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 assets7.43% 7.87%
Tangible common equity to tangible assets (1)7.25% 7.67%
Tier 1 leverage ratio - Corporation8.13% 8.54%
Common tier 1 risk-based capital ratio - Corporation8.77% 9.28%
Tier 1 risk-based capital ratio - Corporation8.77% 9.28%
Total risk-based capital ratio - Corporation12.05% 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 borrowings3.92% 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 income5.88% 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


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Source: Meridian Corporation

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