MERIDIAN BANCORP, INC. Contact: Richard J. Gavegnano, Chairman, President and Chief Executive Officer (978) 977-2211
Richard J. Gavegnano, Chairman, President and Chief Executive Officer, said, 'I am pleased to report loan portfolio growth of
$179 million in the third quarter, or an annualized rate of 26%, fueled by $481 million of commercial loan originations. Our core pre-tax income, which excludes gains on sales of securities, increased $765,000, or 10%, to $8.5 million for the third quarter and
$3.8 million, or 19%, to $23.8 million for the nine months ended September 30, 2015 from the same periods last year due to rising net interest income, expanding net interest margins, improving efficiency ratios and stable asset quality. We also demonstrated our commitment to enhancing stockholder value during the quarter with the initiation of a 5% stock repurchase program and the declaration of our first quarterly dividend of $0.03 per share. Following the opening of our new branches in the Boston neighborhood of Dorchester earlier this month and in Brookline next week, we are on track to further enhance our franchise footprint with the opening of our thirtieth branch in Boston's Chinatown district in January.'
Net interest income increased $3.5 million, or 15.4%, to $26.2 million for the quarter ended September 30, 2015 from $22.7 million for the quarter ended September 30, 2014. The interest rate spread and net interest margin on a tax-equivalent basis were 3.10% and 3.32%, respectively, for the quarter ended September 30, 2015, up from 2.88% and 3.09%, respectively, for the quarter ended September 30, 2014. For the nine months ended September 30, 2015, net interest income increased $11.0 million, or 17.0%, to $75.6 million from $64.6 million for the nine months ended September 30, 2014. The net interest rate spread and net interest margin on a tax-equivalent basis were 3.06% and 3.28%, respectively, for the nine months ended September 30, 2015, up from 3.04% and 3.22%, respectively, for the nine months ended September 30, 2014. The increases in net interest income were due primarily to loan growth along with declines in the cost of funds, partially offset by deposit growth for the third quarter and nine months ended September 30, 2015 compared to the same periods in 2014.
The Company's yield on interest-earning assets on a tax-equivalent basis increased 18 basis points to 3.95% for the quarter ended September 30, 2015 compared to 3.77% for the quarter ended September 30, 2014, while the cost of funds declined three basis points to 0.74% for the quarter ended September 30, 2015 compared to 0.77% for the quarter ended September 30, 2014. The increase in interest income was primarily due to growth in the Company's average loan balances of $350.7 million, or 14.2%, to
$2.814 billion, partially offset by a decrease in the yield on loans on a tax-equivalent basis of three basis points to 4.37% for the quarter ended September 30, 2015 compared to 4.40% for the quarter ended September 30, 2014. The increase in interest expense on deposits was primarily due to the growth in average total deposits of $162.7 million, or 6.6%, to $2.612 billion, partially offset by the decline in the cost of average total deposits of two basis points to 0.71% for the quarter ended September 30, 2015 compared to 0.73% for the quarter ended September 30, 2014. The decrease in interest expense on borrowings was primarily due to the reduction in average borrowings of $56.2 million, or 28.6%, to $140.3 million, partially offset by an increase in the cost of average borrowings of eight basis points to 1.36% for the quarter ended September 30, 2015 compared to 1.28% for the quarter ended September 30, 2014.
Mr. Gavegnano noted, 'Over the past year, our loan portfolio grew $416 million, or 17%, which was facilitated by deposit growth of $227 million and deployment of proceeds from last year's stock offering into commercial loans. This led to an increase in net interest income during each of the last four quarters and, along with stable loan yields and declines in the cost of funds, contributed to expansion of the net interest margin since the third quarter of last year.'
The Company's provision for loan losses was $2.4 million for the quarter ended September 30, 2015 compared to $655,000 for the quarter ended September 30, 2014. For the nine months ended September 30, 2015, the provision for loan losses was $6.1 million compared to $1.5 million for the nine months ended September 30, 2014. These increases were primarily due to strong commercial real estate and construction loan growth during the third quarter and nine months ended September 30, 2015 and a $2.3 million provision and charge-off related to a construction loan relationship during the second quarter of 2015. Changes in the provision for loan losses were also based on management's assessment of loan portfolio growth and composition changes, historical charge-off trends, an ongoing evaluation of credit quality and current economic conditions. The allowance for loan losses was $32.6 million or 1.11% of total loans outstanding at September 30, 2015, compared to $28.5 million or 1.06% of total loans outstanding at December 31, 2014. Net recoveries totaled $65,000 for the quarter ended September 30, 2015, or less than 0.01% of average loans outstanding, and net charge-offs totaled $2.0 million for the nine months ended September 30, 2015, or 0.10% of average loans outstanding on an annualized basis.
Non-accrual loans increased $3.6 million, or 11.5%, to $35.1 million, or 1.20% of total loans outstanding, at September 30, 2015, from $31.5 million, or 1.18% of total loans outstanding, at December 31, 2014, primarily due to an increase of $9.1 million in non- accrual construction loans, partially offset by a decrease of $4.9 million in non-accrual one- to four-family loans. The increase in non-accrual construction loans during the nine months ended September 30, 2015 was primarily due to a $14.0 million construction loan placed on non-accrual status following a $2.3 million charge-off during the second quarter of 2015, partially offset by a reduction of $5.0 million in other non-accrual construction loans during the nine months ended September 30, 2015. Non-performing assets increased $3.2 million, or 9.8%, to $35.7 million, or 1.06% of total assets, at September 30, 2015, from
$32.6 million, or 0.99% of total assets, at December 31, 2014. Non-performing assets at September 30, 2015 were comprised of
$17.5 million of construction loans, $9.7 million of one- to four-family mortgage loans, $5.0 million of commercial real estate loans, $1.8 million of home equity loans, $1.1 million of commercial and industrial loans and foreclosed real estate of $600,000.
Mr. Gavegnano commented, 'Our asset quality trends have remained stable in the third quarter following the second quarter placement on non-accrual status of the $14.0 million construction loan. We are continuing to protect the Bank's interests in this Boston multi-family project and the associated collateral properties as we move toward resolution. Excluding this non-accrual loan relationship, our non-performing assets would have declined by $10.9 million, or 33%, while net charge-offs would have been negligible for the first nine months of 2015. The loan loss provision of $2.4 million for the quarter reflects additional reserve allocations resulting from the significant commercial loan portfolio growth in the third quarter of 2015.'
Non-interest income decreased $890,000, or 24.1%, to $2.8 million for the quarter ended September 30, 2015 from $3.7 million for the quarter ended September 30, 2014, primarily due to a decrease of $1.3 million in gain on sales of securities, net, partially offset by increases of $169,000 in customer service fees and $170,000 in loan fees. For the nine months ended September 30, 2015, non-interest income decreased $1.3 million, or 11.5%, to $10.4 million from $11.7 million for the nine months ended September 30, 2014, primarily due to a decrease of $1.9 million in gain on sales of securities, net, partially offset by increases of
$270,000 in customer service fees and $247,000 in loan fees.
Non-interest expenses increased $1.4 million, or 8.3%, to $18.1 million for the quarter ended September 30, 2015 as compared to
$16.7 million for the quarter ended September 30, 2014, primarily due to increases of $986,000 in salaries and employee benefits,
$154,000 in occupancy and equipment, $174,000 in data processing and $143,000 in foreclosed real estate, partially offset by a decrease of $135,000 in other general and administrative expenses. For the nine months ended September 30, 2015, non-interest expenses increased $3.1 million, or 6.1%, to $53.5 million from $50.4 million for the nine months ended September 30, 2014, primarily due to increases of $2.1 million in salaries and employee benefits, $365,000 in occupancy and equipment, $616,000 in data processing and $291,000 in marketing and advertising, partially offset by decreases of $135,000 in deposit insurance assessments and $149,000 in other general and administrative expenses. The increases in salaries and employee benefits expense were primarily due to employee compensation increases and staffing growth during the current year. The increases in occupancy and equipment include costs associated with the opening of the new branch in Dorchester. The increases in data processing expense reflected a one-time cost reduction during the second quarter of 2014 along with a scheduled contractual increase and business growth during the current year. The increases in marketing and advertising expense reflected the Bank's new and expanded advertising campaign in our Boston area market. The Company's efficiency ratio was 62.45% for the quarter ended September 30, 2015 compared to 66.67% for the quarter ended September 30, 2014. For the nine months ended September 30, 2015, the efficiency ratio was 64.13% compared to 70.15% for the nine months ended September 30, 2014.
Mr. Gavegnano added, 'Rising net interest income as driven by strong loan growth has been the key factor that resulted in improvement in our efficiency ratio since 2012. Franchise expansion has been a significant element of our growth and we remain committed to prudent expense control as part of the expected future expansion of our lending, deposit gathering and customer service capabilities.'
The Company recorded a provision for income taxes of $2.8 million for the quarter ended September 30, 2015, reflecting an effective tax rate of 32.5%, compared to $3.0 million, or 33.5%, for the quarter ended September 30, 2014. For the nine months ended September 30, 2015, the provision for income taxes was $8.6 million, reflecting an effective tax rate of 32.6%, compared to
$8.1 million, or 33.2%, for the nine months ended September 30, 2014. The changes in the effective tax provision were primarily due to changes in the components of pre-tax income.
Total assets increased $97.3 million, or 3.0%, to $3.376 billion at September 30, 2015 from $3.279 billion at December 31, 2014. Net loans increased $242.7 million, or 9.2%, to $2.892 billion at September 30, 2015 from $2.649 billion at December 31, 2014. The net increase in loans for the nine months ended September 30, 2015 was primarily due to increases of $128.6 million in commercial real estate loans, $118.5 million in construction loans and $34.8 million in commercial and industrial loans, partially offset by decreases of $23.6 million in multi-family loans and $9.9 million in one- to four-family loans. Cash and due from banks decreased $107.7 million, or 52.3%, to $98.0 million at September 30, 2015 from $205.7 million at December 31, 2014. Securities available for sale decreased $52.5 million, or 25.8%, to $151.0 million at September 30, 2015 from $203.5 million at December 31, 2014.
Total deposits increased $126.7 million, or 5.1%, to $2.631 billion at September 30, 2015 from $2.504 billion at December 31, 2014. Core deposits, which exclude certificate of deposits, increased $29.4 million, or 1.6%, to $1.825 billion, or 69.4% of total deposits, at September 30, 2015. Total borrowings decreased $31.9 million, or 18.5%, to $140.0 million at September 30, 2015 from $171.9 million at December 31, 2014, reflecting maturing advances with the Federal Home Loan Bank of Boston.
Total stockholders' equity increased $5.4 million, or 0.9%, to $583.1 million at September 30, 2015, from $577.7 million at December 31, 2014. The increase for the nine months ended September 30, 2015 was due primarily to $17.7 million in net income and $2.1 million related to stock-based compensation plans, partially offset by decreases of $6.3 million in accumulated other comprehensive income, reflecting a decrease in the fair value of available for sale securities, a $6.6 million reduction in additional paid-in capital resulting from the Company's repurchase of 522,604 shares and the initial quarterly dividend declaration of $0.03 per share totaling $1.6 million. Stockholders' equity to assets was 17.27% at September 30, 2015, compared to 17.62% at December 31, 2014. Book value per share increased to $10.71 at September 30, 2015 from $10.56 at December 31, 2014. Tangible book value per share increased to $10.46 at September 30, 2015 from $10.31 at December 31, 2014. Market price per share increased $2.45, or 21.8%, to $13.67 at September 30, 2015 from $11.22 at December 31, 2014. At September 30, 2015, the Company and the Bank continued to exceed all regulatory capital requirements.
As of September 30, 2015, the Company had repurchased 522,604 shares of its stock at an average price of $12.57 per share, or 19.1% of the 2,737,334 shares authorized for repurchase under the Company's repurchase program as adopted in August 2015.
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 28 full-service locations in the greater Boston metropolitan area. We offer a variety of deposit and loan products to individuals and businesses located in our primary market, which consists of Essex, Middlesex and Suffolk Counties, Massachusetts. For additional information, visitwww.ebsb.com.
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)ASSETS | September 30, 2015 (Dollars in | December 31, 2014 thousands) |
Cash and due from banks | $ 98,038 | $ 205,732 |
Certificates of deposit | 95,008 | 85,000 |
Securities available for sale, at fair value | 151,025 | 203,521 |
Federal Home Loan Bank stock, at cost | 12,725 | 12,725 |
Loans held for sale | 2,302 | 971 |
Loans, net of fees and costs | 2,924,233 | 2,677,376 |
Less allowance for loan losses | (32,585) | (28,469) |
Loans, net | 2,891,648 | 2,648,907 |
Bank-owned life insurance | 39,262 | 38,611 |
Foreclosed real estate, net | 600 | 1,046 |
Premises and equipment, net | 39,539 | 38,512 |
Accrued interest receivable | 8,239 | 7,748 |
Deferred tax asset, net | 19,933 | 15,610 |
Goodwill | 13,687 | 13,687 |
Other assets | 3,842 | 6,456 |
Total assets | $ 3,375,848 | $ 3,278,526 |
Deposits:
LIABILITIES AND STOCKHOLDERS' EQUITYNon interest-bearing | $ 352,360 | $ 285,990 |
Interest-bearing | 2,278,321 | 2,217,945 |
Total deposits | 2,630,681 | 2,503,935 |
Long-term debt | 140,023 | 171,899 |
Accrued expenses and other liabilities | 22,045 | 24,982 |
Total liabilities | 2,792,749 | 2,700,816 |
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;
54,458,315 and 54,708,066 shares issued at September 30, 2015 | ||
and December 31, 2014, respectively | 545 | 547 |
Additional paid-in capital | 406,214 | 411,476 |
Retained earnings | 200,813 | 184,715 |
Accumulated other comprehensive (loss) income | (3,358) | 2,898 |
Unearned compensation - ESOP, 2,831,005 and 2,922,328 shares | ||
at September 30, 2015 and December 31, 2014, respectively Unearned compensation - restricted shares, 189,559 and 138,838 shares | (20,503) | (21,164) |
at September 30, 2015 and December 31, 2014, respectively | (612) | (762) |
Total stockholders' equity | 583,099 | 577,710 |
Total liabilities and stockholders' equity | $ 3,375,848 | $ 3,278,526 |
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