MALVERN, Pa., May 23, 2019 /PRNewswire/ -- Meridian Corporation (Nasdaq: MRBK) today reported net income of $2.0 million, or $0.31 per diluted share for the first quarter of 2019, which generated a return on average assets and return on average equity of 0.83% and 7.32%, respectively. Meridian also reported a prior period adjustment of $315 thousand, net of tax, or $0.05 per diluted share for expenses related to mortgage loan state licensing issues.
"Meridian had a strong first quarter as earnings improved 58% to $2.0 million compared to 1Q 2018," said Christopher J. Annas, Chairman and CEO. "Loan balances were 16.5% higher at the end of the first quarter compared to a year ago, contributing to our higher profitability. Net income and retained earnings were negatively affected by a combined $486 thousand in current and prior periods associated with a previously announced licensing issue in Maryland where mortgages were originated. We delayed filing our first quarter 2019 financial results as a result of this matter and expect to file our Form 10-Q on or about May 24, 2019. With this licensing issue behind us, the mortgage division looks to have a profitable year."
"The SBA and private banking teams both generated loans in the first quarter after joining Meridian in late 2018, and we are excited about their prospects going forward. In particular, the SBA team is addressing a market that Meridian did not participate in, and the loan growth and potential loan sale income should more than offset their expense in 2019."
"Our Delaware Valley market has favorable population trends according to recent studies, which are contributing to better economics in housing and small business formation. We participate deeply in both these segments and are excited about continued strength in 2020 and beyond."
Select Condensed Financial Information
Reconciliation of Non-GAAP Financial Measures
Meridian believes that non-GAAP measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts to evaluate performance trends and the adequacy of common equity. This non-GAAP disclosure has 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.
Meridian believes adjusted net income, adjusted earnings per common share, adjusted ROAA and adjusted ROAE provide a greater understanding of ongoing operations and enhances comparability of results with prior periods. Because management believes that these adjustments are not incurred as a result of ongoing operations, they are not as helpful a measure of the performance of our underlying business, particularly in light of their unpredictable nature and are difficult to forecast. This supplemental presentation should not be construed as an inference that Meridian's future results will be unaffected by similar adjustments to these measures determined in accordance with GAAP.
Financial Highlights
Net income for the three months ended March 31, 2019 was $2.0 million, reflecting an increase of $700 thousand as compared to net income for the same period in 2018.
- Total assets of $1.03 billion as of March 31, 2019 increased $30 million, or 3.0% during the quarter and $144.0 million or 16.3% year-over-year.
- Total portfolio loans and leases of $862.4 million as of March 31, 2019 increased $24.3 million, or 2.9% during the quarter and $122.0 million or 16.5% year-over-year.
- Total deposits of $810.7 million as of March 31, 2019 increased $58.6 million, or 7.8% during the quarter and $131.4 million or 19.3% year-over-year.
- Non-interest bearing deposits of $115.5 million as of March 31, 2019 decreased $10.7 million, or 8.5% during the quarter but increased $9.9 million or 9.4% year-over-year.
- Net interest income of $8.5 million increased $800 thousand, or 10.2% for the three months ended March 31, 2019 compared to $7.7 million for the same period in 2018.
Income Statement Summary
Net income was $2.0 million, or $0.31 per diluted share for the three months ended March 31, 2019 compared to net income of $1.3 million, or $0.20 per diluted share, for the same period in 2018. The increase was largely attributable to an increase in net interest income of $800 thousand, in addition to a lower level of provision for loan losses as asset quality has remained strong. Non-interest income for the three months ended March 31, 2019 decreased $609 thousand, which was partially offset by the $445 thousand decrease in non-interest expense.
Net interest income increased $800 thousand, or 10.2%, to $8.5 million for the three months ended March 31, 2019, from $7.7 million for the same period in 2018. The growth in interest income for the three months ended March 31, 2019 compared to the same period in 2018 reflects an increase in average interest earning assets of $138.8 million. This increase was partially offset by the decrease in the net interest margin from 3.91% for the three months ended March 31, 2018 to 3.67% for the three month ended March 31, 2019. The decrease in net interest margin reflects pressure from the rising cost of funds, which has outpaced the favorable trend in yield on interest earning assets year-over-year. The provision for loan losses decreased $335 thousand to $219 thousand for the three months ended March 31, 2019 due to continued strong asset quality and lower levels of net charge-offs year-over-year.
Total non-interest income for the three months ended March 31, 2019 was $6.4 million, down $609 thousand, or 8.6%, from the comparable period in 2018. This overall decrease in non-interest income came primarily from our mortgage division. While mortgage banking revenue increased $87 thousand and the net change in fair value of mortgage related financial instruments increased $397 thousand year-over-year, realized gains on derivatives related to mortgage banking, included in other non-interest income, decreased $974 thousand for the three months ended March 31, 2019 to a loss of $275 thousand, compared to a gain of $699 thousand for the same period in 2018. Wealth management revenue decreased $214 thousand year-over-year. Revenue for the three months ended March 31, 2019 was largely based on the market values of assets under management at the end of 2018, which were temporary depressed due to year-end declines in the stock market.
Total non-interest expense was $12.1 million for the three months ended March 31, 2019, down $445 thousand, or 3.5%, from $12.6 million for the three months ended March 31, 2018. The decrease is mainly attributable to a reduction in salaries and employee benefits expense of $709 thousand or 8.4%, as full-time equivalent employees, particularly in the mortgage division were reduced. In addition, variable loan expenses decreased by $64 thousand or 12%, reflecting the lower level of mortgage originations year-over-year. Occupancy and equipment expense as well as professional fees were relatively flat for the comparable three month period, while advertising and promotion expense was down $116 thousand year-over-year due to changes in the timing of certain marketing campaigns. Data processing expenses were up modestly due to the increased transaction volume. Other expenses were up over the comparable three month period due to a charge of $125 thousand to the reserve for the open litigation and higher levels of other employee-related expenses, shares tax expense, as well as other expenses. Additionally, $79 thousand of other expense was incurred for the current period impact of the Maryland mortgage licensing issue previously announced. The impact of the Maryland licensing issue totaled $486 thousand, however $407 thousand ($315 thousand net of tax) pertained to prior periods and was adjusted through retained earnings as of January 1, 2018 as it was considered the correction of an immaterial error.
Balance Sheet Summary
As of March 31, 2019, total assets were $1.03 billion compared with $883.6 million as of March 31, 2018 and $997.5 million as of December 31, 2018. Total assets increased $144.0 million, or 16.3%, on a year-over-year basis primarily due to strong loan growth. Total assets increased $30 million, or 3.0%, from the previous quarter, mostly due to an increase in portfolio loans of $24.3 million.
Total loans, excluding mortgage loans held for sale, grew $122.0 million, or 16.5%, to $862.4 million as of March 31, 2019, from $740.4 million as of March 31, 2018. This was an increase of $24.3 million, or 2.9%, from $838.1 million as of December 31, 2018. The increase in loans for both periods is attributable to several commercial categories as we continue to grow our presence in the Philadelphia market area. Commercial loans increased $43.5 million, or 19.3%, year-over-year, while commercial real estate and commercial construction loans combined increased $56.5 million, or 14.3%, year-over-year. Residential loans held in portfolio increased $20.5 million, or 55.2%, year-over-year as certain loan products or terms were targeted to hold in portfolio. Residential mortgage loans held for sale decreased $1.2 million, or 4.0%, to $29.6 million as of March 31, 2019 from March 31, 2018.
Deposits were $810.7 million as of March 31, 2019, up $131.4 million, or 19.3%, from March 31, 2018, and up $58.6 million, or 7.8%, from December 31, 2018. Non-interest bearing deposits increased $9.9 million, or 9.4%, from March 31, 2018 and decreased $10.7 million, or 8.5%, from December 31, 2018. New business relationships fueled the increases year-over-year, however the decrease since December 31, 2018 related primarily to business fluctuations or transfers to interest-bearing accounts. Money market accounts/savings accounts increased $73.2 million, or 34.3%, since March 31, 2018 and $53.8 million, or 23.1%, since December 31, 2018 due to new business relationship money market accounts. Interest-bearing checking accounts increased $2.6 million, or 2.3%, year-over-year, and decreased $2.1 million or 1.9% quarter-over-quarter. Certificates of deposit increased $45.8 million, or 18.3%, during the year and $17.6 million, or 6.3%, quarter-over-quarter.
Consolidated stockholders' equity of the Corporation was $112.0 million, or 10.90% of total assets as of March 31, 2019, as compared to $102 million, or 11.55% of total assets as of March 31, 2018. As of March 31, 2019, the Tier 1 leverage ratio was 11.01%, the Tier 1 risk-based capital and common equity ratios were 11.71%, and total risk-based capital was 13.65%. Quarter-end numbers show a tangible common equity to tangible assets ratio of 10.47%. Tangible book value per share was $16.70 as of March 31, 2019, compared with $15.12 as of March 31, 2018.
Asset Quality Summary
Asset quality remains strong year-over-year. The Bank realized net reoveries of (0.01)% of total average loans for the quarter ending March 31, 2019, compared with net charge-offs of 0.02% for the quarter ending March 31, 2018. Total non-performing assets, including loans and other real estate property, were $4.0 million as of March 31, 2019, $3.4 million as of March 31, 2018, and $3.9 million as of December 31, 2018. The ratio of non-performing assets to total assets as of March 31, 2019 was 0.38% compared to 0.38% as of March 31, 2018 and 0.39% as of December 31, 2018. The ratio of allowance for loan losses to total loans held for investment, excluding loans at fair value, was 0.99% as of March 31, 2019, an improvement from the 0.98% recorded as of March 31, 2018 and 0.97% as of December 31, 2018.
About Meridian Corporation
Meridian Bank, the wholly owned subsidiary of Meridian Corporation, is a full-service commercial bank headquartered in Malvern, Pennsylvania with 23 offices in the greater Philadelphia Metro market. The Bank offers a full range of commercial and retail loan and deposit products, along with wealth management and electronic payment services. Meridian Mortgage, a division of the Bank, is a top tier provider of residential mortgage loans. 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, 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, 2018) and, for periods prior to the completion of the holding company reorganization, Meridian Bank's filings with the FDIC, including Meridian Bank's Annual Report on Form 10‑K for the year ended December 31, 2017, 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.
Contact: Chris Annas, cannas@meridianbanker.com, 484-568-5001
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