Q1 2026 Washington Trust Bancorp Inc Earnings Call

April 21, 2026

Operator: Ladies and gentlemen, thank you for standing by. Today's conference call will begin shortly. If you would like to register a question at any time, please press star one on your telephone keypad.

Speaker #1: Ladies and gentlemen, thank you for standing by. Today's conference call will begin shortly. If you would like to register a question at any time, please press star one on your telephone keypad.

Speaker #1: Good morning and welcome to Washington Trust Bancorp Incorporated's conference call. My name is Elliot and I'll be your operator today. If you would like to register a question during today's event, please press star one on your telephone keypad.

Operator: Good morning and welcome to Washington Trust Bancorp Incorporated's conference call. My name is Elliot and I'll be your operator today. If you would like to register a question during today's event, please press star one on your telephone keypad. As a reminder, today's call is being recorded. Now I'll turn the call over to Sharon Walsh, Senior Vice President, Director of Marketing and Corporate Communications. Please go ahead.

Operator: Good morning and welcome to Washington Trust Bancorp, Inc's Conference Call. My name is Elliot and I'll be your operator today. If you would like to register a question during today's event, please press star one on your telephone keypad. As a reminder, today's call is being recorded. Now I'll turn the call over to Sharon Walsh, Senior Vice President, Director of Marketing and Corporate Communications. Please go ahead.

Speaker #1: 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.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Elliot. Good morning and welcome to Washington Trust Bancorp Inc's conference call. For the first quarter of 2026, joining us this morning are members of Washington Trust's executive team, Ned Handy, Chairman and Chief Executive Officer; Mary Noones, President and Chief Operating Officer; Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer; and Bill Ray, Senior Executive Vice President and Chief Risk Officer.

Sharon Walsh: Thank you, Elliot. Good morning and welcome to Washington Trust Bancorp, Inc.'s conference call for Q1 2026. Joining us this morning are members of Washington Trust's 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 at ir.washtrust.com. Washington Trust trades on NASDAQ under the symbol WASH.

Sharon Walsh: Thank you, Elliot. Good morning and welcome to Washington Trust Bancorp, Inc's conference call for Q1 2026. Joining us this morning are members of Washington Trust's executive team, Ned Handy, Chairman and Chief Executive Officer, Mary Nunes, 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.

Speaker #2: 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.

Sharon Walsh: 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. Ned?

Speaker #2: 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.

Speaker #2: I'm now pleased to introduce today's host, Washington Trust Chairman and Chief Executive Officer, Ned Handy. Ned?

Operator: I'm now pleased to introduce today's host, Washington Trust Chairman and Chief Executive Officer, Ned Handy. Ned?

Speaker #3: Thank you, Sharon. Good morning, and thank you for joining our first quarter conference call. We appreciate your time and your continued interest in Washington Trust.

Edward O. Handy III: Thank you, Sharon. Good morning, and thank you for joining our Q1 conference call. We appreciate your time and your continued interest in Washington Trust. I'll begin with a brief overview of our Q1 results, and then Ron will provide more detail on our financial performance for the quarter. Following our remarks, Mary and Bill will join us for the question and answer session. Building on the momentum generated throughout 2025, quarterly performance was driven by continued net interest margin expansion, reflecting the underlying strength of our core banking business, and continued benefits from our December 2024 balance sheet repositioning transactions. The Q1 results do, however, include a higher provision related to reserve builds on two CRE credits moved to non-accrual in March, and we'll provide details on those in the Q&A session. Our capital ratios remain strong, providing the flexibility to support continued execution across the business.

Ned Handy: Thank you, Sharon. Good morning, and thank you for joining our Q1 conference call. We appreciate your time and your continued interest in Washington Trust. I'll begin with a brief overview of our Q1 results, and then Ron will provide more detail on our financial performance for the quarter. Following our remarks, Mary and Bill will join us for the question and answer session.

Speaker #3: I'll begin with a brief overview of our first quarter results, and then Ron will provide more detail on our financial performance for the quarter.

Speaker #3: Following our remarks, Mary and Bill will join us for the question-and-answer session. Building on the momentum generated throughout 2025, quarterly performance was driven by continued net interest margin expansion, reflecting the underlying strength of our core banking business and continued benefits from our December 2024 balance sheet repositioning transactions.

Ned Handy: Building on the momentum generated throughout 2025, quarterly performance was driven by continued net interest margin expansion, reflecting the underlying strength of our core banking business, and continued benefits from our December 2024 balance sheet repositioning transactions. The Q1 results do, however, include a higher provision related to reserve builds on two CRE credits moved to non-accrual in March, and we'll provide details on those in the Q&A session. Our capital ratios remain strong, providing the flexibility to support continued execution across the business.

Speaker #3: The Q1 results do, however, include a higher provision related to reserve builds on two pre-credits, moved to non-accrual in March, and will provide details on those in the Q&A session.

Speaker #3: Our capital ratios remain strong, providing the flexibility to support continued execution across the business. In the first quarter, we completed a digital banking conversion for personal accounts that provides enhanced security and technology and a better customer experience, reinforcing our focus on service and relationships.

Edward O. Handy III: In Q1, we completed a digital banking conversion for personal accounts that provides enhanced security and technology and a better customer experience, reinforcing our focus on service and relationships. We will continue the conversion of our business accounts in the ensuing quarters. With recent industry shifts locally, these investments position us well to attract new customers by pairing modern capabilities with the personalized service that defines Washington Trust. We're also leveraging our strength as a community bank that prioritizes local decision-making to attract experienced bankers to our commercial team. We recently added new talent across C&I, CRE, and business banking, all of whom bring deep experience and strong client relationships in the region. The institutional banking team we added in January is showing strong momentum that positions us for loan and deposit growth as the year progresses.

Ned Handy: In Q1, we completed a digital banking conversion for personal accounts that provides enhanced security and technology and a better customer experience, reinforcing our focus on service and relationships. We will continue the conversion of our business accounts in the ensuing quarters. With recent industry shifts locally, these investments position us well to attract new customers by pairing modern capabilities with the personalized service that defines Washington Trust.

Speaker #3: We will continue the conversion of our business accounts in the ensuing quarters. With recent industry shifts locally, these investments position us well to attract new customers by pairing modern capabilities with the personalized service that defines Washington Trust.

Speaker #3: We're also leveraging our strength as a community bank that prioritizes local decision-making to attract experienced bankers to our commercial team. We recently added new talent across CNI, CRE, and business banking, all of whom bring deep experience and strong client relationships in the region.

Ned Handy: We're also leveraging our strength as a community bank that prioritizes local decision-making to attract experienced bankers to our commercial team. We recently added new talent across C&I, CRE, and business banking, all of whom bring deep experience and strong client relationships in the region. The institutional banking team we added in January is showing strong momentum that positions us for loan and deposit growth as the year progresses.

Speaker #3: The institutional banking team we added in January is showing strong momentum that positions us for loan and deposit growth as the year progresses. In addition, our planned branch opening later this year in Pawtucket, Rhode Island, will further expand our presence in the northern part of the state.

Edward O. Handy III: In addition, our planned branch opening later this year in Pawtucket, Rhode Island, will further expand our presence in the northern part of the state. Overall, we're encouraged by the progress we are making to position the company for long-term success. With that, I'll turn the call over to Ron to provide additional detail on our financial results. Ron?

Ned Handy: In addition, our planned branch opening later this year in Pawtucket, Rhode Island, will further expand our presence in the northern part of the state. Overall, we're encouraged by the progress we are making to position the company for long-term success. With that, I'll turn the call over to Ron to provide additional detail on our financial results. Ron?

Speaker #3: Overall, we're encouraged by the progress we are making to position the company for long-term success. With that, I'll turn the call over to Ron to provide additional detail on our financial results.

Speaker #3: Ron?

Ronald S. Ohsberg: Okay. Thank you, Ned, and good morning, everyone. Net income in Q1 was $12.6 million or $0.66 per share compared to $16 million or $0.83 per share in Q4. PPNR was down 6% from Q4 and up by 23% year over year on an adjusted basis. Net interest income was $40.5 million, down by 1% from Q4 and up by 11% year over year. The margin was 263, up by 7 basis points from Q4 and up by 34 basis points year over year. Q1 included $116,000 of loan prepayment fee income, which benefited NIM by 1 basis point compared to $516,000 or 3 basis points in Q4. Non-interest income was down $1.2 million or 6% compared to Q4 and up by 11% year over year on an adjusted basis. Loan-related derivative income, which is transactional in nature, was down by $854,000 compared to Q4.

Ron Ohsberg: Okay. Thank you, Ned, and good morning, everyone. Net income in Q1 was $12.6 million or $0.66 per share compared to $16 million or $0.83 per share in Q4. PPNR was down 6% from Q4 and up by 23% year over year on an adjusted basis. Net interest income was $40.5 million, down by 1% from Q4 and up by 11% year over year. The margin was 263, up by 7 basis points from Q4 and up by 34 basis points year over year. Q1 included $116,000 of loan prepayment fee income, which benefited NIM by 1 basis point compared to $516,000 or 3 basis points in Q4. Non-interest income was down $1.2 million or 6% compared to Q4 and up by 11% year over year on an adjusted basis. Loan-related derivative income, which is transactional in nature, was down by $854,000 compared to Q4.

Speaker #4: Okay. Thank you, Ned, and good morning, everyone. Net income in the first quarter was $12.6 million, or $0.66 per share, compared to $16 million, or $0.83 per share last quarter.

Speaker #4: PP&R was down 6% from Q4 and up by 23% year over year on an adjusted basis. Net interest income was 40.5 million, down by 1% from Q4 and up by 11% year over year.

Speaker #4: The margin was 2.63%, up by 7 basis points from Q4 and up by 34 basis points year over year. Q1 included $116,000 of loan prepayment fee income, which benefited NIM by 1 basis point compared to $516,000, or 3 basis points last quarter.

Speaker #4: Non-interest income was down 1.2 million, or 6%, compared to Q4 and up by 11% year over year on an adjusted basis. Loan-related derivative income, which is transactional in nature, was down by 854,000 compared to Q4.

Speaker #4: Wealth management revenues were down by $205,000, or 2%. Average AUA for Q1 decreased by 1% and increased by 10% year over year. Mortgage banking revenues were $3 million.

Ronald S. Ohsberg: Wealth management revenues were down by $205,000 or 2%. Average AUA for Q1 decreased by 1% and increased by 10% year-over-year. Mortgage banking revenues were $3 million, seasonally down 6%, and were up by 32% year-over-year. Our mortgage pipeline at 31 March was $114 million, up by $33 million or 41% from the end of December. Non-interest expense totaled $37.8 million in Q1, down by 1%. Other non-interest expenses were down by $1.2 million in Q1, largely due to a $1 million contribution made to our charitable foundation in Q4. In the first quarter, salary and employee benefits expense was up by $693,000 or 3%, reflecting merit increases and higher payroll taxes associated with the start of a new calendar year. Our Q1 effective tax rate was 21.6%, and we expect the full year 2026 effective tax rate to be approximately 21.5%.

Ron Ohsberg: Wealth management revenues were down by $205,000 or 2%. Average AUA for Q1 decreased by 1% and increased by 10% year-over-year. Mortgage banking revenues were $3 million, seasonally down 6%, and were up by 32% year-over-year. Our mortgage pipeline at 31 March was $114 million, up by $33 million or 41% from the end of December. Non-interest expense totaled $37.8 million in Q1, down by 1%. Other non-interest expenses were down by $1.2 million in Q1, largely due to a $1 million contribution made to our charitable foundation in Q4. In the first quarter, salary and employee benefits expense was up by $693,000 or 3%, reflecting merit increases and higher payroll taxes associated with the start of a new calendar year. Our Q1 effective tax rate was 21.6%, and we expect the full year 2026 effective tax rate to be approximately 21.5%.

Speaker #4: Seasonally down 6% and were up by 32% year over year. Our mortgage pipeline at March 31st was 114 million, up by 33 million, or 41% from the end of December.

Speaker #4: Non-interest expense totaled $37.8 million in Q1, down by 1%. Other non-interest expenses were down by $1.2 million in Q1, largely due to a $1 million contribution made to our charitable foundation in Q4.

Speaker #4: In the first quarter, salary and employee benefits expense was up by $693,000, or 3%, reflecting merit increases and higher payroll taxes associated with the start of a new calendar year.

Speaker #4: Our Q1 effective tax rate was 21.6%, and we expect the full year 2026 effective tax rate to be approximately 21.5%. Balance sheet total loans were down 2% from December 31st. Total commercial loans decreased by $95 million, reflecting mainly payoffs in the CRE portfolio.

Ronald S. Ohsberg: Balance sheet total loans were down 2% from 31 December. Total commercial loans decreased by $95 million, reflecting mainly payoffs in the CRE portfolio. The commercial pipeline in total is approximately $156 million. Residential loans decreased by $21 million as we continue to amortize that portfolio. In-market deposits were down 2% from the end of Q4 and up by 3% year-over-year, and wholesale funding was down by $50 million or 8% from the end of December. Our loan-to-deposit ratio decreased slightly to 96.9% at the end of March. Turning to asset and credit quality, at 31 March, non-accruing loans were 81 basis points on total loans and increased by $27.5 million from the prior quarter, largely due to two commercial real estate office loans. Past due loans were 33 basis points on total loans.

Ron Ohsberg: Balance sheet total loans were down 2% from 31 December. Total commercial loans decreased by $95 million, reflecting mainly payoffs in the CRE portfolio. The commercial pipeline in total is approximately $156 million. Residential loans decreased by $21 million as we continue to amortize that portfolio. In-market deposits were down 2% from the end of Q4 and up by 3% year-over-year, and wholesale funding was down by $50 million or 8% from the end of December. Our loan-to-deposit ratio decreased slightly to 96.9% at the end of March

Speaker #4: The commercial pipeline in total is approximately $156 million. Residential loans decreased by $21 million as we continue to amortize that portfolio. In-market deposits are down 2% from the end of Q4 and up by 3% year over year, and wholesale funding was down by $50 million, or 8%, from the end of December.

Speaker #4: Our loan-to-deposit ratio decreased slightly to 96.9% at the end of March. Turning to asset and credit quality, at March 31st, non-accruing loans were 81 basis points on total loans and increased by $27.5 million from the prior quarter, largely due to two commercial real estate office loans.

Ron Ohsberg: Turning to asset and credit quality, at 31 March, non-accruing loans were 81 basis points on total loans and increased by $27.5 million from the prior quarter, largely due to two commercial real estate office loans. Past due loans were 33 basis points on total loans. In Q1, we recognized a $4 million provision for credit losses, largely reflecting an increase in specific reserves on the two CRE office loans. The allowance totaled $41.1 million or 82 basis points. At this time, I will turn the call back to Ned.

Speaker #4: Past due loans were 33 basis points on total loans. In the first quarter, we recognized a $4 million provision for credit losses, largely reflecting an increase in specific reserves on the two CRE office loans.

Ronald S. Ohsberg: In Q1, we recognized a $4 million provision for credit losses, largely reflecting an increase in specific reserves on the two CRE office loans. The allowance totaled $41.1 million or 82 basis points. At this time, I will turn the call back to Ned.

Speaker #4: The allowance totaled 41.1 million, or 82 basis points. And at this time, I will turn the call back to Ned.

Speaker #3: Thanks, Ron. And now we'll take questions.

Edward O. Handy III: Thanks, Ron. Now we'll take questions.

Ned Handy: Thanks, Ron. Now we'll take questions.

Speaker #5: Thank you. If you would like to ask a question, please press star, followed by one on your telephone keypad. If you would like to withdraw your question, please press star, followed by two.

Operator: Thank you. First question comes from Justin Crowley with Piper Sandler. Your line is open. Please go ahead.

Speaker #5: When preparing to ask your question, please ensure your device is unmuted locally. First question comes from Justin Crowley with Piper Sandler. Your line is open.

Speaker #5: Please go ahead.

Speaker #3: Hey, good morning, everyone.

Justin Crowley: Hey, good morning, everybody.

Speaker #6: Morning, John.

Edward O. Handy III: Morning, Joe.

Ned Handy: Morning, Joe.

Speaker #3: I was wondering if you could start off just giving them a little more detail on the two office loans, just anything on geography, and then maybe some more specifics on what occurred to drive the downgrades and specific reserves.

Justin Crowley: I was wondering if you'd start off just giving a little more detail on the two office loans, just anything on geography and then maybe some more specifics on what occurred to drive the downgrades and specific reserves. Just things like occupancy levels or perhaps just how close they even were to maturity. Not sure if that maybe necessitated new appraisals.

Speaker #3: So just things like occupancy levels, or perhaps just how close they even were to maturity—not sure if that maybe necessitated new appraisals.

Speaker #6: Yeah, Bill, do you want to take that?

Edward O. Handy III: Yeah. Bill, do you want to take that?

Ned Handy: Yeah. Bill, do you want to take that?

Speaker #3: Sure. Sure. They're both loans that have been current up until this point. In both cases, in March, there were sort of triggering events that led to us deciding to make the decision for quarter end to put them on non-accrual both of them have strong, sophisticated sponsors and we're engaged with both of them right now on one was a maturity, the other doesn't mature until next year.

William K. Wray Sr.: Sure. They're both loans that have been current up until this point. In both cases in March, there were sort of triggering events that led to us deciding to make the decision for quarter end to put them on non-accrual. Both of them have strong, sophisticated sponsors, and we're engaged with both of them right now on. One was a maturity, the other doesn't mature until next year. We're engaged with both of them on the right next steps. I don't want to get into too much detail on what that means. Like with most of our assets that have been in criticized, either special mention or classified, most of them emerge unscathed. In this case, though, we took the step to put reserves in place that we thought were appropriate to reflect any potential loss down the road.

Bill Wray: Sure. They're both loans that have been current up until this point. In both cases in March, there were sort of triggering events that led to us deciding to make the decision for quarter end to put them on non-accrual. Both of them have strong, sophisticated sponsors, and we're engaged with both of them right now on. One was a maturity, the other doesn't mature until next year. We're engaged with both of them on the right next steps. I don't want to get into too much detail on what that means.

Speaker #3: We're engaged with both of them on the right next steps. So I don't want to get into too much detail on what that means, but like with most of our assets that have been in criticized, either special mention or classified, most of them emerge unscathed.

Bill Wray: Like with most of our assets that have been in criticized, either special mention or classified, most of them emerge unscathed. In this case, though, we took the step to put reserves in place that we thought were appropriate to reflect any potential loss down the road. Again, we think they're both solid properties with solid sponsors. We expect that we'll continue to drive resolution, and we're hoping that within the next few quarters, these will either exit or they will emerge back into performing status.

Speaker #3: And in this case, though, we took the step to put reserves in place that we thought were appropriate to reflect any potential loss down the road.

Speaker #3: So again, we think they're both solid properties with solid sponsors. And we expect that we'll continue to drive resolution and we're hoping that within the next few quarters, these will either exit or they will emerge back into performing status.

William K. Wray Sr.: Again, we think they're both solid properties with solid sponsors. We expect that we'll continue to drive resolution, and we're hoping that within the next few quarters, these will either exit or they will emerge back into performing status.

Speaker #7: Okay, got it. And then, were there any general reserves allocated to office, or was it all specific with regard to these two loans? I guess I'm just trying to get a sense of how you think about the risk in the rest of the office book at this point, and whether the cycle for this asset class or your thinking there has changed at all.

Justin Crowley: Okay. Got it. Were there any general reserves allocated to office or was it all specific with regard to these two loans? I guess trying to get a sense of how you think about the risk in the rest of the office book at this point, and the cycle for this asset class and if the thinking there has changed at all.

Speaker #3: Sure. Well, I think our office exposure peaked at $300 million a couple of years ago. It's now down to $230 million. And we think we've done that with a fairly small amount of charge-offs along the way, relatively.

William K. Wray Sr.: Sure. Well, I think our office exposure peaked at $300 million a couple of years ago. It's now down to $230 million. We think we've done that with a fairly small amount of charge-offs along the way, relatively. We expect to continue to reduce our office exposure over time. Within the CECL methodology, we make sure that we use qualitative factors, especially to address issues in office, and so we have taken some of those steps. We believe going forward that there's always going to be a handful of properties that are sort of on the bubble that need some attention and focus. As you can see, all of our other office properties are performing. There aren't delinquencies there that we're concerned about. We just expect that assets will move into lower ratings, and then will emerge from those.

Bill Wray: Sure. Well, I think our office exposure peaked at $300 million a couple of years ago. It's now down to $230 million. We think we've done that with a fairly small amount of charge-offs along the way, relatively. We expect to continue to reduce our office exposure over time. Within the CECL methodology, we make sure that we use qualitative factors, especially to address issues in office, and so we have taken some of those steps. We believe going forward that there's always going to be a handful of properties that are sort of on the bubble that need some attention and focus. As you can see, all of our other office properties are performing. There aren't delinquencies there that we're concerned about. We just expect that assets will move into lower ratings, and then will emerge from those.

Speaker #3: So, we expect to continue to reduce our office exposure over time. Within the CSIL methodology, we make sure that we use qualitative factors, especially to address issues in office.

Speaker #3: And so we have taken some of those steps. And we believe, going forward, that there's always going to be a handful of properties that are sort of on the bubble, that need some attention and focus.

Speaker #3: But as you can see, all of our other office properties are performing. There aren't delinquencies there that we're concerned about. So we just expect that assets will move into lower ratings, and then we'll emerge from those.

Speaker #3: And we certainly spend a lot of time thinking about maturity wall analysis and refinance risk. And so we're constantly juggling those handful of properties that look like they might raise some issues down the road and try to stay ahead of them.

William K. Wray Sr.: We certainly spend a lot of time thinking about maturity wall analysis and refinance risk, and so we're constantly juggling those handful of properties that look like they might raise some issues down the road and try to stay ahead of them. I guess the best way of saying we're cautious on office, and we'll continue to be cautious on office, but we also think the scale of the problems within it are well within our capabilities to handle from an earnings standpoint and a reserving standpoint.

Bill Wray: We certainly spend a lot of time thinking about maturity wall analysis and refinance risk, and so we're constantly juggling those handful of properties that look like they might raise some issues down the road and try to stay ahead of them. I guess the best way of saying we're cautious on office, and we'll continue to be cautious on office, but we also think the scale of the problems within it are well within our capabilities to handle from an earnings standpoint and a reserving standpoint.

Speaker #3: So, I guess the best way of saying it is we're cautious on office, and we'll continue to be cautious on office, but we also think the scale of the problems within it are well within our capabilities to handle from an earnings standpoint and a reserving standpoint.

Speaker #7: Okay. And then, I guess, somewhat larger-sized loans here—it sounds like they were self-originated. Was that the case, or were either participations? Just want to confirm that.

Justin Crowley: Okay. I guess somewhat larger sized loans here. It sounds like they were self-originated. Was that the case or were they participations? Just want to confirm that.

Speaker #3: I'm not sure which one is you're referring to, but there's only there's five loans.

William K. Wray Sr.: I'm not sure which ones you're referring to, but there's five loans.

Bill Wray: I'm not sure which ones you're referring to, but there's five loans.

Justin Crowley: The two office loans that migrated and.

Speaker #7: The two office loans. The two office loans that migrated, and the two office loans that migrated.

William K. Wray Sr.: Sure.

Bill Wray: Sure.

Justin Crowley: matured.

Speaker #3: Sure. Sure. Actually, they're both participations. We're the lead on the Class A office space one. We're two-thirds participant in the lead. And then we are the minority participant on the lab space deal.

William K. Wray Sr.: Sure. Actually, they're both participations. We're the lead on the Class A office space one. We're a 2/3 participant in the lead, and then we are the minority participant on the lab space deal.

Bill Wray: Sure. Actually, they're both participations. We're the lead on the Class A office space one. We're a 2/3 participant in the lead, and then we are the minority participant on the lab space deal.

Speaker #7: Okay, gotcha. And then I guess, pivoting a little, just on loan growth—with the contraction you saw this quarter—can you refresh us just on how to think about growth from here?

Justin Crowley: Okay, got you. I guess pivoting a little, just on loan growth. With the contraction you saw this quarter, can you refresh us just on how to think about growth from here? I believe we talked about mid-single digit, call it maybe 5% growth previously. I know a lot's changed since then with some of the geopolitical noise, so just curious for an update there.

Speaker #7: I believe we talked about mid-single-digit—call it maybe 5%—growth previously. I know a lot's changed since then with some of the geopolitical noise.

Speaker #7: So, just curious for an update there.

Speaker #6: Yeah, I'll take that one. Thanks for the question. Yeah. So the quarter saw pretty significant pay downs, payoffs, mostly in the CRE space.

Edward O. Handy III: Yeah, I'll take that one. Thanks for the question. The quarter saw pretty significant pay downs, payoffs mostly in the CRE space. Not the kind of commensurate new origination that we're used to. The path ahead looks very good. We're sticking with our mid-single digit growth for the year projection. It's important that we talk about where that's going to come from. At this point, we're feeling like CRE is probably going to be low single digit growth for the year. They've got some making up to do based on the Q1 payoffs. Then we're thinking kind of flat to 1% growth in CRE, which is somewhat intentional. Most of the growth is going to come from our core C&I business and our institutional banking business.

Ned Handy: Yeah, I'll take that one. Thanks for the question. The quarter saw pretty significant pay downs, payoffs mostly in the CRE space. Not the kind of commensurate new origination that we're used to. The path ahead looks very good. We're sticking with our mid-single digit growth for the year projection. It's important that we talk about where that's going to come from. At this point, we're feeling like CRE is probably going to be low single digit growth for the year. They've got some making up to do based on the Q1 payoffs. Then we're thinking kind of flat to 1% growth in CRE, which is somewhat intentional. Most of the growth is going to come from our core C&I business and our institutional banking business.

Speaker #6: And not the kind of commensurate new origination that we're used to. But the path ahead looks very good. We're sticking with our mid-single-digit growth for the year projection.

Speaker #6: And it's important that we talk about where that's going to come from. At this point, we're feeling like CRI is probably going to be low single-digit growth for the year.

Speaker #6: They've got some making up to do, based on the first quarter payoffs. And then we're thinking kind of flat to 1% growth in CRI, which is somewhat intentional.

Speaker #6: Most of the growth is going to come from our core CNI business and our institutional banking business. We're expecting sort of high single-digit growth out of our core CNI business, which, you'll recall, has a current outstanding in the kind of $560 million level.

Edward O. Handy III: We're expecting sort of high single digit growth out of our core C&I business, which you'll recall has a current outstanding in the kind of $560 million level. You can do the math there. Most of the C&I growth is going to come out of our relatively new institutional banking group. We expect $50+ million in fundings in this quarter.

Ned Handy: We're expecting sort of high single digit growth out of our core C&I business, which you'll recall has a current outstanding in the kind of $560 million level. You can do the math there. Most of the C&I growth is going to come out of our relatively new institutional banking group. We expect $50+ million in fundings in this quarter.

Speaker #6: So you can do the math there. And then most of the CNI growth is going to come out of our relatively new Institutional Banking Group.

Speaker #6: We expect $50-plus million in fundings in this quarter, and the pipeline is growing. And I think, importantly, alongside that is the strategic growth in deposits that'll come from that portion of our CNI business.

Edward O. Handy III: The pipeline is growing. I think importantly, alongside that is the strategic growth in deposits that'll come from that portion of our C&I business. They're expecting to kind of self-fund at a 30% to 40% level, which is much higher than certainly CRE and much higher than our core C&I business. That's an added benefit. They joined the group in late January, so it's to be expected. It'll take a little while for them to get up and running, but the pipeline is growing as we expected, and we're very encouraged by that. Back to the start, sticking with the mid-single-digit growth, if not a little higher. Again, very encouraged by the types of credit, the quality of credit that we're seeing in the pipeline build. More to come on that at the end of next quarter.

Ned Handy: The pipeline is growing. I think importantly, alongside that is the strategic growth in deposits that'll come from that portion of our C&I business. They're expecting to kind of self-fund at a 30% to 40% level, which is much higher than certainly CRE and much higher than our core C&I business. That's an added benefit. They joined the group in late January, so it's to be expected. It'll take a little while for them to get up and running, but the pipeline is growing as we expected, and we're very encouraged by that. Back to the start, sticking with the mid-single-digit growth, if not a little higher. Again, very encouraged by the types of credit, the quality of credit that we're seeing in the pipeline build. More to come on that at the end of next quarter.

Speaker #6: They're expecting to kind of fund at self-fund at a 30 to 40 percent level, which is much higher than certainly CRI and much higher than our core CNI business.

Speaker #6: So that's an added benefit. They joined the group in late January, so it's to be expected to take a little while for them to get up and running.

Speaker #6: But the pipeline is growing as we expected, and we're very encouraged by that. So, back to the start, sticking with the mid-single-digit growth—if not a little higher—and again, very encouraged by the types of credit, the quality of credit that we're seeing in the pipeline build, so.

Speaker #6: More to come on that at the end of next quarter.

Speaker #7: Okay, great. And then just one last one on the margin. I think I might have missed this in the prepared remarks. I know there were some elevated prepayment fees last quarter.

Justin Crowley: Okay, great. Just one last one on the margin. I think I might have missed this in the prepared remarks. I know there were some elevated prepayment fees last quarter. Was there any of that in the 263 for Q1?

Speaker #7: Was there any of that in the $263 for the first quarter?

Speaker #6: Yes. One basis point.

Ronald S. Ohsberg: Yes. Like one basis point.

Ron Ohsberg: Yes. Like one basis point.

Speaker #7: Okay. And then I guess just thoughts on the margin from here. I think you'll get that lift from the swap termination. But could you just remind us of the benefit there, and then also how you're thinking about organic expansion through the year?

Justin Crowley: Okay. I guess just thoughts on the margin from here. I think you'll get that lift from the swap termination, but could you just remind us the benefit there, and then just also how you're thinking about organic expansion through the year?

Speaker #6: Yeah. So, the swap termination will add 9 basis points in the second quarter and another 4 basis points in the third quarter.

Ronald S. Ohsberg: Yeah. The swap termination will add 9 basis points in Q2 and another 4 basis points in Q3.

Ron Ohsberg: Yeah. The swap termination will add 9 basis points in Q2 and another 4 basis points in Q3.

Speaker #7: Okay. And then I guess just out.

Justin Crowley: Okay. I guess just out-

Speaker #6: Yep. Go ahead. No, go ahead, Justin.

Ronald S. Ohsberg: Yep.

Ron Ohsberg: Yep.

Justin Crowley: Go ahead.

Ronald S. Ohsberg: Go ahead. No, go ahead, Justin.

Ron Ohsberg: Go ahead. No, go ahead, Justin.

Speaker #7: I was just going to ask outside of that, just beyond the benefit from the swap, just how you're thinking about margin left from here as we get through the year.

Justin Crowley: I was just going to ask outside of that, just beyond the benefit from the swap, just how you're thinking about just margin lift from here as we get through the year?

Speaker #6: Yeah, there's modest expansion by quarter. First quarter was probably a little higher. It was helped by the prepayment, actually helped a little bit by the shorter day count in the quarter—actually added about two basis points to the NIM.

Ronald S. Ohsberg: Yeah. There's modest expansion by quarter. Q1 was probably a little higher. Helped by the prepayment. Actually helped a little bit by the shorter day count in the quarter, actually added about two basis points to the NIM. When we look ahead to the Q4, we're thinking 275 to 280 in the quarter.

Ron Ohsberg: Yeah. There's modest expansion by quarter. Q1 was probably a little higher. Helped by the prepayment. Actually helped a little bit by the shorter day count in the quarter, actually added about two basis points to the NIM. When we look ahead to the Q4, we're thinking 275 to 280 in the quarter.

Speaker #6: But when we look ahead to the fourth quarter, we're thinking 275 to 280. In the quarter.

Speaker #7: Okay, great. I appreciate it. Thank you so much.

Justin Crowley: Okay, great. I appreciate it. Thank you so much.

Speaker #6: Sure.

Edward O. Handy III: Sure.

Ron Ohsberg: Sure.

Speaker #7: Thanks, Justin.

Edward O. Handy III: Thanks, Justin.

Ned Handy: Thanks, Justin.

Speaker #1: We now turn to Damon Delmonti with KBW. Your line is open; please go ahead.

Operator: We now turn to Damon DelMonte with KBW. Your line is open. Please go ahead.

Speaker #8: Hey, good morning, guys. Thanks for taking my questions. Ron, could you just repeat the last comment you made in the margin, the $275 to $280?

Damon DelMonte: Hey, good morning, guys. Thanks for taking my questions. Ron, could you just repeat the last comment you made on the margin, the 275 to 280? Was that for Q2, or was that for where you expect it to be at year-end? I missed that, sorry.

Speaker #8: Was that for the second quarter or was that for where you expect it to be at year-end? I missed that. Sorry.

Speaker #6: That's sorry, Damon. Yeah. Just to be clear, fourth quarter.

Ronald S. Ohsberg: Sorry, Damon. Yep. Just to be clear, Q4.

Ron Ohsberg: Sorry, Damon. Yep. Just to be clear, Q4.

Speaker #8: Fourth quarter. Okay.

Damon DelMonte: Q4, okay.

Speaker #6: Yeah, so yeah, we're looking at 265 to 270 in the second quarter.

Ronald S. Ohsberg: Yeah. We're looking at $265 to 270 in Q2.

Ron Ohsberg: Yeah. We're looking at $265 to 270 in Q2.

Speaker #8: Got it. Okay. Yep. That jives with what you were describing from the benefit. Okay. Great. And then I guess maybe a little bit on expenses and kind of how you're thinking about the outlook from there.

Damon DelMonte: Got it. Okay. Yep. That jives with what you were describing from the benefit. Okay, great. I guess, maybe a little bit on expenses and kind of how you're thinking about the outlook from there. You've made some hires. I'm assuming that's all kind of baked into the numbers. I think the expenses were around, what, $37.8 million. Just kind of modest growth off of this, or do you think you could actually keep it kind of flat?

Speaker #8: You've made some hires. I'm assuming that's all kind of baked into the numbers. I think the expenses were around, what, $37.8 million. So, just kind of modest growth off of this, or do you think you could actually keep it kind of flat?

Speaker #6: Yeah, we're actually seeing about a $1 million increase in Q2. And some of that is really—there's three areas we're looking at: advertising, mortgage commissions, and then we've got some project implementation expenses that will be coming through in the quarter.

Ronald S. Ohsberg: Yeah. We're actually seeing about a $1 million increase in Q2, and some of that is, really there's three areas we're looking at. Advertising, mortgage commissions, and then we've got some project implementation expenses that will be coming through in the quarter.

Ron Ohsberg: Yeah. We're actually seeing about a $1 million increase in Q2, and some of that is, really there's three areas we're looking at. Advertising, mortgage commissions, and then we've got some project implementation expenses that will be coming through in the quarter.

Speaker #8: Got it. Okay. Great.

Damon DelMonte: Got it. Okay. Great.

Speaker #6: And then further to that, we're adding a branch which will probably open in the towards the end of the third, beginning of the fourth quarter.

Ronald S. Ohsberg: Further to that, Damon, we're adding a branch, which will probably open towards the end of Q3, beginning of Q4. Those expenses will start to hit in Q3, and so we're probably looking at about $500,000 in 2026 related to the branch opening.

Ron Ohsberg: Further to that, Damon, we're adding a branch, which will probably open towards the end of Q3, beginning of Q4. Those expenses will start to hit in Q3, and so we're probably looking at about $500,000 in 2026 related to the branch opening.

Speaker #6: Those expenses will start to hit in Q3. And so we're probably looking at about 500,000 in 2026. Related to the branch.

Damon DelMonte: Okay. Got it. Okay, great. On wealth management, AUM were down a little bit this quarter. Is that just fluctuation of the market or was there some outflow of clients?

Speaker #8: Okay. Got it. Okay. Great. And then on wealth management, AUM were down a little bit this quarter. Is that just fluctuation of the market, or was there some outflow of clients?

Speaker #6: Yeah, it was mostly market. And by 'mostly,' that means not all. So yes, we did have some of that outflows.

Ronald S. Ohsberg: Yeah. It was mostly market. By mostly, that means that not all. Yes, we did have some net outflows.

Ron Ohsberg: Yeah. It was mostly market. By mostly, that means that not all. Yes, we did have some net outflows.

Speaker #8: Got it. Okay.

Damon DelMonte: Got it. Okay.

Speaker #6: Yeah, you can see markets have rebounded so far, in April. So no one knows what the future holds, but at least a lot of the declines that we saw in the quarter have reversed so far in the second quarter.

Ronald S. Ohsberg: You can see markets have rebounded so far in April.

Ron Ohsberg: You can see markets have rebounded so far in April.

Damon DelMonte: Yep.

Ronald S. Ohsberg: No one knows what the future holds, but at least a lot of the declines that we saw in the quarter have reversed so far in Q2.

Ron Ohsberg: No one knows what the future holds, but at least a lot of the declines that we saw in the quarter have reversed so far in Q2.

Speaker #8: Got it. Okay. And then just lastly, given the outlook for loan growth going forward, how should we think about provision and kind of the reserve level?

Damon DelMonte: Got it. Okay. Just lastly, given the outlook for the loan growth going forward, how do we think about provision and kind of the reserve level? I mean, obviously you built the reserve this quarter for those loans that went to non-accrual status. If we assume that there's no other credit deterioration, do you kind of have the provision such that it keeps the reserve flat given the loan growth?

Speaker #8: I mean, obviously you built the reserve this quarter for those loans that went to non-accrual status. But if we assume that there's no other credit deterioration, do you kind of have the provision such that it keeps the reserve flat given the loan growth?

Speaker #6: Yeah, we're kind of thinking somewhere in the range of $1 to $2 million per quarter. And that covers loan growth, and maybe that gives us a little bit—depending on what we book and when we book it—could give us a little bit of a loan reserve build going forward.

Ronald S. Ohsberg: Yeah. We're kind of thinking somewhere in the range of $1 to 2 million per quarter.

Ron Ohsberg: Yeah. We're kind of thinking somewhere in the range of $1 to 2 million per quarter. Okay. That covers loan growth and maybe that gives us a little bit, depending on what we book and when we book it, could give us a little bit of a reserve build going forward.

Damon DelMonte: Okay.

Ronald S. Ohsberg: That covers loan growth and maybe that gives us a little bit, depending on what we book and when we book it, could give us a little bit of a reserve build going forward.

Speaker #8: Got it. Okay. Okay. Great. Well, that's all that I had. Thanks so much.

Damon DelMonte: Got it. Okay. Okay, great. Well, that's all that I had. Thanks so much.

Speaker #6: Thanks, Tim. You're welcome.

Ronald S. Ohsberg: Thanks, Tim. You're welcome.

Ned Handy: Thanks, Tim. You're welcome.

Speaker #1: That's another reminder if you'd like to ask a question, please press star one on your telephone keypad now. We now turn to Laurie Huntsaker with Seaport Research.

Operator: Just another reminder, if you'd like to ask a question, please press star one on your telephone keypad now. We now turn to Laurie Hunsicker with Seaport Research. Your line is open. Please go ahead.

Speaker #1: Your line is open. Please go ahead.

Speaker #9: Yeah. Hi. Thanks. Good morning, Ned Ron, Marion Bell. Thanks for taking my question.

Laurie Hunsicker: Yeah. Hi. Thanks. Good morning, Nev, Ron, Mary, and Bill. Thanks for taking my question.

Speaker #1: Good morning.

Ronald S. Ohsberg: Good morning, Lori.

Ron Ohsberg: Good morning, Lori.

Ronald S. Ohsberg: Just to stay with where Damon was on loan loss provision. The $4 million loan loss provision, I know you said obviously that was heavy with the office. What exactly was the dollar amount there associated with office of the $4 million, Bill?

Laurie Hunsicker: Just to stay with where Damon was on loan loss provision. The $4 million loan loss provision, I know you said obviously that was heavy with the office. What exactly was the dollar amount there associated with office of the $4 million, Bill?

Speaker #9: Just to stay with where Damon was, loan loss provision. So, the $4 million loan loss provision—I know you said, obviously, that was heavy with the office.

Speaker #9: What exactly was the dollar amount there associated with office of the 4 million build?

Ronald S. Ohsberg: Yeah. Lori, it was essentially all office.

Ron Ohsberg: Yeah. Lori, it was essentially all office.

Speaker #6: Laurie, it was essentially all office.

Speaker #1: Yeah.

Speaker #9: All of it. Got it. Got it. Okay. Perfect. And then I just wanted to dive a little bit deeper here. In office, so just I have a series of questions here.

Laurie Hunsicker: All of it? Got it. Okay, perfect. I just wanted to dive a little bit deeper here in office. I have a series of questions here. Thanks for sticking with me on this. You've got 59% maturing in the next two years, $136 million. Is any of that currently in special mention, classified, non-accrual? And if so, when is that actually maturing?

Speaker #9: So thanks for staying with me on this. So you've got 59% maturing in the next two years, 136 million. Is any of that currently in special mention classified non-accrual?

Speaker #9: And if so, when is that actually maturing?

Speaker #6: Well, of the five deals that are in the office space and special mention or classified, one of them matured. And that was one of the deals that we moved to non-accrual.

William K. Wray Sr.: Well, of the five deals that are in the office space and special mention are classified, one of them matured, and that was one of the deals that we moved to non-accrual. There's another one, the Class B special mention that's actually maturing in Q3 of this year. One reason we moved it to special mention was just kind of as a marker as we work with the sponsor, who's a well-known and committed sponsor on a refinance approach. Then the other deal that went to non-accrual doesn't mature until Q3 of next year. As we disclose, we look at all of our maturing office loans very carefully, and when we know enough to, with an emphasis on caution, we'll take steps to make it special mention. The deals that we talked about here, both were put on special mention.

Bill Wray: Well, of the five deals that are in the office space and special mention are classified, one of them matured, and that was one of the deals that we moved to non-accrual. There's another one, the Class B special mention that's actually maturing in Q3 of this year. One reason we moved it to special mention was just kind of as a marker as we work with the sponsor, who's a well-known and committed sponsor on a refinance approach. Then the other deal that went to non-accrual doesn't mature until Q3 of next year. As we disclose, we look at all of our maturing office loans very carefully, and when we know enough to, with an emphasis on caution, we'll take steps to make it special mention. The deals that we talked about here, both were put on special mention.

Speaker #6: There's another one, the Class B special mention, that's actually maturing in the third quarter of this year. And one reason we moved it to special mention was just kind of as a marker as we work with the sponsor, who's a well-known and committed sponsor, on a refinance approach.

Speaker #6: And then the other deal that went to non-accrual doesn't mature until the third quarter of next year. So, as we disclosed, we look at all of our maturing office loans very carefully.

Speaker #6: And when we know enough to, with an emphasis on caution, we'll take steps to make it special. Mention the deals that we talked about here—both were put on special mention. One in the fourth quarter of '24, the other in the third quarter of last year.

William K. Wray Sr.: 1 in Q4 2024, the other in Q3 last year. You'll also see that we've had some positive migration out of special mention in classified. The large lab loan, for example, is special mention now, and as free rent burns off, we believe if contractual rents pay as agreed, that'll be coming out of special mention before too long. We think our migration track record is pretty solid, and we feel the same about the deals that are in there now. Again, there's 5 that make up that disclosure.

Bill Wray: 1 in Q4 2024, the other in Q3 last year. You'll also see that we've had some positive migration out of special mention in classified. The large lab loan, for example, is special mention now, and as free rent burns off, we believe if contractual rents pay as agreed, that'll be coming out of special mention before too long. We think our migration track record is pretty solid, and we feel the same about the deals that are in there now. Again, there's 5 that make up that disclosure.

Speaker #6: So and you'll also see that we've had some positive migration out of special mention and classified. The large lab loan, for example, is special mention now.

Speaker #6: And as pre-rent burns off, we believe if contractual rates pay as agreed, that that'll be coming out of special mention before too long. So we think our migration track record is pretty solid.

Speaker #6: And we feel the same about the deals that are in there now. And again, there's five that make up that disclosure.

Speaker #9: Yeah, great, thanks, Bill. Okay, so just for my clarification purposes, you had to move into non-accrual. Which was it—the $22 million that matured that triggered that, or was it the...?

Laurie Hunsicker: Yeah. Great. Thanks, Bill. Okay. Just for my clarification purposes, you had 2 move into non-accrual. Was it the $22 million that matured that-

William K. Wray Sr.: Yes

Bill Wray: Yes

Laurie Hunsicker: What triggered that? Okay. That one matured.

Speaker #6: Yeah.

Speaker #9: Okay. So that one matured.

Speaker #6: No, the 22 did not. The 22 was not the one that matured. The one that matured was the 6.5 in the last space.

William K. Wray Sr.: No, the 22 was not the one that matured. The one that matured was the 6.5-

Bill Wray: No, the 22 was not the one that matured. The one that matured was the 6.5-

Laurie Hunsicker: $6.6 million. Okay. That matured. Okay, got it. Okay. The other one, so the $22 million, that matures in Q3 2027, you said?

Speaker #9: The $6.6 million. Okay. So that matured. Okay. Got it. Okay. So the other one—so the $22 million, that matures in the third quarter of '27, you said?

Speaker #6: Yes.

William K. Wray Sr.: Yes.

Bill Wray: Yes.

Speaker #9: Okay. And then what is the occupancy running on that one? That class A?

Laurie Hunsicker: Okay. What is the occupancy running on that one, that Class A?

William K. Wray Sr.: It's solid. It's north of 50%, and there's actually been a fair amount of leasing momentum. The move made here was more triggered by a notification of a potential lease termination for next year, but that tenant is renegotiating. This generates a pretty material NOI, and we feel it's a solid property with a solid sponsor and a solid market. Like most sponsors, they're looking ahead and thinking about what their capital requirements are going to be, and so we're having discussions at this point on that topic.

Bill Wray: It's solid. It's north of 50%, and there's actually been a fair amount of leasing momentum. The move made here was more triggered by a notification of a potential lease termination for next year, but that tenant is renegotiating. This generates a pretty material NOI, and we feel it's a solid property with a solid sponsor and a solid market. Like most sponsors, they're looking ahead and thinking about what their capital requirements are going to be, and so we're having discussions at this point on that topic.

Speaker #6: It's solid. I mean, it's north of 50%. And there's actually been a fair amount of leasing momentum. The move made here was more triggered by a notification of a potential lease termination for next year.

Speaker #6: But that tenant is renegotiating. So this generates a pretty material NOI. And we feel it's a solid property with a solid sponsor and a solid market.

Speaker #6: But like most sponsors, they're looking ahead and thinking about what their capital requirements are going to be. And so we're having discussions at this point on that topic.

Speaker #9: Okay. Okay. And then just the class B that you mentioned, just that 3.8 million that's on special mention, that was new to special mention, what is the occupancy on that and how are you thinking about a resolution there?

Laurie Hunsicker: Okay. Just the Class B that you mentioned, just that $3.8 million that's on special mention, that was new to special mention.

Laurie Hunsicker: Okay. Just the Class B that you mentioned, just that $3.8 million that's on special mention, that was new to special mention. What is the occupancy on that, and how are you thinking about a resolution there?

William K. Wray Sr.: Mm-hmm.

Laurie Hunsicker: What is the occupancy on that, and how are you thinking about a resolution there?

William K. Wray Sr.: It's in the high sixties. It's got some solid tenants. It's a well-known sponsor to us. By the way, all of these are in our core markets in the tri-state area. Our expectation is that we'll work something out with the sponsor and keep it on special mention as long as we need to make sure its payment seasoned, and then potentially do an upgrade. Again, special mention here is sort of more just a prudential judgment to put a marker on something and watch it through its refinance process.

Bill Wray: It's in the high sixties. It's got some solid tenants. It's a well-known sponsor to us. By the way, all of these are in our core markets in the tri-state area. Our expectation is that we'll work something out with the sponsor and keep it on special mention as long as we need to make sure its payment seasoned, and then potentially do an upgrade. Again, special mention here is sort of more just a prudential judgment to put a marker on something and watch it through its refinance process.

Speaker #6: It's in the high 60s. It's got some solid tenants. It's a well-known sponsor to us. By the way, all of these are in our core markets in the tri-state area.

Speaker #6: And so our expectation is that we'll work something out with the sponsor. And keep it on special mention as long as we need to, to make sure it's it's payment season and then potentially do an upgrade.

Speaker #6: So again, special mention here is sort of more just a prudential judgment to put a marker on something and watch it through its refinance process.

Speaker #9: Okay. And then, obviously, with the 6% occupancy.

Laurie Hunsicker: Okay. Obviously with the 60%-

William K. Wray Sr.: Again, it's a fully performing loan at this point, and we expect it to continue that way. We are being cautious as we face the maturity issue in Q3.

Bill Wray: Again, it's a fully performing loan at this point, and we expect it to continue that way. We are being cautious as we face the maturity issue in Q3.

Speaker #6: It's a fully performing loan at this point, and we expect it to continue that way. But we are being cautious as we face the maturity issue in the third quarter.

Speaker #9: Gotcha. Okay. And then the lab space, so I had thought there were that 33, 34 million. I thought that was all related. And then it looked like just one piece moved over.

Laurie Hunsicker: Got you. Okay. The lab space. I had thought that $33 to 34 million, I thought that was all related, and then it looked like just one-

William K. Wray Sr.: No

Bill Wray: No

Laurie Hunsicker: piece moved over. Are those two completely separate loans?

Speaker #9: Are those two completely separate loans?

Speaker #6: Two completely separate loans.

William K. Wray Sr.: Two completely separate loans.

Bill Wray: Two completely separate loans.

Speaker #9: Gotcha. Okay. By the maturity—what, and debt service coverage here is zero. So occupancy here is zero. Am I thinking about that the right way?

Laurie Hunsicker: Got you. Okay. The 6.6, that was triggered by the maturity. Debt service coverage here is zero. Occupancy here is zero? Am I thinking about that the right way? Or what is occupancy?

Speaker #9: Or what is occupancy?

Speaker #6: Yeah. Yeah. Occupancy, that building is still in its initial lease-up phase. So it's zero. The other building is effectively fully leased. And it's just a matter of, as you know, that's a very competitive market.

William K. Wray Sr.: Yeah. Occupancy, that building is still in its initial lease-up phase. It's zero. The other building is effectively fully leased. It's just a matter of, as you know, that's a very competitive market. As free rent burns off, and it's payment season, we expect that to come back to fully performing and past rated. We're just watching as tenants come out of free rent and make their payments. There's very strong positive momentum on that one. On the other one, again, we're in a situation where it matured, and we're talking to the sponsors about what's going to happen next.

Bill Wray: Yeah. Occupancy, that building is still in its initial lease-up phase. It's zero. The other building is effectively fully leased. It's just a matter of, as you know, that's a very competitive market. As free rent burns off, and it's payment season, we expect that to come back to fully performing and past rated. We're just watching as tenants come out of free rent and make their payments. There's very strong positive momentum on that one. On the other one, again, we're in a situation where it matured, and we're talking to the sponsors about what's going to happen next.

Speaker #6: As pre-rent burns off, and as payment season begins, we expect that to come back to fully performing and pass-rated. We're just watching as tenants come out of free rent and make their payments.

Speaker #6: So there's very strong positive momentum on that one. On the other one, again, we're in a situation where it matured, and we're talking to the sponsors about what's going to happen next.

Speaker #9: Gotcha. Okay. And so the one that's fully leased, the 27 and a half million, in other words, positive momentum, happens this year, happens next year?

Laurie Hunsicker: Got you. Okay. The one that's fully leased, the $27.5 million. In other words, positive momentum happens this year, happens next year. I guess when specifically does that, oh, go ahead.

Speaker #9: And I guess, when does that—oh, go ahead.

Speaker #6: I'm sorry. You cut out a little bit. But if you're asking when that comes back out, again, we think it's within probably within the next few quarters.

William K. Wray Sr.: I'm sorry. You cut out a little bit. If you're asking when that comes back out again, we think it's within the next few quarters. We want to make sure the tenants are making their payments as agreed, and that we're going to let it season a little bit and judge that. We're feeling very solid about the leasing status and the performance status to date.

Bill Wray: I'm sorry. You cut out a little bit. If you're asking when that comes back out again, we think it's within the next few quarters. We want to make sure the tenants are making their payments as agreed, and that we're going to let it season a little bit and judge that. We're feeling very solid about the leasing status and the performance status to date.

Speaker #6: We want to make sure the tenants are making their payments as agreed. And that we're going to let it season a little bit and judge that.

Speaker #6: But we're feeling very solid about the leasing status and the performance status to date.

Speaker #9: Yeah, okay. And then one last question on this lab loan: when does this $27.5 million mature?

Laurie Hunsicker: Yeah. Okay. One last question on this lab loan. When does this $27.5 million mature?

William K. Wray Sr.: That is 2029.

Bill Wray: That is 2029.

Speaker #6: That is 2029.

Speaker #9: Okay. 2029. Okay, great. Okay. And then, yeah, I think that answers all my questions on that. Really appreciate the details that you guys put on page 11.

Laurie Hunsicker: Okay. 2029. Okay, great. Okay. Yeah, I think that answers all my questions on that. Really appreciate the details that you guys put on page 11. Actually, oh, I'm so sorry. One more question. You had $2.2 million of Class C that was in special mention last quarter, and now it's gone, which is great. How was that resolved? Was that sold or what happened there?

Speaker #9: And actually, oh, I'm so sorry—one more question. So, you had $2.2 million of Class C that was in special mention last quarter, and now it's gone, which is great.

Speaker #9: How was that resolved? Was that sold or what happened there?

Speaker #6: No, it ended up being fully leased. And it was performing all along. They were paying as agreed. But now that it's fully leased and we've gone through that process, we moved it back into pass rated.

William K. Wray Sr.: No, it ended up being fully leased and it was performing all along. They were paying as agreed. Now that it's fully leased and we've gone through that process, we've moved it back into pass rated.

Bill Wray: No, it ended up being fully leased and it was performing all along. They were paying as agreed. Now that it's fully leased and we've gone through that process, we've moved it back into pass rated.

Speaker #9: Perfect. Perfect. Okay. Great. Okay. So just two more questions. Not for you, Bill. I guess this goes back to you, Ron. Do you have the spot margin for March?

Laurie Hunsicker: Perfect. Okay. Great. Okay, so just two more questions. Not for you, Bill. I guess this goes back to you, Ron. Do you have the spot margin for March?

Speaker #6: Yeah. 259.

Ronald S. Ohsberg: Yeah. 259.

Ron Ohsberg: Yeah. 259.

Speaker #9: 259. Great. Okay. And then Ned, Ned for you, this is my last question. Thanks again for taking all my questions. Buybacks, your capital levels are very, very strong.

Laurie Hunsicker: 2:59. Great. Okay. Ned, for you, this is my last question. Thanks again for taking all my questions. Buybacks. Your capital levels are very, very strong. Your credit, obviously, excellent, is very, very strong. You're one of the few banks in New England not repurchasing shares. Can you just help us think a little bit about your approach to buybacks and how you're thinking about it here? Thanks.

Speaker #9: And your credit, obviously, X office is very, very strong. You're one of the few banks in New England not repurchasing shares. Can you just help us think a little bit about your approach to buybacks and how you're thinking about it here?

Speaker #9: Thanks.

Speaker #6: Yeah. Yeah. Laurie, I'll take it. I mean, we consider that all the time. And I think we've talked about it on previous calls. I can make some arguments in favor of and also, against doing the buybacks.

Ronald S. Ohsberg: Yeah. Lori, I'll take it. I mean, we consider that all the time. I think we've talked about it on previous calls. I can make some arguments in favor of, and also against, doing the buybacks. Our dividend is still relatively high. The payout ratio is still relatively high. At this point, we maintain a buyback program. We really are not at this point intending to be buying back shares. Yeah, at this point in time.

Ron Ohsberg: Yeah. Lori, I'll take it. I mean, we consider that all the time. I think we've talked about it on previous calls. I can make some arguments in favor of, and also against, doing the buybacks. Our dividend is still relatively high. The payout ratio is still relatively high. At this point, we maintain a buyback program. We really are not at this point intending to be buying back shares. Yeah, at this point in time.

Speaker #6: Our dividend is still relatively high. The payout ratio is still relatively high. And so, at this point, we maintain a buyback program. But we really are not, at this point, intending to be buying back shares at this point in time.

Speaker #9: Great. Thanks for taking my question.

Laurie Hunsicker: Great. Thanks for taking my question.

Speaker #6: Sure. Thanks, Laurie.

Edward O. Handy III: Sure.

Ron Ohsberg: Sure.

Edward O. Handy III: Thanks, Laurie.

Ned Handy: Thanks, Laurie.

Speaker #2: We have no further questions, so I'll hand back to Ned Handy for any final comments.

Operator: We have no further questions, so I'll hand back to Ned Handy for any final comments.

Speaker #6: Well, thank you all for joining as we move through 2026. We remain focused on what has defined us for 226 years: pairing personalized service and local decision-making with a comprehensive suite of financial products and services. We very much look forward to the quarters ahead.

Edward O. Handy III: Well, thank you all for joining. As we move through 2026, we remain focused on what has defined us for 226 years, pairing personalized service and local decision-making with a comprehensive suite of financial products and services. We very much look forward to the quarters ahead and sharing the news about those quarters with you as we progress. Thank you for your time today. We certainly appreciate your interest and support, and we look forward to speaking with you again soon. Have a great day, everybody.

Ned Handy: Well, thank you all for joining. As we move through 2026, we remain focused on what has defined us for 226 years, pairing personalized service and local decision-making with a comprehensive suite of financial products and services. We very much look forward to the quarters ahead and sharing the news about those quarters with you as we progress. Thank you for your time today. We certainly appreciate your interest and support, and we look forward to speaking with you again soon. Have a great day, everybody.

Speaker #6: And sharing the news about those quarters with you as we progress. So, thank you for your time today. We certainly appreciate your interest and support.

Speaker #6: And we look forward to speaking with you again soon. Have a great day, everybody.

Operator: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.

Q1 2026 Washington Trust Bancorp Inc Earnings Call

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