Financial Performance - Net loss applicable to common shares for the six months ended June 30, 2024, was 25.5 million compared to net income of 33.3 million 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 13.8 million for the six months ended June 30, 2024, compared to 43.9 million, or 105.2%, 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 71.4 million for the same period in 2023[247]. - Total interest expense was 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 5.6 billion, total deposits of 693.1 million[186]. - Total assets increased to 3.57 billion as of June 30, 2023[229]. - Total deposits reached 3.01 billion as of June 30, 2023[229]. - The total loan portfolio increased by 5.62 billion as of June 30, 2024, primarily due to the merger[289]. - The company has available unused borrowing capacity of 403.7 million as of June 30, 2024, compared to 20.1 million for credit losses for the three months ended June 30, 2024, compared to 23.2 million for the six months ended June 30, 2024, compared 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 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 4.6 million in the same period of 2023, primarily driven by the Merger[276]. - Non-interest expense surged by 201.8% 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].
Burke & Herbert Financial Services (BHRB) - 2024 Q2 - Quarterly Report