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Washington Trust Reports Second Quarter 2014 Earnings

Washington Trust Bancorp, Inc. logo

WESTERLY, R.I., July 21, 2014 (GLOBE NEWSWIRE) -- Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced net income of $9.8 million, or 58 cents per diluted share, for the second quarter of 2014, up from first quarter of 2014 net income of $9.3 million, or 55 cents per diluted share.

"The momentum continued into the second quarter, as Washington Trust once again posted solid earnings, profitability and growth," stated Joseph J. MarcAurele, Washington Trust Chairman and CEO. We had good growth across our business lines and surpassed $5 billion in wealth management assets under administration for the first time in our 214-year history."

Selected highlights for the second quarter of 2014 included:

  • The returns on average equity and average assets were 11.52% and 1.22%, respectively. Comparable amounts for the first quarter of 2014 were 11.10% and 1.17%, respectively.
  • Loan growth was solid in the quarter, totaling $102.5 million, or 4%.
  • Residential mortgage origination volume was strong, and net gains on loan sales and commissions on loans originated for others increased by $468 thousand, or 38%, on a linked quarter basis.
  • Wealth management assets under administration rose by $204.2 million, or 4%, from the end of March.

Net Interest Income
Net interest income totaled $24.5 million for the second quarter of 2014, up from $23.8 million for the first quarter of 2014. The net interest margin was 3.35% for the second quarter of 2014, compared to 3.34% for the first quarter of 2014. Significant linked quarter changes included:

  • Average interest-earning assets increased by $36.3 million, while the yield on interest-earning assets declined by 5 basis points from the previous quarter. Average loan balances increased by $63.1 million, partially offset by declines in average investment security balances due to matured and called securities, as well as principal payments received on mortgage-backed securities.
  • Average interest-bearing liabilities increased by $45.7 million, while the cost of funds declined by 8 basis points from the previous quarter. Average interest-bearing deposits increased by $95.6 million, offset, in part, by a $50 million decline in average Federal Home Loan Bank of Boston (FHLBB) advances largely due to a prepayment of higher rate advances in March 2014.

Noninterest Income
Noninterest income totaled $12.8 million for the second quarter of 2014, compared to $19.4 million for the first quarter of 2014. Included in noninterest income were the following:

  • A net gain of $6.3 million (after-tax $4.0 million, or 24 cents per diluted share) was recognized in the first quarter of 2014 on the sale of the Corporation's merchant processing services business line.
  • Prior to the consummation of this business line sale on March 1, 2014, merchant processing fee revenue of $1.3 million was recognized in the first quarter of 2014. See below regarding corresponding merchant processing expenses.

Excluding these items recognized in the first quarter of 2014, noninterest income increased by $1.0 million, or 8%, compared to the first quarter of 2014. Significant linked quarter changes, on this basis, included the following:

  • Wealth management revenues increased by $465 thousand, or 6%, with increases of $317 thousand in transaction-based revenues and $148 thousand in asset-based revenues. The increase in transaction-based revenues was primarily attributable to a $285 thousand increase in seasonal tax preparation fees, which are typically concentrated in the second quarter.
  • Net gains on loan sales and commissions on loans originated for others increased by $468 thousand, or 38%, reflecting higher levels of mortgage loan origination and sales activity due to a seasonal increase in home purchases, as well as lower market interest rates. Residential mortgage loans sold to the secondary market were $77.0 million in the second quarter, up from $57.0 million in the previous quarter.
  • Net gains on interest rate swap contracts decreased by $297 thousand, or 114%, due to a lower level of customer-related interest rate swap transactions in the second quarter of 2014.
  • Other income increased by $264 thousand, or 64%, and included $160 thousand of non-core income received in the second quarter of 2014.

Noninterest Expenses
Noninterest expenses totaled $22.4 million for the second quarter of 2014, compared to $29.3 million for the first quarter of 2014. Included in noninterest expenses were the following:

  • Debt prepayment penalty expense of $6.3 million (after-tax $4.0 million, or 24 cents per diluted share) was recognized in the first quarter of 2014 on the prepayment of $99.3 million of FHLBB advances in March 2014.
  • Divestiture costs of $355 thousand (after-tax $227 thousand, or 1 cent per diluted share) were expensed in the first quarter of 2014, in connection with the sale of the merchant processing services business line. These costs included $291 thousand in salaries and employee benefit expenses and $64 thousand of legal expenses.
  • Merchant processing expenses of $1.1 million were recognized in the first quarter of 2014, prior to the sale of that business line on March 1, 2014. See above regarding corresponding merchant processing fee revenue.

Excluding these items recognized in the first quarter of 2014, noninterest expenses for the second quarter of 2014 increased by $855 thousand, or 4%, compared to the first quarter of 2014. Significant linked quarter changes, on this basis, included the following:

  • Salaries and employee benefit costs increased by $504 thousand, or 4%, including increased transaction-based compensation due to higher mortgage origination volume.
  • Advertising and promotion costs increased by $308 thousand, or 133%, reflecting seasonal promotion efforts.

Income tax expense amounted to $4.6 million for the second quarter of 2014, compared to $4.3 million for the first quarter of 2014. The effective tax rate for the second quarter of 2014 was 31.9%, compared to 31.7% for the first quarter of 2014. Based on current federal and applicable state income tax statutes, the Corporation currently expects the effective tax rate to be approximately 31.8% for the remainder of 2014.

Asset Quality
Total nonaccrual loans amounted to $12.5 million, or 0.49% of total loans, at June 30, 2014, down from $13.6 million, or 0.55%, at March 31, 2014. Total past due loans amounted to $21.1 million, or 0.82% of total loans, at June 30, 2014, compared to $18.0 million, or 0.73%, at March 31, 2014.

The loan loss provision charged to earnings in the second quarter of 2014 totaled $450 thousand, up from $300 thousand in the first quarter of 2014. Net charge-offs amounted to $224 thousand in the second quarter of 2014. Net charge-offs totaled $1.1 million in the first quarter of 2014 and was largely comprised of a $853 thousand charge-off on one commercial mortgage relationship. The allowance for loan losses was $27.3 million, or 1.06% of total loans, at June 30, 2014, compared to $27.0 million, or 1.09% of total loans, at March 31, 2014.

Loans
Total loans amounted to $2.58 billion at June 30, 2014, up by $102.5 million, or 4%, from the balance at March 31, 2014. This increase was comprised of the following:

  • The residential real estate loan portfolio grew by $66.2 million, or 8%.
  • Total commercial loans increased by $28.9 million, or 2%. The commercial and industrial loan portfolio grew by $31.1 million, while the commercial real estate portfolio declined by a modest $2.2 million.
  • Consumer loans increased by $7.4 million, or 2%, concentrated in home equity lines and loans.

Investment Securities
The securities portfolio amounted to $355.4 million, or 11% of total assets, at June 30, 2014, compared to $389.9 million, or 12%, at March 31, 2014. The decrease of $34.5 million was largely due to the maturity of a $29.5 million U.S. Government Agency security, $5.3 million of called securities of state and political subdivisions and principal payments received on mortgage-backed securities.

Deposits and Borrowings
Deposits totaled $2.59 billion at June 30, 2014, down by $5.6 million, or 0.2%, from the balance at March 31, 2014. This decrease was comprised of the following:

  • Demand deposit and NOW account balances declined by $31.4 million, or 4%.
  • Money market and savings account balances increased by $66.4 million, or 7%.
  • Time deposits declined by $40.6 million, or 5%.

FHLBB advances increased by $118.6 million from March 31, 2014, primarily to fund loan growth.

Capital Management
Capital levels continued to exceed the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 13.24% at June 30, 2014, compared to 13.56% at March 31, 2014. Total shareholder's equity was $343.5 million at June 30, 2014, up by $7.6 million from March 31, 2014.

Dividends Declared
The Board of Directors declared a quarterly dividend of 29 cents per share for the quarter ended June 30, 2014. The dividend was paid on July 11, 2014 to shareholders of record on July 1, 2014.

Conference Call
Washington Trust will host a conference call to discuss second quarter results, business highlights and outlook on Tuesday, July 22, 2014 at 8:30 a.m. (Eastern Time). Individuals may dial in to the call at 1-877-259-5243. An audio replay of the call will be available by dialing 1-877-344-7529 and entering Conference Number 10048168; the audio replay will be available until 9:00 a.m. on August 6, 2014. A webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrustbancorp.com, shortly after the conclusion of the call and will be available through September 30, 2014.

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 written or oral 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: continued weakness in national, regional or local economies; reductions in net interest income resulting from a sustained low interest rate environment 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 Corporation's 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, as filed with the SEC and as updated by our Quarterly Reports on Form 10-Q and other SEC filings, 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 press release, 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)
Jun 30, Dec 31,
(Dollars in thousands, except par value) 2014 2013
Assets:
Cash and due from banks $145,408 $81,939
Short-term investments 3,781 3,378
Mortgage loans held for sale, at fair value 22,407 11,636
Securities:
Available for sale, at fair value 327,578 392,903
Held to maturity, at amortized cost (fair value $28,618 in 2014 and $29,865 in 2013) 27,814 29,905
Total securities 355,392 422,808
Federal Home Loan Bank stock, at cost 37,730 37,730
Loans:
Commercial 1,366,170 1,363,335
Residential real estate 876,639 772,674
Consumer 338,315 326,875
Total loans 2,581,124 2,462,884
Less allowance for loan losses 27,269 27,886
Net loans 2,553,855 2,434,998
Premises and equipment, net 26,518 25,402
Investment in bank-owned life insurance 57,559 56,673
Goodwill 58,114 58,114
Identifiable intangible assets, net 5,165 5,493
Other assets 51,093 50,696
Total assets $3,317,022 $3,188,867
Liabilities:
Deposits:
Demand deposits $411,586 $440,785
NOW accounts 314,060 309,771
Money market accounts 772,084 666,646
Savings accounts 292,112 297,357
Time deposits 796,255 790,762
Total deposits 2,586,097 2,505,321
Federal Home Loan Bank advances 322,056 288,082
Junior subordinated debentures 22,681 22,681
Other liabilities 42,738 43,137
Total liabilities 2,973,572 2,859,221
Shareholders' Equity:
Common stock of $.0625 par value; authorized 30,000,000 shares; issued and outstanding 16,705,427 shares in 2014 and 16,613,561 shares in 2013 1,044 1,038
Paid-in capital 99,288 97,566
Retained earnings 241,918 232,595
Accumulated other comprehensive loss 1,200 (1,553)
Total shareholders' equity 343,450 329,646
Total liabilities and shareholders' equity $3,317,022 $3,188,867
Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars and shares in thousands, except per share amounts) Three Months Six Months
Periods ended June 30, 2014 2013 2014 2013
Interest income:
Interest and fees on loans $26,169 $25,513 $51,758 $50,736
Interest on securities:
Taxable 2,699 2,576 5,641 5,421
Nontaxable 557 647 1,139 1,306
Dividends on Federal Home Loan Bank stock 138 39 280 77
Other interest income 28 24 63 52
Total interest and dividend income 29,591 28,799 58,881 57,592
Interest expense:
Deposits 3,120 3,096 6,089 6,290
Federal Home Loan Bank advances 1,758 2,679 3,999 5,416
Junior subordinated debentures 241 612 482 1,002
Other interest expense 4 3 7 8
Total interest expense 5,123 6,390 10,577 12,716
Net interest income 24,468 22,409 48,304 44,876
Provision for loan losses 450 700 750 1,300
Net interest income after provision for loan losses 24,018 21,709 47,554 43,576
Noninterest income:
Wealth management revenues 8,530 7,912 16,595 15,386
Merchant processing fees 2,613 1,291 4,590
Net gains on loan sales and commissions on loans originated for others 1,707 3,485 2,946 7,651
Service charges on deposit accounts 824 790 1,578 1,581
Card interchange fees 779 683 1,460 1,282
Income from bank-owned life insurance 441 461 886 928
Net gains on interest rate swap contracts (37) 152 223 171
Equity in earnings (losses) of unconsolidated subsidiaries (107) (57) (150) (18)
Gain on sale of business line 6,265
Other income 677 355 1,090 761
Noninterest income, excluding other-than-temporary impairment losses 12,814 16,394 32,184 32,332
Total other-than-temporary impairment losses on securities (613)
Portion of loss recognized in other comprehensive income (before tax) (2,159)
Net impairment losses recognized in earnings (2,772)
Total noninterest income 12,814 16,394 32,184 29,560
Noninterest expense:
Salaries and employee benefits 14,771 15,542 29,329 30,984
Net occupancy 1,475 1,364 3,115 2,878
Equipment 1,235 1,192 2,471 2,436
Merchant processing costs 2,211 1,050 3,884
Outsourced services 1,015 871 2,059 1,712
Legal, audit and professional fees 598 554 1,216 1,162
FDIC deposit insurance costs 413 451 853 882
Advertising and promotion 540 476 772 831
Amortization of intangibles 164 173 328 346
Foreclosed property costs 43 137 21 184
Debt prepayment penalties 6,294
Other expenses 2,194 2,034 4,232 3,890
Total noninterest expense 22,448 25,005 51,740 49,189
Income before income taxes 14,384 13,098 27,998 23,947
Income tax expense 4,587 4,115 8,903 7,543
Net income $9,797 $8,983 $19,095 $16,404
Weighted average common shares outstanding - basic 16,678 16,454 16,653 16,428
Weighted average common shares outstanding - diluted 16,831 16,581 16,817 16,558
Per share information:
Basic earnings per common share $0.59 $0.54 $1.14 $0.99
Diluted earnings per common share $0.58 $0.54 $1.13 $0.99
Cash dividends declared per share $0.29 $0.25 $0.58 $0.50
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
At or for the Quarters Ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(Dollars and shares in thousands, except per share amounts) 2014 2014 2013 2013 2013
Financial Data:
Total assets $3,317,022 $3,194,146 $3,188,867 $3,131,958 $3,061,307
Total loans 2,581,124 2,478,603 2,462,884 2,353,766 2,384,980
Total securities 355,392 389,889 422,808 419,349 350,517
Total deposits 2,586,097 2,591,654 2,505,321 2,454,831 2,304,609
Total shareholders' equity 343,450 335,858 329,646 323,585 303,370
Net interest income 24,468 23,836 23,521 23,388 22,409
Provision for loan losses 450 300 400 700 700
Noninterest income, excluding OTTI losses 12,814 19,370 15,837 17,400 16,394
Net OTTI losses recognized in earnings (717)
Noninterest expense 22,448 29,292 24,048 25,548 25,005
Income tax expense 4,587 4,316 4,404 4,580 4,115
Net income 9,797 9,298 9,789 9,960 8,983
Share Data:
Basic earnings per common share $0.59 $0.56 $0.59 $0.60 $0.54
Diluted earnings per common share $0.58 $0.55 $0.58 $0.59 $0.54
Dividends declared per share $0.29 $0.29 $0.27 $0.26 $0.25
Book value per share $20.56 $20.19 $19.84 $19.51 $18.40
Tangible book value per share - Non-GAAP (1) $16.77 $16.38 $16.01 $15.66 $14.52
Market value per share $36.77 $37.47 $37.22 $31.43 $28.52
Shares outstanding at end of period 16,705 16,635 16,614 16,589 16,487
Weighted average common shares outstanding - basic 16,678 16,626 16,602 16,563 16,454
Weighted average common shares outstanding - diluted 16,831 16,800 16,770 16,696 16,581
Key Ratios:
Return on average assets 1.22% 1.17% 1.24% 1.29% 1.18%
Return on average tangible assets - Non-GAAP (1) 1.24% 1.20% 1.26% 1.31% 1.21%
Return on average equity 11.52% 11.10% 11.98% 12.82% 11.84%
Return on average tangible equity - Non-GAAP (1) 14.15% 13.70% 14.80% 16.13% 15.01%
Tier 1 risk-based capital 12.13% (i) 12.42% 12.12% 12.23% 11.85%
Total risk-based capital 13.24% (i) 13.56% 13.29% 13.44% 13.06%
Tier 1 leverage ratio 9.62% (i) 9.56% 9.41% 9.41% 9.32%
Equity to assets 10.35% 10.51% 10.34% 10.33% 9.91%
Tangible equity to tangible assets - Non-GAAP (1) 8.61% 8.70% 8.51% 8.47% 7.99%
(i) - estimated
Wealth Management Revenues:
Trust and investment management fees $6,828 $6,685 $6,637 $6,291 $6,230
Mutual fund fees 1,086 1,081 1,104 1,075 1,077
Asset-based revenues 7,914 7,766 7,741 7,366 7,307
Transaction-based revenues 616 299 1,069 263 605
Total wealth management revenues $8,530 $8,065 $8,810 $7,629 $7,912
Wealth Management Assets Under Administration:
Balance at beginning of period $4,806,381 $4,781,958 $4,595,594 $4,433,574 $4,420,076
Net investment appreciation (depreciation) & income 131,269 44,335 248,727 190,931 (20,956)
Net client cash flows 72,938 (19,912) (62,363) (28,911) 34,454
Balance at end of period $5,010,588 $4,806,381 $4,781,958 $4,595,594 $4,433,574
(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)
Six Months Ended
Jun 30, Jun 30,
(Dollars and shares in thousands, except per share amounts) 2014 2013
Key Ratios:
Return on average assets 1.13% 1.08%
Return on average tangible assets - Non-GAAP (1) 1.22% 1.11%
Return on average equity 11.31% 10.88%
Return on average tangible equity - Non-GAAP (1) 13.93% 13.82%
Allowance for Loan Losses:
Balance at beginning of period $27,886 $30,873
Provision charged to earnings 750 1,300
Charge-offs (1,490) (4,549)
Recoveries 123 260
Balance at end of period $27,269 $27,884
Net Loan Charge-Offs (Recoveries):
Commercial mortgages $965 $3,922
Other commercial 265 134
Residential real estate mortgages 37 45
Consumer 100 188
Total $1,367 $4,289
Net charge-offs to average loans (annualized) 0.11% 0.37%
Wealth Management Revenues:
Trust and investment management fees $13,513 $12,296
Mutual fund fees 2,167 2,099
Asset-based revenues 15,680 14,395
Transaction-based revenues 915 991
Total wealth management revenues $16,595 $15,386
Wealth Management Assets Under Administration:
Balance at beginning of period $4,781,958 $4,199,640
Net investment appreciation & income 175,604 193,023
Net client cash flows 53,026 40,911
Balance at end of period $5,010,588 $4,433,574
(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
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2014 2014 2013 2013 2013
Average Yield / Rate (taxable equivalent basis):
Assets:
Commercial loans 4.35% 4.43% 4.52% 4.67% 4.58%
Residential real estate loans, including mortgage loans held for sale 4.12% 4.15% 4.09% 4.06% 4.14%
Consumer loans 3.81% 3.83% 3.77% 3.78% 3.81%
Total loans 4.20% 4.26% 4.28% 4.35% 4.34%
Cash, federal funds sold and other short-term investments 0.19% 0.23% 0.22% 0.21% 0.22%
FHLBB stock 1.47% 1.53% 0.37% 0.38% 0.42%
Taxable debt securities 3.36% 3.47% 3.40% 3.44% 3.52%
Nontaxable debt securities 5.92% 5.98% 5.88% 5.87% 5.94%
Total securities 3.74% 3.84% 3.78% 3.88% 3.97%
Total interest-earning assets 4.03% 4.08% 4.02% 4.12% 4.17%
Liabilities:
Interest-bearing demand deposits —% —% —% —% —%
NOW accounts 0.06% 0.06% 0.06% 0.06% 0.06%
Money market accounts 0.38% 0.36% 0.34% 0.31% 0.29%
Savings accounts 0.06% 0.06% 0.06% 0.06% 0.07%
Time deposits 1.14% 1.15% 1.19% 1.23% 1.25%
FHLBB advances 3.20% 3.37% 3.49% 3.25% 3.29%
Junior subordinated debentures 4.26% 4.31% 4.22% 4.22% 7.82%
Other 9.90% 7.03% 2.52% 4.50% 5.87%
Total interest-bearing liabilities 0.85% 0.93% 0.98% 1.01% 1.11%
Interest rate spread (taxable equivalent basis) 3.18% 3.15% 3.04% 3.11% 3.06%
Net interest margin (taxable equivalent basis) 3.35% 3.34% 3.24% 3.29% 3.26%
At June 30, 2014
Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost (1) Gains Losses Value
Securities Available for Sale:
Obligations of U.S. government-sponsored enterprises $9,999 $13 $— $10,012
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 217,767 10,531 (13) 228,285
Obligations of states and political subdivisions 54,161 2,230 56,391
Individual name issuer trust preferred debt securities 30,734 (4,099) 26,635
Corporate bonds 6,123 133 (1) 6,255
Total securities available for sale 318,784 12,907 (4,113) 327,578
Held to Maturity:
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 27,814 804 28,618
Total securities held to maturity 27,814 804 28,618
Total securities $346,598 $13,711 ($4,113) $356,196
(1) Net of other-than-temporary impairment losses recognized in earnings.
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
Period End Balances At
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(Dollars in thousands) 2014 2014 2013 2013 2013
Loans:
Commercial:
Mortgages $772,772 $788,836 $796,249 $727,375 $758,437
Construction & development 38,574 24,696 36,289 51,951 39,449
Other 554,824 523,751 530,797 518,566 512,228
Total commercial 1,366,170 1,337,283 1,363,335 1,297,892 1,310,114
Residential real estate:
Mortgages 846,187 784,623 749,163 711,427 728,158
Homeowner construction 30,452 25,770 23,511 20,265 20,713
Total residential real estate 876,639 810,393 772,674 731,692 748,871
Consumer:
Home equity lines 237,390 233,728 231,362 227,063 228,367
Home equity loans 45,632 41,991 40,212 41,158 41,312
Other 55,293 55,208 55,301 55,961 56,316
Total consumer 338,315 330,927 326,875 324,182 325,995
Total loans $2,581,124 $2,478,603 $2,462,884 $2,353,766 $2,384,980
At June 30, 2014
(Dollars in thousands) Balance % of Total
Commercial Real Estate Loans by Property Location:
Rhode Island, Connecticut, Massachusetts $773,099 95.2%
New York, New Jersey 29,620 3.7%
New Hampshire 8,627 1.1%
Total commercial real estate loans (1) $811,346 100.0%
(1) Commercial real estate loans consist of commercial mortgages and construction and development loans. Commercial mortgages are loans secured by income producing property
At June 30, 2014
(Dollars in thousands) Balance % of Total
Residential Mortgages by Property Location:
Rhode Island, Connecticut, Massachusetts $854,596 97.3%
New Hampshire 10,605 1.2%
New York, Virginia, New Jersey, Maryland, Pennsylvania, District of Columbia 5,872 0.7%
Ohio 2,237 0.3%
Washington, Oregon 1,344 0.2%
Georgia 1,072 0.1%
New Mexico 464 0.1%
Other 449 0.1%
Total residential mortgages $876,639 100.0%
Period End Balances At
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(Dollars in thousands) 2014 2014 2013 2013 2013
Deposits:
Demand deposits $411,586 $445,570 $440,785 $420,075 $358,797
NOW accounts 314,060 311,461 309,771 301,250 301,096
Money market accounts 772,084 704,434 666,646 623,631 540,012
Savings accounts 292,112 293,322 297,357 292,765 293,405
Time deposits 796,255 836,867 790,762 817,110 811,299
Total deposits $2,586,097 $2,591,654 $2,505,321 $2,454,831 $2,304,609
Out-of-market brokered certificates of deposits included in time deposits $171,216 $171,275 $98,009 $106,231 $96,177
In-market deposits, excluding out-of-market brokered certificates of deposit $2,414,881 $2,420,379 $2,407,312 $2,348,600 $2,208,432
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
Period End Balances At
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(Dollars in thousands) 2014 2014 2013 2013 2013
Asset Quality Data:
Nonperforming Assets:
Commercial mortgages $2,290 $2,293 $7,492 $8,956 $9,976
Commercial construction and development
Other commercial 1,615 1,198 1,291 1,248 1,400
Residential real estate mortgages 7,417 8,975 8,315 8,095 7,526
Consumer 1,213 1,108 1,204 1,204 1,124
Total nonaccrual loans 12,535 13,574 18,302 19,503 20,026
Nonaccrual investment securities 547 425 397
Property acquired through foreclosure or repossession 1,309 750 932 594 1,230
Total nonperforming assets $13,844 $14,324 $19,781 $20,522 $21,653
Total past due loans to total loans 0.82% 0.73% 0.89% 1.02% 1.09%
Nonperforming assets to total assets 0.42% 0.45% 0.62% 0.66% 0.71%
Nonaccrual loans to total loans 0.49% 0.55% 0.74% 0.83% 0.84%
Allowance for loan losses to nonaccrual loans 217.54% 199.23% 152.37% 143.61% 139.24%
Allowance for loan losses to total loans 1.06% 1.09% 1.13% 1.19% 1.17%
Troubled Debt Restructured Loans:
Accruing troubled debt restructured loans:
Commercial mortgages $22,603 $22,796 $22,800 $23,892 $19,018
Other commercial 969 989 1,265 1,576 2,602
Residential real estate mortgages 1,459 1,467 1,442 870 876
Consumer 167 233 236 239 242
Accruing troubled debt restructured loans 25,198 25,485 25,743 26,577 22,738
Nonaccrual troubled debt restructured loans:
Commercial mortgages
Other commercial 872 369 542 547 590
Residential real estate mortgages 448 447 144
Consumer 29 38 40 42
Nonaccrual troubled debt restructured loans 1,320 845 580 587 776
Total troubled debt restructured loans $26,518 $26,330 $26,323 $27,164 $23,514
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
Period End Balances At
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(Dollars in thousands) 2014 2014 2013 2013 2013
Past Due Loans:
Loans 30-59 Days Past Due:
Commercial mortgages $311 $— $— $— $—
Other commercial loans 1,785 3,351 276 2,648 505
Residential real estate mortgages 5,249 2,232 4,040 2,624 4,051
Consumer loans 1,889 1,365 1,322 1,013 1,588
Loans 30-59 days past due $9,234 $6,948 $5,638 $6,285 $6,144
Loans 60-89 Days Past Due:
Commercial mortgages $1,583 $15 $— $730 $536
Other commercial loans 773 127 302 8 34
Residential real estate mortgages 855 1,265 1,285 1,960 1,697
Consumer loans 1,102 658 166 328 689
Loans 60-89 days past due $4,313 $2,065 $1,753 $3,026 $2,956
Loans 90 Days or more Past Due:
Commercial mortgages $2,250 $2,238 $7,492 $8,226 $8,895
Other commercial loans 417 428 731 929 3,428
Residential real estate mortgages 4,335 5,634 5,633 4,843 4,266
Consumer loans 512 701 656 693 415
Loans 90 days or more past due $7,514 $9,001 $14,512 $14,691 $17,004
Total Past Due Loans:
Commercial mortgages $4,144 $2,253 $7,492 $8,956 $9,431
Other commercial loans 2,975 3,906 1,309 3,585 3,967
Residential real estate mortgages 10,439 9,131 10,958 9,427 10,014
Consumer loans 3,503 2,724 2,144 2,034 2,692
Total past due loans $21,061 $18,014 $21,903 $24,002 $26,104
Accruing loans 90 days or more past due $— $— $— $— $2,431
Nonaccrual loans included in past due loans $10,432 $11,487 $15,591 $17,275 $17,208
For the Quarters Ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(Dollars in thousands) 2014 2014 2013 2013 2013
Allowance for Loan Losses:
Balance at beginning of period $27,043 $27,886 $28,008 $27,884 $31,139
Provision charged to earnings 450 300 400 700 700
Charge-offs (267) (1,223) (703) (770) (4,175)
Recoveries 43 80 181 194 220
Balance at end of period $27,269 $27,043 $27,886 $28,008 $27,884
Net Loan Charge-Offs (Recoveries):
Commercial mortgages $26 $939 $309 $602 $3,814
Other commercial 95 170 73 (2) 63
Residential real estate mortgages 30 7 80 36
Consumer 73 27 60 (24) 42
Total $224 $1,143 $522 $576 $3,955

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
June 30, 2014 March 31, 2014 June 30, 2013
Average Yield/ Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
Assets:
Commercial loans $1,339,310 $14,509 4.35% $1,336,798 $14,601 4.43% $1,291,244 $14,747 4.58%
Residential real estate loans, including loans held for sale 856,955 8,811 4.12% 802,412 8,208 4.15% 762,363 7,877 4.14%
Consumer loans 333,881 3,171 3.81% 327,793 3,097 3.83% 325,539 3,090 3.81%
Total loans 2,530,146 26,491 4.20% 2,467,003 25,906 4.26% 2,379,146 25,714 4.34%
Cash, federal funds sold and short-term investments 59,507 28 0.19% 62,246 35 0.23% 44,690 24 0.22%
FHLBB stock 37,730 138 1.47% 37,730 142 1.53% 37,730 39 0.42%
Taxable debt securities 322,418 2,699 3.36% 344,009 2,942 3.47% 293,586 2,576 3.52%
Nontaxable debt securities 57,422 847 5.92% 59,958 884 5.98% 66,468 985 5.94%
Total securities 379,840 3,546 3.74% 403,967 3,826 3.84% 360,054 3,561 3.97%
Total interest-earning assets 3,007,223 30,203 4.03% 2,970,946 29,909 4.08% 2,821,620 29,338 4.17%
Noninterest-earning assets 207,426 203,335 213,336
Total assets $3,214,649 $3,174,281 $3,034,956
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits $9,067 $— —% $10,767 $— —% $135 $— —%
NOW accounts 311,948 47 0.06% 304,201 47 0.06% 289,858 45 0.06%
Money market accounts 759,704 713 0.38% 685,142 609 0.36% 535,107 381 0.29%
Savings accounts 291,671 45 0.06% 292,809 45 0.06% 286,547 47 0.07%
Time deposits 813,558 2,315 1.14% 797,458 2,268 1.15% 843,462 2,623 1.25%
FHLBB advances 220,088 1,758 3.20% 269,989 2,241 3.37% 326,839 2,679 3.29%
Junior subordinated debentures 22,681 241 4.26% 22,681 241 4.31% 31,405 612 7.82%
Other 162 4 9.90% 173 3 7.03% 205 3 5.87%
Total interest-bearing liabilities 2,428,879 5,123 0.85% 2,383,220 5,454 0.93% 2,313,558 6,390 1.11%
Demand deposits 409,851 422,975 365,747
Other liabilities 35,684 33,057 52,249
Shareholders' equity 340,235 335,029 303,402
Total liabilities and shareholders' equity $3,214,649 $3,174,281 $3,034,956
Net interest income (FTE) $25,080 $24,455 $22,948
Interest rate spread 3.18% 3.15% 3.06%
Net interest margin 3.35% 3.34% 3.26%
Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:
(Dollars in thousands) Three Months Ended
Jun 30, Mar 31, Jun 30,
2014 2014 2013
Commercial loans $322 $317 $201
Nontaxable debt securities 290 302 338
Total $612 $619 $539
Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)
Six Months Ended
June 30, 2014 June 30, 2013
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
Assets:
Commercial loans $1,338,061 $29,109 4.39% $1,267,612 $29,168 4.64%
Residential real estate loans, including loans held for sale 829,834 17,019 4.14% 758,964 15,814 4.20%
Consumer loans 330,854 6,268 3.82% 324,111 6,143 3.82%
Total loans 2,498,749 52,396 4.23% 2,350,687 51,125 4.39%
Cash, federal funds sold and short-term investments 60,869 63 0.21% 49,186 52 0.21%
FHLBB stock 37,730 280 1.50% 38,755 77 0.40%
Taxable debt securities 333,154 5,641 3.41% 308,576 5,421 3.54%
Nontaxable debt securities 58,683 1,731 5.95% 67,261 1,989 5.96%
Total securities 391,837 7,372 3.79% 375,837 7,410 3.98%
Total interest-earning assets 2,989,185 60,111 4.06% 2,814,465 58,664 4.20%
Noninterest-earning assets 205,391 211,845
Total assets $3,194,576 $3,026,310
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits $9,912 $— —% $68 $— —%
NOW accounts 308,096 94 0.06% 286,450 90 0.06%
Money market accounts 722,629 1,322 0.37% 515,390 732 0.29%
Savings accounts 292,237 90 0.06% 283,059 93 0.07%
Time deposits 805,553 4,583 1.15% 856,447 5,375 1.27%
FHLBB advances 244,900 3,999 3.29% 336,004 5,416 3.25%
Junior subordinated debentures 22,681 482 4.29% 32,194 1,002 6.28%
Other 168 7 8.40% 673 8 2.40%
Total interest-bearing liabilities 2,406,176 10,577 0.89% 2,310,285 12,716 1.11%
Demand deposits 416,377 363,313
Other liabilities 34,377 51,282
Shareholders' equity 337,646 301,430
Total liabilities and shareholders' equity $3,194,576 $3,026,310
Net interest income (FTE) $49,534 $45,948
Interest rate spread 3.17% 3.09%
Net interest margin 3.34% 3.29%
Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:
(Dollars in thousands) Six Months Ended
Jun 30, 2014 Jun 30, 2013
Commercial loans $638 $389
Nontaxable debt securities 592 683
Total $1,230 $1,072
Washington Trust Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION - Non-GAAP Financial Measures (unaudited)
At or for the Quarters Ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(Dollars in thousands, except per share amounts) 2014 2014 2013 2013 2013
Calculation of Tangible Book Value per Share:
Total shareholders' equity at end of period $343,450 $335,858 $329,646 $323,585 $303,370
Less:
Goodwill 58,114 58,114 58,114 58,114 58,114
Identifiable intangible assets, net 5,165 5,329 5,493 5,657 5,827
Total tangible shareholders' equity at end of period $280,171 $272,415 $266,039 $259,814 $239,429
Shares outstanding at end of period 16,705 16,635 16,614 16,589 16,487
Book value per share - GAAP $20.56 $20.19 $19.84 $19.51 $18.40
Tangible book value per share - Non-GAAP $16.77 $16.38 $16.01 $15.66 $14.52
Calculation of Tangible Equity to Tangible Assets:
Total tangible shareholders' equity at end of period $280,171 $272,415 $266,039 $259,814 $239,429
Total assets at end of period $3,317,022 $3,194,146 $3,188,867 $3,131,958 $3,061,307
Less:
Goodwill 58,114 58,114 58,114 58,114 58,114
Identifiable intangible assets, net 5,165 5,329 5,493 5,657 5,827
Total tangible assets at end of period $3,253,743 $3,130,703 $3,125,260 $3,068,187 $2,997,366
Equity to assets - GAAP 10.35% 10.51% 10.34% 10.33% 9.91%
Tangible equity to tangible assets - Non-GAAP 8.61% 8.70% 8.51% 8.47% 7.99%
Calculation of Return on Average Tangible Assets:
Net income $9,797 $9,298 $9,789 $9,960 $8,983
Total average assets $3,214,649 $3,174,281 $3,163,042 $3,098,228 $3,034,956
Less:
Average goodwill 58,114 58,114 58,114 58,114 58,114
Average identifiable intangible assets, net 5,245 5,410 5,573 5,739 5,912
Total average tangible assets $3,151,290 $3,110,757 $3,099,355 $3,034,375 $2,970,930
Return on average assets - GAAP 1.22% 1.17% 1.24% 1.29% 1.18%
Return on average tangible assets - Non-GAAP 1.24% 1.20% 1.26% 1.31% 1.21%
Calculation of Return on Average Tangible Equity:
Net income $9,797 $9,298 $9,789 $9,960 $8,983
Total average shareholders' equity $340,235 $335,029 $326,866 $310,785 $303,402
Less:
Average goodwill 58,114 58,114 58,114 58,114 58,114
Average identifiable intangible assets, net 5,245 5,410 5,573 5,739 5,912
Total average tangible shareholders' equity $276,876 $271,505 $263,179 $246,932 $239,376
Return on average shareholders' equity - GAAP 11.52% 11.10% 11.98% 12.82% 11.84%
Return on average tangible shareholders' equity - Non-GAAP 14.15% 13.70% 14.80% 16.13% 15.01%
Washington Trust Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION - Non-GAAP Financial Measures (unaudited)
Six Months Ended
Jun 30, Jun 30,
(Dollars in thousands) 2014 2013
Calculation of return on average tangible assets:
Net income $19,095 $16,404
Total average assets $3,194,576 $3,026,310
Less:
Average goodwill 58,114 58,114
Average identifiable intangible assets, net 5,327 5,998
Total average tangible assets $3,131,135 $2,962,198
Return on average assets - GAAP 1.20% 1.08%
Return on average tangible assets - Non-GAAP 1.22% 1.11%
Calculation of return on average tangible equity:
Net income $19,095 $16,404
Total average shareholders' equity $337,646 $301,430
Less:
Average goodwill 58,114 58,114
Average identifiable intangible assets, net 5,327 5,998
Total average tangible shareholders' equity $274,205 $237,318
Return on average shareholders' equity - GAAP 11.31% 10.88%
Return on average tangible shareholders' equity - Non-GAAP 13.93% 13.82%

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

Source:The Washington Trust Company