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Burke & Herbert Financial Services Corp. (BHRB)·Q1 2025 Earnings Summary

Executive Summary

  • EPS of $1.80 beat S&P Global consensus by $0.03 (+1.7%) on stronger NIM and lower funding costs; “total revenue” was roughly flat sequentially and modestly below consensus as accretion and fee income moderated . Consensus: EPS $1.77*, Revenue $83.54m* (vs actual $83.01m) .
  • Net interest margin expanded 27 bps q/q to 4.18% (FTE) as deposit costs fell to 1.99% and accretion tailwind remained sizable ($11.4m), driving ROAA 1.41% and ROAE 14.57% .
  • Credit quality mixed: allowance coverage steady at 1.20% of loans but NPLs rose to 1.15% of loans (from 0.68% in Q4), and net charge-offs increased to 8.5 bps annualized; management took $0.9m loan provision “reflective of economic uncertainty” .
  • Capital return is a new catalyst: board authorized up to $50m share repurchase and maintained the $0.55 dividend; capital ratios remain well above “well-capitalized” (CET1 11.7% est., Total RBC 14.7%, Leverage 10.1%) .

What Went Well and What Went Wrong

What Went Well

  • Margin and earnings quality improved: NIM (FTE) rose to 4.18% (+27 bps q/q) while net interest income increased to $73.0m from $70.7m; efficiency ratio improved to 59.8% as conversion-related cost saves flowed through .
  • Funding costs eased: total deposit cost fell to 1.99% from 2.17% q/q; brokered deposits held to 3.8% of total, supporting stable funding and liquidity (total liquidity ~$4.1–$4.2b) .
  • Capital return and tone: introduced a $50m buyback and reaffirmed dividend; CEO: “Expense management improved even as we continue to make investments for the long-term… we are well-positioned for disciplined growth” .

What Went Wrong

  • Credit metrics deteriorated: NPLs/loans rose to 1.15% (0.68% in Q4) and NCOs increased to 8.5 bps annualized; ACL-to-NPL coverage fell to 105% from 177% q/q, prompting a $0.9m loan provision .
  • Modest top-line softness vs expectations: “total revenue” (non-GAAP) of $83.01m was slightly below S&P consensus ($83.54m*), as loan accretion declined q/q ($11.4m vs $12.0m) and noninterest income was lighter vs Q4 .
  • Loans edged down: period-end gross loans decreased $24.7m q/q as the bank exited loans outside its desired risk profile; fee income normalized from Q4 one-time items (securities gains/COLI) .

Financial Results

P&L and Margin Summary (oldest → newest)

MetricQ1 2024Q3 2024Q4 2024Q1 2025Q1 2025 Consensus*
Total Revenue (non-GAAP) ($USD Millions)26.385 83.795 82.501 83.010 83.542*
Diluted EPS ($)0.69 1.82 1.30 1.80 1.77*
Net Interest Margin (FTE) (%)2.68 4.07 3.91 4.18 NA
Efficiency Ratio (%)80.22 60.66 74.44 59.83 NA
ROAA (%)0.58 1.40 1.00 1.41 NA
ROAE (%)6.67 15.20 10.49 14.57 NA

*Values retrieved from S&P Global.

Balance Sheet and Credit KPIs (sequential trend)

KPIQ3 2024Q4 2024Q1 2025
Gross Loans ($B)5.574 5.672 5.648
Total Deposits ($B)6.601 6.515 6.542
Loan-to-Deposit Ratio (%)84.44 87.06 86.33
Total Liquidity / Unused Borrowing Capacity ($B)2.354 4.092 4.083
Total Deposit Cost (%)2.38 2.17 1.99
Loan Accretion Income ($m)15.4 12.0 11.4
Provision for Loan Losses ($m)0.085 1.0 0.9
Total Provision for Credit Losses ($m)0.147 0.833 0.501
NPLs / Loans (%)0.64 0.68 1.15
ACL / Loans (%)1.22 1.20 1.20
ACL / NPLs (%)189.05 177.34 104.63
Net Charge-offs (annualized, bps)2.0 5.2 8.5
CET1 (%)11.40 (est.) 11.53 (est.) 11.72 (est.)
Total RBC (%)14.45 (est.) 14.57 (est.) 14.73 (est.)
Leverage Ratio (%)9.66 (est.) 9.80 (est.) 10.09 (est.)

Loan Portfolio Mix (as of Q1 2025)

SegmentBalance ($000s)
Commercial Real Estate (CRE)2,809,573
Residential1,161,406
Owner-Occupied CRE589,889
Commercial & Industrial613,219
Acquisition/Development/Construction (AD&C)322,963
Consumer150,457
Total Gross Loans5,647,507

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Common DividendQ2 2025 payment (June 2)$0.55/sh (Q4 2024) $0.55/sh declared Apr 24 Maintained
Share Repurchase AuthorizationOngoingNone disclosedNew $50m authorization New
Financial Outlook (NIM, opex, tax, etc.)2025Not providedNot provided in Q1 materialsNA

Earnings Call Themes & Trends

Note: A Q1 2025 call transcript was not available on the company site or typical transcript sources as of this review; the IR “Quarterly Results” page hosted the press release and presentation only .

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
Merger integration & cost savesIntegration underway; Q3: $3.1m merger costs; Q4: $8.9m merger costs, adjusted opex tracked lower Conversion behind them; expense management improved; adjusted opex benefits visible in efficiency ratio Positive (normalizing costs)
Deposit costs & NIMQ3 NIM 4.07% with higher deposit costs; Q4 NIM dipped to 3.91% NIM up to 4.18%; total deposit cost down to 1.99% Improving
Liquidity & capitalLiquidity capacity expanded to ~$4.1b by Q4; CET1 ~11.5% Liquidity ~$4.1b; CET1 11.7% (est.) and buyback introduced Strong/Stable
Credit qualityNPLs low but rising (0.64%→0.68% in Q4) NPLs rose to 1.15%; provision taken; ACL/loans steady at 1.20% Mixed (watch list build)
Technology & growth investmentsIntegration and systems focus Continued tech investments to drive efficiency; market expansion (Bethesda, Richmond) Ongoing investment

Management Commentary

  • CEO David P. Boyle: “Expense management improved even as we continue to make investments for the long-term, including technology improvements to drive efficiency, our expansion in Bethesda, Maryland, and Richmond, Virginia, and the relocation of certain operating activities to lower cost markets… we are well-positioned for disciplined growth” .
  • On funding and margin drivers: cost of total deposits decreased to 1.99%; NIM (FTE) rose to 4.18% with some offset from lower accelerated loan accretion; loan accretion income was $11.4m (vs $12.0m in Q4) .
  • On capital and liquidity: CET1 11.7% (est.), Total RBC 14.7% (est.), leverage 10.1% (est.); total liquidity including borrowing capacity and cash/cash equivalents totaled ~$4.1–$4.2b .

Q&A Highlights

  • No Q1 2025 conference call transcript was available on the company’s investor relations “Quarterly Results” page or major aggregators at the time of analysis; therefore, Q&A highlights and any clarifications from live remarks are not available .

Estimates Context

  • EPS: Actual $1.80 vs S&P Global consensus $1.77*; beat by $0.03 (+1.7%). Actual: .
  • Revenue: Company “total revenue” (non-GAAP) $83.010m vs S&P Global consensus $83.542m*; miss by ~$0.53m (~0.6%). Actual: .
  • Coverage: 2 estimates for EPS and Revenue*.
MetricQ1 2025 Consensus*ActualSurprise
EPS ($)1.77*1.80 +0.03
Revenue ($)83,541,500*83,010,000 -531,500

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin-led EPS beat with improving operating leverage: NIM up 27 bps q/q to 4.18% and efficiency ratio down to 59.8% underpin EPS $1.80 (+$0.03 vs consensus), suggesting early, durable benefits from merger cost saves and funding mix discipline .
  • Funding costs are moving the right way: total deposit cost fell to 1.99% (from 2.17% in Q4), while brokered deposits remain low (3.8% of total), supporting stable NIM even as accretion begins to normalize .
  • Credit is the watch item: NPLs/loans increased to 1.15% and NCOs rose to 8.5 bps; management added $0.9m loan provision, keeping ACL/loans at 1.20%. Monitor migration trends and coverage vs NPLs (now ~105%) .
  • Capital return introduced: $50m buyback plus $0.55 dividend with strong capital ratios (CET1 11.7% est., Total RBC 14.7%), offering flexibility if fundamentals remain resilient .
  • Revenue quality: “Total revenue” was effectively flat q/q and just below consensus; fee income normalizing and lower accretion are near-term headwinds, but lower funding costs offset much of the drag .
  • Tactical setup: Buyback + NIM expansion can support the stock near term; medium-term thesis hinges on sustaining deposit cost reductions, stabilizing credit metrics, and executing on C&I growth and fee initiatives post-integration .

Sources: Q1 2025 8-K/press release and investor materials ; Q4 2024 8-K ; Q3 2024 8-K ; additional April 21, 2025 press release (CAO appointment) . IR “Quarterly Results” page reference for document set and lack of transcript .