Key Highlights

  • WASH shares were trading up 5.68% at $38.67, against a prior close of $36.59.
  • Third quarter EPS of $1.01 topped a consensus of roughly $0.87.
  • Revenue of $65.0 million rose 14.6% year over year.
  • Net interest Margin widened 11 basis points to 2.84%.
  • Nonaccrual loans fell to $24.5 million after an office Loan restructuring.

Margin Repair and Record Deposits Drive the Rally

Washington Trust Bancorp (NASDAQ:WASH) shares were trading up 5.68% at $38.67 on Tuesday, against a prior close of $36.59, after the bank beat third quarter estimates. EPS of $1.01 compared with a consensus of roughly $0.87, and Net Income of $19.4 million was up 21% from the second quarter. Revenue of $65.0 million was up 14.6% year over year and ahead of the $62.6 million expected.

The Rhode Island lender, founded in 1800, combines commercial banking with a large Wealth Management arm and operates in Rhode Island, Connecticut and Massachusetts. Net interest income rose 7% on the quarter to $44.7 million.

The net interest margin widened 11 basis points to 2.84%, and deposits reached a record $5.4 billion, up $77.1 million on the quarter. Borrowings from the Federal Home Loan Bank are down 52% from a year ago, and the bank holds no brokered deposits.

Office Loan Restructuring Cuts Nonaccrual Balances

Credit was the main swing factor. A $22.3 million office loan was restructured, with $18.5 million returned to accruing status and $3.8 million charged off. Nonaccrual loans fell to $24.5 million, or 0.48% of loans, from $39.8 million, and the allowance eased to 0.78% of loans.

Not all of the beat looks repeatable. A $954 thousand tax-free insurance gain added about $0.05 per share, and recovered interest from the same loan added about $0.01. Net charge-offs rose to $3.9 million, tangible Book Value per share of $24.27 missed estimates, and Mortgage banking revenue fell 9%.

Fourth Quarter Margin Guide, Higher Costs and Valuation

On the earnings call, management guided the fourth quarter margin to 2.85% to 2.90% and loan growth of about 10% annualized in commercial lending. It flagged roughly $1.5 million of higher fourth quarter expenses and said no Buybacks are planned in the near term.

Washington Trust has a market Capitalization of $737.57 million, a forward price-to-earnings ratio of 11.20 and a trailing ratio of 11.59, with trailing EPS of $2.88 and a Dividend Yield of 5.81%. The shares trade about 5% below the 52-week high of $40.54 and above the roughly $37.67 average analyst target cited before earnings. They had lagged regional banks over the prior month.

Can the Margin Keep Rising Without One-Off Support?

Washington Trust showed real progress on Credit and funding, and its margin trend suggests earnings could keep recovering. Roughly $0.06 per share came from items that may not recur, and a 2.84% margin leaves limited cushion. Investors may watch loan repricing, Commercial Real Estate performance, expense growth and whether the dividend of $0.56 per quarter stays well covered.