Meridian Bank 2Q 2018 Earnings Release

  MALVERN, PA - 07/30/2018 (PRESS RELEASE JET)

Meridian Bank (Nasdaq: MRBK) today reported net income of $1.8 million, or $0.28 per diluted share for the second quarter of 2018, which generated a return on average assets and return on average equity of 0.81% and 7.00%, respectively. 

Christopher J. Annas, Chairman and CEO, commented: “Our strong loan growth continued through the second quarter with commercial/industrial and commercial real estate together annualizing over 20%. Meridian’s sales efforts and building reputation are bringing consistent opportunities for new relationships and great personnel. The record earnings results from growth and better efficiency at the bank, and moderate profits from our fee businesses. The deposit-only sales personnel are having success in the various niches as some turmoil remains with acquired banks in the area. The balance sheet is very strong with excellent credit quality and capital ratios.”  

Second Quarter Highlights – Record Quarterly Earnings

• Net income for common stockholders for the three and six months ended June 30, 2018 was $1.8 million, and $3.1 million, respectively, increases of $847 thousand or 89% and $2.3 million or 300% as compared to net income for common stockholders for the same periods in 2017. 
• Net interest income increased $1.1 million, or 15.8%, to $8.1 million for the three months ended June 30, 2018, as compared to $7.0 million for the same period in 2017. The net interest margin was 3.88%.
• Total assets of $945.4 million as of June 30, 2018 increased $89.4 million, or 10.4%, from $856.0 million as of December 31, 2017.
• Total portfolio loans and leases as of June 30, 2018 were $781.6 million, an increase of $87.0 million, or 12.5%, from $694.6 million at December 31, 2017. 
• Total deposits of $683.3 million as of June 30, 2018 increased $56.1 million, or 9.0%, from $627.1 million as of December 31, 2017.
• Asset quality remained strong as net charge-offs were only 0.01% of total average loans for the second quarter of 2018.  Non-performing loans were 0.34% of total loans at June 30, 2018

Income Statement Summary

Net income attributable to common stockholders was $1.8 million, or $0.28 per diluted share for the second quarter of 2018 compared to $955 thousand, or $0.26 per diluted share, for the same period in 2017. The increase was largely attributable to an increase in net interest income of $1.1 million as well as lower levels of income tax and loan loss provisions.These improvements were partially offset by an increase in net non-interest expense of $892 thousand. In addition, $289 thousand in preferred dividends were eliminated after repurchasing all of the outstanding shares of preferred stock in the fourth quarter of 2017.Net income attributable to common stockholders was $3.1 million, or $0.48 per diluted share for the six months ended June 30, 2018 compared to $768 thousand, or $0.21 per diluted share, for the same period in 2017. 

Net interest income increased $1.1 million, or 15.8%, for the three months ended June 30, 2018 to $8.1 million from $7.0 million for the same period in 2017. Net interest income increased $2.1 million, or 15.1%, to $15.8 million for the six months ended June 30, 2018, compared to $13.8 million for the six months ended June 30, 2017.The net-interest margin remained strong for both periods at 3.88%, and 3.89%, respectively. The strength in the Bank's net-interest margin reflects the size and asset quality of the loan portfolio, as well as a consistent increase in average non-interest bearing deposits period over period.The provision for loan losses decreased $208 thousand to $413 thousand for the second quarter 2018 reflecting strong asset quality, and increased $187 thousand to $967 thousand for the six months ended June 30, 2018 due to the significant level of loan growth over the first six months of 2018.

Total non-interest income for the second quarter of 2018 was $8.7 million, down $1.4 million, or 13.9%, from the second quarter of 2017.Total non-interest income for the six months ended June 30, 2018 was $15.7 million, down $1.4 million, or 7.9%, from the same period in 2017.These overall decreases in non-interest income came primarily from our mortgage division. These decreases were due to lower levels of loans sold, which were $159 million for the three months ended June 30, 2018, compared to $180 million for the same period in 2017 and $287.1 million for the six months ended June 30, 2018, compared to $326.4 million for the same period in 2017. In addition, the margin over the periods decreased 60 basis points and 21 basis points, respectively. The decline in mortgage banking income was offset slightly by hedging gains and fair value adjustments on the mortgage portfolio period over period.Wealth management revenue increased $119 thousand to $988 thousand for the three months ended June 30, 2018 compared to $869 thousand for the same period in 2017 and $1.1 million to $2.1 million for the six months ended June 30, 2018 compared to $972 thousand for the same period in 2017. 

Non-interest expense was $14.1 million for the second quarter of 2018, down $509 thousand, or 3.5%, from $14.6 million in the second quarter of 2017 and $26.6 million for six months ended June 30, 2018, down $1.4 million, or 5.0%, from the same period in the 2017. The decrease is mainly attributable to a reduction in salaries and employee benefits expense, as full-time equivalent employees, particularly in the mortgage division were reduced. In addition, variable loan expenses decreased reflecting the lower level of mortgage originations. Occupancy, equipment and advertising and promotion expenses increased during both periods due to new business locations.Other expenses were up over both periods. The increase was primarily the result of a $200 thousand reserve established for the open litigation as well as higher levels of other employee-related expenses, shares tax expense, and OREO expense. 

Balance Sheet Summary

As of June 30, 2018, total assets were $945.4 million compared with $856.0 million as of December 31, 2017 and $780.7 million as of June 30, 2017. Total assets increased $164.8 million, or 21.1%, on a year-over-year basis primarily due to strong loan growth.Total assets increased $61.9 million, or 7.0%, on a quarter-over-quarter basis mostly due to net new portfolio loans of $41.2 million, as well as $14.7 million in held-for-sale mortgage loans.

Total loans, excluding mortgage loans held for sale, grew $87.0 million, or 12.5%, to $781.6 million as of June 30, 2018, from $694.6 million as of December 31, 2017. It is an increase of $133.2 million, or 20.6%, from $648.4 million as of June 30, 2017. The increase in loans for both periods is attributable to several commercial categories as the Bank continues to grow its presence in the Philadelphia market area. Commercial loans increased $22.2 million, or 14.3%, during the first six months of the year.  Commercial real estate and commercial construction loans combined increased $35.5 million, or 9.7%, during the first six months of the year. Residential loans held in portfolio increased $15.4 million, or 47.2%, during the first six months as certain loan products or terms were targeted to hold in portfolio. Residential mortgage loans-for-sale increased $10.5 million, or 30.1%, to $45.6 million at June 30, 2018 from December 31, 2017 and $9.2 million, or 25.2%, year over year, reflecting the seasonality of the cycle.

Deposits were $683.3 million as of June 30, 2018, up $56.1 million, or 9.0%, from December 31, 2017, and $123.7 million, or 22.1%, from June 30, 2017. Non-interest bearing deposits increased $6.5 million, or 6.5%, from December 31, 2017 and increased $8.9 million, or 9.1%, from June 30, 2017. New business relationships fueled the increases.Money market accounts/savings accounts decreased $11.3 million, or 5.0%, since December 31, 2017 and increased $5.2 million, or 2.5%, since June 30, 2017 while interest-bearing checking accounts increased $28.4 million, or 34.7%, during the year, and $30.3 million or 38.0% year over year reflecting the customer’s preference for checking accounts over money market accounts. Certificates of deposit increased $32.6 million, or 14.9%, during the past six months and $79.2 million, or 46.2%, year over year as a result of wholesale funds management in the rising rate environment.Borrowings were up $33.6 million, or 30.9%, during the past six months and $12.4 million, or 9.5%, year over year. $15 million of short-term borrowings as of June 30, 2018 were used to fund growth in mortgage loans held for sale, while the remaining increase in borrowing was used to help fund the $87.0 million increase in loans held for investment as the timing of deposit growth trailed behind the loan growth. 

Consolidated shareholder’s equity of the Bank was $104.4 million, or 11.04% of total assets as of June 30, 2018, as compared to $101.4 million, or 11.84% of total assets as of December 31, 2017. Capital ratios remain strong, reflecting the capital raise in the fourth quarter. At June 30, 2018, the Tier 1 leverage ratio was 11.28%, Tier 1 risk-based capital and common equity ratios were 12.03%, and total risk-based capital was 14.07%. Quarter-end numbers show a total shareholder equity-to-total assets ratio of 11.04% and a tangible common equity to tangible assets ratio of 10.53%. Tangible book value per share was $15.47 as of June 30, 2018, compared with $15.00 as of December 31, 2017, and $14.28 as of June 30, 2017.

Asset Quality Summary

Asset quality remained strong. The Bank realized net charge-offs of 0.01% of total average loans for the quarter ending June 30, 2018, compared with net charge-offs of 0.09% for the quarter ending December 31, 2017. Total non-performing assets, including loans and other real estate property, were $2.8 million as of June 30, 2018, $3.6 million at December 31, 2017, and $4.2 million as of June 30, 2017. The ratio of non-performing assets to total assets for quarter end was 0.30% compared to 0.42% as of December 31, 2017 and 0.53% at June 30, 2017. The non-performing loans were 0.34% of total loans as of June 30, 2018, compared to 0.43% as of December 31, 2017 and 0.61% at June 30, 2017. As of June 30, 2018, the ratio of allowance for loan losses to total loans, excluding mortgages available for sale, was 0.95%.

About Meridian Bank

Meridian Bank, is a full-service commercial bank headquartered in Malvern, Pennsylvania with 23 offices in the greater Philadelphia Metro market. The Bank offers a full range of commercial and retail loan and deposit products, along with wealth management and electronic payment services. Meridian Mortgage, a division of the Bank, is a top tier provider of residential mortgage loans. For additional information visit our website at www.meridianbanker.com. Member FDIC.

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