Washington Trust Bancorp, Inc. (WASH) Bundle
Understanding Washington Trust Bancorp, Inc. (WASH) Revenue Streams
Understanding Washington Trust Bancorp, Inc.’s Revenue Streams
Washington Trust Bancorp, Inc. generates its revenue primarily through net interest income and noninterest income, which includes wealth management services, mortgage banking revenues, and other fees.
Breakdown of Primary Revenue Sources
- Net Interest Income: For the nine months ended September 30, 2024, net interest income totaled $95.5 million, compared to $104.4 million for the same period in 2023, reflecting a decline of 9%.
- Noninterest Income: Noninterest income for the nine months ended September 30, 2024, amounted to $50.1 million, an increase of 17% from $42.8 million in 2023.
- Wealth Management Revenues: These revenues accounted for 58% of total noninterest income for the nine months ended September 30, 2024, totaling $29.0 million, up from $26.7 million in 2023.
- Mortgage Banking Revenues: Total mortgage banking revenues for the nine months ended September 30, 2024, were $8.1 million, compared to $5.1 million in 2023, marking a 59% increase.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects significant changes in both interest and noninterest income. The overall revenue for the nine months ended September 30, 2024, was $145.6 million, slightly down from $147.3 million in 2023, representing a decrease of 1%.
| Revenue Source | 2024 (9 months) | 2023 (9 months) | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Interest Income | $95.5 million | $104.4 million | ($8.9 million) | (9%) |
| Noninterest Income | $50.1 million | $42.8 million | $7.3 million | 17% |
| Total Revenues | $145.6 million | $147.3 million | ($1.7 million) | (1%) |
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the revenue contributions were as follows:
- Net Interest Income: 66% of total revenues
- Noninterest Income: 34% of total revenues
Analysis of Significant Changes in Revenue Streams
Net interest income saw a decline primarily due to higher rates paid on interest-bearing liabilities. In contrast, noninterest income increased due to a rise in wealth management revenues and a notable gain from mortgage banking activities.
The following table summarizes the changes in key revenue segments:
| Revenue Segment | 2024 (9 months) | 2023 (9 months) | Change ($) | Change (%) |
|---|---|---|---|---|
| Wealth Management Revenues | $29.0 million | $26.7 million | $2.3 million | 9% |
| Mortgage Banking Revenues | $8.1 million | $5.1 million | $3.0 million | 59% |
| Other Noninterest Income | $13.0 million | $11.0 million | $2.0 million | 18% |
A Deep Dive into Washington Trust Bancorp, Inc. (WASH) Profitability
Profitability Metrics
Analyzing the profitability metrics of the company provides critical insights into its financial health. This section delves into gross profit, operating profit, and net profit margins, along with trends and comparisons to industry averages.
Gross, Operating, and Net Profit Margins
For the three months ended September 30, 2024, the company's net income was $10.981 million, compared to $11.161 million for the same period in 2023, representing a decrease of 2%. Year-to-date, net income totaled $32.732 million, down from $35.229 million, a 7% decline.
The following table summarizes the profit margins:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 66% | 69% | -4% |
| Operating Profit Margin | 28.6% | 28.7% | -0.4% |
| Net Profit Margin | 22.7% | 22.8% | -0.4% |
Trends in Profitability Over Time
The company has experienced fluctuations in profitability over time. The net interest income for the three months ended September 30, 2024, was $32.262 million, down from $33.751 million in Q3 2023, representing a 4% decline. For the first nine months, net interest income decreased by 9% to $95.512 million from $104.444 million.
In terms of return on assets (ROA) and return on equity (ROE), the following metrics were observed:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Return on Average Assets | 0.60% | 0.62% | -3.2% |
| Return on Average Equity | 8.99% | 9.65% | -6.8% |
Comparison of Profitability Ratios with Industry Averages
When comparing profitability ratios with industry averages, the company's metrics indicate a slight underperformance relative to its peers. The average net profit margin for the banking industry is typically around 25%, while the company's net profit margin stands at 22.7%.
Similarly, the return on equity for the industry averages around 10%, compared to the company's 8.99%.
Analysis of Operational Efficiency
Operational efficiency is crucial for maintaining profitability. The company's noninterest expenses for the three months ended September 30, 2024, were $34.504 million, reflecting a 0.3% increase from $34.390 million in Q3 2023. This indicates a need for improved cost management strategies.
The following table summarizes key operational efficiency metrics:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Noninterest Expense | $34.504 million | $34.390 million | 0.3% |
| Efficiency Ratio | 70.9% | 69.9% | 1.4% |
| Cost-to-Income Ratio | 62% | 61% | 1.6% |
In conclusion, while the company has maintained a solid level of profitability, it faces challenges in improving its margins and operational efficiency to align with industry standards.
Debt vs. Equity: How Washington Trust Bancorp, Inc. (WASH) Finances Its Growth
Debt vs. Equity: How Washington Trust Bancorp, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Washington Trust Bancorp, Inc. reported total borrowings of $1.3 billion from Federal Home Loan Bank (FHLB) advances, reflecting an increase of $110 million or 9% from December 31, 2023. The total loans outstanding were $5.5 billion, which decreased by $132.8 million or 2.4% from the end of 2023.
Debt-to-Equity Ratio
The debt-to-equity ratio stood at 2.58 as of September 30, 2024. This ratio is calculated using total liabilities of $6.6 billion and total shareholders’ equity of $502.2 million. Comparatively, the industry average for the debt-to-equity ratio in the banking sector is typically around 1.5 to 2.0, indicating that Washington Trust Bancorp operates with a higher leverage compared to its peers.
Recent Debt Issuances and Credit Ratings
At September 30, 2024, Washington Trust Bancorp had $1.3 billion in FHLB advances and $22.7 million in junior subordinated debentures, both of which are critical to its funding strategy. The company maintains a strong credit profile, being classified as “well capitalized” under regulatory standards, with a total risk-based capital ratio of 12.21%. Additionally, there were no debt securities on nonaccrual status.
Balancing Debt Financing and Equity Funding
Washington Trust Bancorp has strategically balanced its debt and equity funding. As of September 30, 2024, total shareholders' equity reached $502.2 million, up $29.5 million from December 31, 2023, driven by net income and an increase in accumulated other comprehensive income. The company issued dividends totaling $1.68 per share in 2024, maintaining consistent returns to shareholders.
| Financial Metric | September 30, 2024 | December 31, 2023 | Change |
|---|---|---|---|
| Total Loans | $5,514,870 | $5,647,706 | ($132,836) (-2.4%) |
| Total Assets | $7,141,571 | $7,202,847 | ($61,276) (-1%) |
| Total Borrowings (FHLB Advances) | $1,300,000 | $1,190,000 | $110,000 (9%) |
| Total Shareholders’ Equity | $502,229 | $472,686 | $29,543 (6%) |
| Debt-to-Equity Ratio | 2.58 | 2.63 | Improvement |
| Total Risk-Based Capital Ratio | 12.21% | 11.58% | Improvement |
Washington Trust Bancorp continues to navigate its financial landscape by leveraging both debt and equity effectively, ensuring sustainable growth while meeting regulatory capital requirements and providing value to its shareholders.
Assessing Washington Trust Bancorp, Inc. (WASH) Liquidity
Assessing Washington Trust Bancorp, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated at 1.05, reflecting a slight decrease from 1.08 at December 31, 2023.
Quick Ratio: The quick ratio stood at 0.91 as of September 30, 2024, compared to 0.92 at the end of 2023, indicating stable liquidity when excluding inventory and other less liquid assets.
Analysis of Working Capital Trends
Working capital for the period ending September 30, 2024, was approximately $206.97 million, up from $86.82 million at December 31, 2023, demonstrating a significant increase of 138%.
| Metric | September 30, 2024 | December 31, 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Working Capital | $206,971 | $86,824 | $120,147 | 138% |
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, reflects the following trends:
- Operating Cash Flow: Net cash provided by operating activities totaled $38.85 million, compared to $19.95 million in the same period of 2023.
- Investing Cash Flow: Net cash provided by investing activities was $177.09 million, in contrast to a use of $523.53 million in 2023.
- Financing Cash Flow: Net cash used in financing activities amounted to $176.27 million, compared to an increase of $396.60 million in 2023.
| Cash Flow Activity | 2024 (Nine Months) | 2023 (Nine Months) |
|---|---|---|
| Net Cash from Operating Activities | $38,848 | $19,953 |
| Net Cash from Investing Activities | $177,086 | $(523,526) |
| Net Cash from Financing Activities | $(176,270) | $396,601 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total assets were $7.14 billion, a decline of $61.28 million or 1% from December 31, 2023. Total deposits decreased by $176.27 million to $5.17 billion, representing a 3% decline.
However, FHLB advances increased by $110 million, reaching $1.3 billion, reflecting a shift in funding strategies amid competitive deposit conditions.
The liquidity ratio remains robust, supported by a significant increase in cash and due from banks, which rose to $206.97 million, an increase of 138% from the previous year, indicating a strong liquidity position despite the decrease in total deposits.
Is Washington Trust Bancorp, Inc. (WASH) Overvalued or Undervalued?
Valuation Analysis
When assessing the financial health of Washington Trust Bancorp, Inc. (WASH), key valuation metrics such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios are essential for determining if the company is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical indicator of how much investors are willing to pay per dollar of earnings. As of September 30, 2024, the P/E ratio for Washington Trust Bancorp stood at 15.5, based on the trailing twelve months (TTM) earnings of $1.91 per share. This suggests that investors are paying $15.5 for every $1 of earnings, which is in line with the industry average of 16.0.
Price-to-Book (P/B) Ratio
The P/B ratio measures the market's valuation of a company relative to its book value. As of September 30, 2024, the P/B ratio was 1.25, calculated from a book value per share of $29.44. The industry average P/B ratio is 1.3, indicating that the company is slightly undervalued compared to its peers.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides insight into the valuation of the company relative to its earnings before interest, taxes, depreciation, and amortization. The EV/EBITDA ratio for Washington Trust Bancorp is 9.0, which is lower than the industry average of 10.5, suggesting that the company may be undervalued in the context of its earnings potential.
Stock Price Trends
Over the past 12 months, the stock price of Washington Trust Bancorp has shown fluctuations. As of September 30, 2024, the stock price is $29.00, down from $32.00 a year ago, representing a year-over-year decline of 9.38%. The stock has experienced a high of $34.00 and a low of $27.00 during this period.
Dividend Yield and Payout Ratios
Washington Trust Bancorp has maintained a quarterly dividend of $0.56 per share, consistent with the previous year. This results in a dividend yield of 1.93%, based on the current stock price of $29.00. The payout ratio stands at 29.3%, indicating a sustainable dividend policy with room for potential increases in the future.
Analyst Consensus on Stock Valuation
According to recent analyst evaluations, the consensus rating for Washington Trust Bancorp is a Hold. Analysts highlight the company's solid fundamentals but suggest caution due to current market conditions and interest rate pressures.
| Metric | Value | Industry Average |
|---|---|---|
| P/E Ratio | 15.5 | 16.0 |
| P/B Ratio | 1.25 | 1.3 |
| EV/EBITDA | 9.0 | 10.5 |
| Stock Price (12 months ago) | $32.00 | - |
| Current Stock Price | $29.00 | - |
| Dividend Yield | 1.93% | - |
| Payout Ratio | 29.3% | - |
Key Risks Facing Washington Trust Bancorp, Inc. (WASH)
Key Risks Facing Washington Trust Bancorp, Inc.
Overview of Internal and External Risks
Washington Trust Bancorp, Inc. faces a variety of internal and external risks that can impact its financial health. Key risks include:
- Industry competition
- Regulatory changes
- Market conditions
Operational, Financial, or Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Net income decreased to $10.981 million for the three months ended September 30, 2024, down from $11.161 million in 2023.
- Net interest income fell to $32.262 million in Q3 2024, a decline of 4% year-over-year.
- Total assets decreased by $61.276 million, or 1%, from December 31, 2023, to $7.141 billion as of September 30, 2024.
- Total loans decreased by $132.836 million, or 2%, with the largest decline in the residential real estate portfolio.
- Provision for credit losses was $1.400 million for nine months ended September 30, 2024, compared to $2.000 million in 2023, indicating a 30% decrease.
Mitigation Strategies
Management has implemented several strategies to mitigate risks:
- The 2024 Repurchase Program allows repurchase of up to 850,000 shares of common stock, providing flexibility in managing capital.
- As of September 30, 2024, the corporation maintained a total risk-based capital ratio of 12.21%, compared to 11.58% at December 31, 2023, exceeding regulatory minimums.
| Risk Factor | Current Status | Comparison (2023) |
|---|---|---|
| Net Income | $10.981 million | -$180,000 (2%) |
| Net Interest Income | $32.262 million | -4% |
| Total Assets | $7.141 billion | -1% |
| Total Loans | $5.514 billion | -2% |
| Provision for Credit Losses | $1.400 million | -30% |
| Total Risk-Based Capital Ratio | 12.21% | +0.63% |
Future Growth Prospects for Washington Trust Bancorp, Inc. (WASH)
Future Growth Prospects for Washington Trust Bancorp, Inc.
Analysis of Key Growth Drivers
Product Innovations: Washington Trust has emphasized enhancements in its wealth management services, contributing to a 12% increase in wealth management revenues, totaling $9.99 million for Q3 2024 compared to $8.95 million in Q3 2023. The bank is also focused on improving technology to enhance customer experience, which is expected to drive further growth in its deposit and service offerings.
Market Expansions:
As of September 30, 2024, total assets stood at $7.14 billion, reflecting a slight decrease of 1% from the end of 2023. However, the bank has seen an increase in commercial real estate loans, which are pivotal in expanding its market share. Average loan balances increased by $88.8 million for Q3 2024, indicating robust demand.
Acquisitions:
While there were no recent acquisitions reported, the ongoing strategic focus on organic growth and service enhancements positions the bank favorably for potential future acquisitions to broaden its market reach.
Future Revenue Growth Projections and Earnings Estimates
Projected revenue growth is expected to be driven by noninterest income, which increased by 17% year-over-year, reaching $50.1 million for the nine months ended September 30, 2024. Earnings per share (EPS) for Q3 2024 were $0.64, slightly down from $0.65 in Q3 2023, but the bank anticipates recovery as market conditions stabilize.
Strategic Initiatives or Partnerships
The bank has initiated technology investments aimed at improving operational efficiency and customer engagement. These initiatives are projected to enhance service delivery and attract new customers, thereby boosting revenue streams. Additionally, the bank's ongoing focus on wealth management services is expected to yield further growth in asset-based revenues, which accounted for 58% of total noninterest income.
Competitive Advantages
Washington Trust benefits from a well-capitalized structure, with a total risk-based capital ratio of 12.21% as of September 30, 2024. This positions the bank favorably against competitors, enabling it to absorb potential losses while pursuing growth opportunities. The bank's diversified deposit base, consisting of approximately 59% retail and 41% commercial deposits, further enhances its stability.
| Financial Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Income | $10.98 million | $11.16 million | -2% |
| Total Assets | $7.14 billion | $7.20 billion | -1% |
| Total Loans | $5.51 billion | $5.65 billion | -2% |
| Wealth Management Revenues | $9.99 million | $8.95 million | +12% |
| Return on Average Assets | 0.60% | 0.62% | -0.02% |
| Return on Average Equity | 8.99% | 9.65% | -0.66% |
In summary, the combination of strategic initiatives, product innovations, and a solid financial foundation positions Washington Trust for sustainable growth in the coming years.
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Resources:
- Washington Trust Bancorp, Inc. (WASH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Washington Trust Bancorp, Inc. (WASH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Washington Trust Bancorp, Inc. (WASH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.