Burke & Herbert Financial Services Corp.BHRB
Burke & Herbert Financial Services Corp. Debt Disclosure
Borrowed Funds
Short-term borrowings
The Company had borrowings of $450.0 million and $365.0 million at December 31, 2025, and December 31, 2024, respectively. At December 31, 2025, the interest rate on this debt was 3.75%. At December 31, 2024, the interest rate on this debt ranged from 4.43% to 4.57%. The average balance outstanding during 2025 and 2024 was $422.1 million and $422.5 million, respectively. The Company has a finance lease liability that is not included in these balances - See Note 11 — Leased Property for a discussion of this liability that is included in the accrued interest and other liabilities line in the Consolidated Balance Sheets.
The Company has available lines of credit with the Federal Reserve Bank of Richmond, such as the Borrower-In-Custody program, the FHLB of Atlanta, and unsecured federal funds lines of credit from correspondent banking relationships. Through these sources, the Company has unused borrowing capacity of $4.6 billion as of December 31, 2025. The advances on credit lines are secured by both securities and loans. The lendable collateral value of securities and loans pledged against available lines of credit as of December 31, 2025, and December 31, 2024, was $3.2 billion and $3.1 billion, respectively. As of December 31, 2025, all of the Company’s borrowings will mature within one calendar year.
The contractual maturities of these borrowings as of December 31, 2025, are as follows (in thousands):
Due in 2026 | $ | 450,000 | |||
Total | $ | 450,000 | |||
Long-term borrowings
Subordinated Debentures
As part of the Summit merger, Burke & Herbert assumed $75 million of subordinated debentures, with a fair value of $61.5 million with a $13.5 million discount being amortized into interest expense over the stated maturity. As of December 31, 2025, the net balance was $70.2 million. The subordinated debt qualifies as Tier 2 capital under Federal Reserve Board guidelines, until the debt is within 5 years of its maturity; thereafter, the amount qualifying as Tier 2 capital is reduced 20% each year until maturity. The subordinated debentures were issued in the fourth quarter of 2021 and bear interest at a fixed rate of 3.25% per year, from acquisition date to, but excluding, December 1, 2026, payable semi-annually in arrears. From and including, December 1, 2026 to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”), as published by the Federal Reserve Bank of New York, plus 230 basis points, payable quarterly in arrears. This debt has a 10-year term, and generally, is not prepayable by us within the first 5 years from issuance, which was fourth quarter 2021.
Through the merger with Summit, Burke & Herbert also assumed $30 million of subordinated debentures with fair value of $29.8 million with a $0.2 million discount being amortized into interest expense over the stated maturity. This subordinated debt qualified as Tier 2 capital under Federal Reserve Board guidelines, until the debt was within 5 years of its maturity; thereafter, the amount qualifying as Tier 2 capital would have been reduced by 20% each year until its maturity. The subordinated debentures were issued on September 22, 2020, had a 10-year term, and generally were not prepayable by us within the first 5 years from issuance, absent specific events. This subordinated debt bore interest at a fixed rate of 5.00% per year from the date of assumption to, but excluding, September 30, 2025, payable quarterly in arrears. On September 30, 2025, the Company redeemed all $30 million aggregate principal amount of this subordinated debt. The redemption was made pursuant to the optional redemption provisions set forth in the indenture, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to the redemption date. The redemption was funded with available cash in the form of a dividend from the Bank.
Subordinated Debentures Owed to Unconsolidated Subsidiary Trusts
As part of the Summit merger, Burke & Herbert became the sponsor for SFG Capital Trust I, SFG Capital Trust II, and SFG Capital Trust III. For each of these trusts, 100% of the common equity is owned by us. SFG Capital Trust I issued $3.5 million in capital securities and $109 thousand in common securities and invested the proceeds in $3.6 million of debentures, which were assumed by Burke & Herbert in the Summit merger. SFG Capital Trust II issued $7.5 million in capital securities and $232 thousand in common securities and invested the proceeds in $7.7 million of debentures, which were assumed by Burke & Herbert in the Summit merger. SFG Capital Trust III issued $8 million in capital securities and $248 thousand in common securities and invested the proceeds in $8.3 million of debentures, which were assumed by Burke & Herbert in the Summit merger. Distributions on the capital securities issued by the trusts are payable quarterly at a variable rate equal to three-month term SOFR plus 345 basis points for SFG Capital Trust I, three-month term SOFR plus 280 basis points for SFG Capital Trust II, and three-month term SOFR plus 145 basis points for SFG Capital Trust III, and equals the interest rate earned on the debentures held by the trusts and is recorded as interest expense by us. The capital securities are subject to mandatory redemption in whole, or in part, upon repayment of the debentures. We have entered into agreements which, taken collectively, fully and unconditionally guarantee the capital securities subject to the terms of the guarantee. The debentures of each Capital Trust are redeemable by us quarterly.
The capital securities issued by SFG Capital Trust I, SFG Capital Trust II, and SFG Capital Trust III qualify as Tier 1 capital under the Federal Reserve guidelines. In accordance with these Guidelines, trust preferred securities
are limited to 25% of Tier 1 capital elements, net of goodwill. The amount of trust preferred securities and certain other elements in excess of the limit can be included in Tier 2 capital.
The remaining maturities of subordinated debentures as of December 31, 2025, are as follows (in thousands):
Subordinated debentures | Subordinated debentures owed to unconsolidated subsidiary trusts | ||||||||||
| 2026 | $ | — | $ | — | |||||||
| 2027 | — | — | |||||||||
| 2028 | — | — | |||||||||
| 2029 | — | — | |||||||||
| 2030 | — | — | |||||||||
| Thereafter | 75,000 | 19,589 | |||||||||
| Total | $ | 75,000 | $ | 19,589 | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2023 | Mar 22, 2024 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.