UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

For the Fiscal Year Ended December 31, 2019

OR

For the transition period from              to             

Commission file number 001-36573

Meridian Bancorp, Inc.

(Exact name of registrant as specified in its charter)

(617) 567-1500

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒     No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial reporting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No   ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to price at which the common equity was last sold on June 28, 2019 was $953,927,091.  As of March 31, 2020, there were 52,402,395 outstanding shares of the Registrant’s common stock.

DOCUMENTS INCORPORATED BY REFERENCE

None.

EXPLANATORY NOTE

Meridian Bancorp, Inc. (“Meridian Bancorp” or the “Company”) is filing this Amendment No. 1 on Form 10-K/A to its Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on March 2, 2020. The Company would normally only include the information that is required to be filed pursuant to Part III of Form 10-K in the proxy statement for the Annual Meeting of Stockholders. However, the Company is filing an amendment at this time due the Company’s determination to delay the Annual Meeting of Stockholders until June 17, 2020. Other than the inclusion of information for Part III of the Form 10-K, the Form 10-K remains unchanged.

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MERIDIAN BANCORP, INC.

2019 FORM 10-K/A ANNUAL REPORT

TABLE OF CONTENTS

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PART III 

Information about 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.  Information regarding the directors 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, 2019.

All of the directors 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.

The following directors have terms ending in 2020:

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 70.  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 60. 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 67. Director since 2018.

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The following directors have terms ending in 2021:

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 62. Director since 2007.

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 64. 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 (the “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 72. 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 74. Director since 2002.

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 74. 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 74. Director since 1995.

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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 66. Director since 2010.

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 66. Director since 2018.

Information about Executive Officers

The following provides information regarding our executive officers as of December 31, 2019, who are not directors of the Company.

Mark L. Abbate, Executive Vice President, Treasurer and Chief Financial Officer of Meridian Bancorp, Inc. and East Boston Savings Bank, joined us in 2010. In 2009, Mr. Abbate served as Chief Financial Officer of Home Loan Investment Bank, FSB, Warwick, Rhode Island. From 2007 through 2009, Mr. Abbate was Executive Vice President and Chief Financial Officer of Service Bancorp, Inc. and Strata Bank of Franklin, Massachusetts. Mr. Abbate was also a Certified Public Accountant in California and served in various accounting and financial leadership roles in the banking industry since 1978. On February 7, 2020, Mr. Abbate notified the Company of his intention to retire on June 1, 2020. Age 64.

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.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who own more than 10% of any registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Executive officers, directors and greater than 10% stockholders are required by regulation to furnish the Company with copies of all Section 16(a) reports they file.

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Based solely on the Company’s review of copies of the reports it has received and written representations provided to it from the individuals required to file the reports, the Company believes that Executive Vice President John Migliozzi filed one late Form 4 to report the acquisition of 10,000 shares of restricted stock and 15,000 stock options, and that Director Marilyn A. Censullo filed a Form 5 to report a delinquent Form 4 transaction for the sale of 6,000 shares of common stock, and that each of its other executive officers and directors has complied with applicable reporting requirements for transactions in Meridian Bancorp common stock during the year ended December 31, 2019.

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.

Procedures for the Recommendation of Director Nominees by Stockholders

There have been no changes to the procedures by which stockholders can recommend nominees to the Board of Directors since such procedures were previously disclosed in the Company’s Proxy Statement for its 2019 Annual Meeting of Stockholders.

Audit Committee

The Board of Directors has an Audit Committee consisting of Directors Censullo, who serves as Chairman, Chin and Natalucci.  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 Director Censullo qualifies as an audit committee financial expert under the rules of the Securities and Exchange Commission.

ITEM 11.EXECUTIVE COMPENSATION

Executive Compensation

Compensation Discussion and Analysis

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The following Compensation Discussion and Analysis provides information regarding our Named Executive Officers (the “NEOs”) as of December 31, 2019:  

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 2019. Highlights of our accomplishments include:

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

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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. For the 2015 grants, the Company relied on the regulations, consideration of practices of other financial institutions that had recently completed second-step conversions, and our historical practice in 2008 as a reference for developing its equity grant strategy for the 2015 EIP. The grants made in 2017 were in line with regulatory limitations for converting thrift institutions. There were no grants of any equity awards to our executive officers in 2018. One executive officer was granted an equity award during 2019.

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:

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.

2019 Say-on-Pay Results

At the Company’s 2019 Annual Meeting, stockholders cast an advisory vote regarding the Company’s executive compensation (“Say-on-Pay” proposal). Over 79% 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.

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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:

2019 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 2019.

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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 2019 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 $905,000 for Mr. Gavegnano, $275,749 for Mr. Merritt, $286,335 for Mr. Abbate, $321,393 for Mr. Migliozzi and $287,000 for Mr. Romano for 2019.

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.

For 2019, 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 2020 for the year 2019 under this plan are included in the Summary Compensation Table in the column labeled “Bonus.” For 2019, 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.

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To determine the amount of the cash bonus payable to our NEOs for 2019, 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 2019, the performance measures and goals were as follows:

________________

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.

For 2019, 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:

The Company achieved 70% of maximum performance based on the Incentive Compensation Plan’s performance measures and goals established for 2019.  Based on the results of those performance

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measures, Mr. Gavegnano was eligible to receive a bonus between 20% to 28% of his base salary, and the other NEOs were eligible to receive a bonus between 16% to 20% 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 Company’s substantial achievements in 2019 in addition to those reflected in the results of the performance measures.  These achievements included new records for net income, significant improvements in return on assets, return on equity and asset quality, and the opening of two new branches.

The Compensation Committee awarded bonuses to Mr. Gavegnano, Mr. Merritt, Mr. Abbate, Mr. Migliozzi and Mr. Romano in the amounts of $412,680, $99,270, $103,081, $115,701 and $103,500 respectively, with such bonuses paid in the first quarter of 2020; equaling 46% for Mr. Gavegnano, and 36% for the other NEOs.  

Long-Term Compensation. As part of our second-step conversion to full public status, 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. Time-based restricted stock and stock option grants were made to officers of the Bank, including the NEOs, and directors in 2017 in line with regulatory limitations for converting thrift institution. 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.

Conversion grants are awards that are larger than typical annual grants, but with vesting over five years (20% per year).  We do not provide annual grants.  The concept of the bank regulations is to provide meaningful alignment with stockholders with a focus on stock options that provide direct alignment with stock values delivered to stockholders.

The Compensation Committee considered the regulatory guidelines and the allocation process used for the 2015 equity grants. Grants were generally made at the same level to all of the NEOs, to reinforce a team approach and competitive grants for their roles, however the President and Chief Executive Officer received a larger award in line with regulatory limitations and recognition of his role and special contributions to the Company. All grants (2019, 2017, and in aggregate with 2015 grants) were within or less than the regulatory limitations, and in line with those of converted financial institutions.  

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 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

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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.

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

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and retention terms. The Compensation Committee did not utilize the services of a compensation consultant during 2019.

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 prohibits 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 2020

For 2020, 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. Abbate, Mr. Migliozzi and Mr. Romano to $975,000, $285,469, $296,213, $338,204 and $300,000, respectively.

Increases for the NEOs averaged 4.14%. Mr. Gavegnano’s increase was 7.7%. 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 concluded that a 7.7% 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 2019 Regional and Community Bank Survey utilized by the Compensation Committee.

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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, 2019, 2018 and 2017, respectively by the Named Executive Officers.  

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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 $975,000. 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, 2019 termination (at his prior salary of $905,000), Mr. Gavegnano would receive a severance benefit equal to $1,832,210. 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, 2019, the estimated severance payment Mr. Gavegnano would have received (based on taxable compensation earned during the prior five years) would be equal to approximately $4,063,773, which such amount reflects a reduction of $356,919 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 Mark L. Abbate, 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. Abbate, Mr. Merritt, Mr. Migliozzi and Mr. Romano would receive (based on taxable compensation earned) equals $826,206, $798,100, $933,916 and $830,062, respectively, assuming a December 31, 2019 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, 2019.

_____________________

(1)Awards vest at 20% per year, commencing on May 15, 2020.

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Outstanding Equity Awards at Fiscal Year-End

The following table provides information concerning unexercised stock options and stock awards that have not vested as of December 31, 2019 for each Named Executive Officer.  

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Option Exercises and Stock Vested

The following table sets forth information regarding the value realized by our Named Executive Officers upon exercise of stock options and the vesting of stock awards during the year ended December 31, 2019.

Equity Award Plans

Under the 2015 Equity Incentive Plan, the maximum number of shares of Company common stock that may be available for awards of stock options (both incentive and non-qualified) is 3,250,000, and 1,300,000 for awards of restricted stock, restricted stock units and performance awards.  To the extent any shares of stock covered by an award (including restricted stock awards, restricted stock units and performance awards) under the 2015 Equity Incentive Plan are not delivered to a participant or beneficiary because the award is forfeited or canceled or because a stock option is not exercised, then such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of stock available for delivery under the plan. As of December 31, 2019, there were 446,040 restricted stock awards and 1,225,832 stock options that remain available for future grants under the 2015 Equity Incentive Plan. No restricted stock awards or stock options remain available for future grants under the 2008 Equity Incentive Plan.

Under each plan, upon a participant’s termination of service for reasons of death or disability, or in the event of a change in control, the participant would become fully vested in all equity awards under the plan.

As of December 31, 2019, upon death or disability, or in the event of a change in control, Messrs. Gavegnano, Merritt, Abbate, Migliozzi and Romano would be entitled to the acceleration of their unvested restricted stock awards in the amount of $1.5 million, $129,000, $129,000, $265,000 and $129,000, respectively.

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Pension Benefits

Supplemental Executive Retirement Agreement. East Boston Savings Bank has entered into a supplemental executive retirement agreement with Mr. Gavegnano.

The following table provides information with respect to Mr. Gavegnano’s supplemental executive retirement benefits that are not defined contribution plans and that provide for payments or benefits in connection with his retirement as of December 31, 2019.

_____________________

Under Mr. Gavegnano’s agreement, if the executive terminates employment for any reason other than for cause, he will receive an annual benefit (paid monthly) equal to 70% of his final average compensation. For purposes of the agreement, final average compensation equals the three years’ base salary that results in the highest average. The annual benefit is generally payable in the form of an unreduced life annuity with a 50% spousal survivor annuity, or the actuarial equivalent of this benefit as a single lump sum distribution. Mr. Gavegnano elected a lump sum payment in compliance with Internal Revenue Code Section 409A.  Mr. Gavegnano became 100% vested in the annual benefit after the completion of eight years of service.

Upon death, Mr. Gavegnano’s beneficiary is entitled to the annual benefit, which will be calculated as if Mr. Gavegnano had retired the day before his death. In the event Mr. Gavegnano becomes disabled, he will be entitled to his annual benefit, which will be calculated as if he had terminated his employment on the date of his disability.

As of December 31, 2019, Mr. Gavegnano’s lump sum benefit under his agreement is $6.2 million upon his voluntary or involuntary termination, disability, death, or in the event of a change in control of Meridian Bancorp or East Boston Savings Bank followed by his termination of employment.

Non-qualified Deferred Compensation

East Boston Savings Bank entered into a supplemental executive retirement agreement with Edward J. Merritt. Under the terms of the agreement, Mr. Merritt is entitled to the value of the accumulation account upon his termination of employment, death or disability. This accumulation account had a beginning balance of $716,921 and East Boston Savings Bank credited the accumulation account with an additional $50,000, as of each December 31^st. A final contribution was made on December 31, 2015, as East Boston Savings Bank and Mr. Merritt agreed to freeze the accumulation of this benefit as of such date. Upon a termination of employment, death or disability, the accumulation account shall be paid in installments to Mr. Merritt or his beneficiary, as applicable. As of December 31, 2019, the balance in the accumulation account was $1,016,921. Mr. Merritt would have received installment payments in the form of a lifetime annuity if his employment had terminated due to disability, if the executive voluntarily resigned or if the executive was terminated without cause. In the event of the death of the executive or if his employment is terminated within one year of a change in

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control (as defined in the agreement), an amount equal to $1,016,921 shall be paid to Mr. Merritt or his beneficiaries, in the form of a single lump sum. 

CEO Pay Ratio

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the median of the annual total compensation of employees of the Company and the annual total compensation of our CEO.

For 2019, our median annual total compensation for all employees other than our CEO was $57,094. The total annual compensation for our CEO for the same period was $1,560,358.  The ratio of our CEO’s compensation to the median employee’s compensation was 27:1.

We identified our median employee using our entire workforce, including employees who were employed on a full-time, part-time or seasonal basis, as of December 31, 2019. For purposes of identifying the median employee from our employee population base, we used each employee’s “regular earnings” in 2019, including annual base salary, cash bonus, and any amounts paid for paid time off benefits available to all employees, by our employees, as compiled from our payroll records.

We determined the total annual compensation for our median employee based on total cash compensation, which included base pay, commissions and bonuses, plus the value of non-discriminatory benefits funded by the Company, including 401(k) matching and profit sharing contributions, taxable value of life insurance and the share of health insurance premiums paid by the Company. The CEO’s total compensation included the values of executive long-term disability and long-term care coverages, as well as the increase in pension value.

As the SEC rule for identifying the median employee allow companies to adopt various methodologies, to apply certain exclusions, to make reasonable assumptions and to apply various assumptions, the pay ratio reported by the Company may not be comparable to the pay ratio reported by other companies.

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Director Compensation

The following table provides the compensation we paid to our directors for the year ended December 31, 2019, other than Messrs. Gavegnano and Merritt. Messrs. Gavegnano and Merritt do not receive separate compensation for their service as a director, and information with respect to the compensation paid to Messrs. Gavegnano and Merritt is included above in the Summary Compensation Table.

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$4,340 and $789 for Mr. Gambardella and $3,793 and $778 for Mr. Natalucci.