Burke & Herbert Financial Services Corp. Announces Fourth Quarter and Full Year 2024 Results and Declares Common Stock Dividend

Burke & Herbert Financial Services Corp. (the “Company” or “Burke & Herbert”) (Nasdaq: BHRB) reported financial results for the quarter and the year ended December31, 2024. In addition, at its meeting on January23, 2025, the board of directors declared a $0.55 per share regular cash dividend to be paid on March3, 2025, to shareholders of record as of the close of business on February14, 2025.

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Q4 2024 Highlights

— On December 31, 2024, Burke & Herbert Bank & Trust Company became a new member of the Federal Reserve System and purchased shares of Federal Reserve Bank Stock in the amount of $14.8 million.

— On December 11, 2024, the Company's form S-3 was declared effective by the Securities and Exchange Commission and may allow the Company from time to time to offer securities whose aggregate initial offering price will not exceed $350 million.

— Financial results reflect 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.

— For the quarter, net income applicable to common shares totaled $19.6 million, and earnings per diluted common share (“EPS”) was $1.30.

— For the quarter, adjusted (non-GAAP1) operating net income applicable to common shares totaled $26.6 million, and adjusted (non-GAAP1) diluted EPS was $1.77.

— For the twelve months ended December 31, 2024, net income applicable to common shares totaled $35.0 million, and earnings per diluted common share was $2.82.

— For the twelve months ended December 31, 2024, adjusted (non-GAAP1) operating net income applicable to common shares totaled $87.2 million, and adjusted (non-GAAP1) diluted EPS was $7.01.

— The balance sheet remains strong with ample liquidity. Total liquidity, including all available borrowing capacity with cash and cash equivalents, totaled $4.2 billion at the end of the fourth quarter.

— Ending total gross loans of $5.7 billion and ending total deposits of $6.5 billion; ending loan-to-deposit ratio of 87.1%.

— Asset quality remains stable across the loan portfolio with adequate reserves.

— The Company continues to be well-capitalized, ending the quarter with 11.5%2 Common Equity Tier 1 capital to risk-weighted assets, 14.6%2 Total risk-based capital to risk-weighted assets, and a leverage ratio of 9.8%2.

From David P. Boyle, Company Chair and Chief Executive Officer

“Our results for the quarter demonstrate the financial benefits of the merger with Summit and the teamwork involved with the systems integration that took place in November. Despite the amount of time and energy committed to the conversion, we grew both loans and core deposits during the quarter. In addition, the balance sheet reflects ample liquidity and capital as we enter 2025 and we look forward to delivering increased value for our customers, employees, communities, and shareholders.”

Results of Operations

Fourth Quarter2024

The Company reported fourth quarter 2024 net income applicable to common shares of $19.6 million, or $1.30 per diluted common share.

Included in the fourth quarter were pre-tax charges of $8.9 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 $26.6 million, or $1.77 per diluted common share.

— Period-end total gross loans were $5.7 billion at December 31, 2024, an increase of $98.2 million from September 30, 2024.

— Period-end total deposits were $6.5 billion at December 31, 2024, a decrease of $85.6 million from September 30, 2024, primarily due to a $100.5 million decrease in brokered deposits.

— Net interest income for the quarter was $70.7 million compared to $73.2 million in the prior quarter primarily due to a decrease in loan interest income related to lower accelerated loan accretion income offset by a decrease in deposit cost.

— Net interest margin on a fully taxable equivalent basis (non-GAAP1) decreased to 3.91% versus 4.07% in the third quarter of 2024 primarily due to lower accelerated loan accretion income.

— Accretion income on loans during the quarter was $12.0 million, and the amortization expense impact on interest expense was $3.8 million, or 11.4 bps of net interest margin in the fourth quarter of 2024. In the prior quarter, 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.

— The cost of total deposits, including non-interest bearing deposits, was 2.17% in the fourth quarter of 2024, compared to 2.38% in the third quarter of 2024.

— The Company recorded a provision expense on loans in the fourth quarter of 2024 of $1.0 million, reflecting relatively stable asset quality and steady loan growth during the quarter.

— The allowance for credit losses at December 31, 2024, was $68.0 million, or 1.2% of total loans.

— Total non-interest income for the fourth quarter of 2024 was $11.8 million compared to $10.6 million in the prior quarter, primarily due to a gain on sale of securities and an increase in insurance proceeds from the Company's owned life insurance policies.

— Non-interest expense for the fourth quarter of 2024 was $61.4 million and included $8.9 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 December31, 2024, our Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 11.5%2and 14.6%2, respectively, and significantly above the well-capitalized requirements of 6.5% and 10%, respectively. The leverage ratio was 9.8%2compared 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 December31, 2024, the Bank's Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 13.3%2and 14.4%2, respectively, and significantly above the well-capitalized requirements. In addition, the Bank's leverage ratio of 10.9%2is 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, September 30, 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 December 31, Twelve Months Ended December 31, 2024 2023 2024 20233Interest incomeTaxable loans, including fees $ 97,903 $ 27,315 $ 311,303 $ 101,800Tax-exempt loans, including fees 37 – 118 -Taxable securities 9,868 9,049 39,817 37,179Tax-exempt securities 3,191 1,372 10,243 5,615Other interest income 1,794 444 4,680 2,302Total interest income 112,793 38,180 366,161 146,896Interest expenseDeposits 35,919 12,487 118,664 39,195Short-term borrowings 3,383 3,361 14,189 13,856Subordinated debt 2,754 – 7,412 -Other interest expense 27 28 111 86Total interest expense 42,083 15,876 140,376 53,137Net interest income 70,710 22,304 225,785 93,759Credit loss expense (recapture) – loans and available-for-sale securities 960 (799) 20,475 235Credit loss expense (recapture) – off-balance sheet credit exposures (127) 49 3,745 (21)Total provision for (recapture of) credit losses 833 (750) 24,220 214Net interest income after credit loss expense 69,877 23,054 201,565 93,545Non-interest incomeFiduciary and wealth management 2,429 1,358 8,411 5,354Service charges and fees 4,447 1,711 15,594 6,670Net gains (losses) on securities 744 – 1,357 (112)Income from company-owned life insurance 1,887 1,124 4,686 2,844Other non-interest income 2,284 631 6,118 3,196Total non-interest income 11,791 4,824 36,166 17,952Non-interest expenseSalaries and wages 25,818 9,964 77,089 39,247Pensions and other employee benefits 4,840 2,285 17,186 9,401Occupancy 3,630 1,571 11,577 6,035Equipment rentals, depreciation and maintenance 4,531 1,539 23,174 5,770Other operating 22,591 6,941 68,807 25,983Total non-interest expense 61,410 22,300 197,833 86,436Income before income taxes 20,258 5,578 39,898 25,061Income tax expense 465 500 4,190 2,369Net income 19,793 5,078 35,708 22,692Preferred stock dividends 225 – 675 -Net income applicable to common shares $ 19,568 $ 5,078 $ 35,033 $ 22,692
Burke & Herbert Financial Services Corp.Consolidated Balance Sheets(In thousands) December 31, 2024 December 31, 2023 (Unaudited) (Audited)AssetsCash and due from banks $ 35,554 $ 8,896Interest-earning deposits with banks 99,760 35,602Cash and cash equivalents 135,314 44,498Securities available-for-sale, at fair value 1,432,371 1,248,439Restricted stock, at cost 33,559 5,964Loans held-for-sale, at fair value 2,331 1,497Loans 5,672,236 2,087,756Allowance for credit losses (68,040) (25,301)Net loans 5,604,196 2,062,455Other real estate owned 2,783 -Premises and equipment, net 132,270 61,128Accrued interest receivable 34,454 15,895Intangible assets 57,300 -Goodwill 32,783 -Company-owned life insurance 182,834 94,159Other assets 161,990 83,544Total Assets $ 7,812,185 $ 3,617,579Liabilities and Shareholders' EquityLiabilitiesNon-interest-bearing deposits $ 1,379,940 $ 830,320Interest-bearing deposits 5,135,299 2,171,561Total deposits 6,515,239 3,001,881Short-term borrowings 365,000 272,000Subordinated debentures, net 94,872 -Subordinated debentures owed to unconsolidated subsidiary trusts 17,013 -Accrued interest and other liabilities 89,904 28,948Total Liabilities 7,082,028 3,302,829Shareholders' EquityPreferred stock and surplus 10,413 -Common stock 7,770 4,000Common stock, additional paid-in capital 401,172 14,495Retained earnings 434,106 427,333Accumulated other comprehensive income (loss) (95,720) (103,494)Treasury stock (27,584) (27,584)Total Shareholders' Equity 730,157 314,750Total Liabilities and Shareholders' Equity $ 7,812,185 $ 3,617,579
Burke & Herbert Financial Services Corp.Details of Net Interest Margin (unaudited)For the three months endedDetails of Net Interest Margin – Yield Percentages December 31 September 30 June 30 March 31 December 31 2024 2024 2024 2024 2023Interest-earning assets:Loans:Taxable loans 6.91% 7.34% 7.33% 5.41% 5.24%Tax-exempt loans 5.87 5.63 5.55 – -Total loans 6.91 7.34 7.33 5.41 5.24Interest-earning deposits and fed funds sold 4.48 3.43 3.54 3.82 4.35Securities:Taxable securities 3.82 4.05 4.48 3.63 3.73Tax-exempt securities 3.55 3.58 3.05 2.67 2.64Total securities 3.75 3.91 4.05 3.43 3.50Total interest-earning assets 6.22% 6.56% 6.49% 4.66% 4.59%Interest-bearing liabilities:Deposits:Interest-bearing demand 2.51% 3.19% 3.00% 0.63% 0.61%Savings 1.60 1.43 1.53 1.97 1.97Time 4.55 4.82 4.55 4.12 3.97Total interest-bearing deposits 2.76 3.02 2.90 2.41 2.31Borrowings:Short-term borrowings 4.17 4.06 4.38 4.82 4.76Subordinated debt borrowings and other 9.87 10.16 10.30 – -Total interest-bearing liabilities 2.98% 3.21% 3.14% 2.71% 2.59%Taxable-equivalent net interest spread 3.24 3.35 3.35 1.95 2.00Benefit from use of non-interest-bearing deposits 0.67 0.72 0.71 0.73 0.70Taxable-equivalent net interest margin (non-GAAP1) 3.91% 4.07% 4.06% 2.68% 2.70%
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 December 31 September 30 June 30 March 31 December 31 2024 2024 2024 2024 2023Interest-earning assets:Loans:Taxable loans $ 5,634,157 $ 5,621,531 $ 4,481,993 $ 2,085,826 $ 2,069,738Tax-exempt loans 3,115 4,310 3,041 – -Total loans 5,637,272 5,625,841 4,485,034 2,085,826 2,069,738Interest-earning deposits and fed funds sold 152,537 175,265 94,765 41,692 40,524Securities:Taxable securities 1,031,024 996,749 988,492 989,875 961,396Tax-exempt securities 452,937 440,781 426,092 259,699 261,075Total securities 1,483,961 1,437,530 1,414,584 1,249,574 1,222,471Total interest-earning assets $ 7,273,770 $ 7,238,636 $ 5,994,383 $ 3,377,092 $ 3,332,733Interest-bearing liabilities:Deposits:Interest-bearing demand $ 2,560,445 $ 2,144,567 $ 1,587,914 $ 489,779 $ 514,760Savings 1,366,276 1,725,387 1,480,985 922,732 920,600Time 1,247,900 1,328,076 1,141,758 745,945 711,575Total interest-bearing deposits 5,174,621 5,198,030 4,210,657 2,158,456 2,146,935Borrowings:Short-term borrowings 325,084 304,849 376,063 307,446 282,426Subordinated debt borrowings and other 111,021 109,557 72,643 – -Total interest-bearing liabilities $ 5,610,726 $ 5,612,436 $ 4,659,363 $ 2,465,902 $ 2,429,361Non-interest-bearing deposits $ 1,411,202 $ 1,389,134 $ 1,207,443 $ 812,199 $ 852,120
Burke & Herbert Financial Services Corp.Supplemental Information (unaudited)As of or for the three months ended(In thousands, except ratios and per share amounts) December 31 September 30 June 30 March 31 December 31 2024 2024 2024 2024 2023Per common share informationBasic earnings (loss) $ 1.31 $ 1.83 $ (1.41) $ 0.70 $ 0.68Diluted earnings (loss) 1.30 1.82 (1.41) 0.69 0.67Cash dividends 0.55 0.53 0.53 0.53 0.53Book value 48.08 48.63 45.72 42.92 42.37Tangible book value (non-GAAP1) 42.06 42.32 39.11 42.92 42.37Balance sheet-related (at period end, unless otherwise indicated)Assets $ 7,812,185 $ 7,864,913 $ 7,810,193 $ 3,696,390 $ 3,617,579Average interest-earning assets 7,273,770 7,238,636 5,994,383 3,377,092 3,332,733Loans (gross) 5,672,236 5,574,037 5,616,724 2,118,155 2,087,756Loans (net) 5,604,196 5,506,220 5,548,707 2,093,549 2,062,455Securities, available-for-sale, at fair value 1,432,371 1,436,431 1,414,870 1,275,520 1,248,439Intangible assets 57,300 61,598 65,895 – -Goodwill 32,783 32,783 32,783 – -Non-interest-bearing deposits 1,379,940 1,392,123 1,397,030 822,767 830,320Interest-bearing deposits 5,135,299 5,208,702 5,242,541 2,167,346 2,171,561Deposits, total 6,515,239 6,600,825 6,639,571 2,990,113 3,001,881Brokered deposits 244,802 345,328 403,668 370,847 389,011Uninsured deposits 1,926,724 1,999,403 1,931,786 700,846 677,308Short-term borrowings 365,000 320,163 285,161 360,000 272,000Subordinated debt, net 111,885 110,482 109,064 – -Unused borrowing capacity4 4,092,378 2,353,963 2,162,112 704,233 914,980Total equity 730,157 738,059 693,126 319,308 314,750Total common equity 719,744 727,646 682,713 319,308 314,750Accumulated other comprehensive income (loss) (95,720) (75,758) (100,430) (100,954) (103,494)
Burke & Herbert Financial Services Corp.Supplemental Information (unaudited)As of or for the three months ended(In thousands, except ratios and per share amounts) December 31 September 30 June 30 March 31 December 31 2024 2024 2024 2024 2023Income statementInterest income $ 112,793 $ 118,526 $ 96,097 $ 38,745 $ 38,180Interest expense 42,083 45,347 36,332 16,614 15,876Non-interest income 11,791 10,616 9,505 4,254 4,824Total revenue (non-GAAP1) 82,501 83,795 69,270 26,385 27,128Non-interest expense 61,410 50,826 64,432 21,165 22,300Pretax, pre-provision earnings (non-GAAP1) 21,091 32,969 4,838 5,220 4,828Provision for (recapture of) credit losses 833 147 23,910 (670) (750)Income (loss) before income taxes 20,258 32,822 (19,072) 5,890 5,578Income tax expense (benefit) 465 5,200 (2,153) 678 500Net income (loss) 19,793 27,622 (16,919) 5,212 5,078Preferred stock dividends 225 225 225 – -Net income (loss) applicable to common shares $ 19,568 $ 27,397 $ (17,144) $ 5,212 $ 5,078RatiosReturn on average assets (annualized) 1.00% 1.40% (1.06)% 0.58% 0.56%Return on average equity (annualized) 10.49 15.20 (12.44) 6.67 7.30Net interest margin (non-GAAP1) 3.91 4.07 4.06 2.68 2.70Efficiency ratio 74.44 60.66 93.02 80.22 82.20Loan-to-deposit ratio 87.06 84.44 84.59 70.84 69.55Common Equity Tier 1 (CET1) capital ratio2 11.51 11.40 10.91 16.56 16.85Total risk-based capital ratio2 14.55 14.45 13.91 17.54 17.88Leverage ratio2 9.78 9.66 9.04 11.36 11.31
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 December 31 September 30 June 30 March 31 December 31 2024 2024 2024 2024 2023Net income (loss) applicable to common shares $ 19,568 $ 27,397 $ (17,144) $ 5,212 $ 5,078Add back significant items (tax effected):Merger-related 7,069 2,449 18,806 537 1,141Day 2 non-PCD Provision – – 23,305 – -Total significant items 7,069 2,449 42,111 537 1,141Operating net income $ 26,637 $ 29,846 $ 24,967 $ 5,749 $ 6,219Weighted average dilutive shares 15,038,442 15,040,145 12,262,979 7,527,489 7,508,289Adjusted diluted EPS5 $ 1.77 $ 1.98 $ 2.04 $ 0.76 $ 0.83Non-interest expense $ 61,410 $ 50,826 $ 64,432 $ 21,165 $ 22,300Remove significant items:Merger-related 8,948 3,101 23,805 680 1,444Total significant items $ 8,948 $ 3,101 $ 23,805 $ 680 $ 1,444Adjusted non-interest expense $ 52,462 $ 47,725 $ 40,627 $ 20,485 $ 20,856

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 merger-related expenses or Day 2non-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 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 December 31 September 30 June 30 March 31 December 31 2024 2024 2024 2024 2023Interest income $ 112,793 $ 118,526 $ 96,097 $ 38,745 $ 38,180Interest expense 42,083 45,347 36,332 16,614 15,876Non-interest income 11,791 10,616 9,505 4,254 4,824Total revenue (non-GAAP1) $ 82,501 $ 83,795 $ 69,270 $ 26,385 $ 27,128

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.

Burke & Herbert Financial Services Corp.Non-GAAP Reconciliations (unaudited)(In thousands, except ratios and per share amounts)Pretax, Pre-Provision Earnings (non-GAAP1) For the three months ended December 31 September 30 June 30 March 31 December 31 2024 2024 2024 2024 2023Income (loss) before taxes $ 20,258 $ 32,822 $ (19,072) $ 5,890 $ 5,578Provision for (recapture of) credit losses 833 147 23,910 (670) (750)Pretax, pre-provision earnings (non-GAAP1) $ 21,091 $ 32,969 $ 4,838 $ 5,220 $ 4,828

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 December 31 September 30 June 30 March 31 December 31 2024 2024 2024 2024 2023Common shareholders' equity $ 719,744 $ 727,646 $ 682,713 $ 319,308 $ 314,750Less:Intangible assets 57,300 61,598 65,895 – -Goodwill 32,783 32,783 32,783 – -Tangible common equity (non-GAAP1) $ 629,661 $ 633,265 $ 584,035 $ 319,308 $ 314,750Shares outstanding at end of period 14,969,104 14,963,003 14,932,169 7,440,025 7,428,710Tangible book value per common share $ 42.06 $ 42.32 $ 39.11 $ 42.92 $ 42.37

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.

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 December 31 September 30 June 30 March 31 December 31 2024 2024 2024 2024 2023Net interest income $ 70,710 $ 73,179 $ 59,765 $ 22,131 $ 22,304Taxable-equivalent adjustments 858 847 688 362 365Net interest income (Fully Taxable-Equivalent – FTE) $ 71,568 $ 74,026 $ 60,453 $ 22,493 $ 22,669Average interest-earning assets $ 7,273,770 $ 7,238,636 $ 5,994,383 $ 3,377,092 $ 3,332,733Net interest margin (non-GAAP1) 3.91% 4.07% 4.06% 2.68% 2.70%

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.

(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) December 31, 2024, are estimated.(3) The full year 2023 Consolidated Income Statement is audited(4) Includes Federal Home Loan Bank, Borrower-in-Custody (BIC), and correspondent bank availability(5) 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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