Business Combination

12 Months Ended

Dec. 31, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

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

In the Merger, holders of Summit common stock outstanding at the effective time of the Merger received 0.5043 shares of Burke & Herbert Common Stock for each share of Summit common stock they owned, subject to the payment of cash in lieu of fractional shares. The total aggregate consideration payable in the Merger was approximately 7,405,772 shares of Burke & Herbert Common Stock. Additionally, each share of Summit’s 6.0% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series 2021 issued and outstanding was converted into the right to receive a share of Burke & Herbert Series 2021 Preferred Stock.

Summit’s results of operations from May 3, 2024, were included in the Company’s results beginning with reporting as of June 30, 2024. Net interest income and pre-tax net income for Summit were estimated to be $99.9 million and $111.3 million, respectively, since the date of the acquisition through December 31, 2024, and are included in the Company’s Consolidated Statement of Income. Pre-tax net income for Summit only includes income and expense that are still being recorded on Summit’s core operating system. As the Company is merging data and processes, certain legacy Summit expenses, including occupancy and salaries, are now merged within the Company’s core system. Merger-related costs of $36.5 million are included in non-interest expense in the Company’s income statement for the year ended, December 31, 2024. A portion of these merger-related costs is captured in Other Operating Non-Interest Expense as further description in Note 20 - Other Operating Expense and an additional $19.5 million of such merger-related costs is captured in Salaries and Wages, Pensions and Other Employee Benefits, Occupancy, and Equipment rentals, depreciation and maintenance. These costs captured in those line items represent change-in-control payments, acceleration of benefit due to the change-in-control, software breakage, and other lease breakage fees. The fair value of the common shares issued as part of the consideration paid for Summit was determined in the basis of the closing price of the Company’s common shares on the date of completion of the Merger.

We accounted for the Merger using the acquisition method of accounting in accordance with ASC 805, Business Combinations, and accordingly, the assets and liabilities of Summit were recorded at their respective fair values on the date of completion of the Merger. The fair values of assets and liabilities are subject to refinement for up to one year after the acquisition date if any additional information relative to the acquisition date fair values becomes available. We recognized goodwill of $32.8 million in connection with the acquisition, which is not amortized for financial reporting purposes, but is subject to annual impairment testing. The goodwill arising from

the transaction is not deductible for tax purposes and consisted largely of synergies and the cost savings resulting from the combining of the operations of the companies.

The core deposit intangible represents the value of long-term deposit relationships acquired in this transaction and will be amortized over an estimated weighted average life of 7 years using an accelerated method which approximates the estimated run-off of the acquired deposits. The fair value of intangible assets related to core deposits was $68.8 million on the date of acquisition.

The fair value of purchased financial assets with credit deterioration was $380.8 million on the date of the acquisition. The gross contractual amounts receivable relating to the purchased financial assets with credit deterioration was $442.3 million. The Company estimates, on the date of the acquisition, that $23.9 million of the contractual cash flows specific to the purchased financial assets with credit deterioration will not be collected.

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


($ in thousands, except share information)
Consideration	May 3, 2024
Common stock of Summit Financial Group, Inc.	14,686,738
Exchange ratio	0.5043
Expected Burke & Herbert common stock to be issued	7,406,522
Actual Burke & Herbert common stock issued	7,405,772
Fractional common stock to be paid in cash	750

Actual Burke & Herbert common stock issued	7,405,772
Price per share of Burke & Herbert common stock issued	$	51.67
Purchase price consideration for common stock issued	$	382,656

Fractional common stock to be paid in cash	750
Average 10 day closing price used to pay fractional common stock	$	53.66
Cash paid for fractional shares	$	40
Implied value of stock appreciation rights ("SARs") and restricted stock units	4,336
Fair value of preferred stock issued by Burke & Herbert	10,413
Fully diluted transaction value	397,445

Goodwill	$	32,783


	As Recorded		Estimated		Estimated
	by Summit		Fair Value		Fair Value
($ in thousands)	May 3, 2024		Adjustments		May 3, 2024
Total purchase price consideration					$	397,445
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash and equivalents	$	53,357	$	—	$	53,357
Securities, available-for-sale, at fair value	491,608		—		491,608
Securities, held-to-maturity, at amortized cost	93,573		(7,430)		86,143
Equity and other investments	36,085		—		36,085
Loans, gross	3,707,940		(153,306)		3,554,634
Allowance for credit losses	(49,471)		25,991		(23,480)
Loans, net of allowance	3,658,469		(127,315)		3,531,154
Premises and equipment, net	62,255		13,276		75,531
Accrued interest receivable	19,610		—		19,610
Company-owned life insurance	86,363		—		86,363
Goodwill and intangibles	73,144		(4,384)		68,760
Other assets	43,169		11,322		54,491
Total identifiable assets acquired	4,617,633		(114,531)		4,503,102

Deposits	3,704,072		(7,136)		3,696,936
Borrowings	283,398		—		283,398
Subordinated debentures and trust preferred securities	123,533		(16,466)		107,067
Unfunded reserve liability	6,692		(3,190)		3,502
Accrued interest and other liabilities	47,537		—		47,537
Total liabilities	4,165,232		(26,792)		4,138,440
Total identifiable net assets	$	452,401	$	(87,739)	$	364,662

Goodwill					$	32,783

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

The following table presents supplemental pro forma information as if the Merger had occurred on January 1, 2024 and on January 1, 2023. The unaudited pro forma information includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, depreciation expense on property acquired, interest expense on deposits acquired, and the related income tax effects. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed dates.


($ in thousands)	June 30, 2024		June 30, 2023
Net Interest Income	$	287,481	$	293,300

Net Income	110,122		55,453