WashTrust has 2Q gains, but they’re harder to reach

‘Even though the market is not expanding, we believe  there is more  for us to get.’
Joseph J. MarcAurele
Washington Trust Bancorp, chairman, president and CEO
‘Even though the market is not expanding, we believe there is more for us to get.’ Joseph J. MarcAurele Washington Trust Bancorp, chairman, president and CEO

The Washington Trust Co.’s growth mode appears to have downshifted a couple of gears as a result of increased competition and difficulties imposed by the state and national economy, even as the Westerly-based bank continued to report areas of improvement for the 2013 second quarter.
“Our management team understands the economic, regulatory and competitive pressures our industry faces and is meeting these challenges head-on,” Washington Trust Chairman, President and CEO Joseph J. Marc- Aurele said in a telephone conference to review second quarter 2013 earnings with financial industry analysts and media last week.
“What’s important to note is that our loan portfolio has grown steadily for 10 consecutive quarters, which is an accomplishment, considering the continued weakness in our local economy,” said MarcAurele.
The review of the bank’s second quarter of 2013 more than once balanced cautious optimism with some current and potential concerns.
“Washington Trust had another good quarter. However, we realize future results could be impacted by environmental challenges, including a slower than predicted economic recovery, renewed competitive pressures or sharp interest rate increases,” said MarcAurele.
The bank has not reached the limits of its growth cycle, MarcAurele told Providence Business News in a phone interview after the recap with the analysts.
“If you think about the market we primarily operate in, in Rhode Island, this market is really dominated by two large banks – Citizens and Bank of America. We’re third,” MarcAurele said. “They have almost, by most measures, 60-plus percent of the deposit market share. We have about 5, 6 or 7 percent.” That deposit share includes business and consumer deposits, he said.
“We really believe we have room to expand. Even though the market is not expanding, we believe there is more for us to get,” said MarcAurele. “Our job is to keep trying to chip away at additional market share for ourselves.”
Washington Trust Bancorp., parent of The Washington Trust Co., posted a 3.1 percent increase in net income for the second quarter of 2013 over the same quarter in 2012, according to the bank’s earnings report released July 22.
“Washington Trust posted another quarter of solid operating results, with a continuation of strong commercial loan growth and healthy mortgage banking activity,” said MarcAurele. “We continue to attract and build customer relationships across all business lines.”
The bank recorded second-quarter net income of $9 million, or 54 cents per diluted share, compared with profit of $8.7 million, or 52 cents per diluted share, in the second quarter of 2012.
At the same time, the bank reported a 2.5 percent year-over-year decline in total interest and non-interest income to $45.2 million.
Total commercial, residential and consumer loans increased 7.7 percent over the 2012 second quarter to $2.4 billion. Nonperforming assets totaled $21.7 million at the end of the period, however, representing an increase of 14.9 percent. The ratio of nonperforming assets to total assets increased to 0.71 percent from 0.62 percent over the 12-month period. In addition, the bank took a loan loss provision for the period of $700,000, compared with a $600,000 provision a year earlier.
Return on average assets for the second quarter came to 1.18 percent, an increase from 1.16 percent in the 2012 second quarter, although return on average equity fell to 11.84 percent from 11.98 percent in the same period. Net interest margin fell to 3.26 percent in the quarter from 3.3 percent a year earlier. Despite the year-over-year increase in loan activity, the bank did report that it experienced a decrease of $681,000, or 16 percent, in mortgage banking revenue for the second quarter, compared with the first three months of the year.
The decrease reflected “a lower level of mortgage loan refinancing activity due to rising market interest rates,” according to the bank, adding that it is paying close attention to that business line.
“The mortgage business is cyclical, so we recognize that we have to control the expenses in that business if volumes fall off, and there are a lot of ways to control expenses,” said MarcAurele. “Right now, volumes are holding.”
The bank is focused on maintaining a steady course despite market challenges, said Washington Trust Senior Vice President, Secretary and chief financial officer David Devault.
“Overall competitive pressures continue to be noticeable with yields on commercial loans,” said Devault.
Asked about the pipeline yield, Devault said, “There has been a general trend over the past couple of quarters of declining yield of new loans coming into the commercial portfolio. We are seeing a continued decline in the yield on newer loans. That’s what you’re seeing result in the changes in the margin.
“We think this is a problem facing the entire industry, and we’re doing everything we can to manage our way through this,” said Devault. •

No posts to display