Good morning and welcome to Washington Trust's Anchor Pink's conference call. My name is Lydia and I'll be your operator today. If participants need assistance during the call at any time, please press star zero. Participants interested in asking a question at the end of the call should press star one to get in the queue. Today's call is being recorded. And now I'll turn you over to Sharon Walsh, Senior Vice President, Director of Marketing and Corporate Communications to begin. Please go ahead.

Thank you, Lydia. Good morning and welcome to Washington Trust Bancorp Bank's conference call for the third quarter of 2025. Joining us this morning are members of Washington Trust Executive Team, Ned Handy, Chairman and Chief Executive Officer, Mary Nunes, President and Chief Operating Officer, Ron Osbert, Senior Executive Vice President, Chief Financial Officer and Treasurer, and Bill Ray, Senior Executive Vice President and Chief Risk Officer. Please note that today's presentation may contain forward-looking statements and our Actual results could differ materially from what is discussed on the call. Our complete safe harbor statement is contained in our earnings release, which was issued yesterday, as well as other documents that are filed with the SEC. All of these materials and other public filings are available on our Investor Relations website at ir.washtrust.com. Washington Trust trades on NASDAQ under the symbol WASH. I'm now pleased to introduce today's host, Washington Trust Chairman and Chief Executive Officer, Ned Handy.

Thank you, Sharon. good morning and thank you for joining our third quarter conference call. We respect and appreciate your time and your interest in Washington Trust. I'll briefly comment on our financial results and then Ron will provide more details on the quarter. After our remarks, Mary and Bill will join us for the Q&A session. This quarter we realized net income of $10.8 million. We resolved two credit exposures that resulted in an elevated provision for credit losses this quarter as we detailed and an 8K filed earlier this month. That said, we are confident in our current portfolio quality and that we will continue our long track record of strong credit performance. This quarter, we saw strong performance across our core business lines with increases in margin, wealth revenues, and mortgage revenue. We also saw in-market deposit levels increase and AUM growth. This performance underscores our continued commitment to long-term value creation. Additionally, this quarter, we made several key investments to drive growth. We completed an asset purchase from Lighthouse Financial Management, which added AUM of approximately $195 million. This transaction also added four advisory and tax planning team members to our Wealth Management Division. We also hired Jim Brown as Senior Executive Vice President and Chief Commercial Banking Officer. Jim has more than 38 years of experience in the financial services industry, an extensive network, and a proven track record in leading high-performing commercial banking teams. He's focused on building and deepening our commercial relationships and will be working closely with our Wealth Division on continuing to integrate these services. We're pleased with the direction we're headed in and excited about our investments in future growth. We look forward to continuing to build long-term relationships with our customers and support their financial service needs throughout their lives, whether they are buying a home, starting a business, or investing in the future. I'll now turn the call over to Ron for some additional details on the quarter. We'll then be glad to address any of your questions.

Thanks, Ned, and good morning, everyone. For the third quarter, we reported net income of $10.8 million, or 56 cents per share, compared to $13.2 million or $0.68 per share for the preceding quarter. Pre-provisioned pre-tax revenue or PPNR was up 17% from Q2 and 48% compared to the third quarter of last year. As previously disclosed, we resolved two significant credit exposures this quarter, which resulted in an elevated provision for credit losses. Net interest income in Q3 amounted to $38.8 million, up by 1.6 million or 4% on a linked order basis, and by 6.6 million or 20% year-over-year. The margin was 240, up by 4 basis points, and up by 55 basis points compared to last year. Non-interest income comprised 31% of revenue in Q3, up 3% compared to Q2, and up 8% year-over-year. Wealth management revenues were up 3%. This includes a 6% increase in asset-based revenues in Q3, reflecting market appreciation and the purchase of $195 million of managed assets from Lighthouse Financial Management. End of period AUA totaled $7.7 billion, up $501 million, or 7%. Mortgage banking revenues totaled $3.5 million, up 15% for the quarter, and 22% year-over-year. Non-interest expense, total $35.7 million in Q3, down by $804,000 or 2%. Salaries and employee benefits expense was down by $351,000 or 2%, reflecting lower levels of performance-based compensation. Outsourced services declined by $284,000 or 6% due to lower third-party software costs and volume-related changes. Our full-year effective tax rate is expected to be 22.5 percent turning to the balance sheet total loans were down by 18 million in market deposits were up 179 million or four percent from the end of q2 and up by 431 million or nine percent year over year wholesale funding was down 21 compared to june and 53 percent compared to last september and our loan to deposit ratio decreased 3.8 percentage points to 98% as of September 30. Total equity amounted to $533 million, up by $6 million from the end of Q2. The dividend remained at $0.56 per share. In Q3, we repurchased 237,000 shares at an average price of $27.18 per share and a total cost of $6.4 million. We repurchased an additional 21,000 shares in October at $26.98 per share to complete our $7 million internal allocation to this program. The dividend yield on these repurchases was 8.26%, which will reduce dividend payouts by about $600,000 annually. As I mentioned earlier, we resolved two significant credit exposures this quarter. We recorded charge-offs of $11.3 million on these loans and provided additional details and a Form 8-K filed on October 8th. We have a well-established process to monitor credits and asset quality and do not believe that this quarter's results are indicative of any adverse credit trend. At September 30, non-accruing loans were 27 basis points on total loans and were concentrated in collateralized residential and consumer loans. Non-accruing commercial loan balances amounted to $1 million. Past due loans were at 16 basis points of total loans and were essentially all collateralized residential and consumer. Non-accruing loans and past due loans are down 55% and 60% compared to last September. The allowance totaled 36.6 million or 71 basis points of total loans and provided NPL coverage of 261%. And at this time, I will turn the call back to Ned.

Thank you, Ron. We'll now take any questions you might have about the quarter. Thanks, Lydia.

Thank you, Ned. Please press star followed by the number one if you'd like to ask a question and ensure your device is unmuted locally when it's your turn to speak. If you change your mind or your question's already been answered, you can withdraw your question by pressing star followed by the number two. Our first question today comes from Mark Fitzgibbon with Piper Sandler. Please go ahead. Your line is open.

Hey, guys. Good morning. Morning, Mark. Ned, I wonder if you could share with us how much you have in remaining shared national credits, how big that book is.

Yeah, I'm going to turn to Bill on that, but it's a pretty limited portfolio.

It is. It's about $173 million, and it's split between CNI and commercial real estate.

Okay. And then, secondly, Bill, while I've got you, I think last quarter, in response to another analyst question, you said we have appropriate specific reserves on that one credit. I think you had $2.3 million against it.

What changed from then until now that caused you to have to take another $6 million charge off on that loan? sure um a lot of the other bank groups were in the exact same situation we were operating off the information we had from our asian bank and the advisors in the context of a chapter 11. there were two primary means of recovery in chapter 11 both of which were significantly reduced following the end of the quarter in terms of the the outcome so they came in at about maybe 20% or so of what the expectations had been. We had done our reserving at the end of the second quarter based on what at the time was a fairly conservative view of what the recovery might be. It turns out that was certainly erroneous, and we, along with all the other banks, ended up taking a very significant loss.

Okay.

And then I guess kind of a similar question On the office building sale, it looked like the reduction in value versus the charge-off necessitated essentially a 70% reduction in the value of the property versus where you were carrying it last quarter.

I guess I'm curious, how could you be off by that much if you had recent appraisals and valuations done on it when it went on accrual? right well as required by accounting we had this marked to its most current appraised value less selling costs and that happened to be you know about a third of what this property was originally estimated to be so we had it marked down to what the appraiser suggested was the appropriate type even accounting for difficult market we ended up liquidating it because we weren't seeing any positive momentum and as you understand it's very difficult for appraisals of office properties in this market especially when there's not consistent demand to get the numbers right so ultimately we decided that instead of a series of descending appraisals based on limited information we'd take an actual um note sale offer and and dispose of it that way so that's why that final mark was made.

Well, then I guess I'm curious, how do you have any confidence in any of the appraisals that you have on those other office portfolios? What makes you feel comfortable that those are good numbers?

I feel comfortable those are good numbers because they're different properties in different markets. And so when there's some leasing momentum underway, appraisal estimates tend to have more validity the actual sub market in which the final charge-off occurred was a town in connecticut where there had literally been no office deals done no office leases in the last two years so that's when we decided especially because opportunities for alternative redevelopments weren't happening we decided to take the loss and move on um now i do want to also point out that, for example, we had another property in Connecticut that was also non-accrual, happened to be related to the same borrower, where we saw some momentum and we ended up recovering 90% of that with a short sale. So that's why I'm saying it really comes down to the property and the market that it's in. And so I feel very comfortable that we're taking a conservative approach with our other office properties as well. Okay. We've got a very active watched asset process that where we're going over this as a senior team intensively once every at least once every quarter and so we feel comfortable with um our numbers okay but in fairness bill you felt comfortable last quarter with a 2.3 million dollar reserve on that that loan as well we act we did along with about 200 million dollars worth of other bank um lenders he's talking about this is a great deal gotcha um okay just changing gears ron i wondered if you could share with us what client flows were in the wealth management business this

quarter yeah no we're we're not we're not doing client flows anymore okay um you're just unwilling to share that anymore with with us yeah we we brought our disclosures in line with our peers Okay.

Lastly, I wondered if you could share with us any thoughts on the margin.

Yeah, we're looking at margin expansion in the fourth quarter of we'll call it by basis points.

Thank you. Thank you.

Our next question comes from Damon Del Monte with KBW. Please go ahead.

Hey, good morning, everyone. Hope you're all doing well. So first question, I just wanted to talk a bit about, morning, I just want to talk a little bit about loan growth and kind of how you're looking at your pipelines going into year end and kind of where you think that would be tracking after, you know, kind of a flattish third quarter here.

Yeah, you know, I think, Damon, we'll stick with the sort of the low single digit growth for the year. We did have a couple of pay downs right at the end of the quarter. The pipeline is still kind of in the $180 million range, so pretty healthy from uh from where it started at the beginning of the year um really excited that we uh brought jim brown on board he's uh um gotta gotta bring up a brand new rolodex uh of of opportunities uh cois and and uh and the like to uh to the bank and he's he's uh he's already busy you know sort of strengthening the existing team and and uh building bridges across our various businesses and some of the prospects that he brings, but, but pipelines healthy, you know, other than the formation in the, in the quarter, actually, you know, we had $115 million of new formation. We just had $103 million of payoffs. Some of them rather large, right at the, right at the end of the quarter. So, you know, I, I'm going to stick with that, you know, sort of low single digit growth and, and we'll keep the pedal to the metal in the fourth quarter.

Got it. Okay. That's helpful. Thanks. Um, and then, you know, maybe one for, for Ron on the, um, on the expense side here, um, you know, with the addition of, um, with lighthouse and then, you know, some hires that you guys have made and you kind of look at where expenses are kind of here in the, this last quarter, I mean, you, you kind of expect things to kind of go back up towards like around a 36 million, maybe a little bit higher per quarter level once you kind of readjust for accruals and whatnot yeah yeah yeah so damon i would say that you know the guidance that we provided in january was about 37 million per quarter and we've been running you know below that pretty consistently for the first three quarters we do have some timing issues we're

going to have higher levels of marketing in the fourth quarter we're going to have a 500 000 contribution to our foundation in the fourth quarter so i i would say 37 which is kind of what we originally guided in January is close to where we'll be in the fourth quarter.

Gotcha. Okay. That's helpful. And then I guess just lastly, did I hear the commentary on the buyback that you, what you bought during the quarter plus what you bought in October got you to your $7 million internal limit? So should we not expect any more buybacks for the remainder of the year?

Is that fair? Yeah. You know, Damon, we'll always look at it. I can tell you that we, you know, we did what we said we, you know, internally what we said we were going to do and we're going to take a pause right now and we'll continue to reevaluate whether it makes sense to do more and, you know, balancing that off against, you know, redeploying our capital back into growth. So at this at this point in time, we have no plans to do additional share repurchases. Got it.

Okay. That's all that I have for now. Thank you very much.

Thanks, Tim. thanks damon thank you as a reminder if you'd like to ask a question please press star followed by one on your telephone keypad we'll move to our next question from laurie hunsica with seaport research please go ahead great hi thanks good morning um sticking where damon was on the buy back um and pausing the bot i mean it was so great to see you all repurchasing shares and you're still so far below your spot, you know, and obviously with your commercial non-performers down to $1 million and, you know, outside of the lumps this quarter. I mean, help us think about why not buy back. It's so accretive to earnings on a per share basis. What am I missing here?

Yeah, well, listen, Lori, we are on the lower end of the range on capital ratios. We're aware of that. And we do have, you know, hiring Jim Brown coming in, you know, it's too early to give guidance on 2026. However, we are expecting, you know, to ramp up our commercial lending. So we want to make sure that we've got appropriate capital levels to support growth. So, you know, and I guess I will say I'm not ruling out whether or not we do some more. I'm just saying at this point in time, we're going to take a pause and see what's happening. But, yeah, from a credit standpoint, we actually feel pretty good having dealt with these two problems this quarter. Yeah, that's the best I can tell you. I mean, there's arguments either way to do more or to sit tight. And for the time being, we're going to sit tight.

Okay.

And then just going back to credit, the $173 million in SNCC, what is the breakdown, I guess, Ron or Bill, between what's Cree and what's CNI?

There's $90 million of Cree and $84 million of CNI.

Okay. And just double-checking here, NDFI exposure, close to zero? How are we thinking? No. What is your NDFI exposure? We don't have it.

We don't have any NDFI exposure.

Perfect. Okay, perfect. And then office, just switching back over. So just comparing link hoarder within that Class A bucket. And by the way, your disclosures are great. Really, really appreciate it. But it looks like you had within Class A, $22 million pop into special mention. And obviously, I understand what you cured, et cetera. You gave a lot of detail earlier in the month and obviously here. So it's – but just the $22 million is not part of anything. So can you help us think about, I guess, what is that and how to think about it?

What's the maturity? um that's a um office building a class a office building actually two of them in a strong suburb of hartford um occupancy has been at 60 percent however this was downgraded to special mention because two tenants are vacating they've actually replaced those tenants and so they will be getting back up to occupancy of 60 percent they also have an loi out which for which the lease is imminent that we should get them up to a point at which it's got positive debt service coverage very strong sponsor and in addition to the discussion we had earlier about appraised values in office it's important to understand that the sponsorship support for any given property also gives us a lot of confidence in terms of where we're valuing things so we think this is one that like many office properties is kind of on the simmer um we don't think this is going to boil over because where it is they're seeing a fair amount of leasing volume but we did take the downgrade as a precaution given that we knew there were some upcoming um vacancies coming up gotcha and when sorry when does this loan mature you know i'm looking at my write-up and i can't tell you so I'll have to I'll have to let you know that offline.

Okay, that's perfect. Okay, not your term. Okay, that's helpful. Okay, and then just switching gears, I'm just going back to the income statement. Just two questions here. The first is other other income within the non interest income buckets of 619,000. It seems like there might have been some one-time gains in that number um am i thinking about that right or if so can you yeah there's a miscellaneous item of about 250 in there that's correct okay perfect okay and then um obviously you know you've worked you worked down the wholesale which is great your advances came down also but it looks like just based on the averages your fhlb advances came down really kind of at the end of the quarter if i'm backing into that right um maybe just help us think about where that's going yeah um so we we've had strong uh deposit growth in the quarter um of course the fhlb gets paid off at maturity so so

we've got staggered maturities most of that's pretty short term i think you've got another 350 million maturing in the fourth quarter so you know we've got kind of elevated levels of of cash on deposit related to those deposit inflows. So we will just pay down the FHLB as it goes.

Okay, great. Sit there. Oh, one more thing, sorry, if I'm- Oh.

The maturity on that deal we discussed, the seven rated is October of 27. So we've got a couple of years to run on that.

Great, perfect. Okay, I'm sorry, one more, Mr. Margin, do you have the spot margin, Ron, for September?

Yeah, we'll call it 243.

243. Thanks so much.

Thanks, Laurie.

Thank you. We have no further questions, so I'll pass you back over to Mayor Tandy for any closing comments.

Thanks, Lydia. Well, this quarter we celebrated Washington Trust's 225th birthday, which really is a milestone that reflects our enduring commitment to customers and communities. We appreciate your continued support and thank you for your time today and look forward to speaking to you all again soon. Thanks, everybody. Have a great day.

This concludes today's call. Thank you for joining. You may now disconnect your line.