ISBC 2017 Form 10-K & 2018 Proxy Statement

FORM 10-K In connection with the Company’s second step conversion, a $20.0 million charitable contribution was made to the Investors Charitable Foundation, $10.0 million of which was made by Investors Bank and the remaining $10.0 million by Investors Bancorp, Inc. For Investors Bancorp, Inc., the excess contribution over the allowable deduction limit for the standalone entity may be carried forward to the succeeding 5 taxable years. Based on the entity’s standalone future state taxable income, a valuation allowance was established for the portion of the state tax benefit related to the contribution that is not more likely than not to be realized. New York State Taxation. The New York State corporate franchise tax is based on the combined entire net income of the Company and its affiliates allocable and apportionable to New York State and taxed at a rate of 6.5%. The amount of revenues that are sourced to New York State under the new legislation can be expected to fluctuate over time. In addition, the Company and its affiliates are subject to the Metropolitan Transportation Authority (“MTA”) Surcharge allocable to business activities carried on in the Metropolitan Commuter Transportation District. The MTA surcharge for 2017 was 28.3% of a recomputed New York State franchise tax, calculated using a 6.5% tax rate on allocated and apportioned entire net income. Investors Bank is currently under audit with respect to its New York State combined franchise tax return for tax years 2013 and 2014. On December 22, 2017, the President signed into law the Tax Act. Since the starting point for computing entire net income, the primary base of the New York general corporation franchise tax, is federal taxable income, the federal concepts of income and deductions which apply for New York franchise tax purposes, subject to statutory additions, subtractions and modifications, continue to apply in the same manner as prior to the enactment of the new legislation. New York City Taxation. The Company and its affiliates are subject to the combined corporate tax for New York City calculated on a similar basis as the New York State franchise tax, subject to the New York City apportionment rules. While the majority of the Company’s entire net income is derived from outside of the New York City jurisdiction, the sourcing rules enacted by the 2015 tax law provisions have increased the income apportioned to New York City and in turn, caused an increase to our effective tax rate. Pennsylvania Taxation. Considered a mutual thrift institution conducting business in Pennsylvania, Investors Bank is subject to the mutual thrift institutions tax. The mutual thrift institutions tax is imposed at the rate of 11.5% on apportionable net taxable income and is required to be reported and filed on the annual Net Income Tax Report. Mutual thrift institutions are exempt from all other Pennsylvania corporate taxes. Delaware State Taxation. As a Delaware holding company not earning income in Delaware, Investors Bancorp, Inc. is exempted from Delaware corporate income tax but is required to file annual returns and pay annual fees and an annual franchise tax to the State of Delaware. ITEM 1A. RISK FACTORS The risks set forth below, in addition to the other risks described in this Annual Report on Form 10-K, may adversely affect our business, financial condition and operating results. In addition to the risks set forth below and the other risks described in this annual report, there may also be additional risks and uncertainties that are not currently known to us or that we currently deem to be immaterial that could materially and adversely affect our business, financial condition or operating results. As a result, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. Further, to the extent that any of the information contained in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause our actual results to differ materially from those expressed in any forward- looking statements made by or on behalf of us. 37