EBSB Meridian Bancorp Inc

Meridian Bancorp, Inc. (the “Company” or “Meridian”) (NASDAQ: EBSB), the holding company for East Boston Savings Bank (the “Bank”), announced net income of $12.4 million, or $0.24 per diluted share, for the quarter ended December 31, 2018, compared to $17.4 million, or $0.33 per diluted share, for the  quarter ended September 30, 2018 and $9.0 million, or $0.17 per diluted share, for the quarter ended December 31, 2017. For the year ended December 31, 2018, net income was $55.8 million, or $1.06 per diluted share, up from $42.9 million, or $0.82 per diluted share, for the year ended December 31, 2017. Net income for the quarter and year ended December 31, 2018 reflects a reduction in the statutory federal income tax rate to 21% from 35% effective January 1, 2018 related to enactment of the Tax Cuts and Jobs Act (the “Tax Act”) in December 2017. Net income for the quarter and year ended December 31, 2017 reflected a charge of $7.1 million, or $0.13 per diluted share, related to enactment of the Tax Act. Merger and acquisition expenses totaling $114,000 for the year ended December 31, 2018, $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 were also reflected in the Company’s results.

The Company’s return on average assets was 0.83% for the quarter ended December 31, 2018, compared to 1.22% for the  quarter ended September 30, 2018 and 0.70% for the quarter ended December 31, 2017. For the year ended December 31, 2018, the Company’s return on average assets was 0.99%, up from 0.89% for the year ended December 31, 2017. The Company’s return on average equity was 7.28% for the quarter ended December 31, 2018, compared to 10.28% for the quarter ended September 30, 2018 and 5.56% for the quarter ended December 31, 2017.  For the year ended December 31, 2018, the Company’s return on average equity was 8.36%, up from 6.82% for the year ended December 31, 2017.

Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, “I am pleased to report record net income of $55.8 million for the year 2018, up $12.8 million, or 30%, from 2017, while our net income for the quarter rose $3.3 million, or 37%, to $12.4 million from the fourth quarter of 2017. We also proudly achieved record net growth of $971 million, or 21%, in loans and $776 million, or 19%, in deposits during 2018 and increased our total assets to $6.2 billion. Over the past five years, our asset base has grown $3.5 billion for a compounded annual growth rate of 18%. This growth has resulted in steady increases in our profitability along with substantial improvement in measures of operating efficiency and expense management, asset quality and shareholder returns. Our growth plans and earnings were also enhanced in 2018 by income tax expense reductions resulting from the Tax Act’s lower federal income tax rate.”

The Company’s net interest income was $42.2 million for the quarter ended December 31, 2018, up $806,000, or 1.9%, from the quarter ended September 30, 2018 and $2.8 million, or 7.2%, from the quarter ended December 31, 2017. The interest rate spread and net interest margin on a tax-equivalent basis were 2.62% and 2.93%, respectively, for the  quarter ended December 31, 2018 compared to 2.70% and 2.99%, respectively, for the  quarter ended September 30, 2018 and 2.97% and 3.20%, respectively, for the quarter ended December 31, 2017. For the year ended December 31, 2018, net interest income increased $18.2 million, or 12.5%, to $164.4 million from the year ended December 31, 2017.  The net interest rate spread and net interest margin on a tax-equivalent basis were 2.76% and 3.03%, respectively, for the  year ended December 31, 2018 compared to 3.01% and 3.23%, respectively, for the year ended December 31, 2017. The increases in net interest income were primarily due to growth in average loan balances, 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, 2018 compared to the respective prior periods. The interest rate spread and net interest margin on a tax-equivalent basis for the quarter and year ended December 31, 2018 reflect the reduction in the federal income tax rate to 21% from 35%.

Total interest and dividend income increased to $61.7 million for the quarter ended December 31, 2018, up $3.6 million, or 6.2%, from the quarter ended September 30, 2018 and $10.8 million, or 21.3%, from the quarter ended December 31, 2017, primarily due to growth in the Company’s average loan balances to $5.434 billion. The Company’s yield on interest-earning assets on a tax-equivalent basis was 4.26% for the quarter ended December 31, 2018, up eight basis points from the quarter ended September 30, 2018 and up 15 basis points from the quarter ended December 31, 2017.  For the year ended December 31, 2018, the Company’s total interest and dividend income increased $42.6 million, or 23.0%, to $227.7 million from the year ended December 31, 2017 primarily due to growth in the average loan balances of $832.3 million, or 19.4%, to $5.119 billion, and by an increase in the yield on loans on a tax-equivalent basis of three basis points to 4.33% for the year ended December 31, 2018 compared to the year ended December 31, 2017. The Company’s yield on interest-earning assets on a tax-equivalent basis increased 12 basis points to 4.18% for the year ended December 31, 2018 compared to the same period in 2017. The yields on loans and interest-earning assets on a tax-equivalent basis for the quarter and year ended December 31, 2018 also reflect the reduction in the federal income tax rate to 21% from 35%.

Total interest expense increased to $19.5 million for the quarter ended December 31, 2018, up $2.8 million, or 16.7%, from the quarter ended September 30, 2018 and $8.0 million, or 69.3%, from the quarter ended December 31, 2017. Interest expense on deposits increased to $17.1 million for the quarter ended December 31, 2018, up $2.8 million, or 19.6%, from the quarter ended September 30, 2018 and $7.0 million, or 69.2%, from the quarter ended December 31, 2017 primarily due to growth in average total deposits to $4.637 billion and increases in the cost of average total deposits to 1.46% from 1.29% for the quarter ended September 30, 2018, and 1.00% for the quarter ended December 31, 2017. Interest expense on borrowings increased $1.0 million, or 69.6%, to $2.4 million for the quarter ended December 31, 2018, from the quarter ended December 31, 2017 primarily due to growth in average total borrowings of $94.7 million to $581.6 million and an increase in the average cost of borrowings of 49 basis points to 1.67%. The Company’s total cost of funds was 1.49% for the quarter ended December 31, 2018, up 16 basis points from the quarter ended September 30, 2018 and 47 basis points from the quarter ended December 31, 2017. Total interest expense increased $24.3 million, or 62.5%, to $63.2 million for the year ended December 31, 2018 from the year ended December 31, 2017. Interest expense on deposits increased $20.7 million, or 60.8%, to $54.6 million for the year ended December 31, 2018 from the year ended December 31, 2017 due to the growth in average total deposits of $624.6 million, or 16.7%, to $4.356 billion and an increase in the cost of average total deposits of 34 basis points to 1.25%. Interest expense on borrowings increased $3.7 million, or 74.5%, to $8.6 million for the year ended December 31, 2018 from the year ended December 31, 2017 due to the growth in average total borrowings of $165.7 million, or 40.3%, to $576.9 million and an increase in the cost of average total borrowings of 29 basis points to 1.49%. The Company’s cost of funds increased 34 basis points to 1.28% for the year ended December 31, 2018 compared to the year ended December 31, 2017.

Mr. Gavegnano noted, “We expect our earnings growth will continue to be driven by increases in net interest income fueled by loan and deposit growth. As expected, loan and deposit growth was strong in the fourth quarter of 2018, with new quarterly records set for net loan growth of $368 million, or 7%, and net deposit growth of $473 million, or 11%.  Our loan pipeline remains robust and our capacity to fund loan growth is increasing as we continue to roll out our branch network expansion, deposit acquisition and marketing strategies.”

The Company's provision for loan losses was $3.6 million for the quarter ended December 31, 2018, up $3.3 million from the quarter ended September 30, 2018 and up $4.3 million from the quarter ended December 31, 2017. For the year ended December 31, 2018, the provision for loan losses was $7.8 million, up from $4.9 million for the year ended December 31, 2017. The allowance for loan losses was $53.2 million or 0.94% of total loans at December 31, 2018, compared to $49.6 million or 0.94% of total loans at September 30, 2018, and $45.2 million or 0.97% of total loans at December 31, 2017. The increases in the provision and the allowance for loan losses were primarily due to growth in all commercial loan categories during the quarter and year ended December 31, 2018. The changes in the allowance for loan losses coverage ratio 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 improvements in asset quality trends.

Net recoveries totaled $59,000 for the quarter ended December 31, 2018 compared to net charge-offs of $18,000 for the quarter ended September 30, 2018 and net recoveries of $257,000 for the quarter ended December 31, 2017. For the year ended December 31, 2018, net recoveries totaled $198,000, compared to net recoveries of $177,000 for the year ended December 31, 2017.

Non-accrual loans were $6.9 million, or 0.12% of total loans outstanding, at December 31, 2018; down $1.1 million, or 13.7%, from September 30, 2018; and down $1.5 million, or 17.4%, from December 31, 2017. Non-performing assets were $6.9 million, or 0.11% of total assets, at December 31, 2018, compared to $8.0 million, or 0.14% of total assets, at September 30, 2018, and $8.4 million, or 0.16% of total assets, at December 31, 2017.

Non-interest income was $135,000 for the quarter ended December 31, 2018, down from $3.7 million for the quarter ended September 30, 2018 and down from $8.7 million for the quarter ended December 31, 2017. Non-interest income decreased $3.5 million, or 96.3%, compared to the quarter ended September 30, 2018, primarily due to a $2.7 million loss on marketable equity securities, net, reflecting declines in market valuations in the fourth quarter of 2018. Compared to the quarter ended December 31, 2017, non-interest income decreased $8.6 million, or 98.4%, primarily due to a $6.1 million gain on sales of securities available for sale, net, for the fourth quarter of 2017 and a $2.7 million loss on marketable equity securities, net, for the fourth quarter of 2018. For the year ended December 31, 2018, non-interest income decreased $14.1 million, or 61.0%, to $9.0 million from $23.1 million for the year ended December 31, 2017, primarily due to a $9.3 million gain on sales of securities available for sale, net, for the year ended December 31, 2017, a $2.1 million loss on marketable equity securities, net, for the year ended December 31, 2018, a decrease of $1.5 million in gain on life insurance distribution and a decrease of $1.5 million in loan fees due to $1.3 million of loan swap fee income recognized in the second quarter of 2017, partially offset by a $548,000 increase in customer service fees.

Non-interest expenses were $23.6 million, or 1.59% of average assets for the quarter ended December 31, 2018, compared to $23.0 million, or 1.61% of average assets for the quarter ended September 30, 2018 and $23.9 million, or 1.85% of average assets for the quarter ended December 31, 2017.  Non-interest expenses increased $630,000, or 2.7%, compared to the quarter ended September 30, 2018, due primarily to increases of $420,000 in marketing and advertising, $262,000 in salaries and employee benefits and $233,000 in occupancy and equipment, partially offset by a decrease of $275,000 in deposit insurance. Non-interest expenses decreased $232,000, or 1.0%, compared to the quarter ended December 31, 2017, due primarily to decreases of $1.8 million in merger and acquisition expenses and $248,000 in deposit insurance, partially offset by increases of $887,000 in salaries and employee benefits, $416,000 in occupancy and equipment, $301,000 in data processing and $144,000 in other general and administrative expenses.  For the year ended December 31, 2018, non-interest expenses increased $6.8 million, or 7.8%, to $94.8 million from $88.0 million for the year ended December 31, 2017, due to increases of $5.7 million in salaries and employee benefits, $1.2 million in occupancy and equipment expenses, $1.0 million in data processing expenses and $704,000 in other general and administrative expenses, partially offset by a $1.9 million decrease in merger and acquisition expenses. The increases in salaries and employee benefits expenses reflect annual increases in employee compensation and health benefits during the first quarter of 2018.  In addition, the increases in salaries and employee benefits, and occupancy and equipment expenses and data processing include costs associated with the expansion of our branch and support staff, including two branches acquired from Meetinghouse, one new branch opened in the first quarter of 2018, and three new branch openings in the fourth quarter of 2018. Other general and administrative expenses reflect core deposit intangible amortization of $148,000 for the quarter ended September 30, 2018 and $590,000 for the year ended December 31, 2018. The Company’s efficiency ratio was 52.52% for the quarter ended December 31, 2018 compared to 51.92% for the quarter ended September 30, 2018 and 52.61% for the quarter ended December 31, 2017. For the year ended December 31, 2018, the efficiency ratio was 53.95% compared to 53.71% for the year ended December 31, 2017.

Mr. Gavegnano added, “Even as we added four new locations to our branch network, our efficiency ratio remained under 54% during 2018. Our ratio of non-interest expenses to average assets was also reduced to below 1.7% as we grew our asset base to over $6 billion. We opened new branch locations in Boston’s Brigham Circle, Burlington and Lynnfield in the fourth quarter, and plans are underway to open two additional branches in the Cambridge area in 2019 as we expand our branch network to 40 branches. We will continue to seek and execute prudent growth strategies while maximizing infrastructure investments, operating efficiencies and economies of scale as we have repeatedly demonstrated in recent years.”

The Company recorded a provision for income taxes of $2.7 million for the quarter ended December 31, 2018, reflecting an effective tax rate of 18.2%, compared to $4.5 million, or an effective tax rate of 20.4%, for the quarter ended September 30, 2018, and $15.9 million, or an effective tax rate of 63.7%, for the quarter ended December 31, 2017. For the year ended December 31, 2018, the provision for income taxes was $15.0 million, reflecting an effective tax rate of 21.2%, compared to $33.5 million, or an effective tax rate of 43.8%, for the year ended December 31, 2017. The changes in the provision for income taxes and the effective tax rate were primarily due to the decrease in the statutory federal income tax rate to 21% from 35% effective January 1, 2018 and a $7.1 million charge in the fourth quarter of 2017 to revalue the Company’s net deferred tax asset as a result of the Tax Act.

Total assets were $6.179 billion at December 31, 2018, up $403.4 million, or 7.0%, from $5.775 billion at  September 30, 2018 and $879.2 million, or 16.6%, from $5.299 billion at December 31, 2017.  Net loans were $5.593 billion at December 31, 2018, up $367.5 million, or 7.0%, from September 30, 2018, and up $970.6 million, or 21.0%, from December 31, 2017. Loan originations totaled $530.1 million during the quarter ended December 31, 2018 and $1.644 billion during the year ended December 31, 2018. The net increase in loans for the year ended December 31, 2018 was primarily due to increases of $558.2 million in commercial real estate loans, $230.9 million in multi-family loans, $99.4 million in commercial and industrial loans, $45.6 million construction loans, and $43.7 million in one- to four-family loans.  Cash and due from banks was $372.0 million at December 31, 2018, a decrease of $30.7 million, or 7.6% from December 31, 2017. Securities, at fair value, were $30.6 million at December 31, 2018, a decrease of $7.8 million, or 20.2%, from $38.4 million at December 31, 2017.

Total deposits were $4.884 billion at December 31, 2018, an increase of $472.9 million, or 10.7%, from $4.411 billion at September 30, 2018 and an increase of $776.3 million, or 18.9%, from $4.108 billion at December 31, 2017.  Core deposits, which exclude certificates of deposit, increased $460.9 million, or 16.8%, during the year ended December 31, 2018 to $3.198 billion, or 65.5% of total deposits. Total borrowings were $586.9 million, down $63.9 million, or 9.8%, from September 30, 2018 and up $73.4 million, or 14.3%, from December 31, 2017.

Total stockholders’ equity decreased $4.5 million, or 0.7%, to $674.7 million at December 31, 2018 from $679.1 million at September 30, 2018, and increased $28.3 million, or 4.4%, from $646.4 million at December 31, 2017. The increase for the year ended December 31, 2018 was primarily due to net income of $55.8 million and $4.5 million related to stock-based compensation plans, partially offset by the repurchase of 1,209,734 shares of the Company’s common stock related to the stock repurchase program at a total cost of $20.4 million, dividends of $0.22 per share totaling $11.3 million, and the surrender of 192,440 shares of the Company’s stock related to the tax withholdings resulting from stock option exercises at a total cost of $3.3 million during the second half of 2018. Stock options exercised by the Company’s employees and directors totaled 354,968 during the fourth quarter of 2018 and 1,117,300 shares during year ended December 31, 2018, including 868,810 shares from stock options granted in 2008 and exercised prior to expiration on October 13, 2018. Stockholders’ equity to assets was 10.92% at December 31, 2018, compared to 11.76% at September 30, 2018 and 12.20% at December 31, 2017. Book value per share increased to $12.60 at December 31, 2018 from $11.96 at December 31, 2017. Tangible book value per share increased to $12.17 at December 31, 2018 from $11.54 at December 31, 2017. Market price per share decreased $6.28, or 30.5%, to $14.32 at December 31, 2018 from $20.60 at December 31, 2017. At December 31, 2018, the Company and the Bank continued to exceed all regulatory capital requirements.

The Company repurchased 895,724 shares of its stock at an average price of $16.00 during the quarter ended December 31, 2018. As of December 31, 2018, the Company had repurchased 3,269,345 shares of its stock at an average price of $14.87 per share, or 96.9% of the 3,373,621 shares authorized for repurchase under the Company’s repurchase program adopted in August 2015 and amended in November 2018. The amendment increased the Company’s stock repurchase program by 636,287 shares, or approximately 1.2% of its outstanding common stock.

Mr. Gavegnano concluded, “Along with expansion of our stock repurchase program and the repurchase of 895,724 shares during the fourth quarter, our Board of Directors also enhanced shareholder value by declaring a quarterly dividend of $0.07 per share, an increase of $0.02 per share, or 40%, and paid on January 2, 2019. As we look forward to 2019, we are working to further enhance shareholder returns through our increased scale resulting from substantial organic growth in loans, deposits and market share and a continued focus on improving the Bank’s efficiency.”

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 38 branches in the greater Boston metropolitan area, including 37 full-service locations and one mobile branch. 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 SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited)

		December 31, 2018				September 30, 2018				December 31, 2017
		(Dollars in thousands)
ASSETS
Cash and due from banks		$	371,995			$	313,668			$	402,687
Certificates of deposit			5,247				20,891				69,326
Securities available for sale, at fair value			17,159				17,510				38,364
Marketable equity securities, at fair value			13,437				16,135				—
Federal Home Loan Bank stock, at cost			29,187				31,100				24,947
Loans held for sale			409				843				3,772
Loans:
One- to four-family			647,367				636,419				603,680
Home equity lines of credit			50,087				46,534				48,393
Multi-family			1,010,521				969,628				779,637
Commercial real estate			2,621,979				2,438,139				2,063,781
Construction			686,948				594,611				641,306
Commercial and industrial			625,018				585,215				525,604
Consumer			10,953				10,934				10,761
Total loans			5,652,873				5,281,480				4,673,162
Allowance for loan losses			(53,231	)			(49,609	)			(45,185	)
Net deferred loan origination fees			(6,239	)			(5,970	)			(5,179	)
Loans, net			5,593,403				5,225,901				4,622,798
Bank-owned life insurance			40,734				41,164				40,336
Premises and equipment, net			45,140				42,448				40,967
Accrued interest receivable			14,267				13,409				12,902
Deferred tax asset, net			18,196				15,998				15,244
Goodwill			20,378				19,638				19,638
Core deposit intangible			2,653				2,801				3,243
Other assets			6,478				13,822				5,231
Total assets		$	6,178,683			$	5,775,328			$	5,299,455
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest-bearing demand deposits		$	483,777			$	490,703			$	477,428
Interest-bearing demand deposits			1,190,346				1,151,955				1,004,155
Money market deposits			729,174				844,183				921,895
Regular savings and other deposits			794,813				327,721				333,774
Certificates of deposit			1,686,074				1,596,691				1,370,609
Total deposits			4,884,184				4,411,253				4,107,861
Short-term borrowings			50,000				40,000				—
Long-term debt			536,880				610,772				513,444
Accrued expenses and other liabilities			32,965				34,160				31,751
Total liabilities			5,504,029				5,096,185				4,653,056
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; 53,541,429, 54,233,331, and 54,039,316 shares issued at December 31, 2018, September 30, 2018, and December 31, 2017, respectively			535				542				540
Additional paid-in capital			378,583				392,545				395,716
Retained earnings			313,521				304,725				268,533
Accumulated other comprehensive income (loss)			(348	)			(812	)			128
Unearned compensation - ESOP, 2,435,272, 2,465,713, and 2,557,036 at December 31, 2018, September 30, 2018, and December 31, 2017, respectively			(17,637	)			(17,857	)			(18,518	)
Total stockholders' equity			674,654				679,143				646,399
Total liabilities and stockholders' equity		$	6,178,683			$	5,775,328			$	5,299,455

MERIDIAN BANCORP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF NET INCOME(Unaudited)

		Three Months Ended												Years Ended
		December 31, 2018				September 30, 2018				December 31, 2017				December 31, 2018				December 31, 2017
		(Dollars in thousands, except per share amounts)
Interest and dividend income:
Interest and fees on loans		$	59,424			$	55,849			$	49,144			$	219,162			$	179,425
Interest on debt securities:
Taxable			115				115				42				482				302
Tax-exempt			13				13				14				56				32
Dividends on equity securities			121				101				223				504				1,066
Interest on certificates of deposit			82				104				185				530				814
Other interest and dividend income			1,957				1,932				1,265				6,938				3,465
Total interest and dividend income			61,712				58,114				50,873				227,672				185,104
Interest expense:
Interest on deposits			17,090				14,284				10,100				54,634				33,982
Interest on short-term borrowings			183				8				—				191				4
Interest on long-term debt			2,266				2,455				1,444				8,412				4,926
Total interest expense			19,539				16,747				11,544				63,237				38,912
Net interest income			42,173				41,367				39,329				164,435				146,192
Provision for loan losses			3,563				226				(715	)			7,848				4,859
Net interest income, after provision for loan losses			38,610				41,141				40,044				156,587				141,333
Non-interest income:
Customer service fees			2,371				2,242				2,170				9,065				8,517
Loan fees			41				301				88				479				1,970
Mortgage banking gains, net			25				74				109				295				457
Gain on sales of securities available for sale, net			—				—				6,058				—				9,305
(Loss) gain on marketable equity securities, net			(2,698	)			781				—				(2,066	)			—
Income from bank-owned life insurance			281				279				284				1,109				1,158
Gain on life insurance distribution			110				—				—				110				1,657
Other income			5				—				—				11				—
Total non-interest income			135				3,677				8,709				9,003				23,064
Non-interest expenses:
Salaries and employee benefits			14,648				14,386				13,761				58,866				53,161
Occupancy and equipment			3,214				2,981				2,798				12,759				11,533
Data processing			1,832				1,747				1,531				6,915				5,912
Marketing and advertising			1,252				832				1,131				4,057				3,653
Professional services			735				683				804				3,383				3,669
Deposit insurance			576				851				824				3,006				2,988
Merger and acquisition			—				26				1,784				114				2,055
Other general and administrative			1,380				1,501				1,236				5,698				4,994
Total non-interest expenses			23,637				23,007				23,869				94,798				87,965
Income before income taxes			15,108				21,811				24,884				70,792				76,432
Provision for income taxes			2,750				4,454				15,863				15,021				33,487
Net income		$	12,358			$	17,357			$	9,021			$	55,771			$	42,945
Earnings per share:
Basic		$	0.24			$	0.34			$	0.18			$	1.08			$	0.84
Diluted		$	0.24			$	0.33			$	0.17			$	1.06			$	0.82
Weighted average shares:
Basic			51,530,878				51,492,448				51,425,793				51,498,203				51,153,665
Diluted			51,955,139				52,732,340				53,026,141				52,659,752				52,663,597

MERIDIAN BANCORP, INC. AND SUBSIDIARIESNET INTEREST INCOME ANALYSIS(Unaudited)

		Three Months Ended
		December 31, 2018														September 30, 2018														December 31, 2017
		AverageBalance				Interest(1)					Yield/Cost (1)(6)					AverageBalance				Interest(1)					Yield/Cost (1)(6)					AverageBalance				Interest(1)					Yield/Cost (1)(6)
		(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (2)		$	5,434,068			$	60,100					4.39		%		$	5,213,832			$	56,488					4.30		%		$	4,555,544			$	50,361					4.39		%
Securities and certificates of deposit			52,818				356					2.67					57,489				355					2.45					110,900				554					1.98
Other interest-earning assets (3)			321,924				1,957					2.41					310,622				1,932					2.47					375,712				1,265					1.34
Total interest-earning assets			5,808,810				62,413					4.26					5,581,943				58,775					4.18					5,042,156				52,180					4.11
Noninterest-earning assets			122,446														118,253														115,174
Total assets		$	5,931,256													$	5,700,196													$	5,157,330
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,153,265			$	4,716					1.62				$	1,133,916			$	4,032					1.41				$	965,096			$	2,624					1.08
Money market deposits			782,007				2,449					1.24					869,248				2,658					1.21					920,676				2,176					0.94
Regular savings and other deposits			597,827				1,829					1.21					329,586				114					0.14					321,436				113					0.14
Certificates of deposit			1,610,632				8,096					1.99					1,557,998				7,480					1.90					1,322,382				5,187					1.56
Total interest-bearing deposits			4,143,731				17,090					1.64					3,890,748				14,284					1.46					3,529,590				10,100					1.14
Borrowings			581,619				2,449					1.67					612,171				2,463					1.60					486,882				1,444					1.18
Total interest-bearing liabilities			4,725,350				19,539					1.64					4,502,919				16,747					1.48					4,016,472				11,544					1.14
Noninterest-bearing demand deposits			493,715														494,366														462,684
Other noninterest-bearing liabilities			33,036														27,388														29,596
Total liabilities			5,252,101														5,024,673														4,508,752
Total stockholders' equity			679,155														675,523														648,578
Total liabilities and stockholders' equity		$	5,931,256													$	5,700,196													$	5,157,330
Net interest-earning assets		$	1,083,460													$	1,079,024													$	1,025,684
Fully tax-equivalent net interest income							42,874														42,028														40,636
Less: tax-equivalent adjustments							(701	)													(661	)													(1,307	)
Net interest income						$	42,173													$	41,367													$	39,329
Interest rate spread (1)(4)												2.62		%												2.70		%												2.97		%
Net interest margin (1)(5)												2.93		%												2.99		%												3.20		%
Average interest-earning assets to average
interest-bearing liabilities							122.93		%												123.96		%												125.54		%
Supplemental Information:
Total deposits, including noninterest-bearing
demand deposits		$	4,637,446			$	17,090					1.46		%		$	4,385,114			$	14,284					1.29		%		$	3,992,274			$	10,100					1.00		%
Total deposits and borrowings, including
noninterest-bearing demand deposits		$	5,219,065			$	19,539					1.49		%		$	4,997,285			$	16,747					1.33		%		$	4,479,156			$	11,544					1.02		%

 

(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, 2018, September 30, 2018 and December 31, 2017, yields on loans before tax-equivalent adjustments were 4.34%, 4.25% and 4.28%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 2.49%, 2.30% and 1.66%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 4.22%, 4.13% and 4.00%, respectively. Interest rate spread before tax-equivalent adjustments for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017 was 2.58%, 2.65% and 2.86%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017 was 2.88%, 2.94% and 3.09%, 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 SUBSIDIARIESNET INTEREST INCOME ANALYSIS(Unaudited)

		Years Ended
		December 31, 2018														December 31, 2017
		Average									Yield/					Average									Yield/
		Balance				Interest (1)					Cost (1)					Balance				Interest (1)					Cost (1)
		(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (2)		$	5,119,102			$	221,652					4.33		%		$	4,286,830			$	184,337					4.30		%
Securities and certificates of deposit			69,091				1,678					2.43					132,872				2,630					1.98
Other interest-earning assets (3)			319,758				6,938					2.17					266,945				3,465					1.30
Total interest-earning assets			5,507,951				230,268					4.18					4,686,647				190,432					4.06
Noninterest-earning assets			120,720														113,254
Total assets		$	5,628,671													$	4,799,901
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,106,332			$	15,025					1.36				$	799,377			$	7,315					0.92
Money market deposits			845,781				9,490					1.12					971,692				8,865					0.91
Regular savings and other deposits			400,951				2,175					0.54					317,717				448					0.14
Certificates of deposit			1,513,174				27,944					1.85					1,193,803				17,354					1.45
Total interest-bearing deposits			3,866,238				54,634					1.41					3,282,589				33,982					1.04
Borrowings			576,949				8,603					1.49					411,200				4,930					1.20
Total interest-bearing liabilities			4,443,187				63,237					1.42					3,693,789				38,912					1.05
Noninterest-bearing demand deposits			489,887														448,952
Other noninterest-bearing liabilities			28,191														27,221
Total liabilities			4,961,265														4,169,962
Total stockholders' equity			667,406														629,939
Total liabilities and stockholders' equity		$	5,628,671													$	4,799,901
Net interest-earning assets		$	1,064,764													$	992,858
Fully tax-equivalent net interest income							167,031														151,520
Less: tax-equivalent adjustments							(2,596	)													(5,328	)
Net interest income						$	164,435													$	146,192
Interest rate spread (1)(4)												2.76		%												3.01		%
Net interest margin (1)(5)												3.03		%												3.23		%
Average interest-earning assets to average
interest-bearing liabilities							123.96		%												126.88		%
Supplemental Information:
Total deposits, including noninterest-bearing
demand deposits		$	4,356,125			$	54,634					1.25		%		$	3,731,541			$	33,982					0.91		%
Total deposits and borrowings, including
noninterest-bearing demand deposits		$	4,933,074			$	63,237					1.28		%		$	4,142,741			$	38,912					0.94		%

(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, 2018, and 2017, yields on loans before tax-equivalent adjustments were 4.28% and 4.19%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 2.28% and 1.67%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 4.13% and 3.95%, respectively. Interest rate spread before tax-equivalent adjustments for the years ended December 31, 2018, and 2017 was 2.71% and 2.90%, respectively, while net interest margin before tax-equivalent adjustments for the years ended December 31, 2018, and 2017 was 2.99% and 3.12%, 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 SUBSIDIARIESSELECTED FINANCIAL HIGHLIGHTS(Unaudited)

		Three Months Ended															Years Ended
		December 31, 2018					September 30, 2018					December 31, 2017					December 31, 2018					December 31, 2017
Key Performance Ratios
Return on average assets (1)			0.83		%			1.22		%			0.70		%			0.99		%			0.89		%
Return on average equity (1)			7.28					10.28					5.56					8.36					6.82
Interest rate spread  (1) (2)			2.62					2.70					2.97					2.76					3.01
Net interest margin  (1) (3)			2.93					2.99					3.20					3.03					3.23
Non-interest expense to average assets  (1)			1.59					1.61					1.85					1.68					1.83
Efficiency ratio (4)			52.52					51.92					52.61					53.95					53.71

		December 31, 2018					September 30, 2018					December 31, 2017
		(Dollars in thousands)
Asset Quality
Non-accrual loans:
One- to four-family		$	5,888				$	6,977				$	6,890
Home equity lines of credit			—					—					562
Commercial real estate			342					353					388
Commercial and industrial			676					676					523
Total non-accrual loans			6,906					8,006					8,363
Foreclosed assets			—					—					—
Total non-performing assets		$	6,906				$	8,006				$	8,363
Allowance for loan losses/total loans			0.94		%			0.94		%			0.97		%
Allowance for loan losses/non-accrual loans			770.79					619.65					540.30
Non-accrual loans/total loans			0.12					0.15					0.18
Non-accrual loans/total assets			0.11					0.14					0.16
Non-performing assets/total assets			0.11					0.14					0.16
Capital and Share Related
Stockholders' equity to total assets			10.92		%			11.76		%			12.20		%
Book value per share		$	12.60				$	12.52				$	11.96
Tangible book value per share (5)		$	12.17				$	12.11				$	11.54
Market value per share		$	14.32				$	17.00				$	20.60
Shares outstanding		53,541,429					54,233,331					54,039,316

(1)   Quarterly amounts are 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 measure representing non-interest expense, excluding merger and acquisition expenses, divided by the sum of net interest income and non-interest income excluding gains and losses on sales of securities available for sale, and gains and losses on marketable equity securities. The efficiency ratio is a common measure used by banks to understand expenses related to the generation of revenue. We have removed gains and losses on sales of securities available for sale and gains and losses on marketable equity securities as management deems them to be either discretionary or market driven 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, gains and losses on sales of securities available for sale and gains and losses on marketable equity securities, the efficiency ratio was 55.87%, 51.08% and 46.69% for the quarters ended December 31, 2018, September 30, 2018, and December 31, 2017, respectively, and 54.66% and 51.97% for the years ended December 31, 2018 and 2017, respectively.  (5)   Tangible book value per share represents total stockholders’ equity less goodwill and other intangible assets divided by the number of shares outstanding.

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