What changed in this filing

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Item 1. Business

2025-03-20 compared with 2024-03-15 · 50 added, 56 removed, 254 unchanged (29% of the section changed)

2 unchanged sentences

The Trusts were formed for the purpose of selling trust preferred securities that qualified as Tier 1 capital.

The Bank has two consumer finance company subsidiaries - OakFirst Loan Center, Inc., a West Virginia corporation, and OakFirst Loan Center, LLC, a Maryland limited liability company - and two subsidiaries that it uses to hold real estate acquired through foreclosure or by deed in lieu of foreclosure - First OREO Trust, a Maryland statutory trust, and FUBT OREO I, LLC, a Maryland limited liability company.

The Bank has two consumer finance company subsidiaries - OakFirst Loan Center, Inc., a West Virginia corporation, and OakFirst Loan Center, LLC, a Maryland limited liability company (together with OakFirst Loan Center, Inc., the “OakFirst Loan Centers”) - and two subsidiaries that it uses to hold real estate acquired through foreclosure or by deed in lieu of foreclosure - First OREO Trust, a Maryland statutory trust, and FUBT OREO I, LLC, a Maryland limited liability company.

In addition, the Bank owns 99.9% of the limited partnership interests in Liberty Mews Limited Partnership, a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland, and a 99.9% non-voting membership interest in MCC FUBT Fund, LLC, an Ohio limited liability company formed for the purpose of acquiring, developing and operating low-income housing units in Allegany County, Maryland.

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Banking Products and Services

The Bank operates 26 banking offices, one customer service center and 33 Automated Teller Machines (“ATMs”) in Allegany County, Frederick County, Garrett County, and Washington County in Maryland, and in Mineral County, Berkeley County, Monongalia County and Harrison County in West Virginia.

The Bank operates 22 banking offices, one customer service center and 30 Automated Teller Machines (“ATMs”) in Allegany County, Frederick County, Garrett County, and Washington County in Maryland, and in Mineral County, Berkeley County and Monongalia County in West Virginia.

The Bank is an independent community bank providing a complete range of retail and commercial banking services to businesses and individuals in its market areas.

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The Bank also provides safe deposit and night depository facilities, insurance products and trust services.

The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”).

The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to applicable limits.

Lending Activities

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Repayment is often dependent on the successful business operations of the borrower and may be affected by adverse conditions in the local economy or real estate market.

The financial condition and cash flow of commercial borrowers is therefore carefully analyzed during the loan approval process, and continues to be monitored throughout the duration of the loan by obtaining business financial statements, personal financial statements and income tax returns.

frequency of this ongoing analysis depends upon the size and complexity of the credit and collateral that secures the loan.

The financial condition and cash flow of commercial borrowers is therefore carefully analyzed during the loan approval process and continues to be monitored throughout the

duration of the loan by obtaining business financial statements, personal financial statements and income tax returns.

The frequency of this ongoing analysis depends upon the size and complexity of the credit and collateral that secures the loan.

It is also the Bank’s general policy to obtain personal guarantees from the principals of the commercial loan borrowers.

Commercial real estate (“CRE”) loans are primarily those secured by land for residential and commercial development, agricultural purpose properties, service industry buildings such as restaurants and motels, retail buildings and general purpose business space.

Commercial real estate loans are primarily those secured by land for residential and commercial development, agricultural purpose properties, service industry buildings such as restaurants, hotels and motels, retail buildings and general-purpose business space.

The Bank attempts to mitigate the risks associated with these loans through low loan to value ratio standards, thorough financial analyses, and management’s knowledge of the local economy in which the Bank lends.

The risk of loss associated with CRE construction lending is controlled through conservative underwriting procedures such as loan to value ratios of 80% or less, obtaining additional collateral when prudent, analysis of cash flows, and closely monitoring construction projects to control disbursement of funds on loans.

The risk of loss associated with commercial real estate construction lending is controlled through conservative underwriting procedures such as loan to value ratios of 80% or less, obtaining additional collateral when prudent, analysis of cash flows, and closely monitoring construction projects to control disbursement of funds on loans.

The Bank’s residential mortgage portfolio is distributed between variable and fixed rate loans.

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Title insurance protecting the Bank’s lien priority, as well as fire and casualty insurance, is also required.

During 2022, residential mortgage loans at higher rates were booked as in-house portfolio loans.

During the latter half of 2023, the Bank made the strategic decision to shift the lending of residential mortgage loans to the secondary market.

During 2024, the Bank’s mortgage production was strong, as loans were booked in-house as well as eligible loans sold to the secondary market.

Home equity lines of credit, included within the residential mortgage portfolio, are secured by the borrower’s home and can be drawn on at the discretion of the borrower.

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A variety of other consumer loans are also offered to customers, including indirect and direct auto loans, student loans, and other secured and unsecured lines of credit and term loans.

An allowance for credit losses (“ACL”) is maintained to provide for probable losses from our lending activities.

An allowance for credit losses (“ACL”) is maintained to provide for losses over the life of the portfolio from our lending activities.

A complete discussion of the factors considered in determination of the ACL is included in Item 7 of Part II of this report.

Deposit Activities

The Bank offers a full array of deposit products including checking, savings and money market accounts, regular and IRA certificates of deposit, Christmas Savings accounts, College Savings accounts, and Health Savings accounts.

The Bank also offers the Certificate of Deposit Account Registry Service ® , or CDARS ® , program to municipalities, businesses, and consumers through which the Bank provides access to multi-million-dollar certificates of deposit and the IntraFi Cash Service ® , or ICS ® , program to municipalities, businesses, and consumers through which the Bank provides access to multi-million-dollar savings and demand deposits.

Both programs are FDIC-insured.

The Bank offers a full array of deposit products including checking, savings and money market accounts, regular and IRA certificates of deposit, and Health Savings accounts.

The Bank also offers the Certificate of Deposit Account Registry Service ® , or CDARS ® , and the IntraFi Cash Service ® , or ICS ® , programs to municipalities, businesses, and consumers through which the Bank provides access to multi-million-dollar certificates of deposit, savings and demand deposits, respectively.

Both programs are fully FDIC-insured.

In addition, we offer our commercial customers packages which include Treasury Management, Cash Sweep and various checking opportunities.

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Wealth Management

The Bank’s Trust Department offers a full range of trust services, including personal trust, investment agency accounts, charitable trusts, retirement accounts including IRA roll-overs, 401(k) accounts and defined benefit plans, estate administration and estate planning.

At December 31, 2023 and 2022, the total market value of assets under the supervision of the Bank’s Trust Department was approximately $1.5 billion and $1.0 billion, respectively.

Trust Department revenues for these years may be found in the Consolidated Statements of Income under the heading “Other operating income”, which is contained in Item 8 of Part II of this annual report.

The Bank’s wealth department offers a full range of trust services, including personal trust, investment agency accounts, charitable trusts, retirement accounts including IRA roll-overs, 401(k) accounts and defined benefit plans, estate administration and estate planning.

At December 31, 2024 and 2023, the total market value of assets under the supervision of the Bank’s wealth department was approximately $1.7 billion and $1.5 billion, respectively.

Trust and brokerage department revenues for these years may be found in the Consolidated Statements of Income under the heading “Other operating income”, which is contained in Item 8 of Part II of this annual report.

The banking business, in all of its phases, is highly competitive.

Within our market areas, we compete with commercial banks, (including local banks and branches or affiliates of other larger banks), savings and loan associations and credit unions for loans and deposits, with consumer finance companies for loans, and with other financial institutions for various types of products and services, including trust services.

Within our market areas, we compete with commercial banks, (including local banks and branches or affiliates of other larger banks), savings and loan associations and credit unions for loans and deposits, with consumer finance companies for loans, and with other financial institutions and other providers of financial services for various types of products and services, including trust services.

There is also competition for commercial and retail banking business from banks and financial institutions located outside our market areas and on the internet.

The primary factors in competing for deposits are interest rates, personalized services, the quality and range of financial services, convenience of office locations and office hours.

The primary factors in competing for deposits are interest rates, personalized services, the quality and range of financial services, technology, convenience of office locations and office hours.

The primary factors in competing for loans are interest rates, loan origination fees, the quality and range of lending services and personalized services.

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Allegany County, Maryland:

Manufacturers & Traders Trust Company

First United Bank & Trust

Manufacturers and Traders Trust Company

Dollar Bank, Federal Savings Bank

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Frederick County, Maryland:

Bank Of America NA

Manufacturers & Traders Trust Company

PNC Bank, National Association

Bank Of America, National Association

Manufacturers and Traders Trust Company

Sandy Spring Bank

Woodsboro Bank

Capital One, NA

Middletown Valley Bank

Capital One, National Association

First United Bank & Trust

Wells Fargo Bank NA

Wells Fargo Bank, National Association

Fulton Bank, National Association

WesBanco Bank, Inc.

JP Morgan Chase Bank, National Association

Presidential Bank, FSB

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First United Bank & Trust

Manufacturers & Traders Trust Company

Manufacturers and Traders Trust Company

Clear Mountain Bank

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Fulton Bank, National Association

Manufacturers & Traders Trust Company

Manufacturers and Traders Trust Company

Middletown Valley Bank

PNC Bank, National Association

First United Bank & Trust

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Bank of Charles Town

Farmers and Merchants Trust Company of Chambersburg

Ameriserv Financial Bank

Jefferson Security Bank

Farmers and Merchants Trust Company of Chambersburg

FDIC Deposit Market Share Report

1 unchanged sentence

City National Bank of West Virginia

Summit Community Bank, Inc.

Burke & Herbert Bank & Trust Company

First United Bank & Trust

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FDIC Deposit Market Share Report

Harrison County, West Virginia:

MVB Bank, Inc.

The Huntington National Bank

WesBanco Bank, Inc.

JP Morgan Chase Bank, NA

Harrison County Bank

City National Bank of West Virginia

Clear Mountain Bank

BC Bank, Inc.

West Union Bank

Summit Community Bank

Freedom Bank, Inc

First United Bank & Trust

FDIC Deposit Market Share Report

Mineral County, West Virginia:

First United Bank & Trust

Manufacturers & Traders Trust Company

Grant County Bank

Manufacturers and Traders Trust Company

The Grant County Bank

FNB Bank, Inc.

4 unchanged sentences

Clear Mountain Bank

PNC Bank, National Association

WesBanco Bank, Inc.

1 unchanged sentence

Citizens Bank of Morgantown, Inc.

Summit Community Bank, Inc.

First Exchange Bank

JP Morgan Chase Bank, NA

Burke & Herbert Bank & Trust Company

JP Morgan Chase Bank, National Association

City National Bank of West Virginia

31 unchanged sentences

The Bank will be considered to be well managed so long as it achieves a CAMEL composite rating of at least “2” as a result of its most recent examination and at least a “satisfactory” management rating (if such rating is given).

If the Bank were to fail to meet either of these requirements, then the Corporation would be required to enter into an agreement with the FRB that would address the remediation of the condition that led to the failure.

If the Bank were to fail to meet either of these requirements, then the Corporation would be required to enter into an agreement with the FRB that would address the remediation of the

condition that led to the failure.

During the term of that agreement, which is typically 180 days but can be extended at the discretion of the FRB, the Corporation would be prohibited from commencing any additional activity or acquiring control or shares of any company that would otherwise be permissible for a financial holding company under Section 4(k) of the BHC Act.

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These standards include internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation, fees and benefits.

An institution that fails to meet those standards may be

required by the agency to develop a plan acceptable to meet the standards.

An institution that fails to meet those standards may be required by the agency to develop a plan acceptable to meet the standards.

Failure to submit or implement such a plan may subject the institution to regulatory sanctions.

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To the extent that deposits are not adequate to fund our capital requirements, we can rely on the funding sources identified below under the heading “Liquidity Management”.

As of December 31, 2023, the Bank had $140.0 million available through unsecured lines of credit with correspondent banks, $12.2 million available through a secured line of credit with the Federal Reserve Discount Window, $69.5 million available through the FFB’s Bank Term Funding Program (“BTFP”), and approximately $145.4 million available through the Federal Home Loan Bank of Atlanta (“FHLB”).

As of December 31, 2024, the Bank had $140.0 million available through unsecured lines of credit with correspondent banks, $36.6 million available through a secured line of credit with the Federal Reserve Discount Window, and approximately $213.6 million available through the Federal Home Loan Bank of Atlanta (“FHLB”).

Management is not aware of any demands, commitments, events or uncertainties that are likely to materially affect our ability to meet our future capital requirements.

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The relevant capital measures are the total capital ratio, the Tier 1 capital ratio and the leverage ratio.

A bank will be (i) “well capitalized” if the institution has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater, and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure, (ii) “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 4.0% or greater, and a leverage ratio of 4.0% or greater and is not “well capitalized”, (iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio of less than 4.0% or a leverage ratio of less than 4.0%, (iv) “significantly undercapitalized” if the institution has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 3.0% or a leverage ratio of less than 3.0%, and (v) “critically undercapitalized” if the institution’s tangible equity is equal to or less than 2.0% of average quarterly tangible assets.

undercapitalized” if the institution’s tangible equity is equal to or less than 2.0% of average quarterly tangible assets.

An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters.

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The Basel III Capital Rules require banks to measure their liquidity against specific liquidity tests that, although similar in some respects to liquidity measures historically applied by banks and regulators for management and supervisory purposes, going forward would be required by regulation.

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

total cash outflow) under an acute liquidity stress scenario.

The other test, referred to as the net stable funding ratio, is designed to promote more medium- and long-term funding of the assets and activities of banking entities over a one-year time horizon.

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The FDIC has the flexibility to adopt actual rates that are higher or lower than the total base assessment rates adopted without notice and comment, if certain conditions are met.

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

The increased assessment was expected to improve the likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35% by the statutory deadline prescribed under the FDIC’s amended restoration plan.

In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF as a result of bank failures that year and the FDIC’s use of the systemic risk exception to cover certain deposits that were otherwise uninsured.

In June 2024, due to the increased estimate of losses, the FDIC announced that it projects that the special assessment will be collected for an additional two quarters beyond the initial eight-quarter collection period at a lower rate.

The special estimate was based on estimated uninsured deposits at December 31, 2022 (excluding the first $5.0 billion).

The Bank was exempt from this special assessment as its total uninsured deposits were below $5.0 billion.

The FDIC is authorized to conduct examinations of and require reporting by FDIC-insured institutions.

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The USA Patriot Act is designed to deny terrorists and criminals the ability to obtain access to the United States’ financial system and has significant implications for depository institutions, brokers, dealers, and other businesses involved in the transfer of money.

The USA Patriot Act mandates that financial service companies implement additional policies and procedures and take heightened measures designed to address any or all of the following matters:

The USA Patriot Act mandates that financial service companies implement additional policies and procedures

and take heightened measures designed to address any or all of the following matters:

customer identification programs, money laundering, terrorist financing, identifying and reporting suspicious activities and currency transactions, currency crimes, and cooperation between financial institutions and law enforcement authorities.

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Among the instruments of monetary policy used by the FRB to implement these objectives are open market operations in U.S.

Government securities, changes

in the federal funds rate, changes in the discount rate of member bank borrowings, and changes in reserve requirements against member bank deposits.

Government securities, changes in the federal funds rate, changes in the discount rate of member bank borrowings, and changes in reserve requirements against member bank deposits.

These means are used in varying combinations to influence overall growth of bank loans, investments and deposits and may also affect interest rates charged on loans or paid on deposits.

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 1. Business