UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A No. 1
[X] Annual report pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934 [Fee Required] for the
fiscal year ended December 31, 1993, or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required] for the
transition period from ______ to ______________.
Commission file number 0-12364
MERIDIAN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2237529
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
35 North Sixth Street, Reading, Pennsylvania 19601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(610) 655-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($5.00 par value)
Preferred Stock Purchase Rights
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the shares of Common Stock of
the Registrant held by nonaffiliates, on the basis of the sale
price as of February 15, 1994, was $1,524,513,808. As of
February 15, 1994, the Registrant had 57,662,198 shares of such
Common Stock outstanding.
Documents incorporated by reference. Portions of the
following documents are incorporated herein by reference: Proxy
Statement of the Registrant relating to the Registrant's Annual
Meeting of Shareholders to be held April 26, 1994, Part III.
<PAGE>
Items 8 and 14 of the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1993 are hereby
amended in their entirety as follows:
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars In Thousands)
----------------------------
1993 1992
------------- -------------
<S> <C> <C>
ASSETS
Cash and Due from Banks........................................... $587,587 $685,762
Short-Term Investments
Interest-Bearing Deposits in Other Banks........................ 101,860 166,049
Federal Funds Sold and Securities
Purchased Under Agreements to Resell.......................... 14,694 50,260
------------- -------------
Total Short-Term Investments.................................. 116,554 216,309
Investment Securities ------------- -------------
(Fair Value $2,813,100 and $2,505,146 at December 31,
1993 and 1992, Respectively).................................. 2,784,484 2,460,510
Investment Securities Available for Sale (Fair Value $288,152
and $973,414 at December 31, 1993 and 1992, Respectively).... 275,663 945,217
Trading Account Securities........................................ 36,616 65,257
Mortgage Loans and Other Assets Held for Sale..................... 655,844 497,111
Total Loans, Net of Unearned Discount............................. 8,988,044 8,551,597
Less Allowance for Possible Loan Losses..................... 173,388 165,512
------------- -------------
Net Loans................................................. 8,814,656 8,386,085
------------- -------------
Premises and Equipment............................................ 241,584 235,908
Accrued Interest Receivable....................................... 103,250 101,953
Other Assets...................................................... 468,549 696,213
------------- -------------
TOTAL ASSETS.................................................. $14,084,787 $14,290,325
============= =============
LIABILITIES
Deposits
Non-Interest Bearing Deposits................................... $1,849,425 $1,824,879
Interest-Bearing Deposits....................................... 9,496,726 9,949,823
------------- -------------
Total Deposits................................................ 11,346,151 11,774,702
------------- -------------
Short-Term Borrowings
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase........................... 540,255 711,677
Commercial Paper................................................ 2,500 5,000
Other Short-Term Borrowings..................................... 248,968 160,417
------------- -------------
Total Short-Term Borrowings................................... 791,723 877,094
------------- -------------
Long-Term Debt and Other Borrowings............................... 421,291 313,778
Accrued Interest Payable.......................................... 59,581 60,137
Other Liabilities................................................. 280,408 205,295
------------- -------------
TOTAL LIABILITIES............................................. 12,899,154 13,231,006
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS' EQUITY
Preferred Stock (Par Value $25.00)
Authorized - 25,000,000 Shares
Common Stock (Par Value $5.00)
Authorized - 100,000,000 Shares
Issued and Outstanding - 58,154,486 and 56,491,396
shares at December 31, 1993 and 1992, Respectively........... 290,760 282,445
Surplus........................................................... 205,174 180,352
Retained Earnings................................................. 689,699 596,522
------------- -------------
TOTAL SHAREHOLDERS' EQUITY.................................... 1,185,633 1,059,319
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............... $14,084,787 $14,290,325
============= =============
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
--------------- --------------- ---------------
1993 1992 1991
--------------- --------------- ---------------
(Dollars in Thousands)
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans............................ $705,893 $738,248 $884,591
Interest on Investment Securities..................... 151,436 206,332 196,446
Interest on Investment Securities Available for Sale.. 51,963 17,095 -
Interest on Trading Account Securities................ 9,857 4,634 5,967
Interest on Mortgage Loans Held for Sale.............. 36,405 40,630 30,097
Other Interest Income................................. 6,136 9,242 6,610
--------------- --------------- ---------------
Total Interest Income............................... 961,690 1,016,181 1,123,711
--------------- --------------- ---------------
INTEREST EXPENSE
Interest on Deposits.................................. 283,822 396,175 553,550
Interest on Short-Term Borrowings..................... 30,518 29,359 58,966
Interest on Long-Term Debt and Other Borrowings....... 30,058 17,464 11,159
--------------- --------------- ---------------
Total Interest Expense.............................. 344,398 442,998 623,675
--------------- --------------- ---------------
NET INTEREST INCOME..................................... 617,292 573,183 500,036
PROVISION FOR POSSIBLE LOAN LOSSES...................... 56,101 68,827 106,750
--------------- --------------- ---------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES.................................. 561,191 504,356 393,286
--------------- --------------- ---------------
OTHER INCOME
Trust................................................. 41,679 38,506 38,297
Mortgage Banking...................................... 69,683 69,819 56,445
Amortization of and Reserves for Purchased
Mortgage Servicing Rights and Other
Servicing-Related Assets....................... (33,713) (22,133) (15,402)
--------------- --------------- ---------------
Net Mortgage Banking........................ 35,970 47,686 41,043
Broker-Dealer and Investment Banking.................. 69,371 54,210 36,263
Service Charges on Deposit Accounts................... 53,827 48,967 39,112
Fees for Other Customer Services ..................... 43,355 40,743 41,928
Net Securities Gains.................................. 25,280 2,764 3,919
Gain on Sale of Credit Card Portfolio................. - - 40,565
Other Operating Income................................ 15,788 10,002 20,073
--------------- --------------- ---------------
Total Other Income.................................. 285,270 242,878 261,200
--------------- --------------- ---------------
OTHER EXPENSES
Salaries and Employee Benefits........................ 296,126 255,532 235,238
Net Occupancy Expense................................. 42,578 41,259 39,610
Equipment Expense..................................... 38,005 37,087 32,834
Provision for Mortgage Banking Restructuring.......... 17,500 - -
Other Operating Expenses.............................. 242,644 227,972 178,745
--------------- --------------- ---------------
Total Other Expenses................................ 636,853 561,850 486,427
--------------- --------------- ---------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE.................................. 209,608 185,384 168,059
Provision for Income Taxes.............................. 59,068 48,679 43,873
--------------- --------------- ---------------
INCOME FROM CONTINUING OPERATIONS BEFORE
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE............................................. 150,540 136,705 124,186
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAXES......... - - (6,500)
--------------- --------------- ---------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE.................................. 150,540 136,705 117,686
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGE IN
METHOD OF ACCOUNTING FOR INCOME TAXES................. 7,221 - -
--------------- --------------- ---------------
NET INCOME.............................................. $157,761 $136,705 $117,686
=============== =============== ===============
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Thousands) Common Stock
-----------------------
Retained
Shares Amount Surplus Earnings Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1991, AS PREVIOUSLY REPORTED............. 40,573,948 $202,869 $115,814 $369,179 $687,862
Adjustment for Merger Accounted for as a Pooling of Interests.. 10,902,017 54,498 2,723 72,330 129,551
----------- ----------- ----------- ----------- -----------
BALANCE AT JANUARY 1, 1991, AS RESTATED........................ 51,475,965 257,367 118,537 441,509 817,413
Net Income..................................................... -- -- -- 117,686 117,686
Common Stock Dividends Declared................................ -- -- -- (56,702) (56,702)
Sales of Stock Under Dividend Reinvestment, Stock Option
and Employee Benefit Plans................................... 138,556 694 1,492 -- 2,186
Common Stock Offering.......................................... 3,450,000 17,250 45,601 -- 62,851
Cash in Lieu of Fractional Shares.............................. -- -- (222) -- (222)
Reversal of Unrealized Loss on Marketable Equity Securities.... -- -- -- 4,521 4,521
----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31,1991.................................... 55,064,521 275,311 165,408 507,014 947,733
Net Income..................................................... -- -- -- 136,705 136,705
Common Stock Dividends Declared................................ -- -- -- (48,359) (48,359)
Sales of Stock Under Dividend Reinvestment, Stock Option
and Employee Benefit Plans................................... 642,174 3,210 7,730 -- 10,940
Common Stock Issued in Acquisitions............................ 784,701 3,924 7,375 429 11,728
Cash in Lieu of Fractional Shares.............................. -- -- (161) -- (161)
Reversal of Unrealized Loss on Marketable Equity Securities.... -- -- -- 733 733
----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1992................................... 56,491,396 $282,445 $180,352 $596,522 $1,059,319
Net Income..................................................... -- -- -- 157,761 157,761
Common Stock Dividends Declared................................ -- -- -- (67,541) (67,541)
Sales of Stock Under Dividend Reinvestment, Stock Option
and Employee Benefit Plans................................... 621,453 3,107 13,261 -- 16,368
Common Stock Issued in Acquisitions............................ 1,041,637 5,208 11,687 3,168 20,063
Cash in Lieu of Fractional Shares.............................. -- -- (126) -- (126)
Unrealized Loss on Marketable Equity Securities................ -- -- -- (211) (211)
----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1993................................... 58,154,486 $290,760 $205,174 $689,699 $1,185,633
=========== =========== =========== =========== ===========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the Year Ended December 31,
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM CONTINUING AND DISCONTINUED OPERATIONS
Income from Continuing Operations .................................. $157,761 $136,705 $124,186
Adjustments to Reconcile to Net Cash Provided by Continuing
Operations.......................................................
Depreciation and Amortization (Including Amortization of
Purchased Mortgage Servicing Rights)........................... 81,855 60,197 48,540
Deferred Tax Benefit............................................. (626) (6,645) (5,609)
Cumulative Effect on Prior Years of Change in Method of
Accounting for Income Taxes................................... (7,221) - -
Provision for Possible Loan Losses............................... 56,101 68,827 106,750
Provision for Other Real Estate Losses and Mortgage Servicing
Recourse...................................................... 19,618 31,263 4,488
Provision for Mortgage Banking Restructuring..................... 17,500 - -
Net Gains - Investment Securities................................ (12,694) (18,132) (5,616)
Net Gains - Investment Securities Available for Sale............. (14,632) - -
Gains on Sales of Mortgage Servicing............................. (21,606) (15,131) (6,200)
Gain on Sale of Credit Card Portfolio............................ - - (40,565)
Decrease (Increase) in Trading Account Securities................ 28,641 (31,193) 11,175
Increase in Mortgage Loans and Other Assets Held for Sale........ (123,848) (204,945) (76,507)
Decrease (Increase) in Other Assets.............................. 115,748 (246,072) 66,314
Increase in Other Liabilities.................................... 65,262 28,000 38,950
Other, Net....................................................... 14,380 862 (9,550)
-------- --------- ---------
Net Cash Provided by (Used for) Continuing Operations........ 376,239 (196,264) 256,356
-------- --------- ---------
Loss from Discontinued Operations............................... - - (6,500)
Adjustments to Reconcile to Net Cash Provided by Discontinued
Operations...................................................
Provision for Title Insurance Losses....................... - 3,343 15,099
Other, Net................................................. - (3,536) (1,884)
-------- --------- ---------
Net Cash Provided by (Used for) Discontinued Operations. - (193) 6,715
-------- --------- ---------
Net Cash Provided by (Used for) Continuing and Discontinued
Operations................................................ 376,239 (196,457) 263,071
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Short-Term Investments.................. 310,925 701,723 512,913
Purchases of Short-Term Investments................................. (246,736) (645,328) (640,816)
Proceeds from Maturities, Calls and Paydowns of Securities.......... 1,319,468 1,078,147 615,538
Proceeds from Sales of Securities................................... 109,156 474,673 707,521
Purchases of Securities............................................. (1,320,142) (2,087,489) (2,012,273)
Proceeds from Sales and Maturities of Securities Available for Sale. 907,096 - -
Purchases of Securities Available for Sale.......................... (642,886) - -
Net Principal Collected (Disbursed) on Loans to Customers........... (522,815) (169,709) 61,194
Proceeds from Sales of Automobile Loans, Credit Cards, and
Other Loans...................................................... - 9,669 801,491
Proceeds from Sales of Premises and Equipment....................... 5,386 5,838 4,964
Purchases of Premises and Equipment................................. (36,948) (31,980) (20,135)
Proceeds from Sale of Discontinued Title Operations................. - 15,601 -
Proceeds from Sales of Mortgage Servicing........................... 18,528 12,591 6,160
Purchases of Mortgage Servicing..................................... (2,116) (21,286) (38,501)
Other, Net.......................................................... 50,546 9,242 (2,913)
-------- --------- ---------
Net Cash Used for Investing Activities........................... (50,538) (648,308) (4,857)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) in Deposits................................. (426,208) 826,077 375,906
Net Decrease in Short-Term Borrowings............................... (85,371) (39,173) (761,484)
Proceeds from Issuance of Long-Term Debt............................ 197,607 184,017 10,068
Repayment of Long-Term Borrowings................................... (92,077) (15,415) (34,138)
Proceeds from Issuance of Common Stock.............................. 16,242 10,779 64,815
Cash Dividends Paid to Common Shareholders.......................... (69,635) (61,594) (55,640)
-------- --------- ---------
Net Cash Provided by (Used for) Financing Activities............. (459,442) 904,691 (400,473)
-------- --------- ---------
CASH AND CASH EQUIVALENTS
Net Increase (Decrease) During the Period........................ (133,741) 59,926 (142,259)
Balance at Beginning of the Period............................... 736,022 676,096 818,355
-------- --------- ---------
Balance at End of the Period..................................... $602,281 $736,022 $676,096
======== ========= =========
Composed of:
Continuing Operations......................................... $602,281 $736,022 $619,833
Discontinued Operations....................................... - - 56,263
-------- --------- ---------
Total Cash and Cash Equivalents............................... $602,281 $736,022 $676,096
======== ========= =========
<FN>
Cash and cash equivalents include cash and due from banks, federal funds sold, and securities purchased under agreements
to resell. Income tax payments totaled $66,072 in 1993, $52,319 in 1992 and $39,500 in 1991. Interest payments totaled
$344,954 in 1993, $469,932 in 1992 and $630,467 in 1991. Noncash investing activity consists of net transfers of loans
in liquidation to other real estate aggregating $45,824 in 1993, $24,025 in 1992 and $45,870 in 1991, transfers of
investment securities to investment securities available for sale of $415,000 in 1993 and $945,217 in 1992, and a noncash
transfer of purchased mortgage servicing rights and related assets of $36,000 from other assets to mortgage loans and
other assets held for sale. Noncash financing activity consists of stock aggregating $20,063 issued as a result of mergers.
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
1) Summary of Significant Accounting Policies
The following is a description of the more significant
accounting policies and reporting practices of Meridian Bancorp,
Inc. and its subsidiaries (Meridian). They are in accordance
with generally accepted accounting principles and have been
followed on a consistent basis, except for the accounting changes
described in Notes 8 and 11.
Basis of Presentation
The consolidated financial statements include the accounts
of Meridian Bancorp, Inc. and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
On August 31, 1993, Meridian acquired Commonwealth
Bancshares Corporation (Commonwealth). The acquisition of
Commonwealth was accounted for as a pooling of interests and
resulted in the issuance of 10,946,000 shares of Meridian's
common stock. Commonwealth had assets of $2.2 billion and
deposits of $1.6 billion at August 31, 1993. Financial
information for all prior periods presented has been restated to
include the results of operations and financial position of
Commonwealth.
Certain other amounts in prior period financial statements
have been reclassified to conform with the presentation used in
the 1993 financial statements. These reclassifications have no
effect on net income.
Cash and Cash Equivalents
In the accompanying Consolidated and Parent Company
Statements of Cash Flows, cash and cash equivalents include cash
on hand, amounts due from banks, federal funds sold, and
securities purchased under agreements to resell. The original
maturities of such instruments are less than 90 days. Federal
funds are sold and securities are purchased under agreements to
resell for generally one-day periods.
Investment Securities
Securities, other than securities classified as available
for sale and marketable equity securities, are carried at
amortized cost when Meridian has the intent and the ability at
the time of purchase to hold such securities until maturity.
Securities to be held for indefinite periods of time and not
intended to be held to maturity are classified as available for
sale and carried at the lower of aggregate amortized cost or fair
value. Decisions to dispose of these securities are based on an
assessment of economic and financial conditions affecting
Meridian's financial position, including interest rate risk and
the resultant prepayment risk, liquidity, capital adequacy, an
evaluation of alternative asset and liability management
strategies, regulatory requirements, and tax considerations.
This category of securities was established during the third
quarter of 1992.
The amortization of premiums and accretion of discounts to
the expected maturity date of the related debt obligations are
based on a method which approximates a constant yield.
Marketable equity securities are carried at the lower of
aggregate cost or fair value. Unrealized losses on marketable
equity securities that are considered temporary in nature are
recorded as a reduction of shareholders' equity.
When a determination is made that the decline in fair value
below cost for a marketable equity or debt security is other than
temporary, the cost basis of the individual security is written
down to a new cost basis and the amount of the write-down is
accounted for as a realized loss.
Gains and losses on the sale of securities are computed on
the specific identification method.
Trading account securities are carried at fair value and
unrealized gains or losses are included in the Consolidated
Statements of Income.
Effective in the first quarter 1994, Meridian will adopt
Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities",which
requires investments in equity securities with a readily
determinable fair value and investments in all debt securities to
be classified, at the date of adoption, in one of three
categories. The three categories are (1) held to maturity --
carried at amortized cost; (2) available for sale -- carried at
fair value (with unrealized gains and losses, net of related tax
effect, recorded as a separate component of shareholders'
equity); and (3) trading account - carried at fair value (with
unrealized gains and losses recorded in the income statement).
The impact of this accounting change, had Meridian elected to
adopt this statement at December 31, 1993, would have been to
increase shareholders' equity by approximately $8.1 million, or
less than 1%, representing the after-tax unrealized gain in the
available for sale portfolio.
Interest Rate Swaps
Interest rate swaps, the principal derivative product used
by Meridian, are a tool used mainly to alter the repricing
characteristics of a portion of the core deposit base. There is
no effect on the recorded total assets or liabilities of
Meridian. Net amounts receivable or payable under agreements
designated as hedges are recorded as adjustments to the interest
income or expense related to the hedged asset or liability.
Related fees are deferred and amortized over the term of the swap
agreement. Gains or losses resulting from the termination of
interest rate swaps are deferred and amortized over the remaining
term of the hedged asset or liability.
Loans
Loans are stated net of deferred fees and costs and unearned
discount. Loan interest income is accrued using various methods
which approximate a constant yield.
Interest income is not accrued on commercial loans where
management has determined that borrowers may be unable to meet
contractual principal or interest payments, or where such
payments are 90 or more days past due unless the loan is well
secured and in the process of collection. Interest on loans that
have been restructured is recognized according to the
renegotiated terms.
Residential mortgages which are 180 days or more delinquent
are placed on nonaccrual status when total principal, interest,
and escrow owed exceeds 80% of the property's appraised value.
Properties are re-appraised when foreclosure proceedings are
initiated.
Loan origination and commitment fees and direct loan
origination costs are deferred and recognized over the life of
the related loans as an element of the yield.
Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" requires that
impaired loans be measured based on the present value of expected
future cash flows discounted at the loan's effective interest
rate or the fair value of the underlying collateral. This
statement is effective for fiscal years beginning after December
15, 1994 and, based on the analysis to date, management believes
that the impact on Meridian's consolidated results will not be
material.
Allowance for Possible Loan Losses
The allowance for possible loan losses is established
through provisions for possible loan losses charged against
income. Loans deemed to be uncollectible are charged against the
allowance. Subsequent recoveries, if any, are credited to the
allowance.
The balance in the allowance is based on a periodic
evaluation of the loan portfolio and reflects an amount that in
management's opinion is adequate to absorb losses inherent in the
portfolio.
When establishing the appropriate levels for the provision
and the allowance for possible loan losses, management performs
an analysis of the loan portfolio by considering a variety of
factors. This analysis includes periodic reviews by loan review
and loan workout personnel of all borrowers with aggregate
balances of $250,000 or greater. Meridian also reviews, at least
on a quarterly basis, problem borrowers with balances of $500,000
or greater, as well as selected lower balance loans.
Consideration is given to the impact of current and anticipated
economic conditions, the diversification of the loan portfolio,
historical loss experience, delinquency statistics, reviews
performed by loan officers who are primarily responsible for
compliance with established lending policy, the perceived
financial strength of borrowers, and the perceived adequacy of
underlying collateral. Consideration is also given to
examinations performed by regulatory authorities.
Premises and Equipment
Premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed on the
straight line method and is charged to operations over the
estimated useful lives of the related assets. Leasehold
improvements are amortized on a straight line basis over the
terms of the respective leases or the estimated useful lives of
the improvements, whichever is shorter.
Other Assets
Goodwill is the excess of the purchase price over the fair
value of net assets of companies acquired through business
combinations accounted for as purchases. Included in other
assets is $35.0 million of goodwill that is being amortized using
the straight line method over various periods not exceeding 18
years.
Core deposit intangibles are a measure of the value of
consumer demand and savings deposits acquired in business
combinations accounted for as purchases. Included in other
assets is $21.9 million of core deposit intangibles which are
being amortized on an accelerated method, with at least two-
thirds of the original balance being amortized within seven years
following the date of acquisition.
The recoverability of the carrying value of intangible
assets is evaluated on an ongoing basis and permanent declines in
value, if any, are charged to expense.
Assets acquired in foreclosures consist of real estate
acquired through foreclosure or in settlement of debt and loans
considered to be in an in-substance foreclosure status. These
assets are carried at the lower of cost or fair value less
estimated costs of disposal.
Trust Assets
Assets held by Meridian in a fiduciary or agency capacity
for customers are not included in the consolidated financial
statements since such items are not assets of Meridian or its
subsidiaries. Trust income is reported on the accrual method.
Mortgage Banking
Mortgage servicing fees received from permanent investors
for servicing their loan portfolios are recorded as income when
received. Mortgage loan servicing includes collecting monthly
mortgagor payments, forwarding payments and related accounting
reports to investors, collecting escrow deposits for the payment
of mortgagor property taxes and insurance, and paying taxes and
insurance from escrow funds when due.
In the third quarter of 1993 Meridian decided to refocus its
mortgage activities on the origination of residential loans and
to substantially reduce the scope of its mortgage servicing
business. Mortgage servicing intangibles and other related
assets are carried at fair value and are included in mortgage
loans and other assets held for sale in the consolidated balance
sheets.
Acquisition costs of mortgage servicing rights purchased
prior to the third quarter of 1993 were capitalized and amortized
in proportion to, and over the period of, estimated net servicing
revenue (undiscounted servicing revenues in excess of
undiscounted servicing costs). In estimating future servicing
revenues, management takes into consideration a number of factors
including the current rate of anticipated prepayments of the
underlying mortgage loans. Changes in the assumptions used could
significantly affect management's estimates. If actual results
differed significantly from those estimated by management,
adjustments to the carrying value of purchased mortgage servicing
rights could occur.
Excess servicing fees are computed as the present value of
the difference between the estimated future net revenues and
normal servicing revenues as established by the federally
sponsored secondary market makers. Resultant premiums are
deferred and amortized over the estimated life of the related
mortgages using the constant yield method.
The amortization of both purchased mortgage servicing rights
and excess servicing fees is recorded as a reduction of servicing
revenue.
Mortgage loans and other assets held for sale are carried at
the lower of aggregate cost or fair value, with resulting gains
and losses included in other income. The fair value calculation
includes consideration of all open positions, outstanding
commitments from investors and related fees paid.
Securities Operations
Forward rate agreements (commitments to sell securities) and
tender option bonds (commitments to purchase securities) are off-
balance sheet items that represent contingent liabilities and are
therefore not included in the consolidated financial statements.
Realized gains and losses and net interest spread income on these
instruments are included in other income. Securities designated
to cover forward rate agreements are included in trading account
securities and are carried at the lower of cost or contract
price. Collateralized mortgage obligation residuals, rights
acquisition contracts and guaranteed interest rate contracts are
other financial instruments and are included in the consolidated
financial statements in investment securities, investment
securities available for sale and interest-bearing deposits,
respectively.
Income Taxes
Certain items of income and expense are included in one
reporting period for financial accounting purposes and another
reporting period for income tax purposes. Under the liability
method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to temporary differences
between the financial statement and tax bases of existing assets
and liabilities.
Postretirement Benefits
Meridian has a non-contributory defined benefit pension plan
covering substantially all employees who qualify as to age and
length of service. The plan benefits are based on years of
service and an earnings formula that considers average salaries
during a defined period prior to retirement.
The projected unit credit method is used to measure net
periodic pension cost over employees' service lives. The plan is
funded using the entry age actuarial cost method to the extent
deductible under existing federal income tax regulations.
Meridian currently provides postretirement health care and
life insurance benefits to its employees. The medical portion is
contributory and life insurance coverage is non-contributory to
the participants. The expected cost of these benefits is accrued
over the period the employee earns the benefits. There are
currently no plan assets attributable to these postretirement
benefits.
Preferred Stock
Meridian has 25 million shares of preferred stock authorized
that carries a $25.00 par value per share. No shares of
preferred stock were issued and outstanding as of December 31,
1993. Meridian's Board of Directors has the authority to issue
the preferred stock from time to time as a class without series,
or in one or more series.
Common Stock Dividends
Meridian adopted a new dividend payment schedule effective
in 1992. In addition to the dividend of $.30 per share paid on
January 1, 1992 (declared November 1991), the Board of Directors
also declared dividends of $.30 per share in April, July and
October 1992 for payment on June 1, September 1 and December 1,
1992, respectively. Accordingly, a dividend was not declared in
the quarter ended March 31, 1992.
Earnings Per Share
Primary earnings per share is computed by dividing net
income after deduction of any preferred stock dividends by the
weighted average number of common stock and common stock
equivalents outstanding during the year. Stock options are
considered common stock equivalents and are included in the
computation of the number of outstanding shares using the
treasury stock method, unless such options are anti-dilutive
Fully diluted earnings per share gives effect to the assumed
conversion of any convertible preferred stock as well as to the
exercise of stock options.
Net income and dividends per common share and average shares
outstanding for the last three years are as follows:
<TABLE>
<CAPTION>
Per Common Share 1993 1992 1991
<S> <C> <C> <C>
Income from Continuing Operations Before
Cumulative Effect of Change in Accounting
Principle
Primary $2.61 $2.45 $2.36
Fully Diluted 2.61 2.44 2.35
Loss from Discontinued Operations, Net of Taxes
Primary -- -- (.12)
Fully Diluted -- -- (.12)
Income Before Cumulative Effect of Change in
Accounting Principle
Primary 2.61 2.45 2.24
Fully Diluted 2.61 2.44 2.23
Cumulative Effect on Prior Years of Change in
Method of Accounting for Income Taxes
Primary .13 -- --
Fully Diluted .13 -- --
Net Income
Primary 2.74 2.45 2.24
Fully Diluted 2.74 2.44 2.23
Dividends Declared 1.26 .90(1) 1.20
Dividends Paid 1.26 1.20 1.20
<PAGE>
<CAPTION>
<S> <C> <C> <C>
Average Shares Outstanding 1993 1992 1991
Primary 57,674,05855,596,74852,594,138
Fully Diluted 57,674,05855,810,81052,793,025
<FN>
(1) Reflects new dividend payment schedule adopted first quarter 1992.
</TABLE>
<PAGE>
2) ACQUISITIONS
The merger with Commonwealth on August 31, 1993 was
accounted for as a pooling-of-interests and resulted in the
issuance of 10,946,000 shares of Meridian common stock.
Financial information for all prior periods presented has been
restated to include the results of operations and financial
position of Commonwealth. A reconciliation of amounts, as
previously reported for 1992 and 1991, to the consolidated
amounts reported in the accompanying financial statements is as
follows (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
For the Year Ended December 31,
1992
Meridian
as previouslyCommon-Meridian
(Dollars in Thousands) reported wealth as restated
<S>
Net Interest Income.....................$494,657$78,526$573,183
Provision for Possible Loan Losses...... 59,676 9,151 68,827
Other Income............................ 229,365 13,513 242,878
Other Expenses.......................... 509,921 51,929 561,850
Income before Income
Taxes............................. 154,425 30,959 185,384
Provision for Income
Taxes............................. 39,690 8,989 48,679
Net Income..............................$114,735$21,970$136,705
Return on Average Assets................ 0.99% --- 1.00%
Return on Average Common
Shareholders' Equity.............. 13.44% --- 13.63%
Earnings Per Share
Primary...........................$ 2.55($0.10)$ 2.45
Fully Diluted.....................$ 2.54($0.10)$ 2.44
<CAPTION>
For the Year Ended December 31,
1991
Meridian
as previouslyCommon-Meridian
(Dollars in Thousands) reported wealth as restated
<S> <C> <C> <C>
Net Interest Income.....................$431,581$68,455$500,036
Provision for Possible Loan Losses...... 99,419 7,331 106,750
Other Income............................ 247,300 13,900 261,200
Other Expenses.......................... 435,634 50,793 486,427
Income before Income
Taxes............................. 143,828 24,231 168,059
Provision for Income
Taxes............................. 36,774 7,099 43,873
Income from Continuing Operations....... 107,054 17,132 124,186
Loss from Discontinued Operations....... (6,500) --- (6,500)
________ _______ ________
Net Income..............................$100,554$17,132$117,686
Return on Average Assets................ 0.96% --- 0.96%
Return on Average Common
Shareholders' Equity.............. 14.63% --- 14.31%
Earnings Per Share
Primary...........................$ 2.41($0.17)$ 2.24
Fully Diluted.....................$ 2.40($0.17)$ 2.23
</TABLE>
In April 1993, Meridian acquired all of the outstanding
common shares of Cherry Hill National Bank of Medford, New
Jersey. The acquisition was accounted for as a pooling-of-
interests and resulted in the issuance of 477,000 shares of
Meridian's common stock. Cherry Hill had assets of $113 million
and deposits of $101 million at the time of the merger.
In November 1993, Meridian Bank assumed approximately $76
million of deposits of Provident Savings Bank of Jersey City, and
paid a premium of $540 thousand. This acquisition was accounted
for as a purchase.
In December 1993, Meridian, acquired all of the outstanding
common shares of First Bath Corp. The acquisition was accounted
for as a pooling-of-interests and resulted in the issuance of
565,000 shares of Meridian's common stock. First Bath had assets
of approximately $120 million and deposits of $110 million at the
time of the merger.
The above four acquisitions added 74 new branches to
Meridian's branch network.
On July 9, 1992 Meridian entered into an agreement to
acquire 21 branches in seven counties of central and southern New
Jersey of Security Savings Bank, SLA, a wholly-owned subsidiary
of Security Investments Group, Inc. Under the terms of the
agreement, Meridian was to have acquired selected nonclassified
and performing assets and real estate. On December 4, 1992, the
Office of Thrift Supervision declared Security insolvent and
placed it in receivership with the Resolution Trust Corporation
which, in its capacity as receiver of Security, repudiated the
agreement with Meridian during the fourth quarter of 1993.
On December 16, 1993, Meridian entered into a definitive
agreement to acquire McGlinn Capital Management, Inc., an
investment advisory firm with $2.8 billion in assets under direct
management, for 500,000 warrants for shares of Meridian common
stock and cash. The transaction, which is subject to regulatory
approval, is expected to be completed by the end of the second
quarter of 1994.<PAGE>
3) INVESTMENT SECURITIES, INVESTMENT SECURITIES AVAILABLE FOR
SALE AND SECURITIES GAINS
A summary of the carrying value and approximate fair value
of investment securities included in the Consolidated Balance
Sheets is as follows:
<TABLE>
<CAPTION>
1993
Approximate
Carrying Fair
(Dollars in Thousands) Value Value
---------- -----------
<S> <C> <C>
United States Government Securities........... $630,338 $635,047
Mortgage-Backed Securities.................... 1,555,122 1,565,398
State and Municipal Securities................ 375,582 387,298
Other Securities.............................. 223,442 225,357
---------- ----------
Total Investment Securities............... $2,784,484 $2,813,100
========== ==========
<CAPTION>
1992
Approximate
Carrying Fair
Value Value
---------- -----------
<S> <C> <C>
United States Government Securities........... $549,275 $561,897
Mortgage-Backed Securities.................... 1,296,028 1,314,769
State and Municipal Securities................ 356,718 364,155
Other Securities.............................. 258,489 264,325
---------- ----------
Total Investment Securities............... $2,460,510 $2,505,146
========== ==========
<CAPTION>
1991
Approximate
Carrying Fair
Value Value
---------- -----------
<S> <C> <C>
United States Government Securities........... $1,158,142 $1,192,499
Mortgage-Backed Securities.................... 1,049,588 1,071,386
State and Municipal Securities................ 360,648 369,953
Other Securities.............................. 275,810 278,471
---------- ----------
Total Investment Securities............... $2,844,188 $2,912,309
========== ==========
</TABLE>
A summary of the gross unrealized gains and losses on
investment securities is as follows:
<PAGE>
<TABLE>
<CAPTION>
1993
Gross Gross
Unrealized Unrealized
(Dollars in Thousands) Gains Losses
---------- -----------
<S> <C> <C>
United States Government Securities........... $5,644 $935
Mortgage-Backed Securities.................... 15,449 5,173
State and Municipal Securities................ 11,942 226
Other Securities.............................. 2,624 709
---------- ----------
Total Investment Securities............... $35,659 $7,043
========== ==========
<CAPTION>
1992
Gross Gross
Unrealized Unrealized
Gains Losses
---------- -----------
<S> <C> <C>
United States Government Securities........... $13,007 $385
Mortgage-Backed Securities.................... 20,248 1,507
State and Municipal Securities................ 8,426 989
Other Securities.............................. 10,265 4,429
---------- ----------
Total Investment Securities............... $51,946 $7,310
========== ==========
<CAPTION>
1991
Gross Gross
Unrealized Unrealized
Gains Losses
---------- -----------
<S> <C> <C>
United States Government Securities........... $35,270 $913
Mortgage-Backed Securities.................... 36,683 14,885
State and Municipal Securities................ 10,745 1,440
Other Securities.............................. 3,546 885
---------- ----------
Total Investment Securities............... $86,244 $18,123
========== ==========
</TABLE>
The carrying value and approximate fair value of
investment securities at December 31, 1993 by contractual
maturity are shown below. Expected maturities may differ from
contractual maturities because certain borrowers have the right
to call or prepay obligations.
<TABLE>
<CAPTION>
Approximate
Carrying Fair
(Dollars in Thousands) Value Value
---------- -----------
<S> <C> <C>
Other Than Mortgage-Backed Securities
Due in one year or less....................... $287,641 $290,986
Due after one year but within five years...... 679,427 687,342
Due after five years but within ten years..... 143,027 147,522
Due after ten years........................... 119,267 121,852
---------- ----------
Total..................................... 1,229,362 1,247,702
Mortgage-Backed Securities........................... 1,555,122 1,565,398
---------- ----------
Total Investment Securities............... $2,784,484 $2,813,100
========== ==========
</TABLE>
Investment securities carried at approximately $1.8 billion
at December 31, 1993 were pledged as collateral for public
deposits, trust deposits, repurchase agreements, and certain
other deposits as required by law. No securities of an
individual issuer aggregated more than 10% of shareholders'
equity at December 31, 1993. Tax-free income on investment
securities for 1993, 1992 and 1991 amounted to $20.6 million,
$21.8 million and $28.4 million, respectively.
INVESTMENT SECURITIES AVAILABLE FOR SALE
A summary of the carrying value, approximate fair value and
gross unrealized gains and losses of investment securities
available for sale included in the Consolidated Balance Sheets
is as follows. This category of securities was established
during the third quarter of 1992.
<TABLE>
<CAPTION>
1993
Gross
Carrying Unrealized
(Dollars in Thousands) Value Gains
---------- -----------
<S> <C> <C>
United States Government Securities........... $103,086 $2,998
Mortgage-Backed Securities.................... 125,153 3,782
State and Municipal Securities................ 34,306 2,723
Other Securities.............................. 13,118 3,189
---------- ----------
Total Investment Securities Available for
Sale................................... $275,663 $12,692
========== ==========
<CAPTION>
1993
Gross Approximate
Unrealized Fair
Losses Value
---------- -----------
<S> <C> <C>
United States Government Securities........... $87 $105,997
Mortgage-Backed Securities.................... 99 128,836
State and Municipal Securities................ -- 37,029
Other Securities.............................. 17 16,290
---------- ----------
Total Investment Securities Available for
Sale................................... $203 $288,152
========== ==========
caption>
1992
Gross
Carrying Unrealized
Value Gains
---------- -----------
<S> <C> <C>
United States Government Securities........... $220,233 $4,331
Mortgage-Backed Securities.................... 558,559 14,832
State and Municipal Securities................ 146,803 8,091
Other Securities.............................. 19,622 1,397
---------- ----------
Total Investment Securities Available for
Sale................................... $945,217 $28,651
========== ==========
<CAPTION>
1992
Gross Approximate
Unrealized Fair
Losses Value
---------- -----------
<S> <C> <C>
United States Government Securities........... - $224,564
Mortgage-Backed Securities.................... $454 572,937
State and Municipal Securities................ - 154,894
Other Securities.............................. - 21,019
---------- ----------
Total Investment Securities Available for
Sale................................... $454 $973,414
========== ==========
</TABLE>
The carrying value and approximate fair value of investment
securities available for sale at December 31, 1993 by contractual
maturity are shown below. Expected maturities may differ from
contractual maturities because certain borrowers have the right
to call or prepay obligations.
<TABLE>
<CAPTION>
Approximate
Carrying Fair
(Dollars in Thousands) Value Value
---------- -----------
<S> <C> <C>
Other Than Mortgage-Backed Securities
Due in one year or less................... $35,972 $39,446
Due after one year but within five years.. 98,646 102,978
Due after five years but within ten years. 1,124 1,230
Due after ten years....................... 14,768 15,662
---------- ----------
Total................................. 150,510 159,316
Mortgage-Backed Securities....................... 125,153 128,836
---------- ----------
Total Investment Securities Available
for Sale........................... $275,663 $288,152
========== ==========
</TABLE>
TOTAL SECURITIES GAINS
Total gains from securities transactions, which were
included in the following categories in the other income section
of the consolidated statements of income, are as follows:
<TABLE>
<CAPTION>
1993
----------
<S> <C>
Broker-Dealer and Investment Banking Income....... $2,046
Net Securities Gains.............................. 25,280
------
Total Securities Gains.................... $27,326
=======
<CAPTION>
<PAGE>
1992
----------
<S> <C>
Broker-Dealer and Investment Banking Income....... $15,368
Net Securities Gains.............................. 2,764
-------
Total Securities Gains.................... $18,132
=======
<CAPTION>
1991
----------
<S> <C>
Broker-Dealer and Investment Banking Income....... $1,697
Net Securities Gains.............................. 3,919
------
Total Securities Gains.................... $5,616
======
</TABLE>
Net securities gains included gross gains of $25.5 million,
$6.1 million, $9.8 million and gross losses of $203 thousand,
$3.4 million and $5.9 million during 1993, 1992 and 1991,
respectively. Securities gains in 1993 include a gain of $8.6
million on the sale of Meridian's common stock investment in
Fidelity National Financial, Inc. This stock was acquired as
part of the sale of Meridian's title insurance operations in
1992. Exclusive of this gain, securities gains in 1993 resulted
primarily from sales of investments classified as available for
sale.
<PAGE>
4) Loans
A summary of loans included in the Consolidated Balance
Sheets is as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
(Dollars in Thousands) 1993 1992
------------- -------------
<S> <C> <C>
Commercial Loans
Real Estate - Commercial Mortgage.......... $1,620,876 $1,581,188
Real Estate - Construction................. 261,847 286,205
Commercial, Financial and Agricultural..... 3,591,370 3,405,204
--------- ---------
Total Commercial Loans................... 5,474,093 5,272,597
--------- ---------
Real Estate - Residential................... 993,753 1,057,968
Consumer Loans
Real Estate - Home Equity.................. 680,440 581,500
Revolving Credit........................... 79,613 77,847
Other Consumer Loans....................... 1,871,648 1,673,319
--------- ---------
Total Consumer Loans..................... 2,631,701 2,332,666
--------- ---------
Total Loans, Gross.......................... 9,099,547 8,663,231
Less Unearned Discount.................... 111,503 111,634
--------- ---------
Total Loans, Net of
Unearned Discount......................... $8,988,044 $8,551,597
======== ========
</TABLE>
Included within the loan portfolio are restructured loans
and loans on which Meridian has discontinued the accrual of
interest. Such loans amounted to $127.6 million, $143.6
million, and $169.3 million at December 31, 1993, 1992, and 1991,
respectively. If these non-performing loans had been current in
accordance with their original terms and had been outstanding
throughout the period, gross interest income for 1993, 1992, and
1991 would have increased $9.5 million, $13.5 million, and $19.2
million, respectively. Interest income on these non-performing
loans included in income for 1993, 1992, and 1991 amounted to
$706.0 thousand, $3.1 million, and $1.5 million, respectively.
Tax-free income on loans for 1993, 1992, and 1991 amounted
to $14.4 million, $16.6 million, and $22.2 million, respectively.
The aggregate amount of loans by Meridian to its directors
and executive officers, including loans to related persons and
entities, was $37.1 million at December 31, 1993 and $54.9
million at December 31, 1992. These loans were made in the
ordinary course of business at substantially the same terms and
conditions as those with other borrowers and did not involve more
than the normal risk of collectibility. An analysis of the
activity in 1993 for these loans follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C>
Balance January 1, 1993..................... $54,893
New Loans................................. 6,920
Repayments ............................... (23,684)
Other, Net................................ (1,076)
------------
Balance December 31, 1993................... $37,053
============
</TABLE>
Other, Net includes the addition of loans to new directors and
officers and the reductions in loans because of persons who no
longer meet the criteria for classification as a related person
or entity.
<PAGE>
5) Allowance for Possible Loan Losses
A summary of activity in the allowance for possible loan
losses follows:
<TABLE>
<CAPTION>
1993 1992 1991
(Dollars in Thousands) -------- -------- --------
<S> <C> <C> <C>
Balance at Beginning of Period...... $165,512 $179,167 $157,505
Additions (Deductions)
Acquired Allowances............... 3,094 2,154 --
Loans Charged-Off................. (62,510) (95,186) (92,151)
Recoveries on
Charged-Off Loans............... 11,191 10,550 7,063
-------- -------- --------
Net Loans Charged-Off............... (51,319) (84,636) (85,088)
-------- -------- --------
Provision Charged to
Operating Expense................. 56,101 68,827 106,750
-------- -------- --------
Balance at End of Period............ $173,388 $165,512 $179,167
======== ======== ========
</TABLE>
<PAGE>
6) SHORT-TERM BORROWINGS AND LONG-TERM DEBT AND OTHER BORROWINGS
Short-term borrowings consisted of the following:
<TABLE>
<CAPTION>
December 31, 1993 1992
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Federal Funds Purchased................................. $ 29,930 $232,749
Securities Sold Under Agreements to Repurchase.......... 510,325 478,928
Treasury Tax and Loan Notes............................. 245,174 130,166
Commercial Paper........................................ 2,500 5,000
Federal Home Loan Bank and Other Short-Term Borrowings.. 3,794 30,251
-------- --------
Total.............................................. $791,723 $877,094
======== ========
</TABLE>
Meridian had unused lines of credit of $30 million and $202
million at December 31, 1993 and 1992, respectively.
The table below provides outstanding balances and related
information for federal funds purchased and securities sold under
repurchase agreements. Average interest rates for the year are
computed by dividing interest expense by the respective average
daily balances.
<TABLE>
<CAPTION>
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase
(Dollars in Thousands) 1993
---------
<S> <C>
Balance at December 31.................................. $540,255
Average Interest Rate at December 31.................... 2.59%
Maximum Amount Outstanding at Any
Month-End During the Year............................. $917,351
Average Amount Outstanding During the Year.............. $841,257
Average Interest Rate During the Year................... 2.90%
<CAPTION>
1992
---------
<S> <C>
Balance at December 31.................................. $711,677
Average Interest Rate at December 31.................... 2.57%
Maximum Amount Outstanding at Any
Month-End During the Year............................. $977,902
Average Amount Outstanding During the Year.............. $722,320
Average Interest Rate During the Year................... 3.43%
<CAPTION>
1991
---------
<S> <C>
Balance at December 31.................................. $735,030
Average Interest Rate at December 31.................... 3.60%
Maximum Amount Outstanding at Any
Month-End During the Year............................. $1,158,045
Average Amount Outstanding During the Year.............. $908,938
Average Interest Rate During the Year................... 5.61%
</TABLE>
Long-term debt and other borrowings consisted of the
following:
<TABLE>
<CAPTION>
December 31, 1993 1992
(Dollars in Thousands) --------- ---------
<S> <C> <C>
Floating Rate Subordinated Notes, Due 1996.............. $75,000 $75,000
6.625% Subordinated Notes, Due 2003..................... 147,723 --
7.875% Subordinated Notes, Due 2002..................... 98,852 98,727
8.00% Subordinated Notes, Due 1996 (repaid in 1993)..... -- --
9.00% Subordinated Notes, Due through 1994
in Annual Installments (repaid in 1993)............... -- 1,221
Other Term Loans, Due 1993-2005 in Annual
and Quarterly Installments............................ 4,167 11,453
Mortgages Payable and Capitalized Lease
Obligations (See Note 9).............................. 10,462 14,616
Federal Home Loan Bank Advances Due 1993-2000
with Fixed Rates from 5.09% to 7.77%.................. 75,000 95,000
4.80% Fixed Rate Note, Due 1996......................... 8,400 8,400
11% Fixed Rate Note, Due 1994........................... 869 3,115
Other Borrowings........................................ 818 570
-------- --------
Total.............................................. $421,291 $313,778
======== ========
</TABLE>
The floating rate subordinated notes bear interest at a rate
of 1/8 of 1% above the arithmetic mean of London interbank
offering quotations for three-month Eurodollar deposits,
determined quarterly. The notes carry a floor interest rate of 5
1/8%. The notes are subordinate and junior in right of payment
of senior indebtedness of Meridian. Since December 1, 1988,
Meridian has had the option to exchange of the notes for capital
securities, or under certain circumstances, cash, prior to
maturity of the notes on December 1, 1996. The effect of the
capital securities which may be issued in connection with these
notes has not been included in the computation of earnings per
share. In December, 1993, Meridian received approval from the
Federal Reserve Bank to revoke its obligation to exchange the
notes for capital securities at maturity.
During 1993, Meridian Bank, Meridian's principal banking
subsidiary, sold $150 million of 6.625% fixed rate subordinated
notes due March 15, 2003. The net proceeds are being used for
general corporate purposes, including possible branch
acquisitions and other acquisitions of all or portions of failed
institutions from the Resolution Trust Corporation or the
Federal Deposit Insurance Corporation.
Meridian has long-term borrowings from the Federal Home Loan
Bank which total $75 million. These borrowings require Meridian
to maintain membership in the Federal Home Loan Bank of
Pittsburgh and to maintain collateral with a fair value which
approximates the total amount of the outstanding debt.
The remaining long-term debt consists of debt of Meridian's
banking subsidiaries and is subordinated in the right of payment
to the depositors of such subsidiaries. Substantially all of the
notes are redeemable prior to maturity at certain amounts based
on sinking fund provisions or, when applicable, approval of the
appropriate regulatory agency.
7) DIVIDEND, CAPITAL AND OTHER REGULATORY RESTRICTIONS
Various laws restrict the amount of dividends that can be
paid to Meridian by its subsidiary banks without regulatory
approval. Under current regulations, Meridian's subsidiary
banks, without prior approval of bank regulators, may declare
dividends to Meridian in 1994 totalling approximately $147.1
million plus additional amounts equal to the net profits earned
by such subsidiary banks for the period from January 1, 1994,
through the date of declaration, less dividends previously paid
in 1994.
Meridian is required to maintain minimum amounts of capital
to total "risk weighted" assets, as defined by the banking
regulators. Meridian is required to have minimum Tier 1 and
total capital ratios of 4.00% and 8.00%, respectively.
Meridian's actual ratios at December 31, 1993 were 9.60% and
13.67%, respectively, well above regulatory requirements.
Meridian is also required to maintain a leverage ratio of 3%
plus an additional cushion of 100 to 200 basis points.
Meridian's leverage ratio at December 31, 1993 was 7.84%.
The Federal Reserve Act also places restrictions on the
amount of credit that may be extended to Meridian by its
subsidiary banks. During 1993, there were no loans or advances
made to Meridian by any of its subsidiary banks.
Meridian's banking subsidiaries are required to maintain
reserve balances with the Federal Reserve. These balances
totalled $94.3 million at December 31, 1993 and averaged $91.6
million for the year then ended.
<PAGE>
8) EMPLOYEE BENEFIT PLANS
Pension Plans
Total pension expense for 1993, which includes several
informal pension arrangements in addition to the Meridian and
Commonwealth plans, was $2.9 million. Total pension expense for
1992 and 1991 was $59 thousand and $2.5 million, respectively.
Pension expense in 1992 reflects significantly better than
expected investment returns on plan assets.
Net periodic pension expense (credit) of the Meridian and
Commonwealth plans includes the following components:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1993 1992 1991
<S> <C> <C> <C>
Service Cost-Benefits $ 7,299 $ 6,353 $ 5,375
Earned During the Year
Interest Cost on Projected
Benefit Obligation 11,167 9,645 7,802
Actual Return on
Plan Assets (15,985) (14,622) (41,610)
Amortization of Unrecognized
Net Assets and Other
Deferred Amounts - Net (530) (1,617) 29,751
NET PERIODIC PENSION
EXPENSE (CREDIT) $ 1,951 $ (241) $ 1,318
</TABLE>
The following table sets forth the funded status of the Meridian
and Commonwealth plans and amounts recognized in the Consolidated
Balance Sheets at December 31.
<TABLE>
<CAPTION>
(Dollars In Thousands) 1993 1992
<S> <C> <C>
Projected Benefit Obligation
Accumulated Benefit Obligation
Vested Benefits $ 101,574 $ 80,458
Non-Vested Benefits 4,986 4,807
Effect of Projected Future
Compensation Increases 56,193 44,741
PROJECTED BENEFIT OBLIGATION 162,753 130,006
Less Fair Value of Plan Assets 178,658 165,932
PLAN ASSETS IN EXCESS OF
PROJECTED BENEFIT OBLIGATION 15,905 35,926
Less Unrecognized Net Gain Due
to Past Experience Different
from Assumptions Made 4,491 22,481
Less Unrecognized Net Transition Asset
Amortized Over Employee
Service Lives 4,731 5,591
NET PENSION ASSET RECOGNIZED
IN BALANCE SHEET AT DECEMBER 31 $ 6,683 $ 7,854
</TABLE>
Net periodic pension expense is determined using certain
assumptions as of the beginning of the year whereas the funded
status of the plan is determined using assumptions as of the end
of the year.
The discount rate used in determining the actuarial present
value of Meridian's projected benefit obligation was 7.0% in 1993
and 8.0% in 1992 and 1991. The expected long-term rate of return
on plan assets was 9.5% in 1993, 1992 and 1991. The rate of
increase in future compensation levels was 5.3% in 1993 and 6.3%
in 1992 and 1991.
The discount rate used in determining the actuarial present
value of Commonwealth's projected benefit obligation was 7.0% in
1993, 7.5% in 1992 and 8.0% in 1991. The expected long-term rate
of return on plan assets was 9.5% in 1993, 8.0% in 1992 and 9.0%
in 1991. The rate of increase in future compensation levels was
5.3% in 1993 and 5.25% in 1992 and 1991.
The assets of the Meridian and Commonwealth plans are
administered by Meridian Asset Management, Inc., and consist
primarily of common stock, fixed income securities such as
obligations of the United States government and corporations, and
units of certain common trust funds.
Meridian provides postretirement health care and life
insurance plans to its employees. The medical portion is
contributory and life insurance coverage is noncontributory to
the participants. Effective January 1, 1993, Meridian adopted
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". The
new accounting rules require the accrual of the expected cost of
these benefits over the period the employee earns the benefits.
Meridian elected to defer and amortize over 20 years the
cumulative obligation for such benefits at the beginning of 1993.
The annual expense of Meridian's postretirement benefits
other than pensions under these new accounting rules was $4.5
million in 1993 compared to approximately $2.0 million on the
cash basis of accounting previously used, or an increase of $2.5
million. The health care trend rate assumption used to determine
accumulated benefit obligations applicable to these benefits was
11% for 1993 decreasing over time to an annual rate of 5.5% and
remaining at that level thereafter. The discount rate used in
determining the present value of the projected benefit obligation
was 7%.
Net periodic expense of the Meridian and Commonwealth
postretirement healthcare and life insurance plans includes the
following components:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1993
<S> <C>
Service Cost-Benefits $ 824
Earned During the Year
Interest Cost on Accumulated Postretirement
Benefit Obligation 2,280
Amortization of Unrecognized
Net Transition Obligation Amortized Over 20 Years 1,421
NET PERIODIC EXPENSE
$ 4,525
</TABLE>
The following table sets forth the funded status of the
Meridian and Commonwealth postretirement healthcare and life
insurance plans and amounts recognized in the Consolidated
Balance Sheets at December 31. There are currently no plan
assets attributable to these postretirement benefits.
<TABLE>
<CAPTION>
(Dollars In Thousands) 1993
<S> <C>
Accumulated Postretirement Benefit
Obligation $ 31,484
Less Fair Value of Plan Assets -
ACCUMULATED BENEFIT OBLIGATION
IN EXCESS OF PLAN ASSETS 31,484
Less Unrecognized Net Loss Due
to Past Experience Different
from Assumptions Made 1,061
Less Unrecognized Net Transition
Obligation 27,407
NET LIABILITY RECOGNIZED IN BALANCE
SHEET AT DECEMBER 31 $ 3,016
</TABLE>
A change in the health care trend rate assumption of one
percent would increase annual service cost by approximately
$100,000 and the accumulated postretirement benefit obligation at
December 31, 1993 by approximately $800,000.
In November 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits". This
statement, which becomes effective in 1994, establishes
accounting standards for employers who provide benefits to former
employees after employment but before retirement. Such benefits
include, among other things, severance and workers' compensation
benefits. Management is currently evaluating this statement and,
based on the analysis to date, believes that its impact on
Meridian's consolidated results of operations will not be
material.
Savings Plan
Meridian also offers a savings plan which covers
substantially all employees who qualify as to age and length of
service. A participating employee must contribute at least 1%
and may contribute a maximum of 10% of his or her compensation.
Meridian will match up to the first 6% that each employee
contributes. Investment options include Meridian common stock.
Contributions are charged to current expense. The total expense
relating to the Meridian savings plan was $7.1 million in 1993,
$6.5 million in 1992 and $5.7 million in 1991.
Stock Option Plan
Under Meridian's stock option plan, options to acquire a
maximum of 3,500,000 shares of common stock may be granted to key
officers. The plan provides for the granting of options at the
fair market value of Meridian's common stock at the time the
options are granted. Each option granted under the plan may be
exercised within a period of ten years from the date of the
grant; however, no option may be exercised within one year from
the date of grant.
A stock appreciation rights (SARs) plan grants SARs in
tandem with stock option grants, up to a maximum of 750,000
units. The exercise of SARs reduces the stock options otherwise
exercisable; similarly, the exercise of stock options cancels the
corresponding SARs. There were no SARs outstanding at December
31, 1993.
Under Meridian's stock option plan, the exercisable option
prices ranged from $10.50 to $31.12 at December 31, 1993. An
analysis of the activity in this plan for the last three years
follows:
<PAGE>
<TABLE>
<CAPTION>
Number of Common Shares 1993 1992 1991
<S> <C> <C> <C>
Outstanding, January 1 1,521,507 1,552,574 1,723,858
Granted 1,279,658 422,550 --
Exercised (468,463) (443,917) (54,648)
Lapsed ( 14,670) ( 9,700) (116,636)
Outstanding, December 31 2,318,032 1,521,507 1,552,574
Exercisable, December 31 1,770,632 1,098,957 1,552,574
</TABLE>
9) LEASES
Meridian and its subsidiaries are committed under a number
of capital and non-cancelable operating leases for facilities and
equipment with initial or remaining terms in excess of one year.
The minimum annual rental commitments under these leases at
December 31, 1993 are summarized as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
-------- --------
(Dollars in Thousands)
<S> <C> <C>
1994........................ $3,901 $15,751
1995........................ 1,756 11,588
1996........................ 1,038 9,768
1997........................ 679 8,603
1998........................ 678 8,093
1999 and Subsequent......... 509 50,576
-------- --------
Total Minimum Lease
Payments.................. 8,561 $104,379
-------- ========
Amounts Representing
Interest.................. 1,277
--------
Present Value of Net Minimum
Lease Payments............ $7,284
========
</TABLE>
Total rental expense for all operating leases for 1993, 1992
and 1991 amounted to $20.5 million, $18.2 million, and $16.4
million, respectively.
<PAGE>
10) OTHER OPERATING EXPENSES
The following represents the most significant categories
of other operating expenses for the years ended December 31:
<TABLE>
<CAPTION>
(Dollars In Thousands) 1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Accounting and Legal Fees.............. $7,664 $6,811 $5,643
Other Professional Fees and Services... 22,607 18,593 16,176
Advertising and Customer Development... 16,400 14,758 12,624
Communications......................... 20,425 19,067 19,248
FDIC Deposit Insurance................. 29,533 25,552 22,274
Other Deposit Related Expenses......... 2,753 2,297 3,051
Stationery and Supplies................ 10,810 10,306 9,656
Loan Related Expenses.................. 41,488 33,026 16,684
Foreclosed Real Estate Expenses........ 10,939 23,258 7,242
Taxes - Other Than Income.............. 9,495 8,755 7,974
Transportation......................... 6,479 5,880 5,341
Educational Development................ 5,550 4,513 3,521
Amortization of Intangibles............ 11,082 11,202 8,457
Automated Teller Network Charges....... 6,602 5,457 5,023
Merchant Credit Card Servicing......... 12,778 11,183 9,049
Other Expenses......................... 28,039 27,314 26,782
-------- -------- --------
Total............................... $242,644 $227,972 $178,745
======== ======== ========
</TABLE>
<PAGE>
11) INCOME TAXES
Effective January 1, 1993, Meridian adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109),which requires a change from the deferred
method of accounting for income taxes to the liability method.
Under the liability method, deferred tax assets and liabilities
are recognized for future tax consequences attributable to
temporary differences between the financial statement and tax
bases of existing assets and liabilities. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment
date of the rate change.
As permitted by SFAS No. 109, Meridian has elected not to
restate the financial statements of any prior years. The
implementation of these new tax accounting rules resulted in an
increase in consolidated net income of $7.2 million in the first
quarter of 1993. This amount represents the cumulative effect of
adopting SFAS No. 109 at the beginning of 1993. The impact of
SFAS No. 109 on future periods is not expected to be material.
At December 31, 1993, deferred tax assets amounted to $105.5
million and deferred tax liabilities amounted to $60 million. No
valuation allowance has been established for deferred tax assets
because management believes that it is more likely than not that
the deferred tax assets will be realized. Deferred tax assets are
realizable primarily through carryback of existing deductible
temporary differences to recover taxes paid in prior years and
through future reversal of existing taxable temporary
differences.
The Omnibus Budget Reconciliation Act of 1993 was signed
into law during August 1993. The most significant change
included in this act is an increase in the marginal tax rate from
34% to 35%, retroactive to the beginning of 1993. This change
resulted in an increase in income tax expense. However, the
benefit from Meridian's deferred tax assets, which are similar to
tax loss carryforwards, was increased to reflect the higher tax
rates, resulting in a one-time reduction in income tax expense.
This change in deferred tax assets partially offset the increase
in tax rates on operating income, resulting in a net increase of
$350 thousand in income tax expense in 1993. Because of the
increase in marginal tax rates on operating income, the new tax
act will also have a negative effect on future periods.
The provision for income taxes on continuing operations
consists of the following:
<TABLE>
<CAPTION>
1993
____________________________________________________________ _________
(Dollars in Thousands)
<S> <C>
Current Expense - Federal $57,017
State Tax Expense 2,677
Deferred Benefit - Federal (626)
---------
TOTAL INCOME TAX EXPENSE $59,068
=========
<CAPTION>
1992
____________________________________________________________ _________
<S> <C>
Current Expense - Federal $53,600
State Tax Expense 1,724
Deferred Benefit - Federal (6,645)
---------
TOTAL INCOME TAX EXPENSE $48,679
=========
<CAPTION>
1991
____________________________________________________________ _________
<S> <C>
Current Expense - Federal $47,701
State Tax Expense 1,781
Deferred Benefit - Federal (5,609)
---------
TOTAL INCOME TAX EXPENSE $43,873
=========
</TABLE>
The effective tax rate is less than the federal statutory rate in
each year as a result of the following items:
<TABLE>
<CAPTION> 1993
% Of
Pre-Tax
Amount Income
____________________________________________________________ _________ _________
(Dollars in Thousands)
<S> <C> <C>
Federal Income Tax at Statutory Rate $73,355 35.0%
Increase (Decrease) in Tax Rates Resulting from
Tax-Exempt Interest Income on Investment Securities (9,218) (4.4%)
Tax-Exempt Interest Income on Loans (5,022) (2.4%)
Interest Disallowance on Tax-Exempt Assets 1,457 0.7%
Other, Net (1,504) (0.7%)
--------- ---------
TOTAL INCOME TAX EXPENSE $59,068 28.2%
========= =========
<CAPTION>
1992
% Of
Pre-Tax
Amount Income
____________________________________________________________ _________ _________
<S> <C> <C>
Federal Income Tax at Statutory Rate $63,029 34.0%
Increase (Decrease) in Tax Rates Resulting from
Tax-Exempt Interest Income on Investment Securities (7,967) (4.3%)
Tax-Exempt Interest Income on Loans (5,611) (3.0%)
Interest Disallowance on Tax-Exempt Assets 1,454 0.8%
Other, Net (2,226) (1.2%)
--------- ---------
TOTAL INCOME TAX EXPENSE $48,679 26.3%
========= =========
<CAPTION>
1991
% Of
Pre-Tax
Amount Income
____________________________________________________________ _________ _________
<S> <C> <C>
Federal Income Tax at Statutory Rate $57,278 34.0%
Increase (Decrease) in Tax Rates Resulting from
Tax-Exempt Interest Income on Investment Securities (9,649) (5.7%)
Tax-Exempt Interest Income on Loans (7,460) (4.4%)
Interest Disallowance on Tax-Exempt Assets 1,765 1.0%
Other, Net 1,939 1.1%
--------- ---------
TOTAL INCOME TAX EXPENSE $43,873 26.0%
========= =========
</TABLE>
The significant components of deferred income tax expense
attributable to income from continuing operations for the year
ended December 31, 1993 are as follows:
<TABLE>
<CAPTION>
1993
____________________________________________________________ _________
(Dollars In Thousands)
<S> <C>
Increase in Deferred Tax Assets Resulting from Tax Benefits
from an Acquisition $(330)
Adjustments to Deferred Tax Assets and Liabilities for
Increase in Tax Rates (1,120)
Deferred Tax Expense 824
---------
Deferred Tax Benefit $(626)
=========
</TABLE>
For the years ended December 31, 1992 and 1991, deferred income
tax benefit of $6.6 and $5.6 million, respectively, results from
timing differences in the recognition of income and expense for
income tax and financial reporting purposes. The sources and tax
effects of those timing differences are presented below:
<TABLE>
<CAPTION>
1992 1991
____________________________________________________________ _________ _________
(Dollars In Thousands)
<S> <C> <C>
Provision for Possible Credit Related Losses in Excess
of Charge-offs $ (4,312) $ (7,165)
Differences Related to the Financial and Tax Treatment of
Leasing Activities 6,221 5,269
Accelerated Tax Depreciation Expense (2,766) (549)
Interest Income on Non-accrual Loans (1,526) (34)
Other, Net (4,262) (3,130)
--------- ---------
TOTAL DEFERRED TAX PROVISION $(6,645) $(5,609)
========= =========
</TABLE>
The components of the deferred tax asset and liabilities are as follows:
<TABLE>
<CAPTION>
December 31, 1993
____________________________________________________________ _________
(Dollars in thousands)
<S> <C>
DEFERRED TAX ASSET
Provision for Possible Credit Related Losses in Excess
of Charge-offs $63,902
Interest Income on Non-Accrual Loans 5,975
Deferred Compensation 3,789
Deferred Fees for Financial Statement Purposes
Recognized for Tax Purposes 7,340
Expense Accruals not Deductible Until
Paid for Tax Purposes 17,701
Differences Related to the Financial and Tax Treatment
of Other Real Estate Owned 6,734
Other Deferred Tax Assets 70
---------
Total Deferred Tax Assets 105,511
---------
DEFERRED TAX LIABILITIES
Differences Related to the Financial and Tax 29,917
Treatment of Leasing Activities
Accelerated Tax Depreciation 9,951
Differences Related to the Financial and Tax
Treatment of Investment Activities 4,972
Differences Related to the Financial and Tax
Treatment of Mortgage Banking Operations 924
Expenses Accelerated for Tax Purposes 7,541
Other Deferred Tax Liabilities 6,684
---------
Total Deferred Tax Liabilities 59,989
---------
NET DEFERRED TAX ASSET $45,522
=========
</TABLE>
<PAGE>
12) Commitments and Contingencies
Financial Instruments with Off-Balance-Sheet Risk
Meridian uses various financial instruments in conducting
its business activities and in managing its balance sheet risks.
These instruments are properly not included in the accompanying
consolidated financial statements. The instruments involve, to
varying degrees, elements of credit risk, interest rate risk, and
liquidity risk.
A summary of the contractual or notional amounts of these
financial instruments along with a discussion of the instruments
and their underlying risk characteristics is as follows:
<TABLE>
<CAPTION>
December 31,
___________________________
1993 1992
____ ____
(Dollars in Thousands)
<S> <C> <C>
Financial Instruments Whose Contract Amounts
Represent Potential Credit Risk
Commitments to Extend Credit $3,396,741 $3,009,466
Standby and Commercial Letters of Credit 539,366 468,994
Mortgage Loans Sold and Loan Servicing
Acquired with Recourse 975,196 1,298,096
Forward Rate Agreements 53,497 115,479
Financial Instruments Whose Notional or
Contract Amounts Exceed the Amount of
Potential Credit Risk
Commitments to Sell
Mortgage-Backed Securities 552,500 687,855
Tender Option Bonds and Other
Commitments to Purchase Securities 499,995 593,332
Interest Rate Swap Agreements 2,167,000 1,902,000
Forward Interest Rate Swap Commitments 150,000 275,000
Other Interest Rate Contracts 253,572 238,704
</TABLE>
Meridian extends binding loan commitments to prospective
borrowers. Such commitments assure the borrower of financing for
a specified period of time or at a specified rate and usually
require the payment of a fee. The risk to Meridian in an undrawn
loan commitment is limited by the terms of the contract. For
example, Meridian may not be obligated to advance funds if the
customer's financial condition deteriorates or if the customer
fails to meet specific covenants. An undrawn loan commitment
represents both a potential credit risk once the funds are
advanced to the customer and liquidity risk since the customer
may demand immediate cash that would require a funding source.
Meridian's credit review and approval process for loan
commitments is the same as the process used for loans. In
addition, Meridian's Credit Policy Committee reviews customer
requests for loan commitments and monitors outstanding
commitments on an ongoing basis. Meridian's current liquidity
position continues to satisfy its needs for funds. In addition,
since a portion of these loan commitments normally expire unused,
the total amount of outstanding commitments at any point in time
will not require a funding source.
A standby letter of credit is an instrument issued by a bank
that represents an obligation to guarantee payments on certain
transactions of its customers. Meridian evaluates the
creditworthiness of each of its letter of credit customers, using
the same review and approval process that is used for loans. In
addition, Meridian has established guidelines limiting the amount
of total outstanding standby letters of credit to a specified
percentage of its shareholders' equity. Compliance with these
guidelines is monitored on a monthly basis.
The amount of collateral received on loan commitments and on
standby letters of credit is dependent upon the individual
transaction and the creditworthiness of the customer.
Meridian originates and sells residential mortgage loans as
part of various mortgage-backed security programs sponsored by
United States government agencies or government-sponsored
agencies, such as the Government National Mortgage Association,
Federal Home Loan Mortgage Corporation and the Federal National
Mortgage Association. These sales are often subject to certain
recourse provisions in the event of default by the borrower.
Meridian provides for potential losses against these mortgage-
backed securities by establishing reserves at the time of sale
and evaluates the adequacy of these reserves on an ongoing basis.
Forward rate agreements are used in transactions with
municipalities that generally have a debt payment due in the
future. Under these agreements, Meridian agrees to deliver
primarily securities, usually United States Treasury securities,
that will mature on or before the required payment date. The
type and associated interest rate of these securities is
established when the agreement is entered into.
The principal risk associated with forward rate agreements
is interest rate risk to the extent the required securities have
not been purchased. If interest rates fall, securities yielding
the higher agreed upon fixed rate will be more expensive for
Meridian to purchase.
Meridian has commitments to sell mortgage-backed securities
or loans with delivery at a future date but typically within 120
days. The risk associated with these instruments consists
primarily of loans not closing in sufficient volumes and at
appropriate yields to meet mandatory obligations. Meridian is
also subject to interest rate risk in a decreasing rate
environment. Hedges are used to decrease the impact of such
risk.
Tender option bonds are also instruments associated with
municipalities. A municipality generally issues a tax-free,
fixed rate, long-term security in order to finance the
origination of single family residential mortgages. The
municipality enters into a tender option bond program with
Meridian, which converts the fixed rate long-term instrument into
a variable rate short-term product. Under the terms of this
agreement, the municipality will pay a fixed rate to Meridian
over the life of the underlying bond. Meridian, in turn, pays a
short-term variable rate to the ultimate bondholder, who has the
option to sell the bonds back to Meridian. Meridian also
receives the right to remarket any purchased bonds at a short-
term, tax-exempt, variable rate.
The risk to Meridian in tender option bonds is one of
interest rate risk in a rising rate environment. If interest
rates increase, the rate paid on the short-term instrument will
also increase and the spread between the fixed rate that Meridian
receives and the short-term rate Meridian pays to bondholders
will decrease. If short-term rates exceed the fixed rate on the
long-term instrument, then the short-term instrument will be sold
at a discount and Meridian would incur a loss.
Meridian's position in forward rate agreements and tender
option bonds is sometimes hedged through the use of other
interest rate sensitive financial instruments such as options.
In addition, these two instruments have interest rate
sensitivities that move in opposite directions.
Interest rate swap agreements involve the exchange of fixed
and floating rate interest payments without the exchange of the
underlying contractual or notional amounts. Interest rate
options, caps, and floors involve the receipt of a fee by
Meridian in exchange for assumption of the risk of interest rate
movements beyond a predetermined level. Interest rate caps or
floors are written to enable customers to manage their interest
rate risks.
Interest rate swaps, the principal derivative product used
by Meridian, are used as part of the asset and liability
management program to alter the repricing characteristics of a
portion of the core deposit base. Risk in these transactions
involves the risk of counterparty nonperformance under the terms
of the contract. The notional or contract amount does not
represent the risks inherent in these agreements. The risk of
loss can be approximated by estimating the cost, on a present
value basis, of replacing an instrument at current market
interest rates. Credit risk is managed by performing credit
reviews and through ongoing credit monitoring procedures.
Reference should be made to Note 14 of the Notes to
Consolidated Financial Statements for a discussion of contingent
liabilities related to the discontinued title insurance
operations.
Concentrations of Credit Risk
Loan concentrations are considered to exist when a multiple
number of borrowers are engaged in similar activities and have
similar economic characteristics which would cause their ability
to meet contractual obligations to be similarly impacted by
economic or other conditions. At December 31, 1993, Meridian's
commercial loans and commitments did not have any industry
concentration or other known concentration that exceeded 10% of
total loans and commitments. However, the effect of the recent
recession has had a negative impact on the financial performance
of many companies involved in retail trade. At December 31, 1993
Meridian's loans to companies in retail trade totalled $721.6
million, or 8% of total loans outstanding and 13% of total
commercial loans outstanding. Included in this total were loans
to department stores and other retailers of $358.9 million and
loans to automobile dealers of $362.7 million.
Legal
Meridian and certain of its subsidiaries were party
(plaintiff or defendant) to a number of lawsuits. While any
litigation has an element of uncertainty, management, after
reviewing these actions with its legal counsel, is of the opinion
that the liability, if any, resulting from all legal actions will
not have a material effect on the consolidated financial
condition or results of operations of Meridian.
<PAGE>
13) FAIR VALUES OF FINANCIAL INSTRUMENTS
In December 1991, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments," (SFAS
No. 107). SFAS No. 107 requires disclosure of the fair value of
all financial instruments, whether or not recognized on the
balance sheet, for which it is practicable to estimate such
value. Fair value estimates and assumptions are presented below
for Meridian's financial instruments.
Fair value estimates are made at a point in time, based on
relevant market information and available information about the
financial instrument. Fair values are based on quoted market
prices for financial instruments where prices exist in the
market. In cases where quoted market prices are not available,
fair values are derived from estimates using present value or
other valuation techniques. Because a quoted market price does
not exist for a significant portion of Meridian's financial
instruments, fair value estimates are based on judgments
regarding future cash flow expectations, perceived credit risk,
interest rate risk, prepayment risk, economic conditions, and
other factors. The estimates are therefore subjective and may
not reflect the amount that could be realized upon immediate sale
of the instrument. Changes in the assumptions could also
significantly affect the estimates. Also, the estimates do not
reflect any additional premium or discount that could result from
the sale of Meridian's entire holdings of a particular financial
instrument.
Only existing on and off-balance sheet financial instruments
are subject to fair value estimates. A value is not assigned to
fee-based businesses such as Meridian's asset management and
trust operations, with customers' assets of approximately $27.0
billion, and the mortgage banking business, where Meridian
services approximately $7 billion in residential and commercial
loans. In addition, core deposits represent the intangible value
derived from retaining low-cost deposits for an expected future
period of time. The positive value of core deposits held by
Meridian is not reflected in these fair value estimates because
it is not a requirement of SFAS No. 107. The value of other non-
financial instruments, such as property, plant and equipment, and
deferred tax assets is also not considered. In addition, tax
implications related to the realization of unrealized gains and
losses can significantly affect fair value and have not been
considered in these estimates.
Because of these reasons, the aggregate fair values
disclosed in this footnote to the financial statements are not
meant to represent an estimate of the underlying value of
Meridian Bancorp, Inc. taken as a whole.
At December 31, 1993 and 1992, the carrying, contract, or
notional values and estimated fair values of financial
instruments of Meridian are as follows: <PAGE>
<TABLE>
<CAPTION>
1993 1992
On-Balance Sheet
(in millions)
Carrying Approximate Carrying Approximate
Value Fair Value Value Fair Value
________ ___________ ________ ___________
Financial Assets
<S> <C> <C> <C> <C>
Cash and Due from Banks $ 587.6 $ 587.6 $ 685.8 $ 685.8
Short-term Investments 153.2 153.2 281.6 281.6
(Including Trading Account Securities)
Investment Securities
United States Government Securities 630.3 635.0 549.3 561.8
Mortgage-Backed Securities 1,555.1 1,565.4 1,296.0 1,314.7
State and Municipal Securities 375.6 387.3 356.7 364.2
Other Securities 223.4 225.3 258.5 264.4
Investment Securities Available 275.7 288.1 945.2 973.4
for Sale
Mortgage Loans and Other Assets 655.8 658.0 497.1 497.8
Held for Sale
Loans
Commercial 5,353.6 5,362.2 5,135.6 5,121.7
Real Estate - Residential 998.4 1,014.7 1,084.3 1,121.6
Consumer 2,471.8 2,508.9 2,127.8 2,167.1
Allowance for Possible Loan
Losses (173.4) -- (165.5) --
_______ _______ _______ _______
Net Loans 8,650.4 8,885.8 8,182.2 8,410.4
Other Assets 134.0 134.0 132.1 132.1
Financial Liabilities
Deposits 11,346.1 11,438.4 11,774.7 11,882.7
Short-Term Borrowings 791.7 791.7 877.1 877.1
Long-Term Debt and Other 416.5 435.3 297.1 308.6
Borrowings
Other Liabilities 59.6 59.6 60.2 60.2
</TABLE>
<PAGE>
Off-Balance Sheet Financial Instruments
Meridian uses various off-balance sheet financial
instruments in conducting its business activities and in managing
its balance sheet risks. The value of these instruments is based
on their respective settlement values, or the amount that
Meridian would either pay or receive to assume Meridian's
position in these contracts.
<TABLE>
<CAPTION>
December 31
(in millions)
1993 1992
____ ____
Contract Contract
or Approximate or Approximate
Notional Net Payable Notional Net Payable
Amount (Receivable) Amount (Receivable)
________ ____________ ________ ____________
<S> <C> <C> <C> <C>
Commitments to Extend Credit $3,396.7 $ 2.1 $3,009.5 $ 2.5
Standby and Commercial Letters 539.4 4.7 469.0 4.3
of Credit
Mortgage Loans Sold and Loan
Servicing Acquired with Recourse 975.2 2.6 1,298.1 3.4
Forward Rate Agreements 53.5 2.5 115.5 3.4
Commitments to Sell Mortgage-
Backed Securities 552.5 .2 687.9 .2
Tender Option Bonds and Other
Commitments to Purchase Securities 500.0 (25.9) 593.3 (17.6)
Interest Rate Swap Agreements 2,167.0 (5.3) 1,902.0 (27.1)
Forward Interest Rate Swap
Agreements 150.0 .3 275.0 1.2
Other Interest Rate Contracts 253.6 -- 238.7 .6
</TABLE>
The following methods and assumptions were used by Meridian
in estimating the fair value of its financial instruments:
Cash and Due from Banks. The carrying amounts reported in
the balance sheet approximate fair value due to the short-term
nature of these assets.
Short-Term Investments. Short-term investments include
trading account securities which are marked-to-market for
financial reporting purposes and therefore already approximate
fair value. The carrying amounts of other short-term investments
on Meridian's balance sheet approximate fair value since the
maturity of these instruments is generally 90 days or less. For
short-term investments with maturities of greater than 90 days,
fair value estimates are based on market quotes for similar
instruments, adjusted for such differences between the quoted
instruments and the instruments being valued as maturity and
credit quality.
Investment Securities and Investment Securities Available
for Sale. The fair values of investment securities and
investment securities available for sale are based on quoted
market prices as of the balance sheet date, where available. In
cases where a market price is not available, external pricing
services that approximate fair value are used. For certain
instruments, fair value is estimated by obtaining quotes from
independent securities dealers.
Loans. Fair values are estimated for portfolios of loans
with similar financial characteristics. Loans are aggregated by
commercial, residential real estate, and consumer categories.
Each loan portfolio is further classified by variable rate or
fixed rate loans and by performing or nonperforming loans.
For performing variable-rate loans, fair values are based on
carrying amounts, as these loans reprice frequently as market
rates change. Additionally, most variable rate loans are
reviewed and extended on at least an annual basis. At the time
of that review, these loans are repriced to reflect the current
credit risk inherent in the loan. For performing fixed-rate
loans, the fair value methodology varies according to each loan
portfolio. Fair values for residential real estate and consumer
loans are estimated using quoted market prices, where available.
Where quoted market prices are not available, quotations are
obtained for similar instruments and adjusted for such
differences in loan characteristics as maturity and credit
quality. The fair value of performing fixed-rate commercial
loans is estimated by discounting the expected cash flows by a
discount rate that reflects the interest rate and credit risk
inherent in the loan. The estimated maturity of these loans
reflects both contractual maturity and management's assessment of
prepayments, economic conditions, and other factors that may
affect the maturity of the portfolio. The discount rate is based
on the rate that would be currently offered for loans with
similar terms to borrowers of similar credit quality.
Nonperforming loans are included in each of the loan
portfolios previously described. The fair value of nonperforming
loans is estimated by discounting the expected return of
principal over the period of time Meridian anticipates receiving
principal payments on the loan. The discount rate used is a rate
reflective of the higher risk surrounding these assets compared
to a performing loan.
Accrued Interest Receivable and Other Assets. The carrying
value of certain financial instruments included in these
categories, such as accrued interest receivable, approximates
fair value. For other financial instruments, such as assets
related to servicing certain loans, fair value is estimated by
discounting the scheduled cash flows through estimated maturity
by a discount rate that reflects the interest rate and credit
risk inherent in the instrument.
Deposits. The fair value of deposits with no stated
maturity, such as non-interest bearing deposits, NOW accounts,
savings, and money market deposit accounts, is the amount
payable on demand as of year end. The fair value of low-cost
core deposits is not considered in the value of deposits nor is
it recorded as an intangible asset in the balance sheet, as
previously discussed.
For time deposits, fair value is estimated by discounting
the contractual cash flows using a discount rate equal to the
rate currently offered for similar deposits of similar
maturities.
Short-Term Borrowings. The carrying values of federal funds
purchased, securities sold under agreements to repurchase, and
other short-term borrowings approximate fair values.
Long-Term Debt and Other Borrowings. The fair values of
long-term debt and other borrowings are estimated by discounting
the contractual cash flows for each instrument. The discount
rate applied is based on the current incremental borrowing rates
for similar arrangements with similar maturities.
Accrued Interest Payable and Other Liabilities. The
carrying value of certain financial instruments included in these
categories, such as accrued interest payable, approximates fair
value.
Off-Balance Sheet Financial Instruments. Fair values for
Meridian's off-balance sheet financial instruments are calculated
based on market prices (forward rate agreements and interest rate
swaps); market prices for comparable instruments, adjusted for
such differences between the two instruments as maturity or
credit quality (mortgage loans sold or loan servicing acquired
with recourse, commitments to purchase or sell securities, tender
option bonds and other interest rate contracts); and fees
currently charged to enter into similar agreements, taking into
account the remaining term of the agreement and the present
credit risk assessment of the counterparty (commitments to extend
credit and standby letters of credit).
<PAGE>
14) Discontinued Operations
The sale of Meridian's title insurance operations to
Fidelity National Financial, Inc. of Irvine, California was
completed on June 30, 1992.
Meridian retained an investment of $20 million in preferred
stock of American Title Insurance Company. This investment is
mandatorily redeemable by American Title in 2004 and is included
in other assets in the consolidated balance sheets. However, the
redemption price and carrying value of the preferred stock on the
books of Meridian is subject, under certain circumstances, to
reduction to the extent that claims accruals or payments on title
policies issued prior to year-end 1991 by American Title and
certain other general litigation accruals or payments, net of
recoveries, exceed reserves (approximately $46 million) on the
books of American Title at December 31, 1991. Meridian is also
obligated to pay an amount, up to $11 million, to the extent that
claims payments, net of recoveries, by both Meridian Title
Insurance Company and American Title on policies issued prior to
year-end 1991 exceed the preferred stock redemption price of $20
million plus reserves (approximately $53 million) on the books of
both Meridian Title and American Title at December 31, 1991.
<PAGE>
15) MERIDIAN BANCORP, INC.
(PARENT COMPANY ONLY)
<TABLE>
<CAPTION>
Condensed Balance Sheets
December 31, 1993 1992
(Dollars in Thousands) ----------- -----------
<S> <C> <C>
Assets
Cash $2,469 $136
Investment in Subsidiaries
Banking............................... 1,152,620 1,031,765
Non-Banking........................... 111,143 91,429
Short-Term Investments.................. 48,043 32,610
Investment Securities................... 525 3,504
Premises and Equipment.................. 14,220 12,327
Intercompany Note Receivable............ 47,009 75,000
Other Assets............................ 38,633 17,172
---------- ----------
Total Assets........................ $1,414,662 $1,263,943
========== ==========
Liabilities and Shareholders' Equity
Long-Term Debt and Other Borrowings..... $174,394 $174,320
Dividends Payable....................... -- 2,094
Accrued Interest Payable................ 3,970 5,777
Other Liabilities....................... 50,665 22,433
Shareholders' Equity.................... 1,185,633 1,059,319
---------- ----------
Total Liabilities and
Shareholders' Equity............... $1,414,662 $1,263,943
========== ==========
<CAPTION>
Condensed Statements of Income
Year ended December 31, 1993 1992 1991
(Dollars in Thousands) ---------- --------- ---------
<S> <C> <C> <C>
Income
Interest Income from
Subsidiaries.......................... $4,570 $2,425 $505
Management Fees From
Subsidiaries.......................... 57,383 46,014 40,932
Interest and Fees on Loans.............. 4,160 873 987
Investment Securities Income............ 955 516 596
Net Securities Gains.................... 607 1,132 177
Intercompany Service Fees............... 578 5,940 25,553
Other Income............................ 1,414 307 181
-------- -------- --------
Total Income.......................... 69,667 57,207 68,931
Expenses
Interest on Long-Term Debt
and Other Borrowings.................. 12,489 8,609 6,554
Salaries and Benefits................... 35,627 27,992 33,480
Net Occupancy Expense................... 5,528 5,539 8,148
Equipment Expense....................... 3,446 3,605 10,843
Other Expenses.......................... 30,808 21,864 26,537
-------- -------- --------
Total Expenses........................ 87,898 67,609 85,562
-------- -------- --------
Loss Before Taxes....................... (18,231) (10,402) (16,631)
Credit For Income Taxes................. (6,288) (2,848) (2,238)
-------- -------- --------
Loss Before Earnings
of Subsidiaries....................... (11,943) (7,554) (14,393)
Dividend Income from Subsidiaries
Banking Subsidiaries.................. 68,101 52,853 59,230
Non-Banking Subsidiaries.............. 850 250 4,850
Undistributed Earnings(Losses) of
Subsidiaries
Continuing Operations.............. 100,753 91,156 74,499
Discontinued Operations............ - - (6,500)
-------- -------- --------
Net Income............................ $157,761 $136,705 $117,686
======== ======== ========
<CAPTION>
Condensed Statements of Cash Flows
Year ended December 31, 1993 1992 1991
(Dollars in Thousands) --------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Income.............................. $157,761 $136,705 $117,686
Adjustments to Reconcile to Net Cash
Provided by Operating Activities
Earnings of Subsidiaries.............. (169,704) (141,957) (135,140)
Cash Dividends Received from
Subsidiaries....................... 68,951 53,103 64,080
Depreciation and Amortization....... 5,309 4,214 8,571
Other,Net........................... (2,072) (1,165) 331
(Increase) Decrease in Other Operating
Assets........................... (24,738) (3,960) 8,797
Increase in Other Operating
Liabilities...................... 29,536 15,984 4,886
-------- -------- --------
Net Cash Provided by
Operating Activities........ 65,043 62,924 69,211
======== ======== ========
Cash Flows from Investing Activities
Sales of Investment Securities......... 64,508 10,072 6,134
Purchases of Investment Securities..... (1,529) (87,081) (7,388)
Capital Contributions and Advances
to Subsidiaries....................... (53,036) (4,067) (64,787)
Purchases of Premises and Equipment.... (3,803) (4,695) (3,716)
Proceeds from Sales of
Premises and Equipment................ 19 - 132
-------- -------- --------
Net Cash Provided by (Used for)
Investing Activities........ 6,159 (85,771) (69,625)
-------- -------- --------
Cash Flows from Financing Activities
Cash Dividends Paid to Common
Shareholders......................... (69,635) (61,256) (55,639)
Proceeds from Issuance of Common
Stock................................ 16,242 10,779 64,815
Decrease in Short
Term Borrowings...................... - - (560)
Repayment of Long Term Debt
and Other Borrowings................. (43) (305) (5,315)
Proceeds from Issuance of
Long Term Debt....................... - 98,675 -
-------- -------- --------
Net Cash Provided by (Used for)
Financing Activities........ (53,436) 47,893 3,301
-------- -------- --------
Cash and Cash Equivalents
Net Increase During the Year........... 17,766 25,046 2,887
Balance at Beginning of Year........... 32,746 7,700 4,813
-------- -------- --------
Balance at End of Year................. $50,512 $32,746 $7,700
======== ======== ========
<FN>
Interest payments totaled $10,682, $6,456 and $6,439 in 1993,
1992 and 1991, respectively. Noncash investing activity
consisted of a contribution of $18,812 of premises and equipment
to a banking subsidiary in 1991. Noncash financing activity
consisted of the issuance of $11,728 of stock as a result of a
merger, the transfer of capitalized lease obligations of $10,318
to a banking subsidiary in 1991, and the capitalization of leases
of $2,850 in 1991.
</TABLE>
<PAGE>
16) Industry Segment Reporting
Meridian operates principally in two business segments -
banking and securities. Reference should be made to the
discussion and tables appearing under "Banking" and "Securities"
in the section "Primary Business Activities" in Management's
Discussion and Analysis of Earnings and Financial Position for
financial information on each of these business segments.
<PAGE>
Opinion of Independent Auditors
The Board of Directors
Meridian Bancorp, Inc.
We have audited the accompanying consolidated balance sheets
of Meridian Bancorp, Inc. and its subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of income,
changes in shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1993. These
consolidated financial statements are the responsibility of
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Meridian Bancorp, Inc. and its subsidiaries
as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in Notes 8 and 11, respectively, to the
consolidated financial statements, the Company adopted the
provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions, and
Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes, in 1993.
KPMG PEAT MARWICK
Philadelphia, Pennsylvania
January 19, 1994
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
The following documents are filed as part of this report:
A.1. Financial Statements (included under Item 8)
(a) Meridian Bancorp, Inc. and Subsidiaries
- Management's Statement of Responsibility for
Financial Information
- Consolidated Balance Sheets
- Consolidated Statements of Income
- Consolidated Statements of Changes in
Shareholders' Equity
- Consolidated Statements of Cash Flows
- Notes to Consolidated Financial Statements
- Opinion of Independent Auditors
2. All financial schedules are omitted because they are
not applicable, the data are not significant or the required
information is shown in the Annual Report. (The information that
would be shown in Meridian Bancorp, Inc.'s (Parent Company Only)
Statements of Changes in Shareholders' Equity is identical to the
information supplied in the Consolidated Statements of Changes in
Shareholders' Equity which appears herein.)
3. Exhibits (numbered as in Item 601 of Regulation S-K)
(3.1) Articles of Incorporation of Meridian
Bancorp, Inc., as amended, incorporated
herein by reference to Exhibit 3.1 of the
Annual Report on Form 10-K of the Registrant
for the year ended December 31, 1988.
(3.2) By-laws of Meridian Bancorp, Inc., as
amended, incorporated herein by reference to
Exhibit 3.2 of the Annual Report on Form 10-K
of the Registrant for the year ended
December 31, 1991.
(4) Agreement to furnish instruments defining the
rights of holders of long-term debt of
Meridian Bancorp, Inc. and its consolidated
subsidiaries, incorporated herein by
reference to Exhibit 4 of the Annual Report
on Form 10-K of the Registrant for the year
ended December 31, 1991.
(9) Voting Trust Agreement (none).
(10.1) Meridian Bancorp, Inc. Executive Annual
Incentive Plan, as amended, incorporated
herein by reference to Exhibit 10.1 of the
Annual Report on Form 10-K of the Registrant
for the year ended December 31, 1991.*
(10.2) Meridian Bancorp, Inc. Retirement Restoration
Plan, as amended, incorporated herein by
reference to Exhibit 10.2 of the Annual
Report on Form 10-K of the Registrant for the
year ended December 31, 1991.*
(10.3) Meridian Bancorp, Inc. Stock Option Plan, as
amended, incorporated herein by reference to
Exhibit 10.3 of the Annual Report on Form
10-K of the Registrant for the year ended
December 31, 1991.*
(10.4) Meridian Bancorp, Inc. Stock Appreciation
Rights Plan, incorporated herein by reference
to Exhibit 10.4 of the Annual Report on Form
10-K of the Registrant for the year ended
December 31, 1992.*
(10.5) Meridian Bancorp, Inc. Directors' Deferred
Compensation Plan dated July 1, 1983,
incorporated herein by reference to Exhibit
10.8 of the Annual Report on Form 10-K of the
Registrant for the year ended December 31,
1990.*
(10.6) Form of Deferred Compensation Agreements
entered into on January 12, 1987 between
Meridian Bancorp, Inc. and Samuel A.
McCullough, incorporated herein by reference
to Exhibit 10.6 of the Annual Report on Form
10-K of the Registrant for the year ended
December 31, 1991.*
(10.7) Form of Directors' Deferred Compensation
Agreement, incorporated herein by reference
to Exhibit 10.7 of the Annual Report on Form
10-K of the Registrant for the year ended
December 31, 1991.*
(10.8) Termination Agreement between Meridian
Bancorp, Inc. and Samuel A. McCullough dated
as of July 1, 1986, incorporated herein by
reference to Exhibit 10.8 of the Annual
Report on Form 10-K of the Registrant for the
year ended December 31, 1991.*
(10.9) Termination Agreement between Meridian
Bancorp, Inc. and Ezekiel S. Ketchum dated as
of July 1, 1986, incorporated herein by
reference to Exhibit 10.9 of the Annual
Report on Form 10-K of the Registrant for the
year ended December 31, 1991.*
(10.10) Termination Agreement between Meridian
Bancorp, Inc. and Russell J. Kunkel dated as
of July 1, 1986, incorporated herein by
reference to Exhibit 10.11 of the Annual
Report on Form 10-K of the Registrant for the
year ended December 31, 1991.*
(10.11) Termination Agreement between Meridian
Bancorp, Inc. and David E. Sparks dated as of
January 23, 1990, incorporated herein by
reference to Exhibit 10.22 of the Annual
Report on Form 10-K of the Registrant for the
year ended December 31, 1990.*
(10.12) Meridian Bancorp, Inc. Supplemental Salary
Reduction Plan, as amended, incorporated
herein by reference to Exhibit 10.14 of the
Annual Report on Form 10-K of the Registrant
for the year ended December 31, 1991.*
(10.13) Meridian Bancorp, Inc. Supplemental Executive
Retirement Plan, incorporated herein by
reference to Exhibit 10.15 of the Annual
Report on Form 10-K of the Registrant for the
year ended December 31, 1991.*
(10.14) Meridian Bancorp, Inc. Executive Intermediate
Performance Plan adopted January 1, 1990,
incorporated herein by reference to Exhibit
10.23 of the Annual Report on Form 10-K of
the Registrant for the year ended
December 31, 1990.*
(10.15) Rights Agreement dated as of July 25, 1989
between Meridian Bancorp, Inc. and Meridian
Trust Company, incorporated by reference to
Exhibit 4 of the Current Report on Form 8-K
of the Registrant dated August 11, 1989.
(10.16) Lease of The First National Bank of Allentown
building dated August 6, 1984, as amended by
First Amendment to Lease dated September 25,
1984, incorporated herein by reference to
Exhibit 10.9 of the Annual Report on Form
10-K of the Registrant for the year ended
December 31, 1990.
(10.17) Purchase and Assumption Agreement dated
October 13, 1989 between Resolution Trust
Corporation, Receiver of Hill Financial
Savings Association and Meridian Financial
Savings Association, F.A., incorporated by
reference to Exhibit 1 of the Current Report
on Form 8-K of the Registrant dated
October 27, 1989.
(10.18) Preferred Stock Purchase Agreement, dated
August 23, 1991, among Meridian Bank,
American Title Insurance Company and First
Title Insurance Company, incorporated herein
by reference to Exhibit 2.2 of the Current
Report on Form 8-K of the Registrant dated
August 23, 1991.
(10.19) Agreement, dated as of March 30, 1993,
between Commonwealth Bancshares Corporation
and the Registrant, incorporated by reference
to Exhibit 2.1 to Registration Statement No.
33-65780 on Form S-4 of the Registrant.
(11) Statement regarding Computation of Per
Share Earnings.(1)
(12) Statement regarding Computation of Ratios
(not applicable).
(18) Letter regarding Change in Accounting
Principles (not applicable).
(19) Previously Unfiled Documents (none).
(21) List of Subsidiaries of the
Registrant.(1)
(22) Published Report Regarding Matters Submitted
to a Vote of Security Holders (none).
(23) Consent of KPMG Peat Marwick (included
herein).
(24) Power of Attorney (none).
(28) Information from reports furnished to state
insurance regulatory authorities (not
applicable).
(99) Additional Exhibits (none).
________________________
*Denotes compensatory plan or arrangement.
(1) Previously filed.
<PAGE>
B.1 Reports on Form 8-K.
On November 14, 1993, the Registrant filed an amendment to a
Current Report on Form 8-K dated August 31, 1993 for the purpose
of filing under Item 7 of the Current Report the following
financial statements relating to the Registrant's acquisition of
Commonwealth Bancshares Corporation:
1. Consolidated Statements of Condition as of
December 31, 1992 and 1991, and the Consolidated
Statements of Income, Consolidated Statements of
Changes in Shareholders' Equity and Consolidated
Statements of Cash Flows for the years ended
December 31, 1992, 1991 and 1990 of Commonwealth
Bancshares Corporation, and the related Notes to
Consolidated Financial Statements.
2. Unaudited Consolidated Statement of Condition as
of June 30, 1993, the Unaudited Consolidated
Statements of Income for the three-month and six-
month periods ended June 30, 1993 and 1992, and
the Unaudited Consolidated Statements of Cash
Flows for the six-month periods ended June 30,
1993 and 1992 of Commonwealth Bancshares
Corporation, and the related Notes to Unaudited
Consolidated Financial Statements.
3. Pro forma financial statements of the Registrant
and Commonwealth Bancshares Corporation.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this amended report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MERIDIAN BANCORP, INC.
(Registrant)
Date: August 31, 1994 /s/ Michael J. Mizak, Jr.
Michael J. Mizak, Jr., Senior Vice
President and Controller (Principal
Accounting Officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<C> <C>
(3.1) Articles of Incorporation of Meridian
Bancorp, Inc., as amended, incorporated
herein by reference to Exhibit 3.1 of
the Annual Report on Form 10-K of the
Registrant for the year ended
December 31, 1988.
(3.2) By-laws of Meridian Bancorp, Inc., as
amended, incorporated herein by
reference to Exhibit 3.2 of the Annual
Report on Form 10-K of the Registrant
for the year ended December 31, 1991.
(4) Agreement to furnish instruments
defining the rights of holders of long-
term debt of Meridian Bancorp, Inc. and
its consolidated subsidiaries,
incorporated herein by reference to
Exhibit 4 of the Annual Report on
Form 10-K of the Registrant for the
year ended December 31, 1991.
(9) Voting Trust Agreement (none).
(10.1) Meridian Bancorp, Inc. Executive Annual
Incentive Plan, as amended, incorporated
herein by reference to Exhibit 10.1 of
the Annual Report on Form 10-K of the
Registrant for the year ended
December 31, 1991.*
(10.2) Meridian Bancorp, Inc. Retirement
Restoration Plan, as amended,
incorporated herein by reference to
Exhibit 10.2 of the Annual Report on
Form 10-K of the Registrant for the
year ended December 31, 1991.*
(10.3) Meridian Bancorp, Inc. Stock Option
Plan, as amended, incorporated herein
by reference to Exhibit 10.3 of the
Annual Report on Form 10-K of the
Registrant for the year ended
December 31, 1991.*
(10.4) Meridian Bancorp, Inc. Stock Appreciation
Rights Plan, incorporated herein by
reference to Exhibit 10.4 of the Annual
Report on Form 10-K of the Registrant
for the year ended December 31, 1992.*
(10.5) Meridian Bancorp, Inc. Directors'
Deferred Compensation Plan dated July 1,
1983, incorporated herein by reference
to Exhibit 10.8 of the Annual Report on
Form 10-K of the Registrant for the year
ended December 31, 1990.*
(10.6) Form of Deferred Compensation Agreements
entered into on January 12, 1987 between
Meridian Bancorp, Inc. and Samuel A.
McCullough, incorporated herein by
reference to Exhibit 10.6 of the Annual
Report on Form 10-K of the Registrant
for the year ended December 31, 1991.*
(10.7) Form of Directors' Deferred Compensation
Agreement, incorporated herein by
reference to Exhibit 10.7 of the Annual
Report on Form 10-K of the Registrant
for the year ended December 31, 1991.*
(10.8) Termination Agreement between Meridian
Bancorp, Inc. and Samuel A. McCullough
dated as of July 1, 1986, incorporated
herein by reference to Exhibit 10.8 of
the Annual Report on Form 10-K of the
Registrant for the year ended
December 31, 1991.*
(10.9) Termination Agreement between Meridian
Bancorp, Inc. and Ezekiel S. Ketchum
dated as of July 1, 1986, incorporated
herein by reference to Exhibit 10.9 of
the Annual Report on Form 10-K of the
Registrant for the year ended
December 31, 1991.*
(10.10) Termination Agreement between Meridian
Bancorp, Inc. and Russell J. Kunkel
dated as of July 1, 1986, incorporated
herein by reference to Exhibit 10.11 of
the Annual Report on Form 10-K of the
Registrant for the year ended
December 31, 1991.*
(10.11) Termination Agreement between Meridian
Bancorp, Inc. and David E. Sparks dated
as of January 23, 1990, incorporated
herein by reference to Exhibit 10.22 of
the Annual Report on Form 10-K of the
Registrant for the year ended
December 31, 1990.*
(10.12) Meridian Bancorp, Inc. Supplemental
Salary Reduction Plan, as amended,
incorporated herein by reference to
Exhibit 10.14 of the Annual Report on
Form 10-K of the Registrant for the year
ended December 31, 1991.*
(10.13) Meridian Bancorp, Inc. Supplemental
Executive Retirement Plan, incorporated
herein by reference to Exhibit 10.15 of
the Annual Report on Form 10-K of the
Registrant for the year ended
December 31, 1991.*
(10.14) Meridian Bancorp, Inc. Executive
Intermediate Performance Plan adopted
January 1, 1990, incorporated herein by
reference to Exhibit 10.23 of the Annual
Report on Form 10-K of the Registrant
for the year ended December 31, 1990.*
(10.15) Rights Agreement dated as of July 25,
1989 between Meridian Bancorp, Inc. and
Meridian Trust Company, incorporated by
reference to Exhibit 4 of the Current
Report on Form 8-K of the Registrant
dated August 11, 1989.
(10.16) Lease of The First National Bank of
Allentown building dated August 6, 1984,
as amended by First Amendment to Lease
dated September 25, 1984, incorporated
herein by reference to Exhibit 10.9 of
the Annual Report on Form 10-K of the
Registrant for the year ended
December 31, 1990.
(10.17) Purchase and Assumption Agreement
dated October 13, 1989 between
Resolution Trust Corporation, Receiver
of Hill Financial Savings Association
and Meridian Financial Savings
Association, F.A., incorporated by
reference to Exhibit 1 of the Current
Report on Form 8-K of the Registrant
dated October 27, 1989.
(10.18) Preferred Stock Purchase Agreement,
dated August 23, 1991, among Meridian
Bank, American Title Insurance Company
and First Title Insurance Company,
incorporated herein by reference to
Exhibit 2.2 of the Current Report on
Form 8-K of the Registrant dated
August 23, 1991.
(10.19) Agreement, dated as of March 30, 1993,
between Commonwealth Bancshares
Corporation and the Registrant,
incorporated by reference to
Exhibit 2.1 to Registration Statement
No. 33-65780 on Form S-4 of the
Registrant.
(11) Statement regarding Computation of Per
Share Earnings.(1)
(12) Statement regarding Computation of
Ratios (not applicable).
(18) Letter regarding Change in Accounting
Principles (not applicable).
(19) Previously Unfiled Documents (none).
(21) List of Subsidiaries of the Registrant.(1)
(22) Published Report Regarding Matters
Submitted to a Vote of Security Holders
(none).
(23) Consent of KPMG Peat Marwick (included
herein).
(24) Power of Attorney (none).
(28) Information from reports furnished to
state insurance regulatory authorities
(not applicable).
(99) Additional Exhibits (none).
_______________________________
* Denotes Compensatory Plan or arrangement.
(1) Previously filed.
</TABLE>
The Board of Directors
Meridian Bancorp, Inc.
We consent to the incorporation by reference in the Registration
Statement on Form S-3 (Registration No. 33-45562), Form S-3
(Registration No. 33-35228), Form S-3 (Registration No. 2-94325),
Form S-3 (Registration No. 33-58690), Form S-8 (Registration No.
33-40616), Form S-8 (Registration No. 33-12292) and Form S-4
(Registration No. 33-52703) of Meridian Bancorp, Inc. of our
report dated January 19, 1994 relating to the consolidated
balance sheets of Meridian Bancorp, Inc. and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated
statements of income, changes in shareholders' equity, and cash
flows for each of the years in the three-year period ended
December 31, 1993, which report appears in the December 31, 1993
annual report on Form 10-K of Meridian Bancorp, Inc.
KPMG Peat Marwick
Philadelphia, Pennsylvania
March 22, 1994
