• Meridian Corporation Reports Third Quarter 2022 Results

    المصدر: Nasdaq GlobeNewswire / 31 أكتوبر 2022 08:00:02   America/Chicago

    MALVERN, Pa., Oct. 31, 2022 (GLOBE NEWSWIRE) -- Meridian Corporation (Nasdaq: MRBK) today reported:

    • Net income of $5.8 million and diluted earnings per share of $0.96 for the third quarter ended September 30, 2022 compared to net income of $5.9 million and diluted earnings per share of $0.96 for the second quarter ended June 30, 2022.
    • Return on average assets for the third quarter of 2022 was 1.23% compared to 1.31% for the second quarter of 2022; return on average equity for the second quarter was 14.59% compared to 15.03% for the prior quarter.
    • Net interest margin decreased to 4.01% in the third quarter of 2022 from 4.07% in the second quarter of 2022.
    • Third quarter commercial loan growth, excluding Paycheck Protection Program ("PPP") loans, was $69.1 million, or 21.0% annualized; consumer loans increased by $42.9 million.
    • Non-interest income of $10.2 million in the third quarter of 2022 compared to $10.4 million in the prior quarter.
    • Non-interest expenses increased $0.6 million to $20.3 million in the third quarter of 2022 from $19.7 million in the prior quarter with an efficiency ratio of 71.72% and 70.49%, respectively.
    • The Company repurchased 197,849 shares of its common stock at an average price of $30.36 per share during the quarter ended September 30, 2022.
    • On October 27, 2022, the Board of Directors declared a quarterly cash dividend of $0.20 per common share, payable November 21, 2022 to shareholders of record as of November 14, 2022.
     Q3'2022 Q2'2022 Q1'2022 Q4'2021 Q3'2021
     (Dollars in thousands, except per share data)
    Net income$5,798 $5,938 $5,535 $7,719 $9,438
    Pre-tax, pre-provision income (1) 7,989  8,248  7,704  9,671  12,898
    Pre-tax, pre-provision income - Bank (1) 8,040  7,458  8,778  6,829  8,896
    Diluted earnings per common share 0.96  0.96  0.88  1.24  1.52
    (1) See Non-GAAP reconciliation in the Appendix        

    Christopher J. Annas, Chairman and CEO commented, “Meridian’s third quarter revenue of $33.2 million generated earnings of $5.8 million, or $0.96 per diluted share. We continue to produce high returns at the Bank through strong net interest margin and loan growth, and a disciplined cost structure. Our focus is to build deeper in our core Delaware Valley and Maryland markets by training new lenders, and also hiring from the outside, to sustain the exceptional loan growth. These regions have seen a number of banks get acquired, where we’ve been able to expand and become the go to bank for small and medium size businesses. Our SBA and equipment finance groups have benefited from these events, and continue to supplement this growth. Additionally, Meridian Wealth Partners generates over 50% of its business from our commercial portfolio “eco-system”, through lender referrals and liquidity events of customers. From our inception, the cost efficiencies created by “training” our customers to exclusively use the online channel gives us excellent operating leverage. It is not as apparent in the ratio, since we are always hiring support staff ahead of the planned growth."

    "Our mortgage business, which has not lost money on an annual basis in the 12 years of operation, has a $2.2 million pre-tax loss for the nine months ended September 30, 2022. The rate rise has stifled some buyers, but the lack of homes for sale continues to be the biggest factor. We’ve made significant cuts to operating costs this year, but key operations personnel have remained to assure we can rebuild promptly when conditions allow. Housing inventory is expected to build to historical levels over the next eighteen months. If rates begin to decline next year, as some FED watchers predict, a refi surge could also benefit the business. We continue to monitor closely and adjust as necessary."

    Select Condensed Financial Information

     As of or for the quarter ended (Unaudited)
     September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021
     (Dollars in thousands, except per share data)
    Income:         
    Net income - consolidated$5,798  $5,938  $5,535  $7,719  $9,438 
    Basic earnings per common share 0.99   0.99   0.92   1.29   1.56 
    Diluted earnings per common share 0.96   0.96   0.88   1.24   1.52 
    Net interest income - consolidated 18,026   17,551   16,035   16,322   16,257 
              
    Balance Sheet:         
    Total assets$1,921,924  $1,853,019  $1,831,589  $1,713,443  $1,762,445 
    Loans, net of fees and costs 1,610,349   1,518,893   1,431,906   1,386,457   1,378,670 
    Total deposits 1,673,553   1,568,014   1,564,851   1,446,413   1,439,047 
    Non-interest bearing deposits 290,169   291,925   291,379   274,528   265,842 
    Stockholders' equity 151,161   156,087   157,684   165,360   158,416 
              
    Balance Sheet (Average Balances):         
    Total assets$1,868,194  $1,811,335  $1,752,643  $1,755,263  $1,739,848 
    Total interest earning assets 1,791,255   1,736,547   1,680,070   1,696,473   1,691,641 
    Loans, net of fees and costs 1,565,861   1,484,696   1,415,831   1,383,511   1,370,439 
    Total deposits 1,597,648   1,567,325   1,504,241   1,468,575   1,409,534 
    Non-interest bearing deposits 295,975   296,521   281,123   287,801   254,843 
    Stockholders' equity 157,614   158,420   161,939   159,921   155,580 
              
    Performance Ratios (Annualized):         
    Return on average assets - consolidated 1.23%  1.31%  1.28%  1.74%  2.15%
    Return on average equity - consolidated 14.59%  15.03%  13.86%  19.15%  24.07%

    Income Statement - Third Quarter 2022 Compared to Second Quarter 2022

    Net income was $5.8 million, down $140 thousand from $5.9 million for the second quarter. Diluted earnings per share was $0.96 for both periods. Net interest income increased $480 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 expense increased $555 thousand, or 2.8%, and non-interest income decreased $179 thousand, or 1.7%. 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)September 30,
    2022    		 June 30,
    2022    		 Change % Change Change due to rate Change due to volume
    Interest income:           
    Due from banks$92 $49 $43  87.8% $71  $(28)
    Federal funds sold 1  3  (2) (66.7)%  3   (5)
    Investment securities - taxable (1) 648  525  123  23.4%  107   16 
    Investment securities - tax exempt (1) 451  416  35  8.4%  37   (2)
    Loans held for sale 479  565  (86) (15.2)%  92   (178)
    Loans held for investment (1) 21,371  18,558  2,813  15.2%  1,764   1,049 
    Total loans 21,850  19,123  2,727  14.3%  1,856   871 
    Total interest income 23,042  20,116  2,926  14.5%  2,074   852 
    Interest expense:           
    Interest-bearing deposits$798 $248 $550  221.8% $568  $(18)
    Money market and savings deposits 2,075  1,076  999  92.8%  967   32 
    Time deposits 1,202  494  708  143.3%  665   43 
    Total deposits 4,075  1,818  2,257  124.1%  2,200   57 
    Borrowings 266  77  189  245.5%  39   150 
    Subordinated debentures 591  591  —  —%  —   — 
    Total interest expense 4,932  2,486  2,446  98.4%  2,239   207 
    Net interest income differential$18,110 $17,630 $480  2.72% $(165) $645 
    (1) Reflected on a tax-equivalent basis.          

    Interest income increased $2.9 million on a tax equivalent basis, quarter over quarter, due to a higher yield on earning assets, which went up 45 basis points, in addition to a higher level of average earning assets, which increased by $54.7 million. The yield on total loans increased 42 basis points and the yield on cash and investments increased 52 basis points in total, reflecting the impact in rates caused by the Federal Reserve’s monetary policy. Over $644 million in loans repriced during the quarter an average of 95 basis points. Average total loans, excluding PPP loans and residential loans for sale, increased $105.5 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 $15.0 million, and $24.3 million on average, respectively.

    Interest expense increased $2.4 million, quarter over quarter, due primarily to market interest rate rises, and to a lesser degree, an increase of $30.9 million in average deposits. Interest expense on deposits increased $2.3 million with the cost of interest-bearing deposits increasing 67 basis points to 1.24%. Total cost of deposits increased 54 basis points reflecting a steady level of average non-interest bearing deposits. Interest expense on borrowings increased $189 thousand as total average short-term borrowings increased $24.8 million and cost increased 57 basis points.

    Net interest margin decreased 6 basis points to 4.01% for the third quarter from 4.07% in the quarter, due mostly to one-time loan fees recognized in the second quarter. Excluding the impact from PPP, net interest margin increased 4 basis points to 3.99% from 3.95%. A reconciliation of this non-GAAP measure is included in the Appendix.

    Provision for loans losses

    The provision for loan losses decreased $76 thousand to $526 thousand for the third quarter. The third quarter provision was the result of new loan growth as well as covering $429 thousand in charge-offs on small ticket equipment leases, partially offset by decreases in specific reserves on non-performing loans as the underlying credit quality improved.

    Non-interest income

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

     Quarter Ended    
    (Dollars in thousands)September 30,
    2022    		 June 30,
    2022    		 Change % Change
    Mortgage banking income$7,329  $6,942  $387  5.6%
    Wealth management income 1,114   1,254   (140) (11.2)%
    SBA loan income 989   437   552  126.3%
    Earnings on investment in life insurance 138   137   1  0.7%
    Net change in the fair value of derivative instruments 127   (674)  801  (118.8)%
    Net change in the fair value of loans held-for-sale (237)  268   (505) (188.4)%
    Net change in the fair value of loans held-for-investment (886)  (835)  (51) 6.1%
    Net gain on hedging activity 399   1,715   (1,316) (76.7)%
    Service charges 32   31   1  3.2%
    Other 1,219   1,128   91  8.1%
    Total non-interest income$10,224  $10,403  $(179) (1.7)%

    Total non-interest income decreased $179 thousand, or 1.7%, quarter over quarter due primarily to the negative impact from the rising rate environment. The fair value of loans held for sale and net gain on hedging activity, partially offset by an increase in the fair value of derivative instruments, lowered non-interest income $1.0 million combined. Mortgage banking income also was negatively impacted by rising rate environment, causing a decline in originations of $32.2 million. Although volume was down quarter over quarter, gain on sale margins were up 34 basis points, driving an overall increase in mortgage banking income of $387 thousand. The fair value of loans held for sale and net gain on hedging activity

    SBA loan income increased $552 thousand, or 126.3%, over the prior quarter as a higher volume of SBA loans were sold into the secondary market. $20.8 million of loans were sold in the quarter-ending September 30, 2022 compared to $12.8 million in loans sold in the quarter-ending June 30, 2022. Margins on the SBA loan sales decreased due to the upward movement in interest rates, which drove SBA loan prices down.

    Wealth management income decreased $140 thousand, or 11.2%, for the quarter ended September 30, 2022 over the prior quarter due to the effect of market conditions on assets under management. Other non-interest income increased $91 thousand, or 8.1%, over the prior quarter due largely to an increase in title fee income, FHLB stock dividend income and broker fee income.

    Non-interest expense

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

     Quarter Ended    
    (Dollars in thousands)September 30,
    2022    		 June 30,
    2022    		 Change % Change
    Salaries and employee benefits$13,360 $12,926 $434  3.4%
    Occupancy and equipment 1,191  1,176  15  1.3%
    Professional fees 899  913  (14) (1.5)%
    Advertising and promotion 1,165  1,189  (24) (2.0)%
    Data processing 574  580  (6) (1.0)%
    Information technology 868  728  140  19.2%
    Pennsylvania bank shares tax 202  212  (10) (4.7)%
    Other 2,002  1,982  20  1.0%
    Total non-interest expense$20,261 $19,706 $555  2.8%

    Salaries and employee benefits increased $434 thousand overall, with an increase of $519 thousand for bank and wealth segments combined, and a decrease of $85 thousand for mortgage segment salaries and employee benefits. The bank and wealth segments salaries and employee benefits were greater due to an increase in full-time equivalent employees as well as increased 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. Information technology expense increased $140 thousand due to cybersecurity improvements, cloud-based costs and other software upgrades, all as a result of growth.

    Balance Sheet - September 30, 2022 Compared to June 30, 2022

    As of September 30, 2022, total assets increased $68.9 million, or 3.7%, to $1.92 billion from $1.85 billion at June 30, 2022. This growth in assets was due to loan portfolio growth partially funded by a reduction in cash and investments.

    Portfolio loan growth, excluding PPP loans, was $103.2 million, or 6.9% quarter-over-quarter. Construction loans increased $43.3 million, or 21.5%, residential real estate loans held in portfolio increased $41.0 million, or 36.4%, and lease financings increased $13.7 million, or 11.8% from June 30, 2022. Partially offsetting the growth in portfolio loans were decreases of $13.0 million, or 59.6%, in PPP loan balances as they continue to be forgiven by the SBA, commercial loans decrease of $6.3 million, or 1.9%, and a commercial real estate loans decrease of $2.5 million, or 0.5%.

    Total deposits increased $105.5 million, or 6.7%, quarter over quarter, due to a $107.3 million increase in interest-bearing deposits, the majority of this increase was in retail and wholesale time deposits due to more favorable interest rates.

    The following table presents capital ratios at the dates indicated:

     September 30,
    2022    		 June 30,
    2022
    Stockholders' equity to total assets7.87% 8.42%
    Tangible common equity to tangible assets (1)7.67% 8.22%
    Tier 1 leverage ratio - Corporation8.54% 8.87%
    Common tier 1 risk-based capital ratio - Corporation9.28% 9.79%
    Tier 1 risk-based capital ratio - Corporation9.28% 9.79%
    Total risk-based capital ratio - Corporation12.80% 13.50%
    (1) See Non-GAAP reconciliation in the Appendix  

    Consolidated stockholders’ equity of the Corporation decreased as a result of net income of $5.8 million for the quarter, offset by dividends paid of $1.2 million, treasury stock purchases of $6.1 million, and a decline in accumulated other comprehensive income of $3.9 million from the investment securities available for sale portfolio due to broad increases in interest rates over this period. Based on capital ratio levels at September 30, 2022, we remain above the Community Bank Leverage Ratio requirement of 9%.

    Asset Quality Summary

    Meridian's credit culture is strong and asset quality remains a primary focus of management. The ratio of non-performing assets to total assets declined to 1.20% as of September 30, 2022 from 1.24% as of June 30, 2022. There was no other real estate property included in non-performing assets for either period. Total non-performing loans were $23.1 million as of September 30, 2022, relatively flat over the prior period, however subsequent to September 30, 2022, a $3.2 million principal payment on a non-performing loan was received.

    Meridian realized net charge-offs of 0.02% of total average loans for the quarter ended September 30, 2022, down from the quarter ended June 30, 2022 level of 0.03%. Net charge-offs for the quarter ended September 30, 2022 were $358 thousand, comprised of $432 thousand in charge-offs, with $74 thousand in recoveries for the quarter. Nearly all of the charge-offs for the quarter ended September 30, 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 1.20% as of September 30, 2022 compared to 1.27% as of June 30, 2022. As of September 30, 2022 there were specific reserves of $2.6 million against non-performing loans, down from $4.2 million as of June 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
     September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021
    Earnings and Per Share Data:         
    Net income$5,798  $5,938  $5,535  $7,719  $9,438 
    Basic earnings per common share$0.99  $0.99  $0.92  $1.29  $1.56 
    Diluted earnings per common share$0.96  $0.96  $0.88  $1.24  $1.52 
    Common shares outstanding 5,844   6,037   6,129   6,108   6,108 
              
    Performance Ratios:         
    Return on average assets - consolidated 1.23%  1.31%  1.28%  1.74%  2.15%
    Return on average equity - consolidated 14.59   15.03   13.86   19.15   24.07 
    Net interest margin (tax-equivalent) 4.01   4.07   3.89   3.83   3.83 
    Net interest margin (tax-equivalent, excluding PPP loans and borrowings) (1) 3.99   3.95   3.82   3.76   3.73 
    Yield on earning assets (tax-equivalent) 5.10   4.65   4.35   4.28   4.31 
    Yield on earning assets (tax-equivalent, excluding PPP loans) (1) 5.09   4.54   4.31   4.23   4.24 
    Cost of funds 1.17   0.61   0.50   0.49   0.52 
    Efficiency ratio - consolidated 71.72%  70.49%  73.56%  71.05%  66.39%
              
    Asset Quality Ratios:         
    Net charge-offs (recoveries) to average loans 0.02%  0.03%  0.04%  —%  —%
    Non-performing loans to total loans 1.40   1.46   1.51   1.57   0.61 
    Non-performing assets to total assets 1.20   1.24   1.25   1.34   0.52 
    Allowance for loan losses to:         
    Total loans held for investment 1.18   1.24   1.31   1.35   1.38 
    Total loans held for investment (excluding loans at fair value and PPP loans) (1) 1.20   1.27   1.38   1.46   1.52 
    Non-performing loans 82.20%  81.82%  82.48%  81.60%  206.42%
              
    Capital Ratios:         
    Book value per common share$25.86  $25.85  $25.73  $27.07  $25.94 
    Tangible book value per common share$25.16  $25.16  $25.04  $26.37  $25.23 
    Total equity/Total assets 7.87%  8.42%  8.61%  9.65%  8.99%
    Tangible common equity/Tangible assets - Corporation (1) 7.67   8.22   8.40   9.42   8.76 
    Tangible common equity/Tangible assets - Bank (1) 9.61   10.17   10.40   11.54   10.90 
    Tier 1 leverage ratio - Corporation 8.54   8.87   9.10   9.39   9.28 
    Tier 1 leverage ratio - Bank 10.52   10.86   11.20   11.51   11.55 
    Common tier 1 risk-based capital ratio - Corporation 9.28   9.79   10.09   10.83   10.64 
    Common tier 1 risk-based capital ratio - Bank 11.44   11.98   12.41   13.27   13.25 
    Tier 1 risk-based capital ratio - Corporation 9.28   9.79   10.09   10.83   10.64 
    Tier 1 risk-based capital ratio - Bank 11.44   11.98   12.41   13.27   13.25 
    Total risk-based capital ratio - Corporation 12.80   13.50   13.91   14.81   14.72 
    Total risk-based capital ratio - Bank 12.70%  13.33%  13.76%  14.63%  14.62%
    (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 Nine Months Ended
     September 30,
    2022    		 June 30,
    2022    		 September 30,
    2021    		 September 30,
    2022    		 September 30,
    2021
    Interest income:         
    Loans, including fees$21,848  $19,120  $17,626  $58,187  $51,287 
    Securities - taxable 648   525   357   1,599   1,076 
    Securities - tax-exempt 369   340   306   1,015   886 
    Cash and cash equivalents 93   52   17   157   25 
    Total interest income 22,958   20,037   18,306   60,958   53,274 
    Interest expense:         
    Deposits 4,075   1,818   1,327   7,182   4,261 
    Borrowings 857   668   722   2,166   2,224 
    Total interest expense 4,932   2,486   2,049   9,348   6,485 
    Net interest income 18,026   17,551   16,257   51,610   46,789 
    Provision for loan losses 526   602   597   1,743   1,292 
    Net interest income after provision for loan losses 17,500   16,949   15,660   49,867   45,497 
    Non-interest income:         
    Mortgage banking income 7,329   6,942   18,726   21,367   62,293 
    Wealth management income 1,114   1,254   1,232   3,672   3,531 
    SBA loan income 989   437   2,688   3,946   5,423 
    Earnings on investment in life insurance 138   137   93   413   224 
    Net change in the fair value of derivative instruments 127   (674)  (339)  (713)  (3,431)
    Net change in the fair value of loans held-for-sale (237)  268   (532)  (1,094)  (3,164)
    Net change in the fair value of loans held-for-investment (886)  (835)  37   (2,499)  (24)
    Net gain on hedging activity 399   1,715   (1,189)  4,941   2,397 
    Net gain on sale of investment securities available-for-sale —   —   314   —   362 
    Service charges 32   31   35   90   99 
    Other 1,219   1,128   1,057   3,605   3,192 
    Total non-interest income 10,224   10,403   22,122   33,728   70,902 
    Non-interest expense:         
    Salaries and employee benefits 13,360   12,926   19,472   41,585   61,824 
    Occupancy and equipment 1,191   1,176   1,133   3,619   3,460 
    Professional fees 899   913   873   2,659   2,629 
    Advertising and promotion 1,165   1,189   1,089   3,340   2,795 
    Data processing 574   580   530   1,633   1,666 
    Information technology 868   728   476   2,306   1,365 
    Pennsylvania bank shares tax 202   212   152   612   478 
    Other 2,002   1,982   1,756   5,646   5,773 
    Total non-interest expense 20,261   19,706   25,481   61,400   79,990 
    Income before income taxes 7,463   7,646   12,301   22,195   36,409 
    Income tax expense 1,665   1,708   2,863   4,927   8,543 
    Net income$5,798  $5,938  $9,438  $17,268  $27,866 
              
    Basic earnings per common share$0.99  $0.99  $1.56  $2.90  $4.62 
    Diluted earnings per common share$0.96  $0.96  $1.52  $2.80  $4.49 
              
    Basic weighted average shares outstanding 5,867   5,999   6,045   5,964   6,033 
    Diluted weighted average shares outstanding 6,059   6,199   6,231   6,172   6,201 
                        

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

     September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021
    Assets:         
    Cash and due from banks$12,114  $8,280  $11,155  $3,966  $10,321 
    Interest-bearing deposits at other banks 20,774   28,813   44,867   19,514   35,554 
    Federal funds sold —   —   12,866   —   17,246 
    Cash and cash equivalents 32,888   37,093   68,888   23,480   63,121 
    Securities available-for-sale, at fair value 127,999   129,288   130,653   159,302   146,149 
    Securities held-to-maturity, at amortized cost 37,922   37,111   34,977   6,372   6,406 
    Equity investments 2,092   2,153   2,240   2,354   1,011 
    Mortgage loans held for sale, at fair value 33,800   58,938   81,258   80,882   117,996 
    Loans, net of fees and costs 1,610,349   1,518,893   1,431,906   1,386,457   1,378,670 
    Allowance for loan and lease losses (18,974)  (18,805)  (18,826)  (18,758)  (18,976)
    Loans, net of the allowance for loan and lease losses 1,591,375   1,500,088   1,413,080   1,367,699   1,359,694 
    Restricted investment in bank stock 5,217   4,719   4,330   5,117   4,162 
    Bank premises and equipment, net 12,835   12,185   11,883   11,806   8,242 
    Bank owned life insurance 22,916   22,778   22,641   22,503   22,362 
    Accrued interest receivable 6,008   5,108   4,848   5,009   5,080 
    Deferred income taxes 5,722   4,467   3,190   1,413   1,457 
    Servicing assets 12,807   12,860   13,396   12,765   11,932 
    Goodwill 899   899   899   899   899 
    Intangible assets 3,226   3,277   3,328   3,379   3,430 
    Other assets 26,218   22,055   35,978   10,463   10,504 
    Total assets$1,921,924  $1,853,019  $1,831,589  $1,713,443  $1,762,445 
              
    Liabilities:         
    Deposits:         
    Non-interest bearing$290,169  $291,925  $291,379  $274,528  $265,842 
    Interest bearing         
    Interest checking 236,562   205,298   252,298   268,248   279,659 
    Money market and savings deposits 709,127   728,886   688,117   697,628   670,101 
    Time deposits 437,695   341,905   333,057   206,009   223,445 
    Total interest-bearing deposits 1,383,384   1,276,089   1,273,472   1,171,885   1,173,205 
    Total deposits 1,673,553   1,568,014   1,564,851   1,446,413   1,439,047 
    Short-term borrowings 23,458   59,136   36,136   41,344   22,278 
    Long-term debt —   —   —   —   78,405 
    Subordinated debentures 40,597   40,567   40,538   40,508   40,760 
    Accrued interest payable 1,154   146   575   31   663 
    Other liabilities 32,001   29,069   31,805   19,787   22,876 
    Total liabilities 1,770,763   1,696,932   1,673,905   1,548,083   1,604,029 
              
    Stockholders’ equity:         
    Common stock 6,566   6,561   6,556   6,535   6,506 
    Surplus 84,848   84,359   84,177   83,663   82,508 
    Treasury stock (18,033)  (11,896)  (8,860)  (8,860)  (8,025)
    Unearned common stock held by employee stock ownership plan (1,602)  (1,602)  (1,602)  (1,602)  (1,768)
    Retained earnings 92,405   87,815   83,104   84,916   78,408 
    Accumulated other comprehensive (loss) income (13,023)  (9,150)  (5,691)  708   787 
    Total stockholders’ equity 151,161   156,087   157,684   165,360   158,416 
    Total liabilities and stockholders’ equity$1,921,924  $1,853,019  $1,831,589  $1,713,443  $1,762,445 
              
    Common stock shares outstanding 5,844   6,037   6,129   6,108   6,108 
                        

    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
     September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021
    Interest income$22,958 $20,037 $17,964 $18,248  $18,306
    Interest expense 4,932  2,486  1,929  1,926   2,049
    Net interest income 18,026  17,551  16,035  16,322   16,257
    Provision (credit) for loan losses 526  602  615  (222)  597
    Non-interest income 10,224  10,403  13,102  17,086   22,122
    Non-interest expense 20,261  19,706  21,433  23,737   25,481
    Income before income tax expense 7,463  7,646  7,089  9,893   12,301
    Income tax expense 1,665  1,708  1,554  2,174   2,863
    Net Income$5,798 $5,938 $5,535 $7,719  $9,438
              
    Basic weighted average shares outstanding 5,867  5,999  6,023  5,978   6,045
    Basic earnings per common share$0.99 $0.99 $0.92 $1.29  $1.56
              
    Diluted weighted average shares outstanding 6,059  6,199  6,262  6,210   6,231
    Diluted earnings per common share$0.96 $0.96 $0.88 $1.24  $1.52


     Segment Information
     Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
    (dollars in thousands)Bank Wealth Mortgage Total Bank Wealth Mortgage Total
    Net interest income$17,664  $218  $144  $18,026  $15,777  $2  $478  $16,257 
    Provision for loan losses 526   —   —   526   597   —   —   597 
    Net interest income after provision 17,138   218   144   17,500   15,180   2   478   15,660 
    Non-interest income 1,730   1,114   7,380   10,224   3,752   1,232   17,138   22,122 
    Non-interest expense 11,354   780   8,127   20,261   10,633   802   14,046   25,481 
    Income before income taxes$7,514  $552  $(603) $7,463  $8,299  $432  $3,570  $12,301 
    Efficiency ratio 58.54%  58.56%  108.01%  71.72%  54.45%  64.99%  79.73%  66.39%


     Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021
    (dollars in thousands)Bank Wealth Mortgage Total Bank Wealth Mortgage Total
    Net interest income$50,197  $628  $785  $51,610  $45,340  $(249) $1,698  $46,789 
    Provision for loan losses 1,743   —   —   1,743   1,292   —   —   1,292 
    Net interest income after provision 48,454   628   785   49,867   44,048   (249)  1,698   45,497 
    Non-interest income 6,267   3,671   23,790   33,728   8,477   3,531   58,894   70,902 
    Non-interest expense 32,186   2,480   26,734   61,400   28,981   2,486   48,523   79,990 
    Income before income taxes$22,535  $1,819  $(2,159) $22,195  $23,544  $796  $12,069  $36,409 
    Efficiency ratio 57.00%  57.69%  108.79%  71.95%  54.09%  70.66%  80.08%  67.97%


    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
     Q3'2022 Q2'2022 Q1'2022 Q4'2021 Q3'2021
    Income before income tax expense$7,463  $7,646 $7,089  $9,893  $12,301
    Provision for loan losses 526   602  615   (222)  597
    Pre-tax, pre-provision income$7,989  $8,248 $7,704  $9,671  $12,898
              
    Bank$8,040  $7,458 $8,778  $6,829  $8,896
    Wealth 552   749  519   286   432
    Mortgage (603)  41  (1,593)  2,556   3,570
    Pre-tax, pre-provision income$7,989  $8,248 $7,704  $9,671  $12,898
              
              


     Net Interest Margin, (TEY), Excluding PPP Loans & PPPLF Borrowings
    Yield on Interest Earning Assets, (TEY), Excluding PPP income
     Q3'2022 Q2'2022 Q1'2022 Q4'2021 Q3'2021
    Net interest margin (TEY) (GAAP)4.01% 4.07% 3.89% 3.83% 3.83%
    Impact of PPP loans and PPPLF borrowings(0.02)% (0.12)% (0.07)% (0.07)% (0.10)%
    Net interest margin (TEY), excluding PPP loans and PPPLF borrowings3.99% 3.95% 3.82% 3.76% 3.73%
              
    Yield on interest earning assets, tax equivalent (GAAP)5.10% 4.65% 4.35% 4.28% 4.31%
    Impact of PPP loans(0.01)% (0.11)% (0.04)% (0.05)% (0.07)%
    Yield on interest earning assets (TEY), excluding PPP income5.09% 4.54% 4.31% 4.23% 4.24%


     Allowance For Loan Losses to Loans, Net of Fees and Costs, Excluding PPP Loans and Loans at Fair Value
     September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021
    Allowance for loan losses (GAAP)$18,974  $18,805  $18,826  $18,758  $18,976 
              
    Loans, net of fees and costs (GAAP) 1,610,349   1,518,893   1,431,906   1,386,457   1,378,670 
    Less: PPP loans (8,610)  (21,460)  (49,680)  (88,245)  (115,569)
    Less: Loans fair valued (14,702)  (16,212)  (17,375)  (17,558)  (17,142)
    Loans, net of fees and costs, excluding loans at fair value and PPP loans (non-GAAP)$1,587,037  $1,481,221  $1,364,851  $1,280,654  $1,245,959 
              
    Allowance for loan losses to loans, net of fees and costs (GAAP) 1.18%  1.24%  1.31%  1.35%  1.38%
    Allowance for loan losses to loans, net of fees and costs, excluding PPP loans and loans at fair value (non-GAAP) 1.20%  1.27%  1.38%  1.46%  1.52%


     Tangible Common Equity Ratio Reconciliation - Corporation
     September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021
    Total stockholders' equity (GAAP)$151,161  $156,087  $157,684  $165,360  $158,416 
    Less: Goodwill and intangible assets (4,125)  (4,176)  (4,227)  (4,278)  (4,329)
    Tangible common equity (non-GAAP) 147,036   151,911   153,457   161,082   154,087 
              
    Total assets (GAAP) 1,921,924   1,853,019   1,831,589   1,713,443   1,762,445 
    Less: Goodwill and intangible assets (4,125)  (4,176)  (4,227)  (4,278)  (4,329)
    Tangible assets (non-GAAP)$1,917,799  $1,848,843  $1,827,362  $1,709,165  $1,758,116 
    Tangible common equity to tangible assets ratio - Corporation (non-GAAP) 7.67%  8.22%  8.40%  9.42%  8.76%


     Tangible Common Equity Ratio Reconciliation - Bank
     September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021
    Total stockholders' equity (GAAP)$188,386  $192,212  $194,347  $201,486  $196,009 
    Less: Goodwill and intangible assets (4,125)  (4,176)  (4,227)  (4,278)  (4,329)
    Tangible common equity (non-GAAP) 184,261   188,036   190,120   197,208   191,680 
              
    Total assets (GAAP) 1,921,714   1,852,998   1,831,461   1,713,318   1,762,415 
    Less: Goodwill and intangible assets (4,125)  (4,176)  (4,227)  (4,278)  (4,329)
    Tangible assets (non-GAAP)$1,917,589  $1,848,822  $1,827,234  $1,709,040  $1,758,086 
    Tangible common equity to tangible assets ratio - Bank (non-GAAP) 9.61%  10.17%  10.40%  11.54%  10.90%
              
     Tangible Book Value Reconciliation
     September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021
    Book value per common share$25.86  $25.85  $25.73  $27.07  $25.94 
    Less: Impact of goodwill /intangible assets 0.70   0.69   0.69   0.70   0.71 
    Tangible book value per common share$25.16  $25.16  $25.04  $26.37  $25.23 


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