Meridian Corporation Reports Third Quarter 2022 Results

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

• Net income of $5.8 million and diluted earnings per share of $0.96 for the third quarter ended September 30, 2022 compared to net income of $5.9 million and diluted earnings per share of $0.96 for the second quarter ended June 30, 2022.
• Return on average assets for the third quarter of 2022 was 1.23% compared to 1.31% for the second quarter of 2022; return on average equity for the second quarter was 14.59% compared to 15.03% for the prior quarter.
• Net interest margin decreased to 4.01% in the third quarter of 2022 from 4.07% in the second quarter of 2022.
• Third quarter commercial loan growth, excluding Paycheck Protection Program ("PPP") loans, was $69.1 million, or 21.0% annualized; consumer loans increased by $42.9 million.
• Non-interest income of $10.2 million in the third quarter of 2022 compared to $10.4 million in the prior quarter.
• Non-interest expenses increased $0.6 million to $20.3 million in the third quarter of 2022 from $19.7 million in the prior quarter with an efficiency ratio of 71.72% and 70.49%, respectively.
• The Company repurchased 197,849 shares of its common stock at an average price of $30.36 per share during the quarter ended September 30, 2022.
• On October 27, 2022, the Board of Directors declared a quarterly cash dividend of $0.20 per common share, payable November 21, 2022 to shareholders of record as of November 14, 2022.

	Q3'2022			Q2'2022			Q1'2022			Q4'2021			Q3'2021
	(Dollars in thousands, except per share data)
Net income	$	5,798		$	5,938		$	5,535		$	7,719		$	9,438
Pre-tax, pre-provision income (1)		7,989			8,248			7,704			9,671			12,898
Pre-tax, pre-provision income - Bank (1)		8,040			7,458			8,778			6,829			8,896
Diluted earnings per common share		0.96			0.96			0.88			1.24			1.52
(1) See Non-GAAP reconciliation in the Appendix

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

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

Select Condensed Financial Information

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

Income Statement - Third Quarter 2022 Compared to Second Quarter 2022

Net income was $5.8 million, down $140 thousand from $5.9 million for the second quarter. Diluted earnings per share was $0.96 for both periods. Net interest income increased $480 thousand, or 2.7%, on a tax equivalent basis driven by continued strong loan portfolio growth. Offsetting the increase in net interest income, non-interest expense increased $555 thousand, or 2.8%, and non-interest income decreased $179 thousand, or 1.7%. Detailed explanations of the major categories of income and expense follow below.

Net Interest income

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

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

Interest income increased $2.9 million on a tax equivalent basis, quarter over quarter, due to a higher yield on earning assets, which went up 45 basis points, in addition to a higher level of average earning assets, which increased by $54.7 million. The yield on total loans increased 42 basis points and the yield on cash and investments increased 52 basis points in total, reflecting the impact in rates caused by the Federal Reserve's monetary policy. Over $644 million in loans repriced during the quarter an average of 95 basis points. Average total loans, excluding PPP loans and residential loans for sale, increased $105.5 million, most notably in commercial real estate and construction, commercial loans and leases and small business loans, which increased $47.9 million on average combined. Home equity loans and residential real estate loans held in portfolio increased $44.8 million on average combined. Residential loans for sale and PPP loans decreased $15.0 million, and $24.3 million on average, respectively.

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

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

Provision for loans losses

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

Non-interest income

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

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

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

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

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

Non-interest expense

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

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

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

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

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

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

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

The following table presents capital ratios at the dates indicated:

	September 30, 2022			June 30, 2022
Stockholders' equity to total assets	7.87	%		8.42	%
Tangible common equity to tangible assets (1)	7.67	%		8.22	%
Tier 1 leverage ratio - Corporation	8.54	%		8.87	%
Common tier 1 risk-based capital ratio - Corporation	9.28	%		9.79	%
Tier 1 risk-based capital ratio - Corporation	9.28	%		9.79	%
Total risk-based capital ratio - Corporation	12.80	%		13.50	%
(1) See Non-GAAP reconciliation in the Appendix

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

Asset Quality Summary

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

Meridian realized net charge-offs of 0.02% of total average loans for the quarter ended September 30, 2022, down from the quarter ended June 30, 2022 level of 0.03%. Net charge-offs for the quarter ended September 30, 2022 were $358 thousand, comprised of $432 thousand in charge-offs, with $74 thousand in recoveries for the quarter. Nearly all of the charge-offs for the quarter ended September 30, 2022 were from small ticket equipment leases. The ratio of allowance for loan losses to total loans held for investment, excluding loans at fair value and PPP loans (a non-GAAP measure, see reconciliation in the Appendix), was 1.20% as of September 30, 2022 compared to 1.27% as of June 30, 2022. As of September 30, 2022 there were specific reserves of $2.6 million against non-performing loans, down from $4.2 million as of June 30, 2022 due to improvement in the underlying credit quality for certain loans.

About Meridian Corporation

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

"Safe Harbor" Statement

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

MERIDIAN CORPORATION AND SUBSIDIARIES

FINANCIAL RATIOS (Unaudited)

(Dollar amounts and shares in thousands, except per share amounts)

	Quarter Ended
	September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Earnings and Per Share Data:
Net income	$	5,798			$	5,938			$	5,535			$	7,719			$	9,438
Basic earnings per common share	$	0.99			$	0.99			$	0.92			$	1.29			$	1.56
Diluted earnings per common share	$	0.96			$	0.96			$	0.88			$	1.24			$	1.52
Common shares outstanding		5,844				6,037				6,129				6,108				6,108
Performance Ratios:
Return on average assets - consolidated		1.23	%			1.31	%			1.28	%			1.74	%			2.15	%
Return on average equity - consolidated		14.59				15.03				13.86				19.15				24.07
Net interest margin (tax-equivalent)		4.01				4.07				3.89				3.83				3.83
Net interest margin (tax-equivalent, excluding PPP loans and borrowings) (1)		3.99				3.95				3.82				3.76				3.73
Yield on earning assets (tax-equivalent)		5.10				4.65				4.35				4.28				4.31
Yield on earning assets (tax-equivalent, excluding PPP loans) (1)		5.09				4.54				4.31				4.23				4.24
Cost of funds		1.17				0.61				0.50				0.49				0.52
Efficiency ratio - consolidated		71.72	%			70.49	%			73.56	%			71.05	%			66.39	%
Asset Quality Ratios:
Net charge-offs (recoveries) to average loans		0.02	%			0.03	%			0.04	%			—	%			—	%
Non-performing loans to total loans		1.40				1.46				1.51				1.57				0.61
Non-performing assets to total assets		1.20				1.24				1.25				1.34				0.52
Allowance for loan losses to:
Total loans held for investment		1.18				1.24				1.31				1.35				1.38
Total loans held for investment (excluding loans at fair value and PPP loans) (1)		1.20				1.27				1.38				1.46				1.52
Non-performing loans		82.20	%			81.82	%			82.48	%			81.60	%			206.42	%
Capital Ratios:
Book value per common share	$	25.86			$	25.85			$	25.73			$	27.07			$	25.94
Tangible book value per common share	$	25.16			$	25.16			$	25.04			$	26.37			$	25.23
Total equity/Total assets		7.87	%			8.42	%			8.61	%			9.65	%			8.99	%
Tangible common equity/Tangible assets - Corporation (1)		7.67				8.22				8.40				9.42				8.76
Tangible common equity/Tangible assets - Bank (1)		9.61				10.17				10.40				11.54				10.90
Tier 1 leverage ratio - Corporation		8.54				8.87				9.10				9.39				9.28
Tier 1 leverage ratio - Bank		10.52				10.86				11.20				11.51				11.55
Common tier 1 risk-based capital ratio - Corporation		9.28				9.79				10.09				10.83				10.64
Common tier 1 risk-based capital ratio - Bank		11.44				11.98				12.41				13.27				13.25
Tier 1 risk-based capital ratio - Corporation		9.28				9.79				10.09				10.83				10.64
Tier 1 risk-based capital ratio - Bank		11.44				11.98				12.41				13.27				13.25
Total risk-based capital ratio - Corporation		12.80				13.50				13.91				14.81				14.72
Total risk-based capital ratio - Bank		12.70	%			13.33	%			13.76	%			14.63	%			14.62	%
(1) See Non-GAAP reconciliation in the Appendix

MERIDIAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollar amounts and shares in thousands, except per share amounts)

	Three Months Ended												Nine Months Ended
	September 30, 2022				June 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
Interest income:
Loans, including fees	$	21,848			$	19,120			$	17,626			$	58,187			$	51,287
Securities - taxable		648				525				357				1,599				1,076
Securities - tax-exempt		369				340				306				1,015				886
Cash and cash equivalents		93				52				17				157				25
Total interest income		22,958				20,037				18,306				60,958				53,274
Interest expense:
Deposits		4,075				1,818				1,327				7,182				4,261
Borrowings		857				668				722				2,166				2,224
Total interest expense		4,932				2,486				2,049				9,348				6,485
Net interest income		18,026				17,551				16,257				51,610				46,789
Provision for loan losses		526				602				597				1,743				1,292
Net interest income after provision for loan losses		17,500				16,949				15,660				49,867				45,497
Non-interest income:
Mortgage banking income		7,329				6,942				18,726				21,367				62,293
Wealth management income		1,114				1,254				1,232				3,672				3,531
SBA loan income		989				437				2,688				3,946				5,423
Earnings on investment in life insurance		138				137				93				413				224
Net change in the fair value of derivative instruments		127				(674	)			(339	)			(713	)			(3,431	)
Net change in the fair value of loans held-for-sale		(237	)			268				(532	)			(1,094	)			(3,164	)
Net change in the fair value of loans held-for-investment		(886	)			(835	)			37				(2,499	)			(24	)
Net gain on hedging activity		399				1,715				(1,189	)			4,941				2,397
Net gain on sale of investment securities available-for-sale		—				—				314				—				362
Service charges		32				31				35				90				99
Other		1,219				1,128				1,057				3,605				3,192
Total non-interest income		10,224				10,403				22,122				33,728				70,902
Non-interest expense:
Salaries and employee benefits		13,360				12,926				19,472				41,585				61,824
Occupancy and equipment		1,191				1,176				1,133				3,619				3,460
Professional fees		899				913				873				2,659				2,629
Advertising and promotion		1,165				1,189				1,089				3,340				2,795
Data processing		574				580				530				1,633				1,666
Information technology		868				728				476				2,306				1,365
Pennsylvania bank shares tax		202				212				152				612				478
Other		2,002				1,982				1,756				5,646				5,773
Total non-interest expense		20,261				19,706				25,481				61,400				79,990
Income before income taxes		7,463				7,646				12,301				22,195				36,409
Income tax expense		1,665				1,708				2,863				4,927				8,543
Net income	$	5,798			$	5,938			$	9,438			$	17,268			$	27,866
Basic earnings per common share	$	0.99			$	0.99			$	1.56			$	2.90			$	4.62
Diluted earnings per common share	$	0.96			$	0.96			$	1.52			$	2.80			$	4.49
Basic weighted average shares outstanding		5,867				5,999				6,045				5,964				6,033
Diluted weighted average shares outstanding		6,059				6,199				6,231				6,172				6,201

MERIDIAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)

(Dollar amounts and shares in thousands, except per share amounts)

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

MERIDIAN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SEGMENT INFORMATION (Unaudited)

(Dollar amounts and shares in thousands, except per share amounts)

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

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

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

MERIDIAN CORPORATION AND SUBSIDIARIES

APPENDIX: NON-GAAP MEASURES (Unaudited)

(Dollar amounts and shares in thousands, except per share amounts)

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

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

	Net Interest Margin, (TEY), Excluding PPP Loans & PPPLF Borrowings Yield on Interest Earning Assets, (TEY), Excluding PPP income
	Q3'2022			Q2'2022			Q1'2022			Q4'2021			Q3'2021
Net interest margin (TEY) (GAAP)	4.01	%		4.07	%		3.89	%		3.83	%		3.83	%
Impact of PPP loans and PPPLF borrowings	(0.02)%			(0.12)%			(0.07)%			(0.07)%			(0.10)%
Net interest margin (TEY), excluding PPP loans and PPPLF borrowings	3.99	%		3.95	%		3.82	%		3.76	%		3.73	%
Yield on interest earning assets, tax equivalent (GAAP)	5.10	%		4.65	%		4.35	%		4.28	%		4.31	%
Impact of PPP loans	(0.01)%			(0.11)%			(0.04)%			(0.05)%			(0.07)%
Yield on interest earning assets (TEY), excluding PPP income	5.09	%		4.54	%		4.31	%		4.23	%		4.24	%

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

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

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