EX-99.1 2 a2q2024earningspressrelease.htm EX-99.1 Document
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Burke & Herbert Financial Services Corp. Announces Second Quarter 2024 Results and Declares Common Stock Dividend

For Immediate Release
July 26, 2024

Alexandria, VA – Burke & Herbert Financial Services Corp. (the “Company” or “Burke & Herbert”) (Nasdaq: BHRB) reported financial results for the quarter ended June 30, 2024. In addition, at its meeting on July 25, 2024, the board of directors declared a $0.53 per share regular cash dividend to be paid on September 3, 2024, to shareholders of record as of the close of business on August 15, 2024.

Q2 2024 Highlights

•On May 3, 2024, the Company announced the completion of the merger of Summit Financial Group, Inc. ("Summit") with and into Burke & Herbert and the merger of Summit Community Bank, Inc., with and into Burke & Herbert Bank & Trust Company. The merger created a financial holding company with more than $7.8 billion in assets and more than 75 branches across Virginia, West Virginia, Maryland, Delaware, and Kentucky, with more than 800 employees serving our communities.

•Related to the merger, the total aggregate consideration paid was approximately $397.4 million and resulted in approximately $32.8 million of preliminary goodwill subject to adjustment in accordance with ASC 805.

•Reflective of the current expected credit losses (“CECL”) provision expenses related to the day 2 purchase accounting impact from acquired loans and merger related expenses, the Company reported a net loss applicable to common shares of $17.1 million for the quarter; adjusted (non-GAAP1) operating net income applicable to common shares of $25.0 million for the quarter.

•Basic and diluted loss per common share for the quarter was $1.41; adjusted (non-GAAP1) diluted EPS for the quarter was $2.04.

•Net interest income for the quarter was $59.8 million; net interest income on a fully taxable equivalent basis (non-GAAP1) for the quarter was $60.5 million.

•Net interest margin on a fully taxable equivalent basis (non-GAAP1) for the quarter was 4.06%.

•Non-interest expense for the quarter was $64.4 million; adjusted (non-GAAP1) non-interest expense for the quarter was $40.6 million.

•Provision for credit losses (“provision”) of $23.9 million for the quarter; $29.5 million of CECL Day 2 non-purchased credit deteriorated (“non-PCD”) provision expense2.

•Balance sheet remains strong with ample liquidity. Total liquidity, including all available borrowing capacity with cash and cash equivalents, totaled $2.4 billion at the end of the second quarter.

•Ending total loans of $5.6 billion and ending total deposits of $6.6 billion; ending loan-to-deposit ratio of 84.6%.

•Asset quality remains stable across the loan portfolio with adequate reserves.

•The Company continues to be well-capitalized, ending the quarter with 10.9% Common Equity Tier 1 capital to risk-weighted assets3, 13.8% Total risk-based capital to risk-weighted assets3, and a leverage ratio of 9.0%3.

(1) Non-GAAP financial measures referenced in this release are used by management to measure performance in operating the business that management believes enhances investors’ ability to better understand the underlying business performance and trends related to core business activities. Reconciliations of non-GAAP operating measures to the most directly comparable GAAP financial measures are included in the non-GAAP reconciliation tables in this release. Non-GAAP measures should not be used as a substitute for the closest comparable GAAP measurements.
(2) Refers to the initial increase in allowance for credit losses required on acquired non-PCD loans through the provision for credit losses.
(3) Estimated.
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From David P. Boyle, Company Chair and Chief Executive Officer

"The consummation of our partnership with Summit brought together two organizations committed to being the quintessential community bank in our markets, where we care about the people who live and work among us. Our results for the second quarter demonstrate the financial benefits of the merger and we look forward to delivering increased value not only for our shareholders but for our customers, employees, and communities."

Results of Operations

Second Quarter 2024

The Company reported second quarter 2024 net loss applicable to common shares of $17.1 million, or $(1.41) per diluted common share.

Included in the second quarter were pre-tax charges of $29.5 million of CECL Day 2 non-PCD provision expense related to the allowance established on acquired non-PCD loans and $23.8 million of expenses related to the merger with Summit. Excluding these items from the current quarter on a tax effected basis, adjusted operating net income was $25.0 million, or $2.04 per diluted share.

•Period-end total loans were $5.6 billion at June 30, 2024, up from $2.1 billion at December 31, 2023, primarily due to the merger.

•Period-end total deposits were $6.6 billion at June 30, 2024, up from $3.0 billion at December 31, 2023, primarily due to the merger.

•Net interest income increased to $59.8 million in the second quarter of 2024 compared to $22.1 million in the first quarter of 2024.

•Net interest margin on a fully taxable equivalent basis increased 138.1 bps to 4.06% compared to 2.68% in the first quarter of 2024, driven by the mix of interest-earning assets added by the merger and the impact of the fair value accretion and amortization marks.

•Accretion income on loans was $13.4 million and the amortization expense impact on interest expense was $2.5 million, or 18.2 bps of net interest margin in the second quarter of 2024.

•The cost of total deposits was 2.43% in the second quarter of 2024 compared to 1.75% in the first quarter of 2024.

•The Company recorded a total provision expense in the second quarter of 2024 of $23.9 million, which included $29.5 million of CECL Day 2 non-PCD provision expense related to the allowance for credit losses established on acquired non-PCD loans and $3.2 million attributable to the provision for unfunded commitments, compared to $0.7 million of total provision recapture in the first quarter of 2024.

•The allowance for credit losses at June 30, 2024, was $68.0 million, or 1.2% of total loans, which included $29.5 million of CECL Day 2 non-PCD provision expense related to acquired non-PCD loans and $23.5 million of allowance related to acquired PCD loans.

•Total non-interest income for the second quarter of 2024 was $9.5 million, an increase of $5.3 million from the first quarter of 2024 due to the merger.

•Non-interest expense for the second quarter of 2024 was $64.4 million and included $23.8 million of merger-related charges.

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Regulatory capital ratios4

The Company continues to be well-capitalized with capital ratios that are above regulatory requirements. As of June 30, 2024, our Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 10.9%4 and 13.8%4, respectively, and significantly above the well-capitalized requirements of 6.5% and 10%, respectively. The leverage ratio was 9.0%4 compared to a 5% level to be considered well-capitalized.

Burke & Herbert Bank & Trust Company (“the Bank”), the Company’s wholly-owned bank subsidiary, also continues to be well-capitalized with capital ratios that are above regulatory requirements. As of June 30, 2024, the Bank’s Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 12.4%4 and 13.5%4, respectively, and significantly above the well-capitalized requirements. In addition, the Bank’s leverage ratio of 9.9%4 is considered to be well-capitalized.

For more information about the Company’s financial condition, including additional disclosures pertinent to recent events in the banking industry, please see our financial statements and supplemental information attached to this release.

About Burke & Herbert

Burke & Herbert Financial Services Corp. is the financial holding company for Burke & Herbert Bank & Trust Company. Burke & Herbert Bank & Trust Company is the oldest continuously operating bank under its original name headquartered in the greater Washington, D.C. metropolitan area. With over 75 branches across Delaware, Kentucky, Maryland, Virginia, and West Virginia, Burke & Herbert Bank & Trust Company offers a full range of business and personal financial solutions designed to meet customers’ banking, borrowing, and investment needs. Learn more at investor.burkeandherbertbank.com.

Cautionary Note Regarding Forward-Looking Statements

This communication contains “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 the Company regarding 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 cost savings, synergies, returns, and other anticipated benefits from the integration of Summit following the recently completed merger of Summit with and into the Company; 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. Additionally, forward–looking statements speak only as of the date they are made; the Company does not assume any duty, does not undertake, and specifically disclaims any obligation to update such forward–looking statements, whether written or oral, that may be made from time to time, whether because of new information, future events, or otherwise, except as required by law. 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 because of a variety of factors, many of which are beyond the control of the Company. Accordingly, you should not place undue reliance on forward-looking statements.

(4) Estimated.


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The risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements include, but are not limited to, the following: costs or difficulties associated with newly developed or acquired operations; risks related to our ability to successfully integrate Summit into the Company and operate the combined company; changes in general economic trends (either nationally or locally in the areas in which we conduct, or will conduct, business), including inflation, interest rates, market and monetary fluctuations; increased competition; changes in consumer demand for financial services; our ability to control costs and expenses; adverse developments in borrower industries or declines in real estate values; changes in and compliance with federal and state laws and regulations that pertain to our business and capital levels; our ability to raise capital as needed; the effects of any cybersecurity breaches; and the other factors discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Company’s Annual Report on Form 10–K for the year ended December 31, 2023, the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, and other reports the Company files with the SEC.

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Burke & Herbert Financial Services Corp.
Consolidated Statements of Income (unaudited)
(In thousands)
Three months ended June 30Six months ended June 30
2024202320242023
Interest income
Taxable loans, including fees$81,673 $25,300 $109,718 $48,060 
Tax-exempt loans, including fees33 — 33 — 
Taxable securities10,930 9,419 19,873 19,221 
Tax-exempt securities2,556 1,409 3,917 2,867 
Other interest income905 988 1,301 1,296 
Total interest income96,097 37,116 134,842 71,444 
Interest expense
Deposits30,373 10,030 43,304 15,431 
Borrowed funds4,071 3,279 7,726 7,417 
Subordinated debt1,860 — 1,860 — 
Other interest expense28 15 56 30 
Total interest expense36,332 13,324 52,946 22,878 
Net interest income59,765 23,792 81,896 48,566 
Credit loss expense - loans and available-for-sale securities20,100 (97)19,430 834 
Credit loss expense - off-balance sheet credit exposures3,810 311 3,810 (105)
Total provision for (recapture of) credit losses23,910 214 23,240 729 
Net interest income after credit loss expense 35,855 23,578 58,656 47,837 
Non-interest income
Fiduciary and wealth management 2,211 1,305 3,630 2,642 
Service charges and fees4,088 1,741 5,694 3,376 
Net gains (losses) on securities613 (111)613 (111)
Income from company-owned life insurance922 571 1,469 1,131 
Other non-interest income1,671 1,119 2,353 1,801 
Total non-interest income9,505 4,625 13,759 8,839 
Non-interest expense
Salaries and wages20,895 9,922 30,413 19,416 
Pensions and other employee benefits5,303 2,406 7,668 4,874 
Occupancy2,997 1,545 4,535 3,002 
Equipment rentals, depreciation and maintenance12,663 1,457 13,944 2,796 
Other operating22,574 6,018 29,037 11,625 
Total non-interest expense64,432 21,348 85,597 41,713 
Income (loss) before income taxes(19,072)6,855 (13,182)14,963 
Income tax expense (benefit)(2,153)821 (1,475)1,405 
Net income (loss)(16,919)6,034 (11,707)13,558 
Preferred stock dividends225 — 225 — 
Net income (loss) applicable to common shares$(17,144)$6,034 $(11,932)$13,558 



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Burke & Herbert Financial Services Corp.
Consolidated Balance Sheets
(In thousands)
June 30, 2024December 31, 2023
(Unaudited)(Audited)
Assets
Cash and due from banks$35,072 $8,896 
Interest-earning deposits with banks176,848 35,602 
Cash and cash equivalents211,920 44,498 
Securities available-for-sale, at fair value1,414,870 1,248,439 
Restricted stock, at cost15,169 5,964 
Loans held-for-sale, at fair value3,268 1,497 
Loans5,616,724 2,087,756 
Allowance for credit losses(68,017)(25,301)
Net loans5,548,707 2,062,455 
Property held-for-sale3,334 — 
Premises and equipment, net135,581 61,128 
Accrued interest receivable33,371 15,895 
Intangible assets65,895 — 
Goodwill32,783 — 
Company-owned life insurance182,112 94,159 
Other assets163,183 83,544 
Total Assets
$7,810,193 $3,617,579 
Liabilities and Shareholders’ Equity
Liabilities
Non-interest-bearing deposits$1,397,030 $830,320 
Interest-bearing deposits5,242,541 2,171,561 
Total deposits6,639,571 3,001,881 
Short-term borrowings285,161 272,000 
Subordinated debentures, net92,178 — 
Subordinated debentures owed to unconsolidated subsidiary trusts16,886 — 
Accrued interest and other liabilities83,271 28,948 
Total Liabilities 7,117,067 3,302,829 
Shareholders’ Equity
Preferred stock and surplus10,413 — 
Common Stock7,752 4,000 
Common stock, additional paid-in capital399,553 14,495 
Retained earnings403,422 427,333 
Accumulated other comprehensive income (loss)(100,430)(103,494)
Treasury stock(27,584)(27,584)
Total Shareholders’ Equity 693,126 314,750 
Total Liabilities and Shareholders’ Equity $7,810,193 $3,617,579 
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Burke & Herbert Financial Services Corp.
Supplemental Information (unaudited)
As of or for the three months ended
(In thousands, except ratios and per share amounts)


June 30March 31December 31September 30June 30
20242024202320232023
Per common share information
Basic earnings (loss)
$(1.41)$0.70 $0.68 $0.55 $0.81 
Diluted earnings (loss)
(1.41)0.69 0.67 0.55 0.80 
Cash dividends0.53 0.53 0.53 0.53 0.53 
Book value45.72 42.92 42.37 36.46 39.05 
Tangible book value (non-GAAP1)
39.11 42.92 42.37 36.46 39.05 
Balance sheet-related (at period end, unless indicated)
Assets$7,810,193 $3,696,390 $3,617,579 $3,585,188 $3,569,226 
Average earning assets5,994,383 3,377,092 3,332,733 3,337,282 3,379,534 
Loans (gross)5,616,724 2,118,155 2,087,756 2,070,616 2,000,969 
Loans (net)5,548,707 2,093,549 2,062,455 2,044,505 1,975,050 
Securities, available-for-sale, at fair value1,414,870 1,275,520 1,248,439 1,224,395 1,252,190 
Intangible assets65,895 — — — — 
Goodwill32,783 — — — — 
Non-interest-bearing deposits1,397,030 822,767 830,320 853,385 876,396 
Interest-bearing deposits5,242,541 2,167,346 2,171,561 2,132,233 2,128,867 
Deposits, total6,639,571 2,990,113 3,001,881 2,985,618 3,005,263 
Brokered deposits403,668 370,847 389,011 389,018 389,051 
Uninsured deposits1,931,786 700,846 677,308 670,735 681,908 
Short-term borrowings285,161 360,000 272,000 299,000 249,000 
Subordinated debt, net109,064 — — — — 
Unused borrowing capacity5
2,162,112 704,233 914,980 883,525 958,962 
Total equity693,126 319,308 314,750 270,819 290,072 
Total common equity682,713 319,308 314,750 270,819 290,072 
Accumulated other comprehensive income (loss)(100,430)(100,954)(103,494)(146,159)(126,177)




(5) Includes Federal Home Loan Bank, Borrower-in-Custody (BIC), and correspondent bank availability.



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Burke & Herbert Financial Services Corp.
Supplemental Information (unaudited)
As of or for the three months ended
(In thousands, except ratios and per share amounts)


June 30March 31December 31September 30June 30
20242024202320232023
Income statement
Interest income$96,097 $38,745 $38,180 $37,272 $37,116 
Interest expense36,332 16,614 15,876 14,383 13,324 
Non-interest income9,505 4,254 4,824 4,289 4,625 
Total revenue (non-GAAP1)
69,270 26,385 27,128 27,178 28,417 
Non-interest expense64,432 21,165 22,300 22,423 21,348 
Pretax, pre-provision earnings (non-GAAP1)
4,838 5,220 4,828 4,755 7,069 
Provision for (recapture of) credit losses23,910 (670)(750)235 214 
Income (loss) before income taxes
(19,072)5,890 5,578 4,520 6,855 
Income tax expense (benefit)
(2,153)678 500 464 821 
Net income (loss)(16,919)5,212 5,078 4,056 6,034 
Preferred stock dividends225 — — — — 
Net income (loss) applicable to common shares
$(17,144)$5,212 $5,078 $4,056 $6,034 
Ratios
Return on average assets (annualized)(1.06)%0.58 %0.56 %0.45 %0.67 %
Return on average equity (annualized)(12.44)6.67 7.30 5.60 8.34 
Net interest margin (non-GAAP1)
4.06 2.68 2.70 2.76 2.87 
Efficiency ratio93.02 80.22 82.20 82.50 75.12 
Loan-to-deposit ratio84.59 70.84 69.55 69.35 66.58 
Common Equity Tier 1 (CET1) capital ratio6
10.92 16.56 16.85 16.44 17.60 
Total risk-based capital ratio6
13.82 17.54 17.88 17.48 18.71 
Leverage ratio6
9.04 11.36 11.31 11.32 11.20 

(6) Estimated.
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Burke & Herbert Financial Services Corp.
Non-GAAP Reconciliations (unaudited)
(In thousands, except ratios and per share amounts)

Operating net income, adjusted diluted EPS, and adjusted non-interest expense (non-GAAP)
For the three months ended
June 30March 31December 31September 30June 30
20242024202320232023
Net income (loss) applicable to common shares$(17,144)$5,212 $5,078 $4,056 $6,034 
Add back significant items (tax effected):
Listing-related— — — — 79 
Merger-related18,806 537 1,141 1,592 92 
Day 2 non-PCD Provision23,305 — — — — 
Total significant items42,111 537 1,141 1,592 171 
Operating net income$24,967 $5,749 $6,219 $5,648 $6,205 
Weighted average dilutive shares12,262,979 7,527,489 7,508,289 7,499,278 7,514,955 
Adjusted diluted EPS7
$2.04 $0.76 $0.83 $0.75 $0.83 
Non-interest expense$64,432 $21,165 $22,300 $22,423 $21,348 
Remove significant items:
Listing-related— — — — 100 
Merger-related23,805 680 1,444 2,015 116 
Total significant items$23,805 $680 $1,444 $2,015 $216 
Adjusted non-interest expense$40,627 $20,485 $20,856 $20,408 $21,132 

Operating net income is a non-GAAP measure that is derived from net income adjusted for significant items. The Company believes that operating net income is useful in periods with certain significant items, such as listing-related, merger-related expenses, or Day 2 non-PCD provision. The operating net income is more reflective of management’s ability to grow the business and manage expenses. Adjusted non-interest expense also removes these significant items such as listing-related and merger-related expenses. Management believes it represents a more normalized non-interest expense total for periods with identified significant items.

Total Revenue (non-GAAP)
For the three months ended
June 30March 31December 31September 30June 30
20242024202320232023
Interest income$96,097 $38,745 $38,180 $37,272 $37,116 
Interest expense36,332 16,614 15,876 14,383 13,324 
Non-interest income9,505 4,254 4,824 4,289 4,625 
Total revenue (non-GAAP)$69,270 $26,385 $27,128 $27,178 $28,417 
(7) Weighted average diluted shares for Q2 2024 calculated only for computation of adjusted diluted EPS. Weighted average diluted shares for GAAP diluted EPS are the same as shares for calculating basic EPS due to the antidilutive effect of the diluted shares when considering the GAAP net loss for the quarter.



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Burke & Herbert Financial Services Corp.
Non-GAAP Reconciliations (unaudited)
(In thousands, except ratios and per share amounts)
Total revenue is a non-GAAP measure and is derived from total interest income less total interest expense plus total non-interest income. We believe that total revenue is a useful tool to determine how the Company is managing its business and demonstrates how stable our revenue sources are from period to period.

Pretax, Pre-Provision Earnings (non-GAAP)
For the three months ended
June 30March 31December 31September 30June 30
20242024202320232023
Income (loss) before taxes
$(19,072)$5,890 $5,578 $4,520 $6,855 
Provision for (recapture of) credit losses23,910 (670)(750)235 214 
Pretax, pre-provision earnings (non-GAAP)$4,838 $5,220 $4,828 $4,755 $7,069 
Pretax, pre-provision earnings is a non-GAAP measure and is based on adjusting income before income taxes and to exclude provision for (recapture of) credit losses. We believe that pretax, pre-provision earnings is a useful tool to help evaluate the ability to provide for credit costs through operations and provides an additional basis to compare results between periods by isolating the impact of provision for (recapture of) credit losses, which can vary significantly between periods.

Tangible Common Equity (non-GAAP)
For the three months ended
June 30March 31December 31September 30June 30
Actual balances20242024202320232023
Common shareholders' equity$682,713 $319,308 $314,750 $270,819 $290,072 
Less:
Intangible assets65,895 — — — — 
Goodwill32,783 — — — — 
Tangible common equity (non-GAAP)$584,035 $319,308 $314,750 $270,819 $290,072 
Shares outstanding at end of period14,932,169 7,440,025 7,428,710 7,428,710 7,428,710 
Tangible book value per common share$39.11 $42.92 $42.37 $36.46 $39.05 

In management's view, tangible common equity measures are capital adequacy metrics that may be meaningful to the Company, as well as analysts and investors, in assessing the Company's use of equity and in facilitating comparisons with peers. These non-GAAP measures are valuable indicators of a financial institution's capital strength because they eliminate intangible assets from stockholders' equity and retain the effect of accumulated other comprehensive income/(loss) in stockholders' equity.

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Burke & Herbert Financial Services Corp.
Non-GAAP Reconciliations (unaudited)
(In thousands, except ratios and per share amounts)
Net Interest Margin & Taxable-Equivalent Net Interest Income (non-GAAP)
As of or for the three months ended
June 30March 31December 31September 30June 30
20242024202320232023
Net interest income$59,765 $22,131 $22,304 $22,889 $23,792 
Taxable-equivalent adjustments688 362 365 366 375 
Net interest income (Fully Taxable-Equivalent - FTE)$60,453 $22,493 $22,669 $23,255 $24,167 
Average earning assets$5,994,383 $3,377,092 $3,332,733 $3,337,282 $3,379,534 
Net interest margin (non-GAAP)4.06 %2.68 %2.70 %2.76 %2.87 %
The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest income, we use net interest income on a fully taxable-equivalent (FTE) basis by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. FTE net interest income is calculated by adding the tax benefit on certain financial interest earning assets, whose interest is tax-exempt, to total interest income then subtracting total interest expense. Management believes FTE net interest income is a standard practice in the banking industry, and when net interest income is adjusted on an FTE basis, yields on taxable, nontaxable, and partially taxable assets are comparable; however, the adjustment to an FTE basis has no impact on net income and this adjustment is not permitted under GAAP. FTE net interest income is only used for calculating FTE net interest margin, which is calculated by annualizing FTE net interest income and then dividing by the average earning assets. The tax-rate used for this adjustment is 21%. Net interest income shown elsewhere in this presentation is GAAP net interest income.
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