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

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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.