Washington Trust Reports First Quarter 2025 Results

"Washington Trust's first quarter results reflected our effective focus on our balance sheet, resulting in expansion of net interest margin and in-market deposit growth," stated Edward O. Handy III, Washington Trust Chairman and Chief Executive Officer.  "In our 225th year, we remain steadfast in our commitment to our customers and the communities we serve."

Other selected financial highlights for the first quarter 2025 include:

• The net interest margin was 2.29% in the first quarter, up by 34 basis points from the 1.95% reported in the preceding quarter, reflecting benefits from the balance sheet repositioning transactions.
• A provision for credit losses of $1.2 million was recognized for the first quarter, up by $200 thousand from the fourth quarter of 2024.
• Wealth management revenues in the first quarter decreased by 2% from the preceding quarter. End of period assets under administration ("AUA") totaled $6.8 billion, down by 4% from December 31, 2024.
• Mortgage banking revenues in the first quarter decreased by 19% from the preceding quarter, reflecting a lower volume of loans sold to the secondary market.
• Total loans amounted to $5.1 billion, down by 1% from December 31, 2024.
• In-market deposits (total deposits less wholesale brokered deposits) amounted to $5.0 billion, up by 4% from December 31, 2024.

Net Interest Income
Net interest income was $36.4 million for the first quarter of 2025, up by $3.5 million, or 11%, from the fourth quarter of 2024.  The net interest margin was 2.29% for the first quarter, an increase of 34 basis points from the preceding quarter.  This improvement reflected benefits from the balance sheet repositioning transactions executed in the latter portion of the preceding quarter, which included the sale of lower-yielding securities and loans, reinvestment into higher-yielding securities, and pay-down of higher-cost wholesale funding.  Linked quarter changes included:

• Average interest-earning assets decreased by $277 million, largely reflecting a decrease in loans, partially offset by an increase in average balance of deposits at correspondent banks. The yield on interest-earning assets for the first quarter was 4.98%, up by 15 basis points from the preceding quarter.
• Average interest-bearing liabilities decreased by $219 million, as in-market deposits increased by $167 million while wholesale funding balances decreased by $386 million. The cost of interest-bearing liabilities for the first quarter of 2025 was 3.19%, down by 22 basis points from the preceding quarter.

Noninterest Income
Noninterest income was $22.6 million for the first quarter of 2025, compared to a loss of $77.9 million in the fourth quarter of 2024.  Adjusted noninterest income (non-GAAP) was $15.6 million for the first quarter, down by $394 thousand, or 2%, from the preceding quarter.  Our two largest sources of noninterest income are discussed below:

• Wealth management revenues amounted to $9.9 million in the first quarter of 2025, down by $158 thousand, or 2%, from the preceding quarter, reflecting a decrease in asset-based revenues. The end of period AUA balance at March 31, 2025 amounted to $6.8 billion, down by $259 million, or 4%, from December 31, 2024.
• Mortgage banking revenues totaled $2.3 million for the first quarter of 2025, down by $544 thousand, or 19%, from the preceding quarter. Loans sold amounted to $75.5 million in the first quarter of 2025, down by $37.6 million, or 33%, from the fourth quarter of 2024.

Noninterest Expense
Noninterest expense totaled $42.2 million for the first quarter of 2025, up by $7.9 million, or 23%, from the fourth quarter of 2024.  Adjusted noninterest expense (non-GAAP) was $35.8 million for the first quarter, up by $1.5 million, or 4%, from the preceding quarter.  Salaries and employee benefits expense, our largest component of noninterest expense, amounted to $22.4 million, up by $547 thousand, or 3%, from the preceding quarter, which includes higher payroll taxes associated with the start of a new calendar year.  The remaining increase in noninterest expense included higher net occupancy costs and modest changes across a variety of expense categories.

Income Tax
For the first quarter of 2025, income tax expense of $3.5 million was recognized, reflecting an effective tax rate of 22.3%.  Based on current federal and applicable state income tax statutes, the Corporation currently expects its full-year 2025 effective tax rate to be approximately 22.4%.

Investment Securities
The securities portfolio totaled $918 million at March 31, 2025, up by $1 million, or 0.1%, from December 31, 2024.  An increase in the fair value of available for sale securities was essentially offset by routine pay-downs on mortgage-backed debt securities in the quarter.  The securities portfolio represented 14% of total assets at March 31, 2025, compared to 13% of total assets at December 31, 2024.

Loans
Total loans amounted to $5.1 billion at March 31, 2025, down by $42 million, or 1%, from the end of the preceding quarter.  These changes included:

• Commercial loans decreased by $28 million, or 1%, from December 31, 2024.
• Residential real estate loans decreased by $13 million, or 1%, from December 31, 2024.
• Consumer loans decreased by $1 million, or 0.3%, from December 31, 2024.

Deposits and Borrowings
Total deposits amounted to $5.0 billion at March 31, 2025, down by $75 million, or 1%, from the end of the preceding quarter.

In-market deposits, which exclude wholesale brokered deposits, amounted to $5.0 billion at March 31, 2025, up by $195 million, or 4%, from December 31, 2024, largely due to increases in high-rate savings account balances.

Wholesale brokered deposits amounted to $27 million and were down by $270 million, or 91%, from December 31, 2024.  FHLB advances totaled $850 million at March 31, 2025, down by $275 million, or 24%, from December 31, 2024.  These decreases reflected less need for wholesale funding and the use of net proceeds from the aforementioned balance sheet repositioning transactions.

As of March 31, 2025, contingent liquidity amounted to $1.8 billion and consisted of available cash, unencumbered securities, and unused collateralized borrowing capacity.

Asset Quality
Nonaccrual loans were $21.6 million, or 0.42% of total loans, at March 31, 2025, compared to $23.3 million, or 0.45% of total loans, at December 31, 2024.  The composition of nonaccrual loans at March 31, 2025 was 40% commercial and 60% residential and consumer.

Past due loans were $10.2 million, or 0.20% of total loans, at March 31, 2025, compared to $12.0 million, or 0.23% of total loans, at December 31, 2024.  The composition of past due loans at March 31, 2025 was 11% commercial and 89% residential and consumer.

The allowance for credit losses ("ACL") on loans amounted to $41.1 million, or 0.81% of total loans, at March 31, 2025, compared to $42.0 million, or 0.82% of total loans, at December 31, 2024.  The ACL on unfunded commitments, included in other liabilities on the Consolidated Balance Sheets, was $1.2 million at March 31, 2025, compared to $1.4 million at December 31, 2024.

The provision for credit losses totaled $1.2 million in the first quarter of 2025, up by $200 thousand from the preceding quarter, including loss allocations on individually analyzed nonaccrual commercial loans and reflecting our estimate of forecasted economic conditions.  Net charge-offs amounted to $2.3 million in the first quarter of 2025, compared to $1.9 million in the preceding quarter.  The charge-offs recognized in both the first quarter of 2025 and fourth quarter of 2024 were concentrated in the commercial real estate office portfolio segment.

Capital and Dividends
Total shareholders' equity was $521.7 million at March 31, 2025, up by $22.0 million, or 4%, from December 31, 2024.  Net income of $12.2 million and improvement of $20.0 million in the accumulated other comprehensive loss ("AOCL") component of shareholders' equity were partially offset by quarterly dividend declarations of $11.0 million.  The improvement in AOCL included an increase in fair value of available for sale debt securities, as well as the effects of the remeasurement of the qualified pension plan upon settlement and the reclassification of the after-tax pension plan settlement charge to noninterest expenses.

The Board of Directors declared a quarterly dividend of 56 cents per share for the quarter ended March 31, 2025.  The dividend was paid on April 11, 2025 to shareholders of record on April 1, 2025.

Capital levels at March 31, 2025 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 13.13% at March 31, 2025, compared to 12.47% at December 31, 2024.  Book value per share was $27.06 at March 31, 2025, compared to $25.93 at December 31, 2024.

Conference Call
Washington Trust will host a conference call to discuss its first quarter results, business highlights, and outlook on Monday, April 21, 2025 at 10:00 a.m. (Eastern Time).  Individuals may dial in to the call at 1-833-470-1428 and enter Access Code 572620.  An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-866-813-9403 and entering the Replay Access Code 256173.  The audio replay will be available through May 5, 2025.  Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust's website, https://ir.washtrust.com, and will be available through June 30, 2025.

Background
Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company.  Founded in 1800, Washington Trust is the oldest community bank in the nation, the largest state-chartered bank headquartered in Rhode Island and one of the Northeast's premier financial services companies.  Washington Trust offers a full range of financial services, including commercial banking, mortgage banking, personal banking, and wealth management and trust services through its offices located in Rhode Island, Connecticut, and Massachusetts.  The Corporation's common stock trades on NASDAQ under the symbol WASH.  Investor information is available on the Corporation's website at https://ir.washtrust.com.

Forward-Looking Statements
This press release contains statements that are "forward-looking statements."  We may also make forward-looking statements in other documents we file with the U.S. Securities and Exchange Commission ("SEC"), in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors, or employees.  You can identify forward-looking statements by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "outlook," "will," "should," and other expressions that predict or indicate future events and trends and which do not relate to historical matters.  You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties, and other factors, some of which are beyond our control.  These risks, uncertainties, and other factors may cause our actual results, performance, or achievements to be materially different from the anticipated future results, performance, or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include the following:

• changes in general business and economic conditions (including the impact of recently imposed tariffs by the U.S. Administration and foreign governments, inflation and concerns about liquidity) on a national basis and in the local markets in which we operate;
• interest rate changes or volatility, as well as changes in the balance and mix of loans and deposits;
• changes in customer behavior due to political, business and economic conditions;
• changes in loan demand and collectability;
• the possibility that future credit losses are higher than currently expected due to changes in economic assumptions or adverse economic developments;
• ongoing volatility in national and international financial markets;
• reductions in the market value or outflows of wealth management AUA;
• decreases in the value of securities and other assets;
• increases in defaults and charge-off rates;
• changes in the size and nature of our competition;
• changes in, and evolving interpretations of, existing and future laws, rules and regulations;
• changes in accounting principles, policies and guidelines;
• operational risks including, but not limited to, changes in information technology, cybersecurity incidents, fraud, natural disasters, war, terrorism, civil unrest and future pandemics;
• regulatory, litigation and reputational risks; and
• changes in the assumptions used in making such forward-looking statements.

In addition, the factors described under "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, may result in these differences. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans, and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Supplemental Information - Explanation of Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures.  Washington Trust's management believes that the supplemental non-GAAP information, such as adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax expense, adjusted effective tax rate, adjusted net income, adjusted net income available to common shareholders, adjusted diluted earnings per common share, adjusted return on average assets, adjusted return on average equity, and adjusted efficiency ratio, as well as measurements and ratios based on tangible equity and tangible assets, is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors.  These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures, which may be presented by other companies.  Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.