Q1 2025 Washington Trust Bancorp Inc Earnings Call

Okay.

Jayla: Good morning and welcome to the Washington Trust Bancorp Inc. conference call. My name is Jayla and I will be your operator for today. If participants are needed assistance during this call at any time, please press star zero. Participants interested in asking a question at the end of the call should press star followed by one.

Speaker Change: Good morning, and welcome to the Washington Trust Bancorp, Inc. Conference call. My name is Jay Leno will be your operator for today, if participants are needed.

Speaker Change: During this call at any time, please press star zero participants interested in asking a question at the end of the call. She press star followed by one.

Speaker Change: Well get into the queue today's call is being recorded and now I will turn the call over to Sharon Welsh SVP director of marketing and corporate Communications you May proceed.

Sharon Walsh: Today's call is being recorded, and now I will turn the call over to Sharon Walsh, SVP, Director of Marketing and Corporate Communications. Sharon, you may proceed. Thank you, Jayla.

Speaker Change: Yeah.

Ned Handy: Good morning and welcome to Washington Trust Bancorp Inc's conference call for the first quarter of 2025.

Speaker Change: Gela, Good morning, and welcome to Washington Trust Bancorp, Inc. 's conference call for the first quarter of 2025, joining US. This morning are members of Washington Trust Executive team, Ned Handy, Chairman and Chief Executive Officer Meg.

Ned Handy: Joining us this morning are members of Washington Trust executive team, Ned Handy, Chairman and Chief Executive Officer, Mary Noons, President and Chief Operating Officer, Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer, and Bill Wray, 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 earlier today, 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.

Speaker Change: Mary Nunes, President and Chief operating Officer, Ron Osborne, Senior Executive Vice President Chief Financial Officer, and Treasurer, and Bill Wray 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 are <unk>.

Speaker Change: Safe Harbor statement is contained in our earnings release, which was issued earlier today 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 Dot wash dress dotcom.

Ned Handy: Washington Trust trades on NASDAQ under the symbol WASH.

Speaker Change: Washington Trust trades on NASDAQ under the symbol wash I'm now pleased to introduce todays host, Washington trusts, Chairman and Chief Executive Officer, Ned Handy that thank you Sharon and good morning, and thank you all for joining our first quarter conference call with respect and appreciate your time and interest in Washington Trust.

Ned Handy: I'm now pleased to introduce today's host, Washington Trust Chairman and Chief Executive Officer, Ned Handy. Ned? Thank you, Sharon, and good morning and thank you all for joining our first quarter conference call. We respect and appreciate your time and interest in Washington Trust. I'll briefly comment on the quarter, and then Ron will provide more detail on the financial results.

Speaker Change: Briefly comment on the quarter and then Ron will provide more detail on the financial results and after our prepared remarks, Murray and Bill will join us for the Q&A session.

Ned Handy: And after our prepared remarks, Mary and Bill will join us for the Q&A session. Washington Trust's first quarter results show the positive effects of our Q4 balance sheet restructuring with improvements in NIM, loan to deposit ratio, dividend coverage, and capital. We also saw our deposit growth strategies deliver results in both in-market deposits and new households. in market deposits reached an all time high of $5,013,000,000. While intentional reduction in our residential mortgage portfolio, elevated payoffs in our Cree book, and reduced line utilization outstrip new loan fundings in the quarter, pipelines continue to build and we expect low single digit growth to be achievable.

Speaker Change: Washington, Trust's first quarter results show the positive effects of our Q4 balance sheet restructuring with improvements in NIM loan to deposit ratio dividend coverage and capital.

Speaker Change: We also saw our deposit growth strategies deliver results in both end market deposits and new households.

Speaker Change: In market deposits reached an all time high of $5 billion $13 million.

Speaker Change: While intentional reduction in our residential mortgage portfolio elevated payoffs in our credit book and reduced line utilization outstripped new loan fundings in the quarter pipelines continue to build and we expect low single digit growth to be achievable.

Ned Handy: Our retail branches continue to compete well in the neighborhoods they serve, and we've now supplemented them with a team of retail sales officers, full-time sales professionals dedicated to surfacing loan and deposit opportunities, complementary to our branch business and commercial bankers. Our teams continue to listen to our customers and prospects and to build solutions to the varied challenges and opportunities that that arise in uncertain times. We remain committed in service to all the communities, customers and stakeholders who count on our consistent presence and performance.

Speaker Change: Our retail branches continue to compete well in the neighborhoods they serve and we've now supplemented them with a team of retail sales officers fulltime sales professionals dedicated to servicing loan and deposit opportunities complementary to our branch business and commercial bankers.

Speaker Change: Our teams continue to listen to our customers and prospects and to build solutions to the various challenges and opportunities that arise in uncertain times, we remain committed in service to all of the communities customers and stakeholders, who count on our consistent presence in performance.

Ron Ohsberg: I'll now turn the call over to Ron for additional details on the quarter. We'll then be glad to address any questions.

Speaker Change: I'll now turn the call over to Ron for additional details on the quarter will then be glad to address any questions Brian.

Ron Ohsberg: Ron?

Ron Ohsberg: Yeah, thanks, Ned, and good morning, everyone. For the first quarter, we reported net income of $12.2 million or $0.63 per share, excluding two infrequent transactions that I will discuss shortly. Adjusted net income amounted to $11.8 million or $0.61 per share. Net interest income was $36.4 million, up by $3.5 million or 11% on a link quarter basis. The margin was $229, up by 34 basis points, reflecting benefits from the recent balance sheet repositioning transaction.

Ron Osborne: Thanks, Ned and good morning, everyone.

Ron Osborne: For the first quarter, we reported net income of $12 2 million or <unk> 63 per share excluding.

Ron Osborne: Excluding two infrequent transactions that I will discuss shortly adjusted net income amounted to $11 8 million or <unk> 61 per share.

Ron Osborne: Net interest income was $36 4 million up by $3 5 million or 11% on a linked quarter basis. The margin was 229 up by 34 basis points, reflecting benefits from our recent balance sheet repositioning transactions.

Ron Ohsberg: Turning to fees, as previously disclosed, five branch locations with a total net book value of $4.8 million were reported as held for sale on December 31. Sale leaseback transactions were completed in Q1. and a pre-tax net gain on the sale of these properties totaling $7 million was recognized within non-interest income. Excluding infrequent transactions, adjusted net income amounted to $15.6 million and was down 394,000 or 2%. Wealth management revenues were $9.9 million down by $158,000 or 2% and mortgage banking revenues totaled $2.3 million down $544,000 or 19%.

Ron Osborne: Turning to fees as previously disclosed five branch locations with a total net book value of $4 8 million were reported as held for sale at December 31.

Ron Osborne: Sale leaseback transactions were completed in Q1.

Ron Osborne: Pre tax net gain on the sale of these properties totaling 7 million was recognized within noninterest income.

Ron Osborne: Yeah.

Ron Osborne: Excluding infrequent transactions adjusted net income amounted to $15 6 million and was down 394000 or 2%.

Ron Osborne: Wealth management revenues were $9 9 million down by 158000, or 2% and mortgage banking revenues totaled $2 3 million down 544000, or 19% our mortgage pipeline at March 30, <unk> was $95 million up by $35 million or 59% from the end of December.

Ron Ohsberg: Our mortgage pipeline at March 31st was $95 million up by $35 million or 59% from the end of December.

Ron Ohsberg: Turning to expenses, in connection with our previously disclosed termination of our Qualified Pension Plan, plan assets were distributed in Q1, which resulted in a pre-tax, non-cash pension settlement charge of $6.4 million being recognized with a non-interest expense. This charge reflected the recognition of pre-tax actuarial losses previously reported as a reduction in AOCI. Excluding the pension settlement, adjusted non-interest expenses totaled $35.8 million, up by 1.5 million or 4% compared to Q4. Salaries Employee Benefits Expense was up $547,000 or 3%, which includes higher payroll taxes due to the start of the new calendar year. Income tax expense in the first quarter total 3.5 million and the effective tax rate was 22.3%.

Ron Osborne: Turning to expenses in connection with our previously disclosed termination of our qualified pension plan plan assets were distributed in Q1, which resulted in a pretax noncash pension settlement charge of $6 4 million being recognized within noninterest expenses.

Ron Osborne: This charge reflected the recognition of pre tax actuarial losses previously reported as a reduction in OCI.

Ron Osborne: Excluding the pension settlement adjusted noninterest expenses totaled $35 8 million up by $1 5 million or 4% compared to Q4.

Ron Osborne: Salaries and employee benefits expense was up 547000, or 3%, which includes higher payroll taxes due to the start of the new calendar year.

Ron Osborne: Income tax expense in the first quarter totaled $3 $5 million and the effective tax rate was 22, 3% our full year effective tax rate is expected to be 22, 4%.

Ron Ohsberg: Our full year effective tax rate is expected to be 22.4%.

Ron Ohsberg: Turning to the balance sheet total loans were down by 42 million or 1% from December 31. This included a 1% reduction in residential loans, as well as 1% reduction in commercial loans due to higher than expected pay In-market deposits were up by $195 million or 4%. Broker deposits were down by $270 million and FHLB borrowings were down by $275 million, reflecting increases in deposits and the redeployment of cash resulting from the balance sheet repositioning. A loan-to-deposit ratio decreased from 105.5 to 100.7%. Total equity amounted to $522 million at March 31, up by $22 million from the end of Q4.

Ron Osborne: Turning to the balance sheet total loans were down by $42 million or 1% from December 31. This included a 1% reduction in residential loans as well as a 1% reduction in commercial loans due to higher than expected pay downs.

Ron Osborne: In market deposits were up by $195 million or 4% broker deposits were down by $270 million in <unk> borrowings were down by $275 million, reflecting increases in deposits and the redeployment of cash resulting from the balance sheet repositioning.

Ron Osborne: Loan to deposit ratio decreased from 105, 5% to 100.7%.

Ron Osborne: Total equity amounted to 522 million at March 31 up by $22 million from the end of Q4.

Ron Ohsberg: The dividend remained at $0.56 per share. For regulatory capital, CET1 improved 56 basis points to 11.76%, and total risk-based capital improved by 66% to 13.13%. Our asset and credit quality metrics remain solid. Non-occurring loans were 0.42%. March 31st and past due loans were 0.20% on total loans. The allowance totaled 41.1 million or 81 basis points of total loans and provided MPL coverage of 190%. The first quarter provision for credit losses was $1.2 million. This reflected loss allocations on individually analyzed non-accruing commercial loans and reflected our estimate of forecasted economic conditions. We had net charge drops of $2.3 million in the first quarter.

Ron Osborne: Dividend remained at 56 per share and for regulatory capital CET, one improved 56 basis points to 11, 76% and total risk based capital improved by 66% to 13, 3%.

Ron Osborne: Our asset and credit quality metrics remained solid non accruing loans were four 2%.

Ron Osborne: At March 30, <unk> and past due loans were point to zero percent on total loans.

Ron Osborne: The allowance totaled $41 1 million or <unk> 81 basis points of total loans and provided NPL coverage of 190%.

Ron Osborne: First quarter provision for credit losses was $1 2 million.

Ron Osborne: Got it.

Ron Osborne: This reflected loss allocations on individually analysed nonaccruing commercial loans and reflected our estimate of forecasted economic conditions.

Ron Osborne: We had net charge offs of $2 3 million in the first quarter.

Ned Handy: And at this point, I will turn the call back to Ned.

Nick: And at this point I will turn the call back to Nick.

Ned Handy: Thank you, Ron. And at this point, we'll open it up for questions. At this time, if you'd like to ask a question, it is star followed by one on your telephone keypad. If for any reason you would like to remove that question, it is star followed by two. Again, to ask a question, it is star one. I'll pause briefly here if questions are registered.

Ron Osborne: Thank you Ron and at this point, we'll open it up for questions.

Ron Osborne: Yeah.

Ron Osborne: At this time, if you'd like to ask a question just a follow up on one on your telephone keypad.

Ron Osborne: Any reason you would like to remove that question. It is star followed by two again to ask a question. It is star one.

Ron Osborne: Briefly those questions are registered.

Mark Fitzgibbon: Our first question comes from Mark Fitzgibbon with the company Piper Sandler. Mark, your line is now open.

Speaker Change: Our first question comes from Mark Fitzgibbon with the company.

Sandler: Sandler Mark Your line is now open.

Mark Fitzgibbon: Hey guys, good morning. Morning, Mark. Hey, Mark.

Speaker Change: Hey, guys good morning.

Speaker Change: Hey, Mark Hey, Mark.

Ron Ohsberg: Hey, Ron, I was curious, how much will the quarterly operating costs be impacted as a result of the sale lease back and the pension curtailment? Or maybe asked a different way? Yeah, what do you think? sort of run rate operating expenses will look like going forward? Yeah, so the on an annual basis, the sale lease back adds about a net $700,000 to occupancy and equipment. But that was all embedded in the guidance that we gave in January. Okay, and what about the pension curtailment impact? Yeah, I don't there's really no ongoing expense related to the pension.

Sandler: Hey, Ron I was curious how.

Sandler: How much will the quarterly operating costs be impacted as a result of the sale leaseback and the pension curtailment or maybe asked a different way what do you think.

Sandler: Sort of run rate operating expenses will look like going forward.

Sandler: Yeah. So on.

Sandler: On an annual basis, the sale leaseback adds about a net $700000 occupancy and equipment.

Sandler: But that was all embedded in the guidance that we gave in January.

Speaker Change: Okay, and what about the pension curtailment impact.

Speaker Change: Yes, I don't think Theres really no ongoing expense related to the pension and again any.

Ron Ohsberg: And again, any, you know, that was all factored into guidance that we gave at year Okay, so and I would just say, Mark, I would just say that the The guidance I gave at the end in the first quarter is for expenses, both on the salary line and on the other expense line is consistent. Great.

Speaker Change: That was all factored into guidance that we gave at year end.

Speaker Change: Okay.

Mark Fitzgibbon: And I would just say Mark I would just say that the.

Mark Fitzgibbon: The guidance I gave at the end of the first quarter for expenses, both on the salary line and on the other expense line is consistent.

Mark Fitzgibbon: Okay great.

Ned Handy: And then secondly, I know Ned, you mentioned that the pipelines were strong. Can you give us any color on sort of size and complexion? Yeah, Mark, it's it's a little over 100 million on the commercial side, which is which is not, you know, historic highs, but maintain despite about $50 million of formation in the first quarter.

Mark Fitzgibbon: And then secondly, I know Ned you mentioned that the pipelines were strong can you give us any color on sort of size and complexity.

Ned Handy: Yeah, Mark it's a little over $100 million on the commercial side, which is which is not.

Mark Fitzgibbon: Historic highs, but maintain displayed above $50 million of.

Mark Fitzgibbon: A formation in the first quarter so.

Ned Handy: So, you know, we're kind of in rebuild mode. The early stages of the pipeline are stronger. We don't typically report on, you know, proposals out. We report on stuff where proposals have been accepted. So, but that that early stages, is is growing as well. So I feel confident that, you know, the low single digit guidance we gave is still still reachable. And there's a there's a lot of good activity going on.

Mark Fitzgibbon: You know, we're kind of in rebuild mode.

Mark Fitzgibbon: The early stages of the pipeline or are stronger we don't typically report on proposals out.

Mark Fitzgibbon: We report on on stuff, where proposals had been accepted so but that early stages.

Mark Fitzgibbon: Growing as well so I feel confident that the you know the low single digit guidance we gave.

Speaker Change: Well, it's still still reachable and there's a lot of good activity going on Mary I don't know on the on the resi side you are.

Mary Noons: Mary, I don't know, on the resi side, do you want to?

Mary Noons: Um, sure.

Speaker Change: Sure. So we're hitting the seasonal period, where it starts to grow on the resi side again, a lot of that is going to.

Mary Noons: So we're hitting the seasonal period where it starts to grow on the resi side. Again, a lot of that is going towards seed generation. But it's up from where it was at 331. Okay, great.

Speaker Change: Fee generation, but it's up from where it was at 331.

Speaker Change: Okay, Great and then a run <unk>.

Ron Ohsberg: And then, Ron, assuming, you know, we follow the forward curve, I assume you think the net interest margin will continue to steadily rise a few basis points a quarter across the remainder of the year.

Speaker Change: Assuming we follow the forward curve I assume you think the net interest margin will continue to steadily rise a few basis points a quarter across the remainder of the year is that a fair statement.

Ron Ohsberg: Is that a fair statement? Yeah, so we're thinking Well, obviously a lot of uncertainty with the Fed's rate policy.

Speaker Change: Yeah, So we're thinking.

Speaker Change: Well, obviously, a lot of uncertainty with the fed's rate policy. So I'd like to just limit my guidance to the second quarter.

Ron Ohsberg: So I'd like to just limit my guidance to the second quarter. And we're looking at 235. for the quarter, and then we'll see what happens. Okay. Um, fair enough.

Speaker Change: We're looking at.

Speaker Change: At $2 35.

Speaker Change: For the quarter and then we'll see what happens.

Speaker Change: Okay.

Ron Ohsberg: And then lastly, I guess I was curious what your longer, maybe intermediate term or longer term expectations or targets would be for the dividend payout ratio. Where would you like to see that? Yeah, we'd like to see it lower, obviously. We, you know, as we've We have no intention of reducing it, so from this point forward, I think the point is to be improving net income and bringing the ratio down. So, you know, we expect to be certainly in the, in the, you know, to low 80s by the end of the year. And we'll see where it goes from there.

Speaker Change: Fair enough and then lastly, I guess I was curious what your longer maybe intermediate term or longer term expectations. Our targets would be for the dividend payout ratio, where would you like to see that.

Speaker Change: Yes, we'd like to see it lower obviously.

Speaker Change: You know as we've.

<unk>.

Speaker Change: Set at.

We have no intention of reducing it so that from this point forward I think the point is to be improving.

Speaker Change: Moving net income in bringing that ratio down.

Speaker Change: So we expect to be certainly in the <unk>.

Speaker Change: You know mid.

Speaker Change: Mid to low <unk> by the end of the year.

Speaker Change: And we'll see where it goes from there.

Ron Ohsberg: Not likely to increase the dividend anytime soon, for sure. Right, but do you feel like That could constrain your ability to grow when the environment starts to get better if you've got such a high payout ratio. Well, it could. You know, we'll just have to see when we get there. Okay. Thank you.

Speaker Change: That's not why do you feel like the dividend anytime soon for sure.

Speaker Change: Right, but do you feel like.

Speaker Change: On.

Speaker Change: That could constrain your ability to grow when the environment starts to get better if you've got such a high payout ratio.

Speaker Change: Yeah.

Speaker Change: Well it could.

Speaker Change: We'll just have to see when we get there.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Yeah.

Damon Delmonte: Our next question comes from Damon DelMonte with the company KBW. Damon, your line is now open. Thank you. Good morning.

Speaker Change: Our next question comes from Damon Delmonte with a company can't be Debbie Amy Your line is now open.

Damon Delmonte: Thank you good morning.

Damon Delmonte: Um, so just wanted to circle back on the margin. Um, you know, if we do see a couple rate cuts, in the latter part of this year, you know, how has your interest rate sensitivity changed, given the, the, you know, the restructuring and other items that have occurred in the last, you know, few months for you guys? Yeah, so we, we, you know, historically, we were pretty asset sensitive, and we strayed away from that. And I would say even even went liability sensitive, probably. You know, at an inopportune time for sure. The restructuring that we did took a lot of that liability sensitivity off.

So I just wanted to circle back on the margin.

If we do see a couple of rate cuts.

Damon Delmonte: The latter part of this year.

Damon Delmonte: How is your interest rate sensitivity changed given the.

Damon Delmonte: The restructuring and other items that have occurred in the last few months for you guys.

Speaker Change: Yeah. So we historically, we were pretty asset sensitive and we strayed away from that.

Speaker Change: And I would say, even even with liability sensitive probably.

Speaker Change: And in an opportune time for sure.

Speaker Change: The restructuring that we did.

Speaker Change: A lot of that liability sensitivity off so so we're much closer to two to rate neutral I would say.

Ron Ohsberg: So so we're much closer to to rate neutral, I would say. So if you know, we did see some good benefit in the fourth quarter from the Fed cutting the 100 basis points that they did. I think there's there's less upside to future rate reductions for us to improve the margin. And, you know, so, like, as I mentioned, you know, we're seeing, you know, five or six basis points improvement in Q2. And we'll just be, you know, working hard if the Fed cuts to manage our deposit costs down as quickly and as much as we can.

Speaker Change: So if we did see some good benefit in the fourth quarter from the fed cutting the 100 basis points that they did.

Speaker Change: I think there's less upside to future.

Speaker Change: Rate reductions for us to improve the margin.

Speaker Change: And.

Speaker Change: So.

Speaker Change: As I mentioned, we're seeing you know five or six basis points improvement in Q2, and we'll just be working hard if the fed cuts to manage our deposit costs down as quickly and as much as we can.

Speaker Change: Got it okay, but I don't think Youll see that yes, I don't think youll see the expansion that we saw in the third and fourth quarter.

Ron Ohsberg: I don't think you'll see the expansion that we saw in the third and fourth quarter. just just because of the restriction. Got it. Okay, that's good.

Speaker Change: Just because of the restructuring.

Speaker Change: Got it okay.

Ron Ohsberg: And then you guys had some good in market core deposit growth this quarter. What kind of drove that? And you know, has there been a shift in approach to gathering local deposits? Or if you just provide a little color on that? Yeah, so a couple things. So we had we had good growth in the quarter, about half of that was a single relationship. So I'll put that out there. So, so the other half of it, I think, was just good, strong, organic deposit growth kind of across the board. Ned mentioned that we've hired a couple of retail sales officers to kind of get out there and do a better, you know, more targeted job of bringing in deposits.

Speaker Change: And then.

Speaker Change: You guys had some good in market core deposit growth this quarter.

Speaker Change: What kind of drove that and is there been a shift in approach to gathering local deposits or can you just provide a little color on that.

Speaker Change: Yeah. So so a couple of things. So we had we had good growth in the quarter about half of that was a single relationship.

Speaker Change: So I'll put that out there so.

Speaker Change: So the other half of it I think it was just good strong organic deposit growth kind of across the board.

Ned Handy: Ned mentioned that we've hired a couple of retail sales officers.

To kind of get out there and and do a better.

Ned Handy: Targeted job of bringing in deposits.

Damon Delmonte: We're trying a few things on deposit promotion. I can tell you that deposit competition, you know, remains very intense. And, you know, we tried a couple of promotions in the quarter on both the CD and on the on the money market side. And so a good deposit growth. So we'll see if we're able to maintain that. Got it. Okay, great. That's all that I had for now. Thank you. Thanks, Damon.

Ned Handy: We're trying a few things on deposit promotion I can tell you that deposit competition.

Ned Handy: It remains very intense.

And we.

Ned Handy: Tried a couple of promotions in the quarter on both the CD and on the on the money market side and saw good deposit growth.

Ned Handy: So we'll see if we're able to maintain that.

Ned Handy: Got it okay great.

Ned Handy: All that I had for now thank you.

Speaker Change: Great. Thanks, Thanks, Dan.

Laurie Hunsicker: Our next question comes from Laurie Hunsicker with the company Seaport Research Partners. Laurie, your line is now open. Great. Hi. Thanks. Good morning.

Speaker Change: Our next question comes from Laurie.

Speaker Change: With a company Seaport Research partners Laura Your line is now open.

Laurie: Great Hi, Thanks, good morning.

Laurie Hunsicker: Just going back. going back to expenses. Um, so when in the quarter did the sale lease back cap? Uh, it well, it happened in February and March. Okay, so we really didn't see that. the drag back in. So when we when we think about it, and you just sort of reiterated, obviously, similar guidance, what you gave out last quarter, you're still thinking, you know, as we're looking at the core number here, the 35.8 million, that probably still jumps to about 37 million, even though things like snow removal, etc, come out. Yeah, so so I think my guidance that at year end was for you know, for all other expense, which that would be in there about about 13.5 million a quarter.

Speaker Change: Just going back.

Speaker Change: Just going back to expenses.

Speaker Change: The quarter did this happen.

Speaker Change: Captain.

Speaker Change: Well that happened in February and March.

Speaker Change: Okay. So we really didn't see that.

Speaker Change: Yeah.

Speaker Change: So Jack backend so when we when we think about it and you just sort of reiterate it obviously.

Speaker Change: So when you gave out last quarter.

Speaker Change: So we're looking at the core number here the $35 8 million are probably down about $37 million.

Speaker Change: Even though things like.

That wasn't a elect such that come out.

Speaker Change: Yeah. So I think my guidance at at year end was for for all other expense, which that would be in there for about $13 5 million a quarter, we were $13 three in the first quarter, but $13 five I think is a good estimate for the non salary.

Ron Ohsberg: You know, we were 13.3 in the first quarter, but the 13.5 I think is a good estimate for the non salary expense line. Okay and then what the the 2.7 million the other other was there anything non-recurring in that that compares to 2 million in the fourth quarter? Yeah, you know, the other other, you know, at year end, we had some, you know, accrual adjustments. And, you know, there's, it's all other right. So there's nothing, there's nothing notable going through there.

Speaker Change: Expense line.

Speaker Change: And then the $2 7 million only other other was there anything nonrecurring in that that comparison.

Speaker Change: $8 million in FY <unk>.

Speaker Change: Later.

Speaker Change: Yeah.

Speaker Change: Yeah, you know the other other.

Speaker Change: At year end, we had some.

Speaker Change: Accrual adjustments in.

There is it's all other right so theres nothing Theres nothing notable.

Speaker Change: Going through there.

Speaker Change: Okay.

Laurie Hunsicker: Okay, and then last question on a census here.

Speaker Change: Okay and then my last question on expenses here.

Ron Ohsberg: You're still planning to make a Charitable Foundation contribution in the fourth quarter? Yes.

Speaker Change: Yes.

Speaker Change: <unk> local charitable foundation comfortable somewhere in the fourth quarter.

Laurie Hunsicker: Okay, just making sure I got that right. Okay.

Speaker Change: Yes right.

Speaker Change: Yes, okay.

Ron Ohsberg: And then just back to margin and I know you've already touched on this, but do you have a spot margin for March? I do. Yeah, from March it was it was 231.

Speaker Change: Okay. So I got that right. Okay, and then just back to the margin and I know you've already touched on this but do you have a spot margin alright.

Speaker Change: March.

Speaker Change:

Speaker Change: I do.

Speaker Change: Yeah, but for March it was it was $2 31.

Ron Ohsberg: Okay, great. And then I'm just going to credit, and I appreciate all the details you give, but can you just refresh us?

Speaker Change: Okay, Great and then.

Speaker Change: Going to credit.

Speaker Change: All the details you can't.

Speaker Change: Can you just refresh that.

Laurie Hunsicker: you know, specifically on on some of these office properties, and then just help us think about the class B that that dropped from, you know, 10 million last quarter down to 7.6 million.

Speaker Change: You know specifically on some of these office property and then.

Speaker Change: Help us think about that.

Speaker Change: Be that that dropped from 10 million last quarter down to $7 6 million was that all charge offs or did something here or how should we think about that and I guess specifically.

Laurie Hunsicker: Was that all charge offs? Or did something cure? Or how should we think about that?

Laurie Hunsicker: And I guess specifically, you know, around the loans that I would love a refresh. I know you had a, and these are numbers from last quarter 7.8 million class B that was 50% vacant. It was still performing. Is it, you know, how do you think about that?

Speaker Change: Around that.

Speaker Change: I would love a refreshed and he had that and these are numbers from last quarter's $7 8 million class b that 50% vacant.

Speaker Change: It with sub performing is it you know how do you think about that.

Laurie Hunsicker: You had a non performer that come up. And is that still planned to resolve in 2Q? You obviously had the 3.4 million class B. that was due this quarter, was that where the charge-offs were?

Speaker Change: Yeah Yeah.

Speaker Change: And is that still planned to resolve and can kill them.

Speaker Change: You, obviously had the $3 1 million class B.

Speaker Change: It was due to that corridor.

Speaker Change: Was that where the charge offs or I mean, if you could just help us think about that and then that last one that big one that $20 5 million lab, you know any new news on that any new appraisal.

Bill Wray: I mean, if you could just help us think about that, and then that last one, that big one, that $20.5 million lab, you know, any new news on that, any new appraisal? I think that's due in the fourth quarter, unless there's been some restructuring movement. Just anything on those four properties would be super helpful.

Speaker Change: During the fourth quarter unless there is some restructuring there.

Speaker Change: On the core properties would be super helpful.

Ron Ohsberg: Yeah, I'll turn it over to Bill. I mean, we did see a reduction Laurie and and you know, within within non accrual, you know, it's one is one relationship that has two loans, that has three buildings in there. And so one of them has been under P&S. I think we talked about that on the call. That's about 3.3 million, I believe. It's still on track to settle, to close out in the second quarter. And we did take a charge off on the other loan that was secured by the two properties. So that's the only change quarter over quarter in the reported balances.

Speaker Change: Yeah.

Speaker Change: I'll turn it over to Bill I mean, we did see a reduction Laurie.

Speaker Change: Within within non accrual.

It's one.

Speaker Change: It's one relationship that has two loans that has three three buildings in there and so one of them has been under PFS I think we talked about that on the call. That's about $3 3 million I believe.

Speaker Change: Still on track to settle to close out in the second quarter and we did take a charge off on the loan secured by the two properties. So that's the only change quarter over quarter and a reported balances, but bill I'll just let you.

Bill Wray: But Bill, I'll just let you, you know, provide a little bit of color on the loans that we're talking about. Sure, Ron. So as Ron said, about of that non accrual, we can, it'll close when it closes, but we believe it is very likely that we'll get that knocked down by three point about 3.3 million. And then we'll have the remaining non accrual. That's the other half of that relationship. And that is where the charge up was that was driven by an appraisal. It's being marketed for sale. We think it's at a reasonable level to be disposed.

Bill Wray: Provide a little bit of color on the ones that we're talking about.

Speaker Change: Sure Ron.

Speaker Change: So as Ron said about of that non accrual we again.

Speaker Change: It will close when it closes, but we believe it is very likely that we'll get that knocked down by three point about $3 3 million.

Speaker Change: And then we will have the remaining nonaccrual that's the other half of that relationship and that is where the charge off was that was driven by an appraisal it's being marketed for sale. We think it's at a reasonable level to be disposed, but we'll see when the uppers come through.

Bill Wray: But, you know, we'll see when the offers come through. With regard to the large asset, that is over half lease now, just over half lease. There are active lease proposals in place. The borrower put a lot of money in, as we've mentioned before, to build out spec suites. So that seems to be getting them some momentum. So and the borrower has been supportive all along. So again, we believe that's on the upswing and is in good shape. And over time, as these leases convert from LOI into signed leases, you know, would be reevaluating the classification on that.

Speaker Change: With regard to the.

Speaker Change: Large asset.

Speaker Change: That is over half lease now just over half leased or active lease proposals in place the borrower put a lot of money and as we've mentioned before to build out spec suites, so that seems to be getting them. Some momentum so and the borrowers been supportive all along so again, we believe thats on the upswing in is in <unk>.

Speaker Change: Good shape and over time as these leases convert from LOI into signed leases would be reevaluating the classification on that.

Bill Wray: And then was there another question you had a question on?

Speaker Change: And then was there another piece and you had a question.

Bill Wray: Yeah, well, just on that $20.5 million lab, is that still due in the fourth quarter? Is there any movement on extending that? Let's see, we did. We did two one-year extensions that went through 2026 as they put in the, you know, a very significant amount of equity to do that. So I think if I'm reading it right, just to make sure this will be early 2026 when this comes back. Bill, I think it's the end of 2026. Okay. Yeah, I'm sorry. I was wrong. Sorry.

Speaker Change: Yeah, well just on that 25 million lab is that still do in the fourth quarter was there any any movement on extending that.

Speaker Change: Yeah.

Speaker Change: Let's see we did.

We did two one year extensions that went through 2026 as they put in the very significant amount of equity to do that so I think if I'm reading it right.

Speaker Change: Just to make sure. This will be early 2026, when this comes back up.

Speaker Change: Bill I think that's the end of 2026.

Speaker Change: Okay.

Speaker Change: Yes, I'm sorry, it was alright alright.

Bill Wray: You guys with a lot of detailed questions. And they'll just just to go back to the one that you took the the charge off on which loan was that was that the class B Yes, it was due this quarter. Okay, gotcha. And is that still I mean, I had in my notes that was sitting around 70% vacant. Is that still the case? Or has that improved at all? It's 50%. And again, thankfully, through all these, they continue to pay. So they're still current, but it's 50% occupied at this point. Oh, it's gotten better. Okay. That's great.

Speaker Change: That's a lot of detailed question.

Speaker Change: I'll just just to go back to that the one that you've kept the.

Speaker Change: The charge offs on which long was that was that the class b.

Speaker Change: Yes. It was skewed this quarter. Okay got you and is that still I mean I had in my notes I was sitting around 70% vacant is that still the case or has that improved.

Speaker Change: It's 50% and again thankfully through all of these they continue to pay so there is still but it's 50% occupied at this point.

Speaker Change: So it's gotten tighter okay. Okay. That's great I really really appreciate the details there and then just last question for you.

Laurie Hunsicker: I really, really appreciate the details there.

Ned Handy: And then, Ned, just last question for you. with sort of earnings clarity, dividend coverage clarity, et cetera, really, really starting to shine. And the fact now that your stock is 20 plus percent lower than where you did the spot.

Speaker Change: You know with with sort of earnings clarity dividend coverage clarity et cetera.

Speaker Change: Barely starting to sign in and the fact now that your stock is 25% lower than where you thought the spot how do you think about buybacks.

Ron Ohsberg: How do you think about buybacks? How does the board think about buybacks? Yeah, it's, it's certainly something we need to think about. And, and, you know, it goes to best best use of capital. You know, we want to be careful about it, as I think you know, and Ron, you should talk about the current state of approvals. I mean, I know we we let the approval.

Speaker Change: Think about buybacks.

Speaker Change: Yes.

Speaker Change: It's certainly something we need to think about and it goes to the best use of capital.

Speaker Change: We want to be careful about is I think you know Enron.

Speaker Change: You should talk about the current state of approvals I mean, I know, we let the approval.

Laura Hunsicker: Yeah, so so we right, so we don't have a plan currently in place, Lori, but it is something that we're Okay, great. That's helpful. Thanks for taking my question. Thanks, Laura.

Speaker Change: Right. So we don't have a plan currently in place Laurie, but it is something that we're looking at.

Speaker Change: Okay, Great. That's helpful. Thanks for taking my question.

Speaker Change: Yes, Thanks Laurie.

Speaker Change: Right.

Unknown Executive: This has been No More Questions, Question Q. Again, if you'd like to ask a question, please start followed by 1. There are no more questions.

Speaker Change: And then on my questions question queue again, if you'd like to ask a question when you're still followed by one.

Speaker Change: There are no more questions. Thank you I'd like to pass the conference over to our hosting team for closing remarks.

Unknown Executive: I'd like to pass the conference over to our hosting team for closing remarks. Thank you all for joining us. We appreciate your time and your interest and look forward to talking again soon.

Speaker Change: Well. Thank you all for joining US we appreciate your time and your interest and.

Speaker Change: We look forward to talking to you again soon have a great day everybody.

Unknown Executive: Have a great day, everybody.

Unknown Executive: That will conclude today's conference call. Thank you for your participation and enjoy the rest of your day.

Speaker Change: That will conclude today's conference call. Thank you for your participation and enjoy the rest of your day.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [noise].