Burke & Herbert Financial Services Corp.

Previous wording

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on current beliefs, expectations, or assumptions regarding the future of the business, future plans and strategies, operational results, and other future conditions of the Company. All statements other than statements of historical fact included in this Form 10-Q regarding the prospects of our industry or our prospects, plans, financial position, or business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “plans,” “expects” or “does not expect,” “is expected,” “look forward to,” “budget,” “scheduled,” “estimates,” “forecasts,” “will continue,” “intends,” “the intent of,” “have the potential,” “anticipates,” “does not anticipate,” “believes,” “should,” “should not,” or variations of such words and phrases that indicate that certain actions, events, or results “may,” “could,” “would,” “might,” or “will,” “be taken,” “occur,” or “be achieved,” or the negative of these terms or variations of them or similar terms. Additionally, forward–looking statements speak only as of the date they are made; the Company does not assume any duty, does not undertake, and specifically disclaims any obligation to update such forward–looking statements, whether written or oral, that may be made from time to time, whether because of new information, future events, or otherwise, except as required by law. Furthermore, because forward–looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those indicated in or implied by such forward-looking statements because of a variety of factors, many of which are beyond the control of the Company. Further, factors identified herein are not necessarily all of the factors that could cause the Company’s actual results, performance or achievements to differ materially from those expressed in or implied by any of the forward-looking statements. Other factors, including unknown or unpredictable factors, also could harm the Company. Accordingly, you should consider all of these risks, uncertainties and other factors carefully in evaluating all such forward-looking statements made by the Company and not place undue reliance on forward-looking statements. The risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements include, but are not limited to, the following: costs or difficulties associated with newly developed or acquired operations; changes in general economic, political, or market trends (either nationally or locally in the areas in which we conduct, or will conduct, business), including inflation, changes in interest rates, market volatility and monetary fluctuations, and changes in federal government policies and practices, as well as the impact from recently …

Excerpt shortened here; the source contains the full paragraph.

Current wording

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on current beliefs, expectations, or assumptions regarding the future of the business, future plans and strategies, operational results, and other future conditions of the Company. All statements other than statements of historical fact included in this Form 10-Q regarding the prospects of our industry or our prospects, plans, financial position, or business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “plans,” “expects” or “does not expect,” “is expected,” “look forward to,” “budget,” “scheduled,” “estimates,” “forecasts,” “will continue,” “intends,” “the intent of,” “have the potential,” “anticipates,” “does not anticipate,” “believes,” “should,” “should not,” or variations of such words and phrases that indicate that certain actions, events, or results “may,” “could,” “would,” “might,” or “will,” “be taken,” “occur,” or “be achieved,” or the negative of these terms or variations of them or similar terms. Additionally, forward–looking statements speak only as of the date they are made; the Company does not assume any duty, does not undertake, and specifically disclaims any obligation to update such forward–looking statements, whether written or oral, that may be made from time to time, whether because of new information, future events, or otherwise, except as required by law. Furthermore, because forward–looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those indicated in or implied by such forward-looking statements because of a variety of factors, many of which are beyond the control of the Company. Further, factors identified herein are not necessarily all of the factors that could cause the Company’s actual results, performance or achievements to differ materially from those expressed in or implied by any of the forward-looking statements. Other factors, including unknown or unpredictable factors, also could harm the Company. Accordingly, you should consider all of these risks, uncertainties and other factors carefully in evaluating all such forward-looking statements made by the Company and not place undue reliance on forward-looking statements. The risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements include, but are not limited to, the following: costs or difficulties associated with newly developed or acquired operations; changes in general economic, political, or market trends (either nationally or locally in the areas in which we conduct, or will conduct, business), including inflation, changes in interest rates, market volatility and monetary fluctuations, and changes in federal government policies and practices, including with respect to spending o…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

As of March 31, 2025, we had total consolidated assets of $7.8 billion, gross loans of $5.6 billion, total deposits of $6.5 billion, and total shareholders’ equity of $758.0 million. As of March 31, 2025, we had 814 full-time employees. None of our employees are covered by a collective bargaining agreement.

Current wording

As of June 30, 2025, we had total consolidated assets of $8.1 billion, gross loans of $5.6 billion, total deposits of $6.4 billion, and total shareholders’ equity of $780.0 million. As of June 30, 2025, we had 819 full-time employees. None of our employees are covered by a collective bargaining agreement.

Previous wording

The commercial real estate (“CRE”) sector has been impacted significantly by rising interest rates and rising 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. We would expect the federal return to office mandate, combined with mandates at private sector employers and decreasing interest rates could help the region’s CRE office market; however, we cannot be certain that this would be the case or the degree to which such mandates may improve the CRE sector in our markets in 2025, if at all. Additionally, recent reductions, and possible further reductions, in the federal workforce, combined with general economic uncertainty as a result of federal trade and other policies could continue to challenge the economy and impact the CRE sector. The Bank’s exposure to CRE at March 31, 2025, was $2.8 billion, or 49.7%, 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 March 31, 2025, was 35.8%, not including owner-occupied commercial real estate and acquisition, construction & development. Including owner-occupied commercial real estate and acquisition, construction & development, total exposure was at $3.7 billion, or 65.8%, of our total gross loans and 47.4% of total assets at March 31, 2025.

Current wording

The commercial real estate (“CRE”) sector has been impacted significantly by rising interest rates and rising 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. We would expect the federal return to office mandate, combined with mandates at private sector employers and decreasing interest rates could help the region’s CRE office market; however, we cannot be certain that this would be the case or the degree to which such mandates may improve the CRE sector in our markets in 2025, if at all. Additionally, recent reductions, and possible further reductions, in the federal workforce, combined with general economic uncertainty as a result of federal trade and other policies could continue to challenge the economy and impact the CRE sector. The Bank’s exposure to CRE at June 30, 2025, was $2.8 billion, or 49.5%, 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 June 30, 2025, was 34.4%, not including owner-occupied commercial real estate and acquisition, construction & development. Including owner-occupied commercial real estate and acquisition, construction & development, total exposure was at $3.7 billion, or 66.8%, of our total gross loans and 46.4% of total assets at June 30, 2025.

Previous wording

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 largest concentration of the Bank’s commercial real estate loans are in Virginia (approximately 46.8%), and the Bank 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 15.9% 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 Part II, Item 1A. “Risk Factors”.

Current wording

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 largest concentration of the Bank’s commercial real estate loans are in Virginia (approximately 47.4%), and the Bank 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 16.6% 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 Part II, Item 1A. “Risk Factors”.

Previous wording

Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth. See Note 6 - Borrowed Funds and Note 10 - Commitments and Contingencies, in Notes to Consolidated

Current wording

Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth. See Note 6 - Borrowed Funds and Note 10 - Commitments and Contingencies, in Notes to Consolidated Financial Statements for additional information regarding outstanding balances of sources of liquidity and contractual commitments and obligations.

Previous wording

•Economic conditions, including the effects of pandemics, political conflicts, political instability, trade policies, including tariffs and other barriers to trade, the availability of labor, supply chain volatility, and any actions taken to mitigate and manage such impacts;

Current wording

•Economic conditions, and volatility in markets, including the effects of pandemics, wars, political conflicts, political instability and uncertainty both in the U.S. and abroad, government spending policies, trade policies, including tariffs and tariff counter-measures, and other barriers to trade (including the threat of such actions), the availability of labor, supply chain volatility, and any actions taken to mitigate and manage such impacts;

Previous wording

•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;

Current wording

•The actions or inactions (including assumptions about potential actions or inactions) by the Federal Reserve, U.S. Treasury, and other government agencies, including those that impact money supply and market interest rates and inflation;

Previous wording

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

Current wording

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

Previous wording

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 Operation. For additional information on the risks we face, see Part II, Item 1A. - Risk Factors.

Current wording

Risks related to these items, where material to the Company’s business, are discussed in the applicable sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operation. For additional information on the risks we face, see Part II, Item 1A. - Risk Factors.

Previous wording

The following table contains selected historical consolidated financial data as of the dates and for the periods shown. The selected balance sheet data as of March 31, 2025, and March 31, 2024, and the selected income statement data for the three months ended March 31, 2025, and March 31, 2024, have been derived from our consolidated financial statements included elsewhere in this Form 10-Q and in other filings we have submitted with the SEC and should be read in conjunction with the other information contained in this Form 10-Q.

Current wording

The following table contains selected historical consolidated financial data as of the dates and for the periods shown. The selected balance sheet data as of June 30, 2025, and June 30, 2024, and the selected income statement data for the three and six months ended June 30, 2025, and June 30, 2024, have been derived from our consolidated financial statements included elsewhere in this Form 10-Q and in other filings we have submitted with the SEC and should be read in conjunction with the other information contained in this Form 10-Q.

Previous wording

Net interest income increased by $50.9 million to $73.0 million for the three months ended March 31, 2025, compared to $22.1 million for the three months ended March 31, 2024. The main driver for this increase was the impact of the Merger.

Current wording

Net interest income increased by $65.3 million to $147.2 million for the six months ended June 30, 2025, compared to $81.9 million for the six months ended June 30, 2024. The main driver for this increase was results that reflect a full six months of combined income after the Merger.

Previous wording

Net interest income totaled $73.0 million for the three months ended March 31, 2025, compared to $22.1 million for the three months ended March 31, 2024. The increase in net interest income was primarily driven by higher interest earning assets, higher rates, and higher accretion income, as a result of the Merger. Accretion income associated with acquired loans and borrowings totaled $11.4 million for the three months ended March 31, 2025. Amortization expense associated with fair value marks for time deposits, subordinated debt, and trust preferred securities totaled $2.2 million for the three months ended March 31, 2025.

Current wording

Net interest income totaled $147.2 million for the six months ended June 30, 2025, compared to $81.9 million for the six months ended June 30, 2024. The increase in net interest income was primarily driven by results that reflect a full six months of combined income after the Merger as well as higher rates on interest-earning assets, lower rates on interest-bearing liabilities, and higher accretion income, as a result of the Merger. Accretion income associated with acquired loans and borrowings totaled $23.0 million for the six months ended June 30, 2025 compared to $13.3 million for the six months ended June 30, 2024. Amortization expense associated with fair value marks for time deposits, subordinated debt, and trust preferred securities totaled $3.6 million for the six months ended June 30, 2025 compared to $2.5 million the six months ended June 30, 2024.

Previous wording

The yield for the taxable loan portfolio was 6.96% for the three months ended March 31, 2025, compared to 5.41% for the three months ended March 31, 2024. The increase was primarily the result of the effect of the Merger, which resulted in the acquisition of additional, higher-yielding loans.

Current wording

The yield for the taxable loan portfolio was 6.93% for the six months ended June 30, 2025, compared to 6.72% for the six months ended June 30, 2024. The increase was primarily the result of the acquisition of additional, higher-yielding loans.

Previous wording

The tax-adjusted yield on the total investment securities portfolio was 3.85% for the three months ended March 31, 2025, compared to 3.43% for the three months ended March 31, 2024. The increase was partly due to higher yields in our investment portfolio in addition to the Merger, which resulted in the acquisition of additional securities with higher tax-adjusted yields.

Current wording

The tax-adjusted yield on the total investment securities portfolio was 3.90% for the six months ended June 30, 2025, compared to 3.76% for the six months ended June 30, 2024. The increase was mainly due to higher yields in our investment portfolio.

Previous wording

Taxable-equivalent net interest margin, as presented above, is calculated by dividing 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 calculated by adding the tax benefit on certain financial interest-earning assets, whose interest is tax-exempt, to total interest income 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 presentation is GAAP net interest income. The following table reconciles GAAP net interest income to FTE net interest income (in thousands).

Current wording

Taxable-equivalent net interest margin, as presented above, is calculated by dividing 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 provides 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 calculated by adding the tax benefit on certain financial interest-earning assets, whose interest is tax-exempt, to total interest income 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 presentation is GAAP net interest income. The following table reconciles GAAP net interest income to FTE net interest income (in thousands).

Previous wording

Non-interest expense increased $28.5 million, or 134.7%, for the three months ended March 31, 2025, compared to March 31, 2024. The increase was primarily due to effect of the Merger. All other categories of non-interest expense also increased, primarily due to the effect of the Merger, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. See Note 13 — Other Operating Expense in Notes to Consolidated Financial Statements for further information on “Other” non-interest expense.

Current wording

Non-interest expense increased $13.4 million, or 15.6%, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The increase was primarily due to results that reflect a full six months of combined operations after the Merger but reflect some merger cost savings associated with the Merger for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. In total, all categories of non-interest expense increased except equipment rentals, depreciation and maintenance. See Note 13 — Other Operating Expense in Notes to Consolidated Financial Statements for further information on “Other” non-interest expense.

Previous wording

Net income applicable to common shares for the three months ended March 31, 2025, was $27.0 million, compared to net income applicable to common shares of $5.2 million during the three months ended March 31, 2024. The $21.8 million increase was primarily due to results that reflect combined income after the Merger completion for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Current wording

Net income applicable to common shares for the three months ended June 30, 2025, was $29.7 million, compared to a net loss applicable to common shares of $17.1 million during the three months ended June 30, 2024. The $46.8 million increase was due to results that reflect a full three months of combined income after the Merger completion for the three months ended June 30, 2025, and merger related expenses and a one-time CECL Day 2 provision for non-PCD assets acquired in the merger which were recognized in the three months ended June 30, 2024.

Previous wording

For the three months ended March 31, 2025, the Company recorded credit provision expense of $0.5 million compared to a provision recapture of $0.7 million for the three months ended March 31, 2024. For the three months ended March 31, 2025, the Company recognized additional credit loss expense on loans which led to an increase in credit provision expense for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Current wording

For the three months ended June 30, 2025, the Company recorded credit provision expense of $0.6 million compared to a provision of $23.9 million for the three months ended June 30, 2024. For the three months ended June 30, 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.

Previous wording

The tax-adjusted net interest margin was 4.18% for the three months ended March 31, 2025, compared to 2.68% for the three months ended March 31, 2024. The increase in tax-adjusted net interest margin was primarily driven by the effect of the Merger and the acquisition of additional, higher-yielding interest-earning assets.

Current wording

The tax-adjusted net interest margin was 4.17% for the three months ended June 30, 2025, compared to 4.06% for the three months ended June 30, 2024. The increase in tax-adjusted net interest margin was primarily driven by results that reflect a full three months of combined income after the Merger as well as lower rates on interest-bearing liabilities.

Previous wording

The yield on our short-term borrowings for the three months ended March 31, 2025, was 3.88%, compared to 4.82% for the three months ended March 31, 2024. The decrease was due to decreases in the Federal Funds Rate and other short-term market rates. The yield on our subordinated debt assumed in the Merger was 9.85%.

Current wording

The yield on our short-term borrowings for the three months ended June 30, 2025, was 3.91%, compared to 4.38% for the three months ended June 30, 2024. The decrease was due to decreases in the Federal Funds Rate and other short-term market rates in the second half of 2024. The yield on our subordinated debt assumed in the Merger was 9.62% for the three months ended June 30, 2025, compared to 10.30% for the three months ended June 30, 2024.

Previous wording

Total interest income was $110.8 million for the three months ended March 31, 2025, compared to $38.7 million for the three months ended March 31, 2024, an increase of 185.9%. The increase in interest income was due to the effect of the Merger and the acquisition of additional interest-earning assets. Interest income on loans increased by $69.0 million and interest income on securities increased $2.5 million, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Current wording

Total interest income was $111.9 million for the three months ended June 30, 2025, compared to $96.1 million for the three months ended June 30, 2024, an increase of 16.4%. The increase in interest income was primarily due to results that reflect a full three months of combined income after the Merger. Interest income on loans increased by $15.1 million and interest income on securities decreased $0.2 million, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. Accretion income associated with acquired loans and borrowings totaled $11.5 million for the three months ended June 30, 2025, compared to $13.4 million for the three months ended June 30, 2024.

Previous wording

Total interest expense was $37.8 million for the three months ended March 31, 2025, compared to $16.6 million for the three months ended March 31, 2024. The increase in interest expense was a result of the Merger and the assumption of additional interest-bearing liabilities. Interest expense on interest-bearing deposits increased by $18.9 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. Interest on subordinated debt acquired in the Merger was $2.7 million for the three months ended March 31, 2025, while interest expense on short-term borrowings amounted to $3.2 million for the three months ended March 31, 2025, compared to $3.7 million for the three months ended March 31, 2024.

Current wording

Total interest expense was $37.6 million for the three months ended June 30, 2025, compared to $36.3 million for the three months ended June 30, 2024. The increase in interest expense was due to results that reflect a full three months of combined operations after the Merger, partially offset by a decrease in amortization expense associated with fair value marks for liabilities acquired in the Merger, and lower rates on interest-bearing liabilities. Interest expense on interest-bearing deposits increased by $0.1 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. Interest on subordinated debt acquired in the Merger was $2.7 million for the three months ended June 30, 2025, compared to $1.9 million for the three months ended June 30, 2024. Interest expense on short-term borrowings amounted to $4.4 million for the three months ended June 30, 2025, compared to $4.1 million for the three months ended June 30, 2024. Amortization expense associated with fair value marks for time deposits, subordinated debt, and trust preferred securities totaled $1.4 million for the three months ended June 30, 2025, compared to $2.5 million for the three months ended June 30, 2024.

Previous wording

The provision for credit losses was $0.5 million for the three months ended March 31, 2025, compared to a provision recapture of $0.7 million for the three months ended March 31, 2024. The increased provision expense was due to additional credit loss expense in the loan portfolio which was somewhat offset by a recapture in credit expense on off-balance sheet credit exposures, compared to the three months ended March 31, 2024. See Note 4 - Allowance for Credit Losses in Notes to Consolidated Financial Statements for further information.

Current wording

The provision for credit losses was $0.6 million for the three months ended June 30, 2025, compared to a provision of $23.9 million for the three months ended June 30, 2024. For the three months ended June 30, 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. See Note 4 - Allowance for Credit Losses in Notes to Consolidated Financial Statements for further information.

Previous wording

Non-interest income increased 135.6% for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase was primarily driven by the Merger. The largest increase was a $1.8 million increase in bank debit and other card revenue for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. This increase was driven by the Merger and the increase in card revenue as a result of the increase in the customer base. The second largest increase was a $1.4 million increase in service charges and fees for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. This increase was primarily driven by an increase in deposit-based fees of $1.3 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, resulting from the increase in accounts as a result of the Merger. All other categories of non-interest income also increased, primarily due to the Merger for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Current wording

Non-interest income increased 35.5% for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. All categories of non-interest income except net gains on securities increased due to results that reflect a full three months of combined income after the Merger for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The largest dollar increase was a $2.1 million increase in income from company-owned life insurance for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. This increase was driven by an increase in the collection of death proceeds from company-owned life insurance for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. All other categories of non-interest income except net gains on securities also increased, primarily due to results that reflect a full three months of combined income after the Merger for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

Previous wording

Income tax expense was $5.6 million for the three months ended March 31, 2025, an increase of $5.0 million from the tax provision for the three months ended March 31, 2024. The increase was due to the increase in net income and additional state taxes incurred in the combined market area after the Merger, for the three months ended March 31, 2025, when compared to the three months ended March 31, 2024. For the three months ended March 31, 2025, the effective tax rate was 17.2%, while the effective tax rate was 11.5% for March 31, 2024.

Current wording

Income tax expense was $7.3 million for the three months ended June 30, 2025, an increase of $9.4 million from the tax benefit of $2.2 million for the three months ended June 30, 2024. The increase was due to the increase in net income and additional state taxes incurred in the combined market area after the Merger, for the three months ended June 30, 2025, when compared to the three months ended June 30, 2024. For the three months ended June 30, 2025, the effective tax rate was 19.6%, while the effective tax benefit was 11.3% for June 30, 2024.

Previous wording

Assets increased by $25.9 million to $7.84 billion as of March 31, 2025, compared to $7.8 billion as of December 31, 2024. Loans, net of ACL, decreased by $24.4 million from $5.6 billion as of December 31, 2024, to $5.6 billion as of March 31, 2025. Deposits increased by $26.6 million and amounted to $6.5 billion at March 31, 2025, compared to $6.5 billion at December 31, 2024. Short-term borrowings decreased by $65.0 million to $300.0 million as of March 31, 2025, compared to $365.0 million at December 31, 2024. Subordinated debt and subordinated debt owed to unconsolidated subsidiary trusts, which were assumed in the Merger, totaled $113.3 million at March 31, 2025, compared to $111.9 million at December 31, 2024.

Current wording

Assets increased by $240.9 million to $8.05 billion as of June 30, 2025, compared to $7.8 billion as of December 31, 2024. Loans, net of ACL, decreased by $81.0 million from $5.6 billion as of December 31, 2024, to $5.5 billion as of June 30, 2025. Deposits decreased by $124.3 million and amounted to $6.4 billion at June 30, 2025, compared to $6.5 billion at December 31, 2024. Short-term borrowings increased by $285.0 million to $650.0 million as of June 30, 2025, compared to $365.0 million at December 31, 2024. Subordinated debt and subordinated debt owed to unconsolidated subsidiary trusts, which were assumed in the Merger, totaled $114.7 million at June 30, 2025, compared to $111.9 million at December 31, 2024.

Previous wording

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 three months ended March 31, 2025, the unrealized losses on our holdings decreased $7.7 million from December 31, 2024.

Current wording

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 six months ended June 30, 2025, the unrealized losses on our holdings decreased $7.9 million from December 31, 2024.

Previous wording

The loan portfolio, excluding ACL, at March 31, 2025, decreased by $24.7 million primarily due to the exiting of loans that do not align with the Company’s desired risk profile.

Current wording

The loan portfolio, excluding ACL, at June 30, 2025, decreased by $81.8 million from December 31, 2024, primarily due to the exiting of loans that do not align with the Company’s desired risk profile.

Previous wording

The Company’s asset quality remained relatively stable through the first quarter of 2025 with the nonaccrual loan balance increasing by $5.6 million from December 31, 2024. However, the Company’s loans 90 days past due and still accruing increased $20.8 million from 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 March 31, 2025, totaled $67.4 million, up from $41.2 million at December 31, 2024.

Current wording

The Company’s asset quality metrics remain within the Company’s risk profile with adequate reserve coverage. The Company’s nonaccrual loan balances increased by $45.2 million from December 31, 2024, while the Company’s loans 90 days past due and still accruing increased $2.0 million from 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 June 30, 2025, totaled $88.3 million, an increase of $47.1 million from $41.2 million at December 31, 2024.

Previous wording

Gross charged-off loans were $1.4 million and $30.0 thousand for the three months ended March 31, 2025, and March 31, 2024, respectively. Gross recoveries totaled $237.0 thousand and $5.0 thousand for the three months ended March 31, 2025, and March 31, 2024, respectively. The ACL as a percentage of gross loans, net of unearned income, was 1.20% and 1.16% as of March 31, 2025, and March 31, 2024, respectively.

Current wording

Gross charged-off loans were $1.5 million and $611.0 thousand for the three months ended June 30, 2025, and June 30, 2024, respectively and $3.0 million and $641.0 thousand for the six months ended June 30, 2025, and June 30, 2024, respectively. Gross recoveries totaled $326.0 thousand and $12.0 thousand for the three months ended June 30, 2025, and June 30, 2024, respectively and $563.0 thousand and $17.0 thousand for the six months ended June 30, 2025, and June 30, 2024, respectively. The ACL as a percentage of gross loans, net of unearned income, was 1.20% and 1.21% as of June 30, 2025, and June 30, 2024, respectively.

Previous wording

The following table summarizes the changes in the Company’s credit loss experience by portfolio for the three months ended March 31, 2025, and 2024 (dollars in thousands):

Current wording

The following table summarizes the changes in the Company’s credit loss experience by portfolio for the three and six months ended June 30, 2025, and 2024 (dollars in thousands):

Previous wording

Total deposits slightly increased by $26.6 million from December 31, 2024, to March 31, 2025, primarily due to a continued focus on gathering deposits across our commercial and retail businesses. The Company has brokered time deposits that amounted to $246.9 million as of March 31, 2025, and $244.8 million at December 31, 2024. 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 $24.5 million from December 31, 2024 to March 31, 2025.

Current wording

Total deposits decreased by $124.3 million from December 31, 2024, to June 30, 2025, primarily due to a decrease in brokered deposits of $112.7 million. The Company’s brokered time deposits amounted to $132.1 million as of June 30, 2025, and $244.8 million at December 31, 2024. 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 decreased by $11.6 million from December 31, 2024 to June 30, 2025.

Previous wording

The Company has deposits that meet or exceed the FDIC insurance limit of $250,000 in the amounts of $1.9 billion and $1.9 billion at March 31, 2025, and December 31, 2024, respectively. The Company does not have material deposit concentration risk to any significant market, industry or individual at March 31, 2025 or December 31, 2024.

Current wording

The Company has deposits that meet or exceed the FDIC insurance limit of $250,000 in the amounts of $2.0 billion and $1.9 billion at June 30, 2025, and December 31, 2024, respectively. The Company does not have material deposit concentration risk to any significant market, industry or individual at June 30, 2025 or December 31, 2024.

Previous wording

Total shareholders’ equity at March 31, 2025, was $758.0 million, compared to $730.2 million at December 31, 2024. Shareholders’ equity increased by $27.8 million mostly due to an increase in earnings since December 31, 2024. Accumulated other comprehensive income/(loss) decreased $7.7 million from December 31, 2024, to March 31, 2025, from $(95.7) million to $(88.0) million.

Current wording

Total shareholders’ equity at June 30, 2025, was $780.0 million, compared to $730.2 million at December 31, 2024. Shareholders’ equity increased by $49.9 million mostly due to an increase in earnings since December 31, 2024. Accumulated other comprehensive income/(loss) decreased $7.9 million from December 31, 2024, to June 30, 2025, from $(95.7) million to $(87.9) million due to a decrease in unrealized losses in our securities portfolio.