Investors Bancorp, Inc. (NASDAQ: ISBC), the holding company for Investors Bank, reported net income of $44.4 million, or $0.15 per diluted share, for the three months ended June 30, 2016, compared to $43.6 million, or $0.14 per diluted share for the three months ended March 31, 2016, and $46.4 million, or $0.14 per diluted share for the three months ended June 30, 2015.

For the six months ended June 30, 2016, net income totaled $88.0 million, or $0.29 per diluted share, compared to $88.3 million, or $0.26 for the six months ended June 30, 2015.

Kevin Cummings, President and CEO commented, "Investors' results for the second quarter were strong, highlighted by earnings per share growth and improving asset quality trends. We remain mindful of cost control as we continue to grow and enhance our infrastructure."

The Company announced today that its Board of Directors declared a cash dividend of $0.06 per share to be paid on August 25, 2016 for stockholders of record as of August 10, 2016, representing a 40% payout ratio for the three months ended June 30, 2016.

Performance Highlights

• Total assets increased $528.3 million, or 2% to $21.72 billion at June 30, 2016, from $21.19 billion atMarch 31, 2016.
• Net loans increased $488.1 million, or 3%, to $17.41 billion at June 30, 2016 from $16.92 billion at March 31, 2016. During the three months ended June 30, 2016, we originated $639.0 million in multi-family loans, $288.5 million in commercial and industrial loans, $144.4 million in construction loans, $131.7 million in residential loans, $122.9 million in commercial real estate loans and $110.1 million in consumer and other loans.
• Deposits increased by $224.5 million, or 2% from $14.20 billion at March 31, 2016 to $14.43 billion atJune 30, 2016. Core deposit accounts (savings, checking and money market) represent approximately 78% of total deposits as of June 30, 2016.
• Net interest margin for the three months ended June 30, 2016 was 3.04%, which was a 1 basis point decrease compared to the three months ended March 31, 2016 and a 10 basis point decrease compared to the three months ended June 30, 2015.
• For the three months ended June 30, 2016, the Company repurchased 10.7 million shares of its outstanding common stock for approximately $123.6 million. As of June 30, 2016, the Company has approximately 30 million shares remaining under its current repurchase plan.
• On May 3, 2016, the Company announced the signing of a definitive merger agreement with The Bank ofPrinceton, which operates 13 branches primarily in the greater Princeton, NJ area and in Philadelphia, PA. As of March 31, 2016, The Bank of Princeton had assets of $1.0 billion, loans of $842 million and deposits of $820 million. Consideration will be paid to The Bank of Princeton stockholders in a combination of stock and cash valued at the time of announcement of approximately $154 million.

Financial Performance Overview - Second Quarter 2016

For the second quarter of 2016, net income totaled $44.4 million, an increase of $729,000 as compared to the first quarter of 2016 and a decrease of $2.0 million as compared to the second quarter of 2015. The changes in net income on both a sequential and year over year quarter basis are the result of the following:

Net interest income increased by $2.7 million, or 1.8% as compared to the first quarter of 2016 due to:

• An increase in interest and dividend income of $2.9 million, or 1.5% to $195.0 million as compared to the first quarter of 2016 primarily attributed to commercial loan growth, offset by a decrease of 2 basis points on the weighted average loan yield to 4.10%.
• Prepayment penalties, which are included in interest income, totaled $5.9 million for the three months ended June 30, 2016 compared to $4.7 million for the three months ended March 31, 2016.
• An increase in total interest expense of $111,000 was primarily attributed to an increase in interest expense on borrowed funds of $248,000 to $17.1 million, or 1%, partially offset by a decrease of 1 basis point to 0.66% on the weighted average cost of interest-bearing deposits for the three months endedJune 30, 2016.

The net interest margin decreased 1 basis point to 3.04% for the three months ended June 30, 2016 from 3.05% for the three months ended March 31, 2016.

On a year over year basis, net interest income increased by $8.8 million, or 5.9% in the second quarter of 2016, as compared to the second quarter of 2015 due to:

• An increase in interest and dividend income of $13.4 million, or 7.4% to $195.0 million as a result of a$1.53 billion increase in the average balance of net loans, partially offset by the weighted average yield on net loans decreasing 13 basis points to 4.10%.
• Prepayment penalties, which are included in interest income, totaled $5.9 million for the three months ended June 30, 2016 and $5.6 million for the three months ended June 30, 2015.
• An increase in total interest expense of $4.7 million was primarily attributed to an increase in the average balance of total interest-bearing deposits of $1.21 billion, or 10.8% to $12.40 billion for the three months ended June 30, 2016. In addition, the weighted average cost of interest-bearing deposits increased 7 basis points to 0.66% for the three months ended June 30, 2016.

The net interest margin decreased 10 basis points year over year to 3.04% for the three months ended June 30, 2016 from 3.14% for the three months ended June 30, 2015.

Total non-interest income was $11.5 million for the three months ended June 30, 2016, an increase of $2.8 million, or 31.7% as compared to the first quarter of 2016. Gain on loans increased $1.2 million primarily as a result of loan sales through our mortgage subsidiary as well as the Bank. Other income increased $708,000attributed to non-depository investment products and gain on securities transactions increased $252,000primarily due to the sale of $37.4 million of securities resulting in a gain of $1.6 million. During the first quarter of 2016, gain on securities transactions totaled $1.4 million.

Compared to the second quarter of 2015, total non-interest income decreased $116,000, or 1.0% year over year. Gain on loans decreased $1.4 million for the three months ended June 30, 2016 primarily as a result of lower loan sales through our mortgage subsidiary as well as the Bank. This decrease was offset by a $1.6 million gain on securities transactions for the three months ended June 30, 2016 primarily due to the sale of$37.4 million of securities.

Total non-interest expenses was $91.0 million for the three months ended June 30, 2016, an increase of $3.9 million, or 4.4% as compared to the first quarter of 2016. Compensation and fringe benefits increased $1.8 million caused by higher staffing levels to support our continued growth and infrastructure. Other increases were related to professional fees and advertising and promotional expense of $794,000 and $757,000, respectively.

Compared to the second quarter of 2015, total non-interest expenses increased $11.2 million, or 14.0% year over year. Compensation and fringe benefits increased $8.3 million for the three months ended June 30, 2016 primarily due to equity incentive expense of $5.4 million for the three months ended June 30, 2016, resulting from the restricted stock and stock option grants on June 23, 2015 to certain employees, officers and directors of the Company, pursuant to the Investors Bancorp, Inc. 2015 Equity Incentive Plan; normal merit increases; and additions to our staff to support continued growth and infrastructure. Office occupancy and equipment expense increased $1.7 million for the three months ended June 30, 2016 primarily due to new branch openings.

Income tax expense was $28.4 million for the three months ended June 30, 2016 and $27.5 million for the three months ended March 31, 2016, representing an effective tax rate of 39.0% and 38.7%, respectively. Income tax expense was $26.9 million for the three months ended June 30, 2015, representing an effective tax rate of 36.8% which includes a tax benefit realized from revaluing the Company's deferred tax asset related to changes in New York City tax law. Absent this benefit, the tax rate for the three months ended June 30, 2015would have been 38.3%.

Financial Performance Overview- Six Months of 2016

Net income decreased by $328,000, year over year to $88.0 million for the six months ended June 30, 2016. The changes in net income for the six months ended year over year are the result of the following:

• Total interest and dividend income increased by $30.4 million, or 8.5% to $387.1 million for the six months ended June 30, 2016 as compared to the six months of 2015 primarily attributed to growth in the commercial loan portfolio. This increase was offset by a decrease of 12 basis points to the weighted average yield on net loans to 4.11%.
• Prepayment penalties, which are included in interest income, totaled $10.6 million for the six months ended June 30, 2016 compared to $10.2 million for the six months ended June 30, 2015.
• Total interest expense increased by $11.5 million or 18.1% to $75.2 million for the six months ended June 30, 2016 as compared to the six months of 2015. The average balance of total interest-bearing deposits increased $1.26 billion, or 11.3% to $12.37 billion for the six months ended June 30, 2016. In addition, the weighted average cost of interest-bearing deposits increased 9 basis points to 0.67% for the six months ended June 30, 2016.
• Net interest margin decreased 11 basis points as compared to the six months of 2015 to 3.05% for the six months ended June 30, 2016.

Total non-interest income was $20.2 million for the six months ended June 30, 2016, an increase of $59,000, or 0.3% as compared to the six months of 2015. Gain on securities transactions increased $2.9 million for the six months ended June 30, 2016 primarily due to the sale of securities totaling $69.1 million, resulting in a gain of$3.0 million. This increase was offset by a decrease in gain on loans of $2.2 million for the six months ended June 30, 2016 primarily as a result of lower loan sales through our mortgage subsidiary as well as the Bank. Other income decreased $729,000 for the six months ended June 30, 2016 attributed to non-depository investment products.

Total non-interest expense was $178.2 million for the six months ended June 30, 2016, an increase of $21.4 million, or 13.7% as compared to the six months of 2015. Compensation and fringe benefits increased $16.7 million for the six months ended June 30, 2016 primarily due to equity incentive expense of $9.7 million for the six months ended June 30, 2016 resulting from the restricted stock and stock option grants on June 23, 2015 to certain employees, officers and directors of the Company, pursuant to the Investors Bancorp, Inc. 2015 Equity Incentive Plan; normal merit increases; and additions to our staff to support continued growth. Office occupancy and equipment expense increased $3.0 million for the six months ended June 30, 2016 primarily due to new branch openings. Professional fees and other operating expenses increased $1.1 million and $1.3 million, respectively for the six months ended June 30, 2016.

Income tax expense was $55.9 million for the six months ended June 30, 2016 compared to $52.1 million for the six months ended June 30, 2015, representing an effective tax rate of 38.9% and 37.1%, respectively. The tax rate for the six months ended June 30, 2015 includes a tax benefit realized from revaluing the Company's deferred tax asset related to changes in New York City tax law. Absent this benefit, the tax rate for the six months ended June 30, 2015 would have been 37.9%.

Asset Quality

Our provision for loan losses was $5.0 million for the three months ended June 30, 2016 and first quarter of 2016. For the three months ended June 30, 2015 our provision for loan loss was $7.0 million. For the three months ended June 30, 2016, net charge-offs were $1.3 million compared to $6.9 million for the first quarter of 2016 and $1.2 million for the three months ended June 30, 2015. For the six months ended June 30, 2016 our provision for loan loss was $10.0 million compared with $16.0 million for the six months June 30, 2015. For the six months ended June 30, 2016, net charge-offs were $8.2 million compared to $2.3 million for the the six months June 30, 2015.

About the Company

Investors Bancorp, Inc. is the holding company for Investors Bank, which as of June 30, 2016 operates from its corporate headquarters in Short Hills, New Jersey and 146 branches located throughout New Jersey and New York.