Financial News

Meridian Bancorp, Inc. Reports Record Second Quarter and Record First Half Net Income

BOSTON, July 21, 2020 (GLOBE NEWSWIRE) -- Meridian Bancorp, Inc. (the “Company” or “Meridian”) (NASDAQ: EBSB), the holding company for East Boston Savings Bank (the “Bank”), announced net income of $17.3 million, or $0.34 per diluted share, for the quarter ended June 30, 2020, compared to $13.0 million, or $0.25 per diluted share, for the quarter ended March 31, 2020 and $15.2 million, or $0.29 per diluted share, for the quarter ended June 30, 2019. For the six months ended June 30, 2020, net income was $30.3 million, or $0.60 per diluted share, up from $30.2 million, or $0.59 per diluted share, for the six months ended June 30, 2019. The Company’s return on average assets was 1.08% for the quarter ended June 30, 2020, compared to 0.82% for the quarter ended March 31, 2020 and 0.97% for the quarter ended June 30, 2019. For the six months ended June 30, 2020, the Company’s return on average assets was 0.95%, down from 0.97% for the six months ended June 30, 2019. The Company’s return on average equity was 9.45% for the quarter ended June 30, 2020, compared to 7.09% for the quarter ended March 31, 2020, and 8.75% for the quarter ended June 30, 2019. For the six months ended June 30, 2020, the Company’s return on average equity was 8.27%, down from 8.79% for the six months ended June 30, 2019.

Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, “Despite the unprecedented challenges brought on by COVID-19, I am pleased to report record net income of $17.3 million for the second quarter of 2020, up $2.1 million, or 14%, from the prior second quarter record in 2019. This improvement in quarterly results reflects continued growth in net interest income, a $4.2 million gain on sale of a Bank property in South Boston and a decline in operating expenses, despite bolstering our reserves with a $9.6 million provision for loan losses. We are experiencing one of the most unique periods in our long history and management has shifted their focus and allocated available resources to minimizing COVID-19’s impact on the Bank and our customers, community and shareholders. We have kept our branches available, supported our loan customers with temporary modifications and ensured our employees did this in the safest manner possible.”

Mr. Gavegnano continued, “We began working with our loan customers in March, making accommodations for their existing loans to help ease them through the pandemic. As government mandated shutdowns took effect and more people were unemployed, primarily in April and May, we maintained an active understanding of evolving government programs and suspended accounting rules to ensure our customers were taking advantage of these opportunities as needed. This includes successfully executing the Small Business Administration’s Paycheck Protection Program (“PPP”) and providing modifications to existing commercial and residential loans. I was happy with the Bank’s execution in assisting our customers when they needed it most.” 

The Company’s net interest income was $47.4 million for the quarter ended June 30, 2020, up $2.3 million, or 5.0%, from the quarter ended March 31, 2020, and up $4.9 million, or 11.5%, from the quarter ended June 30, 2019. The interest rate spread and net interest margin on a tax-equivalent basis were 2.86% and 3.10%, respectively, for the quarter ended June 30, 2020 compared to 2.67% and 2.99%, respectively, for the quarter ended March 31, 2020 and 2.48% and 2.82%, respectively, for the quarter ended June 30, 2019. For the six months ended June 30, 2020, net interest income increased $7.4 million, or 8.7%, to $92.5 million from the six months ended June 30, 2019. The interest rate spread and net interest margin on a tax-equivalent basis were 2.76% and 3.05% for the six months ended June 30, 2020 compared to 2.53% and 2.85% for the six months ended June 30, 2019. The increases in net interest income for the quarter and six months ended June 30, 2020 compared to the respective prior periods were primarily due to the substantial reduction in the cost of funds.

Total interest and dividend income totaled $62.2 million for the quarter ended June 30, 2020, down $3.9 million, or 5.9%, from the quarter ended March 31, 2020, primarily due to a decrease in yield on loans on a tax-equivalent basis of 17 basis points to 4.37% and a decrease in yield on other interest-earning assets of 139 basis points to 0.40%. Compared to the quarter ended June 30, 2019, total interest and dividend income decreased $4.1 million, or 6.2%, primarily due to a decrease in yield on loans on a tax-equivalent basis of 10 basis points and a decrease in yield on other interest-earning assets of 229 basis points. The Company’s yield on interest-earning assets on a tax-equivalent basis was 4.06% for the quarter ended June 30, 2020, down 29 basis points from the quarter ended March 31, 2020 and 32 basis points from the quarter ended June 30, 2019. For the six months ended June 30, 2020, the Company’s total interest and dividend income totaled $128.2 million, a decrease of $2.6 million, or 2.0%, from the six months ended June 30, 2019, primarily due to a decrease in yield on other interest-earning assets of 181 basis points to 1.03% for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. The Company’s yield on interest-earning assets on a tax-equivalent basis decreased 16 basis points to 4.20% for the six months ended June 30, 2020, compared to the same period in 2019.

Total interest expense totaled $14.8 million for the quarter ended June 30, 2020, down $6.1 million, or 29.4%, from the quarter ended March 31, 2020, and down $9.0 million, or 37.9%, from the quarter ended June 30, 2019. Interest expense on deposits decreased to $10.6 million for the quarter ended June 30, 2020, down $6.2 million, or 36.8%, from the quarter ended March 31, 2020 and $10.1 million, or 48.7%, from the quarter ended June 30, 2019 primarily due to a decrease in average total deposits to $4.844 billion and a decrease in the cost of average total deposits to 0.88% from 1.38% for the quarter ended March 31, 2020, and 1.66% for the quarter ended June 30, 2019. Interest expense on borrowings totaled $4.2 million for the quarter ended June 30, 2020, up $37,000, or 0.9%, from the quarter ended March 31, 2020 primarily due to an increase in average total borrowings to $754.4 million, partially offset by a decrease of 32 basis points in the average cost of borrowings to 2.23%. Compared to the quarter ended June 30, 2019, interest expense on borrowings increased $1.0 million, or 32.9%, primarily due to an increase of $222.0 million, or 41.7%, in average total borrowings, partially offset by a 14 basis point decrease in the average cost of borrowings. The Company’s total cost of funds was 1.06% for the quarter ended June 30, 2020, down 46 basis points from the quarter ended March 31, 2020 and down 67 basis points from the quarter ended June 30, 2019.  Total interest expense totaled $35.7 million for the six months ended June 30, 2020, down $10.0 million, or 21.8%, from the six months ended June 30, 2019. Interest expense on deposits decreased to $27.4 million for the six months ended June 30, 2020, down $12.4 million, or 31.3%, from the six months ended June 30, 2019 primarily due to a decrease in average total deposits to $4.866 billion and a decrease in the cost of average total deposits to 1.13% from 1.62% for the six months ended June 30, 2019. Interest expense on borrowings totaled $8.3 million for the six months ended June 30, 2020, up $2.5 million, or 41.9%, from the six months ended June 30, 2019 primarily due to an increase in average total borrowings to $704.6 million and an increase of 25 basis points in the average cost of borrowings to 2.38%. The Company’s total cost of funds was 1.29% for the six months ended June 30, 2020, down 38 basis points from the six months ended June 30, 2019.

Mr. Gavegnano noted, “Our net interest margin improved to 3.10% for the quarter and 3.05% for the six months ended June 30, 2020, due to increases in net interest income of 12% and 9%, respectively. This is the result of maintaining our loan yields while aggressively reducing our funding costs. We expect our cost of funds to continue to decline as term deposits and advances mature and are replaced at significantly lower rates.” 

The Company’s provision for loan losses was $9.6 million for the quarter ended June 30, 2020, compared to $725,000 for the quarter ended March 31, 2020 and $78,000 for the quarter ended June 30, 2019. The allowance for loan losses was $60.5 million or 1.06% of total loans at June 30, 2020, compared to $50.9 million or 0.89% of total loans at March 31, 2020, and $50.3 million or 0.87% of total loans at December 31, 2019 and $53.9 million or 0.92% of total loans at June 30, 2019. The increases in the provision and coverage ratio reflect the application of economic uncertainties and market volatility caused by COVID-19 to the factors used to determine the Company’s provision.  

Net charge-offs totaled $40,000 for the quarter ended June 30, 2020 compared to net charge-offs of $101,000 for the quarter ended March 31, 2020 and net charge-offs of $210,000 for the quarter ended June 30, 2019. For the six months ended June 30, 2020, net charge-offs totaled $141,000 compared to net charge-offs of $287,000 for six months ended June 30, 2019.

Non-accrual loans were $3.8 million, or 0.07% of total loans outstanding, at June 30, 2020; up $631,000, or 19.8%, from March 31, 2020; and up $415,000 or 12.2% from December 31, 2019 and down $2.2 million or 36.8%, from June 30, 2019. Non-performing assets were $3.8 million, or 0.06% of total assets, at June 30, 2020, compared to $3.2 million, or 0.05% of total assets, at March 31, 2020, $3.4 million, or 0.05% of total assets, at December 31, 2019, and $6.0 million, or 0.09% of total assets at June 30, 2019.

Mr. Gavegnano noted, “We have reserved $9.6 million this quarter through the provision for loan losses, increasing our coverage ratio to 1.06%. We have been prudently adjusting our reserves throughout the quarter to incorporate the modifications being executed in support of our customers.  As of June 30, 2020, we had applied COVID-19 related modifications to approximately 13% of our loan portfolio. Management’s focus over the next several quarters will be on monitoring these modified loans through constant analysis and communication with the customer. These efforts will allow us to quantify our exposure and apply the results to determine a reasonable provision for loan losses.” 

Non-interest income was $8.7 million for the quarter ended June 30, 2020, up from a loss of $831,000 for the quarter ended March 31, 2020 and $3.0 million for the quarter ended June 30, 2019. Non-interest income increased $9.5 million, or 1,141.9%, compared to the quarter ended March 31, 2020, due primarily to a $4.2 million gain on sale of assets and a $2.0 million gain on marketable equity securities, net, reflecting increases in market valuations in the second quarter of 2020 compared to a $4.3 million loss on marketable equity securities, net, in the first quarter of 2020, partially offset by decreases of $709,000 in loan fees and $293,000 in mortgage banking gains, net. Compared to the quarter ended June 30, 2019, non-interest income increased $5.7 million due primarily to a $4.2 million gain on sale of asset and an increase of $1.8 million in gain on marketable equity securities, net, partially offset by a decrease of $340,000 in customer service fees. For the six months ended June 30, 2020, non-interest income increased $1.0 million, or 15.4%  to $7.8 million from $6.8 million for the six months ended June 30, 2019 primarily due to a $4.2 million gain on sale of asset in the second quarter of 2020, and increases of $509,000 in loan fees and $388,000 in mortgage banking gains, net, partially offset by a $2.3 million loss on marketable equity securities, net for the six months ended June 30, 2020, compared to a $1.5 million gain on marketable equity securities, net for the six months ended June 30, 2019, and by a decrease of $340,000 in customer service fees.

Non-interest expenses were $23.3 million, or 1.46% of average assets for the quarter ended June 30, 2020, compared to $26.3 million, or 1.66% of average assets for the quarter ended March 31, 2020 and $25.1 million, or 1.60% of average assets for the quarter ended June 30, 2019. Non-interest expenses decreased $3.0 million, or 11.5%, compared to the quarter ended March 31, 2020, due primarily to decreases of $2.1 million in salaries and employee benefits, $302,000 in professional services, $209,000 in other general and administrative, $200,000 in marketing and advertising, and $185,000 in occupancy and equipment. Non-interest expenses decreased $1.8 million, or 7.2%, compared to the quarter ended June 30, 2019, due primarily to decreases of $1.1 million in salaries and employee benefits, $323,000 in deposit insurance, $290,000 in general and administrative and $269,000 in marketing and advertising, partially offset by an increase of $124,000 in data processing. For the six months ended June 30, 2020, non-interest expenses decreased $1.3 million, or 2.5%, to $49.6 million from $50.9 million for the six months ended June 30, 2019 due primarily to decreases of $776,000 in salaries and employee benefits, $666,000 in deposit insurance, $405,000 in other general and administrative and $201,000 in marketing and advertising, partially offset by increases of $417,000 in occupancy and equipment and $291,000 in data processing. The increases in occupancy and equipment expenses and data processing include costs associated with the expansion of our branch network, including one new branch that opened in the third quarter of 2019, one new branch that opened in the fourth quarter of 2019 and two new branches that are anticipated to open late in July 2020. The Company’s efficiency ratio was 46.79% for the quarter ended June 30, 2020 compared to 54.18% for the quarter ended March 31, 2020 and 55.57% for the quarter ended June 30, 2019. For the six months ended June 30, 2020 the efficiency ratio is 50.44% compared to 56.38% for the six months ended June 30, 2019.

Mr. Gavegnano added, “We lowered our efficiency ratio to 47% and 50% for the quarter and six months ended June 30, 2020, respectively, due to the gain on sale of our former operations center in South Boston and a successful effort to limit our overhead expenses during the COVID-19 shutdowns. Our commitment to our community will continue as we invest in the expansion of our branch network by the planned opening of three new locations in the metropolitan Boston area communities of Salem, Woburn and Brookline in the third quarter.”

The Company recorded a provision for income taxes of $5.8 million for the quarter ended June 30, 2020, reflecting an effective tax rate of 25.2%, compared to $4.2 million, or an effective tax rate of 24.6%, for the quarter ended March 31, 2020, and $5.1 million, or an effective tax rate of 25.0%, for the quarter ended June 30, 2019. For the six months ended June 30, 2020 the provision for income taxes was $10.1 million, reflecting an effective tax rate of 24.9%, compared to $9.8 million, reflecting an effective rate of 24.4% for the period of June 30, 2019.

Total assets were $6.418 billion at June 30, 2020, up $69.4 million, or 1.1%, from $6.349 billion at March 31, 2020 and up $74.3 million, or 1.2%, from $6.344 billion at December 31, 2019. Net loans were $5.654 billion at June 30, 2020, up $14.5 million from March 31, 2020, and down $43.2 million, or 0.8%, from December 31, 2019. Loan originations totaled $353.1 million during the quarter ended June 30, 2020 and $792.7 million for the six months ended June 30, 2020.  The net decrease in loans for the six months ended June 30, 2020 was primarily due to decreases of $140.6 million in commercial real estate loans, $61.5 million in multi-family loans and $23.7 million in one- to four-family loans, partially offset by increases of $155.7 million in commercial and industrial loans, $35.5 million in construction loans and $4.8 million in home equity lines of credit. The increase in commercial and industrial loans includes the origination of 401 PPP loans totaling $123.7 million. Cash and due from banks was $508.6 million at June 30, 2020, an increase of $102.2 million, or 25.2% from December 31, 2019. Securities, at fair value, were $29.4 million at June 30, 2020, a decrease of $896,000, or 3.0%, from $30.3 million at December 31, 2019.

Total deposits were $4.820 billion at June 30, 2020, down $1.6 million, or less than 0.01%, from $4.822 billion at March 31, 2020 and $101.1 million, or 2.1%, from $4.921 billion at December 31, 2019. The net decrease in deposits for the six months ended June 30, 2020 reflects a $338.8 million decrease in certificates of deposit, including a $239.4 million reduction in brokered deposits. Core deposits, which exclude certificates of deposit, increased $237.7 million, or 7.1%, during the six months ended June 30, 2020 to $3.589 billion, or 74.5% of total deposits. The increase in core deposits for the six months ended June 30, 2020 includes a $185.8 million increase, or 35.4%, in non-interest bearing demand deposits to $709.9 million. Total borrowings were $804.1 million at June 30, 2020, up $58.2 million, or 7.8%, from March 31, 2020 and $167.9 million, or 26.4%, from December 31, 2019.

Total stockholders’ equity increased $14.7 million, or 2.0%, to $734.3 million at June 30, 2020 from $719.6 million at March 31, 2020, and increased $7.7 million, or 1.1%, from $726.6 million at December 31, 2019. The increase for the six months ended June 30, 2020 was primarily due to net income of $30.3 million and $2.9 million related to stock-based compensation plans, partially offset by the repurchase of one million shares of the Company’s common stock related to the stock repurchase program at a total cost of $17.7 million and dividends of $0.16 per share totaling $8.0 million. Stockholders’ equity to assets was 11.44% at June 30, 2020, compared to 11.34% at March 31, 2020 and 11.45% at December 31, 2019. Book value per share increased to $14.01 at June 30, 2020 from $13.61 at December 31, 2019. Tangible book value per share increased to $13.59 at June 30, 2020 from $13.19 at December 31, 2019. Market price per share decreased $8.49 or 42.3%, to $11.60 at June 30, 2020 from $20.09 at December 31, 2019. The Company and the Bank elected to be subject to the Community Bank Leverage Ratio and at June 30, 2020 exceeded the minimum requirement to be well capitalized with ratios of 11.19% for the Company and 10.63% for the Bank.  

The Company did not repurchase any of its shares during the quarter ended June 30, 2020. The Company has repurchased 4,698,165 shares of its stock at an average price of $15.66 per share since August 2015.

Mr. Gavegnano concluded, “COVID-19 has brought unprecedented challenges to the financial services industry. We are well-equipped with capital and liquidity and will leverage our resources to steer the Bank and our customers through these difficult times.”

Meridian Bancorp, Inc. is the holding company for East Boston Savings Bank. East Boston Savings Bank, a Massachusetts-chartered stock savings bank founded in 1848, operates 40 branches in the greater Boston metropolitan area, including 39 full-service locations and one mobile branch. We offer a variety of deposit and loan products to individuals and businesses located in our primary market, which consists of Essex, Middlesex, Norfolk and Suffolk Counties, Massachusetts. For additional information, visit www.ebsb.com.

Forward Looking Statements

Certain statements herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by words such as “believes,” “will,” “expects,” “project,” “may,” “could,” “developments,” “strategic,” “launching,” “opportunities,” “anticipates,” “estimates,” “intends,” “plans,” “targets” and similar expressions. These statements are based upon the current beliefs and expectations of Meridian Bancorp, Inc.’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements as a result of numerous factors. Factors that could cause such differences to exist include, but are not limited to, general economic conditions, changes in interest rates, regulatory considerations, and competition and the risk factors described in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Meridian Bancorp, Inc.’s actual results could differ materially from those discussed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release.

Contact: Richard J. Gavegnano, Chairman, President and Chief Executive Officer
(978) 977-2211

 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

 
  June 30,
2020
  March 31,
2020
  December 31,
2019
  June 30,
2019
 
    
  (Dollars in thousands) 
ASSETS                
Cash and due from banks $508,627  $457,048  $406,382  $361,050 
Certificates of deposit     247   247   5,247 
Securities available for sale, at fair value  13,022   13,820   15,076   16,500 
Marketable equity securities, at fair value  16,401   13,130   15,243   14,776 
Federal Home Loan Bank stock, at cost  33,282   33,278   28,947   27,469 
Loans held for sale  3,682   3,403   2,455   2,105 
Loans:                
One- to four-family  635,683   657,245   659,366   668,997 
Home equity lines of credit  74,246   78,016   69,491   60,040 
Multi-family  941,922   972,122   1,003,418   1,061,839 
Commercial real estate  2,556,088   2,622,379   2,696,671   2,647,033 
Construction  742,845   716,477   707,370   748,457 
Commercial and industrial  760,546   638,695   604,889   627,718 
Consumer  11,867   11,888   12,196   11,445 
Total loans  5,723,197   5,696,822   5,753,401   5,825,529 
Allowance for loan losses  (60,547)  (50,946)  (50,322)  (53,865)
Net deferred loan origination fees  (8,340)  (6,021)  (5,539)  (6,292)
Loans, net  5,654,310   5,639,855   5,697,540   5,765,372 
Bank-owned life insurance  41,334   41,061   41,155   41,295 
Premises and equipment, net  67,098   67,527   65,841   66,280 
Accrued interest receivable  17,300   13,868   14,481   15,436 
Deferred tax asset, net  16,873   16,782   16,726   18,301 
Goodwill  20,378   20,378   20,378   20,378 
Core deposit intangible  1,887   2,005   2,123   2,385 
Other assets  23,776   26,152   17,100   11,978 
Total assets $6,417,970  $6,348,554  $6,343,694  $6,368,572 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Deposits:                
Non interest-bearing demand deposits $709,924  $572,847  $524,154  $505,679 
Interest-bearing demand deposits  1,291,458   1,292,384   1,269,211   1,161,835 
Money market deposits  753,980   699,026   675,702   675,452 
Regular savings and other deposits  833,951   867,536   882,550   986,112 
Certificates of deposit  1,231,084   1,390,156   1,569,916   1,689,226 
Total deposits  4,820,397   4,821,949   4,921,533   5,018,304 
Short-term borrowings  25,000   25,000       
Long-term debt  779,101   720,873   636,245   600,088 
Accrued expenses and other liabilities  59,199   61,111   59,329   54,479 
Total liabilities  5,683,697   5,628,933   5,617,107   5,672,871 
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; 52,407,179,  52,402,395, 53,377,506 and 53,321,805 shares issued at June 30, 2020,  March 31, 2020,  December 31, 2019, and, June 30, 2019 respectively  524   524   534   533 
Additional paid-in capital  361,980   360,901   377,213   375,760 
Retained earnings  387,983   374,712   365,742   336,628 
Accumulated other comprehensive income (loss)  100   19   (147)  (24)
Unearned compensation - ESOP, 2,252,627,  2,283,068, 2,313,509, and 2,374,390  shares at June 30, 2020,  March 31, 2020,  December 31, 2019 and June 30, 2019, respectively  (16,314)  (16,535)  (16,755)  (17,196)
Total stockholders' equity  734,273   719,621   726,587   695,701 
Total liabilities and stockholders' equity $6,417,970  $6,348,554  $6,343,694  $6,368,572 
                 


 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)

 
  Three Months Ended  Six Months Ended 
  June 30,
2020
  March 31,
2020
  June 30,
2019
  June 30,
2020
  June 30,
2019
 
    
  (Dollars in thousands, except per share amounts) 
Interest and dividend income:                    
Interest and fees on loans $61,445  $64,037  $64,040  $125,482  $125,681 
Interest on debt securities:                    
Taxable  75   87   108   162   218 
Tax-exempt  12   13   13   25   26 
Dividends on equity securities  145   94   142   239   247 
Interest on certificates of deposit     1   28   1   55 
Other interest and dividend income  473   1,786   1,943   2,259   4,520 
Total interest and dividend income  62,150   66,018   66,274   128,168   130,747 
Interest expense:                    
Interest on deposits  10,591   16,769   20,653   27,360   39,804 
Interest on short-term borrowings  52   8      60   295 
Interest on long-term debt  4,136   4,143   3,151   8,279   5,581 
Total interest expense  14,779   20,920   23,804   35,699   45,680 
Net interest income  47,371   45,098   42,470   92,469   85,067 
Provision for loan losses  9,641   725   78   10,366   921 
Net interest income, after provision for loan losses  37,730   44,373   42,392   82,103   84,146 
Non-interest income (loss):                    
Customer service fees  1,948   2,097   2,288   4,045   4,385 
Loan (costs) fees  (35)  674   53   639   130 
Mortgage banking gains, net  118   411   101   529   141 
Gain on sale of asset  4,195         4,195    
Gain (loss) on marketable equity securities, net  2,025   (4,344)  223   (2,319)  1,549 
Income from bank-owned life insurance  273   297   280   570   561 
Gain on life insurance distribution  124         124    
Other income  10   34   9   44   16 
Total non-interest income (loss)  8,658   (831)  2,954   7,827   6,782 
Non-interest expenses:                    
Salaries and employee benefits  13,858   15,914   14,916   29,772   30,548 
Occupancy and equipment  3,739   3,924   3,650   7,663   7,246 
Data processing  2,133   2,137   2,009   4,270   3,979 
Marketing and advertising  1,030   1,230   1,299   2,260   2,461 
Professional services  695   997   784   1,692   1,644 
Deposit insurance  606   669   929   1,275   1,941 
Other general and administrative  1,240   1,449   1,530   2,689   3,094 
Total non-interest expenses  23,301   26,320   25,117   49,621   50,913 
Income before income taxes  23,087   17,222   20,229   40,309   40,015 
Provision for income taxes  5,808   4,245   5,061   10,053   9,776 
Net income $17,279  $12,977  $15,168  $30,256  $30,239 
                     
Earnings per share:                    
Basic $0.34  $0.26  $0.30  $0.60  $0.59 
Diluted $0.34  $0.25  $0.29  $0.60  $0.59 
Weighted average shares outstanding:                    
Basic  50,131,249   50,634,983   51,051,880   50,383,116   51,086,050 
Diluted  50,211,234   50,920,259   51,511,678   50,565,747   51,489,608 
                     


 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
(Unaudited)
 
  Three Months Ended
  June 30, 2020 March 31, 2020 June 30, 2019
  Average
Balance 
 Interest
(1)
 Yield/
Cost (1)(6)
 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) $5,722,186  $62,164  4.37% $5,741,852  $64,758  4.54% $5,809,827  $64,740  4.47%
Securities and certificates of deposit  33,282   262  3.17   29,290   211  2.90   36,447   312  3.43 
Other interest-earning assets (3)  478,725   473  0.40   400,315   1,786  1.79   290,092   1,943  2.69 
Total interest-earning assets  6,234,193   62,899  4.06   6,171,457   66,755  4.35   6,136,366   66,995  4.38 
Noninterest-earning assets  153,567          157,398          136,159        
Total assets $6,387,760         $6,328,855         $6,272,525        
Liabilities and stockholders' equity:                                 
Interest-bearing liabilities:                                 
Interest-bearing demand deposits $1,297,072  $2,293  0.71  $1,280,003  $4,497  1.41  $1,215,832  $5,584  1.84 
Money market deposits  722,148   1,227  0.68   691,897   2,055  1.19   674,851   2,158  1.28 
Regular savings and other deposits  841,600   995  0.48   906,100   2,531  1.12   954,811   3,961  1.66 
Certificates of deposit  1,331,999   6,076  1.83   1,475,016   7,686  2.10   1,660,373   8,950  2.16 
Total interest-bearing deposits  4,192,819   10,591  1.02   4,353,016   16,769  1.55   4,505,867   20,653  1.84 
Borrowings  754,426   4,188  2.23   654,740   4,151  2.55   532,449   3,151  2.37 
Total interest-bearing liabilities  4,947,245   14,779  1.20   5,007,756   20,920  1.68   5,038,316   23,804  1.90 
Noninterest-bearing demand deposits  651,517          535,182          495,090        
Other noninterest-bearing liabilities  57,922          53,688          45,506        
Total liabilities  5,656,684          5,596,626          5,578,912        
Total stockholders' equity  731,076          732,229          693,613        
Total liabilities and stockholders' equity $6,387,760         $6,328,855         $6,272,525        
Net interest-earning assets $1,286,948         $1,163,701         $1,098,050        
Fully tax-equivalent net interest income      48,120          45,835          43,191    
Less: tax-equivalent adjustments      (749)         (737)         (721)   
Net interest income     $47,371         $45,098         $42,470    
Interest rate spread (1)(4)         2.86%         2.67%         2.48%
Net interest margin (1)(5)         3.10%         2.99%         2.82%
Average interest-earning assets to average interest-bearing liabilities      126.01%         123.24%         121.79%   
                                  
Supplemental Information:                                 
Total deposits, including noninterest-bearing demand deposits $4,844,336  $10,591  0.88% $4,888,198  $16,769  1.38% $5,000,957  $20,653  1.66%
Total deposits and borrowings, including noninterest-bearing demand deposits $5,598,762  $14,779  1.06% $5,542,938  $20,920  1.52% $5,533,406  $23,804  1.73%

_______________________

(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 June 30, 2020, March 31, 2020 and June 30, 2019, yields on loans before tax-equivalent adjustments were 4.32%, 4.49% and 4.42%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 2.80%, 2.68% and 3.20%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 4.01%, 4.30% and 4.33%, respectively. Interest rate spread before tax-equivalent adjustments for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019 was 2.81%, 2.62% and 2.43%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019 was 3.06%, 2.94% and 2.78%, 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.

 

 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
(Unaudited)
 
  Six Months Ended
  June 30, 2020 June 30, 2019
  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) $5,732,019  $126,922   4.45% $5,752,551  $127,065   4.45%
Securities and certificates of deposit  29,170   464   3.20   36,478   584   3.23 
Other interest-earning assets (3)  439,520   2,259   1.03   321,472   4,520   2.84 
Total interest-earning assets  6,200,709   129,645   4.20   6,110,501   132,169   4.36 
Noninterest-earning assets  157,599           127,095         
Total assets $6,358,308          $6,237,596         
                         
Liabilities and stockholders' equity:                        
Interest-bearing liabilities:                        
Interest-bearing demand deposits $1,288,538  $6,790   1.06  $1,202,572  $10,524   1.76 
Money market deposits  707,022   3,281   0.93   687,260   4,306   1.26 
Regular savings and other deposits  873,850   3,527   0.81   937,789   7,763   1.67 
Certificates of deposit  1,403,507   13,762   1.97   1,641,012   17,211   2.11 
Total interest-bearing deposits  4,272,917   27,360   1.29   4,468,633   39,804   1.80 
Borrowings  704,583   8,339   2.38   555,076   5,876   2.13 
Total interest-bearing liabilities  4,977,500   35,699   1.44   5,023,709   45,680   1.83 
Noninterest-bearing demand deposits  593,350           488,897         
Other noninterest-bearing liabilities  55,805           37,324         
Total liabilities  5,626,655           5,549,930         
Total stockholders' equity  731,653           687,666         
Total liabilities and stockholders' equity $6,358,308          $6,237,596         
Net interest-earning assets $1,223,209          $1,086,792         
Fully tax-equivalent net interest income      93,946           86,489     
Less: tax-equivalent adjustments      (1,477)          (1,422)    
Net interest income     $92,469          $85,067     
Interest rate spread (1)(4)          2.76%          2.53%
Net interest margin (1)(5)          3.05%          2.85%
Average interest-earning assets to average interest-bearing liabilities      124.57%          121.63%    
                         
Supplemental Information:                        
Total deposits, including noninterest-bearing demand deposits $4,866,267  $27,360   1.13% $4,957,530  $39,804   1.62%
Total deposits and borrowings, including noninterest-bearing demand deposits $5,570,850  $35,699   1.29% $5,512,606  $45,680   1.67%

_______________________

(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 six months ended, June 30, 2020 and 2019, yields on loans before tax-equivalent adjustments were  4.40% and 4.41%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 2.94% and 3.02%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 4.16%, and 4.31%, respectively. Interest rate spread before tax-equivalent adjustments for the six months ended June 30, 2020 and 2019 was 2.72%, and 2.48%, respectively, while net interest margin before tax-equivalent adjustments for the six months ended, June 30, 2020 and 2019 was 3.00% and 2.81%, 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.
   


 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
 
  Three Months Ended Six Months Ended
  June 30,
2020
 March 31,
2020
 June 30,
2019
 June 30,
2020
 June 30,
2019
Key Performance Ratios                    
Return on average assets (1)  1.08%  0.82%  0.97%  0.95%  0.97%
Return on average equity (1)  9.45   7.09   8.75   8.27   8.79 
Interest rate spread  (1) (2)  2.86   2.67   2.48   2.76   2.53 
Net interest margin  (1) (3)  3.10   2.99   2.82   3.05   2.85 
Non-interest expense to average assets  (1)  1.46   1.66   1.60   1.56   1.63 
Efficiency ratio (4)  46.79   54.18   55.57   50.44   56.38 


  June 30,
2020
 March 31,
2020
 December 31,
2019
 June 30,
2019
   
  (Dollars in thousands)
Asset Quality                
Non-accrual loans:                
One- to four-family $3,074  $2,846  $3,082  $5,378 
Home equity lines of credit  20   20       
Commercial real estate  194         318 
Commercial and industrial  532   323   323   350 
Total non-accrual loans  3,820   3,189   3,405   6,046 
Foreclosed assets            
Total non-performing assets $3,820  $3,189  $3,405  $6,046 
                 
Allowance for loan losses/total loans  1.06%  0.89%  0.87%  0.92%
Allowance for loan losses/non-accrual loans  1,585.00   1,597.55   1,477.89   890.92 
Non-accrual loans/total loans  0.07   0.06   0.06   0.10 
Non-accrual loans/total assets  0.06   0.05   0.05   0.09 
Non-performing assets/total assets  0.06   0.05   0.05   0.09 
                 
Capital and Share Related                
Stockholders' equity to total assets  11.44%  11.34%  11.45%  10.92%
Book value per share $14.01  $13.73  $13.61  $13.05 
Tangible book value per share (5) $13.59  $13.31  $13.19  $12.62 
Market value per share $11.60  $11.22  $20.09  $17.89 
Shares outstanding 52,407,179  52,402,395  53,377,506  53,321,805 

_______________________ 

(1) Quarterly amounts are annualized.
(2) Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest-bearing liabilities. 
(3) Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets. 
(4) The efficiency ratio is a non-GAAP measure representing non-interest expense divided by the sum of net interest income and non-interest income excluding gains and losses on marketable equity securities and gains and losses on sale of assets. The efficiency ratio is a common measure used by banks to understand expenses related to the generation of revenue. We have removed gains and losses on marketable equity securities and gains and losses on sale of assets as management deems them to be either discretionary or market driven and not representative of operating performance. Presented on a basis including gains and losses on marketable equity securities and gains and losses on sale of assets the efficiency ratio was 41.59%, 59.46% and 55.29% for the quarters ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively and 49.47% and 55.43% for the six months ended June 30, 2020 and 2019, respectively.
(5) Tangible book value per share represents total stockholders’ equity less goodwill and other intangible assets divided by the number of shares outstanding.

 

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