• Meridian Corporation Reports Third Quarter 2023 Results and Announces a Quarterly Dividend of $0.125 per Common Share

    ソース: Nasdaq GlobeNewswire / 27 10 2023 11:13:26   America/New_York

    MALVERN, Pa., Oct. 27, 2023 (GLOBE NEWSWIRE) -- Meridian Corporation (Nasdaq: MRBK) today reported:

    • Net income of $4.0 million and diluted earnings of $0.35 per share for the third quarter ended September 30, 2023.
    • Return on average assets and return on average equity for the third quarter of 2023 were 0.73% and 10.17%, respectively.
    • Net interest margin was 3.29% for the third quarter of 2023, with a loan yield of 7.08%.
    • Total assets at September 30, 2023 and June 30, 2023 were $2.2 billion, compared to $1.9 billion at September 30, 2022.
    • Third quarter overall commercial loan growth was $21.3 million, or 6.1% annualized; residential and home equity loans increased by $15.1 million on a combined basis, or 19.2% annualized.
    • Third quarter deposit growth was $26.0 million, or 6.0% annualized.
    • Raised $9.7 million in subordinated debt at 8.00% during the quarter for growth and capital purposes.
    • On October 26, 2023, the Board of Directors declared a quarterly cash dividend of $0.125 per common share, payable November 20, 2023 to shareholders of record as of November 13, 2023.

    Total assets remained relatively flat quarter over quarter, however our portfolio loans increased $25.3 million, or 1.4% and total deposits increased $26.0 million, or 1.5%, during the period. "We were pleased with our growth in the third quarter as we prioritize our asset mix to emphasize relationship-based credits," said Christopher J. Annas, Chairman and CEO. "We continue to show growth in deposits, reduction in borrowings, and strengthening of our capital position. While our margin compressed slightly, we remain focused on high quality assets and prudent management of the balance sheet."

    Mortgage banking revenue was down $231 thousand over the prior quarter reflecting lower than anticipated loan production along with lower gain on sale margins. "With the seasonal slowdown and increasing mortgage rates, mortgage origination decreased $14.5 million. The increase in the ten year Treasury and the lack of homes for sale continue to plague the division as we are simultaneously working to tailor operations to reasonable levels," Mr. Annas added.

    Mr. Annas concluded, "Our growth this year in such a challenging environment is a strong indicator of our success in and our commitment to the regions we serve. We remain focused on opportunities that provide us with additional business and help foster long-term customer connections."

    Select Condensed Financial Information

     As of or for the quarter ended (Unaudited)
     September 30,
    2023    		 June 30,
    2023    		 March 31,
    2023    		 December 31,
    2022    		 September 30,
    2022
     (Dollars in thousands, except per share data)
    Income:         
    Net income$4,005  $4,645  $4,021  $4,557  $5,798 
    Basic earnings per common share 0.36   0.42   0.36   0.40   0.49 
    Diluted earnings per common share 0.35   0.41   0.34   0.39   0.48 
    Net interest income 17,224   17,098   17,677   18,518   18,026 
              
    Balance Sheet:         
    Total assets$2,230,971  $2,206,877  $2,229,783  $2,062,228  $1,921,924 
    Loans, net of fees and costs 1,885,629   1,859,839   1,818,189   1,743,682   1,610,349 
    Total deposits 1,808,645   1,782,605   1,770,413   1,712,479   1,673,553 
    Non-interest bearing deposits 244,668   269,174   262,636   301,727   290,169 
    Stockholders' equity 155,114   153,962   153,049   153,280   151,161 
              
    Balance Sheet (Average Balances):         
    Total assets$2,184,385  $2,166,574  $2,088,599  $1,962,915  $1,868,194 
    Total interest earning assets 2,086,331   2,070,640   1,995,460   1,877,967   1,791,255 
    Loans, net of fees and costs 1,876,648   1,847,736   1,783,322   1,674,215   1,565,861 
    Total deposits 1,782,140   1,775,444   1,759,571   1,698,597   1,597,648 
    Non-interest bearing deposits 253,485   266,675   296,037   312,297   295,975 
    Stockholders' equity 156,271   154,179   153,179   151,791   157,614 
              
    Performance Ratios (Annualized):         
    Return on average assets 0.73%  0.86%  0.78%  0.92%  1.23%
    Return on average equity 10.17%  12.08%  10.65%  11.91%  14.59%
                        

    Income Statement - Third Quarter 2023 Compared to Second Quarter 2023

    Net income of $4.0 million, decreased $640 thousand from $4.6 million for the second quarter driven by a lower level of non-interest income and a higher level of non-interest expense, partially offset by an increase in net interest income and lower loan loss provision. Non-interest income decreased $1.0 million or 11.4%, due to lower levels of gains on sale of mortgage and SBA loans. Non-interest expense increased $403 thousand, or 2.1% due primarily to increased salaries and benefits expense and professional fees. Net interest income increased $128 thousand, or 0.7%, on a tax equivalent basis due to an increase in earnings assets. Detailed explanations of the major categories of income and expense follow below.

    Net Interest income

    The rate/volume analysis table below analyzes dollar changes in the components of interest income and interest expense as they relate to the change in balances (volume) and the change in interest rates (rate) of tax-equivalent net interest income for the periods indicated and allocated by rate and volume. Changes in interest income and/or expense related to changes attributable to both volume and rate have been allocated proportionately based on the relationship of the absolute dollar amount of the change in each category.

     Quarter Ended        
    (dollars in thousands)September 30,
    2023    		 June 30,
    2023    		 $ Change % Change Change due to rate Change due to volume
    Interest income:           
    Due from banks$244 $275 $(31)  (11.3)% $25  $(56)
    Federal funds sold 1  3  (2)  (66.7)%  1   (3)
    Investment securities - taxable (1) 901  992  (91)  (9.2)%  (18)  (73)
    Investment securities - tax exempt (1) 410  426  (16)  (3.8)%  (9)  (7)
    Loans held for sale 456  407  49   12.0%  40   9 
    Loans held for investment (1) 33,526  31,810  1,716   5.4%  1,213   503 
    Total loans 33,982  32,217  1,765   5.5%  1,253   512 
    Total interest income$35,538 $33,913 $1,625   4.8% $1,252  $373 
    Interest expense:             
    Interest-bearing demand deposits$1,488 $1,840 $(352)  (19.1)% $42  $(394)
    Money market and savings deposits 6,755  5,371  1,384   25.8%  796   588 
    Time deposits 7,300  6,812  488   7.2%  537   (49)
    Total deposits 15,543  14,023  1,520   10.8%  1,375   145 
    Borrowings 2,086  2,129  (43)  (2.0)%  (103)  60 
    Subordinated debentures 606  586  20   3.4%  6   14 
    Total interest expense 18,235  16,738  1,497   8.9%  1,278   219 
    Net interest income differential$17,303 $17,175 $128   0.75% $(26) $154 
    (1) Reflected on a tax-equivalent basis.
     

    Interest income increased $1.6 million on a tax equivalent basis, quarter-over-quarter, due to a higher yield on earning assets and higher levels of average earning assets. The yield on earnings assets rose 19 basis points during the period, while average earning assets increased by $15.7 million.

    The yield on total loans increased 19 basis points and the yield on cash and investments decreased 1 basis point combined, reflecting the impact on rates from the Federal Reserve’s monetary policy. Nearly $713.5 million in loans repriced during the quarter with an average increase of 25 basis points. Average total loans, excluding residential loans for sale, increased $28.9 million. Construction, commercial real estate, and small business loans increased $19.3 million on average, combined, while home equity loans and residential real estate loans held in portfolio increased $15.9 million on average, combined.

    Total interest expense increased $1.5 million, quarter-over-quarter, due primarily to market interest rate rises, and increases in both deposit and borrowing average balances. Interest expense on deposits increased $1.5 million as total average deposits increased $19.9 million and the cost of interest-bearing deposits increased 30 basis points to 4.03%. Interest expense on borrowings decreased $43 thousand as the cost of borrowings decreased 30 basis points due to the positive carry on a $75 million pay fixed swap, partially offset by the increase in average borrowings for the period.

    Although net interest income increased quarter over quarter, the net interest margin decreased 4 basis points to 3.29% as the cost of funds outpaced the increase in yield on earnings assets. The margin was also affected by a reduction in average non-interest bearing deposits, which were down on average by $13.2 million for the quarter.

    Provision for Credit Losses

    The overall provision for credit losses is comprised of provisioning for funded loans as well as unfunded commitments. The combined provision decreased to $82 thousand for the third quarter from $705 thousand for the second quarter. The reduction was due in part to a decline in the overall exposure to unfunded loan balances at the end of the third quarter, causing a reduction in the unfunded reserve of $192 thousand. The remaining decrease in provisioning was due largely to favorable changes in some baseline loss rates and certain macroeconomic factors underlying the funded loss model.

    Non-interest income

    The following table presents the components of non-interest income for the periods indicated:

     Quarter Ended    
    (Dollars in thousands)September 30,
    2023    		 June 30,
    2023    		 $ Change % Change
    Mortgage banking income$4,819  $5,050  $(231)  (4.6)%
    Wealth management income 1,258   1,235   23   1.9%
    SBA loan income 982   1,767   (785)  (44.4)%
    Earnings on investment in life insurance 201   193   8   4.1%
    Net change in the fair value of derivative instruments 103   183   (80)  (43.7)%
    Net change in the fair value of loans held-for-sale 111   (199)  310   (155.8)%
    Net change in the fair value of loans held-for-investment (570)  (219)  (351)  160.3%
    Net (loss) gain on hedging activity 82   (1)  83   (8300.0)%
    Net loss on sale of investment securities available-for-sale (3)  (54)  51   (94.4)%
    Other 1,103   1,169   (66)  (5.6)%
    Total non-interest income$8,086  $9,124  $(1,038)  (11.4)%
                  

    Total non-interest income decreased $1.0 million, or 11.4%, quarter-over-quarter as a result of lower mortgage banking income and lower SBA loan income. Mortgage banking income decreased $231 thousand, or 4.6% quarter-over-quarter, due to lower levels of mortgage loan originations, which decreased $14.5 million. In addition to lower volume, the gain on sale margin decreased 18 basis points over the prior quarter. The fair value of loans held for sale and loans held for investment, along with the fair value of derivatives instruments and net gain on hedging activity, decreased $38 thousand in total.

    SBA loan income decreased $785 thousand, or 44.4%, due to a combination of a decrease in the gain on sale of SBA loans and an increase in servicing asset impairment quarter over quarter. While the value of SBA loans sold for the quarter-ended September 30, 2023 was only slightly less than the volume sold for the quarter-ended June 30, 2023 ($26.2 million vs $27.8 million), the gross margin on sale was 6.2% for the quarter-ended September 30, 2023 compared to 7.0% for the quarter-ended June 30, 2023. Also contributing to the decrease in SBA loan income was an increase in servicing asset impairment, led by an increase in the prepayment assumption that drives the servicing asset valuation.

    Non-interest expense

    The following table presents the components of non-interest expense for the periods indicated:

     Quarter Ended    
    (Dollars in thousands)September 30,
    2023    		 June 30,
    2023    		 $ Change % Change
    Salaries and employee benefits$12,420  $12,152  $268   2.2%
    Occupancy and equipment 1,226   1,140   86   7.5%
    Professional fees 1,104   1,004   100   10.0%
    Advertising and promotion 848   1,091   (243)  (22.3)%
    Data processing and software 1,652   1,681   (29)  (1.7)%
    Pennsylvania bank shares tax 244   245   (1)  (0.4)%
    Other 2,524   2,302   222   9.6%
    Total non-interest expense$20,018  $19,615  $403   2.1%
                    

    Salaries and employee benefits increased $268 thousand overall, with bank and wealth segments combined having increased $234 thousand, and the mortgage segment increased $34 thousand. Bank and wealth segment salaries and employee benefits were up due to one-time payment of severance to a former Meridian Equipment Finance officer as well as stock based compensation.

    Professional fees increased $100 thousand during the current quarter due to an increase in loan and lease workout expenses which has helped lead to an increase in recoveries when compared to the prior year. Professional fees were also impacted by system conversion fees for a new loan servicing platform for our mortgage segment. Occupancy expenses were up due to branch re-locations, equipment and some repairs/maintenance. Advertising and promotion expense decreased $243 thousand from the prior quarter as a result of a decrease in business development expense and certain advertising expense due to seasonality. Other non-interest expense increased $222 thousand over the prior quarter due largely to an increase in FDIC insurance expense, an increase in certain commercial and consumer related loan expenses due to portfolio growth, and an increase in our mortgage related representations and warranties reserves, offset by a reduction in the unfunded allowance for credit losses.

    Balance Sheet - September 30, 2023 Compared to June 30, 2023

    As of September 30, 2023, total assets increased $24.1 million, or 1.1%, to $2.2 billion from June 30, 2023. This increase was due to an increase in cash and cash equivalents and an increase in loans. Interest-bearing cash increased $9.7 million, or 26.8%, to $46.0 million as of September 30, 2023, from June 30, 2023.

    Portfolio loan growth was $25.3 million, or 1.4% quarter-over-quarter. Commercial mortgage loans increased $47.9 million, or 7.4%, residential real estate loans held in portfolio increased $8.5 million, or 3.4%, while home equity lines and loans increased $6.6 million, or 9.8% as well. Partially offsetting portfolio loan growth were commercial & industrial loans which decreased $10.4 million, or 3.4%, construction loans which decreased $9.5 million, or 3.3%, small business loans which decreased $6.7 million, or 4.5%, due to loan sales during the period, and lease financings that decreased $11.1 million, or 7.4% from June 30, 2023.

    Total deposits increased $26.0 million, or 1.5% quarter-over-quarter, due largely to higher levels of money market deposits which increased $36.1 million. Much of the increase came from business accounts as well as some seasonal deposits related to school tuition and taxes. Noninterest-bearing deposits decreased $24.5 million, during the period. Servicing deposits of approximately $7.2 million also paid out seasonally, with much of the rest of the change in non-interest bearing accounts migrating to other accounts. Time deposits increased $13.9 million, or 2.1%, from retail and wholesale efforts as customers opt for higher term interest rates.

    In September, Meridian Corporation raised $9.7 million in subordinated debt at 8.00% with a term of 10 years. The funds will be used for general corporate purposes, including providing capital to Meridian Bank and supporting organic growth.

    Consolidated stockholders’ equity of the Corporation increased by $1.2 million from June 30, 2023, to $155.1 million as of September 30, 2023. Changes to equity for the current quarter included net income of $4.0 million, partially offset by a $1.5 million decline in other comprehensive income and prior quarter dividends paid of $1.4 million. The Community Bank Leverage Ratio for the Bank was 9.65% at September 30, 2023.

    Asset Quality Summary

    The ratio of non-performing loans to total loans increased to 1.53% as of September 30, 2023, from 1.44% as of June 30, 2023, while non-performing assets to total assets was up to 1.38% as of September 30, 2023, compared to 1.32% at June 30, 2023. Total non-performing loans of $29.1 million as of September 30, 2023, increased $1.7 million from $27.4 million as of June 30, 2023 due to downgrades of several SBA loans and residential real estate loans, offset somewhat by the impact of returning a residential real estate loan to accrual status, and charge-offs in commercial and SBA loans as of September 30, 2023.

    Meridian realized net charge-offs of 0.05% of total average loans for the quarter ended September 30, 2023, consistent with the quarter ended June 30, 2023 level of 0.05%. Net charge-offs for the quarter ended September 30, 2023 were $913 thousand, comprised of $1.0 million in charge-offs, with $95 thousand in recoveries for the quarter. While a large percentage of charge-offs for the quarter ended September 30, 2023 continue to come from small ticket equipment leases, the level of charge-offs in this portfolio declined by $169 thousand, while we also realized $90 thousand of recoveries related to the small ticket equipment lease portfolio. There were also charge-offs of $272 thousand on SBA loans that had previously been classified as non-performing loans in a prior period.

    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 1.05% as of September 30, 2023 compared to 1.10% as of June 30, 2023. As of September 30, 2023 there were specific reserves of $2.6 million against non-performing loans, an increase from $2.5 million as of June 30, 2023 due to the increase of the existing specific reserve on a commercial loan relationship classified as a non-performing, combined with the impact of establishing a new specific reserve on an SBA loan relationship during the current quarter.

    Bank Sector Considerations

    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.

    As a commercial bank, the majority of Meridian's deposit base is comprised of business deposits (58%), with consumer deposits amounting to 12% at September 30, 2023. Municipal deposits (8%) and brokered deposits (22%) provide growth funding. Historically, business deposits lag loan fundings. A typical business relationship maintains operating accounts, investment accounts or sweep accounts and business owners may also have personal savings or wealth accounts. Deposit balances in business accounts have a tendency to be higher on average than consumer accounts. At September 30, 2023, 63% of business accounts and 88% of consumer accounts were fully insured by the FDIC. The municipal deposits are 100% collateralized and brokered deposits are 100% FDIC insured. The level of uninsured deposits for the entire deposit base was 23% at September 30, 2023.

    Meridian also maintains borrowing arrangements with various correspondent banks to meet short-term liquidity needs and has access to approximately $1.0 billion 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 new Bank Term Funding Program ("BTFP") announced by the Federal Reserve. At September 30, 2023 Meridian elected to secure $33 million in borrowings from the Federal Reserve under the BTFP due to the favorable rate. Management believes that the above sources of liquidity provide Meridian with the necessary resources to meet its short-term and long-term funding requirements.

    About Meridian Corporation

    Meridian Bank, the wholly owned subsidiary of Meridian Corporation, is an innovative community bank serving Pennsylvania, New Jersey, Delaware and Maryland. Through its 20 offices, including banking branches and mortgage locations, Meridian offers a full suite of financial products and services. Meridian specializes in business and industrial lending, retail and commercial real estate lending, electronic payments, and wealth management solutions through Meridian Wealth Partners. Meridian also offers a broad menu of high-yield depository products supported by robust online and mobile access. For additional information, visit our website at www.meridianbanker.com. Member FDIC.

    “Safe Harbor” Statement

    In addition to historical information, this press release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Meridian Corporation’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Meridian Corporation’s control). Numerous competitive, economic, regulatory, legal and technological factors, risks and uncertainties that could cause actual results to differ materially include, without limitation, credit losses and the credit risk of our commercial and consumer loan products; changes in the level of charge-offs and changes in estimates of the adequacy of the allowance for credit losses, or ACL; cyber-security concerns; rapid technological developments and changes; increased competitive pressures; changes in spreads on interest-earning assets and interest-bearing liabilities; changes in general economic conditions and conditions within the securities markets; unanticipated changes in our liquidity position; unanticipated changes in regulatory and governmental policies impacting interest rates and financial markets; legislation affecting the financial services industry as a whole, and Meridian Corporation, in particular; changes in accounting policies, practices or guidance; developments affecting the industry and the soundness of financial institutions and further disruption to the economy and U.S. banking system; among others, could cause Meridian Corporation’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. Meridian Corporation cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Meridian Corporation’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2022 and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Meridian Corporation does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Meridian Corporation or by or on behalf of Meridian Bank.

    Contact:
    Christopher Annas
    cannas@meridianbanker.com
    484-568-5000

    MERIDIAN CORPORATION AND SUBSIDIARIES
    FINANCIAL RATIOS (Unaudited)
    (Dollar amounts and shares in thousands, except per share amounts)

     Quarter Ended
     September 30,
    2023    		 June 30,
    2023    		 March 31,
    2023    		 December 31,
    2022    		 September 30,
    2022
    Earnings and Per Share Data:         
    Net income$4,005  $4,645  $4,021  $4,557  $5,798 
    Basic earnings per common share$0.36  $0.42  $0.36  $0.40  $0.49 
    Diluted earnings per common share$0.35  $0.41  $0.34  $0.39  $0.48 
    Common shares outstanding 11,178   11,178   11,305   11,466   11,689 
              
    Performance Ratios:         
    Return on average assets 0.73%  0.86%  0.78%  0.92%  1.23%
    Return on average equity 10.17   12.08   10.65   11.91   14.59 
    Net interest margin (tax-equivalent) 3.29   3.33   3.61   3.93   4.01 
    Yield on earning assets (tax-equivalent) 6.76   6.57   6.31   5.88   5.10 
    Cost of funds 3.63   3.39   2.83   2.07   1.17 
    Efficiency ratio 79.09%  74.80%  73.16%  75.61%  71.72%
              
    Asset Quality Ratios:         
    Net charge-offs (recoveries) to average loans 0.05%  0.05%  0.08%  0.05%  0.02%
    Non-performing loans to total loans 1.53   1.44   1.25   1.20   1.40 
    Non-performing assets to total assets 1.38   1.32   1.11   1.11   1.20 
    Allowance for credit losses to:         
    Total loans held for investment 1.04   1.09   1.12   1.08   1.18 
    Total loans held for investment (excluding loans at fair value) (1) 1.05   1.10   1.13   1.09   1.20 
    Non-performing loans 67.61%  73.97%  88.41%  88.66%  82.20%
              
    Capital Ratios:         
    Book value per common share$13.88  $13.77  $13.54  $13.37  $12.93 
    Tangible book value per common share$13.53  $13.42  $13.18  $13.01  $12.58 
    Total equity/Total assets 6.95%  6.98%  6.86%  7.43%  7.87%
    Tangible common equity/Tangible assets - Corporation (1) 6.79   6.81   6.70   7.25   7.67 
    Tangible common equity/Tangible assets - Bank (1) 8.89   8.54   8.26   8.80   9.61 
    Tier 1 leverage ratio - Corporation 7.52   7.46   7.65   8.13   8.54 
    Tier 1 leverage ratio - Bank 9.65   9.22   9.32   9.95   10.52 
    Common tier 1 risk-based capital ratio - Corporation 8.43   8.38   8.44   8.77   9.28 
    Common tier 1 risk-based capital ratio - Bank 10.82   10.35   10.27   10.73   11.44 
    Tier 1 risk-based capital ratio - Corporation 8.43   8.38   8.44   8.77   9.28 
    Tier 1 risk-based capital ratio - Bank 10.82   10.35   10.27   10.73   11.44 
    Total risk-based capital ratio - Corporation 11.96   11.49   11.63   12.05   12.80 
    Total risk-based capital ratio - Bank 11.85%  11.43%  11.41%  11.87%  12.70%
    (1) See Non-GAAP reconciliation in the Appendix        
             

    MERIDIAN CORPORATION AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
    (Dollar amounts and shares in thousands, except per share amounts)

     Three Months Ended Nine Months Ended
     September 30,
    2023    		 June 30,
    2023    		 September 30,
    2022    		 September 30,
    2023    		 September 30,
    2022
    Interest income:         
    Loans and other finance receivables, including fees$33,980  $32,215  $21,848  $95,612  $58,187 
    Securities - taxable 901   992   648   2,853   1,599 
    Securities - tax-exempt 333   351   369   1,038   1,015 
    Cash and cash equivalents 245   278   93   741   157 
    Total interest income 35,459   33,836   22,958   100,244   60,958 
    Interest expense:         
    Deposits 15,543   14,023   4,075   41,013   7,182 
    Borrowings 2,692   2,715   857   7,230   2,166 
    Total interest expense 18,235   16,738   4,932   48,243   9,348 
    Net interest income 17,224   17,098   18,026   52,001   51,610 
    Provision for credit losses 82   705   526   2,186   1,743 
    Net interest income after provision for credit losses 17,142   16,393   17,500   49,815   49,867 
    Non-interest income:         
    Mortgage banking income 4,819   5,050   7,329   13,143   21,367 
    Wealth management income 1,258   1,235   1,114   3,689   3,672 
    SBA loan income 982   1,767   989   3,463   3,946 
    Earnings on investment in life insurance 201   193   138   585   413 
    Net change in the fair value of derivative instruments 103   183   127   217   (713)
    Net change in the fair value of loans held-for-sale 111   (199)  (237)  (88)  (1,094)
    Net change in the fair value of loans held-for-investment (570)  (219)  (886)  (673)  (2,499)
    Net (loss) gain on hedging activity 82   (1)  399   81   4,941 
    Net loss on sale of investment securities available-for-sale (3)  (54)  —   (58)  — 
    Other 1,103   1,169   1,251   3,489   3,695 
    Total non-interest income 8,086   9,124   10,224   23,848   33,728 
    Non-interest expense:         
    Salaries and employee benefits 12,420   12,152   13,360   35,633   41,585 
    Occupancy and equipment 1,226   1,140   1,191   3,610   3,619 
    Professional fees 1,104   1,004   899   2,930   2,659 
    Advertising and promotion 848   1,091   1,165   2,799   3,340 
    Data processing and software 1,652   1,681   1,442   4,764   3,939 
    Pennsylvania bank shares tax 244   245   202   735   612 
    Other 2,524   2,302   2,002   6,951   5,646 
    Total non-interest expense 20,018   19,615   20,261   57,422   61,400 
    Income before income taxes 5,210   5,902   7,463   16,241   22,195 
    Income tax expense 1,205   1,257   1,665   3,568   4,927 
    Net income$4,005  $4,645  $5,798  $12,673  $17,268 
              
    Basic earnings per common share$0.36  $0.42  $0.49  $1.14  $1.45 
    Diluted earnings per common share$0.35  $0.41  $0.48  $1.11  $1.40 
              
    Basic weighted average shares outstanding 11,057   11,062   11,736   11,130   11,928 
    Diluted weighted average shares outstanding 11,363   11,304   12,118   11,449   12,344 
                        

    MERIDIAN CORPORATION AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)

    (Dollar amounts and shares in thousands, except per share amounts)

    		September 30,
    2023    		 June 30,
    2023    		 March 31,
    2023    		 December 31,
    2022    		 September 30,
    2022
    Assets:         
    Cash and due from banks$13,737  $10,576  $8,473  $11,299  $12,114 
    Interest-bearing deposits at other banks 46,022   36,290   100,030   27,092   20,774 
    Cash and cash equivalents 59,759   46,866   108,503   38,391   32,888 
    Securities available-for-sale, at fair value 122,218   126,668   142,933   135,346   127,999 
    Securities held-to-maturity, at amortized cost 36,232   36,463   36,525   37,479   37,922 
    Equity investments 2,019   2,097   2,110   2,086   2,092 
    Mortgage loans held for sale, at fair value 23,144   40,422   35,701   22,243   33,800 
    Loans and other finance receivables, net of fees and costs 1,885,629   1,859,839   1,818,189   1,743,682   1,610,349 
    Allowance for credit losses (19,683)  (20,242)  (20,442)  (18,828)  (18,974)
    Loans and other finance receivables, net of the allowance for credit losses 1,865,946   1,839,597   1,797,747   1,724,854   1,591,375 
    Restricted investment in bank stock 8,309   9,157   10,173   6,931   5,217 
    Bank premises and equipment, net 13,310   13,234   13,281   13,349   12,835 
    Bank owned life insurance 28,641   28,440   28,247   28,055   22,916 
    Accrued interest receivable 8,984   7,651   7,651   7,363   6,008 
    Other real estate owned 1,703   1,703   1,703   1,703   — 
    Deferred income taxes 4,993   4,258   4,017   3,936   5,722 
    Servicing assets 11,835   12,193   12,125   12,346   12,807 
    Goodwill 899   899   899   899   899 
    Intangible assets 3,022   3,073   3,124   3,175   3,226 
    Other assets 39,957   34,156   25,044   24,072   26,218 
    Total assets$2,230,971  $2,206,877  $2,229,783  $2,062,228  $1,921,924 
              
    Liabilities:         
    Deposits:         
    Non-interest bearing$244,668  $269,174  $262,636  $301,727  $290,169 
    Interest bearing         
    Interest checking 156,537   155,907   232,616   219,838   236,562 
    Money market and savings deposits 746,599   710,546   647,904   697,564   709,127 
    Time deposits 660,841   646,978   627,257   493,350   437,695 
    Total interest-bearing deposits 1,563,977   1,513,431   1,507,777   1,410,752   1,383,384 
    Total deposits 1,808,645   1,782,605   1,770,413   1,712,479   1,673,553 
    Borrowings 177,959   194,636   233,883   122,082   23,458 
    Subordinated debentures 50,079   40,348   40,319   40,346   40,597 
    Accrued interest payable 7,814   5,612   3,836   2,389   1,154 
    Other liabilities 31,360   29,714   28,283   31,652   32,001 
    Total liabilities 2,075,857   2,052,915   2,076,734   1,908,948   1,770,763 
              
    Stockholders’ equity:         
    Common stock 13,181   13,181   13,180   13,156   13,101 
    Surplus 79,731   79,650   79,473   79,072   78,313 
    Treasury stock (26,079)  (26,079)  (24,512)  (21,821)  (18,033)
    Unearned common stock held by employee stock ownership plan (1,403)  (1,403)  (1,403)  (1,403)  (1,602)
    Retained earnings 102,043   99,434   96,180   95,815   92,405 
    Accumulated other comprehensive loss (12,359)  (10,821)  (9,869)  (11,539)  (13,023)
    Total stockholders’ equity 155,114   153,962   153,049   153,280   151,161 
    Total liabilities and stockholders’ equity$2,230,971  $2,206,877  $2,229,783  $2,062,228  $1,921,924 
                        

    MERIDIAN CORPORATION AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SEGMENT INFORMATION (Unaudited)
    (Dollar amounts and shares in thousands, except per share amounts)

     Three Months Ended
     September 30,
    2023    		 June 30,
    2023    		 March 31,
    2023    		 December 31,
    2022    		 September 30,
    2022
    Interest income$35,459  $33,836  $30,947  $27,763  $22,958 
    Interest expense 18,235   16,738   13,270   9,245   4,932 
    Net interest income 17,224   17,098   17,677   18,518   18,026 
    Provision for credit losses 82   705   1,399   746   526 
    Non-interest income 8,086   9,124   6,638   7,996   10,224 
    Non-interest expense 20,018   19,615   17,789   20,047   20,261 
    Income before income tax expense 5,210   5,902   5,127   5,721   7,463 
    Income tax expense 1,205   1,257   1,106   1,164   1,665 
    Net Income$4,005  $4,645  $4,021  $4,557  $5,798 
              
    Basic weighted average shares outstanding 11,057   11,062   11,272   11,389   11,736 
    Basic earnings per common share$0.36  $0.42  $0.36  $0.40  $0.49 
              
    Diluted weighted average shares outstanding 11,363   11,304   11,656   11,795   12,118 
    Diluted earnings per common share$0.35  $0.41  $0.34  $0.39  $0.48 
                        


     Segment Information
     Three Months Ended September 30, 2023 Three Months Ended September 30, 2022
    (dollars in thousands)Bank Wealth Mortgage Total Bank Wealth Mortgage Total
    Net interest income$17,205  $(15) $34  $17,224  $17,664  $218  $144  $18,026 
    Provision for credit losses 82   —   —   82   526   —   —   526 
    Net interest income after provision 17,123   (15)  34   17,142   17,138   218   144   17,500 
    Non-interest income 1,758   1,258   5,070   8,086   1,730   1,114   7,380   10,224 
    Non-interest expense 12,564   826   6,628   20,018   11,354   780   8,127   20,261 
    Income (loss) before income taxes$6,317  $417  $(1,524) $5,210  $7,514  $552  $(603) $7,463 
    Efficiency ratio 66%  66%  130%  79%  59%  59%  108%  72%
                    
     Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022
    (dollars in thousands)Bank Wealth Mortgage Total Bank Wealth Mortgage Total
    Net interest income$51,928  $(12) $85  $52,001  $50,197  $628  $785  $51,610 
    Provision for credit losses 2,186   —   —   2,186   1,743   —   —   1,743 
    Net interest income after provision 49,742   (12)  85   49,815   48,454   628   785   49,867 
    Non-interest income 5,696   3,689   14,463   23,848   6,267   3,671   23,790   33,728 
    Non-interest expense 35,608   2,704   19,110   57,422   32,186   2,480   26,734   61,400 
    Income (loss) before income taxes$19,830  $973  $(4,562) $16,241  $22,535  $1,819  $(2,159) $22,195 
    Efficiency ratio 62%  74%  131%  76%  57%  58%  109%  72%
                    

    MERIDIAN CORPORATION AND SUBSIDIARIES
    APPENDIX: NON-GAAP MEASURES (Unaudited)
    (Dollar amounts and shares in thousands, except per share amounts)

    Meridian believes that non-GAAP measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts. The non-GAAP disclosure have limitations as an analytical tool, should not be viewed as a substitute for performance and financial condition measures determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of Meridian’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

     Allowance For Loan Losses to Loans, Net of Fees and Costs, Excluding PPP Loans and Loans at Fair Value
     September 30,
    2023    		 June 30,
    2023    		 March 31,
    2023    		 December 31,
    2022    		 September 30,
    2022
    Allowance for credit losses (GAAP)$19,683  $20,242  $20,442  $18,828  $18,974 
              
    Loans, net of fees and costs (GAAP) 1,885,629   1,859,839   1,818,189   1,743,682   1,610,349 
    Less: PPP loans (289)  (187)  (238)  (4,579)  (8,610)
    Less: Loans fair valued (13,231)  (14,403)  (14,434)  (14,502)  (14,702)
    Loans, net of fees and costs, excluding loans at fair value and PPP loans (non-GAAP)$1,872,109  $1,845,249  $1,803,517  $1,724,601  $1,587,037 
              
    Allowance for credit losses to loans, net of fees and costs (GAAP) 1.04%  1.09%  1.12%  1.08%  1.18%
    Allowance for credit losses to loans, net of fees and costs, excluding PPP loans and loans at fair value (non-GAAP) 1.05%  1.10%  1.13%  1.09%  1.20%


     Tangible Common Equity Ratio Reconciliation - Corporation
     September 30,
    2023    		 June 30,
    2023    		 March 31,
    2023    		 December 31,
    2022    		 September 30,
    2022
    Total stockholders' equity (GAAP)$155,114  $153,962  $153,049  $153,280  $151,161 
    Less: Goodwill and intangible assets (3,921)  (3,972)  (4,023)  (4,074)  (4,125)
    Tangible common equity (non-GAAP) 151,193   149,990   149,026   149,206   147,036 
              
    Total assets (GAAP) 2,230,971   2,206,877   2,229,783   2,062,228   1,921,924 
    Less: Goodwill and intangible assets (3,921)  (3,972)  (4,023)  (4,074)  (4,125)
    Tangible assets (non-GAAP)$2,227,050  $2,202,905  $2,225,760  $2,058,154  $1,917,799 
    Tangible common equity to tangible assets ratio - Corporation (non-GAAP) 6.79%  6.81%  6.70%  7.25%  7.67%


     Tangible Common Equity Ratio Reconciliation - Bank
     September 30,
    2023    		 June 30,
    2023    		 March 31,
    2023    		 December 31,
    2022    		 September 30,
    2022
    Total stockholders' equity (GAAP)$201,996  $192,209  $187,954  $185,039  $188,386 
    Less: Goodwill and intangible assets (3,921)  (3,972)  (4,023)  (4,074)  (4,125)
    Tangible common equity (non-GAAP) 198,075   188,237   183,931   180,965   184,261 
              
    Total assets (GAAP) 2,232,297   2,208,252   2,229,721   2,059,557   1,921,714 
    Less: Goodwill and intangible assets (3,921)  (3,972)  (4,023)  (4,074)  (4,125)
    Tangible assets (non-GAAP)$2,228,376  $2,204,280  $2,225,698  $2,055,483  $1,917,589 
    Tangible common equity to tangible assets ratio - Bank (non-GAAP) 8.89%  8.54%  8.26%  8.80%  9.61%
              
     Tangible Book Value Reconciliation
     September 30,
    2023    		 June 30,
    2023    		 March 31,
    2023    		 December 31,
    2022    		 September 30,
    2022
    Book value per common share$13.88  $13.77  $13.54  $13.37  $12.93 
    Less: Impact of goodwill /intangible assets 0.35   0.35   0.36   0.36   0.35 
    Tangible book value per common share$13.53  $13.42  $13.18  $13.01  $12.58 
                        

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