Meridian Bancorp, Inc. - FORM 10-Q

Meridian Bancorp, Inc. - FORM 10-Q - May 9, 2016

Attached files

Attached files

Meridian Bancorp, Inc. Reports

file	filename
EX-32.0 - EX-32.0 - Meridian Bancorp, Inc.	d159668dex320.htm
EX-31.2 - EX-31.2 - Meridian Bancorp, Inc.	d159668dex312.htm
EX-31.1 - EX-31.1 - Meridian Bancorp, Inc.	d159668dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2016

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-36573

Meridian Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland

46-5396964

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

67 Prospect Street,

Peabody, Massachusetts

01960

(Address of Principal Executive Offices)

(Zip Code)

(617) 567-1500

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

At May 2, 2016, the registrant had 53,926,002 shares of $0.01 par value common stock outstanding.

MERIDIAN BANCORP, INC.

FORM 10-Q

INDEX


		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets at March 31, 2016 and December 31, 2015		3

	Consolidated Statements of Net Income for the three months ended March 31, 2016 and 2015		4

	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2015		5

	Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2016 and 2015		6

	Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015		7

	Notes to Consolidated Financial Statements		9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		43

Item 4.	Controls and Procedures		44

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		45

Item 1A.	Risk Factors		45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		45

Item 3.	Defaults Upon Senior Securities		45

Item 4.	Mine Safety Disclosures		45

Item 5.	Other Information		45

Item 6.	Exhibits		46

	Signatures		48

	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32.0

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

MERIDIAN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2016			December 31, 2015
	(Dollars in thousands)
ASSETS
Cash and due from banks	$	154,122		$	96,363
Certificates of deposit		92,675			99,062
Securities available for sale, at fair value		132,115			141,646
Federal Home Loan Bank stock, at cost		13,021			10,931
Loans held for sale		1,194			4,669

Loans, net of fees and costs		3,242,126			3,078,647
Less allowance for loan losses		(34,390	)		(33,405	)

Loans, net		3,207,736			3,045,242

Bank-owned life insurance		39,859			39,557
Foreclosed real estate, net		638			—
Premises and equipment, net		40,733			40,248
Accrued interest receivable		8,831			8,574
Deferred tax asset, net		20,868			21,246
Goodwill		13,687			13,687
Other assets		3,976			3,284


Total assets	$	3,729,455		$	3,524,509


LIABILITIES AND STOCKHOLDERS’ EQUITY

Deposits:
Non interest-bearing	$	388,731		$	370,546
Interest-bearing		2,522,688			2,372,472

Total deposits		2,911,419			2,743,018

Short-term borrowings		—			20,000
Long-term debt		211,426			147,226
Accrued expenses and other liabilities		23,926			26,139

Total liabilities		3,146,771			2,936,383

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; 53,895,870 and 54,875,237 shares issued at March 31, 2016 and December 31, 2015, respectively		539			549
Additional paid-in capital		391,399			403,737
Retained earnings		212,158			206,214
Accumulated other comprehensive loss		(1,350	)		(2,092	)
Unearned compensation - ESOP, 2,770,123 and 2,800,564 shares at March 31, 2016 and December 31, 2015, respectively		(20,062	)		(20,282	)

Total stockholders’ equity		582,684			588,126


Total liabilities and stockholders’ equity	$	3,729,455		$	3,524,509

See accompanying notes to consolidated financial statements.

MERIDIAN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)


	Three Months Ended March 31,
	2016		2015
	(Dollars in thousands, except per share amounts)
Interest and dividend income:
Interest and fees on loans	$	33,097	$	28,332
Interest on debt securities:
Taxable		266		511
Tax-exempt		33		42
Dividends on equity securities		400		387
Interest on certificates of deposit		170		136
Other interest and dividend income		218		170

Total interest and dividend income		34,184		29,578

Interest expense:
Interest on deposits		5,228		4,677
Interest on short-term borrowings		6		—
Interest on long-term debt		571		508

Total interest expense		5,805		5,185

Net interest income		28,379		24,393
Provision for loan losses		1,066		60

Net interest income, after provision for loan losses		27,313		24,333

Non-interest income:
Customer service fees		1,947		1,757
Loan fees		312		166
Mortgage banking gains, net		70		110
Gain on sales of securities, net		59		1,020
Income from bank-owned life insurance		302		296
Other income		2		1

Total non-interest income		2,692		3,350

Non-interest expenses:
Salaries and employee benefits		12,513		11,167
Occupancy and equipment		2,484		2,620
Data processing		1,257		1,263
Marketing and advertising		713		894
Professional services		613		673
Foreclosed real estate		8		14
Deposit insurance		452		461
Other general and administrative		1,190		976

Total non-interest expenses		19,230		18,068

Income before income taxes		10,775		9,615
Provision for income taxes		3,298		3,210

Net income	$	7,477	$	6,405


Earnings per share:
Basic	$	0.14	$	0.12
Diluted	$	0.14	$	0.12
Weighted average shares:
Basic		51,569,683		51,862,146
Diluted		52,663,921		53,003,621

See accompanying notes to consolidated financial statements.

MERIDIAN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
	2016			2015
	(In thousands)
Net income	$	7,477		$	6,405

Other comprehensive income (loss):
Securities available for sale:
Unrealized holding gain (loss)		1,375			(961	)
Reclassification adjustment for gains realized in income ⁽¹⁾		(59	)		(1,020	)

Net unrealized gain (loss)		1,316			(1,981	)
Tax effect		(574	)		790

Total other comprehensive income (loss)		742			(1,191	)

Comprehensive income	$	8,219		$	5,214

(1)	Amounts are included in gain on sales of securities, net in the Consolidated Statements of Net Income. Provisions for income tax associated with the reclassification adjustments for the three months ended March 31, 2016 and 2015 were $26,000 and $407,000, respectively.

See accompanying notes to consolidated financial statements.

MERIDIAN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2016 and 2015

(Unaudited)


	Shares of Common Stock Outstanding			Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Unearned Compensation - ESOP			Total
	(Dollars in thousands)

*Three Months Ended March 31, 2015*
Balance at December 31, 2014		54,708,066		$	547		$	410,714		$	184,715		$	2,898		$	(21,164	)	$	577,710
Comprehensive income		—			—			—			6,405			(1,191	)		—			5,214
ESOP shares earned (30,441 shares)		—			—			150			—			—			220			370
Share-based compensation expense - stock options, net of awards forfeited		—			—			31			—			—			—			31
Share-based compensation expense - restricted stock, net of awards forfeited		88,700			1			73			—			—			—			74
Excess tax benefits in connection with share-based compensation		—			—			149			—			—			—			149
Stock options exercised		149,928			1			56			—			—			—			57

Balance at March 31, 2015		54,946,694		$	549		$	411,173		$	191,120		$	1,707		$	(20,944	)	$	583,605


*Three Months Ended March 31, 2016*
Balance at December 31, 2015		54,875,237		$	549		$	403,737		$	206,214		$	(2,092	)	$	(20,282	)	$	588,126
Comprehensive income		—			—			—			7,477			742			—			8,219
Dividends declared ($0.03 per share)		—			—			—			(1,533	)		—			—			(1,533	)
Repurchased stock related to buyback program		(976,417	)		(10	)		(13,372	)		—			—			—			(13,382	)
ESOP shares earned (30,441 shares)		—			—			194			—			—			220			414
Share-based compensation expense - stock options, net of awards forfeited		—			—			297			—			—			—			297
Share-based compensation expense - restricted stock, net of awards forfeited		(4,950	)		—			530			—			—			—			530
Excess tax benefits in connection with share-based compensation		—			—			6			—			—			—			6
Stock options exercised		2,000			—			7			—			—			—			7

Balance at March 31, 2016		53,895,870		$	539		$	391,399		$	212,158		$	(1,350	)	$	(20,062	)	$	582,684

See accompanying notes to consolidated financial statements.

MERIDIAN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2016			2015
	(In thousands)

Cash flows from operating activities:
Net income	$	7,477		$	6,405
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of acquisition fair value adjustments		(39	)		(23	)
ESOP shares earned		414			370
Provision for loan losses		1,066			60
Accretion of net deferred loan origination fees		(289	)		(150	)
Net accretion of securities available for sale		(17	)		(23	)
Depreciation and amortization expense		712			595
Gain on sales of securities, net		(59	)		(1,020	)
Deferred income tax (benefit) provision		(196	)		3
Income from bank-owned life insurance		(302	)		(296	)
Share-based compensation expense		827			105
Excess tax benefits in connection with share-based compensation		(6	)		(149	)
Net changes in:
Loans held for sale		3,475			(4,843	)
Accrued interest receivable		(257	)		203
Other assets		(692	)		3,199
Accrued expenses and other liabilities		(2,094	)		(2,350	)

Net cash provided by operating activities		10,020			2,086


Cash flows from investing activities:
Maturities of certificates of deposit		16,504			—
Purchases of certificates of deposit		(10,117	)		—
Activity in securities available for sale:
Proceeds from maturities, calls and principal payments		8,388			9,558
Purchase of mutual funds, net		(39	)		(3	)
Proceeds from sales		3,914			4,662
Purchases		(1,344	)		(8,557	)
Loans originated, net of principal payments received		(163,892	)		(2,049	)
Purchases of premises and equipment		(1,176	)		(767	)
Purchase of Federal Home Loan Bank stock		(2,090	)		—

Net cash (used in) provided by investing activities		(149,852	)		2,844

MERIDIAN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2016			2015
	(In thousands)

Cash flows from financing activities:
Net increase in deposits		168,406			90,354
Net change in borrowings with maturities less than three months		(20,000	)		—
Proceeds from Federal Home Loan Bank advances with maturities of three months or more		90,000			—
Repayment of Federal Home Loan Bank advances with maturities of three months or more		(25,800	)		(27,789	)
Stock options exercised		7			57
Excess tax benefits in connection with share-based compensation		6			149
Cash dividends paid on common stock		(1,646	)		—
Repurchase of common stock		(13,382	)		—

Net cash provided by financing activities		197,591			62,771


Net change in cash and cash equivalents		57,759			67,701

Cash and cash equivalents at beginning of period		96,363			205,732


Cash and cash equivalents at end of period	$	154,122		$	273,433

Supplemental cash flow information:
Interest paid on deposits	$	5,143		$	4,733
Interest paid on borrowings		541			534
Income taxes paid, net of refunds		3,026			1,390
Non-cash investing and financing activities:
Transfers from loans to foreclosed real estate		638			—
Net amount due from broker on security transactions		—			2,806

See accompanying notes to consolidated financial statements.

MERIDIAN BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	BASIS OF PRESENTATION

Meridian Bancorp, Inc. (the “Company”) is a Maryland corporation incorporated on March 6, 2014 to be the successor to Meridian Interstate Bancorp, Inc. (“Old Meridian”) upon completion of the second-step mutual-to-stock conversion (the “Conversion”) of Meridian Financial Services, Incorporated (the “MHC”), the top tier mutual holding company of Old Meridian. Old Meridian was the former mid-tier holding company for East Boston Savings Bank (the “Bank”). Prior to completion of the Conversion, approximately 59% of the shares of common stock of Old Meridian were owned by the MHC. In conjunction with the Conversion, the MHC and Meridian Interstate Funding Corporation were merged into Old Meridian (and ceased to exist), and Old Meridian merged into the Company and the Company became its successor under the name Meridian Bancorp, Inc. The Conversion was completed July 28, 2014.

The consolidated financial statements include the accounts of the Company and all other entities in which it has a controlling financial interest. The Company owns the Bank. The Bank’s subsidiaries include Prospect, Inc., which engages in securities transactions on its own behalf, EBOSCO, LLC and Berkeley Riverbend Estates LLC, both can hold foreclosed real estate, and East Boston Investment Services, Inc., which is authorized for third-party investment sales and is currently inactive. All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by such generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Such adjustments were of a normal recurring nature. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the entire year or any other interim period. For additional information, refer to the financial statements and footnotes thereto of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 which was filed with the Securities and Exchange Commission (“SEC”) on March 11, 2016, and is available through the SEC’s website at www.sec.gov.

In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the evaluation of goodwill for impairment and the evaluation of securities for other-than-temporary impairment.

2.	RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The objective of this ASU was to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. The guidance in this ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principal of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted, but not before annual periods beginning after December 31, 2016. The Company is currently reviewing this ASU to determine if it will have an impact on its consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall, (Subtopic 825-10). The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Targeted changes to generally accepted accounting principles include the requirement for equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income and the elimination of the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company has a portfolio of equity investments and if such guidance were effective for the three months ended March 31, 2016, a net unrealized gain of approximately $1.3 million and related deferred tax benefit of $451,000 would have been recognized in net income, instead of in other comprehensive income. The impact of this guidance on future periods is dependent on future market conditions and investment activity.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This update is intended to improve financial reporting about leasing transactions and the key provision impacting the Company is the requirement for a lessee to record a right-to-use asset and liability representing the obligation to make lease payments for long-term operating leases. The update will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently reviewing this ASU to determine the impact on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting (Topic718). This update is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The update will be effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently reviewing this ASU to determine the impact on its consolidated financial statements.

3.	EARNINGS PER SHARE

Basic earnings per share excludes dilution and is calculated by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Rights to dividends on unvested stock awards are non-forfeitable, therefore these unvested stock awards are considered outstanding in the computation of basic earnings per share. Diluted earnings per share is computed in a manner similar to that of basic earnings per share except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares (computed using the treasury method) that would have been outstanding if all potentially dilutive common stock equivalents (such as options) were issued during the period. Unallocated common shares held by the Employee Stock Ownership Plan are shown as a reduction in stockholders’ equity and are not included in the weighted-average number of common shares outstanding for either basic or diluted earnings per share calculations.

Basic and diluted earnings per share have been computed based on the following:


	Three Months Ended March 31,
	2016		2015
	(Dollars in thousands, except per share amounts)

Net income available to common stockholders	$	7,477	$	6,405


Basic weighted average shares outstanding		51,569,683		51,862,146
Effect of dilutive stock options		1,094,238		1,141,475

Diluted weighted average shares outstanding		52,663,921		53,003,621


Earnings per share:
Basic	$	0.14	$	0.12
Diluted	$	0.14	$	0.12

For the three months ended March 31, 2016, options for the exercise of 392,753 shares were not included in the calculation of diluted earnings per share because to do so would have been anti-dilutive. There were no anti-dilutive options for the three months ended March 31, 2015.

4.	SECURITIES AVAILABLE FOR SALE

The amortized cost and fair values of securities available for sale, with gross unrealized gains and losses, follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)

March 31, 2016
Debt securities:
Corporate bonds:
Financial services	$	24,449	$	69	$	(32	)	$	24,486
Industrials		3,000		4		—			3,004

Total corporate bonds		27,449		73		(32	)		27,490
Government-sponsored enterprises		5,000		10		(2	)		5,008
Municipal bonds		4,300		80		—			4,380
Residential mortgage-backed securities:
Government-sponsored enterprises		6,600		450		(2	)		7,048
Private label		858		24		—			882
U.S. treasury securities		24,997		2		—			24,999

Total debt securities		69,204		639		(36	)		69,807

Marketable equity securities:
Common stocks:
Basic materials		12,207		365		(2,838	)		9,734
Consumer products and services		18,435		1,696		(1,190	)		18,941
Financial services		12,478		691		(1,274	)		11,895
Healthcare		9,608		649		(294	)		9,963
Industrials		5,456		451		(182	)		5,725
Technology		4,987		271		(396	)		4,862

Total common stocks		63,171		4,123		(6,174	)		61,120
Money market mutual funds		1,232		—		(44	)		1,188

Total marketable equity securities		64,403		4,123		(6,218	)		62,308


Total securities available for sale	$	133,607	$	4,762	$	(6,254	)	$	132,115


December 31, 2015
Debt securities:
Corporate bonds:
Financial services	$	26,430	$	101	$	(42	)	$	26,489
Industrials		2,999		11		—			3,010

Total corporate bonds		29,429		112		(42	)		29,499
Government-sponsored enterprises		11,000		2		(40	)		10,962
Municipal bonds		4,326		89		—			4,415
Residential mortgage-backed securities:
Government-sponsored enterprises		6,948		436		(3	)		7,381
Private label		878		26		—			904
U.S. treasury securities		24,996		—		(62	)		24,934

Total debt securities		77,577		665		(147	)		78,095

Marketable equity securities:
Common stocks:
Basic materials		13,221		370		(4,043	)		9,548
Consumer products and services		18,987		1,060		(1,578	)		18,469
Financial services		11,821		782		(649	)		11,954
Healthcare		9,403		1,050		(117	)		10,336
Industrials		5,308		96		(573	)		4,831
Technology		4,987		138		(559	)		4,566
Utilities		1,956		757		(11	)		2,702

Total common stocks		65,683		4,253		(7,530	)		62,406
Money market mutual funds		1,193		—		(48	)		1,145

Total marketable equity securities		66,876		4,253		(7,578	)		63,551


Total securities available for sale	$	144,453	$	4,918	$	(7,725	)	$	141,646

At March 31, 2016, securities with an amortized cost of $8.4 million and $825,000 were pledged as collateral for Federal Home Loan Bank of Boston borrowings and for the Federal Reserve Bank discount window borrowings, respectively.

The amortized cost and fair value of debt securities by contractual maturity at March 31, 2016 are as follows. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties.


					After One Year
	One Year or Less				Through Five Years				After Five Years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)

Corporate bonds:
Financial services	$	15,484	$	15,493	$	8,965	$	8,993	$	—	$	—	$	24,449	$	24,486
Industrials		2,000		2,000		1,000		1,004		—		—		3,000		3,004

Total corporate bonds		17,484		17,493		9,965		9,997		—		—		27,449		27,490
Government-sponsored enterprises		—		—		3,000		3,010		2,000		1,998		5,000		5,008
Municipal bonds		2,386		2,402		1,914		1,978		—		—		4,300		4,380
Residential mortgage-backed securities:
Government-sponsored enterprises		—		—		11		11		6,589		7,037		6,600		7,048
Private label		—		—		—		—		858		882		858		882
U.S. treasury securities		24,997		24,999		—		—		—		—		24,997		24,999

Total	$	44,867	$	44,894	$	14,890	$	14,996	$	9,447	$	9,917	$	69,204	$	69,807

For the three months ended March 31, 2016 and 2015, proceeds from sales of securities available for sale amounted to $3.9 million and $4.7 million, respectively. Gross gains of $909,000 and $1.2 million and gross losses of $850,000 and $165,000, respectively, were realized on those sales.

Information pertaining to securities available for sale as of March 31, 2016 and December 31, 2015, with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:


	Less Than Twelve Months				Twelve Months or Longer
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
	(In thousands)

March 31, 2016
Debt securities:
Corporate bonds-financial services	$	2	$	1,997	$	30	$	3,470
Government-sponsored enterprises		2		1,998		—		—
Residential mortgage-backed securities:
Government-sponsored enterprises		—		—		2		212

Total debt securities		4		3,995		32		3,682

Marketable equity securities:
Common stocks:
Basic materials		860		2,684		1,978		4,782
Consumer products and services		570		2,770		620		3,014
Financial services		868		6,098		406		1,183
Healthcare		294		3,767		—		—
Industrials		75		661		107		812
Technology		—		—		396		1,633

Total common stocks		2,667		15,980		3,507		11,424
Money market mutual funds		—		—		44		1,028

Total marketable equity securities		2,667		15,980		3,551		12,452

Total temporarily impaired securities	$	2,671	$	19,975	$	3,583	$	16,134


	Less Than Twelve Months				Twelve Months or Longer
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value
	(In thousands)

December 31, 2015
Debt securities:
Corporate bonds-financial services	$	10	$	4,998	$	32	$	3,468
Government-sponsored enterprises		14		3,986		26		4,974
Residential mortgage-backed securities:
Government-sponsored enterprises		—		—		3		215
U.S. treasury securities		62		24,934		—		—

Total debt securities		86		33,918		61		8,657

Marketable equity securities:
Common stocks:
Basic materials		2,043		4,478		2,000		3,138
Consumer products and services		1,099		7,521		479		1,657
Financial services		421		4,019		228		540
Healthcare		117		1,202		—		—
Industrials		573		2,647		—		—
Technology		103		675		456		1,091
Utilities		11		8		—		—

Total common stocks		4,367		20,550		3,163		6,426
Money market mutual funds		—		—		48		1,020

Total marketable equity securities		4,367		20,550		3,211		7,446


Total temporarily impaired securities	$	4,453	$	54,468	$	3,272	$	16,103

The Company determined no securities were other-than-temporarily impaired for the three months ended March 31, 2016 and 2015. Management evaluates securities for other-than-temporary impairment on a quarterly basis, with more frequent evaluation for selected issuers or when economic or market concerns warrant such evaluations.

As of March 31, 2016, the gross unrealized loss on the total debt securities portfolio was $36,000. At March 31, 2016, eight debt securities had unrealized losses with aggregate depreciation of 0.5% from the Company’s amortized cost basis. In analyzing a debt issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, industry analysts’ reports and, to a lesser extent given the relatively insignificant levels of depreciation in the Company’s debt portfolio, spread differentials between the effective rates on instruments in the portfolio compared to risk-free rates. The unrealized losses are primarily caused by a recent increase in interest rates. The contractual terms of these investments do not permit the companies to settle the security at a price less than the par value of the investment. The Company currently does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of the investments. Therefore, it is expected that the bonds would not be settled at a price less than the par value of the investment. Because (1) the Company does not intend to sell the securities; (2) the Company does not believe it is more likely than not that the Company will be required to sell the securities before recovery of its amortized cost basis; and (3) the present value of expected cash flows is sufficient to recover the entire amortized cost basis of the securities, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2016.

At March 31, 2016, 55 marketable equity securities with a fair value of $28.4 million had gross unrealized losses totaling $6.2 million, or an aggregate depreciation of 17.9% from the Company’s cost basis. These marketable equity securities consisted of 31 securities with a fair value of $16.0 million and a gross unrealized loss of $2.7 million for less than 12 months and 24 securities with a fair value of $12.5 million and a gross unrealized loss of $3.6 million for 12 months or longer. The marketable equity securities in a gross unrealized loss position for 12 months or longer were comprised of 10 securities in the basic materials sector with a fair value of $4.8 million and a gross unrealized loss of $2.0 million, six marketable equity securities in the consumer products and services sector with a fair value of $3.0 million and a gross unrealized loss of $620,000, three securities in the financial services sector with a fair value of $1.2 million and a gross unrealized loss of $406,000, one security in the industrials sector with a fair value of $812,000 and a gross unrealized loss of $107,000, three securities in the technology sector with a fair value of $1.6 million and a gross unrealized loss of $396,000 and one money market mutual fund with a fair value of $1.0 million and a gross unrealized loss of $44,000.

In analyzing an equity issuer’s financial condition, management considers industry analysts’ reports, financial performance and projected target prices of investment analysts within a one-year time frame. A decline of 10% or more in the value of an acquired equity security is generally the triggering event for management to review individual securities for liquidation and/or classification as other-than-temporarily impaired. Impairment losses are recognized when management concludes that declines in the value of equity securities are other than temporary, or when they can no longer assert that they have the intent and ability to hold depreciated equity securities for a period of time sufficient to allow for any anticipated recovery in fair value. Unrealized losses on marketable equity securities that are in excess of 25% of cost and that have been sustained for more than twelve months are generally considered-other-than temporary and charged to earnings as impairment losses, or realized through sale of the security.

Although issuers within the marketable equity securities portfolio had price declines resulting in unrealized losses in excess of cost, management does not believe these declines in market value are other than temporary and the Company currently has the ability and intent to hold these investments until a recovery of fair value. The gross unrealized losses in the basic materials sector resulted primarily from significant reductions in the stock prices of issuers in the oil and gas industry following a rapid decline in oil prices beginning in mid-2015. Continued volatility in oil prices and several other global economic factors contributed to volatility in the broader equities market in the first quarter of 2016, with improvement in equities market prices for most industry sectors, including basic materials, as of March 31, 2016 and into the second quarter of 2016.

LOANS

A summary of loans follows:


	March 31, 2016						December 31, 2015
	Amount			Percent			Amount			Percent
	(Dollars in thousands)
Real estate loans:
Residential real estate:
One- to four-family	$	455,438			14.0	%	$	458,423			14.9	%
Multi-family		430,871			13.3			417,388			13.5
Home equity lines of credit		47,807			1.5			46,660			1.5
Commercial real estate		1,411,410			43.5			1,328,344			43.1
Construction		413,660			12.7			421,531			13.7

Total real estate loans		2,759,186			85.0			2,672,346			86.7
Commercial and industrial		477,450			14.7			400,051			13.0
Consumer		9,832			0.3			10,028			0.3

Total loans		3,246,468			100.0	%		3,082,425			100.0	%

Allowance for loan losses		(34,390	)					(33,405	)
Net deferred loan origination fees		(4,342	)					(3,778	)

Loans, net	$	3,207,736					$	3,045,242

The Company has transferred a portion of its originated commercial real estate loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in the Company’s accompanying balance sheets. The Company and participating lenders share ratably in any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. The Company continues to service the loans on behalf of the participating lenders and, as such, collects cash payments from the borrowers, remits payments to participating lenders and disburses required escrow funds to relevant parties. At March 31, 2016 and December 31, 2015, the Company was servicing loans for participants aggregating $138.4 million and $137.7 million, respectively.

At March 31, 2016, multi-family and commercial real estate loans with carrying values totaling $59.2 million and $151.4 million, respectively, were pledged as collateral for Federal Home Loan Bank of Boston borrowings.

As a result of the Mt. Washington Co-operative Bank acquisition in January 2010, the Company acquired loans at fair value of $345.3 million. Included in this amount was $27.7 million of loans with evidence of deterioration of credit quality since origination for which it was probable, at the time of the acquisition, that the Company would be unable to collect all contractually required payments receivable. The Company’s evaluation of loans with evidence of credit deterioration as of the acquisition date resulted in a non-accretable discount of $7.6 million, which is defined as the loan’s contractually required payments receivable in excess of the amount of its cash flows expected to be collected. The Company considered factors such as payment history, collateral values, and accrual status when determining whether there was evidence of deterioration of the loan’s credit quality at the acquisition date.

The following is a summary of the outstanding balance of the acquired loans with evidence of credit deterioration:


	March 31,			December 31,
	2016			2015
	(In thousands)

Real estate loans:
Residential real estate:
One- to four-family	$	4,972		$	5,014
Multi-family		583			592
Home equity lines of credit		336			344
Commercial real estate		356			360

Outstanding principal balance		6,247			6,310
Discount		(1,358	)		(1,370	)

Carrying amount	$	4,889		$	4,940

A rollforward of the accretable discount follows:


	Three Months Ended March 31,
	2016			2015
	(In thousands)
Beginning balance	$	787		$	919
Accretion		(12	)		(14	)
Disposals		—			(129	)

Ending balance	$	775		$	776

An analysis of the allowance for loan losses and related information follows:


							Home									Commercial
	One- to			Multi-			equity lines			Commercial						and
	four-family			family			of credit			real estate			Construction			industrial			Consumer			Total
	(In thousands)

Allowance for loan losses:
Balance at December 31, 2014	$	1,849		$	3,635		$	100		$	13,000		$	5,155		$	4,633		$	97		$	28,469
Provision (credit) for loan losses		(41	)		(27	)		(5	)		(58	)		(91	)		253			29			60
Charge-offs		(153	)		—			—			—			—			(33	)		(61	)		(247	)
Recoveries		8			—			—			—			292			—			19			319

Balance at March 31, 2015	$	1,663		$	3,608		$	95		$	12,942		$	5,356		$	4,853		$	84		$	28,601

Balance at December 31, 2015	$	1,354		$	3,385		$	144		$	14,497		$	8,313		$	5,620		$	92		$	33,405
Provision (credit) for loan losses		31			102			(48	)		586			(531	)		883			43			1,066
Charge-offs		—			—			—			—			—			(44	)		(64	)		(108	)
Recoveries		—			—			—			—			7			—			20			27

Balance at March 31, 2016	$	1,385		$	3,487		$	96		$	15,083		$	7,789		$	6,459		$	91		$	34,390


					Home						Commercial
	One- to		Multi-		equity lines		Commercial				and
	four-family		family		of credit		real estate		Construction		industrial		Consumer		Total
	(In thousands)

March 31, 2016
Amount of allowance for loan losses for loans deemed to be impaired	$	50	$	142	$	—	$	18	$	50	$	—	$	—	$	260
Amount of allowance for loan losses for loans not deemed to be impaired		1,335		3,345		96		15,065		7,739		6,459		91		34,130

	$	1,385	$	3,487	$	96	$	15,083	$	7,789	$	6,459	$	91	$	34,390

Amount of allowance for loan losses for loans acquired with deteriorated credit quality included above	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Loans deemed to be impaired	$	1,708	$	1,391	$	—	$	3,686	$	14,785	$	745	$	—	$	22,315
Loans not deemed to be impaired		453,730		429,480		47,807		1,407,724		398,875		476,705		9,832		3,224,153

	$	455,438	$	430,871	$	47,807	$	1,411,410	$	413,660	$	477,450	$	9,832	$	3,246,468


					Home						Commercial
	One- to		Multi-		equity lines		Commercial				and
	four-family		family		of credit		real estate		Construction		industrial		Consumer		Total
	(In thousands)

December 31, 2015
Amount of allowance for loan losses for loans deemed to be impaired	$	3	$	143	$	—	$	84	$	—	$	44	$	—	$	274
Amount of allowance for loan losses for loans not deemed to be impaired		1,351		3,242		144		14,413		8,313		5,576		92		33,131

	$	1,354	$	3,385	$	144	$	14,497	$	8,313	$	5,620	$	92	$	33,405

Amount of allowance for loan losses for loans acquired with deteriorated credit quality included above	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Loans deemed to be impaired	$	1,582	$	1,401	$	—	$	3,663	$	16,026	$	805	$	—	$	23,477
Loans not deemed to be impaired		456,841		415,987		46,660		1,324,681		405,505		399,246		10,028		3,058,948

	$	458,423	$	417,388	$	46,660	$	1,328,344	$	421,531	$	400,051	$	10,028	$	3,082,425

The following table provides information about the Company’s past due and non-accrual loans:


	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Loans on Non-accrual
	(In thousands)

March 31, 2016
Real estate loans:
Residential real estate:
One- to four-family	$	1,179	$	434	$	2,625	$	4,238	$	9,662
Home equity lines of credit		318		63		739		1,120		1,983
Commercial real estate		—		—		2,205		2,205		3,686
Construction		—		105		14,507		14,612		14,612

Total real estate loans		1,497		602		20,076		22,175		29,943
Commercial and industrial		—		—		745		745		745
Consumer		589		240		—		829		—

Total	$	2,086	$	842	$	20,821	$	23,749	$	30,688


December 31, 2015
Real estate loans:
Residential real estate:
One- to four-family	$	1,674	$	221	$	3,266	$	5,161	$	9,264
Home equity lines of credit		587		—		1,166		1,753		1,763
Commercial real estate		483		—		2,652		3,135		3,663
Construction		—		—		15,849		15,849		15,849

Total real estate loans		2,744		221		22,933		25,898		30,539
Commercial and industrial		—		—		805		805		805
Consumer		580		317		—		897		—

Total	$	3,324	$	538	$	23,738	$	27,600	$	31,344

At March 31, 2016 and December 31, 2015, the Company did not have any accruing loans past due 90 days or more.

The following tables provide information with respect to the Company’s impaired loans:


	March 31, 2016						December 31, 2015
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
	(In thousands)

Impaired loans without a valuation allowance:
One- to four-family	$	1,299	$	1,818			$	1,318	$	1,813
Multi-family		85		85				88		88
Commercial real estate		3,082		3,394				2,652		2,947
Construction		14,680		17,317				16,026		18,660
Commercial and industrial		745		1,078				761		1,095

Total		19,891		23,692				20,845		24,603


Impaired loans with a valuation allowance:
One- to four-family		409		409	$	50		264		264	$	3
Multi-family		1,306		1,306		142		1,313		1,313		143
Commercial real estate		604		604		18		1,011		1,022		84
Construction		105		105		50		—		—		—
Commercial and industrial		—		—		—		44		44		44

Total		2,424		2,424		260		2,632		2,643		274

Total impaired loans	$	22,315	$	26,116	$	260	$	23,477	$	27,246	$	274

At March 31, 2016, additional funds committed to be advanced in connection with impaired loans were immaterial.


	Three Months Ended March 31,
	2016						2015
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		on Cash Basis		Investment		Recognized		on Cash Basis
	(In thousands)
One- to four-family	$	1,875	$	20	$	15	$	4,109	$	49	$	49
Multi-family		1,395		14		—		1,436		14		14
Home equity lines of credit		—		—		—		20		—		—
Commercial real estate		3,673		38		38		15,357		107		107
Construction		15,564		8		4		8,802		105		94
Commercial and industrial		757		13		13		1,054		3		3

Total impaired loans	$	23,264	$	93	$	70	$	30,778	$	278	$	267

The following table summarizes the troubled debt restructurings (“TDRs”) at the dates indicated:


	March 31,		December 31,
	2016		2015
	(In thousands)
TDRs on accrual status:
One- to four-family	$	2,601	$	2,621
Multi-family		1,391		1,402
Home equity lines of credit		18		18
Commercial real estate		9,904		9,968
Construction		174		174
Commercial and industrial		32		33

Total TDRs on accrual status		14,120		14,216

TDRs on non-accrual status:
One- to four-family		1,392		1,261
Commercial real estate		522		528
Construction		1,121		1,136
Commercial and industrial		178		186

Total TDRs on non-accrual status		3,213		3,111

Total TDRs	$	17,333	$	17,327

During the three months ended March 31, 2016 and 2015, new TDRs and TDRs that defaulted and became 90 days past due in the first 12 months after restructure were immaterial. The Company generally places loans modified as TDRs on non-accrual status for a minimum period of six months. Loans modified as TDRs qualify for return to accrual status once they have demonstrated performance with the modified terms of the loan agreement for a minimum of six consecutive months and future payments are reasonably assured. TDRs are initially reported as impaired loans with an allowance established as part of the allocated component of the allowance for loan losses when the discounted cash flows of the impaired loan are lower than the carrying value of that loan. TDRs may be removed from impairment disclosures in the year following the restructure if the borrower demonstrates compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which would be provided to a borrower with similar credit at the time of restructuring. At March 31, 2016 and December 31, 2015, the allowance for loan losses included an allocated component related to TDRs of $191,000 and $68,000, respectively, with no charge-offs, related to the TDRs modified during the three months ended March 31, 2016 or 2015.

The Company utilizes a nine-grade internal loan rating system for multi-family, commercial real estate, construction, and commercial and industrial loans as follows:

•

Loans rated 1, 2, 3 and 3A: Loans in these categories are considered “pass” rated loans with low to average risk.

•

Loans rated 4 and 4A: Loans in these categories are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

•

Loans rated 5: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

•

Loans rated 6: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

•

Loans rated 7: Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all multi-family, commercial real estate, construction, and commercial and industrial loans. The Company also engages an independent third-party to review a significant portion of loans within these segments on at least an annual basis. Management uses the results of these reviews as part of its annual review process.

The following tables provide information with respect to the Company’s risk ratings:


	March 31, 2016								December 31, 2015
	Multi-family						Commercial		Multi-family						Commercial
	residential		Commercial				and		residential		Commercial				and
	real estate		real estate		Construction		industrial		real estate		real estate		Construction		industrial
	(In thousands)
Loans rated 1 - 3A	$	421,672	$	1,403,835	$	396,882	$	426,876	$	408,121	$	1,320,748	$	403,411	$	375,013
Loans rated 4 - 4A		876		3,612		—		49,797		887		3,655		—		24,199
Loans rated 5		8,323		3,963		16,778		777		8,380		3,941		18,120		839
Loans rated 6		—		—		—		—		—		—		—		—
Loans rated 7		—		—		—		—		—		—		—		—

Total	$	430,871	$	1,411,410	$	413,660	$	477,450	$	417,388	$	1,328,344	$	421,531	$	400,051

For one- to four-family real estate loans, home equity lines of credit and consumer loans, management uses delinquency reports as the key credit quality indicator.

6.	DEPOSITS

A summary of deposit balances, by type, follows:


	March 31,		December 31,
	2016		2015
	(In thousands)
Demand deposits	$	388,731	$	370,546
NOW deposits		360,237		334,753
Money market deposits		880,186		860,957
Regular savings and other deposits		297,806		288,180

Total non-certificate accounts		1,926,960		1,854,436

Term certificates less than $250,000		712,789		651,028
Term certificates $250,000 and greater		271,670		237,554

Total term certificates		984,459		888,582

Total deposits	$	2,911,419	$	2,743,018

A summary of term certificates, by maturity, follows:


	March 31, 2016					December 31, 2015
			Weighted					Weighted
Maturing	Amount		Average Rate			Amount		Average Rate
	(Dollars in thousands)
Within 1 year	$	567,025		1.08	%	$	504,756		1.03	%
Over 1 year to 2 years		197,021		1.24			201,929		1.25
Over 2 years to 3 years		69,663		1.34			74,304		1.25
Over 3 years to 4 years		123,757		1.94			79,017		1.83
Over 4 years to 5 years		23,605		1.69			25,225		1.67
Greater than 5 years		3,388		5.50			3,351		5.50

	$	984,459		1.27	%	$	888,582		1.21	%

The Company had brokered certificates of deposit, which are included in term certificates in the tables above, totaling $140.8 million with a weighted average rate of 1.21% and $130.8 million with a weighted average rate of 1.22% at March 31, 2016 and December 31, 2015, respectively. At March 31, 2016, the Company also had brokered NOW deposits totaling $18.9 million. There were no brokered NOW deposits at December 31, 2015.

7.	BORROWINGS

The Company had no short-term borrowings at March 31, 2016. At December 31, 2015, short-term borrowings with an original maturity of less than one year consisted of a FHLB advance totaling $20.0 million with a rate of 0.57% that matured on January 16, 2016. The Company also has an available line of credit of $9.4 million with the FHLB at an interest rate that adjusts daily and $825,000 of borrowing capacity at the Federal Reserve Bank discount window. No amounts were drawn on the line of credit and no borrowings were outstanding with the Federal Reserve Bank discount window as of March 31, 2016 or December 31, 2015.

Long-term debt consists of FHLB advances as follows:


	March 31, 2016					December 31, 2015
			Weighted					Weighted
Maturing	Amount		Average Rate			Amount		Average Rate
	(Dollars in thousands)
2016	$	16,500		1.99	%	$	41,500		1.20	%
2017		89,633		1.32			89,632		1.32
2018		3,000		1.63			3,000		1.63
2019		6,237		1.23			6,684		1.23
2020		31,056		0.25			6,410		1.22
2021		55,000		1.20			—		—
2023		10,000		2.10			—		—

	$	211,426		1.22	%	$	147,226		1.28	%

At March 31, 2016, advances amounting to $61.5 million are callable by the FHLB prior to maturity, including advances totaling $35.0 million with variable rates based on the 3-Month London Interbank Offered Rate, less 60 basis points, during the first year and maturities of $25.0 million in 2020 and $10.0 million in 2021.

All borrowings from the FHLB are secured by investment securities and qualified collateral, consisting of a blanket lien on one- to four-family loans and certain multi-family and commercial real estate loans held in the Bank’s portfolio. At March 31, 2016, the Company pledged multi-family and commercial real estate loans with carrying values totaling $59.2 million and $151.4 million, respectively.

8.	COMMITMENTS AND DERIVATIVES

In the normal course of business, there are outstanding commitments and contingencies which are not reflected in the accompanying consolidated financial statements.

Loan Commitments

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the accompanying consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for loan commitments is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.

A summary of outstanding financial instruments whose contract amounts represent credit risk is as follows:


	March 31, 2016		December 31, 2015
	(In thousands)

Unadvanced portion of existing loans:
Construction	$	457,336	$	567,177
Home equity line of credit		33,753		34,965
Other lines and letters of credit		283,512		149,973
Commitments to originate:
One- to four-family		25,060		15,122
Commercial real estate		253,473		57,589
Construction		121,186		125,367
Commercial and industrial		30,200		45,960
Other loans		—		1,159


Total loan commitments outstanding	$	1,204,520	$	997,312

Commitments to originate loans are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments are expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case by case basis. The amount of collateral obtained, if deemed necessary by the Company for the extension of credit, is based upon management’s credit evaluation of the borrower. Collateral held includes, but is not limited to, residential real estate and deposit accounts.

Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers. These lines of credit are collateralized if deemed necessary and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed. Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Interest Rate Swaps

The Company is a party to interest rate derivatives that are not designated as hedging instruments. These derivatives relate to interest rate swaps that the Company enters into with commercial business customers to synthetically convert their loans from a variable rate to a fixed rate. The Company pays interest to the customer at a floating rate on the notional amount and receives interest from the customer at a fixed rate for the same notional amount. Concurrently, the Company enters into an offsetting interest rate swap with a third party financial institution. In the offsetting swap, the Company pays the other financial institution interest at the same fixed rate on the same notional amount as the swap entered into with the customer, and receives interest from the financial institution for the same floating rate on the same notional amount. The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating and probability of default. At March 31, 2016 and December 31, 2015, the Company had $1.6 million and $1.4 million, respectively, in cash pledged for collateral on its interest rate swap with the third party financial institution.

Summary information regarding these derivatives is presented below:


						March 31, 2016					December 31, 2015
						Notional		Fair			Notional		Fair
	Maturity		Interest Rate Paid		Interest Rate Received	Amount		Value			Amount		Value

Customer interest rate swap		10/17/33		1 Mo. Libor + 175bp	Fixed (4.1052%)	$	11,057	$	1,390		$	11,100	$	1,008
Third party interest rate swap		10/17/33		Fixed (4.1052%)	1 Mo. Libor + 175bp		11,057		(1,390	)		11,100		(1,008	)

Derivative Loan Commitments

Residential real estate loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. The Company enters into commitments to fund residential real estate loans at specified times in the future, with the intention that these loans will subsequently be sold in the secondary market. A residential loan commitment requires the Company to originate a loan at a specific interest rate upon the completion of various underwriting requirements. Outstanding derivative loan commitments expose the Company to the risk that the price of the loans arising from the exercise of the loan commitment might decline from the inception of the rate lock to funding of the loan due to increases in loan interest rates. If interest rates increase, the value of these commitments decreases. Conversely, if interest rates decrease, the value of these loan commitments increases. Derivative loan commitments with a notional amount of $8.8 million and $6.6 million were outstanding at March 31, 2016 and December 31, 2015, respectively. The fair value of such commitments was a net asset of $38,000 and $15,000 at March 31, 2016 and December 31, 2015, respectively.

Forward Loan Sale Commitments

To protect against the price risk inherent in derivative loan commitments, the Company utilizes both “mandatory delivery” and “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments. Under a “mandatory delivery” contract, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. If the Company fails to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, it is obligated to pay the investor a “pair-off” fee, based then-current market prices, to compensate the investor for the shortfall. Under a “best efforts” contract, the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor and the investor commits to a price that it will purchase the loan from the Company if the loan to the underlying borrower closes. The Company generally enters into forward sale contracts on the same day it commits to lend funds to a potential borrower. The Company expects that these forward loan sale commitments will experience changes in fair value opposite to the change in fair value of derivative loan commitments. Forward loan sale commitments with a notional amount of $9.7 million and $11.1 million were outstanding at March 31, 2016 and December 31, 2015, respectively. The fair value of such commitments was a net liability of $9,000 at March 31, 2016 and a net asset of $65,000 at December 31, 2015.

The following table presents the fair values of derivative instruments in the consolidated balance sheets.


	Assets			Liabilities
	Balance Sheet	Fair		Balance Sheet	Fair
	Location	Value		Location	Value
	(In thousands)

March 31, 2016
Derivative loan commitments	Other assets	$	40	Other liabilities	$	2
Forward loan sale commitments	Other assets		7	Other liabilities		16
Loan level interest rate swaps	Other assets		1,390	Other liabilities		1,390

Total		$	1,437		$	1,408


December 31, 2015
Derivative loan commitments	Other assets	$	19	Other liabilities	$	4
Forward loan sale commitments	Other assets		67	Other liabilities		2
Loan level interest rate swaps	Other assets		1,008	Other liabilities		1,008

Total		$	1,094		$	1,014

The following table presents information pertaining to gains (losses) on the Company’s derivative instruments included in the consolidated statements of net income.


		Three Months Ended March 31,
Derivative Instrument	Location of Gain/(Loss)	2016			2015
		(In thousands)
Derivative loan commitments	Mortgage banking gains, net	$	23		$	(51	)
Forward loan sale commitments	Mortgage banking gains, net		(74	)		46

Total		$	(51	)	$	(5	)

For the three months ended March 31, 2016, the Company recognized net mortgage banking gains of $70,000, consisting of $121,000 in net gains on sale of loans and $51,000 in net derivative mortgage banking losses. The Company recognized net mortgage banking gains of $110,000, consisting of $115,000 in net gains on sale of loans and $5,000 in net derivative mortgage banking losses for the three months ended March 31, 2015.

Other Commitments

As of March 31, 2016, the Company has an outstanding commitment of $24.9 million with its core data processing provider through December 2021.

9.	FAIR VALUES OF ASSETS AND LIABILITIES

Determination of Fair Value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of assets and liabilities is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability.

The following methods and assumptions were used by the Company in estimating fair value disclosures:

Cash and cash equivalents — The carrying amounts of cash and short-term instruments approximate fair values, based on the short-term nature of the assets.

Certificates of deposit — Fair values of certificates of deposit are estimated using discounted cash flow analyses based on current market rates for similar types of deposits.

Securities available for sale — All fair value measurements are obtained from a third party pricing service and are not adjusted by management. Marketable equity securities are measured at fair value utilizing quoted market prices (Level 1). Corporate bonds, obligations of government-sponsored enterprises, U.S. treasury securities, municipal bonds and mortgage-backed securities are determined by pricing models that consider standard input factors such as observable market data, benchmark yields, reported trades, broker/dealer quotes, credit spreads, benchmark securities, as well as new issue data, monthly payment information, and collateral performance, among others (Level 2).

Federal Home Loan Bank stock — The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank.

Loans held for sale — The fair value is based on commitments in effect from investors or prevailing market prices.

Loans — For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for non-accrual loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Deposits — The fair values disclosed for non-certificate accounts are, by definition, equal to the amount payable on demand at the reporting date which is their carrying amounts. Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Borrowings — The fair value is estimated using discounted cash flow analyses based on the current incremental borrowing rates in the market for similar types of borrowing arrangements.

Accrued interest — The carrying amounts of accrued interest approximate fair value.

Forward loan sale commitments and derivative loan commitments — Forward loan sale commitments and derivative loan commitments are based on fair values of the underlying mortgage loans and for derivative loan commitments, fair values also include the value of servicing and the probability of such commitments being exercised. Management judgment and estimation is required in determining these fair value measurements.

Loan level interest rate swaps — The fair value is based on settlement values adjusted for credit risks associated with the counterparties and the Company and observable market interest rate curves.

Off-balance sheet credit-related instruments — Fair values for off-balance-sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of these instruments is considered immaterial.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized as follows:


	Level 1		Level 2		Level 3		Total Fair Value
	(In thousands)

March 31, 2016
Assets:
Debt securities	$	—	$	69,807	$	—	$	69,807
Marketable equity securities		62,308		—		—		62,308
Derivative loan commitments		—		—		40		40
Forward loan sale commitments		—		—		7		7
Loan level interest rate swaps		—		—		1,390		1,390

Total assets	$	62,308	$	69,807	$	1,437	$	133,552


Liabilities:
Derivative loan commitments	$	—	$	—	$	2	$	2
Forward loan sale commitments		—		—		16		16
Loan level interest rate swaps		—		—		1,390		1,390

Total liabilities	$	—	$	—	$	1,408	$	1,408


December 31, 2015
Assets:
Debt securities	$	—	$	78,095	$	—	$	78,095
Marketable equity securities		63,551		—		—		63,551
Derivative loan commitments		—		—		19		19
Forward loan sale commitments		—		—		67		67
Loan level interest rate swaps		—		—		1,008		1,008

Total assets	$	63,551	$	78,095	$	1,094	$	142,740


Liabilities:
Derivative loan commitments	$	—	$	—	$	4	$	4
Forward loan sale commitments		—		—		2		2
Loan level interest rate swaps		—		—		1,008		1,008

Total liabilities	$	—	$	—	$	1,014	$	1,014

For the three months ended March 31, 2016 and 2015, there were no transfers in or out of Levels 1 and 2 and the changes in Level 3 assets and liabilities that are measured at fair value on a recurring basis are as follows:


	Three Months Ended March 31,
	2016			2015
	(In thousands)
Derivative loan commitments and forward sale commitments, net:
Beginning balance	$	80		$	101
Total realized and unrealized loss included in net income		(51	)		(5	)


Ending balance	$	29		$	96

Total realized gain relating to instruments still held at period end	$	29		$	96

Assets Measured at Fair Value on a Non-recurring Basis

The Company may also be required, from time to time, to measure certain other assets on a non-recurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from the application of lower-of-cost-or market accounting or write-downs of individual assets.

The following tables summarize the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets. The gain/loss represents the amount of write-down, charge-off or specific reserve recorded during the periods noted on the assets held at period end. There were no liabilities measured at fair value on a non-recurring basis.


							Three Months Ended
	March 31, 2016						March 31, 2016
	Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Impaired loans	$	—	$	—	$	18,651	$	97
Foreclosed real estate		—		—		638		—

	$	—	$	—	$	19,289	$	97


							Three Months Ended
	December 31, 2015						March 31, 2015
	Level 1		Level 2		Level 3		Total Losses
	(In thousands)
Impaired loans	$	—	$	—	$	20,452	$	1

	$	—	$	—	$	20,452	$	1

Certain impaired loans were adjusted to fair value, less estimated cost to sell, of the underlying collateral securing these loans resulting in losses. The loss is not recorded directly as an adjustment to current earnings, but rather as a component in determining the allowance for loan losses. Fair value was measured using appraised values of collateral and adjusted as necessary by management based on unobservable inputs for specific properties.

Certain properties in foreclosed real estate were adjusted to fair value using appraised values of collateral, less estimated cost to sell, and adjusted as necessary by management based on unobservable inputs for specific properties. The loss on foreclosed assets represents adjustments in valuation recorded during the time period indicated and not for losses incurred on sales.

Summary of Fair Values of Financial Instruments

The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows. Certain financial instruments and all nonfinancial instruments are exempt from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein do not represent the underlying fair value of the Company.


	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
	(In thousands)

March 31, 2016
Financial assets:
Cash and due from banks	$	154,122	$	154,122	$	—	$	—	$	154,122
Certificates of deposit		92,675		—		92,858		—		92,858
Securities available for sale		132,115		62,308		69,807		—		132,115
Federal Home Loan Bank stock		13,021		—		—		13,021		13,021
Loans and loans held for sale, net		3,208,930		—		—		3,222,410		3,222,410
Accrued interest receivable		8,831		—		—		8,831		8,831
Financial liabilities:
Deposits		2,911,419		—		—		2,917,925		2,917,925
Borrowings		211,426		—		213,737		—		213,737
Accrued interest payable		1,014		—		—		1,014		1,014
On-balance sheet derivative financial instruments:
Assets:
Derivative loan commitments		40		—		—		40		40
Forward loan sale commitments		7		—		—		7		7
Loan level interest rate swaps		1,390		—		—		1,390		1,390
Liabilities:
Derivative loan commitments		2		—		—		2		2
Forward loan sale commitments		16		—		—		16		16
Loan level interest rate swaps		1,390		—		—		1,390		1,390

December 31, 2015
Financial assets:
Cash and due from banks	$	96,363	$	96,363	$	—	$	—	$	96,363
Certificates of deposit		99,062		—		99,205		—		99,205
Securities available for sale		141,646		63,551		78,095		—		141,646
Federal Home Loan Bank stock		10,931		—		—		10,931		10,931
Loans and loans held for sale, net		3,049,911		—		—		3,096,160		3,096,160
Accrued interest receivable		8,574		—		—		8,574		8,574
Financial liabilities:
Deposits		2,743,018		—		—		2,749,601		2,749,601
Borrowings		167,226		—		167,702		—		167,702
Accrued interest payable		890		—		—		890		890
On-balance sheet derivative financial instruments:
Assets:
Derivative loan commitments		19		—		—		19		19
Forward loan sale commitments		67		—		—		67		67
Loan level interest rate swaps		1,008		—		—		1,008		1,008
Liabilities:
Derivative loan commitments		4		—		—		4		4
Forward loan sale commitments		2		—		—		2		2
Loan level interest rate swaps		1,008		—		—		1,008		1,008

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. You should read the information in this section in conjunction with our business and financial information and the Consolidated Financial Statements and related notes that included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the Securities and Exchange Commission.

Forward Looking Statements

This report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. These forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. The Company’s ability to predict results or actual effect of future plans is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to:

•

general economic conditions, either nationally or in our market areas, that are worse than expected;

•

inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans we have made and make whether held in portfolio or sold in the secondary markets;

•

competition among depository and other financial institutions;

•

changes in consumer spending, borrowing and savings habits;

•

our ability to enter new markets successfully and capitalize on growth opportunities;

•

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements, including as a result of Basel III;

•

changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

•

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board or the Securities and Exchange Commission;

•

changes in the level and trends of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for loan losses;

•

our ability to access cost-effective funding;

•

fluctuations in real estate values and both residential and commercial real estate market conditions;

•

demand for loans and deposits in our market area;

•

our ability to implement and changes in our business strategies;

•

adverse changes in the securities or secondary mortgage markets;

•

the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations;

•

our ability to manage market risk, credit risk and operational risk in the current economic conditions;

•

our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we have acquired or may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

•

our ability to retain key employees; and

•

significant increases in our loan losses.

Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain. These factors include, but are not limited to, general economic conditions, changes in the interest rate environment, legislative or regulatory changes that may adversely affect our business, changes in accounting policies and practices, changes in competition and demand for financial services, adverse changes in the securities markets and changes in the quality or composition of the Company’s loan or investment portfolios. Additional factors that may affect our results are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the Securities and Exchange Commission on March 11, 2016, under “Risk Factors,” which is available through the SEC’s website at www.sec.gov, as updated by subsequent filings with the SEC. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies

A summary of significant accounting policies is described in Note 1 to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2015. Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Management believes that the most critical accounting policies are the determination of the allowance for loan losses, the evaluation of goodwill for impairment and the evaluation of securities for other-than-temporary impairment.

Comparison of Financial Condition at March 31, 2016 and December 31, 2015

Assets. Our total assets increased $204.9 million, or 5.8%, to $3.729 billion at March 31, 2016 from $3.525 billion at December 31, 2015. Net loans increased $162.5 million, or 5.3%, to $3.208 billion at March 31, 2016 from $3.045 billion at December 31, 2015. Cash and due from banks increased $57.8 million, or 59.9%, to $154.1 million at March 31, 2016 from $96.4 million at December 31, 2015. Securities available for sale decreased $9.5 million, or 6.7%, to $132.1 million at March 31, 2016 from $141.6 million at December 31, 2015.

Loan Portfolio Analysis. At March 31, 2016, net loans were $3.208 billion, or 86.0% of total assets. During the three months ended March 31, 2016, net loans increased $162.5 million, or 5.3%, due to increases of $83.1 million in commercial real estate loans, $77.4 million in commercial and industrial loans, $13.5 million in multi-family loans and $1.1 million in home equity loans, partially offset by decreases of $7.9 million in construction loans and $3.0 million in one- to four-family loans. Refer to Note 5, Loans, in Notes to the Unaudited Consolidated Financial Statements within this report for more detail regarding the loans held in the Company’s loan portfolio.

Credit Risk Management. Our strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans. Management of asset quality is accomplished by internal controls, monitoring and reporting of key risk indicators, and both internal and independent third-party loan reviews. The primary objective of our loan review process is to measure borrower performance and assess risk for the purpose of identifying loan weakness in order to minimize loan loss exposure. From the time of loan origination through final repayment, multi-family, commercial real estate, construction, and commercial and industrial loans are assigned a risk rating based on pre-determined criteria and levels of risk. The risk rating is monitored annually for most loans; however, it may change during the life of the loan as appropriate.

Internal and independent third-party loan reviews vary by loan type, as well as the size and complexity of the loan. Depending on the size and complexity of the loan, some loans may warrant detailed individual review, while other loans may have less risk based upon size, or be of a homogeneous nature reducing the need for detailed individual analysis. Assets with these characteristics, such as consumer loans and loans secured by residential real estate, may be reviewed on the basis of risk indicators such as delinquency or credit rating. In cases of significant concern, a total re-evaluation of the loan and associated risks are documented by completing a loan risk assessment and action plan. Some loans may be re-evaluated in terms of their fair market value or net realizable value in order to determine the likelihood of potential loss exposure and, consequently, the adequacy of specific and general loan loss reserves.

When a borrower fails to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status, including contacting the borrower by letter and phone at regular intervals. When the borrower is in default, we may commence collection proceedings. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the real property securing the loan generally is sold at foreclosure. Management informs the Executive Committee monthly of the amount of loans delinquent more than 30 days. Management provides detailed information to the Board of Directors on loans 60 or more days past due and all loans in foreclosure and repossessed property that we own.

Delinquencies. Total past due loans decreased $3.9 million, or 14.0%, to $23.7 million at March 31, 2016 from $27.6 million at December 31, 2015, reflecting decreases of $2.9 million in loans 90 days or greater past due and $934,000 in loans 30 to 89 days past due. At March 31, 2016, non-accrual loans exceeded loans 90 days or greater past due primarily due to loans which were placed on non-accrual status based on a determination that the ultimate collection of all principal and interest due was not expected and certain loans remain on non-accrual status until they attain a sustained payment history of six consecutive months.

Non-performing Assets. Non-performing assets include loans that are 90 or more days past due or on non-accrual status, including troubled debt restructurings (“TDRs”) on non-accrual status, and real estate and other loan collateral acquired through foreclosure and repossession. Loans 90 days or greater past due may remain on an accrual basis if adequately collateralized and in the process of collection. At March 31, 2016, we did not have any accruing loans past due 90 days or greater. For non-accrual loans, interest previously accrued but not collected is reversed and charged against income at the time a loan is placed on non-accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed real estate until it is sold. When property is acquired, it is initially recorded at the fair value less estimated costs to sell at the date of foreclosure, establishing a new cost basis. Holding costs and declines in fair value after acquisition of the property result in charges against income. The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction totaled $1.6 million at March 31, 2016. The following table provides information with respect to our non-performing assets at the dates indicated.


	March 31,			December 31,
	2016			2015
	(Dollars in thousands)
Loans accounted for on a non-accrual basis:
Real estate loans:
Residential real estate:
One- to four-family	$	9,662		$	9,264
Home equity lines of credit		1,983			1,763
Commercial real estate		3,686			3,663
Construction		14,612			15,849

Total real estate loans		29,943			30,539
Commercial and industrial		745			805

Total non-accrual loans (1)		30,688			31,344
Foreclosed assets		638			—

Total non-performing assets	$	31,326		$	31,344


Non-accrual loans to total loans		0.95	%		1.02	%
Non-accrual loans to total assets		0.82	%		0.89	%
Non-performing assets to total assets		0.84	%		0.89	%

(1)	TDRs on accrual status not included above totaled $14.1 million at March 31, 2016 and $14.2 million and December 31, 2015.

Non-performing assets were $31.3 million or 0.84% of total assets, at March 31, 2016, compared to $31.3 million, or 0.89% of total assets, at December 31, 2015. We recognized $206,000 of interest income on non-accrual loans for the three months ended March 31, 2016. Additional interest income that would have been recorded for the three months ended March 31, 2016 had non-accruing loans been current according to their original terms amounted to $179,000. Construction loans represented approximately 47.6% of our non-performing assets at March 31, 2016.

Non-accrual loans decreased $656,000, or 2.1%, to $30.7 million, or 0.95% of total loans outstanding at March 31, 2016, from $31.3 million, or 1.02% of total loans outstanding at December 31, 2015, primarily due to a decrease of $1.2 million in non-accrual construction loans, partially offset by increases of $398,000 in non-accrual one- to four-family loans and $220,000 in non-accrual home equity loans.

At March 31, 2016, non-accrual construction loans included a $12.4 million loan relationship collateralized by a multi-family development project located in the City of Boston comprised of a substantially completed 12 unit apartment building and a proposed 16 unit apartment building with a shared parking garage. The loan relationship, which matured on May 1, 2015, was originated in 2008 and modified with a new borrower in 2012 for a total exposure of $18.7 million if it had been fully advanced. The loan relationship was also collateralized by other properties in the City of Boston. All of the collateral properties were appraised in 2014 or 2015 based on “as is” values, with a $2.3 million charge-off during the second quarter of 2015 based on these appraisals. We are moving toward resolution with surplus sale proceeds on completed foreclosures on the other properties used to pay down the loan and a foreclosure sale on the construction project scheduled for May 11, 2016. In April 2016, the loan was paid down to $11.5 million following receipt of the remaining foreclosure sales proceeds on the other properties.

Achieving and maintaining a moderate risk profile by aggressively managing troubled assets has been and will continue to be a primary focus for us. At March 31, 2016, our allowance for loan losses was $34.4 million, or 1.06% of total loans and 112.06% of non-accrual loans, compared to $33.4 million, or 1.08% of total loans and 106.58% of non-accrual loans at December 31, 2015. We increased our allowance primarily as a result of growth in the loan portfolio, in particular, commercial loans. Included in our allowance at March 31, 2016 was a general component of $34.1 million, which is based upon our evaluation of various factors relating to loans not deemed to be impaired. We continue to believe our level of non-performing loans and assets, which declined significantly during the past two years, is manageable and we believe that we have sufficient capital and human resources to manage the collection of our non-performing assets in an orderly fashion.

Foreclosed real estate was $638,000 at March 31, 2016 and consisted of two residential properties. At December 31, 2015, the Company did not hold any foreclosed real estate. We continue to be actively engaged with our borrowers in resolving remaining problem assets and with the effective management of real estate owned as a result of foreclosures.

Troubled Debt Restructurings. In the course of resolving loans of borrowers with financial difficulties, we may choose to restructure the contractual terms of certain loans, with terms modified to fit the ability of the borrower to repay in line with its current financial status. A loan is considered a troubled debt restructure if, for reasons related to the debtor’s financial difficulties, a concession is granted to the debtor that would not otherwise be considered.

Total TDRs remained flat at $17.3 million at March 31, 2016 and December 31, 2015. Modifications of TDRs consist of rate reductions, loan term extensions or provisions for interest-only payments for specified periods up to 12 months. We have generally been successful with the concessions we have offered to borrowers to date. We generally return TDRs to accrual status when they have sustained payments for six consecutive months based on the restructured terms and future payments are reasonably assured. We recognized $186,000 of interest income on TDRs for the three months ended March 31, 2016. Interest income that would have been recorded for the three months ended March 31, 2016 had TDRs on non-accrual status been current according to their original terms amounted to $9,000.

Potential Problem Loans. Certain loans are identified during our loan review process that are currently performing in accordance with their contractual terms and we ultimately expect to receive payment in full of principal and interest, but it is deemed probable that we will be unable to collect all the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. This may result from deteriorating conditions such as cash flows, collateral values or creditworthiness of the borrower. These loans are classified as impaired but are not accounted for on a non-accrual basis.

Other potential problem loans are those loans that are currently performing, but where known information about possible credit problems of the borrowers causes us to have concerns as to the ability of such borrowers to comply with contractual loan repayment terms. These other potential problem loans are generally loans classified as “substandard” or 5-rated loans in accordance with our nine-grade internal loan rating system that is consistent with guidelines established by banking regulators. At March 31, 2016, other potential problem loans totaled $9.0 million, including $2.1 million of construction loans and $6.9 million of multi-family loans.

Allowance for Loan Losses. The allowance for loan losses is maintained at levels considered adequate by management to provide for probable loan losses inherent in the loan portfolio as of the consolidated balance sheet reporting dates. The allowance for loan losses is based on management’s assessment of various factors affecting the loan portfolio, including portfolio composition, delinquent and non-accrual loans, national and local business conditions and loss experience and an overall evaluation of the quality of the underlying collateral.

Changes in the allowance for loan losses during the periods indicated were as follows:


	Three Months Ended March 31,
	2016			2015
	(Dollars in thousands)
Beginning balance	$	33,405		$	28,469
Provision for loan losses		1,066			60
Charge offs:
One- to four-family		—			(153	)
Commercial and industrial		(44	)		(33	)
Consumer		(64	)		(61	)

Total charge-offs		(108	)		(247	)

Recoveries:
One- to four-family		—			8
Construction		7			292
Consumer		20			19

Total recoveries		27			319

Net (charge-offs) recoveries		(81	)		72

Ending balance	$	34,390		$	28,601


Allowance to non-accrual loans		112.06	%		98.92	%
Allowance to total loans outstanding		1.06	%		1.07	%
Net (charge-offs) recoveries to average loans outstanding		(0.01	)%		0.01	%

Our provision for loan losses was $1.1 million for the three months ended March 31, 2016 compared to $60,000 for the three months ended March 31, 2015. For the three months ended March 31, 2016, the increase in the provision for loan losses was primarily due to commercial loan growth. The changes in the provision for loan losses were based on management’s assessment of loan portfolio growth and composition changes, historical charge-off trends, an ongoing evaluation of credit quality and current economic conditions. The increase in the allowance for loan losses at March 31, 2016 compared to March 31, 2015 was primarily due to increases in the multi-family, commercial real estate, construction, and commercial and industrial loan categories, as such loans have higher inherent credit risk than loans in our residential real estate loan categories. We continue to assess the adequacy of our allowance for loan losses in accordance with established policies.

The following tables set forth the breakdown of the allowance for loan losses by loan category at the dates indicated:


	March 31, 2016								December 31, 2015
	Amount		Percent of Allowance to Total Allowance			Percent of Loans in Category of Total Loans			Amount		Percent of Allowance to Total Allowance			Percent of Loans in Category of Total Loans
	(Dollars in thousands)
Real estate loans:
Residential real estate:
One- to four-family	$	1,385		4.0	%		14.0	%	$	1,354		4.1	%		14.9	%
Multi-family		3,487		10.1			13.3			3,385		10.1			13.5
Home equity lines of credit		96		0.3			1.5			144		0.4			1.5
Commercial real estate		15,083		43.9			43.5			14,497		43.4			43.1
Construction		7,789		22.6			12.7			8,313		24.9			13.7

Total real estate loans		27,840		80.9			85.0			27,693		82.9			86.7
Commercial and industrial		6,459		18.8			14.7			5,620		16.8			13.0
Consumer		91		0.3			0.3			92		0.3			0.3

Total loans	$	34,390		100.0	%		100.0	%	$	33,405		100.0	%		100.0	%

The allowance consists of general and allocated components. The general component relates to pools of non-impaired loans and is based on historical loss experience adjusted for qualitative factors. The allocated component relates to loans that are classified as impaired. A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled

principal and interest payments when due. Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

We had impaired loans totaling $22.3 million and $23.5 million as of March 31, 2016 and December 31, 2015, respectively. At March 31, 2016, impaired loans totaling $2.4 million had a valuation allowance of $260,000. Impaired loans totaling $2.6 million had a valuation allowance of $274,000 at December 31, 2015. Our average investment in impaired loans was $23.3 million and $30.8 million for the three months ended March 31, 2016 and 2015, respectively.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment based on payment status. Accordingly, we do not separately identify individual one- to four-family residential real estate, home equity lines of credit and consumer loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring. We periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a TDR. All TDRs are initially classified as impaired.

Management has reviewed the collateral value for all impaired and non-accrual loans that were collateral-dependent as of March 31, 2016 and considered any probable loss in determining the allowance for loan losses.

For residential loans measured for impairment based on the collateral value, we will do the following:

•

When a loan becomes seriously delinquent, generally 60 days past due, we obtain third-party appraisals that are generally the basis for charge-offs when a loss is indicated, prior to the foreclosure sale, but usually no later than when such loans are 180 days past due. We generally are able to complete the foreclosure process within six to nine months from receipt of the third-party appraisal.

•

We make adjustments to appraisals based on updated economic information, if necessary, prior to the foreclosure sale. We review current market factors to determine whether, in management’s opinion, downward adjustments to the most recent appraised values may be warranted. If so, we use our best estimate to apply an estimated discount rate to the appraised values to reflect current market factors.

•

Appraisals we receive are based on comparable property sales.

For commercial loans measured for impairment based on the collateral value, we will do the following:

•

We obtain a third party appraisal at the time a loan is deemed to be in a workout situation and there is no indication that the loan will return to performing status, generally when the loan is 90 days or more past due. One or more updated third party appraisals are obtained prior to foreclosure depending on the foreclosure timeline. In general we order new appraisals annually on loans in the process of foreclosure.

•

We make downward adjustments to appraisals when conditions warrant. Adjustments are made by applying a discount to the appraised value based on occupancy, recent changes in condition to the property and certain other factors. Adjustments are also made to appraisals for construction projects involving residential properties based on recent sales of units. Losses are recognized if the appraised value less estimated costs to sell is less than our carrying value of the loan.

•

Appraisals we receive are generally based on a reconciliation of comparable property sales and income capitalization approaches. For loans on construction projects involving residential properties, appraisals are generally based on a discounted cash flow analysis assuming a bulk sale to a single buyer.

Loans that are partially charged off generally remain on non-accrual status until foreclosure or such time that they are performing in accordance with the terms of the loan and have a sustained payment history of at least six consecutive months. The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. Loan losses are charged against the allowance when we believe the uncollectability of a loan balance is confirmed; for collateral-dependent loans, generally when appraised values (as adjusted values, if applicable) less estimated costs to sell, are less than our carrying values.

Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while we believe we have established our allowance for loan losses in conformity with generally accepted accounting principles in the United States of America, there can be no assurance that regulators, in reviewing our loan portfolio, will not require us to increase our allowance for loan losses. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations.

Securities Portfolio. At March 31, 2016, our securities portfolio was $132.1 million, or 3.5% of total assets. During the three months ended March 31, 2016, the securities portfolio decreased $9.5 million, or 6.7%, primarily due to $8.4 million in maturities, calls and principal payments and $3.9 million in sales, partially offset by $1.3 million in purchases. At March 31, 2016, the securities portfolio consisted of $69.8 million, or 52.8%, in debt securities and $62.3 million, or 47.2%, in marketable equity securities. The debt securities within the portfolio are corporate bonds, government-sponsored enterprises, municipal bonds, mortgage-backed securities issued by government-sponsored enterprises and private companies and U.S. treasury securities. Included in marketable equity securities are common stocks and money market mutual funds. We purchase marketable equity securities with the intent to generate long-term capital gains through purchasing investment grade dividend paying securities in companies with relatively low long-term debt and a history of sustained earnings and above-average growth. We typically initiate a securities position based on market opportunities and add to our position through dollar cost averaging on a monthly basis. At March 31, 2016, we had no investments in a single company or entity that had an aggregate book value in excess of 10% of our equity. Refer to Note 4, Securities Available for Sale, in Notes to the Unaudited Consolidated Financial Statements within this report for more detail regarding our securities portfolio.

Deposits. Deposits are a major source of our funds for lending and other investment purposes. Deposit inflows and outflows are significantly influenced by general interest rates and money market conditions. Our deposit base is comprised of demand, NOW, money market, regular savings and other deposits, and certificates of deposit, which include brokered certificates of deposit. We consider demand, NOW, money market, and regular savings and other deposits to be core deposits. Total deposits increased $168.4 million, or 6.1%, to $2.911 billion at March 31, 2016 from $2.743 billion at December 31, 2015. Our continuing focus on the acquisition and expansion of core deposit relationships resulted in net growth in core deposits of $72.5 million, or 3.9%, to $1.927 billion, or 66.2% of total deposits. Refer to Note 6, Deposits, in Notes to the Unaudited Consolidated Financial Statements within this report for more detail regarding our deposits.

The following table sets forth the average balances of deposits for the periods indicated.


	Three Months Ended March 31,
	2016								2015
	Average Balance		Average Rate			Percent of Total Deposits			Average Balance		Average Rate			Percent of Total Deposits
	(Dollars in thousands)
Demand deposits	$	368,038		—	%		13.4	%	$	295,520		—	%		11.8	%
NOW deposits		338,517		0.59			12.4			295,317		0.63			11.9
Money market deposits		873,774		0.80			30.2			980,104		0.86			38.9
Regular savings and other deposits		290,463		0.14			10.2			274,516		0.22			11.0
Certificates of deposit		936,674		1.24			33.8			697,963		1.16			26.4

Total	$	2,807,466		0.75	%		100.0	%	$	2,543,420		0.75	%		100.0	%

Borrowings. We use borrowings from the Federal Home Loan Bank of Boston to supplement our supply of funds for loans and investments. At March 31, 2016 and December 31, 2015, Federal Home Loan Bank of Boston advances totaled $211.4 million and $167.2 million, respectively, with a weighted average rate of 1.22% and 1.20%, respectively. Total borrowings increased $44.2 million, or 26.4%, during the three months ended March 31, 2016, reflecting a $64.2 million increase in long-term advances, partially offset by a $20.0 million decrease in short-term advances. The Bank entered into long-term advances with the Federal Home Loan Bank of Boston totaling $90.0 million with original terms ranging from four to seven years and initial interest rates ranging from 0.02% to 2.10% during the three months ended March 31, 2016. The maturing advances with the Federal Home Loan Bank of Boston totaled $45.8 million and consisted of a short-term advance totaling $20.0 million with an original term of one month and a fixed interest rate of 0.57% and long-term advances totaling $25.0 million with original terms ranging from two to three years and fixed interest rates ranging from of 0.65% to 0.69% during the three months ended March 31, 2016. At March 31, 2016, we also had an available line of credit of $9.4 million with the Federal Home Loan Bank of Boston at an interest rate that adjusts daily, none of which was outstanding at that date. Refer to Note 7, Borrowings, in Notes to the Unaudited Consolidated Financial Statements within this report for more detail regarding our borrowings.

Information relating to borrowings is detailed in the following table.


	Three Months Ended March 31,
	2016			2015
	(Dollars in thousands)
Balance outstanding at end of period	$	211,426		$	144,110
Average amount outstanding during the period	$	199,779		$	150,939
Weighted average interest rate during the period		1.16	%		1.36	%
Maximum outstanding at any month end	$	211,693		$	156,637
Weighted average interest rate at end of period		1.22	%		1.33	%

Stockholders’ Equity. Total stockholders’ equity decreased $5.4 million, or 0.9%, to $582.7 million at March 31, 2016, from $588.1 million at December 31, 2015. The decrease for the three months ended March 31, 2016 was due primarily to a $13.4 million repurchase of 976,417 shares of the Company’s common stock and a dividend of $0.03 per share totaling $1.5 million, partially offset by net income of $7.5 million, $1.3 million related to stock-based compensation plans and $742,000 in accumulated other comprehensive income, reflecting an increase in the fair value of available-for-sale securities. Stockholders’ equity to assets was 15.62% at March 31, 2016, compared to 16.69% at December 31, 2015. Book value per share increased to $10.81 at March 31, 2016 from $10.72 at December 31, 2015. At March 31, 2016, the Company and the Bank continued to exceed all regulatory capital requirements. Refer to “Capital Management” within this report for more information regarding capital requirements and actual capital amounts and ratios for the Bank and the Company.

Average Balance Sheets and Related Yields and Rates. The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. For purposes of this table, average balances have been calculated using daily average balances, and include non-accrual loans and purchase accounting related premium and discounts. The loan yields include the effect of amortization or accretion of deferred loan fees/costs and purchase accounting premiums/discounts to interest and fees on loans.


	Three Months Ended March 31,
	2016									2015
	Average Balance			Interest (1)			Yield/ Cost (1)(6)			Average Balance			Interest (1)			Yield/ Cost (1)(6)
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (2)	$	3,146,449		$	34,104			4.36	%	$	2,686,367		$	29,120			4.40	%
Securities and certificates of deposit		231,604			1,034			1.80			286,790			1,240			1.75
Other interest-earning assets (3)		123,476			218			0.71			212,063			170			0.33

Total interest-earning assets		3,501,529			35,356			4.06			3,185,220			30,530			3.89

Noninterest-earning assets		114,476									113,019

Total assets	$	3,616,005								$	3,298,239


Liabilities and stockholders’ equity:
Interest-bearing liabilities:
NOW deposits	$	338,517			500			0.59		$	295,317			457			0.63
Money market deposits		873,774			1,745			0.80			980,104			2,078			0.86
Regular savings and other deposits		290,463			103			0.14			274,516			151			0.22
Certificates of deposit		936,674			2,880			1.24			697,963			1,991			1.16

Total interest-bearing deposits		2,439,428			5,228			0.86			2,247,900			4,677			0.84
Borrowings		199,779			577			1.16			150,939			508			1.36

Total interest-bearing liabilities		2,639,207			5,805			0.88			2,398,839			5,185			0.88

Noninterest-bearing demand deposits		368,038									295,520
Other noninterest-bearing liabilities		23,312									23,465

Total liabilities		3,030,557									2,717,824
Total stockholders’ equity		585,448									580,415

Total liabilities and stockholders’ equity	$	3,616,005								$	3,298,239

Net interest-earning assets	$	862,322								$	786,381

Fully tax-equivalent net interest income					29,551									25,345
Less: tax-equivalent adjustments					(1,172	)								(952	)

Net interest income				$	28,379								$	24,393

Interest rate spread (1)(4)								3.18	%								3.01	%
Net interest margin (1)(5)								3.39	%								3.23	%
Average interest-earning assets to average interest-bearing liabilities		132.67	%								132.78	%

Supplemental Information:
Total deposits, including noninterest-bearing demand deposits	$	2,807,466		$	5,228			0.75	%	$	2,543,420		$	4,677			0.75	%
Total deposits and borrowings, including noninterest-bearing demand deposits	$	3,007,245		$	5,805			0.78	%	$	2,694,359		$	5,185			0.78	%

(footnotes begin on following page)

(footnotes from previous page)

(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 March 31, 2016 and 2015, yields on loans before tax-equivalent adjustments were 4.23% and 4.28%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 1.51% and 1.52%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.93% and 3.77%, respectively. Interest rate spread before tax-equivalent adjustments for the three months ended March 31, 2016 and 2015 was 3.05% and 2.89%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended March 31, 2016 and 2015 was 3.26% and 3.11%, 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.

Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our fully tax-equivalent net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.


	Three Months Ended March 31,
	2016 Compared to 2015 Increase (Decrease) Due to
	Volume			Rate			Net
	(In thousands)
Interest income:
Loans	$	5,221		$	(237	)	$	4,984
Securities and certificates of deposit		(235	)		29			(206	)
Other interest-earning assets		(93	)		141			48

Total		4,893			(67	)		4,826
Interest expense:
Deposits		611			(60	)		551
Borrowings		163			(94	)		69

Total		774			(154	)		620

Change in fully tax-equivalent net interest income	$	4,119		$	87		$	4,206

Results of Operations for the Three Months Ended March 31, 2016 and 2015

Net Income. Our primary source of income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits and borrowings. Changes in levels of interest rates affect our net interest income. A secondary source of income is non-interest income, which includes revenue that we receive from providing products and services. The majority of our non-interest income generally comes from customer service fees, loan fees, bank-owned life insurance, mortgage banking gains and gains on sales of securities.

Net income information is as follows:


	Three Months Ended March 31,						Change
	2016			2015			Amount			Percent
	(Dollars in thousands)
Net interest income	$	28,379		$	24,393		$	3,986			16.3	%
Provision for loan losses		1,066			60			1,006			1,676.7
Non-interest income		2,692			3,350			(658	)		(19.6	)
Non-interest expenses		19,230			18,068			1,162			6.4
Net income		7,477			6,405			1,072			16.7
Return on average assets		0.83	%		0.78	%		0.05	%		6.4
Return on average equity		5.11	%		4.41	%		0.70	%		15.9

Net Interest Income. The net interest rate spread and net interest margin were 3.05% and 3.26%, respectively, for the three months ended March 31, 2016 compared to 2.89% and 3.11%, respectively, for the three months ended March 31, 2015. The increase in net interest income was due primarily to loan growth, partially offset by growth in total deposits and borrowings for the three months ended March 31, 2016.

The Company’s yield on interest-earning assets increased 16 basis points to 3.93% for the three months ended March 31, 2016 compared to 3.77% for the three months ended March 31, 2015, while the cost of funds remained flat at 0.78% for the three months ended March 31, 2016 and 2015, respectively. The increase in interest income was primarily due to growth in the Company’s average loan balances of $460.1 million, or 17.1%, to $3.146 billion, partially offset by a decrease in the yield on loans of five basis points to 4.23% for the three months ended March 31, 2016 compared to 4.28% for the three months ended March 31, 2015. The increase in interest expense on deposits was primarily due to the growth in average total deposits of $264.0 million, or 10.4%, to $2.807 billion for the three months ended March 31, 2016 compared to the same period in March 31, 2015. The increase in interest expense on borrowings was primarily due to the increase in average borrowings of $48.8 million, or 32.4%, to $199.8 million, partially offset by a decrease in the cost of average borrowings of 20 basis points to 1.16% for the three months ended March 31, 2016 compared to 1.36% for the three months ended March 31, 2015.

Provision for Loan Losses. Our provision for loan losses was $1.1 million for the three months ended March 31, 2016 compared to $60,000 for the three months ended March 31, 2015. For further discussion of the changes in the provision and allowance for loan losses, refer to “Allowance for Loan Losses.”

Non-Interest Income. Non-interest income information is as follows:


	Three Months Ended March 31,				Change
	2016		2015		Amount			Percent
	(Dollars in thousands)
Customer service fees	$	1,947	$	1,757	$	190			10.8	%
Loan fees		312		166		146			88.0
Mortgage banking gains, net		70		110		(40	)		(36.4	)
Gain on sales of securities, net		59		1,020		(961	)		(94.2	)
Income from bank-owned life insurance		302		296		6			2.0
Other income		2		1		1			100.0

Total non-interest income	$	2,692	$	3,350	$	(658	)		(19.6	)%

The increase in customer service fees was primarily due to the increasing number and activity in demand deposit accounts. The increase in loan fees reflects loan growth during the current quarter. The decrease in gain on sales of securities, net, reflected a decrease in the number and prices of marketable equity securities sold during the three months ended March 31, 2016 compared to the same period in March 31, 2015.

Non-Interest Expense. Non-interest expense information is as follows:


	Three Months Ended March 31,				Change
	2016		2015		Amount			Percent
	(Dollars in thousands)
Salaries and employee benefits	$	12,513	$	11,167	$	1,346			12.1	%
Occupancy and equipment		2,484		2,620		(136	)		(5.2	)
Data processing		1,257		1,263		(6	)		(0.5	)
Marketing and advertising		713		894		(181	)		(20.2	)
Professional services		613		673		(60	)		(8.9	)
Foreclosed real estate		8		14		(6	)		(42.9	)
Deposit insurance		452		461		(9	)		(2.0	)
Other general and administrative		1,190		976		214			21.9

Total non-interest expenses	$	19,230	$	18,068	$	1,162			6.4	%

The increase in salaries and employee benefits expense was primarily due to annual increases in employee compensation and health benefits during the three months ended March 31, 2016 and expenses associated with the November 2015 grant of restricted stock and stock options to the Company’s directors, officers and employees. The decrease in marketing and advertising expense reflected lower advertising production and direct mail costs and cost savings associated with the 2015 rebranding of the former Mt. Washington Bank Division into the East Boston Savings Bank brand. The decrease in occupancy and equipment expenses was primarily due to lower snow removal costs during the three months ended March 31, 2016. The Company’s efficiency ratio improved to 62.01% for the three months ended March 31, 2016 from 67.61% for the three months ended March 31, 2015.

Income Tax Provision. We recorded a provision for income taxes of $3.3 million for the three months ended March 31, 2016, reflecting an effective tax rate of 30.6%, compared to $3.2 million, or a 33.4% effective tax rate, for the three months ended March 31, 2015. The changes in the income tax provision and effective tax rate were primarily due to changes in the components of pre-tax income.

Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, sales, maturities and payments on investment securities and borrowings from the Federal Home Loan Bank of Boston. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

We regularly adjust our investments in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities and (4) the objectives of our asset/liability management policy.

Our most liquid assets are cash and due from banks, and certificates of deposit with other banks. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At March 31, 2016, cash and due from banks totaled $154.1 million and certificates of deposit totaled $92.7 million. In addition, at March 31, 2016, we had $170.0 million of available borrowing capacity with the Federal Home Loan Bank of Boston, including a $9.4 million line of credit. On March 31, 2016, we had $211.4 million of advances outstanding.

Our primary investing activities are the origination of loans and the purchase and sale of securities. Our primary financing activities consist of activity in deposit accounts and Federal Home Loan Bank advances. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive. Occasionally, we offer promotional rates on certain deposit products to attract deposits.

A significant use of our liquidity is the funding of loan originations. At March 31, 2016 and December 31, 2015, we had total loan commitments outstanding of $1.205 billion and $997.3 million, respectively. Historically, many of the commitments expire without being fully drawn; therefore the total amount of commitments does not necessarily represent future cash requirements. Refer to Note 8, Commitments and Derivatives, in Notes to the Unaudited Consolidated Financial Statements within this report for more detail regarding our outstanding commitments.

Another significant use of our liquidity is the funding of deposit withdrawals. Certificates of deposit due within one year of March 31, 2016 totaled $567.0 million, or 57.6% of total certificates of deposit. If these maturing deposits do not remain with us, we will be required to utilize other sources of funds. Historically, a significant portion of certificates of deposit that mature have remained with us. We have the ability to attract and retain deposits by adjusting the interest rates offered and accept brokered certificates of deposit when it is deemed cost effective.

Meridian Bancorp, Inc. is a separate legal entity from East Boston Savings Bank and it must provide for its own liquidity to pay dividends and repurchase its common stock and for other corporate purposes. Meridian Bancorp, Inc.’s primary source of liquidity is proceeds from the 2014 second-step offering, and to a lesser extent dividend payments received from East Boston Savings Bank. The ability of East Boston Savings Bank to pay dividends is subject to regulatory requirements. At March 31, 2016, Meridian Bancorp, Inc. (on an unconsolidated basis) had cash and cash equivalents, certificates of deposit and securities available for sale totaling $127.8 million.

The net proceeds from the stock offering significantly increased our liquidity and capital resources. Over time, our level of liquidity may be reduced as the net proceeds from the stock offering are used for general corporate purposes, including the funding of loans. Our financial condition and results of operations are expected to be enhanced and result in increases in net interest-earning assets and net interest income. However, due to the increase in equity from the stock offering proceeds, our return on equity will initially be lower but is expected to increase over time.

Capital Management. Both the Company and the Bank are subject to various regulatory capital requirements administered by the Federal Reserve Board and the Federal Deposit Insurance Corporation, respectively, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2016, both the Company and the Bank exceeded all of their respective regulatory capital requirements. The Bank is considered “well capitalized” under regulatory guidelines.

Effective January 1, 2015, federal banking regulations changed the minimum capital requirements for community banking institutions. The regulations include a new minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5%, raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and includes a minimum leverage ratio of 4% for all banking organizations. Additionally, community banking institutions must maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of total to risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonuses. The capital conservation buffer is being phased in over three years, beginning on January 1, 2016. Also, certain new deductions from and adjustments to regulatory capital will be phased in over several years. Management believes that the Company will remain characterized as “well-capitalized” throughout the phase-in periods.

The Company may use capital management tools such as cash dividends and common share repurchases. Massachusetts regulations restrict repurchases for the first three years following the second-step conversion except where compelling and valid business reasons are established to the satisfaction of the Massachusetts Commissioner of Banks. We are also subject to the Federal Reserve Board’s notice provisions for stock repurchases. In August 2015, the Company received regulatory approval from the Massachusetts Commissioner of Banks and a non-objection from the Federal Reserve Bank to adopt a stock repurchase program for up to 5% of its common stock. As of March 31, 2016, the Company had repurchased 1,698,521 shares of its stock at an average price of $13.43 per share, or 62.1% of the 2,737,334 shares authorized for repurchase under the Company’s repurchase program. The Company’s Board of Directors declared a quarterly cash dividend of $0.03 per common share on March 1, 2016. The dividend was paid on April 5, 2016 to stockholders of record at the close of business on March 22, 2016.

The Company’s and the Bank’s actual capital amounts and ratios follow:


	Actual					Minimum Capital Requirement					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
March 31, 2016
Total Capital (to Risk Weighted Assets):
Company	$	602,642		16.6	%	$	290,311		8.0	%	$	362,889		10.0	%
Bank		453,713		12.4			292,125		8.0			365,156		10.0
Tier 1 Capital (to Risk Weighted Assets):
Company		568,252		15.7			217,734		6.0			290,311		8.0
Bank		419,323		11.5			219,094		6.0			292,125		8.0
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Company		568,252		15.7			163,300		4.5			235,878		6.5
Bank		419,323		11.5			164,320		4.5			237,351		6.5
Tier 1 Capital (to Average Assets):
Company		568,252		15.7			144,640		4.0			180,800		5.0
Bank		419,323		12.1			138,858		4.0			173,572		5.0

December 31, 2015
Total Capital (to Risk Weighted Assets):
Company	$	606,611		17.5	%	$	277,591		8.0	%	$	346,989		10.0	%
Bank		442,978		12.7			279,604		8.0			349,505		10.0
Tier 1 Capital (to Risk Weighted Assets):
Company		573,206		16.5			208,194		6.0			277,591		8.0
Bank		409,573		11.7			209,703		6.0			279,604		8.0
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Company		573,206		16.5			156,145		4.5			225,543		6.5
Bank		409,573		11.7			157,277		4.5			227,179		6.5
Tier 1 Capital (to Average Assets):
Company		573,206		16.7			137,245		4.0			171,557		5.0
Bank		409,573		12.5			130,988		4.0			163,735		5.0

A reconciliation of the Company’s and Bank’s stockholders’ equity to regulatory capital follows:


	March 31, 2016						December 31, 2015
	Consolidated			Bank			Consolidated			Bank
	(In thousands)
Total stockholders’ equity per financial statements	$	582,684		$	433,749		$	588,126		$	424,535
Adjustments to Tier 1 and Common Equity Tier 1 capital:
Accumulated other comprehensive loss		1,350			1,356			2,092			2,050
Net unrealized losses on marketable equity securities		(2,095	)		(2,095	)		(3,325	)		(3,325	)
Goodwill disallowed		(13,687	)		(13,687	)		(13,687	)		(13,687	)

Total Tier 1 and Common Equity Tier 1 capital		568,252			419,323			573,206			409,573

Adjustments to total capital:
Allowance for loan losses		34,390			34,390			33,405			33,405


Total regulatory capital	$	602,642		$	453,713		$	606,611		$	442,978

Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles in the United States of America, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit.

For the three months ended March 31, 2016, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Risk Management. Our earnings and the market value of our assets and liabilities are subject to fluctuations caused by changes in the level of interest rates. We manage the interest rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our earnings while decreases in interest rates may beneficially affect our earnings. To reduce the potential volatility of our earnings, we have sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Our strategy for managing interest rate risk emphasizes: originating loans with adjustable interest rates; selling the residential real estate fixed-rate loans with terms greater than 10 years that we originate; promoting core deposit products; and adjusting the interest rates and maturities of funding sources, as necessary.

We have an Asset/Liability Management Committee to coordinate all aspects of asset/liability management. The committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

Net Interest Income Simulation Analysis. We analyze our interest rate sensitivity position to manage the risk associated with interest rate movements through the use of interest income simulation. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest sensitive.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period.

Our goal is to manage asset and liability positions to moderate the effects of interest rate fluctuations on net interest income. Interest income simulations are completed quarterly and presented to the Asset/Liability Committee and the Board of Directors. The simulations provide an estimate of the impact of changes in interest rates on net interest income under a range of assumptions. The numerous assumptions used in the simulation process are reviewed by the Asset/Liability Committee and the Executive Committee on a quarterly basis. Changes to these assumptions can significantly affect the results of the simulation. The simulation incorporates assumptions regarding the potential timing of the repricing of certain assets and liabilities when market rates change and the changes in spreads between different market rates. The simulation analysis incorporates management’s current assessment of the risk that pricing margins will change adversely over time due to competition or other factors.

Simulation analysis is only an estimate of our interest rate risk exposure at a particular point in time. We continually review the potential effect changes in interest rates could have on the repayment of rate sensitive assets and funding requirements of rate sensitive liabilities.

The simulation uses projected repricing of assets and liabilities on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments. Prepayment rates can have a significant impact on interest income simulation. Because of the large percentage of loans we hold, rising or falling interest rates have a significant impact on the prepayment speeds of our earning assets that in turn affect the rate sensitivity position. When interest rates rise, prepayments tend to slow. When interest rates fall, prepayments tend to rise. Our asset sensitivity would be reduced if prepayments slow and vice versa. While we believe such assumptions to be reasonable, there can be no assurance that assumed prepayment rates will approximate actual future mortgage-backed security and loan repayment activity.

The following table reflects changes in estimated net interest income for the Bank due to immediate non-parallel changes in interest rates for the subsequent one year period as of the dates indicated.


Increase (Decrease) in Market Interest Rates	March 31, 2016								December 31, 2015
Increase (Decrease) in Market Interest Rates	Amount		Change			Percent			Amount		Change			Percent
	(Dollars in thousands)
300	$	100,594	$	(12,840	)		(11.32	)%	$	102,967	$	(7,225	)		(6.56	)%
Flat		113,434								110,192
-100		112,965		(469	)		(0.41	)		109,683		(509	)		(0.46	)

ITEM 4.

CONTROLS AND PROCEDURES

(a)

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

(b)

Changes in Internal Controls over Financial Reporting There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

ITEM 1A.

RISK FACTORS

For information regarding our risk factors, see “Risk Factors,” in the Company’s 2015 Annual Report on Form 10-K, filed with the SEC on March 11, 2016, which is available through the SEC’s website at www.sec.gov. As of March 31, 2016, our risk factors have not changed materially from those reported in the annual report. The risks described in the annual report are not the only risks that we face. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a.)

Not applicable

(b.)

Not applicable

(c.)

The following table sets forth information with respect to any purchase made by or on behalf of the Company during the indicated periods:


Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid Per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1)		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid Per Share (or Unit)
January 1 – 31, 2016		29,649	$	13.68		29,649		1,985,581
February 1 – 29, 2016		946,768	$	13.71		946,768		1,038,813
March 1 – 31, 2016		—	$	—		—		1,038,813

Total		976,417	$	13.71		976,417		1,038,813

(1)	In August 2015, the Company’s Board of Directors voted to adopt a stock repurchase program of up to 5% of its outstanding common stock, or 2,737,334 shares of its common stock.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

Not applicable.

ITEM 6.

EXHIBITS


3.1		Articles of Incorporation of Meridian Bancorp, Inc. (Incorporated by reference to the Registration Statement on Form S-1 of Meridian Bancorp, Inc. (File No. 333-194454), originally filed with the Securities and Exchange Commission on March 10, 2014)

3.2		Bylaws of Meridian Bancorp, Inc. (Incorporated by reference to the Registration Statement on Form S-1 of Meridian Bancorp, Inc. (File No. 333-194454), originally filed with the Securities and Exchange Commission on March 10, 2014)

4		Form of Common Stock Certificate of Meridian Bancorp, Inc. (Incorporated by reference to the Registration Statement on Form S-1 of Meridian Bancorp, Inc. (File No. 333-194454), originally filed with the Securities and Exchange Commission on March 10, 2014)

10.1		Meridian Bancorp, Inc. 2015 Equity Incentive Plan (Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement for the Annual Meeting of Stockholders (File No. 001-36573), filed with the Securities and Exchange Commission on August 18, 2015)

10.2		Form of Employee Stock Option Agreement under the Meridian Bancorp, Inc. 2015 Equity Incentive Plan filed as an exhibit to Form 8-K filed on November 5, 2015

10.3		Form of Director Stock Option Agreement under the Meridian Bancorp, Inc. 2015 Equity Incentive Plan filed as an exhibit to Form 8-K filed on November 5, 2015

10.4		Amended and Restated Employment Agreement with Richard J. Gavegnano and East Boston Savings Bank dated July 28, 2014 filed as an exhibit to Form 10-Q filed on November 10, 2014

10.5		East Boston Savings Bank Amended and Restated Employee Severance Compensation Plan filed as an exhibit to Form 10-Q filed on November 10, 2014

10.6		Form of Amended and Restated Supplemental Executive Retirement Agreements with Directors Vincent D. Basile, Domenic A. Gambardella, Edward L. Lynch, Gregory F. Natalucci, and James G. Sartori filed as an exhibit to Form 10-Q filed on November 10, 2014

10.7		Amended and Restated Supplemental Executive Retirement Agreement with Richard J. Gavegnano filed as an exhibit to Form 10-Q filed on November 10, 2014

10.8		2008 Equity Incentive Plan (Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement for its 2008 Annual Meeting, as filed with the Securities and Exchange Commission on July 11, 2008)

10.9		Termination Amendment for the Amended and Restated Employment Agreement between Edward J. Merritt and East Boston Savings Bank dated December 10, 2015 filed as an exhibit to Form 8-K filed on December 10, 2015

10.10		Amended and Restated Supplemental Executive Retirement Agreement between East Boston Savings Bank and Edward J. Merritt dated July 28, 2014 filed as an exhibit to Form 10-Q filed on November 10, 2014

10.11		Joint Beneficiary Designation Agreement between Edward J. Merritt and Mt. Washington Co-operative Bank (Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 16, 2010)

10.12		First Amendment to Joint Beneficiary Designation Agreement between Edward J. Merritt and Mt. Washington Co-operative Bank (Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 16, 2010)

10.13		Amended and Restated Two-Year Change in Control Agreement between Mark Abbate and East Boston Savings Bank dated July 28, 2014 filed as an exhibit to Form 10-Q filed on November 10, 2014

10.14		Incentive Compensation Plan filed as an exhibit to Form 10-K filed on March 17, 2014

10.15		Amended and Restated Two-Year Change in Control Agreement between John Migliozzi and East Boston Savings Bank dated July 28, 2014 filed as an exhibit to Form 10-Q filed on November 10, 2014

10.16		East Boston Non-Qualified Supplemental Employee Stock Ownership Plan dated October 1, 2014 filed as an exhibit to Form 10-Q filed on November 10, 2014

10.17		Amended and Restated Two-Year Change in Control Agreement between Frank Romano and East Boston Savings Bank dated July 28, 2014 filed as an exhibit to Form 10-K filed on March 13, 2015

10.18		Form of Restricted Stock Award Agreement under the Meridian Bancorp, Inc. 2015 Equity Incentive Plan filed as an exhibit to Form 8-K filed on November 5, 2015

10.19		Two-Year Change in Control Agreement between Edward J. Merritt and East Boston Savings Bank dated December 10, 2015 filed as an exhibit to Form 8-K filed on December 10, 2015

10.20		Freeze Amendment to the Amended and Restated Supplemental Executive Retirement Agreement between East Boston Savings Bank and Edward J. Merritt dated December 10, 2015 filed as an exhibit to Form 8-K filed on December 10, 2015

21		Subsidiaries of Registrant filed as an exhibit to Form 10-Q filed on November 10, 2014

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following financial statements formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Net Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	MERIDIAN BANCORP, INC. (Registrant)

Date: May 9, 2016	By:	/s/ Richard J. Gavegnano
		Richard J. Gavegnano Chairman, President and Chief Executive Officer (Principal Executive Officer)

Date: May 9, 2016	By:	/s/ Mark L. Abbate
		Mark L. Abbate
		Executive Vice President, Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company