Washington Trust Q3 2026 Earnings: Net Income Rises as Margin Expands

Washington Trust (NASDAQ: WASH) reported Q3 2026 total revenue of approximately $65.0 million, up about 15% from $56.5 million a year earlier, while diluted EPS increased to $1.01 from $0.56. Net income rose 79% to $19.4 million as net interest income expanded and the provision for credit losses fell sharply year over year. The quarter also included a $954,000 nontaxable bank-owned life insurance gain and $283,000 of previously unrecognized interest income.

Core Earnings Data

The year-over-year profit increase reflected a $5.9 million rise in net interest income, a $2.6 million increase in noninterest income, and a $5.0 million reduction in the credit-loss provision. These benefits more than offset a $3.1 million increase in noninterest expenses.

Profitability ratios also improved. Return on average assets rose to 1.17% from 0.64%, while return on average equity increased to 13.89% from 8.14%.

Total revenue is calculated as net interest income plus noninterest income because the bank does not present a separate consolidated revenue line.

Business and Portfolio Performance

Wealth management revenue was $11.1 million, up 7% year over year but down 1% from the preceding quarter. Higher asset-based revenue was offset sequentially by a seasonal decline in tax servicing fee income. Wealth management assets under administration reached $7.92 billion, up 3.1% from a year earlier.

Mortgage banking revenue declined 10% year over year to $3.2 million even though total mortgage originations increased 11% to $192.9 million. Net fair-value changes were negative $188,000, compared with a positive $530,000 a year earlier. For the sequential revenue decline, Washington Trust also cited a smaller mortgage pipeline and rising market interest rates.

Other fee-income categories made a larger contribution. Loan-related derivative income rose to $1.5 million from $271,000, driven by increased commercial borrower demand for interest-rate swaps. Bank-owned life insurance income increased to $1.9 million and included a $954,000 nontaxable gain.

Period-end loans were $5.16 billion, up 1.2% from June and 0.8% year over year. Commercial loans increased 2.3% sequentially, led by commercial real estate, while residential real estate loans declined 0.6% and consumer loans grew 3.4%.

Profitability and Balance Sheet

Net interest margin expanded 11 basis points from the preceding quarter. The yield on average interest-earning assets increased seven basis points, while the rate on average interest-bearing liabilities declined three basis points. Average interest-earning assets grew by approximately $104 million.

The reported margin included a two-basis-point benefit from $283,000 of previously unrecognized second-quarter interest tied to the resolution of a commercial real estate office loan. Excluding that specific benefit, the quarter still showed sequential margin improvement.

Deposits reached $5.44 billion, increasing 1.4% from June and 4.1% year over year. Washington Trust had no wholesale brokered deposits at quarter-end. Federal Home Loan Bank advances fell 18% sequentially to $376 million and were down 52% from a year earlier, reflecting deposit growth and the timing of liquidity management activities. Contingent liquidity totaled $2.09 billion.

Shareholders’ equity declined 4.1% sequentially to $530.8 million despite quarterly earnings. The decline was caused by a $32.4 million reduction in accumulated other comprehensive income, primarily reflecting lower fair values for available-for-sale securities, as well as dividend declarations. Book value per share fell to $27.82 from $29.02, while the estimated common equity Tier 1 ratio edged up to 11.93% from 11.89%.

One Office Loan Improved Credit Metrics but Drove the Quarter’s Charge-Off

The resolution of a $22.3 million commercial real estate office loan materially affected several Q3 credit and earnings metrics. Washington Trust restructured and divided the loan, returning $18.5 million to accruing status while charging off $3.8 million. The resolution also generated the $283,000 interest-income benefit included in the quarter.

Nonaccrual loans consequently declined to $24.5 million from $39.8 million in June, and the nonaccrual-loan ratio improved to 0.48% from 0.78%. Past-due loans fell to $27.9 million from $41.4 million. However, nonaccrual loans remained above the $14.0 million reported a year earlier.

The office-loan charge-off drove total net charge-offs to $3.9 million, compared with only $55,000 in the preceding quarter. The allowance for credit losses declined to $40.5 million, or 0.78% of loans, from $42.6 million and 0.83% in June, as charge-offs exceeded the quarter’s $1.8 million provision.

Guidance

Washington Trust’s only quantitative outlook in the release concerned taxes. The company expects its full-year 2026 effective tax rate to be approximately 21.5%, compared with an actual Q3 rate of 20.4%.

Recent Insider Transactions

Separate insider data for the last six months categorized 49,401 shares across 13 transactions as purchases and 885 shares across two transactions as sales, resulting in net purchases of 48,516 shares. The latest ten records included eight director stock-award grants at a reported price and value of zero, so the purchase total should not be interpreted entirely as open-market buying.

The two reported sales in those latest records were as follows:

The provided insider extract did not specify a currency or unit for its value field. Handy’s reported value of 35 is reproduced without adjustment, and neither transaction by itself establishes an insider view on the company’s outlook.

Risks for Investors to Watch

• Commercial real estate credit remains relevant. Office loans totaled $208.1 million, and approximately 61% were scheduled to mature before September 30, 2028. Although quarterly nonaccrual balances improved, they remained 75% above the prior-year level.
• Some margin improvement came from a discrete item. Previously unrecognized interest added two basis points to Q3 net interest margin, so future margin trends will depend more directly on asset yields, funding costs, and balance-sheet mix.
• Mortgage revenue remains sensitive to rates and pipeline changes. Mortgage originations grew year over year, but mortgage banking revenue declined because of unfavorable fair-value changes, while management cited rising rates and a smaller pipeline in the sequential comparison.
• Operating costs are rising. Salaries and employee benefits increased 11% year over year, and outsourced services expense rose 12%, partially offsetting the benefit of higher revenue.
• Interest-rate movements are affecting reported equity. Lower securities values reduced accumulated other comprehensive income and contributed to the sequential decline in book value per share.

Conclusion

Washington Trust’s Q3 2026 earnings improved primarily because of a wider net interest margin, higher fee income, and a much lower credit-loss provision than a year earlier. Deposit growth and reduced reliance on FHLB advances strengthened the funding profile, while the resolution of one office loan improved reported credit metrics but also caused most of the quarter’s charge-offs. The next areas to monitor are the durability of margin expansion, commercial real estate credit performance, mortgage banking revenue, and expense growth.