Meridian (MRBK) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Highlights Overview of Q2 2025 Performance Meridian Corporation's Q2 2025 net income surged to $5.6 million, a 133% increase, driven by improved net interest margin and strong loan sales Key Financial Highlights (Dollars in thousands) | (Dollars in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | | Net income | $ 5,592 | $ 2,399 | $ 3,326 | | Diluted earnings per common share | $ 0.49 | $ 0.21 | $ 0.30 | | Pre-provision net revenue (PPNR) | $ 11,090 | $ 8,357 | $ 7,072 | - CEO Christopher J. Annas highlighted that the strong Q2 earnings were driven by improving margin, SBA loan sales, and mortgage seasonality. PPNR increased 33% quarter-over-quarter, reflecting healthy business growth and good expense control[2] - Management is intensely focused on reducing nonperforming loans, though the process is expected to be slow. The company forecasts annual loan growth in the 8-10% range[2] - Business unit performance was solid, with Meridian Wealth Partners reporting pre-tax income of $604 thousand and the mortgage team showing a significant turnaround from the first quarter despite low housing inventory[3] Dividend Declaration The Board of Directors declared a quarterly cash dividend of $0.125 per common share, payable in August 2025 - A quarterly cash dividend of $0.125 per common share was declared on July 24, 2025, payable on August 18, 2025, to shareholders of record as of August 11, 2025[4] Financial Performance Analysis (Q2 2025 vs. Q1 2025) Income Statement Analysis Net income for Q2 2025 surged by $3.2 million (133.1%) to $5.6 million, driven by improved net interest income and reduced credit loss provision - The $3.2 million (133.1%) quarter-over-quarter increase in net income was driven by improvements in net interest income (+$1.4 million), a lower provision for credit losses (-$1.4 million), and higher non-interest income (+$4.0 million)[7] Net Interest Income Net interest income grew by $1.4 million QoQ, with net interest margin expanding by 8 basis points to 3.54%, driven by increased earning assets - The net interest margin increased by 8 basis points to 3.54% in Q2 2025, as the yield on earning assets increased and the cost of funds declined[13] - Interest income increased by $2.0 million QoQ, mainly due to a $74.7 million increase in average interest-earning assets, which contributed $1.7 million to the rise[10] - Average total loans grew by $73.6 million, led by increases in commercial, commercial real estate, and construction loans[11] - Interest expense rose by $660 thousand due to higher volumes of deposits and borrowings, but the overall cost of deposits dropped by 5 basis points[12] Provision for Credit Losses The provision for credit losses decreased by $1.4 million to $3.8 million in Q2 2025, due to lower non-performing loans and slower loan growth - The provision for credit losses decreased from $5.2 million in Q1 2025 to $3.8 million in Q2 2025, due to a decline in non-performing loans, a decrease in required specific reserves, and lower loan growth during the quarter[14] Non-interest Income Non-interest income significantly rose by $4.0 million (54.1%) to $11.3 million, driven by improved mortgage banking and SBA loan income Non-interest Income (Dollars in thousands) | (Dollars in thousands) | Q2 2025 | Q1 2025 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Mortgage banking income | $ 5,762 | $ 3,393 | $ 2,369 | 69.8% | | SBA loan income | $ 1,988 | $ 748 | $ 1,240 | 165.8% | | Net gain (loss) on sale of MSRs | $ 467 | $ (52) | $ 519 | (998.1)% | | Total non-interest income | $ 11,288 | $ 7,324 | $ 3,964 | 54.1% | - SBA loan income increased by $1.2 million as the volume of SBA loans sold rose by $27.4 million to $39.5 million for the quarter[16] Non-interest Expense Non-interest expense increased by $2.6 million (13.9%) to $21.4 million, primarily due to higher salaries and benefits Non-interest Expense (Dollars in thousands) | (Dollars in thousands) | Q2 2025 | Q1 2025 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $ 13,179 | $ 11,385 | $ 1,794 | 15.8% | | Professional fees | $ 1,164 | $ 763 | $ 401 | 52.6% | | Advertising and promotion | $ 1,277 | $ 779 | $ 498 | 63.9% | | Occupancy and equipment | $ 1,037 | $ 1,338 | $ (301) | (22.5)% | | Total non-interest expense | $ 21,357 | $ 18,743 | $ 2,614 | 13.9% | Balance Sheet Analysis Total assets slightly decreased by $18.0 million to $2.5 billion, primarily due to a cash reduction, despite growth in portfolio loans - Total assets decreased by $18.0 million (0.7%) to $2.5 billion, primarily due to an $84.7 million decrease in cash after a temporary deposit of $103 million was withdrawn[18] - Portfolio loans grew by $36.2 million (1.7%), led by a $32.0 million increase in commercial & industrial loans, partially offset by a $16.4 million decrease in SBA loan balances due to sales[19] - Total deposits decreased by $18.4 million (0.9%), as an $86.4 million decline in non-interest bearing deposits was largely offset by a $68.1 million increase in interest-bearing deposits[20] - Total stockholders' equity increased by $4.5 million to $178.0 million, driven by net income of $5.6 million less dividends paid of $1.4 million[21] Asset Quality Asset quality improved as non-performing loans decreased by $1.7 million to $50.5 million, lowering the NPL to total loans ratio to 2.35% - Non-performing loans decreased by $1.7 million to $50.5 million at June 30, 2025, improving the ratio of non-performing loans to total loans to 2.35% from 2.49%[22] - Net charge-offs increased to $3.6 million (0.17% of total average loans) for Q2 2025, compared to $2.8 million (0.14%) in the previous quarter, mainly from SBA loans and equipment leases[23] - The allowance for credit losses to total loans held for investment was 1.00%, relatively flat from the prior quarter, with specific reserves decreasing by $1.7 million to $3.3 million[24] Consolidated Financial Statements (Unaudited) Select Condensed Financial Information This section provides a five-quarter overview of key financial data, highlighting Q2 2025 net income of $5.6 million as a significant recovery Select Condensed Financial Information (Dollars in thousands) | (Dollars in thousands) | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net income | $ 5,592 | $ 2,399 | $ 5,600 | $ 4,743 | $ 3,326 | | Total assets | $ 2,510,938 | $ 2,528,888 | $ 2,385,867 | $ 2,387,721 | $ 2,351,584 | | Loans, net | $ 2,108,250 | $ 2,071,675 | $ 2,030,437 | $ 2,008,396 | $ 1,988,535 | | Total deposits | $ 2,110,374 | $ 2,128,742 | $ 2,005,368 | $ 1,978,927 | $ 1,915,436 | | Stockholders' equity | $ 178,020 | $ 173,568 | $ 171,522 | $ 167,450 | $ 162,382 | | Return on average assets | 0.90 % | 0.40 % | 0.92 % | 0.80 % | 0.58 % | | Return on average equity | 12.68 % | 5.57 % | 13.01 % | 11.41 % | 8.25 % | Financial Ratios This section presents detailed performance, asset quality, and capital ratios, showing improvements in net interest margin to 3.54% and efficiency ratio to 65.82% Key Financial Ratios | Ratio | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Return on average assets | 0.90 % | 0.40 % | 0.58 % | | Return on average equity | 12.68 % | 5.57 % | 8.25 % | | Net interest margin (tax-equivalent) | 3.54 % | 3.46 % | 3.06 % | | Efficiency ratio | 65.82 % | 69.16 % | 72.89 % | | Non-performing loans to total loans | 2.35 % | 2.49 % | 1.84 % | | Book value per common share | $ 15.76 | $ 15.38 | $ 14.51 | Condensed Consolidated Statements of Income Presents detailed income statements for Q2 2025 and Q2 2024, showing Q2 2025 net income of $5.6 million Condensed Consolidated Statements of Income (Dollars in thousands) | (Dollars in thousands) | Three Months Ended Jun 30, 2025 | Three Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2025 | Six Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $ 21,159 | $ 16,846 | $ 40,935 | $ 33,455 | | Provision for credit losses | $ 3,803 | $ 2,680 | $ 9,015 | $ 5,546 | | Total non-interest income | $ 11,288 | $ 9,244 | $ 18,612 | $ 17,228 | | Total non-interest expense | $ 21,357 | $ 19,018 | $ 40,100 | $ 37,192 | | Net income | $ 5,592 | $ 3,326 | $ 7,991 | $ 6,002 | | Diluted EPS | $ 0.49 | $ 0.30 | $ 0.70 | $ 0.54 | Condensed Consolidated Statements of Condition (Balance Sheet) Details assets, liabilities, and equity, showing $2.51 billion in total assets and $178.0 million in stockholders' equity as of June 30, 2025 Condensed Consolidated Statements of Condition (Dollars in thousands) | (Dollars in thousands) | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Total assets | $ 2,510,938 | $ 2,528,888 | $ 2,351,584 | | Cash and cash equivalents | $ 50,174 | $ 131,225 | $ 24,058 | | Loans, net of allowance | $ 2,087,399 | $ 2,050,848 | $ 1,966,832 | | Total liabilities | $ 2,332,918 | $ 2,355,320 | $ 2,189,202 | | Total deposits | $ 2,110,374 | $ 2,128,742 | $ 1,915,436 | | Total stockholders' equity | $ 178,020 | $ 173,568 | $ 162,382 | Segment Information Breaks down financial performance by Bank, Wealth, and Mortgage segments, with the Bank segment contributing $5.2 million to pre-tax income in Q2 2025 Segment Performance (Dollars in thousands) | (dollars in thousands) | Bank | Wealth | Mortgage | Total | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, 2025 | | | | | | Net interest income | $ 21,025 | $ 63 | $ 71 | $ 21,159 | | Non-interest income | $ 3,029 | $ 1,492 | $ 6,767 | $ 11,288 | | Non-interest expense | $ 15,049 | $ 951 | $ 5,357 | $ 21,357 | | Income before income taxes | $ 5,202 | $ 604 | $ 1,481 | $ 7,287 | | Three Months Ended June 30, 2024 | | | | | | Income before income taxes | $ 3,171 | $ 676 | $ 545 | $ 4,392 | Appendix: Non-GAAP Measures Pre-Provision Net Revenue (PPNR) Reconciliation Reconciles income before income tax expense to PPNR, showing Q2 2025 PPNR of $11.1 million, a significant increase from the prior quarter Pre-Provision Net Revenue (PPNR) Reconciliation (Dollars in thousands) | (Dollars in thousands) | Three Months Ended Jun 30, 2025 | Three Months Ended Mar 31, 2025 | Three Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Income before income tax expense | $ 7,287 | $ 3,145 | $ 4,392 | | Provision for credit losses | $ 3,803 | $ 5,212 | $ 2,680 | | Pre-provision net revenue | $ 11,090 | $ 8,357 | $ 7,072 | Tangible Capital & Book Value Reconciliations Reconciles GAAP measures to non-GAAP tangible counterparts, showing a tangible common equity to tangible assets ratio of 6.96% and tangible book value per common share of $15.44 Tangible Capital & Book Value Reconciliations | (Corporation) | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Tangible common equity to tangible assets ratio | 6.96 % | 6.73 % | 6.76 % | | Tangible book value per common share | $ 15.44 | $ 15.06 | $ 14.17 |