WESTERLY, R.I.— Washington Trust Bancorp, Inc. (Nasdaq: WASH), parent company of The Washington Trust Company, today announced third quarter 2019 net income of $18.8 million, or $1.08 per diluted share, compared to net income of $17.3 million, or $0.99 per diluted share, reported for the second quarter of 2019.
“Washington Trust’s third quarter results once again reflect our continued success at generating a consistent stream of revenues through our diverse business model,” stated Edward O. Handy III, Chairman and Chief Executive Officer.
Selected highlights for the third quarter of 2019 include:
Net Interest Income
Net interest income was $33.0 million for the third quarter of 2019, down by $880 thousand, or 3%, from the second quarter of 2019. The net interest margin was 2.72% for the third quarter, down by 9 basis points from 2.81% reported in the preceding quarter. Prepayment penalty income associated with loan payoffs, which is included in net interest income, was $130 thousand in the third quarter, compared to $37 thousand in the preceding quarter. Excluding the impact of prepayment penalty income associated with loan payoffs from both periods, the net interest margin for the third quarter of 2019 was 2.71%, down by 10 basis points from 2.81% in the preceding quarter.
Significant linked quarter changes included:
Noninterest Income
Noninterest income totaled $18.3 million for the third quarter of 2019, up by $1.6 million, or 9%, from the second quarter of 2019. Significant linked quarter changes included:
Noninterest Expenses
Noninterest expenses totaled $26.9 million for the third quarter of 2019, down by $1.3 million, or 5%, from the second quarter of 2019. Included in this linked quarter change was a $1.0 million reduction in FDIC deposit insurance costs due to FDIC assessment credits recognized in the third quarter of 2019. Excluding the reduction in FDIC deposit insurance costs, noninterest expenses were down by $281 thousand, or 1%, from the preceding quarter. Significant linked quarter changes included:
Income tax expense totaled $5.2 million for the third quarter of 2019, up by $574 thousand from the preceding quarter. The effective tax rate for the third quarter of 2019 was 21.8%, compared to 21.3% for the preceding quarter. Based on current federal and applicable state income tax statutes, the Corporation currently expects its 2019 effective tax rate to be 21.5%.
Investment Securities
The securities portfolio totaled $887 million at September 30, 2019, down by $82 million from the balance at June 30, 2019. The decrease was primarily due to routine principal pay-downs on mortgage-backed securities and calls of debt securities. Investment securities represented 17% of total assets at September 30, 2019, compared to 19% of total assets at June 30, 2019.
Loans
Total loans amounted to $3.8 billion at September 30, 2019, up by $48 million from the end of the preceding quarter. Total commercial loans grew by $17 million, with a net increase of $34 million in the commercial real estate portfolio partially offset by a $17 million net decline in the commercial and industrial portfolio. In the third quarter of 2019, commercial loan originations and advances totaled approximately $93 million and were concentrated in the commercial real estate portfolio. The residential real estate loan portfolio increased by $26 million from the end of the second quarter, reflecting increased mortgage origination activity. In the third quarter of 2019, residential mortgage loan originations for portfolio amounted to $105 million. The consumer loan portfolio increased by $4 million from the balance at June 30, 2019.
Deposits and Borrowings
Total deposits amounted to $3.6 billion at September 30, 2019, up by $82 million, or 2%, from the end of the preceding quarter. Included in total deposits were out-of-market wholesale brokered time deposits, which decreased by $52 million from the balance at June 30, 2019. Excluding wholesale brokered time deposits, total in-market deposits were up by $134 million, reflecting seasonal inflows of various institutional and governmental depositors based on their underlying business cycles. Federal Home Loan Bank advances amounted to $957 million at September 30, 2019, down by $104 million from the balance at June 30, 2019.
Asset Quality
Total nonaccrual loans amounted to $14.9 million, or 0.39% of total loans, at September 30, 2019, compared to $12.9 million, or 0.34% of total loans, at June 30, 2019, reflecting a net increase in nonaccrual residential real estate loans. Total past due loans amounted to $14.4 million, or 0.38% of total loans, at September 30, 2019, compared to $17.9 million, or 0.48% of total loans, at June 30, 2019. The decline in past due loans was largely attributable to one past due commercial real estate loan that was placed on nonaccrual status, partially charged-off and transferred to other real estate owned in the third quarter.
A loan loss provision totaling $400 thousand was recognized in the third quarter of 2019, compared to a loan loss provision of $525 thousand recognized in the preceding quarter. These provisions were based on management’s assessment of loss exposure, as well as loan loss allocations commensurate with growth and changes in the loan portfolio. Net charge-offs totaled $801 thousand in the third quarter and were largely attributable to the one commercial real estate relationship discussed above. Net charge-offs were $771 thousand in the preceding quarter and were largely attributable to one residential real estate relationship.
The allowance for loan losses amounted to $27.0 million, or 0.71% of total loans, at September 30, 2019, compared to $27.4 million, or 0.73% of total loans, at June 30, 2019.
Capital and Dividends
Total shareholders’ equity was $498 million at September 30, 2019, up by $13.6 million from June 30, 2019. This increase included net income of $18.8 million and an increase of $2.9 million in the accumulated other comprehensive income component of shareholders’ equity reflecting an increase in the fair value of available for sale debt securities, partially offset by $8.9 million in dividend declarations in the third quarter. The Board of Directors declared a quarterly dividend of 51 cents per share for the quarter ended September 30, 2019. The dividend was paid on October 11, 2019 to shareholders of record on October 1, 2019.
Capital levels at September 30, 2019 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.94% at September 30, 2019, compared to 12.80% at June 30, 2019. Book value per share amounted to $28.71 at September 30, 2019, compared to $27.93 at June 30, 2019.
Conference Call
Washington Trust will host a conference call to discuss its third quarter results, business highlights and outlook on Tuesday, October 22, 2019 at 8:30 a.m. (Eastern Time). Individuals may dial in to the call at 1-888-317-6016. An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-877-344-7529 and entering the Replay PIN Number 10135833; the audio replay will be available through November 5, 2019. Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust’s web site, http://ir.washtrust.com, and will be available through December 31, 2019.