Wash Trust beats earnings estimates

William Hamilton

07/21/2009

WESTERLY – Washington Trust Bancorp Inc., parent of The Washington Trust Co., today posted a second-quarter profit of $3.77 million, down 38.2 percent from the year-ago period’s $6.1 million.
Earnings per diluted share declined to 23 cents from 45 cents from the second quarter 2008. The result beat the consensus estimate from analysts who follow Washington Trust (Nasdaq: WASH), which was 20 cents, according to Yahoo! Finance.
The bank recorded $44.88 million in revenue from April 1 to June 30, down 2.84 percent from $46.19 million a year ago.
Earnings for the first half of 2009 totaled $6.44 million, down 45.97 percent from the $11.91 million in the first six months of 2008.
Washington Trust said its second-quarter earnings were hurt by Federal Deposit Insurance Corporation premiums that were $1.89 million higher than a year ago – including a $1.35 million special assessment, or $869,000 after tax, which the bank said cut its earnings by 5 cents per diluted share.
The bank also noted that its loan-loss provision – funds set aside for anticipated bad loans – was $3 million, more than double the $1.4 million a year, and up from $1.7 million in the previous quarter.
Washington Trust has set aside $4.7 million for bad loans in the first six months of 2009, compared with the $1.85 million it added to its loan-loss provision in the first half of 2008.
Also, the bank did not receive a dividend from the Federal Home Loan Bank of Boston in the second quarter, compared with the $344,000 dividend from a year earlier.
“The economy remains challenged both locally and nationally,” said John C. Warren, Washington Trust’s chairman and CEO, in a statement accompanying the bank’s results. “In this environment, we will continue to maintain our focus and discipline.”
Troubled assets in the bank’s loan portfolio continued to grow in the second quarter.

Washington Trust said nonperforming assets – typically loans and leases that are more than 90 days overdue – climbed to $24.78 million as of June 30, up from $17.54 million three month earlier and $6.18 million a year ago. Those nonperforming assets amounted to 0.85 percent of total assets, compared with 0.60 percent as of March 31 and 0.23 percent on June 30, 2008.
The bank’s financial statements released today show that loans 60 to 89 days past due shot up from $820,000 on March 31 to $5.42 million on June 30.
Net charge-offs – loans that the bank has determined are uncollectible – for the second quarter were $1.45 million, up from $927,000 in the previous quarter, and up sharply from $161,000 in the year-ago period.
The earnings report issued by the bank today repeated a statement, nearly verbatium, from three months ago:
“We believe that the declining credit quality trend is primarily related to a general weakening in national and regional economic conditions and that this may continue for the next few quarters,” the bank said. “Management will continue to assess the adequacy of the allowance for loan losses in accordance with its established policies.”
Wealth management, long a bright spot for Washington Trust, showed some signs of strain “due to lower valuations in the financial markets,” the bank said.
That segment posted $5.95 million in revenue, down $1.70 million – or 22 percent – from the year-ago income of $7.65 million.
Washington Trust did experience gains on loan sales and commissions on loans originated for others, recording $1.6 million in revenue, up $1.1 million from the second quarter 2008 “due to strong residential mortgage refinancing and sales activity,” the bank said.
Washington Trust noted that commercial loans continued to grow, rising $39 million in the second quarter.
As of June 30, Washington Trust’s total assets were $2.92 billion, down $45.66 million from $2.97 billion three months earlier.
The bank’s returns on average equity and average assets for the second quarter were 6.22 percent and 0.52 percent, respectively, compared with 12.88 percent and 0.92 percent, respectively, for the same period in 2008.
The bank’s net interest margin widened to 2.45 percent in the period ended June 30, up six basis points from the first quarter but down 26 basis points from a year ago.
The Washington Trust board of directors declared a second-quarter dividend of 21 cents per share, the same as the preceding quarters.
Washington Trust Bancorp Inc. (Nasdaq: WASH), based in Westerly, is the parent of The Washington Trust Co., a Rhode Island-chartered bank founded in 1800 that has offices in Rhode Island, Massachusetts and southeastern Connecticut. Additional information is available at www.washtrust.com.