MALVERN, PA — Meridian Corporation (Nasdaq: MRBK) has announced its financial results for the second quarter of 2024, showing a significant improvement in earnings and declaring a quarterly dividend of $0.125 per common share. The corporation’s performance highlights robust growth in its core business areas and strategic management decisions that have contributed to its financial health.
Strong Financial Performance
Meridian’s net income for the second quarter surged by 24.3% compared to the first quarter, reaching $3.3 million, or $0.30 per share. This growth was fueled by an increase in net interest income and a seasonal rise in net operating income from the mortgage division. Key highlights include a steady net interest margin at 3.06% for the quarter and a notable profit in the mortgage segment.
Christopher J. Annas, Chairman and CEO, stated, “Our second quarter earnings showed significant improvement from the first quarter, increasing by 24.3% to $3.3 million, or $0.30 per share.” Annas highlighted the steady net interest margin and the strong performance in real estate loan growth, particularly in residential and multi-family sectors.
Loan Growth and Market Conditions
Total loan growth in the first half of 2024 was 6.5%, driven by new relationships and market disruptions. The Philadelphia metro region remains robust, with a continued shortage of homes for sale. Annas noted that the U.S. needs 5 million more homes to meet national demand, a shortage also evident in the Philadelphia region.
“Meridian continues to gain market share in our region,” Annas said. Despite challenges posed by rising interest rates, the core businesses have remained healthy. The company is optimistic about its prospects and the generally stable economic landscape.
Detailed Income and Expense Analysis
Net interest income increased by $237 thousand, or 1.4%, on a tax-equivalent basis. This was largely due to commercial loan fees, which boosted overall interest income. Non-interest income rose by $1.3 million, or 15.8%, reflecting an improved level of mortgage banking income. However, non-interest expense increased by $844 thousand, or 4.6%, primarily due to higher salaries and benefits, loan expenses, and advertising costs.
Interest income grew by $1.2 million quarter-over-quarter on a tax-equivalent basis, driven by higher levels of average earning assets. Average total loans, excluding residential loans for sale, increased by $28.5 million, resulting in a $517 thousand rise in interest income. The largest contributors to this growth were commercial, commercial real estate, and small business loans.
Total interest expense increased by $1.0 million quarter-over-quarter, mainly due to higher levels of deposits, particularly time deposits. The cost of deposits rose by 14 basis points to 3.98%, leading to a $377 thousand increase in interest expense.
Credit Loss Provisions and Asset Quality
The overall provision for credit losses decreased by $186 thousand to $2.7 million in the second quarter. This reduction was driven by a decrease in specific reserves on individually evaluated loans and favorable changes in certain portfolio baseline loss rates and macroeconomic factors.
Non-performing assets decreased by $604 thousand to $37.6 million as of June 30, 2024. The ratio of non-performing loans to total loans decreased to 1.84%, and the ratio of non-performing assets to total assets dropped to 1.68%. These changes were primarily due to charge-offs and principal paydowns on non-performing commercial loans.
Balance Sheet Strength
Total assets increased by $58.7 million, or 2.6%, to $2.4 billion as of June 30, 2024. This growth was driven by strong loan growth and an increase in investments. Portfolio loan growth was $33.1 million, or 1.7%, quarter-over-quarter, with significant contributions from commercial and industrial loans.
Total deposits grew by $14.7 million, or 0.8%, quarter-over-quarter, largely due to higher levels of certificates of deposits. Time deposits increased by $12.5 million, or 1.6%, from mostly wholesale efforts. Overnight borrowings rose by $41.5 million, or 28.4%, in support of loan growth, particularly residential mortgage loans available for sale.
Equity and Capital Position
Total stockholders’ equity increased by $2.4 million from March 31, 2024, to $162.4 million as of June 30, 2024. The Community Bank Leverage Ratio for the Bank was 9.33% at June 30, 2024. The changes to equity for the current quarter included net income of $3.3 million, less dividends paid of $1.4 million, and a $361 thousand increase in other comprehensive income due to the positive impact of rising interest rates on the investment portfolio.
Navigating Challenges, Seizing Opportunities, and Driving Success
Meridian Corporation’s strong second-quarter performance and strategic growth initiatives highlight its ability to navigate market challenges and capitalize on opportunities. The company’s focus on expanding its loan portfolio, managing interest rate risks, and maintaining asset quality has positioned it well for continued success. Shareholders can expect steady returns as Meridian continues to leverage its market position and financial stability.
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