Washington Trust reports $11.2M profit in Q3, a 40% drop from a year ago

Updated at 10:25 a.m. on Oct. 25

THE WASHINGTON TRUST Bancorp Inc. reported a net income of $11.2 million in the third-quarter Tuesday, during what company chairman and CEO Edward O. Handy III called “difficult operating conditions.
THE WASHINGTON TRUST Bancorp Inc. reported a net income of $11.2 million in the third-quarter Tuesday, during what company chairman and CEO Edward O. Handy III called “difficult operating conditions." / PBN FILE PHOTO/SCOTT KINGSLEY

WESTERLY – The Washington Trust Bancorp Inc. on Tuesday posted a third-quarter profit of $11.2 million, down 40.2% from $18.7 million it reported in the same period a year ago, as the bank said it navigated through “difficult operating conditions.”

Earnings per diluted share declined sharply to 65 cents from $1.08 in the third quarter of 2022.

The latest earnings report comes a month after the Westerly-based company reached a $9 million agreement to resolve allegations it engaged in lending discrimination by redlining majority-Black and Hispanic neighborhoods. The bank denied the allegations and said it entered into the agreement to avoid legal costs.

The company, parent of The Washington Trust Co., recorded $95.9 million in interest and noninterest revenue for the three months that ended Sept. 30, a 41.2% increase from $67.9 million in the year-ago period.

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But as with most banks in 2023, Washington Trust – the fourth largest bank in Rhode Island by in-state deposits – was hindered by much higher interest rates, which in turn sent interest expenses on deposits and Federal Home Loan Bank advances skyrocketing.

Total interest expenses climbed from $10.1 million in the third quarter of 2022 to $47 million in the same period this year. The higher expenses were only partially offset by an increase in interest and dividend income from $52.1 million in the third quarter a year ago to $80.7 million in the most recent quarter.

At the same time, net interest income totaled $33.8 million in the third quarter, a 19.7% decrease from $42 million a year prior.

The net interest margin was 1.97% in the third quarter, compared with 2.82% a year ago, reflecting the challenging interest rate environment, the bank said.

The bank also reported $15.2 million in noninterest income for the third quarter, although that was down 3.7% from the results in the third quarter of 2022 as quarterly wealth management revenue dipped from $9.5 million to $8.9 million year over year.

“Washington Trust’s third-quarter performance reflects the corporation’s core strength, resilience, and ability to manage through difficult operating conditions,” said Edward O. Handy III, Washington Trust chairman and CEO. “We continue to attract new business across all lines, which is challenging in the current rate and competitive environment. We value our employees, customers, communities, and shareholders and remain committed to enhancing the value of these relationships over time.”

Total assets were $7.1 billion in the third quarter up 9.8% from $6.4 million a year ago, but the bank’s nonperforming assets – typically loans and leases that are more than 90 days overdue – increased.

Nonperforming assets totaled $34.3 million as of Sept. 30, up from $11.1 million in the second quarter and $12.1 million a year ago. The bank blamed the sudden jump in nonperforming assets on two commercial real estate loans that were placed on nonaccrual status in the quarter.

Meanwhile, Washington Trust’s common equity tier 1 capital ratio – a measurement of financial strength that compares a bank’s core capital against its risk-weighted assets – decreased from 11.5% in the third quarter of 2022 to 10.35% as of Sept. 30.

On April 19, Washington Trust marked the opening of its 25th branch, this one in Barrington. The bank plans to open two more branches this year the first in the Olneyville section of Providence and another in Smithfield.

Clarification: An earlier version of this story characterized Washington Trust’s agreement to settle redlining allegations as a payment. Actually, the bank will provide $7 million in mortgage loan subsidies over a five-year period for mortgage, home improvement, or refinance loans, in specific census tracts in Rhode Island. Washington Trust will also commit $2 million for focused community outreach and marketing efforts.

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  1. And the R.I. Ass’t A.G. wants Wash Trust to waste depositors money establishing branches in unprofitable areas. Why doesn’t the A.G.’s office focus on catching real criminals instead of trying to put century old RI businesses out of business?