Washington Trust reports $69.8M 2020 profit, ‘record’ mortgage banking income

WASHINGTON TRUST CO. posted a $69.8 million profit in 2020. / PBN FILE PHOTO/SCOTT KINGSLEY

WESTERLY – Despite a year of economic volatility in which many financial institutions reported significant profit losses, Washington Trust Bancorp Inc. saw its 2020 earnings hold steady.

The parent company of Westerly-based Washington Trust Co. on Wednesday reported $69.8 million in 2020 net income, a 1% increase year over year, coupled with a record year for mortgage banking revenues which helped to offset the nearly eight-fold increase in provision for credit losses. Like other banks, the company ramped up its reserves in anticipation of bad loans amid the pandemic, stockpiling $12.3 million in credit loss provisions in 2020 compared to just $1.6 million in 2019.

Annual earnings per diluted share rose 4 cents year over year to $4.00.

Total revenue increased 1.8% year-over-year to $269.4 million, driven by a 220% spike in mortgage banking revenues. The $47.4 million in mortgage banking fees reflected record highs in mortgage originations and sales in 2020, the company stated. The company also saw a record $6.9 billion in wealth management assets under administration, although total wealth management revenue of $35.5 million ticked down 3.8% over the year prior. Total noninterest income of $99.4 million represented a 48.2% increase over 2019.

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Interest income declined 14% to $169.9 million, including a $20 million drop in interest and fees and loans in a continued low-interest rate environment and lower yield on interest-earning assets.

Also a reflection of low interest rates, net interest margin – the difference between interest income generated and the amount paid out to lenders – declined 37 basis points to 2.44%.

Noninterest expenses increased 13.2% to $125.4 million, including $82.9 million in employee salaries and benefits.

Average year-end assets stood at $5.7 billion, a 10.4% year-over-year increase. Total loans of $4.2 billion were up 11.4% over the prior year, driven by the $199.8 million across 1,700 loans through the Paycheck Protection Program, the company stated.

Total deposits of $4.4 billion, a 25% increase over a year ago, including a $573 million bump in in-market deposits.

Fourth-quarter earnings of $18.6 million represented a 19.5% increase over the same time frame in 2019, again driven by mortgage banking revenue which amounted to $14.1 million in the final quarter. The company also set aside another $1.8 million in its credit loss provisions in the fourth quarter, though quarterly net charge-offs of $118,000 were significantly lower than the $308,000 and $623,000 in the second and third quarters of 2020, respectively.

Quarterly net interest income remained below that of the fourth quarter of 2019, but increased eight basis points over the immediate prior quarter to $2.39%, reflecting the $423,000 of accelerated net deferred fee amortization related to forgivable PPP loans, the company stated. The company also gained $1.4 million in noninterest income through sale of a limited partnership interest in a low-income housing tax credit investment. However, this was negated by a $1.4 million debt prepayment penalty expense from paying off higher-yielding Federal Home Loan Bank advances. 

“Washington Trust reported strong earnings for 2020, a year marked by unprecedented challenges, disruption and uncertainties, Chairman and CEO Edward O. Handy III said in a statement. “Our success was due to the spirit and resilience of our dedicated team of employees, who maintained high service levels and ‘business as usual’ operations during a major pandemic; the strength and stability of our balance sheet, which continued to provide a diverse stream of earnings during the most volatile of operating environments; and the loyalty and perseverance of our customers, who have trusted us to help the, through these difficult times.”

Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.

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