ISBC 2017 Form 10-K & 2018 Proxy Statement

FORM 10-K Deposits. At December 31, 2017, deposits totaled $17.36 billion, representing 78.9% of our total liabilities. Our deposit strategy is focused on attracting core deposits (savings, checking and money market accounts), resulting in a deposit mix of lower cost core products. We remain committed to our plan of attracting more core deposits because core deposits represent a more stable source of low cost funds and may be less sensitive to changes in market interest rates. Deposits increased by $2.08 billion, or 13.6%, from $15.28 billion at December 31, 2016 to $17.36 billion at December 31, 2017. Total checking accounts increased $1.24 billion to $7.33 billion at December 31, 2017 from $6.09 billion at December 31, 2016. At December 31, 2017, we held $13.90 billion in core deposits, representing 80.1% of total deposits, of which $709.7 million are brokered money market deposits. At December 31, 2017, $3.46 billion, or 19.9%, of our total deposit balances were certificates of deposit, of which included $759.5 million of brokered certificates of deposit. Borrowed Funds. Our FHLB borrowings, frequently referred to as advances, are collateralized by our residential and commercial mortgage portfolios. Borrowed funds decreased by $84.7 million, or 1.9%, to $4.46 billion at December 31, 2017 from $4.55 billion at December 31, 2016 to help fund the continued growth of the loan portfolio. Stockholders’ Equity. Stockholders’ equity increased by $2.2 million to $3.13 billion at December 31, 2017 from $3.12 billion at December 31, 2016. The increase was primarily attributed to net income of $126.7 million and share-based plan activity of $36.2 million for the year ended December 31, 2017. These increases were partially offset by cash dividends of $0.33 per share totaling $101.6 million and the repurchase of 4.5 million shares of common stock for $59.1 million for the year ended December 31, 2017. Analysis of Net Interest Income Net interest income represents the difference between income we earn on our interest-earning assets and the expense we pay on interest-bearing liabilities. Net interest income depends on the volume of interest-earning assets and interest-bearing liabilities and the interest rates earned on such assets and paid on such liabilities. Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, however interest receivable on these loans have been fully reserved for and not included in interest income. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. 60