Regional bank Washington Trust Bancorp (NASDAQ: WASH) missed Wall Street’s revenue expectations in Q1 CY2026, but sales rose 10.9% year on year to $58 million. Its non-GAAP profit of $0.66 per share was 13% below analysts’ consensus estimates.

Is now the time to buy WASH? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Washington Trust Bancorp’s first quarter results were met with a strongly negative market reaction, as the company missed Wall Street’s revenue and non-GAAP profit expectations. Management pointed to ongoing net interest margin expansion as a positive driver, supported by the bank’s December 2024 balance sheet repositioning. However, the quarter was weighed down by a higher provision for credit losses, driven by reserve builds on two commercial real estate office loans that were moved to nonaccrual status. Chief Risk Officer Bill Wray described the bank’s approach as "cautious on office," noting that the issues were concentrated in a handful of properties and that overall office exposure has been reduced in recent years.

Looking forward, management expects loan growth to be led by the core commercial and industrial (C&I) business and the recently launched institutional banking division. CEO Ned Handy reaffirmed the bank’s projection for mid-single-digit loan growth for the year, stating, “Most of the growth is going to come from our core C&I business and our institutional banking business.” Net interest margin is projected to expand modestly in the coming quarters, aided by benefits from a swap termination, while operating expense growth will reflect recent hiring and the opening of a new branch. Management acknowledged continued caution on commercial real estate office exposure and plans to maintain flexibility to support business execution.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to net interest margin expansion, offset by higher credit provisions tied to select office loans and a decline in noninterest income from loan-related derivatives and wealth management.

• Net interest margin expansion: The bank’s net interest margin increased 7 basis points sequentially, reflecting the benefits of prior balance sheet actions and a small contribution from loan prepayment fees. CFO Ron Ohsberg noted the margin improvement was partly supported by a shorter day count in the quarter.
• Elevated provision for credit losses: A significant credit provision was recognized, primarily due to two commercial real estate office loans being moved to nonaccrual status. Management emphasized that these loans have strong sponsors and are being actively managed, with expectations for resolution or improvement within the next few quarters.
• Noninterest income declines: Noninterest income was down, driven by a reduction in loan-related derivative revenues and softer wealth management results. Average assets under administration decreased slightly due to market fluctuations and some client outflows, though management cited a rebound in market performance in April.
• New digital platform rollout: The completion of a new digital banking platform for personal accounts was highlighted as a step toward enhancing customer experience and security. Conversion for business accounts is slated for upcoming quarters, positioning the company for further growth in digital services.
• Strategic hiring and market expansion: The company expanded its commercial banking team with experienced hires in C&I, CRE, and business banking. Additionally, the launch of the institutional banking team and plans to open a new branch in northern Rhode Island underscore a focus on deposit and loan growth through local relationships and market presence.

Drivers of Future Performance

Management’s outlook centers on loan growth from C&I and institutional banking, margin expansion, and careful management of commercial real estate exposures.

• C&I and institutional banking growth: The bank expects high-single-digit growth in core C&I lending, with most new volume driven by the recently formed institutional banking group. Management believes this team will also deliver strong deposit growth, helping to diversify the funding base.
• Net interest margin trajectory: Net interest margin is projected to expand incrementally throughout the year, supported by a swap termination and minor organic improvements. Ohsberg indicated margin could reach 2.75% to 2.80% by the fourth quarter, assuming no major changes in prepayment activity or day count effects.
• Expense management and expansion: Operating expenses are forecast to rise modestly due to merit increases, additional hiring, and project implementation costs. The opening of a new branch later this year will add to costs, but management expects these investments to support future business growth. Continued vigilance on credit risk, especially in office real estate, remains a key strategic focus.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) the pace of loan and deposit growth from the institutional banking division and recent commercial banking hires, (2) trends in net interest margin as swap benefits phase in and interest rate environments evolve, and (3) the resolution of commercial real estate office loans currently in nonaccrual or special mention status. Execution on digital banking initiatives and the new branch opening will also be key signposts for future performance.

Washington Trust Bancorp currently trades at $30.48, down from $36.10 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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