Meridian Corp

Previous wording

Meridian Corporation may from time to time make written or oral “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.

Current wording

Meridian Corporation may from time to time make written or oral “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; escalating tariff and other trade policies and the resulting impacts on market volatility and global trade; 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.

Previous wording

The following items highlight the Corporation’s changes in its financial condition as of September 30, 2024 compared to December 31, 2023 and the results of operations for the three and nine months ended September 30, 2024 compared to the same periods 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 March 31, 2025 compared to December 31, 2024 and the results of operations for the three months ended March 31, 2025 compared to the same periods in 2024. More detailed information related to these highlights can be found in the sections that follow.

Previous wording

•Non-interest bearing deposits decreased $2.1 million, or 0.9%, to $237.2 million as of September 30, 2024.

Current wording

•Non-interest bearing deposits increased $82.6 million, or 34.3%, to $323.5 million as of March 31, 2025.

Previous wording

•The Corporation returned $4.2 million of capital to Meridian shareholders during the nine months ended September 30, 2024 through a $0.125 dividend per share per quarter, totaling a $0.375 year to date dividend per share.

Current wording

•The Corporation returned $1.4 million of capital to Meridian shareholders during the three months ended March 31, 2025 through a $0.125 dividend per share.

Previous wording

•The return on average assets and return on average equity were 0.80% and 11.41%, respectively, for the third quarter 2024, compared to 0.73% and 10.17%, respectively, for the third quarter 2023.

Current wording

•The return on average assets and return on average equity were 0.40% and 5.57%, respectively, for the first quarter 2025, compared to 0.47% and 6.73%, respectively, for the first quarter 2024.

Previous wording

•The overall provision for credit losses increased $2.2 million when comparing the third quarter 2024 to the third quarter 2023. The provision increase was largely due to the impact of charge-offs, an increase in non-performing loans, combined with providing for loan growth over this period.

Current wording

•The overall provision for credit losses increased $2.3 million when comparing the first quarter 2025 to the first quarter 2024. The provision increase was largely due to the impact of charge-offs, an increase in non-performing loans, combined with providing for loan growth over this period and the impact of unfavorable changes in certain macro-economic factors used in the model due to current economic and market uncertainty.

Previous wording

•Non-interest income increased $2.7 million, or 33.9%, to $10.8 million driven by a $1.7 million increase in mortgage banking income, an overall $1.1 million positive impact of fair value changes related to mortgage banking activities, $189 thousand of an increase in wealth management fee income, and an increase of $263 thousand in other income, partially offset by a $438 thousand decrease in SBA loan income.

Current wording

•Non-interest income decreased $660 thousand, or 8.3%, to $7.3 million driven by a $241 thousand decline in mortgage banking income, a $238 thousand decline in SBA loan income, and a $977 thousand decline in other non-interest income, partially offset by an overall $564 thousand positive impact of fair value changes related to mortgage banking activities, and a $218 thousand increase in wealth management fee income.

Previous wording

•Non-interest expense increased $528 thousand, or 2.6%, to $20.5 million due to a $409 thousand increase in salaries and employee benefits, and an increase of $393 thousand in other non-interest expense, partially offset by decreases of $131 thousand and $99 thousand, in advertising and promotion, and data processing and software expense, respectively.

Current wording

•Non-interest expense increased $569 thousand, or 3.1%, to $18.7 million due to a $812 thousand increase in salaries and employee benefits, and an increase of $414 thousand in other non-interest expense, partially offset by a decrease of $735 thousand in professional fees.

Previous wording

Net interest income is an integral source of the Corporation’s revenue. The tables below present a summary for the three and nine months ended September 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.

Current wording

Net interest income is an integral source of the Corporation’s revenue. The tables below present a summary for the three months ended March 31, 2025 and 2024, 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 and nine months ended September 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.

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 months ended March 31, 2025 as compared to the same period in 2024, 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 nine months ended September 30, 2024 as compared to the same period in 2023, tax-equivalent interest income increased $15.8 million as favorable rate and volume changes contributed $7.2 million, and $8.6 million, respectively, to interest income. The favorable change in rates led to increased yields on loans held for sale (up 38 basis points) and loans held for investment (up 46 basis points) that favorably impact interest income by $6.6 million, overall. The loans held for investment average balances increased $135.4 million, leading to a favorable volume impact on interest income of $7.2 million, while the increase in loans held for sale average balances of $10.5 million had a favorable impact to interest income of $508 thousand. Growth in the loans held for investment portfolio was led by average balance increases in commercial real estate ($153.0 million), commercial loans ($23.4 million), residential real estate ($17.3 million), and home equity loans ($15.4 million).

Current wording

For the three months ended March 31, 2025 as compared to the same period in 2024, tax-equivalent interest income increased $1.9 million as favorable volume changes contributed $2.4 million to interest income, partially offset by rate changes that had a $436 thousand unfavorable impact on interest income. The loans held for investment average balances increased $95.5 million, leading to a favorable volume impact on interest income of $1.7 million, while the increase in loans held for sale average balances of $1.1 million had an small but favorable impact to interest income of $18 thousand. Growth in the loans held for investment portfolio was led by average balance increases in commercial mortgage loans ($59.5 million), home equity lines and loans ($13.2 million), commercial and industrial loans ($33.5 million), and SBA loans ($5.7 million). The change in rates led to decreased yields on loans held for sale (down 11 basis points) and loans held for investment (down 4 basis points) that unfavorably impact interest income by $509 thousand, overall.

Previous wording

On the funding side, overall interest expense increased $16.1 million. The cost of deposits were up across the board, leading to a $14.7 million increase to interest expense. The cost of interest-bearing demand deposits, money market and savings accounts and time deposits increased 51 basis points, 86 basis points and 78 basis points, respectively, while the cost of borrowings decreased by 11 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 $112.8 million, while time deposit average balances increased $115.6 million, and the average balances on interest-bearing demand deposits decreased $63.8 million, while borrowings increased $25.3 million on average.

Current wording

On the funding side, overall interest expense decreased $1.2 million, largely driven by the impact that the Fed's rate cuts in the later part of 2024 have had on the cost of deposits and borrowings. The cost of deposits were down across the board, leading to a $524 thousand decrease to interest expense. The cost of interest-bearing demand deposits, money market and savings accounts and time deposits decreased 65 basis points, 65 basis points and 45 basis points, respectively. These deposit cost declines were partially offset by volume increases as the average balances on money market and savings accounts increased $146.6 million, while time deposit average balances increased $43.4 million, and the average balances on interest-bearing demand deposits increased $11.8 million,

Previous wording

The total provision for credit losses increased $2.2 million on a net basis for the three months ended September 30, 2024. The provision on funded loans increased $1.6 million over the three month comparable period in 2023 driven by provisioning for loan growth and charge-offs, 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 unfunded balances and the baseline loss rate for certain portfolios.

Current wording

The total provision for credit losses increased $2.3 million on a net basis for the three months ended March 31, 2025. The provision on funded loans increased $1.8 million over the three month comparable period in 2024 driven by provisioning for loan growth and charge-offs, as well as an increase in specific reserves, mainly on small business loans and existing non-accrual loans. The increase in provision was also impacted by unfavorable changes in certain macro-economic factors used in the model due to current economic and market uncertainty. There was no provision on unfunded loan commitments for three months ended March 31, 2025, while for the three months March 31, 2024 there was an unfunded provision reversal of $508 thousand.

Previous wording

Total non-interest income increased $2.7 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 $66.0 million to $238.8 million when comparing the quarter ended September 30, 2024 to the quarter ended September 30, 2023. SBA loan income decreased $438 thousand over this period as the value of SBA loans sold for the quarter-ended September 30, 2024 was $14.3 million, or 54.6%, lower than the quarter-ended September 30, 2023, while the gross margin on sale was 7.9% for the quarter-ended September 30, 2024 compared to 6.2% for the quarter-ended September 30, 2023.

Current wording

Total non-interest income decreased $660 thousand due in part to a decline in mortgage banking income from our mortgage segment. While mortgage loan originations increased $8.0 million when comparing the quarter ended March 31, 2025 to the quarter ended March 31, 2024, the sales margin declined over this period as well, leading to the decline in mortgage banking income. SBA loan income decreased $238 thousand over this period as the value of SBA loans sold for the quarter-ended March 31, 2025 was $3.4 million, or 21.7%, lower than the quarter-ended March 31, 2024, while the gross margin on sale was 8.7% for the quarter-ended March 31, 2025 compared to 8.1% for the quarter-ended March 31, 2024.

Previous wording

The net change in the fair value of loans held-for-investment improved to a gain of $965 thousand for the quarter ended September 30, 2024, compared to a loss of $570 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, as well as business credit card fee income.

Current wording

The net change in the fair value of loans held-for-investment improved to a gain of $170 thousand for the quarter ended March 31, 2025, compared to a loss of $175 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 decreased $925 thousand due to higher levels of FHLB stock dividend income, broker fees and other mortgage segment related income in the prior period, partially offset by an increase in business credit card fee income and swap fee income.

Previous wording

Total non-interest expense increased $316 thousand, or 0.6%, largely attributable to an increase in professional fees, and other non-interest expense, partially offset by a decrease in salaries and employee benefits, and advertising expense. Salaries and employee benefits decreased $794 thousand due largely to the above noted cost reduction efforts in the mortgage segment, combined with lower stock based compensation expense. Professional fees increased $703 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 $835 thousand due largely to an increase in certain commercial and consumer related loan expenses due to portfolio growth, and employee related training and recruitment fees.

Current wording

Total non-interest expense increased $569 thousand, or 3.1%, largely attributable to an increase in salaries and employee benefits and other non-interest expense. Salaries and employee benefits increased $812 thousand due largely to overall employee merit, benefit, and tax related increases, combined with an increase in mortgage segment related commissions and other benefits. Other non-interest expense increased $414 thousand due to an increase in certain commercial and consumer related loan expenses due to portfolio growth, partially offset with a decrease in loan servicing fees resulting from the MSR sale in 2024, combined with a decline in OREO expense as a $1.7 million residential OREO property was sold in 2024 . Professional fees decreased $735 thousand over the period mainly due to the results of cost control efforts on legal and consulting fees, combined with savings realized from switching internal audit outsourcing firms.

Previous wording

Income tax expense for the three and nine months ended September 30, 2024 was $1.5 million, and $3.4 million, respectively, as compared to $1.2 million, and $3.6 million, respectively, for the same periods in 2023. Our effective tax rates were 24.0% and 24.3%, respectively, for the three and nine months ended September 30, 2024, compared to 23.1% and 22.0% 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.

Current wording

Income tax expense for the three months ended March 31, 2025 was $746 thousand, as compared to $877 thousand for the same period in 2024. Our effective tax rates were 23.7% for the three months ended March 31, 2025, compared to 24.7% for the same period in 2024. 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 September 30, 2024, total assets were $2.4 billion which increased $141.5 million, or 6.3%, 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:

Current wording

As of March 31, 2025, total assets were $2.5 billion which increased $143.0 million, or 6.0%, from December 31, 2024. 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 $115.0 million, to $2.0 billion as of September 30, 2024, from $1.9 billion as of December 31, 2023. Overall portfolio loan growth was 6.1% since December 31, 2023, or 8.1% on an annualized basis for 2024. Commercial real estate loans increased $63.1 million, or 8.5%, commercial and industrial loans increased $61.0 million, or 20.1%, and construction loans increased $4.1 million, or 1.7%.

Current wording

Portfolio loans increased $42.0 million, to $2.1 billion as of March 31, 2025, from $2.0 billion as of December 31, 2024. Overall portfolio loan growth was 2.1% since December 31, 2024, or 8.3% on an annualized basis for 2025. Commercial real estate loans increased $21.2 million, or 2.6%, construction loans increased $18.3 million, or 7.1%, SBA loans increased $5.3 million, or 3.4%, and commercial and industrial loans increased $4.6 million, or 1.3%.

Previous wording

As of September 30, 2024, included within the commercial real estate loans total of $800.9 million was $253.0 million of owner-occupied commercial loans, as well as $110.2 million of multi-family loans. Nearly all of the multi-family real estate loans are on properties located in Philadelphia and surrounding counties we service.

Current wording

As of March 31, 2025, included within the commercial real estate loans total of $845.2 million was $272.5 million of owner-occupied commercial loans, as well as $121.5 million of multi-family loans. Nearly all of the multi-family real estate loans are on properties located in Philadelphia and surrounding counties we service.

Previous wording

Total deposits increased $155.5 million, or 8.5%, since December 31, 2023. Noninterest-bearing deposits and interest-bearing accounts decreased $2.1 million, and $17.5 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 $100.0 million, or 14.6%, largely due to wholesale funding as customers prefer the higher term interest rates offered by these products.

Current wording

Total deposits increased $123.4 million, or 6.2%, since December 31, 2024. Noninterest-bearing deposits and interest-bearing accounts increased $82.6 million, and $19.6 million, respectively, during the period. The increase in noninterest-bearing deposits was the result of a large late in the quarter deposit from a long-standing customer that sold a business. The deposit remained with the bank for several weeks. The increase in interest-bearing accounts was largely due to customer preference for money market deposits which carry higher interest rates than demand deposits. Time deposits decreased $13.1 million, or 1.9%, largely due to wholesale funding as customers prefer the higher term interest rates offered by these products.

Previous wording

The majority of Meridian's deposit base is comprised of business deposits (51%), with consumer deposits amounting to 12% at September 30, 2024. Municipal deposits (11%) and brokered deposits (26%) 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, 2024, 62% 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 September 30, 2024.

Current wording

The majority of Meridian's deposit base is comprised of business deposits, 52%, with consumer deposits amounting to 12% at March 31, 2025. Municipal deposits at 12% and brokered deposits at 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, 2025, 56% of business accounts and 86% of consumer accounts were fully insured by the

Previous wording

Consolidated stockholders’ equity of the Corporation was $167.5 million, or 7.0% of total assets as of September 30, 2024, as compared to $158.0 million, or 7.0% of total assets as of December 31, 2023. On October 22, 2024, the Board of Directors declared a quarterly cash dividend of $0.125 per common share payable November 19, 2024 to shareholders of record as of November 12, 2024.

Current wording

Consolidated stockholders’ equity of the Corporation was $173.6 million, or 6.9% of total assets as of March 31, 2025, as compared to $171.5 million, or 7.2% of total assets as of December 31, 2024. On April 24, 2025, the Board of Directors declared a quarterly cash dividend of $0.125 per common share payable May 19, 2025 to shareholders of record as of May 12, 2025.

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 9.32% and 9.46% at September 30, 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 9.30% and 9.21% at March 31, 2025 and December 31, 2024, respectively. The Corporation is exempt from CBLR.

Previous wording

In December 2018, the Federal Reserve announced that a banking organization that experiences a reduction in retained earnings due to the CECL adoption as of the beginning of the fiscal year in which CECL is adopted may elect to phase in the regulatory capital impact of adopting CECL. Transitional amounts are calculated for the following items: retained earnings, temporary difference deferred tax assets and credit loss allowances eligible for inclusion in regulatory capital. When calculating regulatory capital ratios, 25% of the transitional amounts are phased in during the first year. An additional 25% of the transitional amounts are phased in over each of the next two years and at the beginning of the fourth year, the day-one effects of CECL are completely reflected in regulatory capital. As of September 30, 2024, Meridian has phased in 50% of the day-one effects of CECL.

Current wording

In December 2018, the Federal Reserve announced that a banking organization that experiences a reduction in retained earnings due to the CECL adoption as of the beginning of the fiscal year in which CECL is adopted may elect to phase in the regulatory capital impact of adopting CECL. Transitional amounts are calculated for the following items: retained earnings, temporary difference deferred tax assets and credit loss allowances eligible for inclusion in regulatory capital. When calculating regulatory capital ratios, 25% of the transitional amounts are phased in during the first year. An additional 25% of the transitional amounts are phased in over each of the next two years and at the beginning of the fourth year, the day-one effects of CECL are completely reflected in regulatory capital. As of March 31, 2025, Meridian has phased in 75% of the day-one effects of CECL.

Previous wording

The ratio of non-performing assets to total assets was 1.97% as of September 30, 2024, up from 1.58% reported as of December 31, 2023. Total non-performing loans of $45.1 million as of September 30, 2024, increased $11.4 million from $33.8 million as December

Current wording

The ratio of non-performing assets to total assets was 2.07% as of March 31, 2025, up from 1.90% reported as of December 31, 2024. Total non-performing loans of $52.2 million as of March 31, 2025, increased $7.1 million from $45.1 million as December 31, 2024. The changes were the result of additional risk rating downgrades leading to non-performing loan classification largely in the SBA loan portfolio and to a lesser degree in small equipment leasing and residential mortgages, partially offset the payoff of $323 thousand in SBA loans and by a $920 thousand decline in non-performing commercial loans due to an additional charge-off on a protracted commercial advertising loan relationship.

Previous wording

Meridian realized net charge-offs of 0.11% of total average loans for the three months ending September 30, 2024, which was up from 0.05% reported for the same period in 2023. Net charge-offs for the quarter ended September 30, 2024 were $2.3 million, compared to net charge-offs of $914 thousand for the quarter ended September 30, 2023. Net charge-offs for the current quarter comprised of $2.4 million in charge-offs, with $152 thousand in recoveries, and were nearly an even split between SBA loans and small ticket equipment leases.

Current wording

Meridian realized net charge-offs of 0.14% of total average loans for the three months ending March 31, 2025, which was up slightly from 0.12% reported for the same period in 2024. Net charge-offs for the quarter ended March 31, 2025 were $2.8 million, compared to net charge-offs of $2.3 million for the quarter ended March 31, 2024. Net charge-offs for the current quarter comprised of $3.0 million in charge-offs, with $175 thousand in recoveries, and were split between commercial loans, construction loans, leases, and SBA loans.

Previous wording

The ratio of allowance for credit losses to total loans and other finance receivables, excluding loans at fair value (a non-GAAP measure, see reconciliation in the Appendix), was 1.10% as of September 30, 2024 compared to 1.17% as of December 31, 2023. As of September 30, 2024 there were specific reserves of $6.8 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 certain SBA and commercial loan relationships, led by the impact of a loan participation that was repurchased during the quarter and classified as a PCD loan and therefore increased the ACL as of September 30, 2024, partially offset by specific reserves that existed as of December 31, 2023 that were charged-off during 2024.

Current wording

The ratio of allowance for credit losses to total loans and other finance receivables, excluding loans at fair value (a non-GAAP measure, see reconciliation in the Appendix), was 1.01% as of March 31, 2025 compared to 0.91% as of December 31, 2024. As of March 31, 2025 there were specific reserves of $5.0 million against non-performing loans, an increase from $2.7 million as of December 31, 2024. The increase over this period was driven by an increase in specific reserves on SBA loan, as well as smaller increases in specific reserves on commercial and commercial real estate loans.

Previous wording

The drop in ACL coverage ratio noted above since December 31, 2023 was the direct result of charge-offs of specific reserves on individually evaluated loans. But despite the decrease in the ACL coverage ratio in the ACL on collectively evaluated loans, management continues to provide for loan growth in various portfolio segments, as well as providing for growth in certain qualitative factors in riskier portfolio segments.

Current wording

The increase in ACL coverage ratio noted above since December 31, 2024 was the result of an increase in specific reserves on individually evaluated loans, combined with providing for loan growth during the quarter.

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 $879.5 million in liquidity from these sources. Through its relationship at the Federal Reserve, Meridian had available credit of approximately $6.0 million at September 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 September 30, 2024, Meridian’s maximum borrowing capacity with the FHLB was $684.0 million. At September 30, 2024, Meridian had borrowed $143.4 million and the FHLB had issued letters of credit, on Meridian’s behalf, totaling $162.4 million against its available credit lines. At September 30, 2024, Meridian also had available $56.0 million of unsecured federal funds lines of credit with other financial institutions as well as $173.9 million of available short or long term funding through the CDARS program and $328.0 million of available short or long term funding through brokered CD arrangements. Management believes that Meridian has adequate resources to meet its short-term and long-term funding requirements.

Current wording

In addition, Meridian maintains borrowing arrangements with various correspondent banks, the FHLB and the Federal Reserve Bank of Philadelphia to meet short-term liquidity needs and has access to approximately $640.5 million in liquidity from these sources. Through its relationship at the Federal Reserve, Meridian had available credit of approximately $5.3 million at March 31, 2025. 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, 2025, Meridian’s maximum borrowing capacity with the FHLB was $698.2 million. At March 31, 2025, Meridian had borrowed $134.9 million and the FHLB had issued letters of credit, on Meridian’s behalf, totaling $190.2 million against its available credit lines. At March 31, 2025, Meridian also had available $56.0 million of unsecured federal funds lines of credit with other financial institutions as well as $264.2 million of available short or long term funding through the CDARS program and $267.8 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 $3.9 million and $10.6 million for the three and nine months ended September 30, 2024, as compared to income before tax of $6.3 million and $19.8 million for the same periods in 2023. The Banking Segment provided 63.1% and 75.0% of the Corporation’s pre-tax profit for the three and nine months ended September 30, 2024, as compared to 121.2% and 122.1% for the same periods in 2023.

Current wording

The Banking Segment recorded income before tax of $3.6 million for the three months ended March 31, 2025, as compared to income before tax of $3.5 million for the same period in 2024. The Banking Segment provided 116.0% of the Corporation’s pre-tax profit for the three months ended March 31, 2025, as compared to 99.6% for the same periods in 2024.

Previous wording

The Wealth Management Segment recorded income before tax of $653 thousand and $1.8 million for the three and nine months ended September 30, 2024, as compared to income before tax of $417 thousand and $973 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.

Current wording

The Wealth Management Segment recorded income before tax of $726 thousand for the three months ended March 31, 2025, as compared to income before tax of $478 thousand for the same period in 2024. 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 income before tax of $1.7 million and $1.7 million for the three and nine months ended September 30, 2024, as compared to losses before tax of $1.5 million and $4.6 million for the same periods in 2023. Mortgage Banking income and expenses related to loan originations and sales increased over the comparable periods due to higher loan origination and sales volume.

Current wording

The Mortgage Banking Segment recorded losses before tax of $1.2 million for the three months ended March 31, 2025, as compared to losses before tax of $465 thousand for the same period in 2024. Mortgage Banking income and expenses related to loan originations and sales increased over the comparable periods 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 September 30, 2024 were $597.3 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 March 31, 2025 were $632.3 million as compared to $603.1 million at December 31, 2024.

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 September 30, 2024 amounted to $11.3 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 March 31, 2025 amounted to $15.4 million as compared to $15.5 million at December 31, 2024.

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 one loan totaling $257 thousand and 5 loans totaling $1.1 million for the three and nine months ended September 30, 2024, respectively, while the Corporation repurchased 2 loans totaling $730 thousand for the three and nine months ended September 30, 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 did not repurchase any loans for the three months ended March 31, 2025, while the Corporation repurchased 3 loans totaling $589 thousand for the three months ended March 31, 2024.