BOSTON, Jan. 30, 2009 (GLOBE NEWSWIRE) -- Meridian Interstate Bancorp, Inc. (the "Company" or "Meridian") (Nasdaq:EBSB), the holding company for East Boston Savings Bank, (the "Bank"), announced a net loss of $1.7 million for the quarter ended December 31, 2008, compared to a net loss of $22,000 for the quarter ended December 31, 2007. Net loss per basic and diluted share for the fourth quarter of 2008 was $.08. The Company recorded a provision for loan losses of $2.9 million in the 2008 quarter, compared to $205,000 in the 2007 quarter.
For the year ended December 31, 2008, the Company recorded a net loss of $2.1 million, compared to net income of $2.3 million for the year ended December 31, 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 year ended December 31, 2008 and prior periods, as shares were not outstanding for the entire periods.
Results of Operations
Net interest income for the quarter ended December 31, 2008 was $7.3 million, an increase of $2.0 million, or 38.2%, from the quarter ended December 31, 2007, due to an increase in loan interest income of $1.1 million, or 12.4%, and a reduction in deposit interest expense of $1.4 million, or 20.1%. Net interest income for the year ended December 31, 2008 was $25.9 million, an increase of $4.8 million, or 22.6%, from the year ended December 31, 2007. An increase in loan interest income of $3.0 million, or 8.5%, and a reduction in deposit expense of $1.2 million, or 4.6%, were offset by a $5.2 million increase in the provision for loan losses.
The Company's net interest margin was 2.38% and 2.97% for the quarters ended December 31, 2007 and 2008, respectively, with the 2008 quarterly net interest margin increasing from 2.70% and 2.35% for the quarters ended September 30, 2008 and June 30, 2008. The increase in the quarterly margin in 2008 is due primarily to a decrease in the overall rate paid on deposits and borrowings. Richard Gavegnano, the Company's Chief Executive Officer, noted, "We are pleased to report another increase in the quarterly net interest margin during these difficult economic times. Despite the economic recession and the problems in the credit and financial markets, the Company remains focused as we move forward."
For the year ended December 31, 2008, the net interest margin was 2.61%, compared to 2.47% for 2007. The 2008 net interest margin benefited from the end of promotional certificate of deposit rates offered in 2007.
Growth in the loan portfolio resulted in increased interest income in 2008, from $9.2 million for the quarter ended December 31, 2007, to $10.3 million for the quarter ended December 31, 2008, as average loan balances increased from $564.6 million to $675.1 million. For the year ended December 31, 2008, total loan interest income was $38.8 million, compared to $35.7 million for 2007.
The average balance of interest-bearing deposits increased from $720.8 million to $746.8 million for the quarters ended December 31, 2007 and 2008, respectively, while deposit interest expense decreased $1.4 million, or 20.1%. For the year ended December 31, 2008, deposit interest expense decreased $1.2 million, or 4.6%, from 2007, due to lower rates paid.
Borrowing expense increased $105,000, or 24.9%, for the quarter ended December 31, 2008 compared to the same period in 2007 due to higher average outstanding borrowings, which increased from $36.5 million to $63.1 million.
The Company's loan loss provision was $2.9 million and $5.6 million for the quarter and year ended December 31, 2008, compared to $205,000 and $465,000 for the same periods in 2007. The increase in the provision relates to loan growth, specific reserves taken for impaired loans, 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 fourth quarter of 2008 was $339,000, compared to $452,000 in the fourth quarter of 2007, due mainly to the receipt of proceeds from a litigation settlement of $305,000 during the fourth quarter of 2007. Non-interest income increased by $3.7 million, to $8.4 million for the year ended December 31, 2008 from the comparable 2007 period. In 2008, the Company recorded gain on sale of securities of $4.4 million, compared to $299,000 in 2007, while income from bank-owned life insurance decreased $315,000, or 27.6%, due to policy proceeds received in 2007.
Non-interest expense increased from $6.1 million for the quarter ended December 31, 2007 to $7.4 million for the quarter ended December 31, 2008, mainly as a result of increased professional service fees and other real estate owned expense. Non-interest expense increased $9.3 million, from $22.6 million to $32.0 million for the years ended December 31, 2007, and 2008, respectively. Salary and employee benefit costs increased from $14.5 million to $17.7 million, primarily as a result of the $1.5 million retirement charge and expense incurred for the Company's Employee Stock Ownership Plan (ESOP) and post-retirement benefits. In 2008, the Company also made a $3.0 million contribution to the Meridian Charitable Foundation in conjunction with its stock offering, and incurred an increase in professional service fees. Professional service fees increased from $1.1 million to $2.3 million as a result of our being a public company. Real estate owned operating expense increased $656,000 in 2008, as more properties were acquired through foreclosure. Other expenses increased from $1.9 million to $2.5 million primarily due to an increase in FDIC insurance premiums. The Company benefited from an FDIC deposit insurance credit in 2007.
Credit Quality
The allowance for loan losses was $6.9 million, or 0.97%, of total loans outstanding as of December 31, 2008, compared to $3.6 million, or 0.63%, as of December 31, 2007, and $5.7 million, or 0.86%, at September 30, 2008. The increase in the allowance for loan losses from the prior quarter is due to continued loan growth and management's ongoing assessment of factors affecting the loan portfolio, including further deterioration of the economic environment. At December 31, 2007, there was $5.1 million of impaired loans, including loans of $621,000 with an impairment allowance of $89,000. At December 31, 2008, there was $12.5 million of impaired loans, including loans of $1.9 million with an impairment allowance of $418,000. The Bank individually reviews classified residential and commercial loans for impairment based on the fair value of collateral or expected cash flows.
Non-performing assets (non-accrual loans and property acquired through foreclosure) were $16.8 million, or 1.58%, of total assets at December 31, 2008, compared to $8.2 million, or 0.77%, of total assets at September 30, 2008, and $5.5 million, or 0.55%, at December 31, 2007. The increase in non-performing assets from September resulted primarily from two construction loans. The Company charged-off of an existing specific impairment reserve of $1.1 million during the fourth quarter for one of these loans. Total property acquired through foreclosure at December 31, 2008 was $2.6 million, compared to $2.0 million at September 30, 2008 and $560,000 at December 31, 2007. The increase in property acquired through foreclosure from the prior year is due to one construction lending relationship and several residential properties.
Financial Condition
The Company's total assets increased by $62.1 million, or 6.2%, to $1.1 billion at December 31, 2008 from December 31, 2007. Net loans increased by $136.0 million, or 23.9%, with the most significant growth in residential and commercial real estate loans. Securities available for sale decreased $14.5 million, or 5.4%, and federal funds sold decreased by $81.4 million, as these funds were utilized to fund loan growth.
Deposits increased by $22.4 million, or 2.9%, for the year ended December 31, 2008, due mainly to an increase in money market balances of $34.2 million, or 24.7%. Outstanding borrowings also increased $29.0 million, to $65.5 million, as the Company opted to replace some higher rate maturing advances with lower cost borrowings.
Stockholders' equity increased by $74.2 million, to $189.8 million at December 31, 2008 from $115.7 million at December 31, 2007, mainly due to the Company's stock offering. The Company also recorded a decrease to other comprehensive income of $12.7 million due to an increase in unrecognized losses on the available for sale portfolio due to general market conditions. The Company does not hold any trust preferred instruments, private label mortgage back securities, or FNMA or FHLMC preferred stock. The Company did not apply for TARP funds from the federal government.
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 and other filings with the U.S. Securities and Exchange Commission. 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)
December 31, December 31,
--------------------------
(Dollars in thousands) 2008 2007
--------------------------
ASSETS
Cash and due from banks $ 10,354 $ 11,821
Federal funds sold 9,911 91,272
-----------------------
Total cash and cash equivalents 20,265 103,093
Certificates of deposit 7,000 --
Securities available for sale, at
fair value 252,529 267,058
Federal Home Loan Bank stock, at cost 4,303 3,165
Loans 711,016 571,741
Less allowance for loan losses (6,912) (3,637)
-----------------------
Loans, net 704,104 568,104
Bank-owned life insurance 22,831 18,003
Investment in affiliate bank 10,376 10,772
Premises and equipment, net 22,710 22,816
Accrued interest receivable 6,036 5,764
Foreclosed real estate, net 2,604 560
Deferred tax asset, net 10,057 --
Other assets 2,537 3,891
-----------------------
Total assets $ 1,065,352 $ 1,003,226
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest-bearing $ 55,216 $ 51,396
Interest-bearing 741,636 723,050
-----------------------
Total deposits 796,852 774,446
Stock subscriptions -- 62,518
Short-term borrowings 7,811 9,154
Long-term debt 57,675 27,373
Accrued expenses and other liabilities 13,174 14,051
-----------------------
Total liabilities 875,512 887,542
-----------------------
Stockholders' equity:
Common stock, no par value 50,000,000
shares authorized; 23,000,000 and 0 shares
issued at December 31, 2008 and
December 31, 2007 -- --
Additional paid-in capital 100,684 --
Retained earnings 105,426 109,177
Accumulated other comprehensive income
(loss) (6,205) 6,507
Unearned compensation - ESOP, 786,600
shares and 0 shares at December 31, 2008
and 2007, respectively (7,866) --
Unearned compensation - restricted shares,
250,000 and 0 shares at December 31, 2008
and 2007, respectively (2,199) --
-----------------------
Total stockholders' equity 189,840 115,684
-----------------------
Total liabilities and stockholders'
equity $ 1,065,352 $ 1,003,226
=======================
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Year Ended
December 31 December,31,
-----------------------------------------------
(Dollars in
thousands, 2008 2007 2008 2007
except per share -----------------------------------------------
amounts)
Interest and
dividend income:
Interest and
fees on loans $ 10,326 $ 9,185 $ 38,781 $ 35,745
Interest on debt
securities 2,541 2,775 10,460 11,039
Dividends on
equity securities 552 316 1,816 1,131
Interest on
certificates of
deposit 59 -- 157 --
Interest on
federal funds
sold 43 534 1,683 1,260
-----------------------------------------------
Total interest
and dividend
income 13,521 12,810 52,897 49,175
-----------------------------------------------
Interest expense:
Interest on
deposits 5,658 7,080 25,040 26,239
Interest on
short-term
borrowings 17 82 132 370
Interest on long-
term debt 509 339 1,872 1,487
-----------------------------------------------
Total interest
expense 6,184 7,501 27,044 28,096
-----------------------------------------------
Net interest income 7,337 5,309 25,853 21,079
Provision for loan
losses 2,907 205 5,638 465
-----------------------------------------------
Net interest
income, after
provision for
loan losses 4,430 5,104 20,215 20,614
-----------------------------------------------
Non-interest income:
Customer service
fees 723 711 2,796 2,733
Loan fees 122 178 673 664
Gain on sales of
loans, net 22 30 39 49
Gain (loss) on
sales of
securities, net (659) (873) 4,433 299
Income from bank-
owned life
insurance 204 293 828 1,143
Equity loss on
investment in
affiliate bank 73 (192) (396) (541)
Litigation
settlement -- 305 -- 305
-----------------------------------------------
Total non-interest
income 339 452 8,373 4,652
-----------------------------------------------
Non-interest expenses:
Salaries and
employee benefits 3,885 3,782 17,678 14,486
Occupancy and
equipment 717 670 2,915 2,602
Data processing 419 488 1,662 1,588
Marketing and
advertising 382 362 1,214 987
Professional
services 738 332 2,300 1,069
Contribution to
the Meridian
Charitable
Foundation -- -- 3,000 --
Other real estate
owned expense 600 18 675 19
Other general and
administrative 638 488 2,522 1,869
-----------------------------------------------
Total non-interest
expenses 7,379 6,140 31,966 22,620
-----------------------------------------------
Income (loss) before
income taxes (2,610) (584) (3,378) 2,646
Provision (benefit)
for income taxes (896) (562) (1,270) 380
-----------------------------------------------
Net income
(loss) $ (1,714) $ (22) $ (2,108) $ 2,266
===============================================
Loss per share:
Basic $ (0.08) N/A N/A N/A
Diluted $ (0.08) N/A N/A N/A
Weighted Average
Shares:
Basic 22,122,373 N/A N/A N/A
Diluted 22,280,636 N/A N/A N/A
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Net Interest Income Analysis
(Unaudited)
For The Three Months Ended December 31,
-------------------------------------------------------
2008 2007
--------------------------------------------------------------------
Interest Yield/ Interest Yield/
(Dollars in Average Earned/ Cost Average Earned Cost
thousands) Balance Paid (4) Balance (4)
-------------------------------------------------------
Assets:
Interest-
earning
assets:
Loans (1) $ 675,091 $ 10,326 6.09% $ 564,647 $ 9,185 6.45%
Securities
and
certificates
of deposit 286,234 3,152 4.38 270,936 3,091 4.53
Other
interest-
earning
assets 21,403 43 0.80 48,034 534 4.41
------------------- -------------------
Total
interest-
earning
assets 982,728 13,521 5.47 883,617 12,810 5.75
-------- --------
Noninterest-
earning
assets 86,909 67,722
---------- ----------
Total
assets $1,069,637 $ 951,339
========== ==========
Liabilities
and
stockholders'
equity:
Interest-
bearing
liabilities:
NOW
deposits $ 40,827 65 0.63 $ 30,739 45 0.58
Money market
deposits 164,945 1,052 2.54 131,569 1,312 3.96
Savings and
other
deposits 121,625 340 1.11 123,084 358 1.15
Certificates
of deposit 419,443 4,201 3.98 435,374 5,365 4.89
------------------- -------------------
Total
interest-
bearing
deposits 746,840 5,658 3.01 720,766 7,080 3.70
FHLB
advances
and other
borrowings 63,102 526 3.32 36,517 421 4.57
------------------- -------------------
Total
interest-
bearing
liabili-
ties 809,942 6,184 3.04 757,283 7,501 3.93
-------- --------
Noninterest-
bearing
demand
deposits 56,566 60,070
Other
noninterest-
bearing
liabilities 11,252 19,036
---------- ----------
Total
liabili-
ties 877,760 836,389
Total
stock-
holders'
equity 191,877 114,950
---------- ----------
Total
liabilities
and stock-
holders'
equity $1,069,637 $ 951,339
========== ==========
Net interest
income $ 7,337 $ 5,309
======== ========
Interest
rate spread
(2) 2.43% 1.82%
Net interest
margin (3) 2.97% 2.38%
Average
interest-
earning
assets to
average
interest-
bearing
liabilities 121.33% 116.68%
--------------------------------------------------------------------
(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 Year Ended December 31,
-------------------------------------------------------
2008 2007
--------------------------------------------------------------------
Interest Interest
(Dollars in Average Earned/ Yield/ Average Earned/ Yield/
thousands) Balance Paid Cost Balance Paid Cost
-------------------------------------------------------
Assets:
Interest-
earning
assets:
Loans (1) $ 621,985 $ 38,781 6.24% $ 550,494 $ 35,745 6.49%
Securities
and
certifi-
cates of
deposit 297,645 12,433 4.18 275,055 12,170 4.42
Other
interest-
earning
assets 69,275 1,683 2.43 26,244 1,260 4.80
------------------- -------------------
Total
interest-
earning
assets 988,905 52,897 5.35 851,793 49,175 5.77
-------- --------
Noninterest-
earning
assets 79,250 65,348
---------- ----------
Total
assets $1,068,155 $ 917,141
========== ==========
Liabilities
and stock-
holders'
equity:
Interest-
bearing
liabilities:
NOW
deposits $ 39,351 301 0.76 $ 34,355 123 0.36
Money
market
deposits 149,827 4,019 2.68 113,392 4,164 3.67
Savings and
other
deposits 127,250 1,445 1.14 129,153 1,500 1.16
Certificates
of deposit 437,183 19,275 4.41 422,588 20,452 4.84
------------------- -------------------
Total
interest-
bearing
deposits 753,611 25,040 3.32 699,488 26,239 3.75
FHLB
advances
and other
borrowings 55,882 2,004 3.59 39,193 1,857 4.74
------------------- -------------------
Total
interest-
bearing
liabili-
ties 809,493 27,044 3.34 738,681 28,096 3.80
---------- ----------
Noninterest-
bearing
demand
deposits 54,503 54,051
Other
noninterest-
bearing
liabilities 10,070 11,429
---------- ----------
Total
liabili-
ties 874,066 804,161
Total
stock-
holders'
equity 194,089 112,980
---------- ----------
Total
liabili-
ties and
stock-
holders'
equity $1,068,155 $ 917,141
========== ==========
Net
interest
income $ 25,853 $ 21,079
======== ========
Interest
rate
spread (2) 2.01% 1.97%
Net interest
margin (3) 2.61% 2.47%
Average
interest-
earning
assets to 122.16% 115.31%
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.
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Financial Ratios
(Unaudited)
------------------------------------------------------------------
Three Months Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
----------------------------------------
Key Performance Ratios
Return on average
assets (4) (0.64)% (0.01)% (0.20)% 0.25 %
Return on average
equity (4) (3.57) (0.08) (1.09) 2.01
Interest rate
spread (1) (4) 2.43 1.82 2.01 1.97
Net interest
margin (2) (4) 2.97 2.38 2.61 2.47
Noninterest expense to
average assets (4) 2.76 2.58 2.99 2.47
Efficiency ratio (3) 96.13 106.58 93.40 87.91
Average interest-earning
assets to average
interest-bearing
liabilities 121.33 116.68 122.16 115.31
(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,
excluding securities gains or losses.
(4) Annualized for the quarterly data.
At At
December 31, December 31,
2008 2007
----------------------------
Asset Quality Ratios
Allowance for loan losses/total loans 0.97 % 0.63 %
Allowance for loan losses/
nonperforming assets 48.57 73.00
Non-performing loans/total loans 2.00 0.87
Non-performing loans/total assets 1.34 0.50
Non-performing assets /total assets 1.58 0.55
--------------------------------------------------------------------