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Meridian Bancorp, Inc. Reports Net Income for the Second Quarter And Six Months Ended June 30, 2016

BOSTON, July 26, 2016 (GLOBE NEWSWIRE) -- Meridian Bancorp, Inc. (the “Company” or “Meridian”) (NASDAQ:EBSB), the holding company for East Boston Savings Bank (the “Bank”) announced net income of $5.9 million, or $0.11 per diluted share, for the quarter ended June 30, 2016 compared to $7.5 million, or $0.14 per diluted share, for the quarter ended March 31, 2016 and $5.6 million, or $0.11 per diluted share, for the quarter ended June 30, 2015. For the six months ended June 30, 2016, net income was $13.4 million, or $0.26 per diluted share, up from $12.0 million, or $0.23 per diluted share, for the six months ended June 30, 2015. The Company’s return on average assets was 0.62% for the quarter ended June 30, 2016 compared to 0.83% for the quarter ended March 31, 2016 and 0.68% for the quarter ended June 30, 2015. For the six months ended June 30, 2016, the Company’s return on average assets was 0.72% compared to 0.73% for the six months ended June 30, 2015. The Company’s return on average equity was 4.03% for the quarter ended June 30, 2016 compared to 5.11% for the quarter ended March 31, 2016 and 3.80% for the quarter ended June 30, 2015. For the six months ended June 30, 2016, the Company’s return on average equity was 4.57% compared to 4.10% for the six months ended June 30, 2015.

Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, “I am pleased to report net income of $5.9 million, or $0.11 per share, for the second quarter and $13.4 million, or $0.26 per share, for the first half of 2016. Our loan portfolio grew to $3.5 billion at June 30, 2016, reflecting record quarterly net loan growth of $299 million, or 37% on an annualized basis, during the second quarter and $461 million, or 30% on an annualized basis, during the first half of 2016. Due to our exceptionally strong organic growth across all our commercial loan categories, we recorded a $4.0 million loan loss provision in the second quarter. Even with the large loan loss provision, our core pre-tax income, which excludes gains on sales of securities, increased $2.0 million, or 29%, to $8.7 million for the second quarter and $4.1 million, or 27%, to $19.4 million for the first half of 2016 compared to the same periods last year, reflecting rising net interest income and improving operating efficiency. Although our core pre-tax income declined from $10.7 million for the first quarter, such income excluding the loan loss provision rose $866,000, or 7%, to $12.6 million in the second quarter.”

The Company’s net interest income was $29.5 million for the quarter ended June 30, 2016, up $1.1 million, or 3.8%, from the quarter ended March 31, 2016 and $4.5 million, or 18.1%, from the quarter ended June 30, 2015. The interest rate spread and net interest margin on a tax-equivalent basis were 3.15% and 3.36%, respectively, for the quarter ended June 30, 2016 compared to 3.18% and 3.39%, respectively, for the quarter ended March 31, 2016 and 3.07% and 3.29%, respectively, for the quarter ended June 30, 2015. For the six months ended June 30, 2016, net interest income increased $8.5 million, or 17.2%, to $57.8 million from the six months ended June 30, 2015. The net interest rate spread and net interest margin on a tax-equivalent basis were 3.17% and 3.37%, respectively, for the six months ended June 30, 2016 compared to 3.04% and 3.26%, respectively, for the six months ended June 30, 2015. The increases in net interest income were due primarily to loan growth, partially offset by growth in total deposits and borrowings for the quarter and six months ended June 30, 2016 compared to the respective prior periods.

Total interest and dividend income increased to $35.8 million for the quarter ended June 30, 2016, up $1.7 million, or 4.8%, from the quarter ended March 31, 2016 and $6.1 million, or 20.3%, from the quarter ended June 30, 2015, primarily due to growth in the Company’s average loan balances to $3.422 billion, partially offset by the decline in the yield on loans on a tax-equivalent basis to 4.23%. The Company’s yield on interest-earning assets on a tax-equivalent basis was 4.05% for the quarter ended June 30, 2016, down one basis point from the quarter ended March 31, 2016 and up 15 basis points from the quarter ended June 30, 2015.

Total interest expense increased to $6.4 million for the quarter ended June 30, 2016, up $579,000, or 10.0%, from the quarter ended March 31, 2016 and $1.5 million, or 31.9%, from the quarter ended June 30, 2015. Interest expense on deposits increased to $5.7 million for the quarter ended June 30, 2016, up $433,000, or 8.3%, from the quarter ended March 31, 2016 and $1.3 million, or 29.9%, from the quarter ended June 30, 2015 primarily due to the growth in average total deposits to $2.943 billion and increases in the cost of average total deposits to 0.77%. Interest expense on borrowings increased to $723,000 for the quarter ended June 30, 2016, up $146,000, or 25.3%, from the quarter ended March 31, 2016 and $241,000, or 50.0%, from the quarter ended June 30, 2015 primarily due to the growth in average total borrowings to $264.1 million, partially offset by decreases in the cost of average total borrowings to 1.10%. The Company’s cost of funds was 0.80% for the quarter ended June 30, 2016, up two basis points from the quarter ended March 31, 2016 and seven basis points from the quarter ended June 30, 2015.

For the six months ended June 30, 2016, the Company’s total interest and dividend income increased $10.7 million, or 18.0%, to $70.0 from the six months ended June 30, 2015 primarily due to growth in the average loan balances of $586.7 million, or 21.8%, to $3.284 billion, partially offset by a decrease in the yield on loans on a tax-equivalent basis of eight basis points to 4.29% for the six months ended June 30, 2016 compared to the six months ended June 30, 2015. The Company’s yield on interest-earning assets on a tax-equivalent basis increased 17 basis points to 4.06% for the six months ended June 30, 2016 compared to 3.89% for the six months ended June 30, 2015.

Total interest expense increased $2.2 million, or 21.6%, to $12.2 million for the six months ended June 30, 2016 compared to $10.0 million for the six months ended June 30, 2015. Interest expense on deposits increased $1.9 million, or 20.5%, to $10.9 million for the six months ended June 30, 2016 from the six months ended June 30, 2015 primarily due to the growth in average total deposits of $341.5 million, or 13.5%, to $2.875 billion and an increase in the cost of average total deposits of four basis points to 0.76%. Interest expense on borrowings increased $310,000, or 31.3%, to $1.3 million for the six months ended June 30, 2016 from the six months ended June 30, 2015 primarily due to the growth in average total borrowings of $85.0 million, or 57.9%, to $231.9 million, partially offset by a decrease in the cost of average total borrowings of 23 basis points to 1.13%. The Company’ cost of funds increased four basis points to 0.79% for the six months ended June 30, 2016 compared to the six months ended June 30, 2015.

Mr. Gavegnano noted, “Our net interest income has continued to rise each consecutive quarter as total loans grew $801 million, or 29%, over the past twelve months on commercial loan originations of $1.6 billion. During that time, our net interest margin has remained fairly stable due to rising asset yields supported by our strong loan growth that effectively offsets the small rise in our cost of funds. Our lending pipeline remains strong as we continue to benefit from many opportunities to originate CRE and C&I loans through our well-established commercial relationships across the Boston area market.”

The Company's provision for loan losses was $4.0 million for the quarter ended June 30, 2016, up from $1.1 million for the quarter ended March 31, 2016 and $3.7 million for the quarter ended June 30, 2015. For the six months ended June 30, 2016, the provision for loan losses was $5.0 million compared to $3.7 million for the six months ended June 30, 2015. The allowance for loan losses was $38.3 million or 1.08% of total loans at June 30, 2016, up from $34.4 million or 1.06% of total loans at March 31, 2016, $33.4 million or 1.08% of total loans at December 31, 2015 and $30.1 million or 1.10% of total loans at June 30, 2015. The increases in the provision and the allowance for loan losses were primarily due to growth in the multi-family, commercial real estate, construction, and commercial and industrial loan categories, as such loans have higher inherent credit risk than loans in our residential real estate loan categories. The provision for loan losses and resulting allowance for loan losses also reflect management’s assessment of improving historical charge-off trends, an ongoing evaluation of credit quality and current economic conditions. The provision for loan losses for the quarter and six months ended June 30, 2015 included a $2.3 million provision and charge-off on a multi-family construction loan relationship during the second quarter of 2015.

Net charge-offs totaled $24,000 for the quarter ended June 30, 2016, or less than 0.01% of average loans outstanding on an annualized basis compared to net charge-offs of $81,000 for the quarter ended March 31, 2016, or 0.01% of average loans outstanding on an annualized basis and net charge-offs of $2.1 million for the quarter ended June 30, 2015, or 0.32% of average loans outstanding on an annualized basis. For the six months ended June 30, 2016, net charge-offs totaled $105,000, or 0.01% of average loans outstanding on an annualized basis compared to net charge-offs of $2.1 million for the six months ended June 30, 2015, or 0.15% of average loans outstanding on an annualized basis.

Non-accrual loans were $29.4 million, or 0.83% of total loans outstanding, at June 30, 2016, down from $30.7 million, or 0.95% of total loans outstanding, at March 31, 2016, $31.3 million, or 1.02% of total loans outstanding, at December 31, 2015 and $37.0 million, or 1.35% of total loans outstanding, at June 30, 2015. The decreases in non-accrual loans were primarily due to steady reductions in construction loans. Non-accrual construction loans include the $11.5 million remaining balance of a multi-family construction loan in Boston placed on non-accrual status during the second quarter of 2015. Non-performing assets were $29.6 million, or 0.75% of total assets, at June 30, 2016, down from $31.3 million, or 0.84% of total assets, at March 31, 2016, $31.3 million, or 0.89% of total assets, at December 31, 2015 and $38.0 million, or 1.15% of total assets, at June 30, 2015.

Mr. Gavegnano commented, “The loan loss provision of $4.0 million for the second quarter of 2016 reflects prudent additions to general reserve allocations resulting from the significant commercial loan portfolio growth during the quarter. Non-performing assets are steadily declining and net charge-offs are historically low. Our credit quality has improved as we continue to directly underwrite high quality commercial loans for our portfolio with strict monitoring through strong credit review and collection processes. We are also making progress toward resolution and collection of the $11.5 million remaining balance on the non-accrual construction loan in Boston.”

Non-interest income was $2.6 million for the quarter ended June 30, 2016, compared to $2.7 million for the quarter ended March 31, 2016 and $4.2 million for the quarter ended June 30, 2015. As compared to the quarter ended June 30, 2015, non-interest income decreased $1.6 million, or 38.8%, primarily due to declines of $1.4 million in gain on sales of securities, net, $252,000 in loan fees and $164,000 in mortgage banking gains, net, partially offset by an increase of $133,000 in customer service fees. For the six months ended June 30, 2016, non-interest income decreased $2.3 million, or 30.3%, to $5.3 million from $7.6 million for the six months ended June 30, 2015 primarily due to declines of $2.3 million in gain on sales of securities, net, $204,000 in mortgage banking gains, net and 106,000 in loan fees, partially offset by an increase of $323,000 in customer service fees.

Non-interest expenses were $19.3 million, or 2.03% of average assets for the quarter ended June 30, 2016, compared to $19.2 million, or 2.13% of average assets for the quarter ended March 31, 2016 and $17.3 million, or 2.12% of average assets for the quarter ended June 30, 2015. As compared to the quarter ended June 30, 2015, non-interest expenses increased $2.0 million, or 11.4%, primarily due to increases of $1.3 million in salaries and employee benefits, $499,000 in occupancy and equipment and $280,000 in other general and administrative expenses, partially offset by a decrease of $196,000 in marketing and advertising. For the six months ended June 30, 2016, non-interest expenses increased $3.1 million, or 8.9%, to $38.6 million from $35.4 million for the six months ended June 30, 2015, primarily due to increases of $2.6 million in salaries and employee benefits, $363,000 in occupancy and equipment and $494,000 in other general and administrative expenses, partially offset by a decrease of $377,000 in marketing and advertising. The increases in salaries and employee benefits expenses were primarily due to annual increases in employee compensation and health benefits during the first quarter and expenses associated with the November 2015 grant of restricted stock and stock options to the Company’s directors, officers and employees. In addition, increases in salaries and employee benefits expenses, occupancy and equipment expenses and other general and administrative expenses reflect costs associated with three new branches opened over the last twelve months. The decreases in marketing and advertising expenses reflect lower advertising production and direct mail costs and cost savings associated with the 2015 rebranding of the former Mt. Washington Bank Division into the East Boston Savings Bank brand. The Company’s efficiency ratio improved to 60.44% for the quarter ended June 30, 2016 from 62.01% for the quarter ended March 31, 2016 and 62.53% for the quarter ended June 30, 2015. For the six months ended June 30, 2016, the efficiency ratio was 61.21% compared to 65.02% for the six months ended June 30, 2015.

Mr. Gavegnano added, “Our efficiency ratio improved to new record low levels in the second quarter and first half of 2016. We will continue to execute the key components of our strategic business plan including a strong emphasis on organic commercial loan growth, selective expansion of our core banking franchise and close monitoring of our overhead expenses that we expect will result in continuing improvement in net interest income and operating efficiency.”

The Company recorded a provision for income taxes of $2.9 million for the quarter ended June 30, 2016, reflecting an effective tax rate of 32.6% for the quarter ended June 30, 2016, compared to $3.3 million for the quarter ended March 31, 2016, reflecting an effective tax rate of 30.6% and $2.6 million, or a 31.6% effective tax rate, for the quarter ended June 30, 2015. For the six months ended June 30, 2016, the provision for income taxes was $6.2 million, reflecting an effective tax rate of 31.5%, compared to $5.8 million, or 32.6%, for the six months ended June 30, 2015. The changes in the income tax provision and effective tax rate were primarily due to changes in the components of pre-tax income.

Total assets were $3.929 billion at June 30, 2016, an increase of $199.6 million, or 5.4%, from $3.729 billion at March 31, 2016 and an increase of $404.6 million, or 11.5%, from $3.525 billion at December 31, 2015. Net loans were $3.507 billion at June 30, 2016, an increase of $298.9 million, or 9.3%, from March 31, 2016 and an increase of $461.4 million, or 15.1% from December 31, 2015. Loan originations totaled $321.9 million during the quarter ended June 30, 2016 and $742.4 million during the six months ended June 30, 2016. The net increase in loans for the six months ended June 30, 2016 was primarily due to increases of $239.9 million in commercial real estate loans, $100.8 million in commercial and industrial loans, $73.3 million in multi-family loans and $63.3 million in construction loans, partially offset by a decrease of $11.3 million in one- to four-family loans. Cash and due from banks was $101.7 million at June 30, 2016, a decrease of $52.4 million, or 34.0%, from March 31, 2016 and an increase of $5.4 million, or 5.6% from December 31, 2015. Securities available for sale were $131.9 million at June 30, 2016, a decrease of $9.7 million, or 6.9%, from $141.6 million at December 31, 2015.

Total deposits were $2.998 billion at June 30, 2016, an increase of $86.6 million, or 3.0%, from $2.911 billion at March 31, 2016 and an increase of $255.0 million, or 9.3%, from $2.743 billion at December 31, 2015. Core deposits, which exclude certificate of deposits, increased $84.4 million, or 4.6%, during the six months ended June 30, 2016 to $1.939 billion, or 64.7% of total deposits. Total borrowings were $320.6 million, an increase $109.2 million, or 51.6%, from March 31, 2016 and an increase of $153.4 million, or 91.7%, from December 31, 2015.

Total stockholders’ equity was $586.7 million, an increase of $4.0 million, or 0.7%, from $582.7 million at March 31, 2016 and a decline of $1.5 million, or 0.3%, from $588.1 million at December 31, 2015. The decrease for the six months ended June 30, 2016 was primarily due to a $17.0 million repurchase of 1,220,711 shares of the Company’s common stock and two quarterly dividends of $0.03 per share totaling $3.1 million, partially offset by increases of $13.4 million in net income, $3.0 million related to stock-based compensation plans and $2.2 in accumulated other comprehensive income, reflecting an increase in the fair value of available-for-sale securities. Stockholders’ equity to assets was 14.93% at June 30, 2016, compared to 15.62% at March 31, 2016 and 16.69% at December 31, 2015. Book value per share increased to $10.93 at June 30, 2016 from $10.72 at December 31, 2015. Tangible book value per share increased to $10.67 at June 30, 2016 from $10.47 at December 31, 2015. Market price per share increased $0.68, or 4.8%, to $14.78 at June 30, 2016 from $14.10 at December 31, 2015. At June 30, 2016, the Company and the Bank continued to exceed all regulatory capital requirements.

During the quarter ended June 30, 2016, the Company repurchased 244,294 shares of its stock at an average price of $14.63 per share. As of June 30, 2016, the Company had repurchased 1,942,815 shares of its stock at an average price of $13.58 per share, or 71.0% of the 2,737,334 shares authorized for repurchase under the Company’s repurchase program as adopted in August 2015.

Mr. Gavegnano concluded, “Our plans are on track to open a second location in Brookline that will become our 31st branch by year end. We also continually evaluate new opportunities to expand our franchise footprint in the greater Boston market area and increase shareholder value.”

Meridian Bancorp, Inc. is the holding company for East Boston Savings Bank. East Boston Savings Bank, a Massachusetts-chartered stock savings bank founded in 1848, operates 30 full-service locations in the greater Boston metropolitan area. We offer a variety of deposit and loan products to individuals and businesses located in our primary market, which consists of Essex, Middlesex and Suffolk Counties, Massachusetts. For additional information, visit www.ebsb.com.

Forward Looking Statements

Certain statements herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by words such as “believes,” “will,” “expects,” “project,” “may,” “could,” “developments,” “strategic,” “launching,” “opportunities,” “anticipates,” “estimates,” “intends,” “plans,” “targets” and similar expressions. These statements are based upon the current beliefs and expectations of Meridian Bancorp, Inc.’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements as a result of numerous factors. Factors that could cause such differences to exist include, but are not limited to, general economic conditions, changes in interest rates, regulatory considerations, and competition and the risk factors described in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Meridian Bancorp, Inc.’s actual results could differ materially from those discussed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release.

MERIDIAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2016
March 31, 2016
December 31, 2015
June 30, 2015
(Dollars in thousands)
ASSETS
Cash and due from banks$101,735 $154,122 $96,363 $176,654
Certificates of deposit 35,342 92,675 99,062 95,000
Securities available for sale, at fair value 131,942 132,115 141,646 175,171
Federal Home Loan Bank stock, at cost 17,818 13,021 10,931 12,725
Loans held for sale 2,397 1,194 4,669 5,154
Loans:
One- to four-family 447,131 455,438 458,423 462,897
Home equity lines of credit 47,412 47,807 46,660 48,274
Multi-family 490,724 430,871 417,388 401,584
Commercial real estate 1,568,224 1,411,410 1,328,344 1,134,686
Construction 484,858 413,660 421,531 335,939
Commercial and industrial 500,897 477,450 400,051 354,696
Consumer 9,568 9,832 10,028 9,564
Total loans 3,548,814 3,246,468 3,082,425 2,747,640
Allowance for loan losses (38,317) (34,390) (33,405) (30,109)
Net deferred loan origination fees (3,902) (4,342) (3,778) (2,815)
Loans, net 3,506,595 3,207,736 3,045,242 2,714,716
Bank-owned life insurance 40,155 39,859 39,557 39,201
Foreclosed real estate, net 183 638 1,046
Premises and equipment, net 40,821 40,733 40,248 38,700
Accrued interest receivable 9,246 8,831 8,574 8,054
Deferred tax asset, net 20,232 20,868 21,246 17,368
Goodwill 13,687 13,687 13,687 13,687
Other assets 8,923 3,976 3,284 4,785
Total assets$3,929,076 $3,729,455 $3,524,509 $3,302,261
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest-bearing demand deposits$373,561 $388,731 $370,546 $351,236
NOW deposits 452,451 360,237 334,753 294,989
Money market deposits 812,315 880,186 860,957 907,933
Regular savings and other deposits 300,522 297,806 288,180 286,311
Certificates of deposit 1,059,188 984,459 888,582 710,697
Total deposits 2,998,037 2,911,419 2,743,018 2,551,166
Short-term borrowings 20,000
Long-term debt 320,624 211,426 147,226 140,817
Accrued expenses and other liabilities 23,763 23,926 26,139 21,681
Total liabilities 3,342,424 3,146,771 2,936,383 2,713,664
Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized; none issued
Common stock, $0.01 par value, 100,000,000 shares authorized; 53,688,566, 53,895,870, 54,875,237 and 54,965,555 shares issued at June 30, 2016, March 31, 2016, December 31, 2015 and June 30, 2015, respectively 537 539 549 550
Additional paid-in capital 389,318 391,399 403,737 411,701
Retained earnings 216,539 212,158 206,214 196,705
Accumulated other comprehensive income (loss) 99 (1,350) (2,092) 364
Unearned compensation - ESOP, 2,739,682, 2,770,123, 2,800,564 and 2,861,446 at June 30, 2016, March 31, 2016, December 31, 2015 and June 30, 2015, respectively (19,841) (20,062) (20,282) (20,723)
Total stockholders' equity 586,652 582,684 588,126 588,597
Total liabilities and stockholders' equity$3,929,076 $3,729,455 $3,524,509 $3,302,261

MERIDIAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, 2016
March 31, 2016
June 30, 2015
June 30, 2016
June 30, 2015
(Dollars in thousands, except per share amounts)
Interest and dividend income:
Interest and fees on loans $34,828 $33,097 $28,546 $67,925 $56,878
Interest on debt securities:
Taxable 238 266 434 504 945
Tax-exempt 32 33 41 65 83
Dividends on equity securities 418 400 421 818 808
Interest on certificates of deposit 135 170 157 305 293
Other interest and dividend income 188 218 188 406 358
Total interest and dividend income 35,839 34,184 29,787 70,023 59,365
Interest expense:
Interest on deposits 5,661 5,228 4,359 10,889 9,036
Interest on short-term borrowings 6 6
Interest on long-term debt 723 571 482 1,294 990
Total interest expense 6,384 5,805 4,841 12,189 10,026
Net interest income 29,455 28,379 24,946 57,834 49,339
Provision for loan losses 3,952 1,066 3,651 5,018 3,711
Net interest income, after provision for loan losses 25,503 27,313 21,295 52,816 45,628
Non-interest income:
Customer service fees 2,136 1,947 2,003 4,083 3,760
Loan fees (22) 312 230 290 396
Mortgage banking gains, net 104 70 268 174 378
Gain on sales of securities, net 68 59 1,424 127 2,444
Income from bank-owned life insurance 296 302 294 598 590
Other income 1 2 3 1
Total non-interest income 2,583 2,692 4,219 5,275 7,569
Non-interest expenses:
Salaries and employee benefits 11,979 12,513 10,717 24,492 21,884
Occupancy and equipment 2,867 2,484 2,368 5,351 4,988
Data processing 1,254 1,257 1,249 2,511 2,512
Marketing and advertising 699 713 895 1,412 1,789
Professional services 720 613 664 1,333 1,337
Foreclosed real estate 31 8 15 39 29
Deposit insurance 532 452 479 984 940
Other general and administrative 1,240 1,190 960 2,430 1,936
Total non-interest expenses 19,322 19,230 17,347 38,552 35,415
Income before income taxes 8,764 10,775 8,167 19,539 17,782
Provision for income taxes 2,857 3,298 2,582 6,155 5,792
Net income $5,907 $7,477 $5,585 $13,384 $11,990
Earnings per share:
Basic $0.12 $0.14 $0.11 $0.26 $0.23
Diluted $0.11 $0.14 $0.11 $0.26 $0.23
Weighted average shares:
Basic 51,026,985 51,569,683 52,074,889 51,298,334 51,969,106
Diluted 52,137,475 51,663,921 53,166,560 52,400,698 53,085,679

MERIDIAN BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
(Unaudited)
For the Three Months Ended
June 30, 2016 March 31, 2016 June 30, 2015
Yield/ Yield/ Yield/
Average
Balance
Interest (1) Cost
(1)(6)
Average
Balance
Interest (1) Cost
(1)(6)
Average
Balance
Interest (1) Cost
(1)(6)
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (2)$3,422,193 $36,000 4.23 % $3,146,449 $34,104 4.36 % $2,708,690 $29,346 4.35 %
Securities and certificates of deposits 199,596 995 2.00 231,604 1,034 1.80 281,526 1,228 1.75
Other interest-earning assets (3) 69,914 188 1.08 123,476 218 0.71 172,820 188 0.44
Total interest-earning assets 3,691,703 37,183 4.05 3,501,529 35,356 4.06 3,163,036 30,762 3.90
Noninterest-earning assets 124,147 114,476 113,572
Total assets$3,815,850 $3,616,005 $3,276,608
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits$462,543 646 0.56 $338,517 500 0.59 $283,429 381 0.54
Money market deposits 813,625 1,609 0.80 873,774 1,745 0.80 941,219 1,914 0.82
Regular savings and other deposits 296,638 106 0.14 290,463 103 0.14 283,702 104 0.15
Certificates of deposit 1,005,764 3,300 1.32 936,674 2,880 1.24 693,054 1,960 1.13
Total interest-bearing deposits 2,578,570 5,661 0.88 2,439,428 5,228 0.86 2,201,404 4,359 0.79
Borrowings 264,060 723 1.10 199,779 577 1.16 142,867 482 1.35
Total interest-bearing liabilities 2,842,630 6,384 0.90 2,639,207 5,805 0.88 2,344,271 4,841 0.83
Noninterest-bearing demand deposits 364,327 368,038 322,701
Other noninterest-bearing liabilities 22,909 23,312 21,500
Total liabilities 3,229,866 3,030,557 2,688,472
Total stockholders' equity 585,984 585,448 588,136
Total liabilities and stockholders' equity$3,815,850 $3,616,005 $3,276,608
Net interest-earning assets$849,073 $862,322 $818,765
Fully tax-equivalent net interest income 30,799 29,551 25,921
Less: tax-equivalent adjustments (1,344) (1,172) (975)
Net interest income $29,455 $28,379 $24,946
Interest rate spread (1)(4) 3.15 % 3.18 % 3.07 %
Net interest margin (1)(5) 3.36 % 3.39 % 3.29 %
Average interest-earning assets to average
interest-bearing liabilities 129.87 % 132.67 % 134.93 %
Supplemental Information:
Total deposits, including noninterest-bearing
demand deposits$2,942,897 $5,661 0.77 % $2,807,466 $5,228 0.75 % $2,524,105 $4,359 0.69 %
Total deposits and borrowings, including
noninterest-bearing demand deposits$3,206,957 $6,384 0.80 % $3,007,245 $5,805 0.78 % $2,666,972 $4,841 0.73 %

(1) Income on debt securities, equity securities and revenue bonds included in commercial real estate loans, as well as resulting yields, interest rate spread and net interest margin, are presented on a tax-equivalent basis. The tax-equivalent adjustments are deducted from tax-equivalent net interest income to agree to amounts reported in the consolidated statements of net income. For the three months ended June 30, 2016, March 31, 2016 and June 30, 2015, yields on loans before tax-equivalent adjustments were 4.09%, 4.23% and 4.23%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 1.66%, 1.51% and 1.50%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.90%, 3.93% and 3.78%, respectively. Interest rate spread before tax-equivalent adjustments for the three months ended June 30, 2016, March 31, 2016 and June 30, 2015 was 3.00%, 3.05% and 2.95%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended June 30, 2016, March 31, 2016 and June 30, 2015 was 3.21%, 3.26% and 3.16%, respectively.
(2) Loans on non-accrual status are included in average balances.
(3) Includes Federal Home Loan Bank stock and associated dividends.
(4) Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest-bearing liabilities.
(5) Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets.
(6) Annualized.

MERIDIAN BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
(Unaudited)
For the Six Months Ended
June 30, 2016 June 30, 2015
Average Yield/ Average Yield/
Balance Interest (1) Cost (1)(6) Balance Interest (1) Cost (1)(6)
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (2)$3,284,321 $70,104 4.29 % $2,697,590 $58,465 4.37 %
Securities and certificates of deposits 215,600 2,028 1.89 284,144 2,469 1.75
Other interest-earning assets (3) 96,695 406 0.84 192,333 358 0.38
Total interest-earning assets 3,596,616 72,538 4.06 3,174,067 61,292 3.89
Noninterest-earning assets 118,614 113,297
Total assets$3,715,230 $3,287,364
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits$401,952 1,146 0.57 $289,340 838 0.58
Money market deposits 843,700 3,355 0.80 960,554 3,992 0.84
Regular savings and other deposits 293,550 209 0.14 279,134 255 0.18
Certificates of deposit 971,219 6,179 1.28 695,495 3,951 1.15
Total interest-bearing deposits 2,510,421 10,889 0.87 2,224,523 9,036 0.82
Borrowings 231,920 1,300 1.13 146,881 990 1.36
Total interest-bearing liabilities 2,742,341 12,189 0.89 2,371,404 10,026 0.85
Noninterest-bearing demand deposits 364,760 309,185
Other noninterest-bearing liabilities 22,413 22,478
Total liabilities 3,129,514 2,703,067
Total stockholders' equity 585,716 584,297
Total liabilities and stockholders' equity$3,715,230 $3,287,364
Net interest-earning assets$854,275 $802,663
Fully tax-equivalent net interest income 60,349 51,266
Less: tax-equivalent adjustments (2,515) (1,927)
Net interest income $57,834 $49,339
Interest rate spread (1)(4) 3.17 % 3.04 %
Net interest margin (1)(5) 3.37 % 3.26 %
Average interest-earning assets to average
interest-bearing liabilities 131.15 % 133.85 %
Supplemental Information:
Total deposits, including noninterest-bearing
demand deposits$2,875,181 $10,889 0.76 % $2,533,708 $9,036 0.72 %
Total deposits and borrowings, including
noninterest-bearing demand deposits$3,107,101 $12,189 0.79 % $2,680,589 $10,026 0.75 %

(1) Income on debt securities, equity securities and revenue bonds included in commercial real estate loans, as well as resulting yields, interest rate spread and net interest margin, are presented on a tax-equivalent basis. The tax-equivalent adjustments are deducted from tax-equivalent net interest income to agree to amounts reported in the consolidated statements of net income. For the six months ended June 30, 2016 and 2015, yields on loans before tax-equivalent adjustments were 4.16% and 4.25%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 1.58% and 1.51%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.92% and 3.77%, respectively. Interest rate spread before tax-equivalent adjustments for the six months ended June 30, 2016 and 2015 was 3.03% and 2.92%, respectively, while net interest margin before tax-equivalent adjustments for the six months ended June 30, 2016 and 2015 was 3.23% and 3.13%, respectively.
(2) Loans on non-accrual status are included in average balances.
(3) Includes Federal Home Loan Bank stock and associated dividends.
(4) Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest-bearing liabilities.
(5) Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets.
(6) Annualized.

MERIDIAN BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
For the Three Months EndedFor the Six Months Ended
June 30, 2016 March 31,
2016
June 30, 2015 June 30, 2016 June 30, 2015
Key Performance Ratios
Return on average assets (1) 0.62 % 0.83 % 0.68 % 0.72 % 0.73 %
Return on average equity (1) 4.03 5.11 3.80 4.57 4.10
Interest rate spread (1) (2) 3.15 3.18 3.07 3.17 3.04
Net interest margin (1) (3) 3.36 3.39 3.29 3.37 3.26
Non-interest expense to average assets (1) 2.03 2.13 2.12 2.08 2.15
Efficiency ratio (4) 60.44 62.01 62.53 61.21 65.02

June 30, 2016 March 31, 2016 December 31, 2015 June 30, 2015
(Dollars in thousands)
Asset Quality
Non-accrual loans:
One- to four-family$9,552 $9,662 $9,264 $11,094
Home equity lines of credit 1,609 1,983 1,763 1,930
Multi-family
Commercial real estate 3,829 3,686 3,663 5,271
Construction 13,698 14,612 15,849 17,775
Commercial and industrial 737 745 805 892
Consumer
Total non-accrual loans 29,425 30,688 31,344 36,962
Foreclosed assets 183 638 1,046
Total non-performing assets$29,608 $31,326 $31,344 $38,008
Allowance for loan losses/total loans 1.08 % 1.06 % 1.08 % 1.10 %
Allowance for loan losses/non-accrual loans 130.22 112.06 106.58 81.46
Non-accrual loans/total loans 0.83 0.95 1.02 1.35
Non-accrual loans/total assets 0.75 0.82 0.89 1.12
Non-performing assets/total assets 0.75 0.84 0.89 1.15
Capital and Share Related
Stockholders' equity to total assets 14.93 % 15.62 % 16.69 % 17.82 %
Book value per share$10.93 $10.81 $10.72 $10.71
Tangible book value per share$10.67 $10.56 $10.47 $10.46
Market value per share$14.78 $13.92 $14.10 $13.41
Shares outstanding53,688,566 53,895,870 54,875,237 54,965,555

(1) Annualized.
(2) Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest-bearing liabilities.
(3) Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets.
(4) The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income excluding gains or losses on securities.


Contact: Richard J. Gavegnano, Chairman, President and Chief Executive Officer (978) 977-2211

Source:Meridian Bancorp, Inc.