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.