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Risk Factor Summary
−Removed: o Risk Related to Our Lending Activities
+Added: o Risks Related to Our Lending Activities
• We may not be able to measure and limit our credit risk adequately.
−Removed: • Our decisions regarding credit risk could be inaccurate and our allowance for credit losses may be inadequate, which could materially and adversely affect our business, financial condition, results of operations, cash flows, and/or future prospects.
+Added: • Our decisions regarding credit risk could be inaccurate and our allowance for credit losses may be inadequate.
• If our non-performing assets increase, our earnings will be adversely affected.
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o Risks Related to Our Business, Industry, and Markets
−Removed: • We operate in a highly competitive market and face increasing competition from a variety of traditional and new financial services providers.
+Added: • We operate in a highly competitive market and face increasing competition.
• Our financial performance may be negatively affected if we are unable to execute our strategy.
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• System failure or breaches of our network security, including as a result of cyber-attacks or data security breaches, could subject us to increased operating costs, litigation, and other liabilities.
−Removed: • We rely on third parties to provide key components of our business infrastructure, and a failure of these parties to perform for any reason could disrupt our operations.
+Added: • We rely on third parties to provide key components of our business infrastructure.
• We could be subject to losses, regulatory action, or reputational harm due to fraudulent and negligent acts on the part of loan applicants, our employees, and vendors.
• We are subject to claims and litigation pertaining to intellectual property.
−Removed: • We may be adversely affected by the lack of soundness of other financial institutions or other market participants.
+Added: • We may be adversely affected by the lack of soundness of other financial institutions and market participants.
• Our risk management framework may not be effective in mitigating risks and/or losses to us.
• Demand for the Company’s services is influenced by general economic and consumer trends.
+Added: • Our results may suffer if we do not effectively manage our expanded operations, including complying with any enhanced regulatory requirements.
o Risks Related to Our Regulatory Environment
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• We face a risk of noncompliance and enforcement action with the BSA and other anti-money laundering statutes and regulations.
−Removed: • We are subject to laws regarding the privacy, information security, and protection of personal information and any violation of these laws or other incident involving personal, confidential, or proprietary information of individuals could damage our reputation and otherwise adversely affect our business.
+Added: • We are subject to laws regarding the privacy, information security, and protection of personal information.
• Our use of third-party vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention.
• Regulatory requirements affecting our loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability.
−Removed: • Increased scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to Environmental, Social, and Governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.
+Added: • Evolving expectations from customers, regulators, investors, and other stakeholders with respect to Environmental, Social, and Governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.
o Risks Related to an Investment in Our Common Stock
• We currently qualify as an “emerging growth company”, and the reduced disclosures and relief from certain other significant disclosure requirements that are available to emerging growth companies may make our Common Stock less attractive to investors.
−Removed: • The obligations associated with being a public company require significant resources and management attention, which may divert from our business operations.
• If we fail to design, implement, and maintain effective internal control over financial reporting or remediate any future material weakness in our internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.
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• An investment in our Common Stock is not an insured deposit and is not guaranteed by the FDIC.
+Added: • Holders of our junior subordinated debentures and preferred stock have rights that are senior to those of our common stockholders.
• Our Bylaws designate the United States District Court for the Eastern District of Virginia, Alexandria Division, or in the event that court lacks jurisdiction, the Circuit Court of the City of Alexandria, Virginia, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which may not be enforced and could discourage lawsuits against us and our directors and officers.
−Removed: o Risks Relating to the Consummation of the Merger and Burke & Herbert Following the Merger
−Removed: • We expect to incur substantial costs related to the merger and integration.
−Removed: • Combining Burke & Herbert and Summit may be more difficult, costly, or time-consuming than expected, and Burke & Herbert and Summit may fail to realize the anticipated benefits of the merger.
−Removed: • Our results following the merger may suffer if we do not effectively manage our expanded operations, including complying with any enhanced regulatory requirements.
−Removed: • The continuing corporation may be unable to retain Burke & Herbert and/or Summit personnel successfully after the merger is completed.
−Removed: • Regulatory approvals necessary for the merger to close may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the continuing corporation following the merger.
−Removed: • The merger agreement may be terminated and the merger may not be completed.
−Removed: • Failure to complete the merger could negatively impact us.
−Removed: • In connection with the merger, we will assume Summit’s outstanding debt obligations, and our level of indebtedness following the completion of the merger could adversely affect our ability to raise additional capital and to meet our obligations under its existing indebtedness.
−Removed: • We will be subject to business uncertainties and contractual restrictions while the merger is pending.
−Removed: • The elevated interest rate environment may adversely impact the fair value adjustments of investments and loans acquired in the merger.
−Removed: • Our shareholders will have reduced ownership and voting interest in the continuing corporation after the consummation of the merger and will exercise less influence over management.
Risk Related to Our Lending Activities
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As of December 31, 2024, the allowance for credit losses was $68.0 million or 1.20% of total gross loans;
+Added: however, there is no guarantee that it will be sufficient to address credit losses.
The determination of the appropriate level of allowance for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates related to current and expected future credit risks and trends, all of which may undergo material changes.
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and identification of additional problem loans, ratings down-grades and other factors, both within and outside of our control, may require an increase in the allowances for credit losses on loans, securities, and off-balance sheet credit exposures.
−Removed: There is no precise method of predicting credit losses, and therefore, we always face the risk that losses in future periods will exceed our allowance for credit losses and that we would need to make additional provisions to our allowance for credit losses.
−Removed: Our methodology for the determination of the adequacy of the allowance for credit losses is set forth in Note 4 — Allowance for Credit Losses of the accompanying Consolidated Financial Statements.
+Added: There is no precise method of predicting credit losses, and therefore, we always face the risk that losses in future periods will exceed our allowance for credit losses and that we would need to make additional provisions to our allowance for credit losses, which would reduce our earnings.
+Added: Our methodology for the determination of the adequacy of the allowance for credit losses is set forth in Note 4 — Allowance for Credit Losses in the accompanying Consolidated Financial Statements.
Additionally, federal and state banking regulators, as an integral part of their supervisory function, periodically review the allowance for credit losses.
−Removed: These regulatory agencies may require us to increase our provision for credit losses or to recognize further loan charge-offs based upon their judgments, which may be different from ours.
−Removed: If we need to make significant and unanticipated increases in the loss allowance in the future, or to take additional charge-
−Removed: offs for which we have not established adequate reserves, our business, financial condition, and results of operations could be adversely affected at that time.
+Added: These regulatory agencies may require us to increase our provision for credit
+Added: losses or to recognize further loan charge-offs based upon their judgments, which may be different from ours.
+Added: If we need to make significant and unanticipated increases in the loss allowance in the future, or to take additional charge-offs for which we have not established adequate reserves, our business, financial condition, and results of operations could be adversely affected at that time.
On January 1, 2023, the Company adopted the Current Expected Credit Loss (“CECL”) methodology as required under ASC 326.
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Adverse changes in the real estate market or economy in our market area could lead to higher levels of problem loans and charge-offs, adversely affecting our earnings and financial condition.
−Removed: We make loans primarily to borrowers in the Washington, D.C.
−Removed: MSA, focusing on the Virginia counties of Arlington, Fairfax, Loudoun and Prince William and the independent cities located within those counties, and Washington, D.C., and its Maryland suburbs.
A substantial portion of our loans are secured by real estate.
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In that event, we would likely experience lower earnings or losses.
−Removed: Additionally, if economic conditions in the area deteriorate, or there is volatility or weakness in the economy or any significant sector of the economy in our markets, our ability to develop our business relationships may be diminished, the quality and collectability of our loans may be adversely affected, our provision for credit losses may increase, the value of collateral may decline, and loan demand may be reduced.
+Added: Additionally, if economic conditions in our market area deteriorate, or there is volatility or weakness in the economy or any significant sector of the economy in our markets, our ability to develop our business relationships may be diminished, the quality and collectability of our loans may be adversely affected, our provision for credit losses may increase, the value of collateral may decline, and loan demand may be reduced.
We are exposed to higher credit risk by commercial real estate, commercial and industrial, and acquisition, construction & development-based lending as well as large lending relationships.
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In particular, the banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market.
−Removed: regulatory authorities typically give commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement enhanced risk management practices, including stricter underwriting, internal controls, risk management policies, more granular reporting, and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposure.
+Added: Banking regulatory authorities typically give commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement enhanced risk management practices, including stricter
+Added: underwriting, internal controls, risk management policies, more granular reporting, and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposure.
If our banking regulators determine that our commercial real estate lending activities are particularly risky and are subject to heightened scrutiny, we may incur significant additional costs or be required to restrict certain of our commercial real estate lending activities.
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If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our OREO, if any, and our allowance for credit losses may not reflect accurate loan impairments.
−Removed: valuation of OREO or inaccurate provisioning for credit losses could have an adverse effect on our business, financial condition, and results of operations.
−Removed: The Company did not have any OREO as of December 31, 2023.
+Added: Inaccurate valuation of OREO or inaccurate provisioning for credit losses could have an adverse effect on our business, financial condition, and results of operations.
+Added: The Company’s OREO amounted to $2.8 million as of December 31, 2024.
Risk Related to Funding and Liquidity
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Our access to funding sources in amounts adequate to finance our activities, or on terms that are acceptable to us, could be impaired by factors that affect us specifically, the financial services industry, or the economy, in general.
−Removed: Factors that could detrimentally affect our access to liquidity sources may be beyond our control and include, among other things, market disruptions, changes in our credit ratings or the sentiment of our investors, the state of the regulatory environment and monetary and fiscal policies, competitive dynamics, reputational damage, the confidence of depositors in us or the financial-services industry, generally, a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated, and an adverse regulatory action against us.
−Removed: Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets, rising interest rates, the possibility of the U.S.
−Removed: government defaulting on its debt, or negative views and expectations about the prospects for the financial services industry.
+Added: Factors that could detrimentally affect our access to liquidity sources may be beyond our control and include, among other things, market disruptions, changes in our credit ratings, lack of sufficient qualifying collateral to support borrowings, competitive dynamics, reputational damage, the confidence of depositors in us or the financial-services industry, generally, a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated, and an adverse regulatory action against us.
+Added: Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets, increased inflation, tariffs or other disruptions to global trade, trade agreements or supply chains, rising interest rates, the state of the regulatory environment and monetary and fiscal policies, the possibility of the U.S.
+Added: government defaulting on its debt, or negative views and expectations about the prospects for the financial services industry or the global economy more broadly.
Actual events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, transactional counterparties, or other companies in the financial services industry or the financial services industry, generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past, and may in the future, lead to market-wide liquidity problems.
−Removed: For example, in March 2023, two large financial institutions were closed and entered into FDIC receivership in part due to significant deposit withdrawals, which resulted in further significant deposit withdrawals at certain other financial institutions.
−Removed: While the Company did not experience significant unusual deposit withdrawals related to these events in early 2023, we cannot be assured that similar unusual deposit withdrawal activity will not affect banks, generally, or us in the future.
Among other sources of funds, we rely heavily on deposits for funds to make loans and provide for our other liquidity needs.
−Removed: However, loan demand may exceed the rate at which we are able to build core deposits for which there is substantial competition from a variety of different competitors, so we may rely on interest-sensitive deposits, including brokered deposits, as sources of funds.
+Added: However, loan demand may exceed the rate at which we are able to build core deposits for which there is substantial competition from a variety of different competitors, so we may rely on more interest-sensitive deposits, including brokered deposits, as sources of funds.
Those deposits may not be as stable as other types of deposits, and in the future, depositors may not renew those deposits when they mature, or we may have to pay a higher rate of interest to attract or retain them or to replace them with other deposits or with funds from other sources.
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Paying higher deposit rates to attract, retain, or replace those deposits could have a negative effect on our net interest margin and operating results.
+Added: Furthermore, as we and other banking organizations experienced in 2023, the failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed “too big to fail” or to remove deposits from the banking system entirely.
+Added: As of December 31, 2024, approximately 29.6% of our deposits were uninsured and we rely on these deposits for liquidity.
Loss of deposits or a change in deposit mix could increase our cost of funding.
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Banks may be restricted in their ability to accept brokered deposits, depending on their capital classification.
−Removed: “Well capitalized” banks are permitted to accept brokered deposits, but all banks that are not well capitalized could be restricted from accepting such deposits.
−Removed: The FDIC may, on a case-by-case basis, permit banks that are adequately
−Removed: capitalized to accept brokered deposits, if the FDIC determines that acceptance of such deposits would not constitute an unsafe or unsound banking practice with respect to the bank.
+Added: “Well capitalized” banks are permitted to accept brokered deposits, but all banks that are not well capitalized could
+Added: be restricted from accepting such deposits.
Should we lose our “well capitalized” status, these restrictions could materially and adversely affect our ability to access lower costs funds, and thereby decrease our future earnings capacity.
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Our ability to identify appropriate markets for expansion, recruit and retain qualified personnel, and fund growth at reasonable cost depends upon prevailing economic conditions, maintenance of sufficient capital, competitive factors, changes in banking laws, and other factors.
+Added: Our ability to execute on our strategy will also depend, in part, on our ability to retain the talents and dedication of key employees currently employed by the Company.
+Added: It is possible that these employees may decide not to remain with the Company.
+Added: If the Company is unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, the Company could face disruptions in its operations, loss of existing customers, loss of key information, expertise, or know-how, and unanticipated additional recruitment costs.
We cannot be certain of our ability to manage increased levels of assets and liabilities without increased expenses and higher levels of non-performing assets.
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To the extent we are able to supplement organic growth with one or more acquisitions, we will be subject to risks commonly encountered in such transactions, including risks related to the time and expense of identifying, evaluating, and negotiating potential acquisitions, exposure to unknown or contingent liabilities of the target, difficulty of integrating the operations and personnel of the target, potential disruption of our ongoing business, failure to retain key personnel at the acquired business, and failure to realize any expected revenue increases, cost savings, and other projected benefits from an acquisition.
−Removed: See “Risks Relating to the Consummation of the Merger and Burke & Herbert Following the Merger” in this Item 1A — Risk Factors for additional information regarding the risks related to our pending merger with Summit.
Failure to keep up with the rapid technological changes in the financial services industry could have an adverse effect on our competitive position and profitability.
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Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations.
−Removed: Many of our competitors have substantially greater resources to invest in technological improvements than we have.
+Added: Many of our competitors
+Added: have substantially greater resources to invest in technological improvements than we have.
We may not be able to implement new technology-driven products and services effectively or be successful in marketing these products and services to our customers.
−Removed: Failure to keep pace successfully with technological change affecting the financial
−Removed: services industry could harm our ability to compete effectively and could have an adverse effect on our business, financial condition, and results of operations.
+Added: Failure to keep pace successfully with technological change affecting the financial services industry could harm our ability to compete effectively and could have an adverse effect on our business, financial condition, and results of operations.
As these technologies improve in the future, we may be required to make significant capital expenditures in order to remain competitive, which may increase our overall expenses and have an adverse effect on our business, financial condition, and results of operations.
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Among the instruments used by the Federal Reserve to implement these objectives are open market purchases and sales of U.S.
−Removed: government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank deposits.
+Added: government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank
These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits.
Their use also affects interest rates charged on loans or paid on deposits.
+Added: Until recently, we were in a rising rate environment.
Interest rate increases often result in larger payment requirements for our borrowers, which increases the potential for default.
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In a rising interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates.
−Removed: In an interest rate environment such as the one we experienced in 2023, loan origination and refinancing activity may decline and the rate of interest we pay on our interest-bearing deposits, borrowings, and other liabilities may increase more quickly than the rate of interest we receive on loans, securities, and other earning assets.
+Added: In 2024, the Federal Reserve’s interest rate policy shifted as inflationary pressure began to ease and economic growth moderated.
+Added: Following a period of aggressive rate hikes in 2022 and 2023 aimed at curbing inflation, the Federal Reserve began lowering rates in 2024, with the Federal Funds target rate ranging from 5.25% to 5.5% at year-end 2023, compared to its range of 4.25% to 4.50% at year end 2024.
+Added: Interest rate decreases can lead to increased prepayments of loans and mortgage-backed securities as borrowers refinance their loans to reduce borrowing costs.
+Added: Under these circumstances, we are subject to reinvestment risk as we may have to redeploy such repayment proceeds into lower yielding loans or investments, which would likely hurt our income.
+Added: It is unclear whether interest rates will continue to decline in 2025.
Changes in monetary policy, including changes in interest rates, could not only influence the interest we receive on loans and investment securities and the amount of interest we pay on deposits and borrowings, but such changes could also affect:
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Individual interest rates or rate indices underlying various interest-earning assets and interest-bearing liabilities may not change in the same degree over a given time period (basis risk), and interest rate relationships may change across the spectrum of interest-earning asset and interest-bearing liability maturities (yield curve risk), including a prolonged flat or inverted yield curve environment.
−Removed: For example, during 2023 inflation and rapid increases in interest rates led to a decline in the trading value of previously issued government securities with interest rates below then-current market interest rates, leading in turn to losses on the sale of such instruments by certain financial institutions, related effects on liquidity, and unrealized losses for institutions holding onto such instruments.
Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations.
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In addition, our reputation and customer relationships could be damaged due to our practices related to climate change, including our or our customers’ involvement in certain industries or projects associated with causing or exacerbating climate change.
−Removed: Moreover, the federal banking regulators are increasingly focused on the physical and financial risks to financial institutions associated with climate change, which may result in increased requirements regarding the disclosure and management of climate risks and related lending activities, as well as increased compliance costs.
+Added: Moreover, over the past few years, federal banking regulators increasingly focused on the physical and financial risks to financial institutions associated with climate change, which may result in increased requirements regarding the disclosure and management of climate risks and related lending activities, as well as increased compliance costs.
+Added: While federal regulators are expected to focus less on climate-related risks given the change in the U.S.
+Added: presidential administration in January 2025, some states are more active in climate-related regulation.
Risks Related to Our Operations
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These losses could have an adverse effect on our business, financial condition, and results of operations.
−Removed: For example, in March 2023, two large financial institutions were closed and entered FDIC receivership in each case due primarily to liquidity concerns.
−Removed: Although the Department of the Treasury, the Federal Reserve, and the FDIC stated that all depositors of those two institutions would have access to their deposits, including funds held in uninsured deposit accounts, it is not certain that depositors of future failed banks will receive similar treatment.
−Removed: Hence, borrowers under credit agreements, letters of credit and certain other financial instruments with any financial institution that is placed into receivership by the FDIC may be unable to access undrawn amounts thereunder.
Our risk management framework may not be effective in mitigating risks and/or losses to us.
−Removed: Our risk management framework is governed by various committees, including the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, the Enterprise Risk Management Committee, the Credit Risk Management Committee, the Asset/Liability Committee, the Trust & Wealth Management Committee, and the Regulatory Risk Committee.
−Removed: In lieu of a Chief Risk Officer, the Chief Credit Officer, the Executive Vice President for Enterprise Risk, and the Chief Financial Officer have primary responsibility for credit risk, enterprise risk, including regulatory risk, and asset and liability management risk, respectively, with each directly reporting to the Chief Executive Officer.
+Added: Our risk management framework is governed by various committees, including the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, the Enterprise Risk Management Committee, the Credit Risk Management Committee, the Asset and Liability Management Committee, the Trust & Wealth Management Committee, the Technology Committee, and the Regulatory Risk Committee.
+Added: The Chief Risk Officer has oversight responsibility for credit risk, enterprise risk, including regulatory risk, and asset and liability management risk, directly reporting to the Chief Executive Officer.
Our risk management framework is comprised of various processes, systems, and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate, and compliance.
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Demand for the Company’s services is influenced by general economic and consumer trends beyond the Company’s control, including disruptions in the financial services industry, in general, and events such as global pandemics and geopolitical conflict.
−Removed: There can be no assurance that our business and corresponding financial performance will not be adversely affected by general economic or consumer trends or events, including those affecting the financial services industry, in general, as well as pandemics, public health crises, weather catastrophes, acts of terrorism, war, and political instability.
−Removed: In particular, global economic markets have seen extensive volatility since the outbreak of the COVID-19 pandemic and the wars in Ukraine and the Middle East, which were further exacerbated by the closing of certain financial institutions by regulators in March 2023, and related disruptions in the financial services industry,
−Removed: In addition, recent events and attacks in the Red Sea on international shipping vessels threaten renewed inflationary pressures and the potential for short-term interest rates to remain elevated.
+Added: There can be no assurance that our business and corresponding financial performance will not be adversely affected by general economic or consumer trends or events, including those affecting the financial services industry.
+Added: Over the past few years, global markets have seen extensive volatility owing to a variety of factors, including high inflation, trade policies and tariffs, volatility in the capital markets, the failure of financial institutions, volatility in the housing market, interest and currency rate fluctuations, labor availability, supply chain disruptions, global pandemics and public health crises and the responses thereto, weather catastrophes and geopolitical instability, including shutdowns and threats of shutdowns of the U.S.
+Added: federal government, growing tensions between China and the U.S., the Russia-Ukraine war, conflict in the Middle East, and acts of terrorism.
These events have created, and may continue to create, significant disruption of the global economy and financial and labor markets.
If such conditions continue, recur or worsen, this may have a material adverse effect on the Company’s business, financial condition, and results of operations.
−Removed: Furthermore, such economic conditions have produced downward pressure on share prices and on the availability of credit for financial institutions and corporations, while also driving up interest rates, further complicating borrowing and lending activities.
+Added: Furthermore, such economic conditions have produced downward pressure on
+Added: share prices and on the availability of credit for financial institutions and corporations, while also driving up interest rates, further complicating borrowing and lending activities.
+Added: Additionally, the change in the U.S.
+Added: presidential administration has given rise to uncertainty regarding the potential impact of certain policies and regulatory approaches on the broader economy, particularly in the areas of immigration and trade.
+Added: For example, any significant new tariffs which may be imposed by the U.S.
+Added: may increase the cost of raw materials used in construction, which can have an adverse effect on commercial and residential real-estate markets through increased production costs, production delays, and challenges in launching new projects.
If current levels of market disruption and volatility continue or increase, the Company might experience reductions in business activity, increases in funding costs, decreases in asset values, additional write-downs and impairment charges, and lower profitability.
+Added: Our results may suffer if we do not effectively manage our expanded operations, including complying with any enhanced regulatory requirements.
+Added: The Company may face increased scrutiny from governmental authorities as a result of the size of its business, including if the total assets of the Company grow to exceed $10 billion as of December 31 of any calendar year.
+Added: Banks with $10 billion or more in total assets are, among other things:
+Added: examined directly by the CFPB with respect to various federal consumer financial laws;
+Added: subject to reduced dividends on any holdings of Federal Reserve Bank of Richmond common stock;
+Added: subject to limits on interchange fees pursuant to Section 920 of the Electronic Funds Transfer Act (known as the Durbin Amendment);
+Added: subject to certain enhanced prudential standards;
+Added: no longer treated as a “small institution” for FDIC deposit insurance assessment purposes;
+Added: and no longer eligible to elect to be subject to the CBLR.
+Added: Compliance with these additional ongoing requirements may necessitate additional personnel, the design and implementation of additional internal controls, and the incurrence of significant expenses, which could have a significant adverse effect on the Company’s financial condition or results of operations.
Risks Related to our Regulatory Environment
Our industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a materially adverse effect on our operations.
−Removed: We are subject to extensive regulation, supervision, and examination by the Federal Reserve, our primary federal regulator, the Virginia BFI, our chartering authority, and the FDIC, as insurer of our deposits.
−Removed: Such regulation and supervision govern the activities in which we and the Bank may engage and are intended primarily for the protection of the insurance fund and the depositors and borrowers of the Bank rather than for holders of our Common Stock.
+Added: Both the Company and the Bank are subject to extensive regulation, supervision, and examination by the Federal Reserve, our primary federal regulator and the Virginia BFI, our chartering authority.
+Added: The Bank is also subject to certain regulations of the FDIC, the insurer of the Bank’s deposits.
+Added: Such regulation, supervision, and examination govern the activities in which we and the Bank may engage and are intended primarily for the protection of the depositors and borrowers of the Bank, the financial system, and the DIF rather than for holders of our Common Stock.
Various consumer compliance laws also affect our operations.
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Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation, or supervisory action, may have a material impact on our operations.
−Removed: The earnings of the Bank, and therefore the earnings of the Company, are affected by changes in federal and state legislation and actions of various regulatory authorities.
+Added: The earnings of the Bank, and therefore the earnings of the Company, are affected by changes in federal and state legislation and the actions of various regulatory authorities.
We are subject to stringent capital requirements, which could have an adverse effect on our operations.
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Not including the capital conservation buffer, the capital rules require community bank holding companies and community banks to maintain a common equity Tier 1 to risk-weighted assets ratio of at least 4.5%, a Tier 1 capital to risk-weighted assets ratio of at least 6.0%, a total capital to risk-weighted assets ratio of at least 8.0%, and a leverage ratio of Tier 1 capital to total consolidated assets of at least 4.0%.
−Removed: The capital conservation buffer, which was phased in ratably over a four-year period beginning January 1, 2016, is designed to absorb losses during periods of economic stress.
+Added: The capital conservation buffer is designed to absorb losses during periods of economic stress.
Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the conservation buffer would result in limitations on an institution’s ability to make capital distributions and discretionary bonus payments.
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The Federal Reserve requires a bank holding company to act as a source of financial and managerial strength to its subsidiary banks and to commit resources to support its subsidiary banks.
−Removed: Under the “source of strength” doctrine that was codified by the Dodd-Frank Act, the Federal Reserve may require a bank holding company to make capital injections into a subsidiary bank at times when the bank holding company may not be inclined to do so and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank.
+Added: Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a subsidiary bank at times when the bank holding company may not be inclined to do so and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank.
Accordingly, we could be required to provide financial assistance to the Bank if it experiences financial distress.
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As of December 31, 2024, acquisition, construction & development loans were 50.6% of our total risk-based capital, and commercial real estate, including owner-occupied loans, were 353.6% of our total risk-based capital.
−Removed: Commercial real estate loans, including acquisition, construction & development and owner-occupied loans, have increased 19.7% during the prior 36 months.
+Added: Commercial real estate loans, including acquisition, construction & development and owner-occupied loans, have increased 193.5% during the prior 36 months, mostly due to the Merger.
We cannot guarantee that any risk management practices we implement will be effective in preventing losses relating to our commercial real estate portfolio.
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Nevertheless, we could be required to maintain higher levels of capital as a result of our commercial real estate concentration, which could limit our growth, require us to obtain additional capital, and have an adverse effect on our business, financial condition, and results of operations.
−Removed: Increased scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to Environmental, Social, and Governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.
−Removed: As a regulated financial institution listed on a national exchange, we face increased scrutiny from customers, regulators, investors, and other stakeholders related to ESG practices and disclosure.
−Removed: Investor advocacy groups, investment funds, and influential investors are increasingly focused on these practices, especially as they relate to climate risk, hiring practices, the diversity of the work force, and racial and social justice issues.
+Added: Evolving expectations from customers, regulators, investors, and other stakeholders with respect to Environmental, Social, and Governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.
+Added: As a regulated financial institution listed on a national exchange, we face evolving scrutiny from customers, regulators, investors, and other stakeholders related to ESG practices and disclosure.
+Added: Investor advocacy groups, investment funds, and influential investors are increasingly focused on these practices, especially as they relate to climate risk, hiring practices, the diversity of the work force, and racial and social justice issues, with various stakeholders advocating both for and against such policies.
+Added: Recently, ESG regulations and rules have faced a political backlash and are increasingly being successfully challenged in court.
+Added: Additionally, the U.S.
+Added: presidential administration has moved to overturn and reject all efforts aimed at promoting diversity, equity and inclusion in the federal government and has advocated for the same in the private sector.
+Added: While federal regulators have in past years called for increased ESG disclosure, it is expected that any federal ESG-related regulations under the U.S.
+Added: presidential administration will call for less disclosure or mandate the abandonment of ESG programs, while regulations at the state level will vary.
Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain customers and business partners, and stock price.
−Removed: New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.
−Removed: ESG-related costs, including costs with respect to compliance with any additional regulatory or disclosure requirements or expectations, could adversely impact our results of operations.
Risks Related to an Investment in Our Common Stock
We currently qualify as an “emerging growth company”, and the reduced disclosures and relief from certain other significant disclosure requirements that are available to emerging growth companies may make our Common Stock less attractive to investors.
−Removed: We are an “emerging growth company,” as defined in the federal securities laws, and we intend to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not emerging growth companies.
+Added: We are an “emerging growth company,” as defined in the federal securities laws, and we intend to continue to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not emerging growth companies.
These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, less extensive disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements to hold non-binding advisory votes on executive compensation and shareholder approval of any golden parachute payments not previously approved.
We could remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the first sale of our common equity securities in an offering registered under the Securities Act, though we may cease to be an emerging growth company earlier, if our gross revenues exceed $1.235 billion, if we issue more than $1.0 billion in non-convertible debt in a three-year period, or if the market value of our Common Stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31.
−Removed: If our merger with Summit is completed before June 30, 2024, as expected, we anticipate that we would no longer qualify as an emerging growth company.
Investors and securities analysts may find it more difficult to evaluate our Common Stock because we rely on one or more of these exemptions.
If, as a result, some investors find our Common Stock less attractive, there may be a less active trading market for our Common Stock, which could result in reductions and greater volatility in the prices of our Common Stock.
−Removed: The obligations associated with being a public company require significant resources and management attention, which may divert from our business operations.
−Removed: We have been subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act since April 2023.
−Removed: As a result, we have undertaken and are required to continue to undertake actions, including the preparation and distribution of periodic reports, proxy statements, and other shareholder communications in compliance with the federal securities laws and rules and complying with Nasdaq Stock Market listing standards and rules.
−Removed: The applicability of these rules and regulations and changes in laws, regulations, and standards relating to corporate governance and public disclosure, which have created uncertainty for public companies, have increased legal and financial compliance costs and made some activities more time consuming and costly.
−Removed: These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
−Removed: This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
−Removed: Our investment in compliance with existing and evolving regulatory requirements will result in increased administrative expenses that we have not historically incurred.
−Removed: These costs have materially increased and may continue to impact our general and administrative expenses.
−Removed: Furthermore, the need to maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing our strategic plan, which could prevent us from successfully implementing our growth initiatives and improving our business, results of operations, and financial condition.
−Removed: As an “emerging growth company” as defined in the JOBS Act, we intend to take advantage of certain temporary exemptions from various reporting requirements.
−Removed: When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them.
If we fail to design, implement and maintain effective internal control over financial reporting or remediate any future material weakness in our internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.
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We may issue additional equity securities, or engage in other transactions, which could affect the priority of our Common Stock, which may adversely affect the market price of our Common Stock.
−Removed: In connection with the pending merger with Summit, we will issue approximately 7,400,527 shares of Common Stock to Summit shareholders and will issue a new series of serial preferred stock to current holders of Summit preferred stock in exchange for the shares of the Summit preferred stock.
−Removed: Additionally, our Board may determine from time to time, that we need to raise additional capital by issuing additional shares of our Common Stock or other securities.
+Added: Our Board may determine from time to time, that we need to raise additional capital by issuing additional shares of our Common Stock or other securities.
Sales of substantial amounts of our Common Stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our Common Stock.
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As a result, if you acquire our Common Stock, you could lose some or all of your investment.
+Added: Holders of our junior subordinated debentures and preferred stock have rights that are senior to those of our common stockholders.
+Added: We have three statutory business trusts for which we became sponsors in connection with the Merger.
+Added: The trusts have issued mandatorily redeemable securities (the “capital securities”) for which we are obligated to third-party investors related, and hold our junior subordinated debentures (the “debentures”).
+Added: The debentures held by the trusts are their sole assets.
+Added: Our subordinated debentures of these unconsolidated statutory trusts totaled approximately $19.6 million excluding the related fair value mark incurred as of acquisition, at December 31, 2024.
+Added: Payments of the principal and interest on the trust preferred securities of the statutory trusts are conditionally guaranteed by us.
+Added: The junior subordinated debentures are senior to our shares of common stock.
+Added: As a result, we must make payments on the junior subordinated debentures before any dividends can be paid on our common stock and, in the event of our bankruptcy, dissolution or liquidation, the holders of the junior subordinated debentures must be satisfied before any distributions can be made on our common stock.
+Added: We have the right to defer distributions on the junior subordinated debentures (and the related trust preferred securities) for up to five (5) years, during which time no dividends may be paid on our common stock.
+Added: See Note 7 — Borrowed Funds in Notes to Consolidated Financial Statements for additional information regarding our trust preferred securities.
+Added: We also have 1,500 shares of our 6.0% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series 2021 outstanding, which is senior to our common stock with respect to dividends upon liquidation or dissolution of the Company.
+Added: While the regular dividends payable on such preferred stock are non-cumulative, we are not permitted to pay dividends on or repurchase our common stock to the extent we do not pay dividends on such preferred stock for each applicable dividend period.
Our Bylaws designate the United States District Court for the Eastern District of Virginia, Alexandria Division, or in the event that court lacks jurisdiction, the Circuit Court of the City of Alexandria, Virginia, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which may not be enforced and could discourage lawsuits against us and our directors and officers.
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Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, results of operations, and financial condition.
−Removed: Risks Relating to the Consummation of the Merger and Burke & Herbert Following the Merger
−Removed: We expect to incur substantial costs related to the merger and integration.
−Removed: We have incurred and expect to incur a number of non-recurring costs associated with the merger.
−Removed: These costs include legal, financial advisory, accounting, consulting, and other advisory fees, severance/employee benefit-related costs, public company filing fees, and other regulatory fees, financial printing, and other printing costs, and other related costs.
−Removed: Some of these costs are payable regardless of whether the merger is completed.
−Removed: We have also incurred and expect to incur significant, non-recurring costs in connection with negotiating the merger agreement and closing the merger.
−Removed: In addition, the continuing corporation will incur integration costs following the completion of the merger, as we integrate their businesses, including facilities and systems consolidation costs and employment-related costs.
−Removed: Burke & Herbert and Summit may also incur additional costs to maintain employee morale and to retain key employees.
−Removed: There are a large number of processes, policies, procedures, operations, technologies, and systems that may need to be integrated, including purchasing, accounting and finance, payroll, compliance, treasury management, branch operations, vendor management, risk management, lines of business, pricing, and benefits.
−Removed: While Burke & Herbert and Summit have assumed that a certain level of costs will be incurred, there are many factors beyond their control that could affect the total amount or the timing of the integration costs.
−Removed: Moreover, many of the costs that will be incurred are, by their nature, difficult to estimate accurately.
−Removed: These integration costs may result in the continuing corporation taking charges against earnings following the completion of the merger, and the amount and timing of such charges are uncertain at present.
−Removed: There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction and integration costs over time.
−Removed: Anticipated future merger and integration-related pre-tax costs are currently estimated to be $57 million.
−Removed: Combining Burke & Herbert and Summit may be more difficult, costly, or time-consuming than expected, and Burke & Herbert and Summit may fail to realize the anticipated benefits of the merger.
−Removed: The merger would combine two financial institutions of relatively similar asset size.
−Removed: The success of the merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of Burke & Herbert and Summit.
−Removed: To realize the anticipated benefits and cost savings from the merger, Burke & Herbert and Summit must successfully integrate and combine their businesses in a manner that permits those cost savings to be realized without adversely affecting current revenues and future growth.
−Removed: If Burke & Herbert and Summit are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully, or at all, or may take longer to realize than expected.
−Removed: In addition, the actual cost savings of the merger could be less than anticipated, and integration may result in additional and unforeseen expenses.
−Removed: An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses, and operating results of the continuing corporation following the completion of the merger, which may adversely affect the value of the common stock of the continuing corporation following the completion of the merger.
−Removed: Burke & Herbert and Summit have operated and, until the completion of the merger, must continue to operate, independently.
−Removed: It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses, or inconsistencies in standards, controls, procedures, and policies that adversely affect the companies’ ability to maintain relationships with clients, customers, depositors, and employees or to achieve the anticipated benefits and cost savings of the merger.
−Removed: Integration efforts between the two companies may also divert management attention and resources.
−Removed: These integration matters could have an adverse effect on each of Burke & Herbert and Summit during this transition period and for an undetermined period after completion of the merger on the continuing corporation.
−Removed: Furthermore, the board of directors of the continuing corporation will consist of former directors from each of Burke & Herbert and Summit.
−Removed: Combining the boards of directors of each company into a single board could require the reconciliation of differing priorities and philosophies.
−Removed: Our results following the merger may suffer if we do not effectively manage our expanded operations, including complying with any enhanced regulatory requirements.
−Removed: Following the merger, the size of our business will increase beyond the current size of either Burke & Herbert’s or Summit’s business.
−Removed: Our success as the continuing corporation will depend, in part, upon our ability to manage this expanded business, which may pose challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity.
−Removed: There can be no assurances that the continuing corporation will be successful or that it will realize the expected operating efficiencies, revenue enhancement, or other benefits currently anticipated from the merger.
−Removed: The continuing corporation may also face increased scrutiny from governmental authorities as a result of the increased size of its business, including if the total assets of the continuing corporation grow to exceed $10 billion as of December 31 of any calendar year.
−Removed: Banks with $10 billion or more in total assets are, among other things:
−Removed: examined directly by the CFPB with respect to various federal consumer financial laws;
−Removed: subject to reduced dividends on any holdings of Federal Reserve Bank of Richmond common stock;
−Removed: subject to limits on interchange fees pursuant to the Durbin amendment to the Dodd-Frank Act;
−Removed: subject to certain enhanced prudential standards;
−Removed: no longer treated as a “small institution” for FDIC deposit insurance assessment purposes;
−Removed: and no longer eligible to elect to be subject to the “community bank leverage ratio”.
−Removed: Compliance with these additional ongoing requirements may necessitate additional personnel, the design and implementation of additional internal controls, and the incurrence of significant expenses, which could have a significant adverse effect on Burke & Herbert’s financial condition or results of operations.
−Removed: The continuing corporation may be unable to retain Burke & Herbert and/or Summit personnel successfully after the merger is completed.
−Removed: The success of the merger will depend, in part, on our ability to retain the talents and dedication of key employees currently employed by Burke & Herbert and Summit.
−Removed: It is possible that these employees may decide not to remain with Burke & Herbert or Summit, as applicable, while the merger is pending or with the continuing corporation after the merger is consummated.
−Removed: If Burke & Herbert and Summit are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, Burke & Herbert and Summit could face disruptions in their operations, loss of existing customers, loss of key information, expertise, or know-how, and unanticipated additional recruitment costs.
−Removed: In addition, following the merger, if key employees terminate their employment, the continuing corporation’s business activities may be adversely affected, and management’s attention may be diverted from successfully hiring suitable replacements, all of which may cause the continuing corporation’s business to suffer.
−Removed: Burke & Herbert and Summit also may not be able to locate or retain suitable replacements for any key employees who leave either company.
−Removed: Regulatory approvals necessary for the merger to close may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the continuing corporation following the merger.
−Removed: Before the merger and the bank merger may be completed, various approvals and consents must be obtained from the Federal Reserve Board (unless a waiver is granted), the FDIC, the VBFI, the West Virginia Division of Financial Institutions (the “WVDFI”), and other regulatory authorities in the United States.
−Removed: In determining whether to grant these approvals, such regulatory authorities consider a variety of factors, including the regulatory standing of each party and other considerations.
−Removed: These approvals could be delayed or not obtained at all, including due to an adverse development in either party’s regulatory standing or in any other factors considered by regulators when granting such approvals;
−Removed: governmental, political, or community group inquiries, investigations, or opposition;
−Removed: or changes in legislation or the political environment, generally.
−Removed: Any approvals granted may impose terms and conditions, limitations, obligations, or costs, or place restrictions on the conduct of the continuing corporation’s business or require changes to the terms of the transactions contemplated by the merger agreement.
−Removed: There can be no assurance that regulators will not impose any such conditions, limitations, obligations, or restrictions and that such conditions, limitations, obligations, or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement,
−Removed: imposing additional material costs on or materially limiting the revenues of the continuing corporation following the merger, or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe.
−Removed: In addition, there can be no assurance that any such conditions, terms, obligations, or restrictions will not result in the delay or abandonment of the merger.
−Removed: The completion of the merger is conditioned on the receipt of the requisite regulatory approvals and the expiration of all statutory waiting periods without the imposition of any material burdensome regulatory condition.
−Removed: Additionally, the completion of the merger is conditioned on the absence of certain orders, injunctions, or decrees by any court or governmental entity of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the merger agreement.
−Removed: In addition, despite the parties’ commitments to using their reasonable best efforts to comply with conditions imposed by regulators, under the terms of the merger agreement, neither Burke & Herbert nor Summit, nor any of their respective subsidiaries, is permitted (without the written consent of the other party), to take any action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining the required permits, consents, approvals, and authorizations of governmental entities or regulatory agencies that would reasonably be expected to have a material adverse effect on the continuing corporation and its subsidiaries, taken as a whole, after giving effect to the merger and the bank merger.
−Removed: The merger agreement may be terminated in accordance with its terms and the merger may not be completed.
−Removed: The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger.
−Removed: Those conditions include, among others:
−Removed: (i) authorization for listing on Nasdaq of the shares of Burke & Herbert common stock to be issued in the merger, subject to official notice of issuance;
−Removed: (ii) the receipt of the requisite regulatory approvals, including the approval of the Federal Reserve Board (unless a waiver is granted), the FDIC, the VBFI and the WVDFI ;
−Removed: and (iii) the absence of any order, injunction, decree, or other legal restraint preventing the completion of the merger, the bank merger, or any of the other transactions contemplated by the merger agreement or making the completion of the merger, the bank merger, or any of the other transactions contemplated by the merger agreement illegal.
−Removed: Each party’s obligation to complete the merger is also subject to certain additional customary conditions, including (a) subject to applicable materiality standards, the accuracy of the representations, and warranties of the other party, (b) the performance in all material respects by the other party of its obligations under the merger agreement, and (c) the receipt by each party of an opinion from its counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.
−Removed: While certain conditions to the merger have been achieved to date, including the requisite approval of Burke & Herbert and Summit shareholders, the remaining conditions to the closing may not be fulfilled in a timely manner or at all, and, accordingly, the merger may not be completed.
−Removed: In addition, the parties can mutually decide to terminate the merger agreement at any time or Burke & Herbert or Summit may elect to terminate the merger agreement in certain other circumstances.
−Removed: Failure to complete the merger could negatively impact us.
−Removed: If the merger is not completed for any reason, there may be various adverse consequences and we may experience negative reactions from the financial markets and from their respective customers and employees.
−Removed: For example, our business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger without realizing any of the anticipated benefits of completing the merger.
−Removed: Additionally, if the merger agreement is terminated, the market price of our common stock could decline to the extent that current market prices reflect a market assumption that the merger will be beneficial and will be completed.
−Removed: We also could be subject to litigation related to any failure to complete the merger or to proceedings commenced against Burke & Herbert or Summit to perform their respective obligations under the merger agreement.
−Removed: If the merger agreement is terminated under certain circumstances, either Burke & Herbert or Summit may be required to pay a termination fee of $14.86 million to the other party.
−Removed: Additionally, we have incurred and will continue to incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement.
−Removed: If the merger is not
−Removed: completed, Burke & Herbert and Summit will have paid these expenses without realizing the expected benefits of the merger.
−Removed: In connection with the merger, we will assume Summit’s outstanding debt obligations, and our level of indebtedness following the completion of the merger could adversely affect our ability to raise additional capital and to meet our obligations under our existing indebtedness.
−Removed: In connection with the merger, we will assume Summit’s outstanding indebtedness.
−Removed: Our existing debt, together with any future incurrence of additional indebtedness, and the assumption of Summit’s outstanding indebtedness could have important consequences for the continuing corporation’s creditors and the continuing corporation’s shareholders.
−Removed: For example, it could:
−Removed: • limit the continuing corporation’s ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions, and general corporate or other purposes;
−Removed: • restrict the continuing corporation from making strategic acquisitions or cause the continuing corporation to make non-strategic divestitures;
−Removed: • restrict the continuing corporation from paying dividends to its shareholders;
−Removed: • increase the continuing corporation’s vulnerability to general economic and industry conditions; and
−Removed: • require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on the continuing corporation’s indebtedness, thereby reducing the continuing corporation’s ability to use cash flows to fund its operations, capital expenditures, and future business opportunities.
−Removed: We will be subject to business uncertainties and contractual restrictions while the merger is pending.
−Removed: Uncertainty about the effect of the merger on employees and customers may have an adverse effect on us.
−Removed: These uncertainties may impair our ability to attract, retain, and motivate key personnel until the merger is completed, and could cause customers and others that deal with us to seek to change existing business relationships.
−Removed: In addition, subject to certain exceptions, Burke & Herbert and Summit have each agreed to operate its business in the ordinary course in all material respects and to refrain from taking certain actions that may adversely affect its ability to consummate the transactions contemplated by the merger agreement on a timely basis without the consent of the other party.
−Removed: These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the merger.
−Removed: The elevated interest rate environment may adversely impact the fair value adjustments of investments and loans acquired in the merger.
−Removed: Upon the closing of the merger, the continuing corporation will need to adjust the fair value of Summit’s investment and loan portfolios.
−Removed: The elevated interest rate environment could have the effect of increasing the magnitude of the purchase accounting marks relating to such fair value adjustments, thereby increasing initial tangible book value dilution, extending the tangible book value earn-back period, and negatively impacting the continuing corporation’s capital ratios, which may result in the continuing corporation taking steps to strengthen its capital position.
−Removed: Our shareholders will have reduced ownership and voting interest in the continuing corporation after the consummation of the merger and will exercise less influence over management.
−Removed: Our shareholders currently have the right to vote in the election of the board of directors and on other matters affecting Burke & Herbert and Summit, respectively.
−Removed: When the merger is completed, each Burke & Herbert shareholder and each Summit shareholder will become a holder of our common stock with a percentage ownership of the continuing corporation that is smaller than the holder’s percentage ownership of either Burke & Herbert or Summit individually, as applicable, prior to the consummation of the merger.
−Removed: Based on the number of shares of Burke & Herbert common stock and Summit common stock outstanding as of the close of business on the respective record dates, and based on the number of shares of Burke & Herbert common stock expected to be issued in the
−Removed: merger, the former Summit shareholders, as a group, are estimated to own approximately 50% of the outstanding shares of the continuing corporation immediately after the merger and current Burke & Herbert shareholders as a group are estimated to own approximately 50% of the outstanding shares of the continuing corporation immediately after the merger.
−Removed: Because of this, our shareholders may have less influence on the management and policies of the continuing corporation than they now have on the management and policies of Burke & Herbert.
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.