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Washington Trust Reports Record Quarterly Earnings

WESTERLY, R.I., Oct. 24, 2016 (GLOBE NEWSWIRE) -- Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced net income of $12.3 million, or $0.72 per diluted share, for the third quarter of 2016, up from net income of $11.1 million, or $0.64 per diluted share, reported for the second quarter of 2016.

"Our third quarter results reflect the strength and diversity of our business model, as we generated key revenues from our core business lines,” stated Joseph J. MarcAurele, Washington Trust Chairman and Chief Executive Officer.  “We also posted record earnings and surpassed $4 billion in total assets for the first time in our 216-year history."

Selected highlights for the third quarter of 2016 include:

  • Returns on average equity and average assets were strong at 12.57% and 1.21%, respectively.  Comparable amounts for the second quarter of 2016 were 11.50% and 1.14%, respectively.

  • The latest quarter results included a $939 thousand, or 5 cent per diluted share, benefit resulting from the reduction of a contingent consideration liability.  Additional information is presented below under the heading Noninterest Expenses.

  • Total loans stood at $3.2 billion at September 30, 2016, up by 3% in the quarter and up by 8% from a year ago.

  • Total deposits grew by 9% in the third quarter and amounted to $3.0 billion at September 30, 2016.  Deposits were up by 7% from a year ago.

  • Wealth management assets at the end of quarter stood in excess of $6 billion and third quarter revenues totaled $9.6 million.  These were record highs for Washington Trust.

  • Mortgage banking revenues amounted to $3.7 million, up by 38% on a linked quarter basis.  Mortgage loans sold to the secondary market totaled $164 million, the highest quarterly volume in our history.

  • In September, Washington Trust declared a quarterly dividend of 37 cents per share, representing a 1 cent per share increase over the previous quarter and the second dividend increase in 2016.

Net Interest Income
Net interest income totaled $27.4 million for the third quarter of 2016, up by $603 thousand on a linked quarter basis.  The net interest margin was 2.94% for the third quarter of 2016, down by 11 basis points from the previous quarter.  The reduction in the net interest margin was primarily due to lower yields on interest-earning assets, resulting from additions to the investment securities portfolio and to a lesser extent, a reduction in the yield on the loan portfolio.  Significant linked quarter changes included:

  • Average interest-earning assets increased by $178 million from the prior quarter, reflecting a $95 million increase in the average balance of investment securities and a $58 million increase in the average balance of loans.  The yield on interest-earning assets was 3.55%, down by 10 basis points.

  • Average interest-bearing liabilities increased by $131 million from the prior quarter, reflecting an increase of $111 million in the average balance of wholesale funding balances and an increase of $19 million in average interest-bearing deposits.  The cost of interest-bearing funds was 0.76%, up by 2 basis points from the prior quarter.

Noninterest Income
Noninterest income totaled $17.3 million for the third quarter of 2016, up by $1.3 million, or 8%, from the second quarter of 2016.  Significant linked quarter changes included:

  • Wealth management revenues, our largest source of noninterest income, totaled $9.6 million for the third quarter, up by $142 thousand, or 1%, from the prior quarter.  The linked quarter change was affected by the second quarter recognition of $344 thousand in tax preparation fee income, which is typically concentrated in that quarter.  Wealth management assets under administration amounted to $6.1 billion at September 30, 2016, up by $152 million on a linked quarter basis.  Managed assets continue to represent over 90% of total wealth management assets at September 30, 2016.

  • Mortgage banking revenues totaled $3.7 million in the third quarter, up by $1.0 million, or 38%, from the previous quarter, reflecting both a higher volume of and yield on loans sold to the secondary market.  Residential mortgage loans sold to the secondary market amounted to $164 million in the third quarter, compared to $139 million in the previous quarter.

  • Income from bank-owned life insurance ("BOLI") amounted to $521 thousand in the third quarter, down by $569 thousand on a linked quarter basis.  This decrease was due to a $589 thousand non-taxable gain recognized in the second quarter due to the receipt of life insurance proceeds.

  • Loan related derivative income amounted to $1.2 million in the third quarter, up by $670 thousand from the prior quarter.

Noninterest Expenses
Noninterest expenses totaled $24.7 million for the third quarter of 2016, down by $1.4 million, or 5%, from the prior quarter.  The largest reason for the decline was a $939 thousand reduction in noninterest expenses resulting from a downward adjustment in the fair value of the contingent consideration liability previously recognized upon the completion of the acquisition of Halsey Associates, Inc. in 2015.  The remaining linked quarter decrease in noninterest expenses was due to a $497 thousand decline in salaries and employee benefit costs.  In the previous quarter, costs of $425 thousand were recognized for various employee severance matters.

Income tax expense amounted to $5.9 million for the third quarter of 2016, up by $710 thousand from the prior quarter.  The effective tax rate for the third quarter of 2016 was 32.2%, compared to 31.8% for the second quarter of 2016.  The effective tax rate in the prior quarter was lower due to the impact of the non-taxable gain related to the receipt of BOLI proceeds.  Based on the current federal and applicable state income tax statutes, the Corporation currently expects the effective tax rate for the fourth quarter of 2016 will be approximately 32.5%.

Loans
Total loans amounted to $3.2 billion at September 30, 2016, up by $100 million, or 3%, from the balance at the end of the second quarter.  Residential loan portfolio balances increased by $75 million, or 7%.  During the quarter, $59 million of residential mortgages were purchased.  These purchased loans were individually evaluated to our underwriting standards and are predominantly secured by properties in Massachusetts.  The commercial loan portfolio increased by $25 million, or 1.4%, during the quarter, reflecting growth in the commercial mortgage and commercial construction portfolios.

Investment Securities
The investment securities portfolio amounted to $581 million at September 30, 2016, up by $161 million, or 38.5%, from the balance at June 30, 2016.  During the quarter, government agency mortgage-backed debt securities and agency debt securities totaling $216 million and with a weighted average yield of 2.48% were purchased.  The purchases were partially offset by calls of agency debt securities and obligations of state and political subdivisions, as well as routine principal pay-downs on mortgage-backed securities.  Investment securities represented 14% of total assets as of September 30, 2016.

Deposits and Borrowings
Total deposits amounted to $3.0 billion at September 30, 2016, up by $248 million, or 8.9%, in the third quarter.  Included in total deposits were wholesale brokered time deposit balances of $359 million, which increased by $65 million from the balance at the end of the second quarter.  Excluding wholesale brokered time deposits, in-market deposits increased by $183 million, or 7.3%, in the quarter.  This reflects increases in money market deposits and noninterest-bearing demand deposits, including inflows associated with the business cycles of various institutional and governmental depositors.

FHLBB advances amounted to $672 million at September 30, 2016, up by $32 million, or 4.9%, from June 30, 2016.

Asset Quality
Total past due loans amounted to $21.3 million, or 0.67% of total loans, at September 30, 2016, compared to $17.1 million, or 0.56% of total loans, at June 30, 2016.  Total nonaccrual loans amounted to $24.0 million, or 0.75% of total loans, at September 30, 2016, compared to $17.2 million, or 0.56% of total loans, at June 30, 2016.  The increase in both past due loans and nonaccrual loans was due to one commercial real estate relationship, previously modified in a troubled debt restructuring, with a carrying value of $6.3 million as of September 30, 2016.  During the third quarter, a $1.9 million charge-off was recognized on this relationship.

A loan loss provision totaling $1.8 million was charged to earnings in the third quarter of 2016, compared to a loan loss provision of $450 thousand recognized in the second quarter of 2016.  The increase in loan loss provision was primarily due to the additional loss exposure allocated to the commercial real estate relationship noted above.  The allowance for loan losses was $25.6 million, or 0.81% of total loans, at September 30, 2016, compared to $25.8 million, or 0.84% of total loans, at June 30, 2016.

Capital and Dividends
Total shareholders' equity was $395 million at September 30, 2016, up by $7 million from June 30, 2016.  Capital levels at September 30, 2016 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.31% at September 30, 2016, compared to 12.43% at June 30, 2016.  At September 30, 2016, book value per share amounted to $23.11, up from $22.73 in the prior quarter.

The Board of Directors declared a quarterly dividend of 37 cents per share for the quarter ended September 30, 2016.  The dividend was paid on October 14, 2016 to shareholders of record on October 3, 2016.

Conference Call
Washington Trust will host a conference call to discuss its third quarter results, business highlights and outlook on Tuesday, October 25, 2016 at 8:30 a.m. (Eastern Time).  Individuals may dial in to the call at 1-877-407-0784.  An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-877-870-5176 and entering the Replay PIN Number 13646314; the audio replay will be available through November 4, 2016.  Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrustbancorp.com, and will be available through December 31, 2016.

Background
Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company.  Founded in 1800, Washington Trust is the oldest community bank in the nation, the largest state-chartered bank headquartered in Rhode Island and one of the Northeast's premier financial services companies.  Washington Trust offers a full range of financial services, including commercial banking, mortgage banking, personal banking and wealth management and trust services through its offices located in Rhode Island, Connecticut and Massachusetts.  The Corporation’s common stock trades on NASDAQ under the symbol WASH.  Investor information is available on the Corporation’s web site at www.washtrustbancorp.com.

Forward-Looking Statements
This press release contains statements that are “forward-looking statements”.  We may also make forward-looking statements in other documents we file with the SEC, in press releases and other written materials, and in oral statements made by our officers, directors or employees.  You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters.  You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of Washington Trust.  These risks, uncertainties and other factors may cause the actual results, performance or achievements of Washington Trust to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include the following: weakness in national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets; volatility in national and international financial markets; additional 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 our 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 December 31, 2015, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, 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 report, and we assume no obligation to update any 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
In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures.  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.  Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

 
Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
           
  Sep 30,
 2016
Jun 30,
 2016
Mar 31,
 2016
Dec 31,
 2015
Sep 30,
 2015
Assets:          
Cash and due from banks $ 126,752     $ 116,658     $ 89,966     $ 93,222     $ 106,445    
Short-term investments   2,420       3,255       4,931       4,409       3,629    
Mortgage loans held for sale   45,162       38,554       22,895       38,554       31,805    
Securities:          
Available for sale, at fair value   564,256       401,749       411,352       375,044       323,795    
Held to maturity, at amortized cost   16,848       17,917       19,040       20,023       21,140    
Total securities   581,104       419,666       430,392       395,067       344,935    
Federal Home Loan Bank stock, at cost   37,249       34,303       26,515       24,316       37,730    
Loans:          
Commercial   1,757,215       1,732,220       1,698,811       1,654,547       1,579,854    
Residential real estate   1,079,887       1,005,036       1,004,349       1,013,555       1,024,214    
Consumer   344,253       343,628       343,833       345,025       345,850    
Total loans   3,181,355       3,080,884       3,046,993       3,013,127       2,949,918    
Less allowance for loan losses   25,649       25,826       26,137       27,069       27,161    
Net loans   3,155,706       3,055,058       3,020,856       2,986,058       2,922,757    
Premises and equipment, net   29,433       29,590       29,882       29,593       28,180    
Investment in bank-owned life insurance   70,557       65,036       66,000       65,501       65,000    
Goodwill   64,059       64,059       64,059       64,059       64,196    
Identifiable intangible assets, net   10,493       10,814       11,137       11,460       11,793    
Other assets   81,099       80,088       71,577       59,365       58,366    
Total assets $ 4,204,034     $ 3,917,081     $ 3,838,210     $ 3,771,604     $ 3,674,836    
Liabilities:          
Deposits:          
Demand deposits $ 566,027     $ 512,307     $ 539,119     $ 537,298     $ 513,856    
NOW accounts   404,827       414,532       394,873       412,602       358,973    
Money market accounts   794,905       675,896       763,565       823,490       855,858    
Savings accounts   357,966       342,579       331,800       326,967       305,775    
Time deposits   913,649       844,036       850,294       833,898       801,818    
Total deposits   3,037,374       2,789,350       2,879,651       2,934,255       2,836,280    
Federal Home Loan Bank advances   671,615       640,010       487,189       378,973       381,649    
Junior subordinated debentures   22,681       22,681       22,681       22,681       22,681    
Other liabilities   77,037       76,708       67,409       60,307       63,699    
Total liabilities   3,808,707       3,528,749       3,456,930       3,396,216       3,304,309    
Shareholders’ Equity:          
Common stock   1,069       1,068       1,064       1,064       1,062    
Paid-in capital   113,290       112,314       111,641       110,949       109,724    
Retained earnings   288,613       282,666       277,810       273,074       268,166    
Accumulated other comprehensive loss   (7,645 )     (7,716 )     (9,235 )     (9,699 )     (8,425 )  
Total shareholders’ equity   395,327       388,332       381,280       375,388       370,527    
Total liabilities and shareholders’ equity $ 4,204,034     $ 3,917,081     $ 3,838,210     $ 3,771,604     $ 3,674,836    
                                         


 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
              For the Nine Months Ended
  For the Three Months Ended  
  Sep 30,
 2016
Jun 30,
 2016
Mar 31,
 2016
Dec 31,
 2015
Sep 30,
 2015
  Sep 30,
 2016
Sep 30,
 2015
Interest income:                
Interest and fees on loans $ 29,633     $ 29,122     $ 29,998     $ 28,511     $ 28,626       $ 88,753     $ 85,718    
Taxable interest on securities   3,024       2,487       2,370       2,262       2,178         7,881       6,613    
Nontaxable interest on securities   218       280       327       352       366         825       1,203    
Dividends on Federal Home Loan Bank stock   288       231       210       315       309         729       638    
Other interest income   93       70       64       37       47         227       101    
Total interest and dividend income   33,256       32,190       32,969       31,477       31,526         98,415       94,273    
Interest expense:                
Deposits   3,110       2,981       2,968       3,097       3,308         9,059       10,045    
Federal Home Loan Bank advances   2,641       2,313       2,152       1,966       1,987         7,106       5,780    
Junior subordinated debentures   125       119       112       157       232         356       714    
Other interest expense   1       1       2       2       2         4       7    
Total interest expense   5,877       5,414       5,234       5,222       5,529         16,525       16,546    
Net interest income   27,379       26,776       27,735       26,255       25,997         81,890       77,727    
Provision for loan losses   1,800       450       500       750       200         2,750       300    
Net interest income after provision for loan losses   25,579       26,326       27,235       25,505       25,797         79,140       77,427    
Noninterest income:                
Wealth management revenues   9,623       9,481       9,174       9,167       8,902         28,278       26,249    
Mortgage banking revenues   3,734       2,710       2,198       2,582       1,990         8,642       7,319    
Service charges on deposit accounts   915       935       907       971       986         2,757       2,894    
Card interchange fees   870       860       797       810       849         2,527       2,389    
Income from bank-owned life insurance   521       1,090       499       502       498         2,110       1,480    
Loan related derivative income   1,178       508       645       752       327         2,331       1,689    
Equity in losses of unconsolidated subsidiaries   (88     (89 )     (88 )     (69 )     (69 )       (265 )     (224 )  
Other income   508       419       502       431       430         1,429       1,398    
Total noninterest income   17,261       15,914       14,634       15,146       13,913         47,809       43,194    
Noninterest expense:                
Salaries and employee benefits   16,908       17,405       16,380       16,053       15,971         50,693       46,971    
Net occupancy   1,766       1,803       1,807       1,724       1,721         5,376       5,276    
Equipment   1,648       1,503       1,501       1,393       1,424         4,652       4,140    
Outsourced services   1,254       1,294       1,363       1,337       1,250         3,911       3,774    
Legal, audit and professional fees   691       662       629       825       630         1,982       1,916    
FDIC deposit insurance costs   504       491       493       470       467         1,488       1,376    
Advertising and promotion   370       420       265       325       356         1,055       1,201    
Amortization of intangibles   321       322       323       333       260         966       571    
Debt prepayment penalties                                   431                         431            
Acquisition related expenses                                           52       504                     937    
Change in fair value of contingent consideration   (939 )                                       (939 )          
Other expenses   2,127       2,130       2,258       2,049       1,955         6,515       6,206    
Total noninterest expense   24,650       26,030       25,450       24,561       24,538         76,130       72,368    
Income before income taxes   18,190       16,210       16,419       16,090       15,172         50,819       48,253    
Income tax expense   5,863       5,153       5,484       5,346       4,964         16,500       15,532    
Net income $ 12,327     $ 11,057     $ 10,935     $ 10,744     $ 10,208       $ 34,319     $ 32,721    
                 
Net income available to common shareholders:                
Basic $ 12,302     $ 11,035     $ 10,910     $ 10,718     $ 10,181       $ 34,247     $ 32,621    
Diluted $ 12,302     $ 11,035     $ 10,910     $ 10,718     $ 10,180       $ 34,247     $ 32,621    
Weighted average common shares outstanding:                
Basic   17,090       17,067       17,023       17,004       16,939         17,060       16,837    
Diluted   17,203       17,194       17,157       17,167       17,102         17,198       17,027    
Earnings per common share:                
Basic $ 0.72     $ 0.65     $ 0.64     $ 0.63     $ 0.60       $ 2.01     $ 1.94    
Diluted $ 0.72     $ 0.64     $ 0.64     $ 0.62     $ 0.60       $ 1.99     $ 1.92    
                 
Cash dividends declared per share $ 0.37     $ 0.36     $ 0.36     $ 0.34     $ 0.34       $ 1.09     $ 1.02    
                                                           


 
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
   
  Sep 30,
 2016
Jun 30,
 2016
Mar 31,
 2016
Dec 31,
 2015
Sep 30,
 2015
Share and Equity Related Data:          
Book value per share $ 23.11     $ 22.73     $ 22.40     $ 22.06     $ 21.82    
Tangible book value per share - Non-GAAP (1) $ 18.75     $ 18.35     $ 17.98     $ 17.62     $ 17.36    
Market value per share $ 40.22     $ 37.92     $ 37.32     $ 39.52     $ 38.45    
Shares issued and outstanding at end of period   17,107       17,081       17,024       17,020       16,985    
           
Capital Ratios:          
Tier 1 risk-based capital 11.48% (i)   11.57   %   11.56   %   11.64   %   11.83   %
Total risk-based capital 12.31% (i)   12.43   %   12.45   %   12.58   %   12.80   %
Tier 1 leverage ratio 8.95% (i)   9.21   %   9.31   %   9.37   %   9.26   %
Common equity tier 1 10.77% (i)   10.84   %   10.82   %   10.89   %   11.05   %
Equity to assets   9.40   %   9.91   %   9.93   %   9.95   %   10.08   %
Tangible equity to tangible assets - Non-GAAP (1)   7.77   %   8.16   %   8.13   %   8.11   %   8.18   %
(i) - estimated          
           


      For the Nine Months Ended
  For the Three Months Ended  
  Sep 30,
 2016
Jun 30,
 2016
Mar 31,
 2016
Dec 31,
 2015
Sep 30,
 2015
  Sep 30,
 2016
Sep 30,
 2015
Performance Ratios:                
Net interest margin (FTE) 2.94 % 3.05 % 3.24 % 3.08 % 3.07 %   3.07 % 3.13 %
Return on average assets 1.21 % 1.14 % 1.16 % 1.16 % 1.11 %   1.17 % 1.20 %
Return on average tangible assets - Non-GAAP (1) 1.24 % 1.17 % 1.18 % 1.19 % 1.13 %   1.20 % 1.22 %
Return on average equity 12.57 % 11.50 % 11.50 % 11.52 % 11.13 %   11.86 % 12.17 %
Return on average tangible equity - Non-GAAP (1) 15.53 % 14.28 % 14.34 % 14.45 % 13.82 %   14.72 % 14.90 %

(1) See the section labeled “SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures” at the end of this document.

 
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)
      For the Nine Months Ended
  For the Three Months Ended  
  Sep 30,
 2016
Jun 30,
 2016
Mar 31,
 2016
Dec 31,
 2015
Sep 30,
 2015
  Sep 30,
 2016
Sep 30,
 2015
Wealth Management Results                
Wealth Management Revenues:                
Trust and investment management fees $ 8,358     $ 8,195     $ 8,065     $ 8,001     $ 7,768       $ 24,618     $ 22,148    
Mutual fund fees   812       812       843       952       989         2,467       3,057    
Asset-based revenues   9,170       9,007       8,908       8,953       8,757         27,085       25,205    
Transaction-based revenues   453       474       266       214       145         1,193       1,044    
Total wealth management revenues $ 9,623     $ 9,481     $ 9,174     $ 9,167     $ 8,902       $ 28,278     $ 26,249    
                 
Assets Under Administration:                
Balance at beginning of period $ 5,905,019     $ 5,878,967     $ 5,844,636     $ 5,714,201     $ 5,211,548       $ 5,844,636     $ 5,069,966    
Acquisition of Halsey Associates, Inc.                             —          —          —        839,994                —       839,994    
Net investment appreciation (depreciation)
 & income
  192,518       71,447       22,389       153,953       (316,121       286,354       (249,181  
Net client asset flows   (40,678     (45,395  )     11,942       (23,518     (21,220       (74,131     53,422    
Balance at end of period $ 6,056,859     $ 5,905,019     $ 5,878,967     $ 5,844,636     $ 5,714,201       $ 6,056,859     $ 5,714,201    
                 
Mortgage Banking Results                
Mortgage Banking Revenues:                
Gains & commissions on loan sales, net $ 3,744     $ 2,804     $ 2,134     $ 2,528     $ 1,964       $ 8,682     $ 7,297    
Residential mortgage servicing fee income, net   (10     (94     64       54       26         (40     22    
Total mortgage banking revenues $ 3,734     $ 2,710     $ 2,198     $ 2,582     $ 1,990       $ 8,642     $ 7,319    
                 
Residential Mortgage Loan Originations:                
Originations for retention in portfolio $ 90,308     $ 54,080     $ 47,545     $ 38,080     $ 76,963       $ 191,934     $ 196,772    
Originations for sale to secondary market (1)   170,673       154,043       90,458       134,125       126,353       $ 415,174       389,709    
Total mortgage loan originations $ 260,981     $ 208,123     $ 138,003     $ 172,205     $ 203,316       $ 607,108     $ 586,481    
                 
Residential Mortgage Loans Sold:                
Sold with servicing rights retained $ 44,611     $ 45,804     $ 26,454     $ 44,493     $ 37,782       $ 116,869     $ 117,731    
Sold with servicing rights released (1)   119,572       93,239       79,507       82,906       94,645       $ 292,318       285,770    
Total mortgage loans sold $ 164,183     $ 139,043     $ 105,961     $ 127,399     $ 132,427       $ 409,187     $ 403,501    

(1) Also includes loans originated in a broker capacity.

END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
   
  Sep 30,
 2016
Jun 30,
 2016
Mar 31,
 2016
Dec 31,
 2015
Sep 30,
 2015
Commercial:          
Mortgages $ 1,086,175     $ 1,074,747     $ 976,931     $ 931,953     $ 873,767    
Construction & development   98,735       81,812       123,032       122,297       121,857    
Commercial & industrial   572,305       575,661       598,848       600,297       584,230    
Total commercial   1,757,215       1,732,220       1,698,811       1,654,547       1,579,854    
Residential real estate:          
Mortgages   1,052,829       978,399       980,274       984,437       994,808    
Homeowner construction   27,058       26,637       24,075       29,118       29,406    
Total residential real estate   1,079,887       1,005,036       1,004,349       1,013,555       1,024,214    
Consumer:          
Home equity lines   265,238       260,541       258,513       255,565       252,862    
Home equity loans   38,264       39,572       45,499       46,649       47,610    
Other   40,751       43,515       39,821       42,811       45,378    
Total consumer   344,253       343,628       343,833       345,025       345,850    
Total loans $ 3,181,355     $ 3,080,884     $ 3,046,993     $ 3,013,127     $ 2,949,918    


  September 30, 2016   December 31, 2015
  Balance % of Total   Balance % of Total
Commercial Real Estate Loans by Property Location:          
Rhode Island, Connecticut, Massachusetts $ 1,097,935     92.7 %   $ 959,883     91.0 %
New York, New Jersey, Pennsylvania   73,893     6.2 %     80,989     7.7 %
New Hampshire   13,082     1.1 %     13,377     1.3 %
Total commercial real estate loans (1) $ 1,184,910     100.0 %   $ 1,054,249     100.0 %
           
Residential Mortgages by Property Location:          
Rhode Island, Connecticut, Massachusetts $ 1,062,256     98.3 %   $ 995,743     98.2 %
New Hampshire, Vermont, Maine   11,827     1.1 %     10,186     1.0 %
New York, Virginia, New Jersey, Maryland, Pennsylvania   2,851     0.3 %     4,163     0.4 %
Ohio   1,077     0.1 %     1,557     0.2 %
Other   1,876     0.2 %     1,906     0.2 %
Total residential mortgages $ 1,079,887     100.0 %   $ 1,013,555     100.0 %

(1) Commercial real estate loans consist of commercial mortgages and construction and development loans.  Commercial mortgages are loans secured by income producing property.

  Sep 30,
 2016
Jun 30,
 2016
Mar 31,
 2016
Dec 31,
 2015
Sep 30,
 2015
Deposits:          
Non-interest bearing demand deposits $ 520,860     $ 476,848     $ 474,477     $ 475,398     $ 472,349    
Interest-bearing demand deposits   45,167       35,459       64,642       61,900       41,507    
NOW accounts   404,827       414,532       394,873       412,602       358,973    
Money market accounts   794,905       675,896       763,565       823,490       855,858    
Savings accounts   357,966       342,579       331,800       326,967       305,775    
Time deposits (in-market)   554,669       549,935       540,815       531,419       534,266    
Wholesale brokered time deposits   358,980       294,101       309,479       302,479       267,552    
Total deposits $ 3,037,374     $ 2,789,350     $ 2,879,651     $ 2,934,255     $ 2,836,280    


CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
   
  Sep 30,
 2016
Jun 30,
 2016
Mar 31,
 2016
Dec 31,
 2015
Sep 30,
 2015
Asset Quality Ratios:          
Nonperforming assets to total assets   0.59   %   0.48   %   0.49   %   0.58   %   0.48   %
Nonaccrual loans to total loans   0.75   %   0.56   %   0.57   %   0.70   %   0.57   %
Allowance for loan losses to nonaccrual loans   107.09   %   149.73   %   150.00   %   128.61   %   161.25   %
Allowance for loan losses to total loans   0.81   %   0.84   %   0.86   %   0.90   %   0.92   %
           
Nonperforming Assets:          
Commercial mortgages $ 10,357     $ 4,054     $ 4,054     $ 5,711     $ 4,915    
Commercial construction & development          
Commercial & industrial   1,744       1,204       2,659       3,018       1,137    
Residential real estate mortgages   10,140       10,409       9,367       10,666       9,472    
Consumer   1,709       1,581       1,345       1,652       1,320    
Total nonaccrual loans   23,950       17,248       17,425       21,047       16,844    
Other real estate owned   1,045       1,515       1,326       716       955    
Total nonperforming assets $ 24,995     $ 18,763     $ 18,751     $ 21,763     $ 17,799    
           
Past Due Loans:          
Commercial mortgages $ 10,352     $ 4,062     $ 4,564     $ 4,555     $ 5,062    
Commercial & industrial   1,047       1,978       2,906       462       4,337    
Residential real estate mortgages   8,291       8,893       8,703       9,286       10,567    
Consumer loans   1,565       2,201       2,122       3,256       1,845    
Total past due loans $ 21,255     $ 17,134     $ 18,295     $ 17,559     $ 21,811    
           
Total past due loans to total loans   0.67   %   0.56   %   0.60   %   0.58   %   0.74   %
Accruing loans 90 days or more past due $—   $—   $—   $—   $—  
Nonaccrual loans included in past due loans $ 18,796     $ 13,211     $ 14,030     $ 13,635     $ 13,964    


      For the Nine Months Ended
  For the Three Months Ended  
  Sep 30,
 2016
Jun 30,
 2016
Mar 31,
 2016
Dec 31,
 2015
Sep 30,
 2015
  Sep 30,
 2016
Sep 30,
 2015
Nonaccrual Loan Activity:                
Balance at beginning of period $ 17,248     $ 17,425     $ 21,047     $ 16,844     $ 15,131       $ 21,047     $ 15,945    
Additions to nonaccrual status   9,750       2,072       1,352       7,029       3,319         13,174       7,494    
Loans returned to accruing status   (592             (206     (303     (156       (798     (2,278  
Loans charged-off   (2,055     (860     (1,475     (904     (725       (4,390     (1,401  
Loans transferred to other real estate owned                           (435     (610     (716               (1,045     (491  
Payments, payoffs and other changes   (401     (954 )     (2,683     (903     (725       (4,038     (2,425  
Balance at end of period $ 23,950     $ 17,248     $ 17,425     $ 21,047     $ 16,844       $ 23,950     $ 16,844    
                 
Allowance for Loan Losses:                
Balance at beginning of period $ 25,826     $ 26,137     $ 27,069     $ 27,161     $ 27,587       $ 27,069     $ 28,023    
Provision charged to earnings   1,800       450       500       750       200         2,750       300    
Charge-offs   (2,055 )     (860     (1,475     (904     (725       (4,390 )     (1,401  
Recoveries   78       99       43       62       99         220       239    
Balance at end of period $ 25,649     $ 25,826     $ 26,137     $ 27,069     $ 27,161       $ 25,649     $ 27,161    
                 
Net Loan Charge-Offs (Recoveries):                
Commercial mortgages $ 1,936     $ 65     $ 1,249     $ 405     $ (4     $ 3,250     $ 312    
Commercial & industrial   (43     684       (18     217       348         623       367    
Residential real estate mortgages   47       2       134       117       12         183       62    
Consumer   37       10       67       103       270         114       421    
Total $ 1,977     $ 761     $ 1,432     $ 842     $ 626       $ 4,170     $ 1,162    
                 
Net charge-offs to average loans (annualized)   0.25   %   0.10   %   0.19   %   0.11   %   0.08   %     0.18   %   0.05   %
                                                           

The following table presents average balance and interest rate information.  Tax-exempt income is converted to a fully taxable equivalent basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit.  Unrealized gains (losses) on available for sale securities and fair value adjustments on mortgage loans held for sale are excluded from the average balance and yield calculations.  Nonaccrual and renegotiated loans, as well as interest recognized on these loans are included in amounts presented for loans.

 
CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited; Dollars in thousands)
           
For the Three Months Ended September 30, 2016   June 30, 2016   September 30, 2015
  Average Balance Interest Yield/
Rate
  Average Balance Interest Yield/
Rate
  Average Balance Interest Yield/
 Rate
 
Assets:                      
Commercial mortgages $ 1,079,917     $ 9,362     3.45     $ 1,019,290     $ 8,992     3.55     $ 869,471     $ 7,898     3.60  
Construction & development   86,623       712     3.27       117,204       985     3.38       118,243       897     3.01  
Commercial & industrial   565,170       6,382     4.49       591,893       6,408     4.35       583,931       6,680     4.54  
Total commercial loans $ 1,731,710     $ 16,456     3.78     $ 1,728,387     $ 16,385     3.81     $ 1,571,645     $ 15,475     3.91  
Residential real estate loans, including loans held for sale   1,080,302       10,386     3.82       1,024,653       9,980     3.92       1,050,949       10,329     3.90  
Consumer loans   341,829       3,340     3.89       342,866       3,311     3.88       343,603       3,283     3.79  
Total loans   3,153,841       30,182     3.81       3,095,906       29,676     3.86       2,966,197       29,087     3.89  
Cash, federal funds sold and short-term investments   88,414       93     0.42       69,839       70     0.40       89,280       47     0.21  
FHLBB stock   37,933       288     3.02       31,723       231     2.93       37,730       309     3.25  
Taxable debt securities   497,738       3,024     2.42       396,428       2,487     2.52       316,214       2,178     2.73  
Nontaxable debt securities   22,038       336     6.07       28,531       433     6.10       37,780       567     5.95  
Total securities   519,776       3,360     2.57       424,959       2,920     2.76       353,994       2,745     3.08  
Total interest-earning assets   3,799,964       33,923     3.55       3,622,427       32,897     3.65       3,447,201       32,188     3.70  
Noninterest-earning assets   262,724             247,081             231,286        
Total assets $ 4,062,688           $ 3,869,508           $ 3,678,487        
Liabilities and Shareholders' Equity:                      
Interest-bearing demand deposits $ 39,865     $ 13     0.13     $ 42,952     $ 7     0.07     $ 30,392     $ 5     0.07  
NOW accounts   402,307       51     0.05       403,136       53     0.05       357,128       53     0.06  
Money market accounts   709,549       487     0.27       710,075       459     0.26       820,597       951     0.46  
Savings accounts   352,032       52     0.06       338,504       49     0.06       303,587       52     0.07  
Time deposits (in-market)   552,576       1,408     1.01       542,621       1,345     1.00       541,486       1,338     0.98  
Wholesale brokered time deposits   310,740       1,099     1.41       302,707       1,068     1.42       279,839       909     1.29  
FHLBB advances   690,843       2,641     1.52       587,395       2,313     1.58       425,931       1,987     1.85  
Junior subordinated debentures   22,681       125     2.19       22,681       119     2.11       22,681       232     4.06  
Other   53       1     7.51       66       1     6.09       104       2     7.63  
Total interest-bearing liabilities   3,080,646       5,877     0.76       2,950,137       5,414     0.74       2,781,745       5,529     0.79  
Demand deposits   520,439             473,731             477,393        
Other liabilities   69,370             60,923             52,625        
Shareholders' equity   392,233             384,717             366,724        
Total liabilities and shareholders' equity $ 4,062,688           $ 3,869,508           $ 3,678,487        
Net interest income (FTE)   $ 28,046           $ 27,483           $ 26,659      
Interest rate spread     2.79         2.91         2.91  
Net interest margin     2.94         3.05         3.07  

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

For the Three Months Ended     Sep 30,
2016    
Jun 30,
2016    
Sep 30,
2015
Commercial loans $ 549     $ 554     $ 461    
Nontaxable debt securities   118       153       201    
Total $ 667     $ 707     $ 662    


 
CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited; Dollars in thousands)
   
For the Nine Months Ended September 30, 2016   September 30, 2015
  Average Balance Interest Yield/
Rate
  Average Balance Interest Yield/
 Rate
 
Assets:              
Commercial mortgages $ 1,011,327     $ 26,569     3.51     $ 864,941     $ 23,394     3.62  
Construction & development   110,914       2,806     3.38       100,787       2,336     3.10  
Commercial & industrial   587,098       20,470     4.66       597,887       20,987     4.69  
Total commercial loans   1,709,339       49,845     3.90       1,563,615       46,717     3.99  
Residential real estate loans, including loans held for sale   1,045,532       30,521     3.90       1,035,408       30,745     3.97  
Consumer loans   342,735       10,044     3.91       339,608       9,634     3.79  
Total loans   3,097,606       90,410     3.90       2,938,631       87,096     3.96  
Cash, federal funds sold and short-term investments   75,627       227     0.40       68,205       101     0.20  
FHLBB stock   31,774       729     3.06       37,730       638     2.26  
Taxable debt securities   418,034       7,881     2.52       319,786       6,613     2.76  
Nontaxable debt securities   27,939       1,276     6.10       41,083       1,858     6.05  
Total securities   445,973       9,157     2.74       360,869       8,471     3.14  
Total interest-earning assets   3,650,980       100,523     3.68       3,405,435       96,306     3.78  
Noninterest-earning assets   250,019             224,921        
Total assets $ 3,900,999           $ 3,630,356        
Liabilities and Shareholders' Equity:              
Interest-bearing demand deposits $ 44,490     $ 34     0.10     $ 35,430     $ 17     0.06  
NOW accounts   397,329       161     0.05       350,151       153     0.06  
Money market accounts   735,324       1,461     0.27       813,915       2,775     0.46  
Savings accounts   339,616       148     0.06       298,635       148     0.07  
Time deposits (in-market)   544,441       4,067     1.00       554,369       4,198     1.01  
Wholesale brokered time deposits   303,442       3,188     1.40       286,728       2,754     1.28  
FHLBB advances   577,501       7,106     1.64       407,363       5,780     1.90  
Junior subordinated debentures   22,681       356     2.10       22,681       714     4.21  
Other   66       4     8.10       116       7     8.07  
Total interest-bearing liabilities   2,964,890       16,525     0.74       2,769,388       16,546     0.80  
Demand deposits   488,767             452,691        
Other liabilities   61,555             49,786        
Shareholders' equity   385,787             358,491        
Total liabilities and shareholders' equity $ 3,900,999           $ 3,630,356        
Net interest income (FTE)   $ 83,998           $ 79,760      
Interest rate spread     2.94         2.98  
Net interest margin     3.07         3.13  

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

For the Nine Months Ended         Sep 30,
2016
Sep 30,
2015
Commercial loans $ 1,657     $ 1,378    
Nontaxable debt securities   451       655    
Total $ 2,108     $ 2,033    


SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)
   
  Sep 30,
 2016
Jun 30,
 2016
Mar 31,
 2016
Dec 31,
 2015
Sep 30,
 2015
Tangible Book Value per Share:          
Total shareholders' equity, as reported $ 395,327     $ 388,332     $ 381,280     $ 375,388     $ 370,527    
Less:          
Goodwill   64,059       64,059       64,059       64,059       64,196    
Identifiable intangible assets, net   10,493       10,814       11,137       11,460       11,793    
Total tangible shareholders' equity $ 320,775     $ 313,459     $ 306,084     $ 299,869     $ 294,538    
           
Shares outstanding, as reported   17,107       17,081       17,024       17,020       16,985    
           
Book value per share - GAAP $ 23.11     $ 22.73     $ 22.40     $ 22.06     $ 21.82    
Tangible book value per share - Non-GAAP $ 18.75     $ 18.35     $ 17.98     $ 17.62     $ 17.34    
           
Tangible Equity to Tangible Assets:          
Total tangible shareholders' equity $ 320,775     $ 313,459     $ 306,084     $ 299,869     $ 294,538    
           
Total assets, as reported $ 4,204,034     $ 3,917,081     $ 3,838,210     $ 3,771,604     $ 3,674,836    
Less:          
Goodwill   64,059       64,059       64,059       64,059       64,196    
Identifiable intangible assets, net   10,493       10,814       11,137       11,460       11,793    
Total tangible assets $ 4,129,482     $ 3,842,208     $ 3,763,014     $ 3,696,085     $ 3,598,847    
           
Equity to assets - GAAP   9.40   %   9.91   %   9.93   %   9.95   %   10.08   %
Tangible equity to tangible assets - Non-GAAP   7.77   %   8.16   %   8.13   %   8.11   %   8.18   %


  For the Three Months Ended   For the Nine Months Ended
  Sep 30,
 2016
Jun 30,
 2016
Mar 31,
 2016
Dec 31,
 2015
Sep 30,
 2015
  Sep 30,
 2016
Sep 30,
 2015
Return on Average Tangible Assets:                
Net income, as reported $ 12,327     $ 11,057     $ 10,935     $ 10,744     $ 10,208       $ 34,319     $ 32,721    
                 
Total average assets, as reported $ 4,062,688     $ 3,869,508     $ 3,769,025     $ 3,700,441     $ 3,678,487       $ 3,900,999     $ 3,630,356    
Less average balances of:                
Goodwill   64,059       64,059       64,059       64,194       62,524         64,059       59,465    
Identifiable intangible assets, net   10,650       10,972       11,294       11,616       8,768         10,971       6,280    
Total average tangible assets $ 3,987,979     $ 3,794,477     $ 3,693,672     $ 3,624,631     $ 3,607,195       $ 3,825,969     $ 3,564,611    
                 
Return on average assets - GAAP   1.21   %   1.14   %   1.16   %   1.16   %   1.11   %     1.17   %   1.20   %
Return on average tangible assets -
  Non-GAAP
  1.24   %   1.17   %   1.18   %   1.19   %   1.13   %     1.20   %   1.22   %
                 
Return on Average Tangible Equity:                
Net income, as reported $ 12,327     $ 11,057     $ 10,935     $ 10,744     $ 10,208       $ 34,319     $ 32,721    
                 
Total average equity, as reported $ 392,233     $ 384,717     $ 380,342     $ 373,197     $ 366,724       $ 385,787     $ 358,491    
Less average balances of:                
Goodwill   64,059       64,059       64,059       64,194       62,524         64,059       59,465    
Identifiable intangible assets, net   10,650       10,972       11,294       11,616       8,768         10,971       6,280    
Total average tangible equity $ 317,524     $ 309,686     $ 304,989     $ 297,387     $ 295,432       $ 310,757     $ 292,746    
                 
Return on average equity - GAAP   12.57   %   11.50   %   11.50   %   11.52   %   11.13   %     11.86   %   12.17   %
Return on average tangible equity -
  Non-GAAP
  15.53   %   14.28   %   14.34   %   14.45   %   13.82   %     14.72   %   14.90   %

 

Contact:  Elizabeth B. Eckel
                  Senior Vice President, Marketing
                  Telephone:  (401) 348-1309
                  E-mail:  ebeckel@washtrust.com

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