Washington Trust beats earnings estimates as full-year turnaround lifts shares
Regional bank expands net interest margin to 2.56% and completes $52.2M profit swing from 2024 loss
Washington Trust Bancorp on Wednesday reported fourth-quarter earnings that exceeded analyst expectations, capping a dramatic full-year turnaround that transformed a $28.1 million loss in 2024 into a $52.2 million profit for 2025.
The Rhode Island-based regional bank delivered diluted earnings per share of $0.83 for the final three months of 2025, beating Wall Street estimates by 37 cents. Net income reached $16 million for the quarter, according to the company's earnings announcement. The results represent a significant improvement from the same period last year, when the bank faced pressure from elevated credit costs and margin compression.
The standout performance came from net interest margin, which expanded 16 basis points sequentially to 2.56%, a key profitability metric for banks that has been under pressure across the industry. Loan loss provisions normalized to $600,000, a sharp improvement from earlier in the year when credit costs weighed on earnings. Asset quality also strengthened, with the bank demonstrating resilience in its loan portfolio despite broader economic uncertainties.
"We achieved sustainable growth positioning for 2026," the bank's management stated in the earnings release, pointing to the turnaround execution and improved operational efficiency.
The earnings beat comes as Washington Trust has been actively returning capital to shareholders. The company initiated a stock repurchase program in May 2025, authorizing the buyback of up to 850,000 shares, or approximately 4.4% of outstanding common stock. The board resumed repurchases in August, signaling confidence in the bank's recovery trajectory. The program is set to run through May 2026.
Shares of Washington Trust traded at $30.19 on Wednesday, giving the bank a market capitalization of approximately $578 million. The stock has a 52-week range between $23.53 and $31.93, reflecting the market's reassessment of the bank's prospects throughout the turnaround. Analysts have set an average price target of $31.67, according to market data, suggesting modest upside from current levels.
The quarterly dividend of $0.56 per share, which the bank declared for the quarter ending September 30, yields 7.4% at current prices—among the highest in the regional banking sector. Washington Trust has paid dividends for 42 consecutive years, demonstrating its commitment to shareholder returns through various market cycles.
The turnaround marks a reversal from the bank's struggles in 2024, when elevated credit provisions and net interest margin compression drove the full-year loss. Through 2025, management focused on improving credit quality, optimizing the deposit base, and expanding the bank's wealth management business, which grew 3% in the third quarter.
Regional banks have faced a challenging operating environment over the past two years, with higher interest rates initially squeezing margins before recent stability allowed for improvement. Washington Trust's margin expansion to 2.56% outperforms many of its peers, suggesting successful execution of its strategic initiatives.
Looking ahead to 2026, analysts project the bank will maintain profitability with an expected full-year EPS of $2.73. The combination of net interest margin stabilization, improving credit quality, and active capital return through both dividends and buybacks positions Washington Trust for continued recovery. However, the bank faces the same macroeconomic headwinds as the broader sector, including potential regulatory changes and the impact of slowing economic growth on loan demand.
The strong fourth-quarter performance validates the bank's turnaround strategy and provides evidence that the worst of the credit cycle pressures may have passed. For investors, the question now shifts from whether Washington Trust can recover to how much value the bank can create as it normalizes operations in a more favorable interest rate environment.