John C. Warren, chairman and CEO of Washington Trust Bancorp Inc., acknowledges that last year wasn’t exactly an easy one for his bank – or for any bank – and that’s why Warren says he’s happy to come out of 2008 with at least some profit.
Washington Trust, parent of The Washington Trust Co., last week posted full-year net income of $22.56 million, down $1.24 million, or 5.21 percent, from the $23.80 million it posted for 2007. Revenue from interest and noninterest sources totaled $181.78 million in 2008, virtually unchanged from the year before.
Warren called the performance “solid” in the face of a recession, a national banking crisis and unprecedented turmoil in the financial markets.
“If 2007 was challenging, then 2008 took it to a whole new level for the financial-service industry,” Warren told analysts in a conference call last week.
For the final three months of the year, Washington Trust posted a profit of $4.61 million – a decrease of $1.18 million, or 20.37 percent, from the year-ago period’s $5.79 million – on fourth-quarter revenue that fell 5.47 percent compared with the year-ago period to $43.69 million.
The lower profits reflected a $2.4 million write-down of certain investments to fair value; an increase in its fourth-quarter loan-loss provision – money set aside against anticipated losses on bad loans – to $1.85 million from the year-ago $850,000; and $663,000 in losses on interest-rate swap contracts.
At the same time, Washington Trust’s commercial loan portfolio continued to grow, hitting a year-end total of $880.31 million. That represented an increase of $38.48 million compared with the third quarter – making the fourth quarter the company’s ninth consecutive period of quarter-to-quarter growth – and $200.05 million, or 29.4 percent, from the end of 2007.
In a cool housing market, Washington Trust still saw some growth in residential real estate loans, increasing 3 percent quarter over quarter to $642.05 million. Warren said the bank has experienced a spurt of mortgage refinancing as interest rates have dropped.
Warren told Providence Business News last week that reports that banks are curtailing lending isn’t entirely correct – at least in Washington Trust’s case.
In fact, he said, Washington Trust is benefiting as larger national financial institutions have been “distracted” by their internal financial troubles.
“We’ve had customers tell us they have been told that the large banks are not making loans,” Warren said. “And so we are more than happy to invite them into our front door and help them out.”
Still, in light of the economic downturn, asset quality continued to be a concern at Washington Trust, as at many other financial institutions.
Nonperforming assets increased to $8.80 million, or 0.30 percent of total assets, in the quarter, compared with $6.82 million, or 0.25 percent of total assets in the third quarter. At the start of 2008, nonperforming assets totaled $4.30 million, or 0.17 percent of total assets. Net charge-offs for the fourth quarter were $776,000, up from $492,000 from the previous quarter.
Meanwhile, the bank’s net interest margin widened slightly to 2.65 percent in the period ended Dec. 31, up 3 basis points from the third quarter and unchanged from a year ago.
Although Washington Trust saw a year-over-year increase in fourth-quarter interest income – from $34.93 million in the final quarter of 2007 to $36.37 million in the period just ended – noninterest income declined significantly, in part because of the company’s $2.4 million write-down of certain investments.
Noninterest income dropped to $7.32 million in the fourth quarter from $11.29 million in the year-ago period.
Wealth-management revenue declined to $6.17 million in the fourth quarter, 17.4 percent less than the $7.48 million in the quarter a year ago. Warren said assets under management declined 22 percent, due mostly to depreciation in the financial markets.
Last week, Warren expressed concern about the near future, although he was hopeful that a new administration in Washington and the prospect of a new stimulus package would boost confidence among consumers and investors alike.
“As we look ahead candidly, 2009 is a total unknown,” he told analysts in the conference call.
Washington Trust also announced last week that John F. “Jack” Treanor, 62, the company president and chief operating officer, will take early retirement in October. Treanor, who joined the bank in April 1999 as president and COO, is slated to remain on the board of directors.
Warren, the CEO, is scheduled to retire in April 2010, the bank noted. So the board has launched the process of finding successors for both executives. •
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