Meridian Corp
For the period ended Dec 31, 2024. Filed Mar 17, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 17, 2025
MRBK$16.82+2.1%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-15.
0001750735-24-000019
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-17.
0001750735-25-000011
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 126 previous paragraphs and 119 current paragraphs.
80 unchanged; 27 reworded; 11 added; 19 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 22 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
•Total assets increased $139.7 million, or 6.2%, to $2.4 billion as of December 31, 2024.
Current report
•Portfolio loans, increased $137.8 million, or 7.3%, to $2.0 billion as of December 31, 2024,
Current report
•Consolidated net income increased $3.1 million, or 23.4%.
Current report
•Net interest income was up $2.1 million, or 3.0% due to higher levels of earning assets.
Current report
•Non-interest income increased $9.4 million or 29.3% due largely to an improved mortgage banking environment.
Current report
Total non-interest income increased $9.4 million as a result of higher mortgage banking revenue, the gain of $4.0 million on the sale of $6.6 million in residential loan servicing rights and an increase in wealth management revenue of $807 thousand. Mortgage banking income increased $4.5 million, due to an increase of $178.0 million, or 28.6% in mortgage loan originations, despite the higher interest rate environment and continued lack of housing inventory.
Current report
Total non-interest expense increased $2.0 million, or 2.6% to $79.1 million for the year ended December 31, 2024. Occupancy and equipment expense increased $1.1 million overall, with $1.0 million of this increase due to fees, credits and other disposal costs for the early termination of the Blue Bell lease. The lease termination is expected to improve occupancy expense by $359 thousand per year. Professional fees increased $455 thousand as we incurred OREO related legal and professional fees as well as an increase in non-performing loan and lease workout expenses.
Current report
Advertising and promotion expense decreased $437 thousand as the result of a decline in mortgage related advertising expense and other promotional expense. Data processing and software expense decreased $271 thousand due to volume based discounts obtained on certain transactional fees. Other expense increased $1.2 million due to increases in certain loan expenses and employee related expenses.
Current report
Commercial and Industrial Loans (C & I)
Current report
Our 10 largest C & I relationships represented 13% of our C & I portfolio and 5% of the total loan portfolio at December 31, 2024. The average loan size outstanding in C & I portfolio, excluding leases, was $413 thousand at December 31, 2024 and the weighted average risk rating of the C & I portfolio is 4.1 (pass), based on our credit rating scale of 1 through 9, where ratings 1 through 5 are considered pass.
Current report
Total deposits were $2.0 billion as of December 31, 2024, up $181.9 million, or 10.0%, from December 31, 2023. Non-interest bearing deposits increased $1.6 million, or 0.7%, from December 31, 2023. Interest-bearing demand deposits decreased $9.5 million, or 6.3%, from December 31, 2023, while money market accounts/savings accounts increased $165.7 million, or 22.2%, during the period. Business accounts comprised 50% of all deposits, consumer accounts and municipal deposits comprised 13% and 12%, respectively, and wholesale funding was approximately 25%. Wholesale funding supports loan growth as business accounts from lending relationships tend to lag and wholesale funding can easily be managed through term.
Removed paragraphs (19)
Previous report
Recent Market Conditions
Previous report
Our financial condition and performance, as well as the ability of our borrowers to repay their loans, the value of collateral securing those loans, and demand for loans and other products and services that we offer, are all highly dependent on the business environment in the primary markets in which we operate and in the United States as a whole.
Previous report
Bank Sector Concerns
Previous report
Meridian is a regional community bank with loans and deposits that are well diversified in size, type, location and industry. We manage this diversification carefully, while avoiding concentrations in business lines. Meridian’s model continues to build on our strong and stable financial position, which serves our regional customers and communities with the banking products and services needed to help build their prosperity.
Previous report
Total balance sheet liquidity, which is derived from cash and investments, as well as salable commercial loans and residential mortgage loans held for sale, was $273.4 million at December 31, 2023. Meridian maintains a high-quality investment bond portfolio comprised of U.S Treasuries, government agencies, government agency mortgage-backed securities, and general obligation municipal securities with an average duration of 4.2 years. Meridian’s investment portfolio represented 8.2% of total assets at December 31, 2023.
Previous report
Meridian also maintains borrowing arrangements with various correspondent banks to meet short-term liquidity needs and has access to approximately $987 million in liquidity from numerous sources including its borrowing capacity with the FHLB and other financial institutions, as well as funding through the CDARS program or through brokered CD arrangements. In addition, the Bank is eligible to receive funds under the Bank Term Funding Program. Management believes that the above sources of liquidity provide Meridian with the necessary resources to meet its short-term and long-term funding requirements.
Previous report
•Total assets increased $184.0 million, or 8.9%, to $2.2 billion as of December 31, 2023.
Previous report
•Portfolio loans, increased $152.9 million, or 8.8%, to $1.9 billion as of December 31, 2023,
Previous report
•Consolidated net income decreased $8.6 million, or 39.3%, driven by a lower level of non-interest revenue from mortgage banking activity, and a decline in net interest income after provision for credit losses, due to increased interest expense on deposits and an increase in the provision for credit losses.
Previous report
•Provision for credit losses increased $4.3 million, or 173.9%, due to an increase in specific reserves on a commercial loan relationship and small business loans, combined with provisioning for loan growth and charge-offs.
Previous report
Total non-interest income decreased $9.8 million largely as a result of lower mortgage banking revenue. Mortgage banking income was down $8.8 million, due primarily to lower levels of mortgage loan originations as rising interest rates and lack of housing inventory has had a negative impact on mortgage banking activity throughout the year. Compounding the impact of the decline in mortgage banking income were net changes in the fair value of derivative instruments and loans held-for-sale, along with a decline in net gains on hedging activity that decreased $3.7 million, combined, year over year.
Previous report
The net change in the fair value of loans held-for-investment increased $2.5 million to a gain of $132 thousand for the year ended December 31, 2023, compared to a loss of $2.4 million for the comparable prior year, due to the negative impact the rising interest rate environment had on the fair value of the loans in portfolio that are held at fair value.
Previous report
Total non-interest expense decreased $4.3 million mainly due to a decrease in salaries and employee benefits expense at the mortgage segment, which recognized decreased fixed and variable compensation as the volume of loan originations and sales were both down year-over-year. Partially offsetting this decrease was an increase for the bank and wealth segments salaries & benefits as FTEs were up and a higher level of stock-based compensation expense.
Previous report
Professional fees increased $677 thousand as we incurred OREO expense during the year to maintain the one property held, non-performing loan and lease workout expenses increased, and we also incurred system conversion fees for a new loan servicing platform for our mortgage segment. Advertising and promotion expense decreased $606 thousand as the result of a decline in mortgage related advertising expense and other promotional expense. Data processing and software expense increased $964 thousand as Meridian continued with the strategy to invest in technology that focuses on improving back-office efficiencies through automation and workflow processes. Data processing expense was up over the prior year due to an increase in customer account transaction volume.
Previous report
While income tax expense decreased primarily due to the decrease in income before income taxes, the effective tax rate increased slightly due to the impact of additional nondeductible stock based compensation in 2023, partially offset by an increase in tax-free bank owned life insurance income.
Previous report
Commercial and Industrial Loans
Previous report
$341.4 million at December 31, 2022. Commercial and industrial loans overall represented 15.8% and 19.4% of our total loan portfolio at December 31, 2023 and 2022, respectively.
Previous report
(2) The allowance for credit losses for the year ended December 31, 2023 was calculated under the current expected credit loss model, while the allowance for the year ended December 21, 2022 was calculated under the incurred loss model.
Previous report
Total deposits were $1.8 billion as of December 31, 2023, up $111.0 million, or 6.5%, from December 31, 2022. Non-interest bearing deposits decreased $62.4 million, or 20.7%, from December 31, 2022. Interest-bearing demand deposits decreased $68.9 million, or 31.4%, from December 31, 2022, while money market accounts/savings accounts increased $50.2 million, or 7.2%, from December 31, 2022. Certificates of deposits increased $192.1 million, or 38.9%, from December 31, 2022, as lower levels of core deposits, combined with continued loan growth year over year, led to the need to obtain more wholesale funding. Included in time deposits as of December 31, 2023, and December 31, 2022, are $429.9 million and $375.3 million of brokered deposits, respectively, which comprise 23.8% and 21.9% of total deposits as of these dates.
Reworded paragraphs (27)
Previous wording
The following items highlight the Corporation’s changes in its financial condition as of December 31, 2023 compared to December 31, 2022 and the results of operations for the year ended December 31, 2023 compared to the same periods in 2022. More detailed information related to these highlights can be found in the sections that follow.
Current wording
The following items highlight the Corporation’s changes in its financial condition as of December 31, 2024 compared to December 31, 2023 and the results of operations for the year ended December 31, 2024 compared to the same period in 2023. More detailed information related to these highlights can be found in the sections that follow.
Previous wording
•The return on average assets and return on average equity was 0.61% and 8.53%, respectively, for the year ended December 31, 2023, compared to 1.18% and 13.87%, respectively, for the year ended December 31, 2022.
Current wording
•The return on average assets and return on average equity was 0.70% and 9.93%, respectively, for the year ended December 31, 2024, compared to 0.61% and 8.53%, respectively, for the year ended December 31, 2023.
Previous wording
Interest income increased $47.9 million on a tax equivalent basis, year over year, due to a higher yield on earning assets, which increased 160 basis points, in addition to a higher level of average earning assets, which increased by $296.8 million. The average yield on loans held for investment increased 156 basis points and the yield on cash and investments increased 119 basis points in total, reflecting the impact on rates caused by the Federal Reserve’s monetary policy. Average total loans held for investment increased $314.1 million, most notably in commercial real estate and construction, commercial loans and small business loans, which increased $191.5 million on average, combined. Home equity loans and residential real estate loans held in portfolio increased $157.1 million on average, combined. Residential loans for sale decreased $21.0 million on average.
Current wording
Interest income increased $19.5 million on a tax equivalent basis, year over year, due to a higher level of average earning assets, which increased by $185.4 million, combined with a higher yield on earning assets, which increased 32 basis points. Average total loans held for investment increased $136.1 million, most notably in commercial real estate and construction, commercial loans and small business loans, which increased $158.7 million on average, combined. Home equity loans and residential real estate loans held in portfolio increased $33.6 million on average, combined. Residential loans for sale increased $11.6 million on average. The average yield on loans held for investment increased 35 basis points and the yield on cash and investments increased 46 basis points in total, reflecting the impact on rates caused by the Federal Reserve’s monetary policy.
Previous wording
Interest expense increased $49.1 million, year over year, due primarily to market interest rate rises, as well as an increase of $221.2 million in average interest bearing deposits. Interest expense on deposits increased $42.4 million with the cost of interest-bearing deposits increasing 262 basis points to 3.81%. Total cost of deposits increased 227 basis points reflecting a decrease of $29.2 million in average non-interest bearing deposits. Interest expense on borrowings increased $6.4 million as the cost increased 199 basis points, and total average short-term borrowings increased $117.9 million.
Current wording
Interest expense increased $17.4 million, year over year, due primarily to market interest rate rises, as well as an increase of $178.0 million in average interest bearing deposits. Interest expense on deposits increased $16.2 million with the cost of interest-bearing deposits increasing 56 basis points to 4.37%. Total cost of deposits increased 58 basis points reflecting a decrease of $25.4 million in average non-interest bearing deposits. Interest expense on borrowings increased $612 thousand as the cost decreased 5 basis points, and total average short-term borrowings increased $13.9 million.
Previous wording
Net interest margin decreased 63 basis points to 3.35% for the year ended December 31, 2023 from 3.98% for the year ended December 31, 2022, as the increase in yield on earnings assets was outpaced by the increase in costs of funds, impacted also by the $29.2 million decrease in average non-interest bearing deposits.
Current wording
Net interest margin decreased 19 basis points to 3.16% for the year ended December 31, 2024 from 3.35% for the year ended December 31, 2023, as the increase in the volume of interest earning assets outpaced the volume increase in interest-bearing liabilities, while the yield on earnings assets was outpaced by the increase in costs of funds, impacted also by the $25.4 million decrease in average non-interest bearing deposits.
Previous wording
The provision for credit losses was $6.8 million for the year ended December 31, 2023, compared to a $2.5 million provision for the year ended December 31, 2022. The provision for credit losses for the year ended December 31, 2023 was calculated under the current expected credit losses method, while the provision for the year ended December 31, 2022 was calculated under the incurred loss model, which impacts comparability. The overall provision for credit losses for 2023 is comprised of provisioning for funded loans as well as unfunded loan commitments. The increase in provision for funded loans was due to a $4.7 million increase in specific reserves on new, mainly small business loans, and existing non-accrual loans combined with provisioning for loan growth and charge-offs. $2.3 million of the increase in specific reserves related to a commercial loan relationship for which new information became available related to the value of the underlying collateral, and an estimate of disposition costs. This increase was partially offset by the impact of favorable changes in certain portfolio baseline loss rates and some macroeconomic factors underlying the funded loss model. The provision for unfunded loan commitments decreased $419 thousand during the year due to the impact of favorable changes in certain portfolio baseline loss rates and some macroeconomic factors underlying the unfunded loss model.
Current wording
The provision for credit losses was $11.4 million for the year ended December 31, 2024, compared to a $6.8 million provision for the year ended December 31, 2023, an increase of $4.6 million. The overall provision for credit losses is comprised of provisioning for funded loans as well as unfunded loan commitments. The increase in provision for funded loans of $4.4 million for the year ended December 31, 2024 was primarily due to an increase in net charge-offs year over year. While net charge-offs increased $10.3 million in 2024 over 2023, nearly half of the loans charged-off were specifically reserved for in prior periods. This increase was partially offset by the impact of favorable changes in certain portfolio baseline loss rates and some macroeconomic factors underlying the funded loss model. The provision for unfunded loan commitments decreased $226 thousand during the year due to favorable changes in certain portfolio baseline loss rates and some macroeconomic factors underlying the unfunded loss model.
Previous wording
SBA loan sale income was relatively unchanged year-over-year, despite an increase of $9.1 million, or 12.0%, in the volume of loans sold in 2023 compared to 2022. The upward movement in interest rates during 2023 had a negative impact on gross margins on the SBA loan sales, which declined to 6.7% for all sales in 2023, compared to 7.4% in 2022.
Current wording
SBA loan sale income decreased $1.0 million due to a decrease of $25.6 million, or 30.1%, in the volume of loans sold in 2024 compared to 2023. Despite the decline in SBA loan sales volume, the gross margin on sales in 2024 was 8.0% overall, compared to 6.7% for 2023 sales. The increase in wealth management revenue was due to increased assets under management and better market conditions in general.
Previous wording
The effective tax rate reflects the recognition of certain tax benefits in the financial statements including those benefits from tax-exempt interest income, federal low-income housing tax credits, and excess tax benefits from recognized stock compensation. These tax benefits are offset by the tax effect of stock-based compensation expense related to incentive stock options and a provision for state income tax expense.
Current wording
While income tax expense increased primarily due to the increase in income before income taxes, the effective tax rate also increased. The effective tax rate reflects the recognition of certain tax benefits in the financial statements including those benefits from tax-exempt interest income, federal low-income housing tax credits, and excess tax benefits from recognized stock compensation. These tax benefits are offset by the tax effect of stock-based compensation expense related to incentive stock options and a provision for state income tax expense.
Previous wording
As of December 31, 2023, total assets were $2.2 billion which increased $184.0 million, or 8.9%, from December 31, 2022. This growth in assets over the prior period was due primarily to loan portfolio growth, as detailed in the following section.
Current wording
As of December 31, 2024, total assets were $2.4 billion which increased $139.7 million, or 6.2%, from December 31, 2023. This growth in assets over the prior period was due primarily to loan portfolio growth, as detailed in the following section.
Previous wording
Our loan portfolio is the largest category of our interest-earning assets. As of December 31, 2023 and 2022, our total loans and leases amounted to $1.9 billion, and $1.8 billion, respectively. Our loan portfolio is comprised of loans originated to be held in portfolio, as well as residential mortgage loans originated for sale. Meridian engages in the origination of residential mortgages, most typically for 1-4 family dwellings, with the intention of the Corporation to principally sell substantially all of these loans in the secondary market to qualified investors. Our loans held in portfolio are originated by our commercial and consumer loan divisions. We have a strong credit culture that promotes diversity of lending products with a focus on commercial businesses. We have no particular credit concentration. Our commercial loans have been proactively managed in an effort to achieve a balanced portfolio with no unusual exposure to one industry.
Current wording
Our loan portfolio is the largest category of our interest-earning assets. As of December 31, 2024 and 2023, our total loans and leases amounted to $2.1 billion, and $1.9 billion, respectively. Our loan portfolio is comprised of loans originated to be held in portfolio, as well as residential mortgage loans originated for sale. Meridian engages in the origination of residential mortgages, most typically for 1-4 family dwellings, with the intention of the Corporation to principally sell substantially all of these loans in the secondary market to qualified investors. Our loans held in portfolio are originated by our commercial and consumer loan divisions. We have a strong credit culture that promotes diversity of lending products with a focus on commercial businesses. We have no particular credit concentration. Our commercial loans have been proactively managed in an effort to achieve a balanced portfolio with no unusual exposure to one industry.
Previous wording
Portfolio loans increased $152.9 million, or 8.8% to $1.9 billion as of December 31, 2023, from $1.7 billion as of December 31, 2022.
Current wording
Portfolio loans increased $137.8 million, or 7.3% to $2.0 billion as of December 31, 2024, from $1.9 billion as of December 31, 2023.
Previous wording
Commercial real estate loans. Our commercial real estate loans are secured by real estate that is both owner-occupied and investor owned. Owner-occupied commercial real estate loans generally involve less risk than an investment property and are distinctly reported from non-owner occupied commercial real estate loans for measuring loan concentrations for regulatory purposes. Our owner-occupied commercial real estate loans are originated and managed within our commercial loan department and comprised 33.8% of our total commercial real estate loan portfolio at December 31, 2023. The remaining commercial real estate loans are managed by our commercial real estate department which offer the following commercial real estate products:
Current wording
Commercial real estate loans. Our commercial real estate loans are secured by real estate that is both owner-occupied and investor owned. Owner-occupied commercial real estate loans generally involve less risk than an investment property and are distinctly reported from non-owner occupied commercial real estate loans for measuring loan concentrations for regulatory purposes. Our owner-occupied commercial real estate loans are originated and managed within our commercial loan department and amounted to $335 million at December 31, 2024. The remaining commercial real estate loans are managed by our commercial real estate department which offer the following commercial real estate products:
Previous wording
Our commercial real estate loans increased by $172.5 million, or 30.5%, to $737.9 million at December 31, 2023 from $565.4 million at December 31, 2022. Our total commercial real estate loan portfolio represented 38.6% and 32.2% of our total loan portfolio at December 31, 2023 and 2022, respectively. Construction loans decreased $25.5 million, or 9.4%, to $246.4 million at December 31, 2023 from $272.0 million at December 31, 2022. Construction loans represented 12.9% and 15.5% of our total loan portfolio at December 31, 2023 and 2022, respectively.
Current wording
Our commercial real estate loans increased by $86.1 million, or 11.7%, to $824.0 million at December 31, 2024 from $737.9 million at December 31, 2023. Our commercial real estate loan portfolio represented 40.0% and 38.6% of our total loan portfolio at December 31, 2024 and 2023, respectively. Construction loans increased $13.1 million, or 5.3%, to $259.6 million at December 31, 2024 from $246.4 million at December 31, 2023. Construction loans represented 12.6% and 12.9% of our total loan portfolio at December 31, 2024 and 2023, respectively.
Previous wording
We provide a variety of variable and fixed rate commercial business loans and lines of credit. These loans and lines of credit are made to small and medium-sized manufacturers and wholesale, retail and service-related businesses. Additionally, we lend to companies in the technology, healthcare, real estate and financial service industries. Commercial business loans generally include lines of credit and term loans with a maturity of five years or less. The primary source of repayment for commercial business loans is generally operating cash flows of the business and may also include collateralization of inventory, accounts receivable, equipment and/or personal guarantees. Our commercial and industrial loans decreased $38.5 million, or 11.3%, to $302.9 million at December 31, 2023 from
Current wording
We provide a variety of variable and fixed rate commercial business loans and lines of credit. These loans and lines of credit are made to small and medium-sized manufacturers and wholesale, retail and service-related businesses. Additionally, we lend to companies in the technology, healthcare, real estate and financial service industries. Commercial business loans generally include lines of credit and term loans with a maturity of five years or less. The primary source of repayment for commercial business loans is generally operating cash flows of the business and may also include collateralization of inventory, accounts receivable, equipment and/or personal guarantees. Our C & I loans increased $64.5 million, or 21.3%, to $367.4 million at December 31, 2024 from $302.9 million at December 31, 2023. C & I loans overall represented 17.8% and 15.8% of our total loan portfolio at December 31, 2024 and 2023, respectively.
Previous wording
We provide financing to small businesses in various industries that include guarantees under the Small Business Administration’s (SBA’s) loan programs. Our small business loans increased by $6.2 million, or 4.5%, to $142.3 million at December 31, 2023 from $136.2 million at December 31, 2022. During 2023 we sold $85.0 million in SBA loans, an increase of $9.1 million, or 12.0%, from $75.9 million in SBA loans sold in 2022. The small business loans portfolio represented 7.4% and 7.7% of our total loan portfolio at December 31, 2023 and 2022, respectively.
Current wording
We provide financing to small businesses in various industries that include guarantees under the Small Business Administration’s (SBA’s) loan programs. Our small business loans increased by $13.4 million, or 9.4%, to $155.8 million at December 31, 2024 from $142.3 million at December 31, 2023. During 2024 we sold $59.4 million in SBA loans, a decrease of $25.6 million, or 30.1%, from $85.0 million in SBA loans sold in 2023. The small business loans portfolio represented 7.6% and 7.4% of our total loan portfolio at December 31, 2024 and 2023, respectively.
Previous wording
Our consumer-lending department principally originates residential mortgage and home equity based products for our clients and prospects. These loans typically fund completely at closing. Additional products include smaller dollar personal loans and our student loan refinance product, designed to provide additional flexibility in repayment terms desired in the marketplace. Home equity lines and loans increased $16.9 million, or 28.4%, to $76.3 million at December 31, 2023 from $59.4 million at December 31, 2022, while residential mortgage loans increased by $38.8 million, or 17.5%, to $260.6 million at December 31, 2023 from $221.8 million at December 31, 2022. Overall the total consumer loan portfolio represented 17.6% and 16.0% of our total loan portfolio at December 31, 2023 and 2022, respectively.
Current wording
Our consumer-lending department principally originates residential mortgage and home equity based products for our clients and prospects. These loans typically fund completely at closing. Additional products include smaller dollar personal loans and our student loan refinance product, designed to provide additional flexibility in repayment terms desired in the marketplace. Home equity lines and loans increased $14.4 million, or 18.9%, to $90.7 million at December 31, 2024 from $76.3 million at December 31, 2023, while residential mortgage loans decreased by $8.0 million, or 3.1%, to $252.6 million at December 31, 2024 from $260.6 million at December 31, 2023. Overall the total consumer loan portfolio represented 16.7% and 17.6% of our total loan portfolio at December 31, 2024 and 2023, respectively.
Previous wording
Meridian Equipment Finance specializes in small ticket equipment leases for small and mid-sized businesses nationally and through a broad range of industries. The Bank’s credit risk generally results from the potential default of borrowers which may be driven by customer specific or broader industry related conditions. Leases decreased $17.4 million, or 12.5%, to $121.6 million at December 31, 2023 from $139.0 million at December 31, 2022.
Current wording
Meridian Equipment Finance specializes in small ticket equipment leases for small and mid-sized businesses nationally and through a broad range of industries. Leases decreased $45.6 million, or 37.5% to $76.0 million at December 31, 2024 as we continue to shift focus to commercial relationship lending.
Previous wording
As of December 31, 2023 our available-for-sale investment portfolio had a fair value of $146.0 million, with an effective tax equivalent yield of 3.15% and an estimated duration of approximately 4.2 years. The largest category of this investment portfolio, or 28.9%, consists of municipal securities, along with 24.8% in U.S. agency securities, and 20.8% in U.S. Treasury securities. The remainder of our available-for-sale securities portfolio is invested in other securities. We regularly evaluate the composition of our investment portfolio as the interest rate yield curve changes and may sell investment securities from time to time to adjust our exposure to interest rates or to provide liquidity to meet loan demand. Not included in the tables below are equity investments that had fair values of $2.1 million as of December 31, 2023 and 2022. As of December 31, 2023 we also had a held-to-maturity investment portfolio with amortized cost of $35.8 million.
Current wording
As of December 31, 2024 our available-for-sale investment portfolio had a fair value of $174.3 million, with an effective tax equivalent yield of 3.72% and an estimated duration of approximately 3.8 years. The largest category of this investment portfolio, or 38.1%, consists of U.S. agency securities, along with 21.1% in municipal securities, and 8.9% in U.S. Treasury securities. The remainder of our available-for-sale securities portfolio is invested in other securities. We regularly evaluate the composition of our investment portfolio as the interest rate yield curve changes and may sell investment securities from time to time to adjust our exposure to interest rates or to provide liquidity to meet loan demand. Not included in the tables below are equity investments that had fair values of $2.1 million as of December 31, 2024 and 2023. As of December 31, 2024 we also had a held-to-maturity investment portfolio with amortized cost of $33.8 million.
Previous wording
The ratio of non-performing assets to total assets increased to 1.58% as of December 31, 2023, from 1.11% as of December 31, 2022. There was $1.7 million in other real estate property included in non-performing assets as of December 31, 2023 and 2022, related to a well secured residential property. Total non-performing loans were $33.8 million and $21.2 million as of December 31, 2023 and December 31, 2022, respectively. The increase in non-performing loans over the period was due to increases in non-performing small business loans, commercial loans, residential real estate loans and construction loans of $5.0 million, $2.9 million, $2.5 million, and $1.2 million, respectively.
Current wording
The ratio of non-performing assets to total assets increased to 1.90% as of December 31, 2024, from 1.58% as of December 31, 2023. There was $159 thousand in other real estate property included in non-performing assets as of December 31, 2024 and 2023 related to a well secured residential property. Total non-performing loans were $45.1 million and $33.8 million as of December 31, 2024 and December 31, 2023, respectively. The increase in non-performing loans over the period was due to increases in non-performing construction loans, residential real estate loans, and small business loans of $6.0 million, $3.4 million, $2.8 million, respectively, partially offset by a decrease of $3.4 million in non-performing commercial loans due to a $3.5 million partial charge-off of a commercial loan relationship.
Previous wording
Meridian realized net charge-offs of $5.6 million, or 0.30%, of total average loans for the year ended December 31, 2023, compared to net charge-offs of $2.4 million, or 0.15%, of total average loans for the year ended December 31, 2022. A majority of charge-offs for the year ended December 31, 2023 were from equipment leases, $4.0 million, and $1.5 million were from small business loans. The ratio of allowance for credit losses to total loans held for investment, excluding loans at fair value (a non-GAAP measure, see reconciliation in the Appendix), was 1.17% as of December 31, 2023 compared to 1.09% as of December 31, 2022.
Current wording
Meridian realized net charge-offs of $15.8 million, or 0.78%, of total average loans for the year ended December 31, 2024, compared to net charge-offs of $5.6 million, or 0.30%, of total average loans for the year ended December 31, 2023. A majority of charge-offs for the year ended December 31, 2024 were from equipment leases, $5.9 million, commercial loans, $4.8 million, and small business loans, $4.3 million. The ratio of allowance for credit losses to total loans held for investment, excluding loans at fair value (a non-GAAP measure, see reconciliation in the Appendix), was 0.91% as of December 31, 2024 compared to 1.17% as of December 31, 2023. The decline in this coverage ratio was largely impacted by net charge-offs of individually evaluated loans of $4.8 million and $4.2 million in the commercial and industrial loan, and small business loan portfolios, respectively, combined with the decline in ACL on leases as we continue to refocus away from lease originations.
Previous wording
As of December 31, 2023 there were specific reserves of $6.5 million against individually evaluated loans, an increase from $2.2 million as of December 31, 2022. The drivers of the increase related to a $2.3 million increase in a commercial loan relationship specific reserve for which new information became available related to the value of the underlying collateral, combined with the net impact of establishing $2.3 million in specific reserves on SBA loan relationships classified as non-performing, netted with the charge-off an SBA loan.
Current wording
As of December 31, 2024 there were specific reserves of $2.7 million against individually evaluated loans, a decrease from $6.5 million as of December 31, 2023. The drivers of the decrease related to a $2.9 million decrease in a commercial loan relationship specific reserve due to the charge-off note above, combined with a decline of $1 million in SBA loan specific reserves.
Previous wording
The Corporation continues to be diligent in its credit underwriting process and proactive with its loan review process, including the engagement of the services of an independent outside loan review firm, which helps identify developing credit issues. Proactive steps that are taken include the procurement of additional collateral (preferably outside the current loan structure) whenever possible and frequent contact with the borrower. The Corporation believes that timely identification of credit issues and appropriate actions early in the process serve to mitigate overall risk of loss.
Current wording
The Corporation is proactive with its loan review process that utilizes the engagement of an independent outside loan review firm, which helps identify developing credit issues. Proactive steps that are taken include the procurement of additional collateral (preferably outside the current loan structure) whenever possible and frequent contact with the borrower. The Corporation believes that timely identification of credit issues and appropriate actions early in the process serve to mitigate overall risk of loss.
Previous wording
Consolidated stockholders’ equity of the Corporation was $158.0 million, or 7.0% of total assets as of December 31, 2023 as compared to $153.3 million, or 7.4% of total assets as of December 31, 2022. The increase in stockholders’ equity is the result of year-to-date net income of $13.2 million, and comprehensive income of $2.1 million, partially offset by dividends paid of $5.6 million, common stock repurchases of $4.3 million, and $1.0 million in stock-based compensation and stock options exercised. On February 28, 2023, the Corporation approved and declared a two-for-one stock split in the form of a 100% stock dividend, payable March 20, 2023, to shareholders of record as of March 14, 2023. Under the terms of the stock split, the Corporation’s shareholders received a dividend of one share for every share held on the record date. The par value of the Corporation's stock was not affected by the split and remained at $1.00 per share. All share and per share amounts reported in the consolidated financial statements have been adjusted to reflect the two-for-one stock split effective February 28, 2023.
Current wording
On February 28, 2023, the Corporation approved and declared a two-for-one stock split in the form of a 100% stock dividend, payable March 20, 2023, to shareholders of record as of March 14, 2023. Under the terms of the stock split, the Corporation’s shareholders received a dividend of one share for every share held on the record date. The par value of the Corporation's stock was not affected by the split and remained at $1.00 per share. All share and per share amounts reported in the consolidated financial statements have been adjusted to reflect the two-for-one stock split effective February 28, 2023.
Previous wording
Management maintains liquidity to meet depositors’ needs for funds, to satisfy or fund loan commitments, and for other operating purposes. Meridian’s foundation for liquidity is a stable and loyal customer deposit base, cash and cash equivalents, and a marketable investment portfolio that provides periodic cash flow through regular maturities and amortization or that can be used as collateral to secure funding. In addition, as part of its liquidity management, Meridian maintains a segment of commercial loan assets that are comprised of SNCs, which have a national market and can be sold in a timely manner. Meridian’s available liquidity, which totaled $273.4 million at December 31, 2023, compared to $264.4 million at December 31, 2022, includes investments, SNCs, Federal funds sold, mortgages held-for-sale and cash and cash equivalents, less the amount of securities required to be pledged for certain liabilities. Meridian also anticipates scheduled payments and prepayments on its loan and mortgage-backed securities portfolios.
Current wording
Management maintains liquidity to meet depositors’ needs for funds, to satisfy or fund loan commitments, and for other operating purposes. Meridian’s foundation for liquidity is a stable and loyal customer deposit base, cash and cash equivalents, and a marketable investment portfolio that provides periodic cash flow through regular maturities and amortization or that can be used as collateral to secure funding. In addition, as part of its liquidity management, Meridian maintains a portion of commercial loan assets that are comprised of SNCs, which have a national market and can be sold in a timely manner. Meridian’s available liquidity, which totaled $315.8 million at December 31, 2024, compared to $273.4 million at December 31, 2023, includes investments, SNCs, Federal funds sold, mortgages held-for-sale and cash and cash equivalents, less the amount of securities required to be pledged for certain liabilities. Meridian also anticipates scheduled payments and prepayments on its loan and mortgage-backed securities portfolios.
Previous wording
In addition, Meridian maintains borrowing arrangements with various correspondent banks, the FHLB and the FRB to meet short-term liquidity needs. Through its relationship at the FRB, Meridian had available credit of approximately $7.8 million at December 31, 2023. At December 31, 2023, Meridian had $33.0 million in borrowings from the Federal Reserve. As a member of the FHLB, we are eligible to borrow up to a specific credit limit, which is determined by the amount of our residential mortgages, commercial mortgages and other loans that have been pledged as collateral. As of December 31, 2023, Meridian’s maximum borrowing capacity with the FHLB was $626.8 million. At December 31, 2023, Meridian had borrowed $141.9 million and the FHLB had issued letters of credit, on Meridian’s behalf, totaling $104.3 million against its available credit lines. At December 31, 2023, Meridian also had available $49.0 million of unsecured federal funds lines of credit with other financial institutions as well as $146.1 million of available short or long term funding through the CDARS program and $356.0 million of available short or long term funding through brokered CD arrangements. Management believes that Meridian has adequate resources to meet its short-term and long-term funding requirements.
Current wording
In addition, Meridian maintains borrowing arrangements with various correspondent banks, the FHLB and the FRB to meet short-term liquidity needs. Through its relationship at the FRB, Meridian had available credit of approximately $5.4 million at December 31, 2024. At December 31, 2024, Meridian had $0 in borrowings from the Federal Reserve. As a member of the FHLB, we are eligible to borrow up to a specific credit limit, which is determined by the amount of our residential mortgages, commercial mortgages and other loans that have been pledged as collateral. As of December 31, 2024, Meridian’s maximum borrowing capacity with the FHLB was $699.3 million. At December 31, 2024, Meridian had borrowed $119.5 million and the FHLB had issued letters of credit, on Meridian’s behalf, totaling $183.5 million against its available credit lines. At December 31, 2024, Meridian also had available $56.0 million of unsecured federal funds lines of credit with other financial institutions as well as $242.5 million of available short or long term funding through the CDARS program and $334.6 million of available short or long term funding through brokered CD arrangements. Management believes that Meridian has adequate resources to meet its short-term and long-term funding requirements.
Previous wording
At December 31, 2023, Meridian had $528.7 million in unfunded loan commitments. Management anticipates these commitments will be funded by means of normal cash flows. Certificates of deposit greater than or equal to $250 thousand scheduled to mature in one year or less from December 31, 2023 totaled $333.6 million. Management believes that the majority of such deposits will be reinvested with Meridian and that certificates that are not renewed will be funded by a reduction in cash and cash equivalents or by pay-downs and maturities of loans and investments. At December 31, 2023, Meridian had a reserve for unfunded loan commitments of $1.0 million.
Current wording
At December 31, 2024, Meridian had $618.6 million in unfunded loan commitments. Management anticipates these commitments will be funded by means of normal cash flows. Certificates of deposit greater than or equal to $250 thousand scheduled to mature in one year or less from December 31, 2024 totaled $411.2 million. Management believes that the majority of such deposits will be reinvested with Meridian and that certificates that are not renewed will be funded by a reduction in cash and cash equivalents or by pay-downs and maturities of loans and investments. At December 31, 2024, Meridian had a reserve for unfunded loan commitments of $817 thousand.
Previous wording
Community banks have long raised concerns with bank regulators about the regulatory burden, complexity, and costs associated with certain provisions of the Basel III Rule. In response, Congress provided an “off-ramp” for institutions, like us, with total consolidated assets of less than $10 billion. Section 201 of the Regulatory Relief Act instructed the federal banking regulators to establish a single CBLR of between 8 and 10%. The Bank adopted this framework in 2020. Under the final rule, a community banking organization is eligible to elect the new framework if it has: less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a CBLR greater than 9%. The Bank’s CBLR was 9.46% and 9.95% as of December 31, 2023 and 2022, respectively, but reports all ratios for comparative purposes.
Current wording
Community banks have long raised concerns with bank regulators about the regulatory burden, complexity, and costs associated with certain provisions of the Basel III Rule. In response, Congress provided an “off-ramp” for institutions, like us, with total consolidated assets of less than $10 billion. Section 201 of the Regulatory Relief Act instructed the federal banking regulators to establish a single CBLR of between 8 and 10%. The Bank adopted this framework in 2020. Under the final rule, a community banking organization is eligible to elect the new framework if it has: less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a CBLR greater than 9%. The Bank’s CBLR was 9.21% and 9.46% as of December 31, 2024 and 2023, respectively, but reports all ratios for comparative purposes.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Consolidated stockholders’ equity of the Corporation was $171.5 million, or 7.2% of total assets as of December 31, 2024 as compared to $158.0 million, or 7.0% of total assets as of December 31, 2023. The increase in stockholders’ equity is the result of year-to-date net income of $16.3 million, and comprehensive income of $1.3 million, partially offset by dividends paid of $5.6 million, and $456 thousand in stock-based compensation and stock options exercised.