ISBC 2017 Form 10-K & 2018 Proxy Statement

FORM 10-K multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume. Years Ended December 31, 2017 vs. 2016 Years Ended December 31, 2016 vs. 2015 Increase (Decrease) Due to Net Increase (Decrease) Increase (Decrease) Due to Net Increase (Decrease) Volume Rate Volume Rate (In thousands) Interest-earning assets: Interest-bearing deposits $ 310 1,512 1,822 $ (86) 203 117 Securities available-for-sale 8,279 3,497 11,776 2,772 97 2,869 Securities held-to-maturity (1,582) 3,862 2,280 3,103 993 4,096 Net loans 82,931 (14,894) 68,037 77,752 (25,275) 52,477 Stock in FHLB 1,719 2,528 4,247 1,387 852 2,239 Total interest-earning assets 91,657 (3,495) 88,162 84,928 (23,130) 61,798 Interest-bearing liabilities: Savings deposits 31 2,060 2,091 (351) 253 (98) Interest-bearing checking 4,760 16,063 20,823 2,576 4,050 6,626 Money market accounts 2,031 6,714 8,745 2,524 (1,039) 1,485 Certificates of deposit 447 (620) (173) 2,024 606 2,630 Total deposits 7,269 24,217 31,486 6,773 3,870 10,643 Borrowed funds 16,240 845 17,085 12,607 (6,553) 6,054 Total interest-bearing liabilities 23,509 25,062 48,571 19,380 (2,683) 16,697 Increase in net interest income $68,148 (28,557) 39,591 $65,548 (20,447) 45,101 Comparison of Operating Results for the Year Ended December 31, 2017 and 2016 Net Income. Net income for the year ended December 31, 2017 was $126.7 million compared to net income of $192.1 million for the year ended December 31, 2016. Included in net income for 2017 was a $49.2 million increase to income tax expense related to the enactment of the Tax Act due to the revaluation of the Company’s deferred tax assets. Net Interest Income. Net interest income increased by $39.6 million, or 6.2%, to $679.8 million for the year ended December 31, 2017 from $640.2 million for the year ended December 31, 2016. The net interest margin decreased 15 basis points to 2.89% for the year ended December 31, 2017 from 3.04% for the year ended December 31, 2016. Interest and Dividend Income. Total interest and dividend income increased by $88.2 million, or 11.1%, to $881.7 million for the year ended December 31, 2017. Interest income on loans increased by $68.0 million, or 9.5%, to $783.9 million for the year ended December 31, 2017, as a result of a $1.93 billion, or 11.1%, increase in the average balance of net loans to $19.41 billion for the year ended December 31, 2017, primarily attributed to the growth in the commercial loan portfolio. This increase was offset by a decrease of 6 basis points in the weighted average yield on net loans to 4.04%. Prepayment penalties, which are included in interest income, totaled $17.3 million for the year ended December 31, 2017 compared to $22.0 million for the year ended December 31, 2016. Interest income on all other interest-earning assets, excluding loans, increased by $20.1 million, or 25.9%, to $97.7 million for the year ended December 31, 2017 which is attributable to a $486.3 million increase in the average balance of all other interest earning assets, excluding loans, to $4.07 billion for the year ended December 31, 2017. In addition, the weighted average yield on interest-earning assets, excluding loans, increased 23 basis points to 2.40%. 62