WESTERLY – Washington Trust Bancorp Inc., the parent company of The Washington Trust Co., earned $7 million after completing sales leaseback transactions on five of the bank’s branches in the first quarter of 2025, the company announced Monday.
A sales leaseback transaction is when a property owner sells property to a buyer and then rents it from the new owner for a set period of time.
"It's a very common strategy used by banks and other companies that own real estate," said Ronald S. Ohsberg, senior executive vice president and chief financial officer for Washington Trust. "Most of our branches are already leased. It's better for us financially to lease than [to] own at the moment."
The moves boosted the company’s noninterest income for the quarter to $22.64 million, up from $17.2 million a year earlier.
The sales leasebacks were part of a larger balance sheet repositioning strategy designed to offset challenges stemming from the sale of low-yielding assets acquired during periods of lower interest rates at a $70 million loss in the fourth quarter of 2024, which contributed to the company’s $60.8 million loss for that quarter and its overall $28.1 million loss for 2024.
The company’s repositioning efforts led to an 11% increase in profits to $12.2 million in the first quarter of 2025 year over year. Meanwhile, net interest margin – a key metric – was 2.29% for the quarter, up from 1.84% reported a year ago.
Washington Trust charged-off $2.5 million in bad debt – loans unlikely to be repaid – as part of the restructuring effort.
"The charge-offs were not a part of a larger trend, for … [Washington] Trust or nationally. It was a single incident regarding a commercial real estate loan customer who was leasing bank-owned property. Unfortunately, they struggled over the past year," Ohsberg said. "If you look back at the last couple of years, we've had virtually no charge-offs."
Meanwhile, Washington Trust Chairman and CEO Edward O. “Ned” Handy III noted that "there's pretty intense competition right now amongst banks for deposits," which are known to drive asset growth.
"That's fuel for any bank, and we're definitely in that race," Handy said. "Everyone is back in asset growth mode, so it's definitely competitive."
Washington Trust posted $5.01 billion in in-market deposits for the first quarter of 2025, a 6% increase over the $4.67 billion reported a year ago.
Total deposits amounted to $5.04 billion, down slightly from the $5.35 billion reported in the first quarter of 2024.
"The repositioning strategy, now that it's completed, has worked just as we had planned," Handy said.
Matthew McNulty is a PBN staff writer. He can be reached at McNulty@PBN.com or on X at @MattMcNultyNYC.
