UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: March 31, 2007

Commission file number: 0-51557

Investors Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		22-3493930 (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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer Yes o     No o     

Accelerated Filer Yes o     No o     Non-Accelerated Filer Yes þ     No o

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

     As of April 30, 2007 there were 112,696,352 shares of the Registrant’s common stock, par value $0.01 per share, outstanding, of which 63,099,781 shares, or 55.99% of the Registrant’s outstanding common stock, were held by Investors Bancorp, MHC, the Registrant’s mutual holding company.

 

 

Investors Bancorp, Inc.
FORM 10-Q

Index

				Page
		Part I. Financial Information
Item 1.		Financial Statements
		Consolidated Balance Sheets as of March 31, 2007 (unaudited) and June 30, 2006			1
		Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2007 and 2006 (unaudited)			2
		Consolidated Statements of Stockholders’ Equity for the Nine Months Ended March 31, 2007 and 2006 (unaudited)			3
		Consolidated Statements of Cash Flows for the Nine Months Ended March 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			14
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			30
Item 4.		Controls and Procedures			32
		Part II. Other Information
Item 1.		Legal Proceedings			33
Item 1A.		Risk Factors			33
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			33
Item 6.		Exhibits			33
		Signature Page			35
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

Part I. Financial Information

Item 1. Financial Statements

INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 31, 2007 (Unaudited) and June 30, 2006

		March 31,				June 30,
		2007				2006
		(In thousands)
Assets
Cash and cash equivalents		$	24,751				39,824
Securities available-for-sale, at estimated fair value			297,234				528,876
Securities held-to-maturity, net (estimated fair value of $1,527,779 and $1,695,975 at March 31, 2007 and June 30, 2006, respectively)			1,557,373				1,763,032
Loans receivable, net			3,388,746				2,960,583
Loans held-for-sale			6,056				974
Stock in the Federal Home Loan Bank			33,524				46,125
Accrued interest receivable			23,872				21,053
Office properties and equipment, net			27,201				27,911
Net deferred tax asset			36,821				28,176
Bank owned life insurance contract			87,096				78,903
Other assets			1,642				1,789
Total assets		$	5,484,316				5,497,246
Liabilities and Stockholders’ Equity
Liabilities:
Deposits		$	3,584,109				3,302,043
Borrowed funds			990,717				1,245,740
Advance payments by borrowers for taxes and insurance			16,026				15,337
Other liabilities			29,230				33,939
Total liabilities			4,620,082				4,597,059
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; 113,086,352 and 116,275,688 outstanding at March 31, 2007 and June 30, 2006, respectively			532				532
Additional paid-in capital			503,511				524,962
Unallocated common stock held by the employee stock ownership plan			(39,350	)			(40,414	)
Treasury stock, at cost; 3,189,336 shares at March 31, 2007			(48,349	)			—
Retained earnings			450,850				426,233
Accumulated other comprehensive loss:
Net unrealized loss on securities available for sale, net of tax			(2,592	)			(10,758	)
Minimum pension liability, net of tax			(368	)			(368	)
			(2,960	)			(11,126	)
Total stockholders’ equity			864,234				900,187
Total liabilities and stockholders’ equity		$	5,484,316				5,497,246

     See accompanying notes to consolidated financial statements.

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

		For the Three Months								For the Nine Months
		Ended March 31,								Ended March 31,
		2007				2006				2007				2006
		(Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable and loans held-for-sale		$	45,868				33,177				131,906				89,554
Securities:
Government-sponsored enterprise obligations			1,339				1,341				4,017				5,505
Mortgage-backed securities			18,286				23,878				60,988				74,542
Equity securities available-for-sale			443				460				1,370				1,370
Municipal bonds and other debt			2,410				2,105				7,228				4,520
Interest-bearing deposits			154				184				545				2,675
Repurchase agreements			—				—				—				613
Federal Home Loan Bank stock			798				756				2,248				2,247
Total interest and dividend income			69,298				61,901				208,302				181,026
Interest expense:
Deposits			35,673				24,343				100,467				69,114
Secured borrowings			11,995				10,187				42,744				32,246
Total interest expense			47,668				34,530				143,211				101,360
Net interest income			21,630				27,371				65,091				79,666
Provision for loan losses			200				200				525				400
Net interest income after provision for loan losses			21,430				27,171				64,566				79,266
Non-interest income:
Fees and service charges			642				598				1,961				1,886
Income on bank owned life insurance contract			910				646				2,629				1,776
Gain on sales of mortgage loans, net			135				93				89				232
Loss on securities transactions, net			—				—				(3,666	)			—
Other income			23				21				65				67
Total non-interest income			1,710				1,358				1,078				3,961
Non-interest expenses:
Compensation and fringe benefits			12,962				10,696				35,663				31,323
Advertising and promotional expense			767				666				2,525				1,752
Office occupancy and equipment expense			2,469				2,528				7,407				7,797
Federal insurance premiums			108				141				326				359
Stationery, printing, supplies and telephone			399				419				1,172				1,327
Legal, audit, accounting, and supervisory examination fees			504				384				1,536				1,183
Data processing service fees			1,004				910				2,912				2,726
Contribution to charitable foundation			—				—				—				20,651
Other operating expenses			891				1,113				2,897				2,900
Total non-interest expenses			19,104				16,857				54,438				70,018
Income before income tax expense (benefit)			4,036				11,672				11,206				13,209
Income tax expense (benefit)			1,042				3,960				(8,159	)			4,475
Net income		$	2,994				7,712				19,365				8,734
Earnings per share — basic and diluted		$	0.03			$	0.07			$	0.17				n/a
Weighted average shares outstanding
Basic			111,138,908				112,163,418				111,401,956				n/a
Diluted			111,218,374				112,163,418				111,406,925				n/a

See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC.
Consolidated Statements of Stockholders’ Equity
Nine months ended March 31, 2007 and 2006
(Unaudited)

																						Accumulated other
																						comprehensive loss
						Additional				Unallocated												Unrealized				Minimum				Total
		Common				paid-in				Common Stock				Treasury				Retained				gain (loss) on				pension				stockholders'
		stock				capital				Held by ESOP				stock				earnings				securities				liability				equity
		(In thousands)
Balance at June 30, 2005		$	—				25				—				—				411,219				(2,316	)			(1,101	)			407,827
Comprehensive income:
Net income			—				—				—				—				8,734				—				—				8,734
Unrealized loss on securities available- for-sale, net of tax benefit of $5,356			—				—				—				—				—				(7,720	)			—				(7,720	)
Total comprehensive income																															1,014
Sale of 53,175,907 shares of common stock in the initial public offering and issuance of 63,099,781 shares to the mutual holding company			532				524,642				—				—				—				—				—				525,174
Purchase of common stock by the ESOP			—				—				(42,541	)			—				—				—				—				(42,541	)
Allocation of ESOP stock			—				84				1,418				—				—				—				—				1,502
Balance at March 31, 2006		$	532				524,751				(41,123	)			—				419,953				(10,036	)			(1,101	)			892,976
Balance at June 30, 2006		$	532				524,962				(40,414	)			—				426,233				(10,758	)			(368	)			900,187
Comprehensive income:
Net income			—				—				—				—				19,365				—				—				19,365
Unrealized gain on securities available- for-sale, net of tax expense of $6,760			—				—				—				—				—				10,117				—				10,117
Reclassification adjustment for losses included in net income, net of tax benefit of $1,347			—				—				—				—				—				(1,951	)			—				(1,951	)
Total comprehensive income																															27,531
Cummulative effect of change in accounting principle			—				—				—				—				5,564				—				—				5,564
Purchase of treasury stock (4,856,295 shares)			—				—				—				(74,082	)			—				—				—				(74,082	)
Treasury stock allocated to restricted stock plan			—				(25,421	)			—				25,733				(312	)			—				—				—
Compensation cost for stock options and restricted stock			—				3,458				—				—				—				—				—				3,458
Allocation of ESOP stock			—				512				1,064				—				—				—				—				1,576
Balance at March 31, 2007		$	532				503,511				(39,350	)			(48,349	)			450,850				(2,592	)			(368	)			864,234

See accompanying notes to consolidated financial statements.

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

		For the Nine Months Ended
		March 31,
		2007				2006
		(In thousands)
Cash flows from operating activities:
Net income		$	19,365				8,734
Adjustments to reconcile net income to net cash provided by operating activities:
Contribution of stock to charitable foundation			—				15,488
ESOP and stock-based compensation expense			5,034				1,502
Amortization of premiums and accretion of discounts on securities, net			1,228				888
Provision for loan losses			525				400
Depreciation and amortization of office properties and equipment			2,106				2,199
Loss on securities transactions, net			3,666				—
Mortgage loans originated for sale			(35,225	)			(21,323	)
Proceeds from mortgage loan sales			30,471				22,360
Gain on sales of mortgage loans, net			(89	)			(232	)
Income on bank owned life insurance contract			(2,629	)			(1,776	)
Increase in accrued interest receivable			(2,819	)			(2,887	)
Deferred tax benefit			(14,058	)			(2,280	)
Decrease in other assets			147				467
Decrease in other liabilities			(4,709	)			(3,393	)
Total adjustments			(16,352	)			11,413
Net cash provided by operating activities			3,013				20,147
Cash flows from investing activities:
Originations of loans			(236,452	)			(317,936	)
Purchases of loans			(499,061	)			(565,293	)
Principal payments on loans			306,586				259,908
Purchases of mortgage-backed securities held-to-maturity			(22,701	)			(39,458	)
Purchases of debt securities held-to-maturity			(13,000	)			(344,484	)
Proceeds from paydowns/maturities on mortgage-backed securities held-to-maturity			214,761				373,839
Proceeds from calls/maturities on debt securities held-to-maturity			2,063				225,397
Proceeds from paydowns/maturities on mortgage-backed securities available-for-sale			70,809				101,666
Proceeds from call of equity securities available-for-sale			10,000				—
Proceeds from sale of mortgage-backed securities held-to-maturity			22,942				—
Proceeds from sale of mortgage-backed securities available-for-sale			161,112				—
Proceeds from redemptions of Federal Home Loan Bank stock			29,251				62,807
Purchases of Federal Home Loan Bank stock			(16,650	)			(57,953	)
Purchases of office properties and equipment			(1,396	)			(927	)
Net cash provided by (used in) investing activities			28,264				(302,434	)
Cash flows from financing activities:
Net increase in deposits			282,066				50,795
Net proceeds from sale of common stock			—				509,686
Loan to ESOP			—				(42,541	)
Net (decrease) increase in funds borrowed under short-term repurchase agreements			(125,000	)			250,000
Proceeds from funds borrowed under other repurchase agreements			310,000				—
Repayments of funds borrowed under other repurchase agreements			(475,000	)			(515,000	)
Net increase (decrease) in Federal Home Loan Bank advances			34,977				(29,522	)
Net increase in advance payments by borrowers for taxes and insurance			689				2,079
Purchase of treasury stock			(74,082	)			—
Net cash (used in) provided by financing activities			(46,350	)			225,497
Net decrease in cash and cash equivalents			(15,073	)			(56,790	)
Cash and cash equivalents at beginning of period			39,824				81,329
Cash and cash equivalents at end of period		$	24,751				24,539
Supplemental cash flow information:
Cash paid during the period for:
Interest			143,168				104,437
Income taxes			7,615				5,022

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

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, 2006 Annual Report on Form 10-K.

2.     Bank Owned Life Insurance

In September 2006, the Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 06-5, “Accounting for Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4” to address diversity in practice with respect to the calculation of the amount that could be realized. The EITF reached a consensus that a policyholder should consider any additional amounts, such as deferred acquisition costs (“DAC”) and claims stabilization reserves (“CSR”), in determining the amount that could be realized under the insurance contract and therefore recognized as an asset. The EITF also agreed that fixed amounts that are recoverable by the policyholder in future periods in excess of one year from the surrender of the policy should be recognized at their present value. The consensus is effective for fiscal years beginning after December 15, 2006. Earlier adoption is permitted as of the beginning of a fiscal year for periods in which interim or annual financial statements have not yet been issued. The Company elected early adoption of the new accounting standard as of July 1, 2006.

The Company’s guaranteed DAC and CSR balances represent amounts that could be realized under its group insurance contract, in accordance with the EITF consensus. Accordingly, the Company recorded an asset of $5.6 million for the guaranteed DAC and CSR balances, through a cumulative effect adjustment to retained earnings due to a change in accounting principle, in the quarter ended September 30, 2006.

The Company’s insurance contract provides that, upon full and complete surrender of all outstanding certificates under the group policy held by the Company, the carrier’s repayment of the DAC and CSR would be guaranteed if certain conditions are met at the time of surrender. The conditions that must be met at the time of surrender to obtain repayment of the DAC and

CSR are as follows: (i) the Company must hold harmless and absolve the carrier from payment of all incurred but not reported claims; (ii) the Company must be a “well capitalized” institution under the regulatory capital rules; (iii) the Company cannot be transacting a non-taxable policy exchange as defined in the Internal Revenue Code; and (iv) the Company cannot have undergone a “change in control” (as defined) within 30 months prior to payment of the CSR. If these conditions have been met, the terms of the guarantee provide that (i) the CSR will be paid in full six months after full surrender of the policy, and (ii) future payments of the DAC will continue to be made in accordance with the terms of the insurance contract (generally based on a predetermined payment schedule over a period of 11 years from the date of original purchase). The Company has continuously satisfied the conditions of the guarantee, and management believes it is probable that the conditions will continue to be satisfied for the foreseeable future. Absent a full surrender of the policy, the guaranteed amounts are expected to be realized through the passage of time (in the case of the DAC) or the collection of future death benefit claims (in the case of the CSR).

3.     Earnings Per Share

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

		For the Three Months Ended March 31,
		2007												2006
		Income				Shares				Per Share Amount				Income				Shares				Per Share Amount
						(Dollars in thousands, except per share data)
Net Income		$	2,994											$	7,712
Basic earnings per share:
Income attributable to common stockholders		$	2,994				111,138,908			$	0.03			$	7,712				112,163,418			$	0.07
Effect of dilutive common stock equivalents			—				79,466								—				—
Diluted earnings per share:
Income attributable to common stockholders		$	2,994				111,218,374			$	0.03			$	7,712				112,163,418			$	0.07

		For the Nine Months Ended March 31,
		2007
		Income				Shares				Per Share Amount
		(Dollars in thousands, except per share data)
Net Income		$	19,365
Basic earnings per share:
Income attributable to common stockholders		$	19,365				111,401,956			$	0.17
Effect of dilutive common stock equivalents			—				4,969
Diluted earnings per share:
Income attributable to common stockholders		$	19,365				111,406,925			$	0.17

4.     Loans Receivable, Net

Loans receivable, net are summarized as follows:

		March 31,				June 30,
		2007				2006
		(In thousands)
Residential mortgage loans		$	3,008,022				2,666,559
Multi-family and commercial			97,486				76,976
Construction loans			114,816				65,459
Consumer and other loans			154,337				139,336
Total loans			3,374,661				2,948,330
Premiums on purchased loans			22,647				20,327
Deferred loan fees, net			(1,836	)			(1,734	)
Allowance for loan losses			(6,726	)			(6,340	)
		$	3,388,746				2,960,583

5.     Deposits

Deposits are summarized as follows:

		March 31,				June 30,
		2007				2006
		(In thousands)
Savings accounts		$	295,244				226,245
Checking accounts			350,864				349,014
Money market accounts			168,265				212,200
Total core deposits			814,373				787,459
Certificates of deposit			2,769,736				2,514,584
		$	3,584,109				3,302,043

6.     Equity Incentive Plan

At the annual meeting held on October 24, 2006, stockholders of the Company approved the Investors Bancorp, Inc. 2006 Equity Incentive Plan. On November 20, 2006, certain officers and employees and a service vendor of the Company were granted in aggregate 2,790,000 stock options and 1,120,000 shares of restricted stock, and non-employee directors received in aggregate 1,367,401 stock options and 546,959 shares of restricted stock. On December 1, 2006, certain other officers and employees of the Company were granted a total of 290,000 options. The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment”, upon approval of the Plan, and began to expense the fair value of all share-based compensation granted over the requisite service periods.

SFAS No. 123R also requires the Company to report as a financing cash flow rather than as an operating cash flow, as previously required, the benefits of realized tax deductions in excess of previously recognized tax benefits on compensation expense. In accordance with SEC Staff Accounting Bulletin (“SAB”) No. 107, the Company classified share-based compensation for employees and outside directors within “compensation and fringe benefits” in the consolidated statements of operations to correspond with the same line item as the cash compensation paid.

Stock options generally vest over a five-year service period. Management recognizes compensation expense for all option grants over the awards’ respective requisite service periods. Management estimated the fair values of all option grants using the Black-Scholes option-pricing model. Since there is limited historical information on the volatility of the Company’s stock, management also considered the average volatilities of similar entities for an appropriate period in determining the assumed volatility rate used in the estimation of fair value. Management estimated the expected life of the options using the simplified method allowed under SAB 107. The 7-year Treasury yield in effect at the time of the grant provides the risk-free rate for periods within the contractual life of the option. Management recognizes compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service period of the awards.

Restricted shares generally vest over a five-year service period. The product of the number of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted shares under the Company’s restricted stock plans. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period.

During the three and nine months ended March 31, 2007, the Company recorded $2.4 million and $3.5 million, respectively of share-based expense, comprised of stock option expense of $996,000 and $1.5 million for the respective periods, and restricted stock expense of $1.4 million and $2.0 million for the respective periods. The Company estimates it will record an additional $2.4 million of share-based expense during the fourth quarter of fiscal 2007.

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

										Weighted
						Weighted				Average
		Number of				Average				Remaining				Aggregate
		Stock				Exercise				Contractual				Intrinsic
		Options				Price				Life				Value
Outstanding at June 30, 2006			—				—
Granted			4,447,401			$	15.26
Exercised			—				—
Forfeited			—				—
Outstanding at March 31, 2007			4,447,401			$	15.26			9.7 years				$	—
Exercisable at March 31, 2007			—				—				N/A				N/A

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

						Weighted
		Number of				Average
		Stock				Grant Date
		Options				Fair Value
Non-vested at June 30, 2006			—				—
Granted			4,447,401			$	4.17
Exercised			—				—
Forfeited			—				—
Non-vested at March 31, 2007			4,447,401			$	4.17

Expected future expense relating to the 4.4 million non-vested options outstanding as of March 31, 2007 is $17.1 million over a weighted average period of 4.6 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 March 31, 2007 and changes therein during the nine months then ended:

						Weighted
		Number of				Average
		Shares				Grant Date
		Awarded				Fair Value
Non-vested at June 30, 2006			—				—
Granted			1,666,959			$	15.25
Vested			—				—
Forfeited			—				—
Non-vested at March 31, 2007			1,666,959			$	15.25

Expected future compensation expense relating to the 1.7 million restricted shares at March 31, 2007 is $23.4 million over a weighted average period of 4.6 years.

7.     Income Taxes

     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 a valuation allowance equal to the amount of any tax benefits that, based on available evidence, are not 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 recently passed legislation in the State of New Jersey. As a result, the Company recognized a deferred tax benefit of $10.7 million during the second fiscal quarter primarily related to the reversal of the previously established deferred tax asset valuation allowance. The reversal includes the recognition of tax benefits associated with state net operating loss carryforwards and minimum tax assessment ($11.8 million) and a portion of the Company’s capital losses related to the sale of equity securities ($163,000). This benefit was partially offset by an additional valuation allowance established for the contribution to the charitable foundation ($1.2 million).

The following table presents a reconciliation between the actual income tax expense (benefit) and the “expected” amount computed using the applicable statutory federal income tax rate of 35% as follows:

		For the Nine
		Months ended
		March 31, 2007
		(In thousands)
“Expected” federal income tax expense		$	3,922
Change in valuation allowance for deferred tax assets — Federal and State			(10,717	)
Other State tax benefit, net			(378	)
Bank owned life insurance			(920	)
Dividend received deduction			(336	)
Other			270
Total income tax benefit		$	(8,159	)

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.

The Company also provides (i) health care benefits to retired employees hired prior to April 1, 1991 who attained at least ten years of service and (ii) certain life insurance benefits to all retired employees. Accordingly, the Company accrues the cost of retiree health care and other benefits during the employee’s period of active service.

The components of net periodic benefit expense are as follows:

		Three months ended March 31,
		SERP and Directors' Plan								Other Benefits
		2007				2006				2007				2006
		(In thousands)
Service cost			313				345				44				49
Interest cost			240				200				132				124
Amortization of:
Transition obligation			—				—				50				50
Prior service cost			47				47				—				—
Net loss			40				81				—				24
Total net periodic benefit expense		$	640				673			$	226				247

		Nine months ended March 31,
		SERP and Directors’ Plan								Other Benefits
		2007				2006				2007				2006
		(In thousands)
Service cost			940				1,035				131				147
Interest cost			719				601				396				373
Amortization of:			—				—				—				—
Prior service cost			141				140				151				151
Net loss			119				244				—				70
Total net periodic benefit expense		$	1,919				2,020			$	678				741

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 2007.

The Company also maintains a defined benefit pension plan. Since it is a multiemployer plan, costs of the pension plan are based on contributions required to be made to the pension plan. We did not contribute to the defined benefit pension plan during the first nine months of fiscal year 2007. We anticipate contributing funds to the plan during fiscal 2007 to meet any minimum funding requirements.

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 at the December 31, 2006 rate.

9.     Stock Repurchase Program

On September 25, 2006, the Company announced that its Board of Directors authorized a stock repurchase plan to acquire up to 10% of its publicly-held outstanding shares of common stock, or 5,317,590 shares, commencing October 12, 2006. During the nine months ended March 31, 2007, the Company purchased 4,856,295 shares at a cost of $74.1 million, or approximately $15.25 per share. Under our stock repurchase program, shares of Investors Bancorp, Inc. common stock may be purchased in the open market and through other privately negotiated transactions, from time to time, depending on market conditions. Of the shares purchased, 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.

At its April 2007 meeting, the Board of Directors approved a second stock repurchase program which authorizes the repurchase of an additional 10% of the Company’s outstanding common stock. The newly approved stock repurchase program will commence immediately upon completion of the current program.

10.     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.” SFAS No. 155 allows an entity to re-measure at fair value a hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation from the host, if the holder irrevocably elects to account for the whole instrument on a fair value basis. Subsequent changes in the fair value would be recognized in earnings. SFAS No. 155 is effective for financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006,

with earlier adoption permitted. The Company does not expect that the adoption of SFAS No. 155 on July 1, 2007 will have a material impact on its financial statements.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” The Interpretation 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.” This Interpretation presents 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. The Interpretation is effective for fiscal years beginning after December 15, 2006. The Company does not expect that the adoption of Interpretation No. 48 on July 1, 2007 will have a material impact on its financial statements.

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 on July 1, 2008 will have a material impact on its financial statements.

In September 2006, FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” which requires employers to recognize on their balance sheets the funded status of pension and other postretirement benefit plans. For public companies, this requirement is effective as of the end of the first fiscal year ending after December 15, 2006 (as of June 30, 2007 for the Company). SFAS No. 158 will also require fiscal-year-end measurements of plan assets and benefit obligations, eliminating the use of earlier measurement dates currently permissible. The new measurement-date requirement will not be effective until fiscal years ending after December 15, 2008 (as of June 30, 2009 for the Company). SFAS No. 158 amends Statements 87, 88, 106 and 132R, but retains most of their measurement and disclosure guidance and will not change the amounts recognized in the statement of operations as net periodic benefit cost. The Company is evaluating the effect of SFAS No. 158 on its financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108), to address diversity in practice in quantifying financial statement misstatements. SAB 108 requires that registrants use a dual approach in quantifying misstatements based on their impact on the financial statements and related disclosures. SAB 108 is effective as of the end of the Company’s 2007 fiscal year, allowing a one-time transitional cumulative effect adjustment to retained earnings as of July 1, 2006 for misstatements (if any) that were not previously deemed material, but are material under the guidance in SAB 108. The Company does not expect the application of SAB 108 to 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 does not expect that the adoption of SFAS No. 159 on July 1, 2008 will have a material impact on its 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. (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, Inc. is a Delaware-chartered mid-tier stock holding company whose most significant business activity is operating Investors Savings Bank. Investors Savings Bank’s principal business is attracting retail deposits from the general public and investing those deposits, together with funds generated from operations (i.e. principal repayments on loans and securities and borrowed funds), primarily in one-to-four family, multi-family and commercial real estate mortgage loans and construction loans. Our results of operations depend primarily on our net interest income which is the difference between the interest we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our net interest income is primarily affected by the market interest rate environment, the shape of the U.S. Treasury yield curve, the timing of the placement of interest-earning assets and interest-bearing liabilities, and the prepayment rate on our mortgage-related assets. Other factors which may affect our results of operations are general and local economic and competitive conditions, government policies and actions of regulatory authorities.

Our business strategy is to operate a well-capitalized and profitable full service community bank dedicated to providing high quality customer service and competitive products to the communities we serve. In October 2003 our Board of Directors approved a change in our strategic direction from one focused on investing in securities, wholesale borrowings and high cost certificates of deposits, to one more focused on originating loans and attracting core deposits. We remain committed to this task of originating more loans and attracting more core deposits and expect to continue to change our asset composition by increasing residential and commercial real estate mortgage loans and building on the significant loan portfolio growth we have experienced since the latter part of 2003. We believe this strategy will enhance shareholder value while building a strong retail banking franchise.

The current interest rate environment continues to be difficult for most financial institutions and continues to have a significant impact on both our net interest spread and our net interest margin. Our net interest margin decreased to 1.64% and 1.62% for the three and nine month periods ended March 31, 2007, respectively, compared to 2.17% and 2.09% for the three and nine month periods ended March 31, 2006, respectively. Our net interest spread fell to 1.00% and 0.97% for the three and nine month periods ended March 31, 2007, respectively, compared to 1.64% and 1.71% for the three and nine month periods ended March 31, 2006, respectively.

Despite the difficult interest rate environment the Company continues toward its goal of reducing securities and wholesale borrowings while increasing loans and deposits. Net loans increased by $433.2 million, or 14.6%, to $3.39 billion at March 31, 2007 from $2.96 billion at June 30, 2006. Deposits increased $282.1 million, or 8.5%, from $3.30 billion at June 30, 2006 to $3.58 billion at March 31, 2007. Our securities portfolio decreased $437.3 million, or 19.1%, to $1.85 billion at March 31, 2007 compared to $2.29 billion at June 30, 2006. Borrowings decreased by $255.0 million, or 20.5%, compared to June 30, 2006.

During the quarter March 31, 2007, the Company also repurchased approximately 2.9 million shares of its common stock at an average price per share of $15.11 pursuant to its publicly announced repurchase plan of September 25, 2006. Under the current stock repurchase plan 461,000 shares remain available for repurchase. At its April 2007 meeting the Board of Directors of the Company approved a second share repurchase program which authorizes the repurchase of an additional 10% of the Company’s outstanding shares of common stock. We believe stock repurchases are a prudent and effective use of capital.

We anticipate that our strategy of adding more retail assets and liabilities to our balance sheet will help improve earnings when and if the yield curve assumes a more positive slope. In addition, we will continue to repurchase shares under our Board authorized share repurchase program as a means to manage our capital position as market conditions warrant.

There has been significant media attention recently about sub-prime lending and the effect this is having on those who originate and keep these loans in their loan portfolio as well as those who originate and sell these loans to the secondary market. Our Company maintains conservative loan underwriting standards to ensure credit risk remains low. While we are committed to growing our loan portfolio, it is important to note we do not originate or purchase and our loan portfolio does not include any sub-prime loans or option ARMs.

Two non–performing loans made to a New Jersey based developer are close to resolution. Both properties are under contract to be sold and we believe this will result in both loans being paid in full. While we are confident of a favorable resolution, we can not ensure a successful outcome

and therefore both loans will remain on non accrual status until the Company is paid in full. For a more detailed discussion see the Net Loans section in “Comparison of Financial Condition at March 31, 2007 and June 30, 2006.”

Comparison of Financial Condition at March 31, 2007 and June 30, 2006

Total Assets. Total assets decreased by $12.9 million, or 0.24%, to $5.48 billion at March 31, 2007 from $5.50 billion at June 30, 2006. This decrease was largely the result of a decrease in the securities portfolio substantially offset by the increase in our loan portfolio.

Securities. Securities, in the aggregate, decreased by $437.3 million, or 19.1%, to $1.85 billion at March 31, 2007, from $2.29 billion at June 30, 2006. During the quarter ended December 31, 2006 the Company sold approximately $187.7 million in bonds yielding 3.90%, representing 9% of the mortgage-backed securities portfolio, at a pretax loss of $3.7 million. The proceeds from the sale of these securities were used to reduce wholesale borrowings costing 5.35%. Additionally, the cash flows from repayments and maturities of our securities portfolio are being used to fund our loan growth. This is consistent with our strategic plan to change our mix of assets by reducing the size of our securities portfolio and increasing the size of our loan portfolio.

Our decision to sell securities during the quarter ended December 31, 2006 was based on an increase in our wholesale borrowing cost of funds, an increase in our wholesale borrowing balances, and the outlook that the Federal Reserve Board may not be lowering rates in the near future.

The securities we chose to sell had similar risk characteristics to those remaining in the portfolio. They were high quality mortgage backed securities guaranteed by agencies of the U.S. government or U.S. government sponsored enterprises, or are rated AAA by nationally recognized rating agencies. The losses incurred were attributable to changes in interest rates and not the credit quality of the issuers.

The critical considerations in selecting the securities to be sold were identifying an amount by which it was prudent and necessary to reduce wholesale borrowings and the optimum securities that would provide the funding to accomplish this reduction. The sold securities had lower yields than those remaining in the portfolio and were chosen to be sold because selling them would improve net interest income by eliminating the negative spread between the yield on the securities sold and the cost of the borrowings repaid. The larger difference in negative spread would allow us to earn back the loss incurred in the shortest period of time.

While the outlook for the interest rate environment also applies to the unsold portion of the portfolio, no conditions existed such as an adverse credit event in either the most current or prior quarters that affected the fair value of the securities and therefore would need to be considered in determining whether the impairments were other than temporary. The gross unrealized losses with respect to our mortgage-backed securities were caused by an increase in market yields attributed to the Federal Reserve’s action of increasing the Federal Funds rate seventeen times over a two year period. The cash flows of these investments are guaranteed by agencies of the U.S. government or U.S. government-sponsored enterprises, or from securities which are rated AAA by nationally recognized rating services. The Company is not in possession of any public or private information indicating a material deterioration in the credit quality of these

investments. As a result, the Company does not consider the remaining portfolio to be other than temporarily impaired. The Company has the ability and intent to hold the remaining securities until a recovery of fair value, which may be maturity. Our positive intent to hold the remaining available for sale securities until a recovery in fair value (which may be to maturity), is based on management’s ongoing consideration of the current interest rate environment, including the outlook with respect to changes in absolute rates and the yield curve, as well as our current and projected net interest income.

Net Loans. Net loans, including loans held for sale, increased by $433.2 million, or 14.6%, to $3.39 billion at March 31, 2007 from $2.96 billion at June 30, 2006. 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 do not originate or purchase and our loan portfolio does not include any sub-prime loans or option ARMs.

We originate residential mortgage loans directly and through our mortgage subsidiary, ISB Mortgage Co. During the nine months ended March 31, 2007 we originated $89.0 million in residential mortgage loans. In addition, we purchase mortgage loans from correspondent entities including other banks and mortgage bankers. Our agreements with these correspondent entities require them to originate loans that adhere to our underwriting standards. During the nine months ended March 31, 2007, we purchased loans totaling $335.2 million from these entities. We also purchase pools of mortgage loans in the secondary market on a “bulk purchase” basis from several well-established financial institutions. During the nine months ended March 31, 2007, we purchased loans totaling $163.8 million on a “bulk purchase” basis.

Additionally, for the nine months ended March 31, 2007, we originated $25.6 million in multi-family and commercial real estate loans and $70.8 million in construction loans. This is consistent with our strategy of originating multi-family, commercial real estate and construction loans 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 the borrower’s ability to repay the loan. The amount of interest-only one-to four-family mortgage loans at March 31, 2007 was $291.9 million compared to $266.5 million at June 30, 2006. The ability of borrowers’ to repay their obligations is 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 address the increased exposure to such risks and that adequate provisions for loan losses are provided for all known and inherent risks.

Total non-performing loans, defined as non-accruing loans, increased by $9.8 million to $13.1 million at March 31, 2007 from $3.3 million at June 30, 2006. This increase is primarily attributable to two residential construction loans to a New Jersey based developer. The developer’s legal entities supporting our loans declared bankruptcy. The Company’s rights to full repayment of principal and interest are preserved under applicable federal bankruptcy law, as the value of the Company’s interests in property of the debtors exceeds those amounts based on recent appraisals. On April 9, 2007, the Bankruptcy Court approved debtor sale transactions of property serving as collateral that shall provide for payment in full of the borrowers’ obligations to the Company.

Both properties are under contract to be sold for an aggregate amount of approximately $14.4 million of which the Company’s outstanding loan balance on both properties is approximately $8.3 million. The bankruptcy judge has ruled the Company will be paid in full when the properties are sold. Given the value of the contracts in place and the fact those contracts of sale were recently approved by the bankruptcy court, we believe there is a high probability the loans will be paid in full and the probability of loss is remote. While management is confident of a favorable resolution, it cannot ensure a successful outcome and therefore these loans remain on non-accrual status.

We do not believe the recent increase in our non performing loans is indicative of a negative credit risk trend in the Company’s construction loan portfolio. While there appears to have been some softening of the real estate market in general and we recognize construction lending carries a greater degree of risk than other types of lending, we believe our underwriting policies and standards have been crafted in a manner that attempts to protect the Company from risk of loss.

There are no loans, other than those on non-accrual status, for which the Company has known information about credit problems that may cause management to have serious doubts as to the repayment ability of the borrowers.

The ratio of non-performing loans to total loans was 0.33% at March 31, 2007 compared with 0.11% at June 30, 2006. The allowance for loan losses as a percentage of non-performing loans was 59.92% at March 31, 2007 compared with 192.18% at June 30, 2006. At March 31, 2007 our allowance for loan losses as a percentage of total loans was 0.20% compared with 0.22% at June 30, 2006.

We believe our allowance for loan losses is adequate based on the overall growth in our loan portfolio, the current level of loan charge-offs, the stability of the New Jersey real estate market in general, and the performance and stability of our loan portfolio.

Although we believe we have established and maintained an adequate level of allowance for loan losses, additions may be necessary if future economic conditions differ substantially from the current operating environment. 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 increased by $8.6 million to $36.8 million at March 31, 2007 from $28.2 million at June 30, 2006. This increase is primarily the result of a reversal of a substantial portion of the previously established deferred tax asset valuation allowance.

The Company recognizes deferred tax assets equal to the amount of tax benefits that management believes is more likely than not to be realized. A valuation allowance is recorded when it is more likely than not that some portion or all or the Company’s deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient future taxable income of the appropriate character in the appropriate corporate entity and taxing jurisdiction. Quarterly the Company evaluates its tax posture and strategies to determine the appropriateness of the valuation allowance.

At June 30, 2006, the Company had a valuation allowance related to the deferred tax assets recorded for: state net operating loss carryforwards; the state minimum tax assessment; capital loss carry forwards; and the charitable contribution made to the Investors Savings Bank Charitable Foundation. The state net operating loss carry forwards and minimum tax assessment arose as a result of our REIT which was formed in 1997. Due to recently passed legislation in the State of New Jersey, we have decided to discontinue the operations of the REIT and transfer the REIT’s assets to the Bank. There was also a valuation allowance on our deferred tax assets relating to the capital losses incurred and carried forward on the sale of certain equity securities in March 2005. Additionally, we had a valuation allowance for the deferred tax asset relating to our contribution to the Investors Savings Bank Charitable Foundation.

During the three months ended December 31, 2006, the Company performed an assessment of its ability to realize the deferred tax assets and concluded that, based on current facts and circumstances, portions of the associated valuation allowance were no longer necessary. Those facts and circumstances include but are 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 discontinuation of our REIT’s operations. As a result, the Company recognized a deferred tax benefit of $10.7 million during the quarter ended December 31, 2006. The benefit includes the recognition of the benefits from state net operating loss carry forwards and minimum tax assessment ($11.8 million) and a portion of the capital losses on equity securities ($163,000). This was partially offset by an additional valuation allowance on the contribution to the foundation ($1.2 million). There was no change during the quarter ended March 31, 2007.

Bank Owned Life Insurance, Stock in the Federal Home Loan Bank and Other Assets. Bank owned life insurance increased by $8.2 million from $78.9 million at June 30, 2006 to $87.1 million at March 31, 2007. This increase was primarily due to adoption of a new accounting principle related to bank owned life insurance. There was also an increase in accrued interest receivable of $2.8 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) decreased by $12.6 million from $46.1 million at June 30, 2006 to $33.5 million at March 31, 2007 as a result of a decrease in our level of borrowings at March 31, 2007.

Deposits. Deposits increased by $282.1 million, or 8.5%, to $3.58 billion at March 31, 2007 from $3.30 billion at June 30, 2006. The increase was due primarily to a $255.2 million increase in certificates of deposits. Savings account deposits also increased by $69.0 million. This can be attributed to the introduction of a High Yield Savings product. This was partially offset by a $43.9 million decrease in money market account deposits.

Borrowed Funds. Borrowed funds decreased $255.0 million, or 20.5%, to $990.7 million at March 31, 2007 from $1.25 billion at June 30, 2006. This decrease in borrowed funds is the

result of utilizing the proceeds from the securities sale and the increase in deposits to repay higher costing borrowed funds.

Stockholders’ Equity. Stockholders’ equity decreased $36.0 million to $864.2 million at March 31, 2007 from $900.2 million at June 30, 2006. A number of significant transactions impacted our stockholders’ equity: the repurchase of our common stock totaling $74.1 million; a $5.6 million increase in retained earnings due to the adoption of a new accounting principle related to bank owned life insurance; an increase of $5.0 million attributable to the recognition of ESOP and stock-based awards expense; a decrease of $8.2 million in accumulated other comprehensive loss; and net income of $19.4 million for the nine months ended March 31, 2007.

On September 25, 2006 the Company announced its first share repurchase program and authorized the repurchase of up to 10% of its publicly-held outstanding shares of common stock, or approximately 5.3 million shares, commencing October 12, 2006. During the nine month period ended March 31, 2007, the Company repurchased 4.9 million shares of its common stock at an average cost of $15.25 per share. Under the current share repurchase program, 461,000 shares remain available for repurchase. At its April 2007 meeting, the Board of Directors approved a second share repurchase program which authorizes the repurchase of an additional 10% of the Company’s outstanding common stock. The newly approved stock repurchase program will commence immediately upon completion of the current program.

Average Balance Sheets for the Three and Nine Months ended March 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 nine months ended March 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
		March 31, 2007												March 31, 2006
		Average												Average
		Outstanding				Interest				Average				Outstanding				Interest				Average
		Balance				Earned/Paid				Yield/Rate				Balance				Earned/Paid				Yield/Rate
		(Dollars in thousands)
Interest-earning assets:
Due from banks		$	18,317			$	154				3.36	%		$	21,399			$	184				3.44	%
Securities available-for-sale			318,611				3,643				4.57	%			590,557				6,309				4.27	%
Securities held-to-maturity			1,573,901				18,835				4.79	%			1,855,879				21,475				4.63	%
Net loans			3,313,269				45,868				5.54	%			2,526,027				33,177				5.25	%
Stock in FHLB			35,541				798				8.98	%			54,265				756				5.57	%
Total interest-earning assets			5,259,639				69,298				5.27	%			5,048,127				61,901				4.90	%
Non-interest earning assets			173,157												136,258
Total assets		$	5,432,796											$	5,184,385
Interest-bearing liabilities:
Savings		$	275,530				1,306				1.90	%		$	242,607				500				0.82	%
Interest-bearing checking			303,904				1,817				2.39	%			310,379				1,562				2.01	%
Money market accounts			174,671				856				1.96	%			234,939				770				1.31	%
Certificates of deposit			2,711,528				31,694				4.68	%			2,449,034				21,511				3.51	%
Borrowed funds			1,003,698				11,995				4.78	%			1,000,433				10,187				4.07	%
Total interest-bearing liabilities			4,469,331				47,668				4.27	%			4,237,392				34,530				3.26	%
Non-interest bearing liabilities			83,284												62,264
Total liabilities			4,552,615												4,299,656
Stockholders’ equity			880,181												884,729
Total liabilities and stockholders’ equity		$	5,432,796											$	5,184,385
Net interest income						$	21,630											$	27,371
Net interest rate spread											1.00	%											1.64	%
Net interest earning assets		$	790,308											$	810,735
Net interest margin											1.64	%											2.17	%
Ratio of interest-earning assets to total interest- bearing liabilities			1.18X												1.19X

		For Nine Months Ended
		March 31, 2007												March 31, 2006
		Average												Average
		Outstanding				Interest				Average				Outstanding				Interest				Average
		Balance				Earned/Paid				Yield/Rate				Balance				Earned/Paid				Yield/Rate
		(Dollars in thousands)
Interest-earning assets:
Due from banks		$	20,346			$	545				3.57	%		$	103,433			$	2,675				3.45	%
Repurchase agreements			0				0				—				21,849				613				3.74	%
Securities available-for-sale			441,337				14,541				4.39	%			624,285				19,809				4.23	%
Securities held-to-maturity			1,650,542				59,062				4.77	%			1,974,576				66,129				4.47	%
Net loans			3,204,120				131,906				5.49	%			2,310,207				89,553				5.17	%
Stock in FHLB			42,903				2,248				6.99	%			56,909				2,247				5.26	%
Total interest-earning assets			5,359,248				208,302				5.18	%			5,091,259				181,026				4.74	%
Non-interest earning assets			159,065												135,903
Total assets		$	5,518,313											$	5,227,162
Interest-bearing liabilities:
Savings		$	247,467			$	2,740				1.48	%		$	363,670				2,335				0.86	%
Interest-bearing checking			303,209				5,452				2.40	%			301,786				4,206				1.86	%
Money market accounts			189,401				2,658				1.87	%			269,985				2,697				1.33	%
Certificates of deposit			2,633,313				89,617				4.54	%			2,418,144				59,876				3.30	%
Borrowed funds			1,165,815				42,744				4.89	%			1,108,272				32,246				3.88	%
Total interest-bearing liabilities			4,539,205				143,211				4.21	%			4,461,857				101,360				3.03	%
Non-interest bearing liabilities			83,321												60,610
Total liabilities			4,622,526												4,522,467
Stockholders’ equity			895,787												704,695
Total liabilities and stockholders’ equity		$	5,518,313											$	5,227,162
Net interest income						$	65,091											$	79,666
Net interest rate spread											0.97	%											1.71	%
Net interest earning assets		$	820,043											$	629,402
Net interest margin											1.62	%											2.09	%
Ratio of interest-earning assets to total interest- bearing liabilities			1.18X												1.14X