Meridian Corp

Previous wording

Our critical accounting policies are described in detail in the "Critical Accounting Policies" section within Item 7 of our 2023 Annual Form Form 10-K. The SEC defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in future periods. See Note 1, "Summary of Significant Accounting Policies" for additional information on the adoption of ASC 326, which changes the methodology under which management calculates its reserve for loans and leases, now referred to as the allowance for credit losses. Management considers the measurement of the allowance for credit losses to be a critical accounting policy.

Current wording

Our critical accounting policies are described in detail in the "Critical Accounting Policies" section within Item 7 of our 2023 Annual Form 10-K. The SEC defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in future periods. See Note 1, "Summary of Significant Accounting Policies" for additional information on the adoption of ASC 326, which changes the methodology under which management calculates its reserve for loans and leases, now referred to as the allowance for credit losses. Management considers the measurement of the allowance for credit losses to be a critical accounting policy.

Previous wording

The following items highlight the Corporation’s changes in its financial condition as of March 31, 2024 compared to December 31, 2023 and the results of operations for the three months ended March 31, 2024 compared to the same period in 2023. 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 June 30, 2024 compared to December 31, 2023 and the results of operations for the three and six months ended June 30, 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

•Portfolio loans increased $61.6 million, or 3.3%, to $2.0 billion as of March 31, 2024.

Current wording

•Portfolio loans increased $94.7 million, or 5.0%, to $2.0 billion as of June 30, 2024.

Previous wording

•Mortgage loans held for sale increased $4.3 million, or 17.4%, to $29.1 million at March 31, 2024.

Current wording

•Mortgage loans held for sale increased $29.5 million, or 118.7%, to $54.3 million as of June 30, 2024.

Previous wording

•Total deposits increased $77.2 million or 4.2% to $1.9 billion at March 31, 2024.

Current wording

•Total deposits increased $92.0 million or 5.0% to $1.9 billion as of June 30, 2024.

Previous wording

•Non-interest bearing deposits decreased $18.7 million, or 7.8%, to $220.6 million as of March 31, 2024.

Current wording

•Non-interest bearing deposits decreased $15.2 million, or 6.4%, to $224.0 million as of June 30, 2024.

Previous wording

•The Corporation returned $1.4 million of capital to Meridian shareholders during the three months ended March 31, 2024 through a $0.125 quarterly dividend.

Current wording

•The Corporation returned $2.8 million of capital to Meridian shareholders during the six months ended June 30, 2024 through a $0.125 dividend per quarter.

Previous wording

•The return on average assets and return on average equity were 0.47% and 6.73%, respectively, for the first quarter 2024, compared to 0.78% and 10.65%, respectively, for the first quarter 2023.

Current wording

•The return on average assets and return on average equity were 0.58% and 8.25%, respectively, for the second quarter 2024, compared to 0.86% and 12.08%, respectively, for the second quarter 2023.

Previous wording

•Net interest margin decreased to 3.09% from 3.61% due to the impact of deposit and borrowing repricing outpacing the repricing of interest earnings assets, mainly loans.

Current wording

•Net interest margin decreased to 3.06% from 3.33% due to the impact of deposit and borrowing costs outpacing the repricing of interest earnings assets, mainly loans.

Previous wording

•Net income was $2.7 million, or $0.24 per diluted share, down $1.3 million, or 33.4%, driven by an increase in interest expense and the provision for credit losses, partially offset by increases in interest income and non-interest income.

Current wording

•Net income was $6.0 million, or $0.54 per diluted share, down $2.7 million, or 30.7%, driven by an increase in interest expense and the provision for credit losses, partially offset by increases in interest income and non-interest income.

Previous wording

•Non-interest income increased $1.3 million, or 20.3%, to $8.0 million driven by a $362 thousand increase in mortgage banking income, a $273 thousand increase in SBA loan income, a $121 thousand of an increase in wealth management fee income, and increase of $743 thousand in other income.

Current wording

•Non-interest income increased $1.5 million, or 9.3%, to $17.2 million driven by a $732 thousand increase in mortgage banking income, a $330 thousand of an increase in wealth management fee income, and increase of $883 thousand in other income, partially offset by a $709 thousand decrease in SBA loan income.

Previous wording

(1) Non-GAAP financial measure. See “Non-GAAP Financial Measures” below for Non-GAAP to GAAP reconciliation.

Current wording

(1)Non-GAAP financial measure. See “Non-GAAP Financial Measures” below for Non-GAAP to GAAP reconciliation.

Previous wording

Net interest income is an integral source of the Corporation’s revenue. The table below present a summary for the three months ended March 31, 2024 and 2023, of the Corporation’s average balances and yields earned on its interest-earning assets and the rates paid on its interest-bearing liabilities. The net interest margin is the net interest income as a percentage of average interest-earning assets. The net interest spread is the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. The difference between the net interest margin and the net interest spread is the result of net free funding sources such as non-interest bearing deposits and stockholders’ equity.

Current wording

Net interest income is an integral source of the Corporation’s revenue. The table below present a summary for the three and six months ended June 30, 2024 and 2023, of the Corporation’s average balances and yields earned on its interest-earning assets and the rates paid on its interest-bearing liabilities. The net interest margin is the net interest income as a percentage of average interest-earning assets. The net interest spread is the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. The difference between the net interest margin and the net interest spread is the result of net free funding sources such as non-interest bearing deposits and stockholders’ equity.

Previous wording

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 three months ended March 31, 2024 as compared to the same period in 2023, allocated by rate and volume. Changes in interest income and/or expense attributable to both rate and volume have been allocated proportionately based on the relationship of the absolute dollar amount of the change in each category.

Current wording

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 three and six months ended June 30, 2024 as compared to the same periods in 2023, allocated by rate and volume. Changes in interest income and/or expense attributable to both rate and volume have been allocated proportionately based on the relationship of the absolute dollar amount of the change in each category.

Previous wording

For the three months ended March 31, 2024 as compared to the same period in 2023, tax-equivalent interest income increased $6.3 million as favorable rate and volume changes contributed $3.3 million, and $3.0 million, respectively, to interest income. The favorable change in rates led to increased yields on loans held for sale (up 95 basis points) and loans held for investment (up 60 basis points) that favorably impact interest income by $3.1 million, overall. The loans held for investment average balances increased $160.9 million, leading to a favorable volume impact on interest income of $2.8 million, while the increase in loans held for sale average balances of $4.1 million had an small but favorable impact to interest income of $64 thousand. Growth in the loans held for investment portfolio was led by average balance increases in commercial real estate ($179.0 million), residential real estate ($29.7 million), home equity loans ($15.3 million), commercial loans ($8.6 million), and SBA loans ($7.6 million).

Current wording

For the three months ended June 30, 2024 as compared to the same period in 2023, tax-equivalent interest income increased $4.6 million as favorable rate and volume changes contributed $2.1 million, and $2.5 million, respectively, to interest income. The favorable change in rates led to increased yields on loans held for sale (up 57 basis points) and loans held for investment (up 41 basis points) that favorably impact interest income by $1.9 million, overall. The loans held for investment average balances increased $125.0 million, leading to a favorable volume impact on interest income of $2.2 million, while the increase in loans held for sale average balances of $7.8 million had an small but favorable impact to interest income of $125 thousand. Growth in the loans held for investment portfolio was led by average balance increases in commercial real estate ($142.0 million), commercial loans ($20.5 million), residential real estate ($17.4 million), and home equity loans ($16.7 million).

Previous wording

On the funding side, overall interest expense increased $7.3 million, largely driven by the continuing impact that the Fed's rate hikes have had on the cost of deposits and borrowings. The cost of deposits were up across the board, leading to a $5.9 million increase to interest expense. The cost of interest-bearing demand deposits, money market and savings accounts and time deposits increased 71 basis points, 129 basis points and 129 basis points, respectively, while the cost of borrowings decreased slightly by 4 basis points. Money market/savings accounts were the largest drivers of the interest expense increase due to volume as average balances on such accounts increased $124.2 million, while time deposit average balances increased $95.4 million, and the average balances on interest-bearing demand deposits decreased $92.9 million, while borrowings increased $96.9 million on average.

Current wording

On the funding side, overall interest expense increased $12.2 million, largely driven by the continuing impact that the Fed's rate hikes have had on the cost of deposits and borrowings. The cost of deposits were up across the board, leading to a $10.9 million increase to interest expense. The cost of interest-bearing demand deposits, money market and savings accounts and time deposits increased 49 basis points, 111 basis points and 99 basis points, respectively, while the cost of borrowings decreased by 20 basis points. Money market/savings accounts were the largest drivers of the interest expense increase due to volume as average balances on such accounts increased $128.9 million, while time deposit average balances increased $107.1 million, and the average balances on interest-bearing demand deposits decreased $81.7 million, while borrowings increased $42.1 million on average.

Previous wording

Overall, the $1.1 million decrease in net interest income over this period was driven by rate changes as the cost of interest bearing liabilities outpaced the increase in the yield on interest earning assets.

Current wording

Overall, the $1.3 million decrease in net interest income over this period was driven by rate changes as the cost of interest bearing liabilities outpaced the increase in the yield on interest earning assets.

Previous wording

The overall provision for credit losses increased $1.5 million on a net basis for the three months ended March 31, 2024. The provision on funded loans increased $2.0 million over the three month comparable period in 2023 driven by an increase in specific reserves, mainly on small business loans and existing non-accrual loans, combined with provisioning for loan growth and charge-offs. The provision on unfunded loan commitments decreased over this period due to a decline in the baseline loss rate and certain macroeconomic factors.

Current wording

The overall provision for credit losses increased $2.0 million on a net basis for the three months ended June 30, 2024. The provision on funded loans increased $1.9 million over the three month comparable period in 2023 driven by provisioning for loan growth and non-performing loans, as well as an increase in specific reserves, mainly on small business loans and existing non-accrual loans. The provision on unfunded loan commitments increased over this period due to an increase in the baseline loss rate for certain portfolios.

Previous wording

The ratio of non-performing assets to total assets was 1.74% as of March 31, 2024, up from 1.58% reported as of December 31, 2023. Total non-performing loans of $38.2 million as of March 31, 2024, increased $4.5 million from $33.8 million as December 31, 2023. The changes were the result of risk rating downgrades of several SBA loans and small ticket equipment leases, partially offset by charge-offs as of March 31, 2024.

Current wording

The ratio of non-performing assets to total assets was 1.68% as of June 30, 2024, up from 1.58% reported as of December 31, 2023. Total non-performing loans of $37.6 million as of June 30, 2024, increased $4 million from $33.8 million as December 31, 2023. The changes were the result of risk rating downgrades of several SBA loans and small ticket equipment leases, partially offset by charge-offs as of June 30, 2024.

Previous wording

Meridian realized net charge-offs of 0.12% of total average loans for the three months ending March 31, 2024, which was up from 0.08% reported for the same period in 2023. Net charge-offs for the quarter ended March 31, 2024 were $2.3 million, compared to net charge-offs of $1.5 million for the quarter ended March 31, 2023. Net charge-offs for the current quarter comprised of $2.4 million in charge-offs, with $133 thousand in recoveries. A large percentage of charge-offs for the quarter ended March 31, 2024 continue to be from small ticket equipment leases, as the level of charge-offs in this portfolio increased by $684 thousand compared to the prior year comparable period, while we also realized $126 thousand of recoveries related to the equipment lease portfolio. There were also charge-offs of $87 thousand on SBA loans for the current quarter, while there were no SBA charge-offs from the prior year comparable period.

Current wording

Meridian realized net charge-offs of 0.20% of total average loans for the three months ending June 30, 2024, which was up from 0.05% reported for the same period in 2023. Net charge-offs for the quarter ended June 30, 2024 were $4.1 million, compared to net charge-offs of $1.0 million for the quarter ended June 30, 2023. Net charge-offs for the current quarter comprised of $4.4 million in charge-offs, with $238 thousand in recoveries. Net charge-offs for the quarter ended June 30, 2024 were nearly an even split between commercial loans, SBA loans, and small ticket equipment leases.

Previous wording

The ratio of allowance for credit losses to total loans held for investment, excluding loans at fair value and PPP loans (a non-GAAP measure, see reconciliation in the Appendix), was 1.19% as of March 31, 2024 and 1.17% as of December 31, 2023. As of March 31, 2024 there were specific reserves of $8.5 million against non-performing loans, an increase from $6.5 million as of December 31, 2023. During the quarter $1.6 million in specific reserves were established for SBA loan relationships along with smaller increases in specific reserves for other commercial loans.

Current wording

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 1.10% as of June 30, 2024 and 1.17% as of December 31, 2023. As of June 30, 2024 there were specific reserves of $7.2 million against non-performing loans, an increase from $6.5 million as of December 31, 2023. The increase over this period was due to an increase in specific reserves on SBA loan relationships, partially offset by a decrease in specific reserves for commercial loans.

Previous wording

Total non-interest income increased $1.3 million due largely to improved income from our mortgage segment, despite the continued impact of the higher rate environment and a lack of housing inventory. Mortgage loan originations increased $4.0 million to $146.8 million when comparing the quarter ended March 31, 2024 to the quarter ended March 31, 2023. SBA loan income increased $273 thousand over this period as the value of SBA loans sold for the quarter-ended March 31, 2024 was $4.6 million, or 42.3%, higher than the quarter-ended March 31, 2023, the gross margin on sale was 8.1% for the quarter-ended March 31, 2024 compared to 7.7% for the quarter-ended March 31, 2023, helping to generate nearly $1 million in SBA loan income for the quarter.

Current wording

Total non-interest income increased $120 thousand due largely to improved income from our mortgage segment, despite the continued impact of the higher rate environment and a lack of housing inventory. Mortgage loan originations increased $34.0 million to $220.5 million when comparing the quarter ended June 30, 2024 to the quarter ended June 30, 2023. SBA loan income decreased $982 thousand over this period as the value of SBA loans sold for the quarter-ended June 30, 2024 was $15.7 million, or 56.4%, lower than the quarter-ended June 30, 2023, while the gross margin on sale was 8.8% for the quarter-ended June 30, 2024 compared to 7.0% for the quarter-ended June 30, 2023.

Previous wording

The net change in the fair value of loans held-for-investment declined to a loss of $175 thousand for the quarter ended March 31, 2024, compared to a gain of $117 thousand for the comparable prior year quarter, 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. Other non-interest income increased due to an increase in FHLB stock income, increases in broker fees and other mortgage segment related income, partially offset by a decline in swap fee income as no new swaps were entered into in the current quarter.

Current wording

The net change in the fair value of loans held-for-investment improved to a loss of $24 thousand for the quarter ended June 30, 2024, compared to a loss of $219 thousand for the comparable prior year quarter, due to the impact of the changing interest rate environment and the impact this has had on loans in portfolio that are held at fair value. Other non-interest income increased due to an increase in FHLB stock income, increases in broker fees and other mortgage segment related income, partially offset by a decline in swap fee income as no new swaps were entered into in the current quarter.

Previous wording

$193 thousand due largely to an increase in FDIC insurance expense, which reflected the new 2 basis point increase in assessment, and an increase in certain commercial and consumer related loan expenses due to portfolio growth.

Current wording

Other non-interest expense increased $251 thousand due largely to an increase in FDIC insurance expense, which reflected the new 2 basis point increase in assessment, and an increase in certain commercial and consumer related loan expenses due to portfolio growth, and employee related training and recruitment fees as we continue to search for high performing individuals to join the Meridian team.

Previous wording

Salaries and employee benefits decreased $488 thousand due largely to cost reduction efforts in the mortgage segment over the last few quarters combined with the impact of lower mortgage loan originations and sales volume. Other non-interest expense increased

Current wording

Total non-interest expense decreased $212 thousand, or 0.6%, largely attributable to a decrease in salaries and employee benefits and advertising expense, partially offset an increase in professional fees, and other non-interest expense. Salaries and employee benefits decreased $1.2 million due largely to the above noted cost reduction efforts in the mortgage segment over the last few quarters, combined with lower stock based compensation expense. Professional fees increased $700 thousand over this period due to an increase in loan and lease workout expenses and OREO expense, as well as an increase in audit related costs. Other non-interest expense increased $444 thousand due largely to an increase in FDIC insurance expense, which reflected the new 2 basis point increase in assessment, and an increase in certain commercial and consumer related loan expenses due to portfolio growth.

Previous wording

Income tax expense for the three months ended March 31, 2024 was $877 thousand, as compared to $1.1 million for the same period in 2023. Our effective tax rate was 24.7% for the three months ended March 31, 2024 and 21.6% for the three months ended March 31, 2023. 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 expense, partially offset by an increase in tax-free bank owned life insurance income.

Current wording

Income tax expense for the three and six months ended June 30, 2024 was $1.1 million, and $1.9 million, respectively, as compared to $1.3 million, and $2.4 million, respectively, for the same periods in 2023. Our effective tax rates were 24.3% and 24.5%, respectively, for the three and six months ended June 30, 2024, compared to 21.3% and 21.4% for the same periods in 2023. While income tax expense decreased primarily due to the decrease in income before income taxes, the effective tax rate increased due to the impact of additional nondeductible expense, partially offset by an increase in tax-free bank owned life insurance income.

Previous wording

As of March 31, 2024, total assets were $2.3 billion which increased $46.7 million, or 2.1%, from December 31, 2023. This growth in assets over the prior period was due primarily to loan portfolio growth, as detailed in the following table:

Current wording

As of June 30, 2024, total assets were $2.4 billion which increased $105.4 million, or 4.7%, from December 31, 2023. This increase in assets over the prior period was due primarily to loan portfolio growth, as detailed in the following table:

Previous wording

Portfolio loans increased $61,588, to $2.0 billion as of March 31, 2024, from $1.9 billion as of December 31, 2023. Overall portfolio loan growth was 3.3% since December 31, 2023, or 13.0% on an annualized basis for 2024. Commercial real estate loans increased $25.5 million, or 3.5%, commercial and industrial loans increased $25.3 million, or 8.3%, and construction loans increased $16.6 million, or 6.7%.

Current wording

Portfolio loans increased $94.7 million, to $2.0 billion as of June 30, 2024, from $1.9 billion as of December 31, 2023. Overall portfolio loan growth was 5.0% since December 31, 2023, or 10.0% on an annualized basis for 2024. Commercial real estate loans increased $37.4 million, or 5.1%, commercial and industrial loans increased $49.6 million, or 16.4%, and construction loans increased $16.2 million, or 6.6%.

Previous wording

Total deposits increased $77.2 million, or 4.2%, since December 31, 2023. Noninterest-bearing deposits and interest-bearing accounts decreased $18.7 million, and $29.7 million, respectively, during the period. This decline was largely due to customer preference for money market deposits which carry higher interest rates than interest-bearing demand deposits. Time deposits grew $75.9 million, or 11.1%, from retail and wholesale efforts as customers prefer the higher term interest rates. Included in time deposits as of March 31, 2024, and December 31, 2023, are $476.0 million and $429.9 million of brokered deposits, respectively, which comprise 26.3% and 21.9% of total deposits as of these dates.

Current wording

Total deposits increased $92.0 million, or 5.0%, since December 31, 2023. Noninterest-bearing deposits and interest-bearing accounts decreased $15.2 million, and $20.8 million, respectively, during the period. This decline was largely due to customer preference for money market deposits which carry higher interest rates than demand deposits. Time deposits grew $88.4 million, or 12.9%, from retail and wholesale efforts as customers prefer the higher term interest rates.

Previous wording

As a commercial bank, the majority of Meridian's deposit base is comprised of business deposits (52%), with consumer deposits amounting to 14% at March 31, 2024. Municipal deposits (10%) and brokered deposits (24%) 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 March 31, 2024, 65% of business accounts and 89% 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 19% at March 31, 2024.

Current wording

The majority of Meridian's deposit base is comprised of business deposits (52%), with consumer deposits amounting to 13% at June 30, 2024. Municipal deposits (11%) and brokered deposits (24%) 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 June 30, 2024, 63% of business accounts and 89% 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 20% at June 30, 2024.

Previous wording

Consolidated stockholders’ equity of the Corporation was $159.9 million, or 7.0% of total assets as of March 31, 2024, as compared to $158.0 million, or 7.0% of total assets as of December 31, 2023. On April 25, 2024, the Board of Directors declared a quarterly cash dividend of $0.125 per common share payable May 20, 2024 to shareholders of record as of May 13, 2024.

Current wording

Consolidated stockholders’ equity of the Corporation was $162.4 million, or 6.9% of total assets as of June 30, 2024, as compared to $158.0 million, or 7.0% of total assets as of December 31, 2023. On July 25, 2024, the Board of Directors declared a quarterly cash dividend of $0.125 per common share payable August 19, 2024 to shareholders of record as of August 12, 2024.

Previous wording

The March 31, 2024 tangible common equity to tangible assets ratio (a non-GAAP measure) was 8.9% for the Bank, compared to 8.94% at December 31, 2023. Tangible book value per share (a non-GAAP measure) was $13.96 as of March 31, 2024, compared with $13.78 as of December 31, 2023. A reconciliation of these non-GAAP measures is below.

Current wording

The June 30, 2024 tangible common equity to tangible assets ratio (a non-GAAP measure) was 8.85% for the Bank, compared to 8.94% at December 31, 2023. Tangible book value per share (a non-GAAP measure) was $14.17 as of June 30, 2024, compared with $13.78 as of December 31, 2023. A reconciliation of these non-GAAP measures is below.

Previous wording

Under the Community Bank Leverage Ratio framework, a community banking organization that is less than $10 billion in total consolidated assets, and has limited amounts of certain assets and off-balance sheet exposures, and a CBLR greater than 9% can elect to report a single regulatory capital ratio. The Corporation has elected to be measured under this framework for Bank capital adequacy and had ratios of 9.42% and 9.46% at March 31, 2024 and December 31, 2023, respectively. The Corporation is exempt from CBLR.

Current wording

Under the Community Bank Leverage Ratio framework, a community banking organization that is less than $10 billion in total consolidated assets, and has limited amounts of certain assets and off-balance sheet exposures, and a CBLR greater than 9% can elect to report a single regulatory capital ratio. The Corporation has elected to be measured under this framework for Bank capital adequacy and had ratios of 9.33% and 9.46% at June 30, 2024 and December 31, 2023, respectively. The Corporation is exempt from CBLR.

Previous wording

In addition, Meridian maintains borrowing arrangements with various correspondent banks, the FHLB and the Federal Reserve Bank of Philadelphia to meet short-term liquidity needs and has access to approximately $1.0 billion in liquidity from these sources. Through its relationship at the Federal Reserve, Meridian had available credit of approximately $6.5 million at March 31, 2024. 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 March 31, 2024, Meridian’s maximum borrowing capacity with the FHLB was $656.0 million. At March 31, 2024, Meridian had borrowed $145.8 million and the FHLB had issued letters of credit, on Meridian’s behalf, totaling $156.0 million against its available credit lines. At March 31, 2024, Meridian also had available $49.0 million of unsecured federal funds lines of credit with other financial institutions as well as $149.0 million of available short or long term funding through the CDARS program and $326.5 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 Federal Reserve Bank of Philadelphia to meet short-term liquidity needs and has access to approximately $824.8 million in liquidity from these sources. Through its relationship at the Federal Reserve, Meridian had available credit of approximately $11.1 million at June 30, 2024. 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 June 30, 2024, Meridian’s maximum borrowing capacity with the FHLB was $666.6 million. At June 30, 2024, Meridian had borrowed $182.3 million and the FHLB had issued letters of credit, on Meridian’s behalf, totaling $157.2 million against its available credit lines. At June 30, 2024, Meridian also had available $56.0 million of unsecured federal funds lines of credit with other financial institutions as well as $149.6 million of available short or long term funding through the CDARS program and $348.9 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

The Banking Segment recorded income before tax of $3.5 million and $7.0 million for the three months ended March 31, 2024 and 2023, respectively. The Banking Segment provided 99.6% and 135.7% of the Corporation’s pre-tax profit for the three months ended March 31, 2024, and 2023, respectively.

Current wording

The Banking Segment recorded income before tax of $3.2 million and $6.7 million for the three and six months ended June 30, 2024, as compared to income before tax of $6.6 million and $13.5 million for the same periods in 2023. The Banking Segment provided 72.2% and 84.5% of the Corporation’s pre-tax profit for the three and six months ended June 30, 2024, as compared to 111.5% and 122.7% for the same periods in 2023.

Previous wording

The Wealth Management Segment recorded income before tax of $478 thousand and $231 thousand for the three months ended March 31, 2024 and 2023, respectively. The increase in income in this segment was the result of improved market conditions over the period.

Current wording

The Wealth Management Segment recorded income before tax of $676 thousand and $1.2 million for the three and six months ended June 30, 2024, as compared to income before tax of $317 thousand and $557 thousand for the same periods in 2023. The increase in income in this segment was the result of an increase in assets under management and improved market conditions over the period.

Previous wording

The Mortgage Banking Segment recorded losses before tax of $465 thousand and $2.1 million for the three months ended March 31, 2024 and 2023, respectively. Mortgage Banking income and expenses related to loan originations and sales decreased due to lower origination volume in the higher rate environment. Originations have been significantly impacted by a lack of homes for sale.

Current wording

The Mortgage Banking Segment recorded income before tax of $545 thousand and $80 thousand for the three and six months ended June 30, 2024, as compared to losses before tax of $1.0 million and $3.1 million for the same periods in 2023. Mortgage Banking income and expenses related to loan originations and sales increased due to higher loan origination and sales volume.

Previous wording

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the loan agreement. Total commitments to extend credit at March 31, 2024 were $540.3 million as compared to $517.7 million at December 31, 2023.

Current wording

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the loan agreement. Total commitments to extend credit at June 30, 2024 were $542.8 million as compared to $517.7 million at December 31, 2023.

Previous wording

Standby letters of credit are conditional commitments issued by the Corporation to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in granting loan facilities to customers. The Corporation’s obligation under standby letters of credit at March 31, 2024 amounted to $10.9 million as compared to $10.9 million at December 31, 2023.

Current wording

Standby letters of credit are conditional commitments issued by the Corporation to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in granting loan facilities to customers. The Corporation’s obligation under standby letters of credit at June 30, 2024 amounted to $11.3 million as compared to $10.9 million at December 31, 2023.

Previous wording

In certain circumstances the Corporation may be required to repurchase residential mortgage loans from investors under the terms of loan sale agreements. Generally, these circumstances include the breach of representations and warranties made to investors regarding borrower default or early payment, as well as a violation of the applicable federal, state, or local lending laws. The Corporation agrees to repurchase loans if the representations and warranties made with respect to such loans are breached. Based on the obligations described above, the Corporation repurchased 3 loans totaling $589 thousand for the three months ended March 31, 2024, while we did not repurchase any loans for the three months ended March 31, 2023.

Current wording

In certain circumstances the Corporation may be required to repurchase residential mortgage loans from investors under the terms of loan sale agreements. Generally, these circumstances include the breach of representations and warranties made to investors regarding borrower default or early payment, as well as a violation of the applicable federal, state, or local lending laws. The Corporation agrees to repurchase loans if the representations and warranties made with respect to such loans are breached. Based on the obligations described above, the Corporation repurchased 3 loans totaling $589 thousand for the three and six months ended June 30, 2024, while we did not repurchase any loans for the three and six months ended June 30, 2023.