Potomac Bancshares : Annual Report - 2021

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150 Years of Service

2021 ANNUAL REPORT

PMAC BANCSHARES

WEST VIRGINIA

- Main Office

CHARLES TOWN

111 E. Washington Street Charles wn,  25414 304-725-8431 HARPERS FER

1366 W. Washington Street Harpers Ferry,  25425 304-535-6336 HEDGESVILLE

119 Cowardly Lion Drive Hedgesville,  25427 304-754-0000

5480 Charles wn Road Kearneysville,  25430 304-876-2563

KEARNEYSVILLE

9738 Tuscarora Pike Mainsburg,  25403 304-262-0089

HAGERSTOWN 1101 Frederick Street Hagerstown, MD 21740 301-739-4BCT (4228)

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1125 Emancipation Highway 540-619-2913

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Suite 400

540-361-2612 LEESBURG

Fredericksburg,  22401

446 Madison ade Plaza SE

703-777-6319

115 The Plains Road Suite 150 Middleburg,  20117 540-687-6132

MIDDLEBURG

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1201 Wolf Rock Drive Suite 125

Purcellville,  20132

Leesburg,  20175

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CUSTOMER AND EMPLOYEE EXPERIENCE REMAIN FOCUS FOR 2021

As the COVID-19 pandemic continued to disrupt the economy, BCT was honored to beselected as an American Banker "Best Banks To Work For" for a third consecutive year. In 2021, BCT launched a zero-interest loan program for minority-owned businesses called Banking On Diversity.

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MINORI BUSINESS FUND

D

ear Valued Shareholder,

Happy 150th Anniversary Bank of Charles Town! It is our honor to lead such a historic organization formed by 38 local farmers and business owners with the foresight to address the escalating need for stability in our community. On April 4, 1871, our service to the community began with a vault, a hitching post, and two employees who formed what became our founding vision of "neighbors helping neighbors, growing our communities."

We are proud to present you with record results for our 150th anniversary year for Bank of Charles Town (BCT) and its holding company Potomac Bancshares, Inc., demonstrating the enduring commitment of our employees to our founding vision. In honor of our anniversary, we dedicate this annual report to our many multi-generational clients who share our same commitment to service, and we are proud to feature several in the following pages.

We hope you enjoy their stories as much as we do.

Our total assets ended the year just over $711 million, growing $89.4 million or 14.6% for the year. We welcomed many new relationships this year driving $55.0 million in net new commercial loan growth which offset the decrease in the Paycheck Protection Program (PPP) and mortgage loans resulting in total loans outstanding of $517.0 million. The second round of PPP allowed us to provide 411 businesses with much needed funds to survive the extended impact of the pandemic. Total deposits grew $80.5 million, to end the year at $629.1 million. Our deposit and cash management initiatives contributed to the growth of non-interest bearing deposits, which increased to 22% of total deposits at year end.

Providing our clients sound financial advice is a privilege, particularly with important decisions like purchasing homes or investments.

During 2021, we guided 342 homeowners through the process of refinancing, constructing, or purchasing their new homes. This privilege extended into BCT Wealth and BCT Investments as we added new relationships, pushing assets under management to over $200 million. We strengthened BCT Investments by partnering with Sterling Financial Management to provide a cost-effective growth solution which includes a team of top-quality financial advisors.

Managing risk is a daily discussion for us as we remain steadfast to prudent, sound banking practices. Our credit culture continues to drive strong credit metrics with non-performing assets of 0.01% of total assets at year end. In addition, all capital ratios remain solidly above the "well capitalized" ratios required by the regulators.

Net income was $7.57 million, or $1.83 per share, for the twelve months ended December 31, 2021. Our 100% increase over last year was driven by PPP fees, strong core loan growth, continued decreases in deposit costs, notable increases in non-interest income and expense management.

Strategically, it has been our goal to become a leader in Small Business Administration (SBA) lending, allowing us to expand our service to local communities and unleash our geographic boundaries through niche programs. In May 2021, we announced the addition of three

2021 ANNUAL REPORT

experienced SBA lenders. Later in the year, we became the first bank chartered in West Virginia to be granted SBA's Preferred Lending Partner status. This is one example of several 2021 initiatives where we invested in our future to ensure an amazing client experience that will build long-term loyalty and profitable growth.

Another way we exemplify "neighbors helping neighbors" is by supporting local charities. BCTCares Foundation and BCTCares For the Hungry successfully raised $43,000 through its "Pack the 'Pack" initiative to support local Backpack programs in our four markets to feed food-insecure school children. BCT, along with three other local community banks, established the nation's first Banking On Diversity, Minority Business Loan Fund to address the lack of access to capital for minority businesses. Programs like this and other community- focused initiatives are the reason BCT received an outstanding Community Reinvestment Act (CRA) rating in April 2021.

BCT has a certain culture, a special sauce, that is easy to taste but hard to explain. For 150 years we have curated the recipe which begins with our employees. We could not be more proud and thankful for their consistent efforts to bring their best during another year of challenges. The result: being voted "Best of the Best" in three categories of the 2021 Journal-News Readers Choice Awards and being selected an American Banker "Best Banks To Work For" a third consecutive year.

Alas, 2021 also brought about two retirements from our Board of Directors. We are enormously grateful for the service of Barbara Scott and Larry Togans. Their insights, advice, and governance has guided us well and set us on a clear path to continued success.

As we look to 2022, our commitment to profitable growth while continuing to invest in our future to remain a safe and sound community bank for years to come is unwavering. The Board of Directors, senior management, and employees genuinely thank you for your continued support, loyalty, and trust.

President & CEO,

Potomac Bancshares, Inc. & Bank of Charles Town

Chairman of the Board, Potomac Bancshares, Inc. & Bank of Charles Town

Directors Retiring In 2021:

Barbara L. Scott

Ms. Scott and Mr. Togans served on the Board of Directors with distinction and honor for nine and 17 years, respectively.

Their contributions were significant.

C. Larry Togans

We will miss them both. With appreciation and admiration, we thank Barbara and Larry for their dedication and service over the years.

BOARD OF DIRECTORS

Keith B. Berkeley, D.V.M. Chairman of the Board, Potomac Bancshares and Bank of Charles Town Veterinarian/Owner,

Valley Equine Associates

Alice P. Frazier

President & CEO, Potomac Bancshares and Bank of Charles Town

Kristina Bouweiri

President & CEO, Reston Limousine

J. Scott Boyd

Pharmacist/President, Jefferson Pharmacy Pharmacist/President, JSB Enterprises, dba South Berkeley Pharmacy Manager, Mountain Spring Properties

Norman M. Casagrande

Retired Location Manager, BMC East, Member of MAC Industries

Margaret M. Cogswell

CEO, Hospice of the Panhandle

Mitesh B. Kothari, M.D.

Managing Member, Capital Women's Care

Barbara H. Pichot

Certified Public Accountant Retired Partner, CoxHollida

Barbara L. Scott

Summit Point Raceway Associates Retired President & CEO,BSR Training

Served May 2012 to April 2021

Andrew C. Skinner Attorney/Owner, Skinner Law Firm

C. Larry Togans

Retired Deputy Branch Chief of

Human Resources, U.S. Geological Survey

Served March 2004 to July 2021

William "Bill" A. White Consultant

Retired CFO and Corporate Secretary First Bauxite Corporation

Anthony P. Zelenka

Retired President & CEO, WVU Medicine

Berkeley Medical Center and

Jefferson Medical Center

ADVISORY BOARD

BCT'S COMMUNITY CHAMPIONS

Many of the top business and community leaders within each market serve on Advisory Boards. In addition to providing valuable introductions to local business leaders, these members help BCT understand each market's competitive landscape plus provide expertise and special knowledge that help guide our strategic planning.

Eastern Panhandle, WV	Loudoun County, VA	Washington County, MD
Advisory Board	Advisory Board	Advisory Board
John Beatty	Kristina Bouweiri (Chair)	Heather Guessford
BCT, Retired	Reston Limousine	United Way of
Washington County
Mark Burkhart	Paige Buscema
Mountain View Farm	Eyetopia	Todd A. Harrison, D.P.M.
Foot & Ankle Specialist of
Alison A. Cox	Bob Caines	the Mid-Atlantic
Bowles Rice LLP	The Bob Caines Team, Re/Max
Mitesh B. Kothari, M.D.
Darin L. Gilpin D.V.M.	Gary Clemens	(Chair)
Shenandoah Veterinary	Loudoun County Circuit Court	Capital Women's Care
Hospital
Matthew Lowers	Richard Kramer, D.D.S.
Justin Henry	Wholesale Screening Solutions	Oral and Facial Surgery
Panhandle Homes of
Berkeley County	Chauvon McFadden	Kevin O'Leary
Crimson Wealth Strategies	Coldwell Banker Innovations
C.W. "Chip" Hensell, III
(Chair)	Susan Mitchell	Ted Reeder III, CPA
Hensell Realty	Guardians of Honor, LLC	Tiger's Eye Benefits Consulting
Jamila Jones-Fleet	Bernard Mustafa	John H. Roney II
Innovation Technology Solutions	BE FIT Technologies	Retired Banker
John Lowe	Anthony "Tony" Stafford	Jeanne Singer
Lowe Products	Ford's Fish Shack	Law Offices of Jeanne Singer
Kenny Roberts	Sonny Swann
Invariant	Climatic Heating and Cooling
Lisa Younis	Katie Wilson
Younis Orthodontics	The Market Group

2021 ANNUAL

REPORT

THE MASTER'S WOODSHOP

HAGERSTOWN, MD

Master's Woodshop, where seasoned craftsmen are busy building architectural cabinetry for upscale residential homes. Additionally, they're creating custom moulding and millwork for windows and doors, kitchens, baths, closets, and more. The business was founded in 1985 by Eben Conner in Hagerstown. In 1999, Jeremy Derr started working at the company sweeping floors, then progressed to building cabinets, drafting, and sales. Earlier this year, Jeremy and his wife, Sarah, the founder's daughter, purchased the business. Today, The Master's Woodshop maintains a staff of 30 in a state-of-the-art 45,000 square-foot facility. themasterswoodshop.com

T

he buzz of spinning saws and the fragrance of fresh-cut wood fill the air of The

2021 ANNUAL REPORT

"BCT is local, offers great rates, and is easy to work with. They take the time to understand us and our business. As first-time business owners and a second-generation business, they are the best fit for us."

Jeremy & Sarah Derr

Owners