Earnings momentum for Washington Trust Bancorp Inc. (WASH) has increased since this major regional bank posted impressive third quarter results last week, which included a 17.0% year-over-year jump in earnings. Furthermore, this Zacks #2 Rank (Buy) pays a regular quarterly dividend that yields a solid 3.6%.
Impressive Third Quarter Earnings
On October 22, Washington Trust Bancorp reported third quarter earnings per share of 54 cents, topping the Zacks Consensus Estimate by 1.9% and the year-ago earnings by 17.0%. The improvement was primarily due to revenue growth and a lower provision for loan losses.
Net interest income climbed 5.6% year over year to $22.7 million. Non-interest income rose 30.0% to $16.9 million. Moreover, net interest margin expanded six basis points (bps) to 3.28%. Yet, the company's non-interest expenses increased 16.4% to $26.3 million over the same period.
Credit metrics continued to improve at Washington Trust. The provision for loan losses was $0.6 million, down 40% from the year-ago quarter. Net charge-offs showed a declining trend, decreasing to $0.3 million from $0.7 million in the prior-year quarter.
Earnings Estimate Revisions Moving Higher
Both estimates for Washington Trust Bancorp have advanced in the past 7 days for this year and next. The Zacks Consensus Estimate for 2012 is up 2.4% to $2.14, while the Zacks Consensus Estimate for 2013 has advanced by 2.8% to $2.18.
The Zacks Consensus Estimate for 2012 reflects year-over-year growth of about 17.6%, while the expected growth rate for 2013 is 1.9%.
Washington Trust Bancorp 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. Again, in September 2012, the dividend was boosted by about 4.3%.
Currently, the company pays a quarterly dividend of 24 cents per share, affirming a yield of 3.6%.
Valuation Looks Reasonable
Shares of Washington Trust Bancorp currently trade at 12.5x 12-month forward earnings, a 9.4% discount to the peer group average of 13.8x. Its price to book ratio of 1.5 is at a 7% premium to the industry median of 1.4. 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 around its 200 days moving average over the last six months.
With rising estimates, strong growth projections, a reasonable valuation and a decent dividend yield, Washington Trust Bancorp looks like a solid pick for investors seeking both growth and income.
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 $436.4 million, Washington Trust competes with Eagle Bancorp, Inc. (EGBN), among others.
Read the full analyst report on WASH (email registration required)