What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-17 compared with 2024-03-22 · 623 added, 333 removed, 1483 unchanged (39% of the section changed)

17 unchanged sentences

(the "Company") as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the three-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principal

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2023, due to the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification No.326, Financial Instruments – Credit Losses (ASC 326).

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2023, due to the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification No.326, Financial Instruments – Credit Losses (ASC 326).

The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

27 unchanged sentences

Net loans 5,604,196 2,062,455

Other real estate owned 2,783 —

Premises and equipment, net 132,270 61,128

Accrued interest receivable 34,454 15,895

Intangible assets 57,300 —

Goodwill 32,783 —

Company-owned life insurance 182,834 94,159

5 unchanged sentences

Total deposits 6,515,239 3,001,881

Borrowed funds 272,000 343,100

Short-term borrowings 365,000 272,000

Subordinated debentures, net 94,872 —

Subordinated debentures owed to unconsolidated subsidiary trusts 17,013 —

Accrued interest and other liabilities 89,904 28,948

2 unchanged sentences

Shareholders’ Equity

Preferred Stock, $ 1.00 par value per share;

Preferred stock and related surplus, $ 1.00 par value per share;

2,000,000 shares authorized;

no shares issued or outstanding

1,500 shares issued and outstanding at December 31, 2024, zero shares issued and outstanding at December 31, 2023

Common stock 7,770 4,000

$ 0.50 par value;

20,000,000 shares authorized and 8,000,000 issued at December 31, 2023, and December 31, 2022;

7,428,710 shares outstanding at December 31, 2023, and 7,425,760 shares outstanding at December 31, 2022

Additional paid-in capital 14,495 12,282

40,000,000 shares authorized, 15,540,394 shares issued and 14,969,104 shares outstanding at December 31, 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 401,172 14,495

Retained earnings 434,106 427,333

11 unchanged sentences

Interest income

Loans, including fees $ 101,800 $ 73,640 $ 73,170

Taxable loans, including fees $ 311,303 $ 101,800 $ 73,640

Tax-exempt loans, including fees 118 — —

Taxable securities 39,817 37,179 29,616

4 unchanged sentences

Deposits 118,664 39,195 3,742

Borrowed funds 13,856 5,136 1,432

Short-term borrowings 14,189 13,856 5,136

Subordinated debt 7,412 — —

Other interest expense 111 86 63

1 unchanged sentence

Net interest income 225,785 93,759 103,692

Credit loss expense - loans and available-for-sale securities 235 ( 7,466 ) ( 1,002 )

Credit loss expense - off-balance sheet credit exposures ( 21 ) — —

Credit loss expense (recapture) - loans and available-for-sale securities 20,475 235 ( 7,466 )

Credit loss expense (recapture) - off-balance sheet credit exposures 3,745 ( 21 ) —

Total provision for (recapture of) credit losses 24,220 214 ( 7,466 )

17 unchanged sentences

Net income 35,708 22,692 44,013

Preferred stock dividends 675 — —

Net income applicable to common shares $ 35,033 $ 22,692 $ 44,013

Earnings per common share:

13 unchanged sentences

Reclassification adjustment for loss (gain) on securities, net of tax of $ 312 for 2024, $( 24 ) for 2023, and ($ 95 ) for 2022

( 1,045 ) 88 359

Reclassification adjustment for loss (gain) on fair value hedge, net of tax of $ 37 for 2024, $( 215 ) for 2023, and $ — for 2022

( 123 ) 810 —

Defined benefit pension plans:

5 unchanged sentences

Reclassification adjustment for losses (gains) included in net income, net of tax of $ 502 for 2024, $( 367 ) for 2023, and $( 35 ) for 2022

( 1,681 ) 1,382 132

Total other comprehensive income (loss) 7,774 36,001 ( 146,450 )

11 unchanged sentences

Stock Shareholders’

Shares Outstanding Amount

Preferred Stock and Surplus Shares Outstanding Amount

Balance December 31, 2021

8 unchanged sentences

Net income — — — — 22,692 — — 22,692

CECL adjustment — — — — ( 3,439 ) — — ( 3,439 )

Other comprehensive income (loss) — — — — — 36,001 — 36,001

5 unchanged sentences

Net income — — — — 35,708 — — 35,708

CECL adjustment — — — ( 3,439 ) — — ( 3,439 )

Acquisition of Summit Financial Group, Inc.

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

Other comprehensive income (loss) — — — — — 7,774 — 7,774

2 unchanged sentences

— — — — ( 28,260 ) — — ( 28,260 )

Preferred stock cash dividends, declared — — — — ( 675 ) — — ( 675 )

Share-based compensation expense, net — 134,622 67 3,348 — — — 3,415

1 unchanged sentence

$ 10,413 14,969,104 $ 7,770 $ 401,172 $ 434,106 $ ( 95,720 ) $ ( 27,584 ) $ 730,157

(1) Cash dividends, paid and accrued for the year ending December 31, 2023, include dividends paid of $ 15,747 thousand and $ 551 thousand of dividends accrued on share-based compensation but unpaid as of December 31, 2023.

(1) Cash dividends, paid and accrued for the year ending December 31, 2024, include dividends paid of $ 28.0 million and $ 299.0 thousand of dividends accrued on share-based compensation but unpaid as of December 31, 2024.

See Notes to Consolidated Financial Statements.

8 unchanged sentences

Depreciation and amortization of fixed assets 5,865 2,872 3,053

Amortization of other intangible assets 11,542 — —

Amortization on assumed liabilities 10,172 — —

Accretion income related to acquired loans ( 40,876 ) — —

Amortization of housing tax credits 5,432 5,591 6,147

Realized loss on sales of available-for-sale securities 112 454 4

Realized (gain) loss on sales of available-for-sale securities ( 1,357 ) 112 454

Realized (gain) on sales of OREO property ( 172 ) — —

Provision for (recapture of) credit losses 24,220 214 ( 7,466 )

10 unchanged sentences

Originations of loans held-for-sale ( 37,477 ) ( 15,536 ) ( 2,300 )

(Increase) in accrued interest receivable ( 414 ) ( 228 ) ( 1,469 )

Decrease in other assets 3,851 501 2,581

(Increase) decrease in accrued interest receivable 3,030 ( 414 ) ( 228 )

(Increase) decrease in other assets ( 32,499 ) 3,851 501

Increase in accrued interest payable and other liabilities 63,660 6,475 3,960

4 unchanged sentences

Purchases of securities available-for-sale, net ( 622,760 ) ( 33,221 ) ( 367,615 )

Net cash from merger 52,607 — —

Sales of restricted stock 40,572 29,880 22,718

Purchases of restricted stock ( 67,683 ) ( 19,402 ) ( 27,081 )

Proceeds from sales of OREO properties 758 — —

Proceeds from sales of property and equipment — 3,383 8,260

2 unchanged sentences

(Increase) decrease in loans made to customers, net 92,170 ( 200,535 ) ( 151,352 )

Net cash flows (used in) investing activities $ ( 43,168 ) $ ( 127,411 ) $ ( 384,126 )

Net cash flows provided by (used in) investing activities $ 123,557 $ ( 43,168 ) $ ( 127,411 )

Burke & Herbert Financial Services Corp.

Consolidated Statements of Cash Flows

Years Ended December 31, 2024, 2023, and 2022

(In thousands, except share and per share data)

Cash Flows from Financing Activities

4 unchanged sentences

Proceeds from employee stock purchase program 259 206 —

Burke & Herbert Financial Services Corp.

Consolidated Statements of Cash Flows

Years Ended December 31, 2023, 2022, and 2021

(In thousands, except share and per share data)

Cash dividends paid ( 28,636 ) ( 15,747 ) ( 15,742 )

Issuance of common stock 3,242 — —

Treasury stock transactions — 141 97

Net cash flows provided by (used in) financing activities $ ( 118,540 ) $ ( 5,138 ) $ 39,286

(Decrease) in cash and cash equivalents ( 5,797 ) ( 27,068 ) ( 151,341 )

(Decrease) increase in cash and cash equivalents 90,816 ( 5,797 ) ( 27,068 )

Cash and cash equivalents

4 unchanged sentences

Interest paid to depositors $ 114,741 $ 37,573 $ 3,411

Interest paid on other borrowed funds 7,975 4,324 1,430

Interest paid on short-term borrowings 17,049 7,975 4,324

Interest paid on subordinated debt and trust preferred securities 7,412 — —

Interest paid on finance lease 110 86 63

6 unchanged sentences

Financing of sale from loans held-for-sale — — 9,000

Common stock issued for merger, net 387,032 — —

Preferred stock issued for merger, net 10,413 — —

Fair value of assets purchased in merger 4,503,102 — —

Fair value of liabilities assumed in merger 4,138,440 — —

See Notes to Consolidated Financial Statements.

2 unchanged sentences

The consolidated financial statements include Burke & Herbert Financial Services Corp.

(“Burke & Herbert”) and its wholly-owned subsidiary Burke & Herbert Bank & Trust Company (“the Bank”), together referred to as “the Company.” Intercompany transactions and balances are eliminated in consolidation.

Burke & Herbert Financial Services Corp.

was organized as a Virginia corporation on September 14, 2022, to serve as the holding company for the Bank.

Burke & Herbert commenced operations as a bank holding company on October 1, 2022, following a reorganization transaction in which it became the Bank’s holding company.

(“Burke & Herbert”) and its wholly-owned subsidiary Burke & Herbert Bank & Trust Company (“the Bank”), together referred to as “the Company” for purposes of the Notes to the Financial Statements.

Intercompany transactions and balances are eliminated in consolidation.

Burke & Herbert was organized as a Virginia corporation in 2022 to serve as the holding company for the Bank.

Burke & Herbert became a bank holding company when it commenced operations on October 1, 2022, following a reorganization transaction in which it acquired control of the Bank under the BHCA.

This transaction was treated as an internal reorganization as all shareholders of the Bank became shareholders of Burke & Herbert.

In September 2023, Burke & Herbert elected to be a financial holding company.

As a financial holding company, Burke & Herbert is subject to regulation and supervision by the Federal Reserve.

Burke & Herbert has no material operations and owns 100 % of the Bank.

Burke & Herbert has no material operations other than owning the Bank.

In September 2023, the Burke & Herbert elected to become a financial holding company under the BHCA.

As a financial holding company of a Virginia state bank, Burke & Herbert is subject to regulation, supervision, and examination by the Federal Reserve and the Virginia BFI.

The Bank is a Virginia chartered commercial bank that commenced operations in 1852.

The Bank is supervised and regulated by the Federal Deposit Insurance Corporation (the “FDIC”) and the Bureau of Financial Institutions of the Virginia State Corporation Commission (the “Virginia BFI”).

The Bank’s primary market area includes northern Virginia, and it has 23 branches throughout the Northern Virginia region and commercial loan offices in Fredericksburg, Loudoun County, and Richmond, Virginia, and in Bethesda, Maryland.

The Bank became a member of the Federal Reserve System on December 31, 2024.

The Bank is subject to regulation, supervision, and examination by the Federal Reserve (through the Federal Reserve Bank of Richmond) and the Virginia BFI.

The Bank’s primary market area includes northern Virginia and West Virginia, and it has over 77 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.

1 unchanged sentence

The Company’s loan portfolio includes commercial and consumer loans, a substantial portion of which are secured by real estate.

Pending Merger with Summit Financial Group, Inc.

On August 24, 2023, the Company and Summit Financial Group, Inc.

(“Summit”), entered into an Agreement and Plan of Reorganization and Plan of Merger (the “merger agreement”) pursuant to which Summit will merge with and into Burke & Herbert, with Burke & Herbert as the continuing corporation (the “merger”).

Immediately following the merger, Summit Community Bank, Inc., a West Virginia banking corporation (“SCB”) and a wholly-owned direct subsidiary of Summit, will merge with and into the Bank, with the Bank as the continuing bank (the “bank merger,” and together with the merger, the “mergers”).

In the merger, Summit shareholders will receive 0.5043 shares of Burke & Herbert common stock for each share of Summit common stock they own (the “exchange ratio”), subject to the payment of cash in lieu of fractional shares.

In addition, each share of Summit series 2021 preferred stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive one share of a newly created series of Burke & Herbert preferred stock having rights, preferences, privileges, and voting powers and limitations and restrictions thereof that are not materially less or more favorable to the holders of the Summit series 2021 preferred stock.

On December 6th, the requisite approvals of the Company’s and Summit’s stockholders were received, and the completion of the merger remains subject to the receipt of all required regulatory approvals and the fulfillment of other customary closing conditions.

Subsequent events

The Company has evaluated subsequent events for recognition and disclosure through March 22, 2024, which is the date the financial statements were available to be issued.

Merger with Summit Financial Group, Inc.

Effective on the Closing Date, Burke & Herbert completed the M erger with Summit, pursuant to the August 24, 2023 Merger Agreement.

Pursuant to the Merger Agreement, on the Closing Date, (i) Summit merged with and into Burke & Herbert with Burke & Herbert as the surviving entity, and (ii) immediately following the Merger, SCB merged with and into the Bank, with the Bank as the surviving bank.

In the Merger, holders of Summit common stock outstanding at the effective time of the Merger received 0.5043 shares of Burke & Herbert Common Stock for each share of Summit common stock they owned, subject to the payment of cash in lieu of fractional shares.

The total aggregate consideration payable in the Merger was approximately 7,405,772 shares of Burke & Herbert Common Stock.

Additionally, each share of the Summit Series 2021 Preferred Stock issued and outstanding was converted into the right to receive a share of the newly created Burke & Herbert Series 2021 Preferred Stock.

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

Use of estimates

To prepare financial statements in conformity with U.S.

generally accepted accounting principles (“GAAP”), management makes estimates and assumptions based on available information that affects the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

2 unchanged sentences

Cash flows from customer loans, federal funds purchased, securities sold under agreements to repurchase, and deposits are reported on a net basis.

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

Restriction on cash

19 unchanged sentences

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists, and an allowance for credit losses is recorded for the credit

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

loss, limited by the amount that the fair value is less than the amortized cost basis.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists, and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

Any impairment that has not been recorded through an ACL is recognized in other comprehensive income.

5 unchanged sentences

Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical, or a similar, investment.

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

Due to the nature of, and restrictions placed upon, certain equity securities have been classified as restricted stock and are carried at cost.

21 unchanged sentences

Changes in the fair value of derivatives not designated or that do not qualify for hedge accounting are reported currently in earnings as non-interest income.

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

Accrued settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense based on the item being hedged.

4 unchanged sentences

The Company formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items.

The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income.

18 unchanged sentences

For all portfolio segments, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, a history of on-time payments has again been established, and future payments are reasonably assured.

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

Concentration of credit risk

8 unchanged sentences

The ACL is measured and recorded upon the initial recognition of a financial asset.

The ACL is reduced by charge-offs, net of recoveries of previous losses, and is increased or decreased by a provision for (or recapture of) credit losses, which is recorded in the Consolidated Statements of Income.

The ACL is reduced by charge-offs, net of

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

recoveries of previous losses, and is increased or decreased by a provision for (or recapture of) credit losses, which is recorded in the Consolidated Statements of Income.

The ACL for expected credit losses is determined based on a quantitative assessment of two categories of loans:

14 unchanged sentences

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

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

specific reserve may be assigned if the measured value of the loan using one of the before mentioned methods is less than the current carrying value of the loan.

A specific reserve may be assigned if the measured value of the loan using one of the before mentioned methods is less than the current carrying value of the loan.

Under CECL, for collateral-dependent loans, the Company has adopted the practical expedient to measure the ACL based on the fair value of the collateral.

4 unchanged sentences

For loans analyzed on the basis of projected future principal and interest cash flows, the Company will discount the expected cash flows at the effective interest rate of the loan, and an ACL would result if the present value of the expected cash flows was less than the amortized cost basis of the loan.

When the discounted cash flow method is used to determine the ACL, management does not adjust the effective interest rate used to discount cash flows to incorporate expected prepayments.

When the discounted cash flow method is used to determine the ACL,

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

management does not adjust the effective interest rate used to discount cash flows to incorporate expected prepayments.

Allowance for credit losses - off-balance sheet credit exposures

3 unchanged sentences

The ACL for unfunded commitments is included in accrued interest and other liabilities on the Company’s Consolidated Balance Sheets.

Purchased credit deteriorated (PCD) loans

The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination.

PCD loans are recorded at the amount paid.

An allowance for credit losses is determined using the same methodology as other loans held for investment.

The initial allowance for credit losses determined on a collective basis is allocated to the individual loans.

The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis.

The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount of premium, which is amortized into interest income over the life of the loan.

Subsequent changes to the allowance for credit losses are recorded through credit loss expense .

Premises and equipment

13 unchanged sentences

After foreclosure, valuations periodically are performed by management and the foreclosed assets held-for-sale are carried at the lower of cost or fair value less estimated costs of disposal.

Any write-down to fair value at the time of transfer to foreclosed assets is charged

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

to the allowance for credit losses.

Any write-down to fair value at the time of transfer to foreclosed assets is charged to the allowance for credit losses.

All subsequent gains on sale, losses on sale, and additional write-downs are included in net gains/(losses) on other real estate owned.

Revenue and expenses from the operations of foreclosed assets are included in other non-interest income and other operating expenses.

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

The Company accounts for income taxes in accordance with income tax accounting guidance.

22 unchanged sentences

401(k) plan & other plans

The Company also has a defined contribution plan (The Investment and Savings Plan) with a salary deferral provision, which covers all employees in the month following their date of hire if they have reached the age of 18.

The Company maintains the 401(k) plans of both legacy Summit and Burke & Herbert.

Under both of these plans, eligible employees may contribute a percentage of their compensation, and the Company matches a portion of the employee’s contribution based on the specific 401(k) plan.

The contribution amounts matched by the Company depend on the 401(k) plan.

The 401(k) expense is the amount of the matching contributions.

34 unchanged sentences

Changes in assumptions or in market conditions could significantly affect the estimates.

Goodwill and other intangible assets

Goodwill arises from business combinations and is determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

Goodwill and intangible assets acquired in a business combination and determined to have indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that an impairment test should be performed.

The Company has selected September 30 as the date to perform the annual impairment test.

Intangible assets with finite useful lives are amortized over their estimated useful lives to their estimated residual values.

Amortized intangibles must be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset (group) might not be recoverable.

An impairment loss related to intangible assets with finite useful lives is recognized if the carrying amount of the intangible asset is not recoverable and its carrying amount exceeds its fair value.

After the impairment loss is recognized, the adjusted carrying amount of the intangible asset shall be its new accounting basis.

Goodwill is the only intangible asset with an indefinite life on our balance sheet.

Other intangible assets consists of core deposit and acquired customer relationship intangible assets arising from whole bank and branch acquisitions and are amortized on an accelerated method over their estimated useful lives, which range from 7 to 10 years .

Share-based compensation

5 unchanged sentences

The Company operates in one segment – Community Banking and the financial performance of this one segment is used to make resource allocations and performance decisions.

The Company’s Chief Executive Officer is in charge of allocating the Company’s resources and assessing performance, and has been identified as the chief operating decision maker.

While the chief decision-maker monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis.

5 unchanged sentences

Adoption of new accounting standards

On November 27, 2023 the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures .

The amendments “improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.” In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

disclosure requirements.

The purpose of the amendments is to enable “investors to better understand an entity’s overall performance” and assess “potential future cash flows.”

The ASU applies to all public entities that are required to report segment information in accordance with ASC 280.

The enhanced segment disclosure requirements apply “retrospectively to all prior periods presented in the financial statements.” The significant segment expense and other segment item amounts “disclosed in prior periods shall be based on the significant segment expense categories identified and disclosed in the period of adoption.” The amendments in ASU 2023-07 were effective for all public entities for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company adopted the standard with the fiscal year ending December 31, 2024, and it did not have a material impact on the financial statements.

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

8 unchanged sentences

Retained earnings, net of deferred taxes, decreased by $ 3.4 million.

Results for reporting periods

Results for reporting periods beginning after January 1, 2023, are presented under ASU 2016-13, while prior period amounts continue to be reported in accordance with the incurred loss model under the previously applicable GAAP.

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

beginning after January 1, 2023, are presented under ASU 2016-13, while prior period amounts continue to be reported in accordance with the incurred loss model under the previously applicable GAAP.

The following table illustrates the impact of the adoption of CECL, and the transition away from the incurred loss method, on January 1, 2023.

33 unchanged sentences

Newly issued not yet adopted accounting standards

In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic 220-40):

Reporting Comprehensive Income—Expense Disaggregation Disclosures.

This ASU seeks to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions.

The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

This ASU is not expected to have a material impact our consolidated financial statements.

In March 2024, the FASB issued ASU 2024-01, Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards .

The amendments in this update seek to improve GAAP by adding an illustrative example that includes four fact patterns to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether a profits interest award should be accounted for in accordance with Topic 718.

The amendments in this update are effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

The adoption of this pronouncement is not expected to have a material impact on our Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

This ASU seeks to enhance the transparency and decision usefulness of the disclosures.

The amendments in this update address investor requests for more transparency about income tax information through improvements to disclosures primarily related to the rate reconciliation and income taxes paid information.

The amendments in this update are effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted for annual consolidated financial statements that have not yet been issued.

This ASU is not expected to have a material impact our consolidated financial statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

11 unchanged sentences

The amendments in this ASU must be applied on either a modified retrospective or a retrospective basis (except for LIHTC investments not accounted for using the proportional amortization method).

A reporting entity that has LIHTC investments that are no longer permitted to use (1) the cost method guidance in paragraph 323-740-25-2A, (2) the equity method example in paragraphs 323-740-55-8 through 55-9, or (3) the delayed equity contribution guidance in paragraphs 323-740-25-3 must either use its general transition method (modified retrospective or retrospective) or apply a prospective approach.

Note 1— Nature of Business Activities and Significant Accounting Policies (continued)

retrospective or retrospective) or apply a prospective approach.

We do not expect the adoption of ASU 2023-02 to have a material impact on our consolidated financial statements.

8 unchanged sentences

Note 2— Securities

The carrying amount of securities and their approximate fair values at December 31, 2023, and December 31, 2022, are summarized as follows (in thousands):

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

December 31, 2024

22 unchanged sentences

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

At December 31, 2023, and December 31, 2022, securities with amortized costs of $ 826.5 million and $ 637.1 million, respectively, and with estimated fair values of $ 742.5 million and $ 552.5 million, respectively, were pledged to collateralize whole-sale funding, secure public deposits, and for other purposes required or permitted by law.

The gross realized gains, realized losses, and proceeds from the sales of securities for the years ended December 31, 2023, December 31, 2022, and December 31, 2021, were as follows (in thousands):

At December 31, 2024, and December 31, 2023, 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.

Note 2— Securities (continued)

The proceeds from sales, calls and maturities, and principal payments received of debt securities available-for-sale, and the related gross gains and losses realized for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, were as follows (in thousands):

Proceeds from Gross realized

For the year ended December 31, Sales Calls and maturities Principal Payments Gains Losses

2024 $ 372,370 $ 46,434 $ 211,443 $ 3,381 $ 2,024

Gross realized gains $ 772 $ 1,512 $ —

Gross realized losses ( 884 ) ( 1,966 ) ( 4 )

Proceeds from sales of securities 77,780 195,907 700

2023 77,780 1,797 110,228 772 884

2022 195,907 59,352 154,244 1,512 1,966

The tax benefit (provision) related to these net realized gains and losses for 2024, 2023, and 2022 was $( 312.1 ) thousand, $ 23.5 thousand, and $ 95.3 thousand, respectively.

1 unchanged sentence

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

Note 2— Securities (continued)

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).

12 unchanged sentences

$ 122,692 $ 520,647 $ 598,527 $ 307,723 $ 1,549,589

Note 2— Securities (continued)

December 31, 2024

13 unchanged sentences

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 December 31, 2024, and December 31, 2023.

Note 2— Securities (continued)

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

12 unchanged sentences

$ 344,160 $ 7,945 $ 934,759 $ 110,931 $ 118,876

Note 2— Securities (continued)

December 31, 2023

14 unchanged sentences

The Company also evaluates the unrealized losses on AFS securities to determine if a security's decline in fair value below its amortized cost basis is due to credit factors.

The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying

Note 2— Securities (continued)

collateral, if applicable, and the level of credit support in the security structure.

The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying collateral, if applicable, and the level of credit support in the security structure.

Management also evaluates other factors and circumstances that may be indicative of a decline in the fair value of the security due to a credit factor.

5 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 (“OTTI”) approach.

The Company did not record an ACL on the AFS securities at December 31, 2023.

The Company did no t record an ACL on the AFS securities as of December 31, 2024 and as of 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.

1 unchanged sentence

The Company has evaluated AFS securities in an unrealized loss position for credit-related impairment at December 31, 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 December 31, 2023.

On January 1, 2023, the Company adopted the CECL methodology as required under ASC 326.

Under the CECL methodology an ACL is required for impaired available-for-sale securities.

As of the previous two year ends, the Company was relying on ASC 320-10 which required the Company to assess if OTTI existed with respect to its security portfolio.

As of December 31, 2022, the Company had no cumulative OTTI.

There were no OTTI charges in earnings as a result of credit losses on investments in the years ended December 31, 2022, or December 31, 2021.

Note 2— Securities (continued)

required to sell any of the investments before recovery of its amortized cost basis.

As such, there was no ACL on AFS securities at December 31, 2024 and at December 31, 2023.

Securities of U.S.

10 unchanged sentences

Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at December 31, 2024.

Note 2— Securities (continued)

Residential & Commercial Mortgage Backed – Non-Agency Securities

17 unchanged sentences

The Company’s investment in FHLB stock totaled $ 18.2 million and $ 5.9 million at December 31, 2024, and 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 December 31, 2023, 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 investment 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 December 31, 2023, and December 31, 2022, which is carried at cost and is not impaired at December 31, 2023.

The Company’s investment in Federal Reserve Bank stock totaled $ 14.8 million and $ — at December 31, 2024, and 2023, respectively.

FHLB and Federal Reserve stock are generally viewed as long-term

Note 2— Securities (continued)

investments and as restricted investment securities, which are carried at cost, because there is no market for the stocks other than member institutions.

Therefore, when evaluating FHLB and Federal Reserve stock for impairment, their values are based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.

The Company does not consider these investments to be impaired at December 31, 2024, and no impairment has been recognized.

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

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

The Company also has other restricted investments including Independent Community Bankcorp, Inc.

and WV Bankers Title which are included in restricted stock on the Consolidated Balance Sheets as of December 31, 2024.

Note 3— Loans

4 unchanged sentences

• Owner-occupied commercial real estate loans carry risk associated with the operations of the business that occupies the property and the value of the collateral.

Note 3— Loans (continued)

• Acquisition, construction & development loans carry risk associated with the credit-worthiness of the borrower, project completion within budget, sale after completion, and the value of the collateral.

2 unchanged sentences

Single family residential (1-4 units) loans for investment purpose carry risk associated with the continued credit-worthiness of the borrower, the value of the collateral, and either the net operating income generated from the lease of the real estate collateral or income generated from the sale of the collateral.

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

• 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.

Note 3— Loans (continued)

Loans at year-end by portfolio segment were as follows (in thousands):

December 31, 2024 December 31, 2023

Commercial real estate $ 2,637,802 $ 1,309,084

8 unchanged sentences

Net deferred loan fees included in the above loan categories totaled $ 4.4 million and $ 3.5 million at December 31, 2024, and December 31, 2023, respectively.

The Company holds $ 3.0 million and $ 7.9 million in Paycheck Protection Program loans, net of deferred fees and costs as of December 31, 2023, and December 31, 2022, respectively.

Note 4— Allowance for Credit Losses

2 unchanged sentences

For further discussion on the Company’s accounting policies and policy elections related to the accounting standards update refer to Note 1 — Nature of Business Activities and Significant Accounting Policies in these Notes to Consolidated Financial Statements.

All information presented as of December 31, 2023, is in accordance with ASC 326.

All information presented as of December 31, 2024, and December 31, 2023, is in accordance with ASC 326.

All other information presented prior to January 1, 2023, is in accordance with previous applicable GAAP.

4 unchanged sentences

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 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

Note 4— Allowance for Credit Losses (continued)

expected future cash flows.

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.

A specific reserve is assigned if the measured value of the loan using one of the before mentioned methods is less than the carrying value of the loan.

2 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, including the impact of the adoption of CECL, for the year ended December 31, 2023, and the activity for the allowance for loan losses for the years ended December 31, 2022, and December 31, 2021 (in thousands).

The following tables present the activity in the ACL for the year ended December 31, 2024, including the impact of the allowance established for PCD loans, the activity in the ACL including the impact of the adoption of

Note 4— Allowance for Credit Losses (continued)

CECL for the year ended December 31, 2023, and the activity in the ACL for the year ended December 31, 2022 (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

1 unchanged sentence

Beginning balance, prior to adoption of CECL $ 20,633 $ 783 $ 368 $ 645 $ 2,797 $ 75 $ — $ 25,301

Impact of adoption CECL 2,686 ( 6 ) ( 640 ) 237 1,661 187 — 4,125

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 2,675 547 11,050 566 4,465 1,172 — 20,475

5 unchanged sentences

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

Provision for (recapture of) loan losses ( 6,391 ) 24 ( 107 ) 293 ( 239 ) 134 ( 1,180 ) ( 7,466 )

Impact of adoption CECL 2,686 ( 6 ) ( 640 ) 237 1,661 187 — 4,125

Provision for (recapture of) credit losses 2,432 154 ( 1,074 ) ( 1 ) ( 1,295 ) 19 — 235

Charge-offs — — — ( 29 ) — ( 165 ) — ( 194 )

8 unchanged sentences

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

The information presented in the table below is not required for periods after the adoption of CECL.

The following table summarizes the allowance for loan losses and the recorded investment in loans by portfolio segment

Note 4— Allowance for Credit Losses (continued)

and based on the impairment method (individually or collectively evaluated for impairment) as of December 31, 2022 (in thousands).

December 31, 2022

Allowance for loan losses

Individually evaluated for impairment $ 41 $ 102 $ — $ — $ 96 $ — $ — $ 239

Collectively evaluated for impairment 15,436 533 2,082 438 2,283 28 — 20,800

Total ending allowance balance $ 15,477 $ 635 $ 2,082 $ 438 $ 2,379 $ 28 $ — $ 21,039

Loan balance:

Individually evaluated for impairment $ 331 $ 2,580 $ — $ — $ 6,158 $ — $ — $ 9,069

Collectively evaluated for impairment 1,108,984 124,534 94,450 53,514 493,204 3,466 — 1,878,152

Total ending loan balance $ 1,109,315 $ 127,114 $ 94,450 $ 53,514 $ 499,362 $ 3,466 $ — $ 1,887,221

Prior to the adoption of CECL, loans were considered impaired when, based on current information and events as of the measurement date, it was probable the Company would be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements.

Impaired loans included loans on non-accrual status and accruing TDRs.

When determining if the Company would be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considered the borrower’s capacity to pay, which included such factors as the borrower’s current financial statements, an analysis of the global cash flow sufficient to pay all debt obligations, and an evaluation of secondary sources of repayment, such as guarantor support and collateral value.

The following table presents information related to impaired loans (in thousands) by portfolio segment as of December 31, 2022 (in thousands).

Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized (1)

December 31, 2022

With no related allowance recorded:

Commercial real estate $ — $ — $ — $ — $ —

Owner-occupied commercial real estate 1,184 1,394 — 1,291 97

Acquisition, construction & development — — — — —

Commercial & industrial — — — — —

Single family residential (1-4 units) 5,151 5,576 — 5,131 213

Consumer non-real estate and other — — — — —

Subtotal $ 6,335 $ 6,970 $ — $ 6,422 $ 310

With an allowance recorded:

Commercial real estate $ 331 $ 331 $ 41 $ 350 $ 23

Owner-occupied commercial real estate 1,397 1,397 102 1,420 74

Acquisition, construction & development — — — — —

Commercial & industrial — — — — —

Single family residential (1-4 units) 1,007 1,141 96 1,033 57

Consumer non-real estate and other — — — — —

Subtotal $ 2,735 $ 2,869 $ 239 $ 2,803 $ 154

Note 4— Allowance for Credit Losses (continued)

(1) Cash basis interest income recognized approximates interest income recognized shown as of the twelve months ended December 31, 2022.

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

33 unchanged sentences

If weaknesses go uncorrected, there is potential for partial loss of principal and/or interest.

Note 4— Allowance for Credit Losses (continued)

Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and unlikely.

Note 4— Allowance for Credit Losses (continued)

Loans classified as a loss are considered to be uncollectible and cannot be justified to continue as viable assets.

36 unchanged sentences

Year to date gross charge-offs $ — $ 10 $ 195 $ 87 $ — $ 9 $ — $ 301

Single family residential (1-4 units)

Pass $ 88,857 $ 152,438 $ 201,410 $ 142,719 $ 77,783 $ 332,025 $ 170,077 $ 1,165,309

Special Mention — — — — — 214 174 388

Note 4— Allowance for Credit Losses (continued)

Substandard — 1,494 800 586 605 3,935 437 7,857

Doubtful — — — — — — — —

Loss 93 — — — — 1 101 195

Total $ 88,950 $ 153,932 $ 202,210 $ 143,305 $ 78,388 $ 336,175 $ 170,789 $ 1,173,749

Year to date gross charge-offs $ — $ 39 $ 28 $ — $ — $ 123 $ — $ 190

Consumer non-real estate and other

Pass $ 21,095 $ 10,796 $ 6,122 $ 1,836 $ 1,096 $ 2,797 $ 123,148 $ 166,890

Special Mention 15 — — — — — — 15

Substandard 363 90 17 — — 17 — 487

Doubtful — — — 5 3 — — 8

Loss 289 12 — — — — — 301

Total $ 21,762 $ 10,898 $ 6,139 $ 1,841 $ 1,099 $ 2,814 $ 123,148 $ 167,701

Year to date gross charge-offs $ 468 $ 71 $ 17 $ 1 $ — $ 20 $ 357 $ 934

Totals $ 554,237 $ 805,534 $ 1,052,113 $ 903,616 $ 329,467 $ 1,258,726 $ 768,543 $ 5,672,236

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

2023 2022 2021 2020 2019 Prior Revolving Loans Total

Commercial real estate

Pass $ 195,857 $ 261,817 $ 166,253 $ 22,791 $ 75,170 $ 416,774 $ 36,761 $ 1,175,423

Special Mention — 12,235 35,449 — 4,876 — — 52,560

Substandard — 15,420 12,847 — 2,209 50,625 — 81,101

Doubtful — — — — — — — —

Loss — — — — — — — —

Total $ 195,857 $ 289,472 $ 214,549 $ 22,791 $ 82,255 $ 467,399 $ 36,761 $ 1,309,084

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

Owner-occupied commercial real estate

Pass $ 9,309 $ 31,725 $ 11,229 $ 14,103 $ 10,279 $ 43,616 $ 6,184 $ 126,445

Special Mention — — — — — — — —

Substandard — 532 — — — 4,404 — 4,936

Doubtful — — — — — — — —

Loss — — — — — — — —

Total $ 9,309 $ 32,257 $ 11,229 $ 14,103 $ 10,279 $ 48,020 $ 6,184 $ 131,381

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

Acquisition, construction & development

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

Special Mention — — — — — — — —

Substandard — — — — — — — —

Doubtful — — — — — — — —

Loss — — — — — — — —

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

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

Note 4— Allowance for Credit Losses (continued)

Commercial & industrial

Pass $ 29,111 $ 15,204 $ 4,344 $ 162 $ 15 $ 1,335 $ 16,854 $ 67,025

Special Mention — — — — — — — —

Substandard — — 822 — — — — 822

Doubtful — — — — — — — —

Loss — — — — — — — —

Total $ 29,111 $ 15,204 $ 5,166 $ 162 $ 15 $ 1,335 $ 16,854 $ 67,847

Year to date gross charge-offs $ — $ — $ — $ 29 $ — $ — $ — $ 29

Single family residential (1-4 units)

15 unchanged sentences

Totals $ 321,368 $ 483,436 $ 305,178 $ 69,608 $ 134,601 $ 656,867 $ 116,698 $ 2,087,756

The value of outstanding loans by credit quality indicators as of December 31, 2022, were as follows (in thousands):

Pass Special Mention Substandard Doubtful Loss Total

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

Collateral Dependent Loans

With Allowance With No Related Allowance Total

Amortized Cost Related Allowance Amortized Cost Amortized Cost Related Allowance

December 31, 2024

6 unchanged sentences

Total $ 9,875 $ 5,854 $ 18,397 $ 28,272 $ 5,854

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

Note 4— Allowance for Credit Losses (continued)

Collateral Dependent Loans

9 unchanged sentences

Total $ — $ — $ 3,744 $ 3,744 $ —

Note 4— Allowance for Credit Losses (continued)

Purchased Credit Deteriorated Loans

The Company has purchased loans for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination.

The carrying amount of those loans, at acquisition, is as follows (in thousands):

Purchase price of loans at acquisition $ 380,795

Allowance for credit losses at acquisition 23,910

Non-credit discount/(premium) at acquisition 37,640

Par value of acquired loans at acquisition $ 442,345

Loan Modifications

On January 1, 2023, the Company adopted ASU 2022-02 on a modified retrospective basis.

5 unchanged sentences

The Company may also provide multiple types of modifications on an individual loan.

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.

The Company did not extend any modifications that were defined as TDRs during the years ended December 31, 2022, or December 31, 2021.

For the years ended December 31, 2024 and 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.

The Company did not extend any modifications that were defined as TDRs during the years ended December 31, 2022.

Note 4— Allowance for Credit Losses (continued)

Other Real Estate Owned

Real estate owned activity was as follows for the year ended December 31, 2024 (in thousands):

December 31, 2024

Beginning balance $ —

Loans acquired/transferred to real estate owned 3,541

Capital expenditures —

Direct write-downs —

Sales of real estate owned ( 758 )

End of period balance $ 2,783

Note 5— Premises and Equipment

Premises and equipment are included in the Balance Sheet at December 31, 2024, and December 31, 2023, were as follows (in thousands):

December 31, 2024 December 31, 2023

Land $ 29,654 $ 14,626

6 unchanged sentences

leasehold improvements) expense for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 was $ 5.9 million , $ 2.9 million, and $ 3.1 million , respectively.

In 2023, 2022, and 2021, the Company sold premises that resulted in a loss of $ — million , and gains of $ 4.5 million , and $ 1.1 million, respectively, that is captured in other operating expenses on the Consolidated Statements of Income.

In 2024, 2023, and 2022, the Company sold or disposed of premises that resulted in a loss of $ 2.2 million, a loss of $ 36.6 thousand , and a gain of $ 4.5 million, respectively, that is captured in other operating expenses on the Consolidated Statements of Income.

Note 6— Deposits

3 unchanged sentences

Note 6— Deposits (continued)

At December 31, 2023, the scheduled maturities of time deposits, including brokered time deposits, for the next five years were as follows (in thousands):

At December 31, 2024, the scheduled maturities of brokered deposits and time deposits for the next five years, and for the years thereafter, were as follows (in thousands):

Years ending December 31,

2025 $ 1,075,072

Thereafter 4,735

At December 31, 2024, and December 31, 2023, amounts included in time deposits for individual retirement accounts totaled $ 118.9 million and $ 28.5 million, respectively.

Overdrafts of $ 110 thousand and $ 503 thousand were reclassified to loans as of the year ended December 31, 2023, and December 31, 2022, respectively.

Note 7— Advances and Other Borrowings

Overdrafts of $ 1.6 million and $ 110 thousand were reclassified to loans as of the year ended December 31, 2024, and December 31, 2023, respectively.

Note 7— Borrowed Funds

Short-term borrowings

The Company had borrowings of $ 365.0 million and $ 272.0 million at December 31, 2024, and December 31, 2023, respectively.

1 unchanged sentence

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

The weighted average interest rate at December 31, 2023, and December 31, 2022, was 4.75 % and 4.42 %, respectively.

The average balance outstanding during 2024 and 2023 was $ 422.5 million and $ 293.9 million, respectively.

The Company has a finance lease liability that is not included in these balances - See Note 11 — 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’s short-term borrowings from time to time may consist of advances from the FHLB of Atlanta, unsecured lines from Correspondent Banks, and secured lines from the Federal Reserve Discount Window.

The Company has available lines of credit with the FHLB of Atlanta and unsecured federal funds lines of credit from correspondent banking relationships.

Through these sources, the Company has unused borrowing capacity of $ 987.0 million as of December 31, 2023.

The Company has available 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 relationships.

Through these sources, the Company has unused borrowing capacity of $ 4.1 billion as of December 31, 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 December 31, 2023, and December 31, 2022, was $ 797.8 million and $ 698.1 million, respectively.

The lendable collateral value of securities and loans pledged against available lines of credit as of December 31, 2024, and December 31, 2023, was $ 3.1 billion and $ 797.8 million, respectively.

As of December 31, 2024, all of the Company’s borrowings will mature within one calendar year.

2 unchanged sentences

Due in 2026 —

Long-term borrowings

Subordinated Debentures

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 December 31, 2024, the net balance was $ 65.0 million.

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

thereafter, the amount qualifying as Tier 2 capital is reduced 20 % each year until maturity.

The subordinated debentures were issued in the fourth quarter of 2021 and bear interest at a fixed rate of 3.25 % per year, from acquisition date to, but excluding, December 1, 2026, payable semi-annually in arrears.

From and including, December 1, 2026 to, but excluding, the maturity date

Note 7— Borrowed Funds (continued)

or earlier redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”), as published by the Federal Reserve Bank of New York, plus 230 basis points, payable quarterly in arrears.

This debt has a 10 -year term, and generally, is not prepayable by us within the first 5 years from issuance, which was fourth quarter 2021.

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 December 31, 2024, the net balance was $ 29.9 million.

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

thereafter, the amount qualifying as Tier 2 capital is reduced by 20 % each year until its maturity.

The subordinated debentures were issued in the third quarter of 2020 and bear interest at a fixed rate of 5.00 % per year from the date of assumption to, but excluding, September 30, 2025, payable quarterly in arrears.

From and including September 30, 2025, to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term SOFR plus 487 basis points, payable quarterly in arrears.

This debt has a 10 -year term, and generally, is not prepayable by us within the first 5 years from issuance, which was third quarter 2020.

Subordinated Debentures Owed to Unconsolidated Subsidiary Trusts

As part of the Merger, Burke & Herbert became the sponsor for SFG Capital Trust I, SFG Capital Trust II, and SFG Capital Trust III.

For each of these trusts, 100 % of the common equity is owned by us.

SFG Capital Trust I issued $ 3.5 million in capital securities and $ 109 thousand in common securities and invested the proceeds in $ 3.6 million of debentures, which were assumed by Burke & Herbert in the Merger.

SFG Capital Trust II issued $ 7.5 million in capital securities and $ 232 thousand in common securities and invested the proceeds in $ 7.7 million of debentures, which were assumed by Burke & Herbert in the Merger.

SFG Capital Trust III issued $ 8 million in capital securities and $ 248 thousand in common securities and invested the proceeds in $ 8.3 million of debentures, which were assumed by Burke & Herbert in the Merger.

Distributions on the capital securities issued by the trusts are payable quarterly at a variable rate equal to 3 month LIBOR plus 345 basis points for SFG Capital Trust I, 3 months of LIBOR plus 280 basis points for SFG Capital Trust II, and 3 month LIBOR plus 145 basis points for SFG Capital Trust III, and equals the interest rate earned on the debentures held by the trusts and is recorded as interest expense by us.

The capital securities are subject to mandatory redemption in whole, or in part, upon repayment of the debentures.

We have entered into agreements which, taken collectively, fully and unconditionally guarantee the capital securities subject to the terms of the guarantee.

The debentures of each Capital Trust are redeemable by us quarterly.

The capital securities issued by SFG Capital Trust I, SFG Capital Trust II, and SFG Capital Trust III qualify as Tier 1 capital under the Federal Reserve guidelines.

In accordance with these Guidelines, trust preferred securities are limited to 25% of Tier 1 capital elements, net of goodwill.

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 December 31, 2024, are as follows (in thousands):

Subordinated debentures

Subordinated debentures owed to unconsolidated subsidiary trusts

Thereafter 105,000 19,589

Total $ 105,000 $ 19,589

Note 8— Income Taxes

The components of applicable income tax expense (benefit) for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, were as follows (in thousands):

2023 2022 2021

December 31, 2024 December 31, 2023 December 31, 2022

Current Expense:

16 unchanged sentences

The Company follows accounting guidance related to accounting for uncertainty in income taxes.

Under the “more likely than not” threshold guidelines, the Company’s uncertain tax position reserve was $ 167 thousand and $ 291 thousand as of December 31, 2023, and December 31, 2022, respectively.

Under the “more likely than not” threshold guidelines, the Company’s uncertain tax position reserve was zero and $ 167 thousand as of December 31, 2024, and December 31, 2023, respectively.

The Company’s policy is to account for interest and penalties as a component of income tax expense.

The Company is no longer subject to examination by federal, state, and local taxing authorities for years before January 1, 2021.

Note 8— Income Taxes (continued)

The following reconciles the amount of reported income tax expense in the financial statements to taxes that would be computed by applying the federal statutory tax rates to income before taxes (in thousands):

2023 2022 2021

December 31, 2024 December 31, 2023 December 31, 2022

Expected taxes using statutory rates $ 8,286 $ 5,263 $ 10,983

6 unchanged sentences

Merger-related 280 382 —

Non-deductible compensation 530 — —

Other adjustment, net 131 ( 626 ) 248

3 unchanged sentences

The net deferred tax amounts in the accompanying Consolidated Balance Sheets include the following components (in thousands):

December 31, 2024 December 31, 2023

Deferred tax assets:

1 unchanged sentence

Lease liability 3,914 2,008

Compensation and other accruals 2,011 1,847

Compensation accruals 10,714 1,984

Other accruals 442 27

Partnership investments 2,587 2,264

Purchase accounting adjustments 35,497 —

Unrealized losses on securities available-for-sale 26,627 26,069

Tax credit carryforward 9,777 8,690

Unrealized losses on interest rate swaps — 422

OPEB Liability 188 —

Total deferred tax asset $ 106,133 $ 46,642

3 unchanged sentences

Unrealized gains on interest rate swaps ( 833 ) ( 85 )

Purchase accounting adjustments ( 16,588 ) —

Right of use asset ( 3,757 ) ( 1,906 )

Mortgage servicing rights ( 460 ) —

Total deferred tax liability $ ( 28,099 ) $ ( 4,498 )

3 unchanged sentences

Employees hired prior to June 1, 2005 participate in the retirement plan on a non-contributing basis and were fully vested after five years of service.

Note 9— Defined Benefit Pension Plan (continued)

The following tables set forth the Plan’s status and related disclosures (in thousands):

December 31, 2024 December 31, 2023

Changes in benefit obligation:

19 unchanged sentences

At December 31, 2024, December 31, 2023, and December 31, 2022, the assumptions used to determine the pension benefit obligation were as follows:

2023 2022 2021

December 31, 2024 December 31, 2023 December 31, 2022

Discount rate 5.49 % 4.80 % 5.00 %

2 unchanged sentences

Components of net periodic benefit cost and other amounts recognized in other comprehensive income (in thousands):

2023 2022 2021

December 31, 2024 December 31, 2023 December 31, 2022

Components of net periodic pension cost:

12 unchanged sentences

For the years ended December 31, 2024, December 31, 2023, and December 31, 2022, the assumptions used to determine net periodic pension cost were as follows:

2023 2022 2021

December 31, 2024 December 31, 2023 December 31, 2022

Discount rate 5.49 % 4.80 % 5.00 %

5 unchanged sentences

The Company’s pension plan asset allocations at December 31, 2024, and December 31, 2023, were as follows:

December 31, 2024 December 31, 2023

Equity securities 9.9 % 9.6 %

30 unchanged sentences

Investment and Savings Plan

The Company has an investment and savings plan for its employees.

In the month following date of hire, an employee is eligible to participate in the investment and savings plan if they are at least 18 years old.

A participant may elect to defer up to 90 % of their annual compensation, not to exceed limitations established by the Internal Revenue Code.

On behalf of each participant who makes the election, the Company contributes an amount up to

As of December 31, 2024, the Company maintained the 401(k) plans of both legacy Summit and Burke & Herbert.

Under both of these plans, eligible employees may contribute a percentage of their compensation, and the Company matched a portion of the employee’s contribution based on the specific 401(k) plan.

The contribution amounts matched by the Company depend on the 401(k) plan.

The Company’s total contributions in 2024, 2023, and

Note 10— Other Post-Retirement Plans (continued)

3.5 % of the amount contributed by the participant.

The Company’s contributions in 2023, 2022, and 2021 totaled $ 1.04 million, $ 1.02 million, and $ 1.02 million, respectively, which were included within pensions and other employee benefits on the Consolidated Statements of Income.

2022 totaled $ 1.7 million, $ 1.0 million, and $ 1.0 million, respectively, which were included within pensions and other employee benefits on the Consolidated Statements of Income.

Other Retirement Plans

The Company has a deferred compensation plan for some of its directors and senior officers that provides benefits payable at age 65.

The deferred compensation is to be paid to the individual or beneficiary over a period of 15 years.

Amounts deferred are invested in increasing whole life insurance policies on the participants’ lives with the Company as owner and beneficiary.

Amounts recognized for the increase in the cash surrender value of the policies are offset against the expense.

The Company recognized net income of $ 33 thousand in 2023, $ 61 thousand in 2022, and $ 57 thousand in 2021, related to this deferred compensation plan.

In 2010, the Company adopted a Supplemental Executive Retirement Plan for a number of its executive officers.

The plan is intended to be unfunded and maintained primarily for the purpose of providing deferred compensation to its participants.

The benefits of the plan vest incrementally based on years of service.

Plan expenses for the years ending December 31, 2023, December 31, 2022, and December 31, 2021, amounted to $ 522 thousand, $ 290 thousand, and $ 459 thousand, respectively.

In 2021, the Company formed a new deferred compensation plan (2021 Deferred Compensation Plan) for current directors and senior officers.

The Company has certain non-qualified Supplemental Executive Retirement Plans (“SERP”) with certain senior officers and directors, which provide participating officers with an income benefit payable at retirement age or death.

Upon the Merger, the Company assumed additional SERP plans along with an acceleration of benefits as part of the Merger.

Plan expenses for the years ending December 31, 2024, December 31, 2023, and December 31, 2022, amounted to $ 3.7 million, $ 522 thousand, and $ 290 thousand, respectively.

The Company has a deferred compensation plan (2021 Deferred Compensation Plan) for current directors and senior officers.

The plan is funded with director fees and salary reductions which are placed in a trust account invested by the Company.

The trust investments consist of equity investments, fixed income investments, and cash.

The trust account balance totaled $ 818 thousand and $ 496 thousand at December 31, 2023, and December 31, 2022, respectively.

This balance is included within other assets and is directly offset within other liabilities.

The trust account balance totaled $ 1.3 million and $ 818 thousand at December 31, 2024, and December 31, 2023, respectively.

This balance is included within other assets and is directly offset within accrued interest and other liabilities on the Company’s Consolidated Balance Sheets.

Amounts contributed to the trust and recorded as expense for the Company totaled $ 541 thousand and $ 341 thousand, respectively, in 2024 and 2023.

2 unchanged sentences

The Company enters into operating leases with customers to lease vacant space in certain owned premises that is not being used by the Company.

These operating leases are typically payable in monthly installments with terms ranging from around two years to around twelve years and may contain renewal options.

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

2023 2022 2021

These operating leases are typically payable in monthly installments with terms ranging from around one year to around ten years and may contain renewal options.

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

December 31, 2024 December 31, 2023 December 31, 2022

Operating lease income $ 2,597 $ 2,301 $ 1,309

4 unchanged sentences

Total lease receivables $ 14,032

Note 11— Leased Property (continued)

Lessee Arrangements

2 unchanged sentences

Certain leases offer the option to extend the lease term, and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably assured of being exercised.

Including renewal options, the Company’s leases range from less than one year to around fifteen years .

Including renewal options, the Company’s leases range from less than one year to around fourteen years .

The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

Note 11— Leased Property (continued)

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows.

3 unchanged sentences

The lease terms were at market with third-parties and resulted in $ 655 thousand of operating lease expense in 2023.

The sale of the two buildings resulted in a realized gain of $ 3.7 million that was recognized in the fourth quarter of 2022.

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

Balance Sheet Classification 2023 2022

Balance Sheet Classification December 31, 2024 December 31, 2023

Right-of-use assets:

7 unchanged sentences

The components of total lease cost were as follows for the period ending (in thousands):

2023 2022 2021

December 31, 2024 December 31, 2023 December 31, 2022

Finance lease cost

3 unchanged sentences

Total lease cost $ 3,259 $ 3,540 $ 2,762

Note 11— Leased Property (continued)

The Company’s future undiscounted lease payments for finance and operating leases with initial terms of one year or more as of December 31, 2024, are as follows (in thousands):

2 unchanged sentences

2026 2,659 340

2027 2,237 347

2028 1,897 354

2029 1,748 361

Thereafter 4,772 2,629

2 unchanged sentences

Net lease liabilities $ 13,586 $ 3,620

Note 11— Leased Property (continued)

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

Supplemental lease information (dollars in thousands) 2023 2022

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

Finance lease weighted average remaining lease term (years) 11.75 12.66

13 unchanged sentences

Failure to meet capital requirements can initiate regulatory action.

Under the Basel Committee on Banking Supervision’s capital guidelines for U.S.

Banks (“Basel III rules”), an entity must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios.

Under the Basel III Framework, an entity must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios.

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

6 unchanged sentences

Note 12— Regulatory Capital Matters (continued)

The table below presents the actual and required capital amounts and ratios for the Company and the Bank at December 31, 2023, and December 31, 2022 (in thousands).

Actual Minimum Required for Capital Adequacy Purposes (includes applicable capital conservation buffer) To Be Well Capitalized Under Prompt Corrective Action Regulations

The table below presents the actual and required capital amounts and ratios for the Company and the Bank at December 31, 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

2 unchanged sentences

Consolidated $ 930,753 14.57 % $ 670,590 ≥ 10.5 %

$ 248,280 ≥ 10.0 %

$ 638,658 N/A

Burke & Herbert Bank & Trust 919,843 14.41 670,028 ≥ 10.5

2 unchanged sentences

Consolidated 763,842 11.96 542,859 ≥ 8.5

198,624 ≥ 8.0

Burke & Herbert Bank & Trust 847,804 13.29 542,404 ≥ 8.5

2 unchanged sentences

Consolidated 736,416 11.53 447,060 ≥ 7.0

161,382 ≥ 6.5

Burke & Herbert Bank & Trust 847,804 13.29 446,686 ≥ 7.0

414,779 ≥ 6.5

Tier 1 (Core) Capital to average assets

Tier 1 (Core) Capital to average assets (leverage ratio)

Consolidated 736,416 9.80 311,904 ≥ 4.0

184,957 ≥ 5.0

Burke & Herbert Bank & Trust 847,804 10.88 311,616 ≥ 4.0

3 unchanged sentences

Consolidated $ 443,799 17.88 % $ 260,694 ≥ 10.5 %

$ 229,834 ≥ 10.0 %

$ 248,280 N/A

Burke & Herbert Bank & Trust 442,414 17.82 260,626 ≥ 10.5

2 unchanged sentences

Consolidated 418,244 16.85 211,038 ≥ 8.5

186,867 ≥ 8.0

Burke & Herbert Bank & Trust 416,859 16.79 210,983 ≥ 8.5

2 unchanged sentences

Consolidated 418,244 16.85 173,796 ≥ 7.0

149,392 ≥ 6.5

Burke & Herbert Bank & Trust 416,859 16.79 173,751 ≥ 7.0

161,340 ≥ 6.5

Tier 1 (Core) Capital to average assets

Tier 1 (Core) Capital to average assets (leverage ratio)

Consolidated 418,244 11.31 147,965 ≥ 4.0

182,007 ≥ 5.0

Burke & Herbert Bank & Trust 416,859 11.27 147,986 ≥ 4.0

2 unchanged sentences

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

As of December 31, 2023, approximately $ 181.8 million of retained earnings was available for dividend declaration without regulatory approval.

As of December 31, 2024, approximately $ 249.7 million of retained earnings was available for dividend declaration consistent with the Company’s capital plan.

Note 13— Derivatives

4 unchanged sentences

Cash flow hedges of interest rate risk

The Company’s objectives in using interest rate derivatives are to add stability to net interest income and to manage its exposure to interest rate movements.

To accomplish this objective, the Company primarily uses interest rate swaps and floors as part of its risk management strategy.

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

Other interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

During 2023, such derivatives were used to hedge the variable cash flows associated with variable-rate debt and assets.

The Company’s objectives in using interest rate derivatives is to add stability to net interest income and to manage its exposure to interest rate movements.

To accomplish this objective, the Company primarily uses interest rate swaps, caps, and floors as part of its risk management strategy.

Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

During 2024, such derivatives were used to hedge the variable cash flows associated with variable-rate liabilities and assets.

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 2024, the Company estimates that an additional $ 0.6 million will be reclassified as a reduction to interest income, and an additional $ 1.2 million will be reclassified as a reduction to interest expense.

The Company is hedging its exposure to the variability in future cash flow for forecasted transactions over a maximum period of 4 months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).

During the next twelve months, the Company estimates an additional $ 1.0 million will be reclassified as a reduction to interest expense.

Derivatives not designated as hedges

13 unchanged sentences

Interest rate swaps related to customer loans Other liabilities 99,899 1,823

Note 13— Derivatives (continued)

December 31, 2023

1 unchanged sentence

Derivatives designated as hedges:

Interest rate swaps related to cash flow hedges Other assets $ 100,000 $ 65

Interest rate swaps related to cash flow hedges Other liabilities 150,000 1,047

2 unchanged sentences

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

Note 13— Derivatives (continued)

The table below presents the effect of cash flow hedge accounting on AOCI for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 (in thousands):

7 unchanged sentences

Interest Rate Products $ ( 329 ) $ ( 329 ) $ — Interest Income $ ( 1,749 ) $ ( 1,749 ) $ —

Interest Rate Products ( 29 ) ( 29 ) — Interest Expense — — —

Total $ ( 358 ) $ ( 358 ) $ — $ ( 1,749 ) $ ( 1,749 ) $ —

4 unchanged sentences

Note 13— Derivatives (continued)

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income as of December 31, 2023, and December 31, 2022 (in thousands).

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income as of December 31, 2024, December 31, 2023, and December 31, 2022 (in thousands).

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

19 unchanged sentences

Credit-risk-related Contingent Features

As of December 31, 2023, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for non-performance risk related to these agreements, was $ 982 thousand.

As of December 31, 2024, the fair value of derivatives in a liability position, which includes accrued interest but excludes any adjustment for non-performance risk related to these agreements, was $ 165 thousand.

As of December 31, 2024, the Company has posted the full amount of collateral related to these agreements.

Note 14— Commitments and Contingencies

Interest rate lock commitments

Commitments to fund consumer mortgage loans (interest rate lock commitments) to be sold into the secondary market are defined as derivatives under GAAP.

The Company enters into best effort forward commitments for the future delivery of mortgage loans to third-party investors.

The Company has elected the fair value option (“FVO”) on both the best-efforts forward commitments and the consumer mortgage loans held-for-sale in order to economically hedge the effect of changes in interest rates resulting from the commitment to fund the loans.

Interest Rate lock commitments are not designated as hedging instruments, and therefore, changes in the fair value of these free-standing derivative instruments are reported as non-interest income.

The net gains (losses) relating to the free-standing derivative instruments (interest rate lock commitments) were $ 8 thousand, $( 13 ) thousand, and $ 13 thousand, at December 31, 2023, December 31, 2022, and December 31, 2021, respectively.

The notional amount of the mortgage loan pipeline that resulted in an interest rate lock commitments at December 31, 2023, December 31, 2022, and December 31, 2021, was $ 3.4 million, zero , and

Note 14— Commitments and Contingencies (continued)

$ 926 thousand, respectively.

Interest Rate lock commitments are not designated as hedging instruments, and therefore changes in the fair value of these free-standing derivative instruments are reported as non-interest income.

Credit extension commitments

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.

Note 14— Commitments and Contingencies (continued)

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

December 31, 2024 December 31, 2023

Commitments to extend credit $ 877,837 $ 278,923

5 unchanged sentences

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

The Company recorded a recapture of credit losses on unfunded commitments of $ 21 thousand for the year ended December 31, 2023.

The ACL on off-balance-sheet credit exposures totaled $ 254 thousand at 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 $ 3.7 million for the year ended December 31, 2024 and a recapture of $ 21 thousand for the year ended December 31, 2023.

The ACL on off-balance-sheet credit exposures totaled $ 4.0 million as of December 31, 2024, and $ 254 thousand as of 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.

3 unchanged sentences

Aggregate loan balances with related parties were as follows (in thousands):

December 31, 2024

Balance, beginning $ 124,414

New loans 1,040

Effect of changes in composition of related parties 32,075

Repayments ( 237 )

2 unchanged sentences

There were no loans to a related party that were considered classified loans at December 31, 2024, or December 31, 2023.

Note 15— Transactions with Related Parties (continued)

Deposits from related parties at years ended December 31, 2024, and December 31, 2023, were $ 156.8 million and $ 103.6 million.

1 unchanged sentence

Determination of Fair Value

Note 16— Fair Value Measurements (continued)

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

13 unchanged sentences

For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

Equity Investments

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

Through the Merger, at December 31, 2024, we acquired an investment in an S&P 500 index mutual fund that is traded on an exchange, and we classify it as Level 2.

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

The perpetual preferred stock does not trade on an exchange or in an active over-the-counter market;

therefore, we estimate its fair value using the present value of its future cash flows using observed discount rates of similar publicly-traded securities, adjusted for a liquidity premium.

We classify the perpetual preferred stock as Level 2.

Such equity securities are included in Equity Investments on the accompanying consolidated balance sheets.

The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2).

3 unchanged sentences

Fair value of interest rate lock commitments is based on the price of underlying loans obtained from an investor for loans that will be delivered on a best effort basis (Level 2).

Note 16— Fair Value Measurements (continued)

Loans held-for-sale, at fair value

1 unchanged sentence

These loans currently consist of one-to-four family residential loans originated for sale in the secondary market.

Note 16— Fair Value Measurements (continued)

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

14 unchanged sentences

Loans held-for-sale, at fair value $ — $ 2,331 $ — $ 2,331

Equity investments

$ — $ 12,407 $ — $ 12,407

18 unchanged sentences

Loans held-for-sale, at fair value $ — $ 1,497 $ — $ 1,497

$ — $ — $ — $ —

Derivatives $ — $ 1,063 $ — $ 1,063

2 unchanged sentences

The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a non-recurring basis in the financial statements:

Individually evaluated loans

Upon the adoption of CECL, loans individually evaluated for credit expected losses included non-accrual loans and other loans that do not share similar risk characteristics to loans in the CECL loan pools and have been classified as Level 3.

Individually evaluated loans with an allocation to the ACL are measured at fair value on a non-recurring basis.

Any fair value adjustments are recorded in the period incurred as provision for credit losses on the Consolidated Statements of Income.

Prior to adoption of CECL and ASU 2022-02, which eliminated the TDR accounting model, loans were designated as impaired when, in the judgment of management and based on current information and events, it was probable that all amounts due, according to the contractual terms of the loan agreement, would not be collected.

The measurement of loss associated with impaired loans can be based on either the observable market price of the loan, the present value of the expected future cash flows, or the fair value of the collateral.

Generally, the fair value of impaired loans will be determined by the present value of the expected future cash flows or, if collateral-dependent, based on recent real estate appraisals.

For collateral-dependent, the fair value is measured based on the value of the collateral securing the loans, less estimated costs of disposal.

Collateral dependent loans

Loans for which the borrower is experiencing financial difficulty and repayment is dependent upon the operation or sale of collateral, are considered collateral-dependent.

For collateral-dependent loans, the fair value is measured based on the value of the collateral securing the loans, less estimated costs of disposal.

Collateral may be in the form of real estate or business assets, including equipment, inventory, and accounts receivable.

The vast majority of the collateral is real estate.

These appraisals may utilize a single valuation approach or a combination of approaches, including comparable sales and the income approach.

Any fair value adjustments are recorded in the period incurred as provision for credit losses on the Consolidated Statements of Income and will result in a Level 3 fair value classification.

Note 16— Fair Value Measurements (continued)

in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification.

The vast majority of the collateral underlying collateral-dependent loans is real estate, the fair value of which is measured through an appraisal.

The appraisals of the collateral supporting collateral-dependent loans may utilize a single valuation approach or a combination of approaches, including comparable sales and the income approach.

Any fair value adjustments are recorded in the period incurred as provision for credit losses on the Consolidated Statements of Income.

Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business.

Other real estate owned

Assets acquired through foreclosure or other proceedings are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.

These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell.

Fair value is commonly based on recent real estate appraisals, which are updated no less frequently than annually.

Any fair value adjustments are recorded in the period incurred and expensed against current earnings.

The fair value of foreclosed properties is determined on a nonrecurring basis generally utilizing current appraisals performed by an independent, licensed appraiser applying an income or market value approach using observable market data.

Updated appraisals of foreclosed properties are generally obtained if the existing appraisal is more than 18 months old or more frequently if there is a known deterioration in value.

However, if a current appraisal is not available, the original appraised value is discounted, as appropriate, to compensate for the estimated depreciation in the value of the real estate since the date of its original appraisal.

Such discounts are generally estimated based upon management’s knowledge of sales of similar property within the applicable market area and its knowledge of other real estate market-related data as well as general economic trends.

Upon foreclosure, any fair value adjustment is charged against the allowance for credit losses on loans.

Note 16— Fair Value Measurements (continued)

fair value adjustments are recorded in the period incurred and included in other noninterest expense in the consolidated statements of income.

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

2 unchanged sentences

(Level 1) (Level 2) (Level 3) Total

Impaired Loans:

Collateral dependent loans

Commercial real estate $ — $ — $ 2,668 $ 2,668

$ — $ — $ 286 $ 286

Owner-occupied commercial real estate — — — —

7 unchanged sentences

(Level 1) (Level 2) (Level 3) Total

Impaired Loans:

Collateral dependent loans

Commercial real estate $ — $ — $ — $ —

$ — $ — $ 290 $ 290

Owner-occupied commercial real estate — — — —

4 unchanged sentences

Other real estate owned — — — —

Note 16— 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 December 31, 2024, and December 31, 2023 (in thousands except for percentages):

Description Fair Value Valuation Techniques Unobservable Inputs Range Weighted Average

Description Fair Value Valuation Techniques Unobservable Inputs Range

December 31, 2024

Individually evaluated loans $ 3,417 Income, Market, & Discounted cash flow analysis External appraised values;

management assumptions regarding market trends, market rate for borrower, or other relevant factors 3.6 % - 9 %

Collateral dependent loans $ 4,021 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 2,783 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

Individually evaluated loans $ 2,496 Income, Market, & Discounted cash flow analysis External appraised values;

management assumptions regarding market trends, market rate for borrower, or other relevant factors 4.5 % - 6 %

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

Note 16— Fair Value Measurements (continued)

Fair value of financial instruments

11 unchanged sentences

Interest-bearing 5,135,299 — 5,126,423 — 5,126,423

Other borrowed funds 272,000 — 271,716 — 271,716

Short-term borrowings

365,000 — 364,985 — 364,985

Subordinated debentures, net

94,872 — 91,760 — 91,760

Subordinated debentures owed to unconsolidated subsidiary trusts

17,013 — 14,587 — 14,587

Accrued interest 6,157 — 6,157 — 6,157

Note 16— Fair Value Measurements (continued)

Fair Value Measurements at December 31, 2023 Using:

12 unchanged sentences

Note 17— Common Stock Transactions

In 2024, the Company reissued zero shares of treasury stock to satisfy the vesting of RSUs and SARs.

No other purchase or sale of the Company’s Common Stock occurred in 2024.

In 2023, the Company reissued 2,950 shares of treasury stock to satisfy the vesting of RSUs.

2 unchanged sentences

All share and earnings per share information have been retroactively adjusted to reflect the stock split within the financial statements and notes to the financial statements.

In 2022, the Company reissued 2,000 shares of treasury stock to satisfy the vesting of RSUs.

No other purchase or sale of the Company’s Common Stock occurred in 2022.

In 2021, the Company purchased shares of its own Common Stock on the open market in arms-length transactions.

It acquired 90,040 shares at an aggregate cost of $ 4.4 million at prices ranging from $ 45.25 to $ 50.00 per share.

Additionally, in early August 2021, the Company sold 64,000 shares to certain of its directors, pursuant to a private placement exemption from registration for aggregate consideration of $ 3.2 million and reissued 1,720 shares of treasury stock to satisfy the vesting of RSUs.

During 2022, the Company also reissued 2,000 shares of treasury stock to satisfy the vesting of RSUs.

Note 17— Common Stock Transactions (continued)

During 2024, 2023, and 2022, the Company declared and paid cash dividends of $ 2.14 , $ 2.12 , and $ 2.12 per share, respectively.

25 unchanged sentences

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

2023 2022 2021

December 31, 2024 December 31, 2023 December 31, 2022

Cash flow hedges:

Interest rate contracts $ ( 611 ) $ ( 1,749 ) $ ( 167 ) Interest income

Interest rate contracts 2,794 — — Interest expense

Tax effect ( 502 ) 367 35 Income tax expense (benefit)

14 unchanged sentences

The following tables summarize condensed financial statements for Burke & Herbert Financial Services Corp., which commenced operations as a holding company on October 1, 2022, as of and for the years ended December 31, 2024, and December 31, 2023 (in thousands):

Parent Company Only Condensed Balance Sheet 2023 2022

Cash $ 284 $ 2,000

Investment in subsidiary 313,364 271,757

Parent Company Only Condensed Balance Sheet December 31, 2024 December 31, 2023

Cash and cash equivalents $ 8,320 $ 284

Investment in banking subsidiary 833,630 313,364

Other assets 73,392 1,653

$ 915,342 $ 315,301

Other liabilities $ 551 $ 513

Subordinated debentures, net 94,872 —

Subordinated debentures owed to unconsolidated subsidiary trusts 17,013 —

Accrued expenses and other liabilities $ 5,828 $ 551

Total liabilities

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$ 915,342 $ 315,301

Parent Company Only Condensed Statement of Income 2023 2022

Parent Company Only Condensed Statement of Income December 31, 2024 December 31, 2023

Dividends from bank subsidiary $ 23,869 $ 18,997

Total Income 23,869 18,997

Salaries and employee benefit 6,949 2,052

Interest expense 7,412 —

Other operating expenses 7,863 4,826

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Equity in undistributed earnings of subsidiary 29,345 9,128

$ 22,692 $ 44,013

Net Income 35,708 22,692

Preferred stock dividends 675 —

Net income applicable to common shares $ 35,033 $ 22,692

Note 19— Parent Company Financial Information (continued)

Parent Company Only Condensed Statement of Cash Flows 2023 2022

Parent Company Only Condensed Statement of Cash Flows December 31, 2024 December 31, 2023

Cash Flows from Operating Activities

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Note 20— Other Operating Expense

Other operating expense from the Statements of Income for years ended December 31, 2023, December 31, 2022, and December 31, 2021, is as follows (in thousands):

2023 2022 2021

FDIC & other regulatory assessment $ 1,957 $ 958 $ 920

Other operating expense from the Consolidated Statements of Income for years ended December 31, 2024, December 31, 2023, and December 31, 2022, is as follows (in thousands):

December 31, 2024 December 31, 2023 December 31, 2022

FDIC assessment $ 3,329 $ 1,957 $ 1,249

Historic tax credit amortization 2,526 2,526 2,526

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Consultant fees 8,510 3,082 1,708

Network expense 1,810 1,693 1,592

ATM, card, & network expense 5,398 2,566 2,244

Directors' fees 1,991 1,918 1,941

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Marketing expense 1,894 459 1,035

Debit card expenses 776 596 795

(Gain)/loss on sale of buildings 37 ( 4,533 ) ( 1,063 )

Donation expense 6,157 89 162

Core deposit intangible amortization 11,460 — —

(Gain) / loss on sale or disposal of assets 2,177 37 ( 4,533 )

Other 16,007 5,418 4,989

Total $ 68,807 $ 25,983 $ 17,419

The Company incurred merger-related expenses of $ 3.0 million for the year ended December 31, 2023.

The substantial majority of the merger-related expenses are included in the consultant fees and legal expense line items detailed in other operating expenses.

The Company incurred merger-related expenses of $ 17.0 million and $ 3.0 million for the year ended December 31, 2024, and December 31, 2023, respectively.

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

Note 21— Qualified Affordable Housing Project and Historic Tax Investments

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The following table presents the components of non-interest income for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 (in thousands):

2023 2022 2021

December 31, 2024 December 31, 2023 December 31, 2022

Service charges and fees (1)

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Customer loan swap fees

Investor servicing income 345 — —

Letter of credit fees 364 89 68

Unfunded commitment purchase accounting adjustment (2)

Other non-interest (3)

1,102 455 558

Total non-interest income $ 36,166 $ 17,952 $ 17,087

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A description of the Company’s revenue streams accounted for under ASC 606 follows:

Income from fiduciary & wealth management activities

Fiduciary and wealth management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets.

The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate.

Payment is generally received a few days after month end through a direct charge to customers’ accounts.

The Company does not earn performance-based incentives.

Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers.

The Company’s performance obligation for these transactional-based services is generally satisfied at a point in time (i.e., as incurred), and that allows the Company to recognize the related revenue associated with that transaction.

Payment is received shortly after services are rendered.

Annuity and insurance income primarily consists of commissions received on annuity product sales.

The Company acts as an intermediary between the Company’s customer and the insurance carrier.

The Company’s performance obligation is generally satisfied upon the issuance of the annuity policy.

Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue.

The Company does not earn a significant amount of trailer fees on annuity sales.

The majority of the trailer fees relates to variable annuity products and are calculated based on a percentage of market value at period end.

Revenue is not recognized until the annuity’s market value can be determined.

Other non-interest income consists of other recurring revenue streams, such as commissions from sales of mutual funds and other investments, investment advisor fees from the Company’s wealth management product,

Note 22— Revenue from Contracts with Customers (continued)

safety deposit box rental fees, and other miscellaneous revenue streams.

Commissions from the sale of mutual funds and other investments are payable on the trade date and are received in the following month, which is when the Company has satisfied its performance obligation.

The Company also receives periodic service fees (i.e., trailers) from mutual fund companies typically based on a percentage of net asset value.

Trailer revenue is recorded over time, usually monthly or quarterly, as net asset value is determined.

Investment advisor fees from the wealth management product are earned over time and based on an annual percentage rate of the net asset value.

The investment advisor fees are charged to the customer’s account in advance on the first month of the quarter, and the revenue is recognized over the following three-month period.

Service charges and fees

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Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Debit card fees and other service charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges.

Debit card fees and merchant & other credit fees charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges.

Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Visa.

3 unchanged sentences

Payment is typically received immediately or in the following month.

Note 22— Revenue from Contracts with Customers (continued)

Income from fiduciary & wealth management activities

Fiduciary and wealth management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets.

The Company does not earn performance-based incentives.

Optional services are transactional-based with the Company’s performance obligation being satisfied at a point in time (i.e., as incurred), and that allows the Company to recognize the related revenue associated with that transaction.

Payment is received shortly after services are rendered.

Other non-interest income

Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment.

The Company determined that since rentals and renewals occur fairly consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation.

The Company earns a servicing release premium for residential loans sold with servicing released to third-party investors.

In some cases, the Company will retain servicing and that will result in investor servicing income being recognized monthly as interest payments are collected from the borrower.

Other items captured within here are recognized at a point in time such as merchant & debit card fees.

Part of the merger resulted in the Company recognizing a liability for the unfunded commitments that were assumed as part of the transaction.

As these commitments mature, the Company reduces this liability that is recorded, within “Accrued Interest and Other Liabilities” on the Consolidated Balance Sheets, and records non-interest income.

Note 23— Share-Based Compensation

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 expense that has been charged against income for the share-based awards granted was $ 2.4 million, $ 2.0 million, and $ 283 thousand for 2023, 2022, and 2021, respectively.

Total compensation expense that has been charged against income for the share-based awards granted was $ 2.9 million, $ 2.4 million, and $ 2.0 million for 2024, 2023, and 2022, respectively.

The total income tax benefit was $ 605 thousand, $ 506 thousand, and $ 421 thousand for 2024, 2023, and 2022, respectively.

2019 Stock Incentive Plan

In 2019, the Company’s Stock Incentive Plan (“2019 SIP”) was approved by the Bank’s Board of Directors.

In 2019, the Company’s Stock Incentive Plan (“2019 SIP”) was approved by the Bank’s Board.

The 2019 SIP provides for the issuance of share-based awards to directors and employees of the Company.

The 2019 SIP authorized 240,000 units to be issued and the Company has a practice of using shares held as treasury stock to satisfy these awards.

The 2019 SIP authorized 240,000 units to be issued and the Company’s practice is using authorized unissued shares to satisfy these awards.

Each unit represents a contingent right to receive one common share or an equivalent amount of cash, or a combination of the two, at the discretion of the Company.

Currently, we have a sufficient number of treasury shares to satisfy outstanding equity awards.

Currently, we have a sufficient number of authorized unissued shares to satisfy outstanding equity awards.

Under the 2019 SIP, the Company has issued restricted stock unit (“RSU”) awards that are both time-based and performance-based.

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Compensation expense is recognized over the vesting period of the awards based on the fair value of the award at grant date.

2023 Stock Incentive Plan

In 2023, a new stock incentive plan (“2023 SIP”) was approved by the Board and shareholders.

Upon the plan’s shareholder approval date of March 30, 2023, no further share-based awards have been issued under the 2019 SIP.

The 2023 SIP provides for the issuance of share-based awards to directors and employees of the Company.

The 2023 SIP authorized the issuance of 250,000 shares, subject to an annual increase in available shares and shares recycled from the 2019 SIP that were cancelled.

Based on our shares outstanding as of December 31, 2023, and awards that were recycled from the 2019 SIP, the total shares authorized for issuance under the plan as of December 31, 2024 was 324,887 .

Note 23— Share-Based Compensation (continued)

A total of 100,665 , 25,705 , and 13,160 shares were issued in 2024, 2023, and 2022, respectively.

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These RSUs vest over three to five years .

Note 23— Share-Based Compensation (continued)

The Board, from time to time, approves performance-based RSU awards that may be earned between a three to five year performance period.

Whether units are earned at the end of the performance period will be determined based on the achievement of a market capitalization target over the performance period.

If the condition is not achieved, the grant recipient will receive 50 % of the units upon fulfilling the required service time.

If the performance condition is achieved, the grant recipient will receive 100 % of the units granted.

The market capitalization target will be determined by the Board.

Whether units are earned at the end of the performance period will be determined based on the achievement of performance and/or market targets (e.g., market capitalization target) over the performance period.

If the conditions are achieved, the grant recipient will receive 100 % of the units granted as these awards do not provide for a multiplier effect.

The performance/market targets are determined by the Board.

The fair value for performance-based RSU awards was determined by using a Monte Carlo simulation analysis to estimate the achievement of the market capitalization target determined by the Board.

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The dividend yield assumption was based on historical and anticipated dividend payouts.

2023 Stock Incentive Plan

In 2023, a new stock incentive plan (“2023 SIP”) was approved by the Board of directors and shareholders.

Upon the plan’s shareholder approval date of March 30, 2023, no further share-based awards will be issued under the 2019 SIP.

The plan provides for the issuance of share-based awards to directors and employees of the Company.

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

As of December 31, 2023, one share-based award of 1,000 shares has been issued under the 2023 SIP.

The following is a summary of all the Company’s RSU awards issued under both the 2019 SIP and 2023 SIP:

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The cost is expected to be recognized over a weighted average period of 1.47 years.

There were 89,135 shares remaining to be issued from the 2019 SIP which were rolled into the 2023 SIP as of the approval date of the 2023 SIP at March 30, 2023.

2023 Employee Stock Purchase Plan

In 2023, a new employee stock purchase plan (“2023 ESPP”) was approved by the Board of directors and shareholders.

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

Whole shares are sold to participants in the plan 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.

In 2023, a new employee stock purchase plan (“2023 ESPP”) was approved by the Board and shareholders.

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, subject to an annual increase in reserved shares.

At December 31, 2024, 312,230 shares were available to be issued.

Whole shares are sold to participants in the plan 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.

At December 31, 2023, no shares have been purchased.

The Company recognized $ 64 thousand of expense captured in salaries and wages line item on the Consolidated Statements of Income for the year ended December 31, 2023.

December 31, 2024

Shares purchased 12,057

Weighted average price of shares purchased $ 44.93

Compensation expense recognized (in 000's) 179.3

Stock Appreciation Rights (“SAR”)

Upon completion of the Merger and as a part of the Merger Agreement, the Company assumed SAR awards that had been issued to existing employees that would continue with the same terms and conditions adjusted for the exchange ratio of 0.5043 .

As part of the Merger, a significant portion of SAR awards accelerated their vesting and thus did not require any future service component.

Management used the Black-Scholes option-pricing model to fair

Note 23— Share-Based Compensation (continued)

value these accelerated SAR awards and included this value as part of the purchase price consideration discussed in Note 25 - Business Combination .

The Company also used the Black-Scholes option-pricing model to fair value the non-accelerated SAR awards that were not fully vested.

The SAR awards that have been assumed by the Company were issued in 2019, 2021, and 2023, and these SAR awards become exercisable ratably over 7 years ( 14.3 % per year) and contractually expire 10 years after the grant date.

Upon completion of the Merger, the Company determined the fair value per SAR using the following assumptions:

2019 SAR 2021 SAR 2023 SAR

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

Fair value $ 14.89 $ 16.92 $ 14.56

Risk-free interest rate 4.51 % 4.32 % 4.14 %

Expected dividend yield 3.95 % 3.95 % 3.95 %

Expected common stock volatility 32.56 % 32.56 % 32.56 %

Expected contractual life (in years)

4.77 7.20 8.77

A summary of SAR and option activity during the year ended December 31, 2024, is as follows:

Weighted Average

Dollars in thousands, except per share information

Aggregate Fair Value Remaining Contractual Term (Yrs.) Exercise Price

Outstanding, December 31, 2023

Granted (or acquired) 299,556 4,996 5.67 45.24

Exercised 70,041 1,387 — 39.90

Forfeited 5,642 86 — 47.96

Expired — — — —

Outstanding, December 31, 2024 223,873 $ 3,523 5.44 $ 46.87

Exercisable SARs:

At December 31, 2024 183,971 2,931 5.04 46.39

The total fair value of SARs exercised was $ 1.4 million during the year ended December 31, 2024.

The total fair value of SARs vested was $ 67.0 thousand during the year ended December 31, 2024.

As of December 31, 2024, there was $ 538.2 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 2.27 years years.

Note 24— Earnings Per Share

Basic earnings per share excludes dilution and is computed by dividing net income 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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Note 24— Earnings Per Share (continued)

The following shows the weighted average number of shares used in computing earnings per share and the effect of weighted average number of shares dilutive potential Common Stock.

The following shows the weighted average number of shares used in computing earnings per share and the effect of the weighted average number of shares of dilutive potential Common Stock.

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

December 31, 2024 December 31, 2023 December 31, 2022

Net income applicable to common shares (in thousands)

$ 35,033 $ 22,692 $ 44,013

Net income (in thousands) $ 22,692 $ 44,013 $ 36,165

Weighted average number of shares 12,393,677 7,428,042 7,425,088

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Weighted average dilutive shares 12,441,831 7,506,855 7,467,717

Basic EPS $ 3.05 $ 5.93 $ 4.87

Diluted EPS 3.02 5.89 4.87

Stock awards equivalent to 503 , zero , and 462 shares of Common Stock were not considered in computing diluted earnings per common share for 2023, 2022, and 2021, respectively, because they were antidilutive.

Note 25— Subsequent Events

The Company has evaluated subsequent events through the filing of this Form 10-K, and determined that there have been no material events that have occurred that would require adjustments to our disclosures in the consolidated financial statements.

Basic earnings per common share

$ 2.83 $ 3.05 $ 5.93

Diluted earnings per common share

2.82 3.02 5.89

Stock awards equivalent to 67,882 shares, 503 shares, and zero shares of Common Stock were not considered in computing diluted earnings per common share for 2024, 2023, and 2022, respectively, because they were antidilutive.

Note 25— Business Combination

Effective on May 3, 2024, Burke & Herbert completed the Merger with Summit, pursuant to the Merger Agreement.

The total aggregate consideration payable in the Merger was approximately 7,405,772 shares of Burke & Herbert Common Stock.

Additionally, each share of Summit’s 6.0 % Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series 2021 issued and outstanding was converted into the right to receive a share of Burke & Herbert Series 2021 Preferred Stock.

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 $ 99.9 million and $ 111.3 million, respectively, since the date of the acquisition through December 31, 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 $ 36.5 million are included in non-interest expense in the Company’s income statement for the year ended, December 31, 2024.

A portion of these merger-related costs is captured in Other Operating Non-Interest Expense as further description in Note 20 - Other Operating Expense and an additional $ 19.5 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.

The fair value of the common shares issued as part of the consideration paid for Summit was determined in the basis of the closing price of the Company’s common shares on the date of completion of the Merger.

We accounted for the Merger using the acquisition method of accounting in accordance with ASC 805, Business Combinations, and accordingly, the assets and liabilities of Summit were recorded at their respective fair values on the date of completion of the Merger.

The fair values of assets and liabilities are subject to refinement for up to one year after the acquisition date if any additional information relative to the acquisition date fair values becomes available.

We recognized goodwill of $ 32.8 million in connection with the acquisition, which is not amortized for financial reporting purposes, but is subject to annual impairment testing.

The goodwill arising from

Note 25— Business Combination (continued)

the transaction is no t deductible for tax purposes and consisted largely of synergies and the cost savings resulting from the combining of the operations of the companies.

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 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.

The gross contractual amounts receivable relating to the purchased financial assets with credit deterioration was $ 442.3 million.

The Company estimates, on the date of the acquisition, that $ 23.9 million of the contractual cash flows specific to the purchased financial assets with credit deterioration will not be collected.

The following table details the total consideration paid for Summit on May 3, 2024, the fair values of the assets acquired and liabilities assumed and the resulting goodwill at the acquisition date.

($ in thousands, except share information)

Consideration May 3, 2024

Common stock of Summit Financial Group, Inc.

Exchange ratio 0.5043

Expected Burke & Herbert common stock to be issued 7,406,522

Actual Burke & Herbert common stock issued 7,405,772

Fractional common stock to be paid in cash 750

Actual Burke & Herbert common stock issued 7,405,772

Price per share of Burke & Herbert common stock issued $ 51.67

Purchase price consideration for common stock issued $ 382,656

Fractional common stock to be paid in cash 750

Average 10 day closing price used to pay fractional common stock $ 53.66

Cash paid for fractional shares $ 40

Implied value of stock appreciation rights ("SARs") and restricted stock units 4,336

Fair value of preferred stock issued by Burke & Herbert 10,413

Fully diluted transaction value 397,445

Goodwill $ 32,783

Note 25— Business Combination (continued)

As Recorded Estimated Estimated

by Summit Fair Value Fair Value

($ in thousands) May 3, 2024 Adjustments May 3, 2024

Total purchase price consideration $ 397,445

Recognized amounts of identifiable assets acquired and liabilities assumed

Cash and equivalents $ 53,357 $ — $ 53,357

Securities, available-for-sale, at fair value 491,608 — 491,608

Securities, held-to-maturity, at amortized cost 93,573 ( 7,430 ) 86,143

Equity and other investments 36,085 — 36,085

Loans, gross 3,707,940 ( 153,306 ) 3,554,634

Allowance for credit losses ( 49,471 ) 25,991 ( 23,480 )

Loans, net of allowance 3,658,469 ( 127,315 ) 3,531,154

Premises and equipment, net 62,255 13,276 75,531

Accrued interest receivable 19,610 — 19,610

Company-owned life insurance 86,363 — 86,363

Goodwill and intangibles 73,144 ( 4,384 ) 68,760

Other assets 43,169 11,322 54,491

Total identifiable assets acquired 4,617,633 ( 114,531 ) 4,503,102

Deposits 3,704,072 ( 7,136 ) 3,696,936

Borrowings 283,398 — 283,398

Subordinated debentures and trust preferred securities 123,533 ( 16,466 ) 107,067

Unfunded reserve liability 6,692 ( 3,190 ) 3,502

Accrued interest and other liabilities 47,537 — 47,537

Total liabilities 4,165,232 ( 26,792 ) 4,138,440

Total identifiable net assets $ 452,401 $ ( 87,739 ) $ 364,662

Goodwill $ 32,783

Post Merger, all of the securities, held-to-maturity were reclassified as available-for-sale.

The following table presents supplemental pro forma information as if the Merger had occurred on January 1, 2024 and on January 1, 2023.

The unaudited pro forma information includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, depreciation expense on property acquired, interest expense on deposits acquired, and the related income tax effects.

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.

($ in thousands) June 30, 2024 June 30, 2023

Net Interest Income $ 287,481 $ 293,300

Net Income 110,122 55,453

Note 26— Goodwill and Other Intangible Assets

The following table presents the change in goodwill for the the years ended December 31, 2024, December 31, 2023, and December 31, 2022, (in thousands):

December 31, 2024 December 31, 2023 December 31, 2022

Beginning of period $ — $ — $ —

Acquired goodwill 32,783 — —

Impairment — — —

End of period $ 32,783 $ — $ —

During the year ended, December 31, 2024, the Company recorded $ 32.8 million of goodwill associated with the acquisition of Summit.

See Note 25 - 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 year ended, December 31, 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 years ended December 31, 2024, December 31, 2023, and December 31, 2022, were as follows (in thousands):

December 31, 2024 December 31, 2023 December 31, 2022

Beginning of period $ — $ — $ —

Acquired core deposit intangible 68,760 — —

Amortization ( 11,460 ) — —

Impairment — — —

Total core deposit intangible $ 57,300 $ — $ —

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 $ 11.5 million for the year ended December 31, 2024.

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

Estimated Amortization

2025 $ 15,553

Thereafter 4,093

Total $ 57,300

Note 27— Segment Information

Accounting policies for segments are the same as those described in Note 1.

Segment performance is evaluated using consolidated net income.

The Company operates in one segment – Community Banking and the financial performance of this one segment is used to make resource allocations and performance decisions.

The Company’s Chief Executive Officer is in charge of allocating the Company’s resources and assessing performance, and has been identified as the chief operating decision maker.

While the chief decision-maker monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis.

Individual operating results are not reviewed by senior management to make resource allocation or performance decisions.

Therefore, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data