Burke & Herbert Financial Services Corp.BHRB
Burke & Herbert Financial Services Corp. Leases Disclosure
Leased Property
Lessor Arrangements
The Company enters into operating leases with customers to lease vacant space in certain owned premises that are not being used by the Company. These operating leases are typically payable in monthly installments with terms ranging from around one year to around nine years and may contain renewal options.
The components of lease income, which is included in non-interest expense on the Consolidated Statements of Income, were as follows for the year ending (in thousands):
| December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||
| $ | 2,810 | $ | 2,597 | $ | 2,301 | ||||||||||||
| Total lease income | $ | 2,810 | $ | 2,597 | $ | 2,301 | |||||||||||
The remaining maturities of operating lease receivables as of December 31, 2025, are as follows (in thousands):
| Operating Leases | |||||
| 2026 | $ | 2,640 | |||
| 2027 | 2,400 | ||||
| 2028 | 2,330 | ||||
| 2029 | 2,130 | ||||
| 2030 | 1,585 | ||||
| Thereafter | 1,370 | ||||
| Total lease receivables | $ | 12,455 | |||
Lessee Arrangements
The Company has entered into leases for branches and office space. The leases are evaluated for whether the lease will be classified as either a finance or operating lease. Certain leases offer the option to extend the lease term, and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably assured of being exercised. Including renewal options, the Company’s leases range from less than one year to around thirteen years. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.
Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. These cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. The right-of-use asset and lease liability are included in other assets and other liabilities, respectively, in the Consolidated Balance Sheets.
In the fourth quarter of 2022 the Company sold two buildings in separate transactions and entered into sale-leaseback agreements to lease back the properties for up to one year. The lease terms were at market with third-parties and resulted in $655 thousand of operating lease expense in 2023.
Right-of-use assets and liabilities by lease type, and the associated balance sheet classifications are as follows (in thousands):
| Balance Sheet Classification | December 31, 2025 | December 31, 2024 | |||||||||||||||
| Right-of-use assets: | |||||||||||||||||
| Operating leases | $ | 14,096 | $ | 13,203 | |||||||||||||
| Finance leases | 3,795 | 3,312 | |||||||||||||||
| Total right-of-use assets | $ | 17,891 | $ | 16,515 | |||||||||||||
| Lease liabilities: | |||||||||||||||||
| Operating leases | $ | 14,717 | $ | 13,586 | |||||||||||||
| Finance Leases | 4,158 | 3,620 | |||||||||||||||
| Total lease liabilities | $ | 18,875 | $ | 17,206 | |||||||||||||
The components of total lease cost were as follows for the period ending (in thousands):
| December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||
| Finance lease cost | |||||||||||||||||
| Right-of-use asset amortization | $ | 292 | $ | 285 | $ | 244 | |||||||||||
| Interest expense | 107 | 110 | 86 | ||||||||||||||
| Operating lease cost | 3,390 | 2,864 | 3,210 | ||||||||||||||
| Total lease cost | $ | 3,789 | $ | 3,259 | $ | 3,540 | |||||||||||
The Company’s future undiscounted lease payments for finance and operating leases with initial terms of one year or more as of December 31, 2025, are as follows (in thousands):
| Operating Leases | Finance Leases | ||||||||||
| 2026 | $ | 3,356 | $ | 426 | |||||||
| 2027 | 3,015 | 435 | |||||||||
| 2028 | 2,451 | 444 | |||||||||
| 2029 | 2,240 | 454 | |||||||||
| 2030 | 1,680 | 463 | |||||||||
| Thereafter | 4,862 | 2,764 | |||||||||
| Total undiscounted lease payments | 17,604 | 4,986 | |||||||||
| Less: discount | (2,887) | (828) | |||||||||
| Net lease liabilities | $ | 14,717 | $ | 4,158 | |||||||
The following table presents additional information about the Company’s leases as of December 31, 2025, and December 31, 2024.
| Supplemental lease information (dollars in thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Finance lease weighted average remaining lease term (years) | 10.61 | 11.75 | ||||||||||||
| Finance lease weighted average discount rate | 3.32 | % | 3.06 | % | ||||||||||
| Operating lease weighted average remaining lease term (years) | 6.66 | 6.84 | ||||||||||||
| Operating lease weighted average discount rate | 4.64 | % | 4.65 | % | ||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||
| Operating cash flows from operating leases | $ | 3,189 | $ | 3,087 | ||||||||||
| Operating cash flows from finance leases | 107 | 110 | ||||||||||||
| Financing cash flows from finance leases | 236 | 216 | ||||||||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | 775 | — | ||||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | 3,672 | 12,329 | ||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Mar 22, 2024 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.