SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended March 31, 1994 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from __________ to __________.
No. 0-12364
(Commission File Number)
MERIDIAN BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA 23-2237529
(State of Incorporation) (IRS Employer ID Number)
35 NORTH SIXTH STREET, READING, PA 19601
(Address of Principal Executive Offices) (Zip Code)
(215) 655-2000
(Registrant's Telephone Number)
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 ___
Number of Shares Outstanding as of March 31, 1994
COMMON STOCK ($5 Par Value) 57,640,315
(Title of Class) (Outstanding Shares)
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MERIDIAN BANCORP, INC.
FORM 10-Q
For the Quarter Ended March 31, 1994
Contents
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1994 and
March 31 and December 31,
1993 29
Consolidated Statements of Income for
the Three-Month Periods Ended
March 31, 1994 and 1993 30
Consolidated Statements of Cash Flows
for the Three-Month Periods Ended
March 31, 1994 and 1993 32
Consolidated Statements of Changes in
Shareholders' Equity for the
Three-Month Periods Ended March 31,
1994 and 1993 34
Notes to Consolidated Financial Statements 35
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Management's Discussion and Analysis of
Earnings and Financial Position 2
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 38
<PAGE>
PART I
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF EARNINGS AND
FINANCIAL POSITION.
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
1994 1993 1993 1993 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest Income........................................ $221,761 $238,090 $241,574 $242,968 $239,058
Interest Expense....................................... 75,055 82,553 84,891 88,329 88,625
Net Interest Income.................................... 146,706 155,537 156,683 154,639 150,433
Provision for Possible Loan Losses..................... 8,500 12,480 14,631 14,656 14,334
Net Interest Income After Provision for
Possible Loan Losses................................ 138,206 143,057 142,052 139,983 136,099
Other Income........................................... 60,573 76,127 85,302 72,622 51,218
Other Expenses......................................... 139,606 162,033 178,875 151,648 144,296
Income Before Income Taxes and Cumulative Effect
of Changes in Accounting Principles................. 59,173 57,151 48,479 60,957 43,021
Provision For Income Taxes............................ 18,634 15,084 13,850 17,417 12,716
Income Before Cumulative Effect of Changes in
Accounting Principles............................... 40,539 42,067 34,629 43,540 30,305
Cumulative After-Tax Effect on Prior Years of Changes
in Accounting Principles............................ (2,730) - - - 7,221
Net Income ............................................ $37,809 $42,067 $34,629 $43,540 $37,526
Net Interest Margin (Taxable Equivalent Basis)......... 4.82% 5.00% 4.97% 4.90% 4.98%
Return on Average Assets............................... 1.10% 1.18% 0.96% 1.22% 1.10%
Return on Average Common Shareholders' Equity.......... 12.91% 14.34% 12.10% 15.85% 14.32%
Fully Diluted Earnings Per Share
Income Before Cumulative Effect of Changes in
Accounting Principles............................ $0.70 $0.73 $0.60 $0.75 $0.53
Cumulative Effect of Changes in Accounting Principles (0.05) - - - 0.13
Net Income .......................................... 0.65 0.73 0.60 0.75 0.66
Dividends Declared and Paid Per Common Share........... 0.32 0.32 0.32 0.32 0.30
Ratio of Dividends Declared and Paid to Net Income..... 49% 45% 46% 39% 42%
FINANCIAL CONDITION
Average Balances for the Quarter
Securities............................................. $3,020,052 $3,090,173 $3,463,329 $3,665,479 $3,419,136
Loans.................................................. 9,023,567 8,884,350 8,719,725 8,595,203 8,476,407
Assets................................................. 13,905,794 14,110,090 14,371,449 14,320,524 13,841,458
Deposits............................................... 11,092,555 11,164,488 11,278,327 11,411,739 11,355,970
Total Shareholders' Equity............................. 1,188,080 1,163,831 1,135,081 1,101,967 1,063,094
Primary Shares Outstanding............................. 58,187,526 58,002,495 57,917,097 57,709,123 57,119,331
Fully Diluted Shares Outstanding....................... 58,195,971 58,002,495 57,942,128 57,834,852 57,119,331
Total Shareholders' Equity to Assets................... 8.54% 8.25% 7.90% 7.70% 7.68%
At Quarter-End
Securities............................................. $3,079,020 $3,060,147 $3,245,765 $3,597,865 $3,635,969
Loans.................................................. 9,157,827 8,988,044 8,832,862 8,626,402 8,522,252
Assets................................................. 14,009,848 14,084,787 14,334,773 14,403,339 14,175,835
Deposits............................................... 11,127,352 11,346,151 11,171,363 11,433,459 11,279,275
Total Shareholders' Equity............................. 1,193,390 1,185,633 1,146,875 1,124,935 1,086,898
Book Value Per Common Share............................ 20.70 20.39 20.00 19.62 19.16
Common Shares Outstanding.............................. 57,640,315 58,154,486 57,343,118 57,324,897 56,721,890
Total Shareholders' Equity to Assets................... 8.52% 8.42% 8.00% 7.81% 7.67%
Risk-Based Capital Ratio............................... 13.81% 13.67% 13.16% 13.05% 12.91%
Allowance for Possible Loan Losses..................... 171,030 173,388 169,568 167,961 166,044
Allowance for Possible Loan Losses to Loans............ 1.87% 1.93% 1.92% 1.95% 1.95%
Allowance for Possible Loan Losses to
Non-Performing Loans................................ 143% 136% 130% 125% 122%
Non-Performing Assets as a Percentage of
Total Period-End Loans and
Assets Acquired in Foreclosures..................... 1.86% 1.98% 2.18% 2.26% 2.39%
Non-Performing Assets and Loans Past Due 90 or
more Days as to Interest or Principal as a
Percentage of Loans and Assets Acquired
in Foreclosures..................................... 2.16% 2.25% 2.48% 2.71% 2.84%
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
Meridian Bancorp, Inc. (Meridian) reported income, before
the effect of accounting changes, of $40.5 million in the first
quarter of 1994 compared to $30.3 million in the first quarter of
1993, an increase of 34%. On a fully diluted per share basis,
income before accounting changes was $.70 in 1994 compared to
$.53 in the first quarter of last year.
Net income, which includes the effect of accounting changes
in both periods, was $37.8 million or $.65 per fully diluted
share in the first quarter of 1994 compared to $37.5 million or
$.66 per fully diluted share a year ago. Net income in 1994 was
reduced by a $2.7 million after-tax charge, or $.05 per share,
for postemployment benefits as a result of adopting newly
effective accounting standards, while the first quarter of 1993
was positively impacted by $7.2 million, or $.13 per share,
related to a change in the method of accounting for income taxes.
The returns on average assets and on average common
shareholders' equity for the quarter ended March 31, 1994 were
1.10% and 12.91%, respectively, compared to 1.10% and 14.32%,
respectively, for the same quarter of last year.
Net interest income was $146.7 million in the first quarter
of 1994 compared to $150.4 million in the first quarter of 1993.
On a taxable-equivalent basis, net interest income was $151.2
million compared to $155.5 million in the first quarter of 1993.
The net interest margin was 4.82% in the first quarter of this
year compared to 4.98% a year ago. The net interest margin in
the fourth quarter of 1993 was 5.00% and was favorably impacted
by 15 basis points as a result of an acquisition during the
quarter. Average loans outstanding increased between the first
quarters of both years, but narrowing spreads between the yields
on interest-earning assets and the cost of interest-bearing
liabilities resulted in the decline in net interest income.
Meridian's provision for possible loan losses was $8.5
million in the first quarter of 1994, down from $12.5 million in
the fourth quarter of 1993 and $14.3 million in the first quarter
of 1993. Non-performing loans declined by $8.0 million as asset
quality improved for the ninth consecutive quarter.
Non-performing loans decreased to $119.6 million or 1.31% of
loans at March 31, 1994, compared to $127.6 million or 1.42% at
December 31, 1993 and $136.2 million or 1.60% a year ago. The
ratio of the allowance for possible loan losses to non-performing
loans was 143% at March 31, 1994 compared to 136% at December 31,
1993 and 122% a year ago.
Net loans charged-off in the first quarter of 1994 were
$10.9 million compared to $10.4 million in the fourth quarter of
1993 and $13.8 million in the comparable period a year ago. The
allowance for possible loan losses was 1.87% of total loans at
March 31, 1994 compared to 1.93% at December 31, 1993 and 1.95%
a year ago.
Total non-performing assets also declined to $171.5 million
at March 31, 1994, or 1.86% of loans and assets acquired in
foreclosures, compared to $178.8 million or 1.98% at December 31,
1993 and $205.3 million or 2.39% at March 31, 1993.
Other income increased by $9.4 million or 18% between the
first quarters of 1994 and 1993. Increases in revenues were
experienced in Meridian's broker-dealer and investment banking
area and in the banking unit. Securities gains decreased by $5.3
million between the first quarters of 1994 and 1993. Mortgage
banking revenues increased by $10.8 million in the quarter
compared to revenues in the same period of last year. Mortgage
banking revenues were negatively impacted in the first quarter of
1993 by amortization of $19.5 million for purchased mortgage
servicing rights, which are recorded as a reduction of revenues.
Definitive agreements have been signed for the sale of a
significant portion of mortgage assets held for sale. This sale
resulted from a decision in the third quarter of 1993 to refocus
Meridian's mortgage activities on the origination of residential
loans and to significantly reduce the scope of its mortgage
servicing business.
It is expected that this sale will close in the second
quarter of 1994 at a price, net of expenses, which approximates
the $25.0 million carrying value at March 31, 1994 of the assets
covered by these sale agreements. Meridian will enter a
subservicing agreement with one purchaser until the servicing
portfolio is transferred during the third quarter of 1994.
Negotiations are continuing with prospective purchasers for the
remaining $3.0 million of servicing-related assets held for sale.
Other operating expenses declined by $4.7 million or 3%
between the first quarters of 1994 and 1993. Declines in
advertising expense and FDIC deposit insurance expense
contributed to the lower level of expenses.
Income in both years was affected by the cumulative effect
of changes in accounting principles. In the first quarter of
1994, Meridian adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment
Benefits". This statement establishes standards for employers
who provide benefits to former employees after employment but
before retirement. Such benefits include, among other things,
severance, disability, and workers' compensation benefits. The
implementation of these new accounting rules resulted in a charge
of $4.2 million ($2.7 million after-tax, or $.05 per share) in
the first quarter of 1994.
In the first quarter of 1993, Meridian adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes", resulting in an increase in consolidated net income of
$7.2 million, or $.13 per share.
Total assets at March 31, 1994 were $14.0 billion compared
to $14.2 billion at March 31, 1993. Total loans were $9.2
billion compared to $8.5 billion a year ago, a 7.5% increase.
The consumer portfolio increased by 12.1% during the last year
and the commercial portfolio grew by 6.7%. Total deposits were
$11.1 billion compared to $11.3 billion a year ago, a 1%
decrease. Meridian continues to fund a significant portion of its
assets with deposits acquired in its local marketplace.
Shareholders' equity increased to $1.2 billion or 8.52% of
total assets at March 31, 1994 compared to $1.1 billion or 7.67%
a year ago. The ratio of tangible shareholders' equity to
assets, which excludes $86.5 million of intangible assets, was
8.14% at March 31, 1994 compared to 6.83% at March 31, 1993.
Meridian's risk-based capital ratio was 13.81% at March 31, 1994,
well above regulatory requirements. This ratio was 13.67% at
December 31, 1993 and 12.91% at March 31, 1993.
Book value per common share was $20.70 at March 31, 1994
compared to $19.16 at March 31, 1993, an increase of 8%. Book
value per common share at December 31, 1993 was $20.39.
INDUSTRY SEGMENTS
Table 1 presents a summary of the operating results of
Meridian's two industry segments.
The banking unit provides a full range of retail and
corporate banking services to customers in central and eastern
Pennsylvania, as well as Delaware and southern New Jersey.
The securities unit underwrites, brokers and distributes
securities and loan servicing to institutional and individual
investors. In addition, the company buys, sells and securitizes
loans. The company also provides investment banking services by
acting as financial advisors in facilitating municipal and
corporate transactions in the capital markets.
The banking unit reported net income of $35.5 million in the
first quarter of 1994 compared to $35.2 million for the same
period of last year. Net interest income declined by $3.6
million between the two periods. This was more than offset by a
decrease of $5.8 million in the provision for possible loan
losses, an increase of $6.7 million in other income and a
decrease of $7.0 million in other expenses. Earnings in 1994
included a negative after-tax adjustment of $2.7 million from
implementing Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits." Earnings in
1993 included a positive after-tax adjustment of $7.2 million
related to the adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes".
Net income for the securities unit was $2.3 million in the
first quarter of 1994, unchanged from earnings reported in the
first quarter of 1993. An increase in net trading gains was
offset by decreases in other revenue categories and an increase
in other expenses, primarily personnel expense.
NET INTEREST INCOME AND RELATED ASSETS AND LIABILITIES
Net interest income was $146.7 million in the first quarter
of 1994 compared to $150.4 million in the same quarter of 1993, a
decrease of 2%. Net interest income on a taxable-equivalent
basis was $151.2 million in the first quarter of this year
compared to $155.5 million in the same period of last year, a
decrease of 3%.
The level of net interest income results from the
interaction between the volume of interest-earning assets and the
sources of funds supporting these assets, and the interest rates
earned on the assets and paid on the funding sources. Average
loans outstanding increased between the first quarters of both
years, but narrowing spreads between the yields on interest-
earning assets and the cost of interest-bearing liabilities
resulted in the decline in net interest income.
Average interest-earning assets increased by $44.6 million
or less than 1% between the first quarter of 1994 and the same
period of last year. Average loans outstanding increased by 6%
between the two periods, as increases in consumer and commercial
loans were partially offset by a decline in the residential
mortgage loan portfolio. Average investment securities and
investment securities available for sale decreased by $399.1
million. Average deposits were $11.1 billion in the first quarter
of 1994, compared to $11.4 billion in the same period of last
year, a 2% decline. The increase in interest-earning assets and
the decrease in deposits were funded by increases in short and
long-term borrowings and shareholders' equity.
The decline in net interest income is primarily attributable
to a decrease in the net interest margin, which was 4.82% in the
first quarter of 1994 compared to 4.98% for the same period last
year, a decrease of 16 basis points. The net interest margin is
affected by both the net interest spread and the level of net
non-interest bearing sources of funds.
The net interest spread decreased 16 basis points between
the two quarters, primarily because yields on interest-earning
assets decreased faster than rates on interest-bearing
liabilities. Average yields on loans declined by 61 basis
points between the two periods while the rates paid on interest-
bearing deposits declined by 52 basis points over the same time
period.
Interest-free funding sources increased by $294.2 million
between the two periods primarily as a result of increases in
demand deposits and shareholders' equity. However, the
beneficial effect that such funds provided to the overall cost of
funds was reduced as a result of the lower interest rate
environment.
Table 2 presents net interest income, yields and rates on a
taxable-equivalent basis, and average balances for the first
quarters of 1994 and 1993, and the fourth quarter of 1993.
Two of Meridian's most important performance goals, in
addition to maintaining a strong capital position, are the
achievement of consistent earnings growth and the maintenance of
financial flexibility sufficient to meet customer and corporate
funding needs at an acceptable cost. Two primary means of
accomplishing these goals are the control of overall interest
rate risk and the management of liquidity.
Meridian manages interest-sensitivity by adjusting the mix
and repricing characteristics of assets and liabilities on the
balance sheet through its securities and purchased funding
portfolios and by the use of off-balance sheet derivative
products, mainly interest rate swaps. The notional amount of
interest rate swap contracts, which include forward interest rate
swaps of $250 million, was $2.9 billion at March 31, 1994
compared to $2.1 billion a year ago.
The majority of the interest rate swap contracts outstanding
at March 31, 1994, or approximately $2.5 billion, represents
contracts on which Meridian receives a fixed rate of interest and
pays a variable rate, thereby favorably impacting net interest
income in periods of declining interest rates. The average
fixed rate received at March 31, 1994 was 4.92% with a remaining
term of approximately 1.4 years until maturity or repricing. The
average floating rate paid on interest rate swaps is based on
short-term variable rates such as LIBOR (London Interbank Offered
Rate). The average floating rate paid was 3.67% at March 31,
1994.
Meridian uses interest rate swaps as a tool to alter the
repricing characteristics of a portion of the core deposit base.
Interest expense on deposits was reduced by approximately $8.1
million in the first quarter of 1994 compared to $13.0 million a
year ago. This decline is attributable to the maturities of
interest rate swaps over the past year and a higher level of
short-term interest rates in the first quarter of 1994.
The favorable impact of Meridian's interest rate swaps on
net interest income will decrease in a rising interest rate
environment. This change should be mitigated by the anticipated
growth in net interest income mainly because of the anticipated
expansion of Meridian's banking business.
Meridian uses income simulation modeling as the primary tool
in measuring interest rate risk and managing interest rate
sensitivity. Simulation modeling considers not only the impact
of changing market rates of interest on future net interest
income, but also such other potential causes of variability as
earning-asset volume and mix, yield curve relationships, customer
preferences and general market conditions.
The objective of liquidity management is to ensure that
sufficient funding is available, at reasonable cost, to meet the
ongoing operational cash needs of Meridian and to take advantage
of income producing opportunities as they arise. While the
desired level of liquidity may vary depending upon a variety of
factors, it is a primary goal of Meridian to maintain a high
level of liquidity in all economic environments.
Management considers the liquidity position of Meridian at
the end of the first quarter of 1994 to be sufficient to meet its
foreseeable cash flow requirements.
Loans. The lending function is Meridian's principal
business activity and it is Meridian's continuing policy to serve
the credit needs of its customer base. Loans were $9.2 billion
at March 31, 1994 compared to $8.5 billion at March 31, 1993, a
7.5% increase. Consumer loans, mostly home equity loans and
other types of personal loans, increased by $279 million, or
12.1%, primarily from successful marketing campaigns in the low
interest rate environment during the period. Commercial loans
increased by $351 million, or 6.7%, reflecting signs of
increasing loan demand. The balance of residential mortgage
loans was almost unchanged between the two periods.
Table 3 presents a summary of period-end loan balances.
Investment Securities and Investment Securities Available
for Sale. The second largest use of funds for Meridian is the
investment portfolio comprised of investments held to maturity
and investments available for sale. The balance in the
investment portfolio was $3.1 billion at March 31, 1994, down
from $3.6 billion a year ago.
Effective in the first quarter of 1994, Meridian adopted
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 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
at March 31, 1994 was to increase shareholders' equity by $4.5
million or less than 1%, representing the after-tax unrealized
gain in the available for sale portfolio.
Table 4 presents a summary of the amortized cost,
approximate fair value and gross unrealized gains and losses for
the investment securities portfolio and investment securities
available for sale.
Deposits. Meridian's deposits, the largest source of funds,
amounted to $11.1 billion at March 31,1994 compared to $11.3
billion at March 31, 1993, a decrease of 1%. The lower interest
rate environment has led some depositors to seek alternative
investment opportunities. In addition, a portion of the decline
resulted from the subsequent run-off of some of the deposits
acquired in banking acquisitions over the past year. There has
also been a planned reduction in certificates of deposit of
$100,000 and more during the past year.
Table 5 presents a summary of period-end deposit balances.
PROVISION FOR POSSIBLE LOAN LOSSES AND RELATED CREDIT QUALITY
The provision for possible loan losses was $8.5 million in
the first quarter of 1994, down from $12.5 million in the fourth
quarter of 1993 and $14.3 million in the first quarter of 1993.
The decline over the past year was due primarily to continued
improvement in loan quality.
The balance in the allowance for possible loan losses was
$171.0 million or 1.87% of total loans at March 31, 1994,
compared to $173.4 million or 1.93% at December 31, 1993 and
$166.0 million or 1.95% at March 31, 1993.
Net charge-offs were $10.9 million or .49% of average loans
in the first quarter of 1994 compared to $13.8 million or .66% of
average loans in the first quarter of 1993. Recoveries were $2.3
million in the first quarter of 1994 compared to $2.6 million in
the same period of last year.
Determining the level of the allowance for possible loan
losses at any given date is difficult, particularly in a
continually changing economy. Management must make estimates,
using assumptions and information which are often subjective and
changing. Management continues to review Meridian's loan
portfolio in light of a changing economy and possible future
changes in the banking and regulatory environment. Although the
economy continues to improve slowly, the balance in the allowance
at March 31, 1994 reflects Meridian's continuing concerns about
the strength and the duration of the current economic recovery,
especially in the commercial and construction real estate sectors
of the economy, in the geographic markets served by Meridian. In
management's opinion, the allowance for possible loan losses is
adequate at March 31, 1994.
Table 6 presents an analysis of the activity in the
allowance for possible loan losses. Table 7 presents a summary
of various indicators of credit quality.
Non-performing assets are comprised of non-accrual loans,
loans categorized as troubled debt restructurings, and assets
acquired in foreclosures, which includes in-substance
foreclosures. Non-performing assets do not include loans past
due ninety days or more as to interest or principal which are
well secured and in the process of collection.
Generally, a loan is classified as non-accrual when it is
determined that the collection of interest or principal is
doubtful, or when a default of interest or principal has existed
for 90 days or more, unless such loan is well secured and in the
process of collection. When the accrual of interest is
discontinued, unpaid interest is reversed through a charge to
interest income. The majority of non-accrual loans are secured by
various forms of collateral, the ultimate recoverability of which
is, however, subject to economic conditions and other factors.
Meridian's non-accrual loans, which totalled $118.7 million
at March 31, 1994, included eight loans with balances in excess
of $2.5 million. These loans aggregated $27.9 million or 24% of
total non-accrual loans at the end of the first quarter of 1994.
A loan is categorized as a troubled debt restructuring if
the original interest rate on the loan, repayment terms, or both,
were restructured on a below market basis, due to a deterioration
in the financial condition of the borrower.
A loan is classified as an in-substance foreclosure when the
borrower is perceived to have little or no equity in the project,
there is no apparent ability or willingness of the borrower to
rebuild equity or repay the loan in the foreseeable future, and
the bank can reasonably anticipate proceeds for repayment only
from the operation or sale of the collateral. These assets are
carried at the lower of cost or fair value, less estimated
selling expenses.
Assets acquired in foreclosures (except consumer related),
which totalled $50.5 million at the end of the first quarter of
1994, included three properties with balances in excess of $2.5
million. These properties aggregated $15.6 million or 31% of
assets acquired in foreclosures. At present, the marketability
of Meridian's foreclosed real estate remains somewhat limited,
principally because of general illiquidity in the commercial real
estate market. If real estate values decline further, additional
writedowns of the current portfolio may be necessary and
foreclosures may increase.
Reference should be made to Table 3 for a summary of the
period-end balances in the loan portfolio. There has not been a
significant change in the percentage of each category to total
loans from a year ago.
In addition, reference should be made to Table 8 for a
breakdown of commercial loans by major industry and to Table 9
for a breakdown of commercial real estate loans by category. As
can be seen in these tables, Meridian's portfolio of commercial
loans and commercial real estate loans is diversified and covers
a wide range of borrowers. This diversification generally
characterizes the economy of Meridian's primary market area. Of
Meridian's commercial real estate loans, almost all, or 98%, are
to borrowers for property in Pennsylvania, Delaware, and New
Jersey, of which Pennsylvania has 81%, or the largest single
share. In connection with the decision to extend credit to
particular borrowers, Meridian takes into account, among other
things, asset diversification and particular risks presented by
the different industries in which such borrowers compete, in
light of changing economic circumstances.
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 March 31, 1994, Meridian did
not have any industry concentration or other known concentration
of commercial loans and commitments that exceeded 10% of total
loans and commitments. However, the effect of the recession has
had a negative impact on the financial performance of many
companies involved in retail trade. At March 31, 1994 Meridian's
loans to companies in retail trade totalled $743.6 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 $361.4 million and loans to
automobile dealers of $382.2 million. Loans to companies in
retail trade included $15.7 million of loans in a non-accrual
status at March 31, 1994. This amount represents 13% and 9% of
non-performing loans and non-performing assets, respectively, at
the end of the first quarter of 1994. Meridian has no foreign
loan exposure.
Meridian's policy has been to participate selectively in
large, public, highly leveraged transactions. The majority of
such transactions is currently in the telecommunications industry
and its cable television and cellular phone segments. According
to the guidelines issued by the Federal Reserve Board, loans and
exposures are characterized as highly leveraged transactions if
they meet certain defined leverage criteria and the total
financing package (including all obligations held by all
participants) originally exceeded $20 million. At March 31,
1994, Meridian's highly leveraged transactions aggregated $66.0
million in outstanding balances or less than 1% of total loans
and an additional $28.4 million in commitments. All such
balances were current as to principal and interest at March 31,
1994. Cable television and cellular phone exposures represented
$43.5 million of such loans outstanding and $16.5 million of the
commitments outstanding.
Potential problem loans consist of loans which are included
in performing loans at March 31, 1994 but for which potential
credit problems of the borrowers have caused management to have
concerns as to the ability of such borrowers to comply with
present repayment terms. At March 31, 1994, such potential
problem loans, not included in Table 7, aggregated approximately
$31 million, unchanged from the balance at December 31, 1993. No
loans to companies in retail trade were included in potential
problem loans at March 31, 1994. Depending on the state of the
economy and the impact thereof on Meridian's borrowers, as well
as other future events, these loans and others not currently so
identified could be classified as non-performing assets in the
future.
OTHER INCOME
Other income increased by $9.4 million or 18% between the
first quarters of 1994 and 1993.
Mortgage banking revenues were $7.9 million in the first
quarter of 1994, an increase of $10.8 million over the first
quarter of 1993. Mortgage banking revenues were negatively
impacted in the first quarter of 1993 by amortization of $19.5
million for purchased mortgage servicing rights, which are
recorded as a reduction of revenues. There was no amortization
in the first quarter of 1994 since all purchased mortgage
servicing rights are in the process of being sold, and have been
written down to fair value. Exclusive of the change in the
amortization of purchased mortgage servicing rights, mortgage
banking revenues declined by $8.7 million between the two
periods. Servicing fee revenues declined $2.4 million, primarily
as a result of a lower mortgage loan servicing portfolio. Gains
on the sale of mortgage loans and mortgage servicing decreased by
$4.8 million between the two periods. The mortgage portfolio
serviced by Meridian Mortgage Corporation was $6.9 billion at
March 31, 1994 compared to $9.2 billion at March 31, 1993. The
decline was caused primarily by mortgage loan refinancing
activity and sales of mortgage servicing.
Broker-dealer and investment banking revenues totalled $15.3
million in the first quarter of 1994 compared to $12.8 million in
the same period a year ago, an increase of 19%. The increase in
revenues was attributable to an increase in net trading gains and
higher levels of commissions and related fees.
Trust revenues were $10.8 million in the first quarter of
1994 compared to $10.5 million in the same period of last year. A
higher level of corporate and institutional revenues was the
primary reason for the increase.
Service charges on deposits increased by $496 thousand, or
4%, for the three months ended March 31, 1994 compared to the same
period of last year. Increases in certain fees for deposit
products, as well as additional deposit accounts because of bank
acquisitions over the past year, contributed to the higher level
of service charges.
Net securities gains were $690 thousand in the first quarter
of 1994 compared to gains of $6.0 million in the same period of
last year. The amount in 1994 was comprised of gains of $725
thousand and losses $35 thousand. These net gains are in addition
to losses of $7 thousand from sales primarily of certain mortgage-
related investments, which are included in broker-dealer and
investment banking revenues. The gains in both years resulted
mainly from sales of investments classified as available for sale
and calls of investments held to maturity.
OTHER EXPENSES
Other expenses for the first quarter of 1994 were $139.6
million compared to $144.3 million for the same quarter of 1993, a
decrease of $4.7 million, or 3%. Increases in personnel,
occupancy and equipment expense were more than offset by decreases
in several categories of other operating expenses.
Salaries and employee benefits totalled $75.2 million in the
first quarter of 1994 compared to $70.6 million in the first
quarter of 1993, an increase of 6%. An increase in staff levels,
primarily in the banking unit because of acquisitions over the
past year and in the broker-dealer and investment banking function
because of ongoing expansion, and an increase in commissions and
other incentive-related compensation contributed to the increase
in expenses. Higher levels of pension and medical insurance
expenses also contributed to the increase.
Net occupancy and equipment expense was $21.8 million in the
first quarter of 1994 compared to $20.0 million in the same period
last year, an increase of 9%. The cost of snow removal, which
approximated $1.2 million in 1994, was the main reason for the
increase between the two periods.
Other operating expenses were $42.6 million in the first
quarter of 1994 compared to $53.7 million in the first quarter of
1993. Contributing to the improvement between the two periods
were decreases in such expense categories as advertising expense,
expenses related to foreclosed real estate, and FDIC deposit
insurance expense.
PROVISION FOR INCOME TAXES
The effective tax rate was 31% in the first quarter of 1994,
up from 30% in the same quarter of 1993. The rate for the entire
year of 1993 was 28%. The tax rate for both periods was less than
the federal statutory rate of 35% primarily because of tax-exempt
investment and loan income.
CAPITAL RESOURCES
Meridian's capital adequacy at March 31, 1994 can be
determined by analyzing the capital ratios presented in Table 10.
Total shareholders' equity at March 31, 1994 was $1.193
billion compared to $1.086 billion at March 31, 1993, an increase
of 10%. Total shareholders' equity was $1.186 billion at December
31, 1993. The ratio of total shareholders' equity to total assets
was 8.52% at March 31, 1994 compared to 7.67% one year ago and
8.42% at December 31, 1993.
Meridian's consolidated ratios at March 31, 1994 exceeded all
regulatory requirements. The risk-based capital ratio was 13.81%
at March 31, 1994 compared to 12.91% a year ago and 13.67% at
December 31, 1993. The ratio of tangible shareholders' equity to
assets was 8.14% at March 31, 1994 compared to 6.83% a year ago
and 7.78% at December 31, 1993. The risk-based capital ratios of
each of Meridian's commercial banks also exceeded regulatory
requirements at March 31, 1994, as shown in the table.
Federal Reserve Board guidelines define a well capitalized
institution as having a Tier 1 capital ratio of 6% or more, a
total risk-based capital ratio of 10% or more, and a leverage
ratio of 5% or more. Meridian's consolidated ratios at March 31,
1994 exceeded these guidelines, as did the ratios of each of
Meridian's commercial banks.
<PAGE>
<TABLE>
<CAPTION>
TABLE 1: INDUSTRY SEGMENTS
(Dollars in Thousands)
Net Income
Three Months Ended Assets
March 31 March 31 December 31
1994 1993 1994 1993 1993
------- ------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Banking............... $35,525 $35,197 $13,526,411 $13,680,262 $13,751,699
Securities............ 2,284 2,329 483,437 495,573 333,088
Consolidated.......... $37,809 $37,526 $14,009,848 $14,175,835 $14,084,787
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 2 NET INTEREST INCOME, AVERAGE BALANCES AND RATES
(Dollars in Thousands)
1994 1993
Three Months Ended March 31 Three Months Ended March 31
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets
Short-Term Investments
Interest-Bearing Deposits in Other Banks...... $92,179 $768 3.38% $131,073 $1,239 3.83%
Federal Funds Sold and Securities Purchased
Under Agreements to Resell.................. 46,319 381 3.34 66,104 590 3.62
Total Short-Term Investments................ 138,498 1,149 3.36 197,177 1,829 3.76
Investment Securities
Taxable....................................... 2,381,720 31,204 5.24 2,223,642 34,214 6.15
Non-Taxable (1)............................... 359,518 7,355 8.18 352,111 7,132 8.10
Total Investment Securities................. 2,741,238 38,559 5.63 2,575,753 41,346 6.42
Investment Securities Available for Sale (1).... 278,814 4,798 6.98 843,383 15,122 7.17
Trading Account Securities (1).................. 114,103 1,883 6.69 106,455 1,548 5.90
Mortgage Loans Held for Sale.................... 374,116 6,404 6.85 426,572 8,331 7.81
Loans
Commercial (1)................................ 5,456,438 100,840 7.50 5,157,707 99,074 7.79
Real Estate-Residential....................... 1,010,351 20,690 8.19 1,048,203 24,952 9.52
Consumer...................................... 2,556,778 51,979 8.24 2,270,497 51,944 9.28
Total Loans (2)............................. 9,023,567 173,509 7.79 8,476,407 175,970 8.40
Total Interest-Earning Assets............... 12,670,336 226,302 7.21 12,625,747 244,146 7.80
Allowance for Possible Loan Losses................ (177,418) -- -- (170,781) -- --
Non-Interest Earning Assets....................... 1,412,876 -- -- 1,386,492 -- --
Total Assets, Interest Income............... $13,905,794 $226,302 6.57% $13,841,458 $244,146 7.12%
LIABILITIES
Interest-Bearing Liabilities
Interest-Bearing Deposits
NOW Accounts.................................. $1,447,921 $4,500 1.26% $1,255,285 $6,014 1.94%
Savings Deposits.............................. 1,897,103 8,762 1.87 1,647,620 10,393 2.56
Money Market Deposit Accounts................. 2,340,774 11,795 2.04 2,445,391 11,150 1.85
Short-Term Time Deposits...................... 786,081 6,468 3.34 965,001 8,842 3.72
Long-Term Time Deposits....................... 2,472,671 24,770 4.06 2,832,583 32,434 4.64
Certificates of Deposits of $100,000 or More.. 453,402 5,130 4.59 629,993 7,700 4.96
Total Interest-Bearing Deposits............. 9,397,952 61,425 2.65 9,775,873 76,533 3.17
Short-Term Borrowing
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase......... 663,805 4,813 2.94 653,710 5,004 3.10
Commercial Paper.............................. 2,989 18 2.44 3,100 23 3.01
Other Short-Term Borrowings................... 197,620 1,641 3.37 152,374 1,122 2.99
Total Short-Term Borrowings................. 864,414 6,472 3.04 809,184 6,149 3.08
Long-Term Debt and Other Borrowings............. 420,214 7,158 6.81 347,150 5,943 6.85
Total Interest-Bearing Liabilities.......... 10,682,580 75,055 2.85 10,932,207 88,625 3.28
Non-Interest Sources to Fund
Interest-Earning Assets
Non-Interest Bearing Deposits................. 1,694,603 -- -- 1,580,098 -- --
Other Liabilities............................. 340,531 -- -- 266,059 -- --
Shareholders' Equity.......................... 1,188,080 -- -- 1,063,094 -- --
Total Non-Interest Sources to Fund
Interest-Earning Assets................... 3,223,214 -- -- 2,909,251 -- --
Total Liabilities and Shareholders' Equity,
Interest Expense.......................... $13,905,794 75,055 2.19% $13,841,458 88,625 2.59%
NET INTEREST INCOME............................... $151,247 $155,521
NET INTEREST SPREAD (3)......................... 4.36% 4.52%
EFFECT OF NON-INTEREST BEARING FUNDS............ 0.46% 0.46%
NET INTEREST MARGIN (4)......................... 4.82% 4.98%
<CAPTION>
1993
Three Months Ended December 31
Interest Average
Average Income/ Yield/
Balance Expense Rate
------- ------- ----
<S> <C> <C> <C>
ASSETS
Interest-Earning Assets
Short-Term Investments
Interest-Bearing Deposits in Other Banks...... $103,938 $908 3.47%
Federal Funds Sold and Securities Purchased
Under Agreements to Resell.................. 40,091 600 5.94
Total Short-Term Investments................ 144,029 1,508 4.15
Investment Securities
Taxable....................................... 2,395,321 32,792 5.48
Non-Taxable (1)............................... 385,389 8,036 8.34
Total Investment Securities................. 2,780,710 40,828 5.87
Investment Securities Available for Sale (1).... 309,463 6,839 8.84
Trading Account Securities (1).................. 155,193 2,377 6.08
Mortgage Loans Held for Sale.................... 525,718 9,362 7.12
Loans
Commercial (1)................................ 5,388,314 106,594 7.85
Real Estate-Residential....................... 973,508 22,156 9.10
Consumer...................................... 2,522,528 53,667 8.44
Total Loans (2)............................. 8,884,350 182,417 8.15
Total Interest-Earning Assets............... 12,799,463 243,331 7.56
Allowance for Possible Loan Losses................ (176,144) -- --
Non-Interest Earning Assets....................... 1,486,771 -- --
Total Assets, Interest Income............... $14,110,090 $243,331 6.86%
LIABILITIES
Interest-Bearing Liabilities
Interest-Bearing Deposits
NOW Accounts.................................. $1,374,666 $5,072 1.46%
Savings Deposits.............................. 1,818,453 10,347 2.26
Money Market Deposit Accounts................. 2,351,590 11,198 1.89
Short-Term Time Deposits...................... 802,109 7,383 3.65
Long-Term Time Deposits....................... 2,502,896 27,244 4.32
Certificates of Deposits of $100,000 or More.. 537,651 6,420 4.74
Total Interest-Bearing Deposits............. 9,387,365 67,664 2.86
Short-Term Borrowing
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase......... 881,624 5,206 2.34
Commercial Paper.............................. 4,840 34 2.79
Other Short-Term Borrowings................... 125,426 2,087 6.60
Total Short-Term Borrowings................. 1,011,890 7,327 2.87
Long-Term Debt and Other Borrowings............. 445,292 7,562 6.79
Total Interest-Bearing Liabilities.......... 10,844,547 82,553 3.02
Non-Interest Sources to Fund
Interest-Earning Assets
Non-Interest Bearing Deposits................. 1,777,123 -- --
Other Liabilities............................. 324,589 -- --
Shareholders' Equity.......................... 1,163,831 -- --
Total Non-Interest Sources to Fund
Interest-Earning Assets................... 3,265,543 -- --
Total Liabilities and Shareholders' Equity,
Interest Expense.......................... $14,110,090 $82,553 2.32%
NET INTEREST INCOME............................... $160,778
NET INTEREST SPREAD (3)......................... 4.54%
EFFECT OF NON-INTEREST BEARING FUNDS............ 0.46%
NET INTEREST MARGIN (4)......................... 5.00%
<FN>
(1) The indicated interest income and average yields are
presented on a taxable-equivalent basis. The
taxable-equivalent adjustments included above are $4,541,
$5,088, and $5,241 for the first quarter of 1994 and 1993,
and the fourth quarter of 1993, respectively.
(2) Loan fees have been included in interest income. Average
loan balances include non-accrual loans.
(3) Net Interest Spread is the arithmetic difference between the
yield on interest-earning assets and the rate paid on
interest-bearing liabilities.
(4) Net Interest Margin is computed by dividing net interest
income by average interest-earning assets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 3: LOANS
(Dollars in Thousands)
March 31, 1994 March 31, 1993 December 31, 1993
Amount % Amount % Amount %
------ ---- ------ ---- ------ ---
<S> <C> <C> <C> <C> <C> <C>
Commercial Loans
Real Estate - Commercial Mortgage.......... $1,628,919 18% $1,619,317 19% $1,654,690 18%
Real Estate - Construction................. 300,261 3 301,560 4 292,177 3
Commercial, Financial and Agricultural..... 3,623,631 40 3,280,910 38 3,500,243 40
Total Commercial Loans.................. 5,552,811 61 5,201,787 61 5,447,110 61
Real Estate - Residential..................... 1,020,592 11 1,015,203 12 993,459 11
Consumer Loans
Real Estate - Home Equity.................. 676,749 7 637,162 7 680,440 7
Revolving Credit........................... 83,360 1 74,863 1 79,613 1
Other Consumer Loans....................... 1,824,315 20 1,593,237 19 1,787,422 20
Total Consumer Loans.................... 2,584,424 28 2,305,262 27 2,547,475 28
Total Loans, Net of Unearned Discount $9,157,827 100% $8,522,252 100% $8,988,044 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 4: INVESTMENT SECURITIES AND INVESTMENTS SECURITIES AVAILABLE FOR SALE
(Dollars In Thousands)
Investment Securities
A summary of the amortized cost and approximate fair value of investment securities is as follows:
March 31, 1994 March 31, 1993 December 31, 1993
Approximate Approximate Approximate
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
----- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
United States Government Securities.... $683,579 $675,812 $652,902 $666,856 $630,338 $635,047
Mortgage-Backed Securities............. 1,525,986 1,509,588 1,659,898 1,680,941 1,555,122 1,565,398
State and Municipal Securities......... 336,041 339,700 350,159 360,086 375,582 387,298
Other Securities....................... 267,726 266,597 249,515 260,663 223,442 225,357
Total Investment Securities...... $2,813,332 $2,791,697 $2,912,474 $2,968,546 $2,784,484 $2,813,100
<CAPTION>
A summary of gross unrealized gains and losses on investment securities is as follows:
March 31, 1994 March 31, 1993 December 31, 1993
Gross Gross Gross Gross Gross Gross
Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses Gains Losses
----- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
United States Government Securities.... $2,077 $9,844 $14,517 $563 $5,644 $935
Mortgage-Backed Securities............. 8,036 24,434 22,007 964 15,449 5,173
State and Municipal Securities......... 6,867 3,208 10,114 187 11,942 226
Other Securities....................... 1,321 2,450 15,471 4,323 2,624 709
Total Investment Securities...... $18,301 $39,936 $62,109 $6,037 $35,659 $7,043
<CAPTION>
Investment Securities Available for Sale
A summary of the amortized cost and approximate fair value of investment securities available for sale is as follows:
March 31, 1994 March 31, 1993 December 31, 1993
Approximate Approximate Approximate
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
----- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
United States Government Securities.... $101,450 $102,446 - - $103,086 $105,997
Mortgage-Backed Securities............. 107,478 107,794 $595,231 $615,682 125,153 128,836
State and Municipal Securities......... 33,367 35,396 115,817 124,066 34,306 37,029
Other Securities....................... 16,442 20,052 12,447 14,955 13,118 16,290
Total Investment Securities
Available for Sale............. $258,737 $265,688 $723,495 $754,703 $275,663 $288,152
<CAPTION>
A summary of gross unrealized gains and losses on investment securities available for sale is as follows:
March 31, 1994 March 31, 1993 December 31, 1993
Gross Gross Gross Gross Gross Gross
Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses Gains Losses
----- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
United States Government Securities.... $1,524 $528 - - $2,998 $87
Mortgage-Backed Securities............. 1,064 748 $20,566 $115 3,782 $99
State and Municipal Securities......... 2,029 - 8,249 - 2,723 -
Other Securities....................... 3,638 28 2,546 38 3,189 17
Total Investment Securities
Available for Sale............. $8,255 $1,304 $31,361 $153 $12,692 $203
</TABLE>
<TABLE>
<CAPTION>
TABLE 5: DEPOSITS
(Dollars In Thousands)
March 31, 1994 March 31, 1993 December 31, 1993
Amount % Amount % Amount %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
Non-Interest Bearing Deposits............... $1,786,628 16% $1,605,090 14% $1,849,425 16%
NOW Accounts................................ 1,454,132 13 1,276,341 11 1,467,758 13
Savings Deposits............................ 1,942,099 17 1,701,783 15 1,867,011 17
Money Market Deposit Accounts............... 2,281,365 21 2,383,565 21 2,385,937 21
Short-Term Time Deposits.................... 773,380 7 942,907 9 794,012 7
Long-Term Time Deposits..................... 2,428,960 22 2,796,162 25 2,504,231 22
Certificates of Deposit of $100,000 or More. 460,788 4 573,427 5 477,777 4
Total................................... $11,127,352 100% $11,279,275 100% $11,346,151 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 6: ALLOWANCES FOR POSSIBLE LOAN LOSSES
(Dollars In Thousands)
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
1994 1993 1993 1993 1993
--------- ------------ ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Period........... $173,388 $169,568 $167,961 $166,044 $165,512
Additions (Deductions):
Acquired Allowances................... - 1,704 - 1,390 -
Loans Charged-Off:
Commercial (includes
Commercial Real Estate)....... (8,400) (9,415) (11,887) (13,029) (12,099)
Real Estate - Residential.......... (2,309) (501) (699) (264) (129)
Consumer........................... (2,442) (4,590) (2,472) (3,251) (4,173)
Total Loans Charged-Off... (13,151) (14,506) (15,058) (16,544) (16,401)
Recoveries on Charged-Off Loans:
Commercial (includes
Commercial Real Estate)....... 1,270 3,066 884 1,272 1,348
Real Estate - Residential.......... 67 91 6 21 45
Consumer........................... 956 985 1,144 1,122 1,206
Total Recoveries on
Charged-Off Loans.. 2,293 4,142 2,034 2,415 2,599
Net Loans Charged-Off................. (10,858) (10,364) (13,024) (14,129) (13,802)
Provision Charged to
Operating Expense............ 8,500 12,480 14,631 14,656 14,334
Balance at End of Period................. $171,030 $173,388 $169,568 $167,961 $166,044
Net Charge-Offs to Average Loans......... 0.49% 0.46% 0.59% 0.66% 0.66%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 7: CREDIT QUALITY
(Dollars in Thousands)
March 31, December 31, September 30, June 30, March 31,
1994 1993 1993 1993 1993
--------- ------------ ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Non-Accrual Loans
Commercial
Real Estate-Commercial Mortgage...................... $28,913 $30,544 $34,623 $38,131 $33,268
Real Estate-Construction............................. 3,910 2,834 2,848 2,953 5,501
Commercial, Financial and Agricultural............... 58,846 59,882 60,676 68,178 72,609
Total Commercial.................................. 91,669 93,260 98,147 109,262 111,378
Real Estate-Residential................................ 25,100 29,843 30,412 23,082 22,841
Consumer............................................... 1,937 1,162 1,425 1,635 1,088
Total Non-Accrual Loans........................... 118,706 124,265 129,984 133,979 135,307
Restructured Loans
Real Estate-Commercial Mortgage........................ 11 908 13 - -
Real Estate-Construction............................... 38 1,419 42 44 45
Commercial, Financial and Agricultural................. 812 1,004 876 834 837
Total Restructured Loans.......................... 861 3,331 931 878 882
TOTAL NON-PERFORMING LOANS................... 119,567 127,596 130,915 134,857 136,189
Assets Acquired in Foreclosures and Assets Considered
to be in an In-Substance Foreclosure Status
Foreclosed Real Estate............................... 36,726 29,497 35,081 27,945 30,944
Assets Related to Consumer Loans..................... 1,438 1,265 1,584 1,592 1,960
In-Substance Foreclosures............................ 13,752 20,454 26,270 31,514 36,250
Total Assets Acquired.............................. 51,916 51,216 62,935 61,051 69,154
TOTAL NON-PERFORMING ASSETS.................. $171,483 $178,812 $193,850 $195,908 $205,343
Allowance for Possible Loan Losses as a Percentage of:
Loans.................................................. 1.87% 1.93% 1.92% 1.95% 1.95%
Non-Performing Loans................................... 143% 136% 130% 125% 122%
Non-Performing Assets.................................. 100% 97% 87% 86% 81%
Total Non-Performing Loans as a Percentage
of Loans............................................... 1.31% 1.42% 1.48% 1.56% 1.60%
Total Non-Performing Assets as a Percentage
of Loans and Assets Acquired in Foreclosures........... 1.86% 1.98% 2.18% 2.26% 2.39%
Loans Past Due 90 or more Days as to Interest or Principal
not Included Above (Includes $8,333 of Real Estate-
Residential as of March 31, 1994)....................... $27,446 $24,798 $26,692 $39,330 $38,865
Total Non-Performing Assets and Loans Past Due
90 or more Days as to Interest or Principal............. $198,930 $203,610 $220,542 $235,238 $244,208
Total Non-Performing Assets and Loans Past Due 90 or
more Days as to Interest or Principal as a Percentage
of Loans and Assets Acquired in Foreclosures............ 2.16% 2.25% 2.48% 2.71% 2.84%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 8: COMMERCIAL LOANS BY MAJOR INDUSTRY CLASSIFICATION
(Dollars in Thousands)
March 31, 1994 March 31, 1993
Loans Non-Accrual Loans Non-Accrual
Outstanding % Loans % Outstanding % Loans %
----------- --- ----------- --- ----------- --- ----------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Agriculture............................. $161,892 3% $863 1% $132,400 3% $391 *
Mining.................................. 15,130 * 55 * 16,833 * 279 *
Construction............................ 216,508 4 2,588 3 212,951 4 3,898 3%
Manufacturing........................... 1,024,129 18 21,810 24 915,689 18 20,607 19
Transportation, Communication and
Public Utilities..................... 315,484 6 1,813 2 275,388 5 2,252 2
Wholesale Trade......................... 340,787 6 5,464 6 326,743 6 3,527 3
Retail Trade............................ 743,644 13 15,696 17 729,147 14 29,416 26
Finance, Insurance and Real Estate...... 1,198,255 22 20,642 23 1,208,092 23 24,612 22
Services................................ 1,378,963 25 20,445 22 1,275,062 25 25,302 24
Public Administration................... 9,012 * 106 * 10,863 - - -
Other................................... 149,007 3 2,187 2 98,619 2 1,094 1
Total................................. $5,552,811 100% $91,669 100% $5,201,787 100% $111,378 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 9:COMMERCIAL REAL ESTATE
March 31
(Dollars in Thousands)
Outstanding Loans March 31, 1994 March 31, 1993
Investor-Developer Owner-Occupied Total Total
Commercial Commercial Commercial Commercial
Mortgage Construction Mortgage Construction Mortgage Construction Mortgage Construction
---------- ------------ ---------- ------------ ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Apartment Buildings........ $213,713 $3,476 - - $213,713 $3,476 $230,182 $3,979
Office Buildings........... 157,896 19,883 $174,339 $4,884 332,235 24,767 299,008 33,409
Residential Properties..... - 84,667 - - - 84,667 52,359 100,022
Shopping Centers........... 138,359 34,493 78,482 5,213 216,841 39,706 161,421 33,600
Land....................... - 50,066 - - - 50,066 - 43,122
Industrial Plants.......... 90,381 19,969 214,026 2,386 304,407 22,355 302,910 28,081
Hotel/Motel/Restaurant..... 120,648 5,748 - - 120,648 5,748 126,611 5,269
Healthcare Facilities...... - - 87,852 43,501 87,852 43,501 98,934 31,276
Other...................... 113,393 11,748 239,830 14,227 353,223 25,975 347,892 22,802
Total.................... $834,390 $230,050 $794,529 $70,211 $1,628,919 (1) $300,261 (1) $1,619,317 $301,560
<FN>
(1) The geographic distribution by state is as follows:
Pennsylvania $1,569,319 (81%), Delaware $242,899 (13%), New
Jersey $77,766 (4%), and all other states $39,196 (2%).
</TABLE>
<TABLE>
<CAPTION>
Non-Accrual Loans March 31, 1994 March 31, 1993
Investor-Developer Owner-Occupied Total Total
Commercial Commercial Commercial Commercial
Mortgage Construction Mortgage Construction Mortgage Construction Mortgage Construction
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Apartment Buildings........ $7,661 $1,469 - - $7,661 $1,469 $4,748 $379
Office Buildings........... 1,459 - $1,164 - 2,623 - 7,078 -
Residential Properties..... - 373 - - - 373 - 4,215
Shopping Centers........... 3,403 66 1,224 - 4,627 66 1,332 -
Land....................... - 1,659 - - - 1,659 - 596
Industrial Plants.......... 792 - 4,007 - 4,799 - 3,663 -
Hotel/Motel/Restaurant..... 3,197 293 - - 3,197 293 6,415 311
Other...................... 2,805 - 3,201 $50 6,006 50 10,032 -
Total.................... $19,317 $3,860 $9,596 $50 $28,913 (2) $3,910 (2) $33,268 $5,501
<FN>
(2) The geographic distribution by state is as follows:
Pennsylvania $27,574 (84%), Delaware $2,219 (7%), New Jersey
$1,511 (5%), and all other states $1,519 (4%).
</TABLE>
<TABLE>
<CAPTION>
Assets Acquired in
Foreclosures (3)
March 31, March 31,
1994 1993
--------- ---------
<S> <C> <C>
Apartment Buildings.................... $368 $105
Office Buildings....................... 14,030 13,750
Shopping Centers....................... 4,970 174
Residential Properties................. 293 7,802
Land................................... 8,439 12,801
Industrial Plants...................... 6,191 4,778
Hotel/Motel/Restaurant................. 2,496 8,408
Other.................................. 2,859 5,385
Total................................ $39,646 (4) $53,203
<FN>
(3) Includes Assets Considered to be in an In-Substance
Foreclosure status.
(4) The geographic distribution by state is as follows:
Pennsylvania $29,411 (74%), Delaware $388 (1%), New Jersey
$6,542 (17%), and all other states $3,305 (8%).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 10: CAPITAL ADEQUACY
March 31, December 31, September 30, June 30, March 31,
1994 1993 1993 1993 1993
--------- ------------ ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Consolidated
Total Shareholders' Equity to Assets...... 8.52% 8.42% 8.00% 7.81% 7.67%
Tangible Shareholders' Equity to Assets... 8.14 7.78 7.36 7.06 6.83
Risk-Based Capital
Tier 1............................... 9.73 9.60 9.12 8.95 8.74
Tier 2............................... 4.08 4.07 4.04 4.10 4.17
Total (1,2)........................ 13.81 (3) 13.67 13.16 13.05 12.91
Leverage (1,2)............................ 8.12 (3) 7.84 7.41 7.30 7.16
Tangible Leverage......................... 8.03 7.43 7.29 7.18 7.03
Banking
Total Risk-Based Capital (1,2)
Meridian Bank......................... 12.51 (3) 12.24 11.71 11.47 11.32
Delaware Trust Company................ 13.12 13.07 12.87 12.88 12.61
Meridian Bank, New Jersey............. 15.19 16.69 16.55 17.42 -
<FN>
(1) The minimum ratios required by the Federal Reserve Board
guidelines are 4% for Tier 1 capital, 8% for total
risk-based capital, and a leverage ratio of 3% plus an
additional cushion of 100 to 200 basis points.
(2) Federal Reserve Board guidelines define a well-capitalized
institution as having a Tier 1 capital ratio of 6% or
more, a total risk-based capital ratio of 10% or more, and a
leverage ratio of 5% or more.
(3) Excludes purchased mortgage servicing rights of $28.3
million.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31, March 31, December 31,
1994 1993 1993
--------- --------- ------------
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks........................................... $480,936 $654,511 $587,587
Short-Term Investments
Interest-Bearing Deposits in Other Banks....................... 92,104 115,456 101,860
Federal Funds Sold and Securities Purchased Under
Agreements to Resell........................................ 85,083 49,630 14,694
Total Short-Term Investments................................ 177,187 165,086 116,554
Trading Account Securities........................................ 130,195 133,464 36,616
Investment Securities Available for Sale
(Fair Value $754,703 and $288,152 at March 31, 1993 and
December 31, 1993, Respectively)............................ 265,688 723,495 275,663
Investment Securities
(Fair Value $2,791,697, $2,968,546 and $2,813,100 at March 31,
March 31, 1993 and December 31, 1993, Respectively)......... 2,813,332 2,912,474 2,784,484
Mortgage Loans and Other Assets Held for Sale..................... 397,366 291,853 655,344
Total Loans, Net of Unearned Discount............................. 9,157,827 8,522,252 8,988,044
Less Allowance for Possible Loan Losses...................... 171,030 166,044 173,388
Net Loans................................................ 8,986,797 8,356,208 8,814,656
Premises and Equipment............................................ 242,537 238,501 241,584
Accrued Interest Receivable....................................... 98,425 104,493 103,250
Other Assets...................................................... 417,385 595,750 468,549
Total Assets........................................... $14,009,848 $14,175,835 $14,084,787
LIABILITIES
Deposits
Non-Interest Bearing Deposits.................................. $1,786,628 $1,605,090 $1,849,425
Interest-Bearing Deposits...................................... 9,340,724 9,674,185 9,496,726
Total Deposits.............................................. 11,127,352 11,279,275 11,346,151
Short-Term Borrowings
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase.............................. 721,682 904,935 540,255
Commercial Paper............................................... 5,500 - 2,500
Other Short-Term Borrowings.................................... 302,952 131,410 248,968
Total Short-Term Borrowings................................. 1,030,134 1,036,345 791,723
Long-Term Debt and Other Borrowings............................... 365,028 470,757 421,291
Accrued Interest Payable.......................................... 51,800 62,859 59,581
Other Liabilities................................................. 242,144 239,701 280,408
Total Liabilities....................................... 12,816,458 13,088,937 12,899,154
COMMITMENTS AND CONTINGENCIES
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 - 58,162,266 shares at March 31, 1994; Issued and
Outstanding - 56,721,890 and 58,154,486 shares at March 31,
and December 31, 1993, Respectively......................... 290,811 283,609 290,761
Surplus........................................................... 205,209 185,019 205,173
Retained Earnings................................................. 713,295 618,270 689,699
Treasury Stock - 521,951 shares in 1994 at cost................... (15,925) - -
Total Shareholders' Equity................................ 1,193,390 1,086,898 1,185,633
Total Liabilities and Shareholders' Equity........... $14,009,848 $14,175,835 $14,084,787
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Data)
Three Months Ended
March 31,
1994 1993
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans................................. $172,053 $173,971
Interest on Trading Account Securities..................... 1,774 1,548
Interest on Investment Securities Available for Sale....... 4,396 14,458
Interest on Investment Securities.......................... 35,985 38,921
Interest on Mortgage Loans Held for Sale................... 6,404 8,331
Other Interest Income...................................... 1,149 1,829
Total Interest Income................................... 221,761 239,058
INTEREST EXPENSE
Interest on Deposits....................................... 61,425 76,533
Interest on Short-Term Borrowings.......................... 6,472 6,149
Interest on Long-Term Debt and Other Borrowings............ 7,158 5,943
Total Interest Expense.................................. 75,055 88,625
NET INTEREST INCOME........................................... 146,706 150,433
PROVISION FOR POSSIBLE LOAN LOSSES............................ 8,500 14,334
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES....................................... 138,206 136,099
OTHER INCOME
Trust...................................................... 10,788 10,478
Mortgage Banking........................................... 7,891 16,548
Amortization of and Reserves for Purchased Mortgage
Servicing Rights and Other Servicing-Related Assets.... (41) (19,475)
Net Mortgage Banking................................. 7,850 (2,927)
Broker-Dealer and Investment Banking....................... 15,309 12,825
Service Charges on Deposit Accounts........................ 13,126 12,630
Fees for Other Customer Services .......................... 10,313 9,761
Net Securities Gains....................................... 690 5,970
Other Operating Income..................................... 2,497 2,481
Total Other Income...................................... 60,573 51,218
OTHER EXPENSES
Salaries and Employee Benefits............................. 75,182 70,629
Net Occupancy Expense...................................... 12,072 10,508
Equipment Expense.......................................... 9,723 9,478
Other Operating Expenses................................... 42,629 53,681
Total Other Expenses.................................... 139,606 144,296
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE................... 59,173 43,021
Provision for Income Taxes.................................... 18,634 12,716
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE.................................... 40,539 30,305
Cumulative Effect on Prior Years of Changes in Method of
Accounting for:
Income Taxes............................................... - 7,221
Postemployment Benefits, Net of Related Taxes of $1,470.... (2,730) -
NET INCOME.................................................... $37,809 $37,526
PER COMMON SHARE
Income Before Cumulative Effect of Change
in Accounting Principle
Primary................................................. $0.70 $0.53
Fully Diluted........................................... $0.70 $0.53
Cumulative Effect on Prior Years of Changes in
Accounting Principles
Primary................................................. ($0.05) $0.13
Fully Diluted........................................... ($0.05) $0.13
Net Income
Primary................................................. $0.65 $0.66
Fully Diluted........................................... $0.65 $0.66
Dividends Declared and Paid................................ $0.32 $0.30
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands) For the Three Months Ended March 31
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income From Operating Activities.......................... $37,809 $37,526
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities
Depreciation and Amortization (Including Amortization of
Purchased Mortgage Servicing Rights)..................... 10,415 29,879
Deferred Tax Expense (Benefit)............................. 243 (3,942)
Provision for Possible Loan Losses......................... 8,500 14,334
Provision for Other Real Estate Losses and Mortgage
Servicing Recourse........................................ 2,879 6,800
Net Gains - Investment Securities.......................... (382) (532)
Net Gains - Investment Securities Available for Sale....... (301) (5,439)
Gains on Sales of Mortgage Servicing....................... 0 (8,522)
Increase in Trading Account Securities..................... (93,579) (68,207)
Decrease in Mortgage Loans and Other Assets Held for Sale.. 251,822 204,869
Decrease in Other Assets................................... 55,703 73,867
Increase (Decrease) in Other Liabilities................... (47,621) 39,309
Other, Net................................................. (752) 414
Net Cash Provided by Operating Activities 224,736 320,356
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Short-Term Investments............ 90,025 119,000
Purchases of Short-Term Investments........................... (80,269) (68,407)
Proceeds from Maturities, Calls and Paydowns of Securities.... 422,672 272,460
Proceeds from Sales of Investment Securities.................. 742 3,797
Purchases of Investment Securities............................ (452,262) (723,485)
Proceeds from Sales and Maturities of Investment Securities
Available for Sale........................................... 24,420 311,710
Purchases of Investment Securities Available for Sale......... (6,811) (84,550)
Net Principal Collected (Disbursed) on Loans to Customers..... (191,400) 1,414
Proceeds from Sales of Premises and Equipment................. 1,562 1,400
Purchases of Premises and Equipment........................... (10,250) (8,576)
Proceeds from Sales of Mortgage Servicing..................... 2,114 5,071
Purchases of Mortgage Servicing............................... 0 (309)
Other, Net.................................................... 9,377 9,562
Net Cash Used for Investing Activities..................... (190,080) (160,913)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Deposits...................................... (218,335) (495,702)
Net Increase in Short-Term Borrowings......................... 238,411 159,352
Proceeds from Issuance of Long-Term Debt...................... 0 157,662
Purchases of Treasury Stock................................... (16,774) 0
Repayment of Long-Term Borrowings............................. (56,439) (2,666)
Proceeds from Issuance of Common Stock........................ 671 5,831
Cash Dividends Paid to Common Shareholders.................... (18,452) (15,801)
Net Cash Used for Financing Activities..................... (70,918) (191,324)
CASH AND CASH EQUIVALENTS
Net Decrease During the Period............................. (36,262) (31,881)
Balance at Beginning of the Period......................... 602,281 736,022
Balance at End of the Period............................... $566,019 $704,141
</TABLE>
Cash and cash equivalents include cash and due from banks,
federal funds sold, and securities purchased under agreements to
resell. Income tax payments totaled $752 in 1994, and $8,804 in
1993. Interest payments totaled $96,406 in 1994 and $101,597 in
1993. Noncash investing activity consists of net transfers of
loans in liquidation to other real estate aggregating $37,945 in
1994, and $16,931 in 1993.
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Thousands)
Common Stock Retained Treasury
Shares Amount Surplus Earnings Stock Total
------ ------ ------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
FOR THE THREE MONTHS ENDED
MARCH 31, 1993
Balance at January 1, 1993 as previously reported.. 45,584,924 $227,925 $177,597 $498,896 $904,418
Adjustment for merger accounted for as a
pooling of interests............................. 10,906,472 54,521 2,754 97,626 154,901
Balance at January 1, 1993 as restated............. 56,491,396 $282,446 $180,351 $596,522 $1,059,319
Net Income......................................... - - - 37,526 37,526
Common Stock Dividends Declared.................... - - - (15,801) (15,801)
Issuances of Stock Under Dividend Reinvestment,
Stock Option and Employee Benefit Plans......... 230,494 1,163 4,670 - 5,833
Reversal of Unrealized Loss on Marketable
Equity Securities............................... - - - 23 23
Cash in Lieu of Fractional Shares.................. - - (2) - (2)
Balance at March 31, 1993.......................... 56,721,890 $283,609 $185,019 $618,270 $1,086,898
FOR THE THREE MONTHS ENDED
MARCH 31, 1994
Balance at January 1, 1994.......................... 58,154,486 $290,761 $205,173 $689,699 $1,185,633
Net Income.......................................... - - - 37,809 37,809
Common Stock Dividends Declared..................... - - - (18,452) (18,452)
Issuances of Stock Under Dividend Reinvestment,
Stock Option and Employee Benefit Plans.......... 40,979 50 42 (264) $849 677
Purchases of Treasury Stock......................... (555,150) - - - (16,774) (16,774)
Unrealized Gain on Investment Securities Available
for Sale.......................................... - - - 4,503 - 4,503
Cash in Lieu of Fractional Shares................... - - (6) - - (6)
Balance at March 31, 1994........................... 57,640,315 $290,811 $205,209 $713,295 ($15,925) $1,193,390
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
Notes to Consolidated Financial Statements
1) Summary of Significant Accounting Policies
The accounting policies and reporting practices of Meridian
Bancorp, Inc., (Meridian) are in accordance with generally
accepted accounting principles and have been followed on a
consistent basis except for the changes described in Note 4.
This Quarterly Report should be read in conjunction with the
1993 Annual Report. Financial information for the interim
periods is not independently audited. However, the financial
information furnished in this report reflects all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the financial condition and results of operations
of the interim periods. Such adjustments are of a normal
recurring nature.
The results of operations for the interim periods are not
necessarily indicative of the consolidated results to be expected
for the entire year.
The consolidated financial statements include the accounts
of Meridian and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Certain amounts in the 1993 financial statements have been
reclassified to conform with the presentation used in the 1994
financial statements. These reclassifications have no effect on
net income.
2) Acquisitions
On December 16, 1993, Meridian entered into a definitive
agreement to acquire McGlinn Capital Management, Inc., an
investment advisory firm with $2.8 billion in assets under direct
management for 500,000 warrants for shares of Meridian common
stock and cash. The transaction, which is subject to regulatory
approval, is expected to be completed by the end of the second
quarter of 1994. The transaction will be treated as a purchase
for financial accounting purposes.
3) Securities Transactions
Total gains (losses) from securities transactions, which
were included in the following categories in the other income
section of the consolidated statements of income, are as follows:
Three Months Ended
March 31,
1994 1993
Broker-Dealer and Investment Banking ($ 7,000) $ 1,000
Net Securities Gains 690,000 5,970,000
Total Securities Gains $683,000 $5,971,000
4) Accounting Changes
Effective January 1, 1994, Meridian adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits". This statement establishes
standards for employers who provide benefits to former employees
after employment but before retirement. Such benefits include,
among other things, severance, disability, and workers'
compensation benefits. The implementation of these new
accounting rules resulted in a charge of $4.2 million ($2.7
million after-tax or $.05 per share)in the first quarter of 1994.
Effective January 1, 1994, Meridian adopted 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 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 at March 31,
1994 was to increase shareholders' equity by $4.5 million or less
than 1%, representing the after-tax unrealized gain in the
available for sale portfolio.
Effective January 1, 1993, Meridian adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes". The implementation of these new tax accounting rules
resulted in an increase in consolidated net income of $7.2
million, or $.13 per share, in the first quarter of 1993.
5) Treasury Stock
In January 1994 the Board of Directors authorized the
repurchase of up to 1 million shares of common stock.
Repurchased shares will be used to satisfy the company's
obligations under the warrants to acquire 500,000 shares of
Meridian's common stock issuable in connection with the proposed
acquisition of McGlinn Capital Management, and obligations under
present and future employee stock option and other employee
benefit plans.
At March 31, 1994, treasury stock consisted of 521,951
shares with a cost of $15,925,000.
6) Commitments and Contingencies
At March 31, 1994, there were outstanding commitments,
contingent liabilities, and off-balance sheet financial
instruments on which management does not anticipate any material
losses. These include, among other things, commitments to extend
credit, letters of credit undertaken in the normal course of
business, and various off-balance sheet financial instruments
used in conducting Meridian's business activities and in managing
its balance sheet risks.
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>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
May 16, 1994 /s/ Michael J. Mizak, Jr.
Senior Vice President and Controller
(Authorized Officer and Principal
Accounting Officer)
