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MERIDIAN INTERSTATE BANCORP INC
Symbol U : EBSB
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Meridian Interstate Bancorp, Inc. Reports Net Income for the Fourth Quarter and Year Ended December 31, 2012

2013-01-22 16:15 ET - News Release

BOSTON, Jan. 22, 2013 (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 $2.1 million, or $0.10 per diluted share, for the quarter ended December 31, 2012 compared to $2.0 million, or $0.09 per diluted share, for the quarter ended December 31, 2011. For the year ended December 31, 2012, net income was $12.4 million, or $0.57 per diluted share compared to $12.0 million, or $0.55 per diluted share, for the year ended December 31, 2011. The Company recorded a pre-tax gain of $4.8 million on June 8, 2012 due to the sale of Hampshire First Bank, which was 43% owned by the Company, to NBT Bancorp, Inc. and NBT Bank, N.A. On an after-tax basis, this gain increased net income by $2.9 million, or $0.13 per diluted share, for the year ended December 31, 2012. The Company's return on average assets was 0.38% for the quarter ended December 31, 2012 compared to 0.40% for the quarter ended December 31, 2011. For the year ended December 31, 2012, the Company's return on average assets was 0.59% compared to 0.63% for the year ended December 31, 2011. The Company's return on average equity was 3.59% for the quarter ended December 31, 2012 compared to 3.58% for the quarter ended December 31, 2011. For the year ended December 31, 2012, the Company's return on average equity was 5.42% compared to 5.45% for the year ended December 31, 2011.

Richard J. Gavegnano, Chairman and Chief Executive Officer, said, "I am pleased to report net income of $2.1 million, or $0.10 per share, for the fourth quarter and $12.4 million, or $0.57 per share, for the full year of 2012. We are gratified by the extraordinary expansion the Bank experienced in conjunction with the improving Boston area economy during 2012, with total loan originations of $1.1 billion, and growth in core deposits of $279 million, or 29%. Commercial real estate loan originations for 2012 were $690 million, representing increased production of $409 million, or 146%. This growth drove the rise in net interest income of $8.2 million, or 14%, to $66.0 million and in our net interest margin by nine basis points to 3.33% for 2012, despite declining loan rates. We will continue to take advantage of our expanded capacity while we seek additional ways to increase market share and franchise value."

Net interest income increased $2.5 million, or 16.8%, to $17.3 million for the quarter ended December 31, 2012 from $14.8 million for the quarter ended December 31, 2011. The net interest rate spread and net interest margin were 3.09% and 3.25%, respectively, for the quarter ended December 31, 2012 compared to 3.06% and 3.23%, respectively, for the quarter ended December 31, 2011. For the year ended December 31, 2012, net interest income increased $8.2 million, or 14.1%, to $66.0 million from $57.8 million for the year ended December 31, 2011. The net interest rate spread and net interest margin were 3.16% and 3.33%, respectively, for the year ended December 31, 2012 compared to 3.06% and 3.24%, respectively, for the year ended December 31, 2011. The increases in net interest income were due primarily to strong loan growth along with declines in the cost of funds for the fourth quarter and year ended December 31, 2012 compared to the same periods in 2011.

The average balance of the Company's loan portfolio increased $320.4 million, or 26.0%, to $1.551 billion, which was partially offset by the decline in the yield on loans of 48 basis points to 4.90% for the year ended December 31, 2012 compared to the year ended December 31, 2011. The Company's cost of total deposits declined 23 basis points to 0.92%, which was partially offset by the increase in the average balance of total deposits of $175.2 million, or 11.4%, to $1.711 billion for the year ended December 31, 2012 compared to the year ended December 31, 2011. The Company's yield on interest-earning assets declined 13 basis points to 4.28% for the year ended December 31, 2012 compared to 4.41% for the year ended December 31, 2011, while the cost of funds declined 23 basis points to 1.02% for the year ended December 31, 2012 compared to 1.25% for the year ended December 31, 2011.

The Company's provision for loan losses was $2.8 million for the quarter ended December 31, 2012 compared to $1.3 million for the quarter ended December 31, 2011.  For the year ended December 31, 2012, the provision for loan losses was $8.6 million compared to $3.7 million for the year ended December 31, 2011. The increases in the provision for loan losses were primarily due to increases in the commercial real estate, construction and commercial business loan categories for the fourth quarter and year ended December 31, 2012 compared to the same periods in 2011. The provision for loan losses was also based on management's assessment of loan portfolio growth and composition changes, an ongoing evaluation of credit quality and current economic conditions. The allowance for loan losses was $20.5 million or 1.13% of total loans outstanding at December 31, 2012, compared to $13.1 million or 0.96% of total loans outstanding at December 31, 2011.

Mr. Gavegnano noted, "The increase in our loan loss reserves during 2012 is a direct result of the impressive net increases of over $420 million in our commercial loan categories. Although our loans have been prudently underwritten, such growth requires us to increase our estimate of losses inherent in the loan portfolio."

Non-performing loans declined $14.1 million, or 26.3%, to $39.6 million, or 2.19% of total loans outstanding, at December 31, 2012, from $53.7 million, or 3.97% of total loans outstanding, at December 31, 2011. Non-performing assets declined $15.4 million, or 26.7%, to $42.2 million, or 1.85% of total assets, at December 31, 2012, from $57.5 million, or 2.91% of total assets, at December 31, 2011.   Non-performing assets at December 31, 2012 were comprised of $7.8 million of construction loans, $8.8 million of commercial real estate loans, $18.9 million of one- to four-family mortgage loans, $976,000 of multi-family mortgage loans, $2.7 million of home equity loans, and $424,000 of commercial business loans and foreclosed real estate of $2.6 million. Non-performing assets at December 31, 2012 included $19.5 million of assets acquired in the January 2010 Mt. Washington Co-operative Bank merger, comprised of $18.5 million of non-performing loans and $1.0 million of foreclosed real estate.

Non-interest income increased $1.2 million, or 41.2%, to $4.2 million for the quarter ended December 31, 2012 from $3.0 million for the quarter ended December 31, 2011, primarily due to an increase of $1.4 million in gain on sales of securities, net, partially offset by a decrease of $188,000 in mortgage banking gains, net. For the year ended December 31, 2012, non-interest income increased $5.9 million, or 38.2%, to $21.3 million from $15.4 million for the year ended December 31, 2011, primarily due to a $4.8 million gain on sale of the Hampshire First Bank affiliate and increases of $1.1 million in gain on sales of securities, net, $778,000 in customer service fees and $246,000 in mortgage banking gains, net, partially offset by decreases of $800,000 in equity income from the Hampshire First Bank affiliate and $245,000 in loan fees.

Non-interest expenses increased $1.9 million, or 14.0%, to $15.5 million for the quarter ended December 31, 2012 from $13.6 million for the quarter ended December 31, 2011, primarily due to increases of $2.2 million in salaries and employee benefits and $206,000 in data processing expenses, partially offset by a decrease of $453,000 in other non-interest expenses.  For the year ended December 31, 2012, non-interest expenses increased $9.0 million, or 17.6%, to $59.9 million from $51.0 million for the year ended December 31, 2011, primarily due to increases of $6.9 million in salaries and employee benefits, $602,000 in data processing expenses and $1.4 million in other non-interest expenses. The increases in non-interest expenses were primarily associated with the new branches opened and costs associated with the expansion of residential and commercial lending capacity in the past year. The Company's efficiency ratio was 78.04% for the quarter ended December 31, 2012 compared to 77.40% for the quarter ended December 31, 2011. For the year ended December 31, 2012, the efficiency ratio was 77.96%, excluding the gain on sale of the Hampshire First Bank affiliate, compared to 74.16% for the year ended December 31, 2011.

Mr. Gavegnano added, "After having risen in the first half of 2012, our efficiency ratio declined in the second half along with the rise in net interest income and fee income. We expect further improvement as an added benefit of our continuing emphasis on loan and core deposit growth."

The Company recorded a provision for income taxes of $1.1 million for the quarter ended December 31, 2012, reflecting an effective tax rate of 33.8%, compared to $946,000, or 32.5%, for the quarter ended December 31, 2011. For the year ended December 31, 2012, the provision for income taxes was $6.3 million, reflecting an effective tax rate of 33.7%, compared to $6.6 million, or 35.5%, for the year ended December 31, 2011. The changes in the income tax provision were primarily due to changes in the components of pre-tax income.

Total assets increased $304.4 million, or 15.4%, to $2.279 billion at December 31, 2012 from $1.974 billion at December 31, 2011. Net loans increased $445.0 million, or 33.2%, to $1.786 billion at December 31, 2012 from $1.341 billion at December 31, 2011. The net increase in loans for the year ended December 31, 2012 was primarily due to increases of $267.6 million in commercial real estate loans, $80.1 million in construction loans and $76.3 million in commercial business loans. Cash and cash equivalents decreased $63.5 million, or 40.5%, to $93.2 million at December 31, 2012 from $156.7 million at December 31, 2011. Securities available for sale decreased $72.4 million, or 21.6%, to $262.8 million at December 31, 2012 from $335.2 million at December 31, 2011.

Total deposits increased $260.9 million, or 16.3%, to $1.865 billion at December 31, 2012 from $1.604 billion at December 31, 2011, reflecting net growth in core deposits of $279.1 million, or 29.1%, to $1.237 billion, or 66.3% of total deposits. Total borrowings increased $29.8 million, or 22.7%, to $161.3 million at December 31, 2012 from $131.5 million at December 31, 2011, reflecting a $46.3 million increase in Federal Home Loan Bank advances partially offset by a $16.5 million decrease in short-term borrowings.

Mr. Gavegnano said, "Our deposit base grew $261 million, or 16%, for 2012, with the five new branches we opened during the last two years contributing 60% of that growth. The opening this month of our new East Boston Savings Bank branch in the Town of Belmont and a new Mt. Washington branch in Boston's Allston neighborhood, along with the scheduled opening later this year of a new East Boston Savings Bank branch in the City of Somerville, will provide additional growth opportunities in our Boston market area."

Total stockholders' equity increased $14.0 million, or 6.4%, to $233.9 million at December 31, 2012, from $219.9 million at December 31, 2011. The increase for the year ended December 31, 2012 was due primarily to $12.4 million in net income and a $930,000 increase in accumulated other comprehensive income reflecting an increase in the fair value of available for sale securities, net of tax, partially offset by a $1.0 million increase in treasury stock resulting from the Company's repurchase of 87,504 shares. Stockholders' equity to assets was 10.27% at December 31, 2012, compared to 11.14% at December 31, 2011. Book value per share increased to $10.57 at December 31, 2012 from $9.93 at December 31, 2011. Tangible book value per share increased to $9.95 at December 31, 2012 from $9.31 at December 31, 2011. Market price per share increased $4.33, or 34.8%, to $16.78 at December 31, 2012 from $12.45 at December 31, 2011. At December 31, 2012, the Company and the Bank continued to exceed all regulatory capital requirements.

As of December 31, 2012, the Company had repurchased 196,566 shares of its stock at an average price of $12.85 per share, or 21.7% of the 904,224 shares authorized for repurchase under the Company's fourth repurchase program as adopted during 2011. The Company has repurchased 1,600,494 shares at an average price of $10.45 per share since December 2008.

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 25 full service locations in the greater Boston metropolitan area including nine 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 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 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. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
     
 December 31,December 31,
 20122011
 (Dollars in thousands)
ASSETS
Cash and due from banks  $ 93,129  $ 156,622
Federal funds sold  63  63
Total cash and cash equivalents  93,192  156,685
     
Certificates of deposit - affiliate bank  --  2,500
Securities available for sale, at fair value  262,785  335,230
Federal Home Loan Bank stock, at cost  12,064  12,538
Loans held for sale   14,502  4,192
     
Loans  1,806,843  1,354,354
Less allowance for loan losses  (20,504)  (13,053)
Loans, net  1,786,339  1,341,301
     
Bank-owned life insurance  36,251  35,050
Foreclosed real estate, net  2,604  3,853
Investment in affiliate bank  --  12,607
Premises and equipment, net  38,719  36,991
Accrued interest receivable  6,745  7,282
Prepaid deposit insurance  --  1,257
Deferred tax asset, net  6,999  7,434
Goodwill  13,687  13,687
Other assets  4,884  3,773
Total assets  $ 2,278,771  $ 1,974,380
     
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:    
Non interest-bearing  $ 204,079  $ 145,274
Interest-bearing  1,661,354  1,459,214
Total deposits  1,865,433  1,604,488
     
Short-term borrowings - affiliate bank  --  6,471
Short-term borrowings - other  --  10,056
Long-term debt  161,254  114,923
Accrued expenses and other liabilities  18,141  18,498
Total liabilities  2,044,828  1,754,436
Stockholders' equity:    
Common stock, no par value, 50,000,000 shares authorized; 23,000,000 shares issued   --  --
Additional paid-in capital  98,338  97,669
Retained earnings  146,959  134,533
Accumulated other comprehensive income  4,915  3,985
Treasury stock, at cost, 660,800 and 584,881 shares at December 31, 2012 and 2011, respectively  (8,331)  (7,317)
Unearned compensation - ESOP, 621,000 and 662,400 shares at December 31, 2012 and 2011, respectively  (6,210)  (6,624)
Unearned compensation - restricted shares, 203,345 and 265,710 at December 31, 2012 and 2011, respectively  (1,728)  (2,302)
Total stockholders' equity  233,943  219,944
Total liabilities and stockholders' equity  $ 2,278,771  $ 1,974,380
 
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
         
 Three Months Ended December 31, Years Ended December 31, 
 2012201120122011
 (Dollars in thousands, except per share amounts)
Interest and dividend income:        
Interest and fees on loans  $ 20,358  $ 16,818  $ 76,050  $ 66,157
Interest on debt securities   1,339  2,475  7,117  11,086
Dividends on equity securities  402  285  1,444  1,033
Interest on certificates of deposit  --  9  26  34
Interest on other interest-earning assets  70  116  254  422
Other interest and dividend income  14  35  78  80
Total interest and dividend income  22,183  19,738  84,969  78,812
Interest expense:        
Interest on deposits   4,014  4,123  15,739  17,738
Interest on short-term borrowings  3  7  16  39
Interest on long-term debt  827  769  3,190  3,195
Total interest expense  4,844  4,899  18,945  20,972
         
Net interest income  17,339  14,839  66,024  57,840
Provision for loan losses   2,803  1,272  8,581  3,663
Net interest income, after provision for loan losses  14,536  13,567  57,443  54,177
Non-interest income:        
Customer service fees  1,727  1,671  6,645  5,867
Loan fees  49  147  339  584
Mortgage banking gains, net  459  647  2,371  2,125
Gain on sales of securities, net  1,624  208  5,568  4,464
Income from bank-owned life insurance  309  302  1,201  1,221
Equity income (loss) on investment in affiliate bank  --  (22)  310  1,110
Gain on sale of investment in affiliate bank  --  --  4,819  --
Other income  1  --  8  17
Total non-interest income  4,169  2,953  21,261  15,388
Non-interest expenses:        
Salaries and employee benefits   9,799  7,645  36,386  29,474
Occupancy and equipment   1,955  1,980  7,932  7,831
Data processing  926  720  3,511  2,909
Marketing and advertising  771  818  2,537  2,450
Professional services  536  698  2,966  2,685
Foreclosed real estate  105  198  599  328
Deposit insurance  462  424  1,760  1,893
Other general and administrative   963  1,127  4,257  3,424
Total non-interest expenses  15,517  13,610  59,948  50,994
Income before income taxes  3,188  2,910  18,756  18,571
Provision for income taxes  1,079  946  6,330  6,601
Net income  $ 2,109  $ 1,964  $ 12,426  $ 11,970
         
Earnings per share:        
Basic  $ 0.10  $ 0.09  $ 0.57  $ 0.55
Diluted  $ 0.10  $ 0.09  $ 0.57  $ 0.55
         
Weighted average shares:        
Basic  21,617,801  21,668,365  21,629,668  21,805,143
Diluted  21,925,933  21,798,777  21,858,381  21,931,863
             
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Net Interest Income Analysis
(Unaudited)
             
  For the Three Months Ended December 31, 
 20122011
 Average  Yield/Average  Yield/
 BalanceInterestCost (5)BalanceInterestCost (5)
 (Dollars in thousands)
Assets:            
Interest-earning assets:            
Loans (1)  $ 1,715,280  $ 20,358  4.72%  $ 1,294,214  $ 16,818  5.16%
Securities and certificates of deposits  271,792  1,741  2.55  338,429  2,769  3.25
Other interest-earning assets (2)  132,104  84  0.25  190,700  151  0.31
Total interest-earning assets   2,119,176  22,183  4.16  1,823,343  19,738  4.29
Noninterest-earning assets   120,606      136,381    
Total assets   $ 2,239,782      $ 1,959,724    
             
Liabilities and stockholders' equity:            
Interest-bearing liabilities:            
NOW deposits   $ 170,555  224  0.52  $ 143,624  177  0.49
Money market deposits   586,493  1,293  0.88  422,352  892  0.84
Regular and other deposits   241,148  232  0.38  212,926  206  0.38
Certificates of deposit   629,178  2,265  1.43  663,628  2,848  1.70
Total interest-bearing deposits   1,627,374  4,014  0.98  1,442,530  4,123  1.13
Borrowings  165,574  830  1.99  132,876  776  2.32
Total interest-bearing liabilities   1,792,948  4,844  1.07  1,575,406  4,899  1.23
Noninterest-bearing demand deposits   195,149      145,770    
Other noninterest-bearing liabilities   16,934      19,373    
Total liabilities   2,005,031      1,740,549    
Total stockholders' equity   234,751      219,175    
Total liabilities and stockholders' equity   $ 2,239,782      $ 1,959,724    
Net interest-earning assets  $ 326,228      $ 247,937    
Net interest income     $ 17,339      $ 14,839  
Interest rate spread (3)      3.09%      3.06%
Net interest margin (4)      3.25%      3.23%
Average interest-earning assets to average interest-bearing liabilities   118.20%      115.74%    
             
Supplemental Information:            
Total deposits, including noninterest-bearing demand deposits  $ 1,822,523  $ 4,014  0.88%  $ 1,588,300  $ 4,123  1.03%
Total deposits and borrowings, including noninterest-bearing demand deposits  $ 1,988,097  $ 4,844  0.97%  $ 1,721,176  $ 4,899  1.13%
 
             
(1) Loans on non-accrual status are included in average balances. 
(2) Includes Federal Home Loan Bank stock and associated dividends.
(3) Interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average interest-earning assets.
(5) Annualized.
             
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Net Interest Income Analysis
(Unaudited)
             
  For the Years Ended December 31, 
 20122011
 Average  Yield/Average  Yield/
 BalanceInterestCostBalanceInterestCost
 (Dollars in thousands)
Assets:            
Interest-earning assets:            
Loans (1)  $ 1,550,707  $ 76,050  4.90%  $ 1,230,294  $ 66,157  5.38%
Securities and certificates of deposits  298,918  8,587  2.87  364,199  12,153  3.34
Other interest-earning assets (2)  135,183  332  0.25  190,634  502  0.26
Total interest-earning assets   1,984,808  84,969  4.28  1,785,127  78,812  4.41
Noninterest-earning assets   124,727      128,955    
Total assets   $ 2,109,535      $ 1,914,082    
             
Liabilities and stockholders' equity:            
Interest-bearing liabilities:            
NOW deposits   $ 154,375  741  0.48  $ 134,557  613  0.46
Money market deposits   523,133  4,484  0.86  376,546  3,515  0.93
Regular and other deposits   231,274  887  0.38  205,664  1,003  0.49
Certificates of deposit   630,349  9,627  1.53  692,638  12,607  1.82
Total interest-bearing deposits   1,539,131  15,739  1.02  1,409,405  17,738  1.26
Borrowings  152,730  3,206  2.10  143,346  3,234  2.26
Total interest-bearing liabilities   1,691,861  18,945  1.12  1,552,751  20,972  1.35
Noninterest-bearing demand deposits   172,258      126,737    
Other noninterest-bearing liabilities   16,166      15,138    
Total liabilities   1,880,285      1,694,626    
Total stockholders' equity   229,250      219,456    
Total liabilities and stockholders' equity   $ 2,109,535      $ 1,914,082    
Net interest-earning assets  $ 292,947      $ 232,376    
Net interest income     $ 66,024      $ 57,840  
Interest rate spread (3)      3.16%      3.06%
Net interest margin (4)      3.33%      3.24%
Average interest-earning assets to average interest-bearing liabilities   117.32%      114.97%    
             
Supplemental Information:            
Total deposits, including noninterest-bearing demand deposits  $ 1,711,389  $ 15,739  0.92%  $ 1,536,142  $ 17,738  1.15%
Total deposits and borrowings, including noninterest-bearing demand deposits  $ 1,864,119  $ 18,945  1.02%  $ 1,679,488  $ 20,972  1.25%
 
             
(1) Loans on non-accrual status are included in average balances. 
(2) Includes Federal Home Loan Bank stock and associated dividends.
(3) Interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average interest-earning assets.
         
 
MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
Selected Financial Highlights
(Unaudited)
         
 At or For the Three Months EndedAt or For the Years Ended
 December 31,December 31,
 2012201120122011
         
Key Performance Ratios        
Return on average assets (1)  0.38%  0.40%  0.59%  0.63%
Return on average equity (1)  3.59  3.58  5.42  5.45
Stockholders' equity to total assets  10.27  11.14  10.27  11.14
Interest rate spread (1) (2)  3.09  3.06  3.16  3.06
Net interest margin (1) (3)  3.25  3.23  3.33  3.24
Non-interest expense to average assets (1)  2.77  2.78  2.84  2.66
Efficiency ratio (4)  78.04  77.40  77.96  74.16
         
     December 31,December 31,
     20122011
         
Asset Quality Ratios        
Allowance for loan losses/total loans      1.13%  0.96%
Allowance for loan losses/non-performing loans      51.81  24.31
Non-performing loans/total loans      2.19  3.97
Non-performing loans/total assets      1.74  2.72
Non-performing assets/total assets      1.85  2.91
         
Share Related        
Book value per share       $ 10.57  $ 9.93
Tangible book value per share       $ 9.95  $ 9.31
Market value per share      $ 16.78  $ 12.45
Shares outstanding     22,135,855 22,149,409
 
(1) Annualized.
(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) The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income excluding gains or losses on securities and gain on sale of investment in affiliate bank.
         
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