ALEXANDRIA, Va., July 26, 2024 /PRNewswire/ -- Burke & Herbert Financial Services Corp. (the "Company" or "Burke & Herbert") (NASDAQ:BHRB) reported financial results for the quarter ended June 30, 2024. In addition, at its meeting on July 25, 2024, the board of directors declared a $0.53 per share regular cash dividend to be paid on September 3, 2024, to shareholders of record as of the close of business on August 15, 2024. Q2 2024 Highlights On May 3, 2024, the Company 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. The merger created a financial holding company with more than $7.8 billion in assets and more than 75 branches across Virginia, West Virginia, Maryland, Delaware, and Kentucky, with more than 800 employees serving our communities. 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. Reflective of the current expected credit losses ("CECL") provision expenses related to the day 2 purchase accounting impact from acquired loans and merger related expenses, the Company reported a net loss applicable to common shares of $17.1 million for the quarter; adjusted (non-GAAP1) operating net income applicable to common shares of $25.0 million for the quarter. Basic and diluted loss per common share for the quarter was $1.41; adjusted (non-GAAP1) diluted EPS for the quarter was $2.04. 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. Net interest margin on a fully taxable equivalent basis (non-GAAP1) for the quarter was 4.06%. Non-interest expense for the quarter was $64.4 million; adjusted (non-GAAP1) non-interest expense for the quarter was $40.6 million. Provision for credit losses ("provision") of $23.9 million for the quarter; $29.5 million of CECL Day 2 non-purchased credit deteriorated ("non-PCD") provision expense2. Balance sheet remains strong with ample liquidity. Total liquidity, including all available borrowing capacity with cash and cash equivalents, totaled $2.4 billion at the end of the second quarter. Ending total loans of $5.6 billion and ending total deposits of $6.6 billion; ending loan-to-deposit ratio of 84.6%. Asset quality remains stable across the loan portfolio with adequate reserves. The Company continues to be well-capitalized, ending the quarter with 10.9% Common Equity Tier 1 capital to risk-weighted assets3, 13.8% Total risk-based capital to risk-weighted assets3, and a leverage ratio of 9.0%3. From David P. Boyle, Company Chair and Chief Executive Officer "The consummation of our partnership with Summit brought together two organizations committed to being the quintessential community bank in our markets, where we care about the people who live and work among us. Our results for the second quarter demonstrate the financial benefits of the merger and we look forward to delivering increased value not only for our shareholders but for our customers, employees, and communities." Results of Operations Second Quarter 2024 The Company reported second quarter 2024 net loss applicable to common shares of $17.1 million, or $(1.41) per diluted common share. Included in the second quarter were pre-tax charges of $29.5 million of CECL Day 2 non-PCD provision expense related to the allowance established on acquired non-PCD loans and $23.8 million of expenses related to the merger with Summit. Excluding these items from the current quarter on a tax effected basis, adjusted operating net income was $25.0 million, or $2.04 per diluted share. Period-end total loans were $5.6 billion at June 30, 2024, up from $2.1 billion at December 31, 2023, primarily due to the merger. Period-end total deposits were $6.6 billion at June 30, 2024, up from $3.0 billion at December 31, 2023, primarily due to the merger. Net interest income increased to $59.8 million in the second quarter of 2024 compared to $22.1 million in the first quarter of 2024. Net interest margin on a fully taxable equivalent basis increased 138.1 bps to 4.06% compared to 2.68% in the first quarter of 2024, driven by the mix of interest-earning assets added by the merger and the impact of the fair value accretion and amortization marks. Accretion income on loans was $13.4 million and the amortization expense impact on interest expense was $2.5 million, or 18.2 bps of net interest margin in the second quarter of 2024. The cost of total deposits was 2.43% in the second quarter of 2024 compared to 1.75% in the first quarter of 2024. The Company recorded a total provision expense in the second quarter of 2024 of $23.9 million, which included $29.5 million of CECL Day 2 non-PCD provision expense related to the allowance for credit losses established on acquired non-PCD loans and $3.2 million attributable to the provision for unfunded commitments, compared to $0.7 million of total provision recapture in the first quarter of 2024. 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 related to acquired non-PCD loans and $23.5 million of allowance related to acquired PCD loans. Total non-interest income for the second quarter of 2024 was $9.5 million, an increase of $5.3 million from the first quarter of 2024 due to the merger. Non-interest expense for the second quarter of 2024 was $64.4 million and included $23.8 million of merger-related charges. Regulatory capital ratios4 The Company continues to be well-capitalized with capital ratios that are above regulatory requirements. As of June 30, 2024, our Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 10.9%4 and 13.8%4, respectively, and significantly above the well-capitalized requirements of 6.5% and 10%, respectively. The leverage ratio was 9.0%4 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 June 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 12.4%4 and 13.5%4, respectively, and significantly above the well-capitalized requirements. In addition, the Bank's leverage ratio of 9.9%4 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 Report on Form 10-Q for the quarter ended March 31, 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 June 30 Six months ended June 30 2024 2023 2024 2023 Interest income Taxable loans, including fees $                81,673 $               25,300 $            109,718 $              48,060 Tax-exempt loans, including fees 33 — 33 — Taxable securities 10,930 9,419 19,873 19,221 Tax-exempt securities 2,556 1,409 3,917 2,867 Other interest income 905 988 1,301 1,296 Total interest income 96,097 37,116 134,842 71,444 Interest expense Deposits 30,373 10,030 43,304 15,431 Borrowed funds 4,071 3,279 7,726 7,417 Subordinated debt 1,860 — 1,860 — Other interest expense 28 15 56 30 Total interest expense 36,332 13,324 52,946 22,878 Net interest income 59,765 23,792 81,896 48,566 Credit loss expense - loans and available-for-sale securities 20,100 (97) 19,430 834 Credit loss expense - off-balance sheet credit exposures 3,810 311 3,810 (105) Total provision for (recapture of) credit losses 23,910 214 23,240 729 Net interest income after credit loss expense 35,855 23,578 58,656 47,837 Non-interest income Fiduciary and wealth management 2,211 1,305 3,630 2,642 Service charges and fees 4,088 1,741 5,694 3,376 Net gains (losses) on securities 613 (111) 613 (111) Income from company-owned life insurance 922 571 1,469 1,131 Other non-interest income 1,671 1,119 2,353 1,801 Total non-interest income 9,505 4,625 13,759 8,839 Non-interest expense Salaries and wages 20,895 9,922 30,413 19,416 Pensions and other employee benefits 5,303 2,406 7,668 4,874 Occupancy 2,997 1,545 4,535 3,002 Equipment rentals, depreciation and maintenance 12,663 1,457 13,944 2,796 Other operating 22,574 6,018 29,037 11,625 Total non-interest expense 64,432 21,348 85,597 41,713 Income (loss) before income taxes (19,072) 6,855