UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: December 31, 2008

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		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 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

Part I. Financial Information

		Page
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 2008 (unaudited) and June 30, 2008			1
Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2008 and 2007 (unaudited)			2
Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended December 31, 2008 and 2007 (unaudited)			3
Consolidated Statements of Cash Flows for the Three and Six Months Ended December 31, 2008 and 2007 (unaudited)			4
Notes to Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3. Quantitative and Qualitative Disclosures About Market Risk			29
Item 4. Controls and Procedures			31
Part II. Other Information
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 3. Defaults upon Senior Securities			33
Item 4. Submission of Matters to a Vote of Security Holders			33
Item 5. Other Information			34
Item 6. Exhibits			34
Signature Page
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

Part I. Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets
December 31, 2008 (Unaudited) and June 30, 2008

		December 31,				June 30,
		2008				2008
		(In thousands)
Assets
Cash and cash equivalents		$	26,692				22,823
Securities available-for-sale, at estimated fair value			176,351				203,032
Securities held-to-maturity, net (estimated fair value of $988,286 and $1,198,053 at December 31, 2008 and June 30, 2008, respectively)			982,952				1,255,054
Loans receivable, net			5,618,185				4,670,150
Loans held-for-sale			16,935				9,814
Stock in the Federal Home Loan Bank			86,585				60,935
Accrued interest receivable			32,931				27,716
Office properties and equipment, net			33,510				29,710
Net deferred tax asset			108,707				40,702
Bank owned life insurance contract			98,153				96,170
Other assets			2,785				3,036
Total assets		$	7,183,786				6,419,142
Liabilities and Stockholders’ Equity
Liabilities:
Deposits		$	4,232,638				3,970,275
Borrowed funds			2,133,569				1,563,583
Advance payments by borrowers for taxes and insurance			22,085				21,829
Other liabilities			41,695				34,917
Total liabilities			6,429,987				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 December 31, 2008 and June 30, 2008, respectively			532				532
Additional paid-in capital			518,457				514,613
Retained earnings			408,534				486,244
Treasury stock, at cost; 8,967,351 shares at December 31, 2008 and June 30, 2008			(128,121	)			(128,977	)
Unallocated common stock held by the employee stock ownership plan			(36,869	)			(37,578	)
Accumulated other comprehensive loss			(8,734	)			(6,296	)
Total stockholders’ equity			753,799				828,538
Total liabilities and stockholders’ equity		$	7,183,786				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 Six Months
		Ended December 31,								Ended December 31,
		2008				2007				2008				2007
		(Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable and loans held-for-sale		$	78,291				57,185				148,771				110,657
Securities:
Government-sponsored enterprise obligations			491				1,443				991				2,905
Mortgage-backed securities			12,834				16,238				26,273				33,371
Equity securities available-for-sale			8				76				63				156
Municipal bonds and other debt			2,249				3,050				4,386				6,146
Interest-bearing deposits			7				275				39				556
Federal Home Loan Bank stock			619				804				1,424				1,400
Total interest and dividend income			94,499				79,071				181,947				155,191
Interest expense:
Deposits			31,928				40,058				62,937				79,811
Secured borrowings			19,663				14,424				37,362				28,527
Total interest expense			51,591				54,482				100,299				108,338
Net interest income			42,908				24,589				81,648				46,853
Provision for loan losses			8,000				1,750				13,000				1,949
Net interest income after provision for loan losses			34,908				22,839				68,648				44,904
Non-interest (loss) income:
Fees and service charges			609				813				1,452				1,568
Income on bank owned life insurance contract			971				1,083				1,984				2,066
(Loss) gain on sales of mortgage loans, net			(118	)			151				66				232
(Loss) gain on securities transactions, net			(153,605	)			18				(157,971	)			(224	)
Other income			117				93				211				178
Total non-interest (loss) income			(152,026	)			2,158				(154,258	)			3,820
Non-interest expenses:
Compensation and fringe benefits			15,061				12,441				29,743				26,270
Advertising and promotional expense			955				737				1,760				1,247
Office occupancy and equipment expense			2,797				2,703				5,542				5,367
Federal insurance premiums			676				112				1,357				220
Stationery, printing, supplies and telephone			496				464				1,035				894
Legal, audit, accounting, and supervisory examination fees			641				576				1,190				1,036
Data processing service fees			1,078				1,069				2,235				2,178
Other operating expenses			1,116				1,200				2,319				2,253
Total non-interest expenses			22,820				19,302				45,181				39,465
(Loss) income before income tax (benefit) expense			(139,938	)			5,695				(130,791	)			9,259
Income tax (benefit) expense			(56,979	)			2,112				(53,323	)			3,244
Net (loss) income		$	(82,959	)			3,583				(77,468	)			6,015
Basic (loss) earnings per share		$	(0.80	)			0.03				(0.75	)			0.06
Diluted earnings per share		$	n/a				0.03				n/a				0.06
Weighted average shares outstanding
Basic			103,950,667				105,909,100				103,872,522				106,359,599
Diluted			103,950,667				106,080,292				103,872,522				106,532,592

See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Stockholders’ Equity

Six months ended December 31, 2008 and 2007

(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			—				—				6,015				—				—				—				6,015
Change in funded status of postretirement plan due to plan curtailment and settlement, net of tax expense of $969			—				—				—				—				—				1,450				1,450
Change in funded status of retirement obligations, net of tax expense of $47			—				—				—				—				—				69				69
Unrealized gain on securities available- for-sale, net of tax expense of $1,716			—				—				—				—				—				2,476				2,476
Reclassification adjustment for losses included in net income			—				—				—				—				—				242				242
Total comprehensive income																											10,252
Cumulative 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				511,036				476,520				(113,349	)			(38,287	)			(3,698	)			832,754
Balance at June 30, 2008		$	532				514,613				486,244				(128,977	)			(37,578	)			(6,296	)			828,538
Comprehensive loss:
Net loss			—				—				(77,468	)			—				—				—				(77,468	)
Change in funded status of retirement obligations, net of tax benefit of $120			—				—				—				—				—				(174	)			(174	)
Unrealized gain on securities available- for-sale, net of tax expense of $1,683			—				—				—				—				—				(2,721	)			(2,721	)
Reclassification adjustment for losses included in net loss			—				—				—				—				—				457				457
Total comprehensive loss																											(79,906	)
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			—				5,269				—				—				—				—				5,269
ESOP shares allocated or committed to be released			—				286				—				—				709				—				995
Balance at December 31, 2008		$	532				518,457				408,534				(128,121	)			(36,869	)			(8,734	)			753,799

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,
		2008				2007
		(In thousands)
Cash flows from operating activities:
Net (loss) income		$	(77,468	)			6,015
Adjustments to reconcile net income to net cash used in operating activities:
ESOP and stock-based compensation expense			6,264				5,719
Amortization of premiums and accretion of discounts on securities, net			258				575
Amortization of premium and accretion of fees and costs on loans, net			1,249				777
Provision for loan losses			13,000				1,949
Depreciation and amortization of office properties and equipment			1,005				1,453
Loss on securities, net			157,971				224
Mortgage loans originated for sale			(203,728	)			(34,116	)
Proceeds from mortgage loan sales			196,673				30,615
Gain on sales of mortgage loans, net			(66	)			(232	)
Increase in bank owned life insurance contract			(1,984	)			(2,066	)
Increase in accrued interest			(5,215	)			(2,003	)
Deferred tax benefit			(66,203	)			(389	)
Decrease (increase) in other assets			251				(430	)
Increase (decrease) in other liabilities			6,485				(712	)
Total adjustments			105,960				1,364
Net cash provided by operating activities			28,492				7,379
Cash flows from investing activities:
Purchases of loans receivable			(822,110	)			(346,336	)
Net originations of loans receivable			(140,174	)			(62,116	)
Purchases of debt securities held-to-maturity			—				(10,000	)
Mortgage-backed securities available-for-sale received in like-kind exchange			(3,911	)			—
Purchases of other investments available-for-sale			(100	)			—
Proceeds from paydowns/maturities on mortgage-backed securities held-to-maturity			95,436				121,515
Proceeds from calls/maturities on debt securities held-to-maturity			19,612				12,570
Proceeds from paydowns/maturities on mortgage-backed securities available-for-sale			20,797				31,468
Redemption of equity securities available-for-sale			4,774				—
Proceeds from redemptions of Federal Home Loan Bank stock			30,578				11,036
Purchases of Federal Home Loan Bank stock			(56,228	)			(23,297	)
Purchases of office properties and equipment			(4,805	)			(2,174	)
Net cash used in investing activities			(856,131	)			(267,334	)
Cash flows from financing activities:
Net increase in deposits			262,363				123,486
Net decrease in funds borrowed under short-term repurchase agreements			(25,000	)			(28,500	)
Proceeds from funds borrowed under other repurchase agreements			55,000				395,000
Repayments of funds borrowed under other repurchase agreements			(120,000	)			(50,000	)
Net increase (decrease) in other borrowings			659,986				(144,015	)
Net increase in advance payments by borrowers for taxes and insurance			256				141
Purchase of treasury stock			(1,097	)			(42,376	)
Net cash provided by financing activities			831,508				253,736
Net increase (decrease) in cash and cash equivalents			3,869				(6,219	)
Cash and cash equivalents at beginning of the period			22,823				35,582
Cash and cash equivalents at end of the period		$	26,692				29,363
Supplemental cash flow information:
Cash paid during the year for:
Interest		$	98,126				105,341
Income taxes			8,815				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 December 31, 2008 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 $622 million in assets, $448 million in deposits and five branches in Essex and Passaic Counties. The transaction is expected to close in the second calendar quarter of 2009, subject to customary closing conditions including regulatory approvals and approval by American Bancorp of New Jersey’s shareholders.

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 December 31,
		2008												2007
										Per												Per
										Share												Share
		Loss				Shares				Amount				Income				Shares				Amount
		(In thousands, except per share data)
Net (Loss) Income		$	(82,959	)										$	3,583
Basic (loss) earnings per share:
(Loss) income available to common stockholders		$	(82,959	)			103,950,667			$	(0.80	)		$	3,583				105,909,100			$	0.03
Effect of dilutive common stock equivalents			—				—								—				171,192
Diluted earnings per share:
(Loss) income available to common stockholders		$	(82,959	)			103,950,667				n/a			$	3,583				106,080,292			$	0.03

		For the Six Months Ended December 31,
		2008												2007
										Per												Per
										Share												Share
		Loss				Shares				Amount				Income				Shares				Amount
		(In thousands, except per share data)
Net (Loss) Income		$	(77,468	)										$	6,015
Basic earnings per share:
(Loss) income available to common stockholders		$	(77,468	)			103,872,522			$	(0.75	)		$	6,015				106,359,599			$	0.06
Effect of dilutive common stock equivalents			—				—								—				172,993
Diluted earnings per share:
(Loss) income available to common stockholders		$	(77,468	)			103,872,522				n/a			$	6,015				106,532,592			$	0.06

4. Securities Impairment

The Company recorded a $156.7 million pre-tax non-cash OTTI charge on our pooled bank trust preferred CDOs during the six months ended December 31, 2008. As a result of the charge, the securities have an amortized cost of $20.8 million. The Company has the ability and intent to hold these securities until their maturity, or recovery, and the majority of the securities are performing in accordance with contractual terms. However, the impairment was recognized as management does not believe that the securities’ market values will recover within the foreseeable future. These securities will continue to be classified as held-to-maturity. Additionally, during the six months ended December 31, 2008, the Company recorded a $456,000 pre-tax non-cash OTTI charge on the AMF Ultra Short Mortgage Fund (“AMF”), and $791,000 pre-tax charge on the redemption in kind of the AMF, a mutual fund acquired in the June 2008 merger with Summit Federal.

5. Loans Receivable, Net

Loans receivable, net are summarized as follows:

		December 31,				June 30,
		2008				2008
		(In thousands)
Residential mortgage loans		$	4,699,758				4,009,563
Multi-family and commercial			455,468				225,154
Construction loans			301,915				260,177
Consumer and other loans			166,422				168,819
Total loans			5,623,563				4,663,713
Premiums on purchased loans, net			23,795				22,622
Deferred loan fees, net			(2,624	)			(2,620	)
Allowance for loan losses			(26,549	)			(13,565	)
Net loans		$	5,618,185				4,670,150

6. Deposits

Deposits are summarized as follows:

		December 31,				June 30,
		2008				2008
		(In thousands)
Savings accounts		$	393,053				417,196
Checking accounts			493,845				401,100
Money market accounts			279,305				229,018
Total core deposits			1,166,203				1,047,314
Certificates of deposit			3,066,435				2,922,961
		$	4,232,638				3,970,275

7. Equity Incentive Plan

During the six months ended December 31, 2008, the Company recorded $5.3 million of share-based expense, comprised of stock option expense of $2.2 million and restricted stock expense of $3.1 million.

During the six months ended December 31, 2008, 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 December 31, 2008, 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 3,368,792 were unvested. Expected future expense relating to the 3.4 million non-vested options outstanding as of December 31, 2008 is $12.3 million over a weighted average period of 3.23 years.

During the six months ended December 31, 2008, 125,000 shares of restricted stock with a grant date fair value of $13.69 were granted and 333,389 shares with a grant date fair value of $15.25 were vested. At December 31, 2008, 1,261,923 shares of restricted stock, with a weighted

average grant date fair value of $14.89, are unvested. Expected future compensation expense relating to the 1.3 million restricted shares at December 31, 2008 is $16.6 million over a weighted average period of 4.0 years.

8. 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 then 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 December 31,
		SERP and Directors’ Plan								Other Benefits
		2008				2007				2008				2007
		(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

		Six months ended December 31,
		SERP and Directors’ Plan								Other Benefits
		2008				2007				2008				2007
		(In thousands)
Service cost		$	225				228			$	—				23
Interest cost			513				479				22				122
Amortization of:
Transition obligation			—				—				17				38
Prior service cost			49				49				—				—
Net loss			64				57				(7	)			(5	)
Total net periodic benefit expense		$	851				813			$	32				178

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 for eligible 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 $614,000 to the defined benefit pension plan during the first six 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 December 31, 2008, the pension plan, SERP plan and postretirement life insurance plan had an accrued liability of $840,000, $981,000 and $346,000, respectively. At December 31, 2008, the charges recognized in accumulated other comprehensive loss for the pension plan, the SERP plan and the postretirement life insurance plan were $1,228,000, $223,000 and $180,000, respectively. For the six months ended December 31, 2008 and 2007, the expense related to these plans was $175,000 and $104,000, respectively.

9. 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.

10. 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.

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 securites, 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 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 December 31, 2008.

		Carrying Value at December 31, 2008
		Total				Level 1				Level 2				Level 3
		(In thousands)
Securities available for sale:
Mortgage-backed securities		$	174,843				—				174,843			$	—
Equity securities			1,508				—				1,508				—
		$	176,351			$	—			$	176,351			$	—

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. For the six months ended December 31, 2008, the Company recognized an OTTI charge on our pooled trust preferred CDOs, for which level 2 was used as quoted prices in active markets for identical assets were not available.

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 December 31, 2008.

		Carrying Value at December 31, 2008
		Total				Level 1				Level 2				Level 3
						(In thousands)
Securities held-to-maturity		$	20,800			$	—			$	20,800			$	—
MSR, net			961				—				—				961
Impaired loans			6,618				—				—				6,618
		$	28,379			$	—			$	20,800			$	7,579

11. Recent Accounting Pronouncements

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. Earlier application is prohibited. The Company does not expect that the adoption of SFAS No. 160 will have a material impact on its 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, with early application encouraged. The Company does not expect that the adoption of SFAS No. 161 will have a material impact on its 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.

In January 2009, the FASB issued FASB Staff Position EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20.’’ This FASB Staff Position (FSP) amends the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets.” The FSP also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and other related guidance. The FSP shall be effective for interim and annual reporting periods ending after December 15, 2008. The adoption did not have a material impact on the 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, providing 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, 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 subprime mortgage lending, illiquidity in the capital and credit markets and the decline of real estate values. The U.S. government’s attempts to respond to the crisis affecting the financial services industry has not, to date, stabilized U.S. financial markets. While the government indicates it will continue to support the financial services industry, it is difficult to determine how the various government programs will impact the banking industry.

During the quarter, the Company recognized a $152.8 million pre-tax, ($90.6 million after-tax, or $0.87 per share), 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 has been reduced to $20.8 million as a result of this charge. Since purchase, the Company had received all payments due under the contractual terms through September 30, 2008. For the quarter ended December 31, 2008 the Company received 98.5% of the contractual payments due. The Company continues to have the ability and intent to hold these securities until their maturity, or recovery. 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. While the accounting rules for other-than-temporary impairment requires us to recognize this non-cash charge, we believe that actual losses will be less than this non-cash charge. Despite this charge, the Company maintains a strong tangible capital ratio of 10.48% and is considered well capitalized under regulatory guidelines.

The Company announced during the quarter 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.

Given our strong capital position, we believe we are well positioned to deal with this economic uncertainty and take advantages of opportunities to enhance our franchise.

On December 15^th, 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 $622 million in assets, $448 million in deposits and five branches in Essex and Passaic Counties. The transaction is expected to close in the second calendar quarter of 2009, subject to customary closing conditions including regulatory approvals and approval by American Bancorp of New Jersey’s shareholders. American is a well managed financial institution that maintains a strong credit culture and will help to enhance our geographic presence in New Jersey.

During 2008 the Federal Reserve lowered the Fed Funds rate by over 400 basis points which helped to reduce the cost of our interest-bearing liabilities by 105 basis points. Our core deposits have grown for the period as we continue to focus on this aspect of our business. In addition, core deposits have increased as depositors searched for well capitalized banks amidst the turmoil surrounding a number of larger financial institutions in our market.

This disruption in the financial markets has created an opportunity for us to add more loans as many financial institutions have reduced or stopped lending. Total loans increased to $5.62 billion at December 31, 2008 from $4.66 billion at June 30, 2008, an increase of 20.6%. The majority of the growth came from residential mortgage loans which grew 17.2%, or $690.2 million to $4.70 billion. In order to diversify our loan portfolio we have continued our expansion into commercial real estate lending. During the three months ended December 31, 2008 commercial real estate, construction and multi-family loans increased $272.1 million or 56.1%. As a result of strong loan growth that exceeded the available cash flows from the investment, loan and deposit portfolios, borrowed funds increased $570.0 million, or 36.5%, to $2.13 billion at December 31, 2008 from $1.56 billion at June 30, 2008. As we add more loans to our balance sheet we remain focused on maintaining our historically strict underwriting standards. We have never originated or purchased, and our portfolio does not include, any sub-prime loans.

During the six months ended December 31, 2008, we recorded a $13.0 million provision for loan losses. As our loan portfolio continues to grow and we increase the amount of commercial real estate loans, we believe higher loans loss provisions are prudent and necessary especially in light of the current economic environment. It is difficult to determine how the economy will fare in 2009 as we are faced with the uncertainty surrounding rising unemployment in our lending area, specifically, the financial services sector. We will monitor our loan portfolio carefully and continue our practices of conservative loan underwriting. Our strong capital position will help us navigate this difficult and unprecedented environment.

Excluding OTTI charges, net income was $7.6 million and $15.6 million for the three month and six month periods ended December 31, 2008, respectively, compared to $3.6 million and $6.2 million for the three month and six month periods ended December 31, 2007, respectively.

Comparison of Financial Condition at December 31, 2008 and June 30, 2008

Total Assets. Total assets increased by $764.6 million, or 11.9%, to $7.18 billion at December 31, 2008 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 $955.2 million, or 20.4%, to $5.64 billion at December 31, 2008 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.

We originate residential mortgage loans directly and through our mortgage subsidiary, ISB Mortgage Co. During the six months ended December 31, 2008 we originated $217.9 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 six months ended December 31, 2008, we purchased loans totaling $542.5 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 six months ended December 31, 2008, we purchased $279.6 million of residential mortgage loans that met our underwriting criteria on a “bulk purchase” basis.

For the six months ended December 31, 2008, we originated $46.5 million in multi-family loans, $84.0 million commercial real estate loans and $89.6 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 December 31, 2008 was $532.5 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 this 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 $13.0 million to $26.5 million at December 31, 2008 from $13.6 million at June 30, 2008. Total non-performing loans, defined as non-accruing loans, were $47.8 million at December 31, 2008, $42.1 million at September 30, 2008 and $19.4 million at June 30, 2008. The majority of the increase from June 30, 2008 was the result of the previously disclosed $19.4 million multi-family loan to a New Jersey developer that was 30 days delinquent at June 30, 2008 and is now on non-accrual. Based on the current loan to value of approximately 55%, management believes that the probability of loss on this loan is low. Non-performing loans at December 31, 2008 are comprised of the following; 39 residential loans totaling $10.3 million; 5 multi-family and commercial loans totaling $20.4 million, which includes the $19.4 million loan described above; and 5 construction loans totaling $17.0 million that have specific reserves of $5.8 million. The ratio of non-performing loans to total loans was 0.85% at December 31, 2008, 0.79% at September 30, 2008 and 0.42% at June 30, 2008. The allowance for loan losses as a percentage of non-performing loans was 55.5% at December 31, 2008, 44.0% at September 30, 2008 and 70.0% at June 30, 2008. Our allowance for loan losses

as a percentage of total loans was 0.47% at December 31, 2008, 0.35% at September 30, 2008 and 0.29% at June 30, 2008.

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 December 31, 2008, the Company has three commercial real estate loans totaling $2.3 million and three construction loans totaling $23.9 million that it deemed potential problem loans. Four of the construction loans are current and two are 30 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 of 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 $298.8 million, or 20.5%, to $1.16 billion at December 31, 2008, from $1.46 billion at June 30, 2008. The decrease is primarily the result of the Company writing-down the book value of pooled bank trust preferred CDOs through a $156.7 million pre-tax non-cash OTTI charge during the six months ended December 31, 2008. At June 30, 2008, the portfolio of pooled bank trust preferred CDOs contained securities with an amortized cost of $13.1 million which had an investment grade rating of AAA and $165.6 million with an investment grade rating of A. During the six month period ended December 31, 2008, Moody’s rating agency downgraded a number of these securities. Based on the Moody’s downgrades, the investment ratings as of December 31, 2008 were $5.8 million with an investment grade of AAA; $2.7 million with an investment grade of A; $3.6 million with an investment grade of BBB; and $8.7 million that are below investment grade. The impairment, which reduced the amortized cost of our portfolio of trust preferred CDOs to $20.8 million, was recognized as we do not believe that the securities market value will recover within the foreseeable future. The Company has the ability and intent to hold these securities until their maturity, or recovery, and the majority of the securities are performing in accordance with contractual terms. These securities will continue to be classified as held-to-maturity.

The securities portfolio also includes private label mortgage backed securities with an amortized cost of $190.7 million and a fair value of $173.8 million. Of these securities, $189.2 million in amortized cost, $172.2 million in fair value, are currently AAA rated and were originated in the period 2002-2004 and are performing in accordance with contractual terms. Given the decline in market value, several securities were evaluated for OTTI and management has determined that they are not OTTI at December 31, 2008. The decrease in fair value for these securities is attributed to changes in market interest rates. The remaining private label securities were received in the AMF redemption-in-kind exchange during the period ended December 31, 2008 and recorded at market value. The Company will continue to closely monitor the private label mortgage backed securities portfolio for other-than-temporary impairment which could result in a future non-cash charge to earnings.

As part of the merger with Summit Federal in June 2008, we acquired a $6.0 million mutual fund investment in AMF, which was deemed OTTI and was written down to fair value through pre-tax charges totaling $651,000 during the year ended June 30, 2008. The Company recorded an

additional $456,000, pre-tax non-cash OTTI charge during the six months ended December 31, 2008. Management decided to liquidate this investment upon completion of the merger and had received $500,000 in cash liquidations through September 30, 2008, which represented the maximum allowable cash redemption by the asset manager for that time period. With the continued deterioration in the net asset value of AMF, management exercised a redemption-in-kind option available to shareholders. The redemption-in-kind allowed the Company to redeem its remaining shares in AMF for its pro-rata share of the underlying securities and cash. The Company received securities, primarily agency and private label mortgage-backed securities, totaling $3.9 million and $613,000 in cash. The securities were recorded at market value resulting in an additional $791,000 pre-tax charge related to the exchange.

Net Deferred Tax Asset. Net deferred tax asset increased by $68.0 million from $40.7 million at June 30, 2008 to $108.7 million at December 31, 2008 which is primarily attributed to the tax benefit recorded as a result of the OTTI charge on our pooled bank trust preferred CDOs. Based on current facts and circumstances, the Company believes that it is more likely than not that the net deferred tax asset will be realized.

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 $25.7 million from $60.9 million at June 30, 2008 to $86.6 million at December 31, 2008 as a result of an increase in our level of borrowings at December 31, 2008. There was also an increase in accrued interest receivable of $5.2 million resulting from an increase in the average balance of our interest-earning assets. Additionally, bank owned life insurance increased by $2.0 million from $96.2 million at June 30, 2008 to $98.2 million at December 31, 2008.

Deposits. Deposits increased by $262.4 million, or 6.6%, to $4.23 billion at December 31, 2008 from $3.97 billion at June 30, 2008. Certificates of deposits, checking account deposits, and money market account deposits increased by $143.5 million, $92.7 million and $50.3 million, respectively. These increases were partially offset by a $24.1 million decrease in savings account deposits.

Borrowed Funds. Borrowed funds increased $570.0 million, or 36.5%, to $2.13 billion at December 31, 2008 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 $74.7 million to $753.8 million at December 31, 2008 from $828.5 million at June 30, 2008 primarily due to net loss of $77.5 million for the six months ended December 31, 2008. 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 December 31, 2008 and 2007

The following table presents certain information regarding Investors Bancorp, Inc.’s financial condition and net interest income for the three and six months ended December 31, 2008 and 2007. 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
		December 31, 2008												December 31, 2007
		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		$	19,933			$	7				0.14	%		$	26,501			$	275				4.15	%
Securities available-for-sale(1)			191,193				2,177				4.55	%			240,958				2,769				4.60	%
Securities held-to-maturity			1,175,931				13,405				4.56	%			1,488,856				18,038				4.85	%
Net loans			5,540,867				78,291				5.65	%			3,974,934				57,185				5.75	%
Stock in FHLB			88,496				619				2.80	%			46,032				804				6.99	%
Total interest-earning assets			7,016,420				94,499				5.39	%			5,777,281				79,071				5.47	%
Non-interest earning assets			195,093												187,257
Total assets		$	7,211,513											$	5,964,538
Interest-bearing Liabilities:
Savings		$	389,446			$	1,778				1.83	%		$	343,742			$	1,703				1.98	%
Interest-bearing checking			379,846				1,469				1.55	%			346,898				1,890				2.18	%
Money market accounts			298,300				1,805				2.42	%			207,385				1,425				2.75	%
Certificates of deposit			3,023,602				26,876				3.56	%			2,925,555				35,040				4.79	%
Borrowed funds			2,174,374				19,663				3.62	%			1,201,523				14,424				4.80	%
Total interest-bearing liabilities			6,265,568				51,591				3.29	%			5,025,103				54,482				4.34	%
Non-interest bearing liabilities			117,845												103,950
Total liabilities			6,383,413												5,129,053
Stockholders’ equity			828,100												835,485
Total liabilities and stockholders’ equity		$	7,211,513											$	5,964,538
Net interest income						$	42,908											$	24,589
Net interest rate spread(2)											2.10	%											1.13	%
Net interest earning assets(3)		$	750,852											$	752,178
Net interest margin(4)											2.45	%											1.70	%
Ratio of interest-earning assets to total interest- bearing liabilities			1.12	X											1.15	X

		For Six Months Ended
		December 31, 2008												December 31, 2007
		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		$	19,221			$	39				0.41	%		$	26,361			$	556				4.22	%
Securities available-for-sale (1)			196,848				4,491				4.56	%			249,060				5,729				4.60	%
Securities held-to-maturity			1,203,268				27,222				4.52	%			1,521,984				36,849				4.84	%
Net loans			5,241,754				148,771				5.68	%			3,864,190				110,657				5.73	%
Stock in FHLB			79,496				1,424				3.58	%			42,856				1,400				6.53	%
Total interest-earning assets			6,740,587				181,947				5.40	%			5,704,451				155,191				5.44	%
Non-interest-earning assets			191,168												184,999
Total assets		$	6,931,755											$	5,889,450
Interest-bearing liabilities:
Savings		$	395,448			$	3,650				1.85	%		$	347,864			$	3,587				2.06	%
Interest-bearing checking			371,200				2,842				1.53	%			358,039				4,351				2.43	%
Money market accounts			265,074				3,024				2.28	%			197,475				2,664				2.70	%
Certificates of deposit			2,968,288				53,421				3.60	%			2,883,144				69,209				4.80	%
Borrowed funds			1,990,807				37,362				3.75	%			1,160,360				28,527				4.92	%
Total interest-bearing liabilities			5,990,817				100,299				3.35	%			4,946,882				108,338				4.38	%
Non-interest-bearing liabilities			114,409												104,371
Total liabilities			6,105,226												5,051,253
Stockholders’ equity			826,529												838,197
Total liabilities and stockholders’ equity		$	6,931,755											$	5,889,450
Net interest income						$	81,648											$	46,853
Net interest rate spread (2)											2.05	%											1.06	%
Net interest-earning assets (3)		$	749,770											$	757,569
Net interest margin (4)											2.42	%											1.64	%
Ratio of interest-earning assets to total interest- bearing liabilities			1.13	X											1.15	X