BOSTON, Aug. 6, 2008 (PRIME 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 $2.2 million for the quarter ended June 30, 2008, compared to net income of $796,000 for the quarter ended June 30, 2007. The 2008 quarter reflects pre-tax compensation charges of $1.5 million as a result of the retirement of the Bank's president and a provision for loan losses of $2.2 million. The net loss per share basic and diluted for the second quarter of 2008 was $.10. Earnings per share for the six months ended June 30, 2008 is not applicable, as shares were not outstanding for the entire period.
For the six months ended June 30, 2008, the Company recorded a net loss of $2.5 million, compared to net income of $2.6 million for the six months ended June 30, 2007. In addition to the retirement charge and loan loss provision, the 2008 loss includes a $3.0 million pre-tax contribution of stock to the Company's charitable foundation, which was made as part of the Company's minority stock offering, completed on January 22, 2008.
Results of Operations
Net interest income for the quarter ended June 30, 2008 was $5.9 million, an increase of $633,000, or 12.0%, from the quarter ended June 30, 2007, primarily due to an increase in interest earned on loans. Net interest income for the six months ended June 30, 2008 was $11.8 million, an increase of $1.2 million, or 11.0%, from the six months ended June 30, 2007. Interest income increased by $2.1 million, or 8.6%, while interest expense increased $889,000, or 6.6%, due to increased loan and deposit balances.
The Company's net interest margin was 2.35% and 2.54% for the quarters ended June 30, 2008 and 2007, respectively. For the six months ended June 30, 2008 the net interest margin was 2.39%, compared to 2.54% for the same period in 2007. The decline in net interest margin reflects decreases in yields on prime-related assets, resulting from Federal Reserve actions to reduce short-term interest rates, offsetting an overall decrease in rates paid on interest-bearing liabilities.
Growth in the loan portfolio resulted in increased interest income in 2008, from $8.8 million for the quarter ended June 30, 2007, to $9.3 million for the quarter ended June 30, 2008. For the six months ended June 30, total loan interest income was $18.5 million, compared to $17.5 million for the six months ended June 30, 2007.
The Company continues to monitor deposit pricing to encourage the retention of deposits obtained under promotional rates in 2007, while managing overall deposit expense. As a result, the average balance of interest-bearing deposits increased $69.8 million, or 10.2%, while deposit interest expense increased $119,000, or 1.9% for the quarter ended June 30, 2008. For the six months ended June 30, 2008, deposit interest expense increased $914,000, or 7.4%, from the same period in 2007, also mainly as a result of an increase in the average balance of interest-bearing deposits.
Borrowing expense increased $77,000, or 15.6%, for the quarter ended June 30, 2008 compared to the same period in 2007 due to higher average outstanding borrowings, which increased from $41.3 million to $64.1 million. The average rate paid on borrowings decreased from 4.79% to 3.58%. Comparing the six months ended June 30, 2008 and 2007, borrowing expense decreased by $25,000, or 2.6%, due to lower rates.
The Company's loan loss provision amounted to $2.2 million and $2.3 million for the quarter and six months ended June 30, 2008, compared to $71,000 and $143,000 for the same periods in 2007. Richard Gavegnano, Meridian's CEO commented, "Most of the increase in the provision related to specific impairment reserves taken for two residential construction projects determined to be impaired during the second quarter, 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 second quarter of 2008 was $1.0 million, a decrease of $203,000, or 16.2%, compared to the second quarter of 2007. The Bank received $382,000 of bank-owned life insurance income in the second quarter of 2007 due to policy proceeds for one insured individual, compared to no policy proceeds in 2008. Non-interest income was $4.2 million for both the second quarter of 2008 and 2007, as a $283,000 decrease in income from bank-owned life insurance was offset by an increase in gains on sale of securities of $281,000.
Non-interest expenses increased from $5.2 million to $8.5 million for the quarter ended June 30, 2008. Salary and employee benefit costs increased from $3.4 million to $5.8 million, primarily as a result of the $1.5 million pre-tax expense associated with the retirement of the Bank's former President in June 2008, as well as 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 $383,000 due mainly to legal and audit expenses related to being a public company. Marketing expense was $293,000, an increase of $90,000 from 2007, as the Company utilized radio media to promote the availability of commercial and residential mortgage credit in its local market area. Non-interest expenses increased $7.0 million, from $10.8 million to $17.8 million for the six months ended June 30, 2007, and 2008, respectively, as a result of the $1.5 million retirement charge and a contribution of $3.0 million to the Meridian Charitable Foundation.
Credit Quality
The allowance for loan losses was $6.0 million, or 0.96% of total loans outstanding as of June 30, 2008, compared to $3.6 million, or 0.63% as of December 31, 2007, and $3.5 million, or 0.64% at June 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 June 30, 2008, there was $14.4 million of impaired loans, including loans of $11.9 million with an impairment allowance of $2.2 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. The June 30, 2008 impaired loan balance includes a $7.5 million troubled debt restructuring. A modification of loan terms constitutes a troubled debt restructuring if, for reasons related to the debtor's financial difficulties, a concession is granted to the debtor that would not otherwise be considered.
Non-performing assets (non-accrual loans and property acquired through foreclosure) were $7.6 million, or 0.70% of total assets at June 30, 2008, compared to $5.5 million, or 0.55% at December 31, 2007, and $7.0 million, or 0.77% at June 30, 2007. The increase in non-performing assets from December resulted primarily from one $2.4 million residential construction lending relationship. We held no property acquired through foreclosure at June 30, 2008 or 2007, compared to $561,000 of such property at December 31, 2007. The Company recorded a $5,000 loss on the sale of other real estate owned for the six months ending June 30, 2008.
Financial Condition
The Company's total assets increased by $76.0 million, or 7.6%, to $1.1 billion at June 30, 2008 from December 31, 2007. Net loans increased by $48.0 million, or 8.5%, and securities available for sale increased $74.0 million, or 27.7%. For the six months ended June 30, 2008, growth in one- to four-family real estate loans was $30.4 million, or 13.6%. An increase in commercial real estate loans of $25.0 million, or 14.3%, was offset by a decrease in the balance of construction loans of $11.9 million, or 10.6%. The one- to four-family real estate and commercial real estate categories had growth in both the first and second quarters of 2008.
Deposits increased by $28.4 million, or 3.7%, for the six months ended June 30, 2008, with increases in all deposit categories. Federal Home Loan Bank of Boston borrowings also increased $26.3 million, to $62.8 million, as the Company opted to replace some higher rate maturing advances with lower cost borrowings.
Stockholders' equity increased by $83.1 million, to $198.8 million at June 30, 2008 from $115.7 million at December 31, 2007, mainly due to the stock offering. As a result of the offering, the Company has 23,000,000 shares outstanding, including 10,050,000 shares of common stock sold in the offering, (including shares sold to the Company's employee stock ownership plan), 300,000 shares contributed to the Meridian Charitable Foundation, Inc. and 12,650,000 shares issued to the Company's mutual holding company parent, Meridian Financial Services, Incorporated.
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)
June 30, December 31,
-----------------------
(Dollars in thousands) 2008 2007
-----------------------
ASSETS
Cash and due from banks $ 11,956 $ 11,821
Federal funds sold 31,594 91,272
-----------------------
Total cash and cash equivalents 43,550 103,093
Certificates of deposit 7,000 --
Securities available for sale, at fair value 341,070 267,058
Federal Home Loan Bank stock, at cost 4,303 3,165
Loans 622,079 571,741
Less allowance for loan losses (5,961) (3,637)
-----------------------
Loans, net 616,118 568,104
Bank-owned life insurance 22,418 18,003
Investment in affiliate bank 10,518 10,772
Premises and equipment, net 22,432 22,816
Accrued interest receivable 6,174 5,764
Other assets 5,675 4,451
-----------------------
Total assets $1,079,258 $1,003,226
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest-bearing $ 55,777 $ 51,396
Interest-bearing 747,044 723,050
-----------------------
Total deposits 802,821 774,446
Stock subscriptions -- 62,518
Short-term borrowings -- 9,154
Long-term debt 62,823 27,373
Accrued expenses and other liabilities 14,805 14,051
-----------------------
Total liabilities 880,449 887,542
-----------------------
Stockholders' equity:
Common stock, no par value 50,000,000
shares authorized; 23,000,000 and 0
shares issued and outstanding at
June 30, 2008 and December 31, 2007 -- --
Additional paid-in capital 100,630 --
Retained earnings 104,998 109,177
Accumulated other comprehensive income 1,254 6,507
Unearned compensation - ESOP, 807,300
shares and 0 shares at June 30, 2008
and December 31, 2007, respectively (8,073) --
-----------------------
Total stockholders' equity 198,809 115,684
-----------------------
Total liabilities and stockholders'
equity $1,079,258 $1,003,226
=======================
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------------
(Dollars in thousands) 2008 2007 2008 2007
----------------------------------------------
Interest and
dividend income:
Interest and
fees on loans $ 9,334 $ 8,815 $ 18,517 $ 17,487
Interest on
debt securities 2,633 2,792 5,245 5,549
Dividends on
equity securities 434 265 691 544
Interest on
certificates
of deposit 30 -- 38 --
Interest on federal
funds sold 478 208 1,541 395
----------------------------------------------
Total interest and
dividend income 12,909 12,080 26,032 23,975
----------------------------------------------
Interest expense:
Interest on deposits 6,426 6,307 13,337 12,423
Interest on
short-term borrowings 53 102 115 191
Interest on
long-term debt 517 391 829 778
----------------------------------------------
Total interest
expense 6,996 6,800 14,281 13,392
----------------------------------------------
Net interest income 5,913 5,280 11,751 10,583
Provision for
loan losses 2,197 71 2,328 143
----------------------------------------------
Net interest income,
after provision
for loan losses 3,716 5,209 9,423 10,440
----------------------------------------------
Non-interest income:
Customer service fees 697 710 1,355 1,312
Loan fees 154 128 370 334
Gain on sales of
loans, net 8 8 27 25
Gain on sales of
securities, net 47 -- 2,313 2,032
Income from bank-owned
life insurance 230 535 415 697
Equity loss on
investment in
affiliate bank (86) (128) (254) (211)
----------------------------------------------
Total non-interest
income 1,050 1,253 4,226 4,189
----------------------------------------------
Non-interest expenses:
Salaries and
employee benefits 5,762 3,414 9,784 7,086
Occupancy and equipment 699 622 1,479 1,324
Data processing 406 369 793 732
Marketing 293 203 539 343
Professional services 623 240 967 459
Contribution to
the Meridian
Charitable Foundation -- -- 3,000 --
Other general
and administrative 693 389 1,226 829
----------------------------------------------
Total non-interest
expenses 8,476 5,237 17,788 10,773
----------------------------------------------
Income (loss) before
income taxes (3,710) 1,225 (4,139) 3,856
Provision (benefit)
for income taxes (1,494) 429 (1,602) 1,265
----------------------------------------------
Net income (loss) $ (2,216) $ 796 $ (2,537) $ 2,591
==============================================
Loss per share:
Basic $ (0.10) N/A N/A N/A
Diluted $ (0.10) N/A N/A N/A
Weighted Average
Shares:
Basic 22,185,914 N/A N/A N/A
Diluted 22,185,914 N/A N/A N/A
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Net Interest Income Analysis
(Unaudited)
For The Three Months Ended June 30,
----------------------------------
2008
---------------------------------------------------------------------
(Dollars in thousands) Average Interest Yield/
Balance Earned/Paid Cost (4)
---------------------------------
Assets:
Interest-earning assets:
Loans (1) $604,227 $9,334 6.21%
Securities and certificates
of deposit 310,094 3,097 4.02
Other interest-earning assets 96,801 478 1.99
----------------------
Total interest-earning assets 1,011,122 12,909 5.13
Noninterest-earning assets 76,288
----------
Total assets $1,087,410
==========
Liabilities and
stockholders' equity:
Interest-bearing liabilities:
NOW deposits $39,530 79 0.80
Money market deposits 143,566 885 2.48
Savings and other deposits 123,801 351 1.14
Certificates of deposit 448,618 5,111 4.58
----------------------
Total interest-bearing deposits 755,515 6,426 3.42
FHLB advances 64,070 570 3.58
----------------------
Total interest-bearing
liabilities 819,585 6,996 3.43
Noninterest-bearing demand
deposits 55,299
Other noninterest-bearing
liabilities 9,647
----------
Total liabilities 884,531
Total stockholders' equity 202,879
----------
Total liabilities and
stockholders' equity $1,087,410
==========
Net interest income $ 5,913
==========
Interest rate spread(2) 1.70%
Net interest margin(3) 2.35%
Average interest-earning assets to
average interest-bearing
liabilities 123.37%
---------------------------------------------------------------------
For The Three Months Ended June 30,
----------------------------------
2007
---------------------------------------------------------------------
(Dollars in thousands) Average Interest Yield/
Balance Earned/Paid Cost (4)
----------------------------------
Assets:
Interest-earning assets:
Loans (1) $ 538,720 $ 8,815 6.56%
Securities and certificates
of deposit 278,410 3,057 4.40
Other interest-earning assets 16,076 208 5.19
----------------------
Total interest-earning assets 833,206 12,080 5.82
Noninterest-earning assets 68,230
----------
Total assets $ 901,436
==========
Liabilities and stockholders'
equity:
Interest-bearing liabilities:
NOW deposits $ 34,289 33 0.39
Money market deposits 103,936 891 3.44
Savings and other deposits 132,958 380 1.15
Certificates of deposit 414,495 5,003 4.84
----------------------
Total interest-bearing deposits 685,678 6,307 3.69
FHLB advances 41,263 493 4.79
----------------------
Total interest-bearing
liabilities 726,941 6,800 3.75
Noninterest-bearing demand
deposits 53,890
Other noninterest-bearing
liabilities 7,598
----------
Total liabilities 788,429
Total stockholders' equity 113,007
----------
Total liabilities and
stockholders' equity $ 901,436
==========
Net interest income $ 5,280
==========
Interest rate spread(2) 2.07%
Net interest margin(3) 2.54%
Average interest-earning
assets to average
interest-bearing liabilities 114.62%
---------------------------------------------------------------------
(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 Six Months Ended June 30,
----------------------------------
2008
---------------------------------------------------------------------
(Dollars in thousands) Average Interest Yield/
Balance Earned/Paid Cost (4)
----------------------------------
Assets:
Interest-earning assets:
Loans (1) $ 585,481 $ 18,517 6.36%
Securities and certificates
of deposit 285,088 5,974 4.21
Other interest-earning assets 117,636 1,541 2.63
----------------------
Total interest-earning assets 988,205 26,032 5.30
Noninterest-earning assets 75,438
----------
Total assets $1,063,643
==========
Liabilities and
stockholders' equity:
Interest-bearing liabilities:
NOW deposits $37,225 147 0.79
Money market deposits 141,844 2,038 2.89
Savings and other deposits 132,122 746 1.14
Certificates of deposit 447,243 10,406 4.68
----------------------
Total interest-bearing deposits 758,434 13,337 3.54
FHLB advances 49,992 944 3.80
----------------------
Total interest-bearing
liabilities 808,426 14,281 3.55
Noninterest-bearing
demand deposits 53,550
Other noninterest-bearing
liabilities 9,215
----------
Total liabilities 871,191
Total stockholders' equity 192,452
----------
Total liabilities and
stockholders' equity $1,063,643
==========
Net interest income $ 11,751
==========
Interest rate spread(2) 1.75%
Net interest margin(3) 2.39%
Average interest-earning assets to
average interest-bearing
liabilities 122.24%
---------------------------------------------------------------------
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Net Interest Income Analysis
(Unaudited)
For The Six Months Ended June 30,
----------------------------------
2007
---------------------------------------------------------------------
(Dollars in thousands) Average Interest Yield/
Balance Earned/Paid Cost (4)
----------------------------------
Assets:
Interest-earning assets:
Loans (1) $ 538,719 $ 17,487 6.49%
Securities and certificates
of deposit 279,757 6,093 4.36
Other interest-earning assets 15,214 395 5.23
----------------------
Total interest-earning assets 833,690 23,975 5.75
Noninterest-earning assets 65,911
----------
Total assets $ 899,601
==========
Liabilities and
stockholders' equity:
Interest-bearing liabilities:
NOW deposits $ 64,040 47 0.15
Money market deposits 101,208 1,709 3.40
Savings and other deposits 133,149 771 1.17
Certificates of deposit 417,620 9,896 4.78
----------------------
Total interest-bearing deposits 716,017 12,423 3.50
FHLB advances 40,823 969 4.79
----------------------
Total interest-bearing
liabilities 756,840 13,392 3.57
Noninterest-bearing
demand deposits 23,851
Other noninterest-bearing
liabilities 7,002
----------
Total liabilities 787,693
Total stockholders' equity 111,908
----------
Total liabilities and
stockholders' equity $ 899,601
==========
Net interest income $ 10,583
==========
Interest rate spread(2) 2.18%
Net interest margin(3) 2.54%
Average interest-earning assets to
average interest-bearing liabilities 110.15%
---------------------------------------------------------------------
(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 Six Months Ended
June 30, June 30,
2008 2007 2008 2007
------------------------------------
Key Performance Ratios
Return on average assets (4) (0.82)% 0.35% (0.48)% 0.58
Return on average equity (4) (4.37) 2.82 (2.64) 4.63
Interest rate spread(1) (4) 1.70 2.07 1.75 2.18
Net interest margin(2) (4) 2.35 2.54 2.39 2.54
Noninterest expense to
average assets(4) 3.12 2.32 3.34 2.40
Efficiency ratio (3) 121.73 80.16 111.34 72.93
Average interest-earning
assets to average
interest-bearing liabilities 123.37 114.62 122.24 110.15
(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
June 30, Dec. 31, June 30,
2008 2007 2007
-------------------------
Asset Quality Ratios
Allowance for loan losses/total loans 0.96% 0.63% 0.64%
Allowance for loan losses/nonperforming
loans 78.64 73.00 49.95
Non-performing loans/total loans 1.22 0.87 1.28
Non-performing loans/total assets 0.70 0.50 0.77
Non-performing assets /total assets 0.70 0.55 0.77