VBFC Village Bank and Trust Financial Corp

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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SCHEDULE 14A

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Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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Filed by the Registrant  ☒

Filed by a Party other than the Registrant  ☐

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Check the appropriate box:

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VILLAGE BANK AND TRUST FINANCIAL CORP.

(Name of Registrant as Specified in Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Payment of Filing Fee (Check the appropriate box):

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PROPOSED MERGER – YOUR VOTE IS VERY IMPORTANT

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On September 23, 2024, Village Bank and Trust Financial Corp. (“Village”) entered into an Agreement and Plan of Reorganization (the “merger agreement”) with TowneBank, Cardinal Sub, Inc., and Village Bank pursuant to which TowneBank will acquire Village and Village Bank (the “merger”). Village shareholders are being asked to approve the merger agreement and other related matters at a special meeting of shareholders to be held virtually at 10:00 a.m., Eastern Time, on December 19, 2024. The meeting will be conducted exclusively via live webcast and there will be no physical location for the meeting. You will be able to attend the meeting online, vote your shares electronically and submit your questions during the meeting by visiting meetnow.global/MHKPWGN.

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If the merger is consummated, on the effective date, each share of Village common stock will be converted into and exchanged for the right to receive $80.25 in cash, or approximately $120.4 million in the aggregate based on the 1,500,343 shares of Village common stock outstanding as of the date of this proxy statement.

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This proxy statement describes the special meeting and includes important information about the proposed merger, the merger agreement and the companies participating in the merger. A copy of the merger agreement is attached as Appendix A. Please carefully read this proxy statement, including the appendices and the other documents referred to herein.

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If you are a Village shareholder, whether or not you plan to attend the special meeting, it is important that your shares be represented at the meeting and your vote recorded. Please take the time to vote by completing and mailing the enclosed proxy card or by voting via the Internet or telephone using the instructions given on the proxy card. Even if you return the proxy card, you may attend the special meeting and vote your shares online during the meeting. The board of directors of Village believes that the merger agreement and the transactions contemplated thereby, including the merger, are fair to and in the best interests of Village and the Village shareholders, and unanimously recommends that Village shareholders vote “FOR” all of the proposals described in this proxy statement.

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This proxy statement is dated November 14, 2024 and is first being mailed, along with the enclosed proxy card, to Village shareholders on or about November 16, 2024.

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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To be held on December 19, 2024

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A special meeting of shareholders of Village Bank and Trust Financial Corp. (“Village”) will be held virtually at 10:00 a.m., Eastern Time, on December 19, 2024. The meeting will be conducted exclusively via live webcast and there will be no physical location for the meeting. You will be able to attend the meeting online, vote your shares electronically and submit your questions during the meeting by visiting meetnow.global/MHKPWGN. The meeting is being held for the following purposes:

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All holders of record of Village common stock at the close of business on October 29, 2024 are entitled to notice of and to vote at the meeting and any adjournments thereof.

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November 14, 2024

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The Village board of directors unanimously recommends that you vote “FOR” the merger proposal, “FOR” the articles amendment proposal, “FOR” the compensation proposal and “FOR” the adjournment proposal.

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ADDITIONAL INFORMATION

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This proxy statement incorporates by reference important business and financial information about Village from other documents that are not included in or delivered with this proxy statement. For a listing of the documents incorporated by reference, see “Where You Can Find More Information” on page 64. This information is available to you without charge upon your request. You can obtain the documents incorporated by reference into this proxy statement through the website of the Securities and Exchange Commission (the “SEC”) at http://www.sec.gov and through the website of Village at http://www.villagebank.com, or without charge by requesting them in writing or by telephone at the contact information set forth below:

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Village Bank and Trust Financial Corp.

13319 Midlothian Turnpike

Midlothian, Virginia 23113

Attention: Deborah M. Golding

Vice President and Corporate Secretary

Telephone: (804) 897-3900

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To receive timely delivery of the documents in advance of the special meeting, please make your request no later than December 12, 2024.

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Except as specifically incorporated by reference into this proxy statement, information on the SEC’s and Village’s websites is not part of this proxy statement.

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In this proxy statement:

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

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The following questions and answers briefly address some commonly asked questions about the special meeting of shareholders of Village and the merger. They may not include all of the information that is important to Village shareholders. We urge shareholders to read carefully this proxy statement, including the appendices and the other documents referred to herein.

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Additional important information is also contained in the documents incorporated by reference into this proxy statement. See “Where You Can Find More Information” on page 64.

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This proxy statement contains important information about the merger and the proposals being voted on at the special meeting. You should read it carefully and in its entirety. The enclosed materials allow you to have your shares voted by proxy without attending the meeting. Your vote is important. We encourage you to submit your proxy as soon as possible.

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By the Internet or Telephone. You can also appoint the proxies to vote your shares for you by going to the Internet website www.envisionreports.com/VBFC or by calling 1-800-652-8683. When you are prompted for your “control number,” enter the number included on the enclosed proxy card, and then follow the instructions provided. You may vote by the Internet or telephone only until 1:00 a.m., Eastern Time, on December 19, 2024, which is the day of the special meeting.

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Online During the Meeting. You can attend the special meeting online and vote during the meeting by visiting meetnow.global/MHKPWGN.

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Shares Held in Street Name. If your shares are held in “street name,” through a broker, bank or other nominee, that entity will send you separate instructions describing the procedure for voting your shares.

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Approval of the articles amendment proposal requires the affirmative vote of at least a majority of the outstanding shares of Village common stock entitled to vote on the proposal.

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Approval of the compensation proposal requires the affirmative vote of at least a majority of the votes cast on the proposal.

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Approval of the adjournment proposal requires the affirmative vote of at least a majority of the votes cast on the proposal, whether or not a quorum is present.

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With respect to the compensation proposal and the adjournment proposal, if you fail to vote, fail to instruct your broker or other nominee how to vote, or respond with an “abstain” vote, it will have no effect on the outcome of the votes on such proposals.

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In each such case, your attendance at the meeting alone will not revoke any proxy.

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If you choose either of the first two methods, your notice or new proxy card must be actually received before the voting takes place at the special meeting.

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If your shares are held in a brokerage account or by a bank or other nominee, you should contact your broker or other nominee for additional information about changing your vote.

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For greater detail, see “Material U.S. Federal Income Tax Consequences” on page 60. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the specific tax consequences of the merger to you.

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If you are a holder of Village stock, you will receive written instructions from the exchange agent after the merger is completed on how to exchange your Village stock certificates for the cash merger consideration.

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If your shares are held in a stock brokerage account or by a bank or other nominee, you should call your broker or other nominee for additional information.

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SUMMARY

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This summary highlights selected information from this proxy statement. We urge you to read carefully the proxy statement and the other documents to which this proxy statement refers to understand fully the merger and the other matters to be considered at the special meeting. See “Where You Can Find More Information” on page 64. Each item in this summary includes a page reference directing you to a more complete description of that item.

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The Parties to the Merger (page 61)

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TowneBank and Cardinal Sub, Inc.

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TowneBank is a Virginia chartered commercial bank headquartered in Portsmouth, Virginia. TowneBank provides retail and commercial banking services to customers located in numerous markets in Virginia and North Carolina. TowneBank also offers a diversified range of financial services through its non-banking subsidiaries and its affiliated divisions. TowneBank currently operates over 50 banking offices throughout Hampton Roads and Central Virginia, as well as Northeastern and Central North Carolina. TowneBank’s common stock is listed on the Nasdaq Global Select Market under the symbol “TOWN.”

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As of September 30, 2024, TowneBank had total consolidated assets of $17.2 billion, total consolidated loans, net of unearned income, of $11.4 billion, total consolidated deposits of $14.4 billion and consolidated shareholders’ equity of $2.1 billion.

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The principal executive offices of TowneBank are located at 5716 High Street, Portsmouth, Virginia 23703, and its telephone number is (757) 638-7500. TowneBank’s website can be accessed at http://www.townebank.com. Information contained on TowneBank’s website does not constitute part of, and is not incorporated into, this proxy statement.

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Merger Sub is a Virginia corporation and wholly owned subsidiary of TowneBank. Merger Sub was organized on September 23, 2024, solely for the purpose of facilitating the merger. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.

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Village Bank and Trust Financial Corp. and Village Bank

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Village is a bank holding company headquartered in Midlothian, Virginia providing community banking services through its wholly owned Virginia chartered bank subsidiary, Village Bank. Village Bank currently operates nine banking offices serving the greater Richmond Metropolitan area and Williamsburg, Virginia. Village’s common stock is listed on the Nasdaq Capital Market under the symbol “VBFC.”

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As of September 30, 2024, Village had total consolidated assets of $759.5 million, total consolidated loans, net of unearned income, of $614.8 million, total consolidated deposits through Village Bank of $646.2 million and consolidated shareholders’ equity of $74.2 million.

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The principal executive offices of Village are located at 13319 Midlothian Turnpike, Midlothian, Virginia 23113, and its telephone number is (804) 897-3900. Village’s website can be accessed at http://www.villagebank.com. Information contained on Village’s website does not constitute part of, and is not incorporated into, this proxy statement. See “Where You Can Find More Information” for information about where you can find additional information about Village and Village Bank.

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The Merger (page 22)

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TowneBank and Village are proposing to combine pursuant to the terms and conditions of the merger agreement. To avoid adverse tax consequences to the combined company, the merger is structured in three steps that are

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expected to occur in quick succession. In the first step, TowneBank will purchase all the outstanding shares of Village common stock for $80.25 per share, and Merger Sub, a wholly owned subsidiary of TowneBank formed to facilitate the merger, will merge with and into Village, with Village as the surviving entity. In the second step, Village will merge with and into TowneBank, with TowneBank as the surviving entity. In the third step, Village Bank will merge with and into TowneBank, with TowneBank as the surviving entity. TowneBank will continue to be a standalone Virginia chartered bank after the merger. The merger agreement is attached to this proxy statement as Appendix A. We encourage you to read the merger agreement because it is the legal document that governs the merger.

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Consideration to be Received in the Merger by Village Shareholders (page 47)

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In the proposed merger, holders of Village common stock will receive $80.25 in cash for each of their shares of Village common stock outstanding immediately before the effective date of the merger, or approximately $120.4 million in the aggregate based on the 1,500,343 shares of Village common stock outstanding as of the date of this proxy statement. The purchase price is fixed and will not be adjusted based upon changes in the market price of TowneBank common stock or Village common stock prior to the effective date of the merger. Shares of TowneBank common stock held by TowneBank shareholders will remain unchanged in the merger.

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Treatment of Village Restricted Stock Awards (page 47)

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In the merger, all outstanding Village restricted stock and restricted stock unit awards that are unvested or contingent and outstanding immediately before the effective date of the merger will vest and be converted into the right to receive, without interest, the cash merger consideration payable with respect to shares of Village common stock. As of the date of this proxy statement, there were 28,151 shares subject to unvested restricted stock and restricted stock unit awards granted under Village equity compensation plans.

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Material U.S. Federal Income Tax Consequences (page 60)

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The receipt of cash in exchange for shares of Village common stock in connection with the merger will be a taxable transaction for federal income tax purposes (and also will be a taxable transaction under applicable state, local and other tax laws) to shareholders of Village. You will recognize a gain or loss measured by the difference between your tax basis in the Village common stock owned by you at the time of the merger and the amount of cash you receive for your shares of common stock. Your gain or loss will be a capital gain or loss if the common stock is held as a capital asset and will be long-term capital gain or loss if you have held the common stock for more than one year. If, however, you have held the common stock for one year or less, the gain or loss will be short-term capital gain or loss. The deductibility of capital losses is subject to limitations under the Code.

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Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the specific tax consequences of the merger to you.

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Village’s Reasons for the Merger; Recommendation of Village’s Board of Directors (page 26)

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Village’s board of directors has determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interests of Village and its shareholders and has approved the merger agreement. The Village board of directors unanimously recommends that Village shareholders vote “FOR” the approval of the merger proposal, “FOR” the approval of the articles amendment proposal, “FOR” the approval of the compensation proposal and “FOR” the approval of the adjournment proposal. In making its recommendations, a number of substantive reasons were considered by the Village board, including, among others (not in any relative order of importance):

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Village’s board of directors also considered the financial analyses and opinion of Janney Montgomery Scott LLC (“Janney”), which was rendered to board on September 23, 2024, to the effect that, as of such date and subject to the procedures followed, matters considered and assumptions and qualifications set forth therein, the cash merger consideration was fair, from a financial point of view, to the holders of Village’s outstanding common stock.

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For additional discussion of the factors considered by Village’s board of directors in reaching its decision to approve the merger agreement, see “The Merger – Village’s Reasons for the Merger; Recommendation of Village’s Board of Directors.”

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Opinion of Village’s Financial Advisor (page 29)

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At the September 23, 2024 meeting of the Village board of directors, representatives of Janney rendered to the Village board Janney’s written opinion, dated September 23, 2024, to the effect that, as of such date and based upon and subject to assumptions made, procedures followed, matters considered and limitations on the review undertaken, the cash merger consideration was fair, from a financial point of view, to the holders of Village common stock.

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The full text of Janney’s written opinion, dated September 23, 2024, is attached as Appendix B to this proxy statement and is incorporated herein by reference. Village’s shareholders are urged to read the opinion in its entirety. The opinion is directed to the board of directors of Village and addresses only the fairness, from a financial point of view, of the cash merger consideration to be paid to Village shareholders in the proposed merger. The opinion does not address, and Janney expresses no view or opinion with respect to, (i) the underlying business decision of Village to engage in the merger, (ii) the relative merits or effect of the merger as compared to any alternative business transactions or strategies that may be or may have been available to or contemplated by Village or Village’s board of directors or (iii) any legal, regulatory, accounting, tax or similar matters relating to Village, its shareholders or relating to or arising out of the merger. The opinion expresses no view or opinion as to any terms or other aspects of the merger, except for the cash merger consideration.

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Regulatory Approvals (page 43)

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TowneBank, Village and Village Bank cannot complete the merger without prior approval from the Federal Deposit Insurance Corporation (the “FDIC) and the Bureau of Financial Institutions of the Virginia State Corporation Commission (the “Virginia SCC”). On October 23, 2024, TowneBank filed applications with the FDIC and Virginia SCC seeking their approval of the merger. TowneBank has also requested a waiver from the Federal Reserve Bank of Richmond (the “Reserve Bank”) of the requirement to file an application under Section 3 of the Bank Holding Company Act of 1956, as amended, for approval of the merger.

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As of the date of this proxy statement, we have not yet received the required approvals from the FDIC and Virginia SCC, or the requested waiver from the Reserve Bank. While we do not know of any reason why we would not be able to obtain such approvals and waiver in a timely manner, we cannot be certain when or if we will receive them.

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Conditions to Completion of the Merger (page 56)

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The parties’ respective obligations to complete the merger are subject to the fulfillment or waiver of certain conditions, including the following:

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Where the merger agreement and/or law permits, TowneBank or Village and Village Bank could choose to waive a condition to its obligation to complete the merger even if that condition has not been satisfied. We cannot be certain when, or if, the conditions to the merger will be satisfied or waived or that the merger will be completed.

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Timing of the Merger (page 47)

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TowneBank and Village expect to complete the merger after all conditions to the merger in the merger agreement are satisfied or waived, including after shareholder approvals are received at the special meeting of Village and the receipt of all required regulatory approvals. We currently expect to complete the merger in the first quarter of 2025. However, it is possible that factors outside of either party’s control could require us to complete the merger at a later time or not to complete it at all.

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Interests of Certain Village Directors and Executive Officers in the Merger (page 37)

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Certain Village directors and executive officers may have interests in the merger that differ from, or are in addition to, their interests as shareholders of Village. These interests exist because of, among other things:

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The Village board of directors was aware of these interests and took them into account in its decision to approve the merger agreement and the merger. See “The Merger – Interests of Certain Village Directors and Executive Officers in the Merger” on page 37.

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No Solicitation (page 54)

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Village has agreed that, while the merger agreement is in effect, it will not directly or indirectly:

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The merger agreement does not, however, prohibit Village from considering an unsolicited bona fide written acquisition proposal from a third party if certain specified conditions are met.

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Termination of the Merger Agreement (page 56)

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Termination by TowneBank, Merger Sub, Village and Village Bank. The merger agreement may be terminated and the merger abandoned by TowneBank, Merger Sub, Village and Village Bank, at any time before the merger is completed, by mutual consent of the parties.

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Termination by TowneBank and Merger Sub or Village and Village Bank. The merger agreement may be terminated and the merger abandoned by TowneBank and Merger Sub or Village and Village Bank if:

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Termination by TowneBank and Merger Sub. TowneBank and Merger Sub may terminate the merger agreement at any time before the merger is completed if:

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Termination by Village and Village Bank. Village and Village Bank may terminate the merger agreement at any time before the merger is completed if:

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In the event of termination, the merger agreement will become null and void, except that certain provisions thereof relating to fees and expenses (including the obligation to pay the termination fee described below in certain circumstances) and confidentiality of information exchanged between the parties will survive any such termination.

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Termination Fee and Expenses (page 58)

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Village must pay TowneBank a termination fee of $4.8 million if the merger agreement is terminated by either party under certain specified circumstances. The termination and payment circumstances are more fully described elsewhere in this proxy statement. See “The Merger Agreement – Termination Fee” on page 58 and in Article 7 of the merger agreement.

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In general, whether or not the merger is completed, TowneBank and Village will each pay its respective expenses incident to preparing, entering into and carrying out the terms of the merger agreement. The parties will share the costs of all filing fees paid to any governmental authorities.

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Amendment to Village’s Articles of Incorporation (page 20)

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Under Virginia law, a Virginia chartered bank like TowneBank can only merge with an entity that is chartered with banking powers under federal or state law. In order to facilitate the merger of Village with and into TowneBank, the parties have agreed that Village will seek shareholder approval of an amendment to its articles of incorporation to amend Article II therein so as to provide Village with banking powers under Virginia law solely for the purpose of consummating the merger. If the shareholders of Village do not approve the merger proposal, or if the shareholders of Village approve the merger proposal, but the merger is not consummated, Village will not amend its articles of incorporation even if Village’s shareholders approve the articles amendment proposal. The form of the amendment to Village’s articles of incorporation amending the purpose article therein so as to provide Village with banking powers under Virginia law is attached as Appendix C to this proxy statement.

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The Village Special Meeting (page 16)

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The special meeting will be held virtually on December 19, 2024, at 10:00 a.m., Eastern Time. The meeting will be conducted exclusively via live webcast and there will be no physical location for the meeting. You will be able to attend the meeting online, vote your shares electronically and submit your questions during the meeting by visiting meetnow.global/MHKPWGN. At the special meeting, the shareholders of Village will be asked to vote on the following matters:

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Record Date and Votes Required (page 16)

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You can vote at the special meeting of shareholders if you owned Village common stock at the close of business on October 29, 2024. On that date, 1,500,343 shares of Village common stock were outstanding and entitled to vote. For each proposal presented at the special meeting, a shareholder can cast one vote for each share of Village common stock owned on the record date.

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The votes required to approve the proposals at the special meeting are as follows:

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Affiliate Agreements Entered into by Directors, Executive Officers and the Majority Shareholder of Village (page 59)

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Each director and executive officer of Village, and Kenneth R. Lehman, the majority shareholder of Village, entered into affiliate agreements with Village and TowneBank at the time the merger agreement was executed. Under the terms of the affiliate agreements, such individuals have agreed to vote their shares of Village common stock in favor of the merger proposal and articles amendment proposal, and against any competing acquisition proposal, respectively, subject to certain exceptions, including that certain shares held in a fiduciary capacity are not covered by the agreements. As of October 29, 2024, the record date for the special meeting, directors and executive officers of Village are entitled to vote 114,648 shares of Village common stock, or approximately 7.64% of the total voting power of the shares of Village common stock outstanding on that date. As of the same date, Mr. Lehman is entitled to vote 768,622 shares of Village common stock, or approximately 51.23% of the total voting power of the shares of Village common stock outstanding on that date, which is sufficient to approve each of the merger proposal, articles amendment proposal, compensation proposal and adjournment proposal. See “The Merger Agreement – Affiliate Agreements” for additional information regarding the affiliate agreements.

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Appraisal or Dissenters’ Rights (page 44)

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Virginia law provides shareholders with the right to assert appraisal rights with respect to the proposed merger and demand in writing to be paid the fair value of your shares of Village common stock instead of accepting the cash merger consideration. If you wish to exercise your appraisal rights, you must strictly comply with Article 15 of the VSCA, a copy which is included as Appendix D to this proxy statement. Please refer to page 44 of this proxy statement for more information regarding your appraisal rights.

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The Merger Will Be Accounted for Under the Acquisition Method of Accounting (page 46)

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TowneBank will use the acquisition method of accounting to account for the merger.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statements. Village desires to take advantage of these “safe harbor” provisions with regard to the forward-looking statements in this proxy statement and in the documents that are incorporated herein by reference. These forward-looking statements reflect the current views of Village with respect to future events and financial performance. Specifically, forward-looking statements may include:

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These forward-looking statements express the best judgment of Village based on currently available information, and we believe that the expectations reflected in our forward-looking statements are reasonable.

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By their nature, however, forward-looking statements often involve assumptions about the future. Such assumptions are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. As such, Village cannot guarantee you that the expectations reflected in our forward-looking statements actually will be achieved. Actual results may differ materially from those in the forward-looking statements due to, among other things, the following factors:

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We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date of this proxy statement or, in the case of a document incorporated herein by reference, as of the date of that document. Except as required by law, Village does not undertake any obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports Village files with the SEC. See “Where You Can Find More Information” on page 64 for a list of the documents incorporated herein by reference.

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THE SPECIAL MEETING

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Date, Place and Time

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This proxy statement is first being mailed on or about November 16, 2024, to holders of shares of Village common stock, par value $4.00 per share, as of the close of business on the record date for the special meeting of shareholders. This proxy statement is accompanied by the notice of the special meeting and a form of proxy that is solicited by the board of directors of Village for use at the special meeting to be held virtually on December 19, 2024, at 10:00 a.m., Eastern Time, and at any adjournments of that meeting. The meeting will be conducted exclusively via live webcast and there will be no physical location for the meeting. You will be able to attend the meeting online, vote your shares electronically and submit your questions during the meeting by visiting meetnow.global/MHKPWGN.

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Purposes of the Special Meeting

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At the special meeting, the shareholders of Village will be asked:

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Recommendation of Village Board of Directors

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The Village board determined that the proposed merger with TowneBank is fair to and is in the best interests of Village and its shareholders and unanimously recommends that Village shareholders vote “FOR” each of the proposals that will be presented at the special meeting as described in this proxy statement.

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Record Date and Voting Rights; Quorum

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The Village board of directors has fixed the close of business on October 29, 2024 as the record date for determining the shareholders of Village entitled to notice of and to vote at the special meeting or any adjournments thereof. Accordingly, you are only entitled to notice of and to vote at the special meeting if you were a record holder of Village common stock at the close of business on the record date. At that date, 1,500,343 shares of Village common stock were outstanding and entitled to vote.

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To have a quorum that permits Village to conduct business at the special meeting, the presence, whether by attendance at the meeting or by proxy, of the holders of Village common stock representing a majority of the voting shares outstanding on the record date is required. You are entitled to one vote for each outstanding share of Village common stock you held as of the close of business on the record date.

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Holders of shares of Village common stock present at the special meeting but not voting, and shares of the common stock for which proxy cards, Internet votes or telephone votes are received indicating that their holders have abstained, will be counted as present at the special meeting for purposes of determining whether there is a quorum for transacting business. Shares held in “street name” that have been designated by brokers on proxies as not voted will not be counted as votes cast for or against any proposal. These broker non-votes will, however, be counted for purposes of determining whether a quorum exists.

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Votes Required

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Vote Required for Approval of the Merger Proposal. The approval of the merger proposal requires the affirmative vote of at least a majority of the shares of common stock outstanding on the record date for the special meeting.

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Failures to vote, abstentions and broker non-votes will not count as votes cast. Because, however, approval of the merger proposal requires the affirmative vote of at least a majority of the shares of Village common stock outstanding on the record date, failures to vote, abstentions and broker non-votes will have the same effect as votes against the merger proposal.

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Vote Required for Approval of the Articles Amendment Proposal. The approval of the articles amendment proposal requires the affirmative vote of at least a majority of the shares of common stock outstanding on the record date for the special meeting.

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Failures to vote, abstentions and broker non-votes will not count as votes cast. Because, however, approval of the articles amendment proposal requires the affirmative vote of at least a majority of the shares of Village common stock outstanding on the record date, failures to vote, abstentions and broker non-votes will have the same effect as votes against the articles amendment proposal.

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Vote Required for Approval of the Compensation Proposal. The approval, on an advisory basis only, of the compensation proposal requires the affirmative vote of at least a majority of the shares of Village common stock cast and entitled to vote on the proposal.

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Failures to vote, abstentions and broker non-votes will not count as votes cast and will have no effect for purposes of determining whether the compensation proposal has been approved.

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Vote Required for Approval of the Adjournment Proposal. The approval of the adjournment proposal requires the affirmative vote of at least a majority of the shares of Village common stock cast and entitled to vote on the proposal, whether or not a quorum is present.

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Failures to vote, abstentions and broker non-votes will not count as votes cast and will have no effect for purposes of determining whether the adjournment proposal has been approved.

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Stock Ownership of Village’s Executive Officers, Directors and Majority Shareholder

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As of October 29, 2024, the record date for the special meeting, directors and executive officers of Village are entitled to vote 114,648 shares of Village common stock, or approximately 7.64% of the total voting power of the shares of Village common stock outstanding on that date. As of the same date, Kenneth R. Lehman, the majority shareholder of Village, is entitled to vote 768,622 shares of Village common stock, or approximately 51.23% of the total voting power of the shares of Village common stock outstanding on that date, which is sufficient to approve each of the merger proposal, articles amendment proposal, compensation proposal and adjournment proposal. Each director and executive officer of Village, and Mr. Lehman, entered into affiliate agreements with Village and TowneBank at the time the merger agreement was executed. Under the terms of the affiliate agreements, such individuals have agreed to vote their shares of Village common stock in favor of the merger proposal and articles amendment proposal, and against any competing acquisition proposal, respectively, subject to certain exceptions, including that certain shares held in a fiduciary capacity are not covered by the agreements.

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Voting During the Special Meeting

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Record Holders. If your shares of Village common stock are held of record in your name, your shares can be voted at the special meeting in any of the following ways:

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If proxy cards are returned properly executed without an indication as to how the proxies should vote, the Village common stock represented by each such proxy card will be considered to be voted (i) “FOR” the merger proposal; (ii) “FOR” the articles amendment proposal; (iii) “FOR” the compensation proposal; and (iv) “FOR” the adjournment proposal.

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Your vote is important. Accordingly, please sign, date and return the enclosed proxy card, or follow the instructions above to vote by the Internet or telephone, whether or not you plan to attend the special meeting.

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Shares Held in “Street Name.” Only the record holders of shares of Village common stock, or their appointed proxies, may vote those shares. As a result, if your shares of Village common stock are held for you in “street name” by a broker or other nominee, such as a bank or custodian, then only your broker or nominee (i.e., the record holder) may vote them for you, or appoint the proxies to vote them for you, unless you previously have made arrangements for your broker or nominee to assign its voting rights to you or for you to be recognized as the person entitled to vote your shares. You will need to follow the directions your broker or nominee provides you and give it instructions as to how it should vote your shares by following the instructions you received from your broker or nominee with your copy of this proxy statement. Brokers and other nominees who hold shares in “street name” for their clients typically have the discretionary authority to vote those shares on “routine” proposals when they have not received instructions from beneficial owners of the shares. However, they may not vote those shares on non-routine matters, such as the proposals that will be presented at the special meeting, unless their clients give them voting instructions. To ensure that your shares are represented at the special meeting and voted in the manner you desire, it is important that you instruct your broker or nominee as to how it should vote your shares.

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If your shares are held in “street name” and you wish to attend the special meeting, you must register in advance. To register, you must submit proof of your proxy power (legal proxy) reflecting your Village holdings along with your name and email address to Village’s transfer agent, Computershare. Requests for registration must be labelled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on December 16, 2024. You will receive a confirmation of your registration by email after Computershare receives your registration materials. Requests for registration should be directed to Computershare at the following:

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Revocation of Proxies

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Record Holders. If you are the record holder of shares of Village common stock and you sign and return a proxy card or appoint the proxies by the Internet or by telephone and you later wish to revoke the authority or change the voting instructions you gave the proxies, you can do so at any time before the voting takes place at the special meeting by taking the appropriate action described below.

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To change the voting instructions you gave the proxies:

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The proxies will follow the last voting instructions received from you before the special meeting.

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To revoke your proxy card or your appointment of the proxies by the Internet or telephone:

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If you submit your new proxy card or notice of revocation by mail, it should be addressed to Village’s corporate secretary at Village Bank and Trust Financial Corp., 13319 Midlothian Turnpike, Midlothian, Virginia 23113, Attention: Deborah M. Golding, and must be received no later than the beginning of the special meeting or, if the special meeting is adjourned, before the adjourned meeting is actually held. If hand delivered, your new proxy card or notice of revocation must be received by Village’s corporate secretary before the voting takes place at the special meeting or at any adjourned meeting. If the special meeting is postponed or adjourned, all proxies will be voted at the postponed or adjourned special meeting in the same manner as they would have been voted at the originally scheduled special meeting except for any proxies that have been properly withdrawn or revoked.

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If you need assistance in changing or revoking your proxy, please contact Village’s corporate secretary by calling Deborah M. Golding, Corporate Secretary, at (804) 897-3900 or by writing to Village’s executive offices at 13319 Midlothian Turnpike, Midlothian, Virginia 23113, Attention: Deborah M. Golding.

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Shares Held in “Street Name.” If your shares are held in “street name” and you want to change or revoke voting instructions you have given to the record holder of your shares, you must follow the directions given by your bank, broker, custodian or nominee.

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Solicitation of Proxies

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This solicitation is made on behalf of the Village board of directors, and Village will pay the costs of soliciting and obtaining proxies, including the cost of reimbursing banks and brokers for forwarding proxy materials to shareholders. Proxies may be solicited, without extra compensation, by Village officers and employees by mail, electronic mail, telephone, fax or personal interviews.

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PROPOSALS TO BE CONSIDERED AT THE SPECIAL MEETING

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Approval of the Merger Proposal (Proposal No. 1)

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At the special meeting, shareholders of Village will be asked to approve the merger proposal providing for TowneBank’s acquisition of Village and Village Bank. Shareholders of Village should read this proxy statement carefully and in its entirety, including the appendices, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this proxy statement as Appendix A.

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After careful consideration, the Village board of directors approved the merger agreement and the merger and deemed them to be fair to and in the best interests of Village and the shareholders of Village. See “The Merger – Village’s Reasons for the Merger; Recommendation of Village’s Board of Directors” included elsewhere in this proxy statement for a more detailed discussion of the Village board of directors’ recommendation.

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The Village board of directors unanimously recommends that Village shareholders vote “FOR” the merger proposal.

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Approval of the Articles Amendment Proposal (Proposal No. 2)

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Under Virginia law, a Virginia chartered bank like TowneBank can only merge with an entity that is chartered with banking powers under federal or state law. In order to facilitate the merger of Village with and into TowneBank, at the special meeting, shareholders of Village will be asked to approve an amendment to Village’s articles of incorporation to amend Article II therein so as to provide Village with banking powers under Virginia law solely for the purpose of consummating the merger. The form of amendment to Village’s articles of incorporation is attached to this proxy statement as Appendix C.

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The Village board of directors unanimously recommends that Village shareholders vote “FOR” the articles amendment proposal.

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Approval of the Compensation Proposal (Proposal No. 3)

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In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Village is providing its shareholders with the opportunity to cast an advisory (non-binding) vote on the compensation that may be paid or become payable to its named executive officers that is based on or otherwise relates to the merger, the value of which is set forth in the table included in the section of this proxy statement entitled “The Merger – Potential Payments and Benefits to Village’s Named Executive Officers in Connection with a Change of Control.” As required by Section 14A of the Exchange Act, Village is asking its shareholders to vote on the adoption of the following resolution:

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“RESOLVED, that the compensation that may be paid or become payable to Village’s named executive officers that is based on or otherwise relates to the merger, as disclosed in the table in the section of the proxy statement entitled “The Merger – Potential Payments and Benefits to Village’s Named Executive Officers in Connection with a Change of Control,” including the associated narrative discussion and the agreements or understandings pursuant to which such compensation may be paid or become payable, are hereby APPROVED.”

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The vote on specified compensation that may be payable in connection with the merger is a vote separate and apart from the vote to approve the merger agreement. Accordingly, a shareholder may vote to approve such specified compensation and vote not to approve the merger agreement and vice versa. Because the vote to approve such specified compensation is advisory in nature only, it will not be binding on either Village or TowneBank. Accordingly, because Village may be contractually obligated to pay the compensation, the compensation will be payable, subject only to the conditions applicable thereto, if the merger agreement is approved and the merger is completed and regardless of the outcome of the compensation proposal.

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The Village board of directors unanimously recommends a vote “FOR” the compensation proposal.

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Approval of the Adjournment Proposal (Proposal No. 4)

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If there are not sufficient votes to approve the merger proposal or the articles amendment proposal at the special meeting, the meeting may be adjourned to a later date or dates, if necessary or appropriate, to permit further solicitation of proxies to approve the merger proposal and the articles amendment proposal. In that event, Village shareholders will be asked to vote on the adjournment proposal and will not be asked to vote on the merger proposal and the articles amendment proposal if there are insufficient votes to approve the proposals at the special meeting until such adjournment, if any.

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In order to allow proxies that have been received by Village at the time of the special meeting to be voted for the adjournment proposal, Village is submitting the adjournment proposal to its shareholders as a separate matter for their consideration. This proposal asks Village shareholders to authorize the holder of any proxy solicited by the Village board of directors on a discretionary basis to vote in favor of adjourning the special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from Village shareholders who have previously voted.

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If it is necessary to adjourn the special meeting, then, unless the meeting will have been adjourned for a total of more than 120 days, no notice of such adjourned meeting is required to be given to shareholders, other than an announcement at the special meeting of the place, date and time to which the special meeting is adjourned. Even if a quorum is not present, shareholders who are represented at a meeting may approve an adjournment of the meeting.

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The Village board of directors unanimously recommends that Village shareholders vote “FOR” the adjournment proposal.

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THE MERGER

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The following discussion contains certain information about the merger. The discussion is subject to and is qualified in its entirety by reference to the merger agreement, which is attached as Appendix A to this proxy statement and incorporated herein by reference. We urge you to read carefully this proxy statement, including the merger agreement, for a more complete understanding of the merger.

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General

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The Village board of directors and TowneBank board of directors have each approved the merger agreement and the merger, which provides for TowneBank’s acquisition of Village and Village Bank.

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Pursuant to the terms of the merger agreement, as a result of the merger, each share of Village common stock issued and outstanding immediately before the merger will be converted into the right to receive $80.25 in cash. Village shareholders will receive approximately $120.4 million in the aggregate based on the 1,500,343 shares of Village common stock outstanding as of the date of this proxy statement. The purchase price is fixed and will not be adjusted based upon changes in the market price of TowneBank common stock or Village common stock prior to the effective date of the merger. Shares of TowneBank common stock held by TowneBank shareholders will remain unchanged in the merger.

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Background of the Merger

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As part of its ongoing consideration and evaluation of Village’s long-term prospects and strategy, the Village board of directors and senior management periodically review and assess its business strategy and objectives. In reviewing its strategic alternatives, the Village board has recently discussed the changes in the financial services industry and the regulatory environment as well as other challenges facing community banks like Village. These challenges have included increasing government regulation, expense burdens related to technology and training, competition in the delivery of financial products and services, and an interest rate environment that has resulted in pressure on interest rate spreads and margins. These discussions have also addressed potential strategic alternatives that might be available to Village, including organic growth opportunities, potential mergers and acquisitions, and capital planning, all with the goal of enhancing long-term shareholder value. In addition, Village’s senior management team has had, from time to time, informal discussions with representatives of other financial institutions and periodically has received informal inquiries from third parties regarding potential business combination transactions.

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In January 2024, the Village board devoted a portion of its regular meeting to discussing possible strategic transactions with other financial institutions, including the potential for partnering with a similarly sized institution in a merger of equals transaction or pursuing a merger with a larger institution. A representative of Janney participated in the meeting to provide insight into the community banking industry along with observations regarding strategic alternatives potentially available to Village. Janney shared with the Village board, among other information, data from recent business combination transactions that involved financial institutions similar to Village and the potential prices that Village could reasonably expect to receive in a sale of the company. The Village board discussed the information provided and the alternatives available to Village, and decided to continue to monitor and consider such alternatives at future meetings.

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During the remainder of the first quarter and second quarter of 2024, James E. Hendricks, Jr., President and Chief Executive Officer of Village and Village Bank, had several discussions with a representative of Janney to stay informed about the mergers and acquisitions environment for community banks and potential opportunities for Village. Mr. Hendricks had separate meetings and telephone calls with multiple peer bank executives during this period to gain perspective from other organizations operating inside and outside Village’s markets. Mr. Hendricks was also in regular contact with members of the Village board and senior management team to share information he gathered and to solicit feedback regarding Village’s strategic options.

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In April 2024, at its regular meeting, the Village board continued to evaluate its strategic goals and opportunities. A representative of Janney participated in the meeting. During the meeting, the Village board discussed the current banking environment and recent developments in the banking and financial services industry. The Village board also discussed a variety of strategic alternatives, including Village’s prospects for organic growth on a stand-alone basis and the potential for a strategic merger with another financial institution. Janney provided the board with a general overview of the process of soliciting interest in a business combination transaction from other financial institutions should the board decide to do so.

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In May 2024, at its regular meeting, the Village board continued its discussion of the future direction of the company. The Village board engaged in a robust and thorough discussion taking into consideration information previously provided by Janney and members of Village’s senior management team. Following this discussion and in consideration of the potential value to be received by Village’s shareholders in a merger with a larger institution along with the challenges of remaining independent, the Village board determined to initiate a process of soliciting interest to acquire Village from a targeted group of larger institutions. The institutions selected were determined by the board, following advice from Janney, to be (i) most likely interested in acquiring Village, (ii) able to pay a price higher than what the Village board believed it could reasonably achieve as a standalone company, and (iii) desirable acquirers for Village’s employees, customers and other stakeholders. The Village board noted that it was not under any obligation to proceed with a transaction should the solicitation process not generate the desired results in terms of valuation and other factors that it determined to be in the best interests of Village and its shareholders.

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In late May and early June 2024, Village’s senior management team, in coordination with Janney, prepared a confidential information memorandum to be used to provide information about Village to potential merger partners and populated an online data room to facilitate the performance of due diligence by potential merger partners.

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Beginning on June 17, 2024, Janney contacted eight financial institutions regarding their interest in a potential strategic transaction with Village. All eight institutions entered into confidentiality agreements and were granted access to the online data room, which contained the confidential information memorandum and extensive financial and other information about Village. TowneBank entered into a confidentiality agreement on July 15, 2024 and thereafter conducted due diligence on Village. Piper Sandler & Co. (“Piper Sandler”) was engaged as financial advisor to the TowneBank board of directors in connection with its consideration of a potential business combination with Village.

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During late June through July 2024, members of Village’s senior management team conducted separate in-person meetings with representatives of four of the potential business combination partners contacted by Janney, including TowneBank. During these meetings, the parties discussed Village’s business, organizational structure and potential structures of a possible transaction. The parties also discussed aspects of potential business integration, including key employee retention, reporting relationships and compensation matters.

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Four of the eight institutions contacted by Janney, including TowneBank, submitted non-binding letters of intent to Village, which were due by July 31, 2024. Two of the proposals consisted of 100% cash consideration and two of the proposals consisted of 100% stock consideration. The TowneBank proposal consisted of 100% cash consideration of $80.00 per share of Village stock, or approximately $120.3 million in the aggregate. The other institutions that submitted non-binding letters of intent to Village are referred to as “Institution A,” “Institution B” and “Institution C.” Institution A’s proposal consisted of 100% stock consideration with an implied price of approximately $69.60 per share of Village stock, or approximately $104.7 million in the aggregate, based on Institution A’s trading price as of the date of its letter of intent. Institution B’s proposal consisted of 100% cash consideration of $70.37 per share of Village stock, or approximately $105.9 million in the aggregate. Institution C’s proposal consisted of 100% stock consideration with an implied price of approximately $65.68 per share of Village stock, or approximately $98.8 million in the aggregate, based on Institution C’s trading price as of the date of its letter of intent.

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A special meeting of the Village board was held on August 7, 2024, with representatives of Janney and Williams Mullen, legal counsel to Village, also present, to analyze and discuss the four letters of intent. The Village board reviewed the proposals in detail with extensive discussion regarding the history and prospects of the interested parties, their respective stock performance, pro-forma analysis of the potential combined companies, and opportunities and risks for Village shareholders under each of the proposals.

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The Village board also evaluated a variety of other factors for each proposal, as applicable, including the (i) ratio of per share consideration to Village’s tangible equity value, (ii) ratio of price to last 12 months earnings per share, (iii) ownership percentage of the combined company that Village shareholders would maintain, (iv) pro forma dividends per share, (v) ratio of buyer’s stock price to its tangible book value, (vi) any seat on the combined company’s board to be held by a Village board member, (vii) Village’s familiarity with the proposed buyer and any existing commercial relationships, (viii) impacts to shareholders of the form of consideration offered, particularly with respect to taxes, and (ix) perceived ability to complete the transaction in a timely manner.

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After considering the merits of each of the proposals, and after discussions with representatives of Janney and of Williams Mullen, the Village board instructed Janney to invite TowneBank, Institution A and Institution B to conduct additional due diligence on Village and to submit revised non-binding letters of intent to Village by August 16, 2024.

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Members of Village’s senior management team met with members of Institution B’s senior management team on August 12, 2024 to exchange further due diligence information and discuss a potential combination of the parties.

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On August 16, 2024, Village received revised non-binding letters of intent from TowneBank, Institution A and Institution B. TowneBank’s revised proposal consisted of 100% cash consideration of $80.25 per share of Village stock, or approximately $120.7 million in the aggregate. Institution A’s revised proposal consisted of 100% stock consideration with an implied price of approximately $78.36 per share of Village stock, or approximately $117.9 million in the aggregate, based on Institution A’s trading price as of the date of its revised letter of intent. Institution B’s revised proposal consisted of 100% cash consideration of $79.00 per share of Village stock, or approximately $118.8 million in the aggregate.

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On August 20, 2024, the Village board held a special meeting, with representatives of Janney and Williams Mullen present, to analyze and discuss the three revised letters of intent. A representative of Janney provided an updated financial analysis of TowneBank, Institution A and Institution B, and of the proposed merger consideration described in each of their proposals. Representatives of Williams Mullen discussed the potential process moving forward and the legal standards and responsibilities of the directors with regard to matters before them. The Village board considered at length whether or not to move forward with a merger transaction, the merits of each proposal, the historical performance and prospects of each potential merger partner, and the risks and benefits of entering into an exclusive negotiation with one of the parties. The Village board determined that the TowneBank proposal represented the best combination of high valuation and low execution risk relative to the other proposals because (i) the TowneBank proposal had the highest purchase price per share and aggregate value as of the dates of the respective revised letters of intent, (ii) the TowneBank proposal was a cash offer, which limited downside market risk and would provide Village shareholders with immediate liquidity, and (iii) TowneBank had a recent history of successfully and efficiently acquiring financial institutions. Following this discussion, the Village board authorized management to contact TowneBank to request that TowneBank’s most recent proposal be revised to indicate that one current director of Village would be added to the TowneBank board on the effective date of the merger to ensure continuity of relationships with Village’s legacy customers and employees after the merger.

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Between August 20, 2024 and August 27, 2024, Mr. Hendricks had several telephone conversations with G. Robert Aston, Jr., Executive Chairman of TowneBank, to discuss, among other matters, Village’s request for TowneBank to add one current director of Village to the TowneBank board on the effective date of the merger. Messrs. Aston and Hendricks discussed the current composition of the TowneBank board and the experience and qualifications the TowneBank board was looking for in new directors. Mr. Hendricks provided perspective on the members of the Village board that would potentially fit the profile of directors being sought by TowneBank. Mr. Aston communicated that the TowneBank board would be willing to add one current director of Village to be identified by TowneBank in its sole discretion, and TowneBank provided a revised non-binding letter of intent, dated August 21, 2024, to reflect such willingness. TowneBank’s August 21, 2024 letter of intent was otherwise the same as its prior letter of intent, including with respect to the proposed $80.25 per share cash purchase price.

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On August 21, 2024, Mr. Hendricks had a telephone conversation with Village’s majority shareholder, Kenneth R. Lehman, to discuss the process Village had undertaken to explore a sale of the company. Mr. Lehman expressed his support for a potential merger with TowneBank on the terms proposed in TowneBank’s August 21, 2024 letter of intent and indicated his willingness to sign an affiliate agreement simultaneous with execution of a definitive merger agreement with TowneBank.

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On August 27, 2024, the Village board held a special meeting, with representatives of Janney and Williams Mullen present, to reaffirm the Village board’s desire to advance the merger discussions with TowneBank and desire to grant TowneBank a 45-day period of exclusivity to conduct additional due diligence and negotiate a definitive merger agreement with Village. On August 27, 2024, Mr. Hendricks, on behalf of Village, executed TowneBank’s August 21, 2024 letter of intent, which contained such 45-day exclusivity period.

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On August 30, 2024, Troutman Pepper Hamilton Sanders, LLP (“Troutman Pepper”), as outside legal counsel for TowneBank in connection with the transaction, delivered a draft of a definitive merger agreement to Williams Mullen. During the period from August 30, 2024 through September 23, 2024, the parties and their respective legal counsel exchanged drafts and negotiated changes to the draft merger agreement in an effort to resolve all open issues to reach a definitive merger agreement. The parties engaged in discussions regarding various transaction terms, including the circumstances under which the Village board would have the right to entertain superior third-party offers prior to the closing of the merger, the circumstances under which the Village board could change its recommendation to its shareholders that they approve the merger, the termination fee that would be payable by Village if the merger agreement is terminated under certain circumstances, the circumstances under which certain former Village employees are entitled to severance from the combined company, the affirmative and negative covenants that would be applicable to each of Village and TowneBank prior to the closing of the merger, the customary representations and warranties of each of Village and TowneBank, and the terms of affiliate agreements that were to be executed and delivered by directors and executive officers of Village and by Village’s majority shareholder. During this time, management of the parties and their respective financial advisors continued discussions, and Village and TowneBank each performed additional due diligence on the other party. TowneBank populated an online data room to facilitate the performance of due diligence of it by Village. The parties also provided drafts of their respective disclosure letters to the merger agreement and discussed other aspects of the proposed transaction and merger integration issues. During this period, TowneBank also negotiated the terms of employment agreements between TowneBank and key executives of Village. The Village executives were advised by separate independent counsel in connection with the negotiation of employment agreements with TowneBank.

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On September 10, 2024, Mr. Hendricks traveled to TowneBank’s headquarters to meet with senior executives of TowneBank, including Mr. Aston, William I. Foster III, President and Chief Executive Officer, R. Lee Clark, Chief Operating Officer, and Brian K. Skinner, President and Regional Banking Director for Virginia and Northeastern North Carolina. The parties discussed, among other matters, the potential combined management team, anticipated reporting structure, and operational and integration plans.

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On September 13, 2024, the Village board held a special meeting to discuss the status of the merger and related matters. Also present were representatives of Janney and Williams Mullen. A representative of Janney reviewed with the board the fulsome process that had been undertaken to that point to identify the best merger partner for Village shareholders, and presented a detailed financial analysis of TowneBank and of the terms of the proposed merger. Representatives of Williams Mullen provided an overview of ongoing negotiations of the merger agreement and related transaction documents, responded to questions and engaged in discussion regarding various transaction terms, and reviewed with the Village board the legal standards applicable to its decisions and actions with respect to the proposed merger.

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On the afternoon of September 23, 2024, at its regular meeting, the Village board further considered the proposed merger with TowneBank. Representatives of Janney and Williams Mullen also participated in the meeting. Representatives of Janney delivered to the Village board its oral opinion, which was subsequently confirmed in writing, to the effect that, as of such date and subject to the procedures followed, matters considered and assumptions and qualifications set forth in Janney’s written opinion, the cash merger consideration was fair, from a financial point of view, to the holders of Village’s outstanding common stock. Representatives of Williams Mullen described the terms and conditions of the most recent draft merger agreement and related transaction documents, copies of which were delivered to the Village board prior to the meeting, and provided an update regarding the negotiation of material terms of the merger agreement and related transaction documents since the September 13, 2024 meeting of the Village board. After considering the proposed terms of the merger agreement and other transaction documents and its discussions with Village’s financial and legal advisors, and taking into consideration the matters discussed during meetings of the Village board, including the factors described below under “– Village’s Reasons for the Merger; Recommendation of Village’s Board of Directors,” the Village board unanimously (i) approved and adopted the merger agreement, (ii) determined that the merger, the merger agreement and the transactions contemplated by the merger agreement were in the best interests of Village and its shareholders, (iii) determined to recommend that the Village shareholders approve the merger agreement and the transactions contemplated thereby, and (iv) authorized Mr. Hendricks to execute and deliver the merger agreement and take the other actions necessary to effect the merger.

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TowneBank’s management strategically reviews opportunities to acquire banks and other financial services companies to build its financial services platform and expand its customer base, market areas and product and services offerings. In 2015, TowneBank completed an out-of-market bank acquisition to expand its market area to the Richmond, Virginia market through the acquisition of Franklin Financial Corporation and its wholly owned thrift subsidiary, Franklin Federal Savings Bank. In 2016, TowneBank completed its acquisition of Monarch Financial Holdings, Inc., and its wholly owned bank subsidiary, Monarch Bank, headquartered in Chesapeake, Virginia. In 2018, TowneBank completed its acquisition of Paragon Commercial Corporation and its wholly owned bank subsidiary, Paragon Commercial Bank, to expand its market area to the Raleigh, Cary and Charlotte, North Carolina markets. In 2023, TowneBank completed its acquisition of Farmers Bankshares, Inc., and its wholly owned bank subsidiary, Farmers Bank, Windsor, Virginia.

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At a special meeting held on September 23, 2024, the TowneBank board approved the proposed merger and merger agreement.

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Village and TowneBank executed the merger agreement the evening of September 23, 2024 and publicly announced the transaction before the stock markets opened on the morning of September 24, 2024 in a press release issued jointly by TowneBank and Village.

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Village’s Reasons for the Merger; Recommendation of Village’s Board of Directors

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After careful consideration, the Village board of directors, at a meeting held on September 23, 2024, determined that the merger agreement and the transactions contemplated thereby are in the best interests of Village and its shareholders. Accordingly, the Village board of directors adopted and approved the merger agreement and unanimously recommends that Village’s shareholders vote “FOR” the merger proposal, “FOR” the articles amendment proposal, “FOR” the compensation proposal and “FOR” the adjournment proposal.

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In evaluating the merger agreement and reaching its decision to adopt and approve the merger agreement and recommend that Village’s shareholders approve the merger agreement, the Village board of directors consulted with Village’s management, as well as its outside legal and financial advisors, and considered a number of factors, including the following material factors (not in any relative order of importance):

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Village’s board also considered potential risks and a variety of potential negative factors in connection with its deliberations concerning the merger agreement and the merger, including the following material factors (not in any relative order of importance):

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Based on the factors described above, the board of Village determined that the merger with TowneBank would be advisable and in the best interests of Village and adopted the merger agreement and resolved to recommend its approval to the shareholders of Village.

The foregoing discussion of the information and factors considered by the Village board of directors is not intended to be exhaustive but includes the material factors considered by the Village board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Village board of directors did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, the individual members of the Village board of directors may have given different weight to different factors. The Village board of directors conducted an overall analysis of the factors described above including through discussions with, and questioning of, Village’s management and Village’s legal and financial advisors, and considered the factors overall to be favorable to, and to support, its determination to adopt the merger agreement and recommend its approval to Village’s shareholders.

The foregoing explanation of Village’s board of directors’ reasoning and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”

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Opinion of Village’s Financial Advisor

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Village retained Janney to render financial advisory and investment banking services to Village. As part of its engagement, Janney agreed to assist Village in analyzing, structuring, negotiating and, if appropriate, effecting a transaction between Village and another corporation or business entity. Janney also agreed to provide the board of directors of Village with an opinion as to the fairness, from a financial point of view, of the cash consideration to be paid to the holders of Village common stock in the proposed merger. Village engaged Janney because Janney is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger and is familiar with Village and its business. As part of its investment banking business, Janney is continually engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

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On September 23, 2024, Village’s board of directors held a meeting to evaluate the proposed merger. At this meeting, Janney reviewed the financial aspects of the proposed merger and rendered an opinion to the board of directors of Village that, as of such date and based upon and subject to assumptions made, procedures followed, matters considered and limitations on the review undertaken, the cash merger consideration to be paid to Village in connection with the proposed merger with TowneBank was fair, from a financial point of view, to Village’s shareholders.

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The full text of Janney’s written opinion, dated September 23, 2024, is attached as Appendix B to this proxy statement and is incorporated herein by reference. The description of the opinion set forth herein is qualified in its entirety by reference to the full text of such opinion. Village’s shareholders are urged to read the opinion in its entirety.

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Janney’s opinion speaks only as of the date of the opinion and Janney undertakes no obligation to revise or update its opinion. The opinion is directed to the board of directors of Village and addresses only the fairness, from a financial point of view, of the cash merger consideration to be paid to Village shareholders in the proposed merger. The opinion does not address, and Janney expresses no view or opinion with respect to, (i) the underlying business decision of Village to engage in the merger, (ii) the relative merits or effect of the merger as compared to any alternative business transactions or strategies that may be or may have been available to or contemplated by Village or Village’s board of directors or (iii) any legal, regulatory, accounting, tax or similar matters relating to Village, its shareholders or relating to or arising out of the merger. The opinion expresses no view or opinion as to any terms or other aspects of the merger, except for the purchase price. Village and TowneBank determined the purchase price through the negotiation process. The opinion does not express any view as to the amount or nature of the compensation to any of Village’s officers, directors or employees, or any class of such persons, relative to the purchase price, or with respect to the fairness of any such compensation. The opinion has been reviewed and approved by Janney’s Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

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The following is a summary of the analyses performed by Janney in connection with its fairness opinion. Certain analyses were confirmed in a presentation to the board of directors of Village by Janney. The summary set forth below does not purport to be a complete description of either the analyses performed by Janney in rendering its opinion or the presentation delivered by Janney to the board of directors of Village, but it does summarize all of the material analyses performed and presented by Janney.

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The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances. In arriving at its opinion, Janney did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Janney may have given various analyses more or less weight than other analyses. Accordingly, Janney believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, without considering all factors, could create an incomplete view of the process underlying the analyses set forth in its report to the board of directors of Village and its fairness opinion.

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In performing its analyses, Janney made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Village or TowneBank. The analyses performed by Janney are not necessarily indicative of actual value or actual future results, which may be significantly more or less favorable than suggested by such analyses. Such analyses were prepared solely as part of Janney’s analysis of the fairness of the cash merger consideration, from a financial point of view, to Village’s shareholders. The analyses do not purport to be an appraisal or to reflect the prices at which Village might actually be sold or the prices at which any securities may trade at the present time or at any time in the future. Janney’s opinion does not address the relative merits of the merger with TowneBank as compared to any other business combination in which Village might engage. In addition, as described above, Janney’s opinion was one of many factors taken into consideration by the board of directors of Village in making its determination to approve the Agreement.

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During the course of its engagement and as a basis for arriving at its opinion, Janney:

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Janney also took into account its assessment of general economic, market and financial conditions and its experience in other transactions as well as its knowledge of the banking industry and its general experience in securities valuation.

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In arriving at its opinion, Janney has assumed, without independent verification, the accuracy and completeness of the financial and other information and representations contained in the materials provided by Village and TowneBank and in the discussions with Village’s and TowneBank’s respective management teams. Janney has further relied upon the assurances of the management of Village and TowneBank that the financial information provided has been prepared on a reasonable basis in accordance with industry practice, and that they are not aware of any information or facts that would make any information provided to Janney incomplete or misleading. Without limiting the generality of the foregoing, for the purpose of its analyses and opinion, Janney has assumed that, with respect to financial forecasts, estimates and other forward-looking information reviewed, that such information has been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments of the management of Village and TowneBank (as the case may be) as to the expected future results of operations and financial condition of Village and TowneBank and the other matters covered thereby.

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Janney has also assumed that the financial estimates and estimates and allowances regarding under-performing and nonperforming assets and net charge-offs have been reasonably prepared on a basis reflecting the best currently available information, judgments and estimates of Village and that such estimates will be realized in the amounts and at the times contemplated thereby. Janney is not an expert in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for losses with respect thereto and has assumed and relied upon management’s estimates and projections. Janney was not retained to and did not conduct a physical inspection of any of the properties or facilities of Village or its respective subsidiaries. In addition, Janney has not reviewed individual credit files, nor has Janney made an independent evaluation or appraisal of the assets and liabilities of Village or any of its respective subsidiaries, and Janney was not furnished with any such evaluations or appraisals.

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Summary of Proposed Merger Consideration and Implied Transaction Metrics

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Based on the $80.25 per share cash offer, Janney calculated an aggregate implied transaction value of approximately $120.0 million. Based upon financial information for Village as or for the last twelve months (“LTM”) ended June 30, 2024, unless otherwise noted, Janney calculated the following implied transaction metrics:

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Source: Agreement and Plan of Merger; Village-provided documents; S&P Capital IQ Pro; Janney calculations.

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Franchise Valuation

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Janney used a franchise valuation analysis to estimate the value of Village’s common stock based on the composition of its balance sheet on June 30, 2024. The franchise valuation analysis involves calculating the net asset value of Village and adding a core deposit premium to the net asset value to determine the overall value of Village. In order to calculate Village’s net asset value, Janney adjusted Village’s tangible common equity with an after-tax credit mark of approximately $2.838 million. The deposit premium was calculated by assigning a premium to each deposit account type based on the perceived value of each type of deposit to a potential acquiror.

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Source: S&P Capital IQ Pro; Village-provided documents.

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Janney selected premiums of 0% for certificates of deposit, 6% for savings and money market accounts, 8% for NOW accounts, and 10% for non-interest bearing deposits. Applying these premiums to Village’s deposits suggested an overall premium of 7.08%, or $44.533 million. Janney noted that deposit premiums paid in bank merger transactions vary. Therefore, Janney also selected a range of deposit premiums from 5% to 9%. The following chart provides a summary of the franchise value analysis:

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Note: Per share metrics based upon 1,495,160 shares outstanding.

Source: S&P Capital IQ Pro; Village-provided documents.

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The franchise value analysis suggested an overall range of value of $66.05 to $82.87 per share for Village’s common stock. The value suggested by a 7.08% deposit premium was $74.80 per share.

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Analysis of Precedent Transactions

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National Group. Janney reviewed certain publicly available transaction multiples and related financial data for transactions in the United States nationwide announced since June 30, 2023, where the deal value was publicly disclosed, and the target’s assets were between $500.0 million and $1.0 billion. The following transactions were selected by Janney because each target’s relative asset size, financial performance and operations, among other factors, was reasonably similar to Village; however, no selected company or transaction below is identical or directly comparable to Village or the proposed merger. A complete analysis involves complex considerations and qualitative judgments concerning differences in the selected transactions and other factors that could affect the transaction values in those selected transactions as compared with the proposed merger. The table below sets forth the data for each transaction and the range of metrics for the comparable group.

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Note: Excludes transactions without disclosed deal values, excludes transactions with non-bank buyers and excludes transactions categorized as mergers of equals.

Note: P/E > 30x deemed non-meaningful for comparison purposes.

Source: S&P Capital IQ Pro; Village-provided documents; data as of September 20, 2024.

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Janney calculated the median values for the following relevant transaction pricing multiples for the National Group: the multiple of the offer value to the company’s tangible book value; the multiple of the offer value to the acquired company’s adjusted net income for the last twelve months; the multiple of the offer value to the acquired company’s total assets; and the premium over tangible book value divided by core deposits. Janney used these median multiples to estimate the value of Village’s common stock by applying each median multiple to Village’s tangible common equity, net income for the twelve months ended June 30, 2024, total assets, and core deposits as of June 30, 2024, respectively. The results of this analysis are as follows:

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Note: Per share metrics based upon 1,495,160 shares outstanding.

Source: S&P Capital IQ Pro; Village-provided documents.

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Regional Group. Janney also reviewed certain publicly available transaction multiples and related financial data for transactions in the Mid-Atlantic region of the United States (New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia and West Virginia), announced since June 30, 2022, where the deal value was publicly disclosed, and the target’s assets were between $250.0 million and $1.0 billion, excluding transactions where the targets non-performing assets to total assets ratio was 3% or greater. The following transactions were selected by Janney because each target’s relative asset size, financial performance and markets of operation, among other factors, was reasonably similar to Village; however, no selected company or transaction below is identical or directly comparable to Village or the proposed merger. A complete analysis involves complex considerations and qualitative judgments concerning differences in the selected transactions and other factors that could affect the transaction values in those selected transactions as compared with the proposed merger. The table below sets forth the data for each transaction and the range of metrics for the comparable group.

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Note: Excludes transactions without disclosed deal values, transactions with non-bank buyers and transactions categorized as mergers of equals.

Note: P/E > 30x deemed non-meaningful for comparison purposes.

Source: S&P Capital IQ Pro; Village-provided documents; data as of September 20, 2024.

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Janney calculated the median values for the following relevant transaction pricing multiples for the Regional Group: the multiple of the offer value to the company’s tangible book value; the multiple of the offer value to the acquired company’s adjusted net income for the last twelve months; the multiple of the offer value to the acquired company’s total assets; and the premium over tangible book value divided by core deposits. Janney used these median multiples to estimate the value of Village’s common stock by applying each median multiple to Village’s tangible common equity, net income for the twelve months ended June 30, 2024, total assets, and core deposits as of June 30, 2024, respectively. The results of this analysis are as follows:

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Note: Per share metrics based upon 1,495,160 shares outstanding.

Source: S&P Capital IQ Pro; Village-provided documents.

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Discounted Cash Flow Analysis

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Janney performed an analysis that estimated the net present value of a share of Village common stock assuming Village performed in accordance with management forecasted net income, asset, and dividends per share estimates for Village for the years ending December 31, 2024, December 31, 2025 and December 31, 2026, and an annual earnings per share growth rate and annual dividends per share estimates for Village for the years ending December 31, 2027 through December 31, 2028, as provided by the senior management of Village. Janney assumed projected net income of $6.7 million, $8.1 million, $9.5 million, $10.0 million, and $10.5 million for 2024, 2025, 2026, 2027, and 2028 respectively. To approximate the terminal value of a share of Village common stock on September 23, 2024, Janney applied price to 2028 earnings multiples ranging from 13.0x to 17.0x and multiples of 2028 tangible book value ranging from 1.2x to 1.6x. Janney selected price to earnings and tangible book value multiples based on Janney’s professional judgment and experience, as well as a review of, the multiples of selected transactions deemed to be comparable to the proposed merger with TowneBank. The terminal values were then discounted to present values using different discount rates ranging from 12.0% to 14.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Village common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of Village common stock of $53.60 to $74.79 when applying multiples of earnings and $49.72 to $70.59 when applying multiples of tangible book value.

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Price / Tangible Book Value Multiples

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Price / Earnings Multiples

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As described above, based upon the foregoing analyses and other investigations and assumptions set forth in its opinion, without giving specific weightings to any one factor or comparison, Janney determined that the cash merger consideration was fair, from a financial point of view, to Village’s shareholders. Janney’s opinion and presentation to the board of directors of Village were among the many factors taken into consideration by the board in making its determination to approve the merger, and to recommend that Village’s shareholders approve the merger.

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Janney’s Relationship with Village

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Janney is serving as financial adviser to Village in connection with the proposed merger and is entitled to receive from Village reimbursement of its expenses and a fee in the amount of 1.50% of the total purchase price for its services as financial advisor to Village, a significant portion of which is contingent upon the consummation of the proposed merger. Janney also received a fee in the amount of $150,000 from Village upon rendering its fairness opinion, which will be credited in full against the fee which will become payable to Janney upon the closing of the proposed merger. Based on the announced purchase price of approximately $120.0 million to be paid by TowneBank, the total fee due to Janney would be approximately $1.8 million, with approximately $1.65 million contingent on a successful closing of the merger. Village has also agreed to indemnify Janney against certain claims and liabilities that could arise out of Janney’s engagement, including certain liabilities that could arise out of Janney providing its opinion.

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Janney issues periodic research reports regarding the business and prospects of Village, and Janney makes a market in the stock of Village. Within the past two years, Janney has not received fees for providing investment banking services to Village. Further, within the past two years, Janney has not provided any investment banking services to TowneBank, nor has it received any fees from TowneBank. In the ordinary course of its business, Janney and its affiliates and employees at any time may hold long or short positions and may trade or otherwise effect transactions as principal or for the accounts of customers, in debt, equity or derivative securities of participants in the proposed merger.

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Certain Village Unaudited Prospective Financial Information

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Village does not as a matter of course make public projections as to future performance, revenues, earnings or other financial results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, Village is including in this proxy statement certain unaudited prospective financial information that was made available to Janney, Village’s financial advisor, and Piper Sandler & Co. (“Piper Sandler”), TowneBank’s financial advisor, in connection with the merger. The inclusion of this information should not be regarded as an indication that any of Village, TowneBank, Janney, Piper Sandler, their respective representatives or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results, or that it should be construed as financial guidance, and it should not be relied on as such.

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Village management approved the use of the following unaudited prospective financial information. This information was prepared solely for internal use and is subjective in many respects. While presented with numeric specificity, the unaudited prospective financial information reflects numerous estimates and assumptions made with respect to business, economic, market, competition, regulatory and financial conditions and matters specific to Village’s business, all of which are difficult to predict and many of which are beyond Village’s control. The unaudited prospective financial information reflects both assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. Village can give no assurance that the unaudited prospective financial information and the underlying estimates and assumptions will be realized. In addition, since the unaudited prospective financial information covers multiple years, such information by its nature becomes less predictive with each successive year. Actual results may differ materially from those set forth below, and important factors that may affect actual results and cause the unaudited prospective financial information to be inaccurate include, but are not limited to, risks and uncertainties relating to Village’s business, industry performance, general business and economic conditions, competition and adverse changes in applicable laws, regulations or rules.

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The unaudited prospective financial information was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with generally accepted accounting principles in the U.S. (“GAAP”), published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. In addition, the unaudited prospective financial information requires significant estimates and assumptions that make it inherently less comparable to the similarly titled GAAP measures in Village’s historical GAAP financial statements. Neither Village’s independent public accountants, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. Furthermore, the unaudited prospective financial information does not take into account any circumstances or events occurring after the date it was prepared. Village can give no assurance that, had the unaudited prospective financial information been prepared either as of the date of the merger agreement or as of the date of this proxy statement, similar estimates and assumptions would be used. Village does not intend to, and disclaims any obligation to, make publicly available any update or other revision to the unaudited prospective financial information to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, or to reflect changes in general economic or industry conditions. The unaudited prospective financial information does not take into account the possible financial and other effects on either Village or TowneBank, as applicable, of the merger and does not attempt to predict or suggest future results of the surviving company. The unaudited prospective financial information does not give effect to the merger, including the impact of negotiating or executing the merger agreement, the expenses that may be incurred in connection with completing the merger, the potential synergies that may be achieved by the surviving company as a

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result of the merger, the effect on either Village or TowneBank, as applicable, of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed, or the effect of any business or strategic decisions or actions that would likely have been taken if the merger agreement had not been executed, but which were instead altered, accelerated, postponed or not taken in anticipation of the merger. Further, the unaudited prospective financial information does not take into account the effect on either Village or TowneBank, as applicable, of any possible failure of the merger to occur. None of Village, TowneBank, Janney, Piper Sandler or their respective affiliates, officers, directors, advisors or other representatives has made, makes or is authorized in the future to make any representation to any Village or TowneBank shareholder or other person regarding Village’s ultimate performance compared to the information contained in the unaudited prospective financial information or that the projected results will be achieved. The inclusion of the unaudited prospective financial information in this proxy statement should not be deemed an admission or representation by Village or TowneBank that it is viewed as material information of Village, particularly in light of the inherent risks and uncertainties associated with such forecasts. The summary of the unaudited prospective financial information included below is not being included to influence your decision whether to vote for the merger proposal, but is being provided solely because it was made available to the respective financial advisors to Village and TowneBank in connection with the merger.

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In light of the foregoing, and considering that the special meeting will be held months after the unaudited prospective financial information was prepared, as well as the uncertainties inherent in any forecasted information, shareholders of Village are cautioned not to place unwarranted reliance on such information, and Village urges all Village shareholders to review Village’s financial and other information contained elsewhere in this proxy statement for a description of Village’s business and reported financial results. See “Where You Can Find More Information” for information about where you can find additional information about Village and Village Bank.

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For purposes of Janney’s discounted cash flow analysis performed in connection with Janney’s opinion, Janney assumed Village performed in accordance with certain internal financial projections of net income, asset, and dividends per share estimates for Village for the years ending December 31, 2024, December 31, 2025 and December 31, 2026, and an annual earnings per share growth rate and annual dividends per share estimates for Village for the years ending December 31, 2027 through December 31, 2028, as provided by the senior management of Village. The following table summarizes this unaudited prospective financial information used by Janney for its Village discounted cash flow analysis:

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Interests of Certain Village Directors and Executive Officers in the Merger

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In considering the recommendations of the Village board of directors that Village shareholders vote in favor of the merger proposal, Village shareholders should be aware that Village directors and executive officers may have interests in the merger that differ from, or are in addition to, their interests as shareholders of Village. The Village board of directors was aware of these interests and took them into account in its decision to approve the merger agreement and the merger.

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Appointment to the Board of Directors of TowneBank. On the effective date of the bank merger, TowneBank will appoint one current director of Village to the board of directors of TowneBank to serve in such capacity until the next annual meeting of shareholders of TowneBank following the effective date of the bank merger. TowneBank will choose the current Village director in its sole discretion. As a director of TowneBank, this director will be compensated in accordance with TowneBank’s director compensation policy as then in effect.

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Regional Advisory Board Appointments and Compensation. Also on the effective date of the bank merger, TowneBank will invite each current member of Village’s board of directors to join an advisory Richmond or Chesterfield regional board of directors of TowneBank.

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On or before the closing of the merger, each of the Village directors that accepts TowneBank’s offer to serve on the advisory Richmond or Chesterfield regional board will enter into an agreement providing that such individual will not engage in activities competitive with TowneBank until the later of the date that is two years following the merger and the date on which he or she ceases to be a member of such regional advisory board.

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Each of the Village directors that serves on an advisory Richmond or Chesterfield regional board will receive an annual cash board retainer fee of $20,000 for 2025 and 2026.

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Indemnification and Insurance. TowneBank has agreed to indemnify the officers and directors of Village against certain liabilities arising before the effective date of the merger. TowneBank has also agreed to purchase a six-year “tail” prepaid policy, on the same terms as Village’s existing directors’ and officers’ liability insurance, for the current officers and directors of Village, subject to a cap on the cost of such policy equal to 300% of Village’s last annual premium.

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Employment and Change of Control Agreements with Village

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Each of the executive officers of Village currently has employment or change of control agreements with Village. Except as provided below under the section entitled “—Employment Agreements with TowneBank following the Merger,” TowneBank will assume each of these employment and change of control agreements at the effective date of the merger.

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Under the terms of Village’s employment agreement with Donald M. Kaloski, Jr., if Mr. Kaloski is terminated without Cause (as defined in his agreement) or resigns for Good Reason (as defined in his agreement), he will be paid the sum of (i) his annual base salary in effect as of the date of termination, plus (ii) an annual bonus amount equal to 25% of such annual base salary. If, within 24 months following a change of control of Village, he is terminated without Cause, he terminates his employment for Good Reason or Village fails to renew his agreement, he will be paid a lump sum cash payment equal to two times the sum of his annual base salary as of the date of termination and an annual bonus amount equal to 25% of his annual base salary. In such circumstances, a COBRA reimbursement is also provided for a maximum of 12 months. The change of control payments and benefits to Mr. Kaloski will be reduced to the extent necessary to avoid certain exercise taxes under Sections 280G and 4999 of the Code.

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Under the terms of Village’s change of control agreements with Christy F. Quesenbery and James C. Winn, if within 12 months following a change of control of Village such officer is terminated without Cause (as defined in each agreement) or resigns following a reduction in the officer’s base salary of at least 10%, the officer will be paid a lump sum cash payment equal to nine months of the officer’s monthly base salary.

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Employment Agreements with TowneBank following the Merger

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In connection with the merger, TowneBank has entered into employment agreements with certain Village executive officers, including James E. Hendricks, Jr., Max C. Morehead, Jr., Roy I. Barzel and Jennifer J. Church, pursuant to which such individuals will continue employment with TowneBank following the merger. Following completion of the merger, Mr. Hendricks will serve as Senior Executive Vice President, Mr. Morehead will serve as Executive Vice President Commercial Banking, Mr. Barzel will serve as Executive Vice President, Senior Credit Administrator and Ms. Church will serve as Executive Vice President, Director of Retail Banking Richmond. These employment agreements are summarized below.

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Employment Agreement with Mr. Hendricks

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TowneBank has entered into an employment agreement, dated September 23, 2024, with Mr. Hendricks to serve as Senior Executive Vice President. The agreement becomes effective upon consummation of the merger and will expire on December 31, 2028, but will be automatically extended for an additional calendar year, subject to prior notice from either TowneBank or Mr. Hendricks not to renew and extend the term. In the event the merger agreement is terminated, the employment agreement will expire and be of no further force or effect.

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During the employment period, Mr. Hendricks will receive an annual base salary in an amount to be determined by TowneBank, but in no event less than $385,000. He will also be entitled to receive annual incentive payments and stock awards in such amounts and at such times as may be determined by TowneBank pursuant to its incentive plans and programs; provided, that for 2025 and 2026, he will receive a guaranteed annual bonus in an amount not less than the average annual bonus he received for performance years 2021-2023 under Village’s short-term incentive plan.

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Subject to the approval of the TowneBank board, after the merger closing TowneBank will make a restricted stock unit grant to Mr. Hendricks representing the right to receive shares of TowneBank common stock with a grant date value of $500,000. The restricted stock units will vest in five equal annual increments beginning on or about the first anniversary of the date of grant, provided that Mr. Hendricks remains employed by TowneBank on such anniversary date. During the employment period, Mr. Hendricks will participate in TowneBank benefit plans and programs on the same basis as other similarly situated officers of TowneBank. In addition, Mr. Hendricks will be eligible to receive a supplemental nonqualified annual cash benefit of $50,000 per year for 15 years beginning at the later of his attainment of age 65 or his retirement.

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TowneBank may terminate Mr. Hendricks’s employment at any time for Cause (as defined in his agreement). If Mr. Hendricks’s employment is terminated for Cause, he will have no right to render services or to receive compensation or other benefits from TowneBank following termination. If Mr. Hendricks terminates his employment without Good Reason (as defined in his agreement), then he will have no right to render services or to receive compensation or other benefits following such termination other than unpaid base salary earned through the date of termination. If TowneBank terminates Mr. Hendricks’s employment without Cause during the term of the agreement or if Mr. Hendricks terminates his employment for Good Reason, he will receive any earned but unpaid base salary through the date of termination. In addition, he will receive the benefits described below if he signs a release and waiver of claims in favor of TowneBank: (i) continuation of base salary until the end of his employment period or for one year following termination, whichever period is greater; (ii) if Mr. Hendricks elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), TowneBank will reimburse the difference between Mr. Hendricks’s monthly COBRA premium and the monthly amount paid by similarly situated active employees until the earliest of (a) the end of his employment period or for one year following termination, whichever period is greater, (b) the date Mr. Hendricks is no longer eligible for COBRA coverage, or (c) the date Mr. Hendricks becomes eligible to receive similar coverage from another employer, in each case subject to modification as necessary to conform with or avoid penalties under the Patient Protection and Affordable Care Act of 2010 and the related regulations and guidance promulgated thereunder.

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Mr. Hendricks will be subject to a covenant not to compete and a covenant not to solicit customers or employees of TowneBank. The non-competition and non-solicitation restrictions apply during the term of the employment agreement and until after the one-year anniversary of its termination. TowneBank’s obligation to continue to make any payments and provide any benefits to Mr. Hendricks under the employment agreement for the period after the noncompete period has expired and prior to the applicable dates specified in the provisions regarding Mr. Hendricks’s termination by TowneBank without Cause shall cease effective upon Mr. Hendricks engaging in any conduct or activity that otherwise would have been prohibited under the loyalty covenants of the employment agreement. To the extent any payments have been made to Mr. Hendricks during such periods when he may engage in any such prohibited conduct or activity, such payments must be repaid to TowneBank within 10 calendar days after its written demand.

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In connection with the closing of the merger, Mr. Hendricks also will receive a cash payment in lieu of the change of control payment to which he would be entitled pursuant to his existing employment agreement with Village if his employment is terminated under certain circumstances following a change of control of Village. Under the terms of his employment agreement with Village, if within 24 months following a change of control of Village, he is terminated by Village without Cause (as defined in his agreement), he terminates his employment for Good Reason (as defined in his agreement) or Village fails to renew his agreement, he will be paid a lump sum cash payment equal to 2.99 times the sum of his annual base salary as of the date of termination and an annual bonus amount equal to 30% of his annual base salary; provided, however, that the change of control payments and benefits to Mr. Hendricks will be reduced to the extent necessary to avoid certain exercise taxes under Sections 280G and 4999 of the Code.

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Employment Agreement with Mr. Morehead

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TowneBank has entered into an employment agreement, dated September 23, 2024, with Mr. Morehead to serve as Executive Vice President Commercial Banking. The agreement becomes effective upon consummation of the merger and will expire on December 31, 2027, but will be automatically extended for an additional calendar year, subject to prior notice from either TowneBank or Mr. Morehead not to renew and extend the term. In the event the merger agreement is terminated, the employment agreement will expire and be of no further force or effect.

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During the employment period, Mr. Morehead will receive an annual base salary in an amount to be determined by TowneBank, but in no event less than $260,000. He will also be entitled to receive annual incentive payments and stock awards in such amounts and at such times as may be determined by TowneBank pursuant to its incentive plans and programs; provided, that (i) for 2025, he will receive a guaranteed annual bonus in an amount not less than the average annual bonus he received for performance years 2021-2023 under Village’s short-term incentive plan and (ii) for 2026, he will receive a guaranteed annual bonus in an amount equal to the greater of the average annual bonus he received for performance years 2021-2023 under Village’s short-term incentive plan and the amount payable pursuant to TowneBank’s short-term incentive plan for 2026.

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Subject to the approval of the TowneBank board, after the merger closing TowneBank will make a restricted stock unit grant to Mr. Morehead representing the right to receive shares of TowneBank common stock with a grant date value of $225,000. The restricted stock units will vest in four equal annual increments beginning on or about the first anniversary of the date of grant, provided that Mr. Morehead remains employed by TowneBank on such anniversary date. During the employment period, Mr. Morehead will participate in TowneBank benefit plans and programs on the same basis as other similarly situated officers of TowneBank.

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TowneBank also has agreed to provide Mr. Morehead with a loan with a principal amount of $200,000, repayable in three equal annual installments on the first three anniversaries of the merger closing, with each such installment forgivable by TowneBank based on his continued employment through each such anniversary date.

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The provisions of Mr. Morehead’s employment agreement with respect to termination for Cause, termination without Good Reason, termination without Cause or for Good Reason (as those terms are defined in his agreement) and non-competition and non-solicitation restrictions are substantially the same as those included Mr. Hendricks’s employment agreement with TowneBank summarized above.

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In connection with the closing of the merger, Mr. Morehead also will receive a cash payment in lieu of the change of control payment to which he would be entitled pursuant to his existing employment agreement with Village if his employment is terminated under certain circumstances following a change of control of Village. Under the terms of his employment agreement with Village, if within 24 months following a change of control of Village, he is terminated by Village without Cause (as defined in his agreement), he terminates his employment for Good Reason (as defined in his agreement) or Village fails to renew his agreement, he will be paid a lump sum cash payment equal to two times the sum of his annual base salary as of the date of termination and an annual bonus amount equal to 25% of his annual base salary; provided, however, that the change of control payments and benefits to Mr. Morehead will be reduced to the extent necessary to avoid certain exercise taxes under Sections 280G and 4999 of the Code.

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Employment Agreement with Mr. Barzel

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TowneBank has entered into an employment agreement, dated September 23, 2024, with Mr. Barzel to serve as Executive Vice President, Senior Credit Administrator, effective upon consummation of the merger. The employment agreement will expire on December 31, 2027, but will be automatically extended for an additional calendar year, subject to prior notice from either TowneBank or Mr. Barzel not to renew and extend the term. In the event the merger agreement is terminated, the employment agreement will expire and be of no further force or effect.

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During the employment period, Mr. Barzel will receive an annual base salary in an amount to be determined by TowneBank, but in no event less than $235,000. He will also be entitled to receive annual incentive payments and stock awards in such amounts and at such times as may be determined by TowneBank pursuant to its incentive plans and programs then in effect for similarly situated employees of TowneBank.

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Subject to the approval of the TowneBank board, after the merger closing TowneBank will make a restricted stock unit grant to Mr. Barzel representing the right to receive shares of TowneBank common stock with a grant date value of $150,000. The restricted stock units will vest in four equal annual increments beginning on or about the first anniversary of the date of grant, provided that Mr. Barzel remains employed by TowneBank on such anniversary date. During the employment period, Mr. Barzel will participate in TowneBank benefit plans and programs on the same basis as other similarly situated employees of TowneBank.

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The provisions of Mr. Barzel’s employment agreement with respect to termination for Cause, termination without Good Reason, termination without Cause or for Good Reason (as those terms are defined in his agreement) and non-competition and non-solicitation restrictions are substantially the same as those included Mr. Hendricks’s employment agreement with TowneBank summarized above, except that the non-competition and non-solicitation restrictions became effective on execution of the employment agreement in advance of consummation of the merger.

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Upon consummation of the merger, Mr. Barzel’s existing change of control agreement with Village Bank will be canceled and terminated and replaced in its entirety by the foregoing employment agreement.

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Employment Agreement with Ms. Church

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TowneBank has entered into an employment agreement, dated September 23, 2024, with Ms. Church to serve as Executive Vice President, Director of Retail Banking Richmond, effective upon consummation of the merger. The employment agreement will expire on December 31, 2027, but will be automatically extended for an additional calendar year, subject to prior notice from either TowneBank or Ms. Church not to renew and extend the term. In the event the merger agreement is terminated, the employment agreement will expire and be of no further force or effect.

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During the employment period, Ms. Church will receive an annual base salary in an amount to be determined by TowneBank, but in no event less than $196,000. She will also be entitled to receive annual incentive payments and stock awards in such amounts and at such times as may be determined by TowneBank pursuant to its incentive plans and programs then in effect for similarly situated employees of TowneBank; provided, that (i) for 2025, she will receive a guaranteed annual bonus in an amount not less than the average annual bonus she received for performance years 2022-2023 under Village’s short-term incentive plan and (ii) for 2026, she will receive a guaranteed annual bonus in an amount equal to the greater of the average annual bonus she received for performance years 2022-2023 under Village’s short-term incentive plan and the amount payable pursuant to TowneBank’s short-term incentive plan for 2026.

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Subject to the approval of the TowneBank board, after the merger closing TowneBank will make a restricted stock unit grant to Ms. Church representing the right to receive shares of TowneBank common stock with a grant date value of $150,000. The restricted stock units will vest in four equal annual increments beginning on or about the first anniversary of the date of grant, provided that Ms. Church remains employed by TowneBank on such anniversary date. During the employment period, Ms. Church will participate in TowneBank benefit plans and programs on the same basis as other similarly situated employees of TowneBank.

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The provisions of Ms. Church’s employment agreement with respect to termination for Cause, termination without Good Reason, termination without Cause or for Good Reason (as those terms are defined in her agreement) and non-competition and non-solicitation restrictions are substantially the same as those included Mr. Hendricks’s employment agreement with TowneBank summarized above, except that the non-competition and non-solicitation restrictions became effective on execution of the employment agreement in advance of consummation of the merger.

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Upon consummation of the merger, Ms. Church’s existing change of control agreement with Village Bank will be canceled and terminated and replaced in its entirety by the foregoing employment agreement.

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Treatment of Village Restricted Stock Awards

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In the merger, all outstanding Village restricted stock and restricted stock unit awards that are unvested or contingent will vest and be converted into the right to receive, without interest, the cash merger consideration payable with respect to shares of Village common stock. For the restricted stock units which have performance-based vesting requirements, the number of units vesting is based on target performance. As of the date of this proxy statement, Village’s directors and executive officers owned, in the aggregate, 29,041 shares subject to unvested restricted stock and restricted stock unit awards granted under Village equity compensation plans, including the following held by Village’s named executive officers: Mr. Hendricks, 7,139; Mr. Kaloski, 3,695; and Mr. Morehead, 3,882.

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For an estimate of the value to be received by each of Village’s named executive officers in respect of their unvested Village restricted stock and restricted stock unit awards outstanding as of the date hereof, see the section entitled “—Potential Payments and Benefits to Village’s Named Executive Officers in Connection with a Change of Control” below.

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Supplemental Executive Retirement Plan

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Village has a Supplemental Executive Retirement Plan pursuant to which it has agreed to provide a supplemental retirement benefit of $50,000 annually for 20 years to Mr. Hendricks and a benefit of $25,000 annually for 15 years to Mr. Morehead. Other than Mr. Hendricks, the participants are fully vested in their respective benefits. Mr. Hendricks is vested in a benefit equal to $25,000 annually for 15 years. The remainder of Mr. Hendricks’s benefit, which was awarded in connection with his promotion to President and Chief Executive Officer in 2020, is subject to vesting and requires Mr. Hendricks to remain employed by Village for a term of 90 months from August 15, 2020. Under the plan, each participant’s payments will begin on the later of the date of his termination of employment with Village or the date he would otherwise have completed his service requirement (without regard to the service requirement added for Mr. Hendricks’ 2020 benefit). Upon a change of control, Mr. Hendricks’s Supplemental Executive Retirement Plan provides that vesting will accelerate, and Mr. Hendricks will be entitled to the full amount of his benefit without regard to this service requirement.

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Potential Payments and Benefits to Village’s Named Executive Officers in Connection with a Change of Control

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The information set forth in the following table is intended to comply with Item 402(t) of the SEC’s Regulation S-K, which requires disclosure of information about the payments and benefits that may be paid or become payable to Village’s named executive officers that is based on or otherwise relates to the merger. Such compensation is the subject of the compensation proposal.

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The amounts shown below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described below, and do not reflect certain compensation actions that may be taken or that may occur before completion of the merger. As a result, the actual amounts, if any, to be received by a named executive officer of Village may differ materially from the amounts shown below. For purposes of quantifying the potential payments and benefits described in this section, the amounts below were calculated assuming that the effective date of the merger is October 29, 2024, which is the assumed date of closing solely for purposes of the disclosure in this section. The amounts below do not include (i) the value of benefits in which the named executive officers are vested without regard to the occurrence of a change of control, (ii) certain compensation actions that may occur following the effective date of the merger, including but not limited to any payments made or benefits for employment by TowneBank or (iii) the potential reductions in payments and benefits to avoid certain exercise taxes under Sections 280G and 4999 of the Code.

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Golden Parachute Compensation

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Regulatory Approvals

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TowneBank, Village and Village Bank cannot complete the merger without prior approval from the FDIC and the Virginia SCC. On October 23, 2024, TowneBank filed applications with the FDIC and the Virginia SCC seeking their approval of the merger. TowneBank has also requested a waiver from the Reserve Bank of the requirement to file an application under Section 3 of the Bank Holding Company Act of 1956, as amended, for approval of the merger.

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As of the date of this proxy statement, we have not yet received the required approvals from the FDIC and Virginia SCC, or the requested waiver from the Reserve Bank. While we do not know of any reason why we would not be able to obtain such approvals and waiver in a timely manner, we cannot be certain when or if we will receive them.

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Appraisal or Dissenters’ Rights in the Merger

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Village shareholders will have the right to assert appraisal rights with respect to the merger and demand in writing to be paid the fair value of their shares of Village common stock under applicable provisions of Virginia law following consummation of the merger by TowneBank. In order to exercise and perfect appraisal rights, you must generally give written notice of your intent to demand payment for your shares to Village before the vote is taken on the merger agreement at the special meeting and you must not vote in favor of the merger agreement. A copy of the applicable Virginia statutory provisions of Article 15 of the VSCA is included in this proxy statement as Appendix D.

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The following is only a summary of the rights of a dissenting shareholder, is not a complete statement of law pertaining to appraisal rights under the VSCA, and is qualified in its entirety by reference to the full text of the provisions of Article 15 of the VSCA pertaining to appraisal rights, a copy of which is attached as Appendix D hereto and incorporated into this discussion by reference. If you intend to exercise your right to dissent, you should carefully review the following summary and comply with all requirements of the VSCA. You should also consult with your attorney. No further notice of the events giving rise to appraisal rights will be furnished to you by TowneBank or Village.

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The VSCA provides in detail the procedure you must follow if you wish to exercise your appraisal rights. In summary, to exercise appraisal rights:

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In other words, you do not have to vote against the merger agreement, or even vote at all, in order to exercise appraisal rights, but you may not vote in favor of the merger agreement, and in all cases you must give the required written notice. If you fail to satisfy these requirements, you will not be entitled to exercise appraisal rights or to receive payment for your shares under the provisions of the VSCA pertaining to appraisal rights. Even if you vote against the merger agreement (either during the meeting or by proxy), you still must send the required notice of intent in order to exercise appraisal rights. You should remember that, as described in the section entitled, “The Special Meeting – Voting During the Special Meeting,” on page 18, if you return a signed proxy card but fail to provide instructions as to the manner in which your shares are to be voted, you will be considered to have voted in favor of the merger agreement and you will not be able to assert appraisal rights. If you do not return a proxy card or otherwise vote at all at the special meeting, you will not be treated as waiving your appraisal rights as long as you have given the required notice of intent as described above.

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If you intend to assert your appraisal rights, your notice of intent should be mailed or delivered to Village’s corporate secretary at Village’s corporate office located at 13319 Midlothian Turnpike, Midlothian, Virginia 23113, Attention: Deborah M. Golding. Notice of intent is effective at the earliest of the following:

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