Thank you, Hilary. Good morning, and welcome to Washington Trust Bancorp, Inc.'

s Conference Call for the second quarter of 2026. Joining us this morning are members of Washington Trust's executive team, Ned Handy, Chairman and Chief Executive Officer; Mary Noons, President and Chief Operating Officer; Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer; and Bill Wray, Senior Executive Vice President and Chief Risk Officer.

Please note that today's presentation may contain forward-looking statements, and our actual results could differ materially from what is discussed on today's call. Our complete safe harbor statement is contained in our earnings release, which was issued yesterday as well as other documents that are filed with the SEC.

All these materials and other public filings are available at our Investor Relations website at ir.washtrust.com. Washington Trust trades on NASDAQ under the symbol WASH.

I'm now pleased to introduce today's host, Washington Trust's Chairman and Chief Executive Officer, Ned Handy. Ned?

Thank you, Sharon. Good morning, and thank you for joining our second quarter conference call.

We appreciate your time and your continued interest in Washington Trust. I'll begin with a brief overview of our second quarter results, and then Ron will provide more detail on our financial performance for the quarter.

Following our remarks, Mary and Bill will join us for the question-and-answer session. We delivered strong results in the second quarter as disciplined execution across the company drove higher profitability and solid loan and deposit growth.

Our institutional banking initiative helped drive an increase in our commercial and industrial loan book and overall deposits. Our capital levels remain strong and supportive of additional expected loan growth.

We are planning to open our 30th branch later this year in Bristol, Rhode Island, providing greater access for consumers and businesses in the East Bay and Southeastern Massachusetts. We're also finalizing the build of our new Pentucket branch and are excited to have both locations open soon.

We are on target to roll out an enhanced digital banking solution for our small business customers this fall and continue to look for ways to leverage technology to provide greater security, convenience and choice for our customers. In April, we welcomed Jeff Wilhelm to our Board.

Jeff has more than 25 years of experience in digital innovation, and we're excited to draw on his expertise in AI and cybersecurity as these areas continue to grow in importance across the financial services industry. Overall, we are pleased with our second quarter performance and the direction of our business.

Strong earnings growth, margin expansion and balance sheet growth position us well as we continue to invest in our franchise, expand our presence in key markets and enhance the customer experience. With that, I'll turn the call over to Ron to provide additional detail on our financial results.

Ron?

Thanks, Ned, and good morning, everyone. In the second quarter, we reported net income of $16 million or $0.83 per share, up by $3.4 million or $0.17 from the preceding quarter.

Pre-provision pretax net revenue or PPNR, was up 9% from Q1 and up 23% year-over-year. Net interest income was $41.8 million, up by 3% from Q1 and up by 12% year-over-year.

The margin was 2.73%, up by 10 basis points from Q1 and up by 37 basis points year-over-year. On May 1, the remaining deferred loss from a terminated hedge was fully amortized, eliminating this expense from the bank's ongoing run rate.

The second quarter captured only a 2-month benefit from ending this amortization expense as 1 month of amortization remained in April. The second quarter benefit to net interest income and NIM was $1.4 million and 9 basis points.

In the third quarter, we will realize the third month of benefit totaling approximately $700,000 or 4 basis points compared to Q2. Noninterest income was up by $1.4 million or 8% compared to Q1 and up by 9% year-over-year.

Wealth management revenues were up $554,000 or 5% compared to Q1 and increased by $1.1 million or 11% year-over-year. Q2 included an increase of $265,000 in transaction-based revenues, largely reflecting seasonal tax servicing fee income.

Asset-based revenues were up by $289,000 from Q1. Mortgage banking revenues totaled $3.5 million, up 14% from the first quarter and also up 14% year-over-year.

Our mortgage pipeline at June 30 was $121 million, up by $7 million or 6% from the end of March. Noninterest income totaled $38.6 million in Q2, up by 2%.

Salaries and benefits expense was up $972,000 or 4%, reflecting staffing additions in our commercial and retail banking business lines as well as volume and performance-related compensation changes. All other categories of noninterest expenses decreased by a net $140,000 in the second quarter.

Our effective tax rate was 21.2%, and we expect our full year 2026 rate to be approximately 21.5%. Turning to the balance sheet.

Total loans were up 2% from March 31. Total commercial loans increased by $63 million, driven by growth in the commercial and industrial loan portfolio, mainly from our institutional banking team.

Commercial real estate had solid production in Q2, but this was more than offset by payoffs. The commercial pipeline is approximately $143 million.

Residential loans increased by $13 million and consumer loans were up by $12 million. Deposits were up 4% from the end of Q1 and up by 6% year-over-year.

Wholesale funding was down $120 million or 21% from the end of March, and our loan-to-deposit ratio improved from 96.9% to 95.1% at June 30. Total equity amounted to $554 million, up by $7 million from the end of Q1.

The dividend remained at $0.56 per share. Turning to asset quality.

Overall, our Q2 asset and credit quality metrics were stable. At June 30, nonaccruing loans were 78 basis points against total loans, decreasing from 81 basis points at the end of Q1.

Past due loans were 81 basis points, up from 33 basis points at the end of Q1. The increase was attributable to a single commercial real estate office loan that had already been placed on nonaccruing status in the preceding quarter and did not reflect further deterioration in portfolio credit quality during the quarter.

In the second quarter, we recognized a $1.6 million provision for credit losses. The allowance totaled $42.6 million or 83 basis points against total loans.

And at this time, I will turn the call back to Ned.

Ron, thanks very much. At this point, we'll open it up to questions, Hilary.

Just wanted to start out on loan growth. Certainly, a really nice result here that you called out.

And you talked about the contribution out of C&I and the institutional team. So just curious if you could talk a bit more about that group, what the runway there looks like and just how sustainable you think the result we saw this quarter could end up being?

Yes. Thanks, Justin.

The group had a great quarter. And we expect -- and commercial loans in general were up 2.4%.

So we expect that kind of rate to continue in the coming quarters. The Institutional Banking group is growing its pipeline.

I think from quarter-to-quarter, there will be a balance between the Institutional Banking Group and CRE. Third quarter generally is a little slow in the not-for-profit space.

So we may see a little bit more of that growth come out of the CRE group than out of Institutional Banking. But I think there's a good balance there.

And yes, we're sticking with the mid-single-digit overall loan growth for the year. And I think as we said in the prior quarter, that will be led by Institutional Banking Group and C&I in general.

And so is it really -- when you look at that Institutional Banking group and specifically, I guess, this quarter, is it really the contribution coming from the not-for-profit space? Or how diversified is that beyond that arena?

Yes, it really is. And in the quarter, it was largely educational in nature, and we expect that to be the kind of the leader in that group.

Again, good loan growth, good deposit growth. Average assets, some of that loan growth happened towards the end of the quarter.

So that obviously had an effect on net interest income, but nice to have those loans on the book. And we expect for the third quarter that, that nonprofit activity to be the driver for the institutional group.

But as I said, third quarter generally tends to be a little bit slower in that space. And so we'll see the overall growth led in the quarter probably by commercial real estate.

Okay. And then I guess on that, on commercial real estate, you called it out as well, but payoffs again sort of a headwind this quarter.

Is there kind of a line of sight that, that should slow? What kind of gives you confidence that will be able to kind of take the torch from maybe a softer quarter on the C&I side?

Yes. The pipeline is good.

And yes, there were -- the credit formation in the quarter was about -- between construction and new loans was about $100 million. Payoffs were a little bit above that and led by CRE at $112 million.

We think with a little bit of upward pressure in rates, cap rates probably move -- outright sales probably slow a little bit. We expect that payoff rate to slow a little bit, but the pipeline is good.

And so we expect that we'll have net growth in the third quarter, certainly in the real estate space. Overall, formation was about $214 million in the quarter.

So we're really happy with the level of activity and payoffs and paydowns were about $150 million. So it's a little bit of slowdown in the payoff and continued pace on the new originations and a little -- our construction book is down a little bit, but we still see some construction advances in the quarter.

So I'm confident that we'll hit that same kind of 2.5-ish percent C&I commercial growth overall in the quarter. And then obviously, the lead time on the not-for-profit space can be a little longer.

So we're while there may not be fundings at the same level in Q3, the pipeline is certainly being built.

Okay. Got you.

That's helpful. And then, Ron, maybe just one on the margin.

You'll get the full benefit of the swap termination in the third quarter. Just wondering if you could comment just on expectations for the NIM trajectory through the balance of the year just beyond that benefit.

Yes. We're looking at, say, 2.75% for Q3 and 2.80% for Q4.

Okay. Great.

That is super helpful. And then maybe just one last one.

Just on wealth. You saw the nice lift in AUM levels.

And so I guess with the move in the market that we saw last quarter, can you provide a little detail on what net flows look like and just how you're thinking about the trajectory looking ahead there?

Yes. We actually set a record in the quarter on wealth assets under management.

And you can see that we do disclose our overall assets. We're not really breaking out the flows, but I would say that we're pretty pleased with the overall performance of the business.

Ron, just a quick follow-up on the margin. I appreciate the guidance for the next couple of quarters.

But I know part of the benefit here in the third quarter is from the interest rate swap component of it. But could you just give a little perspective on kind of how you're feeling about like deposit pricing trends this quarter and kind of going forward?

Are you seeing competition picking up? You had a little bit of a decline this quarter.

Is that sustainable? Just a little bit more color around some of the dynamics that give you the confidence for further margin expansion.

Yes. So on the liability side, I would say most of our CDs and FHLB have kind of repriced, there's repriced down.

There's probably a little bit left to go. I think on the deposit side, we're really focused on trying to improve our mix.

I think that the institutional banking team is expecting to self-fund about 35% of their production that should help our mix going forward and give us some help on that side. So that's kind of how we're thinking about it, Damon.

Does that answer the question?

Yes, that's helpful. And then on the asset side, was the increase this quarter, was that attributable to some of the back book repricing?

Or kind of what were some of the dynamics in the increase there? Or is that all tied to the interest rate swap?

Most of it was the swap. There is an undercurred back book.

We have the big mortgage book that we're still trying to amortize down. So that is giving us some benefit going forward.

I think if the yield curve continues to steepen up a little bit, that should help as our new production comes in. And the mortgage amortization is a little bit of a slow grind, but it's there, and it's helping us as it goes off.

Coming into the year, we were somewhat hopeful that maybe rates would come down and we'd see a pickup in refi activity and maybe some prepayments on that. But that hasn't happened yet.

But the amortization is real, and that should give us a little bit of a tailwind.

Got it. Okay.

Great. And then on the expense side, can you give a little perspective on the back half of the year?

I think you called out that comp and benefits were up a little bit higher from some hiring and ongoing operational costs. So I guess can you keep it under the $39 million level kind of in the back half of the year per quarter?

Or what's the outlook there?

Yes. I would say we're expecting our third quarter expenses to be up about another $1 million.

Some of that is mortgage volume related. We've got the branches coming online that we talked about later this year.

So that will add a couple of hundred thousand in the third quarter and then another couple of hundred thousand in the fourth quarter as those start to roll in. Some open positions we still have that we intend to fill and maybe some timing on the advertising expense.

So right now, I would say we're looking at like $1 million increase in Q3, which would put us just under $39 million.

I just wanted to go back to loans here. So the C&I growth, and I just want to make sure I understand this so and I appreciate the breakdown here you have on Page 13.

But it looks like education loans going from $54 million to $135 million. Can you just take us through exactly what those loans are to?

Are they small private colleges? I mean how should we be thinking about that?

They are schools. They are not colleges.

They're more high school oriented. They're obviously not-for-profit, very well heeled with strong deposit relationship included and very strong operations from the schools.

Okay. And then of that $135 million, how much is college?

Is it any amount of that? Or is that a focus?

I'm sorry, did you say it's college?

Right. Of the $135 million, so the growth was [indiscernible], but I'm just wondering, the $135 million, is there any colleges in that bucket?

And is that a focus?

No, it is a focus, but none of the existing volume is to colleges. It is a focus, though we have a few in the pipeline that we're exploring.

But the group has looked at just order of magnitude, something in the neighborhood of $700 million of opportunities. And we either don't compete on rate or for other reasons, credit related or otherwise, we pass.

So they're seeing a lot of opportunities as we expected, and we're being fairly careful. We have looked at a couple of colleges, Laurie, and have not won a couple of them, have passed on a couple of them.

So it's in the mix. These guys have been at it for a long time.

They have access to the opportunities, but they also have a really good sense of where the market is and where our best opportunities lie.

Okay. Got it.

And then just sort of extrapolating, so most of the jump that you had in the noninterest-bearing demand deposit category was tied to that growth. Is that the right way to think about that?

Yes, I think that's fair, Laurie.

Okay. Okay.

And then just as we look further out, the C&I is 13% of your loan book, up from 11% last quarter. Where does that percentage go if we look out a year or 2 years, how do you think about that?

Yes. So Laurie, we expect over the next, call it, 18 months that C&I is going to grow at a faster pace than everything else in our loan book.

So I think CRE is going to return to kind of normal kind of growth rates that we saw several years back. And then -- but C&I, I think, is the main growth engine.

They're both going to grow. And I would say that the C&I will grow at a somewhat faster pace than the CRE.

Okay. I mean just to quantify that, obviously, just linked quarter, you were up 17%, almost 70% annualized.

I mean what should -- and obviously, you had an exceptional quarter here. But how should we think about that growth?

I mean, can you help us think a little bit about what that looks like this year, next year or however you want to quantify that?

Well, yes. So I think we're where we -- the position we're trying to put ourselves in is to have sustainable growth comparable to what we just posted in Q2.

And we believe that we are on that path to do that, Laurie.

And remember, on the C&I side, the existing C&I book is relatively small and the Institutional Banking group has no risk of payoffs. So that's pure net growth.

So the percentage growth is a little misleading. It's going to be the leader.

It's going to help on the deposit growth side. But we expect both CRE and C&I overall, including Institutional Banking Group to kind of lead the charge.

Okay. Okay.

And a quick question on office. Obviously, things are looking good there.

I know you've got that Class B $3.8 million special mention coming due this next quarter. Do you have any kind of update on that?

Or has that been pushed out that maturity? How should we think about that?

We're in discussion with the sponsor, well known to us, long-standing relationship with the bank. It's got some long-term state leases in it.

So we feel comfortable about where this is and where it's going to go. We're obviously in active discussions right now.

Thank you, Hilary, and thank you all for your questions and for joining us this morning. As we look ahead, we remain focused on disciplined growth, prudent risk management, delivering exceptional service to our customers and communities and creating long-term value for our shareholders.

We appreciate your continued interest in Washington Trust and your support of our company. We look forward to speaking with you again next quarter.

Have a great day, everyone.