What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-17 compared with 2024-03-15 · 334 added, 342 removed, 1505 unchanged (31% of the section changed)

18 unchanged sentences

(2013) issued by COSO.

Change in Accounting Principle

As discussed in Notes 1, 5, and 6 of the financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2023 due to the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification No.

326, Financial Instruments - Credit Losses (ASC 326).

The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

The adoption of the new credit loss standard and its subsequent application is also related to the critical audit matter communicated below.

Basis for Opinions

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Allowance for Credit Losses

In accordance with Accounting Standards Update (the “ASU”) 2016-13, Financial Instruments —Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , the Company adopted Accounting Standards Codification (“ASC”) 326 as of January 1, 2023 as described in Notes 1, 5, and 6 of the consolidated financial statements and the explanatory paragraph above.

The Company has identified the ACL as a critical accounting estimate.

The ACL includes quantitative and qualitative factors that comprise management's current estimate of expected credit losses, including portfolio mix and segmentation, modeling methodology, historical loss experience, relevant available information from internal and external sources relating to reasonable and supportable forecasts about future economic conditions, prepayment speeds, and qualitative adjustment factors.

The Company disclosed the impact of adoption of this standard on January 1, 2023 with a $2.9 million increase to the allowance for credit losses and a $2.2 million decrease to retained earnings for the cumulative effect adjustment recorded upon adoption.

The Company has identified the allowance for credit losses (“ACL”) as a critical accounting estimate.

The ACL includes quantitative and qualitative factors that comprise management’s current estimate of expected credit losses, including portfolio mix and segmentation, modeling methodology, historical loss experience, relevant available information from internal and external sources relating to reasonable and supportable forecasts about future economic conditions, prepayment speeds and qualitative adjustment factors as discussed in Note 1 and 6 in the consolidated financial statements.

As of December 31, 2024, the allowance for credit losses attributable to loans held for investment is $18.4 million.

We determined that auditing the allowance for credit losses on loans was a critical audit matter because of the extent of auditor judgment applied and significant audit effort to evaluate the significant subjective and complex judgments made by management throughout the initial adoption and subsequent application processes, including segmentation, the reasonable and supportable forecasts about future economic conditions, the quantitative factors, and the qualitative adjustments factors.

In addition, we used individuals with specialized skill or knowledge to assist us in auditing the judgments made by management.

We determined that auditing the qualitative factors in the allowance for credit losses on loans was a critical audit matter because of the extent of auditor judgment applied and significant audit effort to evaluate the significant subjective and complex judgments made by management.

The primary procedures we performed to address this critical audit matter included:

Testing the effectiveness of the following controls:

• Management’s initial selection of the model, including modeling methodology, historical loss experience, reasonable and supportable forecasts about future economic conditions, qualitative adjustment factors, and the model validation performed over these selections.

• Management’s review of the completeness and accuracy of internally produced data and the relevance and reliability of the external data used in the determination of the quantitative factors and the qualitative adjustment factors.

• Management’s review of the accuracy of the calculation of the quantitative factors and the qualitative adjustment factors.

• Management’s review of the reasonableness of the judgments applied in the quantitative factors and the qualitative adjustment factors.

• Management’s review of the completeness and accuracy of internally produced data and the relevance and reliability of the external data used in the determination of the qualitative adjustment factors.

• Management’s review of the accuracy of the calculation of the qualitative adjustment factors.

• Management’s review of the reasonableness of the judgments applied in the qualitative adjustment factors.

Substantively testing management’s process to determine the allowance for credit losses, including:

• Evaluating the appropriateness of the Company’s methodology applied to the adoption of ASC 326.

• Testing the relevance and reliability of the external data utilized and the completeness and accuracy of internally produced data utilized in the determination of the quantitative factors and the qualitative adjustment factors.

• Testing the mathematical accuracy of the calculation of the quantitative factors and qualitative adjustment factors.

• Evaluating the reasonableness of management’s judgments used in the determination of the quantitative factors and the qualitative adjustment factors.

• Utilizing internal specialists to evaluate the appropriateness of valuation methodologies and testing significant judgments used in the model.

• Testing the relevance and reliability of the external data utilized and the completeness and accuracy of internally produced data utilized in the determination of the qualitative adjustment factors.

• Testing the mathematical accuracy of the calculation of the qualitative adjustment factors.

• Evaluating the reasonableness of management’s judgments used in the determination of the qualitative adjustment factors.

/s/ Crowe LLP

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CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except shares and per share data) December 31,

(dollars in thousands) December 31,

2024 December 31,

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Year Ended December 31,

(dollars in thousands, except shares and per share data) 2023 2022

(dollars in thousands, except per share data) 2024 2023

Interest income:

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Deposits 74,037 57,819

Borrowings 9,828 3,196

Borrowings and subordinated debentures 10,994 9,828

Total interest expense 85,031 67,647

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Earnings on investment in life insurance 868 789

Gain on sale of MSRs 3,992 —

Gain on sale of OREO 317 —

Net change in the fair value of derivative instruments 30 91

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Net change in the fair value of loans held-for-investment 214 132

Net gain on hedging activity 28 5,439

Net (loss) gain on hedging activity ( 87 ) 28

Net loss on sale of investment securities available-for-sale ( 57 ) ( 58 )

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Professional fees 4,767 4,312

Advertising and promotion 3,730 4,336

Data processing and software 6,144 6,415

FDIC premiums 2,929 1,247

Advertising and promotion 3,293 3,730

Pennsylvania bank shares tax 972 968

Other 10,729 9,481

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$ 16,346 $ 13,243

Other comprehensive income (loss):

Net change in unrealized losses on investment securities available for sale:

Net change in unrealized gains on investment securities available for sale:

Change in fair value of investment securities available for sale, net of tax of $ 239 , and $ 682 , respectively

2,417 ( 11,285 )

Reclassification adjustment for net losses (gains) realized in net income, net of tax effect of $13, and $ 0 , respectively

Reclassification adjustment for net losses realized in net income, net of tax effect of $ 14 , and $ 13 , respectively

Reclassification adjustment for securities transferred from available-for-sale to held-to-maturity, net of tax effect of $ 28 , and $ 19 , respectively

Unrealized investment losses, net of tax effect of $ 714 , and $( 3,352 ), respectively

2,529 ( 12,247 )

Unrealized investment gains, net of tax effect of $ 281 , and $ 714 , respectively

Net change in unrealized gains (losses) on interest rate swaps used in cash flow hedges, net of tax effect of $( 129 ) and $ 22 , respectively

Total other comprehensive income (loss) 2,117 ( 12,247 )

Total other comprehensive income 1,280 2,117

Total comprehensive income $ 17,626 $ 15,360

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Balance at January 1, 2023 $ 13,156 $ 79,072 $ ( 21,821 ) $ ( 1,403 ) $ 95,815 $ ( 11,539 ) $ 153,280

Adjustment to initially apply ASU No.

2016-13 for CECL (1), net of tax — — — — ( 2,228 ) — ( 2,228 )

Net income — — — — 13,243 — 13,243

Other comprehensive loss — — — — — ( 12,247 ) ( 12,247 )

Other comprehensive income — — — — — 2,117 2,117

Dividends declared, $ 0.50 per share

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Balance at December 31, 2023 $ 13,186 $ 80,325 $ ( 26,079 ) $ ( 1,204 ) $ 101,216 $ ( 9,422 ) $ 158,022

Adjustment to initially apply ASU No.

2016-13 for CECL (1), net of tax — — — — ( 2,228 ) — ( 2,228 )

Net income — — — — 16,346 — 16,346

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— — — — ( 5,601 ) — ( 5,601 )

Net purchase of treasury stock through publicly announced plans ( 312,447 shares)

— — ( 4,258 ) — — — ( 4,258 )

Common stock issued through share-based awards and exercises ( 57,000 )

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ESOP shares committed to be released ( 26,656 )

— 322 — 198 — — 520

Stock based compensation expense — 456 — — — — 456

Balance at December 31, 2024 $ 13,243 $ 81,545 $ ( 26,079 ) $ ( 1,006 ) $ 111,961 $ ( 8,142 ) $ 171,522

(1) See Note 1 - Summary of Significant Accounting Policies - Pronouncements Adopted in 2023, for additional information .

(1) See Note 1 - Summary of Significant Accounting Policies for additional information .

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

(dollars in thousands) 2024 2023

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Adjustments to reconcile net income to net cash provided by operating activities:

Loss on sale of investment securities 58 —

Loss on sale of investment securities available-for-sale 57 58

Net amortization of investment premiums and discounts and change in fair value of equity securities 3,991 2,429

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Amortization and net impairment of servicing rights 1,481 2,045

Gain on sale of MSRs ( 3,992 ) —

Gain on sale of OREO ( 317 ) —

SBA loan income ( 3,458 ) ( 4,485 )

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Increase in accrued interest receivable ( 633 ) ( 1,962 )

Lease early termination 1,097 —

Increase in other assets ( 4,559 ) ( 2,021 )

Earnings from investment in bank owned life insurance ( 868 ) ( 789 )

(Increase) decrease in deferred income tax ( 234 ) 1,112

Increase in accrued interest payable 7,935 2,358

Increase in deferred income tax ( 799 ) ( 234 )

(Decrease) increase in accrued interest payable ( 3,464 ) 7,935

Decrease in other liabilities ( 760 ) ( 1,278 )

Net cash provided by operating activities 9,597 18,854

Cash flows used in investing activities:

Cash flows from investing activities:

Activity in available-for-sale securities:

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Maturities, repayments and calls 1,720 1,400

Purchases — ( 5,500 )

Proceeds from sale of OREO 1,861 —

Proceeds from sale of MSRs 9,877 —

Increase in restricted stock 319 ( 1,141 )

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Purchases of premises and equipment ( 568 ) ( 1,823 )

Purchase of bank owned life insurance — ( 5,000 )

Net cash used in investing activities ( 164,996 ) ( 164,185 )

Cash flows provided by financing activities:

Cash flows from financing activities:

Net increase in deposits 181,906 110,983

Increase in short-term borrowings 28,077 71,803

Increase in long-term debt 24,737 8,935

(Decrease) increase in short-term borrowings ( 42,592 ) 28,077

(Decrease) increase in long-term debt ( 7,833 ) 24,737

Repayment of subordinated debt ( 215 ) ( 328 )

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Transfers from loans held for investment to loans held for sale — 21,800

Non-cash transfers from loans receivable to OREO — 1,703

Transfer of securities from AFS to HTM — 23,655

Net loans sold, not settled 9,674 —

The accompanying notes are an integral part of these consolidated financial statements.

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Allowance for Credit Losses - Held-to-Maturity Debt Securities

We follow Accounting Standards Codification (ASC) 326-20, Financial Instruments - Credit Loss - Measured at Amortized Cost, to measure expected credit losses on held-to-maturity debt securities on a collective basis by security investment grade.

We follow ASC 326-20, Financial Instruments - Credit Loss - Measured at Amortized Cost, to measure expected credit losses on held-to-maturity debt securities on a collective basis by security investment grade.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

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On January 1, 2023, the Corporation adopted ASU 2016-13, Financial Instruments-Credit Losses ("Topic 326"), which replaced the incurred loss impairment model with an expected loss methodology that is referred to as the CECL methodology.

Prior to January 1, 2023, the Corporation calculated the Allowance based on a probable incurred credit loss model.

The Corporation now establishes an ACL in accordance with Topic 326.

The Corporation recorded a one-time decrease to retained earnings of $ 2.2 million on January 1, 2023 for the cumulative effect of adopting ASC 326, net of tax.

The transition adjustment included $ 1.2 million and $ 974 thousand post-tax impacts for loans, net of fees and costs and unfunded loan commitments, respectively, due to higher expected credit losses compared to the incurred loss methodology primarily driven by small ticket equipment leases and longer duration commercial and consumer real estate loans.

The Corporation's portfolio segments, established based on similar risk characteristics and loss behaviors, are:

• Commercial mortgage, commercial and industrial, construction, SBA loans, and commercial small business leases (commercial loans), and

• Commercial mortgage, commercial and industrial, construction, SBA loans, and commercial small business leases (commercial

• Residential, equity secured lines and loans, and installment loans (retail loans).

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Expected credit losses are estimated over the contractual term, adjusted for expected prepayments and recoveries.

The contractual term excludes any extensions, renewals and modifications unless the Corporation has reasonable expectations at the reporting date

that it will result in a modification, or they are not unconditionally cancellable.

The contractual term excludes any extensions, renewals and modifications unless the Corporation has reasonable expectations at the reporting date that it will result in a modification, or they are not unconditionally cancellable.

Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

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Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives.

elapsing between the issuance of a loan commitment and closing and sale of the loan generally ranges from 30 days to 120 days.

Time elapsing between the issuance of a loan commitment and closing and sale of the loan generally ranges from 30 days 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.

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Impairment is recognized on the income statement to the extent the fair value is less than the capitalized amount of the servicing assets.

The Corporation may elect, from time to time, to sell portions of its servicing portfolio.

Such sales are recorded in income at the time of the sale when servicing fee income is transferred to the buyer.

During the year ended December 31, 2024, the Corporation sold approximately $ 6.6 million of residential mortgage loan servicing rights associated with $ 777.2 million of serviced loans, and recorded a gain on sale of $ 4.0 million.

Other Real Estate Owned

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Revenues, such as rental income, and holding expenses, as applicable, are included in other income and other expenses, respectively.

The Corporation had one property of $ 1.7 million in OREO at December 31, 2023 and December 31, 2022.

The Corporation had one property of $ 159 thousand and two properties of $ 1.7 million OREO at December 31, 2024 and December 31, 2023, respectively.

During the quarter ended December 31, 2024, one property was sold and a gain of $ 317 thousand was recognized.

Restricted Investment in Bank Stock

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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 $ 1.0 million and $ 858 thousand, respectively for the year ended December 31, 2023 and $ 1.0 million and $ 1.1 million, respectively for the year ended December 31, 2022.

The Corporation recorded expense for the Plan and ESOP of $ 905 thousand and $ 799 thousand, respectively for the year ended December 31, 2024 and $ 1.0 million and $ 858 thousand, respectively for the year ended December 31, 2023.

The expense recorded by the Corporation for the ESOP for the year ended December 31, 2024 included a $ 490 thousand employer contribution, in addition to $ 520 thousand in stock compensation related expense.

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The Corporation is no longer subject to examination by federal, state and local taxing authorities for years before January 1, 2020.

On February 28, 2023, the Corporation approved and declared a two -for-one stock split in the form of a stock dividend, payable March 20, 2023, to shareholders of record as of March 14, 2023.

Under the terms of the stock split, the Corporation’s shareholders will receive a dividend of one share for every share held on the record date.

The dividend will be paid in authorized but unissued shares of common stock of the Corporation.

The par value of the Corporation's stock was not affected by the split and remained at $ 1.00 per

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

Stock Compensation Plans

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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.

All stock compensation issued has been adjusted for the two -for-one stock split effective February 28, 2023, as discussed further in Note 13.

Comprehensive Income

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The estimate includes consideration of the probability of default and utilization rate at default to calculate expected credit losses on commitments expected to be funded over its estimated life of one year, based on historical losses, and qualitative adjustment factors.

The allowance for credit losses for off-balance sheet exposures is included in Other liabilities on the Consolidated Balance Sheets and the provision for credit losses for off-balance sheet exposure is included in the provision for credit losses on the Consolidated Statements of Income for the periods ended December 31, 2023, and in other non-interest expense for periods prior to the adoption of ASU-2016-13 on January 1, 2023.

The allowance for credit losses for off-balance sheet exposures was $ 1.0 million and $ 173 thousand as of December 31, 2023 and December 31, 2022, respectively.

The allowance for credit losses for off-balance sheet exposures was $ 817 thousand and $ 1.0 million as of December 31, 2024 and December 31, 2023, respectively.

Derivative Financial Instruments

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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.

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.

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Fees may be fixed or, where applicable based on a percentage of transaction size.

Wealth management income for the years ended December 31, 2023 and 2022 is $ 4.9 million and $ 4.7 million.

Within other non-interest income is $ 750 thousand and $ 1.1 million for the years ended December 31, 2023 and 2022, respectively, which are in the scope of ASC 606.

Wealth management income for the years ended December 31, 2024 and 2023 was $ 5.7 million and $ 4.9 million.

Within other non-interest income is $ 716 thousand and $ 750 thousand for the years ended December 31, 2024 and 2023, respectively, which are in the scope of ASC 606.

These amounts include wire transfer fees, ATM/debit card commissions, title fee income.

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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.

While the chief operating decision maker monitors 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:

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Recent Accounting Pronouncements

As an “emerging growth company” under the JOBS Act until December 31, 2022, the Bank was permitted an extended transition period for complying with new or revised accounting standards affecting public companies up to this date.

We were classified as an emerging growth company until the end of the fiscal year following the fifth anniversary of the completion of our initial public offering, which took place on November 7, 2022.

While an emerging growth company we had 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 filed in the past, are not subject to all new or revised accounting standards generally applicable to public companies for the transition period.

Pronouncements Adopted in 2024

FASB ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments”

The Corporation adopted ASU 2016-13, as amended, on January 1, 2023, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loans, net of fees and costs, securities HTM, unfunded lending commitments (including loan commitments on loans held for investment, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842.

In addition, ASC 326 made changes to the accounting for securities AFS which now requires credit losses to be presented as an allowance rather than as an other-than-temporary impairment on securities AFS management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Corporation applied the modified retrospective method for all financial assets measured at amortized cost and securities AFS.

Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The Corporation recorded a one-time decrease to retained earnings of $ 2.2 million on January 1, 2023 for the cumulative effect of adopting ASC 326, net of tax.

The transition adjustment includes $ 1.2 million and $ 974 thousand post-tax impacts for loans, net of fees and costs and unfunded loan commitments, respectively, due to higher expected credit losses compared to the incurred loss methodology primarily driven by small ticket equipment leases and longer duration commercial and consumer real estate loans.

The impact of the change from the incurred loss model to the current expected credit loss model is detailed below.

January 1, 2023

(dollars in thousands) Pre-adoption Adoption Impact As Reported

ACL on loans and leases:

Commercial mortgage $ 4,095 $ ( 526 ) $ 3,569

Home equity lines and loans 188 439 627

Residential mortgage 948 17 965

Construction 3,075 ( 1,763 ) 1,312

Commercial and industrial 4,012 ( 1,023 ) 2,989

Small business loans 4,909 1,110 6,019

Consumer 3 ( 3 ) —

Leases, net 1,598 3,345 4,943

Total ACL on loans and leases $ 18,828 $ 1,596 $ 20,424

Reserve for unfunded commitments $ 173 $ 1,256 $ 1,429

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 cancellable by the lender are considered when determining the contractual term over which expected credit losses are measured.

The Corporation adopted ASU 2019-04 at the same time ASU 2016-13 was adopted.

FASB ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures."

In March 2022, the FASB issued ASU No.

2022-02, "Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures." The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted CECL and enhance the disclosure requirements for modifications of receivables made with borrowers experiencing financial difficulty.

In addition, the amendments require disclosure of current period gross write-offs by year of origination for financing receivables and net investment in leases in the existing vintage disclosures.

The Corporation adopted ASU 2022-02 at the same time ASU 2016-13 was adopted, as of January 1, 2023.

The adoption of this ASU resulted in updated disclosures within our financial statements but otherwise did not have a material impact on the Corporation's financial statements.

Pronouncements Not Effective as of December 31, 2023:

The following pronouncements were adopted in 2024, but did not have a material impact on our consolidated financial statements.

• 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 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 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.

The Corporation does not expect this to have a material impact on our consolidated financial statements.

• FASB ASU 2023-02, "Investments Equity Method and Joint Ventures (Topic 323) Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method"

In March 2023, the FASB issued ASU 2023-02, Investments Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method to allow reporting entities to consistently account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits.

If certain conditions are met, a reporting entity may elect to account for its tax equity investments by using the proportional amortization method regardless of the program from which it receives income tax credits, instead of only LIHTC structures.

This amendment also eliminates certain LIHTC specific guidance aligning the accounting with other equity investments in tax credit structures.

The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

The Corporation does not expect this to have a material impact on our consolidated financial statements.

FASB ASU 2023-07, “Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures”

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Early adoption is permitted.

The Corporation is currently evaluating the impact on its results of operation, financial position, liquidity, and disclosures.

FAS ASU 2023-09, “Income Taxes (Topic 740) Improvements to Income Tax Disclosures”

adoption of this standard did not have a material impact on the Corporation’s financial statements.

Refer to Note 20 - Segments for detailed segment disclosures.

Pronouncements Not Effective as of December 31, 2024:

2023-06, "Disclosure Improvements:

Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative".

This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB ASC.

The amendments in this ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC's regulations.

For entities subject to the SEC's existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules.

For all other entities, the amendments will be effective two years later.

However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity.

FASB ASU 2023-09, “Income Taxes (Topic 740) Improvements to Income Tax Disclosures”

The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

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The amendments in this update are effective for fiscal years beginning after December 15, 2024 and are to be applied on a prospective basis.

Early adoption is permitted.The Corporation is currently evaluating the impact on its disclosures.

Early adoption is permitted.

The Corporation is currently evaluating the impact on its disclosures.

FASB ASU 2024-01 Stock Compensation - Scope Application of Profits Interest and Similar Awards

The amendments in this update improve the understandability of paragraph 718-10-15-3 apply to all entities that enter into share-based payments transactions.

The amendments in this update are effective for fiscal years beginning after December 15, 2024 and are to be applied on a prospective basis.

The Corporation is currently evaluating the impact on its disclosures.

FASB Accounting Standards Update (ASU) 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures,

This amendment requires enhanced disaggregation of certain expense categories within the income statement to provide more detailed information about the nature and function of expenses.

The objective is to improve the transparency and usefulness of financial statements for users by offering greater insight into the components of operating expenses.

The amendments in this update are effective for fiscal years beginning after December 15, 2026.

These changes may be applied prospectively or retroactively.

Early adoption is permitted and The Corporation is currently evaluating the impact on its disclosures.

(2) Earnings per Common Share

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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;

if restricted stock awards were vested;

and SERP plan liabilities were satisfied with common shares.

and if restricted stock awards were vested.

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.

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

(dollars in thousands, except per share data) 2024 2023

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Total Intangible Assets $ 2,971 $ ( 204 ) $ 2,767

Total $ 4,074 $ ( 204 ) $ 3,870

Accumulated amortization of intangible assets was $ 1.8 million and $ 1.6 million as of December 31, 2024 and 2023, respectively.

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(4) Securities

The following table presents the amortized cost and fair value of securities at the dates indicated:

The following table presents the amortized cost, allowance for credit losses, and fair value of securities at the dates indicated:

December 31, 2024

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December 31, 2023

(dollars in thousands) Amortized cost Gross unrealized gains Gross unrealized losses Fair value # of Securities in unrealized loss position

(dollars in thousands) Amortized cost Gross unrealized gains Gross unrealized losses Allowance for credit losses Fair value # of Securities in unrealized loss position

Securities available-for-sale:

7 unchanged sentences

Total securities available-for-sale $ 156,492 $ 491 $ ( 10,964 ) $ — $ 146,019 133

Amortized cost Gross unrecognized gains Gross unrecognized losses Fair value # of Securities in unrecognized loss position

Amortized cost Gross unrecognized gains Gross unrecognized losses Allowance for credit losses Fair value # of Securities in unrecognized loss position

Securities held-to-maturity:

1 unchanged sentence

Total securities held-to-maturity $ 35,781 $ 52 $ ( 3,103 ) $ — $ 32,730 21

Although the Corporation’s investment portfolio overall is in a net unrealized loss position at December 31, 2023, the temporary impairment in the above noted securities is primarily the result of changes in market interest rates subsequent to purchase 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.

ACL on Securities AFS and HTM

We use credit ratings quarterly and the most recent financial information of securities' issuers annually to help evaluate the credit quality of our securities AFS and HTM portfolios on a quarterly basis.

The securities portfolio consists primarily of U.S.

government treasuries and U.S.

government agency asset backed securities which have no probability of default.

The remaining portfolio consists of highly rated municipal bonds, non-agency CMO, and corporate bonds that have a low probability of default.

For the year ended December 31, 2023, we had no significant ACL or provision expense and no charge-offs or recoveries on AFS or HTM securities.

Although the Corporation’s investment portfolio overall is in a net unrealized loss position at December 31, 2024, the temporary impairment in the above noted securities is primarily the result of changes in market interest rates subsequent to purchase 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 warranted an ACL.

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 the dates indicated:

56 unchanged sentences

Total $ 183,764 $ 174,304 $ 33,771 $ 30,492

The following table presents the gross gain on sale of investment securities available for sale on the dates indicated:

The following table presents the gross loss on sale of investment securities available for sale on the dates indicated:

(dollars in thousands) 2024 2023

1 unchanged sentence

Gross loss on sale of available for sale investments 57 58

ACL on Securities AFS and HTM

The securities portfolio consists primarily of U.S.

government treasuries and U.S.

government agency asset backed securities which have no probability of default.

The remaining portfolio consists of highly rated municipal bonds, non-agency CMO, and corporate bonds that have a low probability of default.

For the years ended December 31, 2024 and December 31, 2023, we had no ACL or provision expense and no charge-offs or recoveries on AFS or HTM securities.

Pledged Securities

As of December 31, 2023 and December 31, 2022, securities having an amortized cost of $ 60.1 million and $ 89.0 million, respectively, were specifically pledged as collateral for public funds, the FRB discount window program, FHLB borrowings and other purposes.

As of December 31, 2024 and December 31, 2023, securities having a carrying value of $ 43.3 million and $ 60.1 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.

13 unchanged sentences

Leases, net 75,987 121,632

Loans and other finance receivables, net of fees and costs $ 1,888,448 $ 1,735,598

Balances included in loans, net of fees and costs:

Loans and other finance receivables $ 2,026,292 $ 1,888,448

Balances included in loans and other finance receivables, net of fees and costs:

Residential mortgage real estate loans accounted under fair value option, at fair value $ 14,501 $ 13,726

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The remaining loans, net of fees and costs are stated at their outstanding unpaid principal balances, net of deferred fees or costs since the original intent for these loans was to hold them until payoff or maturity.

Nonaccrual and Past Due Loans, Net of Fees and Costs

The following tables present an aging of the Corporation’s loans, net of fees and costs at the dates indicated:

Past Due and Nonaccrual Loans

The following tables present an aging of the Corporation’s loans at the dates indicated:

December 31, 2024

(dollars in thousands) 30-89 days past due 90+ days past due and still accruing Total past due Current Total Accruing Loans and leases Nonaccrual loans and leases Total loans, net of fees and costs % Delinquent

(dollars in thousands) 30-59 days past due 60-89 days past due Total past due Current Total Accruing Loans and leases Nonaccrual loans and leases Total loans % Delinquent

Commercial mortgage $ 1,290 $ — $ 1,290 $ 821,877 $ 823,167 $ 809 $ 823,976 0.25 %

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Total $ 8,122 $ 611 $ 8,733 $ 1,972,434 $ 1,981,167 $ 45,125 $ 2,026,292 2.66 %

(1) Includes $ 13.7 million of loans at fair value of which $ 12.9 million are current, $ 0 are 30-89 days past due, and $ 786 thousand are nonaccrual.

(1) Includes $ 14.5 million of loans at fair value of which $ 13.7 million are current, $ 473 thousand are 30-89 days past due, and $ 340 thousand are nonaccrual.

December 31, 2023

(dollars in thousands) 30-59 days past due 60-89 days past due Total past due Current Total Accruing Loans and leases Nonaccrual loans and leases Total loans % Delinquent

Commercial mortgage $ 571 $ — $ 571 $ 737,292 $ 737,863 $ — $ 737,863 0.08 %

8 unchanged sentences

Total $ 4,410 $ 1,526 $ 5,936 $ 1,848,749 $ 1,854,685 $ 33,763 $ 1,888,448 2.10 %

(1) Includes $ 14.5 million of loans at fair value of which $ 13.8 million are current, $ 184 thousand are 30-89 days past due and $ 558 thousand are nonaccrual.

(1) Includes $ 13.7 million of loans at fair value of which $ 12.9 million are current, $ 0 are 30-89 days past due and $ 786 thousand are nonaccrual.

There were no loans in the tables above as of December 31, 2024 or December 31, 2023 that were 90+days past due and still accruing interest.

Foreclosed and Repossessed Assets

At December 31, 2023, there were 4 consumer mortgage loans totaling $ 937 thousand, secured by residential real estate properties (included in loans, net of fees and costs on the Consolidated Balance Sheets) for which formal foreclosure proceedings were in process.

At December 31, 2024 and December 31, 2023, there were 4 and 4 consumer mortgage loans, respectively, totaling $ 1.3 million and $ 937 thousand, respectively, secured by residential real estate properties (included in loans, net of fees and costs on the Consolidated Balance Sheets) for which formal foreclosure proceedings were in process.

Risks and Uncertainties

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

Additionally, most of our lending activity occurs within our primary market areas which are concentrated in southeastern Pennsylvania, Delaware, New Jersey, Maryland, and Florida, as well as other contiguous markets and represents a geographic concentration.

Additionally, most of our lending activity occurs within our primary market areas which are concentrated in southeastern Pennsylvania, Delaware, and Maryland as well as other contiguous markets and represents a geographic concentration.

Additionally, our loan portfolio is concentrated in commercial loans.

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Past Due and Nonaccrual Status

The following table presents the amortized costs basis of loans and leases on nonaccrual status, net of fees and costs as of December 31, 2023.

As of this date here were no loans 90 days or more past due and still accruing.

December 31, 2023

(dollars in thousands) Nonaccrual Without ACL Nonaccrual With ACL Total Nonaccrual

The following table presents the amortized costs basis of loans and leases on nonaccrual status and loans 90 days or more past due and still accruing, net of fees and costs as of December 31, 2024 and 2023.

As of these dates there were no loans 90 days or more past due and still accruing.

December 31, 2024 December 31, 2023

(dollars in thousands) Nonaccrual Without ACL Nonaccrual With ACL Total Nonaccrual Nonaccrual Without ACL Nonaccrual With ACL Total Nonaccrual

Commercial mortgage $ 809 $ — $ 809 $ — $ — $ —

Home equity lines and loans 1,716 — 1,716 1,037 — 1,037

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Commercial and industrial 1

9,166 2,800 11,966 3,343 12,070 15,413

Small business loans 8,179 4,091 12,270 3,607 5,833 9,440

1 unchanged sentence

Total $ 37,852 $ 7,273 $ 45,125 $ 15,860 $ 17,903 $ 33,763

(1) Increase in commercial and industrial nonaccrual loans with ACL relates to a repurchased loan as described further in footnote 6.

Collateral-dependent Loans

The following table presents the amortized cost basis of non-accruing collateral-dependent loans by class of loans and type of collateral identified as of December 31, 2023 under the current expected credit loss model:

December 31, 2023

(dollars in thousands) Real Estate Equipment and Other Total

The following table presents the amortized cost basis of non-accruing collateral-dependent loans by class of loans and type of collateral identified as of December 31, 2024 and 2023 under the current expected credit loss model:

December 31, 2024 December 31, 2023

(dollars in thousands) Real Estate Equipment and Other Total Real Estate Equipment and Other Total

Commercial mortgage $ 809 $ — $ 809 $ — $ — $ —

Home equity lines and loans 1,716 — 1,716 1,037 — 1,037

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Total $ 30,546 $ 14,579 $ 45,125 $ 14,989 $ 18,774 $ 33,763

(6) Allowance for Credit Losses (the Allowance)

The decline in equipment and other collateral for commercial and industrial loans year over year was directly due to the $ 3.5 million partial charge-off on a protracted commercial advertising loan relationship, while the increase in construction and small business loan based real estate collateral was due to the increase in non-accrual loans in both of these portfolios.

(6) Allowance for Credit Losses

The ACL is maintained at a level considered adequate to provide for estimated expected credit losses within the loan portfolio over the contractual life of an instrument that considers our historical loss experience, current conditions and forecasts of future economic conditions as of the balance sheet date.

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Roll-Forward of Allowance by Portfolio Segment

The following tables provide the activity of our allowance for credit losses for the year ended December 31, 2023 under the CECL model in accordance with ASC 326 (as adopted on January 1, 2023):

The following tables provide the activity of our allowance for credit losses for the years ended December 31, 2024 and 2023 under the CECL model in accordance with ASC 326 (as adopted on January 1, 2023):

Year Ended December 31, 2024

(dollars in thousands) Beginning Balance, prior to adoption of ASU No.

2016-13 for CECL Adjustment to initially apply ASU No.

2016-13 for CECL Charge-offs Recoveries Provision (recovery of provision) for credit losses Ending Balance

(dollars in thousands) Beginning Balance Initial PCD on purchased loan Charge-offs Recoveries Provision (recovery of provision) for credit losses Ending Balance

Commercial mortgage $ 4,375 $ — $ — $ — $ ( 906 ) $ 3,469

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Total $ 22,107 $ 574 $ ( 16,674 ) $ 838 $ 11,593 $ 18,438

(1) - Meridian repurchased, at a discount of $ 574 thousand, the remaining balance of a commercial loan participation to another bank.

The discount was recorded as a PCD loan in the ACL rollforward as presented above.

As noted above, on July 17, 2024 Meridian repurchased, at a discount of $ 574 thousand, the remaining balance of a commercial loan participation to another bank.

At the time of purchase the determination was made that this loan had experienced more than insignificant deterioration in credit quality since origination.

The impact of this loan repurchase increased the balance of non-performing loans by $ 2.1 million and also increased the ACL by $ 574 thousand as this loan is classified as a PCD loan.

This initial measurement of expected credit losses on a PCD loan has no impact on net income.

Subsequent changes to the ACL on the PCD loan would be recognized through a provision for credit losses.

Year Ended December 31, 2023

(dollars in thousands) Beginning Balance Charge-offs Recoveries Provision (Credit) Ending Balance

(dollars in thousands) Beginning Balance Adjustment to initially apply ASU No.

2016-13 for CECL Charge-offs Recoveries Provision (recovery of provision) for credit losses Ending Balance

Commercial mortgage $ 4,095 $ ( 526 ) $ — $ — $ 806 $ 4,375

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(dollars in thousands) 2024 2023

Provision for credit losses - funded $ 7,234 $ 2,488

Recovery of provision for credit losses - unfunded ( 419 ) —

Provision for credit losses - funded loans $ 11,593 $ 7,234

Recovery for credit losses - unfunded loans ( 193 ) ( 419 )

Total provision for credit losses $ 11,400 $ 6,815

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1) Excludes deferred fees and loans carried at fair value.

The following table details the pre-CECL allocation of the allowance for loan and lease losses and the carrying value for loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment at:

December 31, 2023

Allowance on loans and leases Carrying value of loans and leases

(dollars in thousands) Individually

for impairment Collectively

for impairment Total Individually

for impairment Collectively

for impairment Total

Allowance for credit losses Carrying value of loans and leases

(dollars in thousands) Individually evaluated Collectively evaluated Total Individually evaluated Collectively evaluated Total

Commercial mortgage $ — $ 4,375 $ 4,375 $ — $ 737,863 $ 737,863

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1) Excludes deferred fees and loans carried at fair value.

The $ 3.7 million decline in the overall funded ACL from December 31, 2023 to December 31, 2024 was driven by declines in the ACL on commercial and industrial loans and small business loans due to net charge-offs recorded during 2024 in both of these portfolios, combined with a decline in the ACL on the lease portfolio as we continue to refocus away from lease originations.

Credit Quality Indicators

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December 31, 2024 Revolving Loans Converted to Term Loans Revolving Loans Total

2023 2022 2021 2020 2019 Prior

(dollars in thousands) 2024 2023 2022 2021 2020 Prior

Commercial mortgage

2 unchanged sentences

Substandard — 200 30 — 4,681 3,184 — — 8,095

Doubtful — — — — — — — — —

Total $ 118,289 $ 103,642 $ 174,119 $ 141,018 $ 97,433 $ 188,108 $ 1,178 $ 189 $ 823,976

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Pass/Watch $ 89,417 $ 61,040 $ 38,315 $ 10,935 $ 7,015 $ 4,229 $ 123 $ 34,613 $ 245,687

1 unchanged sentence

Substandard — — 1,277 1,605 516 2,608 — 3,567 9,573

Doubtful — — — — — — — — —

Total $ 89,577 $ 62,225 $ 42,540 $ 12,540 $ 7,531 $ 6,837 $ 123 $ 38,180 $ 259,553

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Commercial and industrial

2 unchanged sentences

Substandard — 115 3,813 2,365 — 9,978 — 12,566 28,837

Doubtful — — — — — — — — —

Total $ 81,352 $ 24,623 $ 23,256 $ 18,437 $ 8,499 $ 33,198 $ — $ 178,001 $ 367,366

Current period gross charge-offs $ ( 209 ) $ ( 55 ) $ — $ ( 2 ) $ — $ — $ — $ — $ ( 266 )

Year-to-date gross charge-offs $ ( 351 ) $ ( 1,136 ) $ ( 41 ) $ — $ — $ ( 1,324 ) $ — $ ( 3,515 ) $ ( 6,367 )

Small business loans

2 unchanged sentences

Substandard — 1,804 1,294 8,481 4,085 — — 2,089 17,753

Doubtful — — — — — — — — —

Total $ 35,720 $ 25,943 $ 26,247 $ 33,616 $ 12,116 $ 6,226 $ — $ 15,907 $ 155,775

Current period gross charge-offs $ — $ — $ — $ ( 11 ) $ ( 912 ) $ — $ — $ ( 565 ) $ ( 1,488 )

Year-to-date gross charge-offs $ — $ ( 118 ) $ ( 1,986 ) $ ( 1,064 ) $ ( 352 ) $ — $ — $ ( 780 ) $ ( 4,300 )

Total by risk rating

2 unchanged sentences

Substandard — 2,119 6,414 12,451 9,282 15,770 — 18,222 64,258

Doubtful — — — — — — — — —

Total $ 324,938 $ 216,433 $ 266,162 $ 205,611 $ 125,579 $ 234,369 $ 1,301 $ 232,277 $ 1,606,670

Total current period gross charge-offs $ ( 209 ) $ ( 55 ) $ — $ ( 13 ) $ ( 912 ) $ — $ — $ ( 565 ) $ ( 1,754 )

The Corporation had no loans with a risk rating of Doubtful included within recorded investment in loans and leases held for investment at December 31, 2023.

Total year-to-date gross charge-offs $ ( 351 ) $ ( 1,254 ) $ ( 2,027 ) $ ( 1,064 ) $ ( 352 ) $ ( 1,324 ) $ — $ ( 4,295 ) $ ( 10,667 )

December 31, 2023 Revolving Loans Converted to Term Loans Revolving Loans Total

(dollars in thousands) 2023 2022 2021 2020 2019 Prior

Commercial mortgage

Pass/Watch $ 106,341 $ 160,302 $ 158,647 $ 97,535 $ 56,382 $ 133,349 $ 511 $ 423 $ 713,490

Special Mention — — — 4,425 4,341 9,975 667 — 19,408

Substandard 200 — 571 — 1,635 2,233 — 326 4,965

Total $ 106,541 $ 160,302 $ 159,218 $ 101,960 $ 62,358 $ 145,557 $ 1,178 $ 749 $ 737,863

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Pass/Watch $ 67,776 $ 88,737 $ 21,793 $ 27,336 $ 2,307 $ 2,093 $ 123 $ 25,976 $ 236,141

Special Mention — — 1,329 — 511 4,329 — 2,924 9,093

Substandard — — — — — 1,206 — — 1,206

Total $ 67,776 $ 88,737 $ 23,122 $ 27,336 $ 2,818 $ 7,628 $ 123 $ 28,900 $ 246,440

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Commercial and industrial

Pass/Watch $ 26,314 $ 38,748 $ 24,523 $ 8,449 $ 4,148 $ 33,726 $ — $ 131,304 $ 267,212

Special Mention 500 9 — — — 1,361 — 6,440 8,310

Substandard — — 2,906 — 300 9,469 — 14,694 27,369

Total $ 26,814 $ 38,757 $ 27,429 $ 8,449 $ 4,448 $ 44,556 $ — $ 152,438 $ 302,891

Year-to-date gross charge-offs $ ( 209 ) $ ( 55 ) $ — $ ( 2 ) $ — $ — $ — $ — $ ( 266 )

Small business loans

Pass/Watch $ 35,764 $ 26,621 $ 37,278 $ 11,687 $ 6,672 $ 920 $ — $ 12,507 $ 131,449

Special Mention — — — 909 — — — 314 1,223

Substandard 49 1,523 5,090 2,122 — — — 886 9,670

Total $ 35,813 $ 28,144 $ 42,368 $ 14,718 $ 6,672 $ 920 $ — $ 13,707 $ 142,342

Year-to-date gross charge-offs $ — $ — $ — $ ( 11 ) $ ( 912 ) $ — $ — $ ( 565 ) $ ( 1,488 )

Total by risk rating

Pass/Watch $ 236,195 $ 314,408 $ 242,241 $ 145,007 $ 69,509 $ 170,088 $ 634 $ 170,210 1,348,292

Special Mention 500 9 1,329 5,334 4,852 15,665 667 9,678 38,034

Substandard 249 1,523 8,567 2,122 1,935 12,908 — 15,906 43,210

Total $ 236,944 $ 315,940 $ 252,137 $ 152,463 $ 76,296 $ 198,661 $ 1,301 $ 195,794 $ 1,429,536

Total year-to-date gross charge-offs $ ( 209 ) $ ( 55 ) $ — $ ( 13 ) $ ( 912 ) $ — $ — $ ( 565 ) $ ( 1,754 )

The Corporation had no loans with a risk rating of Doubtful included within recorded investment in loans and leases held for investment at December 31, 2024 and December 31, 2023.

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 at the dates indicated:

December 31, 2024 Revolving Loans Total

2023 2022 2021 2020 2019 Prior

(dollars in thousands) 2024 2023 2022 2021 2020 Prior

Home equity lines and loans

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Total $ 705 $ 332 $ 620 $ 302 $ 328 $ 3,655 $ 84,779 $ 90,721

Current period gross charge-offs $ — $ — $ — $ — $ ( 33 ) $ — $ ( 54 ) $ ( 87 )

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ ( 86 ) $ ( 86 )

Residential mortgage (1)

2 unchanged sentences

Total $ 14,007 $ 44,113 $ 143,276 $ 17,513 $ 7,165 $ 11,990 $ — $ 238,064

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Performing $ 14 $ 32 $ 22 $ — $ — $ 241 $ 40 $ 349

1 unchanged sentence

Total $ 14 $ 32 $ 22 $ — $ — $ 241 $ 40 $ 349

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ ( 2 ) $ ( 2 )

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ ( 5 ) $ ( 5 )

Performing $ 741 $ 15,594 $ 36,229 $ 17,253 $ 4,326 $ — $ — $ 74,143

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Total $ 741 $ 15,892 $ 37,174 $ 17,746 $ 4,434 $ — $ — $ 75,987

Current period gross charge-offs $ ( 128 ) $ ( 2,165 ) $ ( 1,450 ) $ ( 290 ) $ — $ — $ — $ ( 4,033 )

Year-to-date gross charge-offs $ — $ ( 968 ) $ ( 3,606 ) $ ( 1,077 ) $ ( 265 ) $ — $ — $ ( 5,916 )

Total by Payment Performance

2 unchanged sentences

Total $ 15,467 $ 60,369 $ 181,092 $ 35,561 $ 11,927 $ 15,886 $ 84,819 $ 405,121

Total current period gross charge-offs $ ( 128 ) $ ( 2,165 ) $ ( 1,450 ) $ ( 290 ) $ ( 33 ) $ — $ ( 56 ) $ ( 4,122 )

Total year-to-date gross charge-offs $ — $ ( 968 ) $ ( 3,606 ) $ ( 1,077 ) $ ( 265 ) $ — $ ( 91 ) $ ( 6,007 )

(1) Excludes $ 14.5 million of loans at fair value.

December 31, 2022

(dollars in thousands) Pass Special

mention Substandard Doubtful Total

Commercial mortgage $ 536,705 $ 25,309 $ 3,386 $ — $ 565,400

December 31, 2023 Revolving Loans Total

(dollars in thousands) 2023 2022 2021 2020 2019 Prior

Home equity lines and loans

Construction 260,085 11,870 — — 271,955

Commercial and industrial 295,502 6,587 39,289 — 341,378

Small business loans 131,690 — 4,465 — 136,155

Performing $ 343 $ 795 $ 314 $ 352 $ 2,191 $ 2,295 $ 68,600 $ 74,890

Nonperforming — — — — — — 1,397 1,397

Total $ 343 $ 795 $ 314 $ 352 $ 2,191 $ 2,295 $ 69,997 $ 76,287

December 31, 2022

(dollars in thousands) Performing Non-

performing Total

Year-to-date gross charge-offs $ — $ — $ — $ — $ ( 33 ) $ — $ ( 54 ) $ ( 87 )

Residential mortgage (1)

$ 205,881 $ 1,454 $ 207,335

Consumer 488 — 488

Leases, net 138,084 902 138,986

Performing $ 48,576 $ 154,219 $ 22,237 $ 6,260 $ 456 $ 11,380 $ — $ 243,128

Nonperforming — 1,350 — 1,043 — 1,357 — 3,750

Total $ 48,576 $ 155,569 $ 22,237 $ 7,303 $ 456 $ 12,737 $ — $ 246,878

(1) There were four nonperforming residential mortgage loans at December 31, 2022 with a combined outstanding principal balance of $ 558 thousand, which were carried at fair value and not included in the table above.

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 at the dates indicated.

December 31, 2022

(dollars in thousands) Recorded

investment Principal

balance Related

Impaired loans with related allowance:

Commercial and industrial $ 11,099 $ 12,095 $ 776

Small business loans 3,730 3,730 1,449

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Performing $ 39 $ 35 $ — $ — $ 32 $ 234 $ 49 $ 389

Nonperforming — — — — — — — —

Total $ 39 $ 35 $ — $ — $ 32 $ 234 $ 49 $ 389

Impaired loans without related allowance:

Commercial mortgage $ 2,445 $ 2,456 $ —

Commercial and industrial 1,448 1,494 —

Small business loans 797 797 —

Home equity lines and loans 1,097 1,097 —

Residential mortgage 1,454 1,454 —

Construction 1,206 1,206 —

Leases 902 902 —

Year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ ( 2 ) $ ( 2 )

Performing $ 23,054 $ 55,940 $ 30,876 $ 9,718 $ — $ — $ — $ 119,588

Nonperforming 263 1,194 368 219 — — — 2,044

Total $ 23,317 $ 57,134 $ 31,244 $ 9,937 $ — $ — $ — $ 121,632

Grand Total $ 24,178 $ 25,231 $ 2,225

Troubled Debt Restructuring

As result of the adoption of guidance related to CECL effective as of January 1, 2023, the Corporation had no reportable balances related to TDRs as of and for the year ended December 31, 2023.

See Note 1 - Summary of Significant Accounting Policies for additional information.

The following table presents information about TDRs at the dates indicated:

(dollars in thousands) December 31,

TDRs included in nonperforming loans and leases $ 207

TDRs in compliance with modified terms 3,573

Total TDRs $ 3,780

There was 1 modification granted during the year ended December 31, 2022 on commercial mortgages for $ 684 thousand.

No modifications granted during the twelve months ended December 31, 2022 subsequently defaulted during the same time period.

Year-to-date gross charge-offs $ ( 128 ) $ ( 2,165 ) $ ( 1,450 ) $ ( 290 ) $ — $ — $ — $ ( 4,033 )

Total by Payment Performance

Performing $ 72,012 $ 210,989 $ 53,427 $ 16,330 $ 2,679 $ 13,909 $ 68,649 $ 437,995

Nonperforming 263 2,544 368 1,262 — 1,357 1,397 7,191

Total $ 72,275 $ 213,533 $ 53,795 $ 17,592 $ 2,679 $ 15,266 $ 70,046 $ 445,186

Total year-to-date gross charge-offs $ ( 128 ) $ ( 2,165 ) $ ( 1,450 ) $ ( 290 ) $ ( 33 ) $ — $ ( 56 ) $ ( 4,122 )

(1) Excludes $ 13.7 million of loans at fair value.

Modifications to Borrowers Experiencing Financial Difficulty

4 unchanged sentences

therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

The following presents, by class of loans, information regarding accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the year ended December 31, 2023.

The following presents, by class of loans, information regarding accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the years ended December 31, 2024 and 2023.

Year Ended December 31, 2024

Number of Loans Amortized Cost Basis % of Total Class of Financing Receivable Related Reserve

Year Ended December 31, 2023

Number of Loans Amortized Cost Basis % of Total Class of Financing Receivable Related Reserve Number of Loans Amortized Cost Basis % of Total Class of Financing Receivable Related Reserve

(dollars in thousands)

1 unchanged sentence

Small business loans 6 $ 3,534 2.3 % $ — 6 $ 1,880 1.3 % $ —

Commercial & industrial 2 2,401 0.8 % —

Commercial 7 3,156 0.9 % — 2 2,401 0.8 % —

Total 13 $ 6,690 $ — 8 $ 4,281 $ —

1 unchanged sentence

Small business loans 3 $ 1,663 1.1 % $ — 3 $ 1,726 1.2 % $ 38

Commercial & industrial 1 1,324 0.4 % 689

Construction 2 1,856 0.7 % — — — — % —

Commercial 5 2,792 0.8 % — 1 1,324 0.4 % 689

Residential mortgage 3 546 0.2 % 19 — — — % —

Total 13 $ 6,857 $ 19 4 $ 3,050 $ 727

The following presents, by class of loans, information regarding accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the year ended December 31, 2023.

Year Ended December 31, 2024

Number of Loans

Financial Effect

Year Ended December 31, 2023

Number of Loans Number of Loans

Financial Effect Financial Effect

Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:

Small business loans 6 Extend maturity date

Commercial & industrial 2 Extend maturity date

Small business loans 6 Extend maturity date 6 Extend maturity date

Commercial 7 Extend maturity date and allow additional lender funding 2 Extend maturity date

Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:

Small business loans 3 Extend term and allow additional lender funding

Commercial & industrial 1 Extend term and allow additional lender funding

There were 12 modifications granted to borrowers experiencing financial difficulty for the year ended December 31, 2023.

There were no loans that had a payment default during the year ended December 31, 2023 that were modified in the 12 months before default to borrowers experiencing financial difficulty.

There were no commitments to lend additional funds to the borrowers experiencing financial difficulty that had modifications during the year ended December 31, 2023.

Small business loans 3 Extend maturity date 3 Extend term and allow additional lender funding

Construction 2 Extend maturity date —

Commercial 5 Extend maturity date 1 Extend term and allow additional lender funding

Residential mortgage 3 Extend maturity date —

There were 26 and 12 modifications granted to borrowers experiencing financial difficulty for the year ended December 31, 2024 and December 31, 2023, respectively.

There were no loans that had a payment default that were modified in the 12 months before the years ended December 31, 2024 and December 31, 2023.

There were no commitments to lend additional funds to the borrowers experiencing financial difficulty that had modifications during the years ended December 31, 2024 and December 31, 2023.

(7) Bank Premises and Equipment

11 unchanged sentences

Total depreciation expense for the years ended December 31, 2024 and 2023 totaled $ 2.0 million and $ 1.6 million, respectively.

Leasehold improvements decreased during the year ended December 31, 2024 due to the early termination of our Blue Bell office lease.

The components of deposits at December 31, 2024 and 2023 are as follows:

7 unchanged sentences

Total $ 2,005,368 $ 1,823,462

Included in time deposits as of December 31, 2023, and December 31, 2022, are $ 429.9 million and $ 375.3 million of brokered deposits, respectively.

Included in time deposits as of December 31, 2024, and 2023, are $ 500.4 million and $ 429.9 million of brokered deposits, respectively.

The aggregate amount of time deposits in denominations over $250 thousand were $ 545.7 million and $ 458.8 million as of December 31, 2024 and 2023, respectively.

3 unchanged sentences

(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 FHLB and one unsecured Federal funds borrowing facilities with correspondent banks of $ 15 million.

The Corporation’s short-term borrowings generally consist of federal funds purchased and short-term borrowings extended under agreements with the FHLB or other correspondent banks.

The Corporation has 5 unsecured borrowing facilities with correspondent banks for up to $ 56 million in total.

Federal funds purchased generally represent one-day borrowings.

The Corporation had $ 0 in Federal funds purchased at December 31, 2023 and December 31, 2022.

The Corporation had $ 0 and $ 0 in Federal funds purchased at December 31, 2024 and December 31, 2023, respectively.

The Corporation also has a facility with the Federal Reserve Bank discount window of $ 5 million.

This facility is fully secured by investment securities.

This facility is fully secured by investment securities and pledged loans.

There were no borrowings under this at December 31, 2024 and December 31, 2023.

Additionally, the Corporation has a facility with the Federal Reserve’s BTFP of $ 33 million.

This facility was created by the Federal Reserve in March 2023 and is fully secured by United States Treasury Bonds.

There were $ 33 million in borrowings under this facility at December 31, 2023.

The Corporation’s facility with the Federal Reserve’s BTFP expired in March 2024.

The Corporation has a revolving line of credit with ACBB of $ 5 million that is used to fund operating activities of the Corporation and had an outstanding balance of $ 5 million at December 31, 2024.

The following table presents short-term borrowings at the dates indicated:

5 unchanged sentences

FRB BTFP Advances 3/29/2024 4.76 % — 33,000

ACBB Holding Company Revolving LOC 6/25/2025 7.75 % 5,000 —

FHLB Mid-term Repo Fixed 9/30/2024 4.60 % — 3,432

FHLB Mid-term Repo Fixed 10/14/2025 5.16 % 9,492 —

FHLB Mid-term Repo Fixed 12/22/2025 4.23 % 8,935 —

Total Short-Term Borrowings $ 98,632 $ 141,224

7 unchanged sentences

FHLB Mid-term Repo Fixed 7/14/2026 4.57 % 15,245 15,245

FHLB Mid-term Repo Fixed 10/14/2025 5.16 % — 9,492

Total Long-Term Borrowings $ 25,839 $ 33,672

15 unchanged sentences

Total Subordinated Debentures $ 49,743 $ 49,836

The Corporation issued the 2023 and 2019 Debentures, while the Bank issued the 2013, 2011 and 2008 Debentures.

Upon formation of the bank holding company, the Corporation assumed the 2013, 2011 and 2008 Debentures.

Interest accrues at fixed rates of 8.00 %, 6.50 %, and 6.00 % on the 2023, 2013 and 2011 Debentures, respectively.

Interest accrued at a fixed rate of 5.38 % on the 2019 Debentures from the date of issuance up to and including December 30, 2024.

As of the December 31, 2024, the 2019 Debentures converted to a floating rate instrument resetting quarterly at 395 basis points over the 30 day term SOFR.

Interest is paid semi-annually on the 2023 and 2019 Debentures, and paid quarterly on the 2013 and 2011 debentures.

The 2013, 2011 and 2008 Debentures are includable as Tier 2 capital for determining the Bank’s compliance with regulatory capital requirements.

The 2019 and 2023 Debentures are included as Tier 2 capital for the Corporation and as Tier 1 capital for the Bank.

The 2013 and 2011 Debentures are included in Tier 2 capital for the Bank.

The 2019 and 2023 Debentures are included as Tier 2 capital for the Corporation and as Tier 1 capital for the Bank through it investment in sub.

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.

9 unchanged sentences

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 $ 945.2 million of residential mortgage loans as of December 31, 2023 and $ 1.0 billion as of December 31, 2022.

During the year ended December 31, 2024, the Corporation sold approximately $ 6.6 million of residential mortgage loan servicing rights associated with $ 777.2 million of serviced loans.

The Corporation received $ 10.1 million for the sale, and will receive a final payment of approximately $ 534 thousand up to one year from the date of the sale, or after all transfer conditions have been satisfied.

The Corporation has $ 121.8 million of residential mortgage loans being serviced as of December 31, 2024 compared to $ 945.2 million as of December 31, 2023.

During the year ended December 31, 2024 the Corporation recognized servicing fee income of $ 2.0 million compared to $ 2.5 million, during the year ended December 31, 2023.

4 unchanged sentences

Amortization of servicing rights ( 1,136 ) ( 1,343 )

Sale of servicing rights ( 6,458 ) —

Change in valuation allowance — 2

Balance at end of the period $ 1,124 $ 8,621

Activity in the valuation allowance for MSRs was as follows:

(dollars in thousands) 2023 2022

Valuation allowance, beginning of period $ ( 2 ) $ ( 8 )

Impairment — ( 4 )

Recovery 2 10

Valuation allowance, end of period $ — $ ( 2 )

The Corporation uses assumptions and estimates in determining the fair value of MSRs.

43 unchanged sentences

At December 31, 2023, 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 14.70 % and a discount rate equal to 14.66 %.

The change in valuation allowance due to impairment noted in the tables above, was largely due to the decrease in discount rate partially offset by the increase in prepayment speed as a result of the rising interest rate environment.

The sensitivity of the current fair value of the SBA loan servicing rights to immediate 10% and 20% favorable and unfavorable changes in key economic assumptions are included in the following table.

16 unchanged sentences

(12) Lease Commitments

On January 1, 2022, the Corporation adopted ASU 2016-02 (Topic 842), “Leases”, as further explained in Note 1, Summary of Significant Accounting Policies.

The Corporation’s operating leases consist of various retail branch locations and loan production offices.

6 unchanged sentences

As of December 31, 2023 and the Corporation’s ROU assets and related lease liabilities were $ 9.4 million and $ 9.4 million, respectively.

The decrease year over year was due to the termination of the Blue Bell lease.

These amounts are included within other assets and other liabilities , respectively.

5 unchanged sentences

Total lease expense $ 3,031 $ 2,379

Operating lease expense increased $ 1.0 million, net, due to fees, credits and other disposal costs for the early termination of the Blue Bell lease.

Supplemental cash flow information related to leases was as follows:

10 unchanged sentences

Because we generally do not have access to the rate implicit in the lease, we utilize our incremental borrowing rate as the discount rate.

The weighted average discount rate associated with operating leases as of December 31, 2023 is 3.23 %.

The weighted average discount rate associated with operating leases as of December 31, 2024 and 2023 was 3.09 % and 3.23 %, respectively.

(13) Stock-Based Compensation

4 unchanged sentences

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 March 25, 2023 to authorize the Board of Directors to grant up to an aggregate of 1,673,800 stock awards that can take different forms.

A total of 1,222,000 stock options and 86,416 shares of restricted stock have been granted under the 2016 Plan through December 31, 2023, including the impact of the two -for-one stock split.

The Meridian Bank 2016 Equity Incentive Plan (2016 Plan) was amended on May 25, 2023 to authorize the Board of Directors to grant up to an aggregate of 1,673,800 stock awards that can take different forms.

A total of 1,365,250 stock options and 91,776 shares of restricted stock have been granted under the 2016 Plan through December 31, 2024.

As of December 31, 2024 there were 344,480 stock awards remaining to be issued.

28 unchanged sentences

The weighted average fair value of options granted in 2023 was $ 2.37 to per share.

Total stock option compensation cost for the years ended December 31, 2023 and 2022 was $ 650 thousand and $ 1.0 million, respectively.

Total stock option compensation cost for the years ended December 31, 2024 and 2023 was $ 456 thousand and $ 650 thousand, respectively.

During the year ended December 31, 2024 and 2023, the Corporation received $ 442 thousand and $ 279 thousand from the exercise of stock options, respectively.

The Corporation recognized and $ 3 thousand and $ 116 thousand in excess tax benefits related to stock compensation cost for the twelve months ended December 31, 2023 and 2022.

The Corporation recognized $ 18 thousand and $ 3 thousand in excess tax benefits related to stock compensation cost for the twelve months ended December 31, 2024 and 2023.

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.

5 unchanged sentences

The restricted stock awards granted under the 2016 Plan vest according to each award’s specific vesting schedule.

No awards were granted in 2023 and 2022.

All awards granted in 2022 vested 100 % one year from the grant date.

There were 5,360 awards granted in 2024, while no awards were granted in 2023.

All awards granted in 2024 vest 100 % one year from 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.

1 unchanged sentence

Outstanding at December 31, 2023 — $ —

Vested ( 53,210 ) 9.33

Granted 5,360 8.73

Outstanding / nonvested at December 31, 2024 5,360 $ 8.73

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, 2023 and 2022, the Corporation recognized $ 0 and $ 70 thousand of expense related to the restricted stock, respectively.

As of December 31, 2023 and 2022 there was $ 0 in unrecognized compensation costs related to restricted stock.

For the year ended December 31, 2024, the Corporation recognized $ 47 thousand of expense related to the restricted stock.

As of December 31, 2024 there was $ 0 in unrecognized compensation costs related to restricted stock.

(14) Income Taxes

15 unchanged sentences

Bank owned life insurance ( 182 ) ( 0.8 ) ( 166 ) ( 1.0 )

(dollars in thousands) December 31, 2023 December 31, 2022

Stock based compensation 70 0.3 123 0.7

ESOP 23 0.1 26 0.2

Prior year return to provision adjustment 490 2.3 — —

Other ( 10 ) — 123 0.8

5 unchanged sentences

Allowance for credit losses $ 4,179 $ 4,949

Unrealized loss on available for sale securities 2,718 3,327

Accrued incentive compensation

Accrued retirement 948 826

Unrealized gain on available for sale securities 2,387 2,718

Mortgage pipeline fair-value adjustment 541 538

6 unchanged sentences

Property and equipment $ ( 616 ) $ ( 752 )

Loan servicing rights ( 2,630 ) ( 2,762 )

Intangibles ( 154 ) ( 106 )

(dollars in thousands) December 31,

2024 December 31,

Loan servicing rights ( 993 ) ( 2,630 )

Hedge instrument fair-value adjustment ( 50 ) ( 42 )

1 unchanged sentence

Deferred loan costs ( 1,612 ) ( 1,637 )

Other ( 183 ) —

Total deferred tax liability $ ( 3,901 ) $ ( 5,404 )

12 unchanged sentences

(dollars in thousands) 2024 2023

Loans receivable from related parties - beginning at end of period $ 2,046 $ 5,098

Advances for related parties 447 5,196

Proceeds repayments from related party ( 415 ) ( 6,070 )

Loans receivable from related parties - balance at beginning of period $ 1,579 $ 2,046

Advances to related parties 106 447

Repayments from related parties ( 167 ) ( 415 )

Effect of changes in composition of related parties — ( 499 )

1 unchanged sentence

Deposits of related parties totaled $ 36.5 million and $ 30.6 million at December 31, 2024 and 2023, respectively.

Subordinated debt held by related parties totaled $ 1.1 million and $ 208 thousand at December 31, 2023 and 2022, respectively.

The Corporation paid legal fees of $ 14 thousand to a law firm of a director for the year ended December 31, 2022.

The director retired from the law firm in 2022.

Subordinated debt held by related parties totaled $ 844 thousand and $ 1.1 million at December 31, 2024 and 2023, respectively.

(16) Financial Instruments with Off-Balance Sheet Risk, Commitments and Contingencies

11 unchanged sentences

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

The Corporation evaluates each customer’s credit worthiness on a case-by-case basis.

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.

6 unchanged sentences

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 3 indemnifications signed for the year ended December 31, 2023 for $ 860 thousand, and 2 indemnification signed for the year ended December 31, 2022 for $ 734 thousand.

There was 4 indemnifications signed for the year ended December 31, 2024 for $ 1.2 million, and 3 indemnification signed for the year ended December 31, 2023 for $ 860 thousand.

A repurchase reserve of $ 500 thousand was recorded at December 31, 2024, as compared to $ 508 thousand as of December 31, 2023.

10 unchanged sentences

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:

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’s CBLR ratio wa s 9.46 % at December 31, 2023 .

Under the Community Bank Leverage Ratio framework, a community banking organization that is less than $10 billion in total consolidated assets, and has limited amounts of certain assets and off-balance sheet exposures, and a CBLR greater than 9% can elect to report a single regulatory capital ratio.

The Corporation has elected to be measured under this framework for Bank capital adequacy and had ratios of 9.21 % and 9.46 % at December 31, 2024 and December 31, 2023, respectively.

The Corporation is exempt from CBLR.

As of December 31, 2024, the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

3 unchanged sentences

The Banks’s actual and required capital amounts and ratios under the CBLR rules at December 31, 2024 and 2023 are presented below.

Actual For Capital Adequacy Purposes (includes applicable capital conservation buffer) To Be Well Capitalized Under Prompt Corrective Action Provisions

(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

December 31, 2023

Tier 1 leverage ratio:

Meridian Bank $ 211,355 9.46 % $ 89,399 4.00 % $ 111,749 5.00 %

Common tier 1 risk-based capital ratio:

Meridian Bank 211,355 10.10 % 146,448 7.00 % 135,987 6.50 %

Tier 1 risk-based capital ratio:

Meridian Bank 211,355 10.10 % 177,829 8.50 % 167,369 8.00 %

Total risk-based capital ratio:

Meridian Bank 233,671 11.17 % 219,672 10.50 % 209,211 10.00 %

Bank Well-capitalized minimum

2024 December 31,

Tier 1 leverage ratio:

Meridian Bank $ 196,584 9.95 % $ 78,995 4.00 % $ 98,743 5.00 %

Tier 1 leverage ratio (CBLR) 9.21 % 9.46 % 5.00 %

Common tier 1 risk-based capital ratio 10.33 % 10.10 % 6.50 %

Meridian Bank 196,584 10.73 % 128,305 7.00 % 119,140 6.50 %

Tier 1 risk-based capital ratio 10.33 % 10.10 % 8.00 %

Meridian Bank 196,584 10.73 % 155,799 8.50 % 146,634 8.00 %

Total risk-based capital ratio 11.20 % 11.17 % 10.00 %

Meridian Bank 217,593 11.87 % 192,457 10.50 % 183,293 10.00 %

(18) Fair Value Measurements and Disclosures

17 unchanged sentences

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.

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.

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis.

18 unchanged sentences

Treasuries 15,450 15,450 — —

December 31, 2024

(dollars in thousands) Total Level 1 Level 2 Level 3

government agency CMO 11,729 — 11,729 —

4 unchanged sentences

Interest rate lock commitments 216 — — 216

Forward commitments 30 — 30 —

Customer derivatives - interest rate swaps 2,755 — 2,755 —

Fair Value Hedge 3 — 3 —

Interest rate swaps 9 — 9 —

Total $ 226,317 $ 15,450 $ 210,651 $ 216

Interest rate lock commitments $ 35 $ — $ — $ 35

Forward commitments 41 — 41 —

Customer derivatives - interest rate swaps 2,745 — 2,745 —

Risk Participation Agreements 91 — 91 —

Interest rate swaps 61 — 61 —

Total $ 2,932 $ — $ 2,897 $ 35

13 unchanged sentences

Interest rate lock commitments 214 — — 214

Forward commitments — — — —

Customer derivatives - interest rate swaps 3,528 — 3,528 —

1 unchanged sentence

Interest rate lock commitments $ 17 $ — $ — $ 17

Forward commitments 41 — 41 —

Customer derivatives - interest rate swaps 3,544 — 3,544 —

11 unchanged sentences

(1) Individually evaluated loans are those in which the Corporation has measured impairment generally based on the fair value of the loan’s collateral.

The following table details the valuation techniques for Level 3 impaired loans.

The following table details the valuation techniques for Level 3 collateral dependent loans.

(dollars in thousands) Fair Value Valuation Technique Significant Unobservable Input Range of Inputs

22 unchanged sentences

These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Individually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the Allowance policy.

Individually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the ACL policy.

Accrued Interest Receivable and Payable

29 unchanged sentences

Mortgage loans held for sale Level 2 32,413 32,413 24,816 24,816

Loans receivable, net of the allowance for credit losses Level 3 1,882,080 1,832,558 1,729,180 1,679,955

Loans receivable, net of ACL Level 3 2,015,936 1,967,986 1,882,080 1,832,558

Mortgage loans held for investment Level 2 14,501 14,501 13,726 13,726

6 unchanged sentences

Balance at beginning of the period $ 214 $ 87

Decrease in value 127 ( 1,035 )

Increase in value 2 127

Balance at end of the period $ 216 $ 214

17 unchanged sentences

The Corporation performed an assessment of the hedge for effectiveness at the inception of the hedge and performs an assessment on a recurring basis and determined that the derivative currently is and is expected to be highly effective in offsetting changes in cash flows of the hedged item.

For the year ended December 31, 2023, $ 412 thousand, net of tax, is recorded in total comprehensive income as unrealized gains.

For the years ended December 31, 2024 and 2023, $ 431 thousand and $( 412 ) thousand, net of tax, are recorded in total comprehensive income as unrealized gains and unrealized losses, respectively.

This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations and the addition of other hedges subsequent to December 31, 2024.

As of December 31, 2023, the combined notional amount of the interest rate swaps was $ 75 million and the fair value was an liability of $ 539 thousand.

As of December 31, 2024 and 2023, the combined notional amount of the interest rate swaps was $ 75 million in each period and the fair value was a liability of $ 52 thousand and $ 539 thousand, respectively.

In August 2024 the Corporation entered into an interest rate swap classified as a fair value hedge with a notional amount of $ 40 million, to hedge the interest payments received on a pool of residential mortgage loans held in portfolio.

Under the terms of the swap agreement, the Corporation pays an average fixed rate of 3.60 % and receives a variable rate in return indexed to SOFR.

The swap matures August 2027.

For the year ended December 31, 2024, approximately $ 3 thousand, net of tax, is recorded as fair value adjustments.

These amounts could differ from amounts actually recognized due to changes in interest rates, hedge de-designations and the addition of other hedges subsequent to December 31, 2024.

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.

In addition, the Corporation may enter 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.

1 unchanged sentence

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

Customer Derivatives

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.

18 unchanged sentences

Total $ 95,352 $ 10 $ 101,186 $ ( 16 )

Risk Participation Agreements

Customer Derivatives - Risk Participation Agreements

Positive fair values Other assets $ — $ — $ — $ —

1 unchanged sentence

Total $ 7,382 $ ( 91 ) $ 7,082 $ ( 11 )

Fair Value Hedge

Positive fair values Other assets $ 40,000 $ 3 $ — $ —

Negative fair values Other liabilities — — — —

Total $ 40,000 $ 3 $ — $ —

Interest Rate Swaps

1 unchanged sentence

Negative fair values Other liabilities 50,000 ( 61 ) 75,000 ( 539 )

$ 75,000 $ ( 539 ) $ — $ —

Total $ 75,000 $ ( 52 ) $ 75,000 $ ( 539 )

Total derivative financial instruments $ 267,353 $ 81 $ 226,652 $ ( 410 )

5 unchanged sentences

Customer Derivatives - Interest Rate Swaps 26 ( 63 )

Risk Participation Agreements 6 62

Customer Derivatives - Risk Participation Agreements ( 80 ) 6

Fair Value Hedge 3 —

Interest Rate Swaps 487 ( 539 )

Net fair value gains (losses) on derivative financial instruments $ 491 $ ( 448 )

Net realized gains on derivative hedging activities were $ 28 thousand and $ 5.4 million for the year ended December 31, 2023 and 2022, respectively, and are included in non-interest income in the consolidated statements of income.

Net realized activity on derivative hedging activities were losses of $ 87 thousand and gains of $ 28 thousand for the years ended December 31, 2024 and 2023, respectively, and are included in non-interest income in the consolidated statements of income.

(20) 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.

The Corporation’s reportable segments are determined by the Chief Executive Officer, who is designated as the chief operating decision maker, based upon information provided about the Corporation’s products and services offered, primarily distinguished between banking, wealth management, and mortgage banking operations.

They are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products/services, and customers are similar.

The chief operating decision maker evaluates the financial performance of the Corporation’s business components such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the performance of the Corporation’s segments and in the determination of allocating resources.

The chief operating decision maker uses revenue streams to evaluate product pricing and significant expenses to assess performance of each segment.

All operations are domestic.

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.

Segment income (loss) before income taxes is used to assess the performance of the banking segment by monitoring the margin between interest income and interest expense.

The Banking segment generates interest income from its lending and investing activities and is dependent on the gathering of 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 SBA loans, sales 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.

Interest expense, provisions for credit losses, and payroll provide the significant expenses in the banking operation.

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.

Segment income (loss) before income taxes is used to assess the performance of the wealth segment by monitoring the generation of wealth management income as the wealth segment generates non-interest income through advisory fees.

The cost of marketing, business development, and payroll provide the significant expenses in wealth.

Meridian’s mortgage banking segment (“Mortgage”) consists of 8 loan production offices throughout suburban Philadelphia and Maryland.

Segment income (loss) before income taxes is used to assess the performance of the mortgage banking segment by

monitoring the gains received on loan sales.

The Mortgage segment originates 1 – 4 family residential mortgages and sells nearly all of its production to third party investors.

1 unchanged sentence

The unit also recognizes income from document preparation fees, changes in portfolio pipeline fair values and related net hedging gains (losses).

The cost of loans sales and payroll provide the significant expenses in mortgage banking.

The table below summarizes income and expenses, directly attributable to each business line, which has been included in the statement of operations.

4 unchanged sentences

(dollars in thousands) Bank Wealth Mortgage Total Bank Wealth Mortgage Total

Interest income $ 153,809 $ — $ 2,218 $ 156,027 $ 135,097 $ — $ 1,492 $ 136,589

Interest expense 83,103 ( 146 ) 2,074 85,031 66,262 27 1,358 67,647

Net interest income 70,706 146 144 70,996 68,835 ( 27 ) 134 68,942

5 unchanged sentences

SBA income 3,458 — — 3,458 4,485 — — 4,485

Gain on sale of MSRs — — 3,992 3,992 — — — —

Gain on sale of OREO 317 — — 317 — — — —

Net change in fair values ( 23 ) — 242 219 ( 59 ) — 314 255

3 unchanged sentences

Non-interest expense:

Salaries and employee benefits 27,891 2,252 17,125 47,268 26,577 2,582 18,218 47,377

Occupancy and equipment 3,307 237 2,432 5,976 2,798 121 1,923 4,842

Professional fees 3,598 40 1,129 4,767 3,180 32 1,100 4,312

Data processing and software 4,577 169 1,398 6,144 5,166 122 1,127 6,415

Advertising and promotion 2,465 362 466 3,293 2,721 347 662 3,730

Pennsylvania bank shares tax 953 19 — 972 944 24 — 968

Other 8,793 427 1,509 10,729 7,441 433 1,607 9,481

Non-interest expense 51,584 3,506 24,059 79,149 48,827 3,661 24,637 77,125

Income (loss) before income taxes $ 15,298 $ 2,375 $ 4,113 $ 21,786 $ 20,936 $ 1,240 $ ( 5,209 ) $ 16,967

3 unchanged sentences

These statements should be read in conjunction with the notes to the consolidated financial statements.

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

Condensed Balance Sheets

5 unchanged sentences

Total assets $ 226,230 $ 208,971

Short-term borrowing $ 5,000 $ —

Subordinated debentures 49,115 48,992

23 unchanged sentences

Interest expense 3,136 2,484

Other expenses 1,168 1,412

Other expense 982 1,168

Income before equity in undistributed income of subsidiaries 2,780 6,127

3 unchanged sentences

Net income 16,346 13,243

Total other comprehensive income (loss) 2,117 ( 12,247 )

Total other comprehensive income 1,280 2,117

Total comprehensive income $ 17,626 $ 15,360

3 unchanged sentences

Net Income $ 16,346 $ 13,243

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Equity in undistributed income of subsidiaries ( 12,753 ) ( 6,376 )

(dollars in thousands) 2023 2022

Share-based compensation 976 1,173

Amortization of issuance costs on subordinated debt 123 118

Increase in accrued interest payable 100 214

Other, net ( 4,260 ) ( 2,748 )

4 unchanged sentences

Cash flows from financing activities:

Increase in short-term borrowings 5,000 —

Net activity from subordinated debt issuance — 9,699

2 unchanged sentences

Share based awards and exercises 499 309

Net cash provided by (used in) financing activities 136 ( 23,133 )

Net cash (used in) provided by financing activities ( 102 ) 136

Net change in cash and cash equivalents 430 ( 2,240 )

3 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data