Meridian (MRBK) - 2025 Q1 - Quarterly Report

Part I - Financial Information This section presents the unaudited financial statements, management's discussion, market risk disclosures, and internal controls Financial Statements (Unaudited) This section presents Meridian Corporation's unaudited consolidated financial statements, detailing financial position, performance, and cash flows Consolidated Balance Sheets This section details the company's financial position, including assets, liabilities, and equity, at specific quarter-end dates Consolidated Balance Sheet Highlights (in millions USD) | Financial Metric | March 31, 2025 (USD) | December 31, 2024 (USD) | | :--- | :--- | :--- | | Total Assets | $2,528.9 million | $2,385.9 million | | Loans, net of ACL | $2,050.8 million | $2,012.0 million | | Total Deposits | $2,128.7 million | $2,005.4 million | | Total Liabilities | $2,355.3 million | $2,214.3 million | | Total Stockholders' Equity | $173.6 million | $171.5 million | Consolidated Statements of Income This section presents the company's revenues, expenses, and net income over the quarter, reflecting its operational profitability Consolidated Statements of Income Highlights (in millions USD) | Financial Metric | Q1 2025 (USD) | Q1 2024 (USD) | | :--- | :--- | :--- | | Net Interest Income | $19.8 million | $16.6 million | | Provision for Credit Losses | $5.2 million | $2.9 million | | Total Non-interest Income | $7.3 million | $8.0 million | | Total Non-interest Expense | $18.7 million | $18.2 million | | Net Income | $2.4 million | $2.7 million | | Diluted EPS | $0.21 | $0.24 | Consolidated Statements of Cash Flows This section details the sources and uses of cash across operating, investing, and financing activities for the period - Net cash provided by operating activities was $18.1 million in Q1 2025, a significant improvement from a net use of $1.7 million in Q1 2024[22] - Net cash used in investing activities decreased to $51.8 million in Q1 2025 from $78.7 million in Q1 2024, primarily due to a lower net increase in loans[22] - Net cash from financing activities increased substantially to $137.5 million in Q1 2025 from $46.8 million in Q1 2024, driven by a large net increase in deposits[22] Notes to Consolidated Financial Statements These notes provide detailed disclosures on accounting policies, financial statement items, and segment performance, offering deeper insights - The investment portfolio's unrealized loss position of $9.5 million on available-for-sale securities is primarily due to changes in market interest rates, and management does not believe an allowance for credit losses is warranted for these securities[35][36] - Nonaccrual loans increased to $51.8 million as of March 31, 2025, from $45.1 million at December 31, 2024, mainly due to risk rating downgrades in the SBA loan portfolio[54] - The Allowance for Credit Losses (ACL) increased to $20.8 million at March 31, 2025, from $18.4 million at year-end 2024, with a provision of $5.2 million recorded for the quarter[57] - The company utilizes interest rate swaps as cash flow hedges to manage interest rate risk on borrowings and as fair value hedges on certain residential mortgage loans[124][125] Segment Income (Loss) Before Taxes (Q1 2025, in millions USD) | Segment (Q1 2025) | Income (Loss) Before Taxes (USD) | | :--- | :--- | | Banking | $3.6 million | | Wealth Management | $0.7 million | | Mortgage | ($1.2 million) | Management's Discussion and Analysis (MD&A) Management discusses the company's financial condition, operational results, asset quality, and capital, highlighting key drivers and trends Financial Condition This section analyzes the company's balance sheet, focusing on changes in assets, liabilities, and equity over the period - Total assets increased by $143.0 million (6.0%) to $2.5 billion from December 31, 2024, to March 31, 2025[141] - Portfolio loans grew by $42.0 million (2.1%), driven by increases in commercial real estate ($21.2 million) and construction loans ($18.3 million)[141][164] - Total deposits grew by $123.4 million (6.2%), highlighted by a significant $82.6 million (34.3%) increase in non-interest bearing deposits[141][166] Results of Operations This section analyzes the company's income statement, detailing revenue, expenses, and profitability drivers for the quarter Key Operating Results (in millions USD, except EPS and percentages) | Metric | Q1 2025 (USD) | Q1 2024 (USD) | | :--- | :--- | :--- | | Net Income | $2.4 million | $2.7 million | | Diluted EPS | $0.21 | $0.24 | | Return on Average Assets | 0.40% | 0.47% | | Return on Average Equity | 5.57% | 6.73% | - Net interest income increased 19.1% YoY to $19.8 million, and the net interest margin expanded to 3.46% from 3.09%, largely due to lower deposit and borrowing costs[145][155] - The provision for credit losses increased by $2.3 million YoY, driven by loan growth, charge-offs, and unfavorable changes in macroeconomic forecasts[157] - Non-interest income decreased 8.3% YoY to $7.3 million, primarily due to declines in mortgage banking income (-$0.241 million) and SBA loan income (-$0.238 million)[145][159] - Non-interest expense increased 3.1% YoY to $18.7 million, mainly from a $0.812 million rise in salaries and employee benefits[145][161] Asset Quality This section assesses the quality of the company's loan portfolio and other assets, including non-performing assets and credit loss allowances - The ratio of non-performing assets to total assets increased to 2.07% at March 31, 2025, from 1.90% at December 31, 2024[172][177] - Total non-performing loans rose by $7.1 million to $52.2 million since year-end, largely due to downgrades in the SBA loan portfolio[172] - The allowance for credit losses as a percentage of total loans (excluding fair value loans) increased to 1.01% from 0.91% at year-end 2024[174] Capital and Liquidity This section evaluates the company's capital adequacy and liquidity position, crucial for financial stability and operational resilience - The Bank remains well-capitalized, with a Tier 1 leverage ratio of 9.30% as of March 31, 2025, well above the 5.00% regulatory minimum[171] - Stockholders' equity was $173.6 million, representing 6.9% of total assets[169] - The company maintains access to approximately $640.5 million in liquidity from various sources, including the FHLB and other correspondent banks[179] Market Risk Disclosures The company assesses interest rate risk through simulations of Net Interest Income (NII) and Economic Value of Equity (EVE), indicating sensitivity to rate changes Net Interest Income (NII) Sensitivity Simulation (12-month ramp) | NII Simulation (12-month ramp) | % Change in NII | | :--- | :--- | | +100 basis points | +0.94% | | -100 basis points | -1.12% | Economic Value of Equity (EVE) Sensitivity Simulation (Immediate shock) | EVE Simulation (Immediate shock) | % Change in EVE | | :--- | :--- | | +100 basis points | +5% | | -100 basis points | -9% | Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[204] - No changes in internal control over financial reporting were identified that have materially affected, or are reasonably likely to materially affect, the Corporation's internal controls[205] Part II - Other Information This section confirms no new legal proceedings, no material changes to risk factors, and no unregistered equity sales or senior security defaults - The company reports no legal proceedings for the period[207] - There have been no material changes in risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[207]