Christopher J. Annas, Chairman and CEO commented: Income Statement - Second Quarter 2024 Compared to First Quarter 2024 Average total loans, excluding residential loans for sale, increased $28.5 million resulting in an increase in interest income of $517 thousand. The largest drivers of this increase were commercial, commercial real estate, and small business loans which on a combined basis increased $36.0 million on average, partially offset by a decrease in average leases of $13.2 million. Home equity, re ...

Meridian Bank, the wholly owned subsidiary of Meridian Corporation, is an innovative community bank serving Pennsylvania, New Jersey, Delaware and Maryland. Through its 17 offices, including banking branches and mortgage locations, Meridian offers a full suite of financial products and services. Meridian specializes in business and industrial lending, retail and commercial real estate lending, electronic payments, and wealth management solutions through Meridian Wealth Partners. Meridian also offers a broad ...

PART I FINANCIAL INFORMATION [Item 1 Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) This section presents Meridian Corporation's unaudited consolidated financial statements for Q1 2024, including balance sheets, income, comprehensive income, equity, and cash flow statements, with detailed notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to **$2.29 billion** as of March 31, 2024, from **$2.25 billion** at year-end 2023, driven by a net increase in loans, funded by an increase in total deposits to **$1.90 billion** Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$2,292,923** | **$2,246,193** | | Cash and cash equivalents | $23,027 | $56,697 | | Loans, net | $1,933,144 | $1,873,699 | | **Total Liabilities** | **$2,132,987** | **$2,088,171** | | Total deposits | $1,900,696 | $1,823,462 | | Borrowings | $145,803 | $174,896 | | **Total Stockholders' Equity** | **$159,936** | **$158,022** | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) For Q1 2024, net income decreased to **$2.7 million** from **$4.0 million** in Q1 2023, primarily due to increased interest expense outpacing income growth and a doubled provision for credit losses Q1 2024 vs Q1 2023 Income Statement (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Interest Income | $16,609 | $17,677 | | Provision for credit losses | $2,866 | $1,399 | | Non-interest income | $7,984 | $6,638 | | Non-interest expense | $18,174 | $17,789 | | **Net Income** | **$2,676** | **$4,021** | | Diluted EPS | $0.24 | $0.34 | [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for Q1 2024 was **$3.1 million**, down from **$5.7 million** in Q1 2023, including **$2.7 million** net income and **$0.5 million** other comprehensive income from unrealized gains on interest rate swaps Comprehensive Income Summary (in thousands) | Component | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income | $2,676 | $4,021 | | Total Other Comprehensive Income | $473 | $1,670 | | **Total Comprehensive Income** | **$3,149** | **$5,691** | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased to **$159.9 million** by March 31, 2024, driven by **$2.7 million** net income and **$0.5 million** other comprehensive income, partially offset by **$1.4 million** in dividends - Key changes in stockholders' equity for Q1 2024 included **$2.7 million** in net income, **$0.5 million** in other comprehensive income, and **$1.4 million** in dividends declared (**$0.125 per share**)[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents decreased by **$33.7 million** in Q1 2024 due to cash outflows from operating (**$1.7 million**) and investing (**$78.7 million**) activities, partially offset by financing inflows (**$46.8 million**) from increased deposits Cash Flow Summary (in thousands) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,706) | $(11,400) | | Net cash used in investing activities | $(78,728) | $(84,198) | | Net cash provided by financing activities | $46,764 | $165,710 | | **Net change in cash and cash equivalents** | **$(33,670)** | **$70,112** | [Notes to Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) This section details accounting policies, securities, loan portfolio, credit losses, borrowings, fair value, and segment reporting, including investment portfolio unrealized losses, nonaccrual loans, and allowance for credit losses - The investment portfolio's unrealized loss position of **$11.3 million** at March 31, 2024, is primarily attributed to changes in market interest rates rather than credit impairment[37](index=37&type=chunk) - Nonaccrual loans increased to **$38.2 million** as of March 31, 2024, from **$33.8 million** at December 31, 2023[46](index=46&type=chunk)[47](index=47&type=chunk) - The allowance for credit losses (ACL) increased to **$23.2 million** at March 31, 2024, from **$22.1 million** at year-end 2023, with a provision of **$3.4 million** and net charge-offs of **$2.3 million** during the quarter[56](index=56&type=chunk) [Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2024 financial results, highlighting a decrease in net income to **$2.7 million** due to net interest margin compression and higher credit loss provisions, covering asset quality, income, expenses, balance sheet, capital, and segment performance - Net income for Q1 2024 was **$2.7 million** (**$0.24 per diluted share**), down **33.4%** from Q1 2023, driven by increased interest expense and a higher provision for credit losses[140](index=140&type=chunk) - Net interest margin decreased to **3.09%** in Q1 2024 from **3.61%** in Q1 2023 due to deposit and borrowing repricing outpacing the repricing of interest-earning assets[140](index=140&type=chunk) - Total assets grew by **2.1%** to **$2.3 billion**, primarily from a **3.3%** increase in portfolio loans, funded by a **4.2%** increase in total deposits[140](index=140&type=chunk) [Net Interest Income](index=39&type=section&id=NET%20INTEREST%20INCOME) Net interest income decreased by **$1.1 million** to **$16.6 million** in Q1 2024, as a **$7.3 million** increase in interest expense from higher deposit and borrowing costs more than offset a **$6.3 million** rise in tax-equivalent interest income Net Interest Income and Margin (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Interest Income (tax-equivalent) | $16,691 thousand | $17,752 thousand | | Net Interest Margin (tax-equivalent) | 3.09% | 3.61% | - The increase in interest expense was primarily driven by rate changes, which accounted for a **$4.9 million** increase, while volume changes contributed **$2.4 million**[148](index=148&type=chunk) [Provision for Credit Losses and Asset Quality](index=41&type=section&id=PROVISION%20FOR%20CREDIT%20LOSSES) The provision for credit losses increased by **$1.5 million** to **$2.9 million** in Q1 2024, driven by higher specific reserves and loan growth, leading to non-performing assets rising to **1.74%** of total assets - The provision for credit losses increased to **$2.9 million** in Q1 2024 from **$1.4 million** in Q1 2023[57](index=57&type=chunk) - Net charge-offs were **0.12%** of total average loans for Q1 2024, up from **0.08%** in Q1 2023, with a large portion coming from small ticket equipment leases[154](index=154&type=chunk) - The allowance for credit losses to total loans held for investment (non-GAAP) was **1.19%** as of March 31, 2024, slightly up from **1.17%** at December 31, 2023[155](index=155&type=chunk) [Non-Interest Income](index=43&type=section&id=NON-INTEREST%20INCOME) Total non-interest income increased by **20.3%** to **$8.0 million** in Q1 2024, primarily driven by growth in mortgage banking, SBA loan, and wealth management income Non-Interest Income Components (in thousands) | Component | Q1 2024 | Q1 2023 | $ Change | | :--- | :--- | :--- | :--- | | Mortgage banking income | $3,634 | $3,272 | $362 | | Wealth management income | $1,317 | $1,196 | $121 | | SBA loan income | $986 | $713 | $273 | | **Total non-interest income** | **$7,984** | **$6,638** | **$1,346** | [Non-Interest Expense](index=43&type=section&id=NON-INTEREST%20EXPENSE) Total non-interest expense rose slightly by **2.2%** to **$18.2 million** in Q1 2024, mainly due to increased professional fees for loan workout and system conversions, partially offset by reduced salaries and employee benefits Non-Interest Expense Components (in thousands) | Component | Q1 2024 | Q1 2023 | $ Change | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $10,573 | $11,061 | $(488) | | Professional fees | $1,498 | $823 | $675 | | **Total non-interest expense** | **$18,174** | **$17,789** | **$385** | [Balance Sheet Analysis](index=44&type=section&id=BALANCE%20SHEET%20ANALYSIS) Total assets increased by **$46.7 million** to **$2.3 billion** as of March 31, 2024, driven by **3.3%** growth in portfolio loans, funded by a **4.2%** increase in total deposits with a shift towards higher-yielding accounts - Portfolio loan growth was led by increases in commercial real estate (**$25.5 million**), commercial and industrial loans (**$25.3 million**), and construction loans (**$16.6 million**)[167](index=167&type=chunk) - Time deposits grew by **$75.9 million** (**11.1%**), while noninterest-bearing deposits decreased by **$18.7 million** (**7.8%**)[168](index=168&type=chunk) [Capital and Liquidity](index=45&type=section&id=Capital) The Corporation remains well-capitalized with a Tier 1 leverage ratio of **9.42%** and adequate liquidity, including access to approximately **$1.0 billion** from various sources Bank Capital Ratios | Ratio | March 31, 2024 | Well-Capitalized Minimum | | :--- | :--- | :--- | | Tier 1 leverage ratio | 9.42% | 5.00% | | Total risk-based capital ratio | 10.95% | 10.00% | - Tangible book value per share (non-GAAP) increased to **$13.96** from **$13.78** at year-end 2023[170](index=170&type=chunk) - The company has a maximum borrowing capacity with the FHLB of **$656.0 million** as of March 31, 2024[173](index=173&type=chunk) [Item 3 Quantitative and Qualitative Disclosures about Market Risk](index=47&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Corporation manages interest rate risk using simulation models, projecting net interest income to increase by **0.73%** with a 100 basis point rate rise and decrease by **1.85%** with a 100 basis point rate fall, indicating an asset-sensitive balance sheet Net Interest Income Sensitivity (12-Month Simulation) | Rate Change | % Change in NII (as of Mar 31, 2024) | | :--- | :--- | | +200 bps | +1.12% | | +100 bps | +0.73% | | -100 bps | -1.85% | | -200 bps | -3.23% | - The economic value of equity (EVE) simulation shows a negative effect from both increases and decreases in rates, with the impact worsening as rates move downward[192](index=192&type=chunk) [Item 4 Controls and Procedures](index=48&type=section&id=Item%204%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of March 31, 2024[195](index=195&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the Corporation's internal controls[196](index=196&type=chunk) PART II OTHER INFORMATION [Item 1 Legal Proceedings](index=50&type=section&id=Item%201%20Legal%20Proceedings) The Corporation reported no legal proceedings during the period - None[199](index=199&type=chunk) [Item 1A Risk Factors](index=50&type=section&id=Item%201A%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes from the risk factors disclosed in the 2023 Form 10-K[199](index=199&type=chunk) [Item 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Corporation reported no unregistered sales of equity securities or use of proceeds during the period - None[200](index=200&type=chunk) [Item 5 Other Information](index=50&type=section&id=Item%205%20Other%20Information) The Corporation reported no other information required to be disclosed under this item - None[203](index=203&type=chunk) [Item 6 Exhibits](index=51&type=section&id=Item%206%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer, and XBRL data files - Exhibits filed include CEO and CFO certifications (**31.1, 31.2, 32**) and XBRL interactive data files[206](index=206&type=chunk)

MALVERN, Pa., May 08, 2024 (GLOBE NEWSWIRE) -- Meridian Bank announced the appointment of Christopher E. McDermott to the position of Senior Vice President, Commercial Lending. He'll join other members of the Meridian Commercial Lending Team in serving business customers in Bucks and Montgomery Counties. Chris began his long banking career right out of high school. He started as a clerk at Girard Bank and advanced through that organization while he simultaneously earned his degree in finance from LaSalle Co ...

Meridian Bank (MRBK) came out with quarterly earnings of $0.24 per share, beating the Zacks Consensus Estimate of $0.23 per share. This compares to earnings of $0.34 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 4.35%. A quarter ago, it was expected that this company would post earnings of $0.30 per share when it actually produced earnings of $0.05, delivering a surprise of -83.33%.Over the last four quarters, the company ha ...

[Meridian Corporation Q1 2024 Earnings Release](index=1&type=section&id=Meridian%20Corporation%20Q1%202024%20Earnings%20Release) This report details Meridian Corporation's Q1 2024 financial performance, including earnings, balance sheet analysis, and segment results [Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) The company reported improved Q1 2024 net income of $2.7 million, driven by operational successes despite net interest margin contraction Q1 2024 Key Financial Results | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Income | $2,676 thousand | $571 thousand | $4,021 thousand | | Diluted EPS | $0.24 | $0.05 | $0.34 | | Pre-tax, pre-provision income (Non-GAAP) | $6,419 thousand | $5,356 thousand | $6,526 thousand | - CEO Christopher J. Annas noted that Q1 earnings **improved measurably** from the last quarter, despite the **net interest margin contracting to 3.09%**, which is now showing signs of stabilizing[2](index=2&type=chunk) - Commercial loans (excluding leases) grew by **$137.1 million, or 10%, year-over-year**, and total assets stood at **$2.3 billion** as of March 31, 2024[6](index=6&type=chunk) - The Board of Directors declared a quarterly cash dividend of **$0.125 per common share**, payable on May 20, 2024[6](index=6&type=chunk) [Detailed Financial Analysis](index=3&type=section&id=Detailed%20Financial%20Analysis) The analysis details income statement and balance sheet changes, highlighting drivers of net income and shifts in asset quality [Income Statement Analysis (Q1 2024 vs. Q4 2023)](index=3&type=section&id=Income%20Statement%20Analysis%20(Q1%202024%20vs.%20Q4%202023)) Q1 2024 net income rose by $2.1 million, primarily due to lower credit provisions and non-interest expenses - Net income **increased by $2.1 million** quarter-over-quarter, mainly due to a decline in the provision for credit losses and a reduction in non-interest expenses[9](index=9&type=chunk) [Net Interest Income](index=4&type=section&id=Net%20Interest%20Income) Net interest income decreased slightly as rising interest expense outpaced interest income growth, compressing the net interest margin Change in Net Interest Income (Q1 2024 vs Q4 2023) | Component | Change ($ thousands) | Primary Driver | | :--- | :--- | :--- | | Total Interest Income | +$878 | Volume (+853) | | Total Interest Expense | +$1,202 | Volume (+846) & Rate (+356) | | **Net Interest Income** | **-$324** | **Rate (-$331)** | - The net interest margin **decreased by 9 basis points to 3.09%** as the increase in the cost of funds outpaced the increase in yield on earning assets[16](index=16&type=chunk) - Total interest expense **increased by $1.2 million QoQ**, driven by a $586 thousand increase in deposit interest expense and a $616 thousand increase in borrowing interest expense[15](index=15&type=chunk) [Provision for Credit Losses](index=4&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses decreased significantly to $2.9 million from $4.6 million in the prior quarter - The combined provision for credit losses **decreased to $2.9 million in Q1 2024 from $4.6 million in Q4 2023**, positively impacted by favorable changes in portfolio baseline loss rates and some macroeconomic factors[17](index=17&type=chunk) [Non-interest Income](index=6&type=section&id=Non-interest%20Income) Non-interest income slightly decreased to $8.0 million due to a negative fair value adjustment on loans Key Non-interest Income Components (Q1 2024 vs Q4 2023) | Component | Q1 2024 ($ thousands) | Q4 2023 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Mortgage banking income | 3,634 | 3,394 | +7.1% | | Net change in fair value of loans held-for-investment | (175) | 805 | -121.7% | | Other | 1,961 | 1,512 | +29.7% | | **Total non-interest income** | **7,984** | **8,117** | **-1.6%** | [Non-interest Expense](index=6&type=section&id=Non-interest%20Expense) Total non-interest expense declined by $1.5 million, driven by a significant reduction in salaries and employee benefits Key Non-interest Expense Components (Q1 2024 vs Q4 2023) | Component | Q1 2024 ($ thousands) | Q4 2023 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | 10,573 | 11,744 | -10.0% | | Professional fees | 1,498 | 1,382 | +8.4% | | **Total non-interest expense** | **18,174** | **19,703** | **-7.8%** | - The decrease in salaries and benefits was driven by a **$641 thousand reduction** in the bank and wealth segments and a **$530 thousand decrease** in the mortgage segment[21](index=21&type=chunk) [Balance Sheet Analysis (March 31, 2024 vs. December 31, 2023)](index=8&type=section&id=Balance%20Sheet%20Analysis%20(March%2031,%202024%20vs.%20December%2031,%202023)) Total assets grew to $2.3 billion, fueled by strong loan growth funded through an increase in total deposits - Portfolio loan growth was **$61.6 million (3.3%) QoQ**, led by increases in commercial mortgage loans (+$25.5M), commercial & industrial loans (+$25.3M), and construction loans (+$16.6M)[24](index=24&type=chunk) - Total deposits **increased by $77.2 million (4.2%) QoQ**, largely due to a $75.9 million increase in time deposits from wholesale efforts[25](index=25&type=chunk) - Borrowings **decreased by $29.1 million (16.6%) QoQ**, mainly due to the maturity of the Federal Reserve's BTFP facility[25](index=25&type=chunk) [Asset Quality](index=8&type=section&id=Asset%20Quality) Asset quality metrics showed slight deterioration, with the non-performing loans to total loans ratio increasing to 1.93% Asset Quality Ratios | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Non-performing loans to total loans | 1.93% | 1.76% | | Non-performing assets to total assets | 1.74% | 1.58% | | Net charge-offs to average loans (annualized) | 0.12% | 0.11% | - Non-performing loans **increased by $4.5 million to $38.2 million**, primarily due to risk rating downgrades of several SBA loans and small ticket equipment leases[27](index=27&type=chunk) - The allowance for credit losses to total loans held for investment was **1.19% as of March 31, 2024**, compared to 1.17% as of December 31, 2023[29](index=29&type=chunk) [Financial Statements and Data](index=11&type=section&id=Financial%20Statements%20and%20Data) This section provides detailed unaudited financial statements, key ratios, and segment-level data for the quarter [Key Financial Ratios](index=11&type=section&id=Key%20Financial%20Ratios) A summary of key performance, asset quality, and capital ratios highlights a 0.47% ROA and 3.09% NIM for Q1 2024 Selected Performance Ratios (Q1 2024) | Ratio | Q1 2024 | | :--- | :--- | | Return on average assets | 0.47% | | Return on average equity | 6.73% | | Net interest margin (tax-equivalent) | 3.09% | | Efficiency ratio | 73.90% | [Condensed Consolidated Statements of Income](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The income statement details revenues and expenses for Q1 2024, showing a net income of $2.7 million - The full unaudited Condensed Consolidated Statements of Income for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023 are provided[37](index=37&type=chunk) [Condensed Consolidated Statements of Condition](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Condition) The balance sheet presents assets, liabilities, and equity, with total assets reaching $2.3 billion at quarter-end - The full unaudited Condensed Consolidated Statements of Condition as of March 31, 2024 and four preceding quarters are provided[39](index=39&type=chunk) [Segment Information](index=15&type=section&id=Segment%20Information) Financial performance is detailed by Bank, Wealth, and Mortgage segments, with the Mortgage segment showing an improved loss Income (Loss) Before Income Taxes by Segment (Q1 2024) | Segment | Q1 2024 ($ thousands) | Q1 2023 ($ thousands) | | :--- | :--- | :--- | | Bank | 3,540 | 6,959 | | Wealth | 478 | 231 | | Mortgage | (465) | (2,063) | | **Total** | **3,553** | **5,127** | [Appendix: Non-GAAP Measures](index=16&type=section&id=Appendix%3A%20Non-GAAP%20Measures) This appendix provides reconciliations of non-GAAP financial measures to their comparable GAAP counterparts for clarity - Provides a reconciliation of GAAP income before income tax expense to the non-GAAP measure of Pre-tax, pre-provision income[44](index=44&type=chunk) - Includes a reconciliation of the GAAP allowance for credit losses to loans ratio to a non-GAAP ratio that excludes loans carried at fair value[46](index=46&type=chunk) - Details the calculation of non-GAAP tangible common equity and tangible book value per share by removing goodwill and intangible assets from GAAP stockholders' equity[47](index=47&type=chunk)[49](index=49&type=chunk)

MALVERN, Pa., April 26, 2024 (GLOBE NEWSWIRE) -- Meridian Corporation (NASDAQ:MRBK) today reported:  Three Months Ended (Dollars in thousands, except per share data)((Unaudited)March 31,2024 December 31,2023 March 31,2023 Income:       Net income$2,676 $571 $4,021 Diluted earnings per common share$0.24 $0.05 $0.34 Pre-tax, pre-provision income (1)$6,419 $5,356 $6,526 Pre-tax, pre-provision income - Bank (1)$6,406 $5,757 $8,358 (1) See Non-GAAP reconciliation in the Appendix       Commercial loans, excluding ...

Meridian Corp (MRBK) shares rallied 6.6% in the last trading session to close at $8.95. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 15.9% loss over the past four weeks.With the U.S. economy showing no signs of slowing down and the Federal Reserve still expected to cut rates this year, banking sector is in the spotlight. Hence, investors are showing optimistic stance on the sector and this is likely to hav ...

Part I [Business](index=7&type=section&id=Item%201.%20Business) Meridian Corporation operates as a bank holding company through its subsidiary Meridian Bank, focusing on Commercial Banking, Mortgage Banking, and Wealth Management - The Corporation operates through three principal business lines: **Commercial Banking** (including commercial and industrial lending, CRE, SBA lending), **Mortgage Banking** (originating and selling residential mortgages), and **Wealth Management** and Advisory Services[22](index=22&type=chunk)[24](index=24&type=chunk)[27](index=27&type=chunk) - The primary market area is the **five-county Philadelphia metropolitan area**, with a secondary market in the **five-county Baltimore metropolitan area**, both characterized by stable economies and high household incomes[29](index=29&type=chunk)[31](index=31&type=chunk) - The company and its subsidiaries are subject to **extensive regulation** by multiple agencies, including the FDIC, the Pennsylvania Department of Banking and Securities (PDBS), the Federal Reserve Bank (FRB), and the SEC[46](index=46&type=chunk)[47](index=47&type=chunk) Human Capital Overview as of December 31, 2023 | Metric | Value | | :--- | :--- | | Total Employees | 324 | | Women in Workforce | 56% | | Women in Officer Roles | 32% | | 2023 Hires | 83 | | 2023 Turnover Rate | Approx 3% | [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks from economic conditions, cybersecurity threats, interest rate fluctuations, and significant credit risk from its commercial real estate loan concentration - The business is sensitive to general economic conditions, and a downturn could lead to **deteriorating credit quality**, increased delinquencies, and a higher provision for loan losses[108](index=108&type=chunk)[112](index=112&type=chunk) - **Liquidity risk** is inherent, as the inability to access funding sources could negatively impact operations, and dividend payments from its subsidiary bank are subject to regulatory limits[115](index=115&type=chunk)[118](index=118&type=chunk) - The company faces significant **cybersecurity risks**, including fraudulent activity and data breaches, and is dependent on third-party information technology systems[125](index=125&type=chunk)[126](index=126&type=chunk)[131](index=131&type=chunk) - A significant portion of the loan portfolio is secured by real estate, with **38.6% in Commercial Real Estate (CRE)** loans and **12.9% in construction and development loans** as of year-end 2023[168](index=168&type=chunk)[169](index=169&type=chunk) [Unresolved Staff Comments](index=26&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are **no unresolved staff comments**[178](index=178&type=chunk) [Cybersecurity](index=26&type=section&id=Item%201C.%20Cybersecurity) Cybersecurity risk is managed through a cross-departmental approach with oversight from the Board of Directors and is based on the NIST Cybersecurity Framework - Cybersecurity governance involves the **Board of Directors**, **Audit Committee**, and an **IT Steering Committee**, ensuring high-level oversight[179](index=179&type=chunk)[182](index=182&type=chunk) - The company's enterprise-wide information security program is designed to be consistent with the **National Institute of Standards and Technology (NIST) Cybersecurity Framework**[179](index=179&type=chunk) - Cybersecurity practices include **annual employee training**, management-level simulations, **third-party penetration tests**, and a formal process for evaluating third-party service provider risks[180](index=180&type=chunk)[181](index=181&type=chunk) [Properties](index=27&type=section&id=Item%202.%20Properties) The company is headquartered in Malvern, Pennsylvania, and operates numerous branches and offices, the majority of which are leased - The company operates from its headquarters in Malvern, PA, with **six full-service branches** and **18 other offices**, most of which are leased, with a total net book value of **$10.8 million** at December 31, 2023[184](index=184&type=chunk) [Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no material legal proceedings - None[185](index=185&type=chunk) [Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[186](index=186&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=27&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under "MRBK," with a history of quarterly dividends and a recently expired stock repurchase plan - The company's common stock is traded on the **NASDAQ Global Select Market** under the symbol "**MRBK**" with approximately **1,602 registered shareholders** as of March 11, 2024[188](index=188&type=chunk) - A stock repurchase plan expired on April 22, 2023, under which the company repurchased a total of **$19.6 million** of its common stock[189](index=189&type=chunk) Cash Dividends Paid Per Share (Adjusted for Stock Split) | Date Declared | Quarterly Dividend | Special Dividend | | :--- | :--- | :--- | | **2022** | | | | Jan 27, 2022 | — | $0.50 | | Apr 28, 2022 | $0.10 | — | | Jul 28, 2022 | $0.10 | — | | Oct 27, 2022 | $0.10 | — | | **2023** | | | | Jan 26, 2023 | $0.125 | — | | Apr 27, 2023 | $0.125 | — | | Jul 27, 2023 | $0.125 | — | | Oct 26, 2023 | $0.125 | — | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2023, asset and loan growth was offset by a significant decline in net income due to lower mortgage banking revenue and a compressed net interest margin [Executive Overview](index=29&type=section&id=Executive%20Overview) The company experienced asset and loan growth in 2023, but profitability declined significantly due to lower mortgage banking income and a higher provision for credit losses Key Financial Highlights (2023 vs 2022) | Metric | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Assets | $2.2B | $2.1B | 8.9% | | Portfolio Loans | $1.9B | $1.7B | 8.8% | | Net Income | $13.2M | $21.8M | (39.3)% | Key Performance Ratios (2023 vs 2022) | Ratio | 2023 | 2022 | | :--- | :--- | :--- | | Return on average assets | 0.61% | 1.18% | | Return on average equity | 8.53% | 13.87% | | Net interest margin (tax effected) | 3.35% | 3.98% | | Diluted earnings per share | $1.16 | $1.79 | [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Net interest income decreased slightly in 2023 as rising fund costs outpaced asset yield increases, while a sharp drop in mortgage banking income drove non-interest income lower - **Net interest margin decreased by 63 basis points to 3.35%** in 2023, as the rising cost of funds outpaced the increase in yield on earning assets[212](index=212&type=chunk) - The **provision for credit losses increased by $4.3 million to $6.8 million** in 2023, driven by the adoption of CECL, specific reserves on non-accrual loans, and loan growth[213](index=213&type=chunk) - Total non-interest income **decreased by $9.8 million (23.4%)**, largely driven by an **$8.8 million (34.7%) decline in mortgage banking income**[215](index=215&type=chunk) - Total non-interest expense **decreased by $4.3 million (5.3%)**, mainly due to a **$7.0 million (12.9%) reduction in salaries and employee benefits** in the mortgage segment[218](index=218&type=chunk) [Balance Sheet Analysis](index=34&type=section&id=Balance%20Sheet%20Analysis) Total assets and loans grew in 2023, but asset quality deteriorated, and the deposit mix shifted from non-interest-bearing accounts to higher-cost time deposits - **Non-performing assets to total assets increased to 1.58%** as of December 31, 2023, from 1.11% a year earlier, with total non-performing loans rising to **$33.8 million**[240](index=240&type=chunk) - Net charge-offs for 2023 were **$5.6 million**, or **0.30% of total average loans**, compared to $2.4 million, or 0.15%, in 2022[241](index=241&type=chunk) - Total deposits **grew 6.5% to $1.8 billion**, with a mix shift as **non-interest bearing deposits fell 20.7%** while **time deposits grew 38.9%**[251](index=251&type=chunk) Loan Portfolio Composition (in thousands) | Loan Category | Dec 31, 2023 | Dec 31, 2022 | % Change | | :--- | :--- | :--- | :--- | | Commercial mortgage | $737,863 | $565,400 | 30.5% | | Construction | $246,440 | $271,955 | (9.4)% | | Commercial and industrial | $302,891 | $341,378 | (11.3)% | | Residential mortgage | $260,604 | $221,837 | 17.5% | | Leases, net | $121,632 | $138,986 | (12.5)% | | **Total portfolio loans** | **$1,888,448** | **$1,735,598** | **8.8%** | [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a solid liquidity position and is considered "well capitalized" for regulatory purposes, comfortably exceeding minimum capital requirements - Total available liquidity was **$273.4 million** at December 31, 2023, derived from cash, investments, and salable loans[261](index=261&type=chunk) - The company has access to approximately **$987 million in liquidity** from various sources, including a maximum borrowing capacity of **$626.8 million** with the FHLB[197](index=197&type=chunk)[262](index=262&type=chunk) - The Bank is categorized as "**well capitalized**" and has adopted the Community Bank Leverage Ratio (CBLR) framework, with a CBLR of **9.46%** as of December 31, 2023[264](index=264&type=chunk)[266](index=266&type=chunk)[503](index=503&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with simulations indicating a narrowly asset-sensitive balance sheet and manageable exposure within policy guidelines Net Interest Income Sensitivity Analysis (12-Month Rate Ramp) | Change in Market Interest Rates | % Change in NII (Dec 31, 2023) | | :--- | :--- | | +300 basis points | 0.01% | | +200 basis points | 0.19% | | +100 basis points | 0.15% | | -100 basis points | (1.37)% | | -200 basis points | (2.28)% | Economic Value of Equity (EVE) Sensitivity Analysis (Instantaneous Shock) | Change in Market Interest Rates | % Change in EVE (Dec 31, 2023) | | :--- | :--- | | +300 basis points | (7)% | | +200 basis points | (3)% | | +100 basis points | —% | | -100 basis points | (3)% | | -200 basis points | (13)% | [Financial Statements and Supplementary Data](index=51&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the consolidated financial statements, which received an unqualified opinion from the independent auditor and reflect the adoption of the CECL accounting standard - The independent auditor, Crowe LLP, issued an **unqualified opinion**, stating that the financial statements are fairly presented and that internal controls were effective[282](index=282&type=chunk) - Effective January 1, 2023, the company adopted the **ASC 326 (CECL)** accounting standard for credit losses, which was identified as a critical audit matter[283](index=283&type=chunk)[291](index=291&type=chunk) Consolidated Financial Summary (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Balance Sheet** | | | | Total Assets | $2,246,193 | $2,062,228 | | Loans, net | $1,873,699 | $1,724,854 | | Total Deposits | $1,823,462 | $1,712,479 | | Total Stockholders' Equity | $158,022 | $153,280 | | **Income Statement** | | | | Net Interest Income | $68,942 | $70,128 | | Provision for Credit Losses | $6,815 | $2,488 | | Net Income | $13,243 | $21,829 | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=115&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None[557](index=557&type=chunk) [Controls and Procedures](index=115&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls, procedures, and internal control over financial reporting were effective as of year-end 2023 - Management concluded that the Corporation's **disclosure controls and procedures were effective** as of December 31, 2023[558](index=558&type=chunk) - Based on an assessment against the COSO framework, management concluded that the Corporation's system of **internal control over financial reporting was effective** as of December 31, 2023[564](index=564&type=chunk) - **No material changes** in internal control over financial reporting occurred during the fourth quarter of 2023[566](index=566&type=chunk) [Other Information](index=117&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[567](index=567&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=117&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2024 proxy statement - Required information is **incorporated by reference** from the 2024 Proxy Statement[569](index=569&type=chunk) [Executive Compensation](index=117&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2024 proxy statement - Required information is **incorporated by reference** from the 2024 Proxy Statement[570](index=570&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=117&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the 2024 proxy statement - Required information is **incorporated by reference** from the 2024 Proxy Statement[571](index=571&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=117&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the 2024 proxy statement - Required information is **incorporated by reference** from the 2024 Proxy Statement[571](index=571&type=chunk) [Principal Accounting Fees and Services](index=117&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding accounting fees and services is incorporated by reference from the 2024 proxy statement - Required information is **incorporated by reference** from the 2024 Proxy Statement[572](index=572&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=117&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and exhibits filed with the Form 10-K - The consolidated financial statements are set forth in **Item 8** of the report[574](index=574&type=chunk) - A list of exhibits filed with the report is provided, including **governance documents**, **material contracts**, and **certifications**[575](index=575&type=chunk) [Form 10-K Summary](index=118&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary is provided - None[576](index=576&type=chunk)

PART I FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited consolidated financial statements for the period ended September 30, 2023, show an increase in total assets to **$2.23 billion** from **$2.06 billion** at year-end 2022, driven by loan growth, with net income for Q3 2023 decreasing to **$4.0 million** from **$5.8 million** in the prior-year quarter due to lower non-interest income and net interest margin compression, and the adoption of CECL on January 1, 2023, resulting in a **$2.2 million** decrease to retained earnings [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This section presents the consolidated financial position, highlighting changes in assets, liabilities, and equity between September 30, 2023, and December 31, 2022 | Metric | September 30, 2023 ($ millions) | December 31, 2022 ($ millions) | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | $2,230.97 | $2,062.23 | +8.2% | | **Loans, net** | $1,865.95 | $1,724.85 | +8.2% | | **Total Deposits** | $1,808.65 | $1,712.48 | +5.6% | | **Total Liabilities** | $2,075.86 | $1,908.95 | +8.7% | | **Total Stockholders' Equity** | $155.11 | $153.28 | +1.2% | - Cash and cash equivalents increased significantly to **$59.8 million** from **$38.4 million** at the end of 2022[12](index=12&type=chunk) - Non-interest bearing deposits decreased to **$244.7 million** from **$301.7 million**, while interest-bearing deposits grew to **$1.56 billion** from **$1.41 billion**[12](index=12&type=chunk) [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) This section details the company's financial performance, showing revenues, expenses, and net income for the third quarter and nine months ended September 30, 2023 and 2022 | Metric | Q3 2023 ($ thousands) | Q3 2022 ($ thousands) | YoY Change | | :--- | :--- | :--- | :--- | | **Net Interest Income** | $17,224 | $18,026 | -4.4% | | **Total Non-interest Income** | $8,086 | $10,224 | -20.9% | | **Net Income** | $4,005 | $5,798 | -30.9% | | **Diluted EPS** | $0.35 | $0.48 | -27.1% | | Metric | Nine Months Ended Sep 30, 2023 ($ thousands) | Nine Months Ended Sep 30, 2022 ($ thousands) | YoY Change | | :--- | :--- | :--- | :--- | | **Net Interest Income** | $52,001 | $51,610 | +0.8% | | **Total Non-interest Income** | $23,848 | $33,728 | -29.3% | | **Net Income** | $12,673 | $17,268 | -26.6% | | **Diluted EPS** | $1.11 | $1.40 | -20.7% | - Interest expense saw a substantial increase, rising to **$18.2 million** in Q3 2023 from **$4.9 million** in Q3 2022, reflecting the higher interest rate environment[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the sources and uses of cash from operating, investing, and financing activities for the nine months ended September 30, 2023 and 2022 | Cash Flow Activity (Nine Months Ended Sep 30) | 2023 ($ thousands) | 2022 ($ thousands) | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $10,988 | $63,655 | | **Net Cash used in Investing Activities** | ($143,034) | ($246,561) | | **Net Cash from Financing Activities** | $153,414 | $190,787 | | **Net Change in Cash and Cash Equivalents** | $21,368 | $7,881 | - The decrease in cash from operating activities was primarily due to lower mortgage banking income and changes in loans originated for sale[22](index=22&type=chunk) - Financing activities in 2023 were driven by a net increase in deposits of **$96.2 million** and an increase in borrowings, partially offset by treasury stock purchases and dividends paid[22](index=22&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations of significant accounting policies, estimates, and financial statement line items - On January 1, 2023, the Corporation adopted ASU 2016-13 (CECL), which replaced the incurred loss model with an expected loss methodology, resulting in a one-time, after-tax decrease to retained earnings of **$2.2 million**[32](index=32&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) - A two-for-one stock split in the form of a stock dividend was approved on February 28, 2023, and paid on March 20, 2023, with all share and per-share amounts adjusted to reflect this split[30](index=30&type=chunk) - As of September 30, 2023, the investment portfolio had gross unrealized losses of **$15.9 million** in available-for-sale securities and **$5.6 million** in held-to-maturity securities, primarily attributed to changes in market interest rates[71](index=71&type=chunk)[72](index=72&type=chunk) - Total nonaccrual loans increased to **$29.1 million** as of September 30, 2023, from **$21.2 million** at December 31, 2022[80](index=80&type=chunk)[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights a challenging operating environment, with net income declining to **$4.0 million** in Q3 2023 from **$5.8 million** in Q3 2022, driven by a **20.9%** drop in non-interest income from reduced mortgage banking activity and net interest margin compression to **3.29%** from **4.01%** due to rapidly rising funding costs, while total assets grew **8.2%** to **$2.2 billion** since year-end 2022, fueled by an **8.5%** increase in portfolio loans, maintaining a strong liquidity position and well-capitalized regulatory ratios, and recently raising **$9.7 million** in subordinated debt to support growth | Key Performance Ratios | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | **Return on average assets (annualized)** | 0.73% | 1.23% | | **Return on average equity (annualized)** | 10.17% | 14.59% | | **Net interest margin (tax effected)** | 3.29% | 4.01% | | **Diluted EPS** | $0.35 | $0.48 | - The decrease in Q3 2023 net income was primarily driven by a decline in non-interest income (down **$2.1 million**) and a decrease in net interest income (down **$0.8 million**), partially offset by lower operating expenses[185](index=185&type=chunk)[189](index=189&type=chunk) - The company's uninsured deposit level was **23%** of the total deposit base as of September 30, 2023, with management believing its liquidity sources, including access to approximately **$1.0 billion** from the FHLB and other facilities, are sufficient to meet funding requirements[181](index=181&type=chunk)[182](index=182&type=chunk) [Net Interest Income](index=44&type=section&id=Net%20Interest%20Income) This section analyzes the components of net interest income, including interest income from assets and interest expense on liabilities, and the resulting net interest margin - For Q3 2023, net interest income decreased by **$0.81 million** compared to Q3 2022, driven by rate changes as the increase in the cost of interest-bearing liabilities outpaced the increase in yields on interest-earning assets[200](index=200&type=chunk) - The net interest margin compressed to **3.29%** in Q3 2023 from **4.01%** in Q3 2022, primarily due to the rapid rise in funding costs, particularly on time deposits and borrowings[193](index=193&type=chunk)[199](index=199&type=chunk) [Provision for Credit Losses and Asset Quality](index=47&type=section&id=Provision%20for%20Credit%20Losses%20and%20Asset%20Quality) This section discusses the provision for credit losses and key asset quality metrics, including non-performing assets and net charge-offs - The provision for credit losses decreased by **$0.44 million** in Q3 2023 compared to Q3 2022, partly due to a decline in unfunded loan exposure and favorable changes in baseline loss rates and economic factors[204](index=204&type=chunk) - Non-performing assets to total assets ratio increased to **1.38%** at September 30, 2023, up from **1.11%** at year-end 2022, with total non-performing loans rising to **$29.1 million** from **$21.2 million**[205](index=205&type=chunk) - Net charge-offs were **0.18%** of total average loans for the first nine months of 2023, up from **0.10%** in the prior year period, with a large portion of charge-offs coming from small ticket equipment leases[206](index=206&type=chunk) [Non-Interest Income](index=49&type=section&id=Non-Interest%20Income) This section analyzes the various sources of non-interest income, including mortgage banking income and hedging activities - Total non-interest income for Q3 2023 decreased by **$2.1 million** (**20.9%**) year-over-year, primarily due to a **$2.5 million** (**34.2%**) decline in mortgage banking income caused by lower mortgage origination volumes in the rising rate environment and a lack of housing inventory[211](index=211&type=chunk) - For the nine months ended September 30, 2023, mortgage banking income fell by **$8.2 million** (**38.5%**) and net gains on hedging activity decreased by **$4.9 million** (**98.4%**) compared to the same period in 2022[213](index=213&type=chunk) [Non-Interest Expense](index=50&type=section&id=Non-Interest%20Expense) This section details the company's operating expenses, including salaries and employee benefits, and their changes over the period - Total non-interest expense decreased by **$0.24 million** (**1.2%**) in Q3 2023 compared to Q3 2022, mainly due to a **$0.94 million** reduction in salaries and employee benefits in the mortgage segment[215](index=215&type=chunk) - For the nine months ended September 30, 2023, non-interest expense decreased by **$4.0 million** (**6.5%**), driven by a **$6.0 million** decline in salaries and benefits, primarily in the mortgage segment[218](index=218&type=chunk) [Balance Sheet and Capital](index=51&type=section&id=Balance%20Sheet%20and%20Capital) This section reviews the key changes in the balance sheet composition and the company's capital adequacy ratios - Total portfolio loans grew by **$147.8 million** (**8.5%**) since year-end 2022, led by a **$130.7 million** increase in commercial real estate loans[222](index=222&type=chunk) - Total deposits increased by **$96.2 million** (**5.6%**), with a shift from noninterest-bearing and interest-bearing demand accounts into higher-yielding money market and time deposits[223](index=223&type=chunk) - In September 2023, the Corporation raised **$9.7 million** in subordinated debt at an **8.00%** rate to improve Tier 2 capital and support organic growth[225](index=225&type=chunk) | Capital Ratios (Corporation) | September 30, 2023 | December 31, 2022 | Well-capitalized minimum | | :--- | :--- | :--- | :--- | | **Tier 1 leverage ratio** | 7.52% | 8.13% | N/A | | **Common tier 1 risk-based capital** | 8.43% | 8.77% | 6.50% | | **Total risk-based capital ratio** | 11.96% | 12.05% | 10.00% | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's market risk analysis indicates an asset-sensitive balance sheet as of September 30, 2023, with a simulation model projecting that net interest income would fluctuate between a decrease of **1.33%** and **0.29%** in a +/-100 basis point interest rate environment over the next 12 months, and the economic value of equity (EVE) simulation suggesting a negative effect from either an increase or decrease in rates, with a 100 basis point rise potentially decreasing EVE by **2%**, which management views as manageable and within policy guidelines | Change in Market Interest Rates (over 12 months) | Impact on Net Interest Income (as of Sep 30, 2023) | | :--- | :--- | | +300 bps | -1.25% | | +100 bps | -0.29% | | -100 bps | -1.33% | | -200 bps | -2.63% | | Change in Market Interest Rates (instantaneous) | Impact on Economic Value of Equity (as of Sep 30, 2023) | | :--- | :--- | | +300 bps | -10% | | +100 bps | -2% | | -100 bps | 0% | | -200 bps | -5% | [Item 4. Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2023, with new and modified internal controls over financial reporting designed in relation to the adoption of the CECL accounting standard on January 1, 2023, particularly concerning model governance, assumptions, and data, and no other material changes to internal controls reported during the quarter - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of September 30, 2023[253](index=253&type=chunk) - Following the adoption of CECL on January 1, 2023, the Corporation implemented new and modified controls over financial reporting related to model design, governance, assumptions, and loan-level data[255](index=255&type=chunk) PART II OTHER INFORMATION [Item 1A. Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) The company highlights material updates to its risk factors, focusing on adverse developments in the financial services industry that could affect operations, stock price, and regulatory costs, and weakness in the secondary mortgage market driven by higher interest rates and low housing inventory, which has significantly reduced mortgage origination volumes and non-interest income, a trend that may continue - Adverse developments in the financial services industry, including recent bank failures and liquidity concerns, are cited as a material risk that could impact operations, stock price volatility, and lead to increased regulatory costs like special FDIC assessments[258](index=258&type=chunk) - Weakness in the secondary residential mortgage market, characterized by higher interest rates and a lack of housing inventory, has adversely affected mortgage banking income and is expected to be a continuing risk[259](index=259&type=chunk)[260](index=260&type=chunk) [Other Items (Items 1, 2, 3, 4, 5, 6)](index=56&type=section&id=Other%20Items%20(Items%201%2C%202%2C%203%2C%204%2C%205%2C%206)) This section confirms that there are no legal proceedings, unregistered sales of equity securities, or defaults upon senior securities to report for the period, with disclosures regarding mine safety not applicable, and no other material information required to be reported, concluding with a list of exhibits filed, including certifications by the principal executive and financial officers - The company reports no legal proceedings for the period[257](index=257&type=chunk) - There were no unregistered sales of equity securities or defaults upon senior securities[261](index=261&type=chunk)[262](index=262&type=chunk)