ISBC 2017 Form 10-K & 2018 Proxy Statement

FORM 10-K Allocation of Allowance for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories. December 31, 2017 2016 2015 2014 2013 Allowance for Loan Losses Percent of Loans in Each Category to Total Loans Allowance for Loan Losses Percent of Loans in Each Category to Total Loans Allowance for Loan Losses Percent of Loans in Each Category to Total Loans Allowance for Loan Losses Percent of Loans in Each Category to Total Loans Allowance for Loan Losses Percent of Loans in Each Category to Total Loans (Dollars in thousands) End of period allocated to: Multi-family loans $ 81,469 38.9% $ 95,561 39.6% $ 88,223 37.0% $ 71,147 33.4% $ 42,103 30.5% Commercial real estate loans 56,137 22.6 52,796 23.7 46,999 22.7 44,030 20.8 46,657 19.2 Commercial and industrial loans 54,563 8.1 43,492 6.8 40,585 6.2 20,759 3.6 9,273 2.1 Construction loans 11,609 2.1 11,653 1.7 6,794 1.3 6,488 1.0 8,947 1.6 Residential mortgage loans 21,835 25.0 19,831 25.0 31,443 29.8 47,936 38.2 51,760 43.6 Consumer and other loans 3,099 3.3 2,850 3.2 3,155 2.9 3,347 2.9 2,161 3.1 Unallocated 2,257 2,190 1,306 6,577 13,027 Total allowance $230,969 100.0% $228,373 100.0% $218,505 100.0% $200,284 100.0% $173,928 100.0% Security Investments The Board of Directors has adopted our Investment Policy. This policy determines the types of securities in which we may invest. The Investment Policy is reviewed annually by management and changes to the policy are recommended to and subject to approval by the Board of Directors. The Board of Directors delegates operational responsibility for the implementation of the Investment Policy to the Asset Liability Committee, which is primarily comprised of senior officers. While general investment strategies are developed by the Asset Liability Committee, the execution of specific actions rests primarily with our Treasurer. The Treasurer is responsible for ensuring the guidelines and requirements included in the Investment Policy are followed and all securities are considered prudent for investment. Investment transactions are reviewed and ratified by the Board of Directors at their regularly scheduled meetings. Our Investment Policy requires that investment transactions conform to Federal and New Jersey State investment regulations. Our investments purchased may include, but are not limited to, U.S. Treasury obligations, securities issued by various Federal Agencies, State and Municipal subdivisions, mortgage-backed securities, certain certificates of deposit of insured financial institutions, overnight and short-term loans to other banks, investment grade corporate debt instruments, and mutual funds. In addition, Investors Bancorp may invest in equity securities subject to certain limitations. The Investment Policy requires that securities transactions be conducted in a safe and sound manner. Purchase and sale decisions are based upon a thorough pre-purchase analysis of each security to determine it conforms to our overall asset/liability management objectives. The analysis must consider its effect on our risk- based capital measurement, prospects for yield and/or appreciation and other risk factors. In December 2013, regulatory agencies adopted a rule on the treatment of certain collateralized debt obligations backed by trust preferred securities to implement sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd- Frank Act”), known as the Volcker Rule. At December 31, 2017, none of our securities were deemed to be a covered fund under the Volcker Rule. 15