Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-41633 Burke & Herbert Financial Services Corp. (Exact name of registrant as specified in its charter) Virginia ...

Financial Performance - Net income reached $299 million[20] - Diluted earnings per share (EPS) amounted to $197[20] - The net interest margin stood at 417%[20] - Return on average assets was 151%[10] - Return on average equity was 1550%[10] Balance Sheet & Capitalization - Total assets reached $81 billion[10] - Total gross loans amounted to $56 billion[10] - Total deposits reached $64 billion[10] - The loan-to-deposit ratio was 875%[20,37] - Uninsured deposits represented 307% of total deposits, totaling $196 billion[20,37] - Total risk-based capital ratio was 1526%[20]

Financial Performance - Burke & Herbert Financial Services reported quarterly earnings of $1.97 per share, exceeding the Zacks Consensus Estimate of $1.85 per share, but down from $2.04 per share a year ago, representing an earnings surprise of +6.49% [1] - The company posted revenues of $87.11 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.41%, compared to year-ago revenues of $69.27 million [2] Stock Performance - Burke & Herbert shares have increased approximately 4.1% since the beginning of the year, while the S&P 500 has gained 8.1% [3] - The current status of estimate revisions for Burke & Herbert translates into a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $1.93 on revenues of $87.4 million, and for the current fiscal year, it is $7.53 on revenues of $344.4 million [7] - The outlook for the Financial - Miscellaneous Services industry is favorable, ranking in the top 38% of over 250 Zacks industries, suggesting that stocks in the top 50% outperform those in the bottom 50% by more than 2 to 1 [8]

[Q2 2025 Earnings Announcement & Highlights](index=1&type=section&id=Q2%202025%20Earnings%20Announcement%20%26%20Highlights) Burke & Herbert Financial Services Corp. reported increased net income for Q2 2025 and declared a cash dividend of $0.55 per common share [1.1. Q2 2025 Overview](index=1&type=section&id=1.1.%20Q2%202025%20Overview) The company announced its Q2 2025 financial results, including a cash dividend payment and a focus on strategic financial management - The company declared a **cash dividend of $0.55 per common share**, payable on September 2, 2025, to shareholders of record as of August 15, 2025[1](index=1&type=chunk) [1.2. CEO Commentary](index=1&type=section&id=1.2.%20CEO%20Commentary) The CEO expressed satisfaction with H1 2025 performance, highlighting a strong balance sheet, strategic loan replacement, and future expansion plans - Strategic focus included successfully replacing non-strategic loans with relationship-based assets, maintaining **ample liquidity**, **robust capital ratios**, and **sufficient loss reserves**[3](index=3&type=chunk) - Future investments include planned expansion in Bethesda, Maryland, and Fredericksburg and Richmond, Virginia[3](index=3&type=chunk) [1.3. Key Financial Highlights](index=1&type=section&id=1.3.%20Key%20Financial%20Highlights) Q2 2025 saw increased net income and diluted EPS compared to Q1 2025, alongside strong profitability metrics and robust capital ratios Q2 2025 vs Q1 2025 Financial Performance Comparison | Metric | Q2 2025 | Q1 2025 | | :-------------------------------- | :------ | :------ | | Net Income Applicable to Common Shares | $29.7 million | $27.0 million | | Diluted EPS | $1.97 | $1.80 | | Annualized Return on Average Assets | 1.51% | N/A | | Annualized Return on Average Equity | 15.50% | N/A | | Net Interest Margin (non-GAAP) | 4.17% | N/A | Balance Sheet Strength as of June 30, 2025 | Metric | Value | | :-------------------- | :---------- | | Ending Total Gross Loans | $5.6 billion | | Ending Total Deposits | $6.4 billion | | Ending Loan-to-Deposit Ratio | 87.5% | | Total Liquidity | $4.4 billion | Capital Ratios as of June 30, 2025 | Metric | Ratio | Well-Capitalized Requirement | | :-------------------------------- | :------ | :--------------------------- | | Common Equity Tier 1 Capital to RWA | 12.2% | 6.5% | | Total Risk-Based Capital to RWA | 15.3% | 10% | | Leverage Ratio | 10.4% | 5% | [Results of Operations (Q2 2025 vs Q1 2025)](index=1&type=section&id=Results%20of%20Operations%20(Q2%202025%20vs%20Q1%202025)) This section details the company's financial performance in Q2 2025 compared to Q1 2025, covering income, balance sheet, and credit quality [2.1. Net Income and EPS Performance](index=1&type=section&id=2.1.%20Net%20Income%20and%20EPS%20Performance) Net income applicable to common shares increased to $29.7 million in Q2 2025, with diluted EPS rising to $1.97 from $1.80 in Q1 2025 Net Income and EPS Growth | Metric | Q2 2025 | Q1 2025 | | :-------------------------------- | :------ | :------ | | Net Income Applicable to Common Shares | $29.7 million | $27.0 million | | Diluted EPS | $1.97 | $1.80 | [2.2. Balance Sheet Dynamics](index=2&type=section&id=2.2.%20Balance%20Sheet%20Dynamics) Total gross loans decreased due to non-strategic loan divestitures, while total deposits also declined, primarily driven by a reduction in brokered deposits - Loan portfolio changes (Q2 2025 vs Q1 2025): - Ending total gross loans decreased by **$57.1 million to $5.6 billion**[9](index=9&type=chunk) - Approximately **$90.8 million** in non-strategic loans were divested[9](index=9&type=chunk) - **$200 million** in new relationship-based loans were originated[9](index=9&type=chunk) - Deposit portfolio changes (Q2 2025 vs Q1 2025): - Ending total deposits decreased by **$150.9 million to $6.4 billion**[9](index=9&type=chunk) - Primarily due to a **$114.8 million** decrease in brokered deposits[9](index=9&type=chunk) [2.3. Net Interest Income and Net Interest Margin Analysis](index=2&type=section&id=2.3.%20Net%20Interest%20Income%20and%20Net%20Interest%20Margin%20Analysis) Net interest income slightly increased to $74.2 million in Q2 2025, driven by lower interest expense and higher securities interest income, while net interest margin (non-GAAP) marginally decreased Net Interest Income (Q2 2025 vs Q1 2025) | Metric | Q2 2025 | Q1 2025 | Change | | :---------------- | :------ | :------ | :----- | | Net Interest Income | $74.2 million | $73.0 million | +$1.2 million | | Interest Expense | Decreased by $0.2 million | | | | Interest Income | Increased by $1.1 million | | | - Net Interest Margin (non-GAAP) (Q2 2025 vs Q1 2025): - Decreased from **4.18% to 4.17%**[9](index=9&type=chunk) - Primarily attributed to a decrease in loan portfolio yields, offset by an increase in securities portfolio yields and a decrease in interest-bearing liability yields[9](index=9&type=chunk) - Total Cost of Deposits (Q2 2025 vs Q1 2025): - Decreased from **1.99% to 1.90%**[9](index=9&type=chunk) - Mainly due to a **$0.8 million** reduction in acquired time deposit amortization and lower rates on savings and brokered time deposits[9](index=9&type=chunk) [2.4. Non-Interest Income and Expense](index=2&type=section&id=2.4.%20Non-Interest%20Income%20and%20Expense) Total non-interest income significantly increased to $12.9 million in Q2 2025, driven by life insurance death benefits and card network revenue, while non-interest expense slightly decreased due to merger-related cost savings Total Non-Interest Income (Q2 2025 vs Q1 2025) | Metric | Q2 2025 | Q1 2025 | Change | | :-------------------- | :------ | :------ | :----- | | Total Non-Interest Income | $12.9 million | $10.0 million | +$2.9 million | | Drivers | Company-owned life insurance death benefits (+$1.8 million), bank card network partnership income (+$1.3 million), additional swap income | | | Non-Interest Expense (Q2 2025 vs Q1 2025) | Metric | Q2 2025 | Q1 2025 | Change | | :------------------ | :------ | :------ | :----- | | Non-Interest Expense | $49.3 million | $49.7 million | -$0.4 million | | Reason | Cost savings realized following the Q4 2024 merger-related conversion | | | [2.5. Credit Quality and Provision](index=2&type=section&id=2.5.%20Credit%20Quality%20and%20Provision) The company recorded a $0.624 million provision for credit losses in Q2 2025, maintaining an allowance of $67.3 million, representing 1.2% of total loans, with asset quality within moderate risk parameters - Provision for credit losses (Q2 2025): **$0.624 million**[9](index=9&type=chunk) - Allowance for credit losses (as of June 30, 2025): **$67.3 million**, representing **1.2% of total loans**[9](index=9&type=chunk) - Asset quality metrics remained within the company's moderate risk parameters, supported by **ample reserves**[6](index=6&type=chunk) [2.6. Capital Adequacy](index=2&type=section&id=2.6.%20Capital%20Adequacy) Burke & Herbert Financial Services Corp. and its subsidiary bank maintained strong capital positions, with all regulatory capital ratios significantly exceeding minimum requirements Company Capital Ratios (as of June 30, 2025) | Metric | Ratio | Well-Capitalized Requirement | | :-------------------------------- | :------ | :--------------------------- | | Common Equity Tier 1 Capital to RWA | 12.2% | 6.5% | | Total Risk-Based Capital to RWA | 15.3% | 10% | | Leverage Ratio | 10.4% | 5% | Bank Subsidiary Capital Ratios (as of June 30, 2025) | Metric | Ratio | | :-------------------------------- | :------ | | Common Equity Tier 1 Capital to RWA | 14.0% | | Total Risk-Based Capital to RWA | 15.1% | | Leverage Ratio | 11.5% | [Company Information](index=3&type=section&id=Company%20Information) This section provides an overview of Burke & Herbert Financial Services Corp., highlighting its historical significance and extensive service offerings [3.1. About Burke & Herbert](index=3&type=section&id=3.1.%20About%20Burke%20%26%20Herbert) Burke & Herbert Financial Services Corp. is the financial holding company for Burke & Herbert Bank & Trust Company, the oldest continuously operating bank in the D.C. metropolitan area - Company structure: Financial holding company for **Burke & Herbert Bank & Trust Company**[11](index=11&type=chunk) - Historical significance: The **oldest continuously operating bank** under its original name in the Washington D.C. metropolitan area[11](index=11&type=chunk) - Business scope and products: Over **75 branches** across Delaware, Kentucky, Maryland, Virginia, and West Virginia, offering a full range of commercial and personal financial solutions[11](index=11&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section contains cautionary notes regarding forward-looking statements, which are subject to various risks and uncertainties, and the company disclaims any obligation to update them [4.1. Cautionary Note](index=3&type=section&id=4.1.%20Cautionary%20Note) This report includes forward-looking statements about future financial performance and strategic objectives, which are inherently subject to various risks and uncertainties - Nature of statements: Includes beliefs, goals, intentions, and expectations regarding revenue, earnings, EPS, loan originations, asset quality, capital levels, estimates of future action costs and benefits, assessments of expected loan losses, evaluations of interest rate and other market risks, and the ability to achieve financial and strategic objectives, along with other non-historical facts[12](index=12&type=chunk) - Disclaimer: Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, and actual results may differ materially from these statements; the company undertakes no obligation to update these statements, except as required by law[13](index=13&type=chunk) [4.2. Risks and Uncertainties](index=3&type=section&id=4.2.%20Risks%20and%20Uncertainties) Factors that could cause actual results to differ from forward-looking statements include economic and market trends, increased competition, changes in consumer behavior, and regulatory and technological risks - Economic and market risks: Changes in general economic, political, or market trends (nationally or within the company's operating areas), including **inflation, interest rates, market volatility, and currency fluctuations**, as well as changes in federal government policies and practices[14](index=14&type=chunk)[15](index=15&type=chunk) - Operational and business risks: Costs or difficulties associated with new business development or acquisitions; **increased competition**; changes in consumer confidence and demand for financial services, including changes in consumer borrowing, repayment, investment, and deposit habits; changes in asset quality and credit risk; the company's ability to control costs and expenses; adverse developments in borrower industries or declines in real estate values[14](index=14&type=chunk)[15](index=15&type=chunk) - Regulatory and technological risks: Changes in and compliance with federal and state laws and regulations related to the company's business and capital levels; the company's ability to raise capital as needed; the impact, extent, and timing of technological changes; and the impact of any cybersecurity breaches[15](index=15&type=chunk) [Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements, including the statements of income, balance sheets, and detailed net interest margin information [5.1. Consolidated Statements of Income](index=5&type=section&id=5.1.%20Consolidated%20Statements%20of%20Income) The consolidated statements of income show a significant increase in net income applicable to common shares in Q2 2025 compared to Q2 2024, driven by higher net interest and non-interest income and a substantial reduction in credit loss expense Consolidated Statements of Income (Q2 2025 vs Q2 2024, in thousands of US dollars) | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :------ | :------ | | Total Interest Income | $111,858 | $96,097 | | Total Interest Expense | $37,625 | $36,332 | | Net Interest Income | $74,233 | $59,765 | | Total Provision for Credit Losses | $624 | $23,910 | | Total Non-Interest Income | $12,877 | $9,505 | | Total Non-Interest Expense | $49,305 | $64,432 | | Net Income (Loss) Applicable to Common Shares | $29,672 | $(17,144) | [5.2. Consolidated Balance Sheets](index=6&type=section&id=5.2.%20Consolidated%20Balance%20Sheets) The consolidated balance sheets as of June 30, 2025, indicate an increase in total assets, primarily from cash and available-for-sale securities, while total deposits slightly decreased and shareholders' equity grew Consolidated Balance Sheets (June 30, 2025 vs December 31, 2024, in thousands of US dollars) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total Assets | $8,057,981 | $7,812,185 | | Cash and Cash Equivalents | $325,146 | $135,314 | | Securities Available-for-Sale | $1,522,611 | $1,432,371 | | Loans (gross) | $5,590,457 | $5,672,236 | | Total Deposits | $6,390,974 | $6,515,239 | | Total Liabilities | $7,277,963 | $7,082,028 | | Total Shareholders' Equity | $780,018 | $730,157 | [5.3. Details of Net Interest Margin](index=7&type=section&id=5.3.%20Details%20of%20Net%20Interest%20Margin) This section provides detailed insights into the company's net interest margin, including yield percentages and average balances for interest-earning assets and interest-bearing liabilities [5.3.1. Yield Percentages](index=7&type=section&id=5.3.1.%20Yield%20Percentages) Total interest-earning asset yield slightly decreased to 6.25% in Q2 2025 from 6.31% in Q1 2025, primarily due to lower taxable loan yields, accompanied by a decrease in total interest-bearing liability costs Yield Percentages (Q2 2025 vs Q1 2025) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Taxable loans | 6.90% | 6.96% | | Total interest-earning assets | 6.25% | 6.31% | | Total interest-bearing deposits | 2.41% | 2.53% | | Total interest-bearing liabilities | 2.68% | 2.76% | | Taxable-equivalent net interest margin (non-GAAP) | 4.17% | 4.18% | [5.3.2. Average Balances](index=8&type=section&id=5.3.2.%20Average%20Balances) Average interest-earning assets increased to $7.248 billion in Q2 2025 from $7.172 billion in Q1 2025, driven by higher average taxable loans and securities, with average interest-bearing liabilities also slightly increasing Average Balances (Q2 2025 vs Q1 2025, in thousands of US dollars) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Total loans | $5,630,973 | $5,655,994 | | Total securities | $1,535,896 | $1,475,180 | | Total interest-earning assets | $7,248,238 | $7,171,931 | | Total interest-bearing deposits | $5,060,651 | $5,103,391 | | Total interest-bearing liabilities | $5,632,239 | $5,552,019 | [5.4. Supplemental Information](index=9&type=section&id=5.4.%20Supplemental%20Information) This section provides additional financial details, including per common share metrics, balance sheet items, asset quality indicators, and key income statement ratios [5.4.1. Per Common Share & Balance Sheet Metrics](index=9&type=section&id=5.4.1.%20Per%20Common%20Share%20%26%20Balance%20Sheet%20Metrics) Per common share metrics show growth in diluted EPS and book value, while balance sheet items indicate increased total assets and equity, alongside reduced total and brokered deposits Per Common Share Information (Q2 2025 vs Q1 2025) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Diluted earnings (loss) | $1.97 | $1.80 | | Cash dividends | $0.55 | $0.55 | | Book value | $51.28 | $49.90 | | Tangible book value (non-GAAP) | $45.73 | $44.17 | Balance Sheet Related (June 30, 2025 vs March 31, 2025, in thousands of US dollars) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Assets | $8,057,981 | $7,838,090 | | Loans (gross) | $5,590,457 | $5,647,507 | | Deposits, total | $6,390,974 | $6,541,871 | | Brokered deposits | $132,098 | $246,902 | | Total equity | $780,018 | $758,000 | [5.4.2. Asset Quality Metrics](index=9&type=section&id=5.4.2.%20Asset%20Quality%20Metrics) Asset quality indicators show an increase in nonperforming loans and assets as a percentage of total loans and assets, while the allowance for credit losses as a percentage of nonperforming loans decreased Asset Quality (Q2 2025 vs Q1 2025) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Provision for credit losses | $624 | $501 | | Net loan charge-offs | $1,214 | $1,187 | | Allowance for credit losses | $67,256 | $67,753 | | Total delinquencies | $29,056 | $86,223 | | Nonperforming loans | $85,531 | $64,756 | | Allowance for credit losses as % of non-performing loans | 78.63% | 104.63% | | Non-performing loans as % of total loans | 1.53% | 1.15% | | Non-performing assets as % of total assets | 1.10% | 0.86% | [5.4.3. Income Statement & Key Ratios](index=10&type=section&id=5.4.3.%20Income%20Statement%20%26%20Key%20Ratios) Income statement data indicates growth in net income and total revenue, while key ratios show improved return on average assets and equity, stable net interest margin, and enhanced efficiency Income Statement (Q2 2025 vs Q1 2025, in thousands of US dollars) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Interest income | $111,858 | $110,786 | | Interest expense | $37,625 | $37,799 | | Non-interest income | $12,877 | $10,023 | | Total revenue (non-GAAP) | $87,110 | $83,010 | | Non-interest expense | $49,305 | $49,664 | | Net income (loss) applicable to common shares | $29,672 | $26,976 | Key Ratios (Q2 2025 vs Q1 2025) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Return on average assets (annualized) | 1.51% | 1.41% | | Return on average equity (annualized) | 15.50% | 14.57% | | Net interest margin (non-GAAP) | 4.17% | 4.18% | | Efficiency ratio | 56.60 | 59.83 | | Loan-to-deposit ratio | 87.47 | 86.33 | | Consolidated Common Equity Tier 1 (CET1) capital ratio | 12.21% | 11.77% | | Consolidated Total risk-based capital ratio | 15.26% | 14.79% | | Consolidated Leverage ratio | 10.42% | 10.12% | [Non-GAAP Reconciliations (Unaudited)](index=11&type=section&id=Non-GAAP%20Reconciliations%20(Unaudited)) This section provides unaudited non-GAAP reconciliations for key financial metrics, offering a clearer view of core business performance by excluding significant non-recurring items [6.1. Operating Net Income, Adjusted Diluted EPS, and Adjusted Non-Interest Expense](index=11&type=section&id=6.1.%20Operating%20Net%20Income%2C%20Adjusted%20Diluted%20EPS%2C%20and%20Adjusted%20Non-Interest%20Expense) This section presents reconciliations for non-GAAP operating net income, adjusted diluted EPS, and adjusted non-interest expense, excluding significant items like merger-related costs to reflect core business performance Operating Net Income and Adjusted EPS (Q2 2025 vs Q1 2025) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Net income (loss) applicable to common shares | $29,672 | $26,976 | | Operating net income | $29,672 | $26,976 | | Adjusted diluted EPS | $1.97 | $1.80 | Adjusted Non-Interest Expense (Q2 2025 vs Q1 2025) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Non-interest expense | $49,305 | $49,664 | | Adjusted non-interest expense | $49,305 | $49,664 | - Purpose: These non-GAAP metrics are used by management to measure performance, enhancing understanding of underlying business performance by excluding significant items, and reflecting management's ability to grow the business and manage expenses[31](index=31&type=chunk) [6.2. Total Revenue (Non-GAAP)](index=11&type=section&id=6.2.%20Total%20Revenue%20(Non-GAAP)) Non-GAAP total revenue, calculated as total interest income less total interest expense plus total non-interest income, increased to $87.1 million in Q2 2025 from $83.0 million in Q1 2025, indicating stable revenue streams Total Revenue (Non-GAAP) (Q2 2025 vs Q1 2025, in thousands of US dollars) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Total revenue (non-GAAP) | $87,110 | $83,010 | - Purpose: A useful tool for measuring the company's operating condition and demonstrating the stability of revenue sources[32](index=32&type=chunk) [6.3. Pretax, Pre-Provision Earnings (Non-GAAP)](index=12&type=section&id=6.3.%20Pretax%2C%20Pre-Provision%20Earnings%20(Non-GAAP)) Non-GAAP pretax, pre-provision earnings increased to $37.8 million in Q2 2025 from $33.3 million in Q1 2025, providing insight into the company's ability to cover credit costs from operations by isolating the impact of credit loss provisions Pretax, Pre-Provision Earnings (Non-GAAP) (Q2 2025 vs Q1 2025, in thousands of US dollars) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Pretax, pre-provision earnings (non-GAAP) | $37,805 | $33,346 | - Purpose: Helps assess the ability to cover credit costs through operations and compare performance across periods by isolating the impact of credit loss provisions[37](index=37&type=chunk) [6.4. Tangible Common Equity (Non-GAAP)](index=12&type=section&id=6.4.%20Tangible%20Common%20Equity%20(Non-GAAP)) Non-GAAP tangible common equity increased to $686.3 million as of June 30, 2025, from $661.7 million as of March 31, 2025, with tangible book value per share rising to $45.73 Tangible Common Equity (Non-GAAP) (June 30, 2025 vs March 31, 2025, in thousands of US dollars) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Common shareholders' equity | $769,605 | $747,587 | | Tangible common equity (non-GAAP) | $686,342 | $661,743 | | Tangible book value per common share | $45.73 | $44.17 | - Purpose: An important measure of a financial institution's capital strength, assessing the company's equity utilization and facilitating peer comparisons by excluding intangible assets from shareholders' equity[38](index=38&type=chunk) [6.5. Net Interest Margin & Taxable-Equivalent Net Interest Income (Non-GAAP)](index=13&type=section&id=6.5.%20Net%20Interest%20Margin%20%26%20Taxable-Equivalent%20Net%20Interest%20Income%20(Non-GAAP)) The non-GAAP taxable-equivalent net interest margin for Q2 2025 was 4.17%, a slight decrease from 4.18% in Q1 2025, with this adjustment providing a more comparable view of net interest income by considering tax-exempt assets Net Interest Margin (Non-GAAP) (Q2 2025 vs Q1 2025) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Net interest income (FTE) | $75,292 | $73,868 | | Net interest margin (non-GAAP) | 4.17% | 4.18% | - Purpose: Provides a more meaningful comparison of net interest income by adjusting for tax-exempt instruments, making yields on taxable, tax-exempt, and partially tax-exempt assets comparable[42](index=42&type=chunk)

ALEXANDRIA, Va., July 24, 2025 /PRNewswire/ -- Burke & Herbert Financial Services Corp. (the "Company" or "Burke & Herbert") (Nasdaq: BHRB) reported financial results for the quarter year ended June 30, 2025, and disclosed that, at its meeting on July 24, 2025, the board of directors declared a $0.55 per share regular cash dividend to be paid on September 2, 2025, to shareholders of record as of the close of business on August 15, 2025.Q2 2025 Highlights For the quarter, net income applicable to common shar ...

Two of the hires will join the Company's newest commercial office in Bethesda, Maryland, reporting to Regional President Michael Solomon. Daniel Kroll joins as Senior Vice President and Commercial Banking Executive – Commercial Real Estate and Amar Grover joins as Vice President and Portfolio Manager Team Lead. Kroll has over twelve years of experience in the banking industry, most recently with Sandy Spring Bank and Eagle Bank. He has a bachelor's degree from Arizona State University and a master's degree ...

Company Overview - Burke & Herbert (NASDAQ: BHRB) is a bank holding company founded in 1852, primarily operating in Virginia and Maryland [1]. Business Model - As a small community bank, BHRB is deeply integrated into the cities it serves, focusing on local banking needs [1]. Investment Perspective - The company represents a long-standing presence in the banking sector, which may appeal to investors looking for stability and community engagement [1].

[Part I - Financial Information](index=3&type=section&id=Part%20I%20-%20Financial%20Information) This part presents the unaudited consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2025 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Burke & Herbert Financial Services Corp. for the quarter ended March 31, 2025, including balance sheets, income statements, comprehensive income, changes in shareholders' equity, and cash flows, along with detailed notes explaining the company's business activities, significant accounting policies, and specific financial line items [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity as of March 31, 2025, and December 31, 2024 Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 (Unaudited) | December 31, 2024 (Audited) | | :-------------------------------- | :--------------------------- | :-------------------------- | | **Assets** | | | | Cash and cash equivalents | $148,846 | $135,314 | | Securities available-for-sale | $1,436,869 | $1,432,371 | | Net loans | $5,579,754 | $5,604,196 | | Total Assets | $7,838,090 | $7,812,185 | | **Liabilities** | | | | Total deposits | $6,541,871 | $6,515,239 | | Short-term borrowings | $300,000 | $365,000 | | Total Liabilities | $7,080,090 | $7,082,028 | | **Shareholders' Equity** | | | | Total Shareholders' Equity | $758,000 | $730,157 | - Total Assets increased by **$25.9 million** to **$7.84 billion** as of March 31, 2025, from **$7.81 billion** at December 31, 2024, primarily driven by an increase in cash and cash equivalents and total deposits, partially offset by a decrease in net loans and short-term borrowings[10](index=10&type=chunk)[253](index=253&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) This section presents the company's financial performance, including income, expenses, and net income for the three months ended March 31, 2025, and 2024 Consolidated Statements of Income (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $110,786 | $38,745 | | Total interest expense | $37,799 | $16,614 | | Net interest income | $72,987 | $22,131 | | Total provision (recapture) for credit losses | $501 | $(670) | | Total non-interest income | $10,023 | $4,254 | | Total non-interest expense | $49,664 | $21,165 | | Income before income taxes | $32,845 | $5,890 | | Net income | $27,201 | $5,212 | | Net income applicable to common shares | $26,976 | $5,212 | | Basic EPS | $1.80 | $0.70 | | Diluted EPS | $1.80 | $0.69 | - Net income applicable to common shares significantly increased by **$21.8 million** to **$27.0 million** for the three months ended March 31, 2025, compared to **$5.2 million** in the prior year, primarily due to the impact of the Merger with Summit Financial Group, Inc[12](index=12&type=chunk)[225](index=225&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section details comprehensive income, including net income and other comprehensive income (loss) components, for the three months ended March 31, 2025, and 2024 Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $27,201 | $5,212 | | Total other comprehensive income (loss) | $7,696 | $2,540 | | Comprehensive income (loss) | $34,897 | $7,752 | - Total other comprehensive income (loss) increased to **$7.7 million** for the three months ended March 31, 2025, from **$2.5 million** in the prior year, driven by unrealized gains on securities, net of tax[14](index=14&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This section outlines changes in shareholders' equity, including net income, other comprehensive income, and dividends, for the period ended March 31, 2025 Consolidated Statements of Changes in Shareholders' Equity (in thousands) | Metric (in thousands) | Balance December 31, 2024 | Balance March 31, 2025 | | :-------------------------------- | :------------------------ | :--------------------- | | Total Shareholders' Equity | $730,157 | $758,000 | | Net income | $27,201 | | | Other comprehensive income (loss) | $7,696 | | | Common stock cash dividends, declared | $(8,237) | | | Preferred stock cash dividends, declared | $(225) | | | Share-based compensation expense, net | $1,408 | | - Total Shareholders' Equity increased by **$27.8 million** from **$730.2 million** at December 31, 2024, to **$758.0 million** at March 31, 2025, primarily due to net income and other comprehensive income, partially offset by cash dividends[17](index=17&type=chunk)[289](index=289&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents cash flows from operating, investing, and financing activities for the periods presented Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash flows provided by operating activities | $37,647 | $7,089 | | Net cash flows provided by (used in) investing activities | $22,605 | $(70,617) | | Net cash flows provided by (used in) financing activities | $(46,720) | $73,107 | | Increase in cash and cash equivalents | $13,532 | $9,579 | | Cash and cash equivalents, End of period | $148,846 | $54,077 | - Net cash provided by operating activities significantly increased to **$37.6 million** for the three months ended March 31, 2025, from **$7.1 million** in the prior year[20](index=20&type=chunk)[22](index=22&type=chunk) - Investing activities shifted from a net outflow of **$70.6 million** to a net inflow of **$22.6 million**, while financing activities changed from a net inflow of **$73.1 million** to a net outflow of **$46.7 million**[20](index=20&type=chunk)[22](index=22&type=chunk) [Notes to the Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements [Note 1— Nature of Business Activities and Significant Accounting Policies](index=10&type=section&id=Note%201%E2%80%94%20Nature%20of%20Business%20Activities%20and%20Significant%20Accounting%20Policies) This note outlines the company's structure as a financial holding company for Burke & Herbert Bank & Trust Company, its regulatory oversight, primary market areas, and product offerings. It also details the significant merger with Summit Financial Group, Inc. in May 2024, which expanded its operations and market presence, and discusses the basis of financial statement presentation and newly issued accounting standards - Burke & Herbert Financial Services Corp. operates as a financial holding company, with its primary operations conducted through Burke & Herbert Bank & Trust Company, regulated by the Federal Reserve and Virginia BFI[24](index=24&type=chunk)[25](index=25&type=chunk) - The company completed a merger with Summit Financial Group, Inc. on May 3, 2024, significantly expanding its market area to include northern Virginia and West Virginia, with over **77 branches** across multiple states[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - The merger involved an exchange of **0.5043 shares** of Burke & Herbert common stock for each Summit common stock share, totaling approximately **7.4 million shares**, and conversion of Summit preferred stock into Burke & Herbert preferred stock[29](index=29&type=chunk) - Newly issued accounting standards, ASU 2024-03 and ASU 2023-06, are not expected to have a material impact on the company's consolidated financial statements[34](index=34&type=chunk)[35](index=35&type=chunk) [Note 2— Securities](index=12&type=section&id=Note%202%E2%80%94%20Securities) This note provides a detailed breakdown of the company's available-for-sale (AFS) securities portfolio, including amortized cost, fair value, and unrealized gains/losses. It highlights that unrealized losses are primarily due to interest rate fluctuations rather than credit deterioration, and the company does not intend to sell these securities before recovery of amortized cost. It also details restricted stock holdings AFS Securities (in thousands) | Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------------- | :------------------- | | Total AFS Securities (Amortized Cost) | $1,546,361 | $1,549,589 | | Total AFS Securities (Fair Value) | $1,436,869 | $1,432,371 | | Gross Unrealized Gains | $1,492 | $1,658 | | Gross Unrealized Losses | $110,984 | $118,876 | - Unrealized losses on AFS securities decreased by **$7.9 million** from **$118.9 million** at December 31, 2024, to **$111.0 million** at March 31, 2025, primarily attributed to market interest rate fluctuations, not credit deterioration[37](index=37&type=chunk)[42](index=42&type=chunk)[45](index=45&type=chunk)[255](index=255&type=chunk) AFS Securities by Maturity (in thousands) | Maturity | Amortized Cost (March 31, 2025) | | :------------------- | :------------------------------ | | One Year or Less | $94,717 | | One to Five Years | $515,452 | | Five to Ten Years | $558,838 | | After Ten Years | $377,354 | | Total | $1,546,361 | - The company holds restricted stock, primarily FHLB and Federal Reserve Bank stock, totaling **$35.1 million** at March 31, 2025, carried at cost and not considered impaired[52](index=52&type=chunk) [Note 3— Loans](index=16&type=section&id=Note%203%E2%80%94%20Loans) This note details the composition of the company's loan portfolio by segment, including commercial real estate, owner-occupied commercial real estate, acquisition, construction & development, commercial & industrial, single family residential, and consumer non-real estate and other. It also outlines the specific risks associated with each loan category Loan Portfolio Segment (in thousands) | Loan Portfolio Segment (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Commercial real estate | $2,809,573 | $2,637,802 | | Owner-occupied commercial real estate | $589,889 | $614,362 | | Acquisition, construction & development | $322,963 | $465,537 | | Commercial & industrial | $613,219 | $613,085 | | Single family residential (1-4 units) | $1,161,406 | $1,173,749 | | Consumer non-real estate and other | $150,457 | $167,701 | | Loans, gross | $5,647,507 | $5,672,236 | | Allowance for credit losses | $(67,753) | $(68,040) | | Loans, net | $5,579,754 | $5,604,196 | - The loan portfolio, net of ACL, decreased by **$24.4 million** from **$5.60 billion** at December 31, 2024, to **$5.58 billion** at March 31, 2025, primarily due to the exiting of loans not aligning with the company's desired risk profile[55](index=55&type=chunk)[262](index=262&type=chunk) - Commercial real estate loans constitute the largest segment, representing **49.7%** of the gross loan portfolio at March 31, 2025[55](index=55&type=chunk)[193](index=193&type=chunk) [Note 4— Allowance for Credit Losses](index=17&type=section&id=Note%204%E2%80%94%20Allowance%20for%20Credit%20Losses) This note details the company's Allowance for Credit Losses (ACL) methodology under CECL, including collective and individual loan evaluations, qualitative adjustments, and activity in the ACL. It also provides aging of past due loans, credit quality indicators, and information on collateral-dependent loans and purchased credit deteriorated loans - The company adopted the CECL methodology on January 1, 2023, calculating ACL quarterly using the Weighted Average Remaining Maturity (WARM) method for collectively evaluated loans and specific reserve analysis for individually evaluated loans[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk) Allowance for Credit Losses Activity (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Balance, beginning of period | $68,040 | $25,301 | | Provision for (recapture of) credit losses | $900 | $(670) | | Charge-offs | $(1,424) | $(30) | | Recoveries | $237 | $5 | | Balance, end of period | $67,753 | $24,606 | - Total past due loans (30-89 days and 90+ days past due) increased from **$68.3 million** at December 31, 2024, to **$122.1 million** at March 31, 2025, with a notable increase in 90+ days past due loans still accruing[62](index=62&type=chunk)[267](index=267&type=chunk) - The ACL as a percentage of gross loans was **1.20%** at March 31, 2025, up from **1.16%** at March 31, 2024, reflecting an increase in expected losses under the CECL model[272](index=272&type=chunk)[273](index=273&type=chunk) [Note 5— Deposits](index=23&type=section&id=Note%205%E2%80%94%20Deposits) This note provides details on the company's deposit base, including time deposits exceeding FDIC insurance limits, brokered time deposits, and CDARS program deposits. It also outlines the remaining maturities of time deposits - Aggregate time deposits exceeding the FDIC insurance limit were **$292.3 million** at March 31, 2025, an increase from **$284.4 million** at December 31, 2024[79](index=79&type=chunk) - Brokered time deposits, which are fully insured, totaled **$246.9 million** at March 31, 2025, slightly up from **$244.8 million** at December 31, 2024[79](index=79&type=chunk) Remaining Maturity of Time Deposits (as of March 31, 2025, in thousands) | Remaining Maturity (as of March 31, 2025) | Amount (in thousands) | | :---------------------------------------- | :-------------------- | | Remaining nine months ending, Dec 31, 2025 | $987,610 | | 2026 | $215,992 | | 2027 | $41,828 | | 2028 | $8,744 | | 2029 | $6,057 | | Thereafter | $6,922 | | Total | $1,267,153 | [Note 6— Borrowed Funds](index=23&type=section&id=Note%206%E2%80%94%20Borrowed%20Funds) This note details the company's short-term and long-term borrowings, including interest rates, maturities, and available lines of credit. It highlights the subordinated debentures and trust preferred securities assumed as part of the Merger, which qualify as Tier 2 and Tier 1 capital, respectively - Short-term borrowings decreased by **$65.0 million** to **$300.0 million** at March 31, 2025, from **$365.0 million** at December 31, 2024, with an interest rate of **4.42%** at March 31, 2025[82](index=82&type=chunk) - The company has **$4.1 billion** in unused borrowing capacity from secured lines of credit with the Federal Reserve Bank of Richmond and FHLB of Atlanta, and unsecured federal funds lines[83](index=83&type=chunk)[84](index=84&type=chunk) - As part of the Merger, Burke & Herbert assumed **$75.0 million** and **$30.0 million** in subordinated debentures, fair valued at **$61.5 million** and **$29.8 million** respectively, which qualify as Tier 2 capital[86](index=86&type=chunk)[87](index=87&type=chunk) - The company also assumed subordinated debentures owed to unconsolidated subsidiary trusts totaling **$17.1 million** at March 31, 2025, which qualify as Tier 1 capital[88](index=88&type=chunk)[10](index=10&type=chunk) [Note 7— Leased Property](index=26&type=section&id=Note%207%E2%80%94%20Leased%20Property) This note details the company's lessor and lessee arrangements for leased properties. It provides lease income from operating leases, remaining maturities of lease receivables, and information on right-of-use assets and lease liabilities for both operating and finance leases Operating Lease Income (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Operating lease income | $693 | $575 | | Total lease income | $693 | $575 | Lease Assets and Liabilities (in thousands) | Lease Type (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Operating leases (Right-of-use assets) | $12,520 | $13,203 | | Finance leases (Right-of-use assets) | $3,241 | $3,312 | | Operating leases (Lease liabilities) | $12,960 | $13,586 | | Finance leases (Lease liabilities) | $3,563 | $3,620 | - Total lease cost for the three months ended March 31, 2025, was **$932 thousand**, an increase from **$733 thousand** in the prior year, with operating lease costs being the largest component[94](index=94&type=chunk) [Note 8— Regulatory Capital Matters](index=28&type=section&id=Note%208%E2%80%94%20Regulatory%20Capital%20Matters) This note details the company's and the Bank's compliance with regulatory capital requirements under the Basel III Framework and 'prompt corrective action' regulations. It presents actual and required capital amounts and ratios, confirming the Bank's 'well capitalized' status - As of March 31, 2025, both the Company and the Bank meet all capital adequacy requirements and the Bank is categorized as 'well capitalized' under regulatory frameworks[97](index=97&type=chunk)[98](index=98&type=chunk) Capital Ratios (Consolidated) | Capital Ratio (Consolidated) | March 31, 2025 (Actual) | Minimum Required (Basel III) | | :------------------------------------ | :------------------------ | :--------------------------- | | Total Capital to risk weighted assets | 14.79% | ≥ 10.5% | | Tier 1 (Core) Capital to risk weighted assets | 12.20% | ≥ 8.5% | | Common Tier 1 (CET 1) to risk-weighted assets | 11.77% | ≥ 7.0% | | Tier 1 (Core) Capital to average assets (leverage ratio) | 10.12% | ≥ 4.0% | - Approximately **$265.7 million** of retained earnings was available for dividend declaration as of March 31, 2025, consistent with the company's capital plan and banking regulations[99](index=99&type=chunk) [Note 9— Derivatives](index=29&type=section&id=Note%209%E2%80%94%20Derivatives) This note describes the company's use of interest rate swap agreements for asset liability management, including those designated as cash flow hedges and those not designated as hedges (economic hedges for customer loans). It provides fair values of derivative instruments and their impact on comprehensive income and the income statement - The company uses interest rate swaps to manage interest rate risk, with derivatives designated as cash flow hedges recorded in AOCI and reclassified to interest expense/income[100](index=100&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk) - Derivatives not designated as hedges, primarily back-to-back interest rate swaps for customer loans, are reported at fair value with changes recorded in other non-interest expense, summing to zero due to offsetting terms[104](index=104&type=chunk) Derivative Instruments Fair Value (in thousands) | Derivative Type (in thousands) | March 31, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :------------------------------------ | :---------------------------- | :----------------------------- | | Interest rate swaps (cash flow hedges, assets) | $514 | $1,368 | | Interest rate swaps (cash flow hedges, liabilities) | $219 | $165 | | Interest rate swaps (customer loans, assets) | $1,591 | $1,823 | | Interest rate swaps (customer loans, liabilities) | $1,591 | $1,823 | - The company estimates an additional **$360 thousand** will be reclassified as a reduction to interest expense from cash flow hedges over the next twelve months[103](index=103&type=chunk) [Note 10— Commitments and Contingencies](index=32&type=section&id=Note%2010%E2%80%94%20Commitments%20and%20Contingencies) This note outlines the company's off-balance sheet financial instruments, including commitments to extend credit and commercial letters of credit, which involve credit and liquidity risks. It also details the allowance for credit losses on unfunded commitments and confirms no material litigation Commitments (in thousands) | Commitment Type (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Commitments to extend credit | $1,021,447 | $969,317 | | Commercial letters of credit | $30,303 | $13,333 | - The allowance for credit losses on unfunded commitments totaled **$3.6 million** at March 31, 2025, down from **$4.0 million** at December 31, 2024, following a recapture of **$398.8 thousand** for the three months ended March 31, 2025[113](index=113&type=chunk) - Management believes that liabilities from currently pending or threatened litigation will not be material to the company's financial position[114](index=114&type=chunk) [Note 11— Fair Value Measurements](index=32&type=section&id=Note%2011%E2%80%94%20Fair%20Value%20Measurements) This note defines fair value measurement levels (Level 1, 2, 3) and describes the valuation techniques used for various financial instruments, including investment securities, equity investments, derivatives, and loans held-for-sale, measured on a recurring basis. It also covers non-recurring fair value measurements for collateral-dependent loans and other real estate owned - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[115](index=115&type=chunk)[116](index=116&type=chunk) Financial Assets Measured at Fair Value (in thousands) | Financial Asset (in thousands) | Level 1 (March 31, 2025) | Level 2 (March 31, 2025) | Level 3 (March 31, 2025) | Total (March 31, 2025) | | :------------------------------------ | :----------------------- | :----------------------- | :----------------------- | :--------------------- | | Total investment securities AFS | $151,793 | $1,285,076 | $— | $1,436,869 | | Loans held-for-sale, at fair value | $— | $1,302 | $— | $1,302 | | Equity investments | $— | $12,258 | $— | $12,258 | | Derivatives (assets) | $— | $2,105 | $— | $2,105 | | Derivatives (liabilities) | $— | $1,810 | $— | $1,810 | - Collateral-dependent loans and other real estate owned are measured at fair value on a non-recurring basis, primarily using Level 3 inputs based on collateral appraisals and management adjustments for liquidity and selling costs[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) [Note 12— Accumulated Other Comprehensive Income (Loss)](index=37&type=section&id=Note%2012%E2%80%94%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) This note details the changes in accumulated other comprehensive income (loss) by component, including unrealized gains/losses on available-for-sale securities and gains/losses on cash flow hedges, net of tax Accumulated Other Comprehensive Income (in thousands) | Component (in thousands) | Beginning Balance (Dec 31, 2024) | Ending Balance (Mar 31, 2025) | | :------------------------------------ | :------------------------------- | :---------------------------- | | Gains and Losses on Cash Flow Hedges | $911 | $951 | | Unrealized Gains and Losses on AFS Securities | $(92,055) | $(84,399) | | Defined Benefit Pension Items | $(4,576) | $(4,576) | | Total Accumulated Other Comprehensive Income | $(95,720) | $(88,024) | - Accumulated other comprehensive income (loss) improved from **$(95.7) million** at December 31, 2024, to **$(88.0) million** at March 31, 2025, primarily due to net unrealized gains on available-for-sale securities[131](index=131&type=chunk)[289](index=289&type=chunk) Reclassification Adjustments (in thousands) | Reclassification (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Cash flow hedges, net of tax | $330 | $(353) | | AFS securities, net of tax | $32 | $32 | | Total reclassifications, net of tax | $362 | $(321) | [Note 13— Other Operating Expense](index=38&type=section&id=Note%2013%E2%80%94%20Other%20Operating%20Expense) This note itemizes the components of 'Other operating expense' from the Consolidated Statements of Income, highlighting significant increases in various categories for the three months ended March 31, 2025, compared to the prior year, largely due to the Merger Other Operating Expense (in thousands) | Expense Category (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | FDIC & other regulatory assessments | $914 | $516 | | IT related | $417 | $550 | | ATM, card, & network expense | $1,132 | $551 | | Core deposit intangible amortization | $4,298 | $— | | Other | $5,390 | $1,448 | | Total | $15,458 | $6,463 | - Total other operating expense increased by **$8.99 million**, or **139.2%**, to **$15.5 million** for the three months ended March 31, 2025, compared to **$6.5 million** in the prior year, primarily driven by the Merger[134](index=134&type=chunk)[251](index=251&type=chunk) - Merger-related expenses were **zero** for the three months ended March 31, 2025, compared to **$663 thousand** in the prior year, included in consultant fees, audit fees, legal expense, donation, and other line items[134](index=134&type=chunk) [Note 14— Share-Based Compensation](index=38&type=section&id=Note%2014%E2%80%94%20Share-Based%20Compensation) This note describes the company's share-based incentive plans (2019 SIP and 2023 SIP) and the 2023 Employee Stock Purchase Plan (ESPP), detailing the types of awards (RSUs, SARs), vesting conditions, and compensation expense recognized. It also provides a summary of RSU and SAR activity - Total share-based compensation cost charged against income was **$1.3 million** for the three months ended March 31, 2025, up from **$590.5 thousand** in the prior year[136](index=136&type=chunk) - The 2023 Stock Incentive Plan (SIP) authorized **250,000 shares**, with **324,887 shares** available for issuance as of March 31, 2025, including recycled shares from the 2019 SIP[139](index=139&type=chunk) RSU Activity | RSU Activity | Shares | Weighted-Average Grant-Date Fair Value | | :-------------------------- | :----- | :------------------------------------- | | Non-vested at December 31, 2024 | 134,202 | $57.67 | | Granted | 77,441 | $58.49 | | Vested | (9,360) | $54.78 | | Non-vested at March 31, 2025 | 202,283 | $58.12 | - As of March 31, 2025, there was **$8.4 million** of total unrecognized compensation costs related to non-vested RSUs and **$508.1 thousand** for non-vested SARs, expected to be recognized over weighted average periods of **1.57 years** and **2.38 years**, respectively[144](index=144&type=chunk)[149](index=149&type=chunk) [Note 15— Earnings Per Share](index=41&type=section&id=Note%2015%E2%80%94%20Earnings%20Per%20Share) This note provides the calculation of basic and diluted earnings per share (EPS) for common shares, detailing the weighted average number of shares used in the computation Earnings Per Share | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income applicable to common shares (in thousands) | $26,976 | $5,212 | | Weighted average number of shares (basic) | 14,976,483 | 7,433,481 | | Weighted average dilutive shares | 15,026,376 | 7,527,489 | | Basic earnings per common share | $1.80 | $0.70 | | Diluted earnings per common share | $1.80 | $0.69 | - Basic and diluted EPS significantly increased to **$1.80** for the three months ended March 31, 2025, from **$0.70** and **$0.69** respectively in the prior year, reflecting higher net income and an increased weighted average number of shares[152](index=152&type=chunk) [Note 16— Business Combination](index=42&type=section&id=Note%2016%E2%80%94%20Business%20Combination) This note details the acquisition method accounting for the Merger with Summit Financial Group, Inc. on May 3, 2024. It outlines the total consideration paid, the fair values of assets acquired and liabilities assumed, and the resulting goodwill recognized - The Merger with Summit Financial Group, Inc. was completed on May 3, 2024, and accounted for using the acquisition method, with assets and liabilities recorded at fair value[153](index=153&type=chunk)[155](index=155&type=chunk) - Total aggregate consideration for the Merger was approximately **7,405,772 shares** of Burke & Herbert common stock and preferred stock, with a fully diluted transaction value of **$397.4 million**[154](index=154&type=chunk)[160](index=160&type=chunk) - Goodwill of **$32.8 million** was recognized in connection with the acquisition, primarily representing synergies and cost savings, and is not amortized but subject to annual impairment testing[155](index=155&type=chunk)[160](index=160&type=chunk) - The fair value of intangible assets related to core deposits was **$68.8 million** at acquisition, to be amortized over an estimated weighted average life of **7 years**[156](index=156&type=chunk) [Note 17— Goodwill and Other Intangible Assets](index=45&type=section&id=Note%2017%E2%80%94%20Goodwill%20and%20Other%20Intangible%20Assets) This note provides details on the changes in goodwill and other intangible assets, specifically the core deposit intangible, for the three months ended March 31, 2025. It outlines the amortization schedule for the core deposit intangible Goodwill (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2025 | | :------------------------------------ | :-------------------------------- | | Beginning of period (Goodwill) | $32,783 | | Goodwill adjustment | $59 | | End of period (Goodwill) | $32,842 | - The core deposit intangible, valued at **$68.8 million** at acquisition, is being amortized on an accelerated basis over its **7-year** estimated useful life, with **$4.3 million** amortization expense for the three months ended March 31, 2025[163](index=163&type=chunk)[164](index=164&type=chunk) Estimated Amortization (in thousands) | Estimated Amortization (in thousands) | | :------------------------------------ | | Remaining nine months ending, Dec 31, 2025 | $11,255 | | 2026 | $13,097 | | 2027 | $10,641 | | 2028 | $8,186 | | 2029 | $5,730 | | Thereafter | $4,093 | | Total | $53,002 | [Note 18— Segment Information](index=46&type=section&id=Note%2018%E2%80%94%20Segment%20Information) This note clarifies that the company operates in a single reportable operating segment, 'Community Banking,' as its financial performance is evaluated on a company-wide basis by the chief operating decision maker, despite monitoring various product and service revenue streams - The company operates in one reportable segment: Community Banking, with performance evaluated on a company-wide basis by the Chief Executive Officer[166](index=166&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a comprehensive discussion and analysis of the company's financial condition and results of operations, highlighting the significant impact of the Merger with Summit Financial Group, Inc. It covers an overview of the business, critical accounting policies, financial performance, asset quality, liquidity, and capital management, offering insights into key drivers and trends [Overview](index=48&type=section&id=Overview) This section provides an overview of the company, its market, products, and the Merger's impact on operations - Burke & Herbert Financial Services Corp. is a financial holding company operating through Burke & Herbert Bank & Trust Company, which became a Federal Reserve System member on December 31, 2024[171](index=171&type=chunk) - The Bank's primary market area includes northern Virginia and West Virginia, with over **77 branches** across multiple states, offering diverse deposit and loan products[172](index=172&type=chunk) Key Metrics (as of March 31, 2025) | Metric (as of March 31, 2025) | Amount (in billions) | | :------------------------------------ | :------------------- | | Total consolidated assets | $7.8 | | Gross loans | $5.6 | | Total deposits | $6.5 | | Total shareholders' equity | $758.0 million | | Full-time employees | 814 | - The Merger with Summit Financial Group, Inc. on May 3, 2024, significantly expanded the company's operations and is a key factor in the current financial results[175](index=175&type=chunk)[176](index=176&type=chunk) [Critical Accounting Policies and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section discusses critical accounting policies and estimates, including goodwill, ACL, and income taxes - The company identifies business combination and goodwill, allowance for credit losses (ACL), and income taxes as critical accounting areas requiring subjective judgments and estimates[179](index=179&type=chunk) - Goodwill from acquisitions is reviewed annually for impairment, with fair value determinations relying on significant estimates like projected cash flows and discount rates[180](index=180&type=chunk)[181](index=181&type=chunk) - The ACL is estimated quarterly using an internally developed CECL model, which forecasts lifetime expected credit losses based on historical experience, current conditions, and macroeconomic variables (e.g., unemployment rates, real estate prices)[183](index=183&type=chunk)[184](index=184&type=chunk)[186](index=186&type=chunk) - Income tax expense, deferred tax assets/liabilities, and unrecognized tax benefits involve complex calculations and management judgments, with a valuation allowance recognized if deferred tax assets are unlikely to be realized[188](index=188&type=chunk)[189](index=189&type=chunk) [Non-GAAP Financial Measures](index=50&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the use of non-GAAP financial measures to supplement GAAP information for performance assessment - The company presents non-GAAP financial measures to provide additional useful information for assessing financial condition and operating performance, emphasizing that these are not substitutes for GAAP measures[191](index=191&type=chunk) [Commercial Real Estate Sector Concentration](index=51&type=section&id=Commercial%20Real%20Estate%20Sector%20Concentration) This section analyzes the company's commercial real estate exposure, risks, and market conditions - The commercial real estate (CRE) sector faces challenges from rising interest rates and vacancies, but recent federal and private sector return-to-office mandates and decreasing interest rates could potentially improve the market[192](index=192&type=chunk) Loan Portfolio Segment (as of March 31, 2025) | Loan Portfolio Segment (as of March 31, 2025) | Amortized Cost (in thousands) | Percentage of Total Gross Loans | | :-------------------------------------------- | :---------------------------- | :------------------------------ | | Commercial real estate | $2,809,573 | 49.7% | | Owner-occupied commercial real estate | $589,889 | 10.4% | | Acquisition, construction & development | $322,963 | 5.7% | | Total CRE exposure (including owner-occupied and A,C&D) | $3,722,425 | 65.8% | - The Bank's total CRE exposure (including owner-occupied and acquisition, construction & development) was **$3.7 billion**, representing **65.8%** of total gross loans and **47.4%** of total assets at March 31, 2025[192](index=192&type=chunk) - The largest concentration of CRE loans is in Virginia (approximately **46.8%**), and the Bank's overall exposure to 'Office Building / Condo' collateral type is **15.9%** of total CRE loans[195](index=195&type=chunk)[201](index=201&type=chunk) [Liquidity Management](index=53&type=section&id=Liquidity%20Management) This section describes the company's liquidity management, including funding sources, uses, and regulatory oversight - Liquidity management involves maintaining the ability to convert assets to cash and raise funds to meet customer demands, with assessments performed quarterly by the Asset/Liability Committee (ALCO) and reported to the Board[202](index=202&type=chunk)[203](index=203&type=chunk) - Primary liquidity sources include unencumbered AFS securities, loan payments, and maturing investment securities, while liabilities provide liquidity through deposits and FHLB/other borrowings[205](index=205&type=chunk)[206](index=206&type=chunk) - The company's primary source of liquidity for operating needs is dividends from the Bank, which are subject to regulatory restrictions and capital plan approvals[207](index=207&type=chunk) - Management believes current liquidity sources are adequate for requirements and planned growth[208](index=208&type=chunk) [Capital](index=54&type=section&id=Capital) This section outlines the company's and Bank's compliance with Basel III regulatory capital requirements - The company and the Bank are subject to Basel III regulatory capital requirements, including minimum CET 1, Tier 1, and Total Capital ratios, along with a capital conservation buffer[210](index=210&type=chunk)[211](index=211&type=chunk) - As of March 31, 2025, and December 31, 2024, the Bank complied with all regulatory capital standards and was categorized as 'well capitalized' under 'prompt corrective action' regulations[214](index=214&type=chunk) [Effects of Inflation](index=54&type=section&id=Effects%20of%20Inflation) This section discusses inflation's impact on financial results, particularly interest rate management - Inflation's most significant impact on financial results is the company's ability to manage interest rate changes, as most assets and liabilities are monetary[216](index=216&type=chunk) - Management aims to maintain a balanced position between rate-sensitive assets and liabilities to minimize the impact of interest rate fluctuations on net interest income, though this is challenging in rapidly changing rate environments[216](index=216&type=chunk) [Key Factors Affecting Financial Performance](index=54&type=section&id=Key%20Factors%20Affecting%20Financial%20Performance) This section identifies internal and external factors influencing financial performance, including economic conditions - Internal factors affecting financial performance include effective capital and liquidity management, controlling costs related to strategic priorities, managing credit and interest rate risk, adapting to regulatory changes, and managing operational risks[218](index=218&type=chunk) - External factors include economic conditions (inflation, interest rates, political conflicts), actions by federal agencies (Federal Reserve, U.S. Treasury), competitive landscape changes, and impacts of governmental policy and climate change[218](index=218&type=chunk) [Selected Financial Data](index=57&type=section&id=Selected%20Financial%20Data) This section presents key financial data and performance ratios for comparative overview of financial health Selected Financial Data (in thousands, except per share data) | Metric (in thousands, except per share data) | March 31, 2025 | March 31, 2024 | | :------------------------------------------- | :------------- | :------------- | | Total assets | $7,838,090 | $3,696,390 | | Net loans | $5,579,754 | $2,093,549 | | Total deposits | $6,541,871 | $2,990,113 | | Total shareholders' equity | $758,000 | $319,308 | | Net income applicable to common shares | $26,976 | $5,212 | | Basic net income per common share | $1.80 | $0.70 | | Diluted net income per common share | $1.80 | $0.69 | | Dividends declared per common share | $0.53 | $0.53 | | Book value per common share | $49.90 | $42.92 | Performance Ratios | Performance Ratios | March 31, 2025 | March 31, 2024 | | :------------------------------------------- | :------------- | :------------- | | Return on average assets | 1.41% | 0.58% | | Return on average equity | 14.57% | 6.67% | | Net interest margin | 4.18% | 2.68% | | Efficiency ratio | 59.83% | 80.22% | | Common equity tier 1 (CET 1) capital to risk-weighted assets | 11.77% | 16.56% | | Non-performing loans as a percentage of total loans | 1.15% | 1.26% | [Results of Operations for the Three Months Ended March 31, 2025, and March 31, 2024](index=58&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%2C%20and%20March%2031%2C%202024) This section analyzes operational performance, detailing changes in net income, interest, and non-interest items [General](index=58&type=section&id=General) Net income applicable to common shares increased significantly due to the Merger, driving substantial increases in net interest income, non-interest income, and non-interest expense, while credit provision expense also increased - Net income applicable to common shares increased by **$21.8 million** to **$27.0 million** for the three months ended March 31, 2025, compared to **$5.2 million** in the prior year, primarily due to the Merger[225](index=225&type=chunk) - Net interest income increased by **$50.9 million** to **$73.0 million**, and total non-interest income increased by **$5.8 million (135.6%)** to **$10.0 million**, both driven by the Merger[226](index=226&type=chunk)[228](index=228&type=chunk) - Total non-interest expense increased by **$28.5 million (134.7%)** to **$49.7 million**, also primarily due to the Merger[229](index=229&type=chunk) - The company recorded a credit provision expense of **$0.5 million** for the three months ended March 31, 2025, compared to a provision recapture of **$0.7 million** in the prior year[227](index=227&type=chunk) [Net Interest Income and Net Interest Margin](index=59&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income and net interest margin saw substantial increases, primarily driven by the Merger, which led to higher interest-earning assets, increased rates, and significant accretion income. The tax-adjusted net interest margin rose to 4.18% from 2.68% year-over-year - Net interest income increased to **$73.0 million** for the three months ended March 31, 2025, from **$22.1 million** in the prior year, driven by higher interest-earning assets, rates, and **$11.4 million** in accretion income from acquired loans and borrowings[232](index=232&type=chunk) - The tax-adjusted net interest margin increased to **4.18%** for the three months ended March 31, 2025, from **2.68%** in the prior year, primarily due to the Merger and acquisition of higher-yielding assets[233](index=233&type=chunk) - The yield on the taxable loan portfolio increased to **6.96%** (from **5.41%**) and the tax-adjusted yield on the total investment securities portfolio increased to **3.85%** (from **3.43%**), both due to the Merger[234](index=234&type=chunk)[235](index=235&type=chunk) - Interest expense on interest-bearing deposits increased to **2.53%** (from **2.41%**) due to the Merger, while the yield on short-term borrowings decreased to **3.88%** (from **4.82%**) due to lower market rates[236](index=236&type=chunk)[237](index=237&type=chunk) [Interest Income](index=62&type=section&id=Interest%20Income) Total interest income surged by 185.9% to $110.8 million, primarily due to the Merger and the acquisition of additional interest-earning assets, with significant increases in both loan and securities interest income - Total interest income increased by **$72.1 million (185.9%)** to **$110.8 million** for the three months ended March 31, 2025, compared to **$38.7 million** in the prior year, driven by the Merger[247](index=247&type=chunk) - Interest income on loans increased by **$69.0 million**, and interest income on securities increased by **$2.5 million**[247](index=247&type=chunk) [Interest Expense](index=62&type=section&id=Interest%20Expense) Total interest expense increased to $37.8 million, mainly due to the Merger and the assumption of additional interest-bearing liabilities, including a new $2.7 million in subordinated debt interest - Total interest expense increased to **$37.8 million** for the three months ended March 31, 2025, from **$16.6 million** in the prior year, primarily due to the Merger and assumed interest-bearing liabilities[248](index=248&type=chunk) - Interest expense on interest-bearing deposits increased by **$18.9 million**, and interest on subordinated debt acquired in the Merger was **$2.7 million**[248](index=248&type=chunk) [Provision for (Recapture of) Credit Losses](index=62&type=section&id=Provision%20for%20(Recapture%20of)%20Credit%20Losses) The company recorded a provision for credit losses of $0.5 million, a shift from a $0.7 million recapture in the prior year, driven by increased expected losses in the loan portfolio - Provision for credit losses was **$0.5 million** for the three months ended March 31, 2025, compared to a provision recapture of **$0.7 million** in the prior year, due to additional credit loss expense on loans[249](index=249&type=chunk) [Non-interest Income](index=63&type=section&id=Non-interest%20Income) Non-interest income increased by 135.6% to $10.0 million, with all categories showing growth, primarily driven by the Merger and the resulting expansion of the customer base and accounts Non-interest Income (in thousands) | Category (in thousands) | March 31, 2025 | March 31, 2024 | Increase (Decrease) | Percent Change | | :------------------------------------ | :------------- | :------------- | :------------------ | :------------- | | Fiduciary and wealth management | $2,443 | $1,419 | $1,024 | 72.2% | | Service charges and fees | $2,089 | $655 | $1,434 | 218.9% | | Bank debit and other card revenue | $2,884 | $1,132 | $1,752 | 154.8% | | Other non-interest income | $1,413 | $501 | $912 | 182.0% | | Total | $10,023 | $4,254 | $5,769 | 135.6% | - The largest increases were in bank debit and other card revenue (**$1.8 million**) and service charges and fees (**$1.4 million**), both attributed to the Merger and increased customer base[250](index=250&type=chunk) [Non-interest Expense](index=63&type=section&id=Non-interest%20Expense) Non-interest expense increased by 134.7% to $49.7 million, with all categories experiencing growth, primarily as a direct result of the Merger Non-interest Expense (in thousands) | Category (in thousands) | March 31, 2025 | March 31, 2024 | Increase (Decrease) | Percent Change | | :------------------------------------ | :------------- | :------------- | :------------------ | :------------- | | Salaries and wages | $20,941 | $9,518 | $11,423 | 120.0% | | Pensions and other employee benefits | $5,136 | $2,365 | $2,771 | 117.2% | | Occupancy | $4,045 | $1,538 | $2,507 | 163.0% | | Equipment rentals, depreciation and maintenance | $4,084 | $1,281 | $2,803 | 218.8% | | Other | $15,458 | $6,463 | $8,995 | 139.2% | | Total | $49,664 | $21,165 | $28,499 | 134.7% | - All categories of non-interest expense increased, with salaries and wages rising by **$11.4 million** and 'Other' expenses by **$9.0 million**, primarily due to the Merger[251](index=251&type=chunk) [Income Tax Expense](index=63&type=section&id=Income%20Tax%20Expense) Income tax expense increased by $5.0 million to $5.6 million, driven by higher net income and additional state taxes incurred in the expanded market area post-Merger, resulting in an effective tax rate of 17.2% - Income tax expense increased by **$5.0 million** to **$5.6 million** for the three months ended March 31, 2025, from **$0.7 million** in the prior year[252](index=252&type=chunk) - The effective tax rate for the three months ended March 31, 2025, was **17.2%**, up from **11.5%** in the prior year, due to increased net income and additional state taxes post-Merger[252](index=252&type=chunk) [Analysis of Financial Condition for the Period Ended March 31, 2025, and December 31, 2024](index=64&type=section&id=Analysis%20of%20Financial%20Condition%20for%20the%20Period%20Ended%20March%2031%2C%202025%2C%20and%20December%2031%2C%202024) This section analyzes financial condition, including assets, liabilities, and equity, highlighting key changes and trends [Assets](index=64&type=section&id=Assets) Total assets increased slightly to $7.84 billion, while net loans decreased by $24.4 million. Deposits increased by $26.6 million, and short-term borrowings decreased by $65.0 million - Total assets increased by **$25.9 million** to **$7.84 billion** as of March 31, 2025, from **$7.81 billion** at December 31, 2024[253](index=253&type=chunk) - Net loans decreased by **$24.4 million** to **$5.58 billion**, while total deposits increased by **$26.6 million** to **$6.54 billion**[253](index=253&type=chunk) - Short-term borrowings decreased by **$65.0 million** to **$300.0 million**, and subordinated debt increased to **$113.3 million**[253](index=253&type=chunk) [Investment Securities](index=64&type=section&id=Investment%20Securities) The investment portfolio, primarily AFS securities, serves as a liquidity source and interest rate risk management tool. Unrealized losses decreased by $7.7 million, attributed to market movements and interest rate changes, not credit factors, with the company having sufficient liquidity to avoid selling at a loss - The investment portfolio, classified as AFS, provides liquidity and helps manage interest rate risk[254](index=254&type=chunk)[255](index=255&type=chunk) - Unrealized losses on AFS securities decreased by **$7.7 million** during the three months ended March 31, 2025, from December 31, 2024, primarily due to increases in interest rates and market movements, not credit deterioration[255](index=255&type=chunk)[256](index=256&type=chunk) - The company has sufficient liquidity and does not believe it would be necessary to sell investment securities at a loss[257](index=257&type=chunk) Investment Securities (in thousands) | Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------------- | :------------------- | | Total AFS Securities (Amortized Cost) | $1,546,361 | $1,549,589 | | Total AFS Securities (Fair Value) | $1,436,869 | $1,432,371 | | Gross Unrealized Losses | $110,984 | $118,876 | [Lending Activities](index=65&type=section&id=Lending%20Activities) The loan portfolio, primarily commercial real estate, decreased by $24.7 million, mainly due to the exiting of loans that do not align with the company's risk profile. The maturity distribution shows a significant portion of loans maturing within one to five years - The loan portfolio, excluding ACL, decreased by **$24.7 million** to **$5.58 billion** at March 31, 2025, primarily due to exiting loans not aligning with the company's desired risk profile[262](index=262&type=chunk) Loan Portfolio Segment (in thousands) | Loan Portfolio Segment (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Commercial real estate | $2,809,573 | $2,637,802 | | Single family residential (1-4 units) | $1,161,406 | $1,173,749 | | Total Loans, gross | $5,647,507 | $5,672,236 | Loan Maturity (as of March 31, 2025, in thousands) | Loan Maturity (as of March 31, 2025) | Fixed Rates (in thousands) | Adjustable Rates (in thousands) | Total (in thousands) | | :----------------------------------- | :------------------------- | :------------------------------ | :------------------- | | Within One Year | $348,102 | $599,095 | $947,197 | | One Year to Five Years | $1,428,282 | $645,123 | $2,073,405 | | Five Years to 15 Years | $493,861 | $665,011 | $1,158,872 | | After 15 Years | $501,033 | $967,000 | $1,468,033 | | Total Loans | $2,771,278 | $2,876,229 | $5,647,507 | [Asset Quality](index=66&type=section&id=Asset%20Quality) Asset quality remained relatively stable, though non-accrual loans and 90-day past due loans increased. Non-performing assets rose to $67.4 million. The ACL increased to $67.8 million, with a provision expense of $0.9 million, reflecting increased expected losses - Non-accrual loan balance increased by **$5.6 million**, and loans 90 days past due and still accruing increased by **$20.8 million** from December 31, 2024[267](index=267&type=chunk) Non-Performing Assets (in thousands) | Non-Performing Assets (in thousands) | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Non-accrual loans | $41,431 | $35,871 | | 90 days past due and still accruing | $23,325 | $2,497 | | Total non-performing loans | $64,756 | $38,368 | | Other real estate owned | $2,625 | $2,783 | | Total non-performing assets | $67,381 | $41,151 | - The company recorded a provision expense of **$0.9 million** on loans for the three months ended March 31, 2025, compared to a recapture of **$0.7 million** in the prior year, due to increased expected losses under the CECL model[271](index=271&type=chunk) - The ACL as a percentage of gross loans was **1.20%** at March 31, 2025, and the ACL as a percentage of non-performing loans was **104.63%**[272](index=272&type=chunk)[273](index=273&type=chunk) [Derivative Financial Instruments](index=69&type=section&id=Derivative%20Financial%20Instruments) The company uses interest rate swap agreements to manage interest rate risk, recognizing them at fair value on the balance sheet - The company utilizes interest rate swap agreements as part of its asset/liability management strategy to manage interest rate risk, recognizing them at fair value on the Consolidated Balance Sheets[278](index=278&type=chunk) [Off-Balance Sheet Arrangements](index=69&type=section&id=Off-Balance%20Sheet%20Arrangements) The company engages in off-balance sheet arrangements like credit commitments and letters of credit, which carry credit and interest rate risks, but has no other material off-balance sheet arrangements - Off-balance sheet arrangements include commitments to extend credit and standby letters of credit, which involve credit and interest rate risk[279](index=279&type=chunk) - The company has no other material off-balance sheet arrangements that would significantly impact its financial condition[279](index=279&type=chunk) [Funding Activities](index=69&type=section&id=Funding%20Activities) Deposits are the primary funding source, supplemented by borrowings to meet liquidity needs. The company has substantial unused borrowing capacity of $4.1 billion through various credit lines - Deposits are the primary source of funds, complemented by borrowings for liquidity and temporary funding[280](index=280&type=chunk) - The company has **$4.1 billion** in unused borrowing capacity through credit lines with FHLB of Atlanta, Federal Reserve Borrower-In-Custody Program, and correspondent banking relationships[282](index=282&type=chunk) Borrowing Type (in thousands) | Borrowing Type (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Short-term borrowings | $300,000 | $365,000 | | Subordinated debentures, net | $96,212 | $94,872 | | Subordinated debentures owed to unconsolidated subsidiary trusts | $17,077 | $17,013 | | Total long-term debt | $113,289 | $111,885 | [Deposits](index=70&type=section&id=Deposits) Total deposits increased slightly by $26.6 million, driven by a focus on gathering deposits across commercial and retail businesses. Brokered time deposits remained stable, and the company has no material deposit concentration risk - Total deposits increased by **$26.6 million** from December 31, 2024, to March 31, 2025, primarily due to a focus on gathering deposits[284](index=284&type=chunk) Deposit Category (in thousands) | Deposit Category (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------------ | :------------- | :---------------- | | Demand, non-interest-bearing | $1,382,427 | $1,379,940 | | Demand, interest-bearing | $2,224,844 | $2,223,540 | | Money market and savings | $1,667,447 | $1,658,480 | | Brokered deposits | $246,902 | $244,802 | | Time deposits, other | $1,020,251 | $1,008,477 | | Total deposits | $6,541,871 | $6,515,239 | - Brokered time deposits totaled **$246.9 million** at March 31, 2025, and the company has no material deposit concentration risk[284](index=284&type=chunk)[286](index=286&type=chunk) Time Deposits Exceeding FDIC Limit (in thousands) | Time Deposits Exceeding FDIC Limit (in thousands) | March 31, 2025 | | :------------------------------------------------ | :------------- | | Due within 3 months or less | $149,818 | | Due after 3 months and within 6 months | $103,935 | | Due after 6 months and within 12 months | $29,570 | | Due after 12 months | $8,933 | | Total uninsured, time deposits | $292,256 | [Shareholders' Equity](index=71&type=section&id=Shareholders'%20Equity) Total shareholders' equity increased by $27.8 million to $758.0 million, primarily due to increased earnings, while accumulated other comprehensive income (loss) improved by $7.7 million - Total shareholders' equity increased by **$27.8 million** to **$758.0 million** at March 31, 2025, from **$730.2 million** at December 31, 2024, mostly due to an increase in earnings[289](index=289&type=chunk) - Accumulated other comprehensive income (loss) improved by **$7.7 million**, from **$(95.7) million** to **$(88.0) million**[289](index=289&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=72&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's market risk, primarily interest rate risk, and its management strategies. It details how the company monitors and mitigates exposure to interest rate fluctuations through asset-liability management, interest rate sensitivity analysis, and economic value of equity (EVE) modeling - Market risk primarily stems from interest rate risk inherent in lending, investment, and deposit-taking activities, actively monitored and managed by the ALCO[290](index=290&type=chunk) - The company's objective is to minimize the adverse impact of interest rate changes on net interest income and capital, relying on its asset-liability structure and various tools like gap analysis and interest rate simulations[291](index=291&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) Percentage Change in Earnings (March 31, 2025) | Change in Interest Rates (in Basis Points) | Percentage Change in Earnings (March 31, 2025) | | :----------------------------------------- | :--------------------------------------------- | | 200 | (1.7)% | | 100 | (0.6)% | | (100) | (0.5)% | | (200) | (1.4)% | | (300) | (1.8)% | Percentage Change in EVE (March 31, 2025) | Change in Interest Rates (in Basis Points) | Percentage Change in EVE (March 31, 2025) | | :----------------------------------------- | :---------------------------------------- | | 200 | (8.4)% | | 100 | (3.7)% | | (100) | 2.8% | | (200) | 3.2% | | (300) | 1.9% | [Item 4. Controls and Procedures](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2025, concluding they are designed and operating effectively. No material changes to internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated as effective by management, including the CEO and CFO, as of March 31, 2025[303](index=303&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025[304](index=304&type=chunk) [Part II - Other Information](index=72&type=section&id=Part%20II%20-%20Other%20Information) This part provides additional information including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=72&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal claims and proceedings but is not currently party to any material legal proceedings, and management believes any liabilities will not have a material adverse effect on its financial position - The company is not party to any material legal proceedings, and management believes any liabilities from current or threatened litigation will not have a material adverse effect on its financial position[306](index=306&type=chunk) [Item 1A. Risk Factors](index=72&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Form 10-K for the year ended December 31, 2024 - No material changes to the risk factors disclosed in the Form 10-K for the year ended December 31, 2024, have occurred[307](index=307&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company's Board authorized a $50.0 million share repurchase program on April 25, 2025. During the quarter ended March 31, 2025, no shares were purchased under any repurchase program, though some shares were acquired from employees for tax withholding - On April 25, 2025, the Board authorized a share repurchase program for up to **$50.0 million** of common stock[308](index=308&type=chunk) Share Purchases | Period | Total number of shares purchased | Average price paid per share | | :-------------------- | :------------------------------- | :--------------------------- | | January 1 - 31, 2025 | 2,829 | $62.18 | | February 1 - 28, 2025 | — | — | | March 1 - 31, 2025 | — | — | - Shares purchased during January 2025 were transferred from employees to satisfy minimum tax withholding obligations related to restricted stock units, not under a repurchase program[308](index=308&type=chunk)[309](index=309&type=chunk) [Item 3. Defaults Upon Senior Securities](index=72&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period - None[310](index=310&type=chunk) [Item 4. Mine Safety Disclosures](index=72&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[311](index=311&type=chunk) [Item 5. Other Information](index=72&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended March 31, 2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended March 31, 2025[312](index=312&type=chunk) [Item 6. Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, certifications, and financial statements formatted in Inline XBRL - Key exhibits include Articles of Incorporation, Bylaws, CEO/CFO certifications (302 and 906), and financial statements formatted in Inline XBRL[313](index=313&type=chunk)

1Q25 Update (Nasdaq: BHRB) April 2025 1 Cautionary Statement Regarding Forward-Looking Information 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 qual ...

Q1 2025 Financial Results and Corporate Actions [Q1 2025 Highlights](index=1&type=section&id=Q1%202025%20Highlights) The company reported strong Q1 2025 results with significant net income and EPS growth from Q4 2024 | Metric | Q1 2025 | Q4 2024 (GAAP) | Q4 2024 (Adjusted Non-GAAP) | | :--- | :--- | :--- | :--- | | Net Income to Common Shares | $27.0 million | $19.6 million | $26.6 million | | Diluted EPS | $1.80 | $1.30 | $1.77 | | Metric | Value (as of or for Q1 2025) | | :--- | :--- | | Annualized Return on Average Assets | 1.41% | | Annualized Return on Average Equity | 14.57% | | Total Gross Loans | $5.6 billion | | Total Deposits | $6.5 billion | | Loan-to-Deposit Ratio | 86.3% | | Net Interest Margin (non-GAAP) | 4.18% | | Total Liquidity | $4.2 billion | | Common Equity Tier 1 Capital Ratio | 11.7% | - The CEO expressed satisfaction with the first full quarter's results post-merger, emphasizing a **strong balance sheet** and **improved expense management** while continuing to invest for growth[4](index=4&type=chunk) [Corporate Actions](index=1&type=section&id=Corporate%20Actions) The Board declared a quarterly cash dividend and authorized a new $50.0 million share repurchase program - A regular cash dividend of **$0.55 per share** was declared, payable on June 2, 2025[1](index=1&type=chunk) - The board authorized a share repurchase program for up to **$50.0 million** of its common shares[2](index=2&type=chunk) Financial Performance Analysis [Results of Operations (Q1 2025 vs. Q4 2024)](index=2&type=section&id=Results%20of%20Operations%20(Q1%202025%20vs.%20Q4%202024)) Net income increased significantly quarter-over-quarter, driven by higher net interest income and post-merger cost savings | Metric | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Net Income to Common Shares | $27.0 million | $19.6 million | | Diluted EPS | $1.80 | $1.30 | | Net Interest Income | $73.0 million | $70.7 million | | Net Interest Margin (non-GAAP) | 4.18% | 3.91% | | Non-interest Expense | $49.7 million | $52.5 million (Adjusted) | - Total gross loans decreased by **$24.7 million** to $5.6 billion, while total deposits increased by **$26.6 million** to $6.5 billion[7](index=7&type=chunk) - The increase in net interest income was driven by a **$4.3 million decrease** in interest expense, primarily from lower deposit costs[7](index=7&type=chunk) - Non-interest expense decreased, reflecting the realization of cost savings following the merger-related conversion in Q4 2024[7](index=7&type=chunk)[8](index=8&type=chunk) [Capital Adequacy](index=3&type=section&id=Capital%20Adequacy) The holding company and its bank subsidiary remained well-capitalized, exceeding all regulatory requirements | Company Capital Ratios (March 31, 2025) | Actual | "Well-Capitalized" Requirement | | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 11.7% | 6.5% | | Total Risk-Based Capital | 14.7% | 10.0% | | Leverage Ratio | 10.1% | 5.0% | | Bank Subsidiary Capital Ratios (March 31, 2025) | Value | | :--- | :--- | | Common Equity Tier 1 (CET1) | 13.5% | | Total Risk-Based Capital | 14.6% | | Leverage Ratio | 11.2% | Consolidated Financial Statements (Unaudited) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) The company reported net interest income of $73.0 million and net income of $27.0 million for Q1 2025 | Income Statement Item | Q1 2025 (in thousands) | | :--- | :--- | | Total Interest Income | $110,786 | | Total Interest Expense | $37,799 | | **Net Interest Income** | **$72,987** | | Total Provision for Credit Losses | $501 | | Total Non-interest Income | $10,023 | | Total Non-interest Expense | $49,664 | | Income Before Income Taxes | $32,845 | | **Net Income Applicable to Common Shares** | **$26,976** | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Total assets reached $7.84 billion, supported by $6.54 billion in deposits and $758.0 million in equity | Balance Sheet Item | March 31, 2025 (in thousands) | | :--- | :--- | | **Total Assets** | **$7,838,090** | | Net Loans | $5,579,754 | | Securities Available-for-Sale | $1,436,869 | | **Total Liabilities** | **$7,080,090** | | Total Deposits | $6,541,871 | | **Total Shareholders' Equity** | **$758,000** | [Details of Net Interest Margin](index=7&type=section&id=Details%20of%20Net%20Interest%20Margin) The taxable-equivalent net interest margin expanded to 4.18% in Q1 2025, up from 3.91% in the prior quarter | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Yield on Total Interest-Earning Assets | 6.31% | 6.22% | 4.66% | | Cost of Total Interest-Bearing Liabilities | 2.76% | 2.98% | 2.71% | | Taxable-Equivalent Net Interest Spread | 3.55% | 3.24% | 1.95% | | **Taxable-Equivalent Net Interest Margin** | **4.18%** | **3.91%** | **2.68%** | - Average total interest-earning assets for Q1 2025 were **$7.17 billion**, while average total interest-bearing liabilities were **$5.55 billion**[22](index=22&type=chunk) [Supplemental Financial Information](index=9&type=section&id=Supplemental%20Financial%20Information) This section presents a five-quarter trend of key per-share data and performance ratios | Per Common Share Data | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Diluted Earnings (loss) | $1.80 | $1.30 | $0.69 | | Cash Dividends | $0.55 | $0.55 | $0.53 | | Book Value | $49.90 | $48.08 | $42.92 | | Tangible Book Value (non-GAAP) | $44.17 | $42.06 | $42.92 | | Key Ratios (Annualized) | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Return on Average Assets | 1.41% | 1.00% | 0.58% | | Return on Average Equity | 14.57% | 10.49% | 6.67% | | Efficiency Ratio | 59.83% | 74.44% | 80.22% | | Loan-to-Deposit Ratio | 86.33% | 87.06% | 70.84% | Non-GAAP Financial Measures and Reconciliations [Reconciliation of Operating Net Income and Adjusted EPS](index=11&type=section&id=Reconciliation%20of%20Operating%20Net%20Income%20and%20Adjusted%20EPS) The company reconciles GAAP net income to non-GAAP operating net income, adjusting for merger-related expenses in Q4 2024 | Reconciliation (Q4 2024, in thousands) | Amount | | :--- | :--- | | Net Income Applicable to Common Shares (GAAP) | $19,568 | | Add: Merger-related items (tax effected) | $7,069 | | **Operating Net Income (non-GAAP)** | **$26,637** | [Reconciliation of Pretax, Pre-Provision Earnings](index=12&type=section&id=Reconciliation%20of%20Pretax%2C%20Pre-Provision%20Earnings) Pretax, pre-provision earnings increased to $33.3 million in Q1 2025 from $21.1 million in Q4 2024 | PPNR Calculation (in thousands) | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Income Before Taxes (GAAP) | $32,845 | $20,258 | | Add: Provision for Credit Losses | $501 | $833 | | **Pretax, Pre-Provision Earnings (non-GAAP)** | **$33,346** | **$21,091** | [Reconciliation of Tangible Common Equity](index=12&type=section&id=Reconciliation%20of%20Tangible%20Common%20Equity) Tangible book value per common share increased to $44.17 as of March 31, 2025 | Tangible Common Equity (in thousands) | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Common Shareholders' Equity (GAAP) | $747,587 | $719,744 | | Less: Intangible Assets | $53,002 | $57,300 | | Less: Goodwill | $32,842 | $32,783 | | **Tangible Common Equity (non-GAAP)** | **$661,743** | **$629,661** | | **Tangible Book Value per Share** | **$44.17** | **$42.06** | [Reconciliation of Net Interest Margin (FTE)](index=13&type=section&id=Reconciliation%20of%20Net%20Interest%20Margin%20(FTE)) The fully taxable-equivalent net interest margin was 4.18% for Q1 2025 after adjustments | FTE NIM Calculation (Q1 2025, in thousands) | Amount | | :--- | :--- | | Net Interest Income (GAAP) | $72,987 | | Add: Taxable-equivalent adjustments | $881 | | **Net Interest Income (FTE, non-GAAP)** | **$73,868** | | Average Interest-Earning Assets | $7,171,931 | | **Net Interest Margin (FTE, non-GAAP)** | **4.18%** | Forward-Looking Statements and Company Information [About Burke & Herbert](index=3&type=section&id=About%20Burke%20%26%20Herbert) The company is the holding company for the oldest continuously operating bank in the Washington, D.C. area - The company is the financial holding company for Burke & Herbert Bank & Trust Company, the **oldest continuously operating bank** under its original name in the greater Washington, D.C. area[10](index=10&type=chunk) - The bank operates over **75 branches** across Delaware, Kentucky, Maryland, Virginia, and West Virginia, providing a full range of financial services[10](index=10&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This report contains forward-looking statements that are subject to significant risks and uncertainties - The report contains forward-looking statements regarding revenues, earnings, and strategic goals, which are subject to numerous risks and uncertainties[11](index=11&type=chunk)[12](index=12&type=chunk) - Key risks that could cause actual results to differ include changes in economic conditions, interest rates, competition, and asset quality[14](index=14&type=chunk)