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WT

WASHINGTON TRUST BANCORP INC (WASH)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 adjusted diluted EPS was $0.61, slightly below S&P Global consensus of $0.63*; GAAP diluted EPS was $0.63. Revenues (NII + noninterest) materially beat consensus at $57.9M vs $53.2M* .*
  • Net interest margin expanded 34 bps sequentially to 2.29% on the back of balance sheet repositioning; CFO guided Q2 NIM to ~2.35%, with March spot NIM at 2.31% .
  • In‑market deposits rose 4% q/q to $5.013B as wholesale brokered deposits fell 91% to $27M and FHLB advances were reduced 24% to $850M, enhancing funding mix and capital ratios (CET1 11.76%, TRBC 13.13%) .
  • Management reiterated the $0.56 quarterly dividend and expects payout ratio to move to the mid‑ to low‑80s by year‑end; buybacks are under consideration but no plan is in place .

What Went Well and What Went Wrong

What Went Well

  • Net interest income rose 11% q/q to $36.4M and NIM expanded to 2.29%, reflecting the sale of lower‑yielding assets, reinvestment into higher‑yielding securities, and pay‑down of high‑cost wholesale funding .
  • In‑market deposits hit an all‑time high of $5.013B, supported by targeted deposit promotions and new retail sales officers; roughly half of Q1 growth came from one relationship, with the remainder organic .
  • Capital improved: CET1 increased to 11.76% (+56 bps q/q) and total risk‑based capital to 13.13%, with contingent liquidity covering 161% of uninsured deposits (post‑exclusions) .

Management quotes:

  • “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.” — CEO Edward O. Handy III .
  • “We’re looking at [NIM] 2.35 for the [second] quarter… we’re much closer to rate neutral [post‑restructuring].” — CFO Ronald Ohsberg .

What Went Wrong

  • Noninterest income fell 2% q/q on an adjusted basis; wealth management revenues decreased 2% and mortgage banking revenues fell 19% on lower secondary market loan sales .
  • Total loans declined 1% q/q to $5.096B as commercial and residential portfolios contracted; net charge‑offs rose to $2.304M, concentrated in office CRE .
  • A pre‑tax non‑cash pension settlement charge of $6.4M increased noninterest expense; sale‑leaseback transactions added an estimated ~$0.7M annual net occupancy cost .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net Interest Income ($M)$32.262 $32.936 $36.422
Noninterest Income ($M)$16.272 ($77.892) $22.643
Diluted EPS (GAAP)$0.64 ($3.46) $0.63
Adjusted Diluted EPS (non‑GAAP)$0.64 $0.59 $0.61
Net Interest Margin %1.85% 1.95% 2.29%
Provision for Credit Losses ($M)$0.200 $1.000 $1.200
Total Loans ($B)$5.515 $5.138 $5.096
Total Deposits ($B)$5.172 $5.116 $5.041
In‑Market Deposits ($B)$4.792 $4.818 $5.013
FHLB Advances ($B)$1.300 $1.125 $0.850
CET1 Ratio %10.95% 11.20% 11.76%

Segment/Noninterest Breakdown

Noninterest Component ($M)Q3 2024Q4 2024Q1 2025
Wealth Management Revenues$9.989 $10.049 $9.891
Mortgage Banking Revenues$2.866 $2.848 $2.304
Card Interchange Fees$1.321 $1.255 $1.509
Service Charges on Deposits$0.784 $0.794 $0.744
Gain on Sale of Bank‑Owned Properties$0.988 —$6.994
Realized Losses on Securities—($31.047) —
Losses on Sale of Portfolio Loans—($62.888) —

KPIs

KPIQ3 2024Q4 2024Q1 2025
AUA End‑of‑Period ($B)$7.052 $7.078 $6.818
Loans/Deposits Ratio %106.2% 105.5% 100.7%
Uninsured Deposits After Exclusions (% of Total)20% 21% 22%
Contingent Liquidity / Uninsured (After Exclusions) %162.6% 136.1% 161.4%
Adjusted Efficiency Ratio %71.1% 70.0% 68.7%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginQ2 2025Q1 2025 NIM 2.30–2.35 (from Q4 call) ~2.35% in Q2 2025 Maintained trajectory (near upper end)
NIM TrajectoryFY 20252.45–2.50 by Q4 2025 (from Q4 call) Rate‑neutral post restructuring; incremental improvement expected Maintained
Salaries & Benefits Run‑RateQuarterly 2025~$23.5M/quarter Reaffirmed Maintained
Non‑Salary Expense Run‑RateQuarterly 2025~$13.5M/quarter ~$13.5M/quarter reaffirmed Maintained
Occupancy (Sale‑Leaseback)AnnualEmbedded in prior guidance Net +$0.7M/year to occupancy/equipment Clarified
Effective Tax RateFY 2025~22.5% ~22.4% Slightly lowered
Dividend Payout RatioFY 2025Not specifiedPayout expected mid‑ to low‑80s by YE; no cut planned New explicit target
Loan GrowthFY 2025~3% commercial growth view Low single‑digit growth achievable; pipelines building Reaffirmed direction
BuybacksN/AN/AUnder consideration; no plan currently New consideration

Earnings Call Themes & Trends

TopicQ3 2024 (Oct)Q4 2024 (Jan)Q1 2025 (Apr)Trend
Interest Rate Sensitivity & NIMMargin stable; deposit repricing lag; asset/liability sensitive; NIM ~flat into Q4 NIM guided to 2.30–2.35 in Q1; repositioning to support NIM expansion NIM reached 2.29; Q2 guide ~2.35; now closer to rate‑neutral Improving NIM; reduced rate sensitivity
Funding & DepositsIn‑market deposits +3% q/q; contingent liquidity strong FHLB and brokered funding reduced; in‑market +1% q/q In‑market deposits +4% q/q; brokered down 91%; FHLB down 24% Mix improves, liquidity robust
CRE Office CreditClassified/NA details; resolution expected in Q4 Resolution of $10.5M credit; new $3.3M NA under agreement; charge‑offs concentrated in office Further charge‑offs; one NA property under P&S; lab asset >50% leased; extensions to 2026 Gradual de‑risking; targeted resolutions
MortgagePipeline ~$107M; sale‑focus Adjusted revenues steady; 88% originated for sale Pipeline $95M (+59% q/q); revenues down 19% on lower sales Activity seasonal; fee‑driven focus
Capital & DividendCapital ratios improved; dividend maintained Equity raise and repositioning; dividend unchanged Ratios higher; dividend maintained; payout ratio path lower Strengthening capital; stable dividend
Expenses~34.5M run‑rate; 2025 higher Guidance: salaries/benefits ~$23.5M; other ~$13.5M/quarter Pension settlement charge; non‑salary guidance reaffirmed Controlled core run‑rate; one‑time items

Management Commentary

  • CEO: “In our 225th year, we remain steadfast in our commitment to our customers and the communities we serve.” — Edward O. Handy III .
  • CFO: “Net interest income was $36.4 million… margin was 2.29%, up by 34 basis points… reflecting benefits from the recent balance sheet repositioning transactions.” — Ronald Ohsberg .
  • CFO: “We’re looking at [NIM] 2.35 for the quarter… we’re much closer to rate neutral.” — Ronald Ohsberg .
  • CRO: “One [office] loan is under P&S… likely to close in Q2; we took a charge‑off on the other loan secured by two properties… lab asset is just over half leased with active proposals.” — William Wray .
  • CFO: “About half [deposit growth] was a single relationship… the other half strong organic; deposit competition remains very intense.” — Ronald Ohsberg .

Q&A Highlights

  • NIM trajectory and sensitivity: Q2 NIM guided to ~2.35%; restructuring reduced liability sensitivity, moving closer to rate‑neutral, limiting upside from further Fed cuts .
  • Expense run‑rate: Non‑salary expense guidance ~$13.5M per quarter reaffirmed; sale‑leaseback adds ~$0.7M annually; pension settlement has no ongoing expense .
  • Pipelines and growth: Commercial pipeline a little over $100M; residential pipeline seasonally rising; low single‑digit loan growth seen as achievable .
  • Deposits: In‑market growth aided by targeted promotions and new retail sales officers; competition remains intense .
  • Dividend and capital actions: No dividend reduction planned; payout ratio targeted to mid‑ to low‑80s by YE; buybacks considered but no plan .

Estimates Context

MetricQ3 2024Q4 2024Q1 2025
Adjusted EPS – Consensus vs Actual ($)0.557 vs 0.64 — Bold beat*0.55 vs 0.59 — Bold beat*0.63 vs 0.61 — Bold miss*
Revenue – Consensus vs Actual ($M)47.873 vs 48.334 — in line*46.349 vs (45.956) — miss (restructuring loss)*53.156 vs 57.865 — Bold beat*
# EPS Estimates3*3*3*
# Revenue Estimates1*1*1*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • NIM expansion to 2.29% with Q2 guide ~2.35% signals near‑term upward trajectory; benefits from asset mix optimization and lower wholesale funding costs .
  • Funding mix improved: brokered deposits and FHLB advances reduced sharply; in‑market deposits and contingent liquidity strengthen resilience and lower cost of funds .
  • Adjusted EPS modest miss vs consensus, but revenue beat was strong; focus near term on sustaining NIM gains and stabilizing fee lines (wealth/mortgage) .*
  • Credit remains manageable with targeted resolutions and coverage (ACL/NPL ~190%); office portfolio metrics and leasing momentum are improving, but charge‑offs may remain elevated near term .
  • Dividend appears sustainable with payout path to mid‑ to low‑80s by YE; buybacks optionality exists but contingent on capital priorities and market conditions .
  • Medium‑term thesis: gradual earnings recovery driven by NIM accretion, deposit growth, and controlled expenses; mortgage/wealth revenues provide diversification albeit cyclical .
  • Trading implications: near‑term catalysts include confirmation of Q2 NIM at ~2.35%, deposit momentum, and execution on office credit resolutions; monitor quarterly charge‑offs and fee trends .