WESTERLY – Washington Trust Bancorp Inc., the parent of The Washington Trust Co., is poised for higher profitability in 2026 as a costly interest rate swap is set to expire in April, Chairman and CEO Edward O. “Ned” Handy III said on Thursday.
The swap, which is a hedge against changing interest rates, has trimmed roughly $8 million from annual earnings since 2023, he noted a day after the company
released its fourth-quarter earnings.
“The expense stops at the end of April. So that's a benefit,” Handy said. “It's going to help our margin going forward.”
With that headwind ending, Washington Trust is targeting a net interest margin in the high-2% range this year, Handy said.
“We think 2.78% to 2.82%,” Handy said, referring to basis points.
Much of the bank’s improved performance in 2025 stemmed from a balance sheet restructuring completed in 2024, which initially weighed on earnings but ultimately positioned the company for more sustainable profitability.
“A lot of the significant change in our results came from the balance sheet restructure that we did, which was very much supported by our shareholders,” Handy said. “The results have turned out to be at least as good as we thought they would when we did the deal.”
Bank leadership emphasized Thursday that this improved financial performance supports the bank’s broader goal of remaining independent.
“Our goal is to be a top quartile performing financial institution,” said Mary Noons, the bank’s president and chief operating officer. “To stay independent is to provide strong returns for our shareholders. We’re doing everything we can to buy another 50 to 100 years of existence.”
That long-term focus comes as other local institutions reassess their identities and footprints, including Bank Rhode Island, which recently announced plans to change its name following the merger of Brookline Bancorp Inc. and Berkshire Hills Bancorp Inc. Handy said he sympathizes with the challenge of abandoning a locally rooted brand.
“Name, especially their name, BankRI, is a hard one, I’m sure, too, to give up,” he said. “I hope they do everything that they’ve been doing, and that they stay Rhode Island focused to some degree.”
Meanwhile, he added that Washington Trust’s own strategy remains tied to its community banking roots.
“We’re a community bank. We can serve our community in a more personal, high touch way than the big banks can do,” Handy said. “We’re a small bank, and we’ll treat you like a small bank will treat you. But we have the capabilities of banks much larger than us.”
One area of growth in 2026 will be a newly formed institutional banking team focused on lower-risk commercial clients.
“This new group is focused on a specific, relatively high quality, by that, I mean, low risk segment of the economy,” Handy said. “They tend to come with a lot of deposit opportunities.”
Although the team is newly assembled, Handy said early momentum has been encouraging.
“They hit the ground with zero pipeline. And already, in the first nine days, they’re looking at opportunities,” he said.
Washington Trust is also expanding its physical footprint with a new branch in Pawtucket.
“It’s a fast-growing community. It’s the third fastest growing city in the state, so why not be there? We’re thrilled to be there,” Handy said.
Executives also emphasized that the bank remains disciplined in where it deploys capital, particularly in commercial real estate.
“We don’t do a lot of land deals, we don’t do a lot of speculative housing, construction deals,” Handy said. “We’re not out looking for office loans.”
Instead, Washington Trust is betting that disciplined risk management, margin expansion and steady fee-based growth will allow it to compete without sacrificing independence.
“We think we’re very well positioned,” Handy said. “But we’re not trying to be something we’re not.”
Matthew McNulty is a PBN staff writer. He can be reached at McNulty@PBN.com or on X at @MattMcNultyNYC.
