Financial Position - As of September 30, 2024, the company reported total consolidated assets of $7.9 billion, gross loans of $5.6 billion, total deposits of $6.6 billion, and total shareholders' equity of $738.1 million[211]. - The total assets of the company reached $7.8 billion as of September 30, 2024, compared to $3.6 billion as of September 30, 2023[320]. - Total assets increased by $4.25 billion to $7.86 billion as of September 30, 2024, primarily due to the merger[326]. - Total deposits increased by $3.6 billion from $3.0 billion at December 31, 2023, to $6.6 billion at September 30, 2024, primarily due to the completion of the Merger with Summit[364]. - Total shareholders' equity rose to $738.1 million at September 30, 2024, up from $314.8 million at December 31, 2023, an increase of $423.3 million mainly attributed to the Merger[369]. Merger Impact - The company completed the merger with Summit Financial Group, Inc., with holders of Summit common stock receiving 0.5043 shares of Burke & Herbert common stock for each share of Summit common stock owned[212][213]. - The Company incurred $27.5 million in expenses related to the Merger with Summit for the nine months ended September 30, 2024[268]. - Non-interest income rose by $11.2 million, or 85.7%, to $24.4 million for the nine months ended September 30, 2024, compared to $13.1 million for the same period in 2023, also attributed to the Merger[267]. - Net interest income increased by $83.6 million to $155.1 million for the nine months ended September 30, 2024, compared to $71.5 million for the same period in 2023, primarily driven by the impact of the Merger[264]. - The tax-adjusted net interest margin was 3.78% for the nine months ended September 30, 2024, compared to 2.90% for the same period in 2023, reflecting the effects of the Merger[272]. Loan Portfolio and Credit Quality - The bank's loan portfolio is a significant financial asset, and the determination of the ACL is considered a critical accounting estimate due to its reliance on various risk assessments[221]. - The Bank's exposure to commercial real estate (CRE) at September 30, 2024, was $2.5 billion, representing 45.4% of its gross loan portfolio[228]. - The provision for credit losses was $23.4 million for the nine months ended September 30, 2024, compared to $1.0 million for the same period in 2023, due to a one-time CECL Day 2 provision[289]. - The allowance for credit losses (ACL) was recorded at $67,817,000 as of September 30, 2024, reflecting a comprehensive approach to expected credit losses[351]. - The Company's total non-performing assets reached $38,448,000 as of September 30, 2024, compared to $3,744,000 as of December 31, 2023[344]. Income and Expenses - Net income applicable to common shares for the three months ended September 30, 2024, was $27,397 thousand, compared to $4,056 thousand in the prior year[260]. - Non-interest expense increased by $72.3 million, or 112.7%, to $136.4 million for the nine months ended September 30, 2024, compared to $64.1 million for the same period in 2023, largely due to Merger-related costs[268]. - Total interest income increased to $118.5 million for the three months ended September 30, 2024, compared to $37.3 million for the same period in 2023, representing a 218.0% increase[319]. - Non-interest income for the three months ended September 30, 2024, increased by 147.5% to $10.6 million, compared to $4.3 million for the same period in 2023[297]. - The tax-adjusted net interest margin improved to 4.07% for the three months ended September 30, 2024, compared to 2.76% for the same period in 2023[302]. Regulatory Compliance and Risk Management - The company is subject to regulation and supervision by the Federal Reserve as a financial holding company[208]. - As of September 30, 2024, the company complied with all regulatory capital standards and qualifies as "well capitalized"[250]. - The Company actively monitors its commercial real estate portfolio through various credit risk and concentration reports[228]. - The Company conducts periodic stress tests to ensure capital levels remain above regulatory ratios, with liquidity metrics within internal policy guidelines[237]. - Liquidity management is crucial for meeting day-to-day cash flow requirements, with analyses performed quarterly[238][239]. Employee and Operational Metrics - The company had 857 full-time employees as of September 30, 2024, with no employees covered by a collective bargaining agreement[211]. - The number of full-service branches increased to 75 from 23, and full-time equivalent employees rose to 857 from 404, reflecting the expansion following the Merger[268]. - The primary source of liquidity for the company is dividends paid by the Bank, subject to regulatory restrictions[243][244]. - Management believes current liquidity sources are adequate for the company's growth plans[245].

Financial Performance - Net income applicable to common shares for Q3 2024 was $27.4 million, with adjusted operating net income of $29.8 million[2]. - Earnings per diluted common share (EPS) was $1.82, while adjusted diluted EPS was $1.98[2]. - Net income for the quarter ended September 30, 2024, was $27,622,000, compared to a loss of $16,919,000 in the previous quarter[24]. - The net income applicable to common shares for the three months ended September 30, 2024, was $27,397,000, compared to $4,056,000 in the same period of 2023, reflecting an increase of 576%[15]. - Operating net income for September 30, 2024, was $29,846,000, compared to $24,967,000 for June 30, 2024, reflecting a growth of 11.5%[27]. Revenue and Income Growth - Total revenue (non-GAAP) for September 30, 2024, was $83,795,000, up from $69,270,000 in the previous quarter, representing a 20.5% increase[24]. - Total revenue for September 30, 2024, reached $118,526,000, up from $96,097,000 for June 30, 2024, indicating a 23.2% increase[28]. - Total non-interest income for Q3 2024 was $10.6 million, an increase of $1.1 million from Q2 2024[7]. - Non-interest income for the three months ended September 30, 2024, was $10,616,000, compared to $4,289,000 in the same period of 2023, indicating an increase of 148%[15]. Interest Income and Margin - Net interest income for the quarter increased to $73.2 million, up from $59.8 million in Q2 2024[6]. - Total interest income for the three months ended September 30, 2024, was $118,526,000, a significant increase from $37,272,000 in the same period of 2023, representing a growth of 218%[15]. - Net interest income after credit loss expense for the nine months ended September 30, 2024, reached $131,688,000, compared to $70,491,000 in the same period of 2023, marking an increase of 87%[15]. - The net interest margin on a fully taxable equivalent basis was 4.07% for Q3 2024, slightly up from 4.06% in Q2 2024[6]. - The net interest margin for the three months ended September 30, 2024, was 4.07%, compared to 2.70% in the same period of 2023, showing an improvement in profitability[17]. Assets and Deposits - Total assets as of September 30, 2024, amounted to $7,864,913,000, up from $3,617,579,000 as of December 31, 2023, reflecting a growth of 117%[16]. - Total deposits increased to $6,600,825,000 as of September 30, 2024, from $3,001,881,000 as of December 31, 2023, representing a growth of 120%[16]. - Total gross loans at the end of Q3 2024 were $5.6 billion, and total deposits were $6.6 billion, resulting in a loan-to-deposit ratio of 84.4%[3]. Credit Losses and Provisions - The allowance for credit losses at the end of Q3 2024 was $67.8 million, or 1.2% of total loans[6]. - The provision for credit losses for the nine months ended September 30, 2024, was $23,387,000, compared to $964,000 in the same period of 2023, showing a significant increase in credit loss provisions[15]. - Provision for credit losses for September 30, 2024, was $147,000, a significant decrease from $23,910,000 for June 30, 2024[31]. Operational Efficiency - The efficiency ratio improved to 60.66% from 93.02% in the previous quarter, showing enhanced operational efficiency[25]. - Non-interest expense for September 30, 2024, was $50,826,000, a decrease from $64,432,000 for June 30, 2024, showing a reduction of 21.1%[27]. - Total non-interest expense for the nine months ended September 30, 2024, was $136,423,000, compared to $64,136,000 in the same period of 2023, indicating an increase of 113%[15]. Capital and Equity - Common Equity Tier 1 capital to risk-weighted assets ratio was 11.3%, significantly above the regulatory requirement of 6.5%[8]. - Total equity increased to $738,059,000 from $693,126,000, indicating a growth of 6.5%[22]. - Tangible common equity as of September 30, 2024, was $633,265,000, up from $584,035,000 for June 30, 2024, reflecting an increase of 8.4%[32]. Future Plans - The company is focused on planned systems integration in Q4 2024 to enhance efficiencies post-merger with Summit Financial Group[4].

Core Viewpoint - Burke & Herbert Financial Services Corp. reported strong financial results for Q3 2024, reflecting the benefits of its merger with Summit Financial Group, with a notable increase in net income and a dividend hike [1][4]. Financial Performance - Net income applicable to common shares was $27.4 million, or $1.82 per diluted share, with adjusted operating net income of $29.8 million, or $1.98 per diluted share [2][4]. - Net interest income for the quarter reached $73.2 million, up from $59.8 million in the previous quarter, with a net interest margin of 4.07% [2][5]. - Total non-interest income increased to $10.6 million, reflecting a $1.1 million rise from the second quarter of 2024 [6]. Balance Sheet Strength - Total liquidity at the end of Q3 2024 was $2.6 billion, with total gross loans of $5.6 billion and total deposits of $6.6 billion, resulting in a loan-to-deposit ratio of 84.4% [3][5]. - The company maintained strong capital ratios, with a Common Equity Tier 1 capital ratio of 11.3% and a Total risk-based capital ratio of 14.3%, both significantly above regulatory requirements [6][19]. Dividend Declaration - The board of directors declared a regular cash dividend of $0.55 per share, representing a 3.8% increase from the prior quarter's dividend, to be paid on December 2, 2024 [1][4]. Merger Impact - The financial results reflect a full quarter following the completion of the merger with Summit Financial Group, indicating successful integration and operational efficiencies [2][4].

Financial Performance - Net loss applicable to common shares for the six months ended June 30, 2024, was $11.9 million, a decrease of $25.5 million compared to net income of $13.6 million for the same period in 2023[231]. - Net interest income increased by $33.3 million to $81.9 million for the six months ended June 30, 2024, compared to $48.6 million for the same period in 2023, primarily driven by the impact of the Merger[231][235]. - Non-interest income rose by $4.9 million, or 55.7%, to $13.8 million for the six months ended June 30, 2024, compared to $8.8 million for the same period in 2023, also attributed to the Merger[233]. - Non-interest expenses increased by $43.9 million, or 105.2%, to $85.6 million for the six months ended June 30, 2024, compared to $41.7 million for the same period in 2023, largely due to Merger-related costs[233]. - The tax-adjusted net interest margin was 3.56% for the six months ended June 30, 2024, up from 2.96% for the same period in 2023, driven by the Merger and acquisition of higher-yielding assets[236]. - Total interest income increased by 88.7% to $134.8 million for the six months ended June 30, 2024, compared to $71.4 million for the same period in 2023[247]. - Total interest expense was $52.9 million for the six months ended June 30, 2024, up from $22.9 million in the same period in 2023, reflecting the impact of the Merger[248]. Assets and Liabilities - As of June 30, 2024, the company reported total consolidated assets of $7.8 billion, gross loans of $5.6 billion, total deposits of $6.6 billion, and total shareholders' equity of $693.1 million[186]. - Total assets increased to $7.81 billion as of June 30, 2024, compared to $3.57 billion as of June 30, 2023[229]. - Total deposits reached $6.64 billion as of June 30, 2024, compared to $3.01 billion as of June 30, 2023[229]. - The total loan portfolio increased by $3.53 billion to $5.62 billion as of June 30, 2024, primarily due to the merger[289]. - The company has available unused borrowing capacity of $2.2 billion through its lines of credit as of June 30, 2024[310]. - Brokered time deposits amounted to $403.7 million as of June 30, 2024, compared to $389.0 million at December 31, 2023[312]. Credit Losses and Provisions - The allowance for credit losses is based on historical experience, current conditions, and projections, reflecting the expected credit losses for financial assets[193]. - The company recorded a provision of $20.1 million for credit losses for the three months ended June 30, 2024, compared to $310.0 thousand for the same period in 2023[298]. - Provision for credit losses was $23.2 million for the six months ended June 30, 2024, compared to $0.7 million for the same period in 2023, reflecting a one-time CECL Day 2 provision related to the Merger[232]. - The allowance for credit losses (ACL) was adjusted to $68.02 million as of June 30, 2024, reflecting an increase in expected credit losses[289][297]. - The total allowance for credit losses was $68,017 thousand as of June 30, 2024, compared to $25,301 thousand at the end of the previous year[304]. Merger Impact - The company completed a merger with Summit Financial Group, Inc., where holders of Summit common stock received 0.5043 shares of Burke & Herbert common stock for each share of Summit common stock[183]. - Non-interest income increased by 105.5% to $9.5 million for the three months ended June 30, 2024, compared to $4.6 million in the same period of 2023, primarily driven by the Merger[276]. - Non-interest expense surged by 201.8% to $64.4 million for the three months ended June 30, 2024, compared to $21.3 million in the same period of 2023, largely due to Merger-related costs[277]. - The Company incurred $24.4 million of non-interest expense related to the Merger with Summit for the six months ended June 30, 2024[252]. - The company is focused on integrating Summit's operations and achieving related revenue synergies and cost savings[224]. Regulatory Compliance - The company is subject to regulation and supervision by the Federal Reserve as a financial holding company[181]. - As of June 30, 2024, the Bank complied with all regulatory capital standards and qualifies as "well capitalized"[220]. - The Company is subject to various regulatory capital requirements, including maintaining minimum Common Equity Tier 1 (CET 1), Tier 1, and Total Capital ratios[217]. - The Company must adhere to capital adequacy guidelines and regulatory frameworks for "prompt corrective action" to avoid constraints on dividends and other financial activities[219]. Interest Rate Risk Management - The company actively manages its interest rate sensitivity position to achieve sustainable growth in net interest income[324]. - Interest rate risk management includes using tools such as interest rate sensitivity analysis and interest rate simulations[325]. - The company does not hedge all of its interest rate risk, and there is no guarantee that hedging attempts will be successful[323]. - The company’s profitability is affected by fluctuations in interest rates, which may impact interest income and expense[322]. - The economic value of equity (EVE) is expected to decrease by 3.5% with a 200 basis point increase in interest rates as of June 30, 2024[329]. Employment and Operations - The company had 850 full-time employees as of June 30, 2024, with no employees covered by a collective bargaining agreement[186]. - The company must manage operational risks related to new products, changes in processes, and implementation of new technology[223].

Merger and Acquisition - The total aggregate consideration paid for the merger was approximately $397.4 million, resulting in approximately $32.8 million of preliminary goodwill[1] - The merger created a financial holding company with more than $7.8 billion in assets and over 75 branches across multiple states[13] - Total loans at the end of Q2 2024 were $5.6 billion, up from $2.1 billion at the end of 2023, primarily due to the merger[4][16] - Total deposits increased to $6.6 billion at June 30, 2024, up from $3.0 billion at December 31, 2023, primarily due to the merger[7] - Total non-interest income for Q2 2024 was $9.5 million, an increase of $5.3 million from Q1 2024 due to the merger[39] Financial Performance - The net loss applicable to common shares for Q2 2024 was $17.1 million, or $(1.41) per diluted common share; adjusted (non-GAAP) operating net income was $25.0 million[6][14] - Adjusted operating net income for Q2 2024 was $25.0 million, or $2.04 per diluted share[36] - Net income (loss) applicable to common shares for Q2 2024 was $(17.1) million, compared to $6.0 million in Q2 2023[45] - Net income (loss) applicable to common shares for June 30, 2024, was $(17,144,000), a decline from $6,034,000 in June 30, 2023[50] Income and Expenses - Net interest income for the quarter was $59.8 million, with a net interest margin on a fully taxable equivalent basis of 4.06%, an increase of 138.1 basis points compared to the previous quarter[3][17] - Net interest income increased to $59.8 million in Q2 2024, up from $22.1 million in Q1 2024[37] - Interest income for June 30, 2024, reached $96,097,000, significantly up from $37,116,000 in June 30, 2023, representing a growth of 158%[50] - Total revenue (non-GAAP) for June 30, 2024, was $69,270,000, compared to $28,417,000 for the same period last year, indicating an increase of 143%[50] - Non-interest expense for the quarter was $64.4 million, which included $23.8 million of merger-related charges[19] - Non-interest expense for June 30, 2024, totaled $64,432,000, compared to $21,348,000 in June 30, 2023, reflecting a rise of 202%[52] Capital and Assets - The Company ended the quarter with a Common Equity Tier 1 capital ratio of 10.9% and a Total risk-based capital ratio of 13.8%, both above regulatory requirements[5][20] - The Bank's Common Equity Tier 1 capital ratio was 12.4% and Total risk-based capital ratio was 13.5% as of June 30, 2024, both significantly above regulatory requirements[40] - Total assets as of June 30, 2024, were $7.81 billion, an increase from $3.57 billion in June 2023[48] - Total equity increased to $693.1 million as of June 30, 2024, up from $270.8 million in June 2023[48] - Tangible common equity as of June 30, 2024, was $584,035,000, up from $290,072,000 in June 30, 2023[60] Credit and Loans - 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[9] - Provision for credit losses for June 30, 2024, was $23,910,000, compared to a recapture of $(750,000) in December 31, 2023[59] - Loans (gross) reached $5.62 billion as of June 30, 2024, compared to $2.07 billion in June 2023[48] Shareholder Returns - The Company declared a regular cash dividend of $0.53 per share to be paid on September 3, 2024[12] Book Value and Earnings Per Share - Book value per share increased to $45.72 as of June 30, 2024, compared to $39.05 in June 2023[48] - Adjusted diluted EPS for June 30, 2024, was $2.04, up from $0.83 in June 30, 2023[52] Other Financial Metrics - Average earning assets for June 30, 2024, were $5,994,383,000, compared to $3,379,534,000 in June 30, 2023, showing an increase of 77%[63] - Net interest margin (non-GAAP) for June 30, 2024, was 4.06%, compared to 2.87% in June 30, 2023[63] - The company reported a significant increase in non-interest income, which reached $9,505,000 for June 30, 2024, compared to $4,625,000 in June 30, 2023, marking a growth of 105%[50]

Q2 2024 Highlights 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. 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. Provision for credit losses ("provision") of $23.9 million for the quarter; $29.5 million of CECL Day 2 nonpurchased credi ...

Table of Contents Title of Each Class Trading symbol Name of Exchange on which registered UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) Virginia 92-0289417 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 100 S. Fairfax Street, Alexandria, Virginia 22314 (Address of principal executive offices) (Zip Code) 703-666-3555 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of th ...

ALEXANDRIA, Va. and MOOREFIELD, W.Va., May 3, 2024 /PRNewswire/ -- Burke & Herbert Financial Services Corp. ("Burke & Herbert") (Nasdaq: BHRB) today 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, effective May 3, 2024. From David P. Boyle, Chair and Chief Executive Officer "The consummation of this partnership brings together two organizations co ...

ALEXANDRIA, Va., April 26, 2024 /PRNewswire/ --Burke & Herbert Financial Services Corp. (the "Company" or "Burke & Herbert") (Nasdaq: BHRB) reported financial results for the quarter ended March 31, 2024. In addition, at its meeting on April 25, 2024, the board of directors declared a $0.53 per share regular cash dividend to be paid on June 3, 2024, to shareholders of record as of the close of business on May 15, 2024. Net income totaled $5.2 million for the quarter, compared to $5.1 million the previous q ...

First Quarter 2024 Financial Highlights Burke & Herbert Financial Services Corp. reported Q1 2024 net income of $5.2 million, maintained strong capital and liquidity, and secured final merger approval [Key Financial Metrics](index=1&type=section&id=1.1%20Key%20Financial%20Metrics) Burke & Herbert Financial Services Corp. reported a net income of $5.2 million for Q1 2024, with diluted earnings per share of $0.69, while operating net income (non-GAAP) was $5.7 million, and adjusted diluted EPS (non-GAAP) was $0.76, both showing a decrease compared to prior periods Q1 2024 Key Financial Metrics (GAAP & Non-GAAP) | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :-------------------------------- | :------ | :------ | :------ | | Net Income | $5.2M | $5.1M | $7.5M | | Diluted EPS | $0.69 | $0.67 | $1.00 | | Operating Net Income (non-GAAP) | $5.7M | $6.2M | $7.7M | | Adjusted Diluted EPS (non-GAAP) | $0.76 | $0.83 | $1.02 | [Balance Sheet and Liquidity](index=1&type=section&id=1.2%20Balance%20Sheet%20and%20Liquidity) The Company maintained a strong balance sheet with ample liquidity, totaling $758.3 million at the end of the first quarter, with total deposits remaining relatively stable at $3.0 billion - Total liquidity, including all available borrowing capacity with cash and cash equivalents, totaled **$758.3 million** at the end of Q1 2024[2](index=2&type=chunk) - Total deposits were relatively stable, ending the quarter at **$3.0 billion**[3](index=3&type=chunk) - Total gross loans increased by **$166.4 million**, or **8.5%**, year-over-year, with a loan-to-deposit ratio of **70.8%** at quarter-end[22](index=22&type=chunk) [Capital Position](index=1&type=section&id=1.3%20Capital%20Position) Burke & Herbert remains well-capitalized, exceeding regulatory requirements with strong capital ratios at the end of the quarter Q1 2024 Capital Ratios | Metric | Ratio | | :--------------------------------- | :------ | | Common Equity Tier 1 capital to RWA | 16.6% | | Total risk-based capital to RWA | 17.5% | | Leverage ratio | 11.4% | [Strategic Developments (Merger)](index=1&type=section&id=1.4%20Strategic%20Developments%20(Merger)) The Company received final regulatory approval for its merger of equals with Summit Financial Group, Inc., with the closing expected on May 3, 2024, creating a significant financial holding company - Final regulatory approval for the merger with Summit Financial Group, Inc. was received on April 19, 2024, with the merger expected to close on **May 3, 2024**[24](index=24&type=chunk) - Upon completion, the merger will create a financial holding company with over **$8 billion** in assets, more than **75 branches** across five states (Virginia, West Virginia, Maryland, Delaware, and Kentucky), and over **800 employees**[5](index=5&type=chunk) [Management Commentary](index=1&type=section&id=1.5%20Management%20Commentary) David P. Boyle, Company Chair, President, and CEO, expressed satisfaction with the financial progress, highlighting the strong balance sheet, stable asset quality, active lending, dependable deposit base, and the ongoing efforts for a smooth merger integration - CEO David P. Boyle noted satisfaction with financial progress, a well-positioned balance sheet for various economic scenarios, stable asset quality, active lending teams, a strong deposit base, and diligent merger integration efforts[25](index=25&type=chunk) Results of Operations Q1 2024 net income decreased to $5.2 million, driven by increased funding costs and merger expenses, partially offset by loan interest income growth [Net Income and Earnings Per Share](index=2&type=section&id=2.1%20Net%20Income%20and%20Earnings%20Per%20Share) Net income for Q1 2024 was $5.2 million, a decrease of $2.3 million compared to Q1 2023, primarily driven by increased funding costs and merger-related expenses, partially offset by higher loan interest income and a credit loss recapture - Net income for Q1 2024 was **$5.2 million**, a **$2.3 million** decrease from Q1 2023, mainly due to increased funding costs and merger-related costs, partially offset by higher loan interest income and a credit loss recapture[7](index=7&type=chunk) [Net Interest Income and Expense](index=2&type=section&id=2.2%20Net%20Interest%20Income%20and%20Expense) Net interest income decreased by $2.6 million year-over-year, as a significant increase in interest expense, particularly from deposits, outpaced the growth in interest income from loans, reflecting a shift from non-interest-bearing to interest-bearing deposits Q1 2024 Interest Income & Expense (YoY Change) | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------- | :------ | :------ | :----------- | | Total Interest Income | $38.7M | $34.3M | +13% | | Loan Interest & Fees | $28.0M | $22.76M | +23% | | Investment Security Income | $10.3M | $11.26M | -8% | | Total Interest Expense | $16.6M | $9.55M | +$7.1M | | Deposit Interest Expense | $12.9M | $5.4M | +$7.5M | | Net Interest Income | $22.1M | $24.77M | -$2.6M | - Non-interest-bearing deposits decreased by **9%** to **$822.8 million**, while interest-bearing deposits increased by **2%** to **$2.2 billion** year-over-year, reflecting a changing deposit mix[8](index=8&type=chunk) - Borrowed funds increased by **12%** to **$360.0 million** from the prior year quarter[8](index=8&type=chunk) [Non-Interest Income and Expense](index=2&type=section&id=2.3%20Non-Interest%20Income%20and%20Expense) Non-interest income saw a slight increase year-over-year, primarily driven by fiduciary and wealth management fees, while non-interest expense rose due to merger-related activities, including legal, consulting, and integration costs Q1 2024 Non-Interest Income & Expense (YoY Change) | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------- | :------ | :------ | :----------- | | Total Non-Interest Income | $4.3M | $4.2M | +$0.1M | | Fiduciary & Wealth Mgmt Fees | $1.4M | $1.3M | +$0.1M | | Total Non-Interest Expense | $21.2M | $20.4M | +$0.8M | | Non-interest expense increase | 4% | | | - The increase in non-interest expense was primarily due to merger-related activities, including legal, consulting, and integration costs[29](index=29&type=chunk) [Provision for Credit Losses](index=2&type=section&id=2.4%20Provision%20for%20Credit%20Losses) The Company recorded a recapture of credit losses of $0.7 million in Q1 2024, a positive shift from a provision of $0.5 million in the prior year quarter, attributed to improving portfolio credit quality and diversification Q1 Credit Loss Provision/Recapture | Metric | Q1 2024 | Q1 2023 | | :--------------------------------- | :------ | :------ | | Provision for (recapture of) credit losses | ($0.7M) | $0.5M | - The recapture of credit losses was due to improving portfolio credit quality and continued diversification of the loan portfolio[9](index=9&type=chunk) Financial Position Total assets increased to $3.696 billion as of March 31, 2024, reflecting growth in loans and securities, alongside stable deposits and increased equity [Balance Sheet Overview](index=6&type=section&id=3.1%20Balance%20Sheet%20Overview) The Company's total assets increased to $3.696 billion as of March 31, 2024, from $3.618 billion at December 31, 2023, reflecting growth in loans and securities Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------ | :------------- | :---------------- | | Total Assets | $3,696,390 | $3,617,579 | | Total Liabilities | $3,377,082 | $3,302,829 | | Total Shareholders' Equity | $319,308 | $314,750 | [Deposits and Borrowed Funds](index=6&type=section&id=3.2%20Deposits%20and%20Borrowed%20Funds) Total deposits slightly decreased quarter-over-quarter, with a notable shift from non-interest-bearing to interest-bearing deposits, while borrowed funds increased significantly Deposits and Borrowed Funds (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :---------------- | | Non-interest-bearing deposits | $822,767 | $830,320 | | Interest-bearing deposits | $2,167,346 | $2,171,561 | | Total deposits | $2,990,113 | $3,001,881 | | Borrowed funds | $360,000 | $272,000 | [Loans and Investment Securities](index=6&type=section&id=3.3%20Loans%20and%20Investment%20Securities) Gross loans increased quarter-over-quarter, while the fair value of securities available-for-sale also saw an increase Loans and Securities (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------ | :------------- | :---------------- | | Loans (gross) | $2,118,155 | $2,087,756 | | Allowance for credit losses | ($24,606) | ($25,301) | | Net loans | $2,093,549 | $2,062,455 | | Securities available-for-sale, at fair value | $1,275,520 | $1,248,439 | [Shareholders' Equity](index=6&type=section&id=3.4%20Shareholders'%20Equity) Total shareholders' equity increased to $319.3 million, primarily due to higher fair value marks for the security portfolio, which reduced accumulated other comprehensive loss Shareholders' Equity (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------ | :------------- | :---------------- | | Total Shareholders' Equity | $319,308 | $314,750 | | Accumulated other comprehensive income (loss) | ($100,954) | ($103,494) | - The increase in shareholders' equity was primarily the result of higher fair value marks for the security portfolio, leading to a **$22.9 million** lower accumulated other comprehensive loss[9](index=9&type=chunk) Regulatory Capital Ratios Both the Company and its Bank subsidiary maintain strong capital positions, significantly exceeding all regulatory well-capitalized requirements [Company and Bank Capital Ratios](index=3&type=section&id=4.1%20Company%20and%20Bank%20Capital%20Ratios) Both Burke & Herbert Financial Services Corp. and its subsidiary, Burke & Herbert Bank & Trust Company, continue to be well-capitalized, with all regulatory capital ratios significantly exceeding required minimums Q1 2024 Regulatory Capital Ratios | Metric | Company Ratio | Bank Ratio | Well-Capitalized Requirement | | :--------------------------------- | :------------ | :--------- | :--------------------------- | | Common Equity Tier 1 capital to RWA | 16.6% | 16.4% | 6.5% | | Total risk-based capital to RWA | 17.5% | 17.4% | 10% | | Leverage ratio | 11.4% | 11.3% | 5% | Merger with Summit Financial Group, Inc. The merger with Summit Financial Group, Inc. received final regulatory approval and is expected to close on May 3, 2024, creating a significantly expanded financial holding company [Merger Status and Impact](index=1&type=section&id=5.1%20Merger%20Status%20and%20Impact) The merger of equals with Summit Financial Group, Inc. received final regulatory approval and is anticipated to close on May 3, 2024, with this strategic combination expected to significantly expand the Company's asset base, branch network, and employee count - Final regulatory approval for the merger with Summit Financial Group, Inc. was received on April 19, 2024, with the closing expected on **May 3, 2024**[24](index=24&type=chunk) - The combined entity will operate as a financial holding company with over **$8 billion** in assets, more than **75 branches** across Virginia, West Virginia, Maryland, Delaware, and Kentucky, and over **800 employees**[5](index=5&type=chunk) About Burke & Herbert Financial Services Corp. Burke & Herbert Financial Services Corp. is the holding company for Burke & Herbert Bank & Trust Company, the oldest continuously operating bank in the greater Washington DC Metro area [Company Profile](index=3&type=section&id=6.1%20Company%20Profile) Burke & Herbert Financial Services Corp. is the financial holding company for Burke & Herbert Bank & Trust Company, recognized as the oldest continuously operating bank under its original name in the greater Washington DC Metro area, offering a comprehensive range of financial solutions through over 20 branches and commercial loan offices - Burke & Herbert Bank & Trust Company is the oldest continuously operating bank under its original name headquartered in the greater Washington DC Metro area[33](index=33&type=chunk) - The Bank offers a full range of business and personal financial solutions and operates over **20 branches** throughout Northern Virginia, with commercial loan offices in Fredericksburg, Loudoun County, Richmond, and Bethesda, Maryland[33](index=33&type=chunk) Cautionary Note Regarding Forward-Looking Statements This section provides a cautionary note on forward-looking statements, highlighting that actual results may differ materially due to various risks and uncertainties, especially regarding the proposed merger [Forward-Looking Statement Disclaimer](index=3&type=section&id=7.1%20Forward-Looking%20Statement%20Disclaimer) This section provides a standard cautionary note regarding forward-looking statements, emphasizing that actual results may differ materially due to various risks and uncertainties, particularly concerning the proposed merger with Summit Financial Group, Inc. - Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which may cause actual results or future events to differ materially from those indicated[13](index=13&type=chunk)[35](index=35&type=chunk) - Key risks include the possibility of merger termination, legal proceedings, delays in closing, failure to realize anticipated benefits (cost savings, synergies), integration difficulties, unexpected costs, and general economic, political, and market factors[13](index=13&type=chunk) Consolidated Financial Statements (Unaudited) This section presents the Company's unaudited consolidated statements of income and balance sheets for Q1 2024, detailing financial performance and position [Consolidated Statements of Income](index=5&type=section&id=8.1%20Consolidated%20Statements%20of%20Income) The consolidated statements of income provide a detailed breakdown of revenues and expenses for the three months ended March 31, 2024, compared to the same period in 2023 Consolidated Statements of Income (in thousands) | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $38,745 | $34,328 | | Total interest expense | $16,614 | $9,554 | | Net interest income | $22,131 | $24,774 | | Provision for (recapture of) credit losses | ($670) | $515 | | Total non-interest income | $4,254 | $4,214 | | Total non-interest expense | $21,165 | $20,365 | | Income before income taxes | $5,890 | $8,108 | | Income tax expense | $678 | $584 | | Net income | $5,212 | $7,524 | [Consolidated Balance Sheets](index=6&type=section&id=8.2%20Consolidated%20Balance%20Sheets) The consolidated balance sheets present the Company's financial position as of March 31, 2024, and December 31, 2023, detailing assets, liabilities, and shareholders' equity Consolidated Balance Sheets (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------ | :------------- | :---------------- | | Cash and cash equivalents | $54,077 | $44,498 | | Securities available-for-sale, at fair value | $1,275,520 | $1,248,439 | | Loans (net) | $2,093,549 | $2,062,455 | | Total Assets | $3,696,390 | $3,617,579 | | Total deposits | $2,990,113 | $3,001,881 | | Borrowed funds | $360,000 | $272,000 | | Total Liabilities | $3,377,082 | $3,302,829 | | Total Shareholders' Equity | $319,308 | $314,750 | Supplemental Financial Information (Unaudited) This section provides unaudited supplemental financial data, including per common share information, balance sheet trends, key financial ratios, and quarterly income statement trends [Per Common Share Information](index=7&type=section&id=9.1%20Per%20Common%20Share%20Information) This section provides per common share data, including basic and diluted earnings, cash dividends, and book value, across several recent quarters Per Common Share Information | Metric | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :----------------- | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Basic earnings | $0.70 | $0.68 | $0.55 | $0.81 | $1.01 | | Diluted earnings | $0.69 | $0.67 | $0.55 | $0.80 | $1.00 | | Cash dividends | $0.53 | $0.53 | $0.53 | $0.53 | $0.53 | | Book value | $42.92 | $42.37 | $36.46 | $39.05 | $39.02 | [Balance Sheet Related Data](index=7&type=section&id=9.2%20Balance%20Sheet%20Related%20Data) Key balance sheet items are presented over several quarters, showing trends in assets, loans, deposits, and borrowed funds Balance Sheet Related Data (in thousands) | Metric | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :------------------------------------ | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Total Assets | $3,696,390 | $3,617,579 | $3,585,188 | $3,569,226 | $3,671,186 | | Loans (gross) | $2,118,155 | $2,087,756 | $2,070,616 | $2,000,969 | $1,951,738 | | Deposits, total | $2,990,113 | $3,001,881 | $2,985,618 | $3,005,263 | $3,032,391 | | Borrowed funds | $360,000 | $272,000 | $299,000 | $249,000 | $321,700 | | Equity | $319,308 | $314,750 | $270,819 | $290,072 | $289,783 | [Key Financial Ratios](index=8&type=section&id=9.3%20Key%20Financial%20Ratios) A summary of key financial ratios, including profitability, efficiency, and capital adequacy, is provided for recent quarters Key Financial Ratios | Ratio | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :--------------------------------- | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Return on average assets (annualized) | 0.58% | 0.56% | 0.45% | 0.67% | 0.85% | | Return on average equity (annualized) | 6.67% | 7.30% | 5.60% | 8.34% | 10.83% | | Net interest margin (non-GAAP) | 2.68% | 2.70% | 2.76% | 2.87% | 3.06% | | Efficiency ratio | 80.22% | 82.20% | 82.50% | 75.12% | 70.25% | | Loan-to-deposit ratio | 70.84% | 69.55% | 69.35% | 66.58% | 64.36% | | Common Equity Tier 1 (CET1) capital ratio | 16.56% | 16.85% | 16.44% | 17.60% | 17.55% | | Total risk-based capital ratio | 17.54% | 17.88% | 17.48% | 18.71% | 18.65% | | Leverage ratio | 11.36% | 11.31% | 11.32% | 11.20% | 11.19% | [Quarterly Income Statement Trends](index=8&type=section&id=9.4%20Quarterly%20Income%20Statement%20Trends) This table provides a quarterly view of key income statement figures, illustrating trends in interest income, expenses, non-interest income, and net income over the past five quarters Quarterly Income Statement (in thousands) | Metric | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 | | :--------------------------------- | :------ | :------ | :------ | :------ | :------ | | Interest income | $38,745 | $38,180 | $37,272 | $37,116 | $34,328 | | Interest expense | $16,614 | $15,876 | $14,383 | $13,324 | $9,554 | | Non-interest income | $4,254 | $4,824 | $4,289 | $4,625 | $4,214 | | Total revenue (non-GAAP) | $26,385 | $27,128 | $27,178 | $28,417 | $28,988 | | Non-interest expense | $21,165 | $22,300 | $22,423 | $21,348 | $20,365 | | Income before income taxes | $5,890 | $5,578 | $4,520 | $6,855 | $8,108 | | Net income | $5,212 | $5,078 | $4,056 | $6,034 | $7,524 | Non-GAAP Reconciliations (Unaudited) This section provides reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures, along with definitions, for performance insights [Non-GAAP Definitions](index=9&type=section&id=10.1%20Non-GAAP%20Definitions) This section defines the non-GAAP financial measures used by management, including operating net income, total revenue, pretax, pre-provision earnings, and net interest margin on a fully taxable-equivalent (FTE) basis, explaining their utility for performance evaluation - Operating net income (non-GAAP) adjusts net income for significant items like merger-related and listing-related expenses, providing a clearer view of core business performance[19](index=19&type=chunk) - Total revenue (non-GAAP) is calculated as total interest income less total interest expense plus total non-interest income, used to assess business management and revenue stability[43](index=43&type=chunk) - Pretax, pre-provision earnings (non-GAAP) adjusts income before income taxes by excluding the provision for (recapture of) credit losses, useful for evaluating the ability to cover credit costs and comparing results across periods[54](index=54&type=chunk) - Net interest margin on a fully taxable-equivalent (FTE) basis adjusts interest income from tax-exempt assets to be comparable with taxable investments, providing a more meaningful comparison of net interest income[55](index=55&type=chunk) [Operating Net Income Reconciliation](index=9&type=section&id=10.2%20Operating%20Net%20Income%20Reconciliation) This table reconciles GAAP net income to non-GAAP operating net income by adjusting for significant items such as merger-related and listing-related expenses Operating Net Income Reconciliation (in thousands) | Metric | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :--------------------------------- | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Net income | $5,212 | $5,078 | $4,056 | $6,034 | $7,524 | | Add back significant items (tax effected): | | | | | | | Listing-related | — | — | — | $79 | $160 | | Merger-related | $537 | $1,141 | $1,592 | $92 | — | | Total significant items | $537 | $1,141 | $1,592 | $171 | $160 | | Operating net income | $5,749 | $6,219 | $5,648 | $6,205 | $7,684 | | Adjusted diluted EPS | $0.76 | $0.83 | $0.75 | $0.83 | $1.02 | [Total Revenue Reconciliation](index=9&type=section&id=10.3%20Total%20Revenue%20Reconciliation) This table reconciles total interest income, interest expense, and non-interest income to arrive at the non-GAAP total revenue figure for recent quarters Total Revenue (non-GAAP) Reconciliation (in thousands) | Metric | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :----------------- | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Interest income | $38,745 | $38,180 | $37,272 | $37,116 | $34,328 | | Interest expense | $16,614 | $15,876 | $14,383 | $13,324 | $9,554 | | Non-interest income | $4,254 | $4,824 | $4,289 | $4,625 | $4,214 | | Total revenue (non-GAAP) | $26,385 | $27,128 | $27,178 | $28,417 | $28,988 | [Pretax, Pre-Provision Earnings Reconciliation](index=10&type=section&id=10.4%20Pretax,%20Pre-Provision%20Earnings%20Reconciliation) This table reconciles income before taxes to pretax, pre-provision earnings by adjusting for the provision for (recapture of) credit losses Pretax, Pre-Provision Earnings Reconciliation (in thousands) | Metric | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :--------------------------------- | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Income before taxes | $5,890 | $5,578 | $4,520 | $6,855 | $8,108 | | Provision for (recapture of) credit losses | ($670) | ($750) | $235 | $214 | $515 | | Pretax, pre-provision earnings (non-GAAP) | $5,220 | $4,828 | $4,755 | $7,069 | $8,623 | [Net Interest Margin (FTE) Calculation](index=10&type=section&id=10.5%20Net%20Interest%20Margin%20(FTE)%20Calculation) This section provides the calculation of net interest income and net interest margin on a fully taxable-equivalent (FTE) basis, adjusting for the tax benefits of certain interest-earning assets Net Interest Margin (FTE) Calculation (in thousands) | Metric | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :--------------------------------- | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Net interest income | $22,131 | $22,304 | $22,889 | $23,792 | $24,774 | | Taxable-equivalent adjustments | $362 | $365 | $366 | $375 | $387 | | Net interest income (FTE) | $22,493 | $22,669 | $23,255 | $24,167 | $25,161 | | Average earning assets | $3,377,092 | $3,332,733 | $3,337,282 | $3,379,534 | $3,331,920 | | Net interest margin (non-GAAP) | 2.68% | 2.70% | 2.76% | 2.87% | 3.06% |