SHORT HILLS, N.J., Jan. 27, 2011 /PRNewswire/ -- Investors Bancorp, Inc. (Nasdaq: ISBC) ("Company"), the holding company for Investors Savings Bank ("Bank"), reported net income of $16.9 million for the three months ended December 31, 2010 compared to net income of $12.1 million for the three months ended December 31, 2009. Net income for the year ended December 31, 2010 was $62.0 million compared to net income of $35.1 million for the year ended December 31, 2009. Basic and diluted earnings per share were $0.16 for the three months ended December 31, 2010 compared to $0.11 for the three months ended December 31, 2009. Basic and diluted earnings per share were $0.57 and $0.56, respectively, for the year ended December 31, 2010 compared to basic and diluted earnings of $0.33 for the year ended December 31, 2009.

Kevin Cummings, President and CEO discussed the Company's results, "We are pleased with our operating results for both the quarter and the year. The continued growth of our loan and deposit franchise in 2010 is a result of the hard work and dedication of our staff and I am grateful for their efforts."

Mr. Cummings also commented on its most recent branch and loan acquisition, "In October 2010, we completed the acquisition of the branches of the former Millennium Bank and added approximately $600 million in deposits and 15 new branch locations including two in New York City and one in Mineola NY. We welcome our new customers and look forward to providing quality services and expanding our relationship."

On the economy, Mr. Cummings noted, "High unemployment and depressed property values remain a drag on the local economy here in New Jersey.  Our own non performing loans increased slightly for the quarter but are still low compared to regional and national peers. With our strict underwriting standards and adequate reserves we will navigate through this tough economic time."

The following represents performance highlights and significant events that occurred during the period:

• Net interest margin for the three months ended December 31, 2010 was 3.19%, This represents an increase of 38 basis points compared to prior year quarter  and a decrease of 12 basis points compared to linked quarter.

• The efficiency ratio improved to 45.55% for the three months ended December 31, 2010 compared to 49.82% for the three months ended December 31, 2009 and improved to 44.20% for the year ended December 31, 2010 compared to 52.68% for the year ended December 31, 2009.

• The return on average equity improved to 7.38% and 6.95% for the three months and year ended December 31, 2010, respectively, compared to 5.80% and 4.40% for the three months and year ended December 31, 2009, respectively.

• Core deposits, which exclude time deposits, increased $787.2 million, or 30.9%, to $3.33 billion at December 31, 2010 from $2.55 billion at December 31, 2009.

• Net loans increased $1.30 billion, or 19.7%, to $7.92 billion at December 31, 2010 from $6.62 billion at December 31, 2009.

• The Company recorded a gain on bargain purchase of $1.8 million in connection with the purchase of the Millennium deposit franchise and servicing of their loan portfolio.

• The Company maintains a strong tangible capital ratio of 9.02%, and is considered well capitalized under regulatory guidelines.

Millennium Deposit Acquisition and Loan Purchase

As previously disclosed, in October the Company completed the acquisition of the Millennium deposit franchise which increased the Company's total deposits by approximately $600.0 million while adding 15 branches. The Company also purchased approximately $200 million of performing commercial real estate and home equity loans from Millennium. From an income statement perspective, the acquisition resulted in a bargain purchase gain of $1.8 million, net of tax, in the current quarter offset by $2.4 million in one-time non-interest expenses related to the acquisition. The expenses included $700,000 in costs associated with consolidating and closing two branches; $800,000 in professional fees and conversion costs; $600,000 in marketing and promotional costs; and $300,000 in personnel costs. The Company also entered into an agreement to service the remaining Millennium loan portfolio which resulted in $600,000 in servicing fee income for the quarter.

Comparison of Operating Results

Interest and Dividend Income

Total interest and dividend income increased by $10.7 million, or 10.7%, to $110.3 million for the three months ended December 31, 2010 from $99.6 million for the three months ended December 31, 2009.  This increase is attributed to the average balance of interest-earning assets increasing $1.0 billion, or 12.6%, to $9.02 billion for the three months ended December 31, 2010 from $8.01 billion for the three months ended December 31, 2009.  This was partially offset by, the weighted average yield on interest-earning assets decreasing 9 basis points to 4.89% for the three months ended December 31, 2010 compared to 4.98% for the three months ended December 31, 2009.  

Interest income on loans increased by $12.0 million, or 13.7%, to $99.5 million for the three months ended December 31, 2010 from $87.5 million for the three months December 31, 2009, reflecting a $1.27 billion, or 19.6%, increase in the average balance of net loans to $7.76 billion for the three months ended December 31, 2010 from $6.49 billion for the three months ended December 31, 2009.  The increase is primarily attributed to the average balance of multi-family loans and commercial real estate loans increasing $458.9 million and $448.4 million, respectively. This activity is consistent with our strategy to diversify our loan portfolio by adding more multi-family loans and commercial real estate.  This was partially offset by a 26 basis point decrease in the average yield on loans to 5.13% for the three months ended December 31, 2010 from 5.39% for the three months ended December 31, 2009.

Interest income on all other interest-earning assets, excluding loans, decreased by $1.3 million, or 10.8%, to $10.9 million for the three months ended December 31, 2010 from $12.2 million for the three months ended December 31, 2009.  This decrease reflected a $265.9 million decrease in the average balance of all other interest-earning assets, excluding loans, to $1.26 billion for the three months ended December 31, 2010 from $1.52 billion for the three months ended December 31, 2009.  This was partially offset by the weighted average yield on interest-earning assets, excluding loans, increasing by 26 basis points to 3.46% for the three months ended December 31, 2010 compared to 3.20% for the three months ended December 31, 2009. This increase is partially attributed to the accretion of income on trust preferred securities.

Total interest and dividend income increased by $44.3 million, or 11.5%, to $428.7 million for the year ended December 31, 2010 from $384.4 million for the year ended December 31, 2009.  This increase is attributed to the average balance of interest-earning assets increasing $921.0 million, or 12.1%, to $8.51 billion for the year ended December 31, 2010 from $7.59 billion for the year ended December 31, 2009.  This was partially offset by a 3 basis point decrease in the weighted average yield on interest-earning assets to 5.04% for the year ended December 31, 2010 compared to 5.07% for the year ended December 31, 2009.  

Interest income on loans increased by $55.1 million, or 16.8%, to $383.5 million for the year ended December 31, 2010 from $328.5 million for the year ended December 31, 2009, reflecting a $1.15 billion, or 19.0%, increase in the average balance of net loans to $7.20 billion for the year ended December 31, 2010 from $6.05 billion for the year ended December 31, 2009. The increase is primarily attributed to the average balance of commercial real estate loans and multi-family loans increasing by $497.4 million and $378.8 million, respectively. This activity is consistent with our strategy to diversify our loan portfolio by adding more commercial real estate and multi-family loans. In addition, the yield was favorably impacted by commercial real estate prepayment penalties totaling $1.1 million. These increases were partially offset by a 10 basis point decrease in the average yield on loans to 5.33% for the year ended December 31, 2010 from 5.43% for the year ended December 31, 2009.  

Interest income on all other interest-earning assets, excluding loans, decreased by $10.7 million, or 19.2%, to $45.2 million for the year ended December 31, 2010 from $55.9 million for the year ended December 31, 2009.  This decrease reflected a $226.6 million decrease in the average balance of all other interest-earning assets, excluding loans to $1.31 billion for the year ended December 31, 2010 from $1.54 billion for the year ended December 31, 2009.  In addition, the weighted average yield on interest-earning assets, excluding loans decreased 19 basis point to 3.45% for the year ended December 31, 2010 from 3.64% for the year ended December 31, 2009. The decrease in yield is primarily attributed to the purchase of additional securities at lower yields and the repricing of our adjustable rate securities.

Interest Expense

Total interest expense decreased by $4.8 million, or 11.2%, to $38.5 million for the three months ended December 31, 2010 from $43.3 million for the three months ended December 31, 2009.  This decrease is attributed to the weighted average cost of total interest-bearing liabilities decreasing 47 basis points to 1.91% for the three months ended December 31, 2010 compared to 2.38% for the three months ended December 31, 2009.  This was partially offset by the average balance of total interest-bearing liabilities increasing by $774.0 million, or 10.6%, to $8.06 billion for the three months ended December 31, 2010 from $7.28 billion for the three months ended December 31, 2009.  

Interest expense on interest-bearing deposits decreased $4.5 million, or 16.8% to $22.3 million for the three months ended December 31, 2010 from $26.8 million for the three months ended December 31, 2009.  This decrease is attributed to a 48 basis point decrease in the average cost of interest-bearing deposits to 1.40% for the three months ended December 31, 2010 from 1.88% for the three months ended December 31, 2009 as deposit rates decreased to reflect the current interest rate environment. This was partially offset by the average balance of total interest-bearing deposits increasing $667.8 million, or 11.7% to $6.36 billion for the three months ended December 31, 2010 from $5.69 billion for the three months ended December 31, 2009. Core deposit growth represented 82.5%, or $550.6 million of the increase in the average balance of total interest-bearing deposits.

Interest expense on borrowed funds decreased by $0.3 million, or 2.0%, to $16.2 million for the three months ended December 31, 2010 from $16.5 million for the three months ended December 31, 2009. This decrease is attributed to the average cost of borrowed funds decreasing 34 basis points to 3.81% for the three months ended December 31, 2010 from 4.15% for the three months ended December 31, 2009 due to the lower interest rate environment. This was partially offset by the average balance of borrowed funds increasing by $106.3 million or 6.7%, to $1.70 billion for the three months ended December 31, 2010 from $1.59 billion for the three months ended December 31, 2009.

Total interest expense decreased by $32.8 million, or 17.1%, to $159.3 million for the year ended December 31, 2010 from $192.1 million for the year ended December 31, 2009.  This decrease is attributed to the weighted average cost of total interest-bearing liabilities decreasing 71 basis points to 2.07% for the year ended December 31, 2010 compared to 2.78% for the year ended December 31, 2009.  This was partially offset by the average balance of total interest-bearing liabilities increasing by $799.3 million, or 11.6%, to $7.70 billion for the year ended December 31, 2010 from $6.90 billion for the year ended December 31, 2009.  

Interest expense on interest-bearing deposits decreased $32.2 million, or 26.2% to $90.8 million for the year ended December 31, 2010 from $123.0 million for the year ended December 31, 2009.  This decrease is attributed to an 84 basis point decrease in the average cost of interest-bearing deposits to 1.53% for the year ended December 31, 2010 from 2.37% for the year ended December 31, 2009 as deposit rates decreased to reflect the current interest rate environment. This was partially offset by the average balance of total interest-bearing deposits increasing $737.5 million, or 14.2% to $5.92 billion for the year ended December 31, 2010 from $5.19 billion for the year ended December 31, 2009. Core deposit growth represented 82.7%, or $610.1 million of the increase in the average balance of total interest-bearing deposits.

Interest expense on borrowed funds decreased by $600,000, or 0.9%, to $68.5 million for the year ended December 31, 2010 from $69.1 million for the year ended December 31, 2009. This decrease is attributed to the average cost of borrowed funds decreasing 17 basis points to 3.85% for the year ended December 31, 2010 from 4.02% for the year ended December 31, 2009 due to the lower interest rate environment. This was partially offset by the average balance of borrowed funds increasing by $61.8 million or 3.6%, to $1.78 billion for the year ended December 31, 2010 from $1.72 billion for the year ended December 31, 2009.

Net Interest Income

Net interest income increased by $15.6 million, or 27.6%, to $71.9 million for the three months ended December 31, 2010 from $56.3 million for the three months ended December 31, 2009.  The increase was primarily due to a 47 basis point decrease in our cost of interest-bearing liabilities to 1.91% for the three months ended December 31, 2010 from 2.38% for the three months ended December 31, 2009. This was partially offset by the yield on our interest-earning assets decreasing 9 basis points to 4.89% for the three months ended December 31, 2010 from 4.98% for the three months ended December 31, 2009. Short term interest rates remaining at historically low levels resulted in many of our deposits repricing downward. This had a positive impact on our net interest margin which improved by 38 basis points from 2.81% for the three months ended December 31, 2009 to 3.19% for the three months ended December 31, 2010.

Net interest income increased by $77.1 million, or 40.1%, to $269.4 million for the year ended December 31, 2010 from $192.3 million for the year ended December 31, 2009.  The increase was primarily due to a 71 basis point decrease in our cost of interest-bearing liabilities to 2.07% for the year ended December 31, 2010 from 2.78% for the year ended December 31, 2009. This was partially offset by the yield on our interest-earning assets decreasing 3 basis points to 5.04% for the year ended December 31, 2010 from 5.07% for the year ended December 31, 2009. Short term interest rates remaining at historically low levels resulted in many of our deposits repricing downward. This had a positive impact on our net interest margin which improved by 64 basis points from 2.53% for the year ended December 31, 2009 to 3.17% for the year ended December 31, 2010.

Provision for Loan Losses

Our provision for loan losses was $19.0 million for the three months ended December 31, 2010 compared to $11.1 million for the three months ended December 31, 2009. For the three months ended December 31, 2010, net charge-offs were $12.7 million compared to $9.5 million for the three months ended December 31, 2009. For the year ended December 31, 2010, our provision for loan losses was $66.5 million compared to $39.5 million for the year ended December 31, 2009. Net charge-offs totaled $30.6 million for the year ended December 31, 2010 compared to net charge-offs of $14.9 million for the year ended December 31, 2009. The increase in our provision is due to continued growth in the loan portfolio; the increased inherent credit risk in our overall portfolio, particularly the credit risk associated with commercial real estate lending; an increase in non-performing loans and loan delinquency; and the adverse economic conditions in our lending area.

The following table sets forth non-performing assets and accruing past due loans on the dates indicated in conjunction with our quality ratios:

Total non-performing loans, defined as non-accruing loans, were $165.9 million at December 31, 2010 compared to $120.2 million at December 31, 2009. At December 31, 2010 there are 13 residential loans totaling $4.8 million which are deemed troubled debt restructurings. These loans are performing under the restructured terms.

The allowance for loan losses increased by $35.9 million to $90.9 million at December 31, 2010 from $55.1 million at December 31, 2009.  Future increases in the allowance for loan losses may be necessary based on growth of the loan portfolio, change in composition of the loan portfolio, increasing loan delinquency and the impact of the deterioration of the real estate and economic environments in our lending area.  

Non-Interest Income

Total non-interest income was $11.4 million for the three months ended December 31, 2010 compared to $3.6 million for the three months ended December 31, 2009.  The increase is attributed to an increase in gain on loan sales of $3.9 million to $5.4 million for the three months ended December 31, 2010 as the increase in refinancing activity during the current quarter resulted in more loans being sold into the secondary market. In addition, there was a $1.8 million increase in fees and service charges to $3.3 million for the three months ended December 31, 2010.  This increase is partially attributed to fees from commercial deposit and loan accounts as well as fees generated from the servicing of Millennium's loan portfolio. The Company also recorded a $1.8 million gain on bargain purchase from the Millennium deposit acquisition which is included in other operating income.

Total non-interest income was $26.5 million for the year ended December 31, 2010 compared to $14.8 million for the year ended December 31, 2009.  The increase of $11.7 million is primarily attributed to a $4.1 million increase in fees and service charges, $4.1 million increase in gain on loan sales and a $1.8 million gain on bargain purchase in connection with the Millennium deposit acquisition. The year ended December 31, 2009 included a $1.8 million gain from the sale of our largest non-performing loan and a $1.3 million pre-tax other-than-temporary impairment ("OTTI") non-cash charge on certain pooled trust preferred securities ("TruPS").

Non-Interest Expenses

Total non-interest expenses increased by $8.1 million, or 27.0%, to $38.0 million for the three months ended December 31, 2010 from $29.9 million for the three months ended December 31, 2009. Compensation and fringe benefits increased $3.6 million as a result of staff additions in our retail banking areas, our mortgage company and commercial real estate lending department, as well as normal merit increases. Additionally, there was approximately $225,000 in bonuses paid to employees relative to the successful completion of the Millennium integration. Occupancy expense increased $2.3 million as a result of the costs associated with expanding our branch network, including the one time charge of $700,000 for the consolidation and closing of two Millennium branches. Advertising increased $654,000 due to our marketing efforts in relation to our expansion. Data processing expenses increased $476,000 primarily due to increased volume of accounts and professional fees also increased $310,000 primarily due to cost incurred with regards to the Millennium acquisition.

Total non-interest expenses increased by $21.7 million, or 19.9%, to $130.8 million for the year ended December 31, 2010 from $109.1 million for the year ended December 31, 2009. Compensation and fringe benefits increased $9.9 million as a result of staff additions in our retail banking areas due to acquisitions and de novo growth, staff additions in our mortgage company and commercial real estate lending department, as well as normal merit increases.  Occupancy expense increased $5.7 million as a result of the costs associated with expanding our branch network including the one time charge of $700,000 for the consolidation and closing of two Millennium branches. Professional fees increased $2.0 million for initiatives supporting the Company's growth. Advertising increased $1.8 million due to marketing efforts relative to our business expansion and data processing increased $1.2 million primarily due to increased volume of accounts.  These increases was partially offset by a reduction of $1.4 million in FDIC insurance premiums as the year ended December 31, 2009 included a $3.7 million special assessment on insured financial institutions to rebuild the Deposit Insurance Fund.

Income Taxes

Income tax expense was $9.5 million for the three months ended December 31, 2010, representing a 36.01% effective tax rate. For the three months ended December 31, 2009, there was an income tax expense of $7.0 million representing a 36.6% effective tax rate. The decrease in the effective tax rate is due to the gain on bargain purchase which is not taxable and more revenue generated in states other than New Jersey.

Income tax expense was $36.6 million for the year ended December 31, 2010, representing a 37.11% effective tax rate. For the year ended December 31, 2009, there was an income tax expense of $23.4 million representing a 40.04% effective tax rate. The decrease in the effective tax rate is due to the gain on bargain purchase which is not taxable and more revenue generated in states other than New Jersey.

Balance Sheet Summary

Total assets increased by $1.24 billion, or 14.9%, to $9.60 billion at December 31, 2010 from $8.36 billion at December 31, 2009.  This increase was largely the result of a $1.31 billion increase in our net loans, including loans held for sale, to $7.95 billion at December 31, 2010 from $6.64 billion at December 31, 2009. This was partially offset by a $107.4 million, or 9.0%, decrease in securities to $1.08 billion at December 31, 2010 from $1.19 billion at December 31, 2009.

Net loans, including loans held for sale, increased by $1.31 billion, or 19.7%, to $7.95 billion at December 31, 2010 from $6.64 billion at December 31, 2009.  This increase in loans reflects our continued focus on loan originations and purchases, which was partially offset by paydowns and payoffs of loans. The loans we originate and purchase are on properties in New Jersey and states in close proximity to New Jersey. We do not originate or purchase, and our loan portfolio does not include, any sub-prime loans or option ARMs.  

We originate residential mortgage loans through our mortgage subsidiary, ISB Mortgage Co. During the year ended December 31, 2010, ISB Mortgage Co. originated $1.50 billion in residential mortgage loans of which $696.0 million were sold to third party investors and $800.5 million remained in our portfolio. We also purchased mortgage loans from correspondent entities including other banks and mortgage bankers. Our agreements with these correspondent entities require them to originate loans that adhere to our underwriting standards. During year ended December 31, 2010, we purchased loans totaling $814.9 million from these entities. We also purchase, on a "bulk purchase" basis, pools of mortgage loans that meet our underwriting criteria from several well-established financial institutions in the secondary market. During the year ended December 31, 2010, we purchased $47.4 million of residential mortgage loans on a "bulk purchase" basis.  

Additionally, for the twelve month period ended December 31, 2010, we originated $487.9 million in multi-family loans, $412.6 million in commercial real estate loans, $214.4 million in construction loans, $87.8 million in consumer and other loans, and $59.6 million in commercial and industrial loans. We also purchased approximately $200 million in performing commercial real estate and home equity loans from Millennium.  

At December 31, 2010, total loans were $7.99 billion and included $4.94 billion in residential loans, $1.23 billion in commercial real estate loans, $1.16 billion in multi-family loans, $347.8 million in construction loans, $259.8 million in consumer and other loans, and $60.9 million in commercial and industrial loans.

Securities, in the aggregate, decreased by $107.4 million, or 9.0%, to $1.08 billion at December 31, 2010, from $1.19 billion at December 31, 2009. The decrease in the portfolio was due to paydowns, calls or maturities and was partially offset by the purchase of $346.8 million of agency issued mortgage backed securities during the year ended December 31, 2010.

The amount of stock we ownin the Federal Home Loan Bank (FHLB) increased by $14.2 million from $66.2 million at December 31, 2009 to $80.4 million at December 31, 2010 as a result of an increase in our level of borrowings at December 31, 2010. Other assets decreased $8.3 million primarily due to prepaid FDIC insurance premiums amortizing $9.8 million during the period.

Deposits increased by $934.3 million, or 16.0%, to $6.77 billion at December 31, 2010 from $5.84 billion at December 31, 2009. This increase reflects the acquisition of Millennium deposit franchise and the continued growth in our markets. Core deposits represented  $787.2 million or 84.3% of the growth while certificates of deposit represented $147.1 million, or 15.7% of the growth.

Borrowed funds increased $226.0 million, or 14.1%, to $1.83 billion at December 31, 2010 from $1.60 billion at December 31, 2009 as new loan originations have outpaced the deposit growth and principal run-off from the securities portfolio.

Stockholders' equity increased $51.0 million to $901.3 million at December 31, 2010 from $850.2 million at December 31, 2009. The increase is primarily attributed to the $62.0 million net income for year ended December 31, 2010, $9.5 million of compensation cost related to equity incentive plans, partially offset by $24.5 million in purchases of treasury stock.

About the Company

Investors Bancorp, Inc. is the holding company for Investors Savings Bank, which operates from its corporate headquarters in Short Hills, New Jersey, and as of December 31, 2010 had and eighty two branch offices located throughout northern and central New Jersey, New York and Massachusetts.

Earnings Conference Call January 28, 2011 at 11:00 a.m. (ET)

 The Company, as previously announced, will host an earnings conference call Friday, January 28, 2011 at 11:00 a.m. (ET). The toll-free dial-in number is: (877) 317-6789. A telephone replay will be available on January 28, 2011 from 1:00 p.m. (ET) through May 31, 2011, 9:00 a.m. (ET). The replay number is (877) 344-7529 password 447211. The conference call will also be simultaneously webcast on the Company's website www.isbnj.com and archived for one year.

Forward Looking Statements

Certain statements contained herein are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward looking statements may be identified by reference to a future period or periods, or by the use of forward looking terminology, such as "may," "will," "believe," "expect," "estimate," "anticipate," "continue," or similar terms or variations on those terms, or the negative of those terms.  Forward looking statements are subject to numerous risks and uncertainties, as described in our SEC filings, including, but not limited to, those related to the real estate and economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

The Company wishes to caution readers not to place undue reliance on any such forward looking statements, which speak only as of the date made.  The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.  The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions, which may be made to any forward looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

CONTACT:  Domenick Cama ISBC, +1-973-924-5105, dcama@isbnj.com