EX-99.1 2 a3q2024earningspressrelease.htm EX-99.1 Document
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Burke & Herbert Financial Services Corp. Announces Third Quarter 2024 Results and Increases Common Stock Dividend

For Immediate Release
October 25, 2024

Alexandria, VA – 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.”




(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.
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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-



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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.



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Burke & Herbert Financial Services Corp.
Consolidated Statements of Income (unaudited)
(In thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Interest income
Taxable loans, including fees$103,682 $26,425 $213,400 $74,485 
Tax-exempt loans, including fees48 — 81 — 
Taxable securities10,076 8,909 29,949 28,130 
Tax-exempt securities3,135 1,376 7,052 4,243 
Other interest income1,585 562 2,886 1,858 
Total interest income118,526 37,272 253,368 108,716 
Interest expense
Deposits39,441 11,277 82,745 26,708 
Short-term borrowings3,080 3,078 10,806 10,495 
Subordinated debt2,798 — 4,658 — 
Other interest expense28 28 84 58 
Total interest expense45,347 14,383 98,293 37,261 
Net interest income73,179 22,889 155,075 71,455 
Credit loss expense - loans85 200 19,515 1,034 
Credit loss expense (recapture) - off-balance sheet credit exposures62 35 3,872 (70)
Total provision for credit losses147 235 23,387 964 
Net interest income after credit loss expense73,032 22,654 131,688 70,491 
Non-interest income
Fiduciary and wealth management2,352 1,354 5,982 3,996 
Service charges and fees5,453 1,583 11,147 4,959 
Net gains (losses) on securities— (1)613 (112)
Income from company-owned life insurance1,330 589 2,799 1,720 
Other non-interest income1,481 764 3,834 2,565 
Total non-interest income10,616 4,289 24,375 13,128 
Non-interest expense
Salaries and wages20,858 9,867 51,271 29,283 
Pensions and other employee benefits4,678 2,242 12,346 7,116 
Occupancy3,412 1,462 7,947 4,464 
Equipment rentals, depreciation and maintenance4,699 1,435 18,643 4,231 
Other operating17,179 7,417 46,216 19,042 
Total non-interest expense50,826 22,423 136,423 64,136 
Income before income taxes32,822 4,520 19,640 19,483 
Income tax expense 5,200 464 3,725 1,869 
Net income27,622 4,056 15,915 17,614 
Preferred stock dividends225  450  
Net income applicable to common shares$27,397 $4,056 $15,465 $17,614 



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Burke & Herbert Financial Services Corp.
Consolidated Balance Sheets
(In thousands)
September 30, 2024December 31, 2023
(Unaudited)(Audited)
Assets
Cash and due from banks$44,902 $8,896 
Interest-earning deposits with banks246,863 35,602 
Cash and cash equivalents291,765 44,498 
Securities available-for-sale, at fair value1,436,431 1,248,439 
Restricted stock, at cost16,832 5,964 
Loans held-for-sale, at fair value4,216 1,497 
Loans5,574,037 2,087,756 
Allowance for credit losses(67,817)(25,301)
Net loans5,506,220 2,062,455 
Other real estate owned2,576 — 
Premises and equipment, net134,770 61,128 
Accrued interest receivable32,791 15,895 
Intangible assets61,598 — 
Goodwill32,783 — 
Company-owned life insurance182,380 94,159 
Other assets162,551 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 deposits5,208,702 2,171,561 
Total deposits6,600,825 3,001,881 
Short-term borrowings320,163 272,000 
Subordinated debentures, net93,532 — 
Subordinated debentures owed to unconsolidated subsidiary trusts16,950 — 
Accrued interest and other liabilities95,384 28,948 
Total Liabilities 7,126,854 3,302,829 
Shareholders’ Equity
Preferred stock and surplus10,413 — 
Common stock7,767 4,000 
Common stock, additional paid-in capital400,377 14,495 
Retained earnings422,844 427,333 
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 




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Burke & Herbert Financial Services Corp.
Details of Net Interest Margin (unaudited)
For the three months ended
Details of Net Interest Margin - Yield Percentages
September 30June 30March 31December 31September 30
20242024202420232023
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 assets6.56 %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 deposits0.72 0.71 0.73 0.70 0.66 
Taxable-equivalent net interest margin (non-GAAP1)
4.07 %4.06 %2.68 %2.70 %2.76 %

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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 30June 30March 31December 31September 30
20242024202420232023
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 
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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 30June 30March 31December 31September 30
20242024202420232023
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 dividends0.53 0.53 0.53 0.53 0.53 
Book value48.63 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 value1,436,431 1,414,870 1,275,520 1,248,439 1,224,395 
Intangible assets61,598 65,895 — — — 
Goodwill32,783 32,783 — — — 
Non-interest-bearing deposits1,392,123 1,397,030 822,767 830,320 853,385 
Interest-bearing deposits5,208,702 5,242,541 2,167,346 2,171,561 2,132,233 
Deposits, total6,600,825 6,639,571 2,990,113 3,001,881 2,985,618 
Brokered deposits345,328 403,668 370,847 389,011 389,018 
Uninsured deposits1,999,403 1,931,786 700,846 677,308 670,735 
Short-term borrowings320,163 285,161 360,000 272,000 299,000 
Subordinated debt, net110,482 109,064 — — — 
Unused borrowing capacity3
2,353,963 2,162,112 704,233 914,980 883,525 
Total equity738,059 693,126 319,308 314,750 270,819 
Total common equity727,646 682,713 319,308 314,750 270,819 
Accumulated other comprehensive income (loss)(75,758)(100,430)(100,954)(103,494)(146,159)




(3) Includes Federal Home Loan Bank, Borrower-in-Custody (BIC), and correspondent bank availability.



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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 30June 30March 31December 31September 30
20242024202420232023
Income statement
Interest income$118,526 $96,097 $38,745 $38,180 $37,272 
Interest expense45,347 36,332 16,614 15,876 14,383 
Non-interest income10,616 9,505 4,254 4,824 4,289 
Total revenue (non-GAAP1)
83,795 69,270 26,385 27,128 27,178 
Non-interest expense50,826 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 losses147 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 dividends225 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 ratio60.66 93.02 80.22 82.20 82.50 
Loan-to-deposit ratio84.44 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 


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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-GAAP1)
For the three months ended
September 30June 30March 31December 31September 30
20242024202420232023
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-related2,449 18,806 537 1,141 1,592 
Day 2 non-PCD Provision— 23,305 — — — 
Total significant items2,449 42,111 537 1,141 1,592 
Operating net income$29,846 $24,967 $5,749 $6,219 $5,648 
Weighted average dilutive shares15,040,145 12,262,979 7,527,489 7,508,289 7,499,278 
Adjusted diluted EPS4
$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-related3,101 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-GAAP1)
For the three months ended
September 30June 30March 31December 31September 30
20242024202420232023
Interest income$118,526 $96,097 $38,745 $38,180 $37,272 
Interest expense45,347 36,332 16,614 15,876 14,383 
Non-interest income10,616 9,505 4,254 4,824 4,289 
Total revenue (non-GAAP1)
$83,795 $69,270 $26,385 $27,128 $27,178 
(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.



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Burke & Herbert Financial Services Corp.
Non-GAAP Reconciliations (unaudited)
(In thousands, except ratios and per share amounts)
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-GAAP1)
For the three months ended
September 30June 30March 31December 31September 30
20242024202420232023
Income (loss) before taxes
$32,822 $(19,072)$5,890 $5,578 $4,520 
Provision for (recapture of) credit losses147 23,910 (670)(750)235 
Pretax, pre-provision earnings (non-GAAP1)
$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-GAAP1)
For the three months ended
September 30June 30March 31December 31September 30
20242024202420232023
Common shareholders' equity$727,646 $682,713 $319,308 $314,750 $270,819 
Less:
Intangible assets61,598 65,895 — — — 
Goodwill32,783 32,783 — — — 
Tangible common equity (non-GAAP1)
$633,265 $584,035 $319,308 $314,750 $270,819 
Shares outstanding at end of period14,963,003 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.

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Burke & Herbert Financial Services Corp.
Non-GAAP Reconciliations (unaudited)
(In thousands, except ratios and per share amounts)
Net Interest Margin & Taxable-Equivalent Net Interest Income (non-GAAP1)
As of or for the three months ended
September 30June 30March 31December 31September 30
20242024202420232023
Net interest income$73,179 $59,765 $22,131 $22,304 $22,889 
Taxable-equivalent adjustments847 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-GAAP1)
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.
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