Burke & Herbert Financial Services Corp. Announces First Quarter 2025 Results, Declares Common Stock Dividend, and Announces Share Repurchase Program

ALEXANDRIA, Va., April 25, 2025 /PRNewswire/ -- Burke & Herbert Financial Services Corp. (the "Company" or "Burke & Herbert") (NASDAQ:BHRB) reported financial results for the quarter year ended March 31, 2025, and disclosed that, at its meeting on April 24, 2025, the board of directors declared a $0.55 per share regular cash dividend to be paid on June 2, 2025, to shareholders of record as of the close of business on May 15, 2025.

In addition, the Company announced that its board of directors has authorized a share repurchase program ("program"), pursuant to which the Company may purchase up to $50.0 million of Burke & Herbert common shares in the open market or in privately negotiated transactions. The timing and price of repurchases as well as the actual number of shares repurchased under the program will be at the discretion of the Company and will depend on a variety of factors, including general market conditions, the stock price, share availability, alternate uses of capital, the Company's financial performance, and other factors. The program may be discontinued, suspended or reimplemented at any time at the Company's discretion.

Q1 2025 Highlights

• For the quarter, net income applicable to common shares totaled $27.0 million, and diluted earnings per common share ("EPS") was $1.80. For the quarter ended December 31, 2024, net income applicable to common shares totaled $19.6 million, and diluted EPS was $1.30. For the quarter ended December 31, 2024, adjusted (non-GAAP¹) operating net income applicable to common shares totaled $26.6 million and adjusted diluted (non-GAAP¹) EPS was $1.77.
  
  
  
  
• For the quarter, the annualized return on average assets was 1.41% and the annualized return on average equity was 14.57%.
  
  
  
  
• Ending total gross loans were $5.6 billion and ending total deposits were $6.5 billion; ending loan-to-deposit ratio was 86.3%. The net interest margin (non-GAAP¹) was 4.18% for the first quarter.
  
  
  
  
• 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 first quarter.
  
  
  
  
• Asset quality remains stable across the loan portfolio with adequate reserves.
  
  
  
  
• The Company continues to be well-capitalized, ending the quarter with 11.7%² Common Equity Tier 1 capital to risk-weighted assets, 14.7%² Total risk-based capital to risk-weighted assets, and a leverage ratio of 10.1%.²

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

"I'm pleased with our first quarter results that represent the first full quarter following our merger-related systems conversion. The balance sheet remains strong with ample liquidity, solid capital ratios, and adequate loss reserves. Expense management improved even as we continue to make investments for the long-term, including technology improvements to drive efficiency, our expansion in Bethesda, Maryland, and Richmond, Virginia, and the relocation of certain operating activities to lower cost markets. With this start to 2025, we are well-positioned for disciplined growth that should deliver increased value for our customers, employees, communities, and shareholders."

Results of Operations

First Quarter 2025 compared to Fourth Quarter 2024

The Company reported first quarter 2025 net income applicable to common shares of $27.0 million, or $1.80 per diluted common share, compared to fourth quarter 2024 net income to applicable to common shares of $19.6 million, or $1.30 per diluted common share.

Included in the fourth quarter of 2024 were pre-tax charges of $8.9 million of expenses related to the merger with Summit. Excluding these items from the fourth quarter of 2024 on a tax effected basis, adjusted (non-GAAP¹) operating income was $26.6 million, or $1.77 per diluted common share.

• Period-end total gross loans were $5.6 billion at March 31, 2025, a decrease of $24.7 million from December 31, 2024, primarily due to the exiting of loans that do not align with the Company's desired risk profile.
  
  
  
  
• Period-end total deposits were $6.5 billion at March 31, 2025, an increase of $26.6 million from December 31, 2024 as the Company continues its focus on deposit gathering strategies.
  
  
  
  
• Net interest income for the quarter was $73.0 million compared to $70.7 million in the prior quarter due to a decrease in interest expense of $4.3 million, partially offset by a decrease in interest income of $2.0 million. Lower interest expense was primarily attributable to lower deposit costs and the decrease in interest income was due to lower loan and security interest income. Lower loan interest income was mainly due to lower loan accretion related to purchase accounting treatment.
  
  
  
  
• Net interest margin on a fully taxable equivalent basis (non-GAAP¹) increased to 4.18% versus 3.91% in the fourth quarter of 2024, primarily due to an increase in yield from interest earning assets combined with a lower rate on interest-bearing liabilities compared to the fourth quarter of 2024. The increase in yield from interest earning assets was slightly offset by lower accelerated loan accretion income when compared to the fourth quarter of 2024.
  
  
  
  
• Accretion income on loans during the quarter was $11.4 million, and the amortization expense impact on interest expense was $2.2 million, or 12.9 bps of net interest margin, in the first quarter of 2025. In the prior quarter, 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.
  
  
  
  
• The cost of total deposits, including non-interest bearing deposits, was 1.99% in the first quarter of 2025, compared to 2.17% in the fourth quarter of 2024. The decrease in the cost of total deposits is due to a decrease in the rate as the balance of interest-bearing deposits increased by $24.1 million.
  
  
  
  
• The Company recorded a provision expense on loans in the first quarter of 2025 of $900.0 thousand reflective of economic uncertainty.
  
  
  
  
• The allowance for credit losses at March 31, 2025, was $67.8 million, or 1.2% of total loans.
  
  
  
  
• Total non-interest income for the first quarter of 2025 was $10.0 million compared to $11.8 million in the prior quarter, primarily due to a gain on sale of securities and collection of death proceeds from company owned-life insurance which increased non-interest income by $1.4 million in the fourth quarter of 2024 compared to the first quarter of 2025.
  
  
  
  
• Non-interest expense for the first quarter of 2025 was $49.7 million compared to $52.5 million adjusted non-interest expense (non-GAAP¹) in the fourth quarter of 2024, 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 March 31, 2025, our Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 11.7%² and 14.7%², respectively, and significantly above the well-capitalized requirements of 6.5% and 10%, respectively. The leverage ratio was 10.1%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 March 31, 2025, the Bank's Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 13.5%² and 14.6%,² respectively, and significantly above the well-capitalized requirements. In addition, the Bank's leverage ratio of 11.2%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, 2024, June 30, 2024, September 30, 2024, 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 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 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 Relations

703-666-3555 

[email protected]

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