From David P. Boyle, Company Chair and Chief Executive Officer
"I'm pleased with our first quarter 2026 results which have put us on a good trajectory for the year. Our new loan originations were strong and we grew our loan portfolio while maintaining a solid core deposit base. Our balance sheet is well-positioned, asset quality metrics are in line with our moderate risk profile, and we delivered top quartile returns compared to our peers. We're looking forward to our upcoming merger with LINKBANK and the benefits it will provide for our combined customers, employees, communities, and shareholders."
Q1 2026 Highlights
For the quarter, net income applicable to common shares totaled $27.1 million; adjusted (non-GAAP1) operating net income applicable to common shares was $28.2 million.
Diluted earnings per common share ("EPS") was $1.79; adjusted (non-GAAP1) diluted EPS of $1.87.
For the quarter, the annualized return on average assets ("ROA") was 1.39%, the annualized return on average equity ("ROE") was 12.62%, and the annualized return on average tangible common equity ("ROATCE") (non-GAAP1) was 13.87%.
On an adjusted basis (non-GAAP1), ROA was 1.45%, ROE was 13.30%, and ROATCE was 14.44%.
Tangible common equity to tangible assets (non-GAAP1) was 9.93%.
Ending total gross loans were $5.4 billion and ending total deposits were $6.3 billion; ending loan-to-deposit ratio was 85.4%. The net interest margin (non-GAAP1) was 4.09% for the three months ended March 31, 2026.
The balance sheet remains strong with ample liquidity. Total liquidity, including all available borrowing capacity with cash and cash equivalents, totaled $4.8 billion at the end of the first quarter.
Asset quality metrics remain within the Company's moderate risk profile with adequate reserve coverage.
The Company continues to be well-capitalized, ending the quarter with 13.8%2 Common Equity Tier 1 capital to risk-weighted assets, 16.5%2 Total risk-based capital to risk-weighted assets, and a leverage ratio of 11.3%.2
On April 13, 2026, the Company and LINKBANCORP, Inc. ("LINK") (NASDAQ:LNKB) announced receipt of regulatory approval required to complete the previously announced merger pursuant to which Burke & Herbert will acquire LINK. The merger is expected to close on May 1, 2026, pending satisfaction of customary closing conditions.
Results of Operations
First Quarter 2026 compared to Fourth Quarter 2025
The Company reported first quarter 2026 net income applicable to common shares of $27.1 million, or $1.79 per diluted common share, compared to fourth quarter 2025 net income applicable to common shares of $30.0 million, or $1.98 per diluted common share.
Period-end total gross loans were $5.4 billion at March 31, 2026, an increase of $17.0 million from December 31, 2025, as the Company originated $132.0 million of new, relationship-based loan commitments.
Period-end total deposits were $6.3 billion at March 31, 2026, a decrease of $71.7 million from December 31, 2025. Excluding a $61.0 million decrease in brokered deposits, core deposits decreased $10.7 million.
Net interest income for the quarter was $71.8 million compared to $74.9 million in the prior quarter due to a decrease in interest income of $5.7 million, partially offset by a decrease in interest expense of $2.6 million. The decrease in total interest expense was primarily driven by lower deposit costs from a decrease in the balance of brokered time deposits and lower rates on certain deposit products.
Net interest margin on a fully taxable equivalent basis (non-GAAP1) decreased to 4.09% versus 4.11% in the fourth quarter of 2025, mainly attributable to a decrease in average volume and average rate on loans and an increase in average volume on short-term borrowings compared to the fourth quarter of 2025.
Accretion income on loans during the quarter was $6.8 million, and the amortization expense impact on interest expense was $1.4 million, or 30.5 bps of net interest margin on an annualized basis in the first quarter of 2026. In the prior quarter, accretion income on loans during the quarter was $8.7 million, and the amortization expense impact on interest expense was $1.4 million, or 39.3 bps of net interest margin on an annualized basis.
The cost of total deposits, including non-interest bearing deposits, was 1.71% in the first quarter of 2026, compared to 1.80% in the fourth quarter of 2025. The decrease in the cost of deposits was mostly due to a decrease in the rate paid on interest-bearing deposits compared to the fourth quarter of 2025.
The Company recorded credit provision expense in the first quarter of 2026 of $213.0 thousand on loans and a recapture of $201.0 thousand on unfunded commitments and the Company's allowance for credit losses at March 31, 2026, was $68.0 million, or 1.3% of total loans.
Total non-interest income for the first quarter of 2026 was $12.9 million compared to $11.6 million in the prior quarter, primarily due to an increase in gains on securities of $1.9 million and a $821.0 thousand increase in other non-interest income, which was partially offset by a decrease of $1.3 million in income from company-owned life insurance in the first quarter of 2026 compared to the fourth quarter of 2025. In the prior quarter, collection of death proceeds from company-owned life insurance increased non-interest income by $1.7 million.
Non-interest expense for the first quarter of 2026 was $51.4 million compared to $48.5 million in the fourth quarter of 2025, primarily due to an increase in salaries, wages and employee benefits of $1.6 million, an increase in occupancy costs of $631.0 thousand and an increase in equipment rentals, depreciation and maintenance of $455.0 thousand.
Regulatory capital ratios2
The Company continues to be well-capitalized with capital ratios that are above regulatory requirements. As of March 31, 2026, our Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 13.8%2 and 16.5%2, respectively, and significantly above the well-capitalized requirements of 6.5% and 10%, respectively. The leverage ratio was 11.3%2 compared to a 5% level to be considered well-capitalized.
Burke & Herbert Bank & Trust Company ("the Bank"), the Company's wholly-owned bank subsidiary, also continues to be well-capitalized with capital ratios that are above regulatory requirements. As of March 31, 2026, the Bank's Common Equity Tier 1 capital to risk-weighted asset and Total risk-based capital to risk-weighted asset ratios were 15.2%2 and 16.3%,2 respectively, and significantly above the well-capitalized requirements. In addition, the Bank's leverage ratio of 12.0%2 is considered to be well-capitalized.
For more information about the Company's financial condition, including additional disclosures pertinent to recent events in the banking industry, please see our financial statements and supplemental information attached to this release.
About Burke & Herbert
Burke & Herbert Financial Services Corp. is the financial holding company for Burke & Herbert Bank & Trust Company. Burke & Herbert Bank & Trust Company is the oldest continuously operating bank under its original name headquartered in the greater Washington, D.C. metropolitan area. With over 75 branches across Delaware, Kentucky, Maryland, Virginia, and West Virginia, Burke & Herbert Bank & Trust Company offers a full range of business and personal financial solutions designed to meet customers' banking, borrowing, and investment needs. Learn more at investor.burkeandherbertbank.com.
Cautionary Note Regarding Forward-Looking Statements
This communication includes "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, including with respect to (or based on) the beliefs, goals, intentions, and expectations of Burke & Herbert regarding its merger with LINKBANCORP, Inc. (the "proposed transaction"), revenues, earnings, earnings per share, loan production, asset quality, and capital levels, among other matters; our estimates of future costs and benefits of the actions we may take; our assessments of expected losses on loans; our assessments of interest rate and other market risks; our ability to achieve our financial and other strategic goals; the expected timing of completion of the proposed transaction; the expected cost savings, synergies, returns and other anticipated benefits from the proposed transaction; and other statements that are not historical facts. Forward–looking statements are typically identified by such words as "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "project," "will," "should," and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. Forward-looking statements include, without limitation, those relating to the terms, timing and closing of the proposed transaction.
Additionally, forward–looking statements speak only as of the date they are made; Burke & Herbert does not assume any duty, and does not undertake, to update such forward–looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise. Furthermore, because forward–looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those indicated in or implied by such forward-looking statements as a result of a variety of factors, many of which are beyond the control of Burke & Herbert. Such statements are based upon the current beliefs and expectations of the management of Burke & Herbert and are subject to significant risks and uncertainties outside of its control. Caution should be exercised against placing undue reliance on forward-looking statements.
The factors that could cause actual results to differ materially include the following: the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement between Burke & Herbert and LINK; the outcome of any legal proceedings that may be instituted against Burke & Herbert or LINK; the possibility that the proposed transaction will not close due to a failure to meet customary conditions to the closing; the ability of Burke & Herbert and LINK to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction; the possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Burke & Herbert and LINK do business; certain restrictions during the pendency of the proposed transaction that may impact the parties' ability to pursue certain business opportunities or strategic transactions; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management's attention from ongoing business operations and opportunities; the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the merger within the expected timeframes or at all and to successfully integrate LINK's operations and those of Burke & Herbert; such integration may be more difficult, time-consuming or costly than expected; revenues following the proposed transaction may be lower than expected; Burke & Herbert's success in executing its business plans and strategies and managing the risks involved in the foregoing; the dilution caused by Burke & Herbert's issuance of additional shares of its capital stock in connection with the proposed transaction; effects of the announcement, pendency or completion of the proposed transaction on the ability of Burke & Herbert and LINK to retain customers and retain and hire key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally; and risks related to the potential impact of global macroeconomic conditions and changes in general economic, political and market factors on the proposed transaction or our operations generally (either nationally or locally in the areas in which we conduct, or will conduct, business), including inflation, changes in interest rates, market volatility and monetary fluctuations, and changes in federal government policies and practices, including the impact with respect to spending on industries concentrated in our market area, as well as the impact from tariffs on the markets we serve; increased competition; changes in consumer confidence and demand for financial services, including changes in consumer borrowing, repayment, investment, and deposit practices; changes in asset quality and credit risk; our ability to control costs and expenses; adverse developments in borrower industries or declines in real estate values; changes in and compliance with federal and state laws and regulations that pertain to our business and capital levels; our ability to raise capital as needed; the impact, extent and timing of technological changes; emerging external focus among regulators and other officials related to risks in connection with the development and use of artificial intelligence; the effects of any cybersecurity breaches or events; the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, geopolitical conflicts and tensions, or public health events (such as pandemics), and of governmental and societal responses thereto; and the other factors discussed in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of Burke & Herbert's Annual Report on Form 10-K for the year ended December 31, 2025, and other reports Burke & Herbert files with the SEC.
Burke & Herbert Financial Services Corp.Consolidated Statements of Income (unaudited)(In thousands)
Three Months Ended
March 31,
December 31,
2026
2025
2025
Interest income
Taxable loans, including fees
$
88,083
$
97,031
$
93,828
Tax-exempt loans, including fees
40
46
44
Taxable securities
9,758
9,487
8,955
Tax-exempt securities
6,082
3,267
5,295
Other interest income
1,493
955
3,018
Total interest income
105,456
110,786
111,140
Interest expense
Deposits
26,720
31,851
29,401
Short-term borrowings
4,590
3,192
4,471
Subordinated debt
2,269
2,729
2,320
Other interest expense
34
27
26
Total interest expense
33,613
37,799
36,218
Net interest income
71,843
72,987
74,922
Credit loss expense - loans and available-for-sale securities
213
900
135
Credit loss (recapture) - off-balance sheet credit exposures
(201
)
(399
)
1
Total provision for credit losses
12
501
136
Net interest income after credit loss expense
71,831
72,486
74,786
Non-interest income
Fiduciary and wealth management
3,227
2,443
2,923
Service charges and fees
1,855
2,178
2,002
Net gains (losses) on securities
1,799
1
(104
)
Income from company-owned life insurance
1,479
1,193
2,803
Bank debit and other card revenue
2,835
2,884
3,164
Other non-interest income
1,658
1,324
837
Total non-interest income
12,853
10,023
11,625
Non-interest expense
Salaries and wages
21,413
20,941
20,332
Pensions and other employee benefits
5,370
5,136
4,889
Occupancy
4,027
4,045
3,396
Equipment rentals, depreciation and maintenance
4,188
4,084
3,733
Core deposit intangible amortization
3,684
4,298
3,684
ATM, card and network expense
1,134
1,132
1,107
FDIC and other regulatory assessments
1,140
914
926
Other operating
10,425
9,114
10,433
Total non-interest expense
51,381
49,664
48,500
Income before income taxes
33,303
32,845
37,911
Income tax expense
5,954
5,644
7,667
Net income
27,349
27,201
30,244
Preferred stock dividends
225
225
225
Net income applicable to common shares
$
27,124
$
26,976
$
30,019
Burke & Herbert Financial Services Corp.Consolidated Balance Sheets(In thousands)
March 31, 2026
December 31, 2025
(Unaudited)
(Audited)
Assets
Cash and due from banks
$
53,940
$
53,497
Interest-earning deposits with banks
15,652
235,630
Cash and cash equivalents
69,592
289,127
Securities available-for-sale, at fair value
1,826,037
1,615,954
Restricted stock, at cost
45,811
42,187
Loans held-for-sale, at fair value
—
365
Loans
5,404,667
5,387,676
Allowance for credit losses
(67,955
)
(67,823
)
Net loans
5,336,712
5,319,853
Other real estate owned
3,106
2,689
Premises and equipment, net
136,806
136,809
Accrued interest receivable
37,625
35,442
Intangible assets
38,064
41,747
Goodwill
36,253
34,149
Company-owned life insurance
214,606
213,200
Other assets
183,099
189,104
Total Assets
$
7,927,711
$
7,920,626
Liabilities and Shareholders' Equity
Liabilities
Non-interest-bearing deposits
$
1,367,050
$
1,336,380
Interest-bearing deposits
4,965,215
5,067,561
Total deposits
6,332,265
6,403,941
Short-term borrowings
525,000
450,000
Subordinated debentures, net
71,510
70,222
Subordinated debentures owed to unconsolidated subsidiary trusts
17,331
17,268
Accrued interest and other liabilities
117,101
124,546
Total Liabilities
7,063,207
7,065,977
Shareholders' Equity
Preferred stock and surplus
10,413
10,413
Common stock
7,809
7,800
Common stock, additional paid-in capital
407,070
405,922
Retained earnings
535,798
517,058
Accumulated other comprehensive income (loss)
(69,002
)
(58,960
)
Treasury stock
(27,584
)
(27,584
)
Total Shareholders' Equity
864,504
854,649
Total Liabilities and Shareholders' Equity
$
7,927,711
$
7,920,626
Burke & Herbert Financial Services Corp.Details of Net Interest Margin (unaudited)For the three months ended
Details of Net Interest Margin - Yield Percentages
March 31
December 31
September 30
June 30
March 31
2026
2025
2025
2025
2025
Interest-earning assets:
Loans:
Taxable loans
6.64
%
6.79
%
6.76
%
6.90
%
6.96
%
Tax-exempt loans
7.12
7.03
6.78
5.90
5.90
Total loans
6.64
6.79
6.76
6.90
6.96
Interest-earning deposits and fed funds sold
4.25
3.83
4.33
4.68
5.76
Securities:
Taxable securities
3.78
3.78
3.86
3.83
3.85
Tax-exempt securities
4.48
4.27
4.17
4.20
3.85
Total securities
4.05
3.96
3.97
3.95
3.85
Total interest-earning assets
5.97
%
6.06
%
6.11
%
6.25
%
6.31
%
Interest-bearing liabilities:
Deposits:
Interest-bearing demand
1.98
%
2.07
%
2.18
%
2.21
%
2.16
%
Money market & savings
1.83
1.94
2.02
