Meridian Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-55983

(Exact name of registrant as specified in its charter)

Pennsylvania	83-1561918
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

9 Old Lincoln Highway, Malvern, Pennsylvania 19355

(Address of principal executive offices) (Zip Code)

(484) 568-5000

(Registrant’s telephone number, including area code)


Title of class	Trading Symbol	Name of exchange on which registered
Common Stock, $1 par value	MRBK	The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒Yes ☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐	Accelerated Filer ☒

Non-accelerated Filer ☐	Smaller Reporting Company ☒

Emerging Growth Company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 8, 2020 there were 6,132,403 outstanding shares of the issuer’s common stock, par value $1.00 per share.

Table of Contents

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1 Financial Statements (Unaudited)	3

Consolidated Balance Sheets – September 30, 2020 and December 31, 2019	3

Consolidated Statements of Income – Three and Nine Months Ended September 30, 2020 and 2019	4

Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2020 and 2019	5

Consolidated Statements of Stockholders’ Equity – Three and Nine Months Ended September 30, 2020 and 2019	6

Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2020 and 2019	8

Notes to Consolidated Financial Statements (Unaudited)	9

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3 Quantitative and Qualitative Disclosures about Market Risk	57

Item 4 Controls and Procedures	58

PART II OTHER INFORMATION

Item 1 Legal Proceedings	59

Item 1A Risk Factors	59

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	61

Item 3 Defaults Upon Senior Securities	61

Item 4 Mine Safety Disclosures	61

Item 5 Other Information	61

Item 6 Exhibits	61

Signatures	63

Table of Contents

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30,		December 31,
(dollars in thousands, except per share data)	2020		2019
Cash and due from banks	$	74,941	19,106
Federal funds sold		928	20,265
Cash and cash equivalents		75,869	39,371
Securities available-for-sale (amortized cost of $101,471 and $58,874 as of September 30, 2020 and December 31, 2019)		103,358	58,856
Securities held-to-maturity (fair value of $6,916 and $9,003 as of September 30, 2020 and December 31, 2019)		6,544	8,780
Equity investments		1,034	1,009
Mortgage loans held for sale (amortized cost of $220,381 and $33,363 as of September 30, 2020 and December 31, 2019), at fair value		225,150	33,704
Loans, net of fees and costs (includes $11,366 and $10,546 of loans at fair value, amortized cost of $10,849 and $10,186 as of September 30, 2020 and December 31, 2019)		1,306,846	964,710
Allowance for loan and lease losses		(16,573)	(9,513)
Loans, net of the allowance for loan and lease losses		1,290,273	955,197
Restricted investment in bank stock		7,650	8,072
Bank premises and equipment, net		8,065	8,636
Bank owned life insurance		12,069	11,859
Accrued interest receivable		4,666	3,148
Other real estate owned		—	120
Deferred income taxes		398	2,115
Goodwill		899	899
Intangible assets		3,668	3,874
Other assets		19,005	14,379
Total assets	$	1,758,648	1,150,019
Liabilities:
Deposits:
Noninterest bearing	$	193,851	139,450
Interest bearing		1,015,173	711,718
Total deposits		1,209,024	851,168
Short-term borrowings		104,239	123,676
Long-term debt		250,131	3,123
Subordinated debentures		40,814	40,962
Accrued interest payable		2,258	1,088
Other liabilities		20,350	9,307
Total liabilities		1,626,816	1,029,324
Stockholders’ equity:
Common stock, $1 par value. Authorized 10,000,000 shares; issued 6,450,353 and 6,407,685 as of September 30, 2020 and December 31, 2019		6,450	6,408
Surplus		80,981	80,255
Treasury stock - 320,000 and 3,375 shares at September 30, 2020 and December 31, 2019, respectively		(5,828)	(62)
Unearned common stock held by employee stock ownership plan		(2,000)	—
Retained earnings		50,775	34,097
Accumulated other comprehensive income (loss)		1,454	(3)
Total stockholders’ equity		131,832	120,695
Total liabilities and stockholders’ equity	$	1,758,648	1,150,019

See accompanying notes to the unaudited consolidated financial statements.

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MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three months ended			Nine months ended
	September 30,			September 30,
(dollars in thousands, except per share data)	2020		2019	2020	2019
Interest income:
Loans, including fees	$	15,321	13,152	43,048	37,686
Securities:
Taxable		251	336	920	892
Tax-exempt		305	64	698	273
Cash and cash equivalents		3	38	63	136
Total interest income		15,880	13,590	44,729	38,987
Interest expense:
Deposits		2,235	3,633	8,064	10,584
Borrowings		930	683	2,687	1,731
Total interest expense		3,165	4,316	10,751	12,315
Net interest income		12,715	9,274	33,978	26,672
Provision for loan losses		3,956	705	7,139	938
Net interest income after provision for loan losses		8,759	8,569	26,839	25,734
Non-interest income:
Mortgage banking income		21,812	7,315	45,395	17,617
Wealth management income		951	922	2,825	2,698
SBA loan income		641	635	1,821	1,150
Earnings on investment in life insurance		70	74	210	218
Net change in the fair value of derivative instruments		3,028	—	6,346	(16)
Net change in the fair value of loans held-for-sale		2,932	54	4,424	(82)
Net change in the fair value of loans held-for-investment		93	(24)	174	390
Net loss on hedging activity		(2,637)	(300)	(7,363)	(792)
Net gain on sale of investment securities available-for-sale		1,290	74	1,345	212
Service charges		28	28	77	82
Other		852	431	1,718	1,179
Total non-interest income		29,060	9,209	56,972	22,656
Non-interest expenses:
Salaries and employee benefits		20,447	9,319	46,529	25,789
Occupancy and equipment		1,108	946	3,159	2,845
Loan expenses		492	192	1,100	472
Professional fees		681	820	2,118	2,000
Advertising and promotion		781	574	1,996	1,769
Data processing		460	343	1,260	990
Information technology		394	334	1,100	919
Pennsylvania bank shares tax		254	169	734	495
Other		1,217	850	3,156	3,701
Total non-interest expenses		25,834	13,547	61,152	38,980
Income before income taxes		11,985	4,231	22,659	9,410
Income tax expense		2,773	914	5,218	2,065
Net income	$	9,212	3,317	17,441	7,345
Basic earnings per common share	$	1.51	0.52	2.83	1.15
Diluted earnings per common share	$	1.51	0.52	2.82	1.14

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


		Three months ended		Nine months ended
		September 30,		September 30,
(dollars in thousands)		2020	2019	2020	2019
Net income:	$	9,212	3,317	17,441	7,345

Other comprehensive income:
Net change in unrealized gains on investment securities available for sale:
Net unrealized gains arising during the period, net of tax expense of $144, $19, $761 and $220, respectively		304	64	2,489	767
Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of ($301), ($16), ($313), and ($46), respectively		(989)	(58)	(1,032)	(166)
Unrealized investment (losses) gains, net of tax (benefit) expense of $(157), $3, $448, and $174, respectively		(685)	6	1,457	601
Total other comprehensive (loss) income		(685)	6	1,457	601
Total comprehensive income	$	8,527	3,323	18,898	7,946

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


					Unearned		Accumulated
					Common		Other
		Common		Treasury	Stock -	Retained	Comprehensive
(dollars in thousands)		Stock	Surplus	Stock	ESOP	Earnings	Income (Loss)	Total
Balance, January 1, 2020	$	6,408	80,255	(62)	—	34,097	(3)	120,695
Comprehensive income:
Net income						2,516		2,516
Change in unrealized gains on securities available-for-sale, net of tax							429	429
Total comprehensive income								2,945
Common stock issued through share-based awards and exercises		6	26					32
Net purchase of treasury stock through publicly announced plans			63	(5,766)				(5,703)
Stock based compensation			64					64
Balance, March 31, 2020	$	6,414	80,408	(5,828)	—	36,613	426	118,033
Comprehensive income:
Net income						5,713		5,713
Change in unrealized gains on securities available-for-sale, net of tax							1,713	1,713
Total comprehensive income								7,426
Stock based compensation			59					59
Balance, June 30, 2020	$	6,414	80,467	(5,828)	—	42,326	2,139	125,518
Comprehensive income:
Net income						9,212		9,212
Change in unrealized gains on securities available-for-sale, net of tax							(685)	(685)
Total comprehensive income								8,527
Dividends paid or accrued, $0.125 per share						(763)		(763)
Shares purchased for ESOP plan (133,601)					(2,000)			(2,000)
Common stock issued through share-based awards and exercises		36	337					373
Stock based compensation			177					177
Balance, September 30, 2020	$	6,450	80,981	(5,828)	(2,000)	50,775	1,454	131,832

Table of Contents


					Unearned		Accumulated
					Common		Other
		Common		Treasury	Stock -	Retained	Comprehensive
(dollars in thousands)		Stock	Surplus	Stock	ESOP	Earnings	Income (Loss)	Total
Balance, January 1, 2019	$	6,407	79,919	—	—	23,616	(390)	109,552
Comprehensive income:
Net income						2,006		2,006
Change in unrealized gains on securities available-for-sale, net of tax							373	373
Total comprehensive income								2,379
Stock based compensation			61					61
Balance, March 31, 2019	$	6,407	79,980	—	—	25,622	(17)	111,992
Comprehensive income:
Net income						2,022		2,022
Change in unrealized gains on securities available-for-sale, net of tax							222	222
Total comprehensive income								2,244
Stock based compensation			143					143
Balance, June 30, 2019	$	6,407	80,123	—	—	27,644	205	114,379
Comprehensive income:
Net income						3,317		3,317
Change in unrealized gains on securities available-for-sale, net of tax							6	6
Total comprehensive income								3,323
Common stock issued through share-based awards and exercises		1	7					8
Stock based compensation			62					62
Balance, September 30, 2019	$	6,408	80,192	—	—	30,961	211	117,772

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended
	September 30,
(dollars in thousands)	2020		2019
Net income	$	17,441	7,345
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of investment securities		(1,345)	(212)
Depreciation and amortization		(992)	1,581
Loss on disposal of premises and equipment		—	14
Net amortization of investment premiums and discounts		238	(22)
Provision for loan losses		7,139	938
Amortization of issuance costs on subordinated debt		83	—
Compensation expense for stock options		300	266
Net change in fair value of loans held for investment		(174)	(390)
Net change in fair value of loans held for sale		(4,424)	82
Net change in fair value of derivative instruments		(6,346)	16
Gain on sale of OREO		(6)	—
SBA loan income		(1,821)	(1,150)
Proceeds from sale of loans		1,356,637	432,831
Loans originated for sale		(1,498,264)	(421,092)
Mortgage banking income		(45,395)	(19,139)
Increase in accrued interest receivable		(1,518)	(266)
Increase in other assets

Price	17.69	EPS	1
Shares	6	P/E	15
MCap	113	P/FCF	26
Net Debt	-41	EBIT	24
TEV	73	TEV/EBIT	3
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-09
10-Q	2020-06-30	Filed 2020-08-10
10-Q	2020-03-31	Filed 2020-05-11
10-K	2019-12-31	Filed 2020-03-30
10-Q	2019-09-30	Filed 2019-11-13
10-Q	2019-06-30	Filed 2019-08-14
10-Q	2019-03-31	Filed 2019-05-29
10-K	2018-12-31	Filed 2019-04-01

8-K	2020-11-09
8-K	2020-10-22
8-K	2020-08-31
8-K	2020-07-29
8-K	2020-07-27
8-K	2020-06-11
8-K	2020-05-05
8-K	2020-04-27
8-K	2020-03-12
8-K	2020-02-05
8-K	2020-02-03
8-K	2020-01-27
8-K	2019-12-18
8-K	2019-10-24
8-K	2019-07-29
8-K	2019-05-29
8-K	2019-05-23
8-K	2019-05-23
8-K	2019-05-17
8-K	2019-04-11
8-K	2019-03-07
8-K	2019-01-25

EX-31.1	mrbk-20200930xex31d1.htm
EX-31.2	mrbk-20200930xex31d2.htm
EX-32	mrbk-20200930xex32.htm

MRBK 10Q Quarterly Report

Meridian Earnings 2020-09-30