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Meridian Bancorp, Inc. Announces Record Quarterly Net Income of $24 Million

BOSTON, April 22, 2021 (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 $24.3 million, or $0.48 per diluted share, for the quarter ended March 31, 2021, compared to $18.1 million, or $0.36 per diluted share for the quarter ended December 31, 2020, and $13.0 million, or $0.25 per diluted share, for the quarter ended March 31, 2020. The Company’s return on average assets was 1.46% for the quarter ended March 31, 2021, compared to 1.10% for the quarter ended December 31, 2020, and 0.82% for the quarter ended March 31, 2020. The Company’s return on average equity was 12.45% for the quarter ended March 31, 2021, compared to 9.51% for the quarter ended December 31, 2020, and 7.09% for the quarter ended March 31, 2020.

Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, “I am pleased to report record quarterly net income of $24.3 million for the first quarter of 2021, representing increases of $6.2 million, or 34.2% compared to the fourth quarter of 2020, and $11.3 million, or 87.4%, compared to the first quarter of 2020. These earnings reflect a 7.3% increase in net interest income for the first quarter of 2021 compared to the first quarter of 2020, improving the net interest margin to 3.07% from 2.99% over the same period, a result of management’s focus on maintaining loan yields while aggressively decreasing our cost of funds. Also, strong asset quality and changes in the volume and mix of our loan portfolio resulted in a decrease in our percentage of allowance to total loans to 1.20% at March 31, 2021, from 1.25% at December 31, 2020, due to a provision reversal of $5.2 million during the first quarter of 2021.”

The Company’s net interest income was $48.4 million for the quarter ended March 31, 2021, an increase of $3.3 million, or 7.3%, from the quarter ended March 31, 2020. The interest rate spread and net interest margin on a tax-equivalent basis were 2.91% and 3.07%, respectively, for the quarter ended March 31, 2021 compared to 2.67% and 2.99%, respectively, for the quarter ended March 31, 2020. Total interest and dividend income totaled $57.7 million for the quarter ended March 31, 2021, a decrease of $8.3 million, or 12.6% from the quarter ended March 31, 2020. The Company’s yield on interest-earning assets on a tax-equivalent basis was 3.65% for the quarter ended March 31, 2021, down 70 basis points from the quarter ended March 31, 2020. Total interest expense totaled $9.3 million for the quarter ended March 31, 2021, a decrease of $11.6 million, or 55.4%, from the quarter ended March 31, 2020. Interest expense on deposits decreased to $5.7 million for the quarter ended March 31, 2021, a decrease of $11.0 million, or 65.8%, from the quarter ended March 31, 2020 primarily due to a decrease in the cost of average total deposits to 0.45% from 1.38% for the quarter ended March 31, 2020. The Company’s total cost of funds was 0.65% for the quarter ended March 31, 2021, a decrease of 87 basis points from 1.52% for the quarter ended March 31, 2020.

The Company recognized a reversal of $5.2 million in its provision for credit losses for the quarter ended March 31, 2021, compared to a provision of $8.9 million for the quarter ended December 31, 2020 and $725,000 for the quarter ended March 31, 2020. The allowance for credit losses on loans was $63.4 million or 1.20% of total loans at March 31, 2021, compared to $68.8 million or 1.25% of total loans at December 31, 2020, and $50.9 million or 0.89% of total loans at March 31, 2020. Net charge-offs totaled $152,000 for the quarter ended March 31, 2021 and non-performing assets were $3.1 million, or 0.05% of total assets, at March 31, 2021, compared to $3.2 million, or 0.05% of total assets, at March 31, 2020.

Non-interest income was $4.9 million for the quarter ended March 31, 2021, an increase of $5.8 million from an $831,000 loss for the quarter ended March 31, 2020, due primarily to a $4.8 million in valuation increase on marketable equity securities, net, and $1.3 million in gains realized on marketable equity securities, net, sold during the period, partially offset by a decrease of $579,000 in loan fees. Non-interest expenses were $25.5 million, or 1.53% of average assets for the quarter ended March 31, 2021, compared to $26.3 million, or 1.66% of average assets for the quarter ended March 31, 2020, a decrease of $777,000, or 3.0%. The Company’s efficiency ratio was 49.55% for the quarter ended March 31, 2021 compared to 54.18% for the quarter ended March 31, 2020. The Company recorded a provision for income taxes of $8.7 million for the quarter ended March 31, 2021, reflecting an effective tax rate of 26.4%, compared to $4.2 million, or an effective tax rate of 24.6%, for the quarter ended March 31, 2020.

Total assets were $6.504 billion at March 31, 2021, down $115.6 million, or 1.8%, from $6.620 billion at December 31, 2020. Net loans were $5.224 billion at March 31, 2021 down $219.8 million, or 4.0%, from December 31, 2020, despite loan originations of $271.9 million during the quarter ended March 31, 2021. The net decrease in loans for the three months ended March 31, 2021 was primarily due to decreases of $105.5 million in construction loans, $79.9 million in commercial real estate loans and $46.7 million in one- to four-family loans, partially offset by a net increase of $14.4 million in commercial and industrial loans, which includes the origination of $52.4 million in PPP loans during the quarter ended March 31, 2021. The allowance for credit losses on loans decreased $5.4 million, or 7.8%, to $63.4 million during the quarter ended March 31, 2021 from $68.8 million at December 31, 2020, primarily due to changes in the volume and mix of the loan portfolio.

Total deposits were $5.097 billion at March 31, 2021, up $16.2 million, or 0.3%, from $5.081 billion at December 31, 2020. Core deposits, which exclude certificates of deposit, increased $74.8 million, or 1.9%, during the quarter ended March 31, 2021 to $3.937 billion, or 77.2% of total deposits, compared to 76.0% at December 31, 2020. Certificates of deposit decreased $58.6 million during the quarter ended March 31, 2021, inclusive of a $59.9 million decrease in brokered deposits. Total borrowings were $560.6 million at March 31, 2021, down $147.6 million, or 20.8%, from December 31, 2020, primarily due to the payoffs of $50.0 million in matured advances from the FHLB and all remaining funds from the Federal Reserve’s PPPLF program.

Total stockholders’ equity increased $20.2 million, or 2.6%, to $789.1 million at March 31, 2021 from $768.9 million at December 31, 2020. The increase for the quarter ended March 31, 2021 was primarily due to net income of $24.3 million, partially offset by dividends of $0.10 per share totaling $5.0 million. Stockholders’ equity to assets was 12.13% at March 31, 2021, compared to 11.61% at December 31, 2020. Tangible book value per share increased to $14.63 at March 31, 2021 from $14.25 at December 31, 2020. Market price per share increased 23.5% to $18.42 at March 31, 2021 from $14.91 at December 31, 2020. The Company and the Bank exceeded the minimum requirement to be considered well capitalized at March 31, 2021.

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)

    March 31,
2021
      December 31,
2020
      March 31,
2020
 
   
  (Dollars in thousands)
ASSETS                      
Cash and due from banks $ 1,034,107     $ 914,586     $ 457,048  
Certificates of deposit               247  
Securities available for sale, at fair value   10,518       11,326       13,820  
Marketable equity securities, at fair value   8,900       12,189       13,130  
Federal Home Loan Bank stock, at cost   28,447       30,658       33,278  
Loans held for sale   7,422       8,224       3,403  
Loans:                      
One- to four-family   517,442       564,146       657,245  
Home equity lines of credit   64,370       68,721       78,016  
Multi-family   878,331       880,552       972,122  
Commercial real estate   2,419,715       2,499,660       2,622,379  
Construction   625,961       731,432       716,477  
Commercial and industrial   779,603       765,195       638,695  
Consumer   10,307       10,707       11,888  
Total loans   5,295,729       5,520,413       5,696,822  
Allowance for credit losses on loans   (63,436 )     (68,824 )     (50,946 )
Net deferred loan origination fees   (8,298 )     (7,784 )     (6,021 )
Loans, net   5,223,995       5,443,805       5,639,855  
Bank-owned life insurance   42,138       41,877       41,061  
Premises and equipment, net   65,394       66,850       67,527  
Accrued interest receivable   22,498       23,173       13,868  
Deferred tax asset, net   21,418       21,355       16,782  
Goodwill   20,378       20,378       20,378  
Core deposit intangible   1,548       1,651       2,005  
Other assets   17,162       23,776       26,152  
Total assets $ 6,503,925     $ 6,619,848     $ 6,348,554  
                       
LIABILITIES AND STOCKHOLDERS’ EQUITY                      
Deposits:                      
Non interest-bearing demand deposits $ 751,809     $ 711,573     $ 572,847  
Interest-bearing demand deposits   1,461,236       1,364,548       1,292,384  
Money market deposits   852,747       930,507       699,026  
Regular savings and other deposits   870,961       855,329       867,536  
Certificates of deposit   1,160,616       1,219,210       1,390,156  
Total deposits   5,097,369       5,081,167       4,821,949  
Short-term borrowings               25,000  
Long-term debt   560,625       708,245       720,873  
Accrued expenses and other liabilities   56,847       61,551       61,111  
Total liabilities   5,714,841       5,850,963       5,628,933  
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; 52,430,554, 52,415,061 and 52,402,395 shares issued at March 31, 2021, December 31, 2020 and March 31, 2020, respectively   524       524       524  
Additional paid-in capital   364,751       363,995       360,901  
Retained earnings   439,593       420,297       374,712  
Accumulated other comprehensive income (loss)   (131 )     (58 )     19  
Unearned compensation – ESOP; 2,161,304, 2,191,745 and 2,283,068 shares at March 31, 2021, December 31, 2020 and March 31, 2020, respectively   (15,653 )     (15,873 )     (16,535 )
Total stockholders’ equity   789,084       768,885       719,621  
Total liabilities and stockholders’ equity $ 6,503,925     $ 6,619,848     $ 6,348,554  

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

  Three Months Ended
 
  March 31,
2021
    December 31,
2020
    March 31,
2020
 
     
  (Dollars in thousands, except per share amounts)  
Interest and dividend income:                      
Interest and fees on loans $ 57,162     $ 61,599     $ 64,037  
Interest on debt securities   65       68       100  
Dividends on marketable equity securities   124       158       94  
Interest on certificates of deposit               1  
Other interest and dividend income   370       514       1,786  
Total interest and dividend income   57,721       62,339       66,018  
Interest expense:                      
Interest on deposits   5,729       6,883       16,769  
Interest on borrowings   3,591       4,001       4,151  
Total interest expense   9,320       10,884       20,920  
Net interest income   48,401       51,455       45,098  
Provision (reversal) for credit losses   (5,236 )     8,927       725  
Net interest income, after provision (reversal) for credit losses   53,637       42,528       44,373  
Non-interest income:                      
Customer service fees   2,199       2,355       2,097  
Loan fees (costs)   95       (422 )     674  
Mortgage banking gains, net   582       728       411  
Gain (loss) on marketable equity securities, net   1,785       2,853       (4,344 )
Income from bank-owned life insurance   261       271       297  
Other income   9       82       34  
Total non-interest income   4,931       5,867       (831 )
Non-interest expenses:                      
Salaries and employee benefits   15,516       14,704       15,914  
Occupancy and equipment   4,231       3,833       3,924  
Data processing   2,241       2,205       2,137  
Marketing and advertising   896       1,165       1,230  
Professional services   730       594       997  
Deposit insurance   513       404       669  
Other general and administrative   1,416       1,189       1,449  
Total non-interest expenses   25,543       24,094       26,320  
Income before income taxes   33,025       24,301       17,222  
Provision for income taxes   8,705       6,180       4,245  
Net income $ 24,320     $ 18,121     $ 12,977  
                       
Earnings per share:                      
Basic $ 0.48     $ 0.36     $ 0.26  
Diluted $ 0.48     $ 0.36     $ 0.25  
Weighted average shares outstanding:                      
Basic   50,239,611       50,201,720       50,634,983  
Diluted   50,565,459       50,295,295       50,920,259  

MERIDIAN BANCORP, INC. AND SUBSIDIARIES
NET INTEREST INCOME ANALYSIS
(Unaudited)

  Three Months Ended
  March 31, 2021   December 31, 2020   March 31, 2020
  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) $ 5,429,311   $ 57,954     4.33 %   $ 5,613,834   $ 62,400     4.42 %   $ 5,741,852   $ 64,758     4.54 %
Securities and certificates of deposit 20,839   208     4.05     25,855   258     3.97     29,290   211     2.90  
Other interest-earning assets (3) 1,057,264   370     0.14     777,307   514     0.26     400,315   1,786     1.79  
Total interest-earning assets 6,507,414   58,532     3.65     6,416,996   63,172     3.92     6,171,457   66,755     4.35  
Noninterest-earning assets 155,169               164,339               157,398            
Total assets $ 6,662,583               $ 6,581,335               $ 6,328,855            
Liabilities and stockholders’ equity:                                              
Interest-bearing liabilities:                                              
Interest-bearing demand deposits $ 1,462,239   $ 1,408     0.39     $ 1,362,686   $ 1,727     0.50     $ 1,280,003   $ 4,497     1.41  
Money market deposits 877,613   780     0.36     839,992   1,026     0.49     691,897   2,055     1.19  
Regular savings and other deposits 861,439   536     0.25     851,711   729     0.34     906,100   2,531     1.12  
Certificates of deposit 1,223,333   3,005     1.00     1,221,585   3,401     1.11     1,475,016   7,686     2.10  
Total interest-bearing deposits 4,424,624   5,729     0.53     4,275,974   6,883     0.64     4,353,016   16,769     1.55  
Borrowings 666,856   3,591     2.18     787,406   4,001     2.02     654,740   4,151     2.55  
Total interest-bearing liabilities 5,091,480   9,320     0.74     5,063,380   10,884     0.86     5,007,756   20,920     1.68  
Noninterest-bearing demand deposits 734,316               700,341               535,182            
Other noninterest-bearing liabilities 55,337               55,742               53,688            
Total liabilities 5,881,133               5,819,463               5,596,626            
Total stockholders’ equity 781,450               761,872               732,229            
Total liabilities and stockholders’ equity $ 6,662,583               $ 6,581,335               $ 6,328,855            
Net interest-earning assets $ 1,415,934               $ 1,353,616               $ 1,163,701            
Fully tax-equivalent net interest income     49,212               52,288               45,835        
Less: tax-equivalent adjustments     (811 )             (833 )             (737 )      
Net interest income     $ 48,401               $ 51,455               $ 45,098        
Interest rate spread (1)(4)           2.91 %             3.06 %             2.67 %
Net interest margin (1)(5)           3.07 %             3.24 %             2.99 %
Average interest-earning assets to average                                              
interest-bearing liabilities     127.81 %             126.73 %             123.24 %      
                                               
Supplemental Information:                                              
Total deposits, including noninterest-bearing                                              
demand deposits $ 5,158,940   $ 5,729     0.45 %   $ 4,976,315   $ 6,883     0.55 %   $ 4,888,198   $ 16,769     1.38 %
Total deposits and borrowings, including                                              
noninterest-bearing demand deposits $ 5,825,796   $ 9,320     0.65 %   $ 5,763,721   $ 10,884     0.75 %   $ 5,542,938   $ 20,920     1.52 %

     
   
(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 quarters ended March 31, 2021, December 31, 2020 and March 31, 2020, yields on loans before tax-equivalent adjustments were 4.27%, 4.37% and 4.49%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 3.68%, 3.48% and 2.68%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.60%, 3.86% and 4.30%, respectively. Interest rate spread before tax-equivalent adjustments for the quarters ended March 31, 2021, December 31, 2020 and March 31, 2020 was 2.86%, 3.00% and 2.62%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended March 31, 2021, December 31, 2020 and March 31, 2020 was 3.02%, 3.19% and 2.94%, 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
  March 31,
2021
  December 31,
2020
  March 31,
2020
Key Performance Ratios                
Return on average assets (1) 1.46 %   1.10 %   0.82 %
Return on average equity (1) 12.45     9.51     7.09  
Interest rate spread (1) (2) 2.91     3.06     2.67  
Net interest margin (1) (3) 3.07     3.24     2.99  
Non-interest expense to average assets (1) 1.53     1.46     1.66  
Efficiency ratio (4) 49.55     44.23     54.18  

  March 31,
2021
  December 31,
2020
  March 31,
2020
  (Dollars in thousands)
Asset Quality                      
Non-accrual loans:                      
One- to four-family $ 2,466     $ 2,617     $ 2,846  
Home equity lines of credit   20       20       20  
Commercial and industrial   635       527       323  
Total non-accrual loans   3,121       3,164       3,189  
Foreclosed assets                
Total non-performing assets $ 3,121     $ 3,164     $ 3,189  
                       
Allowance for credit losses on loans/total loans   1.20 %     1.25 %     0.89 %
Allowance for credit losses on loans/non-accrual loans   2,032.55       2,175.22       1,597.55  
Non-accrual loans/total loans   0.06       0.06       0.06  
Non-accrual loans/total assets   0.05       0.05       0.05  
Non-performing assets/total assets   0.05       0.05       0.05  
                       
Capital and Share Related                      
Stockholders’ equity to total assets   12.13 %     11.61 %     11.34 %
Book value per share $ 15.05     $ 14.67     $ 13.73  
Tangible book value per share (5) $ 14.63     $ 14.25     $ 13.31  
Market value per share $ 18.42     $ 14.91     $ 11.22  
Shares outstanding 52,430,554     52,415,061     52,402,395  

     
   
(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. 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 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 47.89%, 42.03% and 59.46% for the quarters ended March 31, 2021, December 31, 2020, and March 31, 2020, 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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