Washington Trust Bancorp, Inc. (WASH) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects positive momentum: strong revenue growth in wealth and mortgage banking, stable credit quality, and strategic investments in growth. Despite some expense increases, the company's financial health remains robust. The Q&A reveals confidence in sustaining margins and loan growth, with new initiatives in wealth management and commercial banking. While some uncertainties exist, like vague buyback plans, the overall sentiment is optimistic, supported by solid financial metrics and growth strategies. These factors suggest a positive stock price movement.
Key Financial Performance
Net Income $16 million or $0.83 per share in Q4, compared to $10.8 million or $0.56 per share in the preceding quarter. Adjusted EPS was up 41% year-over-year.
Net Interest Income $40.7 million, up by 5% from Q3 and 24% year-over-year. Improvement driven by better funding mix with higher in-market deposits, lower wholesale funding, and deposit rate management.
Net Interest Margin (NIM) 2.56%, up by 16 basis points from Q3 and 61 basis points year-over-year. Improvement due to better funding mix and deposit rate management.
Noninterest Income Up 5% from Q3 and 15% year-over-year on an adjusted basis. Wealth management revenues increased by 5%, and average AUA for Q4 increased by 4% and 9% year-over-year.
Mortgage Banking Revenues $3.3 million, down seasonally by 7% from Q3 but up 14% year-over-year. Origination and sales volumes increased by 21% and 25%, respectively.
Mortgage Pipeline $81 million at December 31, down seasonally by 37% from the end of September.
Full Year Mortgage Originations $667 million, up by 31% from 2024.
Noninterest Expense $38 million in Q4, up by 6%. On a full year adjusted basis, up by 7%. Salaries and benefits expense increased by $973,000 or 4%, reflecting higher performance and volume-based compensation and increased staffing. Other noninterest expenses increased by $1.3 million, largely due to a $1 million contribution to the charitable foundation.
Effective Tax Rate 22.5% for the full year.
Total Loans Stable, increasing modestly by $12 million from September 30.
In-Market Deposits Up by 1% from Q3 and 9% year-over-year.
Wholesale Funding Down $165 million or 21% from the end of September.
Total Equity $544 million, up by $11 million from the end of Q3.
Dividend Remained at $0.56 per share.
Provision for Credit Losses Normalized in Q4, with improved asset quality metrics. Nonaccruing loans were 25 basis points on total loans, and past due loans were 22 basis points on total loans. Net recoveries for the quarter were $160,000.
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Operating Highlights
Wealth Management and Commercial Banking Investments: Targeted investments in Wealth Management and Commercial Banking business lines, including the wealth asset purchase from Lighthouse Financial Management and hiring a new Chief Commercial Banking Officer, Jim Brown.
Institutional Banking Team: Introduction of a dedicated institutional banking team to serve education, health care, and nonprofit providers in the Northeast region.
De Novo Branch Opening: Planned opening of a new branch in Pawtucket, Rhode Island, to increase presence in the northern part of the state.
Market Expansion in Northeast: Expansion into the Northeast region with a focus on education, health care, and nonprofit providers through the institutional banking team.
Earnings and Profitability: Net income of $16 million in Q4, up from $10.8 million in Q3. EPS increased by 41% year-over-year. Net interest income grew by 24% year-over-year.
Deposit Growth: In-market deposits increased by 1% from Q3 and 9% year-over-year, while wholesale funding decreased by 21%.
Wealth Management Revenue: Wealth management revenues increased by 5% in Q4 and 15% year-over-year. Average assets under administration grew by 4% in Q4 and 9% year-over-year.
Mortgage Banking: Mortgage originations totaled $667 million for the year, up by 31% from 2024. Q4 mortgage banking revenues were $3.3 million, up 14% year-over-year.
Strategic Hiring: Hiring of Jim Brown as Chief Commercial Banking Officer to lead high-performing teams and drive growth.
Charitable Contribution: A $1 million contribution to the company's charitable foundation as part of community engagement.
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Risk or Challenges
Mortgage Banking Revenues: Mortgage banking revenues were down seasonally by 7% in Q4, and the mortgage pipeline decreased by 37% from the end of September, indicating potential challenges in sustaining growth in this segment.
Noninterest Expense: Noninterest expenses increased by 6% in Q4 and 7% on a full-year adjusted basis, driven by higher performance and volume-based compensation as well as increased staffing, which could pressure profitability.
Seasonal Decline in Mortgage Pipeline: The mortgage pipeline at December 31 was down seasonally by 37% from the end of September, which may impact future mortgage banking revenues.
Loan Growth: Total loans increased modestly by $12 million from September 30, indicating limited growth in this area.
Charitable Contributions: A $1 million contribution to the charitable foundation increased noninterest expenses, which could impact short-term financial performance.
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Guidance & Outlook
Future growth initiatives: The company is building on positive momentum from strategic investments in Wealth Management and Commercial Banking. This includes the addition of a dedicated institutional banking team to serve education, healthcare, and nonprofit providers in the Northeast region, which is expected to improve the balance sheet with high-quality C&I loans and strong deposit opportunities.
Branch expansion: A new branch is set to open later this year in Pawtucket, Rhode Island, one of the state's fastest-growing communities, to increase the company's presence in the northern part of the state.
Earnings enhancement: The ability to scale a high-quality new client base with an efficient staffing model is expected to enhance earnings going forward.
Tax rate projection: The full-year effective tax rate for 2026 is expected to be approximately 22%.
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Shareholder Return Plan
Dividend per share: $0.56 per share
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Key Q&A
Q:How sustainable is the mid-2.50% margin level moving into early 2026?
A:Ronald Ohsberg believes the mid-2.50% margin level is sustainable. He provided a full-year outlook on the NIM, expecting a 9 basis point increase in Q2 and another 4 basis points in Q3 due to a swap termination. Organic expansion is projected at 3-4 basis points per quarter, assuming no changes in the Fed funds rate, leading to a Q4 estimate of 2.78%-2.82%.
Q:How does the company view its credit reserve levels compared to peers?
A:William Wray stated that the company follows CECL guidelines and is comfortable with its mid-70 coverage range, despite being on the lower side compared to peers. Ronald Ohsberg added that the large residential portfolio impacts the weighted average reserve coverage, and they aim to reduce residentials over time.
Q:Are there wealth management opportunities, and does this include M&A?
A:Edward Handy clarified that the focus is on the institutional banking team serving the higher-end not-for-profit sector, particularly endowments and retirement funds, rather than M&A.
Q:What is the outlook on expenses for the upcoming year?
A:Ronald Ohsberg projected a 6% increase in Q1 expenses due to merit raises, FICA resets, and increased medical insurance. Year-over-year, all other expenses are expected to rise by 5%, with an additional $600,000 from a new branch opening in late summer or early fall.
Q:What is the outlook for loan growth?
A:Ronald Ohsberg expects 4%-5% growth in CRE and faster growth in the C&I team, with residential loans being a net runoff. Overall, a solid 5% year-over-year growth is anticipated. Edward Handy added that the new C&I team is expected to drive growth, though early prepayments have impacted recent performance.
Q:Can you provide details about the new C&I group?
A:Edward Handy mentioned the group consists of 4 people, led by an experienced leader with 30+ years in the Northeast region. They were previously at Brookline and will focus on the broader Northeast region. A treasury management specialist will be added to the team.
Q:What is the plan for branch expansion?
A:Edward Handy stated that the Pawtucket branch will open in 2026, and future investments may include alternative delivery methods like ATMs. Historically, the company has opened 1-2 branches per year, which is expected to continue.
Q:What is the status of the $6 million office classified loan?
A:William Wray explained that the loan matures in 2031, with occupancy in the mid-40% range and growing. The sponsors are committed, and the building is nearing breakeven. The loan is current and accruing.
Q:What is the company's stance on buybacks?
A:Ronald Ohsberg stated that buybacks are under constant consideration, depending on capital deployment needs. The current authorization has 582,000 shares remaining out of 850,000 authorized.
Q:What is the strategy for wealth management expansion?
A:Edward Handy highlighted the addition of business development officers and a focus on the nonprofit sector. M&A is not a primary focus due to high prices, but smaller tuck-in transactions are considered. The average fee structure is around 60 basis points, and a financial planning specialist has been added to enhance retention and appeal to next-generation clients.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer regarding the current authorization for buybacks, as Ronald Ohsberg did not have the information readily available. Additionally, Edward Handy did not provide specific details on the past performance of the new C&I group, stating that they had only been with the company for 9 days.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bancorp Inc
Chairman Chief
Commercial Banking
Corporate Communications
Director Marketing
Executive Vice
Financial
Handy
Marketing Corporate
Senior Executive
Trust Bancorp
Washington Trust
Wealth
asset quality
banking
basis point
community
credit loss
detail
end
expense
foundation
funding
income
investment
loan basis
loss asset
margin
market deposit
momentum
mortgage
staffing
wealth
WASH Transcript
Washington Trust Bancorp, Inc. (WASH) Q4 2025 Earnings Call Transcript
Positive1-29
The earnings call reflects positive momentum: strong revenue growth in wealth and mortgage banking, stable credit quality, and strategic investments in growth. Despite some expense increases, the company's financial health remains robust. The Q&A reveals confidence in sustaining margins and loan growth, with new initiatives in wealth management and commercial banking. While some uncertainties exist, like vague buyback plans, the overall sentiment is optimistic, supported by solid financial metrics and growth strategies. These factors suggest a positive stock price movement.
PrairieSky Royalty Ltd. (PSK:CA) Q3 2025 Earnings Call Transcript
Positive10-21
The earnings call reveals strong growth in oil and NGL royalty production, successful acquisitions, and efficient capital allocation with share repurchases. Despite low oil prices, the company maintains strong cash flow and debt management, with plans for further growth and acquisitions. Analysts' questions indicate confidence in the company's strategy and potential, although management was vague on some risks. Overall, the positive financial performance and strategic moves suggest a positive stock price movement.
Washington Trust Bancorp, Inc. (WASH) Q3 2025 Earnings Call Transcript
Unknown10-21
The earnings call shows mixed signals: positive elements like net interest income growth, share repurchases, and reduced nonaccruing loans are offset by concerns like significant charge-offs, reduced office property values, and lack of disclosure on client flows. The Q&A section reveals uncertainties about office property valuations and loan downgrades. The company expects modest loan growth and margin expansion, but the lack of additional buybacks and unclear responses in wealth management add caution. The overall sentiment is neutral, reflecting balanced positives and negatives.
Washington Trust Bancorp, Inc. (WASH) Q2 2025 Earnings Call Transcript
Unknown7-22
The earnings call summary presents a mixed picture. Basic financial performance is stable with strong capital ratios but declining net income. Product development shows some progress but faces challenges in wealth management. Market strategy is cautious with a focus on organic growth and potential expansion. Expenses are managed well with a focus on capital preservation. Shareholder return is limited with minimal buybacks. Q&A highlights potential risks in nonperforming loans and derivative income unpredictability. Overall, the sentiment is neutral, reflecting stability but limited growth prospects.
WASH Report
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