Good morning, and welcome to Washington Trust Bank Corp Inc. conference call. My name's 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 queue. As a reminder, today's call is being recorded. And now I'll turn the call over to Sharon Walsh, Senior Vice President, Director of Marketing and Corporate Communications. Please go ahead.

Thank you, Lydia. Good morning and welcome to Washington Trust Bank Corp Inc's conference call for the fourth 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 Osberg, 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 today's 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, 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.

Thanks, Sharon. Good morning, and thank you for joining our fourth quarter conference call. We respect and appreciate your time and interest in Washington Trust. I'll begin with a brief overview of our results, and then Ron will provide more detail on our financial results for the quarter and the year. After our remarks, Mary and Bill will join us for the Q&A session. This quarter's results reflected continued earnings momentum and improving profitability. The quarter's performance was driven by margin expansion, continued in-market deposit growth, and increased revenues from wealth management. We closed out the year with a wealth position balance sheet, a normalized provision for credit losses, and improved asset quality metrics. During 2025, we laid important groundwork for future growth with targeted investments in our wealth management and commercial banking business lines. This included the wealth asset purchase from Lighthouse Financial Management and the hiring of our new Chief Commercial Banking Officer, Jim Brown, who has an extensive network and proven record in leading high-performing commercial banking teams. In this new year, we are continuing to build upon the positive momentum from these strategic investments. Last week, we brought on a dedicated institutional banking team to serve education, healthcare and nonprofit providers throughout the Northeast region. This investment in our commercial banking business will help improve our balance sheet with high-quality C&I loans and strong deposit opportunities. We also expect to see wealth management opportunities come about. The ability to scale this high-quality new client base with an efficient staffing model will enhance earnings going forward. We're very excited about this key addition to Jim's commercial team and the growth potential that lies ahead. We're also looking forward to our de novo branch opening later this year in one of Rhode Island's fastest-growing communities, the city of Pawtucket, market, which will increase our presence in the northern part of the state. All these efforts will enhance our value as a full-service community bank and long-term partner to our customers, and provide a solid foundation for the year ahead. With that, I'll turn the call over to Ron for some additional details on the quarter and the year. We'll then be glad to address any of your questions.

Thank you, Ned, and good morning, everyone. In the fourth quarter, we reported net income of $16 million, or $0.83 per share, compared to $10.8 million, or $0.56 per share, for the preceding quarter. On an adjusted basis, EPS was up 41% compared to last year's fourth quarter. Net interest income was $40.7 million, up by 5% from Q3, and 24% year-over-year. The margin was $2.56, up by 16 basis points, and up by 61 basis points year-over-year. A better funding mix, with higher in-market deposits and lower wholesale funding, as well as deposit rate management contributed to this improvement. Q4 included 516,000 of loan prepayment fee income, which benefited the NEM by three basis points. Non-interest income was up five percent compared to Q3 and up by 15 percent year-over-year on an adjusted basis. Wealth management revenues were up five percent and average AUA for the fourth quarter increased by four percent and nine percent year-over-year. Mortgage banking revenues totaled 3.3 million down seasonally by 7% and up 14% year-over-year. Origination of sales volumes increased by 21% and 25% respectively. Our mortgage pipeline at December 31st was $81 million, down seasonally by 37% from the end of September. Full-year mortgage originations totaled $667 million, up by 31% from 2024. Q4 loan-related derivative income was up by $810,000 in the quarter. Non-interest expense totaled $38 million in Q4, up by 6%. On a full-year adjusted basis, non-interest expense was up by 7%. In the fourth quarter, salaries and benefits expense was up by $973,000, or 4%, reflecting higher levels of performance and volume-based compensation, as well as increased staffing. Other non-interest expenses were up by $1.3 million in Q4, largely due to a $1 million contribution made to our charitable foundation. Our full-year effective tax rate was 22.5%. We expect our full-year 2026 rate to be approximately 22%. Turning to the balance sheet, total loans were stable, increasing modestly by $12 million from September 30th. In-market deposits were up by 1% from the end of Q3 and 9% year-over-year, and wholesale funding was down $165 million, or 21% from the end of September. Total equity amounted to $544 million, up by $11 million from the end of Q3. The dividend remained at $0.56 per share. Turning to credit, in the fourth quarter, the provision for credit losses normalized and our asset quality metrics improved. At December 31st, non-accruing loans were 25 basis points on total loans, non-accruing commercial loans were zero, past due loans were 22 basis points on total loans. It was one Cree loan past due at December 31st, and that was brought current in January. And we had net recoveries for the quarter of $160,000. And at this point, I'll turn the call back to Ned.

Thank you, Ron. And we'll now take any questions you might have.

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

Hey guys, good morning. Nice quarter.

Thank you, Mark.

You bet.

I guess first question, Ron, I'm curious how you're thinking about the margin do you feel like that sort of two mid 250 level is is kind of sustainable as we move into the early part of 2026 I do mark and I can give you you know I can give you kind of a full year outlook on an M I think I think you're all aware of the SWAT termination that'll happen at the end of April so I'll talk about that first so in the second quarter we expect the margin to increase nine basis points related to that item and another four basis points in in the third quarter so that's a run rate benefit of 13 basis points that'll be fully baked in in the third quarter you know outside of that if we talk about more organic expansion we're projecting three to four basis points per quarter that is assuming no changes in the Fed funds rate so that would bring our great secondly I guess I know credit is really good here but optically the the reserve looks a little light relative to your peers how do you guys think about that and and is there a conscious plan to sort of nudge that up

over time with maybe qualitative factors.

Bill, do you want to jump in on that?

Sure. Mark, we, as you know, follow the CECIL guidelines, which essentially say this is our lifetime loss estimate. And we are on the lower side of the spectrum with our peers, although not unduly so. We run the numbers, we look at our history, and we're very comfortable that it's adequate for our portfolio. And so, I think you can expect, you know, it may tick up a few BIPs, tick down a few BIPs here or there, but we're comfortable in that, you know, mid-70 coverage range just based on our portfolio and the loss estimates for it. But obviously, it's something we spend a lot of time on and, you know, we'll be more conservative on the qual side when it's merited. Okay.

And then you mentioned, I'm sorry. I'm sorry, Mark, I would just make one other point. I mean, we still have a relatively large residential portfolio, and so the reserve allocation on that is less than commercial, right? And, you know, we'd like to see our residentials come down, to be honest, but that does have an impact on the weighted average reserve.

Okay, great. And then, Ned, in your opening comments you made a point that you think there's going to be some wealth management opportunities. Should we take that to mean you're looking at potential M&A in the wealth side, or is that more sort of organic hiring and that sort of thing?

Actually, Mark, I was referring specifically to the institutional banking team, which serves in large part the not-for-profit sector, higher-end not-for-profit sector. So that was really focused on endowments and retirement funds that might come with growth in that portfolio. Gotcha.

Thank you.

Yep.

Thank you. Our next question comes from Damon Dalmonte with KBW. Please go ahead.

Hey, good morning, guys. Hope you're all doing well today. Just wanted to start off with kind of a – morning. I just wanted to kind of start off with the outlook on expenses, you know, kind of good control going in here to year end, you know, kind of Ryan.

Just wondering what your thoughts are on kind of the full-year outlook in maybe any variability from a quarter to quarter perspective yeah so Dame I guess a break it salaries and benefits versus you know all other in Q1 you know we're looking at a 6% increase in expenses which factors in you know annual merit raises which you know come into play at the beginning of the year FICA resets and those types of things but we've also you know made this investment in the institutional team that's coming on board we also have you know I think as everyone probably has increased medical insurance those types of things so that's what we're kind of seeing for Q1 on the salaries and benefits line all other expenses we're looking at year-over-year like five percent increase you know and we also have the branch coming online so you You know, that's going to add to both our salary run rate as well as our expense run rate, you know, call it the total $600,000 over the course of the year, you know, starting in late summer, early fall.

Got it. Okay, great. And then kind of, you know, can you just give a little update on kind of your outlook with loan growth? You know, are you optimistic that we can start to get back to that low, mid, single-digit range kind of given what you're seeing? And as well as, you know, the recent hires to the commercial lending team, I guess, yeah, just some color on the outlook for loan growth would be great. Yeah, yeah.

Listen, net loan growth wasn't where we wanted it to be, you know, kind of closing out the year. But we, you know, we're expecting, you know, 4% to 5% growth increase, which would be kind of standard. The C&I team, we think, will grow at a rate faster than that. So I'm not going to put a target on that. they're just getting situated and then you know we expect residential to be a net runoff like it was this year so I would say all in you know we're looking at you know I would say a very solid 5% year-over-year which is a improvement over where we've been in 2025 and we'll leave it at that but I you know we do have you know we do have a lot of confidence in this team that we've just brought in and below we'll set the target there for now yeah and Damon I would just add a little more color I mean we had we had 180 million dollars of credit formation in the quarter we just had a lot of payoffs and the payoffs

were some expected some some earlier than expected and you said you saw that we got a pretty sizable prepayment penalty on one of them but you know we We don't expect that level of early prepayment to continue, but the new team has been with us for nine days, so we haven't seen pipeline growth yet. I think we'll be in a much better position next quarter to share our expectations. We have great expectations. They're a very seasoned team that's been in the market for a long time. They look at a lot of potential deal flow, as they have for years and years. And so we have high hopes and great expectations, all in the CNI space, which, you know, we've been talking about for a while, figuring out strategically how to kind of change the balance sheet around and grow the CNI side a little faster. So the growth that Ron talked about on the Cree side is a little bit continued concentration level, and so we're being careful on that front, hoping this team be successful on the C&I front.

I appreciate you taking my questions. Thanks, Damon.

Thank you. Our next question today comes from Laurie Hunsicker with Seaport Research Partners. Your line's open. Please go ahead.

Yeah, hi. Good morning, Laurie. Just to circle this to the CNI group, can you share with us how many people are there and how much they did last year collectively? Maybe where they came from.

I don't have details on what they did last year collectively, but there are four people in the team that came over. We will add a treasury management specialist to that team because of their tendency to deliver deposits. You know, they've had a – the leader of the group has 30-plus years in this space in the northeast region, very well known, and, you know, they've been highly successful at prior institutions. So, yeah, we're very confident, Laurie, and, again, I think they've been here nine days. Let's take a little time to build the pipeline up, but we'll report in detail, I think, probably as soon as next quarter.

Okay, and where did they come from?

They were most recently at Brookline.

So then is that focus basically in the greater Boston MSA?

Yeah, I'm sorry, Lori, ask that one more time.

Yeah, so the loan focus, is that going to be in the greater Boston MSA?

Northeast region, so broader than just the Boston MSA.

Gotcha, okay. And then going to expenses, Ron, the one-quarter increase, sorry, the 6% increase For one quarter, a four-quarter, that's obviously netting out the charitable foundation charge. Is that correct? Are you thinking about from the $38 million? Okay. And then how should we think about the charitable foundation charge in 26? I think you previously guided the $500,000, but should we be thinking that at the end?

Yeah, we penciled in $750,000 for the end of the year.

Okay, great. And then I guess branching, obviously, we've got Batucket coming. Is there anything else you're thinking about, or should we be thinking about kind of maybe one branch in 27 as well? How do you think about that?

Yeah, so for 26, Batucket's it. But Michelle Kyle, our head of retail banking, has developed a plan, strategic outlook that it may not be full service branches. It might be alternative delivery, you know, ATMs and the like that she's developing a sort of full sketch on. So nothing else on the docket in 2026, but I think it's safe to say that we will continue to invest in our retail footprint in the outer years. You know, Laurie, we've done one or two branches a year for the last five years. I think that order of magnitude is probably reasonable going forward. The form of it might be a little different.

Okay. Okay. That's great. And I would say credit, you're probably one of the few banks in the entire country with zero CRI non-performers, zero C&I non-performers, and booking recoveries. But just a very quick question. The $6 million of office classified, any color on that, and when does that mature?

Yeah, Bill, you want to take that one?

Sure. Sure. That matures in 2031. So plenty of room and room there. extremely strong, dedicated sponsors. Occupancy right now is in the mid 40% but growing so the building's getting close to break even. I think it's just going to be a long, slow nursing process, but the sponsors are fully committed and they are building it up slowly. So we feel comfortable about it. That's why it's accruing and by the way, it's completely current. So we think we're going to nurse our way through on this one. Great, great.

Well, congratulations on credit. Really, really great. Okay, so putting it all together, your earnings are obviously very, very strong. In 3Q, you had dialed back comments around buybacks, and we're seeing buybacks ramp up across the board. As we're looking here, your CET1 almost 12 percent, your risk day is 13 percent. I mean, why wouldn't you revisit buybacks here? How do you think about that?

Yeah, Laurie, I think it's kind of our standard answer that we take it under consideration all the time and taking into account, you know, other ways that we think that we need to deploy capital. So not saying that we're going to do more and not saying that we won't. But we'll just have to take that as it comes.

And just remind me, what's existing in your current authorization?

That information off the top, Laurie, you'll have to look that up.

Okay, great. Hey, thanks so much. Great job on this quarter.

Okay. Thanks, Laurie.

Thank you. And our next question comes from Ross Haverman with RLH Investments. Please go ahead.

Good morning, gentlemen. Most of my questions have been answered.

Could you talk about your wealth management and what you're doing to basically expand that a little faster in 26 thank you thank you Ross good morning so yeah we've added some some business development officers we are you know although I think we need some a little more than nine days time to pass but we're hopeful that this team that is focused mostly on the nonprofit sector will will help us with the various things that will come out of that client base, which is generally higher ed and that sort of thing that tend to have endowments and retirement plans. So we're hopeful there. M&A, you know, we're happy with the Lighthouse deal that we did in 2025. That strategy is probably not the primary focus, and, you know, prices are high, and and so we have to be careful about price and culture and fit and and we're again we're happy with with what we bought in 2025 and so we're we're you know we're not we're not aggressively looking for opportunities but we're opportunistic and and we'll we'll keep our eyes open on the M&A front and in that case it would be relatively you know smaller tuck-in again that the style of how we how we go to market and and and how we run the group so I just

kind of turn on assets well on wealth yeah yeah sorry there are your fee structures are you are your average fees is it somewhere between a half and a hundred basis points yeah I I would say all all in on average it's it's about I think 60 basis points.

Yeah.

Got it. I'm sorry, I cut you guys off, but you were going to say something. I apologize.

No, no. You got the 60 basis points, right?

Yes, I did.

Okay. And I was just going to say that we've also added some A-person in the financial planning side of things. So we think that's a great retention tool. We think it's a great way to appeal to sort of next gen and then full families and so we're we continue to to invest in that side of the business thank you very much and Laurie just to follow up on your question we had 850 authorized and we've got 582 thousand shares remaining thank you and just a final reminder please press star 1 if you'd like to ask a question today we have nothing else on the line so I'll pass you back over to Ned for any closing comments thank you Lydia and thank you all as we move into the new year we remain committed to delivering value as a full-service community bank and long-term financial partner to our customers with it with a disciplined focus on long-term performance so really appreciate your time today and your interest and support and we look forward to speaking to you all again soon have a great day everybody this concludes our call today thank you very much for joining you may now disconnect Connect your line.