Washington Trust(WASH) - 2025 Q3 - Quarterly Results

Executive Summary & Highlights Q3 2025 net income decreased to $10.8 million, but net interest income and margin expanded, wealth management and mortgage banking revenues grew, and credit exposures were resolved Third Quarter 2025 Results Overview Washington Trust Bancorp, Inc. reported a net income of $10.8 million, or $0.56 per diluted share, for Q3 2025, a decrease from $13.2 million, or $0.68 per diluted share, in Q2 2025. Despite the decline in net income, the company expanded net interest income and margin, grew wealth management and mortgage banking revenues, achieved strong in-market deposit growth, and managed expenses prudently. Significant investments were made in commercial banking and wealth management, and two major credit exposures were resolved Metric | Metric | Q3 2025 | Q2 2025 | Change (QoQ) | | :-------------------------------- | :------ | :------ | :----------- | | Net Income (millions) | $10.8 | $13.2 | -$2.4 | | Diluted EPS | $0.56 | $0.68 | -$0.12 | - Expanded net interest income and margin, grew wealth management and mortgage banking revenues, delivered strong in-market deposit growth, and prudently managed expenses[3] - Made significant investments to drive future growth, including hiring a new senior executive for commercial banking and purchasing client accounts of Lighthouse Financial Management, LLC, adding approximately $195 million of managed assets[3] - Resolved two significant credit exposures during the quarter, maintaining confidence in portfolio quality[3] Selected Financial Highlights Key financial indicators for Q3 2025 showed improvements in net interest margin and nonaccrual commercial loans, alongside growth in wealth management and mortgage banking revenues. However, the provision for credit losses significantly increased due to specific charge-offs Metric | Metric | Q3 2025 | Q2 2025 | Q3 2024 | Change (QoQ) | Change (YoY) | | :----------------------------------- | :------ | :------ | :------ | :----------- | :----------- | | Net Interest Margin | 2.40% | 2.36% | 1.85% | +4 bps | +55 bps | | Provision for Credit Losses on Loans (millions) | $7.0 | $650K | N/A | +$6.35M | N/A | | Wealth Management Asset-Based Rev. | N/A | N/A | N/A | +6% | N/A | | Assets Under Administration (AUA) (billions) | $7.7 | N/A | N/A | +7% | N/A | | Mortgage Banking Revenues | N/A | N/A | N/A | +15% | +22% | | Total Loans (billions) | $5.1 | $5.1B | N/A | Unchanged | N/A | | In-Market Deposits (billions) | $5.2 | N/A | N/A | +4% | N/A | | Nonaccrual Commercial Loans (millions) | $1.0 | $14.0M | $18.9M | -$13.0M | -$17.9M | Financial Performance Analysis Net interest and noninterest income rose in Q3 2025, noninterest expense fell, but net income decreased due to higher credit loss provisions Net Interest Income Net interest income increased by 4% quarter-over-quarter, reaching $38.8 million, driven by a 4 basis point expansion in net interest margin to 2.40%. This improvement was supported by an increase in average interest-earning assets and a decrease in the cost of interest-bearing liabilities Metric | Metric | Q3 2025 | Q2 2025 | Change (QoQ) | | :-------------------------- | :------ | :------ | :----------- | | Net Interest Income (millions) | $38.8 | $37.2 | +$1.6 (4%) | | Net Interest Margin | 2.40% | 2.36% | +4 bps | - Average interest-earning assets increased by $96 million, primarily due to higher average balances of deposits at correspondent banks and commercial loans, with the yield remaining stable at 4.99%[5] - Average interest-bearing liabilities grew by $61 million, reflecting increased average in-market deposit balances, while the cost of interest-bearing liabilities decreased by 4 basis points to 3.08%[5] Noninterest Income Total noninterest income rose by 3% to $17.6 million in Q3 2025, primarily fueled by strong growth in wealth management asset-based revenues and mortgage banking revenues, despite a seasonal decline in transaction-based wealth management fees Metric | Metric | Q3 2025 | Q2 2025 | Change (QoQ) | | :-------------------------- | :------ | :------ | :----------- | | Total Noninterest Income (millions) | $17.6 | $17.1 | +$0.558 (3%) | | Wealth Management Revenues (millions) | $10.4 | $10.1 | +$0.253 (3%) | | Asset-based revenues (millions) | N/A | N/A | +$0.562 (6%) | | Transaction-based revenues (millions) | N/A | N/A | -$0.309 (82%) | | Assets Under Administration (AUA) (billions) | $7.7 | $7.2 | +$0.501 (7%) | | Mortgage Banking Revenues (millions) | $3.5 | $3.0 | +$0.467 (15%) | | Loans Sold (millions) | $126.5 | $116.8 | +$9.7 (8%) | | Loan Related Derivative Income (millions) | $0.271 | $0.676 | -$0.405 (60%) | - The decline in transaction-based wealth management revenues was largely due to seasonal tax servicing fee income concentrated in the second quarter[4] Noninterest Expense Noninterest expense decreased by 2% in Q3 2025 to $35.7 million, primarily driven by lower performance-based compensation within salaries and employee benefits, and reduced third-party software costs in outsourced services Metric | Metric | Q3 2025 | Q2 2025 | Change (QoQ) | | :-------------------------------- | :------ | :------ | :----------- | | Total Noninterest Expense (millions) | $35.7 | $36.5 | -$0.804 (2%) | | Salaries and Employee Benefits (millions) | $22.7 | $23.0 | -$0.351 (2%) | | Outsourced Services (millions) | $4.1 | $4.4 | -$0.284 (6%) | - Lower performance-based compensation contributed to the decrease in salaries and employee benefits[6] - Reduced third-party software costs and volume-related changes led to lower outsourced services expense[6] Income Tax Income tax expense for Q3 2025 was $3.1 million, with an effective tax rate of 22.2%, slightly lower than the previous quarter. The Corporation anticipates a full-year 2025 effective tax rate of approximately 22.5% Metric | Metric | Q3 2025 | Q2 2025 | Change (QoQ) | | :---------------------- | :------ | :------ | :----------- | | Income Tax Expense (millions) | $3.1 | $3.9 | -$0.8 | | Effective Tax Rate | 22.2% | 22.7% | -0.5% | - Expected full-year 2025 effective tax rate is approximately 22.5%[7] Balance Sheet Overview The balance sheet showed stable total loans, a slight decrease in investment securities, and significant improvements in deposits and borrowings, enhancing the funding mix and liquidity Investment Securities The securities portfolio slightly decreased by 1% to $962 million at September 30, 2025, maintaining its proportion of total assets at 14% Metric | Metric | Sep 30, 2025 | Jun 30, 2025 | Change (QoQ) | | :-------------------- | :----------- | :----------- | :----------- | | Securities Portfolio (millions) | $962 | $971 | -$9 (1%) | | % of Total Assets | 14% | 14% | 0% | Loans Total loans remained relatively stable at $5.1 billion, with a slight decrease of $18 million from the previous quarter. This was primarily due to a decrease in residential real estate loans, partially offset by an increase in consumer loans Metric | Metric | Sep 30, 2025 | Jun 30, 2025 | Change (QoQ) | | :---------------------- | :----------- | :----------- | :----------- | | Total Loans (billions) | $5.1 | $5.14 | -$18M | | Commercial Loans (millions) | N/A | N/A | -$1M | | Residential Real Estate Loans (millions) | N/A | N/A | -$23M (1%) | | Consumer Loans (millions) | N/A | N/A | +$