Bay Street News

Meridian Corporation Reports Fourth Quarter 2023 Results and Announces a Quarterly Dividend of $0.125 per Common Share

MALVERN, Pa., Jan. 26, 2024 (GLOBE NEWSWIRE) — Meridian Corporation (Nasdaq: MRBK) today reported:

  Three Months Ended   Year Ended
(Dollars in thousands, except per share data)((Unaudited) December 31,
2023
  September 30,
2023
  December 31,
2023
  December 31,
2022
Income:              
Net income $ 571     $ 4,005     $ 13,243     $ 21,829  
Diluted earnings per common share $ 0.05     $ 0.35     $ 1.16     $ 1.79  
Pre-tax, pre-provision income (1) $ 5,356     $ 5,292     $ 23,782     $ 30,408  
Pre-tax, pre-provision income – Bank (1) $ 5,757     $ 6,399     $ 27,751     $ 31,004  
(1) See Non-GAAP reconciliation in the Appendix              

Christopher J. Annas, Chairman and CEO commented, “Meridian’s fourth quarter earnings totaled $571 thousand, which was down from the prior quarter. Contributing to the decline was a necessary additional provision for a non-performing commercial credit, which has experienced some deterioration. In addition, the historical rise in interest rates has had negative impact on our SBA and small-ticket leasing businesses, both of which required additional provisions. We are comfortable with the existing reserves and expect some resolution in the commercial credit in 2024. Annual loan growth in the core CRE, C&I and SBA portfolios was 9%, which reflects our continued outreach and a stable business environment in the Philadelphia metro region. Construction lending for residential and multi-family is still strong because of high housing demand, as housing inventory remains at historical lows.

Mr. Annas added, “Net interest margin was down from the prior quarter mostly due to higher deposit expense, as customers are increasingly rate conscious. We have adjusted well to the tumultuous environment created by the historic Federal Reserve interest rate moves, but the impact on margins continues.

The mortgage segment has been downsized throughout 2023 to match expected volumes. The lack of homes for sale remains the biggest issue, while the higher rates are less of a factor. We will continue to monitor the impact of market conditions on our mortgage operations and are prepared to make further adjustments if warranted.”

Mr. Annas concluded, “Our continued growth results from being highly visible in our regions, and being the preferred bank in the Delaware Valley. If the forecasted rate declines materialize, the business environment should be robust.”

Select Condensed Financial Information

  As of or for the quarter ended (Unaudited)
  December 31,
2023
  September 30,
2023
  June 30,
2023
  March 31,
2023
  December 31,
2022
  (Dollars in thousands, except per share data)
Income:                  
Net income $ 571     $ 4,005     $ 4,645     $ 4,021     $ 4,557  
Basic earnings per common share   0.05       0.36       0.42       0.36       0.40  
Diluted earnings per common share   0.05       0.35       0.41       0.34       0.39  
Net interest income   16,942       17,224       17,098       17,677       18,518  
                   
Balance Sheet:                  
Total assets $ 2,246,193     $ 2,230,971     $ 2,206,877     $ 2,229,783     $ 2,062,228  
Loans, net of fees and costs   1,895,806       1,885,629       1,859,839       1,818,189       1,743,682  
Total deposits   1,823,462       1,808,645       1,782,605       1,770,413       1,712,479  
Non-interest bearing deposits   239,289       244,668       269,174       262,636       301,727  
Stockholders’ equity   158,022       155,114       153,962       153,049       153,280  
                   
Balance Sheet (Average Balances):                  
Total assets $ 2,219,340     $ 2,184,384     $ 2,166,574     $ 2,088,599     $ 1,962,915  
Total interest earning assets   2,121,068       2,086,602       2,070,640       1,995,460       1,877,967  
Loans, net of fees and costs   1,891,170       1,876,648       1,847,736       1,783,322       1,674,215  
Total deposits   1,820,532       1,782,140       1,775,444       1,759,571       1,698,597  
Non-interest bearing deposits   254,025       253,485       266,675       296,037       312,297  
Stockholders’ equity   157,210       156,271       154,179       153,179       151,791  
                   
Performance Ratios (Annualized):                  
Return on average assets   0.10 %     0.73 %     0.86 %     0.78 %     0.92 %
Return on average equity   1.44 %     10.17 %     12.08 %     10.65 %     11.91 %
                                       

Income Statement – Fourth Quarter 2023 Compared to Third Quarter 2023

Net income of $571 thousand for the fourth quarter decreased $3.4 million from $4.0 million for the third quarter mainly due to provisioning for general credit reserves, specific reserves on individually evaluated loans, and charge-offs. Net interest income decreased $288 thousand, or 1.6%, on a tax equivalent basis due to an increase in interest expense that out-paced the increase in interest income. Non-interest income increased $31 thousand or 0.4%, as fair value changes exceeded the lower level of gains on sale of mortgage loans. Non-interest expense decreased $315 thousand, or 1.6% due primarily to a decrease in salaries and benefits expense, partially offset by an increase in professional fees. Detailed explanations of the major categories of income and expense follow below.

Net Interest income

The rate/volume analysis table below analyzes dollar changes in the components of interest income and interest expense as they relate to the change in balances (volume) and the change in interest rates (rate) of tax-equivalent net interest income for the periods indicated and allocated by rate and volume. Changes in interest income and/or expense related to changes attributable to both volume and rate have been allocated proportionately based on the relationship of the absolute dollar amount of the change in each category.

  Quarter Ended                
(dollars in thousands) December 31,
2023
  September 30,
2023
  $ Change   % Change   Change due to rate   Change due to volume
Interest income:                      
Cash and cash equivalents   526       245     $ 281       114.7 %   $ (3 )   $ 284  
Investment securities – taxable   1,020       901       119       13.2 %     65       54  
Investment securities – tax exempt (1)   402       410       (8 )     (2.0 )%     4       (12 )
Loans held for sale   400       456       (56 )     (12.3 )%     36       (92 )
Loans held for investment (1)   34,071       33,526       545       1.6 %     285       260  
Total loans   34,471       33,982       489       1.4 %     321       168  
Total interest income $ 36,419     $ 35,538     $ 881       2.5 %   $ 387     $ 494  
Interest expense:                          
Interest-bearing demand deposits $ 1,476     $ 1,488     $ (12 )     (0.8 )%   $ 51     $ (63 )
Money market and savings deposits   7,384       6,755       629       9.3 %     328       301  
Time deposits   7,946       7,300       646       8.8 %     495       151  
Total deposits   16,806       15,543       1,263       8.1 %     874       389  
Borrowings   1,816       2,086       (270 )     (12.9 )%     (56 )     (214 )
Subordinated debentures   782       606       176       29.0 %     41       135  
Total interest expense   19,404       18,235       1,169       6.4 %     859       310  
Net interest income differential $ 17,015     $ 17,303     $ (288 )     (1.66 )%   $ (472 )   $ 184  
(1) Reflected on a tax-equivalent basis.                    

Interest income increased $881 thousand quarter-over-quarter, on a tax equivalent basis, due to a higher yield on earning assets and higher levels of average earning assets. The yield on earnings assets rose 5 basis points during the period, while average earning assets increased by $34.5 million.

The yield on total loans increased 7 basis points and the yield on cash and investments increased 9 basis points combined. Average total loans, excluding residential loans for sale, increased $14.5 million. Construction, commercial real estate, and small business loans increased $19.3 million on average, combined, while home equity loans and residential real estate loans held in portfolio increased $15.9 million on average, combined.

Total interest expense increased $1.2 million, quarter-over-quarter, due primarily to market interest rate rises, and an increase in deposit average balances. Interest expense on deposits increased $1.3 million as total average deposits increased $37.9 million and the cost of interest-bearing deposits increased 23 basis points to 4.26%. Interest expense on borrowings decreased $270 thousand as the cost of borrowings decreased 14 basis points due to the positive carry on a $75 million pay fixed swap, and average borrowings decreased for the period, while the average balance of subordinated debentures increased for the period due to the $9.7 million raised in the prior quarter.

The net interest margin decreased 11 basis points to 3.18% as the cost of funds outpaced the increase in yield on earnings assets. The average balance on non-interest bearing deposits increased $540 thousand for the quarter which helped offset somewhat the impact of the increase in cost of funds.

Provision for Credit Losses

The overall provision for credit losses is comprised of provisioning for funded loans as well as unfunded loan commitments. The combined provision increased to $4.6 million for the fourth quarter, from $82 thousand for the third quarter, with the provision for unfunded loan commitments representing only $8 thousand of the combined provision. The increase in provision for funded loans was due to a $3.9 million increase in specific reserves on new, mainly small business loans, and existing non-accrual loans combined with provisioning for loan growth and charge-offs. $2.3 million of the increase in specific reserves related to a commercial loan relationship for which new information became available related to the value of the underlying collateral, and an estimate of disposition costs. This increase was partially offset by the impact of favorable changes in certain portfolio baseline loss rates and some macroeconomic factors underlying the funded loss model.

Non-interest income

The following table presents the components of non-interest income for the periods indicated:

  Quarter Ended        
(Dollars in thousands) December 31,
2023
  September 30,
2023
  $ Change   % Change
Mortgage banking income $ 3,394     $ 4,819     $ (1,425 )     (29.6 )%
Wealth management income   1,239       1,258       (19 )     (1.5 )%
SBA loan income   1,022       982       40       4.1 %
Earnings on investment in life insurance   204       201       3       1.5 %
Net change in the fair value of derivative instruments   (126 )     103       (229 )     (222.3 )%
Net change in the fair value of loans held-for-sale   120       111       9       8.1 %
Net change in the fair value of loans held-for-investment   805       (570 )     1,375       (241.2 )%
Net gain on hedging activity   (53 )     82       (135 )     (164.6 )%
Net loss on sale of investment securities available-for-sale         (3 )     3       (100.0 )%
Other   1,512       1,103       409       37.1 %
Total non-interest income $ 8,117     $ 8,086     $ 31       0.4 %
                               

Total non-interest income increased $31 thousand, or 0.4%, quarter-over-quarter as a result of an increase in the net change in fair values and an increase in other income, largely offset by lower mortgage banking income. Other income increased $409 thousand due to swap fee income and gains in fair value of equity securities. Mortgage banking income decreased $1.4 million, or 29.6% quarter-over-quarter, due to lower levels of mortgage loan originations, which decreased $39.8 million. In addition to lower volume, the gain on sale margin increased 5 basis points over the prior quarter. The fair value of loans held for investment increased $1.4 million due to the recent decline in interest rates.

SBA loan income increased $40 thousand, or 4.1%, quarter-over-quarter. While the value of SBA loans sold for the quarter-ended December 31, 2023 was $6.1 million, or 23.3%, less than the quarter-ended September 30, 2023, the gross margin on sale was 6.4% for the quarter-ended December 31, 2023 compared to 6.2% for the quarter-ended September 30, 2023. Also contributing to the increase in SBA loan income was a decrease in amortization expense and in servicing asset impairment.

Non-interest expense

The following table presents the components of non-interest expense for the periods indicated:

  Quarter Ended        
(Dollars in thousands) December 31,
2023
  September 30,
2023
  $ Change   % Change
Salaries and employee benefits $ 11,744     $ 12,420     $ (676 )     (5.4 )%
Occupancy and equipment   1,232       1,226       6       0.5 %
Professional fees   1,382       1,104       278       25.2 %
Advertising and promotion   931       848       83       9.8 %
Data processing and software   1,651       1,652       (1 )     (0.1 )%
Pennsylvania bank shares tax   233       244       (11 )     (4.5 )%
Other   2,530       2,524       6       0.2 %
Total non-interest expense $ 19,703     $ 20,018     $ (315 )     (1.6  
                               

Salaries and employee benefits decreased $676 thousand overall, with bank and wealth segments combined having increased $332 thousand, and the mortgage segment decreased $1.0 million. Bank and wealth segment salaries and employee benefits were up due to increased full-time-equivalent employees, and expense related to the issuance of stock options during the quarter.

Professional fees increased $278 thousand during the current quarter due to an increase in loan and lease workout expenses and other legal expenses. Advertising and promotion expense increased $83 thousand from the prior quarter as a result of an increase in advertising and business development expense during the holiday season.

Balance Sheet – December 31, 2023 Compared to September 30, 2023

As of December 31, 2023, total assets increased $15.2 million, or 0.7%, to $2.2 billion from September 30, 2023. This increase was due to an increase in cash and cash equivalents and an increase in loans. Interest-bearing cash decreased $395 thousand, or 0.8%, to $46.6 million as of December 31, 2023, from September 30, 2023.

Portfolio loan growth was $10.0 million, or 0.5% quarter-over-quarter. Commercial mortgage loans increased $41.7 million, or 6.0%, commercial & industrial loans increased $3.0 million, or 1.0%, while residential real estate loans held in portfolio increased $4.3 million, or 1.7%, and home equity lines and loans increased $2.4 million, or 3.3%. Partially offsetting portfolio loan growth were construction loans which decreased $30.2 million, or 10.9%, and lease financings that decreased $12.4 million, or 8.9% from September 30, 2023.

Total deposits increased $14.8 million, or 0.8% quarter-over-quarter, due largely to higher levels of certificates of deposits. Time deposits increased $24.6 million, or 3.7%, from retail and wholesale efforts as customers continue to opt for higher term interest rates. Money market accounts and savings accounts increased a combined $1.2 million while interest bearing demand deposits decreased $5.6 million. Non-interest bearing deposits decreased $5.4 million, reflecting typical business cash out at the end of the year for distributions and profit-sharing.

Consolidated stockholders’ equity of the Corporation increased by $2.9 million from September 30, 2023, to $158.0 million as of December 31, 2023. Changes to equity for the current quarter included net income of $571 thousand, $199 thousand in ESOP loan payments, an increase of a $2.9 million in other comprehensive income, partially offset by quarter dividends paid of $1.4 million. The Community Bank Leverage Ratio for the Bank was 9.46% at December 31, 2023.

Asset Quality Summary

The ratio of non-performing loans to total loans increased to 1.76% as of December 31, 2023, from 1.53% as of September 30, 2023, while the ratio of non-performing assets to total assets increased to 1.58% as of December 31, 2023, compared to 1.38% at September 30, 2023. Driving the increase in these ratios were total non-performing loans which increased $4.7 million from $29.1 million as of September 30, 2023, to $33.8 million as of December 31, 2023, due to risk rating downgrades of several SBA loans and small ticket equipment leases, partially offset by charge-offs of leases and SBA loans as of December 31, 2023.

Meridian realized net charge-offs of 0.11% of total average loans for the quarter ended December 31, 2023, compared with the quarter ended September 30, 2023 level of 0.05%, as net charge-offs increased to $2.2 million for the quarter ended December 31, 2023, compared to net-charge-offs of $913 thousand for the quarter ended September 30, 2023. Fourth quarter charge-offs were comprised of $1.2 million from small ticket equipment leases which are charged-off after becoming more than 120 days past due, and $890 thousand for an SBA loan. There were recoveries of $17 thousand, largely related to leases.

The ratio of allowance for credit losses to total loans held for investment, excluding loans at fair value (a non-GAAP measure, see reconciliation in the Appendix), was 1.17% as of December 31, 2023 compared to 1.05% as of September 30, 2023. As of December 31, 2023 there were specific reserves of $6.5 million against individually evaluated loans, an increase from $2.6 million as of September 30, 2023. The drivers of the increase related to a $2.3 million increase in a commercial loan relationship specific reserve for which new information became available related to the value of the underlying collateral, combined with the net impact of establishing $2.3 million in specific reserves on SBA loan relationships classified as non-performing, netted with the charge-off an SBA loan during the quarter that had a specific reserve of $890 thousand in the prior quarter.

About Meridian Corporation

Meridian Bank, the wholly owned subsidiary of Meridian Corporation, is an innovative community bank serving Pennsylvania, New Jersey, Delaware and Maryland. Through its 17 offices, including banking branches and mortgage locations, Meridian offers a full suite of financial products and services. Meridian specializes in business and industrial lending, retail and commercial real estate lending, electronic payments, and wealth management solutions through Meridian Wealth Partners. Meridian also offers a broad menu of high-yield depository products supported by robust online and mobile access. For additional information, visit our website at www.meridianbanker.com. Member FDIC.

“Safe Harbor” Statement

In addition to historical information, this press release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Meridian Corporation’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Meridian Corporation’s control). Numerous competitive, economic, regulatory, legal and technological factors, risks and uncertainties that could cause actual results to differ materially include, without limitation, credit losses and the credit risk of our commercial and consumer loan products; changes in the level of charge-offs and changes in estimates of the adequacy of the allowance for credit losses, or ACL; cyber-security concerns; rapid technological developments and changes; increased competitive pressures; changes in spreads on interest-earning assets and interest-bearing liabilities; changes in general economic conditions and conditions within the securities markets; unanticipated changes in our liquidity position; unanticipated changes in regulatory and governmental policies impacting interest rates and financial markets; legislation affecting the financial services industry as a whole, and Meridian Corporation, in particular; changes in accounting policies, practices or guidance; developments affecting the industry and the soundness of financial institutions and further disruption to the economy and U.S. banking system; among others, could cause Meridian Corporation’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. Meridian Corporation cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Meridian Corporation’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2022 and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Meridian Corporation does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Meridian Corporation or by or on behalf of Meridian Bank.

MERIDIAN CORPORATION AND SUBSIDIARIES
FINANCIAL RATIOS (Unaudited)
(Dollar amounts and shares in thousands, except per share amounts)

  Quarter Ended
  December 31,
2023
  September 30,
2023
  June 30,
2023
  March 31,
2023
  December 31,
2022
Earnings and Per Share Data:                  
Net income $ 571     $ 4,005     $ 4,645     $ 4,021     $ 4,557  
Basic earnings per common share $ 0.05     $ 0.36     $ 0.42     $ 0.36     $ 0.40  
Diluted earnings per common share $ 0.05     $ 0.35     $ 0.41     $ 0.34     $ 0.39  
Common shares outstanding   11,183       11,178       11,178       11,305       11,466  
                   
Performance Ratios:                  
Return on average assets   0.10 %     0.73 %     0.86 %     0.78 %     0.92 %
Return on average equity   1.44       10.17       12.08       10.65       11.91  
Net interest margin (tax-equivalent)   3.18       3.29       3.33       3.61       3.93  
Yield on earning assets (tax-equivalent)   6.81       6.76       6.57       6.31       5.88  
Cost of funds   3.81       3.63       3.39       2.83       2.07  
Efficiency ratio   78.63 %     79.09 %     74.80 %     73.16 %     75.61 %
                   
Asset Quality Ratios:                  
Net charge-offs (recoveries) to average loans   0.11 %     0.05 %     0.05 %     0.08 %     0.05 %
Non-performing loans to total loans   1.76       1.53       1.44       1.25       1.20  
Non-performing assets to total assets   1.58       1.38       1.32       1.11       1.11  
Allowance for credit losses to:                  
Total loans held for investment   1.17       1.04       1.09       1.12       1.08  
Total loans held for investment (excluding loans at fair value) (1)   1.17       1.05       1.10       1.13       1.09  
Non-performing loans   65.48 %     67.61 %     73.97 %     88.41 %     88.66 %
                   
Capital Ratios:                  
Book value per common share $ 14.13     $ 13.88     $ 13.77     $ 13.54     $ 13.37  
Tangible book value per common share $ 13.78     $ 13.53     $ 13.42     $ 13.18     $ 13.01  
Total equity/Total assets   7.04 %     6.95 %     6.98 %     6.86 %     7.43 %
Tangible common equity/Tangible assets – Corporation (1)   6.87       6.79       6.81       6.70       7.25  
Tangible common equity/Tangible assets – Bank (1)   8.94       8.89       8.54       8.26       8.80  
Tier 1 leverage ratio – Bank   9.46       9.65       9.22       9.32       9.95  
Common tier 1 risk-based capital ratio – Bank   10.10       10.82       10.35       10.27       10.73  
Tier 1 risk-based capital ratio – Bank   10.10       10.82       10.35       10.27       10.73  
Total risk-based capital ratio – Bank   11.17 %     11.85 %     11.43 %     11.41 %     11.87 %
(1) See Non-GAAP reconciliation in the Appendix                
                 

MERIDIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts and shares in thousands, except per share amounts)

  Three Months Ended   Year Ended
  December 31,
2023
  September 30,
2023
  December 31,
2022
  December 31,
2023
  December 31,
2022
Interest income:                  
Loans and other finance receivables, including fees $ 34,469     $ 33,980     $ 26,440     $ 130,081     $ 84,627  
Securities – taxable   1,020       901       821       3,873       2,420  
Securities – tax-exempt   331       333       373       1,369       1,388  
Cash and cash equivalents   526       245       129       1,266       286  
Total interest income   36,346       35,459       27,763       136,589       88,721  
Interest expense:                  
Deposits   16,806       15,543       8,215       57,819       15,397  
Borrowings   2,598       2,692       1,030       9,828       3,196  
Total interest expense   19,404       18,235       9,245       67,647       18,593  
Net interest income   16,942       17,224       18,518       68,942       70,128  
Provision for credit losses   4,628       82       746       6,815       2,488  
Net interest income after provision for credit losses   12,314       17,142       17,772       62,127       67,640  
Non-interest income:                  
Mortgage banking income   3,394       4,819       3,958       16,537       25,325  
Wealth management income   1,239       1,258       1,061       4,928       4,733  
SBA loan income   1,022       982       522       4,485       4,467  
Earnings on investment in life insurance   204       201       140       789       553  
Net change in the fair value of derivative instruments   (126 )     103       10       91       (703 )
Net change in the fair value of loans held-for-sale   120       111       249       32       (844 )
Net change in the fair value of loans held-for-investment   805       (570 )     91       132       (2,408 )
Net gain on hedging activity   (53 )     82       498       28       5,439  
Net loss on sale of investment securities available-for-sale         (3 )           (58 )      
Other   1,512       1,103       1,467       5,001       5,162  
Total non-interest income   8,117       8,086       7,996       31,965       41,724  
Non-interest expense:                  
Salaries and employee benefits   11,744       12,420       12,794       47,377       54,378  
Occupancy and equipment   1,232       1,226       1,218       4,842       4,837  
Professional fees   1,382       1,104       976       4,312       3,635  
Advertising and promotion   931       848       996       3,730       4,336  
Data processing and software   1,651       1,652       1,513       6,415       5,451  
Pennsylvania bank shares tax   233       244       181       968       793  
Other   2,530       2,524       2,369       9,481       8,014  
Total non-interest expense   19,703       20,018       20,047       77,125       81,444  
Income before income taxes   728       5,210       5,721       16,967       27,920  
Income tax expense   157       1,205       1,164       3,724       6,091  
Net income $ 571     $ 4,005     $ 4,557     $ 13,243     $ 21,829  
                   
Basic earnings per common share $ 0.05     $ 0.36     $ 0.40     $ 1.19     $ 1.85  
Diluted earnings per common share $ 0.05     $ 0.35     $ 0.39     $ 1.16     $ 1.79  
                   
Basic weighted average shares outstanding   11,070       11,057       11,389       11,115       11,792  
Diluted weighted average shares outstanding   11,206       11,363       11,795       11,387       12,204  
                                       

MERIDIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)
(Dollar amounts and shares in thousands, except per share amounts)

  December 31,
2023
  September 30,
2023
  June 30,
2023
  March 31,
2023
  December 31,
2022
Assets:                  
Cash and due from banks $ 10,067     $ 12,734     $ 10,576     $ 8,473     $ 11,299  
Interest-bearing deposits at other banks   46,630       47,025       36,290       100,030       27,092  
Cash and cash equivalents   56,697       59,759       46,866       108,503       38,391  
Securities available-for-sale, at fair value   146,019       122,218       126,668       142,933       135,346  
Securities held-to-maturity, at amortized cost   35,781       36,232       36,463       36,525       37,479  
Equity investments   2,121       2,019       2,097       2,110       2,086  
Mortgage loans held for sale, at fair value   24,816       23,144       40,422       35,701       22,243  
Loans and other finance receivables, net of fees and costs   1,895,806       1,885,629       1,859,839       1,818,189       1,743,682  
Allowance for credit losses   (22,107 )     (19,683 )     (20,242 )     (20,442 )     (18,828 )
Loans and other finance receivables, net of the allowance for credit losses   1,873,699       1,865,946       1,839,597       1,797,747       1,724,854  
Restricted investment in bank stock   8,072       8,309       9,157       10,173       6,931  
Bank premises and equipment, net   13,557       13,310       13,234       13,281       13,349  
Bank owned life insurance   28,844       28,641       28,440       28,247       28,055  
Accrued interest receivable   9,325       8,984       7,651       7,651       7,363  
Other real estate owned   1,703       1,703       1,703       1,703       1,703  
Deferred income taxes   4,201       4,993       4,258       4,017       3,936  
Servicing assets   11,748       11,835       12,193       12,125       12,346  
Goodwill   899       899       899       899       899  
Intangible assets   2,971       3,022       3,073       3,124       3,175  
Other assets   25,740       39,957       34,156       25,044       24,072  
Total assets $ 2,246,193     $ 2,230,971     $ 2,206,877     $ 2,229,783     $ 2,062,228  
                   
Liabilities:                  
Deposits:                  
Non-interest bearing $ 239,289     $ 244,668     $ 269,174     $ 262,636     $ 301,727  
Interest bearing                  
Interest checking   150,898       156,537       155,907       232,616       219,838  
Money market and savings deposits   747,803       746,599       710,546       647,904       697,564  
Time deposits   685,472       660,841       646,978       627,257       493,350  
Total interest-bearing deposits   1,584,173       1,563,977       1,513,431       1,507,777       1,410,752  
Total deposits   1,823,462       1,808,645       1,782,605       1,770,413       1,712,479  
Borrowings   174,896       177,959       194,636       233,883       122,082  
Subordinated debentures   49,836       50,079       40,348       40,319       40,346  
Accrued interest payable   10,324       7,814       5,612       3,836       2,389  
Other liabilities   29,653       31,360       29,714       28,283       31,652  
Total liabilities   2,088,171       2,075,857       2,052,915       2,076,734       1,908,948  
                   
Stockholders’ equity:                  
Common stock   13,186       13,181       13,181       13,180       13,156  
Surplus   80,325       79,731       79,650       79,473       79,072  
Treasury stock   (26,079 )     (26,079 )     (26,079 )     (24,512 )     (21,821 )
Unearned common stock held by employee stock ownership plan   (1,204 )     (1,403 )     (1,403 )     (1,403 )     (1,403 )
Retained earnings   101,216       102,043       99,434       96,180       95,815  
Accumulated other comprehensive loss   (9,422 )     (12,359 )     (10,821 )     (9,869 )     (11,539 )
Total stockholders’ equity   158,022       155,114       153,962       153,049       153,280  
Total liabilities and stockholders’ equity $ 2,246,193     $ 2,230,971     $ 2,206,877     $ 2,229,783     $ 2,062,228  
                                       

MERIDIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SEGMENT INFORMATION (Unaudited)
(Dollar amounts and shares in thousands, except per share amounts)

  Three Months Ended
  December 31,
2023
  September 30,
2023
  June 30,
2023
  March 31,
2023
  December 31,
2022
Interest income $ 36,346     $ 35,459     $ 33,836     $ 30,947     $ 27,763  
Interest expense   19,404       18,235       16,738       13,270       9,245  
Net interest income   16,942       17,224       17,098       17,677       18,518  
Provision for credit losses   4,628       82       705       1,399       746  
Non-interest income   8,117       8,086       9,124       6,638       7,996  
Non-interest expense   19,703       20,018       19,615       17,789       20,047  
Income before income tax expense   728       5,210       5,902       5,127       5,721  
Income tax expense   157       1,205       1,257       1,106       1,164  
Net Income $ 571     $ 4,005     $ 4,645     $ 4,021     $ 4,557  
                   
Basic weighted average shares outstanding   11,070       11,057       11,062       11,272       11,389  
Basic earnings per common share $ 0.05     $ 0.36     $ 0.42     $ 0.36     $ 0.40  
                   
Diluted weighted average shares outstanding   11,206       11,363       11,304       11,656       11,795  
Diluted earnings per common share $ 0.05     $ 0.35     $ 0.41     $ 0.34     $ 0.39  
  Segment Information
  Three Months Ended December 31, 2023   Three Months Ended December 31, 2022
(dollars in thousands) Bank   Wealth   Mortgage   Total   Bank   Wealth   Mortgage   Total
Net interest income $ 16,908     $ (15 )   $ 49     $ 16,942     $ 18,376     $ 68     $ 74     $ 18,518  
Provision for credit losses   4,628                   4,628       746                   746  
Net interest income after provision   12,280       (15 )     49       12,314       17,630       68       74       17,772  
Non-interest income   2,051       1,239       4,827       8,117       1,291       1,061       5,644       7,996  
Non-interest expense   13,202       957       5,544       19,703       12,939       918       6,190       20,047  
Income (loss) before income taxes $ 1,129     $ 267     $ (668 )   $ 728     $ 5,982     $ 211     $ (472 )   $ 5,721  
Efficiency ratio   70 %     78 %     114 %     79 %     66 %     81 %     108 %     76 %
                               
  Year Ended December 31, 2023   Year Ended December 31, 2022
(dollars in thousands) Bank   Wealth   Mortgage   Total   Bank   Wealth   Mortgage   Total
Net interest income $ 68,835     $ (27 )   $ 134     $ 68,942     $ 68,570     $ 697     $ 861     $ 70,128  
Provision for credit losses   6,815                   6,815       2,488                   2,488  
Net interest income after provision   62,020       (27 )     134       62,127       66,082       697       861       67,640  
Non-interest income   7,743       4,928       19,294       31,965       7,556       4,732       29,436       41,724  
Non-interest expense   48,827       3,661       24,637       77,125       45,122       3,399       32,923       81,444  
Income (loss) before income taxes $ 20,936     $ 1,240     $ (5,209 )   $ 16,967     $ 28,516     $ 2,030     $ (2,626 )   $ 27,920  
Efficiency ratio   64 %     75 %     127 %     76 %     59 %     63 %     109 %     73 %
                               

MERIDIAN CORPORATION AND SUBSIDIARIES
APPENDIX: NON-GAAP MEASURES (Unaudited)
(Dollar amounts and shares in thousands, except per share amounts)

Meridian believes that non-GAAP measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts. The non-GAAP disclosure have limitations as an analytical tool, should not be viewed as a substitute for performance and financial condition measures determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of Meridian’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

  Pre-tax, Pre-provision Reconciliation
  Three Months Ended   Year Ended
(Dollars in thousands, except per share data)((Unaudited) December 31,
2023
  September 30,
2023
  December 31,
2023
  December 31,
2022
Income before income tax expense $ 728     $ 5,210     $ 16,967     $ 27,920  
Provision for credit losses   4,628       82       6,815       2,488  
Pre-tax, pre-provision income $ 5,356     $ 5,292     $ 23,782     $ 30,408  
   
       
               
                               
                               
                               
                               
  Pre-tax, Pre-provision Reconciliation
   
       
               
                               
                               
                               
                               
  Three Months Ended   Year Ended
   
       
               
                               
                               
                               
                               
(Dollars in thousands, except per share data)((Unaudited) December 31,
2023
  September 30,
2023
  December 31,
2023
  December 31,
2022
   
       
               
                               
                               
                               
                               
Bank $ 5,757     $ 6,399     $ 27,751     $ 31,004  
   
       
               
                               
                               
                               
                               
Wealth   267       417       1,240       2,030  
   
       
               
                               
                               
                               
                               
Mortgage   (668 )     (1,524 )     (5,209 )     (2,626 )
   
       
               
                               
                               
                               
                               
Pre-tax, pre-provision income $ 5,356     $ 5,292     $ 23,782     $ 30,408  
  Allowance For Loan Losses to Loans, Net of Fees and Costs, Excluding and Loans at Fair Value
  December 31,
2023
  September 30,
2023
  June 30,
2023
  March 31,
2023
  December 31,
2022
Allowance for credit losses (GAAP) $ 22,107     $ 19,683     $ 20,242     $ 20,442     $ 18,828  
                   
Loans, net of fees and costs (GAAP)   1,895,806       1,885,629       1,859,839       1,818,189       1,743,682  
Less: Loans fair valued   (13,726 )     (13,231 )     (14,403 )     (14,434 )     (14,502 )
Loans, net of fees and costs, excluding loans at fair value (non-GAAP) $ 1,882,080     $ 1,872,398     $ 1,845,436     $ 1,803,755     $ 1,729,180  
                   
Allowance for credit losses to loans, net of fees and costs (GAAP)   1.17 %     1.04 %     1.09 %     1.12 %     1.08 %
Allowance for credit losses to loans, net of fees and costs, excluding loans at fair value (non-GAAP)   1.17 %     1.05 %     1.10 %     1.13 %     1.09 %
  Tangible Common Equity Ratio Reconciliation – Corporation
  December 31,
2023
  September 30,
2023
  June 30,
2023
  March 31,
2023
  December 31,
2022
Total stockholders’ equity (GAAP) $ 158,022     $ 155,114     $ 153,962     $ 153,049     $ 153,280  
Less: Goodwill and intangible assets   (3,870 )     (3,921 )     (3,972 )     (4,023 )     (4,074 )
Tangible common equity (non-GAAP)   154,152       151,193       149,990       149,026       149,206  
                   
Total assets (GAAP)   2,246,193       2,230,971       2,206,877       2,229,783       2,062,228  
Less: Goodwill and intangible assets   (3,870 )     (3,921 )     (3,972 )     (4,023 )     (4,074 )
Tangible assets (non-GAAP) $ 2,242,323     $ 2,227,050     $ 2,202,905     $ 2,225,760     $ 2,058,154  
Tangible common equity to tangible assets ratio – Corporation (non-GAAP)   6.87 %     6.79 %     6.81 %     6.70 %     7.25 %
  Tangible Common Equity Ratio Reconciliation – Bank
  December 31,
2023
  September 30,
2023
  June 30,
2023
  March 31,
2023
  December 31,
2022
Total stockholders’ equity (GAAP) $ 204,132     $ 201,996     $ 192,209     $ 187,954     $ 185,039  
Less: Goodwill and intangible assets   (3,870 )     (3,921 )     (3,972 )     (4,023 )     (4,074 )
Tangible common equity (non-GAAP)   200,262       198,075       188,237       183,931       180,965  
                   
Total assets (GAAP)   2,244,893       2,232,297       2,208,252       2,229,721       2,059,557  
Less: Goodwill and intangible assets   (3,870 )     (3,921 )     (3,972 )     (4,023 )     (4,074 )
Tangible assets (non-GAAP) $ 2,241,023     $ 2,228,376     $ 2,204,280     $ 2,225,698     $ 2,055,483  
Tangible common equity to tangible assets ratio – Bank (non-GAAP)   8.94 %     8.89 %     8.54 %     8.26 %     8.80 %
                   
  Tangible Book Value Reconciliation
  December 31,
2023
  September 30,
2023
  June 30,
2023
  March 31,
2023
  December 31,
2022
Book value per common share $ 14.13     $ 13.88     $ 13.77     $ 13.54     $ 13.37  
Less: Impact of goodwill /intangible assets   0.35       0.35       0.35       0.36       0.36  
Tangible book value per common share $ 13.78     $ 13.53     $ 13.42     $ 13.18     $ 13.01  
                                       


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