What happened
Washington Trust Bancorp (NASDAQ: WASH) saw its stock price drop 13.2% this week as of 12:15 p.m. ET on Friday, according to S&P Global Market Intelligence. The stock was trading at about $28.44 per share on Friday, down about 40% year to date (YTD).
The overall markets were up slightly this week, as the S&P 500 gained 0.7%, the Dow Jones Industrial Average was up 0.7%, and the Nasdaq Composite climbed 0.9% this week, as of Friday at 12:15 p.m. ET.
So what
Washington Trust Bancorp is a Rhode Island-based bank with about $6.9 billion in assets. The bank released first-quarter earnings on Monday, April 24, and earnings and revenue fell short of analysts' expectations.
Washington Trust saw loans hit an all-time high of $52 billion, up 2% from the previous quarter and 21% year over year. While net interest income was up 6% year over year to $37.2 billion, it was down 10% from the fourth quarter on higher deposit costs. Overall, revenue was down 8% from the fourth quarter, and down about 3% from the first quarter of 2022, to $50.5 million.
The net interest margin fell to 2.33% in the first quarter, down 32 basis points from the fourth quarter on higher funding costs, which outpaced increases in asset yields.
Overall, net income was down 22% year over year to about $12.8 million. Sizable drops in wealth management and mortgage banking revenue compared to the first quarter of 2022 accounted for the overall decline, as did higher noninterest expenses.
"Our capital, liquidity, and asset quality remain strong, yet first-quarter earnings were dampened by continued margin pressure resulting from rapidly rising funding costs and increased competition for deposits," Edward Handy III, chairman and CEO, said in a press release.
Now what
Washington Trust was also hurt this week by an analyst downgrade, as Piper Sandler lowered its price target to $27, from $40 per share, on the bank's significant earnings miss. It lowered its rating to underweight from neutral following the earnings report.
This is not a great market for smaller banks, as the economy is expected to slow and there is regulatory uncertainty after the March banking meltdowns.
The stock is down about 40% year to date, and the consensus price target is $30, so analysts are not expecting much movement from this stock over the next 12 months. Investors may want to sit tight to see how the next few quarters play out.
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
