What changed in this filing

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Item 1. Business

2026-02-27 compared with 2025-03-17 · 113 added, 99 removed, 396 unchanged (35% of the section changed)

20 unchanged sentences

Our business involves attracting deposits from local businesses and individual customers and using these deposits to originate commercial, mortgage, and consumer loans in our market area.

We also invest in securities consisting primarily of U.S Government Treasuries, obligations of U.S.

government-sponsored entities (“GSEs”), municipal obligations, mortgage-backed securities issued by Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the Government National Mortgage Association (“Ginnie Mae”), and the subordinated debt of other financial institutions.

We also invest in securities consisting primarily of U.S.

Government Treasuries, obligations of U.S.

government-sponsored entities (“GSEs”), municipal obligations, mortgage-backed securities issued by the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the Government National Mortgage Association (“Ginnie Mae”), and the subordinated debt of other financial institutions.

We are the owner and beneficiary of Company-owned life insurance policies on certain current and former Bank employees.

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We must comply with a wide variety of reporting requirements and banking regulations.

The laws and regulations governing us generally have been promulgated to protect depositors, borrowers, the financial system, and the federal Deposit Insurance Fund (“DIF”) and not to protect shareholders.

The laws and regulations governing us generally have been promulgated to protect depositors, borrowers, the financial system, and the federal Deposit Insurance Fund (“DIF”), rather than shareholders.

Additionally, we must bear the cost of compliance with the reporting and regulations;

1 unchanged sentence

Merger with Summit Financial Group, Inc.

Effective on May 3, 2024 (“the Closing Date”), the Company completed its merger (the “M erger”) with Summit Financial Group, Inc., a West Virginia corporation (“Summit”), pursuant to the Agreement and Plan of Reorganization and accompanying Plan of Merger dated August 24, 2023 between the Company and Summit (the “Merger Agreement).

Pursuant to the Merger Agreement, on the Closing Date, (i) Summit merged with and into the Company with the Company as the surviving entity, and (ii) immediately following the Merger, Summit Community Bank, Inc., a West Virginia chartered bank and wholly-owned subsidiary of Summit (“SCB”) merged with and into the Bank, with the Bank as the surviving bank.

In the Merger, holders of Summit common stock outstanding at the effective time of the Merger received 0.5043 shares of the Company Common Stock for each share of Summit common stock they owned, subject to the payment of cash in lieu of fractional shares.

The total aggregate consideration payable in the Merger was approximately 7,405,772 shares of the Company Common Stock.

Additionally, each share of the 6.0% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series 2021 of Summit (the “Summit Series 2021 Preferred Stock”) issued and outstanding was converted into the right to receive a share of a newly created series of preferred stock of the Company, the Burke & Herbert Series 2021 Preferred Stock.

Summit’s results of operations are included from the Closing Date forward.

As of December 31, 2024, the Company had recognized $36.5 million in merger-related expenses in connection with this transaction.

On May 3, 2024, the Company completed its merger with Summit Financial Group, Inc., a West Virginia corporation (“Summit”), pursuant to the Agreement and Plan of Reorganization and accompanying Plan of Merger dated August 24, 2023 between the Company and Summit.

Pending Merger With LINKBANCORP, Inc.

On December 18, 2025, the Company and LNKB entered into an Agreement and Plan of Merger (the “Merger Agreement”).

The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, LNKB will merge with and into the Company, with the Company as the surviving corporation (the “Holding Company Merger”).

The LNKB Merger Agreement further provides that immediately following the Holding Company Merger, LINKBANK will merge with and into the Bank, with the Bank as the surviving bank (the “Bank Merger” and, together with the Holding Company Merger, the “LNKB Merger”).

Upon the terms and subject to the conditions of the Merger Agreement, at the effective time of the Holding Company Merger (the “Effective Time”), each share of common stock, par value $0.01 per share, of LNKB outstanding immediately prior to the Effective Time will be converted into the right to receive 0.1350 shares (the “Exchange Ratio”) of the Company’s common stock.

Holders of LNKB common stock will receive cash in lieu of fractional shares.

Completion of the LNKB Merger is subject to customary conditions, including receipt of the requisite approvals of the Company’s and LNKB’s shareholders, receipt of all required regulatory approvals.

A key factor in our ability to achieve our strategic goals and create shareholder value is the attractiveness of our market area.

The market area in which we operate has seen considerable population and economic growth over the past several decades.

The most recent economic data suggests that the relative economic strength of our market area will continue, enabling us to further grow our customer base and provide opportunities to grow our market share.

The most recent economic data suggests that the relative economic strength of our market area will continue, enabling us to further grow our customer base and providing opportunities to grow our market share.

The Company’s primary market area includes northern Virginia and West Virginia and it has over 77 branches and commercial loan offices across Delaware, Kentucky, Maryland, Virginia, and West Virginia.

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Twenty of the largest Fortune 500 companies are headquartered within the region as of 2025.

Many employers within this MSA thrive and grow due to a large, well-educated labor force and over nineteen colleges and

universities.

employers within this MSA thrive and grow due to a large, well-educated labor force and over nineteen colleges and universities.

According to the U.S.

35 unchanged sentences

Competition among financial institutions is based on interest rates offered on deposit accounts, interest rates charged on loans, other credit and service charges relating to loans, the quality and scope of the services rendered, the convenience of banking services, and, in the case of loans to commercial borrowers, relative lending limits.

We compete with commercial banks, credit unions, savings institutions, mortgage banking firms, finance companies, including “fintech” companies, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as regional and national financial institutions that operate offices in our market area and elsewhere.

We compete with commercial banks, credit unions, savings institutions, mortgage banking firms, finance companies, “fintech” companies, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as regional and national financial institutions that operate offices in our market area and elsewhere.

The increasingly competitive environment is the result of changes in regulation, changes in technology and product delivery systems, additional financial service providers, and the accelerating pace of consolidation among financial services providers.

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None of our employees are covered by a collective bargaining agreement.

We consider our diverse employee base and our culture to be a competitive advantage.

Our employees are from many different countries across the world, whether by birth or descent.

This diversity provides us the opportunity to serve our customers, communities, and each other in meaningful and impactful ways that result in long lasting relationships.

Our overall human capital strategy focuses on attracting, engaging, and retaining qualified, diverse, and innovative talent at all levels of the Company.

We are a committed equal opportunity employer, and all qualified candidates receive consideration for employment without regard to race, color, religion, national origin, age, disability, sex, sexual orientation, gender, gender identity, pregnancy, genetic information, or other characteristics protected by applicable law.

Beyond nondiscrimination compliance, we are committed to maintaining a workforce committed to our core values to serve & lead, deliver more, elevate everyone, and always being invested in the long-term success of our customers, colleagues, and communities..

We seek to actively listen to our employees throughout the year using a defined and continual listening strategy designed to gather regular feedback on well-being, engagement, leadership, ethics, culture and values, and other top of mind topics.

These surveys allow us to respond to employee concerns, benefit from employee perspectives, and better design and develop processes to support our Company culture.

We consider our employee base and our culture to be a competitive advantage.

The variety in our employees’ backgrounds and experiences provides us the opportunity to serve our customers, communities, and each other in meaningful and impactful ways that result in long lasting relationships.

Our overall human capital strategy focuses on attracting, engaging, and retaining qualified and innovative talent at all levels of the Company.

We are a committed equal opportunity employer.

We are also committed to maintaining a workforce committed to our core values to serve & lead, deliver more, elevate everyone, and always being invested in the long-term success of our customers, colleagues, and communities.

We seek to actively listen to our employees throughout the year using a defined listening strategy designed to gather regular feedback on well-being, engagement, leadership, ethics, culture and values, and other important topics.

These surveys help us to respond to employee concerns, benefit from employee perspectives, and better design and develop processes to support our Company culture.

Employees can learn about changes through our ongoing employee updates or employee town hall meetings delivered by senior management.

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We offer our employees numerous live and on-demand training programs and resources to help them build knowledge and improve skills.

These trainings include mandatory programs, as well as recommended programs in areas, including leadership development and technical skills.

These trainings include

mandatory programs, as well as recommended programs in areas, such as leadership development and technical skills.

Wellness and Safety

The Company emphasizes the safety and well-being of our employees as a top priority.

We define wellness comprehensively and include mental, physical, emotional, financial, psychological, and environmental considerations.

We offer a competitive compensation and benefits package and support dedicated campaigns that communicate directly to employees about wellness.

Employee well-being is further supported through policies such as remote work, paid parental leave, military service leave, educational assistance, and bereavement leave policies.

We provide a competitive compensation and benefits program to our employees.

We define wellness comprehensively to include mental, physical, emotional, financial, psychological, and environmental considerations.

We offer a competitive compensation and benefits program to our employees.

In addition to salaries, these programs include annual bonus opportunities, a 401(k) plan with an employer matching contribution, healthcare and insurance benefits, flexible spending accounts, paid time off, and an employee assistance program.

We also support dedicated campaigns that communicate directly to employees about wellness.

Employee well-being is further supported through policies such as remote work, paid parental leave, military service leave, educational assistance, and bereavement leave policies.

General Corporate Information

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The Company and the Bank are highly regulated under both federal and state laws.

The following description briefly addresses certain provisions of federal and state laws and regulations and their potential effects on the Company and the Bank.

The following description briefly addresses certain provisions of federal and state laws and regulations that are material to us and their potential effects on the Company and the Bank and is not a complete description of all laws and regulations, or aspects of those laws and regulations, that affect us.

To the extent statutory or regulatory provisions or proposals are described in this Form 10-K, the description is qualified in its entirety by reference to the particular statutory or regulatory provisions or proposals.

As a bank holding company that has elected financial holding company status under the BHCA, the Company is subject to regulation, supervision, and examination by the Federal Reserve (through the Federal Reserve Bank of Richmond).

The Company is a bank holding company under the banking laws of Virginia, and is subject to regulation, supervision, and examination by the Virginia BFI.

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Activities that are financial in nature include, but are not limited to, securities underwriting and dealing, insurance underwriting, and making merchant banking investments.

believe that a serious risk to the financial safety, soundness, or stability of any bank subsidiary may result from such an activity.

Despite prior approval or permissibility, the Federal Reserve may order the Company or its subsidiaries to terminate any activity or to terminate ownership or control of any subsidiary when the Federal Reserve has reasonable cause to believe that a serious risk to the financial safety, soundness, or stability of any bank subsidiary may result from such an activity.

To maintain financial holding company status, a financial holding company and all of its depository institution subsidiaries must be “well capitalized” and “well managed” as defined under applicable Federal Reserve requirements.

8 unchanged sentences

In determining whether to approve a proposed bank acquisition, the Federal Reserve will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, any outstanding regulatory compliance issues of any institution that is a party to the transaction, the projected capital ratios and levels on a post-acquisition basis, the financial condition of each institution that is a party to the transaction and of the combined institution after the transaction, the parties’ managerial resources and risk management and governance processes and systems, the parties’ compliance with the Bank Secrecy Act (“BSA”) and anti-money laundering requirements, and the acquiring institution’s performance under the CRA and compliance with fair housing and other consumer protection laws.

On July 9, 2021, the U.S.

president issued an executive order that encouraged the federal banking agencies to review merger oversight under the BHCA and the Bank Merger Act.

While the FDIC updated its bank merger policy statement, the Federal Reserve made no changes to its merger rules and guidelines.

It is possible that the current President could rescind the executive order, and any changes related to implementation of the Bank Merger Act are uncertain and cannot be predicted at this time.

However, the adoption of more expansive or stringent standards may have an impact on the Company’s ability to engage in acquisition activities.

Subject to certain exceptions, the BHCA and the Change in Bank Control Act, together with the applicable regulations, require Federal Reserve approval (or depending on the circumstances, no notice of disapproval) prior to any person or company’s acquiring “control” of a bank or bank holding company.

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Source of Strength.

Federal Reserve policy has historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks, which was codified in Section 38A of the Federal Deposit Insurance Act (“FDIA”).

Under this requirement, the Company is expected to commit resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources.

The Company is statutorily required to act as a source of financial and managerial strength to its subsidiary bank.

The Company is expected to commit resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources.

Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks.

1 unchanged sentence

Safety and Soundness.

There are a number of obligations and restrictions imposed on bank holding companies and their subsidiary banks by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and the Deposit Insurance Fund (“DIF”) in the event of a depository institution insolvency, receivership, or default.

There are a number of obligations and restrictions imposed on bank holding companies and their subsidiary banks by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and the DIF in the event of a depository institution insolvency, receivership, or default.

For example, under the Federal Deposit Insurance Corporation Improvement Act of 1991, to avoid receivership of an insured depository institution subsidiary, a bank holding company is required to guarantee the compliance of any subsidiary bank that may become “undercapitalized” with the terms of any capital restoration plan filed by such subsidiary with its appropriate federal bank regulatory agency up to the lesser of (i) an amount equal to 5% of the institution’s total assets at the time the institution became “undercapitalized,” or (ii) the amount that is necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan.

Under the FDIA, federal bank regulatory agencies have adopted guidelines prescribing safety and soundness standards.

Under the FDIA, the federal bank regulatory agencies have adopted guidelines prescribing safety and soundness standards.

These guidelines establish general standards relating to capital management, internal controls and information systems, data security, loan documentation, credit underwriting, interest rate exposure, risk management vendor management, corporate governance, asset growth, and compensation, fees, and benefits.

8 unchanged sentences

The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends to the Company.

Under current regulations, prior approval from the Federal Reserve is required if cash dividends declared by the Bank or the Company would be an unsafe or unsound practice, and may be limited by other factors, such as requirements to maintain capital above regulatory guidelines.

Under current regulations, prior approval from the Federal Reserve is required if cash dividends declared by the Bank in any given year exceed net income for that year, plus retained net income of the two preceding years.

The payment of dividends by the Bank or the Company may be limited by other factors, such as requirements to maintain capital above regulatory guidelines.

Bank regulatory agencies have the authority to prohibit the Bank and the Company from engaging in unsafe or unsound practices in conducting their respective businesses.

The payment of dividends, or the repurchase of outstanding capital stock, depending on the financial condition of the Bank or the Company, could be deemed to constitute such an unsafe or unsound practice.

Under the FDIA, insured depository institutions, such as the Bank, are prohibited from making capital distributions, including the payment of dividends, if after making such distributions the institution would become “undercapitalized” (as such term is used in the FDIA).

Under the Federal Deposit Insurance Act (“FDIA”), insured depository institutions, such as the Bank, are prohibited from making capital distributions, including the payment of dividends, if after making such distributions the institution would become “undercapitalized” (as such term is used in the FDIA).

The Company may receive fees from or pay fees to its affiliated companies for expenses incurred related to certain activities performed by or for the Company for the benefit of its affiliated companies or for its benefit.

These fees are charged to/received from each affiliated company based upon various specific allocation methods measuring

the estimated usage of such services by that company.

These fees are charged to/received from each affiliated company based upon various specific allocation methods measuring the estimated usage of such services by that company.

The fees are eliminated from reported financial statements in the consolidation process.

2 unchanged sentences

On that date, the Bank became a member of the Federal Reserve System, and now both the Bank and the Company are supervised and regularly examined by the Federal Reserve and the Virginia BFI.

The various laws and regulations administered by the bank regulatory agencies affect corporate practices, such as the payment of dividends, incurrence of debt, and the acquisition of financial institutions and other companies.

If the Bank exceeds $10 billion in assets, which is anticipated as a result of the LNKB Merger, it will also be subject to regulation and supervision by the Consumer Financial Protection Bureau (the “CFPB”).

The various laws and regulations administered by the bank regulatory agencies affect corporate practices,

such as the payment of dividends, incurrence of debt, and the acquisition of financial institutions and other companies.

These laws and regulations also affect business practices, such as the payment of interest on deposits, the charging of interest on loans, credit policies, the types of business conducted, and the location of offices.

Certain of these laws and regulations are referenced above under “The Company.”

Interchange Fees.

Interchange fees, or “swipe” fees, are charges that merchants pay to the Bank and other card-issuing for processing electronic payment transactions.

For financial institutions that have assets of $10 billion or more, which is anticipated as a result of the LNKB Merger, the current maximum permissible interchange fee is equal to the sum of 21 cents plus 5 bps of the transaction value for many types of debt interchange transactions.

An upward adjustment to an issuer’s debit card interchange fee of no more than one cent per transaction is permissible if the issuer develops and implements policies and procedures reasonably designed to achieve certain fraud-prevention standards.

The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid products.

Capital Requirements.

2 unchanged sentences

Those regulatory agencies may from time to time require that a banking organization maintain capital above the minimum levels because of its financial condition or actual or anticipated growth.

These capital rules require the Bank to comply with the following minimum capital ratios:

These capital rules require the Company and the Bank to comply with the following minimum capital ratios:

(i) a minimum ratio of common equity Tier 1 to risk-weighted assets of 4.5%, plus a 2.5% capital conservation buffer, resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of 7.0%, (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, plus the 2.5% capital conservation buffer, resulting in a minimum Tier 1 capital ratio of 8.5%, (iii) a minimum ratio of total risk-based capital to risk-weighted assets of 8.0%, plus the 2.5% capital conservation buffer, resulting in a minimum total risk-based capital ratio of 10.5%, and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets.

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See Note 12 — Regulatory Capital Matters , in Notes to the December 31, 2025 Consolidated Financial Statements of the Company (the “Notes to Consolidated Financial Statements”) for additional information.

On November 4, 2019, the federal banking agencies jointly issued a final rule that permits qualifying banks that have less than $10 billion in total consolidated assets to elect to be subject to a 9% “community bank leverage ratio” (“CBLR”).

Under the final rule, a qualifying bank that has chosen the proposed framework would not be required to calculate the existing risk-based and leverage capital requirements and would be considered to have met the capital ratio requirements to be “well capitalized” under “prompt corrective action” rules provided it has a CBLR greater than 9%.

The Bank has not yet opted into the CBLR framework, but continues to assess the potential impact of making this election as part of its ongoing capital management and planning processes.

In 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which requires financial institutions to estimate and establish an allowance for credit losses using a current expected credit loss (“CECL”) model.

The CECL model will estimate credit losses over the lifetime of our financial assets measured at amortized cost at the date of origination or acquisition, as opposed to reserving for incurred or probable losses through the balance sheet date.

The Company implemented ASU 2016-13 on January 1, 2023, and recognized a one-time cumulative effect adjustment to the allowance through retained earnings as a result of applying this ASU.

The Federal Reserve has adopted a rule providing for an optional three-year phase-in period

for the day-one adverse regulatory capital effects upon adopting the standard, which the Company has not elected to implement.

See “ Adoption of New Accounting Standards ” under Note 1 — Nature of Banking Activities and Significant Accounting Policies in Notes to the December 31, 2024 Consolidated Financial Statements for further information regarding the implementation of CECL.

Prompt Corrective Action.

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The federal bank regulatory agencies have additional enforcement authority with respect to “undercapitalized” depository institutions.

As described above, the final rules to implement the Basel III Framework also integrated new requirements into the “prompt corrective action” framework.

“Well capitalized” institutions may generally operate without additional supervisory restriction.

6 unchanged sentences

and (v) require prior approval of certain expansion proposals.

The appropriate federal banking agency for an “undercapitalized” institution also may take any number of discretionary supervisory actions if the agency determines that any of these actions is necessary to resolve the problems of the institution at the least possible long-term cost to the DIF, subject in certain cases to specified procedures.

in certain cases to specified procedures.

These discretionary supervisory actions include:

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The deposits of the Bank are insured by the FDIC up to applicable limits by the DIF.

The basic limit on FDIC deposit insurance coverage is $250,000 per ownership category.

The basic limit on FDIC deposit insurance coverage is $250,000 per depositor for each account ownership type.

Under the FDIA, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations as an insured depository institution, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC, subject to administrative and potential judicial hearing and review processes.

1 unchanged sentence

Deposit insurance pricing is based on CAMELS composite ratings and certain other financial ratios to determine assessment rates for small-established institutions with less than $10 billion in assets.

For large-established institutions with greater than $10 billion in assets, deposit insurance pricing is based on CAMELS composite ratings, financial measures used to estimate an institution’s ability to withstand asset-related and funding-related stress, and a measure of loss severity that estimates the relative magnitude of potential losses to the FDIC in the event of the institution’s failure.

Assessment rates for both large and small banks are subject to adjustment.

The CAMELS rating system is a supervisory rating system designed to take into account and reflect all financial and operational risks that a bank may face, including Capital adequacy, Asset quality, Management capability, Earnings, Liquidity, and Sensitivity to market risk (“CAMELS”).

CAMELS composite ratings set a maximum insurance assessment for CAMELS 1 (highest) and 2 rated banks and set minimum assessments for lower rated institutions.

In March 2016, the FDIC raised the DIF’s minimum reserve ratio from 1.15% to 1.35%.

The FDIC imposed a 4.5 basis point annual surcharge on insured depository institutions with total consolidated assets of $10 billion or more.

The rule granted credits to smaller banks for the portion of their regular assessments that contributed to increasing the reserve ratio from 1.15% to 1.35%.

For the years ended December 31, 2024, December 31, 2023, and December 31, 2022, the Company recorded expense of $3.0 million, $1.65 million, and $958 thousand, respectively, for FDIC insurance premiums.

On October 18, 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023.

This increase in assessment rate schedules is intended to increase the likelihood that the reserve ratio reaches 1.35% by the statutory deadline of September 30, 2028.

The new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds 2%.

Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2%, and again when it reaches 2.5%.

For the years ended December 31, 2025, December 31, 2024, and December 31, 2023, the Company recorded expense of $3.3 million, $3.01 million, and $1.65 million, respectively, for FDIC insurance premiums.

Transactions with Affiliates.

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The Bank received a “satisfactory” CRA rating in its most recent examination, dated May 1, 2023.

On October 24, 2023, the federal bank regulatory agencies jointly issued a final rule to modernize CRA regulations consistent with the following key goals:

(1) to encourage banks to expand access to credit, investment, and banking services in low to moderate income communities;

(2) to adapt to changes in the banking industry, including internet and mobile banking and the growth of non-branch delivery systems;

(3) to provide greater clarity and consistency in the application of the CRA regulations, including adoption of a new metrics-based approach to evaluating bank retail lending and community development financing;

and (4) to tailor CRA evaluations and data collection to bank size and type, recognizing that differences in bank size and business models may impact CRA evaluations and qualifying activities.

Most of the final CRA rule’s requirements will be applicable beginning January 1, 2026, with certain requirements, including the data reporting requirements, applicable as of January 1, 2027.

The Bank is currently evaluating the impact of the modified CRA regulations, but does not anticipate any resulting material impact to its operations or compliance objectives.

The Bank anticipates that final and formal changes to interagency CRA regulations will require an extended process, and any such changes are uncertain and cannot be predicted at this time.

The final rule is currently enjoined as to the plaintiff trade associations while a federal court considers a lawsuit challenging the rule.

Federal Home Loan Banks (“FHLBs”).

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As a member, the Bank must purchase and maintain stock in the FHLB of Atlanta.

Privacy Legislation.

Data Privacy and Cybersecurity.

The Bank is subject to a variety of complex and evolving laws, regulations, rules and standards at the federal, state and local levels regarding data privacy and cybersecurity.

Data privacy and cybersecurity are currently areas of considerable legislative and regulatory attention, with new or modified laws, regulations, rules and standards being frequently adopted and potentially subject to divergent interpretation or application in a manner that may create inconsistent or conflicting requirements for businesses.

Several laws, including the Right to Financial Privacy Act and the Gramm-Leach-Bliley Act (“GLB Act”), and related regulations issued by the federal bank regulatory agencies, provide protections against the transfer and use of customer information by financial institutions.

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These privacy provisions generally prohibit a financial institution from providing a customer’s personal financial information to unaffiliated parties without prior notice to and approval from the customer.

In March 2021, the Governor of Virginia signed into law the Virginia Consumer Data Protection Act (the “VCDPA”), which went into effect on January 1, 2023.

The VCDPA grants Virginia residents the right to access, correct, delete, know, and opt-out of the sale and processing for targeted advertising purposes of their personal information, similar to the protections provided by similar consumer data privacy laws in California and in Europe.

Additionally, the federal bank regulatory agencies have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of a financial institution’s board of directors.

The federal bank regulatory agencies also adopted rules to improve the sharing of information about cyber incidents that may affect the U.S.

banking system.

A banking organization must notify its primary federal regulator of certain significant “computer-security incidents” that may pose a threat to the stability of the U.S.

financial sector as soon as possible and no later than 36 hours after the banking organization determines that such an incident has occurred.

A bank service provider must also notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially disrupted or degraded or is reasonably likely to materially disrupt or degrade covered services provided to such banking organization customers for four or more hours.

Additionally, the enactment of the Cyber Incident Reporting for Critical Infrastructure Act (“CIRCIA”) in 2022, once rulemaking is complete, will require, among other things, covered entities to report significant cyber incidents, including ransomware attacks, to the Cybersecurity and Infrastructure Security Agency (“CISA”) within 72 hours from the time the covered entity reasonably believes the incident occurred (and within 24 hours of making a ransom payment as a result of a ransomware attack).

Data privacy and cybersecurity are areas of increasing state legislative focus.

Several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements.

Many states have also implemented, or are considering implementing comprehensive data privacy and cybersecurity laws and regulations.

For example, in March 2021, the Governor of Virginia signed into law the Virginia Consumer Data Protection Act (the “VCDPA”), which went into effect on January 1, 2023.

The VCDPA also imposes data protection assessment requirements and authorizes the Attorney General of Virginia to enforce the VCDPA, but does not provide a private right of action for consumers.

As a financial institution subject to the GLB Act, the Bank is exempt from the VCDPA, but certain third-party vendors of the Company or the Bank will be subject to the VCDPA, which may impact the products or services that we obtain from those vendors.

In addition, laws in all 50 U.S.

states generally require businesses to provide notice under certain circumstances to individuals whose personal information has been disclosed as a result of a data breach.

Moreover, Congress has considered, and is currently considering, various proposals for more comprehensive data privacy and cybersecurity legislation, to which the Company and/or the Bank may be subject if passed.

Collectively, these privacy laws and regulations impose compliance costs and create obligations and, in some cases, reporting obligations, and compliance with these laws, regulations, and obligations may require significant resources of the Company and the Bank.

With increased focus on data privacy and cybersecurity, we are continuing to monitor legislative, regulatory, and supervisory developments related thereto.

For more information on our cybersecurity practices, see Item 1C.

“Cybersecurity.”

Anti-Money Laundering Laws and Regulations.

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

These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act, laws governing flood insurance, federal and state laws prohibiting unfair and deceptive business practices, foreclosure laws, and various regulations that implement some or all of the foregoing.

These laws include, but are not limited to, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act, laws governing flood insurance, federal and state laws prohibiting unfair and deceptive business practices, foreclosure laws, and various regulations that implement some or all of the foregoing.

These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, collecting loans, and providing other services.

If the Bank fails to comply with these laws and regulations, it may be subject to various penalties.

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

The Consumer Financial Protection Bureau (the “CFPB”) is responsible for implementing, examining, and enforcing compliance with federal consumer financial protection laws.

If the Bank fails to comply with these laws and regulations, it may be subject to various penalties or enforcement actions.

Failure to comply with consumer protection requirements may also result in delays in obtaining or failure to obtain any required bank regulatory approval for merger or acquisition transactions the Bank may wish to pursue or being prohibited from engaging in such transactions, even if approval is not required.

The CFPB is responsible for implementing, examining, and enforcing compliance with federal consumer financial protection laws.

The CFPB focuses on (i) risks to consumers and compliance with the federal consumer financial laws, (ii) the markets in which firms operate and risks to consumers posed by activities in those markets, (iii) depository institutions that offer a wide variety of consumer financial products and services, and (iv) non-depository companies that offer one or more consumer financial products or services.

The CFPB is responsible for examining and enforcing compliance with federal consumer financial laws for institutions with more than $10 billion of assets.

While the Bank, like all banks, is subject to federal consumer protection rules enacted by the CFPB, because the Company and the Bank have total consolidated assets of less than $10 billion, the Federal Reserve oversees most of the consumer financial protection laws and regulations applicable to the Bank.

While the Bank, like all banks, is subject to federal consumer protection rules enacted by the CFPB, because the Company and the Bank currently have total consolidated assets of less than $10 billion, the Federal Reserve oversees most of the consumer financial protection laws and regulations applicable to the Bank.

As a result of the LNKB Merger, the Company and the Bank are expected to have total consolidated assets exceeding $10 billion, meaning that the CFPB will have examination and primary enforcement authority with respect to consumer financial laws.

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

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Further regulatory positions taken by the CFPB may influence how other regulatory agencies may apply the subject consumer financial protection laws and regulations.

Notwithstanding the foregoing, the recent changes in the U.S.

presidential administration and the composition of the U.S.

Congress is expected to lead to potentially significant changes to the existence, priorities, scope, practices and/or staffing levels of various regulatory agencies.

For example, in February 2025, the U.S.

presidential administration directed the CFPB to, among other things, suspend rule implementations and cease supervision activities.

The current leadership of the CFPB has indicated intentions to rescind or revise many regulations, as well as to narrow its enforcement and supervision.

We cannot currently predict the nature and timing of future developments that may potentially impact CFPB rules, proposals, enforcement and supervision.

Incentive Compensation .

In 2016, the SEC and the federal banking agencies proposed rules that prohibit covered financial institutions (including bank holding companies and banks) from establishing or maintaining incentive-based compensation arrangements that encourage inappropriate risk taking by providing covered persons (consisting of senior executive officers and significant risk takers, as defined in the rules) with excessive compensation, fees, or benefits that could lead to material financial loss to the financial institution.

The comment period for these proposed rules has closed, and although the agencies indicated that the incentive compensation proposal would be on their collective 2024 regulatory agenda, a final rule has not yet been published.

If the rules are adopted as currently proposed, they will restrict the manner in which executive compensation is structured.

It is unclear when or whether this rule will be finalized.

Mortgage Banking Regulation.

mortgagors concerning credit and settlement costs, limit payment for settlement services to the reasonable value of the services rendered, and require the maintenance and disclosure of information regarding the disposition of mortgage applications based on race, gender, geographical distribution, and income level.

In connection with making mortgage loans, the Bank is subject to rules and regulations that, among other things, establish standards for loan origination, prohibit discrimination, provide for inspections and appraisals of property, require credit reports on prospective borrowers, in some cases, restrict certain loan features and fix maximum interest rates and fees, require the disclosure of certain basic information to mortgagors concerning credit and settlement costs, limit payment for settlement services to the reasonable value of the services rendered, and require the maintenance and disclosure of information regarding the disposition of mortgage applications based on race, gender, geographical distribution, and income level.

The Bank is also subject to rules and regulations that require the collection and reporting of significant amounts of information with respect to mortgage loans and borrowers.

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Certain provisions of Regulation Z require creditors to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms.

Creditors are required to determine consumers’ ability to repay in one of two ways.

The first alternative requires the creditor to consider the following eight underwriting factors when making the credit decision:

(i) current or reasonably expected income or assets;

(ii) current employment status;

(iii) the monthly payment on the covered transaction;

(iv) the monthly payment on any simultaneous loan;

(v) the monthly payment for mortgage-related obligations;

(vi) current debt obligations, alimony, and child support;

(vii) the monthly debt-to-income ratio or residual income;

and (viii) credit history.

Alternatively, the creditor can originate “qualified mortgages,” which are entitled to a presumption that the creditor making the loan satisfied the ability-to-repay requirements.

In general, a

“qualified mortgage” is a mortgage loan without negative amortization, interest-only payments, balloon payments, or terms exceeding 30 years.

In addition, to be a qualified mortgage, the points and fees paid by a consumer cannot exceed 3% of the total loan amount.

Qualified mortgages that are higher-priced (e.g., subprime loans) garner a rebuttable presumption of compliance with the ability-to-repay rules, while qualified mortgages that are not “higher-priced” (e.g., prime loans) are given a safe harbor of compliance.

Real Estate Lending Standards and Guidance.

The federal banking agencies have adopted uniform regulations setting forth standards for extensions of credit that are secured by real estate.

Under these regulations, the Bank must adopt and maintain written policies establishing appropriate limits and standards for extensions of credit that are secured by real estate.

These policies must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value limits) that are clear and measurable, loan administration procedures and documentation, approval and reporting requirements.

The federal banking agencies have also jointly issued guidance on “Concentrations in Commercial Real Estate Lending,” which defines CRE loans as exposures secured by raw land, land development and construction (including 1-4 family residential construction), multi-family property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income or the proceeds of the sale, refinancing, or permanent financing of the property.

The guidance requires that appropriate processes be in place to identify, monitor and control risks associated with real estate lending concentrations.

If a concentration is present, management must employ heightened risk management practices that address key elements, including board and management oversight and strategic planning, portfolio management, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing, and maintenance of increased capital levels as needed to support the level of CRE lending.

The guidance states that the following metrics may indicate a concentration of CRE loans, but that these metrics are neither limits nor a safe harbor:

(1) total reported loans for construction, land development, and other land represent 100% or more of total risk-based capital;

or (2) total reported loans secured by multi-family properties, nonfarm non-residential properties (excluding those that are owner-occupied), and loans for construction, land development, and other land represent 300% or more of total risk-based capital and the bank’s CRE loan portfolio has increased 50% or more during the prior 36 months.

Brokered Deposits.

Section 29 of the FDIA and FDIC regulations generally limit the ability of any bank to accept, renew, or roll over any brokered deposit unless it is “well capitalized” or, with the FDIC’s approval, “adequately capitalized.” On December 15, 2020, the FDIC issued rules to revise brokered deposit regulations in light of modern deposit-taking methods.

The rules established a new framework for certain provisions of the “deposit broker” definition and amended the FDIC’s interest rate methodology calculating rates and rate caps.

Section 29 of the FDIA and FDIC regulations generally limit the ability of any bank to accept, renew, or roll over any brokered deposit unless it is “well capitalized” or, with the FDIC’s approval, “adequately capitalized.” In December 2020, the FDIC issued rules establishing a framework for certain provisions of the “deposit broker” definition and amended the FDIC’s interest rate methodology calculating rates and rate caps.

The rules became effective on April 1, 2021.

The Bank has not experienced any material impact to its operations as a result of the rules.

In July 2024, the FDIC proposed further revisions to the brokered deposit regulations that would reverse many of the changes made in 2020.

The comment period for the proposed rule has closed, but a final rule has not yet been published.

Future Regulation

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These policies have a significant impact on overall growth and distribution of loans, investments, and deposits;

they affect market interest rates charged on loans or paid for time and savings deposits, and can significantly influence employment and inflation rates.

they affect market interest rates charged on loans or paid for time and savings deposits, and can significantly influence employment and

inflation rates.

Federal Reserve monetary policies have had a significant effect on the operating results of commercial banks, including the Company, in the past and are expected to do so in the future.

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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 1. Business