BOSTON, Jan. 23, 2018 (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 $9.0 million, or $0.17 per diluted share, for the quarter ended December 31, 2017, down from $13.3 million, or $0.25 per diluted share, for the quarter ended September 30, 2017 and $11.3 million, or $0.22 per diluted share, for the quarter ended December 31, 2016. For the year ended December 31, 2017, net income was $42.9 million, or $0.82 per diluted share, up from $34.2 million, or $0.65 per diluted share, for the year ended December 31, 2016.  Net income for the quarter and year ended December 31, 2017 reflects a charge of approximately $7.0 million, or $0.13 per diluted share, related to enactment of the Tax Cuts and Jobs Act (the “Tax Act”) on December 22, 2017. Non-recurring merger and acquisition expenses totaling $1.8 million for the quarter and $2.1 million for the year ended December 31, 2017 related to the Company’s acquisition of Meetinghouse Bancorp, Inc. and Meetinghouse Bank (“Meetinghouse”) completed on December 29, 2017 are also reflected in the Company’s results. The Company’s return on average assets was 0.70% for the quarter ended December 31, 2017, down from 1.10% for the quarter ended September 30, 2017 and 1.05% for the quarter ended December 31, 2016. For the year ended December 31, 2017, the Company’s return on average assets was 0.89%, up from 0.87% for the year ended December 31, 2016. The Company’s return on average equity was 5.56% for the quarter ended December 31, 2017, down from 8.40% for the quarter ended September 30, 2017 and 7.51% for the quarter ended December 31, 2016.  For the year ended December 31, 2017, the Company’s return on average equity was 6.82%, up from 5.77% for the year ended December 31, 2016.

Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, “Meridian earned record net income of $42.9 million for the year 2017, up $8.8 million, or 26%, from the prior record set in 2016, even after the $7.0 million tax charge resulting from the Tax Act and $2.1 million of acquisition expenses. Without these non-recurring expenses, our net income for 2017 would have been $51 million, up 50% from 2016. The strong organic loan and deposit growth that continues to drive our earnings to new records also increased total assets to $5.3 billion during the year. The Meetinghouse acquisition added $120 million in assets, including $76 million in loans, $94 million in deposits and two branches in the Boston neighborhoods of Dorchester and Roslindale that provide us with a platform for expansion of our market share in the surrounding areas.”

Mr. Gavegnano added, “A major element of our enhanced commitments to our employees, infrastructure investment and charitable giving as previously announced is to expand our core banking franchise to areas not being served by a community bank. We are moving forward with plans to open four new branches in Boston’s Cleveland Circle and Brigham Circle neighborhoods and north of Boston in Lynnfield and West Peabody in 2018 as we continue to evaluate additional branch opportunities within our metropolitan Boston footprint.”

The Company’s net interest income was $39.3 million for the quarter ended December 31, 2017, up $1.3 million or 3.4%, from the quarter ended September 30, 2017 and $5.9 million, or 17.7%, from the quarter ended December 31, 2016. The interest rate spread and net interest margin on a tax-equivalent basis were 2.97% and 3.20%, respectively, for the quarter ended December 31, 2017 compared to 3.08% and 3.30%, respectively, for the quarter ended September 30, 2017 and 3.09% and 3.31%, respectively, for the quarter ended December 31, 2016. For the year ended December 31, 2017, net interest income increased $23.6 million, or 19.3%, to $146.2 million from the year ended December 31, 2016.  The net interest rate spread and net interest margin on a tax-equivalent basis were 3.01% and 3.23%, respectively, for the year ended December 31, 2017 compared to 3.13% and 3.34%, respectively, for the year ended December 31, 2016  The increases in net interest income were primarily due to loan growth, partially offset by increases in the average balances of total deposits and borrowings and the cost of funds for the quarter and year ended December 31, 2017 compared to the respective prior periods.

Total interest and dividend income increased to $50.9 million for the quarter ended December 31, 2017, up $2.9 million, or 6.1%, from the quarter ended September 30, 2017 and $9.6 million, or 23.3%, from the quarter ended December 31, 2016, primarily due to growth in the Company’s average loan balances to $4.556 billion and increases in the yield on loans, to 4.39% on a tax-equivalent basis, of eight basis points from the quarter ended September 30, 2017 and five basis points from the quarter ended December 31, 2016. The Company’s yield on interest-earning assets on a tax-equivalent basis was 4.11% for the quarter ended December 31, 2017, down two basis points from the quarter ended September 30, 2017 and up six basis points from the quarter ended December 31, 2016.  For the year ended December 31, 2017, the Company’s total interest and dividend income increased $35.4 million, or 23.7%, to $185.1 million from the year ended December 31, 2016 primarily due to growth in the average loan balances of $791.7 million, or 22.6%, to $4.287 billion. The Company’s yield on interest-earning assets on a tax-equivalent basis was 4.06% for the year ended December 31, 2017, up one basis point from the year ended December 31, 2016.

Total interest expense increased to $11.5 million for the quarter ended December 31, 2017, up $1.6 million, or 16.4%, from the quarter ended September 30, 2017 and $3.7 million, or 47.4%, from the quarter ended December 31, 2016. Interest expense on deposits increased to $10.1 million for the quarter ended December 31, 2017, up $1.6 million, or 18.4%, from the quarter ended September 30, 2017 and $3.1 million, or 45.1%, from the quarter ended December 31, 2016 primarily due to growth in average total deposits to $3.992 billion and increases in the cost of average total deposits to 1.00% from 0.91% for the quarter ended September 30, 2017, and 0.83% for the quarter ended December 31, 2016. Interest expense on borrowings increased to $1.4 million for the quarter ended December 31, 2017, up $56,000, or 4.0%, from the quarter ended September 30, 2017 and $576,000, or 66.4%, from the quarter ended December 31, 2016 primarily due to growth in average total borrowings to $486.9 million. The Company’s total cost of funds was 1.02% for the quarter ended December 31, 2017, up eight basis points from the quarter ended September 30, 2017 and 17 basis points from the quarter ended December 31, 2016. Total interest expense increased $11.8 million, or 43.4%, to $38.9 million for the year ended December 31, 2017 from the year ended December 31, 2016. Interest expense on deposits increased $9.9 million, or 40.9%, to $34.0 million for the year ended December 31, 2017 from the year ended December 31, 2016 due to the growth in average total deposits of $682.5 million, or 22.4%, to $3.732 billion and an increase in the cost of average total deposits of 12 basis points to 0.91%. Interest expense on borrowings increased $1.9 million, or 63.6%, to $4.9 million for the year ended December 31, 2017 from the year ended December 31, 2016 due to the growth in average total borrowings of $133.6 million, or 48.1%, to $411.2 million and an increase in the cost of average total borrowings of 11 basis points to 1.20%. The Company’s cost of funds increased 12 basis points to 0.94% for the year ended December 31, 2017 compared to the year ended December 31, 2016.

Mr. Gavegnano noted, “Rising net interest income, the key component of our record earnings pace, continues to be driven by strong organic loan growth. Our loan portfolio, excluding acquired with Meetinghouse, rose $648 million, or 17%, on loan originations of $1.8 billion in 2017. Our net interest income rose 19% in 2017 despite a rising short-term interest rate environment that contributed to the 12 basis point increase in our cost of funds to 0.94% and an 11 basis point decline in our net interest margin to 3.23%.”

The Company recognized a reversal of $715,000 in its provision for loan losses for the quarter ended December 31, 2017, compared to provisions of $2.5 million for the quarter ended September 30, 2017 and $1.3 million from the quarter ended December 31, 2016. For the year ended December 31, 2017, the provision for loan losses was $4.9 million compared to $7.2 million for the year ended December 31, 2016. The allowance for loan losses was $45.2 million or 0.97% of total loans at December 31, 2017, compared to $45.6 million or 1.00% of total loans at September 30, 2017, and $40.1 million or 1.02% of total loans at December 31, 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, with reductions in the provision for loan losses for the quarter and year ended December 31, 2017 reflecting improvement in these asset quality factors during the year.

Net recoveries totaled $257,000 for the quarter ended December 31, 2017, or 0.02% of average loans outstanding on an annualized basis compared to net charge-offs of $44,000 for the quarter ended September 30, 2017, and net recoveries of $147,000 for the quarter ended December 31, 2016, or 0.02% of average loans on an annualized basis. For the year ended December 31, 2017, net recoveries totaled $177,000, or 0.00% of average loans outstanding compared to net charge-offs of $436,000, or 0.01% of average loans outstanding, for the year ended December 31, 2016.

Non-accrual loans were $8.4 million, or 0.18% of total loans outstanding, at December 31, 2017; down $815,000, or 8.9%, from September 30, 2017; and down $5.1 million, or 37.8%, from December 31, 2016. Non-performing assets were $8.4 million, or 0.16% of total assets, at December 31, 2017, compared to $10.9 million, or 0.21% of total assets, at September 30, 2017, and $13.4 million, or 0.30% of total assets, at December 31, 2016.

Mr. Gavegnano commented, “We saw continuing improvement in our asset quality during 2017, as non-performing assets declined to 0.16% of total assets, the lowest level since 2006, with negligible loan charge-off activity. This improvement reflects our ongoing emphasis on maintaining disciplined underwriting, credit monitoring and collection processes.”

Non-interest income was $8.7 million for the quarter ended December 31, 2017, up from $5.3 million for the quarter ended September 30, 2017 and up from $5.6 million for the quarter ended December 31, 2016. Non-interest income increased $3.5 million, or 65.8%, as compared to the quarter ended September 30, 2017, primarily due to a $5.2 million increase in gain on sales of securities, net, partially offset by a $1.7 million gain on a life insurance distribution related to a banked-owned life insurance claim recognized during the third quarter of 2017. As compared to the quarter ended December 31, 2016, non-interest income increased $3.1 million, or 55.1%, primarily due to a $3.4 million increase in gain on sales of securities, net. For the year ended December 31, 2017, non-interest income increased $8.9 million, or 62.5%, to $23.1 million from $14.2 million for the year ended December 31, 2016, primarily due to a $6.3 million increase in gain on sale of securities, net, the $1.7 million gain on a life insurance distribution, and a $1.1 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 $23.9 million, or 1.85% of average assets for the quarter ended December 31, 2017, compared to $20.8 million, or 1.71% of average assets for the quarter ended September 30, 2017 and $19.8 million, or 1.84% of average assets for the quarter ended December 31, 2016.  Non-interest expenses increased $4.1 million, or 20.7%, compared to the quarter ended December 31, 2016, due primarily to increases of $1.8 million in merger and acquisition expenses, $1.6 million in salaries and employee benefits, $343,000 in deposit insurance premiums, $260,000 in other general and administrative expenses, and $200,000 in data processing.  For the year ended December 31, 2017, non-interest expenses increased $10.5 million, or 13.5%, to $88.0 million from $77.5 million for the year ended December 31, 2016, due to increases of $4.3 million in salaries and employee benefits, $2.1 million in merger and acquisition expenses, $951,000 in deposit insurance premiums, $777,000 in data processing expenses, $724,000 in occupancy and equipment expenses, $704,000 in professional services, $491,000 in other general and administrative expenses, and $436,000 in marketing and advertising expenses.  The increases in salaries and employee benefits expenses reflect annual increases in employee compensation and health benefits during the first quarter of 2017 and a 20% bonus enhancement to the Bank’s Incentive Compensation Plan for 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, which excludes non-recurring merger and acquisition expenses, was 52.61% for the quarter ended December 31, 2017 compared to 48.40% for the quarter ended September 30, 2017 and 54.33% for the quarter ended December 31, 2016.  For the year ended December 31, 2017, the efficiency ratio was 53.71% compared to 57.95% for the year ended December 31, 2016. 

Mr. Gavegnano said, “Our efficiency ratio improved to 53.71% in 2017 from 57.95% in 2016, primarily due to the 19% rise in net interest income. Non-interest expenses, without the non-recurring Meetinghouse acquisition expenses of $2.1 million in 2017 that were excluded from the determination of our efficiency ratio, increased 11%. The significant expenses related to the Meetinghouse acquisition and our regulatory compliance infrastructure enhancements are now behind us. As we move forward with prudent staffing and capital commitments related to our planned branch expansion, we believe these investments will ultimately contribute to further improvement in our financial performance.”

The Company recorded a provision for income taxes of $15.9 million for the quarter ended December 31, 2017, reflecting an effective tax rate of 63.7%, compared to $6.7 million, or an effective tax rate of 33.5%, for the quarter ended September 30, 2017, and $6.6 million, or an effective tax rate of 37.0%, for the quarter ended December 31, 2016. For the year ended December 31, 2017, the provision for income taxes was $33.5 million, reflecting an effective tax rate of 43.8%, compared to $17.9 million, or an effective tax rate of 34.3%, for the year ended December 31, 2016. The changes in the income tax provision and effective tax rate were primarily due to the $7.0 million charge related to enactment of the Tax Act that required the Company to revalue its net deferred tax asset.  This charge may be subject to adjustment in future periods.

Total assets were $5.299 billion at December 31, 2017, up $213.0 million, or 4.2%, from $5.086 billion at September 30, 2017 and $863.5 million, or 19.5%, from $4.436 billion at December 31, 2016.  The growth in assets includes $120.4 million of assets acquired in the Meetinghouse acquisition. Net loans were $4.623 billion at December 31, 2017, up $120.9 million, or 2.7%, from September 30, 2017, and $724.1 million, or 18.6%, from December 31, 2016, including $73.6 million of loans acquired in the Meetinghouse acquisition.  Loan originations totaled $452.9 million during the quarter ended December 31, 2017 and $1.763 billion during the year ended December 31, 2017. The net increase in loans for the year ended December 31, 2017 was primarily due to increases of $287.2 million in commercial real estate loans, $216.7 million in multi-family loans, $138.5 million in construction loans, $71.2 million in one- to four-family loans and $10.2 million in commercial and industrial loans.  Cash and due from banks was $402.7 million at December 31, 2017, an increase of $166.3 million, or 70.3% from December 31, 2016.  Securities available for sale were $38.4 million at December 31, 2017, a decrease of $29.3 million, or 43.3%, from $67.7 million at December 31, 2016.

Total deposits were $4.108 billion at December 31, 2017, an increase of $162.4 million, or 4.1%, from $3.945 billion at September 30, 2017 and an increase of $632.0 million, or 18.2%, from $3.476 billion at December 31, 2016.  Contributing to the growth was $93.8 million of deposits acquired in the Meetinghouse acquisition.  Core deposits, which exclude certificate of deposits, increased $389.6 million, or 16.6%, during the year ended December 31, 2017 to $2.737 billion, or 66.6% of total deposits. Total borrowings were $513.4 million, up $42.4 million, or 9.0%, from September 30, 2017 and up $190.9 million, or 59.2%, from December 31, 2016. 

Total stockholders’ equity increased $6.0 million, or 0.9%, to $646.4 million at December 31, 2017 from $640.4 million at September 30, 2017, and $39.1 million, or 6.4%, from $607.3 million at December 31, 2016. The increase for the year ended December 31, 2017 was primarily due to net income of $42.9 million, and $6.5 million related to stock-based compensation plans partially offset by $1.7 million in accumulated other comprehensive losses, reflecting a decrease in the fair value of available-for-sale securities, partially offset by dividends of $0.17 per share totaling $8.7 million. Stockholders’ equity to assets was 12.20% at December 31, 2017, compared to 12.59% at September 30, 2017 and 13.69% at December 31, 2016. Book value per share increased to $11.96 at December 31, 2017 from $11.33 at December 31, 2016. Tangible book value per share increased to $11.54 at December 31, 2017 from $11.08 at December 31, 2016. Market price per share increased $1.70, or 9.0%, to $20.60 at December 31, 2017 from $18.90 at December 31, 2016. At December 31, 2017, the Company and the Bank continued to exceed all regulatory capital requirements.

As of December 31, 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 year ended December 31, 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 33 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)
 
  December 31, 2017  September 30, 2017  December 31, 2016 
             
  (Dollars in thousands) 
ASSETS            
Cash and due from banks $402,687  $300,297  $236,423 
Certificates of deposit  69,326   75,192   80,323 
Securities available for sale, at fair value  38,364   44,661   67,663 
Federal Home Loan Bank stock, at cost  24,947   22,976   18,175 
Loans held for sale  3,772   3,707   3,944 
Loans:            
One- to four-family  603,680   560,393   532,450 
Home equity lines of credit  48,393   42,042   42,913 
Multi-family  779,637   702,631   562,948 
Commercial real estate  2,063,781   2,070,761   1,776,601 
Construction  641,306   604,487   502,753 
Commercial and industrial  525,604   561,769   515,430 
Consumer  10,761   10,222   9,712 
Total loans  4,673,162   4,552,305   3,942,807 
Allowance for loan losses  (45,185)  (45,643)  (40,149)
Net deferred loan origination fees  (5,179)  (4,794)  (3,990)
Loans, net  4,622,798   4,501,868   3,898,668 
Bank-owned life insurance  40,336   40,052   40,745 
Foreclosed real estate, net     1,690    
Premises and equipment, net  40,967   40,077   41,427 
Accrued interest receivable  12,902   11,580   10,381 
Deferred tax asset, net  15,244   21,487   21,461 
Goodwill  19,638   13,687   13,687 
Other intangible assets  3,243       
Other assets  5,231   9,140   3,105 
Total assets $5,299,455  $5,086,414  $4,436,002 
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Deposits:            
Non interest-bearing demand deposits $477,428  $455,540  $431,222 
Interest-bearing demand deposits  1,004,155   896,561   630,413 
Money market deposits  921,895   975,246   980,344 
Regular savings and other deposits  333,774   324,895   305,632 
Certificates of deposit  1,370,609   1,293,227   1,128,226 
Total deposits  4,107,861   3,945,469   3,475,837 
Long-term debt  513,444   471,069   322,512 
Accrued expenses and other liabilities  31,751   29,472   30,356 
Total liabilities  4,653,056   4,446,010   3,828,705 
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; 54,039,316, 53,947,394 and 53,596,105 shares issued at December 31, 2017, September 30, 2017 and December 31, 2016, respectively  540   539   536 
Additional paid-in capital  395,716   393,903   390,065 
Retained earnings  268,533   262,079   234,290 
Accumulated other comprehensive income  128   2,622   1,806 
Unearned compensation - ESOP, 2,557,036, 2,587,477 and 2,678,800 at December 31, 2017, September 30, 2017 and December 31, 2016, respectively  (18,518)  (18,739)  (19,400)
Total stockholders' equity  646,399   640,404   607,297 
Total liabilities and stockholders' equity $5,299,455  $5,086,414  $4,436,002 
 


 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)
 
  Three Months Ended  Years Ended 
  December 31,
2017
  September 30,
2017
  December 31,
2016
  December 31,
2017
  December 31,
2016
 
                     
  (Dollars in thousands, except per share amounts) 
Interest and dividend income:                    
Interest and fees on loans $49,144  $46,597  $40,172  $179,425  $145,541 
Interest on debt securities:                    
Taxable  42   58   159   302   866 
Tax-exempt  14      19   32   114 
Dividends on equity securities  223   275   346   1,066   1,529 
Interest on certificates of deposit  185   221   115   814   495 
Other interest and dividend income  1,265   819   438   3,465   1,147 
Total interest and dividend income  50,873   47,970   41,249   185,104   149,692 
Interest expense:                    
Interest on deposits  10,100   8,528   6,962   33,982   24,124 
Interest on short-term borrowings           4   6 
Interest on long-term debt  1,444   1,388   868   4,926   3,007 
Total interest expense  11,544   9,916   7,830   38,912   27,137 
Net interest income  39,329   38,054   33,419   146,192   122,555 
Provision for loan losses  (715)  2,458   1,304   4,859   7,180 
Net interest income, after provision for loan losses  40,044   35,596   32,115   141,333   115,375 
Non-interest income:                    
Customer service fees  2,170   2,081   2,233   8,517   8,491 
Loan fees  88   180   335   1,970   918 
Mortgage banking gains, net  109   176   125   457   573 
Gain on sales of securities, net  6,058   865   2,627   9,305   3,020 
Income from bank-owned life insurance  284   294   294   1,158   1,188 
Gain on life insurance distribution     1,657      1,657    
Total non-interest income  8,709   5,253   5,614   23,064   14,190 
Non-interest expenses:                    
Salaries and employee benefits  13,761   12,973   12,167   53,161   48,828 
Occupancy and equipment  2,798   2,676   2,881   11,533   10,809 
Data processing  1,531   1,528   1,331   5,912   5,135 
Marketing and advertising  1,131   715   973   3,653   3,217 
Professional services  804   624   969   3,669   2,965 
Deposit insurance  824   660   481   2,988   2,037 
Merger and acquisition  1,784   271      2,055    
Other general and administrative  1,236   1,367   976   4,994   4,503 
Total non-interest expenses  23,869   20,814   19,778   87,965   77,494 
Income before income taxes  24,884   20,035   17,951   76,432   52,071 
Provision for income taxes  15,863   6,702   6,642   33,487   17,881 
Net income $9,021  $13,333  $11,309  $42,945  $34,190 
                     
Earnings per share:                    
Basic $0.18  $0.26  $0.22  $0.84  $0.67 
Diluted $0.17  $0.25  $0.22  $0.82  $0.65 
Weighted average shares:                    
Basic  51,425,793   51,229,203   50,940,037   51,153,665  51,128,914 
Diluted  53,026,141   52,672,962   52,102,511   52,663,597  52,248,308 
                    


 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
(Unaudited)
 
  Three Months Ended
  December 31, 2017 September 30, 2017 December 31, 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) $4,555,544  $50,361    4.39 % $4,402,966  $47,855    4.31 % $3,792,961  $41,394    4.34 %
Securities and certificates of deposit  110,900   554    1.98    132,972   658    1.96    147,509   778    2.10  
Other interest-earning assets (3)  375,712   1,265    1.34    208,193   819    1.56    244,241   438    0.71  
Total interest-earning assets  5,042,156   52,180    4.11    4,744,131   49,332    4.13    4,184,711   42,610    4.05  
Noninterest-earning assets  115,174             115,491             113,336           
Total assets $5,157,330            $4,859,622            $4,298,047           
Liabilities and stockholders' equity:                                          
Interest-bearing liabilities:                                          
Interest-bearing deposits $965,096  $2,624    1.08   $819,965   1,874    0.91   $577,419  $1,025    0.71  
Money market deposits  920,676   2,176    0.94    966,340   2,240    0.92    907,157   1,955    0.86  
Regular savings and other deposits  321,436   113    0.14    323,621   113    0.14    301,832   108    0.14  
Certificates of deposit  1,322,382   5,187    1.56    1,169,264   4,301    1.46    1,139,816   3,874    1.35  
Total interest-bearing deposits  3,529,590   10,100    1.14    3,279,190   8,528    1.03    2,926,224   6,962    0.95  
Borrowings  486,882   1,444    1.18    468,642   1,388    1.18    325,421   868    1.06  
Total interest-bearing liabilities  4,016,472   11,544    1.14    3,747,832   9,916    1.05    3,251,645   7,830    0.96  
Noninterest-bearing demand deposits  462,684             450,890             416,727           
Other noninterest-bearing liabilities  29,596             26,228             26,977           
Total liabilities  4,508,752             4,224,950             3,695,349           
Total stockholders' equity  648,578             634,672             602,698           
Total liabilities and stockholders' equity $5,157,330            $4,859,622            $4,298,047           
Net interest-earning assets $1,025,684            $996,299            $933,066           
Fully tax-equivalent net interest income      40,636             39,416             34,780       
Less: tax-equivalent adjustments      (1,307)            (1,362)            (1,361)      
Net interest income     $39,329            $38,054            $33,419       
Interest rate spread (1)(4)           2.97 %           3.08 %           3.09 %
Net interest margin (1)(5)           3.20 %           3.30 %           3.31 %
Average interest-earning assets to average interest-bearing liabilities      125.54 %           126.58 %           128.70 %     
Supplemental Information:                                          
Total deposits, including noninterest-bearing demand deposits $3,992,274  $10,100    1.00 % $3,730,080  $8,528    0.91 % $3,342,951  $6,962    0.83 %
Total deposits and borrowings, including noninterest-bearing demand deposits $4,479,156  $11,544    1.02 % $4,198,722  $9,916    0.94 % $3,668,372  $7,830    0.85 %
                                           

(1)   Income on debt securities, equity securities and revenue bonds included in commercial real estate loans, as well as resulting yields, interest rate spread and net interest margin, are presented on a tax-equivalent basis. The tax-equivalent adjustments are deducted from tax-equivalent net interest income to agree to amounts reported in the consolidated statements of net income. For the three months ended December 31, 2017, September 30, 2017 and December 31, 2016, yields on loans before tax-equivalent adjustments were 4.28%, 4.20% and 4.21%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 1.66%, 1.65% and 1.72%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 4.00%, 4.01% and 3.92%, respectively. Interest rate spread before tax-equivalent adjustments for the three months ended December 31, 2017, September 30, 2017 and December 31, 2016 was 2.86%, 2.96% and 2.96%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended December 31, 2017, September 30, 2017 and December 31, 2016 was 3.09%, 3.18% and 3.18%, respectively.
(2)   Loans on non-accrual status are included in average balances.
(3)   Includes Federal Home Loan Bank stock and associated dividends.
(4)   Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest-bearing liabilities.
(5)   Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets.
(6)   Annualized.

 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
(Unaudited)
 
  Years Ended
  December 31, 2017 December 31, 2016
  Average
Balance
  Interest (1) Yield/
Cost (1)
 Average
Balance
  Interest (1) Yield/
Cost (1)
                             
  (Dollars in thousands)
Assets:                            
Interest-earning assets:                            
Loans (2) $4,286,830  $184,337    4.30 % $3,495,088  $150,182    4.30 %
Securities and certificates of deposit  132,872   2,630    1.98    183,828   3,629    1.97  
Other interest-earning assets (3)  266,945   3,465    1.30    146,786   1,147    0.78  
Total interest-earning assets  4,686,647   190,432    4.06    3,825,702   154,958    4.05  
Noninterest-earning assets  113,254             116,985           
Total assets $4,799,901            $3,942,687           
                             
Liabilities and stockholders' equity:                            
Interest-bearing liabilities:                            
Interest-bearing demand deposits $799,377  $7,315    0.92   $469,103  $2,988    0.64  
Money market deposits  971,692   8,865    0.91    857,952   7,025    0.82  
Regular savings and other deposits  317,717   448    0.14    296,951   424    0.14  
Certificates of deposit  1,193,803   17,354    1.45    1,042,425   13,687    1.31  
Total interest-bearing deposits  3,282,589   33,982    1.04    2,666,431   24,124    0.90  
Borrowings  411,200   4,930    1.20    277,586   3,013    1.09  
Total interest-bearing liabilities  3,693,789   38,912    1.05    2,944,017   27,137    0.92  
Non interest-bearing demand deposits  448,952             382,644           
Other noninterest-bearing liabilities  27,221             23,879           
Total liabilities  4,169,962             3,350,540           
Total stockholders' equity  629,939             592,147           
Total liabilities and stockholders' equity $4,799,901            $3,942,687           
Net interest-earning assets $992,858            $881,685           
Fully tax-equivalent net interest income      151,520             127,821       
Less: tax-equivalent adjustments      (5,328)            (5,266)      
Net interest income     $146,192            $122,555       
Interest rate spread (1)(4)           3.01 %           3.13 %
Net interest margin (1)(5)           3.23 %           3.34 %
Average interest-earning assets to average interest-bearing liabilities      126.88 %           129.95 %     
                             
Supplemental Information:                            
Total deposits, including noninterest-bearing demand deposits $3,731,541  $33,982    0.91 % $3,049,075  $24,124    0.79 %
Total deposits and borrowings, including noninterest-bearing demand deposits $4,142,741  $38,912    0.94 % $3,326,661  $27,137    0.82 %
                             

(1)   Income on debt securities, equity securities and revenue bonds included in commercial real estate loans, as well as resulting yields, interest rate spread and net interest margin, are presented on a tax-equivalent basis. The tax-equivalent adjustments are deducted from tax-equivalent net interest income to agree to amounts reported in the consolidated statements of net income. For the years ended December 31, 2017, and 2016, yields on loans before tax-equivalent adjustments were 4.19% and 4.16%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 1.67% and 1.63%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.95% and 3.91%, respectively. Interest rate spread before tax-equivalent adjustments for the years ended ended December 31, 2017, and 2016 was 2.90% and 2.99%, respectively, while net interest margin before tax-equivalent adjustments for the years ended December 31, 2017, and 2016 was 3.12% and 3.20%, respectively.
(2)   Loans on non-accrual status are included in average balances.
(3)   Includes Federal Home Loan Bank stock and associated dividends.
(4)   Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest-bearing liabilities.
(5)   Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets.

 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
 
  Three Months Ended Years Ended 
  December 31,
2017
 September 30,
2017
 December 31,
2016
 December 31,
2017
 December 31,
2016
 
                           
Key Performance Ratios                          
Return on average assets (1)  0.70 %  1.10 %  1.05 %  0.89 %  0.87 % 
Return on average equity (1)  5.56    8.40    7.51    6.82    5.77   
Interest rate spread  (1) (2)  2.97    3.08    3.09    3.01    3.13   
Net interest margin  (1) (3)  3.20    3.30    3.31    3.23    3.34   
Non-interest expense to average assets  (1)  1.85    1.71    1.84    1.83    1.97   
Efficiency ratio (4)  52.61    48.40    54.33    53.71    57.95   


  December 31,
2017
 September 30,
2017
 December 31,
2016
 
                 
  (Dollars in thousands) 
Asset Quality                
Non-accrual loans:                
One- to four-family $6,890   $7,055   $8,487   
Home equity lines of credit  562    563    674   
Commercial real estate  388    862    2,807   
Construction  -    173    815   
Commercial and industrial  523    525    653   
Total non-accrual loans  8,363    9,178    13,436   
Foreclosed assets      1,690       
Total non-performing assets $8,363   $10,868   $13,436   
                 
Allowance for loan losses/total loans  0.97 %  1.00 %  1.02 % 
Allowance for loan losses/non-accrual loans  540.30    497.31    298.82   
Non-accrual loans/total loans  0.18    0.20    0.34   
Non-accrual loans/total assets  0.16    0.18    0.30   
Non-performing assets/total assets  0.16    0.21    0.30   
                 
Capital and Share Related                
Stockholders' equity to total assets  12.20 %  12.59 %  13.69 % 
Book value per share $11.96   $11.87   $11.33   
Tangible book value per share (5) $11.54   $11.62   $11.08   
Market value per share $20.60   $18.65   $18.90   
Shares outstanding 54,039,316   53,947,394   53,596,105   
              

(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, excluding merger and acquisition expenses, 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. We have removed merger and acquisition expenses as management deems them to be not representative of operating performance. Presented on a basis including merger and acquisition expenses and gains or losses on sales of securities, the efficiency ratio was 46.69%, 48.06% and 50.67% for the quarters ended December 31, 2017, September 30, 2017 and December 31, 2016, respectively, and 51.97% and 56.67% for the years ended December 31, 2017 and 2016, respectively.
(5)   Tangible book value per share represents total stockholders’ equity less goodwill and other intangible assets divided by the number of shares outstanding.


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