Meridian Corp (MRBK)

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 and related notes 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, 2025 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, including the timing of third-party appraisals and loan valuations from lead financial institutions in which we are a loan participant; cyber-security concerns; rapid technological developments and changes, including the development and use of artificial intelligence in business processes, services, and products; 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

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impacts on market volatility and global trade; the impact of uncertain or changing political conditions or any current or future federal government shutdown and uncertainty regarding the federal government's debt limit; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and military conflicts, including the ongoing conflict in the Middle East, which could impact economic conditions in the United States; 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, 2025 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 2025 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. 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 June 30, 2026 compared to December 31, 2025 and the results of operations for the three and six months ended June 30, 2026 compared to the same periods in 2025. More detailed information related to these highlights can be found in the sections that follow.

Changes in Financial Condition - June 30, 2026 Compared to December 31, 2025

•Total assets increased $31.2 million, or 1.2%, to $2.6 billion as of June 30, 2026.

•Portfolio loans increased $7.9 million, or 0.4%, to $2.2 billion as of June 30, 2026.

•Mortgage loans held for sale increased $21.1 million, or 62.6%, to $54.9 million as of June 30, 2026.

•Total deposits increased $36.3 million or 1.7% to $2.2 billion as of June 30, 2026.

•The Corporation earned net income of $7.8 million during the six months ended June 30, 2026 and returned $3.3 million of capital to Meridian shareholders during this period through a $0.14 dividend per share in each of the first two quarters of the year.

Three Month Results of Operations - June 30, 2026 Compared to June 30, 2025

•Net income was $5.8 million, or $0.48 per diluted share, up $215 thousand, or 3.8%, driven by higher net interest income and a lower level of provision for credit losses, partially offset by lower non-interest income, and higher non-interest expense.

•The return on average assets and return on average equity were 0.90% and 11.42%, respectively, for the second quarter 2026, compared to 0.90% and 12.68%, respectively, for the second quarter 2025.

•Net interest income increased $1.6 million, or 7.7%, to $22.8 million and the net interest margin increased to 3.69% from 3.54%, due to the impact of deposit and borrowing cost declines as well as the increase in average noninterest-bearing deposits over the period.

•The overall provision for credit losses decreased $835 thousand when comparing the second quarter 2026 to the second quarter 2025. The provision on funded loans decreased $840 thousand over the three month comparable period in 2025 driven largely by a decrease of $940 thousand in charge-offs over this period, combined with a lower level of loan growth as well.

•Non-interest income decreased $1.4 million, or 12.4%, to $9.9 million driven by a $1.4 million decline in SBA loan income, and a $467 thousand decrease in the net gain on sale of MSR's. These declines in non-interest income were partially offset by a $333 thousand increase in mortgage banking income.

•Non-interest expense increased $870 thousand, or 4.1%, to $22.2 million due to largely to an increase of $312 thousand in data processing and software expense, a $135 thousand increase in occupancy and equipment expense, combined with a $392 thousand increase in other non-interest expense.

Six Month Results of Operations - June 30, 2026 Compared to June 30, 2025

•Net income was $7.8 million, or $0.64 per diluted share, down $178 thousand, or 2.2%, driven by an increase in the provision for credit losses, a decrease in non-interest income, and an increase in non-interest expense.

•The return on average assets and return on average equity were 0.61% and 7.75%, respectively, for the six months ended June 30, 2026, compared to 0.66% and 9.16%, respectively, for the six months ended June 30, 2025

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•Net interest margin increased to 3.75% from 3.50% due to the impact of a reduction in deposit and borrowing costs outpacing the decreased yield on interest earnings assets, mainly loans.

•The overall provision for credit losses increased $1.4 million when comparing the six months ended June 30, 2026 to June 30, 2025, due to an increase in charge-offs, combined with providing for loan growth and an increase in certain loss factors.

•Non-interest income decreased $1.7 million, or 9.1%, to $16.9 million driven by a $2.0 million decrease in SBA loan income, and an overall $1.0 million negative impact of fair value changes related to mortgage banking activities. These changes were partially offset by a $1.5 million increase in mortgage banking income, and a $408 thousand increase in wealth management fee income.

•Non-interest expense increased $2.3 million, or 5.7%, to $42.4 million due to an increase of $1.0 million in salaries and employee benefits, an increase of $806 thousand in data processing and software expense, combined with a $211 thousand increase in professional fees, and an increase of $354 thousand in other non-interest expense.

Key Performance Ratios

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

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

(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, other finance receivables, and investments and the interest expense paid on deposits and borrowed funds;

•Provision For Credit Losses, or the amount added to the Allowance t

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to assist in understanding the financial condition and results of operations of Meridian as of and for the year ended December 31, 2025. The information contained in this section should be read together with the December 31, 2025 audited Consolidated Financial Statements and the accompanying Notes included in Item 8. Financial Statements And Supplementary Data of this Form 10-K.

This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.

Critical Accounting Policies and Estimates

Our accounting and reporting policies conform to GAAP and conform to general practices within the industry in which we operate. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements. In particular, management has identified the provision and allowance for credit losses as the accounting policy that, due to the estimates, assumptions and judgments inherent in that policy, is critical in understanding our financial statements. Management has presented the application of this policy to the audit committee of our board of directors.

The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 1 - Summary of Significant Accounting Policies, to the Corporation’s Consolidated Financial Statements as of and for the years ended December 31, 2025 and 2024.

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Provision and allowance for credit losses

The ACL is a valuation reserve established and maintained by charges against operating income. It is an estimate of expected credit losses, measured over the contractual life of a loan, that considers historical loss experience, current conditions and forecasts of future economic conditions.

Management’s evaluation process used to determine the appropriateness of the ACL is complex and requires the use of estimates, assumptions and judgments which are inherently subject to high uncertainty. The evaluation process combines several factors: historical loan loss experience, managements ongoing review of lending policies and practices, experience and depth of staff, quality of the loan grading system, the fair value of underlying collateral, concentration of loans to specific borrowers or industries, existing economic conditions and forecasts, segment specific risks and other quantitative and qualitative factors which could affect future credit losses. Our reasonable and supportable forecast is for a period of four quarters. For periods beyond our one-year forecast, we revert to historical loss rates over one quarter. Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on loans and the appropriateness of the ACL could change significantly. It is challenging to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

Executive Overview

The following items highlight the Corporation’s changes in its financial condition as of December 31, 2025 compared to December 31, 2024 and the results of operations for the year ended December 31, 2025 compared to the same period in 2024. More detailed information related to these highlights can be found in the sections that follow.

Changes in Financial Condition

•Total assets increased $176.1 million, or 7.4%, to $2.6 billion as of December 31, 2025.

•Portfolio loans, increased $141.4 million, or 7.0%, to $2.2 billion as of December 31, 2025.

Results of Operations

•Consolidated net income increased $5.5 million, or 33.6%, to $21.8 million.

•The return on average assets and return on average equity was 0.87% and 12.00%, respectively, for the year ended December 31, 2025, compared to 0.70% and 9.93%, respectively, for the year ended December 31, 2024.

•Net interest income was up $16.7 million, or 23.5% due to higher volume of earning assets.

•Non-interest income decreased $2.2 million or 5.2% due largely to a decline in MSR sales and a decline in other non-interest income.

Key Performance Ratios

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

(1) Non-GAAP financial measure. See “Non-GAAP Financial Measures” below for Non-GAAP to GAAP reconciliation.

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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 ACL to provide for current expected credit losses on portfolio loans and leases;

•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 & software, loan expenses, and other operating expenses; and

•Income Taxes, which include state and federal jurisdictions.

NET INTEREST INCOME

Net interest income is an integral source of the Corporation’s income. The tables below present a summary for the years ended December 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 tables 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.

(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 year ended December 31, 2025 as compared to the year ended December 31, 2024, allocated by rate and volume. Changes in interest income and/or expense attributable to both volume and rate have been allocated proportionately based on the relationship of the absolute dollar amount of the change in each category.

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