EBSB Stock: Over 15% Increase Pre-Market Explanation

By Amit Chowdhry ● Apr 23, 2021
  • The stock price of Meridian Bancorp Inc (NASDAQ: EBSB) has increased by over 15% pre-market. This is why it happened.

The stock price of Meridian Bancorp Inc (NASDAQ: EBSB) has increased by over 15% pre-market. Investors are responding positively to Meridian Bancorp, the holding company for East Boston Savings Bank, announcing net income of $24.3 million, or $0.48 per diluted share, for the quarter ended March 31, 2021, compared to $18.1 million, or $0.36 per diluted share for the quarter ended December 31, 2020, and $13 million, or $0.25 per diluted share, for the quarter ended March 31, 2020. And Meridian Bancorp’s return on average assets was 1.46% for the quarter ended March 31, 2021, compared to 1.10% for the quarter ended December 31, 2020, and 0.82% for the quarter ended March 31, 2020. Plus Meridian Bancorp’s return on average equity was 12.45% for the quarter ended March 31, 2021, compared to 9.51% for the quarter ended December 31, 2020, and 7.09% for the quarter ended March 31, 2020.

Meridian Bancorp’s net interest income was $48.4 million for the quarter ended March 31, 2021, an increase of $3.3 million, or 7.3%, from the quarter ended March 31, 2020. And the interest rate spread and net interest margin on a tax-equivalent basis were 2.91% and 3.07%, respectively, for the quarter ended March 31, 2021, compared to 2.67% and 2.99%, respectively, for the quarter ended March 31, 2020. 

The total interest and dividend income totaled $57.7 million for the quarter ended March 31, 2021, a decrease of $8.3 million, or 12.6% from the quarter ended March 31, 2020. And the company’s yield on interest-earning assets on a tax-equivalent basis was 3.65% for the quarter ended March 31, 2021, down 70 basis points from the quarter ended March 31, 2020. The total interest expense totaled $9.3 million for the quarter ended March 31, 2021, a decrease of $11.6 million, or 55.4%, from the quarter ended March 31, 2020. Interest expense on deposits decreased to $5.7 million for the quarter ended March 31, 2021, a decrease of $11 million, or 65.8%, from the quarter ended March 31, 2020, primarily due to a decrease in the cost of average total deposits to 0.45% from 1.38% for the quarter ended March 31, 2020. Meridian Bancorp’s total cost of funds was 0.65% for the quarter ended March 31, 2021, a decrease of 87 basis points from 1.52% for the quarter ended March 31, 2020.

Meridian Bancorp had recognized a reversal of $5.2 million in its provision for credit losses for the quarter ended March 31, 2021, compared to a provision of $8.9 million for the quarter ended December 31, 2020, and $725,000 for the quarter ended March 31, 2020. The allowance for credit losses on loans was $63.4 million or 1.2% of total loans on March 31, 2021, compared to $68.8 million or 1.25% of total loans on December 31, 2020, and $50.9 million or 0.89% of total loans at March 31, 2020. The net charge-offs totaled $152,000 for the quarter ended March 31, 2021, and non-performing assets were $3.1 million, or 0.05% of total assets, on March 31, 2021, compared to $3.2 million, or 0.05% of total assets, at March 31, 2020.

The company’s non-interest income was $4.9 million for the quarter ended March 31, 2021, an increase of $5.8 million from an $831,000 loss for the quarter ended March 31, 2020, due primarily to a $4.8 million valuation increase on marketable equity securities, net, and $1.3 million in gains realized on marketable equity securities, net, sold during the period, partially offset by a decrease of $579,000 in loan fees. And non-interest expenses were $25.5 million, or 1.53% of average assets for the quarter ended March 31, 2021, compared to $26.3 million, or 1.66% of average assets for the quarter ended March 31, 2020, a decrease of $777,000, or 3%. Meridian Bancorp’s efficiency ratio was 49.55% for the quarter ended March 31, 2021, compared to 54.18% for the quarter ended March 31, 2020. Plus Meridian Bancorp recorded a provision for income taxes of $8.7 million for the quarter ended March 31, 2021, reflecting an effective tax rate of 26.4%, compared to $4.2 million, or an effective tax rate of 24.6%, for the quarter ended March 31, 2020.

Meridian Bancorp’s total assets were $6.504 billion on March 31, 2021, down $115.6 million, or 1.8%, from $6.620 billion on December 31, 2020. Net loans were $5.224 billion on March 31, 2021, down $219.8 million, or 4%, from December 31, 2020, despite loan originations of $271.9 million during the quarter ended March 31, 2021. And the net decrease in loans for the three months ended March 31, 2021, was primarily due to decreases of $105.5 million in construction loans, $79.9 million in commercial real estate loans, and $46.7 million in one- to four-family loans, partially offset by a net increase of $14.4 million in commercial and industrial loans, which includes the origination of $52.4 million in PPP loans during the quarter ended March 31, 2021. Plus the allowance for credit losses on loans decreased $5.4 million, or 7.8%, to $63.4 million during the quarter ended March 31, 2021, from $68.8 million on December 31, 2020, primarily due to changes in the volume and mix of the loan portfolio.

Meridian Bancorp’s total deposits were $5.097 billion on March 31, 2021, up $16.2 million, or 0.3%, from $5.081 billion on December 31, 2020. And core deposits, which exclude certificates of deposit, increased $74.8 million, or 1.9%, during the quarter ended March 31, 2021, to $3.937 billion, or 77.2% of total deposits, compared to 76.0% at December 31, 2020. Certificates of deposit decreased $58.6 million during the quarter ended March 31, 2021, inclusive of a $59.9 million decrease in brokered deposits. Total borrowings were $560.6 million on March 31, 2021, down $147.6 million, or 20.8%, from December 31, 2020, primarily due to the payoffs of $50.0 million in matured advances from the FHLB and all remaining funds from the Federal Reserve’s PPPLF program.

Meridian Bancorp’s total stockholders’ equity increased $20.2 million, or 2.6%, to $789.1 million on March 31, 2021, from $768.9 million on December 31, 2020. And the increase for the quarter ended March 31, 2021, was primarily due to net income of $24.3 million, partially offset by dividends of $0.10 per share totaling $5 million. The company’s stockholders’ equity to assets was 12.13% on March 31, 2021, compared to 11.61% on December 31, 2020. 

And tangible book value per share increased to $14.63 on March 31, 2021, from $14.25 on December 31, 2020. The market price per share increased 23.5% to $18.42 at March 31, 2021, from $14.91 at December 31, 2020. And the company exceeded the minimum requirement to be considered well-capitalized on March 31, 2021.

KEY QUOTE:

“I am pleased to report record quarterly net income of $24.3 million for the first quarter of 2021, representing increases of $6.2 million, or 34.2% compared to the fourth quarter of 2020, and $11.3 million, or 87.4%, compared to the first quarter of 2020. These earnings reflect a 7.3% increase in net interest income for the first quarter of 2021 compared to the first quarter of 2020, improving the net interest margin to 3.07% from 2.99% over the same period, a result of management’s focus on maintaining loan yields while aggressively decreasing our cost of funds. Also, strong asset quality and changes in the volume and mix of our loan portfolio resulted in a decrease in our percentage of allowance to total loans to 1.20% at March 31, 2021, from 1.25% at December 31, 2020, due to a provision reversal of $5.2 million during the first quarter of 2021.”

— Richard J. Gavegnano, Chairman, President and Chief Executive Officer

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