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Burke & Herbert Financial Services Corp. (BHRB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 GAAP EPS was $1.30 on net income to common of $19.6M; adjusted diluted EPS was $1.77, reflecting $8.9M of merger-related charges excluded in non-GAAP results .
  • Net interest margin (FTE, non-GAAP) declined to 3.91% from 4.07% in Q3 on lower accelerated loan accretion; deposit costs improved to 2.17% from 2.38%, supporting funding cost relief .
  • Liquidity remained ample at $4.2B with CET1 11.5%, total risk-based capital 14.6%, and leverage ratio 9.8%; loan-to-deposit ratio ended at 87.1% .
  • 2H 2024 guidance was largely achieved or exceeded: NII within range; noninterest income above; provision well below; core noninterest expense at the low end; merger expense below the range .
  • CEO cited Summit integration benefits and continued loan and core deposit growth as catalysts; dividend maintained at $0.55 per share for Q4 .

What Went Well and What Went Wrong

  • What Went Well

    • Deposit cost declined to 2.17% vs. 2.38% in Q3, helping funding costs despite lower accretion; noninterest income rose to $11.8M on securities gains and higher COLI income .
    • Liquidity and capital remained strong (total liquidity ~$4.2B; CET1 11.5%; TRBC 14.6%; leverage 9.8%); brokered deposits decreased by $100.5M, improving deposit mix .
    • “Despite the amount of time and energy committed to the conversion, we grew both loans and core deposits during the quarter...balance sheet reflects ample liquidity and capital as we enter 2025” — David P. Boyle, Chair & CEO .

  • What Went Wrong

    • Net interest margin fell to 3.91% (from 4.07%) and net interest income declined to $70.7M (from $73.2M), primarily due to lower accelerated loan accretion .
    • Noninterest expense increased to $61.4M including $8.9M of merger-related charges, pressuring GAAP earnings quality; efficiency ratio worsened to 74.44% vs. 60.66% in Q3 .
    • Deposits decreased by $85.6M versus Q3, driven largely by a $100.5M reduction in brokered deposits, modestly elevating the loan-to-deposit ratio to 87.1% .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Diluted EPS ($)$(1.41) $1.82 $1.30
Adjusted Diluted EPS ($, non-GAAP)$2.04 $1.98 $1.77
Total Revenue ($000, non-GAAP)$69,270 $83,795 $82,501
Net Interest Income ($000)$59,765 $73,179 $70,710
Net Interest Margin (FTE, %)4.06% 4.07% 3.91%
Provision for Credit Losses ($000)$23,910 $147 $833
Noninterest Expense ($000)$64,432 $50,826 $61,410
Adjusted Noninterest Expense ($000, non-GAAP)$40,627 $47,725 $52,462

Segment/Balance Sheet KPIs

KPIQ2 2024Q3 2024Q4 2024
Ending Loans (Gross, $000)$5,616,724 $5,574,037 $5,672,236
Ending Deposits ($000)$6,639,571 $6,600,825 $6,515,239
Loan-to-Deposit Ratio (%)84.59% 84.44% 87.06%
Brokered Deposits ($000)$403,668 $345,328 $244,802
Uninsured Deposits ($000)$1,931,786 $1,999,403 $1,926,724
Cost of Total Deposits (%)2.43% 2.38% 2.17%
CET1 Ratio (%)10.91% 11.30% 11.51% (est.)
Total Risk-Based Capital Ratio (%)13.91% 14.55% 14.55% (est.)
Leverage Ratio (%)9.04% 9.59% 9.78% (est.)
Total Liquidity ($000)$2,162,112 Unused capacity Q2; $2.4B total liquidity cited $2,353,963 Unused capacity; $2.6B total liquidity cited $4,092,378 Unused capacity; ~$4.2B total liquidity cited

Loan Portfolio Composition (Q4 2024)

Loan CategoryBalance ($000)Notes
Commercial Real Estate (CRE)$2,637,802 Diversified; minimal DC office exposure
Residential$1,173,749
Owner-Occupied CRE$614,362
Commercial & Industrial$613,085 Focus area for growth
AD&C$465,537 AD&C ~51% of bank total RBC
Consumer$167,701

Guidance Changes

MetricPeriodPrevious GuidanceActual/OutcomeChange
Net Interest Income (non-FTE, $MM)2H 2024$141–$149 Q3+Q4 = $143.9 Maintained (met)
Noninterest Income ($MM)2H 2024$20.5–$22.0 Q3+Q4 = $22.4 Raised (above)
Provision Expense ($MM)2H 2024Up to $5.0 Q3+Q4 = $1.0 Lowered (below)
Core Noninterest Expense ($MM, excl. merger)2H 2024$100–$104 Q3+Q4 = $100.2 Maintained (low end)
Merger-Related Expense ($MM)2H 2024$15–$17 Q3+Q4 = $12.0 Lowered (below)
Effective Tax Rate (%)2H 202417.0–18.5 Combined ~10.7% (Q3+Q4 taxes/pre-tax) Lowered (below)
2025 Expectations (qualitative)FY 2025Loan growth high single digits; deposit growth low single digits; NIM 4.05–4.10%; operating leverage >10%; top-quartile ROA/ROE vs peers N/A (forward guidance)Initiated

Earnings Call Themes & Trends

Note: A full Q4 2024 earnings call transcript was not available via the document tools or company archives during this review; themes below reflect prepared materials (press releases and investor presentations).

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Merger Integration & Cost SavesMerger closed (May 3); Day 2 CECL; systems conversion planned for Q4; cost saves targeted at $20MM Achieved annualized cost saves of $27.8MM vs $20MM goal; integration completed Improving execution
Net Interest Margin TrajectoryNIM improved to 4.06% in Q2 on accretion; 4.07% in Q3 NIM 3.91% on lower loan accretion; deposit costs declined Mixed: funding cost better, accretion lower
Deposit Mix & CostCost rose post-merger in Q2 (2.43%); 2.38% in Q3 Cost of deposits 2.17%; brokered deposits down $100.5M QoQ Positive
Liquidity & Borrowing Capacity~$2.4–$2.6B liquidity in Q2–Q3; unused capacity increased ~$4.2B total liquidity; unused borrowing capacity ~$4.1B Strengthening
Capital RatiosCET1 ~10.9–11.3%; leverage ~9.0–9.6% CET1 11.5% (est.); leverage 9.8% (est.) Slightly higher
Asset QualityAllowance ~1.2% of loans; provision negligible in Q3; Day 2 in Q2 Provision $1.0M; allowance $68.0M (~1.2%) Stable
CRE ExposureDiversified CRE; minimal DC office; AD&C ~50% RBC in Q3 CRE diversified; AD&C ~51% RBC Stable

Management Commentary

  • CEO statement: “Our results for the quarter demonstrate the financial benefits of the merger with Summit…we grew both loans and core deposits during the quarter…balance sheet reflects ample liquidity and capital as we enter 2025” — David P. Boyle .
  • Strategic priorities emphasized: trusted advisor model, fee revenue growth, profitable market expansion; risk discipline and fortress balance sheet (liquidity sources, stress testing, governance) .

Q&A Highlights

  • A Q4 2024 earnings call transcript could not be located via SEC filings, IR downloads, or transcript repositories within the review window; therefore, specific Q&A themes and clarifications are unavailable from primary sources at this time (searches included the company IR site and third-party aggregators) .

Estimates Context

  • S&P Global consensus data was unavailable due to an access limit during retrieval; caution is warranted. Third-party sources indicate Q4 2024 adjusted EPS consensus of $1.77, which matched reported adjusted EPS of $1.77, while revenue consensus data points were not consistently disclosed for banks (non-GAAP total revenue reported was $82.5M) .
  • Based on these references, no material EPS surprise is indicated; revenue comparisons are less standardized due to non-GAAP “total revenue” definitions in bank reporting .

Key Takeaways for Investors

  • Funding cost tailwind emerging: deposit cost fell 21 bps QoQ to 2.17%, partially offsetting lower loan accretion; watch sustainability of deposit repricing into 2025 .
  • Accretion normalization compressed NIM QoQ; normalized core earnings quality should improve as merger-related items abate and cost saves flow through .
  • Liquidity and capital provide strategic flexibility (unused capacity ~$4.1B; CET1 11.5%); supports balance sheet repositioning and selective growth .
  • Mix improvements (brokered deposits down $100.5M QoQ) and stable credit (ACL ~1.2% of loans; provision $1.0M) reduce risk profile amid macro uncertainty .
  • 2H guidance execution was solid (NII met; noninterest income above; provision below; core Opex at low end), supporting confidence in 2025 expectations (NIM 4.05–4.10%, loan growth HSD) .
  • Dividend stability ($0.55) and shelf registration effectiveness ($350M S-3) broaden capital management options and investor appeal .
  • Trading implication: near term, the narrative hinges on the pace of accretion normalization vs. deposit cost relief and operating leverage realization from cost saves; medium term, loan growth granularity (C&I focus) and credit discipline in CRE/AD&C will shape returns .