Year-over-year net income dropped sharply during the second quarter at Boston-based Meridian Interstate Bancorp, the holding company for East Boston Savings Bank, which also operates under the name Mt. Washington Bank, to $3 million from $5.4 million for the same period last year.
The company explained the apparent drop in net income by way of a pre-tax gain of $4.8 million during last year’s second quarter, resulting from the sale of its investment in Hampshire First Bank, of which Meridian owned 43 percent, to NBT Bancorp. According to a statement accompanying its earnings release, this one-time gain increased net income by $2.9 million on an after-tax basis last year.
Net interest income increased $1.9 million, or 11.7 percent, to $18.3 million for the quarter ended June 30 from $16.4 million last year.
Total deposits increased $196.6 million, or 10.5 percent, to $2.1 billion at June 30, from $1.9 billion at the end of 2012, including net growth in core deposits of $132.2 million, or 10.7 percent, to $1.4 billion, or 66.4 percent, of total deposits.
Net loans increased $219.2 million, or 12.3 percent, to $2 billion at June 30 from $1.8 billion at Dec.31, 2012, which the company mainly attributed to increases of $151.4 million in commercial real estate loans, $59.3 million in construction loans and $30.6 million in commercial business loans. The average balance of the company’s loan portfolio increased $439.8 million, or 29.4 percent, to $1.9 billion, which was partially offset by the decline in the yield on loans of 51 basis points to 4.56 percent for second quarter over the same time last year.
"The tremendous growth of $468 million, or 30 percent, in our loan portfolio and $290 million, or 27 percent, in core deposits since June of last year contributed to our eighth consecutive quarter of rising net interest income. This growth has also been a factor in limiting the decline in our net interest margin despite falling loan yields," Chairman and CEO Richard Gavegnano said in the statement.
The net interest rate spread and net interest margin were 3.08 percent and 3.24 percent, respectively, for the this year’s second quarter, compared with 3.37 percent and 3.53 percent last year.
Provision for loan losses increased to $3.2 million compared with $2.2 million last year, which the company primarily attributed to growth in the commercial real estate, construction and commercial business loan categories this year.
The allowance for loan losses totaled $23.5 million or 1.16 percent of total loans outstanding at June 30, compared with $20.5 million or 1.13 percent of total loans outstanding at the end of 2012. Net loan charge-offs in the second quarter totaled $652,000, or 0.13 percent of average loans outstanding.
During this time frame, non-performing loans also increased $5.7 million, or 14.5 percent, to $45.3 million, or 2.23 percent of total loans outstanding, from $39.6 million, or 2.19 percent of total loans outstanding, at Dec. 31, 2012, primarily due to a net increase of $7.6 million in non-performing construction loans. Non-performing assets increased $4.9 million, or 11.7 percent, to $47.1 million, or 1.88 percent of total assets, at June 30, from $42.2 million, or 1.85 percent of total assets, at Dec. 31.
