Burke & Herbert Financial Services Corp. (the “Company” or “Burke & Herbert”) (Nasdaq: BHRB) reported financial results for the quarter year ended September30, 2025, and disclosed that, at its meeting on October23, 2025, the board of directors declared a $0.55 per share regular cash dividend to be paid on December1, 2025, to shareholders of record as of the close of business on November14, 2025.
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Q3 2025 Highlights
— 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 June 30, 2025, net income applicable to common shares totaled $29.7 million, and diluted EPS was $1.97.
— For the quarter, the annualized return on average assets was 1.50% and the annualized return on average equity was 14.88%.
— Ending total gross loans were $5.6 billion and ending total deposits were $6.4 billion; ending loan-to-deposit ratio was 86.7%. The net interest margin (non-GAAP1) was 4.08% for the three months ended September30, 2025.
— The balance sheet remains strong with ample liquidity. Total liquidity, including all available borrowing capacity with cash and cash equivalents, totaled $4.3 billion at the end of the third 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 12.7%2 Common Equity Tier 1 capital to risk-weighted assets, 15.4%2 Total risk-based capital to risk-weighted assets, and a leverage ratio of 10.7%.2
From David P. Boyle, Company Chair and Chief Executive Officer
“Our solid results reflect the teamwork in executing our strategy to be trusted advisors to our customers and to expand into attractive markets where we deliver our full suite of products and services.Our loan originations were strong, and we increased our deposits during the quarter.We recently opened our first branch in Bethesda, Maryland and our newer markets in Virginia, including Fredericksburg and Richmond, are exceeding our expectations. Our balance sheet remains well positioned with ample liquidity, solid capital ratios, and adequate loss reserves. We are looking forward to a strong close to 2025 and delivering increased value for our customers, employees, communities, and shareholders.”
Results of Operations
Third Quarter2025 compared to Second Quarter 2025
The Company reported third quarter 2025 net income applicable to common shares of $29.7 million, or $1.97 per diluted common share, compared to second quarter 2025 net income applicable to common shares of $29.7 million, or $1.97 per diluted common share.
— Period-end total gross loans were $5.6 billion at September 30, 2025, a decrease of $31.0 million from June 30, 2025, as the Company exited approximately $80.0 million of non-strategic loans while originating $228.9 million of new, relationship-based loan commitments.
— Period-end total deposits were $6.4 billion at September 30, 2025, an increase of $21.1 million from June 30, 2025. Excluding a $7.7 million decrease in brokered deposits, core deposits increased $28.8 million.
— Net interest income for the quarter was $73.8 million compared to $74.2 million in the prior quarter due to a decrease in interest income of $0.6 million which slightly exceeded a decrease in interest expense of $0.2 million. The decrease in total interest income was mainly attributable to a decrease in loan interest income of $1.7 million primarily driven by lower accretion income. This was slightly offset by an increase in interest income from securities of $0.7 million and an increase in other interest income of $0.3 million. The decrease in total interest expense was primarily driven by lower deposit costs from a decrease in the balance of brokered time deposits and lower rates on certain deposit products.
— Net interest margin on a fully taxable equivalent basis (non-GAAP1) decreased to 4.08% versus 4.17% in the second quarter of 2025, mainly attributable to a lower yield on the loan portfolio primarily due to lower accretion income, partially offset by an increase in yield on the securities portfolio and a decrease in yield on interest-bearing liabilities compared to the second quarter of 2025.
— Accretion income on loans during the quarter was $8.2 million, and the amortization expense impact on interest expense was $1.4 million, or 36.7bps of net interest margin on an annualized basis in the third quarter of 2025. In the prior quarter, 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.
— The cost of total deposits, including non-interest bearing deposits, was 1.87% in the third quarter of 2025, compared to 1.90% in the second quarter of 2025. The decrease in the cost of deposits was mostly due to a decrease in the rate paid on interest-bearing deposits compared to the second quarter of 2025.
— The Company recorded credit provision expense in the third quarter of 2025 of $262 thousand and the Company's allowance for credit losses at September 30, 2025, was $67.6 million, or 1.2% of total loans.
— Total non-interest income for the third quarter of 2025 was $11.6 million compared to $12.9 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 in the prior quarter, which was somewhat offset by increases in other categories of non-interest income in the third quarter of 2025 compared to the second quarter of 2025.
— Non-interest expense for the third quarter of 2025 was $48.1 million compared to $49.3 million in the second quarter of 2025, primarily reflecting continued operating efficiency gains, post-merger.
Regulatory capital ratios2
The Company continues to be well-capitalized with capital ratios that are above regulatory requirements. As of September30, 2025, our Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 12.7%2and 15.4%2, respectively, and significantly above the well-capitalized requirements of 6.5% and 10%, respectively. The leverage ratio was 10.7%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 September30, 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%2and 15.2%,2respectively, and significantly above the well-capitalized requirements. In addition, the Bank's leverage ratio of 11.4%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 Reports on Form 10-Q for the quarters ended March 31, 2025, June 30, 2025, and other reports the Company files with the SEC.
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. 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 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 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.
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.
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.
CONTACT:Investor Relations703-666-3555bhfsir@burkeandherbertbank.com
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