WESTERLY – Washington Trust Bancorp Inc., parent of The Washington Trust Co., today announced third-quarter net income of $6.6 million, up 13.0 percent from its $5.8 million earnings in the third quarter of 2005. Per diluted share, the quarter’s net income was 48 cents, up 5 cents, or 11.6 percent, from the 43 cents in the year-ago period.
For the nine months ended Sept. 30, net income was $18.8 million, up from $16.9 million for the same period a year ago. Per diluted share, net income was $1.37 for the first nine months of the year, up 13 cents from the year-ago period’s $1.24 per share.
Certain “non-core” items affected the computation of earnings in accordance with generally accepted accounting principles (“GAAP”) in 2005 and 2006, Washington Trust said in its news release. The following are included (net of tax) in the reported earnings:
* The corporation received an additional quarterly dividend of about $305,000 (2 cents per diluted share) in the third quarter of 2006 from the Federal Home Loan Bank of Boston (“FHLBB”), because the FHLBB had delayed its normal second-quarter dividend.
* It recorded $247,000 (2 cents per diluted share) in net realized losses on sales of securities in the quarter just ended, in connection with securities portfolio deleveraging and other portfolio transactions.
* Acquisition-related costs of $440,000 (3 cents per diluted share) were recognized in the third quarter of 2005.
Excluding those non-core items, adjusted net income for the quarter ended Sept. 30 was $6.5 million up 4.1 percent from the year-ago period;adjusted earnings per diluted share were $0.48, up $0.02, or 4. 4 percent.
For the first nine months the year, adjusted net income was $18.8 million, up 8.5 percent from the same period in 2005; adjusted earnings per diluted share for the period were $1.37, up $0.10, or 7.9 percent, from the first three quarters of 2005.
“The third-quarter earnings represent a continuation of the strong financial results we have experienced in 2006,” said John C. Warren, Washington Trust’s chairman and chief executive officer.
“More recently, however, loan demand has been weak, competition for loans and deposits has intensified and the inverted yield curve continues to apply pressure to our margins. While these conditions may continue to create a difficult banking environment, we will remain focused on managing our company to enhance the long term value of our shareholders.”
Net interest income for the third quarter was $15.9 million, up $506,000 year-over-year. That includes a catch-up for the delayed second-quarter dividend on the corporation’s investment in FHLBB stock of about $450,000. Excluding the impact of the additional FHLBB dividend, adjusted income was $15.4 million, essentially unchanged from the year-ago period.
The net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) for the third quarter of 2006 amounted to 2.86 percent. The additional FHLBB dividend represented approximately 8 basis points of that margin. Excluding the effect of the delay of the second quarter FHLBB dividend until the third quarter, the net interest margin was down 5 basis points from the second quarter, but unchanged from the year-ago period.
The continued rise in short-term rates this year has caused deposit costs to rise while yields on loans and securities have remained relatively flat, the corporation said, adding that it anticipates this trend will continue.
Excluding net realized gains and losses on securities, noninterest income amounted to $11.1 million for the third quarter of 2006, up 33 percent from the same quarter of 2005. The corporation cited higher revenues from wealth-management and trust services, mainly due to the acquisition of Weston Financial Group Inc. (“Weston Financial”), which it completed Aug. 31, 2005.
The returns on average equity and average assets for the quarter were 15.62 percent and 1.09 percent, respectively, compared to 14.75 percent and 0.98 percent, respectively, for the year-ago period.
Returns on average equity and average assets for the nine months ended Sept. 30 were 15.33 percent and 1.04 percent, respectively, up from 14.51 percent and 0.96 percent, respectively, for the first nine months of 2005.
Total assets were $2.403 billion on Sept. 30, up $1.3 million from Dec. 31, 2005. The corporation said it has experienced relatively modest loan demand this year and has reduced its investment securities portfolio.
Deposits totaled $1.700 billion on Sept. 30, up $60.9 million, or 3.7 percent, from Dec. 31, 2005. Excluding a $13.9 million decrease in brokered certificates of deposit, in-market deposits were up $74.9 million, or 5.2 percent, for the nine months ended Sept. 30. The corporation blamed rising short-term interest rates for the ongoing shift in deposits away from savings accounts and into higher-cost money market accounts and certificates of deposit.
In the third quarter, Washington Trust recognized a liability of $4.6 million, “with a corresponding increase in goodwill,” related to the contingent payment terms of its August 2005 acquisition of Weston Financial. This amount represents the 2006 payment for the three-year earn-out period ending Dec. 31, 2008.
Asset quality continues to remain strong, the corporation said, with nonperforming assets (nonaccrual loans and property acquired through foreclosure) amounting to $2.6 million, or 0.11 percent of total assets on Sept. 30, compared with$2.4 million, or 0.10 percent of total assets Dec. 31. Net charge-offs were $173,000 for the nine months ended Sept. 30, versus net loan recoveries of $193,000 for the same period a year ago.
The allowance for loan losses on Sept. 30 was $18.6 million, or 1.31 percent of total loans, up from $17.6 million, or 1.26 percent of total loans, a year earlier. Loan-loss provision charged to earnings amounted to $300,000 and $900,000, respectively, for the three and nine months ended Sept. 30, unchanged from the amounts recorded for the same periods in 2005.
Shareholder equity amounted to $172.4 million on Sept. 30, up from $158.4 million on Dec. 31. Book value per share as of Sept. 30, 2006, and Dec. 31, 2005, amounted to $12.82 and $11.86, respectively.
During the first nine months of 2006 total loans increased by $26.6 million, or 1.9 percent. Consumer loans rose by $15.3 million, or 5.8 percent, led by growth in home equity loans. Total commercial and commercial real estate loans rose by $6.6 million, or 1.2 percent. Residential mortgages increased by $4.7 million, or 0.8 percent, for the nine months ended September 30, 2006.
Additional details from the corporation’s report today to the U.S. Securities and Exchange Commission are available at www.snl.com.
Westerly-based Washington Trust Bancorp Inc. 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. Its common stock trades on the Nasdaq Global Market under the symbol WASH. Investor information is available at www.washtrust.com.
