ISBC 2017 Form 10-K & 2018 Proxy Statement

FORM 10-K INVESTORS BANCORP, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 2016 Less than 12 months 12 months or more Total Estimated fair value Unrealized losses Estimated fair value Unrealized losses Estimated fair value Unrealized losses (In thousands) Available-for-sale: Equity Securities $ 4,722 83 — — 4,722 83 Mortgage-backed securities: Federal Home Loan Mortgage Corporation 406,878 7,220 12,756 86 419,634 7,306 Federal National Mortgage Association 762,272 15,977 25,089 497 787,361 16,474 Government National Mortgage Association 46,747 791 — — 46,747 791 Total mortgage-backed securities available-for-sale 1,215,897 23,988 37,845 583 1,253,742 24,571 Total available-for-sale securities 1,220,619 24,071 37,845 583 1,258,464 24,654 Held-to-maturity: Mortgage-backed securities: Federal Home Loan Mortgage Corporation 339,666 3,354 3,623 148 343,289 3,502 Federal National Mortgage Association 970,194 15,389 — — 970,194 15,389 Total held-to-maturity securities $1,309,860 18,743 3,623 148 1,313,483 18,891 Total $2,530,479 42,814 41,468 731 2,571,947 43,545 At December 31, 2017, the majority of gross unrealized losses primarily relate to our mortgage-backed- security portfolio which is comprised of securities issued by U.S. Government Sponsored Enterprises. The fair values of these securities have been negatively impacted by the recent increase in intermediate-term market interest rates. Other-Than-Temporary Impairment (“OTTI”) We conduct a quarterly review and evaluation of the securities 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. If a determination is made that a debt security is other-than-temporarily impaired, the Company will estimate the amount of the unrealized loss that is attributable to credit and all other non-credit related factors. The credit related component will be recognized as an other-than-temporary impairment charge in non-interest income. The non-credit related component will be recorded as an adjustment to accumulated other comprehensive income (loss), net of tax. With the assistance of a valuation specialist, we evaluate the credit and performance of each issuer underlying our pooled trust preferred securities. Cash flows for each security are forecasted using assumptions for defaults, recoveries, pre-payments and amortization. At December 31, 2017, 2016 and 2015 management deemed that the present value of projected cash flows for each security was greater than the book value and did not recognize any additional OTTI charges for the years ended December 31, 2017, 2016 and 2015. At 94