updated 10/26/2010 5:48:06 PM ET 2010-10-26T21:48:06

BOSTON, Oct. 26, 2010 (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 $3.0 million, or $0.13 per share (basic and diluted), for the quarter ended September 30, 2010 compared to $1.9 million, or $0.09 per share (basic and diluted), for the quarter ended September 30, 2009. For the nine months ended September 30, 2010, net income was $9.1 million, or $0.41 per share (basic and diluted) compared to net income of $1.7 million, or $0.08 per share (basic and diluted), for the nine months ended September 30, 2009. The nine months ended September 30, 2010 reflects combined results following the acquisition of Mt. Washington Cooperative Bank ("Mt. Washington") on January 4, 2010.

The Company recorded a pre-tax charge of $3.1 million during the quarter ended September 30, 2010 for costs related to termination of the contract with Mt. Washington's data processing services provider in October 2010. The after tax impact of this charge was a reduction to net income of $1.8 million, or $0.08 per share (basic and diluted), for the quarter and nine months ended September 30, 2010.

Richard J. Gavegnano, Chairman and Chief Executive Officer, noted, "I am very pleased to report net income of $3.0 million and earnings per share of $0.13 for the third quarter of 2010. It is even more remarkable that our quarterly earnings would have been even stronger at $4.8 million or $0.21 per share with the exclusion of the non-recurring data processing contract termination charge. These results, which have resulted from high net interest margins in the current low rate environment, growing demand for our loan and deposit products, stable asset quality and increased non-interest income, also reflect the successful integration of Mt. Washington into our Boston area franchise. We continue to see increasing signs of stability and improvement in the economic conditions of our market areas, and we believe we have positioned the Bank to take advantage of various opportunities to enhance shareholder value."

Net interest income increased $6.5 million, or 68.1%, to $16.0 million for the quarter ended September 30, 2010 from $9.5 million for the quarter ended September 30, 2009. The net interest rate spread and net interest margin were 3.75% and 3.93%, respectively, for the quarter ended September 30, 2010 compared to 3.00% and 3.35%, respectively, for the quarter ended September 30, 2009. For the nine months ended September 30, 2010, net interest income increased $20.4 million, or 79.6%, to $46.0 million from $25.6 million for the nine months ended September 30, 2009. The net interest rate spread and net interest margin were 3.72% and 3.90%, respectively, for the nine months ended September 30, 2010 compared to 2.80% and 3.21%, respectively, for the nine months ended September 30, 2009. The increases in net interest income were due primarily to the Mt. Washington merger and organic loan growth, along with continuing declines in interest costs of deposits and borrowings.

The average balance of the Company's loan portfolio, which is principally comprised of real estate loans, increased $423.3 million, or 54.4%, to $1.2 billion, which was partially offset by the decline in the yield on loans of eight basis points to 5.78% for the quarter ended September 30, 2010 compared to the quarter ended September 30, 2009. The Company's cost of deposits declined 63 basis points to 1.37%, which was partially offset by the increase in the average balance of interest-bearing deposits of $384.5 million, or 44.0%, to $1.3 billion for the quarter ended September 30, 2010 compared to the quarter ended September 30, 2009. The Company's yield on interest-earning assets increased 14 basis points to 5.22% for the quarter ended September 30, 2010 compared to 5.08% for the quarter ended September 30, 2009, while the cost of interest-bearing liabilities declined 61 basis points to 1.47% for the quarter ended September 30, 2010 compared to 2.08% for the quarter ended September 30, 2009.

The Company's provision for loan losses was $77,000 for the quarter ended September 30, 2010 compared to $694,000 for the quarter ended September 30, 2009. For the nine months ended September 30, 2010, the provision for loan losses was $2.2 million compared to $1.8 million for the nine months ended September 30, 2009. These changes were based primarily on management's assessment of loan portfolio growth and composition changes, an ongoing evaluation of credit quality and current economic conditions. The allowance for loan losses was $11.5 million or 0.95% of total loans outstanding at September 30, 2010, compared to $9.2 million, or 1.12% of total loans outstanding at December 31, 2009. The decrease in the ratio of the allowance for loan losses to total loans outstanding was primarily due to $345.9 million of loans acquired in the Mt. Washington merger at fair value and the application of current accounting guidance that precludes the combination of allowance for loan loss amounts associated with such loans acquired.

Non-performing loans increased to $37.3 million, or 3.10% of total loans outstanding at September 30, 2010, from $21.7 million, or 2.63% of total loans outstanding at December 31, 2009. Non-performing assets increased to $40.5 million, or 2.26% of total assets, at September 30, 2010, from $24.6 million, or 2.03% of total assets, at December 31, 2009, primarily due to assets acquired in the Mt. Washington acquisition. Non-performing assets at September 30, 2010 were comprised of $14.4 million of construction loans, $6.1 million of commercial real estate loans, $11.5 million of one-to four-family mortgage loans, $3.1 million of multi-family mortgage loans, $2.2 million of home equity loans and foreclosed real estate of $3.2 million. Non-performing assets at September 30, 2010 included $17.4 million acquired in the Mt. Washington merger, comprised of $16.5 million of non-performing loans and $924,000 of foreclosed real estate.

Non-interest income increased $2.2 million, or 202.2%, to $3.3 million for the quarter ended September 30, 2010 from $1.1 million for the quarter ended September 30, 2009, primarily due to increases of $1.1 million in gain on sale of securities, $729,000 in customer service fees and $184,000 in gain on sale of loans. For the nine months ended September 30, 2010, non-interest income increased $4.8 million, or 149.2%, to $8.0 million from $3.2 million for the nine months ended September 30, 2009, primarily due to increases of $2.1 million in customer service fees, $1.1 million in gain on sale of securities, $649,000 in gain on sales of loans, $429,000 from other-than-temporary impairment losses recorded in the prior year period and $229,000 in equity income from the Company's Hampshire First Bank affiliate. The increases in customer service fees were primarily due to service charges on deposit relationships acquired in the Mt. Washington merger and additional growth in deposits. The increases in gain on sales of loans reflected higher gains on sales of loans originated for sale during the first nine months of 2010 and gains totaling $352,000 on sales of fixed-rate bi-weekly mortgage loans during the first quarter of 2010.

Non-interest expense increased $7.5 million, or 104.3%, to $14.6 million for the quarter ended September 30, 2010 from $7.2 million for the quarter ended September 30, 2009, primarily due to the $3.1 million charge related to termination of the contract with Mt. Washington's data processing services provider and increases of $373,000 in recurring data processing costs, $2.9 million in salaries and employee benefits and $593,000 in occupancy and equipment expenses.  For the nine months ended September 30, 2010, non-interest expense increased $13.2 million, or 53.8%, to $37.7 million from $24.5 million for the nine months ended September 30, 2009, primarily due to the $3.1 million charge related to termination of the contract with Mt. Washington's data processing services provider and increases of $964,000 in recurring data processing costs, $5.1 million in salaries and employee benefits, $1.9 million in occupancy and equipment expenses, $485,000 in marketing and advertising, $405,000 in professional services and $1.3 million in other general and administrative expenses. The increases in non-interest expenses were primarily due to higher expense levels following the Mt. Washington merger. The Company's efficiency ratio improved to 62.45% for the quarter ended September 30, 2010, excluding the charge to terminate Mt. Washington's data processing contract, from 65.73% for the quarter ended September 30, 2009. For the nine months ended September 30, 2010, the efficiency ratio improved to 65.02%, excluding the charge to terminate Mt. Washington's data processing contract, from 84.13% for the quarter ended September 30, 2009.

The Company agreed to revised contract terms with its current data processing services provider during the quarter ended September 30, 2010 that included provisions for the conversion of Mt. Washington's accounts from their data processing services provider in October 2010. As a result of these revised contract terms and the termination of Mt. Washington's prior data processing services contract, the Company expects to realize significant data processing cost savings in subsequent periods.

Mr. Gavegnano noted, "Our efficiency ratios improved to 62.45% for the third quarter of 2010 and to 65.02% for first nine months of 2010 despite higher non-interest expense levels following completion of the Mt. Washington acquisition. The conversion of Mt. Washington's accounts to our core systems and the growing synergies between the East Boston Savings Bank and Mt. Washington Divisions are expected to provide even greater opportunities to increase revenues and improve efficiency."

The Company recorded a provision for income taxes of $1.6 million for the quarter ended September 30, 2010, reflecting an effective tax rate of 35.3%, compared to $864,000, or 31.4%, for the quarter ended September 30, 2009. For the nine months ended September 30, 2010, the provision for income taxes was $5.0 million, reflecting an effective tax rate of 35.7%, compared to $787,000, or 31.1%, for the nine months ended September 30, 2009. The increase in the income tax provision was primarily due to taxable income that was higher than tax preference items.

Total assets increased $584.2 million, or 48.2%, to $1.8 billion at September 30, 2010 from $1.2 billion at December 31, 2009, reflecting $465.1 million of assets acquired in the Mt. Washington merger. Cash and cash equivalents increased $101.0 million to $121.0 million at September 30, 2010 from $20.0 million at December 31, 2009, including $14.4 million of cash acquired in the Mt. Washington merger. Securities available for sale increased $55.5 million, or 18.9%, to $348.9 million at September 30, 2010 from $293.4 million at December 31, 2009, including $45.5 million of securities acquired in the Mt. Washington merger. Net loans increased $378.4 million, or 46.5%, to $1.2 billion at September 30, 2010 from $813.3 million at December 31, 2009, primarily due to $345.9 million of loans acquired in the Mt. Washington merger, partially offset by sales of fixed-rate bi-weekly mortgage loans totaling $34.1 million in the first quarter of 2010.

Total deposits increased $486.6 million, or 52.7%, to $1.4 billion at September 30, 2010 from $922.5 million at December 31, 2009, reflecting $380.6 million of deposits acquired in the Mt. Washington merger along with organic deposit growth of $106.0 million. Total borrowings increased $78.5 million, or 104.1%, to $153.9 million at September 30, 2010 from $75.4 million at December 31, 2009, reflecting $80.9 million of Federal Home Loan Bank advances acquired in the Mt. Washington merger.

Total stockholders' equity increased $11.8 million, or 5.9%, to $212.2 million at September 30, 2010, from $200.4 million at December 31, 2009, due primarily to $9.1 million in net income and a $3.3 million increase in accumulated other comprehensive income reflecting an increase in the fair value of available for sale securities, net of tax. Stockholders' equity to assets was 11.82% at September 30, 2010, compared to 16.54% at December 31, 2009, reflecting the increase in assets resulting from the Mt. Washington merger. Book value per share increased to $9.45 at September 30, 2010 from $9.07 at December 31, 2009. Tangible book value per share decreased to $8.95 at September 30, 2010 from $9.07 at December 31, 2009, primarily due to goodwill resulting from the Mt. Washington merger. Market price per share increased $1.84, or 21.1%, to $10.54 at September 30, 2010 from $8.70 at December 31, 2009. At September 30, 2010, the Company and the Bank continued to exceed all regulatory capital requirements.

As of September 30, 2010, the Company had repurchased 153,367 shares of its stock at an average price of $11.15 per share, or 32.5% of the 472,428 shares authorized for repurchase under the Company's third stock repurchase program announced on April 9, 2010. The Company has repurchased 1,084,867 shares since December 2008.

Meridian Interstate Bancorp, Inc. is the holding company for East Boston Savings Bank. East Boston Savings Bank is a Massachusetts-chartered stock savings bank that operates from 20 full service locations in the greater Boston metropolitan area.  East Boston Savings Bank was originally founded in 1848.  We offer a variety of deposit and loan products to individuals and businesses located in our primary market, which consists of Essex, Middlesex 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 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 filings with the 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.


 

© Copyright 2012, GlobeNewswire, Inc. All Rights Reserved

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 3.79%
$30K home equity loan FICO 4.99%
$75K home equity loan FICO 4.69%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.83%
13.79%
Cash Back Cards 17.80%
17.78%
Rewards Cards 17.18%
17.17%
Source: Bankrate.com