WESTERLY – The Washington Trust Bancorp Inc. on Wednesday posted a profit of $48.2 million for 2023, down 32.8% from the $71.7 million it reported for 2022 as rapid interest rate increases last year took their toll on banks.
Earnings per diluted share of Washington Trust dropped to $2.82 for the full 2023, down from $4.11 a year earlier.
For the fourth quarter, the parent company of The Washington Trust Co. said it had $12.95 million in net income, a decline of 21.9% from the $16.6 million it reported in the same three-month period a year ago. Quarterly earnings per diluted share were 76 cents, down from 95 cents a year earlier.
“Washington Trust’s year-end results reflect the corporation’s continued perseverance in facing economic headwinds and addressing numerous challenges posed by a difficult operating environment,” said Edward O. "Ned" Handy III, Washington Trust CEO and chairman. “While we remain cautious about economic growth in 2024, we believe our diversified business model, disciplined credit culture, and dedicated team will guide us going forward.”
Washington Trust – the third largest bank in Rhode Island by in-state deposits – is likely eager to put 2023 behind it.
In September, the Westerly-based company reached a $9 million agreement to resolve allegations it engaged in lending discrimination by redlining majority-Black and Hispanic neighborhoods. The bank denied the allegations and said it entered into the agreement to avoid legal costs.
Meanwhile, as with most banks in 2023, Washington Trust was hindered by much higher interest rates, which in turn sent interest expenses on deposits and Federal Home Loan Bank advances skyrocketing.
Total interest expenses climbed to $171.6 million in 2023, from $38.5 million a year earlier. Those expenses were only partially offset by an increase in interest and fees on loans, from $169.3 million in 2022 to $270.3 million last year.
The net interest margin – a key metric that indicates the difference between the interest income generated and the amount the company pays out – was 1.88% for the fourth quarter of 2023, down significantly from 2.65% in the fourth quarter of 2022. Full-year net interest margin for 2023 was 2.05%, down 64 basis points from the 2.69% reported in 2022.
The bank reported $56.1 million in noninterest income for 2023, but that was down $6.5 million, or 10.3%, from a year earlier. The decline was largely because revenue from wealth management shrank from $38.7 million to $35.5 million year over year and revenue from mortgage banking dropped from $8.7 million to $6.7 million.
Meanwhile, in the fourth quarter, a provision for credit losses of $1.2 million was recognized, up from $800,000 in the same quarter a year ago. The provision for credit losses in 2023 totaled $3.6 million, compared with a shrinking of the provision by $1.4 million in the prior year.
Total assets were $7.2 billion as of Dec. 31, up from $6.66 billion a year earlier, but the bank’s nonperforming assets – typically loans and leases that are more than 90 days overdue – continued to increase.
Nonperforming assets totaled $45.3 million as of Dec. 31, up from $34.3 million in the third quarter and $12.8 million a year ago. The bank said the rise in nonperforming assets was the result of a commercial real estate loan that was placed on nonaccrual status in the fourth quarter.
The bank said 75% of its nonaccrual loans were related to commercial real estate with the other 25% being residential and consumer loans.
Meanwhile, Washington Trust’s common equity tier 1 capital ratio – a measurement of financial strength that compares a bank’s core capital against its risk-weighted assets – edged upward to 10.44% in the fourth quarter, from 10.35% three months earlier, but it remained below the 11.24% the bank posted in the fourth quarter of 2022.
(Correction: The Washington Trust Co. is the third largest bank in Rhode Island by deposits. An earlier version of this story gave an incorrect ranking.)
