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Meridian Interstate Bancorp, Inc. Reports Results for the Quarter Ended March 31, 2011

/ Source: GlobeNewswire

BOSTON, April 26, 2011 (GLOBE NEWSWIRE) -- Meridian Interstate Bancorp, Inc. (the "Company" or "Meridian") (Nasdaq:EBSB), the holding company for East Boston Savings Bank (the "Bank"), which also operates under the name Mt. Washington Bank, a Division of East Boston Savings Bank ("Mt. Washington"), announced net income of $3.2 million, or $0.15 per share (basic and diluted), for the quarter ended March 31, 2011, compared to $2.9 million, or $0.13 per share (basic and diluted), for the quarter ended March 31, 2010. The Company's return on average assets was 0.69% for each of the quarters ended March 31, 2011 and March 31, 2010. For the quarter ended March 31, 2011, the Company's return on average equity increased to 5.89% from 5.62% for the quarter ended March 31, 2010.

Richard J. Gavegnano, Chairman and Chief Executive Officer, noted, "I am pleased to report net income of $3.2 million, earnings per share of $0.15, a return on assets of 0.69% and a return on equity of 5.89% for the first quarter of 2011. Following our successful merger and integration of Mt. Washington Co-operative Bank last year, we are taking additional steps this year to build our market share and future earnings potential. During January, we opened an East Boston Savings Bank branch in the City of Revere and a Mt. Washington branch in Boston's West Roxbury area. Another new Mt. Washington branch is scheduled to open in Boston's South End by early summer with a new East Boston Savings Bank branch planned for Cambridge later in the year. At the same time, we are continuing our efforts to expand residential and commercial lending capacity in both divisions of the Bank."

Net interest income decreased $336,000, or 2.3%, to $14.4 million for the quarter ended March 31, 2011 from $14.8 million for the quarter ended March 31, 2010. The net interest rate spread and net interest margin were 3.23% and 3.40%, respectively, for the quarter ended March 31, 2011, compared to 3.75% and 3.92%, respectively, for the quarter ended March 31, 2010. The decrease in net interest income was due primarily to deposit growth that was in excess of loan growth along with declines in yields on loans and securities for the quarter ended March 31, 2011 compared to the quarter ended March 31, 2010. The average balance of the Company's loan portfolio increased $42.8 million, or 3.7%, to $1.194 billion, which was partially offset by a decline in the yield on loans of 12 basis points to 5.59% for the quarter ended March 31, 2011 compared to the quarter ended March 31, 2010. The average balance of the Company's interest-bearing deposits increased $157.4 million, or 13.1%, to $1.357 billion, which was partially offset by a decline in the cost of deposits of five basis points to 1.37% for the quarter ended March 31, 2011 compared to the quarter ended March 31, 2010. The Company's yield on interest-earning assets declined by 59 basis points to 4.69% for the quarter ended March 31, 2011 compared to 5.28% for the quarter ended March 31, 2010, while the cost of interest-bearing liabilities declined seven basis points to 1.46% for the quarter ended March 31, 2011 compared to 1.53% for the quarter ended March 31, 2010.

The Company's provision for loan losses was $342,000 for the quarter ended March 31, 2011 compared to $1.4 million for the quarter ended March 31, 2010. This change was based primarily on management's assessment of loan portfolio growth and composition changes, and an ongoing evaluation of credit quality and current economic conditions. The reduction in the provision for loan losses was primarily due to lower provision expense related to specific reserves recorded for impaired loans for the quarter ended March 31, 2011 compared to the quarter ended March 31, 2010. The allowance for loan losses was $10.3 million or 0.87% of total loans outstanding at March 31, 2011, compared to $10.2 million or 0.86% of total loans outstanding at December 31, 2010. Non-performing loans increased to $50.8 million, or 4.27% of total loans outstanding at March 31, 2011, from $43.1 million, or 3.64% of total loans outstanding at December 31, 2010. Non-performing assets increased to $55.8 million, or 2.93% of total assets, at March 31, 2011, from $47.2 million, or 2.57% of total assets, at December 31, 2010. Non-performing assets at March 31, 2011 were comprised of $22.9 million of construction loans, $9.5 million of commercial real estate loans, $11.7 million of one-to four-family mortgage loans, $4.2 million of multi-family mortgage loans, $2.5 million of home equity loans and foreclosed real estate of $5.0 million. Non-performing assets at March 31, 2011 included $16.2 million acquired in the Mt. Washington merger, comprised of $13.2 million of non-performing loans and $3.0 million of foreclosed real estate.

Non-interest income increased $1.1 million, or 45.3%, to $3.6 million for the quarter ended March 31, 2011 from $2.5 million for the quarter ended March 31, 2010, primarily due to increases of $867,000 in gain on sales of securities and $415,000 in equity income on investment from the Company's Hampshire First Bank affiliate, partially offset by decreases of $118,000 in customer service fees and $129,000 in gain on sales of loans.

Non-interest expense increased $1.3 million, or 11.2%, to $12.6 million for the quarter ended March 31, 2011 from $11.3 million for the quarter ended March 31, 2010. This increase was due primarily to increases of $934,000 in salaries and employee benefits, $433,000 in occupancy and equipment expenses, and $110,000 in deposit insurance premiums, partially offset by decreases of $117,000 in foreclosed real estate expenses and $139,000 in other general and administrative expenses. The increases in non-interest expenses include employee, occupancy and equipment expenses associated with two new branches opened during the quarter ended March 31, 2011. The Company's efficiency ratio was 73.40% for the quarter ended March 31, 2011 as compared to 65.72% for the quarter ended March 31, 2010.

Mr. Gavegnano noted, "The increase in our efficiency ratio for the first quarter of 2011 reflects the costs of additional staffing, facilities and other overhead expenses associated with our new branches and other business expansion efforts."

The Company recorded a provision for income taxes of $1.9 million for the quarter ended March 31, 2011, reflecting an effective tax rate of 37.1%, compared to $1.7 million, or 37.1%, for the quarter ended March 31, 2010.

Total assets increased $64.9 million, or 3.5%, to $1.901 billion at March 31, 2011 from $1.836 billion at December 31, 2010. Cash and cash equivalents increased $31.8 million, or 20.4%, to $187.3 million at March 31, 2011 from $155.5 million at December 31, 2010. Securities available for sale increased $34.4 million, or 9.5%, to $395.0 million at March 31, 2011 from $360.6 million at December 31, 2010. Net loans increased $6.6 million, or 0.6%, to $1.180 billion at March 31, 2011 from $1.174 billion at December 31, 2010.

Total deposits increased $43.5 million, or 3.0%, to $1.499 billion at March 31, 2011 from $1.455 billion at December 31, 2010, including growth of $38.1 million in core deposits. This growth also reflects $18.2 million of new deposits in the two branches opened in January 2011. Total borrowings increased $9.2 million, or 6.2%, to $157.8 million at March 31, 2011 from $148.7 million at December 31, 2010, reflecting a $9.5 million increase in short-term borrowings.

Total stockholders' equity increased $2.7 million, or 1.3%, to $218.3 million at March 31, 2011, from $215.6 million at December 31, 2010. The increase was due primarily to $3.2 million in net income partially offset by a $596,000 decrease in accumulated other comprehensive income reflecting a decrease in the fair value of available for sale securities, net of tax. Stockholders' equity to assets was 11.49% at March 31, 2011, compared to 11.74% at December 31, 2010.  Book value per share increased to $9.72 at March 31, 2011 from $9.59 at December 31, 2010. Tangible book value per share increased to $9.11 at March 31, 2011 from $8.98 at December 31, 2010. Market price per share increased $2.26, or 19.2%, to $14.05 at March 31, 2011 from $11.79 at December 31, 2010. At March 31, 2011, the Company and the Bank continued to exceed all regulatory capital requirements.

As of March 31, 2011, the Company had repurchased 212,163 shares of its stock at an average price of $11.29 per share as included in treasury stock, or 44.9% of the 472,428 shares authorized for repurchase under the Company's third stock repurchase program announced on April 9, 2010.

Mr. Gavegnano added, "Since December 2008, we have repurchased a total of 1,143,663 shares. Along with additional stock repurchases, we continue to evaluate various other opportunities to enhance shareholder value, including new business lines, potential mergers, strategic alliances and partnerships."

Meridian Interstate 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 21 full service locations in the greater Boston metropolitan area including seven full service locations in its Mt. Washington Bank Division.  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.

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