Washington Trust earnings rose 21% from the preceding quarter to $19.4 million in the third quarter of 2026, supported by higher net interest income and a wider lending margin. The bank announced the results on October 19, ahead of its October 20 earnings call, reporting diluted earnings of $1.01 per share.
Key Takeaways
- Net interest income increased 7% sequentially, while net interest margin widened 11 basis points to 2.84%.
- An office-loan restructuring reduced nonaccrual balances but also generated a $3.8 million charge-off.
- Deposits reached a record $5.4 billion as Federal Home Loan Bank advances declined.
Table of Contents
- Washington Trust earnings benefit from wider margins
- Fee growth includes an insurance gain
- Office-loan resolution improves credit measures
- Deposit growth reduces wholesale borrowing
- Conclusion
Washington Trust earnings benefit from wider margins
Washington Trust’s third-quarter 2026 results announcement showed diluted earnings per share increasing by $0.18 from the second quarter. Compared with the third quarter of 2025, net income rose by $8.5 million and diluted earnings increased by $0.45 per share.
Net interest income reached $44.7 million, up $2.9 million sequentially and 15% year over year. Average interest-earning assets increased by $104 million, their yield rose seven basis points, and the rate paid on average interest-bearing liabilities fell three basis points.
The improvement included $283,000 of previously unrecognized second-quarter interest associated with a resolved commercial real estate office loan. That receipt contributed approximately $0.01 per diluted share and two basis points to the quarter’s net interest margin, meaning part of the reported expansion came from the loan resolution.
| Item | Details |
|---|---|
| Return on average equity | 13.89% in Q3 2026, compared with 11.61% in Q2 |
| Return on average assets | 1.17%, compared with 0.99% in Q2 |
| Common equity tier 1 ratio | 11.93% at September 30, compared with 11.89% at June 30 |
| Book value per share | $27.82 at September 30, compared with $29.02 at June 30 |
| Quarterly dividend | $0.56 per share, paid October 9, 2026 |
Fee growth includes an insurance gain
Noninterest income increased 9% from the second quarter. Loan-related derivative income rose to $1.5 million, driven by increased commercial borrower demand for interest-rate swaps.
Income from bank-owned life insurance included a $954,000 nontaxable gain, equivalent to $0.05 per diluted share. Other fee businesses were softer: wealth management revenue declined 1% sequentially as seasonal tax-servicing fees fell, while mortgage banking revenue dropped 9%, reflecting a smaller mortgage pipeline and rising market interest rates.
Noninterest expenses increased just 0.5% from the preceding quarter. Salaries and employee benefits declined modestly, partly offsetting higher outsourced services costs.
Office-loan resolution improves credit measures
Nonaccrual loans fell to $24.5 million, or 0.48% of total loans, from $39.8 million, or 0.78%, at June 30. The principal driver was the restructuring of a $22.3 million commercial real estate office loan that had entered nonaccrual status in the first quarter.
The restructuring split the exposure, returning $18.5 million to accruing status and charging off $3.8 million. The lower problem-loan balance therefore reflected both a return to interest accrual and the recognition of a credit loss.
Total net charge-offs increased to $3.9 million from $55,000 in the second quarter. The provision for credit losses rose to $1.8 million from $1.6 million, while the allowance for loan losses declined to $40.5 million, or 0.78% of loans.
Deposit growth reduces wholesale borrowing
Deposits increased by $77.1 million from June 30 to a record $5.4 billion at September 30. Federal Home Loan Bank advances fell by $80 million to $376 million, reflecting deposit growth and the timing of liquidity-management activities.
Total loans rose by $61.8 million to approximately $5.2 billion, led by commercial real estate lending. The bank had no wholesale brokered deposits at quarter-end.
Shareholders’ equity nevertheless declined 4% to $530.8 million. Lower fair values for available-for-sale debt securities reduced accumulated other comprehensive income, while quarterly dividend declarations also offset earnings.
Conclusion
Washington Trust’s profit improvement combined stronger interest income with specific benefits from a loan resolution and an insurance gain. For the remainder of 2026, management’s stated outlook includes an approximately 21.5% full-year effective tax rate, compared with 20.4% in the third quarter.
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