WashTrust reports record lending in third quarter

WASHINGTON TRUST Providence Branch. / COURTESY GREATER CITY PROVIDENCE/JEF NICKERSON
WASHINGTON TRUST Providence Branch. / COURTESY GREATER CITY PROVIDENCE/JEF NICKERSON

Washington Trust Bancorp Inc. reported record lending of $2.26 billion in the third quarter due mostly to favorable interest rates and increased commercial lending, bank Chairman, President and CEO Joseph J. MarcAurele said last week.
The parent company of Westerly-based The Washington Trust Co. also reported record deposits for a quarter that generated an $8.9 million profit, a 15 percent improvement over the third quarter in 2011. Diluted earnings per share for the third quarter 2012 were 54 cents, up 8 cents, or 17 percent from the same period last year.
The $2.26 billion in loans for the quarter was a 7.5 percent increase from the $2.09 billion reported for the 2011 third quarter, and a 2 percent increase when compared to the $2.21 billion reported for this year’s second quarter. The increase was attributed to a rise in commercial lending and, to a lesser degree, mortgage lending.
For the third quarter, total commercial loans equaled $1.22 billion, a $149 million, or 12 percent, increase from the same period last year. When compared to the second quarter, commercial loans increased $27.3 million, or 2.2 percent.
MarcAurele also credited favorable interest rates. “We are in a longer-term interest-rate environment than many people would have thought was possible. We think the rates will stay low throughout 2013, which should spur refinancing activity in residential mortgages,” he told Providence Business News. Should rates increase, the bank’s balance sheet is strong enough to weather a slowdown in loan activity and it would also benefit from the higher rates.
For the past year through Sept. 30, the net gain on loan sales and commissions on loans generated for others tripled, from $1.08 million to $3.5 million, respectively.
“We have expanded our residential mortgage business substantially over the last few years,” explained MarcAurele. “We have entered new markets in the Boston area and in Connecticut.”
While the bank has indeed explored new markets, MarcAurele still refers to its strong Rhode Island roots.
“We are a Rhode Island bank with a very strong presence in the southern part of the state,” he said. “We have a strong statewide brand but not statewide convenience yet.”
The bank also reported record deposits for the quarter of $2.23 billion, an increase of $170 million, or 6 percent from Sept. 30, 2011, and an increase of $104.2 million, or 5 percent from June 30, 2012. Demand deposits and money-market accounts saw most of the gains. Demand deposits increased $37.1 million since Sept. 30, 2011, and money-market accounts increased $85.3 million for the same period.
“We have invested in and expanded our cash-management capabilities,” MarcAurele said, “but more significantly we have focused our commercial bankers on building their deposit base, both with existing customers but with new customers.”
The return on average equity for the third quarter of 2012 was 12.02 percent, an improvement from the 10.67 percent reported for the third quarter 2011, and slightly better than the 11.98 percent reported in the quarter ending June 30, 2012. It marked the first time average equity broke the 12 percent barrier since the third quarter of 2008.
The return on average assets for the third quarter of 2012 was 1.17 percent, better than the 1.03 percent recorded at the same time last year and similar to the 1.16 percent reported for the second quarter of 2012.
Noninterest expenses for the quarter were $2.23 million, a 16 percent increase from Sept. 30, 2011, a reflection of debt repayment penalties and pay and benefit increases.
Noninterest income for the third quarter 2012 equaled $16.9 million, up 31 percent from Sept. 30, 2011, and 5 percent from the second quarter 2012. The increase was due to strong mortgage banking revenue and merchant processing fees. Fees for all wealth-management services, service charges on deposit accounts, merchant processing and card interchange fees equaled $11.91 million for the quarter.
The bank did have to restructure $9.1 million in commercial-mortgage troubled debt with one borrower. Marc-Aurele said the Rhode Island-based borrower, whom he declined to identify, has plenty of liquidity and has already put its own resources toward the restructuring. The restructuring converted a portion of the credit to interest-only payments at a reduced rate for a temporary period, while a guarantor injected $1 million into the property and provided additional collateral to the bank.
Loan-loss provisions for the third quarter equaled $600,000, a figure level with the prior quarter, but $400,000 less than the $1 million provision during the same period last year. •

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