BOSTON, Oct. 28, 2008 (GLOBE NEWSWIRE) -- Meridian Interstate Bancorp, Inc. (the "Company" or "Meridian") (Nasdaq:EBSB), the holding company for East Boston Savings Bank, (the "Bank"), announced net income of $2.1 million for the quarter ended September 30, 2008, compared to a net loss of $303,000 for the quarter ended September 30, 2007. Net income per basic and diluted share for the third quarter of 2008 was $.10. The Company recorded a net pre-tax gain on sale of securities of $2.8 million for the 2008 third quarter, compared to a pre-tax loss on sale of securities of $860,000 during the comparable 2007 period.
For the nine months ended September 30, 2008, the Company recorded a net loss of $394,000, compared to net income of $2.3 million for the nine months ended September 30, 2007. The 2008 net loss includes a $3.0 million pre-tax contribution of stock to the Company's charitable foundation, and pre-tax compensation charges of $1.5 million as a result of the retirement of the Bank's president.
Earnings per share is not applicable for the nine months ended September 30, 2008 and prior periods, as shares were not outstanding for the entire periods.
Results of Operations
Net interest income for the quarter ended September 30, 2008 was $6.8 million, an increase of $1.6 million, or 30.4%, from the quarter ended September 30, 2007, due to an increase in interest income earned on loans of $865,000, or 9.5%, and a reduction in deposit interest expense of $691,000, or 10.3%. Net interest income for the nine months ended September 30, 2008 was $18.5 million, an increase of $2.7 million, or 17.4%, from the nine months ended September 30, 2007, due primarily to an increase in loan interest income of $1.9 million, or 7.1%.
The Company's net interest margin was 2.70% and 2.48% for the quarters ended September 30, 2008 and 2007, respectively, and for the quarter ended June 30, 2008 was 2.35%. The margin increase from the prior quarter and the prior year comparable periods is due to a decrease in the overall rate paid on deposits and borrowings. For the nine months ended September 30, 2008 the net interest margin was 2.50%, compared to 2.53% for the same period in 2007. The decline in the nine-month net interest margin is due to faster repricing of prime-related assets compared to interest-bearing liabilities.
Growth in the loan portfolio resulted in increased interest income in 2008, from $9.1 million for the quarter ended September 30, 2007, to $9.9 million for the quarter ended September 30, 2008. For the nine months ended September 30, 2008, total loan interest income was $28.5 million, compared to $26.6 million for the nine months ended September 30, 2007.
The average balance of interest-bearing deposits increased from $728.0 million to $750.8 million for the quarters ended September 30, 2007 and 2008, respectively, while deposit interest expense decreased $691,000, or 10.3%. For the nine months ended September 30, 2008, deposit interest expense increased $223,000, or 1.2%, from the same period in 2007 due to higher average balances.
Borrowing expense increased $67,000, or 14.3%, for the quarter ended September 30, 2008 compared to the same period in 2007 due to higher average outstanding borrowings, which increased from $38.7 million to $60.3 million.
The Company's loan loss provision was $403,000 and $2.7 million for the quarter and nine months ended September 30, 2008, compared to $117,000 and $260,000 for the same periods in 2007. The increase in the provision relates to specific reserves taken during the second quarter for two impaired construction loans, as well as growth in the loan portfolio and management's assessment of various factors affecting the portfolio, including, among others, an ongoing evaluation of credit quality, local real estate market conditions, and general economic factors.
Non-interest income for the third quarter of 2008 was $3.8 million, compared to $11,000 in the third quarter of 2007. A loss on sale of securities of $860,000 in the third quarter of 2007 offset other income earned, as the Company sold debt securities with exposure to the subprime mortgage market. The Company recorded gains on sales of securities of $2.8 million during the third quarter of 2008.
Non-interest expenses increased from $5.7 million for the quarter ended September 30, 2007 to $6.8 million for the quarter ended September 30, 2008. Salary and employee benefit costs increased from $3.6 million to $4.0 million, primarily as a result of additional expense incurred in connection with the Company's Employee Stock Ownership Plan (ESOP) and bank-owned life insurance policies. The Company also incurred an increase in professional service fees of $317,000 due mainly to legal and audit expenses related to being a public company. Other expenses increased $180,000 due to an increase in deposit insurance expense and annual meeting expenses. The Company benefited from a one-time deposit insurance credit in 2007 and the first quarter of 2008. Non-interest expenses increased $8.1 million, from $16.5 million to $24.6 million for the nine months ended September 30, 2007, and 2008, respectively, primarily as a result of the $1.5 million retirement charge, contribution of $3.0 million to the Meridian Charitable Foundation, and increased professional service fees.
Credit Quality
The allowance for loan losses was $5.7 million, or 0.86% of total loans outstanding as of September 30, 2008, compared to $3.6 million, or 0.63% as of December 31, 2007, and $3.6 million, or 0.66% at September 30, 2007. The Bank individually reviews classified residential and commercial loans for impairment based on the fair value of collateral or expected cash flows. At September 30, 2008, there was $10.4 million of impaired loans, including loans of $8.1 million with an impairment allowance of $1.5 million. At December 31, 2007, there was $5.1 million of impaired loans, including loans of $621,000 with an impairment allowance of $89,000.
Non-performing assets (non-accrual loans and property acquired through foreclosure) were $8.2 million, or 0.77% of total assets at September 30, 2008, compared to $5.5 million, or 0.55% at December 31, 2007, and $5.2 million, or 0.56% at September 30, 2007. The increase in non-performing assets from December resulted primarily from one construction lending relationship that was transferred to property acquired through foreclosure during the third quarter. The balance of the relationship was $2.4 million at the time of foreclosure, and a charge-off of $596,000 was recorded against the allowance. The charge-off had been identified as a specific reserve prior to June 30, 2008. Total property acquired through foreclosure was $2.0 million at September 30, 2008, compared to $560,000 and $220,000 at December 31 and September 30, 2007.
Financial Condition
The Company's total assets increased by $70.5 million, or 7.0%, to $1.1 billion at September 30, 2008 from December 31, 2007. Net loans increased by $93.8 million, or 16.5%, and securities available for sale increased $21.9 million, or 8.2%. For the nine months ended September 30, 2008, the Company increased outstanding loans in all categories except construction and consumer lending.
Deposits increased by $30.6 million, or 4.0%, for the nine months ended September 30, 2008. Demand deposit and money market balances increased by $13.6 million and $17.6 million, respectively, during this time. Federal Home Loan Bank of Boston borrowings also increased $21.1 million, to $57.7 million, as the Company opted to replace some higher rate maturing advances with lower cost borrowings.
Stockholders' equity increased by $79.4 million, to $195.1 million at September 30, 2008 from $115.7 million at December 31, 2007, mainly due to the Company's first quarter stock offering. During the third quarter of 2008, accumulated other comprehensive income decreased by $11.3 million primarily due to the change in net unrealized losses on securities available for sale.
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 Interstate 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 November 13, 2007 prospectus. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Meridian Interstate 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 INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
Sept. 30, Dec. 31,
------------------------
(Dollars in thousands) 2008 2007
------------------------
ASSETS
Cash and due from banks $ 15,934 $ 11,821
Federal funds sold 23,550 91,272
------------------------
Total cash and cash equivalents
39,484 103,093
Certificates of deposit 7,000 --
Securities available for sale, at fair
value 288,941 267,058
Federal Home Loan Bank stock, at cost 4,303 3,165
Loans 667,608 571,741
Less allowance for loan losses (5,718) (3,637)
------------------------
Loans, net 661,890 568,104
Bank-owned life insurance 22,627 18,003
Investment in affiliate bank 10,449 10,772
Premises and equipment, net 22,575 22,816
Accrued interest receivable 5,627 5,764
Foreclosed real estate 2,045 560
Other assets 8,742 3,891
Total assets $ 1,073,683 $ 1,003,226
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest-bearing $ 56,805 $ 51,396
Interest-bearing 748,279 723,050
------------------------
Total deposits 805,084 774,446
Stock subscriptions -- 62,518
Short-term borrowings -- 9,154
Long-term debt 57,675 27,373
Accrued expenses and other liabilities 15,870 14,051
------------------------
Total liabilities 878,629 887,542
------------------------
Stockholders' equity:
Common stock, no par value 50,000,000
shares authorized; 23,000,000 and 0
shares issued and outstanding at
September 30, 2008 and December 31, 2007 -- --
Additional paid-in capital 100,628 --
Retained earnings 107,141 109,177
Accumulated other comprehensive income
(loss) (4,745) 6,507
Unearned compensation - ESOP, 796,950
shares and 0 shares at September 30, 2008
and December 31, 2007, respectively (7,970) --
------------------------
Total stockholders' equity
195,054 115,684
------------------------
Total liabilities and stockholders'
equity $ 1,073,683 $ 1,003,226
========================
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------------
(Dollars in
thousands,
except per
share amounts) 2008 2007 2008 2007
--------------------------------------------------
Interest and
dividend
income:
Interest and
fees on loans $ 9,938 $ 9,073 $ 28,455 $ 26,560
Interest on
debt securities 2,674 2,715 7,919 8,264
Dividends on
equity
securities 573 271 1,264 815
Interest on
certificates of
deposit 60 -- 98 --
Interest on
federal funds
sold 99 331 1,640 726
--------------------------------------------------
Total interest
and dividend
income 13,344 12,390 39,376 36,365
--------------------------------------------------
Interest expense:
Interest on
deposits 6,045 6,736 19,382 19,159
Interest on
short-term
borrowings -- 97 115 288
Interest on
long-term debt 534 370 1,363 1,148
--------------------------------------------------
Total interest
expense 6,579 7,203 20,860 20,595
--------------------------------------------------
Net interest
income 6,765 5,187 18,516 15,770
Provision for
loan losses 403 117 2,731 260
--------------------------------------------------
Net interest
income, after
provision for
loan losses 6,362 5,070 15,785 15,510
--------------------------------------------------
Non-interest
income:
Customer
service fees 718 710 2,073 2,022
Loan fees 181 152 551 486
Gain (loss) on
sales of loans,
net (10) (6) 17 19
Gain (loss) on
sales of
securities, net 2,779 (860) 5,092 1,172
Income from
bank-owned
life insurance 209 153 624 850
Equity loss on
investment in
affiliate bank (69) (138) (323) (349)
--------------------------------------------------
Total non-
interest
income 3,808 11 8,034 4,200
--------------------------------------------------
Non-interest
expenses:
Salaries and
employee
benefits 4,009 3,618 13,793 10,704
Occupancy and
equipment 719 608 2,198 1,932
Data processing 450 368 1,243 1,100
Marketing 293 282 832 625
Professional
services 595 278 1,562 737
Contribution to
the Meridian
Charitable
Foundation -- -- 3,000 --
Other general
and
administrative 733 553 1,959 1,382
--------------------------------------------------
Total non-
interest
expenses 6,799 5,707 24,587 16,480
--------------------------------------------------
Income (loss)
before income
taxes 3,371 (626) (768) 3,230
Provision
(benefit)
for income
taxes 1,228 (323) (374) 942
--------------------------------------------------
Net income
(loss) $ 2,143 $ (303) $ (394) $ 2,288
==================================================
Income per
share:
Basic $ 0.10 N/A N/A N/A
Diluted $ 0.10 N/A N/A N/A
Weighted Average
Shares:
Basic 22,196,225 N/A N/A N/A
Diluted 22,196,225 N/A N/A N/A
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Net Interest Income Analysis
(Unaudited)
For The Three Months Ended
September 30,
------------------------------
2008
-------------------------------------------------------------------
Average Interest Yield/
(Dollars in thousands) Balance Earned/Paid Cost (4)
------------------------------
Assets:
Interest-earning assets:
Loans (1) $ 641,094 $ 9,938 6.17%
Securities and certificates of
deposit 333,900 3,307 3.94
Other interest-earning assets 21,478 99 1.83
---------------------
Total interest-earning assets 996,472 13,344 5.33
Noninterest-earning assets 79,296
----------
Total assets $1,075,768
==========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits $ 42,078 92 0.87
Money market deposits 150,501 929 2.46
Savings and other deposits 123,236 354 1.14
Certificates of deposit 435,022 4,670 4.27
---------------------
Total interest-bearing deposits 750,837 6,045 3.20
FHLB advances 60,316 534 3.52
---------------------
Total interest-bearing liabilities 811,153 6,579 3.23
Noninterest-bearing demand
deposits 54,711
Other noninterest-bearing
liabilities 10,509
----------
Total liabilities 876,373
Total stockholders' equity 199,395
----------
Total liabilities and stockholders'
equity $1,075,768
==========
Net interest income $ 6,765
==========
Interest rate spread (2) 2.10%
Net interest margin (3) 2.70%
Average interest-earning assets to
average interest-bearing liabilities 122.85%
For The Three Months Ended
September 30,
------------------------------
2007
-------------------------------------------------------------------
Average Interest Yield/
(Dollars in thousands) Balance Earned/Paid Cost (4)
------------------------------
Assets:
Interest-earning assets:
Loans (1) $ 545,808 $ 9,073 6.63%
Securities and certificates of
deposit 262,927 2,986 4.54
Other interest-earning assets 26,153 331 5.02
--------------------
Total interest-earning assets 834,888 12,390 5.94
Noninterest-earning assets 77,934
---------
Total assets 912,822
=========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits $ 61,909 $ 31 0.20
Money market deposits 119,184 1,144 3.81
Savings and other deposits 127,363 371 1.15
Certificates of deposit 419,575 5,190 4.91
--------------------
Total interest-bearing deposits 728,031 6,736 3.70
FHLB advances 38,663 467 4.83
--------------------
Total interest-bearing liabilities 766,694 7,203 3.76
Noninterest-bearing demand deposits 25,111
Other noninterest-bearing
liabilities 8,232
---------
Total liabilities 800,037
Total stockholders' equity 112,785
---------
Total liabilities and
stockholders' equity $ 912,822
=========
Net interest income $ 5,187
=========
Interest rate spread (2) 2.18%
Net interest margin (3) 2.48%
Average interest-earning assets to
average interest-bearing
liabilities 108.89%
-------------------------------------------------------------------
(1) Loans on non accrual status are included in average balances.
(2) Interest rate spread represents the difference between the yield
on interest-earning assets and the cost of interest-bearing
liabilities.
(3) Net interest margin represents net interest income divided by
average interest-earning assets.
(4) Annualized.
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Net Interest Income Analysis
(Unaudited)
For The Nine Months Ended
September 30,
-----------------------------
2008
---------------------------------------------------------------------
Interest
Average Earned/ Yield/
(Dollars in thousands) Balance Paid Cost(4)
-----------------------------
Assets:
Interest-earning assets:
Loans(1) $ 604,157 $ 28,455 6.29%
Securities and certificates of deposit 301,477 9,281 4.11
Other interest-earning assets 85,350 1,640 2.57
--------------------
Total interest-earning assets 990,984 39,376 5.31
Noninterest-earning assets 76,733
----------
Total assets $1,067,717
==========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits $ 38,855 236 0.81
Money market deposits 144,751 2,967 2.74
Savings and other deposits 129,138 1,103 1.14
Certificates of deposit 443,140 15,076 4.54
--------------------
Total interest-bearing deposits 755,884 19,382 3.43
FHLB advances 53,458 1,478 3.69
--------------------
Total interest-bearing liabilities 809,342 20,860 3.44
Noninterest-bearing demand deposits 53,867
Other noninterest-bearing liabilities 9,854
----------
Total liabilities 873,063
Total stockholders' equity 194,654
----------
Total liabilities and stockholders'
equity $1,067,717
==========
Net interest income $ 18,516
========
Interest rate spread(2) 1.87%
Net interest margin(3) 2.50%
Average interest-earning assets to
average interest-bearing liabilities 122.44%
---------------------------------------------------------------------
For The Nine Months Ended
September 30,
-----------------------------
2007
---------------------------------------------------------------------
Interest
Average Earned/ Yield/
(Dollars in thousands) Balance Paid Cost(4)
-----------------------------
Assets:
Interest-earning assets:
Loans(1) $ 541,108 $ 26,560 6.55%
Securities and certificates of deposit 269,448 9,079 4.49
Other interest-earning assets 18,900 726 5.14
--------------------
Total interest-earning assets 829,456 36,365 5.85
Noninterest-earning assets 74,542
----------
Total assets $ 903,998
==========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW deposits 63,322 $ 79 0.17
Money market deposits 107,266 2,852 3.55
Savings and other deposits 131,199 1,142 1.16
Certificates of deposit 418,279 15,086 4.82
--------------------
Total interest-bearing deposits 720,066 19,159 3.56
FHLB advances 40,095 1,436 4.79
--------------------
Total interest-bearing liabilities 760,161 20,595 3.62
Noninterest-bearing demand deposits 24,275
Other noninterest-bearing liabilities 7,417
----------
Total liabilities 791,853
Total stockholders' equity 112,145
----------
Total liabilities and stockholders'
equity $ 903,998
==========
Net interest income $ 15,770
========
Interest rate spread(2) 2.23%
Net interest margin(3) 2.53%
Average interest-earning assets to 109.12%
average interest-bearing liabilities
--------------------------------------------------------------------
(1) Loans on non accrual status are included in average balances.
(2) Interest rate spread represents the difference between the yield
on interest-earning assets and the cost of interest-bearing
liabilities.
(3) Net interest margin represents net interest income divided by
average interest-earning assets.
(4) Annualized.
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Financial Ratios
(Unaudited)
---------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
--------------------------------------
Key Performance Ratios
Return on average assets(4) 0.80% (0.13)% (0.05)% 0.34%
Return on average equity(4) 4.30 (1.08) (0.27) 2.72
Interest rate spread(1)(4) 2.10 2.18 1.87 2.23
Net interest margin(2)(4) 2.70 2.48 2.50 2.53
Noninterest expense to average
assets(4) 2.53 2.50 3.07 2.43
Efficiency ratio(3) 64.31 109.79 92.61 82.52
Average interest-earning assets
to average interest-bearing
liabilities 122.85 108.89 122.44 109.12
(1) Interest rate spread represents the difference between the yield
on interest-earning assets and the cost of interest-bearing
liabilities.
(2) Net interest margin represents net interest income divided by
average interest-earning assets.
(3) The efficiency ratio represents non-interest expense, divided by
the sum of net interest income plus non-interest income.
(4) Annualized.
At At At
Sept. 30, Dec. 31, Sept. 30,
2008 2007 2007
----------------------------
Asset Quality Ratios
Allowance for loan losses/total loans 0.86% 0.63% 0.66%
Allowance for loan losses/
nonperforming loans 92.51 73.00 72.49
Non-performing loans/total loans 0.92 0.87 0.91
Non-performing loans/total assets 0.58 0.50 0.53
Non-performing assets /total assets 0.77 0.55 0.56
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