Meridian (MRBK) - 2025 Q1 - Quarterly Results

Financial Highlights and CEO Commentary The company reported Q1 2025 results, highlighting strong PPNR growth despite lower net income and providing CEO commentary on key business drivers Q1 2025 Financial Highlights The company reported Q1 2025 net income of $2.4 million, with strong PPNR growth offset by lower earnings compared to prior periods Q1 2025 Key Financial Metrics | (Dollars in thousands, except per share data) | March 31, 2025 | December 31, 2024 | March 31, 2024 | |---|---|---|---| | Net income | $2,399 | $5,600 | $2,676 | | Diluted earnings per common share | $0.21 | $0.49 | $0.24 | | Pre-provision net revenue (PPNR) (Non-GAAP) | $8,357 | $11,167 | $6,419 | - The Board of Directors declared a quarterly cash dividend of $0.125 per common share, payable May 19, 2025[7] - Key performance metrics for Q1 2025 include a 3.46% net interest margin, $2.5 billion in total assets, 3% quarterly commercial loan growth, and 6% quarterly deposit growth[7] CEO Commentary The CEO noted strong PPNR growth and improved net interest margin, despite earnings being impacted by higher provisions for distressed SBA loans - Q1 2025 earnings were negatively affected by higher provisioning for distressed SBA loans, which have been impacted by dramatic rate rises[2] - The net interest margin showed consistent improvement, reaching 3.46% in Q1 2025[2] - Annualized loan growth was 12% in the first quarter, with commercial/industrial lending benefiting from strategic hiring[3] - Meridian Wealth Partners continued its strong performance, with pre-tax income of $726 thousand for the quarter[4] - The mortgage group experienced a larger pre-tax loss compared to Q1 2024, primarily due to lower volume and a reduced number of loan officers[5] Financial Performance Analysis This section details the quarter-over-quarter changes in the income statement and balance sheet, analyzing key drivers of performance Income Statement Analysis (Q1 2025 vs Q4 2024) Net income decreased to $2.4 million, driven by lower non-interest income and higher credit provisions, partially offset by improved net interest income Net Interest Income Net interest income rose to $19.8 million, with the net interest margin expanding to 3.46% due to a lower cost of deposits - Net interest income increased by $477 thousand quarter-over-quarter[10] - The net interest margin increased by 17 basis points to 3.46% as the cost of funds declined[14] - The overall cost of deposits dropped by 21 basis points, and total interest expense decreased by $1.3 million[13] Provision for Credit Losses The provision for credit losses increased by $1.6 million to $5.2 million, driven by a rise in non-performing SBA loans - The provision for credit losses increased by $1.6 million to $5.2 million in Q1 2025[15] - The increase was driven by a $7.1 million rise in non-performing loans, leading to a $2.3 million increase in specific reserves[15] Non-interest Income Non-interest income fell by 44.8% to $7.3 million, primarily due to a non-recurring gain on MSR sales in the prior quarter Non-interest Income Breakdown | (Dollars in thousands) | Q1 2025 | Q4 2024 | $ Change | % Change | |---|---|---|---|---| | Mortgage banking income | $3,393 | $5,516 | $(2,123) | (38.5)% | | Net (loss) gain on sale of MSRs | $(52) | $3,992 | $(4,044) | (101.3)% | | SBA loan income | $748 | $1,143 | $(395) | (34.6)% | | Total non-interest income | $7,324 | $13,279 | $(5,955) | (44.8)% | - SBA loan sales totaled $12.1 million, a decrease of $7.8 million (39.1%) from the previous quarter, leading to lower SBA loan income[17] Non-interest Expense Non-interest expense decreased by 12.5% to $18.7 million, driven by lower salary and occupancy costs Non-interest Expense Breakdown | (Dollars in thousands) | Q1 2025 | Q4 2024 | $ Change | % Change | |---|---|---|---|---| | Salaries and employee benefits | $11,385 | $12,429 | $(1,044) | (8.4)% | | Occupancy and equipment | $1,338 | $2,270 | $(932) | (41.1)% | | Professional fees | $763 | $1,134 | $(371) | (32.7)% | | Total non-interest expense | $18,743 | $21,411 | $(2,668) | (12.5)% | Balance Sheet Analysis (March 31, 2025 vs Dec 31, 2024) Total assets grew 6.0% to $2.5 billion, driven by loan growth and a significant temporary customer deposit - Total assets increased by $142.7 million (6.0%) to $2.5 billion, partly due to a temporary $103 million deposit from a customer[20] - Portfolio loan growth was $42.0 million (2.1%), driven by increases in commercial mortgage ($21.2M), construction ($18.3M), and small business loans ($5.3M)[21] - Total deposits grew by $123.4 million (6.2%), led by an $82.6 million increase in non-interest bearing deposits[22] - Total stockholders' equity increased by $1.7 million to $173.3 million, after accounting for net income of $2.4 million and dividends paid of $1.4 million[23] Asset Quality Asset quality deteriorated as non-performing loans rose to 2.49% of total loans, though net charge-offs decreased - Non-performing loans increased by $7.1 million to $52.2 million at March 31, 2025, compared to the prior quarter[24] - The ratio of non-performing loans to total loans rose to 2.49% from 2.19% quarter-over-quarter, led by a $6.9 million increase in non-performing SBA loans[25] - Net charge-offs as a percentage of total average loans decreased to 0.14% for Q1 2025, down from 0.34% in Q4 2024[26] - The allowance for credit losses to total loans increased to 1.01% from 0.91% at the end of the prior quarter[27] Financial Statements and Ratios This section presents key financial statements and performance ratios for the company over recent periods Key Financial Data and Ratios Key ratios for Q1 2025 show decreased profitability and deteriorating asset quality, but an improved net interest margin Selected Financial Ratios | (Annualized Ratios) | Q1 2025 | Q4 2024 | Q1 2024 | |---|---|---|---| | Return on average assets | 0.40% | 0.92% | 0.47% | | Return on average equity | 5.57% | 13.01% | 6.73% | | Net interest margin (tax-equivalent) | 3.46% | 3.29% | 3.09% | | Non-performing loans to total loans | 2.49% | 2.19% | 1.93% | Condensed Consolidated Statements of Income The company reported net income of $2.4 million on total revenues of $27.1 million for the first quarter of 2025 Income Statement Summary | (Dollars in thousands) | Q1 2025 | Q4 2024 | Q1 2024 | |---|---|---|---| | Net interest income | $19,776 | $19,299 | $16,609 | | Provision for credit losses | $5,212 | $3,572 | $2,866 | | Total non-interest income | $7,324 | $13,279 | $7,984 | | Total non-interest expense | $18,743 | $21,411 | $18,174 | | Net income | $2,399 | $5,600 | $2,676 | Condensed Consolidated Statements of Condition (Balance Sheet) The balance sheet shows total assets of $2.53 billion and total stockholders' equity of $173.3 million as of March 31, 2025 Balance Sheet Summary | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | |---|---|---| | Total assets | $2,528,586 | $2,385,867 | | Loans and other finance receivables, net | $2,050,848 | $2,011,999 | | Total deposits | $2,128,742 | $2,005,368 | | Total liabilities | $2,355,320 | $2,214,345 | | Total stockholders' equity | $173,266 | $171,522 | Segment Information The Bank and Wealth segments remained profitable in Q1 2025, while the Mortgage segment reported a wider pre-tax loss Segment Pre-Tax Income | Income (loss) before income taxes (in thousands) | Q1 2025 | Q1 2024 | |---|---|---| | Bank | $3,648 | $3,540 | | Wealth | $726 | $478 | | Mortgage | $(1,229) | $(465) | | Total | $3,145 | $3,553 | Appendix: Non-GAAP Measures This appendix provides reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures Non-GAAP Reconciliations Reconciliations show Q1 2025 PPNR of $8.4 million and a tangible book value per share of $15.03 Reconciliation of Pre-Provision Net Revenue (Non-GAAP) | (Dollars in thousands) | Q1 2025 | Q4 2024 | Q1 2024 | |---|---|---|---| | Income before income tax expense (GAAP) | $3,145 | $7,595 | $3,553 | | Provision for credit losses | $5,212 | $3,572 | $2,866 | | Pre-provision net revenue (Non-GAAP) | $8,357 | $11,167 | $6,419 | Reconciliation of Tangible Book Value per Common Share (Non-GAAP) | (Per share data) | March 31, 2025 | December 31, 2024 | |---|---|---| | Book value per common share (GAAP) | $15.35 | $15.26 | | Tangible book value per common share (Non-GAAP) | $15.03 | $14.93 | - The Tangible Common Equity to Tangible Assets ratio for the Corporation was 6.72% as of March 31, 2025, down from 7.05% at the end of the prior quarter[43]