Burke & Herbert Financial Services Corp. Announces Third Quarter 2024 Results and Increases Common Stock Dividend
ALEXANDRIA, Va., Oct. 25, 2024 /PRNewswire/ -- Burke & Herbert Financial Services Corp. (the "Company" or "Burke & Herbert") (NASDAQ:BHRB) reported financial results for the quarter ended September 30, 2024. In addition, at its meeting on October 24, 2024, the board of directors declared a $0.55 per share regular cash dividend to be paid on December 2, 2024, to shareholders of record as of the close of business on November 15, 2024, representing a 3.8% increase from the prior quarter dividend.
Q3 2024 Highlights
Financial results reflect a full quarter following the May 3, 2024 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.
Net income applicable to common shares of $27.4 million; adjusted (non-GAAP1) operating net income applicable to common shares of $29.8 million.
Earnings per diluted common share ("EPS") of $1.82; adjusted (non-GAAP1) diluted EPS of $1.98.
Net interest income for the quarter was $73.2 million; net interest income on a fully taxable equivalent basis (non-GAAP1) for the quarter was $74.0 million.
Net interest margin on a fully taxable equivalent basis (non-GAAP1) for the quarter was 4.07%.
Non-interest expense for the quarter was $50.8 million; adjusted (non-GAAP1) non-interest expense for the quarter was $47.7 million.
The balance sheet remains strong with ample liquidity. Total liquidity, including all available borrowing capacity with cash and cash equivalents, totaled $2.6 billion at the end of the third quarter.
Ending total gross loans of $5.6 billion and ending total deposits of $6.6 billion; ending loan-to-deposit ratio of 84.4%.
Asset quality remains stable across the loan portfolio with adequate reserves.
The Company continues to be well-capitalized, ending the quarter with 11.3%2 Common Equity Tier 1 capital to risk-weighted assets, 14.3%2 Total risk-based capital to risk-weighted assets, and a leverage ratio of 9.6%2.
From David P. Boyle, Company Chair and Chief Executive Officer
"Our results for the third quarter and the increase in the dividend demonstrate the financial benefits of the merger with Summit and are in line with our expectations. In addition, the team is working diligently toward the planned systems integration in the fourth quarter, which should lead to additional efficiencies and position us to deliver even greater value for our shareholders."
Results of Operations
Third Quarter 2024
The Company reported third quarter 2024 net income applicable to common shares of $27.4 million, or $1.82 per diluted common share.
Included in the third quarter were pre-tax charges of $3.1 million of expenses related to the merger with Summit. Excluding these items from the current quarter on a tax effected basis, adjusted (non-GAAP1) operating net income was $29.8 million, or $1.98 per diluted share.
Period-end average total gross loans were $5.6 billion at September 30, 2024, up from $4.5 billion at June 30, 2024, primarily due to results that reflect a full quarter after the merger completion.
Period-end average total deposits were $6.6 billion at September 30, 2024, up from $5.4 billion at June 30, 2024, primarily due to results that reflect a full quarter after the merger completion.
Net interest income increased to $73.2 million in the third quarter of 2024 compared to $59.8 million in the second quarter of 2024, primarily due to results that reflect a full quarter of combined income after the merger completion.
Net interest margin on a fully taxable equivalent basis (non-GAAP1) increased to 4.07% versus 4.06% in the second quarter of 2024.
Accretion income on loans during the quarter was $15.4 million and the amortization expense impact on interest expense was $3.8 million, or 16.0 bps of net interest margin in the third quarter of 2024.
The cost of total deposits was 2.38% in the third quarter of 2024, compared to 2.25% in the second quarter of 2024.
The Company recorded a provision expense on loans in the third quarter of 2024 of $85.0 thousand, reflecting relatively stable asset quality.
The allowance for credit losses at September 30, 2024, was $67.8 million, or 1.2% of total loans.
Total non-interest income for the third quarter of 2024 was $10.6 million, an increase of $1.1 million from the second quarter of 2024, primarily due to results that reflect a full quarter of combined income after the merger completion.
Non-interest expense for the third quarter of 2024 was $50.8 million and included $3.1 million of merger-related charges.
Regulatory capital ratios2
The Company continues to be well-capitalized with capital ratios that are above regulatory requirements. As of September 30, 2024, our Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 11.3%2 and 14.3%2, respectively, and significantly above the well-capitalized requirements of 6.5% and 10%, respectively. The leverage ratio was 9.6%2 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 September 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 13.0%2 and 14.1%2, respectively, and significantly above the well-capitalized requirements. In addition, the Bank's leverage ratio of 10.6%2 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.
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 Reports on Form 10-Q for the quarters ended March 31, 2024, June 30, 2024, and other reports the Company files with the SEC.
Burke & Herbert Financial Services Corp.Consolidated Statements of Income (unaudited)(In thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Interest income
Taxable loans, including fees
$ 103,682
$ 26,425
$ 213,400
$ 74,485
Tax-exempt loans, including fees
48
—
81
—
Taxable securities
10,076
8,909
29,949
28,130
Tax-exempt securities
3,135
1,376
7,052
4,243
Other interest income
1,585
562
2,886
1,858
Total interest income
118,526
37,272
253,368
108,716
Interest expense
Deposits
39,441
11,277
82,745
26,708
Short-term borrowings
3,080
3,078
10,806
10,495
Subordinated debt
2,798
—
4,658
—
Other interest expense
28
28
84
58
Total interest expense
45,347
14,383
98,293
37,261
Net interest income
73,179
22,889
155,075
71,455
Credit loss expense - loans
85
200
19,515
1,034
Credit loss expense (recapture) - off-balance sheet credit exposures
62
35
3,872
(70)
Total provision for credit losses
147
235
23,387
964
Net interest income after credit loss expense
73,032
22,654
131,688
70,491
Non-interest income
Fiduciary and wealth management
2,352
1,354
5,982
3,996
Service charges and fees
5,453
1,583
11,147
4,959
Net gains (losses) on securities
—
(1)
613
(112)
Income from company-owned life insurance
1,330
589
2,799
1,720
Other non-interest income
1,481
764
3,834
2,565
Total non-interest income
10,616
4,289
24,375
13,128
Non-interest expense
Salaries and wages
20,858
9,867
51,271
29,283
Pensions and other employee benefits
4,678
2,242
12,346
7,116
Occupancy
3,412
1,462
7,947
4,464
Equipment rentals, depreciation and maintenance
4,699
1,435
18,643
4,231
Other operating
17,179
7,417
46,216
19,042
Total non-interest expense
50,826
22,423
136,423
64,136
Income before income taxes
32,822
4,520
19,640
19,483
Income tax expense
5,200
464
3,725
1,869
Net income
27,622
4,056
15,915
17,614
Preferred stock dividends
225
—
450
—
Net income applicable tocommon shares
$ 27,397
$ 4,056
$ 15,465
$ 17,614
Burke & Herbert Financial Services Corp.Consolidated Balance Sheets(In thousands)
September 30, 2024
December 31, 2023
(Unaudited)
(Audited)
Assets
Cash and due from banks
$ 44,902
$ 8,896
Interest-earning deposits with banks
246,863
35,602
Cash and cash equivalents
291,765
44,498
Securities available-for-sale, at fair value
1,436,431
1,248,439
Restricted stock, at cost
16,832
5,964
Loans held-for-sale, at fair value
4,216
1,497
Loans
5,574,037
2,087,756
Allowance for credit losses
(67,817)
(25,301)
Net loans
5,506,220
2,062,455
Other real estate owned
2,576
—
Premises and equipment, net
134,770
61,128
Accrued interest receivable
32,791
15,895
Intangible assets
61,598
—
Goodwill
32,783
—
Company-owned life insurance
182,380
94,159
Other assets
162,551
83,544
Total Assets
$ 7,864,913
$ 3,617,579
Liabilities and Shareholders' Equity
Liabilities
Non-interest-bearing deposits
$ 1,392,123
$ 830,320
Interest-bearing deposits
5,208,702
2,171,561
Total deposits
6,600,825
3,001,881
Short-term borrowings
320,163
272,000
Subordinated debentures, net
93,532
—
Subordinated debentures owed to unconsolidated subsidiary trusts
16,950
—
Accrued interest and other liabilities
95,384
28,948
Total Liabilities
