ALEXANDRIA, Va., Oct. 27,
2023 /PRNewswire/ -- Burke & Herbert Financial
Services Corp. (the "Company" or "Burke & Herbert") (Nasdaq:
BHRB) reported financial results for the quarter ended
September 30, 2023. In addition, at its meeting on
October 26, 2023, the board of directors declared a
$0.53 per share regular cash dividend
to be paid on December 1, 2023, to shareholders of record as
of the close of business November 15, 2023.
For the third quarter, the Company reported net income of
$4.1 million, or $0.55 per diluted share. Excluding significant
items1, operating net income (non-GAAP2) for
the same period was $5.6 million, or
$0.75 per diluted share. For the nine
months ended September 30, 2023, net
income was $17.6 million, or
$2.35 per diluted share. Excluding
significant items1, operating net income
(non-GAAP2) for the same period was $19.5 million, or $2.60 per diluted share.
The Company notes the following highlights:
- Balance sheet remains strong with ample liquidity. Total
liquidity, including all available borrowing capacity with cash and
cash equivalents, totaled $925.4
million at the end of the third quarter.
- Total loans increased $69.6
million, representing a 13.8% annualized growth rate, during
the quarter ending September 30,
2023, to $2.1 billion.
- Total deposits were relatively stable and ended the quarter at
$3.0 billion, resulting in a
loan-to-deposit ratio of 69.4%.
- Asset quality remains stable across the loan portfolio with
adequate reserves.
- The Company continues to be well-capitalized, ending the
quarter with 16.4% Common Equity Tier 1 capital to risk-weighted
assets, 17.5% Total risk-based capital to risk-weighted assets, and
a leverage ratio of 11.3%.
- On August 24, 2023, the Company
and Summit Financial Group, Inc. ("Summit") (Nasdaq: SMMF)
announced the signing of a definitive agreement under which Summit
will merge with and into the Company in an all-stock merger of
equals. When the merger is completed, the combined organization
will create a financial holding company with more than $8 billion in assets and more than 75 branches
across Virginia, West Virginia, Maryland, Delaware, and Kentucky, with more than 800 employees serving
our communities. Completion of the merger is subject to receiving
the requisite approvals of the Company's and Summit's stockholders,
receipt of all required regulatory approvals, and fulfillment of
other customary closing conditions.
From David P. Boyle,
Company Chair, President and Chief Executive Officer
"I'm pleased that, despite the multiple challenges facing our
industry, we remained focused on being the quintessential community
bank. This quarter we increased loans, maintained a strong
liquidity position, continued to make investments in our businesses
and communities, and are well-positioned to deliver increased
shareholder value over the long-term."
Results of Operations
Third Quarter 2023 - Comparison to prior year
quarter
Net income for the three months ended September 30, 2023,
was $4.1 million or $7.1 million lower than the three months ended
September 30, 2022, primarily due to merger-related costs,
increased funding costs, and the change in provision for credit
losses that included a recapture of credit losses in the prior year
quarter.
Total revenue (non-GAAP2) for the three months ended
September 30, 2023, was $27.2 million or 12% lower than the three
months ended September 30, 2022, and included $26.4 million in interest and fees on loans
and $10.3 million in investment
security income, which was a 42% increase and a 2% decrease,
respectively, over the prior year three months ended
September 30, 2022. Overall, interest income for the three
months ended September 30, 2023, was $37.3 million or 27% higher than the three months
ended September 30, 2022. The increase in interest income for
the Company's loans was due to increased loan balances and higher
rates, and the interest income decrease in investment securities
was due to a lower level of investment securities. Loans, net of
allowance for credit losses, ended the quarter at $2.0 billion or 18% higher than
September 30, 2022, while the investment portfolio fair value
ended the quarter at $1.2 billion or
16% lower than the prior year quarter.
The increase in interest income was offset by an increase in
interest expense, which was $14.4
million for the three months ended September 30, 2023,
or $11.8 million higher than the
prior year period. The rapidly rising rate environment resulted in
an increase in the Company's cost of funds that outpaced the
resulting benefit of higher rates on assets. The Company's deposit
and borrowing interest expense was $11.3
million and $3.1 million, or
$10.3 million and $1.5 million higher, respectively, for the three
months ended September 30, 2023. Total deposits ended the
quarter at $3.0 billion, which was
approximately the same as in the prior year. Non-interest-bearing
deposits decreased by 13% to $853.4
million and borrowed funds increased by 23% to $299.0 million from the prior year quarter ended
September 30, 2022, reflecting the changing deposit mix from
non-interest bearing to interest-bearing, resulting in higher
interest expense.
Non-interest income for the three months ended
September 30, 2023, increased slightly from the same period
last year and was $4.3 million in the
current period. The increase in other non-interest income is
primarily the result of increased fee income from customer swap
activity when compared to the prior year quarter, partially offset
by a decrease in fee income for service charges and fees.
For the three months ended September 30, 2023, the Company
recorded a provision for credit losses of $0.2 million, compared to a recapture of credit
losses of $2.4 million in the prior
year quarter. Total revenue (non-GAAP2) after provision
for credit losses was $26.9 million
for the three months ended September 30, 2023, which was a
decrease of 19% compared to the same period last year.
Non-interest expense increased by $2.5
million, or 12%, for the three months ended
September 30, 2023, from the prior year three months ended
September 30, 2022. The increase was primarily due to other
non-interest expenses associated with merger-related activities.
The Company incurred expenses during the third quarter of 2023
related to the pending merger with Summit that included legal,
consulting, investment banking, and due diligence-related
costs.
As of September 30, 2023, total shareholders' equity was
$270.8 million or $15.3 million higher than September 30,
2022, primarily the result of higher earnings in the last quarter
of 2022.
Nine months ended September 30, 2023 - Comparison to
prior year period
Net income for the nine months ended September 30, 2023,
was $17.6 million or $13.0 million lower than the nine months ended
September 30, 2022.
Total revenue (non-GAAP2) for the nine months ended
September 30, 2023, was $84.6
million or 5% lower than the nine months ended
September 30, 2022, and included $74.5
million in interest and fees on loans and $32.4 million in investment security income,
which was a 42% increase and an 18% increase, respectively, over
the prior year nine months. Overall, interest income for the nine
months ended September 30, 2023, was $108.7 million or 36% higher than the nine months
ended September 30, 2022. The increase in interest income for
the Company's loans was due to increased loan growth and higher
rates and the interest income increase on investment securities was
due to higher rates.
The increase in interest income was offset by an increase in
interest expense, which was $37.3
million for the nine months ended September 30, 2023,
or $33.0 million higher than the
prior year period. The rapidly rising rate environment resulted in
an increase in the Company's cost of funds that outpaced the
resulting benefit of higher rates on assets. The Company's deposit
and borrowing interest expense was $26.7
million and $10.5 million, or
$25.0 million and $8.0 million higher, respectively, for the nine
months ended September 30, 2023, than for the nine months
ended September 30, 2022.
Non-interest income for the nine months ended September 30,
2023, increased $0.3 million from the
same period last year to $13.1
million. The increase was primarily due to higher other
non-interest income revenue of $0.5 million. Within other non-interest
income, the Company received an increase in dividend income from
the FHLB and increased fee income from customer swap activity when
compared to the prior year period ended September 30, 2022.
This increase in non-interest income was partially offset by lower
income generated from service charges and fees which decreased by
$0.2 million.
For the nine months ended September 30, 2023, the Company
recorded a provision for credit losses of $1.0 million compared to a recapture of credit
losses of $7.6 million in the prior
year period. Total revenue (non-GAAP2) after provision
for credit losses was $83.6 million
for the nine months ended September 30, 2023, which was a
decrease of 13% compared to the same period last year.
Non-interest expense increased by $4.7
million, or 8%, for the nine months ended September 30,
2023, from the prior year nine months. The increase was primarily
driven by other non-interest expenses that the Company incurred
during 2023 related to costs associated with the listing of our
common stock on the Nasdaq stock exchange and the filing of a Form
10 Registration Statement with the U.S. Securities Exchange
Commission ("SEC") to register our common stock under the
Securities Exchange Act of 1934, as amended (together,
"Listing-related"), and with costs incurred for the merger with
Summit. Additionally, the Company incurred higher personnel-related
expenses, primarily benefits and pension, due to increased
healthcare costs and general macro-economic conditions.
Regulatory capital ratios
The Company continues to be well-capitalized with capital ratios
that are above regulatory requirements. As of September 30,
2023, our Common Equity Tier 1 capital to risk-weighted asset and
Total risk-based capital to risk-weighted asset ratios were 16.4%
and 17.5%, respectively, and significantly above the
well-capitalized requirements of 6.5% and 10%, respectively. The
leverage ratio was 11.3% 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
September 30, 2023, the Bank's Common Equity Tier 1 capital to
risk-weighted asset and Total risk-based capital to risk-weighted
asset ratios were 16.4% and 17.4%, respectively, and significantly
above the well-capitalized requirements. In addition, the Bank's
leverage ratio of 11.3% 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.
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 DC Metro
area. The Bank offers a full range of business and personal
financial solutions designed to meet customers' banking, borrowing,
and investment needs and has over 20 branches throughout the
Northern Virginia region and
commercial loan offices in Fredericksburg, Loudoun County, Richmond, and in Bethesda, Maryland. Learn more at
www.burkeandherbertbank.com.
Member FDIC; Equal Housing Lender
Cautionary Note Regarding Forward-Looking Statements
This communication includes "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 regarding the proposed merger of equals with
Summit, 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 timing of
completion of the proposed merger; the expected cost savings,
synergies, returns and other anticipated benefits from the proposed
merger; 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.
These forward-looking statements include, without limitation, those
relating to the terms, timing and closing of the proposed
transaction.
Additionally, forward–looking statements speak only as of the
date they are made; Burke & Herbert does not assume any duty,
and does not undertake, to update such forward–looking statements,
whether written or oral, that may be made from time to time,
whether as a result of new information, future events, or
otherwise. 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 as a result of a
variety of factors, many of which are beyond the control of Burke
& Herbert. Such statements are based upon the current beliefs
and expectations of the management of Burke & Herbert and are
subject to significant risks and uncertainties outside of the
control of the parties. Caution should be exercised against placing
undue reliance on forward-looking statements. The factors that
could cause actual results to differ materially include the
following: the occurrence of any event, change or other
circumstances that could give rise to the right of one or both of
the parties to terminate the definitive merger agreement between
Burke & Herbert and Summit; the outcome of any legal
proceedings that may be instituted against Burke & Herbert or
Summit; the possibility that the proposed transaction will not
close when expected or at all because required regulatory,
shareholder or other approvals are not received or other conditions
to the closing are not satisfied on a timely basis or at all, or
are obtained subject to conditions that are not anticipated (and
the risk that required regulatory approvals may result in the
imposition of conditions that could adversely affect the combined
company or the expected benefits of the proposed transaction); the
ability of Burke & Herbert and Summit to meet expectations
regarding the timing, completion and accounting and tax treatments
of the proposed transaction; the risk that any announcements
relating to the proposed transaction could have adverse effects on
the market price of the common stock of either or both parties to
the proposed transaction; the possibility that the anticipated
benefits of the proposed transaction will not be realized when
expected or at all, including as a result of the impact of, or
problems arising from, the integration of the two companies or as a
result of the strength of the economy and competitive factors in
the areas where Burke & Herbert and Summit do business; certain
restrictions during the pendency of the proposed transaction that
may impact the parties' ability to pursue certain business
opportunities or strategic transactions; the possibility that the
transaction may be more expensive to complete than anticipated,
including as a result of unexpected factors or events; diversion of
management's attention from ongoing business operations and
opportunities; the possibility that the parties may be unable to
achieve expected synergies and operating efficiencies in the merger
within the expected timeframes or at all and to successfully
integrate Summit's operations and those of Burke & Herbert;
such integration may be more difficult, time-consuming, or costly
than expected; revenues following the proposed transaction may be
lower than expected; Burke & Herbert's and Summit's success in
executing their respective business plans and strategies and
managing the risks involved in the foregoing; the dilution caused
by Burke & Herbert's issuance of additional shares of its
capital stock in connection with the proposed transaction; effects
of the announcement, pendency, or completion of the proposed
transaction on the ability of Burke & Herbert and Summit to
retain customers and retain and hire key personnel and maintain
relationships with their suppliers, and on their operating results
and businesses, generally; and risks related to the potential
impact of general economic, political, and market factors on the
companies or the proposed merger and other factors that may affect
future results of Burke & Herbert and Summit; and the other
factors discussed in the "Risk Factors" section of Burke &
Herbert's Registration Statement on Form 10, as amended and as
ordered effective by the SEC on April 21,
2023, and in the "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
sections of Burke & Herbert's Quarterly Report on Form 10–Q for
the quarters ended March 31, 2023,
and June 30, 2023, and other reports
Burke & Herbert files with the SEC.
Additional Information and Where to Find It
In connection with the proposed merger, Burke & Herbert
filed a registration statement on Form S-4 with the SEC. The
registration statement includes a joint proxy statement of Burke
& Herbert and Summit, which also constitutes a prospectus of
Burke & Herbert, that was sent to shareholders of Burke &
Herbert and shareholders of Summit seeking certain approvals
related to the proposed merger.
The information contained herein does not constitute an offer to
sell or a solicitation of an offer to buy any securities or a
solicitation of any vote or approval, nor shall there be any sale
of securities in any jurisdiction in which such offer,
solicitation, or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
INVESTORS AND SHAREHOLDERS OF BURKE & HERBERT AND THEIR
RESPECTIVE AFFILIATES ARE URGED TO READ, THE REGISTRATION STATEMENT
ON FORM S-4, THE JOINT PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN
THE REGISTRATION STATEMENT ON FORM S-4, AND ANY OTHER RELEVANT
DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE
PROPOSED MERGER, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE
DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
BURKE & HERBERT, SUMMIT AND THE PROPOSED MERGER. Investors and
shareholders are able to obtain a free copy of the registration
statement, including the joint proxy statement/prospectus, as well
as other relevant documents filed with the SEC containing
information about Burke & Herbert and Summit, without charge,
at the SEC's website www.sec.gov. Copies of documents filed with
the SEC by Burke & Herbert are available free of charge in the
"Investor Relations" section of Burke & Herbert's website,
www.burkeandherbertbank.com.
Participants in Solicitation
Burke & Herbert and certain of its respective directors and
executive officers may be deemed to be participants in the
solicitation of proxies in respect of the proposed merger under the
rules of the SEC. Information regarding Burke & Herbert's
directors and executive officers is available in its Registration
Statement on Form 10, as amended and as ordered effective by the
SEC on April 21, 2023. Other
information regarding the participants in the solicitation of
proxies in respect of the proposed merger and a description of
their direct and indirect interests, by security holdings or
otherwise, is contained in the joint proxy statement/prospectus and
other relevant materials filed with the SEC. Free copies of these
documents may be obtained as described in the preceding
paragraph.
Burke & Herbert
Financial Services Corp.
Consolidated
Statements of Income (unaudited)
(In
thousands)
|
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Interest
income
|
|
|
|
|
|
|
|
Loans, including
fees
|
$
26,425
|
|
$
18,618
|
|
$
74,485
|
|
$
52,486
|
Taxable
securities
|
8,909
|
|
8,171
|
|
28,130
|
|
20,101
|
Tax-exempt
securities
|
1,376
|
|
2,334
|
|
4,243
|
|
7,224
|
Other interest
income
|
562
|
|
142
|
|
1,858
|
|
248
|
Total interest
income
|
37,272
|
|
29,265
|
|
108,716
|
|
80,059
|
Interest
expense
|
|
|
|
|
|
|
|
Deposits
|
11,277
|
|
954
|
|
26,708
|
|
1,723
|
Borrowed
funds
|
3,078
|
|
1,614
|
|
10,495
|
|
2,506
|
Other interest
expense
|
28
|
|
17
|
|
58
|
|
48
|
Total interest
expense
|
14,383
|
|
2,585
|
|
37,261
|
|
4,277
|
Net interest
income
|
22,889
|
|
26,680
|
|
71,455
|
|
75,782
|
|
|
|
|
|
|
|
|
Provision for
(recapture of) credit losses
|
235
|
|
(2,388)
|
|
964
|
|
(7,564)
|
Net interest income
after credit loss expense
|
22,654
|
|
29,068
|
|
70,491
|
|
83,346
|
|
|
|
|
|
|
|
|
Non-interest
income
|
|
|
|
|
|
|
|
Fiduciary and wealth
management
|
1,354
|
|
1,328
|
|
3,996
|
|
3,995
|
Service charges and
fees
|
1,583
|
|
1,736
|
|
4,959
|
|
5,130
|
Net gains (losses) on
securities
|
(1)
|
|
(41)
|
|
(112)
|
|
63
|
Income from
company-owned life insurance
|
589
|
|
555
|
|
1,720
|
|
1,634
|
Other non-interest
income
|
764
|
|
683
|
|
2,565
|
|
2,050
|
Total non-interest
income
|
4,289
|
|
4,261
|
|
13,128
|
|
12,872
|
|
|
|
|
|
|
|
|
Non-interest
expense
|
|
|
|
|
|
|
|
Salaries and
wages
|
9,867
|
|
10,094
|
|
29,283
|
|
29,240
|
Pensions and other
employee benefits
|
2,242
|
|
2,017
|
|
7,116
|
|
5,957
|
Occupancy
|
1,462
|
|
1,151
|
|
4,464
|
|
4,306
|
Equipment rentals,
depreciation, and maintenance
|
1,435
|
|
1,534
|
|
4,231
|
|
4,296
|
Other
operating
|
7,417
|
|
5,156
|
|
19,042
|
|
15,686
|
Total non-interest
expense
|
22,423
|
|
19,952
|
|
64,136
|
|
59,485
|
Income before
income taxes
|
4,520
|
|
13,377
|
|
19,483
|
|
36,733
|
|
|
|
|
|
|
|
|
Income tax
expense
|
464
|
|
2,240
|
|
1,869
|
|
6,073
|
Net
income
|
$
4,056
|
|
$
11,137
|
|
$
17,614
|
|
$
30,660
|
Burke & Herbert
Financial Services Corp.
Consolidated Balance
Sheets
(In
thousands)
|
|
|
September 30,
2023
|
|
December 31,
2022
|
|
(Unaudited)
|
|
(Audited)
|
Assets
|
|
|
|
Cash and due from
banks
|
$
9,063
|
|
$
9,124
|
Interest-earning
deposits with banks
|
32,801
|
|
41,171
|
Cash and cash
equivalents
|
41,864
|
|
50,295
|
Securities
available-for-sale, at fair value
|
1,224,395
|
|
1,371,757
|
Restricted stock, at
cost
|
7,247
|
|
16,443
|
Loans held-for-sale, at
fair value
|
3,011
|
|
—
|
Loans
|
2,070,616
|
|
1,887,221
|
Allowance for credit
losses
|
(26,111)
|
|
(21,039)
|
Net loans
|
2,044,505
|
|
1,866,182
|
Premises and equipment,
net
|
57,514
|
|
53,170
|
Accrued interest
receivable
|
15,597
|
|
15,481
|
Company-owned life
insurance
|
94,213
|
|
92,487
|
Other assets
|
96,842
|
|
97,083
|
Total
Assets
|
$
3,585,188
|
|
$
3,562,898
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Liabilities
|
|
|
|
Non-interest-bearing
deposits
|
$
853,385
|
|
$
960,692
|
Interest-bearing
deposits
|
2,132,233
|
|
1,959,708
|
Total
deposits
|
2,985,618
|
|
2,920,400
|
Borrowed
funds
|
299,000
|
|
343,100
|
Accrued interest and
other liabilities
|
29,751
|
|
25,945
|
Total
Liabilities
|
3,314,369
|
|
3,289,445
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
Common Stock
|
4,000
|
|
4,000
|
Additional paid-in
capital
|
13,818
|
|
12,282
|
Retained
earnings
|
426,744
|
|
424,391
|
Accumulated other
comprehensive income (loss)
|
(146,159)
|
|
(139,495)
|
Treasury
stock
|
(27,584)
|
|
(27,725)
|
Total Shareholders'
Equity
|
270,819
|
|
273,453
|
Total Liabilities
and Shareholders' Equity
|
$
3,585,188
|
|
$
3,562,898
|
Burke & Herbert
Financial Services Corp.
Supplemental
Information (unaudited)
As of or for the
three months ended
(In thousands,
except ratios and per share amounts)
|
|
|
September
30
|
|
June
30
|
|
March
31
|
|
December
31
|
|
September
30
|
|
2023
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
Per common share
information
|
Basic
earnings
|
$
0.55
|
|
$
0.81
|
|
$
1.01
|
|
$
1.80
|
|
$
1.50
|
Diluted
earnings
|
0.55
|
|
0.80
|
|
1.00
|
|
1.78
|
|
1.49
|
Cash
dividends
|
0.53
|
|
0.53
|
|
0.53
|
|
0.53
|
|
0.53
|
Book value
|
36.46
|
|
39.05
|
|
39.02
|
|
36.82
|
|
34.40
|
|
|
|
|
|
|
|
|
|
|
Balance
sheet-related (at period end, unless indicated)
|
Assets
|
$
3,585,188
|
|
$
3,569,226
|
|
$
3,671,186
|
|
$
3,562,898
|
|
$
3,501,145
|
Average earning
assets
|
3,337,282
|
|
3,379,534
|
|
3,331,920
|
|
3,255,213
|
|
3,328,594
|
Loans
(gross)
|
2,070,616
|
|
2,000,969
|
|
1,951,738
|
|
1,887,221
|
|
1,751,827
|
Loans (net)
|
2,044,505
|
|
1,975,050
|
|
1,926,034
|
|
1,866,182
|
|
1,730,874
|
Securities,
available-for-sale, at fair value
|
1,224,395
|
|
1,252,190
|
|
1,362,785
|
|
1,371,757
|
|
1,453,104
|
Non-interest-bearing
deposits
|
853,385
|
|
876,396
|
|
906,723
|
|
960,692
|
|
980,714
|
Interest-bearing
deposits
|
2,132,233
|
|
2,128,867
|
|
2,125,668
|
|
1,959,708
|
|
1,996,946
|
Deposits,
total
|
2,985,618
|
|
3,005,263
|
|
3,032,391
|
|
2,920,400
|
|
2,977,660
|
Brokered
deposits
|
389,018
|
|
389,051
|
|
389,185
|
|
100,273
|
|
—
|
Uninsured
deposits
|
670,735
|
|
681,908
|
|
715,053
|
|
843,431
|
|
847,973
|
Borrowed
funds
|
299,000
|
|
249,000
|
|
321,700
|
|
343,100
|
|
243,000
|
Unused borrowing
capacity3
|
883,525
|
|
958,962
|
|
809,127
|
|
622,186
|
|
743,456
|
Equity
|
270,819
|
|
290,072
|
|
289,783
|
|
273,453
|
|
255,471
|
Accumulated other
comprehensive income (loss)
|
(146,159)
|
|
(126,177)
|
|
(123,809)
|
|
(139,495)
|
|
(147,578)
|
Burke & Herbert
Financial Services Corp.
Supplemental
Information (unaudited)
As of or for the
three months ended
(In thousands,
except ratios and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
September
30
|
|
June
30
|
|
March
31
|
|
December
31
|
|
September
30
|
|
2023
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
Ratios
|
Return on average
assets (annualized)
|
0.45 %
|
|
0.67 %
|
|
0.85 %
|
|
1.51 %
|
|
1.23 %
|
Return on average
equity (annualized)
|
5.60
|
|
8.34
|
|
10.83
|
|
20.66
|
|
14.99
|
Net interest margin
(non-GAAP2)
|
2.76
|
|
2.87
|
|
3.06
|
|
3.46
|
|
3.25
|
Efficiency
ratio
|
82.50
|
|
75.12
|
|
70.25
|
|
51.24
|
|
64.48
|
Loan-to-deposit
ratio
|
69.35
|
|
66.58
|
|
64.36
|
|
64.62
|
|
58.83
|
Common Equity Tier 1
(CET1) capital ratio4
|
16.36
|
|
17.47
|
|
17.40
|
|
17.89
|
|
18.23
|
Total risk-based
capital ratio4
|
17.39
|
|
18.57
|
|
18.50
|
|
18.81
|
|
19.18
|
Leverage
ratio4
|
11.27
|
|
11.11
|
|
11.09
|
|
11.30
|
|
11.03
|
|
|
|
|
|
|
|
|
|
|
Income
statement
|
Interest
income
|
$
37,272
|
|
$
37,116
|
|
$
34,328
|
|
$
32,574
|
|
$
29,265
|
Interest
expense
|
14,383
|
|
13,324
|
|
9,554
|
|
4,665
|
|
2,585
|
Non-interest
income
|
4,289
|
|
4,625
|
|
4,214
|
|
4,217
|
|
4,261
|
Total revenue
(non-GAAP2)
|
27,178
|
|
28,417
|
|
28,988
|
|
32,126
|
|
30,941
|
Non-interest
expense
|
22,423
|
|
21,348
|
|
20,365
|
|
16,462
|
|
19,952
|
Pretax, pre-provision
earnings (non-GAAP2)
|
4,755
|
|
7,069
|
|
8,623
|
|
15,664
|
|
10,989
|
Provision for
(recapture of) credit losses
|
235
|
|
214
|
|
515
|
|
98
|
|
(2,388)
|
Income before income
taxes
|
4,520
|
|
6,855
|
|
8,108
|
|
15,566
|
|
13,377
|
Income tax
expense
|
464
|
|
821
|
|
584
|
|
2,213
|
|
2,240
|
Net
income
|
$
4,056
|
|
$
6,034
|
|
$
7,524
|
|
$
13,353
|
|
$
11,137
|
|
|
|
|
|
|
|
|
|
|
Burke & Herbert
Financial Services Corp.
Non-GAAP
Reconciliations (unaudited)
As of or for the
three months ended
(In thousands,
except ratios and per share amounts)
|
|
Operating net income
(non-GAAP)
|
|
|
Three months
ending
|
|
Nine months
ending
|
|
|
September
30
|
|
September
30
|
|
|
2023
|
|
2023
|
Net income
|
|
$
4,056
|
|
$
17,614
|
Add back
significant items (tax effected):
|
|
|
|
|
Listing-related
|
|
—
|
|
239
|
Merger-related
|
|
1,592
|
|
1,684
|
Total significant
items
|
|
1,592
|
|
1,923
|
Operating net
income
|
|
$
5,648
|
|
$
19,537
|
|
|
|
|
|
Weighted average
diluted shares
|
|
7,499,278
|
|
7,506,509
|
Diluted EPS
|
|
$
0.75
|
|
$
2.60
|
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 Listing-related or merger-related
expenses. The operating net income is more reflective of
management's ability to grow the business and manage expenses. The
Company only incurred these significant items in 2023.
Total Revenue
(non-GAAP)
|
|
|
|
|
September
30
|
|
June
30
|
|
March
31
|
|
December
31
|
|
September
30
|
|
|
2023
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
Interest
income
|
|
$
37,272
|
|
$
37,116
|
|
$
34,328
|
|
$
32,574
|
|
$
29,265
|
Interest
expense
|
|
14,383
|
|
13,324
|
|
9,554
|
|
4,665
|
|
2,585
|
Non-interest
income
|
|
4,289
|
|
4,625
|
|
4,214
|
|
4,217
|
|
4,261
|
Total revenue
(non-GAAP)
|
|
$
27,178
|
|
$
28,417
|
|
$
28,988
|
|
$
32,126
|
|
$
30,941
|
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 how stable our revenue
sources are from period to period.
Pretax,
Pre-Provision Earnings (non-GAAP)
|
|
|
|
|
September
30
|
|
June
30
|
|
March
31
|
|
December
31
|
|
September
30
|
|
|
2023
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
Income before
taxes
|
|
$
4,520
|
|
$
6,855
|
|
$
8,108
|
|
$
15,566
|
|
$
13,377
|
Provision for
(recapture of) credit losses
|
|
235
|
|
214
|
|
515
|
|
98
|
|
(2,388)
|
Pretax, pre-provision
earnings (non-GAAP)
|
|
$
4,755
|
|
$
7,069
|
|
$
8,623
|
|
$
15,664
|
|
$
10,989
|
Burke & Herbert Financial Services
Corp.
Non-GAAP Reconciliations (unaudited)
As
of or for the three months ended
(In thousands, except
ratios and per share amounts)
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.
Net Interest Margin
& Taxable-Equivalent Net Interest Income
(non-GAAP)
|
|
|
|
|
September
30
|
|
June
30
|
|
March
31
|
|
December
31
|
|
September
30
|
|
|
2023
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
Net interest
income
|
|
$
22,889
|
|
$
23,792
|
|
$
24,774
|
|
$
27,909
|
|
$
26,680
|
Taxable-equivalent
adjustments
|
|
366
|
|
375
|
|
387
|
|
455
|
|
621
|
Net interest income
(Fully Taxable-Equivalent - FTE)
|
|
$
23,255
|
|
$
24,167
|
|
$
25,161
|
|
$
28,364
|
|
$
27,301
|
|
|
|
|
|
|
|
|
|
|
|
Average earning
assets
|
|
3,337,282
|
|
3,379,534
|
|
3,331,920
|
|
3,255,213
|
|
3,328,594
|
Net interest margin
(non-GAAP)
|
|
2.76 %
|
|
2.87 %
|
|
3.06 %
|
|
3.46 %
|
|
3.25 %
|
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.
(1) Significant items
include items such as merger-related expenses and are further
described below in our non-GAAP reconciliation tables.
|
(2) 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.
|
(3) Includes Federal
Home Loan Bank and correspondent bank availability.
|
(4) Ratios are for
Burke & Herbert Bank & Trust Company for all periods
presented.
|
Investor Relations
703-666-3555
bhfsir@burkeandherbertbank.com
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SOURCE Burke & Herbert Financial Services Corp.