Burke & Herbert Financial Services Corp. operates as the bank holding company for Burke & Herbert Bank & Trust Company that provides various community banking products and services in Virginia and Maryland. Some of the products and services that the company offers include checking, savings, and money market accounts, certificates of deposit, treasury and cash management services, commercial and industrial loans, commercial real estate loans, residential mortgages, acquisition, construction, and...
Burke & Herbert Financial Services Corp. operates as the bank holding company for Burke & Herbert Bank & Trust Company that provides various community banking products and services in Virginia and Maryland. Some of the products and services that the company offers include checking, savings, and money market accounts, certificates of deposit, treasury and cash management services, commercial and industrial loans, commercial real estate loans, residential mortgages, acquisition, construction, and development loans, online banking, mobile banking, and wealth and trust services.
The company is a community-oriented financial institution. The company seeks to be the provider of choice for financial solutions to customers who value exceptional personalized service, local decision-making, and modern banking technology. The company’s business involves attracting deposits from local businesses and individual customers and using these deposits to originate commercial, mortgage, and consumer loans in its market area. The company also invests in securities consisting primarily of U.S. Government Treasuries, obligations of U.S. government-sponsored entities (GSEs), municipal obligations, mortgage-backed securities issued by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Government National Mortgage Association (Ginnie Mae), and the subordinated debt of other financial institutions. The company is the owner and beneficiary of company-owned life insurance policies on certain current and former bank employees.
The company focuses on growing business relationships and building core deposits, profitable loans, and non-interest income. The company has a solid franchise that meets the financial needs of its clients and communities by providing an array of personalized products and services delivered by seasoned professionals, with decisions made at the local level. The company strives to be the leading community bank in its markets.
Market Area
The company’s primary market area includes northern Virginia and West Virginia, and it has branches and commercial loan offices across Delaware, Kentucky, Maryland, Virginia, and West Virginia. 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.
Products and Services
The company emphasizes providing traditional banking and wealth management services. The company’s dedicated relationship managers serve as direct points of contact for owners, management, and employees of small and medium-sized businesses. The company provides subject matter expertise in a variety of industries, including manufacturing, government contractors, distribution, health services, non-profits and associations, professional services, property management companies, and title companies. The company focuses on customers living and working in and near its service area. The company offers retail banking services to accommodate the needs of both corporate customers, as well as individuals residing and working in the communities it serves. The company also offers digital banking, mobile banking, and a remote deposit service, which allows customers to facilitate and expedite deposit transactions through the use of electronic devices. A sophisticated suite of treasury management products is a key feature of its customer-focused, relationship-driven marketing.
Lending Services
The company provides a range of commercial lending services, including commercial real estate loans, acquisition, construction, and development, commercial and industrial loans, consumer and mortgage warehouse lines of credit, and residential real estate loans to customers generally located or conducting business in its market area. Loan terms, including interest rates, loan-to-value ratios, and maturities, are tailored to meet the needs of the borrower. The company’s 10 largest borrowing relationships accounted for approximately 8.8% of its total loans as of December 31, 2024.
Commercial Lending Services
Commercial lending services include commercial real estate loans, acquisition, construction, and development, and commercial and industrial loans. The company’s commercial loan clients represent a diverse cross-section of small to mid-size local businesses within its market footprint, whose owners and employees are often established bank customers. Such banking relationships are a natural business for the company, with its long-standing community roots and extensive experience in serving and lending to this market segment.
Commercial Real Estate Loans
The company’s commercial real estate loans consist of both loans secured by owner-occupied properties and non-owner-occupied properties (investor real estate loans). The commercial real estate categories contain mortgage loans to developers and owners of commercial real estate. Commercial real estate loans are governed by the same lending policies and subject to credit risk as previously described for commercial loans. Commercial real estate loans secured by owner-occupied properties are based upon the borrower’s financial condition and the ability of the borrower and the business to provide for repayment. Investor real estate loans secured by non-owner-occupied properties involve investment properties for multi-family, warehouse, retail, and office space with a history of occupancy and cash flow.
Acquisition, Construction, and Development Loans
Acquisition, construction, and development loans are loans made for the purpose of financing construction or development projects. This portfolio includes commercial and residential land development loans, one-to-four family housing construction, both pre-sold and speculative in nature, multifamily housing construction, non-residential building construction, and undeveloped land. This commercial real estate lending business extends to providing commercial construction financing of owner-occupied properties, as well as non-owner-occupied properties. Construction lending on these properties is based upon the provision for repayment based on cash flow, collateral values, and loan-to-value ratios.
Commercial and Industrial Loans
The company also originates commercial and industrial (C&I) loans. C&I loans are made to provide funds for equipment and general corporate needs. This loan category is designed to support borrowers who have a proven ability to service debt. The company generally requires a first lien position on all collateral and requires guarantees from owners having at least a 10% interest in the involved business. Interest rates on C&I loans are generally floating or fixed for a term not to exceed seven years.
C&I loan documents require borrowers to forward regular financial information on both the business and personal guarantors. Loan covenants require at least annual submission of complete financial information, and in certain cases, this information is required monthly, quarterly, or semi-annually, depending on the degree to which the company desires information resources for monitoring a borrower’s financial condition and compliance with loan covenants.
Commercial lines of credit are granted to finance a business borrower’s short-term credit needs and/or to finance a percentage of eligible receivables and inventory. In addition to the risks inherent in term loan facilities, line of credit borrowers typically require additional monitoring to protect the lender against increasing loan volumes and diminishing collateral values. Commercial lines of credit are generally revolving in nature and require close scrutiny. The company generally requires at least an annual out of debt period (for seasonal borrowers) or regular financial information (monthly or quarterly financial statements, borrowing base certificates, etc.) for borrowers with more growth and greater permanent working capital financing needs.
Residential Real Estate Loans
The residential real estate category contains loans principally to consumers secured by residential real estate. Loans for residential real estate may carry either a fixed rate of interest or an adjustable rate over the life of the loan. Adjustable rate mortgage (ARM) loans have a 30-year amortization period with a fixed rate of interest for the first five, seven, or ten years, re-pricing at stated intervals thereafter at a predetermined spread to an index. The company’s residential real estate lending policy requires each loan to have viable repayment sources. Residential real estate loans are evaluated for the adequacy of these repayment sources at the time of approval, based upon measures, including credit scores, debt-to-income ratios, and collateral values.
The company originates non-conforming loans for its own portfolio and for sale to third-party investors, usually large mortgage companies, under commitments by the mortgage company to purchase the loans subject to compliance with pre-established investor criteria. Non-conforming loans generated for sale include loans that may not be underwritten using customary underwriting standards. These loans typically are held after funding for thirty days or less, and are included in residential mortgages held-for-sale. The company currently sells both conforming and non-conforming loans on a servicing-released basis.
Investment Activities
The current investment policy authorizes the bank to invest in debt securities issued by the United States Government, agencies of the United States Government, or GSEs. The policy permits investments in mortgage-backed securities, including pass-through securities, issued and guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The investment policy also permits investments in federal funds and deposits in other insured institutions. In addition, management is authorized to invest in investment-grade state and municipal obligations, private mortgage-backed securities, and the subordinated debt of other financial institutions.
The investment portfolio is actively managed and consists of investments classified as available-for-sale, and under the available-for-sale classification, investment instruments may be sold as deemed appropriate by management.
Deposit Activities
Deposits are the major source of funding for the bank. The bank offers a broad array of consumer and commercial deposit products that include digital banking, demand, negotiable order of withdrawal (NOW), money market and savings accounts, as well as certificates of deposit. The bank typically pays a competitive rate on the interest-bearing deposits. As a relationship-oriented organization, the company seeks generally to obtain deposit relationships with its loan clients.
For the year ended December 31, 2024, the company’s deposits portfolio included demand, non-interest-bearing; demand, interest-bearing; money market and savings; brokered deposits; time deposits; and interest-bearing deposits.
Other Services
The company’s business solutions include small business and commercial checking and savings options, as well as investments via its wealth management group. Treasury management solutions include a suite of digital banking, payables, receivables, risk management, and automated cash flow, such as enhanced reporting, automated clearing house (ACH), wires, remote deposit capture, bill pay, lockbox, credit and debit cards, merchant services, fraud protection, and deposit and loan sweeps.
Securities
For the year ended December 31, 2024, the company’s deposit securities included the U.S. Treasuries and government agencies; obligations of states and municipalities; residential mortgage-backed—agency, residential mortgage-backed—non-agency; commercial mortgage-backed—agency; commercial mortgage-backed—non-agency; asset-backed; and other.
Supervision and Regulation
In September 2023, the company elected to become a financial holding company under the BHCA. As a financial holding company of a Virginia state bank, the company is subject to regulation, supervision, and examination by the Board of Governors of the Federal Reserve System (the Federal Reserve) and the Bureau of Financial Institutions of the Virginia State Corporation Commission (the Virginia BFI). The bank became a member of the Federal Reserve System on December 31, 2024. The bank is subject to regulation, supervision, and examination by the Federal Reserve (through the Federal Reserve Bank of Richmond) and the Virginia BFI.
The Federal Reserve and the Virginia State Corporation Commission, through the Virginia BFI, regulate and monitor the operations of the company and the bank. The Federal Reserve and the Virginia BFI conduct periodic onsite and offsite examinations. The company must comply with a wide variety of reporting requirements and banking regulations. The laws and regulations governing the company generally have been promulgated to protect depositors, borrowers, the financial system, and the federal Deposit Insurance Fund (DIF) and not to protect shareholders. Additionally, the company must bear the cost of compliance with the reporting and regulations; these costs can be significant and may have an effect on the company’s financial performance.
As a bank holding company that has elected financial holding company status under the BHCA, the company is subject to regulation, supervision, and examination by the Federal Reserve (through the Federal Reserve Bank of Richmond). The company is a bank holding company under the banking laws of Virginia and is subject to regulation, supervision, and examination by the Virginia BFI.
Under the FDIA, insured depository institutions, such as the bank, are prohibited from making capital distributions, including the payment of dividends, if after making such distributions the institution would become ‘undercapitalized’ (as such term is used in the FDIA).
The bank’s principal federal regulator was the FDIC until December 31, 2024. On that date, the bank became a member of the Federal Reserve System, and now both the bank and the company supervised and regularly examined by the Federal Reserve and the Virginia BFI. The deposits of the bank are insured by the FDIC up to applicable limits by the DIF. The bank is subject to deposit insurance assessments to maintain the DIF. Pursuant to Sections 23A and 23B of the Federal Reserve Act and Regulation W, the authority of the bank to engage in transactions with related parties or ‘affiliates,’ or to make loans to insiders, is limited.
The bank is subject to the requirements of the CRA. The bank received a ‘satisfactory’ CRA rating in its most recent examination, dated May 1, 2023. The bank is a member of the FHLB of Atlanta, which is one of 12 regional FHLBs that provide funding to their members for making housing loans, as well as for affordable housing and community development loans. As a financial institution subject to the GLB Act, the bank is exempt from the VCDPA, but certain third-party vendors of the company or the bank will be subject to the VCDPA, which may impact the products or services that the company obtains from those vendors.
The bank is subject to several federal laws that are designed to combat money laundering, terrorist financing, and transactions with persons, companies, or foreign governments designated by U.S. authorities (AML laws). This category of laws includes the BSA, the Money Laundering Control Act of 1986, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and the Anti-Money Laundering Act of 2020.
The bank has appointed an OFAC compliance officer to oversee the inspection of its accounts and the filing of any notifications. The bank actively checks high-risk OFAC areas, such as new accounts, wire transfers, and customer files. The bank performs these checks utilizing software, which is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals and Blocked Persons.
The bank is subject to a number of federal and state consumer protection laws that extensively govern its relationship with its customers. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act, laws governing flood insurance, federal and state laws prohibiting unfair and deceptive business practices, foreclosure laws, and various regulations that implement some or all of the foregoing.
The bank’s mortgage origination activities are subject to Regulation Z, which implements the Truth in Lending Act. The company is subject to the periodic and other reporting requirements of the Exchange Act, including the filing of annual, quarterly, and other reports, and amendments to those reports, with the SEC. The company’s SEC filings will be posted and available at no cost on its website as soon as reasonably practicable after the reports are filed or furnished electronically with the SEC.
History
Burke & Herbert Bank & Trust Company, a Virginia corporation, was founded in 1852. The company was incorporated in 2022.
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