Meridian Interstate Bancorp Inc., parent of East Boston Savings Bank and Mt. Washington Bank, pulled down a $5.4 million profit in the second quarter compared to $4.2 million in the same period a year ago.
That’s thanks to a $4.8 million pre-tax gain – $2.9 million of which made its way to the bottom line – from the sale of Hampshire First Bank. Meridian owned 43 percent of Manchester, N.H.-based Hampshire First, and sold it to NBT Bancorp Inc., of upstate New York. Meridian got a total of $6.6 million in cash in the deal, and shares valued at $11.1 million.
Closing the Hampshire First deal also helped Meridian’s return on average assets, which hit 1.07 percent in the second quarter, compared to 0.87 percent a year earlier.
Returns like that were not considered impressive just a few years ago, but these days, they are well above average. The median return on assets for Massachusetts institutions in the first quarter was 0.56 percent. That was up from 0.45 percent a year earlier, and up slightly from 0.55 percent in the fourth quarter of 2011, according to Federal Deposit Insurance Corp. data.
“The gain on the sale of Hampshire First hit in the second quarter,” explained EBSB CFO Mark Abbate.
‘Growing Like Crazy’
But the earnings jolt of the Hampshire First sale, which is front and center in the bank’s earnings announcement, may distract a little from some of the quarter’s other important results.
Total deposits increased 6 percent to $1.7 billion as of the end of the second quarter, compared to $1.6 billion as of the end of 2011. That increase was concentrated in net growth of $120 million, or 12.6 percent, in core deposits.
Loans were up to $1.6 billion, compared to $1.4 billion at the end of 2011. Non-performing loans declined 24.7 percent to $40.4 million, about 2.6 percent of total loans. Non-performing assets declined 24.5 percent to $43.4 million, or about 2.1 percent of total assets.
John Migliozzi, EBSB’s vice president of lending, said the bank has been the beneficiary of continued customer flight from its larger competitors.
“The larger banks are not serving customers in our sweet spot, between $5 million and $7 million commercial,” Migliozzi told Banker & Tradesman. He said commercial borrowers in the multi-family market have been particularly active. “Rents are going up and we’re seeing strong demand.”
Retail has also been active, with a couple of caveats, he said.
“Retail has to be strong tenanted,” Migliozzi explained. “And it has to be a good asset in a good location.”
President and CEO Richard Gavegnano was more effusive. He’s got his eyes on earnings, and he’s encouraged by the bank’s second quarter performance. Earnings hit 25 cents per share during the quarter, compared to 19 cents a year ago.
“We’re growing like crazy and booking a ton of loans,” Gavegnano told Banker & Tradesman. “The volume of loans and the spread are increasing, and the cost of funds is going down. Deposits are moving away from CDs to core deposits, checking.”
Gavegnano said residential borrowers are “on a refi kick,” but that there “are subtle signs of the market leveling off.” In that regard, EBSB “is very fortunate to be in the geographic region we’re in. We’re in a healthy part of the state and the country.”
And the bank is looking to get deeper into that geography with plans to open branches in Belmont, Boston’s Allston neighborhood and Watertown in the coming months.
In Allston, EBSB sees a market “with a high concentration of [students] who have a need for checking accounts, debit cards and credit cards” said Abbate. The location is between a Dunkin Donuts and a CVS, and all the student activity attracts apartment developers.
“And there’s no big community bank presence there,” Gavegnano said. “Watertown is next.”
