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

Meridian Bancorp, Inc. (the “Company” or “Meridian”) (NASDAQ: EBSB), the holding company for East Boston Savings Bank (the “Bank”), announced net income of $24.3 million, or $0.48 per diluted share, for the quarter ended March 31, 2021, compared to $18.1 million, or $0.36 per diluted share for the quarter ended December 31, 2020, and $13.0 million, or $0.25 per diluted share, for the quarter ended March 31, 2020. The Company’s return on average assets was 1.46% for the quarter ended March 31, 2021, compared to 1.10% for the quarter ended December 31, 2020, and 0.82% for the quarter ended March 31, 2020. The Company’s return on average equity was 12.45% for the quarter ended March 31, 2021, compared to 9.51% for the quarter ended December 31, 2020, and 7.09% for the quarter ended March 31, 2020.

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

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

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

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

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

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

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

Meridian Bancorp, Inc. is the holding company for East Boston Savings Bank. East Boston Savings Bank, a Massachusetts-chartered stock savings bank founded in 1848, operates 43 branches in the greater Boston metropolitan area, including 42 full-service locations and one mobile branch. We offer a variety of deposit and loan products to individuals and businesses located in our primary market, which consists of Essex, Middlesex, Norfolk and Suffolk Counties, Massachusetts. For additional information, visit www.ebsb.com.

Forward Looking Statements

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

MERIDIAN BANCORP, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited)

		March 31,2021			December 31,2020			March 31,2020

	(Dollars in thousands)
ASSETS
Cash and due from banks	$	1,034,107		$	914,586		$	457,048
Certificates of deposit		—			—			247
Securities available for sale, at fair value		10,518			11,326			13,820
Marketable equity securities, at fair value		8,900			12,189			13,130
Federal Home Loan Bank stock, at cost		28,447			30,658			33,278
Loans held for sale		7,422			8,224			3,403
Loans:
One- to four-family		517,442			564,146			657,245
Home equity lines of credit		64,370			68,721			78,016
Multi-family		878,331			880,552			972,122
Commercial real estate		2,419,715			2,499,660			2,622,379
Construction		625,961			731,432			716,477
Commercial and industrial		779,603			765,195			638,695
Consumer		10,307			10,707			11,888
Total loans		5,295,729			5,520,413			5,696,822
Allowance for credit losses on loans		(63,436	)		(68,824	)		(50,946	)
Net deferred loan origination fees		(8,298	)		(7,784	)		(6,021	)
Loans, net		5,223,995			5,443,805			5,639,855
Bank-owned life insurance		42,138			41,877			41,061
Premises and equipment, net		65,394			66,850			67,527
Accrued interest receivable		22,498			23,173			13,868
Deferred tax asset, net		21,418			21,355			16,782
Goodwill		20,378			20,378			20,378
Core deposit intangible		1,548			1,651			2,005
Other assets		17,162			23,776			26,152
Total assets	$	6,503,925		$	6,619,848		$	6,348,554

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest-bearing demand deposits	$	751,809		$	711,573		$	572,847
Interest-bearing demand deposits		1,461,236			1,364,548			1,292,384
Money market deposits		852,747			930,507			699,026
Regular savings and other deposits		870,961			855,329			867,536
Certificates of deposit		1,160,616			1,219,210			1,390,156
Total deposits		5,097,369			5,081,167			4,821,949
Short-term borrowings		—			—			25,000
Long-term debt		560,625			708,245			720,873
Accrued expenses and other liabilities		56,847			61,551			61,111
Total liabilities		5,714,841			5,850,963			5,628,933
Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized; none issued		—			—			—
Common stock, $0.01 par value, 100,000,000 shares authorized; 52,430,554, 52,415,061 and 52,402,395 shares issued at March 31, 2021, December 31, 2020 and March 31, 2020, respectively		524			524			524
Additional paid-in capital		364,751			363,995			360,901
Retained earnings		439,593			420,297			374,712
Accumulated other comprehensive income (loss)		(131	)		(58	)		19
Unearned compensation - ESOP; 2,161,304, 2,191,745 and 2,283,068 shares at March 31, 2021, December 31, 2020 and March 31, 2020, respectively		(15,653	)		(15,873	)		(16,535	)
Total stockholders' equity		789,084			768,885			719,621
Total liabilities and stockholders' equity	$	6,503,925		$	6,619,848		$	6,348,554

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

	Three Months Ended
	March 31,2021			December 31,2020			March 31,2020

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

Earnings per share:
Basic	$	0.48		$	0.36		$	0.26
Diluted	$	0.48		$	0.36		$	0.25
Weighted average shares outstanding:
Basic		50,239,611			50,201,720			50,634,983
Diluted		50,565,459			50,295,295			50,920,259

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

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

Supplemental Information:
Total deposits, including noninterest-bearing
demand deposits	$	5,158,940	$	5,729		0.45	%	$	4,976,315	$	6,883		0.55	%	$	4,888,198	$	16,769		1.38	%
Total deposits and borrowings, including
noninterest-bearing demand deposits	$	5,825,796	$	9,320		0.65	%	$	5,763,721	$	10,884		0.75	%	$	5,542,938	$	20,920		1.52	%



(1)	Income on debt securities, equity securities and revenue bonds included in commercial real estate loans, as well as resulting yields, interest rate spread and net interest margin, are presented on a tax-equivalent basis. The tax-equivalent adjustments are deducted from tax-equivalent net interest income to agree to amounts reported in the consolidated statements of net income. For the quarters ended March 31, 2021, December 31, 2020 and March 31, 2020, yields on loans before tax-equivalent adjustments were 4.27%, 4.37% and 4.49%, respectively, yields on securities and certificates of deposit before tax-equivalent adjustments were 3.68%, 3.48% and 2.68%, respectively, and yield on total interest-earning assets before tax-equivalent adjustments were 3.60%, 3.86% and 4.30%, respectively. Interest rate spread before tax-equivalent adjustments for the quarters ended March 31, 2021, December 31, 2020 and March 31, 2020 was 2.86%, 3.00% and 2.62%, respectively, while net interest margin before tax-equivalent adjustments for the three months ended March 31, 2021, December 31, 2020 and March 31, 2020 was 3.02%, 3.19% and 2.94%, respectively.
(2)	Loans on non-accrual status are included in average balances.
(3)	Includes Federal Home Loan Bank stock and associated dividends.
(4)	Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest-bearing liabilities.
(5)	Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets.
(6)	Annualized.

MERIDIAN BANCORP, INC. AND SUBSIDIARIESSELECTED FINANCIAL HIGHLIGHTS(Unaudited)

	Three Months Ended
	March 31,2021		December 31,2020		March 31,2020
Key Performance Ratios
Return on average assets (1)	1.46	%	1.10	%	0.82	%
Return on average equity (1)	12.45		9.51		7.09
Interest rate spread (1) (2)	2.91		3.06		2.67
Net interest margin (1) (3)	3.07		3.24		2.99
Non-interest expense to average assets (1)	1.53		1.46		1.66
Efficiency ratio (4)	49.55		44.23		54.18

	March 31,2021			December 31,2020			March 31,2020
	(Dollars in thousands)
Asset Quality
Non-accrual loans:
One- to four-family	$	2,466		$	2,617		$	2,846
Home equity lines of credit		20			20			20
Commercial and industrial		635			527			323
Total non-accrual loans		3,121			3,164			3,189
Foreclosed assets		—			—			—
Total non-performing assets	$	3,121		$	3,164		$	3,189

Allowance for credit losses on loans/total loans		1.20	%		1.25	%		0.89	%
Allowance for credit losses on loans/non-accrual loans		2,032.55			2,175.22			1,597.55
Non-accrual loans/total loans		0.06			0.06			0.06
Non-accrual loans/total assets		0.05			0.05			0.05
Non-performing assets/total assets		0.05			0.05			0.05

Capital and Share Related
Stockholders' equity to total assets		12.13	%		11.61	%		11.34	%
Book value per share	$	15.05		$	14.67		$	13.73
Tangible book value per share (5)	$	14.63		$	14.25		$	13.31
Market value per share	$	18.42		$	14.91		$	11.22
Shares outstanding	52,430,554			52,415,061			52,402,395



(1)	Quarterly amounts are annualized.
(2)	Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest-bearing liabilities.
(3)	Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets.
(4)	The efficiency ratio is a non-GAAP measure representing non-interest expense divided by the sum of net interest income and non-interest income excluding gains and losses on marketable equity securities. The efficiency ratio is a common measure used by banks to understand expenses related to the generation of revenue. We have removed gains and losses on marketable equity securities as management deems them to be either discretionary or market driven and not representative of operating performance. Presented on a basis including gains and losses on marketable equity securities and gains and losses on sale of assets the efficiency ratio was 47.89%, 42.03% and 59.46% for the quarters ended March 31, 2021, December 31, 2020, and March 31, 2020, respectively.
(5)	Tangible book value per share represents total stockholders’ equity less goodwill and other intangible assets divided by the number of shares outstanding.