Burke & Herbert Financial Services Corp. Announces Fourth Quarter and Full Year 2024 Results and Declares Common Stock Dividend

• On December 31, 2024, Burke & Herbert Bank & Trust Company became a new member of the Federal Reserve System and purchased shares of Federal Reserve Bank Stock in the amount of $14.8 million.
• On December 11, 2024, the Company's form S-3 was declared effective by the Securities and Exchange Commission and may allow the Company from time to time to offer securities whose aggregate initial offering price will not exceed $350 million.
• Financial results reflect 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.
• For the quarter, net income applicable to common shares totaled $19.6 million, and earnings per diluted common share ("EPS") was $1.30.
• For the quarter, adjusted (non-GAAP¹) operating net income applicable to common shares totaled $26.6 million, and adjusted (non-GAAP¹) diluted EPS was $1.77.
• For the twelve months ended December 31, 2024, net income applicable to common shares totaled $35.0 million, and earnings per diluted common share was $2.82.
• For the twelve months ended December 31, 2024, adjusted (non-GAAP¹) operating net income applicable to common shares totaled $87.2 million, and adjusted (non-GAAP¹) diluted EPS was $7.01.
• The balance sheet remains strong with ample liquidity. Total liquidity, including all available borrowing capacity with cash and cash equivalents, totaled $4.2 billion at the end of the fourth quarter.
• Ending total gross loans of $5.7 billion and ending total deposits of $6.5 billion; ending loan-to-deposit ratio of 87.1%.
• Asset quality remains stable across the loan portfolio with adequate reserves.
• The Company continues to be well-capitalized, ending the quarter with 11.5%² Common Equity Tier 1 capital to risk-weighted assets, 14.6%² Total risk-based capital to risk-weighted assets, and a leverage ratio of 9.8%².

From David P. Boyle, Company Chair and Chief Executive Officer

"Our results for the quarter demonstrate the financial benefits of the merger with Summit and the teamwork involved with the systems integration that took place in November. Despite the amount of time and energy committed to the conversion, we grew both loans and core deposits during the quarter. In addition, the balance sheet reflects ample liquidity and capital as we enter 2025 and we look forward to delivering increased value for our customers, employees, communities, and shareholders."

Results of Operations

Fourth Quarter 2024

The Company reported fourth quarter 2024 net income applicable to common shares of $19.6 million, or $1.30 per diluted common share.

Included in the fourth quarter were pre-tax charges of $8.9 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 $26.6 million, or $1.77 per diluted common share.

• Period-end total gross loans were $5.7 billion at December 31, 2024, an increase of $98.2 million from September 30, 2024.
• Period-end total deposits were $6.5 billion at December 31, 2024, a decrease of $85.6 million from September 30, 2024, primarily due to a $100.5 million decrease in brokered deposits.
• Net interest income for the quarter was $70.7 million compared to $73.2 million in the prior quarter primarily due to a decrease in loan interest income related to lower accelerated loan accretion income offset by a decrease in deposit cost.
• Net interest margin on a fully taxable equivalent basis (non-GAAP¹) decreased to 3.91% versus 4.07% in the third quarter of 2024 primarily due to lower accelerated loan accretion income.
• Accretion income on loans during the quarter was $12.0 million, and the amortization expense impact on interest expense was $3.8 million, or 11.4 bps of net interest margin in the fourth quarter of 2024. In the prior quarter, 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.
• The cost of total deposits, including non-interest bearing deposits, was 2.17% in the fourth quarter of 2024, compared to 2.38% in the third quarter of 2024.
• The Company recorded a provision expense on loans in the fourth quarter of 2024 of $1.0 million, reflecting relatively stable asset quality and steady loan growth during the quarter.
• The allowance for credit losses at December 31, 2024, was $68.0 million, or 1.2% of total loans.
• Total non-interest income for the fourth quarter of 2024 was $11.8 million compared to $10.6 million in the prior quarter, primarily due to a gain on sale of securities and an increase in insurance proceeds from the Company's owned life insurance policies.
• Non-interest expense for the fourth quarter of 2024 was $61.4 million and included $8.9 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 December 31, 2024, our Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 11.5%² and 14.6%², respectively, and significantly above the well-capitalized requirements of 6.5% and 10%, respectively. The leverage ratio was 9.8%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 December 31, 2024, the Bank's Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 13.3%² and 14.4%², respectively, and significantly above the well-capitalized requirements. In addition, the Bank's leverage ratio of 10.9%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, September 30, 2024, and other reports the Company files with the SEC.

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 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 merger-related expenses. Management believes it represents a more normalized non-interest expense total for periods with identified significant items.

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.