Company Quick10K Filing
Meridian
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 6 $115
10-Q 2019-11-13 Quarter: 2019-09-30
10-Q 2019-08-14 Quarter: 2019-06-30
10-Q 2019-05-29 Quarter: 2019-03-31
10-K 2019-04-01 Annual: 2018-12-31
8-K 2019-12-18 Enter Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2019-10-24 Earnings, Exhibits
8-K 2019-07-29 Earnings, Exhibits
8-K 2019-05-29 Other Events
8-K 2019-05-23 Shareholder Vote, Exhibits
8-K 2019-05-23 Earnings, Regulation FD, Exhibits
8-K 2019-05-17 Earnings, Regulation FD, Exhibits
8-K 2019-04-11 Officers, Regulation FD, Exhibits
8-K 2019-03-07 Other Events, Exhibits
8-K 2019-01-25 Earnings, Exhibits
MRBK 2019-09-30
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part Ii–Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 mrbk-20190930ex311c0ec8c.htm
EX-31.2 mrbk-20190930ex31284d79c.htm
EX-32 mrbk-20190930xex32.htm

Meridian Earnings 2019-09-30

MRBK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
PME 190 362 207 84 32 17 20 312 38% 15.9 5%
AIQ 146 654 663 524 226 18 109 666 43% 6.1 3%
SRET 135 701 419 119 15 20 42 509 12% 12.1 3%
MRBK 115 1,056 942 0 0 9 30 85 2.8 1%
ASG 112 0 1 0 0 -1 -1 112 71% -81.5 -2,619%
NEWT 102 203 120 38 19 3 7 98 50% 14.4 1%
AQB 61 37 7 0 0 -12 -11 56 14% -5.2 -32%
ARCT 54 44 38 4 0 -7 -7 32 0% -4.8 -15%
CACG 37 30 9 0 0 -0 -0 37 -96.2 -1%
USAU 22 9 0 0 0 -8 -7 18 -2.5 -86%

10-Q 1 mrbk-20190930x10q.htm 10-Q mrbk_Current_Folio_10Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

(Mark one)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

Or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to               

 

Commission File Number: 000-55983

 

Picture 1

 

(Exact name of registrant as specified in its charter)

 

Pennsylvania

32-0116054

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

9 Old Lincoln Highway, Malvern, Pennsylvania 19355

(Address of principal executive offices) (Zip Code)

 

(484) 568‑5000

(Registrant’s telephone number, including area code)

 

 

 

 

Title of class

Trading Symbol

Name of exchange on which registered

Common Stock, $1 par value

MRBK

The NASDAQ Stock Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   ☐No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes   ☐No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

Large accelerated filer ☐

Accelerated filer ☐

 

 

Non-accelerated filer ☐ 

Smaller reporting company 

 

 

Emerging growth company    

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). ☐ Yes ☒ No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 13, 2019 there were 6,405,600 outstanding shares of the issuer’s common stock, par value $1.00 per share.

 

 

 

 

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION 

 

 

 

Item 1 Financial Statements (Unaudited) 

3

 

 

Consolidated Balance Sheets – September 30, 2019 and December 31, 2018 

3

 

 

Consolidated Statements of Income – Three and Nine Months Ended September 30, 2019 and 2018 

4

 

 

Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2019 and 2018 

5

 

 

Consolidated Statements of Stockholders’ Equity – Three and Nine Months Ended September 30, 2019 and 2018 

6

 

 

Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2019 and 2018 

7

 

 

Notes to Consolidated Financial Statements (Unaudited) 

8

 

 

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 

36

 

 

Item 3 Quantitative and Qualitative Disclosures about Market Risk 

54

 

 

Item 4 Controls and Procedures 

55

 

 

PART II OTHER INFORMATION 

 

 

 

Item 1 Legal Proceedings 

57

 

 

Item 1A Risk Factors 

57

 

 

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 

57

 

 

Item 3 Defaults Upon Senior Securities 

57

 

 

Item 4 Mine Safety Disclosures 

57

 

 

Item 5 Other Information 

57

 

 

Item 6 Exhibits 

57

 

 

Signatures 

59

 

 

 

 

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

(dollars in thousands, except per share data)

    

2019

    

2018

Cash and due from banks

 

$

40,267

 

23,159

Federal funds sold

 

 

265

 

793

Cash and cash equivalents

 

 

40,532

 

23,952

Securities available-for-sale (amortized cost of $52,496 and $50,942 as of September 30, 2019 and December 31, 2018)

 

 

52,757

 

50,428

Securities held-to-maturity (fair value of $9,028 and $12,655 as of September 30, 2019 and December 31, 2018)

 

 

8,814

 

12,741

Mortgage loans held for sale (amortized cost of $48,339 and $37,337 as of September 30, 2019 and December 31, 2018)

 

 

48,615

 

37,695

Loans, net of fees and costs (includes $11,278 and $11,422 of loans at fair value, amortized cost of $10,934 and $11,466 as of September 30, 2019 and December 31, 2018)

 

 

935,858

 

838,106

Allowance for loan and lease losses

 

 

(9,312)

 

(8,053)

Loans, net of the allowance for loan and lease losses

 

 

926,546

 

830,053

Restricted investment in bank stock

 

 

8,237

 

7,002

Bank premises and equipment, net

 

 

8,929

 

9,638

Bank owned life insurance

 

 

11,787

 

11,569

Accrued interest receivable

 

 

3,155

 

2,889

Other real estate owned

 

 

120

 

 —

Deferred income taxes (Footnote 1)

 

 

1,803

 

1,728

Goodwill and intangible assets

 

 

4,841

 

5,046

Other assets

 

 

10,801

 

4,739

Total assets

 

$

1,126,937

 

997,480

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Deposits:

 

 

 

 

 

Noninterest bearing

 

$

129,302

 

126,150

Interest-bearing

 

 

729,159

 

625,980

Total deposits

 

 

858,461

 

752,130

Short-term borrowings

 

 

128,465

 

114,300

Long-term debt

 

 

3,123

 

6,238

Subordinated debentures

 

 

9,176

 

9,239

Accrued interest payable

 

 

669

 

305

Other liabilities (Footnote 1)

 

 

9,271

 

5,716

Total liabilities

 

 

1,009,165

 

887,928

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $1 par value. Authorized 10,000,000 shares; issued and outstanding 6,407,685 and 6,406,795 as of September 30, 2019 and December 31, 2018

 

 

6,408

 

6,407

Surplus

 

 

80,192

 

79,919

Retained earnings (Footnote 1)

 

 

30,961

 

23,616

Accumulated other comprehensive loss

 

 

211

 

(390)

Total stockholders’ equity

 

 

117,772

 

109,552

Total liabilities and stockholders’ equity

 

$

1,126,937

 

997,480

 

See accompanying notes to the unaudited consolidated financial statements.

3

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

September 30, 

 

September 30, 

(dollars in thousands, except per share data)

    

2019

    

2018

    

2019

    

2018

Interest income:

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

13,152

 

11,218

 

37,686

 

31,217

Securities:

 

 

 

 

 

 

 

 

 

Taxable

 

 

336

 

213

 

892

 

549

Tax-exempt

 

 

64

 

112

 

273

 

336

Cash and cash equivalents

 

 

38

 

30

 

136

 

75

Total interest income

 

 

13,590

 

11,573

 

38,987

 

32,177

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

 

3,633

 

2,485

 

10,584

 

6,171

Borrowings

 

 

683

 

710

 

1,731

 

1,790

Total interest expense

 

 

4,316

 

3,195

 

12,315

 

7,961

Net interest income

 

 

9,274

 

8,378

 

26,672

 

24,216

Provision for loan losses

 

 

705

 

291

 

938

 

1,258

Net interest income after provision for loan losses

 

 

8,569

 

8,087

 

25,734

 

22,958

Non-interest income:

 

 

 

 

 

 

 

 

 

Mortgage banking income

 

 

7,910

 

8,274

 

19,139

 

20,407

Wealth management income

 

 

922

 

930

 

2,698

 

2,996

SBA loan income

 

 

645

 

 —

 

1,160

 

 —

Earnings on investment in life insurance

 

 

74

 

74

 

218

 

225

Net change in the fair value of derivative instruments

 

 

 —

 

70

 

(16)

 

59

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

 

 

54

 

(300)

 

(82)

 

(241)

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

 

 

(24)

 

(103)

 

390

 

(289)

Gain on sale of investment securities available-for-sale

 

 

74

 

 —

 

212

 

 —

Service charges

 

 

28

 

27

 

82

 

87

Other

 

 

131

 

195

 

387

 

1,647

Total non-interest income

 

 

9,814

 

9,167

 

24,188

 

24,891

Non-interest expenses:

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

9,319

 

8,901

 

25,789

 

26,719

Occupancy and equipment

 

 

946

 

920

 

2,845

 

2,870

Loan expenses

 

 

758

 

769

 

1,877

 

1,962

Professional fees

 

 

820

 

714

 

2,000

 

1,670

Advertising and promotion

 

 

574

 

590

 

1,769

 

1,802

Data processing

 

 

343

 

334

 

990

 

924

Information technology

 

 

334

 

268

 

919

 

836

Communications

 

 

155

 

197

 

510

 

683

Other

 

 

903

 

1,060

 

3,813

 

2,923

Total non-interest expenses

 

 

14,152

 

13,753

 

40,512

 

40,389

Income before income taxes

 

 

4,231

 

3,501

 

9,410

 

7,460

Income tax expense

 

 

914

 

774

 

2,065

 

1,661

Net income

 

$

3,317

 

2,727

 

7,345

 

5,799

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.52

 

0.43

 

1.15

 

0.91

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.52

 

0.42

 

1.14

 

0.90

 

See accompanying notes to the unaudited consolidated financial statements.

4

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

September 30, 

 

September 30, 

(dollars in thousands)

    

2019

    

2018

 

2019

    

2018

Net income:

 

$

3,317

 

2,727

 

7,345

 

5,799

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Net unrealized gains (losses) arising during the period, net of tax (benefit) expense of $17,  ($57),  $219, and ($155), respectively

 

 

64

 

(171)

 

767

 

(510)

Less: reclassification adjustment for net (gains) on sales realized in net income, net of tax (expense) benefit of ($16),  $0,  ($47), and $0, respectively

 

 

(58)

 

 —

 

(166)

 

 —

Unrealized investment gains (losses), net of tax expense (benefit) of $1,  ($57),  $172, and ($155), respectively

 

 

 6

 

(171)

 

601

 

(510)

Total other comprehensive income (loss)

 

 

 6

 

(171)

 

601

 

(510)

Total comprehensive income

 

$

3,323

 

2,556

 

7,946

 

5,289

 

See accompanying notes to the unaudited consolidated financial statements.

5

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

Common

 

 

 

Retained

 

Comprehensive

 

 

(dollars in thousands)

    

Stock

    

Surplus

    

Earnings

    

Income (Loss)

    

Total

Balance, January 1, 2018 (Footnote 1)

$

6,392

 

79,501

 

15,453

 

(298)

 

101,048

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

1,270

 

 

 

1,270

Change in unrealized gains on securities available-for-sale, net of tax

 

 

 

 

 

 

 

(276)

 

(276)

Total comprehensive income

 

 

 

 

 

 

 

 

 

994

Compensation expense related to stock option grants

 

 

 

 3

 

 

 

 

 

 3

Balance, March 31, 2018

$

6,392

 

79,504

 

16,723

 

(574)

 

102,045

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

1,802

 

 

 

1,802

Change in unrealized gains on securities available-for-sale, net of tax

 

 

 

 

 

 

 

(63)

 

(63)

Total comprehensive income

 

 

 

 

 

 

 

 

 

1,739

Share-based awards and exercises

 

 9

 

 

 

 

 

 

 

 9

Compensation expense related to stock option grants

 

 

 

272

 

 

 

 

 

272

Balance, June 30, 2018

$

6,401

 

79,776

 

18,525

 

(637)

 

104,065

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

2,727

 

 

 

2,727

Change in unrealized gains on securities available-for-sale, net of tax

 

 

 

 

 

 

 

(171)

 

(171)

Total comprehensive income

 

 

 

 

 

 

 

 

 

2,556

Share-based awards and exercises

 

 6

 

 

 

 

 

 

 

 6

Compensation expense related to stock option grants

 

 

 

76

 

 

 

 

 

76

Balance, September 30, 2018

$

6,407

 

79,852

 

21,252

 

(808)

 

106,703

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

Common

 

 

 

Retained

 

Comprehensive

 

 

(dollars in thousands)

    

Stock

    

Surplus

    

Earnings

    

Income (Loss)

    

Total

Balance, January 1, 2019

$

6,407

 

79,919

 

23,616

 

(390)

 

109,552

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

2,006

 

 

 

2,006

Change in unrealized gains on securities available-for-sale, net of tax

 

 

 

 

 

 

 

373

 

373

Total comprehensive income

 

 

 

 

 

 

 

 

 

2,379

Compensation expense related to stock option grants

 

 

 

61

 

 

 

 

 

61

Balance, March 31, 2019

$

6,407

 

79,980

 

25,622

 

(17)

 

111,992

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

2,022

 

 

 

2,022

Change in unrealized gains on securities available-for-sale, net of tax

 

 

 

 

 

 

 

222

 

222

Total comprehensive income

 

 

 

 

 

 

 

 

 

2,244

Compensation expense related to stock option grants

 

 

 

143

 

 

 

 

 

143

Balance, June 30, 2019

$

6,407

 

80,123

 

27,644

 

205

 

114,379

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

3,317

 

 

 

3,317

Change in unrealized gains on securities available-for-sale, net of tax

 

 

 

 

 

 

 

 6

 

 6

Total comprehensive income

 

 

 

 

 

 

 

 

 

3,323

Share-based awards and exercises

 

 1

 

 7

 

 

 

 

 

 8

Compensation expense related to stock option grants

 

 

 

62

 

 

 

 

 

62

Balance, September 30, 2019

$

6,408

 

80,192

 

30,961

 

211

 

117,772

 

See accompanying notes to the unaudited consolidated financial statements.

6

MERIDIAN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

Nine months ended

 

 

September 30, 

(dollars in thousands)

    

2019

    

2018

Net income

 

$

7,345

 

5,799

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

 

 

 

 

 

Gain on sale of investment securities

 

 

(212)

 

 —

Depreciation and amortization

 

 

1,559

 

1,088

Loss on disposal of premises and equipment

 

 

14

 

 —

Provision for loan losses

 

 

938

 

1,258

Compensation expense for stock options

 

 

266

 

351

Net change in fair value of loans held for sale

 

 

82

 

241

Net change in fair value of derivative instruments

 

 

16

 

(59)

Net change in fair value of contingent assets

 

 

 —

 

177

Gain on sale of OREO

 

 

 —

 

(57)

SBA loan income

 

 

(1,160)

 

 —

Proceeds from sale of loans

 

 

432,831

 

513,259

Loans originated for sale

 

 

(421,092)

 

(492,113)

Mortgage banking income

 

 

(19,139)

 

(20,407)

Increase in accrued interest receivable

 

 

(266)

 

(377)

Decrease (increase) in other assets

 

 

91

 

(110)

Earnings from investment in life insurance

 

 

(218)

 

(225)

Deferred income tax (benefit) (Footnote 1)

 

 

(249)

 

(465)

Increase in accrued interest payable

 

 

364

 

137

Increase in other liabilities (Footnote 1)

 

 

3,249

 

1,184

Net cash provided by operating activities

 

 

4,419

 

9,681

Cash flows from investing activities:

 

 

 

 

 

Activity in available-for-sale securities:

 

 

 

 

 

Maturities, repayments and calls

 

 

11,090

 

4,080

Sales

 

 

19,366

 

 —

Purchases

 

 

(29,027)

 

(12,768)

Proceeds from sale of OREO

 

 

 —

 

494

Settlement of forward contracts

 

 

(85)

 

(21)

(Increase) decrease in restricted stock

 

 

(1,235)

 

2,233

Net increase in loans

 

 

(104,640)

 

(107,068)

Purchases of premises and equipment

 

 

(634)

 

(1,499)

Proceeds from settlement of loans

 

 

 —

 

2,766

Net cash used in investing activities

 

 

(105,165)

 

(111,783)

Cash flows from financing activities:

 

 

 

 

 

Net increase in deposits

 

 

106,331

 

154,818

Increase (decrease) in short term borrowings

 

 

14,165

 

(57,795)

Repayment of long term debt (FHLB advances)

 

 

(2,702)

 

 —

Repayment of long term debt (Acquisition note)

 

 

(413)

 

(619)

Repayment of long term debt (Subordinated debt)

 

 

(63)

 

(4,000)

Share based awards and exercises

 

 

 8

 

15

Net cash provided by financing activities

 

 

117,326

 

92,419

Net change in cash and cash equivalents 

 

 

16,580

 

(9,683)

Cash and cash equivalents at beginning of period

 

 

23,952

 

35,506

Cash and cash equivalents at end of period

 

$

40,532

 

25,823

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

11,951

 

7,392

Income taxes

 

 

1,539

 

1,565

Supplemental disclosure of cash flow information:

 

 

 

 

 

Transfers from loans and leases to real estate owned

 

 

120

 

 —

Transfers from loans held for sale to loans held for investment

 

 

3,602

 

 —

Net loans sold, not settled

 

 

(5,580)

 

4,490

 

See accompanying notes to the unaudited consolidated financial statements.

7

MERIDIAN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(1)      Basis of Presentation

Meridian Corporation (the “Corporation”)  was incorporated on June 8, 2009, by and at the direction of the board of directors of Meridian Bank (the “Bank”) for the sole purpose of acquiring the Bank and serving as the Bank’s parent bank holding company.  On August 24, 2018, the Corporation acquired the Bank in a merger and reorganization effected under Pennsylvania law and in accordance with the terms of a Plan of Merger and Reorganization dated April 26, 2018 (the “Agreement”).  Pursuant to the Agreement, on August 24, 2018 at 5:00 p.m. all of the outstanding shares of the Bank’s $1.00 par value common stock formerly held by its shareholders was converted into and exchanged for one newly issued share of the Corporation’s par value common stock, and the Bank became a subsidiary of the Corporation. Because the Bank and the Corporation were entities under common control, this exchange of shares between entities under common control resulted in the retrospective combination of the Bank and the Corporation for all periods presented as if the combination had been in effect since inception of common control.  As the Corporation had no assets, liabilities, revenues, expenses or operations prior to August 24, 2018, the historical financial statements of the Bank are the historical financial statements of the combined entity. 

The Corporation’s unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial position and the results of operations for the interim periods presented have been included.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Amounts subject to significant estimates are items such as the allowance for loan losses and lending related commitments, the fair value of financial instruments, other-than-temporary impairments of investment securities, and the valuations of goodwill and intangible assets.

These unaudited consolidated financial statements should be read in conjunction with the Corporation’s filings with the Securities and Exchange Commission (including our Annual Report on Form 10-K for the year ended December 31, 2018) and, for periods prior to the completion of the holding company reorganization, the Bank’s filings with the FDIC, including the Bank’s annual report on Form 10-K for the year ended December 31, 2017, and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K that update or provide information in addition to the information included in Form 10-K and Form 10-Q filings, if any.   Certain prior period amounts have been reclassified to conform with current period presentation. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results for the year ended December 31, 2019 or for any other period.

During the quarter-ended March 31, 2019, the Corporation identified and corrected an immaterial error related to Maryland state licensing requirements for mortgage loan originations by our Mortgage division. As the result of our mortgage operations not being fully compliant with Maryland licensing law, we agreed to reimburse consumers approximately $474 thousand in interest and certain fees on loans originated, in addition to paying a fine of $12 thousand to resolve the matter. The Corporation has revised its comparative consolidated financial statements in the amount of $407 thousand, or $315 thousand net of tax, for periods prior to January 1, 2018 related to interest and fees on loans. The error correction impacted beginning retained earnings, deferred tax assets and other liabilities as of January 1, 2018, as shown below.

8

The following table summarizes the impacts of the correction on the consolidated balance sheet as of January 1, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands, except per share data)

    

 

Reported

 

Corrections

 

Revised

Deferred income taxes

 

$

1,312

 

92

 

1,404

Other liabilities

 

 

5,426

 

407

 

5,833

Retained earnings

 

 

15,768

 

(315)

 

15,453

 

 

 

 

 

 

 

 

 

 

 

The following table summarizes the impacts of the correction on the consolidated balance sheet as of December 31, 2018:

 

 

 

 

 

 

 

 

(dollars in thousands, except per share data)

    

 

Reported

 

Corrections

 

Revised

Deferred income taxes

 

$

1,636

 

92

 

1,728

Other liabilities

 

 

5,309

 

407

 

5,716

Retained earnings

 

 

23,931

 

(315)

 

23,616

 

The following table summarizes the impacts of the corrections to our capital ratios as of December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018 - as reported

 

 

 

 

 

 

 

 

 

 

 

 

To be well capitalized under

 

 

 

 

 

 

 

For capital adequacy

 

prompt corrective action

 

 

Actual

 

purposes *

 

provisions

(dollars in thousands):

    

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

Total capital (to risk-weighted assets)

 

$

122,577

 

13.70%

 

$

71,577

 

8.00%

 

$

89,472

 

10.00%

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

 

 

105,196

 

11.76%

 

 

40,262

 

4.50%

 

 

58,157

 

6.50%

Tier 1 capital (to risk-weighted assets)

 

 

105,196

 

11.76%

 

 

53,683

 

6.00%

 

 

71,577

 

8.00%

Tier 1 capital (to average assets)

 

 

105,196

 

11.20%

 

 

37,578

 

4.00%

 

 

46,972

 

5.00%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018 - as revised

 

 

 

 

 

 

 

 

 

 

 

 

 

To be well capitalized under

 

 

 

 

 

 

 

 

For capital adequacy

 

prompt corrective action

 

 

 

Actual

 

purposes *

 

provisions

 

(dollars in thousands):

    

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

 

Total capital (to risk-weighted assets)

 

$

122,262

 

13.66%

 

$

88,362

 

9.88%

 

$

89,481

 

10.00%

 

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

 

 

104,881

 

11.72%

 

 

57,044

 

6.38%

 

 

58,163

 

6.50%

 

Tier 1 capital (to risk-weighted assets)

 

 

104,881

 

11.72%

 

 

70,466

 

7.88%

 

 

71,585

 

8.00%

 

Tier 1 capital (to average assets)

 

 

104,881

 

11.16%

 

 

37,581

 

4.00%

 

 

46,977

 

5.00%

 

 

 

 

 

 

 

 


*Includes capital conservation buffer of 2.50% for 2019 and 1.875% for 2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

(2)      Earnings per Common Share

Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. 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. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 

 

September 30, 

(dollars in thousands, except per share data)

    

2019

    

2018

 

2019

    

2018

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

3,317

 

 

2,727

 

$

7,345

 

 

5,799

Denominator for basic earnings per share - weighted average shares outstanding

 

 

6,407

 

 

6,402

 

 

6,407

 

 

6,395

Effect of dilutive common shares

 

 

30

 

 

28

 

 

29

 

 

31

Denominator for diluted earnings per share - adjusted weighted average shares outstanding

 

 

6,437

 

 

6,430

 

 

6,436

 

 

6,426

Basic earnings per share

 

$

0.52

 

 

0.43

 

$

1.15

 

 

0.91

Diluted earnings per share

 

$

0.52

 

 

0.42

 

$

1.14

 

 

0.90

Antidilutive shares excluded from computation of average dilutive earnings per share

 

 

199

 

 

116

 

 

199

 

 

116

 

 

(3)      Goodwill and Other Intangibles

The Corporation’s goodwill and intangible assets related to the acquisition of HJ Wealth in April 2017 are detailed below:

 

 

 

 

 

 

 

 

 

 

 

 

Balance

 

 

 

Balance

 

Amortization

 

 

December 31, 

 

Amortization

 

September 30, 

 

Period

(dollars in thousands)

    

2018

    

Expense

    

2019

    

(in years)

Goodwill - Wealth

 

$

899

 

 —

 

899

 

Indefinite

Total Goodwill

 

 

899

 

 —

 

899