What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2025-03-10 compared with 2024-03-15 · 91 added, 96 removed, 348 unchanged (35% of the section changed)

9 unchanged sentences

The Bank is a national banking association chartered under the laws of the United States with trust powers that can trace its origin to 1876.

The Bank currently operates 42 full-service branches, 42 automatic teller machines (an “ATM”), 3 interactive teller machines, 5 loan production offices, and provides a full range of commercial and consumer banking products and services to individuals, businesses, and other organizations in Baltimore County, Howard County, Kent County, Queen Anne’s County, Caroline County, Talbot County, Dorchester County, Anne Arundel County, Charles County, St Mary’s County, Calvert County and Worcester County in Maryland, Kent County and Sussex County in Delaware and Accomack County, Fredericksburg City, Stafford County and Spotsylvania County in Virginia.

The Bank currently operates 40 full-service branches, 39 automatic teller machines (an “ATM”), 3 interactive teller machines, 10 loan production and administration offices, and provides a full range of commercial and consumer banking products and services to individuals, businesses, and other organizations in Baltimore County, Howard County, Kent County, Queen Anne’s County, Caroline County, Talbot County, Dorchester County, Anne Arundel County, Charles County, St.

Mary’s County, Calvert County and Worcester County in Maryland, Kent County and Sussex County in Delaware and Fredericksburg City, Stafford County and Spotsylvania County in Virginia.

The Bank’s deposits are insured up to applicable legal limits by the FDIC.

The Bank is an independent community bank that serves businesses and individuals in their respective market areas.

Services offered are essentially the same as those offered by larger regional institutions that compete with the Bank.

Services provided to businesses include commercial checking, savings, certificates of deposit and overnight investment sweep accounts.

1 unchanged sentence

Treasury management services are also available, such as merchant card processing services, remote deposit capture, ACH origination, digital banking and telephone banking services.

Services to individuals include checking accounts, various savings programs, mortgage loans, home improvement loans, installment and other personal loans, credit cards, personal lines of credit, automobile and other consumer financing, safe deposit boxes, debit cards, 24-hour telephone banking, internet banking, mobile banking and 24-hour ATM services.

The Bank, through Wye Financial Partners, a department of the Bank, provides full-service investment and insurance solutions through our broker/dealer, LPL Financial.

The Bank also offers wealth management solutions such as corporate trustee services and trust administration through Wye Trust, a division of the Bank.

Services provided to individuals include checking accounts, various savings programs, mortgage loans, home improvement loans, installment and other personal loans, credit cards, personal lines of credit, automobile and other consumer financing, safe deposit boxes, debit cards, 24-hour telephone banking, internet banking, mobile banking and 24-hour ATM services.

Additionally, the Bank has Saturday hours and extended hours on certain evenings during the week for added customer convenience.

1 unchanged sentence

The Company’s business strategy is to establish a leading community banking franchise that delivers exceptional financial services to the communities we serve.

We believe this strategy has been implemented over the past several years through a combination of organic and strategic growth, both within and contiguous to our existing footprint.

Consistent with our strategy, on July 1, 2023, the Company completed its acquisition of TCFC and its wholly-owned subsidiary Community Bank of the Chesapeake (“CBTC”).

This strategy has been implemented over the past several years through a combination of organic and strategic growth, both within and contiguous to our existing footprint.

On July 1, 2023, the Company completed the acquisition of The Community Financial Corporation (“TCFC”) and its wholly-owned subsidiary Community Bank of the Chesapeake (“CBTC”).

The transaction was valued at approximately $153.6 million and expanded the Bank’s footprint into the Southern Maryland Counties of Charles, St.

Mary’s and Calvert and the greater Fredericksburg area in Virginia, which includes, Stafford and Spotsylvania Counties.

Mary’s and Calvert and the greater Fredericksburg area in Virginia, which includes Fredericksburg City as well as Stafford and Spotsylvania Counties.

At the time of the acquisition, TCFC added $2.4 billion in assets, $454.5 million in investments, $1.8 billion in loans, $2.1 billion in deposits, $150.6 million in brokered deposits, $69.0 million in Federal Home Loan Bank (the “FHLB”) advances and $32.0 million in subordinated debt and trust preferred debentures.

The excess of the fair value of net TCFC assets acquired over the merger consideration resulted in an $8.8 million bargain purchase gain.

On October 31, 2021, the Company completed the acquisition of Severn Bancorp, Inc.

(“Severn”), and its wholly-owned subsidiary Severn Savings Bank, FSB, a federally charted savings bank, headquartered in Annapolis, Maryland.

The transaction was valued at approximately $169.8 million and expanded the Bank’s footprint into the Columbia, Baltimore and Towson MSA, while also filling in the Bank’s existing market footprint.

At the time of the acquisition, Severn added $1.1 billion in assets, $584.8 million in net loans held for investment, $955.3 million in deposits and $28.3 million in subordinated debt.

Lending Activities

The Bank originates loans of all types, including commercial, commercial mortgage, commercial construction, residential construction, residential mortgage and consumer loans.

• Commercial Lending.

The Bank originates secured and unsecured loans for business purposes.

Commercial loans are typically secured by real estate, accounts receivable, inventory, equipment and/or other assets of the business.

Commercial loans generally involve a greater degree of credit risk than one to four family residential mortgage loans.

Repayment is often dependent upon the successful operation of the business 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 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.

The Bank originates loans including commercial real estate, residential real estate, construction, commercial, consumer and credit cards.

• Commercial Real Estate (“CRE”) and Other Non-Residential Real Estate Loans.

The Bank’s CRE loans are primarily secured by land for residential and commercial development, agricultural purpose properties, service industry buildings such as restaurants and hotels, retail buildings and general purpose business space.

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

• Residential Construction Loans.

The Bank provides residential real estate construction loans to builders and individuals for single family dwellings.

The Bank’s CRE loans are primarily secured by commercial buildings, multi-family buildings, agricultural purpose consumer properties, service industry buildings such as restaurants and hotels, retail buildings and general purpose business space.

The Bank attempts to mitigate the risks associated with these loans through financial analyses, conservative underwriting procedures, including loan-to-value ratio standards, obtaining additional collateral and management’s knowledge of the local economy in which the Bank lends.

• Residential Real Estate Loans.

The Bank originates residential mortgage loans that are to be held in our loan portfolio as well as loans that are intended for sale in the secondary market.

Loans sold in the secondary market are primarily sold to investors with which the Bank maintains a correspondent relationship.

These loans are made in conformity with standard government-sponsored

enterprise underwriting criteria required by the investors to assure maximum eligibility for resale in the secondary market and are approved either by the Bank’s underwriter or the correspondent’s underwriter.

Additionally, loans that are sold into the secondary market are typically residential long-term loans (15 or more years), generally with fixed rates of interest.

Loans retained for the Bank’s portfolio typically include loans that periodically reprice or mature prior to the end of an amortized term.

Generally, loans are sold with servicing retained which includes loans sold to the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”).

As of December 31, 2024, the Bank was servicing $366.5 million in loans for Fannie Mae and $116.6 million in loans for Freddie Mac.

• Construction Loans.

The Bank provides commercial and residential real estate construction loans to builders and individuals.

Residential construction loans are usually granted based upon “as completed” appraisals and are secured by the property under construction.

3 unchanged sentences

Permanent financing options for individuals include fixed and variable rate loans with three- and five-year balloon features and one-, three- and five-year adjustable rate mortgage loans.

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

• Residential Mortgage Loans.

The Bank originates residential mortgage loans that are to be held in our loan portfolio as well as loans that are intended for sale in the secondary market.

Loans sold in the secondary market are primarily sold to investors with which the Bank maintains a correspondent relationship.

These loans are made in conformity with standard government-sponsored enterprise underwriting criteria required by the investors to assure maximum eligibility for resale in the secondary market and are approved either by the Bank’s underwriter or the correspondent’s underwriter.

Additionally, loans that are sold into the secondary market are typically residential long-term loans (15 or more years), generally with fixed rates of interest.

Loans retained for the Bank’s portfolio typically include construction loans and loans that periodically reprice or mature prior to the end of an amortized term.

Generally, loans are sold with servicing retained which includes loans sold to the Federal National Mortgage Association or Freddie Mac.

Due to increasing interest rates, the market for residential mortgage loans slowed in the second half of 2023.

Management recognizes that residential mortgage lending is cyclical, but believes that residential mortgage loans we retain in our portfolio are important to both support our local communities and balance sheet diversification.

As of December 31, 2023, the Bank was servicing $371.5 million in loans for Federal National Mortgage Association and $113.2 million in loans for Freddie Mac.

The Bank attempts to mitigate risks associated with these loans through conservative underwriting procedures such as loan-to-value ratios of 80% or less at origination, obtaining additional collateral when prudent, and closely monitoring construction projects to control disbursement of funds on loans.

• Commercial Loans.

The Bank originates secured and unsecured loans for business purposes.

Commercial loans are typically secured by real estate, accounts receivable, inventory, equipment and/or other assets of the business.

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

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.

• Consumer Loans.

A variety of consumer loans are offered to customers, including home equity loans, credit cards, marine loans and other secured and unsecured lines of credit and term loans.

A variety of consumer loans are offered to customers, including home equity loans, marine loans and other secured and unsecured lines of credit and term loans.

Certain consumer loans are originated by a third-party on behalf of the Company.

Careful analysis of an applicant’s creditworthiness is performed before granting credit, and ongoing monitoring of loans outstanding is performed in an effort to minimize risk of loss by identifying problem loans early.

The Company discontinued the issuance of new marine loans in June 2023 and only services the existing portfolio as of December 31, 2024.

• Credit Card Loans.

The Bank offered unsecured credit card loans to commercial and consumer customers.

Credit risk factors include the borrower’s continuing financial stability, which can be adversely impacted by job loss, divorce, illness or personal bankruptcy, among other factors.

The Company discontinued the issuance of new credit cards in April 2024 (except to select existing credit card customers) and only services the existing portfolio as of December 31, 2024.

Deposit Activities

1 unchanged sentence

The Bank also offers its certificate of deposit account registry service (“CDARS”) program and the insured cash sweep (“ICS”) program allowing customers the ability to insure deposits over $250,000 among other banks that participate in the CDARS and ICS networks while providing competitive rates and easy access to funds.

In addition, we offer our commercial customers packages which include cash management services and various checking opportunities and other cash sweep products.

In addition, we offer our commercial customers packages that include cash management services, various checking opportunities and other cash sweep products.

Title Services

The Company offers title services through its wholly-owned subsidiary, the Title Company, which engages in residential and commercial real estate settlement activities and offers title insurance policies, title search and lien satisfaction services.

Financial Services

The Company, through Wye Financial Partners, a division of the Bank, offers full-service investment, insurance and financial planning services through our broker/dealer, LPL Financial, to residents of the states of AL, AZ, CA, CO, CT, DE, DC, FL, GA, IN, KY, ME, MD, MA, MI, NJ, NY, NC, OH, PA, RI, SC, SD, TX, VA, WA and WV.

Trust Services

The Bank has a trust department through which it offers trust, asset management and financial planning services to customers within our market areas using the trade name Wye Trust.

The Company, through Wye Trust, a division of the Bank, offers wealth management, corporate trustee services and trust administration to customers within our market areas and nationwide.

Cannabis Related Business

3 unchanged sentences

Throughout the relationship, the Bank continues to monitor the business, including site visits, to ensure that the cannabis business continues to meet stringent requirements, including maintenance of required licenses.

The Bank performs periodic financial reviews of the business and monitors the business in accordance with the Bank Secrecy Act of 1970 (“BSA”) and Maryland Cannabis Administration requirements.

See Note 20 to the Consolidated Financial Statements for a summary of the level of business activities with the Bank’s cannabis customers.

The Company recognizes that certain customers have a seasonality within their operations which indirectly impact the Bank’s liquidity.

The Bank has a significant banking activity with state, county and local municipalities within Maryland, Virginia and Delaware who receive their funding from federal and state agencies, as well as, tax generating revenue which is seasonal in nature.

Employees and Human Capital Resourc es

The Bank performs periodic financial reviews of the business and monitors the business in accordance with the Bank Secrecy Act of 1970 (“BSA”) and other state requirements.

The Company recognizes that certain customers have seasonality within their operations which indirectly impacts the Bank’s liquidity.

The Bank has significant banking relationships with state, county and local municipalities within Maryland, Virginia and Delaware who receive their funding from federal and state agencies, as well as, tax generating revenue, which is seasonal in nature.

Employees and Human Capital Resources

Our Mission and Culture

The Bank is built around the character of our people and our communities.

We are dedicated to our clients, our employees, our communities, and our shareholders – our mission is your success.

The Bank’s corporate culture is defined by core values which include integrity, family, performance, dedication and empowerment.

We are dedicated to our clients, our employees, our communities and our shareholders.

The Bank’s corporate culture is defined by core values which include integrity, accountability, teamwork, and resilience.

We value our employees by investing in competitive compensation and benefit packages and fostering a team environment centered on professional service and open communication.

4 unchanged sentences

The Bank’s employees were not represented by a collective bargaining agreement.

The Company has no employees and reimburses the Bank for estimated expenses, including an allocation of salaries and benefits.

Diversity and Inclusion

We are committed to building a diverse workforce and an inclusive work environment which are supported by our culture and values.

We strive to attract and retain employees with diverse characteristics, backgrounds and perspectives, which inspires our team to achieve more creative and innovative solutions for our customers.

With a commitment to equality, inclusion and workplace diversity, we focus on understanding, accepting, and valuing the differences between people.

Our commitment to equal employment opportunities is demonstrated through an affirmative action plan which includes annual compensation analyses, ongoing reviews of our selection and hiring practices and an annual review of our plan to ensure we build and maintain a diverse workforce.

The Company has no employees and reimburses the Bank for estimated expenses, including an allocation of salaries and employee benefits.

Belonging and Inclusion

We are committed to building an inclusive work environment which are supported by our culture and values.

We believe diversity of thought and experiences inspires our team to achieve more creative and innovative solutions for our customers.

With a commitment to support an inclusive workplace, we focus on understanding, accepting, and valuing the differences between people.

Compensation and Benefits

The Bank’s compensation and benefits package is designed to attract and retain a talented workforce.

In addition to salaries, benefits include a 401(k) plan with an employer matching contribution, an employee stock purchase plan, medical insurance benefits, paid short-term and long-term disability and life insurance, flexible spending accounts, and tuition assistance.

In addition to salaries, employee benefits include a 401(k) plan with an employer matching contribution, an employee stock purchase plan, medical insurance benefits, paid short-term and long-term disability and life insurance, flexible spending accounts, and tuition assistance.

Employee Health, Safety and Wellness

8 unchanged sentences

and its subsidiaries operate in a highly competitive environment.

Our competitors include community banks, commercial banks, credit unions, thrifts, mortgage banking companies, credit card issuers, investment advisory firms, brokerage firms, mutual fund companies, fintechs, title companies and e-commerce and other internet-based companies.

Our competitors include community banks, commercial banks, credit unions, thrifts, mortgage banking companies, investment advisory firms, brokerage firms, mutual and debt fund companies, private equity, fintechs, title companies and e-commerce and other internet-based companies.

We compete on a local and regional basis for banking and investment products and services.

The primary factors when competing in the financial service market include personalized services, the quality and range of products and services, interest rates on loans and deposits, lending services, price, customer convenience, and our ability to attract and retain experienced employees.

The primary factors when competing in the financial services market include personalized services, the quality and range of products and services, interest rates on loans and deposits, lending services, price, customer convenience, and our ability to attract and retain experienced employees.

To compete in our market areas, we utilize multiple media channels including print, online, social media, television, radio, direct mail, e-mail and digital signage.

32 unchanged sentences

The OCC may prohibit national banking associations, such as the Bank, from engaging in activities or investments that the OCC believes are unsafe or unsound banking practices.

The OCC has extensive enforcement authority over national banking associations to prohibit or correct activities that violate law, regulation or a regulatory agreement or which are deemed to be unsafe or unsound practices.

The OCC has extensive enforcement authority over national banking associations to prohibit or

correct activities that violate law, regulation or a regulatory agreement or which are deemed to be unsafe or unsound practices.

Enforcement actions may include the appointment of a conservator or receiver, the issuance of a cease and desist order, the termination of deposit insurance, the imposition of civil money penalties on the institution, its directors, officers, employees and institution-affiliated parties, the issuance of directives to increase capital, the issuance of formal and informal agreements, the removal of or restrictions on directors, officers, employees and institution-affiliated parties, and the enforcement of any such mechanisms through restraining orders or other court actions.

27 unchanged sentences

On October 18, 2022, the FDIC adopted a final rule that increased initial base deposit insurance assessment rates by 2 basis points, which began with the first quarterly assessment period of 2023.

Extraordinary growth in insured deposits during the first and second quarters of 2020 caused a decline in the DIF reserve ratio below the statutory minimum of 1.35% as of June 30, 2020.

Due to this decline, the FDIC established a Restoration Plan in September 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35% within eight years.

This Restoration Plan did not include an increase in the deposit insurance assessment rate.

On June 21, 2022, however, the FDIC adopted an Amended Restoration Plan and notice of proposed rulemaking to increase the deposit insurance assessment rates as it was otherwise at risk of not reaching the statutory minimum by the statutory deadline of September 30, 2028.

The proposed rule was adopted as final without change.

The increase was instituted to account for extraordinary growth in insured deposits during the first and second quarters of 2020, which caused a substantial decrease in the DIF reserve ratio.

The new assessment rate schedules are expected to remain in effect until the DIF reserve ratio meets or exceeds 2%.

Also, in the final rule adopted on October 18, 2022, the FDIC incorporated Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures in the risk-based deposit insurance assessment system applicable to all large and highly complex insured depository institutions.

In March 2022, the FASB issued ASU 2022-02, which eliminates accounting guidance for troubled debt restructurings (“TDRs”) and introduces new disclosures and enhances existing disclosures concerning certain loan refinancings and restructurings when a borrower is experiencing financial difficulty.

The FDIC final rule amends the assessment regulations to include a new term, “modifications to borrowers experiencing financial difficulty,” in two financial measures—the underperforming assets ratio and the higher-risk assets ratio—used to determine deposit insurance assessments for large and highly complex insured depository institutions.

The Dodd-Frank Act also raised the limit for federal deposit insurance to $250,000 for most deposit accounts and increased the cash limit of Securities Investor Protection Corporation protection from $100,000 to $250,000.

2 unchanged sentences

We cannot predict what insurance assessment rates will be in the future.

Furthermore, deposit insurance may be terminated by the FDIC upon a finding that an insured depository institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

Furthermore, deposit insurance may be terminated by the FDIC upon a finding that an insured depository institution has engaged in unsafe

or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

The Bank is required to monitor large deposit relationships and concentration risks in accordance with FDIC policy.

This includes monitoring deposit concentrations and maintaining fund management policies and strategies that take into account potentially volatile concentrations and significant deposits that mature simultaneously.

The FDIC defines a large depositor as a customer or entity that owns or controls 2% or more of the Bank’s total deposits.

The FDIC defines a large depositor as a customer or entity that owns or controls 2% or more of a bank’s total deposits.

Capital Adequacy Guidelines

5 unchanged sentences

Under federal regulations, bank holding companies and banks must meet certain risk-based capital requirements.

Effective as of January 1, 2015, the Basel III final capital framework (“Basel III”), among other things, (i) introduced as a new capital measure “Common Equity Tier 1” (“CET1”), (ii) specifies that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements, (iii) defines CET1 narrowly by requiring that most adjustments to regulatory capital measures be made to CET1 and not to the other components of capital, and (iv) expands the scope of the adjustments as compared to existing regulations.

Beginning January 1, 2016, financial institutions were required to maintain a minimum “capital conservation buffer” to avoid restrictions on capital distributions such as dividends and equity repurchases and other payments such as discretionary bonuses to executive officers.

The minimum capital conservation buffer was phased-in over a four -year transition period with minimum buffers of 0.625%, 1.25%, 1.875%, and 2.50% during 2016, 2017, 2018, and 2019, respectively.

As fully phased-in on January 1, 2019, Basel III subjects banks to the following risk-based capital requirements:

• a minimum ratio of CET1 to risk-weighted assets of at least 4.5%, plus a 2.5% capital conservation buffer, or 7.0%;

Effective as of January 1, 2015, the Basel III final capital framework (“Basel III”) required financial institutions to maintain a minimum “capital conservation buffer” on top of each of the minimum risk-based capital ratios to avoid restrictions on capital distributions such as dividends and equity repurchases and other payments such as discretionary bonuses to executive officers.

Basel III subjects banks to the following risk-based capital requirements:

• a minimum ratio of common equity Tier 1 (“CET1”) to risk-weighted assets of at least 4.5%, plus a 2.5% capital conservation buffer, or 7.0%;

• a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer, or 8.5%;

1 unchanged sentence

• a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures.

The Basel III provides for a number of deductions from and adjustments to CET1.

Basel III provides for a number of deductions from and adjustments to CET1.

These include, for example, the requirement that mortgage servicing rights, deferred tax assets dependent upon future taxable income and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10.0% of CET1 or all such categories in the aggregate exceed 15.0% of CET1.

11 unchanged sentences

In particular, loans categorized as “high-volatility CRE” loans, as defined pursuant to applicable federal regulations, are required to be assigned a 150% risk weighting, and require additional capital support.

In addition to the uniform risk-based capital guidelines and regulatory capital ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

Future changes in regulations or practices could further reduce the amount of capital recognized for purposes of capital adequacy.

2 unchanged sentences

Basel III is currently applicable to the Bank and the Company.

Overall, the Company believes that implementation of the Basel III rule has not had and will not have a material adverse effect on the Company’s or the Bank’s capital ratios, earnings, stockholders’ equity, or its ability to pay dividends, effect stock repurchases or pay discretionary bonuses to executive officers.

Overall, the Company’s implementation of Basel III did not have a material adverse effect on the Company’s or the Bank’s capital ratios, earnings, stockholders’ equity, or its ability to pay dividends, effect stock repurchases or pay discretionary bonuses to executive officers.

In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as “Basel IV”).

11 unchanged sentences

Federal banking regulations define, for each capital category, the levels at which institutions are “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” Under applicable regulations, as of December 31, 2024, the Bank was “well capitalized,” which means it had a CET1 capital ratio of 6.5% or higher;

a Tier I risk-based capital ratio of 8.0% or higher;

a Tier 1 risk-based capital ratio of 8.0% or higher;

a total risk-based capital ratio of 10.0% or higher;

15 unchanged sentences

The aggregate liability of the holding company of an undercapitalized bank is limited to the lesser of 5% of the institution’s assets at the time it became undercapitalized or the amount necessary to cause the institution to be “adequately capitalized.” The bank regulators have greater power in situations where an institution becomes “significantly” or “critically” undercapitalized or fails to submit a capital restoration plan.

In addition to requiring undercapitalized institutions to submit a capital restoration plan, bank regulations contain broad restrictions on certain activities of undercapitalized institutions including asset growth, acquisitions, branch establishment and expansion into new lines of business.

In addition to requiring undercapitalized institutions to submit a capital

restoration plan, bank regulations contain broad restrictions on certain activities of undercapitalized institutions including asset growth, acquisitions, branch establishment and expansion into new lines of business.

With certain exceptions, an insured depository institution is prohibited from making capital distributions, including dividends, and is prohibited from paying management fees to control persons if the institution would be undercapitalized after any such distribution or payment.

21 unchanged sentences

and (vi) provide periodic asset quality reports with adequate information for management and the board of directors to assess the level of asset risk.

On January 29, 2024, the OCC issued a notice of proposed rulemaking and Policy Statement on Bank Mergers, wherein the OCC requested comment on a proposal to update its rules for business combinations involving national banks and federal savings associations.

proposal also includes a policy statement to clarify the OCC’s review of applications under the Bank Merger Act (the “BMA”).

The proposed rulemaking is part of the OCC’s effort to enhance transparency around its process of reviewing transactions under the BMA.

It would also serve to provide additional guidance to stakeholders around the OCC’s review of applications.

The proposed policy statement specifically would discuss:

(1) general principles for the OCC’s review of applications under the BMA, including indicators for applications likely consistent with approval and applications that raise supervisory or regulatory concerns;

(2) the OCC’s consideration of the financial stability;

managerial and financial resources and future prospects;

and convenience and needs statutory factors under the BMA;

and (3) the OCC’s decision process for extending the public comment period or holding a public meeting.

On September 17, 2024, the FDIC, the OCC and the U.S.

Department of Justice (“DOJ”), each announced new rules and policy statements impacting their bank merger review processes.

Among these actions, the FDIC approved a final statement of policy on bank merger transactions (the “2024 Statement”) and the OCC approved a final rule updating the agency’s regulations for business combinations involving national banks and federal savings associations.

The OCC’s final rule modifies its procedures for reviewing bank merger applications under the Bank Merger Act, including the elimination of the expedited bank merger review and the streamlined application procedures.

The OCC’s final rule also includes a new policy statement that addresses the substantive standards that it will use to evaluate bank merger applications, including indicators that point in favor of likely approval or rejection.

Concurrent with the FDIC and OCC announcements, the DOJ withdrew from its 1995 Bank Merger Guidelines and announced that it would consider bank mergers under its 2023 Merger Guidelines, which are not industry specific, as well as a separate, recently adopted bank merger addendum.

On March 3, 2025, the FDIC approved a proposal to rescind the 2024 Statement and reinstate, on an interim basis, the statement of policy on bank merger transactions that was in effect prior to the 2024 Statement.

It remains unclear whether the OCC under anticipated new leadership will also reconsider its new regulation and policy statement.

Community Reinvestment Act

4 unchanged sentences

In October 2023, the OCC, together with the FRB and FDIC, issued a joint final rule to modernize the CRA regulatory framework.

The final rule is intended, among other things, to adapt to changes in the banking industry, including the expanded role of mobile and online banking, and to tailor performance standards to account for differences in bank size and business models.

The final rule introduces new tests under which the performance of banks with over $2 billion in assets will be assessed.

The new rule also includes data collection and reporting requirements, some of which are applicable only to banks with over $10 billion in assets.

Most provisions of the final rule will become effective on January 1, 2026, and the data reporting requirements will become effective on January 1, 2027.

On March 29, 2024, the federal court paused the enforcement of the new rules in response to a lawsuit filed by several trade groups.

We will continue to monitor the litigation until resolved.

We have also begun efforts to evaluate the impact of the new rule and to develop a strategy to ensure compliance.

Anti-Terrorism, Money Laundering Legislation and OFAC

77 unchanged sentences

The federal banking agencies agreed to review the definition of Qualified Residential Mortgages in 2019, following the CFPB’s own review of its “qualified mortgage” regulation.

purposes of residential mortgage securitizations, the Risk Retention Rule took effect on December 24, 2015.

For purposes of residential mortgage securitizations, the Risk Retention Rule took effect on December 24, 2015.

For all other securitizations, the rule took effect on December 24, 2016.

7 unchanged sentences

Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various agencies, the full extent of the impact such requirements will have on financial institutions’ operations is unclear.

Climate-Related and Other Environmental, Social and Governance Developments

In recent years, federal, state and international lawmakers and regulators have increased their focus on financial institutions’ and other companies’ risk oversight, disclosures and practices in connection with climate change and other environmental, social and governance matters.

For example, in March 2022, the SEC issued a proposed rule on the enhancement and standardization of climate-related disclosures for investors.

The proposed rule would require public issuers, including us, to significantly expand the scope of climate-related disclosures in their SEC filings.

The SEC has also announced plans to propose rules to require enhanced disclosure regarding human capital management and board diversity for public issuers.

Other Laws and Regulations

39 unchanged sentences

In view of changing conditions in the national economy and in the money markets, as well as the effect of actions by monetary and fiscal authorities, including the FRB, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand or their effect on the business and earnings of the Company and its subsidiaries.

Future Legislative Developments

Various legislative acts are from time to time introduced in Congress and the Maryland legislature.

This legislation may change banking statutes and the environment in which we operate in substantial and unpredictable ways.

We cannot determine the ultimate effect that potential legislation, if enacted, or implementing regulations and interpretations with respect thereto, would have on our financial condition or results of operations.

The new presidential administration and many members of Congress have advocated for changes in financial services regulation, potentially including amendments to the Dodd-Frank Act and other federal banking laws, and structural changes to the CFPB.

It is possible, though uncertain, that Congress and/or the relevant federal agencies may seek to roll back or modify some or much of the rulemaking and regulatory guidance issued under the previous presidential administration.

Additionally, the full impact of the leadership changes at banking regulatory agencies on the enforcement and supervisory priorities of each agency is not fully known at this time.

It is therefore unclear at the present time what effect the aforementioned changes will have on the banking industry as a whole or the Company specifically.

AVAILABLE INFORMATION

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