Washington Trust Reports Third Quarter 2015 Earnings

WESTERLY, R.I., Oct. 19, 2015 (GLOBE NEWSWIRE) — Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced net income of $10.2 million, or 60 cents per diluted share, for the third quarter of 2015, compared to net income of $11.5 million, or 68 cents per diluted share, reported for the second quarter of 2015.  The decrease in earnings was largely reflective of conditions affecting revenues in several business lines, including mortgage banking, commercial banking and wealth management.

Earnings on a year-to-date basis are up 10% over the same period in 2014.  Returns on average equity and average assets were 12.17% and 1.20%, respectively, for the nine months ended September 30, 2015, compared to 11.60% and 1.21%, respectively, for the same period in 2014.

“Washington Trust’s third quarter results reflect our continued efforts to compete and grow in a challenging environment,” stated Joseph J. MarcAurele, Chairman and Chief Executive Officer.  “During the quarter we completed the acquisition of Halsey Associates, Inc., providing a wealth management presence and client base in Connecticut.  While loan growth was affected by strong competition and other factors, asset quality remained very satisfactory and we had solid deposit growth in the quarter.”

Acquisition of Halsey Associates, Inc.

The acquisition of Halsey Associates, Inc. (“Halsey”), a registered investment adviser firm located in New Haven, CT, was completed on August 1, 2015.  The cost to acquire Halsey was $10.0 million, including approximately $1.7 million in cash, $5.4 million in the form of 136,543 shares of Washington Trust common stock and $2.9 million for the estimated present value of future earn-outs to be paid.  As of the date of acquisition, Halsey’s assets under administration amounted to approximately $840 million.  The transaction resulted in the recognition of intangible assets and goodwill of approximately $6.6 million and $6.7 million, respectively.  Acquisition related expenses amounted to $504 thousand in the third quarter and $433 thousand in the second quarter.  On an after-tax basis, these acquisition related expenses resulted in a charge of 3 cents per diluted share in the third quarter of 2015 and 2 cents per diluted share in the second quarter of 2015.  A small amount of acquisition related expenses is expected to be recognized in the fourth quarter of 2015.

Net Interest Income

Net interest income totaled $26.0 million for the third quarter of 2015, a slight decrease from the second quarter of 2015. This reflects continued pressure on net interest margin, a lower level of prepayment fee income and a modest increase of average interest‑earning assets of $46.1 million, or 1%.

The net interest margin was 3.07% for the third quarter of 2015, down 8 basis points from the previous quarter.  Commercial loan prepayment fee income, which is included in net interest income, amounted to $169 thousand in the third quarter of 2015, compared to $519 thousand in the prior quarter.  Excluding the loan prepayment fee income in each period, the third quarter net interest margin was 3.05%, down by 4 basis points on a linked quarter basis.  This decline in the net interest margin reflects continued pressure on asset yields resulting from a sustained low interest rate environment.

Noninterest Income

Noninterest income totaled $13.9 million for the third quarter of 2015, down by $1.3 million, or 9%, from the second quarter of 2015.  Significant linked quarter changes included:

  • Wealth management revenues totaled $8.9 million for the third quarter, down slightly by $10 thousand, or 0.1%, from the previous quarter.  While total wealth management revenues were essentially unchanged, included in these results were $662 thousand of revenues generated by Halsey since the August 1 acquisition date.  Overall wealth management revenues were affected by equity market declines in the quarter and also included a $344 thousand decline in tax preparation fees, which are typically concentrated in the second quarter.

    Wealth management assets under administration amounted to $5.7 billion at September 30, 2015, up by $503 million, or 9.6%, in the quarter.  While the net increase reflects the addition of assets under administration attributable to Halsey, total wealth management assets under administration were impacted by financial market declines. 

  • Mortgage banking revenues (net gains on loan sales and commissions on loans originated for others) totaled $2.0 million for the third quarter, down by $785 thousand, or 29%, on a linked quarter basis.  The decline largely reflects a lower yield on loan sales and a decrease in loan sales volume.  Residential mortgage loans sold to the secondary market amounted to $132.4 million in the third quarter, down by $10.8 million, compared to the second quarter.
  • Loan related derivative income amounted to $327 thousand in the third quarter, down by $390 thousand from the prior quarter.
  • Other income totaled $457 thousand for the third quarter, down by $205 thousand on a linked quarter basis.  The decrease was largely due to a $250 thousand settlement payment received in the second quarter on a trust preferred debt obligation previously held by the Corporation.  On an after-tax basis, this second quarter transaction amounted to 1 cent per diluted share. 

Noninterest Expenses

Noninterest expenses totaled $24.5 million for the third quarter of 2015, up by $239 thousand, or 1%, from the second quarter of 2015.  The increase in noninterest expenses was largely attributable to the addition of Halsey for the two-month period since the date of acquisition, offset, in part, by a decline in advertising and promotion expenses due to the timing of promotional activities.  Halsey noninterest expenses since the date of acquisition totaled $447 thousand, including $289 thousand of salaries and benefits expense and $110 thousand of amortization of intangible assets.

Income tax expense amounted to $5.0 million for the third quarter of 2015, down by $423 thousand, or 8%, from the amount recognized in the previous quarter.  The effective tax rate for the third quarter of 2015 was 32.7%, compared to 31.9% for the second quarter of 2015.  The effective tax rate for the remainder of 2015 will be approximately 32.5%.

Loans

Total loans amounted to $2.9 billion at September 30, 2015, up by $21.3 million, or 1%, from the balance at June 30, 2015.  Significant linked quarter changes included:

  • Total commercial loans decreased by $3.7 million, or 0.2%, with an $8.0 million increase in commercial real estate and an $11.7 million decline in commercial and industrial.  The $8.0 million increase in the commercial real estate portfolio included a $10.9 million increase in construction and development loans, but was hindered by unscheduled loan payoffs of approximately $36 million in the most recent quarter.  The decline in the commercial and industrial portfolio was primarily due to decreased line utilization by commercial borrowers.
  • The residential real estate loan portfolio grew by $23.0 million, or 2%.
  • Consumer loans increased by $2.1 million, or 1%, with growth in home equity lines of credit. 

Investment Securities

The securities portfolio amounted to $344.9 million at September 30, 2015, down $29.0 million, or 8%, from the balance at June 30, 2015.  The decrease reflects calls of securities and routine principal pay-downs on mortgage backed securities, partially offset by purchases of U.S. government agency securities.

Deposits and Borrowings

Total deposits grew by $97.2 million, or 4%, in the third quarter of 2015 and amounted to $2.8 billion at September 30, 2015.  Wholesale brokered time deposits decreased by $17.0 million from the previous quarter.  Excluding wholesale brokered time deposits, in-market deposits increased by $114.2 million, or 5%.  This increase included a $56.1 million, or 12%, increase in demand deposit accounts.

FHLBB advances amounted to $381.6 million at September 30, 2015, down by $89.7 million, or 19%, from June 30, 2015.

Asset Quality

Asset quality metrics remained at manageable levels in the third quarter of 2015.  Total nonaccrual loans amounted to $16.8 million, or 0.57% of total loans, at September 30, 2015, up from $15.1 million, or 0.52%, at June 30, 2015.  Total past due loans amounted to $21.8 million, or 0.74% of total loans, at September 30, 2015, down from $24.0 million, or 0.82% of total loans, at June 30, 2015.

A loan loss provision totaling $200 thousand was charged to earnings in the third quarter of 2015, compared to a loss provision of $100 thousand recognized in the second quarter of 2015.  The third quarter provision includes loan loss allocations commensurate with growth in loan portfolio balances, offset by reductions in other loan loss exposures based on management’s assessment of continued improvement in credit quality conditions.  Net charge-offs amounted to $626 thousand in the third quarter of 2015, compared to $323 thousand in the second quarter of 2015.  The allowance for loan losses was $27.2 million, or 0.92% of total loans, at September 30, 2015, compared to $27.6 million, or 0.94% of total loans, at June 30, 2015.

Capital and Dividends

Total shareholder’s equity was $370.5 million at September 30, 2015, up by $11.4 million from June 30, 2015.  Capital levels at September 30, 2015 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk‑based capital ratio of 12.80% at September 30, 2015, compared to 12.78% at June 30, 2015.

The Board of Directors declared a quarterly dividend of 34 cents per share for the quarter ended September 30, 2015.  The dividend was paid on October 14, 2015 to shareholders of record on October 1, 2015.

Conference Call

Washington Trust will host a conference call to discuss third quarter results, business highlights and outlook on Tuesday, October 20, 2015 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 13621367; the audio replay will be available through October 30, 2015.  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, 2015.

Background

Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company, a state-chartered bank headquartered in Westerly, Rhode Island. Founded in 1800, Washington Trust is the oldest community bank in the nation and is the largest independent bank headquartered in Rhode Island. Washington Trust offers a full range of financial services, including commercial banking, small business 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 OMX® under the symbol WASH. Investor information is available on the Corporation’s web site: 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; the ability to fully realize the expected cost savings and revenues from the Halsey acquisition; 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, 2014, 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)
           
        Sep 30, Dec 31,
(Dollars in thousands, except par value)   2015     2014  
Assets:          
Cash and due from banks       $ 106,445   $ 76,386  
Short-term investments         3,629     3,964  
Mortgage loans held for sale (including $21,136 at September 30, 2015 and $30,321 at December 31, 2014 measured at fair value)   31,805     45,693  
Securities:          
Available for sale, at fair value         323,795     357,662  
Held to maturity, at amortized cost (fair value $21,820 at September 30, 2015 and $26,008 at December 31, 2014)   21,140     25,222  
Total securities         344,935     382,884  
Federal Home Loan Bank stock, at cost         37,730     37,730  
Loans:          
Commercial         1,579,854     1,535,488  
Residential real estate         1,024,214     985,415  
Consumer   345,850     338,373  
Total loans         2,949,918     2,859,276  
Less allowance for loan losses   27,161     28,023  
Net loans         2,922,757     2,831,253  
Premises and equipment, net         28,180     27,495  
Investment in bank-owned life insurance         65,000     63,519  
Goodwill         64,803     58,114  
Identifiable intangible assets, net         10,832     4,849  
Other assets   58,720     54,987  
Total assets $ 3,674,836   $ 3,586,874  
Liabilities:          
Deposits:          
Demand deposits       $ 513,856   $ 459,852  
NOW accounts         358,973     326,375  
Money market accounts         855,858     802,764  
Savings accounts         305,775     291,725  
Time deposits   801,818     874,102  
Total deposits         2,836,280     2,754,818  
Federal Home Loan Bank advances         381,649     406,297  
Junior subordinated debentures         22,681     22,681  
Other liabilities   63,699     56,799  
Total liabilities   3,304,309     3,240,595  
Shareholders’ Equity:          
Common stock of $.0625 par value; authorized 30,000,000 shares; issued and outstanding 16,984,737 shares at September 30, 2015 and 16,746,363 shares at December 31, 2014   1,062     1,047  
Paid-in capital         109,724     101,204  
Retained earnings         268,166     252,837  
Accumulated other comprehensive loss   (8,425 )   (8,809 )
Total shareholders’ equity   370,527     346,279  
Total liabilities and shareholders’ equity $ 3,674,836   $ 3,586,874  
           
           
Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
           
(Dollars and shares in thousands, except per share amounts) Three Months Nine Months
Periods ended September 30,   2015     2014     2015     2014  
Interest income:          
Interest and fees on loans   $ 28,626   $ 27,239   $ 85,718   $ 78,997  
Interest on securities: Taxable   2,178     2,397     6,613     8,038  
  Nontaxable   366     519     1,203     1,658  
Dividends on Federal Home Loan Bank stock     309     140     638     420  
Other interest income   47     36     101     99  
Total interest and dividend income   31,526     30,331     94,273     89,212  
Interest expense:          
Deposits     3,308     3,317     10,045     9,406  
Federal Home Loan Bank advances     1,987     1,832     5,780     5,831  
Junior subordinated debentures     232     241     714     723  
Other interest expense   2     3     7     10  
Total interest expense   5,529     5,393     16,546     15,970  
Net interest income     25,997     24,938     77,727     73,242  
Provision for loan losses   200     600     300     1,350  
Net interest income after provision for loan losses   25,797     24,338     77,427     71,892  
Noninterest income:          
Wealth management revenues     8,902     8,374     26,249     24,969  
Merchant processing fees                 1,291  
Net gains on loan sales and commissions on loans originated for others   1,963     1,742     7,296     4,688  
Service charges on deposit accounts     986     881     2,894     2,459  
Card interchange fees     849     804     2,389     2,264  
Income from bank-owned life insurance     498     468     1,480     1,354  
Loan related derivative income     327     339     1,689     562  
Equity in earnings (losses) of unconsolidated subsidiaries   (69 )   (63 )   (224 )   (213 )
Gain on sale of business line                 6,265  
Other income   457     580     1,421     1,670  
Total noninterest income   13,913     13,125     43,194     45,309  
Noninterest expense:          
Salaries and employee benefits     15,971     14,516     46,971     43,845  
Net occupancy     1,721     1,557     5,276     4,672  
Equipment     1,424     1,211     4,140     3,682  
Merchant processing costs                 1,050  
Outsourced services     1,250     1,138     3,774     3,197  
Legal, audit and professional fees     630     494     1,916     1,710  
FDIC deposit insurance costs     467     442     1,376     1,295  
Advertising and promotion     356     368     1,201     1,140  
Amortization of intangibles     260     161     571     489  
Debt prepayment penalties                 6,294  
Other expenses   2,459     2,160     7,143     6,413  
Total noninterest expense   24,538     22,047     72,368     73,787  
Income before income taxes     15,172     15,416     48,253     43,414  
Income tax expense   4,964     4,878     15,532     13,781  
Net income $ 10,208   $ 10,538   $ 32,721   $ 29,633  
           
Weighted average common shares outstanding – basic   16,939     16,714     16,837     16,673  
Weighted average common shares outstanding – diluted   17,102     16,855     17,027     16,832  
Per share information: Basic earnings per common share $ 0.60   $ 0.63   $ 1.94   $ 1.77  
  Diluted earnings per common share $ 0.60   $ 0.62   $ 1.92   $ 1.75  
  Cash dividends declared per share $ 0.34   $ 0.32   $ 1.02   $ 0.90  

Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
 
  At or for the Quarters Ended
(Dollars and shares in thousands, except per share amounts) Sep 30,
 2015
  Jun 30,
 2015
  Mar 31,
 2015
  Dec 31,
 2014
  Sep 30,
 2014
Financial Data:                  
Total assets $ 3,674,836       $ 3,644,477       $ 3,602,514       $ 3,586,874       $ 3,415,882    
Total loans   2,949,918         2,928,584         2,880,592         2,859,276         2,674,047    
Total securities   344,935         373,901         364,967         382,884         402,553    
Total deposits   2,836,280         2,739,119         2,783,143         2,754,818         2,738,888    
Total shareholders’ equity   370,527         359,167         353,879         346,279         348,562    
Net interest income   25,997         26,028         25,702         26,263         24,938    
Provision for loan losses   200         100             500         600    
Noninterest income   13,913         15,261         14,020         13,706         13,125    
Noninterest expense   24,538         24,299         23,531         23,060         22,047    
Income tax expense   4,964         5,387         5,181         5,218         4,878    
Net income   10,208         11,503         11,010         11,191         10,538    
                   
Share Data:                  
Basic earnings per common share $ 0.60       $ 0.68       $ 0.65       $ 0.67       $ 0.63    
Diluted earnings per common share $ 0.60       $ 0.68       $ 0.65       $ 0.66       $ 0.62    
Dividends declared per share $ 0.34       $ 0.34       $ 0.34       $ 0.32       $ 0.32    
Book value per share $ 21.82       $ 21.34       $ 21.10       $ 20.68       $ 20.85    
Tangible book value per share – Non-GAAP (1) $ 17.36       $ 17.61       $ 17.35       $ 16.92       $ 17.07    
Market value per share $ 38.45       $ 39.48       $ 38.19       $ 40.18       $ 32.99    
Shares outstanding at end of period   16,985         16,834         16,773         16,746         16,721    
Weighted average common shares outstanding – basic   16,939         16,811         16,759         16,735         16,714    
Weighted average common shares outstanding – diluted   17,102         16,989         16,939         16,911         16,855    
                   
Key Ratios:                  
Return on average assets   1.11   %     1.27   %     1.23   %     1.27   %     1.25   %
Return on average tangible assets – Non-GAAP (1)   1.13   %     1.29   %     1.25   %     1.29   %     1.27   %
Return on average equity   11.13   %     12.88   %     12.54   %     12.68   %     12.15   %
Return on average tangible equity – Non-GAAP (1)   13.82   %     15.62   %     15.27   %     15.44   %     14.86   %
Tier 1 risk-based capital 11.83% (i)     11.79   %     11.78   %     11.52   %     12.15   %
Total risk-based capital 12.80% (i)     12.78   %     12.80   %     12.56   %     13.26   %
Tier 1 leverage ratio 9.25% (i)     9.31   %     9.21   %     9.14   %     9.35   %
Tier 1 common equity (2) 11.05% (i)     11.00   %     10.98   %     N/A         N/A    
Equity to assets   10.08   %     9.86   %     9.82   %     9.65   %     10.20   %
Tangible equity to tangible assets – Non-GAAP (1)   8.19   %     8.28   %     8.22   %     8.04   %     8.51   %
(i) – estimated                  
                   
Wealth Management Revenues:                  
Trust and investment management fees $ 7,768       $ 7,238       $ 7,142       $ 7,059       $ 6,982    
Mutual fund fees   989         1,032         1,036         1,068         1,100    
Asset-based revenues   8,757         8,270         8,178         8,127         8,082    
Transaction-based revenues   145         642         257         282         292    
Total wealth management revenues $ 8,902       $ 8,912       $ 8,435       $ 8,409       $ 8,374    
                   
Wealth Management Assets Under Administration:                  
Balance at beginning of period $ 5,211,548       $ 5,159,663       $ 5,069,966       $ 4,983,464       $ 5,010,588    
Acquisition of Halsey Associates, Inc. (Aug. 1, 2015)   839,994                                    
Net investment appreciation (depreciation) & income   (316,121       (13,932 )       80,872         111,715         (29,199  
Net client cash flows   (21,220 )       65,817         8,825         (25,213       2,075    
Balance at end of period $ 5,714,201       $ 5,211,548       $ 5,159,663       $ 5,069,966       $ 4,983,464    
 
(1) See the section labeled “Supplemental Information – Non-GAAP Financial Measures” at the end of this document.
(2) New capital ratio effective January 1, 2015 under the Basel III capital requirements.

 
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
           
        Nine Months Ended
        Sep 30, Sep 30,
(Dollars in thousands)         2015     2014  
Key Ratios:          
Return on average assets         1.20 %   1.21 %
Return on average tangible assets – Non-GAAP (1)         1.22 %   1.24 %
Return on average equity         12.17 %   11.60 %
Return on average tangible equity – Non-GAAP (1)         14.90 %   14.24 %
           
Allowance for Loan Losses:          
Balance at beginning of period       $ 28,023   $ 27,886  
Provision charged to earnings         300     1,350  
Charge-offs         (1,401 )   (1,638 )
Recoveries         239     170  
Balance at end of period       $ 27,161   $ 27,768  
           
Net Loan Charge-Offs (Recoveries):          
Commercial mortgages       $ 312   $ 958  
Commercial & industrial         367     328  
Residential real estate mortgages         62     36  
Consumer         421     146  
Total       $ 1,162   $ 1,468  
           
Net charge-offs to average loans (annualized)         0.05 %   0.08 %
           
Wealth Management Revenues:          
Trust and investment management fees       $ 22,148   $ 20,495  
Mutual fund fees         3,057     3,267  
Asset-based revenues         25,205     23,762  
Transaction-based revenues         1,044     1,207  
Total wealth management revenues       $ 26,249   $ 24,969  
           
Wealth Management Assets Under Administration:          
Balance at beginning of period       $ 5,069,966   $ 4,781,958  
Acquisition of Halsey Associates, Inc. (Aug. 1, 2015)         839,994            
Net investment appreciation & income         (249,181 )   146,405  
Net client cash flows         53,422     55,101  
Balance at end of period       $ 5,714,201   $ 4,983,464  
 
(1)  See the section labeled “Supplemental Information – Non-GAAP Financial Measures” at the end of this document.
           
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
           
  For the Quarters Ended
  Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
    2015     2015     2015     2014     2014  
Average Yield / Rate (taxable equivalent basis):          
Assets:          
Commercial loans   3.91 %   4.06 %   4.02 %   4.23 %   4.20 %
Residential real estate loans, including mortgage loans held for sale   3.90 %   3.95 %   4.06 %   4.06 %   4.06 %
Consumer loans   3.79 %   3.77 %   3.82 %   3.79 %   3.83 %
Total loans   3.89 %   3.99 %   4.01 %   4.12 %   4.10 %
Cash, federal funds sold and other short-term investments   0.21 %   0.18 %   0.20 %   0.18 %   0.19 %
FHLBB stock   3.25 %   1.74 %   1.77 %   1.48 %   1.47 %
Taxable debt securities   2.73 %   2.72 %   2.84 %   2.83 %   2.94 %
Nontaxable debt securities   5.95 %   6.15 %   6.03 %   5.87 %   5.86 %
Total securities   3.08 %   3.11 %   3.23 %   3.22 %   3.36 %
Total interest-earning assets   3.70 %   3.80 %   3.84 %   3.91 %   3.89 %
Liabilities:          
Interest-bearing demand deposits   0.07 %   0.03 %   0.09 %   %   %
NOW accounts   0.06 %   0.06 %   0.06 %   0.06 %   0.06 %
Money market accounts   0.46 %   0.46 %   0.45 %   0.43 %   0.41 %
Savings accounts   0.07 %   0.07 %   0.06 %   0.06 %   0.06 %
Time deposits (in-market)   0.98 %   1.00 %   1.05 %   1.14 %   1.17 %
Wholesale brokered time deposits   1.29 %   1.28 %   1.29 %   1.23 %   1.09 %
FHLBB advances   1.85 %   1.94 %   1.91 %   2.28 %   2.57 %
Junior subordinated debentures   4.06 %   4.26 %   4.31 %   4.22 %   4.22 %
Other   7.63 %   6.92 %   9.51 %   8.50 %   7.88 %
Total interest-bearing liabilities   0.79 %   0.79 %   0.82 %   0.84 %   0.84 %
           
Interest rate spread (taxable equivalent basis)   2.91 %   3.01 %   3.02 %   3.07 %   3.05 %
Net interest margin (taxable equivalent basis)   3.07 %   3.15 %   3.18 %   3.23 %   3.21 %
           
    At September 30, 2015
    Amortized Unrealized Unrealized Fair
(Dollars in thousands)   Cost Gains Losses Value
Securities Available for Sale:          
Obligations of U.S. government-sponsored enterprises   $ 52,430   $ 220   $ (7 ) $ 52,643  
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises     197,790     8,498         206,288  
Obligations of states and political subdivisions     36,775     982         37,757  
Individual name issuer trust preferred debt securities     29,806         (4,123 )   25,683  
Corporate bonds     1,418     8     (2 )   1,424  
Total securities available for sale     318,219     9,708     (4,132 )   323,795  
Held to Maturity:          
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises    21,140     680         21,820  
Total securities held to maturity     21,140     680         21,820  
Total securities   $ 339,359   $ 10,388   $ (4,132 ) $ 345,615  

 

Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
 
  Period End Balances At
(Dollars in thousands) Sep 30,
 2015
  Jun 30,
 2015
  Mar 31,
 2015
  Dec 31,
 2014
  Sep 30,
 2014
Loans:                  
Commercial: Mortgages $ 873,767       $ 876,589       $ 865,042       $ 843,978       $ 766,703    
  Construction & development   121,857         110,989         89,851         79,592         58,750    
  Commercial & industrial   584,230         595,959         604,630         611,918         564,920    
  Total commercial   1,579,854         1,583,537         1,559,523         1,535,488         1,390,373    
Residential real estate: Mortgages   994,808         971,705         954,905         948,731         912,956    
  Homeowner construction   29,406         29,558         32,659         36,684         32,624    
  Total residential real estate   1,024,214         1,001,263         987,564         985,415         945,580    
Consumer: Home equity lines   252,862         249,845         239,537         242,480         240,567    
  Home equity loans   47,610         47,437         46,727         46,967         46,455    
  Other   45,378         46,502         47,241         48,926         51,072    
  Total consumer   345,850         343,784         333,505         338,373         338,094    
  Total loans $ 2,949,918       $ 2,928,584       $ 2,880,592       $ 2,859,276       $ 2,674,047    
   
  At September 30, 2015
(Dollars in thousands) Balance   % of Total
Commercial Real Estate Loans by Property Location:      
Rhode Island, Connecticut, Massachusetts $ 919,473       92.4 %
New York, New Jersey, Pennsylvania   62,678       6.3 %
New Hampshire   13,473       1.3 %
Total commercial real estate loans (1) $ 995,624       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.  
   
  At September 30, 2015
(Dollars in thousands) Balance   % of Total
Residential Mortgages by Property Location:      
Rhode Island, Connecticut, Massachusetts $ 1,005,610       98.1 %
New Hampshire   10,867       1.1 %
New York, Virginia, New Jersey, Maryland, Pennsylvania   4,200       0.4 %
Ohio   1,622       0.2 %
Other   1,915       0.2 %
Total residential mortgages $ 1,024,214       100.0 %
     
    Period End Balances At
(Dollars in thousands)   Sep 30,
 2015
  Jun 30,
 2015
  Mar 31,
 2015
  Dec 31,
 2014
  Sep 30,
 2014
Deposits:                    
Demand deposits   $ 513,856       $ 457,755       $ 477,046       $ 459,852       $ 476,808    
NOW accounts     358,973         357,922         333,321         326,375         313,391    
Money market accounts     855,858         789,334         821,353         802,764         833,318    
Savings accounts     305,775         300,108         298,802         291,725         290,561    
Time deposits     801,818         834,000         852,621         874,102         824,810    
Total deposits   $ 2,836,280       $ 2,739,119       $ 2,783,143       $ 2,754,818       $ 2,738,888    
                     
Out-of-market brokered certificates of deposits included in time deposits   $ 267,552       $ 284,590       $ 290,863       $ 299,129       $ 211,222    
In-market deposits, excluding out-of-market brokered certificates of deposit   $ 2,568,728       $ 2,454,529       $ 2,492,280       $ 2,455,689       $ 2,527,666    

Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
 
  Period End Balances At
  Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(Dollars in thousands)   2015     2015     2015     2014     2014  
Asset Quality Ratios:          
Total past due loans to total loans   0.74 %   0.82 %   0.66 %   0.63 %   0.75 %
Nonperforming assets to total assets   0.48 %   0.45 %   0.48 %   0.48 %   0.53 %
Nonaccrual loans to total loans   0.57 %   0.52 %   0.55 %   0.56 %   0.63 %
Allowance for loan losses to nonaccrual loans   161.25 %   182.32 %   175.29 %   175.75 %   163.68 %
Allowance for loan losses to total loans   0.92 %   0.94 %   0.97 %   0.98 %   1.04 %
           
Nonperforming Assets:          
Commercial mortgages $ 4,915   $ 4,915   $ 5,115   $ 5,315   $ 6,022  
Commercial construction & development                    
Commercial & industrial   1,137     1,039     2,193     1,969     1,326  
Residential real estate mortgages   9,472     7,411     6,956     7,124     7,890  
Consumer   1,320     1,766     1,601     1,537     1,727  
Total nonaccrual loans   16,844     15,131     15,865     15,945     16,965  
Nonaccrual investment securities                    
Property acquired through foreclosure or repossession   955     1,388     1,398     1,176     988  
Total nonperforming assets $ 17,799   $ 16,519   $ 17,263   $ 17,121   $ 17,953  
           
Troubled Debt Restructured Loans:          
Accruing troubled debt restructured loans:          
Commercial mortgages $ 10,637   $ 9,448   $ 9,448   $ 9,676   $ 9,677  
Commercial & industrial   2,069     2,209     881     954     1,036  
Residential real estate mortgages   674     679     684     1,252     1,258  
Consumer   232     201     134     135     164  
Accruing troubled debt restructured loans   13,612     12,537     11,147     12,017     12,135  
Nonaccrual troubled debt restructured loans:          
Commercial mortgages   4,498     4,498     4,698     4,898     4,898  
Commercial & industrial   380     381     1,442     1,193     854  
Residential real estate mortgages   613     92     338     248     441  
Consumer       33     34          
Nonaccrual troubled debt restructured loans   5,491     5,004     6,512     6,339     6,193  
Total troubled debt restructured loans $ 19,103   $ 17,541   $ 17,659   $ 18,356   $ 18,328  
           
           
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
           
  Period End Balances At
  Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(Dollars in thousands)   2015     2015     2015     2014     2014  
Past Due Loans:          
Loans 30-59 Days Past Due:          
Commercial mortgages $ 147   $ 14   $ 497   $   $  
Commercial & industrial   162     2,581     229     2,136     1,129  
Residential real estate mortgages   3,610     5,120     4,470     2,943     2,582  
Consumer loans   899     1,634     1,512     954     1,677  
Loans 30-59 days past due $ 4,818   $ 9,349   $ 6,708   $ 6,033   $ 5,388  
           
Loans 60-89 Days Past Due:          
Commercial mortgages $   $   $ 61   $   $  
Commercial & industrial   3,455     2,299     229     1,202     314  
Residential real estate mortgages   2,458     913     1,352     821     2,001  
Consumer loans   338     397     565     345     356  
Loans 60-89 days past due $ 6,251   $ 3,609   $ 2,207   $ 2,368   $ 2,671  
           
Loans 90 Days or More Past Due:          
Commercial mortgages $ 4,915   $ 4,915   $ 5,115   $ 5,315   $ 5,995  
Commercial & industrial   720     638     721     181     970  
Residential real estate mortgages   4,499     4,871     3,607     3,284     3,922  
Consumer loans   608     647     723     897     989  
Loans 90 days or more past due $ 10,742   $ 11,071   $ 10,166   $ 9,677   $ 11,876  
           
Total Past Due Loans:          
Commercial mortgages $ 5,062   $ 4,929   $ 5,673   $ 5,315   $ 5,995  
Commercial & industrial   4,337     5,518     1,179     3,519     2,413  
Residential real estate mortgages   10,567     10,904     9,429     7,048     8,505  
Consumer loans   1,845     2,678     2,800     2,196     3,022  
Total past due loans $ 21,811   $ 24,029   $ 19,081   $ 18,078   $ 19,935  
           
Accruing loans 90 days or more past due $   $   $   $   $  
Nonaccrual loans included in past due loans $ 13,964   $ 12,397   $ 12,314   $ 12,721   $ 14,364  
           
  For the Quarters Ended
  Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(Dollars in thousands)   2015     2015     2015     2014     2014  
Allowance for Loan Losses:          
Balance at beginning of period $ 27,587   $ 27,810   $ 28,023   $ 27,768   $ 27,269  
Provision charged to earnings   200     100         500     600  
Charge-offs   (725 )   (355 )   (321 )   (311 )   (148 )
Recoveries   99     32     108     66     47  
Balance at end of period $ 27,161   $ 27,587   $ 27,810   $ 28,023   $ 27,768  
           
Net Loan Charge-Offs (Recoveries):          
Commercial mortgages $ (4 ) $ 196   $ 120   $ (5 ) $ (7 )
Commercial & industrial   348     26     (7 )   144     63  
Residential real estate mortgages   12     4     46     45     (1 )
Consumer   270     97     54     61     46  
Total $ 626   $ 323   $ 213   $ 245   $ 101  
 
 
 
The following tables present 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.  For dividends on corporate stocks, the 70% federal dividends received deduction is also used in the calculation of tax equivalency.  Unrealized gains (losses) on available for sale securities are excluded from the average balance and yield calculations.  Nonaccrual and renegotiated loans, as well as interest earned on these loans (to the extent recognized in the Consolidated Statements of Income) are included in amounts presented for loans.

Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)
 
    Three Months Ended
    September 30, 2015   June 30, 2015   September 30, 2014
    Average Balance Interest Yield/
Rate
  Average Balance Interest Yield/
Rate
  Average Balance Interest Yield/
 Rate
(Dollars in thousands)  
Assets:                        
Commercial loans   $ 1,571,645     $ 15,475     3.91 %   $ 1,574,183     $ 15,930     4.06 %   $ 1,380,229     $ 14,624       4.20   %
Residential real estate loans, including loans held for sale     1,050,949       10,329     3.90 %     1,025,029       10,102     3.95 %     946,738       9,685       4.06   %
Consumer loans     343,603       3,283     3.79 %     338,809       3,183     3.77 %     337,598       3,259       3.83   %
Total loans     2,966,197       29,087     3.89 %     2,938,021       29,215     3.99 %     2,664,565       27,568       4.10   %
Cash, federal funds sold and short-term investments     89,280       47     0.21 %     63,858       29     0.18 %     74,569       36       0.19   %
FHLBB stock     37,730       309     3.25 %     37,730       164     1.74 %     37,730       140       1.47   %
Taxable debt securities     316,214       2,178     2.73 %     320,643       2,176     2.72 %     323,140       2,397       2.94   %
Nontaxable debt securities     37,780       567     5.95 %     40,886       627     6.15 %     53,374       789       5.86   %
Total securities     353,994       2,745     3.08 %     361,529       2,803     3.11 %     376,514       3,186       3.36   %
Total interest-earning assets     3,447,201       32,188     3.70 %     3,401,138       32,211     3.80 %     3,153,378       30,930       3.89   %
Noninterest-earning assets     231,286             221,577             216,945        
Total assets   $ 3,678,487           $ 3,622,715           $ 3,370,323        
Liabilities and Shareholders’ Equity:                        
Interest-bearing demand deposits   $ 30,392     $ 5     0.07 %   $ 38,129     $ 3     0.03 %   $ 12,862     $         %
NOW accounts     357,128       53     0.06 %     363,434       53     0.06 %     311,077       47       0.06   %
Money market accounts     820,597       951     0.46 %     820,887       941     0.46 %     798,273       830       0.41   %
Savings accounts     303,587       52     0.07 %     298,286       50     0.07 %     291,386       46       0.06   %
Time deposits (in-market)     541,486       1,338     0.98 %     554,839       1,390     1.00 %     623,221       1,832       1.17   %
Wholesale brokered time deposits     279,839       909     1.29 %     285,844       911     1.28 %     204,046       562       1.09   %
FHLBB advances     425,931       1,987     1.85 %     391,152       1,891     1.94 %     283,219       1,832       2.57   %
Junior subordinated debentures     22,681       232     4.06 %     22,681       241     4.26 %     22,681       241       4.22   %
Other     104       2     7.63 %     116       2     6.92 %     151       3       7.88   %
Total interest-bearing liabilities     2,781,745       5,529     0.79 %     2,775,368       5,482     0.79 %     2,546,916       5,393       0.84   %
Demand deposits     477,393             441,355             439,353        
Other liabilities     52,625             48,627             37,217        
Shareholders’ equity     366,724             357,365             346,837        
Total liabilities and shareholders’ equity   $ 3,678,487           $ 3,622,715           $ 3,370,323        
Net interest income (FTE)     $ 26,659           $ 26,729           $ 25,537      
Interest rate spread       2.91 %       3.01 %         3.05   %
Net interest margin       3.07 %       3.15 %         3.21   %
                               
Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:
                               
(Dollars in thousands)                       Three Months Ended 
  Sep 30,
2015
Jun 30, 2015 Sep 30, 2014 
Commercial loans                       $ 461   $ 476   $ 329 
Nontaxable debt securities                         201     225     270 
Total                       $ 662   $ 701   $ 599 

 
Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)
 
    Nine Months Ended
    September 30, 2015   September 30, 2014
    Average
Balance
Interest Yield/
Rate
  Average
Balance
Interest Yield/
 Rate
(Dollars in thousands)  
Assets:                
Commercial loans   $ 1,563,615     $ 46,717     3.99 %   $ 1,352,271     $ 43,733       4.32   %
Residential real estate loans, including loans held for sale     1,035,408       30,745     3.97 %     869,230       26,704       4.11   %
Consumer loans     339,608       9,634     3.79 %     333,127       9,527       3.82   %
Total loans     2,938,631       87,096     3.96 %     2,554,628       79,964       4.19   %
Cash, federal funds sold and short-term investments     68,205       101     0.20 %     65,486       99       0.20   %
FHLBB stock     37,730       638     2.26 %     37,730       420       1.49   %
Taxable debt securities     319,786       6,613     2.76 %     329,779       8,038       3.26   %
Nontaxable debt securities     41,083       1,858     6.05 %     56,894       2,520       5.92   %
Total securities     360,869       8,471     3.14 %     386,673       10,558       3.65   %
Total interest-earning assets     3,405,435       96,306     3.78 %     3,044,517       91,041       4.00   %
Noninterest-earning assets     224,921             209,286        
Total assets   $ 3,630,356           $ 3,253,803        
Liabilities and Shareholders’ Equity:                
Interest-bearing demand deposits   $ 35,430     $ 17     0.06 %   $ 10,906     $         %
NOW accounts     350,151       153     0.06 %     309,101       141       0.06   %
Money market accounts     813,915       2,775     0.46 %     748,121       2,152       0.38   %
Savings accounts     298,635       148     0.07 %     291,949       136       0.06   %
Time deposits (in-market)     554,369       4,198     1.01 %     649,166       5,645       1.16   %
Wholesale brokered time deposits     286,728       2,754     1.28 %     163,705       1,332       1.09   %
FHLBB advances     407,363       5,780     1.90 %     257,814       5,831       3.02   %
Junior subordinated debentures     22,681       714     4.21 %     22,681       723       4.26   %
Other     116       7     8.07 %     162       10       8.25   %
Total interest-bearing liabilities     2,769,388       16,546     0.80 %     2,453,605       15,970       0.87   %
Demand deposits     452,691             424,120        
Other liabilities     49,786             35,335        
Shareholders’ equity     358,491             340,743        
Total liabilities and shareholders’ equity   $ 3,630,356           $ 3,253,803        
Net interest income (FTE)     $ 79,760           $ 75,071      
Interest rate spread       2.98 %         3.13   %
Net interest margin       3.13 %         3.30   %
                     
(Dollars in thousands)               Nine Months Ended 
                Sep 30,
2015
Sep 30,
2014 
Commercial loans               $ 1,378   $ 967 
Nontaxable debt securities                 655     862 
Total               $ 2,033   $ 1,829 

Washington Trust Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION – Non-GAAP Financial Measures (unaudited)
           
  At or for the Quarters Ended
  Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(Dollars in thousands, except per share amounts)   2015     2015     2015     2014     2014  
Calculation of Tangible Book Value per Share:          
Total shareholders’ equity at end of period $ 370,527   $ 359,167   $ 353,879   $ 346,279   $ 348,562  
Less:          
Goodwill   64,803     58,114     58,114     58,114     58,114  
Identifiable intangible assets, net   10,832     4,539     4,694     4,849     5,004  
Total tangible shareholders’ equity at end of period $ 294,892   $ 296,514   $ 291,071   $ 283,316   $ 285,444  
           
Shares outstanding at end of period   16,985     16,834     16,773     16,746     16,721  
           
Book value per share – GAAP $ 21.82   $ 21.34   $ 21.10   $ 20.68   $ 20.85  
Tangible book value per share – Non-GAAP $ 17.36   $ 17.61   $ 17.35   $ 16.92   $ 17.07  
           
Calculation of Tangible Equity to Tangible Assets:          
Total tangible shareholders’ equity at end of period $ 294,892   $ 296,514   $ 291,071   $ 283,316   $ 285,444  
           
Total assets at end of period $ 3,674,836   $ 3,644,477   $ 3,602,514   $ 3,586,874   $ 3,415,882  
Less:          
Goodwill   64,803     58,114     58,114     58,114     58,114  
Identifiable intangible assets, net   10,832     4,539     4,694     4,849     5,004  
Total tangible assets at end of period $ 3,599,201   $ 3,581,824   $ 3,539,706   $ 3,523,911   $ 3,352,764  
           
Equity to assets – GAAP   10.08 %   9.86 %   9.82 %   9.65 %   10.20 %
Tangible equity to tangible assets – Non-GAAP   8.19 %   8.28 %   8.22 %   8.04 %   8.51 %
           
Calculation of Return on Average Tangible Assets:          
Net income $ 10,208   $ 11,503   $ 11,010   $ 11,191   $ 10,538  
           
Total average assets $ 3,678,487   $ 3,622,715   $ 3,588,881   $ 3,521,503   $ 3,370,323  
Less:          
Average goodwill   62,524     58,114     58,114     58,114     58,114  
Average identifiable intangible assets, net   8,768     4,614     4,770     4,924     5,082  
Total average tangible assets $ 3,607,195   $ 3,559,987   $ 3,525,997   $ 3,458,465   $ 3,307,127  
           
Return on average assets – GAAP   1.11 %   1.27 %   1.23 %   1.27 %   1.25 %
Return on average tangible assets – Non-GAAP   1.13 %   1.29 %   1.25 %   1.29 %   1.27 %
           
Calculation of Return on Average Tangible Equity:          
Net income $ 10,208   $ 11,503   $ 11,010   $ 11,191   $ 10,538  
           
Total average shareholders’ equity $ 366,724   $ 357,365   $ 351,215   $ 352,916   $ 346,837  
Less:          
Average goodwill   62,524     58,114     58,114     58,114     58,114  
Average identifiable intangible assets, net   8,768     4,614     4,770     4,924     5,082  
Total average tangible shareholders’ equity $ 295,432   $ 294,637   $ 288,331   $ 289,878   $ 283,641  
           
Return on average shareholders’ equity – GAAP   11.13 %   12.88 %   12.54 %   12.68 %   12.15 %
Return on average tangible shareholders’ equity – Non-GAAP   13.82 %   15.62 %   15.27 %   15.44 %   14.86 %
           
 
Washington Trust Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION – Non-GAAP Financial Measures (unaudited)
           
        Nine Months Ended
        Sep 30, Sep 30,
(Dollars in thousands)         2015     2014  
Calculation of Return on Average Tangible Assets:          
Net income  $ 32,721   $ 29,633  
           
Total average assets       $ 3,630,356   $ 3,253,803  
Less:          
Average goodwill         59,600     58,114  
Average identifiable intangible assets, net    6,065     5,244  
Total average tangible assets  $ 3,564,691   $ 3,190,445  
           
Return on average assets – GAAP    1.20 %   1.21 %
Return on average tangible assets – Non-GAAP    1.22 %   1.24 %
           
           
Calculation of Return on Average Tangible Equity:          
Net income  $ 32,721   $ 29,633  
           
Total average shareholders’ equity       $ 358,491   $ 340,743  
Less:          
Average goodwill         59,600     58,114  
Average identifiable intangible assets, net    6,065     5,244  
Total average tangible shareholders’ equity  $ 292,826   $ 277,385  
           
Return on average shareholders’ equity – GAAP    12.17 %   11.60 %
Return on average tangible shareholders’ equity – Non-GAAP    14.90 %   14.24 %
             
CONTACT: Contact:  Elizabeth B. Eckel
Senior Vice President, Marketing
Telephone:  (401) 348-1309
E-mail:  ebeckel@washtrust.com