WESTERLY – Hit with a $6.2 million one-time charge on deferred tax assets, Washington Trust Bancorp Inc. on Tuesday reported 2017 profit fell 1.2 percent to $46 million, or $2.64 per diluted share, compared with $46.5 million, or $2.70 per diluted share, a year earlier.
Profit for the quarter ended Dec. 31, meanwhile, fell 34.4 percent to $8 million, or 46 cents per diluted share, compared with $12.2 million, or 70 cents per diluted share, in the same prior-year period.
The one-time noncash charge on deferred tax assets was the result of sweeping federal tax changes signed into law last month, which had a mixed impact on bank earnings for the fourth quarter.
Banks with deferred tax assets, such as Washington Trust, largely suffered losses, while banks with deferred tax liabilities typically realized gains.
For the parent of The Washington Trust Co., the charge resulted in 2017 income tax expense growing 41.8 percent to $31.7 million. For the quarter, income tax expense grew 124.1 percent to $13.2 million.
The company expects tax expense to fall moving forward, as new federal tax law results in its effective tax rate being lowered to 21.5 percent from 33.1 percent (the rate excluding the $6.2 million charge) in the fourth quarter.
The bank did not immediately provide underlying figures, but if the $6.2 million tax-related expense were excluded from the income statement, 2017 profit would have increased 12.1 percent to $52.1 million. Fourth-quarter profit would have grown 16.6 percent to $14.2 million.
“Our fourth-quarter earnings, excluding the noncash charge associated with the enactment of the [tax law], were very solid,” said Joseph J. MarcAurele, chairman and CEO.
The 2017 earnings report marks MarcAurele’s last as CEO, as he’s slated to retire this quarter. Edward “Ned” O. Handy III, president and chief operating officer, will take over the helm of the Westerly-based bank.
On balance, Washington Trust’s income statement continued to improve. Total interest and dividend income, and total noninterest income for 2017 grew 8 percent to $214.4 million. For the quarter, it grew 5.2 percent to $55.1 million.
Total interest and dividend income for 2017 grew 12.1 percent to $149.6 million thanks largely to gains realized on interest and fees on loans and taxable interest on securities.
Total loans for 2017 grew 4.3 percent to $3.4 billion compared with a year earlier due in part to increases in various segments, including commercial construction and development, commercial and industrial, and residential real estate.
Allowance for loans losses to total loans fell to 0.79 percent compared with 0.8 percent a year earlier.
Total interest expense grew to $30.1 million compared with $23 million a year earlier largely because of cost increases on deposits and Federal Home Loan Bank advances.
Total noninterest income for 2017, meanwhile, fell 0.5 percent to $64.8 million, as the bank suffered from a reduction in mortgage-banking revenue, which fell to $11.4 million compared with $13.2 million the prior year. The reduction was largely because of gains and commissions on mortgage loan sales falling 33 percent to $3 million compared to a year earlier for the quarter. On the year, gains and commissions fell 16.3 percent to $11 million.
Total noninterest expense grew slightly to $104.1 million compared with $101.1 million a year earlier.
The bank continues to realize growth in its wealth management business, as assets under administration grew 10.7 percent to $6.7 billion. The business delivered revenue totaling $39.3 million for 2017, representing a 4.7 percent increase compared with 2016.
Total assets grew 3.4 percent to $4.5 billion compared with $4.4 billion a year earlier. Total nonperforming assets fell to $15.3 million compared with $24.4 million in 2016.
Total deposits grew 5.8 percent to $3.2 billion compared with $3.1 billion in 2016.
“Washington Trust’s strong financial foundation, diversified revenue stream and market footprint positions us for future growth and success in the year ahead,” MarcAurele said.