Meridian Bancorp, Inc. History

Company History:

Meridian Bancorp is one of the largest and most venerable of the regional financial services holding companies on the eastern coast of the United States. Meridian was created in 1983 when the boards of directors from Central Penn National Corp. of Philadelphia, a traditional and rather conservative banking institution, and American Bancorp of Reading, a rapidly growing rural bank, voted to consolidate their operations. Meridian owns 325 branch offices and 350 automated teller machines throughout eastern and central Pennsylvania, southern New Jersey, and Delaware. The company's financial services include asset management, mortgage financing for residential and commercial properties, brokerage services, and investment banking services.

The Central Penn National Bank of Philadelphia opened for business on July 14, 1828 under the name Bank of Penn Township. The bank was established to service the burgeoning business in and around Philadelphia during the early part of the nineteenth century. During this time, Philadelphia was home to over 30 cloth factories, ten sugar refineries, and a host of small carpet, soap, glass, leather, paper, silverplate, and wallpaper businesses. On the outskirts of Philadelphia lay Penn Township, a district mostly populated by drovers, butchers, and market people. Thirteen men from the Penn Township community incorporated the bank with a capitalization of $150,000. The original directors included six merchants, a carpenter, a drover, a butcher, and two men who described themselves as "gentlemen"; none, including the person chosen to serve as the bank's first president, had any previous banking experience.

Nevertheless, in its early years the Bank of Penn Township was a successful enterprise. The bank opened many individual accounts for customers living in the area and provided loans to the Pennsylvania Canal & Railroad Company and the Germantown & Norristown Railroad. By 1834, however, the bank began to experience several challenges that threatened its survival. Overdrafts became a serious problem and, due to the lack of uniformity in design of a national currency, counterfeit paper money proliferated. Moreover, in 1841, after examining the books, the directors discovered that the cashier, first teller, and second teller had stolen nearly $130,000 of the bank's money. As a result, the bank was forced to reduce its activities and limit business hours.

However, having made an excellent investment in the Pennsylvania Railroad in 1846, and with sound management through the latter 1840s and early 1850s, the Bank of Penn Township weathered these misfortunes as well as subsequent upheavals in the banking industry, and, by 1858, it was once again operating on a firm financial basis. When the Civil War began, the bank began issuing loans to the U.S. federal government for the war effort against the Confederacy. With the passage of the National Bank Act of 1863, which among other things established a uniform national currency, the directors of Penn recommended that it be converted into a national bank. In 1864, the Bank of Penn Township was officially renamed the Penn National Bank. The bank's capitalization amounted to an impressive $500,000.

Every year, from the end of the Civil War in 1865 until 1873, Penn National's net profits averaged 11 percent on net worth. During this time, the bank loaned money primarily to shipping companies, printing houses, and railroad operations. The failure of the New York Securities & Warehouse Company, primarily involved in financing new railroad ventures, led to a run on other financial houses also involved in railroad securities. Penn National lost much of its depository accounts and again scaled back operations. However, management directed the bank through the crisis, and, by the late 1880s, Penn National had recouped its losses.

The financial crises of 1893 and 1907 were met by Penn National with foresight and preparation, and the bank did not suffer the losses typical of its earlier years. The bank prospered and grew rapidly during World War I and was very active in the federal government Liberty War Bond drive. Like other banks listed on the New York stock exchange, Penn National prospered during the heady days of the 1920s. Just before the Wall Street crash of October 1929, Penn National's assets amounted to $21 million, while its profits exceeded $4 million. In 1929, the bank split its stock ten for one, and its dividend rate was a healthy 26 percent.

The Great Depression of the 1930s brought trouble once again to Penn National. With ever decreasing deposits after a run on the bank, and the unexpected death of the company president, the directors at Penn National decided to merge with another bank to ensure its long-term financial viability. In July of 1930, Penn National consolidated its operations with Central National Bank, an institution founded in 1864 to meet the needs of a growing number of wealthy industrialists in the coal, machinery, and iron industries. The new bank, Central Penn National, had combined assets of over $70 million, and its strong liquidity in the form of commercial paper helped offset the effects of the Depression on banking operations. Although deposits continued to decline, Central Penn was healthy enough to provide loans throughout the Depression to more needy banks in the Philadelphia area.

The bank expanded rapidly with the advent of World War II. By 1942, Central Penn's resources were over $100 million, and capital funds amounted to almost $11 million. In addition, the bank reported the largest number of commercial accounts in its entire history. Near the end of the war in 1945, the president and the board of directors recommended the approval of the Bretton Woods Agreement establishing the International Monetary Fund and the International Bank for Reconstruction and Development. Also that year, Central Penn collaborated with 36 other Philadelphia banks in order to create a $10 million loan fund for returning veterans, to be used primarily for commercial purposes; Central Penn provided the first loan out of this fund, enabling a veteran to open a printing shop in Philadelphia.

Over the next three decades, Central Penn continued its activity in the area of commercial banking, while expanding its base of operations by acquiring smaller local banks. In 1950, Central Penn purchased the Charter Bank, and, during 1952, the bank acquired both City National Bank and South Philadelphia National Bank. In 1955, Wyoming Bank and Trust Company was consolidated into Central Penn's operations, and both Newtown Bank and Trust and Peoples National Bank in Langhoma were acquired in 1958. In 1969, Central Penn became a wholly owned subsidiary of a new holding company, Central Penn Financial Corp., which was subsequently renamed Central Penn National Corp. By means of acquisition strategy, Central Penn expanded its branch network from four to seven counties, increased its services in consumer and instalment banking, and enlarged its base of deposits. By the time Central Penn merged with American Bank and Trust Co. to form Meridian in 1983, Central Penn reported over 30 years of ever-increasing deposits, capital accounts, commercial loans, and assets.

The history of American Bank and Trust Co. of Pennsylvania involved four community banks located in the city of Reading, Pennsylvania: Schuylkill Valley Bank, Colonial Trust Company, The Berks County Trust Company, and Northeastern Trust Company. Schuylkill Valley Bank opened for business on July 21, 1890, with initial resources of $50,000; Colonial Trust was opened on July 2, 1900, with resources of $375,000; The Berks County Trust Company opened approximately one year later, with resources of $375,000; Northeastern Trust Company opened in 1919, with original resources of $125,000. All of these banks provided banking services for individual customers as well as commercial accounts. Moreover, all four banks were heavily involved in providing loans for customers to build or purchase houses, securing capital for small business ventures, helping large manufacturing companies expand their facilities, and taking care of the large volume of deposits made by local farmers.

The growth of these banks was characterized not only by increasing assets but by constant mergers and acquisitions. In 1923, The Berks County Trust Company merged with Schuylkill Valley bank to form The Berks County Trust Company. In 1929, Colonial Trust Company and Northeastern Trust Company merged to form Colonial-Northeastern Trust Company. In 1932, at the height of the Great Depression, The Berks County Trust Company consolidated its operations with Colonial-Northeastern Trust Company in order to form Berks County Trust Company. With the resources from this merger, Berks County Trust not only survived the Depression but was designated as one of the two banks in Reading that was financially healthy enough to open for business after the "Bank Holiday" imposed by the Roosevelt administration in March 1933.

During World War II and the post-war economic boom in America, Berks County Trust did what it did best: merge with or acquire small banks. In 1941, the bank purchased Union National Bank and incorporated its branch network into its own operations. The strategy of an aggressive merger policy combined with new branch construction enabled Berks Country Trust to grow rapidly. Acquisitions such as Wyomissing Valley Bank of Mohnton, Temple State Bank, Mount Penn Trust Company, Reamstown Exchange Bank, and Schuylkill Trust Company in Pottsville increased both assets and branch operations. By 1964, Berks County Trust had grown from a small community bank into a large regional banking institution. That year, in order to reflect the rapid development in the scope of its services and operations, Berks County Trust changed its name to American Bank and Trust Co. of Pennsylvania. By the time of its merger with Central Penn in 1983, American Bank had established itself as a major presence in Pennsylvania. Between 1953 and 1983, the bank had either merged with or acquired over 20 financial institutions, expanding into eight counties of southeastern Pennsylvania and increasing its network of bank branches from four to 83.

On June 30, 1983, the board of directors at both American and Central Penn voted to consolidate their operations and form a new financial services holding company named Meridian Bancorp, Inc. American Bank and Central Penn National Bank were designated as wholly-owned subsidiaries under the auspices of Meridian. Upon its formation, Meridian reported assets of $3.6 billion and deposits amounting to $2.9 billion. The company recorded loans totaling $2.1 billion and just under $250 million in shareholder equity. Earnings for 1983, Meridian's first year of business, were $32.3 million. At the time, Meridian employed 2,794 people and operated 106 branches in 11 Pennsylvania counties.

In 1983, Meridian formed a mortgage subsidiary and also announced the establishment of discount brokerage services. The first major move after the consolidation, however, was during 1984 when Meridian purchased the First National Bank of Allentown. The acquisition of First National, founded in 1855, immediately made Meridian the dominant financial services provider in Pennsylvania's Lehigh Valley. Two years later, Meridian bought the First National Bank of Pike County, adding six branches to its already expanding network in northeastern Pennsylvania.

Continuing its expansion strategy, Meridian became the first Pennsylvania bank holding company to enter the Delaware market with its purchase of Delaware Trust Company in 1988. This acquisition added 24 branches to Meridian's banking network. From 1989 to 1993 Meridian focused on additional acquisitions, including Hill Financial Savings Association, Peoples Bancorp of Lebanon, Bell Federal Savings Bank, Liberty Bank, Commonwealth Bancshares, First National Bank of Bath, and four branch offices of Provident Federal Savings Bank in New Jersey. In 1993, Meridian entered the retail market in New Jersey by acquiring Cherry Hill National Bank.

In just ten years, from 1983 to 1993, Meridian had developed into a major regional financial services institution. The company's assets in 1993 shot up to over $14 billion, while deposits grew to more than $10 billion. During that year, Meridian reported $7.4 billion in loans and a shareholders equity amounting to $904 million. Earnings had increased to $157.8 million by 1993, and the company's work force numbered over 7,000 throughout southeastern Pennsylvania, New Jersey, and Delaware. With the June 1994 acquisition of Security Federal Savings Bank, Meridian Bank of New Jersey increased the number of its branch offices to 37 across the southern part of the state. This acquisition brought the total number of Meridian's branch offices to 325, with more than 350 automated teller machines located in 39 counties throughout a three state region. Meridian's primary business activities, including banking services, mortgage banking, asset management, and securities remained financially healthy and well-situated for future growth. In the mid-1990s, management had no intention of slowing down the pace of its acquisition strategy.

Principal Subsidiaries: Delware Trust Company; Meridian Asset Management, Inc.; Meridian Bank; Meridian Bank, New Jersey; Meridian Leasing, Inc.; Meridian Securitites, Inc.

Further Reading:

LaCerda, John, and Edward D. Maher, This Is Our Story: Central Penn National Bank of Philadelphia, Philadelphia: Allen, Scott & Lane, 1953. Meridian Marks Tenth Anniversary as Financial Services Holding Company, Reading, Penn.: Meridian Bancorp, Inc., 1993.

Source: International Directory of Company Histories, Vol. 11. St. James Press, 1995.

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