Earnings momentum for Washington Trust Bancorp Inc. (WASH) has been increasing since this major regional bank posted impressive second quarter results, including a 15.2% year-over-year jump in earnings. This Zacks #2 Rank (Buy) has seen upward price movement since then. In addition, the company pays a regular quarterly dividend that yields a solid 3.7%.
Second Quarter EPS Moves Higher
On July 23, Washington Trust reported second quarter 2012 net earnings per share of 53 cents, topping the Zacks Consensus Estimate of 51 cents by 3.9% and beating the year-ago earnings of 46 cents. The upsurge was primarily due to growth in revenue and a lower provision for loan losses.
Net interest income climbed 6.2% year over year to $22.4 million. Non-interest income increased 21.8% to $16.2 million. Moreover, net interest margin expanded 9 basis points (bps) to 3.30%. Yet, the company's non-interest expenses escalated 13.0% to $25.2 million over the same period.
Credit metrics continued to improve at Washington Trust. The provision for loan losses was $0.6 million, down 50% from the year-ago quarter with net charge-offs showing a declining trend. Net charge-offs amounted to $0.2 million, down from $1.0 million in the prior-year quarter.
Upward Estimate Revisions
Both estimates for 2012 have moved higher in the past 7 days, pushing the Zacks Consensus Estimate up by 2.5% to $2.08. For 2013, one out of 2 estimates moved north over the same time frame, helping the Zacks Consensus Estimate advance 2.9% to $2.12.
The Zacks Consensus Estimate for 2012 reflects a year-over-year growth of about 14.0%, while the expected growth rate for 2013 is 2.2%.
Washington Trust is one of the few banks that maintained its dividend payment throughout the financial crisis. Moreover, the company announced a dividend hike of 4.5% in March 2012.
Currently the company pays a quarterly dividend of 23 cents per share, affirming a yield of 3.7%.
Valuation Not So Cheap
Shares of Washington Trust currently trade at 12.0x 12-month forward earnings, a 10% discount to the peer group average of 13.3x. Its price to book ratio of 1.4 is at an 8% premium to the industry median of 1.3. The company has a trailing 12-month ROE of 11.3% compared with the peer group average of 10.7%.
Chart Shows Strength
The stock has been trading near its 200 days moving average over the last six months.
Headquartered in Westerly, Rhode Island, Washington Trust provides various banking products and services. The company was founded in 1800 and conducts business through 18 banking offices, including 10 in southern Rhode Island, 6 in the greater Providence area in Rhode Island, and two in southeastern Connecticut. With a market cap of about $409.3 million, Washington Trust competes with United Financial Bancorp Inc. (UBNK), among others.
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