Good morning, and welcome to Investors Bancorp's First Quarter Earnings Call. Please note this event is being recorded. We'll begin this morning's call with the company's standard forward-looking statement disclosure. On this call, representatives of Investors Bancorp, Inc. may make forward-looking statements with respect to its financial position, results of operations and business. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond Investors Bancorp's control, are difficult to predict and which can cause actual results to materially differ from those expressed or forecast in these forward-looking statements. In last night's press release, the company included its safe harbor disclosure and refers you to that statement. That document is incorporated into this presentation. For a more complete discussion of the certain risks and uncertainties affecting Investors Bancorp, please see the sections entitled Risk Factors, Management Discussion and Analysis of Financial Conditions and Results of Operations set forth in Investors Bancorp's filings under the SEC. And now I'd like to turn the call over to Kevin Cummings, Chairman and Chief Executive Officer of Investors Bancorp. Please go ahead.

Okay. Thank you. Good morning, and welcome to the Investors Bancorp First Quarter Earnings Call for 2021. Last night, the company reported in its press release net income of $72.3 million or $0.31 per diluted share for the quarter ended March 31, 2021. This compares to $75.1 million or $0.32 per diluted share for the quarter ended December 30 last year and $39.5 million or $0.17 per diluted share for the three months ended March 31, 2020. In the fourth quarter of last year, we recorded some non-core transactions that impacted results and improved earnings to $84 million or $0.35 per share. The difference in core operating results of approximately $9 million for the fourth quarter were due to a $6.9 million reduction in prepayment fees, which are included in interest income. This decrease in fees caused a reduction in our net interest margin of eight basis points. Excluding these fees, our core margin increased by two basis points. The quarter was also impacted by a reduction in gain on sale of loans in mortgage banking activities of $1.7 million and a more favorable tax rate due to R&D credits recognized in the fourth quarter. These decreases in revenues were offset by cost control, with reduced core operating expenses of $2.7 million in the first quarter. All things considered, it was a solid quarter for the bank and a good start to 2021. This time last year, there were major concerns about liquidity, capital and where the credit cycle was going to go. I'm happy to report that the company declared a cash dividend of $0.14 per share to be paid in May, which reflects a $0.02 increase from the dividend paid at the height of the pandemic in May 2020. These results reflect our third straight quarter of double-digit return on tangible equity, and our return on average assets has averaged over 1.07% over that three-quarter period. When I look back to where we were a year ago, it is remarkable what we have accomplished through this pandemic. A year ago, we were in the midst of the PPP process. Customers and our employees were cautious about in-person interactions. There was uncertainty and no one felt comfortable with the normal routines of everyday life. Through grit and determination, we were able to take care of our customers, keep all our retail branches open, and most importantly, protect our employees. Today, we are a stronger bank. Our capital ratios are up approximately 30 basis points. Our credit culture is stronger than ever. And our outlook for 2021 is bright. We are anxious to get all our corporate employees back to the office and look forward to being that bank that serves our customers and communities in both good times and times of crisis. On the credit front, our nonaccrual loans are down $23.8 million or 22% for the quarter and $48.7 million or 37% from September 30 of last year. This reduction in nonaccrual loans was completed with no cumulative net charge-offs as our net charge-offs in the last six months were negative and resulted in net recoveries of $5.7 million for the last two quarters. Our loan loss coverage ratio to nonaccrual loans is 341% this quarter versus 248% last year at March 31. In the commercial portfolio, our total nonaccrual loans of $37.6 million consist of 53 loans for an average loan of approximately $709,000, which is down from $79.8 million at September 30 of last year. Our three largest nonaccrual loans at March 31 are: a multifamily loan for $4.6 million, a CRE loan for $3.1 million and a business loan for $2.6 million. The remaining 50 loans in the nonaccrual group reflect an average exposure of $550,000 and is similar to the exposure in our mortgage and consumer portfolio, which has an average nonaccrual loan of $191,000. We have a war-room mentality with respect to credit but still believe we have a lot of work to do to get through this operating environment and the post-effects of the pandemic. Almost every week since June, we have met to discuss our loan exposures and trends in deferred loans due to this pandemic. At March 31, our total deferrals were down to $582 million and include approximately $500 million in loans that are currently paying us interest and are keeping their taxes current. We have made a concerted effort to reach out to our customers during this time to work with them through the crisis. In a period of uncertainty, we see these times as an opportunity to help our customers and build long-term relationships. With respect to principal and interest deferrals, we have approximately $83 million, of which $23 million in the entertainment category commenced payments as of April 1. The remaining $60 million is made up of 20 loans, and the two largest loans are both multifamily loans for $37 million and $10 million. We have recently visited those two properties earlier this month. One is in Washington, D.C., with an average loan per unit of approximately $70,000. The complex was recording stronger cash collections in March, and we collected pro forma cash flow representing a 1.2x debt service coverage. It is a well-maintained property and should retain its value; we expect it to be back to full payment at the end of the deferral period. The other loan is in Brooklyn; it is a 20-unit, relatively new building that is fully occupied and is recovering its cash flows after concessions to new apartment dwellers and should not be a problem due to the strong sponsorship, the quality of the building and its amenities. The remaining exposure in this principal and interest deferral is $13 million, which is made up of 18 loans for an average loan of approximately $722,000. At the end of the day, we feel we have a great handle on the exposure of this $60 million of principal and interest deferral. There's a lot of discussion of what's going on in Manhattan. In that deferral portfolio, our Manhattan exposure is mainly in the hotel sector for $196 million of the total $367 million that we have in the Manhattan area. All of the loans in the hotel sector and in Manhattan are paying interest and are showing improving trends. The hotels are seeing increased tourist activity but little business travel. These properties are family businesses for multiple generations and have strong sponsorship. The remaining exposure in Manhattan is in multifamily and CRE for $88 million and $38 million, respectively, and have good sponsorship and improving operations and do not show any major issues at this time. As I mentioned earlier, our credit and first-line teams have been meeting on a weekly basis to discuss the progress of the deferral portfolio and other trends in the total commercial portfolio. Last week, we met for several hours to discuss our office portfolio, where we reviewed the top 25 loans for approximately $620 million. All of these loans are current as to interest and principal and there was nothing discussed that would set off alarm bells at this time. We will continue to monitor this and other portfolios at the highest level of management to make sure we stay ahead of the leasing activities in both retail and office and the impact of changes in business practices and workplace activities. Today, we feel we are doing everything possible to manage this credit risk with strong reserves, low delinquency trends and a strong credit and monitoring team in place to manage us through this pandemic. With respect to loan growth, our commercial loans grew 1.3% in the quarter compared to a reduction in loans of 1.4% in the 2020 first quarter. The first quarter is usually a slower quarter for us, and we are optimistic about the activity we are seeing in the marketplace. Our lending teams are engaged and are making calls in the market. They are out in the market, out of the office. We have a strong commercial pipeline, which totals over $3.3 billion and compares to $1.5 billion last year at this time and $2.2 billion at year-end. We believe we can grow our loans at a 7% to 9% pace for 2021. On the deposit front, deposits were down $534 million, which related to planned runoff of higher-costing brokered deposits of $534 million and government deposits of $327 million as our cost of deposits went down 19 basis points for the quarter. Our consumer and business deposits were up $328 million with our noninterest deposits increasing $174 million or 4.8% for the quarter. Noninterest deposits now comprise 20% of deposits, which is a first for the company. We are seeing great activity from the investments we made in 2019 and 2020 with our business lenders and business development teams generating core deposits, relationships and business loans. We are moving forward with our Berkshire acquisition, which will bring approximately $300 million in loans and $600 million in deposits. We recently agreed to a marketing partnership with the Trenton Thunder, a local Minor League Baseball team in the Berkshire market, and have been active in coordinating activities with the retail and business teams in that market. It is a great opportunity for us, and we will expand our brand with two additional branches in Bucks County in Pennsylvania. Going into 2021, we have strong momentum and continue to see great opportunities in the marketplace as larger banks are not paying attention to the middle market during this pandemic. It takes a bank that sees the long view, whose management teams are local, has access to decision-makers, and will be there for their customers and prospects during these difficult times. We are that community bank, and we are looking forward to a record year in 2021. Now I'd like to turn the meeting over to Sean Burke, our Chief Financial Officer, who will give some commentary on the operating results for the quarter.

Thank you, Kevin. What a difference a year makes. Year-over-year net income and earnings per share were up over 80% with net income for the first quarter totaling $72.3 million or $0.31 per diluted share. Our net interest margin dropped eight basis points quarter-over-quarter to 2.9% with prepayment fees driving the decline. Our core net interest margin, however, expanded two basis points quarter-over-quarter as we continue to benefit from declining deposit costs. On an encouraging note, we have seen prepayment fees rebound and totaled $4.5 million in the month of April alone and expect our second quarter margin to rebound accordingly. Total noninterest income totaled $20 million, a decrease of $2.7 million on a core basis quarter-over-quarter. Year-over-year, however, noninterest income increased $5.3 million or 36%, driven by mortgage banking, swap fees and wealth advisory fees. Total noninterest expenses totaled $104 million for the first quarter, a decrease of $38.5 million quarter-over-quarter. The decrease was driven by $23 million of costs from the early extinguishment of debt and $12 million of branch closure costs in the fourth quarter. Excluding these items, noninterest expenses were down $4 million compared to the fourth quarter. The decrease was primarily driven by incentive compensation. Provision for credit losses was a negative $3 million for the first quarter compared to a negative $2.7 million release for the fourth quarter. The decrease was primarily driven by an improving economic forecast and net loan recoveries in the quarter of $2 million. Our total loan balances were flat quarter-over-quarter, while C&I loans grew $66.5 million or 2% quarter-over-quarter. Total deposits were down $534 million quarter-over-quarter, driven by the intentional runoff of brokered deposits, while noninterest-bearing deposits were up $174 million or 5% quarter-over-quarter. Our percentage of noninterest-bearing deposits to total deposits improved to 20% at March 31 compared to 13% a year ago. Asset quality, liquidity and capital continued to remain in a solid position at quarter end. Nonaccrual loans represented 0.4% of total loans at March 31 compared to 0.51% at December 31 while our allowance for loan losses to loans remained unchanged at 1.44%. Our common equity Tier 1 ratio was 13% at quarter end. Now I'd like to turn it back over to Kevin for concluding remarks.

Okay. Before I open up to questions, I just want to give a longer view. The last 12 months have been an unbelievable year of social unrest and economic turmoil. When I look back on the last year, I see the bank's leadership team that has grown in confidence and competence as they've executed through this storm and continued to provide a platform for our employees for personal growth and successful business careers. There is great optimism in the bank and in the communities that we serve. We continue to serve our customers, employees and our communities in partnership with our foundation. It is part of our brand to be the different community bank that makes a difference. This is not a new trend for our bank; it is part of our DNA. With all the discussions of corporate social responsibility, we are and have been on the front lines in supporting and serving the underserved. Let our sermons be said without words, and our actions speak volumes of who we are and what we have accomplished. Our foundation and bank have donated over $70 million since 2005. Our return to shareholders has been almost 280% since that time. This compares very favorably to local community thrifts here in New Jersey, up 42%, and New Jersey commercial banks, up 58%. Compared to the four largest national banks during this period, we surpassed them 2.5 times with that 280% return for investors versus 78% for the large national banks. We have always taken the long-term view, something that society or government sometimes has difficulty doing. In the words of my predecessor, Bob Cashill, we understand that we can do good and do well. We recently added two new directors to our corporate Board, and I'd like to welcome Kim Wales and John Harmon to our Board. They both bring a broad range of experience to our team, and we are happy to have them. Their diverse background and experience will make us stronger. With respect to DE&I, we recently held a town hall meeting with Dom and I taking questions on how we can create greater opportunities for our customers, employees, our vendors and the communities that we serve. We are constantly looking forward to better communications and listening better. God gave you two ears and one mouth for a reason. I'm happy to report that our workforce is 56% women and 41% diverse and our offices are 42% women and 28% diverse. At the most senior EVP level, it's 24% women and 60% diverse. The journey is the destination, and we are on a journey of continuous improvement, getting better every day. I don't want to be better than Dom, but I want to be better than I was yesterday — getting better and being a servant leader who serves. Our leadership teams continue to be selfless in their service to others. We have accomplished a lot in the past 15 months and in the last 15 years. We are stronger today and certainly more hopeful. As I said last year, when I was one of five employees at the bank, let's be faithful and not fearful. The future looks bright. There was certainly great hope and optimism in the President's speech last night, and I look forward to a record and great year in 2021. I'd like to now turn it over to questions and open the lines up to hear from you. Thank you.

Our first question comes from Jared Shaw with Wells Fargo Securities.

Good morning, guys. Maybe starting off on the funding side, with the runoff of that higher cost funding, your loan-to-deposit ratio is still pretty high. Are you seeing good trends in DDA growth that should be sustainable and that we should see maybe a faster pace of deposit growth from here? Or how should we be thinking about funding and deposit growth in light of loan growth expectations?

I think we'll continue to see an increase in our funding on the deposit side. Noninterest-bearing has been a nice surprise for us. This quarter, Sean mentioned that we were about $180 million in noninterest-bearing growth. Total deposit growth, though, was about $350 million in the branches. When you compare that to $1.2 billion in growth in 2020, I think we're on pace to match what we did in 2020.

Okay. And then when you look at the loan growth outlook, what category should we see that in? What's your appetite for taking on additional New York City CRE at this point? Has pricing improved at all or has it gotten tighter? What does the growth mix outlook look like?

The pipeline is broken out with CRE at about $2.4 billion and the C&I pipeline at just about $900 million, which equates to the $3.3 billion Kevin referred to earlier. We have seen some Manhattan business pick up, especially on the CRE side and the multifamily side. Things are getting better; they're not where they were pre-COVID, but they are improving. To the extent we need additional risk mitigants in the CRE space, we're using them in the form of personal guarantees and asking customers to put six months of payments in escrow with us. We're comfortable with this approach. We do a lot of business in New Jersey, so New Jersey is contributing nicely to the pipeline. We're not running away from Manhattan at this point; we're simply being more cautious as we make those loans. When a loan comes in from Manhattan, the first question we ask is, 'How were you impacted during the COVID crisis?' and then we work from there.

And then just finally for me, we're seeing some deal activity in your markets over the last few weeks. How do you think that impacts your ability to potentially hire some people or target some customers that maybe you weren't able to get before? And then what's your outlook in terms of a participant in the M&A environment at this point?

From the perspective of competitive forces, I think you're exactly right. While a number of institutions are doing deals and integrating, there will be an opportunity for us to bring over additional lending teams or to capture additional business in our market. We're starting to see a bit of that already. Regarding deal activity, as a management team we see compelling reasons to pursue deals: being bigger, having more funds to contribute to technology investments and being more diversified. So we view those opportunities positively and will evaluate them.

Jared, the strategic opportunities will always be evaluated here. The core pillars are organic growth, M&A (either as a buyer or a strategic partnership), dividends and stock buybacks. Those are the pillars of our strategy moving forward. There's a lot of chatter; we're talking to a lot of people and seeing many opportunities. It's an exciting time, and either way, the long-term view is that we're in a very good position.

Thank you, I appreciate it.

Our next question comes from Mark Fitzgibbon with Piper Sandler.

Hey guys, good morning. Kevin, I love the uplifting comments. First, I wondered if you could give us any update on the timing of the expected closing on the Berkshire Hills branches — when that might be?

We'll probably get that closed before June 30, Mark.

Okay. And then secondly, on the expense front, you guys did a nice job managing cost this quarter. Sean, maybe share with us your outlook for expenses for the next quarter or two.

I think we should be in a very good spot, Mark. We've provided a guide around $425 million, and we're doing a bit better than that. So next quarter, I expect expenses to be in a similar spot. The Berkshire transaction, when it closes, will add some additional cost, but probably not until sometime in the second quarter. So looking forward to the second quarter, expense is probably in a very similar spot as today.

Okay. And then last, given the increased digitization of the business, are you thinking more about being proactive with branch consolidations in the rest of your network?

Yes, we are. We planned on closing 10 branches and we actually closed those earlier this month on April 9. We will continue to evaluate those opportunities. We continue to develop online products; that technology progress has been moving along nicely and will be a catalyst for us to continue to trim the branch network around the region.

Thank you.

Our next question comes from Steven Duong from RBC Capital Markets.

Hey, good morning guys. Sean, I just want to make sure I heard it right. The prepay income through April so far, was that $4.5 million?

That's correct. $4.5 million in the month of April.

Okay. So you're on pace to be above the fourth quarter level then?

I wouldn't go that far, Steven. The fourth quarter was elevated relative to our guidance for NIM that we gave for the full year around the 3% area. Our budget assumed less than what we saw in the fourth quarter. Our budget was $4 million to $5 million of prepayment fees per quarter built into our guidance. We are seeing a nice rebound and expect the margin to pop back up maybe eight to ten basis points in the second quarter.

Usually, it's seasonal in the fourth quarter because of tax reasons, 1031 exchanges and similar activity. Prepayments are typically highest in the fourth quarter.

Right. That makes sense. So I guess maybe we just drill down on the loan yields. If we strip out just the prepaid income, I'm getting your core loan yield down around 13 basis points. Does that sound right? Can you explain the dynamics with the core loan yield excluding the prepay income?

The best way to answer that is to look at average coupons by category. Residential loans are coming on at around 3%. Multifamily is coming on somewhere between 3.125% and 3.20%. CRE is coming on at about 3.25% to 3.375%. And C&I has become more competitive in this market, with yields coming in between 3.375% and 3.75%. The interest rate environment has benefited us on the liability side, but it's impacting the asset side as well.

Your math is approximately correct. Where we probably saw the most compression is in our residential portfolio. Current market rates are around the 3% area, and our residential portfolio yields were higher than that and are coming back down toward the market. That's where we saw the most compression.

Got it. So if rates are static, would you think we'd be around this level on the core loan yields?

Yes, that's fair. We took more compression this quarter, and moving forward we don't expect to see that much compression on the loan yield side — some, but not to the degree we saw in the first quarter.

Got it, appreciate that. Thank you guys.

The next question comes from Michael Perito with KBW.

Hey guys, I appreciate you taking the time. First, can you expand a little bit more on the residential mortgage gain on sale pipeline? Is it fair to think that number could bounce back a little in the second quarter before normalizing over the back half of the year?

We see activity has slowed on the mortgage banking front, and we think that number will trend down for the next quarter. When we did our budgets, we actually projected that mortgage banking income would come down in 2021. So that number will likely continue to trend down as we head through the rest of the year.

To add on, while mortgage banking may trend down, we expect swap fee income to offset some of that decline as we go through the year. That's how we see fee income unfolding: we'll lose a bit on mortgage banking but pick up offsetting swap income.

Thanks. And then on loan growth — 7% to 9% is pretty strong. How do we balance the provision expense between improving economic conditions and accelerating loan growth? Any initial thoughts?

Our models showed improved economic conditions this quarter and that can continue if the current trajectory holds. The New York City area has been slower to improve from a modeling and forecasting perspective than other parts of the country, but we do believe it's trending in the right direction. If that path continues, there could be more release coming in the provision line item toward the back half of the year.

I hope we'll have some loan growth that offsets any release. We're expecting loan growth.

Yes. That would be a scenario everyone would be happy with. Thank you.

Our next question is from Laurie Hunsicker with Compass Point.

Hi, good morning. Of your $582 million in deferrals, how much of that is New York City?

$341 million, I believe.

Okay, great. And then will you remind us, of that, how much is multifamily in New York and how much is office in New York? Also, of your $1.2 billion in office, how much of that is in New York City?

Laurie, are you specifically asking about Manhattan as the borough?

One second. We will follow up with the office breakdown. In Manhattan, $88 million is multifamily, CRE is $38 million, lodging is $195 million, and C&I loans are $0. I want to emphasize these loans are paying interest and are showing improving trends.

Okay. Great. The buybacks — love seeing them. They were a little slower this quarter. Any comments around that?

We saw our stock price accelerate quickly, which gave us reason to pause the buybacks and evaluate how tangible book value compares to where we're trading. The stock reached around $15, so we paused to monitor stability and will continue to evaluate buybacks.

Got it. And then on M&A, can you help us think about asset size targets and what makes sense? How big would you go, and how do you think about MOE and strategic fit?

We're open to strategic discussions and consider fit with our strategy. Berkshire was a $600 million deposit branch acquisition and Gold Coast was on the east side of our franchise. $7 billion to $15 billion would be an attractive scale for a larger transaction, but we're open to opportunities that enhance shareholder value. There are many discussions happening, and we are certainly looking at opportunities in the marketplace.

Thanks for taking my questions.

Laurie, just on the numbers, to reiterate: total exposure in Manhattan is $367 million, of which the hotel sector is $196 million; multifamily is $88 million; and CRE is $38 million. As I mentioned earlier, these loans have good sponsorship, improving operations and are paying interest.

Our next question comes from Matthew Breese with Stephens.

Good morning. On core NIM excluding prepayment penalty income, how do you think the year unfolds for that metric and the cadence of expansion from here?

We'll continue to see benefits from falling rates, especially on the deposit side. We still have some room to go in our government banking portfolio and a number of CD buckets maturing through the year that will benefit us. The core NIM should continue to expand. Focus on core NIM reflects the balance sheet changes: residential and multifamily yields are falling while C&I and CRE are increasing and noninterest-bearing deposits have reached 20%.

Got it. The other question: there are two pieces of legislation — in New York State, discussions around eviction without good cause, and at the federal level talk about changes to 1031 exchanges. How do you view these pieces of legislation impacting commercial real estate and multifamily, and how would you assess loan growth and credit quality impact potential?

I think you have to look at this in the context of the broader legislative agenda. Proposals like higher capital gains taxes and changes to incentives for investment are not positive for business and can be detrimental to economic development and productivity. Commercial real estate, especially multifamily, is a strong sector that generates substantial tax revenue. Policymakers should be cautious about changes that could discourage investment. My view is these proposals could have negative impacts on business investment if enacted.

Got it, that's all I have. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Well, thank you for your participation today. I look forward to seeing you all at our shareholders' meeting in May; it will be a virtual meeting again. I think 2021 is going to be a very strong year for the company. We've had three quarters of double-digit return on equity, and I believe that will continue throughout 2021. Thank you for your participation today. Have a great day, enjoy your spring, and be well.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.