Burke & Herbert Financial Services Corp. · NASDAQ:BHRB
Burke & Herbert Financial Services — Q4 2023 Earnings Presentation
26 slides from Burke & Herbert Financial Services's earnings presentation, February 2024
Slide 1: 4Q23 Update
4Q23 Update (Nasdaq: BHRB) February 2024 On August 24, 2023, Burke & Herbert Financial Services Corp. (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 mer
Slide 2: Cautionary Statement Regarding Forward-Looking Information
Cautionary Statement Regarding Forward-Looking Information 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 193
Slide 3: Introduction
Introduction • Thank you for your interest in Burke & Herbert Financial Services Corp. and its wholly owned subsidiary Burke & Herbert Bank & Trust Company. A proud and flourishing community institution, we are headquartered in Old Town Alexandria, Virginia and have served the banking, borrowing and
Slide 4: Key Takeaways
Key Takeaways • Burke & Herbert Financial Services Corp. was established in September 2022 as the holding company for Burke & Herbert Bank & Trust Company, which has been offering banking services in Northern Virginia since 1852 • We have a seasoned executive management team and an experienced Board
Slide 5: Executive Team
Executive Team Name Role Years in Banking Years at BHB Prior Institution Experience David Boyle Chair, CEO, President 25+ years 4 years PNC Financial Services / National City Bank Roy Halyama EVP, Chief Financial Officer 25+ years 2 years JP Morgan / PNC Financial Services / Fifth Third Bank Jeffrey
Slide 6: Company Overview
Company Overview Overview Financial Performance FY20 FY21 FY22 FY23 • The Bank was founded in 1852, making us the oldest, continuously operating Balance Sheet Highlights (millions) Bank in Virginia Assets $ 3,425 $ 3,622 $ 3,563 $ 3,618 • Our primary market area includes Virginia / Maryland / DC wit
Slide 7: Loan Portfolio as of 4Q23
Loan Portfolio as of 4Q23 ($ in 000s) Portfolio Commercial Real Estate Category in dollars in percentage $2,087,756 Residential Retail Real Estate $ 339,783 26% $527,980 Industrial/Warehouse 213,616 16% Office Bldgs/Condos 187,000 14% Multi-Family 195,380 15% Hotels/Motels 143,771 11% Owner-Occupied
Slide 8: Security Portfolio as of 4Q23
Security Portfolio as of 4Q23 ($in 000s) Portfolio FV Net Unrealized $1,248,439 Category Amortized Cost WA Yield Losses Other U.S. Treasury & Agency $ 17,955 $ 197,026 1.36% Asset-Backed $8,014 U.S Treasury & Municipal 72,026 535,229 2.11% $77,936 Agency Agency RMBS 4,836 47,074 3.67% $179,071 Non-A
Slide 9: Funding Sources as of 4Q23
Funding Sources as of 4Q23 ($ in 000s) Deposits Category Average Rate $3,001,881 Demand (non-interest bearing) −% Demand (interest bearing) 0.42% Time Deposits & Other $347,052 Money Market & Savings 1.64% Demand (non- Brokered Certificate of Deposits 4.57% interest) Time Deposits & Other 2.07% $830
Slide 10: Capital Trends as of 4Q23
Capital Trends as of 4Q23 Capital Management Common Equity Tier 1 Ratio Total Capital Ratio • We take a forward-looking, disciplined approach to capital management that emphasizes acceptable risk- 18.8% 18.9% adjusted returns over the long-term 17.6% 18.0% 17.5% 17.9% 16.2% 16.9% • Our capital manag
Slide 11: Asset Quality as of 4Q23
Asset Quality as of 4Q23 Allowance Coverage Ratio NCOs / Average Loans Credit Management • Our objective is to maintain a moderate risk profile through the economic cycle 1.78% 1.82% • Credit risk management is embedded in our risk culture and in our decision-making processes 1.21% 0.22% 1.11% 0.18%
Slide 12: Final Burke & Herbert Standalone Thoughts
Final Burke & Herbert Standalone Thoughts • Burke & Herbert Financial Services Corp. was established in September 2022, as the holding company for Burke & Herbert Bank & Trust Company • Burke & Herbert Bank & Trust Company is a $3.6 billion growth-oriented commercial bank headquartered in Alexandria
Slide 13: Merger of Equals with Summit Financial Group, Inc.
Burke & Herbert Financial Services Corp. (Nasdaq: BHRB) Merger of Equals with Summit Financial Group, Inc. (Nasdaq: SMMF) Previously Announced on August 24th, 2023 All data related to pages 13 – 23 are as of the merger announcement date or otherwise indicated 13
Slide 14: Strategic Rationale
Strategic Rationale Scale: Creates a ~$8 billion bank with >75 branch locations across an attractive 5-state 1 Mid-Atlantic and Southeast footprint Management Strength: Culturally compatible organizations with combined 2 management depth supportive of growth to $10 billion of assets and beyond Strat
Slide 15: Creating a Diversified, High Performing Community Banking Institution
Creating a Diversified, High Performing Community Banking Institution Mid-Atlantic & Southeast Franchise With Scale(1) Attractive Deposit Franchise $8.1bn $5.6bn $6.7bn >75 #3 Top 10 Largest Bank Deposit Market Share Assets Gross Loans Deposits Branches Headquartered in in Both Virginia and Virginia
Slide 16: Combined Leadership: Executive Management Bios
Combined Leadership: Executive Management Bios David Boyle Charlie Maddy Roy Halyama Rob Tissue Joe Hager Chief Executive Officer President Chief Financial Officer EVP of Financial Strategy Chief Operating Officer Served as the President and CEO of BHRB Served as the President and Chief Served
Slide 17: Pro Forma Financial Impact
Pro Forma Financial Impact Financial Results GAAP Financial Results GAAP Financial Results Excluding AOCI and Rate Marks (1) Excluding CECL Day-2 Double Count (2) Earnings 71% 92% 30% 49% 63% 86% Impact 2024E 2025E 2024E 2025E 2024E 2025E EPS Accretion EPS Accretion EPS Accretion EPS Accretion EPS A
Slide 18: Combined Footprint
Combined Footprint Indicates higher than U.S. National Average (1) Key Combined Markets of Operation Greater Washington D.C. Charleston, WV Eastern Shore of MD (2) Capital of the U.S. Capital of West Virginia Population: 6.44mm Population: 70k Population: 252k Pop. CAGR: 1.01% Pop. CAG
Slide 19: Diversified Pro Forma Loan Composition
Diversified Pro Forma Loan Composition BHRB SMMF Pro Forma Consumer & Commercial & Other Construction Industrial 2.7% 4.6% Non-Owner Commercial & Industrial Commercial & Industrial 3.0% Occupied CRE Non-Owner 9.4% 13.0% 35.1% Occupied CRE Non-Owner 44.0% Residential R.E. Consumer & Other Occupied CR
Slide 20: Pro Forma Deposit Composition
Pro Forma Deposit Composition BHRB SMMF Pro Forma Retail Time Deposits MMDA & Other MMDA & Other Retail Time 16.9% Savings Savings Deposits MMDA & Other Jumbo Time 46.2% 39.8% 12.1% Deposits Retail Time Savings 4.2% Deposits 32.0% 8.3% Jumbo Time Deposits $3.0bn $3.7bn Jumbo Time $6.7bn 5.0% Deposit
Slide 21: Pro Forma Net Income Reconciliation
Pro Forma Net Income Reconciliation Pro Forma Earnings Reconciliation Earnings Buildup ($mm) 2024E $23.3 Dollars in millions, except per share data Pro Forma $118.1 (1) Combined Net Income to Common 86.2 ($12.7) $21.3 After - Tax Transaction Adjustments Cost Savings - Fully Realized 14.6 $86.2 Oppor
Slide 22: Transaction Overview
Transaction Overview Merger of Equals Accounting and Legal Acquirer: Summit Financial Group, Inc. (SMMF) merges into Burke and Herbert Financial Services Corp. (BHRB), with BHRB surviving as the bank holding company and Merger Structure deemed to be the acquiring entity Bank Merger: Summit Com
Slide 23: Key Assumptions
Key Assumptions BHRB’s earnings per internal company estimates Earnings Assumptions SMMF’s earnings per Street consensus estimates, as adjusted for lost income from interest rate derivative positions Merger Costs One-time merger expenses of approximately $45.5 million after-tax Cost savings
Slide 24: Appendix: Notes on Non-GAAP Financial Measures
Appendix: Notes on Non-GAAP Financial Measures Total Revenue: 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
Slide 25: Appendix: Notes on Non-GAAP Financial Measures
Appendix: Notes on Non-GAAP Financial Measures Net Interest Margin: 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
Slide 26: Appendix: Notes on Non-GAAP Financial Measures
Appendix: Notes on Non-GAAP Financial Measures Tangible Book Value per share (TBVPS) & TBVPS (excluding Securities AOCI): TBVPS represents the Company’s tangible common equity at period-end divided by common shares at period-end. Currently, there are no adjustments from common equity to determine ta
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