MERIDIAN BANCORP, INC. This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. You should read the information in this section in conjunction with our business and financial information and the Consolidated Financial Statements and related notes that are included in the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 , filed with theSEC .
Forward Looking Statements
This report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. These forward-looking statements, which can be identified by the use of words such as "will", "continue", "estimate," "project," "believe," "intend," "anticipate," "plan," "seek," "expect" and words of similar meaning. The Company's ability to predict results or actual effect of future plans is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to:
• general economic conditions, either nationally or in our market areas,
that are worse than expected;
• inflation and changes in the interest rate environment that reduce our
margins and yields, our mortgage banking revenues, the fair value of
financial instruments or the origination levels in our lending business,
or increase the level of defaults, losses and prepayments on loans we have
made and make whether held in portfolio or sold in the secondary markets;
• competition among depository and other financial institutions; • changes in consumer spending, borrowing and savings habits;
• our ability to enter new markets successfully and capitalize on growth
opportunities;
• changes in laws or government regulations or policies affecting financial
institutions, including changes in regulatory fees and capital
requirements;
• changes in monetary or fiscal policies of the
policies of the
• changes in the financial condition, results of operations or future
prospects of issuers of securities that we own;
• changes in accounting policies and practices, as may be adopted by the
bank regulatory agencies, the
• changes in the level and trends of loan delinquencies and charge-offs and
changes in estimates of the adequacy of the allowance for credit losses;
• the effects of any civil unrest;
• the effects of the COVID-19 pandemic on our business, customers, employees
and third-party service providers;
• diversion of management time on pandemic related issues;
• changes to statutes, regulations, or regulatory policies or practices
resulting from the COVID-19 pandemic;
• our ability to access cost-effective funding;
• fluctuations in real estate values and both residential and commercial
real estate market conditions;
• demand for loans and deposits in our market area;
• our ability to implement and changes in our business strategies;
• adverse changes in the securities or secondary mortgage markets;
• our ability to manage market risk, credit risk and operational risk in the
current economic conditions;
• failure or breaches of our IT security systems;
• our ability to successfully integrate any assets, liabilities, customers,
systems and management personnel we have acquired or may acquire into our
operations and our ability to realize related revenue synergies and cost
savings within expected time frames and any goodwill charges related
thereto;
• technological changes that may be more difficult or expensive than expected;
• the ability of third-party providers to perform their obligations to us;
22
--------------------------------------------------------------------------------• the ability of theU.S. Government to manage federal debt limits; • the effects of federal government shutdowns; • our ability to successfully introduce new products and services; and • our ability to retain key employees. Management's ability to predict results or the effect of future plans or strategies is inherently uncertain. Additional factors that may affect our results are discussed in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 filed with theSEC onMarch 1, 2021 , under "Risk Factors," which is available through theSEC's website at www.sec.gov, as updated by subsequent filings with theSEC . These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events. Critical Accounting Policies A summary of significant accounting policies is described in Note 1 to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year endedDecember 31, 2020 . Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Management believes the allowance for credit losses is the most critical accounting policy.
Impact of COVID-19
The COVID-19 pandemic created a significant economic disruption resulting in an unprecedented slow-down in economic activity and a related increase in unemployment. In response to the COVID-19 outbreak, theFederal Reserve reduced the benchmark federal funds rate to a target range of 0% to 0.25%. Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and passed legislation providing relief from reporting loan classifications due to modifications related to the COVID-19 outbreak. The current impact of COVID-19 and the CARES Act is detailed throughout Management's Discussion and Analysis, however, the extent to which the effects of the CARES Act and any further legislation of its kind will impact the Company's financial results and operations during 2021 and beyond remains uncertain.
Comparison of Financial Condition at
Assets. Total assets decreased$332.7 million , or 5.0%, to$6.287 billion atJune 30, 2021 from$6.620 billion atDecember 31, 2020 . Net loans decreased$507.2 million , or 9.3%, to$4.937 billion atJune 30, 2021 from$5.444 billion atDecember 31, 2020 . Cash and due from banks increased$186.8 million , or 20.4%, to$1.101 billion atJune 30, 2021 from$914.6 million atDecember 31, 2020 . Loan Portfolio Analysis. AtJune 30, 2021 , net loans were$4.937 billion , or 78.5% of total assets. During the six months endedJune 30, 2021 , net loans decreased$507.2 million , or 9.3% fromDecember 31, 2020 . The net decrease for the six months endedJune 30, 2021 reflects commercial loan payoffs totaling$633.2 million , which exceeded loan originations of$449.7 million during the same period. The net decrease in loans resulted primarily from decreases of$204.6 million in commercial real estate loans,$85.8 million in construction loans,$74.8 million in one- to four-family loans,$71.2 million in multi-family loans, and$61.4 million in commercial and industrial loans. Refer to Note 4, Loans, in Notes to the Unaudited Consolidated Financial Statements within this report for more detail regarding the loans held in the Company's loan portfolio. The CARES Act includes the establishment of the Paycheck Protection Program ("PPP"), a program designed to aid small- and medium-sized business through federally guaranteed loans distributed through financial institutions. These loans are intended to guarantee payroll and other costs to help those businesses remain viable and allow their workers to pay their bills. This program is being administered by theSmall Business Administration ("SBA") and backed by theFederal Reserve Bank . The Company originated 350 PPP loans in the six months endedJune 30, 2021 , totaling$62.3 million with associated fees of$2.6 million . As ofJune 30, 2021 , the Company has$82.4 million of PPP loans in its commercial and industrial loan portfolio. Credit Risk Management. Our strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans. Management of asset quality is accomplished by internal controls, monitoring and reporting of key risk indicators, and both internal and independent third-party loan reviews. The primary objective of our loan review process is to measure borrower performance and assess risk for the purpose of identifying loan weakness in order to minimize loan loss exposure. From the time of loan origination through final repayment, multi-family, commercial real estate, construction, and commercial and industrial loans are assigned a risk rating based on pre-determined criteria 23
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and levels of risk. The risk rating is monitored annually for most loans; however, it may change during the life of the loan as appropriate.
Internal and independent third-party loan reviews vary by loan type, as well as the size and complexity of the loan. Depending on the size and complexity of the loan, some loans may warrant detailed individual review, while other loans may have less risk based upon size or be of a homogeneous nature reducing the need for detailed individual analysis. Assets with these characteristics, such as consumer loans and loans secured by residential real estate, may be reviewed on the basis of risk indicators such as delinquency or credit rating. In cases of significant concern, a total re-evaluation of the loan and associated risks are documented by completing a loan risk assessment and action plan. Some loans may be re-evaluated in terms of their fair market value or net realizable value in order to determine the likelihood of potential loss exposure and, consequently, the adequacy of specific and general loan loss reserves. When a borrower fails to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status, including contacting the borrower by letter and phone at regular intervals. When the borrower is in default, we may commence collection proceedings. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the real property securing the loan generally is sold at foreclosure. Management informs the Executive Committee monthly of the amount of loans delinquent more than 30 days. Management provides detailed information to the Board of Directors on loans 60 or more days past due and all loans in foreclosure and repossessed property that we own. Delinquencies. Total past due loans increased$11.5 million , or 346.7%, to$14.8 million atJune 30, 2021 from$3.3 million atDecember 31, 2020 , reflecting a net increase of$11.8 million in loans 30 to 59 days past due, partially offset by a net decrease of$392,000 in loans 90 days or greater past due. AtJune 30, 2021 , non-accrual loans exceeded loans 90 days or greater past due primarily due to loans which were placed on non-accrual status based on a determination that the ultimate collection of all principal and interest due was not expected and certain loans remain on non-accrual status until they attain a sustained contractual payment history of six consecutive months. Delinquencies do not include loans that have had COVID-19 related payment deferral modifications, as appropriate under the CARES Act. Non-performing Assets. Non-performing assets include loans that are 90 or more days past due or on non-accrual status, including TDRs on non-accrual status, and real estate and other loan collateral acquired through foreclosure and repossession. Loans 90 days or greater past due may remain on an accrual basis if adequately collateralized and in the process of collection. AtJune 30, 2021 , we did not have any accruing loans past due 90 days or greater. For non-accrual loans, interest previously accrued but not collected is reversed and charged against income at the time a loan is placed on non-accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. As ofJune 30, 2021 , there were no loans placed on non-accrual due to COVID-19 related repayment modifications, per provisions of the CARES Act. Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed real estate until it is sold. When property is acquired, it is initially recorded at the fair value, less estimated costs to sell, at the date of foreclosure, establishing a new cost basis. Holding costs and declines in fair value after acquisition of the property result in charges against income. The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction totaled$596,000 atJune 30, 2021 .
The following table provides information with respect to our non-performing assets at the dates indicated.
June 30, December 31,
2021 2020
(Dollars in thousands)
Loans accounted for on a non-accrual basis:
Real estate loans:
Residential real estate:
One- to four-family $ 1,633 $ 2,617
Home equity lines of credit 20 20
Commercial real estate 8,176 -
Total real estate loans 9,829 2,637
Commercial and industrial 635 527
Total non-accrual loans (1) 10,464 3,164
Total non-performing assets $ 10,464 $ 3,164
Non-accrual loans to total loans 0.21 % 0.06 %
Non-accrual loans to total assets 0.17 % 0.05 %
Non-performing assets to total assets 0.17 % 0.05 %
24
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(1) TDRs on accrual status not included above totaled
million at
Non-accrual loans increased$7.3 million or 230.7%, to$10.5 million , or 0.21% of total loans outstanding atJune 30, 2021 , from$3.2 million , or 0.06% of total loans outstanding atDecember 31, 2020 . The increase in non-accrual loans includes an impaired$8.2 million commercial real estate loan with a related allowance of$2.3 million atJune 30, 2021 . Achieving and maintaining a moderate risk profile by aggressively managing troubled assets has been and will continue to be a primary focus. AtJune 30, 2021 , our allowance for credit losses was$64.3 million , or 1.28% of total loans, compared to$68.8 million , or 1.25% of total loans atDecember 31, 2020 . The decreases in the allowance reflect decreases in the loan portfolio and changes in economic uncertainties and market volatility caused by COVID-19 to the factors used to determine the Company's provision. Included in our allowance atJune 30, 2021 was a general component of$61.8 million , which is based upon our evaluation of various factors relating to loans not deemed to be impaired. Due to government guarantee, we have not currently provided for credit losses for PPP loans. We continue to believe our level of non-performing loans and assets is manageable and we believe that we have sufficient capital and human resources to manage the collection of our non-performing assets in an orderly fashion. AtJune 30, 2021 andDecember 31, 2020 , the Company did not hold any foreclosed real estate. We continue to be actively engaged with our borrowers in resolving remaining problem assets. Troubled Debt Restructurings and Other Loan Modifications. In the course of resolving loans to borrowers with financial difficulties, we may choose to restructure the contractual terms of certain loans, with terms modified to fit the ability of the borrower to repay in line with its current financial status. A loan is considered a TDR if, for reasons related to the debtor's financial difficulties, a concession is granted to the debtor that would not otherwise be considered. Total TDRs decreased$550,000 , or 25.6%, to$1.6 million atJune 30, 2021 from$2.2 million atDecember 31, 2020 , reflecting principal paydowns. Modifications of TDRs consist of rate reductions, loan term extensions or provisions for interest-only payments for specified periods up to 12 months. We have generally been successful with the concessions we have offered to borrowers to date. We generally return TDRs to accrual status when they have sustained payments for six consecutive months based on the restructured terms and future payments are reasonably assured. In response to COVID-19, the Company has provided temporary relief in the form of short-term loan modifications, generally with deferred payments and associated accrued interest due and payable based on the specific terms of the modification. As ofJune 30, 2021 , the Company had$268.6 million in loans making interest-only payments under COVID-19 related loan modifications, representing 5.4% of the total loan portfolio. Potential Problem Loans. Certain loans are identified during our loan review process that are currently performing in accordance with their contractual terms and we ultimately expect to receive payment in full of principal and interest, but it is deemed probable that we will be unable to collect all the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. This may result from deteriorating conditions such as cash flows, collateral values or creditworthiness of the borrower. These loans are classified as impaired but are not accounted for on a non-accrual basis. Other potential problem loans are those loans that are currently performing, but where known information about possible credit problems of the borrowers causes us to have concerns as to the ability of such borrowers to comply with contractual loan repayment terms. These other potential problem loans are generally loans classified as "substandard" or 8-rated loans in accordance with our ten-grade internal loan rating system that is consistent with guidelines established by banking regulators. AtJune 30, 2021 other potential problem loans totaled$20.1 million and consist of two commercial and industrial loans to non-profit educational organizations in easternMassachusetts with loan balances of$16.5 million and$3.5 million that were identified during our loan review process as having possible financial issues that, if not corrected, could result in some loss to the Company. It was determined that these loan relationships are performing in accordance with the terms of the loans with the current expectation that we will be repaid in full in accordance with those terms, but with continual credit monitoring of the relationships. Allowance for Credit Losses. The allowance for credit losses is maintained at levels considered adequate by management to provide for probable credit losses inherent in the loan portfolio as of the consolidated balance sheet reporting dates. The allowance for credit losses is based on management's assessment of various factors affecting the loan portfolio, including portfolio composition, delinquent and non-accrual loans, national and local business conditions and loss experience and an overall evaluation of the quality of the underlying collateral. 25
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Changes in the allowance for credit losses on loans during the periods indicated
were as follows:
Six Months Ended June 30,
2021 2020
(Dollars in thousands)
Beginning balance $ 68,824 $ 50,322
Provision (reversal) for credit losses on loans (4,487 ) 10,366
Charge-offs:
One- to four-family 68 -
Commercial and industrial 139 133
Consumer 57 80
Total charge-offs 264 213
Recoveries:
One- to four-family 73 13
Construction 100 -
Commercial and industrial 16 6
Home equity lines of credit 2 1
Consumer 36 52
Total recoveries 227 72
Net charge-offs 37 141
Ending balance $ 64,300 $ 60,547
Allowance to non-accrual loans 614.49 % 1,585.00 %
Allowance to total loans outstanding 1.28 % 1.06 %
Net charge-offs to average loans outstanding 0.00 % 0.00 %
Our loan loss provision was a reversal of $4.5 million for the six months ended
June 30, 2021 compared to a provision of $10.4 million for the six months ended
June 30, 2020 . The decrease in the allowance for credit losses at June 30, 2021
compared to December 31, 2020 was primarily due to decreases in the loan
portfolio, partially offset by a $2.3 million specific reserve on a non-owner
occupied commercial real estate property. We continue to assess the adequacy of
our allowance for credit losses in accordance with established policies and are
closely monitoring the evolving pandemic to ensure proper evaluation of its
impact on our loan portfolio.
The following table sets forth the breakdown of the allowance for credit losses by loan category at the dates indicated:
June 30, 2021 December 31, 2020
Percent of Percent of
Percent of Loans in Percent of Loans in
Allowance Category Allowance Category
to Total of Total to Total of Total
Amount Allowance Loans Amount Allowance Loans
(Dollars in thousands)
Real estate loans:
Residential real estate:
One- to four-family $ 1,451 2.3 % 9.8 % $ 2,076 3.0 % 10.2 %
Multi-family 1,517 2.4 1.1 2,251 3.3 16.0
Home equity lines of credit 138 0.2 16.2 206 0.3 1.2
Commercial real estate 30,304 47.0 45.8 30,145 43.8 45.3
Construction 22,293 34.7 12.9 25,197 36.6 13.2
Total real estate loans 55,703 86.6 85.8 59,875 87.0 85.9
Commercial and industrial 8,161 12.7 14.0 8,453 12.3 13.9
Consumer 436 0.7 0.2 496 0.7 0.2
Total loans $ 64,300 100.0 % 100.0 % $ 68,824 100.0 % 100.0 %
The allowance consists of general and allocated components. The general
component relates to pools of non-impaired loans and is based on historical loss
experience adjusted for qualitative factors. The allocated component relates to
loans that are classified as impaired. A loan is considered impaired when, based
on current information and events, it is probable that we will be unable to
collect the scheduled payments of principal or interest when due according to
the contractual terms of the loan agreement. Factors considered by management in
determining impairment include payment status, collateral value and the
probability of collecting scheduled
26
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principal and interest payments when due. Impairment is measured on a loan by
loan basis by either the present value of expected future cash flows discounted
at the loan's effective interest rate, the loan's obtainable market price, or
the fair value of the collateral if the loan is collateral dependent.
We had impaired loans totaling $8.9 million and $4.3 million as of June 30, 2021
and December 31, 2020 , respectively. The increase in impaired loans includes the
addition of an $8.2 million commercial real estate loan with a related allowance
of $2.3 million at June 30, 2021 . Our average investment in impaired loans was
$2.1 million and $5.8 million for the six months ended June 30, 2021 and 2020,
respectively.
Large groups of smaller balance homogeneous loans are collectively evaluated for
impairment based on payment status. Accordingly, we do not separately identify
individual one- to four-family residential real estate, home equity lines of
credit or consumer loans for impairment disclosures, unless such loans are
subject to a troubled debt restructuring. We periodically may agree to modify
the contractual terms of loans. When a loan is modified and a concession is made
to a borrower experiencing financial difficulty, the modification is considered
a TDR. All TDRs are initially classified as impaired.
Management has reviewed the collateral value for all impaired and non-accrual
loans that were collateral dependent as of
For residential loans measured for impairment based on the collateral value, we will do the following:
• When a loan becomes seriously delinquent, generally 60 days past due, we
obtain third-party appraisals that are generally the basis for charge-offs
when a loss is indicated, prior to the foreclosure sale, but usually no
later than when such loans are 180 days past due. We generally are able to
complete the foreclosure process within six to nine months from receipt of
the third-party appraisal.
• We make adjustments to appraisals based on updated economic information,
if necessary, prior to the foreclosure sale. We review current market
factors to determine whether, in management's opinion, downward
adjustments to the most recent appraised values may be warranted. If so,
we use our best estimate to apply an estimated discount rate to the
appraised values to reflect current market factors.
• Appraisals we receive are based on comparable property sales.
For commercial loans measured for impairment based on the collateral value, we will do the following:
• We obtain a third party appraisal at the time a loan is deemed to be in a
workout situation and there is no indication that the loan will return to
performing status, generally when the loan is 90 days or more past due.
One or more updated third party appraisals are obtained prior to
foreclosure depending on the foreclosure timeline. In general, we order
new appraisals annually on loans in the process of foreclosure.• We make downward adjustments to appraisals when conditions warrant.
Adjustments are made by applying a discount to the appraised value based
on occupancy, recent changes in condition to the property and certain
other factors. Adjustments are also made to appraisals for construction
projects involving residential properties based on recent sales of units.
Losses are recognized if the appraised value less estimated costs to sell
is less than our carrying value of the loan.
• Appraisals we receive are generally based on a reconciliation ofcomparable property sales and income capitalization approaches. For loans
on construction projects involving residential properties, appraisals are
generally based on a discounted cash flow analysis assuming a bulk sale to
a single buyer.
Loans that are partially charged off generally remain on non-accrual status until foreclosure or such time that they are performing in accordance with the terms of the loan and have a sustained contractual payment history of at least six consecutive months. The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. Loan losses are charged against the allowance when we believe the uncollectability of a loan balance is confirmed; for collateral-dependent loans, generally when appraised values (as adjusted values, if applicable), less estimated costs to sell, are less than our carrying values. Although we believe that we use the best information available to establish the allowance for credit losses, future adjustments to the allowance for credit losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while we believe we have established our allowance for credit losses in conformity with generally accepted accounting principles inthe United States of America , there can be no assurance that regulators, in reviewing our loan portfolio, will not require us to increase our allowance for credit losses. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing 27
-------------------------------------------------------------------------------- allowance for credit losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for credit losses may adversely affect our financial condition and results of operations. Securities Portfolio. AtJune 30, 2021 our securities portfolio was$18.9 million , or 0.3% of total assets, compared to$23.5 million , or 0.4% of total assets, atDecember 31, 2020 . During the six months endedJune 30, 2021 , the securities portfolio decreased$4.6 million , or 19.5% primarily due to$5.5 million in sales of marketable equity securities and$1.4 million in maturities, calls, and principal payments, partially offset by purchases of$1.4 million in marketable equity securities and a net unrealized gain recognized on marketable equity securities of$1.0 million . AtJune 30, 2021 , the securities portfolio consisted of$9.8 million , or 51.8%, in debt securities and$9.1 million , or 48.2%, in marketable equity securities. Refer to Note 4, Securities, in Notes to the Unaudited Consolidated Financial Statements within this report for more detail regarding our securities portfolio. Deposits. Deposits are a major source of our funds for lending and other investment purposes. Our deposit base is comprised of noninterest-bearing demand, interest-bearing demand, money market, regular savings and other deposits, and certificates of deposit, which include brokered certificates of deposit. Total deposits decreased$217.4 million , or 4.3%, to$4.864 billion atJune 30, 2021 from$5.081 billion atDecember 31, 2020 . The decrease during the six months endedJune 30, 2021 includes decreases of$175.6 million in brokered interest-bearing demand deposits and$68.3 million in brokered certificates of deposit. Refer to Note 6, Deposits, in Notes to the Unaudited Consolidated Financial Statements within this report for more detail regarding our deposits. The following table sets forth the average balances of deposits for the periods indicated. Six Months Ended June 30, 2021 2020 Percent Percent Average Average of Total Average Average of Total Balance Rate Deposits Balance Rate Deposits (Dollars in thousands) Noninterest-bearing demand deposits$ 756,122 - % 16.5 %$ 593,350 - % 14.7 % Interest-bearing demand deposits 1,432,595 0.33 26.1 1,288,538 1.06 26.8 Money market deposits 868,350 0.29 17.8 707,022 0.93 15.7 Regular savings and other deposits 865,998 0.20 17.8 873,850 0.81 17.3 Certificates of deposit 1,169,837 0.94 21.8 1,403,507 1.97 25.5 Total$ 5,092,902 0.39 % 100.0 %$ 4,866,267 1.13 %$ 100.0 % Borrowings. We use borrowings from the FHLB to supplement our supply of funds for loans and investments. Beginning in the second quarter of 2020, we utilized borrowings from theFederal Reserve's Paycheck Protection Program Liquidity Facility ("PPPLF") program to fund the origination of PPP loans. AtJune 30, 2021 andDecember 31, 2020 , FHLB advances totaled$560.6 million and$610.6 million , respectively, with a weighted average rate of 2.44% and 2.33%, respectively. There were no Federal Reserve PPPLF borrowings atJune 30, 2021 . Federal Reserve PPPLF borrowings totaled$97.6 million with a weighted average rate of 0.35% atDecember 31, 2020 . Total borrowings decreased$147.6 million , or 20.8%, during the six months endedJune 30, 2021 , reflecting decreases of$50.0 million in FHLB advances and$97.6 million in PPPLF borrowings. Advances maturing with the FHLB during the six months endedJune 30, 2021 totaled$50.0 million and consisted of advances with original terms ranging from one to five years and interest rates ranging from 0.66% to 1.78%. The Bank paid off PPPLF borrowings totaling$97.6 million with terms ranging from two to five years and a rate of 0.35% during the six months endedJune 30, 2021 . AtJune 30, 2021 , we also had an available line of credit of$10.0 million with the FHLB at an interest rate that adjusts daily, none of which was outstanding at that date. Refer to Note 7, Borrowings, in Notes to the Unaudited Consolidated Financial Statements within this report for more detail regarding our borrowings.
Information relating to borrowings is detailed in the following table.
Six Months Ended June 30,
2021 2020
(Dollars in thousands)
Balance outstanding at end of period $ 560,625 $ 804,101
Average amount outstanding during the period$ 613,447 $ 704,583 Weighted average interest rate during the period 2.32 % 2.38 % Maximum outstanding at any month end$ 699,703 $
804,101
Weighted average interest rate at end of period 2.44 % 1.97 %
28
-------------------------------------------------------------------------------- Stockholders' Equity. Total stockholders' equity increased$32.3 million , or 4.2%, to$801.2 million atJune 30, 2021 , from$768.9 million atDecember 31, 2020 . The increase for the six months endedJune 30, 2021 was primarily due to net income of$40.9 million , partially offset dividends of$0.20 per share totaling$10.1 million . Stockholders' equity to assets was 12.74% atJune 30, 2021 , compared to 11.61% atDecember 31, 2020 . Book value per share increased to$15.23 atJune 30, 2021 from$14.67 atDecember 31, 2020 . AtJune 30, 2021 , the Company and the Bank continued to exceed all regulatory capital requirements. Refer to "- Capital Management" within this report for more information regarding capital requirements and actual capital amounts and ratios for the Bank and the Company.
Results of Operations for the Three and Six Months Ended
Net Income. Our primary source of income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits and borrowings. Changes in levels of interest rates affect our net interest income. A secondary source of income is non-interest income, which includes revenue that we receive from providing products and services. The majority of our non-interest income generally comes from customer service fees, loan fees, bank-owned life insurance, and mortgage banking gains.
Net income information is as follows:
Three Months Ended June 30, Change Six Months Ended June 30, Change
2021 2020 Amount Percent 2021 2020 Amount Percent
(Dollars in thousands, except per share amounts)
Net interest income $ 47,768 $ 47,371 $ 397 0.8 % $ 96,169 $ 92,469 $ 3,700 4.0 %
Provision (reversal) for
credit losses 749 9,641 (8,892 ) (92.2 ) (4,487 ) 10,366 (14,853 ) (143.3 )
Non-interest income 3,050 8,658 (5,608 ) (64.8 ) 7,981 7,827 154 2.0
Non-interest expenses 28,033 23,301 4,732 20.3 53,576 49,621 3,955 8.0
Net income 16,546 17,279 (733 ) (4.2 ) 40,866 30,256 10,610 35.1
Basic earnings per share 0.33 0.34 (0.01 ) (2.9 ) 0.81 0.60 0.21 35.3
Diluted earnings per
share 0.32 0.34 (0.02 ) (5.9 ) 0.81 0.60 0.21 34.6
Return on average assets 1.03 % 1.08 % (0.05 ) % (4.6 ) 1.25 % 0.95 % 0.30 % 31.6
Return on average equity 8.32 % 9.45 % (1.13 ) % (12.0 ) 10.36 % 8.27 % 2.09 % 25.3
29
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Net Interest Income.
Average Balance Sheets and Related Yields and Rates. The following tables
present information regarding average balances of assets and liabilities, the
total dollar amounts of interest income and dividends from average
interest-earning assets, the total dollar amounts of interest expense on average
interest-bearing liabilities and the resulting annualized average yields and
costs. The yields and costs for the periods indicated are derived by dividing
income or expense by the average balances of assets or liabilities,
respectively, for the periods presented. For purposes of the tables, average
balances have been calculated using daily average balances, and include
non-accrual loans and purchase accounting related premium and discounts. The
loan yields include the effect of amortization or accretion of deferred loan
fees/costs and purchase accounting premiums/discounts to interest and fees on
loans.
Three Months Ended June 30,
2021 2020
Average Yield Average Yield
Balance Interest (1) Cost (1)(6) Balance Interest (1) Cost (1)(6)
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (2) $ 5,160,579 $ 55,702 4.33 % $ 5,722,186 $ 62,164 4.37 %
Securities and certificates of
deposits 19,445 171 3.53 33,282 262 3.17
Other interest-earning assets
(3) 1,099,850 361 0.13 478,725 473 0.40
Total interest-earning assets 6,279,874 56,234 3.59 6,234,193 62,899 4.06
Noninterest-earning assets 154,470 153,567
Total assets $ 6,434,344 $ 6,387,760
Liabilities and stockholders'
equity:
Interest-bearing liabilities:
Interest-bearing demand
deposits $ 1,403,276 959 0.27 $ 1,297,072 2,293 0.71
Money market deposits 859,189 471 0.22 722,148 1,227 0.68
Regular savings and other
deposits 870,508 333 0.15 841,600 995 0.48
Certificates of deposit 1,116,928 2,446 0.88 1,331,999 6,076 1.83
Total interest-bearing
deposits 4,249,901 4,209 0.40 4,192,819 10,591 1.02
Borrowings 560,625 3,453 2.47 754,426 4,188 2.23
Total interest-bearing
liabilities 4,810,526 7,662 0.64 4,947,245 14,779 1.20
Noninterest-bearing demand
deposits 777,688 651,517
Other noninterest-bearing
liabilities 50,409 57,922
Total liabilities 5,638,623 5,656,684
Total stockholders' equity 795,721 731,076
Total liabilities and
stockholders' equity $ 6,434,344 $ 6,387,760
Net interest-earning assets $ 1,469,348 $ 1,286,948
Fully tax-equivalent net
interest income 48,572 48,120
Less: tax-equivalent
adjustments (803 ) (749 )
Net interest income $ 47,769 $ 47,371
Interest rate spread (1)(4) 2.95 % 2.86 %
Net interest margin (1)(5) 3.10 % 3.10 %
Average interest-earning
assets to average
interest-bearing liabilities 130.54 % 126.01 %
Supplemental Information:
Total deposits, including
noninterest-bearing
demand deposits $ 5,027,589 $ 4,209 0.34 % $ 4,844,336 $ 10,591 0.88 %
Total deposits and borrowings,
including
noninterest-bearing demand
deposits $ 5,588,214 $ 7,662 0.55 % $ 5,598,762 $ 14,779 1.06 %
----------------------
(1) Income on debt securities, marketable 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
2021 and 2020, yields on loans before tax-equivalent adjustments were 4.27%
and 4.32%, respectively, yields on securities and certificates of deposit
before tax-equivalent adjustments were 3.11% and 2.80%, respectively, and
yields on total interest-earning assets before tax-equivalent adjustments
were 3.54% and 4.01%, respectively. Interest rate spread before
tax-equivalent adjustments for the three months ended
was 2.90% and 2.81%, respectively, while net interest margin before
tax-equivalent adjustments for the three months ended
was 3.05% and 3.06%, respectively.
30
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(2) Loans on non-accrual status are included in average balances.
(3) Includes FHLB 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.
Six Months Ended June 30,
2021 2020
Average Yield Average Yield
Balance Interest (1) Cost (1)(6) Balance Interest (1) Cost (1)(6)
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (2) $ 5,294,203 $ 113,656 4.33 % $ 5,732,019 $ 126,922 4.45 %
Securities and certificates of
deposits 20,138 373 3.74 29,170 464 3.20
Other interest-earning assets
(3) 1,078,675 731 0.14 439,520 2,259 1.03
Total interest-earning assets 6,393,016 114,760 3.62 6,200,709 129,645 4.20
Noninterest-earning assets 154,817 157,599
Total assets $ 6,547,833 $ 6,358,308
Liabilities and stockholders'
equity:
Interest-bearing liabilities:
Interest-bearing demand
deposits $ 1,432,595 2,368 0.33 $ 1,288,538 6,790 1.06
Money market deposits 868,350 1,251 0.29 707,022 3,281 0.93
Regular savings and other
deposits 865,998 868 0.20 873,850 3,527 0.81
Certificates of deposit 1,169,837 5,451 0.94 1,403,507 13,762 1.97
Total interest-bearing
deposits 4,336,780 9,938 0.46 4,272,917 27,360 1.29
Borrowings 613,447 7,044 2.32 704,583 8,339 2.38
Total interest-bearing
liabilities 4,950,227 16,982 0.69 4,977,500 35,699 1.44
Noninterest-bearing demand
deposits 756,122 593,350
Other noninterest-bearing
liabilities 52,859 55,805
Total liabilities 5,759,208 5,626,655
Total stockholders' equity 788,625 731,653
Total liabilities and
stockholders' equity $ 6,547,833 $ 6,358,308
Net interest-earning assets $ 1,442,789 $ 1,223,209
Fully tax-equivalent net
interest income 97,778 93,946
Less: tax-equivalent
adjustments (1,609 ) (1,477 )
Net interest income $ 96,169 $ 92,469
Interest rate spread (1)(4) 2.93 % 2.76 %
Net interest margin (1)(5) 3.08 % 3.05 %
Average interest-earning
assets to average
interest-bearing liabilities 129.15 % 124.57 %
Supplemental Information:
Total deposits, including
noninterest-bearing
demand deposits $ 5,092,902 $ 9,938 0.39 % $ 4,866,267 $ 27,360 1.13 %
Total deposits and borrowings,
including
noninterest-bearing demand
deposits $ 5,706,349 $ 16,982 0.60 % $ 5,570,850 $ 35,699 1.29 %
(1) Income on debt securities, marketable 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
and 2020, yields on loans before tax-equivalent adjustments were 4.27% and
4.40%, respectively, yields on securities and certificates of deposit before
tax-equivalent adjustments were 3.40% and 2.94%, respectively, and yields on
total interest-earning assets before tax-equivalent adjustments were 3.57%
and 4.16%, respectively. Interest rate spread before tax-equivalent
adjustments for the six months ended
2.72%, respectively, while net interest margin before tax-equivalent
adjustments for the six months ended
3.00%, respectively.
31
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(2) Loans on non-accrual status are included in average balances.
(3) Includes FHLB 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.
Rate/Volume Analysis. The following table sets forth the effects of changing
rates and volumes on our fully tax-equivalent net interest income. The rate
column shows the effects attributable to changes in rate (changes in rate
multiplied by prior volume). The volume column shows the effects attributable to
changes in volume (changes in volume multiplied by prior rate). The net column
represents the sum of the prior columns. For purposes of this table, changes
attributable to changes in both rate and volume that cannot be segregated have
been allocated proportionally based on the changes due to rate and the changes
due to volume.
Three Months Ended June 30, Six Months Ended June 30,
2021 Compared to 2020 2021 Compared to 2020
Increase (Decrease) Due to Increase (Decrease) Due to
Volume Rate Net Volume Rate Net
(In thousands)
Interest income:
Loans $ (5,911 ) $ (551 ) $ (6,462 ) $ (9,729 ) $ (3,537 ) $ (13,266 )
Securities and certificates of
deposit (118 ) 27 (91 ) (160 ) 69 (91 )
Other interest-earning assets 345 (457 ) (112 ) 1,491 (3,019 ) (1,528 )
Total (5,684 ) (981 ) (6,665 ) (8,398 ) (6,487 ) (14,885 )
Interest expense:
Deposits (451 ) (5,931 ) (6,382 ) (739 ) (16,683 ) (17,422 )
Borrowings (1,152 ) 417 (735 ) (1,071 ) (224 ) (1,295 )
Total (1,603 ) (5,514 ) (7,117 ) (1,810 ) (16,907 ) (18,717 )
Change in fully tax-equivalent
net interest
income $ (4,081 ) $ 4,533 $ 452 $ (6,588 ) $ 10,420 $ 3,832
The interest rate spread and net interest margin on a tax-equivalent basis were
2.95% and 3.10%, respectively, for the three months ended June 30, 2021 compared
to 2.86% and 3.10%, respectively, for the three months ended June 30, 2020 . For
the six months ended June 30, 2021 , the interest rate spread and net interest
margin on a tax-equivalent basis were 2.93% and 3.08%, respectively, compared to
2.76% and 3.05%, respectively, for the six months ended June 30, 2020 . The
increase in net interest income for the three and six months ended June 30, 2021
was primarily due to the substantial reduction in the cost of funds, partially
offset by a decrease in average loan volume.
The yield on interest-earning assets on a tax-equivalent basis decreased 47
basis points to 3.59% for the three months ended June 30, 2021 , compared to
4.06% for the three months ended June 30, 2021 , while the cost of funds
decreased 51 basis points to 0.55% from 1.06% for the three months ended
June 30, 2021 and 2020, respectively. The decrease in interest income was
primarily due to a decrease of $561.6 million , or 9.8%, in the Company's average
net loans to $5.161 billion and a 27 basis point decrease in yield on other
earning assets to 0.13%, from 0.40%, for the three months ended June 30, 2020 .
The decrease in interest expense on deposits was primarily due to the decrease
in the average total cost of deposits of 54 basis points to 0.34% for the three
months ended June 30, 2021 compared to 0.88% for the same period in 2020. The
decrease in interest expense on borrowings was primarily due to a $193.8 million
decrease, or 25.7%, in the Company's average borrowings to $560.6 million for
the three months ended June 30, 2021 from $754.4 million for the three months
ended June 30, 2020 .
The yield on interest-earning assets on a tax-equivalent basis decreased 58
basis points to 3.62% for the six months ended June 30, 2021 , compared to 4.20%
for the six months ended June 30, 2020 , while the cost of funds decreased 69
basis points to 0.60% from 1.29% for the six months ended June 30, 2021 and
2020, respectively. The decrease in interest income was primarily due to a
decrease of $437.8 million , or 7.6%, in the Company's average net loans to
$5.294 billion and an 89 basis point decrease in yield on other earning assets
to 0.14% from 1.03%, for the six months ended June 30, 2020 . The decrease in
interest expense on deposits was primarily due to the decrease in the average
total cost of deposits of 74 basis points to 0.39% for the six months ended
June 30, 2021 compared to 1.13% for the same period in 2020. The decrease in
interest expense on borrowings was primarily due to a $91.1 million decrease, or
12.9%, in the Company's average borrowings to $613.4 million for the six months
ended June 30, 2021 from $704.6 million for the six months ended June 30, 2020 .
32
-------------------------------------------------------------------------------- Provision for Credit Losses. The provision for credit losses for the three months endedJune 30, 2021 was$749,000 compared to a provision of$9.6 million for the three months endedJune 30, 2020 . For the six months endedJune 30, 2021 , the provision for credit losses was a reversal of$4.5 million compared to a provision of$10.4 million forJune 30, 2020 . For further discussion of the changes in the provision and allowance for credit losses, refer to "Comparison of Financial Condition atJune 30, 2021 andDecember 31, 2020 - Allowance for Credit losses."
Non-Interest Income. Non-interest income information is as follows:
Three Months Ended June 30, Change Six Months Ended June 30, Change
2021 2020 Amount Percent 2021 2020 Amount Percent
(Dollars in thousands)
Customer service fees $ 2,485 $ 1,948 $ 537 27.6 % $ 4,684 $ 4,045 $ 639 15.8 %
Loan fees 39 (35 ) 74 211.4 134 639 (505 ) (79.0 )
Mortgage banking gains,
net 45 118 (73 ) (61.9 ) 627 529 98 18.5
Gain on sale of asset - 4,195 (4,195 ) (100.0 ) - 4,195 (4,195 ) (100.0 )
Gain (loss) gain on
marketable equity
securities, net 200 2,025 (1,825 ) (90.1 ) 1,985 (2,319 ) 4,304 185.6
Income from bank-owned
life
insurance 264 273 (9 ) (3.3 ) 525 570 (45 ) (7.9 )
Other income 17 134 (117 ) (87.3 ) 26 168 (142 ) (84.5 )
Total non-interest income
(loss) $ 3,050 $ 8,658 $ (5,608 ) (64.8 ) % $ 7,981 $ 7,827 $ 154 2.0 %
The decrease in non-interest income for the three months ended June 30, 2021 was
due primarily to a $4.2 million gain on sale of asset recognized in the second
quarter of 2020 and a $1.8 million in valuation decrease on marketable equity
securities, net. The increase in non-interest income for the six months ended
June 30, 2021 was due primarily to a $3.0 million valuation increase in
marketable equity securities, net, a $1.3 million increase in gain on sale of
marketable equity securities, net, partially offset by a $4.2 million gain on
sale of asset realized in 2020. Refer to Note 4, Securities, in the Notes to the
Unaudited Consolidated Financial Statements within this report for more detail
regarding our securities portfolio.
Non-Interest Expense. Non-interest expense information is as follows:
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2021 2020 Amount Percent 2021 2020 Amount Percent
(Dollars in thousands) (Dollars in thousands)
Salaries and employee
benefits $ 13,939 $ 13,858 $ 81 0.6
%
8,131 7,663 468 6.1
Data processing 2,273 2,133 140 6.6 4,514 4,270 244 5.7
Marketing and
advertising 1,032 1,030 2 0.2 1,928 2,260 (332 ) (14.7 ) Professional services
691 695 (4 ) (0.6 ) 1,421 1,692 (271 ) (16.0 ) Deposit insurance
345 606 (261 ) (43.1 ) 858 1,275 (417 ) (32.7 ) Merger and acquisition 1,115
- 1,115 - 1,115 - 1,115 -
Other general and
administrative 4,738 1,240 3,498 282.1 6,154 2,689 3,465 128.9
Total non-interest
expenses $ 28,033 $ 23,301 $ 4,732 20.3 % $ 53,576 $ 49,621 $ 3,955 8.0 %
The increase in the Company's non-interest expenses for the three and six months
ended June 30, 2021 was due primarily to $3.3 million in expense for a legal
judgment related to a loan assumed in the Mt. Washington Bank acquisition,
included in other general and administrative expense, and $1.1 million in merger
and acquisition related expenses realized in the second quarter of 2021.
Income Tax Provision. The Company recorded a provision for income taxes of
$5.5 million for the three months ended June 30, 2021 , reflecting an effective
tax rate of 24.9%, compared to $5.8 million , or a 25.2% effective tax rate, for
the three months ended June 30, 2020 . For the six months ended June 30, 2021 ,
the provision for income taxes was $14.2 million , reflecting an effective tax
rate of 25.8%, compared to $10.1 million , or a 24.9% effective tax rate, for the
six months ended June 30, 2020 .
Liquidity Management. Liquidity is the ability to meet current and future
financial obligations of a short-term nature. Our primary sources of funds
consist of deposit inflows, loan repayments, sales, maturities and payments on
investment securities and borrowings from the FHLB. While maturities and
scheduled amortization of loans and securities are predictable sources of funds,
deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition.
33
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We regularly adjust our investments in liquid assets based upon our assessment
of (1) expected loan demand, (2) expected deposit flows, (3) yields available on
interest-earning deposits and securities and (4) the objectives of our
asset/liability management policy.
Our most liquid assets are cash and due from banks. The level of this asset
depends on our operating, financing, lending, and investing activities during
any given period. At June 30, 2021 , cash and due from banks totaled
$1.101 billion . In addition, at June 30, 2021 , we had $530.6 million of
available borrowing capacity with the FHLB, including a $10.0 million line of
credit. On June 30, 2021 , we had $560.6 million of FHLB advances outstanding. We
periodically pledge additional multi-family and commercial real estate loans
held in the Bank's portfolio as qualified collateral to increase our borrowing
capacity with the FHLB.
Our primary investing activities are the origination of loans and the purchase
and sale of securities. Our primary financing activities consist of activity in
deposit accounts and FHLB advances. Deposit flows are affected by the overall
level of interest rates, the interest rates and products offered by us and our
local competitors and other factors. We generally manage the pricing of our
deposits to be competitive. Occasionally, we offer promotional rates on certain
deposit products to attract deposits.
A significant use of our liquidity is the funding of loan originations. At
June 30, 2021 and December 31, 2020 , we had total loan commitments outstanding
of $1.026 billion and $1.075 billion , respectively. Historically, many of the
commitments expire without being fully drawn; therefore, the total amount of
commitments does not necessarily represent future cash requirements. Refer to
Note 8, Commitments and Contingencies and Derivatives, in Notes to the Unaudited
Consolidated Financial Statements within this report for more detail regarding
our outstanding commitments.
Another significant use of our liquidity is the funding of deposit withdrawals.
Certificates of deposit due within one year of June 30, 2021 totaled $828.4
million , or 78.0% of total certificates of deposit. If these maturing deposits
do not remain with us, we will be required to utilize other sources of funds.
Historically, a significant portion of certificates of deposit that mature have
remained with us. We have the ability to attract and retain deposits by
adjusting the interest rates offered and accepting brokered certificates of
deposit when it is deemed cost effective.
Meridian Bancorp, Inc. is a separate legal entity from East Boston Savings Bank ,
and it must provide for its own liquidity to pay dividends and repurchase its
common stock and for other corporate purposes. Meridian Bancorp, Inc.'s primary
source of liquidity is dividend payments received from East Boston Savings Bank .
The ability of East Boston Savings Bank to pay dividends is subject to
regulatory requirements. At June 30, 2021 , Meridian Bancorp, Inc. (on an
unconsolidated basis) had cash and cash equivalents totaling $42.7 million ,
reflecting a $40.0 million dividend received from the Bank during the quarter
ended June 30, 2021 .
Capital Management. Both the Company and the Bank are subject to various
regulatory capital requirements administered by the Federal Reserve Board and
the Federal Deposit Insurance Corporation , respectively, including a risk-based
capital measure. The risk-based capital guidelines include both a definition of
capital and a framework for calculating risk-weighted assets by assigning
balance sheet assets and off-balance sheet items to broad risk categories. At
June 30, 2021 , both the Company and the Bank exceeded all of their respective
regulatory capital requirements. The Bank is considered "well capitalized" under
regulatory guidelines.
Federal banking regulations include minimum capital requirements as set forth in
the following table. Additionally, community banking institutions must maintain
a capital conservation buffer of Total, Tier 1 and common equity Tier 1 capital
in an amount greater than 2.5% of total to risk-weighted assets to avoid being
subject to limitations on capital distributions, including dividend payments and
stock repurchases, and discretionary bonuses.
As a result of the Economic Growth, Regulatory Relief, and Consumer Protection
Act, the federal banking agencies were required to develop a "Community Bank
Leverage Ratio" ("CBLR") (the ratio of a bank's tangible equity capital to
average total consolidated assets) for financial institutions with assets of
less than $10 billion . A "qualifying community bank" that exceeds this ratio
will be deemed to be in compliance with all other capital and leverage
requirements, including the capital requirements to be considered "well
capitalized" under Prompt Corrective Action statutes. The federal banking
agencies may consider a financial institution's risk profile when evaluating
whether it qualifies as a community bank for purposes of the capital ratio
requirement. The federal banking agencies have set 9% as the minimum capital for
the Community CBLR, effective March 31, 2020 . On April 6, 2020 , the federal
banking agencies issued two interim final rules related to Section 4012 of the
CARES Act, which requires the agencies to lower the CBLR requirement to 8%. The
second rule provides a transition from the temporary 8% requirement back to 9%.
The CBLR requirement transitioned from greater than 8% from the second quarter
through the fourth quarter of 2020, to greater than 8.5% during calendar year
2021, and will transition to a requirement of greater than 9% in 2022. The
Company and the Bank elected to be subject to the CBLR at June 30, 2020 .
The Company may use capital management tools such as cash dividends and common
share repurchases. We are subject to the Federal Reserve Board's notice
provisions for stock repurchases. The Company did not repurchase any of its
common stock during the three months ended June 30, 2021 . As of June 30, 2021 ,
the Company had repurchased 4,698,165 shares of its stock at an average price of
$15.66 per share since August of 2015. During the six months ended June 30, 2021
the Company's Board of Directors declared two quarterly cash dividends of $0.10
per common share on February 24, 2021 and May 27, 2021 . The dividend declared on
May 27, 2021 was paid on July 1, 2021 to stockholders of record at the close of
business on June 17, 2021 .
34
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The Company's and the Bank's actual capital amounts and ratios follow:
Minimum Minimum to be Well
Capital Capitalized Under Prompt
Actual Requirement Corrective Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
June 30, 2021
Community Bank Leverage Ratio:
Company $ 779,537 12.2 % N/A N/A $ 545,031 8.5 %
Bank 722,109 11.3 N/A N/A 545,119 8.5
December 31, 2020
Community Bank Leverage Ratio:
Company $ 746,914 11.6 % N/A N/A $ 515,439 8.0 %
Bank 719,372 11.2 N/A N/A 515,509 8.0
A reconciliation of the Company's and Bank's stockholders' equity to regulatory
capital follows:
June 30, December 31,
2021 2020
Consolidated Bank Consolidated Bank
(In thousands)
Total stockholders' equity per
financial statements $ 801,214 $ 743,786 $ 768,885 $ 741,343
Adjustments to Tier 1 and Common
Equity Tier 1
capital:
Accumulated other comprehensive loss 146 146 58 58 Goodwill disallowed (20,378 ) (20,378 ) (20,378 ) (20,378 ) Core deposit intangible (1,445 ) (1,445 ) (1,651 ) (1,651 ) Total Tier 1 and Common Equity Tier 1 capital 779,537 722,109 746,914 719,372 Adjustments to total capital: Allowance for credit losses 64,300 64,300 68,824 68,824 Total regulatory capital$ 843,837 $ 786,409 $ 815,738 $ 788,196 Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles inthe United States of America , are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers' requests for funding and take the form of loan commitments and lines of credit.
For the six months ended
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