BHRB US Equity☆

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our consolidated financial condition and results of operations of the Company should be read in conjunction with our consolidated financial statements and notes thereto presented in Item 8. Financial Statements and Supplementary Data. Historical results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate trends in operations or results of operations for any future periods. We are a financial holding company and we conduct all of our material business operations through the Bank. As a result, the discussion and analysis below primarily relate to activities conducted at the Bank.

We have made, and will continue to make, various forward-looking statements with respect to financial and business matters. Comments regarding our business that are not historical facts are considered forward-looking statements that involve inherent risks and uncertainties, see Disclosure Regarding Forward-Looking Statements. Actual results may differ materially from those contained in these forward-looking statements.

53

Table of Contents

Overview

Burke & Herbert Financial Services Corp. was organized as a Virginia corporation in 2022 to serve as the holding company for Burke & Herbert Bank & Trust Company. The Company 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 the Company. The Company has no material operations other than owning the Bank. In September 2023, the Company elected to become a financial holding company under the BHCA. As a financial holding company of a Virginia state bank, the Company 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 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. The Company’s deposit products include checking, savings, and term certificate accounts. The Company’s loan portfolio includes commercial and consumer loans, a substantial portion of which are secured by real estate.

The Bank derives a significant portion of its income from interest received on loans and investments. The Bank’s primary source of funding is deposits, both interest-bearing and non-interest-bearing. In order to maximize the Bank’s net interest income, or the difference between the income on interest-earning assets and the expense of interest-bearing liabilities, the Bank must not only manage the volume of these balance sheet items, but also the yields earned on interest-earning assets and the rates paid on interest-bearing liabilities. To account for credit risk inherent in all loans, the Bank maintains an allowance for credit loss (“ACL”) to absorb expected credit losses on existing loans that may become uncollectible. The Bank establishes and maintains this ACL by charging a provision for credit losses against operating earnings. In order to maintain its operations and branch locations, the Bank incurs various operating expenses, which are further described within the “Results of Operations” later in this section.

As of December 31, 2024, we had total consolidated assets of $7.8 billion, gross loans of $5.7 billion, total deposits of $6.5 billion, and total shareholders’ equity of $730.2 million. As of December 31, 2024, we had 815 full-time equivalent employees. None of our employees are covered by a collective bargaining agreement.

Merger with Summit Financial Group, Inc.

Effective on the Closing Date, the Company completed the Merger 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 the Company, with the Company 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 the Company 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 the Company 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.

The impact of this transaction, where material, is discussed in the applicable sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

54

Table of Contents

Critical Accounting Policies andEstimates

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and conform to general practices within the industry in which we operate. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions, and judgments based on available information. These estimates, assumptions, and judgments affect the amounts reported in the financial statements and accompanying notes and are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements. In particular, management has identified several accounting policies that, due to the estimates, assumptions, and judgments inherent in those policies, are critical in understanding our financial statements.

Our most significant accounting policies are presented in the notes to the accompanying consolidated financial statements. These policies, along with the other disclosures presented in the financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, we have identified business combination and goodwill, the determination of the allowance for credit losses, and income taxes to be the accounting areas that require the most subjective or complex judgments, and as such, could be most subject to revision as new information becomes available.

Business Combination and Goodwill

For acquisitions, we are required to record the assets acquired, including identified intangible assets such as core deposit intangibles, and the liabilities assumed at their respective fair values. The difference between consideration and the net fair value of assets acquired is recorded as goodwill. Management uses significant estimates and assumptions to value such items, including projected cash flows, repayment rates, default rates and losses assuming default, discount rates, and realizable collateral values. The allowance for credit losses for purchased credit deteriorated (“PCD”) loans is recognized within acquisition accounting. The allowance for credit losses for non-PCD assets is recognized as provision for credit losses in the same reporting period as the acquisition. Fair value adjustments are amortized or accreted into the income statement over the estimated life of the acquired assets or assumed liabilities. The purchase date valuations and any subsequent adjustments determine the amount of goodwill recognized in connection with the acquisition. The use of different assumptions could produce significantly different valuation results, which could have material positive or negative effects on our results of operations. The carrying value of goodwill recorded must be reviewed for impairment on an annual basis, as well as on an interim basis if events or changes indicate that the asset might be impaired. An impairment loss must be recognized for any excess of carrying value over fair value of the goodwill.

The determination of fair values is based on valuations using management’s assumptions of future growth rates, future attrition, discount rates, multiples of earnings or other relevant factors. In addition, we engage third party specialists to assist in the development of fair values. Preliminary estimates of fair values may be adjusted for a period of time subsequent to the acquisition date if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Adjustments recorded during this period are recognized in the current reporting period. Management uses various valuation methodologies to estimate the fair value of these assets and liabilities, and often involves a significant degree of judgment, particularly when liquid markets do not exist for the particular item being valued. Examples of such items include loans, deposits, identifiable intangible assets, and certain other assets and liabilities.

Changes in these factors, as well as downturns in economic or business conditions, could have a significant adverse impact on the carrying value of assets, including goodwill and liabilities, which could result in impairment losses affecting our financial statements as a whole and our banking subsidiary in which the goodwill resides.

Allowance for Credit Losses

The allowance for credit losses represents our estimate of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and projections including reasonable and

55

Table of Contents

supportable, reversion, and post-reversion forecasts. It is a valuation account that is deducted from the financial assets’ amortized cost basis to present the net amount expected to be collected on the financial asset. Financial assets are charged-off against the allowance when management believes the uncollectibility of a financial asset is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The Company’s loan portfolio is the largest financial asset that is in scope of this critical accounting estimate. Determining the amount of the allowance for credit losses is considered a critical accounting estimate, because it is based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts, and prepayment experience as related to credit contractual terms. Management estimates the allowance balance using relevant available information from internal and external sources. Historical credit loss experience provides the basis for the estimation of expected credit losses; adjustments to historical loss information are made for differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, and delinquency levels, as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors. The model methodology used for funded credits, along with taking into consideration the probability of drawdowns or funding on unfunded commitments and whether such commitments are irrevocable or not by the Company, is how the Company determines the allowance for credit losses for unfunded commitments. These evaluations are conducted at least quarterly and more frequently, if deemed necessary.

The Company is using an internally developed model that produces an estimate of the allowance for credit losses as the lifetime expected credit losses of the loan portfolio. This model uses a remaining useful life or weighted average remaining maturity (“WARM”) method within defined-contractual terms by federal call codes. The model forecasts net charge-off rates by call codes using ordinary least squares (“OLS”) regression models that use macroeconomic variables to forecast the Company’s and peer banks’ net charge-off rates. These models are used to produce reasonable and supportable forecasts of net charge-off rates. The macroeconomic variables utilized by the Company include variables that meet defined criteria in forecasting credit losses for our loan portfolio. These variables include, but are not limited to, unemployment rates, housing and commercial real estate prices, gross domestic product levels, equity market conditions or interest rates, as well as other variables that are portfolio-specific, such as those pertaining to commercial real estate or to residential loan portfolios. The Company sources the macroeconomic variables and the macroeconomic variable forecasts that it uses in its ACL model from the Standard & Poor’s Global Market Intelligence and from CoStar Group.

The Company currently has set an initial reasonable and supportable period of two years with a subsequent straight-line loss-rate reversion for the following four quarters before then utilizing historical average loss rates in remaining periods of the modeled contractual terms. Based on management’s analysis, adjustments may be applied for additional factors impacting the risk of loss in the loan portfolio beyond information used to calculate reasonable and supportable, reversion and post-reversion period forecasts on collectively evaluated loans. As the reasonable and supportable and reversion period forecasts reflect the use of the macroeconomic variable loss drivers, management may consider that an additional or reduced reserve is warranted through qualitative risk factors based on current and expected conditions, including those that utilize supplemental information relative to the macroeconomic variable loss drivers. Qualitative adjustments considered by management include the following: (i) management’s assessment of macroeconomic forecasts used in the model and how those forecasts align with management’s overall evaluation of current expected credit conditions; (ii) organization specific risks such as credit concentrations, collateral specific risks, nature and size of the portfolio, and external factors that may ultimately impact credit quality; and (iii) underwriting and delinquency trends. The qualitative factors applied at December 31, 2024, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management’s assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model. Management reviews supplemental data sources including historical net charge-off rates and data measuring other specific credit

56

Table of Contents

outcomes from its systems of record in supporting qualitative factors. However, qualitative factor evaluations are inherently imprecise and require significant management judgement.

See Note 1 — Nature of Business Activities and Significant Accounting Policies for more discussion of the qualitative factors along with information on the allowance for credit losses for the off-balance sheet credit exposures.

Income Taxes

The Company’s income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated taxes due. The calculation of each component of the Company’s income tax provision is complex and requires the use of estimates and judgments in its determination. As part of the Company’s evaluation and implementation of business strategies, consideration is given to the regulations and tax laws that apply to the specific facts and circumstances for any tax positions under evaluation. Management closely monitors tax developments on both the federal and state level in order to evaluate the effect they may have on the Company’s overall tax position and the estimates and judgments used in determining the income tax provision and records adjustments as necessary.

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expenses. In evaluating the Company’s ability to recover its deferred tax assets within the jurisdiction from which they arise, the Company must consider all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and the results of recent operations. A valuation allowance is recognized for a deferred tax asset if, based on the available evidence, it is more likely than not that some portion or all of a deferred tax asset will not be realized. See Note 8 — Income Taxes, in Notes to the Consolidated Financial Statements of the Company for additional information.

Non-GAAP Financial Measures

We prepare our financial statements in accordance with U.S. GAAP and also present certain non-GAAP financial measures that exclude certain items or otherwise include components that differ from the most directly comparable measures calculated in accordance with U.S. GAAP. Non-GAAP measures are provided as additional useful information to assess our financial condition and results of operations (including period-to-period operating performance). These non-GAAP measures are not intended as a substitute for GAAP financial measures and may not be defined or calculated the same way as non-GAAP measures with similar names used by other companies. For more information, including the reconciliation of these non-GAAP financial measures to their corresponding GAAP financial measures, see the respective sections where the measures are presented.

Commercial Real Estate Sector Concentration

The commercial real estate (“CRE”) sector has been impacted significantly by rising interest rates and higher vacancies, increasing the prospect of default that borrowers may face due to the record amount of upcoming maturities. In addition, the office market continues to struggle with fewer employees in the office after the COVID-19 pandemic. The Bank continues to monitor its commercial real estate portfolio by reviewing various credit risk and concentration reports. However, in late 2024 interest rates began falling, and in January 2025 the U.S. president signed an executive order requiring all federal employees to return to offices on a five day a week basis. Additionally, several large private-sector employers instituted similar return to office mandates in 2024. Given our concentration in the Washington, D.C. MSA we would expect that the federal return to office mandate, combined with mandates at private sector employers and decreases interest rates could help the region’s struggling CRE market; however, we cannot be certain that this would be the case or the degree to which such mandates may improve the CRE picture in 2025, if at all. The Bank’s exposure to commercial real estate at December 31, 2024, was $2.6 billion or 46.5% of its gross loan portfolio, not including owner-occupied commercial real estate and acquisition, construction & development. Commercial real estate as a percent of total assets at December 31, 2024, was 33.8%, not including owner-occupied commercial real estate and acquisition, construction & development.

57

Table of Contents

Including owner-occupied commercial real estate and acquisition, construction & development, total exposure was $3.7 billion or 65.5% of our total gross loans and 47.7% of total assets at December 31, 2024.

Loan balances by portfolio segment amortized cost (in thousands) and by percentage of our total gross loan portfolio at December 31, 2024, were as follows:

Amortized Cost Percentage

Owner-occupied commercial real estate 614,362 10.8

Acquisition, construction & development 465,537 8.2

Consumer non-real estate and other 167,701 3.0

Monitoring of the CRE concentration is performed at both the loan level and at the portfolio level. The Credit Risk Management team provides management and the Board with periodic reports on the credit portfolio, which include the CRE portfolio (including owner-occupied CRE and acquisition, construction & development loans). These reports provide an assessment of asset quality and risk rating migration and monitor concentrations against the board approved concentration limits (including sub-limits). The tables below present the Company’s commercial real estate, owner-occupied commercial real estate, and acquisition, construction & development portfolios by collateral type and geographic location as of December 31, 2024 (in thousands).

Commercial Real Estate by Collateral Type and Geographic Location

VA WV MD DC Other Total Percentage

58

Table of Contents

Owner-Occupied Commercial Real Estate by Collateral Type and Geographic Location

VA WV MD DC Other Total Percentage

VA WV MD DC Other Total Percentage

CRE loans are monitored through various processes that include payment monitoring, financial reporting, and covenant compliance monitoring, and annual reviews for larger relationships. Furthermore, construction loans are monitored throughout the life of the project and the construction loan administration function is centralized within the Credit Risk Management team. Monitoring the market conditions is also an important component of prudent CRE risk management. Quarterly construction progress reviews are also completed on all acquisition, construction & development loans. For each loan, management reviews the adequacy of the construction budget, adequacy of the interest reserve, pace of construction, and review of any loan covenants.

The Bank believes its underwriting and monitoring standards for commercial real estate loans are sufficient to evaluate its loan portfolio and keep it from incurring significant losses. The majority of the Company’s commercial real estate loans are in Virginia (approximately 46.7%), and it does not have significant exposure to any economic areas of the country that are underperforming the national economy. Additionally, the Bank’s overall exposure to the “Office Building/Condo” collateral type is 16.4% of total commercial real estate loans, including owner-occupied commercial real estate and acquisition, construction & development. The Bank believes that the combined loan portfolio is well-diversified, generally seasoned, manageable, and will outperform the industry in terms of performance through the economic cycle; however, our underwriting, review, and monitoring cannot eliminate all of the risks related to these loans. For further discussion see Item 1A, under the caption “Risk Factors”.

Liquidity Management

Liquidity is the ability of the Company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management involves maintaining the Company’s ability to meet the day-to-day cash flow requirements of its customers, whether they are depositors wishing to

59

Table of Contents

withdraw funds or borrowers requiring funds to meet their credit needs. Without proper liquidity management, the Company would not be able to perform the primary function of a financial intermediary and would, therefore, not be able to meet the needs of the communities it serves.

The Company assesses the need for liquidity in a variety of scenarios. Those scenarios may include projected growth, credit deterioration, deposit decay, interest rate changes, and a variety of other economic scenarios that can impact the liquidity position of the Company. These analyses are performed on a quarterly basis in conjunction with the Company’s Asset/Liability meetings, and findings are reported to the Asset and Liability Management Committee (the “ALCO”) and to the Board. From time to time, management may change the frequency of such testing or update certain inputs as a result of abnormal market conditions.

Findings, as a result of the Company’s prudent liquidity modeling, may result in the change of certain products offered to customers or adjust the way the Company manages its balance sheet. Such changes could include adjusting interest rates offered on certain deposit products, changes to interest rates charged in lending activities, or the suspension of certain products and activities altogether. Times of significant economic stress may cause the mix of funding to shift and increase the likelihood of changes to certain products in order to manage the Company’s overall liquidity and capital position.

The asset portion of the balance sheet provides liquidity primarily through unencumbered securities available-for-sale, loan principal and interest payments, maturities and prepayments of investment securities, and, to a lesser extent, sales of investment securities available-for-sale. Other short-term investments available to the Company that could act as potential sources of liquidity are federal funds sold, securities purchased under agreements to resell, and maturing interest-bearing deposits with other banks.

The liability portion of the balance sheet provides liquidity through interest-bearing and non-interest-bearing deposit accounts and through FHLB and other borrowings. Brokered deposits, federal funds purchased, securities sold under agreements to repurchase, and other short-term borrowings are additional sources of liquidity and basically represent the Company’s incremental borrowing capacity. These sources of liquidity are used as necessary to fund asset growth and meet short-term liquidity needs.

In addition to the Company’s financial performance and condition, liquidity may be impacted by the Company’s structure as a financial holding company that is a separate legal entity from the Bank. The Company requires cash for various operating needs that could include payment of dividends to its shareholders, the servicing of debt, and the payment of general corporate expenses. The primary source of liquidity for the Company is dividends paid by the Bank. Applicable federal and state statutes and regulations impose restrictions on the amount of dividends that may be paid by the Bank. In addition to the formal statutes and regulations, regulatory authorities also consider the adequacy of the Bank’s total capital in relation to its assets, deposits, and other such items. Any future dividends must be set forth in the Company’s capital plans before any dividends can be paid.

Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth. See Note 7 — Borrowed Funds and Note 14 — Commitments and Contingencies, in Notes to Consolidated Financial Statements for additional information regarding outstanding balances of sources of liquidity and contractual commitments and obligations.

Capital

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.

Applicable capital rules under the Basel III Framework require the Company and the Bank to maintain minimum Common Equity Tier 1 (“CET 1”), Tier 1, and Total Capital ratios, along with a capital conservation buffer, effectively resulting in new minimum capital ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET 1 capital to risk-weighted assets above the minimum but below the conservation buffer (or below the combined capital conservation buffer and

60

Table of Contents

counter-cyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. The Basel III Framework also provide for a “counter-cyclical capital buffer” that is applicable to only certain covered institutions and does not have any current applicability to the Company or the Bank.

Under capital adequacy guidelines and the regulatory framework for “prompt corrective action”, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Additionally, federal banking laws require regulatory authorities to take “prompt corrective action” with respect to depository institutions that do not satisfy minimum capital requirements. The extent of these powers depends upon whether the institution in question is “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized,” as such terms are defined under federal banking agency regulations. Depository institutions that do not meet minimum capital requirements will face constraints on payment of dividends, equity repurchases, and compensation based on the amount of shortfall. A depository institution that is not “well capitalized” is generally prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market, may be subject to asset growth limitations, and may be required to submit capital restoration plans.

As of December 31, 2024, and December 31, 2023, the Bank complied with all regulatory capital standards and qualifies as “well capitalized”. Note 12 — Regulatory Capital Matters in Notes to the Consolidated Financial Statements contains additional discussion and analysis regarding the Company and the Bank’s regulatory capital requirements.

Effects of Inflation

The majority of assets and liabilities of a financial institution are monetary in nature; therefore, a financial institution differs greatly from most commercial and industrial companies, which have significant investments in fixed assets or inventories that are greatly impacted by inflation. However, inflation does have an important impact on the growth of total assets in the banking industry and the resulting need to increase equity capital at higher-than-normal rates in order to maintain an appropriate equity-to-assets ratio. Inflation also affects other expenses that tend to rise during periods of general inflation.

Management believes the most significant potential impact of inflation on financial results is a direct result of the Company’s ability to manage the impact of changes in interest rates. Management attempts to maintain a balanced position between rate-sensitive assets and liabilities over an economic cycle in order to minimize the impact of interest rate fluctuations on net interest income. However, this goal can be difficult to completely achieve in times of rapidly changing interest rates and is one of many factors considered in determining the Company’s interest rate positioning.

Key Factors Affecting Financial Performance

We face a variety of risks that may impact various aspects of our financial performance from time to time. The extent of such impacts may vary depending on factors such as the current business and economic conditions, political and regulatory environment, and operational challenges. Many of these risks and our risk management strategies are described in more detail elsewhere in this Report.

Our success will depend upon, among other things, the following factors that we manage or control:

•Effectively managing capital and liquidity, including:

◦Continuing to maintain and, over time, grow our deposit base as a low-cost stable funding source,

◦Prudent liquidity and capital management to meet evolving regulatory capital, capital planning, stress testing, and liquidity standards, and

61

Table of Contents

◦Actions we take within the capital and other financial markets,

•Our ability to manage any material costs related to the execution of our strategic priorities, including increased employees, infrastructure, compliance, and other costs in a profitable manner over the long term,

•Management of credit risk and interest rate risk in our portfolio,

•Our ability to manage and implement strategic business objectives within the changing regulatory environment,

•The impact of legal and regulatory-related contingencies,

•The appropriateness of critical accounting estimates and related contingencies,

•Our ability to manage operational risks related to new products and services, changes in processes and procedures, or the implementation of new technology, and

•The ability to make investments to promote compliance with existing and evolving regulatory requirements that will increase as the Company grows and will result in increased administrative expenses that we did not previously incur, which costs may materially increase our general and administrative expenses.

Our financial performance is also substantially affected by a number of external factors outside of our control, including the following:

•Economic conditions, including pandemics and political conflicts, the availability of labor, supply chain volatility, and any actions taken to mitigate and manage such impacts,

•The effect of climate change on our business and performance, including indirectly through impacts on our customers,

•The actions by the Federal Reserve, U.S. Treasury, and other government agencies, including those that impact money supply and market interest rates and inflation,

•The level of, and direction, timing, and magnitude of movement in interest rates and the shape of the interest rate yield curve,

•The functioning and other performance of and availability of liquidity in U.S. and global financial markets, including capital markets,

•The impact of tariffs and other trade policies of the U.S. and its global trading partners,

•Changes in the competitive landscape,

•Impacts of changes in federal, state, and local governmental policy, including on the regulatory landscape, capital markets, taxes, infrastructure spending, and social programs,

•The impact of market credit spreads on asset valuations,

•The ability of customers, counterparties, and issuers to perform in accordance with contractual terms and the resulting impact on our asset quality,

•Loan demand, utilization of credit commitments, and standby letters of credit, and

•The impact on customers and changes in customer behavior due to changing business and economic conditions or regulatory or legislative initiatives.

The impact of these items, where material, is discussed in the applicable sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations. For additional information on the risks we face, see Item 1A. — Risk Factors.

62

Table of Contents

Selected Financial Data

The following table sets forth selected historical consolidated financial information for each of the periods indicated. This information should be read together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, below, and with the accompanying consolidated financial statements included in this Form 10-K. The historical information indicated as of and for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, has been derived from the Company’s audited consolidated financial statements for the years ended December 31, 2024, December 31, 2023, and December 31, 2022. Historical results set forth below and elsewhere in this Form 10-K are not necessarily indicative of future performance.

As of December 31,

(In thousands, except ratios, share, and per share data) 2024 2023 2022

Selected Financial Condition Data:

As of or for the Year Ended December 31,

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

Preferred stock dividends 675 — —

Per Share Data:

Basic net income per common share $ 2.83 $ 3.05 $ 5.93

Diluted net income per common share 2.82 3.02 5.89

Dividends declared per common share 2.14 2.12 2.12

Book value per common share (at period end) $ 48.08 $ 42.37 $ 36.82

63

Table of Contents

As of or for the Year Ended December 31,

Performance Ratios:

Capital Ratios:

Total risk-based capital to risk-weighted assets 14.57 17.88 18.88

Tier 1 capital to average assets (leverage ratio) 9.80 11.31 11.34

Asset Quality Ratios:

Net charge-offs to average outstanding loans during the period 0.03 — 0.18

Non-performing loans as a percentage of total loans 0.68 0.18 0.29

Non-performing assets as a percentage of total assets 0.53 0.10 0.15

Other Data:

Number of full-service branches 77 23 23

Number of full-time equivalent employees 815 400 411

__________________

(1)Dividend payout ratio represents dividends declared per common share divided by diluted earnings per common share.

(2)Return on average equity computed using total average equity at period-end.

(3)The interest rate spread represents the difference between the fully taxable-equivalent weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.

(4)The net interest margin represents fully taxable-equivalent net interest income as a percent of average interest-earning assets for the period.

(5)The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income and non-interest income.

64

Table of Contents

Results of Operations

Results of Operations for Years Ended December 31, 2024, and December 31, 2023

General

Consolidated net income applicable to common shares for the year ended December 31, 2024, was $35.0 million compared to $22.7 million earned during the year ended December 31, 2023. The $12.3 million or 54.4% increase in net income applicable to common shares in 2024 compared to 2023 was primarily due to the effect of the Merger which resulted in increases in all categories of interest income exceeding increases in interest expense compared to the prior year ended December 31, 2023.

Net interest income totaled $225.8 million for the year ended December 31, 2024, compared to $93.8 million for the year ended December 31, 2023. The $132.0 million increase in net interest income was primarily driven by the Merger which resulted in higher loan interest income partially offset by higher deposit interest expense. Interest-bearing demand deposits and time deposits were the primary driver of increased net interest expense due mostly to an increase in volume and partly to an increase in rate.

For the year ended December 31, 2024, the Company recorded credit provision expense of $24.2 million compared to $0.2 million for the year ended December 31, 2023. For the year ended December 31, 2024, the Company recognized a one-time CECL Day 2 provision for non-PCD assets acquired in the Merger, which resulted in a higher credit provision expense compared to the year ended December 31, 2023.

Non-interest income increased by $18.2 million, or 101.5%, to $36.2 million for the year ended December 31, 2024, compared to $18.0 million for the year ended December 31, 2023. The increase in non-interest income was mostly due to the Merger, and included increases in all categories of non-interest income. The largest increase was in service charges and fees of $8.9 million followed by an increase in fiduciary and wealth management of $3.1 million and and increase in other non-interest income of $2.9 million. The Company also realized gains on the sale of securities resulting in an increase of $1.5 million in net gains/(losses) from securities compared to the year ended December 31, 2023.

Non-interest expense increased by $111.4 million, or 128.9%, to $197.8 million for the year ended December 31, 2024, compared to $86.4 million for the year ended December 31, 2023. The increase was mostly due to the Merger, and included increases in all categories of non-interest expense. The largest increase was in other operating expenses which included $36.5 million of legal, consulting, and audit fees related to the Merger with Summit Financial Group, Inc. Other large increases included salaries and wages which increased by $37.8 million and equipment rentals, depreciation and maintenance which increased $17.4 million compared to the year ended December 31, 2023.

Net Interest Income and Net Interest Margin

Net interest income is the principal component of the Company’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Net interest margin, stated as a percentage, is the yield obtained by dividing the difference between interest income generated on earning assets and the interest expense paid on all funding sources by average earning assets.

Fluctuations in interest rates as well as changes in the volume and mix of earnings assets and interest-bearing liabilities can impact net interest income and net interest margin. Management closely monitors both total net interest income and the net interest margin and seeks to maximize net interest income without exposing the Company to an excessive level of interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity, and repricing options of all classes of interest-bearing assets and liabilities.

Net interest income totaled $225.8 million for the year ended December 31, 2024, compared to $93.8 million for the year ended December 31, 2023. The $132.0 million increase in net interest income was primarily driven by

65

Table of Contents

the Merger which resulted in higher loan interest income driven by higher accretion income, partially offset by higher deposit interest expense. Interest income on loans increased by $209.6 million while interest income on securities increased $7.3 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. Accretion income associated with acquired loans and borrowings totaled $40.9 million for the year ended, December 31, 2024. Deposit interest expense increased by $79.5 million, while interest expense on subordinated debt assumed in the Merger led to an increase in interest expense of $7.4 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.

The tax adjusted net interest margin was 3.08% for the year ended December 31, 2024, compared to 2.85% for the year ended December 31, 2023. The increase in tax-adjusted net interest margin was primarily driven by the the effect of the Merger and the acquisition of additional, higher-yielding interest-earning assets.

The yield for the year ended December 31, 2024, for the loan portfolio was 5.48% compared to 5.07% for the year ended December 31, 2023. The increase was primarily the result of the Merger which resulted in higher accretion income and the acquisition of additional, higher-yielding loans.

For the year ended December 31, 2024, the tax-adjusted yield on the total investment securities portfolio was 3.30% compared to 3.44% for the year ended December 31, 2023. The decrease was primarily due to the recovery on unrealized losses that decreased the effective rate earned on investment securities.

The rate paid on interest-bearing deposits increased to 2.27% during the year ended December 31, 2024, from 1.86% during the year ended December 31, 2023. The increase was a result of the Merger which resulted in the assumption of additional interest-bearing deposits with higher interest rates and to a lesser extent by higher market interest rates.

The rate paid on our borrowings for the year ended December 31, 2024, was 3.35% compared to 4.69% for the year ended December 31, 2023. The decrease was due to the decrease in short-term borrowing costs, driven by decreases in the Federal Funds Rate during 2024.

The rate paid on subordinated debt and trust preferred securities acquired in the merger was 10.08% for the year ended December 31, 2024.

66

Table of Contents

The following table sets forth the major components of net interest income and the related yields and rates for the years ended December 31, 2024, and December 31, 2023, for comparison (dollars in thousands).

For the Years Ended

Assets:

Liabilities and shareholders’ equity:

Deposits:

Borrowings:

Taxable-equivalent net interest margin(6) 3.08 % 2.85 %

Taxable-equivalent net adjustment (2,754) (1,493)

(1)Non-accrual loans are included in average loan balances.

(2)Loan fees are included in the calculation of interest income.

(3)Yields and interest income on tax-exempt assets are computed on a taxable-equivalent basis assuming a 21% tax rate.

(4)FHLB Advances and other includes finance lease liabilities.

(5)The interest rate spread represents the difference between the fully taxable equivalent weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.

(6)The net interest margin represents fully taxable equivalent net interest income as a percent of average interest-earning assets for the period.

Taxable-equivalent net interest margin, as presented above, is calculated by dividing fully tax-equivalent (“FTE”) net interest income by total average earning assets. Net interest income, on an FTE basis, is a non-GAAP financial measure that the Company believes to provide a more accurate picture of the interest margin for comparative purposes. Management believes FTE net interest income is a standard practice in the banking industry, and when net interest income is adjusted on an FTE basis, yields on taxable, nontaxable, and partially taxable assets are comparable; however, the adjustment to an FTE basis has no impact on net income. FTE net interest income is

67

Table of Contents

calculated by adding the tax benefit on certain financial interest earning assets, whose interest is tax-exempt, to total interest income and then subtracting total interest expense. As a non-GAAP measure, FTE net interest income should not be considered as a substitute for the nearest comparable GAAP measure, net interest income. Net interest income shown elsewhere in this Form 10-K is GAAP net interest income. The following table reconciles GAAP net interest income to FTE net interest income (in thousands).

For the Years Ended

GAAP Financial Measurements

Interest Income - Tax-exempt loans 118 —

Interest Income - Securities tax-exempt 10,243 5,615

Interest Income - Other interest income 4,680 2,302

Interest Expense - Subordinated debt 7,412 —

Interest Expense - Other 111 86

Non-GAAP Financial Measurements

Add: Tax Benefit on Tax-Exempt Interest Income - Securities $ 2,754 $ 1,493

Total Tax Benefit on Tax-Exempt Interest Income (1) 2,754 1,493

(1)Tax benefit was calculated using the federal statutory tax rate of 21%.

Rate/Volume Analysis

The following table sets forth the dollar difference in interest earned and paid for each major category of interest-earning assets and interest-bearing liabilities for the noted periods and the amount of such change attributable to changes in average balances (volume) or changes in average interest rates. Interest income and interest expense for the years ended December 31, 2024, and December 31, 2023, are annualized using an actual days over calendar year method. The volume variances are equal to the increase or decrease in average balance multiplied by current period rates, and rate variances are equal to the increase or decrease in rate times prior period average balances. Variances attributable to both rate and volume changes are calculated by multiplying the change in rate by the change in average balance and are allocated to the volume variance. See table below (in thousands).

68

Table of Contents

Increase (Decrease) Due to Change in:

Average Volume Average Rate Net Change

Income from the interest-earning assets:

Interest-bearing deposits and fed funds sold 2,494 (338) 2,156

Expense from the interest-bearing liabilities:

Total interest expense on interest-bearing deposits 69,652 9,817 79,469

Total interest expense on interest-bearing liabilities 81,397 5,841 87,238

(1)Yields and interest income on tax-exempt securities have been computed on a taxable-equivalent basis.

Interest Income

Total interest income was $366.2 million for the year ended December 31, 2024, compared to $146.9 million for the year ended December 31, 2023, an increase of 149.3%. The increase in interest income was primarily driven by the Merger which resulted in higher loan and security interest income. Interest income on securities increased by $7.3 million or 17.0% for the year ended December 31, 2024, compared to the year ended December 31, 2023. Interest income on loans increased $209.6 million or 205.9% for the year ended December 31, 2024, compared to the year ended December 31, 2023.

Interest Expense

Total interest expense was $140.4 million for the year ended December 31, 2024, compared to $53.1 million for the previous year ended December 31, 2023, an increase of 164.2%. The increase in interest expense was primarily driven by the effect of the Merger and increases in deposit and debt balances. Interest expense on interest-bearing deposits increased by $79.5 million or 202.8% for the year ended December 31, 2024, compared to the year ended December 31, 2023. Interest expense on borrowed funds increased by $0.3 million or 2.4% for the year ended December 31, 2024, compared to the year ended December 31, 2023. Interest expense on subordinated debt acquired in the Merger led to an increase in interest expense of $7.4 million for the year ended December 31, 2024, compared to the year ended December 31, 2023.

Provision for (Recapture of) Credit Losses

The provision for credit losses was $24.2 million for the year ended December 31, 2024, compared to $0.2 million for the year ended December 31, 2023. For the year ended December 31, 2024, the Company recognized a one-time CECL Day 2 provision for non-PCD assets acquired in the Merger and acquired commitments for unfunded commitments, which resulted in a higher credit provision expense compared to the year ended December 31, 2023. Additionally, loan balances have risen significantly for the year ended December 31, 2024, due to the Merger versus the year ended December 31, 2023. See Note 4 — Allowance for Credit Losses in Notes to Consolidated Financial Statements for further information.

69

Table of Contents

Non-interest Income

The following table sets forth the various components of our non-interest income for the periods indicated (in thousands):

Years Ended December 31, Increase (Decrease) 2024 vs. 2023

Non-interest income increased by $18.2 million or 101.5% for the year ended December 31, 2024, compared to December 31, 2023. The increase was primarily driven by the Merger, and included increases in all categories of non-interest income. The largest increase was in service charges and fees of $8.9 million followed by an increase in fiduciary and wealth management of $3.1 million and and increase in other non-interest income of $2.9 million. See Note 22 — Revenue from Contracts with Customers in Notes to Consolidated Financial Statements for further information. The Company also realized gains on the sale of securities resulting in an increase of $1.5 million in non-interest income and an increase in income from Company-owned life insurance of $1.8 million for the year ended December 31, 2024, compared to December 31, 2023.

Non-interest Expense

The following table sets forth the various components of our non-interest expense for the periods indicated (in thousands):

Years Ended December 31, Increase (Decrease) 2024 vs. 2023

Non-interest expense increased 128.9% for the year ended December 31, 2024, compared to December 31, 2023. The increase was mostly due to the Merger, and included increases in all categories of non-interest expense. The largest increase was in other operating expenses which included $36.5 million of legal, consulting, and audit fees related to the Merger with Summit Financial Group, Inc. The majority of these merger-related costs consist of legal, consulting, and audit fees. See Note 20 — Other Operating Expenses in Notes to Consolidated Financial Statements for further information on “Other” non-interest expense. Other large increases included salaries and wages which increased by $37.8 million, or 96.4%, and equipment rentals, depreciation and maintenance which increased $17.4 million, or 301.6%, compared to the year ended December 31, 2023. Pensions and other employee benefits increased by $7.8 million while occupancy increased by $5.5 million for the year ended December 31, 2024, compared to December 31, 2023.

Income Tax Expense

Income tax expense was $4.2 million for the year ended December 31, 2024, a increase of $1.8 million from the tax provision for the year ended December 31, 2023. For 2024 and 2023, our effective tax rates were 10.5% and 9.5%, respectively. A increase in income from operations led to a slight increase in the effective tax rate for 2024.

70

Table of Contents

The effective tax rate going forward will continue to depend on income from operations as well as any legislative corporate tax changes.

Results of Operations for Years Ended December 31, 2023, and December 31, 2022

For a comparison of the 2023 results to the 2022 results and other 2022 information not included herein, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of the Company’s 10-K filed with the SEC on March 22, 2024, as amended by the Company’s 10-K/A filed with the SEC on April 12, 2024.

71

Table of Contents

Analysis of Financial Condition for Years Ended December 31, 2024, and December 31, 2023

Assets increased by $4.2 billion to $7.8 billion as of December 31, 2024, compared to $3.6 billion as of December 31, 2023. The increase in assets was primarily due to the Merger and included an increase in loans, net of ACL, of $3.5 billion, and an increase of $183.9 million in the securities portfolio as of December 31, 2024 compared to December 31, 2023. Deposits increased by $3.5 billion and amounted to $6.5 billion at December 31, 2024, compared to $3.0 billion at December 31, 2023, while short-term borrowings increased by $93.0 million to $365.0 million as of December 31, 2024, compared to $272.0 million at December 31, 2023. Subordinated debt and subordinated debt owed to unconsolidated subsidiary trusts, which were assumed in the Merger, totaled $111.9 million at December 31, 2024, compared to zero at December 31, 2023.

Investment Securities

Our investment policy is established and reviewed annually by the Board. We are permitted under federal law to invest in various types of liquid assets, including United States Government obligations, securities of various federal agencies and of state and municipal governments, mortgage-backed securities, time deposits of federally insured institutions, certain bankers’ acceptances, and federal funds. Our securities are all classified as available-for-sale (“AFS”).

Our investments provide a source of liquidity because we can pledge them to support borrowed funds or can liquidate them to generate cash proceeds. Our investment portfolio is also a resource in managing interest rate risk because the maturity and interest rate characteristics of this asset class can be modified to match changes in the loan and deposit portfolios. The majority of our AFS investment portfolio is comprised of obligations of states and municipalities and residential mortgage-backed securities. During the year ended December 31, 2024, the unrealized losses on our holdings decreased $6.9 million from December 31, 2023.

The Company determined that the declines in market value were due to increases in interest rates and market movements and not due to credit factors. Therefore, the Company has concluded that the unrealized losses for the AFS securities do not require an ACL at December 31, 2024, or at December 31, 2023. The Company has sufficient access to liquidity such that management does not believe it would be necessary to sell any of its investment securities at a loss to offset any unexpected deposit outflows. Management believes the structure of the Bank’s investment portfolio is appropriately aligned with the rest of the balance sheet to protect against significant and unexpected charges against earnings and capital.

The following tables reflect the amortized cost and fair market values for the total portfolio for each category of investment as of December 31, 2024, and December 31, 2023 (in thousands):

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Securities Available-for-Sale

72

Table of Contents

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Securities Available-for-Sale

The investment maturity table below summarizes contractual maturities for our investment securities at December 31, 2024. The actual timing of principal payments may differ from remaining contractual maturities because obligors may have the right to repay certain obligations with or without penalties. The overall weighted average duration of the Company’s investment portfolio is 4.5 years at December 31, 2024. The weighted-average yield below represents the effective yield for the investment securities and is calculated based on the amortized cost of each security (dollars in thousands). Interest on securities below excludes tax-equivalent adjustments.

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

Securities Available-for-Sale

Lending Activities

Our loan portfolio consists primarily of commercial real estate loans, but we offer a variety of loan products to meet the credit needs of our borrowers. The risks associated with lending activities differ among loan classes and are subject to the impact of changes in interest rates, market conditions of collateral securing the loans, and general economic conditions. Any of these factors may adversely impact a borrower’s ability to repay loans and also impact the associated collateral. Additional discussion on the classes of loans the Company makes and related risks is included in Note 1 — Nature of Business Activities and Significant Accounting Policies and Note 3 — Loans in Notes to Consolidated Financial Statements.

73

Table of Contents

Loan balances by portfolio segment were as follows (in thousands):

The loan portfolio, excluding ACL, increased by $3.6 billion from December 31, 2023, to December 31, 2024, primarily due to the effect of the Merger. Additionally, the Company has continued to grow organically by continuing to serve existing customers and new customers through our expansion into newer markets.

The following table shows the maturity distribution for total loans outstanding as of December 31, 2024. The maturity distribution is grouped by remaining scheduled principal payments that are due in the following periods. The principal balances of loans are indicated by both fixed and floating rate categories in the table below (in thousands).

Within One Year One Year to Five Years Five Years to 15 Years After 15 Years

Loans:

Asset Quality

The Company maintains policies and procedures to promote sound underwriting and mitigate credit risk. The Chief Credit Officer is responsible for establishing credit risk policies and procedures, including underwriting guidelines and credit approval authority, and monitoring credit exposure and performance of the Company’s lending-related transactions.

74

Table of Contents

A loan is placed on non-accrual status when (i) the Company is advised by the borrower that scheduled principal or interest payments cannot be met, (ii) when management’s best judgment indicates that payment in full of principal and interest can no longer be expected, or (iii) when any such loan or obligation becomes delinquent for 90 days, unless it is both well-secured and in the process of collection.

The Company’s asset quality remained strong through December 31, 2024. The Company’s non-performing assets, which includes non-performing loans consisting of non-accrual loans, loans that are more than 90 days past due and still accruing, and other real estate owned, as of December 31, 2024, and December 31, 2023, totaled $41.2 million and $3.7 million, respectively. The increase in the non-performing asset balance is mostly due to the effect of the Merger and the related increase in the loan portfolio as of December 31, 2024 when compared to December 31, 2023. In addition, the other real estate owned assets were entirely assumed as part of the Merger.

The following table summarizes the Company’s non-performing assets as of December 31, 2024, and December 31, 2023 (in thousands).

90 days past due and still accruing 2,497 —

Other real estate owned 2,783 —

Allowance for Credit Losses

Refer to the discussion in the “Critical Accounting Policies and Estimates” section above and Note 1 — Nature of Business Activities and Significant Accounting Policies in Notes to Consolidated Financial Statements for management’s approach to estimating the allowance for credit losses.

The Company maintains the ACL at a level deemed adequate by management for expected credit losses. As disclosed in Note 1 and Note 4 in Notes to Consolidated Financial Statements, on January 1, 2023, the Company implemented CECL and increased the ACL, previously the allowance for credit losses, with a cumulative-effect adjustment to the ACL for credit losses of $4.4 million, which included a cumulative-effect adjustment to the ACL for off-balance sheet exposures of $274.8 thousand. The Company’s ACL is calculated quarterly with any adjustment recorded to the provision for credit losses in the consolidated Statement of Income. Management evaluates the adequacy of the ACL, utilizing a defined methodology to determine if it properly addresses the current and expected risks in the loan portfolio, which considers the performance of borrowers and specific evaluation of individually evaluated loans, including historical loss experiences, trends in delinquencies, non-performing loans and other risk assets, and qualitative factors. Risk factors are continuously reviewed and adjusted, as needed, by management when conditions support a change. Management believes its approach properly addresses relevant accounting and bank regulatory guidance for loans both collectively and individually evaluated.

Gross charged-off loans were $1.8 million, $0.2 million, and $3.5 million for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively. The increase in charge-offs during 2024, when compared to 2023, was due to the merger and the increase in the value of the loan portfolio. A majority of the charge-offs in 2022 related to a loan that the Company sold as part of a portfolio management strategy. Gross recoveries totaled $0.2 million, $0.1 million, and $0.2 million for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively. The ACL as a percentage of gross loans, net of unearned income, was 1.20%, 1.21%, and 1.11% as of December 31, 2024, December 31, 2023, and December 31, 2022, respectively.

The Company recorded a provision for credit losses of $20.5 million, a provision for credit losses of $0.2 million, and a provision recapture of credit losses of $7.5 million for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively. The increase in provision for the year ended

75

Table of Contents

December 31, 2024 was due to the Merger and the requirement to record an immediate provision expense for loans classified as non-PCD versus PCD loans where the Company is allowed to establish an adjustment to the ACL.

The following table summarizes the changes in the Company’s credit loss experience by portfolio for the year ended December 31, 2024, and the changes in the Company’s allowance for loan losses for the years ended December 31, 2023, and December 31, 2022 (dollars in thousands):

Initial CECL adjustment — (4,125) —

Allowance established for acquired PCD loans (23,910) — —

Loans charged-off

Owner-occupied commercial real estate — — —

Acquisition, construction & development — — —

Residential 190 — —

Consumer non-real estate and other 934 165 148

Recoveries of loans charged-off

Commercial real estate 15 38 38

Owner-occupied commercial real estate — — —

Acquisition, construction & development — — —

Commercial & industrial 39 — —

Consumer non-real estate and other 24 6 24

Total recoveries of loans charged-off 161 96 246

Provision for (recapture of) credit losses for the period 20,475 235 (7,466)

Net charge-offs to average outstanding loans during the period(2) 0.03 0.00 0.18

__________________

(1)The allowance coverage ratio is calculated by dividing the ACL at the end of the period by gross loans, net of unearned income at the end of the period.

(2)The Net charge-offs to average outstanding loans during the period is calculated by dividing total net loan charge-offs (recoveries) during the year by average gross loans outstanding during the year.

(3)The Allowance for credit losses as a percentage of non-performing loans ratio is calculated by dividing the ACL at the end of the period by non-accrual loans at the end of the period.

76

Table of Contents

The following table summarizes the ACL by portfolio with a comparison of the percentage composition in relation to total ACL and allowance for credit losses and total loans as of December 31, 2024, and December 31, 2023 (dollars in thousands).

Consumer non real estate and other 553 0.81 2.96

Owner occupied commercial real estate 783 3.09 6.29

Acquisition, construction & development 368 1.45 2.35

Consumer non real estate and other 75 0.30 0.11

Derivative Financial Instruments

The Company utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position. The Company recognizes derivative financial instruments at fair value as either other assets or other liabilities on the Consolidated Balance Sheets. The Company’s use of derivative financial instruments are described more fully in Note 13 — Derivatives in Notes to Consolidated Financial Statements.

Off-Balance Sheet Arrangements

The Company enters into certain off-balance sheet arrangements in the normal course of business to meet the financing needs of its customers. These off-balance sheet arrangements include commitments to extend credit, standby letters of credit, and financial guarantees which would impact the Company’s liquidity and capital resources to the extent customers accept and/or use these commitments. See Note 14— Commitments and Contingencies in Notes to Consolidated Financial Statements for a discussion of credit extension commitments. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. With the exception of these off-balance sheet arrangements, the Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

77

Table of Contents

Funding Activities

The Company’s funding activities are monitored and governed through the Company’s asset/liability management process. Deposits are the primary source of funds for lending and investing activities; however, the Company will use borrowings to meet liquidity needs and for temporary funding. The Company has available secured lines of credit with the Federal Reserve Bank of Richmond, such as the Borrower-In-Custody program, the FHLB of Atlanta, and unsecured federal funds lines of credit from correspondent banking relationships. The Company also utilizes brokered time deposits. For more discussion of brokered time deposits, see the Deposits heading below this section.

As of December 31, 2024, the Company has available unused borrowing capacity of $4.1 billion through its available lines of credit with the FHLB of Atlanta, the Federal Reserve Borrower-In-Custody Program line, and unsecured federal fund lines of credit from correspondent banking relationships.

The following table shows certain information regarding short-term borrowings at year end 2024 and 2023 (dollars in thousands):

Weighted average interest rate at end of period 3.35 % 4.75 %

The following table shows certain information regarding long-term debt at year end 2024, and 2023, respectively (dollars in thousands):

Subordinated debentures, net $ 94,872 $ —

Subordinated debentures owed to unconsolidated subsidiary trusts 17,013 —

Total long-term debt $ 111,885 $ —

Weighted average interest yield at end of period 10.08% N/A

Deposits

Total deposits increased by $3.5 billion from December 31, 2024, to December 31, 2023, primarily driven by the Merger. The Company’s brokered deposits balance was $244.8 million and $389.0 million at December 31, 2024, and December 31, 2023, respectively. All of the Company’s brokered deposits are in the form of certificates of deposits that are insured by the FDIC. Excluding the brokered deposit balance, the total deposit balance increased by $3.7 billion from December 31, 2023 to December 31, 2024 mostly due to the completion of the Merger.

The following table sets forth the balance of each category of deposits as of the dates indicated (dollars in thousands).

Balance Balance

78

Table of Contents

The Company continues to seek organic growth in both interest-bearing and non-interest-bearing deposits consistent with our relationship-based strategy. Management evaluates its utilization of brokered deposits, taking into consideration the interest rate curve and regulatory views on non-core funding sources, and balances this funding source with its funding needs based on growth initiatives.

The Company has deposits that meet or exceed the FDIC insurance limit of $250,000 of $1.9 billion and $677.3 million at December 31, 2024, and December 31, 2023. The increase in uninsured deposits as of December 31, 2024 was due to the completion of the Merger and the related increase in total deposits. The Company does not have material deposit concentration risk to any significant market, industry or individual at December 31, 2024.

The following table sets forth maturity ranges of time deposits, as of December 31, 2024, that meet or exceed the FDIC insurance limit (in thousands).

Due within 3 months or less $ 142,793

Due after 3 months and within 6 months 105,330

Due after 6 months and within 12 months 27,708

Total uninsured, time deposits $ 284,400

Shareholders’ Equity

Total shareholders’ equity at December 31, 2024, was $730.2 million, compared to $314.8 million at December 31, 2023. Shareholders’ equity increased by $415.4 million primarily due to the completion of the Merger. Additionally, accumulated other comprehensive loss decreased by $7.8 million as a result of an increase in the fair value of investment securities available-for-sale.

79

Table of Contents

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk inherent in lending, investment, and deposit-taking activities. To that end, management actively monitors and manages its interest rate risk exposure, and on at least a quarterly basis, in conjunction with the Company’s Asset/Liability meetings, reports its findings to the ALCO and to the Board. From time to time, management may change the frequency of such testing or update certain inputs as a result of abnormal market conditions. Our profitability is affected by fluctuations in interest rates; a sudden and substantial change in interest rates may adversely impact our earnings to the extent that the interest rates borne by assets and liabilities do not change at the same speed, to the same extent, or on the same basis. We monitor the impact of changes in interest rates on net interest income using several tools.

Our primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on our net interest income and capital while configuring our asset-liability structure to obtain the maximum yield-cost spread on that structure. We rely primarily on our asset-liability structure to control interest rate risk.

In addition, the Company’s Asset/Liability policy provides for a subcommittee of the ALCO, comprised of executive and senior management that, upon the determination that abnormal market risks are occurring or may be forthcoming, will convene with the responsibility of making all decisions related to mitigation of potential negative impacts to the Company. This subcommittee acts as a clearinghouse for information on Company earnings, credit risk, lending and deposit activities, and liquidity management necessary for internal communications, including to the Board, and external communications.

Interest Rate Sensitivity

Interest rate risk is the risk to earnings and fair value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricing and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay home mortgage loans at any time, depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve, where interest rates increase or decrease in a non-parallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and SOFR (basis risk).

The rates on some interest-bearing financial instruments may adjust promptly with changes in market rates, while others adjust only periodically or are fixed for a predefined term. Such instances can cause a mismatch between the sensitivity and behavior of financial assets and liabilities. Interest rate fluctuations and economic factors, coupled with repricing mismatches and embedded options inherent in these financial assets and liabilities, may impact the Company’s interest expense, interest income, and the value of certain financial assets and liabilities. Through the ALCO, we attempt to manage the balance sheet in a manner that increases the benefit or reduces the negative impacts from such events.

The overall impact of changes in interest rates, including, but not limited to, the impact to our net interest income and to our securities portfolio, can be enhanced or diluted depending on the variability of interest rates. From time to time, the Company may hedge its interest rate risk position, which can impact earnings. We generally do not hedge all of our interest rate risk, nor can we guarantee that any attempts to hedge some or all of our interest rate risk will be successful. See Note 13 — Derivatives in Notes to Consolidated Financial Statements for a discussion of our hedging activity.

The Company actively manages its interest rate sensitivity position. The objectives of interest rate risk management are to control exposure of net interest income to risks associated with interest rate movements and to achieve sustainable growth in net interest income. The ALCO, using policies and procedures approved by the Company’s Board, is responsible for the management of the Company’s interest rate sensitivity position. The Company manages interest rate sensitivity by changing the mix, pricing, and re-pricing characteristics of its assets and liabilities, through the management of its investment portfolio, its offerings of loan and selected deposit terms,

80

Table of Contents

and through wholesale funding. Wholesale funding consists of, but is not limited to, borrowings with the FHLB, federal funds purchased, and brokered time deposits.

The Company uses several tools to manage its interest rate risk, including interest rate sensitivity analysis, or gap analysis, market value of portfolio equity analysis, interest rate simulations under various rate scenarios, and net interest margin reports. The results of these reports are compared to limits established by the Company’s ALCO policies, and appropriate adjustments are made if the results are outside the established limits.

There are an infinite number of potential interest rate scenarios, each of which can be accompanied by differing economic/political/regulatory climates; can generate multiple differing behavior patterns by markets, borrowers, depositors, etc.; and, can last for varying degrees of time. Therefore, by definition, interest rate risk sensitivity cannot be predicted with certainty. Accordingly, the Company’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between theoretical and practical scenarios, especially given the primary objective of the Company’s overall asset/liability management process, which is to facilitate meaningful strategy development and implementation.

Therefore, we model a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios; the collective impact of which will enable the Company to clearly understand the nature and extent of its sensitivity to interest rate changes. Doing so necessitates an assessment of rate changes over varying time horizons and of varying/sufficient degrees such that the impact of embedded options within the balance sheet are sufficiently examined.

The following tables demonstrate the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or “shock”, in the yield curve and subjective adjustments in deposit pricing might have on the Company’s projected net interest income over the next 12 months. This simulation assumes that there is no growth in interest-earning assets or interest-bearing liabilities over the next 12 months.

Economic Value of Equity Analysis (“EVE”). We analyze the sensitivity of our financial condition to changes in interest rates through our economic value of equity model. This analysis measures the difference between predicted changes in the fair value of our assets and predicted changes in the present value of our liabilities, assuming various changes in current interest rates. The table below represents an analysis of our interest rate risk as measured by the estimated changes in our economic value of equity, resulting from an instantaneous and sustained parallel shift in the yield curve at December 31, 2024, and December 31, 2023.

81

Table of Contents

Item 8. Financial Statements and Supplementary Data

Burke & Herbert Financial Services Corp. Audited Consolidated Financial Statements:

Page

Report of Independent Registered Public Accounting Firm (PCAOB No.: 173) 83

Consolidated Balance Sheets as of December 31, 2024, and 2023 84

Notes to the Consolidated Financial Statements 90

82

Table of Contents

Crowe LLPIndependent Member Crowe Global

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors

of Burke & Herbert Financial Services Corp.

Alexandria, Virginia

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Burke & Herbert Financial Services Corp. (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, 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 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.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/Crowe LLP

We have served as the Company's auditor since 2021.

Washington, D.C.

March 17, 2025

83

Table of Contents

Burke & Herbert Financial Services Corp.

Consolidated Balance Sheets

December 31, 2024, and 2023

(In thousands, except share and per share data)

Assets

Loans held-for-sale, at fair value 2,331 1,497

Other real estate owned 2,783 —

Intangible assets 57,300 —

Liabilities and Shareholders' Equity

Liabilities

Subordinated debentures, net 94,872 —

Subordinated debentures owed to unconsolidated subsidiary trusts 17,013 —

Accrued interest and other liabilities 89,904 28,948

Commitments and contingent liabilities (see Note 14)

Shareholders’ Equity

Accumulated other comprehensive income (loss) (95,720) (103,494)

See Notes to Consolidated Financial Statements.

84

Table of Contents

Burke & Herbert Financial Services Corp.

Consolidated Statements of Income

Years Ended December 31, 2024, 2023, and 2022

(In thousands, except share and per share data)

Interest income

Tax-exempt loans, including fees 118 — —

Interest expense

Subordinated debt 7,412 — —

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

Non-interest income

Non-interest expense

Equipment rentals, depreciation and maintenance 23,174 5,770 5,768

Preferred stock dividends 675 — —

Earnings per common share:

See Notes to Consolidated Financial Statements.

85

Table of Contents

Burke & Herbert Financial Services Corp.

Consolidated Statements of Comprehensive Income (Loss)

Years Ended December 31, 2024, 2023, and 2022

(In thousands, except share and per share data)

Other comprehensive income (loss), net of tax:

Unrealized gains (losses) on securities:

Defined benefit pension plans:

Unrealized gain (loss) on cash flow hedge

See Notes to Consolidated Financial Statements.

86

Table of Contents

Burke & Herbert Financial Services Corp.

Consolidated Statements of Changes in Shareholders’ Equity

Years Ended December 31, 2024, 2023, and 2022

(In thousands, except share and per share data)

Preferred Stock and Surplus Shares Outstanding Amount

Other comprehensive income (loss) — — — — — (146,450) — (146,450)

(Purchase) sale of treasury stock, net — 2,000 — — — — 97 97

Cash dividends, declared — — — — (15,742) — — (15,742)

Share-based compensation expense, net — — — 1,908 — — — 1,908

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

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

(Purchase) sale of treasury stock, net — 2,950 — — — — 141 141

Cash dividends, declared — — — — (16,298) — — (16,298)

Share-based compensation expense, net — — — 2,213 (13) — — 2,200

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

(Purchase) sale of treasury stock, net — — — — — — — —

Cash dividends, paid and accrued(1) — — — — (28,260) — — (28,260)

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

(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.

87

Table of Contents

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 Operating Activities

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) — —

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)

Income from company-owned life insurance (4,686) (2,844) (2,656)

(Gain) loss on disposal of fixed assets 2,177 37 (4,533)

Repayment of operating lease liabilities (2,705) (3,137) (2,330)

(Gain) on loans held-for-sale (484) (138) (58)

Change in fair value of loans held-for-sale 28 (28) 23

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

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

Cash Flows from Investing Activities

Net cash from merger 52,607 — —

Proceeds from sales of OREO properties 758 — —

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

Purchases of property and equipment, net of disposals (4,567) (14,249) (23,075)

88

Table of Contents

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

Repayment of finance lease liabilities (216) (119) (152)

Proceeds from employee stock purchase program 259 206 —

Issuance of common stock 3,242 — —

Treasury stock transactions — 141 97

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

Cash and cash equivalents

Supplemental Disclosures of Cash Flow Information

Cash payments for:

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

Interest paid on finance lease 110 86 63

Lease liability arising from obtaining right-of-use assets 12,329 1,214 1,558

Premises & equipment transferred to property held-for-sale — — 3,449

Transfers from portfolio loans to loans held-for-sale — — 19,594

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.

89

Table of Contents

Note 1— Nature of Business Activities and Significant Accounting Policies

Nature of operations and principles of consolidation

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” 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. 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 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. The Company’s deposit products include checking, savings, and term certificate accounts. The Company’s loan portfolio includes commercial and consumer loans, a substantial portion of which are secured by real estate.

Merger with Summit Financial Group, Inc.

Effective on the Closing Date, Burke & Herbert completed the Merger 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash, cash equivalents, and cash flows

For purposes of reporting cash flows, cash and cash equivalents include cash on hand and amounts due from banks, including cash items in process of clearing with maturities fewer than 90 days. Cash flows from customer loans, federal funds purchased, securities sold under agreements to repurchase, and deposits are reported on a net basis.

90

Table of Contents

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

Restriction on cash

No reserve balances were required at December 31, 2024, and December 31, 2023. There was no reserve requirement with the Federal Reserve as of December 31, 2024, or December 31, 2023.

Debt securities

Management determines the appropriate classification of debt securities at the time of purchase. Debt securities that the Company has both the positive intent and ability to hold to maturity are classified as held to maturity and are reported at cost, adjusted for amortization of premiums and accretion of discounts. Debt securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity, are classified as available-for-sale and are reported at fair value. Unrealized gains and losses on investments classified as available-for-sale have been accounted for as a separate component of accumulated other comprehensive income or loss, net of the related deferred tax effect.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are recognized in interest income over the terms of the securities. Any decision to sell a security classified as available-for-sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

A debt security is placed on non-accrual status at the time any principal or interest payments become more than 90 days delinquent. Interest accrued but not received for a security placed on non-accrual is reversed against interest income.

Allowance for credit losses (“ACL”) - available-for-sale debt securities

Management evaluates all available-for-sale (“AFS”) debt securities in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. The Company first assesses whether it intends to sell or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.

For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. 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 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.

Changes in the ACL are recorded as credit loss expense (or recapture). Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on AFS debt securities totaled $10.3 million at December 31, 2024, and is excluded from the estimate of credit losses.

Equity securities

Equity securities are carried at fair value with changes in fair value reported in net income. 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.

91

Table of Contents

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. These equity securities are not subject to the classifications above.

Loan commitments and related financial instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Loans held-for-sale

Loans held-for-sale are those loans the Company has the intent to sell in the foreseeable future. The Company has elected to use the fair value accounting option (“FVO”) for loans held-for-sale. Gains and losses on sales of loans are recognized at settlement dates and are determined by the difference between the sales proceeds and the fair value of the loans. All sales are made without recourse and are sold with servicing released.

Mortgage banking derivatives

The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (interest rate lock commitments). Interest rate lock commitments on mortgage loans to be held-for-sale are accounted for as free-standing derivatives. The period of time between issuance of a loan commitment and closing and sale of the loan generally ranges from 15 to 90 days. The Company protects itself from changes in interest rates through the use of best-efforts forward delivery commitments, whereby the Company commits to sell a loan at the time the borrower commits to an interest rate with the intent that the buyer has assumed interest rate risk on the loan. As a result, the Company is not exposed to significant losses, nor will it realize significant gains related to rate lock commitments due to changes in interest rates. The Company has elected to use the FVO for best effort forward sales commitments.

Derivatives

At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s intentions and belief as to the likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or (3) an instrument with no hedging designation (“stand-alone derivative”). For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings as respective fair values changes. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. 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.

Accrued settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense based on the item being hedged. Accrued settlements on derivatives not designated or that do not qualify for hedge accounting are reported in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. 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

92

Table of Contents

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. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still probable of occurring, gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods in which the hedged transactions will affect earnings.

The Company is exposed to losses if a counterparty fails to make its payments under a contract in which the Company is in the net receiving position. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements. All of the contracts to which the Company is a party settle monthly or quarterly. In addition, the Company obtains collateral above certain thresholds of the fair value of its derivatives for each dealer counterparty based upon their credit standing and the Company has netting agreements with the dealers with which it does business.

Loans

Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding unpaid principal balances, adjusted for partial charge-offs, the allowance for credit losses, and any deferred fees and costs on originated loans. Accrued interest receivable totaled $24.1 million on the Consolidated Balance Sheets and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct original costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

For all loan portfolio segments, the accrual of interest income is discontinued at the time the loan becomes 90 days delinquent, unless the loan is well-secured and in process of collection. Loans also are placed on non-accrual if collection of principal or interest is considered impaired. Past-due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

All interest income accrued, but not received, for loans placed on non-accrual is reversed against interest income. Interest income received on such loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. 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.

Concentration of credit risk

Substantially all of the Company’s loans and commitments have been granted to customers in the Company’s market area; therefore, the Company’s exposure to credit risk is significantly affected by changes in the market area’s economy. Our customers are general depositors of the Company from the same market area. Some investments in state and municipal securities also involve governmental entities within the Company’s market area. The distribution of commitments to extend credit approximates the distribution of loans outstanding.

Allowance for credit losses - loans

The allowance for credit losses, in management’s judgement, reflects expected credit losses in the loan portfolio as of the balance sheet date. The estimate for expected credit losses is based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions, and prepayment experience as related to credit contractual term information. The ACL is measured and recorded upon the initial recognition of a financial asset. The ACL is reduced by charge-offs, net of

93

Table of Contents

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: collectively evaluated loans and individually evaluated loans. In addition, the ACL also includes a qualitative component which adjusts the CECL model for risk factors that are not considered within the CECL model, but are relevant in assessing the expected credit losses within the loan portfolio.

The Company is using a remaining useful life or weighted average remaining maturity (“WARM”) methodology to estimate its current expected credit losses. For purposes of calculating reserves in collectively evaluated loans, the ACL calculation segments the Company’s loan portfolio using federal call codes to group loans which share similar risk characteristics. In order to generate reasonable and supportable forecasts of loss rates over a two-year period, the ACL calculation utilizes macroeconomic variable loss drivers, which may include aggregate macroeconomic indicators pertaining to such items as equity market conditions or interest rates, as well as other variables that are portfolio-specific, such as those that pertain to the commercial real estate or residential loan portfolios. A straight-line reversion technique is used for the following four quarters, and in following quarters, the ACL calculation reverts to historical average loss rates.

Based on management’s analysis, adjustments may be applied for additional factors impacting the risk of loss in the loan portfolio beyond information used to calculate reasonable and supportable, reversion and post-reversion period forecasts on collectively evaluated loans. As the reasonable and supportable and reversion period forecasts reflect the use of the macroeconomic variable loss drivers, management may consider that an additional or reduced reserve is warranted through qualitative risk factors based on current and expected conditions, including those that utilize supplemental information relative to the macroeconomic variable loss drivers. Qualitative risk factors considered by management include the following:

•Nature and volume of loans;

•Concentrations of credit; and

•Delinquency trends.

Loans that do not share similar risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation for the ACL. 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 collectively evaluated. 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. 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. A loan is considered collateral-dependent when the Company determines foreclosure is probable or the borrower is experiencing financial difficulty and the Company expects repayment to be provided substantially through the operation or sale of the collateral. Collateral could be in the form of real estate, equipment, or business assets. An ACL may result for a collateral-dependent loan if the fair value of the underlying collateral, as of the reporting date, adjusted for expected costs to repair or sell, was less than the amortized cost basis of the loan. If repayment of the loan is instead dependent only on the operation, rather than the sale of the collateral, the measure of the ACL does not incorporate estimated costs to sell. 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,

94

Table of Contents

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

On a quarterly basis, the Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on off-balance sheet credit exposures is adjusted through the provision for credit losses on the Consolidated Statements of Income. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life by loan segment at each balance sheet date under the CECL model using the same methodology as the loan portfolio. 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

Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives up to 40 years. Furniture, fixtures and equipment are depreciated using the straight-line method (or accelerated) method with useful lives ranging from 3 to 10 years. Maintenance and repairs are charged to expense as incurred and major improvements are capitalized.

Company-owned life insurance

The Company has purchased life insurance policies on certain employees. Company-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Transfers of financial assets

Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Other real estate owned (OREO)

Assets acquired through foreclosure or other proceedings are initially recorded at fair value at the date of foreclosure less estimated costs of disposal, which establishes a new cost. 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 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.

95

Table of Contents

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

Income taxes

The Company accounts for income taxes in accordance with income tax accounting guidance. The Company has adopted the accounting guidance related to accounting for uncertainty in income taxes, which sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions.