ISBC 2017 Form 10-K & 2018 Proxy Statement

FORM 10-K INVESTORS BANCORP, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements The following table presents the reconciliation between the actual income tax expense and the “expected” amount computed using the applicable statutory federal income tax rate of 35%: Years Ended December 31, 2017 2016 2015 (In thousands) “Expected” federal income tax expense $ 98,206 104,675 98,307 State tax, net 6,051 9,887 4,753 Impact of tax reform 49,164 — — Bank owned life insurance (1,310) (1,548) (1,382) Excess tax benefits from employee share-based payments (1,722) (7,735) — Acquisition related net operating loss — — (4,076) ESOP fair market value adjustment 1,237 931 947 Non-deductible compensation 1,451 1,602 276 Expiration of stock options — — 19 Other 768 (865) 528 Total income tax expense $153,845 106,947 99,372 The temporary differences and loss carryforwards which comprise the deferred tax asset and liability are as follows: December 31, 2017 2016 (In thousands) Deferred tax asset: Employee benefits $ 21,201 34,218 Deferred compensation 994 1,596 Premises and equipment — 1,587 Allowance for loan losses 67,307 92,738 Net unrealized loss on securities 12,542 17,078 Net other than temporary impairment loss on securities — 40,228 ESOP 3,518 4,333 Allowance for delinquent interest 283 14,539 Fair value adjustments related to acquisitions 12,750 20,823 Charitable contribution carryforward 720 406 Loan origination costs 7,964 9,599 Intangible assets — — State NOL 3,996 — Other 1,720 1,305 Gross deferred tax asset 132,995 238,450 Valuation allowance (284) (346) 132,711 238,104 Deferred tax liability: Intangible assets 71 363 Discount accretion — 4,080 Mortgage servicing rights 4,039 6,257 Premises and equipment 1,664 — Net unrealized gain on hedging activities 5,274 5,127 Gross deferred tax liability 11,048 15,827 Net deferred tax asset $121,663 222,277 112