WASH — Washington Trust Bancorp, Inc.

Washington Trust Bancorp (WASH) Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Net Income: $12.6 million ($0.66 per share), down from $16 million ($0.83 per share) in Q4 2025.
• Pre-Provision Net Revenue (PPNR): Decreased by 6% quarter-over-quarter, but up 23% year-over-year on an adjusted basis.
• Net Interest Income: $40.5 million, down 1% from Q4, but up 11% year-over-year.
• Net Interest Margin (NIM): 2.63%, up 7 basis points from Q4 and 34 basis points year-over-year.
• Noninterest Income: Decreased by $1.2 million (6% quarter-over-quarter), but increased 11% year-over-year.
• Noninterest Expense: Totaled $37.8 million, down 1% from Q4.
• Loan Portfolio: Total loans decreased by 2% from December 31, with commercial loans down $95 million primarily due to payoffs in the commercial real estate (CRE) portfolio.
• Credit Quality: Nonaccruing loans increased to 81 basis points of total loans, with a $4 million provision for credit losses primarily related to two office loans.

2. Strategic Updates and Business Highlights

• Completed a digital banking conversion for personal accounts aimed at enhancing security and customer experience, with plans to convert business accounts in future quarters.
• Strengthened the commercial banking team by hiring experienced bankers in commercial and industrial (C&I), CRE, and business banking sectors.
• Anticipating growth from a new institutional banking team added in January, with a loan pipeline of approximately $156 million.
• Planned branch opening in Pataka, Rhode Island, later in the year to expand market presence.

3. Forward Guidance and Outlook

• Loan Growth: Maintaining a mid-single-digit growth target for 2026, with expectations of low single-digit growth in CRE and high single-digit growth in core C&I business.
• Net Interest Margin: Projected to rise to $265 million to $270 million in Q2, with further increases expected in subsequent quarters due to swap terminations.
• Expense Management: Anticipating a modest increase in expenses due to new hires and branch openings, with an estimated $1 million increase in Q2.

4. Bad News, Challenges, or Points of Concern

• Credit Quality Issues: Increased provision for credit losses due to two office loans moving to nonaccrual status, raising concerns about the office sector's stability.
• Loan Portfolio Decline: Total loans and commercial loans decreased, reflecting significant payoffs and a lack of new originations in the CRE space.
• Market Volatility: Wealth management revenues were down, attributed to market fluctuations and some net outflows, although recent market rebounds may mitigate this.

5. Notable Q&A Insights

• Management provided details on the two office loans that moved to nonaccrual, indicating they had strong sponsors and were being actively monitored for resolution.
• The bank is cautious about its office exposure, which has decreased from a peak of $300 million to $230 million, with ongoing efforts to manage risk in this sector.
• The discussion highlighted a cautious but optimistic outlook for the loan pipeline, particularly from the newly established institutional banking team.
• Management clarified that while share buybacks are considered, the current focus remains on maintaining a strong dividend and capital levels rather than repurchasing shares at this time.

Overall, Washington Trust Bancorp's Q1 2026 performance reflects a mix of strategic growth initiatives and challenges in credit quality, particularly within the office loan segment. The company remains focused on enhancing its banking capabilities while navigating market uncertainties.