WESTERLY – New residential mortgage loans, wealth management services and deposit account growth helped Washington Trust Bancorp Inc. post $76.9 million in net income for 2021, the company reported on Wednesday.
Year-end profits represented a 10.1% increase over what the parent company for The Washington Trust Co. recorded in 2020. Earnings per diluted share also rose from $4.00 to $4.39.
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The net income rose in part because of the release of $4.8 million from the company’s credit loss provisions, versus the $12.3 million it had set aside in 2020 in case of defaults. Like financial institutions across the country, Washington Trust socked away millions in its reserves in 2020 in anticipation of bad loans from the COVID-19 pandemic. These largely never materialized, and in 2021 the company let go of some of its loan-loss provisions to adjust for the “downward trend in loan-loss rates as well as improvements in forecasted economic conditions and relatively stable asset quality metrics,” the company stated.
Also contributing to increased earnings was the record $41.3 million in wealth management revenues, up 16.4% year over year. Wealth management assets under administration also reached an all-time high of $7.8 billion as of Dec. 31.
This growth was partially offset by losses in yearly mortgage banking revenues, which had hit historic highs in 2020. Changes in fair value of mortgage loan commitments and lower sales yields on loans to the secondary market cut annual mortgage banking income by nearly 40% to $28.6 million.
Total noninterest income of $87.4 million was down 12.1% over the prior year.
Interest income also declined, falling 7.0% to $158.0 million because of low interest rates. However, interest expenses were cut even more, down 61.0% to $16.6 million, creating net interest income growth.
Net interest margin – the difference between interest income generated by a bank and amount of interest it pays out – increased 19 basis points to 2.59%.
Noninterest expenses rose 8.1% to $135.5 million, including increases to employee salaries and benefits, outsourced benefits and debt prepayment penalties resulting from the payoff of higher-yielding Federal Home Loan Bank advances, the company stated.
Total assets ticked up 2.4% to $5.9 billion, including $4.3 billion in total loans. Loan growth was driven by a record $1.7 billion in residential real estate mortgage originations. This was partially offset by drops to commercial and industrial loans and consumer loans due in part to the end of the Paycheck Protection Program. As of Dec. 31, the company still had $38 million in outstanding PPP loans, down from $199.8 million in 2020.
Total deposits stood at $5.0 billion, including a record $4.5 billion in in-market deposits, a 17.9% year-over-year increase that was fueled by noninterest-bearing demand deposits and money market accounts.
The company also reported $20.2 million in fourth-quarter earnings, up 8.7% over the fourth quarter of 2020. The profit gains again reflected driving down loan loss reserves, with the release of $2.8 million from its credit loss provisions in quarter four of 2021, compared with the addition of $1.8 million in the fourth quarter of 2020.
Quarterly wealth management income of $10.5 million also set a new record, though total non-interest income declined 26.8% to $20.3 million because of dramatic cuts to mortgage banking revenue.
Quarterly interest income also edged up 5.0% to $41.4 million, with commercial loan prepayment fee income and accelerated net deferred fee amortization for forgivable PPP loans helping to offset the low interest rates.
“Washington Trust reported strong fourth-quarter and full-year 2021 results,” Edward O. Handy III, Washington Trust chairman and CEO, said in a statement. “We achieved record wealth management revenues, originated an all-time high volume of residential mortgages, reached a record level of in-market deposits and maintained healthy commercial loan activity. Solid business line performances and a strong balance sheet have positioned us well as we enter 2022.”
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com. You can follow her on Twitter @NancyKLavin.
