The Company has a share-based incentive plan described below that allows it to offer a variety of equity compensation awards subject to approval. Total compensation cost that has been charged against income for restricted stock unit awards granted was $1.1 million and $1.3 million for the three months ended March 31, 2026, and March 31, 2025, respectively. The total income tax benefit was $248.5 thousand and $264.7 thousand for the three months ended March 31, 2026, and March 31, 2025, respectively.

In 2019, the Company’s Stock Incentive Plan (“2019 SIP”) was approved by the Bank’s Board of Directors (the “Bank Board”). The 2019 SIP provides for the issuance of share-based awards to directors and employees of the Company. The 2019 SIP authorized 240,000 units to be issued, and the Company’s practice is using authorized unissued shares to satisfy these share-based awards. Each unit represents a contingent right to receive one common share or an equivalent amount of cash, or a combination of the two, at the discretion of the Company. Currently, we have a sufficient number of authorized unissued shares to satisfy all outstanding equity awards.

Under the 2019 SIP, the Company has issued restricted stock unit (“RSU”) awards that are both time-based and performance-based. Each RSU award will indicate the number of shares, the conditions (e.g., service, performance, and/or a combination), and the grant date. Compensation expense is recognized over the vesting period of the awards based on the fair value of the award at grant date.

In 2023, a new stock incentive plan (“2023 SIP”) was approved by the Company’s Board of Directors (the “Board”) and shareholders. Since the plan’s shareholder approval date of March 30, 2023, no further share-based awards have been issued under the 2019 SIP. The 2023 SIP provides for the issuance of share-based awards to directors and employees of the Company. The 2023 SIP authorized the issuance of 250,000 shares, subject to an annual increase in available shares and shares recycled from the 2019 SIP that were cancelled. Based on our shares outstanding as of March 31, 2026, and awards that were recycled from the 2019 SIP, the total shares authorized for issuance under the plan as of March 31, 2026 was 474,578.

The Board, from time to time, approves performance-based RSU awards that may be earned between a three to five year performance period. Whether or not units are earned at the end of the performance period will be determined based on the achievement of performance and/or market targets (e.g., market capitalization target) over the performance period. If the conditions are achieved, the grant recipient will receive 100% of the units granted as these awards do not provide for a multiplier effect. The performance/market targets are determined by the Board.

The fair value for performance-based RSU awards was determined by using a Monte Carlo simulation analysis to estimate the achievement of the market capitalization target determined by the Board. The Monte Carlo simulation analysis required the following inputs: (1) expected term, (2) expected volatility, (3) risk-free rate, and (4) dividend yield. The expected term was based on the stated performance period. Management used the expected volatility from a peer group. The risk-free interest rate is based on the U.S. Treasury yield curve over the performance period. The dividend yield assumption was based on historical and anticipated dividend payouts.


Non-vested Shares	Shares	Weighted-Average Grant-Date Fair Value
Non-vested at December 31, 2025	180,849	$	59.43
Granted	58,605	68.41
Vested	(9,232)	73.00
Forfeited	(4,000)	63.34
Non-vested at March 31, 2026	226,222	$	61.13

As of March 31, 2026, there was $8.7 million of total unrecognized compensation costs related to non-vested shares granted under both the 2019 SIP and 2023 SIP. The cost is expected to be recognized over a weighted average period of 1.26 years.

In 2023, an employee stock purchase plan (“2023 ESPP”) was approved by the Board and shareholders. Upon the 2023 ESPP’s shareholder approval date of March 30, 2023, the 2023 ESPP reserved 250,000 shares of common stock for issuance to employees, subject to an annual increase in reserved shares. At March 31, 2026, total shares authorized for issuance were 473,978 and 442,165 shares were available to be issued. Whole shares are sold to participants in the 2023 ESPP at 85% of the lower of the stock price at the beginning or end of each semi-annual offering period. The first semi-annual offering period began on September 1, 2023, and the current semi-annual offering period began on March 1, 2026. Eligible employees may purchase shares in an amount that does not exceed the lesser of the IRS limit of $25,000 or 15% of their annual salary.

Upon completion of the Summit Merger and as a part of the Summit Merger Agreement, Burke & Herbert assumed SAR awards that had been issued to existing employees that would continue with the same terms and conditions adjusted for the exchange ratio of 0.5043. As part of the Summit Merger, a significant portion of SAR awards accelerated their vesting and thus did not require any future service component. Management used the Black-Scholes option-pricing model to fair value these accelerated SAR awards and included this value as part of the purchase price consideration.

The Company also used the Black-Scholes option-pricing model to fair value the non-accelerated SAR awards that were not fully vested. The SAR awards that have been assumed by the Company, were issued in 2019, 2021, and 2023, and these SAR awards become exercisable ratably over seven years (14.3% per year) and contractually expire ten years after the grant date.


	2019 SAR			2021 SAR			2023 SAR
# of years to full vesting	7 years			7 years			7 years
Fair value	$	14.89		$	16.92		$	14.56
Risk-free interest rate	4.51		%	4.32		%	4.14		%
Expected dividend yield	3.95		%	3.95		%	3.95		%
Expected common stock volatility	32.56		%	32.56		%	32.56		%
Expected contractual life (in years)	4.77			7.20			8.77


				Weighted Average
Dollars in thousands, except per share information	SARs	Aggregate Intrinsic Value		Remaining Contractual Term (Yrs.)	Exercise Price
Outstanding, December 31, 2025	184,719	$	1,980	4.84	$	48.48
Granted (or acquired)	—	—		—	—
Exercised	(20,451)	(353)		—	45.03
Forfeited	—	—		—	—
Expired	—	—		—	—
Outstanding, March 31, 2026	164,268	$	1,627	4.56	$	48.91

Exercisable SARs:
At March 31, 2026	140,976	$	1,888	4.28	$	48.90