[PART I FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Meridian Corporation's unaudited consolidated financial statements reflect a rise in total assets to **$2.21 billion** by June 30, 2023, primarily due to loan growth, alongside a decrease in Q2 2023 net income to **$4.6 million** influenced by increased interest expenses and the adoption of CECL [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$2.21 billion** by June 30, 2023, from **$2.06 billion** at year-end 2022, primarily due to a **$114.7 million** rise in net loans, funded by increases in deposits and borrowings, with total stockholders' equity remaining stable at **$154.0 million** | (dollars in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$2,206,877** | **$2,062,228** | | Loans, net | $1,839,597 | $1,724,854 | | Cash and cash equivalents | $46,866 | $38,391 | | **Total Liabilities** | **$2,052,915** | **$1,908,948** | | Total deposits | $1,782,605 | $1,712,479 | | Borrowings | $194,636 | $122,082 | | **Total Stockholders' Equity** | **$153,962** | **$153,280** | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) Net income for Q2 2023 decreased by **21.8%** to **$4.6 million** (**$0.41** per diluted share), and by **24.5%** to **$8.7 million** for the six-month period, primarily due to increased interest expense and lower non-interest income | (dollars in thousands) | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $17,098 | $17,551 | $34,775 | $33,586 | | Provision for credit losses | $705 | $602 | $2,104 | $1,217 | | Non-interest income | $9,124 | $10,403 | $15,762 | $23,505 | | Non-interest expense | $19,615 | $19,706 | $37,404 | $41,139 | | **Net income** | **$4,645** | **$5,938** | **$8,666** | **$11,473** | | **Diluted EPS** | **$0.41** | **$0.48** | **$0.75** | **$0.92** | [Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive income for Q2 2023 increased to **$3.7 million** from **$2.5 million** in Q2 2022, despite lower net income, as other comprehensive loss narrowed to **($0.95 million)** due to smaller unrealized losses on investment securities | (dollars in thousands) | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | $4,645 | $5,938 | $8,666 | $11,473 | | Total other comprehensive income (loss) | $(952) | $(3,459) | $718 | $(9,858) | | **Total comprehensive income (loss)** | **$3,693** | **$2,479** | **$9,384** | **$1,615** | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity slightly increased to **$154.0 million** by June 30, 2023, influenced by **$8.7 million** in net income, offset by **$2.8 million** in dividends, **$4.3 million** in treasury stock purchases, and a **$2.2 million** CECL adoption adjustment to retained earnings - A one-time adjustment of **($2.2 million)**, net of tax, was made to retained earnings on January 1, 2023, to reflect the initial application of the CECL accounting standard (ASU No. 2016-13)[20](index=20&type=chunk) - During the first six months of 2023, the company paid dividends totaling **$2.8 million** (**$0.25** per share) and repurchased **312,447 shares** of treasury stock for **$4.3 million**[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased by **$8.5 million** for the six months ended June 30, 2023, as **$11.5 million** net cash outflow from operating activities and **$115.6 million** from investing activities were offset by **$135.6 million** net cash inflow from financing activities | (dollars in thousands) | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(11,545) | $35,679 | | Net cash used in investing activities | $(115,553) | $(150,217) | | Net cash provided by financing activities | $135,573 | $128,151 | | **Net change in cash and cash equivalents** | **$8,475** | **$13,613** | [Notes to Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes detail significant accounting policies, including the **$2.2 million** after-tax reduction to retained earnings from the CECL adoption, and provide breakdowns of the securities portfolio, loan composition, and segment performance, noting an increase in nonaccrual loans to **$27.4 million** and a pre-tax loss in the Mortgage segment - The Corporation adopted ASU 2016-13 (CECL) on January 1, 2023, replacing the incurred loss model with an expected loss methodology, resulting in a one-time decrease to retained earnings of **$2.2 million**, net of tax[37](index=37&type=chunk)[66](index=66&type=chunk)[68](index=68&type=chunk) - The securities portfolio had a fair value of **$126.7 million** for available-for-sale and an amortized cost of **$36.5 million** for held-to-maturity, with the overall portfolio in a net unrealized loss position primarily due to changes in market interest rates[76](index=76&type=chunk)[79](index=79&type=chunk) - Total nonaccrual loans increased to **$27.4 million** as of June 30, 2023, from **$21.2 million** at December 31, 2022[87](index=87&type=chunk)[89](index=89&type=chunk) - The allowance for credit losses (ACL) stood at **$20.2 million** as of June 30, 2023, with the provision for credit losses for the six months ended June 30, 2023, being **$2.1 million**[96](index=96&type=chunk)[99](index=99&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 highlights a **7.0%** growth in total assets driven by loan growth, despite a **24.5%** decline in net income for the first six months of 2023 due to net interest margin compression and reduced mortgage banking income, while maintaining strong liquidity and capital ratios exceeding 'well-capitalized' minimums - Total assets increased by **7.0%** to **$2.2 billion** since December 31, 2022, while portfolio loans grew by **9.2%** on an annualized basis[186](index=186&type=chunk) - Net income for the first six months of 2023 decreased by **24.5%** year-over-year, driven by a decline in non-interest income and net interest margin compression[188](index=188&type=chunk) - The company addresses banking sector concerns by highlighting its diversified deposit base, with uninsured deposits at **23%** of total deposits, and access to approximately **$853.3 million** in liquidity from various sources[183](index=183&type=chunk)[185](index=185&type=chunk) - Net interest margin for Q2 2023 decreased to **3.33%** from **4.07%** in Q2 2022, as the cost of deposits and borrowings repriced upward faster than interest-earning assets[187](index=187&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Q2 2023 saw net interest income decrease slightly to **$17.1 million** due to margin compression, while non-interest income fell **12.3%** to **$9.1 million**, primarily from a **$1.9 million** drop in mortgage banking income, and non-interest expense remained flat at **$19.6 million** | Metric | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $17.1M | $17.6M | -2.6% | | Provision for Credit Losses | $0.7M | $0.6M | +17.1% | | Non-Interest Income | $9.1M | $10.4M | -12.3% | | Non-Interest Expense | $19.6M | $19.7M | -0.5% | | Net Income | $4.6M | $5.9M | -21.8% | - The decrease in non-interest income was primarily driven by a **27.3%** decline in mortgage banking income, partially offset by a **304.3%** increase in SBA loan income[213](index=213&type=chunk)[214](index=214&type=chunk) [Balance Sheet Analysis](index=52&type=section&id=Balance%20Sheet%20Analysis) Total assets grew by **$144.6 million** (**7.0%**) to **$2.2 billion** since year-end 2022, driven by a **$122.5 million** (**7.1%**) increase in portfolio loans, while total deposits rose by **$70.1 million** (**4.1%**) with a notable shift to higher-yielding time deposits - Portfolio loan growth was **14.1%** on an annualized basis, led by increases in commercial real estate (**$82.8 million**) and residential real estate (**$26.0 million**)[223](index=223&type=chunk) - There was a notable shift in deposit composition: noninterest-bearing deposits decreased by **$32.6 million**, while time deposits increased by **$153.6 million**, reflecting customer preference for higher interest rates[224](index=224&type=chunk) [Capital and Liquidity](index=52&type=section&id=Capital%20and%20Liquidity) The Corporation remains well-capitalized with all regulatory ratios exceeding minimums, maintaining strong liquidity with **$276.8 million** in balance sheet liquidity and access to an additional **$853.3 million** from various borrowing facilities | Capital Ratio (Bank) | June 30, 2023 | Well-capitalized minimum | | :--- | :--- | :--- | | Tier 1 leverage ratio | 9.22% | 5.00% | | Common tier 1 risk-based capital ratio | 10.35% | 6.50% | | Total risk-based capital ratio | 11.43% | 10.00% | - The company has access to approximately **$853.3 million** in liquidity from various sources, including the FHLB, correspondent banks, and the Federal Reserve[230](index=230&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's interest rate risk model indicates a liability-sensitive balance sheet, projecting a **0.44%** decrease in net interest income from a **100 basis point** rate increase and a **1.14%** decrease from a **100 basis point** rate decrease, which management deems manageable | Changes in Market Interest Rates (over 12 months) | Impact on Net Interest Income (June 30, 2023) | | :--- | :--- | | +300 basis points | (1.92)% | | +200 basis points | (1.14)% | | +100 basis points | (0.44)% | | -100 basis points | (1.14)% | | -200 basis points | (2.29)% | [Item 4. Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls were effective as of June 30, 2023, with internal controls over financial reporting modified to accommodate the CECL accounting standard, focusing on model governance, assumptions, and data - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of June 30, 2023[252](index=252&type=chunk) - Changes were made to internal controls over financial reporting to accommodate the adoption of CECL, focusing on model creation, governance, assumptions, and data[253](index=253&type=chunk) [PART II OTHER INFORMATION](index=56&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - None[255](index=255&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) The company updated its risk factors, highlighting the adverse impact on mortgage banking income due to secondary market weakness, driven by higher interest rates, housing inventory shortages, and inflation, which have reduced origination volumes - A key risk factor is the potential for continued adverse effects on mortgage banking income due to volatility in the residential mortgage market[256](index=256&type=chunk) - Factors negatively impacting the mortgage segment include changes in interest rates, lack of housing inventory, inflation, and reduced demand from third-party investors[256](index=256&type=chunk)[257](index=257&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2023, the Corporation repurchased **127,849 shares** at an average price of **$12.21** per share, with the **$20 million** stock repurchase plan expiring on April 22, 2023, after **$19.6 million** in total buybacks | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 to April 30, 2023 | 127,849 | $12.21 | - The company's **$20 million** stock repurchase plan expired on April 22, 2023, after a total of **$19.6 million** worth of stock was repurchased[258](index=258&type=chunk) [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amended articles of incorporation, officer certifications, and XBRL interactive data files

PART I FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) Unaudited Q1 2023 financials show total assets grew to $2.23 billion, but net income declined to $4.0 million, primarily from lower non-interest income [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet highlights significant growth in total assets and borrowings, alongside an increase in cash and loans Consolidated Balance Sheet Highlights (as of March 31, 2023 vs. December 31, 2022) | Account | March 31, 2023 ($ thousands) | December 31, 2022 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets** | **$2,229,783** | **$2,062,228** | **+8.1%** | | Cash and cash equivalents | $108,503 | $38,391 | +182.6% | | Loans, net | $1,797,747 | $1,724,854 | +4.2% | | Total Deposits | $1,770,413 | $1,712,479 | +3.4% | | Borrowings | $233,883 | $122,082 | +91.6% | | Total Stockholders' Equity | $153,049 | $153,280 | -0.2% | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) The income statement reveals a decrease in net income despite growth in net interest income, primarily due to a sharp decline in non-interest income Consolidated Income Statement Summary (Three Months Ended March 31) | Metric | 2023 ($ thousands) | 2022 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $17,677 | $16,035 | +10.2% | | Provision for credit losses | $1,399 | $615 | +127.5% | | Non-interest Income | $6,638 | $13,102 | -49.3% | | Non-interest Expense | $17,789 | $21,433 | -17.0% | | **Net Income** | **$4,021** | **$5,535** | **-27.4%** | | **Diluted EPS** | **$0.34** | **$0.44** | **-22.7%** | - The significant decrease in net income was primarily driven by a sharp decline in non-interest income, with mortgage banking income falling from **$7.1 million** to **$3.3 million** and SBA loan income decreasing from **$2.5 million** to **$713 thousand** year-over-year[14](index=14&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive income significantly improved in Q1 2023, driven by positive changes in unrealized gains on available-for-sale securities - Total comprehensive income was **$5.7 million** for Q1 2023, a significant improvement from a comprehensive loss of **$0.9 million** in Q1 2022, driven by a positive net change in unrealized gains on available-for-sale securities[16](index=16&type=chunk) [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity was impacted by the CECL accounting standard adoption, resulting in a $2.2 million after-tax reduction to retained earnings - On January 1, 2023, the company recorded a **$2.2 million** after-tax decrease to retained earnings upon the adoption of the CECL accounting standard (ASU 2016-13)[19](index=19&type=chunk) - During Q1 2023, the company paid dividends of **$1.4 million** (**$0.125 per share**) and repurchased **$2.7 million** of treasury stock (**184,598 shares**)[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased by $70.1 million, primarily funded by net cash from financing activities, including deposits and borrowings - Cash and cash equivalents increased by **$70.1 million** during the three months ended March 31, 2023, primarily funded by net cash from financing activities of **$165.7 million**, which included a **$57.9 million** net increase in deposits and a **$111.8 million** net increase in borrowings, while net cash used in operating and investing activities was **$11.4 million** and **$84.2 million**, respectively[23](index=23&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) Notes detail the two-for-one stock split, the impact of CECL adoption, investment portfolio unrealized losses, and an increase in nonaccrual loans - On February 28, 2023, the Corporation approved a two-for-one stock split in the form of a stock dividend, effective March 20, 2023, with all share and per-share amounts adjusted to reflect this split[30](index=30&type=chunk) Impact of CECL Adoption on January 1, 2023 | Item | Pre-adoption ($ thousands) | Adoption Impact ($ thousands) | As Reported ($ thousands) | | :--- | :--- | :--- | :--- | | Total ACL on loans and leases | $18,828 | $1,596 | $20,424 | | Reserve for unfunded commitments | $173 | $1,256 | $1,429 | - As of March 31, 2023, the investment portfolio had a total fair value of **$176.0 million** with a net unrealized loss of **$15.2 million**, primarily attributed to changes in market interest rates, with no securities deemed other-than-temporarily impaired[75](index=75&type=chunk) - Total nonaccrual loans increased to **$23.1 million** as of March 31, 2023, from **$21.2 million** at year-end 2022, with the delinquency rate for total loans at **1.77%**[87](index=87&type=chunk)[88](index=88&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 results, highlighting a 27.4% net income decrease driven by lower non-interest income, despite net interest income growth and loan expansion [Executive Overview](index=33&type=section&id=Executive%20Overview) The executive overview highlights an 8.1% growth in total assets and a 27.4% decrease in net income for Q1 2023, alongside a compressed net interest margin - Total assets grew **8.1%** to **$2.2 billion** since December 31, 2022, with portfolio loans increasing **4.7%** (**18.6% annualized**)[177](index=177&type=chunk) - Net income for Q1 2023 was **$4.0 million** (**$0.34 per diluted share**), a **27.4%** decrease from Q1 2022, primarily due to a **49.3%** drop in non-interest income, and net interest margin decreased to **3.61%** from **3.89%** in Q1 2022[178](index=178&type=chunk) - The company adopted the CECL standard on January 1, 2023, resulting in a **$1.6 million** increase to the allowance for credit losses and a **$2.2 million** after-tax reduction to retained earnings[177](index=177&type=chunk) [Bank Sector Concerns](index=33&type=section&id=Bank%20Sector%20Concerns) The company addresses bank sector concerns by detailing its diversified deposit base, with 23% uninsured deposits, and access to $817.9 million in liquidity - The deposit base is comprised of **57%** business deposits, **11%** consumer, **9%** municipal, and **23%** brokered deposits[173](index=173&type=chunk) - As of March 31, 2023, the level of uninsured deposits for the entire deposit base was **23%**, with municipal deposits **100%** collateralized and brokered deposits **100%** FDIC insured[173](index=173&type=chunk) - The company has access to approximately **$817.9 million** in liquidity from various sources, including the FHLB and the Federal Reserve's Bank Term Funding Program (BTFP), having secured **$33 million** in borrowings from the BTFP in Q1 2023[175](index=175&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Results of operations show increased net interest income offset by higher provision for credit losses and a significant decline in non-interest income - Net interest income increased by **$1.7 million** year-over-year, as a **$13.0 million** increase in interest income (driven by loan growth and higher rates) was partially offset by an **$11.3 million** increase in interest expense due to higher funding costs[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - The provision for credit losses increased by **$784 thousand** year-over-year to cover loan growth and a **$906 thousand** increase in net charge-offs[189](index=189&type=chunk) - Non-interest income decreased by **$6.5 million** (**49.3%**), primarily due to a **$3.8 million** drop in mortgage banking income and a **$1.8 million** decrease in SBA loan income[196](index=196&type=chunk)[197](index=197&type=chunk) - Non-interest expense decreased by **$3.6 million** (**17.0%**), largely due to a **$4.2 million** reduction in salaries and employee benefits in the mortgage segment, reflecting lower origination volumes[199](index=199&type=chunk) [Balance Sheet, Liquidity and Capital](index=41&type=section&id=Balance%20Sheet,%20Liquidity%20and%20Capital) The balance sheet analysis indicates strong portfolio loan growth, increased deposits with a compositional shift, and the Bank maintaining a well-capitalized status - Portfolio loans grew by **$80.8 million** (**4.7%**) in Q1 2023, an annualized rate of **18.6%**, driven by commercial real estate, residential mortgages, small business loans, and lease financings[202](index=202&type=chunk) - Total deposits increased by **$57.9 million** (**3.4%**), with a shift in composition as noninterest-bearing and money market deposits decreased while time deposits grew by **$133.9 million**, including an increase in brokered deposits[203](index=203&type=chunk) - The Bank remains well-capitalized, with a Tier 1 leverage ratio of **9.32%** as of March 31, 2023, well above the **5.00%** minimum requirement[206](index=206&type=chunk) - Tangible book value per share (a non-GAAP measure) increased to **$13.33** as of March 31, 2023, from **$13.01** as of December 31, 2022[205](index=205&type=chunk)[221](index=221&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk analysis indicates an asset-sensitive balance sheet, with rising interest rates projected to positively impact net interest income and economic value of equity Net Interest Income Sensitivity Analysis (Projected Change over 12 months) | Rate Shock Scenario | March 31, 2023 (%) | March 31, 2022 (%) | | :--- | :--- | :--- | | +300 bps | 1.58% | 0.93% | | +200 bps | 1.21% | 0.44% | | +100 bps | 0.76% | -0.10% | | -100 bps | -1.80% | -0.15% | | -200 bps | -3.19% | -1.29% | - The economic value of equity (EVE) simulation shows a positive effect from rising interest rates and a negative effect from falling rates, indicating an asset-sensitive position[228](index=228&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were effective as of March 31, 2023, with new internal controls implemented for CECL adoption - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2023[231](index=231&type=chunk) - New and modified internal controls over financial reporting were implemented to accommodate the adoption of CECL, covering model governance, assumptions, and data[232](index=232&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - There are no legal proceedings to report[234](index=234&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) New risk factors address potential adverse effects from financial industry turmoil and the impact of rising interest rates on the securities portfolio's unrealized losses - A new risk factor was added concerning recent turmoil in the financial services industry, which could lead to deposit withdrawals, increased regulatory scrutiny, and higher FDIC insurance costs[235](index=235&type=chunk)[236](index=236&type=chunk) - Another new risk factor highlights that rising interest rates have created significant unrealized losses in the Corporation's securities portfolio, where a forced sale to meet liquidity needs could result in realized losses, impairing capital and profitability[238](index=238&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 184,598 shares of common stock for approximately $2.9 million during Q1 2023, under a plan that expired in April 2023 Share Repurchases for Q1 2023 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2023 | 29,142 | $15.67 | | Feb 2023 | 45,194 | $15.24 | | Mar 2023 | 110,262 | $15.99 | | **Total** | **184,598** | **$15.63** | [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL data files

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20429 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 (State or other jurisdiction of incorporation or organization) Pennsylvania 83-1561918 (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) Secu ...

239 15 75 112 173 71 239 15 75 112 173 71 | --- | --- | --- | --- | |-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 239 | | | | | | | | | --- | --- | --- | --- | --- | |-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 234 | | | | 186 12 47 186 12 0 • HQ in Malvern, PA • Six full service branches | --- | |------------------------------------------------------------------------| | ...

Table of Contents 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 September 30, 2022 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (484) 568-5000 (Registrant's telephone number, including area code) | Title of class | Trading Symbol | Name of exchange on which registered | | --- | --- | --- | | Co ...

186 12 47 239 15 75 0 0 0 111 111 113 186 12 0 234 234 234 112 173 71 MeridianCorporation ® Q3'2022 Investor Presentation NASDAQ: MRBK 186 12 47 239 15 75 0 0 0 111 111 113 186 12 0 234 234 234 112 173 71 FORWARD-LOOKING STATEMENTS Meridian Corporation (the "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 re ...

Table of Contents 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 June 30, 2022 Or ☐ 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 (St ...

186 12 47 239 15 75 0 0 0 111 111 113 186 12 0 234 234 234 112 173 71 2 nd QTR 2022 Investor Presentation NASDAQ: MRBK 186 12 47 239 15 75 0 0 0 111 111 113 186 12 0 234 234 234 112 173 71 FORWARD-LOOKING STATEMENTS Meridian Corporation (the "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 Meridia ...

PART I FINANCIAL INFORMATION [Item 1 Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) Unaudited Q1 2022 financial statements show net income decreased to $5.5 million, total assets grew to $1.83 billion, and stockholders' equity declined to $157.7 million [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets show total assets increased to $1.83 billion and total stockholders' equity decreased to $157.7 million | (dollars in thousands) | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $68,888 | $23,480 | | Loans, net | $1,413,080 | $1,367,699 | | Total assets | $1,831,589 | $1,713,443 | | **Liabilities & Equity** | | | | Total deposits | $1,564,851 | $1,446,413 | | Total liabilities | $1,673,905 | $1,548,083 | | Total stockholders' equity | $157,684 | $165,360 | | Total liabilities and stockholders' equity | $1,831,589 | $1,713,443 | - Total assets increased by **$118.2 million**, or **6.9%**, from December 31, 2021, to March 31, 2022, primarily driven by growth in net loans and cash[9](index=9&type=chunk) - Total stockholders' equity decreased by **$7.7 million**, or **4.6%**, from year-end 2021, mainly due to a shift in accumulated other comprehensive income from a gain of $708 thousand to a loss of $5.7 million[9](index=9&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Statements of Income show a significant decrease in net income to $5.5 million, primarily due to a sharp drop in mortgage banking income | (dollars in thousands, except per share data) | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Net interest income | $16,035 | $15,120 | | Provision for loan losses | $615 | $599 | | Non-interest income | $13,102 | $27,048 | | Non-interest expenses | $21,433 | $28,263 | | Net income | $5,535 | $10,170 | | Diluted earnings per common share | $0.88 | $1.65 | - Net income for Q1 2022 was **$5.5 million**, a **45.6% decrease** from $10.2 million in Q1 2021, primarily driven by a sharp drop in mortgage banking income from $24.1 million to $7.1 million year-over-year[12](index=12&type=chunk) - Net interest income grew by **6.0% YoY** to **$16.0 million**, while non-interest expenses decreased by **24.2% YoY**, mainly due to lower salaries and employee benefits tied to mortgage activity[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows indicate a significant decrease in cash from operating activities, offset by a substantial increase from financing activities | (dollars in thousands) | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,454 | $62,764 | | Net cash used in investing activities | ($67,204) | ($81,014) | | Net cash provided by financing activities | $106,158 | $12,510 | | **Net change in cash and cash equivalents** | **$45,408** | **($5,740)** | - Cash from operating activities significantly decreased, primarily due to lower proceeds from the sale of loans and reduced mortgage banking income compared to the prior year period[20](index=20&type=chunk) - Financing activities provided a significant source of cash, driven by a **$118.4 million** net increase in deposits[20](index=20&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes to Consolidated Financial Statements detail portfolio changes, asset quality metrics, and the impact of new accounting standards - During Q1 2022, the Corporation transferred **$27.7 million** of municipal securities from the available-for-sale portfolio to the held-to-maturity portfolio at fair value[30](index=30&type=chunk) - The total loan and lease portfolio grew to **$1.43 billion** as of March 31, 2022, from $1.39 billion at year-end 2021, with notable growth in commercial mortgage, construction, and lease categories, while Paycheck Protection Program (PPP) loans decreased from $90.2 million to $50.9 million[36](index=36&type=chunk) - The allowance for loan and lease losses was **$18.8 million**, or **1.31%** of total portfolio loans and leases, as of March 31, 2022, a slight increase from $18.76 million at year-end 2021[9](index=9&type=chunk)[42](index=42&type=chunk) - The Corporation adopted the new lease accounting standard (ASU 2016-02, Topic 842) on January 1, 2022, recognizing right-of-use (ROU) assets of **$10.5 million** and lease liabilities of **$10.3 million**[124](index=124&type=chunk)[126](index=126&type=chunk)[131](index=131&type=chunk) - The Mortgage banking segment reported a pre-tax loss of **$1.6 million** in Q1 2022, a significant reversal from a $5.8 million pre-tax income in Q1 2021, reflecting the slowdown in the mortgage market[123](index=123&type=chunk) [Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2022 net income decrease to lower mortgage banking, offset by strong core banking loan growth and an expanded net interest margin of 3.89% [Financial Condition and Results of Operations Overview](index=38&type=section&id=Financial%20Condition%20and%20Results%20of%20Operations%20Overview) The company experienced asset and deposit growth in Q1 2022, with strong portfolio loan growth, while key performance ratios declined due to lower net income - Total assets increased by **$118.1 million (6.9%)** to **$1.8 billion** in Q1 2022, while portfolio loans, excluding PPP loans, grew **$84.1 million (6.5%)**, representing a **26% annualized growth rate**[146](index=146&type=chunk) - Total deposits grew **$118.4 million (8.2%)** to **$1.6 billion**, with non-interest bearing deposits increasing by **$16.9 million (6.1%)**[146](index=146&type=chunk) | Key Performance Ratios | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Annualized return on average equity | 13.86% | 30.06% | | Annualized return on average assets | 1.28% | 2.43% | | Net interest margin (tax effected yield) | 3.89% | 3.72% | | Diluted earnings per share | $0.88 | $1.65 | - The company returned **$7.7 million** to shareholders in Q1 2022 through a $1.00 special dividend and a $0.20 quarterly dividend[146](index=146&type=chunk) [Net Interest Income and Market Risk](index=42&type=section&id=Net%20Interest%20Income%20and%20Market%20Risk) Net interest income increased due to higher volumes, and the balance sheet is liability sensitive in the near term but asset sensitive with larger rate increases - Net interest income increased **6.1% YoY** to **$16.1 million** (tax-equivalent basis), with the net interest margin expanding by **17 basis points** to **3.89%** for Q1 2022, up from 3.72% in Q1 2021[161](index=161&type=chunk) - The increase in net interest income was driven by a **$1.2 million** positive impact from higher loan and investment volumes, which offset a $681 thousand negative impact from rate changes[167](index=167&type=chunk)[168](index=168&type=chunk) | Interest Rate Sensitivity (Rate Ramp) | Estimated % change in Net Interest Income over 12 months | | :--- | :--- | | +300 basis points | 0.93% | | +200 basis points | 0.44% | | +100 basis points | (0.10)% | | -100 basis points | (0.15)% | - As of March 31, 2022, the balance sheet is liability sensitive in the near term, with a 100 bps rate increase projected to have a slightly negative impact on NII, but becomes asset sensitive with larger rate increases (+200 bps and +300 bps)[173](index=173&type=chunk) [Asset Quality](index=46&type=section&id=Asset%20Quality) Asset quality remains stable with a slight increase in loan loss provision and consistent non-performing loan levels - The provision for loan losses was **$615 thousand** for Q1 2022, a slight increase from $599 thousand in Q1 2021, reflecting loan growth and a specific reserve on a non-performing commercial loan[178](index=178&type=chunk) - Total non-performing loans were stable at **$22.8 million** as of March 31, 2022, compared to $23.0 million at year-end 2021, with the ratio of non-performing assets to total assets at **1.25%**[180](index=180&type=chunk)[186](index=186&type=chunk) - The allowance for loan losses to total loans (excluding PPP and fair value loans) was **1.38%** as of March 31, 2022, down from 1.46% at December 31, 2021[181](index=181&type=chunk)[186](index=186&type=chunk) [Non-Interest Income and Expense](index=49&type=section&id=Non-Interest%20Income%20and%20Expense) Non-interest income significantly decreased due to lower mortgage banking revenue, partially offset by increased SBA loan sales, while non-interest expenses also declined - Non-interest income fell **51.6% YoY** to **$13.1 million**, driven by a **$17.0 million (70.6%) decrease** in mortgage banking net revenue due to lower origination volumes[187](index=187&type=chunk) - Net revenue from the sale of SBA 7(a) loans increased by **$1.3 million (93.0%) YoY**, providing a partial offset to the mortgage decline[188](index=188&type=chunk) - Non-interest expense decreased **24.2% YoY** to **$21.4 million**, primarily due to a **$6.8 million (30.9%) reduction** in salaries and employee benefits, mostly related to lower variable compensation in the mortgage segment[189](index=189&type=chunk) [Capital and Liquidity](index=50&type=section&id=Capital%20and%20Liquidity) Stockholders' equity decreased due to dividends and AOCI decline, yet all capital ratios remain above 'well capitalized' thresholds, with substantial available liquidity - Stockholders' equity decreased to **$157.7 million** from $165.4 million at year-end 2021, impacted by **$7.3 million** in dividends and a **$6.4 million** decline in accumulated other comprehensive income[197](index=197&type=chunk) - All capital ratios remain above the 'well capitalized' thresholds, with the Corporation's Tier 1 leverage ratio at **9.10%** as of March 31, 2022, exceeding the 8.00% requirement under the CBLR framework[198](index=198&type=chunk)[199](index=199&type=chunk) - Total available liquidity was **$331.9 million** at March 31, 2022, and the company has a maximum borrowing capacity with the FHLB of **$524.3 million**[201](index=201&type=chunk)[202](index=202&type=chunk) [Item 3 Quantitative and Qualitative Disclosures about Market Risk](index=52&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section directs readers to Item 2 for detailed disclosures on market risk, specifically interest rate risk analysis - The company's disclosures about market risk, particularly interest rate risk, are detailed within the Management's Discussion and Analysis (MD&A) section of this report[211](index=211&type=chunk) [Item 4 Controls and Procedures](index=52&type=section&id=Item%204%20Controls%20and%20Procedures) Management confirmed effective disclosure controls and procedures as of March 31, 2022, with no material changes to internal control over financial reporting - Based on an evaluation as of the end of the period, the CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective[212](index=212&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended March 31, 2022, that materially affected or are likely to materially affect internal controls[213](index=213&type=chunk) PART II OTHER INFORMATION [Item 1 Legal Proceedings and Item 1A Risk Factors](index=53&type=section&id=Item%201%20Legal%20Proceedings%20and%20Item%201A%20Risk%20Factors) No material changes to legal proceedings or risk factors from the 2021 Form 10-K are reported, with other items being not applicable - There have been no material changes in the risk factors from those disclosed in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2021[216](index=216&type=chunk) - The company reports no information for Legal Proceedings, Unregistered Sales of Equity Securities and Use of Proceeds, or Defaults Upon Senior Securities[216](index=216&type=chunk)[217](index=217&type=chunk)

PART I [Business](index=6&type=section&id=Item%201.%20Business) Meridian Corporation, a bank holding company, offers commercial, mortgage, and wealth management services in the Delaware Valley and Central Maryland - The Corporation operates through three principal business lines: **Commercial Banking**, **Mortgage Banking**, and **Wealth Management and Advisory Services**[18](index=18&type=chunk)[19](index=19&type=chunk)[26](index=26&type=chunk) - The primary market area is the five-county Philadelphia metropolitan area, with a secondary market in the five-county Baltimore metropolitan area. The company operates **six** full-service branches and **19** other loan production and corporate offices[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) Human Capital Overview (as of Dec 31, 2021) | Metric | Value | | :--- | :--- | | Total Employees | 413 | | Women in Workforce | 48% | | Women Officers | 32% | | **Employee Distribution by Segment** | | | Banking | 36% | | Mortgage | 62% | | Wealth | 2% | - The company qualifies as an "**emerging growth company**" under the JOBS Act, which allows it to take advantage of reduced reporting requirements and an extended transition period for complying with new accounting standards[45](index=45&type=chunk)[46](index=46&type=chunk) - Meridian and its subsidiaries are subject to extensive regulation and supervision by the **FDIC**, the **Pennsylvania Department of Banking and Securities (PDBS)**, the **Federal Reserve**, and the **SEC**[52](index=52&type=chunk)[53](index=53&type=chunk) [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from economic conditions, cybersecurity, real estate market fluctuations, interest rate changes, and an evolving regulatory environment - Business and operations are sensitive to economic conditions in its primary markets of **Pennsylvania**, **New Jersey**, **Delaware**, and **Maryland**, which can affect credit quality, loan demand, and collateral values[129](index=129&type=chunk)[132](index=132&type=chunk) - The company faces significant risks from **fraudulent activity** and **cybersecurity incidents**, which could result in financial losses, disclosure of confidential information, and reputational damage. It is also dependent on the information technology systems of third-party providers[157](index=157&type=chunk)[163](index=163&type=chunk) - A significant portion of the loan portfolio is secured by **real estate**, making the business highly dependent on the real estate markets in which it operates. Declines in property values could lead to deterioration in credit quality[196](index=196&type=chunk) - The mortgage lending business is highly competitive and susceptible to changes in **market interest rates**, the availability of an active **secondary market**, and programs offered by **government-sponsored entities (GSEs)**[184](index=184&type=chunk)[186](index=186&type=chunk)[188](index=188&type=chunk) - Fluctuations in **market interest rates** can negatively impact **net interest margin** and **net interest income**, as well as the volume of mortgage originations and the value of assets under management in the wealth division[199](index=199&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - The company is subject to **extensive regulation and supervision**, and changes in laws, regulations, or capital adequacy requirements could adversely affect operations and increase costs[205](index=205&type=chunk)[208](index=208&type=chunk) [Unresolved Staff Comments](index=60&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments - None[215](index=215&type=chunk) [Properties](index=60&type=section&id=Item%202.%20Properties) The Corporation's properties include its Malvern, PA headquarters, six branches, and 19 other offices, with a net book value of **$5.8 million** as of December 31, 2021 - The company's main office is in Malvern, PA, with **six** full-service branches serving the surrounding counties of Philadelphia[216](index=216&type=chunk)[218](index=218&type=chunk) - There are **19** other offices, including headquarters for Corporate, Operations, Wealth, and Mortgage divisions. All offices except the corporate and operations headquarters are leased[216](index=216&type=chunk)[218](index=218&type=chunk)[227](index=227&type=chunk) - The net book value of all locations was **$5.8 million** at December 31, 2021[216](index=216&type=chunk) [Legal Proceedings](index=62&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no legal proceedings - None[221](index=221&type=chunk) [Mine Safety Disclosures](index=62&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[222](index=222&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=62&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under **MRBK**, with **28,202 shares** repurchased in Q4 2021 and increased quarterly dividends - The Corporation's common stock trades on the NASDAQ Global Select Market under the symbol "**MRBK**"[224](index=224&type=chunk) Share Repurchases in Q4 2021 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Oct 2021 | 25,935 | $29.56 | | Nov 2021 | 2,267 | $31.71 | | **Total** | **28,202** | **$29.91** | - On August 30, 2021, the stock repurchase plan was increased to **$20 million** over a two-year period[228](index=228&type=chunk) 2021 Dividend Declarations | Type | Per Share Amount | Declaration Date | | :--- | :--- | :--- | | Quarterly | $0.125 | Jan 28, 2021 | | Special | $1.00 | Feb 16, 2021 | | Quarterly | $0.125 | Apr 22, 2021 | | Quarterly | $0.125 | Jul 22, 2021 | | Quarterly | $0.200 | Oct 28, 2021 | [Selected Financial Data](index=65&type=section&id=Item%206.%20Selected%20Financial%20Data) This section summarizes key historical financial data, reporting **$1.71 billion** in total assets, **$35.6 million** net income, and **$5.73** diluted EPS for 2021 Selected Financial Data (2020 vs 2021) | (In thousands, except per share data) | 2021 | 2020 | | :--- | :--- | :--- | | **Balance Sheet Data:** | | | | Total assets | $1,713,443 | $1,720,197 | | Loans receivable, gross | $1,386,457 | $1,284,764 | | Total deposits | $1,446,413 | $1,241,335 | | Total stockholders' equity | $165,360 | $141,622 | | **Income Statement Data:** | | | | Net interest income | $63,111 | $48,996 | | Non-interest income | $87,988 | $86,918 | | Net income | $35,585 | $26,438 | | **Per Share Data:** | | | | Earnings per common share, diluted | $5.73 | $4.27 | | Book value per common share | $27.07 | $23.08 | | **Performance Metrics:** | | | | Return on average assets (ROAA) | 2.06% | 1.78% | | Return on average equity (ROAE) | 23.74% | 21.33% | | Net interest margin (NIM) | 3.77% | 3.40% | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=66&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reports **$35.6 million** net income in 2021, driven by increased net interest income and lower loan loss provisions, despite higher non-interest expenses and a rise in non-performing assets Results of Operations (2021 vs. 2020) | (In millions) | 2021 | 2020 | | :--- | :--- | :--- | | Net Interest Income | $63.1 | $49.0 | | Provision for Loan Losses | $1.1 | $8.3 | | Non-interest Income | $88.0 | $86.9 | | Non-interest Expense | $103.7 | $93.1 | | **Net Income** | **$35.6** | **$26.4** | | Diluted EPS | $5.73 | $4.27 | - The net interest margin expanded by **37 basis points** to **3.77%** in 2021, benefiting from PPP loan forgiveness, growth in non-interest bearing deposits, and a **59 basis point** decrease in the cost of deposits[247](index=247&type=chunk) - Total loans, net of allowance, grew by **$101 million (7.9%)** to **$1.4 billion**, driven by increases in small business loans (**+$64.6 million**), commercial real estate (**+$31.8 million**), and lease financings (**+$57.2 million**). This growth was offset by decreases in residential loans held for sale (**-$148.3 million**) and PPP loans (**-$113.3 million**)[271](index=271&type=chunk) - Non-performing assets to total assets increased to **1.34%** from **0.46%** in 2020, primarily due to one commercial loan relationship of **$13.8 million** becoming non-performing[293](index=293&type=chunk) - Deposits grew by **$205.1 million (16.5%)** to **$1.4 billion**, with strong growth in core deposits, including a **34.7%** increase in non-interest bearing deposits[302](index=302&type=chunk) - The Corporation and Bank remain "**well capitalized**" for regulatory purposes, adopting the Community Bank Leverage Ratio (CBLR) framework in Q1 2020[313](index=313&type=chunk)[316](index=316&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=90&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages primary market risk, mainly interest rate volatility, through ALCO's gap analysis and simulation models, showing varied impacts on net interest income and economic value of equity from rate changes - The primary market risk is **interest rate volatility**, managed by the Asset/Liability Committee (**ALCO**) using repricing gap analysis, net interest income simulation, and economic value of equity simulation[318](index=318&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) Net Interest Income Sensitivity (as of Dec 31, 2021) | Rate Change Scenario (Ramp over 12 months) | Estimated % Change in Net Interest Income | | :--- | :--- | | +300 basis points | 0.21% | | +200 basis points | (0.18)% | | +100 basis points | (0.31)% | | -100 basis points | (0.22)% | | -200 basis points | (2.34)% | Economic Value of Equity Sensitivity (as of Dec 31, 2021) | Rate Change Scenario (Instantaneous Shift) | Estimated % Change in Net Economic Value | | :--- | :--- | | +300 basis points | 60% | | +200 basis points | 45% | | +100 basis points | 26% | | -100 basis points | (37)% | | -200 basis points | (97)% | [Financial Statements and Supplementary Data](index=95&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2021 and 2020, including balance sheets, income statements, and cash flows, with an **unqualified opinion** from Crowe LLP - The independent registered public accounting firm, **Crowe LLP**, issued an **unqualified opinion** on the financial statements, stating they are presented fairly in all material respects in conformity with U.S. GAAP[336](index=336&type=chunk) Consolidated Balance Sheet Highlights (Dec 31, 2021) | Account | Amount (in thousands) | | :--- | :--- | | Total Assets | $1,713,443 | | Loans, net | $1,367,699 | | Total Deposits | $1,446,413 | | Total Liabilities | $1,548,083 | | Total Stockholders' Equity | $165,360 | Consolidated Income Statement Highlights (Year Ended Dec 31, 2021) | Account | Amount (in thousands) | | :--- | :--- | | Net Interest Income | $63,111 | | Provision for Loan Losses | $1,070 | | Non-interest Income | $87,988 | | Non-interest Expense | $103,727 | | **Net Income** | **$35,585** | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=181&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 on accounting and financial disclosures - None[601](index=601&type=chunk) [Controls and Procedures](index=181&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were **effective** as of December 31, 2021, with no material changes identified - Management concluded that the Corporation's disclosure controls and procedures were **effective** as of December 31, 2021[601](index=601&type=chunk) - Based on an assessment against the **COSO framework (2013)**, management concluded that the Corporation's system of internal control over financial reporting was **effective** as of December 31, 2021[606](index=606&type=chunk) - There were no changes in internal control over financial reporting during the fourth quarter of 2021 that materially affected, or are reasonably likely to materially affect, these controls[608](index=608&type=chunk) [Other Information](index=183&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[609](index=609&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=183&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 **2022 Annual Meeting of Shareholders proxy statement** - Information is incorporated by reference from the definitive proxy statement for the **2022 Annual Meeting of Shareholders**[611](index=611&type=chunk) [Executive Compensation](index=183&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive and director compensation is incorporated by reference from the **2022 Annual Meeting of Shareholders proxy statement** - Information is incorporated by reference from the definitive proxy statement for the **2022 Annual Meeting of Shareholders**[612](index=612&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=183&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and equity compensation plans is incorporated by reference from the **2022 Annual Meeting of Shareholders proxy statement** - Information is incorporated by reference from the definitive proxy statement for the **2022 Annual Meeting of Shareholders**[613](index=613&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=183&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the **2022 Annual Meeting of Shareholders proxy statement** - Information is incorporated by reference from the definitive proxy statement for the **2022 Annual Meeting of Shareholders**[613](index=613&type=chunk) [Principal Accounting Fees and Services](index=183&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information detailing fees paid to the principal accountant is incorporated by reference from the **2022 Annual Meeting of Shareholders proxy statement** - Information is incorporated by reference from the definitive proxy statement for the **2022 Annual Meeting of Shareholders**[614](index=614&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=184&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements from Item 8 and exhibits filed with the Form 10-K, noting the omission of inapplicable financial statement schedules - Lists the consolidated financial statements set forth in **Item 8**[617](index=617&type=chunk) - Provides a list of exhibits filed with the **Form 10-K**, including articles of incorporation, bylaws, material contracts, and certifications[618](index=618&type=chunk) [Form 10-K Summary](index=185&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports that there is no Form 10-K summary - None[619](index=619&type=chunk)[620](index=620&type=chunk)