Washington Trust Reports First Quarter 2017 Earnings

WESTERLY, R.I., April 24, 2017 (GLOBE NEWSWIRE) -- Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced net income of $11.8 million, or $0.68 per diluted share, for the first quarter of 2017, compared to net income of $12.2 million, or $0.70 per diluted share, reported for the fourth quarter of 2016.

“Washington Trust posted solid first quarter results with very good contributions from our core business lines,” stated Joseph J. MarcAurele, Washington Trust Chairman and Chief Executive Officer. “We continue to benefit from a solid level of business activity and production throughout our market area.”

Selected highlights for the first quarter of 2017 include:

  • Returns on average equity and average assets were 11.87% and 1.08%, respectively. Comparable amounts for the fourth quarter of 2016 were 12.26% and 1.14%, respectively.
  • Wealth management revenues amounted to $9.5 million for the first quarter of 2017, up by 2% on a linked quarter basis. Wealth management assets of $6.2 billion reached an all-time high for the Corporation at March 31, 2017.
  • Total loans amounted to $3.2 billion at March 31, 2017, down slightly from the preceding quarter and up by 6% from a year ago.
  • Deposit balances experienced good growth, rising by 2% in the quarter and have increased by 8% from a year ago.
  • In March, Washington Trust declared a quarterly dividend of 38 cents per share, a 1 cent per share increase over the preceding quarter; representing the seventh consecutive year of dividend increases.

Net Interest Income
Net interest income totaled $28.7 million for the first quarter of 2017, up modestly from the fourth quarter. Included in net interest income was loan prepayment fee income of $135 thousand for the first quarter, compared to $816 thousand in the fourth quarter. Excluding the impact of loan prepayment fee income in both periods, net interest income was up by $727 thousand, or 3%, on a linked quarter basis. The net interest margin was 2.87% for the first quarter of 2017, down by 2 basis points from the preceding quarter. Excluding the impact of the loan prepayment fee income in each period, the net interest margin was 2.86%, up by 5 basis points from the fourth quarter of 2016. Significant linked quarter changes included:

  • Average interest-earning assets increased by $112 million from the preceding quarter, due to an increase in the average balance of investment securities, which was largely due to portfolio purchases during the fourth quarter of 2016. The yield on interest-earning assets was 3.56%, up by 3 basis points from the preceding quarter. Excluding the impact of loan prepayment fee income in each period, the yield on interest-earning assets was 3.54% for the first quarter of 2017, compared to 3.45% in the preceding quarter, due in part to the increase in the Federal Reserve target interest rate in December 2016.
  • Average interest-bearing liabilities increased by $132 million from the fourth quarter, reflecting increases of $114 million in the average balance of wholesale funding balances (FHLBB advances and wholesale brokered time deposits). The cost of interest-bearing funds was 0.83%, up by 4 basis points from the preceding quarter.

Loans
Total loans amounted to $3.2 billion at March 31, 2017, down by $10 million from the balance at the end of the fourth quarter. Residential loan portfolio balances increased by $8 million, or 1%. The commercial loan portfolio decreased by $9 million, or 0.5%. Among the reasons for the decline were a lower line of credit utilization in the commercial and industrial portfolio and payoffs in the commercial real estate portfolio. The consumer loan portfolio decreased by $9 million, or 3%, largely due to a reduction in home equity line and home equity loan balances.

Investment Securities
The investment securities portfolio amounted to $769 million at March 31, 2017, up by $14 million, or 2%, from the balance at December 31, 2016. During the quarter, government agency mortgage-backed securities and agency debt securities totaling $40 million and with a weighted average rate of 2.40% were purchased. These purchases were partially offset by calls, maturities and routine principal pay-downs. Investment securities represented 18% of total assets as of March 31, 2017.

Deposits and Borrowings
Total deposits amounted to $3.1 billion at March 31, 2017, up by $52 million, or 2%, from the balance at December 31, 2016. Included in total deposits were wholesale brokered time deposit balances of $382 million, which decreased by $30 million from the balance at December 31, 2016. Excluding wholesale brokered time deposits, in-market deposits increased by $82 million, or 3%, in the quarter, reflecting growth in both new and existing depositor relationships.

FHLBB advances amounted to $799 million at March 31, 2017, down by $50 million from the balance at December 31, 2016.

Noninterest Income
Noninterest income totaled $14.5 million for the first quarter of 2017, down by $2.8 million from the preceding quarter. Significant linked quarter changes included:

  • Wealth management revenues totaled $9.5 million for the first quarter, up by $186 thousand, or 2%, on a linked quarter basis, driven by an increase of $193 thousand in asset-based revenues. Wealth management assets under administration amounted to $6.2 billion at March 31, 2017, up by $180 million on a linked quarter basis, reflecting financial market appreciation in the first quarter of 2017. Managed assets represented 93% of total wealth management assets at March 31, 2017.
  • Mortgage banking revenues totaled $2.3 million for the first quarter, down by $2.2 million, or 48%, from the very strong results in the fourth quarter of 2016. These results reflect a decrease in the volume of residential mortgage loans sold and a lower overall yield on sales in the secondary market. Residential mortgage loans sold to the secondary market amounted to $107 million in the first quarter, compared to $200 million in the preceding quarter.
  • Loan related derivative income amounted to $148 thousand in the first quarter, down by $764 thousand from the preceding quarter. The number of commercial borrower loan related derivative transactions occurring in the quarter were relatively modest compared to activity in recent quarters.

Noninterest Expenses
Noninterest expenses totaled $25.3 million for the first quarter of 2017, up by $313 thousand, or 1%, from the fourth quarter. Included in the first quarter was a $310 thousand reduction in noninterest expenses, resulting from a downward adjustment in the fair value of the contingent consideration liability recognized upon the completion of a 2015 acquisition. Excluding this adjustment, noninterest expenses were up by $623 thousand, or 2%, on a linked quarter basis, with the largest increase in salaries and benefit costs. Salaries and benefits cost increased by $267 thousand, or 2%, from the preceding quarter. This increase reflected an increase in payroll taxes associated with the start of the new calendar year and the impact of merit increases, net of a decline in commissions expense due to a decrease in mortgage banking activities.

Income tax expense amounted to $5.7 million for the first quarter of 2017, down by $152 thousand from the preceding quarter. The effective tax rate for the first quarter of 2017 was 32.7%, compared to 32.6% for the fourth quarter of 2016. During the first quarter of 2017, the Corporation recognized excess tax benefits on the settlement of share-based awards totaling $195 thousand, which were recorded as a reduction to income tax expense. Excluding the impact of the excess tax benefits recognized, the effective tax rate for the first quarter of 2017 was 33.8%. Effective January 1, 2017, Washington Trust adopted Accounting Standards Update No. 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU"). Under this ASU, excess tax benefits and tax deficiencies on the settlement of share-based awards are recognized as income tax benefit or expense in the period that they occur. Prior to 2017, excess tax benefits on the settlement of share-based awards were recognized as additional paid in capital in shareholders' equity and did not impact income tax expense or the effective tax rate. Average annual excess tax benefits recognized as additional paid in capital in the 3-year period from 2014 through 2016 amounted to approximately $760 thousand.

Asset Quality
Total past due loans amounted to $20.9 million, or 0.65% of total loans, at March 31, 2017, down from $24.4 million, or 0.76% of total loans, at December 31, 2016. Total nonaccrual loans amounted to $22.1 million, or 0.69% of total loans, at March 31, 2017, compared to $22.1 million, or 0.68% of total loans, at December 31, 2016.

Based on the assessment of loss exposure, including loan loss allocations commensurate with changes in the loan portfolio during the quarter, a loan loss provision totaling $400 thousand was charged to earnings in the first quarter of 2017. In the fourth quarter of 2016, a loan loss provision of $2.9 million was charged to earnings, a substantial portion of which was due to loss exposure recognized on one nonaccrual commercial real estate relationship. The allowance for loan losses was $26.4 million, or 0.82% of total loans, at March 31, 2017, compared to $26.0 million, or 0.80% of total loans, at December 31, 2016.

Capital and Dividends
Total shareholders' equity was $398 million at March 31, 2017, up by $7 million from December 31, 2016. Capital levels at March 31, 2017 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.38% at March 31, 2017, compared to 12.26% at December 31, 2016. Book value per share amounted to $23.14 at March 31, 2017, up from $22.76 at December 31, 2016.

The Board of Directors declared a quarterly dividend of 38 cents per share for the quarter ended March 31, 2017. The dividend was paid on April 13, 2017 to shareholders of record on April 3, 2017.

Conference Call
Washington Trust will host a conference call to discuss its first quarter results, business highlights and outlook on Monday, April 24, 2017 at 10:00 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 13658778; the audio replay will be available through May 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 June 30, 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; increasing occurrences of cyberattacks, hacking and identity theft; 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, 2016, 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)
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Assets:
Cash and due from banks$111,941 $106,185 $126,752 $116,658 $89,966
Short-term investments 2,039 1,612 2,420 3,255 4,931
Mortgage loans held for sale 25,414 29,434 45,162 38,554 22,895
Securities:
Available for sale, at fair value 754,720 739,912 564,256 401,749 411,352
Held to maturity, at amortized cost 14,721 15,633 16,848 17,917 19,040
Total securities 769,441 755,545 581,104 419,666 430,392
Federal Home Loan Bank stock, at cost 43,714 43,129 37,249 34,303 26,515
Loans:
Commercial 1,762,499 1,771,666 1,757,215 1,732,220 1,698,811
Residential real estate 1,131,210 1,122,748 1,079,887 1,005,036 1,004,349
Consumer 331,151 339,957 344,253 343,628 343,833
Total loans 3,224,860 3,234,371 3,181,355 3,080,884 3,046,993
Less allowance for loan losses 26,446 26,004 25,649 25,826 26,137
Net loans 3,198,414 3,208,367 3,155,706 3,055,058 3,020,856
Premises and equipment, net 28,853 29,020 29,433 29,590 29,882
Investment in bank-owned life insurance 71,642 71,105 70,557 65,036 66,000
Goodwill 64,059 64,059 64,059 64,059 64,059
Identifiable intangible assets, net 9,898 10,175 10,493 10,814 11,137
Other assets 63,348 62,484 81,099 80,088 71,577
Total assets$4,388,763 $4,381,115 $4,204,034 $3,917,081 $3,838,210
Liabilities:
Deposits:
Demand deposits$596,974 $585,960 $566,027 $512,307 $539,119
NOW accounts 454,344 427,707 404,827 414,532 394,873
Money market accounts 762,233 730,075 794,905 675,896 763,565
Savings accounts 362,281 358,397 357,966 342,579 331,800
Time deposits 939,739 961,613 913,649 844,036 850,294
Total deposits 3,115,571 3,063,752 3,037,374 2,789,350 2,879,651
Federal Home Loan Bank advances 798,741 848,930 671,615 640,010 487,189
Junior subordinated debentures 22,681 22,681 22,681 22,681 22,681
Other liabilities 53,985 54,948 77,037 76,708 67,409
Total liabilities 3,990,978 3,990,311 3,808,707 3,528,749 3,456,930
Shareholders’ Equity:
Common stock 1,075 1,073 1,069 1,068 1,064
Paid-in capital 116,200 115,123 113,290 112,314 111,641
Retained earnings 299,555 294,365 288,613 282,666 277,810
Accumulated other comprehensive loss (19,045) (19,757) (7,645) (7,716) (9,235)
Total shareholders’ equity 397,785 390,804 395,327 388,332 381,280
Total liabilities and shareholders’ equity$4,388,763 $4,381,115 $4,204,034 $3,917,081 $3,838,210


CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
For the Three Months EndedMar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Interest income:
Interest and fees on loans$30,352 $30,738 $29,633 $29,122 $29,998
Taxable interest on securities 4,709 3,703 3,024 2,487 2,370
Nontaxable interest on securities 112 157 218 280 327
Dividends on Federal Home Loan Bank stock 387 362 288 231 210
Other interest income 104 95 93 70 64
Total interest and dividend income 35,664 35,055 33,256 32,190 32,969
Interest expense:
Deposits 3,502 3,445 3,110 2,981 2,968
Federal Home Loan Bank advances 3,344 2,886 2,641 2,313 2,152
Junior subordinated debentures 138 135 125 119 112
Other interest expense 1 1 1 1 2
Total interest expense 6,985 6,467 5,877 5,414 5,234
Net interest income 28,679 28,588 27,379 26,776 27,735
Provision for loan losses 400 2,900 1,800 450 500
Net interest income after provision for loan losses 28,279 25,688 25,579 26,326 27,235
Noninterest income:
Wealth management revenues 9,477 9,291 9,623 9,481 9,174
Mortgage banking revenues 2,340 4,541 3,734 2,710 2,198
Service charges on deposit accounts 883 945 915 935 907
Card interchange fees 802 858 870 860 797
Income from bank-owned life insurance 536 549 521 1,090 499
Loan related derivative income 148 912 1,178 508 645
Equity in losses of unconsolidated subsidiaries (88) (89) (88) (89) (88)
Other income 412 313 508 419 502
Total noninterest income 14,510 17,320 17,261 15,914 14,634
Noninterest expense:
Salaries and employee benefits 16,795 16,528 16,908 17,405 16,380
Net occupancy 1,967 1,775 1,766 1,803 1,807
Equipment 1,467 1,556 1,648 1,503 1,501
Outsourced services 1,457 1,311 1,254 1,294 1,363
Legal, audit and professional fees 616 597 691 662 629
FDIC deposit insurance costs 481 390 504 491 493
Advertising and promotion 237 403 370 420 265
Amortization of intangibles 277 318 321 322 323
Debt prepayment penalties 431
Change in fair value of contingent consideration (310) (939) 16 25
Other expenses 2,299 2,095 2,127 2,114 2,233
Total noninterest expense 25,286 24,973 24,650 26,030 25,450
Income before income taxes 17,503 18,035 18,190 16,210 16,419
Income tax expense 5,721 5,873 5,863 5,153 5,484
Net income$11,782 $12,162 $12,327 $11,057 $10,935
Net income available to common shareholders:
Basic$11,755 $12,137 $12,302 $11,035 $10,910
Diluted$11,755 $12,137 $12,302 $11,035 $10,910
Weighted average common shares outstanding:
Basic 17,186 17,142 17,090 17,067 17,023
Diluted 17,293 17,245 17,203 17,194 17,157
Earnings per common share:
Basic$0.68 $0.71 $0.72 $0.65 $0.64
Diluted$0.68 $0.70 $0.72 $0.64 $0.64
Cash dividends declared per share$0.38 $0.37 $0.37 $0.36 $0.36


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
Mar 31,Dec 31,Sep 30,Jun 30,Mar 31,
20172016201620162016
Share and Equity Related Data:
Book value per share$23.14 $22.76 $23.11 $22.73 $22.40
Tangible book value per share - Non-GAAP (1)$18.83 $18.44 $18.75 $18.35 $17.98
Market value per share$49.30 $56.05 $40.22 $37.92 $37.32
Shares issued and outstanding at end of period 17,193 17,171 17,107 17,081 17,024
Capital Ratios:
Tier 1 risk-based capital11.54% (i) 11.44% 11.48% 11.57% 11.56%
Total risk-based capital12.38% (i) 12.26% 12.31% 12.43% 12.45%
Tier 1 leverage ratio8.58% (i) 8.67% 8.95% 9.21% 9.31%
Common equity tier 110.86% (i) 10.75% 10.77% 10.84% 10.82%
Equity to assets 9.06% 8.92% 9.40% 9.91% 9.93%
Tangible equity to tangible assets - Non-GAAP (1) 7.51% 7.35% 7.77% 8.16% 8.13%
(i) - estimated
For the Three Months EndedMar 31,Dec 31,Sep 30,Jun 30,Mar 31,
20172016201620162016
Performance Ratios:
Net interest margin (FTE) 2.87% 2.89% 2.94% 3.05% 3.24%
Return on average assets 1.08% 1.14% 1.21% 1.14% 1.16%
Return on average tangible assets - Non-GAAP (1) 1.10% 1.16% 1.24% 1.17% 1.18%
Return on average equity 11.87% 12.26% 12.57% 11.50% 11.50%
Return on average tangible equity - Non-GAAP (1) 14.59% 15.09% 15.53% 14.28% 14.34%

(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 EndedMar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Wealth Management Results
Wealth Management Revenues:
Trust and investment management fees$8,518 $8,283 $8,358 $8,195 $8,065
Mutual fund fees 729 771 812 812 843
Asset-based revenues 9,247 9,054 9,170 9,007 8,908
Transaction-based revenues 230 237 453 474 266
Total wealth management revenues$9,477 $9,291 $9,623 $9,481 $9,174
Assets Under Administration:
Balance at beginning of period$6,063,293 $6,056,859 $5,905,019 $5,878,967 $5,844,636
Net investment appreciation (depreciation) & income 220,423 (8,506) 192,518 71,447 22,389
Net client asset flows (40,415) 14,940 (40,678) (45,395) 11,942
Balance at end of period$6,243,301 $6,063,293 $6,056,859 $5,905,019 $5,878,967
Mortgage Banking Results
Mortgage Banking Revenues:
Gains & commissions on loan sales, net$2,268 $4,455 $3,744 $2,804 $2,134
Residential mortgage servicing fee income, net 72 86 (10) (94) 64
Total mortgage banking revenues$2,340 $4,541 $3,734 $2,710 $2,198
Residential Mortgage Loan Originations:
Originations for retention in portfolio$57,907 $72,533 $90,308 $54,080 $47,545
Originations for sale to secondary market (1) 102,441 185,626 170,673 154,043 90,458
Total mortgage loan originations$160,348 $258,159 $260,981 $208,123 $138,003
Residential Mortgage Loans Sold:
Sold with servicing rights retained$22,567 $48,545 $44,611 $45,804 $26,454
Sold with servicing rights released (1) 84,345 151,506 119,572 93,239 79,507
Total mortgage loans sold$106,912 $200,051 $164,183 $139,043 $105,961

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


END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Commercial:
Mortgages$1,076,648 $1,074,186 $1,086,175 $1,074,747 $976,931
Construction & development 123,841 121,371 98,735 81,812 123,032
Commercial & industrial 562,010 576,109 572,305 575,661 598,848
Total commercial 1,762,499 1,771,666 1,757,215 1,732,220 1,698,811
Residential real estate:
Mortgages 1,100,435 1,094,824 1,052,829 978,399 980,274
Homeowner construction 30,775 27,924 27,058 26,637 24,075
Total residential real estate 1,131,210 1,122,748 1,079,887 1,005,036 1,004,349
Consumer:
Home equity lines 258,695 264,200 265,238 260,541 258,513
Home equity loans 36,050 37,272 38,264 39,572 45,499
Other 36,406 38,485 40,751 43,515 39,821
Total consumer 331,151 339,957 344,253 343,628 343,833
Total loans$3,224,860 $3,234,371 $3,181,355 $3,080,884 $3,046,993


March 31, 2017 December 31, 2016
Balance% of Total Balance% of Total
Commercial Real Estate Loans by Property Location:
Rhode Island, Connecticut, Massachusetts$1,110,934 92.5% $1,105,539 92.5%
New York, New Jersey, Pennsylvania 76,678 6.4% 77,038 6.4%
New Hampshire 12,877 1.1% 12,980 1.1%
Total commercial real estate loans (1)$1,200,489 100.0% $1,195,557 100.0%
Residential Mortgages by Property Location:
Rhode Island, Connecticut, Massachusetts$1,115,205 98.6% $1,106,366 98.6%
New Hampshire, Vermont, Maine 11,570 1.0% 11,445 1.0%
New York, Virginia, New Jersey, Maryland, Pennsylvania 2,228 0.2% 2,648 0.2%
Ohio 922 0.1% 997 0.1%
Other 1,285 0.1% 1,292 0.1%
Total residential mortgages$1,131,210 100.0% $1,122,748 100.0%

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

Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Deposits:
Non-interest bearing demand deposits$534,792 $521,165 $520,860 $476,848 $474,477
Interest-bearing demand deposits 62,182 64,795 45,167 35,459 64,642
NOW accounts 454,344 427,707 404,827 414,532 394,873
Money market accounts 762,233 730,075 794,905 675,896 763,565
Savings accounts 362,281 358,397 357,966 342,579 331,800
Time deposits (in-market) 557,312 549,376 554,669 549,935 540,815
Wholesale brokered time deposits 382,427 412,237 358,980 294,101 309,479
Total deposits$3,115,571 $3,063,752 $3,037,374 $2,789,350 $2,879,651


CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
Mar 31,Dec 31,Sep 30,Jun 30,Mar 31,
20172016201620162016
Asset Quality Ratios:
Nonperforming assets to total assets 0.54% 0.53% 0.59% 0.48% 0.49%
Nonaccrual loans to total loans 0.69% 0.68% 0.75% 0.56% 0.57%
Allowance for loan losses to nonaccrual loans 119.52% 117.89% 107.09% 149.73% 150.00%
Allowance for loan losses to total loans 0.82% 0.80% 0.81% 0.84% 0.86%
Nonperforming Assets:
Commercial mortgages$7,809 $7,811 $10,357 $4,054 $4,054
Commercial construction & development
Commercial & industrial 1,129 1,337 1,744 1,204 2,659
Residential real estate mortgages 12,253 11,736 10,140 10,409 9,367
Consumer 936 1,174 1,709 1,581 1,345
Total nonaccrual loans 22,127 22,058 23,950 17,248 17,425
Other real estate owned 1,410 1,075 1,045 1,515 1,326
Total nonperforming assets$23,537 $23,133 $24,995 $18,763 $18,751
Past Due Loans:
Commercial mortgages$7,806 $8,708 $10,352 $4,062 $4,564
Commercial & industrial 1,046 1,154 1,047 1,978 2,906
Residential real estate mortgages 10,533 12,226 8,291 8,893 8,703
Consumer loans 1,547 2,334 1,565 2,201 2,122
Total past due loans$20,932 $24,422 $21,255 $17,134 $18,295
Total past due loans to total loans 0.65% 0.76% 0.67% 0.56% 0.60%
Accruing loans 90 days or more past due$ $ $ $ $
Nonaccrual loans included in past due loans$18,081 $18,602 $18,796 $13,211 $14,030
For the Three Months EndedMar 31,Dec 31,Sep 30,Jun 30,Mar 31,
20172016201620162016
Nonaccrual Loan Activity:
Balance at beginning of period$22,058 $23,950 $17,248 $17,425 $21,047
Additions to nonaccrual status 2,138 2,105 9,750 2,072 1,352
Loans returned to accruing status (547) (718) (592) (206)
Loans charged-off (79) (2,622) (2,055) (860) (1,475)
Loans transferred to other real estate owned (478) (30) (435) (610)
Payments, payoffs and other changes (965) (627) (401) (954) (2,683)
Balance at end of period$22,127 $22,058 $23,950 $17,248 $17,425
Allowance for Loan Losses:
Balance at beginning of period$26,004 $25,649 $25,826 $26,137 $27,069
Provision charged to earnings 400 2,900 1,800 450 500
Charge-offs (79) (2,622) (2,055) (860) (1,475)
Recoveries 121 77 78 99 43
Balance at end of period$26,446 $26,004 $25,649 $25,826 $26,137
Net Loan Charge-Offs (Recoveries):
Commercial mortgages$ $2,510 $1,936 $65 $1,249
Commercial & industrial (105) (20) (43) 684 (18)
Residential real estate mortgages (4) 6 47 2 134
Consumer 67 49 37 10 67
Total$(42)$2,545 $1,977 $761 $1,432
Net charge-offs to average loans (annualized) (0.01%) 0.31% 0.25% 0.10% 0.19%


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 EndedMarch 31, 2017 December 31, 2016 March 31, 2016
Average
Balance
InterestYield/
Rate
Average
Balance
InterestYield/
Rate
Average
Balance
InterestYield/
Rate
Assets:
Commercial mortgages$1,079,171 $9,444 3.55 $1,086,772 $9,520 3.48 $933,939 $8,215 3.54
Construction & development 127,861 1,113 3.53 110,342 927 3.34 129,217 1,108 3.45
Commercial & industrial 573,801 6,157 4.35 575,983 6,927 4.78 604,519 7,681 5.11
Total commercial loans 1,780,833 $16,714 3.81 1,773,097 $17,374 3.90 1,667,675 $17,004 4.10
Residential real estate loans, including loans held for sale 1,152,468 10,868 3.82 1,140,492 10,652 3.72 1,031,260 10,155 3.96
Consumer loans 335,054 3,323 4.02 341,528 3,284 3.83 343,519 3,393 3.97
Total loans 3,268,355 30,905 3.83 3,255,117 31,310 3.83 3,042,454 30,552 4.04
Cash, federal funds sold and short-term investments 56,195 104 0.75 77,092 95 0.49 68,488 64 0.38
FHLBB stock 43,622 387 3.60 39,212 362 3.67 25,597 210 3.30
Taxable debt securities 755,955 4,709 2.53 636,277 3,703 2.32 359,060 2,370 2.65
Nontaxable debt securities 11,521 173 6.09 16,003 244 6.07 33,313 507 6.12
Total securities 767,476 4,882 2.58 652,280 3,947 2.41 392,373 2,877 2.95
Total interest-earning assets 4,135,648 36,278 3.56 4,023,701 35,714 3.53 3,528,912 33,703 3.84
Noninterest-earning assets 229,823 249,182 240,113
Total assets$4,365,471 $4,272,883 $3,769,025
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits$56,782 $15 0.11 $46,668 $16 0.14 $50,704 $13 0.10
NOW accounts 420,622 50 0.05 408,788 51 0.05 386,488 56 0.06
Money market accounts 754,501 599 0.32 761,582 574 0.30 786,633 515 0.26
Savings accounts 357,894 51 0.06 356,837 51 0.06 328,174 49 0.06
Time deposits (in-market) 554,855 1,418 1.04 552,474 1,419 1.02 538,035 1,315 0.98
Wholesale brokered time deposits 397,274 1,369 1.40 382,798 1,334 1.39 296,801 1,020 1.38
FHLBB advances 831,614 3,344 1.63 732,269 2,886 1.57 453,019 2,152 1.91
Junior subordinated debentures 22,681 138 2.47 22,681 135 2.37 22,681 112 1.99
Other 27 1 15.02 40 1 9.95 79 2 10.18
Total interest-bearing liabilities 3,396,250 6,985 0.83 3,264,137 6,467 0.79 2,862,614 5,234 0.74
Demand deposits 527,215 548,595 471,782
Other liabilities 44,889 63,410 54,287
Shareholders' equity 397,117 396,741 380,342
Total liabilities and shareholders' equity$4,365,471 $4,272,883 $3,769,025
Net interest income (FTE) $29,293 $29,247 $28,469
Interest rate spread 2.73 2.74 3.10
Net interest margin 2.87 2.89 3.24

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

For the Three Months EndedMar 31,
2017
Dec 31,
2016
Mar 31,
2016
Commercial loans$553 $572 $554
Nontaxable debt securities 61 87 180
Total$614 $659 $734



SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)
Mar 31,Dec 31,Sep 30,Jun 30,Mar 31,
20172016201620162016
Tangible Book Value per Share:
Total shareholders' equity, as reported$397,785 $390,804 $395,327 $388,332 $381,280
Less:
Goodwill 64,059 64,059 64,059 64,059 64,059
Identifiable intangible assets, net 9,898 10,175 10,493 10,814 11,137
Total tangible shareholders' equity$323,828 $316,570 $320,775 $313,459 $306,084
Shares outstanding, as reported 17,193 17,171 17,107 17,081 17,024
Book value per share - GAAP$23.14 $22.76 $23.11 $22.73 $22.40
Tangible book value per share - Non-GAAP$18.83 $18.44 $18.75 $18.35 $17.98
Tangible Equity to Tangible Assets:
Total tangible shareholders' equity$323,828 $316,570 $320,775 $313,459 $306,084
Total assets, as reported$4,388,763 $4,381,115 $4,204,034 $3,917,081 $3,838,210
Less:
Goodwill 64,059 64,059 64,059 64,059 64,059
Identifiable intangible assets, net 9,898 10,175 10,493 10,814 11,137
Total tangible assets$4,314,806 $4,306,881 $4,129,482 $3,842,208 $3,763,014
Equity to assets - GAAP 9.06% 8.92% 9.40% 9.91% 9.93%
Tangible equity to tangible assets - Non-GAAP 7.51% 7.35% 7.77% 8.16% 8.13%
For the Three Months EndedMar 31,Dec 31,Sep 30,Jun 30,Mar 31,
20172016201620162016
Return on Average Tangible Assets:
Net income, as reported$11,782 $12,162 $12,327 $11,057 $10,935
Total average assets, as reported$4,365,471 $4,272,883 $4,062,688 $3,869,508 $3,769,025
Less average balances of:
Goodwill 64,059 64,059 64,059 64,059 64,059
Identifiable intangible assets, net 10,027 10,330 10,650 10,972 11,294
Total average tangible assets$4,291,385 $4,198,494 $3,987,979 $3,794,477 $3,693,672
Return on average assets - GAAP 1.08% 1.14% 1.21% 1.14% 1.16%
Return on average tangible assets - Non-GAAP 1.10% 1.16% 1.24% 1.17% 1.18%
Return on Average Tangible Equity:
Net income, as reported$11,782 $12,162 $12,327 $11,057 $10,935
Total average equity, as reported$397,117 $396,741 $392,233 $384,717 $380,342
Less average balances of:
Goodwill 64,059 64,059 64,059 64,059 64,059
Identifiable intangible assets, net 10,027 10,330 10,650 10,972 11,294
Total average tangible equity$323,031 $322,352 $317,524 $309,686 $304,989
Return on average equity - GAAP 11.87% 12.26% 12.57% 11.50% 11.50%
Return on average tangible equity - Non-GAAP 14.59% 15.09% 15.53% 14.28% 14.34%

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

Source:Washington Trust Bancorp, Inc.