Meridian (MRBK) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1 Financial Statements (Unaudited) Unaudited Q2 2025 financials show total assets at $2.51 billion and net income at $5.6 million, driven by loan growth Consolidated Financial Statements Consolidated financial statements show total assets grew to $2.51 billion and Q2 2025 net income rose to $5.6 million, driven by loan growth Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,510,938 | $2,385,867 | | Loans and other finance receivables, net | $2,087,399 | $2,011,999 | | Total Deposits | $2,110,374 | $2,005,368 | | Total Liabilities | $2,332,918 | $2,214,345 | | Total Stockholders' Equity | $178,020 | $171,522 | Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $21,159 | $16,846 | $40,935 | $33,455 | | Provision for credit losses | $3,803 | $2,680 | $9,015 | $5,546 | | Net Income | $5,592 | $3,326 | $7,991 | $6,002 | | Diluted EPS | $0.49 | $0.30 | $0.70 | $0.54 | Consolidated Cash Flow Highlights - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $6,072 | $(20,915) | | Net cash used in investing activities | $(100,549) | $(113,333) | | Net cash provided by financing activities | $117,189 | $101,609 | | Net change in cash and cash equivalents | $22,712 | $(32,639) | Notes to Consolidated Financial Statements Notes detail accounting policies, financial instruments, and segment performance, with loan portfolio at $2.1 billion and ACL at $20.9 million - The investment portfolio's temporary impairment is primarily due to market interest rate changes, and the Corporation does not anticipate needing to sell these securities before recovery, thus no Allowance for Credit Losses (ACL) was deemed warranted[37] Loan Portfolio Composition (in thousands) | Loan Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Commercial mortgage | $855,465 | $823,976 | | Construction | $285,231 | $259,553 | | Commercial and industrial | $404,011 | $367,366 | | Small business loans | $144,655 | $155,775 | | Leases, net | $57,822 | $75,987 | | Other | $357,250 | $343,635 | | Total Loans | $2,104,434 | $2,026,292 | Allowance for Credit Losses (ACL) Roll-Forward - Six Months Ended June 30, 2025 (in thousands) | | Amount | | :--- | :--- | | Beginning Balance (Jan 1, 2025) | $18,438 | | Charge-offs | $(6,987) | | Recoveries | $555 | | Provision for credit losses | $8,845 | | Ending Balance (June 30, 2025) | $20,851 | - The company sold approximately $979 thousand of residential mortgage loan servicing rights (MSRs) associated with $110.2 million of serviced loans during the first six months of 2025, significantly reducing its MSR asset balance[85] Segment Income Before Taxes (in thousands) | Segment | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Bank | $5,202 | $3,171 | $8,848 | $6,711 | | Wealth | $604 | $676 | $1,332 | $1,154 | | Mortgage | $1,481 | $545 | $252 | $80 | | Total | $7,287 | $4,392 | $10,432 | $7,945 | Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights significant improvements in Q2 2025 financial performance, driven by increased net interest income Executive Overview Executive overview summarizes H1 2025 financial achievements, including total assets growth to $2.5 billion and Q2 net income of $5.6 million - Key financial highlights for the first six months of 2025 compared to year-end 2024 include: - Total assets increased by $125.1 million (5.2%) to $2.5 billion - Portfolio loans grew by $78.1 million (3.9%) to $2.1 billion - Total deposits increased by $105.0 million (5.2%) to $2.1 billion[146] - Operational performance for Q2 2025 compared to Q2 2024 showed strong improvement: - Net income increased by $2.3 million (68.1%) to $5.6 million - Net interest income grew by $4.3 million (25.6%) to $21.2 million - Net interest margin expanded to 3.54% from 3.06%[146] Net Interest Income Net interest income significantly increased in H1 2025 due to favorable rate and volume changes, expanding net interest margin to 3.54% Net Interest Margin Analysis | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Yield on Interest-Earning Assets | 6.89% | 6.98% | 6.86% | 6.94% | | Cost of Interest-Bearing Liabilities | 3.96% | 4.60% | 3.98% | 4.55% | | Net Interest Spread | 2.93% | 2.38% | 2.88% | 2.39% | | Net Interest Margin | 3.54% | 3.06% | 3.50% | 3.08% | - For Q2 2025 vs Q2 2024, the $4.3 million increase in net interest income was driven by a $2.5 million positive impact from rate changes and a $1.8 million positive impact from volume changes, with the primary driver being a significant decrease in interest expense on deposits due to lower rates[158][160][162] Asset Quality and Balance Sheet Balance sheet grew to $2.5 billion, fueled by loan growth, while asset quality slightly weakened with non-performing assets rising to 2.14% - The provision for credit losses increased by $1.1 million in Q2 2025 and $3.5 million in the first six months of 2025 compared to the prior year periods, driven by provisioning for loan growth, charge-offs, and adjustments for macro-economic uncertainty[168][169] Non-Performing Assets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total nonaccrual loans and leases | $50,534 | $45,125 | | Other real estate owned (OREO) | $719 | $159 | | Repossessed assets | $2,429 | $117 | | Total non-performing assets | $53,682 | $45,401 | | Non-performing assets to total assets | 2.14% | 1.90% | - The increase in non-performing loans to $50.5 million was primarily due to risk rating downgrades in the SBA and residential mortgage portfolios, partially offset by a $4.7 million decline in non-performing commercial loans following foreclosures[187] - Total deposits grew by $105.0 million (5.2%) since year-end 2024, with a notable shift from noninterest-bearing deposits (down $3.8 million) to interest-bearing deposits (up $108.8 million) as customers sought higher yields[182] Capital and Liquidity The Corporation maintains a strong capital and liquidity position, with stockholders' equity at $178.0 million and robust capital ratios Bank Capital Ratios | Ratio | June 30, 2025 | Well-Capitalized Minimum | | :--- | :--- | :--- | | Tier 1 leverage ratio | 9.32% | 5.00% | | Common tier 1 risk-based capital ratio | 10.53% | 6.50% | | Tier 1 risk-based capital ratio | 10.53% | 8.00% | | Total risk-based capital ratio | 11.54% | 10.00% | - The company has access to significant liquidity sources, including a maximum borrowing capacity of $710.4 million with the FHLB and $56.0 million in unsecured federal funds lines[194] - A quarterly cash dividend of $0.125 per common share was declared on July 24, 2025[184] Item 3 Quantitative and Qualitative Disclosures about Market Risk Market risk, primarily interest rate risk, is managed using simulation models to assess impact on Net Interest Income and Economic Value of Equity Net Interest Income (NII) Sensitivity Analysis | Change in Market Interest Rates (over 12 months) | % Change in NII (June 30, 2025) | | :--- | :--- | | +300 basis points | 0.39% | | +200 basis points | 0.49% | | +100 basis points | 0.39% | | -100 basis points | (0.54)% | | -200 basis points | (0.93)% | Economic Value of Equity (EVE) Sensitivity Analysis | Instantaneous Change in Market Interest Rates | % Change in EVE (June 30, 2025) | | :--- | :--- | | +300 basis points | 6% | | +200 basis points | 6% | | +100 basis points | 4% | | -100 basis points | (7)% | | -200 basis points | (19)% | Item 4 Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of June 30, 2025[217] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Corporation's internal controls[218] PART II OTHER INFORMATION Item 1 Legal Proceedings The Corporation reported no legal proceedings during the period - There are no legal proceedings to report[220] Item 1A Risk Factors No material changes to risk factors have occurred since the filing of the 2024 Form 10-K - No material changes in risk factors have occurred since the filing of the 2024 Form 10-K[220] Item 2, 3, 4, 5 Other Information The Corporation reported no unregistered sales of equity securities, no defaults upon senior securities, or other material information - The company reports 'None' for Unregistered Sales of Equity Securities, Defaults Upon Senior Securities, and Other Information, and Mine Safety Disclosures are not applicable[221] Item 6 Exhibits This section provides an index of exhibits filed with the report, including certifications and XBRL data files