What changed in this filing

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Item 1. Business

2023-03-16 compared with 2022-03-16 · 106 added, 125 removed, 286 unchanged (45% of the section changed)

Meridian 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 in the Central Maryland market.

We have a financial services business model with significant non-interest income streams from mortgage lending, small business (“SBA”) lending and wealth management services.

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 in the Central Maryland market, and Florida.

We have a financial services business model with non-interest revenue streams from mortgage lending, 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.

We are technology driven, with a culture that incorporates significant use of customer preferred alternative delivery channels, 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.

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Commercial Banking

The first line of business is our traditional banking operations, serving both commercial and consumer customers via deposits and treasury management, commercial and industrial lending and leasing, commercial real estate lending, small business lending, consumer and home equity lending, private banking, merchant services, and title and land settlement services.

The first line of business is our traditional banking operations, serving both commercial and consumer customers.

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

We provide deposit and treasury management services, commercial and industrial lending and leasing, commercial real estate lending, small business lending, consumer and home equity lending, private banking, merchant services, and title and land settlement services.

Our commercial and industrial lending department supports our small business and middle market borrowers with a comprehensive selection of loan products including financing solutions for wholesalers, manufacturers, distributors, service providers, importers and exporters, among others.

Our portfolio includes business lines of credit, term loans, SBA lending, lease financing, other financings, and SNCs.

We have no particular credit concentration.

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

Our portfolio includes business lines of credit, term loans, small business lending (“SBA”), lease financing and shared national credits (“SNCs”).

Our SBA team and their alliances with local economic development councils provide SBA 504 and 7(a) financing options to help grow local businesses, create and retain jobs and stimulate our local economy.

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Our approach is to apply disciplined and integrated standards to underwriting, credit and portfolio management.

The extensive backgrounds of our commercial real

estate lending team, not only in banking, but also directly in the builder/developer fields, bring a unique perspective and ability to communicate and consider all elements of a project and related risk from the clients’ viewpoint as well as ours.

The extensive backgrounds of our commercial real estate lending team, not only in banking, but also directly in the builder/developer fields, bring a unique perspective and ability to communicate and consider all elements of a project and related risk from the clients’ viewpoint as well as ours.

Mortgage Banking

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Clients include homeowners and smaller scale investors.

The mortgage division operates and originates mortgage loans in the Delaware Valley tri-state market, and Maryland markets, most typically for 1-4 family dwellings, with the intention of selling substantially all of these loans in the secondary market to qualified investors, while retaining the servicing rights on these loans.

Mortgages are originated through sales and marketing initiatives, as well as realtor, builder, bank, advertising and customer referral resources.

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Acquiring and sustaining wealth is a gradual progression, one that requires a considerable amount of thought and planning.

Our process takes a comprehensive approach to financial planning and encompasses all aspects of retirement, with an emphasis on sustainability.

Our process takes a comprehensive approach to financial planning and encompasses all aspects of retirement, with an emphasis on

sustainability.

Meridian Wealth offers a significant enhancement to both our capacity and the variety of tools we can use to help bring effective financial planning and wealth management services to a broad segment of customers.

Meridian is headquartered in Malvern, PA and has six full-service branches in Philadelphia and surrounding counties.

Meridian is headquartered in Malvern, PA, and has an operations center in Exton, PA, and six full-service branches in Philadelphia and surrounding counties.

Its main branch, in Paoli, serves the Main Line.

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Our sixth branch is in Philadelphia.

These branches provide “Relationship Hubs” for our regional lending groups and allow Meridian to proceed in its plan for serving markets in each of the central (at or near the county seat) townships of the counties in and surrounding Philadelphia.

In addition to our deposit taking branches, there are currently 19 other locations, including Corporate headquarters, that serve as loan production offices primarily for our mortgage division.

These offices extend from the Philadelphia market area to Central Maryland.

These branches provide “Relationship Hubs” for our regional lending groups and allow Meridian to serve markets at or near the county seat of counties in and surrounding Philadelphia.

In addition to our deposit taking branches, there are currently 17 other locations, including Corporate headquarters, that serve as loan production offices.

These offices extend from the Philadelphia market area to Central Maryland, and Florida.

Demographic information for the five county Philadelphia metropolitan area (Philadelphia County, Chester County, Delaware County, Montgomery County, Bucks County) shows our primary market to be stable, with moderate population growth.

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Census Bureau – 2020, the median household income in the Baltimore metropolitan area is $98,513 compared to the national average of $62,843, while the total population in this market was 3,804,375.

United States

(dollars in thousands / population actual) United States Pennsylvania Maryland

Population (1)

308,449,281 13,002,700 6,177,224

Median household income (1)

$ 63 $ 62 $ 85

Unemployment rate (2)

3.30 % 5.50 % 3.20 %

Philadelphia Metropolitan Area Counties

Montgomery County

Delaware County

Chester County

Philadelphia County

Bucks County Montgomery County Delaware County Chester County Philadelphia County Total

Population (1)

646,538 856,553 576,830 534,413 1,603,797 4,218,131

Median household income (1)

$ 89 $ 92 $ 74 $ 100 $ 46 $ 80

Unemployment rate (2)

2.90 % 2.60 % 3.30 % 2.40 % 4.50 %

Baltimore Metropolitan Area Counties

Howard County

Montgomery County

Anne Arundel County

Prince George's County

Baltimore County

Howard County Montgomery County Anne Arundel County Prince George's County Baltimore County Total

Population (1)

332,317 1,062,061 588,261 967,201 854,535 3,804,375

Median household income (1)

$ 121 $ 109 $ 101 $ 85 $ 77 $ 99

Unemployment rate (2)

(1) – Source:

2.50 % 2.80 % 2.60 % 3.70 % 3.20 %

Census Data – 2020

(2) – Source:

Bureau of Labor Statistics – December 2021

Overall, the banking business in our market area is highly competitive.

Meridian Bank faces substantial competition both in attracting deposits and in originating loans.

Meridian Bank competes with local, regional and national commercial banks, savings banks, and savings and loan associations.

The Bank faces substantial competition both in attracting deposits and in originating loans.

The Bank competes with local, regional and national commercial banks, savings banks, and savings and loan associations.

Other competitors include non-bank fintech and finance companies, money market mutual funds, mortgage bankers, insurance companies, securities brokerage firms, regulated small loan companies, credit unions, and issuers of commercial paper and other securities.

Meridian Bank seeks to compete for business principally on the basis of high quality, personal service to customers, customer access to our decision-makers, and customer preferred electronic delivery channels while providing an attractive banking platform and competitive interest rates and fees.

The Bank seeks to compete for business principally on the basis of high quality, personal service to customers, customer access to our decision-makers, and customer preferred electronic delivery channels while providing an attractive banking platform and competitive interest rates and services.

Human Capital Resources

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None of these employees are covered by collective bargaining agreements, and Meridian believes it enjoys good relations with its personnel.

In December of 2020, the Bank was named by the Independent Community Bankers of American (“ICBA”) as one of their ‘Best Community Banks to Work For’.

The Bank was named to American Bankers 2022 Top 200 Community Banks and in December of 2020, the Bank was named by the ICBA as one of their ‘Best Community Banks to Work For’.

As an integrated full-service financial institution, approximately 52% of our employees are employed through our banking segment, 45% through our mortgage segment, and 3% for our wealth segment.

The safety of our employees has been our top priority over the last two years due to the COVID-19 pandemic.

A portion of our workforce continues to work remotely and we have occasionally closed lobbies to appointment-only during times of heightened transmission of COVID-19 to protect the health of our employees.

We will continue to follow all of the appropriate guidance and engage our staff members as needed to deal with new challenges.

The safety of our employees has always been our top priority over the last few years due to the COVID-19 pandemic and this priority continues today.

A portion of our workforce continues to work remotely and we still provide appointment-only lobby hours when requested.

Meridian is committed to giving back to our communities.

In 2021 we donated $486 thousand to nearly 100 organizations throughout the various communities that we serve in Pennsylvania, New Jersey, Delaware, and Maryland.

Meridian also sponsors individual / group service days and provides time off to employees to participate.

In 2022, we donated $520 thousand to over 100 organizations throughout the various communities that we serve in Pennsylvania, New Jersey, Delaware, Maryland, and Florida.

Meridian also sponsors individual / group service days and provides time off to employees to participate in charitable activities in the communities we serve.

In order to compete effectively and continue to provide excellent service to our clients, we must attract, retain, and motivate qualified professionals.

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As of December 31, 2022, Meridian had 13,156,308 shares of common stock, $1 par value, issued and 11,465,572 shares outstanding.

There is no preferred stock outstanding.

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”).

An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies.

As an emerging growth company,

● we may present only two years of audited financial statements and only two years of related management discussion and analysis of financial condition and results of operations;

● we are permitted to provide less extensive disclosure about our executive compensation arrangements;

● we are not required to give our shareholders non-binding advisory votes on executive compensation or golden parachute arrangements.

We have elected to take advantage of the scaled disclosure requirements and other relief described above and may take advantage of these exemptions for so long as we remain an emerging growth company.

We will remain an emerging growth company until December 31, 2022, the end of the fiscal year following the fifth anniversary of the completion of our initial public offering.

In addition to scaled disclosure and the other relief described above, the JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies.

We have elected to take advantage of this extended transition period, which means that the financial statements included 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.

There is 1,690,736 shares held in treasury.

All share and per share amounts have been adjusted to reflect the two-for-one stock split effective February 28, 2023.

Update on Emerging Growth Company Status

We qualified as an “emerging growth company” as defined by the JOBS Act, until December 31, 2022, the end of the fiscal year following the fifth anniversary of the completion of our initial public offering.

An emerging growth company is able to take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies.

While we are no longer considered an emerging growth company, we still qualify as a “smaller reporting company” under Item 10(f)(1) of Regulation S-K, and as such are still able to present only two years of audited financial statements, as well as including less extensive narrative disclosures around executive compensation arrangements.

Information about Meridian

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Our Internet website is www.meridianbanker.com and our investor relations page can be found at investor.meridianbanker.com.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and all amendments thereto, from November 7, 2017 through August 18, 2018 have been filed with the FDIC.

Since August 19, 2018, all reports on Form 8-K, and Form 10-Q along with this Annual Report on Form 10-K have been filed with the SEC.

Also on our website are our Audit Committee and Compensation Committee Charters.

The information contained in our website or in any websites linked by our website, is not part of this Annual Report on Form 10-K.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and all amendments thereto have been filed, along with this Annual Report on Form 10-K, with the SEC.

The Corporation’s filings with the SEC can also be accessed at the SEC’s internet website:

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Meridian will also furnish a paper copy of such filings free of charge upon request.

Also on our website are our Audit Committee and Compensation Committee Charters.

The information contained in our website or in any websites linked by our website, is not part of this Annual Report on Form 10-K.

Reports of the Bank’s condition and income, known as “Call Reports,” are filed with the FDIC and the Parent Company Only Financial Statement for Small Holding Companies known as the “FR Y-9SP” with the Federal Reserve.

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This discussion is qualified in its entirety by reference to the full texts of the laws, regulations and policies described.

The Bank is an FDIC-insured commercial bank chartered under the laws of Pennsylvania with regulatory oversight from the FDIC and the Pennsylvania Department of Banking and Securities (“PDBS”).

The holding company, Meridian Corporation, is subject to supervision and examination by, and the regulations and reporting requirements of, the Board of Governors of the Federal Reserve System, and is subject to the disclosure and regulatory requirements of the Exchange Act.

In order to adhere to regulatory expectations on an ongoing basis and to successfully prepare for the normal examination processes, Meridian maintains numerous internal controls including policies and programs appropriate to maintain the Bank’s safety and soundness, under such key areas as lending, compliance, BSA-AML, information security, human resources, deposit and cash management products, enterprise risk, merchant services, finance, title services, branch security and wealth management.

The Bank is an FDIC-insured commercial bank chartered under the laws of Pennsylvania with regulatory oversight from the FDIC and the PDBS.

The holding company, Meridian Corporation, is subject to supervision and examination by, and the regulations and reporting requirements of, the FRB, and is subject to the disclosure and regulatory requirements of the Exchange Act.

risk, merchant services, finance, title services, branch security and wealth management.

As a public company, the Corporation also files reports with the SEC and is subject to its regulatory authority, as well as the disclosure and regulatory requirements of the Securities Act, as amended, and the Exchange Act, as amended, with respect to the Corporation’s securities, financial reporting and certain governance matters.

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Permissible Activities for Bank Holding Companies

The Corporation is a registered bank holding company under the Bank Holding Company Act of 1956 (“BHC Act”).

The Corporation is a registered bank holding company under the BHC Act.

In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks and other activities that the Federal Reserve has determined to be so closely related to banking as to be a proper incident thereto, which include certain activities relating to extending credit or acting as an investment or financial advisor.

Bank holding companies that qualify and elect to be treated as “financial holding companies” may engage in a broader range of additional activities than bank holding companies that are not financial holding companies.

In particular, financial holding companies may engage in activities that are (i) financial in nature or incidental to such financial activities or (ii) complementary to a financial activity and do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.

These activities include securities underwriting and dealing, insurance underwriting and making merchant banking investments.

As of this filing, we have not elected to be treated as a financial holding company.

The Federal Reserve has the power to order any bank holding company or any of its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the Federal Reserve has reasonable grounds to believe that continuing such activity, ownership or control constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the bank holding company.

The FRB has the power to order any bank holding company or any of its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the FRB has reasonable grounds to believe that continuing such activity, ownership or control constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the bank holding company.

Permissible Activities for Banks

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issuing letters of credit;

buying, discounting, and negotiating promissory notes and other forms of indebtedness;

buying, selling, discounting, factoring, and negotiating promissory notes and other forms of indebtedness;

buying and selling foreign currency and, subject to certain limitations, certain investment securities;

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Meridian Wealth, a registered investment advisory firm, and Meridian Equipment Finance, an equipment leasing company.

Pennsylvania law also imposes restrictions on Meridian Bank’s activities intended to ensure the safety and soundness of the Bank.

Pennsylvania law also imposes restrictions on the Bank’s activities intended to ensure the safety and soundness of the Bank.

For example, Meridian Bank is restricted under the Pennsylvania Banking Code from investing in certain types of investment securities and is generally limited in the amount of money it can lend to a single borrower or invest in securities issued by a single issuer.

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Control Acquisitions.

The Change in Bank Control Act (“CBCA”) prohibits a person or group of persons from acquiring “control” of a bank holding company unless the Federal Reserve has been notified and has not objected to the transaction.

The CBCA prohibits a person or group of persons from acquiring “control” of a bank holding company unless the Federal Reserve has been notified and has not objected to the transaction.

Under a rebuttable presumption established by the Federal Reserve, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act, such as Meridian Corporation, would, under the circumstances set forth in the presumption, constitute acquisition of control of Meridian Corporation.

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Under the final rule, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence.

Meridian is a legal entity separate and distinct from the Bank and the wholly-owned subsidiaries of the Bank.

The Corporation is a legal entity separate and distinct from the Bank and the Bank’s wholly-owned subsidiaries.

As a Pennsylvania banking institution, the Bank is subject to certain restrictions on its ability to pay dividends under applicable banking laws and regulations.

Federal banking regulators are authorized to determine under certain circumstances relating to the financial condition of a bank holding company or a bank that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof.

In particular, federal banking regulators have stated that paying dividends that deplete a banking organization’s capital base to an inadequate level would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends only out of current operating earnings.

In particular, federal banking regulators have stated that paying dividends that deplete a banking organization’s capital base to an inadequate level

would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends only out of current operating earnings.

In addition, in the current financial and economic environment, the federal banking regulators have indicated that banks should carefully review their dividend policy and have discouraged payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong.

Under the Capital Rules, institutions that seek to pay dividends must maintain 2.5% in Common Equity Tier 1 capital attributable to the capital conservation buffer, which was phased in over a three-year period that began on January 1, 2016.

Under the Capital Rules, institutions that seek to pay dividends must maintain 2.5% in Common Equity Tier 1 capital attributable to the capital conservation buffer.

See “—Regulatory Capital Requirements”.

Our principal source of cash flow and income is dividends from our subsidiaries, which is also the component of our liquidity.

In addition to the restrictions discussed above, the Bank is subject to limitations under Pennsylvania law regarding the level of dividends that it may pay to our shareholders.

In addition to the restrictions discussed above, the Bank is subject to limitations under Pennsylvania law regarding the level of dividends that it may pay to its shareholder.

Under the Pennsylvania Banking Code, the Bank generally may not pay dividends in excess of its net profits.

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Among other things, extensions of credit to insiders are required to be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons.

Also, the terms of such extensions of credit may not

involve more than the normal risk of non-repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons individually and in the aggregate.

Also, the terms of such extensions of credit may not involve more than the normal risk of non-repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons individually and in the aggregate.

Source of Strength

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The banking regulators use a combination of risk-based guidelines and a leverage ratio to evaluate capital adequacy.

The risk-based capital guidelines applicable to us are based on the Basel Committee’s December 2010 final capital framework, known as Basel III, as implemented by the federal banking regulators.

The risk-based capital guidelines applicable to us are based on capital framework, known as Basel III, as implemented by the federal banking regulators.

The risk-based guidelines are intended to make regulatory capital requirements sensitive to differences in credit and market risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets.

Basel III and the Capital Rules.

In July 2013, the federal banking regulators approved final rules, or the Capital Rules, implementing the Basel Committee’s December 2010 final capital framework for strengthening international capital standards, known as Basel III, and various provisions of the Dodd-Frank Act.

The Capital Rules substantially revise the risk-based capital requirements applicable to bank holding companies and banks, including us, compared to the previous risk-based capital rules.

The Capital Rules revise the components of capital and address other issues affecting the numerator in regulatory capital ratio calculations.

The Capital Rules, among other things, (i) include a new capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements, (iii) define CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital, and (iv) expand the scope of the deductions/adjustments to capital as compared to prior regulations.

Under the Basel III Capital Rules, the minimum capital ratios are (i) 4.5% CET1 to risk-weighted assets, (ii) 6% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets, (iii) 8% total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets and (iv) 4% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).

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These include, for example, the requirement that mortgage servicing rights, certain deferred tax assets and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1.

Implementation of the deductions and other adjustments to CET1 began on January 1, 2016 and was phased in over a four-year period, until it became fully implemented on January 1, 2019.

In addition, the Capital Rules provide for a countercyclical capital buffer applicable only to certain covered institutions.

We do not expect the countercyclical capital buffer to be applicable to us.

buffer, when the latter is applied) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

In addition, under the general risk-based Capital Rules, the effects of accumulated other comprehensive income items included in capital were excluded for the purposes of determining regulatory capital ratios.

Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

In addition, the effects of accumulated other comprehensive income items included in capital were excluded for the purposes of determining regulatory capital ratios.

Under the Capital Rules, the effects of certain accumulated other comprehensive income items are not excluded;

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The Bank made this election.

The Capital Rules also prescribed a new standardized approach for risk weightings that expanded the risk-weighting categories from the current four Basel I-derived categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0%, for U.S.

The Capital Rules prescribe a new standardized approach for risk weightings that expanded the risk-weighting categories from the current four Basel I-derived categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0%, for U.S.

government and agency securities, to 600%, for certain equity exposures, and resulting in higher risk weights for a variety of asset categories.

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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%.

Section 201 of the Regulatory Relief Act instructed the federal banking regulators to establish a single CBLR of between 8 and 10%.

Under the final rule, a community banking organization is eligible to elect the new framework if it has:

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Prompt Corrective Action Framework

The Federal Deposit Insurance Act, as amended (“FDIA”), requires among other things, that the federal banking agencies take “prompt corrective action” with respect to banks that do not meet minimum capital requirements.

The FDIA, requires among other things, that the federal banking agencies take “prompt corrective action” with respect to banks that do not meet minimum capital requirements.

The FDIA sets forth the following five capital tiers for purposes of implementing the PCA regulations:

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Historically, the regulation and monitoring of bank and bank holding company liquidity has been addressed as a supervisory matter, without required formulaic measures.

The Basel III final framework requires banks and bank holding companies to measure their liquidity against specific liquidity tests that, although similar in some respects to liquidity measures historically applied by banks and regulators for management and supervisory purposes, going forward would be required by regulation.

The Basel final framework requires banks and bank holding companies to measure their liquidity against specific liquidity tests that, although similar in some respects to liquidity measures historically applied by banks and regulators for management and supervisory purposes, going forward would be required by regulation.

One test, referred to as the liquidity coverage ratio, or LCR, is designed to ensure that the banking entity maintains an adequate level of unencumbered high-quality liquid assets equal to the entity’s expected net cash outflow for a 30-day time horizon (or, if greater, 25% of its expected total cash outflow) under an acute liquidity stress scenario.

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The FDIA requires the federal banking agencies to prescribe standards, by regulations or guidelines, relating to internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, stock valuation and compensation, fees and benefits, and such other operational and managerial standards as the agencies deem appropriate.

The federal banking agencies have adopted the

Interagency Guidelines for Establishing Standards for Safety and Soundness.

The federal banking agencies have adopted the Interagency Guidelines for Establishing Standards for Safety and Soundness.

The guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits.

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Deposits are insured up to applicable limits by the FDIC and such insurance is backed by the full faith and credit of the United States Government.

As an institution with less than $10 billion in assets, the Bank’s assessment rates are based on the level of risk it poses to the FDIC’s deposit insurance fund (“DIF”).

Pursuant to changes adopted by the FDIC that were effective July 1, 2016, the initial base rate for deposit insurance is between three and 30 basis points.

As an institution with less than $10 billion in assets, the Bank’s assessment rates are based on the level of risk it poses to the FDIC’s DIF.

The initial base rate for deposit insurance is between three and 30 basis points.

Total base assessment after possible adjustments now ranges between 1.5 and 40 basis points.

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The Dodd-Frank Act also set a new minimum DIF reserve ratio at 1.35% of estimated insured deposits.

In October 2010, the FDIC adopted a new DIF restoration plan to ensure that the fund reserve ratio reaches 1.35% by September 30, 2020, as required by the Dodd-Frank Act.

In December 2018, the FDIC announced that the DIF reserve ratio had surpassed this benchmark.

In October, 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023.

The increased assessment rate schedules would remain in effect unless and until the reserve ratio of the Deposit Insurance Fund meets or exceeds 2 percent.

As a result of the new rule, the FDIC insurance costs of insured depository institutions, including Meridian Bank, would generally increase.

The FDIC adopted a final rule effective June 26, 2020, and applied as of April 1, 2020, to mitigate the effect on deposit insurance assessments of a bank’s participation in the Paycheck Protection Program, the Paycheck Protection Program Liquidity Facility and the Money Market Mutual Fund Liquidity Facility in connection with the COVID-19 pandemic.

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Other assessments

In addition, the Deposit Insurance Funds Act of 1996 authorized the Financing Corporation (“FICO”) to impose assessments on certain deposits in order to service the interest on the FICO’s bond obligations from deposit insurance fund assessments.

In addition, the Deposit Insurance Funds Act of 1996 authorized the FICO to impose assessments on certain deposits in order to service the interest on the FICO’s bond obligations from deposit insurance fund assessments.

The amount assessed on individual institutions is in addition to the amount, if any, paid for deposit insurance according to the FDIC’s risk-related assessment rate schedules.

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Consumer Financial Protection

We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our customers.

These laws include the Equal Credit Opportunity Act (“ECOA”), the Fair Credit Reporting Act, the Truth in Lending Act (“TILA”), the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, Fair Credit Reporting Act, the Service Members Civil Relief Act, the Right to Financial Privacy Act, Telephone Consumer Protection Act, CAN-SPAM Act, and these laws’ respective state-law counterparts, as well as state usury laws and laws regarding unfair and deceptive acts and practices.

The Bank is subject to a number of federal and state consumer protection laws that extensively govern our relationship with our customers.

These laws include the ECOA, the Fair Credit Reporting Act, the TILA, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, Fair Credit Reporting Act, the Service Members Civil Relief Act, the Right to Financial Privacy Act, Telephone Consumer Protection Act, CAN-SPAM Act, and these laws’ respective state-law counterparts, as well as state usury laws and laws regarding unfair and deceptive acts and practices.

These and other federal laws, among other things, require disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, restrict our ability to raise interest rates on extensions of credit and subject us to substantial regulatory oversight.

Violations of applicable consumer protection laws can result in significant potential liability from litigation brought by customers, including actual damages, restitution and attorneys’ fees.

Federal banking regulators, state attorneys general and state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights, action by the state and local attorneys general in each jurisdiction in which we operate and civil money penalties.

action by the state and local attorneys general in each jurisdiction in which we operate and civil money penalties.

Failure to comply with consumer protection requirements may also result in our failure to obtain any required bank regulatory approval for merger or acquisition transactions we may wish to pursue or our prohibition from engaging in such transactions even if approval is not required.

The Consumer Financial Protection Bureau (“CFPB”), has broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws with respect to certain consumer financial products and services, including the ability to require reimbursements and other payments to customers for alleged legal violations.

The CFPB has broad rule making, supervisory and enforcement powers under various federal consumer financial protection laws with respect to certain consumer financial products and services, including the ability to require reimbursements and other payments to customers for alleged legal violations.

The CFPB has the authority to impose significant penalties, as well as injunctive relief that prohibits lenders from engaging in allegedly unlawful practices.

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The FDIC has primary responsibility for examination of the Bank and enforcement with respect to various federal consumer protection laws so long as the Bank has total consolidated assets of less than $10 billion, and state authorities are responsible for monitoring our compliance with all state consumer laws.

CFPB also has the authority to require reports from institutions with less than $10 billion in assets, such as the Bank, to support the CFPB in implementing federal consumer protection laws, supporting examination activities, and assessing and detecting risks to consumers and financial markets.

The CFPB also has the authority to require reports from institutions with less than $10 billion in assets, such as the Bank, to support the CFPB in implementing federal consumer protection laws, supporting examination activities, and assessing and detecting risks to consumers and financial markets.

The consumer protection provisions of the Dodd-Frank Act and the examination, supervision and enforcement of those laws and implementing regulations by the CFPB have created a more intense and complex environment for consumer finance regulation.

The CFPB has significant authority to implement and enforce federal consumer finance laws, including the TILA, the ECOA and new requirements for financial services products provided for in the Dodd-Frank Act.

The CFPB has broad rulemaking authority for a wide range of consumer financial laws that apply to all banks including, among other things, the authority to prohibit “unfair, deceptive, or abusive” acts and practices.

The CFPB has broad rule making authority for a wide range of consumer financial laws that apply to all banks including, among other things, the authority to prohibit “unfair, deceptive, or abusive” acts and practices.

Abusive acts or practices are defined in the Dodd-Frank Act as those that (1) materially interfere with a consumer’s ability to understand a term or condition of a consumer financial product or service, or (2) take unreasonable advantage of a consumer’s (a) lack of financial savvy, (b) inability to protect herself or himself in the selection or use of consumer financial products or services, or (c) reasonable reliance on a covered entity to act in the consumer’s interests.

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Federal Home Loan Bank Membership

The Bank is a member of the Federal Home Loan Bank of Pittsburgh (“FHLB”), which serves as a central credit facility for its members.

The Bank is a member of the FHLB, which serves as a central credit facility for its members.

The FHLB is funded primarily from proceeds from the sale of obligations of the FHLB system.

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In December 2015, the federal banking regulators released a statement entitled “Interagency Statement on Prudent Risk Management for Commercial Real Estate Lending” (the “CRE Guidance”).

In the CRE Guidance, the federal banking regulators (i) expressed concerns with institutions that ease commercial real estate underwriting standards, (ii) directed financial institutions to maintain underwriting discipline and exercise risk management practices to identify, measure and monitor lending risks, and (iii) indicated that they will continue to pay special attention to commercial real estate lending

activities and concentrations going forward.

The federal banking regulators previously issued guidance in December 2006, entitled “Interagency Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices”, which stated that an institution is potentially exposed to significant commercial real estate concentration risk, and should employ enhanced risk management practices, where (1) total commercial real estate loans represent 300% or more of its total capital and (2) the outstanding balance of such institution’s commercial real estate loan portfolio has increased by 50% or more during the prior 36 months.

Leveraged Lending Guidance

In March 2013, the federal banking regulators jointly issued guidance on leveraged lending that updates and replaces the guidance for leveraged finance activities issued by the federal banking regulators in April 2001.

The revised leveraged lending guidance describes regulatory expectations for the sound risk management of leveraged lending activities, including the importance for institutions to maintain, among other things, (i) a credit limit and concentration framework consistent with the institution’s risk appetite, (ii) underwriting standards that define acceptable leverage levels, (iii) strong pipeline management policies and procedures and (iv) guidelines for conducting periodic portfolio and pipeline stress tests.

The federal banking regulators jointly issued guidance on leveraged lending that describes regulatory expectations for the sound risk management of leveraged lending activities, including the importance for institutions to maintain, among other things, (i) a credit limit and concentration framework consistent with the institution’s risk appetite, (ii) underwriting standards that define acceptable leverage levels, (iii) strong pipeline management policies and procedures and (iv) guidelines for conducting periodic portfolio and pipeline stress tests.

Community Reinvestment Act of 1977

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Our bank’s failure to comply with the CRA could, among other things, result in the denial or delay in certain corporate applications filed by us, including applications for branch openings or relocations and applications to acquire, merge or consolidate with another banking institution or holding company.

In May 2022, the Federal Reserve, the FDIC and the OCC issued a joint proposal that would, among other things (i) expand access to credit, investment and basic banking services in low - and moderate-income communities, (ii) adapt to changes in the banking industry, including internet and mobile banking, (iii) provide greater clarity, consistency and transparency in the application of the regulations and (iv) tailor performance standards to account for differences in bank size, business model, and local conditions.

The Bank will continue to evaluate the impact of any changes to the regulations implementing the CRA and their impact to the Bank’s financial condition, results of operations, and/or liquidity, which cannot be predicted at this time.

Our bank received a rating of “Satisfactory” in its most recently completed CRA examination in 2020 that was as of February 11, 2020.

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Office of Foreign Assets Control Regulation

Treasury Department’s Office of Foreign Assets Control (“OFAC”) administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others.

Treasury Department’s OFAC administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others.

OFAC publishes lists of specially designated targets and countries.

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Failure to comply with these sanctions could have serious legal and reputational consequences and could result in civil money penalties imposed on the institution by OFAC.

Failure to comply with these sanctions could also cause applicable bank regulatory authorities not to

approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.

Failure to comply with these sanctions could also cause applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.

Incentive Compensation

The Federal Reserve will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as us, that are not “large, complex banking organizations.” These reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements.

Our primary regulator, as part of the regular, risk-focused examination process, will review the incentive compensation arrangements of banking organizations, such as us, that are not “large, complex banking organizations.” These reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements.

The findings of the supervisory initiatives will be included in reports of examination.

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Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

During the second quarter of 2016, certain U.S.

regulators, including the Federal Reserve, the FDIC and the SEC, proposed revised rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion in total assets (which would not include the Bank).

The proposed revised rules would establish general qualitative requirements applicable to all covered entities, which would include:

For regulated entities having at least $1 billion in total assets the rules establish general qualitative requirements applicable to all covered entities, which include:

(i) prohibiting incentive arrangements that encourage inappropriate risks by providing excessive compensation;

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A compensation committee must have the authority to hire advisors and to have the public company fund reasonable compensation of such advisors.

Public companies will be required, once stock exchanges impose additional listing requirements under the Dodd-Frank Act, to implement “clawback” procedures for incentive compensation payments and to disclose the details of the procedures which allow recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating a restatement due to material noncompliance with financial reporting requirements.

This clawback policy is intended to apply to compensation paid within a three-year look-back window of the restatement and would cover all executives who received incentive awards.

In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including Nasdaq, to implement listing standards that require listed companies to adopt policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.

The final rule requires Meridian to adopt a clawback policy within 60 days after such listing standard becomes effective.

Cybersecurity

In March 2015, federal regulators issued two related statements regarding cybersecurity.

One statement indicates that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution.

The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyberattack involving destructive malware.

A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyberattack.

If we fail to observe the regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties.

In June 2016, federal regulators also issued a joint statement on cybersecurity of interbank messaging and wholesale payment networks.

This statement highlights that cyberattacks have targeted interbank messaging and wholesale payment networks, resulting in large-dollar fraud at several foreign institutions.

The statement notes that financial institutions

should review their risk management practices and controls over information technology and wholesale payment systems networks, including authentication, authorization, fraud detection, and response management systems and processes.

An increasing number of state laws and regulations have been enacted in recent years to implement privacy and cybersecurity standards and regulations, including data breach notification and data privacy requirements.

Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs that meet specified requirements.

This trend of activity is expected to continue to expand, requiring continual monitoring of developments in the states and nations in which our customers are located and ongoing investments in our information systems and compliance capabilities.

The GLB Act requires financial institutions to implement a comprehensive information security program that includes administrative, technical, and physical safeguards to ensure the security and confidentiality of client records and information.

The Cybersecurity Information Sharing Act is intended to improve cybersecurity in the U.S.

by enhanced sharing of information about security threats among the U.S.

government and private sector entities, including financial institutions.

The Cybersecurity Information Sharing Act also authorizes companies to monitor their own systems notwithstanding any other provision of law and allows companies to carry out defensive measures on their own systems from cyber-attacks.

The law includes liability protections for companies that share cyber threat information with third parties so long as such sharing activity is conducted in accordance with Cybersecurity Information Sharing Act.

In October 2016, the federal bank regulatory agencies issued an Advanced Notice of Proposed Rulemaking regarding enhanced cyber risk management standards, which would apply to a wide range of large financial institutions and their third-party service providers.

The proposed rules would expand existing cybersecurity regulations and guidance to focus on cyber risk management and governance, management of internal and external dependencies, and incident response, cyber resilience, and situational awareness.

In addition, the proposal contemplates more stringent standards for institutions with systems that are critical to the financial sector.

These enhanced standards would apply only to depository institutions and depository institution holding companies with total consolidated assets of $50 billion or more.

The federal banking agencies have not yet taken further action on these proposed standards.

Separately, in November 2021, the United States federal bank regulatory agencies adopted a rule regarding notification requirements for banking organizations related to significant computer security incidents.

Under the final rule, a bank holding company and a state member bank are required to notify the FRB within 36 hours of incidents that have materially disrupted or degraded, or are reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its client base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector.

In March 2022, the SEC proposed rules that would require disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance.

In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data.

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While to date, we have not experienced a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our customers and third party service providers are under constant threat and it is possible that we could experience a significant event in the future.

Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.

Risks and exposures related to cybersecurity attacks are expected to remain high due to the rapidly evolving nature and sophistication of these threats.

Future Legislation and Regulation

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What changed 10-K

Item 1. Business