EBSB Meridian Bancorp Inc

Meridian Bancorp, Inc. (the “Company” or “Meridian”) (NASDAQ: EBSB), the holding company for East Boston Savings Bank (the “Bank”), announced net income of $17.3 million, or $0.34 per diluted share, for the quarter ended June 30, 2020, compared to $13.0 million, or $0.25 per diluted share, for the quarter ended March 31, 2020 and $15.2 million, or $0.29 per diluted share, for the quarter ended June 30, 2019. For the six months ended June 30, 2020, net income was $30.3 million, or $0.60 per diluted share, up from $30.2 million, or $0.59 per diluted share, for the six months ended June 30, 2019. The Company’s return on average assets was 1.08% for the quarter ended June 30, 2020, compared to 0.82% for the quarter ended March 31, 2020 and 0.97% for the quarter ended June 30, 2019. For the six months ended June 30, 2020, the Company’s return on average assets was 0.95%, down from 0.97% for the six months ended June 30, 2019. The Company’s return on average equity was 9.45% for the quarter ended June 30, 2020, compared to 7.09% for the quarter ended March 31, 2020, and 8.75% for the quarter ended June 30, 2019. For the six months ended June 30, 2020, the Company’s return on average equity was 8.27%, down from 8.79% for the six months ended June 30, 2019.

Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, “Despite the unprecedented challenges brought on by COVID-19, I am pleased to report record net income of $17.3 million for the second quarter of 2020, up $2.1 million, or 14%, from the prior second quarter record in 2019. This improvement in quarterly results reflects continued growth in net interest income, a $4.2 million gain on sale of a Bank property in South Boston and a decline in operating expenses, despite bolstering our reserves with a $9.6 million provision for loan losses. We are experiencing one of the most unique periods in our long history and management has shifted their focus and allocated available resources to minimizing COVID-19’s impact on the Bank and our customers, community and shareholders. We have kept our branches available, supported our loan customers with temporary modifications and ensured our employees did this in the safest manner possible.”

Mr. Gavegnano continued, “We began working with our loan customers in March, making accommodations for their existing loans to help ease them through the pandemic. As government mandated shutdowns took effect and more people were unemployed, primarily in April and May, we maintained an active understanding of evolving government programs and suspended accounting rules to ensure our customers were taking advantage of these opportunities as needed. This includes successfully executing the Small Business Administration’s Paycheck Protection Program (“PPP”) and providing modifications to existing commercial and residential loans. I was happy with the Bank’s execution in assisting our customers when they needed it most.” 

The Company’s net interest income was $47.4 million for the quarter ended June 30, 2020, up $2.3 million, or 5.0%, from the quarter ended March 31, 2020, and up $4.9 million, or 11.5%, from the quarter ended June 30, 2019. The interest rate spread and net interest margin on a tax-equivalent basis were 2.86% and 3.10%, respectively, for the quarter ended June 30, 2020 compared to 2.67% and 2.99%, respectively, for the quarter ended March 31, 2020 and 2.48% and 2.82%, respectively, for the quarter ended June 30, 2019. For the six months ended June 30, 2020, net interest income increased $7.4 million, or 8.7%, to $92.5 million from the six months ended June 30, 2019. The interest rate spread and net interest margin on a tax-equivalent basis were 2.76% and 3.05% for the six months ended June 30, 2020 compared to 2.53% and 2.85% for the six months ended June 30, 2019. The increases in net interest income for the quarter and six months ended June 30, 2020 compared to the respective prior periods were primarily due to the substantial reduction in the cost of funds.

Total interest and dividend income totaled $62.2 million for the quarter ended June 30, 2020, down $3.9 million, or 5.9%, from the quarter ended March 31, 2020, primarily due to a decrease in yield on loans on a tax-equivalent basis of 17 basis points to 4.37% and a decrease in yield on other interest-earning assets of 139 basis points to 0.40%. Compared to the quarter ended June 30, 2019, total interest and dividend income decreased $4.1 million, or 6.2%, primarily due to a decrease in yield on loans on a tax-equivalent basis of 10 basis points and a decrease in yield on other interest-earning assets of 229 basis points. The Company’s yield on interest-earning assets on a tax-equivalent basis was 4.06% for the quarter ended June 30, 2020, down 29 basis points from the quarter ended March 31, 2020 and 32 basis points from the quarter ended June 30, 2019. For the six months ended June 30, 2020, the Company’s total interest and dividend income totaled $128.2 million, a decrease of $2.6 million, or 2.0%, from the six months ended June 30, 2019, primarily due to a decrease in yield on other interest-earning assets of 181 basis points to 1.03% for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. The Company’s yield on interest-earning assets on a tax-equivalent basis decreased 16 basis points to 4.20% for the six months ended June 30, 2020, compared to the same period in 2019.

Total interest expense totaled $14.8 million for the quarter ended June 30, 2020, down $6.1 million, or 29.4%, from the quarter ended March 31, 2020, and down $9.0 million, or 37.9%, from the quarter ended June 30, 2019. Interest expense on deposits decreased to $10.6 million for the quarter ended June 30, 2020, down $6.2 million, or 36.8%, from the quarter ended March 31, 2020 and $10.1 million, or 48.7%, from the quarter ended June 30, 2019 primarily due to a decrease in average total deposits to $4.844 billion and a decrease in the cost of average total deposits to 0.88% from 1.38% for the quarter ended March 31, 2020, and 1.66% for the quarter ended June 30, 2019. Interest expense on borrowings totaled $4.2 million for the quarter ended June 30, 2020, up $37,000, or 0.9%, from the quarter ended March 31, 2020 primarily due to an increase in average total borrowings to $754.4 million, partially offset by a decrease of 32 basis points in the average cost of borrowings to 2.23%. Compared to the quarter ended June 30, 2019, interest expense on borrowings increased $1.0 million, or 32.9%, primarily due to an increase of $222.0 million, or 41.7%, in average total borrowings, partially offset by a 14 basis point decrease in the average cost of borrowings. The Company’s total cost of funds was 1.06% for the quarter ended June 30, 2020, down 46 basis points from the quarter ended March 31, 2020 and down 67 basis points from the quarter ended June 30, 2019.  Total interest expense totaled $35.7 million for the six months ended June 30, 2020, down $10.0 million, or 21.8%, from the six months ended June 30, 2019. Interest expense on deposits decreased to $27.4 million for the six months ended June 30, 2020, down $12.4 million, or 31.3%, from the six months ended June 30, 2019 primarily due to a decrease in average total deposits to $4.866 billion and a decrease in the cost of average total deposits to 1.13% from 1.62% for the six months ended June 30, 2019. Interest expense on borrowings totaled $8.3 million for the six months ended June 30, 2020, up $2.5 million, or 41.9%, from the six months ended June 30, 2019 primarily due to an increase in average total borrowings to $704.6 million and an increase of 25 basis points in the average cost of borrowings to 2.38%. The Company’s total cost of funds was 1.29% for the six months ended June 30, 2020, down 38 basis points from the six months ended June 30, 2019.

Mr. Gavegnano noted, “Our net interest margin improved to 3.10% for the quarter and 3.05% for the six months ended June 30, 2020, due to increases in net interest income of 12% and 9%, respectively. This is the result of maintaining our loan yields while aggressively reducing our funding costs. We expect our cost of funds to continue to decline as term deposits and advances mature and are replaced at significantly lower rates.” 

The Company’s provision for loan losses was $9.6 million for the quarter ended June 30, 2020, compared to $725,000 for the quarter ended March 31, 2020 and $78,000 for the quarter ended June 30, 2019. The allowance for loan losses was $60.5 million or 1.06% of total loans at June 30, 2020, compared to $50.9 million or 0.89% of total loans at March 31, 2020, and $50.3 million or 0.87% of total loans at December 31, 2019 and $53.9 million or 0.92% of total loans at June 30, 2019. The increases in the provision and coverage ratio reflect the application of economic uncertainties and market volatility caused by COVID-19 to the factors used to determine the Company’s provision.  

Net charge-offs totaled $40,000 for the quarter ended June 30, 2020 compared to net charge-offs of $101,000 for the quarter ended March 31, 2020 and net charge-offs of $210,000 for the quarter ended June 30, 2019. For the six months ended June 30, 2020, net charge-offs totaled $141,000 compared to net charge-offs of $287,000 for six months ended June 30, 2019.

Non-accrual loans were $3.8 million, or 0.07% of total loans outstanding, at June 30, 2020; up $631,000, or 19.8%, from March 31, 2020; and up $415,000 or 12.2% from December 31, 2019 and down $2.2 million or 36.8%, from June 30, 2019. Non-performing assets were $3.8 million, or 0.06% of total assets, at June 30, 2020, compared to $3.2 million, or 0.05% of total assets, at March 31, 2020, $3.4 million, or 0.05% of total assets, at December 31, 2019, and $6.0 million, or 0.09% of total assets at June 30, 2019.

Mr. Gavegnano noted, “We have reserved $9.6 million this quarter through the provision for loan losses, increasing our coverage ratio to 1.06%. We have been prudently adjusting our reserves throughout the quarter to incorporate the modifications being executed in support of our customers.  As of June 30, 2020, we had applied COVID-19 related modifications to approximately 13% of our loan portfolio. Management’s focus over the next several quarters will be on monitoring these modified loans through constant analysis and communication with the customer. These efforts will allow us to quantify our exposure and apply the results to determine a reasonable provision for loan losses.” 

Non-interest income was $8.7 million for the quarter ended June 30, 2020, up from a loss of $831,000 for the quarter ended March 31, 2020 and $3.0 million for the quarter ended June 30, 2019. Non-interest income increased $9.5 million, or 1,141.9%, compared to the quarter ended March 31, 2020, due primarily to a $4.2 million gain on sale of assets and a $2.0 million gain on marketable equity securities, net, reflecting increases in market valuations in the second quarter of 2020 compared to a $4.3 million loss on marketable equity securities, net, in the first quarter of 2020, partially offset by decreases of $709,000 in loan fees and $293,000 in mortgage banking gains, net. Compared to the quarter ended June 30, 2019, non-interest income increased $5.7 million due primarily to a $4.2 million gain on sale of asset and an increase of $1.8 million in gain on marketable equity securities, net, partially offset by a decrease of $340,000 in customer service fees. For the six months ended June 30, 2020, non-interest income increased $1.0 million, or 15.4%  to $7.8 million from $6.8 million for the six months ended June 30, 2019 primarily due to a $4.2 million gain on sale of asset in the second quarter of 2020, and increases of $509,000 in loan fees and $388,000 in mortgage banking gains, net, partially offset by a $2.3 million loss on marketable equity securities, net for the six months ended June 30, 2020, compared to a $1.5 million gain on marketable equity securities, net for the six months ended June 30, 2019, and by a decrease of $340,000 in customer service fees.

Non-interest expenses were $23.3 million, or 1.46% of average assets for the quarter ended June 30, 2020, compared to $26.3 million, or 1.66% of average assets for the quarter ended March 31, 2020 and $25.1 million, or 1.60% of average assets for the quarter ended June 30, 2019. Non-interest expenses decreased $3.0 million, or 11.5%, compared to the quarter ended March 31, 2020, due primarily to decreases of $2.1 million in salaries and employee benefits, $302,000 in professional services, $209,000 in other general and administrative, $200,000 in marketing and advertising, and $185,000 in occupancy and equipment. Non-interest expenses decreased $1.8 million, or 7.2%, compared to the quarter ended June 30, 2019, due primarily to decreases of $1.1 million in salaries and employee benefits, $323,000 in deposit insurance, $290,000 in general and administrative and $269,000 in marketing and advertising, partially offset by an increase of $124,000 in data processing. For the six months ended June 30, 2020, non-interest expenses decreased $1.3 million, or 2.5%, to $49.6 million from $50.9 million for the six months ended June 30, 2019 due primarily to decreases of $776,000 in salaries and employee benefits, $666,000 in deposit insurance, $405,000 in other general and administrative and $201,000 in marketing and advertising, partially offset by increases of $417,000 in occupancy and equipment and $291,000 in data processing. The increases in occupancy and equipment expenses and data processing include costs associated with the expansion of our branch network, including one new branch that opened in the third quarter of 2019, one new branch that opened in the fourth quarter of 2019 and two new branches that are anticipated to open late in July 2020. The Company’s efficiency ratio was 46.79% for the quarter ended June 30, 2020 compared to 54.18% for the quarter ended March 31, 2020 and 55.57% for the quarter ended June 30, 2019. For the six months ended June 30, 2020 the efficiency ratio is 50.44% compared to 56.38% for the six months ended June 30, 2019.

Mr. Gavegnano added, “We lowered our efficiency ratio to 47% and 50% for the quarter and six months ended June 30, 2020, respectively, due to the gain on sale of our former operations center in South Boston and a successful effort to limit our overhead expenses during the COVID-19 shutdowns. Our commitment to our community will continue as we invest in the expansion of our branch network by the planned opening of three new locations in the metropolitan Boston area communities of Salem, Woburn and Brookline in the third quarter.”

The Company recorded a provision for income taxes of $5.8 million for the quarter ended June 30, 2020, reflecting an effective tax rate of 25.2%, compared to $4.2 million, or an effective tax rate of 24.6%, for the quarter ended March 31, 2020, and $5.1 million, or an effective tax rate of 25.0%, for the quarter ended June 30, 2019. For the six months ended June 30, 2020 the provision for income taxes was $10.1 million, reflecting an effective tax rate of 24.9%, compared to $9.8 million, reflecting an effective rate of 24.4% for the period of June 30, 2019.

Total assets were $6.418 billion at June 30, 2020, up $69.4 million, or 1.1%, from $6.349 billion at March 31, 2020 and up $74.3 million, or 1.2%, from $6.344 billion at December 31, 2019. Net loans were $5.654 billion at June 30, 2020, up $14.5 million from March 31, 2020, and down $43.2 million, or 0.8%, from December 31, 2019. Loan originations totaled $353.1 million during the quarter ended June 30, 2020 and $792.7 million for the six months ended June 30, 2020.  The net decrease in loans for the six months ended June 30, 2020 was primarily due to decreases of $140.6 million in commercial real estate loans, $61.5 million in multi-family loans and $23.7 million in one- to four-family loans, partially offset by increases of $155.7 million in commercial and industrial loans, $35.5 million in construction loans and $4.8 million in home equity lines of credit. The increase in commercial and industrial loans includes the origination of 401 PPP loans totaling $123.7 million. Cash and due from banks was $508.6 million at June 30, 2020, an increase of $102.2 million, or 25.2% from December 31, 2019. Securities, at fair value, were $29.4 million at June 30, 2020, a decrease of $896,000, or 3.0%, from $30.3 million at December 31, 2019.

Total deposits were $4.820 billion at June 30, 2020, down $1.6 million, or less than 0.01%, from $4.822 billion at March 31, 2020 and $101.1 million, or 2.1%, from $4.921 billion at December 31, 2019. The net decrease in deposits for the six months ended June 30, 2020 reflects a $338.8 million decrease in certificates of deposit, including a $239.4 million reduction in brokered deposits. Core deposits, which exclude certificates of deposit, increased $237.7 million, or 7.1%, during the six months ended June 30, 2020 to $3.589 billion, or 74.5% of total deposits. The increase in core deposits for the six months ended June 30, 2020 includes a $185.8 million increase, or 35.4%, in non-interest bearing demand deposits to $709.9 million. Total borrowings were $804.1 million at June 30, 2020, up $58.2 million, or 7.8%, from March 31, 2020 and $167.9 million, or 26.4%, from December 31, 2019.

Total stockholders’ equity increased $14.7 million, or 2.0%, to $734.3 million at June 30, 2020 from $719.6 million at March 31, 2020, and increased $7.7 million, or 1.1%, from $726.6 million at December 31, 2019. The increase for the six months ended June 30, 2020 was primarily due to net income of $30.3 million and $2.9 million related to stock-based compensation plans, partially offset by the repurchase of one million shares of the Company’s common stock related to the stock repurchase program at a total cost of $17.7 million and dividends of $0.16 per share totaling $8.0 million. Stockholders’ equity to assets was 11.44% at June 30, 2020, compared to 11.34% at March 31, 2020 and 11.45% at December 31, 2019. Book value per share increased to $14.01 at June 30, 2020 from $13.61 at December 31, 2019. Tangible book value per share increased to $13.59 at June 30, 2020 from $13.19 at December 31, 2019. Market price per share decreased $8.49 or 42.3%, to $11.60 at June 30, 2020 from $20.09 at December 31, 2019. The Company and the Bank elected to be subject to the Community Bank Leverage Ratio and at June 30, 2020 exceeded the minimum requirement to be well capitalized with ratios of 11.19% for the Company and 10.63% for the Bank.  

The Company did not repurchase any of its shares during the quarter ended June 30, 2020. The Company has repurchased 4,698,165 shares of its stock at an average price of $15.66 per share since August 2015.

Mr. Gavegnano concluded, “COVID-19 has brought unprecedented challenges to the financial services industry. We are well-equipped with capital and liquidity and will leverage our resources to steer the Bank and our customers through these difficult times.”

Meridian Bancorp, Inc. is the holding company for East Boston Savings Bank. East Boston Savings Bank, a Massachusetts-chartered stock savings bank founded in 1848, operates 40 branches in the greater Boston metropolitan area, including 39 full-service locations and one mobile branch. We offer a variety of deposit and loan products to individuals and businesses located in our primary market, which consists of Essex, Middlesex, Norfolk and Suffolk Counties, Massachusetts. For additional information, visit www.ebsb.com.

Forward Looking Statements

Certain statements herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by words such as “believes,” “will,” “expects,” “project,” “may,” “could,” “developments,” “strategic,” “launching,” “opportunities,” “anticipates,” “estimates,” “intends,” “plans,” “targets” and similar expressions. These statements are based upon the current beliefs and expectations of Meridian Bancorp, Inc.’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements as a result of numerous factors. Factors that could cause such differences to exist include, but are not limited to, general economic conditions, changes in interest rates, regulatory considerations, and competition and the risk factors described in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Meridian Bancorp, Inc.’s actual results could differ materially from those discussed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release.

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

MERIDIAN BANCORP, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited)
		June 30,2020				March 31,2020				December 31,2019				June 30,2019
		(Dollars in thousands)
ASSETS
Cash and due from banks		$	508,627			$	457,048			$	406,382			$	361,050
Certificates of deposit			—				247				247				5,247
Securities available for sale, at fair value			13,022				13,820				15,076				16,500
Marketable equity securities, at fair value			16,401				13,130				15,243				14,776
Federal Home Loan Bank stock, at cost			33,282				33,278				28,947				27,469
Loans held for sale			3,682				3,403				2,455				2,105
Loans:
One- to four-family			635,683				657,245				659,366				668,997
Home equity lines of credit			74,246				78,016				69,491				60,040
Multi-family			941,922				972,122				1,003,418				1,061,839
Commercial real estate			2,556,088				2,622,379				2,696,671				2,647,033
Construction			742,845				716,477				707,370				748,457
Commercial and industrial			760,546				638,695				604,889				627,718
Consumer			11,867				11,888				12,196				11,445
Total loans			5,723,197				5,696,822				5,753,401				5,825,529
Allowance for loan losses			(60,547	)			(50,946	)			(50,322	)			(53,865	)
Net deferred loan origination fees			(8,340	)			(6,021	)			(5,539	)			(6,292	)
Loans, net			5,654,310				5,639,855				5,697,540				5,765,372
Bank-owned life insurance			41,334				41,061				41,155				41,295
Premises and equipment, net			67,098				67,527				65,841				66,280
Accrued interest receivable			17,300				13,868				14,481				15,436
Deferred tax asset, net			16,873				16,782				16,726				18,301
Goodwill			20,378				20,378				20,378				20,378
Core deposit intangible			1,887				2,005				2,123				2,385
Other assets			23,776				26,152				17,100				11,978
Total assets		$	6,417,970			$	6,348,554			$	6,343,694			$	6,368,572
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest-bearing demand deposits		$	709,924			$	572,847			$	524,154			$	505,679
Interest-bearing demand deposits			1,291,458				1,292,384				1,269,211				1,161,835
Money market deposits			753,980				699,026				675,702				675,452
Regular savings and other deposits			833,951				867,536				882,550				986,112
Certificates of deposit			1,231,084				1,390,156				1,569,916				1,689,226
Total deposits			4,820,397				4,821,949				4,921,533				5,018,304
Short-term borrowings			25,000				25,000				—				—
Long-term debt			779,101				720,873				636,245				600,088
Accrued expenses and other liabilities			59,199				61,111				59,329				54,479
Total liabilities			5,683,697				5,628,933				5,617,107				5,672,871
Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized; none issued			—				—				—				—
Common stock, $0.01 par value, 100,000,000 shares authorized; 52,407,179,  52,402,395, 53,377,506 and 53,321,805 shares issued at June 30, 2020,  March 31, 2020,  December 31, 2019, and, June 30, 2019 respectively			524				524				534				533
Additional paid-in capital			361,980				360,901				377,213				375,760
Retained earnings			387,983				374,712				365,742				336,628
Accumulated other comprehensive income (loss)			100				19				(147	)			(24	)
Unearned compensation - ESOP, 2,252,627,  2,283,068, 2,313,509, and 2,374,390  shares at June 30, 2020,  March 31, 2020,  December 31, 2019 and June 30, 2019, respectively			(16,314	)			(16,535	)			(16,755	)			(17,196	)
Total stockholders' equity			734,273				719,621				726,587				695,701
Total liabilities and stockholders' equity		$	6,417,970			$	6,348,554			$	6,343,694			$	6,368,572

MERIDIAN BANCORP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF NET INCOME(Unaudited)
		Three Months Ended												Six Months Ended
		June 30,2020				March 31,2020				June 30,2019				June 30,2020				June 30,2019
		(Dollars in thousands, except per share amounts)
Interest and dividend income:
Interest and fees on loans		$	61,445			$	64,037			$	64,040			$	125,482			$	125,681
Interest on debt securities:
Taxable			75				87				108				162				218
Tax-exempt			12				13				13				25				26
Dividends on equity securities			145				94				142				239				247
Interest on certificates of deposit			—				1				28				1				55
Other interest and dividend income			473				1,786				1,943				2,259				4,520
Total interest and dividend income			62,150				66,018				66,274				128,168				130,747
Interest expense:
Interest on deposits			10,591				16,769				20,653				27,360				39,804
Interest on short-term borrowings			52				8				—				60				295
Interest on long-term debt			4,136				4,143				3,151				8,279				5,581
Total interest expense			14,779				20,920				23,804				35,699				45,680
Net interest income			47,371				45,098				42,470				92,469				85,067
Provision for loan losses			9,641				725				78				10,366				921
Net interest income, after provision for loan losses			37,730				44,373				42,392				82,103				84,146
Non-interest income (loss):
Customer service fees			1,948				2,097				2,288				4,045				4,385
Loan (costs) fees			(35	)			674				53				639				130
Mortgage banking gains, net			118				411				101				529				141
Gain on sale of asset			4,195				—				—				4,195				—
Gain (loss) on marketable equity securities, net			2,025				(4,344	)			223				(2,319	)			1,549
Income from bank-owned life insurance			273				297				280				570				561
Gain on life insurance distribution			124				—				—				124				—
Other income			10				34				9				44				16
Total non-interest income (loss)			8,658				(831	)			2,954				7,827				6,782
Non-interest expenses:
Salaries and employee benefits			13,858				15,914				14,916				29,772				30,548
Occupancy and equipment			3,739				3,924				3,650				7,663				7,246
Data processing			2,133				2,137				2,009				4,270				3,979
Marketing and advertising			1,030				1,230				1,299				2,260				2,461
Professional services			695				997				784				1,692				1,644
Deposit insurance			606				669				929				1,275				1,941
Other general and administrative			1,240				1,449				1,530				2,689				3,094
Total non-interest expenses			23,301				26,320				25,117				49,621				50,913
Income before income taxes			23,087				17,222				20,229				40,309				40,015
Provision for income taxes			5,808				4,245				5,061				10,053				9,776
Net income		$	17,279			$	12,977			$	15,168			$	30,256			$	30,239
Earnings per share:
Basic		$	0.34			$	0.26			$	0.30			$	0.60			$	0.59
Diluted		$	0.34			$	0.25			$	0.29			$	0.60			$	0.59
Weighted average shares outstanding:
Basic			50,131,249				50,634,983				51,051,880				50,383,116				51,086,050
Diluted			50,211,234				50,920,259				51,511,678				50,565,747				51,489,608

MERIDIAN BANCORP, INC. AND SUBSIDIARIESNET INTEREST INCOME ANALYSIS(Unaudited)
		Three Months Ended
		June 30, 2020											March 31, 2020											June 30, 2019
		AverageBalance				Interest(1)				Yield/Cost (1)(6)			AverageBalance				Interest(1)				Yield/Cost (1)(6)			AverageBalance				Interest(1)				Yield/Cost (1)(6)
		(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (2)		$	5,722,186			$	62,164			4.37	%		$	5,741,852			$	64,758			4.54	%		$	5,809,827			$	64,740			4.47	%
Securities and certificates of deposit			33,282				262			3.17				29,290				211			2.90				36,447				312			3.43
Other interest-earning assets (3)			478,725				473			0.40				400,315				1,786			1.79				290,092				1,943			2.69
Total interest-earning assets			6,234,193				62,899			4.06				6,171,457				66,755			4.35				6,136,366				66,995			4.38
Noninterest-earning assets			153,567											157,398											136,159
Total assets		$	6,387,760										$	6,328,855										$	6,272,525
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,297,072			$	2,293			0.71			$	1,280,003			$	4,497			1.41			$	1,215,832			$	5,584			1.84
Money market deposits			722,148				1,227			0.68				691,897				2,055			1.19				674,851				2,158			1.28
Regular savings and other deposits			841,600				995			0.48				906,100				2,531			1.12				954,811				3,961			1.66
Certificates of deposit			1,331,999				6,076			1.83				1,475,016				7,686			2.10				1,660,373				8,950			2.16
Total interest-bearing deposits			4,192,819				10,591			1.02				4,353,016				16,769			1.55				4,505,867				20,653			1.84
Borrowings			754,426				4,188			2.23				654,740				4,151			2.55				532,449				3,151			2.37
Total interest-bearing liabilities			4,947,245				14,779			1.20				5,007,756				20,920			1.68				5,038,316				23,804			1.90
Noninterest-bearing demand deposits			651,517											535,182											495,090
Other noninterest-bearing liabilities			57,922											53,688											45,506
Total liabilities			5,656,684											5,596,626											5,578,912
Total stockholders' equity			731,076											732,229											693,613
Total liabilities and stockholders' equity		$	6,387,760										$	6,328,855										$	6,272,525
Net interest-earning assets		$	1,286,948										$	1,163,701										$	1,098,050
Fully tax-equivalent net interest income							48,120											45,835											43,191
Less: tax-equivalent adjustments							(749	)										(737	)										(721	)
Net interest income						$	47,371										$	45,098										$	42,470
Interest rate spread (1)(4)										2.86	%										2.67	%										2.48	%
Net interest margin (1)(5)										3.10	%										2.99	%										2.82	%
Average interest-earning assets to average interest-bearing liabilities							126.01	%										123.24	%										121.79	%
Supplemental Information:
Total deposits, including noninterest-bearing demand deposits		$	4,844,336			$	10,591			0.88	%		$	4,888,198			$	16,769			1.38	%		$	5,000,957			$	20,653			1.66	%
Total deposits and borrowings, including noninterest-bearing demand deposits		$	5,598,762			$	14,779			1.06	%		$	5,542,938			$	20,920			1.52	%		$	5,533,406			$	23,804			1.73	%

_______________________

(1)		Income on debt securities, equity securities and revenue bonds included in commercial real estate loans, as well as resulting yields, interest rate spread and net interest margin, are presented on a tax-equivalent basis. The tax-equivalent adjustments are deducted from tax-equivalent net interest income to agree to amounts reported in the consolidated statements of net income. For the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, yields on loans before tax-equivalent adjustments were 4.32%, 4.49% and 4.42%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 2.80%, 2.68% and 3.20%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 4.01%, 4.30% and 4.33%, respectively. Interest rate spread before tax-equivalent adjustments for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019 was 2.81%, 2.62% and 2.43%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019 was 3.06%, 2.94% and 2.78%, respectively.
(2)		Loans on non-accrual status are included in average balances.
(3)		Includes Federal Home Loan Bank stock and associated dividends.
(4)		Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest-bearing liabilities.
(5)		Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets.
(6)		Annualized.

 

MERIDIAN BANCORP, INC. AND SUBSIDIARIESNET INTEREST INCOME ANALYSIS(Unaudited)
		Six Months Ended
		June 30, 2020												June 30, 2019
		AverageBalance				Interest (1)				Yield/Cost (1)(6)				AverageBalance				Interest (1)				Yield/Cost (1)(6)
		(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (2)		$	5,732,019			$	126,922				4.45	%		$	5,752,551			$	127,065				4.45	%
Securities and certificates of deposit			29,170				464				3.20				36,478				584				3.23
Other interest-earning assets (3)			439,520				2,259				1.03				321,472				4,520				2.84
Total interest-earning assets			6,200,709				129,645				4.20				6,110,501				132,169				4.36
Noninterest-earning assets			157,599												127,095
Total assets		$	6,358,308											$	6,237,596
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing demand deposits		$	1,288,538			$	6,790				1.06			$	1,202,572			$	10,524				1.76
Money market deposits			707,022				3,281				0.93				687,260				4,306				1.26
Regular savings and other deposits			873,850				3,527				0.81				937,789				7,763				1.67
Certificates of deposit			1,403,507				13,762				1.97				1,641,012				17,211				2.11
Total interest-bearing deposits			4,272,917				27,360				1.29				4,468,633				39,804				1.80
Borrowings			704,583				8,339				2.38				555,076				5,876				2.13
Total interest-bearing liabilities			4,977,500				35,699				1.44				5,023,709				45,680				1.83
Noninterest-bearing demand deposits			593,350												488,897
Other noninterest-bearing liabilities			55,805												37,324
Total liabilities			5,626,655												5,549,930
Total stockholders' equity			731,653												687,666
Total liabilities and stockholders' equity		$	6,358,308											$	6,237,596
Net interest-earning assets		$	1,223,209											$	1,086,792
Fully tax-equivalent net interest income							93,946												86,489
Less: tax-equivalent adjustments							(1,477	)											(1,422	)
Net interest income						$	92,469											$	85,067
Interest rate spread (1)(4)											2.76	%											2.53	%
Net interest margin (1)(5)											3.05	%											2.85	%
Average interest-earning assets to average interest-bearing liabilities							124.57	%											121.63	%
Supplemental Information:
Total deposits, including noninterest-bearing demand deposits		$	4,866,267			$	27,360				1.13	%		$	4,957,530			$	39,804				1.62	%
Total deposits and borrowings, including noninterest-bearing demand deposits		$	5,570,850			$	35,699				1.29	%		$	5,512,606			$	45,680				1.67	%

_______________________

(1)		Income on debt securities, equity securities and revenue bonds included in commercial real estate loans, as well as resulting yields, interest rate spread and net interest margin, are presented on a tax-equivalent basis. The tax-equivalent adjustments are deducted from tax-equivalent net interest income to agree to amounts reported in the consolidated statements of net income. For the six months ended, June 30, 2020 and 2019, yields on loans before tax-equivalent adjustments were  4.40% and 4.41%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 2.94% and 3.02%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 4.16%, and 4.31%, respectively. Interest rate spread before tax-equivalent adjustments for the six months ended June 30, 2020 and 2019 was 2.72%, and 2.48%, respectively, while net interest margin before tax-equivalent adjustments for the six months ended, June 30, 2020 and 2019 was 3.00% and 2.81%, respectively.
(2)		Loans on non-accrual status are included in average balances.
(3)		Includes Federal Home Loan Bank stock and associated dividends.
(4)		Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest-bearing liabilities.
(5)		Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets.
(6)		Annualized.

MERIDIAN BANCORP, INC. AND SUBSIDIARIESSELECTED FINANCIAL HIGHLIGHTS(Unaudited)
		Three Months Ended												Six Months Ended
		June 30,2020				March 31,2020				June 30,2019				June 30,2020				June 30,2019
Key Performance Ratios
Return on average assets (1)			1.08	%			0.82	%			0.97	%			0.95	%			0.97	%
Return on average equity (1)			9.45				7.09				8.75				8.27				8.79
Interest rate spread  (1) (2)			2.86				2.67				2.48				2.76				2.53
Net interest margin  (1) (3)			3.10				2.99				2.82				3.05				2.85
Non-interest expense to average assets  (1)			1.46				1.66				1.60				1.56				1.63
Efficiency ratio (4)			46.79				54.18				55.57				50.44				56.38

		June 30,2020				March 31,2020				December 31,2019				June 30,2019
		(Dollars in thousands)
Asset Quality
Non-accrual loans:
One- to four-family		$	3,074			$	2,846			$	3,082			$	5,378
Home equity lines of credit			20				20				—				—
Commercial real estate			194				—				—				318
Commercial and industrial			532				323				323				350
Total non-accrual loans			3,820				3,189				3,405				6,046
Foreclosed assets			—				—				—				—
Total non-performing assets		$	3,820			$	3,189			$	3,405			$	6,046
Allowance for loan losses/total loans			1.06	%			0.89	%			0.87	%			0.92	%
Allowance for loan losses/non-accrual loans			1,585.00				1,597.55				1,477.89				890.92
Non-accrual loans/total loans			0.07				0.06				0.06				0.10
Non-accrual loans/total assets			0.06				0.05				0.05				0.09
Non-performing assets/total assets			0.06				0.05				0.05				0.09
Capital and Share Related
Stockholders' equity to total assets			11.44	%			11.34	%			11.45	%			10.92	%
Book value per share		$	14.01			$	13.73			$	13.61			$	13.05
Tangible book value per share (5)		$	13.59			$	13.31			$	13.19			$	12.62
Market value per share		$	11.60			$	11.22			$	20.09			$	17.89
Shares outstanding		52,407,179				52,402,395				53,377,506				53,321,805

_______________________ 

(1)		Quarterly amounts are annualized.
(2)		Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest-bearing liabilities.
(3)		Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets.
(4)		The efficiency ratio is a non-GAAP measure representing non-interest expense divided by the sum of net interest income and non-interest income excluding gains and losses on marketable equity securities and gains and losses on sale of assets. The efficiency ratio is a common measure used by banks to understand expenses related to the generation of revenue. We have removed gains and losses on marketable equity securities and gains and losses on sale of assets as management deems them to be either discretionary or market driven and not representative of operating performance. Presented on a basis including gains and losses on marketable equity securities and gains and losses on sale of assets the efficiency ratio was 41.59%, 59.46% and 55.29% for the quarters ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively and 49.47% and 55.43% for the six months ended June 30, 2020 and 2019, respectively.
(5)		Tangible book value per share represents total stockholders’ equity less goodwill and other intangible assets divided by the number of shares outstanding.