UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
___________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
August 24, 2023
Date of Report (date of earliest event reported)
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Burke & Herbert Financial Services Corp.
(Exact name of registrant as specified in its charter)
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Virginia (State or other jurisdiction of incorporation or organization) | 001-41633 (Commission File Number) | 92-0289417 (I.R.S. Employer Identification Number) | ||||||
100 S. Fairfax Street Alexandria, VA 22314 | ||||||||
| (Address of principal executive offices and zip code) | ||||||||
| (703) 666-3555 | ||||||||
| (Registrant's telephone number, including area code) | ||||||||
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☒ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
| Common stock, par value $.50 | BHRB | The Nasdaq Stock Market LLC | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 - Entry into a Material Definitive Agreement
On August 24, 2023, Burke & Herbert Financial Services Corp., a Virginia corporation (“BHRB”), and Summit Financial Group, Inc., a West Virginia corporation (“SMMF”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, SMMF will merge with and into BHRB, with BHRB as the surviving corporation (the “Merger”). The Merger Agreement further provides that immediately following the Merger, Summit Community Bank, Inc., a West Virginia chartered bank and a wholly-owned subsidiary of SMMF (“SCB”), will merge with and into Burke & Herbert Bank & Trust Company, a Virginia chartered bank and a wholly-owned Subsidiary of BHRB (“B&H Bank”), with B&H Bank as the surviving bank (the “Subsidiary Merger” and, together with the Merger, the “Transaction”). The Merger Agreement was unanimously approved by the board of directors of each of BHRB and SMMF on August 24, 2023.
Merger Consideration
Upon the terms and subject to the conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock, par value $2.50 per share, of SMMF (“SMMF Common Stock”) outstanding immediately prior to the Effective Time will be converted into the right to receive 0.5043 shares (the “Exchange Ratio”) of common stock, par value $0.50 per share, of BHRB (“BHRB Common Stock”). Holders of SMMF Common Stock will receive cash in lieu of fractional shares.
Furthermore, each share of 6.0% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series 2021 of SMMF (the “SMMF Series 2021 Preferred Stock”) issued and outstanding immediately prior to the Effective Time will automatically be converted into the right to receive a share of a newly created series of preferred stock of BHRB having rights, preferences, privileges and voting powers and limitations and restrictions thereof that are not materially less or more favorable to the holders of the SMMF Series 2021 Preferred Stock.
The Merger is intended to be a tax-free reorganization under Section 368(a) of the Internal Revenue Code.
Treatment of SMMF Equity-Based Awards
Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time:
•each stock appreciation right under an equity compensation plan of SMMF and that may be settled in SMMF Common Stock (a “SMMF SAR”) shall be converted into a stock appreciation right (each, a “Replacement SAR”) in respect of shares of BHRB Common Stock on the same terms and conditions as were applicable under such SMMF SAR, with the number of shares of BHRB Common Stock and base price of BHRB Common Stock underlying such Replacement SAR adjusted based on the Exchange Ratio; and
•each outstanding restricted stock unit award granted under an equity compensation plan of SMMF (a “SMMF RSU Award”) shall be converted into a restricted stock unit (each, a “Replacement RSU”) in respect of shares of BHRB Common Stock on the same terms and conditions as were applicable under such SMMF RSU Award, with the number of shares of BHRB Common Stock underlying such Replacement RSU adjusted based on the Exchange Ratio.
Certain Governance Matters
The Merger Agreement provides that, prior to the Effective Time, BHRB and B&H Bank will each adopt certain amendments to its bylaws regarding governance matters. At the Effective Time, the continuing corporation will have 16 directors, of which eight will be directors of BHRB immediately prior to the Effective Time (the “BHRB Continuing Directors”) and eight will be directors of SMMF immediately prior to the Effective Time (the “SMMF Continuing Directors”). At the first two annual meetings of shareholders following the Effective Time, the continuing corporation will nominate and recommend each BHRB Continuing Director and each SMMF Continuing Director for reelection to the board of directors, and the continuing corporation's proxy materials with respect to such annual meeting shall include the recommendation of the board of directors that its shareholders vote to reelect each BHRB Continuing Director and each SMMF Continuing Director to the board of directors. For two years from the Effective Time, any vacancies in BHRB Continuing Directors will be filled by an individual whose nomination or appointment (as applicable) is approved by the remaining BHRB Continuing Directors and any vacancies in SMMF Continuing Directors will be filled by an individual whose nomination or appointment (as applicable) is
approved by the remaining SMMF Continuing Directors. The amendments to the B&H Bank bylaws will have substantially similar effect with respect to the continuing bank board of directors as the amendments to the BHRB bylaws.
In addition, as of the Effective Time, the Merger Agreement provides that:
•David P. Boyle, the current Chair of the Board of Directors and President and Chief Executive Officer of BHRB, shall be appointed to serve as Chair of the Board of Directors and Chief Executive Officer of the continuing corporation and as Chief Executive Officer of the continuing bank;
•Oscar M. Bean, the current Chair of the Board of Directors of SMMF, shall be appointed to serve as a Vice Chair of the Board of Directors of the continuing corporation;
•H. Charles Maddy, III, the current President and Chief Executive Officer of SMMF, shall be appointed to serve as President of the continuing corporation and the continuing bank;
•Roy E. Halyama, the current Executive Vice President and Chief Financial Officer of BHRB and B&H Bank, shall be appointed to serve as Executive Vice President and Chief Financial Officer of the continuing corporation and the continuing bank;
•Robert S. Tissue, the current Executive Vice President and Chief Financial Officer of SMMF and SCB, shall be appointed to serve as Executive Vice President of Financial Strategy of the continuing corporation and the continuing bank; and
•E. Hunt Burke shall be appointed to serve as Chair of the Board of Directors of the continuing bank.
The Merger Agreement provides that, following the Transaction, the headquarters of the continuing corporation and the continuing bank will remain in Alexandria, Virginia and the name of the continuing corporation and the continuing bank will remain Burke & Herbert Financial Services Corp. and Burke & Herbert Bank & Trust Company, respectively.
In connection with the Merger Agreement, BHRB and B&H Bank have entered into employment agreements with Charles Maddy, III, the current President and Chief Executive Officer of SMMF; Robert S. Tissue, the current Executive Vice President and Chief Financial Officer of SMMF and SCB; and Bradford E. Ritchie, the current President of SCB. The employment agreements become effective contingent upon the completion of the Transaction.
Certain Other Terms and Conditions of the Merger Agreement
The Merger Agreement contains customary representations and warranties from both BHRB and SMMF, and each party has agreed to customary covenants, including, among others, covenants relating to (i) the conduct of its business during the interim period between the execution of the Merger Agreement and the Effective Time, (ii) the obligation of each of BHRB and SMMF to call a meeting of its respective shareholders to approve the Merger Agreement and, subject to certain exceptions, the obligation of each board of directors to recommend that its shareholders approve the Merger Agreement, and (iii) each party’s non-solicitation obligations related to alternative acquisition proposals. BHRB and SMMF have also agreed to use their reasonable best efforts to prepare and file all applications, notices and other documents to obtain all necessary consents and approvals for consummation of the transactions contemplated by the Merger Agreement.
The completion of the Merger is subject to customary conditions, including (i) approval of the Merger Agreement by the requisite vote of the shareholders of each of BHRB and SMMF, (ii) authorization for listing on Nasdaq of the shares of BHRB Common Stock to be issued in the Merger, (iv) receipt of required regulatory approvals, including the approval of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Virginia Bureau of Financial Institutions and the West Virginia Department of Financial Institutions, without the imposition of any condition or restriction that would be reasonably expected to have a material adverse effect on the continuing corporation and its subsidiaries, taken as a whole, after giving effect to the Merger and the Subsidiary Merger, (v) effectiveness of the registration statement on Form S-4 for the BHRB Common Stock to be issued in the Merger and (vi) the absence of any order, injunction, decree or other legal restraint preventing the completion of the Merger, the Subsidiary Merger or any of the other transactions contemplated by the Merger Agreement or making the completion of the Merger, the Subsidiary Merger, or any of the other transactions contemplated by the Merger Agreement illegal. Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (a) subject to certain exceptions, the accuracy of the
representations and warranties of the other party, (b) performance in all material respects by the other party of its obligations under the Merger Agreement, and (c) receipt by such party of an opinion from its counsel to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
The Merger Agreement provides certain termination rights for both BHRB and SMMF and further provides that a termination fee of $14,860,000 will be payable by either BHRB or SMMF, as applicable, upon termination of the Merger Agreement under certain circumstances.
The representations, warranties and covenants of each party set forth in the Merger Agreement have been made only for purposes of, and were and are solely for the benefit of the parties to the Merger Agreement; may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts; and, may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, the representations and warranties may not describe the actual state of affairs at the date they were made or at any other time, and investors should not rely on them as statements of fact. In addition, such representations and warranties (i) will not survive consummation of the Merger and (ii) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information regarding BHRB or SMMF, their respective affiliates or their respective businesses. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding BHRB, SMMF, their respective affiliates or their respective businesses, the Merger Agreement, the Merger, and the Subsidiary Merger that will be contained in, or incorporated by reference into, the Registration Statement on Form S-4 that will include a joint proxy statement of BHRB and SMMF and a prospectus of BHRB, and as may be amended from time-to-time, as well as in the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings that each of BHRB and SMMF makes with the Securities and Exchange Commission (“SEC”).
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and incorporated herein by reference.
Affiliate Agreements
Simultaneously with the execution of the Merger Agreement, BHRB entered into an affiliate agreement (a “SMMF Affiliate Agreement”) with each of the directors on the board of SMMF. Each SMMF director, as a shareholder party to a SMMF Affiliate Agreement, has agreed, among other things, to vote shares of SMMF Common Stock owned by such shareholder, and over which such shareholder has the right to dispose of and has voting power, in favor of the Merger Agreement and the other transactions contemplated by the Merger Agreement, and against any competing acquisition proposal, any action, agreement transaction or proposal which could reasonably be expected to result in a breach of any representation, warranty, covenant, agreement or other obligation of SMMF in the Merger Agreement in any material respect, or other action that is intended or would reasonably be expected to prevent, impede, interfere with, delay, postpone or discourage any of the transactions contemplated by the Merger Agreement. The SMMF Affiliate Agreements will terminate in certain circumstances, including upon consummation of the Merger or the termination of the Merger Agreement in accordance with its terms.
Furthermore, simultaneously with the execution of the Merger Agreement, SMMF entered into an affiliate agreement (a “BHRB Affiliate Agreement”) with each of the directors on the board of BHRB. Each BHRB director, as a shareholder party to a BHRB Affiliate Agreement, has agreed, among other things, to vote shares of BHRB Common Stock owned by such shareholder, and over which such shareholder has the right to dispose of and has voting power, in favor of the Merger Agreement and the other transactions contemplated by the Merger Agreement, and against any competing acquisition proposal, any action, agreement transaction or proposal which could reasonably be expected to result in a breach of any representation, warranty, covenant, agreement or other obligation of BHRB in the Merger Agreement in any material respect, or other action that is intended or would reasonably be expected to prevent, impede, interfere with, delay, postpone or discourage any of the transactions contemplated by the Merger Agreement. The BHRB Affiliate Agreements will terminate in certain circumstances, including upon consummation of the Merger or the termination of the Merger Agreement in accordance with its terms.
The foregoing description of the SMMF Affiliate Agreements and BHRB Affiliate Agreements do not purport to be complete and are qualified in their entirety by reference to the full text of the SMMF Affiliate Agreements and BHRB Affiliate Agreements, forms of which are attached as Exhibit 99.1 and 99.2, respectively, to this Current Report on Form 8-K and are incorporated by reference herein.
Item 7.01 - Regulation FD Disclosure
In connection with the announcement of the Merger Agreement, BHRB and SMMF intend to provide supplemental information regarding the proposed transaction in connection with a presentation to analysts and investors. A copy of the investor presentation is attached hereto as Exhibit 99.3 and is incorporated herein by reference.
The information in this Item 7.01 and Exhibit 99.4 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth in such filing.
Item 8.01 - Other Events
On August 24, 2023, BHRB and SMMF issued a joint press release announcing the execution of the Merger Agreement. A copy of the press release is filed as Exhibit 99.4 hereto and is incorporated herein by reference.
Item 9.01 - Financial Statements and Exhibits
(a) Financial statements of businesses acquired. None.
(b) Pro forma financial information. None.
(c) Shell company transactions. None.
(d) The following exhibits are being filed herewith:
| Exhibit No. | Description | |||||||
| 2.1 | ||||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 99.3 | ||||||||
| 99.4 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
* The schedules and certain exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Burke & Herbert Financial Services Corp. agrees to furnish a copy of such schedules and exhibits, or any section thereof, to the SEC upon request.
Forward-Looking Statements
This Current Report on Form 8-K includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the beliefs, goals, intentions, and expectations of Burke & Herbert Financial Services Corp. (“BHRB”) and Summit Financial Group, Inc. (“SMMF”) regarding the proposed transaction, revenues, earnings, earnings per share, loan production, asset quality, and capital levels, among other matters; our estimates of future costs and benefits of the actions we may take; our assessments of expected losses on loans; our assessments of
interest rate and other market risks; our ability to achieve our financial and other strategic goals; the expected timing of completion of the proposed transaction; the expected cost savings, synergies, returns and other anticipated benefits from the proposed transaction; and other statements that are not historical facts.
Forward–looking statements are typically identified by such words as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “will,” “should,” and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. These forward-looking statements include, without limitation, those relating to the terms, timing and closing of the proposed transaction.
Additionally, forward-looking statements speak only as of the date they are made; BHRB and SMMF do not assume any duty, and do not undertake, to update such forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise. Furthermore, because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those indicated in or implied by such forward-looking statements as a result of a variety of factors, many of which are beyond the control of BHRB and SMMF. Such statements are based upon the current beliefs and expectations of the management of BHRB and SMMF and are subject to significant risks and uncertainties outside of the control of the parties. Caution should be exercised against placing undue reliance on forward-looking statements. The factors that could cause actual results to differ materially include the following: the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive Merger Agreement between BHRB and SMMF; the outcome of any legal proceedings that may be instituted against BHRB or SMMF; the possibility that the proposed transaction will not close when expected or at all because required regulatory, shareholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated (and the risk that required regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction); the ability of BHRB and SMMF to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the common stock of either or both parties to the proposed transaction; the possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where BHRB and SMMF do business; certain restrictions during the pendency of the proposed transaction that may impact the parties’ ability to pursue certain business opportunities or strategic transactions; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management’s attention from ongoing business operations and opportunities; the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the Merger within the expected timeframes or at all and to successfully integrate SMMF’s operations and those of BHRB; such integration may be more difficult, time-consuming or costly than expected; revenues following the proposed transaction may be lower than expected; BHRB’s and SMMF’s success in executing their respective business plans and strategies and managing the risks involved in the foregoing; the dilution caused by BHRB’s issuance of additional shares of its capital stock in connection with the proposed transaction; effects of the announcement, pendency or completion of the proposed transaction on the ability of BHRB and SMMF to retain customers and retain and hire key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally; and risks related to the potential impact of general economic, political and market factors on the companies or the proposed transaction and other factors that may affect future results of BHRB and SMMF; on; and the other factors discussed in the “Risk Factors” section of BHRB’s Registration Statement on Form 10, as amended and as ordered effective by the SEC on April 21, 2023, and SMMF’s Annual Report on Form 10–K for the year ended December 31, 2022, in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of each of BHRB’s and SMMF’s Quarterly Reports on Form 10–Q for the quarters ended March 31, 2023 and June 30, 2023, and other reports BHRB and SMMF file with the SEC.
Additional Information and Where to Find It
In connection with the proposed transaction, BHRB will file a registration statement on Form S-4 with the SEC. The registration statement will include a joint proxy statement of BHRB and SMMF, which also constitutes a prospectus of BHRB, that will be sent to shareholders of BHRB and shareholders of SMMF seeking certain approvals related to the proposed transaction. The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. INVESTORS AND SECURITY HOLDERS OF BHRB AND SMMF AND THEIR RESPECTIVE AFFILIATES ARE URGED TO READ, WHEN AVAILABLE, THE REGISTRATION STATEMENT ON FORM S-4,
THE JOINT PROXY STATEMENT/PROSPECTUS TO BE INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT BHRB, SMMF AND THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain a free copy of the registration statement, including the joint proxy statement/prospectus, as well as other relevant documents filed with the SEC containing information about BHRB and SMMF, without charge, at the SEC’s website www.sec.gov. Copies of documents filed with the SEC by BHRB will be made available free of charge in the “Investor Relations” section of BHRB’s website, www.burkeandherbertbank.com. Copies of documents filed with the SEC by SMMF will be made available free of charge in the “News” section of SMMF’s website, www.summitfgi.com, under the heading “News and Filings.”
Participants in Solicitation
BHRB, SMMF, and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction under the rules of the SEC. Information regarding BHRB’s directors and executive officers is available in its Registration Statement on Form 10, as amended and as ordered effective by the SEC on April 21, 2023. Information regarding SMMF’s directors and executive officers is available in its definitive proxy statement, which was filed with the SEC on March 31, 2023, and certain other documents filed by SMMF with the SEC. Other information regarding the participants in the solicitation of proxies in respect of the proposed transaction and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC. Free copies of these documents, when available, may be obtained as described in the preceding paragraph.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized on this 25th day of August, 2023.
| Burke & Herbert Financial Services Corp. | |||||
| By: | /s/ Roy E. Halyama | ||||
| Name: | Roy E. Halyama | ||||
| Title: | Executive Vice President, CFO | ||||