A Steady Presence for Over Two Centuries

Washington Trust has always taken a disciplined approach to credit and that has helped us preserve our balance sheet and consistently perform through difficult economic cycles over the past 224 years. Recent industry events have caused banks to be more circumspect about offering credit; however, we continue to focus on what has always worked for us: relationship lending to creditworthy customers with well-structured transactions. We believe it is important to maintain strong relationships with our customers and meet their credit needs.

We are not going to back away from making good loans to good customers due to transient conditions in the market. Instead, we are currently finding opportunities to support existing and new customers by structuring credit products that reflect today’s interest-rate environment and addressing risk within more stressed sectors of the real estate markets. The structures are more conservative, and the pricing mechanics reflect both economic risk and the uncertainties of future rate movements. Our borrowers generally agree that debt structures should consider the challenges in the near-term environment.

Washington Trust has always maintained strong levels of liquidity, including the pledging of qualified loans and investment securities to FHLBank Boston to provide us with ample levels of contingent liquidity. We will continue to do so, along with our ongoing efforts to increase deposit market share.

We were well positioned from a risk standpoint as we had and have always had a low level of uninsured deposits and were not subject to a flight to security. We have maintained an acute focus on both the level and quality of our deposit franchise. Our balance sheet has a mix of retail, commercial, and municipal deposits, and our funding base is diversified, relationship-based, and largely insured or collateralized.

We conduct robust asset and liability tests and actively manage this throughout the year and have done so for many decades. We have a large contingent liquidity position and strong capital ratios, and our credit performance has been exemplary. While it was disconcerting to see what was happening to a few other banks, we were thankful for our strong positions and disciplined approach to asset and liability management.

As funding costs have increased with the market, our base has remained intact. As with others, the current rate environment creates margin pressure, but we see that as the price in the short-term for the benefit of long-term beneficial relationships. We have enjoyed a meaningful relationship with FHLBank Boston over the years and value the ability to access funding and maintain excess availability to weather conditions as they arise.

We are a relationship-oriented bank, so we constantly monitor economic conditions, demographic shifts, and lifestyle and behavioral trends to ensure we are meeting our customers’ preferences and changing needs. In the past couple of years, our industry has seen tremendous change due to the pandemic and the resulting economic fallout.

The prolonged yield curve inversion has been especially difficult to combat. The pressure on lending has been significant because lending at the margin is very trying over the short term. We have a commitment to our communities and to our customers and do not feel the solution is a reflexive and pronounced pullback in lending. Instead, we carefully consider each deal from a pricing perspective.

The pandemic changed how our employees and customers conduct their business, as more and more people began working remotely and conducting their banking digitally. As a result of this dramatic behavioral shift, we continually assess and upgrade our technology to ensure our systems, processes, and services are convenient, efficient, and secure. We also want to ensure that we maintain service excellence across all delivery channels, so we regularly survey customers to evaluate their experience and satisfaction. The increased digital banking environment poses additional cyber-risk and security issues, and we take proactive measures to protect the bank and our customers.

Finally, as our population becomes more diverse, we want to ensure inclusivity and that we are equitably addressing the needs of every segment in everything we do. We have introduced new banking products and services, reduced fees, expanded our financial literacy program, and hired multi-lingual employees to ensure we are reaching all segments. We’ve also introduced innovative community lending programs to provide opportunities for those seeking the dream of homeownership. High interest rates and the shortage of housing supply continues to drive valuations, which is challenging for all. The opportunity for banks and all financial service providers to be attentive to the needs of low- and moderate-income borrowers and to build equitable access to credit and service has never been more evident, so that remains a focus in our markets.

Washington Trust is active in Rhode Island, Connecticut, Massachusetts, and the nearby New Hampshire market; however, our branch network and our deposit franchise are largely Rhode Island based. Each of those markets has strong economic and cultural diversity and, during these difficult economic times, have proven to be more resilient than much of the country.

We have more challenges with home inventories than some other areas that have more buildable land readily available, but that may be the only unfavorable component in our market composition versus other parts of the country. Our markets have not seen over-supply in the real estate space, benefit from business formation coming out of higher education, and have seen a healthy component from a tourism-driven economy.

Digital tools give us access to a wider deposit base which has become an increasingly important part of our funding base. It is invigorating to be able to offer services through a number of different delivery channels and find the right fits for each community.

We have been an active partner with the FHLBank Boston’s homeownership assistance programs for many years. We are honored to have been asked to participate on a panel last year to describe how we have been able to incorporate FHLBank Boston programs into other tailored products to enable homeownership in a meaningful way. It means that, together, we enable people to buy and retain homes by structuring them without depleting all their resources and giving them the opportunity to realize the American dream of owning their own home. Sometimes, those borrowers are the first in generations of their family to achieve homeownership. The assistance funds provided by FHLBank Boston are significant in amount and in results.

We use the FHLBank Boston’s advance program, Online Banking, and correspondent services to help manage day-to-day operations and liquidity needs. We also use Letters of Credit to provide collateral for customer deposits.

I proudly signed the CEO Action for Diversity and Inclusion pledge, joining more than 2,300 CEOs throughout the country, as an indication of our commitment and a promise to advance diversity and inclusion in the workplace. Our culture has always been about valuing people: our employees, our customers, and our communities. I believe we must take an informed approach to ensure we foster a supportive and inclusive work environment, that is reflective of our diverse communities, and allows all individuals to succeed.

We have taken proactive steps and have an intentional strategy that guides our diversity, equity, and inclusion (“DE&I”) efforts, focusing on four pillars – culture and employee experience; recruitment, development, and retention; leadership and workforce engagement; and impactful community relationships. We have a DE&I Council, comprised of a cross-functional group of colleagues representing different perspectives, backgrounds, and experiences. This passionate group serves to reinforce and strengthen Washington Trust’s culture by informing, educating, and engaging our team and leadership about DE&I matters, observances, and celebrations.

We have both an inward focus to attract, retain and empower a highly talented, engaged, and diverse workforce, as well as an outward focus to ensure that we are engaging with and serving the needs of all communities in our market. We have increased diversity in our customer-facing teams, our management ranks and our Board. These steps are only part of our ongoing efforts to reflect the communities we serve.

We believe there are always opportunities for improvement and will continue to ensure our efforts are part of the solution to building equity in the markets we serve.