Washington Trust's Margin Expansion Continues

The Tip Desk · October 22, 2026 · 3 min read

Net interest margin reached 2.84% after a second straight quarterly expansion, lifting net interest income to $44.7 million.

Washington Trust Bancorp (WASH), parent of The Washington Trust Company, expanded net interest margin for a second consecutive quarter, lifting net interest income and returns on equity as a commercial real estate office loan returned to accrual.

Net interest margin rose 11 basis points to 2.84% in the third quarter of 2026, after a 10 bps expansion to 2.73% in the second quarter. Average interest-earning assets increased $104 million, with the yield up 7 bps. Average interest-bearing liabilities rose $52 million, and the rate was down 3 bps.

Net interest income was $44.7 million, up $2.9 million, or 7%, from the second quarter. That figure included $283 thousand of previously unrecognized second-quarter interest, equivalent to $0.01 a share and a 2 bps NIM benefit, tied to the CRE office loan that returned to accruing status.

The second-quarter margin expansion had included about 9 bps from two months of benefit after a terminated cash-flow hedge’s remaining deferred loss finished amortizing on May 1, 2026. The third quarter had no such amortization, which the company said would be a permanent run-rate improvement.

Net income was $19.4 million, or $1.01 a share, up $3.4 million, or 21%, from the preceding quarter. Return on average equity was 13.89% and return on average assets 1.17%. The efficiency ratio improved to 59.7% from 63.8%.

Asset quality improved after the $22.3 million CRE office loan, previously on nonaccrual, was restructured and bifurcated: $18.5 million returned to accruing status and $3.8 million was charged off. Nonaccrual loans fell to $24.5 million, or 0.48% of loans, from $39.8 million, or 0.78%. Past-due loans were $27.9 million, or 0.54%. Net charge-offs were $3.9 million, versus $55 thousand in the second quarter. The provision for credit losses was $1.8 million. The allowance for credit losses on loans was $40.5 million, or 0.78% of loans.

Noninterest income rose $1.6 million, or 9%, to $20.3 million. Loan-related derivative income was $1.5 million, up $924 thousand on increased commercial interest-rate swap demand. Income from bank-owned life insurance was $1.9 million, up $959 thousand, including a $954 thousand non-taxable gain. Wealth management revenues were $11.1 million, down $112 thousand, or 1%, as higher asset-based fees were offset by a seasonal decline in tax servicing. Mortgage banking revenues were $3.2 million, down $318 thousand, or 9%, on a smaller pipeline and higher market rates.

Noninterest expense rose only $200 thousand, or 0.5%, to $38.8 million. Salaries and employee benefits fell $188 thousand, or 0.7%. All other expenses rose $388 thousand, or 3%, largely on outsourced services.

Total loans were $5.2 billion, up $61.8 million, or 1%, from June 30, 2026. Commercial loans rose $62 million, or 2%, on CRE growth. Consumer loans rose $12 million, or 3%. Residential real estate loans fell $12 million, or 1%. Deposits reached an all-time high of $5.4 billion, up $77.1 million, or 1%. Noninterest-bearing deposits were $690.7 million, up $46.7 million, or 7%. FHLB advances fell $80 million, or 18%, to $376 million. Contingent liquidity was $2.1 billion.

Common equity tier 1 capital was 11.93% at September 30, 2026, up 4 bps from 11.89% at June 30. The board declared a quarterly dividend of 56 cents a share. The company expects its full-year 2026 effective tax rate to be approximately 21.5%.