by the numbersby a healthy 5.6%, driving the overall positive trend for total interest income. the...

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BURK E A NDHER BERTBA NK.COM

O U R B R A N D P R O M I S E At Burke & Herbert Bank, our customers are the focal point of our work. We know we must work hard to earn both their banking business and their loyalty. That’s why we strive to deliver high-quality products and services designed to meet customers’ banking, borrowing, and investing needs — products and services that help our customers to achieve their objectives and realize their dreams. It is why we are focused on exceeding customer expectations, making banking easy, convenient, and rewarding — for both consumers and businesses. And, it is why we will continue to provide friendly and attentive personal service, our signature for generations. When we say that we are “At Your Service,” we mean it.

O U R B R A N D M I S S I O N We believe that delivering on this promise of putting customers and their needs first will enable us to become the bank of choice for consumers and businesses throughout northern Virginia, and at the same time, deliver strong financial results and value to our shareholders.

YEARS OF

EXCEEDING EXPECTATIONS

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T A B L E O F C O N T E N T S OUR BR AND PROMISE & MISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

LET TER TO OUR SHAREHOLDERS, CUSTOMERS & FRIENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2016 PERFOR M ANCE “BY THE NUMBERS” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Number One Year for Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

A Number of Other Successes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Strong Numbers in Consumer Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

A Number of Enhancements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

A Number of Important Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Support for a Number of Causes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Looking Forward to More Success in Year Number 165. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

DIRECTORS AND BANK OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

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2016 A NNUA L R EP ORT

T O O U R S H A R E H O L D E R S , C U S T O M E R S A N D F R I E N D S We are pleased to report that 2016 was another year of solid financial results and significant accomplishments for Burke & Herbert Bank. It is relevant to note that 2016 included some important changes in the banking marketplace. The ever-increasing array of laws and regulations with which banks must comply has required the industry as a whole to invest in new systems, processes, and people to ensure compliance. Advancements in technology continued to make a profound impact on consumer behavior and preferences for how they manage their finances and receive information. Changes and enhancements to service delivery are required to keep pace and to maintain a strong competitive stance. And, on a regional level, a number of community banks merged with – or were acquired by – other institutions, further reducing the number of independent, locally-owned and operated banks in the region.

While the banking industry continues to evolve, presenting new challenges and opportunities, Burke & Herbert Bank continues to grow and thrive. In fact, as we look at the key numbers for 2016, we are proud of all we have accomplished – highlighted by record-setting numbers in our lending business. To tell the story of 2016, this year’s Annual Report takes a “by the numbers” approach to sharing our results, milestones, and progress toward achieving our brand mission of becoming the Bank of Choice for consumers and businesses throughout northern Virginia.

2016 PERFOR M ANCE “BY THE NUMBERS” Burke & Herbert Bank posted net income of $27.2 million in 2016. While this was $3.7 million or 11.9% lower than the result of the year prior, it nevertheless is a number of which we are quite proud. In 2016, pressure on the Bank’s net interest margin continued as a result of the long-term, prevailing environment of low interest rates. Additionally, significant expenses and investments were

ABOVE: E. Hunt Burke, Chairman & Chief Executive Offi cer (right) W. Scott McSween, President & Chief Operating Offi cer (left)

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LEFT: Jeff Stryker, Senior Executive Vice President & Cashier

Net income of $27.2 million was solid given continued margin pressure and major infrastructure investment to meet regulatory requirements.

$ 27.2 MILLION

required, associated with building the robust infrastructure that will enable us to fulfill regulatory requirements. Earnings

per share for 2016 amounted to $142.07, of which $74.00 was distributed to shareholders in the form of dividends – a strong return. Shareholders have received annual dividends of at least $74.00 in each year since 2011.

The Bank’s total interest income for 2016 was $98.2 million, having increased by $2.2 million or 2.3% over the year prior. Interest income and fees on loans grew by a healthy 5.6%, driving the overall positive trend for total interest income. The Bank’s $1.0 billion investment portfolio contributed $31.1 million to interest income in 2016, a modest decline (4.2%) from the year prior, as lower-yielding investments continued to replace maturing ones that typically have provided higher yields.

The Bank’s net interest income benefitted from a reduction in interest expense. In 2016 interest expense totaled $6.8 million, a decrease of 1.5% from the year prior. As has been the case for the past several years, interest paid on deposits continued to trend downward, due to the prevailing low interest rates, declining by 9.8% from the previous year. This decline in interest paid on deposits was offset partially by an increase in interest paid on other borrowed funds, which totaled $489 thousand.

After the provision for loan losses, the Bank’s net interest income for the year was $90.8 million, an increase of $1.7 million or 1.9%, as compared to 2015.

or $221.8 million since the end of the year prior. As of December 31, net loans exceeded $1.6 billion, an all-time high for the Bank. This year’s significant growth followed a gain of $138.6 million or 10.8% in 2015.

Equally impressive is the quality of our growing loan portfolio. Delinquent loans, as a percent of total loans, stood at only 0.57% at year-end 2016, having improved from 1.67% at year-end 2015. Loans in non-accrual status represented only 0.42% of total loans as of December 31, 2016, also improved as compared to the year prior. Recognizing the importance of credit risk management, particularly as we grow our lending business, in 2016 we improved processes, enhanced reporting, and strengthened our credit organization. We welcomed a new, talented and highly-skilled Credit Manager, Mary Edwards, and additional experienced underwriters to our credit team. We also have engaged an independent, third-party firm to conduct periodic, comprehensive reviews of our loan portfolio.

As a key driver of earnings, our commercial lending business is continuing to grow at a healthy pace. In 2016, the Bank welcomed three new Commercial Relationship Managers, building additional depth in both real estate and general business lending. Among the additions to our team in 2016 is Principal Vice President Brett Kaplowitz, who brings a wealth of experience and local market knowledge to his newly-created role as team leader for our expanded Commercial Real Estate lending group. With a larger team and deeper organization, the commercial lending business increased the volume of new loans by a healthy amount. New loan production for the year totaled $487.9 million, ahead of the prior year by 8.2%, driven primarily by commercial real estate business, which remains a core competency for Burke & Herbert Bank. We are pleased with the results for 2016 and are poised for continued loan growth in 2017 and beyond.

We have added to and enhanced our products and programs to meet the borrowing needs of individuals, as well as businesses. In 2016 we completed the deployment of a new online application system and a comprehensive training program to provide branch team The Bank s̓ investment members with the portfolio grew by 3.8%, knowledge and tools generating $31.1 million required to support in interest income.

LEFT: Nick Greksouk, Senior Vice President, FinanceNUMBER ONE YEAR

FOR LENDING The Bank’s strong level of net interest

MILLIONMILLION 131.

income was fueled by the solid performance of our lending business. By year-end, the Bank’s loan portfolio had grown by 15.4%


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the effective delivery of Home Equity Lines of Credit in branches for customers with borrowing needs. This year’s enhancements to our consumer lending program followed the prior year’s introduction of a new, highly-competitive, feature-rich Home Equity Line of Credit product and the creation of a new consumer lending team. While we are continuing our work to leverage technology to enhance the efficiency of this business, we are well positioned to meet the needs of customers who wish to use the equity in their homes to finance home improvements, higher education, or to achieve other important goals.

In 2016, the Bank welcomed Matthew Saros as Principal Vice President and Consumer Mortgage Director to lead the sales and operations of this key line of business. With new leadership in place, the Consumer Mortgage team began work to identify and implement process and system enhancements that will support the growth of our consumer mortgage business. In 2016, the Bank generated

The Bank achieved record breaking new loan volume MILLION INwhile maintaining outstanding credit quality. RIGHT: Bill Newell, Executive Vice President & Chief Lending Officer Jeff Welch, Executive Vice President & Chief Credit Officer 0.57%

DELINQUENCY RATE

$487.9NEW LOANS$487.9 of the new mortgage loans generated this year remain in the Bank’s loan portfolio, a portion of the loans were sold to investors in the secondary market, generating $369 thousand in Servicing Released Premiums. As highlighted during our 2016 mortgage marketing campaign, featuring the headline “Local Loans, Local Homes,” we believe strongly that our northern Virginia neighbors and friends wishing to purchase a new home or refinance an existing mortgage should look no further than Burke & Herbert Bank. We remain committed to delivering high-caliber experiences for customers with home lending needs, and are continuing our work to design and deliver additional process and program enhancements.

A NUMBER OF OTHER SUCCESSES Although interest income generated from our loan portfolio is the Bank’s primary source of earnings, non-interest income is another important source of revenue, and also continues to increase. In 2016, non-interest income, totaling $14.3 million, rose 6.4% over the year prior. Within this category, service charges, commissions and fees totaled nearly $7.5 million for the year, a 10.7% increase over 2015. This revenue, a large portion of which was interchange income derived from checking customers’

$104.6 million in new home mortgage loans, ahead of the year prior by $14.7 million or 16.4%. While the majority

10 Year Draw Term and 15 Year Repayment Term are two key features of the Bankʼs new Home Equity Line of Credit.

ABOVE: Anne-Marie McPhillips, Principal Vice President & SeniorProduct Manager Joe Bonaccorsy, Principal Vice President & Consumer Credit Officer

15Year Repayment Term

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use of their Burke & Herbert Bank Visa® Debit Cards, has increased steadily over the past several years, as has our base of core checking accounts. In 2016, our customers completed over 4.9 million purchases using their Burke & Herbert Bank Visa® Debit Cards, ahead of the year prior by 1.8%, and the dollar volume of purchases topped $208.3 million, 1.7% more than in 2015.

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Also driving growth in non-interest income, the Bank’s Wealth Services businesses – which include Burke & Herbert Trust Services and Burke & Herbert Wealth Management – generated over $3.7 million in income in 2016, a 2.3% increase over 2015. Client assets under management within the combined businesses grew by $62.8 million or 12.9% to end the year at $549.7 million. Both income and asset growth were driven primarily by the Wealth Management component of the business. Wealth Management revenue grew by 8.6% and Wealth Management assets increased by 43.5% in 2016. Our Managed Account product, which provides customers with the expertise and service of investment professionals who select and monitor investments based on the customers’ needs and goals, fueled the majority of the Wealth Management gains.

The Bank’s non-interest expenses in 2016 totaled $74.4 million, 16.0% higher than in 2015. Accounting for the majority of the increase were salaries and benefits, which at $47.2 million were 22.4% above the year prior. This increase was driven primarily by the Bank’s engagement of both permanent and temporary staff to complete the work required to design, implement, and sustain a robust program to ensure full compliance with the Bank Secrecy Act (BSA) and related Anti-Money Laundering (AML) regulations. In August 2014, the Bank’s Board of Directors entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to make enhancements to our BSA/AML compliance program. We have worked diligently for more than two years to put in place the systems, processes, and people required to support an

To lead our BSA compliance effort going forward, the Bank was pleased to welcome Sepideh Behram to the position of Bank Secrecy Act Officer and Principal Vice President. Ms. Behram joined Burke & Herbert Bank in 2016 after having gained extensive experience as both an attorney and compliance officer for a number of large, global financial institutions. We are delighted to have Ms. Behram on our team to provide the ongoing leadership required to sustain an effective and comprehensive BSA/AML program at the Bank.

More than 80 people – full time team members, temporary staff, and consultants – contributed to the Bank s̓ BSA/AML program improvements in 2016.

8088 0 INDIVIDUALSINDIVIDUALS

ABOVE: Nick Fitzgerald, Principal Vice President & Process and Risk Management Director; Lester Bain, Principal Vice President & Director of Security; Debbie Holley, Principal Vice President & Senior Operations Officer; Erica Stryker, Bank Officer & Risk Management Coordinator; Sepideh Behram, Principal Vice President & BSA Officer; Jerry McQuaid, Executive Vice President & Chief Technology and Administrative Officer; Jennifer Schmidt, Principal Vice President & Chief Compliance Officer


Wealth Management and Trust services are not deposits, are not insured by the FDIC or any other government agency, are not guaranteed by the Bank and may lose value.

MILL IONMMILL ION Wealth Management and Trust Services income rose by 2.3% to $3.7 million. ABOVE: Patricia Barron, Principal Vice President, Trust Services Shannon Rowan, Senior Vice President, Director of Wealth Management & Trust Services

enhanced and expanded system of activity monitoring that will enable us to identify and report instances of potential money laundering and other suspicious activities, as required by federal laws and regulations. We are pleased to report that the FDIC has reviewed our enhanced BSA/AML compliance program and agreed that we have completed all required changes and improvements as detailed in our 2014 agreement and that we have the infrastructure in place to support ongoing success. Our BSA/AML remediation work during 2016 also required the specialized assistance of expert consultants and independent, third-party auditors, which resulted in significant, but non-recurring incremental expense.

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4.334.4 3 GROWTH IN CHECKING

Growth in core checking is driven by customers switching to Burke & Herbert Bank for a better banking experience.

ABOVE: Joe Collum, Senior Vice President & Director of Branch and Business Banking

Araba Brobbey, Principal Vice President & Area Manager

Sandra Vasquez, Principal Vice President & Area Manager

STRONG NUMBERS IN

CONSUMER BANKING

Our region’s consumer banking marketplace remains extremely competitive, and we are pleased and proud of our continuing success in expanding Burke & Herbert Bank’s base of core personal checking account relationships, both in number of accounts and overall checking account balances. In 2016 the Bank acquired nearly 6,400 new accounts, and by year-end, total personal checking accounts on file had grown by 4.3% year-over-year, approaching 50,000 accounts. As of December 31, total personal checking balances stood at $584.3 million, 8.8% ahead of the year prior.

Individuals looking for a new bank have many choices in the greater Washington area, and to stand out among the crowded field of banking competitors, Burke & Herbert Bank continues to invest in advertising and promotional campaigns that build and maintain awareness of our brand. The unique and better banking experience that Burke & Herbert Bank offers was the focus of two major advertising campaigns in 2016. The campaigns, which featured the headlines “Bank to a Different Beat” and “What’s Your Different? Here’s Our Different” were instrumental in helping us to gain new personal and business banking customer relationships.

A NUMBER OF ENHANCEMENTS Consistent with our strategy of ensuring a highly-competitive position for Burke & Herbert Bank, throughout the past year, we worked hard to provide our customers with additional modern, up-to-date banking products and conveniences. In 2016, we updated our popular Mobile Banking apps

with a variety of enhancements, including “Touch ID” and “Remember Me” features which enable users to log into their apps quickly and easily, as well as the ability to view check images, view items that were included in a deposit, and view statements, along with new user preference options. We expect that Mobile Banking will continue to grow in popularity, as more and more customers turn to their smartphones and other devices for information and service.

Customers also continue to value and rely upon debit cards as a key payment and access tool. Recognizing the importance to our customers of the Burke & Herbert Bank Visa® Debit Card, in 2016 the Bank introduced two Card-specific enhancements. We completed a reissue of all Burke & Herbert Bank Visa® Debit Cards for both personal and business banking customers to provide all of our cardholders with new, more secure cards equipped with EMV chips. These new cards, which contain an embedded electronic chip used to hold the data required to process transactions securely, have become the industry standard to aid in the prevention of ever-increasing fraudulent card use. Also in 2016, the Bank developed and began implementation of a program to offer “instant issue” debit cards in all the Bank’s branches. With this new service in place, customers opening new accounts and customers requiring a replacement card now may obtain their personalized, permanent card instantly in a branch. New customers gain immediate, convenient access to their accounts and existing customers avoid the wait times and inconvenience associated previously with lost cards. Early response from customers indicates that instant issue is an instant success.

Mobile Banking that knows you by touch

Other channels for viewing information and accessing accounts also were enhanced in 2016. Recognizing that customers increasingly prefer smaller devices (rather than laptop or desktop computers) to go online, the Bank’s website, burkeandherbertbank.com, was upgraded so that it is “mobile-friendly.” The site layout now adapts to mobile devices providing improved viewing and functionality on smartphones and tablets. Additional enhancements were made to make the site more convenient for customers to use and the site was expanded to include a Wealth Services


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section, providing visitors with more visibility into the full array of products and services we offer. And for our customers who prefer to do their banking by telephone, our Automated Telephone Banking service was enhanced this past year. The updated service includes an easier-to-navigate menu, and voice recognition, among other improvements.

Big bank skills, local bank service. Like the sound of that?

Bank to a different

beat

Indeed, the number of customers choosing to use convenient services that complement the core checking account continues to rise. In 2016, 87.0% of new personal checking customers enrolled in Burke & Herbert Bank Online Banking, 31.0% enrolled in Online Bill Pay, and 30.5% enrolled in eStatements. Our business banking customers are taking advantage of online convenience in increasing numbers as well, with more than 83.3% of customers opening new business checking accounts enrolling in Burke & Herbert Bank Business Online Banking.

At year-end, the Bank’s total deposits stood at $2.2 billion, $6.2 million or 0.3% higher than at the end of the year prior. Checking account balances increased by $34.4 million or 3.7% in 2016, driven by growth in both the number of accounts and average balances. As of December 31, checking account balances reached $958.6 million, comprising 43.3% of the Bank’s total deposits. This gain was offset, however, by continued declines in the Bank’s certificate of deposit account balances, this year down 10.7%. The trends in the Bank’s deposit portfolio reflect customer preference for more liquid deposits, given the low interest rates that have prevailed for several years.

A NUMBER OF IMPORTANT INVESTMENTS While electronic delivery channels providing quick and easy access to information and accounts are increasingly important to today’s banking consumers, branches

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continue to serve as a key customer touchpoint and represent the face of the bank to customers and non-customers alike. As such, we continue to invest in branch improvements and upgrades that are designed to enhance customers’ overall experiences. In the past year, our busy Falls Church and Telegraph Road branches underwent complete renovations. Both branches now feature large open lobbies, customer greeter stations, and redesigned offices that provide a higher level of comfort and privacy for customer interactions.

Equally important to our continued success is our investment in our people. We believe that for Burke & Herbert Bank to be a great place to bank it must also be a great place to work. Hiring and nurturing talented and committed team members remained a core focus for us in 2016. For newly-hired team members, the Bank worked to enhance and expand our onboarding program to help ensure new hires have the information and support required to work effectively and successfully in the organization. We invested in a coaching and mentoring program for select high-performing, high-potential individuals. And, we continued to expand and enhance our training programs, providing more opportunities for team member skill building and development. And in 2016, we completed our second Leadership Development Program session, during which seven branch team members completed a months-long comprehensive learning journey to prepare them to take on leadership roles within the branch organization.

Our Leadership Development Program helps to ensure that the Bank continues to have experienced and knowledgeable leaders to manage the Bank s̓ branches.

ABOVE FAR RIGHT: David Wallace, Principal Vice President, Sales & Service Development with graduates of the 2017 Leadership Development Program: Top row, left to right: Arben Zeko, Ahmad Quraishi, Aldo Fiallega, Tobias Johnson Bottom row, left to right: Sadafnaz Deal, Betsy Huezo, Farhat Khan


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At year end, the Bank had about 450 employees, 53% of whom have been with the Bank for at least 5 years – we believe a level of tenure and commitment not found at most other banks or organizations. Additionally, 46 employees (10%) were promoted during the year. This includes some key senior-level appointments. Following the retirement of Donna Udvari in April 2016 after 43 years of service

IN ALEXANDRIA

This year was a special year for the Bank’s Chairman & Chief Executive Officer E. Hunt Burke. Mr. Burke was named the 2016 Business Leader of the Year by the Alexandria Chamber of Commerce – an award that recognizes individuals who have played significant roles in the growth and development of the local business community. In addition to his contributions to Burke & Herbert Bank where he began working at the age of 13, Mr. Burke is active in several community organizations including INOVA Alexandria Hospital Foundation Board and The Campagna Center. His past service has included Director on the Board for Five Guys Burgers & Fries, Elder Crafters of Alexandria, the Alexandria Chapter of the American Red Cross, Alexandria Business Cares Foundation, Friends of Carlyle House and Alexandria Neighborhood Kids at Risk.

The award was particularly meaningful for Hunt given that his father and former Chairman of the Bank, Taylor Burke, Jr. was the first recipient of the award twenty-two years prior. Hunt Burke is a member of the fifth generation of the Burke family to lead Virginia’s oldest Bank.

to the Bank, most recently as the Director of Branch & Business Banking, we were pleased to promote twenty-one-year Bank veteran, Joseph F. Collum into this key position. Sandra M. Vasquez, also a long-time member of the Burke & Herbert Bank family, was promoted to the position of Area Manager in the branch organization. And, Assistant Controller Daniel S. Kendle was appointed to the position of Controller for the Bank, following the retirement of thirteen-year Burke & Herbert Bank veteran Kathy Younger. Our goal is to maintain a high level of commitment and experience at the Bank, enabling us to deliver effectively on our “At Your Service” brand promise.

SUPPORT FOR A NUMBER OF CAUSES As a community bank and long-time member of the greater Washington market, it is important to us to go beyond banking and give back to the communities in which we do business. In 2016, we supported a number of worthy causes with special emphasis on providing assistance and rewarding opportunities to students. During the 2015-2016 National Hockey League season, and again in the 2016-2017 season, Burke & Herbert Bank teamed with CSN Mid-Atlantic, broadcasters of the Washington Capitals, to promote the “Burke & Herbert Bank Scores for Kids” program. For every goal scored by the hometown Capitals during the regular 2015-2016 season, the Bank pledged to donate $100 to Most Valuable Kids, Inc. The resulting $25,200 donation enabled over 7,000 area children to attend a sporting or similar event that otherwise would have been out of reach. The recipient of the $100-per-goal donation for the current Capitals season will be Alexandria-based Alice’s Kids. Through season two of the Scores for Kids program, the Bank will assist this local non-profit in their work to provide financial assistance to children by paying for smaller-value but urgently needed items that matter to a kid’s success and self-esteem, such as clothing, shoes, instrument rentals, field trip fees, sports uniforms and equipment, and more.


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to work.

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Team members remain at Burke & Herbert Bank much longer than our counterparts at other companies. The Bank s̓ Human Resources team plays a key role in helping to make Burke & Herbert Bank a great place

LEFT: Emily Debeniotis, Senior Vice President, Human Resources Dawn Boynton, Vice President, Human Resources Nicole Brase, Assistant Vice President & Human Resources Generalist

,

Collaborations with media partners enhance the Bank s̓ visibility and brand, plus provide funds for worthy programs.

LEFT: Penni Barnett, Vice President & Marketing Manager Terry Cole, Executive Vice President & Chief Marketing Officer Yvette Golladay, Principal Vice President & Brand Manager

255,25$$$$$ 0002200,20“Burke & Herbert Bank Scores for Kids” donation.

We again were proud to promote financial literacy by serving as a Virginia participating bank in the American Bankers Associations’ ”Lights, Camera, Save!” video competition, which challenges students to create a video that inspires fellow students to use money wisely. Burke & Herbert Bank promoted the program actively, and accepted and judged entries from across the region. We are proud to note that the Burke & Herbert Bank regional winner from West Potomac High School advanced to the national contest and was awarded a $2,500 scholarship for his second-place finish.

To promote additional scholarship opportunities for area students, Burke & Herbert Bank hosted eight high school


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seniors as part of the Virginia Bankers Association’s Bank Day Scholarship Program. The students spent the day meeting with Bank executives to learn first-hand about personal finance and the vital role banks play in our communities. Students then wrote essays about their experience to compete for up to $7,500 in scholarships.

The Bank also was proud to partner with NBC-4, the Salvation Army, and Bergmann’s Cleaning to sponsor the Share the Warmth Coat Drive for the sixth year in a row, collecting coats for the needy at all 25 Burke & Herbert Bank branches in October and November. The estimated 3,000 coats donated by our customers and friends were distributed by the Salvation Army to those in need throughout the community.

LOOKING FORWARD TO MORE SUCCESS IN YEAR NUMBER 165 As we reflect on the past year, and look ahead to 2017 and beyond, we are confident that the future is bright for Burke & Herbert Bank. As is evident “by the numbers,” the Bank continues to grow and thrive. We have overcome a variety of challenges throughout the course of our 164-year history. We have accomplished a great deal to modernize and put into place new, up-to-date infrastructure, systems and processes that will serve us in many ways well into the future. We have a full range of banking products and services designed to meet the banking, borrowing and investing needs of consumers and businesses. We have an intelligent, business-savvy, and highly-engaged Board of Directors, each of whom continues to provide us with sound guidance and counsel. And, perhaps most importantly, we have a dedicated, hard-working, and experienced team that remains committed to being “At Your Service.” We are confident about the future and will continue to work hard to earn your trust, confidence, and business. Thank you for your support.

E. Hunt Burke Chairman & Chief Executive Officer

W. Scott McSween President & Chief Operating Officer

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ON-INTEREST EXPENSESalaries & Benefi ts 47,244 38,596

Occupancy Expense 5,311 5,324Other Operating Expenses 21,837 20,218TOTAL NON INTEREST EXPENSE 74,392 64,138

I N C O M E S TAT E M E N T

December 31, Twelve Months Ended (in thousands) 2016 2015

INTEREST INCOME Interest on Investments Interest & Fees on Loans TOTAL INTEREST INCOME

$ 31,117 67,077

98,194

$ 32,471 63,543

96,014

INTEREST EXPENSE Interest on Deposits Interest on Repurchase Agreements Interest on Other Borrowed Funds TOTAL INTEREST EXPENSE

5,558

175

1,047

6,780

6,163

163

558

6,884

NET INTEREST INCOME BEFORE PROVISION 91,414 89,130

Provision for Loan Losses 648 60 NET INTEREST INCOME 90,766 89,070

NON-INTEREST INCOME Fiduciary & Wealth Management Income 3,721 3,637 Other Fees on Loans 900 1,468 Service Charges, Commissions & Fees 7,460 6,738 Income on Bank Owned Life Insurance 2,227 1,601 TOTAL NON-INTEREST INCOME 14,308 13,444

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NON-INTEREST EXPENSE Salaries & Benefits 47,244 38,596 Occupancy Expense 5,311 5,324 Other Operating Expenses 21,837 20,218

TOTAL NON-INTEREST EXPENSE 74,392 64,138

Realized Gain/(Loss) on Securities Realized Gain/(Loss) on Foreclosed Property

NET INCOME BEFORE TAX Income Tax Expense

NET INCOME

HIGHLIGHTS Earnings per Share

Number of Shares Outstanding

Dividend per Share

Book Value per Share

Return on Average Assets

Return on Average Equity

Overhead Efficiency Ratio

Gross Loans to Deposits

(29) (11)

30,642 3,449

$ 27,193

$

$ $

142.07 191,063

74.00 1,720.34

0.97% 8.06%

70.37% 75.03%

$

(45) (697)

37,634 6,759

30,875

$

$ $

160.86 191,911

74.00 1,710.22

1.16% 9.61%

63.88% 65.20%


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B A L A N C E S H E E T

December 31, (in thousands) 2016 2015

ASSETS Cash & Due from Banks $ 72,815 $ 73,556

Obligations of Federal Agencies 143,780 143,482 Collateralized Mortgage Obligations & Mortgage Backed Securities 576,084 563,108 Obligations of States & Political Subdivisions 314,235 300,260

Other Investments 13,927 3,079 Total Investments 1,048,026 1,009,929

Loans, Total 1,661,651 1,439,813 Reserve for Loan Losses (17,918) (17,248)

Loans, Net 1,643,733 1,422,565

Premises & Equipment 42,715 43,209 Other Real Estate 437 1,081

Other Assets 152,703 114,850

TOTAL ASSETS $ 2,960,429 $ 2,665,190

LIABILITIES Demand Deposits $ 570,992 $ 521,429 NOW Deposits 387,622 402,800

Time & Savings Deposits 1,255,962 1,284,114 Total Deposits 2,214,576 2,208,343

Repurchase Agreements 103,739 92,895 Other Borrowed Funds 270,000 15,000

Other Liabilities 43,420 20,742

TOTAL LIABILITIES 2,631,735 2,336,980

STOCKHOLDERS’ EQUITY Common Stock 3,821 3,838 Surplus 10,000 10,000 Retained Earnings 301,945 285,215

Net Income Year to Date 27,193 30,875 Accumulated Other Comprehensive Income/(Loss) (388) 10,503 Common Stock Repurchased (13,877) (12,221)

TOTAL STOCKHOLDERS’ EQUITY 328,694 328,210 TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY $ 2,960,429 $ 2,665,190

The Bank’s transfer agent is: American Stock Transfer (AST), 6201 15th Avenue, Brooklyn, NY 11219.

Visit AST online at astfinancial.com or call 1-888-509-4619.

To request a copy of Burke & Herbert Bank’s audited financial statements, please call us at 703-684-1655.


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http:astfinancial.com

D I R E C T O R S & B A N K O F F I C E R S DIRECTORS EXECUTIVE PRINCIPAL E. Matthew Saros Debra L. Mills E. Hunt Burke Chairman Burke & Herbert Bank

S. Laing Hinson Vice Chairman S.L. Hinson Associates, LLLP

Julian F. Barnwell, Jr. Design & Production Incorporated

OFFICERS E. Hunt Burke Chairman & Chief Executive Officer

W. Scott McSween President & Chief Operating Officer

Jeffrey L. Stryker Senior Executive Vice President & Cashier

VICE PRESIDENTS Lester J. Bain Corporate Security

M. Patricia Barron Trust

Sepideh Behram Compliance

Joseph D. Bonaccorsy

Consumer Mortgage

Jennifer P. Schmidt Compliance

Sandra N. Vasquez Branch Banking

David F. Wallace Sales & Service Development

Ann Marie Moore Amit Nagpal Mauricio D. Perea Charles A. Persico Henry Robert Peterbark Jane Petty Anthony B. Riolo Terry L. Rowland Noble W. Rubenstein Justin Shutters Catherine E. Slepitza Arlene M. Sullivan

Tyrone B. Bradley Bradley/Parker & Associates, P.C.

James M. Burke Burke Capital Corporation

EXECUTIVE V ICE PRESIDENTS Terry Cole Chief Marketing Officer

Consumer Lending

Araba A. Brobbey Branch Banking

Tiffany N. Craddock Commercial Lending

Teresa M. DeMarco

VICE PRESIDENTS Khalil Y. Abu-Ghannam Nancy E. Adcock Daniel A. Andryszak Penelope M. Barnett

Henry B. Swoope, V Christopher J. Talbert Matthew T. Tikoyan Christopher A. Tomasino Joshua J. Toth Terri B. Wyzkoski

Nicholas Carosi III Arban & Carosi, Inc.

Michael D. Lubeley Walsh Colucci Lubeley & Walsh PC

Shawn P. McLaughlin McLaughlin Ryder Investments, Inc.

W. Scott McSween Burke & Herbert Bank

Marsha H. Murphy Murphy & Associates, LLC

Kenneth L. Wainstein Cadwalader, Wickersham & Taft LLP

Gerald F. McQuaid Chief Technology & Administrative Officer

William W. Newell Chief Lending Officer

Jeffrey A. Welch Chief Credit Officer

SENIOR V ICE PRESIDENTS Joseph F. Collum Branch & Business Banking

Emily S. Debeniotis Human Resources

Loan Operations

Elizabeth V. Ellis Commercial Lending

Nicholas J. Fitzgerald Process and Risk Management

Carl A. Ford Information Technology

Yvette M. Golladay Marketing

Deborah L. Holley Operations

Brett W. Kaplowitz Commercial Lending

Josefina M. Beck Peter J. Benjamin Berhane H. Beraki Dawn N. Boynton Jennifer L. Callendar Noemie C. Cam Tonya L. Chappell Walter C. Clarke Karen M. Clinton William F. Cole John D. Convery, Jr. Erik J. Darm William G. DuBose, II Mary S. Edwards John M. Gallo Donald W. Galloway Philip J. Harvilla Victoria A. Hatfi eld John W. Hill William J. Hilliard

Nicholas Greksouk Finance

Shannon B. Rowan Trust & Wealth Management

Daniel S. Kendle Accounting

Anne-Marie McPhillips Product Management

Mary Ann Michniak Audit

Craig J. Holmes Nancy Hong Theresa J. Hoyt Charles S. Hulfi sh Sherrill D. Hurd Robert G. Korman, Jr. Edward Kraemer Brian T. Lawrence

John E. Osborn Credit

Stephanie Lawrence Marina Lubbers Sheila P. McCree

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B R A N C H E S

ALEX ANDRIA CIT Y 100 South Fairfax Street (Main Office)

1705 Fern Street (Fairlington)

1775 Jamieson Avenue (Carlyle)

621 King Street

306 East Monroe Avenue

155 North Paxton Street (Landmark)

ARLINGTON 500 23rd Street South (Crystal City) 3020 Clarendon Boulevard

FALLS CHURCH 225 West Broad Street

CIT Y OF M ANASSAS 9103 Centreville Road, Manassas

PRINCE W ILLIA M COUNT Y 17119 Wayside Drive, Dumfries (Southbridge) 4605 Daisy Reid Avenue, Lake Ridge (Reid’s Prospect) 14008 Smoketown Road, Woodbridge


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Rt 267 Rt 7

Rt 50

Rt 50

Rt 29

Rt 29

Rt 236

Rt 1

Rt 611

Rt 1

Rt 123

Rt 123

I-495

I-495

I-495

I-66

I-395

I-95

WashDC

Virginia

Maryland Dale City

Woodbridge

Manassas

Centreville

Fairfax

Springfield Alexandria

Mt. Vernon

Arlington

McLeanVienna

McLean

Falls Church

Rt 5050 Clarendon

Skyline

Annandale

Fairlington Crystal City

Monroe King Street

Main Office

TelegraphFranconia

Kingstowne

Sherwood

Cooper Road

Centreville

Manassas

Smoketown

Southbridge Reid’s Prospect

Springfield

Burke

Carlyle

exandand Landmark

FAIRFA X COUNT Y 8738 Cooper Road, Alexandria 5519 Franconia Road, Alexandria 6210 Interparcel Road, Alexandria (Kingstowne) 2604 Sherwood Hall Lane, Alexandria 5733 Telegraph Road, Alexandria 4235 Annandale Road, Annandale 9516 Old Keene Mill Road, Burke 14122 Lee Highway, Centreville 5705 Seminary Road, Falls Church (Skyline) 6705 Whittier Avenue, McLean 6200 Backlick Road, Springfield 302 Maple Avenue West, Vienna

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703.684.1655 BURKE ANDHERBERTBANK.COM

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by the numbersby a healthy 5.6%, driving the overall positive trend for total interest income. the...

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