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Meridian Bancorp, Inc. Reports Record Net Income for the Third Quarter And Nine Months Ended September 30, 2016

BOSTON, Oct. 25, 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 $9.5 million, or $0.18 per diluted share, for the quarter ended September 30, 2016, up from $5.9 million, or $0.11 per diluted share, for the quarter ended June 30, 2016 and $5.7 million, or $0.11 per diluted share, for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, net income was $22.9 million, or $0.44 per diluted share, up from $17.7 million, or $0.33 per diluted share, for the nine months ended September 30, 2015. The Company’s return on average assets was 0.94% for the quarter ended September 30, 2016, up from 0.62% for the quarter ended June 30, 2016 and 0.68% for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, the Company’s return on average assets was 0.80%, up from 0.71% for the nine months ended September 30, 2015. The Company’s return on average equity was 6.39% for the quarter ended September 30, 2016, up from 4.03% for the quarter ended June 30, 2016 and 3.89% for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, the Company’s return on average equity was 5.18%, up from 4.03% for the nine months ended September 30, 2015.

Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, “I am proud to report net income of $9.5 million for the third quarter of 2016, up 61% from the second quarter of 2016 and 65% from the third quarter of 2015, and net income of $22.9 million for the nine months ended September 30, 2016, up 29% from the same period in 2015. Our record earnings resulted from strong organic growth in loans and deposits along with significant enhancements to our credit quality over the past year as accomplished through the tremendous Bank-wide efforts of our team.”

The Company’s net interest income was $31.3 million for the quarter ended September 30, 2016, up $1.8 million, or 6.3%, from the quarter ended June 30, 2016 and $5.1 million, or 19.4%, from the quarter ended September 30, 2015. The interest rate spread and net interest margin on a tax-equivalent basis were 3.11% and 3.32%, respectively, for the quarter ended September 30, 2016 compared to 3.15% and 3.36%, respectively, for the quarter ended June 30, 2016 and 3.10% and 3.32%, respectively, for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, net interest income increased $13.6 million, or 18.0%, to $89.1 million from the nine months ended September 30, 2015. The net interest rate spread and net interest margin on a tax-equivalent basis were 3.14% and 3.35%, respectively, for the nine months ended September 30, 2016 compared to 3.06% and 3.28%, respectively, for the nine months ended September 30, 2015. The increases in net interest income were due primarily to loan growth, partially offset by increases in the average balances and costs of total deposits and borrowings for the quarter and nine months ended September 30, 2016 compared to the respective prior periods.

Total interest and dividend income increased to $38.4 million for the quarter ended September 30, 2016, up $2.6 million, or 7.2%, from the quarter ended June 30, 2016 and $7.1 million, or 22.6%, from the quarter ended September 30, 2015, primarily due to growth in the Company’s average loan balances to $3.614 billion. The Company’s yield on interest-earning assets on a tax-equivalent basis was 4.04% for the quarter ended September 30, 2016, down one basis point from the quarter ended June 30, 2016 and up nine basis points from the quarter ended September 30, 2015.

Total interest expense increased to $7.1 million for the quarter ended September 30, 2016, up $734,000, or 11.5%, from the quarter ended June 30, 2016 and $2.0 million, or 38.9%, from the quarter ended September 30, 2015. Interest expense on deposits increased to $6.3 million for the quarter ended September 30, 2016, up $612,000, or 10.8%, from the quarter ended June 30, 2016 and $1.6 million, or 35.1%, from the quarter ended September 30, 2015 primarily due to growth in average total deposits to $3.099 billion and an increase in the cost of average total deposits to 0.81%. Interest expense on borrowings increased to $845,000 for the quarter ended September 30, 2016, up $122,000, or 16.9%, from the quarter ended June 30, 2016 and $363,000, or 75.3%, from the quarter ended September 30, 2015 primarily due to growth in average total borrowings to $320.1 million, partially offset by a decrease in the cost of average total borrowings to 1.05%. The Company’s cost of funds was 0.83% for the quarter ended September 30, 2016, up three basis points from the quarter ended June 30, 2016 and nine basis points from the quarter ended September 30, 2015.

For the nine months ended September 30, 2016, the Company’s total interest and dividend income increased $17.7 million, or 19.6%, to $108.4 million from the nine months ended September 30, 2015 primarily due to growth in the average loan balances of $658.4 million, or 24.1%, to $3.395 billion, partially offset by a decrease in the yield on loans on a tax-equivalent basis of nine basis points to 4.28% for the nine months ended September 30, 2016 compared to 4.37% for the nine months ended September 30, 2015. The Company’s yield on interest-earning assets on a tax-equivalent basis increased 14 basis points to 4.05% for the nine months ended September 30, 2016 compared to 3.91% for the nine months ended September 30, 2015.

Total interest expense increased $4.2 million, or 27.4%, to $19.3 million for the nine months ended September 30, 2016 compared to $15.2 million for the nine months ended September 30, 2015. Interest expense on deposits increased $3.5 million, or 25.5%, to $17.2 million for the nine months ended September 30, 2016 from the nine months ended September 30, 2015 primarily due to growth in average total deposits of $390.3 million, or 15.2%, to $2.950 billion and an increase in the cost of average total deposits of seven basis points to 0.78%. Interest expense on borrowings increased $673,000, or 45.7%, to $2.1 million for the nine months ended September 30, 2016 from the nine months ended September 30, 2015 primarily due to growth in average total borrowings of $116.9 million, or 80.8%, to $261.5 million, partially offset by a decrease in the cost of average total borrowings of 26 basis points to 1.10%. The Company’s cost of funds increased five basis points to 0.80% for the nine months ended September 30, 2016 compared to 0.75% for the nine months ended September 30, 2015.

Mr. Gavegnano noted, “The continuing rise in our net interest income is attributable to growth in total loans of $777 million, or 27%, over the past twelve months, reflecting commercial loan originations of $1.3 billion. The strength and quality of our loan growth contributed to the relative stability of our earning assets yields and net interest margin since last year and reduced the effect of a small rise in our cost of funds.”

The Company's provision for loan losses was $858,000 for the quarter ended September 30, 2016, down from $4.0 million for the quarter ended June 30, 2016 and $2.4 million for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, the provision for loan losses was $5.9 million compared to $6.1 million for the nine months ended September 30, 2015. The allowance for loan losses was $38.7 million or 1.04% of total loans at September 30, 2016, compared to $38.3 million or 1.08% of total loans at June 30, 2016, $33.4 million or 1.08% of total loans at December 31, 2015 and $32.6 million or 1.11% of total loans at September 30, 2015. The changes in the provision and the allowance for loan losses were based on management’s assessment of loan portfolio growth and composition changes, declines in historical charge-off trends, reductions in problem loans and other improving asset quality trends, partially offset by growth in the multi-family, commercial real estate, construction, and commercial and industrial loan categories. The changes also reflected provisions and charge-offs on a multi-family construction loan relationship of $486,000 during the third quarter of 2016 and $2.3 million during the second quarter of 2015.

Net charge-offs totaled $478,000 for the quarter ended September 30, 2016, or 0.05% of average loans outstanding on an annualized basis compared to net charge-offs of $24,000 for the quarter ended June 30, 2016, or less than 0.01% of average loans outstanding on an annualized basis and net recoveries of $65,000 for the quarter ended September 30, 2015, or 0.01% of average loans outstanding on an annualized basis. For the nine months ended September 30, 2016, net charge-offs totaled $583,000, or 0.02% of average loans outstanding on an annualized basis compared to net charge-offs of $2.0 million for the nine months ended September 30, 2015, or 0.10% of average loans outstanding on an annualized basis.

Non-accrual loans were $15.2 million, or 0.41% of total loans outstanding, at September 30, 2016, down $14.2 million, or 48.3%, from June 30, 2016, $16.1 million, or 51.5%, from December 31, 2015 and $19.9 million, or 56.7%, from September 30, 2015. The reductions in non-accrual loans were primarily due to the sale at foreclosure during the third quarter of 2016 of an $11.5 million multi-family construction loan in Boston that was originally placed on non-accrual status during the second quarter of 2015, along with steady reductions across various categories of non-accrual loans. Non-performing assets were $15.2 million, or 0.36% of total assets, at September 30, 2016, down from $29.6 million, or 0.75% of total assets, at June 30, 2016, $31.3 million, or 0.89% of total assets, at December 31, 2015 and $35.7 million, or 1.06% of total assets, at September 30, 2015.

Mr. Gavegnano commented, “During the third quarter, our non-performing assets were reduced by one half to the lowest level in eight years. Although the third quarter resolution of the $11.5 million non-accrual construction loan in Boston provided the largest reduction, enhancements in our credit quality as exemplified by historically low charge-off rates have been achieved through solid loan underwriting, credit review and collection processes.”

Non-interest income was $3.3 million for the quarter ended September 30, 2016, up from $2.6 million for the quarter ended June 30, 2016 and $2.8 million for the quarter ended September 30, 2015 primarily due to increases in fee income, mortgage banking gains, net and gain on sale of securities, net. For the nine months ended September 30, 2016, non-interest income decreased $1.8 million, or 17.3%, to $8.6 million from $10.4 million for the nine months ended September 30, 2015 primarily due to declines of $2.1 million in gain on sales of securities, net and $131,000 in loan fees, partially offset by an increase of $444,000 in customer service fees.

Non-interest expenses were $19.2 million, or 1.90% of average assets for the quarter ended September 30, 2016, compared to $19.3 million, or 2.03% of average assets for the quarter ended June 30, 2016 and $18.1 million, or 2.15% of average assets for the quarter ended September 30, 2015. As compared to the quarter ended September 30, 2015, non-interest expenses increased $1.1 million, or 5.9%, primarily due to increases of $934,000 in salaries and employee benefits and $171,000 in occupancy and equipment expenses. For the nine months ended September 30, 2016, non-interest expenses increased $4.2 million, or 7.9%, to $57.7 million from $53.5 million for the nine months ended September 30, 2015, primarily due to increases of $3.5 million in salaries and employee benefits, $534,000 in occupancy and equipment and $518,000 in other general and administrative expenses, partially offset by a decrease of $311,000 in marketing and advertising. The increases in salaries and employee benefits expenses were primarily due to annual increases in employee compensation and health benefits, 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 55.81% for the quarter ended September 30, 2016 from 60.44% for the quarter ended June 30, 2016 and 62.45% for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, the efficiency ratio was 59.31% compared to 64.13% for the nine months ended September 30, 2015.

Mr. Gavegnano added, “Our efficiency ratio improved to 55.81% for the third quarter as a result of continually increasing net interest income and close control over our non-interest expenses. We are continuing to attract new business relationships across the board in the lucrative Boston market, providing us with many opportunities to gain market share in loans and deposits. With our seasoned branches serving as a strong platform, our newer branches are contributing to our robust growth. As we continue to emphasize organic growth across our commercial portfolios, we are strategically expanding our core banking franchise with the opening of our 31st branch at a second location in Brookline by year end.”

The Company recorded a provision for income taxes of $5.1 million for the quarter ended September 30, 2016, reflecting an effective tax rate of 34.9%, compared to $2.9 million for the quarter ended June 30, 2016, reflecting an effective tax rate of 32.6% and $2.8 million, or a 32.5% effective tax rate, for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, the provision for income taxes was $11.2 million, reflecting an effective tax rate of 32.9%, compared to $8.6 million, or 32.6%, for the nine months ended September 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 $4.173 billion at September 30, 2016, an increase of $244.1 million, or 6.2%, from $3.929 billion at June 30, 2016 and an increase of $648.6 million, or 18.4%, from $3.525 billion at December 31, 2015. Net loans were $3.662 billion at September 30, 2016, an increase of $155.0 million, or 4.4%, from June 30, 2016 and an increase of $616.4 million, or 20.2% from December 31, 2015. Loan originations totaled $270.5 million during the quarter ended September 30, 2016 and $1.0 billion during the nine months ended September 30, 2016. The net increase in loans for the nine months ended September 30, 2016 was primarily due to increases of $313.4 million in commercial real estate loans, $149.4 million in multi-family loans, $101.9 million in commercial and industrial loans and $68.5 million in construction loans, partially offset by a decrease of $10.4 million in one- to four-family loans. These net changes exclude reclassifications during the third quarter of $44.3 million in multi-family loans and $34.5 million in commercial real estate loans to one- to four-family loans in accordance with regulatory guidance. Cash and due from banks was $182.9 million at September 30, 2016, an increase of $81.1 million, or 79.7%, from June 30, 2016 and an increase of $86.5 million, or 89.8% from December 31, 2015. Securities available for sale were $145.4 million at September 30, 2016, an increase of $3.8 million, or 2.7%, from $141.6 million at December 31, 2015.

Total deposits were $3.230 billion at September 30, 2016, an increase of $231.5 million, or 7.7%, from $2.998 billion at June 30, 2016 and an increase of $486.6 million, or 17.7%, from $2.743 billion at December 31, 2015. Core deposits, which exclude certificate of deposits, increased $269.0 million, or 14.5%, during the nine months ended September 30, 2016 to $2.123 billion, or 65.8% of total deposits. Total borrowings were $319.8 million, a decrease of $804,000, or 0.3%, from June 30, 2016 and an increase of $152.6 million, or 91.3%, from December 31, 2015.

Total stockholders’ equity was $597.1 million, an increase of $10.4 million, or 1.8%, from $586.7 million at June 30, 2016 and an increase of $8.9 million, or 1.5%, from $588.1 million at December 31, 2015. The increase for the nine months ended September 30, 2016 was primarily due to increases from $22.9 million in net income, $4.5 million related to stock-based compensation plans and $3.1 million in accumulated other comprehensive income, reflecting an increase in the fair value of available-for-sale securities, partially offset by a $17.0 million repurchase of 1,220,711 shares of the Company’s common stock and three quarterly dividends of $0.03 per share totaling $4.6 million. Stockholders’ equity to assets was 14.31% at September 30, 2016, compared to 14.93% at June 30, 2016 and 16.69% at December 31, 2015. Book value per share increased to $11.12 at September 30, 2016 from $10.72 at December 31, 2015. Tangible book value per share increased to $10.86 at September 30, 2016 from $10.47 at December 31, 2015. Market price per share increased $1.47, or 10.4%, to $15.57 at September 30, 2016 from $14.10 at December 31, 2015. At September 30, 2016, the Company and the Bank continued to exceed all regulatory capital requirements.

As of September 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. The Company did not repurchase any of its shares during the quarter ended September 30, 2016.

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)
September 30, 2016 June 30,
2016
December 31, 2015 September 30, 2015
(Dollars in thousands)
ASSETS
Cash and due from banks$182,852 $101,735 $96,363 $98,038
Certificates of deposit 30,342 35,342 99,062 95,008
Securities available for sale, at fair value 145,441 131,942 141,646 151,025
Federal Home Loan Bank stock, at cost 17,818 17,818 10,931 12,725
Loans held for sale 2,854 2,397 4,669 2,302
Loans:
One- to four-family 526,828 447,131 458,423 458,635
Home equity lines of credit 46,249 47,412 46,660 48,838
Multi-family 522,444 490,724 417,388 386,060
Commercial real estate 1,607,276 1,568,224 1,328,344 1,274,371
Construction 490,016 484,858 421,531 384,468
Commercial and industrial 501,976 500,897 400,051 365,594
Consumer 9,680 9,568 10,028 9,793
Total loans 3,704,469 3,548,814 3,082,425 2,927,759
Allowance for loan losses (38,697) (38,317) (33,405) (32,585)
Net deferred loan origination fees (4,159) (3,902) (3,778) (3,526)
Loans, net 3,661,613 3,506,595 3,045,242 2,891,648
Bank-owned life insurance 40,451 40,155 39,557 39,262
Foreclosed real estate, net 183 600
Premises and equipment, net 40,747 40,821 40,248 39,539
Accrued interest receivable 9,209 9,246 8,574 8,239
Deferred tax asset, net 19,835 20,232 21,246 19,933
Goodwill 13,687 13,687 13,687 13,687
Other assets 8,281 8,923 3,284 3,842
Total assets$4,173,130 $3,929,076 $3,524,509 $3,375,848
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest-bearing demand deposits$410,667 $373,561 $370,546 $352,360
NOW deposits 547,650 452,451 334,753 308,612
Money market deposits 863,385 812,315 860,957 880,841
Regular savings and other deposits 301,754 300,522 288,180 283,595
Certificates of deposit 1,106,113 1,059,188 888,582 805,273
Total deposits 3,229,569 2,998,037 2,743,018 2,630,681
Short-term borrowings 20,000
Long-term debt 319,820 320,624 147,226 140,023
Accrued expenses and other liabilities 26,685 23,763 26,139 22,045
Total liabilities 3,576,074 3,342,424 2,936,383 2,792,749
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; 53,714,191, 53,688,566, 54,875,237 and 54,458,315 shares issued at September 30, 2016, June 30, 2016, December 31, 2015 and September 30, 2015, respectively 537 537 549 545
Additional paid-in capital 390,587 389,318 403,737 405,602
Retained earnings 224,509 216,539 206,214 200,813
Accumulated other comprehensive income (loss) 1,044 99 (2,092) (3,358)
Unearned compensation - ESOP, 2,709,242, 2,739,682, 2,800,564 and 2,831,005 at September 30, 2016, June 30, 2016, December 31, 2015 and September 30, 2015, respectively (19,621) (19,841) (20,282) (20,503)
Total stockholders' equity 597,056 586,652 588,126 583,099
Total liabilities and stockholders' equity$4,173,130 $3,929,076 $3,524,509 $3,375,848


MERIDIAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30,
2016
June 30,
2016
September 30,
2015
September 30,
2016
September 30,
2015
(Dollars in thousands, except per share amounts)
Interest and dividend income:
Interest and fees on loans$37,444 $34,828 $30,153 $105,369 $87,031
Interest on debt securities:
Taxable 203 238 366 707 1,311
Tax-exempt 30 32 41 95 124
Dividends on equity securities 365 418 408 1,183 1,216
Interest on certificates of deposit 75 135 163 380 456
Other interest and dividend income 303 188 207 709 565
Total interest and dividend income 38,420 35,839 31,338 108,443 90,703
Interest expense:
Interest on deposits 6,273 5,661 4,643 17,162 13,679
Interest on short-term borrowings 6
Interest on long-term debt 845 723 482 2,139 1,472
Total interest expense 7,118 6,384 5,125 19,307 15,151
Net interest income 31,302 29,455 26,213 89,136 75,552
Provision for loan losses 858 3,952 2,412 5,876 6,123
Net interest income, after provision
for loan losses
30,444 25,503 23,801 83,260 69,429
Non-interest income:
Customer service fees 2,170 2,136 2,049 6,253 5,809
Loan fees 293 (22) 318 583 714
Mortgage banking gains, net 274 104 38 448 416
Gain on sales of securities, net 266 68 45 393 2,489
Income from bank-owned life insurance 296 296 340 894 930
Other income 2 1 7 5 8
Total non-interest income 3,301 2,583 2,797 8,576 10,366
Non-interest expenses:
Salaries and employee benefits 12,169 11,979 11,235 36,661 33,119
Occupancy and equipment 2,577 2,867 2,406 7,928 7,394
Data processing 1,293 1,254 1,375 3,804 3,887
Marketing and advertising 832 699 766 2,244 2,555
Professional services 663 720 644 1,996 1,981
Foreclosed real estate (11) 31 96 28 125
Deposit insurance 572 532 522 1,556 1,462
Other general and administrative 1,069 1,240 1,045 3,499 2,981
Total non-interest expenses 19,164 19,322 18,089 57,716 53,504
Income before income taxes 14,581 8,764 8,509 34,120 26,291
Provision for income taxes 5,084 2,857 2,767 11,239 8,559
Net income$9,497 $5,907 $5,742 $22,881 $17,732
Earnings per share:
Basic$0.19 $0.12 $0.11 $0.45 $0.34
Diluted$0.18 $0.11 $0.11 $0.44 $0.33
Weighted average shares:
Basic50,982,633 51,026,985 51,940,055 51,192,332 51,959,315
Diluted52,093,009 52,137,475 53,023,850 52,297,367 53,064,962


MERIDIAN BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
(Unaudited)
Three Months Ended
September 30, 2016 June 30, 2016 September 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) $3,614,168 $38,684 4.26% $3,422,193 $36,000 4.23% $2,813,703 $30,967 4.37%
Securities and certificates of deposit 157,293 823 2.08 199,596 995 2.00 262,874 1,150 1.74
Other interest-earning assets (3) 148,425 303 0.81 69,914 188 1.08 171,454 207 0.48
Total interest-earning assets 3,919,886 39,810 4.04 3,691,703 37,183 4.05 3,248,031 32,324 3.95
Noninterest-earning assets 117,703 124,147 117,024
Total assets $4,037,589 $3,815,850 $3,365,055
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits $493,612 816 0.66 $462,543 646 0.56 $296,829 416 0.56
Money market deposits 836,941 1,715 0.82 813,625 1,609 0.80 921,425 1,909 0.82
Regular savings and other deposits 298,799 107 0.14 296,638 106 0.14 283,130 102 0.14
Certificates of deposit 1,085,898 3,635 1.33 1,005,764 3,300 1.32 759,682 2,216 1.16
Total interest-bearing deposits 2,715,250 6,273 0.92 2,578,570 5,661 0.88 2,261,066 4,643 0.81
Borrowings 320,091 845 1.05 264,060 723 1.10 140,297 482 1.36
Total interest-bearing liabilities 3,035,341 7,118 0.93 2,842,630 6,384 0.90 2,401,363 5,125 0.85
Noninterest-bearing demand deposits 383,953 364,327 350,963
Other noninterest-bearing liabilities 23,977 22,909 22,572
Total liabilities 3,443,271 3,229,866 2,774,898
Total stockholders' equity 594,318 585,984 590,157
Total liabilities and stockholders' equity $4,037,589 $3,815,850 $3,365,055
Net interest-earning assets $884,545 $849,073 $846,668
Fully tax-equivalent net interest income 32,692 30,799 27,199
Less: tax-equivalent adjustments (1,390) (1,344) (986)
Net interest income $31,302 $29,455 $26,213
Interest rate spread (1)(4) 3.11% 3.15% 3.10%
Net interest margin (1)(5) 3.32% 3.36% 3.32%
Average interest-earning assets to
average interest-bearing liabilities 129.14 % 129.87 % 135.26 %
Supplemental Information:
Total deposits, including noninterest-
bearing demand deposits $3,099,203 $6,273 0.81% $2,942,897 $5,661 0.77% $2,612,029 $4,643 0.71%
Total deposits and borrowings,
including noninterest-bearing demand deposits $3,419,294 $7,118 0.83% $3,206,957 $6,384 0.80% $2,752,326 $5,125 0.74%

(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 September 30, 2016, June 30, 2016 and September 30, 2015, yields on loans before tax-equivalent adjustments were 4.12%, 4.09% and 4.25%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 1.70%, 1.66% and 1.48%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.90%, 3.90% and 3.83%, respectively. Interest rate spread before tax-equivalent adjustments for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015 was 2.97%, 3.00% and 2.98%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015 was 3.18%, 3.21% and 3.20%, 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)
Nine Months Ended
September 30, 2016 September 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)$3,395,072 $108,788 4.28% $2,736,720 $89,432 4.37%
Securities and certificates of deposit 196,022 2,852 1.94 276,976 3,618 1.75
Other interest-earning assets (3) 114,064 709 0.83 185,297 565 0.41
Total interest-earning assets 3,705,158 112,349 4.05 3,198,993 93,615 3.91
Noninterest-earning assets 118,211 114,196
Total assets$3,823,369 $3,313,189
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits$432,729 1,962 0.61 $291,864 1,254 0.57
Money market deposits 841,430 5,070 0.80 947,368 5,901 0.83
Regular savings and other deposits 295,313 316 0.14 280,481 357 0.17
Certificates of deposit 1,009,724 9,814 1.30 717,126 6,167 1.15
Total interest-bearing deposits 2,579,196 17,162 0.89 2,236,839 13,679 0.82
Borrowings 261,524 2,145 1.10 144,662 1,472 1.36
Total interest-bearing liabilities 2,840,720 19,307 0.91 2,381,501 15,151 0.85
Noninterest-bearing demand deposits 371,204 323,264
Other noninterest-bearing liabilities 22,841 22,152
Total liabilities 3,234,765 2,726,917
Total stockholders' equity 588,604 586,272
Total liabilities and stockholders' equity$3,823,369 $3,313,189
Net interest-earning assets$864,438 $817,492
Fully tax-equivalent net interest income 93,042 78,464
Less: tax-equivalent adjustments (3,906) (2,912)
Net interest income $89,136 $75,552
Interest rate spread (1)(4) 3.14% 3.06%
Net interest margin (1)(5) 3.35% 3.28%
Average interest-earning assets to average
interest-bearing liabilities 130.43 % 134.33 %
Supplemental Information:
Total deposits, including noninterest-bearing
demand deposits$2,950,400 $17,162 0.78% $2,560,103 $13,679 0.71%
Total deposits and borrowings, including
noninterest-bearing demand deposits$3,211,924 $19,307 0.80% $2,704,765 $15,151 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 nine months ended September 30, 2016 and 2015, yields on loans before tax-equivalent adjustments were 4.15% and 4.25%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 1.61% and 1.50%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.91% and 3.79%, respectively. Interest rate spread before tax-equivalent adjustments for the nine months ended September 30, 2016 and 2015 was 3.00% and 2.94%, respectively, while net interest margin before tax-equivalent adjustments for the nine months ended September 30, 2016 and 2015 was 3.21% 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
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30,
2016
June 30,
2016
September 30,
2015
September 30,
2016
September 30,
2015
Key Performance Ratios
Return on average assets (1) 0.94% 0.62% 0.68% 0.80% 0.71%
Return on average equity (1) 6.39 4.03 3.89 5.18 4.03
Interest rate spread (1) (2) 3.11 3.15 3.10 3.14 3.06
Net interest margin (1) (3) 3.32 3.36 3.32 3.35 3.28
Non-interest expense to average assets (1) 1.90 2.03 2.15 2.01 2.15
Efficiency ratio (4) 55.81 60.44 62.45 59.31 64.13


September 30,
2016
June 30,
2016
December 31,
2015
September 30,
2015
(Dollars in thousands)
Asset Quality
Non-accrual loans:
One- to four-family $8,828 $9,552 $9,264 $9,717
Home equity lines of credit 746 1,609 1,763 1,837
Multi-family
Commercial real estate 2,871 3,829 3,663 4,983
Construction 2,031 13,698 15,849 17,502
Commercial and industrial 730 737 805 1,101
Consumer
Total non-accrual loans 15,206 29,425 31,344 35,140
Foreclosed assets 183 600
Total non-performing assets $15,206 $29,608 $31,344 $35,740
Allowance for loan losses/total loans 1.04% 1.08% 1.08% 1.11%
Allowance for loan losses/non-accrual loans 254.49 130.22 106.58 92.73
Non-accrual loans/total loans 0.41 0.83 1.02 1.20
Non-accrual loans/total assets 0.36 0.75 0.89 1.04
Non-performing assets/total assets 0.36 0.75 0.89 1.06
Capital and Share Related
Stockholders' equity to total assets 14.31% 14.93% 16.69% 17.27%
Book value per share $11.12 $10.93 $10.72 $10.71
Tangible book value per share $10.86 $10.67 $10.47 $10.46
Market value per share $15.57 $14.78 $14.10 $13.67
Shares outstanding 53,714,191 53,688,566 54,875,237 54,458,315

(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.