MALVERN, PA — Meridian Corporation (Nasdaq: MRBK) revised its first-quarter earnings after learning of a change in the status of a participated loan following the company’s original April 23 earnings release, driving a sharp increase in credit-loss provisions and a 72% decline in quarterly profit.
Net income for the quarter ended March 31 fell to $2.0 million, or $0.17 per diluted share, from $7.2 million in the prior quarter. Meridian said the revised financial results will align with figures included in its upcoming quarterly filing with the Securities and Exchange Commission.
The company increased its provision for credit losses to $7.5 million from $3.3 million in the fourth quarter, largely tied to a $3.9 million charge-off on a non-performing commercial mortgage loan following collateral depreciation.
Net charge-offs rose to $7.8 million during the quarter from $3.5 million in the prior period. Charge-offs included $3.9 million tied to the commercial mortgage loan, $2.5 million in SBA loans, $856,000 in finance receivables, and $745,000 in small-ticket equipment leases.
Non-performing loans increased to $58.7 million at March 31 from $55.1 million at year-end, raising the ratio of non-performing loans to total loans to 2.64% from 2.50%.
Meridian said more than half of its non-performing SBA loans were originated during 2020 and 2021, before the Federal Reserve’s rapid interest-rate increases. Of the bank’s $23.9 million in non-performing SBA loans, about 54% are guaranteed by the SBA.
Despite the earnings decline, the bank reported improvement in several core operating metrics. Pre-provision net revenue rose 21% from the year-earlier quarter to $10.1 million, while net interest margin improved to 3.82%.
Interest expense fell $1.7 million from the previous quarter as deposit and borrowing costs declined. Meridian said the overall cost of deposits fell 19 basis points during the period.
Total assets stood at $2.6 billion at March 31, little changed from year-end. Portfolio loans increased $11.1 million, driven by growth in commercial and industrial lending and construction loans.
Commercial and industrial loans increased $15.4 million during the quarter, while construction loans rose $12.8 million. Commercial mortgage balances declined $8.9 million and SBA loan balances fell $5.3 million.
Non-interest income declined 34% from the prior quarter, reflecting weaker mortgage banking revenue and lower SBA loan sales income. Mortgage loan sales fell $40.6 million, or 20%, from the prior quarter.
Meridian’s board declared a quarterly cash dividend of $0.14 per common share payable May 11 to shareholders of record as of May 4.
Total stockholders’ equity increased to $200.2 million at March 31 from $199.7 million at year-end. The bank’s community bank leverage ratio was 9.58% at quarter-end.
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