BHRB 10-K & 10-Q changes, risk factors and insider trading

•We follow a relationship-based operating model, andmodel; our ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially adversely affect our performance.

•Changes in interest rates and monetary policy may negatively affect our earnings, income andincome, financial condition, as well asand the value of our assets.

•We are subject to physical and financial risks associated with climate change and other weather impacts.

We attempt to maintain an appropriate allowance for credit losses to provide for our estimate of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. As of December 31, 2024,2025, the allowance for credit losses was $68.0$67.8 million or 1.20%1.26% of total gross loans; however, there is no guarantee that it will be sufficient to address credit losses. The determination of the appropriate level of allowance for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates related to current and expected future credit risks and trends, all of which may undergo material changes. Continuing deterioration in economic conditions affecting borrowers and securities issuers; new information regarding existing loans, credit commitments and securities holdings; global pandemics; natural disasters and risks related to climate change; and identification of additional problem loans, ratings down-grades and other factors, both within and outside of our control, may require an increase in the allowances for credit losses on loans, securities, and off-balance sheet credit exposures. There is also the possibility that we have failed or will fail to accurately identify the appropriate economic indicators, to accurately estimate the timing of future changes in economic conditions, or to estimate accurately the impacts of future changes in economic conditions to our borrowers, which similarly could impact the accuracy of our loss forecasts and allowance estimates. There is no precise method of predicting credit losses, and therefore, we always face the risk that losses in future periods will exceed our allowance for credit losses and that we would need to make additional provisions to our allowance for credit losses, which would reduce our earnings. Our methodology for the determination of the adequacy of the allowance for credit losses is set forth in Note 4 — Allowance for Credit Losses in the accompanying Consolidated Financial Statements.

•There are legal fees associated with the resolution of problemnon-performing assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and

•The resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.activity, and

If borrowers become delinquent and do not pay their loans and we are unable to successfully manage our non-performing assets, our losses and troublednon-performing assets could increase, which could have a material adverse effect on our financial condition and results of operations.

We target our business development and marketing strategy primarily to serve the banking and financial services needs of small to medium-sized businesses. These businesses generally have fewer financial resources in terms of capital access or borrowing capacity than larger entities, frequently have smaller market shares than their competition, and may be more vulnerable to economic downturns. These businesses also often need substantial additional capital to expand or compete, and may experience substantial volatility in operating results,results. anyAny of whichthese factors may impair their ability as a borrower to repay a loan. These factors may be especially true given the effects of global macroeconomic conditions, including volatility and market factors related to or caused by any health crises, global political conflict, rising interest rates, labor market volatility, and instability in financial markets. If general economic conditions in the markets in which we operate negatively impact this customer segment, our results of operations and financial condition and the value of our Common Stock may be adversely affected. Moreover, a portion of these loans have been made by us in recent years, and the borrowers may not have experienced a complete business or economic cycle. The deterioration of our borrowers’ businesses may hinder their ability to repay their loans with us, which could have a material adverse effect on our financial condition and results of operations.

A substantial portion of our loans are secured by real estate. These concentrations expose us to the risk that adverse developments in the real estate market, or in the general economic conditions in the areas where such areas,real estate is located, or the continuation of such adverse developments, could increase the levels of non-performing loans and charge-offs, and reduce loan demand and deposit growth. In that event, we would likely experience lower earnings or losses. Additionally, if economic conditions in our market area deteriorate, or there is volatility or weakness in the economy or any significant sector of the economy in our markets, our ability to develop our business relationships may be diminished, the quality and collectability of our loans may be adversely affected, our provision for credit losses may increase, the value of collateral may decline, and loan demand may be reduced.

Additionally, commercial real estate loans, commercial and industrial loans, and acquisition, construction & development loans are more susceptible to a risk of loss during a downturn in the business cycle. Our underwriting, review and monitoring cannot eliminate all of the risks related to these loans. In particular, the banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market. Banking regulatory authorities typically give commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement enhanced risk management practices, including stricter underwriting, internal controls, risk management policies, more granular reporting, and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposure. If our banking regulators determine that our commercial real estate lending activities are particularly risky and are subject to heightened scrutiny, we may incur significant additional costs or be required to restrict certain of our commercial real estate lending activities.

Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property, in which case we would be exposed to the risks inherent in the ownership of real estate. The amount that we, as a mortgagee, may realize after a foreclosure depends on factors outside of our control, including, but not limited to, general or local economic conditions, environmental cleanup liabilities, assessments, interest rates, real estate tax rates, operating expenses of the mortgaged properties, our ability to obtain and maintain adequate occupancy of the properties, zoning laws, governmental and regulatory rules, and natural disasters. For example, we could be subject to environmental liabilities with respect to these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property, which could have a material adverse effect on our business, financial condition and results of operations. Our inability to manage the amount of costs or size of the risks associated with the ownership of real estate or write-downs in the value of other real estate owned (“OREO”) could have an adverse effect on our business, financial condition, and results of operations.

Additionally, consumer protection initiatives or changes in state or federal law may substantially increase the time and expenses associated with the foreclosure process or prevent us from foreclosing at all. A number of states in recent years have either considered or adopted foreclosure reform laws that make it substantially more difficult and expensive for lenders to foreclose on properties in default, including in response to the COVID-19 pandemic.default. Additionally, federal and state regulators have prosecuted or pursued enforcement action against a number of mortgage servicing companies for alleged consumer law violations. If new federal or state laws or regulations are ultimately enacted that significantly raise the cost of foreclosure or raise outright barriers to foreclosure, they could have an adverse effect on our business, financial condition, and results of operations.

In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and, as real estate values may change significantly in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately reflect the net value of the collateral after the loan is made. As a result, we may not be able to realize the full amount of any remaining indebtedness when we foreclose on and sell the relevant property. In addition, we rely on appraisals and other valuation techniques to establish the value of OREO that we acquire through foreclosure proceedings and to determine loan impairments.

Liquidity is essential to our business. An inability to maintain sufficient deposits or raise funds through additional deposits, borrowings, the sale of loans, and other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities, or on terms that are acceptable to us, could be impaired by factors that affect us specifically, the financial services industry, or the economy, in general. Factors that could detrimentally affect our access to liquidity sources may be beyond our control and include, among other things, market disruptions, changes in our credit ratings, lack of sufficient qualifying collateral to support borrowings, competitive dynamics, reputational damage, the confidence of depositors in us or the financial-services industry, generally, a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated, and an adverse regulatory action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets, increased inflation, tariffs or other disruptions to global trade, trade agreements or supply chains, geopolitical conflicts or tensions, rising interest rates, the state of the regulatory environment and monetary and fiscal policies, the possibility of the U.S. government defaulting on its debt, or negative views and expectations about the prospects for the financial services industry or the global economy more broadly. If a large number of our depositors or depositors with a high concentration of deposits sought to withdraw their deposits suddenly, we could encounter difficulty meeting such a significant deposit outflow, which could negatively impact our profitability, reputation and liquidity. Significant unanticipated deposit outflows have occurred at other financial institutions, and may occur in the future, compounded by advances in technology that increase the speed at which deposits can be moved from bank to bank or outside the banking system, as well as the speed and reach with which information, concerns and rumors can spread through media, in each case potentially exacerbating liquidity concerns. While we believe our funding sources are adequate to meet any significant unanticipated deposit withdrawal, we may not be able to manage the risk of deposit volatility effectively, which could have a material adverse effect on our liquidity, business, financial condition and results of operations.

Among other sources of funds, we rely heavily on deposits for funds to make loans and provide for our other liquidity needs. Core deposits are generally a low-cost and stable source of funding. However, loan demand may exceed the rate at which we are able to build core deposits for which there is substantial competition from a variety of different competitors, so we may rely on more interest-sensitive deposits, including brokered deposits, as sources of funds. Those deposits may not be as stable as other types of deposits, and in the future, depositors may not renew those deposits when they mature, or we may have to pay a higher rate of interest to attract or retain them or to replace them with other deposits or with funds from other sources. Not being able to attract deposits, or to retain or replace them as they mature, would adversely affect our liquidity. PayingFunding costs may increase if we lose core deposits and are forced to replace them with more expensive sources. Depending on the interest rate environment and competitive factors, low-cost deposits may need to be replaced with higher depositcost ratesfunding, toresulting attract, retain, or replace those deposits could havein a negativedecrease effect on ourin net interest marginincome and operatingnet results. Furthermore, as we and other banking organizations experienced in 2023, the failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed “too big to fail” or to remove deposits from the banking system entirely.income. As of December 31, 2024,2025, approximately 29.6%32.1% of our deposits were uninsured and we rely on these deposits for liquidity.

We haveoperate manyin competitors.a competitive market for financial services and face intense competition from other financial institutions in making loans and attracting deposits, which can greatly affect pricing for our products and services and could adversely affect our cost of funds. Our principal competitors are commercial and community banks, credit unions, savings and loan associations, mortgage banking firms, online mortgage lenders, and consumer finance companies, including large national financial institutions that operate in our market. Many of these competitors are larger than us, have significantly more resources, greater brand recognition, more extensive and established branch networks or geographic footprints than we do, and may be able to attract customers more effectively than we can. Because of their scale, many of these competitors can be more aggressive than we can on loan and deposit pricing, and may better afford and make broader use of media advertising, support services, and electronic technology than we do. Also, many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures. WeAs competea withresult, thesesome otherof financialour institutions,competitors bothcan inoffer attracting depositsproducts and makingservices loans.that we are unable to offer or to offer such products and services at more competitive rates. We expect competition to continue to increase as a result of legislative, regulatory, and technological changes, the continuing trend of consolidation in the financial services industry, and the continued emergence of alternative banking sources. Our profitability in large part depends upon our continued ability to compete successfully with traditional and new financial services providers, some of which maintain a physical presence in our market and others of which maintain only a virtual presence. Increased competition could require us to increase the rates we pay on deposits or lower the rates that we offer on loans, which could reduce our profitability.

Our strategy is to grow organically and supplement that growth with select acquisitions, if available.available, such as the merger with Summit and the LNKB Merger. Our success depends primarily on generating loans and deposits of acceptable risk and expense. There can be no assurance that we will be successful in continuing our organic, or internal, growth strategy. Our ability to identify appropriate markets for expansion, recruit and retain qualified personnel, and fund growth at reasonable cost depends upon prevailing economic conditions, maintenance of sufficient capital, competitive factors, changes in banking laws, and other factors. OurIn ability to execute on our strategy will also depend, in part, onaddition, our ability to retainmanage growth successfully depends on a variety of factors, including whether we can maintain adequate capital levels, maintain cost controls, effectively manage asset quality, effectively manage increasing regulatory compliance requirements, and successfully integrate any businesses acquired into our organization, including the talentsLNKB Merger. We cannot be certain of our ability to manage increased levels of assets and dedicationliabilities without increased expenses and higher levels of keynon-performing employeesassets. currentlyWe employedmay bybe required to make additional investments in equipment and personnel to manage higher asset levels and loan balances, which may adversely affect earnings, shareholder returns, and our efficiency ratio. Increases in operating expenses or non-performing assets may decrease our earnings and the Company. It is possible that these employees may decide not to remain with the Company. If the Company is unable to retain key employees, including management, who are critical to the successful integration and future operationsvalue of the companies,Company’s thecapital Company could face disruptions in its operations, loss of existing customers, loss of key information, expertise, or know-how, and unanticipated additional recruitment costs.stock.

To the extent we are able to supplement organic growth with one or more acquisitions, including the LNKB Merger, we are and will be subject to risks commonly encountered in such transactions, including risks related to the time and expense of identifying, evaluating, and negotiating potential acquisitions, exposure to unknown or contingent liabilities of the target, difficulty of integrating the operations and personnel of the target, potential disruption of our ongoing business, failure to retain key personnel at the acquired business, and failure to realize any expected revenue increases, cost savings, and other projected benefits from an acquisition.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services.services, and we anticipate that new technologies will continue to emerge. The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations. ManyDeveloping or acquiring access to new technologies and incorporating those technologies into our products and services, or using them to expand our products and services, may require significant investments, may take considerable time to complete, and ultimately, may not be successful. If we fail to maintain or enhance our competitive position with respect to technology, whether because of oura competitorsfailure haveto anticipate customer expectations, substantially greaterfewer resources to invest in technological improvements than our larger competitors, or because our technological developments fail to perform as desired or are not rolled out in a timely manner, we have. We may notlose market share or incur additional expense. In addition, any future implementation of technological changes and upgrades to maintain current systems may cause operational and customer challenges upon implementation and for some time afterwards. Key challenges include service interruptions, transaction processing errors and system conversion delays, which may cause us to lose customers or fail to comply with applicable laws, and may cause us to incur additional expenses, which may be able to implement new technology-driven products and services effectively or be successful in marketing these products and services to our customers. Failure to keep pace successfully with technological change affecting the financial services industry could harm our ability to compete effectivelysubstantial and could have ana material adverse effect on our business, financial condition, and results of operations. As these technologies improve in the future, we may be required to make significant capital expenditures in order to remain competitive, which may increase our overall expensesoperations, and havefuture an adverse effect on our business, financial condition, and results of operations.prospects.

We follow a relationship-based operating model,model. and ourOur ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially adversely affect our performance.

We believe that our continued growth and future success will depend on the retention of our management team and key employees. Our management team and other key employees, including those who conduct our loan origination and other business development activities, have significant industry experience. We cannot ensure that we will be able to retain the services of any members of our management team or other key employees. Though we have employment agreements in place with certain members of our management team, they may still elect to leave at any time. The loss of any of our management team or our key employees could adversely affect our ability to execute our strategy, and we may not be able to find adequate replacements on a timely basis, or at all. Additionally, the loss of personnel with extensive customer relationships may lead to the loss of business if the customers were to follow the employee to a competitor.

Until recently, we were in a rising rate environment. Interest rate increases often result in larger payment requirements for our borrowers, which increases the potential for default. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. In a rising interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates. In late 2024, the Federal Reserve’s interest rate policy shifted as inflationary pressure began to ease and economic growth moderated. Following a period of aggressive rate hikes aimed at curbing inflation in 2022 and 2023 aimed at curbing inflation,2023, the Federal Reserve began lowering rates in 2024, with the Federal Funds target rate ranging from 5.25% to 5.5% at year-end 2023, compared to its range of 4.25% to 4.50% at year endyear-end 2024. Rate cuts continued through 2025, bringing the Federal Funds target rate down to a range of 3.5% to 3.75% as of December 31, 2025. Interest rate decreases can lead to increased prepayments of loans and mortgage-backed securities as borrowers refinance their loans to reduce borrowing costs. Under these circumstances, we are subject to reinvestment risk as we may have to redeploy such repayment proceeds into lower yielding loans or investments, which would likely hurt our income. It is unclear whether interest rates will continue to decline in 2025.2026.

We are subject to the growing risk of climate change. Among the risks associated with climate change are more frequent severe weather events. Severe weather events such as hurricanes, tropical storms, tornados, winter storms, freezes, flooding and other large-scale weather catastrophes in our markets subject us to significant risks, and more frequent severe weather events magnify those risks. Large-scale weather catastrophes, or other significant climate change effects that either damage or destroy residential or multifamily real estate underlying mortgage loans or real estate collateral, could decrease the value of our real estate collateral or increase our delinquency rates in the affected areas and thus diminish the value of our loan portfolio. In addition, the effects of climate change may have a significant effect on our geographic markets and could disrupt our operations or the operations of our customers, third-party service providers, or supply chains, more generally. Those disruptions could result in declines in economic conditions in our geographic markets or industries in which our borrowers operate and impact their ability to repay loans or maintain deposits. Climate change could also impact our assets or employees directly or lead to changes in customer preferences that could negatively affect our growth or business strategies. In addition, our reputation and customer relationships could be damaged due to our practices related to climate change, including our or our customers’ involvement in certain industries or projects associated with causing or exacerbating climate change.projects. Moreover, over the past few years, federal banking regulators increasingly focused on the physical and financial risks to financial institutions associated with climate change,change; whichalthough, mayexpectations resultwith respect to these matters has been changing, and it is difficult to predict changes in increasedpriorities and requirements regardingwith therespect disclosureto andthese managementmatters, ofincluding climateany riskschanges and related lending activities, as well as increasedin compliance costs.costs While federal regulators are expectedrelating to focussuch lesschanges. on climate-related risks given the change in the U.S. presidential administration in January 2025,Additionally, some states arehave morebeen, and may continue to be, active in climate-related regulation.

Our ability to grow and compete is dependent on the Bank’s ability to build or acquire the necessary operational and technological infrastructure and to manage the cost of that infrastructure as we expand. In our case, operational risk can manifest itself in many ways, such as errors related to failed or inadequate processes, faulty or disabled computer systems, fraud by employees or outside persons, which may take many forms including check fraud, electronic fraud, wire fraud, social engineering, phishing and other dishonest acts, and exposure to external events. As discussed below, we are dependent on our operational infrastructure to help manage these risks. In addition, we are heavily dependent on the strength and capability of the technology systems that the Bank uses both to interface with customers and to manage internal financial and other systems. Our ability to develop and deliver new products that meet the needs of our existing customers and attract new ones depends on the functionality of our technology systems. Additionally, our ability to run our business in compliance with applicable laws and regulations depends on these systems.

We continuously monitor our operational and technological capabilities and make modifications and improvements as circumstances warrant. In some instances, the Bank may build and maintain these capabilities itself; however, we outsource many of these functions to third parties. These third parties may experience errors or disruptions, including cyber-attacks, that could adversely impact the Bank and over which the Bank may have limited control. We also face risk from the integration of new infrastructure platformsplatforms, including in connection with acquisitions, such as the LNKB Merger, and/or new third-party providers of such platforms into the Bank’s existing businesses.

The computer systems and network infrastructure we useuse, as well as those of third parties on which we are highly dependent, may be vulnerable to physical theft, fire, power loss, telecommunications failure, or a similar catastrophic event, as well as security breaches, denial of service attacks, viruses, worms, and other disruptive problems caused by hackers or malicious actors. Any damage or failure that causes breakdowns or disruptions in our customer relationship management, general ledger, deposit, loan, and other systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny for failure to comply with required information security standards, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on us.

Computer break-ins, phishing, and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure. Information security risks have generally increased in recent years in part because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties. Our operations rely on the secure processing, transmission, and storage of confidential information in our computer systems and networks.networks and the computer systems and networks of third parties. In addition, to access our products and services, our customers may use devices that are beyond our control systems. Although we believe we have robust information security procedures and controls, our technologies, systems, networks, and our customers’ devices mayhave becomebeen subject to, and are likely to continue to be, the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, or destruction of the Bank’s or our customers’ confidential, proprietary, and other information, or otherwise disrupt the Bank’s or our customers’ or other third parties’ business operations. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

In deciding whether to extend credit or enter into other transactions with clients and counterparties, and the terms of any such transaction, we may rely on information furnished by, or on behalf of, clients and counterparties, including financial statements, property appraisals, title information, employment and income documentation, account information, and other financial information. We may also rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. Any such misrepresentation or incorrect or incomplete information, whether fraudulent or inadvertent, may not be detected prior to funding. In addition, one or more of our employees or vendors could cause a significant operational breakdown or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our loan documentation, operations, or systems. Whether a misrepresentation is made by the applicant or another third-party, we generally bear the risk of loss associated with the misrepresentation. A loan subject to a material misrepresentation is typically unsellable or subject to repurchase if it is sold prior to detection of the misrepresentation. The sources of the misrepresentations may also be difficult to locate, and we may be unable to recover any of the monetary losses we may suffer as a result of the misrepresentations. Any of these developments could have an adverse effect on our business, financial condition, and results of operations.

Our risk management framework is comprised of various processes, systems, and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate, operational, technology, and compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment. Our risk management framework may not be effective under all circumstances. Our risk management framework may not adequately mitigate any risk or loss to us. If our risk management framework is not effective, we could suffer unexpected losses and our business, financial condition, and results of operations could be adversely affected. We may also be subject to potentially adverse regulatory consequences.

Demand for the Company’s services is influenced by general economic and consumer trends beyond the Company’s control, including disruptions in the financial services industry, in general, and events such as globalgeopolitical pandemicsconflict and geopoliticalglobal conflict.pandemics.

There can be no assurance that our business and corresponding financial performance will not be adversely affected by general economic or consumer trends or events, including those affecting the financial services industry. Over the past few years, global markets have seen extensive volatility owing to a variety of factors, including high inflation, trade policies and tariffs, volatility in the capital markets, the failure of financial institutions, volatility in the housing market, interest and currency rate fluctuations, labor availability, supply chain disruptions, global pandemics and public health crises and the responses thereto, weather catastrophes and geopolitical instability, including shutdowns and threats of shutdowns of the U.S. federal government, growing geopolitical tensions between China and the U.S., the Russia-Ukraine war, conflict in the Middle East,conflicts, and acts of terrorism. These events have created, and may continue to create, significant disruption of the global economy and financial and labor markets. If such conditions continue, recur or worsen, this may have a material adverse effect on the Company’s business, financial condition, and results of operations. Furthermore, such economic conditions have produced downward pressure on share prices and on the availability of credit for financial institutions and corporations, while also driving up interest rates, further complicating borrowing and lending activities.

The Company may face increased scrutiny from governmental authorities as a result of the size of its business, including if the total assets of the Company grow to exceed $10 billion as of December 31 of any calendar year. As a result of the LNKB Merger, the Company and the Bank are expected to have total assets exceeding $10 billion. Banks with $10 billion or more in total assets are, among other things: examined directly by the CFPB with respect to various federal consumer financial laws; subject to reduced dividends on any holdings of Federal Reserve Bank of Richmond common stock; subject to limits on interchange fees pursuant to Section 920 of the Electronic Funds Transfer Act (known as the Durbin Amendment); subject to certain enhanced prudential standards; no longer treated as a “small institution” for FDIC deposit insurance assessment purposes; and no longer eligible to elect to be subject to the CBLR. Compliance with these additional ongoing requirements may necessitate additional personnel, the design and implementation of additional internal controls, and the incurrence of significant expenses, which could have a significant adverse effect on the Company’s financial condition or results of operations.

EffectiveOn onMay the3, Closing Date,2024, the Company completed theits Mergermerger with Summit, pursuant to the Agreement and Plan of Reorganization and accompanying Plan of Merger dated August 24, 2023 Mergerbetween Agreement.the Company and Summit.

PursuantOn toDecember 18, 2025, the Company and LNKB entered into the Merger Agreement, onwhich provides that, upon the Closingterms Date,and (i)subject Summitto mergedthe conditions set forth therein, LNKB will merge with and into the Company, with the Company as the surviving entitycorporation. andThe (ii)LNKB Merger Agreement further provides that immediately following the Holding Company Merger, SCBLINKBANK mergedwill merge with and into the Bank, with the Bank as the surviving bank.

The Company currently has set an initial reasonable and supportable forecast 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,supportable forecast and the subsequent reversion andto post-reversionhistorical periodloss forecastsinformation on collectively evaluated loans. As the reasonable and supportable forecast and reversion period forecastsforecast reflectreflects 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, 2024,2025, 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 outcomes from its systems of record in supporting qualitative factors. However, qualitative factor evaluations are inherently imprecise and require significant management judgement.judgment.

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 positionsposition 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.

Under capital adequacy guidelines and the regulatory framework for “prompt corrective actionaction,”, 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,weightings and other factors.

•Economic conditions, and volatility in markets, including pandemicsthe andeffects of pandemics, wars, political conflicts, political instability, hostility 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,impacts;

•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,inflation;

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

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

•Changes in the competitive landscape,landscape;

•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,programs;

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

Consolidated net income applicable to common shares for the year ended December 31, 2024,2025, was $35.0$116.4 million compared to $22.7$35.0 million earned during the year ended December 31, 2023.2024. The $12.3$81.4 million or 54.4%232.3% increase in net income applicable to common shares in 20242025 compared to 20232024 was primarily due to thehigher effectrates ofon theinterest-earning Mergerassets whichand resulteda slight decrease in increases in all categories of interest income exceeding increases in interestnon-interest expense compared to the prior year ended December 31, 2023.2024.

Net interest income totaled $225.8$295.9 million for the year ended December 31, 2024,2025, compared to $93.8$226.7 million for the year ended December 31, 2023.2024. The $132.0$69.2 million increase in net interest income was primarily driven by thehigher Mergerrates which resulted in higher loan interest income on loans and securities, partially offset by higher deposit interest expense.expense and higher interest expense on subordinated debt. Interest-bearing demand deposits and timemoney depositsmarket & savings accounts were the primary driver of increased net interest expense due mostly to an increase in volumerates, andwhich partlywas topartially anoffset increaseby a decline in rate.volume.

For the year ended December 31, 2024,2025, the Company recorded credit provision expense of $24.2$1.5 million compared to $0.2$24.2 million for the year ended December 31, 2023.2024. 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,Summit merger, which resulted in a higher credit provision expense when compared to the year ended December 31, 2023.2025.

Non-interest income increased by $18.2$10.8 million, or 101.5%,30.8%, to $36.2$46.1 million for the year ended December 31, 2024,2025, compared to $18.0$35.3 million for the year ended December 31, 2023.2024. The increase in non-interest income was mostly due to the Merger,effect of the Summit merger and included increases in all categories of non-interest income.income except net gains on securities. The largest increase was inincome servicefrom chargescompany-owned andlife feesinsurance of $8.9$3.4 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$3.1 million.million, Theand Companyan alsoincrease in bank debit and other card revenue of $2.5 million compared to the year ended December 31, 2024. Net realized gains on the sale of securities resultingdecreased inby an increase of $1.5$1.2 million in net gains/(losses) from securities compared to the year ended December 31, 2023.2024.

Net interest income totaled $225.8$295.9 million for the year ended December 31, 2024,2025, compared to $93.8$226.7 million for the year ended December 31, 2023.2024. The $132.0$69.2 million increase in net interest income was primarily driven by the Merger which resulted in higher loan interest income drivenon byloans higherand accretion income,securities, partially offset by higher deposit interest expense. Interest income on loans increased by $209.6$71.6 million while interest income on securities increased $7.3$4.1 million for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. Accretion income associated with acquired loans and borrowings totaled $39.8 million for the year ended, December 31, 2025 compared to $40.9 million for the year ended,ended December 31, 2024. Deposit interest expense increased by $79.5$3.3 million, while interest expense on subordinated debt assumed in the MergerSummit merger led to an increase in interest expense of $7.4$3.1 million for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024.

The tax adjusted net interest margin was 3.08%4.14% for the year ended December 31, 2024,2025, compared to 2.85%3.10% for the year ended December 31, 2023.2024. The increase in tax-adjusted net interest margin was primarily driven by thehigher rates on interest-earning assets for the effectyear ofended December 31, 2025 compared to the Mergeryear andended theDecember acquisition31, of additional, higher-yielding interest-earning assets.2024.

The yield for the year ended December 31, 2024,2025, for the loan portfolio was 5.48%6.85% compared to 5.07%5.48% for the year ended December 31, 2023.2024. The increase was primarily the result of the Merger which resulted in higher accretionrates incomeon andloans, thepartially acquisitionoffset ofby additional,lower higher-yielding loans.volume.

For the year ended December 31, 2024,2025, the tax-adjusted yield on the total investment securities portfolio was 3.30%3.96% compared to 3.44%3.36% for the year ended December 31, 2023.2024. The decreaseincrease was primarily due to thehigher recoveryrates onand unrealizedwas lossespartially thatoffset decreasedby thelower effective rate earned on investment securities.volume.

The rate paid on interest-bearing deposits increased to 2.40% during the year ended December 31, 2025, from 2.27% during the year ended December 31, 2024, from 1.86% during the year ended December 31, 2023.2024. The increase was a result of the Merger which resulted in the assumption of additional interest-bearing deposits with higher interestrates, ratespartially and to a lesser extentoffset by higherlower market interest rates.volume.

The rate paid on our short-term borrowings for the year ended December 31, 2024,2025, was 3.35%3.90% compared to 4.69%3.35% for the year ended December 31, 2023.2024. The decreaseincrease was due to thehigher decreaseaverage inrates short-term borrowing costs, driven by decreases infor the Federalyear Fundsended, RateDecember during31, 2024.2025.

The weighted-average rate paid on subordinated debt and trust preferred securities acquired in the Summit merger was 9.85% for the year ended December 31, 2025 compared to 10.08% for the year ended December 31, 2024.

(45)FHLBShort-term Advancesborrowings and other includes finance lease liabilities.

Total interest income was $366.2$445.0 million for the year ended December 31, 2025, compared to $367.1 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%.21.2%. The increase in interest income was primarily driven by thehigher Mergerrates which resulted in higher loan and security interest income. Interest income on securities increased by $7.3$4.1 million or 17.0%8.2% for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. Interest income on loans increased $209.6$71.6 million or 205.9%23.0% for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024.

Total interest expense was $140.4$149.1 million for the year ended December 31, 2024,2025, compared to $53.1$140.4 million for the previous year ended December 31, 2023,2024, an increase of 164.2%.6.2%. The increase in interest expense was primarily driven by thehigher effect of the Mergerrates and increaseswas inpartially depositoffset andby debt balances.volume. Interest expense on interest-bearing deposits increased by $79.5$3.3 million or 202.8%2.8% for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. Interest expense on borrowed funds increased by $0.3$2.3 million or 2.4%16.1% for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. Interest expense on subordinated debt acquired in the MergerSummit merger led to an increase in interest expense of $7.4$3.1 million for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024.

The provision for credit losses was $1.5 million for the year ended December 31, 2025, compared to $24.2 million for the year ended December 31, 2024, compared to $0.2 million for the year ended December 31, 2023.2024. For the year ended December 31, 2024, the Company recognized a one-time CECL Day 2 provision for non-PCD assets acquired in the MergerSummit 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, 2023.2025. See Note 4 — Allowance for Credit Losses in Notes to Consolidated Financial Statements for further information.

Non-interest income increased by $18.2$10.8 million or 101.5%30.8% for the year ended December 31, 2024,2025, compared to December 31, 2023.2024. The increase was primarily driven by the Merger,effect of the Summit merger, and included increases in all categories of non-interest income.income except net gains on securities. The largest increase was inincome servicefrom chargescompany-owned andlife feesinsurance of $8.9$3.4 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$3.1 million.million, and an increase in bank debit and other card revenue of $2.5 million compared to the year ended December 31, 2024. See Note 22 — Revenue from Contracts with Customers in Notes to Consolidated Financial Statements for further information. The Company alsorealized realizeda decrease of $1.2 million in net 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, 2024,2025, compared to December 31, 2023.2024.

Non-interest expense increaseddecreased 128.9%by $2.3 million, 1.1% for the year ended December 31, 2024,2025, compared to December 31, 2023.2024. The increasedecrease was mostly due to thelarge Merger,decreases in equipment rentals, depreciation and includedmaintenance, increaseswhich indecreased all$7.3 categoriesmillion of non-interest expense. The largest increase was inand other operating expensesexpense which includeddecreased $36.5by $9.5 million of legal, consulting, and audit fees relatedcompared to the Mergeryear withended SummitDecember Financial31, Group, Inc. The majority of these merger-related costs consist of legal, consulting, and audit fees.2024. See Note 20 — Other Operating Expenses in Notes to Consolidated Financial Statements for further information on “Other” non-interest expense. OtherIncreases largewere increasesnoted includedin other non-interest expense categories including salaries and wages which increased by $37.8$6.4 million, orcore 96.4%,deposit andintangible equipment rentals, depreciation and maintenanceamortization which increased $17.4by $4.1 million during the first full year following the Summit merger, occupancy, which increased by $2.9 million, orand 301.6%,pensions and other employee benefits which increased by $1.3 million 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, 2023.2024.

Income tax expense was $4.2$27.6 million for the year ended December 31, 2024,2025, aan increase of $1.8$23.4 million from the tax provision for the year ended December 31, 2023.2024. For 20242025 and 2023,2024, our effective tax rates were 10.5%19.1% and 9.5%,10.5%, respectively. AAn increase in income from operations led to a slightan increase in the effective tax rate for 2024.2025. The effective tax rate going forward will continue to depend on income from operations as well as any legislative corporate tax changes.

For a comparison of the 20232024 results to the 20222023 results and other 20222023 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 22,17, 2024, as amended by the Company’s 10-K/A filed with the SEC on April 12, 2024.2025.

Assets increased by $4.2$108.4 million to $7.9 billion as of December 31, 2025, compared to $7.8 billion as of December 31, 2024, compared to $3.6 billion as of December 31, 2023.2024. The increase in assets was primarily due to an increase in the Mergersecurities portfolio of $183.6 million, and included an increase of $153.8 million in cash and cash equivalents, partially offset by a decrease in loans, net of ACL, of $3.5 billion, and an increase of $183.9$284.3 million in the securities portfolio as of December 31, 20242025 compared to December 31, 2023.2024. Deposits increaseddecreased by $3.5$111.3 billionmillion and amounted to $6.4 billion at December 31, 2025, compared 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$85.0 million to $365.0$450.0 million as of December 31, 2024,2025, compared to $272.0$365.0 million at December 31, 2023.2024. Subordinated debt and subordinated debt owed to unconsolidated subsidiary trusts, which were assumed in the Merger,Summit merger, totaled $87.5 million at December 31, 2025, compared to $111.9 million at December 31, 2024, compareddue to zeroa atredemption Decemberof 31,subordinated 2023.debt in the second half of 2025.

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, 2024,2025, the unrealized losses on our holdings decreased $6.9$45.4 million from December 31, 2023.2024 and amounted to $71.9 million as of December 31, 2025.

The loan portfolio, excluding ACL, increaseddecreased by $3.6$284.6 billionmillion from December 31, 2023,2024, to December 31, 2024,2025, primarily due to the effectCompany ofexiting thenon-core Merger.loans. Additionally, theThe Company has continued to grow organically by continuing to serve existing customers and new customers through our expansion into newer markets.

The Company’s asset quality remained strong through December 31, 2024.2025. 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, 2024,2025, and December 31, 2023,2024, totaled $41.2$76.9 million and $3.7$41.2 million, respectively. The increase in the non-performing asset balance is mostly due to the effect of the Merger and the relatedan increase in thenon-accrual loanloans portfolioof $34.7 million as of December 31, 20242025 when compared to December 31, 2023.2024. InMost addition,of the other real estate owned assets of $2.7 million were entirely assumed as part of the Merger.Summit merger.

Gross charged-off loans were $1.8$3.8 million, $0.2$1.8 million, and $3.5$194.0 millionthousand for the years ended December 31, 2024,2025, December 31, 2023,2024, and December 31, 2022,2023, respectively. The increase in charge-offs during 2024,2025, when compared to 2023,2024, was due to the merger and thean increase in the value of the loan portfolio. A majority of the charge-offs in 2022 related to aowner loanoccupied thatcommercial real estate loans of $1.1 million, and consumer non real estate and other loans of $1.2 million for the Companyyear soldended asDecember part31, of2025 acompared portfolioto managementthe strategy.year ended December 31, 2024. Gross recoveries totaled $0.2$1.3 million, $0.1$161.0 million,thousand, and $0.2$96.0 millionthousand for the years ended December 31, 2024,2025, December 31, 2023,2024, and December 31, 2022,2023, respectively. The ACL as a percentage of gross loans, net of unearned income, was 1.26%, 1.20%, 1.21%, and 1.11%1.21% as of December 31, 2025, December 31, 2024, and December 31, 2023, and December 31, 2022, respectively.

The Company recorded a provision for credit losses of $20.5$2.3 million, a provision for credit losses of $0.2$20.5 million, and a provision recapture of credit losses of $7.5$235.0 millionthousand for the years ended December 31, 2024,2025, December 31, 2023,2024, and December 31, 2022,2023, respectively. The increase in provision for the year ended December 31, 2024 was due to the MergerSummit 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 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 areis described more fully in Note 13 — Derivatives in Notes to Consolidated Financial Statements.

Total deposits increaseddecreased by $3.5$111.3 billionmillion from December 31, 2024,2025, to December 31, 2023,2024, primarily driven by thea Merger.$180.4 million decrease in brokered deposits and a $43.6 million decrease in non-interest-bearing deposits, which was partially offset by a $106.6 million increase in interest-bearing deposits. The Company’s brokered deposits balance was $244.8$64.4 million and $389.0$244.8 million at December 31, 2024,2025, and December 31, 2023,2024, 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 Company’s total core deposit balance increased by $3.7$69.1 billionmillion from December 31, 20232024 to December 31, 2024 mostly due to the completion of the Merger.2025.

The Company has deposits that meet or exceed the FDIC insurance limit of $250,000 of $1.9$2.1 billion and $677.3$1.9 millionbillion at December 31, 2024,2025, and December 31, 2023.2024. The increase in uninsured deposits as of December 31, 20242025 was due to the completiondecline ofin thebrokered MergerCDs which are fully insured, and the relatedan increase in totalcore deposits.deposits, some of which are uninsured. The Company does not have material deposit concentration risk to any significant market, industry or individual at December 31, 2024.2025.

Total shareholders’ equity at December 31, 2024,2025, was $730.2$854.6 million, compared to $314.8$730.2 million at December 31, 2023.2024. Shareholders’ equity increased by $415.4$124.5 million primarily due to the completionCompany’s ofearnings thefrom Merger.operations. Additionally, accumulated other comprehensive loss decreased by $7.8$36.8 million as a result of an increase in the fair value of investment securities available-for-sale.

This Form 10-Q contains statements that we believe are, or may be considered to be, “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the beliefs, goals, intentions, and expectations of the Company regarding our: merger with LNKB and the expected cost savings, synergies, returns, and other anticipated benefits from the integration of LNKB; revenues, earnings, earnings per share, loan production, asset quality, and capital levels, among other matters; our estimates of the future costs and benefits of the actions we may take; our assessments of expected losses on loans; our assessments of interest rate and other market risks; our ability to achieve our financial and other strategic goals; and other statements that are not historical facts.

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: the possibility that the anticipated benefits of the LNKB Merger will not be realized when expected or at all, including as a result of the impact of, or problems arising from,from (if any), the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where the Company does business; costs or difficulties associated with newly developed or acquired operations; the possibility that we may be unable to achieve expected synergies and operating efficiencies of the LNKB Merger within the expected timeframes or at all and to successfully integrate LNKB’s operations and those of the Company; suchthat the integration of LNKB may be more difficult, time-consuming or costly than expected; revenues following the LNKB Merger may be lower than expected; the Company’s success in executing its business plans and strategies and managing the risks involved in the foregoing; the dilution caused by the Company’s issuance of additional shares of its capital stock in connection with the LNKB Merger; costs or difficulties associated with newly developed or acquired operations; risks related to the potential impact of global macroeconomic conditions and changes in general economic, political,political and market factors on the integration of LNKB or marketour trendsoperations generally (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 the impact of the federal government shutdown that began in October 2025 and with respect to spending on industries concentrated in our market area, as well as the impact from recently announced and future tariffs on the markets we serve; increased competition; changes in consumer confidence and demand for financial services, including changes in consumer borrowing, repayment, investment, and deposit practices; changes in asset quality and credit risk; our ability to control costs and expenses; adverse developments in borrower industries or declines in real estate values; changes in and compliance with federal and state laws and regulations that pertain to our business and capital levels; our ability to raise capital as needed; the impact, extent and timing of technological changes; the effects of any cybersecurity breaches or events; the development and use of artificial intelligence (“AI”) in business processes, services, and products, including emerging external focus among regulators and other officials related to risks in connection with the development and use of AI; the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, geopolitical conflicts and tensions, or public health events (such as pandemics), and of governmental and societal responses thereto; and the other factors discussed in the “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” section of the Company's Annual Report on Form 10–K for the year ended December 31, 2025 and in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Part II, Item 1A. Risk Factors in this Form 10-Q.

The Bank’s primaryoperations marketare areaconducted includesfrom northern Virginia and West Virginia, and as of March 31, 2026, it hasit’s over 77105 branches and commercial loan offices across Delaware, Kentucky, Maryland, Virginia, West Virginia, and West Virginia.Pennsylvania. 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.

As of MarchJune 31,30, 2026, we had total consolidated assets of $7.9$11.0 billion, gross loans of $5.4$8.0 billion, total deposits of $6.3$9.0 billion, and total shareholders’ equity of $864.5$1.2 million.billion. As of MarchJune 31,30, 2026, we had 8301,051 full-time employees. None of our employees are covered by a collective bargaining agreement.

Merger Withwith LINKBANCORP,LINKBANCORP Inc.

Effective on May 1, 2026, Burke & Herbert Financial Services Corp., a Virginia corporation, completed its previously announced merger with LINKBANCORP, Inc., a Pennsylvania corporation,LNKB, pursuant to the LNKB Merger Agreement between Burke & Herbert and LNKB. See Note 1 - Nature of Business Activities and Significant Accounting Policies, in Notes to Consolidated Financial Statements for additional information regarding the LNKB merger.Merger.

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”) and purchased seasoned loans (“PSL”) loans is recognized within acquisition accounting. The allowance for credit losses for non-PCD and non-PSL 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 allowance for credit losses represents our estimate of all expected credit losses for financial assets held for investment at the reporting date based on historical experience, current conditions, and projections including reasonable and 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.assets. 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 as related to macroeconomic data provides the basis for the estimation of expected credit losses; over defined credit contractual terms. Qualitative adjustments to historicalmodeled loss informationrates are made for differences in current loan-specificportfolio 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 lossesconcentrations and for unfundedadversely commitments.classified Theseor evaluationsgraded are conducted at least quarterly and more frequently, if deemed necessary.credits.

The Company is using ana internallythird-party 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-contractualdefined 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 are sourced from third parties and include variables that meet defined criteria in forecasting credit losses for our loan portfolio. These variables include, but are not limited to,to unemploymentsuch rates,items housing and commercial real estate prices, gross domestic product levels,as equity market conditions or interest rates, as well as otherto variablesportfolio-specific that are portfolio-specific,indicators, such as those pertainingthat pertain to the commercial real estate or to the residential loan portfolios. TheTo Company sourcesreview the macroeconomicintegrity variablesof the modeled output, Management validates, validates the specific loan and the macroeconomic variabledata forecasts that it uses in its ACL model from the Standard & Poor’s Global Market Intelligence and from CoStar Group.inputs.

The Company currently has set an initial reasonable and supportable forecast period of two years with a subsequent immediateone-year input reversion period to the historical averagemean input forecast loss rates in the remaining or post-reversion 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 forecastforecasts and the subsequent reversion to historical loss information on collectively evaluated loans. As the reasonablequantitatively andmodeled supportableforecasts forecast and reversion period forecast reflectsreflect 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 MarchJune 31,30, 2026, 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.model exclusive of qualitative factors. Management reviews supplemental data sources including historical net charge-off rates and data measuring other specific credit outcomes from its systems of record in supporting qualitative factors. However, qualitative factor evaluations are inherently imprecise and require significant management judgment.

The Bank continues to monitor its commercial real estate portfolio by reviewing various credit risk and concentration reports. The Bank’s exposure to CRE at MarchJune 31,30, 2026, was $2.8$3.9 billion, or 51.9%,48.7%, of its gross loan portfolio, not including owner-occupied commercial real estate and acquisition, construction & development. Commercial real estateCRE as a percent of total assets at MarchJune 31,30, 2026, was 35.4%,35.5%, not including owner-occupied commercial real estateCRE and acquisition, construction & development. Including owner-occupied commercial real estateCRE and acquisition, construction & development, total exposure was at $3.7$5.5 billion, or 69.1%,68.8%, of our total gross loans and 47.2%50.1% of total assets at MarchJune 31,30, 2026.

Loan balances by portfolio segment amortized cost (in thousands) and by percentage of our total gross loan portfolio at MarchJune 31,30, 2026, were as follows:

The tables below present the Company’sBank’s commercial real estate, owner-occupied commercial real estate, and acquisition, construction & development portfolios by collateral type and geographic location as of MarchJune 31,30, 2026 (in thousands).

As of MarchJune 31,30, 2026, and December 31, 2025, the Bank complied with all regulatory capital standards and qualifies as “well capitalized.” Note 8 - Regulatory Capital Matters in Notes to Consolidated Financial Statements contains additional discussion and analysis regarding the Company and the Bank’s regulatory capital requirements.

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 MarchJune 31,30, 2026, and MarchJune 31,30, 2025, and the selected income statement data for the three and six months ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025, 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.

(1) Common stockThe dividend payout ratio represents per share dividends declared divided by diluted earnings per share.

Results of Operations for the ThreeSix Months Ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025

Net income applicable to common shares for the threesix months ended MarchJune 31,30, 2026, was $27.1$36.4 million, compared to net income applicable to common shares of $27.0$56.6 million during the threesix months ended MarchJune 31,30, 2025. The $0.1$20.3 million increase was due to a decrease in interestnet expense,income andapplicable to common shares was primarily the result of an increase in non-interestmerger-related income, partially offset by a decrease in interest income, and an increase in non-interest expenseexpenses for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025.

Net interest income decreasedincreased by $1.1$17.7 million to $71.8$164.9 million for the threesix months ended MarchJune 31,30, 2026, compared to $73.0$147.2 million for the threesix months ended MarchJune 31,30, 2025. The main driver for this decreaseincrease was resultsthe thatimpact reflectof lowerthe interestLNKB income, primarily related to lower accretion income,Merger which wasresulted partiallyin offsetan byincrease lower interest expense when compared toin the threebalance monthsof endedinterest-earning Marchassets, 31,in 2025.excess of the increase in interest-bearing liabilities.

Non-interest income increased by $2.8$3.8 million, or 28.2%,16.6%, to $12.9$26.7 million for the threesix months ended MarchJune 31,30, 2026, as compared to $10.0$22.9 million for the threesix months ended MarchJune 31,30, 2025. IncreasesAll incategories fiduciary and wealth management, net gains on securities, income from company-owned life insurance, and otherof non-interest income exceededincreased declines inexcept service charges and fees and net (losses) gains on securities for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increases in income from fiduciary and wealth management income was driven by the acquisition of Burke & Herbert Wealth Services, LLC, while increases in company-owned life insurance, bank debit and other card revenue and other non-interest income were driven by the LNKB Merger, for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025.

Non-interest expense increased by $1.7$45.9 million, or 3.5%,46.4%, to $51.4$144.9 million for the threesix months ended MarchJune 31,30, 2026, as compared to $49.7$99.0 million for the threesix months ended MarchJune 31,30, 2025. The increase was primarily due to increasesthe ineffect salariesof the LNKB Merger and wages,included pensionshigher legal, consulting, audit, investment banking, software contract terminations, and otherchange-in-control employee benefits, equipment rentals, depreciationsalary and maintenance,benefit FDIC and other regulatory assessments and other operating expensepayments for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025. The increases were partially offset by a decrease in core deposit intangible amortization for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Net interest income totaled $71.8$164.9 million for the threesix months ended MarchJune 31,30, 2026, compared to $73.0$147.2 million for the threesix months ended MarchJune 31,30, 2025. The decreaseincrease in net interest income was primarily driven by the LNKB Merger and results thatreflecting reflecthigher loweraverage interestbalances income,of primarilyinterest-earning relatedassets toin lowerexcess accretion income, partially offset by lower interest expense related to lower deposit rates when compared toof the threehigher monthsaverage endedbalances Marchof 31,interest-bearing 2025.liabilities. Accretion income associated with acquired loans totaled $6.8$16.1 million for the threesix months ended MarchJune 31,30, 2026, compared to $11.4$23.0 million for the threesix months ended MarchJune 31,30, 2025. Amortization expense associated with fair value marks for time deposits, subordinated debt, and trust preferred securities totaled $1.4$2.9 million for the threesix months ended MarchJune 31,30, 2026, compared to $2.2$3.6 million for the threesix months ended MarchJune 31,30, 2025.

The tax-adjusted net interest margin was 4.09%4.12% for the threesix months ended MarchJune 31,30, 2026, compared to 4.18%4.17% for the threesix months ended MarchJune 31,30, 2025. The decrease in tax-adjusted net interest margin was primarily driven by resultslower thataccretion reflectincome and the acquisition of lower interestyielding income,loans primarilyfrom relatedthe LNKB Merger which led to lower accretionrates income,on partiallyinterest-earning offset by lower interest expense related to lower deposit rates, when compared to the three months ended March 31, 2025.assets.

The yield for the taxable loan portfolio was 6.64%6.58% for the threesix months ended MarchJune 31,30, 2026, compared to 6.96%6.93% for the threesix months ended MarchJune 31,30, 2025. The decrease was primarily the result of an increase in the balance of lower yielding loans due to the LNKB Merger, as well as lower accretion income for threethe six months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025.

The tax-adjusted yield on the total investment securities portfolio was 4.05%4.23% for the threesix months ended MarchJune 31,30, 2026, compared to 3.85%3.90% for the threesix months ended MarchJune 31,30, 2025. The increase was primarilymainly thedue resultto ofhigher yields through reinvestment in our securities portfolio as well as an increase in balancebalances of higher-yielding securities for the three months ended March 31, 2026, compareddue to the threeLNKB months ended March 31, 2025.Merger.

The yieldrate on interest-bearing deposits decreased to 2.16%2.21% during the threesix months ended MarchJune 31,30, 2026, from 2.53%2.47% during the threesix months ended MarchJune 31,30, 2025. The decrease was primarily due to the LNKB Merger which resulted in an increase in lower marketrate deposits and decreases in interest rates onacross the different categories of deposit productsliabilities reflectingas well as decreases in the Federal Funds Rate and other market rates.

The yieldrate on our short-term borrowings for the threesix months ended MarchJune 31,30, 2026, was 3.78%,3.70%, compared to 3.88%3.90% for the threesix months ended MarchJune 31,30, 2025. The decrease was due to decreases in the Federal Funds Rate and other short-term market rates and the addition of derivative swaps that decreased our cost of borrowing. The yieldrate on our subordinated debt assumed in the Summit Merger was 10.46%9.68% for the threesix months ended MarchJune 31,30, 2026, compared to 9.85%9.73% for the threesix months ended MarchJune 31,30, 2025.

The following table sets forth the major components of net interest income and the related yields and rates for the threesix months ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025, for comparison (dollars in thousands).

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

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 threesix months ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025, are annualized using actual days over calendar year method. 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).

Total interest income was $105.5$242.4 million for the threesix months ended MarchJune 31,30, 2026, compared to $110.8$222.6 million for the threesix months ended MarchJune 31,30, 2025, aan decreaseincrease of 4.8%.8.9%. The decreaseincrease in interest income was primarily due to lowerthe LNKB Merger and an increase in the balance of interest-earning assets, partially offset by a decrease in accretion incomeincome, when compared to the threesix months ended MarchJune 31,30, 2025. Interest income on loans decreasedincreased by $9.0$11.0 million and interest income on securities increased $3.1$8.8 million, for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025.2025, primarily due to a higher volume of interest earning assets and higher reinvestment rates in our securities portfolio. Accretion income associated with acquired loans totaled $6.8$16.1 million for the threesix months ended MarchJune 31,30, 2026, compared to $11.4$23.0 million for the threesix months ended MarchJune 31,30, 2025.

Total interest expense was $33.6$77.6 million for the threesix months ended MarchJune 31,30, 2026, compared to $37.8$75.4 million for the threesix months ended MarchJune 31,30, 2025. The decreaseincrease in interest expense was due to results that reflect an increase in interest-bearing liabilities due to the LNKB Merger, partially offset by lower rates on interest-bearing liabilities, and lower amortization expense associated with fair value marks for liabilities acquired in the Summit Merger.liabilities. Interest expense on interest-bearing deposits decreased by $5.1$544.0 millionthousand for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025, due to lower market rates.2025. Interest on subordinated debt acquired in the Summit Merger was $2.3$5.3 million for the threesix months ended MarchJune 31,30, 2026, compared to $2.7$5.5 million for the threesix months ended MarchJune 31,30, 2025. Interest expense on short-term borrowings amountedtotaled to $4.6$10.5 million for the threesix months ended MarchJune 31,30, 2026, compared to $3.2$7.6 million for the threesix months ended MarchJune 31,30, 2025, due to higher average balances.2025. Amortization expense associated with fair value marks for time deposits, subordinated debt, and trust preferred securities totaled $1.4$2.9 million for the threesix months ended MarchJune 31,30, 2026, compared to $2.2$3.6 million for the threesix months ended MarchJune 31,30, 2025.

Provision for (Recapture of) Credit Losses

Non-interest income increased 28.2%16.6% for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025. TheAll largestcategories dollarof increasenon-interest wasincome aincreased $1.8except millionservice increasecharges inand fees and net (losses) gains on securities increased for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025. ThisThe increase was driven by an increaseincreases in sales in our AFS securities portfolio for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. Increases in fiduciary and wealth management, income from company-owned life insurance, and other non-interest income exceeded declines in service charges and fees income and bank debit and other card revenue forand other non-interest income were driven by the threeLNKB monthsMerger, ended March 31, 2026, compared towhile the threeincrease months ended March 31, 2025. Thein fiduciary and wealth management increaseincome was driven by increasedthe wealthacquisition andof fiduciaryBurke services& performance.Herbert Wealth Services, LLC.

Non-interest expense increased $1.7$45.9 million, or 3.5%,46.4%, for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025. TheIncreases increasewere wasnoted primarilyin every non-interest expense category and were driven by increasesthe ineffect salariesof the LNKB Merger and wages,merger pensionsexpenses which included higher legal, consulting, audit, investment banking, software contract terminations, and otherchange-in-control employee benefits, equipment rentals, depreciationsalary and maintenance,benefit FDIC and other regulatory assessments, and other operating expensespayments for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025. The largest dollar increase for the threesix months ended MarchJune 31,30, 2026,2026 compared to the threesix months ended MarchJune 31,30, 2025 was a $1.3$20.5 million increasefor insalaries otherand operating expenses,wages, mostly driven by anchange-in-control increasesalary inand mergerbenefit relatedpayments expenses. The largest dollar decrease wasand a $614.0larger thousandcompany-wide decrease in core deposit intangible amortization which declinedheadcount due to itsthe acceleratedLNKB amortization method.Merger. See Note 13 — Other Operating Expense in Notes to Consolidated Financial Statements for further information on “Other” non-interest expense.

Income tax expense was $6.0$8.5 million for the threesix months ended MarchJune 31,30, 2026, ana increasedecrease of $310.0$4.5 thousandmillion from theincome tax expense offor $5.6the millionsix months ended June 30, 2025. The decrease was due to the decrease in income before income taxes for the threesix months ended MarchJune 31, 2025. The increase was mostly due to additional state taxes incurred in the combined market area after the Summit Merger, for the three months ended March 31,30, 2026, when compared to the threesix months ended MarchJune 31,30, 2025. For the threesix months ended MarchJune 31,30, 2026, the effective tax rate was 17.9%,18.7%, while the effective tax rate was 17.2%18.5% for MarchJune 31,30, 2025.

AnalysisResults of Financial ConditionOperations for the PeriodThree Months Ended MarchJune 31,30, 2026, and DecemberJune 31,30, 2025