What changed in this filing

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Item 1. Financial Statements

2024-11-13 compared with 2024-08-13 · 226 added, 234 removed, 1285 unchanged (26% of the section changed)

2 unchanged sentences

Consolidated Financial Statements:

Consolidated Balance Sheets as of June 30, 202 4 (Unaudited), and December 31 , 202 3

Consolidated Statements of Income ( L oss) for the Three and Six Months Ended June 30, 202 4 , and June 30, 202 3 (Unaudited)

Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 202 4 , and June 30, 202 3 (Unaudited)

Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 202 4 , and June 30, 202 3 (Unaudited)

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 202 4 , and Jun e 30, 202 3 (Unaudited)

Consolidated Balance Sheets as of September 30, 2024 (Unaudited), and December 31, 2023

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2024, and September 30, 2023 (Unaudited)

Consolidated Statements of Comprehensive Income (Loss) for the Three and Nin e Months Ended September 30, 2024, and September 30, 2023 (Unaudited)

Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2024, and September 30, 2023 (Unaudited)

Consolidated Statements of Cash Flows for the Nine Months Ended Septem ber 30, 2024, and September 30, 2023 (Unaudited)

Notes to the Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(In thousands, except share and per share data)

June 30, 2024

September 30, 2024

December 31, 2023

30 unchanged sentences

2,000,000 shares authorized;

1,500 shares issued and outstanding at June 30, 2024;

1,500 shares issued and outstanding at September 30, 2024;

no shares issued and outstanding at December 31, 2023

1 unchanged sentence

$ 0.50 par value;

20,000,000 shares authorized, 15,503,459 shares issued and 14,932,169 shares outstanding at June 30, 2024;

8,000,000 shares issued and 7,428,710 shares outstanding at December 31, 2023

40,000,000 shares authorized, 15,534,293 shares issued and 14,963,003 shares outstanding at September 30, 2024;

20,000,000 shares authorized, 8,000,000 shares issued and 7,428,710 shares outstanding at December 31, 2023

Common stock, additional paid-in capital 400,377 14,495

2 unchanged sentences

Treasury stock ( 27,584 ) ( 27,584 )

571,290 shares, at cost, at June 30, 2024, and 571,290 shares, at cost, at December 31, 2023

571,290 shares, at cost, at September 30, 2024, and 571,290 shares, at cost, at December 31, 2023

Total Shareholders’ Equity

4 unchanged sentences

Burke & Herbert Financial Services Corp.

Consolidated Statements of Income (Loss)

Consolidated Statements of Income

(In thousands, except share and per share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

14 unchanged sentences

73,179 22,889 155,075 71,455

Credit loss expense - loans and available-for-sale securities 20,100 310 19,430 833

Credit loss expense - off-balance sheet credit exposures 3,810 ( 96 ) 3,810 ( 104 )

Credit loss expense - loans 85 200 19,515 1,034

Credit loss expense (recapture) - off-balance sheet credit exposures 62 35 3,872 ( 70 )

Total provision for credit losses 147 235 23,387 964

14 unchanged sentences

Total non-interest expense 50,826 22,423 136,423 64,136

Income (loss) before income taxes ( 19,072 ) 6,855 ( 13,182 ) 14,963

Income tax expense (benefit)

Income before income taxes 32,822 4,520 19,640 19,483

Income tax expense

5,200 464 3,725 1,869

Net income (loss) ( 16,919 ) 6,034 ( 11,707 ) 13,558

Net income 27,622 4,056 15,915 17,614

Preferred stock dividends 225 — 450 —

Net income (loss) applicable to common shares $ ( 17,144 ) $ 6,034 $ ( 11,932 ) $ 13,558

Earnings (loss) per common share:

Net income applicable to common shares $ 27,397 $ 4,056 $ 15,465 $ 17,614

Earnings per common share:

Basic $ 1.83 $ 0.55 $ 1.34 $ 2.37

4 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Net income (loss) $ ( 16,919 ) $ 6,034 $ ( 11,707 ) $ 13,558

Net income $ 27,622 $ 4,056 $ 15,915 $ 17,614

Other comprehensive income (loss), net of tax:

Unrealized gains (losses) on securities:

Unrealized gain (loss) arising during period, net of tax of ($ 221 ) and $ 1,397 for the three months ended June 30, 2024, and June 30, 2023, respectively, net of tax of ($ 104 ) and ($ 3,180 ) for the six months ended June 30, 2024, and June 30, 2023, respectively

Unrealized gain (loss) arising during period, net of tax of ($ 7,610 ) and $ 5,392 for the three months ended September 30, 2024, and September 30, 2023, respectively, net of tax of ($ 7,714 ) and $ 2,212 for the nine months ended September 30, 2024, and September 30, 2023, respectively

28,628 ( 20,285 ) 29,019 ( 8,322 )

Reclassification adjustment for loss (gain) on securities, net of tax of $ 129 and ($ 23 ) for the three months ended June 30, 2024, and June 30, 2023, respectively, net of tax of $ 129 and ($ 23 ) for the six months ended June 30, 2024, and June 30, 2023, respectively

Reclassification adjustment for loss (gain) on securities, net of tax of $ 0 and $ 0 for the three months ended September 30, 2024, and September 30, 2023, respectively, net of tax of $ 129 and ($ 23 ) for the nine months ended September 30, 2024, and September 30, 2023, respectively

— — ( 484 ) 88

Reclassification adjustment for loss (gain) on fair value hedge, net of tax of $ 9 and ($ 728 ) for the three months ended June 30, 2024, and June 30, 2023, respectively, net of tax of $ 17 and ($ 232 ) for the six months ended June 30, 2024, and June 30, 2023, respectively

Reclassification adjustment for loss (gain) on fair value hedge, net of tax of $ 9 and $ 9 for the three months ended September 30, 2024, and September 30, 2023, respectively, net of tax of $ 25 and ($ 224 ) for the nine months ended September 30, 2024, and September 30, 2023, respectively

( 32 ) ( 32 ) ( 95 ) 842

Unrealized gain (loss) on cash flow hedge:

Unrealized holding gain (loss) on cash flow hedge, net of tax of ($ 238 ) and $ 73 for the three months ended June 30, 2024, and June 30, 2023, respectively, net of tax of ($ 945 ) and $ 61 for the six months ended June 30, 2024, and June 30, 2023, respectively

Unrealized holding gain (loss) on cash flow hedge, net of tax of $ 816 and $ 10 for the three months ended September 30, 2024, and September 30, 2023, respectively, net of tax of ($ 128 ) and $ 71 for the nine months ended September 30, 2024, and September 30, 2023, respectively

( 3,071 ) ( 38 ) 483 ( 267 )

Reclassification adjustment for losses (gains) included in net income, net of tax $ 183 and ($ 89 ) for the three months ended June 30, 2024, and June 30, 2023, respectively, net of tax of $ 89 and ($ 165 ) for the six months ended June 30, 2024, and June 30, 2023, respectively

Reclassification adjustment for losses (gains) included in net income, net of tax $ 227 and ($ 99 ) for the three months ended September 30, 2024, and September 30, 2023, respectively, net of tax of $ 315 and ($ 264 ) for the nine months ended September 30, 2024, and September 30, 2023, respectively

( 853 ) 373 ( 1,187 ) 995

5 unchanged sentences

Consolidated Statements of Changes in Shareholders’ Equity

For the Three Months Ended June 30, 2024, and 2023

For the Three Months Ended September 30, 2024, and 2023

(In thousands, except share and per share data)

4 unchanged sentences

Shares Outstanding Amount Additional Paid-in

Balance March 31, 2024 $ — 7,440,025 $ 4,006 $ 15,308 $ 428,532 $ ( 100,954 ) $ ( 27,584 ) $ 319,308

Acquisition of Summit Financial Group, Inc.

10,413 7,405,772 3,703 383,329 — — — 397,445

Net income (loss) — — — — ( 16,919 ) — — ( 16,919 )

Balance June 30, 2024 $ 10,413 14,932,169 $ 7,752 $ 399,553 $ 403,422 $ ( 100,430 ) $ ( 27,584 ) $ 693,126

Net income — — — — 27,622 — — 27,622

Other comprehensive income (loss) — — — — — 24,672 — 24,672

3 unchanged sentences

Share-based compensation expense, net — 30,834 15 824 ( 54 ) — — 785

Balance September 30, 2024 $ 10,413 14,963,003 $ 7,767 $ 400,377 $ 422,844 $ ( 75,758 ) $ ( 27,584 ) $ 738,059

Balance June 30, 2023 $ — 7,428,710 $ 4,000 $ 13,208 $ 426,625 $ ( 126,177 ) $ ( 27,584 ) $ 290,072

Balance March 31, 2023 $ — 7,427,840 $ 4,000 $ 12,686 $ 424,532 $ ( 123,809 ) $ ( 27,626 ) $ 289,783

Net income — — — — 4,056 — — 4,056

3 unchanged sentences

Share-based compensation expense, net — — — 610 — — — 610

Balance June 30, 2023 $ — 7,428,710 $ 4,000 $ 13,208 $ 426,625 $ ( 126,177 ) $ ( 27,584 ) $ 290,072

Balance September 30, 2023 $ — 7,428,710 $ 4,000 $ 13,818 $ 426,744 $ ( 146,159 ) $ ( 27,584 ) $ 270,819

See Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Changes in Shareholders’ Equity

For the Six Months Ended June 30, 2024, and 2023

For the Nine Months Ended September 30, 2024, and 2023

(In thousands, except share and per share data)

7 unchanged sentences

10,413 7,405,772 3,703 383,329 — — — 397,445

Net income (loss) — — — — ( 11,707 ) — — ( 11,707 )

Net income — — — — 15,915 — — 15,915

Other comprehensive income (loss) — — — — — 27,736 — 27,736

3 unchanged sentences

Share-based compensation expense, net — 128,521 64 2,553 ( 225 ) — — 2,392

Balance June 30, 2024 $ 10,413 14,932,169 $ 7,752 $ 399,553 $ 403,422 $ ( 100,430 ) $ ( 27,584 ) $ 693,126

Balance September 30, 2024 $ 10,413 14,963,003 $ 7,767 $ 400,377 $ 422,844 $ ( 75,758 ) $ ( 27,584 ) $ 738,059

Balance December 31, 2022 $ — 7,425,760 $ 4,000 $ 12,282 $ 424,391 $ ( 139,495 ) $ ( 27,725 ) $ 273,453

5 unchanged sentences

Share-based compensation expense, net — — — 1,536 ( 13 ) — — 1,523

Balance June 30, 2023 $ — 7,428,710 $ 4,000 $ 13,208 $ 426,625 $ ( 126,177 ) $ ( 27,584 ) $ 290,072

Balance September 30, 2023 $ — 7,428,710 $ 4,000 $ 13,818 $ 426,744 $ ( 146,159 ) $ ( 27,584 ) $ 270,819

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(In thousands, except share and per share data)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows from Operating Activities

Net Income (loss) $ ( 11,707 ) $ 13,558

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net Income $ 15,915 $ 17,614

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of fixed assets 4,130 2,050

Amortization of other intangible assets 7,204 —

Accretion on assumed liabilities 2,526 —

Amortization on assumed liabilities 6,324 —

Accretion income related to acquired loans ( 28,836 ) —

14 unchanged sentences

Originations of loans held-for-sale ( 30,452 ) ( 10,181 )

(Increase) decrease in accrued interest receivable ( 1,501 ) 700

(Increase) in accrued interest receivable ( 104 ) ( 117 )

(Increase) decrease in other assets ( 43,413 ) 2,904

Increase in accrued interest payable and other liabilities 61,882 6,329

Net cash flows provided by (used in) operating activities $ ( 12,275 ) $ 22,864

Net cash flows provided by operating activities $ 8,918 $ 32,335

Cash Flows from Investing Activities

8 unchanged sentences

(Increase) decrease in loans made to customers, net 190,979 ( 183,395 )

Net cash flows provided by investing activities $ 139,053 $ 24,688

Net cash flows provided by (used in) investing activities $ 202,653 $ ( 50,086 )

Cash Flows from Financing Activities

10 unchanged sentences

Sale of treasury stock — 141

Net cash flows provided by (used in) financing activities $ 40,644 $ ( 17,048 )

Increase in cash and cash equivalents 167,422 30,504

Net cash flows provided by financing activities $ 35,696 $ 9,320

Increase (decrease) in cash and cash equivalents 247,267 ( 8,431 )

Cash and cash equivalents

32 unchanged sentences

Summit’s results of operations are included from the Closing Date.

The Bank’s primary market area includes northern Virginia and West Virginia, and it has over 75 branches and other commercial loan offices across Delaware, Kentucky, Maryland, Virginia, and West Virginia.

The Bank’s primary market area includes northern Virginia and West Virginia, and it has over 75 branches and commercial loan offices across Delaware, Kentucky, Maryland, Virginia, and West Virginia.

The Company’s branch locations accept business and consumer deposits from a diverse customer base.

15 unchanged sentences

In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of operations in these financial statements, have been made.

The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the results to be expected for any other interim period or for the full year.

The results of operations for the three and nine months ended September 30, 2024, are not necessarily indicative of the results to be expected for any other interim period or for the full year.

All December 31, 2023, amounts and disclosures included in this quarterly report were derived from the Company’s audited consolidated financial statements.

51 unchanged sentences

Note 2— Securities

The carrying amount of available-for-sale (“AFS”) securities and their approximate fair values at June 30, 2024, and December 31, 2023, are summarized as follows (in thousands):

June 30, 2024

The carrying amount of available-for-sale (“AFS”) securities and their approximate fair values at September 30, 2024, and December 31, 2023, are summarized as follows (in thousands):

September 30, 2024

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

22 unchanged sentences

Total $ 1,372,575 $ 89 $ 124,225 $ 1,248,439

At June 30, 2024, and December 31, 2023, AFS securities with amortized costs of $ 1.1 billion and $ 826.5 million, respectively, and with estimated fair values of $ 953.0 million and $ 742.5 million, respectively, were pledged to serve as collateral for secured borrowings, derivative exposures, or to secure public deposits as required or permitted by law.

The proceeds from sales, calls, and maturities of debt securities available-for-sale, including principal payments received, and the related gross gains and losses realized, for the six months ended June 30, 2024, and June 30, 2023, were as follows (in thousands):

At September 30, 2024, and December 31, 2023, AFS securities with amortized costs of $ 1.2 billion and $ 826.5 million, respectively, and with estimated fair values of $ 1.1 billion and $ 742.5 million, respectively, were pledged to serve as collateral for secured borrowings, derivative exposures, or to secure public deposits as required or permitted by law.

The proceeds from sales, calls, and maturities of debt securities available-for-sale, including principal payments received, and the related gross gains and losses realized, for the nine months ended September 30, 2024, and September 30, 2023, were as follows (in thousands):

Proceeds from Gross realized

Six months ended, June 30 Sales Calls and maturities Principal Payments Gains Losses

Nine months ended September 30, Sales Calls and maturities Principal Payments Gains Losses

2024 $ 365,990 $ 38,137 $ 152,087 $ 2,637 $ 2,024

2023 77,780 1,427 76,187 772 884

The tax benefit (provision) related to these net realized gains and losses for June 30, 2024, and June 30, 2023, was ($ 128.7 ) thousand, and $ 23.3 thousand, respectively.

The maturities of AFS securities at June 30, 2024, were as follows (in thousands):

The tax benefit (provision) related to these net realized gains and losses for September 30, 2024, and September 30, 2023, was ($ 128.7 ) thousand, and $ 23.5 thousand, respectively.

The maturities of AFS securities at September 30, 2024, were as follows (in thousands):

(Expected maturities of securities not due at a single maturity date are based on average life at estimated prepayment speed.

Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay some obligations with or without call or prepayment penalties).

June 30, 2024

September 30, 2024

Amortized Cost

11 unchanged sentences

Note 2— Securities (continued)

June 30, 2024

September 30, 2024

One Year or Less One to Five Years Five to Ten Years After Ten Years Total

9 unchanged sentences

Total $ 144,042 $ 515,634 $ 564,075 $ 212,680 $ 1,436,431

At June 30, 2024, and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S.

At September 30, 2024, and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S.

Government and its agencies, in any amount greater than 10% of shareholders’ equity.

The following table shows the gross unrealized losses and fair value of the Company’s securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2024, and December 31, 2023.

AFS securities in a continuous unrealized loss position for less than twelve months and more than twelve months are as follows (in thousands):

June 30, 2024

September 30, 2024

Less Than Twelve Months More Than Twelve Months

35 unchanged sentences

Prior to implementation of the CECL standard, unrealized losses caused by a credit event would require the direct write-down of the AFS security through the other-than-temporary impairment approach.

The Company did no t record an ACL on the AFS securities as of June 30, 2024 or December 31, 2023.

The Company did no t record an ACL on the AFS securities as of September 30, 2024, or December 31, 2023.

The Company considers the unrealized losses on the AFS securities to be related to fluctuations in market conditions, primarily interest rates, and not reflective of deterioration in credit.

The Company had 445 securities in an unrealized loss position as of June 30, 2024.

The Company has evaluated AFS securities in an unrealized loss position for credit-related impairment at June 30, 2024, and concluded no impairment existed based on a combination of factors, which included:

The Company had 383 securities in an unrealized loss position as of September 30, 2024.

The Company has evaluated AFS securities in an unrealized loss position for credit-related impairment at September 30, 2024, and concluded no impairment existed based on a combination of factors, which included:

(1) the securities are of high credit quality, (2) unrealized losses are primarily the result of market volatility and increases in market interest rates, (3) the contractual terms of the investments do not permit the issuer(s) to settle the securities at a price less than the par value of each investment, (4) issuers continue to make timely principal and interest payments, and (5) the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis.

As such, there was no ACL on AFS securities at June 30, 2024.

As such, there was no ACL on AFS securities at September 30, 2024.

Securities of U.S.

Treasury and Federal Agencies and Federal Agency Mortgage (Residential and Commercial) Backed Securities

At June 30, 2024, the unrealized losses associated with 11 U.S.

At September 30, 2024, the unrealized losses associated with 11 U.S.

Treasuries and Government Agency securities, 14 Residential Mortgage Backed – Agency securities, and 14 Commercial Mortgage Backed – Agency securities were generally driven by changes in interest rates and not due to credit losses given the explicit or implicit guarantees provided

Note 2— Securities (continued)

Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at June 30, 2024.

Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at September 30, 2024.

Securities of U.S.

States and Municipalities

At June 30, 2024, the unrealized losses associated with 257 State and Municipal securities were primarily caused by changes in interest rates and not the credit quality of the securities.

At September 30, 2024, the unrealized losses associated with 212 State and Municipal securities were primarily caused by changes in interest rates and not the credit quality of the securities.

These securities are investment grade and were generally underwritten in accordance with our own investment standards prior to the decision to purchase, without relying on a bond insurer’s guarantee in making the investment decision.

1 unchanged sentence

As a result, we expect to recover the entire amortized cost basis of these securities.

Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at June 30, 2024.

Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at September 30, 2024.

Residential & Commercial Mortgage Backed – Non-Agency Securities

At June 30, 2024, the unrealized losses associated with 84 Residential Mortgage Backed – Non-Agency securities and 31 Commercial Mortgage Backed – Non-Agency securities were generally driven by changes in interest rates, credit spreads, and projected collateral losses.

At September 30, 2024, the unrealized losses associated with 69 Residential Mortgage Backed – Non-Agency securities and 30 Commercial Mortgage Backed – Non-Agency securities were generally driven by changes in interest rates, credit spreads, and projected collateral losses.

We assess for credit impairment by estimating the present value of expected cash flows.

1 unchanged sentence

Based on our assessment of the expected credit losses and the credit enhancement level of the securities, we expect to recover the entire amortized cost of these securities.

Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at June 30, 2024.

Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at September 30, 2024.

Asset-Backed Securities

At June 30, 2024, the unrealized losses associated with 19 Asset-Backed securities were generally driven by changes in interest rates, credit spreads, and projected collateral losses.

At September 30, 2024, the unrealized losses associated with 21 Asset-Backed securities were generally driven by changes in interest rates, credit spreads, and projected collateral losses.

We assess for credit impairment by estimating the present value of expected cash flows.

1 unchanged sentence

Based on our assessment of the expected credit losses and the credit enhancement level of the securities, we expect to recover the entire amortized cost of these securities.

Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at June 30, 2024.

Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at September 30, 2024.

Other Securities

At June 30, 2024, the unrealized losses associated with 12 securities were primarily driven by interest rates and not the credit quality of the securities.

At September 30, 2024, the unrealized losses associated with 12 securities were primarily driven by interest rates and not the credit quality of the securities.

These investments were underwritten in accordance with our own investment standards prior to the decision to purchase, without relying on a bond insurer’s guarantee in making the investment decision.

Based on our assessment of the expected credit losses, we expect to recover the entire amortized cost basis of the securities.

Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at June 30, 2024.

Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at September 30, 2024.

Restricted stock, at cost

The Company’s investment in Federal Home Loan Bank (“FHLB”) stock totaled $ 15.1 million and $ 5.9 million at June 30, 2024, and December 31, 2023, respectively.

The Company’s investment in Federal Home Loan Bank (“FHLB”) stock totaled $ 16.8 million and $ 5.9 million at September 30, 2024, and December 31, 2023, respectively.

FHLB stock is generally viewed as a long-term investment and as a restricted investment security, which is carried at cost, because there is no market for the stock other than the FHLB or member institutions.

Therefore, when evaluating FHLB stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.

The Company does not consider this investment to be impaired at June 30, 2024, and no impairment has been recognized.

The Company does not consider this investment to be impaired at September 30, 2024, and no impairment has been recognized.

FHLB stock is included in a separate line item, Restricted stock, at cost on the Consolidated Balance Sheets and is not part of the Company’s AFS securities portfolio.

The Company’s Restricted stock line item on the Consolidated Balance Sheets also includes an investment in Community Bankers’ Bank, totaling $ 50 thousand at both June 30, 2024, and December 31, 2023, which is carried at cost and is not impaired at June 30, 2024.

The Company’s Restricted stock line item on the Consolidated Balance Sheets also includes an investment in Community Bankers’ Bank, totaling $ 111 thousand at September 30, 2024, and $ 50 thousand at December 31, 2023, which is carried at cost and is not impaired at September 30, 2024.

Note 3— Loans

11 unchanged sentences

• Consumer non-real estate and other loans, which includes overdrafts, carry risk associated with the credit-worthiness of the borrower and the value of the collateral, if any.

Loan balances as of June 30, 2024, and December 31, 2023, by portfolio segment were as follows (in thousands):

June 30, 2024 December 31, 2023

Loan balances as of September 30, 2024, and December 31, 2023, by portfolio segment were as follows (in thousands):

September 30, 2024 December 31, 2023

Commercial real estate $ 2,526,945 $ 1,309,084

7 unchanged sentences

Loans, net $ 5,506,220 $ 2,062,455

Net deferred loan fees included in the above loan categories totaled $ 3.2 million and $ 3.5 million at June 30, 2024, and December 31, 2023, respectively.

The Company holds $ 1.0 million and $ 3.0 million in Paycheck Protection Program loans, net of deferred fees and costs, as of June 30, 2024, and December 31, 2023, respectively.

Net deferred loan fees included in the above loan categories totaled $ 3.4 million and $ 3.5 million at September 30, 2024, and December 31, 2023, respectively.

Note 4— Allowance for Credit Losses

1 unchanged sentence

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables.

All information presented as of June 30, 2024, is in accordance with ASC 326.

All information presented as of September 30, 2024, is in accordance with ASC 326.

The Company’s ACL is calculated quarterly, with any adjustment recorded to the provision for credit losses in the Consolidated Statement of Income.

2 unchanged sentences

Loans that do not share similar risk characteristics are evaluated on an individual loan basis and are excluded from the collective evaluation for the ACL.

Loans identified to be individually evaluated under CECL include loans on non-accrual

Loans identified to be individually evaluated under CECL include loans on non-accrual status and may include accruing loans that do not share similar risk characteristics to other accruing loans that are

Note 4— Allowance for Credit Losses (continued)

status and may include accruing loans that do not share similar risk characteristics to other accruing loans that are collectively evaluated on a loan pool basis.

collectively evaluated on a loan pool basis.

A specific reserve analysis may be applied to the individually evaluated loans, which considers collateral value, an observable market price, or the present value of the expected future cash flows.

3 unchanged sentences

These qualitative risk factors considered by management are largely comparable to legacy factors prior to the adoption of CECL.

The following tables present the activity in the ACL for the three months and six months ended June 30, 2024, and for the three months and six months ended June 30, 2023, including the impact of the adoption of CECL for the six months ended June 30, 2023, and the impact of the allowance established for PCD loans for the three months and six months ended June 30, 2024, (in thousands).

The following tables present the activity in the ACL for the three months and nine months ended September 30, 2024, and for the three months and nine months ended September 30, 2023, including the impact of the adoption of CECL for the nine months ended September 30, 2023, and the impact of the allowance established for PCD loans for the three months and nine months ended September 30, 2024, (in thousands).

Commercial real estate Owner-occupied commercial real estate Acquisition, construction & development Commercial & industrial Single family residential (1-4 units) Consumer non-real estate and other Unallocated Total

Three months ended

June 30, 2024

September 30, 2024

Balance, beginning of period $ 27,304 $ 5,040 $ 18,639 $ 4,768 $ 11,648 $ 618 $ — $ 68,017

Allowance established for acquired PCD loans 7,503 1,931 5,968 5,684 2,608 216 — 23,910

Provision for (recapture of) credit losses ( 1,516 ) ( 1,073 ) 3,084 425 ( 1,006 ) 171 — 85

2 unchanged sentences

Balance, end of period $ 25,791 $ 3,967 $ 21,723 $ 5,170 $ 10,576 $ 590 $ — $ 67,817

June 30, 2023

September 30, 2023

Balance, beginning of period $ 18,639 $ 719 $ 1,319 $ 612 $ 4,520 $ 110 $ — $ 25,919

3 unchanged sentences

Balance, end of period $ 19,612 $ 785 $ 1,765 $ 517 $ 3,386 $ 46 $ — $ 26,111

Note 4— Allowance for Credit Losses (continued)

Six months ended

June 30, 2024

Nine months ended

September 30, 2024

Balance, beginning of period $ 20,633 $ 783 $ 368 $ 645 $ 2,797 $ 75 $ — $ 25,301

4 unchanged sentences

Balance, end of period $ 25,791 $ 3,967 $ 21,723 $ 5,170 $ 10,576 $ 590 $ — $ 67,817

June 30, 2023

September 30, 2023

Balance, beginning of period $ 15,477 $ 635 $ 2,082 $ 438 $ 2,379 $ 28 $ — $ 21,039

4 unchanged sentences

Balance, end of period $ 19,612 $ 785 $ 1,765 $ 517 $ 3,386 $ 46 $ — $ 26,111

Note 4— Allowance for Credit Losses (continued)

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2024, and December 31, 2023, by portfolio segment (in thousands):

June 30, 2024

The following table presents the aging of the recorded investment in past due loans as of September 30, 2024, and December 31, 2023, by portfolio segment (in thousands):

September 30, 2024

30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or More Past Due Total Past Due Current Loans Total Loans 90 Days Past Due & Still Accruing Non-accrual loans

22 unchanged sentences

The Company uses the following definitions for credit risk classifications:

Note 4— Allowance for Credit Losses (continued)

These include satisfactory loans that have acceptable levels of risk.

9 unchanged sentences

While there may be the possibility of some recovery in the future, it is not practical or desirable to defer writing off these loans at the present time.

Note 4— Allowance for Credit Losses (continued)

The Company has a portfolio of smaller homogenous loans that are not individually risk rated that are included within the single family residential and consumer non-real estate and other loan classes.

Generally, these loan classes are rated as “Pass” unless these loans are on non-accrual and are then classified as substandard.

The following table presents the amortized cost basis of the loan portfolio, by year of origination, loan class, and credit quality, as of June 30, 2024, and December 31, 2023 (in thousands):

June 30, 2024

The following table presents the amortized cost basis of the loan portfolio, by year of origination, loan class, and credit quality, as of September 30, 2024, and December 31, 2023 (in thousands):

September 30, 2024

2024 2023 2022 2021 2020 Prior Revolving Loans Total

23 unchanged sentences

Year to date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Note 4— Allowance for Credit Losses (continued)

Commercial & industrial

13 unchanged sentences

Total $ 75,618 $ 161,955 $ 219,853 $ 155,369 $ 80,942 $ 365,160 $ 138,348 $ 1,197,245

Note 4— Allowance for Credit Losses (continued)

Year to date gross charge-offs $ — $ 39 $ 28 $ — $ — $ 37 $ — $ 104

28 unchanged sentences

Pass $ 8,535 $ 24,286 $ 13,698 $ — $ 728 $ 241 $ 1,603 $ 49,091

Note 4— Allowance for Credit Losses (continued)

Special Mention — — — — — — — —

13 unchanged sentences

Single family residential (1-4 units)

Note 4— Allowance for Credit Losses (continued)

Pass $ 78,222 $ 122,067 $ 60,202 $ 32,158 $ 40,938 $ 137,376 $ 54,273 $ 525,236

15 unchanged sentences

Note 4— Allowance for Credit Losses (continued)

The following tables present information about collateral-dependent loans that were individually evaluated for purposes of determining the ACL as of June 30, 2024, and December 31, 2023 (in thousands):

June 30, 2024

The following tables present information about collateral-dependent loans that were individually evaluated for purposes of determining the ACL as of September 30, 2024, and December 31, 2023 (in thousands):

September 30, 2024

With Allowance With No Related Allowance Total

Amortized Cost Related Allowance Amortized Cost Amortized Cost Related Allowance

June 30, 2024

September 30, 2024

Commercial real estate $ 7,994 $ 5,326 $ 12,745 $ 20,739 $ 5,326

32 unchanged sentences

an individual loan.

For the three and six months ended June 30, 2024, and for the year ended, December 31, 2023, the Company did not extend any modifications to borrowers experiencing financial difficulty that had a more-than-insignificant direct change in the contractual cash flows of the loan.

For the three and nine months ended September 30, 2024, and for the year ended, December 31, 2023, the Company did not extend any modifications to borrowers experiencing financial difficulty that had a more-than-insignificant direct change in the contractual cash flows of the loan.

Other Real Estate Owned

Real estate owned activity was as follows (in thousands):

June 30, 2024 December 31, 2023

Real estate owned activity was as follows for the nine months ended September 30, 2024, and for the year ended, December 31, 2023 (in thousands):

September 30, 2024 December 31, 2023

Beginning balance $ — $ —

5 unchanged sentences

Note 5— Deposits

The aggregate amount of time deposits that meet or exceed the FDIC Insurance Limit of $250,000, was approximately $ 247.1 million and $ 92.3 million on June 30, 2024, and December 31, 2023, respectively.

Brokered time deposits, which are fully insured, totaled $ 403.7 million and $ 389.0 million as of June 30, 2024, and December 31, 2023, respectively.

Time deposits through the Certificate of Deposit Account Registry Service (“CDARS”) program totaled $ 41.0 million at June 30, 2024, compared to $ 24.2 million at December 31, 2023.

At June 30, 2024, the scheduled maturities of time deposits for the remaining six months ending June 30, 2024, and the following five years were as follows (in thousands):

As of June 30, 2024

Remaining six months ending, December 31, 2024 $ 750,178

The aggregate amount of time deposits that meet or exceed the FDIC Insurance Limit of $250,000, was approximately $ 265.1 million and $ 92.3 million on September 30, 2024, and December 31, 2023, respectively.

Brokered time deposits, which are fully insured, totaled $ 345.3 million and $ 389.0 million as of September 30, 2024, and December 31, 2023, respectively.

Time deposits through the Certificate of Deposit Account Registry Service (“CDARS”) program totaled $ 36.5 million at September 30, 2024, compared to $ 24.2 million at December 31, 2023.

At September 30, 2024, the scheduled maturities of time deposits for the remaining three months ending December 31, 2024, the following five years, and for the years thereafter, were as follows (in thousands):

As of September 30, 2024

Remaining three months ending, December 31, 2024 $ 450,696

Thereafter 4,307

Total $ 1,316,599

At June 30, 2024, and December 31, 2023, amounts included in time deposits for individual retirement accounts totaled $ 123.6 million and $ 28.5 million, respectively.

Overdrafts of $ 5.0 million and $ 110 thousand were reclassified to loans as of June 30, 2024, and the year ended December 31, 2023, respectively.

At September 30, 2024, and December 31, 2023, amounts included in time deposits for individual retirement accounts totaled $ 121.0 million and $ 28.5 million, respectively.

Overdrafts of $ 1.3 million and $ 110 thousand were reclassified to loans as of September 30, 2024, and the year ended December 31, 2023, respectively.

Note 6— Borrowed Funds

Short-term borrowings

The Company had borrowings of $ 285.2 million and $ 272.0 million at June 30, 2024, and December 31, 2023, respectively.

At June 30, 2024, the interest rate on this debt ranged from 4.87 % to 5.46 %.

The Company had borrowings of $ 320.2 million and $ 272.0 million at September 30, 2024, and December 31, 2023, respectively.

At September 30, 2024, the interest rate on this debt ranged from 4.87 % to 4.90 %.

At December 31, 2023, the interest rate on this debt ranged from 4.38 % to 5.57 %.

The average balance outstanding during the six months ending June 30, 2024, and the year ending December 31, 2023, was $ 334.8 million and $ 293.9 million, respectively.

The average balance outstanding during the nine months ending September 30, 2024, and the year ending December 31, 2023, was $ 323.5 million and $ 293.9 million, respectively.

The Company has a finance lease liability that is not included in these balances - see Note 7 - Leased Property for a discussion of this liability that is included in the accrued interest and other liabilities line in the Consolidated Balance Sheets.

The Company has available secured lines of credit with the Federal Reserve Bank of Richmond, such as the Borrower-In-Custody program, the FHLB of Atlanta, and unsecured federal funds lines of credit from correspondent banking

Note 6— Borrowed Funds (continued)

relationships.

Through these sources, the Company has unused capacity of $ 2.2 billion in remaining borrowing capacity as of June 30, 2024.

Through these sources, the Company has unused capacity of $ 2.4 billion in remaining borrowing capacity as of September 30, 2024.

The advances on credit lines are secured by both securities and loans.

The lendable collateral value of securities and loans pledged against available lines of credit as of June 30, 2024, and December 31, 2023, was $ 1.3 billion and $ 797.8 million, respectively.

As of June 30, 2024, all of the Company’s borrowings will mature within one calendar year.

The contractual maturities of these borrowings, which all occur within one year of the reporting date, are as follows as of June 30, 2024, (in thousands):

The lendable collateral value of securities and loans pledged against available lines of credit as of September 30, 2024, and December 31, 2023, was $ 1.1 billion and $ 797.8 million, respectively.

As of September 30, 2024, all of the Company’s borrowings will mature within one calendar year.

The contractual maturities of these borrowings, which all occur within one year of the reporting date, are as follows as of September 30, 2024, (in thousands):

Due in 2024 $ 300,163

4 unchanged sentences

As part of the Merger, Burke & Herbert assumed $ 75 million of subordinated debentures, that were fair valued at $ 61.5 million with a $ 13.5 million discount being amortized into interest expense over the stated maturity.

As of June 30, 2024, the net balance was $ 62.4 million.

As of September 30, 2024, the net balance was $ 63.7 million.

The subordinated debt qualifies as Tier 2 capital under Federal Reserve Board guidelines, until the debt is within 5 years of its maturity;

5 unchanged sentences

Through the Merger, Burke & Herbert also assumed $ 30 million of subordinated debentures that were fair valued at $ 29.8 million with a $ 0.2 million discount being amortized into interest expense over the stated maturity.

As of June 30, 2024, the net balance was $ 30 million.

As of September 30, 2024, the net balance was $ 29.8 million.

The subordinated debt qualifies as Tier 2 capital under Federal Reserve Board guidelines, until the debt is within 5 years of its maturity;

19 unchanged sentences

The amount of trust preferred securities and certain other elements in excess of the limit can be included in Tier 2 capital.

The remaining maturities of subordinated debentures as of June 30, 2024, are as follows (in thousands):

The remaining maturities of subordinated debentures as of September 30, 2024, are as follows (in thousands):

Subordinated debentures

Subordinated debentures owed to unconsolidated subsidiary trusts

Remaining six months ending, December 31, 2024 $ — $ —

Remaining three months ending, December 31, 2024 $ — $ —

Thereafter 105,000 19,589

5 unchanged sentences

The components of lease income, which was included in non-interest expense on the Consolidated Statements of Income, were as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

1 unchanged sentence

Total lease income $ 565 $ 576 $ 1,696 $ 1,726

The remaining maturities of operating lease receivables as of June 30, 2024, are as follows (in thousands):

The remaining maturities of operating lease receivables as of September 30, 2024, are as follows (in thousands):

Operating Leases

Remaining six months ending, December 31, 2024 $ 1,083

Remaining three months ending, December 31, 2024 $ 543

Thereafter 4,732

11 unchanged sentences

Right-of-use assets and liabilities by lease type, and the associated balance sheet classifications are as follows (in thousands):

Balance Sheet Classification June 30, 2024 December 31, 2023

Balance Sheet Classification September 30, 2024 December 31, 2023

Right-of-use assets:

7 unchanged sentences

The components of total lease cost were as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

4 unchanged sentences

Total lease cost $ 879 $ 869 $ 2,365 $ 2,668

The Company’s future undiscounted lease payments for finance and operating leases with initial terms of one year or more as of June 30, 2024, are as follows (in thousands):

The Company’s future undiscounted lease payments for finance and operating leases with initial terms of one year or more as of September 30, 2024, are as follows (in thousands):

Operating Leases Finance Leases

Remaining six months ending, December 31, 2024 $ 3,203 $ 330

Remaining three months ending, December 31, 2024 $ 855 $ 83

2025 2,766 333

7 unchanged sentences

Note 7— Leased Property (continued)

The following table presents additional information about the Company’s leases as of June 30, 2024, and December 31, 2023.

Supplemental lease information (dollars in thousands) June 30, 2024 December 31, 2023

The following table presents additional information about the Company’s leases as of September 30, 2024, and December 31, 2023.

Supplemental lease information (dollars in thousands) September 30, 2024 December 31, 2023

Finance lease weighted average remaining lease term (years) 12.00 12.66

2 unchanged sentences

Operating lease weighted average discount rate 4.62 % 3.33 %

Six Months Ended June 30,

Nine Months Ended September 30,

Cash paid for amounts included in the measurement of lease liabilities 2024 2023

10 unchanged sentences

The net unrealized gain or loss on AFS securities is not included in computing regulatory capital.

Management believes as of June 30, 2024, the Company and the Bank meet all capital adequacy requirements to which they are subject.

Management believes as of September 30, 2024, the Company and the Bank meet all capital adequacy requirements to which they are subject.

“Prompt corrective action” regulations provide five classifications:

2 unchanged sentences

If “undercapitalized”, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

As of June 30, 2024, and December 31, 2023, the most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework for “prompt corrective action”.

As of September 30, 2024, and December 31, 2023, the most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework for “prompt corrective action”.

Note 8— Regulatory Capital Matters (continued)

The following table presents the actual and required capital amounts and ratios for the Company and the Bank at June 30, 2024, and December 31, 2023 (in thousands except for ratios):

The following table presents the actual and required capital amounts and ratios for the Company and the Bank at September 30, 2024, and December 31, 2023 (in thousands except for ratios):

Actual Minimum Required Capital - Basel III Minimum Required to be Well Capitalized

Amount Ratio Amount Ratio Amount Ratio

As of June 30, 2024

As of September 30, 2024

Total Capital to risk weighted assets

35 unchanged sentences

Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies.

As of June 30, 2024, approximately $ 193.7 million of retained earnings was available for dividend declaration c onsistent with the Company’s capital plan.

As of September 30, 2024, approximately $ 234.7 million of retained earnings was available for dividend declaration consistent with the Company’s capital plan.

Note 9— Derivatives

11 unchanged sentences

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest expense or interest income in the same period(s) during which the hedged transaction affects earnings.

During the next twelve months, the Company estimates that an additional $ 2.8 million will be reclassified as a reduction to interest expense.

During the next twelve months, the Company estimates that an additional $ 76.4 thousand will be reclassified as an increase to interest expense.

Derivatives not designated as hedges

4 unchanged sentences

Changes in the fair value of interest rate swaps are recorded in other non-interest expense and sum to zero because of offsetting terms of swaps with borrowers and swaps with dealer counterparties.

The table below presents the fair value of the Company’s derivative financial instruments, which includes accrued interest, as well as their classification on the Consolidated Balance Sheets as of June 30, 2024, and December 31, 2023 (in thousands):

June 30, 2024

The table below presents the fair value of the Company’s derivative financial instruments, which includes accrued interest, as well as their classification on the Consolidated Balance Sheets as of September 30, 2024, and December 31, 2023 (in thousands):

September 30, 2024

Balance Sheet Location Notional Amount Fair Value

Derivatives designated as hedges:

Interest rate swaps related to cash flow hedges Other assets $ 90,725 $ 1,422

Interest rate swaps related to fair value hedges Other liabilities $ 300,000 $ 1,502

Derivatives not designated as hedges:

9 unchanged sentences

Interest rate swaps related to customer loans Other liabilities 72,572 998

The table below presents the effect of cash flow hedge accounting on AOCI for the three months ended June 30, 2024, and June 30, 2023, as follows (in thousands):

The table below presents the effect of cash flow hedge accounting on AOCI for the three months ended September 30, 2024, and September 30, 2023 (in thousands):

Derivatives in Cash Flow

Hedging Relationships June 30, 2024 Location of Gain or (Loss) Reclassified from AOCI into Income June 30, 2024

Hedging Relationships September 30, 2024 Location of Gain or (Loss) Reclassified from AOCI into Income September 30, 2024

Amount of Gain or (Loss) Recognized in OCI on Derivative

5 unchanged sentences

Derivatives in Cash Flow

Hedging Relationships June 30, 2023 Location of Gain or (Loss) Reclassified from AOCI into Income June 30, 2023

Hedging Relationships September 30, 2023 Location of Gain or (Loss) Reclassified from AOCI into Income September 30, 2023

Amount of Gain or (Loss) Recognized in OCI on Derivative

2 unchanged sentences

Total $ ( 48 ) $ ( 48 ) $ — $ ( 473 ) $ ( 473 ) $ —

The table below presents the effect of cash flow hedge accounting on AOCI for the six months ended June 30, 2024, and June 30, 2023, as follows (in thousands):

The table below presents the effect of cash flow hedge accounting on AOCI for the nine months ended September 30, 2024, and September 30, 2023 (in thousands):

Derivatives in Cash Flow

Hedging Relationships June 30, 2024 Location of Gain or (Loss) Reclassified from AOCI into Income June 30, 2024

Hedging Relationships September 30, 2024 Location of Gain or (Loss) Reclassified from AOCI into Income September 30, 2024

Amount of Gain or (Loss) Recognized in OCI on Derivative

4 unchanged sentences

Derivatives in Cash Flow

Hedging Relationships June 30, 2023 Location of Gain or (Loss) Reclassified from AOCI into Income June 30, 2023

Hedging Relationships September 30, 2023 Location of Gain or (Loss) Reclassified from AOCI into Income September 30, 2023

Amount of Gain or (Loss) Recognized in OCI on Derivative

2 unchanged sentences

Total $ ( 337 ) $ ( 337 ) $ — $ ( 1,259 ) $ ( 1,259 ) $ —

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income for the three and six months ended June 30, 2024, and June 30, 2023 (in thousands).

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income for the three and nine months ended September 30, 2024, and September 30, 2023 (in thousands).

Note 9— Derivatives (continued)

1 unchanged sentence

Three months ended

June 30, 2024 June 30, 2023

September 30, 2024 September 30, 2023

Interest Income Interest Expense Interest Income Interest Expense

5 unchanged sentences

Hedged items (1)

40 — ( 3,468 ) —

Derivatives designated as hedging instruments — — — —

2 unchanged sentences

Amount of gain or (loss) reclassified from AOCI into income

— 1,080 ( 473 ) —

Amount of gain or (loss) reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring — — — —

3 unchanged sentences

Location and Amount of Gain or (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships

Six months ended

June 30, 2024 June 30, 2023

Nine months ended

September 30, 2024 September 30, 2023

Interest Income Interest Expense Interest Income Interest Expense

16 unchanged sentences

The Company has allocated the basis adjustment to the remaining individual assets in the closed portfolio and will amortize the basis adjustment over a period consistent with amortization of other discounts or premiums on the assets.

Credit-risk-related Contingent Features

Note 9— Derivatives (continued)

As of June 30, 2024, the Company has no derivatives in a net liability position that would require the posting of collateral.

Credit-risk-related Contingent Features

As of September 30, 2024, the Company has no derivatives in a net liability position that would require the posting of collateral.

Note 10— Commitments and Contingencies

6 unchanged sentences

Since many of our commitments to extend credit may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements.

A summary of the contractual amounts of the Company’s financial instruments outstanding at June 30, 2024, and December 31, 2023, is as follows (in thousands):

June 30, 2024 December 31, 2023

A summary of the contractual amounts of the Company’s financial instruments outstanding at September 30, 2024, and December 31, 2023, is as follows (in thousands):

September 30, 2024 December 31, 2023

Commitments to extend credit $ 995,782 $ 278,923

5 unchanged sentences

Allowance for credit losses - off-balance-sheet credit exposures

The Company recorded a provision for credit losses on unfunded commitments of $ 3.8 million for the three and six months ended June 30, 2024.

The Company recorded a recapture of credit losses on unfunded commitments of $ 96.0 thousand and $ 104.0 thousand for the three and six months ended June 30, 2023.

The ACL on off-balance-sheet credit totaled $ 4.1 million and $ 254.2 thousand as of June 30, 2024 and December 31, 2023, and is included in accrued interest and other liabilities on the accompanying Consolidated Balance Sheets.

The Company recorded a provision for credit losses on unfunded commitments of $ 62.0 thousand and $ 3.9 million for the three and nine months ended September 30, 2024.

The Company recorded a provision for credit losses on unfunded commitments of $ 35.0 thousand and a recapture of $ 69.8 thousand for the three and nine months ended September 30, 2023.

The ACL on off-balance-sheet credit totaled $ 4.1 million and $ 254.2 thousand as of September 30, 2024 and December 31, 2023, and is included in accrued interest and other liabilities on the accompanying Consolidated Balance Sheets.

The Company is a party to litigation, claims, and proceedings arising in the normal course of business that are ordinary and routine to the nature of the Company’s business and operations.

5 unchanged sentences

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Note 11— Fair Value Measurements (continued)

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;

1 unchanged sentence

or other inputs that are observable or can be corroborated by observable market data.

Note 11— Fair Value Measurements (continued)

Level 3 – Significant unobservable inputs that reflect our own assumptions that market participants would use in pricing an asset or liability.

9 unchanged sentences

Equity investments are recorded at fair value on a recurring basis, with changes in fair value reported in net income.

Through the Merger, at June 30, 2024, we acquired an investment in an S&P 500 index mutual fund that is actively traded on an exchange, and we classify it as Level 1.

Through the Merger, at September 30, 2024, we acquired an investment in an S&P 500 index mutual fund that is actively traded on an exchange, and we classify it as Level 1.

Through the Merger, we acquired perpetual preferred stock of a bank holding company issued in October 2022 in a private offering.

14 unchanged sentences

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

Fair Value Measurements at June 30, 2024, Using:

Fair Value Measurements at September 30, 2024, Using:

Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs

54 unchanged sentences

Assets that were measured at fair value on a non-recurring basis during the period are summarized below (in thousands):

Fair Value Measurements at June 30, 2024, Using:

Fair Value Measurements at September 30, 2024, Using:

Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs

20 unchanged sentences

Note 11— Fair Value Measurements (continued)

The following table presents quantitative information about Level 3 Fair Value Measurements for assets measured at fair value on a non-recurring basis at June 30, 2024, and December 31, 2023 (in thousands except for percentages):

The following table presents quantitative information about Level 3 Fair Value Measurements for assets measured at fair value on a non-recurring basis at September 30, 2024, and December 31, 2023 (in thousands except for percentages):

Description Fair Value Valuation Techniques Unobservable Inputs Range

June 30, 2024

Collateral dependent loans $ 3,288 Appraisal of collateral Management adjustments (e.g.

liquidity, selling costs, etc.) 5.0 % to 20.0 % for liquidity, 6.0 % to 8.0 % for selling costs

Other real estate owned 3,334 Appraisal of collateral Management adjustments (e.g.

liquidity, selling costs, etc.) 5.0 % to 20.0 % for liquidity, 6.0 % to 8.0 % for selling costs

September 30, 2024

Collateral dependent loans $ 3,850 Appraisal of collateral Management adjustments (e.g., liquidity, selling costs, etc.) 5.0 % to 20.0 % for liquidity, 6.0 % to 8.0 % for selling costs

Other real estate owned 2,576 Appraisal of collateral Management adjustments (e.g., liquidity, selling costs, etc.) 5.0 % to 20.0 % for liquidity, 6.0 % to 8.0 % for selling costs

December 31, 2023

Collateral dependent loans $ — Appraisal of collateral Management adjustments (e.g.

liquidity, selling costs, etc.) 5.0 % to 20.0 % for liquidity, 6.0 % to 8.0 % for selling costs

Collateral dependent loans $ — Appraisal of collateral Management adjustments (e.g., liquidity, selling costs, etc.) 5.0 % to 20.0 % for liquidity, 6.0 % to 8.0 % for selling costs

Fair value of financial instruments

The carrying amounts and estimated fair values of financial instruments not carried at fair value, at June 30, 2024, and December 31, 2023, were as follows (in thousands):

Fair Value Measurements at June 30, 2024, Using:

The carrying amounts and estimated fair values of financial instruments not carried at fair value, at September 30, 2024, and December 31, 2023, were as follows (in thousands):

Fair Value Measurements at September 30, 2024, Using:

Carrying Amount Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs

26 unchanged sentences

Note 12— Accumulated Other Comprehensive Income (Loss)

The following table presents changes in accumulated other comprehensive income (loss) by component, net of tax, for the three and six months ended June 30, 2024, and June 30, 2023 (in thousands):

Three months ended June 30, 2024

The following table presents changes in accumulated other comprehensive income (loss) by component, net of tax, for the three and nine months ended September 30, 2024, and September 30, 2023 (in thousands):

Three months ended September 30, 2024

Gains and Losses on Cash Flow Hedges Unrealized Gains and Losses on Available-for-Sale Securities Defined Benefit Pension Items Accumulated Other Comprehensive Income

4 unchanged sentences

Ending Balance $ ( 1,194 ) $ ( 68,819 ) $ ( 5,745 ) $ ( 75,758 )

Three months ended June 30, 2023

Three months ended September 30, 2023

Gains and Losses on Cash Flow Hedges Unrealized Gains and Losses on Available-for-Sale Securities Defined Benefit Pension Items Accumulated Other Comprehensive Income

4 unchanged sentences

Ending Balance $ ( 861 ) $ ( 138,267 ) $ ( 7,031 ) $ ( 146,159 )

Six months ended June 30, 2024

Nine months ended September 30, 2024

Gains and Losses on Cash Flow Hedges Unrealized Gains and Losses on Available-for-Sale Securities Defined Benefit Pension Items Accumulated Other Comprehensive Income

4 unchanged sentences

Ending Balance $ ( 1,194 ) $ ( 68,819 ) $ ( 5,745 ) $ ( 75,758 )

Six months ended June 30, 2023

Nine months ended September 30, 2023

Gains and Losses on Cash Flow Hedges Unrealized Gains and Losses on Available-for-Sale Securities Defined Benefit Pension Items Accumulated Other Comprehensive Income

5 unchanged sentences

Note 12— Accumulated Other Comprehensive Income (Loss) (continued)

The following table presents amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2024, and June 30, 2023 (in thousands).

The following table presents amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2024, and September 30, 2023 (in thousands).

Details about Accumulated Other Comprehensive Income Components Amount Reclassified From Accumulated Other Comprehensive Income Affected Line Item in the Statements of Income

Three months ended Six months ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Three months ended Nine months ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Cash flow hedges:

10 unchanged sentences

Note 13— Other Operating Expense

Other operating expense from the Consolidated Statements of Income for the three and six months ended June 30, 2024, and June 30, 2023, is as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Other operating expense from the Consolidated Statements of Income for the three and nine months ended September 30, 2024, and September 30, 2023, is as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

13 unchanged sentences

Total $ 17,179 $ 7,417 $ 46,216 $ 19,042

The Company incurred Merger-related expenses of $ 9.5 million for the six months ended June 30, 2024, including $ 8.9 million of which were incurred during the three months ended June 30, 2024.

The Company incurred Merger-related expenses of $ 11.3 million for the nine months ended September 30, 2024, including $ 1.8 million of which were incurred during the three months ended September 30, 2024.

These expenses are included in the consultant fees, audit fees, legal expense, donation, and other line items detailed in other operating expenses.

1 unchanged sentence

The Company has a share-based incentive plan described below that allows it to offer a variety of equity compensation awards subject to approval.

Total compensation cost that has been charged against income for the share-based awards granted was $ 937.6 thousand and $ 607.2 thousand for the three months ended June 30, 2024, and June 30, 2023, respectively.

The total income tax benefit was $ 196.9 thousand and $ 127.5 thousand for the three months ended June 30, 2024, and June 30, 2023, respectively.

Total compensation cost that has been charged against income for the share-based awards granted was $ 1.4 million and $ 1.2 million for the six months ended June 30, 2024, and June 30, 2023, respectively.

The total income tax benefit was $ 291.5 thousand and $ 249.4 thousand for the six months ended June 30, 2024, and June 30, 2023, respectively.

Total compensation cost that has been charged against income for the share-based awards granted was $ 566.9 thousand and $ 610.1 thousand for the three months ended September 30, 2024, and September 30, 2023, respectively.

The total income tax benefit was $ 119.0 thousand and $ 128.1 thousand for the three months ended September 30, 2024, and September 30, 2023, respectively.

Total compensation cost that has been charged against income for the share-based awards granted was $ 2.0 million and $ 1.8 million for the nine months ended September 30, 2024, and September 30, 2023, respectively.

The total income tax benefit was $ 410.5 thousand and $ 377.6 thousand for the nine months ended September 30, 2024, and September 30, 2023, respectively.

2019 Stock Incentive Plan

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The 2023 SIP authorized the issuance of 250,000 shares, subject to an annual increase in available shares.

A total of 48,450 and 24,705 shares were issued during the six months ended June 30, 2024, and June 30, 2023, respectively.

A total of 64,365 and 24,705 shares were issued during the nine months ended September 30, 2024, and September 30, 2023, respectively.

For time-based RSUs, the fair value was determined by using the closing stock price on the date prior to the grant date.

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Forfeited ( 600 ) 73

Non-vested at June 30, 2024 87,875 $ 56.15

As of June 30, 2024, there was $ 3.3 million of total unrecognized compensation costs related to non-vested shares granted under the 2019 SIP.

Non-vested at September 30, 2024 99,830 $ 55.65

As of September 30, 2024, there was $ 3.6 million of total unrecognized compensation costs related to non-vested shares granted under both the 2019 SIP and 2023 SIP.

The cost is expected to be recognized over a weighted average period of 1.31 years.

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Upon the 2023 ESPP’s shareholder approval date of March 30, 2023, the 2023 ESPP reserved 250,000 shares of common stock for issuance to employees.

At June 30, 2024, 243,620 shares were available to be issued.

Whole shares are sold to participants in the 2023 ESPP at 85 % of the lower of the stock price at the beginning or end of each semi-annual offering period that began on September 1, 2023.

At September 30, 2024, 237,943 shares were available to be issued.

Whole shares are sold to participants in the 2023 ESPP at 85 % of the lower of the stock price at the beginning or end of each semi-annual offering period.

The first semi-annual offering period began on September 1, 2023, and the current semi-annual offering period began on September 1, 2024.

Eligible employees may purchase shares in an amount that does not exceed the lesser of the IRS limit of $25,000 or 15 % of their annual salary.

The following table presents information for the 2023 ESPP at the end of June 30, 2024:

June 30, 2024

The following table presents information for the 2023 ESPP at the end of September 30, 2024:

September 30, 2024

Shares purchased 12,057

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# of years to full vesting 7 years 7 years 7 years

# of awards unvested as of June 30, 2024

3,202 17,322 25,921

Fair value $ 14.89 $ 16.92 $ 14.56

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4.77 7.20 8.77

A summary of SAR and option activity during the six months ended June 30, 2024, is as follows:

A summary of SAR and option activity during the nine months ended September 30, 2024, is as follows:

Note 14— Share-Based Compensation (continued)

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Expired — — — —

Outstanding, June 30, 2024 299,556 $ 4,996 5.67 $ 45.24

Outstanding, September 30, 2024 233,020 $ 3,763 5.61 $ 46.34

Exercisable SARs:

At June 30, 2024 253,111 $ 4,278 5.29 $ 44.63

The total fair value of SARs exercised was zero during the six months ended June 30, 2024.

The total fair value of SARs vested was zero during the six months ended June 30, 2024.

As of June 30, 2024, there was $ 691.1 thousand of total unrecognized compensation costs related to non-vested SARs acquired through the Merger.

At September 30, 2024 193,613 $ 3,159 5.21 $ 45.79

The total fair value of SARs exercised was $ 1.1 million during the nine months ended September 30, 2024.

The total fair value of SARs vested was $ 47.1 thousand during the nine months ended September 30, 2024.

As of September 30, 2024, there was $ 583.2 thousand of total unrecognized compensation costs related to non-vested SARs acquired through the Merger.

The cost is expected to be recognized over a weighted average period of 2.53 years.

Note 15— Earnings Per Share

Basic earnings per share excludes dilution and is computed by dividing net income (loss) applicable to common shares by the weighted average number of common shares outstanding for the period.

Basic earnings per share excludes dilution and is computed by dividing net income applicable to common shares by the weighted average number of common shares outstanding for the period.

Diluted earnings per share reflects the potential impact of contingently issuable shares.

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Dilutive potential common stock has no effect on income available to common shareholders.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Net income (loss) applicable to common shares (in thousands) $ ( 17,144 ) $ 6,034 $ ( 11,932 ) $ 13,558

Net income applicable to common shares (in thousands) $ 27,397 $ 4,056 $ 15,465 $ 17,614

Weighted average number of shares 14,944,962 7,428,710 11,529,953 7,427,817

1 unchanged sentence

Weighted average dilutive shares 15,040,145 7,499,278 11,591,783 7,506,509

Basic earnings (loss) per common share $ ( 1.41 ) $ 0.81 $ ( 1.22 ) $ 1.82

Diluted earnings (loss) per common share ( 1.41 ) 0.80 ( 1.22 ) 1.80

For the three months ended June 30, 2024, and the six months ended June 30, 2024, the options effect of dilutive shares is anti-dilutive and not considered in calculating diluted EPS.

Stock awards equivalent to 323,902 and zero shares of common stock were not considered in computing diluted earnings per common share for the three months ended June 30, 2024, and June 30, 2023, respectively, because they are antidilutive.

Stock awards equivalent to 329,572 and zero shares of common stock are not considered in computing diluted earnings per share for the six months ended June 30, 2024, and June 30, 2023, respectively, because they are antidilutive.

Basic earnings per common share $ 1.83 $ 0.55 $ 1.34 $ 2.37

Diluted earnings per common share 1.82 0.55 1.33 2.35

For the three months ended September 30, 2024, and the nine months ended September 30, 2024, the options effect of dilutive shares is anti-dilutive and not considered in calculating diluted EPS.

Stock awards equivalent to 27,418 and 1,368 shares of common stock were not considered in computing diluted earnings per common share for the three months ended September 30, 2024, and September 30, 2023, respectively, because they are antidilutive.

Stock awards equivalent to 51,094 and zero shares of common stock are not considered in computing diluted earnings per share for the nine months ended September 30, 2024, and September 30, 2023, respectively, because they are antidilutive.

Note 16— Business Combination

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Summit’s results of operations from May 3, 2024, were included in the Company’s results beginning with reporting as of June 30, 2024.

Net interest income and pre-tax net income for Summit were estimated to be $ 25.3 million and $ 27.5 million, respectively, since the date of the acquisition through June 30, 2024 and are included in the Company’s Consolidated Statement of Income.

Merger-related costs of $ 24.4 million are included in non-interest expense in the Company’s income statement for the six months ended, June 30, 2024.

A portion of these Merger-related costs are captured in the line item Other Operating Non-Interest Expense on the consolidated Income Statement with further description in Note 13 - Other O perating Expense .

An additional $ 14.9 million is captured in line items for Salaries and Wages, Pensions and Other Employee Benefits, Occupancy, and Equipment Rentals, depreciation and maintenance.

Net interest income and pre-tax net income for Summit were estimated to be $ 63.0 million and $ 68.5 million, respectively, since the date of the acquisition through September 30, 2024, and are included in the Company’s Consolidated Statement of Income.

Pre-tax net income for Summit only includes income and expense that are still being recorded on Summit’s core operating system.

As the Company is merging data and processes, certain legacy Summit expenses, including occupancy and salaries, are now merged within the Company’s core system.

Merger-related costs of $ 27.5 million are included in non-interest expense in the Company’s income statement for the nine months ended, September 30, 2024.

A portion of these Merger-related costs is captured in Other Operating Non-Interest Expense as further description in Note 13 - Other Operating Expense and an additional $ 16.3 million of such Merger-related costs is captured in Salaries and Wages, Pensions and Other Employee Benefits, Occupancy, and Equipment rentals, depreciation and maintenance.

These costs captured in those line items represent change-in-control payments, acceleration of benefit due to the change-in-control, software breakage, and other lease breakage fees.

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The core deposit intangible represents the value of long-term deposit relationships acquired in this transaction and will be amortized over an estimated weighted average life of 7 years using an accelerated method which approximates the estimated run-off of the acquired deposits.

The fair value of $ 68.8 million of intangible assets related to core deposits is subject to change pending the receipt of the final valuation.

The fair value of intangible assets related to core deposits was $ 68.8 million on the date of acquisition.

The fair value of purchased financial assets with credit deterioration was $ 380.8 million on the date of the acquisition.

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The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed dates.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

($ in thousands) 2024 2023 2024 2023

2 unchanged sentences

Note 17— Goodwill and Other Intangible Assets

The following table presents the change in goodwill for the three and six months ended June 30, 2024, and June 30, 2023, (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The following table presents the change in goodwill for the three and nine months ended September 30, 2024, and September 30, 2023, (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

3 unchanged sentences

End of period $ 32,783 $ — $ 32,783 $ —

During the three months ended, June 30, 2024, the Company recorded $ 32.8 million of preliminary goodwill associated with the acquisition of Summit.

See Note 16 - B usiness Combination to the consolidated financial statements for additional detail regarding this transaction.

The Company will perform the annual goodwill impairment test on September 30 every year.

During the nine months ended, September 30, 2024, the Company recorded $ 32.8 million of preliminary goodwill associated with the acquisition of Summit.

See Note 16 - Business Combination to the consolidated financial statements for additional detail regarding this transaction.

The Company performs the annual goodwill impairment test on September 30 every year.

Other intangible assets consist of the core deposit intangible which is being amortized on an accelerated basis over its estimated useful life of 7 years.

During the three months ended, June 30, 2024, the Company recorded $ 68.8 million of core deposit intangibles associated with the acquisition of Summit.

The gross carrying amounts and accumulated amortization of other intangible assets for the three and six months ended June 30, 2024, and June 30, 2023, was as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Core deposit intangible $ 68,760 $ — $ 68,760 $ —

During the nine months ended, September 30, 2024, the Company recorded $ 68.8 million of core deposit intangibles associated with the acquisition of Summit.

The gross carrying amounts and accumulated amortization of other intangible assets for the nine months ended September 30, 2024, were as follows (in thousands):

Nine Months Ended September 30,

Beginning of period $ —

Core deposit intangible acquired 68,760

Accumulated amortization ( 7,162 )

Total intangible assets $ 65,895 $ — $ 65,895 $ —

Total core deposit intangible $ 61,598

The Company reviews other intangible assets for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Total amortization expense associated with intangible assets was $ 2.9 million for the three months ended June 30, 2024.

Total amortization expense associated with intangible assets was $ 7.2 million for the nine months ended September 30, 2024.

Estimated amortization expense for future years is as follows (in thousands):

Estimated Amortization

6 months ended December 31, 2024 $ 8,595

Remaining three months ending, December 31, 2024 $ 4,298

Thereafter 9,823

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements