Core Insights - Meridian Corporation (NASDAQ: MRBK) was downgraded from a 'buy' to a 'hold' at the end of December, following an 18% increase in its share price prior to the downgrade [1] Company Analysis - The decision to downgrade was made after a significant rise in the company's stock, indicating a potential reassessment of its valuation and future growth prospects [1] Industry Context - Crude Value Insights provides an investment service focused on oil and natural gas, emphasizing cash flow and the companies that generate it, which are critical for identifying value and growth opportunities in the sector [1]

Group 1 - The company is reducing its mortgage banking income estimate due to a weak housing market [1] - The expected EPS for the company in 2025 has been revised down to $1.43 from a previous estimate of $1.67 [1]

[Part I - Financial Information](index=6&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the unaudited financial statements, management's discussion, market risk disclosures, and internal controls [Financial Statements (Unaudited)](index=6&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) This section presents Meridian Corporation's unaudited consolidated financial statements, detailing financial position, performance, and cash flows [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) This section details the company's financial position, including assets, liabilities, and equity, at specific quarter-end dates Consolidated Balance Sheet Highlights (in millions USD) | Financial Metric | March 31, 2025 (USD) | December 31, 2024 (USD) | | :--- | :--- | :--- | | **Total Assets** | $2,528.9 million | $2,385.9 million | | **Loans, net of ACL** | $2,050.8 million | $2,012.0 million | | **Total Deposits** | $2,128.7 million | $2,005.4 million | | **Total Liabilities** | $2,355.3 million | $2,214.3 million | | **Total Stockholders' Equity** | $173.6 million | $171.5 million | [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) This section presents the company's revenues, expenses, and net income over the quarter, reflecting its operational profitability Consolidated Statements of Income Highlights (in millions USD) | Financial Metric | Q1 2025 (USD) | Q1 2024 (USD) | | :--- | :--- | :--- | | **Net Interest Income** | $19.8 million | $16.6 million | | **Provision for Credit Losses** | $5.2 million | $2.9 million | | **Total Non-interest Income** | $7.3 million | $8.0 million | | **Total Non-interest Expense** | $18.7 million | $18.2 million | | **Net Income** | $2.4 million | $2.7 million | | **Diluted EPS** | $0.21 | $0.24 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section details the sources and uses of cash across operating, investing, and financing activities for the period - Net cash provided by operating activities was **$18.1 million** in Q1 2025, a significant improvement from a net use of **$1.7 million** in Q1 2024[22](index=22&type=chunk) - Net cash used in investing activities decreased to **$51.8 million** in Q1 2025 from **$78.7 million** in Q1 2024, primarily due to a lower net increase in loans[22](index=22&type=chunk) - Net cash from financing activities increased substantially to **$137.5 million** in Q1 2025 from **$46.8 million** in Q1 2024, driven by a large net increase in deposits[22](index=22&type=chunk) [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on accounting policies, financial statement items, and segment performance, offering deeper insights - The investment portfolio's unrealized loss position of **$9.5 million** on available-for-sale securities is primarily due to changes in market interest rates, and management does not believe an allowance for credit losses is warranted for these securities[35](index=35&type=chunk)[36](index=36&type=chunk) - Nonaccrual loans increased to **$51.8 million** as of March 31, 2025, from **$45.1 million** at December 31, 2024, mainly due to risk rating downgrades in the SBA loan portfolio[54](index=54&type=chunk) - The Allowance for Credit Losses (ACL) increased to **$20.8 million** at March 31, 2025, from **$18.4 million** at year-end 2024, with a provision of **$5.2 million** recorded for the quarter[57](index=57&type=chunk) - The company utilizes interest rate swaps as cash flow hedges to manage interest rate risk on borrowings and as fair value hedges on certain residential mortgage loans[124](index=124&type=chunk)[125](index=125&type=chunk) Segment Income (Loss) Before Taxes (Q1 2025, in millions USD) | Segment (Q1 2025) | Income (Loss) Before Taxes (USD) | | :--- | :--- | | Banking | $3.6 million | | Wealth Management | $0.7 million | | Mortgage | ($1.2 million) | [Management's Discussion and Analysis (MD&A)](index=39&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, asset quality, and capital, highlighting key drivers and trends [Financial Condition](index=39&type=section&id=Financial%20Condition) This section analyzes the company's balance sheet, focusing on changes in assets, liabilities, and equity over the period - Total assets increased by **$143.0 million (6.0%)** to **$2.5 billion** from December 31, 2024, to March 31, 2025[141](index=141&type=chunk) - Portfolio loans grew by **$42.0 million (2.1%)**, driven by increases in commercial real estate (**$21.2 million**) and construction loans (**$18.3 million**)[141](index=141&type=chunk)[164](index=164&type=chunk) - Total deposits grew by **$123.4 million (6.2%)**, highlighted by a significant **$82.6 million (34.3%)** increase in non-interest bearing deposits[141](index=141&type=chunk)[166](index=166&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) This section analyzes the company's income statement, detailing revenue, expenses, and profitability drivers for the quarter Key Operating Results (in millions USD, except EPS and percentages) | Metric | Q1 2025 (USD) | Q1 2024 (USD) | | :--- | :--- | :--- | | **Net Income** | $2.4 million | $2.7 million | | **Diluted EPS** | $0.21 | $0.24 | | **Return on Average Assets** | 0.40% | 0.47% | | **Return on Average Equity** | 5.57% | 6.73% | - Net interest income increased **19.1%** YoY to **$19.8 million**, and the net interest margin expanded to **3.46%** from **3.09%**, largely due to lower deposit and borrowing costs[145](index=145&type=chunk)[155](index=155&type=chunk) - The provision for credit losses increased by **$2.3 million** YoY, driven by loan growth, charge-offs, and unfavorable changes in macroeconomic forecasts[157](index=157&type=chunk) - Non-interest income decreased **8.3%** YoY to **$7.3 million**, primarily due to declines in mortgage banking income (**-$0.241 million**) and SBA loan income (**-$0.238 million**)[145](index=145&type=chunk)[159](index=159&type=chunk) - Non-interest expense increased **3.1%** YoY to **$18.7 million**, mainly from a **$0.812 million** rise in salaries and employee benefits[145](index=145&type=chunk)[161](index=161&type=chunk) [Asset Quality](index=49&type=section&id=Asset%20Quality) This section assesses the quality of the company's loan portfolio and other assets, including non-performing assets and credit loss allowances - The ratio of non-performing assets to total assets increased to **2.07%** at March 31, 2025, from **1.90%** at December 31, 2024[172](index=172&type=chunk)[177](index=177&type=chunk) - Total non-performing loans rose by **$7.1 million** to **$52.2 million** since year-end, largely due to downgrades in the SBA loan portfolio[172](index=172&type=chunk) - The allowance for credit losses as a percentage of total loans (excluding fair value loans) increased to **1.01%** from **0.91%** at year-end 2024[174](index=174&type=chunk) [Capital and Liquidity](index=49&type=section&id=Capital%20and%20Liquidity) This section evaluates the company's capital adequacy and liquidity position, crucial for financial stability and operational resilience - The Bank remains well-capitalized, with a Tier 1 leverage ratio of **9.30%** as of March 31, 2025, well above the **5.00%** regulatory minimum[171](index=171&type=chunk) - Stockholders' equity was **$173.6 million**, representing **6.9%** of total assets[169](index=169&type=chunk) - The company maintains access to approximately **$640.5 million** in liquidity from various sources, including the FHLB and other correspondent banks[179](index=179&type=chunk) [Market Risk Disclosures](index=53&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company assesses interest rate risk through simulations of Net Interest Income (NII) and Economic Value of Equity (EVE), indicating sensitivity to rate changes Net Interest Income (NII) Sensitivity Simulation (12-month ramp) | NII Simulation (12-month ramp) | % Change in NII | | :--- | :--- | | +100 basis points | +0.94% | | -100 basis points | -1.12% | Economic Value of Equity (EVE) Sensitivity Simulation (Immediate shock) | EVE Simulation (Immediate shock) | % Change in EVE | | :--- | :--- | | +100 basis points | +5% | | -100 basis points | -9% | [Controls and Procedures](index=54&type=section&id=Item%204%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[204](index=204&type=chunk) - No changes in internal control over financial reporting were identified that have materially affected, or are reasonably likely to materially affect, the Corporation's internal controls[205](index=205&type=chunk) [Part II - Other Information](index=55&type=section&id=PART%20II%20OTHER%20INFORMATION) This section confirms no new legal proceedings, no material changes to risk factors, and no unregistered equity sales or senior security defaults - The company reports no legal proceedings for the period[207](index=207&type=chunk) - There have been no material changes in risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[207](index=207&type=chunk)

Company Performance - Meridian Bank reported quarterly earnings of $0.21 per share, missing the Zacks Consensus Estimate of $0.33 per share, and down from $0.24 per share a year ago, representing an earnings surprise of -36.36% [1] - The bank posted revenues of $27.1 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 4.24%, compared to year-ago revenues of $24.59 million [2] - Over the last four quarters, the company has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Meridian Bank shares have increased by approximately 3.4% since the beginning of the year, contrasting with the S&P 500's decline of -6.8% [3] - The current consensus EPS estimate for the upcoming quarter is $0.44, with expected revenues of $30.32 million, and for the current fiscal year, the EPS estimate is $1.72 on revenues of $121.52 million [7] Industry Outlook - The Zacks Industry Rank for Banks - Northeast is currently in the top 26% of over 250 Zacks industries, indicating a favorable outlook for the industry [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the industry outlook can significantly impact stock performance [5][8]

[Financial Highlights and CEO Commentary](index=1&type=section&id=Financial%20Highlights%20and%20CEO%20Commentary) The company reported Q1 2025 results, highlighting strong PPNR growth despite lower net income and providing CEO commentary on key business drivers [Q1 2025 Financial Highlights](index=1&type=section&id=Q1%202025%20Financial%20Highlights) The company reported Q1 2025 net income of $2.4 million, with strong PPNR growth offset by lower earnings compared to prior periods **Q1 2025 Key Financial Metrics** | (Dollars in thousands, except per share data) | March 31, 2025 | December 31, 2024 | March 31, 2024 | |---|---|---|---| | Net income | $2,399 | $5,600 | $2,676 | | Diluted earnings per common share | $0.21 | $0.49 | $0.24 | | Pre-provision net revenue (PPNR) (Non-GAAP) | $8,357 | $11,167 | $6,419 | - The Board of Directors declared a quarterly cash dividend of **$0.125 per common share**, payable May 19, 2025[7](index=7&type=chunk) - Key performance metrics for Q1 2025 include a **3.46% net interest margin**, **$2.5 billion in total assets**, **3% quarterly commercial loan growth**, and **6% quarterly deposit growth**[7](index=7&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) The CEO noted strong PPNR growth and improved net interest margin, despite earnings being impacted by higher provisions for distressed SBA loans - Q1 2025 earnings were negatively affected by higher provisioning for distressed SBA loans, which have been impacted by dramatic rate rises[2](index=2&type=chunk) - The net interest margin showed consistent improvement, reaching **3.46% in Q1 2025**[2](index=2&type=chunk) - Annualized loan growth was **12% in the first quarter**, with commercial/industrial lending benefiting from strategic hiring[3](index=3&type=chunk) - Meridian Wealth Partners continued its strong performance, with pre-tax income of **$726 thousand** for the quarter[4](index=4&type=chunk) - The mortgage group experienced a larger pre-tax loss compared to Q1 2024, primarily due to lower volume and a reduced number of loan officers[5](index=5&type=chunk) [Financial Performance Analysis](index=3&type=section&id=Financial%20Performance%20Analysis) This section details the quarter-over-quarter changes in the income statement and balance sheet, analyzing key drivers of performance [Income Statement Analysis (Q1 2025 vs Q4 2024)](index=3&type=section&id=Income%20Statement%20Analysis%20(Q1%202025%20vs%20Q4%202024)) Net income decreased to $2.4 million, driven by lower non-interest income and higher credit provisions, partially offset by improved net interest income [Net Interest Income](index=3&type=section&id=Net%20Interest%20Income) Net interest income rose to $19.8 million, with the net interest margin expanding to 3.46% due to a lower cost of deposits - Net interest income increased by **$477 thousand** quarter-over-quarter[10](index=10&type=chunk) - The net interest margin increased by **17 basis points to 3.46%** as the cost of funds declined[14](index=14&type=chunk) - The overall cost of deposits dropped by **21 basis points**, and total interest expense decreased by $1.3 million[13](index=13&type=chunk) [Provision for Credit Losses](index=4&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses increased by $1.6 million to $5.2 million, driven by a rise in non-performing SBA loans - The provision for credit losses increased by **$1.6 million to $5.2 million** in Q1 2025[15](index=15&type=chunk) - The increase was driven by a **$7.1 million rise in non-performing loans**, leading to a $2.3 million increase in specific reserves[15](index=15&type=chunk) [Non-interest Income](index=4&type=section&id=Non-interest%20Income) Non-interest income fell by 44.8% to $7.3 million, primarily due to a non-recurring gain on MSR sales in the prior quarter **Non-interest Income Breakdown** | (Dollars in thousands) | Q1 2025 | Q4 2024 | $ Change | % Change | |---|---|---|---|---| | Mortgage banking income | $3,393 | $5,516 | $(2,123) | (38.5)% | | Net (loss) gain on sale of MSRs | $(52) | $3,992 | $(4,044) | (101.3)% | | SBA loan income | $748 | $1,143 | $(395) | (34.6)% | | **Total non-interest income** | **$7,324** | **$13,279** | **$(5,955)** | **(44.8)%** | - SBA loan sales totaled **$12.1 million**, a decrease of $7.8 million (39.1%) from the previous quarter, leading to lower SBA loan income[17](index=17&type=chunk) [Non-interest Expense](index=4&type=section&id=Non-interest%20Expense) Non-interest expense decreased by 12.5% to $18.7 million, driven by lower salary and occupancy costs **Non-interest Expense Breakdown** | (Dollars in thousands) | Q1 2025 | Q4 2024 | $ Change | % Change | |---|---|---|---|---| | Salaries and employee benefits | $11,385 | $12,429 | $(1,044) | (8.4)% | | Occupancy and equipment | $1,338 | $2,270 | $(932) | (41.1)% | | Professional fees | $763 | $1,134 | $(371) | (32.7)% | | **Total non-interest expense** | **$18,743** | **$21,411** | **$(2,668)** | **(12.5)%** | [Balance Sheet Analysis (March 31, 2025 vs Dec 31, 2024)](index=6&type=section&id=Balance%20Sheet%20Analysis%20(March%2031%2C%202025%20vs%20Dec%2031%2C%202024)) Total assets grew 6.0% to $2.5 billion, driven by loan growth and a significant temporary customer deposit - Total assets increased by **$142.7 million (6.0%) to $2.5 billion**, partly due to a temporary $103 million deposit from a customer[20](index=20&type=chunk) - Portfolio loan growth was **$42.0 million (2.1%)**, driven by increases in commercial mortgage ($21.2M), construction ($18.3M), and small business loans ($5.3M)[21](index=21&type=chunk) - Total deposits grew by **$123.4 million (6.2%)**, led by an $82.6 million increase in non-interest bearing deposits[22](index=22&type=chunk) - Total stockholders' equity increased by **$1.7 million to $173.3 million**, after accounting for net income of $2.4 million and dividends paid of $1.4 million[23](index=23&type=chunk) [Asset Quality](index=6&type=section&id=Asset%20Quality) Asset quality deteriorated as non-performing loans rose to 2.49% of total loans, though net charge-offs decreased - Non-performing loans increased by **$7.1 million to $52.2 million** at March 31, 2025, compared to the prior quarter[24](index=24&type=chunk) - The ratio of non-performing loans to total loans rose to **2.49% from 2.19%** quarter-over-quarter, led by a $6.9 million increase in non-performing SBA loans[25](index=25&type=chunk) - Net charge-offs as a percentage of total average loans decreased to **0.14%** for Q1 2025, down from 0.34% in Q4 2024[26](index=26&type=chunk) - The allowance for credit losses to total loans increased to **1.01% from 0.91%** at the end of the prior quarter[27](index=27&type=chunk) [Financial Statements and Ratios](index=3&type=section&id=Financial%20Statements%20and%20Ratios) This section presents key financial statements and performance ratios for the company over recent periods [Key Financial Data and Ratios](index=3&type=section&id=Key%20Financial%20Data%20and%20Ratios) Key ratios for Q1 2025 show decreased profitability and deteriorating asset quality, but an improved net interest margin **Selected Financial Ratios** | (Annualized Ratios) | Q1 2025 | Q4 2024 | Q1 2024 | |---|---|---|---| | Return on average assets | 0.40% | 0.92% | 0.47% | | Return on average equity | 5.57% | 13.01% | 6.73% | | Net interest margin (tax-equivalent) | 3.46% | 3.29% | 3.09% | | Non-performing loans to total loans | 2.49% | 2.19% | 1.93% | [Condensed Consolidated Statements of Income](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The company reported net income of $2.4 million on total revenues of $27.1 million for the first quarter of 2025 **Income Statement Summary** | (Dollars in thousands) | Q1 2025 | Q4 2024 | Q1 2024 | |---|---|---|---| | Net interest income | $19,776 | $19,299 | $16,609 | | Provision for credit losses | $5,212 | $3,572 | $2,866 | | Total non-interest income | $7,324 | $13,279 | $7,984 | | Total non-interest expense | $18,743 | $21,411 | $18,174 | | **Net income** | **$2,399** | **$5,600** | **$2,676** | [Condensed Consolidated Statements of Condition (Balance Sheet)](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Condition%20(Balance%20Sheet)) The balance sheet shows total assets of $2.53 billion and total stockholders' equity of $173.3 million as of March 31, 2025 **Balance Sheet Summary** | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | |---|---|---| | **Total assets** | **$2,528,586** | **$2,385,867** | | Loans and other finance receivables, net | $2,050,848 | $2,011,999 | | Total deposits | $2,128,742 | $2,005,368 | | Total liabilities | $2,355,320 | $2,214,345 | | **Total stockholders' equity** | **$173,266** | **$171,522** | [Segment Information](index=13&type=section&id=Segment%20Information) The Bank and Wealth segments remained profitable in Q1 2025, while the Mortgage segment reported a wider pre-tax loss **Segment Pre-Tax Income** | Income (loss) before income taxes (in thousands) | Q1 2025 | Q1 2024 | |---|---|---| | Bank | $3,648 | $3,540 | | Wealth | $726 | $478 | | Mortgage | $(1,229) | $(465) | | **Total** | **$3,145** | **$3,553** | [Appendix: Non-GAAP Measures](index=14&type=section&id=Appendix%3A%20Non-GAAP%20Measures) This appendix provides reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures [Non-GAAP Reconciliations](index=14&type=section&id=Non-GAAP%20Reconciliations) Reconciliations show Q1 2025 PPNR of $8.4 million and a tangible book value per share of $15.03 **Reconciliation of Pre-Provision Net Revenue (Non-GAAP)** | (Dollars in thousands) | Q1 2025 | Q4 2024 | Q1 2024 | |---|---|---|---| | Income before income tax expense (GAAP) | $3,145 | $7,595 | $3,553 | | Provision for credit losses | $5,212 | $3,572 | $2,866 | | **Pre-provision net revenue (Non-GAAP)** | **$8,357** | **$11,167** | **$6,419** | **Reconciliation of Tangible Book Value per Common Share (Non-GAAP)** | (Per share data) | March 31, 2025 | December 31, 2024 | |---|---|---| | Book value per common share (GAAP) | $15.35 | $15.26 | | **Tangible book value per common share (Non-GAAP)** | **$15.03** | **$14.93** | - The Tangible Common Equity to Tangible Assets ratio for the Corporation was **6.72%** as of March 31, 2025, down from 7.05% at the end of the prior quarter[43](index=43&type=chunk)

Core Insights - Meridian Corporation reported a net income of $2.4 million for Q1 2025, a decrease from $2.7 million in Q1 2024, while pre-provision net revenue (PPNR) increased by 30.2% to $8.4 million [1][2][5] - The company faced challenges due to higher provisioning related to distressed SBA loans, impacted by rising interest rates, but showed improvement in net interest margin, which reached 3.46% [2][5][6] Financial Performance - Net income for Q1 2025 was $2.4 million, or $0.21 per diluted share, down from $5.6 million, or $0.49 per diluted share in Q4 2024 [1][5][31] - PPNR increased by $1.9 million, or 30.2%, compared to Q1 2024 [5][31] - Total assets grew to $2.5 billion, a 6.0% increase from $2.4 billion at the end of Q4 2024 [18][21] Loan and Deposit Growth - Loan growth was annualized at 12%, with commercial loans increasing by $49.5 million, or 3% for the quarter [3][19] - Total deposits increased by $123.4 million, or 6.2%, with non-interest-bearing deposits rising by $82.6 million, or 34% [20][21] Non-Interest Income and Expenses - Total non-interest income decreased by $6.0 million, or 44.8%, primarily due to a lack of gains on the sale of mortgage servicing rights (MSRs) [15][16] - Non-interest expenses decreased by $2.7 million, or 12.5%, driven by reductions in salaries and employee benefits, occupancy costs, and professional fees [17][32] Asset Quality - Non-performing loans increased by $7.1 million to $52.2 million, with a ratio of non-performing loans to total loans rising to 2.49% [22][23] - The provision for credit losses increased to $5.2 million, reflecting the rise in non-performing loans [14][31] Wealth Management Performance - Meridian Wealth Partners reported pre-tax income of $726 thousand for the quarter, supported by a slight increase in assets under management [4]

Group 1 - Meridian Bank, founded in 2004, is a newcomer in the regional banking sector [1] - The bank has experienced growth over the last twenty years, establishing itself as a primary lender in the Delaware Valley [1]

Core Viewpoint - The analyst has revised their outlook on Meridian Corporation (NASDAQ: MRBK) due to the emergence of tariff issues and inflation uncertainty, moving from a previously dovish stance to a more cautious one [1]. Group 1 - The analyst previously expected a sharp fall in market interest rates but has changed this expectation based on new economic factors [1].

Corporate Structure and Operations - The Corporation operates through its wholly-owned subsidiary, Meridian Bank, providing a range of banking services across Pennsylvania, New Jersey, Delaware, Central Maryland, and Florida[22]. - The Bank operates four wholly-owned subsidiaries, including Meridian Wealth, which is a registered investment advisory firm[51]. - Meridian Wealth, a subsidiary, enhances the Corporation's capacity to provide comprehensive wealth management services to professionals and higher net worth individuals[27]. Financial Performance - Consolidated net income rose by $3.1 million, or 23.4%, for the year ended December 31, 2024[199]. - Basic earnings per share increased to $1.47 in 2024 from $1.19 in 2023[199]. - Diluted earnings per share rose to $1.45 in 2024 from $1.16 in 2023[199]. - Return on average assets improved to 0.70% in 2024 from 0.61% in 2023[199]. - Return on average equity increased to 9.93% in 2024 from 8.53% in 2023[199]. - Net interest income grew by $2.1 million, or 3.0%, due to higher levels of earning assets[199]. - Non-interest income surged by $9.4 million, or 29.3%, attributed to an improved mortgage banking environment[199]. Capital and Regulatory Compliance - Meridian Corporation is subject to extensive regulatory oversight from the FDIC, FRB, and PDBS, ensuring compliance with safety and soundness standards[46]. - Under Basel III Capital Rules, the minimum capital ratios required are 4.5% CET1 to risk-weighted assets and 6% Tier 1 capital to risk-weighted assets[64]. - The Capital Rules require an additional capital conservation buffer of 2.5% of CET1, resulting in effective minimum ratios of 7% CET1 to risk-weighted assets[66]. - The Bank adopted the community bank leverage ratio framework as its primary regulatory capital ratio, applicable to institutions with total consolidated assets of less than $10 billion[68]. - The FDIA mandates prompt corrective action for banks that do not meet minimum capital requirements, categorizing them into five capital tiers[70]. - The liquidity coverage ratio (LCR) requires the Bank to maintain high-quality liquid assets equal to expected net cash outflows for a 30-day period[70]. Loan and Deposit Growth - Total loans held for investment increased by $136.1 million, with significant growth in commercial real estate, construction, and small business loans, which collectively rose by $158.7 million[205]. - The loan portfolio grew by $137.8 million, or 7.3%, to $2.0 billion as of December 31, 2024, from $1.9 billion as of December 31, 2023[217]. - As of December 31, 2024, the company had $2.0 billion in deposits, which are subject to fluctuations due to various external factors[118]. Risk Management - The company must maintain adequate policies to combat money laundering and terrorist financing, as mandated by the USA PATRIOT Act, to avoid legal and reputational risks[98]. - The company faces liquidity risks that could impair its ability to meet financial commitments, particularly if customer deposits decrease due to alternative investment perceptions[115]. - The company’s operations are sensitive to economic conditions, particularly in its local markets, which could adversely affect loan repayment and overall profitability[108]. - Cybersecurity risks are actively managed through a comprehensive strategy involving regular assessments and training, although threats have been experienced[182]. Market and Economic Conditions - The median household income in the Philadelphia metropolitan area is $88,336, significantly higher than the national average of $62,843[31]. - The unemployment rate in the Philadelphia metropolitan area is 4.20%, while the median household income in the Baltimore metropolitan area is $105,582[32][31]. - The competitive landscape is intensifying, with larger institutions having greater resources, which may pressure the company's net interest margin[133]. Community Engagement - In 2024, the Corporation donated $546,000 to over 100 organizations across its service areas, demonstrating its commitment to community support[36]. Interest Rate and Economic Sensitivity - Changes in interest rates significantly impact mortgage-related revenues, with a decline in rates generally increasing demand for mortgage loans[144]. - The corporation's interest rate spread, net interest margin, and net interest income improved as interest-bearing liabilities repriced faster than interest-earning assets[139]. - Interest expense rose by $17.4 million year-over-year, primarily due to market interest rate increases and an increase of $178.0 million in average interest-bearing deposits[206]. Wealth Management - Wealth management revenues are primarily derived from investment advisory fees based on assets under management, which may decline due to market conditions or client withdrawals[164]. - Strong competition in the wealth management sector may hinder the company's ability to attract and retain clients, affecting overall financial results[166]. Compliance and Legal Risks - The company is required to comply with various federal and state consumer protection laws, which can result in significant liabilities if violated[84]. - The CFPB has broad authority to enforce consumer financial protection laws, particularly for institutions with assets of $10 billion or more[85]. - The company is subject to heightened independence requirements for its compensation committee as per the Dodd-Frank Act, which could affect governance practices[102].

Core Viewpoint - Meridian Bank (MRBK) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [3][5]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [3]. Meridian Bank's Earnings Outlook - The upgrade reflects an improvement in Meridian Bank's underlying business, with rising earnings estimates expected to drive the stock price higher [4]. - For the fiscal year ending December 2025, Meridian Bank is projected to earn $2.07 per share, representing a 42.8% increase from the previous year [7]. - Over the past three months, the Zacks Consensus Estimate for Meridian Bank has risen by 13.4% [7]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks which have averaged a +25% annual return since 1988 [6]. - The upgrade to Zacks Rank 2 places Meridian Bank in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [9].