Burke & Herbert Financial Services (BHRB) - 2024 Q3 - Quarterly Report

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$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].