Wash Trust expansion leads to record profit

THANKS TO INCREASES in mortgage originations and wealth management income, The Washington Trust Co. posted record earnings for 2012.
THANKS TO INCREASES in mortgage originations and wealth management income, The Washington Trust Co. posted record earnings for 2012.

Rhode Island’s weak economy and sluggish housing market are not keeping Westerly-based Washington Trust Bancorp Inc. from continuing its momentum of increased earnings, as the parent of The Washington Trust Co. reaped the benefits of its strategic expansion into healthier markets in Massachusetts and Connecticut.
Washington Trust posted record earnings of $35.1 million for 2012, an 18 percent increase in net income compared with 2011, according to the bank’s earnings release on Jan. 30. Diluted earnings per share totaled $2.13 in 2012, an increase of 17 percent over the 2011 total.
“Virtually every line of business performed better in 2012 than in 2011,” Washington Trust Chairman, President and CEO Joseph J. MarcAurele said in a telephone interview with Providence Business News.
The company’s total interest and noninterest revenue of $186.3 million in 2012 represented a 7 percent increase over the corresponding 2011 total. That growth was driven entirely by non-interest income, which increased 23.6 percent to $65.2 million even as interest income declined by little more than one-tenth of a percent.
A key to the growth of noninterest income was the expansion of mortgage-origination offices out-of-state.
“We opened residential mortgage-origination offices in Massachusetts – one in Burlington and one in Sharon. We also opened one in Glastonbury, Conn.,” MarcAurele said. “In addition, we have very aggressively added to our Rhode Island mortgage-origination staff.”
The physical expansion resulted in growth of residential mortgage originations as well as the sale of the mortgages into the secondary market, said MarcAurele, resulting in greater fee revenue.
Rhode Island’s largest independent bank, with $3.1 billion in assets, Washington Trust grew commercial lending by 11 percent over the past year as well. “Commercial mortgages made up more than half of the 11 percent growth,” MarcAurele said. “We’re taking advantage of the robust commercial real estate market in Massachusetts and Connecticut.”
He also noted that “wealth management fees grew very well over the year,” adding to a 4.7 percent rise in wealth management income to $29.6 million, a record.
In fourth-quarter results, Washington Trust’s net income climbed to $9 million, a rise of 16 percent from the same 2011 period, as earnings per diluted share 55 cents in the period, compared with 47 cents per diluted share a year earlier.
Growth in residential mortgages was a highlight of Washington Trust’s strong performance in the fourth-quarter as well, with residential mortgage origination volume and mortgage banking revenue reaching an all-time quarterly high at $4.5 million, a 28 percent increase over the third quarter.
“The challenge for us is to repeat and improve upon that during 2013, when the economy is still challenged,” MarcAurele said.
Overall, he sees the New England economy improving, particularly the Greater Boston area.
“I also think Rhode Island is getting better. We’ve gone from just stabilizing to starting to see some growth, and some optimism, particularly our small- and middle-market customers, who are mostly the owners of businesses,” MarcAurele said. “We’re starting to see a little more investment.”
Washington Trust’s expansion plans will be “very measured and controlled.”
“I wouldn’t preclude us from opening branches of either type during this year. For us, it’s about finding the correct location that expands our market,” MarcAurele said. •

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