(Source: Business Wire)
Washington Trust Bancorp, Inc. (NASDAQ Global Select; symbol: WASH), parent company of The Washington Trust Company, today announced second quarter 2009 net income of $3.8million, or 23cents per diluted share, compared to second quarter 2008 net income of $6.1million, or 45cents per diluted share. For the six months ended June30, 2009, net income amounted to $6.4million, or 40cents per diluted share, compared to $11.9million, or 88cents per diluted share, for the same period in 2008.
Earnings in the second quarter of 2009 were influenced by the following:
Federal Deposit Insurance Corp. ("FDIC") deposit insurance premiums for the second quarter of 2009 were up by $1.9million from the second quarter a year earlier. This increase included a special FDIC assessment of $1.35million ($869thousand, after tax; or 5cents per diluted share).
The loan loss provision charged to earnings amounted to $3.0million for the second quarter of 2009, compared to $1.4million for the second quarter of 2008. The provision was based on management's assessment of economic and credit conditions as well as growth in the loan portfolio.
No dividend was received from the Federal Home Loan Bank of Boston (FHLBB) in the second quarter of 2009. Dividend income on Washington Trust's investment in FHLBB stock totaled $344thousand in the second quarter of 2008.
Selected Second Quarter 2009 developments:
Wealth management revenues for the second quarter of 2009 were down by $1.7million, or 22percent, from the second quarter of 2008, primarily due to lower valuations in the financial markets. Assets under administration totaled $3.316billion at June30, 2009, down $607.3million from the June30, 2008 balance.
Net gains on loan sales and commissions on loans originated for others totaled $1.6million for the second quarter of 2009, up by $1.1million from the second quarter of 2008, due to strong residential mortgage refinancing and sales activity.
Commercial loan growth continued at a good pace, amounting to $39.0million, or 4percent, in the second quarter of 2009. Commercial loans have increased $152.2million, or 19percent, from the balance at June30, 2008.
Reflecting continued weak economic conditions, nonperforming assets amounted to $24.8million, or 0.85% of total assets, at June30, 2009 up from $17.5million, or 0.60% of total assets, at March31, 2009. Nonperforming assets were $8.8million, or 0.30% of total assets, at December31, 2008.
John C. Warren, Washington Trust Bancorp, Inc.'s Chairman and Chief Executive Officer, stated "The economy remains challenged both locally and nationally. In this environment we will continue to maintain our focus and discipline."
RESULTS OF OPERATIONS
Net interest income for the second quarter of 2009 increased $302thousand, or 2percent, from the first quarter of 2009 and remained essentially flat compared to the second quarter a year ago. On a year-to-date basis, net interest income increased $937thousand, or 3percent, from 2008. No dividend has been received from the FHLBB in 2009. Dividend income on Washington Trust's investment in FHLBB stock totaled $445thousand and $344thousand in the first and second quarters of 2008, respectively.
The net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) for the second quarter of 2009 was 2.45%, up 6basis points from the first quarter of 2009 and down 26basis points from the second quarter a year ago. For the six months ended June30, 2009, the net interest margin was 2.42%, down 23basis points from the same period a year earlier. The quarter and year-to-date decreases in net interest margin from 2008 reflect the elimination of FHLBB dividend income and margin compression, in general, on core deposit rates following the Federal Reserve's actions to reduce short-term interest rates in late 2008 and early 2009.
Total noninterest income for the second quarter of 2009 increased $4.4million, or 56percent, from the first quarter of 2009 and increased $144thousand, or 1percent, from the second quarter of 2008. Included in noninterest income in the first quarter of 2009 were net impairment losses of $2.0million for investment securities deemed to be other-than-temporarily impaired. There were no impairment losses recognized in the second quarter of 2009. On a year-to-date basis, total noninterest income decreased by $3.0million, or 13percent, from 2008, reflecting declines in wealth management revenues and lower net realized gains on securities, partially offset by higher net gains on loan sales and commissions on loans originated for others.
Wealth management revenues for the second quarter of 2009 increased $541thousand, or 10percent, from the first quarter of 2009 and decreased $1.7million, or 22percent, from the second quarter a year ago. Second quarter 2009 amounts included seasonal tax preparation fee revenues of $339thousand. For the six months ended June30, 2009, wealth management revenues were down $3.5million, or 24percent, from the same period in 2008. Wealth management revenues are largely dependent on the value of assets under administration and are closely tied to the performance of the financial markets. Assets under administration totaled $3.316billion at June30, 2009, up $358.4million, or 12percent, from March31, 2009 and up $168.7million, or 5percent, from December31, 2008. Assets under administration were down $607.3million, or 15percent, from June30, 2008. The decline in assets under administration was primarily due to lower valuations in the financial markets.
Due to strong residential mortgage refinancing and sales activity, net gains on loan sales and commissions on loans originated for others for the second quarter of 2009 increased by $508thousand from the first quarter of 2009 and by $1.1million from the second quarter of 2008. On a year-to-date basis, net gains on loan sales and commissions on loans originated for others increased by $1.7million from the same period in 2008.
Net realized gains on securities amounted to $257thousand in the second quarter of 2009, compared to net realized gains of $57thousand in the first quarter of 2009 and $1.1million in the second quarter of 2008. Also included in noninterest income were net unrealized gains on interest rate swap contracts of $341thousand in the second quarter of 2009, compared to $60thousand in the first quarter of 2009 and $26thousand in the second quarter a year ago.
Noninterest expenses for the second quarter of 2009 increased by $1.9million, or 11percent, from the first quarter of 2009 and by $2.3million, or 13percent, from the second quarter of 2008. FDIC deposit insurance premiums for the second quarter of 2009 were up $1.5million from the first quarter of 2009 and $1.9million from the second quarter a year earlier. A special FDIC assessment of $1.35million was recorded in the second quarter of 2009. On a year-to-date basis, total noninterest expenses increased by $3.5million, or 10percent, from 2008, which included a $2.3million increase in FDIC deposit insurance costs. In addition to the special assessment, the year over year increase in FDIC deposit insurance costs also reflects higher assessment rates.
Income tax expense amounted to $1.5million for the three months ended June30, 2009, as compared to $1.1million for the first quarter of 2009 and $2.8million for the second quarter of 2008. The effective tax rate for the second quarter of 2009 was 28.1%, as compared to 29.3% for the first quarter of 2009 and 31.6% for the second quarter of 2008.
ASSET QUALITY
Nonperforming assets (nonaccrual loans, nonaccrual investment securities and property acquired through foreclosure) amounted to $24.8million, or 0.85% of total assets, at June30, 2009, compared to $17.5million, or 0.60% of total assets, at March31, 2009. Nonperforming assets were $8.8million, or 0.30% of total assets, at December31, 2008 and $6.2million, or 0.23% of total assets, at June30, 2008. Nonaccrual loans totaled $22.7million at June30, 2009, up $7.2million in the second quarter of 2009. Included in this increase was one relationship in the commercial real estate category totaling $3.2million and two relationships in other commercial loans totaling $3.7million. Total nonaccrual loans were $7.8million at December31, 2008 and $6.2million at June30, 2008.
At June30, 2009, total 30day+delinquencies amounted to $25.6million, or 1.35% of total loans, up $3.5million in the second quarter of 2009 and up $8.0million from the balance at December31, 2008, with the largest increase in the commercial loan category. Commercial loan delinquencies amounted to $17.6million, or 1.85% of total commercial loans, at June30, 2009, up $2.6million in the second quarter of 2009 and up $6.0million from the balance at December31, 2008.
Total residential mortgage and consumer loan 30 day+delinquencies amounted to $8.1million, or 0.85% of these loans, at June30, 2009, up $892thousand in the second quarter of 2009 and up $2.0million from the balance at December31, 2008. Total 90 day+delinquencies in the residential mortgage and consumer loan categories amounted to $3.8million (10 loans) and $2thousand (2 loans), respectively, at June30, 2009. Washington Trust has never offered a subprime residential loan program.
The loan loss provision charged to earnings amounted to $3.0million for the second quarter of 2009, compared to $1.7million for the first quarter of 2009 and $1.4 millionfor the second quarter of 2008. For the six months ended June30, 2009 and 2008, the loan loss provision totaled $4.7million and $1.85million, respectively. The provision for loan losses was based on management's assessment of economic and credit conditions, with particular emphasis on commercial and commercial real estate categories, as well as growth in the loan portfolio. Net charge-offs amounted to $1.4million in the second quarter of 2009, as compared to net charge-offs of $927thousand in the first quarter of 2009 and $161thousand in the second quarter of 2008. For the six months ended June30, 2009 and 2008, net charge-offs totaled $2.4million and $164thousand, respectively.
We believe that the declining credit quality trend is primarily related to a general weakening in national and regional economic conditions and that this trend may continue for the next few quarters. Management will continue to assess the adequacy of the allowance for loan losses in accordance with its established policies. The allowance for loan losses was $26.1million, or 1.38% of total loans, at June30, 2009, compared to $23.7million, or 1.29% of total loans, at December31, 2008 and $22.0million, or 1.29% of total loans, at June30, 2008.
FINANCIAL CONDITION
Total loans grew by $25.3million, or 1.4percent, in the second quarter of 2009, due to growth in the commercial loan portfolio. Commercial loans increased $39.0million, or 4.3percent, in the second quarter of 2009 due primarily to increases in commercial real estate loans. During the first six months of 2009, total loans grew by $52.1million, or 2.8percent, with commercial loan growth of $66.9million, or 7.6percent.
The investment securities portfolio amounted to $776.4million at June30, 2009, down by $57.5million in the second quarter of 2009 and down by $89.8million from the balance at December31, 2008. The largest component of the investment securities portfolio is mortgage-backed securities, all of which are issued by U.S. Government agencies or U.S. Government-sponsored enterprises. At June30, 2009, the net unrealized gain position on the investment securities portfolio was $4.2million, including gross unrealized losses of $20.0million. Approximately 90% of the gross unrealized losses on the investment securities portfolio were concentrated in variable rate trust preferred securities issued by financial services companies.
Total deposits amounted to $1.884billion at June30, 2009, essentially flat compared to March31, 2009 and up by $92.9million, or 5percent, from December31, 2008. Excluding out-of-market brokered certificates of deposit, in-market deposits grew by $10.7million during the second quarter of 2009. Demand deposits and NOW account balances increased by $24.0million, saving account balances grew by $6.3million and money market account balances declined by $20.9million during the second quarter of 2009. During the first six months of 2009, in-market deposits increased by $129.7million, which included $45.4million in wealth management client money market deposits previously held in outside money market funds.
FHLBB advances totaled $688.4million at June30, 2009, down by $34.7million from March31, 2009 and down by $141.2million from December31, 2008.
DIVIDENDS DECLARED
The Board of Directors declared a quarterly dividend of 21cents per share for the quarter ended June30, 2009. The dividend was paid on July10, 2009 to shareholders of record on June30, 2009.
CONFERENCE CALL
Washington Trust Chairman and Chief Executive Officer John C. Warren, and David V. Devault, Executive Vice President, Chief Financial Officer and Secretary, will host a conference call on Wednesday, July22, 2009 at 8:30a.m. (Eastern Time) to discuss Washington Trust's second quarter results. This call is being webcast by SNL IR Solutions and can be accessed through the Investor Relations section of the Washington Trust website, www.washtrust.com, or may be accessed by calling (800)860-2442, or (412)858-4600 for international callers. A replay of the call will be posted in this same location on the website shortly after the conclusion of the call. To listen to a replay of the conference call, dial (877)344-7529 and enter Conference ID #: 431996. The replay will be available until 9:00a.m. on July30, 2009.
BACKGROUND
Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company, a Rhode Island state-chartered bank founded in 1800. Washington Trust offers personal banking, business banking and wealth management services through its offices in Rhode Island, Massachusetts and southeastern Connecticut. Washington Trust Bancorp, Inc.'s common stock trades on the NASDAQ Global Select® Market under the symbol "WASH." Investor information is available on the Washington Trust's web site: www.washtrust.com.
FORWARD-LOOKING STATEMENTS
This press release contains certain statements that may be considered "forward-looking statements" within the meaning of Section27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, including statements regarding our strategy, effectiveness of investment programs, evaluations of future interest rate trends and liquidity, expectations as to growth in assets, deposits and results of operations, success of acquisitions, future operations, market position, financial position, and prospects, plans, goals and objectives of management are forward-looking statements. The actual results, performance or achievements of Washington Trust could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in general national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets, volatility and disruption in national and international financial markets, government intervention in the U.S. financial system, reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits, reductions in the market value of wealth management assets under administration, changes in the value of securities and other assets, reductions in loan demand, changes in loan collectibility, default and charge-off rates, changes in the size and nature of the Washington Trust's competition, changes in legislation or regulation and accounting principles, policies and guidelines, and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December31, 2008, as filed with the Securities and Exchange Commission, may result in these differences. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this press release, and Washington Trust assumes no obligation to update forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.
SUPPLEMENTAL INFORMATION -- EXPLANATION OF NON-GAAP FINANCIAL MEASURES
Reported amounts are presented in accordance with U.S. generally accepted accounting principles ("GAAP"). Washington Trust's management believes that the supplemental non-GAAP information, which consists of measurements and ratios based on tangible equity and tangible assets, is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.
Washington Trust Bancorp, Inc.
