Burke & Herbert Financial Services Corp. Announces Third Quarter 2024 Results and Increases Common Stock Dividend

ALEXANDRIA, Va., Oct. 25, 2024 /PRNewswire/ -- Burke & Herbert Financial Services Corp. (the "Company" or "Burke & Herbert") (Nasdaq: BHRB) reported financial results for the quarter ended September 30, 2024. In addition, at its meeting on October 24, 2024, the board of directors declared a $0.55 per share regular cash dividend to be paid on December 2, 2024, to shareholders of record as of the close of business on November 15, 2024, representing a 3.8% increase from the prior quarter dividend.

Q3 2024 Highlights

• Financial results reflect a full quarter following 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.
  
  
• Net income applicable to common shares of $27.4 million; adjusted (non-GAAP¹) operating net income applicable to common shares of $29.8 million.
  
  
• Earnings per diluted common share ("EPS") of $1.82; adjusted (non-GAAP¹) diluted EPS of $1.98.
  
  
• Net interest income for the quarter was $73.2 million; net interest income on a fully taxable equivalent basis (non-GAAP¹) for the quarter was $74.0 million.
  
  
• Net interest margin on a fully taxable equivalent basis (non-GAAP¹) for the quarter was 4.07%.
  
  
• Non-interest expense for the quarter was $50.8 million; adjusted (non-GAAP¹) non-interest expense for the quarter was $47.7 million.
  
  
• The balance sheet remains strong with ample liquidity. Total liquidity, including all available borrowing capacity with cash and cash equivalents, totaled $2.6 billion at the end of the third quarter.
  
  
• Ending total gross loans of $5.6 billion and ending total deposits of $6.6 billion; ending loan-to-deposit ratio of 84.4%.
  
  
• Asset quality remains stable across the loan portfolio with adequate reserves.
  
  
• The Company continues to be well-capitalized, ending the quarter with 11.3%² Common Equity Tier 1 capital to risk-weighted assets, 14.3%² Total risk-based capital to risk-weighted assets, and a leverage ratio of 9.6%².

From David P. Boyle, Company Chair and Chief Executive Officer

"Our results for the third quarter and the increase in the dividend demonstrate the financial benefits of the merger with Summit and are in line with our expectations. In addition, the team is working diligently toward the planned systems integration in the fourth quarter, which should lead to additional efficiencies and position us to deliver even greater value for our shareholders."

Results of Operations

Third Quarter 2024

The Company reported third quarter 2024 net income applicable to common shares of $27.4 million, or $1.82 per diluted common share.

Included in the third quarter were pre-tax charges of $3.1 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 $29.8 million, or $1.98 per diluted share.

• Period-end average total gross loans were $5.6 billion at September 30, 2024, up from $4.5 billion at June 30, 2024, primarily due to results that reflect a full quarter after the merger completion.
  
  
• Period-end average total deposits were $6.6 billion at September 30, 2024, up from $5.4 billion at June 30, 2024, primarily due to results that reflect a full quarter after the merger completion.
  
  
• Net interest income increased to $73.2 million in the third quarter of 2024 compared to $59.8 million in the second quarter of 2024, primarily due to results that reflect a full quarter of combined income after the merger completion.
  
  
• Net interest margin on a fully taxable equivalent basis (non-GAAP¹) increased to 4.07% versus 4.06% in the second quarter of 2024.
  
  
• 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 in the third quarter of 2024.
  
  
• The cost of total deposits was 2.38% in the third quarter of 2024, compared to 2.25% in the second quarter of 2024.
  
  
• The Company recorded a provision expense on loans in the third quarter of 2024 of $85.0 thousand, reflecting relatively stable asset quality.
  
  
• The allowance for credit losses at September 30, 2024, was $67.8 million, or 1.2% of total loans.
  
  
• Total non-interest income for the third quarter of 2024 was $10.6 million, an increase of $1.1 million from the second quarter of 2024, primarily due to results that reflect a full quarter of combined income after the merger completion.
  
  
• Non-interest expense for the third quarter of 2024 was $50.8 million and included $3.1 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 September 30, 2024, our Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 11.3%² and 14.3%², respectively, and significantly above the well-capitalized requirements of 6.5% and 10%, respectively. The leverage ratio was 9.6%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 September 30, 2024, the Bank's Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 13.0%² and 14.1%², respectively, and significantly above the well-capitalized requirements. In addition, the Bank's leverage ratio of 10.6%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, and other reports the Company files with the SEC.

Burke & Herbert Financial Services Corp. Consolidated Statements of Income (unaudited) (In thousands)
		Three Months Ended September 30,				Nine Months Ended September 30,
		2024		2023		2024		2023
Interest income
Taxable loans, including fees		$ 103,682		$ 26,425		$ 213,400		$ 74,485
Tax-exempt loans, including fees		48		-		81		-
Taxable securities		10,076		8,909		29,949		28,130
Tax-exempt securities		3,135		1,376		7,052		4,243
Other interest income		1,585		562		2,886		1,858
Total interest income		118,526		37,272		253,368		108,716
Interest expense
Deposits		39,441		11,277		82,745		26,708
Short-term borrowings		3,080		3,078		10,806		10,495
Subordinated debt		2,798		-		4,658		-
Other interest expense		28		28		84		58
Total interest expense		45,347		14,383		98,293		37,261
Net interest income		73,179		22,889		155,075		71,455
Credit loss expense - loans		85		200		19,515		1,034
Credit loss expense (recapture) - off-balance sheet credit exposures		62		35		3,872		(70)
Total provision for credit losses		147		235		23,387		964
Net interest income after credit loss expense		73,032		22,654		131,688		70,491
Non-interest income
Fiduciary and wealth management		2,352		1,354		5,982		3,996
Service charges and fees		5,453		1,583		11,147		4,959
Net gains (losses) on securities		-		(1)		613		(112)
Income from company-owned life insurance		1,330		589		2,799		1,720
Other non-interest income		1,481		764		3,834		2,565
Total non-interest income		10,616		4,289		24,375		13,128
Non-interest expense
Salaries and wages		20,858		9,867		51,271		29,283
Pensions and other employee benefits		4,678		2,242		12,346		7,116
Occupancy		3,412		1,462		7,947		4,464
Equipment rentals, depreciation and maintenance		4,699		1,435		18,643		4,231
Other operating		17,179		7,417		46,216		19,042
Total non-interest expense		50,826		22,423		136,423		64,136
Income before income taxes		32,822		4,520		19,640		19,483
Income tax expense		5,200		464		3,725		1,869
Net income		27,622		4,056		15,915		17,614
Preferred stock dividends		225		-		450		-
Net income applicable to common shares		$ 27,397		$ 4,056		$ 15,465		$ 17,614

Burke & Herbert Financial Services Corp. Consolidated Balance Sheets (In thousands)
		September 30, 2024		December 31, 2023
		(Unaudited)		(Audited)
Assets
Cash and due from banks		$ 44,902		$ 8,896
Interest-earning deposits with banks		246,863		35,602
Cash and cash equivalents		291,765		44,498
Securities available-for-sale, at fair value		1,436,431		1,248,439
Restricted stock, at cost		16,832		5,964
Loans held-for-sale, at fair value		4,216		1,497
Loans		5,574,037		2,087,756
Allowance for credit losses		(67,817)		(25,301)
Net loans		5,506,220		2,062,455
Other real estate owned		2,576		-
Premises and equipment, net		134,770		61,128
Accrued interest receivable		32,791		15,895
Intangible assets		61,598		-
Goodwill		32,783		-
Company-owned life insurance		182,380		94,159
Other assets		162,551		83,544
Total Assets		$ 7,864,913		$ 3,617,579
Liabilities and Shareholders' Equity
Liabilities
Non-interest-bearing deposits		$ 1,392,123		$ 830,320
Interest-bearing deposits		5,208,702		2,171,561
Total deposits		6,600,825		3,001,881
Short-term borrowings		320,163		272,000
Subordinated debentures, net		93,532		-
Subordinated debentures owed to unconsolidated subsidiary trusts		16,950		-
Accrued interest and other liabilities		95,384		28,948
Total Liabilities		7,126,854		3,302,829
Shareholders' Equity
Preferred stock and surplus		10,413		-
Common stock		7,767		4,000
Common stock, additional paid-in capital		400,377		14,495
Retained earnings		422,844		427,333
Accumulated other comprehensive income (loss)		(75,758)		(103,494)
Treasury stock		(27,584)		(27,584)
Total Shareholders' Equity		738,059		314,750
Total Liabilities and Shareholders' Equity		$ 7,864,913		$ 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
	September 30		June 30		March 31		December 31		September 30
	2024		2024		2024		2023		2023
Interest-earning assets:
Loans:
Taxable loans	7.34 %		7.33 %		5.41 %		5.24 %		5.15 %
Tax-exempt loans	5.63		5.55		-		-		-
Total loans	7.34		7.33		5.41		5.24		5.15
Interest-earning deposits and fed funds sold	3.43		3.54		3.82		4.35		4.50
Securities:
Taxable securities	4.05		4.48		3.63		3.73		3.57
Tax-exempt securities	3.58		3.05		2.67		2.64		2.63
Total securities	3.91		4.05		3.43		3.50		3.37
Total interest-earning assets	6.56 %		6.49 %		4.66 %		4.59 %		4.47 %
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	3.19 %		3.00 %		0.63 %		0.61 %		0.56 %
Savings	1.43		1.53		1.97		1.97		1.82
Time	4.82		4.55		4.12		3.97		3.73
Total interest-bearing deposits	3.02		2.90		2.41		2.31		2.09
Borrowings:
Short-term borrowings	4.06		4.38		4.82		4.76		4.69
Subordinated debt borrowings and other	10.16		10.30		-		-		-
Total interest-bearing liabilities	3.21 %		3.14 %		2.71 %		2.59 %		2.37 %
Taxable-equivalent net interest spread	3.35		3.35		1.95		2.00		2.10
Benefit from use of non- interest-bearing deposits	0.72		0.71		0.73		0.70		0.66
Taxable-equivalent net interest margin (non-GAAP 1)	4.07 %		4.06 %		2.68 %		2.70 %		2.76 %

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
	September 30		June 30		March 31		December 31		September 30
	2024		2024		2024		2023		2023
Interest-earning assets:
Loans:
Taxable loans	$ 5,621,531		$ 4,481,993		$ 2,085,826		$ 2,069,738		$ 2,034,275
Tax-exempt loans	4,310		3,041		-		-		-
Total loans	5,625,841		4,485,034		2,085,826		2,069,738		2,034,275
Interest-earning deposits and fed funds sold	175,265		94,765		41,692		40,524		49,501
Securities:
Taxable securities	996,749		988,492		989,875		961,396		991,170
Tax-exempt securities	440,781		426,092		259,699		261,075		262,336
Total securities	1,437,530		1,414,584		1,249,574		1,222,471		1,253,506
Total interest-earning assets	$ 7,238,636		$ 5,994,383		$ 3,377,092		$ 3,332,733		$ 3,337,282
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$ 2,144,567		$ 1,587,914		$ 489,779		$ 514,760		$ 537,644
Savings	1,725,387		1,480,985		922,732		920,600		952,001
Time	1,328,076		1,141,758		745,945		711,575		654,952
Total interest-bearing deposits	5,198,030		4,210,657		2,158,456		2,146,935		2,144,597
Borrowings:
Short-term borrowings	304,849		376,063		307,446		282,426		262,521
Subordinated debt borrowings and other	109,557		72,643		-		-		-
Total interest-bearing liabilities	$ 5,612,436		$ 4,659,363		$ 2,465,902		$ 2,429,361		$ 2,407,118
Non-interest-bearing deposits	$ 1,389,134		$ 1,207,443		$ 812,199		$ 852,120		$ 860,983

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
	2024		2024		2024		2023		2023
Per common share information
Basic earnings (loss)	$ 1.83		$ (1.41)		$ 0.70		$ 0.68		$ 0.55
Diluted earnings (loss)	1.82		(1.41)		0.69		0.67		0.55
Cash dividends	0.53		0.53		0.53		0.53		0.53
Book value	48.63		45.72		42.92		42.37		36.46
Tangible book value (non-GAAP1)	42.32		39.11		42.92		42.37		36.46
Balance sheet-related (at period end, unless otherwise indicated)
Assets	$ 7,864,913		$ 7,810,193		$ 3,696,390		$ 3,617,579		$ 3,585,188
Average interest-earning assets	7,238,636		5,994,383		3,377,092		3,332,733		3,337,282
Loans (gross)	5,574,037		5,616,724		2,118,155		2,087,756		2,070,616
Loans (net)	5,506,220		5,548,707		2,093,549		2,062,455		2,044,505
Securities, available-for- sale, at fair value	1,436,431		1,414,870		1,275,520		1,248,439		1,224,395
Intangible assets	61,598		65,895		-		-		-
Goodwill	32,783		32,783		-		-		-
Non-interest-bearing deposits	1,392,123		1,397,030		822,767		830,320		853,385
Interest-bearing deposits	5,208,702		5,242,541		2,167,346		2,171,561		2,132,233
Deposits, total	6,600,825		6,639,571		2,990,113		3,001,881		2,985,618
Brokered deposits	345,328		403,668		370,847		389,011		389,018
Uninsured deposits	1,999,403		1,931,786		700,846		677,308		670,735
Short-term borrowings	320,163		285,161		360,000		272,000		299,000
Subordinated debt, net	110,482		109,064		-		-		-
Unused borrowing capacity3	2,353,963		2,162,112		704,233		914,980		883,525
Total equity	738,059		693,126		319,308		314,750		270,819
Total common equity	727,646		682,713		319,308		314,750		270,819
Accumulated other comprehensive income (loss)	(75,758)		(100,430)		(100,954)		(103,494)		(146,159)

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
	2024		2024		2024		2023		2023
Income statement
Interest income	$ 118,526		$ 96,097		$ 38,745		$ 38,180		$ 37,272
Interest expense	45,347		36,332		16,614		15,876		14,383
Non-interest income	10,616		9,505		4,254		4,824		4,289
Total revenue (non- GAAP1)	83,795		69,270		26,385		27,128		27,178
Non-interest expense	50,826		64,432		21,165		22,300		22,423
Pretax, pre-provision earnings (non-GAAP1)	32,969		4,838		5,220		4,828		4,755
Provision for (recapture of) credit losses	147		23,910		(670)		(750)		235
Income (loss) before income taxes	32,822		(19,072)		5,890		5,578		4,520
Income tax expense (benefit)	5,200		(2,153)		678		500		464
Net income (loss)	27,622		(16,919)		5,212		5,078		4,056
Preferred stock dividends	225		225		-		-		-
Net income (loss) applicable to common shares	$ 27,397		$ (17,144)		$ 5,212		$ 5,078		$ 4,056
Ratios
Return on average assets (annualized)	1.40 %		(1.06) %		0.58 %		0.56 %		0.45 %
Return on average equity (annualized)	15.20		(12.44)		6.67		7.30		5.60
Net interest margin (non- GAAP1)	4.07		4.06		2.68		2.70		2.76
Efficiency ratio	60.66		93.02		80.22		82.20		82.50
Loan-to-deposit ratio	84.44		84.59		70.84		69.55		69.35
Common Equity Tier 1 (CET1) capital ratio2	11.30		10.91		16.56		16.85		16.44
Total risk-based capital ratio2	14.34		13.91		17.54		17.88		17.48
Leverage ratio2	9.59		9.04		11.36		11.31		11.32

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-GAAP 1)
		For the three months ended
		September 30		June 30		March 31		December 31		September 30
		2024		2024		2024		2023		2023
Net income (loss) applicable to common shares		$ 27,397		$ (17,144)		$ 5,212		$ 5,078		$ 4,056
Add back significant items (tax effected):
Listing-related		-		-		-		-		-
Merger-related		2,449		18,806		537		1,141		1,592
Day 2 non-PCD Provision		-		23,305		-		-		-
Total significant items		2,449		42,111		537		1,141		1,592
Operating net income		$ 29,846		$ 24,967		$ 5,749		$ 6,219		$ 5,648
Weighted average dilutive shares		15,040,145		12,262,979		7,527,489		7,508,289		7,499,278
Adjusted diluted EPS 4		$ 1.98		$ 2.04		$ 0.76		$ 0.83		$ 0.75
Non-interest expense		$ 50,826		$ 64,432		$ 21,165		$ 22,300		$ 22,423
Remove significant items:
Listing-related		-		-		-		-		-
Merger-related		3,101		23,805		680		1,444		2,015
Total significant items		$ 3,101		$ 23,805		$ 680		$ 1,444		$ 2,015
Adjusted non-interest expense		$ 47,725		$ 40,627		$ 20,485		$ 20,856		$ 20,408

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, 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 listing-related and merger-related expenses. Management believes it represents a more normalized non-interest expense total for periods with identified significant items.

Total Revenue (non-GAAP 1)
		For the three months ended
		September 30		June 30		March 31		December 31		September 30
		2024		2024		2024		2023		2023
Interest income		$ 118,526		$ 96,097		$ 38,745		$ 38,180		$ 37,272
Interest expense		45,347		36,332		16,614		15,876		14,383
Non-interest income		10,616		9,505		4,254		4,824		4,289
Total revenue (non- GAAP 1)		$ 83,795		$ 69,270		$ 26,385		$ 27,128		$ 27,178

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.

Pretax, Pre-Provision Earnings (non-GAAP 1)
		For the three months ended
		September 30		June 30		March 31		December 31		September 30
		2024		2024		2024		2023		2023
Income (loss) before taxes		$ 32,822		$ (19,072)		$ 5,890		$ 5,578		$ 4,520
Provision for (recapture of) credit losses		147		23,910		(670)		(750)		235
Pretax, pre- provision earnings (non-GAAP 1)		$ 32,969		$ 4,838		$ 5,220		$ 4,828		$ 4,755

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-GAAP 1)
		For the three months ended
		September 30		June 30		March 31		December 31		September 30
		2024		2024		2024		2023		2023
Common shareholders' equity		$ 727,646		$ 682,713		$ 319,308		$ 314,750		$ 270,819
Less:
Intangible assets		61,598		65,895		-		-		-
Goodwill		32,783		32,783		-		-		-
Tangible common equity (non-GAAP1)		$ 633,265		$ 584,035		$ 319,308		$ 314,750		$ 270,819
Shares outstanding at end of period		14,963,003		14,932,169		7,440,025		7,428,710		7,428,710
Tangible book value per common share		$ 42.32		$ 39.11		$ 42.92		$ 42.37		$ 36.46

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.

Net Interest Margin & Taxable-Equivalent Net Interest Income (non-GAAP 1)
		As of or for the three months ended
		September 30		June 30		March 31		December 31		September 30
		2024		2024		2024		2023		2023
Net interest income		$ 73,179		$ 59,765		$ 22,131		$ 22,304		$ 22,889
Taxable-equivalent adjustments		847		688		362		365		366
Net interest income (Fully Taxable- Equivalent - FTE)		$ 74,026		$ 60,453		$ 22,493		$ 22,669		$ 23,255
Average interest-earning assets		$ 7,238,636		$ 5,994,383		$ 3,377,092		$ 3,332,733		$ 3,337,282
Net interest margin (non-GAAP 1)		4.07 %		4.06 %		2.68 %		2.70 %		2.76 %

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 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 September 30, 2024, are estimated.
³ Includes Federal Home Loan Bank, Borrower-in-Custody (BIC), and correspondent bank availability.
⁴ 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.

CONTACT:
Investor Relations
703-666-3555
[email protected]

SOURCE Burke & Herbert Financial Services Corp.