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Meridian Bancorp, Inc. Reports Record Net Income for the Fourth Quarter And Year Ended December 31, 2016

BOSTON, Jan. 24, 2017 (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 $11.3 million, or $0.22 per diluted share, for the quarter ended December 31, 2016, up from $9.5 million, or $0.18 per diluted share, for the quarter ended September 30, 2016 and $6.9 million, or $0.13 per diluted share, for the quarter ended December 31, 2015. For the year ended December 31, 2016, net income was $34.2 million, or $0.65 per diluted share, up from $24.6 million, or $0.46 per diluted share, for the year ended December 31, 2015. The Company’s return on average assets was 1.05% for the quarter ended December 31, 2016, up from 0.94% for the quarter ended September 30, 2016 and 0.80% for the quarter ended December 31, 2015. For the year ended December 31, 2016, the Company’s return on average assets was 0.87%, up from 0.74% for the year ended December 31, 2015. The Company’s return on average equity was 7.51% for the quarter ended December 31, 2016, up from 6.39% for the quarter ended September 30, 2016 and 4.67% for the quarter ended December 31, 2015. For the year ended December 31, 2016, the Company’s return on average equity was 5.77%, up from 4.19% for the year ended December 31, 2015.

Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, “It is my great pleasure to report record net income of $34.2 million for the year 2016, up $9.6 million, or 39%, from 2015. Our net income of $11.3 million for the fourth quarter of 2016, a new quarterly record, was up $1.8 million, or 19%, from the third quarter of 2016 and $4.4 million, or 64%, from the fourth quarter of 2015. Our earnings momentum over the past year resulted from rising net interest income, driven by our strong organic growth in loans and deposits, along with increasingly favorable trends in asset quality and operating efficiency. These results are also directly related to the hard work of the entire East Boston Savings Bank team, and all of us remain committed to building on these accomplishments to further strengthen our franchise and enhance shareholder value.”

The Company’s net interest income was $33.4 million for the quarter ended December 31, 2016, up $2.1 million, or 6.8%, from the quarter ended September 30, 2016 and $6.1 million, or 22.2%, from the quarter ended December 31, 2015. The interest rate spread and net interest margin on a tax-equivalent basis were 3.09% and 3.31%, respectively, for the quarter ended December 31, 2016 compared to 3.11% and 3.32%, respectively, for the quarter ended September 30, 2016 and 3.17% and 3.39%, respectively, for the quarter ended December 31, 2015. For the year ended December 31, 2016, net interest income increased $19.7 million, or 19.1%, to $122.6 million from the year ended December 31, 2015. The net interest rate spread and net interest margin on a tax-equivalent basis were 3.13% and 3.34%, respectively, for the year ended December 31, 2016 compared to 3.09% and 3.31%, respectively, for the year ended December 31, 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 year ended December 31, 2016 compared to the respective prior periods.

Total interest and dividend income increased to $41.2 million for the quarter ended December 31, 2016, up $2.8 million, or 7.4%, from the quarter ended September 30, 2016 and $8.6 million, or 26.4%, from the quarter ended December 31, 2015, primarily due to growth in the Company’s average loan balances to $3.793 billion. The Company’s yield on interest-earning assets on a tax-equivalent basis was 4.05% for the quarter ended December 31, 2016, up one basis point from the quarter ended September 30, 2016 and up two basis points from the quarter ended December 31, 2015.

Total interest expense increased to $7.8 million for the quarter ended December 31, 2016, up $712,000, or 10.0%, from the quarter ended September 30, 2016 and $2.5 million, or 47.7%, from the quarter ended December 31, 2015. Interest expense on deposits increased to $7.0 million for the quarter ended December 31, 2016, up $689,000, or 11.0%, from the quarter ended September 30, 2016 and $2.2 million, or 45.0%, from the quarter ended December 31, 2015 primarily due to growth in average total deposits to $3.343 billion and an increase in the cost of average total deposits to 0.83%. Interest expense on borrowings increased to $868,000 for the quarter ended December 31, 2016, up $23,000, or 2.7%, from the quarter ended September 30, 2016 and $368,000, or 73.6%, from the quarter ended December 31, 2015 primarily due to growth in average total borrowings to $325.4 million, partially offset by a decrease in the cost of average total borrowings to 1.06%. The Company’s cost of funds was 0.85% for the quarter ended December 31, 2016, up two basis points from the quarter ended September 30, 2016 and 10 basis points from the quarter ended December 31, 2015.

For the year ended December 31, 2016, the Company’s total interest and dividend income increased $26.4 million, or 21.4%, to $149.7 million from the year ended December 31, 2015 primarily due to growth in the average loan balances of $693.1 million, or 24.7%, to $3.495 billion, partially offset by a decrease in the yield on loans on a tax-equivalent basis of five basis points to 4.30% for the year ended December 31, 2016 compared to 4.35% for the year ended December 31, 2015. The Company’s yield on interest-earning assets on a tax-equivalent basis increased 11 basis points to 4.05% for the year ended December 31, 2016 compared to 3.94% for the year ended December 31, 2015.

Total interest expense increased $6.7 million, or 32.7%, to $27.1 million for the year ended December 31, 2016 compared to $20.5 million for the year ended December 31, 2015. Interest expense on deposits increased $5.6 million, or 30.5%, to $24.1 million for the year ended December 31, 2016 from the year ended December 31, 2015 primarily due to growth in average total deposits of $462.1 million, or 17.9%, to $3.049 billion and an increase in the cost of average total deposits of eight basis points to 0.79%. Interest expense on borrowings increased $1.0 million, or 52.8%, to $3.0 million for the year ended December 31, 2016 from the year ended December 31, 2015 primarily due to growth in average total borrowings of $131.2 million, or 89.7%, to $277.6 million, partially offset by a decrease in the cost of average total borrowings of 26 basis points to 1.09%. The Company’s cost of funds increased seven basis points to 0.82% for the year ended December 31, 2016 compared to 0.75% for the year ended December 31, 2015.

Mr. Gavegnano noted, “The robust increases in net interest income have been driven by our proven capabilities to attract and retain high quality commercial loan and core deposit relationships. Over the past five years, our net interest income has steadily risen each consecutive quarter as our total loan portfolio increased $2.6 billion, for a compounded annual growth rate of 24%, and core deposits increased $1.4 billion, for a compounded annual growth rate of 20%.”

The Company's provision for loan losses was $1.3 million for the quarter ended December 31, 2016, up from $858,000 for the quarter ended September 30, 2016 and $544,000 for the quarter ended December 31, 2015. For the year ended December 31, 2016, the provision for loan losses was $7.2 million compared to $6.7 million for the year ended December 31, 2015. The allowance for loan losses was $40.1 million or 1.02% of total loans at December 31, 2016, compared to $38.7 million or 1.04% of total loans at September 30, 2016 and $33.4 million or 1.08% of total loans at December 31, 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 recoveries totaled $147,000 for the quarter ended December 31, 2016, or 0.02% of average loans outstanding on an annualized basis compared to net charge-offs of $478,000 for the quarter ended September 30, 2016, or 0.05% of average loans outstanding on an annualized basis and net recoveries of $274,000 for the quarter ended December 31, 2015, or 0.04% of average loans outstanding on an annualized basis. For the year ended December 31, 2016, net charge-offs totaled $436,000, or 0.01% of average loans outstanding compared to net charge-offs of $1.7 million for the year ended December 31, 2015, or 0.06% of average loans outstanding.

Non-accrual loans were $13.4 million, or 0.34% of total loans outstanding, at December 31, 2016, down $1.8 million, or 11.6%, from September 30, 2016 and $17.9 million, or 57.1%, from December 31, 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 all categories of non-accrual loans. Non-performing assets, comprised entirely of non-accrual loans, were $13.4 million, or 0.30% of total assets, at December 31, 2016, down from $15.2 million, or 0.36% of total assets, at September 30, 2016 and $31.3 million, or 0.89% of total assets, at December 31, 2015.

Mr. Gavegnano commented, “During 2016, we successfully reduced our non-performing assets to the lowest levels since before the Great Recession, while our loan charge-off rates have remained at historic lows. These results were achieved through highly selective loan underwriting, diligent credit monitoring and effective collection processes.”

Non-interest income was $5.6 million for the quarter ended December 31, 2016, up from $3.3 million for the quarter ended September 30, 2016 and $2.7 million for the quarter ended December 31, 2015 primarily due to an increase in gain on sale of securities, net. For the year ended December 31, 2016, non-interest income increased $1.2 million, or 8.8%, to $14.2 million from $13.0 million for the year ended December 31, 2015 primarily due to increases of $561,000 in customer service fees and $588,000 in gain on sales of securities, net.

Non-interest expenses were $19.8 million, or 1.84% of average assets for the quarter ended December 31, 2016, compared to $19.2 million, or 1.90% of average assets for the quarter ended September 30, 2016 and $19.2 million, or 2.24% of average assets for the quarter ended December 31, 2015. As compared to the quarter ended December 31, 2015, non-interest expenses increased $591,000, or 3.1%, primarily due to increases of $549,000 in salaries and employee benefits, $399,000 in occupancy and equipment expenses and $317,000 in professional fees, partially offset by decreases of $187,000 in marketing and advertising expenses, $107,000 in foreclosed real estate expenses and $348,000 in other general and administrative expenses. For the year ended December 31, 2016, non-interest expenses increased $4.8 million, or 6.6%, to $77.5 million from $72.7 million for the year ended December 31, 2015, primarily due to increases of $4.1 million in salaries and employee benefits, $933,000 in occupancy and equipment expenses, $332,000 in professional services and $170,000 in other general and administrative expenses, partially offset by decreases of $498,000 in marketing and advertising expenses and $204,000 in foreclosed real estate expenses. 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 two new branches opened over the past year. 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 54.33% for the quarter ended December 31, 2016 from 55.81% for the quarter ended September 30, 2016 and 63.81% for the quarter ended December 31, 2015. For the year ended December 31, 2016, the efficiency ratio was 57.95% compared to 64.05% for the year ended December 31, 2015.

Mr. Gavegnano added, “Our efficiency ratio has steadily improved over the past four years from a high of 77.96% for the year 2012 to 57.95% for the year 2016, with further improvement in the ratio to 54.33% for the fourth quarter, reflecting our growth-driven rise in net interest income and prudent management of non-interest expenses. These improvements were realized during a period when we expanded our core banking franchise in the lucrative metropolitan Boston market area to 31 branches. We have opened eight new branches since the end of 2011, including the March opening in Boston’s Chinatown neighborhood, the June roll-out of our innovative mobile branch and the December addition of a second Brookline location during 2016. This expansion has enabled the Bank to attract new business and consumer relationships with the resulting gains in market share of loans and deposits.”

The Company recorded a provision for income taxes of $6.6 million for the quarter ended December 31, 2016, reflecting an effective tax rate of 37.0%, compared to $5.1 million for the quarter ended September 30, 2016, reflecting an effective tax rate of 34.9% and $3.4 million, or a 33.1% effective tax rate, for the quarter ended December 31, 2015. For the year ended December 31, 2016, the provision for income taxes was $17.9 million, reflecting an effective tax rate of 34.3%, compared to $12.0 million, or 32.7%, for the year ended December 31, 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 $4.436 billion at December 31, 2016, an increase of $262.9 million, or 6.3%, from $4.173 billion at September 30, 2016 and an increase of $911.5 million, or 25.9%, from $3.525 billion at December 31, 2015. Net loans were $3.899 billion at December 31, 2016, an increase of $237.1 million, or 6.5%, from September 30, 2016 and an increase of $853.4 million, or 28.0% from December 31, 2015. Loan originations totaled $550.3 million during the quarter ended December 31, 2016 and $1.6 billion during the year ended December 31, 2016. The net increase in loans for the year ended December 31, 2016 was primarily due to increases of $482.8 million in commercial real estate loans, $189.9 million in multi-family loans, $115.4 million in commercial and industrial loans and $81.2 million in construction loans, partially offset by a decrease of $4.8 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 $236.4 million at December 31, 2016, an increase of $53.6 million, or 29.3%, from September 30, 2016 and an increase of $140.1 million, or 145.3% from December 31, 2015. Securities available for sale were $67.7 million at December 31, 2016, a decrease of $74.0 million, or 52.2%, from $141.6 million at December 31, 2015 primarily due to $56.4 million in maturities, calls and principal payments and $35.4 million in sales, partially offset by $12.5 million in purchases and $6.4 million in market value appreciation.

Total deposits were $3.476 billion at December 31, 2016, an increase of $246.3 million, or 7.6%, from $3.230 billion at September 30, 2016 and an increase of $732.8 million, or 26.7%, from $2.743 billion at December 31, 2015. Core deposits, which exclude certificate of deposits, increased $493.2 million, or 26.6%, during the year ended December 31, 2016 to $2.348 billion, or 67.5% of total deposits. Total borrowings were $322.5 million, an increase of $2.7 million, or 0.8%, from September 30, 2016 and an increase of $155.3 million, or 92.9%, from December 31, 2015.

Total stockholders’ equity was $607.3 million, an increase of $10.2 million, or 1.7%, from $597.1 million at September 30, 2016 and an increase of $19.2 million, or 3.3%, from $588.1 million at December 31, 2015. The increase for the year ended December 31, 2016 was primarily due to net income of $34.2 million, $6.0 million related to stock-based compensation plans and $3.9 million in accumulated other comprehensive income, reflecting an increase in the fair value of available-for-sale securities, partially offset by a $18.8 million repurchase of 1,337,507 shares of the Company’s common stock and four quarterly dividends of $0.03 per share totaling $6.1 million. Stockholders’ equity to assets was 13.69% at December 31, 2016, compared to 14.31% at September 30, 2016 and 16.69% at December 31, 2015. Book value per share increased to $11.33 at December 31, 2016 from $10.72 at December 31, 2015. Tangible book value per share increased to $11.08 at December 31, 2016 from $10.47 at December 31, 2015. Market price per share increased $4.80, or 34.0%, to $18.90 at December 31, 2016 from $14.10 at December 31, 2015. At December 31, 2016, the Company and the Bank continued to exceed all regulatory capital requirements.

During the quarter ended December 31, 2016, the Company repurchased 116,796 shares of its stock at an average price of $15.79 per share. As of December 31, 2016, the Company had repurchased 2,059,611 shares of its stock at an average price of $13.71 per share, or 75.2% of the 2,737,334 shares authorized for repurchase under the Company’s repurchase program as adopted in August 2015.

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 31 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)
December 31, 2016 September 30, 2016 December 31, 2015
(Dollars in thousands)
ASSETS
Cash and due from banks $236,423 $182,852 $96,363
Certificates of deposit 80,323 30,342 99,062
Securities available for sale, at fair value 67,663 145,441 141,646
Federal Home Loan Bank stock, at cost 18,175 17,818 10,931
Loans held for sale 3,944 2,854 4,669
Loans:
One- to four-family 532,450 526,828 458,423
Home equity lines of credit 42,913 46,249 46,660
Multi-family 562,948 522,444 417,388
Commercial real estate 1,776,601 1,607,276 1,328,344
Construction 502,753 490,016 421,531
Commercial and industrial 515,430 501,976 400,051
Consumer 9,712 9,680 10,028
Total loans 3,942,807 3,704,469 3,082,425
Allowance for loan losses (40,149) (38,697) (33,405)
Net deferred loan origination fees (3,990) (4,159) (3,778)
Loans, net 3,898,668 3,661,613 3,045,242
Bank-owned life insurance 40,745 40,451 39,557
Premises and equipment, net 41,427 40,747 40,248
Accrued interest receivable 10,381 9,209 8,574
Deferred tax asset, net 21,461 19,835 21,246
Goodwill 13,687 13,687 13,687
Other assets 3,105 8,281 3,284
Total assets $4,436,002 $4,173,130 $3,524,509
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest-bearing demand deposits $431,222 $410,667 $370,546
NOW deposits 630,413 547,650 334,753
Money market deposits 980,344 863,385 860,957
Regular savings and other deposits 305,632 301,754 288,180
Certificates of deposit 1,128,226 1,106,113 888,582
Total deposits 3,475,837 3,229,569 2,743,018
Short-term borrowings 20,000
Long-term debt 322,512 319,820 147,226
Accrued expenses and other liabilities 30,356 26,685 26,139
Total liabilities 3,828,705 3,576,074 2,936,383
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; 53,596,105, 53,714,191 and 54,875,237 shares issued at December 31, 2016, September 30, 2016 and December 31, 2015, respectively 536 537 549
Additional paid-in capital 390,065 390,587 403,737
Retained earnings 234,290 224,509 206,214
Accumulated other comprehensive income (loss) 1,806 1,044 (2,092)
Unearned compensation - ESOP, 2,678,800, 2,709,242 and 2,800,564 at December 31, 2016, September 30, 2016 and December 31, 2015, respectively (19,400) (19,621) (20,282)
Total stockholders' equity 607,297 597,056 588,126
Total liabilities and stockholders' equity $4,436,002 $4,173,130 $3,524,509

MERIDIAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)
Three Months Ended Years Ended
December 31,
2016
September 30,
2016
December 31,
2015
December 31,
2016
December 31,
2015
(Dollars in thousands, except per share amounts)
Interest and dividend income:
Interest and fees on loans $40,172 $37,444 $31,555 $145,541 $118,586
Interest on debt securities:
Taxable 159 203 297 866 1,608
Tax-exempt 19 30 38 114 162
Dividends on equity securities 346 365 422 1,529 1,638
Interest on certificates of deposit 115 75 168 495 624
Other interest and dividend income 438 303 159 1,147 724
Total interest and dividend income 41,249 38,420 32,639 149,692 123,342
Interest expense:
Interest on deposits 6,962 6,273 4,800 24,124 18,479
Interest on short-term borrowings 5 6 5
Interest on long-term debt 868 845 495 3,007 1,967
Total interest expense 7,830 7,118 5,300 27,137 20,451
Net interest income 33,419 31,302 27,339 122,555 102,891
Provision for loan losses 1,304 858 544 7,180 6,667
Net interest income, after provision for loan losses 32,115 30,444 26,795 115,375 96,224
Non-interest income:
Customer service fees 2,231 2,170 2,114 8,484 7,923
Loan fees 282 293 203 865 917
Mortgage banking gains, net 125 274 119 573 535
Gain (loss) on sales of securities, net 2,627 266 (57) 3,020 2,432
Income from bank-owned life insurance 294 296 295 1,188 1,225
Other income 55 2 60 8
Total non-interest income 5,614 3,301 2,674 14,190 13,040
Non-interest expenses:
Salaries and employee benefits 12,167 12,169 11,618 48,828 44,737
Occupancy and equipment 2,881 2,577 2,482 10,809 9,876
Data processing 1,331 1,293 1,317 5,135 5,204
Marketing and advertising 973 832 1,160 3,217 3,715
Professional services 969 663 652 2,965 2,633
Foreclosed real estate 2 (11) 109 30 234
Deposit insurance 481 572 527 2,037 1,989
Other general and administrative 974 1,069 1,322 4,473 4,303
Total non-interest expenses 19,778 19,164 19,187 77,494 72,691
Income before income taxes 17,951 14,581 10,282 52,071 36,573
Provision for income taxes 6,642 5,084 3,407 17,881 11,966
Net income $11,309 $9,497 $6,875 $34,190 $24,607
Earnings per share:
Basic $0.22 $0.19 $0.13 $0.67 $0.47
Diluted $0.22 $0.18 $0.13 $0.65 $0.46
Weighted average shares:
Basic 50,940,037 50,982,633 51,982,009 51,128,914 51,965,036
Diluted 52,102,511 52,093,009 53,092,652 52,248,308 53,071,932

MERIDIAN BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
(Unaudited)
Three Months Ended
December 31, 2016 September 30, 2016 December 31, 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)$3,792,961 $41,394 4.34% $3,614,168 $38,684 4.26% $2,995,593 $32,427 4.29%
Securities and certificates of deposit 147,509 778 2.10 157,293 823 2.08 242,945 1,100 1.80
Other interest-earning assets (3) 244,241 438 0.71 148,425 303 0.81 78,836 159 0.80
Total interest-earning assets 4,184,711 42,610 4.05 3,919,886 39,810 4.04 3,317,374 33,686 4.03
Noninterest-earning assets 113,336 117,703 114,080
Total assets$4,298,047 $4,037,589 $3,431,454
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits$577,419 $1,025 0.71 $493,612 816 0.66 $308,105 $455 0.59
Money market deposits 907,157 1,955 0.86 836,941 1,715 0.82 873,355 1,762 0.80
Regular savings and other deposits 301,832 108 0.14 298,799 107 0.14 284,085 102 0.14
Certificates of deposit 1,139,816 3,874 1.35 1,085,898 3,635 1.33 831,152 2,481 1.18
Total interest-bearing deposits 2,926,224 6,962 0.95 2,715,250 6,273 0.92 2,296,697 4,800 0.83
Borrowings 325,421 868 1.06 320,091 845 1.05 151,416 500 1.31
Total interest-bearing liabilities 3,251,645 7,830 0.96 3,035,341 7,118 0.93 2,448,113 5,300 0.86
Noninterest-bearing demand deposits 416,727 383,953 370,061
Other noninterest-bearing liabilities 26,977 23,977 24,285
Total liabilities 3,695,349 3,443,271 2,842,459
Total stockholders' equity 602,698 594,318 588,995
Total liabilities and stockholders' equity$4,298,047 $4,037,589 $3,431,454
Net interest-earning assets$933,066 $884,545 $869,261
Fully tax-equivalent net interest income 34,780 32,692 28,386
Less: tax-equivalent adjustments (1,361) (1,390) (1,047)
Net interest income $33,419 $31,302 $27,339
Interest rate spread (1)(4) 3.09% 3.11% 3.17%
Net interest margin (1)(5) 3.31% 3.32% 3.39%
Average interest-earning assets to average
interest-bearing liabilities 128.70 % 129.14 % 135.51 %
Supplemental Information:
Total deposits, including noninterest-bearing
demand deposits$3,342,951 $6,962 0.83% $3,099,203 $6,273 0.81% $2,666,758 $4,800 0.71%
Total deposits and borrowings, including
noninterest-bearing demand deposits$3,668,372 $7,830 0.85% $3,419,294 $7,118 0.83% $2,818,174 $5,300 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 three months ended December 31, 2016, September 30, 2016 and December 31, 2015, yields on loans before tax-equivalent adjustments were 4.21%, 4.12% and 4.18%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 1.72%, 1.70% and 1.51%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.92%, 3.90% and 3.90%, respectively. Interest rate spread before tax-equivalent adjustments for the three months ended December 31, 2016, September 30, 2016 and December 31, 2015 was 2.96%, 2.97% and 3.04%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended December 31, 2016, September 30, 2016 and December 31, 2015 was 3.18%, 3.18% and 3.27%, 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)
Years Ended December 31,
2016 2015
Average
Balance
Interest (1) Yield
Cost (1)
Average
Balance
Interest (1) Yield
Cost (1)
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (2)$3,495,088 $150,182 4.30% $2,801,970 $121,859 4.35%
Securities and certificates of deposit 183,828 3,629 1.97 268,398 4,719 1.76
Other interest-earning assets (3) 146,786 1,147 0.78 158,463 724 0.46
Total interest-earning assets 3,825,702 154,958 4.05 3,228,831 127,302 3.94
Noninterest-earning assets 116,985 114,081
Total assets$3,942,687 $3,342,912
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits$469,103 $2,988 0.64 $295,958 $1,709 0.58
Money market deposits 857,952 7,025 0.82 928,712 7,663 0.83
Regular savings and other deposits 296,951 424 0.14 281,389 459 0.16
Certificates of deposit 1,042,425 13,687 1.31 745,866 8,648 1.16
Total interest-bearing deposits 2,666,431 24,124 0.90 2,251,925 18,479 0.82
Borrowings 277,586 3,013 1.09 146,364 1,972 1.35
Total interest-bearing liabilities 2,944,017 27,137 0.92 2,398,289 20,451 0.85
Noninterest-bearing demand deposits 382,644 335,060
Other noninterest-bearing liabilities 23,879 22,605
Total liabilities 3,350,540 2,755,954
Total stockholders' equity 592,147 586,958
Total liabilities and stockholders' equity$3,942,687 $3,342,912
Net interest-earning assets$881,685 $830,542
Fully tax-equivalent net interest income 127,821 106,851
Less: tax-equivalent adjustments (5,266) (3,960)
Net interest income $122,555 $102,891
Interest rate spread (1)(4) 3.13% 3.09%
Net interest margin (1)(5) 3.34% 3.31%
Average interest-earning assets to average
interest-bearing liabilities 129.95 % 134.63 %
Supplemental Information:
Total deposits, including noninterest-bearing
demand deposits$3,049,075 $24,124 0.79% $2,586,985 $18,479 0.71%
Total deposits and borrowings, including
noninterest-bearing demand deposits$3,326,661 $27,137 0.82% $2,733,349 $20,451 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 years ended December 31, 2016 and 2015, yields on loans before tax-equivalent adjustments were 4.16% and 4.23%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 1.63% and 1.50%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.91% and 3.82%, respectively. Interest rate spread before tax-equivalent adjustments for the years ended December 31, 2016 and 2015 was 2.99% and 2.97%, respectively, while net interest margin before tax-equivalent adjustments for the years ended December 31, 2016 and 2015 was 3.20% and 3.19%, 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.

MERIDIAN BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
Three Months Ended Years Ended
December 31,
2016
September 30,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Key Performance Ratios
Return on average assets (1) 1.05% 0.94% 0.80% 0.87% 0.74%
Return on average equity (1) 7.51 6.39 4.67 5.77 4.19
Interest rate spread (1) (2) 3.09 3.11 3.17 3.13 3.09
Net interest margin (1) (3) 3.31 3.32 3.39 3.34 3.31
Non-interest expense to average assets (1) 1.84 1.90 2.24 1.97 2.17
Efficiency ratio (4) 54.33 55.81 63.81 57.95 64.05

December 31, 2016 September 30, 2016 December 31, 2015
(Dollars in thousands)
Asset Quality
Non-accrual loans:
One- to four-family $8,487 $8,828 $9,264
Home equity lines of credit 674 746 1,763
Multi-family
Commercial real estate 2,807 2,871 3,663
Construction 815 2,031 15,849
Commercial and industrial 653 730 805
Consumer
Total non-accrual loans 13,436 15,206 31,344
Foreclosed assets
Total non-performing assets $13,436 $15,206 $31,344
Allowance for loan losses/total loans 1.02% 1.04% 1.08%
Allowance for loan losses/non-accrual loans 298.82 254.49 106.58
Non-accrual loans/total loans 0.34 0.41 1.02
Non-accrual loans/total assets 0.30 0.36 0.89
Non-performing assets/total assets 0.30 0.36 0.89
Capital and Share Related
Stockholders' equity to total assets 13.69% 14.31% 16.69%
Book value per share $11.33 $11.12 $10.72
Tangible book value per share $11.08 $10.86 $10.47
Market value per share $18.90 $15.57 $14.10
Shares outstanding 53,596,105 53,714,191 54,875,237
(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 is a non-GAAP measure representing non-interest expense divided by the sum of net interest income and non-interest income excluding gains or losses on sales of securities. The efficiency ratio is a common measure used by banks to understand expenses related to the generation of revenue. We have removed gains or losses on sales of securities as management deems them to be discretionary and not representative of operating performance.


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

Source:Meridian Bancorp, Inc.