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Meridian Bancorp, Inc. Reports Fourth Quarter and Record Full Year Net Income; Rise in Total Assets to Over $6 Billion on Record Loan and Deposit Growth

By GlobeNewswire,  January 22, 2019, 04:05:00 PM EDT


BOSTON, Jan. 22, 2019 (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 $12.4 million, or $0.24 per diluted share, for the quarter ended December 31, 2018, compared to $17.4 million, or $0.33 per diluted share, for the  quarter ended September 30, 2018 and $9.0 million, or $0.17 per diluted share, for the quarter ended December 31, 2017. For the year ended December 31, 2018, net income was $55.8 million, or $1.06 per diluted share, up from $42.9 million, or $0.82 per diluted share, for the year ended December 31, 2017. Net income for the quarter and year ended December 31, 2018 reflects a reduction in the statutory federal income tax rate to 21% from 35% effective January 1, 2018 related to enactment of the Tax Cuts and Jobs Act (the "Tax Act") in December 2017. Net income for the quarter and year ended December 31, 2017 reflected a charge of $7.1 million, or $0.13 per diluted share, related to enactment of the Tax Act. Merger and acquisition expenses totaling $114,000 for the year ended December 31, 2018, $1.8 million for the quarter and $2.1 million for the year ended December 31, 2017 related to the Company's acquisition of Meetinghouse Bancorp, Inc. and Meetinghouse Bank ("Meetinghouse") completed on December 29, 2017 were also reflected in the Company's results.

The Company's return on average assets was 0.83% for the quarter ended December 31, 2018, compared to 1.22% for the  quarter ended September 30, 2018 and 0.70% for the quarter ended December 31, 2017. For the year ended December 31, 2018, the Company's return on average assets was 0.99%, up from 0.89% for the year ended December 31, 2017. The Company's return on average equity was 7.28% for the quarter ended December 31, 2018, compared to 10.28% for the quarter ended September 30, 2018 and 5.56% for the quarter ended December 31, 2017.  For the year ended December 31, 2018, the Company's return on average equity was 8.36%, up from 6.82% for the year ended December 31, 2017.

Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, "I am pleased to report record net income of $55.8 million for the year 2018, up $12.8 million, or 30%, from 2017, while our net income for the quarter rose $3.3 million, or 37%, to $12.4 million from the fourth quarter of 2017. We also proudly achieved record net growth of $971 million, or 21%, in loans and $776 million, or 19%, in deposits during 2018 and increased our total assets to $6.2 billion. Over the past five years, our asset base has grown $3.5 billion for a compounded annual growth rate of 18%. This growth has resulted in steady increases in our profitability along with substantial improvement in measures of operating efficiency and expense management, asset quality and shareholder returns. Our growth plans and earnings were also enhanced in 2018 by income tax expense reductions resulting from the Tax Act's lower federal income tax rate."

The Company's net interest income was $42.2 million for the quarter ended December 31, 2018, up $806,000, or 1.9%, from the quarter ended September 30, 2018 and $2.8 million, or 7.2%, from the quarter ended December 31, 2017. The interest rate spread and net interest margin on a tax-equivalent basis were 2.62% and 2.93%, respectively, for the  quarter ended December 31, 2018 compared to 2.70% and 2.99%, respectively, for the  quarter ended September 30, 2018 and 2.97% and 3.20%, respectively, for the quarter ended December 31, 2017. For the year ended December 31, 2018, net interest income increased $18.2 million, or 12.5%, to $164.4 million from the year ended December 31, 2017.  The net interest rate spread and net interest margin on a tax-equivalent basis were 2.76% and 3.03%, respectively, for the  year ended December 31, 2018 compared to 3.01% and 3.23%, respectively, for the year ended December 31, 2017. The increases in net interest income were primarily due to growth in average loan balances, partially offset by increases in the average balances of total deposits and borrowings and the cost of funds for the quarter and year ended December 31, 2018 compared to the respective prior periods. The interest rate spread and net interest margin on a tax-equivalent basis for the quarter and year ended December 31, 2018 reflect the reduction in the federal income tax rate to 21% from 35%.

Total interest and dividend income increased to $61.7 million for the quarter ended December 31, 2018, up $3.6 million, or 6.2%, from the quarter ended September 30, 2018 and $10.8 million, or 21.3%, from the quarter ended December 31, 2017, primarily due to growth in the Company's average loan balances to $5.434 billion. The Company's yield on interest-earning assets on a tax-equivalent basis was 4.26% for the quarter ended December 31, 2018, up eight basis points from the quarter ended September 30, 2018 and up 15 basis points from the quarter ended December 31, 2017.  For the year ended December 31, 2018, the Company's total interest and dividend income increased $42.6 million, or 23.0%, to $227.7 million from the year ended December 31, 2017 primarily due to growth in the average loan balances of $832.3 million, or 19.4%, to $5.119 billion, and by an increase in the yield on loans on a tax-equivalent basis of three basis points to 4.33% for the year ended December 31, 2018 compared to the year ended December 31, 2017. The Company's yield on interest-earning assets on a tax-equivalent basis increased 12 basis points to 4.18% for the year ended December 31, 2018 compared to the same period in 2017. The yields on loans and interest-earning assets on a tax-equivalent basis for the quarter and year ended December 31, 2018 also reflect the reduction in the federal income tax rate to 21% from 35%.

Total interest expense increased to $19.5 million for the quarter ended December 31, 2018, up $2.8 million, or 16.7%, from the quarter ended September 30, 2018 and $8.0 million, or 69.3%, from the quarter ended December 31, 2017. Interest expense on deposits increased to $17.1 million for the quarter ended December 31, 2018, up $2.8 million, or 19.6%, from the quarter ended September 30, 2018 and $7.0 million, or 69.2%, from the quarter ended December 31, 2017 primarily due to growth in average total deposits to $4.637 billion and increases in the cost of average total deposits to 1.46% from 1.29% for the quarter ended September 30, 2018, and 1.00% for the quarter ended December 31, 2017. Interest expense on borrowings increased $1.0 million, or 69.6%, to $2.4 million for the quarter ended December 31, 2018, from the quarter ended December 31, 2017 primarily due to growth in average total borrowings of $94.7 million to $581.6 million and an increase in the average cost of borrowings of 49 basis points to 1.67%. The Company's total cost of funds was 1.49% for the quarter ended December 31, 2018, up 16 basis points from the quarter ended September 30, 2018 and 47 basis points from the quarter ended December 31, 2017. Total interest expense increased $24.3 million, or 62.5%, to $63.2 million for the year ended December 31, 2018 from the year ended December 31, 2017. Interest expense on deposits increased $20.7 million, or 60.8%, to $54.6 million for the year ended December 31, 2018 from the year ended December 31, 2017 due to the growth in average total deposits of $624.6 million, or 16.7%, to $4.356 billion and an increase in the cost of average total deposits of 34 basis points to 1.25%. Interest expense on borrowings increased $3.7 million, or 74.5%, to $8.6 million for the year ended December 31, 2018 from the year ended December 31, 2017 due to the growth in average total borrowings of $165.7 million, or 40.3%, to $576.9 million and an increase in the cost of average total borrowings of 29 basis points to 1.49%. The Company's cost of funds increased 34 basis points to 1.28% for the year ended December 31, 2018 compared to the year ended December 31, 2017.

Mr. Gavegnano noted, "We expect our earnings growth will continue to be driven by increases in net interest income fueled by loan and deposit growth. As expected, loan and deposit growth was strong in the fourth quarter of 2018, with new quarterly records set for net loan growth of $368 million, or 7%, and net deposit growth of $473 million, or 11%.  Our loan pipeline remains robust and our capacity to fund loan growth is increasing as we continue to roll out our branch network expansion, deposit acquisition and marketing strategies."

The Company's provision for loan losses was $3.6 million for the quarter ended December 31, 2018, up $3.3 million from the quarter ended September 30, 2018 and up $4.3 million from the quarter ended December 31, 2017. For the year ended December 31, 2018, the provision for loan losses was $7.8 million, up from $4.9 million for the year ended December 31, 2017. The allowance for loan losses was $53.2 million or 0.94% of total loans at December 31, 2018, compared to $49.6 million or 0.94% of total loans at September 30, 2018, and $45.2 million or 0.97% of total loans at December 31, 2017. The increases in the provision and the allowance for loan losses were primarily due to growth in all commercial loan categories during the quarter and year ended December 31, 2018. The changes in the allowance for loan losses coverage ratio were based on management's assessment of loan portfolio growth and composition changes, declines in historical charge-off trends, reduced levels of problem loans and other improvements in asset quality trends.

Net recoveries totaled $59,000 for the quarter ended December 31, 2018 compared to net charge-offs of $18,000 for the quarter ended September 30, 2018 and net recoveries of $257,000 for the quarter ended December 31, 2017. For the year ended December 31, 2018, net recoveries totaled $198,000, compared to net recoveries of $177,000 for the year ended December 31, 2017.

Non-accrual loans were $6.9 million, or 0.12% of total loans outstanding, at December 31, 2018; down $1.1 million, or 13.7%, from September 30, 2018; and down $1.5 million, or 17.4%, from December 31, 2017. Non-performing assets were $6.9 million, or 0.11% of total assets, at December 31, 2018, compared to $8.0 million, or 0.14% of total assets, at September 30, 2018, and $8.4 million, or 0.16% of total assets, at December 31, 2017.

Non-interest income was $135,000 for the quarter ended December 31, 2018, down from $3.7 million for the quarter ended September 30, 2018 and down from $8.7 million for the quarter ended December 31, 2017. Non-interest income decreased $3.5 million, or 96.3%, compared to the quarter ended September 30, 2018, primarily due to a $2.7 million loss on marketable equity securities, net, reflecting declines in market valuations in the fourth quarter of 2018. Compared to the quarter ended December 31, 2017, non-interest income decreased $8.6 million, or 98.4%, primarily due to a $6.1 million gain on sales of securities available for sale, net, for the fourth quarter of 2017 and a $2.7 million loss on marketable equity securities, net, for the fourth quarter of 2018. For the year ended December 31, 2018, non-interest income decreased $14.1 million, or 61.0%, to $9.0 million from $23.1 million for the year ended December 31, 2017, primarily due to a $9.3 million gain on sales of securities available for sale, net, for the year ended December 31, 2017, a $2.1 million loss on marketable equity securities, net, for the year ended December 31, 2018, a decrease of $1.5 million in gain on life insurance distribution and a decrease of $1.5 million in loan fees due to $1.3 million of loan swap fee income recognized in the second quarter of 2017, partially offset by a $548,000 increase in customer service fees.

Non-interest expenses were $23.6 million, or 1.59% of average assets for the quarter ended December 31, 2018, compared to $23.0 million, or 1.61% of average assets for the quarter ended September 30, 2018 and $23.9 million, or 1.85% of average assets for the quarter ended December 31, 2017.  Non-interest expenses increased $630,000, or 2.7%, compared to the quarter ended September 30, 2018, due primarily to increases of $420,000 in marketing and advertising, $262,000 in salaries and employee benefits and $233,000 in occupancy and equipment, partially offset by a decrease of $275,000 in deposit insurance. Non-interest expenses decreased $232,000, or 1.0%, compared to the quarter ended December 31, 2017, due primarily to decreases of $1.8 million in merger and acquisition expenses and $248,000 in deposit insurance, partially offset by increases of $887,000 in salaries and employee benefits, $416,000 in occupancy and equipment, $301,000 in data processing and $144,000 in other general and administrative expenses.  For the year ended December 31, 2018, non-interest expenses increased $6.8 million, or 7.8%, to $94.8 million from $88.0 million for the year ended December 31, 2017, due to increases of $5.7 million in salaries and employee benefits, $1.2 million in occupancy and equipment expenses, $1.0 million in data processing expenses and $704,000 in other general and administrative expenses, partially offset by a $1.9 million decrease in merger and acquisition expenses. The increases in salaries and employee benefits expenses reflect annual increases in employee compensation and health benefits during the first quarter of 2018.  In addition, the increases in salaries and employee benefits, and occupancy and equipment expenses and data processing include costs associated with the expansion of our branch and support staff, including two branches acquired from Meetinghouse, one new branch opened in the first quarter of 2018, and three new branch openings in the fourth quarter of 2018. Other general and administrative expenses reflect core deposit intangible amortization of $148,000 for the quarter ended September 30, 2018 and $590,000 for the year ended December 31, 2018. The Company's efficiency ratio was 52.52% for the quarter ended December 31, 2018 compared to 51.92% for the quarter ended September 30, 2018 and 52.61% for the quarter ended December 31, 2017. For the year ended December 31, 2018, the efficiency ratio was 53.95% compared to 53.71% for the year ended December 31, 2017.

Mr. Gavegnano added, "Even as we added four new locations to our branch network, our efficiency ratio remained under 54% during 2018. Our ratio of non-interest expenses to average assets was also reduced to below 1.7% as we grew our asset base to over $6 billion. We opened new branch locations in Boston's Brigham Circle, Burlington and Lynnfield in the fourth quarter, and plans are underway to open two additional branches in the Cambridge area in 2019 as we expand our branch network to 40 branches. We will continue to seek and execute prudent growth strategies while maximizing infrastructure investments, operating efficiencies and economies of scale as we have repeatedly demonstrated in recent years."

The Company recorded a provision for income taxes of $2.7 million for the quarter ended December 31, 2018, reflecting an effective tax rate of 18.2%, compared to $4.5 million, or an effective tax rate of 20.4%, for the quarter ended September 30, 2018, and $15.9 million, or an effective tax rate of 63.7%, for the quarter ended December 31, 2017. For the year ended December 31, 2018, the provision for income taxes was $15.0 million, reflecting an effective tax rate of 21.2%, compared to $33.5 million, or an effective tax rate of 43.8%, for the year ended December 31, 2017. The changes in the provision for income taxes and the effective tax rate were primarily due to the decrease in the statutory federal income tax rate to 21% from 35% effective January 1, 2018 and a $7.1 million charge in the fourth quarter of 2017 to revalue the Company's net deferred tax asset as a result of the Tax Act.

Total assets were $6.179 billion at December 31, 2018, up $403.4 million, or 7.0%, from $5.775 billion at  September 30, 2018 and $879.2 million, or 16.6%, from $5.299 billion at December 31, 2017.  Net loans were $5.593 billion at December 31, 2018, up $367.5 million, or 7.0%, from September 30, 2018, and up $970.6 million, or 21.0%, from December 31, 2017. Loan originations totaled $530.1 million during the quarter ended December 31, 2018 and $1.644 billion during the year ended December 31, 2018. The net increase in loans for the year ended December 31, 2018 was primarily due to increases of $558.2 million in commercial real estate loans, $230.9 million in multi-family loans, $99.4 million in commercial and industrial loans, $45.6 million construction loans, and $43.7 million in one- to four-family loans.  Cash and due from banks was $372.0 million at December 31, 2018, a decrease of $30.7 million, or 7.6% from December 31, 2017. Securities, at fair value, were $30.6 million at December 31, 2018, a decrease of $7.8 million, or 20.2%, from $38.4 million at December 31, 2017.

Total deposits were $4.884 billion at December 31, 2018, an increase of $472.9 million, or 10.7%, from $4.411 billion at September 30, 2018 and an increase of $776.3 million, or 18.9%, from $4.108 billion at December 31, 2017.  Core deposits, which exclude certificates of deposit, increased $460.9 million, or 16.8%, during the year ended December 31, 2018 to $3.198 billion, or 65.5% of total deposits. Total borrowings were $586.9 million, down $63.9 million, or 9.8%, from September 30, 2018 and up $73.4 million, or 14.3%, from December 31, 2017.

Total stockholders' equity decreased $4.5 million, or 0.7%, to $674.7 million at December 31, 2018 from $679.1 million at September 30, 2018, and increased $28.3 million, or 4.4%, from $646.4 million at December 31, 2017. The increase for the year ended December 31, 2018 was primarily due to net income of $55.8 million and $4.5 million related to stock-based compensation plans, partially offset by the repurchase of 1,209,734 shares of the Company's common stock related to the stock repurchase program at a total cost of $20.4 million, dividends of $0.22 per share totaling $11.3 million, and the surrender of 192,440 shares of the Company's stock related to the tax withholdings resulting from stock option exercises at a total cost of $3.3 million during the second half of 2018. Stock options exercised by the Company's employees and directors totaled 354,968 during the fourth quarter of 2018 and 1,117,300 shares during year ended December 31, 2018, including 868,810 shares from stock options granted in 2008 and exercised prior to expiration on October 13, 2018. Stockholders' equity to assets was 10.92% at December 31, 2018, compared to 11.76% at September 30, 2018 and 12.20% at December 31, 2017. Book value per share increased to $12.60 at December 31, 2018 from $11.96 at December 31, 2017. Tangible book value per share increased to $12.17 at December 31, 2018 from $11.54 at December 31, 2017. Market price per share decreased $6.28, or 30.5%, to $14.32 at December 31, 2018 from $20.60 at December 31, 2017. At December 31, 2018, the Company and the Bank continued to exceed all regulatory capital requirements.

The Company repurchased 895,724 shares of its stock at an average price of $16.00 during the quarter ended December 31, 2018. As of December 31, 2018, the Company had repurchased 3,269,345 shares of its stock at an average price of $14.87 per share, or 96.9% of the 3,373,621 shares authorized for repurchase under the Company's repurchase program adopted in August 2015 and amended in November 2018. The amendment increased the Company's stock repurchase program by 636,287 shares, or approximately 1.2% of its outstanding common stock.

Mr. Gavegnano concluded, "Along with expansion of our stock repurchase program and the repurchase of 895,724 shares during the fourth quarter, our Board of Directors also enhanced shareholder value by declaring a quarterly dividend of $0.07 per share, an increase of $0.02 per share, or 40%, and paid on January 2, 2019. As we look forward to 2019, we are working to further enhance shareholder returns through our increased scale resulting from substantial organic growth in loans, deposits and market share and a continued focus on improving the Bank's efficiency."

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 38 branches in the greater Boston metropolitan area, including 37 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.

MERIDIAN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

    December 31,

2018
    September 30,

2018
    December 31,

2017
 
       
    (Dollars in thousands)  
ASSETS                        
Cash and due from banks   $ 371,995     $ 313,668     $ 402,687  
Certificates of deposit     5,247       20,891       69,326  
Securities available for sale, at fair value     17,159       17,510       38,364  
Marketable equity securities, at fair value     13,437       16,135        
Federal Home Loan Bank stock, at cost     29,187       31,100       24,947  
Loans held for sale     409       843       3,772  
Loans:                        
One- to four-family     647,367       636,419       603,680  
Home equity lines of credit     50,087       46,534       48,393  
Multi-family     1,010,521       969,628       779,637  
Commercial real estate     2,621,979       2,438,139       2,063,781  
Construction     686,948       594,611       641,306  
Commercial and industrial     625,018       585,215       525,604  
Consumer     10,953       10,934       10,761  
Total loans     5,652,873       5,281,480       4,673,162  
Allowance for loan losses     (53,231 )     (49,609 )     (45,185 )
Net deferred loan origination fees     (6,239 )     (5,970 )     (5,179 )
Loans, net     5,593,403       5,225,901       4,622,798  
Bank-owned life insurance     40,734       41,164       40,336  
Premises and equipment, net     45,140       42,448       40,967  
Accrued interest receivable     14,267       13,409       12,902  
Deferred tax asset, net     18,196       15,998       15,244  
Goodwill     20,378       19,638       19,638  
Core deposit intangible     2,653       2,801       3,243  
Other assets     6,478       13,822       5,231  
Total assets   $ 6,178,683     $ 5,775,328     $ 5,299,455  
                         
LIABILITIES AND STOCKHOLDERS' EQUITY                        
Deposits:                        
Non interest-bearing demand deposits   $ 483,777     $ 490,703     $ 477,428  
Interest-bearing demand deposits     1,190,346       1,151,955       1,004,155  
Money market deposits     729,174       844,183       921,895  
Regular savings and other deposits     794,813       327,721       333,774  
Certificates of deposit     1,686,074       1,596,691       1,370,609  
Total deposits     4,884,184       4,411,253       4,107,861  
Short-term borrowings     50,000       40,000        
Long-term debt     536,880       610,772       513,444  
Accrued expenses and other liabilities     32,965       34,160       31,751  
Total liabilities     5,504,029       5,096,185       4,653,056  
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; 53,541,429, 54,233,331, and 54,039,316 shares issued at December 31, 2018, September 30, 2018,

and December 31, 2017, respectively
    535       542       540  
Additional paid-in capital     378,583       392,545       395,716  
Retained earnings     313,521       304,725       268,533  
Accumulated other comprehensive income (loss)     (348 )     (812 )     128  
Unearned compensation - ESOP, 2,435,272, 2,465,713, and 2,557,036 at December 31, 2018, September 30, 2018, and December 31, 2017, respectively     (17,637 )     (17,857 )     (18,518 )
Total stockholders' equity     674,654       679,143       646,399  
Total liabilities and stockholders' equity   $ 6,178,683     $ 5,775,328     $ 5,299,455  
                         

MERIDIAN BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)

    Three Months Ended     Years Ended  
    December 31,

2018
    September

30, 2018
    December 31,

2017
    December 31,

2018
    December 31,

2017
 
       
    (Dollars in thousands, except per share amounts)  
Interest and dividend income:                                        
Interest and fees on loans   $ 59,424     $ 55,849     $ 49,144     $ 219,162     $ 179,425  
Interest on debt securities:                                        
Taxable     115       115       42       482       302  
Tax-exempt     13       13       14       56       32  
Dividends on equity securities     121       101       223       504       1,066  
Interest on certificates of deposit     82       104       185       530       814  
Other interest and dividend income     1,957       1,932       1,265       6,938       3,465  
Total interest and dividend income     61,712       58,114       50,873       227,672       185,104  
Interest expense:                                        
Interest on deposits     17,090       14,284       10,100       54,634       33,982  
Interest on short-term borrowings     183       8             191       4  
Interest on long-term debt     2,266       2,455       1,444       8,412       4,926  
Total interest expense     19,539       16,747       11,544       63,237       38,912  
Net interest income     42,173       41,367       39,329       164,435       146,192  
Provision for loan losses     3,563       226       (715 )     7,848       4,859  
Net interest income, after provision for loan losses     38,610       41,141       40,044       156,587       141,333  
Non-interest income:                                        
Customer service fees     2,371       2,242       2,170       9,065       8,517  
Loan fees     41       301       88       479       1,970  
Mortgage banking gains, net     25       74       109       295       457  
Gain on sales of securities available for sale, net                 6,058             9,305  
(Loss) gain on marketable equity securities, net     (2,698 )     781             (2,066 )      
Income from bank-owned life insurance     281       279       284       1,109       1,158  
Gain on life insurance distribution     110                   110       1,657  
Other income     5                   11        
Total non-interest income     135       3,677       8,709       9,003       23,064  
Non-interest expenses:                                        
Salaries and employee benefits     14,648       14,386       13,761       58,866       53,161  
Occupancy and equipment     3,214       2,981       2,798       12,759       11,533  
Data processing     1,832       1,747       1,531       6,915       5,912  
Marketing and advertising     1,252       832       1,131       4,057       3,653  
Professional services     735       683       804       3,383       3,669  
Deposit insurance     576       851       824       3,006       2,988  
Merger and acquisition           26       1,784       114       2,055  
Other general and administrative     1,380       1,501       1,236       5,698       4,994  
Total non-interest expenses     23,637       23,007       23,869       94,798       87,965  
Income before income taxes     15,108       21,811       24,884       70,792       76,432  
Provision for income taxes     2,750       4,454       15,863       15,021       33,487  
Net income   $ 12,358     $ 17,357     $ 9,021     $ 55,771     $ 42,945  
                                         
Earnings per share:                                        
Basic   $ 0.24     $ 0.34     $ 0.18     $ 1.08     $ 0.84  
Diluted   $ 0.24     $ 0.33     $ 0.17     $ 1.06     $ 0.82  
Weighted average shares:                                        
Basic     51,530,878       51,492,448       51,425,793       51,498,203       51,153,665  
Diluted     51,955,139       52,732,340       53,026,141       52,659,752       52,663,597  
                                         

MERIDIAN BANCORP, INC. AND SUBSIDIARIES

NET INTEREST INCOME ANALYSIS

(Unaudited)

    Three Months Ended
    December 31, 2018   September 30, 2018   December 31, 2017
    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)   $ 5,434,068     $ 60,100         4.39   %   $ 5,213,832     $ 56,488         4.30   %   $ 4,555,544     $ 50,361         4.39   %
Securities and certificates of deposit     52,818       356         2.67         57,489       355         2.45         110,900       554         1.98    
Other interest-earning assets (3)     321,924       1,957         2.41         310,622       1,932         2.47         375,712       1,265         1.34    
Total interest-earning assets     5,808,810       62,413         4.26         5,581,943       58,775         4.18         5,042,156       52,180         4.11    
Noninterest-earning assets     122,446                           118,253                           115,174                      
Total assets   $ 5,931,256                         $ 5,700,196                         $ 5,157,330                      
Liabilities and stockholders' equity:                                                                                    
Interest-bearing liabilities:                                                                                    
Interest-bearing demand deposits   $ 1,153,265     $ 4,716         1.62       $ 1,133,916     $ 4,032         1.41       $ 965,096     $ 2,624         1.08    
Money market deposits     782,007       2,449         1.24         869,248       2,658         1.21         920,676       2,176         0.94    
Regular savings and other deposits     597,827       1,829         1.21         329,586       114         0.14         321,436       113         0.14    
Certificates of deposit     1,610,632       8,096         1.99         1,557,998       7,480         1.90         1,322,382       5,187         1.56    
Total interest-bearing deposits     4,143,731       17,090         1.64         3,890,748       14,284         1.46         3,529,590       10,100         1.14    
Borrowings     581,619       2,449         1.67         612,171       2,463         1.60         486,882       1,444         1.18    
Total interest-bearing liabilities     4,725,350       19,539         1.64         4,502,919       16,747         1.48         4,016,472       11,544         1.14    
Noninterest-bearing demand deposits     493,715                           494,366                           462,684                      
Other noninterest-bearing liabilities     33,036                           27,388                           29,596                      
Total liabilities     5,252,101                           5,024,673                           4,508,752                      
Total stockholders' equity     679,155                           675,523                           648,578                      
Total liabilities and stockholders' equity   $ 5,931,256                         $ 5,700,196                         $ 5,157,330                      
Net interest-earning assets   $ 1,083,460                         $ 1,079,024                         $ 1,025,684                      
Fully tax-equivalent net interest income             42,874                           42,028                           40,636              
Less: tax-equivalent adjustments             (701 )                         (661 )                         (1,307 )            
Net interest income           $ 42,173                         $ 41,367                         $ 39,329              
Interest rate spread (1)(4)                       2.62   %                       2.70   %                       2.97   %
Net interest margin (1)(5)                       2.93   %                       2.99   %                       3.20   %
Average interest-earning assets to average                                                                                    
interest-bearing liabilities             122.93   %                       123.96   %                       125.54   %          
                                                                                     
Supplemental Information:                                                                                    
Total deposits, including noninterest-bearing                                                                                    
demand deposits   $ 4,637,446     $ 17,090         1.46   %   $ 4,385,114     $ 14,284         1.29   %   $ 3,992,274     $ 10,100         1.00   %
Total deposits and borrowings, including                                                                                    
noninterest-bearing demand deposits   $ 5,219,065     $ 19,539         1.49   %   $ 4,997,285     $ 16,747         1.33   %   $ 4,479,156     $ 11,544         1.02   %

 

(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 December 31, 2018, September 30, 2018 and December 31, 2017, yields on loans before tax-equivalent adjustments were 4.34%, 4.25% and 4.28%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 2.49%, 2.30% and 1.66%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 4.22%, 4.13% and 4.00%, respectively. Interest rate spread before tax-equivalent adjustments for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017 was 2.58%, 2.65% and 2.86%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017 was 2.88%, 2.94% and 3.09%, 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)

    Years Ended
    December 31, 2018   December 31, 2017
    Average               Yield/   Average               Yield/
    Balance     Interest (1)   Cost (1)   Balance     Interest (1)   Cost (1)
     
    (Dollars in thousands)
Assets:                                                        
Interest-earning assets:                                                        
Loans (2)   $ 5,119,102     $ 221,652         4.33   %   $ 4,286,830     $ 184,337         4.30   %
Securities and certificates of deposit     69,091       1,678         2.43         132,872       2,630         1.98    
Other interest-earning assets (3)     319,758       6,938         2.17         266,945       3,465         1.30    
Total interest-earning assets     5,507,951       230,268         4.18         4,686,647       190,432         4.06    
Noninterest-earning assets     120,720                           113,254                      
Total assets   $ 5,628,671                         $ 4,799,901                      
                                                         
Liabilities and stockholders' equity:                                                        
Interest-bearing liabilities:                                                        
Interest-bearing demand deposits   $ 1,106,332     $ 15,025         1.36       $ 799,377     $ 7,315         0.92    
Money market deposits     845,781       9,490         1.12         971,692       8,865         0.91    
Regular savings and other deposits     400,951       2,175         0.54         317,717       448         0.14    
Certificates of deposit     1,513,174       27,944         1.85         1,193,803       17,354         1.45    
Total interest-bearing deposits     3,866,238       54,634         1.41         3,282,589       33,982         1.04    
Borrowings     576,949       8,603         1.49         411,200       4,930         1.20    
Total interest-bearing liabilities     4,443,187       63,237         1.42         3,693,789       38,912         1.05    
Noninterest-bearing demand deposits     489,887                           448,952                      
Other noninterest-bearing liabilities     28,191                           27,221                      
Total liabilities     4,961,265                           4,169,962                      
Total stockholders' equity     667,406                           629,939                      
Total liabilities and stockholders' equity   $ 5,628,671                         $ 4,799,901                      
Net interest-earning assets   $ 1,064,764                         $ 992,858                      
Fully tax-equivalent net interest income             167,031                           151,520              
Less: tax-equivalent adjustments             (2,596 )                         (5,328 )            
Net interest income           $ 164,435                         $ 146,192              
Interest rate spread (1)(4)                       2.76   %                       3.01   %
Net interest margin (1)(5)                       3.03   %                       3.23   %
Average interest-earning assets to average                                                        
interest-bearing liabilities             123.96   %                       126.88   %          
                                                         
Supplemental Information:                                                        
Total deposits, including noninterest-bearing                                                        
demand deposits   $ 4,356,125     $ 54,634         1.25   %   $ 3,731,541     $ 33,982         0.91   %
Total deposits and borrowings, including                                                        
noninterest-bearing demand deposits   $ 4,933,074     $ 63,237         1.28   %   $ 4,142,741     $ 38,912         0.94   %

(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 years ended December 31, 2018, and 2017, yields on loans before tax-equivalent adjustments were 4.28% and 4.19%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 2.28% and 1.67%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 4.13% and 3.95%, respectively. Interest rate spread before tax-equivalent adjustments for the years ended December 31, 2018, and 2017 was 2.71% and 2.90%, respectively, while net interest margin before tax-equivalent adjustments for the years ended December 31, 2018, and 2017 was 2.99% and 3.12%, 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. 



MERIDIAN BANCORP, INC. AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

    Three Months Ended   Years Ended
    December 31,

2018
  September 30,

2018
  December 31,

2017
  December 31,

2018
  December 31,

2017
Key Performance Ratios                                                  
Return on average assets (1)     0.83   %     1.22   %     0.70   %     0.99   %     0.89   %
Return on average equity (1)     7.28         10.28         5.56         8.36         6.82    
Interest rate spread  (1) (2)     2.62         2.70         2.97         2.76         3.01    
Net interest margin  (1) (3)     2.93         2.99         3.20         3.03         3.23    
Non-interest expense to average assets  (1)     1.59         1.61         1.85         1.68         1.83    
Efficiency ratio (4)     52.52         51.92         52.61         53.95         53.71    



    December 31, 2018   September 30, 2018   December 31, 2017
     
    (Dollars in thousands)
Asset Quality                              
Non-accrual loans:                              
One- to four-family   $ 5,888       $ 6,977       $ 6,890    
Home equity lines of credit                     562    
Commercial real estate     342         353         388    
Commercial and industrial     676         676         523    
Total non-accrual loans     6,906         8,006         8,363    
Foreclosed assets                        
Total non-performing assets   $ 6,906       $ 8,006       $ 8,363    
                               
Allowance for loan losses/total loans     0.94   %     0.94   %     0.97   %
Allowance for loan losses/non-accrual loans     770.79         619.65         540.30    
Non-accrual loans/total loans     0.12         0.15         0.18    
Non-accrual loans/total assets     0.11         0.14         0.16    
Non-performing assets/total assets     0.11         0.14         0.16    
                               
Capital and Share Related                              
Stockholders' equity to total assets     10.92   %     11.76   %     12.20   %
Book value per share   $ 12.60       $ 12.52       $ 11.96    
Tangible book value per share (5)   $ 12.17       $ 12.11       $ 11.54    
Market value per share   $ 14.32       $ 17.00       $ 20.60    
Shares outstanding   53,541,429       54,233,331       54,039,316    

(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 measure representing non-interest expense, excluding merger and acquisition expenses, divided by the sum of net interest income and non-interest income excluding gains and losses on sales of securities available for sale, and 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 sales of securities available for sale and gains and losses on marketable equity securities as management deems them to be either discretionary or market driven and not representative of operating performance. We have removed merger and acquisition expenses as management deems them to be not representative of operating performance. Presented on a basis including merger and acquisition expenses, gains and losses on sales of securities available for sale and gains and losses on marketable equity securities, the efficiency ratio was 55.87%, 51.08% and 46.69% for the quarters ended December 31, 2018, September 30, 2018, and December 31, 2017, respectively, and 54.66% and 51.97% for the years ended December 31, 2018 and 2017, 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

Source: Meridian Bancorp, Inc.

This article appears in: News Headlines

Referenced Stocks: EBSB










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