##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 OR
 o
    
    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 001-33898
 Meridian Interstate Bancorp, Inc.
 (Exact name of registrant as specified in its charter)
 Massachusetts
    
    20-4652200(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)10 Meridian Street,East Boston, Massachusetts
    
    02128(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)
 Yes þ No o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ




---



##### 



MERIDIAN INTERSTATE BANCORP, INC.
 FORM 10-Q
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets at
March 31, 2011 and December 31, 2010 (Unaudited)
    
    
    3Consolidated Statements of Income for the three months
ended March 31, 2011 and 2010 (Unaudited)
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the three months
ended March 31, 2011 and 2010 (Unaudited)
    
    
    5Consolidated Statements of Cash Flows for the three months
ended March 31, 2011 and 2010 (Unaudited)
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    35PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    36Item 1A. Risk Factors
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 3. Defaults Upon Senior Securities
    
    
    36Item 4. [Removed and Reserved]
    
    
    36Item 5. Other Information
    
    
    36Item 6. Exhibits
    
    
    37Signatures
    
    
    38Exhibit 31.1Exhibit 31.2Exhibit 32.0
   2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. financial statements
 MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(Unaudited)
 March 31,
    
    
    December 31,(Dollars in thousands)
    
    2011
    
    
    2010ASSETSCash and due from banks
    
    $
    187,197
    
    
    $
    155,430Federal funds sold
    
    
    63
    
    
    
    63Total cash and cash equivalents
    
    
    187,260
    
    
    
    155,493Certificates of deposit  affiliate bank
    
    
    2,508
    
    
    
    Securities available for sale, at fair value
    
    
    395,034
    
    
    
    360,602Federal Home Loan Bank stock, at cost
    
    
    12,538
    
    
    
    12,538Loans held for sale
    
    
    2,815
    
    
    
    13,013Loans
    
    
    1,190,510
    
    
    
    1,183,717Less allowance for loan losses
    
    
    (10,323
    )
    
    
    (10,155
    )Loans, net
    
    
    1,180,187
    
    
    
    1,173,562Bank-owned life insurance
    
    
    34,146
    
    
    
    33,829Foreclosed real estate, net
    
    
    4,966
    
    
    
    4,080Investment in affiliate bank
    
    
    11,982
    
    
    
    11,497Premises and equipment, net
    
    
    35,260
    
    
    
    34,425Accrued interest receivable
    
    
    7,164
    
    
    
    7,543Prepaid deposit insurance
    
    
    2,439
    
    
    
    3,026Deferred tax asset, net
    
    
    5,792
    
    
    
    5,441Goodwill
    
    
    13,687
    
    
    
    13,687Other assets
    
    
    4,902
    
    
    
    7,094Total assets
    
    $
    1,900,680
    
    
    $
    1,835,830LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Non interest-bearing
    
    $
    115,988
    
    
    $
    111,423Interest-bearing
    
    
    1,382,699
    
    
    
    1,343,792Total deposits
    
    
    1,498,687
    
    
    
    1,455,215Short-term borrowings  affiliate bank
    
    
    11,455
    
    
    
    1,949Short-term borrowings  other
    
    
    10,042
    
    
    
    10,037Long-term debt
    
    
    136,350
    
    
    
    136,697Accrued expenses and other liabilities
    
    
    25,830
    
    
    
    16,321Total liabilities
    
    
    1,682,364
    
    
    
    1,620,219Stockholders equity:Common stock, no par value, 50,000,000 shares
authorized; 23,000,000 shares issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    97,165
    
    
    
    97,005Retained earnings
    
    
    125,774
    
    
    
    122,563Accumulated other comprehensive income
    
    
    7,442
    
    
    
    8,038Treasury stock, at cost, 215,554 and 192,918 shares
at March 31, 2011 and December 31, 2010, respectively
    
    
    (2,425
    )
    
    
    (2,121
    )Unearned compensation  ESOP, 693,450 and 703,800 shares
at March 31, 2011 and December 31, 2010, respectively
    
    
    (6,934
    )
    
    
    (7,038
    )Unearned compensation  restricted shares, 321,645 and 326,905
at March 31, 2011 and December 31, 2010, respectively
    
    
    (2,706
    )
    
    
    (2,836
    )Total stockholders equity
    
    
    218,316
    
    
    
    215,611Total liabilities and stockholders equity
    
    $
    1,900,680
    
    
    $
    1,835,830
   3




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MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 Three Months Ended March 31,(Dollars in thousands, except per share amounts)
    
    2011
    
    
    2010Interest and dividend income:Interest and fees on loans
    
    $
    16,446
    
    
    $
    16,210Interest on debt securities
    
    
    3,105
    
    
    
    3,441Dividends on equity securities
    
    
    253
    
    
    
    205Interest on certificates of deposit
    
    
    8
    
    
    
    17Interest on other interest-earning assets
    
    
    85
    
    
    
    12Total interest and dividend income
    
    
    19,897
    
    
    
    19,885Interest expense:Interest on deposits
    
    
    4,573
    
    
    
    4,199Interest on short-term borrowings
    
    
    10
    
    
    
    29Interest on long-term debt
    
    
    879
    
    
    
    886Total interest expense
    
    
    5,462
    
    
    
    5,114Net interest income
    
    
    14,435
    
    
    
    14,771Provision for loan losses
    
    
    342
    
    
    
    1,374Net interest income, after provision
for loan losses
    
    
    14,093
    
    
    
    13,397Non-interest income:Customer service fees
    
    
    1,296
    
    
    
    1,414Loan fees
    
    
    231
    
    
    
    158Gain on sales of loans, net
    
    
    436
    
    
    
    565Gain on sales of securities, net
    
    
    867
    
    
    
    Income from bank-owned life insurance
    
    
    317
    
    
    
    292Equity income on investment in affiliate bank
    
    
    485
    
    
    
    70Total non-interest income
    
    
    3,632
    
    
    
    2,499Non-interest expenses:Salaries and employee benefits
    
    
    7,101
    
    
    
    6,167Occupancy and equipment
    
    
    2,216
    
    
    
    1,783Data processing
    
    
    809
    
    
    
    754Marketing and advertising
    
    
    541
    
    
    
    466Professional services
    
    
    644
    
    
    
    720Foreclosed real estate
    
    
    37
    
    
    
    154Deposit insurance
    
    
    625
    
    
    
    515Other general and administrative
    
    
    651
    
    
    
    790Total non-interest expenses
    
    
    12,624
    
    
    
    11,349Income before income taxes
    
    
    5,101
    
    
    
    4,547Provision for income taxes
    
    
    1,890
    
    
    
    1,687Net income
    
    $
    3,211
    
    
    $
    2,860Income per share:Basic
    
    $
    0.15
    
    
    $
    0.13Diluted
    
    $
    0.15
    
    
    $
    0.13Weighted average shares:Basic
    
    
    21,982,714
    
    
    
    22,133,155Diluted
    
    
    22,095,617
    
    
    
    22,133,155
   4




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MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Three Months Ended March 31, 2011 and 2010
 Shares of No
    
    
    
    
    
    
    
    
    
    
    AccumulatedPar Common
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Unearned
    
    
    UnearnedStock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    Compensation
    
    
    Compensation(Dollars in thousands)
    
    Outstanding
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Stock
    
    
    ESOP
    
    
    Restricted Shares
    
    
    TotalThree Months Ended March 31, 2010Balance at December 31, 2009
    
    
    22,098,565
    
    
    $
    100,972
    
    
    $
    109,189
    
    
    $
    5,583
    
    
    $
    (4,535
    )
    
    $
    (7,452
    )
    
    $
    (3,342
    )
    
    $
    200,415Comprehensive income :Net income
    
    
    
    
    
    
    
    
    
    
    2,860
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,860Change in net unrealized gain on securities available
for sale, net of reclassification adjustment and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,694
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,694Change in defined benefit plan prior service costs and actuarial
losses, net of reclassification adjustments and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,656ESOP shares earned (10,350 shares)
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    100Issuance of 514,109 shares to Meridian Financial Services,
Incorporated, the mutual holding company
    
    
    514,109
    
    
    
    (4,505
    )
    
    
    
    
    
    
    
    
    
    
    4,505
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation expense
    
    
    2,620
    
    
    
    121
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    241Balance at March 31, 2010
    
    
    22,615,294
    
    
    $
    96,585
    
    
    $
    112,049
    
    
    $
    7,379
    
    
    $
    (30
    )
    
    $
    (7,349
    )
    
    $
    (3,222
    )
    
    $
    205,412Three Months Ended March 31, 2011Balance at December 31, 2010
    
    
    22,480,877
    
    
    $
    97,005
    
    
    $
    122,563
    
    
    $
    8,038
    
    
    $
    (2,121
    )
    
    $
    (7,038
    )
    
    $
    (2,836
    )
    
    $
    215,611Comprehensive income :Net income
    
    
    
    
    
    
    
    
    
    
    3,211
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,211Change in net unrealized gain on securities available
for sale, net of reclassification adjustment and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (596
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (596
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,615Purchase of treasury stock
    
    
    (23,336
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (304
    )
    
    
    
    
    
    
    
    
    
    
    (304
    )ESOP shares earned (10,350 shares)
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    133Share-based compensation expense
    
    
    5,260
    
    
    
    131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    261Balance at March 31, 2011
    
    
    22,462,801
    
    
    $
    97,165
    
    
    $
    125,774
    
    
    $
    7,442
    
    
    $
    (2,425
    )
    
    $
    (6,934
    )
    
    $
    (2,706
    )
    
    $
    218,316
   5




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##### Table of Contents



MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months Ended March 31,(In thousands)
    
    2011
    
    
    2010Cash flows from operating activities:Net income
    
    $
    3,211
    
    
    $
    2,860Adjustments to reconcile net income to net cash provided by
operating activities:Accretion of acquisition fair value adjustments
    
    
    (574
    )
    
    
    (533
    )Earned ESOP shares
    
    
    133
    
    
    
    100Provision for loan losses
    
    
    342
    
    
    
    1,374Amortization (accretion) of net deferred loan origination fees
    
    
    181
    
    
    
    (672
    )Net amortization of securities available for sale
    
    
    221
    
    
    
    309Depreciation and amortization expense
    
    
    597
    
    
    
    591Gain on sales of securities, net
    
    
    (867
    )
    
    
    Gain on sales of loans held in portfolio, net
    
    
    
    
    
    
    (352
    )Gain on sales and provision for foreclosed real estate, net
    
    
    (118
    )
    
    
    (26
    )Deferred income tax provision (benefit)
    
    
    66
    
    
    
    (1,996
    )Income from bank-owned life insurance
    
    
    (317
    )
    
    
    (292
    )Equity income on investment in affiliate bank
    
    
    (485
    )
    
    
    (70
    )Share-based compensation expense
    
    
    261
    
    
    
    241Net changes in:Loans held for sale
    
    
    10,198
    
    
    
    1,842Accrued interest receivable
    
    
    379
    
    
    
    706Prepaid deposit insurance
    
    
    587
    
    
    
    321Other assets
    
    
    2,192
    
    
    
    3,968Accrued expenses and other liabilities
    
    
    9,509
    
    
    
    3,913Net cash provided by operating activities
    
    
    25,516
    
    
    
    12,284Cash flows from investing activities:Cash provided by business combination
    
    
    
    
    
    
    14,422Purchases of certificates of deposit
    
    
    (2,508
    )
    
    
    Activity in securities available for sale:Proceeds from maturities, calls and principal payments
    
    
    32,135
    
    
    
    15,619Net purchase of mutual funds
    
    
    (10,435
    )
    
    
    Proceeds from sales
    
    
    3,901
    
    
    
    Purchases
    
    
    (60,245
    )
    
    
    (24,270
    )Loans originated, net of principal payments received
    
    
    (8,327
    )
    
    
    (19,088
    )Proceeds from sales of fixed-rate loans held in portfolio
    
    
    
    
    
    
    34,488Purchases of premises and equipment
    
    
    (1,411
    )
    
    
    (78
    )Capitalized costs on foreclosed real estate
    
    
    (13
    )
    
    
    (197
    )Proceeds from sales of foreclosed real estate
    
    
    305
    
    
    
    667Net cash (used in) provided by investing activities
    
    
    (46,598
    )
    
    
    21,563
    6




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##### Table of Contents



MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months Ended March 31,(In thousands)
    
    2011
    
    
    2010Cash flows from financing activities:Net increase in deposits
    
    
    43,642
    
    
    
    32,389Net change in borrowings with maturities
less than three months
    
    
    9,511
    
    
    
    (8,638
    )Proceeds from Federal Home Loan Bank advances
with maturities of three months or more
    
    
    
    
    
    
    15,000Repayment of Federal Home Loan Bank advances
with maturities of three months or more
    
    
    
    
    
    
    (6,050
    )Purchase of treasury stock
    
    
    (304
    )
    
    
    Net cash provided by financing activities
    
    
    52,849
    
    
    
    32,701Net change in cash and cash equivalents
    
    
    31,767
    
    
    
    66,548Cash and cash equivalents at beginning of period
    
    
    155,493
    
    
    
    19,966Cash and cash equivalents at end of period
    
    $
    187,260
    
    
    $
    86,514Supplemental cash flow information:Interest paid on deposits
    
    $
    4,720
    
    
    $
    4,087Interest paid on borrowings
    
    
    1,235
    
    
    
    607Income taxes paid, net of refunds
    
    
    40
    
    
    
    15Non-cash investing and financing activities:Transfers from loans to foreclosed real estate
    
    
    1,060
    
    
    
    978In conjunction with the purchase acquisition:Fair value of assets acquired, net of cash acquired
    
    
    
    
    
    
    453,031Fair value of liabilities assumed
    
    
    
    
    
    
    467,453
   7




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##### Table of Contents



MERIDIAN INTERSTATE BANCORP, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION
  www.sec.gov
  2. RECENT ACCCOUNTING PRONOUNCEMENT
 Receivables (Topic 310), A Creditors Determination of Whether a
Restructuring Is a Troubled Debt Restructuring. Receivables (Topic 310),
Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses
 3. FAIR VALUE HIERARCHY
    8




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##### Table of Contents



Level 1
 Level 2 
 Level 3
  Cash and cash equivalents
 Certificates of deposit
 Securities available for sale
 Federal Home Loan Bank stock
 Loans held for sale 
 Loans
 Deposits
 Borrowings 
 Accrued interest
 Off-balance sheet credit-related instruments
  9




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##### Table of Contents



Assets Measured at Fair Value on a Recurring Basis
  March 31, 2011Total Fair(In thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    ValueDebt securities:Corporate bonds
    
    $
    
    
    
    $
    203,338
    
    
    $
    
    
    
    $
    203,338Government-sponsored enterprises
    
    
    
    
    
    
    83,757
    
    
    
    
    
    
    
    83,757Municipal bonds
    
    
    
    
    
    
    7,424
    
    
    
    
    
    
    
    7,424Residential mortgage-backed securities:Government-sponsored enterprises
    
    
    
    
    
    
    31,276
    
    
    
    
    
    
    
    31,276Private label
    
    
    
    
    
    
    9,557
    
    
    
    
    
    
    
    9,557Other debt securities
    
    
    
    
    
    
    
    
    
    
    641
    
    
    
    641Total debt securities
    
    
    
    
    
    
    335,352
    
    
    
    641
    
    
    
    335,993Marketable equity securities:Common stocks
    
    
    34,719
    
    
    
    
    
    
    
    
    
    
    
    34,719Money market mutual funds
    
    
    24,322
    
    
    
    
    
    
    
    
    
    
    
    24,322Total marketable equity securities
    
    
    59,041
    
    
    
    
    
    
    
    
    
    
    
    59,041Total securities
available for sale
    
    $
    59,041
    
    
    $
    335,352
    
    
    $
    641
    
    
    $
    395,034
 December 31, 2010Total Fair(In thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    ValueDebt securities:Corporate bonds
    
    $
    
    
    
    $
    222,038
    
    
    $
    
    
    
    $
    222,038Government-sponsored enterprises
    
    
    
    
    
    
    35,900
    
    
    
    
    
    
    
    35,900Municipal bonds
    
    
    
    
    
    
    6,493
    
    
    
    
    
    
    
    6,493Residential mortgage-backed securities:Government-sponsored enterprises
    
    
    
    
    
    
    34,542
    
    
    
    
    
    
    
    34,542Private label
    
    
    
    
    
    
    10,334
    
    
    
    
    
    
    
    10,334Other debt securities
    
    
    
    
    
    
    
    
    
    
    641
    
    
    
    641Total debt securities
    
    
    
    
    
    
    309,307
    
    
    
    641
    
    
    
    309,948Marketable equity securities:Common stocks
    
    
    36,765
    
    
    
    
    
    
    
    
    
    
    
    36,765Money market mutual funds
    
    
    13,889
    
    
    
    
    
    
    
    
    
    
    
    13,889Total marketable equity securities
    
    
    50,654
    
    
    
    
    
    
    
    
    
    
    
    50,654Total securities
available for sale
    
    $
    50,654
    
    
    $
    309,307
    
    
    $
    641
    
    
    $
    360,602
  Assets Measured at Fair Value on a Non-recurring Basis
   10




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##### Table of Contents



Three Months EndedMarch 31, 2011March 31, 2011
    
    
    Total(In thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Gains/(Losses)Impaired loans
    
    $
    
    
    
    $
    
    
    
    $
    7,035
    
    
    $
    41Foreclosed real esate
    
    
    
    
    
    
    
    
    
    
    4,966
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,001
    
    
    $
    41
 Three Months EndedMarch 31, 2010December 31, 2010
    
    
    Total(In thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Gains/(Losses)Impaired loans
    
    $
    
    
    
    $
    
    
    
    $
    6,274
    
    
    $
    (239
    )Foreclosed real esate
    
    
    
    
    
    
    
    
    
    
    4,080
    
    
    
    $
    
    
    
    $
    
    
    
    $
    10,354
    
    
    $
    (239
    )
   Summary of Fair Values of Financial Instruments
  March 31, 2011
    
    
    December 31, 2010Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fair(In thousands)
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    187,260
    
    
    $
    187,260
    
    
    $
    155,493
    
    
    $
    155,493Certificates of deposit
    
    
    2,508
    
    
    
    2,523
    
    
    
    
    
    
    
    Securities available for sale
    
    
    395,034
    
    
    
    395,034
    
    
    
    360,602
    
    
    
    360,602Federal Home Loan Bank stock
    
    
    12,538
    
    
    
    12,538
    
    
    
    12,538
    
    
    
    12,538Loans and loans held for sale, net
    
    
    1,183,002
    
    
    
    1,191,884
    
    
    
    1,186,575
    
    
    
    1,195,661Accrued interest receivable
    
    
    7,164
    
    
    
    7,164
    
    
    
    7,543
    
    
    
    7,543Financial liabilities:Deposits
    
    
    1,498,687
    
    
    
    1,507,254
    
    
    
    1,455,215
    
    
    
    1,463,016Borrowings
    
    
    157,847
    
    
    
    162,028
    
    
    
    148,683
    
    
    
    153,618Accrued interest payable
    
    
    1,154
    
    
    
    1,154
    
    
    
    1,131
    
    
    
    1,131
  11




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##### Table of Contents



4. EARNINGS PER SHARE
   Three Months Ended March 31,(Dollars in thousands, except per share amounts)
    
    2011
    
    
    2010Net income available to common stockholders
    
    $
    3,211
    
    
    $
    2,860Average number of common shares outstanding
    
    
    21,773,621
    
    
    
    21,866,229Effect of unvested stock awards
    
    
    209,093
    
    
    
    266,926Basic weighted average shares outstanding
    
    
    21,982,714
    
    
    
    22,133,155Effect of dilutive stock options
    
    
    112,903
    
    
    
    Diluted weighted average shares outstanding
    
    
    22,095,617
    
    
    
    22,133,155Earnings per share:Basic
    
    $
    0.15
    
    
    $
    0.13Diluted
    
    $
    0.15
    
    
    $
    0.13
  4. SECURITIES
    12




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##### Table of Contents



Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueMarch 31, 2011Debt securities:Corporate bonds:Financial services
    
    $
    84,405
    
    
    $
    2,063
    
    
    $
    (272
    )
    
    $
    86,196Industry and manufacturing
    
    
    29,821
    
    
    
    1,464
    
    
    
    
    
    
    
    31,285Consumer products and services
    
    
    33,641
    
    
    
    1,705
    
    
    
    
    
    
    
    35,346Technology
    
    
    15,256
    
    
    
    766
    
    
    
    
    
    
    
    16,022Healthcare
    
    
    21,685
    
    
    
    736
    
    
    
    
    
    
    
    22,421Other
    
    
    11,686
    
    
    
    382
    
    
    
    
    
    
    
    12,068Total corporate bonds
    
    
    196,494
    
    
    
    7,116
    
    
    
    (272
    )
    
    
    203,338Government-sponsored enterprises
    
    
    84,111
    
    
    
    75
    
    
    
    (429
    )
    
    
    83,757Municipal bonds
    
    
    7,501
    
    
    
    16
    
    
    
    (93
    )
    
    
    7,424Residential mortgage-backed securities:Government-sponsored enterprises
    
    
    30,492
    
    
    
    786
    
    
    
    (2
    )
    
    
    31,276Private label
    
    
    8,870
    
    
    
    695
    
    
    
    (8
    )
    
    
    9,557Other debt securities
    
    
    641
    
    
    
    
    
    
    
    
    
    
    
    641Total debt securities
    
    
    328,109
    
    
    
    8,688
    
    
    
    (804
    )
    
    
    335,993Marketable equity securities:Common stocks
    
    
    29,517
    
    
    
    5,448
    
    
    
    (246
    )
    
    
    34,719Money market mutual funds
    
    
    24,339
    
    
    
    
    
    
    
    (17
    )
    
    
    24,322Total marketable equity securities
    
    
    53,856
    
    
    
    5,448
    
    
    
    (263
    )
    
    
    59,041Total securities available for sale
    
    $
    381,965
    
    
    $
    14,136
    
    
    $
    (1,067
    )
    
    $
    395,034December 31, 2010Debt securities:Corporate bonds:Financial services
    
    $
    79,896
    
    
    $
    1,983
    
    
    $
    (266
    )
    
    $
    81,613Industry and manufacturing
    
    
    32,875
    
    
    
    1,595
    
    
    
    
    
    
    
    34,470Consumer products and services
    
    
    39,173
    
    
    
    1,895
    
    
    
    
    
    
    
    41,068Technology
    
    
    29,280
    
    
    
    948
    
    
    
    
    
    
    
    30,228Healthcare
    
    
    21,687
    
    
    
    783
    
    
    
    
    
    
    
    22,470Other
    
    
    11,714
    
    
    
    475
    
    
    
    
    
    
    
    12,189Total corporate bonds
    
    
    214,625
    
    
    
    7,679
    
    
    
    (266
    )
    
    
    222,038Government-sponsored enterprises
    
    
    36,062
    
    
    
    77
    
    
    
    (239
    )
    
    
    35,900Municipal bonds
    
    
    6,583
    
    
    
    10
    
    
    
    (100
    )
    
    
    6,493Residential mortgage-backed securities:Government-sponsored enterprises
    
    
    33,625
    
    
    
    927
    
    
    
    (10
    )
    
    
    34,542Private label
    
    
    9,737
    
    
    
    687
    
    
    
    (90
    )
    
    
    10,334Other debt securities
    
    
    641
    
    
    
    
    
    
    
    
    
    
    
    641Total debt securities
    
    
    301,273
    
    
    
    9,380
    
    
    
    (705
    )
    
    
    309,948Marketable equity securities:Common stocks
    
    
    31,344
    
    
    
    5,596
    
    
    
    (175
    )
    
    
    36,765Money market mutual funds
    
    
    13,904
    
    
    
    
    
    
    
    (15
    )
    
    
    13,889Total marketable equity securities
    
    
    45,248
    
    
    
    5,596
    
    
    
    (190
    )
    
    
    50,654Total securities available for sale
    
    $
    346,521
    
    
    $
    14,976
    
    
    $
    (895
    )
    
    $
    360,602
  13




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##### Table of Contents



Within 1 year
    
    
    Over 1 year to 5 years
    
    
    Over 5 years
    
    
    TotalAmortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair(In thousands)
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueCorporate bonds:Financial services
    
    $
    17,011
    
    
    $
    17,429
    
    
    $
    58,442
    
    
    $
    59,938
    
    
    $
    8,952
    
    
    $
    8,829
    
    
    $
    84,405
    
    
    $
    86,196Industry and manufacturing
    
    
    6,611
    
    
    
    6,800
    
    
    
    23,210
    
    
    
    24,485
    
    
    
    
    
    
    
    
    
    
    
    29,821
    
    
    
    31,285Consumer products and services
    
    
    8,946
    
    
    
    9,256
    
    
    
    24,695
    
    
    
    26,090
    
    
    
    
    
    
    
    
    
    
    
    33,641
    
    
    
    35,346Technology
    
    
    7,281
    
    
    
    7,511
    
    
    
    7,975
    
    
    
    8,511
    
    
    
    
    
    
    
    
    
    
    
    15,256
    
    
    
    16,022Healthcare
    
    
    3,010
    
    
    
    3,037
    
    
    
    18,675
    
    
    
    19,384
    
    
    
    
    
    
    
    
    
    
    
    21,685
    
    
    
    22,421Other
    
    
    4,064
    
    
    
    4,125
    
    
    
    7,622
    
    
    
    7,943
    
    
    
    
    
    
    
    
    
    
    
    11,686
    
    
    
    12,068Total corporate bonds
    
    
    46,923
    
    
    
    48,158
    
    
    
    140,619
    
    
    
    146,351
    
    
    
    8,952
    
    
    
    8,829
    
    
    
    196,494
    
    
    
    203,338Government-sponsored enterprises
    
    
    
    
    
    
    
    
    
    
    42,866
    
    
    
    42,823
    
    
    
    41,245
    
    
    
    40,934
    
    
    
    84,111
    
    
    
    83,757Municipal bonds
    
    
    
    
    
    
    
    
    
    
    2,580
    
    
    
    2,574
    
    
    
    4,921
    
    
    
    4,850
    
    
    
    7,501
    
    
    
    7,424Residential mortgage-backed securities:Government-sponsored enterprises
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    7
    
    
    
    30,485
    
    
    
    31,269
    
    
    
    30,492
    
    
    
    31,276Private label
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,870
    
    
    
    9,557
    
    
    
    8,870
    
    
    
    9,557Other debt securities
    
    
    
    
    
    
    
    
    
    
    140
    
    
    
    140
    
    
    
    501
    
    
    
    501
    
    
    
    641
    
    
    
    641Total
    
    $
    46,923
    
    
    $
    48,158
    
    
    $
    186,212
    
    
    $
    191,895
    
    
    $
    94,974
    
    
    $
    95,940
    
    
    $
    328,109
    
    
    $
    335,993
   Less Than Twelve Months
    
    
    Over Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair(In thousands)
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    ValueMarch 31, 2011Debt securities:Corporate bonds  financial services
    
    $
    261
    
    
    $
    15,747
    
    
    $
    11
    
    
    $
    2,989Government-sponsored enterprises
    
    
    429
    
    
    
    52,647
    
    
    
    
    
    
    
    Municipal bonds
    
    
    93
    
    
    
    4,989
    
    
    
    
    
    
    
    Residential mortgage-backed securities:Government-sponsored enterprises
    
    
    2
    
    
    
    218
    
    
    
    
    
    
    
    Private label
    
    
    8
    
    
    
    493
    
    
    
    
    
    
    
    Total debt securities
    
    
    793
    
    
    
    74,094
    
    
    
    11
    
    
    
    2,989Marketable equity securities:Common stocks
    
    
    193
    
    
    
    3,794
    
    
    
    53
    
    
    
    492Money market mutual funds
    
    
    17
    
    
    
    972
    
    
    
    
    
    
    
    Total marketable equity securities
    
    
    210
    
    
    
    4,766
    
    
    
    53
    
    
    
    492Total temporarily impaired securities
    
    $
    1,003
    
    
    $
    78,860
    
    
    $
    64
    
    
    $
    3,481
  14




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##### Table of Contents



Less Than Twelve Months
    
    
    Over Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair(In thousands)
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    ValueDecember 31, 2010Debt securities:Corporate bonds  financial services
    
    $
    213
    
    
    $
    18,533
    
    
    $
    53
    
    
    $
    5,947Government-sponsored enterprises
    
    
    239
    
    
    
    25,254
    
    
    
    
    
    
    
    Municipal bonds
    
    
    100
    
    
    
    4,983
    
    
    
    
    
    
    
    Residential mortgage-backed securities:Government-sponsored enterprises
    
    
    10
    
    
    
    271
    
    
    
    
    
    
    
    Private label
    
    
    90
    
    
    
    1,933
    
    
    
    
    
    
    
    Total debt securities
    
    
    652
    
    
    
    50,974
    
    
    
    53
    
    
    
    5,947Marketable equity securities:Common stocks
    
    
    86
    
    
    
    2,556
    
    
    
    89
    
    
    
    735Money market mutual funds
    
    
    15
    
    
    
    968
    
    
    
    
    
    
    
    Total marketable equity securities
    
    
    101
    
    
    
    3,524
    
    
    
    89
    
    
    
    735Total temporarily impaired securities
    
    $
    753
    
    
    $
    54,498
    
    
    $
    142
    
    
    $
    6,682
     15




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##### Table of Contents



5. LOANS
  March 31, 2011
    
    
    December 31, 2010(Dollars in thousands)
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Real estate loans:Residential real estate:One-to four-family
    
    $
    390,832
    
    
    
    32.7
    %
    
    $
    402,887
    
    
    
    34.0
    %Multi-family
    
    
    160,533
    
    
    
    13.5
    
    
    
    135,290
    
    
    
    11.4Home equity lines of credit
    
    
    62,666
    
    
    
    5.3
    
    
    
    62,750
    
    
    
    5.3Commercial real estate
    
    
    451,305
    
    
    
    37.9
    
    
    
    433,504
    
    
    
    36.6Construction
    
    
    87,756
    
    
    
    7.4
    
    
    
    113,142
    
    
    
    9.6Total real estate loans
    
    
    1,153,092
    
    
    
    96.8
    
    
    
    1,147,573
    
    
    
    96.9Commercial business loans
    
    
    31,843
    
    
    
    2.7
    
    
    
    30,189
    
    
    
    2.6Consumer
    
    
    5,659
    
    
    
    0.5
    
    
    
    6,043
    
    
    
    0.5Total loans
    
    
    1,190,594
    
    
    
    100.0
    %
    
    
    1,183,805
    
    
    
    100.0
    %Allowance for loan losses
    
    
    (10,323
    )
    
    
    
    
    
    
    (10,155
    )Net deferred loan origination fees
    
    
    (84
    )
    
    
    
    
    
    
    (88
    )Loans, net
    
    $
    1,180,187
    
    
    
    
    
    
    $
    1,173,562
    16




---



##### Table of Contents



March 31,
    
    
    December 31,(In thousands)
    
    2011
    
    
    2010Residential real estate:One-to four-family
    
    $
    9,027
    
    
    $
    10,685Multi-family
    
    
    2,109
    
    
    
    2,120Home equity lines of credit
    
    
    393
    
    
    
    667Commercial real estate
    
    
    3,586
    
    
    
    4,769Construction
    
    
    2,426
    
    
    
    2,361Total mortgage loans on real estate
    
    
    17,541
    
    
    
    20,602Other loans:Commercial business loans
    
    
    106
    
    
    
    111Consumer
    
    
    5
    
    
    
    5111
    
    
    
    116Outstanding principal balance
    
    
    17,652
    
    
    
    20,718Nonaccretable discount
    
    
    (3,870
    )
    
    
    (4,216
    )Carrying amount
    
    $
    13,782
    
    
    $
    16,502
  At or For the Three Months Ended March 31, 2011HomeOne-to
    
    
    Multi-
    
    
    equity lines
    
    
    Commercial
    
    
    
    
    
    
    Commercial(In thousands)
    
    four-family
    
    
    family
    
    
    of credit
    
    
    real estate
    
    
    Construction
    
    
    business
    
    
    Consumer
    
    
    Unallocated
    
    
    TotalBeginning Balance
    
    $
    1,130
    
    
    $
    1,038
    
    
    $
    227
    
    
    $
    5,238
    
    
    $
    2,042
    
    
    $
    448
    
    
    $
    32
    
    
    $
    
    
    
    $
    10,155Provision for loan loss
    
    
    50
    
    
    
    233
    
    
    
    (24
    )
    
    
    812
    
    
    
    (806
    )
    
    
    63
    
    
    
    14
    
    
    
    
    
    
    
    342Charge-offs
    
    
    (104
    )
    
    
    
    
    
    
    (27
    )
    
    
    (74
    )
    
    
    (194
    )
    
    
    (19
    )
    
    
    (30
    )
    
    
    
    
    
    
    (448
    )Recoveries
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    254
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    274Ending Balance
    
    $
    1,078
    
    
    $
    1,273
    
    
    $
    177
    
    
    $
    5,976
    
    
    $
    1,296
    
    
    $
    492
    
    
    $
    31
    
    
    $
    
    
    
    $
    10,323Amount of allowance for loan losses for
loans deemed to be impaired
    
    $
    12
    
    
    $
    
    
    
    $
    8
    
    
    $
    59
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    79Amount of allowance for loan losses for
loans not deemed to be impaired
    
    
    1,066
    
    
    
    1,273
    
    
    
    169
    
    
    
    5,917
    
    
    
    1,296
    
    
    
    492
    
    
    
    31
    
    
    
    
    
    
    
    10,244$
    1,078
    
    
    $
    1,273
    
    
    $
    177
    
    
    $
    5,976
    
    
    $
    1,296
    
    
    $
    492
    
    
    $
    31
    
    
    $
    
    
    
    $
    10,323Amount of allowance for loan losses for
loans acquired with deteriored credit
quality included above
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5Loans deemed to be impaired
as of March 31, 2011
    
    $
    3,836
    
    
    $
    4,393
    
    
    $
    125
    
    
    $
    13,842
    
    
    $
    25,871
    
    
    $
    59
    
    
    $
    
    
    
    $
    
    
    
    $
    48,126Loans not deemed to be impaired
as of March 31, 2011
    
    
    386,996
    
    
    
    156,140
    
    
    
    62,541
    
    
    
    437,463
    
    
    
    61,885
    
    
    
    31,784
    
    
    
    5,659
    
    
    
    
    
    
    
    1,142,468$
    390,832
    
    
    $
    160,533
    
    
    $
    62,666
    
    
    $
    451,305
    
    
    $
    87,756
    
    
    $
    31,843
    
    
    $
    5,659
    
    
    $
    
    
    
    $
    1,190,594
 At December 31, 2010Amount of allowance for loan losses for
loans deemed to be impaired
    
    $
    37
    
    
    $
    
    
    
    $
    8
    
    
    $
    38
    
    
    $
    18
    
    
    $
    19
    
    
    $
    
    
    
    $
    
    
    
    $
    120Amount of allowance for loan losses for
loans not deemed to be impaired
    
    
    1,093
    
    
    
    1,038
    
    
    
    219
    
    
    
    5,200
    
    
    
    2,024
    
    
    
    429
    
    
    
    32
    
    
    
    
    
    
    
    10,035$
    1,130
    
    
    $
    1,038
    
    
    $
    227
    
    
    $
    5,238
    
    
    $
    2,042
    
    
    $
    448
    
    
    $
    32
    
    
    $
    
    
    
    $
    10,155Amount of allowance for loan losses for
loans acquired with deteriored credit
quality as of December 31, 2010
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    10
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    10Loans deemed to be impaired
as of December 31, 2010
    
    $
    4,200
    
    
    $
    3,732
    
    
    $
    125
    
    
    $
    11,794
    
    
    $
    18,474
    
    
    $
    186
    
    
    $
    
    
    
    $
    
    
    
    $
    38,511Loans not deemed to be impaired
as of December 31, 2010
    
    
    398,687
    
    
    
    131,558
    
    
    
    62,625
    
    
    
    421,710
    
    
    
    94,668
    
    
    
    30,003
    
    
    
    6,043
    
    
    
    
    
    
    
    1,145,294$
    402,887
    
    
    $
    135,290
    
    
    $
    62,750
    
    
    $
    433,504
    
    
    $
    113,142
    
    
    $
    30,189
    
    
    $
    6,043
    
    
    $
    
    
    
    $
    1,183,805
  17




---



##### Table of Contents



At or For the Three Months Ended March 31, 2010HomeOne-to
    
    
    Multi-
    
    
    equity lines
    
    
    Commercial
    
    
    
    
    
    
    Commercial(In thousands)
    
    four-family
    
    
    family
    
    
    of credit
    
    
    real estate
    
    
    Construction
    
    
    business
    
    
    Consumer
    
    
    Unallocated
    
    
    TotalBeginning Balance
    
    $
    1,730
    
    
    $
    467
    
    
    $
    128
    
    
    $
    4,435
    
    
    $
    1,859
    
    
    $
    586
    
    
    $
    37
    
    
    $
    
    
    
    $
    9,242Provision for loan loss
    
    
    179
    
    
    
    451
    
    
    
    1
    
    
    
    434
    
    
    
    527
    
    
    
    (329
    )
    
    
    111
    
    
    
    
    
    
    
    1,374Charge-offs
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    (22
    )Recoveries
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    35Ending Balance
    
    $
    1,931
    
    
    $
    918
    
    
    $
    129
    
    
    $
    4,869
    
    
    $
    2,386
    
    
    $
    257
    
    
    $
    139
    
    
    $
    
    
    
    $
    10,629Amount of allowance for loan losses for
loans deemed to be impaired
    
    $
    576
    
    
    $
    11
    
    
    $
    
    
    
    $
    195
    
    
    $
    320
    
    
    $
    60
    
    
    $
    
    
    
    $
    
    
    
    $
    1,162Amount of allowance for loan losses for
loans not deemed to be impaired
    
    
    1,355
    
    
    
    907
    
    
    
    129
    
    
    
    4,674
    
    
    
    2,066
    
    
    
    197
    
    
    
    139
    
    
    
    
    
    
    
    9,467$
    1,931
    
    
    $
    918
    
    
    $
    129
    
    
    $
    4,869
    
    
    $
    2,386
    
    
    $
    257
    
    
    $
    139
    
    
    $
    
    
    
    $
    10,629Amount of allowance for loan losses for
loans acquired with deteriored credit
quality included above
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Loans deemed to be impaired
as of March 31, 2010
    
    $
    3,535
    
    
    $
    2,862
    
    
    $
    100
    
    
    $
    7,382
    
    
    $
    15,176
    
    
    $
    4
    
    
    $
    4
    
    
    $
    
    
    
    $
    29,063Loans not deemed to be impaired
as of March 31, 2010
    
    
    422,801
    
    
    
    119,005
    
    
    
    72,797
    
    
    
    367,414
    
    
    
    105,989
    
    
    
    28,817
    
    
    
    7,791
    
    
    
    
    
    
    
    1,124,614$
    426,336
    
    
    $
    121,867
    
    
    $
    72,897
    
    
    $
    374,796
    
    
    $
    121,165
    
    
    $
    28,821
    
    
    $
    7,795
    
    
    $
    
    
    
    $
    1,153,677
  March 31, 2011
    
    
    December 31, 2010% of
    
    
    
    
    
    
    
    
    
    
    % of% of
    
    
    Loans in
    
    
    
    
    
    
    % of
    
    
    Loans inAllowance
    
    
    Category
    
    
    
    
    
    
    Allowance
    
    
    Categoryto Total
    
    
    of Total
    
    
    
    
    
    
    to Total
    
    
    of Total(Dollars in thousands)
    
    Amount
    
    
    Allowance
    
    
    Loans
    
    
    Amount
    
    
    Allowance
    
    
    LoansReal estate loans:Residential real estate:One-to four-family
    
    $
    1,078
    
    
    
    10.4
    %
    
    
    32.7
    %
    
    $
    1,130
    
    
    
    11.1
    %
    
    
    34.0
    %Multi-family
    
    
    1,273
    
    
    
    12.3
    
    
    
    13.5
    
    
    
    1,038
    
    
    
    10.2
    
    
    
    11.4Home equity lines of credit
    
    
    177
    
    
    
    1.7
    
    
    
    5.3
    
    
    
    227
    
    
    
    2.2
    
    
    
    5.3Commercial real estate
    
    
    5,976
    
    
    
    57.9
    
    
    
    37.9
    
    
    
    5,238
    
    
    
    51.7
    
    
    
    36.6Construction
    
    
    1,296
    
    
    
    12.6
    
    
    
    7.4
    
    
    
    2,042
    
    
    
    20.1
    
    
    
    9.6Total real estate loans
    
    
    9,800
    
    
    
    94.9
    
    
    
    96.8
    
    
    
    9,675
    
    
    
    95.3
    
    
    
    96.9Commercial business loans
    
    
    492
    
    
    
    4.8
    
    
    
    2.7
    
    
    
    448
    
    
    
    4.4
    
    
    
    2.6Consumer
    
    
    31
    
    
    
    0.3
    
    
    
    0.5
    
    
    
    32
    
    
    
    0.3
    
    
    
    0.5Total loans
    
    $
    10,323
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    $
    10,155
    
    
    
    100.0
    %
    
    
    100.0
    %Allowance to non-accrual loans
    
    
    20.32
    %
    
    
    
    
    
    
    
    
    
    
    23.54
    %Allowance to total loans outstanding
    
    
    0.87
    %
    
    
    
    
    
    
    
    
    
    
    0.86
    %Net charge-offs to average loans
outstanding (annualized)
    
    
    0.06
    %
    
    
    
    
    
    
    
    
    
    
    0.19
    %
  18




---



##### Table of Contents



March 31, 2011
    
    
    December 31, 201030-59
    
    
    60-89
    
    
    90 Days
    
    
    
    
    
    
    30-59
    
    
    60-89
    
    
    90 DaysDays
    
    
    Days
    
    
    or Greater
    
    
    Total
    
    
    Days
    
    
    Days
    
    
    or Greater
    
    
    Total(In thousands)
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past DueReal estate loans:Residential real estate:One-to four-family
    
    $
    4,378
    
    
    $
    679
    
    
    $
    4,878
    
    
    $
    9,935
    
    
    $
    4,434
    
    
    $
    799
    
    
    $
    7,400
    
    
    $
    12,633Multi-family
    
    
    
    
    
    
    
    
    
    
    710
    
    
    
    710
    
    
    
    2,630
    
    
    
    
    
    
    
    860
    
    
    
    3,490Home equity lines of credit
    
    
    954
    
    
    
    186
    
    
    
    1,156
    
    
    
    2,296
    
    
    
    1,129
    
    
    
    322
    
    
    
    1,769
    
    
    
    3,220Commercial real estate
    
    
    616
    
    
    
    541
    
    
    
    2,154
    
    
    
    3,311
    
    
    
    1,265
    
    
    
    534
    
    
    
    2,735
    
    
    
    4,534Construction
    
    
    
    
    
    
    
    
    
    
    11,822
    
    
    
    11,822
    
    
    
    
    
    
    
    
    
    
    
    6,969
    
    
    
    6,969Total real estate loans
    
    
    5,948
    
    
    
    1,406
    
    
    
    20,720
    
    
    
    28,074
    
    
    
    9,458
    
    
    
    1,655
    
    
    
    19,733
    
    
    
    30,846Commercial business loans
    
    
    617
    
    
    
    164
    
    
    
    437
    
    
    
    1,218
    
    
    
    15
    
    
    
    48
    
    
    
    385
    
    
    
    448Consumer
    
    
    364
    
    
    
    179
    
    
    
    
    
    
    
    543
    
    
    
    293
    
    
    
    245
    
    
    
    5
    
    
    
    543Total
    
    $
    6,929
    
    
    $
    1,749
    
    
    $
    21,157
    
    
    $
    29,835
    
    
    $
    9,766
    
    
    $
    1,948
    
    
    $
    20,123
    
    
    $
    31,837
  March 31,
    
    
    December 31,(Dollars in thousands)
    
    2011
    
    
    2010Loans accounted for on a non-accrual basis:Real estate loans:Residential real estate:One-to four family
    
    $
    11,737
    
    
    $
    11,529Multi-family
    
    
    4,158
    
    
    
    2,246Home equity lines of credit
    
    
    2,484
    
    
    
    2,408Commercial real estate
    
    
    9,535
    
    
    
    11,290Construction
    
    
    22,852
    
    
    
    15,326Total real estate loans
    
    
    50,766
    
    
    
    42,799Commercial business loans
    
    
    44
    
    
    
    335Consumer
    
    
    
    
    
    
    Total non-accrual loans
    
    
    50,810
    
    
    
    43,134Foreclosed assets
    
    
    4,966
    
    
    
    4,080Total nonperforming assets
    
    $
    55,776
    
    
    $
    47,214Non-performing loans to total loans
    
    
    4.27
    %
    
    
    3.64
    %Non-performing loans to total assets
    
    
    2.67
    %
    
    
    2.35
    %Non-performing assets to total assets
    
    
    2.93
    %
    
    
    2.57
    %
  19




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##### Table of Contents



Three Months Ended March 31, 2011March 31, 2011
    
    
    
    
    
    
    
    
    
    
    InterestUnpaid
    
    
    
    
    
    
    Average
    
    
    Interest
    
    
    IncomeRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    Income
    
    
    Recognized(In thousands)
    
    Investment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    Recognized
    
    
    on Cash BasisImpaired loans without a valuation allowance:Residential real estate:One-to four-family
    
    $
    3,104
    
    
    $
    3,104
    
    
    $
    
    
    
    $
    3,274
    
    
    $
    59
    
    
    $
    47Multi-family
    
    
    4,393
    
    
    
    4,393
    
    
    
    
    
    
    
    4,063
    
    
    
    152
    
    
    
    145Home equity lines of credit
    
    
    100
    
    
    
    100
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    Commercial real estate
    
    
    7,327
    
    
    
    7,444
    
    
    
    
    
    
    
    6,347
    
    
    
    182
    
    
    
    136Construction
    
    
    25,009
    
    
    
    25,871
    
    
    
    
    
    
    
    21,647
    
    
    
    660
    
    
    
    443Commercial business loans
    
    
    59
    
    
    
    59
    
    
    
    
    
    
    
    113
    
    
    
    13
    
    
    
    13Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    39,992
    
    
    
    40,971
    
    
    
    
    
    
    
    35,544
    
    
    
    1,066
    
    
    
    784Impaired loans with a valuation allowance:Residential real estate:One-to four-family
    
    
    720
    
    
    
    732
    
    
    
    12
    
    
    
    720
    
    
    
    11
    
    
    
    9Multi-family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity lines of credit
    
    
    16
    
    
    
    25
    
    
    
    8
    
    
    
    17
    
    
    
    
    
    
    
    Commercial real estate
    
    
    6,299
    
    
    
    6,398
    
    
    
    59
    
    
    
    6,344
    
    
    
    104
    
    
    
    71Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    8
    
    
    
    Commercial business loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    7,035
    
    
    
    7,155
    
    
    
    79
    
    
    
    7,167
    
    
    
    123
    
    
    
    80Total impaired loans
    
    $
    47,027
    
    
    $
    48,126
    
    
    $
    79
    
    
    $
    42,711
    
    
    $
    1,189
    
    
    $
    864
 Three Months Ended March 31, 2010December 31, 2010
    
    
    
    
    
    
    
    
    
    
    InterestUnpaid
    
    
    
    
    
    
    Average
    
    
    Interest
    
    
    IncomeRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    Income
    
    
    Recognized(In thousands)
    
    Investment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    Recognized
    
    
    on Cash BasisImpaired loans without a valuation allowance:Residential real estate:One-to four-family
    
    $
    3,255
    
    
    $
    3,255
    
    
    $
    
    
    
    $
    2,295
    
    
    $
    41
    
    
    $
    28Multi-family
    
    
    3,732
    
    
    
    3,732
    
    
    
    
    
    
    
    4,755
    
    
    
    128
    
    
    
    83Home equity lines of credit
    
    
    100
    
    
    
    100
    
    
    
    
    
    
    
    118
    
    
    
    2
    
    
    
    5Commercial real estate
    
    
    6,494
    
    
    
    6,578
    
    
    
    
    
    
    
    852
    
    
    
    23
    
    
    
    7Construction
    
    
    17,422
    
    
    
    18,285
    
    
    
    
    
    
    
    14,669
    
    
    
    259
    
    
    
    173Commercial business loans
    
    
    167
    
    
    
    167
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    1
    
    
    
    1Total
    
    
    31,170
    
    
    
    32,117
    
    
    
    
    
    
    
    22,694
    
    
    
    454
    
    
    
    297Impaired loans with a valuation allowance:Residential real estate:One-to four-family
    
    
    908
    
    
    
    945
    
    
    
    37
    
    
    
    1,897
    
    
    
    33
    
    
    
    29Multi-family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    796
    
    
    
    12
    
    
    
    10Home equity lines of credit
    
    
    17
    
    
    
    25
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    5,178
    
    
    
    5,216
    
    
    
    38
    
    
    
    2,839
    
    
    
    77
    
    
    
    39Construction
    
    
    171
    
    
    
    189
    
    
    
    18
    
    
    
    742
    
    
    
    14
    
    
    
    Commercial business loans
    
    
    
    
    
    
    19
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    6,274
    
    
    
    6,394
    
    
    
    120
    
    
    
    6,274
    
    
    
    136
    
    
    
    78Total impaired loans
    
    $
    37,444
    
    
    $
    38,511
    
    
    $
    120
    
    
    $
    28,968
    
    
    $
    590
    
    
    $
    375
  20




---



##### Table of Contents




    
    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 this category 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.
   March 31, 2011Multi-familyresidential
    
    
    Commercial
    
    
    
    
    
    
    Commercial(In thousands)
    
    real estate
    
    
    real estate
    
    
    Construction
    
    
    businessLoans rated 1 - 4
    
    $
    152,847
    
    
    $
    443,338
    
    
    $
    68,916
    
    
    $
    31,543Loans rated 5
    
    
    7,686
    
    
    
    7,967
    
    
    
    18,840
    
    
    
    300Loans rated 6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans rated 7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    160,533
    
    
    $
    451,305
    
    
    $
    87,756
    
    
    $
    31,843
 December 31, 2010Multi-familyresidential
    
    
    Commercial
    
    
    
    
    
    
    Commercial(In thousands)
    
    real estate
    
    
    real estate
    
    
    Construction
    
    
    businessLoans rated 1 - 4
    
    $
    132,176
    
    
    $
    425,010
    
    
    $
    93,092
    
    
    $
    29,872Loans rated 5
    
    
    3,114
    
    
    
    8,494
    
    
    
    20,050
    
    
    
    317Loans rated 6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans rated 7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    135,290
    
    
    $
    433,504
    
    
    $
    113,142
    
    
    $
    30,189
  21




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##### Table of Contents



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward Looking Statements
  
    
    general economic conditions, either nationally or in our market area, that are worse than
expected;
 
    
    inflation and changes in the interest rate environment that reduce our interest margins
or reduce the fair value of financial instruments;
 
    
    increased competitive pressures among financial services companies;
 
    
    changes in consumer spending, borrowing and savings habits;
 
    
    our ability to enter new markets successfully and take advantage of growth opportunities,
and the possible dilutive effect of potential acquisitions or de novobranches, if any;
 
    
    legislative or regulatory changes that adversely affect our business;
 
    
    adverse changes in the securities markets;
 
    
    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;
 
    
    inability of third-party providers to perform their obligations to us; and
 
    
    changes in our organization, compensation and benefit plans.
 www.sec.gov
  22




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##### Table of Contents



Critical Accounting Policies
  Comparison of Financial Condition at March 31, 2011 and December 31, 2010
 Assets
  Asset Quality
 Credit Risk Management
   Delinquencies
  March 31, 2011
    
    
    December 31, 201030-59
    
    
    60-89
    
    
    90 Days
    
    
    
    
    
    
    30-59
    
    
    60-89
    
    
    90 DaysDays
    
    
    Days
    
    
    or Greater
    
    
    Total
    
    
    Days
    
    
    Days
    
    
    or Greater
    
    
    Total(In thousands)
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past Due
    
    
    Past DueReal estate loans:Residential real estate:One-to four-family
    
    $
    4,378
    
    
    $
    679
    
    
    $
    4,878
    
    
    $
    9,935
    
    
    $
    4,434
    
    
    $
    799
    
    
    $
    7,400
    
    
    $
    12,633Multi-family
    
    
    
    
    
    
    
    
    
    
    710
    
    
    
    710
    
    
    
    2,630
    
    
    
    
    
    
    
    860
    
    
    
    3,490Home equity lines of credit
    
    
    954
    
    
    
    186
    
    
    
    1,156
    
    
    
    2,296
    
    
    
    1,129
    
    
    
    322
    
    
    
    1,769
    
    
    
    3,220Commercial real estate
    
    
    616
    
    
    
    541
    
    
    
    2,154
    
    
    
    3,311
    
    
    
    1,265
    
    
    
    534
    
    
    
    2,735
    
    
    
    4,534Construction
    
    
    
    
    
    
    
    
    
    
    11,822
    
    
    
    11,822
    
    
    
    
    
    
    
    
    
    
    
    6,969
    
    
    
    6,969Total real estate loans
    
    
    5,948
    
    
    
    1,406
    
    
    
    20,720
    
    
    
    28,074
    
    
    
    9,458
    
    
    
    1,655
    
    
    
    19,733
    
    
    
    30,846Commercial business loans
    
    
    617
    
    
    
    164
    
    
    
    437
    
    
    
    1,218
    
    
    
    15
    
    
    
    48
    
    
    
    385
    
    
    
    448Consumer
    
    
    364
    
    
    
    179
    
    
    
    
    
    
    
    543
    
    
    
    293
    
    
    
    245
    
    
    
    5
    
    
    
    543Total
    
    $
    6,929
    
    
    $
    1,749
    
    
    $
    21,157
    
    
    $
    29,835
    
    
    $
    9,766
    
    
    $
    1,948
    
    
    $
    20,123
    
    
    $
    31,837
  23




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##### Table of Contents



Non-performing Assets
    March 31,
    
    
    December 31,(Dollars in thousands)
    
    2011
    
    
    2010Loans accounted for on a non-accrual basis:Real estate loans:Residential real estate:One-to four family
    
    $
    11,737
    
    
    $
    11,529Multi-family
    
    
    4,158
    
    
    
    2,246Home equity lines of credit
    
    
    2,484
    
    
    
    2,408Commercial real estate
    
    
    9,535
    
    
    
    11,290Construction
    
    
    22,852
    
    
    
    15,326Total real estate loans
    
    
    50,766
    
    
    
    42,799Commercial business loans
    
    
    44
    
    
    
    335Consumer
    
    
    
    
    
    
    Total non-accrual loans
    
    
    50,810
    
    
    
    43,134Foreclosed assets
    
    
    4,966
    
    
    
    4,080Total nonperforming assets
    
    $
    55,776
    
    
    $
    47,214Non-performing loans to total loans
    
    
    4.27
    %
    
    
    3.64
    %Non-performing loans to total assets
    
    
    2.67
    %
    
    
    2.35
    %Non-performing assets to total assets
    
    
    2.93
    %
    
    
    2.57
    %
   24




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##### Table of Contents



Impaired Loans
     
    
    When a loan becomes seriously delinquent, generally 60 days past due, internal valuations
are completed by our in-house appraiser who is a Massachusetts certified residential
appraiser. We obtain third party appraisals, which are generally the basis for charge-offs
when a loss is indicated, prior to the foreclosure sale. We generally are able to complete
the foreclosure process within nine to 12 months from receipt of the internal valuation.
 
    
    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.
  
    
    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 every 180 days 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.
 Troubled Debt Restructurings
   25




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##### Table of Contents



March 31,
    
    
    December 31,(In thousands)
    
    2011
    
    
    2010TDRs on accrual status:One-to four-family
    
    $
    659
    
    
    $
    1,289659
    
    
    
    1,289TDRs on non-accrual status:One-to four-family
    
    
    586
    
    
    
    288Multi-family
    
    
    3,448
    
    
    
    Commercial real estate
    
    
    4,770
    
    
    
    4,797Construction
    
    
    5,032
    
    
    
    3,48713,836
    
    
    
    8,572Total TDRs
    
    $
    14,495
    
    
    $
    9,861
    Potential Problem Loans
  Allowance for Loan Losses
    26




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##### Table of Contents



Deposits
   March 31, 2011
    
    
    December 31, 2010Percent of
    
    
    
    
    
    
    Percent of(Dollars in thousands)
    
    Balance
    
    
    Total Deposits
    
    
    Balance
    
    
    Total DepositsDemand deposits
    
    $
    115,988
    
    
    
    7.7
    %
    
    $
    111,423
    
    
    
    7.7
    %NOW deposits
    
    
    127,848
    
    
    
    8.5
    
    
    
    134,677
    
    
    
    9.3Money market deposits
    
    
    354,947
    
    
    
    23.7
    
    
    
    323,619
    
    
    
    22.2Regular and other deposits
    
    
    197,191
    
    
    
    13.2
    
    
    
    188,178
    
    
    
    12.9Certificates of deposit
    
    
    702,713
    
    
    
    46.9
    
    
    
    697,318
    
    
    
    47.9Total
    
    $
    1,498,687
    
    
    
    100.0
    %
    
    $
    1,455,215
    
    
    
    100.0
    %
 Borrowings
   27




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##### Table of Contents



Stockholders Equity
   28




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##### Table of Contents



Average Balance Sheets and Related Yields and Rates
  Three Months Ended March 31,2011
    
    
    2010Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/(Dollars in thousands)
    
    Balance
    
    
    Interest
    
    
    Cost (4)
    
    
    Balance
    
    
    Interest
    
    
    Cost (4)Assets:Interest-earning assets:Loans (1)
    
    $
    1,194,169
    
    
    $
    16,446
    
    
    
    5.59
    %
    
    $
    1,151,328
    
    
    $
    16,210
    
    
    
    5.71
    %Securities and certificates of deposits
    
    
    372,945
    
    
    
    3,366
    
    
    
    3.66
    
    
    
    341,330
    
    
    
    3,663
    
    
    
    4.35Other interest-earning assets
    
    
    154,304
    
    
    
    85
    
    
    
    0.22
    
    
    
    35,279
    
    
    
    12
    
    
    
    0.14Total interest-earning assets
    
    
    1,721,418
    
    
    
    19,897
    
    
    
    4.69
    
    
    
    1,527,937
    
    
    
    19,885
    
    
    
    5.28Noninterest-earning assets
    
    
    137,038
    
    
    
    
    
    
    
    
    
    
    
    138,229Total assets
    
    $
    1,858,456
    
    
    
    
    
    
    
    
    
    
    $
    1,666,166Liabilities and stockholders equity:Interest-bearing liabilities:NOW deposits
    
    $
    129,029
    
    
    
    148
    
    
    
    0.47
    
    
    $
    107,768
    
    
    
    128
    
    
    
    0.48Money market deposits
    
    
    336,768
    
    
    
    867
    
    
    
    1.04
    
    
    
    300,778
    
    
    
    893
    
    
    
    1.20Regular and other deposits
    
    
    191,668
    
    
    
    260
    
    
    
    0.55
    
    
    
    178,937
    
    
    
    246
    
    
    
    0.56Certificates of deposit
    
    
    699,128
    
    
    
    3,298
    
    
    
    1.91
    
    
    
    611,717
    
    
    
    2,932
    
    
    
    1.94Total interest-bearing deposits
    
    
    1,356,593
    
    
    
    4,573
    
    
    
    1.37
    
    
    
    1,199,200
    
    
    
    4,199
    
    
    
    1.42Borrowings
    
    
    156,151
    
    
    
    889
    
    
    
    2.31
    
    
    
    156,537
    
    
    
    915
    
    
    
    2.37Total interest-bearing liabilities
    
    
    1,512,744
    
    
    
    5,462
    
    
    
    1.46
    
    
    
    1,355,737
    
    
    
    5,114
    
    
    
    1.53Noninterest-bearing demand deposits
    
    
    113,209
    
    
    
    
    
    
    
    
    
    
    
    95,943Other noninterest-bearing liabilities
    
    
    14,399
    
    
    
    
    
    
    
    
    
    
    
    10,970Total liabilities
    
    
    1,640,352
    
    
    
    
    
    
    
    
    
    
    
    1,462,650Total stockholders equity
    
    
    218,104
    
    
    
    
    
    
    
    
    
    
    
    203,516Total liabilities and stockholders
equity
    
    $
    1,858,456
    
    
    
    
    
    
    
    
    
    
    $
    1,666,166Net interest-earning assets
    
    $
    208,674
    
    
    
    
    
    
    
    
    
    
    $
    172,200Net interest income
    
    
    
    
    
    $
    14,435
    
    
    
    
    
    
    
    
    
    
    $
    14,771Interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    3.23
    %
    
    
    
    
    
    
    
    
    
    
    3.75
    %Net interest margin (3)
    
    
    
    
    
    
    
    
    
    
    3.40
    %
    
    
    
    
    
    
    
    
    
    
    3.92
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    113.79
    %
    
    
    
    
    
    
    
    
    
    
    112.70
    %
 (1)
    
    Loans on non-accrual status are included in average balances.(2)
    
    Interest rate spread represents the difference between the yield on interest-earning assets and
the cost of interest-bearing liabilities.(3)
    
    Net interest margin represents net interest income divided by average interest-earning assets.(4)
    
    Annualized.  29




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##### Table of Contents



Rate/Volume Analysis
  Three Months Ended March 31,2011 Compared to 2010Increase (Decrease) Due to(In thousands)
    
    Volume
    
    
    Rate
    
    
    NetInterest Income:Loans
    
    $
    595
    
    
    $
    (359
    )
    
    $
    236Securities and certificates of deposits
    
    
    319
    
    
    
    (616
    )
    
    
    (297
    )Other interest-earning assets
    
    
    62
    
    
    
    11
    
    
    
    73Total
    
    
    976
    
    
    
    (964
    )
    
    
    12Interest Expense:Deposits
    
    
    555
    
    
    
    (181
    )
    
    
    374Borrowings
    
    
    (2
    )
    
    
    (24
    )
    
    
    (26
    )Total
    
    
    553
    
    
    
    (205
    )
    
    
    348Change in net interest income
    
    $
    423
    
    
    $
    (759
    )
    
    $
    (336
    )
 Results of Operations for the Three Months Ended March 31, 2011 and 2010
 Net Income
    Net Interest Income
   30




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##### Table of Contents



Provision for Loan Losses
 Managements
Discussion and Analysis of Results of Operations and Financial Condition -Allowance for Loan
Losses
 Non-Interest Income
  Non-Interest Expense
  Income Tax Provision
   31




---



##### Table of Contents



Liquidity and Capital Management
 Liquidity Management
     March 31,
    
    
    December 31,(In thousands)
    
    2011
    
    
    2010Unadvanced portion of existing loans:Construction
    
    $
    58,185
    
    
    $
    64,722Home equity line of credit
    
    
    38,878
    
    
    
    39,791Other lines and letters of credit
    
    
    9,473
    
    
    
    7,095Commitments to originate:One-to four-family
    
    
    6,324
    
    
    
    15,362Commercial real estate
    
    
    71,138
    
    
    
    65,187Construction
    
    
    17,940
    
    
    
    12,625Other loans
    
    
    2,986
    
    
    
    2,783Total loan commitments outstanding
    
    $
    204,924
    
    
    $
    207,565
     32




---



##### Table of Contents



Capital Management
    Off-Balance Sheet Arrangements
    33




---



##### Table of Contents



Item 3. quantitative and qualitative disclosures about market risk
 Interest Rate Risk Management
   Net Interest Income Simulation Analysis
      Increase (Decrease)in Market Interest
    
    Net Interest IncomeRates (Rate Shock)
    
    Amount
    
    
    Change
    
    
    Percent(Dollars in Thousands)300
    
    $
    54,703
    
    
    $
    (4,787
    )
    
    
    (8.05
    )%Flat
    
    
    59,490-50
    
    
    57,956
    
    
    
    (1,534
    )
    
    
    (2.58
    )
  34




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##### Table of Contents



Item 4. Controls and Procedures
 (a)
    
    Disclosure Controls and ProceduresMeridian Interstate Bancorps management, including
Meridian Interstate Bancorps principal executive officer and principal financial officer,
have evaluated the effectiveness of Meridian Interstate Bancorp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, Meridian Interstate Bancorps disclosure controls and
procedures were effective for the purpose of ensuring that the information required to be
disclosed in the reports that Meridian Interstate Bancorp 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 Meridian Interstate Bancorps management,
including its principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure.
 (b)
    
    Internal Control over Financial ReportingThere have not been any changes in Meridian
Interstate Bancorp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, Meridian Interstate Bancorps internal control over financial reporting.
  35




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. legal proceedings
  
 Item 1a . risk factors
 www.sec.gov
 
 Item 2. unregistered sales of equity securities and use of proceeds
 (a.)  (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:
 (a)
    
    
    (b)
    
    
    (c)
    
    
    (d)Maximum Number(or ApproximateTotal Number of
    
    
    Dollar Value) ofShares (or Units)
    
    
    Shares (or Units)Purchased as Part
    
    
    that May Yet BeTotal Number of
    
    
    Average Price
    
    
    of Publicly
    
    
    Purchased UnderShares (or Units)
    
    
    Paid Per Share (or
    
    
    Announced Plans
    
    
    the Plans orPeriod
    
    Purchased
    
    
    Unit)
    
    
    or Programs (1)
    
    
    ProgramsJanuary 1  31, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    283,601February 1  28, 2011
    
    
    12,934
    
    
    $
    12.96
    
    
    
    12,934
    
    
    
    270,667March 1  31, 2011
    
    
    10,402
    
    
    $
    13.07
    
    
    
    10,402
    
    
    
    260,265Total
    
    
    23,336
    
    
    $
    13.01
    
    
    
    23,336
    
    
    
    260,265
 (1)
    
    In April 2010, the Commonwealth of Massachusetts Office of the Commissioner of Banks
approved the Companys application to repurchase up to 5% of its outstanding common stock not
held by its mutual holding company parent, or 472,428 shares of its common stock. 
 Item 3. defaults upon senior secutiries
  
 Item 4 . [removed and reserved]
 
 Item 5. other information
   36




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##### Table of Contents



Item 6. Exhibits
 3.1
    
    
    Amended and Restated Articles of Organization of Meridian Interstate Bancorp, Inc.*3.2
    
    
    Amended and Restated Bylaws of Meridian Interstate Bancorp, Inc.*3.3
    
    
    Articles of Correction of Meridian Interstate Bancorp, Inc.***4
    
    
    Form of Common Stock Certificate of Meridian Interstate Bancorp, Inc.*10.1
    
    
    Form of East Boston Savings Bank Employee Stock Ownership Plan*10.2
    
    
    Form of East Boston Savings Bank Employee Stock Ownership Plan Trust Agreement*10.3
    
    
    East Boston Savings Bank Employee Stock Ownership Plan Loan Agreement, Pledge Agreement and Promissory
Note*10.4
    
    
    Form of Amended and Restated Employment Agreement*10.5
    
    
    Form of East Boston Savings Bank Employee Severance Compensation Plan*10.6
    
    
    Form of Supplemental Executive Retirement Agreements with certain directors*10.7
    
    
    [Reserved]10.8
    
    
    Form of Separation Agreement with Leonard V. Siuda incorporated by reference to the Form 8-K filed on
April 7, 200910.9
    
    
    Form of Separation Agreement with Philip F. Freehan incorporated by reference to the Form 8-K filed on
April 7, 200910.10
    
    
    Form of Supplemental Executive Retirement Agreement with Richard J. Gavegnano filed as an exhibit to
Form 10-Q filed on May 14, 200810.11
    
    
    Form of Employment Agreement with Richard J. Gavegnano incorporated by reference to the Form 8-K filed
on January 12, 200910.12
    
    
    Form of Employment Agreement with Deborah J. Jackson incorporated by reference to the Form 8-K filed on
January 22, 200910.13
    
    
    Form of Supplemental Executive Retirement Agreement with Deborah J. Jackson incorporated by reference to
the Form 8-K filed on January 22, 200910.14
    
    
    2008 Equity Incentive Plan**10.15
    
    
    Amendment to Supplemental Executive Retirement Agreements with Certain Directors incorporated by
reference to the Form 10-K/A filed on April 8, 200910.16
    
    
    Agreement and Plan of Merger incorporated by reference to the Form 8-K filed on July 24, 200910.17
    
    
    Employment Agreement between Edward J. Merritt and East Boston Savings Bank***10.18
    
    
    Supplemental Executive Retirement Agreement between East Boston Savings Bank and Edward J. Merritt***10.19
    
    
    Joint Beneficiary Designation Agreement between Edward J. Merritt and Mt. Washington Co-operative Bank***10.20
    
    
    First Amendment to Joint Beneficiary Designation Agreement between Edward J. Merritt and Mt. Washington
Co-operative Bank***10.21
    
    
    Change in Control Agreement between Mark Abbate and East Boston Savings Bank incorporated by reference
to the Form 8-K filed on December 15, 200921
    
    
    Subsidiaries of Registrant*31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 *
    
    Incorporated by reference to the Registration Statement on Form S-1 of Meridian Interstate Bancorp, Inc. (File No.
333-146373), originally filed with the Securities and Exchange Commission on September 28, 2007.**
    
    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.***
    
    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.  37




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##### Table of Contents



SIGNATURES
  MERIDIAN INTERSTATE BANCORP, INC.

(Registrant)Dated: May 10, 2011
    /s/  Richard J. GavegnanoRichard J. GavegnanoChairman and Chief Executive Officer
(Principal Executive Officer)Dated: May 10, 2011
    /s/  Mark L. AbbateMark L. AbbateSenior Vice President, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)  38