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Meridian Bancorp, Inc. Reports Record Net Income for the Second Quarter And Six Months Ended June 30, 2017

BOSTON, July 25, 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 June 30, 2017, compared to $9.2 million, or $0.18 per diluted share, for the quarter ended March 31, 2017 and $5.9 million, or $0.11 per diluted share, for the quarter ended June 30, 2016. For the six months ended June 30, 2017, net income was $20.6 million, or $0.39 per diluted share, up from $13.4 million, or $0.26 per diluted share, for the six months ended June 30, 2016. The Company’s return on average assets was 0.97% for the quarter ended June 30, 2017, up from 0.82% for the quarter ended March 31, 2017 and 0.62% for the quarter ended June 30, 2016. For the six months ended June 30, 2017, the Company’s return on average assets was 0.90%, up from 0.72% for the six months ended June 30, 2016. The Company’s return on average equity was 7.28% for the quarter ended June 30, 2017, up from 6.03% for the quarter ended March 31, 2017 and 4.03% for the quarter ended June 30, 2016. For the six months ended June 30, 2017, the Company’s return on average equity was 6.66%, up from 4.57% for the six months ended June 30, 2016.

Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, “I am proud to report record net income of $11.3 million for the second quarter of 2017, up 23% from the first quarter of 2017 and up 92% from the second quarter of 2016. Our net income was also up 54% to $20.6 million for the first half of 2017 from the first half of 2016. These record earnings were driven by increases in net interest income and loan swap fees earned from strong organic commercial loan portfolio growth, along with lower loan loss provisions resulting from outstanding credit quality.”

Mr. Gavegnano added, “As announced in June, our core banking franchise will be enhanced following the anticipated completion in the fourth quarter of our acquisition of Meetinghouse Bancorp, Inc. and Meetinghouse Bank, with approximately $118 million in assets, $80 million in loans, $99 million in deposits and two branches in Dorchester and Roslindale. Our expanding presence in the lucrative Boston market area and the continuing strength of our organic loan growth remain as vital elements of our strategic plan to gain market share and enhance stockholder value.”

The Company’s net interest income was $35.5 million for the quarter ended June 30, 2017, up $2.1 million or 6.3%, from the quarter ended March 31, 2017 and $6.0 million, or 20.4%, from the quarter ended June 30, 2016. The interest rate spread and net interest margin on a tax-equivalent basis were 3.01% and 3.24%, respectively, for the quarter ended June 30, 2017 compared to 2.99% and 3.20%, respectively, for the quarter ended March 31, 2017 and 3.15% and 3.36%, respectively, for the quarter ended June 30, 2016. For the six months ended June 30, 2017, net interest income increased $11.0 million, or 19.0%, to $68.8 million from the six months ended June 30, 2016. The net interest rate spread and net interest margin on a tax-equivalent basis were 3.01% and 3.22%, respectively, for the six months ended June 30, 2017 compared to 3.17% and 3.37%, respectively, for the six months ended June 30, 2016. The increases in net interest income were primarily due to loan growth, partially offset by increases in the average balances and costs of total deposits and borrowings for the quarter and six months ended June 30, 2017 compared to the respective prior periods.

Total interest and dividend income increased to $44.5 million for the quarter ended June 30, 2017, up $2.8 million, or 6.6%, from the quarter ended March 31, 2017 and $8.7 million, or 24.2%, from the quarter ended June 30, 2016, primarily due to growth in the Company’s average loan balances to $4.181 billion and a three basis point increase in the yield on loans to 4.26% on a tax-equivalent basis. The Company’s yield on interest-earning assets on a tax-equivalent basis was 4.03% for the quarter ended June 30, 2017, up five basis points from the quarter ended March 31, 2017 and down two basis points from the quarter ended June 30, 2016. For the six months ended June 30, 2017, the Company’s total interest and dividend income increased $16.2 million, or 23.2%, to $86.3 million from the six months ended June 30, 2016 primarily due to growth in the average loan balances of $806.9 million, or 24.6%, to $4.091 billion, partially offset by a decrease in the yield on loans on a tax-equivalent basis of five basis points to 4.24% for the six months ended June 30, 2017 compared to the six months ended June 30, 2016. The Company’s yield on interest-earning assets on a tax-equivalent basis decreased five basis points to 4.01% for the six months ended June 30, 2017 compared to 4.06% for the six months ended June 30, 2016.

Total interest expense increased to $9.1 million for the quarter ended June 30, 2017, up $654,000, or 7.8%, from the quarter ended March 31, 2017 and $2.7 million, or 41.8%, from the quarter ended June 30, 2016. Interest expense on deposits increased to $7.9 million for the quarter ended June 30, 2017, up $516,000, or 7.0%, from the quarter ended March 31, 2017 and $2.3 million, or 40.2%, from the quarter ended June 30, 2016 primarily due to growth in average total deposits to $3.668 billion and increases in the cost of average total deposits to 0.87%. Interest expense on borrowings increased to $1.1 million for the quarter ended June 30, 2017, up $138,000, or 14.1%, from the quarter ended March 31, 2017 and $395,000, or 54.6%, from the quarter ended June 30, 2016 primarily due to growth in average total borrowings to $356.3 million, and increases in the cost of average total borrowings to 1.26%. The Company’s cost of funds was 0.90% for the quarter ended June 30, 2017, up two basis points from the quarter ended March 31, 2017 and 10 basis points from the quarter ended June 30, 2016. Total interest expense increased $5.3 million, or 43.2%, to $17.5 million for the six months ended June 30, 2017 from the six months ended June 30, 2016. Interest expense on deposits increased $4.5 million, or 41.0%, to $15.4 million for the six months ended June 30, 2017 from the six months ended June 30, 2016 primarily due to the growth in average total deposits of $724.6 million, or 25.2%, to $3.600 billion and an increase in the cost of average total deposits of 10 basis points to 0.86%. Interest expense on borrowings increased $798,000, or 61.4%, to $2.1 million for the six months ended June 30, 2017 from the six months ended June 30, 2016 primarily due to the growth in average total borrowings of $111.6 million, or 48.1%, to $343.5 million and an increase in the cost of average total borrowings of 10 basis points to 1.23%. The Company’s cost of funds increased 10 basis points to 0.89% for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

Mr. Gavegnano noted, “Rising net interest income remains the most significant contributor to our increased profitability, reflecting growth in total loans of $755 million, or 21%, on total loan originations of $1.7 billion since June 30, 2016. Total loans and net interest income both rose 6% in the second quarter from the first quarter of 2017, while our net interest margin also rose four basis points, reflecting increases in asset yields and a stable cost of funds achieved by utilizing selective wholesale funding opportunities during the quarter. Our net interest margin has remained relatively stable over the last several years through proactive pricing management of loans, deposits and borrowings.”

The Company's provision for loan losses was $1.5 million for the quarter ended June 30, 2017, down $122,000 from the quarter ended March 31, 2017 and $2.5 million from the quarter ended June 30, 2016. The allowance for loan losses was $43.2 million or 1.00% of total loans at June 30, 2017, compared to $41.8 million or 1.03% of total loans at March 31, 2017, $40.1 million or 1.02% of total loans at December 31, 2016, and $38.3 million or 1.08% of total loans at June 30, 2016. 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, reduced levels of problem loans and other improving asset quality trends.

Net charge-offs totaled $32,000 for the quarter ended June 30, 2017, or 0.00% of average loans outstanding on an annualized basis compared to net charge-offs of $4,000 for the quarter ended March 31, 2017, and net charge-offs of $25,000 for the quarter ended June 30, 2016. For the six months ended June 30, 2017, net charge-offs totaled $36,000, or 0.00% of average loans outstanding on an annualized basis compared to net charge-offs of $106,000 for the six months ended June 30, 2016, or 0.01% of average loans outstanding on an annualized basis.

Non-accrual loans were $11.5 million, or 0.27% of total loans outstanding, at June 30, 2017, down $2.2 million, or 16.1%, from March 31, 2017 and down $17.9 million, or 61.0%, from June 30, 2016. The reductions in non-accrual loans from June 30, 2016 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 reductions across all categories of non-accrual loans. Non-performing assets were $11.5 million, or 0.24% of total assets, at June 30, 2017, compared to $13.7 million, or 0.30% of total assets, at March 31, 2017 and $29.6 million, or 0.75% of total assets, at June 30, 2016.

Mr. Gavegnano commented, “Our outstanding asset quality improved further during the second quarter of 2017 with delinquent and non-performing loans declining to new historic lows and only insignificant loan charge-off activity. Even as we benefit from the favorable economic conditions in our metropolitan Boston market area, we continue to be highly disciplined in our loan underwriting, credit monitoring and loan collection processes.”

Non-interest income was $5.0 million for the quarter ended June 30, 2017, up from $4.1 million for the quarter ended March 31, 2017 and up from $2.6 million for the quarter ended June 30, 2016. Non-interest income increased $958,000, or 23.5%, as compared to the quarter ended March 31, 2017, primarily due to increases of $1.6 million in loan fees, partially offset by a decrease of $766,000 in gain on sales of securities, net. As compared to the quarter ended June 30, 2016, non-interest income increased $2.4 million, or 94.7%, primarily due to increases of $1.7 million in loan fees and $740,000 in gain on sales of securities, net. For the six months ended June 30, 2017, non-interest income increased $3.8 million, or 72.5%, to $9.1 million from $5.3 million for the six months ended June 30, 2016, primarily due to a $2.3 million increase in gain on sale of securities, net and a $1.4 million increase in loan fees. The increases in loan fees are primarily due to $1.3 million of loan swap fee income recognized in the second quarter of 2017.

Non-interest expenses were $21.4 million, or 1.83% of average assets for the quarter ended June 30, 2017, compared to $21.9 million, or 1.94% of average assets for the quarter ended March 31, 2017 and $19.3 million, or 2.03% of average assets for the quarter ended June 30, 2016. Non-interest expenses increased $2.1 million, or 10.8%, compared to the quarter ended June 30, 2016, due to increases of $773,000 in salaries and employee benefits, $386,000 in professional services, $281,000 in deposit insurance premiums, $254,000 in marketing and advertising, $220,000 in data processing, and $169,000 in occupancy and equipment expenses. For the six months ended June 30, 2017, non-interest expenses increased $4.7 million, or 12.3%, to $43.3 million from $38.6 million for the six months ended June 30, 2016, primarily due to increases of $1.9 million in salaries and employee benefits, $908,000 in professional services, $708,000 in occupancy and equipment expenses, $520,000 in deposit insurance premiums, $395,000 in marketing and advertising, and $342,000 in data processing expenses. The increases in salaries and employee benefits expenses reflect annual increases in employee compensation and health benefits during the first quarter of 2017. In addition, the increases in salaries and employee benefits, and occupancy and equipment expenses include costs associated with the expansion of our branch and regulatory compliance staff. Professional services increased primarily due to additional costs related to regulatory compliance projects. The Company’s efficiency ratio improved to 53.95% for the quarter ended June 30, 2017 compared to 61.02% for the quarter ended March 31, 2017 and 60.44% for the quarter ended June 30, 2016. For the six months ended June 30, 2017, the efficiency ratio was 57.31% compared to 61.21% for the six months ended June 30, 2016.

Mr. Gavegnano said, “Our efficiency ratio significantly improved in the second quarter of 2017 as a result of the increases in net interest income and loan swap fee income along with virtually flat overhead expense levels. We have successfully implemented many enhancements to our regulatory compliance infrastructure since late last year, with progress continuing. We also expect our non-interest expenses to normalize over the next several quarters, with further improvement in our operating efficiency.”

The Company recorded a provision for income taxes of $6.2 million for the quarter ended June 30, 2017, reflecting an effective tax rate of 35.5%, compared to $4.7 million, or an effective tax rate of 33.6%, for the quarter ended March 31, 2017, and $2.9 million, or an effective tax rate of 32.6%, for the quarter ended June 30, 2016. For the six months ended June 30, 2017, the provision for income taxes was $10.9 million, reflecting an effective tax rate of 34.7%, compared to $6.2 million, or an effective tax rate of 31.5%, for the six months ended June 30, 2016. 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 $4.787 billion at June 30, 2017, up $148.7 million, or 3.2%, from $4.639 billion at March 31, 2017 and $351.4 million, or 7.9%, from $4.436 billion at December 31, 2016. Net loans were $4.256 billion at June 30, 2017, up $235.1 million, or 5.8%, from March 31, 2017, and $357.2 million, or 9.2%, from December 31, 2016. Loan originations totaled $400.7 million during the quarter ended June 30, 2017 and $826.7 million during the six months ended June 30, 2017. The net increase in loans for the six months ended June 30, 2017 was primarily due to increases of $151.0 million in commercial real estate loans, $132.7 million in multi-family loans, $42.0 million in commercial and industrial loans, $20.3 million in one- to four-family loans, and $14.7 million in construction loans. Cash and due from banks was $234.8 million at June 30, 2017, a decrease of $1.6 million, or 0.7% from December 31, 2016. Securities available for sale were $52.4 million at June 30, 2017, a decrease of $15.3 million, or 22.6%, from $67.7 million at December 31, 2016.

Total deposits were $3.660 billion at June 30, 2017, an increase of $3.3 million, or 0.1%, from $3.657 billion at March 31, 2017 and an increase of $184.1 million, or 5.3%, from $3.476 billion at December 31, 2016. Core deposits, which exclude certificate of deposits, increased $183.0 million, or 7.8%, during the six months ended June 30, 2017 to $2.531 billion, or 69.1% of total deposits. Total borrowings were $474.0 million, up $139.2 million, or 41.6%, from March 31, 2017 and $151.5 million, or 47.0%, from December 31, 2016.

Total stockholders’ equity increased $10.5 million, or 1.7%, to $626.7 million at June 30, 2017 from $616.2 million at March 31, 2017, and $19.4 million, or 3.2%, from $607.3 million at December 31, 2016. The increase for the six months ended June 30, 2017 was primarily due to net income of $20.6 million, $2.8 million related to stock-based compensation plans and $99,000 in accumulated other comprehensive income, reflecting an increase in the fair value of available-for-sale securities, partially offset by dividends of $0.08 per share totaling $4.1 million. Stockholders’ equity to assets was 13.09% at June 30, 2017, compared to 13.28% at March 31, 2017 and 13.69% at December 31, 2016. Book value per share increased to $11.68 at June 30, 2017 from $11.33 at December 31, 2016. Tangible book value per share increased to $11.43 at June 30, 2017 from $11.08 at December 31, 2016. Market price per share decreased $2.00, or 10.6%, to $16.90 at June 30, 2017 from $18.90 at December 31, 2016. At June 30, 2017, the Company and the Bank continued to exceed all regulatory capital requirements.

As of the quarter ended June 30, 2017, 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 adopted in August 2015. The Company did not repurchase any of its shares during the six months ended June 30, 2017.

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 and one mobile location 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, Norfolk 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, 2017 March 31, 2017 December 31, 2016 June 30, 2016
(Dollars in thousands)
ASSETS
Cash and due from banks $234,776 $327,663 $236,423 $101,735
Certificates of deposit 85,323 80,323 80,323 35,342
Securities available for sale, at fair value 52,362 59,058 67,663 131,942
Federal Home Loan Bank stock, at cost 22,579 18,629 18,175 17,818
Loans held for sale 2,257 1,022 3,944 2,397
Loans:
One- to four-family 552,762 544,025 532,450 447,131
Home equity lines of credit 42,599 42,642 42,913 47,412
Multi-family 695,602 587,180 562,948 490,724
Commercial real estate 1,927,572 1,791,468 1,776,601 1,568,224
Construction 517,471 567,352 502,753 484,858
Commercial and industrial 557,443 524,723 515,430 500,897
Consumer 10,058 9,710 9,712 9,568
Total loans 4,303,507 4,067,100 3,942,807 3,548,814
Allowance for loan losses (43,229) (41,764) (40,149) (38,317)
Net deferred loan origination fees (4,443) (4,593) (3,990) (3,902)
Loans, net 4,255,835 4,020,743 3,898,668 3,506,595
Bank-owned life insurance 41,325 41,033 40,745 40,155
Foreclosed real estate, net 183
Premises and equipment, net 40,621 41,099 41,427 40,821
Accrued interest receivable 11,068 10,070 10,381 9,246
Deferred tax asset, net 21,728 21,471 21,461 20,232
Goodwill 13,687 13,687 13,687 13,687
Other assets 5,853 3,914 3,105 8,923
Total assets $4,787,414 $4,638,712 $4,436,002 $3,929,076
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest-bearing demand deposits $457,009 $439,315 $431,222 $373,561
NOW deposits 779,208 748,465 630,413 452,451
Money market deposits 972,720 1,005,534 980,344 812,315
Regular savings and other deposits 321,674 323,136 305,632 300,522
Certificates of deposit 1,129,306 1,140,183 1,128,226 1,059,188
Total deposits 3,659,917 3,656,633 3,475,837 2,998,037
Short-term borrowings 40,000
Long-term debt 434,015 334,827 322,512 320,624
Accrued expenses and other liabilities 26,753 31,074 30,356 23,763
Total liabilities 4,160,685 4,022,534 3,828,705 3,342,424
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; 53,649,946, 53,630,841, 53,596,105 and 53,688,566 shares issued at June 30, 2017, March 31, 2017, December 31, 2016 and June 30, 2016, respectively 537 536 536 537
Additional paid-in capital 392,446 391,316 390,065 389,318
Retained earnings 250,800 241,472 234,290 216,539
Accumulated other comprehensive income 1,905 2,034 1,806 99
Unearned compensation - ESOP, 2,617,198, 2,648,359, 2,678,800 and 2,739,682 at June 30, 2017, March 31, 2017, December 31, 2016 and June 30, 2016, respectively (18,959) (19,180) (19,400) (19,841)
Total stockholders' equity 626,729 616,178 607,297 586,652
Total liabilities and stockholders' equity $4,787,414 $4,638,712 $4,436,002 $3,929,076


MERIDIAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2017 March 31, 2017 June 30, 2016 June 30, 2017 June 30, 2016
(Dollars in thousands, except per share amounts)
Interest and dividend income:
Interest and fees on loans$43,195 $40,489 $34,828 $83,684 $67,925
Interest on debt securities:
Taxable 83 119 238 202 504
Tax-exempt 8 10 32 18 65
Dividends on equity securities 291 277 418 568 818
Interest on certificates of deposit 196 212 135 408 305
Other interest and dividend income 736 645 188 1,381 406
Total interest and dividend income 44,509 41,752 35,839 86,261 70,023
Interest expense:
Interest on deposits 7,935 7,419 5,661 15,354 10,889
Interest on short-term borrowings 4 4 6
Interest on long-term debt 1,114 980 723 2,094 1,294
Total interest expense 9,053 8,399 6,384 17,452 12,189
Net interest income 35,456 33,353 29,455 68,809 57,834
Provision for loan losses 1,497 1,619 3,952 3,116 5,018
Net interest income, after provision for loan losses 33,959 31,734 25,503 65,693 52,816
Non-interest income:
Customer service fees 2,214 2,052 2,137 4,266 4,086
Loan fees 1,634 68 (22) 1,702 290
Mortgage banking gains, net 82 90 104 172 174
Gain on sales of securities, net 808 1,574 68 2,382 127
Income from bank-owned life insurance 292 288 296 580 598
Total non-interest income 5,030 4,072 2,583 9,102 5,275
Non-interest expenses:
Salaries and employee benefits 12,752 13,675 11,979 26,427 24,492
Occupancy and equipment 3,036 3,023 2,867 6,059 5,351
Data processing 1,474 1,379 1,254 2,853 2,511
Marketing and advertising 953 854 699 1,807 1,412
Professional services 1,106 1,135 720 2,241 1,333
Deposit insurance 813 691 532 1,504 984
Other general and administrative 1,271 1,120 1,271 2,391 2,469
Total non-interest expenses 21,405 21,877 19,322 43,282 38,552
Income before income taxes 17,584 13,929 8,764 31,513 19,539
Provision for income taxes 6,237 4,685 2,857 10,922 6,155
Net income$11,347 $9,244 $5,907 $20,591 $13,384
Earnings per share:
Basic$0.22 $0.18 $0.12 $0.40 $0.26
Diluted$0.22 $0.18 $0.11 $0.39 $0.26
Weighted average shares:
Basic 51,003,967 50,949,634 51,026,985 50,976,950 51,298,334
Diluted 52,422,486 52,526,737 52,137,475 52,474,761 52,400,698


MERIDIAN BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
(Unaudited)
For the Three Months Ended
June 30, 2017 March 31, 2017 June 30, 2016
Average
Balance
Interest (1) Yield
Cost
(1)(6)
Average
Balance
Interest (1) Yield
Cost
(1)(6)
Average
Balance
Interest (1) Yield
Cost
(1)(6)
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (2) $4,180,602 $44,431 4.26% $4,000,857 $41,689 4.23% $3,422,193 $36,000 4.23%
Securities and certificates of deposit 142,159 691 1.95 145,841 726 2.02 199,596 995 2.00
Other interest-earning assets (3) 239,590 736 1.23 243,478 645 1.08 69,914 188 1.08
Total interest-earning assets 4,562,351 45,858 4.03 4,390,176 43,060 3.98 3,691,703 37,183 4.05
Noninterest-earning assets 110,509 111,757 124,147
Total assets $4,672,860 $4,501,933 $3,815,850
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits $753,839 $1,598 0.85 $654,977 $1,219 0.75 $462,543 $646 0.56
Money market deposits 992,382 2,219 0.90 1,008,392 2,230 0.90 813,625 1,609 0.80
Regular savings and other deposits 317,656 114 0.14 307,940 108 0.14 296,638 106 0.14
Certificates of deposit 1,147,440 4,004 1.40 1,134,329 3,862 1.38 1,005,764 3,300 1.32
Total interest-bearing deposits 3,211,317 7,935 0.99 3,105,638 7,419 0.97 2,578,570 5,661 0.88
Borrowings 356,325 1,118 1.26 330,604 980 1.20 264,060 723 1.10
Total interest-bearing liabilities 3,567,642 9,053 1.02 3,436,242 8,399 0.99 2,842,630 6,384 0.90
Noninterest-bearing demand deposits 456,447 425,353 364,327
Other noninterest-bearing liabilities 25,732 27,312 22,909
Total liabilities 4,049,821 3,888,907 3,229,866
Total stockholders' equity 623,039 613,026 585,984
Total liabilities and stockholders' equity $4,672,860 $4,501,933 $3,815,850
Net interest-earning assets $994,709 $953,934 $849,073
Fully tax-equivalent net interest income 36,805 34,661 30,799
Less: tax-equivalent adjustments (1,349) (1,308) (1,344)
Net interest income $35,456 $33,353 $29,455
Interest rate spread (1)(4) 3.01% 2.99% 3.15%
Net interest margin (1)(5) 3.24% 3.20% 3.36%
Average interest-earning assets to average
interest-bearing liabilities 127.88 % 127.76 % 129.87 %
Supplemental Information:
Total deposits, including noninterest-bearing
demand deposits $3,667,764 $7,935 0.87% $3,530,991 $7,419 0.85% $2,942,897 $5,661 0.77%
Total deposits and borrowings, including
noninterest-bearing demand deposits $4,024,089 $9,053 0.90% $3,861,595 $8,399 0.88% $3,206,957 $6,384 0.80%
(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, 2017, March 31, 2017 and June 30, 2016, yields on loans before tax-equivalent adjustments were 4.14%, 4.10% and 4.09%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 1.63%, 1.71% and 1.66%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.91%, 3.86% and 3.90%, respectively. Interest rate spread before tax-equivalent adjustments for the three months ended June 30, 2017, March 31, 2017 and June 30, 2016 was 2.89%, 2.87% and 3.00%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended June 30, 2017, March 31, 2017 and June 30, 2016 was 3.12%, 3.08% and 3.21%, 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, 2017 June 30, 2016
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) $4,091,226 $86,121 4.24% $3,284,321 $70,104 4.29%
Securities and certificates of deposit 143,990 1,418 1.99 215,600 2,028 1.89
Other interest-earning assets (3) 241,523 1,381 1.15 96,695 406 0.84
Total interest-earning assets 4,476,739 88,920 4.01 3,596,616 72,538 4.06
Noninterest-earning assets 111,130 118,614
Total assets $4,587,869 $3,715,230
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits $704,681 $2,817 0.81 $401,952 $1,146 0.57
Money market deposits 1,000,343 4,449 0.90 843,700 3,355 0.80
Regular savings and other deposits 312,825 222 0.14 293,550 209 0.14
Certificates of deposit 1,140,921 7,866 1.39 971,219 6,179 1.28
Total interest-bearing deposits 3,158,770 15,354 0.98 2,510,421 10,889 0.87
Borrowings 343,536 2,098 1.23 231,920 1,300 1.13
Total interest-bearing liabilities 3,502,306 17,452 1.00 2,742,341 12,189 0.89
Noninterest-bearing demand deposits 440,986 364,760
Other noninterest-bearing liabilities 26,517 22,413
Total liabilities 3,969,809 3,129,514
Total stockholders' equity 618,060 585,716
Total liabilities and stockholders' equity $4,587,869 $3,715,230
Net interest-earning assets $974,433 $854,275
Fully tax-equivalent net interest income 71,468 60,349
Less: tax-equivalent adjustments (2,659) (2,515)
Net interest income $68,809 $57,834
Interest rate spread (1)(4) 3.01% 3.17%
Net interest margin (1)(5) 3.22% 3.37%
Average interest-earning assets to average
interest-bearing liabilities 127.82 % 131.15 %
Supplemental Information:
Total deposits, including noninterest-bearing
demand deposits $3,599,756 $15,354 0.86% $2,875,181 $10,889 0.76%
Total deposits and borrowings, including
noninterest-bearing demand deposits $3,943,292 $17,452 0.89% $3,107,101 $12,189 0.79%
(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, 2017, and 2016, yields on loans before tax-equivalent adjustments were 4.12% and 4.16%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 1.67% and 1.58%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.89% and 3.92%, respectively. Interest rate spread before tax-equivalent adjustments for the six months ended June 30, 2017, and 2016 was 2.89% and 3.03%, respectively, while net interest margin before tax-equivalent adjustments for the six months ended June 30, 2017, and 2016 was 3.10% and 3.23%, 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)
Three Months Ended Six Months Ended
June 30, 2017 March 31, 2017 June 30, 2016 June 30, 2017
June 30, 2016
Key Performance Ratios
Return on average assets (1) 0.97% 0.82% 0.62% 0.90% 0.72%
Return on average equity (1) 7.28 6.03 4.03 6.66 4.57
Interest rate spread (1) (2) 3.01 2.99 3.15 3.01 3.17
Net interest margin (1) (3) 3.24 3.20 3.36 3.22 3.37
Non-interest expense to average assets (1) 1.83 1.94 2.03 1.89 2.08
Efficiency ratio (4) 53.95 61.02 60.44 57.31 61.21


June 30, 2017 March 31, 2017 December 31, 2016 June 30, 2016
(Dollars in thousands)
Asset Quality
Non-accrual loans:
One- to four-family $7,667 $8,761 $8,487 $9,552
Home equity lines of credit 619 672 674 1,609
Commercial real estate 2,666 2,792 2,807 3,829
Construction - 815 815 13,698
Commercial and industrial 529 646 653 737
Total non-accrual loans 11,481 13,686 13,436 29,425
Foreclosed assets 183
Total non-performing assets $11,481 $13,686 $13,436 $29,608
Allowance for loan losses/total loans 1.00% 1.03% 1.02% 1.08%
Allowance for loan losses/non-accrual loans 376.53 305.16 298.82 130.22
Non-accrual loans/total loans 0.27 0.34 0.34 0.83
Non-accrual loans/total assets 0.24 0.30 0.30 0.75
Non-performing assets/total assets 0.24 0.30 0.30 0.75
Capital and Share Related
Stockholders' equity to total assets 13.09% 13.28% 13.69% 14.93%
Book value per share $11.68 $11.49 $11.33 $10.93
Tangible book value per share $11.43 $11.23 $11.08 $10.67
Market value per share $16.90 $18.30 $18.90 $14.78
Shares outstanding 53,649,946 53,630,841 53,596,105 53,688,566
(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.

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