Meridian Corporation Reports Second Quarter 2024 Results and Announces a Quarterly Dividend of $0.125 per Common Share

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Insights

Meridian 's Q2 2024 results show a mixed performance with some positive trends and areas of concern. Net income increased by 24.3% quarter-over-quarter to $3.3 million, or $0.30 per diluted share. This improvement was driven by higher net interest income and a seasonal uptick in mortgage banking income.

Key positives include:

Commercial loan growth of 3% for the quarter and 8% year-over-year
Total assets increased to $2.4 billion, up from $2.3 billion in the previous quarter
Pre-tax, pre-provision income rose to $7.1 million
Net interest margin held steady at 3.06%

However, there are some concerns:

The allowance for credit losses ratio decreased to 1.10% from 1.19% in the previous quarter
Net charge-offs increased to 0.20% of average loans, up from 0.12%
Non-performing assets, while slightly decreased, remain elevated at 1.68% of total assets

The bank's focus on commercial and real estate lending in the Philadelphia metro area appears to be paying off, but the increase in charge-offs and still-high non-performing assets warrant close monitoring. The steady net interest margin in a challenging rate environment is commendable, but pressure on this metric may continue as deposit costs rise.

Meridian 's Q2 2024 results reflect the broader trends in the banking sector, particularly for regional banks. The Philadelphia metro region's robust real estate market is a key driver for Meridian's growth, aligning with the national housing shortage mentioned by DR Horton.

Notable market insights:

The continued shortage of homes for sale in Meridian's region suggests sustained demand for mortgage and construction lending
The bank's market share gains amid industry disruption indicate potential for further growth
The shift towards higher-yield time deposits (1.6% increase) mirrors the industry-wide trend of depositors seeking better returns
The 49.1% increase in mortgage banking income suggests a resilient housing market despite high interest rates

However, investors should consider:

The potential impact of private equity's significant ownership of homes on the local real estate market dynamics
The bank's exposure to commercial real estate in a potentially softening market
The competitive pressure on deposits, as evidenced by the 14 basis point increase in deposit costs

Meridian's performance relative to its peer group and its ability to navigate the challenging interest rate environment will be important factors for investors to watch in the coming quarters.

From a legal and regulatory perspective, Meridian 's Q2 2024 results highlight several key points:

The bank maintains a Community Bank Leverage Ratio of 9.33%, which is above the regulatory minimum, indicating adequate capitalization
The increase in net charge-offs and non-performing assets, while not alarming, may attract regulatory attention if the trend continues
The decrease in the allowance for credit losses ratio from 1.19% to 1.10% could be scrutinized by regulators, especially given the increase in charge-offs
The bank's focus on commercial and real estate lending in a specific geographic area (Philadelphia metro) may raise concentration risk concerns from a regulatory standpoint

Meridian's management should be prepared to address these points in regulatory examinations and ensure robust risk management practices are in place. The bank's ability to maintain strong capital ratios while growing its loan portfolio will be important from a regulatory compliance perspective.

Additionally, the bank's dividend declaration of $0.125 per share appears to be in line with regulatory expectations for capital distribution. However, management should continue to assess the appropriateness of dividend levels in light of earnings, asset quality trends and capital needs.

Overall, while there are no immediate legal red flags, the bank should remain vigilant in its risk management and regulatory compliance efforts, particularly in areas of credit quality and concentration risk.

07/26/2024 - 01:09 PM

MALVERN, Pa., July 26, 2024 (GLOBE NEWSWIRE) -- Meridian Corporation (Nasdaq: MRBK) today reported:

	Three Months Ended
(Dollars in thousands, except per share data)((Unaudited)	June 30, 2024		March 31, 2024		June 30, 2023
Income:
Net income	$	3,326	$	2,676	$	4,645
Diluted earnings per common share	$	0.30	$	0.24	$	0.41
Pre-tax, pre-provision income ⁽¹⁾	$	7,072	$	6,419	$	6,607
(1) See Non-GAAP reconciliation in the Appendix

Commercial loans, excluding leases, increased $40.7 million, or 3%, for the quarter and $112.3 million, or 8%, year over year.
Total assets at June 30, 2024 were $2.4 billion, compared to $2.3 billion at March 31, 2024 and $2.2 billion at June 30, 2023.
Pre-tax, pre-provision income was $7.1 million for the quarter, with $545 thousand from the mortgage division.
Net interest margin was 3.06% for the second quarter of 2024, with a loan yield of 7.31%.
On July 25, 2024, the Board of Directors declared a quarterly cash dividend of $0.125 per common share, payable August 19, 2024 to shareholders of record as of August 12, 2024.

Christopher J. Annas, Chairman and CEO commented:

“Our second quarter earnings showed significant improvement from the first quarter, increasing by 24.3% to $3.3 million, or $0.30 per share. Key highlights include a steady net interest margin at 3.06% for the quarter and a quarterly profit in our mortgage segment. Total loan growth in the first half was 6.5% as we continue to bring on new relationships and take advantage of market disruption. Real estate loan growth is particularly strong in residential and multi-family, which are both in high demand.

The Philadelphia metro region remains healthy, with a continued shortage of homes for sale. A recent comment from DR Horton highlighted that the US needs 5 million more homes nationally to meet demand, a deficiency that is evident in our region. Private equity’s significant ownership and rental of homes nationally contributes to this problem. Despite these challenges our volume has improved from 2023, and if rates come down the demand could strengthen.

Meridian continues to gain market share in our region. While navigating the rate rise has presented some obstacles, our core businesses remain healthy. We are excited about our prospects and the generally stable economic landscape.”

Select Condensed Financial Information

	As of or for the quarter ended (Unaudited)
	June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023
	(Dollars in thousands, except per share data)
Income:
Net income	$	3,326		$	2,676		$	571		$	4,005		$	4,645
Basic earnings per common share		0.30			0.24			0.05			0.36			0.42
Diluted earnings per common share		0.30			0.24			0.05			0.35			0.41
Net interest income		16,846			16,609			16,942			17,224			17,098

Balance Sheet:
Total assets	$	2,351,584		$	2,292,923		$	2,246,193		$	2,230,971		$	2,206,877
Loans, net of fees and costs		1,988,535			1,956,315			1,895,806			1,885,629			1,859,839
Total deposits		1,915,436			1,900,696			1,823,462			1,808,645			1,782,605
Non-interest bearing deposits		224,040			220,581			239,289			244,668			269,174
Stockholders' equity		162,382			159,936			158,022			155,114			153,962

Balance Sheet Average Balances:
Total assets	$	2,319,295		$	2,269,047		$	2,219,340		$	2,184,384		$	2,166,575
Total interest earning assets		2,222,177			2,173,212			2,121,068			2,086,602			2,070,640
Loans, net of fees and costs		1,972,740			1,944,187			1,891,170			1,876,648			1,847,736
Total deposits		1,919,954			1,823,523			1,820,532			1,782,140			1,775,444
Non-interest bearing deposits		229,040			233,255			254,025			253,485			266,675
Stockholders' equity		162,119			159,822			157,210			156,271			154,183

Performance Ratios (Annualized):
Return on average assets		0.58	%		0.47	%		0.10	%		0.73	%		0.86	%
Return on average equity		8.25	%		6.73	%		1.44	%		10.17	%		12.08	%

Income Statement - Second Quarter 2024 Compared to First Quarter 2024

Net income for the second quarter increased $650 thousand, or 24.3%, to $3.3 million mainly due to a seasonal increase in net operating income from the mortgage division, as well as increased net interest income and lower quarterly provision for credit losses. Net interest income increased $237 thousand, or 1.4%, on a tax equivalent basis, as commercial loan fees of $238 thousand boosted overall interest income and out-paced the increase in interest expense. Non-interest income increased $1.3 million or 15.8%, reflecting the improved level of mortgage banking income. Non-interest expense increased $844 thousand, or 4.6%, due primarily to an increase in salaries and benefits expense, loan expenses and advertising and promotion. These increases were partially offset by a decrease in professional fees. Detailed explanations of the major categories of income and expense follow below.

Net Interest income

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

	Quarter Ended
(dollars in thousands)	June 30, 2024		March 31, 2024		$ Change			% Change		Change due to rate			Change due to volume
Interest income:
Cash and cash equivalents		331		300	$	31		10.3	%	$	(2	)	$	33
Investment securities - taxable		1,324		1,251		73		5.8	%		38			35
Investment securities - tax exempt⁽¹⁾		403		405		(2	)	(0.5)%			5			(7	)
Loans held for sale		572		323		249		77.1	%		(3	)		252
Loans held for investment ⁽¹⁾		35,916		35,018		898		2.6	%		381			517
Total loans		36,488		35,341		1,147		3.2	%		378			769
Total interest income	$	38,546	$	37,297	$	1,249		3.3	%	$	419		$	830
Interest expense:
Interest-bearing demand deposits	$	1,279	$	1,367	$	(88	)	(6.4)%		$	(28	)	$	(60	)
Money market and savings deposits		8,265		7,855		410		5.2	%		284			126
Time deposits		9,447		8,170		1,277		15.6	%		121			1,156
Total interest - bearing deposits		18,991		17,392		1,599		9.2	%		377			1,222
Borrowings		1,851		2,435		(584	)	(24.0)%			(20	)		(564	)
Subordinated debentures		777		779		(2	)	(0.3)%			(2	)		—
Total interest expense		21,619		20,606		1,013		4.9	%		355			658
Net interest income differential	$	16,927	$	16,691	$	236		1.41	%	$	64		$	172
(1) Reflected on a tax-equivalent basis.

Interest income increased $1.2 million quarter-over-quarter on a tax equivalent basis, driven by the increased levels of average earning assets. Average earning assets increased by $49.0 million contributing $830 thousand to the increase. In addition, the yield on earnings assets increased 8 basis points during the period, which benefited from commercial loan fees.

Average total loans, excluding residential loans for sale, increased $28.5 million resulting in an increase in interest income of $517 thousand. The largest drivers of this increase were commercial, commercial real estate, and small business loans which on a combined basis increased $36.0 million on average, partially offset by a decrease in average leases of $13.2 million. Home equity, residential real estate, consumer and other loans held in portfolio increased on a combined basis $5.9 million on average. The yield on total loans increased 7 basis points and the yield on cash and investments increased 13 basis points on a combined basis.

Total interest expense increased $1.0 million, quarter-over-quarter, due to higher levels of deposits, particularly time deposits. Interest expense on total deposits increased $1.6 million while interest expense on borrowings decreased $584 thousand. Non-interest bearing balances decreased $6.7 million on average, while time deposits increased $94.7 million on average. The cost of deposits increased 14 basis points to 3.98% causing an increase of $377 thousand in interest expense. Interest expense on borrowings decreased $564 thousand due to volume changes as average borrowings decreased $46.0 million for the period, while the cost of borrowings were relatively flat period over period.

Overall the net interest margin decreased 3 basis points to 3.06% as the cost of funds outpaced the increase in yield on earnings assets.

Provision for Credit Losses

The overall provision for credit losses is comprised of expected loan loss recorded for funded loans as well as unfunded loan commitments. The overall expense for the second quarter decreased $186 thousand to $2.7 million, from $2.9 million in the first quarter, with the provision for unfunded loan commitments representing an increase of $34 thousand of the combined provision during the current quarter. The second quarter provision for funded loans of $2.6 million was driven by an increase in overall loan portfolio growth as well as an increase in net charge-offs during the quarter, offset somewhat by a decrease in specific reserves on individually evaluated loans. This decline in the overall provision was also positively impacted by favorable changes in certain portfolio baseline loss rates and some macroeconomic factors underlying the funded loss model.

Non-interest income

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

	Quarter Ended
(Dollars in thousands)	June 30, 2024			March 31, 2024			$ Change			% Change
Mortgage banking income	$	5,420		$	3,634		$	1,786		49.1	%
Wealth management income		1,444			1,317			127		9.6	%
SBA loan income		785			986			(201	)	(20.4)%
Earnings on investment in life insurance		215			207			8		3.9	%
Net change in the fair value of derivative instruments		203			75			128		170.7	%
Net change in the fair value of loans held-for-sale		(29	)		(2	)		(27	)	1350.0	%
Net change in the fair value of loans held-for-investment		(24	)		(175	)		151		(86.3)%
Net loss on hedging activity		(63	)		(19	)		(44	)	231.6	%
Other		1,293			1,961			(668	)	(34.1)%
Total non-interest income	$	9,244		$	7,984		$	1,260		15.8	%

Total non-interest income increased $1.3 million, or 15.8%, quarter-over-quarter as mortgage banking income increased $1.8 million, or 49.1%. Mortgage loan sales increased $68.3 million or 52.6% quarter over quarter driving higher gain on sale income at a slightly lower margin. SBA and other income decreased $869 thousand combined due to lower levels of SBA loan sales and other mortgage related fees. SBA loans sold for the quarter-ended June 30, 2024 totaled $12.1 million, down $3.4 million, or 21.7%, compared to the quarter-ended March 31, 2024. The gross margin on SBA sales was 8.8% for the quarter, up from 8.1% for the previous quarter. Contributing to the increased margin on sale was an increase in the average yield on loans sold over the prior quarter.

Non-interest expense

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

	Quarter Ended
(Dollars in thousands)	June 30, 2024		March 31, 2024		$ Change			% Change
Salaries and employee benefits	$	11,437	$	10,573	$	864		8.2	%
Occupancy and equipment		1,230		1,233		(3	)	(0.2)%
Professional fees		1,029		1,498		(469	)	(31.3)%
Advertising and promotion		989		748		241		32.2	%
Data processing and software		1,506		1,532		(26	)	(1.7)%
Pennsylvania bank shares tax		274		274		—		—	%
Other		2,553		2,316		237		10.2	%
Total non-interest expense	$	19,018	$	18,174	$	844		4.6	%

Salaries and employee benefits increased $864 thousand overall, with bank and wealth segments combined having increased $80 thousand, and the mortgage segment increased $784 thousand. Mortgage segment salaries, commissions, and employee benefits are impacted by volume and therefore increased as originations increased $85.4 million over the prior quarter.

Professional fees decreased $469 thousand during the current quarter due to lower legal expenses. Advertising and promotion expense increased $241 thousand from the prior quarter as a result of an increase in business development expenses. Other expense increased $237 thousand from the prior quarter due to an increase in employee travel and trainings, combined with an increase in FDIC premiums.

Balance Sheet - June 30, 2024 Compared to March 31, 2024

Total assets increased $58.7 million, or 2.6%, to $2.4 billion as of June 30, 2024 from $2.3 billion at March 31, 2024. This increase was driven by strong loan growth and an increase in investments. Interest-bearing cash increased $1.5 million, or 10.7%, to $15.6 million as of June 30, 2024, from March 31, 2024.

Portfolio loan growth was $33.1 million, or 1.7% quarter-over-quarter. The portfolio growth was generated from commercial & industrial loans which increased $24.3 million, or 7.4%, commercial mortgage loans which increased $11.9 million, or 1.6%, and small business loans which increased $4.9 million despite the sale of $12.1 million in small business loan during the quarter. Lease financings decreased $11.3 million, or 10.3% from March 31, 2024, partially offsetting the above noted loan growth, but this decline was expected as we continue to refocus away from lease originations. Other assets decreased by $10.2 million quarter-over-quarter due to certain SBA loan sales that settled after quarter-end.

Total deposits increased $14.7 million, or 0.8% quarter-over-quarter, due largely to higher levels of certificates of deposits. Time deposits increased $12.5 million, or 1.6%, from largely wholesale efforts, as customers continue to opt for higher rate term deposits. Money market accounts and savings accounts decreased a combined $10.0 million while interest bearing demand deposits increased $8.9 million. Non-interest bearing deposits increased $3.5 million. Overnight borrowings increased $41.5 million, or 28.4% quarter-over-quarter, in support of loan growth, particularly residential mortgage loans available for sale which are up over $25 million seasonally.

Total stockholders’ equity increased by $2.4 million from March 31, 2024, to $162.4 million as of June 30, 2024. Changes to equity for the current quarter included net income of $3.3 million, less dividends paid of $1.4 million, plus an increase of $361 thousand in other comprehensive income as the result of the positive impact that rising interest rates had on the investment portfolio. The Community Bank Leverage Ratio for the Bank was 9.33% at June 30, 2024.

Asset Quality Summary

Non-performing assets decreased $604 thousand to $37.6 million at June 30, 2024 compared to $38.2 million at March 31, 2024. As a result of the decrease, the ratio of non-performing loans to total loans decreased to 1.84% as of June 30, 2024, from 1.93% as of March 31, 2024, and the ratio of non-performing assets to total assets decreased to 1.68% as of June 30, 2024, compared to 1.74% as of March 31, 2024. The changes were primarily the result of charge-offs in addition to principal paydowns of $645 thousand on 2 commercial loans classified as non-performing.

Meridian realized net charge-offs of 0.20% of total average loans for the quarter ended June 30, 2024, compared with 0.12% for the quarter ended March 31, 2024. The level of net charge-offs increased to $4.1 million for the quarter ended June 30, 2024, compared to net charge-offs of $2.3 million for the quarter ended March 31, 2024. Second quarter charge-offs were comprised of $1.3 million from small ticket equipment leases which are charged-off after becoming more than 120 days past due, a $1.3 million charge off of 1 commercial loan, and $1.4 million for SBA loans. There were recoveries of $237 thousand, largely related to leases.

The ratio of allowance for credit losses to total loans held for investment, excluding loans at fair value (a non-GAAP measure, see reconciliation in the Appendix), was 1.10% as of June 30, 2024 compared to 1.19% as of March 31, 2024. As of June 30, 2024 there were specific reserves of $7.2 million against individually evaluated loans, a decrease of $1.3 million from $8.5 million in specific reserves as of March 31, 2024. The specific reserve decline over the prior quarter was the result of a drop in both commercial and SBA loan related reserves driven by charge-offs.

About Meridian Corporation

Meridian Bank, the wholly owned subsidiary of Meridian Corporation, is an innovative community bank serving Pennsylvania, New Jersey, Delaware and Maryland. Through its 17 offices, including banking branches and mortgage locations, Meridian offers a full suite of financial products and services. Meridian specializes in business and industrial lending, retail and commercial real estate lending, electronic payments, and wealth management solutions through Meridian Wealth Partners. Meridian also offers a broad menu of high-yield depository products supported by robust online and mobile access. For additional information, visit our website at www.meridianbanker.com. Member FDIC.

“Safe Harbor” Statement

In addition to historical information, this press release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Meridian Corporation’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Meridian Corporation’s control). Numerous competitive, economic, regulatory, legal and technological factors, risks and uncertainties that could cause actual results to differ materially include, without limitation, credit losses and the credit risk of our commercial and consumer loan products; changes in the level of charge-offs and changes in estimates of the adequacy of the allowance for credit losses, or ACL; cyber-security concerns; rapid technological developments and changes; increased competitive pressures; changes in spreads on interest-earning assets and interest-bearing liabilities; changes in general economic conditions and conditions within the securities markets; unanticipated changes in our liquidity position; unanticipated changes in regulatory and governmental policies impacting interest rates and financial markets; legislation affecting the financial services industry as a whole, and Meridian Corporation, in particular; changes in accounting policies, practices or guidance; developments affecting the industry and the soundness of financial institutions and further disruption to the economy and U.S. banking system; among others, could cause Meridian Corporation’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. Meridian Corporation cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Meridian Corporation’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2023 and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Meridian Corporation does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Meridian Corporation or by or on behalf of Meridian Bank.

Contact: Christopher J. Annas
484.568.5001
CAnnas@meridianbanker.com

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

	Quarter Ended
	June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023
Earnings and Per Share Data:
Net income	$	3,326		$	2,676		$	571		$	4,005		$	4,645
Basic earnings per common share	$	0.30		$	0.24		$	0.05		$	0.36		$	0.42
Diluted earnings per common share	$	0.30		$	0.24		$	0.05		$	0.35		$	0.41
Common shares outstanding		11,191			11,186			11,183			11,178			11,178

Performance Ratios:
Return on average assets⁽²⁾		0.58	%		0.47	%		0.10	%		0.73	%		0.86	%
Return on average equity ⁽²⁾		8.25			6.73			1.44			10.17			12.08
Net interest margin (tax-equivalent) ⁽²⁾		3.06			3.09			3.18			3.29			3.33
Yield on earning assets (tax-equivalent) ⁽²⁾		6.98			6.90			6.81			6.76			6.57
Cost of funds ⁽²⁾		4.10			4.00			3.81			3.63			3.39
Efficiency ratio		72.89	%		73.90	%		78.63	%		79.09	%		74.80	%

Asset Quality Ratios:
Net charge-offs (recoveries) to average loans		0.20	%		0.12	%		0.11	%		0.05	%		0.05	%
Non-performing loans to total loans		1.84			1.93			1.76			1.53			1.44
Non-performing assets to total assets		1.68			1.74			1.58			1.38			1.32
Allowance for credit losses to:
Total loans held for investment		1.09			1.18			1.17			1.04			1.09
Total loans held for investment (excluding loans at fair value) ⁽¹⁾		1.10			1.19			1.17			1.05			1.10
Non-performing loans		57.66	%		60.59	%		65.48	%		67.61	%		73.97	%

Capital Ratios:
Book value per common share	$	14.51		$	14.30		$	14.13		$	13.88		$	13.77
Tangible book value per common share	$	14.17		$	13.96		$	13.78		$	13.53		$	13.42
Total equity/Total assets		6.91	%		6.98	%		7.04	%		6.95	%		6.98	%
Tangible common equity/Tangible assets - Corporation ⁽¹⁾		6.76			6.82			6.87			6.79			6.81
Tangible common equity/Tangible assets - Bank ⁽¹⁾		8.85			8.93			8.94			8.89			8.54
Tier 1 leverage ratio - Bank		9.33			9.42			9.46			9.65			9.22
Common tier 1 risk-based capital ratio - Bank		9.84			9.87			10.10			10.82			10.35
Tier 1 risk-based capital ratio - Bank		9.84			9.87			10.10			10.82			10.35
Total risk-based capital ratio - Bank		10.84	%		10.95	%		11.17	%		11.85	%		11.43	%
(1) See Non-GAAP reconciliation in the Appendix
(2) Annualized

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

	Three Months Ended									Six Months Ended
	June 30, 2024			March 31, 2024			June 30, 2023			June 30, 2024			June 30, 2023
Interest income:
Loans and other finance receivables, including fees	$	36,486		$	35,339		$	32,215		$	71,825		$	61,632
Securities - taxable		1,324			1,251			992			2,575			1,951
Securities - tax-exempt		324			325			351			649			705
Cash and cash equivalents		331			300			278			631			495
Total interest income		38,465			37,215			33,836			75,680			64,783
Interest expense:
Deposits		18,991			17,392			14,023			36,383			25,470
Borrowings		2,628			3,214			2,715			5,842			4,538
Total interest expense		21,619			20,606			16,738			42,225			30,008
Net interest income		16,846			16,609			17,098			33,455			34,775
Provision for credit losses		2,680			2,866			705			5,546			2,104
Net interest income after provision for credit losses		14,166			13,743			16,393			27,909			32,671
Non-interest income:
Mortgage banking income		5,420			3,634			5,050			9,054			8,322
Wealth management income		1,444			1,317			1,235			2,761			2,431
SBA loan income		785			986			1,767			1,771			2,480
Earnings on investment in life insurance		215			207			193			422			385
Net change in the fair value of derivative instruments		203			75			183			278			114
Net change in the fair value of loans held-for-sale		(29	)		(2	)		(199	)		(31	)		(200	)
Net change in the fair value of loans held-for-investment		(24	)		(175	)		(219	)		(199	)		(102	)
Net loss on hedging activity		(63	)		(19	)		(1	)		(82	)		(1	)
Net loss on sale of investment securities available-for-sale		—			—			(54	)		—			(54	)
Other		1,293			1,961			1,169			3,254			2,387
Total non-interest income		9,244			7,984			9,124			17,228			15,762
Non-interest expense:
Salaries and employee benefits		11,437			10,573			12,152			22,010			23,213
Occupancy and equipment		1,230			1,233			1,140			2,463			2,384
Professional fees		1,029			1,498			1,004			2,527			1,827
Advertising and promotion		989			748			1,091			1,737			1,952
Data processing and software		1,506			1,532			1,681			3,038			3,113
Pennsylvania bank shares tax		274			274			245			548			490
Other		2,553			2,316			2,302			4,869			4,425
Total non-interest expense		19,018			18,174			19,615			37,192			37,404
Income before income taxes		4,392			3,553			5,902			7,945			11,029
Income tax expense		1,066			877			1,257			1,943			2,363
Net income	$	3,326		$	2,676		$	4,645		$	6,002		$	8,666

Basic earnings per common share	$	0.30		$	0.24		$	0.42		$	0.54		$	0.78
Diluted earnings per common share	$	0.30		$	0.24		$	0.41		$	0.54		$	0.75

Basic weighted average shares outstanding		11,096			11,088			11,062			11,092			11,167
Diluted weighted average shares outstanding		11,150			11,201			11,304			11,178			11,494

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

	June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023
Assets:
Cash and due from banks	$	8,457		$	8,935		$	10,067		$	12,734		$	10,576
Interest-bearing deposits at other banks		15,601			14,092			46,630			47,025			36,290
Cash and cash equivalents		24,058			23,027			56,697			59,759			46,866
Securities available-for-sale, at fair value		159,141			150,996			146,019			122,218			126,668
Securities held-to-maturity, at amortized cost		35,089			35,157			35,781			36,232			36,463
Equity investments		2,088			2,092			2,121			2,019			2,097
Mortgage loans held for sale, at fair value		54,278			29,124			24,816			23,144			40,422
Loans and other finance receivables, net of fees and costs		1,988,535			1,956,315			1,895,806			1,885,629			1,859,839
Allowance for credit losses		(21,703	)		(23,171	)		(22,107	)		(19,683	)		(20,242	)
Loans and other finance receivables, net of the allowance for credit losses		1,966,832			1,933,144			1,873,699			1,865,946			1,839,597
Restricted investment in bank stock		10,044			8,560			8,072			8,309			9,157
Bank premises and equipment, net		13,114			13,451			13,557			13,310			13,234
Bank owned life insurance		29,267			29,051			28,844			28,641			28,440
Accrued interest receivable		9,973			9,864			9,325			8,984			7,651
Other real estate owned		1,862			1,703			1,703			1,703			1,703
Deferred income taxes		3,950			4,339			4,201			4,993			4,258
Servicing assets		11,341			11,573			11,748			11,835			12,193
Goodwill		899			899			899			899			899
Intangible assets		2,869			2,920			2,971			3,022			3,073
Other assets		26,779			37,023			25,740			39,957			34,156
Total assets	$	2,351,584		$	2,292,923		$	2,246,193		$	2,230,971		$	2,206,877

Liabilities:
Deposits:
Non-interest bearing	$	224,040		$	220,581		$	239,289		$	244,668		$	269,174
Interest bearing
Interest checking		130,062			121,204			150,898			156,537			155,907
Money market and savings deposits		787,479			797,525			747,803			746,599			710,546
Time deposits		773,855			761,386			685,472			660,841			646,978
Total interest-bearing deposits		1,691,396			1,680,115			1,584,173			1,563,977			1,513,431
Total deposits		1,915,436			1,900,696			1,823,462			1,808,645			1,782,605
Borrowings		187,260			145,803			174,896			177,959			194,636
Subordinated debentures		49,897			49,867			49,836			50,079			40,348
Accrued interest payable		7,709			8,350			10,324			7,814			5,612
Other liabilities		28,900			28,271			29,653			31,360			29,714
Total liabilities		2,189,202			2,132,987			2,088,171			2,075,857			2,052,915

Stockholders’ equity:
Common stock		13,194			13,189			13,186			13,181			13,181
Surplus		80,639			80,487			80,325			79,731			79,650
Treasury stock		(26,079	)		(26,079	)		(26,079	)		(26,079	)		(26,079	)
Unearned common stock held by employee stock ownership plan		(1,204	)		(1,204	)		(1,204	)		(1,403	)		(1,403	)
Retained earnings		104,420			102,492			101,216			102,043			99,434
Accumulated other comprehensive loss		(8,588	)		(8,949	)		(9,422	)		(12,359	)		(10,821	)
Total stockholders’ equity		162,382			159,936			158,022			155,114			153,962
Total liabilities and stockholders’ equity	$	2,351,584		$	2,292,923		$	2,246,193		$	2,230,971		$	2,206,877

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
	June 30, 2024		March 31, 2024		December 31, 2023		September 30, 2023		June 30, 2023
Interest income	$	38,465	$	37,215	$	36,346	$	35,459	$	33,836
Interest expense		21,619		20,606		19,404		18,235		16,738
Net interest income		16,846		16,609		16,942		17,224		17,098
Provision for credit losses		2,680		2,866		4,628		82		705
Non-interest income		9,244		7,984		8,117		8,086		9,124
Non-interest expense		19,018		18,174		19,703		20,018		19,615
Income before income tax expense		4,392		3,553		728		5,210		5,902
Income tax expense		1,066		877		157		1,205		1,257
Net Income	$	3,326	$	2,676	$	571	$	4,005	$	4,645

Basic weighted average shares outstanding		11,096		11,088		11,070		11,057		11,062
Basic earnings per common share	$	0.30	$	0.24	$	0.05	$	0.36	$	0.42

Diluted weighted average shares outstanding		11,150		11,201		11,206		11,363		11,304
Diluted earnings per common share	$	0.30	$	0.24	$	0.05	$	0.35	$	0.41

	Segment Information
	Three Months Ended June 30, 2024												Three Months Ended June 30, 2023
(dollars in thousands)	Bank			Wealth			Mortgage			Total			Bank			Wealth			Mortgage			Total
Net interest income	$	16,784		$	36		$	26		$	16,846		$	17,102		$	(29	)	$	25		$	17,098
Provision for credit losses		2,680			—			—			2,680			705			—			—			705
Net interest income after provision		14,104			36			26			14,166			16,397			(29	)		25			16,393
Non-interest income		1,673			1,444			6,127			9,244			2,508			1,235			5,381			9,124
Non-interest expense		12,606			804			5,608			19,018			12,325			889			6,401			19,615
Income (loss) before income taxes	$	3,171		$	676		$	545		$	4,392		$	6,580		$	317		$	(995	)	$	5,902
Efficiency ratio		68	%		54	%		91	%		73	%		63	%		74	%		118	%		75	%

	SixMonths EndedJune 30, 2024												SixMonths EndedJune 30, 2023
(dollars in thousands)	Bank			Wealth			Mortgage			Total			Bank			Wealth			Mortgage			Total
Net interest income	$	33,376		$	30		$	49		$	33,455		$	34,721		$	3		$	51		$	34,775
Provision for credit losses		5,546			—			—			5,546			2,104			—			—			2,104
Net interest income after provision		27,830			30			49			27,909			32,617			3			51			32,671
Non-interest income		3,550			2,760			10,918			17,228			3,938			2,431			9,393			15,762
Non-interest expense		24,669			1,636			10,887			37,192			23,024			1,877			12,503			37,404
Income (loss) before income taxes	$	6,711		$	1,154		$	80		$	7,945		$	13,531		$	557		$	(3,059	)	$	11,029
Efficiency ratio		67	%		59	%		99	%		73	%		60	%		77	%		132	%		74	%

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.

	Pre-tax, Pre-provision Reconciliation
	Three Months Ended						Six Months Ended
(Dollars in thousands, except per share data, Unaudited)	June 30, 2024		March 31, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Income before income tax expense	$	4,392	$	3,553	$	5,902	$	7,945	$	11,029
Provision for credit losses		2,680		2,866		705		5,546		2,104
Pre-tax, pre-provision income	$	7,072	$	6,419	$	6,607	$	13,491	$	13,133

	Pre-tax, Pre-provision Reconciliation
	Three Months Ended								Six Months Ended
(Dollars in thousands, except per share data, Unaudited)	June 30, 2024		March 31, 2024			June 30, 2023			June 30, 2024		June 30, 2023
Bank	$	5,851	$	6,406		$	7,285		$	12,257	$	15,643
Wealth		676		478			317			1,154		548
Mortgage		545		(465	)		(995	)		80		(3,058	)
Pre-tax, pre-provision income	$	7,072	$	6,419		$	6,607		$	13,491	$	13,133

	Allowance For Credit Losses to Loans, Net of Fees and Costs, Excluding and Loans at Fair Value
	June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023
Allowance for credit losses (GAAP)	$	21,703		$	23,171		$	22,107		$	19,683		$	20,242

Loans, net of fees and costs (GAAP)		1,988,535			1,956,315			1,895,806			1,885,629			1,859,839
Less: Loans fair valued		(12,900	)		(13,139	)		(13,726	)		(13,231	)		(14,403	)
Loans, net of fees and costs, excluding loans at fair value (non-GAAP)	$	1,975,635		$	1,943,176		$	1,882,080		$	1,872,398		$	1,845,436

Allowance for credit losses to loans, net of fees and costs (GAAP)		1.09	%		1.18	%		1.17	%		1.04	%		1.09	%
Allowance for credit losses to loans, net of fees and costs, excluding loans at fair value (non-GAAP)		1.10	%		1.19	%		1.17	%		1.05	%		1.10	%

	Tangible Common Equity Ratio Reconciliation - Corporation
	June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023
Total stockholders' equity (GAAP)	$	162,382		$	159,936		$	158,022		$	155,114		$	153,962
Less: Goodwill and intangible assets		(3,768	)		(3,819	)		(3,870	)		(3,921	)		(3,972	)
Tangible common equity (non-GAAP)		158,614			156,117			154,152			151,193			149,990

Total assets (GAAP)		2,351,584			2,292,923			2,246,193			2,230,971			2,206,877
Less: Goodwill and intangible assets		(3,768	)		(3,819	)		(3,870	)		(3,921	)		(3,972	)
Tangible assets (non-GAAP)	$	2,347,816		$	2,289,104		$	2,242,323		$	2,227,050		$	2,202,905
Tangible common equity to tangible assets ratio - Corporation (non-GAAP)		6.76	%		6.82	%		6.87	%		6.79	%		6.81	%

	Tangible Common Equity Ratio Reconciliation - Bank
	June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023
Total stockholders' equity (GAAP)	$	211,308		$	208,319		$	204,132		$	201,996		$	192,209
Less: Goodwill and intangible assets		(3,768	)		(3,819	)		(3,870	)		(3,921	)		(3,972	)
Tangible common equity (non-GAAP)		207,540			204,500			200,262			198,075			188,237

Total assets (GAAP)		2,349,600			2,292,894			2,244,893			2,232,297			2,208,252
Less: Goodwill and intangible assets		(3,768	)		(3,819	)		(3,870	)		(3,921	)		(3,972	)
Tangible assets (non-GAAP)	$	2,345,832		$	2,289,075		$	2,241,023		$	2,228,376		$	2,204,280
Tangible common equity to tangible assets ratio - Bank (non-GAAP)		8.85	%		8.93	%		8.94	%		8.89	%		8.54	%

	Tangible Book Value Reconciliation
	June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023
Book value per common share	$	14.51		$	14.30		$	14.13		$	13.88		$	13.77
Less: Impact of goodwill /intangible assets		0.34			0.34			0.35			0.35			0.35
Tangible book value per common share	$	14.17		$	13.96		$	13.78		$	13.53		$	13.42

FAQ

What was Meridian 's (MRBK) net income for Q2 2024?

Meridian (MRBK) reported net income of $3.3 million for Q2 2024, an increase of 24.3% from the previous quarter.

How much did MRBK's commercial loans grow in Q2 2024?

MRBK's commercial loans grew 3% for the quarter and 8% year-over-year in Q2 2024.

What was the quarterly cash dividend declared by MRBK for Q2 2024?

The Board of Directors declared a quarterly cash dividend of $0.125 per common share, payable August 19, 2024, to shareholders of record as of August 12, 2024.

What was MRBK's net interest margin in Q2 2024?

MRBK's net interest margin was 3.06% for the second quarter of 2024, with a loan yield of 7.31%.

Meridian Corporation Reports Second Quarter 2024 Results and Announces a Quarterly Dividend of $0.125 per Common Share

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Meridian Corporation Reports Second Quarter 2024 Results and Announces a Quarterly Dividend of $0.125 per Common Share

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