Meridian Corporation Reports Fourth Quarter and Year End 2022 Results and Announces an Increase in the Quarterly Dividend to $0.25 per Common Share

Meridian Corporation Reports Fourth Quarter and Year End 2022 Results and Announces an Increase in the Quarterly Dividend to $0.25 per Common Share

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,
2022
  September 30,
2022
  June 30,
2022
  March 31,
2022
  December 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,
2022
  September 30,
2022
  $ Change   % Change   Change due
to rate
  Change due
to volume
Interest 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,
2022
  September 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,
2022
  September 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,
2022
  September 30,
2022
Stockholders’ 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,
2022
  September 30,
2022
  June 30,
2022
  March 31,
2022
  December 31,
2021
Earnings 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,
2022
  September 30,
2022
  December 31,
2021
  December 31,
2022
  December 31,
2021
Interest 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,
2022
  September 30,
2022
  June 30,
2022
  March 31,
2022
  December 31,
2021
Assets:                  
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,
2022
  September 30,
2022
  June 30,
2022
  March 31,
2022
  December 31,
2021
Interest 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 income
  Q4’2022   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,
2022
  September 30,
2022
  June 30,
2022
  March 31,
2022
  December 31,
2021
Allowance 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,
2022
  September 30,
2022
  June 30,
2022
  March 31,
2022
  December 31,
2021
Total 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,
2022
  September 30,
2022
  June 30,
2022
  March 31,
2022
  December 31,
2021
Total 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,
2022
  September 30,
2022
  June 30,
2022
  March 31,
2022
  December 31,
2021
Book 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

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