Meridian Corporation Reports Fourth Quarter and Year End 2022 Results and Announces an Increase in the Quarterly Dividend to $0.25 per Common Share

Rhea-AI Summary

Meridian Corporation (Nasdaq: MRBK) reported a net income of $21.8 million and diluted earnings per share of $3.58 for the year ended December 31, 2022. In Q4 2022, net income was $4.6 million with diluted earnings per share of $0.77. The return on average assets was 1.18% for the year and 0.92% for the quarter. Total assets increased to $2.1 billion. A quarterly cash dividend of $0.25 per share was declared, payable on February 21, 2023. Despite strong loan growth, the company faced challenges in its mortgage segment, which saw a 67% decline in revenue year-over-year due to rising rates and low inventory.

Positive

• Net income of $21.8 million for 2022.
• Diluted earnings per share of $3.58 for the year.
• Total assets grew to $2.1 billion, a 7.3% increase.
• Declared a quarterly cash dividend of $0.25.

Negative

• Q4 2022 net income decreased by $1.2 million from Q3 2022.
• Mortgage segment revenue down 67% year-over-year.
• SBA loan income decreased by 47.2% quarter-over-quarter.

MALVERN, Pa., Jan. 30, 2023 (GLOBE NEWSWIRE) -- Meridian Corporation (Nasdaq: MRBK) today reported:

• Net income of $21.8 million and diluted earnings per share of $3.58 for the year ended December 31, 2022, and net income of $4.6 million and diluted earnings per share of $0.77 for the fourth quarter ended December 31, 2022.
• Return on average assets and return on average equity for the year ended December 31, 2022 were 1.18% and 13.87%, respectively; while the return on average assets and return on average equity for the fourth quarter of 2022 were 0.92% and 11.91%, respectively.
• Net interest margin was 3.98% for the year ended December 31, 2022 and 3.93% for the fourth quarter of 2022.
• Total assets at December 31, 2022 were $2.1 billion, compared to $1.9 billion at September 30, 2022 and $1.7 billion at December 31, 2021.
• Fourth quarter commercial loan growth, excluding Paycheck Protection Program ("PPP") loans, was $61.3 million, or 17.6% annualized; residential and home equity loans increased by $70.1 million.
• Fourth quarter deposit growth was $38.9 million with an $11.6 million increase in non-interest bearing deposits.
• Non-interest income of $41.7 million for the year ended December 31, 2022, and $8.0 million in the fourth quarter of 2022.
• Non-interest expenses of $81.4 million for the year ended December 31, 2022, and $20.0 million in the fourth quarter of 2022.
• The Company repurchased 123,441 shares of its common stock at an average price of $30.82 per share during the fourth quarter.
• On January 26, 2023, the Board of Directors declared a quarterly cash dividend of $0.25 per common share, payable February 21, 2023 to shareholders of record as of February 14, 2023.

Christopher J. Annas, Chairman and CEO commented, “Meridian’s fourth quarter revenue of $35.8 million generated earnings of $4.6 million, or $0.77 per diluted share. The bank fundamentals were very strong, with net interest margin of 3.93% and quarterly loan growth of 8%. Loan demand has been consistent within our customer base, and we also won a number of relationships from competitors. Reduced income from our ancillary businesses, mortgage (down 46%) and SBA (down 47%) hurt bottom line results."

"On an annual basis, we fared well in a tumultuous year. Loans grew 26%, led by commercial real estate and commercial/industrial. We also generated adjustable rate mortgages for the portfolio, in shorter maturity buckets. I’m very pleased with a 3.98% net interest margin for the year. The change from a flush deposit environment to rapid rate increases and deposit outflows has been a challenge. Credit quality is good, and we experienced some non-performing loan payoffs. Our branch lite and customer self-service model helps control expenses."

"Our mortgage segment experienced a 67% decline in revenue year-over-year, resulting from the rate increases and a lack of homes for sale. The low inventory has plagued the business for the last two years and is only now showing signs of subsiding. We made dramatic cuts in expense throughout the year but still ended with a $2.6 million pretax loss, our first negative year. We are monitoring applications daily and are ready to cut further if sales don’t improve."

"The SBA business was impacted by rates, as gain on sale margins reduced and transactions slowed. We have added some new lenders and expect economic conditions to be ripe for more opportunities."

Mr. Annas added, "The Meridian team managed through a difficult year with the historic rate rise and other economic factors. Ironically, this year helped to illuminate the basic loan/deposit bank operations that are the engine of MRBK. Recognizing this, we will continue to grow organically, while seeking revenue diversification to make Meridian resilient against varied economic conditions."

Select Condensed Financial Information

	As of or for the quarter ended (Unaudited)
	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
	(Dollars in thousands, except per share data)
Income:
Net income	$	4,557			$	5,798			$	5,938			$	5,535			$	7,719
Basic earnings per common share		0.80				0.99				0.99				0.92				1.29
Diluted earnings per common share		0.77				0.96				0.96				0.88				1.24
Net interest income		18,518				18,026				17,551				16,035				16,322
Balance Sheet:
Total assets	$	2,062,228			$	1,921,924			$	1,853,019			$	1,831,589			$	1,713,443
Loans, net of fees and costs		1,743,682				1,610,349				1,518,893				1,431,906				1,386,457
Total deposits		1,712,479				1,673,553				1,568,014				1,564,851				1,446,413
Non-interest bearing deposits		301,727				290,169				291,925				291,379				274,528
Stockholders' equity		153,280				151,161				156,087				157,684				165,360
Balance Sheet (Average Balances):
Total assets	$	1,962,915			$	1,868,194			$	1,811,335			$	1,752,643			$	1,755,263
Total interest earning assets		1,877,967				1,791,255				1,736,547				1,680,070				1,696,473
Loans, net of fees and costs		1,674,215				1,565,861				1,484,696				1,415,831				1,383,511
Total deposits		1,698,597				1,597,648				1,567,325				1,504,241				1,409,534
Non-interest bearing deposits		312,297				295,975				296,521				281,123				287,801
Stockholders' equity		151,791				157,614				158,420				161,939				159,921
Performance Ratios (Annualized):
Return on average assets		0.92	%			1.23	%			1.31	%			1.28	%			1.74	%
Return on average equity		11.91	%			14.59	%			15.03	%			13.86	%			19.15	%

Income Statement - Fourth Quarter 2022 Compared to Third Quarter 2022
Net income was $4.6 million, down $1.2 million from $5.8 million for the third quarter. Net interest income increased $486 thousand, or 2.7%, on a tax equivalent basis driven by continued strong loan portfolio growth. Offsetting the increase in net interest income, non-interest income decreased $2.2 million or 21.8%, while non-interest expense decreased $214 thousand, or 1.1%. Detailed explanations of the major categories of income and expense follow below.

Net Interest income

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

	Quarter Ended
(dollars in thousands)	December 31, 2022				September 30, 2022				$ Change				% Change			Change due to rate				Change due to volume
Interest income:
Due from banks	$	126			$	92			$	34			37.0	%		$	49			$	(15	)
Federal funds sold		3				1				2			200.0	%			1				1
Investment securities - taxable (1)		821				648				173			26.7	%			172				1
Investment securities - tax exempt (1)		449				451				(2	)		(0.4	)%			9				(11	)
Loans held for sale		292				479				(187	)		(39.0	)%			71				(258	)
Loans held for investment (1)		26,150				21,371				4,779			22.4	%			3,231				1,548
Total loans		26,442				21,850				4,592			21.0	%			3,302				1,290
Total interest income		27,841				23,042				4,799			20.8	%			3,533				1,266
Interest expense:
Interest-bearing demand deposits	$	1,388			$	798			$	590			73.9	%		$	589			$	1
Money market and savings deposits		3,851				2,075				1,776			85.6	%			1,813				(37	)
Time deposits		2,976				1,202				1,774			147.6	%			1,385				389
Total deposits		8,215				4,075				4,140			101.6	%			3,787				353
Borrowings		439				266				173			65.0	%			206				(33	)
Subordinated debentures		591				591				—			—	%			—				—
Total interest expense		9,245				4,932				4,313			87.4	%			3,993				320
Net interest income differential	$	18,596			$	18,110			$	486			2.68	%		$	(460	)		$	946
(1) Reflected on a tax-equivalent basis.

Interest income increased $4.8 million on a tax equivalent basis, quarter over quarter, due to a higher yield on earning assets, which went up 78 basis points, in addition to a higher level of average earning assets, which increased by $86.7 million. Included in interest income was approximately $280 thousand of one-time fees and interest recapture. The yield on total loans increased 78 basis points and the yield on cash and investments increased 50 basis points in total, reflecting the impact in rates caused by the Federal Reserve’s monetary policy. Over $718 million in loans repriced during the quarter with an average increase of 129 basis points. Average total loans, excluding PPP loans and residential loans for sale, increased $113.9 million, most notably in commercial real estate and construction, commercial loans and leases and small business loans, which increased $47.9 million on average, combined. Home equity loans and residential real estate loans held in portfolio increased $44.8 million on average, combined. Residential loans for sale and PPP loans decreased $18.1 million, and $5.6 million on average, respectively.

Interest expense increased $4.3 million, quarter over quarter, due primarily to market interest rate rises, as well as an increase of $84.6 million in average deposits. Interest expense on deposits increased $4.1 million with the cost of interest-bearing deposits increasing 111 basis points to 2.35%. Total cost of deposits increased 91 basis points reflecting an increase of $16.3 million in average non-interest bearing deposits. Interest expense on borrowings increased $173 thousand as total average short-term borrowings decreased $4.7 million and the cost increased 221 basis points.

Net interest margin decreased 8 basis points to 3.93% for the fourth quarter from 4.01% for third the quarter, as retail deposits experienced pent-up repricing and wholesale funding repriced quicker than loans at the tail end of the quarter. Excluding the impact from PPP, net interest margin decreased 7 basis points to 3.92% from 3.99%. A reconciliation of this non-GAAP measure is included in the Appendix.

Provision for loans losses

The provision for loan losses increased $220 thousand to $746 thousand for the fourth quarter. The fourth quarter provision was the result of new loan growth as well as covering $933 thousand in charge-offs on small ticket equipment leases, partially offset by improvements in certain qualitative factors and decreases in specific reserves due to payoffs on non-performing loans and other underlying credit quality improvements.

Non-interest income

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

	Quarter Ended
(Dollars in thousands)	December 31, 2022				September 30, 2022				$ Change				% Change
Mortgage banking income	$	3,958			$	7,329			$	(3,371	)		(46.0	)%
Wealth management income		1,061				1,114				(53	)		(4.8	)%
SBA loan income		522				989				(467	)		(47.2	)%
Earnings on investment in life insurance		140				138				2			1.4	%
Net change in the fair value of derivative instruments		10				127				(117	)		(92.1	)%
Net change in the fair value of loans held-for-sale		249				(237	)			486			(205.1	)%
Net change in the fair value of loans held-for-investment		91				(886	)			977			(110.3	)%
Net gain on hedging activity		498				399				99			24.8	%
Service charges		35				32				3			9.4	%
Other		1,432				1,219				213			17.5	%
Total non-interest income	$	7,996			$	10,224			$	(2,228	)		(21.8	)%

Total non-interest income decreased $2.2 million, or 21.8%, quarter over quarter due primarily to impact from the rising rate environment. Mortgage banking income was negatively impacted by rising rates, higher home values and record low home inventory which resulted in a decline in loan originations of $70.6 million over the prior quarter. Gain on sale margins remained flat at 267 basis points, as mortgage banking income decreased $3.4 million. The fair value of loans held for sale, derivatives instruments and net gain on hedging activity increased $468 thousand in total, helping offset the decline in mortgage banking income.

SBA loan income decreased $467 thousand, or 47.2%, over the prior quarter as a lower volume of SBA loans were sold into the secondary market in the fourth quarter. $17.2 million of loans were sold in the quarter-ending December 31, 2022 compared to $20.8 million in loans sold in the quarter-ending September 30, 2022. The upward movement in interest rates had a negative impact on gross margins on the SBA loan sales, which declined 8 basis points to 5.0%, while also contributing to the decline in income was increased amortization and impairment of $128 thousand on SBA servicing assets.

Wealth management income decreased $53 thousand, or 4.8%, for the quarter-ended December 31, 2022 over the prior quarter due to the effect of market conditions on assets under management. Other non-interest income increased $213 thousand, or 17.5%, over the prior quarter due largely to an increase in swap fee income and FHLB stock dividend income.

Non-interest expense

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

	Quarter Ended
(Dollars in thousands)	December 31, 2022				September 30, 2022				$ Change				% Change
Salaries and employee benefits	$	12,794			$	13,360			$	(566	)		(4.2	)%
Occupancy and equipment		1,218				1,191				27			2.3	%
Professional fees		976				899				77			8.6	%
Advertising and promotion		996				1,165				(169	)		(14.5	)%
Data processing		677				574				103			17.9	%
Information technology		836				868				(32	)		(3.7	)%
Pennsylvania bank shares tax		181				202				(21	)		(10.4	)%
Other		2,369				2,002				367			18.3	%
Total non-interest expense	$	20,047			$	20,261			$	(214	)		(1.1	)%

Salaries and employee benefits decreased $566 thousand overall, with an increase of $1.3 million for bank and wealth segments combined, and a decrease of $1.9 million for mortgage segment salaries and employee benefits. The bank and wealth segments salaries and employee benefits were greater due to new hires, as well as increased incentive compensation and stock based compensation quarter-over-quarter. The mortgage segment salary and benefits decreased due to lower levels of variable compensation as well as a general reduction in mortgage segment workforce.

Professional fees increased $77 thousand over the prior quarter due to legal expense incurred related to dealing with non-performing loans and the increase in other real estate owned, discussed below. Advertising and promotion expense decreased $169 thousand from the prior quarter as promotional costs were down in the fourth quarter due to seasonality, while there was also a decline in advertising expense from the mortgage segment. Data processing expense increased $103 thousand over the prior quarter due to an increase in deposit processing fees. Other non-interest expense increased $367 thousand over the prior quarter due to $161 thousand in expenses related to the other real estate owned property recorded in the fourth quarter, combined with an increase in year-end business development costs.

Balance Sheet - December 31, 2022 Compared to September 30, 2022
As of December 31, 2022, total assets increased $140.3 million, or 7.3%, to $2.1 billion from $1.9 billion at September 30, 2022. This growth in assets was due to loan portfolio growth partially funded by an increase in deposits and borrowings.

Portfolio loan growth, excluding PPP loans, was $135.5 million, or 8.5% quarter-over-quarter. Construction loans increased $27.5 million, or 11.3%, residential real estate loans held in portfolio increased $68.3 million, or 44.5%, and lease financings increased $9.4, or 7.3% from September 30, 2022. Partially offsetting the growth in portfolio loans were decreases of $4.1 million, or 46.9%, in PPP loan balances as they continue to be forgiven by the SBA.

Total deposits increased $38.9 million, or 2.3%, quarter over quarter, due to an increase of $11.6 million in non-interest bearing deposits and a $27.4 million increase in interest-bearing deposits.

Consolidated stockholders’ equity of the Corporation increased as a result of net income of $4.6 million for the quarter, as well as improvement $1.5 million in other comprehensive loss, partially offset by dividends paid of $1.1 million, treasury stock purchases of $3.8 million. Based on capital ratio levels at December 31, 2022, we remain above the Community Bank Leverage Ratio requirement of 9%.

The following table presents capital ratios at the dates indicated:

	December 31, 2022			September 30, 2022
Stockholders' equity to total assets	7.43	%		7.87	%
Tangible common equity to tangible assets (1)	7.25	%		7.67	%
Tier 1 leverage ratio - Corporation	8.13	%		8.54	%
Common tier 1 risk-based capital ratio - Corporation	8.77	%		9.28	%
Tier 1 risk-based capital ratio - Corporation	8.77	%		9.28	%
Total risk-based capital ratio - Corporation	12.05	%		12.80	%
(1) See Non-GAAP reconciliation in the Appendix

Asset Quality Summary
Meridian's strong credit culture remains focused on asset quality, while working with customers to navigate current economic challenges. As a result of continuing work-out process, several non-performing assets moved forward with positive changes in underlying credit position. Three non-performing loans paid down, paid off or moved to OREO during the period. The ratio of non-performing loans to total loans decreased to 1.20% as of December 31, 2022, from 1.40% at September 30, 2022. Non-performing assets to total assets declined to 1.11% as of December 31, 2022 from 1.20% as of September 30, 2022. There was $1.7 million in other real estate owned included in non-performing assets as of December 31, 2022, as the result of taking possession of a well collateralized residential real estate property in the quarter. There was no other real estate owned as of September 30, 2022. Total non-performing loans were $21.2 million as of December 31, 2022, down $1.8 million from $23.1 million as September 30, 2022 due to $3.2 million principal payment on a non-performing loan relationship, payoff of $2.7 million on another non-performing loan, both partially offset by an increase of $3.1 million in SBA loans considered non-performing.

Meridian realized net charge-offs of 0.05% of total average loans for the quarter ended December 31, 2022, up from the quarter ended September 30, 2022 level of 0.02%. Net charge-offs for the quarter ended December 31, 2022 were $891 thousand, comprised of $936 thousand in charge-offs, with $45 thousand in recoveries for the quarter. Nearly all of the charge-offs for the quarter ended December 31, 2022 were from small ticket equipment leases. The ratio of allowance for loan 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 1.09% as of December 31, 2022 compared to 1.20% as of September 30, 2022. As of December 31, 2022 there were specific reserves of $2.2 million against non-performing loans, down from $2.6 million as of September 30, 2022 due to improvement in the underlying credit quality for certain loans.

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

“Safe Harbor” Statement
In addition to historical information, this press release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Meridian Corporation’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Meridian Corporation’s control). Numerous competitive, economic, regulatory, legal and technological factors, risks and uncertainties that could cause actual results to differ materially include, without limitation, the impact of the COVID-19 pandemic and government responses thereto; on the U.S. economy, including the markets in which we operate; actions that we and our customers take in response to these factors and the effects such actions have on our operations, products, services and customer relationships; and the risk that the Small Business Administration may not fund some or all Paycheck Protection Program (PPP) loan guaranties; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and the effects of inflation, a potential recession, among others, could cause Meridian Corporation’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. Meridian Corporation cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Meridian Corporation’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2021 and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Meridian Corporation does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Meridian Corporation or by or on behalf of Meridian Bank.

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

	Quarter Ended
	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Earnings and Per Share Data:
Net income	$	4,557			$	5,798			$	5,938			$	5,535			$	7,719
Basic earnings per common share	$	0.80			$	0.99			$	0.99			$	0.92			$	1.29
Diluted earnings per common share	$	0.77			$	0.96			$	0.96			$	0.88			$	1.24
Common shares outstanding		5,733				5,844				6,037				6,129				6,108
Performance Ratios:
Return on average assets		0.92	%			1.23	%			1.31	%			1.28	%			1.74	%
Return on average equity		11.91				14.59				15.03				13.86				19.15
Net interest margin (tax-equivalent)		3.93				4.01				4.07				3.89				3.83
Net interest margin (tax-equivalent, excluding PPP loans and borrowings) (1)		3.92				3.99				3.95				3.82				3.76
Yield on earning assets (tax-equivalent)		5.88				5.10				4.65				4.35				4.28
Yield on earning assets (tax-equivalent, excluding PPP loans) (1)		5.88				5.09				4.54				4.31				4.23
Cost of funds		2.07				1.17				0.61				0.50				0.49
Efficiency ratio		75.61	%			71.72	%			70.49	%			73.56	%			71.05	%
Asset Quality Ratios:
Net charge-offs (recoveries) to average loans		0.05	%			0.02	%			0.03	%			0.04	%			0.00	%
Non-performing loans to total loans		1.20				1.40				1.46				1.51				1.57
Non-performing assets to total assets		1.11				1.20				1.24				1.25				1.34
Allowance for loan losses to:
Total loans held for investment		1.08				1.18				1.24				1.31				1.35
Total loans held for investment (excluding loans at fair value and PPP loans) (1)		1.09				1.20				1.27				1.38				1.46
Non-performing loans		88.66	%			82.20	%			81.82	%			82.48	%			81.60	%
Capital Ratios:
Book value per common share	$	26.74			$	25.86			$	25.85			$	25.73			$	27.07
Tangible book value per common share	$	26.03			$	25.16			$	25.16			$	25.04			$	26.37
Total equity/Total assets		7.43	%			7.87	%			8.42	%			8.61	%			9.65	%
Tangible common equity/Tangible assets - Corporation (1)		7.25				7.67				8.22				8.40				9.42
Tangible common equity/Tangible assets - Bank (1)		8.80				9.61				10.17				10.40				11.54
Tier 1 leverage ratio - Corporation		8.13				8.54				8.87				9.10				9.39
Tier 1 leverage ratio - Bank		9.95				10.52				10.86				11.20				11.51
Common tier 1 risk-based capital ratio - Corporation		8.77				9.28				9.79				10.09				10.83
Common tier 1 risk-based capital ratio - Bank		10.73				11.44				11.98				12.41				13.27
Tier 1 risk-based capital ratio - Corporation		8.77				9.28				9.79				10.09				10.83
Tier 1 risk-based capital ratio - Bank		10.73				11.44				11.98				12.41				13.27
Total risk-based capital ratio - Corporation		12.05				12.80				13.50				13.91				14.81
Total risk-based capital ratio - Bank		11.87	%			12.70	%			13.33	%			13.76	%			14.63	%
(1) See Non-GAAP reconciliation in the Appendix

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

	Three Months Ended												Year Months Ended
	December 31, 2022				September 30, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Interest income:
Loans and other finance receivables, including fees	$	26,440			$	21,848			$	17,535			$	84,627			$	68,822
Securities - taxable		821				648				387				2,420				1,463
Securities - tax-exempt		373				369				303				1,388				1,189
Cash and cash equivalents		129				93				23				286				48
Total interest income		27,763				22,958				18,248				88,721				71,522
Interest expense:
Deposits		8,215				4,075				1,233				15,397				5,494
Borrowings		1,030				857				693				3,196				2,917
Total interest expense		9,245				4,932				1,926				18,593				8,411
Net interest income		18,518				18,026				16,322				70,128				63,111
Provision for loan losses		746				526				(222	)			2,488				1,070
Net interest income after provision for loan losses		17,772				17,500				16,544				67,640				62,041
Non-interest income:
Mortgage banking income		3,958				7,329				13,639				25,325				75,932
Wealth management income		1,061				1,114				1,270				4,733				4,801
SBA loan income		522				989				1,475				4,467				6,898
Earnings on investment in life insurance		140				138				141				553				365
Net change in the fair value of derivative instruments		10				127				(907	)			(703	)			(4,338	)
Net change in the fair value of loans held-for-sale		249				(237	)			(147	)			(844	)			(3,311	)
Net change in the fair value of loans held-for-investment		91				(886	)			(165	)			(2,408	)			(189	)
Net gain on hedging activity		498				399				563				5,439				2,961
Net gain on sale of investment securities available-for-sale		—				—				73				—				435
Service charges		35				32				29				125				129
Other		1,432				1,219				1,115				5,037				4,305
Total non-interest income		7,996				10,224				17,086				41,724				87,988
Non-interest expense:
Salaries and employee benefits		12,794				13,360				17,042				54,378				78,866
Occupancy and equipment		1,218				1,191				1,085				4,837				4,545
Professional fees		976				899				929				3,635				3,558
Advertising and promotion		996				1,165				919				4,336				3,714
Data processing		677				574				484				2,310				2,150
Information technology		836				868				867				3,142				2,232
Pennsylvania bank shares tax		181				202				131				793				609
Other		2,369				2,002				2,280				8,014				8,053
Total non-interest expense		20,047				20,261				23,737				81,445				103,727
Income before income taxes		5,721				7,463				9,893				27,919				46,302
Income tax expense		1,164				1,665				2,174				6,091				10,717
Net income	$	4,557			$	5,798			$	7,719			$	21,828			$	35,585
Basic earnings per common share	$	0.80			$	0.99			$	1.29			$	3.70			$	5.91
Diluted earnings per common share	$	0.77			$	0.96			$	1.24			$	3.58			$	5.73
Basic weighted average shares outstanding		5,695				5,868				5,978				5,896				6,019
Diluted weighted average shares outstanding		5,898				6,059				6,210				6,102				6,206

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

	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Assets:
Cash and due from banks	$	11,299			$	12,114			$	8,280			$	11,155			$	3,966
Interest-bearing deposits at other banks		27,092				20,774				28,813				44,867				19,514
Federal funds sold		—				—				—				12,866				—
Cash and cash equivalents		38,391				32,888				37,093				68,888				23,480
Securities available-for-sale, at fair value		135,346				127,999				129,288				130,653				159,302
Securities held-to-maturity, at amortized cost		37,479				37,922				37,111				34,977				6,372
Equity investments		2,086				2,092				2,153				2,240				2,354
Mortgage loans held for sale, at fair value		22,243				33,800				58,938				81,258				80,882
Loans, net of fees and costs		1,743,682				1,610,349				1,518,893				1,431,906				1,386,457
Allowance for loan and lease losses		(18,828	)			(18,974	)			(18,805	)			(18,826	)			(18,758	)
Loans, net of the allowance for loan and lease losses		1,724,854				1,591,375				1,500,088				1,413,080				1,367,699
Restricted investment in bank stock		6,931				5,217				4,719				4,330				5,117
Bank premises and equipment, net		13,349				12,835				12,185				11,883				11,806
Bank owned life insurance		28,055				22,916				22,778				22,641				22,503
Accrued interest receivable		7,363				6,008				5,108				4,848				5,009
Other real estate owned		1,703				—				—				—				—
Deferred income taxes		3,936				5,722				4,467				3,190				1,413
Servicing assets		12,346				12,807				12,860				13,396				12,765
Goodwill		899				899				899				899				899
Intangible assets		3,175				3,226				3,277				3,328				3,379
Other assets		24,072				26,218				22,055				35,978				10,463
Total assets	$	2,062,228			$	1,921,924			$	1,853,019			$	1,831,589			$	1,713,443
Liabilities:
Deposits:
Non-interest bearing	$	301,727			$	290,169			$	291,925			$	291,379			$	274,528
Interest bearing
Interest checking		219,838				236,562				205,298				252,298				268,248
Money market and savings deposits		697,564				709,127				728,886				688,117				697,628
Time deposits		493,350				437,695				341,905				333,057				206,009
Total interest-bearing deposits		1,410,752				1,383,384				1,276,089				1,273,472				1,171,885
Total deposits		1,712,479				1,673,553				1,568,014				1,564,851				1,446,413
Short-term borrowings		122,082				23,458				59,136				36,136				41,344
Subordinated debentures		40,346				40,597				40,567				40,538				40,508
Accrued interest payable		2,389				1,154				146				575				31
Other liabilities		31,652				32,001				29,069				31,805				19,787
Total liabilities		1,908,948				1,770,763				1,696,932				1,673,905				1,548,083
Stockholders’ equity:
Common stock		6,578				6,566				6,561				6,556				6,535
Surplus		85,650				84,848				84,359				84,177				83,663
Treasury stock		(21,821	)			(18,033	)			(11,896	)			(8,860	)			(8,860	)
Unearned common stock held by employee stock ownership plan		(1,403	)			(1,602	)			(1,602	)			(1,602	)			(1,602	)
Retained earnings		95,815				92,405				87,815				83,104				84,916
Accumulated other comprehensive (loss) income		(11,539	)			(13,023	)			(9,150	)			(5,691	)			708
Total stockholders’ equity		153,280				151,161				156,087				157,684				165,360
Total liabilities and stockholders’ equity	$	2,062,228			$	1,921,924			$	1,853,019			$	1,831,589			$	1,713,443

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

	Three Months Ended
	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Interest income	$	27,763			$	22,958			$	20,037			$	17,964			$	18,248
Interest expense		9,245				4,932				2,486				1,929				1,926
Net interest income		18,518				18,026				17,551				16,035				16,322
Provision (credit) for loan losses		746				526				602				615				(222	)
Non-interest income		7,996				10,224				10,403				13,102				17,086
Non-interest expense		20,047				20,261				19,706				21,433				23,737
Income before income tax expense		5,721				7,463				7,646				7,089				9,893
Income tax expense		1,164				1,665				1,708				1,554				2,174
Net Income	$	4,557			$	5,798			$	5,938			$	5,535			$	7,719
Basic weighted average shares outstanding		5,695				5,868				5,999				6,023				5,978
Basic earnings per common share	$	0.80			$	0.99			$	0.99			$	0.92			$	1.29
Diluted weighted average shares outstanding		5,898				6,059				6,199				6,262				6,210
Diluted earnings per common share	$	0.77			$	0.96			$	0.96			$	0.88			$	1.24

	Segment Information
	Three Months Ended December 31, 2022																Three Months Ended December 31, 2021
(dollars in thousands)	Bank				Wealth				Mortgage				Total				Bank				Wealth				Mortgage				Total
Net interest income	$	18,376			$	68			$	74			$	18,518			$	15,931			$	25			$	366			$	16,322
Provision for loan losses		746				—				—				746				(222	)			—				—				(222	)
Net interest income after provision		17,630				68				74				17,772				16,153				25				366				16,544
Non-interest income		1,291				1,061				5,644				7,996				2,305				1,270				13,511				17,086
Non-interest expense		12,939				918				6,190				20,047				11,407				1,009				11,321				23,737
Income (loss) before income taxes	$	5,982			$	211			$	(472	)		$	5,721			$	7,051			$	286			$	2,556			$	9,893
Efficiency ratio		65.79	%			81.31	%			108.25	%			75.61	%			62.55	%			77.92	%			81.58	%			71.05	%

	Year Months Ended December 31, 2022																Year Months Ended December 31, 2021
(dollars in thousands)	Bank				Wealth				Mortgage				Total				Bank				Wealth				Mortgage				Total
Net interest income	$	68,570			$	697			$	861			$	70,128			$	61,032			$	15			$	2,064			$	63,111
Provision for loan losses		2,488				—				—				2,488				1,070				—				—				1,070
Net interest income after provision		66,082				697				861				67,640				59,962				15				2,064				62,041
Non-interest income		7,556				4,732				29,436				41,724				10,779				4,802				72,407				87,988
Non-interest expense		45,123				3,399				32,923				81,445				40,392				3,496				59,839				103,727
Income (loss) before income taxes	$	28,515			$	2,030			$	(2,626	)		$	27,919			$	30,349			$	1,321			$	14,632			$	46,302
Efficiency ratio		59.27	%			62.61	%			108.67	%			72.81	%			56.25	%			72.58	%			80.35	%			68.65	%

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

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

	Net Interest Margin, (TEY), Excluding PPP Loans & PPPLF Borrowings Yield on Interest Earning Assets, (TEY), Excluding PPP income
	Q4'2022			Q3'2022			Q2'2022			Q1'2022			Q4'2021
Net interest margin (TEY) (GAAP)	3.93	%		4.01	%		4.07	%		3.89	%		3.83	%
Impact of PPP loans and PPPLF borrowings	(0.01	)%		(0.02	)%		(0.12	)%		(0.07	)%		(0.07	)%
Net interest margin (TEY), excluding PPP loans and PPPLF borrowings	3.92	%		3.99	%		3.95	%		3.82	%		3.76	%
Yield on interest earning assets, tax equivalent (GAAP)	5.88	%		5.10	%		4.65	%		4.35	%		4.28	%
Impact of PPP loans	—	%		(0.01	)%		(0.11	)%		(0.04	)%		(0.05	)%
Yield on interest earning assets (TEY), excluding PPP income	5.88	%		5.09	%		4.54	%		4.31	%		4.23	%

	Allowance For Loan Losses to Loans, Net of Fees and Costs, Excluding PPP Loans and Loans at Fair Value
	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Allowance for loan losses (GAAP)	$	18,828			$	18,974			$	18,805			$	18,826			$	18,758
Loans, net of fees and costs (GAAP)		1,743,682				1,610,349				1,518,893				1,431,906				1,386,457
Less: PPP loans		(4,579	)			(8,610	)			(21,460	)			(49,680	)			(88,245	)
Less: Loans fair valued		(14,502	)			(14,702	)			(16,212	)			(17,375	)			(17,558	)
Loans, net of fees and costs, excluding loans at fair value and PPP loans (non-GAAP)	$	1,724,601			$	1,587,037			$	1,481,221			$	1,364,851			$	1,280,654
Allowance for loan losses to loans, net of fees and costs (GAAP)		1.08	%			1.18	%			1.24	%			1.31	%			1.35	%
Allowance for loan losses to loans, net of fees and costs, excluding PPP loans and loans at fair value (non-GAAP)		1.09	%			1.20	%			1.27	%			1.38	%			1.46	%

	Tangible Common Equity Ratio Reconciliation - Corporation
	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Total stockholders' equity (GAAP)	$	153,280			$	151,161			$	156,087			$	157,684			$	165,360
Less: Goodwill and intangible assets		(4,074	)			(4,125	)			(4,176	)			(4,227	)			(4,278	)
Tangible common equity (non-GAAP)		149,206				147,036				151,911				153,457				161,082
Total assets (GAAP)		2,062,228				1,921,924				1,853,019				1,831,589				1,713,443
Less: Goodwill and intangible assets		(4,074	)			(4,125	)			(4,176	)			(4,227	)			(4,278	)
Tangible assets (non-GAAP)	$	2,058,154			$	1,917,799			$	1,848,843			$	1,827,362			$	1,709,165
Tangible common equity to tangible assets ratio - Corporation (non-GAAP)		7.25	%			7.67	%			8.22	%			8.40	%			9.42	%

	Tangible Common Equity Ratio Reconciliation - Bank
	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Total stockholders' equity (GAAP)	$	185,039			$	188,386			$	192,212			$	194,347			$	201,486
Less: Goodwill and intangible assets		(4,074	)			(4,125	)			(4,176	)			(4,227	)			(4,278	)
Tangible common equity (non-GAAP)		180,965				184,261				188,036				190,120				197,208
Total assets (GAAP)		2,059,557				1,921,714				1,852,998				1,831,461				1,713,318
Less: Goodwill and intangible assets		(4,074	)			(4,125	)			(4,176	)			(4,227	)			(4,278	)
Tangible assets (non-GAAP)	$	2,055,483			$	1,917,589			$	1,848,822			$	1,827,234			$	1,709,040
Tangible common equity to tangible assets ratio - Bank (non-GAAP)		8.80	%			9.61	%			10.17	%			10.40	%			11.54	%
	Tangible Book Value Reconciliation
	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Book value per common share	$	26.74			$	25.86			$	25.85			$	25.73			$	27.07
Less: Impact of goodwill /intangible assets		0.71				0.70				0.69				0.69				0.70
Tangible book value per common share	$	26.03			$	25.16			$	25.16			$	25.04			$	26.37

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

FAQ

What is the dividend amount declared by Meridian Corporation?

Meridian Corporation declared a quarterly cash dividend of $0.25 per common share.

When will the dividend be paid to shareholders of MRBK?

The dividend will be payable on February 21, 2023, to shareholders of record as of February 14, 2023.

What was the net income for Meridian Corporation in Q4 2022?

The net income for Q4 2022 was $4.6 million.

How did net interest margin change for Meridian Corporation in Q4 2022?

The net interest margin decreased to 3.93% in Q4 2022.

What were the total assets of Meridian Corporation as of December 31, 2022?

Total assets increased to $2.1 billion as of December 31, 2022.