Meridian Corp

Previous wording

You should read the following discussion and analysis in conjunction with the unaudited consolidated interim financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2024 included in Meridian Corporation’s Annual Report on Form 10-K filed with the SEC.

Current wording

You should read the following discussion and analysis in conjunction with the unaudited consolidated interim financial statements and related notes contained in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2025 included in Meridian Corporation’s Annual Report on Form 10-K filed with the SEC.

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; escalating tariff and other trade policies and the resulting impacts on market volatility and global trade; the impact of uncertain or changing political conditions or any current or future federal government shutdown and uncertainty regarding the federal government's debt limit; 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, including the timing of third-party appraisals and loan valuations from lead financial institutions in which we are a loan participant; cyber-security concerns; rapid technological developments and changes, including the development and use of artificial intelligence in business processes, services, and products; 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; the impact of uncertain or changing political conditions or any current or future federal government shutdown and uncertainty regarding the federal government's debt limit; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and military conflicts, including the ongoing conflict in the Middle East, which could impact economic conditions in the United States; 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, object…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Our critical accounting policies are described in detail in the "Critical Accounting Policies" section within Item 7 of our 2024 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.

Current wording

Our critical accounting policies are described in detail in the "Critical Accounting Policies" section within Item 7 of our 2025 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. 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 September 30, 2025 compared to December 31, 2024 and the results of operations for the three and nine months ended September 30, 2025 compared to the same periods in 2024. 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, 2026 compared to December 31, 2025 and the results of operations for the three months ended March 31, 2026 compared to the same period in 2025. More detailed information related to these highlights can be found in the sections that follow.

Previous wording

•The Corporation earned net income of $14.7 million during the nine months ended September 30, 2025 and returned $4.2 million of capital to Meridian shareholders during the nine months ended September 30, 2025 through a $0.125 dividend per share in each of the first three quarters of the year.

Current wording

•The Corporation earned net income of $2.0 million during the three months ended March 31, 2026 and returned $1.7 million of capital to Meridian shareholders during the three months ended March 31, 2026 through a $0.14 dividend per share in the first quarter of the year.

Previous wording

Three Month Results of Operations - September 30, 2025 Compared to the Same Period in 2024

Current wording

Three Month Results of Operations - March 31, 2026 Compared to March 31, 2025

Previous wording

•Net income was $6.7 million, or $0.58 per diluted share, up $1.9 million, or 40.4%, driven by higher net interest income, offset somewhat by a higher provision for credit losses and higher non-interest expense.

Current wording

•Net income was $2.0 million, or $0.17 per diluted share, down $393 thousand, or 16.4%, driven by a higher provision for credit losses, lower non-interest income, and higher non-interest expense, offset somewhat by improved net interest income.

Previous wording

•The return on average assets and return on average equity were 1.04% and 14.42%, respectively, for the third quarter 2025, compared to 0.80% and 11.41%, respectively, for the third quarter 2024.

Current wording

•The return on average assets and return on average equity were 0.32% and 4.02%, respectively, for the first quarter 2026, compared to 0.40% and 5.57%, respectively, for the first quarter 2025.

Previous wording

•Net interest income increased $4.9 million, or 26.7%, to $23.1 million and the net interest margin increased to 3.77% from 3.20%, due to the impact of deposit and borrowing cost declines as well as the in increase in average noninterest-bearing deposits over the period.

Current wording

•Net interest income increased $3.4 million, or 17.3%, to $23.2 million and the net interest margin increased to 3.82% from 3.46%, due to the impact of deposit and borrowing cost declines as well as the increase in average noninterest-bearing deposits over the period.

Previous wording

•Non-interest expense increased $1.0 million, or 4.9%, to $21.5 million due to a $784 thousand increase in salaries and employee benefits, and an increase of $312 thousand in data processing and software expense.

Current wording

•Non-interest expense increased $1.4 million, or 7.5%, to $20.2 million due to a $1.0 million increase in salaries and employee benefits, and an increase of $494 thousand in data processing and software expense.

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, or the difference between the interest income earned on loans, leases and investments and the interest expense paid on deposits and borrowed funds;

Current wording

•Net Interest Income, or the difference between the interest income earned on loans, leases, other finance receivables, and investments and the interest expense paid on deposits and borrowed funds;

Previous wording

•Non-interest Expense, which consists primarily of salaries and employee benefits, occupancy, professional fees, advertising & promotion, data processing, information technology, loan expenses, and other operating expenses; and

Current wording

•Non-interest Expense, which consists primarily of salaries and employee benefits, occupancy, professional fees, advertising & promotion, data processing and software expense, loan expenses, and other operating expenses; and

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, 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.

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, 2026 and 2025, 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, 2025 as compared to the same periods 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.

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, 2026 as compared to the same period in 2025, 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 September 30, 2025 as compared to the same period in 2024, tax-equivalent interest income increased $2.8 million as favorable volume changes contributed $2.9 million to interest income, partially offset by rate changes that had a $110 thousand unfavorable impact on interest income. The loans held for investment average balances increased $149.1 million, leading to a favorable volume impact on interest income of $2.8 million, while the decrease in loans held for sale average balances of $13.9 million had a small unfavorable impact on interest income of $224 thousand. Growth in the loans held for investment portfolio was led by average balance increases in commercial mortgage loans ($69.2 million), home equity lines and loans ($18.1 million), commercial and industrial loans ($26.1 million), and construction loans ($51.8 million). The change in rates led to decreased yields on loans held for sale (down 7 basis points) and loans held for investment (down 6 basis points) that unfavorably impact interest income by $178 thousand, overall.

Current wording

For the three months ended March 31, 2026 as compared to the same period in 2025, tax-equivalent interest income increased $1.5 million as favorable volume changes contributed $2.5 million to interest income, partially offset by rate changes that had a $925 thousand unfavorable impact on interest income. The loans held for investment average balances increased $136.3 million, leading to a favorable volume impact on interest income of $2.4 million, while the increase in loans held for sale average balances of $3.2 million had a favorable impact on interest income of $48 thousand. Growth in the loans held for investment portfolio was led by average balance increases in construction loans ($82.9 million), commercial mortgage loans ($40.3 million), commercial and industrial loans ($27.6 million), and home equity lines and loans ($15.6 million). The change in rates led to decreased yields on loans held for sale (down 79 basis points) and loans held for investment (down 15 basis points) that unfavorably impact interest income by $835 thousand, overall.

Previous wording

On the funding side, overall interest expense decreased $2.1 million, largely driven by the a continuation in the decline of the cost of deposits and borrowings driven by the Fed's rates cuts over the last year. The cost of deposits were down across the board, leading to a $1.9 million decrease to interest expense. The cost of interest-bearing demand deposits, money market and savings accounts and time deposits decreased 117 basis points, 78 basis points and 70 basis points, respectively. These deposit cost declines were partially offset by overall volume increases as the average balances on money market and savings accounts increased $173.5 million, and the average balances on interest-bearing demand deposits increased $40.8 million, while time deposit average balances decreased $37.7 million.

Current wording

On the funding side, overall interest expense decreased $1.9 million, largely driven by a continuation in the decline of the cost of deposits and borrowings driven by the Fed's rates cuts over the last year. The cost of deposits were down across the board, leading to a $1.6 million decrease to interest expense. The cost of interest-bearing demand deposits, money market and savings accounts and time deposits decreased 47 basis points, 64 basis points and 54 basis points, respectively. These deposit cost declines were partially offset by overall volume increases as the average balances on money market and savings accounts increased $105.3 million, and the average balances on time increased $26.1 million.

Previous wording

The cost of borrowings decreased by 13 basis points, while the cost of subordinated debentures increased 239 basis points as the $40 million in 2019 Debentures converted to a floating rate instrument as of December 31, 2024, contributing a $303 thousand increase to interest expense. Borrowing balances decreased $36.4 million on average.

Current wording

The cost of borrowings decreased by 14 basis points, while the cost of subordinated debentures decreased 49 basis points as the interest rate on the $40 million in floating rate 2019 Debentures was lower in the current quarter, contributing a $60 thousand decrease to interest expense. Borrowing balances decreased $11.6 million on average.

Previous wording

Overall, the $4.9 million increase in net interest income over this period was primarily driven by rate changes and secondarily through volume changes.

Current wording

Overall, the $3.4 million increase in net interest income over this period was primarily driven by rate changes and secondarily through volume changes.

Previous wording

The total provision for credit losses increased $568 thousand on a net basis for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The provision on funded loans increased $874 thousand over the three month comparable period in 2024 driven by provisioning for loan growth and charge-offs, as well as an increase in baseline loss rates on certain portfolios. There was no provision on unfunded loan commitments for the three months ended September 30, 2025, while for the three months September 30, 2024 there was a $306 thousand provision on unfunded loan commitments.

Current wording

The total provision for credit losses increased $2.3 million on a net basis for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The provision on funded loans increased $2.2 million over the three month comparable period in 2025 driven largely by an increase of $3.9 million in commercial mortgage charge-offs from a loan participated to us by another financial institution that became non-performing as of March 31, 2026. There was a $55 thousand provision on unfunded loan commitments for the three months ended March 31, 2026, while for the three months March 31, 2025 there was no provision on unfunded loan commitments.

Previous wording

Partially offsetting the overall decrease in non-interest income was an increase in SBA loan income. SBA loan income increased $887 thousand over this period as the value of SBA loans sold for the quarter-ended September 30, 2025 was $13.4 million, or 112.8%, higher than the quarter-ended September 30, 2024, while the gross margin on sale was 7.4% for the quarter-ended September 30, 2025 compared to 7.9% for the quarter-ended September 30, 2024.

Current wording

SBA loan income also decreased $598 thousand over this period due to a decline in the volume of SBA loans sold. The value of SBA loans sold for the quarter-ended March 31, 2026 was $5.4 million, or 44.8%, lower than the quarter-ended March 31, 2025, while the gross margin on sale was 8.5% for the quarter-ended March 31, 2026 compared to 8.7% for the quarter-ended March 31, 2025, down slightly.

Previous wording

Total non-interest expense increased $1.0 million, or 4.9%, largely attributable to an increase in salaries and employee benefits and data processing and software expense, partially offset by a decline in occupancy and equipment expense. Salaries and employee benefits increased $784 thousand due largely to overall employee merit, benefit, and tax related increases for existing employees, as well as an increase of 4 full-time equivalent employees, combined with an increase in mortgage segment related commissions and other benefits. There was a decline of $252 thousand in occupancy and equipment expense due to the early termination of office lease space, as discussed in prior earnings filings. Data processing and software expense increased $312 thousand due to an increase in customer transaction volume and the impact of Meridian's continued investment in technology.

Current wording

Total non-interest expense increased $1.4 million, or 7.5%, primarily as the result of an increase in salaries and employee benefits and data processing and software expense, partially offset by a decline in occupancy and equipment expense. Salaries and employee benefits increased $1.0 million due largely to overall employee merit, benefit, and tax related increases for existing employees, as well as an increase of six full-time equivalent employees, combined with an increase in mortgage segment related commissions and other benefits. Data processing and software expenses increased $494 thousand, reflecting greater customer transaction activity and Meridian's ongoing commitment to technology investments. Professional fees increased $211 thousand, largely related to loan work out expenses. Meanwhile, there was a decline of $155 thousand in occupancy and equipment expense largely due to a prior year early termination of office lease space.

Previous wording

Income tax expense for the three and nine months ended September 30, 2025 was $2.0 million and $4.5 million, respectively, as compared to $1.5 million and $3.4 million for the same periods in 2024. Our effective tax rates were 23.2% and 23.3% for the three and nine months ended September 30, 2025, compared to 24.1% and 24.3% for the same periods in 2024. While income tax expense increased primarily due to the increase in income before income taxes, the effective tax rate decreased slightly due to the impact of lower nondeductible expense and an increase in tax-free bank owned life insurance income.

Current wording

Income tax expense for the three months ended March 31, 2026 was $582 thousand, as compared to $746 thousand for the same period in 2025. Our effective tax rate was 22.5% for the three months ended March 31, 2026, compared to 23.7% for the same period in 2025. While income tax expense decreased primarily due to the decrease in income before income taxes, the effective tax rate decreased slightly due to the impact of tax expense recognized in the prior-quarter related to the surrender of certain bank owned life insurance policies.

Previous wording

As of September 30, 2025, total assets were $2.5 billion which increased $155.3 million, or 6.5%, 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:

Current wording

As of March 31, 2026, total assets were $2.6 billion which increased $14.6 million, or 0.6%, from December 31, 2025. This increase in assets over the prior period was due primarily to loan portfolio growth, as detailed in the following table:

Previous wording

Total loans and other finance receivables increased $133.0 million, to $2.2 billion as of September 30, 2025, from $2.0 billion as of December 31, 2024. Overall portfolio loan growth was 6.6% since December 31, 2024, or 8.7% on an annualized basis for 2025. Commercial real estate loans increased $48.5 million, or 5.9%, construction loans increased $55.5 million, or 21.4%, SBA loans decreased $17.9 million, or 11.5% due to loan sales described above, and commercial and industrial loans increased $50.7 million, or 13.8%.

Current wording

Total loans and other finance receivables increased $11.1 million, to $2.2 billion as of March 31, 2026, from $2.2 billion as of December 31, 2025. Overall portfolio loan growth was 0.5% since December 31, 2025, or 2.0% on an annualized basis for 2026. Construction loans increased $12.8 million, or 3.9%, and commercial and industrial loans increased $15.4 million, or 3.6%. While commercial real estate loans decreased $8.9 million, or 1.0%, and SBA loans decreased $5.3 million, or 3.8% due to loan sales described above.

Previous wording

As of September 30, 2025, included within the commercial real estate loans total of $872.5 million was $282.4 million of owner-occupied commercial loans, as well as $125.0 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, 2026, included within the commercial real estate loans total of $870.5 million was $290.3 million of owner-occupied commercial loans, as well as $104.2 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.

Previous wording

Total deposits increased $125.7 million, or 6.3%, since December 31, 2024. Total interest-bearing deposits increased $127.0 million during the period, while noninterest-bearing deposits decreased $1.2 million. The overall 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 increased $33.9 million, or 4.8%, largely due customer preference for the higher term interest rates offered by these products.

Current wording

Total deposits increased $11.8 million, or 0.5%, since December 31, 2025. Total interest-bearing deposits increased $13.8 million during the period, whereas noninterest-bearing deposits decreased $1.9 million. Time deposits increased $23.7 million, or 3.2%, largely due to customer preference for the higher interest rates offered by these products.

Previous wording

The majority of Meridian's deposit base is comprised of business deposits, 50%, with consumer deposits amounting to 14% at September 30, 2025. Municipal deposits at 13% and brokered deposits at 23% 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, 2025, 61% of business accounts and 90% 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 21% at September 30, 2025.

Current wording

The majority of Meridian's deposit base is comprised of business deposits, 51%, with consumer deposits amounting to 15% at March 31, 2026. Municipal deposits at 11% and brokered deposits at 23% 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, 2026, 64% 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 March 31, 2026.

Previous wording

Consolidated stockholders’ equity of the Corporation was $188.0 million, or 7.4% of total assets as of September 30, 2025, as compared to $171.5 million, or 7.2% of total assets as of December 31, 2024. On October 23, 2025, the Board of Directors declared a quarterly cash dividend of $0.125 per common share payable November 17, 2025 to shareholders of record as of November 10, 2025.

Current wording

Consolidated stockholders’ equity of the Corporation was $200.2 million, or 7.8% of total assets as of March 31, 2026, as compared to $199.7 million, or 7.8% of total assets as of December 31, 2025. On April 23, 2026, the Board of Directors declared a quarterly cash dividend of $0.14 per common share payable May 11, 2026 to shareholders of record as of May 4, 2026.

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 9.41% and 9.21% at September 30, 2025 and December 31, 2024, 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 9.58% and 9.50% at March 31, 2026 and December 31, 2025, 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, 2025, Meridian has phased in 75% 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, 2026, Meridian has phased in 100% of the day-one effects of CECL.

Previous wording

Meridian realized net charge-offs of 0.09% of total average loans for the three months ending September 30, 2025, which was down slightly from 0.11% reported for the same period in 2024. Net charge-offs for the quarter ended September 30, 2025 were $1.9 million, compared to net charge-offs of $2.3 million for the quarter ended September 30, 2024. Net charge-offs for the current quarter comprised of $2.1 million in charge-offs, with $214 thousand in recoveries, and were split between commercial loans, leases, and SBA loans.

Current wording

Meridian realized net charge-offs of 0.35% of total average loans for the three months ending March 31, 2026, which had increased from 0.14% reported for the same period in 2025. Net charge-offs for the quarter ended March 31, 2026 were $7.8 million, compared to net charge-offs of $2.8 million for the quarter ended March 31, 2025. Net charge-offs for the current quarter comprised of $8.2 million in total charge-offs, of which $3.9 million related to a commercial mortgage purchased participation and $2.5 million related to SBA. There were $407 thousand in recoveries during the period, largely related to leases.

Previous wording

The Corporation is proactive with its loan review process that utilizes the engagement of an independent outside loan review firm, which helps identify developing credit issues. Proactive steps that are taken include the procurement of additional collateral (preferably outside the current loan structure) whenever possible and frequent contact with the borrower. The Corporation believes that timely identification of credit issues and appropriate actions early in the process serve to mitigate overall risk of loss.

Current wording

The Corporation believes it is proactive with its loan review process that utilizes the engagement of an independent outside loan review firm, which helps identify developing credit issues. For example, the Corporation procures additional collateral (preferably outside the current loan structure) whenever possible and frequent contact with the borrower. The Corporation believes that timely identification of credit issues and appropriate actions early in the process serve to mitigate overall risk of loss.

Previous wording

Management maintains liquidity to meet depositors’ needs for funds, to satisfy or fund loan commitments, and for other operating purposes. Meridian’s foundation for liquidity is a stable and loyal customer deposit base, cash and cash equivalents, and a marketable investment portfolio that provides periodic cash flow through regular maturities and amortization or that can be used as collateral to secure funding.

Current wording

Management maintains liquidity to meet depositors’ needs for funds, to satisfy or fund loan commitments, and for other operating purposes. Meridian’s foundation for liquidity is a stable and loyal customer deposit base, cash and cash equivalents, and a marketable investment portfolio that provides periodic cash flow through regular maturities and amortization or that can be used as collateral to secure funding. In addition, as part of its liquidity management, Meridian maintains a portion of commercial loan assets that are comprised of SNCs, which have a national market and can be sold in a timely manner. Meridian’s available liquidity, which totaled $348.0 million at March 31, 2026, compared to $346.3 million at December 31, 2025, includes investments, SNCs, Federal funds sold, mortgages held-for-sale and cash and cash equivalents, less the amount of securities required to be pledged for certain liabilities. Meridian also anticipates scheduled payments and prepayments on its loan and mortgage-backed securities portfolios.

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 $680.4 million in liquidity from these sources. Through its relationship at the Federal Reserve, Meridian had available credit of approximately $5.0 million at September 30, 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 September 30, 2025, Meridian’s maximum borrowing capacity with the FHLB was $746.0 million. At September 30, 2025, Meridian had borrowed $134.3 million and the FHLB had issued letters of credit, on Meridian’s behalf, totaling $183.2 million against its available credit lines. At September 30, 2025, Meridian also had available $56.0 million of unsecured federal funds lines of credit with other financial institutions as well as $292.1 million of available short or long term wholesale funding arrangements through the CDARS/ICS one-way buy program and conventional brokered CDs. 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 FRB to meet short-term liquidity needs and has access to approximately $744.9 million in liquidity from these sources. Through its relationship at the Federal Reserve, Meridian had available credit of approximately $4.3 million at March 31, 2026. At March 31, 2026, Meridian had $0 in borrowings from the Federal Reserve. As a member of the FHLB, Meridian is 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, 2026, Meridian’s maximum borrowing capacity with the FHLB was $732.0 million. At March 31, 2026, Meridian had borrowed $120.8 million and the FHLB had issued letters of credit, on Meridian’s behalf, totaling $170.1 million against its available credit lines. At March 31, 2026, Meridian also had available $56.0 million of unsecured federal funds lines of credit with other financial institutions as well as $304.1 million of available short or long term wholesale funding arrangements through the CDARS/ICS one-way buy program and conventional brokered CDs. 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 $7.7 million and $16.5 million for the three and nine months ended September 30, 2025, as compared to income before tax of $3.9 million and $10.6 million for the same periods in 2024. The Banking Segment provided 88.3% and 86.4% of the Corporation’s pre-tax profit for the three and nine months ended September 30, 2025, as compared to 63.1% and 75.0% for the same periods in 2024.

Current wording

The Banking Segment recorded income before tax of $3.0 million for the three months ended March 31, 2026, as compared to income before tax of $3.6 million for the same period in 2025. The Banking Segment provided 116.7% of the Corporation’s pre-tax profit for the three months ended March 31, 2026, as compared to 116.0% for the same period in 2025.

Previous wording

The Wealth Management Segment recorded income before tax of $512 thousand and $1.8 million for the three and nine months ended September 30, 2025, as compared to income before tax of $653 thousand and $1.8 million for the same periods in 2024.

Current wording

The Wealth Management Segment recorded income before tax of $811 thousand for the three months ended March 31, 2026, as compared to income before tax of $726 thousand for the same period in 2025.

Previous wording

The Mortgage Banking Segment recorded income before tax of $507 thousand and $758 thousand for the three and nine months ended September 30, 2025, as compared to income before tax of $1.7 million and $1.7 million for the same periods 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.

Current wording

The Mortgage Banking Segment recorded a loss before tax of $1.2 million for the three months ended March 31, 2026, as compared to a loss before tax of $1.2 million for the same period in 2025. 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, 2025 were $617.3 million as compared to $603.1 million at December 31, 2024.

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, 2026 were $656.1 million as compared to $641.9 million at December 31, 2025.

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, 2025 amounted to $15.4 million as compared to $15.5 million at December 31, 2024.

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, 2026 amounted to $10.3 million as compared to $9.4 million at December 31, 2025.