Washington Trust reports profit dip in 4th quarter

Westerly-based Washington Trust Bancorp Inc., parent of The Washington Trust Co, last week posted a fourth-quarter profit of $5.79 million. That’s a decline of $416,000, or 6.7 percent, from the year-ago period’s $6.2 million, due in part because of an increase in the bank’s loan-loss provision.
For the year, the bank finished with a profit of $23.8 million. That was $1.2 million, or 4.9 percent, less than the previous year’s earnings of $25.03 million, on revenue of $181.94 million.
Earnings per diluted share were 43 cents in the quarter just ended, down two cents from a year ago. For the year, earnings per diluted share were $1.75, a decrease of seven cents from $1.82 in 2006.
Washington Trust, Rhode Island’s largest independent bank, said its loan-loss provision – funds set aside for anticipated bad loans – for the fourth quarter was $1 million, a sizable hike over the $300,000 set-aside in each of the previous four quarters. For the year, the loan-loss provision was $1.9 million, up from $1.2 million in 2006.
John C. Warren, the bank’s chairman and CEO, said the set-aside was increased to match the growth of Washington Trust’s loan portfolio, and because of heightened worries that the subprime and credit turmoil will hurt lending areas that have been relatively unscathed so far.
“It’s important to note that we’ve never had a subprime lending and Alt-A [non-conforming] mortgage program,” Warren said during a conference call with analysts last week. “But our concern in this economy is that the magnitude of the economic dilemma will spill over into the healthier portions of the economy.”
David V. Devault, chief financial officer, insisted the quality of the bank’s loan portfolio continues to be strong. He noted that only two loans in Washington Trust’s $600 million residential mortgage portfolio and two loans in the $294 million consumer loan portfolio are more than 90 days past due.
In the conference call last week and later, in an interview with Providence Business News, Warren spoke about the difficult economic environment the banking industry is enduring right now.
Despite the drop in earnings, Warren was pleased with the overall performance in the fourth quarter, particularly in gains in wealth-management services and commercial lending.
The bank said commercial loans grew by 16 percent to $92.9 million in 2007 – and increased $30.2 million in the fourth quarter alone. At the same time, residential mortgages were “much quieter,” Warren said, with the portfolio growing 1.9 percent in 2007 to $599.67 million.
Revenue from its wealth-management services grew to $7.48 million, a $737,000 increase – or 10.9 percent – from the fourth quarter of 2006. For the year, the revenue were $29.02 million, up from $26.38 million in 2006, a 9.9-percent increase.
Those numbers helped non-interest income continue to be a growing part of Washington Trust’s revenue stream. Non-interest income totaled $11.2 million in the fourth quarter of 2007, an increase of $855,000, or 8.2 percent, from the same quarter a year ago. For the year, non-interest income was $45.51 million, a 7.9-percent increase over the $42.18 million a year earlier.
In contrast, net interest income totaled $14.83 million in the fourth quarter of 2007, a $139,000 decline from the same period a year earlier. For the year, net interest income was $59.94 million, down 2.5 percent from 2006.
Total deposits declined to $1.65 billion at the end of 2007, down $31.79 million from a year earlier. “Deposit generation is a challenge,” Warren said. &#8226