Meridian Corporation

11/07/2025 | Press release | Distributed by Public on 11/07/2025 07:59

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis in conjunction with the unaudited consolidated interim financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2024 included in Meridian Corporation's Annual Report on Form 10-K filed with the SEC.
Forward-Looking Statements
Meridian Corporation may from time to time make written or oral "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Meridian Corporation's strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words "may," "could," "should," "pro forma," "looking forward," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Meridian Corporation's control). Numerous competitive, economic, regulatory, legal and technological factors, risks and uncertainties that could cause actual results to differ materially include, without limitation: credit losses and the credit risk of our commercial and consumer loan products; changes in the level of charge-offs and changes in estimates of the adequacy of the allowance for credit losses, or ACL; cyber-security concerns; rapid technological developments and changes; increased competitive pressures; changes in spreads on interest-earning assets and interest-bearing liabilities; changes in general economic conditions and conditions within the securities markets; escalating tariff and other trade policies and the resulting impacts on market volatility and global trade; the impact of uncertain or changing political conditions or any current or future federal government shutdown and uncertainty regarding the federal government's debt limit; unanticipated changes in our liquidity position; unanticipated changes in regulatory and governmental policies impacting interest rates and financial markets; legislation affecting the financial services industry as a whole, and Meridian Corporation, in particular; changes in accounting policies, practices or guidance; developments affecting the industry and the soundness of financial institutions and further
disruption to the economy and U.S. banking system; among others, could cause Meridian Corporation's financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements.
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 SEC, including our Annual Report on Form 10-K for the year ended December 31, 2024 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.
Critical Accounting Policies and Estimates
Our critical accounting policies are described in detail in the "Critical Accounting Policies" section within Item 7 of our 2024 Annual Form 10-K. The SEC defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in future periods. See Note 1, "Summary of Significant Accounting Policies" for additional information on the adoption of ASC 326, which changes the methodology under which management calculates its reserve for loans and leases, now referred to as the allowance for credit losses. Management considers the measurement of the allowance for credit losses to be a critical accounting policy.
Executive Overview
The following items highlight the Corporation's changes in its financial condition as of September 30, 2025 compared to December 31, 2024 and the results of operations for the three and nine months ended September 30, 2025 compared to the same periods in 2024. More detailed information related to these highlights can be found in the sections that follow.
Changes in Financial Condition - September 30, 2025 Compared to December 31, 2024
•Total assets increased $155.3 million, or 6.5%, to $2.5 billion as of September 30, 2025.
•Portfolio loans increased $133.0 million, or 6.6%, to $2.2 billion as of September 30, 2025.
•Mortgage loans held for sale decreased $4.4 million, or 13.6%, to $28.0 million as of September 30, 2025.
•Total deposits increased $125.7 million or 6.3% to $2.1 billion as of September 30, 2025.
•The Corporation raised $2.8 million in common equity through an ATM offering during the nine months ended September 30, 2025.
•The Corporation earned net income of $14.7 million during the nine months ended September 30, 2025 and returned $4.2 million of capital to Meridian shareholders during the nine months ended September 30, 2025 through a $0.125 dividend per share in each of the first three quarters of the year.
Three Month Results of Operations - September 30, 2025 Compared to the Same Period in 2024
•Net income was $6.7 million, or $0.58 per diluted share, up $1.9 million, or 40.4%, driven by higher net interest income, offset somewhat by a higher provision for credit losses and higher non-interest expense.
•The return on average assets and return on average equity were 1.04% and 14.42%, respectively, for the third quarter 2025, compared to 0.80% and 11.41%, respectively, for the third quarter 2024.
•Net interest income increased $4.9 million, or 26.7%, to $23.1 million and the net interest margin increased to 3.77% from 3.20%, due to the impact of deposit and borrowing cost declines as well as the in increase in average noninterest-bearing deposits over the period.
•The overall provision for credit losses increased $568 thousand when comparing the third quarter 2025 to the third quarter 2024. While net-charge offs were down over this period, the increase in provision was driven by providing for loan growth, an increase in non-performing loans, and adjusting for macro-economic impacts due to the current economic and market uncertainty.
•Non-interest income decreased $878 thousand, or 8.1%, to $10.0 million driven by a $560 thousand decline in mortgage banking income, a $731 thousand decline the fair value of mortgage related items, partially offset by a $887 thousand increase in SBA loan income.
•Non-interest expense increased $1.0 million, or 4.9%, to $21.5 million due to a $784 thousand increase in salaries and employee benefits, and an increase of $312 thousand in data processing and software expense.
Nine Month Results of Operations - September 30, 2025 Compared to the Same Period in 2024
•Net income was $14.7 million, or $1.28 per diluted share, an increase of $3.9 million, or 36.3%, driven by a higher level of net interest income and non-interest income, offset somewhat by a higher provision for credit losses and higher non-interest expense.
•The return on average assets and return on average equity were 0.79% and 10.98%, respectively, for the nine months ended September 30, 2025, compared to 0.62% and 8.84%, respectively, for the nine months ended September 30, 2024.
•Net interest income increased $12.4 million, or 23.9%, to $64.1 million and the net interest margin increased to 3.59% from 3.12%, largely due to the impact of deposit and borrowing cost declines as well as the in increase in average noninterest-bearing deposits over the period.
•The overall provision for credit losses increased $4.0 million when comparing the nine months ended September 30, 2025 to nine months ended September 30, 2024 as we provided for loan growth, experienced an increase in non-performing loans, and while adjusting for macro-economic impacts due to the current economic and market uncertainty.
•Non-interest income increased $506 thousand, or 1.8%, to $28.6 million driven by a $1.9 million increase in SBA loan income, a $415 thousand net gain on sale of MSRs, and a $429 thousand increase in wealth management income, partially offset by a $459 thousand decline in mortgage banking income, and an overall $1.8 million decline in other non-interest income.
•Non-interest expense increased $3.9 million, or 6.8%, to $61.6 million due to a $3.3 million increase in salaries and employee benefits, and an increase of $523 thousand in other non-interest expense, partially offset by a decrease of $614 thousand in professional fees.
Key Performance Ratios
The following table presents key financial performance ratios for the periods indicated:
Three months ended
September 30, 		Nine months ended
September 30,
2025 2024 2025 2024
Return on average assets, annualized 1.04 % 0.80 % 0.79 % 0.62 %
Return on average equity, annualized 14.42 % 11.41 % 10.98 % 8.84 %
Net interest margin (tax effected yield) 3.77 % 3.20 % 3.59 % 3.12 %
Basic earnings per share $ 0.59 $ 0.43 $ 1.30 $ 0.97
Diluted earnings per share $ 0.58 $ 0.42 $ 1.28 $ 0.96
The following table presents certain key period-end balances and ratios at the dates indicated:
(dollars in thousands, except per share amounts) September 30,
2025 		December 31,
2024
Book value per common share $ 16.33 $ 15.26
Tangible book value per common share (1)
$ 16.02 $ 14.93
Allowance as a percentage of loans and other finance receivables (excluding loans at fair value) 1.01 % 0.91 %
Tier I capital to risk weighted assets 8.41 % 8.13 %
Tangible common equity to tangible assets ratio (1)
7.27 % 7.05 %
Loans and other finance receivables, net of fees and costs $ 2,162,845 $ 2,030,437
Total assets $ 2,541,130 $ 2,385,867
Total stockholders' equity $ 188,029 $ 171,522
(1) Non-GAAP financial measure. See "Non-GAAP Financial Measures" below for Non-GAAP to GAAP reconciliation.
Components of Net Income
Net income is comprised of five major elements:
•Net Interest Income, or the difference between the interest income earned on loans, leases and investments and the interest expense paid on deposits and borrowed funds;
•Provision For Credit Losses, or the amount added to the Allowance to provide for current expected credit losses on portfolio loans and other finance receivables;
•Non-interest Income,which is made up primarily of mortgage banking income, wealth management income, SBA loan sale income, fair value adjustments, gains and losses from the sale of loans, gains and losses from the sale of investment securities available for sale and other fees from loan and deposit services;
•Non-interest Expense, which consists primarily of salaries and employee benefits, occupancy, professional fees, advertising & promotion, data processing, information technology, loan expenses, and other operating expenses; and
•Income Taxes, which include state and federal jurisdictions.
NET INTEREST INCOME
Net interest income is an integral source of the Corporation's revenue. The tables below present a summary for the three and nine months ended September 30, 2025 and 2024, of the Corporation's average balances and yields earned on its interest-earning assets and the rates paid on its interest-bearing liabilities. The net interest margin is the net interest income as a percentage of average interest-earning assets. The net interest spread is the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. The difference between the net interest margin and the net interest spread is the result of net free funding sources such as non-interest bearing deposits and stockholders' equity.
Analyses of Interest Rates and Interest Differential
The table below present the major asset and liability categories on an average daily balance basis for the periods presented, along with interest income, interest expense and key rates and yields on a tax equivalent basis.
For the Three Months Ended September 30,
(dollars in thousands) 2025 2024
Average Balance Interest Income/ Expense Yields/ Rates Average Balance Interest Income/ Expense Yields/ Rates
Assets:
Cash and cash equivalents $ 37,001 $ 412 4.42 % $ 30,519 $ 416 5.43 %
Investment securities - taxable 172,404 1,895 4.36 145,845 1,480 4.04
Investment securities - tax exempt (1)
53,909 400 2.94 56,408 397 2.80
Loans held for sale 33,296 536 6.39 47,177 766 6.46
Loans held for investment(1)
2,146,651 39,942 7.38 1,997,574 37,339 7.44
Total loans 2,179,947 40,478 7.37 2,044,751 38,105 7.41
Total interest-earning assets 2,443,261 43,185 7.01 % 2,277,523 40,398 7.06 %
Noninterest earning assets 91,304 95,738
Total assets $ 2,534,565 $ 2,373,261
Liabilities and stockholders' equity:
Interest-bearing demand deposits $ 173,023 $ 1,314 3.01 % $ 132,257 $ 1,390 4.18 %
Money market and savings deposits 973,952 8,322 3.39 800,406 8,391 4.17
Time deposits 743,472 7,782 4.15 781,172 9,532 4.85
Total interest - bearing deposits 1,890,447 17,418 3.66 1,713,835 19,313 4.48
Borrowings 123,695 1,495 4.80 160,063 1,985 4.93
Subordinated debentures 49,802 1,080 8.60 49,908 779 6.21
Total interest-bearing liabilities 2,063,944 19,993 3.84 1,923,806 22,077 4.57
Noninterest-bearing deposits 253,374 246,310
Other noninterest-bearing liabilities 34,005 37,836
Total liabilities 2,351,323 2,207,952
Total stockholders' equity 183,242 165,309
Total stockholders' equity and liabilities $ 2,534,565 $ 2,373,261
Net interest income and spread(1)
$ 23,192 3.17 $ 18,321 2.49
Net interest margin (1)
3.77 % 3.20 %
(1)Yields and net interest income are reflected on a tax-equivalent basis.
For the Nine Months Ended September 30,
(dollars in thousands) 2025 2024
Average Balance Interest Income/ Expense Yields/ Rates Average Balance Interest Income/ Expense Yields/ Rates
Assets:
Cash and cash equivalents $ 43,574 $ 1,452 4.46 % $ 25,712 $ 1,047 5.44 %
Investment securities - taxable 166,431 5,380 4.32 136,275 4,055 3.97
Investment securities - tax exempt(1)
54,350 1,150 2.83 57,007 1,204 2.82
Loans held for sale 28,567 1,364 6.38 33,914 1,661 6.54
Loans held for investment (1)
2,100,305 114,364 7.28 1,971,595 108,274 7.34
Total loans 2,128,872 115,728 7.27 2,005,509 109,935 7.32
Total interest-earning assets 2,393,227 123,710 6.91 % 2,224,503 116,241 6.98 %
Noninterest earning assets 89,446 96,228
Total assets $ 2,482,673 $ 2,320,731
Liabilities and stockholders' equity:
Interest-bearing demand deposits $ 165,309 $ 3,897 3.15 % $ 134,814 $ 4,036 4.00 %
Money market and savings deposits 944,118 24,227 3.43 786,345 24,512 4.16
Time deposits 733,526 23,463 4.28 744,025 27,148 4.87
Total interest - bearing deposits 1,842,953 51,587 3.74 1,665,184 55,696 4.47
Borrowings 128,526 4,636 4.82 169,265 6,271 4.95
Subordinated debentures 49,775 3,214 8.63 49,877 2,335 6.25
Total interest-bearing liabilities 2,021,254 59,437 3.93 1,884,326 64,302 4.56
Noninterest-bearing deposits 249,127 236,239
Other noninterest-bearing liabilities 33,954 37,739
Total liabilities 2,304,335 2,158,304
Total stockholders' equity 178,338 162,427
Total stockholders' equity and liabilities $ 2,482,673 $ 2,320,731
Net interest income and spread (1)
$ 64,273 2.98 $ 51,939 2.42
Net interest margin (1)
3.59 % 3.12 %
(1)Yields and net interest income are reflected on a tax-equivalent basis.
Rate / Volume Analysis
The rate/volume analysis table below analyzes dollar changes in the components of interest income and interest expense as they relate to the change in balances (volume) and the change in interest rates (rate) of tax-equivalent net interest income for the three and nine months ended September 30, 2025 as compared to the same periods in 2024, allocated by rate and volume. Changes in interest income and/or expense attributable to both rate and volume have been allocated proportionately based on the relationship of the absolute dollar amount of the change in each category.
Three Months Ended September 30,
Nine Months Ended September 30,
2025 Compared to 2024
(dollars in thousands) Rate Volume Total Rate Volume Total
Interest income:
Cash and cash equivalents $ (83) $ 79 $ (4) $ (217) $ 622 $ 405
Investment securities - taxable 130 285 415 372 953 1,325
Investment securities - tax exempt (1)
21 (18) 3 2 (56) (54)
Loans held for sale (6) (224) (230) (41) (256) (297)
Loans held for investment (1)
(172) 2,775 2,603 (925) 7,015 6,090
Total loans (178) 2,551 2,373 (966) 6,759 5,793
Total interest income $ (110) $ 2,897 $ 2,787 $ (809) $ 8,278 $ 7,469
Interest expense:
Interest-bearing demand deposits $ (442) $ 366 $ (76) $ (952) $ 813 $ (139)
Money market and savings deposits (1,707) 1,638 (69) (4,741) 4,456 (285)
Time deposits (1,307) (443) (1,750) (3,307) (378) (3,685)
Total interest - bearing deposits (3,456) 1,561 (1,895) (9,000) 4,891 (4,109)
Borrowings (49) (441) (490) (162) (1,473) (1,635)
Subordinated debentures 303 (2) 301 884 (5) 879
Total interest expense $ (3,202) $ 1,118 $ (2,084) $ (8,278) $ 3,413 $ (4,865)
Interest differential $ 3,092 $ 1,779 $ 4,871 $ 7,469 $ 4,865 $ 12,334
(1)Yields and net interest income are reflected on a tax-equivalent basis.
Three Months Ended September 30, 2025 Compared to the Same Period in 2024
For the three months ended September 30, 2025 as compared to the same period in 2024, tax-equivalent interest income increased $2.8 million as favorable volume changes contributed $2.9 million to interest income, partially offset by rate changes that had a $110 thousand unfavorable impact on interest income. The loans held for investment average balances increased $149.1 million, leading to a favorable volume impact on interest income of $2.8 million, while the decrease in loans held for sale average balances of $13.9 million had a small unfavorable impact on interest income of $224 thousand. Growth in the loans held for investment portfolio was led by average balance increases in commercial mortgage loans ($69.2 million), home equity lines and loans ($18.1 million), commercial and industrial loans ($26.1 million), and construction loans ($51.8 million). The change in rates led to decreased yields on loans held for sale (down 7 basis points) and loans held for investment (down 6 basis points) that unfavorably impact interest income by $178 thousand, overall.
On the funding side, overall interest expense decreased $2.1 million, largely driven by the a continuation in the decline of the cost of deposits and borrowings driven by the Fed's rates cuts over the last year. The cost of deposits were down across the board, leading to a $1.9 million decrease to interest expense. The cost of interest-bearing demand deposits, money market and savings accounts and time deposits decreased 117 basis points, 78 basis points and 70 basis points, respectively. These deposit cost declines were partially offset by overall volume increases as the average balances on money market and savings accounts increased $173.5 million, and the average balances on interest-bearing demand deposits increased $40.8 million, while time deposit average balances decreased $37.7 million.
The cost of borrowings decreased by 13 basis points, while the cost of subordinated debentures increased 239 basis points as the $40 million in 2019 Debentures converted to a floating rate instrument as of December 31, 2024, contributing a $303 thousand increase to interest expense. Borrowing balances decreased $36.4 million on average.
Overall, the $4.9 million increase in net interest income over this period was primarily driven by rate changes and secondarily through volume changes.
Nine Months Ended September 30, 2025 Compared to the Same Period in 2024
For the nine months ended September 30, 2025 as compared to the same period in 2024, tax-equivalent interest income increased $7.5 million as favorable volume changes contributed $8.3 million to interest income, partially offset by rate changes that had a $809 thousand unfavorable impact on interest income. The loans held for investment average balances increased $128.7 million, leading to a favorable volume impact on interest income of $7.0 million. Growth in the loans held for investment portfolio was led by average balance increases in commercial mortgage loans ($76.2 million), commercial and industrial loans ($32.7 million), construction loans
($27.3 million), and home equity lines and loans ($17.1 million). The change in rates led to decreased yields on loans held for sale (down 16 basis points) and loans held for investment (down 6 basis points) that unfavorably impacted interest income by $966 thousand, overall.
On the funding side, overall interest expense decreased $4.9 million, largely driven by the impact that the Fed's rate cuts over the last year have had on the cost of deposits and borrowings. The cost of deposits were down across the board, leading to a $4.1 million decrease to interest expense. The cost of interest-bearing demand deposits, money market and savings accounts and time deposits decreased 85 basis points, 73 basis points and 59 basis points, respectively. These deposit cost declines were partially offset by volume increases as the average balances on money market and savings accounts increased $157.8 million, the average balances on interest-bearing demand deposits increased $30.5 million, while time deposit average balances decreased $10.5 million.
Additionally, the cost of borrowings decreased by 13 basis points, while the cost of subordinated debentures increased 238 basis points as the $40 million in 2019 Debentures converted to a floating rate instrument as of December 31, 2024, contributing a $884 thousand increase to interest expense. Borrowings decreased $40.7 million on average.
Overall, the $12.3 million increase in net interest income over this period was driven by both rate and volume changes.
PROVISION FOR CREDIT LOSSES
Three and Nine Months Ended September 30, 2025 Compared to the Same Period in 2024
The total provision for credit losses increased $568 thousand on a net basis for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The provision on funded loans increased $874 thousand over the three month comparable period in 2024 driven by provisioning for loan growth and charge-offs, as well as an increase in baseline loss rates on certain portfolios. There was no provision on unfunded loan commitments for the three months ended September 30, 2025, while for the three months September 30, 2024 there was a $306 thousand provision on unfunded loan commitments.
The total provision for credit losses increased $4.0 million on a net basis for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The provision on funded loans increased $3.7 million over the nine month comparable period in 2024 for similar reasons noted above for the three month comparable period. There was a $170 thousand provision on unfunded loan commitments for the nine months ended September 30, 2025, while for the nine months September 30, 2024 there was an unfunded provision reversal of $168 thousand.
NON-INTEREST INCOME
Three Months Ended September 30, 2025 Compared to the Same Period in 2024
The following table presents the components of non-interest income for the periods indicated:
Three Months Ended
(dollars in thousands) September 30,
2025 		September 30,
2024 		$ Change % Change
Mortgage banking income $ 5,914 $ 6,474 $ (560) (8.6) %
Wealth management income 1,610 1,447 163 11.3 %
SBA loan income 1,431 544 887 163.1 %
Earnings on investment in life insurance 246 222 24 10.8 %
Net change in the fair value of derivative instruments 129 (102) 231 (226.5) %
Net change in the fair value of loans held-for-sale (75) 169 (244) (144.4) %
Net change in the fair value of loans held-for-investment 213 965 (752) (77.9) %
Net (loss) gain on hedging activity (166) (197) 31 (15.7) %
Other 651 1,309 (658) (50.3) %
Total non-interest income $ 9,953 $ 10,831 $ (878) (8.1) %
Total non-interest income decreased $878 thousand largely due to a decrease in mortgage banking income, fair value adjustments, and other income, compared to the prior year quarterly period. Mortgage banking income decreased $560 thousand over the comparable quarterly period due to a decrease in volume of loans sold of $39.9 million. On a positive note, the overall margin improved by 11 basis points, attributed to changes in the program mix and investor pricing. Other income decreased $658 thousand due to a lower level of other mortgage segment related income.
Partially offsetting the overall decrease in non-interest income was an increase in SBA loan income. SBA loan income increased $887 thousand over this period as the value of SBA loans sold for the quarter-ended September 30, 2025 was $13.4 million, or 112.8%, higher than the quarter-ended September 30, 2024, while the gross margin on sale was 7.4% for the quarter-ended September 30, 2025 compared to 7.9% for the quarter-ended September 30, 2024.
Nine Months Ended September 30, 2025 Compared to the Same Period in 2024
The following table presents the components of non-interest income for the periods indicated:
Nine Months Ended
(dollars in thousands) September 30,
2025 		September 30,
2024 		$ Change % Change
Mortgage banking income $ 15,069 $ 15,528 $ (459) (3.0) %
Wealth management income 4,637 4,208 429 10.2 %
SBA loan income 4,167 2,315 1,852 80.0 %
Earnings on investment in life insurance 708 644 64 9.9 %
Net gain on sale of MSRs 415 - 415 100.0 %
Net change in the fair value of derivative instruments 176 176 - - %
Net change in the fair value of loans held-for-sale 198 138 60 43.5 %
Net change in the fair value of loans held-for-investment 573 766 (193) (25.2) %
Net (loss) gain on hedging activity (129) (279) 150 (53.8) %
Other 2,751 4,563 (1,812) (39.7) %
Total non-interest income $ 28,565 $ 28,059 $ 506 1.8 %
Total non-interest income increased $506 thousand as the result of several drivers, including an increase in SBA loan income, increased wealth management income from our Meridian Wealth Partners segment, and a net gain on sale of MSRs. These increases were partially offset by a decline in other non-interest income and mortgage banking income.
SBA loan income increased $1.9 million over this period as the value of SBA loans sold for the nine months ended September 30, 2025 was $37.4 million, or 94.7%, higher than the nine months ended September 30, 2024, while the gross margin on sale was 7.0% for the nine months ended September 30, 2025 compared to 8.2% for the nine months ended September 30, 2024. Wealth management income increased $429 thousand as the value of the markets improved over this period. From the MSR sale discussed above, there was a net gain on sale of $415 thousand over the nine month comparable period.
Other non-interest income decreased $1.8 million due to lower levels of FHLB stock dividend income, broker fees and other mortgage segment related income, partially offset by an increase in business credit card fee income and swap fee income.
NON-INTEREST EXPENSE
Three Months Ended September 30, 2025 Compared to the Same Period in 2024
The following table presents the components of non-interest expense for the periods indicated:
Three Months Ended
(dollars in thousands) September 30,
2025 		September 30,
2024 		$ Change % Change
Salaries and employee benefits $ 13,613 $ 12,829 $ 784 6.1 %
Occupancy and equipment 991 1,243 (252) (20.3) %
Professional fees 1,092 1,106 (14) (1.3) %
Data processing and software 1,865 1,553 312 20.1 %
Advertising and promotion 877 717 160 22.3 %
Pennsylvania bank shares tax 254 181 73 40.3 %
Other 2,854 2,917 (63) (2.2) %
Total non-interest expense $ 21,546 $ 20,546 $ 1,000 4.9 %
Total non-interest expense increased $1.0 million, or 4.9%, largely attributable to an increase in salaries and employee benefits and data processing and software expense, partially offset by a decline in occupancy and equipment expense. Salaries and employee benefits increased $784 thousand due largely to overall employee merit, benefit, and tax related increases for existing employees, as well as an increase of 4 full-time equivalent employees, combined with an increase in mortgage segment related commissions and other benefits. There was a decline of $252 thousand in occupancy and equipment expense due to the early termination of office lease space, as discussed in prior earnings filings. Data processing and software expense increased $312 thousand due to an increase in customer transaction volume and the impact of Meridian's continued investment in technology.
Nine Months Ended September 30, 2025 Compared to the Same Period in 2024
The following table presents the components of non-interest expense for the periods indicated:
Nine Months Ended
(dollars in thousands) September 30,
2025 		September 30,
2024 		$ Change % Change
Salaries and employee benefits $ 38,177 $ 34,839 $ 3,338 9.6 %
Occupancy and equipment 3,366 3,706 (340) (9.2) %
Professional fees 3,019 3,633 (614) (16.9) %
Data processing and software 5,050 4,591 459 10.0 %
Advertising and promotion 2,933 2,454 479 19.5 %
Pennsylvania bank shares tax 792 729 63 8.6 %
Other 8,309 7,786 523 6.7 %
Total non-interest expense $ 61,646 $ 57,738 $ 3,908 6.8 %
Total non-interest expense increased $3.9 million, or 6.8%, largely attributable to an increase in salaries and employee benefits and other non-interest expense. Data processing and software expenses, along with advertising expenses increased over this period as well. Salaries and employee benefits increased $3.3 million due largely to overall employee merit, benefit, and tax related increases for existing employees, as well as an increase of 4 full-time equivalent employees, combined with an increase in mortgage segment related commissions and other benefits.
Professional fees decreased $614 thousand over the prior period due to the results of cost control efforts on certain internal audit fees, combined with a lower level of OREO expense over the comparable period. Data processing and software expense increased $459 thousand due to an increase in customer transaction volume and the impact of Meridian's continued investment in technology. Advertising and promotion expense increased $479 thousand over the comparable period due to a multimedia marketing campaign run during the current year, combined with the impact from an increase in customer engagement activities. Other non-interest expense increased $523 thousand due to an increase in certain loan related expenses, combined with an increase in employee travel and training activities.
INCOME TAX EXPENSE
Income tax expense for the three and nine months ended September 30, 2025 was $2.0 million and $4.5 million, respectively, as compared to $1.5 million and $3.4 million for the same periods in 2024. Our effective tax rates were 23.2% and 23.3% for the three and nine months ended September 30, 2025, compared to 24.1% and 24.3% for the same periods in 2024. While income tax expense increased primarily due to the increase in income before income taxes, the effective tax rate decreased slightly due to the impact of lower nondeductible expense and an increase in tax-free bank owned life insurance income.
On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was enacted into law in the U.S. The Act includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing its impact on our consolidated financial statements.
BALANCE SHEET ANALYSIS
As of September 30, 2025, total assets were $2.5 billion which increased $155.3 million, or 6.5%, from December 31, 2024. This increase in assets over the prior period was due primarily to loan portfolio growth, as detailed in the following table:
(dollars in thousands) September 30,
2025 		December 31,
2024 		$ Change % Change
Mortgage loans held for sale $ 28,016 $ 32,413 $ (4,397) (13.6) %
Real estate loans:
Commercial mortgage 872,497 823,976 48,521 5.9
Home equity lines and loans 105,109 90,721 14,388 15.9
Residential mortgage 260,495 252,565 7,930 3.1
Construction 315,095 259,553 55,542 21.4
Total real estate loans 1,553,196 1,426,815 126,381 8.9
(dollars in thousands) September 30,
2025 		December 31,
2024 		$ Change % Change
Commercial and industrial 418,069 367,366 50,703 13.8
Small business loans 137,894 155,775 (17,881) (11.5)
Consumer 336 349 (13) (3.7)
Leases, net 49,766 75,987 (26,221) (34.5)
Total loans and other finance receivables $ 2,159,261 $ 2,026,292 $ 132,969 6.6
Total loans and leases $ 2,187,277 $ 2,058,705 $ 128,572 6.2 %
Total loans and other finance receivables increased $133.0 million, to $2.2 billion as of September 30, 2025, from $2.0 billion as of December 31, 2024. Overall portfolio loan growth was 6.6% since December 31, 2024, or 8.7% on an annualized basis for 2025. Commercial real estate loans increased $48.5 million, or 5.9%, construction loans increased $55.5 million, or 21.4%, SBA loans decreased $17.9 million, or 11.5% due to loan sales described above, and commercial and industrial loans increased $50.7 million, or 13.8%.
As of September 30, 2025, included within the commercial real estate loans total of $872.5 million was $282.4 million of owner-occupied commercial loans, as well as $125.0 million of multi-family loans. Nearly all of the multi-family real estate loans are on properties located in Philadelphia and surrounding counties we service.
The following table presents the major categories of deposits at the dates indicated:
(Dollars in thousands) September 30,
2025 		December 31,
2024 		$ Change % Change
Noninterest-bearing deposits $ 239,614 $ 240,858 $ (1,244) (0.5) %
Interest-bearing deposits:
Interest-bearing demand deposits 151,973 141,439 10,534 7.4 %
Money market and savings deposits 996,126 913,536 82,590 9.0 %
Time deposits 743,403 709,535 33,868 4.8 %
Total interest-bearing deposits $ 1,891,502 $ 1,764,510 $ 126,992 7.2 %
Total deposits $ 2,131,116 $ 2,005,368 $ 125,748 6.3 %
Total deposits increased $125.7 million, or 6.3%, since December 31, 2024. Total interest-bearing deposits increased $127.0 million during the period, while noninterest-bearing deposits decreased $1.2 million. The overall increase in interest-bearing accounts was largely due to customer preference for money market deposits which carry higher interest rates than demand deposits. Time deposits increased $33.9 million, or 4.8%, largely due customer preference for the higher term interest rates offered by these products.
The majority of Meridian's deposit base is comprised of business deposits, 50%, with consumer deposits amounting to 14% at September 30, 2025. Municipal deposits at 13% and brokered deposits at 23% provide growth funding. Historically, business deposits lag loan fundings. A typical business relationship maintains operating accounts, investment accounts or sweep accounts and business owners may also have personal savings or wealth accounts. Deposit balances in business accounts have a tendency to be higher on average than consumer accounts. At September 30, 2025, 61% of business accounts and 90% of consumer accounts were fully insured by the FDIC. The municipal deposits are 100% collateralized and brokered deposits are 100% FDIC insured. The level of uninsured deposits for the entire deposit base was 21% at September 30, 2025.
Capital
Consolidated stockholders' equity of the Corporation was $188.0 million, or 7.4% of total assets as of September 30, 2025, as compared to $171.5 million, or 7.2% of total assets as of December 31, 2024. On October 23, 2025, the Board of Directors declared a quarterly cash dividend of $0.125 per common share payable November 17, 2025 to shareholders of record as of November 10, 2025.
In February 2025, the Corporation entered into an Equity Distribution Agreement with D.A. Davidson & Co., as distribution agent, relating to the sale of up to 1,000,000 shares of its common stock, from time to time, pursuant to an at-the-market (ATM) program. During the three months ended September 30, 2025, the Corporation sold, and subsequently settled the issuance of 188,478 shares of common stock directly through the distribution agent under its ATM at an average price per share of $15.75. Total net proceeds from these sales of common stock amounted to $2.8 million during the three months ended September 30, 2025. As of September 30, 2025, 811,522 shares of common stock remain available for issuance under the ATM program.
Under the Community Bank Leverage Ratio framework, a community banking organization that is less than $10 billion in total consolidated assets, and has limited amounts of certain assets and off-balance sheet exposures, and a CBLR greater than 9% can elect to report a single regulatory capital ratio. The Corporation has elected to be measured under this framework for Bank capital
adequacy and had ratios of 9.41% and 9.21% at September 30, 2025 and December 31, 2024, respectively. The Corporation is exempt from CBLR.
The following table presents the Bank's capital ratios and the minimum capital requirements to be considered "well capitalized" by regulators at the periods indicated:
Bank Well-capitalized minimum
September 30,
2025 		December 31,
2024
Tier 1 leverage ratio 9.41 % 9.21 % 5.00 %
Common tier 1 risk-based capital ratio 10.52 % 10.33 % 6.50 %
Tier 1 risk-based capital ratio 10.52 % 10.33 % 8.00 %
Total risk-based capital ratio 11.54 % 11.20 % 10.00 %
In December 2018, the Federal Reserve announced that a banking organization that experiences a reduction in retained earnings due to the CECL adoption as of the beginning of the fiscal year in which CECL is adopted may elect to phase in the regulatory capital impact of adopting CECL. Transitional amounts are calculated for the following items: retained earnings, temporary difference deferred tax assets and credit loss allowances eligible for inclusion in regulatory capital. When calculating regulatory capital ratios, 25% of the transitional amounts are phased in during the first year. An additional 25% of the transitional amounts are phased in over each of the next two years and at the beginning of the fourth year, the day-one effects of CECL are completely reflected in regulatory capital. As of September 30, 2025, Meridian has phased in 75% of the day-one effects of CECL.
Asset Quality Summary
The ratio of non-performing assets to total assets was 2.32% as of September 30, 2025, up from 1.90% reported as of December 31, 2024. Total non-performing loans of $55.4 million as of September 30, 2025, increased $10.3 million from $45.1 million as December 31, 2024. Included in non-performing loans at September 30, 2025 is $11.8 million of SBA guaranteed loans. The overall increase was the result of risk rating downgrades leading to non-performing loan classification mainly in the SBA loan portfolio and to a lesser degree in construction loans and residential mortgages, partially offset by a $4.1 million decline in non-performing commercial loans due to the repossession of a billboard on a advertising based commercial loan relationship and the foreclosure of real estate collateral from another commercial loan. The repossessed billboard was transferred into other repossessed assets with a value of $2.4 million, after adjustment for estimated costs to sell, while the foreclosed real estate from another commercial loan was transferred into OREO with a value of $1.3 million, after adjustment for estimated costs to sell.
Meridian realized net charge-offs of 0.09% of total average loans for the three months ending September 30, 2025, which was down slightly from 0.11% reported for the same period in 2024. Net charge-offs for the quarter ended September 30, 2025 were $1.9 million, compared to net charge-offs of $2.3 million for the quarter ended September 30, 2024. Net charge-offs for the current quarter comprised of $2.1 million in charge-offs, with $214 thousand in recoveries, and were split between commercial loans, leases, and SBA loans.
The ratio of allowance for credit losses to total loans and other finance receivables, excluding loans at fair value (a non-GAAP measure, see reconciliation in the Appendix), was 1.01% as of September 30, 2025 compared to 0.91% as of December 31, 2024. As of September 30, 2025 there were specific reserves of $3.3 million against non-performing loans, a increase from $2.7 million as of December 31, 2024. The increase in ACL coverage over this period was driven by an increase in baseline quantitative and qualitative reserving for loan growth and economic factors, as well as an increase in baseline loss rates for certain portfolios.
The Corporation is proactive with its loan review process that utilizes the engagement of an independent outside loan review firm, which helps identify developing credit issues. Proactive steps that are taken include the procurement of additional collateral (preferably outside the current loan structure) whenever possible and frequent contact with the borrower. The Corporation believes that timely identification of credit issues and appropriate actions early in the process serve to mitigate overall risk of loss.
Nonperforming Assets and Related Ratios
The following table presents nonperforming assets and related ratios for the periods indicated:
(dollars in thousands) September 30,
2025 		December 31,
2024
Non-performing assets:
Nonaccrual loans and leases:
Real estate loans:
Commercial mortgage $ 1,241 $ 809
Home equity lines and loans 1,583 1,716
Residential mortgage 10,350 7,900
Construction 10,308 8,613
Total real estate loans 23,482 19,038
Commercial and industrial 7,838 11,966
Small business loans 21,256 12,270
Leases 2,301 1,851
Total nonaccrual loans and leases 54,877 45,125
Loans 90+ days past due and still accruing 480 -
Other real estate owned 1,297 159
Repossessed assets 2,417 117
Total non-performing assets $ 59,071 $ 45,401
Asset quality ratios:
Non-performing assets to total assets 2.32 % 1.90 %
Non-performing loans to:
Total loans and other finance receivables 2.56 % 2.22 %
Total loans and other finance receivables (excluding loans at fair value) (1)
2.58 % 2.24 %
Non-performing loans (excluding guaranteed portion of SBA loans) to total loans and leases (1)
1.99 % 1.87 %
Allowance for credit losses to:
Total loans and other finance receivables 1.01 % 0.91 %
Total loans and other finance receivables (excluding loans at fair value) (1)
1.01 % 0.91 %
Non-performing loans 39.37 % 40.86 %
Total loans and leases $ 2,190,861 $ 2,062,850
Total loans and other finance receivables 2,162,845 2,030,437
Total loans and other finance receivables (excluding loans at fair value) 2,148,391 2,015,936
Allowance for credit losses 21,794 18,438
(1) The allowance for credit losses to total loans and other finance receivables (excluding loans at fair value) ratio is a non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation of this measure to its most comparable GAAP measure.
Liquidity
Management maintains liquidity to meet depositors' needs for funds, to satisfy or fund loan commitments, and for other operating purposes. Meridian's foundation for liquidity is a stable and loyal customer deposit base, cash and cash equivalents, and a marketable investment portfolio that provides periodic cash flow through regular maturities and amortization or that can be used as collateral to secure funding.
In addition, Meridian maintains borrowing arrangements with various correspondent banks, the FHLB and the Federal Reserve Bank of Philadelphia to meet short-term liquidity needs and has access to approximately $680.4 million in liquidity from these sources. Through its relationship at the Federal Reserve, Meridian had available credit of approximately $5.0 million at September 30, 2025. As a member of the FHLB, we are eligible to borrow up to a specific credit limit, which is determined by the amount of our residential mortgages, commercial mortgages and other loans that have been pledged as collateral. As of September 30, 2025, Meridian's
maximum borrowing capacity with the FHLB was $746.0 million. At September 30, 2025, Meridian had borrowed $134.3 million and the FHLB had issued letters of credit, on Meridian's behalf, totaling $183.2 million against its available credit lines. At September 30, 2025, Meridian also had available $56.0 million of unsecured federal funds lines of credit with other financial institutions as well as $292.1 million of available short or long term wholesale funding arrangements through the CDARS/ICS one-way buy program and conventional brokered CDs. Management believes that Meridian has adequate resources to meet its short-term and long-term funding requirements.
Discussion of Segments
As of September 30, 2025, the Corporation has three principal segments as defined by FASB ASC 280, "Segment Reporting." The segments are Banking, Mortgage Banking and Wealth Management (see Note 10 in the accompanying Notes to Unaudited Consolidated Financial Statements).
The Banking Segment recorded income before tax of $7.7 million and $16.5 million for the three and nine months ended September 30, 2025, as compared to income before tax of $3.9 million and $10.6 million for the same periods in 2024. The Banking Segment provided 88.3% and 86.4% of the Corporation's pre-tax profit for the three and nine months ended September 30, 2025, as compared to 63.1% and 75.0% for the same periods in 2024.
The Wealth Management Segment recorded income before tax of $512 thousand and $1.8 million for the three and nine months ended September 30, 2025, as compared to income before tax of $653 thousand and $1.8 million for the same periods in 2024.
The Mortgage Banking Segment recorded income before tax of $507 thousand and $758 thousand for the three and nine months ended September 30, 2025, as compared to income before tax of $1.7 million and $1.7 million for the same periods in 2024. Mortgage Banking income and expenses related to loan originations and sales increased over the comparable periods due to higher loan origination and sales volume.
Off Balance Sheet Risk
The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and loan repurchase commitments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the loan agreement. Total commitments to extend credit at September 30, 2025 were $617.3 million as compared to $603.1 million at December 31, 2024.
Standby letters of credit are conditional commitments issued by the Corporation to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in granting loan facilities to customers. The Corporation's obligation under standby letters of credit at September 30, 2025 amounted to $15.4 million as compared to $15.5 million at December 31, 2024.
Estimated fair values of the Corporation's off-balance sheet instruments are based on fees and rates currently charged to enter into similar loan agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. Since fees and rates charged for off-balance sheet items are at market levels when set, there is no material difference between the stated amount and the estimated fair value of off-balance sheet instruments.
In certain circumstances the Corporation may be required to repurchase residential mortgage loans from investors under the terms of loan sale agreements. Generally, these circumstances include the breach of representations and warranties made to investors regarding borrower default or early payment, as well as a violation of the applicable federal, state, or local lending laws. The Corporation agrees to repurchase loans if the representations and warranties made with respect to such loans are breached. Based on the obligations described above, the Corporation repurchased no loans for the three months ended September 30, 2025, and one loan of $425 thousand for the nine months ended September 30, 2025, while the Corporation repurchased one loan and 5 loans of $257 thousand and $1.1 million in total for the three and nine months ended September 30, 2024, respectively.
Non-GAAP Financial Measures
Meridian believes that non-GAAP measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts to evaluate performance trends and the adequacy of common equity. This non-GAAP disclosure has 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.
Our management used the measure of the tangible common equity ratio to assess our capital strength. We believe that this non-GAAP financial measure is useful to investors because, by removing the impact of our goodwill and other intangible assets, it allows investors to more easily assess our capital adequacy. This non-GAAP financial measure should not be considered a substitute for any regulatory capital ratios and may not be comparable to other similarly titled measures used by other companies.
The table below provides the non-GAAP reconciliation for our tangible common equity ratio and tangible book value per common share:
(dollars in thousands, except share data) September 30,
2025 		December 31,
2024
Total stockholders' equity (GAAP) $ 188,029 $ 171,522
Less: Goodwill and intangible assets (3,513) (3,666)
Tangible common equity (non-GAAP) 184,516 167,856
Total assets (GAAP) 2,541,130 2,385,867
Less: Goodwill and intangible assets (3,513) (3,666)
Tangible assets (non-GAAP) $ 2,537,617 $ 2,382,201
Stockholders' equity to total assets (GAAP) 7.40 % 7.19 %
Tangible common equity to tangible assets (non-GAAP) 7.27 % 7.05 %
Shares outstanding 11,517 11,240
Book value per share (GAAP) $ 16.33 $ 15.26
Tangible book value per share (non-GAAP) $ 16.02 $ 14.93
The following is a reconciliation of the allowance for credit losses to total loans held for investment ratio at September 30, 2025. This is considered a non-GAAP measure as the calculation excludes the impact of loans held for investment that are fair valued as these loan types are not included in the allowance for credit losses calculation.
(dollars in thousands) September 30,
2025 		December 31,
2024
Allowance for credit losses (GAAP) $ 21,794 $ 18,438
Loans and other finance receivables (GAAP) 2,162,845 2,030,437
Less: Loans at fair value (14,454) (14,501)
Loans and other finance receivables, excluding loans at fair value (non-GAAP) $ 2,148,391 $ 2,015,936
Allowance for credit losses to loans and other finance receivables (GAAP) 1.01 % 0.91 %
Allowance for credit losses to loans and other finance receivables, excluding loans at fair value (non-GAAP) 1.01 % 0.91 %
The following is a reconciliation of non-performing loans, excluding the guaranteed portion of SBA loans that are classified as non-performing loans, to total loans and leases at September 30, 2025. This is considered a non-GAAP measure as the calculation excludes the impact of SBA guarantees from non-performing loans.
(dollars in thousands) September 30,
2025 		December 31,
2024
Non-performing loans (GAAP)
$ 55,357 $ 45,125
Less: Guaranteed portion of SBA loans classified as non-performing
$ (11,811) $ (6,520)
Non-performing loans, excluding guaranteed portion of SBA loans (non-GAAP)
$ 43,546 $ 38,605
Total loans and leases
$ 2,190,861 $ 2,062,850
Non-performing loans (excluding guaranteed portion of SBA loans) to total loans and leases
1.99 % 1.87 %
Meridian Corporation published this content on November 07, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 07, 2025 at 14:00 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]