Burke & Herbert Financial Services Corp. Announces Second Quarter 2025 Results and Declares Common Stock Dividend

• For the quarter, net income applicable to common shares totaled $29.7 million, and diluted earnings per common share ("EPS") was $1.97. For the quarter ended March 31, 2025, net income applicable to common shares totaled $27.0 million, and diluted EPS was $1.80.
• For the quarter, the annualized return on average assets was 1.51% and the annualized return on average equity was 15.50%.
• Ending total gross loans were $5.6 billion and ending total deposits were $6.4 billion; ending loan-to-deposit ratio was 87.5%. The net interest margin (non-GAAP¹) was 4.17% for the three months ended June 30, 2025.
• The balance sheet remains strong with ample liquidity. Total liquidity, including all available borrowing capacity with cash and cash equivalents, totaled $4.4 billion at the end of the second quarter.
• Asset quality metrics remain within the Company's moderate risk profile with adequate reserve coverage.
• The Company continues to be well-capitalized, ending the quarter with 12.2%² Common Equity Tier 1 capital to risk-weighted assets, 15.3%² Total risk-based capital to risk-weighted assets, and a leverage ratio of 10.4%.²

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

"I'm pleased with our first half 2025 results and how our balance sheet is positioned. We're successfully replacing non-strategic loans with assets that meet our relationship-based approach and maintaining ample liquidity, solid capital ratios, and adequate loss reserves. Our provision for credit losses reflects the confidence we have in our ability to manage and maintain asset quality metrics within our moderate risk appetite. We're keeping our focus on expense management while we continue to invest for the future, including our planned expansion in Bethesda, Maryland, and in Fredericksburg and Richmond, Virginia. We are looking forward to a strong second half of 2025 by continuing to be a trusted advisor to our customers and delivering our full suite of products and services across our footprint. Regardless of market developments, we are committed to delivering increased value for our customers, employees, communities and shareholders."

Results of Operations

Second Quarter 2025 compared to First Quarter 2025

The Company reported second quarter 2025 net income applicable to common shares of $29.7 million, or $1.97 per diluted common share, compared to first quarter 2025 net income to applicable to common shares of $27.0 million, or $1.80 per diluted common share.

• Period-end total gross loans were $5.6 billion at June 30, 2025, a decrease of $57.1 million from March 31, 2025, as the Company exited approximately $90.8 million of non-strategic loans while originating $200.0 million of new, relationship-based loans.
• Period-end total deposits were $6.4 billion at June 30, 2025, a decrease of $150.9 million from March 31, 2025, primarily due to a $114.8 million decrease in brokered deposits.
• Net interest income for the quarter was $74.2 million compared to $73.0 million in the prior quarter due to a decrease in interest expense of $0.2 million, combined with an increase in interest income of $1.1 million. Lower interest expense was primarily attributable to lower deposit costs, including lower interest expense resulting from calling brokered time deposits, and the increase in interest income was primarily due to higher security and other interest income, somewhat offset by lower loan interest income.
• Net interest margin on a fully taxable equivalent basis (non-GAAP¹) decreased to 4.17% versus 4.18% in the first quarter of 2025, mainly attributable to a lower yield on the loan portfolio offset by an increase in yield on the securities portfolio and a decrease in yield on interest-bearing liabilities compared to the  first quarter of 2025.
• Accretion income on loans during the quarter was $11.5 million, and the amortization expense impact on interest expense was $1.4 million, or 56.0 bps of net interest margin on an annualized basis in the second quarter of 2025. In the prior quarter, accretion income on loans during the quarter was $11.4 million, and the amortization expense impact on interest expense was $2.2 million, or 51.7 bps of net interest margin on an annualized basis.
• The cost of total deposits, including non-interest bearing deposits, was 1.90% in the second quarter of 2025, compared to 1.99% in the first quarter of 2025. The decrease in the cost of deposits was mostly due to a decrease in amortization of acquired time deposits of $0.8 million and a decrease in the rate paid on savings deposits and brokered time deposits compared to the first quarter of 2025.
• The Company recorded credit provision expense in the second quarter of 2025 of $624 thousand and the Company's allowance for credit losses at June 30, 2025, was $67.3 million, or 1.2% of total loans.
• Total non-interest income for the second quarter of 2025 was $12.9 million compared to $10.0 million in the prior quarter, primarily due to collection of death proceeds from company-owned life insurance which increased non-interest income by $1.8 million, card network partnership income of $1.3 million, and additional swap income in the second quarter of 2025 compared to the first quarter of 2025.
• Non-interest expense for the second quarter of 2025 was $49.3 million compared to $49.7 million in the first quarter of 2025, primarily reflecting cost save realizations following the merger-related conversion that occurred in the fourth quarter of 2024.

Regulatory capital ratios²

The Company continues to be well-capitalized with capital ratios that are above regulatory requirements. As of June 30, 2025, our Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 12.2%² and 15.3%², respectively, and significantly above the well-capitalized requirements of 6.5% and 10%, respectively. The leverage ratio was 10.4%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 June 30, 2025, the Bank's Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 14.0%² and 15.1%,² respectively, and significantly above the well-capitalized requirements. In addition, the Bank's leverage ratio of 11.5%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; 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. Further, factors identified herein are not necessarily all of the factors that could cause the Company's actual results, performance or achievements to differ materially from those expressed in or implied by any of the forward-looking statements. Other factors, including unknown or unpredictable factors, also could harm the Company. Accordingly, you should consider all of these risks, uncertainties and other factors carefully in evaluating all such forward-looking statements made by the Company and 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; changes in general economic, political, or market trends (either nationally or locally in the areas in which we conduct, or will conduct, business), including inflation, changes in interest rates, market volatility and monetary fluctuations, and changes in federal government policies and practices, as well as the impact from recently announced and future tariffs on the markets we serve; increased competition; changes in consumer confidence and demand for financial services, including changes in consumer borrowing, repayment, investment, and deposit practices; changes in asset quality and credit risk; 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 impact, extent and timing of technological changes; 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, 2024, the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, and other reports the Company files with the SEC.