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, 1995 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)
(610) 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, 1995
COMMON STOCK ($5 Par Value) 57,805,658
(Title of Class) (Outstanding Shares)
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MERIDIAN BANCORP, INC.
FORM 10-Q
For the Quarter Ended March 31, 1995
Contents
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1995 and
March 31 and December 31,
1994
Consolidated Statements of Income for
the Three-Month Periods Ended
March 31, 1995 and 1994
Consolidated Statements of Cash Flows
for the Three-Month Periods Ended
March 31, 1995 and 1994
Consolidated Statements of Changes in
Shareholders' Equity for the
Three-Month Periods Ended March 31,
1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Management's Discussion and Analysis of
Earnings and Financial Position
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<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
1995 1994 1994 1994 1994
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest Income........................................ $273,735 $264,121 $257,210 $241,724 $221,985
Interest Expense....................................... 123,258 110,888 100,799 85,880 75,057
Net Interest Income.................................... 150,477 153,233 156,411 155,844 146,928
Provision for Possible Loan Losses..................... 8,021 6,069 6,493 6,699 8,825
Net Interest Income After Provision for
Possible Loan Losses................................ 142,456 147,164 149,918 149,145 138,103
Non-Interest Income.................................... 57,757 57,453 57,302 55,334 57,937
Non-Interest Expenses.................................. 140,404 144,102 153,686 145,012 136,868
Income Before Income Taxes and Cumulative Effect
of Change in Accounting Principle................... 59,809 60,515 53,534 59,467 59,172
Provision For Income Taxes............................ 18,574 16,370 16,914 18,683 18,633
Income Before Cumulative Effect of Change in
Accounting Principle................................ 41,235 44,145 36,620 40,784 40,539
Cumulative After-Tax Effect on Prior Years of Change
In Accounting Principle............................. - - - - (2,730)
Net Income ............................................ $41,235 $44,145 $36,620 $40,784 $37,809
Net Interest Margin (Taxable Equivalent Basis)......... 4.58% 4.60% 4.65% 4.85% 4.82%
Return on Average Assets............................... 1.13% 1.18% 0.97% 1.13% 1.10%
Return on Average Common Shareholders' Equity.......... 13.90% 14.33% 11.95% 13.74% 13.00%
Fully Diluted Earnings Per Share
Income Before Cumulative Effect of Change in
Accounting Principle............................. $0.73 $0.77 $0.63 $0.70 $0.70
Cumulative After-Tax Effect on Prior Years of
Change in Accounting Principle...................... - - - - ($0.05)
Net Income ......................................... $0.73 $0.77 $0.63 $0.70 $0.65
Dividends Per Common Share............................. $0.34 $0.34 $0.34 $0.34 $0.32
Ratio of Dividends to Net Income....................... 46% 44% 54% 48% 49%
FINANCIAL CONDITION
Average Balances
Securities............................................. $3,233,603 $3,398,587 $3,476,349 $3,183,606 $3,011,703
Loans.................................................. 9,775,050 9,545,556 9,499,372 9,345,021 9,023,564
Assets................................................. 14,822,105 14,826,353 14,996,590 14,450,335 13,923,401
Deposits............................................... 11,097,803 11,230,079 11,380,801 11,170,222 11,118,299
Total Shareholders' Equity............................. 1,203,192 1,222,293 1,215,464 1,190,994 1,179,449
Primary Shares Outstanding............................. 56,452,905 57,535,268 58,301,343 58,170,280 58,187,526
Fully Diluted Shares Outstanding....................... 56,562,364 57,535,268 58,301,343 58,170,280 58,195,971
Total Shareholders' Equity to Assets................... 8.12% 8.24% 8.10% 8.24% 8.47%
At Quarter-End
Securities............................................. $3,231,392 $3,307,413 $3,475,980 $3,349,579 $3,079,020
Loans.................................................. 9,906,538 9,763,523 9,444,630 9,520,497 9,173,551
Assets................................................. 14,996,342 15,052,647 14,782,400 15,184,724 14,038,474
Deposits............................................... 11,137,466 11,379,567 11,310,179 11,666,783 11,151,964
Total Shareholders' Equity............................. 1,222,835 1,215,085 1,231,596 1,214,604 1,193,395
Book Value Per Common Share............................ 21.90 21.50 21.31 21.01 20.70
Common Shares Outstanding.............................. 55,826,807 56,506,642 57,803,902 57,802,722 57,640,315
Total Shareholders' Equity to Assets................... 8.15% 8.07% 8.33% 8.00% 8.50%
Risk-Based Capital Ratio............................... 12.80% 12.73% 13.07% 13.30% 13.81%
Allowance for Possible Loan Losses..................... 168,426 169,402 173,503 172,343 173,021
Allowance for Possible Loan Losses to Loans............ 1.70% 1.74% 1.84% 1.81% 1.89%
Allowance for Possible Loan Losses to
Non-Performing Loans................................ 158% 176% 168% 151% 128%
Non-Performing Assets as a Percentage of
Total Period-End Loans and
Assets Acquired in Foreclosure...................... 1.33% 1.24% 1.35% 1.50% 1.88%
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..................................... 1.57% 1.47% 1.56% 1.87% 2.18%
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF EARNINGS AND FINANCIAL POSITION
FINANCIAL HIGHLIGHTS
Meridian Bancorp, Inc. (Meridian) reported net income of
$41.2 million in the first quarter of 1995 compared to $37.8
million in the first quarter of 1994, an increase of 9%. On a
fully-diluted per share basis, net income was $.73 in the first
quarter of 1995 compared to $.65 in the first quarter of last
year, a 12% increase.
The returns on average assets and on average common
shareholders' equity for the quarter ended March 31, 1995 were
1.13% and 13.90%, respectively, compared to 1.10% and 13.00%,
respectively, for the same quarter of last year.
Net income in the first quarter of 1994 was reduced by $2.7
million or $.05 per share because of an accounting change.
Income before this change in the first quarter of last year was
$40.5 million or $.70 per fully diluted share.
Net interest income was $150.5 million in the first quarter
of 1995 compared to $146.9 million in the first quarter of 1994.
On a taxable-equivalent basis, net interest income was $154.6
million compared to $151.4 million in the first quarter of 1994.
The net interest margin was 4.58% in the first quarter of this
year compared to 4.82% a year ago and 4.60% in the fourth quarter
of 1994. The decline in the net interest margin resulted from
asset and liability repricing in the current interest rate
environment.
The provision for possible loan losses was $8.0 million in
the first quarter of 1995, compared to $8.8 million in the first
quarter of 1994 and $6.1 million in the fourth quarter of 1994.
The increase over the fourth quarter provision reflects the
recent growth in loans.
Non-performing loans were $106.5 million or 1.07% of loans
at March 31, 1995 compared to $96.2 million or .98% at December
31, 1994 and $135.3 million or 1.47% a year ago. The increase
from year-end 1994 resulted primarily from the addition of one
significant non-performing loan during 1995. The ratio of the
allowance for possible loan losses to non-performing loans was
158% at March 31, 1995 compared to 176% at December 31, 1994 and
128% a year ago.
Total non-performing assets were $131.7 million at March 31,
1995, or 1.33% of loans and assets acquired in foreclosures,
compared to $121.7 million or 1.24% at December 31, 1994 and
$173.5 million or 1.88% at March 31, 1994.
Net loans charged-off in the first quarter of 1995 were $9.0
million compared to $7.8 million in the fourth quarter of 1994
and $10.9 million in the comparable period a year ago. The
allowance for possible loan losses was 1.70% of total loans at
March 31, 1995 compared to 1.74% at December 31, 1994 and 1.89% a
year ago.
Non-interest income was $57.8 million in the first quarter
of 1995, almost unchanged from $57.9 million in the first quarter
of last year. Trust revenues increased by $4.9 million, mostly
as a result of the acquisition of McGlinn Capital Management in
mid-1994. Mortgage revenues declined by $5.0 million, reflecting
lower origination and servicing volumes due to rising interest
rates and the reduction in scope of Meridian's mortgage banking
activities.
Meridian's expense control efforts have slowed the growth in
operating expenses, which increased by $3.5 million or 3% between
the first quarters of 1995 and 1994. Without the impact of three
acquisitions during the past year, expenses would have declined
during the first quarter of 1995 compared to the same period of
last year.
Net income in 1994 was affected by the cumulative effect on
prior years of a change in accounting principle. 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.
Total assets at March 31, 1995 were $15.0 billion compared
to $14.0 billion at March 31, 1994. Total loans were $9.9
billion compared to $9.2 billion a year ago, an 8% increase.
Total deposits were $11.1 billion, almost unchanged from the
balance of a year ago. Meridian continues to fund a significant
portion of its assets with deposits acquired in its local
marketplace.
Shareholders' equity was $1.22 billion or 8.15% of total
assets at March 31, 1995 compared to $1.19 billion or 8.50% a
year ago. Equity was impacted by the purchase of 2.0 million
shares of Meridian's common stock over the past twelve months by
the trustee of Meridian's employee stock ownership plan. The
ratio of tangible shareholders' equity to assets, which excludes
$130.9 million of intangible assets in 1995 and $86.5 million in
1994, was 7.35% at March 31, 1995 compared to 7.95% at March 31,
1994. Meridian's risk-based capital ratio was 12.80% at March
31, 1995, in excess of the 10% regulatory requirement for well
capitalized institutions. This ratio was 12.73% at December 31,
1994 and 13.81% at March 31, 1994. Book value per common share
was $21.90 at March 31, 1995 compared to $20.70 at March 31,
1994, an increase of 6%. Book value per common share at December
31, 1994 was $21.50.
NET INTEREST INCOME AND RELATED ASSETS AND LIABILITIES (INCLUDING
DERIVATIVES)
Net interest income was $150.5 million in the first quarter
of 1995 compared to $146.9 million in the same quarter of 1994.
Net interest income on a taxable-equivalent basis was $154.6
million in the first quarter of this year compared to $151.4
million in the same period of last year.
The level of net interest income results from the
interaction between the volume and mix of interest-earning assets
and the related funding sources, and the net interest margin.
Over the past year, the positive impact on net interest income of
earning asset growth of 8% was offset by a 24 basis point decline
in the net interest margin as a result of asset and liability
repricing in the current interest rate environment. The net
interest margin was 4.58% in the first quarter of 1995 compared
to 4.82% in the same period of last year.
Average interest-earning assets increased to $13.6 billion
in the first quarter of 1995 from $12.7 billion in the same
period of last year, an increase of 8%. Average loans
outstanding increased by 8% between the two periods, with
increases reflected in each of the major loan categories. Average
investment securities and investment securities available for
sale increased by 7%. Average deposits were $11.1 billion in the
first quarter of 1995, almost unchanged from the same period of
last year. Average short-term borrowings increased to $1.9
billion in the first quarter of 1995 from $864 million in the
same period of last year.
Table 1 presents net interest income, yields and rates on a
taxable-equivalent basis, and average balances for the first
quarters of 1995 and 1994, and the fourth quarter of 1994.
The level and volatility of interest rates can have a
significant impact on Meridian's profitability. The objective of
interest rate risk management is to identify and manage the
sensitivity of net interest income to changing interest rates and
other market factors in order to achieve overall financial goals.
Based on economic conditions, on and off-balance sheet positions,
asset quality and various other considerations, management
establishes tolerance ranges for interest rate sensitivity and
manages within these ranges.
Meridian uses several tools to measure interest rate risk.
Income simulation modeling, the primary risk measurement tool, is
used to project net interest income in different interest rate
environments. Simulation modeling considers not only the impact
of changing interest rates but also other potential causes of
variability, such as earning-asset volume and mix, yield curve
relationships, loan spreads, customer preferences and general
market conditions. Meridian also monitors the sensitivity of the
market value of assets, liabilities and off-balance sheet
positions to changing interest rates. An interest rate
sensitivity or gap analysis is used to supplement simulation
modeling.
Meridian uses off-balance sheet derivative products for
interest rate risk management and in the securities unit (broker-
dealer activities). Table 2 provides information on derivative
positions at March 31, 1995.
Meridian's core banking businesses generate a mix of loans
and deposits that tends to create an asset sensitive interest
rate risk profile, primarily because retail core deposits do not
reprice as quickly as loans. An asset sensitive position
generally indicates that net interest income would increase in
periods of rising interest rates and decrease in periods of
declining interest rates. Meridian manages this tendency towards
asset sensitivity through its securities and purchased funding
portfolios and by the use of off-balance sheet derivative
products. At March 31, 1995, Meridian's interest sensitivity
indicated a moderate liability sensitive position through the
one-year time period.
Meridian utilizes a variety of derivative instruments in
managing interest rate risk, including interest rate swaps,
options, forwards, caps and floors. These instruments provide an
efficient means to achieve risk management goals, while
supporting liquidity and capital management objectives.
Interest rate swaps account for approximately 70% of the
derivative products used for interest rate risk management
purposes. Interest rate swaps involve the exchange of fixed and
variable interest payments based on an underlying notional
amount. Meridian will generally receive a fixed rate and pay a
variable rate in order to reduce the asset sensitive position
associated with its core banking businesses. Meridian uses
interest rate swaps primarily to alter the repricing
characteristics of its retail core deposits, including time
deposits, interest-bearing checking accounts, and savings and
money market deposits.
The notional amount of interest rate swaps totaled $2.6
billion at March 31, 1995 compared to $2.9 billion at March 31,
1994 and $2.9 billion at December 31, 1994. Because of the
nature of risk being managed, the impact on net interest income
of swaps for which Meridian receives a fixed and pays a variable
interest rate will be positive during periods of declining rates
and negative in periods of rising rates. Consistent with this
profile, the impact of interest-rate swaps was to increase
interest expense on deposits by $8.0 million in the rising rate
environment of the first quarter of 1995 compared to a reduction
of $8.1 million in interest expense in the first quarter of 1994.
Derivative products, as with all financial instruments,
contain elements of risk. A derivative product is subject to
market risk in that the value of a contract will increase or
decrease as a result of movements in market interest rates.
Meridian continually monitors the sensitivity of its derivative
contracts to changing interest rates. Unrealized gains and
losses are calculated based on the replacement costs of the
contracts. The decline in the market value of Meridian's
interest rate contracts over the past twelve months is consistent
with the rising interest rate environment over that time period.
Unrealized gains and losses on derivative positions should
be viewed in the context of the overall balance sheet. An
unrealized loss on a derivative product used for interest rate
risk management purposes is generally offset or mitigated by an
unrealized gain on the asset or liability to which the derivative
contract is assigned. Meridian, as part of its asset and
liability management process, continually monitors the impact of
interest rate movements on the market value of not only its
derivative positions, but also all other on and off-balance sheet
positions. In a rising rate environment, fixed rate loan,
investment and off-balance sheet positions will decline in market
value, while core deposits and longer term borrowings will
appreciate in value.
The securities unit uses various off-balance sheet
derivative products for sale to customers and to manage the
market risks associated with the broker-dealer business. The
securities unit acts as remarketing agent on tender option bonds
totaling $243 million at March 31, 1995 compared to $372 million
at March 31, 1994. The premium paid for Treasury float
contracts, which is included on the balance sheet in other
assets, was $1.5 million at March 31, 1995 and represents the
maximum exposure to Meridian from such contracts.
The objective of liquidity management is to ensure that
sufficient funding is available, at reasonable cost, to meet the
ongoing and potential 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 Meridian's liquidity position at the end of the first
quarter of 1995 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 $9.9 billion
at March 31, 1995 compared to $9.2 billion at March 31, 1994, an
8% increase. Commercial loans increased by $508.1 million, or
9%. Residential mortgage loans increased by $225.3 million or
22%. Consumer loans, mostly home equity loans and other types of
personal loans, were $2.6 billion at March 31, 1995, almost
unchanged from the balance of a year ago. Excluding the sale of
$223 million of student loans in the third quarter of 1994,
consumer loans increased by 9% over the twelve month period.
Table 4 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
portfolio of investment securities and investment securities
available for sale. The balance in the combined portfolio was
$3.2 billion at March 31, 1995, compared to $3.1 billion a year
ago, an increase of 5%.
Table 5 presents a summary of the amortized cost,
approximate fair value, and gross unrealized gains and losses for
the portfolio at March 31, 1995 and 1994, and December 31, 1994.
Changes in long-term interest rates over the past year, with
rates rising through much of 1994 and then declining in the first
quarter of 1995, had a significant impact on the approximate fair
value of the combined portfolios, as reflected in this table.
Deposits. Meridian's deposits, the largest source of funds,
amounted to $11.1 billion at March 31,1995, almost unchanged from
the balance of a year ago. During the second quarter of 1994,
Meridian assumed approximately $487 million of deposits of
Security Federal Savings Bank from the Resolution Trust
Corporation. These additional deposits offset runoff from prior
years' acquisitions and the loss of escrow balances related to
mortgage servicing rights sold in mid-1994.
Table 6 presents a summary of period-end deposit balances.
PROVISION FOR POSSIBLE LOAN LOSSES AND RELATED CREDIT QUALITY
The provision for possible loan losses was $8.0 million in
the first quarter of 1995, compared to $8.8 million in the first
quarter of 1994 and $6.1 million in the fourth quarter of 1994.
The increase over the fourth quarter provision reflects the
recent growth in loans. The balance in the allowance for
possible loan losses was $168.4 million or 1.70% of total loans
at March 31, 1995, compared to $169.4 million or 1.74% at
December 31, 1994 and $173.0 million or 1.89% at March 31, 1994.
Net charge-offs were $9.0 million, or .37% of average loans
in the first quarter of 1995 compared to $10.9 million or .49% of
average loans in the first quarter of 1994. Recoveries were $2.9
million in the first quarter of 1995 compared to $2.3 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. In
management's opinion, the allowance for possible loan losses is
adequate at March 31, 1995.
Table 7 presents an analysis of the activity in the
allowance for possible loan losses. Table 8 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. Non-performing assets do not include
loans past due 90 days or more as to interest or principal which
are well secured and in the process of collection, the majority
of which represent residential mortgage loans.
Non-performing assets totaled $131.7 million at March 31,
1995 compared to $121.7 million at December 31, 1994 and $173.5
million a year ago. The increase from year-end 1994 resulted
primarily from the addition of one significant non-performing
loan during 1995.
Generally, a commercial 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.
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 reappraised when foreclosure proceedings are
initiated. Consumer loans are charged-off when deemed
uncollectible, which is generally at a time no later than 180
days past due.
Meridian's non-accrual loans, which totaled $105.3 million
at March 31, 1995, included only two loans with balances in
excess of $2.5 million, one of which was added in 1995. These
two loans aggregated $32.9 million or 31% of total non-accrual
loans at the end of the first quarter of 1995.
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.
Assets acquired in foreclosures (except consumer related),
which totaled $25.3 million at the end of the first quarter of
1995, included only one property with a balance in excess of $2.5
million. This property had a balance of $6.4 million or 25% of
assets acquired in foreclosures.
Reference should be made to Table 4 for a summary of the
period-end balances in the loan portfolio. Except for a
reclassification of certain balances within consumer loans, 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 9 for a
breakdown of commercial loans by major industry and to Table 10
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 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 97%, are to
borrowers for property in Pennsylvania, Delaware, and New Jersey,
of which Pennsylvania has 80%, or the largest single share.
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, 1995, Meridian's
commercial loans and commitments did not have any industry
concentration or other known concentration that exceeded 10% of
total loans and commitments. Meridian has no foreign loan
exposure.
Potential problem loans consist of loans which are included
in performing loans at March 31, 1995 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, 1995, such potential
problem loans, not included in Table 8, aggregated approximately
$35 million compared to $43 million at December 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.
Meridian continues to service approximately $685 million of
residential mortgage loans on which there is potential credit
loss. This servicing was either originated by Meridian or
purchased with recourse from other financial institutions. These
institutions have since experienced financial difficulties,
including bankruptcies. As of March 31, 1995, reserves of $9.7
million have been established in recognition of potential losses
related to the recourse servicing portfolio.
NON-INTEREST INCOME
Non-interest income was $57.8 million in the first quarter
of 1995, almost unchanged from $57.9 million in the first quarter
of last year.
Trust revenues were $15.7 million in the first quarter of
1995, an increase of 45% from the first quarter of 1994.
Contributing to the higher level of revenues was the acquisition
of McGlinn Capital Management, Inc. in July 1994, and increases
in personal trust, employee benefit and investment advisory fees.
Mortgage revenues declined by $5.0 million, or 63%, between
the two quarters, reflecting lower origination and servicing
volumes due to rising interest rates and the reduction in scope
of Meridian's mortgage banking activities.
Broker-dealer and investment banking revenues totaled $12.5
million in the first quarter of 1995 compared to $15.3 million in
the same period a year ago, a decrease of 18%. The decrease in
revenues reflects the impact of financial market conditions and
the current interest rate environment, which resulted in reduced
profitability on trading volumes and calls of underlying bonds on
which tender option bond fees were being earned.
Service charges on deposits and fees for other customer
services increased by $1.8 million, or 8%, for the three months
ended March 31, 1995 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 losses were $413 thousand in the first
quarter of 1995 compared to gains of $690 thousand in the same
period of last year. The amount in 1995 was comprised of losses
of $440 thousand and gains of $27 thousand. The gains and losses
in both years resulted mainly from sales of investments
classified as available for sale and calls of investments.
NON-INTEREST EXPENSES
Non-interest expenses for the first quarter of 1995 were
$140.4 million compared to $136.9 million for the same quarter of
1994, an increase of 3%. Without the impact of three
acquisitions during the past year, expenses would have declined
during the first quarter of 1995 compared to the same period of
last year.
Salaries and employee benefits totaled $76.4 million in the
first quarter of 1995 compared to $75.2 million in the first
quarter of 1994, an increase of 2%. A decline in commissions and
other incentive-related compensation in the securities unit and
the impact of a decline in staff levels in the mortgage banking
function offset the effect of increases in staff in the banking
and securities units because of acquisitions over the past year.
Full-time equivalent staff levels were 6,789 at March 31, 1995
compared to 6,970 a year ago.
Net occupancy and equipment expense was $20.5 million in the
first quarter of 1995 compared to $21.8 million in the same
period last year, a decrease of 6%. Snow removal cost was $1.2
million in first quarter of 1994 and was minimal in 1995.
Other operating expenses were $43.5 million in the first
quarter of 1995 compared to $39.9 million in the first quarter of
1994. Contributing to the increase were operating expenses
related to recent acquisitions, including the amortization of
intangible assets.
PROVISION FOR INCOME TAXES
The provision for income taxes was $18.6 million in the
first quarter of 1995, unchanged from the amount in the same
quarter of last year.
The effective tax rate, which is the ratio of income tax
expense to income before income taxes, was 31% in the first
quarter of 1995, unchanged from the same quarter of 1994. The
rate for the entire year of 1994 was 30%. 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
Total shareholders' equity at March 31, 1995 was $1.22
billion compared to $1.19 billion at March 31, 1994, an increase
of 2%. Total shareholders' equity was $1.22 billion at December
31, 1994. The ratio of total shareholders' equity to total
assets was 8.15% at March 31, 1995 compared to 8.50% one year ago
and 8.07% at December 31, 1994. The ratio of tangible
shareholders' equity to assets, which excludes $130.9 million of
intangible assets in 1995 and $86.5 million in 1994, was 7.35% at
March 31, 1995 compared to 7.95% a year ago and 7.23% at December
31, 1994. The increase in intangible assets over the past year
resulted from the assumption of deposits of the former Security
Savings Bank and the acquisition of McGlinn Capital Management,
Inc.
Meridian's capital adequacy at March 31, 1995 can be
determined by analyzing the capital ratios presented in Table 11.
Meridian's consolidated ratios at March 31, 1995 exceeded all
regulatory requirements. The risk-based capital ratio was 12.80%
at March 31, 1995 compared to 13.81% a year ago and 12.73% at
December 31, 1994. The risk-based capital ratios of each of
Meridian's commercial banks also exceeded regulatory requirements
at March 31, 1995, 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,
1995 exceeded these guidelines, as did the ratios of each of
Meridian's commercial banks.
INDUSTRY SEGMENTS
Table 12 presents a summary of the operating results of
Meridian's two reportable industry segments.
Banking. The banking unit provides a full range of retail
and corporate banking, and trust and asset management services to
customers in central and eastern Pennsylvania, as well as
Delaware and southern New Jersey.
Banking unit net income was $40.2 million in the first
quarter of 1995 compared to $35.5 million for the same period of
last year, an increase of 13%. Net income in the first quarter
of 1994 was reduced by $2.7 million because of the accounting
change previously described. Income before this change in the
first quarter of last year was $38.2 million.
Net interest income increased by $3.1 million or 2% between
the two periods as the positive impact of an increase in average
loans outstanding more than offset the narrowing spreads between
the yield on interest-earning assets and the cost of interest-
bearing liabilities. The provision for possible loan losses
declined by $804 thousand between the two quarters. Non-interest
income increased by $2.4 million, or 6%, as increases in trust
revenues and other fee-related revenues more than offset a
decline in mortgage servicing and origination revenues. Non-
interest expenses increased by $3.7 million, or 3%, reflecting
the impact of acquisitions over the past year.
Securities (Broker-Dealer Activities). The securities unit
underwrites, brokers and distributes securities to
municipalities, and institutional and individual investors. In
addition, the unit buys, sells and securitizes mortgage loans and
brokers loan servicing portfolios. The area also provides
investment banking services by acting as financial advisors in
facilitating municipal and corporate transactions in the capital
markets.
The securities unit reported after-tax operating income of
$1.0 million in the first quarter of 1995 compared to $2.3
million in the first quarter of 1994. The decline in income
resulted primarily from a decrease in revenues of $2.1 million or
13%. Financial market conditions and the current interest rate
environment resulted in reduced profitability on trading volumes
and calls of underlying bonds on which tender option bond fees
were being earned. The decline in revenues more than offset a
decline in operating expenses, primarily salaries and incentive-
related compensation expense.
<PAGE>
<TABLE>
<CAPTION>
TABLE 1: NET INTEREST INCOME, AVERAGE BALANCES AND RATES
(Dollars in Thousands)
1995 1994
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..... $119,082 $1,798 6.12% $92,179 $769 3.38%
Federal Funds Sold and Securities Purchased
Under Agreements to Resell................. 54,231 667 4.99 46,321 381 3.34
Total Short-Term Investments............... 173,313 2,465 5.77 138,500 1,150 3.37
Trading Account Securities (1)................. 333,777 6,350 7.61 114,103 1,883 6.60
Investment Securities Available for Sale (1)... 435,112 7,638 7.02 270,466 4,799 7.10
Investment Securities
Taxable...................................... 2,478,872 35,900 5.81 2,388,959 31,232 5.26
Non-Taxable (1).............................. 319,619 6,645 8.32 352,278 7,310 8.30
Total Investment Securities................ 2,798,491 42,545 6.10 2,741,237 38,542 5.65
Loans Held for Sale............................ 98,570 2,104 8.54 374,116 6,404 6.85
Loans
Commercial (1)............................... 5,966,633 135,630 9.22 5,456,436 100,834 7.49
Real Estate-Residential...................... 1,222,326 25,155 8.23 1,010,350 20,907 8.28
Consumer..................................... 2,586,091 56,007 8.78 2,556,778 51,979 8.24
Total Loans (2)............................ 9,775,050 216,792 8.98 9,023,564 173,720 7.79
Total Interest-Earning Assets.............. 13,614,313 277,894 8.25 12,661,986 226,498 7.23
Allowance for Possible Loan Losses............... (172,881) -- -- (177,419) - --
Non-Interest Earning Assets...................... 1,380,673 -- -- 1,438,834 - --
Total Assets, Interest Income.............. $14,822,105 $277,894 7.58% $13,923,401 $226,498 6.57%
LIABILITIES
Interest-Bearing Liabilities
Interest-Bearing Deposits
NOW Accounts................................. $1,471,503 $7,109 1.96% $1,447,922 $4,500 1.26%
Savings Deposits............................. 1,810,738 11,709 2.62 1,897,102 8,762 1.87
Money Market Deposit Accounts................ 2,242,998 19,633 3.55 2,337,787 11,796 2.05
Short-Term Time Deposits..................... 619,635 6,023 3.94 786,083 6,469 3.34
Long-Term Time Deposits...................... 2,652,263 37,372 5.71 2,472,671 24,770 4.06
Certificates of Deposits of $100,000 or More. 601,151 8,570 5.78 456,388 5,130 4.56
Total Interest-Bearing Deposits............ 9,398,288 90,416 3.90 9,397,953 61,427 2.65
Short-Term Borrowings
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase........ 1,622,883 22,710 5.68 663,807 4,819 2.94
Other Short-Term Borrowings.................. 234,535 3,544 6.13 200,608 1,653 3.34
Total Short-Term Borrowings................ 1,857,418 26,254 5.73 864,415 6,472 3.04
Long-Term Debt and Other Borrowings............ 368,677 6,588 7.15 420,214 7,158 6.81
Total Interest-Bearing Liabilities......... 11,624,383 123,258 4.30 10,682,582 75,057 2.85
Non-Interest Sources to Fund
Interest-Earning Assets
Non-Interest Bearing Deposits................ 1,699,515 -- -- 1,720,346 -- --
Other Liabilities............................ 295,015 -- -- 341,024 -- --
Shareholders' Equity......................... 1,203,192 -- -- 1,179,449 -- --
Total Non-Interest Sources to Fund
Interest-Earning Assets.................. 3,197,722 -- -- 3,240,819 -- --
Total Liabilities and Shareholders' Equity,
Interest Expense......................... $14,822,105 123,258 3.37% $13,923,401 75,057 2.18%
NET INTEREST INCOME.............................. $154,636 $151,441
NET INTEREST SPREAD (3)........................ 3.95% 4.38%
EFFECT OF NON-INTEREST BEARING FUNDS........... 0.63% 0.44%
NET INTEREST MARGIN (4)........................ 4.58% 4.82%
<CAPTION>
1994
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..... $114,383 $1,515 5.25%
Federal Funds Sold and Securities Purchased
Under Agreements to Resell................. 62,035 707 4.52
Total Short-Term Investments............... 176,418 2,222 5.00
Trading Account Securities (1)................. 92,424 1,541 6.67
Investment Securities Available for Sale (1)... 450,753 7,662 6.80
Investment Securities
Taxable...................................... 2,615,500 36,220 5.49
Non-Taxable (1).............................. 332,334 6,942 8.36
Total Investment Securities................ 2,947,834 43,162 5.82
Loans Held for Sale............................ 390,203 7,619 7.81
Loans
Commercial (1)............................... 5,781,121 126,881 8.71
Real Estate-Residential...................... 1,185,194 24,734 8.35
Consumer..................................... 2,579,241 54,534 8.39
Total Loans (2)............................ 9,545,556 206,149 8.58
Total Interest-Earning Assets.............. 13,603,188 268,355 7.84
Allowance for Possible Loan Losses............... (174,159) -- --
Non-Interest Earning Assets...................... 1,397,324 -- --
Total Assets, Interest Income.............. $14,826,353 $268,355 7.19%
LIABILITIES
Interest-Bearing Liabilities
Interest-Bearing Deposits
NOW Accounts................................. $1,492,878 $6,445 1.71%
Savings Deposits............................. 1,889,372 11,575 2.43
Money Market Deposit Accounts................ 2,332,342 17,829 3.03
Short-Term Time Deposits..................... 660,201 5,810 3.49
Long-Term Time Deposits...................... 2,560,030 32,902 5.10
Certificates of Deposits of $100,000 or More. 552,864 7,302 5.24
Total Interest-Bearing Deposits............ 9,487,687 81,863 3.42
Short-Term Borrowings
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase........ 1,552,647 19,545 4.99
Other Short-Term Borrowings.................. 201,797 2,937 5.77
Total Short-Term Borrowings................ 1,754,444 22,482 5.08
Long-Term Debt and Other Borrowings............ 373,565 6,543 7.01
Total Interest-Bearing Liabilities......... 11,615,696 110,888 3.79
Non-Interest Sources to Fund
Interest-Earning Assets
Non-Interest Bearing Deposits................ 1,742,392 -- --
Other Liabilities............................ 245,972 -- --
Shareholders' Equity......................... 1,222,293 -- --
Total Non-Interest Sources to Fund
Interest-Earning Assets.................. 3,210,657 -- --
Total Liabilities and Shareholders' Equity,
Interest Expense......................... $14,826,353 110,888 2.97%
NET INTEREST INCOME.............................. $157,467
NET INTEREST SPREAD (3)........................ 4.05%
EFFECT OF NON-INTEREST BEARING FUNDS........... 0.55%
NET INTEREST MARGIN (4)........................ 4.60%
<FN>
(1) The indicated interest income and average yields are
presented on a taxable-equivalent basis. The
taxable-equivalent adjustments included above are $4,159,
$4,513, $4,234 for the first quarter of 1995 and 1994 and
the fourth quarter of 1994, 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 2: OFF-BALANCE SHEET DERIVATIVES
MATURITIES AND OTHER INFORMATION
March 31, 1995
(Dollars in Thousands) 1999
and
Consolidated Notional Amount 1995 1996 1997 1998 Beyond Total
<S> <C> <C> <C> <C> <C> <C>
Related to Interest Rate Risk Management............ $820,541 $1,003,836 $766,222 $407,898 $688,836 $3,687,333
Related to Securities Unit (Broker-Dealer
Activities)....................................... 242,559 106,167 156,622 88,992 843,238 1,437,578
Consolidated Derivatives.......................... $1,063,100 $1,110,003 $922,844 $496,890 $1,532,074 $5,124,911
Related to Interest Rate Risk Management
Interest Rate Swaps
Fixed Rate Receive
Notional Amount............................... $700,000 $1,000,000 $533,500 $300,000 - $2,533,500
Weighted Average Fixed Rate Receive........... 5.63% 5.86% 5.61% 5.33% - 5.68%
Weighted Average Floating Rate Pay............ 6.38% 6.23% 6.27% 6.34% - 6.29%
Fixed Rate Pay
Notional Amount............................... 50,000 - - - - 50,000
Weighted Average Floating Rate Receive........ 9.00% - - - - 9.00%
Weighted Average Fixed Rate Pay............... 6.81% - - - - 6.81%
Purchased Interest Rate Floors
Notional Amount............................... - - 200,000 - $425,000 625,000
Weighted Average Rate......................... - - 7.50% - 6.51% 6.83%
Interest Rate Collars
Notional Amount............................... - - - 100,000 100,000 200,000
Weighted Average Floating Rate Receive........ - - - 6.25% 6.00% 6.13%
Weighted Average Fixed Rate Pay............... - - - 8.12% 8.80% 8.46%
Notional Amount of Other Contracts
Interest Rate Caps and Floors for Customers... 17,376 3,836 32,722 7,898 163,836 225,668
Other......................................... 53,165 - - - - 53,165
Total Interest Rate Risk Management................... $820,541 $1,003,836 $766,222 $407,898 $688,836 $3,687,333
<CAPTION>
March 31, 1995 Net
(Dollars in Thousands) Unrealized
Unrealized Unrealized Gains
Consolidated Notional Amount Gains Losses (Losses)
<S> <C> <C> <C>
Related to Interest Rate Risk Management............ $10,887 ($49,264) ($38,377)
Related to Securities Unit (Broker-Dealer
Activities)....................................... 16,601 (3,116) 13,485
Consolidated Derivatives.......................... $27,488 ($52,380) ($24,892)
Related to Interest Rate Risk Management
Interest Rate Swaps
Fixed Rate Receive
Notional Amount............................... $3,665 ($48,794) ($45,129)
Weighted Average Fixed Rate Receive...........
Weighted Average Floating Rate Pay............
Fixed Rate Pay
Notional Amount............................... 436 - 436
Weighted Average Floating Rate Receive........
Weighted Average Fixed Rate Pay...............
Purchased Interest Rate Floors
Notional Amount............................... 6,786 - 6,786
Weighted Average Rate.........................
Interest Rate Collars
Notional Amount............................... - (470) (470)
Weighted Average Floating Rate Receive........
Weighted Average Fixed Rate Pay...............
Notional Amount of Other Contracts
Interest Rate Caps and Floors for Customers... - - -
Other......................................... - - -
Total Interest Rate Risk Management................... $10,887 ($49,264) ($38,377)
<FN>
Notes
1. Maturity information reflects contractual terms based on
interest rates in effect at March 31, 1995.
2. Fixed rate receive swaps convert retail deposits to floating
rates.
3. Fixed rates shown are rates over the life of the swaps;
floating rates represent rates in effect at March 31, 1995.
4. Fixed rate receive swaps contain $224 million of indexed
amortizing swaps, where amortization of the notional amount
is dependent upon the level of short term interest rates.
5. Weighted average rates shown for purchased floors are the
exercise rates; payments would be received when market rates
are below these predetermined exercise rates.
6. Interest rate collars combine the purchase of a floor with
the sale of a cap; payments would be received when market
rates are below a predetermined level and payments would be
made when market rates are above a predetermined level.
7. Other contracts include customer caps and floors, forward
delivery instruments to manage risks from mortgage
operations, and foreign exchange contracts.
<CAPTION>
March 31, 1995
(Dollars in Thousands) 1999
and
Related to Securities Unit (Broker-Dealer Activities) 1995 1996 1997 1998 Beyond Total
<S> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
Fixed Rate Receive
Notional Amount............................... - - - - $8,000 $8,000
Weighted Average Fixed Rate Receive........... - - - - 7.09% 7.09%
Weighted Average Floating Rate Pay............ - - - - 5.98% 5.98%
Tender Option Bonds
Notional Amount............................... $31,206 $56,655 $108,815 $3,195 43,497 243,368
Weighted Average Fixed Rate Receive........... 8.08% 7.96% 7.88% 6.75% 8.04% 7.94%
Weighted Average Floating Rate Pay............ 4.61% 4.29% 4.51% 4.75% 5.13% 4.58%
Treasury Float Contracts............................ 50,063 44,065 42,970 82,221 741,614 960,933
Commitments to Purchase or
Sell Mortgages and Securities..................... 161,290 5,447 4,837 3,576 50,127 225,277
Total Securities Unit................................. $242,559 $106,167 $156,622 $88,992 $843,238 $1,437,578
<CAPTION>
Net
Unrealized
Unrealized Unrealized Gains
Related to Securities Unit (Broker-Dealer Activities) Gains Losses (Losses)
<S> <C> <C> <C>
Interest Rate Swaps
Fixed Rate Receive
Notional Amount............................... $16 - $16
Weighted Average Fixed Rate Receive...........
Weighted Average Floating Rate Pay............
Tender Option Bonds
Notional Amount............................... 9,148 ($2,205) 6,943
Weighted Average Fixed Rate Receive...........
Weighted Average Floating Rate Pay............
Treasury Float Contracts............................ 5,076 - 5,076
Commitments to Purchase or
Sell Mortgages and Securities..................... 2,361 (911) 1,450
Total Securities Unit................................. $16,601 ($3,116) $13,485
<FN>
Notes
1. Maturity information reflects contractual terms based on
interest rates in effect at March 31, 1995.
2. Fixed rates shown are rates over the life of the swaps;
floating rates represent rates in effect at March 31, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 3: ACTIVITY IN DERIVATIVES RELATED TO INTEREST RATE RISK MANAGEMENT
NOTIONAL AMOUNTS
(Dollars in Thousands)
FIXED RATE FIXED RATE
RECEIVE SWAPS RECEIVE SWAPS FIXED RATE PURCHASED
OUTSTANDING FORWARD START PAY SWAPS FLOORS COLLARS TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994.... $2,060,000 $150,000 $100,000 - - $2,310,000
Maturities.................... (550,000) - (50,000) - - (600,000)
Terminations.................. (225,000) - - - (225,000)
New contracts................. 875,000 525,000 - $500,000 - 1,900,000
Forwards becoming effective... 625,000 (625,000) - - - -
Balance at December 31, 1994.. 2,785,000 50,000 50,000 500,000 - 3,385,000
Maturities..................... (76,500) - - - - (76,500)
Terminations................... (275,000) - - - - (275,000)
New contracts.................. - 50,000 - 125,000 $200,000 375,000
Forwards becoming effective.... 100,000 (100,000) - - - -
Balance at March 31, 1995...... $2,533,500 - $50,000 $625,000 $200,000 $3,408,500
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 4: LOANS
(Dollars in Thousands)
March 31, 1995 March 31, 1994 December 31, 1994
Amount % Amount % Amount %
------------ ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Commercial Loans
Real Estate - Commercial Mortgage........... $1,789,822 18% $1,635,828 18% $1,702,816 17%
Real Estate - Construction.................. 224,103 2 309,094 3 278,271 3
Commercial, Financial and Agricultural...... 4,062,706 41 3,623,613 40 3,966,785 41
Total Commercial Loans................... 6,076,631 61 5,568,535 61 5,947,872 61
Real Estate - Residential...................... 1,245,917 13 1,020,592 11 1,217,142 12
Consumer Loans
Real Estate - Home Equity................... 1,137,878 (1) 12 676,749 7 744,022 8
Revolving Credit............................ 113,595 1 83,360 1 110,049 1
Other Consumer Loans........................ 1,332,517 (2) 13 1,824,315 20 1,744,438 (2) 18
Total Consumer Loans..................... 2,583,990 26 2,584,424 28 2,598,509 27
Total Loans, Net of Unearned Discount. $9,906,538 100% $9,173,551 100% $9,763,523 100%
<FN>
(1) Includes $347 million of loans transferred from "Other
Consumer Loans" during the first quarter of 1995.
(2) Balances reflect the sale of $223 million of student loans
in the third quarter of 1994.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 5: INVESTMENT SECURITIES AND INVESTMENT 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, 1995 March 31, 1994 December 31, 1994
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...... $650,436 $634,347 $683,579 $675,812 $667,031 $638,476
Mortgage-Backed Securities
Collateralized Mortgage Obligations... 1,338,320 1,299,838 1,252,764 1,233,258 1,380,105 1,311,068
Other ................................ 223,726 221,084 273,222 276,330 231,290 222,298
Total Mortgage-Backed Securities... 1,562,046 1,520,922 1,525,986 1,509,588 1,611,395 1,533,366
State and Municipal Securities........... 327,599 327,899 336,041 339,700 335,401 327,811
Other Securities......................... 220,996 218,278 267,726 266,597 258,592 253,654
Total Investment Securities........ $2,761,077 $2,701,446 $2,813,332 $2,791,697 $2,872,419 $2,753,307
A summary of gross unrealized gains and losses on investment
securities is as follows:
<CAPTION>
March 31, 1995 March 31, 1994 December 31, 1994
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...... $157 $16,246 $2,077 $9,844 $162 $28,717
Mortgage-Backed Securities
Collateralized Mortgage Obligations... 997 39,479 1,842 21,348 75 69,112
Other ................................ 2,154 4,796 6,194 3,086 1,056 10,048
Total Mortgage-Backed Securities... 3,151 44,275 8,036 24,434 1,131 79,160
State and Municipal Securities........... 4,302 4,002 6,867 3,208 2,802 10,392
Other Securities......................... 43 2,761 1,321 2,450 128 5,066
Total Investment Securities........ $7,653 $67,284 $18,301 $39,936 $4,223 $123,335
Investment Securities Available for Sale
A summary of the amortized cost and approximate fair value of
investment securities available for sale is as follows:
<CAPTION>
March 31, 1995 March 31, 1994 December 31, 1994
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...... $279,946 $277,855 $101,450 $102,446 $282,500 $274,594
Mortgage-Backed Securities
Collateralized Mortgage Obligations... 60,152 60,519 - - 25,089 24,260
Other ................................ 94,246 92,511 107,478 107,794 96,501 91,678
Total Mortgage-Backed Securities... 154,398 153,030 107,478 107,794 121,590 115,938
State and Municipal Securities........... 29,429 30,245 33,367 35,396 32,530 33,362
Other Securities......................... 7,341 9,185 16,442 20,052 9,163 11,100
Total Investment Securities
Available for Sale.......... $471,114 $470,315 $258,737 $265,688 $445,783 $434,994
A summary of gross unrealized gains and losses on investment
securities available for sale is as follows:
<CAPTION>
March 31, 1995 March 31, 1994 December 31, 1994
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...... $291 $2,382 $1,524 $528 $105 $8,011
Mortgage-Backed Securities
Collateralized Mortgage Obligations... 465 98 - - - 829
Other ................................ 199 1,934 1,064 $748 72 4,895
Total Mortgage-Backed Securities... 664 2,032 1,064 $748 72 5,724
State and Municipal Securities........... 862 46 2,029 - 958 126
Other Securities......................... 1,970 126 3,638 28 2,121 184
Total Investment Securities
Available for Sale.......... $3,787 $4,586 $8,255 1,304 $3,256 $14,045
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 6: DEPOSITS
(Dollars In Thousands)
March 31, 1995 March 31, 1994 December 31, 1994
Amount % Amount % Amount %
------------- ----- ------------- ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Non-Interest Bearing Deposits................. $1,779,667 16% $1,811,240 16% $1,998,660 18%
NOW Accounts.................................. 1,465,843 13 1,454,132 13 1,523,834 13
Savings Deposits.............................. 1,781,717 16 1,942,099 17 1,846,758 16
Money Market Deposit Accounts................. 2,181,749 20 2,281,365 21 2,287,039 20
Short-Term Time Deposits...................... 595,038 5 773,380 7 638,823 6
Long-Term Time Deposits....................... 2,778,230 25 2,428,960 22 2,586,443 23
Certificates of Deposit of $100,000 or More... 555,222 5 460,788 4 498,010 4
Total..................................... $11,137,466 100% $11,151,964 100% $11,379,567 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 7: ALLOWANCE FOR POSSIBLE LOAN LOSSES
(Dollars In Thousands)
Three Months Ended
--------------------------------------------------------
March 31 December 31 September 30 June 30 March 31
1995 1994 1994 1994 1994
---------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Period.......... $169,402 $173,503 $172,343 $173,021 $175,078
Additions (Deductions):
Loans Charged-Off:
Commercial (includes
Commercial Real Estate)...... (8,397) (12,182) (7,621) (3,672) (8,422)
Real Estate - Residential......... (499) (989) (838) (5,165) (2,309)
Consumer.......................... (3,014) (3,035) (2,808) (2,750) (2,442)
Total Loans Charged-Off.. (11,910) (16,206) (11,267) (11,587) (13,173)
Recoveries on Charged-Off Loans:
Commercial (includes
Commercial Real Estate)...... 1,485 7,063 3,528 2,524 1,268
Real Estate - Residential......... 80 45 216 132 67
Consumer.......................... 1,348 1,305 1,161 1,415 956
Total Recoveries on
Charged-Off Loans. 2,913 8,413 4,905 4,071 2,291
Net Loans Charged-Off................ (8,997) (7,793) (6,362) (7,516) (10,882)
Acquired Allowances................. - - 1,029 139 -
Other Deductions.................... - (2,377) - - -
Provision Charged to
Operating Expense........... 8,021 6,069 6,493 6,699 8,825
Balance at End of Period................ $168,426 $169,402 $173,503 $172,343 $173,021
Net Charge-Offs to Average Loans........ 0.37% 0.32% 0.27% 0.32% 0.49%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 8: CREDIT QUALITY
(Dollars in Thousands)
March 31, December 31, September 30, June 30, March 31,
1995 1994 1994 1994 1994
----------- ------------ ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Non-Accrual Loans
Commercial
Real Estate-Commercial Mortgage...................... $23,152 $32,521 $35,152 $35,021 $35,822
Real Estate-Construction............................. 2,059 3,000 6,492 8,808 12,743
Commercial, Financial and Agricultural............... 63,054 42,899 46,459 52,654 58,846
Total Commercial.................................. 88,265 78,420 88,103 96,483 107,411
Real Estate-Residential................................ 16,235 16,370 13,304 15,472 25,100
Consumer............................................... 817 233 822 758 1,937
Total Non-Accrual Loans........................... 105,317 95,023 102,229 112,713 134,448
Restructured Loans
Real Estate-Commercial Mortgage........................ 769 761 10 10 11
Real Estate-Construction............................... 31 33 34 37 38
Commercial, Financial and Agricultural................. 349 351 1,138 1,086 812
Total Restructured Loans.......................... 1,149 1,145 1,182 1,133 861
TOTAL NON-PERFORMING LOANS................... 106,466 96,168 103,411 113,846 135,309
Assets Acquired in Foreclosures
Foreclosed Real Estate............................... 23,338 23,392 23,519 28,058 36,726
Assets Related to Consumer Loans..................... 1,923 2,178 1,127 1,677 1,438
Total Assets Acquired.............................. 25,261 25,570 24,646 29,735 38,164
TOTAL NON-PERFORMING ASSETS.................. $131,727 $121,738 $128,057 $143,581 $173,473
Allowance for Possible Loan Losses as a Percentage of:
Loans.................................................. 1.70% 1.74% 1.84% 1.81% 1.89%
Non-Performing Loans................................... 158% 176% 168% 151% 128%
Non-Performing Assets.................................. 128% 139% 135% 120% 100%
Total Non-Performing Loans as a Percentage
of Loans............................................... 1.07% 0.98% 1.09% 1.20% 1.47%
Total Non-Performing Assets as a Percentage
of Loans and Assets Acquired in Foreclosures........... 1.33% 1.24% 1.35% 1.50% 1.88%
Loans Past Due 90 or more Days as to Interest or Principal
not Included Above (Includes $13,102 of Real Estate-
Residential as of March 31, 1995).................. $24,071 $22,355 $19,639 $35,036 $27,446
Total Non-Performing Assets and Loans Past Due
90 or more Days as to Interest or Principal............ $155,798 $144,093 $147,696 $178,617 $200,919
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........... 1.57% 1.47% 1.56% 1.87% 2.18%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 9: COMMERCIAL LOANS BY MAJOR INDUSTRY CLASSIFICATION
March 31,
(Dollars in Thousands)
1995 1994
---------------------------------------------------------------------
Loans Non-Accrual Loans Non-Accrual
Outstanding % Loans % Outstanding % Loans %
------------ ----- --------- ---- ------------ ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Agriculture......................... $162,403 3% $808 1% $161,892 3% $863 1%
Mining.............................. 19,874 * 253 * 15,130 * 55 *
Construction........................ 219,828 4 2,863 3 216,508 4 2,588 2
Manufacturing....................... 1,120,913 19 45,992 52 1,025,748 18 23,429 22
Transportation, Communication and
Public Utilities................. 353,672 6 1,864 2 315,484 6 1,813 2
Wholesale Trade..................... 369,785 6 5,341 6 343,174 6 7,851 7
Retail Trade........................ 877,505 14 6,867 8 744,208 13 16,260 15
Finance, Insurance and Real Estate.. 1,382,973 23 13,600 16 1,207,097 22 29,484 28
Services............................ 1,481,037 24 10,635 12 1,380,044 25 21,546 20
Public Administration............... 18,155 * - - 9,012 * 106 *
Other............................... 70,486 1 42 * 150,238 3 3,416 3
Total............................. $6,076,631 100% $88,265 100% $5,568,535 100% $107,411 100%
* Less than one percent
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 10:COMMERCIAL REAL ESTATE
March 31
(Dollars in Thousands)
Outstanding Loans 1995 1994
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..... $221,944 $1,071 - - $221,944 $1,071 $213,713 $3,476
Office Buildings........ 174,187 15,574 $200,247 $7,525 374,434 23,099 334,260 24,767
Residential Properties.. - 107,239 - - - 107,239 130 84,962
Shopping Centers........ 178,065 19,159 72,390 3,224 250,455 22,383 216,841 39,706
Land.................... - 34,563 - - - 34,563 - 58,604
Industrial Plants....... 102,131 3,604 195,498 6,328 297,629 9,932 306,423 22,355
Hotel/Motel/Restaurant.. 135,263 904 - - 135,263 904 121,592 5,748
Healthcare Facilities... - - 110,813 831 110,813 831 87,852 43,501
Other................... 149,006 11,708 250,278 12,373 399,284 24,081 355,017 25,975
Total................. $960,596 $193,822 $829,226 $30,281 $1,789,822 (1) $224,103 (1) $1,635,828 $309,094
<FN>
(1)The geographic distribution by state is as follows: Pennsylvania $1,601,311 (80%), Delaware $245,101 (12%), New Jersey
$99,490 (5%), and all other states $68,023 (3%).
<CAPTION>
Non-Accrual Loans 1995 1994
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..... $2,277 - - - $2,277 - $7,661 $1,469
Office Buildings........ 633 - $3,689 - 4,322 - 4,648 -
Residential Properties.. - $1,175 - - - $1,175 130 668
Shopping Centers........ 1,791 - 812 - 2,603 - 4,627 66
Land.................... - 605 - - - 605 - 10,197
Industrial Plants....... 532 - 3,859 - 4,391 - 6,815 -
Hotel/Motel/Restaurant.. 4,220 279 - - 4,220 279 4,141 293
Other................... 946 - 4,393 - 5,339 - 7,800 50
Total................. $10,399 $2,059 $12,753 - $23,152 (2) $2,059 (2) $35,822 $12,743
<FN>
(2)The geographic distribution by state is as follows: Pennsylvania $19,224, (76%), Delaware $3,262 (13%), New Jersey $1,083
(4%), and all other states $1,642 (7%).
<CAPTION>
Assets Acquired in
Foreclosures (3) 1995 1994
---------- ----------
<S> <C> <C>
Apartment Buildings................. $42 $368
Office Buildings.................... 10,961 12,455
Residential Properties.............. 2,819 4,620
Shopping Centers.................... 95 293
Land................................ 2,705 639
Industrial Plants................... 2,192 4,195
Hotel/Motel/Restaurant.............. 336 1,992
Other............................... 1,202 1,332
Total............................. $20,352 (3) $25,894
<FN>
(3)The geographic distribution by state is as follows: Pennsylvania $15,339 (75%), Delaware $412 (2%), and New Jersey $4,601
(23%).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 11: CAPITAL ADEQUACY
March 31, December 31, September 30, June 30, March 31,
1995 1994 1994 1994 1994
Consolidated
<S> <C> <C> <C> <C> <C>
Total Shareholders' Equity to Assets..... 8.15% 8.07% 8.33% 7.99% 8.50%
Tangible Shareholders' Equity to Assets.. 7.35 7.23 7.46 7.39 7.95
Risk-Based Capital
Tier 1.............................. 9.32 9.25 9.44 9.66 9.73
Tier 2.............................. 3.48 3.48 3.63 3.64 4.08
Total (1,2)....................... 12.80 12.73 13.07 13.30 13.81
Leverage (1,2)........................... 7.52 7.47 7.47 7.84 8.12
Banking
Total Risk-Based Capital (1,2)
Meridian Bank........................ 12.39 12.16 12.53 12.66 12.51
Delaware Trust Company............... 14.59 14.32 13.58 13.56 13.12
Meridian Bank, New Jersey............ 15.20 15.06 15.88 16.67 15.19
<FN>
(1) The minimum ratios required by 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 12: INDUSTRY SEGMENTS
(Dollars in Thousands)
Net Income
------------------- Assets
Three Months Ended -----------------------------------------
March 31 March 31 December 31
1995 1994 1995 1994 1994
--------- -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Banking.................................. $40,218 $35,525 $14,522,479 $13,555,099 $14,550,315
Securities (Broker-Dealer Activities).... 1,017 2,284 473,863 483,375 502,332
Consolidated............................. $41,235 $37,809 $14,996,342 $14,038,474 $15,052,647
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31, March 31, December 31,
1995 1994 1994
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks...................................... $644,320 $505,516 $669,642
Short-Term Investments
Interest-Bearing Deposits in Other Banks.................. 128,126 92,103 123,608
Federal Funds Sold and Securities Purchased Under
Agreements to Resell................................... 48,485 85,083 96,810
Total Short-Term Investments........................... 176,611 177,186 220,418
Trading Account Assets....................................... 299,555 130,195 346,170
Investment Securities Available for Sale
(Amortized Cost, $471,114, $258,737 and $445,783 at
March 31, 1995, March 31, 1994 and
December 31, 1994, Respectively)...................... 470,315 265,689 434,994
Investment Securities
(Fair Value $2,701,446, $2,791,697 and $2,753,307 at
March 31, 1995, March 31, 1994 and
December 31, 1994, Respectively)...................... 2,761,077 2,813,331 2,872,419
Loans and Other Assets Held for Sale......................... 85,031 397,366 90,590
Total Loans, Net of Unearned Discount........................ 9,906,538 9,173,551 9,763,523
Less Allowance for Possible Loan Losses................. 168,426 173,021 169,402
Net Loans........................................... 9,738,112 9,000,530 9,594,121
Premises and Equipment....................................... 259,273 242,537 263,583
Accrued Interest Receivable.................................. 106,496 98,398 111,936
Other Assets................................................. 455,552 407,726 448,774
Total Assets..................................... $14,996,342 $14,038,474 $15,052,647
LIABILITIES
Deposits
Non-Interest Bearing Deposits............................. $1,779,667 $1,811,240 $1,998,660
Interest-Bearing Deposits................................. 9,357,799 9,340,724 9,380,907
Total Deposits......................................... 11,137,466 11,151,964 11,379,567
Short-Term Borrowings
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase......................... 1,789,352 721,682 1,569,153
Other Short-Term Borrowings............................... 198,967 308,452 243,413
Total Short-Term Borrowings............................ 1,988,319 1,030,134 1,812,566
Long-Term Debt and Other Borrowings.......................... 361,200 365,028 372,153
Accrued Interest Payable..................................... 63,165 51,772 62,344
Other Liabilities............................................ 223,357 246,181 210,932
Total Liabilities...................................... 13,773,507 12,845,079 13,837,562
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Preferred Stock (Par Value $25.00)
Authorized - 25,000,000 Shares
Common Stock (Par Value $5.00)
Authorized - 200,000,000 Shares
Issued - 58,316,978 shares at March 31, 1995 and
December 31, 1994 and 58,162,266 shares at
March 31, 1994......................................... 291,585 290,811 291,585
Surplus...................................................... 210,900 205,209 211,011
Retained Earnings............................................ 792,497 709,158 771,150
Net Unrealized Gains (Losses) on Securities.................. (689) 4,142 (7,182)
Treasury Stock - 515,170, 521,951 and 525,336 Shares at
March 31, 1995, March 31, 1994 and December 31, 1994,
Respectively............................................... (15,679) (15,925) (15,911)
Unallocated Shares Held by Employees Stock Ownership Plan
(ESOP) Trust - 1,975,001 and 1,285,000 Shares at
March 31, 1995 and December 31, 1994, Respectively........ (55,779) - (35,568)
Total Shareholders' Equity............................. 1,222,835 1,193,395 1,215,085
Total Liabilities and Shareholders' Equity........ $14,996,342 $14,038,474 $15,052,647
<FN>
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
1995 1994
------------ ------------
<C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans.............................. $215,340 $172,276
Interest on Trading Account Assets...................... 6,292 1,774
Interest on Investment Securities Available for Sale.... 7,314 4,397
Interest on Investment Securities....................... 40,220 35,984
Interest on Loans Held for Sale......................... 2,104 6,404
Other Interest Income................................... 2,465 1,150
Total Interest Income................................ 273,735 221,985
INTEREST EXPENSE
Interest on Deposits.................................... 90,416 61,427
Interest on Short-Term Borrowings....................... 26,254 6,472
Interest on Long-Term Debt and Other Borrowings......... 6,588 7,158
Total Interest Expense............................... 123,258 75,057
NET INTEREST INCOME........................................ 150,477 146,928
PROVISION FOR POSSIBLE LOAN LOSSES......................... 8,021 8,825
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES.................................... 142,456 138,103
NON-INTEREST INCOME
Trust................................................... 15,683 10,789
Mortgage................................................ 2,887 7,851
Broker-Dealer and Investment Banking.................... 12,471 15,282
Service Charges on Deposit Accounts..................... 14,511 13,126
Fees for Other Customer Services ....................... 8,276 7,876
Net Securities Gains (Losses)........................... (413) 690
Other Income............................................ 4,342 2,323
Total Non-Interest Income............................ 57,757 57,937
NON-INTEREST EXPENSES
Salaries and Employee Benefits.......................... 76,375 75,186
Net Occupancy Expense................................... 11,551 12,071
Equipment Expense....................................... 8,994 9,722
Other Expenses.......................................... 43,484 39,889
Total Non-Interest Expenses.......................... 140,404 136,868
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE................ 59,809 59,172
Provision for Income Taxes................................. 18,574 18,633
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE................................. 41,235 40,539
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGE
IN METHOD OF ACCOUNTING FOR POSTEMPLOYMENT
BENEFITS................................................. - (2,730)
NET INCOME................................................. $41,235 $37,809
PER COMMON SHARE
Income Before Cumulative Effect of Change
in Accounting Principle
Primary.............................................. $0.73 $0.70
Fully Diluted........................................ $0.73 $0.70
Cumulative After-Tax Effect on Prior Years of Change
in Accounting Principle
Primary.............................................. - ($0.05)
Fully Diluted........................................ - ($0.05)
Net Income
Primary.............................................. $0.73 $0.65
Fully Diluted........................................ $0.73 $0.65
Dividends............................................... $0.34 $0.32
AVERAGE SHARES OUTSTANDING
Primary.............................................. 56,452,905 58,187,526
Fully Diluted........................................ 56,562,364 58,195,971
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW
(Dollars in Thousands)
For the Three Months Ended
March 31
--------------------------------
1995 1994
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income................................................... $41,235 $37,809
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities
Depreciation and Amortization............................. 12,875 10,415
Deferred Tax Expense (Benefit)............................ 249 (1,886)
Cumulative Effect of Change in Accounting Principle....... - (2,730)
Provision for Possible Loan Losses........................ 8,021 8,825
Provision for Other Real Estate Losses and Mortgage
Mortgage Servicing Recourse............................. 1,913 2,554
Net Gains - Investment Securities......................... (20) (382)
Net (Gains) Losses - Investment Securities Available
for Sale................................................ 419 (301)
Gains On Sales Of Mortgage Servicing...................... (207) -
Decrease (Increase) in Trading Account Assets............. 46,615 (93,579)
Decrease in Loans and Other Assets Held for Sale.......... 5,801 251,822
Decrease (Increase) in Other Assets....................... (10,432) 56,362
Increase (Decrease) in Other Liabilities.................. 12,351 (43,421)
Other, Net................................................ 778 (759)
Net Cash Provided by Operating Activities 119,598 224,729
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Short-Term Investments........... 76,087 90,025
Purchases of Short-Term Investments.......................... (80,602) (80,269)
Proceeds from Sales of Investment Securities................. 1,141 742
Proceeds from Maturities, Calls and Paydowns of Investment
Securities................................................. 112,761 422,672
Purchases of Investment Securities........................... (22,574) (452,262)
Proceeds from Sales of Investment Securities Available
for Sale................................................... 98,453 7,471
Proceeds from Maturities, Calls and Paydowns of Investment
Securities Available for Sale.............................. 4,879 16,949
Purchases of Investment Securities Available for Sale........ (128,913) (6,811)
Net Principal Disbursed on Loans to Customers................ (157,696) (184,698)
Proceeds from Sales of Premises and Equipment................ 749 1,562
Purchases of Premises and Equipment.......................... (4,378) (10,250)
Proceeds from Sales of Mortgage Servicing.................... 536 2,114
Proceeds from Sales of Assets Acquired in Foreclosures....... 4,283 2,675
Net Cash Used for Investing Activities.................... (95,274) (190,080)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Deposits..................................... (242,331) (218,335)
Net Increase in Short Term Borrowings ....................... 175,753 238,411
Repayment of Long Term Borrowings............................ (11,601) (56,439)
Purchases of Treasury Stock Shares........................... (1,143) (16,774)
Proceeds from Issuance of Common Stock....................... 479 678
Cash Dividends Paid to Common Shareholders................... (19,128) (18,452)
Net Cash Provided by (Used for) Financing Activities...... (97,971) (70,911)
CASH AND CASH EQUIVALENTS
Net Decrease During the Period............................ (73,647) (36,262)
Balance at Beginning of the Period........................ 766,452 602,281
Balance at End of the Period.............................. $692,805 $566,019
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Thousands)
Net Unrealized
Common Stock Gains
Shares Retained (Losses) on Treasury
Outstanding Amount Surplus Earnings Securities Stock
------------ ------------ ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
FOR THE THREE MONTHS ENDED
March 31, 1994
Balance at January 1, 1994.............................. 58,154,486 $290,760 $205,174 $690,058 ($359) -
Net Income.............................................. - - - 37,809 - -
Common Stock Dividends Declared......................... - - - (18,452) - -
Sales of Stock Under Dividend Reinvestment,
Stock Option and Employee Benefit Plans.............. 40,979 51 41 (257) - 849
Purchases of Treasury Stock............................. (555,150) - - - - (16,774)
Unrealized After-Tax Gain on Investment Securities
Available for Sale................................... - - - - 4,501 -
Cash in Lieu of Fractional Shares....................... - - (6) - - -
Balance at March 31, 1994............................... 57,640,315 $290,811 $205,209 $709,158 $4,142 ($15,925)
FOR THE THREE MONTHS ENDED
March 31, 1995
Balance at January 1, 1995.............................. 56,506,642 $291,585 $211,011 $771,150 ($7,182) ($15,911)
Net Income.............................................. - - - 41,235 - -
Common Stock Dividends Declared......................... - - - (19,128) - -
Sales of Stock Under Dividend Reinvestment,
Stock Option and Employee Benefit Plans.............. 73,350 - (133) (760) - 1,375
Purchases of Treasury Stock............................. (63,184) - - - (1,143)
Purchases of Shares of Employee Stock Ownership
Plan (ESOP)........................................... (715,000) - - - - -
Employee Stock Ownership Plan (ESOP) Shares Committed
To Be Released to Participants........................ 24,999 - 25 - - -
Unrealized After-Tax Gain on Investment Securities
Available for Sale................................... - - - - 6,493 -
Cash in Lieu of Fractional Shares....................... - - (3) - -
Balance at March 31, 1995............................... 55,826,807 $291,585 $210,900 $792,497 ($689) ($15,679)
<CAPTION>
Unallocated
ESOP
Shares Total
------------ ------------
FOR THE THREE MONTHS ENDED
March 31, 1994
<S> <C> <C>
Balance at January 1, 1994.............................. - $1,185,633
Net Income.............................................. - 37,809
Common Stock Dividends Declared......................... - (18,452)
Sales of Stock Under Dividend Reinvestment,
Stock Option and Employee Benefit Plans.............. - 684
Purchases of Treasury Stock............................. - (16,774)
Unrealized After-Tax Gain on Investment Securities
Available for Sale................................... - 4,501
Cash in Lieu of Fractional Shares....................... - (6)
Balance at March 31, 1994............................... - $1,193,395
FOR THE THREE MONTHS ENDED
March 31, 1995
Balance at January 1, 1995.............................. ($35,568) $1,215,085
Net Income.............................................. - 41,235
Common Stock Dividends Declared......................... - (19,128)
Sales of Stock Under Dividend Reinvestment,
Stock Option and Employee Benefit Plans.............. - 482
Purchases of Treasury Stock............................. - (1,143)
Purchases of Shares of Employee Stock Ownership
Plan (ESOP)........................................... (20,916) (20,916)
Employee Stock Ownership Plan (ESOP) Shares Committed
To Be Released to Participants........................ 705 730
Unrealized After-Tax Gain on Investment Securities
Available for Sale................................... - 6,493
Cash in Lieu of Fractional Shares....................... - (3)
Balance at March 31, 1995............................... ($55,779) $1,222,835
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<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
1994 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 prior period financial statements
have been reclassified to conform with the presentation used in
the 1995 financial statements. These reclassifications have no
effect on net income.
In the accompanying Consolidated 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.
Relative to the Consolidated Statements of Cash Flows,
income tax payments totaled $548 thousand in 1995 and $752
thousand in 1994. Interest payments totaled $122.4 million in
1995 and $96.4 million in 1994. Non-cash investing activity
consists of net transfers of loans in liquidation to other real
estate aggregating $5.9 million in 1995 and $37.9 million in
1994.
2) Securities Transactions
Total gains (losses) from securities transactions, which
were included in the following categories in the non-interest
income section of the consolidated statements of income, are as
follows:
Three Months Ended
March 31
1995 1994
Broker-Dealer and Investment Banking $ 14,000 $ (7,000)
Net Securities Gains (Losses) (413,000) 690,000
Total Securities Gains (Losses) $(399,000) $683,000
3) Employee Stock Ownership Plan
Effective January 1, 1995, all employees of Meridian and its
subsidiaries with two or more years of service are participating
in a non-contributory employee stock ownership plan (ESOP). The
ESOP is a leveraged plan and is funded through a direct loan from
Meridian. The ESOP acquired a total of 2,000,000 shares of
Meridian common stock for distribution to eligible employees
ratably over a 20 year period. Compensation cost is recognized
based on the fair market value of the shares committed to be
released to employees. Compensation cost recognized in the first
quarter of 1995 totaled $731,000. Dividends on allocated shares
will be paid to participants and will be charged to retained
earnings. Dividends on unallocated shares and additional cash
contributions from Meridian will be used by the ESOP for debt
service.
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, 1995, Meridian adopted Statement of
Financial Accounting Standards No. 114 "Accounting by Creditors
for Impairment of A Loan" and Statement No. 118 "Accounting by
Creditors for Impairment of a Loan - Income Recognition and
Disclosures". Statement No. 114 requires that certain 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 loan if the loan is collateral dependent.
Statement No. 118 amends Statement No. 114 to allow a creditor to
use existing methods for recognizing interest income on an
impaired loan. There was no impact on consolidated net income
resulting from the implementation of these statements. Prior
period financial information has been restated to reflect the
reclassification of in-substance foreclosed loans to non-
performing loans.
A loan is considered impaired when, based on current
information and events, it is probable that a creditor will be
unable to collect all amounts due according to the contractual
terms of the loan agreement. Currently, this category includes
all commercial loans on non-accrual status, and certain
restructured loans. Large groups of smaller-balance, homogeneous
loans, such as residential mortgage and consumer loans that are
collectively evaluated for impairment are not included in
impaired loans.
The average recorded investment in impaired loans in the
first quarter of 1995 was $82.0 million. The recorded investment
in impaired loans at March 31, 1995 was $89.1 million. The
recorded investment for which there is a related allowance for
possible loan losses was $49.6 million at March 31, 1995, and the
related allowance was $21.9 million. The recorded investment for
which there is no related allowance for possible loan losses was
$39.5 million.
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 collections
on nonaccrual loans for which the ultimate collectibility of
principal is uncertain are applied as principal reductions.
Otherwise, such collections are credited to income when received.
Interest on loans that have been restructured is recognized
according to the renegotiated terms. The amount of interest
income recognized on impaired loans, using the cash-basis method
of accounting, was $44 thousand in the first quarter of 1995.
5) Commitments and Contingencies
At March 31, 1995, 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
(27) Financial Data Schedule
(b) Reports on Form 8-K
On January 12, 1995, Meridian filed a Current
Report on Form 8-K with the Commission, reporting
information under Items 5 and 7(c). The form 8-K
did not contain any financial statements.
<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 15, 1995
Michael J. Mizak, Jr.,
Senior Vice President and Controller
(Authorized Officer and Principal
Accounting Officer)
<PAGE>
EXHIBIT INDEX
Number
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> MAR-31-1995
<CASH> 644,320
<INT-BEARING-DEPOSITS> 128,126
<FED-FUNDS-SOLD> 48,485
<TRADING-ASSETS> 299,555
<INVESTMENTS-HELD-FOR-SALE> 470,315
<INVESTMENTS-CARRYING> 2,761,077
<INVESTMENTS-MARKET> 2,701,446
<LOANS> 9,906,538
<ALLOWANCE> 168,426
<TOTAL-ASSETS> 14,996,342
<DEPOSITS> 11,137,466
<SHORT-TERM> 1,988,319
<LIABILITIES-OTHER> 286,522
<LONG-TERM> 361,200
<COMMON> 291,585
0
0
<OTHER-SE> 931,250
<TOTAL-LIABILITIES-AND-EQUITY> 14,996,342
<INTEREST-LOAN> 215,340
<INTEREST-INVEST> 47,534
<INTEREST-OTHER> 10,861
<INTEREST-TOTAL> 273,735
<INTEREST-DEPOSIT> 90,416
<INTEREST-EXPENSE> 123,258
<INTEREST-INCOME-NET> 150,477
<LOAN-LOSSES> 8,021
<SECURITIES-GAINS> (413)
<EXPENSE-OTHER> 140,404
<INCOME-PRETAX> 59,809
<INCOME-PRE-EXTRAORDINARY> 41,235
<EXTRAORDINARY> 0
<CHANGES> (2,730)
<NET-INCOME> 41,235
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.73
<YIELD-ACTUAL> 4.58
<LOANS-NON> 105,317
<LOANS-PAST> 24,071
<LOANS-TROUBLED> 1,149
<LOANS-PROBLEM> 35,000
<ALLOWANCE-OPEN> 169,402
<CHARGE-OFFS> 11,910
<RECOVERIES> 2,913
<ALLOWANCE-CLOSE> 168,426
<ALLOWANCE-DOMESTIC> 168,426
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
