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)

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, 2021 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 (State or other juri ...

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, 2021 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 (State or other jurisdict ...

PART I [Item 1 Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for Meridian Corporation for the quarterly period ended March 31, 2021, including balance sheets, income statements, and cash flows, with detailed notes on accounting policies and financial line items [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2021, total assets increased to $1.74 billion from $1.72 billion at December 31, 2020, driven by growth in net loans and total deposits, while stockholders' equity saw a slight increase Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $31,004 | $36,744 | | Loans, net of allowance | $1,336,175 | $1,266,997 | | Total assets | $1,743,977 | $1,720,197 | | **Liabilities & Equity** | | | | Non-interest bearing deposits | $257,730 | $203,843 | | Total deposits | $1,383,590 | $1,241,335 | | Total liabilities | $1,600,472 | $1,578,575 | | Total stockholders' equity | $143,505 | $141,622 | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) For the three months ended March 31, 2021, net income surged to $10.2 million, driven by a 56.4% rise in net interest income and a substantial increase in non-interest income from mortgage banking activities, leading to diluted earnings per share of $1.65 Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Net interest income | $15,120 | $9,666 | | Provision for loan losses | $599 | $1,552 | | Non-interest income | $27,048 | $9,219 | | Non-interest expenses | $28,263 | $14,062 | | Net income | $10,170 | $2,516 | | Diluted earnings per common share | $1.65 | $0.39 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended March 31, 2021, net cash provided by operating activities was $62.8 million, while net cash used in investing activities was $81.0 million, and net cash provided by financing activities was $12.5 million, resulting in a net decrease in cash and cash equivalents of $5.7 million Consolidated Cash Flow Summary (in thousands) | Activity | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $62,764 | $(62,678) | | Net cash used in investing activities | $(81,014) | $(83,979) | | Net cash provided by financing activities | $12,510 | $144,808 | | **Net change in cash and cash equivalents** | **$(5,740)** | **$(1,849)** | [Notes to Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes detail the basis of financial statement preparation under U.S. GAAP, including disclosures on earnings per share, securities, loans, fair value measurements, derivatives, and segment reporting, while highlighting the impact of COVID-19 on estimates and the election for an extended transition period for new accounting standards - The financial statements are prepared under U.S. GAAP for interim periods and include management's estimates, which are subject to uncertainty, especially concerning the allowance for loan losses due to the COVID-19 pandemic[19](index=19&type=chunk)[20](index=20&type=chunk)[23](index=23&type=chunk) - As an 'emerging growth company,' the Corporation has elected to use an extended transition period for complying with new or revised accounting standards, such as CECL (ASU 2016-13), which will be effective January 1, 2023[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&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 2021 financial results, highlighting a significant increase in net income to $10.2 million, driven by strong growth in net interest income and a 193.4% surge in non-interest income from mortgage banking, with total assets growing to $1.7 billion and continued strong asset quality Q1 2021 Performance Highlights vs. Q1 2020 | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Income | $10.2 million | $2.5 million | | Diluted EPS | $1.65 | $0.39 | | ROE | 30.06% | 8.40% | | ROA | 2.43% | 0.87% | | Net Interest Income | $15.1 million | $9.7 million | | Non-interest Income | $27.1 million | $9.2 million | - The company processed over **797 PPP loan applications** totaling approximately **$117 million** in Q1 2021 under the reopened program[139](index=139&type=chunk) - As of March 31, 2021, active loan modifications related to COVID-19 stood at **$28.8 million**, up slightly from **$26.9 million** at year-end 2020[147](index=147&type=chunk) - The company returned **$6.9 million** to shareholders in Q1 2021 through a regular quarterly dividend of **$0.125** and a special dividend of **$1.00** per share[150](index=150&type=chunk) [Components of Net Income](index=38&type=section&id=Components%20of%20Net%20Income) Net income for Q1 2021 was driven by a $5.5 million (56.4%) year-over-year increase in net interest income to $15.1 million, a decrease in provision for loan losses, and a $17.8 million (193.4%) surge in non-interest income, primarily from mortgage banking, despite a $14.2 million (101.0%) rise in non-interest expense - Net interest margin increased to **3.72%** in Q1 2021 from **3.49%** in Q1 2020, as the decline in funding costs outpaced the decline in asset yields[165](index=165&type=chunk) - Mortgage banking net revenue increased by **$17.3 million (254.8%)** YoY, driven by a **184.6%** increase in loan originations to **$724.7 million**[198](index=198&type=chunk)[200](index=200&type=chunk) - Salaries and employee benefits expense increased by **$12.3 million (124.0%)**, with **$12.5 million** of the increase related to the mortgage division's expansion[203](index=203&type=chunk) [Asset Quality and Analysis of Credit Risk](index=44&type=section&id=Asset%20Quality%20and%20Analysis%20of%20Credit%20Risk) As of March 31, 2021, asset quality remained strong, with non-performing assets at $8.6 million (0.49% of total assets), a stable allowance for loan losses at 1.65% of total loans held for investment (excluding PPP and fair value loans), and net charge-offs of 0.00% for the quarter Asset Quality Ratios | Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Non-performing assets to total assets | 0.49% | 0.46% | | Total non-performing assets | $8,593 thousand | $7,930 thousand | | Allowance for loan losses to non-performing loans | 213.83% | 224.04% | [Balance Sheet Analysis](index=47&type=section&id=BALANCE%20SHEET%20ANALYSIS) As of March 31, 2021, total assets grew by $23.8 million to $1.7 billion, driven by a $69.2 million increase in net loans and a $142.3 million rise in deposits, while borrowings decreased and stockholders' equity increased to $143.5 million - Total loans, net of allowance, grew **5.5%** to **$1.3 billion**, with a **$37.9 million** net increase in PPP loans[209](index=209&type=chunk) - Total deposits increased **11.5%** to **$1.4 billion**, with non-interest bearing deposits growing **26.4%**[211](index=211&type=chunk) - The tangible common equity to tangible assets ratio remained stable at **7.99%**[214](index=214&type=chunk) [Liquidity](index=48&type=section&id=Liquidity) The Corporation maintains a strong liquidity position with a stable deposit base, cash, and a marketable investment portfolio, totaling $341.6 million in primary liquidity as of March 31, 2021, supplemented by significant available credit lines to meet funding needs - Primary liquidity stood at **$341.6 million** as of March 31, 2021[216](index=216&type=chunk) - Maximum borrowing capacity with the FHLB was **$546.7 million**, with **$38.6 million** borrowed and **$154 million** in letters of credit issued against it[217](index=217&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Corporation manages market risk, primarily interest rate risk, through simulation modeling and gap analysis, indicating an asset-sensitive balance sheet where net interest income is expected to increase in a rising rate environment, with strategies employed to mitigate risk Net Interest Income Sensitivity (Rate Ramp over 12 months) | Change in Market Interest Rates | Estimated % Change in NII (as of Mar 31, 2021) | | :--- | :--- | | +300 basis points | 3.83% | | +200 basis points | 2.28% | | +100 basis points | 1.06% | | -100 basis points | (1.56)% | | -200 basis points | (5.01)% | - The Corporation's balance sheet is asset-sensitive, with a cumulative one-year repricing gap of **$50.4 million**, or **2.9%** of total assets, as of March 31, 2021[188](index=188&type=chunk)[190](index=190&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the Corporation's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting identified during the quarter - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of March 31, 2021[229](index=229&type=chunk) - No material changes to internal control over financial reporting were identified during the quarter[230](index=230&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The report does not disclose any material legal proceedings - No material legal proceedings were reported[233](index=233&type=chunk) [Item 1A. Risk Factors](index=51&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, 2020 - No material changes in risk factors were reported since the last Annual Report on Form 10-K[233](index=233&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The report does not contain information regarding unregistered sales of equity securities or use of proceeds - None reported[234](index=234&type=chunk)

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Meridian Corporation, a bank holding company, operates through Meridian Bank across three segments: Commercial Banking, Mortgage Banking, and Wealth Management - Meridian Corporation operates as a bank holding company through Meridian Bank in the Delaware Valley tri-state market and Maryland[12](index=12&type=chunk) - The company's diversified model includes Commercial Banking, Mortgage Banking, and Wealth Management, generating significant non-interest income[12](index=12&type=chunk)[14](index=14&type=chunk) - In 2020, Meridian originated **$259.7 million** in PPP loans, with **$203.5 million** outstanding as of December 31, 2020[47](index=47&type=chunk) - Loan payment holidays totaling **$156.3 million** were provided to approximately 200 borrowers, with **$129.4 million** returning to original terms by year-end 2020[47](index=47&type=chunk) - As of December 31, 2020, the company employed **381 individuals**, with **41%** in banking, **56%** in mortgage, and **3%** in wealth segments[26](index=26&type=chunk) - The company qualifies as an 'emerging growth company' under the JOBS Act, allowing reduced reporting and extended accounting standard transition[28](index=28&type=chunk)[31](index=31&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from economic conditions, interest rate fluctuations, regulatory oversight, and its concentration in real estate lending - Business performance is sensitive to economic conditions, with low interest rates impacting deposit attraction and portfolio earnings[127](index=127&type=chunk) - The COVID-19 pandemic poses a significant risk, disrupting the economy, financial markets, and customer behavior[170](index=170&type=chunk) - A significant portion of the loan portfolio is secured by real estate in Pennsylvania, Delaware, and New Jersey, creating market dependency[188](index=188&type=chunk)[190](index=190&type=chunk) - Mortgage lending is highly competitive and susceptible to interest rate changes and secondary market conditions[182](index=182&type=chunk)[184](index=184&type=chunk) - Extensive regulation and potential changes in laws or accounting standards could increase costs and limit business opportunities[197](index=197&type=chunk)[198](index=198&type=chunk) - Liquidity risk exists if the company cannot raise funds, as primary funding from customer deposits can fluctuate[138](index=138&type=chunk) - Dependence on third-party IT systems exposes the company to risks of system failures, interruptions, or data breaches[158](index=158&type=chunk) [Item 1B. Unresolved Staff Comments](index=62&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments as of the report date - There are no unresolved staff comments as of the report date[206](index=206&type=chunk) [Item 2. Properties](index=62&type=section&id=Item%202.%20Properties) The company operates six branches and 17 offices, primarily leased, with a net book value of **$5.8 million** as of December 31, 2020 - The Corporation is headquartered in Malvern, PA, operating six full-service branches and 17 other offices[207](index=207&type=chunk) - All properties are leased, except the corporate headquarters, with a net book value of **$5.8 million** at December 31, 2020[207](index=207&type=chunk) [Item 3. Legal Proceedings](index=62&type=section&id=Item%203.%20Legal%20Proceedings) A 2017 lawsuit by former mortgage-banking employees for unpaid wages was settled for **$990 thousand**, with a final payment of **$1.0 million** in February 2020 - A 2017 class action lawsuit by former mortgage-banking employees was settled for **$990 thousand**[209](index=209&type=chunk) - A final payment of **$1.0 million** was made on February 29, 2020, fully settling the matter[212](index=212&type=chunk) [Item 4. Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[213](index=213&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=64&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', initiated quarterly dividends in 2020, and declared a special dividend in 2021 - The company's common stock trades on the NASDAQ Global Select Market under the symbol **'MRBK'**[215](index=215&type=chunk) - In 2020, the Corporation began paying a quarterly cash dividend of **$0.125 per common share**[217](index=217&type=chunk) - A special dividend of **$1.00 per share** was declared on February 16, 2021[218](index=218&type=chunk) - No share repurchase activity occurred during the fourth quarter of 2020[216](index=216&type=chunk) [Item 6. Selected Financial Data](index=65&type=section&id=Item%206.%20Selected%20Financial%20Data) This section summarizes five years of consolidated financial data, highlighting significant growth in assets, loans, deposits, and net income in 2020 Selected Historical Consolidated Financial Data (2019 vs 2020) | (Dollars in thousands, except per share data) | 2020 | 2019 | | :--- | :--- | :--- | | **Balance Sheet Data (End of Period):** | | | | Total assets | $1,720,197 | $1,150,019 | | Loans receivable, gross | $1,284,764 | $964,710 | | Total deposits | $1,241,335 | $851,168 | | Total Stockholders' equity | $141,622 | $120,695 | | **Income Statement Data:** | | | | Net interest income | $48,996 | $36,336 | | Non-interest income | $86,918 | $32,893 | | Net income available to common stockholders | $26,438 | $10,481 | | **Per Share Data:** | | | | Earnings per common share, diluted | $4.27 | $1.63 | | Book value per common share | $23.08 | $18.84 | | **Performance Metrics:** | | | | Return on average assets (ROAA) | 1.78% | 1.01% | | Return on average equity (ROAE) | 21.33% | 9.09% | | Net interest margin (NIM) | 3.40% | 3.65% | [Item 7. 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 discusses strong 2020 financial performance, driven by increased net income, asset growth, and significant non-interest income from mortgage operations - Net income for 2020 was **$26.4 million** (**$4.27 per diluted share**), significantly up from **$10.5 million** (**$1.63 per diluted share**) in 2019[233](index=233&type=chunk) - Total assets grew **49.6%** to **$1.7 billion** at year-end 2020, driven by **33.2%** loan growth and **45.8%** deposit growth[252](index=252&type=chunk)[253](index=253&type=chunk) - Non-interest income surged **164.1%** to **$86.9 million**, primarily from a **$50.5 million** increase in mortgage banking revenue, with **$2.4 billion** in loan originations[244](index=244&type=chunk) - The provision for loan losses increased to **$8.3 million** in 2020 from **$901 thousand** in 2019, mainly due to COVID-19 related uncertainty[243](index=243&type=chunk) - Net interest margin (NIM) decreased to **3.40%** in 2020 from **3.65%** in 2019, reflecting declining asset yields offset by lower funding costs[234](index=234&type=chunk) - The company adopted the Community Bank Leverage Ratio (CBLR) framework in Q1 2020 and is considered 'well capitalized' for regulatory purposes[291](index=291&type=chunk)[294](index=294&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=89&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate volatility, managed by ALCO using NII and EVE simulations, indicating an asset-sensitive balance sheet - The company's primary market risk is interest rate volatility, managed by its Asset/Liability Committee (ALCO) using gap analysis, NII, and EVE simulations[299](index=299&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk) - Gap analysis as of December 31, 2020, indicates the company is modestly asset-sensitive, with a positive gap of **1.0% of total assets** for maturities of 12 months or less[305](index=305&type=chunk)[306](index=306&type=chunk) Net Interest Income (NII) Sensitivity Analysis (Rate Ramp) | Changes in Market Interest Rates | Estimated % Change in NII (2020) | Estimated % Change in NII (2019) | | :--- | :--- | :--- | | +300 basis points | 1.87% | 0.40% | | +200 basis points | 1.02% | 0.60% | | +100 basis points | 0.50% | 0.40% | | -100 basis points | (1.73)% | (0.60)% | | -200 basis points | (5.21)% | (2.30)% | Economic Value of Equity (EVE) Sensitivity Analysis | Changes in Market Interest Rates | Estimated % Change in EVE (2020) | Estimated % Change in EVE (2019) | | :--- | :--- | :--- | | +300 basis points | 103% | 13% | | +200 basis points | 78% | 11% | | +100 basis points | 45% | 7% | | -100 basis points | (67)% | (12)% | | -200 basis points | (175)% | (32)% | [Item 8. 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 2020 and 2019, including auditor reports, core statements, and detailed notes [Report of Independent Registered Public Accounting Firm](index=96&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Independent auditors Crowe LLP and KPMG LLP issued unqualified opinions on the 2020 and 2019 financial statements, respectively - Crowe LLP issued an unqualified opinion on the 2020 financial statements[320](index=320&type=chunk)[323](index=323&type=chunk) - KPMG LLP issued an unqualified opinion on the 2019 financial statements[325](index=325&type=chunk)[329](index=329&type=chunk) [Consolidated Financial Statements](index=99&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of **$1.72 billion** and net income of **$26.4 million** in 2020, reflecting strong growth Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Total assets | $1,720,197 | $1,150,019 | | Loans, net | $1,266,997 | $955,197 | | **Liabilities & Equity** | | | | Total deposits | $1,241,335 | $851,168 | | Total liabilities | $1,578,575 | $1,029,324 | | Total stockholders' equity | $141,622 | $120,695 | Consolidated Income Statement Highlights (in thousands) | | Year ended Dec 31, 2020 | Year ended Dec 31, 2019 | | :--- | :--- | :--- | | Net interest income | $48,996 | $36,336 | | Provision for loan losses | $8,302 | $901 | | Non-interest income | $86,918 | $32,893 | | Non-interest expenses | $93,076 | $54,814 | | Net income | $26,438 | $10,481 | [Notes to Consolidated Financial Statements](index=105&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, loan portfolio concentration in commercial real estate, increased loan loss allowance, servicing assets, and capital adequacy - The loan portfolio has a significant concentration in commercial real estate-backed loans, totaling **38%** of loans held for investment as of December 31, 2020[345](index=345&type=chunk) Allowance for Loan and Lease Losses Roll-Forward (in thousands) | | 2020 | 2019 | | :--- | :--- | :--- | | Balance, Beginning of Year | $9,513 | $8,053 | | Charge-offs | (131) | (30) | | Recoveries | 83 | 589 | | Provision | 8,302 | 901 | | **Balance, End of Year** | **$17,767** | **$9,513** | - The company serviced **$506.0 million** in residential mortgage loans and **$55.9 million** in SBA loans as of December 31, 2020[459](index=459&type=chunk)[464](index=464&type=chunk) - As of December 31, 2020, unfunded loan commitments totaled **$421.4 million**, and mortgage loan commitments were **$428.8 million**[503](index=503&type=chunk)[505](index=505&type=chunk) - The company adopted the Community Bank Leverage Ratio (CBLR) framework in Q1 2020 and was categorized as well capitalized by the FDIC[515](index=515&type=chunk)[516](index=516&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=180&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 reported[585](index=585&type=chunk) [Item 9A. Controls and Procedures](index=180&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - Management concluded the Corporation's disclosure controls and procedures were effective as of December 31, 2020[585](index=585&type=chunk) - Management assessed and concluded internal control over financial reporting was effective as of December 31, 2020, based on COSO 2013[590](index=590&type=chunk) - No material changes in internal control over financial reporting occurred during Q4 2020[592](index=592&type=chunk) [Item 9B. Other Information](index=182&type=section&id=Item%209B.%20Other%20Information) The company reports no other information under this item - None[593](index=593&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=182&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 proxy statement - Information regarding directors, executive officers, corporate governance, and the audit committee is incorporated by reference from the 2021 proxy statement[595](index=595&type=chunk) [Item 11. Executive Compensation](index=182&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive and director compensation is incorporated by reference from the 2021 proxy statement - Information regarding executive compensation is incorporated by reference from the 2021 proxy statement[596](index=596&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=182&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 2021 proxy statement - Information regarding security ownership and equity compensation plans is incorporated by reference from the 2021 proxy statement[597](index=597&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=182&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 2021 proxy statement - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2021 proxy statement[597](index=597&type=chunk) [Item 14. Principal Accounting Fees and Services](index=182&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the 2021 proxy statement - Information regarding principal accounting fees and services is incorporated by reference from the 2021 proxy statement[598](index=598&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=183&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, omitting inapplicable financial schedules - This item lists the consolidated financial statements filed under Item 8 and all exhibits filed with the Form 10-K[601](index=601&type=chunk)[602](index=602&type=chunk) [Item 16. Form 10-K Summary](index=184&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no summary for this item - None[603](index=603&type=chunk)