WESTERLY – While the real estate market remains as hot as ever, mortgage profits have diminished for Washington Trust Bancorp Inc., which saw its quarterly mortgage banking revenue cut by more than half compared to a year ago, the company reported on Wednesday.
The loss of mortgage banking revenue contributed to the overall 17% decline in earnings, to $17.5 million, for the quarter that ended June 30. However, the parent company for The Washington Trust Co. also saw record wealth management revenue and assets under administration, alongside a revival of commercial loan activity post pandemic.
Earnings per diluted share fell from $1.21 to $1.00.
While the residential real estate remains strong, lower sales yields on loans sold to the secondary market, as well as a decrease in the fair value of mortgage loan commitments, created losses in mortgage banking revenues, according to the company. This was partially offset by a record-high of $10.4 million in wealth management revenues, due to growth in asset-based revenues. Also a sign of success for the company’s wealth management division was its record-setting $7.4 billion in assets under administration.
Overall, noninterest income declined 21.8% year over year to $20.6 million.
Interest income dipped 8.9% to $38.8 million amid a continued low-interest-rate environment which was partially offset by commercial loan prepayment income.
The $717,000 in commercial loan prepayment income also boosted the net interest margin, the difference between interest income generated versus the amount of interest paid out to lenders, which rose 24 basis points to 2.55%.
Further boosting the bottom line was the lack of additional reserves set aside for bad loans. The company, like banks nationwide, bolstered its credit loss provisions during the pandemic, including $2.2 million in the second quarter of 2020. The decision not to include reserves in this quarter reflects forecasted economic conditions and continued stability in asset quality metrics, the company stated.
Interest expenses declined 65.2% year over year to $4.1 million while noninterest expenses increased 15.9% in that time to $33.0 million. Noninterest expenses included $22.1 million in salaries and employee benefits – an increase of 13% year over year.
Total quarterly assets stood at $5.9 billion, a 0.4% increase over a year ago, including $4.3 billion in total loans. While total loans also remained relatively flat, commercial loans dipped by $50 million, including a net reduction in Paycheck Protection Loans, while residential real estate loans added $83 million thanks to a strong volume and a higher proportion of loans originated for portfolio, the company stated.
Total deposits reached $4.7 billion, a 15.2% year-over-year increase, driven by increases in noninterest bearing demand deposits, NOW accounts, and money market accounts.
“Washington Trust reported solid second quarter results, with strong performances across key business lines,” Edward O. Handy III, chairman and CEO, said in a statement. “As the economic recovery continues, we have seen a revival of commercial lending activity.”
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
