WashTrust sees revenue rise, profit drop in 3Q as loan growth slows

WASHINGTON TRUST BANCORP Monday reported a drop in its its third-quarter profit. Management said that loan growth was adversely affected by strong competition.
WASHINGTON TRUST BANCORP Monday reported a drop in its its third-quarter profit. Management said that loan growth was adversely affected by strong competition.

WESTERLY – Despite strengthening its asset quality, Washington Trust Bancorp Inc. on Monday reported net income falling 3.1 percent to $10.2 million in this year’s third quarter, a drop it attributes largely to stiff competition in the lending market.

Earnings totaled 60 cents per diluted share compared with 62 cents in the same period last year, although the bank increased its per-share dividend to 34 cents from 32 cents a year ago.

“Washington Trust’s third-quarter results reflect our continued efforts to compete and grow in a challenging environment,” said Joseph J. MarcAurele, chairman and CEO, in a statement.

The company, parent of Westerly-based The Washington Trust Co., reported total interest and noninterest revenue growth of 4.6 percent to $45.4 million for the quarter that ended on Sept. 30. Simultaneously, both interest expenses ($5.5 million) and noninterest expenses ($24.5 million) grew 2.5 percent and 11.3 percent, respectively.

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Washington Trust’s overhead grew in several areas, including net occupancy, equipment and outsourced services, and the state’s oldest community bank paid $1.5 million more in salaries and employee benefits compared with the third quarter of last year.

Despite the bank growing total loans 10.3 percent to $2.7 billion compared with the same period last year, MarcAurele said growth was affected by “strong competition and other factors.”

The bank’s asset quality is improving, as its allowance for loan losses balance fell 2.2 percent – or $607,000 – to $27.2 million at the end of the third quarter, as the loan loss provision for the period fell to $200,000 from $600,000 in 2014. The allowance for loan losses to total loans ratio was 0.92 percent compared with 1.04 percent a year earlier. Total nonperforming assets fell 0.86 percent to $17.8 million.

“Asset quality remained very satisfactory, and we had solid deposit growth in the quarter,” MarcAurele said.

Total deposits grew 3.6 percent to $2.8 billion compared with the same period last year. Total assets increased 7.6 percent to $3.7 billion.

The company on Aug. 1 acquired Halsey Associates Inc., an investment adviser firm in New Haven, Conn., for about $10 million, which included about $1.7 million in cash, 136,543 shares of Washington Trust common stock valued at $5.4 million and $2.9 million for the estimated present value of future earn-outs to be paid, according to the bank.

The bank through the acquisition recognized $6.6 million of intangible assets and $6.7 million in goodwill. It estimates acquisition-related expenses totaled $504,000 in the third quarter and $433,000 in the second quarter and expects “a small amount of acquisition-related expenses” to be recognized in this year’s fourth quarter.

The bank saw a 6.3 percent increase in wealth management revenue to $8.9 million, as wealth management assets under management grew 14.7 percent to $5.7 billion.

The bank’s drop in net income was reflected in return on average assets, which fell to 1.11 percent from 1.25 percent a year earlier, as well as return on average equity, which dropped to 11.13 percent from 12.15 percent. The net interest margin also tightened, falling to 3.07 percent from 3.21 percent in the third quarter for 2014.

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