Washington Trust Bancorp, Inc.

What they do

The Bancorp owns all of the common stock of The Washington Trust Company, a Rhode Island-chartered institution offering commercial banking, mortgage banking, personal banking, and wealth management and trust services. Lending is concentrated in southern New England, with total loans of $5.1 billion, or 78% of total assets, at December 31, 2025. The commercial portfolio was 54% of total loans, split 79% CRE and 21% C&I, while residential real estate loans were 40% of total loans.

Revenue drivers

• Commercial lending — Commercial loans were 54% of total loans at December 31, 2025, with CRE at 79% of that commercial book (43% of total loans) and C&I at 21% (11% of total loans); income is earned primarily as net interest income on these balances.
• Residential real estate lending and mortgage banking — Residential real estate loans, originated largely by commissioned mortgage originator employees, were 40% of total loans at year-end 2025, and mortgage banking revenues rose 14% in Q2 2026 versus Q1 2026 and versus Q2 2025, driven by higher sales volume.
• Wealth management and trust — Wealth management revenues increased 5% in Q2 2026 versus Q1 2026, including a $265 thousand increase in transaction-based seasonal tax servicing fees and a $289 thousand (3%) rise in asset-based revenues; revenues were up 11% versus Q2 2025.
• Deposit funding — Total deposits were $5.3 billion at December 31, 2025, and grew 4% from March 31, 2026 to June 30, 2026; the institutional banking team contributed meaningfully to overall deposit growth in Q2 2026.

Recent performance

Second quarter 2026 net income was $16.0 million, or $0.83 per diluted share, up $3.4 million and $0.17 per share from the preceding quarter and up $2.7 million, or $0.15 per share, from Q2 2025. Net interest income rose 3% from Q1 2026 and 12% from Q2 2025, with net interest margin of 2.73%, up 10 basis points sequentially and 37 basis points year over year. Noninterest income increased 8% sequentially and 9% year over year, led by a 5% rise in wealth management revenues and a 14% rise in mortgage banking revenues. Returns on average equity and average assets were 11.61% and 0.99%; the provision for credit losses was $1.6 million. Loan balances rose 2% and deposits 4% from March 31, 2026.

Strategy

Management highlighted the institutional banking team as a key driver of commercial and industrial loan growth and deposit gathering in Q2 2026. The bank is adding staffing in commercial banking, retail banking and wealth management, which lifted salaries and employee benefits expense 4% sequentially and 10% year over year. A terminated cash flow hedge was fully amortized as of May 1, 2026, which contributed $1.4 million to Q2 net interest income and is expected to permanently improve the earnings and margin run rate with no ongoing amortization expense. Management cites a common equity tier 1 ratio of 11.89% at June 30, 2026 as supporting confidence in the outlook for the remainder of 2026. The company also reports adjusted (non-GAAP) results that exclude items such as securities losses, loan sale losses, property sale gains, litigation settlement income, and a pension plan settlement charge.

Risks

• Interest rate sensitivity — Earnings depend on net interest income, and the 10-K notes that loan prepayments decline and depositors shift to higher-cost accounts when rates rise, while prepayments increase and proceeds reinvest lower when rates fall.
• CRE concentration — CRE loans were 43% of the total loan portfolio at December 31, 2025, and the 10-K notes CRE loans frequently involve larger balances to single borrowers or groups of related borrowers.
• Credit losses — The company recorded a $1.6 million provision for credit losses in Q2 2026, and its risk factors cite the possibility that future credit losses exceed current expectations due to economic assumptions or adverse developments.
• Wealth management asset outflows — The 10-K and 10-Q risk factors specifically flag reductions in the market value or outflows of wealth management AUA as a factor that could cause actual results to differ.

Outlook

Management said the Q2 2026 results reinforce its confidence in the outlook for the remainder of 2026 and in its ability to deliver sustainable, profitable growth, citing strong capital and commercial and deposit momentum. The bank expects no further hedge amortization expense beginning in the third quarter, which it describes as a permanent improvement to earnings and margin run rate. It expects a full-year 2026 effective tax rate of approximately 21.5%, after a 21.2% rate in Q2 2026.