Washington Trust Bancorp Q4 Earnings Call Highlights

30 Jan 2026, 12:30 by Doug Wharley · The Cerbat Gem

Washington Trust Bancorp (NASDAQ:WASH) reported stronger fourth-quarter results as the company pointed to margin expansion, in-market deposit growth, and higher wealth management revenue as key drivers of improved profitability. Management also outlined strategic investments made during 2025—particularly in wealth management and commercial banking—that it expects will support growth in 2026.

Fourth-quarter earnings rose on higher net interest income and fee revenue

For the fourth quarter, Washington Trust reported net income of $16.0 million, or $0.83 per share, compared with $10.8 million, or $0.56 per share, in the preceding quarter. Chief Financial Officer Ron Ohsberg said adjusted EPS was up 41% versus the fourth quarter of the prior year.

Net interest income was $40.7 million, increasing 5% from the third quarter and 24% year-over-year. Net interest margin rose to 2.56%, up 16 basis points sequentially and 61 basis points year-over-year. Ohsberg attributed the improvement to a better funding mix, including higher in-market deposits and lower wholesale funding, along with deposit rate management. The quarter also included $516,000 in loan prepayment fee income, which management said benefited the margin by 3 basis points.

Non-interest income increased 5% versus the third quarter and, on an adjusted basis, rose 15% year-over-year. Wealth management revenues were up 5%, and average assets under administration increased 4% in the quarter and 9% year-over-year. Mortgage banking revenue totaled $3.3 million, down 7% seasonally but up 14% year-over-year. Ohsberg said origination and sales volumes increased 21% and 25%, respectively, while the mortgage pipeline ended the year at $81 million, down 37% from the end of September due to seasonal factors. Full-year mortgage originations were $667 million, up 31% from 2024.

Management also noted that loan-related derivative income increased by $810,000 in the quarter.

Expense trends include staffing investments and a charitable contribution

Non-interest expense totaled $38.0 million in the fourth quarter, up 6%. On a full-year adjusted basis, non-interest expense rose 7%. Salaries and benefits increased by $973,000, or 4%, reflecting higher performance and volume-based compensation and increased staffing. Other non-interest expenses rose by $1.3 million, driven largely by a $1.0 million contribution to the company’s charitable foundation.

Looking ahead, management discussed expense expectations for early 2026. Ohsberg said the company is projecting a 6% increase in expenses in the first quarter, citing annual merit increases, payroll tax resets, higher medical insurance costs, and the addition of an institutional banking team. For other expenses, he described an expected 5% year-over-year increase. Management also expects the planned Pawtucket branch opening later in the year to add roughly $600,000 in combined salary and expense run-rate over the course of the year, beginning in late summer or early fall. For charitable foundation contributions, Ohsberg said the company has penciled in $750,000 at the end of 2026.

Balance sheet mix shifted toward in-market deposits as wholesale funding declined

Total loans were essentially stable in the quarter, increasing $12 million from September 30. In-market deposits rose 1% from the end of the third quarter and 9% year-over-year. Wholesale funding declined by $165 million, or 21%, from the end of September.

Total equity ended the quarter at $544 million, up $11 million from the end of the third quarter. The dividend remained $0.56 per share.

Credit metrics improved; reserves discussed in relation to portfolio mix

Management said credit results normalized and asset quality improved during the quarter. At December 31, non-accruing loans were 25 basis points of total loans, and non-accruing commercial loans were zero. Past due loans were 22 basis points of total loans. Ohsberg noted there was one CRE loan past due at quarter-end that was brought current in January, and the company recorded net recoveries of $160,000 for the quarter.

In response to a question about reserve levels relative to peers, Chief Risk Officer Bill Wray said Washington Trust follows CECL guidelines and is “on the lower side of the spectrum” but “not unduly so,” adding management is comfortable with reserve adequacy based on portfolio loss estimates. Wray said the reserve could move “a few bps” up or down over time, and he referenced comfort with coverage in the “mid-seventy” range. Ohsberg added that the company’s relatively large residential portfolio influences weighted average reserve coverage because reserves allocated to residential are typically lower than for commercial loans.

Wray also addressed a $6 million office exposure discussed on the call, saying it matures in 2031, has strong dedicated sponsors, and remains current. He said occupancy is in the mid-40% range but improving and that management expects a “long, slow nursing process,” while noting the building is close to break-even.

2026 outlook: NIM expansion, commercial lending focus, and wealth management growth initiatives

On margin outlook, Ohsberg said he believes the current mid-2.50% level is sustainable and outlined an expectation for further improvement tied to a swap termination at the end of April. He said management expects the margin to increase 9 basis points in the second quarter and another 4 basis points in the third quarter from the swap impact, for a fully realized 13-basis-point run-rate benefit by the third quarter. Excluding that item, he projected organic expansion of 3 to 4 basis points per quarter assuming no change in the Fed funds rate, which would imply a fourth-quarter margin estimate of 2.78% to 2.82%.

For loan growth, management said 2025 results were below its target, but it expects improvement in 2026. Ohsberg projected 4% to 5% growth in CRE, faster growth in C&I without specifying a target, and continued net runoff in residential loans. Overall, he said the company is looking for about 5% year-over-year loan growth, an improvement from 2025. Handy added that the company had $180 million of credit formation in the quarter but experienced significant payoffs, some earlier than expected, and said management does not expect that level of early prepayment to continue.

Handy highlighted a new institutional banking team focused on education, healthcare, and nonprofit organizations across the Northeast, describing the effort as an opportunity to add “high-quality C&I loans and strong deposit opportunities” and to generate wealth management opportunities tied to endowments and retirement plans. Management said the team consists of four people and plans to add a treasury management specialist; the group most recently came from Brookline.

In wealth management, Handy said the company added business development officers and a financial planning professional, describing financial planning as both a retention tool and a way to appeal to “next gen and full families.” He also said the company is satisfied with its 2025 Lighthouse Financial Management asset purchase. While management described itself as opportunistic on wealth management M&A, Handy said prices are high and the bank is not “aggressively” pursuing deals, but would consider smaller tuck-in transactions with the right culture and fit. In response to a question on wealth fees, management said the average is about 60 basis points.

On capital deployment and buybacks, management reiterated that repurchases are considered alongside other capital uses and did not provide a commitment. Later in the call, management said it had 850,000 shares authorized for repurchase with 582,000 shares remaining under the authorization.

Washington Trust also reiterated plans to open a de novo branch in Pawtucket, Rhode Island, later in 2026. Handy said Pawtucket is the only branch planned for 2026, while noting the bank is reviewing longer-term retail footprint strategies that could include alternative delivery options such as ATMs.

About Washington Trust Bancorp (NASDAQ:WASH)

Washington Trust Bancorp, Inc is the bank holding company for The Washington Trust Company, a community bank headquartered in Westerly, Rhode Island. Through its subsidiary, the company operates a network of branch offices across Rhode Island and southeastern Connecticut, serving individuals, small businesses and municipalities with a full suite of financial services.

The company’s core business activities encompass retail and commercial banking, including checking and savings accounts, consumer and commercial loans, mortgage financing, and cash management solutions.