Meridian Corp 10-K

Item 8. Financial Statements and Supplementary Data The consolidated financial statements are set forth in this Annual Report on Form 10-K as follows: i. Report of Crowe LLP, Independent Registered Public Accounting Firm (PCAOB ID 173 ) ii. Consolidated Balance Sheets iii. Consolidated Statements of Income iv. Consolidated Statements of Comprehensive Income v. Consolidated Statements of Stockholders’ Equity vi. Consolidated Statements of Cash Flows vii. Notes to Consolidated Financial Statements ​ 51 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and the Board of Directors of Meridian Corporation and Subsidiaries Malvern, Pennsylvania ​ Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Meridian Corporation and Subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for years then ended, in conformity with accounting principles generally accepted in the United States of America. ​ Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ /s/ Crowe LLP We have served as the Company’s auditor since 2020. Washington, D.C. March 16, 2022 ​ ​ 52 Table of Contents Meridian Corporation and Subsidiaries Consolidated Balance Sheets ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, (dollars in thousands, except per share data) 2021 2020 Cash and due from banks ​ $ 23,480 ​ 34,190 Federal funds sold ​ ​ — ​ 2,554 Cash and cash equivalents ​ ​ 23,480 ​ 36,744 Securities available-for-sale (amortized cost of $ 158,387 and $ 120,215 as of December 31, 2021 and December 31, 2020) ​ ​ 159,302 ​ 123,562 Securities held-to-maturity (fair value of $ 6,591 and $ 6,857 as of December 31, 2021 and December 31, 2020) ​ ​ 6,372 ​ 6,510 Equity investments ​ ​ 2,354 ​ 1,031 Mortgage loans held for sale (amortized cost of $ 80,002 and $ 225,007 as of December 31, 2021 and December 31, 2020), at fair value ​ ​ 80,882 ​ 229,199 Loans, net of fees and costs (includes $ 17,558 and $ 12,182 of loans at fair value, amortized cost of $ 17,106 and $ 11,514 as of December 31, 2021 and December 31, 2020) ​ ​ 1,386,457 ​ 1,284,764 Allowance for loan and lease losses ​ ​ ( 18,758 ) ​ ( 17,767 ) Loans, net of the allowance for loan and lease losses ​ ​ 1,367,699 ​ 1,266,997 Restricted investment in bank stock ​ ​ 5,117 ​ 7,861 Bank premises and equipment, net ​ ​ 11,806 ​ 7,777 Bank owned life insurance ​ ​ 22,503 ​ 12,138 Accrued interest receivable ​ ​ 5,009 ​ 5,482 Deferred income taxes ​ ​ 1,413 ​ 62 Servicing assets ​ ​ 12,765 ​ 5,617 Goodwill ​ ​ 899 ​ 899 Intangible assets ​ ​ 3,379 ​ 3,601 Other assets ​ ​ 10,463 ​ 12,717 Total assets ​ $ 1,713,443 ​ 1,720,197 Liabilities: ​ ​ ​ ​ ​ Deposits: ​ ​ ​ ​ ​ Non-interest bearing ​ $ 274,528 ​ 203,843 Interest bearing ​ ​ 1,171,885 ​ 1,037,492 Total deposits ​ ​ 1,446,413 ​ 1,241,335 Short-term borrowings ​ ​ 41,344 ​ 106,862 Long-term debt ​ ​ — ​ 165,546 Subordinated debentures ​ ​ 40,508 ​ 40,671 Accrued interest payable ​ ​ 31 ​ 1,154 Other liabilities ​ ​ 19,787 ​ 23,007 Total liabilities ​ ​ 1,548,083 ​ 1,578,575 Stockholders’ equity: ​ ​ ​ ​ ​ Common stock, $ 1 par value. Authorized 25,000,000 and 10,000,000 shares as of December 31, 2021 and December 31, 2020; issued 6,534,587 and 6,455,566 as of December 31, 2021 and December 31, 2020 ​ ​ 6,535 ​ 6,456 Surplus ​ ​ 83,663 ​ 81,196 Treasury stock - 426,693 and 320,000 shares at December 31, 2021 and December 31, 2020 ​ ​ ( 8,860 ) ​ ( 5,828 ) Unearned common stock held by employee stock ownership plan ​ ​ ( 1,602 ) ​ ( 1,768 ) Retained earnings ​ ​ 84,916 ​ 59,010 Accumulated other comprehensive income ​ ​ 708 ​ 2,556 Total stockholders’ equity ​ ​ 165,360 ​ 141,622 Total liabilities and stockholders’ equity ​ $ 1,713,443 ​ 1,720,197 The accompanying notes are an integral part of these consolidated financial statements . ​ 53 Table of Contents Meridian Corporation and Subsidiaries Consolidated Statements of Income ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, (dollars in thousands, except per share data) 2021 2020 Interest income: ​ ​ ​ ​ Loans, including fees $ 68,822 ​ 60,357 Securities: ​ ​ ​ ​ Taxable ​ 1,460 ​ 1,186 Tax-exempt ​ 1,192 ​ 1,044 Cash and cash equivalents ​ 48 ​ 69 Total interest income ​ 71,522 ​ 62,656 Interest expense: ​ ​ ​ ​ Deposits ​ 5,494 ​ 9,970 Borrowings ​ 2,917 ​ 3,690 Total interest expense ​ 8,411 ​ 13,660 Net interest income ​ 63,111 ​ 48,996 Provision for loan losses ​ 1,070 ​ 8,302 Net interest income after provision for loan losses ​ 62,041 ​ 40,694 Non-interest income: ​ ​ ​ ​ Mortgage banking income ​ 75,932 ​ 76,461 Wealth management income ​ 4,801 ​ 3,854 SBA loan income ​ 6,898 ​ 2,572 Earnings on investment in life insurance ​ 365 ​ 279 Net change in the fair value of derivative instruments ​ ( 4,338 ) ​ 4,975 Net change in the fair value of loans held-for-sale ​ ( 3,311 ) ​ 3,847 Net change in the fair value of loans held-for-investment ​ ( 189 ) ​ 323 Net gain (loss) on hedging activity ​ 2,961 ​ ( 9,400 ) Net gain on sale of investment securities available-for-sale ​ 435 ​ 1,345 Service charges ​ 129 ​ 107 Other ​ 4,305 ​ 2,555 Total non-interest income ​ 87,988 ​ 86,918 Non-interest expenses: ​ ​ ​ ​ Salaries and employee benefits ​ 78,866 ​ 72,147 Occupancy and equipment ​ 4,545 ​ 4,292 Professional fees ​ 3,558 ​ 3,113 Advertising and promotion ​ 3,714 ​ 2,852 Data processing ​ 2,150 ​ 1,913 Information technology ​ 2,232 ​ 1,542 Pennsylvania bank shares tax ​ 609 ​ 1,049 Other ​ 8,053 ​ 6,168 Total non-interest expenses ​ 103,727 ​ 93,076 Income before income taxes ​ 46,302 ​ 34,536 Income tax expense ​ 10,717 ​ 8,098 Net income $ 35,585 ​ 26,438 Basic earnings per common share $ 5.91 ​ 4.32 Diluted earnings per common share $ 5.73 ​ 4.27 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 54 Table of Contents Meridian Corporation and Subsidiaries Consolidated Statements of Comprehensive Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ ​ December 31, (dollars in thousands) ​ 2021 2020 Net income: ​ $ 35,585 ​ 26,438 ​ ​ ​ ​ ​ ​ Other comprehensive (loss) income: ​ ​ ​ ​ ​ Net change in unrealized gains on investment securities available for sale: ​ ​ ​ ​ ​ Net unrealized (losses) gains arising during the period, net of tax expense of ($ 485 ), and $ 1,121 , respectively ​ ​ ( 1,514 ) ​ 3,584 Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of ($ 101 ), and ($ 320 ), respectively ​ ​ ( 334 ) ​ ( 1,025 ) Unrealized investment (losses) gains, net of tax expense of $( 584 ), and $ 801 , respectively ​ ​ ( 1,848 ) ​ 2,559 Total other comprehensive (loss) income ​ ​ ( 1,848 ) ​ 2,559 Total comprehensive income ​ $ 33,737 ​ 28,997 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 55 Table of Contents Meridian Corporation and Subsidiaries Consolidated Statements of Stockholders' Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unearned ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common ​ ​ ​ Other ​ ​ ​ ​ Common ​ ​ ​ Treasury ​ Stock - ​ Retained ​ Comprehensive ​ ​ (dollars in thousands) Stock Surplus Stock ​ ESOP ​ Earnings Income Total Balance, January 1, 2020 $ 6,408 ​ 80,196 ​ ( 3 ) ​ — ​ 34,097 ​ ( 3 ) ​ 120,695 Comprehensive income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ 26,438 ​ ​ ​ 26,438 Net change in unrealized gains on securities available-for-sale, net of tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,559 ​ 2,559 Total comprehensive income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 28,997 Dividends paid or accrued, $ 0.250 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,525 ) ​ ​ ​ ( 1,525 ) Shares purchased for ESOP plan ( 133,601 ) ​ ​ ​ ​ ​ ​ ​ ( 2,000 ) ​ ​ ​ ​ ​ ( 2,000 ) Net purchase of treasury stock through publicly announced plans ( 316,625 ) ​ ​ ​ 122 ​ ( 5,825 ) ​ ​ ​ ​ ​ ​ ​ ( 5,703 ) Common stock issued through share-based awards and exercises ( 47,881 ) ​ 48 ​ 347 ​ ​ ​ ​ ​ ​ ​ ​ ​ 395 ESOP shares committed to be released ( 13,328 ) ​ ​ ​ ​ ​ ​ ​ 232 ​ ​ ​ ​ ​ 232 Stock based compensation ​ ​ ​ 531 ​ ​ ​ ​ ​ ​ ​ ​ ​ 531 Balance, December 31, 2020 $ 6,456 ​ 81,196 ​ ( 5,828 ) ​ ( 1,768 ) ​ 59,010 ​ 2,556 ​ 141,622 Comprehensive income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ 35,585 ​ ​ ​ 35,585 Net change in unrealized losses on securities available-for-sale, net of tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,848 ) ​ ( 1,848 ) Total comprehensive income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 33,737 Dividends paid or accrued, $ 1.575 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 9,679 ) ​ ​ ​ ( 9,679 ) Net purchase of treasury stock through publicly announced plans ( 106,693 ) ​ ​ ​ ​ ​ ( 3,032 ) ​ ​ ​ ​ ​ ​ ​ ( 3,032 ) Common stock issued through share-based awards and exercises, net of shares withheld ( 79,021 ) ​ 79 ​ 1,026 ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,105 ESOP shares committed to be released ( 13,328 ) ​ ​ ​ 228 ​ ​ ​ 166 ​ ​ ​ ​ ​ 394 Stock based compensation ​ ​ ​ 1,213 ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,213 Balance, December 31, 2021 $ 6,535 ​ 83,663 ​ ( 8,860 ) ​ ( 1,602 ) ​ 84,916 ​ 708 ​ 165,360 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 56 Table of Contents Meridian Corporation and Subsidiaries Consolidated Statements of Cash Flows ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, (dollars in thousands) 2021 2020 Net income ​ $ 35,585 ​ 26,438 Adjustments to reconcile net income to net cash (used in) provided by operating activities: ​ ​ ​ ​ ​ Gain on sale of investment securities ​ ​ ( 435 ) ​ ( 1,345 ) Net amortization of investment premiums and discounts and change in fair value of equity securities ​ ​ 1,369 ​ 425 Depreciation and amortization, net ​ ​ ( 5,922 ) ​ ( 2,890 ) Provision for loan losses ​ ​ 1,070 ​ 8,302 Amortization of issuance costs on subordinated debt ​ ​ 118 ​ 112 Share-based compensation ​ ​ 1,607 ​ 763 Net change in fair value of derivative instruments ​ ​ 4,338 ​ ( 4,975 ) Net change in fair value of loans held for sale ​ ​ 3,311 ​ ( 3,847 ) Net change in fair value of loans held for investment ​ ​ 189 ​ ( 323 ) Gain on sale of OREO ​ ​ — ​ ( 6 ) Amortization and net impairment of servicing rights ​ ​ 1,109 ​ 816 SBA loan income ​ ​ ( 6,898 ) ​ ( 2,733 ) Proceeds from sale of loans ​ ​ 2,483,373 ​ 2,235,986 Loans originated for sale ​ ​ ( 2,270,693 ) ​ ( 2,356,821 ) Mortgage banking income ​ ​ ( 75,932 ) ​ ( 77,116 ) Decrease (increase) in accrued interest receivable ​ ​ 473 ​ ( 2,334 ) (Increase) decrease in other assets ​ ​ ( 3,693 ) ​ 8,995 Earnings from investment in life insurance ​ ​ ( 365 ) ​ ( 279 ) (Increase) decrease income in deferred income tax ​ ​ ( 768 ) ​ 1,254 (Decrease) increase in accrued interest payable ​ ​ ( 1,122 ) ​ 66 (Decreased) increase in other liabilities ​ ​ ( 1,591 ) ​ 11,047 Net cash provided by (used in) operating activities ​ ​ 165,123 ​ ( 158,465 ) Cash flows from investing activities: ​ ​ ​ ​ ​ Activity in available-for-sale securities: ​ ​ ​ ​ ​ Maturities, repayments and calls ​ ​ 10,447 ​ 8,247 Sales ​ ​ 23,585 ​ 45,927 Purchases ​ ​ ( 74,341 ) ​ ( 114,494 ) Activity in held-to-maturity securities: ​ ​ ​ ​ ​ Maturities, repayments and calls ​ ​ — ​ 2,140 Proceeds from sale of OREO ​ ​ — ​ 126 Decrease in restricted stock ​ ​ 2,743 ​ 211 Net increase in loans ​ ​ ( 87,575 ) ​ ( 312,112 ) Purchases of premises and equipment ​ ​ ( 5,374 ) ​ ( 747 ) Purchase of bank owned life insurance ​ ​ ( 10,000 ) ​ — Net cash used in investing activities ​ ​ ( 140,515 ) ​ ( 370,702 ) Cash flows from financing activities: ​ ​ ​ ​ ​ Net increase in deposits ​ ​ 205,079 ​ 390,167 Decrease in short-term borrowings ​ ​ ( 44,939 ) ​ ( 922 ) Decrease in short-term borrowings with original maturity > 90 days ​ ​ ( 20,579 ) ​ ( 15,479 ) Repayment of long-term debt (subordinated debt) ​ ​ ( 281 ) ​ ( 172 ) (Repayment) proceeds from long-term debt, net ​ ​ ( 165,546 ) ​ 162,423 Repayment of acquisition note payable ​ ​ — ​ ( 413 ) Issuance costs on subordinated debt ​ ​ — ​ ( 231 ) Net purchase of treasury stock ​ ​ ( 3,032 ) ​ ( 5,703 ) Dividends paid ​ ​ ( 9,679 ) ​ ( 1,525 ) Purchase of common shares for ESOP ​ ​ — ​ ( 2,000 ) Share based awards and exercises ​ ​ 1,105 ​ 395 Net cash (used in) provided by financing activities ​ ​ ( 37,872 ) ​ 526,540 Net change in cash and cash equivalents ​ ​ ( 13,264 ) ​ ( 2,627 ) Cash and cash equivalents at beginning of period ​ ​ 36,744 ​ 39,371 Cash and cash equivalents at end of period ​ $ 23,480 ​ 36,744 Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ Cash paid during the period for: ​ ​ ​ ​ ​ Interest ​ $ 9,534 ​ 13,594 Income taxes ​ ​ 14,069 ​ 5,295 Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ Transfers from loans held for sale to loans held for investment ​ ​ 8,410 ​ 3,313 Net loans purchased, not settled ​ ​ — ​ 325 The accompanying notes are an integral part of these consolidated financial statements . ​ 57 Table of Contents (1) Summary of Significant Accounting Policies (a) Nature of Operations ​ Meridian Corporation (“Meridian” or the “Corporation”) is a bank holding company engaged in banking activities through its wholly-owned subsidiary, Meridian Bank (the “Bank”), a full-service, state-chartered commercial bank with offices in the Delaware Valley tri-state market, which includes Pennsylvania, New Jersey and Delaware, as well as the Central Maryland market area. We have a financial services business model with significant noninterest income streams from mortgage lending, small business (“SBA”) lending and wealth management services. We provide services to small and middle market businesses, professionals and retail customers throughout our market area. We have a modern, progressive, consultative approach to creating innovative solutions for our customers. We are technology driven, with a culture that incorporates significant use of customer preferred alternative deliver y channel s, such as mobile banking, remote deposit capture and bank-to-bank ACH. Our ‘Meridian everywhere’ philosophy of community presence, along with our strategic business footprint, allows us to provide the high degree of service, convenience and products our customers need to achieve their financial objectives. We provide this service through three principal business line distribution channels, described further below. ​ The Corporation operates in a highly competitive market areas that includes local, national and regional banks as competitors along with savings banks, credit unions, insurance companies, trust companies and registered investment advisors. The Corporation and its subsidiaries are regulated by many regulatory agencies including the Securities and Exchange Commission (“SEC”), Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve and the Pennsylvania Department of Banking and Securities. ​ The Bank was incorporated on March 16, 2004 under the laws of the Commonwealth of Pennsylvania and is a Pennsylvania state-chartered bank. The Bank commenced operations on July 8, 2004 and is a full-service bank providing personal and business lending and deposit services through 6 full-service banking offices in Pennsylvania, 9 mortgage loan production offices throughout the Delaware Valley, and 8 mortgage loan production offices in Maryland. The Bank and Corporation are headquartered in Malvern, Pennsylvania, located in the western suburbs of Philadelphia. ​ (b) Basis of Presentation ​ The accounting policies of the Corporation conform to U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include accounts of the Corporation and its wholly owned subsidiary, the Bank, and the wholly owned subsidiaries of the Bank: Meridian Land Settlement Services LLC; APEX Realty LLC; Meridian Wealth Partners LLC; and Meridian Equipment Finance LLC. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year’s presentation. Reclassifications had no effect on prior year net income or total stockholders’ equity. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Although our current estimates contemplate current conditions and how we expect them to change in the future, due to the continuing impact that the COVID-19 pandemic has had on financial markets and the economy both locally and nationally, it is reasonably possible that this could continue to materially affect these significant estimates and our results of operations and financial condition. ​ (c) Significant Concentrations of Credit Risk Most of the Corporation’s activities are with customers located in the Delaware Valley tri-state market and the central Maryland market area. Note 4 discusses the types of securities that the Corporation invests in. Note 5 58 Table of Contents discusses types of lending that the Corporation engages in. Although the Corporation has a diversified loan portfolio, its debtors’ ability to honor their contracts is influenced by the region’s economy. The Corporation does not have any significant concentrations to any one industry or customer, however there is significant concentration of commercial real estate-backed loans, amounting to 37 % and 38 % of total loans held for investment, as of December 31, 2021 and December 31, 2020, respectively. (d) Presentation of Cash Flows For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold. Generally, federal funds are purchased or sold for one day periods. The Federal Reserve Board removed cash minimum reserve requirements in March 2020. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, and the federal funds purchased and repurchased agreements. (e) Securities Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Securities classified as available-for-sale are those securities that the Corporation intends to hold for an indefinite period of time but not necessarily to maturity. Securities available-for-sale are carried at fair value. Any decision to sell a security classified as available-for-sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Corporation’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Unrealized gains and losses are reported as increases or decreases in other comprehensive income. Gains or losses on disposition are based on the net proceeds and cost of the securities sold, adjusted for the amortization of premiums and accretion of discounts, using the specific identification method. Securities classified as held to maturity are those debt securities the Corporation has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs or changes in general economic conditions. These securities are carried at cost adjusted for the amortization of premium and accretion of discount, computed on a level yield basis. Investments in equity securities are recorded in accordance with ASC 321-10, Investments - Equity Securities. Equity securities are carried at fair value, with changes in fair value reported in net income. At December 31, 2021 and 2020, investments in equity securities consisted of an investment in mutual funds with a fair value of $ 2.4 million, and $ 1 million, respectively. ​ The Corporation’s accounting policy specifies that (a) if the Corporation does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired, unless there is a credit loss. When the Corporation does not intend to sell the security, and it is more likely than not, the Corporation will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. The Corporation did not recognize any other-than-temporary impairment charges during the years ended December 31, 2021 and 2020. ​ (f) Loans Receivable Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Corporation generally amortizes these amounts over the contractual life of the loan. 59 Table of Contents Loans that were originated by the Corporation and intended for sale in the secondary market to permanent investors, but were either repurchased or unsalable due to defect, are held for the foreseeable future or until maturity or payoff, are carried at fair value. The accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and charged against current year income. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt. (g) Allowance for Loan and Lease Losses The allowance for loan and lease losses (“Allowance”) is a valuation for probable incurred credit losses established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the Allowance, and subsequent recoveries, if any, are credited to the Allowance. All, or part, of the principal balance of loans receivable are charged off to the Allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Charge-offs for retail consumer loans are generally made for any balance not adequately secured after 120 cumulative days past due. The Allowance is maintained at a level considered adequate to provide for probable incurred credit losses. Management’s periodic evaluation of the adequacy of the Allowance is based on known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is subjective as it requires material estimates that may be susceptible to significant revisions as more information becomes available. In addition, Federal regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s Allowance and may require the Corporation to recognize additions to the Allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. The Allowance consists of general and specific components. The general component covers non-classified loans, as well as, non-impaired classified loans and is based on historical loss experience adjusted for qualitative factors. The specific component relates to loans that are classified as doubtful, substandard, and are on non-accrual and have been deemed impaired. Loan classifications are determined based on various assessments such as the borrower’s overall financial condition, payment history, repayment sources, guarantors and value of collateral. We apply historical loss rates to pools of loans with similar risk characteristics. Loss rates are calculated by historical charge-offs that have occurred within each pool of loans over the loss emergence period (“LEP”). The LEP is an estimate of the average amount of time from when an event happens that causes the borrower to be unable to pay on a loan until the loss is confirmed through a loan charge-off. ​ Another key assumption is the look-back period (“LBP”), which represents the historical data period utilized to calculate loss rates. Our LBP goes back to Q1 2010 for all portfolio segments, as applicable, which encompasses our loss experience during the Financial Crisis, and our more recent improved loss experience. ​ After consideration of the historic loss calculations, management applies qualitative adjustments so that the Allowance is reflective of the inherent losses that exist in the loan portfolio at the balance sheet date. Qualitative adjustments are made based upon changes in lending policies and practices, economic conditions, changes in the loan portfolio, changes in lending management, results of internal loan reviews, asset quality trends, collateral values, concentrations of credit risk and other external factors. The evaluation of the various components of the Allowance requires considerable judgment in order to estimate inherent loss exposures. 60 Table of Contents ​ A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement, or a troubled debt restructure (“TDR”). Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. For commercial and construction loans, impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral adjusted for cost to sell, if the loan is collateral dependent. Large groups of smaller balance homogeneous residential mortgage and consumer loans are collectively evaluated for impairment. Accordingly, the Corporation does not separately identify individual loans of this nature for impairment disclosures, unless such loans become impaired or are troubled and the subject of a restructuring agreement. Loans whose terms are modified are classified as TDRs if the Corporation grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a TDR generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. TDRs are considered impaired loans No portion of the Allowance is restricted to any individual loan or groups of loans, and the entire Allowance is available to absorb any and all loan and lease losses. The Corporation has identified the following portfolio segments with similar risk characteristics for measuring credit losses: Commercial mortgage – 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. Repayment of commercial real estate loans depends on the cash flow of the borrower and the net operating income of the property, the borrower’s profitability, and the value of the underlying property. Of primary concern in commercial real estate lending is the borrower’s creditworthiness and the cash flows from the property. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject, to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy. Commercial real estate is also subject to adverse market conditions that cause a decrease in market value or lease rates, obsolescence in location or function and market conditions associated with oversupply of units in a specific region. Residential mortgage – Residential loans held in portfolio are primarily secured by single-family homes located in our market areas. Residential loans are generally made on the basis of the borrower’s ability to make repayment from employment income or other income, and are secured by real property whose value tends to be more easily ascertainable. Repayment of single-family loans are subject to adverse employment conditions in the local economy leading to increased default rates and decreased market values, including from oversupply in a geographic area. In general, these loans depend on the borrower’s continuing financial stability and, therefore, are likely to be adversely affected by various factors, including job loss, divorce, illness, or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans. 61 Table of Contents Construction – Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, additional funds may be required to be advanced in excess of the amount originally committed to permit completion of the building. Commercial and Industrial – 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. 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. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. Furthermore, any collateral securing such loans may depreciate over time, may be difficult to appraise, and may fluctuate in value. Leases – Meridian Equipment Finance (“MEF”) specializes in small ticket equipment leases for small and mid-sized businesses nationally and through a broad range of industries. The Bank’s credit risk generally results from the potential default of borrowers which may be driven by customer specific or broader industry related conditions. Consumer, including home equity – 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 student loan refinance product, designed to provide additional flexibility in repayment terms desired in the marketplace. Most consumer loans are originated in Meridian’s primary market and surrounding areas. The largest component of Meridian’s consumer loan portfolio consists of fixed rate home equity loans and variable rate home equity lines of credit. Substantially all home equity loans and lines of credit are secured by junior lien mortgages on principal residences. The Bank will lend amounts, which, together with all prior liens, typically may be up to 90 percent of the appraised value of the property securing the loan. Home equity term loans may have maximum terms up to 20 years , while home equity lines of credit generally have maximum terms of 15 years . Credit risk on such loans is mitigated through prudent underwriting standards, including evaluation of the creditworthiness of the borrower through credit scores and debt-to-income ratios and, if secured, the collateral value of the assets. ​ h) Mortgage Banking Activities and Mortgage Loans Held for Sale The Corporation’s mortgage banking division operates 9 offices in the tri-state area of Pennsylvania, Delaware and New Jersey and another 8 offices in Maryland. The mortgage banking division originates conventional mortgages, FHA, VA, USDA, and other state insured mortgages. The loans are generally sold to various investors in the secondary market. Mortgage loans originated by the Corporation and intended for sale in the secondary market to permanent investors are classified as mortgage loans held for sale on the balance sheet as the Corporation has elected to measure loans held for sale at fair value. Fair value is based on outstanding investor commitments or, in the absence of such commitments, on current investor yield requirements based on third party models. Gains and losses on sales of these loans, as well as loan origination costs, are recorded as a component of noninterest income in the Consolidated Statements of Income. The Corporation’s current practice is to sell residential mortgage loans and retain the servicing rights, as discussed further below. Interest on loans held for sale is credited to income based on the principal amounts outstanding. ​ 62 Table of Contents The Corporation enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (interest rate lock commitments). Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Time elapsing between the issuance of a loan commitment and closing and sale of the loan generally ranges from 30 to 120 days . The Corporation protects itself from changes in interest rates through the use of best efforts forward sale contracts, whereby the Corporation commits to sell a loan at the time the borrower commits to an interest rate with the intent that the buyer has assumed interest rate risk on the loan. The Corporation also commits to loan sales through a mandatory sales channel which are economically hedged by the future sale of mortgage-backed securities to third-party counterparties to mitigate the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. By entering into best efforts commitments and economically hedging the mandatory commitments, the Corporation limits its exposure to loss and its realization of significant gains related to its rate lock commitments due to changes in interest rates. ​ The Corporation utilizes a third-party model to determine the fair value of rate lock commitments or forward sale contracts. This model uses investor quotes while taking into consideration the probability that the rate lock commitments will close. Net derivative assets and liabilities are recorded within other assets or other liabilities, respectively, on the consolidated balance sheets, with changes in fair value during the period recorded within net change in the fair value of derivative instruments on the consolidated statements of income. (i) Loan Servicing Rights The Corporation sells substantially all of the residential mortgage loans originated for sale in the secondary market; however, the Corporation may retain the servicing rights related to some of these loans. A fee, usually based on a percentage of the outstanding principal balance of the loan, is received in return for these services. Mortgage servicing rights (“MSRs") are recognized when a loan’s servicing rights are retained upon sale of a loan. When mortgage loans are sold with servicing retained, MSRs are initially recorded at fair value with the income effect recorded in non-interest income. The Corporation also sells the guaranteed portion of certain Small Business Administration (“SBA”) loans to third parties and retains servicing rights and receives servicing fees. All such transfers are accounted for as sales. While the Corporation may retain a portion of certain sold SBA loans, its continuing involvement in the portion of the loan that was sold is limited to certain servicing responsibilities. These servicing assets amortize in proportion to, and over the period of, the estimated future net servicing life of the underlying loans. The servicing assets are evaluated quarterly for impairment based upon the fair value of the rights as compared to their amortized cost. Impairment is recognized on the income statement to the extent the fair value is less than the capitalized amount of the servicing assets. (j) Other Real Estate Owned Other real estate owned (OREO) is comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure. The Corporation acquires OREO through the wholly owned subsidiary of the Bank, Apex Realty. OREO is recorded at the lower of cost or fair value, or the loan amount net of estimated selling costs, at the date of foreclosure. The cost basis of OREO is its recorded value at the time of acquisition. After acquisition, valuations are periodically performed by management and subsequent changes in the valuation allowance are charged to OREO expense. Revenues, such as rental income, and holding expenses are included in other income and other expenses, respectively. The Corporation had no OREO at December 31, 2021 and 2020. (k) Restricted Investment in Bank Stock Restricted bank stock is principally comprised of stock in the Federal Home Loan Bank of Pittsburgh (FHLB). Federal law requires a member institution of the FHLB to hold stock according to a predetermined formula. As of December 31, 2021, and 2020, the Corporation had an investment of $ 5.1 million and $ 7.9 million, 63 Table of Contents respectively, related to the FHLB stock. Also included in restricted stock is secondary stock from a correspondent bank in the amount of $ 50 thousand as of December 31, 2021 and 2020. All restricted stock is carried at cost. Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) significance of the decline in net assets of the banks as compared to the capital stock amount and the length of time this situation has persisted, (2) commitments by the banks to make payments required by law or regulation and the level of such payments in relation to the operating performance of the banks, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the banks. Management believes no impairment charge is necessary related to these bank restricted stocks as of December 31, 2021 or 2020. (l ) Transfers of Financial Assets Transfers of financial assets, including loan and loan participation sales, are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Corporation, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Corporation does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. (m) Bank Premises and Equipment Bank premises and equipment are stated at cost less accumulated depreciation. Land is carried at cost. Buildings and related components are depreciated using the straight-line method with useful lives ranging from 12 to 40 years . Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives ranging from 3 to 7 years and 3 to 5 years for computer software and hardware, respectively. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. The costs of maintenance and repairs are expensed as incurred; while major replacements, improvements and additions are capitalized. (n) Bank-Owned Life Insurance The Corporation invests in bank owned life insurance (“BOLI”) as a source of funding for employee benefit expenses. BOLI involves the purchasing of life insurance by the Corporation on a chosen group of employees. The Corporation is the owner and beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies. Earnings from the increase in cash surrender value of the policies are included in non-interest income on the consolidated statements of income. (o) Advertising Costs The Corporation follows the policy of charging the costs of advertising to expense as incurred. (p) Employee Benefit Plans The Corporation has a 401(k) Plan (the Plan) and an Employee Stock Ownership Plan (ESOP). All employees are eligible to participate in the Plan and ESOP after they have attained the age of 21 and have also completed 3 consecutive months of service. Employees must participate in the Plan to be eligible for participation in the ESOP. The employees may contribute to the Plan up to the maximum percentage allowable by law of their compensation. The Corporation may make a discretionary matching contribution to the Plan and the ESOP. Full vesting in the Corporation’s contribution to the Plan and ESOP is over a three-year period. The Corporation recorded expense for the Plan and ESOP of $ 1.4 million and $ 1.1 million, respectively for the year ended December 31, 2021 and 64 Table of Contents $ 1.1 million and $ 1.2 million, respectively for the year ended December 31, 2020. The expense recorded by the Corporation for the ESOP for the year ended December 31, 2021 included a $ 663 thousand employer contribution, in addition to $ 437 thousand in stock compensation related expense. The expense recorded by the Corporation for the ESOP for the year ended December 31, 2020 included a $ 550 thousand employer contribution, and a $ 600 thousand one-time contribution approved by the Board of Directors. There was no such contribution made in 2021. During the year ended December 31, 2021, 45,606 shares were purchased by the ESOP at an average market value of $ 24.30 , while for the year ended December 31, 2020, 161,576 shares were purchased by the ESOP at an average market value of $ 15.06 . Shares in the ESOP that are committed to be released to employees are treated as outstanding shares in the Corporation’s computation of earnings per share. On August 31, 2020 the Corporation established a $ 2 million stock purchase authorization with the ESOP. By the end of 2020 the ESOP had fully utilized the $ 2 million loan to purchase 133,280 Corporation common shares and as of December 31, 2021, 26,656 of these common shares were released to the ESOP leaving 106,624 unallocated shares. The 133,280 common shares purchased using the loan proceeds are included in the 161,576 shares purchased by the ESOP in 2020. There were 269,904 shares in the ESOP as of December 31, 2021. Shares in the ESOP would be impacted by any stock dividends and stock splits in the same manner as all other outstanding common shares of the Corporation. (q) Income Taxes Deferred income taxes are provided on the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and net operating losses and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and net operating loss carry-forwards and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Corporation follows accounting guidance related to accounting for uncertainty in income taxes. Under the “more likely than not” threshold guidelines, the Corporation believes no significant uncertain tax positions exist, either individually or in the aggregate, that would give rise to the non-recognition of an existing tax benefit. As of December 31, 2021, and 2020, the Corporation had no material unrecognized tax benefits or accrued interest and penalties. The Corporation’s policy is to account for interest as a component of interest expense and penalties as a component of other expense. The Corporation is no longer subject to examination by federal, state and local taxing authorities for years before January 1, 2018. (r ) Stock Compensation Plans Stock compensation accounting guidance requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the grant date fair value of the equity or liability instruments issued. The stock compensation accounting guidance covers a wide range of share-based compensation arrangements including stock options and restricted share plans. The stock compensation accounting guidance requires that compensation cost for all stock awards be calculated and recognized over the employees’ service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. A Black-Scholes model is used to estimate the fair value of stock options, while the market price of the Corporation’s common stock at the date of grant is used for restricted stock awards. 65 Table of Contents (s) Comprehensive Income Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. The components of other comprehensive income (loss) for the years ended December 31, 2021 and 2020 consist of unrealized holding gains and (losses) arising during the year on available-for-sale securities. (t ) Off-Balance Sheet Financial Instruments In the ordinary course of business, the Corporation has entered into off-balance sheet financial instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded in the balance sheet when they are funded. (u) Derivative Financial Instruments The Corporation recognizes all derivative financial instruments related to its mortgage banking activities on its balance sheet at fair value. The Corporation utilizes investor quotes to determine the fair value of interest rate lock commitment derivatives and market pricing to determine the fair value of forward security purchase commitment derivatives. All changes in fair value of derivative instruments are recognized in earnings. The Corporation enters into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. The interest rate swaps are recognized on the Corporation’s balance sheet at fair value. Under these agreements, the Corporation originates variable-rate loans with customers in addition to interest rate swap agreements, which serve to effectively swap the customers’ variable-rate loans into fixed-rate loans. The Corporation then enters into corresponding swap agreements with swap dealer counterparties to economically hedge its exposure on the variable and fixed components of the customer agreements. The interest rate swaps with both the customers and third parties are not designated as hedges under ASC 815 and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC 820. (v) Earnings per Common Share Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period reduced by unearned ESOP Plan shares and treasury stock. Diluted earnings per common share takes into account the potential dilution that would occur if in the-money stock options were exercised and converted into shares of common stock and restricted stock awards and performance-based stock awards were vested. Proceeds assumed to have been received on options exercises are assumed to be used to purchase shares of the Corporation’s common stock at the average market price during the period, as required by the treasury stock method of accounting. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive. (w) Revenue Recognition The Corporation recognizes all sources of income on the accrual method, with the exception of nonaccrual loans and leases. The Corporation earns wealth management fee income from investment advisory services provided to individual and 401k customers. Fees that are determined based on the market value of the assets held in their accounts are 66 Table of Contents generally billed quarterly, in advance, based on the market value of assets at the end of the previous billing period. Other related services that are based on a fixed fee schedule are recognized when the services are rendered. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e. the trade date. Included in other assets on the balance sheet is a receivable for wealth management fees that have been earned but not yet collected. ​ (x) Loss Contingencies ​ Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements. ​ (y) Operating Segments ​ While the chief decision-makers monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Corporation-wide basis. The Corporation has identified three segments: a banking segment, a wealth management segment and a mortgage banking segment, as more fully disclosed in the Segment note to the consolidated financial statements. ​ (z) Fair Value of Financial Instruments ​ Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in the Fair Value Measurements and Disclosures note to the consolidated financial statements. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates. ​ ​ (2) Earnings per Common Share Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period reduced by unearned ESOP Plan shares and treasury shares. Diluted earnings per common share takes into account the potential dilution computed pursuant to the treasury stock method that could occur if stock options were exercised and converted into common stock and if restricted stock awards were vested, and SERP plan liabilities were satisfied with common shares. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be anti-dilutive. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (dollars in thousands, except per share data) 2021 2020 Numerator: ​ ​ ​ ​ ​ ​ Net income available to common stockholders ​ $ 35,585 ​ ​ 26,438 Denominator for basic earnings per share ​ ​ ​ ​ ​ ​ Weighted average shares outstanding ​ ​ 6,133 ​ ​ 6,159 Average unearned ESOP shares ​ ​ ( 114 ) ​ ​ ( 37 ) Basic weighted averages shares outstanding ​ ​ 6,019 ​ ​ 6,122 Dilutive effects of assumed exercises of stock options ​ ​ 130 ​ ​ 23 Dilutive effects of SERP shares ​ ​ 57 ​ ​ 42 Denominator for diluted earnings per share - adjusted weighted average shares outstanding ​ ​ 6,206 ​ ​ 6,187 Basic earnings per share ​ $ 5.91 ​ ​ 4.32 Diluted earnings per share ​ $ 5.73 ​ ​ 4.27 Antidilutive shares excluded from computation of average dilutive earnings per share ​ ​ 139 ​ ​ 275 ​ ​ 67 Table of Contents ​ (3) Goodwill and Other Intangibles The Corporation’s goodwill and intangible assets are detailed below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance ​ ​ ​ Balance ​ Amortization ​ ​ December 31, ​ Amortization ​ December 31, ​ Period (dollars in thousands) 2020 Expense 2021 (in years) Goodwill - Wealth ​ $ 899 ​ — ​ 899 ​ Indefinite Total Goodwill ​ ​ 899 ​ — ​ 899 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Intangible assets - trade name ​ ​ 266 ​ — ​ 266 ​ Indefinite Intangible assets - customer relationships ​ ​ 3,319 ​ ( 206 ) ​ 3,113 ​ 20 Intangible assets - non competition agreements ​ ​ 16 ​ ( 16 ) ​ — ​ 4 Total Intangible Assets ​ ​ 3,601 ​ ( 222 ) ​ 3,379 ​ ​ Total ​ $ 4,500 ​ ( 222 ) ​ 4,278 ​ ​ ​ Accumulated amortization of intangible assets was $ 1.2 million and $ 1 million as of December 31, 2021 and 2020, respectively. In accordance with ASC Topic 350, the Corporation performed a qualitative assessment of goodwill and identifiable intangible assets as of December 31, 2021 and determined it was more likely than not that the fair value of the Corporation, including the wealth reporting unit where the goodwill and identifiable intangible assets are held, was more than its carrying amount. ​ At December 31, 2021, the schedule of future intangible asset amortization is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ 204 2023 ​ ​ ​ ​ ​ ​ 204 2024 ​ ​ ​ ​ ​ ​ 204 2025 ​ ​ ​ ​ ​ ​ 204 2026 ​ ​ ​ ​ ​ ​ 204 Thereafter ​ ​ ​ ​ ​ ​ 2,093 ​ ​ ​ ​ ​ ​ $ 3,113 ​ ​ 68 Table of Contents (4) Securities The amortized cost and approximate fair value of securities as of December 31, 2021 and 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ # of Securities ​ ​ Amortized ​ unrealized ​ unrealized ​ Fair ​ in unrealized (dollars in thousands) cost gains losses value ​ loss position Securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. asset backed securities ​ $ 16,850 ​ 55 ​ ( 68 ) ​ 16,837 ​ 10 U.S. government agency mortgage-backed securities ​ ​ 9,749 ​ 124 ​ ( 60 ) ​ 9,813 ​ 3 U.S. government agency collateralized mortgage obligations ​ ​ 22,276 ​ 358 ​ ( 253 ) ​ 22,381 ​ 10 State and municipal securities ​ ​ 72,099 ​ 1,379 ​ ( 496 ) ​ 72,982 ​ 12 U.S. Treasuries ​ ​ 29,973 ​ 1 ​ ( 246 ) ​ 29,728 ​ 21 Non-U.S. government agency collateralized mortgage obligations ​ ​ 990 ​ ─ ​ ( 15 ) ​ 975 ​ 1 Corporate bonds ​ ​ 6,450 ​ 154 ​ ( 18 ) ​ 6,586 ​ 5 Total securities available-for-sale ​ $ 158,387 ​ 2,071 ​ ( 1,156 ) ​ 159,302 ​ 62 Securities held-to-maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ State and municipal securities ​ ​ 6,372 ​ 219 ​ ─ ​ 6,591 ​ — Total securities held-to-maturity ​ $ 6,372 ​ 219 ​ — ​ 6,591 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ # of Securities ​ ​ Amortized ​ unrealized ​ unrealized ​ Fair ​ in unrealized (dollars in thousands) cost gains losses value ​ loss position Securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. asset backed securities ​ $ 25,303 ​ 364 ​ ( 75 ) ​ 25,592 ​ 8 U.S. government agency mortgage-backed securities ​ ​ 3,854 ​ 192 ​ — ​ 4,046 ​ — U.S. government agency collateralized mortgage obligations ​ ​ 23,010 ​ 916 ​ ( 17 ) ​ 23,909 ​ 1 State and municipal securities ​ ​ 63,848 ​ 2,025 ​ ( 63 ) ​ 65,810 ​ 3 Corporate bonds ​ ​ 4,200 ​ 7 ​ ( 2 ) ​ 4,205 ​ 2 Total securities available-for-sale ​ $ 120,215 ​ 3,504 ​ ( 157 ) ​ 123,562 ​ 14 Securities held-to-maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ State and municipal securities ​ ​ 6,510 ​ 347 ​ — ​ 6,857 ​ — Total securities held-to-maturity ​ $ 6,510 ​ 347 ​ — ​ 6,857 ​ — ​ Although the Corporation’s investment portfolio overall is in a net unrealized gain position at December 31, 2021, the temporary impairment in the above noted securities is primarily the result of changes in market interest rates subsequent to purchase and the Corporation does not intend to sell these securities prior to recovery and it is more likely than not that the Corporation will not be required to sell these securities prior to recovery to satisfy liquidity needs, and therefore, no securities are deemed to be other-than-temporarily impaired. As of December 31, 2021 and 2020, securities having a fair value of $ 92.2 million and $ 55.9 million, respectively, were specifically pledged as collateral for public funds, the FRB discount window program, FHLB borrowings and other purposes. The FHLB has a blanket lien on non-pledged, mortgage-related loans and securities as part of the Corporation’s borrowing agreement with the FHLB. 69 Table of Contents ​ The following table shows the Corporation’s investment gross unrealized losses and fair value aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position at December 31, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Less than 12 Months ​ 12 Months or more ​ Total ​ ​ Fair ​ Unrealized ​ Fair ​ Unrealized ​ Fair ​ Unrealized (dollars in thousands) value losses value losses value losses Securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. asset backed securities ​ $ 12,330 ​ ( 68 ) ​ — ​ — ​ 12,330 ​ ( 68 ) U.S. government agency mortgage-backed securities ​ ​ 3,852 ​ ( 60 ) ​ — ​ — ​ 3,852 ​ ( 60 ) U.S. government agency collateralized mortgage obligations ​ ​ 8,836 ​ ( 187 ) ​ 1,657 ​ ( 66 ) ​ 10,493 ​ ( 253 ) State and municipal securities ​ ​ 14,994 ​ ( 427 ) ​ 2,019 ​ ( 69 ) ​ 17,013 ​ ( 496 ) U.S. Treasuries ​ ​ 28,750 ​ ( 246 ) ​ — ​ — ​ 28,750 ​ ( 246 ) Non-U.S. government agency collateralized mortgage obligations ​ ​ 975 ​ ( 15 ) ​ — ​ — ​ 975 ​ ( 15 ) Corporate bonds ​ ​ 2,232 ​ ( 18 ) ​ — ​ — ​ 2,232 ​ ( 18 ) Total securities available-for-sale ​ $ 71,969 ​ ( 1,021 ) ​ 3,676 ​ ( 135 ) ​ 75,645 ​ ( 1,156 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ Less than 12 Months ​ 12 Months or more ​ Total ​ ​ Fair ​ Unrealized ​ Fair ​ Unrealized ​ Fair ​ Unrealized (dollars in thousands) value losses value losses value losses Securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. asset backed securities ​ $ 2,884 ​ ( 4 ) ​ 7,443 ​ ( 71 ) ​ 10,327 ​ ( 75 ) U.S. government agency collateralized mortgage obligations ​ ​ 2,284 ​ ( 17 ) ​ — ​ — ​ 2,284 ​ ( 17 ) State and municipal securities ​ ​ 4,163 ​ ( 63 ) ​ — ​ — ​ 4,163 ​ ( 63 ) Corporate bonds ​ ​ 1,198 ​ ( 2 ) ​ — ​ — ​ 1,198 ​ ( 2 ) Total securities available-for-sale ​ $ 10,529 ​ ( 86 ) ​ 7,443 ​ ( 71 ) ​ 17,972 ​ ( 157 ) ​ The amortized cost and carrying value of securities at December 31, 2021 and 2020 are shown below by contractual maturities. Actual maturities may differ from contractual maturities as issuers may have the right to call or repay obligations with or without call or prepayment penalties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ December 31, 2020 ​ ​ Available-for-sale ​ Held-to-maturity ​ Available-for-sale ​ Held-to-maturity ​ ​ Amortized ​ Fair ​ Amortized ​ Fair ​ Amortized ​ Fair ​ Amortized ​ Fair (dollars in thousands) cost value cost value cost value cost value Investment securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due in one year or less ​ $ — ​ — ​ 763 ​ 769 ​ $ — ​ — ​ — ​ — Due after one year through five years ​ ​ 12,934 ​ 12,885 ​ 2,354 ​ 2,397 ​ ​ — ​ — ​ 3,181 ​ 3,288 Due after five years through ten years ​ ​ 30,890 ​ 30,798 ​ 3,255 ​ 3,425 ​ ​ 12,035 ​ 12,095 ​ 3,329 ​ 3,569 Due after ten years ​ ​ 81,548 ​ 82,450 ​ — ​ — ​ ​ 81,316 ​ 83,512 ​ — ​ — Subtotal ​ ​ 125,372 ​ 126,133 ​ 6,372 ​ 6,591 ​ ​ 93,351 ​ 95,607 ​ 6,510 ​ 6,857 Mortgage-related securities ​ ​ 33,015 ​ 33,169 ​ — ​ — ​ ​ 26,864 ​ 27,955 ​ — ​ — Mutual funds with no stated maturity ​ ​ — ​ — ​ — ​ — ​ ​ — ​ — ​ — ​ — Total ​ $ 158,387 ​ 159,302 ​ 6,372 ​ 6,591 ​ $ 120,215 ​ 123,562 ​ 6,510 ​ 6,857 ​ ​ ​ Proceeds from the sale of available for sale investment securities totaled $ 23.6 million for the year ended December 31, 2021, resulting in a gross gain on sale of $ 634 thousand and a gross loss on sale of $ 199 thousand for the year ended December 31, 2021. Proceeds from the sale of available for sale investment securities totaled $ 45.9 million for the year 70 Table of Contents ended December 31, 2020, resulting in a gross gain on sale of $ 1.5 million and a gross loss on sale of $ 196 thousand for the year ended December 31, 2020. ​ ​ (5) Loans Receivable Loans and leases outstanding at December 31, 2021 and 2020 are detailed by category as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, (dollars in thousands) 2021 2020 Mortgage loans held for sale ​ $ 80,882 ​ 229,199 Real estate loans: ​ ​ ​ ​ ​ Commercial mortgage ​ ​ 516,928 ​ 485,103 Home equity lines and loans ​ ​ 52,299 ​ 64,987 Residential mortgage (1) ​ ​ 68,175 ​ 52,454 Construction ​ ​ 160,905 ​ 140,246 Total real estate loans ​ ​ 798,307 ​ 742,790 ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ 293,771 ​ 261,750 Small business loans ​ ​ 114,158 ​ 49,542 Paycheck Protection Program ("PPP") loans ​ ​ 90,194 ​ 203,543 Main Street Lending Program ("MSLP") loans ​ ​ 597 ​ 580 Consumer ​ ​ 419 ​ 511 Leases, net ​ ​ 88,242 ​ 31,040 Total portfolio loans and leases ​ ​ 1,385,688 ​ 1,289,756 Total loans and leases ​ $ 1,466,570 ​ 1,518,955 ​ ​ ​ ​ ​ ​ Loans with predetermined rates ​ $ 488,220 ​ 658,458 Loans with adjustable or floating rates ​ ​ 978,350 ​ 860,497 Total loans and leases ​ $ 1,466,570 ​ 1,518,955 ​ ​ ​ ​ ​ ​ Net deferred loan origination costs (fees) ​ $ 769 ​ ( 4,992 ) ​ (1) Includes $ 17,558 and $ 12,182 of loans at fair value as of December 31, 2021 and 2020, respectively. ​ Components of the net investment in leases at December 31, 2021 and 2020 are detailed as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, (dollars in thousands) 2021 2020 Minimum lease payments receivable ​ $ 105,608 ​ 37,919 Unearned lease income ​ ​ ( 17,366 ) ​ ( 6,879 ) Total ​ $ 88,242 ​ 31,040 ​ ​ 71 Table of Contents Age Analysis of Past Due Loans and Leases The following table presents an aging of the Corporation’s loan and lease portfolio as of December 31, 2021 and 2020, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 90+ days ​ ​ ​ ​ ​ accruing ​ Nonaccrual ​ Total loans ​ ​ ​ December 31, 2021 ​ 30-89 days ​ past due and ​ Total past ​ ​ ​ loans and ​ loans and ​ portfolio ​ Delinquency ​ (dollars in thousands) past due still accruing due Current leases leases and leases percentage Commercial mortgage ​ $ — ​ — ​ — ​ 516,928 ​ 516,928 ​ — ​ 516,928 ​ — % Home equity lines and loans ​ ​ 103 ​ — ​ 103 ​ 51,285 ​ 51,388 ​ 911 ​ 52,299 ​ 1.94 ​ Residential mortgage (1) ​ ​ 600 ​ — ​ 600 ​ 65,177 ​ 65,777 ​ 2,398 ​ 68,175 ​ 4.40 ​ Construction ​ ​ — ​ — ​ — ​ 160,905 ​ 160,905 ​ — ​ 160,905 ​ — ​ Commercial and industrial ​ ​ — ​ — ​ — ​ 274,970 ​ 274,970 ​ 18,801 ​ 293,771 ​ 6.40 ​ Small business loans ​ ​ — ​ — ​ — ​ 113,492 ​ 113,492 ​ 666 ​ 114,158 ​ 0.58 ​ Paycheck Protection Program loans ​ ​ — ​ — ​ — ​ 90,194 ​ 90,194 ​ — ​ 90,194 ​ — ​ Main Street Lending Program loans ​ ​ — ​ — ​ — ​ 597 ​ 597 ​ — ​ 597 ​ — ​ Consumer ​ ​ — ​ — ​ — ​ 419 ​ 419 ​ — ​ 419 ​ — ​ Leases, net ​ ​ 390 ​ — ​ 390 ​ 87,640 ​ 88,030 ​ 212 ​ 88,242 ​ 0.68 ​ Total ​ $ 1,093 ​ — ​ 1,093 ​ 1,361,607 ​ 1,362,700 ​ 22,988 ​ 1,385,688 ​ 1.74 % (1) Includes $ 17,558 of loans at fair value as of December 31, 2021 ($ 16,768 of current, $ 189 of 30-89 days past due and $ 601 of nonaccrual). ​ The increase in nonaccrual loans and leases was largely due to one commercial loan relationship for $ 13.8 million that had been on COVID-19 deferral but became a non-performing loan relationship late in 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 90+ days ​ ​ ​ ​ ​ accruing ​ Nonaccrual ​ Total loans ​ ​ ​ December 31, 2020 ​ 30-89 days ​ past due and ​ Total past ​ ​ ​ loans and ​ loans and ​ portfolio ​ Delinquency ​ (dollars in thousands) past due still accruing due Current leases leases and leases percentage Commercial mortgage ​ $ — ​ — ​ — ​ 482,042 ​ 482,042 ​ 3,061 ​ 485,103 ​ 0.63 % Home equity lines and loans ​ ​ — ​ — ​ — ​ 64,128 ​ 64,128 ​ 859 ​ 64,987 ​ 1.32 ​ Residential mortgage (1) ​ ​ 3,595 ​ — ​ 3,595 ​ 46,134 ​ 49,729 ​ 2,725 ​ 52,454 ​ 12.05 ​ Construction ​ ​ — ​ — ​ — ​ 140,246 ​ 140,246 ​ — ​ 140,246 ​ — ​ Commercial and industrial ​ ​ — ​ — ​ — ​ 260,465 ​ 260,465 ​ 1,285 ​ 261,750 ​ 0.49 ​ Small business loans ​ ​ — ​ — ​ — ​ 49,542 ​ 49,542 ​ — ​ 49,542 ​ — ​ Paycheck Protection Program loans ​ ​ — ​ — ​ — ​ 203,543 ​ 203,543 ​ — ​ 203,543 ​ — ​ Main Street Lending Program loans ​ ​ — ​ — ​ — ​ 580 ​ 580 ​ — ​ 580 ​ — ​ Consumer ​ ​ — ​ — ​ — ​ 511 ​ 511 ​ — ​ 511 ​ — ​ Leases, net ​ ​ 109 ​ — ​ 109 ​ 30,931 ​ 31,040 ​ — ​ 31,040 ​ 0.35 ​ Total ​ $ 3,704 ​ — ​ 3,704 ​ 1,278,122 ​ 1,281,826 ​ 7,930 ​ 1,289,756 ​ 0.90 % (1) Includes $ 12,182 of loans at fair value as of December 31, 2020 ($ 10,314 of current, $ 958 of 30-89 days past due and $ 910 of nonaccrual). ​ 72 Table of Contents (6) Allowance for Loan and Lease Losses (the Allowance) The Allowance is evaluated on at least a quarterly basis, as losses are estimated to be probable and incurred. The provision for loan and lease losses increase or decrease the ALLL, if deemed necessary. Loans deemed to be uncollectible are charged against the Allowance, and subsequent recoveries, if any, are credited to the Allowance. The Allowance is maintained at a level considered adequate to provide for losses that are probable and estimable. Management’s periodic evaluation of the adequacy of the Allowance is based on known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is subjective as it requires material estimates that may be susceptible to significant revisions as more information becomes available. Roll-Forward of the Allowance by Portfolio Segment The following tables detail the roll-forward of the Corporation’s Allowance, by portfolio segment, as of December 31, 2021 and 2020, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, ​ ​ ​ ​ ​ ​ ​ Balance, (dollars in thousands) December 31, 2020 Charge-offs Recoveries Provision December 31, 2021 Commercial mortgage ​ $ 7,451 ​ — ​ — ​ ( 2,501 ) ​ 4,950 Home equity lines and loans ​ ​ 434 ​ ( 81 ) ​ 82 ​ ( 211 ) ​ 224 Residential mortgage ​ ​ 385 ​ — ​ 5 ​ ( 107 ) ​ 283 Construction ​ ​ 2,421 ​ — ​ — ​ ( 379 ) ​ 2,042 Commercial and industrial ​ ​ 5,431 ​ — ​ 41 ​ 1,061 ​ 6,533 Small business loans ​ ​ 1,259 ​ — ​ — ​ 2,478 ​ 3,737 Consumer ​ ​ 4 ​ — ​ 4 ​ ( 5 ) ​ 3 Leases ​ ​ 382 ​ ( 130 ) ​ — ​ 734 ​ 986 Total ​ $ 17,767 ​ ( 211 ) ​ 132 ​ 1,070 ​ 18,758 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, ​ ​ ​ ​ ​ ​ ​ Balance, (dollars in thousands) December 31, 2019 Charge-offs Recoveries Provision December 31, 2020 Commercial mortgage ​ $ 3,426 ​ — ​ — ​ 4,025 ​ 7,451 Home equity lines and loans ​ ​ 342 ​ ( 90 ) ​ 14 ​ 168 ​ 434 Residential mortgage ​ ​ 179 ​ — ​ 7 ​ 199 ​ 385 Construction ​ ​ 2,362 ​ — ​ — ​ 59 ​ 2,421 Commercial and industrial ​ ​ 2,684 ​ ( 31 ) ​ 58 ​ 2,720 ​ 5,431 Small business loans ​ ​ 509 ​ — ​ — ​ 750 ​ 1,259 Consumer ​ ​ 6 ​ ( 10 ) ​ 4 ​ 4 ​ 4 Leases ​ ​ 5 ​ — ​ — ​ 377 ​ 382 Total ​ $ 9,513 ​ ( 131 ) ​ 83 ​ 8,302 ​ 17,767 ​ ​ 73 Table of Contents The Allowance Allocated by Portfolio Segment The following table details the allocation of the Allowance and the carrying value for loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of December 31, 2021 respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance on loans and leases ​ Carrying value of loans and leases ​ ​ ​ Individually ​ Collectively ​ ​ ​ Individually ​ Collectively ​ ​ ​ December 31, 2021 ​ evaluated ​ evaluated ​ ​ ​ evaluated ​ evaluated ​ ​ ​ (dollars in thousands) for impairment for impairment Total for impairment for impairment Total ​ Commercial mortgage ​ $ — ​ 4,950 ​ 4,950 ​ $ 3,556 ​ 513,372 ​ 516,928 ​ Home equity lines and loans ​ ​ — ​ 224 ​ 224 ​ ​ 905 ​ 51,394 ​ 52,299 ​ Residential mortgage ​ ​ — ​ 283 ​ 283 ​ ​ 1,797 ​ 48,820 ​ 50,617 ​ Construction ​ ​ — ​ 2,042 ​ 2,042 ​ ​ 1,206 ​ 159,699 ​ 160,905 ​ Commercial and industrial ​ ​ 2,900 ​ 3,633 ​ 6,533 ​ ​ 17,361 ​ 276,410 ​ 293,771 ​ Small business loans ​ ​ 376 ​ 3,361 ​ 3,737 ​ ​ 792 ​ 113,366 ​ 114,158 ​ Paycheck Protection Program loans ​ ​ — ​ — ​ — ​ ​ — ​ 90,194 ​ 90,194 (2) Main Street Lending Program ​ ​ — ​ — ​ — ​ ​ — ​ 597 ​ 597 (2) Consumer ​ ​ — ​ 3 ​ 3 ​ ​ — ​ 419 ​ 419 ​ Leases, net ​ ​ — ​ 986 ​ 986 ​ ​ 212 ​ 88,030 ​ 88,242 ​ Total ​ $ 3,276 ​ 15,482 ​ 18,758 ​ $ 25,829 ​ 1,342,301 ​ 1,368,130 (1) (1) Excludes deferred fees and loans carried at fair value. (2) PPP and MSLP loans are not reserved against as they are 100 % guaranteed. ​ The following table details the allocation of the Allowance and the carrying value for loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of December 31, 2020 respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance on loans and leases ​ Carrying value of loans and leases ​ ​ ​ Individually ​ Collectively ​ ​ ​ Individually ​ Collectively ​ ​ ​ December 31, 2020 ​ evaluated ​ evaluated ​ ​ ​ evaluated ​ evaluated ​ ​ ​ (dollars in thousands) for impairment for impairment Total for impairment for impairment Total ​ Commercial mortgage ​ $ — ​ 7,451 ​ 7,451 ​ $ 1,606 ​ 483,497 ​ 485,103 ​ Home equity lines and loans ​ ​ 9 ​ 425 ​ 434 ​ ​ 921 ​ 64,066 ​ 64,987 ​ Residential mortgage ​ ​ 73 ​ 312 ​ 385 ​ ​ 1,817 ​ 38,455 ​ 40,272 ​ Construction ​ ​ — ​ 2,421 ​ 2,421 ​ ​ 1,206 ​ 139,040 ​ 140,246 ​ Commercial and industrial ​ ​ 1,563 ​ 3,868 ​ 5,431 ​ ​ 4,645 ​ 257,105 ​ 261,750 ​ Small business loans ​ ​ — ​ 1,259 ​ 1,259 ​ ​ 185 ​ 49,357 ​ 49,542 ​ Paycheck Protection Program loans ​ ​ — ​ — ​ — ​ ​ — ​ 203,543 ​ 203,543 (2) Main Street Lending Program ​ ​ — ​ — ​ — ​ ​ — ​ 580 ​ 580 (2) Consumer ​ ​ — ​ 4 ​ 4 ​ ​ — ​ 511 ​ 511 ​ Leases, net ​ ​ — ​ 382 ​ 382 ​ ​ — ​ 31,040 ​ 31,040 ​ Total ​ $ 1,645 ​ 16,122 ​ 17,767 ​ $ 10,380 ​ 1,267,194 ​ 1,277,574 (1) (1) Excludes deferred fees and loans carried at fair value. (2) PPP and MSLP loans are not reserved against as they are 100 % guaranteed. ​ Loans and Leases by Credit Ratings As part of the process of determining the Allowance to the different segments of the loan and lease portfolio, Management considers certain credit quality indicators. For the commercial mortgage, construction and commercial and industrial loan segments, periodic reviews of the individual loans are performed by Management. The results of these reviews are reflected in the risk grade assigned to each loan. These internally assigned grades are as follows: ● Pass – Loans considered to be satisfactory with no indications of deterioration. 74 Table of Contents ● Special mention – Loans classified as special mention have a potential weakness that deserves Management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. ● Substandard – Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. ● Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loan balances classified as doubtful have been reduced by partial charge-offs and are carried at their net realizable values. The following table details the carrying value of loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of December 31, 2021 and 2020, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Special ​ ​ ​ (dollars in thousands) ​ Pass ​ mention ​ Substandard ​ Doubtful ​ Total Commercial mortgage ​ $ 481,551 ​ 29,452 ​ 5,925 ​ — ​ 516,928 Home equity lines and loans ​ ​ 50,908 ​ — ​ 1,391 ​ — ​ 52,299 Construction ​ ​ 151,608 ​ 9,297 ​ — ​ — ​ 160,905 Commercial and industrial ​ ​ 236,298 ​ 14,603 ​ 42,870 ​ — ​ 293,771 Small business loans ​ ​ 112,096 ​ — ​ 2,062 ​ — ​ 114,158 Paycheck Protection Program loans ​ ​ 90,194 ​ — ​ — ​ — ​ 90,194 Main Street Lending Program loans ​ ​ 597 ​ — ​ — ​ — ​ 597 Total ​ $ 1,123,252 ​ 53,352 ​ 52,248 ​ — ​ 1,228,852 ​ Commercial and industrial loans classified as substandard totaled $ 42.9 million as of December 31, 2021, an increase of $ 33.9 million, from $ 9.0 million as of December 31, 2020. The increase was driven by the $ 13.8 million commercial loan relationship in the advertising industry that became a non-performing loan relationship late in 2021, discussed above. The remaining $ 20.1 million of increase year-over-year was comprised of 18 different loan relationships with no specific industry concentration. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ Special ​ ​ ​ (dollars in thousands) ​ Pass ​ mention ​ Substandard ​ Doubtful ​ Total Commercial mortgage ​ $ 449,545 ​ 32,059 ​ 3,499 ​ — ​ 485,103 Home equity lines and loans ​ ​ 63,923 ​ — ​ 1,064 ​ — ​ 64,987 Construction ​ ​ 132,286 ​ 7,960 ​ — ​ — ​ 140,246 Commercial and industrial ​ ​ 227,349 ​ 21,721 ​ 9,000 ​ 3,680 ​ 261,750 Small business loans ​ ​ 46,789 ​ — ​ 2,753 ​ — ​ 49,542 Paycheck Protection Program loans ​ ​ 203,543 ​ — ​ — ​ — ​ 203,543 Main Street Lending Program loans ​ ​ 580 ​ — ​ — ​ — ​ 580 Total ​ $ 1,124,015 ​ 61,740 ​ 16,316 ​ 3,680 ​ 1,205,751 ​ In addition to credit quality indicators as shown in the above tables, Allowance allocations for residential mortgages, consumer loans and leases are also applied based on their performance status as December 31, 2021 and 2020, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ December 31, 2020 (dollars in thousands) Performing Nonperforming Total Performing Nonperforming Total Residential mortgage ​ $ 48,820 ​ 1,797 ​ 50,617 ​ $ 38,457 ​ 1,815 ​ 40,272 Consumer ​ ​ 419 ​ — ​ 419 ​ ​ 511 ​ — ​ 511 Leases, net ​ ​ 88,030 ​ 212 ​ 88,242 ​ ​ 31,040 ​ — ​ 31,040 Total ​ $ 137,269 ​ 2,009 ​ 139,278 ​ $ 70,008 ​ 1,815 ​ 71,823 ​ 75 Table of Contents There were four nonperforming residential mortgage loans at December 31, 2021 and five at December 31, 2020 with a combined outstanding principal balance of $ 601 thousand and $ 910 thousand, respectively, which were carried at fair value and not included in the table above. No TDR’s performing according to modified terms are included in performing residential mortgages above for the twelve months ended December 31, 2021 and 2020, respectively. Impaired Loans The following tables detail the recorded investment and principal balance of impaired loans by portfolio segment, their related Allowance and interest income recognized for the periods. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2021 ​ As of December 31, 2020 ​ ​ Recorded ​ Principal ​ Related ​ Recorded ​ Principal ​ Related (dollars in thousands) investment balance allowance investment balance allowance Impaired loans with related allowance: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 17,147 ​ 17,310 ​ 2,900 ​ 3,860 ​ 3,902 ​ 1,563 Small business loans ​ ​ 666 ​ 666 ​ 376 ​ — ​ — ​ — Home equity lines and loans ​ ​ — ​ — ​ — ​ 95 ​ 105 ​ 9 Residential mortgage ​ ​ — ​ — ​ — ​ 689 ​ 689 ​ 73 Total ​ $ 17,813 ​ 17,976 ​ 3,276 ​ 4,644 ​ 4,696 ​ 1,645 Impaired loans without related allowance: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial mortgage ​ $ 3,556 ​ 3,559 ​ — ​ 1,606 ​ 1,642 ​ — Commercial and industrial ​ ​ 214 ​ 269 ​ — ​ 785 ​ 862 ​ — Small business loans ​ ​ 126 ​ 126 ​ — ​ 185 ​ 185 ​ — Home equity lines and loans ​ ​ 905 ​ 935 ​ — ​ 826 ​ 839 ​ — Residential mortgage ​ ​ 1,797 ​ 1,797 ​ — ​ 1,128 ​ 1,128 ​ — Construction ​ ​ 1,206 ​ 1,206 ​ — ​ 1,206 ​ 1,206 ​ — Leases ​ ​ 212 ​ 212 ​ — ​ — ​ — ​ — Total ​ ​ 8,016 ​ 8,104 ​ — ​ 5,736 ​ 5,862 ​ — Grand Total ​ $ 25,829 ​ 26,080 ​ 3,276 ​ 10,380 ​ 10,558 ​ 1,645 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Year Ended ​ ​ ​ December 31, 2021 ​ December 31, 2020 ​ ​ ​ Average ​ Interest ​ Average ​ Interest ​ ​ ​ recorded ​ income ​ recorded ​ income (dollars in thousands) ​ ​ investment ​ recognized ​ investment ​ recognized Impaired loans with related allowance: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ 17,349 ​ 15 ​ 3,907 ​ 31 Small business loans ​ ​ 887 ​ — ​ — ​ — Home equity lines and loans ​ ​ — ​ — ​ 102 ​ — Residential mortgage ​ ​ — ​ — ​ 689 ​ — Total ​ $ 18,236 ​ 15 ​ 4,698 ​ 31 Impaired loans without related allowance: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial mortgage ​ $ 3,578 ​ 43 ​ 1,697 ​ 86 Commercial and industrial ​ ​ 239 ​ 24 ​ 832 ​ 19 Small business loans ​ ​ 154 ​ 14 ​ 213 ​ 14 Home equity lines and loans ​ ​ 914 ​ — ​ 831 ​ — Residential mortgage ​ ​ 1,807 ​ 11 ​ 1,131 ​ 133 Construction ​ ​ 1,206 ​ 62 ​ 1,208 ​ 45 Leases ​ ​ 240 ​ — ​ — ​ — Total ​ $ 8,138 ​ 154 ​ 5,912 ​ 297 Grand Total ​ $ 26,374 ​ 169 ​ 10,610 ​ 328 ​ ​ 76 Table of Contents Troubled Debt Restructuring (“TDR’s”) The restructuring of a loan is considered a TDR if both of the following conditions are met: (i) the borrower is experiencing financial difficulties, and (ii) the creditor has granted a concession. The most common concessions granted include one or more modifications to the terms of the debt, such as (a) a reduction in the interest rate for the remaining life of the debt, (b) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (c) a temporary period of interest-only payments, (d) a reduction in the contractual payment amount for either a short period or remaining term of the loan, and (e) for leases, a reduced lease payment. A less common concession granted is the forgiveness of a portion of the principal. The determination of whether a borrower is experiencing financial difficulties takes into account not only the current financial condition of the borrower, but also the potential financial condition of the borrower, were a concession not granted. The determination of whether a concession has been granted is very subjective in nature. For example, simply extending the term of a loan at its original interest rate or even at a higher interest rate could be interpreted as a concession unless the borrower could readily obtain similar credit terms from a different lender. The balance of TDRs at December 31, 2021 and 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, (dollars in thousands) 2021 2020 TDRs included in nonperforming loans and leases ​ $ 361 244 TDRs in compliance with modified terms ​ 3,446 3,362 Total TDRs ​ $ 3,807 3,606 ​ There were 2 loan and lease modifications granted during the year ended December 31, 2021 on commercial mortgages and no loan and lease modifications granted during the year ended December 31, 2020 that were categorized as TDRs. No loan and lease modifications granted during the twelve months ended December 31, 2021 and 2020 subsequently defaulted during the same time period. ​ ​ COVID-19 Assistance to Customers ​ During 2021 and 2020 we assisted customers that were impacted by the COVID-19 pandemic through 2 distinct and impactful ways: the issuance of PPP loans and short-term loan deferrals on a limited basis, in accordance with Section 4103 of the CARES Act. ​ Throughout the life of the PPP loan program we helped borrowers with the issuance of 1,451 such loans totaling over $ 370 million. As of March 10, 2022, approximately $ 314 million, or 1,224 loans, had been paid back. Out of the remaining $ 56.3 million that have yet to be forgiven by the SBA, $ 31.7 million have submitted for forgiveness and are awaiting a response from the SBA, while the remaining $ 24.6 million has not yet submitted a request for forgiveness. We also provided COVID-19 loan deferrals, typically in 3 month increments, to loan customers that amounted to $ 2.4 million as of December 31, 2021, down $ 21.8 million, or 90 %, from the $ 24.2 million as of December 31, 2020 as detailed by industry concentration of the borrower in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, (dollars in thousands) 2021 2020 Hotels ​ $ — 11,832 C&I building construction ​ ​ — ​ 10,103 Other ​ 2,424 2,243 Total ​ $ 2,424 24,178 ​ As these modifications related to the COVID-19 pandemic and qualify under the provisions of either Section 4013 of the CARES Act or Interagency Guidance, they are not considered TDR’s. Management continues to monitor these deferrals and has adequately considered these credits in the December 31, 2021 allowance for loan losses balance. These modified 77 Table of Contents loans are classified as performing and are not considered past due. Loans are to be placed on non-accrual when it becomes apparent that payment of interest or recovery of all principal is questionable, and the COVID-19 related modification is no longer considered short-term or the modification is deemed ineffective. As of January 31, 2022 the $ 2.4 million of deferrals that had existed as of December 31, 2021 expired without further deferral or modification given to these borrowers. ​ ​ (7) Bank Premises and Equipment The components of premises and equipment at December 31, 2021 and 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) 2021 2020 Building ​ $ 4,141 ​ 4,141 Leasehold improvements ​ ​ 3,347 ​ 3,202 Land ​ ​ 600 ​ 600 Land Improvements ​ ​ 218 ​ 218 Furniture, fixtures and equipment ​ ​ 3,229 ​ 2,700 Computer equipment and data processing software ​ ​ 7,971 ​ 7,034 Construction in process ​ ​ 3,763 ​ — Less: accumulated depreciation ​ ​ ( 11,463 ) ​ ( 10,118 ) Total ​ $ 11,806 ​ 7,777 ​ Total depreciation expense for the years ended December 31, 2021 and 2020 totaled $ 1.3 million and $ 1.6 million, respectively. In November 2021 Meridian purchased a building for $ 3.8 million that will serve as the future headquarters of our bank operations department, as well as other departments. As of December 31, 2021 this building was classified as construction in process as it has not yet been put into service, and therefore has not started to be depreciated. (8) Deposits The components of deposits at December 31, 2021 and 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) 2021 2020 Demand, non-interest bearing ​ $ 274,528 ​ 203,843 Demand, interest bearing ​ ​ 268,248 ​ 206,573 Savings accounts ​ ​ 45,038 ​ 8,056 Money market accounts ​ ​ 652,590 ​ 564,566 Time deposits ​ ​ 206,009 ​ 258,297 Total ​ $ 1,446,413 ​ 1,241,335 ​ The aggregate amount of time deposits in denominations over $250 thousand were $ 179.8 million and $ 233.1 milllion as of December 31, 2021 and 2020, respectively. ​ At December 31, 2021, the scheduled maturities of time deposits are as follows (in thousands): ​ ​ ​ ​ ​ ​ 2022 ​ ​ $ 126,719 2023 ​ ​ ​ ​ 18,106 2024 ​ ​ ​ ​ 4,071 2025 ​ ​ ​ ​ 24,271 2026 ​ ​ ​ ​ 32,842 Total ​ ​ ​ $ 206,009 ​ ​ 78 Table of Contents (9) Short-Term Borrowings and Long-Term Debt The Corporation’s short-term borrowings generally consist of federal funds purchased and short-term borrowings extended under agreements with the Federal Home Loan Bank of Pittsburgh (“FHLB”). The Corporation has two unsecured Federal Funds borrowing facilities with correspondent banks: one of $ 24 million and one of $ 15 million. Federal funds purchased generally represent one-day borrowings. The Corporation had no Federal Funds purchased at December 31, 2021 and December 31, 2020. The Corporation also has a facility with the Federal Reserve discount window of $ 3.5 million. This facility is fully secured by investment securities. There were no borrowings under this at December 31, 2021 and $ 10 million at December 31, 2020. Short-term borrowings at December 31, 2021 and December 31, 2020 consisted of the following notes: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of ​ ​ Maturity ​ Interest ​ December 31, ​ December 31, (dollars in thousands) ​ date rate 2021 2020 Open Repo Plus Weekly ​ 05/31/2022 ​ 0.33 % $ 36,458 ​ 60,416 Mid-term Repo-fixed ​ 09/12/2022 ​ 0.23 ​ ​ 4,886 ​ — Federal Reserve Discount Window ​ 03/31/2021 ​ 0.25 ​ ​ — ​ 10,000 Mid-term Repo-fixed ​ 01/13/2021 ​ 0.36 ​ ​ — ​ 4,605 Mid-term Repo-fixed ​ 06/10/2021 ​ 0.10 ​ ​ — ​ 6,376 Mid-term Repo-fixed ​ 09/10/2021 ​ 0.11 ​ ​ — ​ 10,000 Mid-term Repo-fixed ​ 12/10/2021 ​ 0.16 ​ ​ — ​ 10,000 Mid-term Repo-fixed ​ 01/27/2021 ​ 0.23 ​ ​ — ​ 5,465 Total ​ ​ ​ ​ ​ $ 41,344 ​ 106,862 ​ As part of the CARES Act, the FRB of Philadelphia offered secured discounted borrowings to banks who originated PPP loans through the Paycheck Protection Program Liquidity Facility or PPPLF program. Advances from this facility are secured 100 % by the aggregate face value of pools comprised of loans with common maturity dates. PPPLF advances mature concurrently with the loans in a given pool. At December, 2021, the Corporation had no of PPPLF advances with the FRB of Philadelphia. Advances made on the PPPLF were ended by the FRB on July 30, 2021. Long-term debt at December 31, 2021 and December 31, 2020 consisted of the following fixed rate notes with the FHLB of Pittsburgh: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of ​ ​ Maturity ​ Interest ​ December 31, ​ December 31, (dollars in thousands) date rate 2021 2020 PPPLF Advances ​ 2022 ​ 0.35 % $ — ​ 153,269 Mid-term Repo-fixed ​ 06/29/2022 ​ 0.32 ​ ​ — ​ 7,392 Mid-term Repo-fixed ​ 09/12/2022 ​ 0.23 ​ ​ — ​ 4,885 Total ​ ` ​ ​ ​ $ — ​ 165,546 ​ The FHLB of Pittsburgh has also issued $ 131.5 million of letters of credit to the Corporation for the benefit of the Corporation’s public deposit funds and loan customers. These letters of credit expire throughout 2021. The Corporation has a maximum borrowing capacity with the FHLB of $ 505.4 million as of December 31, 2021 and $ 638.9 million as of December 31, 2020. All advances and letters of credit from the FHLB are secured by a blanket lien on non-pledged, mortgage-related loans and securities as part of the Corporation’s borrowing agreement with the FHLB. ​ 79 Table of Contents (10) Subordinated Debentures In December 2008, the Bank issued $ 550 thousand of mandatory convertible unsecured subordinated debentures (2008 Debentures). The 2008 Debentures have a maturity date of December 18, 2023 and interest on the 2008 Debentures is paid quarterly at 6 %. The 2008 Debentures are convertible into 1 share of the Corporation’s common stock for every $15 in principal amount of the 2008 Debentures automatically on such date, if any, as accumulated losses of the Bank first exceed the sum of the retained earnings and capital surplus accounts of the Bank. The 2008 Debentures began to repay principal in eight equal installments which commenced in December of 2016. As of December 31, 2021, $ 113 thousand of the 2008 Debentures remained outstanding, after pay downs of $ 56 thousand for 2021 and 2020 combined. In December 2011, the Bank issued $ 1.4 million of mandatory convertible unsecured subordinated debentures (2011 Debentures). The 2011 Debentures have a maturity date of December 31, 2026 and interest on the 2011 Debentures is paid quarterly at 6 %. The 2011 Debentures are convertible into 1 share of the Corporation’s common stock for every $17 in principal amount of the 2011 Debentures automatically on such date, if any, as accumulated losses of the Bank first exceed the sum of the retained earnings and capital surplus accounts of the Bank. The 2011 Debentures began to repay principal in eight equal installments which commenced in December of 2020. As of December 31, 2021, $ 578 thousand of the 2011 Debentures remained outstanding, after pay downs of $ 116 thousand each during 2021 and 2020. In April 2013, the Bank issued $ 1.4 million of mandatory convertible unsecured subordinated debentures (2013 Debentures). The 2013 Debentures have a maturity date of December 31, 2028 and interest on the 2013 Debentures is paid quarterly at 6.5 %. The 2013 Debentures are convertible into 1 share of the Corporation’s common stock for every $22 in principal amount of the 2013 Debentures automatically on such date, if any, as accumulated losses of the Bank first exceed the sum of the retained earnings and capital surplus accounts of the Bank. As of December 31, 2021, $ 761 thousand of the 2013 Debentures remained outstanding, after pay downs of $ 109 thousand during 2021 and no payments during 2020. In June, August and September 2014, the Bank issued $ 3 million, $ 100 thousand, and $ 7 million of non-convertible unsecured subordinated debentures (2014 Debentures). The 2014 Debentures have maturity dates of June 30, 2024, June 30, 2024 and September 30, 2024, respectively. Interest on all three tranches of the 2014 Debentures is paid quarterly at 7.25 %. During 2020, the Corporation redeemed the remaining $ 7.1 million of 2014 Debentures and therefore there was $ 0 outstanding as of December 31, 2021 and 2020. Upon formation of the bank holding company, the Corporation assumed the 2008, 2011, 2013 and 2014 Debentures that were originally issued by the Bank. During December 2019, the Corporation issued $ 40 million of fixed-to-floating rate non-convertible unsecured subordinated debentures (2019 Debentures). The 2019 Debentures have a maturity date of December 30, 2029 and interest on the 2019 Debentures is paid semiannually at 5.375 %. The debt issuance costs are included as a direct deduction from the debt liability and these costs are amortized to interest expense using the effective yield method. During 2021 and 2020 the Corporation made interest payments of $ 2.2 million and $ 2.2 million on the 2019 Debentures, respectively. The 2008, 2011, and 2013 Debentures are includable as Tier 2 capital for determining the Bank’s compliance with regulatory capital requirements (see footnote 19). The 2019 Debentures are included as Tier 2 capital for the Corporation and as Tier 1 capital for the Bank. 80 Table of Contents (11) Servicing Assets The Corporation sells certain residential mortgage loans and the guaranteed portion of certain SBA loans to third parties and retains servicing rights and receives servicing fees. All such transfers are accounted for as sales. When the Corporation sells a residential mortgage loan, it does not retain any portion of that loan and its continuing involvement in such transfers is limited to certain servicing responsibilities. While the Corporation may retain a portion of certain sold SBA loans, its continuing involvement in the portion of the loan that was sold is limited to certain servicing responsibilities. When the contractual servicing fees on loans sold with servicing retained are expected to be more than adequate compensation to a servicer for performing the servicing, a capitalized servicing asset is recognized. The Corporation accounts for the transfers and servicing of financial assets in accordance with ASC 860, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. Residential Mortgage Loans MSRs are amortized to non-interest expense in proportion to, and over the period of, the estimated future net servicing life of the underlying assets. MSR’s are evaluated quarterly for impairment based upon the fair value of the rights as compared to their amortized cost. Impairment is recognized on the income statement to the extent the fair value is less than the capitalized amount of the MSR. The Corporation serviced $ 1.0 billion and $ 506.0 million of residential mortgage loans as of December 31, 2021 and 2020, respectively. During the twelve months ended December 31, 2021, the Corporation recognized servicing fee income of $ 2.0 million, compared to $ 498 thousand during the twelve months ended December 31, 2020, respectively. Changes in the MSR balance are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (dollars in thousands) ​ 2021 2020 Balance at beginning of the period ​ $ 4,647 ​ 446 Servicing rights capitalized ​ ​ 6,769 ​ 4,856 Amortization of servicing rights ​ ​ ( 1,087 ) ​ ( 318 ) Change in valuation allowance ​ ​ 427 ​ ( 337 ) Balance at end of the period ​ $ 10,756 ​ 4,647 ​ Activity in the valuation allowance for MSR’s was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (dollars in thousands) ​ 2021 2020 Valuation allowance, beginning of period ​ $ ( 435 ) ​ ( 98 ) Impairment ​ ​ — ​ ( 337 ) Recovery ​ ​ 427 ​ — Valuation allowance, end of period ​ $ ( 8 ) ​ ( 435 ) ​ The Corporation uses assumptions and estimates in determining the fair value of MSRs. These assumptions include prepayment speeds and discount rates. The assumptions used in the valuation were based on input from buyers, brokers and other qualified personnel, as well as market knowledge. At December 31, 2021, the key assumptions used to determine the fair value of the Corporation’s MSRs included a lifetime constant prepayment rate equal to 7.23 % and a discount rate equal to 9.00 %. At December 31, 2020, the key assumptions used to determine the fair value of the Corporation’s MSRs included a lifetime constant prepayment rate equal to 9.39 % and a discount rate equal to 9.00 %. 81 Table of Contents At December 31, 2021 and 2020, the sensitivity of the current fair value of the residential mortgage servicing rights to immediate 10% and 20% unfavorable changes in key economic assumptions are included in the following table. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ December 31, 2021 December 31, 2020 Fair value of residential mortgage servicing rights ​ $ 11,241 ​ $ 4,647 ​ ​ ​ ​ ​ ​ ​ Weighted average life (months) ​ ​ 11.0 ​ ​ 5.0 ​ ​ ​ ​ ​ ​ ​ Prepayment speed ​ ​ 7.23 % ​ ​ 9.39 % Impact on fair value: ​ ​ ​ ​ ​ ​ 10% adverse change ​ $ ( 376 ) ​ $ ( 183 ) 20% adverse change ​ ​ ( 731 ) ​ ​ ( 354 ) ​ ​ ​ ​ ​ ​ ​ Discount rate ​ ​ 9.00 % ​ ​ 9.00 % Impact on fair value: ​ ​ ​ ​ ​ ​ 10% adverse change ​ $ ( 436 ) ​ $ ( 168 ) 20% adverse change ​ ​ ( 840 ) ​ ​ ( 329 ) ​ The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or counteract the effect of the change. SBA Loans SBA loan servicing assets are amortized to non-interest expense in proportion to, and over the period of, the estimated future net servicing life of the underlying assets. SBA loan servicing assets are evaluated quarterly for impairment based upon the fair value of the rights as compared to their amortized cost. Impairment is recognized on the income statement to the extent the fair value is less than the capitalized amount of the SBA loan servicing asset. The Corporation serviced $ 115.1 million of SBA loans, as of December 31, 2021 and $ 55.9 million as of December 31, 2020. Changes in the SBA loan servicing asset balance are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (dollars in thousands) ​ 2021 2020 Balance at beginning of the period ​ $ 970 ​ 337 Servicing rights capitalized ​ ​ 1,488 ​ 794 Amortization of servicing rights ​ ​ ( 392 ) ​ ( 148 ) Change in valuation allowance ​ ​ ( 57 ) ​ ( 13 ) Balance at end of the period ​ $ 2,009 ​ 970 ​ Activity in the valuation allowance for SBA loan servicing assets was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (dollars in thousands) ​ 2021 2020 Valuation allowance, beginning of period ​ $ ( 39 ) ​ ( 26 ) Impairment ​ ​ ( 57 ) ​ ( 13 ) Recovery ​ ​ — ​ — Valuation allowance, end of period ​ $ ( 96 ) ​ ( 39 ) ​ 82 Table of Contents The Corporation uses assumptions and estimates in determining the fair value of SBA loan servicing rights. These assumptions include prepayment speeds, discount rates, and other assumptions. The assumptions used in the valuation were based on input from buyers, brokers and other qualified personnel, as well as market knowledge. At December 31, 2021, the key assumptions used to determine the fair value of the Corporation’s SBA loan servicing rights included a lifetime constant prepayment rate equal to 12.38 %, and a discount rate equal to 9.01 %. At December 31, 2020, the key assumptions used to determine the fair value of the Corporation’s SBA loan servicing rights included a lifetime constant prepayment rate equal to 12.73 %, and a discount rate equal to 8.33 %. At December 31, 2021 and 2020, the sensitivity of the current fair value of the SBA loan servicing rights to immediate 10% and 20% unfavorable changes in key economic assumptions are included in the following table. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ December 31, 2021 December 31, 2020 Fair value of SBA loan servicing rights ​ $ 2,107 ​ $ 1,010 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average life (years) ​ ​ 3.8 ​ ​ 3.7 ​ ​ ​ ​ ​ ​ ​ ​ ​ Prepayment speed ​ ​ 12.38 % ​ ​ 12.73 % ​ Impact on fair value: ​ ​ ​ ​ ​ ​ ​ 10% adverse change ​ $ ( 69 ) ​ $ ( 37 ) ​ 20% adverse change ​ ​ ( 132 ) ​ ​ ( 71 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Discount rate ​ ​ 9.01 % ​ ​ 8.33 % ​ Impact on fair value: ​ ​ ​ ​ ​ ​ ​ 10% adverse change ​ $ ( 54 ) ​ $ ( 25 ) ​ 20% adverse change ​ ​ ( 106 ) ​ ​ ( 49 ) ​ ​ The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the SBA servicing rights is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or counteract the effect of the change. ​ (12) Lease Commitments The Corporation leases twenty-two offices from third parties under operating lease agreements expiring at different periods through March 2031. Under all current agreements, the Corporation is responsible for its portion of real estate taxes, utilities, insurance, and repairs and maintenance. Total rental expense for the years ended December 31, 2021 and 2020 was $ 2.2 million and $ 1.9 million, respectively. Future minimum lease payments by year and in the aggregate, under these lease agreements, are as follows: ​ ​ ​ ​ ​ Future minimum lease payments ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ ​ 2022 ​ $ 2,179 2023 ​ ​ 1,874 2024 ​ ​ 1,737 2025 ​ ​ 1,456 2026 ​ ​ 1,436 Thereafter ​ ​ 3,134 ​ ​ $ 11,816 ​ ​ ​ ​ 83 Table of Contents ​ ​ ​ ​ Refer to footnote 23 for discussion of ASU 2016-02 Leases, which the Corporation adopted as of January 1, 2022. ​ ​ ​ ​ ​ ​ ​ (13) Stock-Based Compensation The Corporation has issued stock options under the Meridian Bank 2004 Stock Option Plan (2004 Plan). The 2004 Plan authorized the Board of Directors to grant options up to an aggregate of 446,091 shares, as adjusted for the 5 % stock dividends in 2012, 2014 and 2016 to officers, other employees and directors of the Corporation. No additional shares are available for future grants. The shares granted under the 2004 Plan to directors are nonqualified options. The shares granted under the 2004 Plan to officers and other employees are incentive stock options, and are subject to the limitations under Section 422 of the Internal Revenue Code. The Meridian Bank 2016 Equity Incentive Plan (2016 Plan) was amended on May 24, 2019 to authorize the Board of Directors to grant up to an aggregate of 686,900 stock awards that can take different forms. A total of 438,750 stock options and 43,208 shares of restricted stock have been granted under the 2016 Plan through December 31, 2021. As of December 31, 2021 there were 204,942 stock awards remaining to be issued. Options granted under the 2016 Plan to directors are nonqualified options, while options granted to officers and other employees are incentive stock options, and are subject to the limitations under Section 422 of the Internal Revenue Code. Stock Options Stock-based compensation cost is measured at the grant date, based on the fair value of the award and is recognized as an expense over the vesting period. The fair value of stock option grants is determined using the Black-Scholes pricing model. The assumptions necessary for the calculation of the fair value are expected life of options, annual volatility of stock price, risk-free interest rate and annual dividend yield. Stock option awards granted under the 2016 Plan have a term that does not exceed ten years and vest according to each award’s specific vesting schedule. Currently, all option awards granted to date vest 25 % upon grant and become fully exercisable after three years of service from the grant date. The following table provides information about stock options outstanding as of December 31, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Weighted ​ ​ ​ ​ average ​ average ​ ​ ​ ​ exercise ​ grant date ​ Shares price fair value Outstanding at December 31, 2019 ​ 346,381 ​ $ 16.13 ​ $ 4.55 Exercised ​ ( 14,673 ) ​ ​ 13.64 ​ ​ 3.74 Granted ​ 94,650 ​ ​ 17.70 ​ ​ 5.07 Forfeited ​ ( 25,631 ) ​ ​ 17.03 ​ ​ 4.73 Outstanding at December 31, 2020 ​ 400,727 ​ ​ 16.53 ​ ​ 4.69 Exercised ​ ( 77,265 ) ​ ​ 13.68 ​ ​ 4.35 Granted ​ 142,650 ​ ​ 27.50 ​ ​ 9.47 Forfeited ​ ( 4,148 ) ​ ​ 18.63 ​ ​ 6.57 Outstanding at December 31, 2021 ​ 461,964 ​ ​ 20.38 ​ ​ 6.21 Exercisable at December 31, 2021 ​ 291,832 ​ ​ 18.40 ​ ​ 5.27 Nonvested at December 31, 2021 ​ 170,132 ​ $ 23.77 ​ $ 7.81 ​ The weighted average remaining contractual life of the outstanding stock options at December 31, 2021 is 7.6 years. At December 31, 2021 the range of exercise prices is $ 11.79 to $ 31.00 . The aggregate intrinsic value of options outstanding and exercisable was $ 7.6 million and $ 5.4 million, respectively, as of December 31, 2021. 84 Table of Contents The fair value of each option granted in 2021 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0.0 %, risk-free interest rate of between 1.02 % and 1.54 %, expected life of 5.75 years, and expected volatility of between 39.25 % and 40.97 % based on an average of the Corporation’s share price since going public. The weighted average fair value of options granted in 2021 was $ 8.14 to $ 9.57 per share. The fair value of each option granted in 2020 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0.0 %, risk-free interest rate of between 0.47 % and 1.68 %, expected life of 5.75 years, and expected volatility of 21.81 % and 39.65 % based on an average of the Corporation’s share price since going public. The weighted average fair value of options granted in 2020 was $ 4.47 to $ 5.87 per share. Total stock option compensation cost for the twelve months ended December 31, 2021 and December 31, 2020 was $ 803 thousand and $ 451 thousand, respectively. During the twelve months ended December 31, 2021 and December 31, 2020, the Corporation received $ 1.0 million and $ 200 thousand from the exercise of stock options, respectively. There were no tax benefits recognized related to stock compensation cost for the twelve months ended December 31, 2021 and 2020. In accordance with ASU 2016-09 – Compensation – Stock Compensation (ASU 2016-09), forfeitures are recognized as they occur instead of applying an estimated forfeiture rate to each grant. For purposes of the determination of stock-based compensation expense for the year ended December 31, 2021, we recognized the forfeiture of 4,148 of shares of stock options that were previously granted to officers and other employees. As of December 31, 2021, there was $ 1.3 million of unrecognized compensation cost related to nonvested stock options. This cost will be recognized over a weighted average period of 1.24 years. During 2021, the intrinsic value of options exercised was $ 1.2 million. Restricted Stock The restricted stock granted under the 2016 Plan vest according to each award’s specific vesting schedule. All awards granted in 2021 vest 100 % one year from the grant date, while all awards granted in 2020 vest 50 % one year from the grant date and the remaining 50 % on the second anniversary of the grant date. The grant date fair value of the restricted stock is based on the closing price on the date prior to the grant. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Weighted ​ ​ ​ ​ average ​ average ​ ​ ​ ​ exercise ​ grant date ​ Shares price fair value Outstanding at December 31, 2019 ​ — ​ $ — ​ $ — Granted ​ 33,208 ​ ​ 14.00 ​ ​ 14.00 Outstanding at December 31, 2020 ​ 33,208 ​ ​ 14.00 ​ ​ 14.00 Granted ​ 10,000 ​ ​ 26.36 ​ ​ 26.36 Vested ​ ( 16,603 ) ​ ​ 14.00 ​ ​ 14.00 Outstanding at December 31, 2021 ​ 26,605 ​ ​ 18.65 ​ ​ 18.65 Nonvested at December 31, 2021 ​ 26,605 ​ $ 18.65 ​ $ 18.65 ​ Compensation expense for restricted stock is measured based on the market price of the stock on the day prior to the grant date and is recognized on a straight-line basis over the vesting period. For the years ended December 31, 2021 and 2020, the Corporation recognized $ 460 thousand and $ 80 thousand of expense related to the restricted stock, respectively. As of December 31, 2021, there was $ 189 thousand in unrecognized compensation costs related to restricted stock. This cost will be recognized over a weighted average period of 0.23 years. ​ 85 Table of Contents (14) Income Taxes The components of the federal and state income tax expense for the years ended December 31, 2021 and 2020 were: ​ ​ ​ ​ ​ ​ (dollars in thousands) 2021 2020 Federal: ​ ​ ​ ​ Current $ 10,022 ​ 5,703 Deferred ​ ( 717 ) ​ 1,242 Total federal income tax expense ​ 9,305 ​ 6,945 State: ​ ​ ​ ​ Current ​ 1,463 ​ 1,141 Deferred ​ ( 51 ) ​ 12 Total state income tax expense ​ 1,412 ​ 1,153 Total income tax expense $ 10,717 ​ 8,098 ​ A reconciliation of the statutory income tax at 21 % to the income tax expense included in the statement of operations is as follows for 2021 and 2020, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) ​ 2021 2020 ​ Federal income tax at statutory rate $ 9,733 21.0 % 7,252 21.0 % State tax expense, net of federal benefit ​ 1,116 ​ 2.4 ​ 911 ​ 2.6 ​ Tax exempt interest ​ ( 248 ) ​ ( 0.5 ) ​ ( 153 ) ​ ( 0.4 ) ​ Bank owned life insurance ​ ( 77 ) ​ ( 0.2 ) ​ ( 59 ) ​ ( 0.2 ) ​ Incentive stock options ​ 81 ​ 0.2 ​ 74 ​ 0.2 ​ ESOP ​ 41 ​ 0.1 ​ — ​ — ​ Other ​ 71 ​ 0.1 ​ 73 ​ 0.2 ​ Effective income tax rate $ 10,717 ​ 23.1 % 8,098 ​ 23.4 % ​ The components of the net deferred tax asset at December 31, 2021 and 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) 2021 2020 Deferred tax assets: ​ ​ ​ ​ ​ Allowance for loan and lease losses ​ $ 4,345 ​ 4,230 Intangibles ​ ​ — ​ 30 Accrued incentive compensation ​ ​ 287 ​ — Accrued retirement ​ ​ 874 ​ 528 Deferred rent ​ ​ 141 ​ 180 Mortgage repurchase reserve ​ ​ 738 ​ 641 Other ​ ​ 183 ​ 122 Total deferred tax asset ​ ​ 6,568 ​ 5,731 Deferred tax liabilities: ​ ​ ​ ​ ​ Property and equipment ​ ​ ( 535 ) ​ ( 377 ) Loan servicing rights ​ ​ ( 2,957 ) ​ ( 1,337 ) Intangibles ​ ​ ( 15 ) ​ — Mortgage pipeline fair-value adjustment ​ ​ ( 308 ) ​ ( 1,156 ) Hedge instrument fair-value adjustment ​ ​ ( 190 ) ​ ( 1,252 ) Unrealized gain on available for sale securities ​ ​ ( 213 ) ​ ( 797 ) Prepaid expenses ​ ​ ( 465 ) ​ ( 340 ) Deferred loan costs ​ ​ ( 471 ) ​ ( 406 ) Other ​ ​ ( 1 ) ​ ( 4 ) Total deferred tax liability ​ ​ ( 5,155 ) ​ ( 5,669 ) Net deferred tax asset ​ $ 1,413 ​ 62 ​ 86 Table of Contents The effective tax rates for the twelve-month periods ended December 31, 2021 and 2020 were 23.1 % and 23.4 % respectively. The decrease in rate from 23.4 % to 23.1 % between 2020 and 2021 was primarily related to the decrease in state income tax expense from Meridian’s mortgage division, specifically in Maryland. Under ASC 740, Income Taxes, the effect of income tax law changes on deferred taxes should be recognized as a component of income tax expense related to continuing operations in the period in which the law is enacted. This requirement applies not only to items initially recognized in continuing operations, but also to items initially recognized in other comprehensive income. The CARES Act, enacted in March 2020 grants potential tax relief to businesses, including corporate tax provisions that: temporarily allow for the carryback of certain net operating losses, increase interest expense deduction limitations, and allow accelerated depreciation deductions on certain fixed asset improvements. The tax relief under the CARES Act had no material impact to the Corporation’s Consolidated Financial Statements. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deferred tax assets. As of December 31, 2021, the Corporation had an investment in low income housing tax credits of $ 3.3 million on which it recognized tax credits of $ 161 thousand, amortization of $ 183 thousand and tax benefits from losses of $ 144 thousand during the year ended December 31, 2021. As of December 31, 2020, the Corporation had an investment in low income housing tax credits of $ 1.3 million on which it recognized tax credits of $ 161 thousand, amortization of $ 180 thousand and tax benefits from losses of $ 26 thousand during the year ended December 31, 2020. (15) Revenue from Contracts with Customers All of the Corporation’s revenue from contracts with customers in the scope of FASB ASU 2014-09 (Topic 606), “Revenue for Contracts with Customers” (ASC 606) is recognized within non-interest income. The following table presents the Corporation’s non-interest income by revenue stream and reportable segment for the years ended December 31, 2021 and 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ Year Ended December 31, 2020 (Dollars in thousands) Bank Wealth Mortgage Total Bank Wealth Mortgage Total Non-interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage banking income (1) ​ $ 1,097 ​ — ​ 74,835 ​ 75,932 ​ $ 1,632 ​ — ​ 74,829 ​ 76,461 Wealth management income ​ ​ — ​ 4,801 ​ — ​ 4,801 ​ ​ — ​ 3,854 ​ — ​ 3,854 SBA loan income (1) ​ ​ 6,898 ​ — ​ — ​ 6,898 ​ ​ 2,572 ​ — ​ — ​ 2,572 Net change in fair values (1) ​ ​ 43 ​ — ​ ( 7,881 ) ​ ( 7,838 ) ​ ​ ( 40 ) ​ — ​ 9,185 ​ 9,145 Net gain (loss) on hedging activity (1) ​ ​ — ​ — ​ 2,961 ​ 2,961 ​ ​ — ​ — ​ ( 9,400 ) ​ ( 9,400 ) Earnings on investment in life insurance (1) ​ ​ 365 ​ — ​ — ​ 365 ​ ​ 279 ​ — ​ — ​ 279 Net gain on sale of investment securities available-for-sale (1) ​ ​ 435 ​ — ​ — ​ 435 ​ ​ 1,345 ​ — ​ — ​ 1,345 Dividends on FHLB stock (1) ​ ​ 191 ​ — ​ — ​ 191 ​ ​ 325 ​ — ​ — ​ 325 Service charges ​ ​ 128 ​ — ​ — ​ 128 ​ ​ 107 ​ — ​ — ​ 107 Other (2) ​ ​ 1,622 ​ 1 ​ 2,492 ​ 4,115 ​ ​ 1,468 ​ 14 ​ 748 ​ 2,230 Non-interest income ​ $ 10,779 ​ 4,802 ​ 72,407 ​ 87,988 ​ $ 7,688 ​ 3,868 ​ 75,362 ​ 86,918 (1) Not within the scope of ASC 606. (2) Within other non-interest income is $ 1.2 million and $ 925 thousand for the years ended December 31, 2021 and 2020, respectively, which are in the scope of ASC 606. These amounts include wire transfer fees, ATM/debit card commissions, and title fee income. ​ 87 Table of Contents A description of the Corporation’s primary revenue streams accounted for under ASC 606 follows: Wealth Management Income: The Corporation earns wealth management fee income from investment advisory services provided to individual and 401k customers. Fees that are determined based on the market value of the assets held in their accounts are generally billed quarterly, in advance, based on the market value of assets at the end of the previous billing period. Other related services that are based on a fixed fee schedule are recognized when the services are rendered. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e. the trade date. Included in other assets on the balance sheet is a receivable for wealth management fees that have been earned but not yet collected. Service Charges on Deposit Accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance. ​ (16) Transactions with Executive Officers, Directors and Principal Stockholders The Corporation has had, and may be expected to have in the future, banking transactions in the ordinary course of business with its executive officers, directors, principal stockholders, their immediate families and affiliated companies (commonly referred to as related parties). Loans receivable from related parties totaled $ 5.1 million and $ 3.3 million at December 31, 2021 and 2020, respectively. Advances, repayments, and the effect of changes in composition of related parties during 2021 totaled $ 2.8 million, $ 1.3 million, and $ 284 thousand, respectively. Advances, repayments, and the effect of changes in composition of related parties during 2020 totaled $ 4.9 million, $ 3.8 million, and $ 1.5 million, respectively. Deposits of related parties totaled $ 34.7 million and $ 25.6 million at December 31, 2021 and 2020, respectively. Subordinated debt held by related parties totaled $ 409 thousand and $ 485 thousand at December 31, 2021 and 2020, respectively. The Corporation paid legal fees of $ 22 thousand and $ 8 thousand to a law firm of a director for the years ended December 31, 2021 and 2020, respectively. (17) Financial Instruments with Off-Balance Sheet Risk, Commitments and Contingencies The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. A summary of the Corporation’s financial instrument commitments at December 31, 2021 and 2020 is as follows: ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) 2021 2020 Commitments to fund loans and commitments under lines of credit ​ $ 486,632 ​ 421,399 Letters of credit ​ ​ 25,986 ​ 8,928 ​ Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may 88 Table of Contents require payment of a fee. The Corporation evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment. Outstanding letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. The majority of these are standby letters of credit that expire within the next twelve months . The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Corporation requires collateral supporting these letters of credit as deemed necessary. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees. Not included in commitments outstanding, in the table above are mortgage loan commitments of $ 143.9 million and $ 428.8 million in 2021 and 2020, respectively, which included interest rate lock commitments. These rate lock commitments represent an agreement to extend credit to a mortgage loan applicant whereby the interest rate on the loan is set prior to funding. The loan commitment binds the Corporation to lend funds to a potential borrower at the specified rate, regardless of whether interest rates change between the commitment date and the loan funding date. The Corporation’s loan commitments generally range between 30 and 120 days ; however, the borrower is not obligated to obtain the loans. As such, these commitments are subject to interest rate risk and related price risk during the period from interest rate lock commitment through the loan funding date or expiration date. To manage this risk, the Corporation either locks the rate with the investor purchasing the loan on a “best efforts” basis or economically hedges this risk for loans sold to investors on its mandatory sales channel using the forward sale of mortgage-backed securities, in addition to best-efforts forward sale commitments to substantially eliminate these risks. At December 31, 2021 and 2020, the Corporation had a notional amount of $ 68.6 million and $ 230.1 million, respectively, related to commitments on the mandatory channel. At December 31, 2021 and 2020, the Corporation had best efforts forward sale commitments to sell loans amounting to $ 75.8 million and $ 198.7 million, respectively. The Corporation is only obligated to settle the forward sale commitment if the loan closes in accordance with the terms of the interest rate lock commitment. The Corporation’s forward sale commitments generally expire within 90 days . Loans sold under FHA or investor programs are subject to indemnification or repurchase if they fail to meet the origination criteria of those programs or if the loan is two or three months delinquent during a set period that usually varies from the first six months to a year after the loan is sold. There was one indemnification signed for the year ended December 31, 2021 for $ 109 thousand, and no indemnifications signed for the year ended December 31, 2020. A repurchase reserve of $ 3.2 million was recorded at December 31, 2021, as compared to $ 2.7 million as of December 31, 2020. There were six loans repurchased for the year ended December 31, 2021 with a total unpaid principal balance of $ 1.3 million, as compared to one loan repurchased for the year ended December 31, 2020 with an unpaid principal balance of $ 153 thousand. ​ ​ (18) Recent Litigation In the ordinary course of business, the Corporation and its subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings are generally based on alleged violations of banking, employment, contract and other laws. In some of these actions and proceedings, claims for substantial monetary damages are asserted against the Corporation and its subsidiaries. In the ordinary course of business, the Corporation and its subsidiaries are also subject to regulatory and governmental examinations, information gathering requests, inquiries, investigations, and threatened legal actions and proceedings. In connection with formal and informal inquiries by federal, state, and local agencies, the Corporation and its subsidiaries receive numerous requests, subpoenas and orders for documents, testimony and information in connection with various aspects of their activities. ​ 89 Table of Contents (19) Regulatory Matters The Bank and the Corporation are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank and the Corporation must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s and the Corporation’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank and the Corporation to maintain minimum amounts and ratios (set forth below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets, and of Tier 1 capital to average assets. Management believes, as of December 31, 2021, that the Bank and the Corporation meet all capital adequacy requirements to which it is subject. Community banks have long raised concerns with bank regulators about the regulatory burden, complexity, and costs associated with certain provisions of the Basel III Rule. In response, Congress provided an “off-ramp” for institutions, like us, with total consolidated assets of less than $10 billion. Section 201 of the Regulatory Relief Act instructed the federal banking regulators to establish a single "Community Bank Leverage Ratio" (“CBLR”) of between 8 and 10%. Under the final rule, a community banking organization is eligible to elect the new framework if it has: less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a CBLR greater than 9%.The bank regulatory agencies temporarily lowered the CBLR to 8% as a result of the COVID-19 pandemic. During the first quarter of 2020, the Bank adopted the community bank leverage ratio framework as its primary regulatory capital ratio, but reports all ratios for comparative purposes. As of December 31, 2021, the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category. The Bank is subject to certain restrictions on the amount of dividends that it may declare and pay to the Corporation due to regulatory considerations. The Pennsylvania Banking Code provides that cash dividends may be declared and paid only out of accumulated net earnings. The Corporation’s and the Banks’s actual and required capital amounts and ratios under the CBLR rules at December 31, 2021 and the Basel III rules at December 31, 2020 are presented below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ To Be Well Capitalized ​ ​ Actual ​ Under CBLR Framework (dollars in thousands) Amount Ratio Amount Ratio Tier 1 capital (to average assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporation ​ $ 160,379 ​ 9.39 % ​ $ 136,621 ​ 8.00 % Bank ​ ​ 196,506 ​ 11.51 % ​ ​ 136,620 ​ 8.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ ​ ​ ​ ​ ​ To Be Well Capitalized ​ ​ Actual ​ Under CBLR Framework (dollars in thousands) Amount Ratio Amount Ratio Tier 1 capital (to average assets) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporation ​ $ 134,564 ​ 8.96 % ​ $ 120,082 ​ 8.00 % Bank ​ ​ 173,231 ​ 11.54 % ​ ​ 120,080 ​ 8.00 % ​ ​ ​ 90 Table of Contents (20) Fair Value Measurements and Disclosures The Corporation uses fair value measurements to record fair value adjustments to certain assets and liabilities. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Corporation’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation techniques or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Corporation groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 – Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation. ​ 91 Table of Contents For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2021 and 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 (dollars in thousands) Total Level 1 Level 2 Level 3 Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities available for sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. asset backed securities ​ $ 16,837 ​ — ​ 16,837 ​ — U.S. government agency mortgage-backed securities ​ ​ 9,813 ​ — ​ 9,813 ​ — U.S. government agency collateralized mortgage obligations ​ ​ 22,381 ​ — ​ 22,381 ​ — State and municipal securities ​ ​ 72,982 ​ — ​ 72,982 ​ — U.S. Treasuries ​ ​ 29,728 ​ 29,728 ​ — ​ — Non-U.S. government agency collateralized mortgage obligations ​ ​ 975 ​ — ​ 975 ​ — Corporate bonds ​ ​ 6,586 ​ — ​ 6,586 ​ — Equity investments ​ ​ 2,354 ​ — ​ 2,354 ​ — Mortgage loans held for sale ​ ​ 80,882 ​ — ​ 80,882 ​ — Mortgage loans held for investment ​ ​ 17,558 ​ — ​ 17,558 ​ — Interest rate lock commitments ​ ​ 1,122 ​ — ​ — ​ 1,122 Forward commitments ​ ​ 65 ​ — ​ 65 ​ — Customer derivatives - interest rate swaps ​ ​ 961 ​ — ​ 961 ​ — Total ​ $ 262,244 ​ 29,728 ​ 231,394 ​ 1,122 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments ​ ​ 203 ​ — ​ — ​ 203 Forward commitments ​ ​ 106 ​ — ​ 106 ​ — Customer derivatives - interest rate swaps ​ ​ 1,018 ​ — ​ 1,018 ​ — ​ ​ $ 1,327 ​ — ​ 1,124 ​ 203 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 (dollars in thousands) Total Level 1 Level 2 Level 3 Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities available for sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. asset backed securities ​ $ 25,592 ​ — ​ 25,592 ​ — U.S. government agency mortgage-backed securities ​ ​ 4,046 ​ — ​ 4,046 ​ — U.S. government agency collateralized mortgage obligations ​ ​ 23,909 ​ — ​ 23,909 ​ — State and municipal securities ​ ​ 65,810 ​ — ​ 65,810 ​ — Corporate bonds ​ ​ 4,205 ​ — ​ 4,205 ​ — Equity investments ​ ​ 1,031 ​ — ​ 1,031 ​ — Mortgage loans held for sale ​ ​ 229,199 ​ — ​ 229,199 ​ — Mortgage loans held for investment ​ ​ 12,182 ​ — ​ 12,182 ​ — Interest rate lock commitments ​ ​ 6,932 ​ — ​ — ​ 6,932 Forward commitments ​ ​ — ​ — ​ — ​ — Customer derivatives - interest rate swaps ​ ​ 1,118 ​ — ​ 1,118 ​ — Total ​ $ 374,024 ​ — ​ 367,092 ​ 6,932 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments ​ ​ 100 ​ — ​ — ​ 100 Forward commitments ​ ​ 1,572 ​ — ​ 1,572 ​ — Customer derivatives - interest rate swaps ​ ​ 1,219 ​ — ​ 1,219 ​ — ​ ​ $ 2,891 ​ — ​ 2,791 ​ 100 ​ 92 Table of Contents Assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2021 and 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ December 31, 2020 (dollars in thousands) Fair Value Fair Value Mortgage servicing rights ​ $ 10,756 ​ ​ 4,647 SBA loan servicing rights ​ ​ 2,009 ​ ​ 970 Impaired loans (1) ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ 1,837 ​ ​ 2,297 Small business loans ​ ​ 290 ​ ​ — Home equity lines and loans ​ ​ — ​ ​ 86 Residential mortgage ​ ​ — ​ ​ 615 Total ​ $ 14,892 ​ ​ 8,615 (1) Impaired loans are those in which the Corporation has measured impairment generally based on the fair value of the loan’s collateral. Refer to the following page for further qualitative discussion around impaired loans. ​ The following table details the valuation techniques for Level 3 impaired loans. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ Unobservable ​ ​ (dollars in thousands) Level 3 Valuation Technique Input Range of Inputs December 31, 2021 ​ $ 2,127 ​ Appraisal of collateral ​ Management adjustments on appraisals for property type and recent activity ​ 2 - 15 % discount December 31, 2020 ​ ​ 2,998 ​ Appraisal of collateral ​ Management adjustments on appraisals for property type and recent activity ​ 2 - 15 % discount ​ Below is management’s estimate of the fair value of all financial instruments, whether carried at cost or fair value on the Corporation’s balance sheet. The following information should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair value of the Corporation’s financial instruments: (a) Cash and Cash Equivalents The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets’ fair values. (b) Securities The fair value of securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. U.S. Treasuries includes in the available for sale portfolio are the only securities considered Level 1, while all other securities are considered Level 2. (c) Mortgage Loans Held-for-Sale The fair value of loans held for sale is based on secondary market prices. 93 Table of Contents (d) Loans Receivable The fair value of loans receivable is estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair value below is reflective of an exit price. (e) Mortgage Loans Held-for-Investment The fair value of mortgage loans held for investment is based on the price secondary markets are currently offering for similar loans using observable market data. (f) Loan Servicing Rights The Corporation estimates the fair value of mortgage servicing rights and SBA servicing rights using discounted cash flow models that calculate the present value of estimated future net servicing income. The model uses readily available prepayment speed assumptions for the interest rates of the portfolios serviced. These servicing rights are classified within Level 3 in the fair value hierarchy based upon management’s assessment of the inputs. The Corporation reviews the servicing rights portfolios on a quarterly basis for impairment. (g) Impaired Loans Impaired loans are those in which the Corporation has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the Allowance policy. (h) Restricted Investment in Bank Stock The carrying amount of restricted investment in bank stock approximates fair value, and considers the limited marketability of such securities. (i) Accrued Interest Receivable and Payable The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value. (j) Deposit Liabilities The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits. (k) Short-Term Borrowings The carrying amounts of short-term borrowings approximate their fair values. 94 Table of Contents (l) Long-Term Debt Fair values of FHLB advances and the acquisition purchase note payable are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party. (m) Subordinated Debt Fair values of junior subordinated debt are estimated using discounted cash flow analysis, based on market rates currently offered on such debt with similar credit risk characteristics, terms and remaining maturity. (n) Off-Balance Sheet Financial Instruments Off-balance sheet instruments are primarily comprised of loan commitments, which are generally priced at market at the time of funding. Fees on commitments to extend credit and stand-by letters of credit are deemed to be immaterial and these instruments are expected to be settled at face value or expire unused. It is impractical to assign any fair value to these instruments and as a result they are not included in the table below. Fair values assigned to the notional value of interest rate lock commitments and forward sale contracts are based on market quotes. (o) Derivative Financial Instruments The fair value of forward commitments and interest rate swaps is based on market pricing and therefore are considered Level 2. Derivatives classified as Level 3 consist of interest rate lock commitments related to mortgage loan commitments. The determination of fair value includes assumptions related to the likelihood that a commitment will ultimately result in a closed loan, which is a significant unobservable assumption. A significant increase or decrease in the external market price would result in a significantly higher or lower fair value measurement. 95 Table of Contents The estimated fair values of the Corporation’s financial instruments at December 31, 2021 and 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ December 31, 2020 ​ ​ Fair Value ​ Carrying ​ ​ ​ Carrying ​ ​ (dollars in thousands) Hierarchy Level amount Fair value amount Fair value Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ Level 1 ​ $ 23,480 ​ 23,480 ​ 36,744 ​ 36,744 Securities available-for-sale (1) ​ Level 2 ​ ​ 159,302 ​ 159,302 ​ 123,562 ​ 123,562 Securities held-to-maturity ​ Level 2 ​ ​ 6,372 ​ 6,591 ​ 6,510 ​ 6,857 Equity investments ​ Level 2 ​ ​ 2,354 ​ 2,354 ​ 1,031 ​ 1,031 Mortgage loans held for sale ​ Level 2 ​ ​ 80,882 ​ 80,882 ​ 229,199 ​ 229,199 Loans receivable, net of the allowance for loan and lease losses ​ Level 3 ​ ​ 1,368,899 ​ 1,370,885 ​ 1,272,582 ​ 1,289,776 Mortgage loans held for investment ​ Level 2 ​ ​ 17,558 ​ 17,558 ​ 12,182 ​ 12,182 Interest rate lock commitments ​ Level 3 ​ ​ 1,122 ​ 1,122 ​ 6,932 ​ 6,932 Forward commitments ​ Level 2 ​ ​ 65 ​ 65 ​ — ​ — Restricted investment in bank stock ​ NA ​ ​ 5,117 ​ NA ​ 7,861 ​ NA Accrued interest receivable ​ Level 3 ​ ​ 5,009 ​ 5,009 ​ 5,482 ​ 5,482 Customer derivatives - interest rate swaps ​ Level 2 ​ ​ 961 ​ 961 ​ 1,118 ​ 1,118 Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ Level 2 ​ ​ 1,446,413 ​ 1,549,100 ​ 1,241,335 ​ 1,392,500 Short-term borrowings ​ Level 2 ​ ​ 41,344 ​ 41,344 ​ 106,862 ​ 106,862 Long-term debt ​ Level 2 ​ ​ — ​ — ​ 165,546 ​ 168,000 Subordinated debentures ​ Level 2 ​ ​ 40,508 ​ 40,803 ​ 40,671 ​ 38,375 Accrued interest payable ​ Level 2 ​ ​ 31 ​ 31 ​ 1,154 ​ 1,154 Interest rate lock commitments ​ Level 3 ​ ​ 203 ​ 203 ​ 100 ​ 100 Forward commitments ​ Level 2 ​ ​ 106 ​ 106 ​ 1,572 ​ 1,572 Customer derivatives - interest rate swaps ​ Level 2 ​ ​ 1,018 ​ 1,018 ​ 1,219 ​ 1,219 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Notional ​ ​ ​ Notional ​ ​ Off-balance sheet financial instruments: ​ amount Fair value amount Fair value Commitments to extend credit ​ Level 2 ​ $ 486,632 ​ — ​ 421,399 ​ — Letters of credit ​ Level 2 ​ ​ 25,986 ​ — ​ 8,928 ​ — (1) U.S. Treasuries within securities available-for-sale are classified as Level 1. ​ The following table includes a rollforward of interest rate lock commitments for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the years ended December 31, 2021 and 2020. ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 Balance at beginning of the period $ 6,932 ​ 504 (Decrease) increase in value ​ ( 5,810 ) ​ 6,428 Balance at end of the period $ 1,122 ​ 6,932 ​ The following table details the valuation techniques for Level 3 interest rate lock commitments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Significant ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ Unobservable ​ Range of ​ Weighted ​ (dollars in thousands) Level 3 Valuation Technique Input Inputs Average December 31, 2021 ​ $ 1,122 ​ Market comparable pricing ​ Pull through ​ 1 - 99 % 87.66 % December 31, 2020 ​ ​ 6,932 ​ Market comparable pricing ​ Pull through ​ 1 - 99 ​ 83.08 ​ ​ 96 Table of Contents Net realized losses of $ 5.9 million and gains of $ 6.5 million due to changes in the fair value of interest rate lock commitments which are classified as Level 3 assets and liabilities for the twelve months ended December 31, 2021 and 2020, respectively, are recorded in non-interest income as net change in the fair value of derivative instruments in the Corporation’s consolidated statements of income. (21) Derivative Financial Instruments Risk Management Objective of Using Derivatives The Corporation is exposed to certain risk arising from both its business operations and economic conditions. The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Corporation enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Corporation’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Corporation’s known or expected cash receipts and its known or expected cash payments principally related to the Corporation’s loan portfolio. Mortgage Banking Derivatives In connection with its mortgage banking activities, the Corporation enters into commitments to originate certain fixed rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, the Corporation enters into forward commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans or interest rate locks at a fixed price at a future date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. Interest rate lock commitments and forward commitments are recorded within other assets/liabilities on the consolidated balance sheets, with changes in fair values during the period recorded within net change in the fair value of derivative instruments on the consolidated statements of income. Customer Derivatives – Interest Rate Swaps Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain customers to swap a fixed rate product for a variable rate product, or vice versa. The Corporation executes interest rate derivatives with commercial banking customers to facilitate their respective risk management strategies. Those interest rate derivatives are simultaneously hedged by offsetting derivatives that the Corporation executes with a third party, such that the Corporation minimizes its net interest rate risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. 97 Table of Contents The following table presents a summary of the notional amounts and fair values of derivative financial instruments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ December 31, 2020 (dollars in thousands) Balance Sheet Line Item ​ Notional Amount Asset (Liability) Fair Value Notional Amount Asset (Liability) Fair Value Interest Rate Lock Commitments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Positive fair values Other assets ​ $ 108,653 ​ 1,122 ​ 406,422 ​ 6,932 Negative fair values Other liabilities ​ ​ 35,264 ​ ( 203 ) ​ 22,406 ​ ( 100 ) Total ​ ​ ​ 143,917 ​ 919 ​ 428,828 ​ 6,832 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Forward Commitments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Positive fair values Other assets ​ ​ 30,500 ​ 65 ​ — ​ — Negative fair values Other liabilities ​ ​ 45,500 ​ ( 106 ) ​ 218,000 ​ ( 1,572 ) Total ​ ​ ​ 76,000 ​ ( 41 ) ​ 218,000 ​ ( 1,572 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer Derivatives - Interest Rate Swaps ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Positive fair values Other assets ​ ​ 35,447 ​ 961 ​ 20,979 ​ 1,118 Negative fair values Other liabilities ​ ​ 35,447 ​ ( 1,018 ) ​ 20,979 ​ ( 1,219 ) Total ​ ​ ​ 70,894 ​ ( 57 ) ​ 41,958 ​ ( 101 ) Total derivative financial instruments ​ ​ $ 290,811 ​ 821 ​ 688,786 ​ 5,159 ​ Interest rate lock commitments are considered Level 3 in the fair value hierarchy, while the forward commitments and interest rate swaps are considered Level 2 in the fair value hierarchy. The following table presents a summary of the fair value gains and losses on derivative financial instruments: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (dollars in thousands) 2021 2020 Interest Rate Lock Commitments $ ( 5,913 ) ​ 6,486 Forward Commitments ​ 1,531 ​ ( 1,459 ) Customer Derivatives - Interest Rate Swaps ​ 44 ​ ( 52 ) Net fair value (losses) gains on derivative financial instruments $ ( 4,338 ) ​ 4,975 ​ ​ ​ ​ ​ ​ ​ ​ Net realized gains on derivative hedging activities were $ 3.0 million and net realized losses were $ 9.4 million for the year ended December 31, 2021 and 2020, respectively, and are included in non-interest income in the consolidated statements of income. (22) Segments ASC Topic 280 – Segment Reporting identifies operating segments as components of an enterprise which are evaluated regularly by the Corporation’s Chief Operating Decision Maker, our Chief Executive Officer, in deciding how to allocate resources and assess performance. The Corporation has applied the aggregation criterion set forth in this codification to the results of its operations. Our Banking segment (“Bank”) consists of commercial and retail banking. The Banking segment generates interest income from its lending (including leasing) and investing activities and is dependent on the gathering of lower cost deposits from its branch network or borrowed funds from other sources for funding its loans, resulting in the generation of net interest income. The Banking segment also derives revenues from other sources including gains on the sale of available for sale investment securities, service charges on deposit accounts, cash sweep fees, overdraft fees, BOLI income, title insurance fees, and other less significant non-interest income. 98 Table of Contents Meridian Wealth (“Wealth”), a registered investment advisor and wholly-owned subsidiary of the Bank, provides a comprehensive array of wealth management services and products and the trusted guidance to help its clients and our banking customers prepare for the future. The unit generates non-interest income through advisory fees. Meridian’s mortgage banking segment (“Mortgage”) consists of one central loan production facility and several retail and profit sharing loan production offices located throughout suburban Philadelphia and Maryland. The Mortgage segment originates 1 – 4 family residential mortgages and sells nearly all of its production to third party investors. The unit generates net interest income on the loans it originates and holds temporarily, then earns fee income (primarily gain on sales) at the time of the sale. The unit also recognizes income from document preparation fees, changes in portfolio pipeline fair values and related net hedging gains (losses). The table below summarizes income and expenses, directly attributable to each business line, which has been included in the statement of operations. Total assets for each segment is also provided. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ Year Ended December 31, 2020 (Dollars in thousands) Bank Wealth Mortgage Total Bank Wealth Mortgage Total Net interest income ​ $ 61,032 ​ 15 ​ 2,064 ​ 63,111 ​ $ 46,997 ​ ( 48 ) ​ 2,047 ​ 48,996 Provision for loan losses ​ ​ 1,070 ​ — ​ — ​ 1,070 ​ ​ 8,302 ​ — ​ — ​ 8,302 Net interest income after provision ​ ​ 59,962 ​ 15 ​ 2,064 ​ 62,041 ​ ​ 38,695 ​ ( 48 ) ​ 2,047 ​ 40,694 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage banking income ​ ​ 1,097 ​ — ​ 74,835 ​ 75,932 ​ ​ 1,632 ​ — ​ 74,829 ​ 76,461 Wealth management income ​ ​ — ​ 4,801 ​ — ​ 4,801 ​ ​ — ​ 3,854 ​ — ​ 3,854 SBA loan income ​ ​ 6,898 ​ — ​ — ​ 6,898 ​ ​ 2,572 ​ — ​ — ​ 2,572 Net change in fair values ​ ​ 43 ​ — ​ ( 7,881 ) ​ ( 7,838 ) ​ ​ ( 40 ) ​ — ​ 9,185 ​ 9,145 Net gain (loss) on hedging activity ​ ​ — ​ — ​ 2,961 ​ 2,961 ​ ​ — ​ — ​ ( 9,400 ) ​ ( 9,400 ) Other ​ ​ 2,741 ​ 1 ​ 2,492 ​ 5,234 ​ ​ 3,524 ​ 14 ​ 748 ​ 4,286 Non-interest income ​ ​ 10,779 ​ 4,802 ​ 72,407 ​ 87,988 ​ ​ 7,688 ​ 3,868 ​ 75,362 ​ 86,918 Non-interest expense ​ ​ 40,392 ​ 3,496 ​ 59,839 ​ 103,727 ​ ​ 33,351 ​ 3,213 ​ 56,512 ​ 93,076 Income before income taxes ​ $ 30,349 ​ 1,321 ​ 14,632 ​ 46,302 ​ $ 13,032 ​ 607 ​ 20,897 ​ 34,536 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Assets ​ $ 1,608,305 ​ 6,355 ​ 98,783 ​ 1,713,443 ​ $ 1,488,312 ​ 5,479 ​ 226,406 ​ 1,720,197 ​ ​ (23) Recent Accounting Pronouncements As an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), the Bank is permitted an extended transition period for complying with new or revised accounting standards affecting public companies. We will remain an emerging growth company until the earliest of (i) the end of the fiscal year during which we have total annual gross revenues of $1,070,000,000 or more, (ii) the end of the fiscal year following the fifth anniversary of the completion of our initial public offering (December 31, 2022), (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt and (iv) the end of the fiscal year in which the market value of our equity securities that are held by non-affiliates exceeds $700 million as of June 30 of that year. We have elected to take advantage of this extended transition period, which means that the financial statements included herein, 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 following our decision, and such decision is irrevocable. As a filer under the JOBS Act, we will implement new accounting standards subject to the effective dates required for non-public entities. 99 Table of Contents Adopted Pronouncements in 2021: FASB ASU 2018-15 (Topic 350), "Intangibles - Goodwill and Other - Internal-Use Software" Issued in August 2018, ASU 2018-15 provides clarity on capitalizing and expensing implementation costs for cloud computing arrangements in a service contract. If an implementation cost is capitalized, the cost should be recognized over the noncancellable term and periodically assessed for impairment. The guidance is effective in annual and interim periods in fiscal years beginning after December 15, 2020 and interim periods within annual periods beginning after December 15, 2021. Adoption should be applied retrospectively or prospectively to all implementation costs incurred after the date of adoption. The adoption of this ASU did not have a material impact on our consolidated financial statements and related disclosures. FASB ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” Issued in December 2019, ASU 2019-12 adds new guidance to simplify accounting for income taxes, changes the accounting for certain income tax transactions and makes minor improvements to the codification. The guidance is effective for annual periods beginning after December 15, 2020. Early adoption is permitted. The adoption of this ASU did not have a material impact on our consolidated financial statements and related disclosures. ​ Pronouncements Not Effective as of December 31, 2021: FASB ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments” Issued in June 2016, ASU 2016-13 significantly changes how companies measure and recognize credit impairment for many financial assets. This ASU requires businesses and other organizations to measure the current expected credit losses (“CECL”) on financial assets, such as loans, net investments in leases, certain debt securities, bond insurance and other receivables. The amendments affect entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. Current GAAP requires an incurred loss methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. The amendments in this ASU replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonableness and supportable information to inform credit loss estimates. An entity should apply the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (modified retrospective approach). Acquired credit impaired loans for which the guidance in Accounting Standards Codification (ASC) Topic 310-30 has been previously applied should prospectively apply the guidance in this ASU. A prospective transition approach is required for debt securities for which an other-than-temporary impairment has been recognized before the effective date. In October 2019, the FASB approved a delay for the implementation of the ASU. Accordingly, as an emerging growth company, the Corporation’s effective date for the implementation of the ASU will be January 1, 2023. The Corporation is currently determining under which method we will adopt this ASU. The Corporation has assembled a cross-functional team from Finance, Credit, and IT that is leading the implementation efforts to evaluate the impact of this guidance on the Corporation's consolidated financial statements and related disclosures, internal systems, accounting policies, processes and related internal controls. At this time the Corporation cannot yet estimate the impact to the consolidated financial statements. ​ FASB ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” Issued in April 2019, ASU 2019-04 clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments (addressed by ASUs 2016-13, 2017-12, and 2016-01, respectively). The amendments to estimating expected credit losses (ASU 2016-13), in particular, how a company considers recoveries and extension options when estimating expected credit losses, are the most relevant to the Corporation. The ASU clarifies that (1) the estimate of expected credit losses should include expected recoveries of financial assets, including recoveries of amounts expected to be written off and those previously written off, and (2) that contractual extension or renewal options that are not unconditionally 100 Table of Contents cancellable by the lender are considered when determining the contractual term over which expected credit losses are measured. Management will consider the impact of ASU 2019-04 when considering the impact of ASU 2016-13 as discussed above. FASB ASU 2016-02 (Topic 842), “Leases” Issued in February 2016, ASU 2016-02 revises the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use (ROU) asset for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. ​ The new standard became effective for us on January 1, 2022. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. Management has elected to use the effective date as its date of initial application. Consequently, financial information will not be updated, and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2022. ​ The Corporation has implemented a third party lease accounting system to assist with the measurement of lease liabilities and related right-of-use assets, the post-implementation administration aspect of lease accounting, and the preparation of applicable disclosures related to the new guidance. ​ The new standard provided a number of optional practical expedients in transition. We have elected the ‘package of practical expedients’, which permitted us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. ​ This standard will have a material effect on our Consolidated Balance Sheet and related disclosures but is not expected to have a material impact on our Consolidated Statement of Income. Any additional assets recorded as a result of adoption is expected to have a negative impact on the Corporation and Bank capital ratios under current regulatory guidance. On adoption, we recorded approximately $ 10.6 million of operating lease liabilities and $ 10.8 million of related right-of-use assets at January 1, 2022. ​ The new standard also provides practical expedients for an entity’s ongoing accounting. We have elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also have elected the practical expedient to not separate lease and non-lease components for all of our leases. ​ FASB ASU 2020-04 (Topic 848), “Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” Issued in March 2020, ASU 2020-04 contains optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The Corporation does not have a significant concentration of loans, derivative contracts, borrowings or other financial instruments with attributes that are either directly or indirectly dependent on LIBOR. The guidance under ASC-848 will be available for a limited time, generally through December 31, 2022. The Corporation expects to adopt the LIBOR transition relief allowed under this standard. ​ FASB ASU 2020-06, “Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ” ​ This ASU clarifies the accounting for certain financial instruments with characteristics of liabilities and equity. The amendments in this update reduce the number of accounting models for convertible debt instruments and convertible 101 Table of Contents preferred stock by removing the cash conversion model and the beneficial conversion feature models. For public business entities that meet the definition of an SEC filer (excluding smaller reporting entities), the amendments are effective for fiscal years beginning after Dec. 15, 2021, and interim periods within. For all other entities, the amendments are effective for fiscal years beginning after Dec. 15, 2023, and interim periods within. ​ ​ (24) Parent Company Financial Statements The condensed financial statements of the Corporation (parent company only) are presented below. These statements should be read in conjunction with the notes to the consolidated financial statements. A. Condensed Balance Sheets ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, (dollars in thousands, except per share data) 2021 2020 Cash and due from banks ​ $ 2,836 ​ 213 Investments in subsidiaries ​ ​ 200,410 ​ 180,288 Other assets ​ ​ 1,382 ​ 360 Total assets ​ $ 204,628 ​ 180,861 ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ Subordinated debentures ​ ​ 39,057 ​ 38,904 Accrued interest payable ​ ​ 6 ​ 6 Other liabilities ​ ​ 205 ​ 329 Total liabilities ​ ​ 39,268 ​ 39,239 Stockholders’ equity: ​ ​ ​ ​ ​ Common stock, $ 1 par value. Authorized 25,000,000 shares; issued 6,534,587 and 6,455,566 as of December 31, 2021 and December 31, 2020 ​ ​ 6,535 ​ 6,456 Surplus ​ ​ 83,663 ​ 81,196 Treasury Stock- 426,693 and 320,000 shares at December 31, 2021 and December 31, 2020, respectively ​ ​ ( 8,860 ) ​ ( 5,828 ) Unearned common stock held by employee stock ownership plan ​ ​ ( 1,602 ) ​ ( 1,768 ) Retained earnings ​ ​ 84,916 ​ 59,010 Accumulated other comprehensive income ​ ​ 708 ​ 2,556 Total stockholders’ equity ​ ​ 165,360 ​ 141,622 Total liabilities and stockholders’ equity ​ $ 204,628 ​ 180,861 ​ 102 Table of Contents B. Condensed Statements of Income ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, (dollars in thousands, except per share data) 2021 2020 Dividends from Bank ​ $ 17,187 ​ 11,512 Non-interest and other income ​ ​ — ​ 10 Total operating income ​ ​ 17,187 ​ 11,522 Interest expense ​ ​ 2,303 ​ 2,202 Other expenses ​ ​ 1,675 ​ — Income before equity in undistributed income of subsidiaries ​ ​ 13,209 ​ 9,320 Equity in undistributed income of subsidiaries ​ ​ 22,376 ​ 17,118 Income before income taxes ​ ​ 35,585 ​ 26,438 Income tax expense ​ ​ — ​ — Net income ​ ​ 35,585 ​ 26,438 Total other comprehensive (loss) income ​ ​ ( 1,848 ) ​ 2,559 Total comprehensive income ​ $ 33,737 ​ 28,997 ​ C. Condensed Statements of Cash Flows ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, (dollars in thousands) 2021 2020 Net income ​ $ 35,585 ​ 26,438 Adjustments to reconcile net income to net cash provided by (used in) operating activities: ​ ​ ​ ​ ​ Equity in undistributed income of subsidiaries ​ ​ ( 22,376 ) ​ ( 17,818 ) Share-based compensation ​ ​ 1,607 ​ 763 Amortization of issuance costs on subordinated debt ​ ​ 153 ​ 112 (Decrease) in accrued interest payable ​ ​ — ​ ( 72 ) Other, net ​ ​ ( 740 ) ​ ( 294 ) Net cash provided by operating activities ​ ​ 14,229 ​ 9,129 Cash flows from financing activities: ​ ​ ​ ​ ​ Issuance cost on subordinated debt ​ ​ — ​ ( 231 ) Net purchase of treasury stock ​ ​ ( 3,032 ) ​ ( 5,703 ) Dividends paid ​ ​ ( 9,679 ) ​ ( 1,525 ) Purchase of common shares for ESOP ​ ​ — ​ ( 2,000 ) Share based awards and exercises ​ ​ 1,105 ​ 395 Net cash (used in) provided by financing activities ​ ​ ( 11,606 ) ​ ( 9,064 ) Net change in cash and cash equivalents ​ ​ 2,623 ​ 65 Cash and cash equivalents at beginning of period ​ ​ 213 ​ 148 Cash and cash equivalents at end of period ​ $ 2,836 ​ 213 ​ ​ ​ ​ (25) Subsequent Events Special Dividend ​ On January 27, 2022, the Corporation’s Board of Directors declared a special dividend of $ 1.00 per share on its Common Stock, payable on February 21, 2022 to shareholders of record as of February 14, 2022. ​ ​ ​ 103 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None.