Burke & Herbert Financial Services Reports 54.4% Increase in Net Income to $35M for 2024

Burke & Herbert Financial Services Corp. (BHRB) reported a significant increase in net income for the year ended December 31, 2024, reaching $35.0 million, a 54.4% jump from the $22.7 million recorded in 2023. This surge is primarily attributed to the May 3, 2024, merger with Summit Financial Group, Inc., resulting in increased interest income exceeding the rise in interest expense. Total consolidated assets reached $7.8 billion, gross loans $5.7 billion, total deposits $6.5 billion, and total shareholders' equity $730.2 million as of December 31, 2024. The company employed 815 full-time equivalent employees at year-end.

The merger significantly impacted the company's financial performance. Net interest income increased by $132.0 million to $225.8 million in 2024, driven by higher loan interest income, partially offset by increased deposit interest expense. Non-interest income rose by $18.2 million (101.5%) to $36.2 million, primarily due to increases across all categories, including service charges and fees, and fiduciary and wealth management services. Conversely, non-interest expense increased by $111.4 million (128.9%) to $197.8 million, largely due to merger-related expenses ($36.5 million) and increases in salaries and wages.

The company's primary market area encompasses northern Virginia and West Virginia, with 77 branches and commercial loan offices across five states. As of June 30, 2024, the company held a 1.1% market share of deposits within the Washington, D.C. MSA, totaling $3.2 billion. The company's strategic focus is on organic growth and selective acquisitions, emphasizing personalized service and local decision-making to compete in a highly competitive market. The company highlights its community banking philosophy, disciplined credit culture, and conservative balance sheet as key strengths.

Significant risks identified in the filing include credit risk associated with lending to small and medium-sized businesses and concentrations in commercial real estate lending (65.5% of total gross loans). Liquidity risk is also noted, stemming from reliance on deposits and the potential for deposit outflows. The company acknowledges the impact of interest rate changes and monetary policy on its earnings and the highly regulated nature of the banking industry. The company also notes the risks associated with cybersecurity threats and the evolving regulatory landscape, including ESG considerations.

The company's outlook is positive, with management believing it is well-positioned for continued profitable growth. However, the filing emphasizes the need for additional employees and infrastructure to manage increasing customer relationships and the uncertainties associated with the execution of its strategic plan and the impact of external factors such as economic conditions and regulatory changes. The company declared a cash dividend of $0.55 per share payable on March 3, 2025.