Financial News

Meridian Bancorp, Inc. Announces Third Quarter 2020 Results

BOSTON, Oct. 27, 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 $16.7 million, or $0.33 per diluted share, for the quarter ended September 30, 2020, compared to $19.7 million, or $0.38 per diluted share, for the quarter ended September 30, 2019. For the nine months ended September 30, 2020, net income was $46.9 million, or $0.93 per diluted share, down from $49.9 million, or $0.97 per diluted share, for the nine months ended September 30, 2019. The Company’s return on average assets was 1.03% for the quarter ended September 30, 2020, compared to 1.24% for the quarter ended September 30, 2019. For the nine months ended September 30, 2020, the Company’s return on average assets was 0.98%, down from 1.06% for the nine months ended September 30, 2019. The Company’s return on average equity was 8.94% for the quarter ended September 30, 2020, compared to 11.17% for the quarter ended September 30, 2019. For the nine months ended September 30, 2020, the Company’s return on average equity was 8.50%, down from 9.60% for the nine months ended September 30, 2019.

Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, “Notwithstanding the economic impacts resulting from COVID-19, I am pleased to report net income of $16.7 million for the third quarter and $46.9 million for the first nine months of 2020. Net interest income increased significantly for the quarter and nine months ended September 30, 2020, raising the net interest margin to 3.13% and 3.07%, respectively, highlighting the successful efforts of prudent balance sheet management throughout these tumultuous times. We also continued to build our allowance for loan losses, increasing the percentage of allowance to total loans to 1.20%, compared to 0.87% at December 31, 2019. We reserved $7.2 million this quarter and $17.5 million for the nine months ended September 30, 2020 through the provision for loan losses, which represents increases of $10.1 million and $19.6 million, respectively, when compared to the same periods in 2019. These results also reflect a decline in the market valuation of our equities portfolio and decreased operating expenses, despite remaining open for our customers and adding three de novo branches during the third quarter.”

Mr. Gavegnano continued, “We continue to support our loan customers with temporary repayment modifications to assist them through the pandemic, including full payment deferrals and interest-only accommodations. We have remained in close contact with these borrowers to understand their needs as the initial modification periods come to end and we expect that most of these borrowers will be able to improve their repayment status, with many returning to either full payment or interest-only payments for an additional period. As of October 19, 2020, total COVID-19 related modifications have declined nearly 50% from those reported at June 30, 2020, a trend we anticipate to continue as the initial modifications expire.”

The Company’s net interest income was $48.8 million for the quarter ended September 30, 2020, up $1.4 million, or 3.0%, from the quarter ended June 30, 2020, and up $4.6 million, or 10.4%, from the quarter ended September 30, 2019. The interest rate spread and net interest margin on a tax-equivalent basis were 2.91% and 3.13%, respectively, for the quarter ended September 30, 2020 compared to 2.86% and 3.10%, respectively, for the quarter ended June 30, 2020 and 2.52% and 2.87%, respectively, for the quarter ended September 30, 2019. For the nine months ended September 30, 2020, net interest income increased $12.0 million, or 9.3%, to $141.3 million from the nine months ended September 30, 2019. The interest rate spread and net interest margin on a tax-equivalent basis were 2.81% and 3.07% for the nine months ended September 30, 2020 compared to 2.52% and 2.86% for the nine months ended September 30, 2019. The increases in net interest income for the quarter and nine months ended September 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 $61.6 million for the quarter ended September 30, 2020, down $6.9 million, or 10.1%, from the quarter ended September 30, 2019, primarily due to a decrease in yield on loans on a tax-equivalent basis of 21 basis points and a decrease in yield on other interest-earning assets of 221 basis points. The Company’s yield on interest-earning assets on a tax-equivalent basis was 3.94% for the quarter ended September 30, 2020, down 12 basis points from the quarter ended June 30, 2020 and 48 basis points from the quarter ended September 30, 2019. For the nine months ended September 30, 2020, the Company’s total interest and dividend income totaled $189.8 million, a decrease of $9.5 million, or 4.8%, from the nine months ended September 30, 2019, primarily due to a decrease in the yield on other interest-earning assets of 199 basis points to 0.74%, and a decrease in the yield on loans on a tax-equivalent basis of seven basis points to 4.41% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The Company’s yield on interest-earning assets on a tax-equivalent basis decreased 27 basis points to 4.11% for the nine months ended September 30, 2020, compared to the same period in 2019, primarily due to the increase of $168.9 million, or 51.8%, in the Company’s average other interest-earning assets to $495.1 million and a 199 basis point, or 72.9%, decrease in the yield on other interest-earning assets.

Total interest expense totaled $12.8 million for the quarter ended September 30, 2020, down $2.0 million, or 13.4%, from the quarter ended June 30, 2020, and down $11.5 million, or 47.4%, from the quarter ended September 30, 2019. Interest expense on deposits decreased to $8.7 million for the quarter ended September 30, 2020, down $1.8 million, or 17.4%, from the quarter ended June 30, 2020 and down $11.4 million, or 56.7%, from the quarter ended September 30, 2019 primarily due to a decrease in the cost of average total deposits to 0.72% from 0.88% for the quarter ended June 30, 2020, and 1.61% for the quarter ended September 30, 2019. Interest expense on borrowings totaled $4.1 million for the quarter ended September 30, 2020, down $79,000, or 1.9%, from the quarter ended September 30, 2019, primarily due to a decrease of 61 basis points in the average cost of borrowings, partially offset by an increase of $177.2 million, or 28.3%, in average total borrowings to $804.3 million. The Company’s total cost of funds was 0.90% for the quarter ended September 30, 2020, down 16 basis points from the quarter ended June 30, 2020 and down 82 basis points from 1.72% for the quarter ended September 30, 2019. Interest expense totaled $48.5 million for the nine months ended September 30, 2020, down $21.5 million, or 30.7%, from the nine months ended September 30, 2019. Interest expense on deposits decreased to $36.1 million for the nine months ended September 30, 2020, down $23.9 million, or 39.8%, primarily due to a decrease in the cost of average total deposits to 0.99% from 1.62% for the nine months ended September 30, 2019. Interest expense on borrowings totaled $12.4 million for the nine months ended September 30, 2020, up $2.4 million, or 23.8%, from the nine months ended September 30, 2019, primarily due to an increase in average total borrowings to $738.1 million. The Company’s total cost of funds was 1.16% for the nine months ended September 30, 2020, down 53 basis points from 1.69% for the nine months ended September 30, 2019.

Mr. Gavegnano noted, “Our net interest margin improved to 3.13% for the quarter and 3.07% for the nine months ended September 30, 2020, due to increases in net interest income of 10% and 9%, respectively. We have been steadfast in maintaining loan yields, with the decline in yields on excess cash reserves being the primary driver of the decline in overall asset yields. However, these declines were easily outpaced by the decrease in our cost of funds, resulting in the margin improvements in the periods presented.”  

The Company’s provision for loan losses was $7.2 million for the quarter ended September 30, 2020, compared to $9.6 million for the quarter ended June 30, 2020, and a reversal of $3.0 million for the quarter ended September 30, 2019. The provision for loan losses was $17.5 million for the nine months ended September 30, 2020, compared to a reversal of $2.1 million for the same period in 2019. The allowance for loan losses was $67.6 million or 1.20% of total loans at September 30, 2020, compared to $60.5 million or 1.06% of total loans at June 30, 2020, and $50.3 million or 0.87% of total loans at December 31, 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 $71,000 for the quarter ended September 30, 2020 compared to net charge-offs of $56,000 for the quarter ended September 30, 2019. For the nine months ended September 30, 2020, net charge-offs totaled $212,000 compared to net charge-offs of $343,000 for nine months ended September 30, 2019.

Non-accrual loans were $3.6 million, or 0.06% of total loans outstanding, at September 30, 2020, up $197,000, or 5.8%, from December 31, 2019. Non-performing assets were $3.6 million, or 0.05% of total assets, at September 30, 2020, compared to $3.4 million, or 0.05% of total assets, at December 31, 2019.

Mr. Gavegnano noted, “We have continued to build our allowance for loan losses as we assess both the short-term and long-term impacts of the pandemic on our portfolio. The increases in our provision for loan losses, and ultimately the coverage ratio, reflect the status of COVID-19 related modifications as well as the current and expected economic climate in our market. We will continue our focus on monitoring modified loans and communicating with customers as we navigate through the pandemic, providing an important component in our determination of an appropriate provision for loan losses.”  

Non-interest income was $3.6 million for the quarter ended September 30, 2020, down from $8.7 million for the quarter ended June 30, 2020 and up from $2.8 million for the quarter ended September 30, 2019. Non-interest income decreased $5.1 million, or 58.7%, compared to the quarter ended June 30, 2020, due primarily to a $4.2 million gain on sale of assets realized in the second quarter of 2020 and a decrease of $1.9 million in gain on marketable equity securities, net, reflecting decreases in market valuations in the third quarter of 2020, partially offset by increases of $586,000 in mortgage banking gains, net. Compared to the quarter ended September 30, 2019, non-interest income increased $723,000, or 25.4%, due primarily to increases of $605,000 in mortgage banking gains, net and $585,000 valuation increase on marketable equity securities, net, partially offset by decreases of $235,000 in customer service fees and $172,000 in loan fees. For the nine months ended September 30, 2020, non-interest income increased $1.8 million, or 18.4%, to $11.4 million from $9.6 million for the nine months ended September 30, 2019, due primarily to a $4.2 million gain on sale of asset, and an increase of $1.0 million in mortgage banking gains, net, partially offset by a $3.3 million valuation decrease on marketable equity securities, net for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019.

Non-interest expenses were $22.8 million, or 1.41% of average assets for the quarter ended September 30, 2020, compared to $23.8 million, or 1.50% of average assets for the quarter ended September 30, 2019. Non-interest expenses decreased $1.0 million, or 4.3%, compared to the quarter ended September 30, 2019, due primarily to decreases of $1.7 million in salaries and employee benefits and $465,000 in marketing and advertising, partially offset by an increase of $682,000 in deposit insurance. For the nine months ended September 30, 2020, non-interest expenses decreased $2.3 million, or 3.1%, to $72.5 million from $74.8 million for the nine months ended September 30, 2019, due primarily to decreases of $2.5 million in salaries and employee benefits and $666,000 in marketing and advertising, partially offset by increases of $494,000 in occupancy and equipment and $461,000 in data processing. The increases in occupancy and equipment expenses and data processing include costs associated with the expansion of our branch network, including four new branches that opened in the past 12 months, three of which were opened in the third quarter of 2020. The Company’s efficiency ratio was 43.69% for the quarter ended September 30, 2020 compared to 46.79% for the quarter ended June 30, 2020 and 50.18% for the quarter ended September 30, 2019. For the nine months ended September 30, 2020 the efficiency ratio was 48.10%, a decrease of 614 basis points compared to 54.24% for the nine months ended September 30, 2019.

Mr. Gavegnano added, “We lowered our efficiency ratio to 44% and 48%, respectively, for the quarter and nine months ended September 30, 2020, due to the efforts made to limit overhead expenses throughout the pandemic. We also were able to do this while completing our most recent expansion to our branch network, opening new locations in Salem, Woburn and Brookline during the third quarter.”

The Company recorded a provision for income taxes of $5.7 million for the quarter ended September 30, 2020, reflecting an effective tax rate of 25.5%, compared to $6.5 million, or an effective tax rate of 24.8%, for the quarter ended September 30, 2019. For the nine months ended September 30, 2020 the provision for income taxes was $15.8 million, reflecting an effective tax rate of 25.1%, compared to $16.3 million, reflecting an effective rate of 24.6% for the nine months ended September 30, 2019.

Total assets were $6.567 billion at September 30, 2020, up $223.0 million, or 3.5%, from $6.344 billion at December 31, 2019. Net loans were $5.584 billion at September 30, 2020, down $113.7 million, or 2.0%, from December 31, 2019. Loan originations totaled $162.6 million during the quarter ended September 30, 2020 and $955.3 million for the nine months ended September 30, 2020. The net decrease in loans for the nine months ended September 30, 2020 was primarily due to decreases of $101.5 million in commercial real estate loans, $62.0 million in multi-family loans, $55.3 million in one- to four-family loans and $41.0 million in construction loans, partially offset by increases of $161.5 million in commercial and industrial loans and $4.1 million in home equity lines of credit. The increase in commercial and industrial loans includes the origination of $123.7 million in PPP loans. The allowance for loan losses increased $17.3 million, or 34.4%, to $67.6 million during the nine months ended September 30, 2020. Cash and due from banks was $702.1 million at September 30, 2020, an increase of $295.8 million, or 72.8% from December 31, 2019.

Total deposits were $4.952 billion at September 30, 2020, up $30.5 million, or 0.6%, from $4.922 billion at December 31, 2019. Core deposits, which exclude certificates of deposit, increased $349.5 million, or 10.4%, during the nine months ended September 30, 2020 to $3.701 billion, or 74.7% of total deposits, compared to 68.1% at December 31, 2019. The net increase in deposits for the nine months ended September 30, 2020 includes a $183.3 million increase, or 35.0%, in non-interest bearing demand deposits and a $319.0 million decrease in certificates of deposit, including a $187.4 million reduction in brokered deposits. Total borrowings were $804.3 million at September 30, 2020, up $168.0 million, or 26.4%, from December 31, 2019.

Total stockholders’ equity increased $21.7 million, or 3.0%, to $748.3 million at September 30, 2020 from $726.6 million at December 31, 2019. The increase for the nine months ended September 30, 2020 was primarily due to net income of $46.9 million and $4.2 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 $0.24 per share totaling $12.0 million. Stockholders’ equity to assets was 11.39% at September 30, 2020, compared to 11.45% at December 31, 2019. Book value per share increased to $14.28 at September 30, 2020 from $13.61 at December 31, 2019. Tangible book value per share increased to $13.85 at September 30, 2020 from $13.19 at December 31, 2019. Market price per share decreased 48.5% to $10.35 at September 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 September 30, 2020 exceeded the minimum requirement to be considered well capitalized.

Mr. Gavegnano concluded, “COVID-19 has and will continue to challenge the strength of the overall economy, especially the financial services industry. We are prepared to continue to meet the challenges faced by the Bank, leveraging our industry experience, seasoned risk management practices and strong liquidity and capital positions to support our customers through the pandemic and its current and future impacts on the economy.”

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 43 branches in the greater Boston metropolitan area, including 42 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, the effects of any health pandemic, 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.

 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
             
  September 30,
2020
  June 30,
2020
  December 31,
2019
  September 30,
2019
 
             
  (Dollars in thousands) 
ASSETS                
Cash and due from banks $702,138  $508,627  $406,382  $428,061 
Certificates of deposit        247   247 
Securities available for sale, at fair value  12,183   13,022   15,076   15,799 
Marketable equity securities, at fair value  16,203   16,401   15,243   14,313 
Federal Home Loan Bank stock, at cost  33,282   33,282   28,947   28,947 
Loans held for sale  11,662   3,682   2,455   1,828 
Loans:                
One- to four-family  604,037   635,683   659,366   667,385 
Home equity lines of credit  73,581   74,246   69,491   66,495 
Multi-family  941,409   941,922   1,003,418   1,069,312 
Commercial real estate  2,595,124   2,556,088   2,696,671   2,687,614 
Construction  666,375   742,845   707,370   656,615 
Commercial and industrial  766,418   760,546   604,889   594,683 
Consumer  12,213   11,867   12,196   12,017 
Total loans  5,659,157   5,723,197   5,753,401   5,754,121 
Allowance for loan losses  (67,639)  (60,547)  (50,322)  (50,831)
Net deferred loan origination fees  (7,717)  (8,340)  (5,539)  (5,670)
Loans, net  5,583,801   5,654,310   5,697,540   5,697,620 
Bank-owned life insurance  41,606   41,334   41,155   41,267 
Premises and equipment, net  67,917   67,098   65,841   65,582 
Accrued interest receivable  21,460   17,300   14,481   14,305 
Deferred tax asset, net  17,007   16,873   16,726   18,393 
Goodwill  20,378   20,378   20,378   20,378 
Core deposit intangible  1,769   1,887   2,123   2,254 
Other assets  37,327   23,776   17,100   14,146 
Total assets $6,566,733  $6,417,970  $6,343,694  $6,363,140 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Deposits:                
Non interest-bearing demand deposits $707,458  $709,924  $524,154  $514,941 
Interest-bearing demand deposits  1,353,153   1,291,458   1,269,211   1,262,552 
Money market deposits  789,712   753,980   675,702   689,324 
Regular savings and other deposits  850,810   833,951   882,550   848,582 
Certificates of deposit  1,250,894   1,231,084   1,569,916   1,640,303 
Total deposits  4,952,027   4,820,397   4,921,533   4,955,702 
Short-term borrowings  25,000   25,000       
Long-term debt  779,279   779,101   636,245   636,615 
Accrued expenses and other liabilities  62,163   59,199   59,329   58,841 
Total liabilities  5,818,469   5,683,697   5,617,107   5,651,158 
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; 52,413,120, 52,407,179, 53,377,506 and 53,297,061 shares issued at September 30, 2020, June 30, 2020, December 31, 2019, and September 30, 2019, respectively  524   524   534   533 
Additional paid-in capital  363,093   361,980   377,213   375,618 
Retained earnings  400,649   387,983   365,742   352,758 
Accumulated other comprehensive income (loss)  91   100   (147)  48 
Unearned compensation - ESOP, 2,222,186, 2,252,627, 2,313,509, and 2,343,949 shares at September 30, 2020, June 30, 2020, December 31, 2019 and September 30, 2019, respectively  (16,093)  (16,314)  (16,755)  (16,975)
Total stockholders' equity  748,264   734,273   726,587   711,982 
Total liabilities and stockholders' equity $6,566,733  $6,417,970  $6,343,694  $6,363,140 
                 


 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)
       
  Three Months Ended  Nine Months Ended 
  September 30,
2020
  June 30,
2020
  September 30,
2019
  September 30,
2020
  September 30,
2019
 
                
  (Dollars in thousands, except per share amounts) 
Interest and dividend income:                    
Interest and fees on loans $60,918  $61,445  $66,121  $186,400  $191,802 
Interest on debt securities:                    
Taxable  63   75   101   225   319 
Tax-exempt  13   12   12   38   38 
Dividends on equity securities  118   145   137   357   384 
Interest on certificates of deposit        18   1   73 
Other interest and dividend income  494   473   2,136   2,753   6,656 
Total interest and dividend income  61,606   62,150   68,525   189,774   199,272 
Interest expense:                    
Interest on deposits  8,746   10,591   20,178   36,106   59,982 
Interest on short-term borrowings  52   52   1   112   296 
Interest on long-term debt  3,999   4,136   4,129   12,278   9,710 
Total interest expense  12,797   14,779   24,308   48,496   69,988 
Net interest income  48,809   47,371   44,217   141,278   129,284 
Provision (reversal) for loan losses  7,163   9,641   (2,978)  17,529   (2,057)
Net interest income, after provision for loan losses  41,646   37,730   47,195   123,749   131,341 
Non-interest income:                    
Customer service fees  2,193   1,948   2,428   6,238   6,813 
Loan fees (costs)  264   (35)  436   903   566 
Mortgage banking gains, net  704   118   99   1,233   240 
Gain on sale of asset     4,195      4,195    
Gain (loss) on marketable equity securities, net  122   2,025   (463)  (2,197)  1,086 
Income from bank-owned life insurance  272   273   285   842   846 
Other income  17   134   64   185   80 
Total non-interest income  3,572   8,658   2,849   11,399   9,631 
Non-interest expenses:                    
Salaries and employee benefits  13,426   13,858   15,101   43,198   45,649 
Occupancy and equipment  3,734   3,739   3,657   11,397   10,903 
Data processing  2,196   2,133   2,026   6,466   6,005 
Marketing and advertising  554   1,030   1,019   2,814   3,480 
Professional services  688   695   680   2,380   2,324 
Deposit insurance  692   606   10   1,967   1,951 
Other general and administrative  1,540   1,240   1,354   4,229   4,448 
Total non-interest expenses  22,830   23,301   23,847   72,451   74,760 
Income before income taxes  22,388   23,087   26,197   62,697   66,212 
Provision for income taxes  5,714   5,808   6,508   15,767   16,284 
Net income $16,674  $17,279  $19,689  $46,930  $49,928 
                     
Earnings per share:                    
Basic $0.33  $0.34  $0.39  $0.93  $0.98 
Diluted $0.33  $0.34  $0.38  $0.93  $0.97 
Weighted average shares outstanding:                    
Basic  50,169,024   50,131,249   50,923,760   50,311,231   51,031,359 
Diluted  50,248,048   50,211,234   51,454,186   50,459,326   51,477,206 
                     


 
MERIDIAN BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
(Unaudited)
   
  Three Months Ended
  September 30, 2020 June 30, 2020 September 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) $5,671,957  $61,682    4.33 % $5,722,186  $62,164    4.37 % $5,840,885  $66,837    4.54 %
Securities and certificates of deposit  29,263   219    2.98    33,282   262    3.17    34,108   289    3.36  
Other interest-earning assets (3)  604,916   494    0.32    478,725   473    0.40    335,400   2,136    2.53  
Total interest-earning assets  6,306,136   62,395    3.94    6,234,193   62,899    4.06    6,210,393   69,262    4.42  
Noninterest-earning assets  161,886             153,567             145,445           
Total assets $6,468,022            $6,387,760            $6,355,838           
Liabilities and stockholders' equity:                                          
Interest-bearing liabilities:                                          
Interest-bearing demand deposits $1,291,341  $1,946    0.60   $1,297,072  $2,293    0.71   $1,195,266  $5,258    1.75  
Money market deposits  769,571   1,270    0.66    722,148   1,227    0.68    683,201   2,281    1.32  
Regular savings and other deposits  834,368   966    0.46    841,600   995    0.48    870,677   3,199    1.46  
Certificates of deposit  1,262,433   4,564    1.44    1,331,999   6,076    1.83    1,705,718   9,440    2.20  
Total interest-bearing deposits  4,157,713   8,746    0.84    4,192,819   10,591    1.02    4,454,862   20,178    1.80  
Borrowings  804,281   4,051    2.00    754,426   4,188    2.23    627,063   4,130    2.61  
Total interest-bearing liabilities  4,961,994   12,797    1.03    4,947,245   14,779    1.20    5,081,925   24,308    1.90  
Noninterest-bearing demand deposits  702,717             651,517             516,020           
Other noninterest-bearing liabilities  57,636             57,922             52,663           
Total liabilities  5,722,347             5,656,684             5,650,608           
Total stockholders' equity  745,675             731,076             705,230           
Total liabilities and stockholders' equity $6,468,022            $6,387,760            $6,355,838           
Net interest-earning assets $1,344,142            $1,286,948            $1,128,468           
Fully tax-equivalent net interest income      49,598             48,120             44,954       
Less: tax-equivalent adjustments      (789)            (749)            (737)      
Net interest income     $48,809            $47,371            $44,217       
Interest rate spread (1)(4)           2.91 %           2.86 %           2.52 %
Net interest margin (1)(5)           3.13 %           3.10 %           2.87 %
Average interest-earning assets to average                                          
interest-bearing liabilities      127.09 %           126.01 %           122.21 %     
                                           
Supplemental Information:                                          
Total deposits, including noninterest-bearing                                          
demand deposits $4,860,430  $8,746    0.72 % $4,844,336  $10,591    0.88 % $4,970,882  $20,178    1.61 %
Total deposits and borrowings, including                                          
noninterest-bearing demand deposits $5,664,711  $12,797    0.90 % $5,598,762  $14,779    1.06 % $5,597,945  $24,308    1.72 %

________________
(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 September 30, 2020, June 30, 2020 and September 30, 2019, yields on loans before tax-equivalent adjustments were 4.27%, 4.32% and 4.49%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 2.64%, 2.80% and 3.12%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.89%, 4.01% and 4.38%, respectively. Interest rate spread before tax-equivalent adjustments for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019 was 2.86%, 2.81% and 2.48%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019 was 3.08%, 3.06% and 2.82%, 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)
   
  Nine Months Ended
  September 30, 2020 September 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) $5,711,852  $188,603    4.41 % $5,782,319  $193,902    4.48 %
Securities and certificates of deposit  29,201   676    3.09    35,679   873    3.27  
Other interest-earning assets (3)  495,054   2,753    0.74    326,166   6,656    2.73  
Total interest-earning assets  6,236,107   192,032    4.11    6,144,164   201,431    4.38  
Noninterest-earning assets  159,039             133,279           
Total assets $6,395,146            $6,277,443           
                             
Liabilities and stockholders' equity:                            
Interest-bearing liabilities:                            
Interest-bearing demand deposits $1,289,479  $8,736    0.90   $1,200,110  $15,782    1.76  
Money market deposits  728,024   4,551    0.84    685,892   6,587    1.28  
Regular savings and other deposits  860,593   4,493    0.70    915,173   10,962    1.60  
Certificates of deposit  1,356,139   18,326    1.81    1,662,818   26,651    2.14  
Total interest-bearing deposits  4,234,235   36,106    1.14    4,463,993   59,982    1.80  
Borrowings  738,058   12,390    2.24    579,335   10,006    2.31  
Total interest-bearing liabilities  4,972,293   48,496    1.30    5,043,328   69,988    1.86  
Noninterest-bearing demand deposits  630,072             498,037           
Other noninterest-bearing liabilities  56,420             42,493           
Total liabilities  5,658,785             5,583,858           
Total stockholders' equity  736,361             693,585           
Total liabilities and stockholders' equity $6,395,146            $6,277,443           
Net interest-earning assets $1,263,814            $1,100,836           
Fully tax-equivalent net interest income      143,536             131,443       
Less: tax-equivalent adjustments      (2,258)            (2,159)      
Net interest income     $141,278            $129,284       
Interest rate spread (1)(4)           2.81 %           2.52 %
Net interest margin (1)(5)           3.07 %           2.86 %
Average interest-earning assets to average                            
interest-bearing liabilities      125.42 %           121.83 %     
                             
Supplemental Information:                            
Total deposits, including noninterest-bearing                            
demand deposits $4,864,307  $36,106    0.99 % $4,962,030  $59,982    1.62 %
Total deposits and borrowings, including                            
noninterest-bearing demand deposits $5,602,365  $48,496    1.16 % $5,541,365  $69,988    1.69 %

____________________
(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 nine months ended September 30, 2020 and 2019, yields on loans before tax-equivalent adjustments were 4.36% and 4.43%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 2.84% and 3.05%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 4.06%, and 4.34%, respectively. Interest rate spread before tax-equivalent adjustments for the nine months ended September 30, 2020 and 2019 was 2.76%, and 2.48%, respectively, while net interest margin before tax-equivalent adjustments for the nine months ended September 30, 2020 and 2019 was 3.03% 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 Nine Months Ended
  September 30,
2020
 June 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
Key Performance Ratios                         
Return on average assets (1)  1.03 %  1.08 %  1.24 %  0.98 %  1.06 %
Return on average equity (1)  8.94    9.45    11.17    8.50    9.60  
Interest rate spread (1) (2)  2.91    2.86    2.52    2.81    2.52  
Net interest margin (1) (3)  3.13    3.10    2.87    3.07    2.86  
Non-interest expense to average assets (1)  1.41    1.46    1.50    1.51    1.59  
Efficiency ratio (4)  43.69    46.79    50.18    48.10    54.24  


  September 30,
2020
 June 30,
2020
 December 31,
2019
 September 30,
2019
         
  (Dollars in thousands)
Asset Quality                    
Non-accrual loans:                    
One- to four-family $3,041   $3,074   $3,082   $3,600  
Home equity lines of credit  20    20          
Commercial real estate      194          
Commercial and industrial  541    532    323    350  
Total non-accrual loans  3,602    3,820    3,405    3,950  
Foreclosed assets                
Total non-performing assets $3,602   $3,820   $3,405   $3,950  
                     
Allowance for loan losses/total loans  1.20 %  1.06 %  0.87 %  0.88 %
Allowance for loan losses/non-accrual loans  1,877.82    1,585.00    1,477.89    1,286.86  
Non-accrual loans/total loans  0.06    0.07    0.06    0.07  
Non-accrual loans/total assets  0.05    0.06    0.05    0.06  
Non-performing assets/total assets  0.05    0.06    0.05    0.06  
                     
Capital and Share Related                    
Stockholders' equity to total assets  11.39 %  11.44 %  11.45 %  11.19 %
Book value per share $14.28   $14.01   $13.61   $13.36  
Tangible book value per share (5) $13.85   $13.59   $13.19   $12.93  
Market value per share $10.35   $11.60   $20.09   $18.75  
Shares outstanding 52,413,120   52,407,179   53,377,506   53,297,061  

___________________
(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 43.58%, 41.59% and 50.67% for the quarters ended September 30, 2020, June 30, 2020, and September 30, 2019, respectively and 47.45% and 53.82% for the nine months ended September 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.

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

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