mrbk-20250331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 000-55983

(Exact name of registrant as specified in its charter)


Pennsylvania			83-1561918
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

9 Old Lincoln Highway, Malvern, Pennsylvania 19355

(Address of principal executive offices) (Zip Code)

(484) 568-5000

(Registrant’s telephone number, including area code)


Title of class	Trading Symbol	Name of exchange on which registered
Common Stock, $1 par value	MRBK	The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes ☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☒

Non-accelerated Filer

☐

Smaller Reporting Company

☒

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 5, 2025 there were 11,285,278 outstanding shares of the issuer’s common stock, par value $1.00 per share.

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TABLE OF CONTENTS


PART I FINANCIAL INFORMATION

Item 1 Financial Statements (Unaudited)			3

Consolidated Balance Sheets – March 31, 2025 and December 31, 2024			3

Consolidated Statements of Income – Three Months Ended March 31, 2025 and 2024			4

Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2025 and 2024			5

Consolidated Statements of Stockholders’ Equity – Three Months Ended March 31, 2025 and 2024			6

Consolidated Statements of Cash Flows – Three Months Ended March 31, 2025 and 2024			7

Notes to Consolidated Financial Statements (Unaudited)			8

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			32

Item 3 Quantitative and Qualitative Disclosures about Market Risk			42

Item 4 Controls and Procedures			43

PART II OTHER INFORMATION

Item 1 Legal Proceedings			44

Item 1A Risk Factors			44

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			44

Item 3 Defaults Upon Senior Securities			44

Item 4 Mine Safety Disclosures			44

Item 5 Other Information			44

Item 6 Exhibits			45

Signatures			46

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Glossary of Acronyms, Abbreviations, and Terms

The acronyms, abbreviations, and terms listed below are used in various sections of this report. As used throughout this report, the terms "Meridian", “we”, “our”, or “us” refer to Meridian Corporation and its consolidated subsidiaries, unless the context otherwise requires.


Acronym			Description
ACBB			Atlantic Central Bankers Bank
ACH			Automated clearing house
ACL			Allowance for credit losses
AFS			Available-for-sale
ALCO			Asset/Liability Committee
ALLL			Allowance for loan and lease losses
ALM			Asset / liability management
AOCI			Accumulated other comprehensive income
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
BHC Act			Bank Holding Company Act of 1956
BOLI			Bank owned life insurance
BSA-AML			Bank Secrecy Act - Anti-Money Laundering
BTFP			Federal Reserve Bank Term Funding Program
CBCA			Change in Bank Control Act
CBLR			Community Bank Leverage Ratio
CDARS			Certificate of Deposit Account Registry Service
CECL			Current expected credit losses
CET1			Common equity tier 1
CFPB			Consumer Financial Protection Bureau
CMO			Collateralized mortgage obligation

CRE			Commercial real estate
DIF			FDIC’s deposit insurance fund
ECOA			Equal Credit Opportunity Act
ESOP			Employee Stock Ownership Plan
FASB			Financial Accounting Standards Board

FDIC			Federal Deposit Insurance Corporation
FFIEC			Federal Financial Institutions Examination Council
FHA			Federal Housing Authority
FHFA			Federal Housing Finance Agency
FHLB			Federal Home Loan Bank of Pittsburgh
FHLMC			Federal Home Loan Mortgage Corporation or Freddie Mac
FICO			Financing Corporation
FNMA			Federal National Mortgage Association or Fannie Mae
FRB			Federal Reserve Bank of Philadelphia
FTE			Fully taxable equivalent
GAAP			U.S. generally accepted accounting principles
GLB Act			Gramm-Leach-Bliley Act
GNMA			Government National Mortgage Association or Ginnie Mae
GSE			Government-sponsored entities
HTM			Held-to-maturity
ICBA			Independent Community Bankers of America
JOBS Act			Jumpstart Our Business Startups Act of 2012
LBP			Look-back period
LEP			Loss emergence period

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LGD			Loss given default
LIBOR			London Inter-bank Offering Rate
LIHTC			Low-income-housing tax credit
MBS			Mortgage-backed securities
MSLP			Main Street Lending Programs
MSR			Mortgage servicing rights
OFAC			Office of Foreign Assets Control
OREO			Other real estate owned
PCAOB			Public Company Accounting Oversight Board
PCD			Purchased credit deteriorated
PD			Probability of default
PDBS			Pennsylvania Department of Banking and Securities

ROU			Right-of-use
SBA			Small Business Administration
SEC			Securities and Exchange Commission
SERP			Supplemental Executive Retirement Plan
SNC			Shared national credit
SOFR			Secure Overnight Financing Rate
TILA			Truth in Lending Act
TDR			Troubled debt restructuring
USDA			U.S. Department of Agriculture
VA			U.S. Department of Veteran’s Affairs

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MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in thousands, except share data)	March 31, 2025		December 31, 2024
Assets:
Cash and due from banks	$	16,976	$	5,598
Interest-bearing deposits at other banks	113,620		21,864
Federal funds sold	629		—
Cash and cash equivalents	131,225		27,462
Securities available-for-sale, at fair value (amortized cost of $193,783 and $183,764, respectively)	185,221		174,304
Securities held-to-maturity, at amortized cost (fair value of $29,357 and $30,492, respectively)	32,720		33,771
Equity investments	2,126		2,086
Mortgage loans held for sale	28,047		32,413
Loans and other finance receivables, net of fees and costs	2,071,675		2,030,437
Allowance for credit losses	(20,827)		(18,438)
Loans and other finance receivables, net of the allowance for credit losses	2,050,848		2,011,999
Restricted investment in bank stock	8,369		7,753
Bank premises and equipment, net	12,028		12,151
Bank owned life insurance	29,935		29,712
Accrued interest receivable	10,345		9,958
Other real estate owned	159		159
Deferred income taxes	5,136		4,669
Servicing assets	4,284		4,382

Goodwill	899		899
Intangible assets	2,716		2,767
Other assets	24,830		31,382
Total assets	$	2,528,888	$	2,385,867

Liabilities:
Deposits:
Non-interest bearing	$	323,485	$	240,858
Interest bearing	1,805,257		1,764,510
Total deposits	2,128,742		2,005,368
Borrowings	139,590		124,471

Subordinated debentures	49,761		49,743
Accrued interest payable	7,404		6,860
Other liabilities	29,823		27,903
Total liabilities	2,355,320		2,214,345

Stockholders’ equity:
Common stock, $1 par value per share. 25,000,000 shares authorized; 13,288,461 and 13,243,258 shares issued and 11,285,278 and 11,240,075 shares outstanding, respectively	13,288		13,243
Surplus	82,026		81,545
Treasury stock, 2,003,183 shares, at cost	(26,079)		(26,079)
Unearned common stock held by employee stock ownership plan	(1,006)		(1,006)
Retained earnings	112,952		111,961
Accumulated other comprehensive loss	(7,613)		(8,142)
Total stockholders’ equity	173,568		171,522
Total liabilities and stockholders’ equity	$	2,528,888	$	2,385,867

See accompanying notes to the unaudited consolidated financial statements.

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MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three months ended March 31,
(dollars in thousands, except per share data)	2025		2024
Interest income:
Loans and other finance receivables, including fees	$	36,549	$	35,339
Securities - taxable	1,693		1,251
Securities - tax-exempt	313		325
Cash and cash equivalents	613		300
Total interest income	39,168		37,215
Interest expense:
Deposits	16,868		17,392
Borrowings and subordinated debentures	2,524		3,214
Total interest expense	19,392		20,606
Net interest income	19,776		16,609
Provision for credit losses	5,212		2,866
Net interest income after provision for credit losses	14,564		13,743
Non-interest income:
Mortgage banking income	3,393		3,634
Wealth management income	1,535		1,317
SBA loan income	748		986
Earnings on investment in life insurance	222		207

Net change in the fair value of derivative instruments	149		75
Net change in the fair value of loans held-for-sale	102		(2)
Net change in the fair value of loans held-for-investment	170		(175)
Net gain (loss) on hedging activity	21		(19)


Other	984		1,961
Total non-interest income	7,324		7,984
Non-interest expense:
Salaries and employee benefits	11,385		10,573
Occupancy and equipment	1,338		1,233
Professional fees	763		1,498
Data processing and software	1,479		1,532
Advertising and promotion	779		748
Pennsylvania bank shares tax	269		274
Other	2,730		2,316
Total non-interest expense	18,743		18,174
Income before income taxes	3,145		3,553
Income tax expense	746		877
Net income	$	2,399	$	2,676
Basic earnings per common share	$	0.21	$	0.24
Diluted earnings per common share	$	0.21	$	0.24
Basic weighted average shares outstanding	11,205		11,088
Diluted weighted average shares outstanding	11,446		11,201

See accompanying notes to the unaudited consolidated financial statements.

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MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three months ended March 31,
(dollars in thousands)	2025		2024
Net income:	$	2,399	$	2,676

Net change in unrealized gains (losses) on investment securities available for sale:
Change in fair value of investment securities, net of tax of $202 and $(98), respectively	699		(298)

Reclassification adjustment for investment securities transferred to held-to-maturity, net of tax effect of $7 and $7, respectively	22		22
Unrealized investment gains (losses), net of tax effect of $210 and $(90), respectively	$	721	$	(276)
Net change in unrealized (losses) gains on interest rate swaps used in cash flow hedges, net of tax effect of $192, and $(247),respectively	(192)		749



Total other comprehensive income	$	529	$	473
Total comprehensive income	$	2,928	$	3,149

See accompanying notes to the unaudited consolidated financial statements.

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MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


(dollars in thousands, except per share data)	Common Stock		Surplus		Treasury Stock		Unearned ESOP		Retained Earnings		AOCI		Total
Three Months Ended March 31, 2025
Balance at January 1, 2025	$	13,243	$	81,545	$	(26,079)	$	(1,006)	$	111,961	$	(8,142)	$	171,522
Net income	—		—		—		—		2,399		—		2,399
Other comprehensive income	—		—		—		—		—		529		529
Dividends declared ($0.125 per share)	—		—		—		—		(1,408)		—		(1,408)

Common stock issued through share-based awards and exercises	45		363		—		—		—		—		408

Stock based compensation expense	—		118		—		—		—		—		118
Balance at March 31, 2025	$	13,288	$	82,026	$	(26,079)	$	(1,006)	$	112,952	$	(7,613)	$	173,568


(dollars in thousands, except per share data)	Common Stock		Surplus		Treasury Stock		Unearned ESOP		Retained Earnings		AOCI		Total
Three Months Ended March 31, 2024
Balance at January 1, 2024	$	13,186	$	80,325	$	(26,079)	$	(1,204)	$	101,216	$	(9,422)	$	158,022

Net income	—		—		—		—		2,676		—		2,676
Other comprehensive income	—		—		—		—		—		473		473
Dividends declared ($0.125 per share)	—		—		—		—		(1,400)		—		(1,400)

Common stock issued through share-based awards and exercises	3		20		—		—		—		—		23
Stock based compensation expense	—		142		—		—		—		—		142
Balance at March 31, 2024	$	13,189	$	80,487	$	(26,079)	$	(1,204)	$	102,492	$	(8,949)	$	159,936

See accompanying notes to the unaudited consolidated financial statements.

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MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Threes Months Ended March 31,
(dollars in thousands)	2025		2024
Net income	$	2,399	$	2,676
Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Net amortization of investment premiums and discounts and change in fair value of equity securities	1,069		240
Depreciation and amortization (accretion), net	6		1,780
Provision for credit losses	5,212		2,866
Amortization of issuance costs on subordinated debt	31		31
Stock based compensation	118		142
Net change in fair value of derivative instruments	(149)		(75)
Net change in fair value of loans held for sale	(102)		2
Net change in fair value of loans held for investment	(170)		175
Amortization and net impairment of servicing rights	326		479


SBA loan income	(748)		(986)
Proceeds from sale of loans	148,087		143,457
Loans originated for sale	(140,455)		(144,437)
Mortgage banking income	(3,393)		(3,634)
Increase in accrued interest receivable	(387)		(539)

Decrease (increase) in other assets	4,317		(353)
Earnings from investment in bank owned life insurance	(222)		(207)
Increase in deferred income tax	(646)		(251)
Increase (decrease) in accrued interest payable	544		(1,974)
Increase (decrease) in other liabilities	2,280		(1,098)
Net cash provided by (used in) operating activities	18,117		(1,706)

Cash flows from investing activities:
Activity in available-for-sale securities:
Maturities, repayments and calls	3,198		3,554

Purchases	(14,274)		(9,068)
Activity in held-to-maturity securities:
Maturities, repayments and calls	999		554



Increase in restricted stock	(616)		(488)
Net increase in loans	(40,882)		(71,370)

Purchases of premises and equipment	(259)		(1,910)

Net cash used in investing activities	(51,834)		(78,728)

Cash flows from financing activities:
Net increase in deposits	123,374		77,234

Increase (decrease) in short-term borrowings	6,184		(29,093)
Increase in long-term debt	8,935		—

Repayment of subordinated debt	(13)		—



Dividends paid	(1,408)		(1,400)
Share based awards and exercises	408		23

Net cash provided by financing activities	137,480		46,764

Net change in cash and cash equivalents	103,763		(33,670)
Cash and cash equivalents at beginning of period	27,462		56,697
Cash and cash equivalents at end of period	$	131,225	$	23,027

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	18,848	$	22,580



Net loans sold, (settled) not settled	(1,834)		10,631

See accompanying notes to the unaudited consolidated financial statements.

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MERIDIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Summary of Significant Accounting Policies

Basis of Presentation

The Corporation’s unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial position and the results of operations for the interim periods presented have been included.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Amounts subject to significant estimates are items such as the allowance for credit losses, lending related commitments and the related unfunded commitment reserve, the fair value of financial instruments, other-than-temporary impairments of investment securities, and the valuations of goodwill, intangible assets, and servicing assets.

These unaudited consolidated financial statements should be read in conjunction with the Corporation’s filings with the SEC (including our Annual Report on Form 10-K for the year ended December 31, 2024), 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 Form 10-K and Form 10-Q filings, if any.

Certain prior period amounts have been reclassified to conform with current period presentation. Reclassifications had no effect on net income or stockholders’ equity. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results for the year ending December 31, 2025 or for any other period.

Pronouncements Adopted/Effective during the three months ended March 31, 2025:

FASB ASU 2024-01 Stock Compensation - Scope Application of Profits Interest and Similar Awards

The amendments in this update improve the understandability of paragraph 718-10-15-3 apply to all entities that enter into share-based payments transactions and are effective for fiscal years beginning after December 15, 2024 and are to be applied on a prospective basis. The adoption of this amendment did not have a material impact on the Corporation's consolidated financial statements.

Pronouncements Not Yet Effective as of March 31, 2025:

FASB ASU No. 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative".

This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB ASC. The amendments in this ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC's regulations. For entities subject to the SEC's existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity.

FASB ASU 2023-09, “Income Taxes (Topic 740) Improvements to Income Tax Disclosures”

The amendments in this update address investor requests for more transparency about income tax information through improvements to annual income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this update are effective for our annual reporting period ended December 31, 2025 and are to be applied on a prospective basis. Early adoption is permitted.The Corporation is currently evaluating the impact on its annual disclosures.

FASB ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures"

This amendment requires enhanced disaggregation of certain expense categories within the income statement to provide more detailed information about the nature and function of expenses. The objective is to improve the transparency and usefulness of financial statements for users by offering greater insight into the components of operating expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2026. These changes may be applied prospectively or retroactively. Early adoption is permitted. The Corporation is currently evaluating the impact on its disclosures.

FASB ASU 2025-01, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date"

This amendment addresses questions that were raised regarding the effective date of ASU 2024-03 for public business entities with non-calendar year ends. The amendment clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted.

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(2) Earnings per Common Share

Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period reduced by unearned ESOP Plan shares and treasury shares. Diluted earnings per common share takes into account the potential dilution computed pursuant to the treasury stock method that could occur if stock options were exercised and converted into common stock, and if restricted stock awards were vested. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be anti-dilutive.


	Three months ended March 31,
(dollars in thousands, except per share data)	2025		2024
Numerator for earnings per share:
Net income available to common stockholders	$	2,399	$	2,676

Denominators for earnings per share:
Weighted average shares outstanding	11,336		11,245
Average unearned ESOP shares	(131)		(157)
Basic weighted averages shares outstanding	11,205		11,088
Dilutive effects of assumed exercises of stock options	241		113

Diluted weighted averages shares outstanding	11,446		11,201

Basic earnings per share	$	0.21	$	0.24
Diluted earnings per share	$	0.21	$	0.24
Antidilutive shares excluded from computation of average dilutive earnings per share	364		585

(3) Securities

The following tables presents the amortized cost, allowance for credit losses, and fair value of securities at the dates indicated:


	March 31, 2025
(dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Allowance for credit losses		Fair value		# of Securities in unrealized loss position
Securities available-for-sale:
U.S. asset backed securities	$	29,077	$	57	$	(214)	$	—	$	28,920	16
U.S. government agency MBS	21,243		135		(458)		—		20,920		12
U.S. government agency CMO	55,854		139		(2,001)		—		53,992		38
State and municipal securities	41,874		28		(4,567)		—		37,335		31
U.S. Treasuries	17,039		—		(1,296)		—		15,743		16
Non-U.S. government agency CMO	11,314		45		(297)		—		11,062		9
Corporate bonds	17,382		542		(675)		—		17,249		14
Total securities available-for-sale	$	193,783	$	946	$	(9,508)	$	—	$	185,221	136

	Amortized cost		Gross unrecognized gains		Gross unrecognized losses		Allowance for credit losses		Fair value		# of Securities in unrecognized loss position
Securities held to maturity:
State and municipal securities	$	32,720	$	2	$	(3,365)	$	—	$	29,357	19
Total securities held-to-maturity	$	32,720	$	2	$	(3,365)	$	—	$	29,357	19

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	December 31, 2024
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Allowance for credit losses		Fair value		# of Securities in unrealized loss position
Securities available-for-sale:
U.S. asset backed securities	$	29,931	$	73	$	(160)	$	—	$	29,844	12
U.S. government agency MBS	21,392		96		(617)		—		20,871		14
U.S. government agency CMO	48,051		23		(2,461)		—		45,613		42
State and municipal securities	40,854		1		(4,159)		—		36,696		31
U.S. Treasuries	17,039		—		(1,589)		—		15,450		16
Non-U.S. government agency CMO	12,082		59		(412)		—		11,729		9
Corporate bonds	14,415		448		(762)		—		14,101		15
Total securities available-for-sale	$	183,764	$	700	$	(10,160)	$	—	$	174,304	139

	Amortized cost		Gross unrecognized gains		Gross unrecognized losses		Allowance for credit losses		Fair value		# of Securities in unrecognized loss position
Securities held to maturity:
State and municipal securities	$	33,771	$	7	$	(3,286)	$	—	$	30,492	19
Total securities held-to-maturity	$	33,771	$	7	$	(3,286)	$	—	$	30,492	19

Although the Corporation’s investment portfolio overall is in a net unrealized loss position at March 31, 2025, the temporary impairment in the above noted securities is primarily the result of changes in market interest rates subsequent to purchase and it is more likely than not that the Corporation will not be required to sell these securities prior to recovery to satisfy liquidity needs, and therefore, no securities warranted an ACL.

The following table shows the Corporation’s investment gross unrealized losses and fair value aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position at the dates indicated:


	March 31, 2025
	Less than 12 Months				12 Months or more				Total
(dollars in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Securities available-for-sale:
U.S. asset backed securities	$	15,331	$	(114)	$	6,453	$	(100)	$	21,784	$	(214)
U.S. government agency MBS	3,407		(92)		9,090		(366)		12,497		(458)
U.S. government agency CMO	18,631		(318)		17,935		(1,683)		36,566		(2,001)
State and municipal securities	—		—		34,605		(4,567)		34,605		(4,567)
U.S. Treasuries	—		—		15,743		(1,296)		15,743		(1,296)
Non-U.S. government agency CMO	1,372		(22)		5,110		(275)		6,482		(297)
Corporate bonds	916		(13)		7,541		(662)		8,457		(675)
Total securities available-for-sale	$	39,657	$	(559)	$	96,477	$	(8,949)	$	136,134	$	(9,508)

	Less than 12 Months				12 Months or more				Total
	Fair value		Unrecognized losses		Fair value		Unrecognized losses		Fair value		Unrecognized losses
Securities held-to-maturity:
State and municipal securities	$	2,040	$	(34)	$	26,145	$	(3,331)	$	28,185	$	(3,365)
Total securities held-to-maturity	$	2,040	$	(34)	$	26,145	$	(3,331)	$	28,185	$	(3,365)

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	December 31, 2024
	Less than 12 Months				12 Months or more				Total
(dollars in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Securities available-for-sale:
U.S. asset backed securities	$	12,708	$	(56)	$	3,568	$	(104)	$	16,276	$	(160)
U.S. government agency MBS	5,773		(183)		9,050		(434)		14,823		(617)
U.S. government agency CMO	22,351		(506)		18,876		(1,955)		41,227		(2,461)
State and municipal securities	—		—		35,199		(4,159)		35,199		(4,159)
U.S. Treasuries	—		—		15,450		(1,589)		15,450		(1,589)
Non-U.S. government agency CMO	1,403		(12)		5,204		(400)		6,607		(412)
Corporate bonds	1,688		(41)		7,479		(721)		9,167		(762)
Total securities available-for-sale	$	43,923	$	(798)	$	94,826	$	(9,362)	$	138,749	$	(10,160)

	Less than 12 Months				12 Months or more				Total
	Fair value		Unrecognized losses		Fair value		Unrecognized losses		Fair value		Unrecognized losses
Securities held-to-maturity:
State and municipal securities	$	1,048	$	(15)	$	27,271	$	(3,271)	$	28,319	$	(3,286)
Total securities held-to-maturity	$	1,048	$	(15)	$	27,271	$	(3,271)	$	28,319	$	(3,286)

As of March 31, 2025, substantially all of the Corporation’s available-for-sale investment securities were mortgage-backed securities or collateral mortgage obligations which were issued or guaranteed by U.S. government-sponsored entities and agencies. As of March 31, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.

The amortized cost and carrying value of securities are shown below by contractual maturities at the dates indicated. Actual maturities may differ from contractual maturities as issuers may have the right to call or repay obligations with or without call or prepayment penalties.


	March 31, 2025
	Available-for-sale				Held-to-maturity
(dollars in thousands)	Amortized cost		Fair value		Amortized cost		Fair value
Due in one year or less	$	—	$	—	$	—	$	—
Due after one year through five years	18,039		16,643		1,000		1,002
Due after five years through ten years	23,150		22,679		5,793		5,018
Due after ten years	64,183		59,925		25,927		23,337
Subtotal	105,372		99,247		32,720		29,357
Mortgage-related securities	88,411		85,974		—		—
Total	$	193,783	$	185,221	$	32,720	$	29,357

There were no sales of investment securities available for sale for the three months ended March 31, 2025 or March 31, 2024.

ACL on Securities AFS and HTM

We use credit ratings quarterly and the most recent financial information of securities' issuers annually to help evaluate the credit quality of our securities AFS and HTM portfolios on a quarterly basis. The securities portfolio consists primarily of U.S. government treasuries and U.S. government agency asset backed securities which have no probability of default. The remaining portfolio consists of highly rated municipal bonds, non-agency CMO, and corporate bonds that have a low probability of default.

For the three months ended March 31, 2025 and 2024, we had no significant ACL or provision expense and no charge-offs or recoveries on AFS or HTM securities.

Pledged Securities

As of March 31, 2025 and December 31, 2024, securities having a carrying value of $56.1 million and $43.3 million, respectively, were specifically pledged as collateral for public funds, the FRB discount window program, FHLB borrowings and other purposes. The FHLB has a blanket lien on non-pledged, mortgage-related loans and securities as part of the Corporation’s borrowing agreement with the FHLB.

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(4) Loans and Other Finance Receivables

The following table presents loans and other finance receivables detailed by category at the dates indicated:


(dollars in thousands)	March 31, 2025		December 31, 2024
Real estate loans:
Commercial mortgage	$	845,215	$	823,976
Home equity lines and loans	94,179		90,721
Residential mortgage	250,684		252,565
Construction	277,895		259,553
Total real estate loans	1,467,973		1,426,815
Commercial and industrial	371,980		367,366
Small business loans	161,104		155,775
Consumer	376		349
Leases, net	66,813		75,987
Total loans and other finance receivables	$	2,068,246	$	2,026,292





Balances included in loans and other finance receivables, net of fees and costs:
Residential mortgage real estate loans accounted under fair value option, at fair value	$	14,182	$	14,501
Residential mortgage real estate loans accounted under fair value option, at amortized cost	16,425		16,543
Unearned lease income included in leases, net	(7,502)		(9,057)
Unamortized deferred loan origination costs, net of deferred fees	$	3,429	$	4,145

Fair Value Option for Residential Mortgage Real Estate Loans

Residential mortgage real estate loans that were originated by the Corporation and intended for sale in the secondary market to permanent investors, but were either repurchased or unsalable due to defect, and that the Corporation has the ability and intent to hold for the foreseeable future or until maturity or payoff are carried at fair value pursuant to the Corporation's election of the fair value option for these loans. The remaining loans, net of fees and costs are stated at their outstanding unpaid principal balances, net of deferred fees or costs, since the original intent for these loans was to hold them until payoff or maturity.

Nonaccrual and Past Due Loans and Leases

The following tables present an aging of the Corporation’s loans and leases at the dates indicated:


	March 31, 2025
(dollars in thousands)	30-59 days past due		60-89 days past due		90+ days past due and still accruing		Total past due		Current		Total accruing loans and leases		Nonaccrual loans and leases		Total loans portfolio and leases		% Delinquent
Commercial mortgage	$	1,167	$	—	$	—	$	1,167	$	843,264	$	844,431	$	784	$	845,215	0.23	%
Home equity lines and loans	20		—		—		20		92,483		92,503		1,676		94,179		1.80
Residential mortgage (1)	3,546		—		—		3,546		238,830		242,376		8,308		250,684		4.73
Construction	—		10,055		—		10,055		259,334		269,389		8,506		277,895		6.68
Commercial and industrial	213		—		—		213		360,721		360,934		11,046		371,980		3.03
Small business loans (2)	655		377		359		1,391		140,923		142,314		18,790		161,104		12.53
Consumer	—		—		—		—		376		376		—		376		—
Leases, net	882		619		—		1,501		62,580		64,081		2,732		66,813		6.34	%
Total	$	6,483	$	11,051	$	359	$	17,893	$	1,998,511	$	2,016,404	$	51,842	$	2,068,246	3.37	%

(1) Includes $14.2 million of loans at fair value of which $13.4 million are current, $308 thousand are 30-89 days past due and $506 thousand are nonaccrual.

(2) Includes $9.9 million of loans within nonaccrual loans and leases that are guaranteed by the SBA.

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	December 31, 2024
(dollars in thousands)	30-59 days past due		60-89 days past due		Total past due		Current		Total accruing loans and leases		Nonaccrual loans and leases		Total loans portfolio and leases		% Delinquent
Commercial mortgage	$	1,290	$	—	$	1,290	$	821,877	$	823,167	$	809	$	823,976	0.25	%
Home equity lines and loans	176		154		330		88,675		89,005		1,716		90,721		2.26
Residential mortgage (1)	3,259		—		3,259		241,406		244,665		7,900		252,565		4.42
Construction	1,000		—		1,000		249,940		250,940		8,613		259,553		3.70
Commercial and industrial	—		—		—		355,400		355,400		11,966		367,366		3.26
Small business loans (2)	1,351		—		1,351		142,154		143,505		12,270		155,775		8.74
Consumer	—		—		—		349		349		—		349		—
Leases, net	1,046		457		1,503		72,633		74,136		1,851		75,987		4.41
Total	$	8,122	$	611	$	8,733	$	1,972,434	$	1,981,167	$	45,125	$	2,026,292	2.66	%

(1) Includes $14.5 million of loans at fair value of which $13.7 million are current, $473 thousand are 30-89 days past due and $340 thousand are nonaccrual.

(2) Includes $6.2 million of loans within nonaccrual loans and leases that are guaranteed by the SBA.

There was 1 loan of $359 thousand in the table above as of March 31, 2025, and no loans and leases as of December 31, 2024, that were 90+days past due and still accruing interest.

Foreclosed and Repossessed Assets

At March 31, 2025 and December 31, 2024, there were 3 and 4 consumer mortgage loans, respectively, secured by residential real estate properties (included in loans, net of fees and costs on the Consolidated Balance Sheets) totaling $1.5 million and $1.3 million, respectively, for which formal foreclosure proceedings were in process.

Risks and Uncertainties

Our commercial loans have been proactively managed in an effort to achieve a balanced portfolio with no unusual exposure to one industry. Additionally, most of our lending activity occurs within our primary market areas which are concentrated in southeastern Pennsylvania, Delaware, and Maryland as well as other contiguous markets and represents a geographic concentration. Commercial loans are generally viewed as having more inherent risk of default than residential real estate loans or other consumer loans. Also, the commercial loan balance per borrower is typically larger than that for residential real estate loans and consumer loans, implying higher potential losses on an individual loan basis.

Past Due and Nonaccrual Status

The following tables presents the amortized costs basis of loans and leases on nonaccrual status and loans 90 days or more past due and still accruing, net of fees and costs as of March 31, 2025 and December 31, 2024. As of this date here were no loans 90 days or more past due and still accruing.


	March 31, 2025						December 31, 2024
(dollars in thousands)	Nonaccrual without ACL		Nonaccrual with ACL		Total nonaccrual		Nonaccrual without ACL		Nonaccrual with ACL		Total nonaccrual
Commercial mortgage	$	784	$	—	$	784	$	809	$	—	$	809
Home equity lines and loans	1,676		—		1,676		1,716		—		1,716
Residential mortgage	7,927		381		8,308		7,518		382		7,900
Construction	6,392		2,114		8,506		8,613		—		8,613

Commercial and industrial	8,246		2,800		11,046		9,166		2,800		11,966
Small business loans	8,356		10,434		18,790		8,179		4,091		12,270
Leases, net	2,732		—		2,732		1,851		—		1,851
Total	$	36,113	$	15,729	$	51,842	$	37,852	$	7,273	$	45,125

The decrease in commercial and industrial nonaccrual loans with ACL relates to the charge-off on a protracted commercial advertising loan relationship, while the increase in nonaccrual SBA loans with ACL relates to additional risk rating downgrades leading to non-performing loan classification in the SBA loan portfolio.

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Collateral-dependent Loans

The following tables presents the amortized cost basis of non-accruing collateral-dependent loans by class or loans as of March 31, 2025 and December 31, 2024 under the current expected credit loss model:


	March 31, 2025						December 31, 2024
(dollars in thousands)	Real estate		Equipment and other		Total		Real estate		Equipment and other		Total
Commercial mortgage	$	784	$	—	$	784	$	809	$	—	$	809
Home equity lines and loans	1,676		—		1,676		1,716		—		1,716
Residential mortgage	8,308		—		8,308		7,900		—		7,900
Construction	8,506		—		8,506		8,613		—		8,613
Commercial and industrial	1,344		9,702		11,046		1,344		10,622		11,966
Small business loans	16,865		1,925		18,790		10,164		2,106		12,270
Leases, net	—		2,732		2,732		—		1,851		1,851
Total	$	37,483	$	14,359	$	51,842	$	30,546	$	14,579	$	45,125

(5) Allowance for Credit Losses

The ACL is maintained at a level considered adequate to provide for estimated expected credit losses within the loan portfolio over the

contractual life of an instrument that considers our historical loss experience, current conditions and forecasts of future economic conditions as of the balance sheet date. Management’s periodic evaluation of the adequacy of the ACL is based on known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is subjective as it requires material estimates that may be susceptible to significant revisions as more information becomes available.

Roll-Forward of ACL by Portfolio Segment

The following tables provide the activity of our allowance for credit losses for the three months ended March 31, 2025 and March 31, 2024 under the CECL model in accordance with ASC 326:


	Three Months Ended March 31, 2025
(dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision (recovery of provision) for credit losses		Ending balance
Commercial mortgage	$	3,469	$	—	$	—	$	(87)	$	3,382
Home equity lines and loans	1,147		—		2		16		1,165
Residential mortgage	1,021		—		—		6		1,027
Construction	923		(738)		—		1,456		1,641
Commercial and industrial	3,098		(1,430)		17		1,080		2,765
Small business loans	6,304		(277)		29		2,555		8,611
Consumer	—		—		1		(1)		—
Leases	2,476		(553)		126		187		2,236
Total	$	18,438	$	(2,998)	$	175	$	5,212	$	20,827

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	Three Months Ended March 31, 2024
(dollars in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision (recovery of provision) for credit losses		Ending balance
Commercial mortgage	$	4,375	$	—	$	—	$	(196)	$	4,179
Home equity lines and loans	998		—		2		(42)		958
Residential mortgage	1,020		—		—		157		1,177
Construction	485		—		—		98		583
Commercial and industrial	4,518		(208)		2		771		5,083
Small business loans	7,005		(87)		3		884		7,805
Consumer	—		(1)		1		1		1
Leases	3,706		(2,148)		126		1,701		3,385
Total	$	22,107	$	(2,444)	$	134	$	3,374	$	23,171

Reconciliation of Provision for Credit Losses

The following table provides a reconciliation of the provision for credit losses on the consolidated statements of income between the funded and unfunded components at the dates indicated:


	Three Months Ended March 31,
(dollars in thousands)	2025		2024
Provision for credit losses - funded loans	$	5,212	$	3,374
Recovery for credit losses - unfunded loans	—		(508)
Total provision for credit losses	$	5,212	$	2,866

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Allowance Allocated by Portfolio Segment

The following tables detail the allocation of the ACL and the carrying value for loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases at the dates indicated:


	March 31, 2025
	Allowance for credit losses						Carrying value of loans and leases
(dollars in thousands)	Individually evaluated		Collectively evaluated		Total		Individually evaluated		Collectively evaluated		Total
Commercial mortgage	$	—	$	3,382	$	3,382	$	784	$	844,431	$	845,215
Home equity lines and loans	—		1,165		1,165		1,676		92,503		94,179
Residential mortgage	27		1,000		1,027		7,802		228,700		236,502
Construction	535		1,106		1,641		8,506		269,389		277,895
Commercial and industrial	1,028		1,737		2,765		11,046		360,934		371,980
Small business loans	3,407		5,204		8,611		18,790		142,314		161,104
Consumer	—		—		—		—		376		376
Leases, net	—		2,236		2,236		2,732		64,081		66,813
Total	$	4,997	$	15,830	$	20,827	$	51,336	$	2,002,728	$	2,054,064

(1) Excludes deferred fees and loans carried at fair value.


	December 31, 2024
	Allowance for credit losses						Carrying value of loans and leases
(dollars in thousands)	Individually evaluated		Collectively evaluated		Total		Individually evaluated		Collectively evaluated		Total
Commercial mortgage	$	—	$	3,469	$	3,469	$	809	$	823,167	$	823,976
Home equity lines and loans	—		1,147		1,147		1,716		89,005		90,721
Residential mortgage	29		992		1,021		7,560		230,504		238,064
Construction	—		923		923		8,613		250,940		259,553
Commercial and industrial	855		2,243		3,098		11,966		355,400		367,366
Small business loans	1,808		4,496		6,304		12,270		143,505		155,775
Consumer	—		—		—		—		349		349
Leases, net	—		2,476		2,476		1,851		74,136		75,987
Total	$	2,692	$	15,746	$	18,438	$	44,785	$	1,967,006	$	2,011,791

(1) Excludes deferred fees and loans carried at fair value.

Credit Quality Indicators

As part of the process of determining the ACL to the different segments of the loan and lease portfolio, Management considers certain credit quality indicators. For the commercial mortgage, construction and commercial and industrial loan segments, periodic reviews of the individual loans are performed by Management. The results of these reviews are reflected in the risk grade assigned to each loan. These internally assigned grades are as follows:

•Pass – Loans considered to be satisfactory with no indications of deterioration.

•Special mention – Loans classified as special mention have a potential weakness that deserves Management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

•Substandard – Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

•Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loan balances classified as doubtful have been reduced by partial charge-offs and are carried at their net realizable values.

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The following tables detail the carrying value of loans and leases by portfolio segment based on year of origination and the credit quality indicators used to determine the allowance for credit losses at the dates indicated:


	March 31, 2025												Revolving Loans Converted to Term Loans		Revolving Loans		Total
	Term Loans
(dollars in thousands)	2025		2024		2023		2022		2021		Prior
Commercial mortgage
Pass/Watch	$	34,156	$	119,252	$	103,002	$	156,573	$	139,983	$	265,250	$	511	$	188	$	818,915
Special Mention	—		—		3,454		12,456		964		776		667		—		18,317
Substandard	—		—		200		30		—		7,753		—		—		7,983

Total	$	34,156	$	119,252	$	106,656	$	169,059	$	140,947	$	273,779	$	1,178	$	188	$	845,215
Year-to-date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction
Pass/Watch	$	18,306	$	107,369	$	54,063	$	30,007	$	4,861	$	10,567	$	123	$	32,656	$	257,952
Special Mention	—		197		1,185		—		—		—		—		—		1,382
Substandard	—		—		—		10,368		2,181		3,105		—		2,907		18,561

Total	$	18,306	$	107,566	$	55,248	$	40,375	$	7,042	$	13,672	$	123	$	35,563	$	277,895
Year-to-date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(738)	$	(738)

Commercial and industrial
Pass/Watch	$	20,680	$	71,949	$	19,927	$	13,166	$	15,048	$	26,149	$	—	$	171,405	$	338,324
Special Mention	—		—		850		2,556		342		—		—		2,019		5,767
Substandard	—		—		115		3,813		2,365		9,899		—		11,697		27,889

Total	$	20,680	$	71,949	$	20,892	$	19,535	$	17,755	$	36,048	$	—	$	185,121	$	371,980
Year-to-date gross charge-offs	$	—	$	(484)	$	(95)	$	—	$	—	$	—	$	—	$	(851)	$	(1,430)

Small business loans
Pass/Watch	$	14,768	$	30,301	$	25,308	$	24,231	$	20,305	$	11,345	$	—	$	12,387	$	138,645
Special Mention	—		—		288		—		—		31		—		190		509
Substandard	—		—		2,163		525		10,572		5,528		—		3,162		21,950

Total	$	14,768	$	30,301	$	27,759	$	24,756	$	30,877	$	16,904	$	—	$	15,739	$	161,104
Year-to-date gross charge-offs	$	—	$	—	$	—	$	(233)	$	(2)	$	(42)	$	—	$	—	$	(277)

Total by risk rating
Pass/Watch	$	87,910	$	328,871	$	202,300	$	223,977	$	180,197	$	313,311	$	634	$	216,636	$	1,553,836
Special Mention	—		197		5,777		15,012		1,306		807		667		2,209		25,975
Substandard	—		—		2,478		14,736		15,118		26,285		—		17,766		76,383

Total	$	87,910	$	329,068	$	210,555	$	253,725	$	196,621	$	340,403	$	1,301	$	236,611	$	1,656,194
Total year-to-date gross charge-offs	$	—	$	(484)	$	(95)	$	(233)	$	(2)	$	(42)	$	—	$	(1,589)	$	(2,445)

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	December 31, 2024												Revolving Loans Converted to Term Loans		Revolving Loans		Total
	Term Loans
(dollars in thousands)	2024		2023		2022		2021		2020		Prior
Commercial mortgage
Pass/Watch	$	118,289	$	99,971	$	162,831	$	140,046	$	92,705	$	184,157	$	511	$	189	$	798,699
Special Mention	—		3,471		11,258		972		47		767		667		—		17,182
Substandard	—		200		30		—		4,681		3,184		—		—		8,095

Total	$	118,289	$	103,642	$	174,119	$	141,018	$	97,433	$	188,108	$	1,178	$	189	$	823,976
Year-to-date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction
Pass/Watch	$	89,417	$	61,040	$	38,315	$	10,935	$	7,015	$	4,229	$	123	$	34,613	$	245,687
Special Mention	160		1,185		2,948		—		—		—		—		—		4,293
Substandard	—		—		1,277		1,605		516		2,608		—		3,567		9,573

Total	$	89,577	$	62,225	$	42,540	$	12,540	$	7,531	$	6,837	$	123	$	38,180	$	259,553
Year-to-date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial and industrial
Pass/Watch	$	81,352	$	23,658	$	16,844	$	15,634	$	8,499	$	23,220	$	—	$	162,980	$	332,187
Special Mention	—		850		2,599		438		—		—		—		2,455		6,342
Substandard	—		115		3,813		2,365		—		9,978		—		12,566		28,837

Total	$	81,352	$	24,623	$	23,256	$	18,437	$	8,499	$	33,198	$	—	$	178,001	$	367,366
Year-to-date gross charge-offs	$	(351)	$	(1,136)	$	(41)	$	—	$	—	$	(1,324)	$	—	$	(3,515)	$	(6,367)

Small business loans
Pass/Watch	$	35,720	$	23,714	$	24,446	$	22,800	$	6,699	$	6,226	$	—	$	13,818	$	133,423
Special Mention	—		425		507		2,335		1,332		—		—		—		4,599
Substandard	—		1,804		1,294		8,481		4,085		—		—		2,089		17,753

Total	$	35,720	$	25,943	$	26,247	$	33,616	$	12,116	$	6,226	$	—	$	15,907	$	155,775
Year-to-date gross charge-offs	$	—	$	(118)	$	(1,986)	$	(1,064)	$	(352)	$	—	$	—	$	(780)	$	(4,300)

Total by risk rating
Pass/Watch	$	324,778	$	208,383	$	242,436	$	189,415	$	114,918	$	217,832	$	634	$	211,600	$	1,509,996
Special Mention	160		5,931		17,312		3,745		1,379		767		667		2,455		32,416
Substandard	—		2,119		6,414		12,451		9,282		15,770		—		18,222		64,258

Total	$	324,938	$	216,433	$	266,162	$	205,611	$	125,579	$	234,369	$	1,301	$	232,277	$	1,606,670
Total year-to-date gross charge-offs	$	(351)	$	(1,254)	$	(2,027)	$	(1,064)	$	(352)	$	(1,324)	$	—	$	(4,295)	$	(10,667)

The Corporation had no loans with a risk rating of Doubtful included within recorded investment in loans and leases held for investment at March 31, 2025 and December 31, 2024.

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In addition to credit quality indicators as shown in the above tables, allowance allocations for home equity lines and loans, residential mortgages, consumer loans and leases are also applied based on their year of origination and performance status at the dates indicated:


	March 31, 2025												Revolving Loans		Total
	Term Loans
(dollars in thousands)	2025		2024		2023		2022		2021		Prior
Home equity lines and loans
Performing	$	68	$	706	$	253	$	615	$	210	$	3,558	$	86,504	$	91,914
Nonperforming	—		—		—		—		91		342		1,832		2,265
Total	$	68	$	706	$	253	$	615	$	301	$	3,900	$	88,336	$	94,179
Year-to-date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential mortgage (1)
Performing	$	2,147	$	13,286	$	41,302	$	141,179	$	16,535	$	14,379	$	—	$	228,828
Nonperforming	—		—		253		2,315		747		4,359		—		7,674
Total	$	2,147	$	13,286	$	41,555	$	143,494	$	17,282	$	18,738	$	—	$	236,502
Year-to-date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer
Performing	$	11	$	21	$	29	$	19	$	—	$	236	$	60	$	376
Nonperforming	—		—		—		—		—		—		—		—
Total	$	11	$	21	$	29	$	19	$	—	$	236	$	60	$	376
Year-to-date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Leases, net
Performing	$	490	$	202	$	14,591	$	31,644	$	14,112	$	3,137	$	—	$	64,176
Nonperforming	—		—		373		1,386		780		98		—		2,637
Total	$	490	$	202	$	14,964	$	33,030	$	14,892	$	3,235	$	—	$	66,813
Year-to-date gross charge-offs	$	—	$	—	$	—	$	(324)	$	(206)	$	(23)	$	—	$	(553)

Total by Payment Performance
Performing	$	2,716	$	14,215	$	56,175	$	173,457	$	30,857	$	21,310	$	86,564	$	385,294
Nonperforming	—		—		626		3,701		1,618		4,799		1,832		12,576
Total	$	2,716	$	14,215	$	56,801	$	177,158	$	32,475	$	26,109	$	88,396	$	397,870
Total year-to-date gross charge-offs	$	—	$	—	$	—	$	(324)	$	(206)	$	(23)	$	—	$	(553)
(1) Excludes $14.2 million of loans at fair value.

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	December 31, 2024												Revolving Loans		Total
	Term Loans
(dollars in thousands)	2024		2023		2022		2021		2020		Prior
Home equity lines and loans
Performing	$	705	$	332	$	620	$	211	$	328	$	3,313	$	83,016	$	88,525
Nonperforming	—		—		—		91		—		342		1,763		2,196
Total	$	705	$	332	$	620	$	302	$	328	$	3,655	$	84,779	$	90,721
Year-to-date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	(86)	$	(86)

Residential mortgage (1)
Performing	$	13,878	$	43,860	$	140,953	$	16,761	$	6,808	$	8,245	$	—	$	230,505
Nonperforming	129		253		2,323		752		357		3,745		—		7,559
Total	$	14,007	$	44,113	$	143,276	$	17,513	$	7,165	$	11,990	$	—	$	238,064
Year-to-date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer
Performing	$	14	$	32	$	22	$	—	$	—	$	241	$	40	$	349
Nonperforming	—		—		—		—		—		—		—		—
Total	$	14	$	32	$	22	$	—	$	—	$	241	$	40	$	349
Year-to-date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	(5)	$	(5)

Leases, net
Performing	$	741	$	15,594	$	36,229	$	17,253	$	4,326	$	—	$	—	$	74,143
Nonperforming	—		298		945		493		108		—		—		1,844
Total	$	741	$	15,892	$	37,174	$	17,746	$	4,434	$	—	$	—	$	75,987
Year-to-date gross charge-offs	$	—	$	(968)	$	(3,606)	$	(1,077)	$	(265)	$	—	$	—	$	(5,916)

Total by Payment Performance
Performing	$	15,338	$	59,818	$	177,824	$	34,225	$	11,462	$	11,799	$	83,056	$	393,522
Nonperforming	129		551		3,268		1,336		465		4,087		1,763		11,599
Total	$	15,467	$	60,369	$	181,092	$	35,561	$	11,927	$	15,886	$	84,819	$	405,121
Total year-to-date gross charge-offs	$	—	$	(968)	$	(3,606)	$	(1,077)	$	(265)	$	—	$	(91)	$	(6,007)

(1) Excludes $14.5 million of fair value loans.

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Modifications to Borrowers Experiencing Financial Difficulty

An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the ACL on loans and leases, a change to the allowance for credit losses is generally not recorded upon modification. However, when principal forgiveness is provided, the amortized cost basis of the asset is written off against the ACL on loans and leases. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

The following presents, by class of loans, information regarding accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the three months ended March 31, 2025 and 2024.


	Three Months Ended March 31, 2025							Three Months Ended March 31, 2024
	Number of Loans	Amortized Cost Basis		% of Total Class of Financing Receivable		Related Reserve		Number of Loans	Amortized Cost Basis		% of Total Class of Financing Receivable		Related Reserve
(dollars in thousands)
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Small business loans	3	$	1,948	1.2	%	$	—	1	$	165	0.1	%	$	—
Construction	3	2,869		1.0	%	—		—	—		—	%	—
Commercial mortgage	1	959		0.1	%	—		—	—		—	%	—
Commercial & industrial	1	1,095		0.3	%	—		2	1,097		0.3	%	—
Total	8	$	6,871			$	—	3	$	1,262			$	—
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Small business loans	1	$	565	0.4	%	$	434	—	$	—	—	%	$	—
Construction	1	2,907		1.0	%	—		—	—		—	%	—


Total	2	$	3,472			$	434	—	$	—			$	—

Three Months Ended March 31, 2025

Three Months Ended March 31, 2024

Number of Loans

Financial Effect

Number of Loans

Financial Effect

(dollars in thousands)

Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:

Small business loans

Extend maturity date

Construction

Extend maturity date

—

Commercial mortgage

Extend maturity date/payment concession

—

Commercial & industrial

Extend maturity date

Extend maturity date and allow additional lender funding

Total

Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:

Small business loans

Extend maturity date

—

Construction

Extend maturity date

—

Total

—

There were 10 and 3 modifications granted to borrowers experiencing financial difficulty during the three months ended March 31, 2025 and March 31, 2024, respectively. The increase period over period in assistance provided to borrowers experiencing financial difficulty was largely focused in the small business loan, construction, residential mortgage, and commercial mortgage loan portfolios and due to the increase in non-performing loans.

There were zero loans that had payment defaults during the three months ended March 31, 2025, respectively, and zero during the three months ended March 31, 2024, that were modified in the 12 months before default to borrowers experiencing financial difficulty. There were $882 thousand in commitments to lend additional funds to the borrowers experiencing financial difficulty that had modifications during the three months ended March 31, 2025 and no commitments to lend additional funds to such borrowers during the three months ended March 31, 2024.

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The following presents, by class of loans, the amortized cost and performance status of accruing and nonaccrual modified loans to borrowers experiencing financial difficulty that have been modified in the last 12 months as of March 31, 2025 and 2024.


	March 31, 2025
	Current		30-59 days past due		60-89 days past due		90+ days past due and still accruing		Nonaccrual loans and leases		Total
(dollars in thousands)
Small business loans	$	2,505	$	—	$	—	$	—	$	2,328	$	4,833
Construction	2,869		—		—		—		4,763		7,632
Commercial mortgage	1,388		—		959		—		—		2,347
Commercial & industrial	1,897		—		—		—		2,772		4,669
Residential mortgage	—		—		—		—		545		545
Total	$	8,659	$	—	$	959	$	—	$	10,408	$	20,026


	March 31, 2024
	Current		30-59 days past due		60-89 days past due		90+ days past due and still accruing		Nonaccrual loans and leases		Total
(dollars in thousands)
Small business loans	$	165	$	194	$	—	$	—	$	895	$	1,254


Commercial & industrial	1,097		—		—		—		—		1,097

Total	$	1,262	$	194	$	—	$	—	$	895	$	2,351

(6) Short-Term Borrowings and Long-Term Debt

The Corporation’s short-term borrowings generally consist of federal funds purchased and short-term borrowings extended under agreements with the FHLB or other correspondent banks. The Corporation has 4 unsecured borrowing facilities with correspondent banks for up to $56 million in total. Federal funds purchased generally represent one-day borrowings. The Corporation had $0 and $0 in Federal funds purchased at March 31, 2025 and December 31, 2024. The Corporation also has a facility with the Federal Reserve Bank discount window of $5 million. This facility is fully secured by investment securities and pledged loans. There were no borrowings under this at March 31, 2025 and December 31, 2024. The Holding Company has a revolving line of credit with ACBB of $5 million that is used to fund operating activities of the Corporation.

The following table presents short-term borrowings at the dates indicated:


(dollars in thousands)	Maturity date	Interest rate	March 31, 2025		December 31, 2024
FHLB Open Repo Plus Weekly	6/16/2025	4.69%	$	90,624	$	75,205

ACBB Holding Company Revolving LOC	6/25/2025	7.75%	4,700		5,000
FHLB Mid-term Repo Fixed	10/14/2025	5.16%	9,492		9,492

FHLB Mid-term Repo Fixed	12/22/2025	4.23%	—		8,935

Total Short-Term Borrowings			$	104,816	$	98,632

The following table presents long-term borrowings at the dates indicated:


(dollars in thousands)	Maturity date	Interest rate	March 31, 2025		December 31, 2024

FHLB Mid-term Repo Fixed	5/20/2027	4.70%	10,594		10,594

FHLB Mid-term Repo Fixed	7/14/2026	4.57%	15,245		15,245
Total Long-Term Borrowings			$	34,774	$	25,839

The FHLB has also issued $190.2 million of letters of credit to the Corporation for the benefit of the Corporation’s public deposit funds and loan customers. These letters of credit expire throughout the remainder of 2025.

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The Corporation has a maximum borrowing capacity with the FHLB of $698.2 million as of March 31, 2025 and $699.3 million as of December 31, 2024. All advances and letters of credit from the FHLB are secured by a blanket lien on non-pledged, mortgage-related loans and securities as part of the Corporation’s borrowing agreement with the FHLB.

(7) Servicing Assets

The Corporation sells certain residential mortgage loans and the guaranteed portion of certain SBA loans to third parties and retains servicing rights and receives servicing fees. All such transfers are accounted for as sales. When the Corporation sells a residential mortgage loan, it does not retain any portion of that loan and its continuing involvement in such transfers is limited to certain servicing responsibilities. While the Corporation may retain a portion of certain sold SBA loans, its continuing involvement in the portion of the loan that was sold is limited to certain servicing responsibilities. When the contractual servicing fees on loans sold with servicing retained are expected to be more than adequate compensation to a servicer for performing the servicing, a capitalized servicing asset is recognized.

Residential Mortgage Loans

The related MSR asset is amortized over the period of the estimated future net servicing life of the underlying assets. MSRs are evaluated quarterly for impairment based upon the fair value of the rights as compared to their amortized cost. Impairment is recognized on the income statement to the extent the fair value is less than the capitalized amount of the MSR. The Corporation serviced $120 million and $122 million of residential mortgage loans as of March 31, 2025 and December 31, 2024, respectively. During the three months ended March 31, 2025, the Corporation recognized servicing fee income of $48 thousand, compared to $636 thousand, during the three months ended March 31, 2024.

Changes in the MSR balance are summarized as follows:


	Three months ended March 31,
(dollars in thousands)	2025		2024
Balance at beginning of the period	$	1,124	$	8,622
Servicing rights capitalized	—		10
Amortization of servicing rights	(45)		(318)

Balance at end of the period	$	1,079	$	8,314

The decrease in MSR balance in the table above was the result of the Corporation's sale of approximately $6.6 million of residential mortgage loan servicing rights associated with $777.2 million of serviced loans during the year ended December 31, 2024.

The Corporation uses assumptions and estimates in determining the fair value of MSRs. These assumptions include prepayment speeds and discount rates. The assumptions used in the valuation were based on input from buyers, brokers and other qualified personnel, as well as market knowledge. At March 31, 2025, the key assumptions used to determine the fair value of the Corporation’s MSRs included a lifetime constant prepayment rate equal to 12.10% and a discount rate equal to 9.50%. At December 31, 2024, the key assumptions used to determine the fair value of the Corporation’s MSRs included a lifetime constant prepayment rate equal to 10.97% and a discount rate equal to 9.50%.

The sensitivity of the current fair value of the residential mortgage servicing rights to immediate 10% and 20% adverse changes in key economic assumptions are included in the following table.


(dollars in thousands)	March 31, 2025			December 31, 2024
Fair value of residential mortgage servicing rights	$	1,467		$	1,494

Weighted average life (months)	45			43

Prepayment speed	12.10		%	10.97		%
Impact on fair value:
10% adverse change	$	(65)		$	(63)
20% adverse change	(125)			(121)

Discount rate	9.50		%	9.50		%
Impact on fair value:
10% adverse change	$	(50)		$	(53)
20% adverse change	(96)			(102)

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The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or counteract the effect of the change.

SBA Loans

SBA loan servicing assets are amortized over the period of the estimated future net servicing life of the underlying assets. SBA loan servicing assets are evaluated quarterly for impairment based upon the fair value of the rights as compared to their amortized cost. Impairment is recognized on the income statement to the extent the fair value is less than the capitalized amount of the SBA loan servicing asset. The Corporation serviced $246.7 million and $246.7 million of SBA loans, as of March 31, 2025 and December 31, 2024, respectively.

Changes in the SBA loan servicing asset balance are summarized as follows:


	Three months ended March 31,
(dollars in thousands)	2025		2024
Balance at beginning of the period	$	3,258	$	3,127
Servicing rights capitalized	228		197
Amortization of servicing rights	(310)		(241)
Change in valuation allowance	29		176
Balance at end of the period	$	3,205	$	3,259

Activity in the valuation allowance for SBA loan servicing assets was as follows:


	Three months ended March 31,
(dollars in thousands)	2025		2024
Valuation allowance, beginning of period	$	(74)	$	(268)

Recovery	29		176
Valuation allowance, end of period	$	(45)	$	(92)

The Corporation uses assumptions and estimates in determining the fair value of SBA loan servicing rights. These assumptions include prepayment speeds, discount rates, and other assumptions. The assumptions used in the valuation were based on input from buyers, brokers and other qualified personnel, as well as market knowledge. At March 31, 2025, the key assumptions used to determine the fair value of the Corporation’s SBA loan servicing rights included a lifetime constant prepayment rate equal to 17.52% and a discount rate equal to 13.40%. At December 31, 2024, the key assumptions used to determine the fair value of the Corporation’s SBA loan servicing rights included a lifetime constant prepayment rate equal to 17.18% and a discount rate equal to 13.40%.

The sensitivity of the current fair value of the SBA loan servicing rights to immediate 10% and 20% adverse changes in key economic assumptions are included in the following table.


(dollars in thousands)	March 31, 2025			December 31, 2024
Fair value of SBA loan servicing rights	$	3,688		$	3,670

Weighted average life (years)	3.2			3.5

Prepayment speed	17.52		%	17.18		%
Impact on fair value:
10% adverse change	$	(169)		$	(166)
20% adverse change	(324)			(317)

Discount rate	13.40		%	13.40		%
Impact on fair value:
10% adverse change	$	(82)		$	(81)
20% adverse change	(160)			(159)

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change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the SBA servicing rights is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or counteract the effect of the change.

(8) Fair Value Measurements and Disclosures

The Corporation uses fair value measurements to record fair value adjustments to certain assets and liabilities. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Corporation’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation techniques or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

In accordance with this guidance, the Corporation groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis.

Securities

The fair value of securities available-for-sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

Mortgage Loans Held for Sale

The fair value of loans held for sale is based on secondary market prices.

Mortgage Loans Held for Investment

The fair value of mortgage loans held for investment is based on the price secondary markets are currently offering for similar loans using observable market data.

Derivative Financial Instruments

The fair values of forward commitments and interest rate swaps are based on market pricing and therefore are considered Level 2. Derivatives classified as Level 3 consist of interest rate lock commitments related to mortgage loan commitments. The determination of fair value includes assumptions related to the likelihood that a commitment will ultimately result in a closed loan, which is a significant unobservable assumption. A significant increase or decrease in the external market price would result in a significantly higher or lower fair value measurement.

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The following table presents the fair value of financial assets measured at fair value on a recurring basis by level within the fair value hierarchy at the dates indicated:


	March 31, 2025
(dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets
Securities available for sale:
U.S. asset backed securities	$	28,920	$	—	$	28,920	$	—
U.S. government agency MBS	20,920		—		20,920		—
U.S. government agency CMO	53,992		—		53,992		—
State and municipal securities	37,335		—		37,335		—
U.S. Treasuries	15,743		15,743		—		—
Non-U.S. government agency CMO	11,062		—		11,062
Corporate bonds	17,249		—		17,249		—
Equity investments	2,126		—		2,126		—
Mortgage loans held for sale	28,047		—		28,047		—
Mortgage loans held for investment	14,182		—		14,182		—
Interest rate lock commitments	364		—		—		364

Customer derivatives - interest rate swaps	2,286		—		2,286		—
Fair Value Hedge	2		—		2		—

Total	$	232,228	$	15,743	$	216,121	$	364

Liabilities
Interest rate lock commitments	$	81	$	—	$	—	$	81

Customer derivatives - interest rate swaps	2,309		—		2,309		—
Risk Participation Agreements	11		—		11		—
Interest rate swaps	305		—		305		—
Total	$	2,706	$	—	$	2,625	$	81


	December 31, 2024
(dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets
Securities available for sale:
U.S. asset backed securities	$	29,844	$	—	$	29,844	$	—
U.S. government agency MBS	20,871		—		20,871		—
U.S. government agency CMO	45,613		—		45,613		—
State and municipal securities	36,696		—		36,696		—
U.S. Treasuries	15,450		15,450		—		—
Non-U.S. government agency CMO	11,729		—		11,729		—
Corporate bonds	14,101		—		14,101		—
Equity investments	2,086		—		2,086		—
Mortgage loans held for sale	32,413		—		32,413		—
Mortgage loans held for investment	14,501		—		14,501		—
Interest rate lock commitments	216		—		—		216
Forward commitments	30		—		30		—
Customer derivatives - interest rate swaps	2,755		—		2,755		—
Fair Value Hedge	3		—		3		—
Interest rate swaps	9		—		9		—
Total	$	226,317	$	15,450	$	210,651	$	216

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Liabilities
Interest rate lock commitments	$	35	$	—	$	—	$	35
Forward commitments	2,745		—		2,745		—
Customer derivatives - interest rate swaps	91		—		91		—
Risk Participation Agreements	61		—		61		—

Total	$	2,932	$	—	$	2,897	$	35

The following table presents assets measured at fair value on a nonrecurring basis at the dates indicated:


(dollars in thousands)	March 31, 2025		December 31, 2024
Mortgage servicing rights	$	1,079	$	1,124
SBA loan servicing rights	3,205		3,258
Individually evaluated loans (1)
Commercial and industrial	1,737		1,944
Construction	1,579		—
Small business loans	7,027		2,284
Total	$	14,627	$	8,610

(1) Individually evaluated loans are those in which the Corporation has measured impairment generally based on the fair value of the loan’s collateral. The increase in individually evaluated commercial and industrial loans noted above was due to reassessing how we evaluate the impairment on a loan relationship to now be based on the fair value of collateral.

The following table details the valuation techniques for Level 3 individually evaluated loans.

(dollars in thousands)

Fair Value

Valuation Technique

Significant Unobservable Input

Range of Inputs

March 31, 2025

10,343

Appraisal of collateral

Management adjustments on appraisals for property type and recent activity

2%-33% discount

December 31, 2024

4,228

Appraisal of collateral

Management adjustments on appraisals for property type and recent activity

2%-33% discount

Below is management’s estimate of the fair value of all financial instruments, whether carried at cost or fair value on the Corporation’s balance sheet. The following information should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair value of the Corporation’s financial instruments:

Cash and Cash Equivalents

The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets’ fair values.

Loans Receivable

The fair value of loans receivable is estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair value below is reflective of an exit price.

Servicing Assets

The Corporation estimates the fair value of mortgage servicing rights and SBA loan servicing rights using discounted cash flow models that calculate the present value of estimated future net servicing income. The model uses readily available prepayment speed assumptions for the interest rates of the portfolios serviced. These servicing rights are classified within Level 3 in the fair value hierarchy based upon management’s assessment of the inputs. The Corporation reviews the servicing rights portfolios on a quarterly basis for impairment.

Individually Evaluated Loans

Individually evaluated loans are those in which the Corporation has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third party appraisals of the properties, or discounted cash flows based upon the expected proceeds. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business. These assets

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are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. Individually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the ACL policy.

Accrued Interest Receivable and Payable

The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value.

Deposit Liabilities

The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-Term Borrowings

The carrying amounts of short-term borrowings approximate their fair values.

Long-Term Debt

Fair values of FHLB advances and the acquisition purchase note payable are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Subordinated Debt

Fair values of junior subordinated debt are estimated using discounted cash flow analysis, based on market rates currently offered on such debt with similar credit risk characteristics, terms and remaining maturity.

Off-Balance Sheet Financial Instruments

Off-balance sheet instruments are primarily comprised of loan commitments, which are generally priced at market at the time of funding. Fees on commitments to extend credit and stand-by letters of credit are deemed to be immaterial and these instruments are expected to be settled at face value or expire unused. It is impractical to assign any fair value to these instruments and as a result they are not included in the table below. Fair values assigned to the notional value of interest rate lock commitments and forward sale contracts are based on market quotes.

Derivative Financial Instruments

The fair value of forward commitments and interest rate swaps is based on market pricing and therefore are considered Level 2. Derivatives classified as Level 3 consist of interest rate lock commitments related to mortgage loan commitments. The determination of fair value includes assumptions related to the likelihood that a commitment will ultimately result in a closed loan, which is a significant unobservable assumption. A significant increase or decrease in the external market price would result in a significantly higher or lower fair value measurement.

The following table presents the estimated fair values of the Corporation’s financial instruments at the dates indicated:


	Fair Value Hierarchy Level	March 31, 2025				December 31, 2024
(dollars in thousands)		Carrying amount		Fair value		Carrying amount		Fair value
Financial assets:
Cash and cash equivalents	Level 1	$	131,225	$	131,225	$	27,462	$	27,462
Mortgage loans held for sale	Level 2	28,047		28,047		32,413		32,413
Loans and other finance receivables, net of ACL	Level 3	2,057,493		2,003,971		2,015,936		1,967,986
Mortgage loans held for investment	Level 2	14,182		14,182		14,501		14,501





Financial liabilities:
Deposits	Level 2	$	2,128,742	$	2,136,000	$	2,005,368	$	2,014,200
Borrowings	Level 2	139,590		140,100		124,471		133,200
Subordinated debentures	Level 2	49,761		48,841		49,743		48,572

The following table includes a rollforward of interest rate lock commitments for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the periods indicated.


	Three months ended March 31,
(dollars in thousands)	2025		2024
Balance at beginning of the period	$	216	$	214
Increase in value	148		74
Balance at end of the period	$	364	$	288

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The following table details the valuation techniques for Level 3 interest rate lock commitments.

(dollars in thousands)

Fair Value

Valuation Technique

Significant Unobservable Input

Range of Inputs

Weighted Average

March 31, 2025

364

Market comparable pricing

Pull through

1 - 99%

84.26%

December 31, 2024

216

Market comparable pricing

Pull through

1 - 99%

83.27%

(9) Derivative Financial Instruments

Risk Management Objective of Using Derivatives

The Corporation is exposed to certain risk arising from both its business operations and economic conditions. The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Corporation enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Corporation’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Corporation’s known or expected cash receipts and its known or expected cash payments principally related to the Corporation’s loan portfolio.

Interest Rate Swaps

The Corporation uses interest rate swap agreements to modify interest rate characteristics from variable to fixed or fixed to variable in order to reduce the impact of interest rate changes on future net interest income. The Corporation’s credit exposure on interest rate swaps includes changes in fair value and any collateral that is held by a third party.

In June 2023 the Corporation entered into three interest rate swaps classified as cash flow hedges with notional amounts of $25 million each, to hedge the interest payments received on short term borrowings. Under the terms of the three swap agreements, the Corporation pays average fixed rates of 4.070%, 4.027% and 4.117%, and receives variable rates in return indexed to SOFR. The swaps mature between May, June, and December 2026. The Corporation performed an assessment of the hedge for effectiveness at the inception of the hedge and performs an assessment on a recurring basis and determined that the derivative currently is and is expected to be highly effective in offsetting changes in cash flows of the hedged item. For the three months ended March 31, 2025, approximately $192 thousand, net of tax, is recorded in total comprehensive income as unrealized losses, while for the three months ended March 31, 2024, approximately $749 thousand, net of tax, is recorded in total comprehensive income as unrealized gains. These amounts could differ from amounts actually recognized due to changes in interest rates, hedge de-designations and the addition of other hedges subsequent to March 31, 2025. At March 31, 2025 and December 31, 2024, the combined notional amount of the interest rate swaps was $75 million and $75 million, respectively, and the fair value was a liability of $305 thousand and $52 thousand, respectively.

In August 2024 the Corporation entered into an interest rate swap classified as a fair value hedge with a notional amount of $40 million, to hedge the interest payments received on a pool of residential mortgage loans held in portfolio. Under the terms of the swap agreement, the Corporation pays an average fixed rate of 3.60% and receives a variable rate in return indexed to SOFR. The swap matures August 2027. The Corporation performed an assessment of the hedge for effectiveness at the inception of the hedge and performs an assessment on a recurring basis and determined that the derivative currently is and is expected to be highly effective in offsetting changes in fair value of the hedged item. For the three months ended March 31, 2025, approximately $— thousand respectively, net of tax, is recorded as a fair values adjustment. These amounts could differ from amounts actually recognized due to changes in interest rates, hedge de-designations and the addition of other hedges subsequent to March 31, 2025.

Mortgage Banking Derivatives

In connection with its mortgage banking activities, the Corporation enters into commitments to originate certain fixed rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, the Corporation may enter into forward commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans or interest rate locks at a fixed price at a future date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. Interest rate lock commitments and forward commitments are recorded within other assets/liabilities on the consolidated balance sheets, with changes in fair values during the period recorded within net change in the fair value of derivative instruments on the consolidated statements of income.

Customer Derivatives

Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain customers to swap a fixed rate product for a variable rate product, or vice versa. The Corporation executes interest rate derivatives with commercial banking customers to facilitate their respective risk management strategies. Those interest rate derivatives are simultaneously hedged by offsetting derivatives that the Corporation executes with a third party, such that the Corporation minimizes its net interest rate risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge

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accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

The following table presents a summary of notional amounts and fair values of derivative financial instruments at the dates indicated:


		March 31, 2025				December 31, 2024
(dollars in thousands)	Balance Sheet Line Item	Notional Amount		Asset (Liability) Fair Value		Notional Amount		Asset (Liability) Fair Value
Interest Rate Lock Commitments
Positive fair values	Other assets	$	59,688	$	364	$	35,820	$	216
Negative fair values	Other liabilities	17,373		(81)		9,049		(35)
Total		$	77,061	$	283	$	44,869	$	181

Forward Commitments
Positive fair values	Other assets	$	—	$	—	$	4,250	$	30
Negative fair values	Other liabilities	—		—		500		—
Total		$	—	$	—	$	4,750	$	30

Customer Derivatives - Interest Rate Swaps
Positive fair values	Other assets	$	55,553	$	2,286	$	47,676	$	2,755
Negative fair values	Other liabilities	55,553		(2,309)		47,676		(2,745)
Total		$	111,106	$	(23)	$	95,352	$	10

Customer Derivatives - Risk Participation Agreements
Positive fair values	Other assets	$	—	$	—	$	—	$	—
Negative fair values	Other liabilities	7,384		(11)		7,382		(91)
Total		$	7,384	$	(11)	$	7,382	$	(91)

Fair Value Hedge
Positive fair values	Other assets	$	40,000	$	2	$	40,000	$	3
Negative fair values	Other liabilities	—		—		—		—
Total		$	40,000	$	2	$	40,000	$	3

Interest Rate Swaps
Positive fair values	Other assets	$	—	$	—	$	25,000	$	9
Negative fair values	Other liabilities	75,000		(305)		50,000		(61)
Total		$	75,000	$	(305)	$	75,000	$	(52)

Total derivative financial instruments		$	310,551	$	(54)	$	267,353	$	81

Interest rate lock commitments are considered Level 3 in the fair value hierarchy, while the forward commitments and interest rate swaps are considered Level 2 in the fair value hierarchy.

The following table presents a summary of the fair value gains and (losses) on derivative financial instruments:


	Three months ended March 31,
(dollars in thousands)	2025		2024
Interest Rate Lock Commitments	$	102	$	7
Forward Commitments	(30)		41
Customer Derivatives - Interest Rate Swaps	(33)		21
Customer Derivatives - Risk Participation Agreements	80		6

Net fair value gains (losses) on derivative financial instruments	$	119	$	75

Net realized gains on derivative hedging activities were $21 thousand for the three months ended March 31, 2025, and net realized losses of $19 thousand for the three months ended March 31, 2024, and are included in non-interest income in the consolidated statements of income.

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(10) Segments

ASC Topic 280 – Segment Reporting identifies operating segments as components of an enterprise which are evaluated regularly by the Corporation’s Chief Operating Decision Maker, our Chief Executive Officer, in deciding how to allocate resources and assess performance. The Corporation has applied the aggregation criterion set forth in this codification to the results of its operations.

Our Banking segment (“Bank”) consists of commercial and retail banking. The Banking segment generates interest income from its lending and investing activities and is dependent on the gathering of lower cost deposits from its branch network or borrowed funds from other sources for funding its loans, resulting in the generation of net interest income. The Banking segment also derives revenues from other sources including gains on the sale of available for sale investment securities, service charges on deposit accounts, cash sweep fees, overdraft fees, BOLI income, title insurance fees, and other less significant non-interest income.

Meridian Wealth (“Wealth”), a registered investment advisor and wholly-owned subsidiary of the Bank, provides a comprehensive array of wealth management services and products and the trusted guidance to help its clients and our banking customers prepare for the future. The unit generates non-interest income through advisory fees.

Meridian’s mortgage banking segment (“Mortgage”) consists of 8 loan production offices throughout suburban Philadelphia and Maryland. The Mortgage segment originates 1 – 4 family residential mortgages and sells nearly all of its production to third party investors. The unit generates net interest income on the loans it originates and holds temporarily, then earns fee income (primarily gain on sales) at the time of the sale. The unit also recognizes income from document preparation fees, changes in portfolio pipeline fair values and net hedging gains (losses), if any.

The table below summarizes income and expenses, directly attributable to each business line, which have been included in the statement of operations. Total assets for each segment is also provided.


	Segment Information
	Three Months Ended March 31, 2025								Three Months Ended March 31, 2024
(dollars in thousands)	Bank		Wealth		Mortgage		Total		Bank		Wealth		Mortgage		Total
Interest income	$	38,835	$	—	$	333	$	39,168	$	36,903	$	—	$	312	$	37,215
Interest expense	19,129		(9)		272		19,392		20,311		6		289		20,606
Net interest income	$	19,706	$	9	$	61	$	19,776	$	16,592	$	(6)	$	23	$	16,609
Provision for credit losses	5,212		—		—		5,212		2,866		—		—		2,866
Net interest income after provision	14,494		9		61		14,564		13,726		(6)		23		13,743

Non-interest Income:
Mortgage banking income	18		—		3,375		3,393		88		—		3,546		3,634
Wealth management income	—		1,535		—		1,535		—		1,317		—		1,317
SBA loan income	748		—		—		748		986		—		—		986
Net change in fair values	77		—		344		421		28		—		(130)		(102)
Net gain (loss) on hedging activity	—		—		21		21		—		—		(19)		(19)
Other	1,069		—		137		1,206		772		—		1,396		2,168
Non-interest income	1,912		1,535		3,877		7,324		1,874		1,317		4,793		7,984

Non-interest expense:
Salaries and employee benefits	7,049		560		3,776		11,385		6,609		572		3,392		10,573
Occupancy and equipment	795		7		536		1,338		733		33		467		1,233
Professional fees	677		11		75		763		760		8		730		1,498
Data processing and software	1,065		43		371		1,479		1,231		35		266		1,532
Advertising and promotion	591		93		95		779		570		82		96		748
Pennsylvania bank shares tax	264		5		—		269		269		5		—		274
Other	2,317		99		314		2,730		1,888		98		330		2,316
Non-interest expense	12,758		818		5,167		18,743		12,060		833		5,281		18,174
Income (loss) before income taxes	$	3,648	$	726	$	(1,229)	$	3,145	$	3,540	$	478	$	(465)	$	3,553

Total Assets	$	2,483,477	$	11,243	$	34,168	$	2,528,888	$	2,219,626	$	9,335	$	63,962	$	2,292,923

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Item 2. 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; 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 March 31, 2025 compared to December 31, 2024 and the results of operations for the three months ended March 31, 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 - March 31, 2025 Compared to December 31, 2024

•Total assets increased $143.0 million, or 6.0%, to $2.5 billion as of March 31, 2025.

•Portfolio loans increased $42.0 million, or 2.1%, to $2.0 billion as of March 31, 2025.

•Mortgage loans held for sale decreased $4.4 million, or 13.5%, to $28.0 million as of March 31, 2025.

•Total deposits increased $123.4 million or 6.2% to $2.1 billion as of March 31, 2025.

•Non-interest bearing deposits increased $82.6 million, or 34.3%, to $323.5 million as of March 31, 2025.

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•The Corporation returned $1.4 million of capital to Meridian shareholders during the three months ended March 31, 2025 through a $0.125 dividend per share.

Three Month Results of Operations - March 31, 2025 Compared to the Same Period in 2024

•Net income was $2.4 million, or $0.21 per diluted share, down $277 thousand, or 10.4%, driven by a higher provision for credit losses and lower non-interest income, offset somewhat by higher net interest income.

•The return on average assets and return on average equity were 0.40% and 5.57%, respectively, for the first quarter 2025, compared to 0.47% and 6.73%, respectively, for the first quarter 2024.

•Net interest income increased $3.2 million, or 19.1%, to $19.8 million and the net interest margin increased to 3.46% from 3.09%, largely due to the impact of deposit and borrowing cost declines over the period.

•The overall provision for credit losses increased $2.3 million when comparing the first quarter 2025 to the first quarter 2024. The provision increase was largely due to the impact of charge-offs, an increase in non-performing loans, combined with providing for loan growth over this period and the impact of unfavorable changes in certain macro-economic factors used in the model due to current economic and market uncertainty.

•Non-interest income decreased $660 thousand, or 8.3%, to $7.3 million driven by a $241 thousand decline in mortgage banking income, a $238 thousand decline in SBA loan income, and a $977 thousand decline in other non-interest income, partially offset by an overall $564 thousand positive impact of fair value changes related to mortgage banking activities, and a $218 thousand increase in wealth management fee income.

•Non-interest expense increased $569 thousand, or 3.1%, to $18.7 million due to a $812 thousand increase in salaries and employee benefits, and an increase of $414 thousand in other non-interest expense, partially offset by a decrease of $735 thousand in professional fees.

Key Performance Ratios

The following table presents key financial performance ratios for the periods indicated:


	Three months ended March 31,
	2025			2024
Return on average assets, annualized	0.40		%	0.47		%
Return on average equity, annualized	5.57		%	6.73		%
Net interest margin (tax effected yield)	3.46		%	3.09		%
Basic earnings per share	$	0.21		$	0.24
Diluted earnings per share	$	0.21		$	0.24

The following table presents certain key period-end balances and ratios at the dates indicated:


(dollars in thousands, except per share amounts)	March 31, 2025			December 31, 2024
Book value per common share	$	15.38		$	15.26
Tangible book value per common share (1)	$	15.06		$	14.93
Allowance as a percentage of loans and other finance receivables	1.01		%	0.91		%

Tier I capital to risk weighted assets	7.99		%	8.13		%
Tangible common equity to tangible assets ratio (1)	6.73		%	7.05		%
Loans and other finance receivables, net of fees and costs	$	2,071,675		$	2,030,437
Total assets	$	2,528,888		$	2,385,867
Total stockholders’ equity	$	173,568		$	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 leases;

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•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.

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NET INTEREST INCOME

Net interest income is an integral source of the Corporation’s revenue. The tables below present a summary for the three months ended March 31, 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 March 31,
(dollars in thousands)	2025						2024
	Average Balance		Interest Income/ Expense		Yields/ Rates		Average Balance		Interest Income/ Expense		Yields/ Rates
Assets:
Cash and cash equivalents	$	56,170	$	613	4.43	%	$	22,059	$	300	5.47	%

Investment securities - taxable	159,051		1,693		4.32		129,660		1,251		3.88
Investment securities - tax exempt (1)	54,723		387		2.87		57,797		405		2.82
Loans held for sale	20,604		333		6.55		19,509		323		6.66
Loans held for investment (1)	2,039,676		36,218		7.20		1,944,187		35,018		7.24
Total loans	2,060,280		36,551		7.19		1,963,696		35,341		7.24
Total interest-earning assets	2,330,224		39,244		6.83	%	2,173,212		37,297		6.90	%
Noninterest earning assets	90,347						95,835
Total assets	$	2,420,571					$	2,269,047
Liabilities and stockholders' equity:
Interest-bearing demand deposits	$	150,980	$	1,229	3.30	%	$	139,225	$	1,367	3.95	%
Money market and savings deposits	919,731		7,808		3.44		773,123		7,855		4.09
Time deposits	721,336		7,831		4.40		677,920		8,170		4.85
Total interest - bearing deposits	1,792,047		16,868		3.82		1,590,268		17,392		4.40
Borrowings	123,677		1,469		4.82		196,909		2,435		4.97
Subordinated debentures	49,749		1,055		8.60		49,847		779		6.29
Total interest-bearing liabilities	1,965,473		19,392		4.00		1,837,024		20,606		4.51
Noninterest-bearing deposits	244,161						233,255
Other noninterest-bearing liabilities	36,203						38,946
Total liabilities	2,245,837						2,109,225
Total stockholders' equity	174,734						159,822
Total stockholders' equity and liabilities	$	2,420,571					$	2,269,047
Net interest income and spread (1)			$	19,852	2.83				$	16,691	2.39
Net interest margin (1)					3.46	%					3.09	%

(1)Yields and net interest income are reflected on a tax-equivalent basis.

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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 months ended March 31, 2025 as compared to the same period 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 March 31,
	2025 Compared to 2024
(dollars in thousands)	Rate		Volume		Total
Interest income:
Cash and cash equivalents	$	(69)	$	382	$	313

Investment securities - taxable	138		304		442
Investment securities - tax exempt (1)	4		(22)		(18)
Loans held for sale	(8)		18		10
Loans held for investment (1)	(501)		1,701		1,200
Total loans	(509)		1,719		1,210
Total interest income	$	(436)	$	2,383	$	1,947
Interest expense:
Interest-bearing demand deposits	$	(247)	$	109	$	(138)
Money market and savings deposits	(1,405)		1,358		(47)
Time deposits	(842)		503		(339)
Total interest - bearing deposits	(2,494)		1,970		(524)
Borrowings	(93)		(873)		(966)
Subordinated debentures	278		(2)		276
Total interest expense	$	(2,309)	$	1,095	$	(1,214)
Interest differential	$	1,873	$	1,288	$	3,161

(1)Yields and net interest income are reflected on a tax-equivalent basis.

Three Months Ended March 31, 2025 Compared to the Same Period in 2024

For the three months ended March 31, 2025 as compared to the same period in 2024, tax-equivalent interest income increased $1.9 million as favorable volume changes contributed $2.4 million to interest income, partially offset by rate changes that had a $436 thousand unfavorable impact on interest income. The loans held for investment average balances increased $95.5 million, leading to a favorable volume impact on interest income of $1.7 million, while the increase in loans held for sale average balances of $1.1 million had an small but favorable impact to interest income of $18 thousand. Growth in the loans held for investment portfolio was led by average balance increases in commercial mortgage loans ($59.5 million), home equity lines and loans ($13.2 million), commercial and industrial loans ($33.5 million), and SBA loans ($5.7 million). The change in rates led to decreased yields on loans held for sale (down 11 basis points) and loans held for investment (down 4 basis points) that unfavorably impact interest income by $509 thousand, overall.

On the funding side, overall interest expense decreased $1.2 million, largely driven by the impact that the Fed's rate cuts in the later part of 2024 have had on the cost of deposits and borrowings. The cost of deposits were down across the board, leading to a $524 thousand decrease to interest expense. The cost of interest-bearing demand deposits, money market and savings accounts and time deposits decreased 65 basis points, 65 basis points and 45 basis points, respectively. These deposit cost declines were partially offset by volume increases as the average balances on money market and savings accounts increased $146.6 million, while time deposit average balances increased $43.4 million, and the average balances on interest-bearing demand deposits increased $11.8 million,

Additionally, the cost of borrowings decreased by 15 basis points, while the cost of subordinated debentures increased 231 basis points as the $40 million in 2019 Debentures converted to a floating rate instrument as of December 31, 2024, contributing a $278 thousand increase to interest expense. Borrowings decreased $73.2 million on average.

Overall, the $3.2 million increase in net interest income over this period was driven by both rate and volume changes.

PROVISION FOR CREDIT LOSSES

Three Months Ended March 31, 2025 Compared to the Same Period in 2024

The total provision for credit losses increased $2.3 million on a net basis for the three months ended March 31, 2025. The provision on funded loans increased $1.8 million over the three month comparable period in 2024 driven by provisioning for loan growth and charge-offs, as well as an increase in specific reserves, mainly on small business loans and existing non-accrual loans. The increase in provision was also impacted by unfavorable changes in certain macro-economic factors used in the model due to current economic and market uncertainty. There was no provision on unfunded loan commitments for three months ended March 31, 2025, while for the three months March 31, 2024 there was an unfunded provision reversal of $508 thousand.

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NON-INTEREST INCOME

Three Months Ended March 31, 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)	March 31, 2025		March 31, 2024		$ Change		% Change
Mortgage banking income	$	3,393	$	3,634	$	(241)	(6.6)	%
Wealth management income	1,535		1,317		218		16.6	%
SBA loan income	748		986		(238)		(24.1)	%
Earnings on investment in life insurance	222		207		15		7.2	%

Net change in the fair value of derivative instruments	149		75		74		98.7	%
Net change in the fair value of loans held-for-sale	102		(2)		104		NM
Net change in the fair value of loans held-for-investment	170		(175)		345		(197.1)	%
Net gain (loss) on hedging activity	21		(19)		40		(210.5)	%

Other	984		1,961		(977)		(49.8)	%
Total non-interest income	$	7,324	$	7,984	$	(660)	(8.3)	%

Total non-interest income decreased $660 thousand due in part to a decline in mortgage banking income from our mortgage segment. While mortgage loan originations increased $8.0 million when comparing the quarter ended March 31, 2025 to the quarter ended March 31, 2024, the sales margin declined over this period as well, leading to the decline in mortgage banking income. SBA loan income decreased $238 thousand over this period as the value of SBA loans sold for the quarter-ended March 31, 2025 was $3.4 million, or 21.7%, lower than the quarter-ended March 31, 2024, while the gross margin on sale was 8.7% for the quarter-ended March 31, 2025 compared to 8.1% for the quarter-ended March 31, 2024.

The net change in the fair value of loans held-for-investment improved to a gain of $170 thousand for the quarter ended March 31, 2025, compared to a loss of $175 thousand for the comparable prior year quarter, due to the impact of the changing interest rate environment and the impact this has had on loans in portfolio that are held at fair value. Other non-interest income decreased $925 thousand due to higher levels of FHLB stock dividend income, broker fees and other mortgage segment related income in the prior period, partially offset by an increase in business credit card fee income and swap fee income.

NON-INTEREST EXPENSE

Three Months Ended March 31, 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)	March 31, 2025		March 31, 2024		$ Change		% Change
Salaries and employee benefits	$	11,385	$	10,573	$	812	7.7	%
Occupancy and equipment	1,338		1,233		105		8.5	%
Professional fees	763		1,498		(735)		(49.1)	%
Data processing and software	1,479		1,532		(53)		(3.5)	%
Advertising and promotion	779		748		31		4.1	%
Pennsylvania bank shares tax	269		274		(5)		(1.8)	%
Other	2,730		2,316		414		17.9	%
Total non-interest expense	$	18,743	$	18,174	$	569	3.1	%

Total non-interest expense increased $569 thousand, or 3.1%, largely attributable to an increase in salaries and employee benefits and other non-interest expense. Salaries and employee benefits increased $812 thousand due largely to overall employee merit, benefit, and tax related increases, combined with an increase in mortgage segment related commissions and other benefits. Other non-interest expense increased $414 thousand due to an increase in certain commercial and consumer related loan expenses due to portfolio growth, partially offset with a decrease in loan servicing fees resulting from the MSR sale in 2024, combined with a decline in OREO expense as a $1.7 million residential OREO property was sold in 2024 . Professional fees decreased $735 thousand over the period mainly due to the results of cost control efforts on legal and consulting fees, combined with savings realized from switching internal audit outsourcing firms.

INCOME TAX EXPENSE

Income tax expense for the three months ended March 31, 2025 was $746 thousand, as compared to $877 thousand for the same period in 2024. Our effective tax rates were 23.7% for the three months ended March 31, 2025, compared to 24.7% for the same period

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in 2024. While income tax expense decreased primarily due to the decrease in income before income taxes, the effective tax rate increased due to the impact of additional nondeductible expense, partially offset by an increase in tax-free bank owned life insurance income.

BALANCE SHEET ANALYSIS

As of March 31, 2025, total assets were $2.5 billion which increased $143.0 million, or 6.0%, 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)	March 31, 2025		December 31, 2024		$ Change		% Change
Mortgage loans held for sale	$	28,047	$	32,413	$	(4,366)	(13.5)	%
Real estate loans:
Commercial mortgage	845,215		823,976		21,239		2.6
Home equity lines and loans	94,179		90,721		3,458		3.8
Residential mortgage	250,684		252,565		(1,881)		(0.7)
Construction	277,895		259,553		18,342		7.1
Total real estate loans	1,467,973		1,426,815		41,158		2.9

Commercial and industrial	371,980		367,366		4,614		1.3
Small business loans	161,104		155,775		5,329		3.4
Consumer	376		349		27		7.7
Leases, net	66,813		75,987		(9,174)		(12.1)
Total loans and other finance receivables	$	2,068,246	$	2,026,292	$	41,954	2.1
Total loans and leases	$	2,096,293	$	2,058,705	$	37,588	1.8	%

Portfolio loans increased $42.0 million, to $2.1 billion as of March 31, 2025, from $2.0 billion as of December 31, 2024. Overall portfolio loan growth was 2.1% since December 31, 2024, or 8.3% on an annualized basis for 2025. Commercial real estate loans increased $21.2 million, or 2.6%, construction loans increased $18.3 million, or 7.1%, SBA loans increased $5.3 million, or 3.4%, and commercial and industrial loans increased $4.6 million, or 1.3%.

As of March 31, 2025, included within the commercial real estate loans total of $845.2 million was $272.5 million of owner-occupied commercial loans, as well as $121.5 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)	March 31, 2025		December 31, 2024		$ Change		% Change
Noninterest-bearing deposits	$	323,485	$	240,858	$	82,627	34.3	%
Interest-bearing deposits:
Interest-bearing demand deposits	161,055		141,439		19,616		13.9	%
Money market and savings deposits	947,795		913,536		34,259		3.8	%
Time deposits	696,407		709,535		(13,128)		(1.9)	%
Total interest-bearing deposits	$	1,805,257	$	1,764,510	$	40,747	2.3	%
Total deposits	$	2,128,742	$	2,005,368	$	123,374	6.2	%

Total deposits increased $123.4 million, or 6.2%, since December 31, 2024. Noninterest-bearing deposits and interest-bearing accounts increased $82.6 million, and $19.6 million, respectively, during the period. The increase in noninterest-bearing deposits was the result of a large late in the quarter deposit from a long-standing customer that sold a business. The deposit remained with the bank for several weeks. The 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 decreased $13.1 million, or 1.9%, largely due to wholesale funding as customers prefer the higher term interest rates offered by these products.

The majority of Meridian's deposit base is comprised of business deposits, 52%, with consumer deposits amounting to 12% at March 31, 2025. Municipal deposits at 12% and brokered deposits at 24% 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 March 31, 2025, 56% of business accounts and 86% of consumer accounts were fully insured by the

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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 25% at March 31, 2025.

Capital

Consolidated stockholders’ equity of the Corporation was $173.6 million, or 6.9% of total assets as of March 31, 2025, as compared to $171.5 million, or 7.2% of total assets as of December 31, 2024. On April 24, 2025, the Board of Directors declared a quarterly cash dividend of $0.125 per common share payable May 19, 2025 to shareholders of record as of May 12, 2025.

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 9.30% and 9.21% at March 31, 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
		March 31, 2025				December 31, 2024
Tier 1 leverage ratio		9.30	%	9.21	%		5.00	%
Common tier 1 risk-based capital ratio		10.15	%	10.33	%		6.50	%
Tier 1 risk-based capital ratio		10.15	%	10.33	%		8.00	%
Total risk-based capital ratio		11.14	%	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 March 31, 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 2.07% as of March 31, 2025, up from 1.90% reported as of December 31, 2024. Total non-performing loans of $52.2 million as of March 31, 2025, increased $7.1 million from $45.1 million as December 31, 2024. The changes were the result of additional risk rating downgrades leading to non-performing loan classification largely in the SBA loan portfolio and to a lesser degree in small equipment leasing and residential mortgages, partially offset the payoff of $323 thousand in SBA loans and by a $920 thousand decline in non-performing commercial loans due to an additional charge-off on a protracted commercial advertising loan relationship.

Meridian realized net charge-offs of 0.14% of total average loans for the three months ending March 31, 2025, which was up slightly from 0.12% reported for the same period in 2024. Net charge-offs for the quarter ended March 31, 2025 were $2.8 million, compared to net charge-offs of $2.3 million for the quarter ended March 31, 2024. Net charge-offs for the current quarter comprised of $3.0 million in charge-offs, with $175 thousand in recoveries, and were split between commercial loans, construction 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 March 31, 2025 compared to 0.91% as of December 31, 2024. As of March 31, 2025 there were specific reserves of $5.0 million against non-performing loans, an increase from $2.7 million as of December 31, 2024. The increase over this period was driven by an increase in specific reserves on SBA loan, as well as smaller increases in specific reserves on commercial and commercial real estate loans.

The increase in ACL coverage ratio noted above since December 31, 2024 was the result of an increase in specific reserves on individually evaluated loans, combined with providing for loan growth during the quarter.

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.

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Nonperforming Assets and Related Ratios

The following table presents nonperforming assets and related ratios for the periods indicated:


(dollars in thousands)	March 31, 2025			December 31, 2024
Non-performing assets:
Nonaccrual loans and leases:
Real estate loans:
Commercial mortgage	$	784		$	809
Home equity lines and loans	1,676			1,716
Residential mortgage	8,308			7,900
Construction	8,506			8,613
Total real estate loans	19,274			19,038
Commercial and industrial	11,046			11,966
Small business loans	18,790			12,270
Leases	2,732			1,851
Total nonaccrual loans and leases	51,842			45,125
Loans 90+ days past due and still accruing	359			—
Other real estate owned	159			159
Total non-performing assets	$	52,360		$	45,284

Asset quality ratios:
Non-performing assets to total assets	2.07		%	1.90		%
Non-performing loans to:

Total loans and other finance receivables	2.52		%	2.22		%
Total loans and other finance receivables (excluding loans at fair value) (1)	2.54		%	2.24		%
Allowance for credit losses to:

Total loans and other finance receivables	1.01		%	0.91		%

Non-performing loans	39.90		%	40.86		%

Total loans and leases	$	2,099,722		$	2,062,850
Total loans and other finance receivables	2,071,675			2,030,437
Total loans and other finance receivables (excluding loans at fair value)	2,057,493			2,015,936
Allowance for credit losses	20,827			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 $640.5 million in liquidity from these sources. Through its relationship at the Federal Reserve, Meridian had available credit of approximately $5.3 million at March 31, 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 March 31, 2025, Meridian’s maximum borrowing capacity with the FHLB was $698.2 million. At March 31, 2025, Meridian had borrowed $134.9 million and the FHLB had issued letters of credit, on Meridian’s behalf, totaling $190.2 million against its available credit lines. At March 31, 2025, Meridian also had available $56.0 million of unsecured federal funds lines of credit with other financial institutions as well as $264.2 million of available short or long

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term funding through the CDARS program and $267.8 million of available short or long term funding through brokered CD arrangements. Management believes that Meridian has adequate resources to meet its short-term and long-term funding requirements.

Discussion of Segments

As of March 31, 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 $3.6 million for the three months ended March 31, 2025, as compared to income before tax of $3.5 million for the same period in 2024. The Banking Segment provided 116.0% of the Corporation’s pre-tax profit for the three months ended March 31, 2025, as compared to 99.6% for the same periods in 2024.

The Wealth Management Segment recorded income before tax of $726 thousand for the three months ended March 31, 2025, as compared to income before tax of $478 thousand for the same period in 2024. The increase in income in this segment was the result of an increase in assets under management and improved market conditions over the period.

The Mortgage Banking Segment recorded losses before tax of $1.2 million for the three months ended March 31, 2025, as compared to losses before tax of $465 thousand for the same period 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 March 31, 2025 were $632.3 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 March 31, 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 did not repurchase any loans for the three months ended March 31, 2025, while the Corporation repurchased 3 loans totaling $589 thousand for the three months ended March 31, 2024.

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)	March 31, 2025		December 31, 2024
Total stockholders' equity (GAAP)	$	173,568	$	171,522
Less: Goodwill and intangible assets	(3,615)		(3,666)
Tangible common equity (non-GAAP)	169,953		167,856

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(dollars in thousands, except share data)	March 31, 2025			December 31, 2024

Total assets (GAAP)	2,528,888			2,385,867
Less: Goodwill and intangible assets	(3,615)			(3,666)
Tangible assets (non-GAAP)	$	2,525,273		$	2,382,201

Stockholders' equity to total assets (GAAP)	6.86		%	7.19		%
Tangible common equity to tangible assets (non-GAAP)	6.73		%	7.05		%

Shares outstanding	11,285			11,240

Book value per share (GAAP)	$	15.38		$	15.26
Tangible book value per share (non-GAAP)	$	15.06		$	14.93

The following is a reconciliation of the allowance for credit losses to total loans held for investment ratio at March 31, 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)	March 31, 2025			December 31, 2024
Allowance for credit losses (GAAP)	$	20,827		$	18,438

Loans and other finance receivables (GAAP)	2,071,675			2,030,437

Less: Loans at fair value	(14,182)			(14,501)
Loans and other finance receivables, excluding loans at fair value (non-GAAP)	$	2,057,493		$	2,015,936

Allowance for credit losses to loans and other finance receivables (GAAP)	1.01		%	0.91		%

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Simulations of Net Interest Income

We use a simulation model on a quarterly basis to measure and evaluate potential changes in our net interest income resulting from various hypothetical interest rate scenarios. Our model incorporates various assumptions that management believes to be reasonable, but which may have a significant impact on results such as:

•The timing of changes in interest rates;

•Shifts or rotations in the yield curve;

•Repricing characteristics for market rate sensitive instruments on the balance sheet;

•Differing sensitivities of financial instruments due to differing underlying rate indices;

•Varying timing of loan prepayments for different interest rate scenarios;

•The effect of interest rate floors, periodic loan caps and lifetime loan caps;

•Overall growth rates and product mix of interest-earning assets and interest-bearing liabilities.

Because of the limitations inherent in any approach used to measure interest rate risk, simulated results are not intended to be used as a forecast of the actual effect of a change in market interest rates on our results, but rather as a means to better plan and execute appropriate ALM strategies.

Potential increase (decrease) to our net interest income between a flat interest rate scenario and hypothetical rising and declining interest rate scenarios, measured over a one-year period as of the dates indicated, are presented in the following table which assuming rate shifts occur upward and downward on the yield curve in even increments over the first twelve months (ramp) followed by rates held constant thereafter.

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	March 31,
Changes in Market Interest Rates	2025		2024
+300 basis points over next 12 months	2.10	%	1.30	%
+200 basis points over next 12 months	1.61	%	1.12	%
+100 basis points over next 12 months	0.94	%	0.73	%
No Change
-100 basis points over next 12 months	(1.12)	%	(1.85)	%
-200 basis points over next 12 months	(2.05)	%	(3.23)	%
-300 basis points over next 12 months	(1.89)	%	(4.68)	%

The above interest rate simulation suggests as of March 31, 2025 that the Corporation’s balance sheet is fairly neutrally positioned at +/- 1% in an up or down 100 basis point environment over the next 12 months. The simulated exposure to a change in interest rates is manageable and well within policy guidelines. The results continue to drive our funding strategy of increasing relationship-based accounts (core deposits) and utilizing term deposits to fund short to medium duration assets.

Simulation of economic value of equity

To quantify the amount of capital required to absorb potential losses in value of our interest-earning assets and interest-bearing liabilities resulting from adverse market movements, we calculate economic value of equity on a quarterly basis. We define economic value of equity as the net present value of our balance sheet’s cash flow, and we calculate economic value of equity by discounting anticipated principal and interest cash flows under the prevailing and hypothetical interest rate environments. Potential changes to our economic value of equity between a flat rate scenario and hypothetical rising and declining rate scenarios are presented in the following table. The projections assume shifts upward and downward in the yield curve of 100, 200 and 300 basis points occurring immediately.


	March 31,
Changes in Market Interest Rates	2025		2024
+300 basis points	10	%	(5)	%
+200 basis points	9	%	(2)	%
+100 basis points	5	%	—	%
No Change
-100 basis points	(9)	%	(3)	%
-200 basis points	(22)	%	(10)	%
-300 basis points	(43)	%	(23)	%

This economic value of equity profile at March 31, 2025 suggests that we would experience a negative effect from a decrease of 100 basis points in rates, and the impact would worsen as rates continued to move downward. While an instantaneous shift in interest rates is used in this analysis to provide an estimate of exposure, we believe that a gradual shift in interest rates would have a much more modest impact. Since economic value of equity measures the discounted present value of cash flows over the estimated lives of instruments, the change in economic value of equity does not directly correlate to the degree that earnings would be impacted over a shorter time horizon.

The results of our net interest income and economic value of equity simulation analysis are purely hypothetical, and a variety of factors might cause actual results to differ substantially from what is depicted. For example, if the timing and magnitude of interest rate changes differ from that projected, our net interest income might vary significantly. Non-parallel yield curve shifts or changes in interest rate spreads would also cause net interest income to be different from that projected. An increasing interest rate environment could reduce projected net interest income if deposits and other short-term interest-bearing liabilities reprice faster than expected or faster than our interest-earning assets. Actual results could differ from those projected if interest-earning assets and interest-bearing liabilities grow faster or slower than estimated, or otherwise change its mix of products. Actual results could also differ from those projected if actual repayment speeds in the loan portfolio are substantially different than those assumed in the simulation model. Furthermore, the results do not take into account the impact of changes in loan prepayment rates on loan discount accretion. If loan prepayment rates were to increase, any remaining loan discounts would be recognized into interest income. This would result in a current period offset to declining net interest income caused by higher rate loans prepaying. Finally, these simulation results do not contemplate all the actions that management may undertake in response to changes in interest rates, such as changes to loan, investment, deposit, funding or other strategies.

Management has and continues to employ strategies to mitigate risk in the Net Interest Income and Economic Value simulations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act, as of the end of the period covered by this Quarterly

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Report on Form 10-Q. Based on this evaluation, the Corporation’s CEO and CFO have concluded that the Corporation’s disclosure controls and procedures were effective as of March 31, 2025 to ensure that the information required to be disclosed by the Corporation in the reports that the Corporation files or submits under the Exchange Act is recorded, processed, summarized, and reported completely and accurately within the time periods specified in SEC rules and forms.

Changes in Internal Control Over Financial Reporting

There was no change in the Corporation’s internal control over financial reporting identified during the quarter ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II–OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

There have been no material changes in the risk factors faced by the Corporation from those disclosed in the Corporation’s Annual

Report on Form 10-K for the year ended December 31, 2024.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

EXHIBIT INDEX


Exhibit Number						Description
3.1						Amended Articles of Incorporation of Registrant, filed herewith.
3.2						Bylaws of Registrant, filed as Exhibit 3.2 to Form 8-K on August 24, 2018 and incorporated herein by reference.
4.2						Indenture, dated as of December 18, 2019, between Meridian Corporation, as Issuer, and U.S. Bank National Association, as Trustee, incorporated by reference to Exhibit 4.1 of the Registrant's Form 8-K filed with the SEC on December 18, 2019.
4.3						Form of 5.375% Subordinated Note due 2029 (included as Exhibit A-1 and Exhibit A-2 to the Indenture incorporated by reference as Exhibit 4.2 hereto), filed with the SEC on December 18, 2019.
10.7						Equity Distribution Agreement between Meridian Corporation and D.A. Davidson & Co., effective February 20, 2025, filed as Exhibit 10.1 to Form 8-K on February 20, 2025 and incorporated herein by reference.
31.1						Rule 13a-14(a)/ 15d-14(a) Certification of the Principal Executive Officer, filed herewith.
31.2						Rule 13a-14(a)/ 15d-14(a) Certification of the Principal Financial Officer, filed herewith.
32						Section 1350 Certifications, filed herewith.
101.INS						XBRL Instance Document – The instance document does not appear in the interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 104						Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date:	May 9, 2025	Meridian Corporation

		By:	/s/ Christopher J. Annas
			Christopher J. Annas President and Chief Executive Officer (Principal Executive Officer)

		By:	/s/ Denise Lindsay
			Denise Lindsay Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)