Why did WASH's Q4 2024 earnings shock the market?

Washington Trust Bancorp's (WASH) Q4 2024 earnings report revealed a net loss of $60.8 million, resulting in a significant decline of $3.46 per share. This shocking announcement can be attributed to several factors: 1. **Repositioning Impact**: The bank's strategic repositioning efforts had a considerable impact on the bottom line, leading to a net loss. This was due to the recognition of losses on the sale of securities and loans, amounting to $44.2 million. The repositioning was undertaken to improve the bank's asset quality and risk profile, despite the short-term negative effects on profitability. 2. **Asset Quality Concerns**: The bank faced challenges with asset quality, particularly in its securities portfolio. The recognition of losses on securities and loans contributed to the net loss. This indicates that the bank may have had to write down the value of certain assets, which can be a red flag for investors regarding the overall health of the bank's asset portfolio. 3. **Interest Income and Margin**: Despite the net loss, the bank reported a net interest income of $32.9 million, reflecting a 2% increase. Additionally, the net interest margin improved by 10 basis points to 195 basis points. These improvements suggest that the bank's core lending activities are performing better, which could be a silver lining for investors. In summary, WASH's Q4 2024 earnings shocked the market due to a combination of strategic repositioning losses and asset quality concerns, despite some positive trends in net interest income and margin improvements.