Meridian Bancorp, Inc. is a Maryland corporation that was incorporated in
2014. The Company owns all of East Boston Savings Bank’s stock and directs,
plans and coordinates East Boston Savings Bank’s business activities.
The Company is the successor to East Boston Savings Bank’s previous holding
company, Meridian Interstate Bancorp, Inc. (“Old Meridian”), and
was formed as a result of a second-step mutual-to-stock conversion (the “Conversion”)
of Meridian Financial Services, Incorporated, (the “MHC”), the top
tier mutual holding company of Old Meridian. The Conversion was completed in
2014 at which point, the MHC and Meridian Interstate Funding Corporation were
merged into Old Meridian (and ceased to exist), and Old Meridian merged into
the Company.
East Boston Savings Bank is a Massachusetts-chartered stock savings bank, founded
in 1848, that conducts its business from 29 full-service locations and three
loan centers in the greater Boston metropolitan area. We offer a variety of
deposit and loan products to individuals and businesses located in our primary
market, which consists of Suffolk, Middlesex and Essex Counties, Massachusetts.
We attract deposits from the general public and use those funds to originate
one- to four-family real estate, multi-family and commercial real estate, construction,
commercial and industrial, and consumer loans, which we primarily hold for investment.
Our lending business also involves the purchase and sale of loan participation
interests. We also offer non-deposit financial products through a third-party
network arrangement.
We originate a variety of fixed- and adjustable-rate commercial real estate
loans for terms and amortization periods up to 30 years, which may include balloon
loans. Interest rates and payments on our adjustable-rate loans adjust every
three, five or seven years and generally are adjusted to a rate equal to a percentage
above the corresponding U.S. Treasury rate or Federal Home Loan Bank borrowing
rate. Most of our adjustable-rate commercial real estate loans adjust every
five years and amortize over terms of 20 to 25 years. We also include prepayment
penalties on loans we originate. Loan amounts generally do not exceed 75% to
80% of the property’s appraised value at the time the loan is originated.
In addition, borrowers are by policy, required to have a minimum income to debt
service ratio of 1.20x. We require independent appraisals or evaluations on
all loans secured by commercial real estate from an approved appraisers list.
We require most of our commercial real estate loan borrowers to submit annual
financial statements and/or rent rolls on the subject property. These properties
may also be subject to annual inspections to support that appropriate maintenance
is being performed by the owner/borrower. All commercial real estate loans over
$500,000 are reviewed at least annually along with each commercial real estate
borrower and, as applicable, each guarantor. The loan and its borrowers and/or
guarantors are subject to an annual risk certification verifying that the loan
is properly risk rated based upon covenant compliance and other terms as provided
for in the loan agreements. While this process does not prevent loans from becoming
delinquent, it provides us with the opportunity to better identify problem loans
in a timely manner and to work with the borrower prior to the loan becoming
delinquent.
While one- to four-family residential real estate loans are normally originated
with up to 30-year terms, such loans typically remain outstanding for substantially
shorter periods because borrowers often prepay their loans in full either upon
sale of the property pledged as security or upon refinancing the original loan.
Therefore, average loan maturity is a function of, among other factors, the
level of purchase and sale activity in the real estate market, prevailing interest
rates and the interest rates payable on outstanding loans. We do not offer loans
with negative amortization and generally do not offer interest-only, one- to
four-family residential real estate loans. Additionally, our current practice
is generally (1) to sell to the secondary market newly originated longer-term
(terms of 10 years or greater) fixed-rate, one- to four-family residential real
estate loans, and (2) to hold in our portfolio shorter-term, fixed-rate loans,
bi-weekly amortization loans and adjustable-rate loans. We sell residential
real estate loans in the secondary market primarily with servicing released.
We also sell loans to Fannie Mae, the Federal Home Loan Bank Mortgage Partnership
Finance Program and other investors with servicing retained.
We originate a variety of adjustable-rate multi-family real estate loans for
terms up to 30 years. Interest rates and payments on our adjustable-rate loans
adjust every three, five or seven years and generally are adjusted to a rate
equal to a percentage above the corresponding U.S. Treasury rate or Federal
Home Loan Bank borrowing rate. Most of our adjustable-rate multi-family real
estate loans adjust every five years and amortize over terms of 20 to 25 years.
We also include prepayment penalties on loans we originate. Loan amounts generally
do not exceed 75% to 80% of the property’s appraised value at the time
the loan is originated. Borrowers are by policy, required to have a minimum
income to debt service ratio of 1.20x. We require most of our multi-family real
estate loan borrowers to submit annual financial statements and/or rent rolls
on the subject property. These properties may also be subject to annual inspections
to support that appropriate maintenance is being performed by the owner/borrower.
We primarily make construction loans for commercial development projects, including
apartment buildings, small industrial buildings and retail and office buildings.
We also originate adjustable loans to individuals and to builders to finance
the construction of residential dwellings. Most of our construction loans provide
for the payment of only interest during the construction phase, which is usually
up to 12 to 24 months, although some construction loans are renewed, generally
for one or two additional years. At the end of the construction phase, the loan
may convert to a permanent mortgage loan or the loan may be paid in full. Loans
generally can be made with a maximum loan-to-value ratio of 80% of the appraised
market value upon completion of the project. As appropriate to the underwriting,
a “discounted cash flow analysis” is utilized. Before making a commitment
to fund a construction loan, we require an appraisal of the property by an independent
licensed appraiser. We also will generally require an inspection of the property
before disbursement of funds during the term of the construction loan.
Commercial lending products include term loans and revolving lines of credit.
Commercial loans and lines of credit are made with either variable or fixed
rates of interest. Variable rates are based on the prime rate as published in
The Wall Street Journal, plus a margin. Initial rates on fixed-rate business
loans are generally based on a corresponding U.S. Treasury or Federal Home Loan
Bank rate, plus a margin. Commercial and industrial loans typically have shorter
maturity terms and higher interest rates than commercial real estate loans,
but may involve more credit risk because of the type and nature of the collateral.
The procedures for underwriting home equity lines of credit include an assessment
of the applicant’s payment history on other debts and ability to meet
existing obligations and payments on the proposed loan. Although the applicant’s
creditworthiness is a primary consideration, the underwriting process also includes
a comparison of the value of the collateral to the proposed loan amount. The
procedures for underwriting one- to four-family residential real estate loans
apply equally to home equity loans.
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