ISBC 2017 Form 10-K & 2018 Proxy Statement

FORM 10-K INVESTORS BANCORP, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements Fair Values of Derivative Instruments on the Balance Sheet The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016: Asset Derivatives Liability Derivatives At December 31, 2017 (1) At December 31, 2016 At December 31, 2017 (1) At December 31, 2016 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Balance Sheet Location Fair Value Balance Sheet Location Fair Value (In thousands) Derivatives designated as hedging instruments: Interest Rate Swaps Other assets $— Other assets $12,550 Other liabilities $613 Other liabilities $— Total derivatives designated as hedging instruments $— $12,550 $613 $— (1) In accordance with the Chicago Mercantile Exchange (“CME”) rulebook changes effective January 3, 2017, the fair value is inclusive of accrued interest and variation margin posted by the CME. The CME amended their rules to legally characterize the variation margin posted between counterparties to be classified as settlements of the outstanding derivative contracts instead of cash collateral. The Company adopted the new rule on a prospective basis to include the accrued interest and variation margin posted by the CME in the fair value. Effect of Derivative Instruments on the Income Statement The following table presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income as of December 31, 2017 and 2016. Twelve Months Ended December 31, 2017 2016 (In thousands) Cash Flow Hedges — Interest rate swaps Amount of gain recognized in other comprehensive income (loss) $ 2,049 $12,110 Amount of (loss) reclassified from accumulated other comprehensive income (loss) to interest expense (4,160) $ (440) Amount of gain (loss) recognized in other non- interest income (ineffective portion) — — Offsetting Derivatives The following table presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives in the Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016. The net amounts of derivative liabilities and assets can be reconciled to the tabular disclosure of the fair value hierarchy, see Footnote 13, Fair Value Measurements. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Company’s Consolidated Balance Sheets. 122