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Meridian Corporation Reports Fourth Quarter and Year End 2022 Results and Announces an Increase in the Quarterly Dividend to $0.25 per Common Share
ソース: Nasdaq GlobeNewswire / 30 1 2023 16:47:33 America/New_York
MALVERN, Pa., Jan. 30, 2023 (GLOBE NEWSWIRE) -- Meridian Corporation (Nasdaq: MRBK) today reported:
- Net income of $21.8 million and diluted earnings per share of $3.58 for the year ended December 31, 2022, and net income of $4.6 million and diluted earnings per share of $0.77 for the fourth quarter ended December 31, 2022.
- Return on average assets and return on average equity for the year ended December 31, 2022 were 1.18% and 13.87%, respectively; while the return on average assets and return on average equity for the fourth quarter of 2022 were 0.92% and 11.91%, respectively.
- Net interest margin was 3.98% for the year ended December 31, 2022 and 3.93% for the fourth quarter of 2022.
- Total assets at December 31, 2022 were $2.1 billion, compared to $1.9 billion at September 30, 2022 and $1.7 billion at December 31, 2021.
- Fourth quarter commercial loan growth, excluding Paycheck Protection Program ("PPP") loans, was $61.3 million, or 17.6% annualized; residential and home equity loans increased by $70.1 million.
- Fourth quarter deposit growth was $38.9 million with an $11.6 million increase in non-interest bearing deposits.
- Non-interest income of $41.7 million for the year ended December 31, 2022, and $8.0 million in the fourth quarter of 2022.
- Non-interest expenses of $81.4 million for the year ended December 31, 2022, and $20.0 million in the fourth quarter of 2022.
- The Company repurchased 123,441 shares of its common stock at an average price of $30.82 per share during the fourth quarter.
- On January 26, 2023, the Board of Directors declared a quarterly cash dividend of $0.25 per common share, payable February 21, 2023 to shareholders of record as of February 14, 2023.
Christopher J. Annas, Chairman and CEO commented, “Meridian’s fourth quarter revenue of $35.8 million generated earnings of $4.6 million, or $0.77 per diluted share. The bank fundamentals were very strong, with net interest margin of 3.93% and quarterly loan growth of 8%. Loan demand has been consistent within our customer base, and we also won a number of relationships from competitors. Reduced income from our ancillary businesses, mortgage (down 46%) and SBA (down 47%) hurt bottom line results."
"On an annual basis, we fared well in a tumultuous year. Loans grew 26%, led by commercial real estate and commercial/industrial. We also generated adjustable rate mortgages for the portfolio, in shorter maturity buckets. I’m very pleased with a 3.98% net interest margin for the year. The change from a flush deposit environment to rapid rate increases and deposit outflows has been a challenge. Credit quality is good, and we experienced some non-performing loan payoffs. Our branch lite and customer self-service model helps control expenses."
"Our mortgage segment experienced a 67% decline in revenue year-over-year, resulting from the rate increases and a lack of homes for sale. The low inventory has plagued the business for the last two years and is only now showing signs of subsiding. We made dramatic cuts in expense throughout the year but still ended with a $2.6 million pretax loss, our first negative year. We are monitoring applications daily and are ready to cut further if sales don’t improve."
"The SBA business was impacted by rates, as gain on sale margins reduced and transactions slowed. We have added some new lenders and expect economic conditions to be ripe for more opportunities."
Mr. Annas added, "The Meridian team managed through a difficult year with the historic rate rise and other economic factors. Ironically, this year helped to illuminate the basic loan/deposit bank operations that are the engine of MRBK. Recognizing this, we will continue to grow organically, while seeking revenue diversification to make Meridian resilient against varied economic conditions."
Select Condensed Financial Information
As of or for the quarter ended (Unaudited) December 31,
2022September 30,
2022June 30,
2022March 31,
2022December 31,
2021(Dollars in thousands, except per share data) Income: Net income $ 4,557 $ 5,798 $ 5,938 $ 5,535 $ 7,719 Basic earnings per common share 0.80 0.99 0.99 0.92 1.29 Diluted earnings per common share 0.77 0.96 0.96 0.88 1.24 Net interest income 18,518 18,026 17,551 16,035 16,322 Balance Sheet: Total assets $ 2,062,228 $ 1,921,924 $ 1,853,019 $ 1,831,589 $ 1,713,443 Loans, net of fees and costs 1,743,682 1,610,349 1,518,893 1,431,906 1,386,457 Total deposits 1,712,479 1,673,553 1,568,014 1,564,851 1,446,413 Non-interest bearing deposits 301,727 290,169 291,925 291,379 274,528 Stockholders' equity 153,280 151,161 156,087 157,684 165,360 Balance Sheet (Average Balances): Total assets $ 1,962,915 $ 1,868,194 $ 1,811,335 $ 1,752,643 $ 1,755,263 Total interest earning assets 1,877,967 1,791,255 1,736,547 1,680,070 1,696,473 Loans, net of fees and costs 1,674,215 1,565,861 1,484,696 1,415,831 1,383,511 Total deposits 1,698,597 1,597,648 1,567,325 1,504,241 1,409,534 Non-interest bearing deposits 312,297 295,975 296,521 281,123 287,801 Stockholders' equity 151,791 157,614 158,420 161,939 159,921 Performance Ratios (Annualized): Return on average assets 0.92 % 1.23 % 1.31 % 1.28 % 1.74 % Return on average equity 11.91 % 14.59 % 15.03 % 13.86 % 19.15 %
Income Statement - Fourth Quarter 2022 Compared to Third Quarter 2022
Net income was $4.6 million, down $1.2 million from $5.8 million for the third quarter. Net interest income increased $486 thousand, or 2.7%, on a tax equivalent basis driven by continued strong loan portfolio growth. Offsetting the increase in net interest income, non-interest income decreased $2.2 million or 21.8%, while non-interest expense decreased $214 thousand, or 1.1%. Detailed explanations of the major categories of income and expense follow below.Net Interest income
The rate/volume analysis table below analyzes dollar changes in the components of interest income and interest expense as they relate to the change in balances (volume) and the change in interest rates (rate) of tax-equivalent net interest income for the periods indicated and allocated by rate and volume. Changes in interest income and/or expense attributable to both volume and rate have been allocated proportionately based on the relationship of the absolute dollar amount of the change in each category.
Quarter Ended (dollars in thousands) December 31,
2022September 30,
2022$ Change % Change Change due
to rateChange due
to volumeInterest income: Due from banks $ 126 $ 92 $ 34 37.0 % $ 49 $ (15 ) Federal funds sold 3 1 2 200.0 % 1 1 Investment securities - taxable (1) 821 648 173 26.7 % 172 1 Investment securities - tax exempt (1) 449 451 (2 ) (0.4 )% 9 (11 ) Loans held for sale 292 479 (187 ) (39.0 )% 71 (258 ) Loans held for investment (1) 26,150 21,371 4,779 22.4 % 3,231 1,548 Total loans 26,442 21,850 4,592 21.0 % 3,302 1,290 Total interest income 27,841 23,042 4,799 20.8 % 3,533 1,266 Interest expense: Interest-bearing demand deposits $ 1,388 $ 798 $ 590 73.9 % $ 589 $ 1 Money market and savings deposits 3,851 2,075 1,776 85.6 % 1,813 (37 ) Time deposits 2,976 1,202 1,774 147.6 % 1,385 389 Total deposits 8,215 4,075 4,140 101.6 % 3,787 353 Borrowings 439 266 173 65.0 % 206 (33 ) Subordinated debentures 591 591 — — % — — Total interest expense 9,245 4,932 4,313 87.4 % 3,993 320 Net interest income differential $ 18,596 $ 18,110 $ 486 2.68 % $ (460 ) $ 946 (1) Reflected on a tax-equivalent basis.
Interest income increased $4.8 million on a tax equivalent basis, quarter over quarter, due to a higher yield on earning assets, which went up 78 basis points, in addition to a higher level of average earning assets, which increased by $86.7 million. Included in interest income was approximately $280 thousand of one-time fees and interest recapture. The yield on total loans increased 78 basis points and the yield on cash and investments increased 50 basis points in total, reflecting the impact in rates caused by the Federal Reserve’s monetary policy. Over $718 million in loans repriced during the quarter with an average increase of 129 basis points. Average total loans, excluding PPP loans and residential loans for sale, increased $113.9 million, most notably in commercial real estate and construction, commercial loans and leases and small business loans, which increased $47.9 million on average, combined. Home equity loans and residential real estate loans held in portfolio increased $44.8 million on average, combined. Residential loans for sale and PPP loans decreased $18.1 million, and $5.6 million on average, respectively.Interest expense increased $4.3 million, quarter over quarter, due primarily to market interest rate rises, as well as an increase of $84.6 million in average deposits. Interest expense on deposits increased $4.1 million with the cost of interest-bearing deposits increasing 111 basis points to 2.35%. Total cost of deposits increased 91 basis points reflecting an increase of $16.3 million in average non-interest bearing deposits. Interest expense on borrowings increased $173 thousand as total average short-term borrowings decreased $4.7 million and the cost increased 221 basis points.
Net interest margin decreased 8 basis points to 3.93% for the fourth quarter from 4.01% for third the quarter, as retail deposits experienced pent-up repricing and wholesale funding repriced quicker than loans at the tail end of the quarter. Excluding the impact from PPP, net interest margin decreased 7 basis points to 3.92% from 3.99%. A reconciliation of this non-GAAP measure is included in the Appendix.
Provision for loans losses
The provision for loan losses increased $220 thousand to $746 thousand for the fourth quarter. The fourth quarter provision was the result of new loan growth as well as covering $933 thousand in charge-offs on small ticket equipment leases, partially offset by improvements in certain qualitative factors and decreases in specific reserves due to payoffs on non-performing loans and other underlying credit quality improvements.
Non-interest income
The following table presents the components of non-interest income for the periods indicated:
Quarter Ended (Dollars in thousands) December 31,
2022September 30,
2022$ Change % Change Mortgage banking income $ 3,958 $ 7,329 $ (3,371 ) (46.0 )% Wealth management income 1,061 1,114 (53 ) (4.8 )% SBA loan income 522 989 (467 ) (47.2 )% Earnings on investment in life insurance 140 138 2 1.4 % Net change in the fair value of derivative instruments 10 127 (117 ) (92.1 )% Net change in the fair value of loans held-for-sale 249 (237 ) 486 (205.1 )% Net change in the fair value of loans held-for-investment 91 (886 ) 977 (110.3 )% Net gain on hedging activity 498 399 99 24.8 % Service charges 35 32 3 9.4 % Other 1,432 1,219 213 17.5 % Total non-interest income $ 7,996 $ 10,224 $ (2,228 ) (21.8 )%
Total non-interest income decreased $2.2 million, or 21.8%, quarter over quarter due primarily to impact from the rising rate environment. Mortgage banking income was negatively impacted by rising rates, higher home values and record low home inventory which resulted in a decline in loan originations of $70.6 million over the prior quarter. Gain on sale margins remained flat at 267 basis points, as mortgage banking income decreased $3.4 million. The fair value of loans held for sale, derivatives instruments and net gain on hedging activity increased $468 thousand in total, helping offset the decline in mortgage banking income.SBA loan income decreased $467 thousand, or 47.2%, over the prior quarter as a lower volume of SBA loans were sold into the secondary market in the fourth quarter. $17.2 million of loans were sold in the quarter-ending December 31, 2022 compared to $20.8 million in loans sold in the quarter-ending September 30, 2022. The upward movement in interest rates had a negative impact on gross margins on the SBA loan sales, which declined 8 basis points to 5.0%, while also contributing to the decline in income was increased amortization and impairment of $128 thousand on SBA servicing assets.
Wealth management income decreased $53 thousand, or 4.8%, for the quarter-ended December 31, 2022 over the prior quarter due to the effect of market conditions on assets under management. Other non-interest income increased $213 thousand, or 17.5%, over the prior quarter due largely to an increase in swap fee income and FHLB stock dividend income.
Non-interest expense
The following table presents the components of non-interest expense for the periods indicated:
Quarter Ended (Dollars in thousands) December 31,
2022September 30,
2022$ Change % Change Salaries and employee benefits $ 12,794 $ 13,360 $ (566 ) (4.2 )% Occupancy and equipment 1,218 1,191 27 2.3 % Professional fees 976 899 77 8.6 % Advertising and promotion 996 1,165 (169 ) (14.5 )% Data processing 677 574 103 17.9 % Information technology 836 868 (32 ) (3.7 )% Pennsylvania bank shares tax 181 202 (21 ) (10.4 )% Other 2,369 2,002 367 18.3 % Total non-interest expense $ 20,047 $ 20,261 $ (214 ) (1.1 )%
Salaries and employee benefits decreased $566 thousand overall, with an increase of $1.3 million for bank and wealth segments combined, and a decrease of $1.9 million for mortgage segment salaries and employee benefits. The bank and wealth segments salaries and employee benefits were greater due to new hires, as well as increased incentive compensation and stock based compensation quarter-over-quarter. The mortgage segment salary and benefits decreased due to lower levels of variable compensation as well as a general reduction in mortgage segment workforce.Professional fees increased $77 thousand over the prior quarter due to legal expense incurred related to dealing with non-performing loans and the increase in other real estate owned, discussed below. Advertising and promotion expense decreased $169 thousand from the prior quarter as promotional costs were down in the fourth quarter due to seasonality, while there was also a decline in advertising expense from the mortgage segment. Data processing expense increased $103 thousand over the prior quarter due to an increase in deposit processing fees. Other non-interest expense increased $367 thousand over the prior quarter due to $161 thousand in expenses related to the other real estate owned property recorded in the fourth quarter, combined with an increase in year-end business development costs.
Balance Sheet - December 31, 2022 Compared to September 30, 2022
As of December 31, 2022, total assets increased $140.3 million, or 7.3%, to $2.1 billion from $1.9 billion at September 30, 2022. This growth in assets was due to loan portfolio growth partially funded by an increase in deposits and borrowings.Portfolio loan growth, excluding PPP loans, was $135.5 million, or 8.5% quarter-over-quarter. Construction loans increased $27.5 million, or 11.3%, residential real estate loans held in portfolio increased $68.3 million, or 44.5%, and lease financings increased $9.4, or 7.3% from September 30, 2022. Partially offsetting the growth in portfolio loans were decreases of $4.1 million, or 46.9%, in PPP loan balances as they continue to be forgiven by the SBA.
Total deposits increased $38.9 million, or 2.3%, quarter over quarter, due to an increase of $11.6 million in non-interest bearing deposits and a $27.4 million increase in interest-bearing deposits.
Consolidated stockholders’ equity of the Corporation increased as a result of net income of $4.6 million for the quarter, as well as improvement $1.5 million in other comprehensive loss, partially offset by dividends paid of $1.1 million, treasury stock purchases of $3.8 million. Based on capital ratio levels at December 31, 2022, we remain above the Community Bank Leverage Ratio requirement of 9%.
The following table presents capital ratios at the dates indicated:
December 31,
2022September 30,
2022Stockholders' equity to total assets 7.43 % 7.87 % Tangible common equity to tangible assets (1) 7.25 % 7.67 % Tier 1 leverage ratio - Corporation 8.13 % 8.54 % Common tier 1 risk-based capital ratio - Corporation 8.77 % 9.28 % Tier 1 risk-based capital ratio - Corporation 8.77 % 9.28 % Total risk-based capital ratio - Corporation 12.05 % 12.80 % (1) See Non-GAAP reconciliation in the Appendix
Asset Quality Summary
Meridian's strong credit culture remains focused on asset quality, while working with customers to navigate current economic challenges. As a result of continuing work-out process, several non-performing assets moved forward with positive changes in underlying credit position. Three non-performing loans paid down, paid off or moved to OREO during the period. The ratio of non-performing loans to total loans decreased to 1.20% as of December 31, 2022, from 1.40% at September 30, 2022. Non-performing assets to total assets declined to 1.11% as of December 31, 2022 from 1.20% as of September 30, 2022. There was $1.7 million in other real estate owned included in non-performing assets as of December 31, 2022, as the result of taking possession of a well collateralized residential real estate property in the quarter. There was no other real estate owned as of September 30, 2022. Total non-performing loans were $21.2 million as of December 31, 2022, down $1.8 million from $23.1 million as September 30, 2022 due to $3.2 million principal payment on a non-performing loan relationship, payoff of $2.7 million on another non-performing loan, both partially offset by an increase of $3.1 million in SBA loans considered non-performing.Meridian realized net charge-offs of 0.05% of total average loans for the quarter ended December 31, 2022, up from the quarter ended September 30, 2022 level of 0.02%. Net charge-offs for the quarter ended December 31, 2022 were $891 thousand, comprised of $936 thousand in charge-offs, with $45 thousand in recoveries for the quarter. Nearly all of the charge-offs for the quarter ended December 31, 2022 were from small ticket equipment leases. The ratio of allowance for loan losses to total loans held for investment, excluding loans at fair value and PPP loans (a non-GAAP measure, see reconciliation in the Appendix), was 1.09% as of December 31, 2022 compared to 1.20% as of September 30, 2022. As of December 31, 2022 there were specific reserves of $2.2 million against non-performing loans, down from $2.6 million as of September 30, 2022 due to improvement in the underlying credit quality for certain loans.
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 more than 20 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, the impact of the COVID-19 pandemic and government responses thereto; on the U.S. economy, including the markets in which we operate; actions that we and our customers take in response to these factors and the effects such actions have on our operations, products, services and customer relationships; and the risk that the Small Business Administration may not fund some or all Paycheck Protection Program (PPP) loan guaranties; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and the effects of inflation, a potential recession, 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, 2021 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,
2022September 30,
2022June 30,
2022March 31,
2022December 31,
2021Earnings and Per Share Data: Net income $ 4,557 $ 5,798 $ 5,938 $ 5,535 $ 7,719 Basic earnings per common share $ 0.80 $ 0.99 $ 0.99 $ 0.92 $ 1.29 Diluted earnings per common share $ 0.77 $ 0.96 $ 0.96 $ 0.88 $ 1.24 Common shares outstanding 5,733 5,844 6,037 6,129 6,108 Performance Ratios: Return on average assets 0.92 % 1.23 % 1.31 % 1.28 % 1.74 % Return on average equity 11.91 14.59 15.03 13.86 19.15 Net interest margin (tax-equivalent) 3.93 4.01 4.07 3.89 3.83 Net interest margin (tax-equivalent, excluding PPP loans and borrowings) (1) 3.92 3.99 3.95 3.82 3.76 Yield on earning assets (tax-equivalent) 5.88 5.10 4.65 4.35 4.28 Yield on earning assets (tax-equivalent, excluding PPP loans) (1) 5.88 5.09 4.54 4.31 4.23 Cost of funds 2.07 1.17 0.61 0.50 0.49 Efficiency ratio 75.61 % 71.72 % 70.49 % 73.56 % 71.05 % Asset Quality Ratios: Net charge-offs (recoveries) to average loans 0.05 % 0.02 % 0.03 % 0.04 % 0.00 % Non-performing loans to total loans 1.20 1.40 1.46 1.51 1.57 Non-performing assets to total assets 1.11 1.20 1.24 1.25 1.34 Allowance for loan losses to: Total loans held for investment 1.08 1.18 1.24 1.31 1.35 Total loans held for investment (excluding loans at fair value and PPP loans) (1) 1.09 1.20 1.27 1.38 1.46 Non-performing loans 88.66 % 82.20 % 81.82 % 82.48 % 81.60 % Capital Ratios: Book value per common share $ 26.74 $ 25.86 $ 25.85 $ 25.73 $ 27.07 Tangible book value per common share $ 26.03 $ 25.16 $ 25.16 $ 25.04 $ 26.37 Total equity/Total assets 7.43 % 7.87 % 8.42 % 8.61 % 9.65 % Tangible common equity/Tangible assets - Corporation (1) 7.25 7.67 8.22 8.40 9.42 Tangible common equity/Tangible assets - Bank (1) 8.80 9.61 10.17 10.40 11.54 Tier 1 leverage ratio - Corporation 8.13 8.54 8.87 9.10 9.39 Tier 1 leverage ratio - Bank 9.95 10.52 10.86 11.20 11.51 Common tier 1 risk-based capital ratio - Corporation 8.77 9.28 9.79 10.09 10.83 Common tier 1 risk-based capital ratio - Bank 10.73 11.44 11.98 12.41 13.27 Tier 1 risk-based capital ratio - Corporation 8.77 9.28 9.79 10.09 10.83 Tier 1 risk-based capital ratio - Bank 10.73 11.44 11.98 12.41 13.27 Total risk-based capital ratio - Corporation 12.05 12.80 13.50 13.91 14.81 Total risk-based capital ratio - Bank 11.87 % 12.70 % 13.33 % 13.76 % 14.63 % (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 Months Ended December 31,
2022September 30,
2022December 31,
2021December 31,
2022December 31,
2021Interest income: Loans and other finance receivables, including fees $ 26,440 $ 21,848 $ 17,535 $ 84,627 $ 68,822 Securities - taxable 821 648 387 2,420 1,463 Securities - tax-exempt 373 369 303 1,388 1,189 Cash and cash equivalents 129 93 23 286 48 Total interest income 27,763 22,958 18,248 88,721 71,522 Interest expense: Deposits 8,215 4,075 1,233 15,397 5,494 Borrowings 1,030 857 693 3,196 2,917 Total interest expense 9,245 4,932 1,926 18,593 8,411 Net interest income 18,518 18,026 16,322 70,128 63,111 Provision for loan losses 746 526 (222 ) 2,488 1,070 Net interest income after provision for loan losses 17,772 17,500 16,544 67,640 62,041 Non-interest income: Mortgage banking income 3,958 7,329 13,639 25,325 75,932 Wealth management income 1,061 1,114 1,270 4,733 4,801 SBA loan income 522 989 1,475 4,467 6,898 Earnings on investment in life insurance 140 138 141 553 365 Net change in the fair value of derivative instruments 10 127 (907 ) (703 ) (4,338 ) Net change in the fair value of loans held-for-sale 249 (237 ) (147 ) (844 ) (3,311 ) Net change in the fair value of loans held-for-investment 91 (886 ) (165 ) (2,408 ) (189 ) Net gain on hedging activity 498 399 563 5,439 2,961 Net gain on sale of investment securities available-for-sale — — 73 — 435 Service charges 35 32 29 125 129 Other 1,432 1,219 1,115 5,037 4,305 Total non-interest income 7,996 10,224 17,086 41,724 87,988 Non-interest expense: Salaries and employee benefits 12,794 13,360 17,042 54,378 78,866 Occupancy and equipment 1,218 1,191 1,085 4,837 4,545 Professional fees 976 899 929 3,635 3,558 Advertising and promotion 996 1,165 919 4,336 3,714 Data processing 677 574 484 2,310 2,150 Information technology 836 868 867 3,142 2,232 Pennsylvania bank shares tax 181 202 131 793 609 Other 2,369 2,002 2,280 8,014 8,053 Total non-interest expense 20,047 20,261 23,737 81,445 103,727 Income before income taxes 5,721 7,463 9,893 27,919 46,302 Income tax expense 1,164 1,665 2,174 6,091 10,717 Net income $ 4,557 $ 5,798 $ 7,719 $ 21,828 $ 35,585 Basic earnings per common share $ 0.80 $ 0.99 $ 1.29 $ 3.70 $ 5.91 Diluted earnings per common share $ 0.77 $ 0.96 $ 1.24 $ 3.58 $ 5.73 Basic weighted average shares outstanding 5,695 5,868 5,978 5,896 6,019 Diluted weighted average shares outstanding 5,898 6,059 6,210 6,102 6,206
MERIDIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)
(Dollar amounts and shares in thousands, except per share amounts)December 31,
2022September 30,
2022June 30,
2022March 31,
2022December 31,
2021Assets: Cash and due from banks $ 11,299 $ 12,114 $ 8,280 $ 11,155 $ 3,966 Interest-bearing deposits at other banks 27,092 20,774 28,813 44,867 19,514 Federal funds sold — — — 12,866 — Cash and cash equivalents 38,391 32,888 37,093 68,888 23,480 Securities available-for-sale, at fair value 135,346 127,999 129,288 130,653 159,302 Securities held-to-maturity, at amortized cost 37,479 37,922 37,111 34,977 6,372 Equity investments 2,086 2,092 2,153 2,240 2,354 Mortgage loans held for sale, at fair value 22,243 33,800 58,938 81,258 80,882 Loans, net of fees and costs 1,743,682 1,610,349 1,518,893 1,431,906 1,386,457 Allowance for loan and lease losses (18,828 ) (18,974 ) (18,805 ) (18,826 ) (18,758 ) Loans, net of the allowance for loan and lease losses 1,724,854 1,591,375 1,500,088 1,413,080 1,367,699 Restricted investment in bank stock 6,931 5,217 4,719 4,330 5,117 Bank premises and equipment, net 13,349 12,835 12,185 11,883 11,806 Bank owned life insurance 28,055 22,916 22,778 22,641 22,503 Accrued interest receivable 7,363 6,008 5,108 4,848 5,009 Other real estate owned 1,703 — — — — Deferred income taxes 3,936 5,722 4,467 3,190 1,413 Servicing assets 12,346 12,807 12,860 13,396 12,765 Goodwill 899 899 899 899 899 Intangible assets 3,175 3,226 3,277 3,328 3,379 Other assets 24,072 26,218 22,055 35,978 10,463 Total assets $ 2,062,228 $ 1,921,924 $ 1,853,019 $ 1,831,589 $ 1,713,443 Liabilities: Deposits: Non-interest bearing $ 301,727 $ 290,169 $ 291,925 $ 291,379 $ 274,528 Interest bearing Interest checking 219,838 236,562 205,298 252,298 268,248 Money market and savings deposits 697,564 709,127 728,886 688,117 697,628 Time deposits 493,350 437,695 341,905 333,057 206,009 Total interest-bearing deposits 1,410,752 1,383,384 1,276,089 1,273,472 1,171,885 Total deposits 1,712,479 1,673,553 1,568,014 1,564,851 1,446,413 Short-term borrowings 122,082 23,458 59,136 36,136 41,344 Subordinated debentures 40,346 40,597 40,567 40,538 40,508 Accrued interest payable 2,389 1,154 146 575 31 Other liabilities 31,652 32,001 29,069 31,805 19,787 Total liabilities 1,908,948 1,770,763 1,696,932 1,673,905 1,548,083 Stockholders’ equity: Common stock 6,578 6,566 6,561 6,556 6,535 Surplus 85,650 84,848 84,359 84,177 83,663 Treasury stock (21,821 ) (18,033 ) (11,896 ) (8,860 ) (8,860 ) Unearned common stock held by employee stock ownership plan (1,403 ) (1,602 ) (1,602 ) (1,602 ) (1,602 ) Retained earnings 95,815 92,405 87,815 83,104 84,916 Accumulated other comprehensive (loss) income (11,539 ) (13,023 ) (9,150 ) (5,691 ) 708 Total stockholders’ equity 153,280 151,161 156,087 157,684 165,360 Total liabilities and stockholders’ equity $ 2,062,228 $ 1,921,924 $ 1,853,019 $ 1,831,589 $ 1,713,443
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,
2022September 30,
2022June 30,
2022March 31,
2022December 31,
2021Interest income $ 27,763 $ 22,958 $ 20,037 $ 17,964 $ 18,248 Interest expense 9,245 4,932 2,486 1,929 1,926 Net interest income 18,518 18,026 17,551 16,035 16,322 Provision (credit) for loan losses 746 526 602 615 (222 ) Non-interest income 7,996 10,224 10,403 13,102 17,086 Non-interest expense 20,047 20,261 19,706 21,433 23,737 Income before income tax expense 5,721 7,463 7,646 7,089 9,893 Income tax expense 1,164 1,665 1,708 1,554 2,174 Net Income $ 4,557 $ 5,798 $ 5,938 $ 5,535 $ 7,719 Basic weighted average shares outstanding 5,695 5,868 5,999 6,023 5,978 Basic earnings per common share $ 0.80 $ 0.99 $ 0.99 $ 0.92 $ 1.29 Diluted weighted average shares outstanding 5,898 6,059 6,199 6,262 6,210 Diluted earnings per common share $ 0.77 $ 0.96 $ 0.96 $ 0.88 $ 1.24 Segment Information Three Months Ended December 31, 2022 Three Months Ended December 31, 2021 (dollars in thousands) Bank Wealth Mortgage Total Bank Wealth Mortgage Total Net interest income $ 18,376 $ 68 $ 74 $ 18,518 $ 15,931 $ 25 $ 366 $ 16,322 Provision for loan losses 746 — — 746 (222 ) — — (222 ) Net interest income after provision 17,630 68 74 17,772 16,153 25 366 16,544 Non-interest income 1,291 1,061 5,644 7,996 2,305 1,270 13,511 17,086 Non-interest expense 12,939 918 6,190 20,047 11,407 1,009 11,321 23,737 Income (loss) before income taxes $ 5,982 $ 211 $ (472 ) $ 5,721 $ 7,051 $ 286 $ 2,556 $ 9,893 Efficiency ratio 65.79 % 81.31 % 108.25 % 75.61 % 62.55 % 77.92 % 81.58 % 71.05 % Year Months Ended December 31, 2022 Year Months Ended December 31, 2021 (dollars in thousands) Bank Wealth Mortgage Total Bank Wealth Mortgage Total Net interest income $ 68,570 $ 697 $ 861 $ 70,128 $ 61,032 $ 15 $ 2,064 $ 63,111 Provision for loan losses 2,488 — — 2,488 1,070 — — 1,070 Net interest income after provision 66,082 697 861 67,640 59,962 15 2,064 62,041 Non-interest income 7,556 4,732 29,436 41,724 10,779 4,802 72,407 87,988 Non-interest expense 45,123 3,399 32,923 81,445 40,392 3,496 59,839 103,727 Income (loss) before income taxes $ 28,515 $ 2,030 $ (2,626 ) $ 27,919 $ 30,349 $ 1,321 $ 14,632 $ 46,302 Efficiency ratio 59.27 % 62.61 % 108.67 % 72.81 % 56.25 % 72.58 % 80.35 % 68.65 %
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.
Net Interest Margin, (TEY), Excluding PPP Loans & PPPLF Borrowings
Yield on Interest Earning Assets, (TEY), Excluding PPP incomeQ4'2022 Q3'2022 Q2'2022 Q1'2022 Q4'2021 Net interest margin (TEY) (GAAP) 3.93 % 4.01 % 4.07 % 3.89 % 3.83 % Impact of PPP loans and PPPLF borrowings (0.01 )% (0.02 )% (0.12 )% (0.07 )% (0.07 )% Net interest margin (TEY), excluding PPP loans and PPPLF borrowings 3.92 % 3.99 % 3.95 % 3.82 % 3.76 % Yield on interest earning assets, tax equivalent (GAAP) 5.88 % 5.10 % 4.65 % 4.35 % 4.28 % Impact of PPP loans — % (0.01 )% (0.11 )% (0.04 )% (0.05 )% Yield on interest earning assets (TEY), excluding PPP income 5.88 % 5.09 % 4.54 % 4.31 % 4.23 % Allowance For Loan Losses to Loans, Net of Fees and Costs, Excluding PPP Loans and Loans at Fair Value December 31,
2022September 30,
2022June 30,
2022March 31,
2022December 31,
2021Allowance for loan losses (GAAP) $ 18,828 $ 18,974 $ 18,805 $ 18,826 $ 18,758 Loans, net of fees and costs (GAAP) 1,743,682 1,610,349 1,518,893 1,431,906 1,386,457 Less: PPP loans (4,579 ) (8,610 ) (21,460 ) (49,680 ) (88,245 ) Less: Loans fair valued (14,502 ) (14,702 ) (16,212 ) (17,375 ) (17,558 ) Loans, net of fees and costs, excluding loans at fair value and PPP loans (non-GAAP) $ 1,724,601 $ 1,587,037 $ 1,481,221 $ 1,364,851 $ 1,280,654 Allowance for loan losses to loans, net of fees and costs (GAAP) 1.08 % 1.18 % 1.24 % 1.31 % 1.35 % Allowance for loan losses to loans, net of fees and costs, excluding PPP loans and loans at fair value (non-GAAP) 1.09 % 1.20 % 1.27 % 1.38 % 1.46 % Tangible Common Equity Ratio Reconciliation - Corporation December 31,
2022September 30,
2022June 30,
2022March 31,
2022December 31,
2021Total stockholders' equity (GAAP) $ 153,280 $ 151,161 $ 156,087 $ 157,684 $ 165,360 Less: Goodwill and intangible assets (4,074 ) (4,125 ) (4,176 ) (4,227 ) (4,278 ) Tangible common equity (non-GAAP) 149,206 147,036 151,911 153,457 161,082 Total assets (GAAP) 2,062,228 1,921,924 1,853,019 1,831,589 1,713,443 Less: Goodwill and intangible assets (4,074 ) (4,125 ) (4,176 ) (4,227 ) (4,278 ) Tangible assets (non-GAAP) $ 2,058,154 $ 1,917,799 $ 1,848,843 $ 1,827,362 $ 1,709,165 Tangible common equity to tangible assets ratio - Corporation (non-GAAP) 7.25 % 7.67 % 8.22 % 8.40 % 9.42 % Tangible Common Equity Ratio Reconciliation - Bank December 31,
2022September 30,
2022June 30,
2022March 31,
2022December 31,
2021Total stockholders' equity (GAAP) $ 185,039 $ 188,386 $ 192,212 $ 194,347 $ 201,486 Less: Goodwill and intangible assets (4,074 ) (4,125 ) (4,176 ) (4,227 ) (4,278 ) Tangible common equity (non-GAAP) 180,965 184,261 188,036 190,120 197,208 Total assets (GAAP) 2,059,557 1,921,714 1,852,998 1,831,461 1,713,318 Less: Goodwill and intangible assets (4,074 ) (4,125 ) (4,176 ) (4,227 ) (4,278 ) Tangible assets (non-GAAP) $ 2,055,483 $ 1,917,589 $ 1,848,822 $ 1,827,234 $ 1,709,040 Tangible common equity to tangible assets ratio - Bank (non-GAAP) 8.80 % 9.61 % 10.17 % 10.40 % 11.54 % Tangible Book Value Reconciliation December 31,
2022September 30,
2022June 30,
2022March 31,
2022December 31,
2021Book value per common share $ 26.74 $ 25.86 $ 25.85 $ 25.73 $ 27.07 Less: Impact of goodwill /intangible assets 0.71 0.70 0.69 0.69 0.70 Tangible book value per common share $ 26.03 $ 25.16 $ 25.16 $ 25.04 $ 26.37 Contact:
Christopher Annas
cannas@meridianbanker.com
484-568-5000
