MALVERN, PA — Meridian Corporation (NASDAQ: MRBK) reported a sharp increase in second-quarter earnings as improved net interest margins, strong SBA loan sales, and seasonal mortgage activity drove substantial gains. Net income for the three months ended June 30 surged to $5.6 million, or $0.49 per diluted share, more than double the $2.4 million earned in the first quarter.
The bank’s pre-provision net revenue rose 57% quarter-over-quarter to $11.1 million, reflecting broader margin expansion and a recovery in non-interest income. Net interest margin climbed 8 basis points to 3.54%, while loan yield increased to 7.24%.
“Our second quarter earnings were substantially above first quarter 2025, benefiting from improving margin, SBA loan sales and mortgage seasonality,” said Chairman and CEO Christopher J. Annas. “Management is intensely focused on reducing the nonperforming loans, historically high for us, but negotiations and lengthy court schedules will slow the process.”
Loan Growth and Credit Quality
Total loans increased $36.2 million, or 1.7% from the prior quarter. Commercial and industrial lending led the way with an $32 million increase, followed by gains in construction and commercial real estate loans. The rise was partially offset by planned paydowns in the lease portfolio and a $16.4 million decline in SBA loan balances due to increased loan sales.
Non-performing loans declined modestly to $50.5 million, or 2.35% of total loans, helped by the repossession of loan collateral. Meridian acknowledged that over $19 million in non-performing balances were tied to SBA loans, roughly half of which are guaranteed.
The provision for credit losses fell to $3.8 million, down from $5.2 million last quarter, driven by reduced non-performing loan levels and a decline in required specific reserves. Net charge-offs rose to $3.6 million, largely tied to SBA loans, leases, and commercial credits.
Income Drivers: SBA and Mortgage Gains
Non-interest income jumped 54% to $11.5 million, fueled by a rebound in mortgage banking and robust SBA loan sales. Mortgage gains improved by $2.4 million on the back of $63.5 million in loan sales, while SBA sales contributed an additional $1.2 million. Despite the increase in volume, margins on SBA loans narrowed, reflecting market discounts on older vintages.
Meridian Wealth Partners also posted solid performance with pre-tax income of $604,000 for the quarter, and the bank added senior talent to expand that unit’s opportunity pipeline.
Expenses and Capital Management
Non-interest expense increased $2.6 million, largely due to higher compensation costs tied to headcount growth and increased origination activity. Advertising and professional fees also rose as business development and compliance costs ramped up. Occupancy expense declined, benefiting from office space reductions in prior quarters.
Meridian’s balance sheet remained stable with total assets at $2.5 billion. Deposit balances fell slightly due to the withdrawal of a $103 million temporary deposit. Stockholders’ equity rose to $178 million, aided by strong earnings. The bank’s Community Bank Leverage Ratio stood at 9.32% at quarter-end.
Dividend and Outlook
Meridian’s board declared a quarterly dividend of $0.125 per share, payable August 18 to shareholders of record as of August 11.
Looking ahead, the company reaffirmed full-year loan growth expectations in the 8% to 10% range, while acknowledging headwinds from a tight housing inventory and elevated non-performing assets. “Our principal Philadelphia metro market is healthy and vibrant,” said Annas. “We are excited about our market penetration in all segments and believe this will propel us to greater performance.”
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