What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-29 compared with 2020-03-30 · 19 added, 417 removed, 58 unchanged (88% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Shares of our common stock trade on the NASDAQ Global Select Market under the symbol "MRBK".

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Shares of our common stock trade on the NASDAQ Global Select Market under the symbol "MRBK".

As of March 25, 2021, there were approximately 196 registered shareholders of the Corporation's common stock.

Certain shares are held in “nominee”

or “street”

name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.

On August 24, 2018, the Corporation acquired the Bank in a merger and reorganization effected under Pennsylvania law and in accordance with the terms of a Plan of Merger and Reorganization dated April 26, 2018 (the “Agreement”).

Pursuant to the Agreement, on August 24, 2018 at 5:00 p.m.

all of the outstanding shares of the Bank’s $1.00 par value common stock formerly held by its shareholders was converted into and exchanged for one newly issued share of the Corporation’s par value common stock, and the Bank became a subsidiary of the Corporation.

Because the Bank and the Corporation were entities under common control, this exchange of shares between entities under common control resulted in the retrospective combination of the Bank and the Corporation for all periods presented as if the combination had been in effect since inception of common control.

Certain shares are held in “nominee” or “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.

Share Repurchases

The following table presents the repurchasing activity of the Corporation during the fourth quarter of 2019.

Issuer Purchases of Equity Securities

Total Number of

Maximum Number

Shares Purchased

of Shares that May

as Part of Publicly

Yet Be Purchased

Total Number of

Average Price Paid

Announced Plans or

Under the Plan or

Shares Purchased

October 1-31, 2019

November 1-30, 2019

December 1-31, 2019

Refer to note 25 to the consolidated financial statements for discussion of a stock buy-back in March 2020.

The was no repurchasing activity of the Corporation during the fourth quarter of 2020.

Dividend Policy

The Corporation has not paid any cash dividends on its common stock and has no plans at this time to pay cash dividends.

In 2020 the Corporation commenced quarterly cash dividends on its common stock.

The Board of Directors declared a quarterly cash dividend of $0.125 per common share, payable August 24, 2020, to shareholders of record as of August 10, 2020.

On October 22, 2020, the Board of Directors declared a quarterly cash dividend of $0.125 per common share, payable November 23, 2020, to shareholders of record as of November 9, 2020.

On January 28, 2021, the Board of Directors declared a quarterly cash dividend of $0.125 per common share, payable February 22, 2021, to shareholders of record as of February 8, 2021.

Special Dividend

On February 16, 2021, the Corporation’s Board of Directors declared a special dividend of $1.00 per share on its Common Stock, payable on March 15, 2021 to shareholders of record as of March 1, 2021.

Future dividend payments will depend upon maintenance of a strong financial condition, future earnings and capital and regulatory requirements.

Also, the Corporation and the Bank are subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities.

Selected Financial Data

Selected historical consolidated financial information

The following table should be read in conjunction with our Consolidated Financial Statements and related notes and "Management’s Discussion and Analysis of Financial Condition and Results of Operations," each of which is included elsewhere in this Annual Report on Form 10‑K.

each of which is included elsewhere in this Annual Report on Form 10-K.

As of and for the Years Ended December 31,

17 unchanged sentences

Net interest income after provisions for loan losses

Noninterest income

Noninterest expense

Non-interest income

Non-interest expense

Net income before income taxes

27 unchanged sentences

Allowance for loan losses to total loans

Allowance for loan losses to total loans held-for-investment

Allowance for loan losses to total loans held-for-investment (excluding loans at fair value and PPP loans) (1)

Net charge-offs to average loans

Capital Ratios:

Corporation Capital Ratios:

Tier 1 leverage capital ratio

2 unchanged sentences

Common equity tier 1 capital ratio

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Recent Market Conditions

Our financial condition and performance, as well as the ability of our borrowers to repay their loans, the value of collateral securing those loans, as well as demand for loans and other products and services that we offer, are all highly dependent on the business environment in the primary markets in which we operate and in the United States as a whole.

During the first quarter of 2020, an outbreak of a novel strain of coronavirus (COVID-19), which was originally identified in Wuhan, China, has spread to a number of countries around the world, including the United States.

COVID-19 and its associated impacts on trade (including supply chains and export levels), travel, employee productivity and other economic activities have had, are currently having and may for some time continue to have a destabilizing effect on financial markets and economic activity.

The extent of the impact of COVID-19 on our operational and financial performance is currently uncertain, cannot be predicted and will depend on certain developments, including, among others, the duration and spread of COVID-19, its impact on our customers, employees and vendors, and governmental, regulatory and private sector responses, which may be precautionary, to the coronavirus.

In light of the changing economic outlook as a result of COVID-19, as well as other factors, including the possibility of an oil price war in March 2020, the 10-year Treasury yield has fallen to historic lows, and the equity markets have been significantly impacted.

In response, the Federal Reserve reduced the target federal funds rate by 50 basis points on March 3, 2020, and then by an additional 100 basis points on March 15, 2020.

The assets and liabilities of the Corporation may be significantly impacted by changes in interest rates.

The Corporation is currently reviewing actions that it may take in response to these changes in the event that market turmoil continues for an extended period.

Critical Accounting Policies and Estimates

Our accounting and reporting policies conform to GAAP and conform to general practices within the industry in which we operate.

To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information.

These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes.

These estimates, assumptions and judgements are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements.

In particular, management has identified the provision and allowance for loan and lease losses as the accounting policy that, due to the estimates, assumptions and judgements inherent in that policy, is critical in understanding our financial statements.

Management has presented the application of this policy to the audit committee of our board of directors.

The JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies.

We have elected to take advantage of this extended transition period, which means that the financial statements included in this Annual Report, as well as any financial statements that we file in the future, will not be subject to all new or revised accounting standards generally applicable to public companies for the transition period for so long as we remain an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period under the JOBS Act.

If we do so, we will prominently disclose this decision in the first periodic report filed with the SEC following our decision, and such decision is irrevocable.

The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments.

Additional information about these policies can be found in footnote 1 of the Corporation ’

s Consolidated Financial Statements as of and for the years ended December 31, 2019 and 2018.

Provision and allowance for loan and lease losses

The provision for loan and lease losses reflects the amount required to maintain the allowance for loan and lease losses ( “

Allowance ”

) at an appropriate level based upon management ’

s evaluation of the adequacy of general and specific loss reserves.

The Allowance is maintained at a level that management believes is appropriate to provide for incurred loan and lease losses as of the date of the Consolidated Balance Sheet and we have established methodologies for the determination of its adequacy.

The methodologies are set forth in a formal policy and take into consideration the need for an overall general allowance as well as specific allowances that are determined on an individual loan basis for impaired loans.

We increase our Allowance by charging provisions for losses against our income and decreased by charge‑offs, net of recoveries.

The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

While management uses available information to recognize losses on loans and leases, changes in economic or other conditions may necessitate revision of the estimate in future periods.

The Allowance is maintained at a level sufficient to provide for probable losses based upon an ongoing review of the originated loan and lease portfolios by portfolio category, which include consideration of actual loss experience, peer loss experience, changes in the size and risk profile of the portfolio, identification of individual problem loan and lease situations which may affect a borrower ’

s ability to repay, and evaluation of prevailing economic conditions.

Results of operations –

Years ended December 31, 2019 and 2018

Our reported net income for the year ended December 31, 2019, was $10.5 million or $1.63 per diluted common share compared to $8.2 million or $1.27 per diluted common share for the same period in 2018.

The $2.3 million increase in net income was attributable to a $4.4 million increase net interest income, a decrease in the provision for loan losses of $676 thousand, offset somewhat by an increase of $1.3 million in net non-interest expense (non-interest expense less non-interest income).

Net interest income

Our earnings are derived predominantly from net interest income, which is our interest income less interest expense.

Changes in our balance sheet composition, including interest-earning assets, deposits, and borrowings, combined with changes in market interest rates, impact our net interest income.

Net interest margin is net interest income divided by average interest-earning assets.

We manage our interest-earning assets and funding sources, including non-interest and interest-bearing liabilities, in order to maximize this margin.

Net interest income increased by $3.7 million, or 11.3%, to $36.3 million for the year ended December 31, 2019 from $32.7 million for the same period in 2018.

Our net interest margin was 3.65% on a tax equivalent yield basis (“TEY”) for the year ended December 31, 2019 as compared to 3.80% for the same period in 2018.

The decrease in net interest margin, year-over-year, reflects the pressure from rising cost of funds, which outpaced the favorable trend in yield on earning assets.

Average balance sheet, interest and yield/rate analysis.

The following table presents average balance sheet information, interest income, interest expense and the corresponding average yield earned, on a tax equivalent basis, and rates paid for the years ended December 31, 2019 and 2018.

The average balances are principally daily averages and, for loans, include both performing and nonperforming loans.

For the Year Ended December 31,

(dollars in thousands)

Interest-earning assets

Due from banks

Federal funds sold

Investment securities (1)

Loans held for sale

Loans held for investment (1)

Total interest-earning assets

Noninterest earning assets

Liabilities and stockholders' equity

Interest-bearing liabilities

Interest-bearing deposits

Money market and savings deposits

Time deposits

Total deposits

Short-term borrowings

Long-term borrowings

Total Borrowings

Subordinated Debentures

Total interest-bearing liabilities

Noninterest-bearing deposits

Other noninterest-bearing liabilities

Total liabilities

Total stockholders' equity

Total stockholders' equity and liabilities

Net interest income

Net interest spread

Net interest margin

Yields and net interest income are reflected on a tax-equivalent basis.

Rate/Volume Analysis

During 2019, net interest income increased $3.7 million or 11.3% on a tax equivalent basis.

As shown in the following Rate/Volume Analysis table, this increase was primarily attributable to volume changes.

Volume related changes contributed $5.3 million towards interest income which was partially offset by unfavorable changes in rate of $1.6 million.

The favorable change in net interest income due to volume changes was driven largely from growth in total loans, which increased $128.6 million on average.

This increase contributed $7.3 million to interest income.

Total investment securities, cash and cash equivalents increased $7.6 million on average combined, contributing $186 thousand to interest income.

On the funding side, interest checking and money market accounts together rose $50.9 million on average during the year,

reducing net interest income by $836 thousand.

Time deposits increased $56.1 million on average year over year, causing an unfavorable change of $1.1 million to net interest income.

Average borrowings increased $4.8 million and had an unfavorable impact of $83 thousand on net interest income, while moderately higher level of average subordinated debt contributed $95 thousand unfavorably to net interest income.

The unfavorable change in net interest income due to rate changes was driven largely from the increase in cost of funds, particularly from wholesale funding such as borrowings and time deposits, which rose 24 and 52 basis points, respectively.

Cost of funds for core deposits, such as interest checking and money market accounts, rose 38 and 32 basis points, respectively.

These unfavorable rate changes reduced net interest income $3.0 million, but were partially offset by favorable rate changes in interest-earning assets which increased net interest income $1.3 million.

The favorable change due to rate earned on loans was $1.2 million resulting from a 16 basis point increase on average for the total portfolio.

The favorable change due to rate earned on cash and investments was $151 thousand, resulting from a 23 basis point increase in the yields.

The following table sets forth, among other things, the extent to which changes in interest rates and changes in the average balances of interest-earning assets and interest-bearing liabilities have affected interest income and expense for the periods noted (tax-exempt yields have been adjusted to a tax equivalent basis using a 22% tax rate).

For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (i) changes in rate (change in rate multiplied by old volume) and (ii) changes in volume (change in volume multiplied by new rate).

The net change attributable to the combined impact of rate and volume has been allocated proportionately to the change due to rate and the change due to volume.

2019 Compared to 2018

Change in interest due to:

(dollars in thousands)

Interest income:

Due from banks

Federal funds sold

Investment securities (1)

Loans held for sale

Loans held for investment (1)

Total interest income

Interest expense:

Interest checking

Money market and savings deposits

Time deposits

Total interest-bearing deposits

Short-term borrowings

Long-term borrowings

Total borrowings

Subordinated debentures

Total interest expense

Interest differential

Yields and net interest income are reflected on a tax-equivalent basis.

Provision for loan losses

We recorded a provision for loan losses of $901 thousand for the year ended December 31, 2019, down $676 thousand from $1.6 million for the same period in 2018.

The decreased provision for 2019 is due to continued strong asset quality and net recoveries of $559 thousand, compared to net charge-offs of $233 thousand for the same period in 2018.

Non-interest income

Non-interest income increased $743 thousand, or 2.3%, to $33.1 million for the year ended December 31, 2019 compared to $32.4 million for the prior year.

The increase was mainly the result of $1.4 million in SBA income recognized on the sales of SBA loans for the year ended December 31, 2019.

There were no SBA loan sales in the prior year.

Mortgage revenue for the year ended December 31, 2019 was $26.2 million, relatively unchanged from the same period in 2018.

In addition, fair value gains were $489 thousand for the twelve months of 2019, compared to fair value losses of $368 thousand for the twelve months in 2018.

For the twelve month period of 2019, wealth management revenue was down $293 thousand to $3.6 million reflecting the market value changes in assets under management largely from the first quarter.

Included in other non-interest income is fee income as well as hedging gains and losses.

Fee income was $1.6 million for the full year of 2019 compared to $1.6 million for the same period in 2018.

Fee income is comprised mainly of FHLB stock dividend income, wire transfer fee income, title fee income, as well as various other less significant income sources.

Hedging losses were $816 thousand for the full year of 2019 compared to hedging gains of $627 thousand for the same period in 2018.

Year Ended December 31,

(dollars in thousands)

Non-interest income:

Mortgage banking income

Wealth management income

SBA loan income

Earnings on investment in life insurance

Net change in the fair value of derivative instruments

Net change in the fair value of loans held-for-sale

Net change in the fair value of loans held-for-investment

Gain on sale of investment securities available-for-sale

Service charges

Total non-interest income

Non-interest expense

Non-interest expenses increased $2.1 million, or 3.9%, to $55.0 million for the year ended December 31, 2019 from $52.9 million in 2018.

This increase was mainly attributable to an increase of $452 thousand, or 20.9%, in professional fees for the twelve month periods ended December 31, 2019 compared to the same periods in 2018.

The higher professional fees were due largely to legal and accounting fees incurred as part of the Maryland mortgage licensing issue in the first quarter, in addition to legal fees incurred related to the litigation matter discussed below.

Other non-interest expenses increased $1.2 million, or 29.6%, to $5.1 million when compared to the prior year period.

The settlement of the outstanding litigation matter contributed $790 thousand to other non-interest expense, along with $79 thousand of other expense incurred for the previously disclosed Maryland mortgage licensing issue.

Increases in the PA shares tax assessment and FDIC insurance due to the growth of the Bank also contributed to higher other non-interest expenses during the year-to-date period, from the same period in the prior year.

Year Ended December 31,

(dollars in thousands)

Non-interest expenses:

Salaries and employee benefits

Occupancy and equipment

Loan expenses

Professional fees

Advertising and promotion

Data processing

Information Technology

Communications

Total non-interest expenses

Income tax expense

Income tax expense for the year ended December 31, 2019 was $3.0 million as compared to $2.3 million for the same period in 2018.

The effective tax rates for the twelve-month periods ended December 31, 2019 and 2018 were 22.4% and 22.1%, respectively.

For more information related to income taxes, refer to footnote 14 in the Notes to Consolidated Financial Statements.

Balance Sheet Summary

As of December 31, 2019, total assets were $1.2 billion compared with $997.5 million as of December 31, 2018.

Total assets increased $152.5 million, or 15.3%, on a year-over-year basis.

This growth was concentrated in our loan portfolio, excluding mortgage loans held for sale, which increased by $126.6 million, or 15.1%, year-over-year.

Investment securities and cash decreased $20.9 million, or 24.0%, year-over-year.

Our overall asset growth was funded largely by an increase in deposits of $99.0 million, or 13.2%, to $851.2 million at December 31, 2019 from $752.1 million at December 31, 2018.

Increases in borrowings of $6.3 million, or 5.2% year-over-year, as well as an increase of $31.7 million or 343.4% in subordinated debt, also helped to fund the growth in our loan portfolio.

Our loan portfolio is the largest category of our interest-earning assets.

As of December 31, 2019 and 2018, our total loans amounted to $998.4 million and $875.8 million, respectively.

Our loan portfolio is comprised of loans originated to be held in portfolio, as well as residential mortgage loans originated for sale.

Meridian engages in the origination of residential mortgages, most typically for 1‑4 family dwellings, with the intention of the Corporation to principally sell substantially all of these loans in the secondary market to qualified investors.

Our loans held in portfolio are originated by our commercial and consumer loan divisions.

We have a strong credit culture that promotes diversity of lending products with a focus on commercial businesses.

We have no particular credit concentration.

Our commercial loans have been proactively managed in an effort to achieve a balanced portfolio with no unusual exposure to one industry.

Loans held for investment increased $126.6 million, or 15.1%, for the year ended December 31, 2019.

Loans and leases outstanding at December 31, 2019 and 2018 are detailed by category as follows:

(dollars in thousands)

Mortgage loans held for sale

Real estate loans:

Commercial mortgage

Home equity lines and loans

Residential mortgage

Total real estate loans

Commercial and industrial

Small business loans

Total portfolio loans and leases

Total loans and leases

Commercial loans, commercial construction loans and commercial real estate loans increased a combined $111.6 million, or 16.0%, for the year ended December 31, 2019.

The growth in the commercial portfolios continues to reflect the work of our strategically expanded lending team as well as strong local market conditions.

Commercial real estate loans .

Our commercial real estate loans are secured by real estate that is both owner-occupied and investor owned.

Owner-occupied commercial real estate loans generally involve less risk than an investment property and are distinctly reported from non-owner occupied commercial real estate loans for measuring loan concentrations for regulatory purposes.

Our owner-occupied commercial real estate loans are originated and managed within our commercial loan department and comprised 37% of our total commercial real estate loan portfolio at December 31, 2019.

The remaining commercial real estate loans are managed by our commercial real estate department which offer the following commercial real estate products:

Permanent –

Investor Real Estate Loans

Purchase and refinance loan opportunities for a number of product types, including single-family rentals, multi-family residential as well as tenanted income producing properties in a variety of real estate types, including office, retail, industrial, and flex space

Construction Loans

Residential construction loans to finance new construction and renovation of single and 1‑4 family homes located within our market area

Commercial construction loans for investment properties, generally with semi-permanent attributes

Construction loans for new, expanded or renovated operations for our owner occupied business clients

Land Development Loans

Meridian considers a limited number of strictly land development oriented loans based upon the risk, merit of the future project and strength of the borrower/guarantor relationship

Our commercial real estate loans increased by $37.2 million, or 11.4%, to $362.6 million at December 31, 2019 from $325.4 million at December 31, 2018.

Our total commercial real estate loan portfolio represented 36.3% and 37.1% of our total loan portfolio at December 31, 2019 and 2018, respectively.

Commercial and Industrial Loans

We provide a variety of variable and fixed rate commercial business loans and lines of credit.

These loans and lines of credit are made to small and medium-sized manufacturers and wholesale, retail and service-related businesses.

Additionally, we lend to companies in the technology, healthcare, real estate and financial service industries.

Commercial business loans generally include lines of credit and term loans with a maturity of five years or less.

The primary source of repayment for commercial business loans is generally operating cash flows of the business and may also include collateralization of inventory, accounts receivable, equipment and/or personal guarantees.

Our commercial loans increased by $19.3 million, or 7.6%, to $273.3 million at December 31, 2019 from $254.0 million at December 31, 2018.

The total commercial portfolio represented 27.3% and 29.0% of our total loan portfolio at December 31, 2019 and 2018, respectively.

Small Business Loans

We provide financing to small businesses in various industries that include guarantees under the Small Business Administrations (SBA’s) loan programs.

Our small business loans increased by $15.9 million, or 275.5%, to $21.6 million at December 31, 2019 from $5.8 million at December 31, 2018.

The small business loans portfolio represented 2.2% and 0.7% of our total loan portfolio at December 31, 2019 and 2018, respectively.

Residential loans

Our residential loans held in portfolio are primarily secured by single-family homes located in our market areas.

Our loan pipeline is fed via our mortgage loan production offices (“LPOs”) and through relationships with commercial lending and through relationships with sales brokers and agents who actively refer clients to Meridian.

The balance of residential loans in portfolio increased $305 thousand, or 0.6%, to $53.7 million at December 31, 2019 from $53.4 million at December 31, 2018.

The total residential loan portfolio represented 5.4% and 6.1% of our total loan portfolio at December 31, 2019 and 2018, respectively.

Consumer and Personal Loans

Our consumer-lending department principally originates home equity based products for our clients and prospects.

These loans typically fund completely at closing.

Additional products include smaller dollar personal loans and our newly introduced student loan refinance product, designed to provide additional flexibility in repayment terms desired in the marketplace.

Our consumer credit products include home equity lines and loans, personal lines and loans, and student loan refinancing.

The total consumer loan portfolio represented 0.1% of our total loan portfolio at December 31, 2019 and 2018.

Our securities portfolio is used to make various term investments, maintain a source of liquidity and serve as collateral for certain types of deposits and borrowings.

We manage our investment portfolio according to written investment policies approved by our board of directors.

Investments in our securities portfolio may change over time based on our funding needs and interest rate risk management objectives.

Our liquidity levels take into account anticipated future cash flows and other available sources of funds and are maintained at levels that we believe are appropriate to provide the necessary flexibility to meet our anticipated funding requirements.

As of December 31, 2019 the fair value of our investment portfolio totaled $68.9 million, with an effective tax equivalent yield of 2.65% and an estimated duration of approximately 3.64 years.

The majority of our investment portfolio, or 59.1%, consists of residential mortgage‑backed securities, along with 22.2% in municipal securities.

The remainder of our securities portfolio is invested in U.S.

Treasuries and other securities.

We regularly evaluate the composition of our

investment portfolio as the interest rate yield curve changes and may sell investment securities from time to time to adjust our exposure to interest rates or to provide liquidity to meet loan demand.

December 31, 2019

(dollars in thousands)

Securities available-for-sale:

asset backed securities

government agency mortgage-backed securities

government agency collateralized mortgage obligations

State and municipal securities

Total securities available-for-sale

Securities held to maturity:

State and municipal securities

Total securities held-to-maturity

December 31, 2018

(dollars in thousands)

Securities available-for-sale:

government agency mortgage-backed securities

government agency collateralized mortgage obligations

State and municipal securities

Investments in mutual funds

Total securities available-for-sale

Securities held to maturity:

State and municipal securities

Total securities held-to-maturity

Asset Quality Summary

As of December 31, 2019, total nonperforming loans and leases decreased by $696 thousand to $3.2 million, representing 0.34% of loans and leases held-for-investment, compared to $3.9 million, or 0.48% of loans and leases held-for-investment as of December 31, 2018.

The decrease to nonperforming loans resulted from a decrease of $491 thousand in commercial mortgage loans, and a decrease of $56 thousand in commercial and industrial loans.

Nonperforming residential mortgage loans decreased $603 thousand as well but were offset by a $454 thousand increase in nonperforming home equity loans from December 31, 2018 to December 31, 2019.

As of December 31, 2019, the allowance of $9.5 million represented 1.00% of loans and leases held-for-investment (excluding loans at fair value), compared to 0.97% as of December 31, 2018.

The allowance to non-performing loans increased from 204.85% as of December 31, 2018 to 294.12% as of December 31, 2019.

During 2019 one residential mortgage loan was foreclosed on and the property was recorded within other real estate owned (“OREO”) in the balance sheet at the lower of cost or fair value less cost to sell of $120 thousand.

As of December 31, 2019, the Corporation had $3.9 million of troubled debt restructurings (“TDRs”), of which $3.6 million were in compliance with the modified terms and excluded from non-performing loans and leases.

As of December 31, 2018, the Corporation had $4.3 million of TDRs, of which $3.1 million were in compliance with the modified terms, and were excluded from non-performing loans and leases.

As of December 31, 2019, the Corporation had a recorded investment of $7.3 million of impaired loans and leases which included $3.9 million of TDRs.

Impaired loans and leases are those for which it is probable that the Corporation will not be able to collect all scheduled principal and interest in accordance with the original terms of the loans and leases.

Impaired loans and leases as of December 31, 2018 totaled $5.8 million, which included $4.3 million of TDRs.

Refer to footnote 6 in the notes to the Consolidated Financial Statements for more information regarding the Corporation’s impaired loans and leases.

The Corporation continues to be diligent in its credit underwriting process and proactive with its loan review process, including the engagement of the services of an independent outside loan review firm, which helps identify developing credit issues.

Proactive steps that are taken include the procurement of additional collateral (preferably outside the current loan structure) whenever possible and frequent contact with the borrower.

The Corporation believes that timely identification of credit issues and appropriate actions early in the process serve to mitigate overall risk of loss.

(dollars in thousands)

Non-performing assets:

Nonaccrual loans:

Real estate loans:

Commercial mortgage

Home equity lines and loans

Residential mortgage

Total real estate loans

Commercial and industrial

Total nonaccrual loans

Other real estate owned

Total non-performing loans

Total non-performing assets

Troubled debt restructurings:

TDRs included in non-performing loans

TDRs in compliance with modified terms

Asset quality ratios:

Non-performing assets to total assets

Non-performing loans to:

Total loans held-for-investment (excluding loans at fair value)

Allowance for loan losses to:

Total loans held-for-investment (excluding loans at fair value)

Non-performing loans

Total loans and leases

Total loans and leases held-for-investment

Total loans and leases held-for-investment (excluding loans at fair value)

Allowance for loan and lease losses

Deposits and Equity

Deposits increased $99.0 million, or 13.2%, to $851.2 million at December 31, 2019 from $752.1 million at December 31, 2018.

This growth year-over-year was across all deposit categories except for interest-bearing demand deposits.

Non-maturity deposits, consisting of demand deposits, NOW accounts, money market accounts and regular savings accounts

increased $65.9 million, or 13.9%.

Certificates of deposit increased $33.1 million, or 11.9%.

Core funding continues to be a strategic initiative and the deposit growth for the fourth quarter resulted from our expanded business development team as well as the efforts from all sales personnel in our branch markets.

The following table summarizes our deposit balances and weighted average rate paid for the periods presented.

Year ended December 31, 2019

Year ended December 31, 2018

(dollars in thousands)

total deposits

Noninterest-bearing deposits

Interest-bearing deposits

Time deposits:

Under $100,000

$100,000 and greater

Total equity increased $11.1 million, or 10.2%, to $120.7 million at December 31, 2019 from $109.6 million at December 31, 2018.

This increase was attributable to net income recorded for the year ended December 31, 2019.

Liquidity and Capital Resources

Management maintains liquidity to meet depositors’

needs for funds, to satisfy or fund loan commitments, and for other operating purposes.

Meridian’s foundation for liquidity is a stable and loyal customer deposit base, cash and cash equivalents, a marketable investment portfolio that provides periodic cash flow through regular maturities and amortization, or that can be used as collateral to secure funding.

In addition, as part of its liquidity management, Meridian maintains a segment of commercial loan assets that are comprised of SNCs which have a national market and can be sold in a timely manner.

Meridian’s primary liquidity, which totaled $161.5 million at December 31, 2019 compared to $136.6 million at December 31, 2018, includes investments, SNCs, federal funds sold, mortgages held-for-sale and cash and cash equivalents, less the amount of securities required to be pledged for certain liabilities.

Meridian also anticipates scheduled payments and prepayments on its loan and mortgage-backed securities portfolios.

In addition, Meridian maintains borrowing arrangements with various correspondent banks, the FHLB and the Federal Reserve Bank of Philadelphia to meet short-term liquidity needs.

Through these relationships, Meridian had available credit of approximately $8.5 million at December 31, 2019.

As a member of the FHLB, we are eligible to borrow up to a specific credit limit which is determined by the amount of our residential mortgages, commercial mortgages and other loans that have been pledged as collateral.

As of December 31, 2019, Meridian’s maximum borrowing capacity with the FHLB was $507.3 million.

At December 31, 2019, Meridian had borrowed $126.8 million and the FHLB had issued letters of credit, on Meridian’s behalf, totaling $102.8 million against its available credit lines.

At December 31, 2019, Meridian also had available $39.0 million of unsecured federal funds lines of credit with other financial institutions as well as $161.6 million of available short or long term funding through the Certificate of Deposit Account Registry Service (“CDARS”) program and $45.3 million of available short or long term funding through brokered CD arrangements.

Management believes that Meridian has adequate resources to meet its short-term and long-term funding requirements.

At December 31, 2019, Meridian had $327.8 million in unfunded loan commitments.

Management anticipates these commitments will be funded by means of normal cash flows.

Certificates of deposit greater than or equal to $250 thousand scheduled to mature in one year or less from December 31, 2019 totaled $243.3 million.

Management believes that the majority of such deposits will be reinvested with Meridian and that certificates that are not renewed will be funded by a reduction in cash and cash equivalents or by pay-downs and maturities of loans and investments.

At December 31, 2019, Meridian had a reserve for unfunded loan commitments of $47 thousand.

Meridian meets the definition of “well capitalized”

for regulatory purposes on December 31, 2019.

Our capital category is determined for the purposes of applying the bank regulators’

“prompt corrective action”

regulations and for determining levels of deposit insurance assessments and may not constitute an accurate representation of Meridian’s overall financial condition or prospects.

Under federal banking laws and regulations, Meridian is required to maintain minimum capital as determined by certain regulatory ratios.

Capital adequacy for regulatory purposes, and the capital category assigned to an institution by its regulators, may be determinative of an institution’s overall financial condition.

Under the final capital rules that became effective on January 1, 2015, there was a requirement for a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets which is in addition to the other minimum risk-based capital standards in the rule.

Institutions that do not maintain this required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management.

The capital conservation buffer has been phased in over a four year period, which began on January 1, 2016, as follows:

the maximum buffer was 0.625% of risk-weighted assets for 2016, 1.25% for 2018 and 1.875% for 2018, and effective as of January 1, 2019, the capital conservation buffer is fully phased in at 2.5%.

The following table summarizes data and ratios pertaining to our capital structure.

December 31, 2019

To be well capitalized under

For capital adequacy

prompt corrective action

(dollars in thousands)

Total capital (to risk-weighted assets)

Common equity tier 1 capital (to risk-weighted assets)

Tier 1 capital (to risk-weighted assets)

Tier 1 capital (to average assets)

December 31, 2018 - as revised

To be well capitalized under

For capital adequacy

prompt corrective action

(dollars in thousands):

Total capital (to risk-weighted assets)

Common equity tier 1 capital (to risk-weighted assets)

Tier 1 capital (to risk-weighted assets)

Tier 1 capital (to average assets)

* Does not include capital conservation buffer of 1.250% for 2019 and 1.875% for 2018

(1) Refer to Non-GAAP Financial Measures section below

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity