Commercial Bancgroup, Inc. (CBK) Business

ITEM 1. BUSINESS

Company Overview

We are a bank holding company with our principal executive offices
located in Harrogate, Tennessee, and have elected under the BHC Act to become a financial holding company. We were incorporated in Tennessee
in 1975, and we operate primarily through our wholly owned bank subsidiary, Commercial Bank, a Tennessee banking corporation organized
in 1976 (the “Bank”). The Bank is a full-service community banking institution that offers traditional consumer and commercial
products and services to serve businesses and individuals in select markets in Kentucky, North Carolina, and Tennessee. As of December 31,
2025, we had total consolidated assets of $2.3 billion, loans, net of allowance for credit losses, of $1.9 billion, deposits of $1.8 billion
and total shareholders’ equity of $285.3 million, and we operated 34 banking offices.

Our primary service areas in Tennessee are (i) the metropolitan
statistical areas (the “MSAs”) of (a) Nashville-Davidson — Murfreesboro — Franklin, Tennessee
(the “Nashville MSA”), (b) Knoxville, Tennessee (the “Knoxville MSA”), and (c) Kingsport-Bristol, Tennessee-Virginia and
Johnson City, Tennessee (collectively, the “Tri-Cities MSA”), and (ii) Claiborne County, Cocke County, Union County,
and Hamblen County, and their surrounding areas. In Kentucky, we primarily serve the communities in Southeast Kentucky, with branches
in Barbourville, Corbin, Cumberland, Harlan, London, Middlesboro, and Pineville. Upon the Bank’s merger with Alliance Bank &
Trust Company (“Alliance”) on July 1, 2024, we expanded our services to North Carolina, including parts of the Charlotte-Concord-Gastonia,
North Carolina-South Carolina MSA (the “Charlotte MSA”), with branches in Shelby, Kings Mountain and Gastonia. We also
operate one loan production office (“LPO”) in Lincolnton, North Carolina.

Through our many years of growth, our experiences have shaped
our character. We continue to pursue our mission to create positive experiences for every customer, every day. Through drastic changes
in technology and the economy, we have remained strong and continue to enjoy long-term, positive working relationships with our customers
and communities.

Initial Public Offering

On October 3, 2025, we completed an initial public offering (“IPO”)
of 7,173,092 shares of our common stock at an IPO price of $24.00 per share, with 1,458,334 shares sold by us and 5,714,758 shares sold
by certain selling shareholders. We received net proceeds of approximately $29.9 million, after deducting underwriting discounts and commissions
of approximately $2.3 million and offering expenses, including legal, accounting, and other expenses, of approximately $2.8 million. On
October 7, 2025, the Company used $20.5 million of its net proceeds from the IPO to fully repay its outstanding holding company loan agreement
with Community Trust Bank, Inc. (the “CTB Loan”).

Reclassification

In connection with the IPO, on September 18, 2025,
the Company filed with the Tennessee Secretary of State an amended and restated charter (the “A&R Charter”) providing
for (i) the automatic reclassification and conversion of each outstanding share of the Company’s Class B common stock, $10.00 par
value per share (“Class B Common Stock”), into 1.15 shares of common stock, and the automatic reclassification and
conversion of each outstanding share of the Company’s Class C common stock, $10.00 par value per share (“Class C Common
Stock”), into 1.05 shares of common stock and (ii) effective immediately following the reclassification, a 250-for-1 forward
stock split whereby each holder of common stock received 249 additional shares of common stock for each share of common stock
owned as of immediately following the reclassification. All share and per share amounts set forth in the consolidated financial statements
of the Company have been retroactively restated to reflect the reclassification and conversion and stock split as if they had occurred
as of the earliest period presented.

1

Business Strategy

Our business strategy is to grow through both acquisitions and organically
in our current markets and any new markets. We have been very successful with integrating our past acquisitions and growing organically
in both existing and new markets. We intend to execute our strategic plan through the following:

2

Our Markets

As of December 31, 2025, we provided banking services from 34 banking
offices in Kentucky, North Carolina, and Tennessee and one LPO in North Carolina. Our markets are a mix of higher-growth areas and stable
markets with strong core deposits. We have a top five deposit market share in seven counties of operation and have outperformed as to
deposit growth in the majority of our markets. We find strength in the stability of our rural markets coupled with higher growth potential
in metropolitan areas such as the Charlotte MSA, the Knoxville MSA, the Nashville MSA and the Tri-Cities MSA.

Our Customers

Our core customer profile across our footprint includes small businesses,
corporate customers, CRE owners and consumers. We target business customers with substantial operating history that have annual revenues
of up to $300 million. Our typical business customer would keep business deposit accounts with us, and we would look to provide banking
services to the owners and employees of the business as well. We also have an active consumer lending business that includes mortgages,
home equity lines of credit and small consumer finance loans. We strive to build deeper relationships by actively cross-selling incremental
products to meet the banking needs of our customers. The long-standing customer relationships that we have developed throughout our history
form the foundation of our attractive returns and stable growth.

Competition

The Bank faces substantial competition in attracting and retaining
deposits and making loans to its customers in all of its principal markets. The banking and financial services industry is highly competitive,
and we compete with a large number of financial institutions within our markets, including local, regional and national commercial banks
and credit unions. We also compete with mortgage companies, trust companies, brokerage firms, consumer finance companies, mutual funds,
securities firms, insurance companies, third-party payment processors, financial technology companies and other financial intermediaries
for certain of our products and services. Some of our competitors are not subject to the regulatory restrictions and level of regulatory
supervision to which we are subject.

Interest rates on loans and deposits, as well as prices on fee-based
services, are typically significant competitive factors within the banking and financial services industry. Other important competitive
factors in our industry and markets include office locations and hours, quality of customer service, community reputation, continuity
of personnel and services, capacity and willingness to extend credit, and ability to offer excellent banking products and services.

3

Competition involves efforts to retain current customers, obtain new
loans and deposits, increase the types and scope of services offered, and offer competitive interest rates on deposits and loans. Many
of our competitors are much larger financial institutions that have greater financial resources than we do and compete aggressively for
market share. These competitors attempt to gain market share through their financial product mix, pricing strategies and banking center
locations.

While we seek to remain competitive with respect to fees charged, interest
rates and pricing, we believe that our broad suite of financial solutions, our high-quality and high-touch customer service culture, our
positive reputation and our longstanding community relationships will enable us to compete successfully within our markets and enhance
our ability to attract and retain customers.

Risk Management

We believe that effective risk management and control processes are
critical to our safety and soundness, our ability to predict and manage the challenges that we face and, ultimately, our long-term corporate
success. Risk management refers to the policies and processes by which we identify, measure, monitor, evaluate and manage the risks we
face in the course of our banking activities. Such risks include liquidity, interest rate, credit, price, operational, compliance, regulatory,
strategic, financial and reputational risk exposures. We also seek to monitor our exposure to cyber risk, which generally refers to the
risk arising from inadequate or failed information technology systems, vulnerabilities to internal information technology networks, engineered
breaches of customer information or inadequate information technology policies and procedures. Given the rapidly changing cybersecurity
landscape, we evaluate our cyber risk management practices regularly, which may include testing the security of our information technology
infrastructure, incident response planning, employee training, engaging third parties to conduct independent reviews and audits, scanning
for internal vulnerabilities and adopting measures designed to help our clients stay protected against cybersecurity threats.

The board of directors of the Company (the “Board”), both
directly and through its committees, is responsible for overseeing our risk management processes. In addition, the Board’s Audit
Committee (the “Audit Committee”) is responsibility for overseeing enterprise-wide risks related to information security and
cybersecurity, the Risk Committee of the Bank board of directors (the “Risk Committee”) in coordination with the Information
Technology (“IT”) Steering Committee of the Bank board of directors (the “IT Steering Committee”), oversees the
Bank’s cybersecurity initiatives and strives to ensure that the Bank’s information technology infrastructure aligns with strategic
goals while managing related risks, particularly cybersecurity threats. Under the oversight of our Audit Committee, the Risk Committee
in coordination with the IT Steering Committee also reviews and updates the Bank’s cybersecurity policies, evaluates information
technology controls, and monitors the performance of internal and third-party IT service providers as part of its efforts to enhance the
Bank’s defense mechanisms.

Our senior management is responsible for implementing our risk management
processes, including by assessing and managing the risks we face on a day-to-day basis, and reporting to our Board regarding our
risk management processes. Our senior management is also responsible for creating and recommending to our Board for approval appropriate
risk appetite metrics reflecting the aggregate levels and types of risk we are willing to accept in connection with the operation of our
business and pursuit of our business objectives.

Information Technology Systems

We have recently made and continue to make significant investments
in our technology platforms. In 2023, we completed an upgrade to our customer online banking and mobile platforms deploying competitive
technology to support consumer self-service banking behavior, including real-time options via Zelle. Additionally, we implemented Teller
Capture allowing our front-line employees to efficiently process and image transactions at all of our branch locations.

In 2024, we implemented real-time payment options for FedNow and real-time
payments (“RTP”). Both new RTP rails provide additional payment technology opportunities allowing our customers to take advantage
of an ever-changing payments environment.  In 2026, we anticipate the installation of a dedicated commercial cash management platform
that is configurable and supports a broad range of customer needs, including a commercial mobile and tablet app with access to commercial
products such as risk management tools, wire transfers and Automated Clearing House (ACH) origination.

4

Human Capital Management

As of December 31, 2025, the Bank had 281 full-time employees and 17
part-time employees. Our employees are not represented by a collective bargaining unit. We consider our relations with our employees to
be good and have not experienced interruptions of operations due to labor disagreements.

Our people are our most important asset. To facilitate talent attraction
and retention, we strive to create a safe and healthy workplace with opportunities for our employees to grow and develop in their careers.

We invest in the growth and development of our employees by providing
a multi-dimensional approach to learning that fosters empowerment, intellectual growth, and professional development for our colleagues.
In particular, we facilitate the educational and professional development of our employees through support to attend conferences and obtain
degrees, licenses and certifications while employed by us.

We offer competitive compensation to attract and retain talented employees.
Our generous total compensation package includes market-competitive salaries, bonuses, healthcare and retirement benefits, and paid time
off. Employees have regular performance reviews and salary raises commensurate with performance.

Supervision and Regulation

Bank holding companies and banks are regulated extensively under both
federal and state law. The bank regulatory framework is intended primarily for the protection of depositors, the deposit insurance system,
and the banking system, and not for the protection of shareholders or any other constituency.

The bank and bank holding company supervisory and regulatory framework
subjects banks and bank holding companies to regular examination by their respective state and/or federal regulatory agencies, which results
in examination reports and ratings that, while not publicly available, can affect the conduct and growth of their businesses. These examinations
consider not only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management’s
ability and performance, earnings, liquidity, sensitivity to market risks and various other factors.

Composite regulatory ratings assigned to banks (which are commonly
referred to as “CAMELS” ratings) are based on evaluations of an institution’s managerial, operational, financial and
compliance performance. The composite CAMELS rating is not an arithmetical formula or rigid weighting of numerical component ratings.
Elements of subjectivity and examiner judgment, especially as these relate to qualitative assessments, are important elements in assigning
ratings. The federal bank regulatory agencies from time to time review the CAMELS rating system and the consistency of their ratings.

Bank regulatory agencies have broad discretion to impose restrictions
and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe
or unsound, are not in compliance with applicable laws or regulations or are otherwise inconsistent with applicable laws and regulations
or with the supervisory policies of these agencies.

The following is a summary of material elements of the supervisory
and regulatory framework applicable to the Company and the Bank. It does not describe all of the statutes, regulations and regulatory
policies that apply to the Company and the Bank, nor does it restate all of the requirements of those that are described. To the extent
that the following information describes statutory and regulatory provisions, it is qualified in its entirety by express reference to
each of the particular statutory and regulatory provisions. A change in applicable statutes, regulations or regulatory policy may have
a material effect on the business of the Company and the Bank.

5

Commercial Bancgroup, Inc.

The Company is a Tennessee corporation and is registered as a bank
holding company with the Federal Reserve. Additionally, the Company has elected to be a financial holding company. In order for a bank
holding company to qualify to be a financial holding company, each of its depository institution subsidiaries generally must, at the time
of its election to become a financial holding company, be “well capitalized” and “well managed” and have at least
a “satisfactory” rating under the CRA. The Company is subject to examination, regulation and supervision by the Federal Reserve
under the BHC Act. The Company is required to file periodic reports with the Federal Reserve. As the holding company for a bank chartered
under Tennessee law, we also are subject to the Tennessee Banking Act, and as a Tennessee corporation we are subject generally to the
Tennessee Business Corporation Act (“TBCA”).

The BHC Act and the regulations thereunder place limitations on the
activities in which a bank holding company may engage. Subject to certain exceptions (such as becoming a financial holding company), the
BHC Act and its implementing regulations generally prohibit a bank holding company from acquiring direct or indirect ownership or control
of voting shares of any company that is not a bank or bank holding company and from engaging directly or indirectly in any activity other
than banking or managing or controlling banks. A bank holding company may, however, engage in or acquire an interest in a company that
engages in activities that the Federal Reserve has determined by regulation or order to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Financial holding companies are permitted to engage, without prior Federal Reserve
approval, in a broader range of banking and non-banking activities that are deemed to be financial in nature or incidental to a financial
activity. These activities include securities underwriting, dealing and market making; organizing, sponsoring and managing mutual funds;
insurance underwriting and agency activities; merchant banking activities; and other activities that the Federal Reserve has determined
to be financial in nature.

A financial holding company with a depository institution subsidiary
that fails to maintain at least a “satisfactory” rating under the CRA generally is prohibited from engaging in any new, or
acquiring control of a company engaged in, activities that are financial in nature or incidental to a financial activity. If we fail to
maintain our “satisfactory” CRA rating and become subject to their prohibition, it could have a material impact on the Bank’s
prospects for so long as the prohibition remains in place.

The BHC Act permits acquisitions by bank holding companies of banks
and other bank holding companies, subject in most instances to the approval of the Federal Reserve and subject generally to the transaction
not resulting in a monopoly or substantially lessening competition in any part of the United States. In considering whether to approve
any such acquisition, the Federal Reserve must also take into account, among other things, the financial condition and prospects of, and
the competence, experience, and integrity of management of, the constituent parties, as well as the constituent parties’ record
of performance under the CRA. Additionally, under Tennessee law and applicable rules of the Tennessee Department of Financial Institutions
(“TDFI”), a bank holding company organized under Tennessee law, such as the Company, generally must make application to and
receive approval from the Commissioner of the TDFI before acquiring a Tennessee state-chartered financial institution.

Under the Change in Bank Control Act and associated Federal Reserve
regulations, generally, any person that, directly or indirectly or in concert with one or more other persons, seeks to acquire control
of a bank holding company or a Federal Reserve member bank (such as the Bank) must give the Federal Reserve 60 days’ prior
written notice before acquiring control of the bank holding company or member bank. Under the applicable regulations, control is defined
as the ownership or control of or power to vote 25% or more of any class of voting securities of the bank holding company or member bank.
The regulations also provide for a presumption of control if a person would own, control, or hold with power to vote 10% or more (but
less than 25%) of any class of voting securities of the bank holding company or member bank and either the institution has securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or no other
person owns a greater percentage of that class of voting securities.

The Company is subject to the registration, disclosure, reporting,
and other requirements of the Securities Act of 1933, as amended (the “Securities Act”) and the Exchange Act and the
rules and regulations promulgated thereunder and administered by the SEC. In addition, the Company is subject to The Nasdaq Stock
Market LLC’s (“Nasdaq”)’s rules for listed companies.

The Company is a legal entity separate and distinct from the Bank.
Various legal limitations restrict the Bank from lending or otherwise providing financial support to the Company.

Various other federal and state laws, rules, and regulations (including
Tennessee corporate law that applies generally to corporations incorporated under Tennessee law) regulate the Company’s business
and operations, including its corporate governance structure, its investment authority, its manner of doing business, its employment practices,
its consumer privacy and consumer protection policies and procedures, its relationship with the Bank and its other affiliates, its ability
to merge with, acquire, or be acquired by other entities, its capitalization, its payment of dividends or other distributions, and the
types of businesses in which it can engage.

6

Commercial Bank

The Bank is chartered under Tennessee law. The Bank is a Federal Reserve
member, which means that the Federal Reserve is the Bank’s primary federal regulator. The Bank is also a member of the Federal Deposit
Insurance Corporation (the “FDIC”) and its deposits are insured, as provided by law, by the FDIC’s Deposit Insurance
Fund (the “DIF”). The Bank is subject to supervision, regulation, and examination by both the Federal Reserve and the
TDFI. The Bank is subject to various requirements and restrictions under federal and state law, including capital adequacy requirements,
requirements to maintain reserves against deposits, requirements under the CRA, restrictions on the types and amounts of loans that may
be made and the interest that may be charged thereon and limitations on the types of investments that it can make, the types of activities
that it can engage in, and the types of services that it can offer. The business and operations of the Bank are also affected by various
consumer laws and regulations, including regulations of the Consumer Financial Protection Bureau (“CFPB”) and other federal
and state agencies relating to equal credit opportunity, truth in lending disclosures, truth in savings disclosures, debt collection,
privacy, and consumer lending practices. In addition to the impact of direct regulation, commercial banks are affected significantly by
the actions of the Federal Reserve as it attempts to control the money supply and credit availability in the United States in order
to influence the economy.

Strict compliance at all times with state and federal banking laws,
rules and regulations, as well as other laws, is and will continue to be required. The Bank believes that the experience of its executive
management team will assist it in its continuing efforts to achieve the requisite level of compliance. Certain provisions of state law
may be preempted by existing and future federal laws, rules and regulations, and no prediction can be made as to the impact of preemption
on state law or the regulation of the Bank thereunder.

The Federal Reserve and the TDFI regularly examine the Bank and have
the authority to approve or disapprove of certain activities of the Bank, including expansionary activities such as mergers and acquisitions
to which the Bank is a party and the Bank’s establishment of new branch offices. Both regulatory bodies have broad power to take
enforcement action to prevent or halt the continuance of unsafe or unsound banking practices or other violations of law. The FDIC, as
the insurer of the Bank’s deposits, also has certain regulatory authority over and requires certain routine reporting by the Bank.

As a bank chartered under Tennessee law, the Bank is subject to the
provisions of the Tennessee Banking Act and, to the extent not inconsistent with the Tennessee Banking Act, the provisions of the TBCA.

Enforcement Powers of Federal and State Banking Agencies

The federal and state bank regulatory agencies have broad enforcement
powers, including the power to terminate deposit insurance, impose substantial fines and other civil and criminal penalties, and appoint
a conservator or receiver for financial institutions. Our failure to comply with applicable laws and regulations could subject us and
our officers and directors to administrative sanctions and potentially substantial civil money penalties. In addition to the grounds discussed
below under “— Prompt Corrective Action and Other Consequences of Capital Adequacy,” the appropriate bank regulatory
agency may appoint the FDIC as conservator or receiver for a depository institution (or the FDIC may appoint itself, under certain circumstances)
if any one or more of a number of circumstances exist, including if the depository institution is operating in an unsafe and unsound condition,
is insolvent or is undercapitalized and has no reasonable prospect of becoming adequately capitalized, fails to become adequately capitalized
when required to do so, fails to submit a timely and acceptable capital restoration plan or materially fails to implement an accepted
capital restoration plan.

Payment of Dividends and Repurchases of Capital Instruments

The Company is a legal entity separate and distinct from the Bank.
The Company’s principal source of cash flow, including cash flow to pay indebtedness and to pay dividends to its shareholders, is
dividends the Bank pays to the Company as the Bank’s sole shareholder. Statutory and regulatory limitations apply to the Bank’s
payment of dividends to the Company as well as to the Company’s payment of dividends to its shareholders.

7

Federal Reserve Supervisory Letter SR 09-4 (February 24,
2009), as revised December 21, 2015 and July 24, 2020, applies to dividend payments, stock redemptions and stock repurchases
by bank holding companies. Under this Supervisory Letter, a bank holding company is expected to consult with Federal Reserve supervisory
staff before:

Further, the board of directors of a bank holding company must consider
various different factors when deciding whether to declare, and determining the amount of, dividends in order to ensure that dividend
levels are prudent relative to the company’s financial position and are not based on overly optimistic earnings scenarios, including
any potential events which may occur prior to the payment of a dividend that could affect its ability to pay while still maintaining a
strong financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company
should eliminate, defer or significantly reduce dividends if:

The Bank is similarly subject to various restrictions on its ability
to pay dividends to the Company. Under Tennessee law, a Tennessee state-chartered bank generally cannot pay dividends in any calendar
year that exceed its net income for that year plus its retained net income for the prior two calendar years without prior regulatory
approval. Additionally, under the Federal Deposit Insurance Act (“FDIA”), the Bank is generally prohibited from making capital
distributions (including paying dividends) or paying management fees to the Company if the Bank is not adequately capitalized or if the
distribution or payment would cause the Bank to become undercapitalized.

Under applicable federal capital adequacy guidelines, both banks and
bank holding companies subject to the capital adequacy guidelines (the Company is not currently subject to these guidelines but may be
in the future) are also subject to capital distribution (including dividend) limitations and restrictions, as well as restrictions on
discretionary bonuses to executive officers, if they fail to maintain an appropriate capital conservation buffer. See “— Capital
Adequacy” below. A Tennessee corporation, such as the Company and the Bank, is also not permitted to pay dividends if, after giving
effect to the dividends, it would not be able to pay its debts as they come due in the usual course of business or if its assets would
be less than the sum of its liabilities plus the amount necessary to satisfy the rights of preferred shareholders, if any, upon dissolution.
Both the Company and the Bank may from time to time also be subject to contractual restrictions on their ability to pay dividends, such
as, for example, dividend restrictions contained in agreements evidencing indebtedness of the Company or the Bank.

The Company’s and the Bank’s payment of dividends may also
be affected or limited by other factors, such as requirements to maintain adequate levels of capital above regulatory guidelines. Federal
and state bank regulatory agencies generally have the authority to prohibit bank holding companies and banks from engaging in unsafe or
unsound practices in conducting their businesses. Depending on the financial condition of a bank holding company and its subsidiary bank(s),
the payment of dividends by the bank holding company or its subsidiary bank(s) could under certain circumstances be deemed an unsafe
or unsound practice and therefore restricted.

8

Restrictions on Acquisitions and Certain Other Activities

As a bank holding company, the Company generally must obtain the prior
approval of the Federal Reserve before (i) acquiring direct or indirect ownership or control of more than 5% of the voting stock
of a bank, (ii) acquiring all or substantially all of the assets of a bank, or (iii) merging or consolidating with another bank
holding company. The BHC Act also generally limits the business in which a bank holding company may engage to banking, managing or controlling
banks and other authorized subsidiaries, and furnishing services to or performing services for its subsidiaries. A bank holding company
may, however, engage in or acquire an interest in a company that engages in activities that the Federal Reserve has determined to be so
closely related to banking or managing or controlling banks as to be a proper incident thereto.

Bank holding companies that meet certain eligibility requirements prescribed
by the BHC Act and elect to operate as financial holding companies may engage in, or have ownership interests in companies engaged in,
a wider range of non-banking activities, including underwriting, dealing in, or making a market in securities, insurance underwriting
and sales, providing financial, investment, or economic advisory services, merchant banking, and any other activity that the Federal Reserve,
in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature or incidental to any such
financial activity or that the Federal Reserve determines by regulation or order to be complementary to any such financial activity and
does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. The Company
elected to become a financial holding company in 2017.

The Change in Bank Control Act and associated federal regulations,
generally and subject to certain exceptions, prohibit any person (individual or entity) from, directly or indirectly or in concert with
one or more other persons, acquiring control of an FDIC-insured depository institution or its holding company unless the appropriate federal
banking agency is given prior written notice and does not disapprove of the proposed acquisition. Control for this purpose is defined
as the power, directly or indirectly, to direct the management or policies of an FDIC-insured depository institution or its holding company
or to vote 25% or more of any class of voting securities of an FDIC-insured depository institution or its holding company. Additionally,
it is rebuttably presumed than an acquisition of voting securities of an FDIC-insured depository institution or its holding company constitutes
the acquisition of control of the institution or holding company under the Change in Bank Control Act if immediately
after the transaction the acquiring person (or persons acting in concert) will own, control, or hold with the
power to vote 10% or more of any class of voting securities of the institution or holding company and either (i) the institution
or holding company has securities registered under Section 12 of the Exchange Act or (ii) immediately after the transaction
no other person will own, control, or hold the power to vote a greater percentage of that class of voting securities.

Any corporation or other company that, directly or indirectly or acting
through one or more other persons, acquires ownership or control of or the power to vote 25% or more of any class of voting securities
of a bank or bank holding company (such as the Bank and the Company), that controls the election of a majority of the directors of a bank
or bank holding company, or that otherwise is deemed to have the power to exercise, directly or indirectly, a “controlling influence
over the management or policies” of a bank or bank holding company under the BHC Act (which control can, under certain circumstances,
be found to exist even if a corporation or other company owns, controls, or has the power to vote far less than 25% of a class of voting
securities of a bank or bank holding company) would be subject to regulation itself as a bank holding company under the BHC Act.

The Federal Reserve may require that a bank holding company terminate
an activity or terminate control of or liquidate or divest certain subsidiaries or affiliates when the Federal Reserve believes the activity
or control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness, or stability of the bank
holding company or any of its banking subsidiaries. The Federal Reserve also has the authority to regulate provisions of certain bank
holding company debt. Under certain circumstances, a bank holding company must give written notice to and obtain approval from the Federal
Reserve prior to purchasing or redeeming its equity securities.

Further, poor examination ratings, deficient capital ratios, regulatory
concerns regarding management, controls, asset quality, earnings, liquidity, or risk management, or other factors can all potentially
result in practical limitations on the ability of a bank or bank holding company to engage in new activities, grow, acquire other financial
institutions or other businesses, repurchase its stock, pay dividends, or continue to conduct existing activities.

Banks organized under Tennessee law are also subject to restrictions
on the types of activities that they are permitted to engage in under applicable law and regulations of the Federal Reserve, FDIC, and
TDFI, which permissible activities are generally limited to the business of banking and activities that are incidental to the business
of banking.

9

Source of Strength

Under applicable law and Federal Reserve policy, the Company is expected
to act as a source of financial and managerial strength to, and to commit resources to support, the Bank. This support may be required
at times when the Company may otherwise not be inclined to provide it.

In the event an FDIC-insured depository institution subsidiary of a
bank holding company becomes subject to a capital restoration plan with its regulators, the parent bank holding company is required to
guarantee performance of the plan up to 5% of the bank’s assets, and such guarantee is given priority in the event of bankruptcy
of the bank holding company. In addition, if a bank holding company has more than one bank or thrift subsidiary, each of the bank holding
company’s subsidiary depository institutions may be responsible for any losses to the DIF if an affiliated depository institution
fails. As a result, a bank holding company may be required to loan money to a bank subsidiary in the form of subordinate capital notes
or other instruments which qualify as capital under applicable regulations. However, any loans from a bank holding company to any such
subsidiary bank likely will be unsecured and subordinated to such bank’s depositors and to other creditors of the bank. See “— Prompt
Corrective Action and Other Consequences of Capital Adequacy.”

Capital Adequacy

The federal banking agencies, including the Federal Reserve, have adopted
risk-based capital requirements for assessing bank and bank holding company capital adequacy. These requirements establish minimum capital
standards in relation to the relative credit risk of assets and off-balance sheet exposures. Capital is classified into two tiers. Tier
1 capital consists generally of common equity Tier 1 capital (which is generally comprised of common stock and related surplus and retained
earnings, and from which goodwill and certain other intangible assets are deducted) and additional Tier 1 capital (which includes, among
other things, certain types of noncumulative perpetual preferred stock). Tier 2 capital generally includes the allowance for loan and
lease losses (subject to certain limitations) and certain types of subordinated debt and cumulative perpetual preferred stock. The risk-based
capital guidelines require financial institutions to maintain specific, defined credit risk factors and apply them to their assets which
results in risk-adjusted assets.

The federal capital adequacy guidelines impose the following minimum
capital requirements:

In addition to these required minimum regulatory capital ratios, applicable
regulations establish a capital conservation buffer with respect to the first three ratios listed above. Specifically, banking organizations
must maintain a 2.5% capital conservation buffer comprised of common equity Tier 1 capital in order to avoid limitations on capital distributions
(including dividend payments, discretionary payments on Tier 1 instruments, and stock repurchases) and certain discretionary bonus payments
to executive officers. When including the 2.5% capital conservation buffer, a banking organization’s minimum ratio of common equity
Tier 1 capital to risk-weighted assets becomes 7.0%, its minimum ratio of Tier 1 capital to total risk-weighted assets becomes 8.5%, and
its minimum ratio of total capital to risk-weighted assets becomes 10.5%.

These capital adequacy guidelines only establish the minimum levels
of regulatory capital a banking organization must maintain, and banking regulators generally expect banks and bank holding companies to
maintain capital well in excess of these minimum levels. Failure to maintain compliance with the capital adequacy guidelines could subject
a bank or bank holding company to a variety of enforcement actions, including the issuance of a capital directive, the termination of
a bank’s deposit insurance, a prohibition on accepting brokered deposits or other restrictions on its business, and, in certain
circumstances, the appointment of a receiver.

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The Economic Growth, Regulatory Relief, and Consumer Protection Act
(the “Regulatory Relief Act”), enacted May 24, 2018, provided for the simplification of the regulatory capital rules
for certain financial institutions and their holding companies with total consolidated assets of less than $10 billion. The Regulatory
Relief Act required the federal banking agencies to develop a community bank leverage ratio (“CBLR”) for qualifying banks
and holding companies with total consolidated assets of less than $10 billion and an appropriate risk profile. The Regulatory Relief
Act mandated a minimum CBLR of not less than 8% and a CBLR not more than 10%. In October 2019, the federal banking agencies issued
a final rule implementing the CBLR framework and setting the CBLR at 9%. Under the final rule, the CBLR is calculated, generally, as Tier
1 capital divided by average total consolidated assets (minus amounts deducted from Tier 1 capital). Under this final rule, which was
effective January 1, 2020, a qualifying community banking organization that has opted to use the CBLR framework is considered to
have met the generally applicable risk-based and leverage capital requirements, the capital ratio requirements to be considered “well
capitalized” under the prompt corrective action framework (discussed below), and any other capital or leverage requirements to which
the qualifying community banking organization is subject, if it maintains a CBLR greater than 9%. A qualifying community banking organization
is a non-advanced approaches banking organization that has a leverage ratio greater than 9%, total consolidated assets of less than $10 billion,
total off-balance sheet exposures (excluding derivatives other than sold credit derivatives and unconditionally cancelable commitments)
of 25% or less of total consolidated assets, and total trading assets and trading liabilities of 5% or less of total consolidated assets.
In November 2025, the federal banking agencies issued a notice of proposed rulemaking proposing to lower the CBLR to 8% and make certain
other modifications to the CBLR framework; however, there can be no assurance that a final rule lowering the CBLR will be issued by the
federal banking agencies. While we believe we qualify as a qualifying community banking organization, we have not opted into the
CBLR framework and presently do not intend to do so, although we could elect to do so in the future.

Bank holding companies that qualify for the Federal Reserve’s
Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (the “Small Bank Holding Company Policy Statement”)
are exempt from consolidated capital requirements. The Small Bank Holding Company Policy Statement is generally applicable to bank holding
companies with consolidated assets of less than $3 billion that are not engaged in significant nonbanking activities, either directly
or through a nonbank subsidiary; do not conduct significant off-balance sheet activities, either directly or through a nonbank subsidiary;
and do not have a material amount of debt or equity securities outstanding (other than trust preferred securities) that are registered
with the SEC. The Company, which has total consolidated assets of less than $3 billion, currently qualifies for the Small Bank
Holding Company Policy Statement and, therefore, is not subject to the Federal Reserve’s capital adequacy guidelines on a consolidated
basis at the bank holding company level. If our total consolidated assets in the future exceed $3 billion, we would no longer be
able to take advantage of the Small Bank Holding Company Policy Statement and, among other things, we would no longer be exempt from consolidated
capital requirements, we would be subject to more extensive regulatory reporting and examination requirements, and we would be more limited
in the amount of debt we can use to finance the acquisition of other banks and bank holding companies.

Prompt Corrective Action and Other Consequences of Capital Adequacy

The FDIA requires, among other things, that the federal banking regulators
take prompt corrective action with respect to FDIC-insured depository institutions that do not meet the applicable minimum capital requirements.
Under the FDIA, insured depository institutions are divided into five capital categories: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized. An institution may be deemed to be in a capitalization category that
is lower than is indicated by its actual numerical capital position if it receives an unsatisfactory examination rating. The five capital
categories are defined as follows:

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The federal bank regulatory agencies have the authority to require
an institution to hold additional capital and have indicated that higher capital levels may be required during times when market conditions
and the risk profile of the institution warrant such additional capital.

The FDIA generally prohibits an FDIC-insured depository institution
from making capital distributions (including paying dividends) or paying any management fees to its holding company if the depository
institution is or would thereafter be undercapitalized. Undercapitalized depository institutions are subject to restrictions on borrowing
from the Federal Reserve. In addition, undercapitalized depository institutions are, among other things, subject to growth limitations
and are required to submit capital restoration plans. An insured depository institution’s holding company must guarantee the institution’s
capital plan, up to an amount equal to the lesser of 5% of the depository institution’s assets at the time it becomes undercapitalized
or the amount of the capital deficiency when the institution fails to comply with the plan, for the plan to be accepted by the applicable
federal regulatory agency. The federal banking agencies may not accept a capital plan without determining, among other things, that the
plan is based on realistic assumptions and is likely to succeed in restoring the depository institution to acceptable capital levels.
If a depository institution fails to submit an acceptable capital plan or fails to implement its plan, it is treated as if it is significantly
undercapitalized.

Significantly undercapitalized depository institutions can be subject
to a number of requirements and restrictions, including orders to sell sufficient stock to become adequately capitalized, to sell to another
bank or bank holding company, to reduce total assets, to restrict interest rates paid on deposits, to replace its board of directors or
management or to cease accepting deposits from correspondent banks. Critically undercapitalized depository institutions are subject to
the appointment of a receiver or conservator, generally within 90 days of the date on which they become critically undercapitalized,
as well as other restrictions.

Business activities may be influenced by an institution’s capital
classification. For example, only a “well capitalized” depository institution may accept brokered deposits without prior regulatory
approval and an “adequately capitalized” institution may accept such deposits only with prior regulatory approval. Such approval
has historically been difficult to obtain.

General Regulatory Considerations

Under the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”),
each insured depository institution must undergo regular, periodic examinations conducted by its appropriate federal banking agency. The
cost of examining an insured depository institution and its affiliates may be assessed by the appropriate federal baking agency against
the institution or its affiliates as the agency deems necessary or appropriate. Insured depository institutions are required to submit
periodic reports to the FDIC and their primary federal regulators, if other than the FDIC (as well as, for state-chartered institutions,
their state regulators). FDICIA also requires the federal bank regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions and depository institution holding companies relating to, among other things, (i) internal controls, information
systems and audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset
quality.

In response to perceived needs in financial institution regulation,
Congress enacted the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”). FIRREA provides,
in part, that a depository institution the deposits of which are insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC in connection with (i) the default of a commonly controlled FDIC-insured depository institution
or (ii) any assistance provided by the FDIC to a commonly controlled FDIC-insured depository institution in danger of default.

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FIRREA also provides that financial institutions and their affiliated
parties (such as officers and directors) may be subject to civil money penalties for certain types of violations and misconduct. Additionally,
the FDIC has been granted enhanced authority to withdraw or to suspend deposit insurance in certain cases. The federal banking regulators
have not been reluctant to use the enforcement powers provided for under FIRREA. Further, banking regulators have broad power to
issue cease and desist orders that may, among other things, require affirmative action to correct any harm resulting from a violation
or practice, including restitution, reimbursement, indemnification or guarantees against loss. A financial institution may also be ordered
to restrict its growth, dispose of certain assets, rescind agreements or contracts, employ qualified officers or employees, or take other
actions determined by the ordering agency to be appropriate.

Federal and state banking laws subject banks to certain restrictions
on extensions of credit to executive officers, directors, and certain principal shareholders, and their related interests. For example,
such extensions of credit (i) generally must be made on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unrelated third parties and (ii) generally must not involve more than
the normal risk of repayment or present other unfavorable features. These laws also impose certain limits on the amount of such extensions
of credit and under certain circumstances require that they be approved by an institution’s board of directors.

Community Reinvestment Act

The CRA requires each insured depository institution to be evaluated
by its primary federal regulator with respect to its record of meeting the credit needs of the communities in which it operates, including
low- and moderate-income neighborhoods, consistent with the safe and sound operation of the institution. An institution’s compliance
with and performance under the CRA is also considered in evaluating mergers, acquisitions and applications to open branch office facilities.

A bank’s compliance with its CRA obligations is based on a performance-based
evaluation system that bases CRA ratings on an institution’s lending, service and investment performance. When a bank holding company
applies for approval to acquire a bank or other bank holding company, the Federal Reserve will review the CRA assessment of each subsidiary
bank of the applicant bank holding company, and those banks’ CRA performance records may be the basis for denying the application.
In connection with its assessment of CRA performance, the appropriate federal bank regulatory agency assigns each bank a rating of “outstanding,”
“satisfactory,” “needs to improve” or “substantial noncompliance.” As of its most recent CRA examination
in October 2025, the Bank was rated “satisfactory.”

The CRA regulations require that evidence of discriminatory, illegal
or abusive lending practices be considered in the CRA evaluation. A less than satisfactory CRA rating is likely to slow, if not preclude,
mergers, acquisitions, the opening of new branches and other expansionary activities.

CRA agreements with private parties must be disclosed and annual CRA
reports must be made to a bank’s primary federal regulator. Generally, each insured depository institution controlled by a bank
holding company must have at least a “satisfactory” CRA rating in order for the bank holding company to elect to become a
financial holding company. A financial holding company that controls an insured depository institution that does not have at least a “satisfactory”
CRA rating is subject to certain restrictions, including, generally, being precluded from commencing, or acquiring a company engaged in,
activities determined to be financial in nature or incidental to such financial activity (such as underwriting, dealing in, or making
a market in securities and certain insurance activities). As a financial holding company, we are currently not subject to these restrictions
because the Bank has a “satifactory” CRA rating.

USA Patriot Act

After the terrorist attacks of September 11, 2001, Congress enacted
broad anti-terrorism legislation called the United and Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (the “USA Patriot Act”). Title III of the USA Patriot Act requires financial
institutions, including the Company and the Bank, to help prevent, detect and prosecute international money laundering and the financing
of terrorism. The Department of the Treasury has adopted additional requirements to further implement Title III.

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This law is intended to enhance the powers of the federal government
and law enforcement organizations to combat terrorism, organized crime and money laundering. The USA Patriot Act materially amended and
expanded the application of the Bank Secrecy Act. It introduced several enhanced compliance measures, including the know your customer
process, new suspicious activity reporting rules and enhanced anti-money laundering programs. Under the USA Patriot Act, each financial
institution is required to establish and maintain an anti-money laundering compliance program that includes, at a minimum:

In addition, the USA Patriot Act requires bank regulatory agencies
to consider the record of a bank or bank holding company in combating money laundering activities in their evaluation of bank and bank
holding company merger, acquisition and branch expansion transactions.

The U.S. Treasury Department has issued regulations under the
USA Patriot Act. These regulations provide that a depository institution will be deemed in compliance with the USA Patriot Act provided
that it continues to comply with the Bank Secrecy Act regulations. Under these regulations, a mechanism has been established for law enforcement
to communicate names of suspected terrorists and money launderers to financial institutions in return for securing the ability to promptly
locate accounts and transactions involving those suspects. Financial institutions receiving names of suspects must search their account
and transaction records for potential matches and report positive results to the Financial Crimes Enforcement Network (“FinCEN”).
Each financial institution must designate a point of contact to receive information requests. These regulations outline how financial
institutions can share information concerning suspected terrorist and money laundering activity with other financial institutions under
protection from the statutory safe harbor from liability, provided each financial institution notifies FinCEN of its intent to share information.

Recent FinCEN rules require banks to know the beneficial owners of
customers that are not natural persons, update customer information in order to develop a customer risk profile, and generally monitor
such matters.

FinCEN has also adopted regulations intended to prevent money laundering
and terrorist financing through correspondent accounts maintained by U.S. financial institutions on behalf of foreign banks. Financial
institutions are required to take reasonable steps to ensure that they are not providing banking services, directly or indirectly, to
foreign shell banks or others who might be engaging in terrorist activities or the financing thereof.

Lending Limits

Under Tennessee law, the amount of loans which a Tennessee-chartered
bank (such as the Bank) may make, in the aggregate, to any one person is limited. Tennessee law generally provides that a Tennessee-chartered
bank may not lend to any one person an amount in excess of 15% of the bank’s capital, surplus, and undivided profits. However, a
bank may lend more than 15%, but no more than 25%, of the bank’s capital, surplus, and undivided profits to any one person if each
loan in excess of 15% is approved in advance by the bank’s board of directors. Under Tennessee law, no loan limit applies to the
extent that a loan is secured by a segregated deposit account in the lending bank.

Commercial Real Estate Concentrations

Lending operations that involve concentrations of CRE loans are subject
to enhanced scrutiny by federal banking regulators. The federal banking regulators have issued guidance with respect to the risks posed
by CRE lending concentrations. CRE loans generally include C&D loans and loans secured by multifamily property and nonfarm, nonresidential
real property where the primary source of repayment is derived from rental income associated with the property or the proceeds of the
sale, refinancing, or permanent financing of the property, but generally do not include owner-occupied real estate. The guidance prescribes
the following guidelines for examiners to help identify institutions that are potentially exposed to concentration risk and may warrant
greater supervisory scrutiny (however, these guidelines are not outright limits on an institution’s lending activities):

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At December 31, 2025, the Bank’s ratio of C&D and other
land loans to total risk-based capital was 81.9%, and its ratio of total CRE loans excluding owner-occupied CRE loans (as defined in the
guidance) to total risk-based capital was 322%. The three-year growth rates for the Bank’s CRE portfolio as of December 31, 2025,
and December 31, 2024, were 60.5% and 75.4%, respectively, in each case above the 50% growth rate threshold contained in the federal
regulatory guidance. The recent growth in our levels of CRE loans is primarily the result of our acquisition of Alliance, not significant
organic growth within the Bank’s legacy loan portfolio.

Given the level of, and recent growth in, CRE loans in our loan portfolio,
our CRE loan portfolio, risk management practices, and capital levels may be subject to enhanced regulatory scrutiny. If our risk management
practices relative to CRE lending or our capital levels are determined to be inadequate in light of the risks associated with our CRE
loan portfolio, we may have to reduce our level of CRE lending and/or seek to increase capital to support our CRE lending function.

FDIC Insurance Assessments and Depositor Preference

The Bank’s deposits are insured by the FDIC’s DIF up to
the limits provided for by applicable law, which currently are set at $250,000 per depositor, per insured bank for each account ownership
category. The Bank is subject to FDIC assessments for its deposit insurance. The FDIC calculates quarterly deposit insurance assessments
based on an institution’s average total consolidated assets less its average tangible equity and applies one of four risk categories
determined by reference to its capital levels, supervisory ratings, and certain other factors. The assessment rate schedule can change
from time to time, at the discretion of the FDIC, subject to certain limits.

As of June 30, 2020, the DIF reserve ratio fell to 1.30%, below
the statutory minimum of 1.35%. The FDIC, as required under the FDIA, established a plan in September 2020 to restore the DIF reserve
ratio to meet or exceed the statutory minimum of 1.35% within eight years. In October 2022, the FDIC adopted an amended restoration
plan to increase the likelihood that the reserve ratio would be restored to at least 1.35% by September 30, 2028. The FDIC’s
amended restoration plan increased the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning
in the first quarterly assessment period of 2023. The FDIC could further increase the deposit insurance assessments for certain insured
depository institutions, including the Bank, if the DIF reserve ratio is not restored as projected.

In November 2023, the FDIC approved a final rule to implement
a special assessment to recover the loss to the DIF associated with several bank failures that occurred during early 2023. The assessment
base for the special assessment was equal to estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the
first $5 billion, to be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly
assessment periods beginning the first quarterly assessment period of 2024.

Deposit insurance may be terminated by the FDIC upon a finding that
an institution has engaged in unsafe and 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 a bank’s primary federal regulatory agency. In addition, the
FDIA provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors
of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses
of the FDIC as receiver, will have priority over other general unsecured claims against the institution, including those of a parent bank
holding company.

Transactions with Affiliates

The Bank is subject to Sections 23A and 23B of the Federal Reserve
Act (the “Affiliates Act”) and the Federal Reserve’s implementing regulations, Regulation W, which place limitations
on certain transactions between a bank and its affiliates. For purposes of the Affiliates Act and Regulation W, an affiliate of a
bank generally is any company that controls, is controlled by or is under common control with the bank. Accordingly, transactions between
the Company and the Bank are subject to the requirements of the Affiliates Act and Regulation W. The Affiliates Act and Regulation W
impose restrictions and limitations on a bank making extensions of credit to, or issuing a guarantee or letter of credit on behalf of,
the bank’s affiliates, a bank’s purchase of, or investment in, stock or other securities of an affiliate, a bank taking such
securities as collateral for loans, and the purchase by a bank of assets of its affiliates. Such restrictions and limitations prevent
the Company or other Bank affiliates from borrowing from the Bank unless the borrowings are secured by marketable obligations of designated
amounts. All such transactions, as well as contracts entered into between the Bank and its affiliates, must be on terms that are no less
favorable to the Bank than those that would be available to/from non-affiliated third parties. Federal Reserve policy also forbids the
payment by bank subsidiaries of management fees to their parent holding companies that are unreasonable in amount or exceed the fair market
value of the services rendered or, if no market exists, actual costs plus a reasonable profit.

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Consumer Financial Services

The Bank is subject to a number of federal and state consumer protection
laws that extensively govern its relationships 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, the Military Lending Act, and these laws’ respective state law counterparts, as well
as state usury laws and laws regarding unfair and deceptive acts and practices. These and other federal laws, among other things, require
disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit
transactions, regulate the use of credit report information, provide financial privacy protections, prohibit unfair, deceptive and abusive
practices and subject us to substantial regulatory oversight. Violations of applicable consumer protection laws can result in significant
potential liability from litigation brought by customers, including actual damages, restitution and attorneys’ fees. Federal and
state bank regulators, state attorneys general and state and local consumer protection agencies may also seek to enforce consumer protection
requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights, action by the state and
local attorneys general in each jurisdiction in which we operate and civil money penalties. Failure to comply with applicable consumer
protection requirements may also negatively impact our reputation in the marketplace and result in our failure to obtain required regulatory
approvals for mergers or acquisitions or a prohibition on expansionary activities.

Dodd-Frank Act

On July 21, 2010, the Dodd-Frank Act was signed into law. This
law significantly changed the bank regulatory landscape and affects the lending, deposit, investment, trading and operating activities
of banks and their holding companies. The Dodd-Frank Act required various federal agencies to adopt a broad range of new implementing
rules and regulations and to prepare numerous studies and reports for Congress. The following summarizes just a few of the provisions
of the Dodd-Frank Act.

The Dodd-Frank Act changed the types of instruments that are eligible
for Tier 1 capital treatment at the bank holding company level. It also called for the Federal Reserve to apply to certain bank holding
companies (currently, generally, those with $3 billion or more in total consolidated assets) the same minimum leverage and risk-based
capital standards that apply to banks under the FDIA’s prompt corrective action framework.

The Dodd-Frank Act eliminated the federal prohibitions on paying interest
on demand deposits, thus allowing businesses to have interest-bearing checking accounts.

The Dodd-Frank Act authorized state-chartered and national banks to,
subject to the receipt of any required regulatory approvals, establish de novo interstate branches at any location where a bank based
in that state could establish a branch. The act also requires that bank holding companies and banks be well capitalized and well managed
in order to acquire banks located outside their home state.

The Dodd-Frank Act required fees charged by banks for debit card transactions,
commonly referred to as interchange fees, to be both “reasonable and proportional” to the cost incurred by the card issuer
and authorized the Federal Reserve to implement regulations with respect to this requirement.

The Dodd-Frank Act broadened the base for FDIC insurance assessments.
Assessments are based on the average consolidated total assets, less tangible equity capital, of a financial institution. The Dodd-Frank
Act permanently increased the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor,
per insured bank for each account ownership category.

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The Dodd-Frank Act also created a new federal consumer protection agency,
the CFPB, with broad powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range
of consumer protection laws that apply to all banks, including the authority to prohibit “unfair, deceptive or abusive” acts
and practices. The CFPB has examination and enforcement authority over all banks with more than $10 billion in assets. Banks with
less than $10 billion in assets are examined for compliance with consumer protection laws by their primary federal bank regulators.
The CFPB has recently been the target of intense scrutiny from the Trump administration, which has indicated a desire to dismantle, or
significantly reform, the agency, one which it perceives as lacking sufficient supervision and regularly exceeding its statutory authority.
The future structure, operation, and authority of the CFPB, as well as its fate, are currently uncertain and cannot be predicted.

Additionally, the Dodd-Frank Act increased the regulation of consumer
protections relative to mortgage origination, including mortgage loan originator compensation, minimum repayment standards and new servicing
requirements.

Mortgage Lending Rules

The Dodd-Frank Act authorized the CFPB to establish certain minimum
standards for the origination of residential mortgages, including a determination of a borrower’s ability to repay. Under the Dodd-Frank
Act, financial institutions may not make a residential mortgage loan unless they make a “reasonable and good faith determination”
that the consumer has a “reasonable ability” to repay the loan. The Dodd-Frank Act allows borrowers to raise certain defenses
to foreclosure but provides a full or partial safe harbor from such defenses for loans that are “qualified mortgages.” The
CFPB published final rules to, among other things, specify the types of income and assets that may be considered in the ability-to-repay
determination, the permissible sources for verification, and the required methods of calculating a loan’s monthly payments. Subsequently,
the CFPB made certain modifications to these rules. The rules extend the requirement that creditors verify and document a borrower’s
income and assets to include all information that creditors rely on in determining repayment ability.

Financial Privacy and Cybersecurity Requirements

Federal law and regulations limit a financial institution’s ability
to share consumers’ financial information with unaffiliated third parties. Specifically, these laws and regulations require all
financial institutions offering financial products or services to consumer customers to provide such customers with the financial institution’s
privacy policy and provide such customers the opportunity to “opt out” of the sharing of personal financial information with
unaffiliated third parties. The sharing of information for marketing purposes is also subject to limitations.

Federal law and regulations also establish certain information security
guidelines that require each financial institution, under the supervision and ongoing oversight of its board of directors or an appropriate
committee thereof, to develop, implement, and maintain a comprehensive written information security program designed to ensure the security
and confidentiality of customer information, to protect against anticipated threats or hazards to the security or integrity of such information,
and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any
customer. Federal and state laws also require that notice of a data breach incident be provided to a bank’s customers under certain
circumstances.

Federal banking regulators regularly issue guidance relative to cybersecurity
that is intended to enhance cyber risk management. A financial institution is expected to implement multiple lines of defense against
cyber-attacks. Financial institutions are also expected to implement procedures designed to address the risks posed by potential cyber
threats and to allow the institutions to respond and recover effectively after a cyber-attack.

Other Legislation and Regulation

Other legislative and regulatory proposals that would impact banking
and the regulation of banks, thrifts and other financial institutions are considered from time to time by the executive branch of the
federal government, Congress and various state governments. It cannot be predicted whether any of such legislative or regulatory proposals
will be adopted or, if any of such proposals are adopted, how they will affect the Company and the Bank. The Trump administration has
signaled a willingness to undertake comprehensive reviews of bank regulatory laws and regulations; however, there can be no assurance
as to the likelihood, scope, or results of any such revisions that such a review will take place or, if it does, what the result will
be.

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Monetary and Fiscal Policy

Banking is a business which heavily depends on interest rate differentials.
In general, the difference between the interest paid by a bank on its deposits and its other borrowings and the interest received by a
bank on its loans to customers and its securities holdings generally constitutes a major portion of a bank’s earnings. Thus, the
earnings and growth of the Bank will be subject to the influence of economic conditions generally, both domestic and foreign, and also
to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve. The Federal Reserve
regulates the supply of money through various means, including open-market dealings in United States government securities, the discount
rate at which Federal Reserve members may borrow, and reserve requirements on deposits and funds availability regulations. These instruments
are used by the Federal Reserve in varying combinations to influence the overall growth of bank loans, investments and deposits and also
affect interest rates charged on loans or paid on deposits. The policies of the Federal Reserve have had a significant effect on the operating
results of commercial banks in the past and will continue to do so in the future. The nature and timing of any future changes in Federal
Reserve policies and their impact on the Bank cannot be predicted.

Corporate Information

Our principal executive office is located at 6710 Cumberland Gap Parkway,
Harrogate, Tennessee 37752, and our telephone number is 423-869-5151. Our website address is www.cbtn.com. The information
contained on or accessible from our website is not part of this Report and is not incorporated into this Report.

Public Information

Persons interested in obtaining information on the Company may read
and copy any materials that we file with the U.S. Securities and Exchange Commission (the “SEC”). The SEC maintains an Internet
website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC.

We make available, free of charge, on or through our website, www.cbtn.com,
our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings pursuant to Section 13(a)
or 15(d) of the Exchange Act, and amendments to such filings, as soon as reasonably practicable after each is electronically filed with,
or furnished to, the SEC. We routinely post these reports, recent news and announcements, financial results and other important information
about our business on our website at www.cbtn.com. Information contained on our website does not constitute part of, and is not incorporated
by reference into, this Report.

Also available on the Company’s website are its Code of Conduct and
Ethics, Corporate Governance Guidelines, the charter of each active committee of the Board, and other materials outlining the Company’s
corporate governance practices. If we amend or grant a waiver of one or more of the provisions of our Code of Conduct and Ethics, we intend
to satisfy the requirements under Item 5.05 of Form 8-K regarding the disclosure of amendments to or waivers from provisions
of our Code of Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer
or controller, or persons performing similar functions, by posting the required information on our corporate website at www.cbtn.com.