Meridian Interstate Bancorp, Inc., Reports Results for the Three and Six Months Ended June 30, 2009

• Press Release
• Source: Meridian Interstate Bancorp
• On 7:11 pm EDT, Wednesday July 29, 2009

BOSTON, July 29, 2009 (GLOBE NEWSWIRE) -- Meridian Interstate Bancorp, Inc. (the "Company" or "Meridian") (Nasdaq:EBSB - News), the holding company for East Boston Savings Bank (the "Bank"), announced net income of $962,000 or $.04 per share (basic and diluted), for the quarter ended June 30, 2009, compared to a net loss of $2.2 million, or $.10 per share (basic and diluted) for the quarter ended June 30, 2008. The Company recorded a net loss of $146,000 or $.01 per share (basic and diluted), and $2.5 million for the six months ended June 30, 2009 and 2008, respectively. Earnings per share information is not applicable for the six months ended June 30, 2008, as shares were not outstanding for the entire period.

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{"s" : "ebsb","k" : "c10,l10,p20,t10","o" : "","j" : ""}

Net interest income after provision for loan losses for the quarter ended June 30, 2009 was $7.9 million, an increase of $4.2 million, or 112.7%, from $3.7 million for the quarter ended June 30, 2008. For the six months ended June 30, 2009, net interest income after provision for loan losses was $15.0 million, an increase of $5.6 million, or 59.3% over the comparable 2008 period.

Notable items in 2009 include the following:

 * Total loans increased by $58.4 million, or 8.2% from December 31,
   2008.
 * Deposits increased by $116.9 million, or 14.7% from December 31,
   2008.
 * The net interest margin improved for the fifth consecutive quarter,
   increasing from 3.04% for the quarter ended March 31, 2009 to 3.18%
   for the quarter ended June 30, 2009.
 * Deposit insurance expense increased to $830,000 for the three
   months ended June 30, 2009, from $188,000 for the comparable 2008
   period, as the FDIC made a special insurance assessment to
   replenish the Deposit Insurance Fund.
 * The Company continues to exceed all requirements for
   well-capitalized regulatory ratios.
 * The Company announced the signing of a definitive merger agreement
   to acquire Mt. Washington Bank ("Mt. Washington"), which operates
   seven offices in Suffolk County, Massachusetts. Mt. Washington's
   approximately $373 million in deposits in Suffolk County will
   increase East Boston Savings Bank's market share ranking from 9th
   to 5th in the county. The transaction is subject to regulatory
   approval.

Richard J. Gavegnano, Chairman and Chief Executive Officer of the Company, noted that, "The Bank continues to see great opportunities in lending and healthy growth in deposits. Yields on new loans remain stable, and the Bank's cost of funds has decreased sharply, enhancing net interest income. In addition, the pipeline for residential and commercial loans remains strong. Our capital position is a source of stability for the Bank and provides us the ability to capture relationships from customers disaffected by larger institutions. Also, as a member of the Depositors Insurance Fund, we offer our customers peace of mind with full deposit protection above FDIC limits."

Gavegnano added, "The Company's most important assets are our capital position and our employees, which provide us the foundation to plan and execute a growth strategy in the coming years. We are very excited about the recently announced merger with Mt. Washington Bank, and we welcome all of the Mt. Washington employees. The Mt. Washington transaction will significantly enhance our visibility in Suffolk County, which we intend to build on by making a bold statement with a new marketing campaign."

 Net Interest Income

 * Net interest income for the quarter ended June 30, 2009 was
   $8.5 million, an increase of $2.6 million, or 43.3%, from the
   quarter ended June 30, 2008.
 * Interest and fees on loans increased from $9.3 million to
   $11.0 million, or 18.3%, as a result of higher average loan
   balances, which increased from $604.2 million to $757.1 million for
   the quarters ended June 30, 2008 and 2009, respectively.
 * Interest expense on deposits decreased by $1.5 million, or 23.2%,
   from $6.4 million to $4.9 million, as the average cost of deposits
   decreased from 3.42% to 2.40% for the quarters ended June 30, 2008
   and 2009, respectively.
 * For the six months ended June 30, 2009, net interest income
   increased by $4.4 million, or 37.2%, to $16.1 million. The Company
   incurred lower interest expense on deposits, which decreased by
   $3.1 million, or 23.5%, from $13.3 million to $10.2 million.
 * The Company continues to utilize funds received from its 2008
   public offering and from deposit inflows to invest in new loan
   originations. The average balance of other interest earning assets,
   which includes federal funds sold, decreased by $91.4 million, or
   77.7% for the six months ended June 30, 2009, while average loan
   balances increased by $156.6 million, or 26.7%

 Non-interest Income

 * Non-interest income was $1.0 million for the quarters ended June 30,
   2009 and 2008.
 * The Company recorded $116,000 in gains on sale of mortgage loans
   during the second quarter of 2009, compared to $8,000 in the 2008
   comparable quarter, as saleable residential loan origination volume
   has increased in 2009 due to lower rates.
 * Non-interest income for the six-months ended June 30, 2009 was
   $2.1 million, compared to $4.2 million for the six-months ended
   June 30, 2008. The Company recorded a loss on securities determined
   to be other than temporarily impaired of $373,000 in 2009, compared
   to a net gain on sale of securities of $2.3 million in 2008.

 Non-interest Expense

 * Non-interest expenses decreased $792,000, or 9.3%, from
   $8.5 million to $7.7 million for the quarters ended June 30, 2008,
   and 2009, respectively.
 * Salaries and benefits expense decreased $1.7 million, or 28.8% for
   the quarter ended June 30, 2009. In the second quarter of 2008, the
   Company recorded a $1.5 million pre-tax charge related to the
   retirement of the Bank's former President.
 * Professional service fees decreased $207,000, or 33.2% primarily as
   a result of reduced expenses related to the settlement of employee
   benefit matters.
 * Deposit insurance expense increased by $642,000, to $830,000 for
   the three months ended June 30, 2009 compared to the comparable
   2008 period, due to deposit growth and a special assessment levied
   on all FDIC insured institutions.
 * Non-interest expense was $17.4 million and $17.8 million for the
   six months ended June 30, 2009 and 2008, respectively.
 * Salary and employee benefit expenses increased $631,000, or 6.4%,
   to $10.4 million, for the six months ended June 30, 2009, as a
   result of expenses relating to the Company's equity incentive plan
   and benefit expenses incurred for retiring executives.
 * In the first quarter of 2008, the Company made a pre-tax
   $3.0 million contribution to the Company's charitable foundation in
   conjunction with its stock offering.
 * Foreclosed real estate expense increased to $478,000 from $38,000,
   due to higher levels of foreclosed real estate holdings during 2009.

 Securities

 * Securities available for sale increased by $49.1 million, or 19.5%,
   from December 31, 2008, as the Company invested excess cash in
   money market mutual funds and debt securities as an alternative to
   lower-yielding federal funds sold.

 Loans

 * Loan demand remained strong in 2009, with increases in all real
   estate loan types at June 30, 2009 compared to December 31, 2008.
 * Multi-family loans increased by $17.2 million, or 55.0%, while the
   commercial real estate and construction loan portfolios increased
   by $20.1 million, or 7.4%, and $11.0 million, or 12.0%,
   respectively. The increase in construction loans included two
   hospital-affiliated medical facilities totaling $14.5 million and a
   $5.7 million build-to-suit industrial building that are expected to
   be completed and transferred to the commercial real estate
   portfolio by the end of year.

 Credit Quality

 * The allowance for loan losses was $8.1 million, or 1.05% of total
   loans outstanding as of June 30, 2009, as compared to $6.9 million,
   or 0.97% of total loans outstanding as of December 31, 2008. The
   increase in the balance of the allowance for loan losses is due to
   growth in the loan portfolio and management's ongoing analysis of
   loan loss factors.
 * The percentage of non-performing assets to total assets was 1.70%
   at June 30, 2009, compared to 1.58% at December 31, 2008.
   Non-performing assets, which totaled $20.1 million at June 30, 2009,
   included foreclosed real estate of $3.0 million, $11.7 million of
   construction loans, $4.2 million of residential mortgage loans, and
   $1.2 million of other loans.
 * Mr. Gavegnano noted that, "The Bank has experienced positive signs
   of purchase activity in residential construction projects. We
   continue to work diligently on the lending real estate portfolio."

 Provision for Loan Losses

 * The Company's loan loss provision was $568,000 and $1.1 million for
   the quarter and six months ended June 30, 2009, compared to
   $2.2 million and $2.3 million for the same periods in 2008. The
   decrease was due primarily to lower specific reserves recorded on
   impaired loans. The provision expense for the second quarter of
   2008 included $1.7 million of specific reserves for two impaired
   loans.
 * The provision for loan losses in the second quarter of 2009 also
   benefited from a $250,000 recovery of a loan previously charged-off
   in 2008.

 Deposits

 * Deposits increased by $116.9 million, or 14.7%, from December 31,
   2008, with increases in all deposit types. In 2009, marketing
   efforts emphasized the safety provided by the Bank's full deposit
   insurance coverage and the range of our products, which provide
   customers an alternative to larger competitors.
 * Money market deposits increased by $80.8 million, or 46.7%, to
   $253.6 million at June 30, 2009. Certificates of deposit also
   increased by $20.1 million, or 4.9%, to $434.1 million. The Company
   successfully established an online deposit account-opening website
   during the second quarter, which contributed to the increase in
   money market account balances.

 Equity

 * Stockholders' equity increased from $189.8 million as of
   December 31, 2008 to $192.8 million as of June 30, 2009. A
   reduction in the level of accumulated other comprehensive loss from
   $6.2 million to $255,000, due to improved market pricing on the
   securities portfolio, contributed to the increase.
 * The Company also commenced a stock buy-back program in the current
   quarter. Mr. Gavegnano added, "The buy-back program provides us an
   opportunity to deploy excess funds, and is one of the capital
   management tools that we expect to be able to utilize in the future
   as a result of continued strong capital levels."

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.

                  MERIDIAN INTERSTATE BANCORP, INC.
                     Consolidated Balance Sheets
                             (Unaudited)

                                              June 30,    December 31,
                                            --------------------------
 (Dollars in thousands)                         2009          2008
                                            --------------------------
                  ASSETS
 Cash and due from banks                    $     11,090  $     10,354
 Federal funds sold                               24,799         9,911
                                            --------------------------
    Total cash and cash equivalents               35,889        20,265

 Certificates of deposit - affiliate bank          2,000         7,000
 Securities available for sale, at fair
  value                                          301,675       252,529
 Federal Home Loan Bank stock, at cost             4,394         4,303

 Loans held for sale                               5,911            --
 Loans                                           769,445       711,016
 Less allowance for loan losses                   (8,120)       (6,912)
                                            --------------------------
    Loans, net                                   761,325       704,104

 Bank-owned life insurance                        23,285        22,831
 Investment in affiliate bank                     10,351        10,376
 Premises and equipment, net                      23,512        22,710
 Accrued interest receivable                       6,189         6,036
 Foreclosed real estate, net                       3,050         2,604
 Deferred tax asset, net                           6,216        10,057
 Other assets                                      1,395         2,537
                                            --------------------------
     Total assets                           $  1,185,192  $  1,065,352
                                            ==========================

    LIABILITIES AND STOCKHOLDERS' EQUITY
 Deposits:
  Non interest-bearing                      $     63,241  $     55,216
  Interest-bearing                               850,538       741,636
                                            --------------------------
   Total deposits                                913,779       796,852

 Short-term borrowings                             5,803         7,811
 Long-term debt                                   57,200        57,675
 Accrued expenses and other liabilities           15,657        13,174
                                            --------------------------
     Total liabilities                           992,439       875,512
                                            --------------------------

 Stockholders' equity:
  Common stock, no par value 50,000,000
   shares authorized; 23,000,000 shares
   issued; 22,357,549 and 22,750,000 shares
   outstanding at June 30, 2009 and
   December 31, 2008, respectively                    --            --
  Additional paid-in capital                     100,842       100,684
  Retained earnings                              105,280       105,426
  Accumulated other comprehensive loss              (255)       (6,205)
  Treasury stock                                  (1,971)           --
  Unearned compensation - ESOP, 765,900 and
   786,600 shares at June 30, 2009 and
   December 31, 2008, respectively                (7,659)       (7,866)
  Unearned compensation - restricted shares
   - 414,000 and 250,000 shares at June 30,
   2009 and December 31 2008, respectively        (3,484)       (2,199)
                                            --------------------------
     Total stockholders' equity                  192,753       189,840
                                            --------------------------
      Total liabilities and stockholders'
       equity                               $  1,185,192  $  1,065,352
                                            ==========================


                  MERIDIAN INTERSTATE BANCORP, INC.
                  Consolidated Statements of Income
                             (Unaudited)

                            Three Months Ended      Six Months Ended
                                 June 30                 June 30
 (Dollars in thousands,   ----------------------  --------------------
  except per share           2009        2008        2009       2008
  amounts)                ----------------------  --------------------
 Interest and dividend
  income:
  Interest and fees on
   loans                  $   11,046  $    9,334  $   21,691  $ 18,517
  Interest on debt
   securities                  2,554       2,633       5,009     5,245
  Dividends on equity
   securities                    299         434         592       691
  Interest on certificates
   of deposit                     14          30          56        38
  Interest on federal
   funds sold                      6         478          18     1,541
                          ----------------------  --------------------
   Total interest and
    dividend income           13,919      12,909      27,366    26,032
                          ----------------------  --------------------

 Interest expense:
  Interest on deposits         4,938       6,426      10,201    13,337
  Interest on short-term
   borrowings                      7          53          42       115
  Interest on long-term
   debt                          502         517         999       829
                          ----------------------  --------------------
   Total interest expense      5,447       6,996      11,242    14,281
                          ----------------------  --------------------

 Net interest income           8,472       5,913      16,124    11,751
 Provision for loan losses       568       2,197       1,114     2,328
                          ----------------------  --------------------
   Net interest income,
    after provision for
    loan losses                7,904       3,716      15,010     9,423
                          ----------------------  --------------------

 Non-interest income:
  Customer service fees          799         697       1,496     1,355
  Loan fees                      127         154         277       370
  Gain on sales of loans,
   net                           116           8         299        27
  Gain (loss) on
   securities, net              (249)         47        (373)    2,313
  Income from bank-owned
   life insurance                240         230         454       415
  Equity income (loss) on
   investment in affiliate
   bank                            2         (86)        (25)     (254)
                          ----------------------  --------------------
   Total non-interest
    income                     1,035       1,050       2,128     4,226
                          ----------------------  --------------------

 Non-interest expenses:
  Salaries and employee
   benefits                    4,101       5,762      10,415     9,784
  Occupancy and equipment        697         699       1,561     1,479
  Data processing                474         406         912       793
  Marketing and
   advertising                   313         293         547       539
  Professional services          416         623       1,068       967
  Contribution to the
   Meridian Charitable
   Foundation                     --          --          --     3,000
  Foreclosed real estate
   expense                       223          14         478        38
  Deposit insurance              830         188       1,140       210
  Other general and
   administrative                630         491       1,240       978
                          ----------------------  --------------------
   Total non-interest
    expenses                   7,684       8,476      17,361    17,788
                          ----------------------  --------------------

  Income (loss) before
   income taxes                1,255      (3,710)       (223)   (4,139)

  Provision (benefit) for
   income taxes                  293      (1,494)        (77)   (1,602)
                          ----------------------  --------------------

   Net income (loss)      $      962  $   (2,216) $     (146) $ (2,537)
                          ======================  ====================

 Net income (loss) per
  share:
   Basic                  $     0.04  $    (0.10) $    (0.01)      N/A
   Diluted                $     0.04  $    (0.10) $    (0.01)      N/A

 Weighted Average Shares:
   Basic                  21,834,988  22,185,914  21,801,781       N/A
   Diluted                22,024,179  22,185,914  21,991,924       N/A


          MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
                     Net Interest Income Analysis
                             (Unaudited)

                             For The Three Months Ended June 30,
                  ----------------------------------------------------
                             2009                        2008
 ----------------------------------------------------------------------
                             Interest  Yield/           Interest Yield/
 (Dollars in       Average    Earned/  Cost   Average    Earned/  Cost
  thousands)       Balance     Paid     (4)   Balance     Paid     (4)
                  ----------------------------------------------------
 Assets:
 Interest-earning
  assets:
  Loans(1)        $  757,131 $ 11,046  5.85% $  604,227 $  9,334  6.21%
  Securities and
   certificates of
   deposit           290,433    2,867  3.96     310,094    3,097  4.02
  Other interest-
   earning assets     22,125        6  0.11      96,801      478  1.99
                  -------------------        -------------------
   Total interest-
    earning
    assets         1,069,689   13,919  5.22   1,011,122   12,909  5.13
                             --------                   --------

 Noninterest-
  earning assets      82,769                     76,288
                  ----------                 ----------
   Total assets   $1,152,458                 $1,087,410
                  ==========                 ==========

 Liabilities and
  stockholders'
  equity:
 Interest-bearing
  liabilities:
  NOW deposits    $   37,913       37  0.39% $   39,530       79  0.80%
  Money market
   deposits          226,777    1,074  1.90     143,566      885  2.48
  Savings and
   other deposits    128,148      293  0.92     123,801      351  1.14
  Certificates of
   deposit           432,899    3,534  3.27     448,618    5,111  4.58
                  -------------------        -------------------
   Total interest-
    bearing
    deposits         825,737    4,938  2.40     755,515    6,426  3.42

  FHLB advances
   and other
   borrowings         64,212      509  3.18      64,070      570  3.58
                  -------------------        -------------------

   Total interest-
    bearing
    liabilities      889,949    5,447  2.45     819,585    6,996  3.43
                             --------                   --------

  Noninterest-
   bearing demand
   deposits           61,772                     55,299
  Other
   noninterest-
   bearing
   liabilities        10,853                      9,647
                  ----------                 ----------
    Total
     liabilities     962,574                    884,531

   Total
    stockholders'
    equity           189,884                    202,879
                  ----------                 ----------
   Total
    liabilities
    and
    stockholders'
    equity        $1,152,458                 $1,087,410
                  ==========                 ==========

  Net interest
   income                    $  8,472                   $  5,913
                             ========                   ========

  Interest rate
   spread(2)                           2.77%                      1.70%
  Net interest
   margin(3)                           3.18%                      2.35%
  Average interest-
   earning assets
   to average
   interest-bearing
   liabilities                 120.20%                    123.37%

 ---------------------------------------------------------------------

 (1) Loans on non-accrual status are included in average balances.

 (2) Interest rate spread represents the difference between the yield
     on interest-earning assets and the cost of interest-bearing
     liabilities.

 (3) Net interest margin represents net interest income divided by
     average interest-earning assets.

 (4) Annualized.


          MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
                     Net Interest Income Analysis
                             (Unaudited)

                           For The Six Months Ended June 30,
                  ----------------------------------------------------
                             2009                        2008
 ----------------------------------------------------------------------
                             Interest  Yield/           Interest Yield/
 (Dollars in       Average    Earned/  Cost   Average    Earned/  Cost
  thousands)       Balance     Paid     (4)   Balance     Paid     (4)
                  ----------------------------------------------------
 Assets:
 Interest-earning
  assets:
  Loans(1)        $  742,085 $ 21,691  5.89% $  585,481 $ 18,517  6.36%
  Securities and
   certificates of
   deposit           272,016    5,657  4.19     285,088    5,974  4.21
  Other interest-
   earning assets     26,220       18  0.14     117,636    1,541  2.63
                  -------------------        -------------------
   Total interest-
    earning assets 1,040,321   27,366  5.30     988,205   26,032  5.30
                             --------                   --------

 Noninterest-
  earning assets      83,764                     75,438
                  ----------                 ----------
   Total assets   $1,124,085                 $1,063,643
                  ==========                 ==========

 Liabilities and
  stockholders'
  equity:
 Interest-bearing
  liabilities:
  NOW deposits    $   37,265       83  0.45% $   37,225      147  0.79%
  Money market
   deposits          205,108    2,101  2.07     141,844    2,038  2.89
  Savings and
   other deposits    125,584      595  0.96     132,122      746  1.14
  Certificates of
   deposit           430,232    7,422  3.48     447,243   10,406  4.68
                  -------------------        -------------------
   Total interest-
    bearing
    deposits         798,189   10,201  2.58     758,434   13,337  3.54

  FHLB advances
   and other
   borrowings         65,973    1,041  3.18      49,992      944  3.80
                  -------------------        -------------------

   Total interest-
    bearing
    liabilities      864,162   11,242  2.62     808,426   14,281  3.55
                             --------                   --------

  Noninterest-
   bearing demand
   deposits           60,247                     53,550
  Other
   noninterest-
   bearing
   liabilities         9,979                      9,215
                  ----------                 ----------
    Total
     liabilities     934,388                    871,191

   Total
    stockholders'
    equity           189,697                    192,452
                  ----------                 ----------
   Total
    liabilities
    and
    stockholders'
    equity        $1,124,085                 $1,063,643
                  ==========                 ==========
  Net interest
   income                    $ 16,124                   $ 11,751
                             ========                   ========
  Interest rate
   spread (2)                          2.68%                      1.75%
  Net interest
   margin (3)                          3.13%                      2.39%
  Average interest-
   earning assets
   to average
   interest-bearing
   liabilities                 120.38%                    122.24%
 ---------------------------------------------------------------------

 (1) Loans on non-accrual status are included in average balances.

 (2) Interest rate spread represents the difference between the yield
     on interest-earning assets and the cost of interest-bearing
     liabilities.

 (3) Net interest margin represents net interest income divided by
     average interest-earning assets.

 (4) Annualized.


          MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
                           Financial Ratios
                             (Unaudited)

 ---------------------------------------------------------------------
                                Three Months Ended   Six Months Ended
                                     June 30,            June 30,
                                  2009      2008      2009      2008
                                --------  ------------------  --------
 Key Performance Ratios
 Return on average assets(4)       0.33%    (0.82)%   (0.03)%   (0.48)%
 Return on average equity(4)       2.03     (4.37)    (0.15)    (2.64)
 Interest rate spread(1)(4)        2.77      1.70      2.68      1.75
 Net interest margin(2)(4)         3.18      2.35      3.13      2.39
 Noninterest expense to average
  assets(4)                        2.67      3.12      3.09      3.34
 Efficiency ratio (3)             85.96    121.73    101.30    111.34
 Average interest-earning assets
  to average interest-bearing
  liabilities                    120.20    123.37    120.38    122.24

 (1)  Interest rate spread represents the difference between the yield
      on interest-earning assets and the cost of interest-bearing
      liabilities.

 (2) Net interest margin represents net interest income divided by
     average interest-earning assets.

 (3) The efficiency ratio represents non-interest expense divided by
     the sum of net interest income plus non-interest income.

 (4) Annualized.


                                            At      At        At
                                           June,   June,  December 31,
                                           2009    2008       2008
 ---------------------------------------------------------------------
 Asset Quality Ratios
 Allowance for loan losses/total loans     1.05%   0.96%      0.97%
 Allowance for loan losses/
  nonperforming loans                     47.61   78.64      48.57

 Non-performing loans/total loans          2.21    1.22       2.00
 Non-performing loans/total assets         1.44    0.70       1.34
 Non-performing assets /total assets       1.70    0.70       1.58
 ---------------------------------------------------------------------

Meridian Interstate Bancorp, Inc.
Richard J. Gavegnano, Chairman and Chief Executive Officer
(978) 977-2211