ISBC 2017 Form 10-K & 2018 Proxy Statement

FORM 10-K As of December 31, 2017, the Bank and the Company were considered “well capitalized” under applicable regulations and exceeded all regulatory capital requirements as follows: As of December 31, 2017 (1) Actual Minimum Capital Requirement To be Well Capitalized under Prompt Corrective Action Provisions (2) Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) Bank: Tier 1 Leverage Ratio $2,732,757 11.00% $ 993,750 4.00% $1,242,188 5.00% Common Equity Tier 1 Risk-Based Capital 2,732,757 13.94% 1,127,081 5.75% 1,274,092 6.50% Tier 1 Risk-Based Capital 2,732,757 13.94% 1,421,102 7.25% 1,568,113 8.00% Total Risk-Based Capital 2,964,721 15.13% 1,813,131 9.25% 1,960,141 10.00% Investors Bancorp, Inc.: Tier 1 Leverage Ratio $3,072,783 12.36% $ 994,164 4.00% n/a n/a Common Equity Tier 1 Risk-Based Capital 3,072,783 15.67% 1,127,662 5.75% n/a n/a Tier 1 Risk-Based Capital 3,072,783 15.67% 1,421,835 7.25% n/a n/a Total Risk-Based Capital 3,304,747 16.85% 1,814,066 9.25% n/a n/a (1) For purposes of calculating Tier 1 leverage ratio, assets are based on adjusted total average assets. In calculating Tier 1 risk-based capital and Total risk-based capital, assets are based on total risk-weighted assets. (2) Prompt corrective action provisions do not apply to the bank holding company. Activity Restrictions on State-Chartered Banks. Federal law and FDIC regulations generally limit the activities and investments of state-chartered FDIC insured banks and their subsidiaries to those permissible for national banks and their subsidiaries, unless such activities and investments are specifically exempted by law or consented to by the FDIC. Before making a new investment or engaging in a new activity that is not permissible for a national bank or otherwise permissible under federal law or FDIC regulations, an insured bank must seek approval from the FDIC to make such investment or engage in such activity. The FDIC will not approve the activity unless the bank meets its minimum capital requirements and the FDIC determines that the activity does not present a significant risk to the FDIC insurance funds. Certain activities of subsidiaries that are engaged in activities permitted for national banks only through a “financial subsidiary” are subject to additional restrictions. Federal law permits a state-chartered savings bank to engage, through financial subsidiaries, in any activity in which a national bank may engage through a financial subsidiary and on substantially the same terms and conditions. In general, the law permits a national bank that is well-capitalized and well-managed to conduct, through a financial subsidiary, any activity permitted for a financial holding company other than insurance underwriting, insurance investments or real estate development or merchant banking. The total assets of all such financial subsidiaries may not exceed the lesser of 45% of the bank’s total assets or $50 billion. The bank must have policies and procedures to assess the financial subsidiary’s risk and protect the bank from such risk and potential liability, must not consolidate the financial subsidiary’s assets with the bank’s and must exclude from its own assets and equity all equity investments, including retained earnings, in the financial subsidiary. State- chartered savings banks may retain subsidiaries in existence as of March 11, 2000 and may engage in activities that are not authorized under federal law. Although Investors Bank meets all conditions necessary to establish and engage in permitted activities through financial subsidiaries, it has not chosen to engage in such activities. Federal Home Loan Bank System. Investors Bank is a member of the Federal Home Loan Bank system, which consists of the regional Federal Home Loan Banks, each subject to supervision and regulation by the 27