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Washington Trust Reports Record Full-Year 2016 Earnings

WESTERLY, R.I., Jan. 25, 2017 (GLOBE NEWSWIRE) -- Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced net income of $12.2 million, or $0.70 per diluted share, for the fourth quarter of 2016, compared to net income of $12.3 million, or $0.72 per diluted share, reported for the third quarter of 2016.

For the year ended December 31, 2016, net income totaled $46.5 million, or $2.70 per diluted share. Full-year net income increased by 7% from $43.5 million, or $2.54 per diluted share, reported for 2015. Returns on average equity and average assets in 2016 were 11.96% and 1.16%, respectively, compared to 12.00% and 1.19%, for the same period in 2015.

“Washington Trust’s solid fourth quarter results contributed to record 2016 net income and earnings per share,” stated Joseph J. MarcAurele, Washington Trust Chairman and Chief Executive Officer. “We are pleased with our continued success at growing our core business lines, expanding our local and regional footprint, and consistently providing healthy returns to our shareholders.”

Selected highlights for 2016 include:

  • Total loans stood at $3.2 billion at December 31, 2016, up by 2% in the quarter and up by 7% from a year ago.

  • Total deposits amounted to $3.1 billion at December 31, 2016, up by 1% from the third quarter. Total deposits were up by 4% from a year ago.

  • Wealth management revenues of $37.6 million for the year 2016 and wealth management assets of $6.1 billion at December 31, 2016 were all-time highs for the Corporation.

  • Mortgage banking revenues rose by 22% on a linked quarter basis. Mortgage banking revenues and loans sold during the quarter were record highs for Washington Trust.

Net Interest Income
Net interest income totaled $28.6 million for the fourth quarter of 2016, up by $1.2 million from the third quarter. Included in net interest income was loan prepayment fee income of $816 thousand for the fourth quarter, compared to $365 thousand in the third quarter. The net interest margin was 2.89% for the fourth quarter of 2016, down by 5 basis points from the preceding quarter. The reduction in the net interest margin reflects additions of lower-yielding debt securities to the investment portfolio and increases in wholesale funding balances. Significant linked quarter changes included:

  • Average interest-earning assets increased by $224 million from the third quarter, reflecting a $133 million increase in the average balance of investment securities and a $101 million increase in the average balance of loans. The yield on interest-earning assets was 3.53%, down by 2 basis points from the preceding quarter.

  • Average interest-bearing liabilities increased by $183 million from the preceding quarter, reflecting increases of $113 million in the average balance of wholesale funding balances (FHLBB advances and wholesale brokered time deposits) and $70 million in the average balance of in-market interest-bearing deposits. The cost of interest-bearing funds was 0.79%, up by 3 basis points from the third quarter.

Noninterest Income
Noninterest income totaled $17.3 million for the fourth quarter of 2016, up modestly from the preceding quarter. Significant linked quarter changes included:

  • Wealth management revenues totaled $9.3 million for the fourth quarter, down by $332 thousand, or 3%, from the preceding quarter, largely due to a decline of $216 thousand in transaction-based revenues. Wealth management assets under administration amounted to $6.1 billion at December 31, 2016, up by $6 million on a linked quarter basis. Managed assets continue to represent over 90% of total wealth management assets at December 31, 2016.

    Total annual wealth management revenues reached an all-time high of $37.6 million, up by $2.2 million, or 6%, from the preceding year.

  • Mortgage banking revenues totaled $4.5 million for the fourth quarter, up by $807 thousand, or 22%, from the preceding quarter, reflecting both higher volume and yields on loans sold to the secondary market. Residential mortgage loans sold to the secondary market amounted to $200 million in the fourth quarter, compared to $164 million in the preceding quarter.

    Total full-year 2016 mortgage banking revenues amounted to $13.2 million, up by $3.3 million, or 33%, from the preceding year.

  • Loan related derivative income amounted to $912 thousand in the fourth quarter, down by $266 thousand from the preceding quarter, reflecting a lower volume of commercial borrower interest rate swap transactions.

Noninterest Expenses
Noninterest expenses totaled $25.0 million for the fourth quarter of 2016, up by $323 thousand, or 1%, from the third quarter. Included in the third quarter was a $939 thousand reduction in noninterest expenses, resulting from a downward adjustment in the fair value of the contingent consideration liability recognized in connection with a 2015 acquisition. Excluding this adjustment, noninterest expenses were down by $616 thousand, or 2%, on a linked quarter basis. Salaries and benefit costs, the largest component of noninterest expenses, decreased by $380 thousand from the preceding quarter.

Income tax expense amounted to $5.9 million for the fourth quarter of 2016, up by $10 thousand from the preceding quarter. The effective tax rate for the fourth quarter of 2016 was 32.6%, compared to 32.2% for the third quarter of 2016. Based on the current federal and applicable state income tax statutes, the Corporation currently expects the 2017 effective tax rate will be approximately 34.0%.

Loans
Total loans amounted to $3.2 billion at December 31, 2016, up by $53 million, or 2%, from the balance at the end of the third quarter. The commercial loan portfolio increased by $14 million, or approximately 1%, during the quarter, reflecting growth in the commercial construction portfolio, partially offset by a reduction in commercial mortgages. Residential loan portfolio balances increased by $43 million, or 4%. During the quarter, $36 million of residential mortgages were purchased from another financial institution. These purchased loans were individually evaluated to our underwriting standards and are predominantly secured by properties in Massachusetts.

Total loans were up by $221.2 million, or 7%, in the last twelve months. This included a 7% increase in the commercial portfolio and an 11% increase in the residential real estate portfolio.

Investment Securities
The investment securities portfolio amounted to $756 million at December 31, 2016, up by $174 million, or 30%, from the balance at September 30, 2016. During the quarter, government agency mortgage-backed debt securities and agency debt securities totaling $235 million and with a weighted average yield of 2.55% were purchased. The purchases were partially offset by calls and maturities of agency debt securities and obligations of state and political subdivisions, as well as routine principal pay-downs on mortgage-backed securities. Investment securities represented 17% of total assets as of December 31, 2016.

Deposits and Borrowings
Total deposits amounted to $3.1 billion at December 31, 2016, up by $26 million, or 1%, from the preceding quarter end and up by $129.5 million, or 4%, in the last twelve months. Included in total deposits were wholesale brokered time deposit balances of $412 million, which increased by $53 million in the quarter and by $109.8 million in the last twelve months. Excluding wholesale brokered time deposits, in-market deposits decreased by $27 million, or 1%, in the quarter and increased by $20 million, or 1%, in the last twelve months. The balance of demand deposits and NOW accounts were up by 4% in the quarter and 7% in the last twelve months.

FHLBB advances amounted to $849 million at December 31, 2016, up by $177 million from September 30, 2016 and by $470 million from December 31, 2015.

Asset Quality
Total past due loans amounted to $24.4 million, or 0.76% of total loans, at December 31, 2016, compared to $21.3 million, or 0.67% of total loans, at September 30, 2016. The linked quarter increase in past due loans was largely due to a $3.9 million increase in residential mortgage loans. Total nonaccrual loans amounted to $22.1 million, or 0.68% of total loans, at December 31, 2016, compared to $24.0 million, or 0.75% of total loans, at September 30, 2016. The linked quarter decrease in nonaccrual loans was attributable to $2.6 million of charge-offs recognized in the fourth quarter.

During the fourth quarter of 2016, a charge-off of $2.5 million was recognized on one nonaccrual commercial real estate relationship. This relationship was placed on nonaccrual status in the third quarter of 2016 and had a carrying value of $3.9 million at December 31, 2016. A loan loss provision totaling $2.9 million was charged to earnings in the fourth quarter of 2016, compared to a loan loss provision of $1.8 million recognized in the third quarter of 2016. The increase in loan loss provision was primarily due to additional loss exposure allocated to this commercial real estate relationship. The allowance for loan losses was $26.0 million, or 0.80% of total loans, at December 31, 2016, compared to $25.6 million, or 0.81% of total loans, at September 30, 2016.

Capital and Dividends
Total shareholders' equity was $391 million at December 31, 2016, down by $5 million from September 30, 2016. This change included $9.5 million of market depreciation on available for sale securities and a charge of $2.6 million associated with the annual measurement of defined benefit pension liabilities, both net of tax and recognized in the accumulated other comprehensive income component of shareholders' equity. Capital levels at December 31, 2016 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.26% at December 31, 2016, compared to 12.31% at September 30, 2016. At December 31, 2016, book value per share amounted to $22.76, down from $23.11 in the preceding quarter.

The Board of Directors declared a quarterly dividend of 37 cents per share for the quarter ended December 31, 2016. The dividend was paid on January 13, 2017 to shareholders of record on January 2, 2017.

Conference Call
Washington Trust will host a conference call to discuss its fourth quarter results, business highlights and outlook on Thursday, January 26, 2017 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 1-844-512-2921 and entering the Replay PIN Number 13652407; the audio replay will be available through February 5, 2017. 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 March 31, 2017.

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

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

Some of the factors that might cause these differences include the following: weakness in national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets; volatility in national and international financial markets; 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)
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Assets:
Cash and due from banks$106,185 $126,752 $116,658 $89,966 $93,222
Short-term investments 1,612 2,420 3,255 4,931 4,409
Mortgage loans held for sale 29,434 45,162 38,554 22,895 38,554
Securities:
Available for sale, at fair value 739,912 564,256 401,749 411,352 375,044
Held to maturity, at amortized cost 15,633 16,848 17,917 19,040 20,023
Total securities 755,545 581,104 419,666 430,392 395,067
Federal Home Loan Bank stock, at cost 43,129 37,249 34,303 26,515 24,316
Loans:
Commercial 1,771,666 1,757,215 1,732,220 1,698,811 1,654,547
Residential real estate 1,122,748 1,079,887 1,005,036 1,004,349 1,013,555
Consumer 339,957 344,253 343,628 343,833 345,025
Total loans 3,234,371 3,181,355 3,080,884 3,046,993 3,013,127
Less allowance for loan losses 26,004 25,649 25,826 26,137 27,069
Net loans 3,208,367 3,155,706 3,055,058 3,020,856 2,986,058
Premises and equipment, net 29,020 29,433 29,590 29,882 29,593
Investment in bank-owned life insurance 71,105 70,557 65,036 66,000 65,501
Goodwill 64,059 64,059 64,059 64,059 64,059
Identifiable intangible assets, net 10,175 10,493 10,814 11,137 11,460
Other assets 62,484 81,099 80,088 71,577 59,365
Total assets$4,381,115 $4,204,034 $3,917,081 $3,838,210 $3,771,604
Liabilities:
Deposits:
Demand deposits$585,960 $566,027 $512,307 $539,119 $537,298
NOW accounts 427,707 404,827 414,532 394,873 412,602
Money market accounts 730,075 794,905 675,896 763,565 823,490
Savings accounts 358,397 357,966 342,579 331,800 326,967
Time deposits 961,613 913,649 844,036 850,294 833,898
Total deposits 3,063,752 3,037,374 2,789,350 2,879,651 2,934,255
Federal Home Loan Bank advances 848,930 671,615 640,010 487,189 378,973
Junior subordinated debentures 22,681 22,681 22,681 22,681 22,681
Other liabilities 54,948 77,037 76,708 67,409 60,307
Total liabilities 3,990,311 3,808,707 3,528,749 3,456,930 3,396,216
Shareholders’ Equity:
Common stock 1,073 1,069 1,068 1,064 1,064
Paid-in capital 115,123 113,290 112,314 111,641 110,949
Retained earnings 294,365 288,613 282,666 277,810 273,074
Accumulated other comprehensive loss (19,757) (7,645) (7,716) (9,235) (9,699)
Total shareholders’ equity 390,804 395,327 388,332 381,280 375,388
Total liabilities and shareholders’ equity$4,381,115 $4,204,034 $3,917,081 $3,838,210 $3,771,604


CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
For the Three Months Ended For the Twelve Months
Ended
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Dec 31,
2016
Dec 31,
2015
Interest income:
Interest and fees on loans$30,738 $29,633 $29,122 $29,998 $28,511 $119,491 $114,229
Taxable interest on securities 3,703 3,024 2,487 2,370 2,262 11,584 8,875
Nontaxable interest on securities 157 218 280 327 352 982 1,555
Dividends on Federal Home Loan Bank stock 362 288 231 210 315 1,091 953
Other interest income 95 93 70 64 37 322 138
Total interest and dividend income 35,055 33,256 32,190 32,969 31,477 133,470 125,750
Interest expense:
Deposits 3,445 3,110 2,981 2,968 3,097 12,504 13,142
Federal Home Loan Bank advances 2,886 2,641 2,313 2,152 1,966 9,992 7,746
Junior subordinated debentures 135 125 119 112 157 491 871
Other interest expense 1 1 1 2 2 5 9
Total interest expense 6,467 5,877 5,414 5,234 5,222 22,992 21,768
Net interest income 28,588 27,379 26,776 27,735 26,255 110,478 103,982
Provision for loan losses 2,900 1,800 450 500 750 5,650 1,050
Net interest income after provision for loan losses 25,688 25,579 26,326 27,235 25,505 104,828 102,932
Noninterest income:
Wealth management revenues 9,291 9,623 9,481 9,174 9,167 37,569 35,416
Mortgage banking revenues 4,541 3,734 2,710 2,198 2,582 13,183 9,901
Service charges on deposit accounts 945 915 935 907 971 3,702 3,865
Card interchange fees 858 870 860 797 810 3,385 3,199
Income from bank-owned life insurance 549 521 1,090 499 502 2,659 1,982
Loan related derivative income 912 1,178 508 645 752 3,243 2,441
Equity in losses of unconsolidated subsidiaries (89) (88) (89) (88) (69) (354) (293)
Other income 313 508 419 502 431 1,742 1,829
Total noninterest income 17,320 17,261 15,914 14,634 15,146 65,129 58,340
Noninterest expense:
Salaries and employee benefits 16,528 16,908 17,405 16,380 16,053 67,221 63,024
Net occupancy 1,775 1,766 1,803 1,807 1,724 7,151 7,000
Equipment 1,556 1,648 1,503 1,501 1,393 6,208 5,533
Outsourced services 1,311 1,254 1,294 1,363 1,337 5,222 5,111
Legal, audit and professional fees 597 691 662 629 825 2,579 2,741
FDIC deposit insurance costs 390 504 491 493 470 1,878 1,846
Advertising and promotion 403 370 420 265 325 1,458 1,526
Amortization of intangibles 318 321 322 323 333 1,284 904
Debt prepayment penalties 431 431
Acquisition related expenses 52 989
Change in fair value of contingent consideration (939) 16 25 41 (898) 41
Other expenses 2,095 2,127 2,114 2,233 2,008 8,569 8,214
Total noninterest expense 24,973 24,650 26,030 25,450 24,561 101,103 96,929
Income before income taxes 18,035 18,190 16,210 16,419 16,090 68,854 64,343
Income tax expense 5,873 5,863 5,153 5,484 5,346 22,373 20,878
Net income$12,162 $12,327 $11,057 $10,935 $10,744 $46,481 $43,465
Net income available to common shareholders:
Basic$12,137 $12,302 $11,035 $10,910 $10,718 $46,384 $43,339
Diluted$12,137 $12,302 $11,035 $10,910 $10,718 $46,384 $43,339
Weighted average common shares outstanding:
Basic 17,142 17,090 17,067 17,023 17,004 17,081 16,879
Diluted 17,245 17,203 17,194 17,157 17,167 17,208 17,067
Earnings per common share:
Basic$0.71 $0.72 $0.65 $0.64 $0.63 $2.72 $2.57
Diluted$0.70 $0.72 $0.64 $0.64 $0.62 $2.70 $2.54
Cash dividends declared per share$0.37 $0.37 $0.36 $0.36 $0.34 $1.46 $1.36


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Share and Equity Related Data:
Book value per share$22.76 $23.11 $22.73 $22.40 $22.06
Tangible book value per share - Non-GAAP (1)$18.44 $18.75 $18.35 $17.98 $17.62
Market value per share$56.05 $40.22 $37.92 $37.32 $39.52
Shares issued and outstanding at end of period 17,171 17,107 17,081 17,024 17,020
Capital Ratios:
Tier 1 risk-based capital11.44% (i) 11.48% 11.57% 11.56% 11.64%
Total risk-based capital12.26% (i) 12.31% 12.43% 12.45% 12.58%
Tier 1 leverage ratio8.67% (i) 8.95% 9.21% 9.31% 9.37%
Common equity tier 110.75% (i) 10.77% 10.84% 10.82% 10.89%
Equity to assets 8.92% 9.40% 9.91% 9.93% 9.95%
Tangible equity to tangible assets - Non-GAAP (1) 7.35% 7.77% 8.16% 8.13% 8.11%
(i) - estimated


For the Three Months Ended For the Twelve Months
Ended
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Dec 31,
2016
Dec 31,
2015
Performance Ratios:
Net interest margin (FTE)2.89%2.94%3.05%3.24%3.08% 3.02%3.12%
Return on average assets1.14%1.21%1.14%1.16%1.16% 1.16%1.19%
Return on average tangible assets - Non-GAAP (1)1.16%1.24%1.17%1.18%1.19% 1.19%1.21%
Return on average equity12.26%12.57%11.50%11.50%11.52% 11.96%12.00%
Return on average tangible equity - Non-GAAP (1)15.09%15.53%14.28%14.34%14.45% 14.82%14.79%

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

SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)
For the Three Months Ended For the Twelve Months
Ended
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Dec 31,
2016
Dec 31,
2015
Wealth Management Results
Wealth Management Revenues:
Trust and investment management fees$8,283 $8,358 $8,195 $8,065 $8,001 $32,901 $30,149
Mutual fund fees 771 812 812 843 952 3,238 4,009
Asset-based revenues 9,054 9,170 9,007 8,908 8,953 36,139 34,158
Transaction-based revenues 237 453 474 266 214 1,430 1,258
Total wealth management revenues$9,291 $9,623 $9,481 $9,174 $9,167 $37,569 $35,416
Assets Under Administration:
Balance at beginning of period$6,056,859 $5,905,019 $5,878,967 $5,844,636 $5,714,201 $5,844,636 $5,069,966
Acquisition of Halsey Associates, Inc. 839,994
Net investment appreciation (depreciation)
& income
(8,506) 192,518 71,447 22,389 153,953 277,848 (95,228)
Net client asset flows 14,940 (40,678) (45,395) 11,942 (23,518) (59,191) 29,904
Balance at end of period$6,063,293 $6,056,859 $5,905,019 $5,878,967 $5,844,636 $6,063,293 $5,844,636
Mortgage Banking Results
Mortgage Banking Revenues:
Gains & commissions on loan sales, net$4,455 $3,744 $2,804 $2,134 $2,528 $13,137 $9,825
Residential mortgage servicing fee income, net 86 (10) (94) 64 54 46 76
Total mortgage banking revenues$4,541 $3,734 $2,710 $2,198 $2,582 $13,183 $9,901
Residential Mortgage Loan Originations:
Originations for retention in portfolio$72,533 $90,308 $54,080 $47,545 $38,080 $264,466 $234,852
Originations for sale to secondary market (1) 185,626 170,673 154,043 90,458 134,125 $600,800 523,834
Total mortgage loan originations$258,159 $260,981 $208,123 $138,003 $172,205 $865,266 $758,686
Residential Mortgage Loans Sold:
Sold with servicing rights retained$48,545 $44,611 $45,804 $26,454 $44,493 $165,414 $162,224
Sold with servicing rights released (1) 151,506 119,572 93,239 79,507 82,906 $443,824 368,676
Total mortgage loans sold$200,051 $164,183 $139,043 $105,961 $127,399 $609,238 $530,900

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


END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Commercial:
Mortgages$1,074,186 $1,086,175 $1,074,747 $976,931 $931,953
Construction & development 121,371 98,735 81,812 123,032 122,297
Commercial & industrial 576,109 572,305 575,661 598,848 600,297
Total commercial 1,771,666 1,757,215 1,732,220 1,698,811 1,654,547
Residential real estate:
Mortgages 1,094,824 1,052,829 978,399 980,274 984,437
Homeowner construction 27,924 27,058 26,637 24,075 29,118
Total residential real estate 1,122,748 1,079,887 1,005,036 1,004,349 1,013,555
Consumer:
Home equity lines 264,200 265,238 260,541 258,513 255,565
Home equity loans 37,272 38,264 39,572 45,499 46,649
Other 38,485 40,751 43,515 39,821 42,811
Total consumer 339,957 344,253 343,628 343,833 345,025
Total loans$3,234,371 $3,181,355 $3,080,884 $3,046,993 $3,013,127


December 31, 2016 December 31, 2015
Balance% of Total Balance% of Total
Commercial Real Estate Loans by Property Location:
Rhode Island, Connecticut, Massachusetts$1,105,539 92.5% $959,883 91.0%
New York, New Jersey, Pennsylvania 77,038 6.4% 80,989 7.7%
New Hampshire 12,980 1.1% 13,377 1.3%
Total commercial real estate loans (1)$1,195,557 100.0% $1,054,249 100.0%
Residential Mortgages by Property Location:
Rhode Island, Connecticut, Massachusetts$1,106,366 98.6% $995,743 98.2%
New Hampshire, Vermont, Maine 11,445 1.0% 10,186 1.0%
New York, Virginia, New Jersey, Maryland, Pennsylvania 2,648 0.2% 4,163 0.4%
Ohio 997 0.1% 1,557 0.2%
Other 1,292 0.1% 1,906 0.2%
Total residential mortgages$1,122,748 100.0% $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.

Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Deposits:
Non-interest bearing demand deposits$521,165 $520,860 $476,848 $474,477 $475,398
Interest-bearing demand deposits 64,795 45,167 35,459 64,642 61,900
NOW accounts 427,707 404,827 414,532 394,873 412,602
Money market accounts 730,075 794,905 675,896 763,565 823,490
Savings accounts 358,397 357,966 342,579 331,800 326,967
Time deposits (in-market) 549,376 554,669 549,935 540,815 531,419
Wholesale brokered time deposits 412,237 358,980 294,101 309,479 302,479
Total deposits$3,063,752 $3,037,374 $2,789,350 $2,879,651 $2,934,255


CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Asset Quality Ratios:
Nonperforming assets to total assets 0.53% 0.59% 0.48% 0.49% 0.58%
Nonaccrual loans to total loans 0.68% 0.75% 0.56% 0.57% 0.70%
Allowance for loan losses to nonaccrual loans 117.89% 107.09% 149.73% 150.00% 128.61%
Allowance for loan losses to total loans 0.80% 0.81% 0.84% 0.86% 0.90%
Nonperforming Assets:
Commercial mortgages$7,811 $10,357 $4,054 $4,054 $5,711
Commercial construction & development
Commercial & industrial 1,337 1,744 1,204 2,659 3,018
Residential real estate mortgages 11,736 10,140 10,409 9,367 10,666
Consumer 1,174 1,709 1,581 1,345 1,652
Total nonaccrual loans 22,058 23,950 17,248 17,425 21,047
Other real estate owned 1,075 1,045 1,515 1,326 716
Total nonperforming assets$23,133 $24,995 $18,763 $18,751 $21,763
Past Due Loans:
Commercial mortgages$8,708 $10,352 $4,062 $4,564 $4,555
Commercial & industrial 1,154 1,047 1,978 2,906 462
Residential real estate mortgages 12,226 8,291 8,893 8,703 9,286
Consumer loans 2,334 1,565 2,201 2,122 3,256
Total past due loans$24,422 $21,255 $17,134 $18,295 $17,559
Total past due loans to total loans 0.76% 0.67% 0.56% 0.60% 0.58%
Accruing loans 90 days or more past due$ $ $ $ $
Nonaccrual loans included in past due loans$18,602 $18,796 $13,211 $14,030 $13,635


For the Three Months Ended For the Twelve Months
Ended
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Dec 31,
2016
Dec 31,
2015
Nonaccrual Loan Activity:
Balance at beginning of period$23,950 $17,248 $17,425 $21,047 $16,844 $21,047 $15,945
Additions to nonaccrual status 2,105 9,750 2,072 1,352 7,029 15,278 14,964
Loans returned to accruing status (718) (592) (206) (303) (1,516) (2,489)
Loans charged-off (2,622) (2,055) (860) (1,475) (904) (7,012) (2,305)
Loans transferred to other real estate owned (30) (435) (610) (716) (1,075) (1,206)
Payments, payoffs and other changes (627) (401) (954) (2,683) (903) (4,664) (3,862)
Balance at end of period$22,058 $23,950 $17,248 $17,425 $21,047 $22,058 $21,047
Allowance for Loan Losses:
Balance at beginning of period$25,649 $25,826 $26,137 $27,069 $27,161 $27,069 $28,023
Provision charged to earnings 2,900 1,800 450 500 750 5,650 1,050
Charge-offs (2,622) (2,055) (860) (1,475) (904) (7,012) (2,305)
Recoveries 77 78 99 43 62 297 301
Balance at end of period$26,004 $25,649 $25,826 $26,137 $27,069 $26,004 $27,069
Net Loan Charge-Offs (Recoveries):
Commercial mortgages$2,510 $1,936 $65 $1,249 $405 $5,760 $717
Commercial & industrial (20) (43) 684 (18) 217 603 584
Residential real estate mortgages 6 47 2 134 117 189 179
Consumer 49 37 10 67 103 163 524
Total$2,545 $1,977 $761 $1,432 $842 $6,715 $2,004
Net charge-offs to average loans (annualized) 0.31% 0.25% 0.10% 0.19% 0.11% 0.21% 0.07%

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 EndedDecember 31, 2016 September 30, 2016 December 31, 2015
Average
Balance
Interest Yield/
Rate
Average
Balance
Interest Yield/
Rate
Average
Balance
Interest Yield/
Rate
Assets:
Commercial mortgages$1,086,772 $9,520 3.48 $1,079,917 $9,362 3.45 $885,967 $7,887 3.53
Construction & development 110,342 927 3.34 86,623 712 3.27 134,243 1,004 2.97
Commercial & industrial 575,983 6,927 4.78 565,170 6,382 4.49 581,584 6,520 4.45
Total commercial loans 1,773,097 $17,374 3.90 1,731,710 $16,456 3.78 1,601,794 $15,411 3.82
Residential real estate loans, including loans held for sale 1,140,492 10,652 3.72 1,080,302 10,386 3.82 1,049,007 10,338 3.91
Consumer loans 341,528 3,284 3.83 341,829 3,340 3.89 344,690 3,251 3.74
Total loans 3,255,117 31,310 3.83 3,153,841 30,182 3.81 2,995,491 29,000 3.84
Cash, federal funds sold and short-term investments 77,092 95 0.49 88,414 93 0.42 72,031 37 0.20
FHLBB stock 39,212 362 3.67 37,933 288 3.02 24,316 315 5.14
Taxable debt securities 636,277 3,703 2.32 497,738 3,024 2.42 341,130 2,262 2.63
Nontaxable debt securities 16,003 244 6.07 22,038 336 6.07 35,799 550 6.10
Total securities 652,280 3,947 2.41 519,776 3,360 2.57 376,929 2,812 2.96
Total interest-earning assets 4,023,701 35,714 3.53 3,799,964 33,923 3.55 3,468,767 32,164 3.68
Noninterest-earning assets 249,182 262,724 231,674
Total assets$4,272,883 $4,062,688 $3,700,441
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits$46,668 $16 0.14 $39,865 $13 0.13 $42,324 $11 0.10
NOW accounts 408,788 51 0.05 402,307 51 0.05 376,185 56 0.06
Money market accounts 761,582 574 0.30 709,549 487 0.27 856,405 707 0.33
Savings accounts 356,837 51 0.06 352,032 52 0.06 310,608 47 0.06
Time deposits (in-market) 552,474 1,419 1.02 552,576 1,408 1.01 533,224 1,333 0.99
Wholesale brokered time deposits 382,798 1,334 1.39 310,740 1,099 1.41 277,681 943 1.35
FHLBB advances 732,269 2,886 1.57 690,843 2,641 1.52 373,652 1,966 2.09
Junior subordinated debentures 22,681 135 2.37 22,681 125 2.19 22,681 157 2.75
Other 40 1 9.95 53 1 7.51 92 2 8.62
Total interest-bearing liabilities 3,264,137 6,467 0.79 3,080,646 5,877 0.76 2,792,852 5,222 0.74
Demand deposits 548,595 520,439 475,215
Other liabilities 63,410 69,370 59,177
Shareholders' equity 396,741 392,233 373,197
Total liabilities and shareholders' equity$4,272,883 $4,062,688 $3,700,441
Net interest income (FTE) $29,247 $28,046 $26,942
Interest rate spread 2.74 2.79 2.94
Net interest margin 2.89 2.94 3.08

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

For the Three Months EndedDec 31,
2016
Sep 30,
2016
Dec 31,
2015
Commercial loans$572 $549 $489
Nontaxable debt securities 87 118 198
Total$659 $667 $687


CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited; Dollars in thousands)
For the Twelve Months EndedDecember 31, 2016 December 31, 2015
Average
Balance
Interest Yield/
Rate
Average
Balance
Interest Yield/
Rate
Assets:
Commercial mortgages$1,030,289 $36,089 3.50 $870,241 $31,281 3.59
Construction & development 110,770 3,732 3.37 109,198 3,340 3.06
Commercial & industrial 584,307 27,398 4.69 593,799 27,507 4.63
Total commercial loans 1,725,366 67,219 3.90 1,573,238 62,128 3.95
Residential real estate loans, including loans held for sale 1,069,402 41,173 3.85 1,038,836 41,083 3.95
Consumer loans 342,431 13,328 3.89 340,889 12,885 3.78
Total loans 3,137,199 121,720 3.88 2,952,963 116,096 3.93
Cash, federal funds sold and short-term investments 75,997 322 0.42 69,169 138 0.20
FHLBB stock 33,643 1,091 3.24 34,349 953 2.77
Taxable debt securities 472,892 11,584 2.45 325,166 8,875 2.73
Nontaxable debt securities 24,939 1,520 6.09 39,751 2,408 6.06
Total securities 497,831 13,104 2.63 364,917 11,283 3.09
Total interest-earning assets 3,744,670 136,237 3.64 3,421,398 128,470 3.75
Noninterest-earning assets 249,808 226,623
Total assets$3,994,478 $3,648,021
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits$45,038 $49 0.11 $37,168 $27 0.07
NOW accounts 400,209 212 0.05 356,713 209 0.06
Money market accounts 741,925 2,035 0.27 824,625 3,482 0.42
Savings accounts 343,943 200 0.06 301,652 196 0.06
Time deposits (in-market) 546,460 5,486 1.00 549,039 5,531 1.01
Wholesale brokered time deposits 323,390 4,522 1.40 284,448 3,697 1.30
FHLBB advances 616,404 9,992 1.62 398,866 7,746 1.94
Junior subordinated debentures 22,681 491 2.16 22,681 871 3.84
Other 60 5 8.33 110 9 8.18
Total interest-bearing liabilities 3,040,110 22,992 0.76 2,775,302 21,768 0.78
Demand deposits 503,806 458,369
Other liabilities 62,021 52,152
Shareholders' equity 388,541 362,198
Total liabilities and shareholders' equity$3,994,478 $3,648,021
Net interest income (FTE) $113,245 $106,702
Interest rate spread 2.88 2.97
Net interest margin 3.02 3.12

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

For the Twelve Months EndedDec 31,
2016
Dec 31,
2015
Commercial loans$2,229 $1,867
Nontaxable debt securities 538 853
Total$2,767 $2,720


SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Tangible Book Value per Share:
Total shareholders' equity, as reported$390,804 $395,327 $388,332 $381,280 $375,388
Less:
Goodwill 64,059 64,059 64,059 64,059 64,059
Identifiable intangible assets, net 10,175 10,493 10,814 11,137 11,460
Total tangible shareholders' equity$316,570 $320,775 $313,459 $306,084 $299,869
Shares outstanding, as reported 17,171 17,107 17,081 17,024 17,020
Book value per share - GAAP$22.76 $23.11 $22.73 $22.40 $22.06
Tangible book value per share - Non-GAAP$18.44 $18.75 $18.35 $17.98 $17.62
Tangible Equity to Tangible Assets:
Total tangible shareholders' equity$316,570 $320,775 $313,459 $306,084 $299,869
Total assets, as reported$4,381,115 $4,204,034 $3,917,081 $3,838,210 $3,771,604
Less:
Goodwill 64,059 64,059 64,059 64,059 64,059
Identifiable intangible assets, net 10,175 10,493 10,814 11,137 11,460
Total tangible assets$4,306,881 $4,129,482 $3,842,208 $3,763,014 $3,696,085
Equity to assets - GAAP 8.92% 9.40% 9.91% 9.93% 9.95%
Tangible equity to tangible assets - Non-GAAP 7.35% 7.77% 8.16% 8.13% 8.11%


For the Three Months Ended For the Twelve Months Ended
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Dec 31,
2016
Dec 31,
2015
Return on Average Tangible Assets:
Net income, as reported$12,162 $12,327 $11,057 $10,935 $10,744 $46,481 $43,465
Total average assets, as reported$4,272,883 $4,062,688 $3,869,508 $3,769,025 $3,700,441 $3,994,478 $3,648,021
Less average balances of:
Goodwill 64,059 64,059 64,059 64,059 64,194 64,059 60,657
Identifiable intangible assets, net 10,330 10,650 10,972 11,294 11,616 10,810 7,625
Total average tangible assets$4,198,494 $3,987,979 $3,794,477 $3,693,672 $3,624,631 $3,919,609 $3,579,739
Return on average assets - GAAP 1.14% 1.21% 1.14% 1.16% 1.16% 1.16% 1.19%
Return on average tangible assets -
Non-GAAP
1.16% 1.24% 1.17% 1.18% 1.19% 1.19% 1.21%
Return on Average Tangible Equity:
Net income, as reported$12,162 $12,327 $11,057 $10,935 $10,744 $46,481 $43,465
Total average equity, as reported$396,741 $392,233 $384,717 $380,342 $373,197 $388,541 $362,198
Less average balances of:
Goodwill 64,059 64,059 64,059 64,059 64,194 64,059 60,657
Identifiable intangible assets, net 10,330 10,650 10,972 11,294 11,616 10,810 7,625
Total average tangible equity$322,352 $317,524 $309,686 $304,989 $297,387 $313,672 $293,916
Return on average equity - GAAP 12.26% 12.57% 11.50% 11.50% 11.52% 11.96% 12.00%
Return on average tangible equity -
Non-GAAP
15.09% 15.53% 14.28% 14.34% 14.45% 14.82% 14.79%


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

Source:Washington Trust Bancorp, Inc.