Washington Trust Bancorp ((WASH)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Washington Trust Bancorp’s recent earnings call presented a balanced sentiment, reflecting both positive developments and notable challenges. The company reported strong core business performance and strategic investments, but faced difficulties with declining net income, elevated credit loss provisions, and office property valuations. This duality highlights the company’s growth potential alongside existing risks.
Strong Core Business Performance
Washington Trust Bancorp showcased robust performance across its core business lines, with notable increases in margin, wealth revenues, and mortgage revenue. The company also experienced growth in in-market deposit levels and assets under management (AUM), underscoring its commitment to long-term value creation.
Strategic Investments and Leadership Additions
The company made strategic strides by completing an asset purchase from Lighthouse Financial Management, adding approximately $195 million in AUM. Furthermore, the hiring of Jim Brown as Senior Executive Vice President and Chief Commercial Banking Officer, with over 38 years of experience, marks a significant leadership addition.
Increase in Net Interest Income
Net interest income for the third quarter reached $38.8 million, reflecting a 4% increase on a linked-quarter basis and a 20% rise year-over-year. This growth highlights the company’s ability to enhance its interest income effectively.
Growth in Non-Interest Income
Noninterest income accounted for 31% of the company’s revenue in Q3, marking a 3% increase from Q2 and an 8% rise year-over-year. Wealth management revenues also saw a 3% increase, contributing to this growth.
Decrease in Noninterest Expense
The company reported a reduction in noninterest expense to $35.7 million in Q3, down by 2%. This decrease was primarily due to lower levels of performance-based compensation, reflecting efficient cost management.
Decline in Net Income and EPS
Washington Trust Bancorp faced a decline in net income for the third quarter, reporting $10.8 million or $0.56 per share, compared to $13.2 million or $0.68 per share in the preceding quarter, indicating challenges in maintaining profitability.
Elevated Provision for Credit Losses
The resolution of two significant credit exposures resulted in an elevated provision for credit losses, with charge-offs totaling $11.3 million. This highlights the company’s ongoing challenges in managing credit risk.
Challenges in Office Property Valuation
A significant reduction in the value of an office property led to a large charge-off, underscoring the difficulties in appraising office properties in the current market environment.
Decrease in Total Loans
Total loans decreased by $18 million, with several large paydowns occurring at the end of the quarter. This reduction reflects the company’s current lending challenges.
Forward-Looking Guidance
Looking ahead, Washington Trust Bancorp anticipates continued growth in net interest income and noninterest income, with a focus on maintaining cost efficiency. The company also plans to continue its share repurchase program, having already repurchased 237,000 shares during the quarter. Despite challenges, the company remains committed to strategic growth and value creation.
In summary, Washington Trust Bancorp’s earnings call painted a picture of balanced sentiment, with strong core business performance and strategic investments countered by challenges in net income and credit risk management. The company’s forward-looking guidance suggests a focus on growth and efficiency, indicating potential for future success amidst current market challenges.