Executive Summary

Solid quarter with EPS $1.97 (+9% q/q) on stronger fee income, lower deposit costs, and stable NIM 4.17%. EPS beat Street by $0.15 (8%) and revenue was roughly in line/slightly above; total revenue (company non‑GAAP) was $87.11M while SPGI “Revenue” actual printed $86.05M, reflecting definitional differences between company non‑GAAP revenue and SPGI revenue constructs . EPS consensus $1.82; Revenue consensus $86.06M*.
Estimates: EPS 1.82, Rev 86.0595M, EPS est.#=3, Rev est.#=2; Actuals per SPGI: EPS 1.97, Rev 86.051M*.
What worked: expense control (efficiency 56.6%), non‑interest income uplift (COLI proceeds, card partnership, swaps), and deposit cost declines (1.90% vs 1.99% q/q) despite modest loan and deposit contraction; ROA 1.51%, ROE 15.5% .
Watch items: rising NPLs to 1.53% of loans (from 1.15% in Q1) as the bank exits non‑strategic loans; allowance coverage steady at 1.20%, provision modest at $0.62M, net charge‑offs 8.6 bps annualized .
Capital/liquidity remain strong (CET1 12.21%, liquidity $4.4B) and dividend held at $0.55; management reiterated disciplined growth and market expansion (Bethesda, Fredericksburg, Richmond) as key catalysts for 2H25 execution .

What Went Well and What Went Wrong

What Went Well
- Margin/Cost discipline: Efficiency ratio improved to 56.6% from 59.8% in Q1, supported by merger-related cost saves realized in prior quarters and lower deposit costs (1.90% vs 1.99% q/q) .
- Fee momentum: Non‑interest income rose to $12.9M (vs $10.0M in Q1), aided by $1.8M COLI death benefits, $1.3M card network partnership income, and higher swap income .
- Management tone: “Successfully replacing non‑strategic loans… maintaining ample liquidity, solid capital ratios, and adequate loss reserves… looking forward to a strong second half of 2025,” said CEO David Boyle, reinforcing balanced growth and expense focus .
What Went Wrong
- Credit optics: NPL ratio rose to 1.53% (from 1.15% in Q1; 0.68% in Q4), and non‑performing loans increased to $85.5M; delinquencies elevated vs Q1 (though down vs Q1 on total delinquencies, non‑performers increased), with allowance/NPL coverage down to 78.6% from 104.6% .
- Loan and deposit contraction: Loans fell by $57.1M and deposits by $150.9M as the bank exited ~$90.8M of non‑strategic loans and reduced brokered deposits by $114.8M; while strategic, headline volumes declined .
- NIM flat q/q: NIM ticked down 1 bp to 4.17% as lower loan yields offset securities yield gains, albeit partially mitigated by lower interest‑bearing liability costs; accretion contribution remained material (loan accretion $11.5M) .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Net Interest Income ($M)	70.71	72.99	74.23
Non‑Interest Income ($M)	11.79	10.02	12.88
Total Revenue (non‑GAAP) ($M)	82.50	83.01	87.11
Provision for Credit Losses ($M)	0.83	0.50	0.62
Non‑Interest Expense ($M)	61.41	49.66	49.31
Net Income to Common ($M)	19.57	26.98	29.67
Diluted EPS ($)	1.30	1.80	1.97
Net Interest Margin (%, FTE)	3.91	4.18	4.17
Efficiency Ratio (%)	74.44	59.83	56.60
ROA (annualized, %)	1.00	1.41	1.51
ROE (annualized, %)	10.49	14.57	15.50

YoY snapshot (selected):

EPS: $(1.41) in Q2’24 to $1.97 in Q2’25 .
Total Revenue (non‑GAAP): $69.27M in Q2’24 to $87.11M in Q2’25 .
NIM: 4.06% in Q2’24 to 4.17% in Q2’25 .
Efficiency: 93.02% in Q2’24 to 56.60% in Q2’25 .

Balance Sheet and Asset Quality

KPI	Q4 2024	Q1 2025	Q2 2025
Loans (Gross, $B)	5.672	5.648	5.590
Deposits (Total, $B)	6.515	6.542	6.391
Loan/Deposit Ratio (%)	87.06	86.33	87.47
CET1 (%)	11.51	11.72	12.21
Total Risk‑Based Capital (%)	14.55	14.73	15.26
Leverage Ratio (%)	9.78	10.09	10.42
Non‑Performing Loans ($M)	38.37	64.76	85.53
NPLs / Total Loans (%)	0.68	1.15	1.53
Allowance for Credit Losses ($M)	68.04	67.75	67.26
Allowance Coverage (%)	1.20	1.20	1.20
NCOs / Avg Loans (annualized, bps)	5.2	8.5	8.6
Cost of Total Deposits (%)	2.17	1.99	1.90

Revenue/Drivers (Q2 2025 detail)

Loan accretion income: $11.5M; amortization impact on interest expense: $1.4M (56 bps annualized NIM contribution) .
Non‑interest income drivers: $1.8M COLI death benefits; $1.3M card network partnership income; higher swap income q/q .

Dividend

$0.55 per share declared, payable Sep 2, 2025 (record Aug 15, 2025) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net interest margin (FTE)	FY 2025	4.05%–4.10% (Q4’24 deck expectation)	No update provided in Q2 materials; NIM ran 4.17% in Q2’25	Maintained (implicit)
AOCI accretion	Ongoing	~5.5% per quarter (assuming flat rates) (Q1’25 deck)	~5.5% per quarter (assuming flat rates) reiterated in Q2’25 deck	Maintained
Dividend	Quarterly	$0.55/share (Q1’25)	$0.55/share declared for Q3 payment	Maintained
Liquidity capacity	Near‑term	~$4.1–$4.2B (Q4–Q1)	$4.4B (Q2)	Raised

Note: No explicit numeric updates for loan growth, deposit growth, OpEx, OI&E, or tax rate in Q2 materials beyond prior frameworks; management emphasized expense discipline and market expansion .

Earnings Call Themes & Trends

No Q2 2025 earnings call transcript was available in our document search or common transcript aggregators as of this analysis. We searched the company’s filings and newsroom for “earnings-call-transcript” and external sites; a MarketBeat page lists the call date/time (Jul 24, 2025, 9:30am ET), but no transcript was accessible . Below themes are drawn from Q4’24 and Q1’25 disclosures and the Q2’25 press release/deck.

Topic	Previous Mentions (Q4’24, Q1’25)	Current Period (Q2’25)	Trend
Deposit costs & NIM	Q4: NIM fell to 3.91% as accretion slowed; deposit cost 2.17% . Q1: NIM up to 4.18%; deposit cost 1.99% .	NIM 4.17%; deposit cost 1.90%; modestly lower loan yields offset by lower interest‑bearing liability cost and higher securities yields .	Stabilizing at ~4.17%, deposit costs trending lower.
Capital & liquidity	Liquidity ~$4.2B; CET1 11.5%–11.7% (Q4–Q1) .	Liquidity $4.4B; CET1 12.21%; leverage 10.42% .	Strengthening.
Asset quality	NPLs/Loans: 0.68% (Q4); 1.15% (Q1) .	NPLs/Loans: 1.53%; allowance/NPL down to 78.6% .	Deteriorating optics (levels still moderate).
Merger/cost saves	Q4 included $8.9M merger charges; cost saves realized into Q1 .	No merger charges; expense steady at ~$49.3M .	Normalized run‑rate sustained.
AOCI & securities	AOCI accretion ~5.5%/qtr (Q1 deck) .	Reiterated ~5.5%/qtr; duration ~4.6 yrs; unrealized losses details unchanged in construct .	Maintained.
Market expansion	Bethesda/Richmond build‑out signaled in Q1 .	New senior hires in Bethesda and Treasury Mgmt to drive growth .	Executing expansion hiring.

Management Commentary

CEO David P. Boyle (Q2’25 press release): “We’re successfully replacing non‑strategic loans with assets that meet our relationship‑based approach… maintaining ample liquidity, solid capital ratios, and adequate loss reserves… looking forward to a strong second half of 2025… delivering increased value for our customers, employees, communities and shareholders.”
Operating posture (Q2 deck): Emphasis on fortress balance sheet, neutral rate positioning, stress testing, and risk‑adjusted returns; capital metrics above well‑capitalized thresholds (CET1 12.21%; Total 15.26%; Leverage 10.42%) .

Q&A Highlights

We could not locate a Q2 2025 earnings call transcript in the company’s filings or typical transcript repositories; our search included company docs and third‑party sites (MarketBeat lists the event timing but no transcript) . As such, no Q&A excerpts or guidance clarifications were available. Notably, the press release provided incremental clarity on:

Deposit costs: down 9 bps q/q driven by lower amortization of acquired time deposits and lower rates on savings and brokered time deposits .
Accretion dynamics: loan accretion $11.5M and $1.4M interest expense amortization benefited NIM on an annualized basis (56 bps) .

Estimates Context

Metric (Q2 2025)	Consensus*	Actual*	Surprise
Primary EPS ($)	1.82 (3 est.)	1.97	+0.15 (+8.2%)
Revenue ($M)	86.06 (2 est.)	86.05	-$0.01 (~flat)

Notes: Company “Total revenue (non‑GAAP)” was $87.11M, which differs from SPGI “Revenue” definition; investors should reconcile construct differences when comparing to guidance or peer “revenue” prints .
*Values retrieved from S&P Global.

Key Takeaways for Investors

Quality beat on EPS with in‑line revenue: EPS upside driven by lower funding costs and stronger fee income; watch for sustainability of COLI and swap/card fees into 2H25 .
Margin holding in a competitive deposit market: NIM essentially flat q/q at 4.17% with lower deposit costs; trajectory into 2H hinges on asset yield mix and accretion normalization .
Credit optics warrant monitoring: NPLs rose to 1.53% and allowance/NPL coverage declined; absolute provision remains modest, but further migration could pressure PPNR if normalization continues .
Capital/liquidity are clear supports: CET1 12.21% and $4.4B in liquidity provide flexibility for growth and buybacks (board authorized $50M program in Q1) while maintaining dividend .
Strategy execution: Exit of non‑strategic loans, expansion hires in Bethesda/Treasury Mgmt, and cost discipline frame the 2H25 narrative; investors should track loan growth granularity (C&I focus) and deposit mix improvements as catalysts .
AOCI accretion tailwind: With duration ~4.6 years and expected ~5.5%/qtr accretion (flat rate scenario), book value and capital could benefit, supporting valuation resilience .
Near‑term setup: Neutral to positive—EPS beat, improving efficiency, and strong capital offset rising NPLs and slightly lower balances; watch 3Q run‑rate of non‑interest income and any credit migration.

Appendix: Additional Data Points

Q2 2025 KPIs: ROA 1.51%, ROE 15.5%, Efficiency 56.6%, Dividend $0.55, Loan/Deposit 87.5% .
Funding mix: Brokered deposits 2.1% of total; uninsured deposits 30.7%; short‑term borrowings $650M; average rate on short‑term borrowings 3.91% .
Securities: AFS fair value $1.523B; portfolio duration ~4.6 years; unrealized losses net of tax reduce BV by ~$5.61/share .

Sources

Q2 2025 press release and exhibits (8‑K Item 2.02, EX‑99.1; deck EX‑99.2): .
PR distribution of Q2 release: .
Q1 2025 results (press/8‑K): .
Q4 2024 results (press/8‑K): .
Other Q2 2025 press release (hiring): .
Earnings event reference (no transcript): .

Estimates

SPGI/Capital IQ consensus and actuals for Q2 2025: EPS 1.82 (3 est.), Rev $86.0595M (2 est.), Actual EPS 1.97, Actual Rev $86.051M. Values retrieved from S&P Global.*

Burke & Herbert Financial Services Corp. (BHRB)·Q2 2025 Earnings Summary