				4.93	%
Total interest-bearing liabilities			4,848,512				107,446				4.43	%							4,574,193				95,543				4.18	%
Non-interest-bearing liabilities			99,927																83,478
Total liabilities			4,948,439																4,657,671
Stockholders’ equity			822,881																903,498
Total liabilities and stockholders’ equity		$	5,771,320															$	5,561,169
Net interest income						$	45,159															$	43,461
Net interest rate spread (2)											1.03	%															0.96	%
Net interest-earning assets (3)		$	746,402															$	834,963
Net interest margin (4)											1.61	%															1.61	%
Ratio of interest-earning assets to total interest- bearing liabilities			1.15	X															1.18	X