Meridian Corporation Reports Net Income of $2.0 Million, or $0.31 Per Diluted Share, in 1Q 2019

MALVERN, Pa., May 23, 2019 /PRNewswire/ -- Meridian Corporation 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





For the Quarter Ended (Unaudited)





2019



2018



2018



2018



2018

(Dollars in thousands, except per share data)



March 31



December 31



September 30



June 30



March 31

Income:































Net income - consolidated



$

2,006



$

2,364



$

2,727



$

1,802



$

1,270

Diluted earnings per common share



$

0.31



$

0.37



$

0.42



$

0.28



$

0.20

Net income - excluding Mortgage





1,969





1,826





1,973





1,701





1,406

Net income - Mortgage





37





538





754





101





(136)

Net interest income - consolidated





8,477





8,441





8,378





8,146





7,692





































































At the Quarter Ended (Unaudited)





2019



2018



2018



2018



2018





March 31



December 31



September 30



June 30



March 31

Balance Sheet:































Total assets



$

1,027,514



$

997,480



$

959,921



$

945,527



$

883,613

Loans, net of fees and costs





862,372





838,106





806,788





781,622





740,408

Total deposits





810,713





752,130





781,927





683,250





679,303

Non-interest bearing deposits





115,464





126,150





124,855





106,942





105,576

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.





Adjusted Net Income, Earnings per Share and Return Ratios (Unaudited)





2019



2018



2018



2018



2018

(Dollars in thousands, except per share data)



1st QTR



4th QTR



3rd QTR



2nd QTR



1st QTR

Net income - consolidated



$

2,006



$

2,364



$

2,727



$

1,802



$

1,270

Holding company formation cost adjustment













179









Contingent asset fair value adjustment













138









Adjusted net income - consolidated(1)





2,006





2,364





3,044





1,802





1,270

































Net income - excluding Mortgage





1,969





1,826





1,973





1,701





1,406

Adjusted net income - excluding Mortgage(1)





1,969





1,826





2,290





1,701





1,406

































Net income per common share, diluted



$

0.31



$

0.37



$

0.42



$

0.28



$

0.20

Holding company formation cost adjustment













0.03









Contingent asset fair value adjustment













0.02









Adjusted diluted earnings per share(1)



$

0.31



$

0.37



$

0.47



$

0.28



$

0.20

Adjusted diluted earnings per share- excluding

Mortgage(1)



$

0.31



$

0.28



$

0.36



$

0.26



$

0.22

































Return on average assets - consolidated





0.83%





0.99%





1.16%





0.81%





0.61%

Adjusted return on average assets - consolidated(1)





0.83%





0.99%





1.29%





0.81%





0.61%

Return on average equity - consolidated





7.32%





8.66%





10.19%





7.02%





5.08%

Adjusted return on average equity - consolidated(1)





7.32%





8.66%





11.34%





7.02%





5.08%

































Return on average assets - excluding Mortgage





0.83%





0.79%





0.87%





0.79%





0.70%

Adjusted return on average assets - excluding

Mortgage(1)





0.83%





0.79%





0.97%





0.79%





0.70%

Return on average equity - excluding Mortgage





7.18%





6.69%





7.37%





6.63%





5.63%

Adjusted return on average equity - excluding

Mortgage(1)





7.18%





6.69%





8.53%





6.63%





5.63%























(1)

Adjusted net income, adjusted earnings per common share, adjusted ROAA and adjusted ROAE are non-GAAP measures and remove the tax effect of the charge to earnings for the holding company formation costs of $51 thousand, and the fair value adjustment to contingent assets of $39 thousand in the third quarter of 2018.

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

FINANCIAL TABLES FOLLOW

 

FINANCIAL RATIOS







Quarterly





2019



2018



2018



2018



2018

(Dollars in thousands, except per share data)



1st QTR



4th QTR



3rd QTR



2nd QTR



1st QTR

Earnings and Per Share Data































Net income



$

2,006



$

2,364



$

2,727



$

1,802



$

1,270

Basic earnings per common share





0.31





0.37





0.43





0.28





0.20

Common shares outstanding





6,407





6,407





6,407





6,401





6,392

































Performance Ratios































Return on average assets - consolidated





0.83%





0.99%





1.16%





0.81%





0.61%

Return on average assets - excluding Mortgage (non-

GAAP)





0.83%





0.79%





0.87%





0.79%





0.70%

Return on average equity - consolidated





7.32%





8.66%





10.19%





7.02%





5.08%

Return on average equity - excluding Mortgage (non-

GAAP)





7.18%





6.69%





7.37%





6.63%





5.63%

Net interest margin (TEY)





3.67%





3.70%





3.72%





3.88%





3.91%

Efficiency ratio - consolidated





81%





79%





78%





84%





85%

Adjusted efficiency ratio - consolidated (non-GAAP)





81%





79%





76%





84%





85%

Efficiency ratio - excluding Mortgage (non-GAAP)





72%





73%





71%





73%





77%

Adjusted efficiency ratio - excluding Mortgage (non-

GAAP)





72%





73%





67%





73%





77%

































Asset Quality Ratios































Net charge-offs to average loans





(0.01%)





0.00%





0.00%





0.01%





0.02%

Non-performing loans/Total loans





0.43%





0.45%





0.35%





0.34%





0.38%

Non-performing assets/Total assets





0.38%





0.39%





0.30%





0.30%





0.38%

Allowance for loan losses/Total loans





0.94%





0.92%





0.92%





0.90%





0.93%

Allowance for loan losses/Total loans held for

investment (excluding loans at fair value)





0.99%





0.97%





0.97%





0.97%





0.98%

Allowance for loan losses/Non-performing loans





218.64%





204.85%





263.89%





261.83%





241.97%

































Capital Ratios































Book value per common share



$

17.48



$

17.10



$

16.67



$

16.27



$

15.96

Tangible book value per common share



$

16.70



$

16.31



$

15.87



$

15.43



$

15.12

Total equity/Total assets





10.90%





10.98%





11.12%





11.01%





11.55%

Tangible common equity/Tangible assets





10.47%





10.53%





10.64%





10.50%





11.00%

Tier 1 leverage ratio





11.01%





11.16%





10.98%





11.24%





11.65%

Common tier 1 risk-based capital ratio





11.71%





11.72%





11.99%





11.99%





12.32%

Tier 1 risk-based capital ratio





11.71%





11.72%





11.99%





11.99%





12.32%

Total risk-based capital ratio





13.65%





13.66%





13.99%





14.03%





14.41%

 

 





Statements of Income (Unaudited)





Quarter Ended

(Dollars in Thousands)



March 31, 2019



March 31, 2018

Interest Income













Interest and fees on loans



$

11,887



$

9,493

Investments





437





303

Total interest income





12,324





9,796















Interest Expense













Deposits





3,236





1,659

Borrowings





611





445

   Total interest expense





3,847





2,104















Net interest income





8,477





7,692

Provision for loan losses





219





554

Net interest income after provision for loan losses





8,258





7,138















Non-Interest Income













Mortgage banking income





4,908





4,821

Wealth management income





864





1,078

Earnings on investment in life insurance





72





78

Net change in fair value of mortgage related financial instruments





430





33

Service charges





27





32

Other





146





1,014

Total non-interest income





6,447





7,056















Non-Interest Expenses













Salaries and employee benefits





7,727





8,436

Occupancy and equipment





963





960

Loan expenses





468





532

Professional fees





472





479

Advertising and promotion





465





581

Data processing





324





288

Information technology





266





325

Communications





192





246

Other





1,240





715

Total non-interest expenses





12,117





12,562















Income before income taxes





2,588





1,632

Income tax expense





582





362

Net Income



$

2,006



$

1,270















Weighted-average basic shares outstanding





6,407





6,392

Basic earnings per common share



$

0.31



$

0.20















Adjusted weighted-average diluted shares outstanding





6,436





6,426

Diluted earnings per common share



$

0.31



$

0.20

 

 





Statement of Condition (Unaudited)

(Dollars in Thousands)



March 31, 2019



December 31, 2018



September 30, 2018



June 30, 2018



March 31, 2018

Assets































Cash & cash equivalents



$

38,940



$

23,952



$

25,823



$

27,013



$

24,964

Investment securities





63,152





63,169





60,449





54,773





51,372

Mortgage loans held for sale





29,612





37,695





34,044





45,571





30,858

Loans, net of fees and costs





862,372





838,106





806,788





781,622





740,408

Allowance for loan losses





(8,376)





(8,053)





(7,711)





(7,449)





(7,138)

Bank premises and equipment, net





9,276





9,638





9,947





10,207





10,446

Bank owned life insurance





11,641





11,569





11,494





11,420





11,347

Other real estate owned





120

















427

Goodwill and intangible assets





4,978





5,046





5,114





5,359





5,427

Other assets





15,799





16,358





13,973





17,011





15,502

Total Assets



$

1,027,514



$

997,480



$

959,921



$

945,527



$

883,613

































Liabilities & Stockholders' Equity































Liabilities































Non-interest bearing deposits



$

115,464



$

126,150



$

124,855



$

106,942



$

105,576

Interest bearing deposits































Interest checking





112,484





114,610





103,353





110,259





109,914

Money market / savings accounts





286,463





232,653





276,258





215,042





213,282

Certificates of deposit





296,302





278,717





277,461





251,007





250,531

Total interest bearing deposits





695,249





625,980





657,072





576,308





573,727

Total deposits





810,713





752,130





781,927





683,250





679,303

Borrowings





88,264





120,538





50,199





142,176





86,366

Subordinated debt





9,239





9,239





9,308





9,308





9,308

Other liabilities





7,306





6,021





11,784





6,728





6,591

Total Liabilities





915,522





887,928





853,218





841,462





781,568

































Stockholders' Equity





111,992





109,552





106,703





104,065





102,045

Total Liabilities & Stockholders'

Equity



$

1,027,514



$

997,480



$

959,921



$

945,527



$

883,613

 

 





Condensed Statements of Income (Unaudited)





Three Months Ended

(Dollars in Thousands)



March 31, 2019



December 31, 2018



September 30, 2018



June 30, 2018



March 31, 2018

Interest income



$

12,324



$

11,886



$

11,573



$

10,809



$

9,796

Interest expense





3,847





3,445





3,195





2,663





2,104

Net interest income





8,477





8,441





8,378





8,146





7,692

Provision for credit losses





219





319





291





413





554

Non-interest income





6,447





7,464





9,167





8,668





7,056

Non-interest expense





12,117





12,556





13,753





14,074





12,562

Income before income tax expense





2,588





3,030





3,501





2,327





1,632

Income tax expense





582





666





774





525





362

Net Income



$

2,006



$

2,364



$

2,727



$

1,802



$

1,270

































Weighted-average basic shares

outstanding





6,407





6,407





6,402





6,395





6,392

Basic earnings per common share



$

0.31



$

0.37



$

0.43



$

0.28



$

0.20

































Adjusted weighted-average diluted

shares outstanding





6,436





6,433





6,430





6,425





6,426

Diluted earnings per common share



$

0.31



$

0.37



$

0.42



$

0.28



$

0.20

 

 

Cision View original content:http://www.prnewswire.com/news-releases/meridian-corporation-reports-net-income-of-2-0-million-or-0-31-per-diluted-share-in-1q-2019--300856413.html

SOURCE Meridian Corporation

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