8-K
Burke & Herbert Financial Services Corp. (BHRB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 8-K
___________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
January 24, 2025
Date of Report (date of earliest event reported)
___________________________________
Burke & Herbert Financial Services Corp.
(Exact name of registrant as specified in its charter)
___________________________________
| Virginia<br><br>(State or other jurisdiction of<br><br>incorporation or organization) | 001-41633<br><br>(Commission File Number) | 92-0289417<br><br>(I.R.S. Employer Identification Number) |
|---|---|---|
| 100 S. Fairfax Street<br><br>Alexandria, VA 22314 | ||
| (Address of principal executive offices and zip code) | ||
| (703) 666-3555 | ||
| (Registrant's telephone number, including area code) |
___________________________________
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 $0.50 | 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 2.02 - Results of Operations and Financial Condition.
On January 24, 2025, Burke & Herbert Financial Services Corp. (the "Company") issued a press release announcing its results of operations and financial condition for fourth quarter and the year ended December 31, 2024. A copy of the press release is included as Exhibit 99.1 to this report.
Item 7.01 - Regulation FD Disclosure
The management of Burke & Herbert Financial Services Corp. anticipates meetings with investors during 2025. A copy of presentation materials will be made available on the investor relations section of the Company's website (https://www.burkeandherbertbank.com) and is furnished as exhibit 99.2 to this report. All information included in this presentation is presented as of the dates indicated, and the Company does not assume any obligation to correct or update such information in the future. The Company disclaims any inferences regarding the materiality of such information which otherwise may arise as a result of it furnishing such information under Item 7.01 of this Form 8-K.
In accordance with General Instruction B.2 of Form 8-K, the information furnished in this Item 7.01, including Exhibit 99.2, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise be subject to the liabilities of Section 18 of the Exchange Act.
Item 8.01 - Other Events
On January 24, 2025, the Company announced its Board of Directors declared a regular quarterly cash dividend on the Company's common stock of $0.55 per share, payable on March 3, 2025, to shareholders of record as of the close of business on February 14, 2025.
Item 9.01 - Financial Statements and Exhibits
(d) The following exhibits are being filed herewith:
| Exhibit No. | Description |
|---|---|
| 99.1 | Press release, dated January 24, 2025 |
| 99.2 | Earnings Presentation, dated January 24, 2025 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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 24th day of January, 2025.
| Burke & Herbert Financial Services Corp. | |
|---|---|
| By: | /s/ Roy E. Halyama |
| Name: | Roy E. Halyama |
| Title: | Executive Vice President, CFO |
Document
Burke & Herbert Financial Services Corp. Announces Fourth Quarter and Full Year 2024 Results and Declares Common Stock Dividend
For Immediate Release
January 24, 2025
Alexandria, VA – Burke & Herbert Financial Services Corp. (the “Company” or “Burke & Herbert”) (Nasdaq: BHRB) reported financial results for the quarter and the year ended December 31, 2024. In addition, at its meeting on January 23, 2025, the board of directors declared a $0.55 per share regular cash dividend to be paid on March 3, 2025, to shareholders of record as of the close of business on February 14, 2025.
Q4 2024 Highlights
•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.
(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) December 31, 2024, are estimated.
1
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.
Burke & Herbert Financial Services Corp.
Consolidated Statements of Income (unaudited)
(In thousands)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 20233 | |||||
| Interest income | ||||||||
| Taxable loans, including fees | $ | 97,903 | $ | 27,315 | $ | 311,303 | $ | 101,800 |
| Tax-exempt loans, including fees | 37 | — | 118 | — | ||||
| Taxable securities | 9,868 | 9,049 | 39,817 | 37,179 | ||||
| Tax-exempt securities | 3,191 | 1,372 | 10,243 | 5,615 | ||||
| Other interest income | 1,794 | 444 | 4,680 | 2,302 | ||||
| Total interest income | 112,793 | 38,180 | 366,161 | 146,896 | ||||
| Interest expense | ||||||||
| Deposits | 35,919 | 12,487 | 118,664 | 39,195 | ||||
| Short-term borrowings | 3,383 | 3,361 | 14,189 | 13,856 | ||||
| Subordinated debt | 2,754 | — | 7,412 | — | ||||
| Other interest expense | 27 | 28 | 111 | 86 | ||||
| Total interest expense | 42,083 | 15,876 | 140,376 | 53,137 | ||||
| Net interest income | 70,710 | 22,304 | 225,785 | 93,759 | ||||
| Credit loss expense (recapture) - loans and available-for-sale securities | 960 | (799) | 20,475 | 235 | ||||
| Credit loss expense (recapture) - off-balance sheet credit exposures | (127) | 49 | 3,745 | (21) | ||||
| Total provision for (recapture of) credit losses | 833 | (750) | 24,220 | 214 | ||||
| Net interest income after credit loss expense | 69,877 | 23,054 | 201,565 | 93,545 | ||||
| Non-interest income | ||||||||
| Fiduciary and wealth management | 2,429 | 1,358 | 8,411 | 5,354 | ||||
| Service charges and fees | 4,447 | 1,711 | 15,594 | 6,670 | ||||
| Net gains (losses) on securities | 744 | — | 1,357 | (112) | ||||
| Income from company-owned life insurance | 1,887 | 1,124 | 4,686 | 2,844 | ||||
| Other non-interest income | 2,284 | 631 | 6,118 | 3,196 | ||||
| Total non-interest income | 11,791 | 4,824 | 36,166 | 17,952 | ||||
| Non-interest expense | ||||||||
| Salaries and wages | 25,818 | 9,964 | 77,089 | 39,247 | ||||
| Pensions and other employee benefits | 4,840 | 2,285 | 17,186 | 9,401 | ||||
| Occupancy | 3,630 | 1,571 | 11,577 | 6,035 | ||||
| Equipment rentals, depreciation and maintenance | 4,531 | 1,539 | 23,174 | 5,770 | ||||
| Other operating | 22,591 | 6,941 | 68,807 | 25,983 | ||||
| Total non-interest expense | 61,410 | 22,300 | 197,833 | 86,436 | ||||
| Income before income taxes | 20,258 | 5,578 | 39,898 | 25,061 | ||||
| Income tax expense | 465 | 500 | 4,190 | 2,369 | ||||
| Net income | 19,793 | 5,078 | 35,708 | 22,692 | ||||
| Preferred stock dividends | 225 | — | 675 | — | ||||
| Net income applicable to common shares | $ | 19,568 | $ | 5,078 | $ | 35,033 | $ | 22,692 |
(3) The full year 2023 Consolidated Income Statement is audited.
5
Burke & Herbert Financial Services Corp.
Consolidated Balance Sheets
(In thousands)
| December 31, 2024 | December 31, 2023 | |||
|---|---|---|---|---|
| (Unaudited) | (Audited) | |||
| Assets | ||||
| Cash and due from banks | $ | 35,554 | $ | 8,896 |
| Interest-earning deposits with banks | 99,760 | 35,602 | ||
| Cash and cash equivalents | 135,314 | 44,498 | ||
| Securities available-for-sale, at fair value | 1,432,371 | 1,248,439 | ||
| Restricted stock, at cost | 33,559 | 5,964 | ||
| Loans held-for-sale, at fair value | 2,331 | 1,497 | ||
| Loans | 5,672,236 | 2,087,756 | ||
| Allowance for credit losses | (68,040) | (25,301) | ||
| Net loans | 5,604,196 | 2,062,455 | ||
| Other real estate owned | 2,783 | — | ||
| Premises and equipment, net | 132,270 | 61,128 | ||
| Accrued interest receivable | 34,454 | 15,895 | ||
| Intangible assets | 57,300 | — | ||
| Goodwill | 32,783 | — | ||
| Company-owned life insurance | 182,834 | 94,159 | ||
| Other assets | 161,990 | 83,544 | ||
| Total Assets | $ | 7,812,185 | $ | 3,617,579 |
| Liabilities and Shareholders’ Equity | ||||
| Liabilities | ||||
| Non-interest-bearing deposits | $ | 1,379,940 | $ | 830,320 |
| Interest-bearing deposits | 5,135,299 | 2,171,561 | ||
| Total deposits | 6,515,239 | 3,001,881 | ||
| Short-term borrowings | 365,000 | 272,000 | ||
| Subordinated debentures, net | 94,872 | — | ||
| Subordinated debentures owed to unconsolidated subsidiary trusts | 17,013 | — | ||
| Accrued interest and other liabilities | 89,904 | 28,948 | ||
| Total Liabilities | 7,082,028 | 3,302,829 | ||
| Shareholders’ Equity | ||||
| Preferred stock and surplus | 10,413 | — | ||
| Common stock | 7,770 | 4,000 | ||
| Common stock, additional paid-in capital | 401,172 | 14,495 | ||
| Retained earnings | 434,106 | 427,333 | ||
| Accumulated other comprehensive income (loss) | (95,720) | (103,494) | ||
| Treasury stock | (27,584) | (27,584) | ||
| Total Shareholders’ Equity | 730,157 | 314,750 | ||
| Total Liabilities and Shareholders’ Equity | $ | 7,812,185 | $ | 3,617,579 |
Burke & Herbert Financial Services Corp.
Details of Net Interest Margin (unaudited)
For the three months ended
| Details of Net Interest Margin - Yield Percentages | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||
| 2024 | 2024 | 2024 | 2024 | 2023 | ||||||
| Interest-earning assets: | ||||||||||
| Loans: | ||||||||||
| Taxable loans | 6.91 | % | 7.34 | % | 7.33 | % | 5.41 | % | 5.24 | % |
| Tax-exempt loans | 5.87 | 5.63 | 5.55 | — | — | |||||
| Total loans | 6.91 | 7.34 | 7.33 | 5.41 | 5.24 | |||||
| Interest-earning deposits and fed funds sold | 4.48 | 3.43 | 3.54 | 3.82 | 4.35 | |||||
| Securities: | ||||||||||
| Taxable securities | 3.82 | 4.05 | 4.48 | 3.63 | 3.73 | |||||
| Tax-exempt securities | 3.55 | 3.58 | 3.05 | 2.67 | 2.64 | |||||
| Total securities | 3.75 | 3.91 | 4.05 | 3.43 | 3.50 | |||||
| Total interest-earning assets | 6.22 | % | 6.56 | % | 6.49 | % | 4.66 | % | 4.59 | % |
| Interest-bearing liabilities: | ||||||||||
| Deposits: | ||||||||||
| Interest-bearing demand | 2.51 | % | 3.19 | % | 3.00 | % | 0.63 | % | 0.61 | % |
| Savings | 1.60 | 1.43 | 1.53 | 1.97 | 1.97 | |||||
| Time | 4.55 | 4.82 | 4.55 | 4.12 | 3.97 | |||||
| Total interest-bearing deposits | 2.76 | 3.02 | 2.90 | 2.41 | 2.31 | |||||
| Borrowings: | ||||||||||
| Short-term borrowings | 4.17 | 4.06 | 4.38 | 4.82 | 4.76 | |||||
| Subordinated debt borrowings and other | 9.87 | 10.16 | 10.30 | — | — | |||||
| Total interest-bearing liabilities | 2.98 | % | 3.21 | % | 3.14 | % | 2.71 | % | 2.59 | % |
| Taxable-equivalent net interest spread | 3.24 | 3.35 | 3.35 | 1.95 | 2.00 | |||||
| Benefit from use of non-interest-bearing deposits | 0.67 | 0.72 | 0.71 | 0.73 | 0.70 | |||||
| Taxable-equivalent net interest margin (non-GAAP1) | 3.91 | % | 4.07 | % | 4.06 | % | 2.68 | % | 2.70 | % |
Burke & Herbert Financial Services Corp.
Details of Net Interest Margin (unaudited)
For the three months ended
(In thousands)
| Details of Net Interest Margin - Average Balances | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||
| 2024 | 2024 | 2024 | 2024 | 2023 | ||||||
| Interest-earning assets: | ||||||||||
| Loans: | ||||||||||
| Taxable loans | $ | 5,634,157 | $ | 5,621,531 | $ | 4,481,993 | $ | 2,085,826 | $ | 2,069,738 |
| Tax-exempt loans | 3,115 | 4,310 | 3,041 | — | — | |||||
| Total loans | 5,637,272 | 5,625,841 | 4,485,034 | 2,085,826 | 2,069,738 | |||||
| Interest-earning deposits and fed funds sold | 152,537 | 175,265 | 94,765 | 41,692 | 40,524 | |||||
| Securities: | ||||||||||
| Taxable securities | 1,031,024 | 996,749 | 988,492 | 989,875 | 961,396 | |||||
| Tax-exempt securities | 452,937 | 440,781 | 426,092 | 259,699 | 261,075 | |||||
| Total securities | 1,483,961 | 1,437,530 | 1,414,584 | 1,249,574 | 1,222,471 | |||||
| Total interest-earning assets | $ | 7,273,770 | $ | 7,238,636 | $ | 5,994,383 | $ | 3,377,092 | $ | 3,332,733 |
| Interest-bearing liabilities: | ||||||||||
| Deposits: | ||||||||||
| Interest-bearing demand | $ | 2,560,445 | $ | 2,144,567 | $ | 1,587,914 | $ | 489,779 | $ | 514,760 |
| Savings | 1,366,276 | 1,725,387 | 1,480,985 | 922,732 | 920,600 | |||||
| Time | 1,247,900 | 1,328,076 | 1,141,758 | 745,945 | 711,575 | |||||
| Total interest-bearing deposits | 5,174,621 | 5,198,030 | 4,210,657 | 2,158,456 | 2,146,935 | |||||
| Borrowings: | ||||||||||
| Short-term borrowings | 325,084 | 304,849 | 376,063 | 307,446 | 282,426 | |||||
| Subordinated debt borrowings and other | 111,021 | 109,557 | 72,643 | — | — | |||||
| Total interest-bearing liabilities | $ | 5,610,726 | $ | 5,612,436 | $ | 4,659,363 | $ | 2,465,902 | $ | 2,429,361 |
| Non-interest-bearing deposits | $ | 1,411,202 | $ | 1,389,134 | $ | 1,207,443 | $ | 812,199 | $ | 852,120 |
Burke & Herbert Financial Services Corp.
Supplemental Information (unaudited)
As of or for the three months ended
(In thousands, except ratios and per share amounts)
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2024 | 2024 | 2024 | 2023 | ||||||
| Per common share information | ||||||||||
| Basic earnings (loss) | $ | 1.31 | $ | 1.83 | $ | (1.41) | $ | 0.70 | $ | 0.68 |
| Diluted earnings (loss) | 1.30 | 1.82 | (1.41) | 0.69 | 0.67 | |||||
| Cash dividends | 0.55 | 0.53 | 0.53 | 0.53 | 0.53 | |||||
| Book value | 48.08 | 48.63 | 45.72 | 42.92 | 42.37 | |||||
| Tangible book value (non-GAAP1) | 42.06 | 42.32 | 39.11 | 42.92 | 42.37 | |||||
| Balance sheet-related (at period end, unless otherwise indicated) | ||||||||||
| Assets | $ | 7,812,185 | $ | 7,864,913 | $ | 7,810,193 | $ | 3,696,390 | $ | 3,617,579 |
| Average interest-earning assets | 7,273,770 | 7,238,636 | 5,994,383 | 3,377,092 | 3,332,733 | |||||
| Loans (gross) | 5,672,236 | 5,574,037 | 5,616,724 | 2,118,155 | 2,087,756 | |||||
| Loans (net) | 5,604,196 | 5,506,220 | 5,548,707 | 2,093,549 | 2,062,455 | |||||
| Securities, available-for-sale, at fair value | 1,432,371 | 1,436,431 | 1,414,870 | 1,275,520 | 1,248,439 | |||||
| Intangible assets | 57,300 | 61,598 | 65,895 | — | — | |||||
| Goodwill | 32,783 | 32,783 | 32,783 | — | — | |||||
| Non-interest-bearing deposits | 1,379,940 | 1,392,123 | 1,397,030 | 822,767 | 830,320 | |||||
| Interest-bearing deposits | 5,135,299 | 5,208,702 | 5,242,541 | 2,167,346 | 2,171,561 | |||||
| Deposits, total | 6,515,239 | 6,600,825 | 6,639,571 | 2,990,113 | 3,001,881 | |||||
| Brokered deposits | 244,802 | 345,328 | 403,668 | 370,847 | 389,011 | |||||
| Uninsured deposits | 1,926,724 | 1,999,403 | 1,931,786 | 700,846 | 677,308 | |||||
| Short-term borrowings | 365,000 | 320,163 | 285,161 | 360,000 | 272,000 | |||||
| Subordinated debt, net | 111,885 | 110,482 | 109,064 | — | — | |||||
| Unused borrowing capacity4 | 4,092,378 | 2,353,963 | 2,162,112 | 704,233 | 914,980 | |||||
| Total equity | 730,157 | 738,059 | 693,126 | 319,308 | 314,750 | |||||
| Total common equity | 719,744 | 727,646 | 682,713 | 319,308 | 314,750 | |||||
| Accumulated other comprehensive income (loss) | (95,720) | (75,758) | (100,430) | (100,954) | (103,494) |
(4) Includes Federal Home Loan Bank, Borrower-in-Custody (BIC), and correspondent bank availability.
9
Burke & Herbert Financial Services Corp.
Supplemental Information (unaudited)
As of or for the three months ended
(In thousands, except ratios and per share amounts)
| December 31 | September 30 | June 30 | March 31 | December 31 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2024 | 2024 | 2024 | 2023 | |||||||||||
| Income statement | |||||||||||||||
| Interest income | $ | 112,793 | $ | 118,526 | $ | 96,097 | $ | 38,745 | $ | 38,180 | |||||
| Interest expense | 42,083 | 45,347 | 36,332 | 16,614 | 15,876 | ||||||||||
| Non-interest income | 11,791 | 10,616 | 9,505 | 4,254 | 4,824 | ||||||||||
| Total revenue (non-GAAP1) | 82,501 | 83,795 | 69,270 | 26,385 | 27,128 | ||||||||||
| Non-interest expense | 61,410 | 50,826 | 64,432 | 21,165 | 22,300 | ||||||||||
| Pretax, pre-provision earnings (non-GAAP1) | 21,091 | 32,969 | 4,838 | 5,220 | 4,828 | ||||||||||
| Provision for (recapture of) credit losses | 833 | 147 | 23,910 | (670) | (750) | ||||||||||
| Income (loss) before income taxes | 20,258 | 32,822 | (19,072) | 5,890 | 5,578 | ||||||||||
| Income tax expense (benefit) | 465 | 5,200 | (2,153) | 678 | 500 | ||||||||||
| Net income (loss) | 19,793 | 27,622 | (16,919) | 5,212 | 5,078 | ||||||||||
| Preferred stock dividends | 225 | 225 | 225 | — | — | ||||||||||
| Net income (loss) applicable to common shares | $ | 19,568 | $ | 27,397 | $ | (17,144) | $ | 5,212 | $ | 5,078 | |||||
| Ratios | |||||||||||||||
| Return on average assets (annualized) | 1.00 | % | 1.40 | % | (1.06) | % | 0.58 | % | 0.56 | % | |||||
| Return on average equity (annualized) | 10.49 | 15.20 | (12.44) | 6.67 | 7.30 | ||||||||||
| Net interest margin (non-GAAP1) | 3.91 | 4.07 | 4.06 | 2.68 | 2.70 | ||||||||||
| Efficiency ratio | 74.44 | 60.66 | 93.02 | 80.22 | 82.20 | ||||||||||
| Loan-to-deposit ratio | 87.06 | 84.44 | 84.59 | 70.84 | 69.55 | ||||||||||
| Common Equity Tier 1 (CET1) capital ratio2 | 11.51 | 11.40 | 10.91 | 16.56 | 16.85 | ||||||||||
| Total risk-based capital ratio2 | 14.55 | 14.45 | 13.91 | 17.54 | 17.88 | ||||||||||
| Leverage ratio2 | 9.78 | 9.66 | 9.04 | 11.36 | 11.31 |
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-GAAP1) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| For the three months ended | ||||||||||
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||
| 2024 | 2024 | 2024 | 2024 | 2023 | ||||||
| Net income (loss) applicable to common shares | $ | 19,568 | $ | 27,397 | $ | (17,144) | $ | 5,212 | $ | 5,078 |
| Add back significant items (tax effected): | ||||||||||
| Merger-related | 7,069 | 2,449 | 18,806 | 537 | 1,141 | |||||
| Day 2 non-PCD Provision | — | — | 23,305 | — | — | |||||
| Total significant items | 7,069 | 2,449 | 42,111 | 537 | 1,141 | |||||
| Operating net income | $ | 26,637 | $ | 29,846 | $ | 24,967 | $ | 5,749 | $ | 6,219 |
| Weighted average dilutive shares | 15,038,442 | 15,040,145 | 12,262,979 | 7,527,489 | 7,508,289 | |||||
| Adjusted diluted EPS5 | $ | 1.77 | $ | 1.98 | $ | 2.04 | $ | 0.76 | $ | 0.83 |
| Non-interest expense | $ | 61,410 | $ | 50,826 | $ | 64,432 | $ | 21,165 | $ | 22,300 |
| Remove significant items: | ||||||||||
| Merger-related | 8,948 | 3,101 | 23,805 | 680 | 1,444 | |||||
| Total significant items | $ | 8,948 | $ | 3,101 | $ | 23,805 | $ | 680 | $ | 1,444 |
| Adjusted non-interest expense | $ | 52,462 | $ | 47,725 | $ | 40,627 | $ | 20,485 | $ | 20,856 |
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 (non-GAAP1) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| For the three months ended | ||||||||||
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||
| 2024 | 2024 | 2024 | 2024 | 2023 | ||||||
| Interest income | $ | 112,793 | $ | 118,526 | $ | 96,097 | $ | 38,745 | $ | 38,180 |
| Interest expense | 42,083 | 45,347 | 36,332 | 16,614 | 15,876 | |||||
| Non-interest income | 11,791 | 10,616 | 9,505 | 4,254 | 4,824 | |||||
| Total revenue (non-GAAP1) | $ | 82,501 | $ | 83,795 | $ | 69,270 | $ | 26,385 | $ | 27,128 |
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.
(5) 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.
11
Burke & Herbert Financial Services Corp.
Non-GAAP Reconciliations (unaudited)
(In thousands, except ratios and per share amounts)
| Pretax, Pre-Provision Earnings (non-GAAP1) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| For the three months ended | ||||||||||
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||
| 2024 | 2024 | 2024 | 2024 | 2023 | ||||||
| Income (loss) before taxes | $ | 20,258 | $ | 32,822 | $ | (19,072) | $ | 5,890 | $ | 5,578 |
| Provision for (recapture of) credit losses | 833 | 147 | 23,910 | (670) | (750) | |||||
| Pretax, pre-provision earnings (non-GAAP1) | $ | 21,091 | $ | 32,969 | $ | 4,838 | $ | 5,220 | $ | 4,828 |
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-GAAP1) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| For the three months ended | ||||||||||
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||
| 2024 | 2024 | 2024 | 2024 | 2023 | ||||||
| Common shareholders' equity | $ | 719,744 | $ | 727,646 | $ | 682,713 | $ | 319,308 | $ | 314,750 |
| Less: | ||||||||||
| Intangible assets | 57,300 | 61,598 | 65,895 | — | — | |||||
| Goodwill | 32,783 | 32,783 | 32,783 | — | — | |||||
| Tangible common equity (non-GAAP1) | $ | 629,661 | $ | 633,265 | $ | 584,035 | $ | 319,308 | $ | 314,750 |
| Shares outstanding at end of period | 14,969,104 | 14,963,003 | 14,932,169 | 7,440,025 | 7,428,710 | |||||
| Tangible book value per common share | $ | 42.06 | $ | 42.32 | $ | 39.11 | $ | 42.92 | $ | 42.37 |
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.
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-GAAP1) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of or for the three months ended | |||||||||||||||
| December 31 | September 30 | June 30 | March 31 | December 31 | |||||||||||
| 2024 | 2024 | 2024 | 2024 | 2023 | |||||||||||
| Net interest income | $ | 70,710 | $ | 73,179 | $ | 59,765 | $ | 22,131 | $ | 22,304 | |||||
| Taxable-equivalent adjustments | 858 | 847 | 688 | 362 | 365 | ||||||||||
| Net interest income (Fully Taxable-Equivalent - FTE) | $ | 71,568 | $ | 74,026 | $ | 60,453 | $ | 22,493 | $ | 22,669 | |||||
| Average interest-earning assets | $ | 7,273,770 | $ | 7,238,636 | $ | 5,994,383 | $ | 3,377,092 | $ | 3,332,733 | |||||
| Net interest margin (non-GAAP1) | 3.91 | % | 4.07 | % | 4.06 | % | 2.68 | % | 2.70 | % |
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.
13
a4q24investordeckfinal
1 4Q24 Update (Nasdaq: BHRB) January 2025
2 Cautionary Statement Regarding Forward-Looking Information This presentation 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 Burke & Herbert Financial Services Corp. (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 Financial Group, Inc. (“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 Report on Form 10-Q for the quarters ended March 31, 2024, June 30, 2024, and September 30, 2024, and other reports the Company files with the SEC. Non-GAAP Financial Measures This presentation contains certain financial measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Such non-GAAP financial measures may include the following: fully tax-equivalent net interest margin, core operating earnings, core net income, tangible book value per common share, total risk-based capital ratio, tier one leverage ratio, tier one capital ratio, and the tangible common equity to tangible assets ratio. Management uses these non-GAAP financial measures to assess the performance of the Company’s core business and the strength of its capital position. Management believes that these non-GAAP financial measures provide meaningful additional information about the Company to assist investors in evaluating operating results, financial strength, and capitalization. The non-GAAP financial measures should be considered as additional views of the way our financial measures are affected by significant charges for credit costs and other factors. These non-GAAP financial measures should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The computations of the non-GAAP financial measures used in this presentation are referenced in a footnote or in the appendix to this presentation.
3 Introduction • Thank you for your interest in Burke & Herbert Financial Services Corp., and its wholly owned subsidiary Burke & Herbert Bank & Trust Company. A quintessential community banking institution, we are headquartered in Old Town Alexandria, Virginia, and have served the banking, borrowing and investing needs of businesses, organizations, families, and individuals since 1852. • As a true community bank, we are deeply tied to the people, neighborhoods, and institutions where we live and work. Our employees form a diverse, dedicated, close-knit team that upholds a culture of customer service and forges strong and lasting relationships with our customers and shared communities. We are selective in our hiring, proud of the caliber of our people, and encourage a collegial environment in which each individual feels valued. • On May 3, 2024, we merged with Summit Financial Group, Inc. (Summit), creating an $8 billion financial institution with more than 75 branches across Virginia, West Virginia, Maryland, Delaware, and Kentucky, with more than 800 employees serving our communities.
4 Our Business Model • Our business model is built on customer service - Understanding our customers’ financial goals and offering our diverse products and services to help them achieve financial prosperity • Our approach is concentrated on growing and deepening relationships across our businesses that meet our risk/return measures • We are focused on our strategic priorities which are designed to enhance value over the long term - Being a trusted advisor - Growing fee revenue - Profitably expanding our markets
5 An Attractive Footprint Population: 137k Pop. CAGR: 0.70% Proj. Pop. CAGR: 0.57% Median HHI: $70k Proj. Median HHI: $81k Harrisonburg, VA Eastern Shore of MD (2) Population: 70k Pop. CAGR: 0.24% Median HHI: $75k Proj. Median HHI: $81k Charleston, WV Population: 252k Median HHI: $52k Proj. Median HHI: $60k Hagerstown-Martinsburg, MD-WV Population: 302k Pop. CAGR: 0.88% Proj. Pop. CAGR: 0.70% Median HHI: $68k Proj. Median HHI: $74k Population: 6.44mm Pop. CAGR: 1.01% Proj. Pop. CAGR: 0.54% Median HHI: $118k Proj. Median HHI: $132k Greater Washington D.C. Lexington-Fayette, KY Population: 523k Pop. CAGR: 0.79% Proj. Pop. CAGR: 0.52% Proj. Median HHI: $77k Population: 147k Pop. CAGR: 1.04% Proj. Pop. CAGR: 0.95% Median HHI: $82k Proj. Median HHI: $93k Winchester, VA-WV Huntington-Ashland, WV-KY-OH Population: 354k Median HHI: $54k Proj. Median HHI: $59k Salisbury, MD-DE Population: 436k Pop. CAGR: 1.19% Proj. Pop. CAGR: 1.03% Median HHI: $68k Proj. Median HHI: $74k Fastest Growing Metro in VA Horse Capital of the World Capital of the U.S. Capital of West Virginia Indicates higher than U.S. National Average (1) Source: S&P Global Market Intelligence. Current population and HHI metrics are for the year 2023. Population CAGR is based on through 2023; Projected population and HHI CAGRs are based on 2023 actual through 2028 projected (1) U.S. National Benchmark defined as the median for HHI metrics and as the growth rate pertaining to the total U.S. population for population CAGR metrics; U.S. population CAGR is 0.62%; U.S. projected population CAGR is 0.42%; U.S. median HHI is $74k; U.S. projected HHI is $83k (2) Eastern Shore of MD is made up of the Easton, MD and Cambridge, MD MSAs; Median HHI calculated using a weighted average based on pro forma deposits
6 Key merger-related metrics Aug. 24, 20231 June 30, 2024 Sept. 30, 2024 Dec. 31, 2024 Tangible book value per common share2 $34.57 $39.11 $42.32 $42.06 Tangible common equity/tangible assets2 6.4% 7.6% 8.2% 8.2% Leverage ratio3 8.1% 9.0% 9.7% 9.8% Common equity tier 1 ratio3 10.4% 10.9% 11.4% 11.5% Tier 1 capital ratio3 10.6% 11.3% 11.8% 11.9% Total capital ratio3 12.5% 13.9% 14.5% 14.6% (1) Estimated at August 24, 2023, Summit merger announcement date assuming December 31, 2023, close. Actual closing was May 3, 2024. (2) Non-GAAP measure. See the appendix for further information. (3) December 31, 2024, is estimated. Delivering on Expectations – Merger Related Statistics Merger Related Cost Saves Software Professional services Processing Personnel related Depreciation / amortization Identified annualized cost saves Goal $20MM $2.5MM $7.7MM $15.1MM $1.4MM $1.1MM Achieved $27.8MM
7 Balance Sheet Trends Highlights • Our objective is to build and maintain a fortress balance sheet - Maintain credit discipline through the cycle - Ensure proper allowances for credit losses - Stay liquid and have multiple sources of liquidity - Manage capital for the long term - Stress test the balance sheet for severe shocks - Continually improve risk, governance, and controls - Operate an effective risk-adjusted return culture • Loan to deposit ratio of 87.1% • Brokered deposits to total deposits of 3.8% • Uninsured deposits to total deposits of 29.6% • Relatively neutral interest rate position Balance Sheet ($ in 000s) Dec. 31, 2024 Sept. 30, 2024 June 30, 2024 Assets Cash and Cash Equivalents 135,314$ 291,765$ 211,920$ Investments 1,465,930 1,453,263 1,430,039 Loans Held for Sale 2,331 4,216 3,268 AOCIncome/(Loss) 5,672,236 5,574,037 5,616,724 Allowance for Loan Losses (68,040) (67,817) (68,017) Net Loans 5,604,196 5,506,220 5,548,707 Goodwill and Other Intangibles 90,083 94,381 98,678 Other Assets 514,331 515,068 517,581 Total Assets 7,812,185 7,864,913 7,810,193 Liabilities Total Deposits 6,515,239 6,600,825 6,639,571 Short-term Borrowings 365,000 320,163 285,161 Subordinated Debentures 111,885 110,482 109,064 Other Liablities 89,904 95,384 83,271 Total Liabilities 7,082,028 7,126,854 7,117,067 Shareholders' Equity Common Stock 7,770 7,767 7,752 Preferred Stock 10,413 10,413 10,413 Additional Paid-in Capital 401,172 400,377 399,553 Retained Earnings 434,106 422,844 403,422 AOCIncome/(Loss) (95,720) (75,758) (100,430) Treasury Stock (27,584) (27,584) (27,584) Total Shareholders' Equity 730,157 738,059 693,126 Total Liabilities & Shareholders' Equity 7,812,185$ 7,864,913$ 7,810,193$
8 Income Statement Trends Income Statement ($ in 000s) Dec. 31, 2024 Sept. 30, 2024 Operating Net Income (non-GAAP) Dec. 31, 2024 Sept. 30, 2024 (1) See appendix for reconciliation of merger-related expenses. • Loan growth in high single digits • Deposit growth in low single digits • Net interest margin 4.05% - 4.10% • Operating leverage > 10% versus 4Q24 annualized adjusted • Top quartile returns on assets and equity relative to peers Expectations for 2025 3 months ended 3 months ended Net income applicable to common shares $ 19,568 $ 27,397 Addback significant items (tax effected): Merger-related 7,069 2,449 Total significant items 7,069 2,449 Operating net income $ 26,637 $ 29,846 Weighted average dilutive shares 15,038,442 15,040,145 Adjusted diluted EPS 1.77$ 1.98$ Non-interest expense $ 61,410 $ 50,826 Remove significant items: Merger-related1 8,948 3,101 Total significant items 8,948 3,101 Adjusted non-interest expense $ 52,462 $ 47,725 Interest income 3 months ended 12 months ended 3 months ended 9 months ended Loans $ 97,940 $ 311,421 $ 103,730 $ 213,481 Securities 13,059 50,060 13,211 37,001 Other Interest Income 1,794 4,680 1,585 2,886 Total Interest Income 112,793 366,161 118,526 253,368 Interest expense Deposits 35,919 118,664 39,441 82,745 Borrowed Funds 3,383 14,189 3,080 10,806 Subordinated Debt and other interest 2,781 7,523 2,826 4,742 Total Interest Expense 42,083 140,376 45,347 98,293 Net Interest Income 70,710 225,785 73,179 155,075 Provision expense 833 24,220 147 23,387 Net Interest Income after Provision 69,877 201,565 73,032 131,688 Non-interest income Fiduciary and wealth management 2,429 8,411 2,352 5,982 Service charges and fees 4,447 15,594 5,453 11,147 Other non-interest income 4,915 12,161 2,811 7,246 Total Non-interest Income 11,791 36,166 10,616 24,375 Non-interest expense Salaries and other benefits 30,658 94,275 25,536 63,617 Occupancy 3,630 11,577 3,412 7,947 Other operating 27,122 91,981 21,878 64,859 Total Non-interest Expense 61,410 197,833 50,826 136,423 Income tax expense 465 4,190 5,200 3,725 Net income 19,793 35,708 27,622 15,915 Preferred stock dividends 225 675 225 450 Net income applicable to common shares $ 19,568 $ 35,033 $ 27,397 $ 15,465
9 Loan Portfolio as of 4Q24 ($ in 000s) Residential $1,173,749 Owner-Occupied CRE $614,362 Commercial & Industrial $613,085 AD&C $465,537 Consumer $167,701 Commercial Real Estate $2,637,802 Portfolio $5,672,236 Loan Segment Adjustable Rate Fixed Rate Commercial Real Estate $ 1,111,665 $ 1,526,137 Residential 577,347 596,402 Owner-occupied CRE 314,447 299,915 AD&C 355,847 109,690 Commercial & Industrial 421,104 191,981 Consumer 123,159 44,542 $ 2,903,569 $ 2,768,667 • The commercial real estate (CRE) portfolio is well-diversified across asset classes - CRE as a percentage of bank total risk-based capital is estimated at 337% - AD&C as a percentage of bank total risk-based capital is estimated at 51% • The CRE loan portfolio geographic footprint is spread across the West Virginia and greater DC / Maryland / Virginia (DMV) area with minimal office building exposure within Washington D.C. • In line with our overall strategy, we are focused on commercial & industrial loan growth and greater portfolio granularity Commercial Real Estate Category $ by Asset Class % by Asset Class Retail Real Estate $ 577,747 22% Multi-Family 491,924 19% Office Bldgs/Condos 398,331 15% Hotels/Motels 375,433 14% Industrial/Warehouse 262,632 10% Other 205,434 8% Nursing-Assisted Living 132,846 5% Self-Storage 124,672 4% Restaurants and Gas Stations 68,783 3% $ 2,637,802 100%
10 Security Portfolio as of 4Q24 ($in 000s) U.S Treasury & Agency $149,127 Municipal $698,724 Agency RMBS $53,186 Non-Agency RMBS $247,876 Agency CMBS $33,071 Non-Agency CMBS $154,511 Asset-Backed $64,056 Other $31,820 Portfolio FV $1,432,371 • Portfolio duration is approximately 4.5 years • 81% of unrealized losses have a duration of approximately 5.5 years; remainder less than 2.5 years • Unrealized losses are the result of the interest rate environment • AOCI accretion is expected to be approximately 5.5% per quarter assuming a stagnant interest rate environment • The current portfolio is held as available-for-sale, and there is no intent to reclassify any part • Majority of non-agency CMBS and ABS are equity enhanced through structure and credit support Category Net Unrealized Losses Amortized Cost WA Yield U.S. Treasury & Agency $ 16,492 $ 165,619 1.31% Municipal 78,457 777,181 2.76% Agency RMBS 4,058 57,244 3.63% Non-Agency RMBS 12,088 259,964 4.09% Agency CMBS 720 33,791 4.85% Non-Agency CMBS 4,110 158,621 3.92% Asset-Backed 252 64,308 6.05% Other 1,041 32,861 7.37% $ 117,218 $1,549,589 3.26%
11 Funding Sources as of 4Q24 ($ in 000s) Demand (non- interest) $1,379,940 Demand (interest) $2,223,540 Money Market & Savings $1,658,480 Brokered CDs $244,802 Time Deposits & Other $1,008,477 Deposits $6,515,239 Category Average Rate QTD Demand (non-interest bearing) − % Demand (interest bearing) 2.51% Money Market & Savings 1.60% Brokered Certificate of Deposits 4.45% Time Deposits & Other 4.57% Total Interest-Bearing Deposits 2.76% Total Deposits 2.17% • Loan-to-deposit ratio of 87.1% and loan + security-to-deposit ratio of 109.6% • Brokered deposits represent 3.8% of total deposits • Uninsured deposits totaled $1.9 billion, representing 29.6% of total deposit balance • Borrowings totaled $365 million with a total capacity of $4.4 billion and remaining capacity of $4.1 billion • Stress tests are performed on liquidity and capital on a quarterly basis • We believe we have ample liquidity to withstand significant stress
12 Capital Ratio Trends1 16.6% 10.9% 11.4% 11.5% 1Q24 2Q24 3Q24 4Q24 Common Equity Tier 1 Ratio 16.6% 11.3% 11.8% 11.9% 1Q24 2Q24 3Q24 4Q24 Tier 1 Capital Ratio 17.5% 13.9% 14.5% 14.6% 1Q24 2Q24 3Q24 4Q24 Total Capital Ratio 11.4% 9.0% 9.7% 9.8% 1Q24 2Q24 3Q24 4Q24 Leverage Ratio Capital Management • We take a forward-looking, disciplined approach to capital management that emphasizes acceptable risk-adjusted returns over the long- term • Our capital management priorities include - Supporting customers - Funding business investments - Maintaining appropriate capital in light of economic conditions and regulatory expectations - Returning excess capital to shareholders • Modeled stress scenarios include evaluating the impact of deposit shocks, interest rate scenarios, and general balance sheet repositioning • Stress scenarios result in capital levels well above well-capitalized levels (1) All 4Q24 capital ratios are estimated.
13 Asset Quality Trends 1.16% 1.21% 1.22% 1.20% 1Q24 2Q24 3Q24 4Q24 Allowance Coverage Ratio 0.00% 0.01% 0.01% 0.01% 1Q24 2Q24 3Q24 4Q24 NCOs / Average Loans 92.0% 207.1% 189.1% 177.3% 1Q24 2Q24 3Q24 4Q24 Allowance for Credit Losses / NPLs 1.26% 0.58% 0.64% 0.68% 1Q24 2Q24 3Q24 4Q24 NPLs / Total Loans Credit Management • Our objective is to maintain a moderate risk profile through the economic cycle • Credit risk management is embedded in our risk culture and in our decision-making processes - Managed through specific policies and processes - Measured and evaluated against our risk appetite and credit concentration limits - Reported, along with specific mitigation activities, to management and the Board of Directors through our governance structure • Underwriting guidelines are adjusted to reflect current market conditions • Loan reviews include ongoing monitoring procedures that involve additional stress testing of interest rate movements and collateral performance
14 Final Thoughts • Our business model is built on customer service - Understanding our customers’ financial goals and offering our diverse products and services to help them achieve financial prosperity • Our approach is concentrated on growing and deepening relationships across our businesses that meet our risk/return measures • We are focused on our strategic priorities which are designed to enhance value over the long term - Being a trusted advisor - Growing fee revenue - Profitably expanding our markets
15 Appendix: Notes on Non-GAAP Financial Measures Total Common Equity, Tangible Book Value & Tangible Assets: 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 since they eliminate intangible assets from stockholders' equity and retain the effect of accumulated other comprehensive income/(loss) in stockholders' equity. Dec. 31, 2024 Sept. 30, 2024 June 30, 2024 Common Shareholders’ Equity $ 719,744 $ 727,646 $ 682,713 Less: Goodwill and intangible assets, net 90,083 94,381 98,678 Tangible common equity (non-GAAP) 629,661 633,265 584,035 Shares outstanding at end of period 14,969,104 14,963,003 14,932,169 Tangible book value per common share $ 42.06 $ 42.32 $ 39.11 Total Assets 7,812,185 7,864,913 7,810,193 Less: Goodwill and Intangible assets, net 90,083 94,381 98,678 Tangible assets (non-GAAP) $ 7,722,102 $ 7,770,532 $ 7,711,515
16 Appendix: Noninterest Expense Reconciliation Dec. 31, QTD Merger Adjusted non- 2024 Related interest expense Sept. 30, QTD Merger Adjusted non- 2024 Related interest expense Salaries and wages 25,818$ (2,926)$ 22,892$ 20,858$ -$ 20,858$ Pensions and other employee benefits 4,840 (36) 4,804 4,678 - 4,678 Occupancy 3,630 - 3,630 3,412 (63) 3,349 Equipment rentals, depreciation & maintenance 4,531 (332) 4,199 4,699 (1,249) 3,450 Other Operating 22,591 (5,654) 16,937 17,179 (1,789) 15,390 Total non-interest expense 61,410$ (8,948)$ 52,462$ 50,826$ (3,101)$ 47,725$ 3 months ended3 months ended