DEF 14A 1 ebsb-def14a_20210519.htm DEF 14A ebsb-def14a_20210519.htm

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant                               Filed by a Party other than the Registrant  

Check the appropriate box:

 

 

 

 

 

Preliminary Proxy Statement

 

 

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

 

 

Definitive Proxy Statement

 

 

 

Definitive Additional Materials

 

 

 

Soliciting Material Pursuant to § 240.14a-12

Meridian Bancorp, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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No fee required.

 

 

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

 

 

(1)

 

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(2)

 

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(3)

 

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(4)

 

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Fee paid previously with preliminary materials.

 

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

 

 

 

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April 9, 2021

 

Dear Fellow Stockholder:

 

You are cordially invited to attend the 2021 annual meeting of stockholders of Meridian Bancorp, Inc. The meeting will be held at the Peabody office of East Boston Savings Bank, 67 Prospect Street, Peabody, Massachusetts on May 19, 2021 at 11:00 a.m., local time.

 

We continue to monitor the public health impact of the coronavirus (COVID-19). The health and well-being of our employees, stockholders, directors, officers and other stakeholders are paramount. If public health developments warrant, we may change the date or location of the annual meeting, including the possibility that we may hold the annual meeting through a “virtual” or online method.  Any such change will be announced as promptly as practicable, including by any notification required by state law.

 

The notice of annual meeting and proxy statement appearing on the following pages describe the formal business to be transacted at the meeting. Officers of the Company, as well as a representative of Wolf & Company, P.C., the Company’s independent registered public accounting firm, are expected to be present to respond to appropriate questions of stockholders.

 

It is important that your shares are represented at this meeting, whether or not you attend the meeting in person and regardless of the number of shares you own. To make sure your shares are represented, we urge you to complete and mail the proxy card promptly. If you attend the meeting, you may vote in person even if you have previously mailed a proxy card.

 

We will be using the “Notice and Access” method of providing proxy materials to you via the Internet in accordance with the rules and regulations of the Securities and Exchange Commission. We believe that this process should provide you with a convenient and quick way to access your proxy materials and vote your shares, while allowing us to conserve natural resources and reduce the costs of printing and distributing the proxy materials. On or about April 9, 2021, we will mail to our stockholders a Stockholder Meeting Notice (the “Meeting Notice”) containing instructions on how to access our Proxy Statement and 2020 Annual Report, and how to vote your shares. The Meeting Notice will also contain instructions on how you may receive, if you wish, a paper copy of your proxy materials.

 

We look forward to seeing you at the meeting.

 

Sincerely,

 

Richard J. Gavegnano

Chairman of the Board, President and Chief Executive Officer

 

 


 

 

 

67 Prospect Street

Peabody, Massachusetts 01960

(617) 567-1500

 

 

NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS

 

TIME AND DATE

 

11:00 a.m. on May 19, 2021

PLACE

 

Peabody Office of East Boston Savings Bank

 

 

67 Prospect Street

 

 

Peabody, Massachusetts 01960

ITEMS OF BUSINESS

 

(1)

To elect four directors to serve for a term of three years.

 

 

(2)

To ratify the selection of Wolf & Company, P.C. as our independent registered public accounting firm for fiscal year 2021.

 

 

(3)

To consider a non-binding proposal to approve our executive compensation as described in the proxy statement.

 

 

(4)

To consider a non-binding proposal with respect to the frequency that stockholders will vote on our executive compensation.

 

 

(5)

To transact such other business as may properly come before the meeting and any adjournment or postponement thereof.

RECORD DATE

 

To vote, you must have been a stockholder at the close of business on March 31, 2021.

PROXY VOTING

 

It is important that your shares be represented and voted at the meeting. You can vote your shares by completing and returning the proxy card or voting instruction card sent to you. Voting instructions are printed on your proxy or voting instruction card and included in the accompanying proxy statement. You can revoke a proxy at any time before its exercise at the meeting by following the instructions in the proxy statement.

 

 

 

 

Edward J. Merritt

Corporate Secretary

 

 

April 9, 2021

 

 

 

 


 

Meridian Bancorp, Inc.

 

Proxy Statement

 

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of Meridian Bancorp, Inc. (the “Company” or “Meridian Bancorp”) to be used at the annual meeting of stockholders of the Company. The Company is the holding company for East Boston Savings Bank (the “Bank”). The annual meeting will be held at the Peabody office of East Boston Savings Bank, 67 Prospect Street, Peabody, Massachusetts on Wednesday, May 19, 2021 at 11:00 a.m., local time. This proxy statement and the proxy card are first being made available on or about April 9, 2021.

Voting and Proxy Procedure

Who Can Vote at the Meeting

You are entitled to vote your Company common stock if the records of the Company show that you held your shares as of the close of business on March 31, 2021. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by your broker or other nominee. As the beneficial owner, you have the right to direct your broker or other nominee how to vote.

As of the close of business on March 31, 2021, there were 52,430,554 shares of Company common stock outstanding for voting purposes. Each share of common stock has one vote. The Company’s Articles of Incorporation provide that, subject to certain exceptions, record owners of the Company’s common stock that is beneficially owned by a person who beneficially owns in excess of 10% of the Company’s outstanding shares, are not entitled to any vote in respect of the shares held in excess of the 10% limit.

Attending the Meeting

If you were a stockholder as of the close of business on March 31, 2021, you may attend the meeting. However, if your shares of Company common stock are held by a broker or other nominee, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or a letter from a bank or broker are examples of proof of ownership. If you want to vote your shares of Company common stock held in street name in person at the meeting, you will have to get a written proxy in your name from the broker or other nominee who holds your shares.

Quorum and Vote Required

A majority of the outstanding shares of common stock entitled to vote is required to be represented at the meeting to constitute a quorum for the transaction of business. If you return valid proxy instructions or attend the meeting in person, your shares will be counted for purposes of determining whether there is a quorum, even if you abstain from voting. Broker non-votes also will be counted for purposes of determining the existence of a quorum. A broker non-vote occurs when a broker, bank or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner.

 


 

In voting on the election of directors, you may vote in favor of all nominees, withhold votes as to all nominees or withhold votes as to specific nominees. There is no cumulative voting for the election of directors. Directors are elected by a plurality of the votes cast at the annual meeting. This means that the nominees receiving the greatest number of votes will be elected. Votes that are withheld and broker non-votes will have no effect on the outcome of the election.

In voting to ratify the appointment of Wolf & Company, P.C., as our independent registered public accounting firm, you may vote in favor of the proposal, against the proposal or abstain from voting. To be approved, this matter requires the affirmative vote of a majority of the votes cast at the annual meeting. Broker non-votes and abstentions will not be counted as votes cast and will have no effect on this proposal.

In voting on the non-binding proposal to approve our executive compensation, you may vote in favor of the proposal, vote against the proposal or abstain from voting. To approve the proposal, the affirmative vote of a majority of the votes cast at the annual meeting is required. Broker non-votes and abstentions will not be counted as votes cast and will have no effect on this proposal. While this vote is required by law, it will neither be binding on us or the Board of Directors, nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on us or the Board of Directors.

In voting on the non-binding proposal with respect to the frequency that stockholders will vote on our executive compensation, a stockholder may select that stockholders: (i) consider the proposal every “1 YEAR”; (ii) consider the proposal every “2 YEARS”; (iii) consider the proposal every “3 YEARS”; or (iv) “ABSTAIN” from voting on the proposal. Generally, approval of any matter presented to stockholders requires the affirmative vote of a majority of the votes cast. However, because this vote is advisory and non-binding, if none of the frequency options receive a majority of the votes cast, the option receiving the greatest number of votes will be considered the frequency recommended by our stockholders. Even though this vote will neither be binding on us or the Board of Directors, nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on us or the Board of Directors, the Board of Directors will take into account the outcome of this vote in making a determination on the frequency that advisory votes on executive compensation will be included in our proxy statements.

Voting by Proxy

The Company’s Board of Directors is sending you this proxy statement or has made this proxy statement available to you to request that you allow your shares of Company common stock to be represented at the annual meeting by the persons named in the proxy card. All shares of Company common stock represented at the meeting by properly executed and dated proxies will be voted according to the instructions indicated on the proxy card. If you sign, date and return a proxy card without giving voting instructions, your shares will be voted as recommended by the Company’s Board of Directors. The Board of Directors recommends that you:

 

vote for each of the nominees for director;

 

vote for ratification of the appointment of Wolf & Company, P.C. as the Company’s independent registered public accounting firm;

 

vote for the approval of our executive compensation as described in this proxy statement; and

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mark the “1 YEAR” box with respect to the advisory proposal on the frequency of the stockholders’ vote on executive compensation.

If any matters not described in this proxy statement are properly presented at the annual meeting, the persons named in the proxy card will use their judgment to determine how to vote your shares. This includes a motion to adjourn or postpone the meeting to solicit additional proxies. The Company does not currently know of any other matters to be presented at the meeting.

You may revoke your proxy at any time before the vote is taken at the meeting. To revoke your proxy, you must either advise the Corporate Secretary of the Company in writing before your common stock has been voted at the annual meeting, deliver a later dated proxy or attend the meeting and vote your shares in person by ballot. Attendance at the annual meeting will not in itself constitute revocation of your proxy.

If your Company common stock is held in street name, you will receive instructions from your broker or other nominee that you must follow to have your shares voted. Your broker or other nominee may allow you to deliver your voting instructions via the telephone or the Internet. Please review the proxy card or instruction form provided by your broker or other nominee.

Participants in the ESOP and 401(k) Plan

If you participate in the East Boston Savings Bank Employee Stock Ownership Plan (the “ESOP”) or if you hold Company common stock through the East Boston Savings Bank 401(k) Plan (the “401(k) Plan”), you will receive vote authorization form(s) that reflect all shares you may direct the trustees to vote on your behalf under the plans. Under the terms of the ESOP, the ESOP trustee will vote all shares held by the ESOP, but each ESOP participant may direct the trustee how to vote the shares of common stock allocated to his or her account. The ESOP trustee, subject to the exercise of its fiduciary responsibilities, will vote all unallocated shares of Company common stock held by the ESOP and all allocated shares for which no voting instructions are received in the same proportion as shares for which it has received timely voting instructions. Although not required by the terms of the 401(k) Plan, East Boston Savings Bank is providing a participant the opportunity to provide voting instructions for all shares credited to his or her 401(k) Plan account and held in the Meridian Bancorp, Inc. Stock Fund. Shares for which no voting instructions are given or for which instructions were not timely received will be voted at the discretion of the 401(k) plan trustee. The deadline for returning your voting instructions is May 12, 2021.

If you have any questions about voting under the 401(k) Plan or ESOP, please contact Eric Heath, Senior Vice President, Human Resources, at (978) 977-2820.

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Corporate Governance

General

The Company periodically reviews its corporate governance policies and procedures to ensure that the Company meets the highest standards of ethical conduct, reports results with accuracy and transparency and maintains full compliance with the laws, rules and regulations that govern the Company’s operations. As part of this periodic corporate governance review, the Board of Directors reviews and adopts best corporate governance policies and practices for the Company.

Code of Ethics and Business Conduct

The Company has adopted a Code of Ethics and Business Conduct that is designed to promote the highest standards of ethical conduct by the Company’s directors, executive officers and employees. The Code of Ethics and Business Conduct requires that the Company’s directors, executive officers and employees avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in the Company’s best interest. Under the terms of the Code of Ethics and Business Conduct, directors, executive officers and employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Ethics and Business Conduct. A copy of the Code of Ethics and Business Conduct can be found in the “Investor Relations—Corporate Governance” section of the Company’s website, www.ebsb.com. Amendments to and waivers from the Code of Ethics with respect to directors and executive officers will also be disclosed on the Company’s website.

As a mechanism to encourage compliance with the Code of Ethics and Business Conduct, the Company has established procedures to receive, retain and treat complaints regarding accounting, internal accounting controls and auditing matters. These procedures ensure that individuals may submit concerns regarding questionable accounting or auditing matters in a confidential and anonymous manner. The Code of Ethics and Business Conduct also prohibits the Company from retaliating against any director, executive officer or employee who reports actual or apparent violations of the Code of Ethics and Business Conduct.

Meetings of the Board of Directors

The Company conducts business through meetings of its Board of Directors and through activities of its committees. During 2020, the Board of Directors of Meridian Bancorp held 13 meetings (not including committee meetings). No director, with the exception of Thomas J. Gunning, attended fewer than 75% of the total meetings of the Company’s and the Bank’s respective Board of Directors and the committees on which such director served (held during the period for which the director has served as a director or committee member, as appropriate).

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Committees of the Board of Directors

The following table identifies our Audit, Compensation and Nominating/Corporate Governance committees and their members. All members of each committee are independent in accordance with the listing rules of the Nasdaq Stock Market, Inc. The Company also maintains an Executive Committee as a standing committee. The charters of the Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee are available in the “Investor Relations—Corporate Governance” section of the Company’s website, www.ebsb.com.

 

 

 

 

 

 

 

Nominating/

 

 

 

 

 

 

Corporate

 

 

Audit

 

Compensation

 

Governance

Director

 

Committee

 

Committee

 

Committee

Cynthia C. Carney

 

 

 

 

 

X

Marilyn A. Censullo

 

  X*

 

X

 

 

Russell L. Chin

 

X

 

 

 

 

Anna R. DiMaria

 

 

 

X

 

X

Domenic A. Gambardella

 

 

 

  X*

 

  X*

Thomas J. Gunning

 

 

 

X

 

X

Gregory F. Natalucci

 

X

 

 

 

X

 

 

 

 

 

 

 

Number of Committee Meetings in 2020

 

9

 

1

 

1

 

 

*

Denotes Chairperson

Audit Committee. Pursuant to Meridian Bancorp’s Audit Committee Charter, the Audit Committee assists the Board of Directors in its oversight of the Company’s accounting and reporting practices, the quality and integrity of the Company’s financial reports and the Company’s compliance with applicable laws and regulations. The Audit Committee is also responsible for engaging the Company’s independent registered public accounting firm and monitoring its conduct and independence. In addition to meeting the independence requirements of the Nasdaq Stock Market, Inc., each member of the Audit Committee meets the audit committee independence requirements of the Securities and Exchange Commission. The Board of Directors has determined that Marilyn A. Censullo qualifies as an audit committee financial expert under the rules of the Securities and Exchange Commission. The report of the Audit Committee required by the rules of the Securities and Exchange Commission is included in this proxy statement. See “Audit Committee Report.”

Compensation Committee. Pursuant to Meridian Bancorp’s Compensation Committee Charter, the Compensation Committee approves the compensation objectives for the Company and the Bank and establishes the compensation for the President and Chief Executive Officer and other executives. The Compensation Committee reviews corporate goals and objectives relevant to our President and Chief Executive Officer compensation, evaluates our President and Chief Executive Officer’s performance in light of those goals and objectives, and approves our President and Chief Executive Officer’s compensation level based on this evaluation. Our President and Chief Executive Officer makes recommendations as to the appropriate mix and level of compensation for other executive officers to the Compensation Committee and determines the compensation for subordinates of executive officers. In making his recommendations, the President and Chief Executive Officer considers the objectives of our compensation philosophy and the range of compensation programs authorized by the Compensation Committee. Our President and Chief Executive Officer does not participate in discussions related to his compensation or the Committee’s review of any documents related to the determination of his compensation. The Compensation Committee reviews all compensation components for the Company’s President and Chief Executive Officer and other executive officers’ compensation including base salary, annual incentive, long-term incentives and other perquisites. In addition to reviewing competitive market

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values, the committee also examines the total compensation mix, pay-for-performance relationship, and how all elements, in the aggregate, comprise the executive’s total compensation package. See “Compensation Discussion and Analysis” for more information regarding the role of the Compensation Committee in determining and/or recommending the amount or form of executive compensation. The report of the Compensation Committee required by the rules of the Securities and Exchange Commission is included in this proxy statement. See “Compensation Committee Report.”

Nominating/Corporate Governance Committee. Pursuant to Meridian Bancorp’s Nominating/Corporate Governance Committee Charter, the Company’s Nominating/Corporate Governance Committee assists the Board of Directors in identifying qualified individuals to serve as Board members, in determining the composition of the Board of Directors and its committees, in monitoring a process to assess Board effectiveness and in developing and implementing the Company’s corporate governance guidelines. The Nominating/Corporate Governance Committee also considers and recommends the nominees for director to stand for election at the Company’s annual meeting of stockholders. The procedures of the Nominating/Corporate Governance Committee required to be disclosed by the rules of the Securities and Exchange Commission are included in this proxy statement. See “Nominating/Corporate Governance Committee Procedures.”

Risk Oversight

The Board of Directors has an active role, as a whole and also at the committee level, in overseeing management of the Company’s risks. The Board of Directors regularly reviews information regarding the Company’s credit, liquidity and operations, as well as the risks associated with such areas. The Company’s Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and arrangements. The Audit Committee oversees management of financial risks. The Nominating/Corporate Governance Committee manages risks associated with the independence of the Board of Directors and potential conflicts of interest.

While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed about such risks. The Board of Directors annually reviews our conflict of interest policy to ensure all directors are in compliance with the policy.

Anti-Hedging Policy

The Company has adopted an Insider Trading Policy that prohibits hedging of Company common stock for all directors, officers of the Company with the title of senior vice president or higher, and all persons in the Company’s finance department (the “Restricted Group”).  While there is no prohibition against employees who are not in the Restricted Group to hedge Company common stock, these employees are prohibited from trading Company common stock while in the possession of material non-public information.  Under the policy, no person in the Restricted Group may at any time engage in (i) any short sale of Company common stock or other sale of any equity securities of the Company that they do not own, or (ii) any transactions in publicly-traded options of the Company, such as puts and calls based on Company common stock, including, but not limited to, any hedging, monetization or similar transactions designed to decrease the risks associated with holding Company common stock, such as zero-cost collars and forward sales contracts. Generally, a short sale means any transaction whereby one may benefit from a decline in the Company's stock price.  

 

 

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Attendance at the Annual Meeting

The Board of Directors encourages each director to attend annual meetings of stockholders. All but one of our then-existing directors attended the 2020 Annual Meeting of Stockholders.  

Board Leadership Structure

The Board of Directors currently combines the position of Chairman of the Board with the position of President and Chief Executive Officer, coupled with a lead independent director to further strengthen the governance structure. The Board of Directors believes this provides an efficient and effective leadership model for the Company. Combining the Chairman of the Board and President and Chief Executive Officer positions fosters clear accountability, effective decision-making, a clear and direct channel of communication from senior management to the full Board of Directors and alignment on corporate strategy. To further strengthen the leadership of the Board of Directors, the Board selects a lead independent director on an annual basis, currently Domenic A. Gambardella. The responsibilities of the lead independent director include leading all meetings of non-management Directors. The Board of Directors believes its leadership structure and corporate governance practices enhance the administration of its risk oversight function. To assure effective independent oversight, the Board has adopted a number of governance practices, including holding executive sessions of the independent directors at least twice a year or more often as needed. In addition, the Compensation Committee, which consists only of independent directors, evaluates the performance of our Chairman of the Board and President and Chief Executive Officer and presents its findings to our independent directors.

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Stock Ownership

The following table provides information as of March 31, 2021, with respect to persons known by the Company to be the beneficial owners of more than 5% of the Company’s outstanding common stock. A person may be considered to own any shares of common stock over which he or she has, directly or indirectly, sole or shared voting or investing power. Percentages are based on 52,430,554 shares of Company common stock outstanding for voting purposes as of March 31, 2021.  

 

 

 

 

 

Percent

 

 

Number of

 

of Common

Stock

Name and Address

 

Shares Owned

 

Outstanding

T. Rowe Price Associates, Inc. (1)

 

7,732,899

 

14.75%

100 E. Pratt Street

 

 

 

 

Baltimore, Maryland 21202

 

 

 

 

 

 

 

 

 

BlackRock, Inc.  (1)

 

3,900,604

 

7.44%

55 East 52nd Street

 

 

 

 

New York, New York 10055

 

 

 

 

 

 

 

 

 

East Boston Savings Bank

 

3,399,320

 

6.48%

Employee Stock Ownership Plan Trust

 

 

 

 

2900 North 23rd Street

 

 

 

 

Quincy, Illinois 62305

 

 

 

 

 

 

 

 

 

Dimensional Fund Advisors, LP  (1)

 

2,907,437

 

5.55%

Building One

 

 

 

 

6300 Bee Cave Road

 

 

 

 

Austin, Texas 78746

 

 

 

 

____________________

 

(1)

Number of shares owned and reported on the most recent Schedule 13G filing with the Securities and Exchange Commission.

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The following table provides information as of March 31, 2021 about the shares of Meridian Bancorp common stock that may be considered to be beneficially owned by each director, named executive officer and all directors and executive officers of the Company as a group. A person may be considered to beneficially own any shares of common stock over which he or she has, directly or indirectly, sole or shared voting or investment power, or which he or she has the right to acquire beneficial ownership at any time within 60 days after March 31, 2021. Unless otherwise indicated, none of the shares listed are pledged as collateral for a loan, and each of the named individuals has sole voting power and sole investment power with respect to the number of shares shown. Percentages are based on 52,430,554 shares of Company common stock outstanding for voting purposes as of March 31, 2021.  

 

 

 

 

 

 

 

 

Name

 

Number of Shares Owned

 

Percent of Common Stock Outstanding

 

Directors

 

 

 

 

 

 

 

 

 

Cynthia L. Carney

 

 

18,461

 

(1)

 

*

 

Marilyn A. Censullo

 

 

122,556

 

(2)

 

*

 

Russell L. Chin

 

 

10,186

 

(3)

 

*

 

Anna R. DiMaria

 

 

126,503

 

(4)

 

*

 

Domenic A. Gambardella

 

 

170,425

 

(5)

 

*

 

Richard J. Gavegnano

 

 

1,463,257

 

(6)

 

2.8%

 

Thomas J. Gunning

 

 

83,271

 

(7)

 

*

 

Edward J. Merritt

 

 

135,274

 

(8)

 

*

 

Joyce A. Murphy

 

 

6,000

 

(9)

 

*

 

Gregory F. Natalucci

 

 

98,232

 

(10)

 

*

 

Peter F. Scolaro

 

 

15,856

 

(11)

 

*

 

 

 

 

 

 

 

 

 

 

 

Executive Officers Who Are Not Also Directors

 

 

 

 

 

 

 

 

 

Kenneth R. Fisher

 

 

45,865

 

(12)

 

*

 

John Migliozzi

 

 

102,668

 

(13)

 

*

 

Frank P. Romano

 

 

264,776

 

(14)

 

*

 

John A. Carroll

 

 

100,599

 

(15)

 

*

 

 

 

 

 

 

 

 

 

 

 

All directors and executives as a group (15 persons)

 

 

2,763,929

 

 

 

5.3%

 

 

 

 

*

Less than 1%.

 

(1)

Includes 1,200 restricted shares, 4,407 shares held in an individual retirement account (“IRA”) and 4,989 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(2)

Includes 2,400 restricted shares, 2,448 shares held in an IRA and 46,172 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(3)

Includes 1,200 restricted shares and 4,500 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(4)

Includes 2,400 restricted shares, 10,000 shares held in an IRA and 44,498 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(5)

Includes 2,400 restricted shares, 3,554 shares pledged as collateral and 42,500 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(6)

Includes 30,000 restricted shares, 17,338 shares held in the ESOP, 8,057 shares held in the 401(k) plan, 25,000 shares held in an IRA, 50,000 shares pledged as collateral and 487,500 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

9


 

 

(7)

Includes 2,400 restricted shares and 44,948 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(8)

Includes 2,400 restricted shares, 10,717 shares held in the ESOP, 19,147 shares held in the 401(k) plan, 22,356 shares held in an IRA and 44,530 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(9)

Includes 1,800 restricted shares and 3,000 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(10)

Includes 2,400 restricted shares, 855 shares held in an IRA, and 42,500 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(11)

Includes 1,800 restricted shares, 2,548 held in an IRA and 3,000 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(12)

Includes 5,600 restricted shares, 6,691 shares held in the ESOP, 6,743 shares held in the 401(k) plan and 13,150 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(13)

Includes 9,200 restricted shares 9,876 shares held in the ESOP, 6,592 shares held in the 401(k) plan, 5,937 shares held in an IRA and 34,386 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(14)

Includes 2,400 restricted shares, 9,307 shares held in the ESOP, 6,224 shares held in the 401(k) plan, 139,713 shares held in an IRA, 5,357 shares held by Mr. Romano’s spouse and 69,014 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.

 

(15)

Includes 2,400 restricted shares, 8,409 held in the ESOP, 3,895 shares held in the 401(k) plan, 14,896 shares held in an IRA and 49,427 shares that may be acquired under options that are presently exercisable or will become exercisable within 60 days.


10


 

Proposal 1—Election of Directors

The Board of Directors of Meridian Bancorp is presently composed of 11 members. The Board is divided into three classes, each with three-year staggered terms, with approximately one-third of the directors elected each year. The nominees for election this year are Marilyn A. Censullo, Russell L. Chin, Richard J. Gavegnano and Gregory F. Natalucci, all of whom are current directors of the Company.

All of our directors except for Messrs. Gavegnano and Merritt are independent under the current listing standards of the Nasdaq Stock Market, Inc. Messrs. Gavegnano and Merritt are not independent because they are executive officers of Meridian Bancorp and East Boston Savings Bank.  In determining the independence of our other directors, the Board of Directors considered loans to directors and members of their affiliates, and legal fees and fees related to loan originations paid to, or received by, directly or indirectly, which transactions were not required to be disclosed individually under “—Transactions with Certain Related Persons.”

It is intended that the proxies solicited by the Board of Directors will be voted for the election of the nominees named below. If any nominee is unable to serve, the persons named in the proxy card will vote your shares to approve the election of any substitute proposed by the Board of Directors.  Alternatively, the Board of Directors may adopt a resolution to reduce the size of the Board. At this time, the Board of Directors knows of no reason why any nominee might be unable to serve.

The Board of Directors recommends a vote “FOR” the election of all nominees.

Information regarding the nominees and the directors continuing in office is provided below. Unless otherwise stated, each individual has held his or her current occupation for the last five years. The age indicated in each biography is as of December 31, 2020.

All of the nominees and directors continuing in office are long-time residents of the communities served by the Company and its subsidiaries and many of such individuals have operated, or currently operate, businesses located in such communities. As a result, each nominee and director continuing in office has significant knowledge of the businesses that operate in the Company’s market area, an understanding of the general real estate market, values and trends in such communities and an understanding of the overall demographics of such communities. Additionally, as residents of such communities, each nominee and continuing director has direct knowledge of the trends and developments occurring in such communities. As a community banking institution, the Company believes that the local knowledge and experience of its directors assists the Company in assessing the credit and banking needs of its customers, developing products and services to better serve its customers and in assessing the risks inherent in its lending operations. As local residents, our nominees and directors are also exposed to the advertising, product offerings and community development efforts of competing institutions which, in turn, assists the Company in structuring its marketing efforts and community outreach programs.

Nominees for Election of Directors

The nominees standing for election are:

Marilyn A. Censullo, a Certified Public Accountant, has been a partner in the accounting firm of Naffah & Company, P.C. since 2000, and has over 30 years of experience as an accountant. Ms. Censullo has significant experience with the application of generally accepted accounting principles and matters of business finance and business transactions. Ms. Censullo’s professional and business experience provides the Board with valuable insight into the accounting and public reporting issues faced by the Company and in assessing strategic transactions involving the Company. Age 63. Director since 2007.

11


 

Russell L. Chin is the Principal of Chin Law Firm and has practiced law in Massachusetts since 1981. Prior to launching his law firm, he partnered at various law firms within Boston, including Holland & Knight, LLP, Sherburne, Powers & Needham, P.C. and Chin, Wright & Branson, P.C.   Mr. Chin’s extensive experience representing major governmental authorities, large financial institutions, multi-national companies and individual clients both in the United States and abroad provides the Board with significant expertise in legal and regulatory matters. Age 65. Director since 2016.

Richard J. Gavegnano was in the investment business for 37 years with national New York Stock Exchange member firms, and retired in 2006 ending his career as a Vice President with A.G. Edwards & Sons, Inc. He has been associated with East Boston Savings Bank for over 40 years serving as corporator, trustee and director. Mr. Gavegnano has served as Chairman of the Board of East Boston Savings Bank and the Company since 2003 and 2006, respectively. In 2007, Mr. Gavegnano was appointed Chief Executive Officer of the Company and Investor Relations Officer of the Company, and in 2014 was appointed President of East Boston Savings Bank and the Company. Mr. Gavegnano serves on the Federal Reserve Bank of Boston’s Community Depository Institutions Advisory Council. Mr. Gavegnano has experience in business development, commercial real estate and investments. Mr. Gavegnano’s positions as Chairman of the Board and Chief Executive Officer foster clear accountability, effective decision-making, a clear and direct channel of communication from senior management to the full Board, and alignment on corporate strategy. Age 73. Director since 1995.

Gregory F. Natalucci is a former auditor with CNA Financial Corporation, a commercial and property-casualty insurer. Mr. Natalucci practiced in this field for over 35 years. In connection with his position with CNA Financial he gained extensive knowledge of audit practices and of the insurance industry. Mr. Natalucci’s experience provides the Board with experience when assessing the Company’s accounting and internal audit practices and with respect to its insurance needs in general. Age 75. Director since 2002.

Directors Continuing in Office

The following directors have terms ending in 2022:

Anna R. DiMaria has been an Attorney at Law with the Law Offices of Michael A. D’Avolio for over 20 years. Ms. DiMaria’s background as an attorney provides the Board of Directors with a unique perspective in addressing the legal requirements of the Company and its subsidiaries. Her professional experience also provides the Company with expertise in the areas of real estate and estate law. Age 75. Director since 2006.

Domenic A. Gambardella is the former owner and President of Meridian Insurance Agency Inc., an insurance agency, and was the owner of a financial services firm focused on small businesses.  Mr. Gambardella’s experience as President of an insurance agency gives him unique insights into the Company’s challenges, opportunities, and operations in the insurance products field and generally in the area of wealth management and non-depository products that are offered by the Company and its subsidiaries. Age 75. Director since 1995.

Thomas J. Gunning is Executive Director of Building Trades Employers Association, a multi-trade organization that represents over 250 contractors affiliated with 11 different building trade unions. Mr. Gunning’s experience in legislative matters, labor relations and contract negotiations brings the Board of Directors the perspective of someone who is familiar with all facets of labor matters. Mr. Gunning served as a director of Mt. Washington Co-operative Bank since 2008 and became a director of the Company as result of the Bank’s acquisition of Mt. Washington Co-operative Bank in 2010. Age 67. Director since 2010.

12


 

Peter F. Scolaro is the Director of Property Services for Action for Boston Community Development (ABCD). Mr. Scolaro’s experience with ABCD preparing budgets and overseeing property and construction management benefits the Company with respect to real estate and construction lending. Mr. Scolaro has been affiliated with the Bank since 1984 as both corporator and trustee. Age 67. Director since 2018.

The following directors have terms ending in 2023:

Cynthia C. Carney has been the Principal/Broker of Carney & Company, LLC, for over 20 years. Previously, Ms. Carney worked as a Commercial Real Estate Broker at the Hamilton Company and a Corporate Marketing & Leasing Coordinator at Corcoran Management Company in Boston. Ms. Carney provides the Board with significant experience in commercial real estate, residential real estate marketing, sales and leasing, business generation and business referrals. Age 71. Director since 2016.

Edward J. Merritt serves as Corporate Secretary of the Company and Executive Vice President, Business Development and Community Reinvestment of the Bank, and became a Board member as a result of the Bank’s acquisition of Mt. Washington Co-operative Bank.  Previously, Mr. Merritt served as the President and Chief Executive Officer and a director of Mt. Washington Cooperative Bank for over 11 years. Mr. Merritt’s long-term experience with managing the day-to-day operations of a community banking institution provides additional banking management experience to the Board, and his experience operating in a community in which the Company previously had limited market penetration also provides the Board with additional perspective with respect to such market area and assists the Board in recognizing and assessing growth opportunities in that market area. Age 61. Director since 2010.

Joyce A. Murphy retired in August 2018 as the Executive Vice Chancellor and Chief Executive Officer of Commonwealth Medicine, the public service and operations division of University of Massachusetts Medical School (“UMMS”). Prior to joining UMMS in 2006, Ms. Murphy served for nine years as the President and Chief Executive Officer of Carney Hospital, a community teaching hospital located in Boston. Ms. Murphy currently serves as Director on the Curry College Board of Directors.  Ms. Murphy’s extensive leadership experience, as well as her knowledge of the Boston market, are valuable in assisting the Board of Directors with evaluating strategic planning initiatives. Age 68. Director since 2018.

 

 

 

 

 

13


 

Proposal 2—Ratification of Independent Registered Public Accounting Firm

The Audit Committee of the Board of Directors has appointed Wolf & Company, P.C. to be the Company’s independent registered public accounting firm for the 2021 fiscal year, subject to ratification by stockholders. A representative of Wolf & Company, P.C. is expected to be present at the annual meeting to respond to appropriate questions from stockholders and will have the opportunity to make a statement should he or she desire to do so.

If the ratification of the appointment of the firm is not approved by a majority of the votes cast by stockholders at the annual meeting, other independent registered public accounting firms may be considered by the Audit Committee of the Board of Directors.

The Board of Directors recommends that stockholders vote “FOR” the ratification of the appointment of Wolf & Company, P.C. as the Company’s independent registered public accounting firm.

Audit Fees

The following table sets forth the fees paid by the Company for the fiscal years ended December 31, 2020 and 2019 to Wolf & Company, P.C.

 

 

2020

 

 

2019

 

Audit fees

 

$

418,000

 

 

$

409,000

 

Audit-related fees

 

$

40,400

 

 

$

39,700

 

Tax fees

 

$

38,000

 

 

$

32,500

 

All other fees

 

$

 

 

$

38,000

 

 

Audit fees pertain to the audit of the Company’s annual consolidated financial statements, quarterly review fees, and the audit of internal controls over financial reporting, and include out-of-pocket costs. Audit-related fees pertain to the audits of the Company’s 401(k) Plan and employee stock ownership plan. Tax fees pertain to tax return preparation and other tax matters. All other fees pertain to services related to the application of Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses, which was adopted by the Company on December 31, 2020.

Pre-Approval of Services by the Independent Registered Public Accounting Firm

The Audit Committee is responsible for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In accordance with its charter, the Audit Committee approves, in advance, all audit and permissible non-audit services to be performed by the independent registered public accounting firm. Such approval can be given either by approving an engagement prior to the engagement or pursuant to a pre-approval policy with respect to particular services. Such approval process ensures that the independent registered public accounting firm does not provide any non-audit services to the Company that are prohibited by law or regulation.

During the years ended December 31, 2020 and 2019, 100% of audit and other services provided by Wolf & Company, P.C. were approved, in advance, by the Audit Committee.

14


 

Proposal 3—Advisory (Non-Binding) Vote on Executive Compensation

Stockholders are being given the opportunity to vote on an advisory (non-binding) “say-on-pay” resolution at the Annual Meeting to approve the compensation of our “Named Executive Officers,” as described in this proxy statement under Compensation Discussion and Analysis” and the compensation tables and narrative disclosure.

The purpose of our compensation policies and procedures is to attract and retain experienced, highly qualified executives critical to the Company’s long-term success and enhancement of stockholder value. The Board of Directors believes the Company’s compensation policies and procedures achieve this objective, and therefore recommend stockholders vote For the proposal.

Specifically, stockholders are being asked to approve the following resolution:

RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this proxy statement pursuant to Item 402 of Securities and Exchange Commission Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.”

Although non-binding, the Board of Directors and the Compensation Committee value constructive dialogue on executive compensation and other important governance topics with our stockholders and encourage all stockholders to vote their shares on this matter. The Board of Directors and the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs.

Unless otherwise instructed, validly executed proxies will be voted “FOR” this resolution. The Board of Directors recommends that you vote “FOR” the resolution set forth in Proposal 3.

Proposal 4—Advisory (Non-Binding) Vote on the Frequency of Voting on Executive Compensation

Stockholders have been given the opportunity to vote on an advisory (non-binding) resolution at the Annual Meeting to approve the compensation of executive officers (the “say-on-pay” advisory vote in Proposal 3 above) on an annual basis. At the 2021 Annual Meeting, we are also asking stockholders to vote on whether future “say-on-pay” advisory votes on executive compensation should occur every year, every two years or every three years.

After careful consideration, the Board of Directors recommends that future stockholder “say-on-pay” advisory votes on executive compensation be conducted every year. The determination was based upon the premise that named executive officer compensation is evaluated, adjusted and approved on an annual basis by the Board of Directors upon a recommendation from the Compensation Committee and the belief that investor sentiment should be a factor taken into consideration by the Compensation Committee in making its annual recommendation.

Although the Board of Directors recommends a “say-on-pay” vote every year, stockholders will be able to specify one of four choices for this proposal on the proxy card: every year, every two years, every three years or abstain. Stockholders are not voting to approve or disapprove of the Board of Directors’ recommendation.

Unless otherwise instructed, validly executed proxies will be voted “FOR” the 1 Year frequency option.

The Board of Directors recommends that you vote “FOR” the 1 Year option.

15


 

Audit Committee Report

The Company’s management is responsible for the Company’s internal controls and financial reporting process. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements, issuing an opinion on the conformity of those financial statements with generally accepted accounting principles, and issuing a report on internal control over financial reporting. The Audit Committee oversees the Company’s internal controls and financial reporting process on behalf of the Board of Directors.

In this context, the Audit Committee has met and held discussions with management and the independent registered public accounting firm. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles and the Audit Committee has reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm. The Audit Committee discussed with the independent registered public accounting firm matters required to be discussed under Public Company Accounting Oversight Board (“PCAOB”) standards including the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of the disclosures in the consolidated financial statements.

In addition, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the PCAOB and has discussed with the independent registered public accounting firm the firm’s independence from the Company and its management. In concluding that the registered public accounting firm is independent, the Audit Committee considered, among other factors, whether the non-audit services provided by the firm were compatible with its independence.

The Audit Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans for their audit. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of their audit, their evaluation of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

In performing all of these functions, the Audit Committee acts only in an oversight capacity. In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for consolidated financial statements and reports, and of the independent registered public accounting firm who, in their report, express an opinion on the conformity of the Company’s consolidated financial statements to generally accepted accounting principles. The Audit Committee’s oversight does not provide it with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions with management and the independent registered public accounting firm do not assure that the Company’s consolidated financial statements are presented in accordance with generally accepted accounting principles, that the audit of the Company’s consolidated financial statements has been carried out in accordance with generally accepted auditing standards or that the Company’s independent registered public accounting firm is in fact “independent.”

16


 

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for filing with the Securities and Exchange Commission. The Audit Committee also has approved, subject to stockholder ratification, the selection of Wolf & Company, P.C. as the Company’s independent registered public accounting firm, for the fiscal year ending December 31, 2021.

Audit Committee of the Board of

Directors of Meridian Bancorp, Inc.

Marilyn A. Censullo, Chair

Russell L. Chin

Gregory F. Natalucci

17


 

Information about Executive Officers

The following provides information regarding our executive officers as of December 31, 2020, who are not directors of the Company.

Kenneth R. Fisher, Executive Vice President, Treasurer and Chief Financial Officer of Meridian Bancorp, Inc. and East Boston Savings Bank, assumed those roles on June 1, 2020. Mr. Fisher had been serving as the Controller of the Bank for the previous ten years. Mr. Fisher is a Certified Public Accountant who, prior to joining the Bank, was Treasurer at Beverly National Bank (now People’s United Bank) after serving five years in public accounting at Parent McLaughlin & Nangle, CPA’s (now Marcum LLP). Age 42.

John Migliozzi, Executive Vice President, Real Estate Lending of East Boston Savings Bank, joined us in 1998.  Mr. Migliozzi began his career with us as a Commercial Lender. Age 62.

John A. Carroll, Executive Vice President, who was appointed Chief Operating Officer of Meridian Bancorp, Inc. and East Boston Savings Bank in 2014, joined us in 2012. Mr. Carroll previously served as our Chief Information Officer. Previously, Mr. Carroll served as Senior Vice President, Operations & Technology for nearly eight years at DanversBank prior to its acquisition by People’s United Bank. Age 53.

Frank P. Romano, Executive Vice President, Corporate Banking of East Boston Savings Bank, joined us in 2011. From 2003 to 2011, he served at the former DanversBank as Senior Vice President, Group Head of Corporate Banking; prior to that, from 1999, he served at Warren Bank as Senior Vice President, Head of Middle Market Lending. Mr. Romano had similar roles at Eastern Bank and The Bank for Savings since 1983. Age 65.

 

Executive Compensation

Compensation Discussion and Analysis

The following Compensation Discussion and Analysis provides information regarding our Named Executive Officers (the “NEOs”) as of December 31, 2020:  

 

Richard J. Gavegnano, Chairman of the Board, President and Chief Executive Officer

 

Edward J. Merritt, Executive Vice President, Business Development and Community Reinvestment, and Corporate Secretary

 

Kenneth R. Fisher, Executive Vice President, Treasurer and Chief Financial Officer

 

John Migliozzi, Executive Vice President, Real Estate Lending

 

Frank P. Romano, Executive Vice President, Corporate Banking

18


 

 

Executive Summary

The Company is the holding company for East Boston Savings Bank, a high-performing stock savings bank serving the greater Boston metropolitan market.

We continued our strong performance through 2020. Highlights of our accomplishments include:

 

Net income of $65.1 million for the year was relatively unchanged compared to the record $67.0 million recorded in 2019, despite the economic impact of the COVID-19 pandemic

 

The net interest margin increased to 3.12% for 2020 from 2.86% for 2019, as net interest income rose $19.8 million, or 11.4%, to $192.7 million and the cost of funds decreased to 1.05% for 2020 from 1.68% for 2019

 

The efficiency ratio improved to 47.07% for 2020 compared to 54.29% for 2019, despite increasing the branch network to 43 with the opening of three new branches in the communities of Brookline, Salem and Woburn in 2020

 

Successful adoption of the Current Expected Credit Loss accounting standard (“CECL”) on December 31, 2020, increasing the allowance for credit losses to $68.8 million, or 1.25% of total loans

 

Asset quality continued to improve, with non-performing assets of $3.2 million at December 31, 2020 and negligible charge-off activity during the year

 

Total deposits increased to $5.1 billion, as core deposits increased $510.3 million, or 15.2%, to $3.9 billion, or 76% of total deposits and certificates of deposit decreased $350.7 million, or 22.3%, to $1.2 billion, or 24% of total deposits

 

Tangible book value per share improved to $14.25 at December 31, 2020 compared to $13.19 at December 31, 2019

 

The Company repurchased 1,000,000 shares of its common stock at an average price of $17.68 per share, completing the total repurchase program of 1,324,544 shares

19


 

Over the prior five years, the Company’s compound annual growth rate has ranked slightly below the SNL U.S. Thrift Index.  

 

 

Our compensation program continues to transition and evolve with our fully public company status that began in 2014. Following our initial minority stock offering in 2008, our stockholders approved and we granted stock from our 2008 Equity Incentive Plan (“2008 EIP”).  Consistent with bank regulatory guidelines, those awards were granted with an initial “conversion” grant that aligned our executives, employees and directors with our new stockholders. Most of the shares and vesting from that plan ended in 2014.  In 2015, our stockholders approved our 2015 Equity Incentive Plan (“2015 EIP”), which enables us to continue to provide stock-based compensation to our executives, employees and directors. This component of compensation allows us to provide rewards that align our executives and employees with the returns to our stockholders. The 2015 EIP and award allocations coincided with our second-step conversion to a fully public company and were developed in line with regulatory guidelines of the Office of the Comptroller of Currency. Mutual conversion stock plans and grant practices are unique in their structure and vesting which utilizes a mix of stock options and restricted stock as the equity instruments. There were no grants of any equity awards to our executive officers in 2018. One executive officer was granted an equity award during 2019 and one executive officer was granted an equity award during 2020.

Our executive compensation program consists of four components (base salary, annual cash incentive, equity grants and benefits) that work together to enable us to attract, retain, motivate and reward our employees and executives with a competitive performance-based program that rewards long term performance and stockholder value.  Our total compensation program is designed to:

 

Reward achievements to specific strategic goals and to encourage performance

 

Align our interests with our stockholders

 

Provide a balanced, and risk-appropriate compensation program

 

Provide a competitive pay program that attracts and retains talent

20


 

 

We will continue to monitor and evolve our compensation program as we transition from our mutual ownership structure to public company. We look forward to reinforcing our strong pay-for- performance focus and team culture.  Our compensation programs, including stock, is part of all employees’ compensation, a culture we believe has led to our sustained, strong performance over many years.

2020 Say-on-Pay Results

At the Company’s 2020 Annual Meeting, stockholders cast an advisory vote regarding the Company’s executive compensation (“Say-on-Pay” proposal). Over 80% of the votes cast on the Say-on-Pay proposal were voted in favor of the Company’s executive compensation program.  Our Board of Directors and Compensation Committee appreciate the support of our stockholders and continue to take an informed and responsible approach to executive compensation that is performance based and aligned with our stockholder interests. We have considered the most recent Say-on-Pay advisory vote in determining compensation policies and decisions. In light of strong support, the Compensation Committee concluded that no revisions were necessary to our executive officer compensation program at this time but will continue to monitor and review our practices in light of changing needs and stockholder perspectives.

Our Executive Compensation Philosophy.

Our compensation philosophy starts from the premise that the success of the Company depends, in large part, on the dedication and commitment of the people we place in key operating positions to drive our business strategy. We strive to provide our executive and management team with incentives tied to the successful implementation of our corporate objectives. We also recognize that we operate in a competitive environment for talent. Therefore, our approach to compensation considers the full range of compensation techniques that enable us to be competitive with our peers as we seek to attract and retain key personnel.

As a relatively new public company, we expect our mix of base salary, bonus and long-term equity compensation will evolve to be more focused on performance-based components with a greater ongoing focus on equity, depending upon the role of the individual officer in the organization.

We base our executive compensation decisions on four basic principles:

 

Meeting the Demands of the Market—Our goal is to target our pay opportunities to be in line with other community banks in our market. We strive to position the bank as a preferred employer among our peers who provide similar financial services in the regional market. Providing competitive compensation package has helped us attract and retain the talent we need to continue to be successful.

 

Aligning with Stockholders—We believe equity-based compensation is a key component of our total compensation mix.  Providing a component of pay in stock-based rewards helps to reinforce a culture of ownership among our executives and employees, and to align their individual financial interests with the interests of our stockholders. Long-term incentives such as the 2015 EIP and the Employee Stock Ownership Plan (the “ESOP”) are important in aligning all of our interests with those of our stockholders.

21


 

 

Driving Performance—We structure compensation around the attainment of company-wide, business unit and individual targets that return positive results to our bottom line and stockholders. Base pay rates are subject to annual merit increases that result from performance evaluations.  Our annual cash bonus plan (the “Incentive Compensation Plan”) focuses rewards on current year individual and bank performance.  Our 2015 EIP provides equity-based compensation through stock options and restricted stock that was developed in line with bank regulatory guidelines and support our ownership and stockholder alignment objectives.  

 

Reflecting our Business Philosophy—Our approach to compensation reflects our business goals, values and the way we do business in the communities we serve.  Compensation rates need to be valued by the market and prudent for the organization’s strategic well-being. Base pay and the incentive compensation plan are meant to place a recognizable fair value on our performance in our roles.   Long-term incentives, such as the EIP, help retain our top performers and represent our longer-term goals to drive stockholder value.

2020 Compensation Program and Pay Decisions

The executive compensation program has three key elements of total direct compensation: base salary, annual incentives and long-term incentives, such as stock option and restricted stock awards.  Below we summarize our programs and the resulting pay decisions approved by our Compensation Committee for 2020.

Base Compensation. The salaries of our executive and other officers are reviewed annually to assess our competitive position and make any necessary adjustments. Our goal is to maintain salary levels for our officers at a level consistent with base pay received by those in comparable positions at peer banks. To further that goal, we obtain benchmark data from a variety of independent survey sources. Our primary survey sources are the “Pearl Meyer & Partners Banking Compensation Survey” conducted in conjunction with the Massachusetts Bankers Association, and the “McLagan Regional & Community Bank Compensation Survey”.  For both surveys, we used the asset size scope that included our Company's asset size as our reference for comparing base salaries, determining projected pay raise budgets, guiding our adjustments to pay grades and providing reference to confirm our short-term incentive targets.

We utilize a salary structure approach for all employees, from teller to Chief Executive Officer.  The midpoints of our pay grades are compared to salary data and individual salaries are reviewed with the comparable surveyed position. Ultimately, any individual’s rate of pay is determined with these criteria in mind, as well as performance evaluations and the individual’s contribution in their role.

In determining 2020 base salaries for the NEOs, the Compensation Committee reviewed salaries of similar executive roles using the data from surveys indicated above.  Using this data, the Committee determined equitable pay scales within which annual merit increases would be made. The Committee then determined the merit increases based on written analyses of the accomplishments and attainment of goals for each executive during the preceding year. The Compensation Committee approved annual base salaries of $975,000 for Mr. Gavegnano, $285,469 for Mr. Merritt, $198,500 for Mr. Fisher, $338,204 for Mr. Migliozzi and $300,000 for Mr. Romano for 2020.

Annual Cash Bonuses under our Incentive Compensation Plan. The objective of our Incentive Compensation Plan is to motivate and reward all eligible employees, including our NEOs for achieving specific company and individual goals that support our strategic plan. While we set specific goals, weights and ratings, these are to serve as a reference for the Compensation Committee when making awards under the plan.  All bonus payments under this plan are determined by the Compensation Committee and no participant has a right to a bonus under this plan unless authorized by the Compensation Committee. Rewards under this plan represent compensation that must be earned each year based on performance relative to company and individual standards.

22


 

For 2020, the Compensation Committee determined the bonus amounts by reviewing the Company’s loan growth, deposit growth, cost of funds, net operating income, efficiency ratio and other discretionary factors, as well as the individual contributions of our NEOs to our success. These metrics were determined by the Committee to serve as a balanced perspective of our performance and ability to drive our strategic goals.

The amounts of the bonuses paid in 2021 for the year 2020 under this plan are included in the Summary Compensation Table in the column labeled “Bonus.” For 2020, the amount of the incentive cash bonus could range from 0% to 50% of the CEO’s salary and 0% to 40% of other NEO salaries.

The total bonus pool which may be distributed under the Incentive Compensation Plan equals 10% of the net operating income of the Company, unless the Compensation Committee authorizes a different amount.

To determine the amount of the cash bonus payable to our NEOs for 2020, Company goals, which are defined each year, are first measured by comparing our performance against defined goals for each of the five performance measures. For 2020, the performance measures and goals were as follows:

 

 

 

Weight

 

 

 

 

 

Actual

 

 

 

Weighted

Performance Measure (1)(2)

 

(%)

 

Threshold

 

Target

 

Results

 

Points

 

Points

Net Loan Growth

 

25.0

 

(10.00%)

 

(5.00%)

 

(4.45%)

 

5

 

5

Deposit Growth

 

12.5

 

(5.00%)

 

0.00%

 

3.24%

 

5

 

2.5

Cost of Funds

 

12.5

 

1.31%

 

1.09%

 

1.05%

 

5

 

2.5

Net Operating Income

 

25.0

 

$64,401

 

$80,501

 

$86,998

 

5

 

5

Efficiency Ratio

 

25.0

 

58.67%

 

48.89%

 

47.07%

 

5

 

5

________________

 

(1)

The Performance Measures are calculated in accordance with Generally Accepted Accounting Principles (“GAAP”) or from amounts presented in accordance with GAAP, except where noted as follows. Net Operating Income is referred to as Income before Income Taxes included in the Company’s Form 10-K filed on March 1, 2021 with the Securities and Exchange Commission, excluding merger and acquisition expenses and gains and losses on marketable equity securities. The efficiency ratio is a non-GAAP measure representing non-interest expense divided by the sum of net interest income and non-interest income excluding gains and losses on marketable equity securities. The efficiency ratio is a common measure used by banks to understand expenses related to the generation of revenue. We have removed gains and losses on marketable equity securities and gain on sale of asset as management deems them to be not representative of operating performance. Presented on a basis including gains and losses on marketable equity securities and gain on sale of asset, the efficiency ratio was 45.97% for the year ended December 31, 2020.

 

(2)

The performance metrics were adjusted in the second quarter of 2020 to reflect the economic uncertainty and business challenges as a result of the COVID-19 pandemic. There were no changes to the long-term compensation program.

The Incentive Compensation Plan weights the relative importance of each of the performance measures and assigns a number of points (from 1 to 5) to represent the level of achievement of each performance measure. The Plan may result in five points if the maximum goal is achieved and no points if the threshold goal is not achieved. Achievement between threshold and maximum will result in one to four points for each performance measure.

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For 2020, based on actual results, the Compensation Committee assigned two points for Net Loan Growth, one point for Deposit Growth, five points for Cost of Funds, five points for Net Operating Income and four points for Efficiency Ratio. The points achieved were then adjusted based on the relative weight given to the performance measure and the weighted points were multiplied by “5” in order to determine the percentage achievement of the performance goals. After determining the Company performance, the Compensation Committee uses a table to determine the amount of the bonus payable to a Named Executive Officer as follows:

 

 

 

 

 

 

 

Amount of Bonus for

 

 

 

 

 

 

 

Edward J. Merritt,

 

 

 

 

 

 

 

Kenneth R. Fisher,

 

(% of maximum

 

Amount of Bonus for

 

 

John Migliozzi

 

performance)

 

Richard J. Gavegnano

 

 

and Frank P. Romano

 

20

 

12%

 

 

10%

 

40

 

16% - 20%

 

 

12% - 16%

 

60

 

20% - 28%

 

 

16% - 20%

 

80

 

28% - 38%

 

 

20% - 30%

 

100

 

38% - 50%

 

 

30% - 40%

 

 

The Company achieved 100% of maximum performance based on the Incentive Compensation Plan’s performance measures and goals established for 2020.  Based on the results of those performance measures, Mr. Gavegnano was eligible to receive a bonus between 38% to 50% of his base salary, and the other NEOs were eligible to receive a bonus between 30% to 40% of their base salary. The Compensation Committee considered the executive’s individual performance in determining the amount of the actual award. As described above, all bonuses are subject to the discretion of the Compensation Committee. Based on such discretion, the Compensation Committee also considered and adjusted the bonus amounts to reflect the uncertain economic environment caused by the COVID-19 pandemic. As a result, the Compensation Committee reduced the 100% indicated by the performance scale to the 60% level.  

The Compensation Committee awarded bonuses to Mr. Gavegnano, Mr. Merritt, Mr. Fisher, Mr. Migliozzi and Mr. Romano in the amounts of $300,300, $62,803, $43,670, $74,405, and $66,000 respectively, with such bonuses paid in the first quarter of 2021; equaling 31% for Mr. Gavegnano, and 22% for the other NEOs.  

Long-Term Compensation. As part of our second-step conversion to a fully public company and following stockholder approval of the 2015 EIP in 2015, the Compensation Committee established a long-term incentive compensation program to deliver equity based compensation to our employees and executives going forward. The goal of the long-term incentive program is to reward outstanding performance with stock-based compensation that provides a continuing stake in our success and aligns our employees and executives’ interests with those of our stockholders. There were no grants of equity awards made to NEOs in 2018. Mr. Migliozzi was granted 10,000 shares of restricted stock and 15,000 stock options on May 15, 2019, with a grate date fair value of $237,650. Mr. Fisher was granted 5,000 shares of restricted stock and 10,000 stock options on May 28, 2020, with a grant date fair value of $80,500.

Retirement Benefits. All of our NEOs participate in our 401(k) plan and ESOP. (See “Employee Stock Ownership Plan” following the “Summary Compensation Table” for more details on this retirement plan.)  In addition to the tax-qualified plans, the Company maintains non-qualified supplemental executive retirement agreements with Messrs. Gavegnano and Merritt (See “Pension

24


 

Benefits - Supplemental Executive Retirement Agreement” and “Non-qualified Deferred Compensation” following the “Summary Compensation Table" for more details on these non-qualified plans.)     

Executive Agreements.  An important consideration in our ability to attract and retain key executives is our ability to minimize the impact on our management team of the possible disruption associated with our analysis of strategic opportunities.  Accordingly, we believe it is in the best interest of the Company and its stockholders to provide our key executives with reasonable financial arrangements in the event of termination of employment.  Therefore, we maintain an employment agreement with Mr. Gavegnano and change in control agreements with our other NEOs.  

The use of employment and change in control agreements is common among our competitors and therefore influences our use of such arrangements to retain our current management team.  The Compensation Committee periodically reviews the terms of the employment and change in control agreements.  For additional information regarding the executive agreements, see the section headed “Employment-Related Arrangements and Potential Payments Upon Termination of Change in Control” following the “Summary Compensation Table.”

Perquisites.  We provide our NEOs with reasonable perquisites to further their ability to promote the business interests of the Company in our markets and to reflect competitive practices for similarly situated officers employed by our peers. The perquisites are reviewed periodically and adjusted as necessary.

Process and Roles

The Compensation Committee accesses information and advice from a number of perspectives.  This section summarizes the role of our Compensation Committee, management and the independent Compensation Consultant.

Role of the Compensation Committee. The Compensation Committee of the Board of Directors of the Company develops our executive compensation program and monitors the success of the program in achieving the objectives of our compensation philosophy. The Committee, which consists of Ms. Censullo, Ms. DiMaria and Mr. Gambardella, all independent directors, are responsible for the administration of our compensation programs and policies, including the administration of our cash- and stock-based incentive programs. The Committee evaluates the performance of our Chief Executive Officer and other executive officers and approves all compensation decisions relating to our executive officers. The Chief Executive Officer does not participate in discussions related to his compensation or the Committee’s review of any documents specifically related to his compensation. The Committee meets in executive session without the presence of management as desired.  The Committee operates under the mandate of a formal charter that establishes a framework for the fulfillment of its responsibilities.  The Charter can be found on our website.

Role of Management. Although the Compensation Committee makes independent determination on all matters related to compensation of the NEOs, including the Chief Executive Officer, certain members of management are requested to attend meetings and/or provide input to the Compensation Committee. Input may be sought from the Chief Executive Officer, Chief Financial Officer, Human Resources Department or others to ensure the Compensation Committee has the information and perspective to carry out its duties.

Our Chief Executive Officer provides input and recommendations to the Compensation Committee on pay decisions related to the other NEOs and other executive officers but does not participate in discussions related to his compensation or the Committee’s review of any documents related to the determination of his compensation.

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Role of Consultant. The Compensation Committee has the authority to retain a compensation consultant to advise on executive compensation matters. The Compensation Committee also has access to outside legal counsel and other experts as needed. These advisors serve at the request of the Compensation Committee, which has the power and authority to retain such experts and approve fees and retention terms. The Compensation Committee did not utilize the services of a compensation consultant during 2020.

Policies and Practices

Tax and Accounting Considerations. In consultation with our advisors, we evaluate the tax and accounting treatment of each of our compensation programs at the time of adoption and on an annual basis to ensure that we understand the financial impact of the program. Our analysis includes a detailed review of recently adopted and pending changes in tax and accounting requirements. As part of our review, we consider modifications and/or alternatives to existing programs to take advantage of favorable changes in the tax or accounting environment or to avoid adverse consequences. To preserve maximum flexibility in the design and implementation of our compensation program, we have not adopted a formal policy that requires all compensation to be tax deductible.

Stock Compensation Grant and Award Practices. As a public company, we expect that our Compensation Committee’s grant-making process will be independent of any consideration of the timing of the release of material nonpublic information, including with respect to the determination of grant dates or stock option exercise prices. Similarly, we expect that the release of material nonpublic information will never be timed with the purpose or intent to affect the value of executive compensation.  The 2008 EIP and the 2015 EIP expressly prohibit repricing of stock options without stockholder approval.

Risk Assessment. The Compensation Committee believes that any risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on Meridian Bancorp, Inc. and East Boston Savings Bank. In addition, the Compensation Committee believes that the mix and design of the elements of our executive compensation does not encourage management to assume excessive risks. In its review, the Compensation Committee concluded that significant weighting towards long-term incentive compensation discourages short-term risk taking and that the significant number of shares of stock of Meridian Bancorp, Inc. owned by the NEOs discourages excessive risk taking.

Compensation Decisions for the Named Executive Officers for 2021

For 2021, the Compensation Committee reviewed base salaries for the NEOs based on a review of market data and in consideration of each executive’s role, contributions and performance, and increased the base salary for Mr. Gavegnano, Mr. Merritt, Mr. Fisher, Mr. Migliozzi and Mr. Romano to $1,065,000, $294,861, $220,000, $373,500 and $309,870, respectively.

Increases for the NEOs averaged 7.15%. Mr. Gavegnano’s increase was 9.2%. The Compensation Committee considered many factors including his service as Chairman, President and Chief Executive Officer, exceptional strategic leadership and achievements relating to the dramatic growth and quality of the commercial loan portfolio.  The Compensation Committee also recognized his direct effect on the strategic growth of the Bank’s market footprint by finding and evaluating new markets and exerting strategic direction over the Bank’s marketing and advertising initiatives. The Compensation Committee also recognized his responsibility and success in managing the Bank’s equity portfolio. Additionally, the Compensation Committee placed importance on Mr. Gavegnano’s role as Investor Relations Officer and the value of his decades-long affiliation with the Bank and the perspective that brings to his executive insights and decision-making.  In all, the Compensation Committee

26


 

concluded that a 9.2% merit increase to salary was appropriate, mindful that Mr. Gavegnano’s Incentive Compensation Plan cash bonus is comparably below median, at less than the 50th percentile according to the McLagan 2020 Regional and Community Bank Survey utilized by the Compensation Committee.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis that is required by the rules established by the Securities and Exchange Commission. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. See “Compensation Discussion and Analysis.”

Compensation Committee of the Board of

Directors of Meridian Bancorp, Inc.

Domenic A. Gambardella, Chair

Marilyn A. Censullo

Anna R. DiMaria

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Summary Compensation Table

The following table sets forth information concerning compensation received for the years ended December 31, 2020, 2019 and 2018, respectively by the Named Executive Officers.  

 

Name and Principal

Position

 

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Stock

Awards

($)(1)

 

 

Option

Awards

($)(1)

 

 

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)(2)

 

 

All Other

Compensation

($)(3)

 

 

Total ($)

 

Richard J. Gavegnano,

 

2020

 

 

975,000

 

 

 

300,300

 

 

 

 

 

 

 

 

 

969,302

 

 

 

83,350

 

 

 

2,327,952

 

Chairman of the Board, President and

 

2019

 

 

905,000

 

 

 

412,680

 

 

 

 

 

 

 

 

 

154,833

 

 

 

87,845

 

 

 

1,560,358

 

Chief Executive Officer

 

2018

 

 

845,000

 

 

 

353,210

 

 

 

 

 

 

 

 

 

380,246

 

 

 

86,010

 

 

 

1,664,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Edward J. Merritt,

 

2020

 

 

285,469

 

 

 

62,803

 

 

 

 

 

 

 

 

 

 

 

 

26,057

 

 

 

374,329

 

Executive Vice President,

 

2019

 

 

275,749

 

 

 

99,270

 

 

 

 

 

 

 

 

 

 

 

 

25,982

 

 

 

401,001

 

Business Development and Community

 

2018

 

 

266,359

 

 

 

87,899

 

 

 

 

 

 

 

 

 

 

 

 

27,340

 

 

 

381,598

 

Reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kenneth R. Fisher,

 

2020

 

 

185,807

 

 

 

43,670

 

 

 

58,350

 

 

 

22,500

 

 

 

 

 

 

21,065

 

 

 

331,392

 

Executive Vice President,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasurer and Chief Financial Officer (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John Migliozzi,

 

2020

 

 

338,204

 

 

 

74,405

 

 

 

 

 

 

 

 

 

 

 

 

32,026

 

 

 

444,635

 

Executive Vice President,

 

2019

 

 

321,393

 

 

 

115,701

 

 

 

173,000

 

 

 

64,650

 

 

 

 

 

 

28,935

 

 

 

703,679

 

Real Estate Lending

 

2018

 

 

297,308

 

 

 

102,300

 

 

 

 

 

 

 

 

 

 

 

 

30,128

 

 

 

429,736

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Frank P. Romano,

 

2020

 

 

300,000

 

 

 

66,000

 

 

 

 

 

 

 

 

 

 

 

 

33,124

 

 

 

399,124

 

Executive Vice President,

 

2019

 

 

287,500

 

 

 

103,500

 

 

 

 

 

 

 

 

 

 

 

 

33,970

 

 

 

424,970

 

Corporate Banking

 

2018

 

 

270,000

 

 

 

89,100

 

 

 

 

 

 

 

 

 

 

 

 

33,402

 

 

 

392,502

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mark L. Abbate,

 

2020

 

 

125,321

 

 

 

27,572

 

 

 

 

 

 

 

 

 

 

 

 

23,935

 

 

 

176,828

 

Former Executive Vice President,

 

2019

 

 

286,335

 

 

 

103,081

 

 

 

 

 

 

 

 

 

 

 

 

30,761

 

 

 

420,177

 

Treasurer and Chief Financial Officer (4)

 

2018

 

 

276,986

 

 

 

91,405

 

 

 

 

 

 

 

 

 

 

 

 

32,498

 

 

 

400,889

 

 

 

(1)

The amounts shown reflect the grant date fair value of restricted stock awards or stock options, as applicable, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718. Refer to the Company’s Form 10-K filed on March 2, 2021 with the Securities and Exchange Commission for the assumptions relating to these awards.

 

(2)

Represents the actuarial change in pension value in the executive’s account from December 31 of the prior year to December 31 of the reported year under a Supplemental Executive Retirement Agreement.

 

(3)

For 2020, employer contributions under the company match and safe harbor provisions of the 401(k) Plan were $19,950, $15,142, $15,682, $17,317, $18,962 and $19,950 for Messrs. Gavegnano, Merritt, Fisher, Abbate, Migliozzi and Romano, respectively. The amount of premiums paid for long term care and disability insurances were $7,104 for Mr. Gavegnano. For 2020, employer contributions under the ESOP were $4,513 for each of Messrs. Gavegnano, Merritt, Migliozzi and Romano, respectively, and $3,568 for Mr. Fisher. For 2020, imputed income from life insurance provided by the Bank was $28,983, $1,837, $2,796, $3,306 and $2,583 for Messrs. Gavegnano, Merritt, Abbate, Migliozzi and Romano, respectively. For 2020, dividends received from unvested restricted stock were $22,800 for Mr. Gavegnano, $1,275 for Mr. Fisher, $1,024 for Mr. Abbate, $4,000 for Mr. Migliozzo and $1,888 for each of Messrs. Merritt and Romano, respectively.

 

(4)

During 2020, Mr. Fisher served as our SVP, Controller from January 1, 2020 through May 31, 2020 and as our EVP, Treasurer and Chief Financial Officer from June 1, 2020 through December 31, 2020 and Mr. Abbate served as our EVP, Treasurer and Chief Financial Officer from January 1, 2020 through his retirement effective June 1, 2020.

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Employment Agreements

East Boston Savings Bank has entered into an employment agreement with Richard J. Gavegnano, its President and Chief Executive Officer.

The employment agreement provides for a two-year term that extends on a daily basis, unless written notice of non-renewal is given by the Board of Directors of East Boston Savings Bank or by the executive. The current base salary under the employment agreement for Mr. Gavegnano is $1,065,000. In addition to a base salary, the employment agreement provides for, among other things, participation in our annual incentive plan and certain employee benefits plans. The employment agreement provides for termination by East Boston Savings Bank for cause, as defined in the agreement, at any time. If East Boston Savings Bank terminates the executive’s employment for reasons other than for cause, or if the executive resigns from East Boston Savings Bank for good reason (as defined in the employment agreement), then the executive would receive a lump sum severance payment equal to the sum of (i) two times current annual base salary, and (ii) the value of 24 months of health insurance premiums. In that case, assuming a December 31, 2020 termination (at his prior salary of $975,000), Mr. Gavegnano would receive a severance benefit equal to $1,973,170. Upon termination of the executive for reasons other than a change in control (see below), the executive must adhere to a two-year non-competition restriction.

Under the employment agreement, if voluntary or involuntary termination follows a change in control of East Boston Savings Bank or Meridian Bancorp, the executive would receive a severance payment equal to 2.99 times the executive’s “base amount,” less any other “parachute payments,” as those terms are defined under Section 280G of the Internal Revenue Code.  Generally, an executive’s “base amount” equals the average of the taxable compensation paid during the preceding five taxable years.  In the event severance payments to the executive include an “excess parachute payment” as defined in Section 280G of the Internal Revenue Code, such payment would be reduced by the minimum dollar amount necessary to avoid this result.  Accordingly, in the event the executive had terminated employment in connection with a change in control, as of December 31, 2020, the estimated severance payment Mr. Gavegnano would have received (based on taxable compensation earned during the prior five years) would be equal to approximately $8,806,223, which such amount reflects a reduction of $26,408 due to the 280G reduction provisions in the employment agreement.   

Change in Control Agreements

East Boston Savings Bank has entered into substantially similar change in control agreements with Kenneth R. Fisher, its Executive Vice President, Treasurer and Chief Financial Officer, Edward J. Merritt, its Executive Vice President for Business Development and Community Reinvestment, John Migliozzi, its Executive Vice President, Real Estate Lending and with Frank P. Romano, its Executive Vice President, Corporate Banking. The change in control agreements provide that upon an involuntary termination, other than for cause, or voluntary termination for good reason (as defined in the agreement) following a change in control of Meridian Bancorp or East Boston Savings Bank, the executives would be entitled to a cash severance payment equal to two times their base salary and the highest level of cash bonus earned in any one of the three calendar years preceding the year of termination. In addition, the executives would be entitled to receive non-taxable medical and dental coverage substantially identical to the coverage maintained for the executive prior to their termination of employment for 24 months following their termination of employment. In the event severance payments to the executives include an “excess parachute payment” as defined in Section 280G of the Internal Revenue Code, such payment will be cutback by the minimum dollar amount necessary to avoid this result. In the event of a termination of employment in connection with a change in control, the maximum severance payment Mr. Fisher, Mr. Merritt, Mr. Migliozzi and Mr. Romano would receive (based on taxable compensation earned) equals $519,620, $821,664, $965,318, and $853,358 respectively, assuming a December 31, 2020 termination of employment.

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Benefit Plans

Employee Stock Ownership Plan. East Boston Savings Bank maintains an employee stock ownership plan (“ESOP”) for eligible employees of East Boston Savings Bank. Eligible employees who have attained age 18 and completed three months of service during a continuous 12-month period are eligible to participate in the ESOP as of the first entry date following completion of the plan’s eligibility requirements. The ESOP received a favorable determination letter from the Internal Revenue Service in January 2015.

In 2008, the ESOP borrowed funds from Meridian Interstate Funding Corp. in order to purchase 828,000 shares of common stock in connection with Meridian Interstate Bancorp, Inc.’s initial public offering (the “2008 Loan”).  In connection with the second-step conversion on July 28, 2014, the ESOP borrowed additional funds and purchased an additional 1,625,000 shares of Meridian Bancorp, representing 5% of the shares issued in Meridian Bancorp’s second-step offering, with proceeds from Meridian Bancorp’s loan to the ESOP. The new loan amount equaled the aggregate purchase price of the common stock plus the outstanding balance of the 2008 Loan.  This loan is repaid principally through East Boston Savings Bank’s contributions to the ESOP and dividends payable on common stock held by the ESOP over the 25-year term of the loan. The interest rate for the ESOP loan is 3.25%.  

Shares purchased by the ESOP are held in a suspense account, and shares are allocated to the participants’ accounts as the loan is repaid. Shares released from the suspense account are allocated among participants’ accounts on the basis of each participant’s proportional share of compensation relative to all participants’ compensation.

Participants vest 100% in the benefits allocated under the ESOP upon completing three years of service with East Boston Savings Bank or its affiliates. A participant will become fully vested at retirement, upon death or disability, upon a change in control or upon termination of the ESOP. Benefits are generally distributable upon a participant’s separation from service. Any unvested shares that are forfeited upon a participant’s termination of employment will be reallocated among the remaining plan participants.

Plan participants are entitled to direct the ESOP trustee on how to vote common stock allocated to their accounts. The trustee votes allocated shares held in the ESOP as instructed by the plan participants and unallocated shares and allocated shares for which no instructions are received are voted in the same ratio on any matter as those shares for which instructions are given.

Under applicable accounting requirements, Meridian Bancorp records compensation expense each year in an amount equal to the average fair market value of the ESOP shares when committed to be released from the suspense account to participants’ accounts.

 

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Grants of Plan-Based Awards

 

                 The following table provides information concerning grants of plan-based awards to the Named Executive Officers during the year ended December 31, 2020.

 

Name

 

Grant Date

 

All Other Stock

Awards:

Number of

Shares of Stock

(#) (1)

 

All Other Option

Awards:  Number of

Securities

Underlying Options

(#) (1)

 

Exercise Price

of Option

Awards

 

Grant Date Fair

Value of Stock

and Option

Awards (2)

 

 

 

 

 

 

 

 

 

 

 

Richard J. Gavegnano

 

 

 

 

 

Edward J. Merritt

 

 

 

 

 

Kenneth R. Fisher

 

5/28/2020

 

5,000

 

10,000

 

$11.67

 

$80,850

Mark L. Abbate

 

 

 

 

 

John Migliozzi

 

 

 

 

 

Frank P. Romano