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Washington Trust Reports Second Quarter 2016 Earnings

WESTERLY, R.I., July 25, 2016 (GLOBE NEWSWIRE) -- Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced net income of $11.1 million, or $0.64 per diluted share, for the second quarter of 2016, compared to net income of $10.9 million, or $0.64 per diluted share, reported for the first quarter of 2016.

"Washington Trust posted solid second quarter earnings in a challenging economic environment," stated Joseph J. MarcAurele, Washington Trust Chairman and CEO. "Total loans reached a record level, as a result of strong commercial loan and residential mortgage activity during the quarter. Wealth management revenues and assets under administration also achieved all-time highs, despite financial market volatility."

Selected highlights for the second quarter of 2016 include:

  • Returns on average equity and average assets remain solid at 11.50% and 1.14%, respectively. Comparable amounts for the first quarter of 2016 were 11.50% and 1.16%, respectively.

  • Mortgage banking revenues amounted to $2.7 million, up by 23% on a linked quarter basis. Mortgage loans sold to the secondary market totaled $139 million; the second highest quarterly volume in the past three years.

  • Total loans stood at $3.1 billion at June 30, 2016, up by 1% in the quarter and up by 5% from a year ago.

  • Total deposits amounted to $2.8 billion at March 31, 2016, down by 3% in the quarter and up by 2% from a year ago.

Net Interest Income
Net interest income totaled $26.8 million for the second quarter of 2016, compared to $27.7 million, in the first quarter. Prior quarter net interest income included loan prepayment fee income of $1.0 million, compared to $48 thousand in the most recent quarter. Excluding the impact of the loan prepayment fee income from both periods, net interest income was down slightly on a linked quarter basis. The net interest margin was 3.05% for the second quarter of 2016, down by 19 basis points from the previous quarter. Excluding the impact of the loan prepayment fee income in each period, the second quarter net interest margin was 3.05%, down by 8 basis points from the prior quarter. The reduction in the net interest margin was largely due to lower yields on interest-earning assets as a result of the downward movement in longer-term market interest rates in 2016. Other significant linked quarter changes included:

  • Average interest-earning assets increased by $94 million, due to growth in average balances of commercial loans in the quarter as well as an increase in average investment securities driven by portfolio additions near the end of the previous quarter.

  • Average interest-bearing liabilities rose by $88 million, reflecting increases in the average balance of Federal Home Loan Bank of Boston ("FHLBB") advances. The cost of interest-bearing funds was 0.74%, unchanged from the previous quarter.

Noninterest Income
Noninterest income totaled $15.9 million for the second quarter of 2016, up by $1.3 million, or 9%, from the first quarter of 2016. Significant linked quarter changes included:

  • Wealth management revenues totaled $9.5 million for the second quarter, up by $307 thousand, or 3%, from the prior quarter. The increase included a $291 thousand increase in tax preparation fees, which are generally concentrated in the second quarter. Wealth management assets under administration amounted to $5.9 billion at June 30, 2016, up by $26 million on a linked quarter basis. Managed assets continue to represent over 90% of total wealth management assets at June 30, 2016.

  • Mortgage banking benefited from strong activity levels as revenues totaled $2.7 million for the second quarter, up by $512 thousand, or 23%, on a linked quarter basis. These results reflect both a higher volume and yield on loans sold to the secondary market. Residential mortgage loans sold to the secondary market amounted to $139.0 million in the second quarter, compared to $106.0 million in the previous quarter.

  • Income from bank-owned life insurance ("BOLI") amounted to $1.1 million in the second quarter, up by $591 thousand, from the first quarter of 2016. Included in the second quarter was a $589 thousand non-taxable gain due to the receipt of life insurance proceeds.

  • Loan related derivative income amounted to $508 thousand in the second quarter, down by $137 thousand, or 21%, from the prior quarter. The decrease reflected a lower volume of commercial borrower interest rate swaps transactions.

Noninterest Expenses
Noninterest expenses totaled $26.0 million for the second quarter of 2016, up by $580 thousand, or 2%, from the prior quarter. The largest increase was a $1.0 million increase in salaries and employee benefit costs, which included costs of $425 thousand incurred in the second quarter for various employee severance matters. The remaining increase in salaries and employee benefit costs was concentrated in transaction-based commission expense associated with the increase in mortgage banking activities. In first quarter of 2016, noninterest expenses included $431 thousand of debt prepayment penalty expense associated with the prepayment of $10.0 million in FHLBB advances. There were no such expenses in the latest quarter.

Income tax expense amounted to $5.2 million for the second quarter of 2016, down by $331 thousand from the amount recognized in the previous quarter. The effective tax rate for the second quarter of 2016 was 31.8%, compared to 33.4% for the first quarter of 2016. The reduction in the effective tax rate for the second quarter is primarily due to the non-taxable gain related to the receipt of BOLI proceeds.

Loans
Total loans amounted to $3.1 billion at June 30, 2016, up by $34 million, or 1.1%, from the balance at the end of the first quarter. The linked quarter change was due to growth of $57 million in the commercial real estate portfolio, which was partially offset by a decline of $23 million in the commercial and industrial portfolio. The residential and consumer loan portfolio balances were relatively consistent with the period-end balances at March 31, 2016. Included in the residential loan portfolio balance at the end of the second quarter was a $16.1 million purchase of whole loans acquired on June 28, 2016. These loans were individually evaluated to our underwriting standards and predominantly secured by properties in Massachusetts.

Investment Securities
The securities portfolio amounted to $420 million at June 30, 2016, down by $11 million, or 2.5%, from the balance at March 31, 2016, due to calls, maturities and routine principal pay-downs, which were partially offset by the purchases of $52 million of additional U.S. government agency and agency mortgage-backed debt securities. Investment securities were 11% of total assets as of June 30, 2016.

Deposits and Borrowings
Total deposits amounted to $2.8 billion at June 30, 2016, down by $90 million, or 3.1%, in the second quarter. Excluding wholesale brokered time deposits, in-market deposits decreased by $75 million, or 2.9%, in the quarter. The largest outflow during the quarter was $88 million of money market deposits, attributable to outflows associated with various institutional and governmental depositors. A substantial portion of these outflows are considered to be seasonal in nature based on the business cycles of the underlying depositors.

FHLBB advances amounted to $640 million at June 30, 2016, up by $153 million, or 31.4%, from March 31, 2016.

Asset Quality
Total past due loans a/mounted to $17.1 million, or 0.56% of total loans, at June 30, 2016, compared to $18.3 million, or 0.60% of total loans, at March 31, 2016. Total nonaccrual loans amounted to $17.2 million, or 0.56% of total loans, at June 30, 2016, compared to $17.4 million, or 0.57% of total loans, at March 31, 2016.

A loan loss provision totaling $450 thousand was charged to earnings in the second quarter of 2016, compared to a loan loss provision of $500 thousand recognized in the first quarter of 2016. The loan loss provision was based on management’s assessment of loss exposure, as well as loan loss allocations commensurate with changes in the loan portfolio during the quarter. Net charge-offs amounted to $761 thousand in the second quarter of 2016 and included a $737 thousand charge-off associated with one commercial and industrial relationship. A substantial portion of the loss exposure associated with this charge-off was recognized as of March 31, 2016. The allowance for loan losses was $25.8 million, or 0.84% of total loans, at June 30, 2016, compared to $26.1 million, or 0.86% of total loans, at March 31, 2016.

Capital and Dividends
Total shareholder's equity was $388 million at June 30, 2016, up by $7 million from March 31, 2016. Capital levels at June 30, 2016 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.43% at June 30, 2016, compared to 12.45% at March 31, 2016. At June 30, 2016, book value per share amounted to $22.73, up from $22.40 in the prior quarter.

The Board of Directors declared a quarterly dividend of 36 cents per share for the quarter ended June 30, 2016. The dividend was paid on July 14, 2016 to shareholders of record on July 1, 2016.

Conference Call
Washington Trust will host a conference call to discuss its second quarter results, business highlights and outlook on Tuesday, July 26, 2016 at 8:30 a.m. (Eastern Time). Individuals may dial in to the call at 1-877-407-0784. An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-877-870-5176 and entering the Replay PIN Number 13639564; the audio replay will be available through August 5, 2016. Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrustbancorp.com, and will be available through September 30, 2016.

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; and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, may result in these differences. You should carefully review all of these factors and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Supplemental Information - Explanation of Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures. Washington Trust's management believes that the supplemental non-GAAP information, which consists of measurements and ratios based on tangible equity and tangible assets, is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Assets:
Cash and due from banks$116,658 $89,966 $93,222 $106,445 $79,795
Short-term investments 3,255 4,931 4,409 3,629 4,298
Mortgage loans held for sale 38,554 22,895 38,554 31,805 37,389
Securities:
Available for sale, at fair value 401,749 411,352 375,044 323,795 351,378
Held to maturity, at amortized cost 17,917 19,040 20,023 21,140 22,523
Total securities 419,666 430,392 395,067 344,935 373,901
Federal Home Loan Bank stock, at cost 34,303 26,515 24,316 37,730 37,730
Loans:
Commercial 1,732,220 1,698,811 1,654,547 1,579,854 1,583,537
Residential real estate 1,005,036 1,004,349 1,013,555 1,024,214 1,001,263
Consumer 343,628 343,833 345,025 345,850 343,784
Total loans 3,080,884 3,046,993 3,013,127 2,949,918 2,928,584
Less allowance for loan losses 25,826 26,137 27,069 27,161 27,587
Net loans 3,055,058 3,020,856 2,986,058 2,922,757 2,900,997
Premises and equipment, net 29,590 29,882 29,593 28,180 28,124
Investment in bank-owned life insurance 65,036 66,000 65,501 65,000 64,502
Goodwill 64,059 64,059 64,059 64,196 58,114
Identifiable intangible assets, net 10,814 11,137 11,460 11,793 4,539
Other assets 80,088 71,577 59,365 58,366 55,088
Total assets$3,917,081 $3,838,210 $3,771,604 $3,674,836 $3,644,477
Liabilities:
Deposits:
Demand deposits$512,307 $539,119 $537,298 $513,856 $457,755
NOW accounts 414,532 394,873 412,602 358,973 357,922
Money market accounts 675,896 763,565 823,490 855,858 789,334
Savings accounts 342,579 331,800 326,967 305,775 300,108
Time deposits 844,036 850,294 833,898 801,818 834,000
Total deposits 2,789,350 2,879,651 2,934,255 2,836,280 2,739,119
Federal Home Loan Bank advances 640,010 487,189 378,973 381,649 471,321
Junior subordinated debentures 22,681 22,681 22,681 22,681 22,681
Other liabilities 76,708 67,409 60,307 63,699 52,189
Total liabilities 3,528,749 3,456,930 3,396,216 3,304,309 3,285,310
Shareholders’ Equity:
Common stock 1,068 1,064 1,064 1,062 1,052
Paid-in capital 112,314 111,641 110,949 109,724 103,408
Retained earnings 282,666 277,810 273,074 268,166 263,790
Accumulated other comprehensive loss (7,716) (9,235) (9,699) (8,425) (9,083)
Total shareholders’ equity 388,332 381,280 375,388 370,527 359,167
Total liabilities and shareholders’ equity$3,917,081 $3,838,210 $3,771,604 $3,674,836 $3,644,477


CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
For the Six Months Ended
For the Three Months Ended
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Jun 30,
2016
Jun 30,
2015
Interest income:
Interest and fees on loans$29,122 $29,998 $28,511 $28,626 $28,739 $59,120 $57,092
Taxable interest on securities 2,487 2,370 2,262 2,178 2,176 4,857 4,435
Nontaxable interest on securities 280 327 352 366 402 607 837
Dividends on Federal Home Loan Bank stock 231 210 315 309 164 441 329
Other interest income 70 64 37 47 29 134 54
Total interest and dividend income 32,190 32,969 31,477 31,526 31,510 65,159 62,747
Interest expense:
Deposits 2,981 2,968 3,097 3,308 3,348 5,949 6,737
Federal Home Loan Bank advances 2,313 2,152 1,966 1,987 1,891 4,465 3,793
Junior subordinated debentures 119 112 157 232 241 231 482
Other interest expense 1 2 2 2 2 3 5
Total interest expense 5,414 5,234 5,222 5,529 5,482 10,648 11,017
Net interest income 26,776 27,735 26,255 25,997 26,028 54,511 51,730
Provision for loan losses 450 500 750 200 100 950 100
Net interest income after provision for loan losses 26,326 27,235 25,505 25,797 25,928 53,561 51,630
Noninterest income:
Wealth management revenues 9,481 9,174 9,167 8,902 8,912 18,655 17,347
Mortgage banking revenues 2,710 2,198 2,582 1,990 2,741 4,908 5,329
Service charges on deposit accounts 935 907 971 986 973 1,842 1,908
Card interchange fees 860 797 810 849 826 1,657 1,540
Income from bank-owned life insurance 1,090 499 502 498 492 1,589 982
Loan related derivative income 508 645 752 327 717 1,153 1,362
Equity in losses of unconsolidated subsidiaries (89) (88) (69) (69) (69) (177) (155)
Other income 419 502 431 430 669 921 968
Total noninterest income 15,914 14,634 15,146 13,913 15,261 30,548 29,281
Noninterest expense:
Salaries and employee benefits 17,405 16,380 16,053 15,971 15,506 33,785 31,000
Net occupancy 1,803 1,807 1,724 1,721 1,669 3,610 3,555
Equipment 1,503 1,501 1,393 1,424 1,376 3,004 2,716
Outsourced services 1,294 1,363 1,337 1,250 1,277 2,657 2,524
Legal, audit and professional fees 662 629 825 630 610 1,291 1,286
FDIC deposit insurance costs 491 493 470 467 436 984 909
Advertising and promotion 420 265 325 356 578 685 845
Amortization of intangibles 322 323 333 260 156 645 311
Debt prepayment penalties 431 431
Acquisition related expenses 52 504 433 433
Other expenses 2,130 2,258 2,049 1,955 2,258 4,388 4,251
Total noninterest expense 26,030 25,450 24,561 24,538 24,299 51,480 47,830
Income before income taxes 16,210 16,419 16,090 15,172 16,890 32,629 33,081
Income tax expense 5,153 5,484 5,346 4,964 5,387 10,637 10,568
Net income$11,057 $10,935 $10,744 $10,208 $11,503 $21,992 $22,513
Net income available to common shareholders:
Basic$11,035 $10,910 $10,718 $10,181 $11,469 $21,945 $22,440
Diluted$11,035 $10,910 $10,718 $10,180 $11,470 $21,945 $22,441
Weighted average common shares outstanding:
Basic 17,067 17,023 17,004 16,939 16,811 17,045 16,785
Diluted 17,194 17,157 17,167 17,102 16,989 17,185 16,977
Earnings per common share:
Basic$0.65 $0.64 $0.63 $0.60 $0.68 $1.29 $1.34
Diluted$0.64 $0.64 $0.62 $0.60 $0.68 $1.28 $1.32
Cash dividends declared per share$0.36 $0.36 $0.34 $0.34 $0.34 $0.72 $0.68


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Share and Equity Related Data:
Book value per share$22.73 $22.40 $22.06 $21.82 $21.34
Tangible book value per share - Non-GAAP (1)$18.35 $17.98 $17.62 $17.36 $17.61
Market value per share$37.92 $37.32 $39.52 $38.45 $39.48
Shares issued and outstanding at end of period 17,081 17,024 17,020 16,985 16,834
Capital Ratios:
Tier 1 risk-based capital11.57% (i) 11.56 % 11.64 % 11.83 % 11.79 %
Total risk-based capital12.43% (i) 12.45 % 12.58 % 12.80 % 12.78 %
Tier 1 leverage ratio9.21% (i) 9.31 % 9.37 % 9.26 % 9.31 %
Common equity tier 110.84% (i) 10.82 % 10.89 % 11.05 % 11.00 %
Equity to assets 9.91 % 9.93 % 9.95 % 10.08 % 9.86 %
Tangible equity to tangible assets - Non-GAAP (1) 8.16 % 8.13 % 8.11 % 8.18 % 8.28 %
(i) - estimated


For the Six Months Ended
For the Three Months Ended
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Jun 30,
2016
Jun 30,
2015
Performance Ratios:
Net interest margin (FTE)3.05%3.24%3.08%3.07%3.15% 3.15%3.16%
Return on average assets1.14%1.16%1.16%1.11%1.27% 1.15%1.25%
Return on average tangible assets - Non-GAAP (1)1.17%1.18%1.19%1.13%1.29% 1.17%1.27%
Return on average equity11.50%11.50%11.52%11.13%12.88% 11.50%12.71%
Return on average tangible equity - Non-GAAP (1)14.28%14.34%14.45%13.82%15.62% 14.31%15.45%
(1) See the section labeled “Supplemental Information - Non-GAAP Financial Measures” at the end of this document.


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)
For the Six Months Ended
For the Three Months Ended
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Jun 30,
2016
Jun 30,
2015
Wealth Management Results
Wealth Management Revenues:
Trust and investment management fees$8,195 $8,065 $8,001 $7,768 $7,238 $16,260 $14,380
Mutual fund fees 812 843 952 989 1,032 1,655 2,068
Asset-based revenues 9,007 8,908 8,953 8,757 8,270 17,915 16,448
Transaction-based revenues 474 266 214 145 642 740 899
Total wealth management revenues$9,481 $9,174 $9,167 $8,902 $8,912 $18,655 $17,347
Assets Under Administration:
Balance at beginning of period$5,878,967 $5,844,636 $5,714,201 $5,211,548 $5,159,663 $5,844,636 $5,069,966
Acquisition of Halsey Associates, Inc. 839,994
Net investment appreciation (depreciation) & income 71,447 22,389 153,953 (316,121) (13,932) 93,835 66,940
Net client asset flows (45,395) 11,942 (23,518) (21,220) 65,817 (33,452) 74,642
Balance at end of period$5,905,019 $5,878,967 $5,844,636 $5,714,201 $5,211,548 $5,905,019 $5,211,548
Mortgage Banking Results
Mortgage Banking Revenues:
Gains & commissions on loan sales, net$2,804 $2,134 $2,528 $1,964 $2,748 $4,938 $5,333
Residential mortgage servicing fee income, net (94) 64 54 26 (7) (30) (4)
Total mortgage banking revenues$2,710 $2,198 $2,582 $1,990 $2,741 $4,908 $5,329
Residential Mortgage Loan Originations:
Originations for retention in portfolio$54,080 $47,545 $38,080 $76,963 $65,134 $101,626 $119,809
Originations for sale to secondary market (1) 154,043 90,458 134,125 126,353 134,360 $244,501 263,356
Total mortgage loan originations$208,123 $138,003 $172,205 $203,316 $199,494 $346,127 $383,165
Residential Mortgage Loans Sold:
Sold with servicing rights retained$45,804 $26,454 $44,493 $37,782 $32,693 $72,258 $79,949
Sold with servicing rights released (1) 93,239 79,507 82,906 94,645 110,484 $172,746 191,125
Total mortgage loans sold$139,043 $105,961 $127,399 $132,427 $143,177 $245,004 $271,074
(1) Also includes loans originated in a broker capacity.


END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Commercial:
Mortgages$1,074,747 $976,931 $931,953 $873,767 $876,589
Construction & development 81,812 123,032 122,297 121,857 110,989
Commercial & industrial 575,661 598,848 600,297 584,230 595,959
Total commercial 1,732,220 1,698,811 1,654,547 1,579,854 1,583,537
Residential real estate:
Mortgages 978,399 980,274 984,437 994,808 971,705
Homeowner construction 26,637 24,075 29,118 29,406 29,558
Total residential real estate 1,005,036 1,004,349 1,013,555 1,024,214 1,001,263
Consumer:
Home equity lines 260,541 258,513 255,565 252,862 249,845
Home equity loans 39,572 45,499 46,649 47,610 47,437
Other 43,515 39,821 42,811 45,378 46,502
Total consumer 343,628 343,833 345,025 345,850 343,784
Total loans$3,080,884 $3,046,993 $3,013,127 $2,949,918 $2,928,584


June 30, 2016 December 31, 2015
Balance% of Total Balance% of Total
Commercial Real Estate Loans by Property Location:
Rhode Island, Connecticut, Massachusetts$1,073,506 92.9% $959,883 91.0%
New York, New Jersey, Pennsylvania 69,872 6.0% 80,989 7.7%
New Hampshire 13,181 1.1% 13,377 1.3%
Total commercial real estate loans (1)$1,156,559 100.0% $1,054,249 100.0%
Residential Mortgages by Property Location:
Rhode Island, Connecticut, Massachusetts$989,085 98.5% $995,743 98.2%
New Hampshire, Vermont 9,500 0.9% 10,186 1.0%
New York, Virginia, New Jersey, Maryland, Pennsylvania 3,434 0.3% 4,163 0.4%
Ohio 1,132 0.1% 1,557 0.2%
Other 1,885 0.2% 1,906 0.2%
Total residential mortgages$1,005,036 100.0% $1,013,555 100.0%
(1) Commercial real estate loans consist of commercial mortgages and construction and development loans. Commercial mortgages are loans secured by income producing property.


Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Deposits:
Non-interest bearing demand deposits$476,848 $474,477 $475,398 $472,349 $429,904
Interest-bearing demand deposits 35,459 64,642 61,900 41,507 27,851
NOW accounts 414,532 394,873 412,602 358,973 357,922
Money market accounts 675,896 763,565 823,490 855,858 789,334
Savings accounts 342,579 331,800 326,967 305,775 300,108
Time deposits (in-market) 549,935 540,815 531,419 534,266 549,410
Wholesale brokered time deposits 294,101 309,479 302,479 267,552 284,590
Total deposits$2,789,350 $2,879,651 $2,934,255 $2,836,280 $2,739,119


CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Asset Quality Ratios:
Nonperforming assets to total assets 0.48% 0.49% 0.58% 0.48% 0.45%
Nonaccrual loans to total loans 0.56% 0.57% 0.70% 0.57% 0.52%
Allowance for loan losses to nonaccrual loans 149.73% 150.00% 128.61% 161.25% 182.32%
Allowance for loan losses to total loans 0.84% 0.86% 0.90% 0.92% 0.94%
Nonperforming Assets:
Commercial mortgages$4,054 $4,054 $5,711 $4,915 $4,915
Commercial construction & development
Commercial & industrial 1,204 2,659 3,018 1,137 1,039
Residential real estate mortgages 10,409 9,367 10,666 9,472 7,411
Consumer 1,581 1,345 1,652 1,320 1,766
Total nonaccrual loans 17,248 17,425 21,047 16,844 15,131
Other real estate owned 1,515 1,326 716 955 1,388
Total nonperforming assets$18,763 $18,751 $21,763 $17,799 $16,519
Past Due Loans:
Commercial mortgages$4,062 $4,564 $4,555 $5,062 $4,929
Commercial & industrial 1,978 2,906 462 4,337 5,518
Residential real estate mortgages 8,893 8,703 9,286 10,567 10,904
Consumer loans 2,201 2,122 3,256 1,845 2,678
Total past due loans$17,134 $18,295 $17,559 $21,811 $24,029
Total past due loans to total loans 0.56% 0.60% 0.58% 0.74% 0.82%
Accruing loans 90 days or more past due$— $— $— $— $—
Nonaccrual loans included in past due loans$13,211 $14,030 $13,635 $13,964 $12,397


For the Six Months Ended
For the Three Months Ended
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Jun 30,
2016
Jun 30,
2015
Nonaccrual Loan Activity:
Balance at beginning of period$17,425 $21,047 $16,844 $15,131 $15,865 $21,047 $15,945
Additions to nonaccrual status 2,072 1,352 7,029 3,319 2,567 3,424 4,175
Loans returned to accruing status (206) (303) (156) (1,756) (206) (2,122)
Loans charged-off (860) (1,475) (904) (725) (355) (2,335) (676)
Loans transferred to other real estate owned (435) (610) (716) (261) (1,045) (491)
Payments, payoffs and other changes (954) (2,683) (903) (725) (929) (3,637) (1,700)
Balance at end of period$17,248 $17,425 $21,047 $16,844 $15,131 $17,248 $15,131
Allowance for Loan Losses:
Balance at beginning of period$26,137 $27,069 $27,161 $27,587 $27,810 $27,069 $28,023
Provision charged to earnings 450 500 750 200 100 950 100
Charge-offs (860) (1,475) (904) (725) (355) (2,335) (676)
Recoveries 99 43 62 99 32 142 140
Balance at end of period$25,826 $26,137 $27,069 $27,161 $27,587 $25,826 $27,587
Net Loan Charge-Offs (Recoveries):
Commercial mortgages$65 $1,249 $405 ($4)$196 $1,314 $316
Commercial & industrial 684 (18) 217 348 26 666 19
Residential real estate mortgages 2 134 117 12 4 136 50
Consumer 10 67 103 270 97 77 151
Total$761 $1,432 $842 $626 $323 $2,193 $536
Net charge-offs to average loans (annualized) 0.10% 0.19% 0.11% 0.08% 0.04% 0.14% 0.04%

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

CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited; Dollars in thousands)
For the Three Months EndedJune 30, 2016 March 31, 2016 June 30, 2015
Average BalanceInterestYield/
Rate
Average BalanceInterestYield/
Rate
Average BalanceInterestYield/
Rate
Assets:
Commercial mortgages$1,019,290 $8,992 3.55 $933,939 $8,215 3.54 $873,212 $7,779 3.57
Construction & development 117,204 985 3.38 129,217 1,108 3.45 99,435 773 3.12
Commercial & industrial 591,893 6,408 4.35 604,519 7,681 5.11 601,536 7,378 4.92
Total commercial loans$1,728,387 $16,385 3.81 $1,667,675 $17,004 4.10 $1,574,183 $15,930 4.06
Residential real estate loans, including loans held for sale 1,024,653 9,980 3.92 1,031,260 10,155 3.96 1,025,029 10,102 3.95
Consumer loans 342,866 3,311 3.88 343,519 3,393 3.97 338,809 3,183 3.77
Total loans 3,095,906 29,676 3.86 3,042,454 30,552 4.04 2,938,021 29,215 3.99
Cash, federal funds sold and short-term investments 69,839 70 0.40 68,488 64 0.38 63,858 29 0.18
FHLBB stock 31,723 231 2.93 25,597 210 3.30 37,730 164 1.74
Taxable debt securities 396,428 2,487 2.52 359,060 2,370 2.65 320,643 2,176 2.72
Nontaxable debt securities 28,531 433 6.10 33,313 507 6.12 40,886 627 6.15
Total securities 424,959 2,920 2.76 392,373 2,877 2.95 361,529 2,803 3.11
Total interest-earning assets 3,622,427 32,897 3.65 3,528,912 33,703 3.84 3,401,138 32,211 3.80
Noninterest-earning assets 247,081 240,113 221,577
Total assets$3,869,508 $3,769,025 $3,622,715
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits$42,952 $7 0.07 $50,704 $13 0.10 $38,129 $3 0.03
NOW accounts 403,136 53 0.05 386,488 56 0.06 363,434 53 0.06
Money market accounts 710,075 459 0.26 786,633 515 0.26 820,887 941 0.46
Savings accounts 338,504 49 0.06 328,174 49 0.06 298,286 50 0.07
Time deposits (in-market) 542,621 1,345 1.00 538,035 1,315 0.98 554,839 1,390 1.00
Wholesale brokered time deposits 302,707 1,068 1.42 296,801 1,020 1.38 285,844 911 1.28
FHLBB advances 587,395 2,313 1.58 453,019 2,152 1.91 391,152 1,891 1.94
Junior subordinated debentures 22,681 119 2.11 22,681 112 1.99 22,681 241 4.26
Other 66 1 6.09 79 2 10.18 116 2 6.92
Total interest-bearing liabilities 2,950,137 5,414 0.74 2,862,614 5,234 0.74 2,775,368 5,482 0.79
Demand deposits 473,731 471,782 441,355
Other liabilities 60,923 54,287 48,627
Shareholders' equity 384,717 380,342 357,365
Total liabilities and shareholders' equity$3,869,508 $3,769,025 $3,622,715
Net interest income (FTE) $27,483 $28,469 $26,729
Interest rate spread 2.91 3.10 3.01
Net interest margin 3.05 3.24 3.15

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

For the Three Months EndedJun 30, 2016Mar 31, 2016Jun 30, 2015
Commercial loans$554 $554 $476
Nontaxable debt securities 153 180 225
Total$707 $734 $701


CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited; Dollars in thousands)
For the Six Months EndedJune 30, 2016 June 30, 2015
Average BalanceInterestYield/
Rate
Average BalanceInterestYield/
Rate
Assets:
Commercial mortgages$976,619 $17,207 3.54 $862,638 $15,496 3.62
Construction & development 123,209 2,093 3.42 91,911 1,439 3.16
Commercial & industrial 598,203 14,089 4.74 604,984 14,307 4.77
Total commercial loans 1,698,031 33,389 3.95 1,559,533 31,242 4.04
Residential real estate loans, including loans held for sale 1,027,956 20,135 3.94 1,027,509 20,416 4.01
Consumer loans 343,193 6,704 3.93 337,578 6,351 3.79
Total loans 3,069,180 60,228 3.95 2,924,620 58,009 4.00
Cash, federal funds sold and short-term investments 69,164 134 0.39 57,492 54 0.19
FHLBB stock 28,660 441 3.09 37,730 329 1.76
Taxable debt securities 377,744 4,857 2.59 321,602 4,435 2.78
Nontaxable debt securities 30,922 940 6.11 42,762 1,291 6.09
Total securities 408,666 5,797 2.85 364,364 5,726 3.17
Total interest-earning assets 3,575,670 66,600 3.75 3,384,206 64,118 3.82
Noninterest-earning assets 243,597 221,686
Total assets$3,819,267 $3,605,892
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits$46,828 $20 0.09 $37,991 $11 0.06
NOW accounts 394,812 110 0.06 346,605 100 0.06
Money market accounts 748,354 975 0.26 810,519 1,825 0.45
Savings accounts 333,339 96 0.06 296,117 96 0.07
Time deposits (in-market) 540,328 2,659 0.99 560,917 2,859 1.03
Wholesale brokered time deposits 299,754 2,089 1.40 290,230 1,846 1.28
FHLBB advances 520,207 4,465 1.73 397,925 3,793 1.92
Junior subordinated debentures 22,681 231 2.05 22,681 482 4.29
Other 73 3 8.26 122 5 8.26
Total interest-bearing liabilities 2,906,376 10,648 0.74 2,763,107 11,017 0.80
Demand deposits 472,757 440,136
Other liabilities 57,605 48,342
Shareholders' equity 382,529 354,307
Total liabilities and shareholders' equity$3,819,267 $3,605,892
Net interest income (FTE) $55,952 $53,101
Interest rate spread 3.01 3.02
Net interest margin 3.15 3.16

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

For the Six Months EndedJun 30, 2016Jun 30, 2015
Commercial loans$1,108 $917
Nontaxable debt securities 333 454
Total$1,441 $1,371


SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Tangible Book Value per Share:
Total shareholders' equity, as reported$388,332 $381,280 $375,388 $370,527 $359,167
Less:
Goodwill 64,059 64,059 64,059 64,196 58,114
Identifiable intangible assets, net 10,814 11,137 11,460 11,793 4,539
Total tangible shareholders' equity$313,459 $306,084 $299,869 $294,538 $296,514
Shares outstanding, as reported 17,081 17,024 17,020 16,985 16,834
Book value per share - GAAP$22.73 $22.40 $22.06 $21.82 $21.34
Tangible book value per share - Non-GAAP$18.35 $17.98 $17.62 $17.34 $17.61
Tangible Equity to Tangible Assets:
Total tangible shareholders' equity$313,459 $306,084 $299,869 $294,538 $296,514
Total assets, as reported$3,917,081 $3,838,210 $3,771,604 $3,674,836 $3,644,477
Less:
Goodwill 64,059 64,059 64,059 64,196 58,114
Identifiable intangible assets, net 10,814 11,137 11,460 11,793 4,539
Total tangible assets$3,842,208 $3,763,014 $3,696,085 $3,598,847 $3,581,824
Equity to assets - GAAP 9.91% 9.93 % 9.95% 10.08 % 9.86%
Tangible equity to tangible assets - Non-GAAP 8.16% 8.13 % 8.11% 8.18 % 8.28%


For the Three Months Ended For the Six Months Ended
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Jun 30,
2016
Jun 30,
2015
Return on Average Tangible Assets:
Net income, as reported$11,057 $10,935 $10,744 $10,208 $11,503 $21,992 $22,513
Total average assets, as reported$3,869,508 $3,769,025 $3,700,441 $3,678,487 $3,622,715 $3,819,267 $3,605,892
Less average balances of:
Goodwill 64,059 64,059 64,194 62,524 58,114 64,059 58,114
Identifiable intangible assets, net 10,972 11,294 11,616 8,768 4,614 11,133 4,691
Total average tangible assets$3,794,477 $3,693,672 $3,624,631 $3,607,195 $3,559,987 $3,744,075 $3,543,087
Return on average assets - GAAP 1.14% 1.16% 1.16% 1.11% 1.27% 1.15% 1.25%
Return on average tangible assets Non-GAAP 1.17% 1.18% 1.19% 1.13% 1.29% 1.17% 1.27%
Return on Average Tangible Equity:
Net income, as reported$11,057 $10,935 $10,744 $10,208 $11,503 $21,992 $22,513
Total average equity, as reported$384,717 $380,342 $373,197 $366,724 $357,365 $382,529 $354,307
Less average balances of:
Goodwill 64,059 64,059 64,194 62,524 58,114 64,059 58,114
Identifiable intangible assets, net 10,972 11,294 11,616 8,768 4,614 11,133 4,691
Total average tangible equity$309,686 $304,989 $297,387 $295,432 $294,637 $307,337 $291,502
Return on average equity - GAAP 11.50% 11.50% 11.52% 11.13% 12.88% 11.50% 12.71%
Return on average tangible equity -
Non-GAAP
14.28% 14.34% 14.45% 13.82% 15.62% 14.31% 15.45%


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

Source:Washington Trust Bancorp, Inc.