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Washington Trust Reports Third Quarter 2017 Earnings

WESTERLY, R.I., Oct. 23, 2017 (GLOBE NEWSWIRE) -- Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced third quarter 2017 net income of $13.0 million, or $0.75 per diluted share, compared to $13.2 million, or $0.76 per diluted share, reported for the second quarter of 2017.

“Washington Trust’s third quarter performance reflects our continued success at growing our key business lines,” stated Joseph J. MarcAurele, Washington Trust Chairman and Chief Executive Officer. “Our diversified revenue streams were integral to our solid quarterly results, allowing us to maintain our strong profitability metrics.”

Selected highlights for the third quarter of 2017 include:

  • Returns on average equity and average assets were 12.56% and 1.18%, respectively. Comparable amounts for the second quarter of 2017 were 13.06% and 1.21%, respectively.
  • Third quarter 2017 total revenues (net interest income and noninterest income) amounted to $47.3 million, a record level for the Company.
  • Wealth management assets stood at an all-time high of $6.6 billion at September 30, 2017 and third quarter 2017 wealth management revenues exceeded $10.0 million for the first time in the Company's history.
  • Total loans surpassed $3.3 billion at September 30, 2017 and were up by 4% in the third quarter.
  • Total deposits grew by 4% in the third quarter and amounted to $3.2 billion at September 30, 2017.
  • In September 2017, Washington Trust declared a quarterly dividend of 39 cents per share, representing a 1 cent per share increase over the preceding quarter.

Net Interest Income
Net interest income totaled $30.1 million for the third quarter of 2017, up by $155 thousand, or 1%, from the second quarter. Included in net interest income in the third quarter was loan prepayment fee income of $131 thousand, compared to $549 thousand in the second quarter. Excluding the impact of loan prepayment fee income in each period, net interest income was up by $566 thousand, or 2%, on a linked quarter basis. The net interest margin was 2.93% for the third quarter of 2017, down by 4 basis points from the preceding quarter. Excluding the impact of the loan prepayment fee income in each period, the net interest margin was 2.91%, down by 1 basis point from the second quarter of 2017. Significant linked quarter changes included:

  • Average interest-earning assets increased by $35 million, with an increase of $59 million in average loan balances, partially offset by a $24 million decrease in the average balance of securities. The yield on interest-earning assets for the third quarter was 3.67%, down by 1 basis point from the preceding quarter. Excluding the impact of loan prepayment fee income in each period, the yield on interest-earning assets was 3.66%, up by 4 basis points from the preceding quarter.
  • Average interest-bearing liabilities increased by $8 million, reflecting an increase of $32 million in average wholesale funding balances (Federal Home Loan Bank advances and wholesale brokered time deposits), partially offset by a seasonal $24 million decrease in average in-market interest-bearing deposits. The cost of interest-bearing funds was 0.92%, up by 5 basis points from the preceding quarter.

Loans
Total loans amounted to $3.3 billion at September 30, 2017, up by $123 million, or 4%, from the end of the preceding quarter. Commercial loans increased by $102 million, or 6%, on a linked quarter basis, with growth of $91 million in the commercial real estate portfolio and $11 million in the commercial and industrial portfolio. Residential loan portfolio balances increased by $27 million, or 2%, from the balance at June 30, 2017. The consumer loan portfolio was down by $6 million, or 2%, from the end of the preceding quarter.

Investment Securities
The investment securities portfolio amounted to $728 million at September 30, 2017, down by $36 million, or 5%, from the balance at June 30, 2017, due to routine principal pay-downs on mortgage-backed securities and calls of debt securities. Investment securities represented 16% of total assets as at September 30, 2017.

Deposits and Borrowings
Total deposits amounted to $3.2 billion at September 30, 2017, up by $136 million, or 4%, from the balance at June 30, 2017. Included in total deposits were wholesale brokered time deposit balances of $416 million, which increased by $15 million from the end of preceding quarter. Excluding wholesale brokered time deposits, in-market deposits increased by $121 million, or 5%, in the quarter, reflecting seasonal inflows of various institutional and governmental depositors based on their underlying business cycles, as well as growth in promotional time certificates of deposit.

Federal Home Loan Bank advances amounted to $814 million at September 30, 2017, down by $56 million from the balance at June 30, 2017.

Noninterest Income
Noninterest income totaled $17.3 million for the third quarter of 2017, up by $477 thousand, or 3%, from the preceding quarter. Linked quarter changes included:

  • Wealth management revenues increased by $71 thousand, or 1%. This included an increase of $390 thousand in asset-based revenues and a decrease of $319 thousand in transaction-based revenues. The linked quarter change in transaction-based revenues was affected by the second quarter recognition of tax preparation fee income, which is typically concentrated in that quarter.

    Wealth management assets under administration amounted to $6.6 billion at September 30, 2017, up by $184 million from the second quarter, reflecting financial market appreciation. Managed assets represented 92% of total wealth management assets at September 30, 2017.

  • Mortgage banking revenues increased by $117 thousand, or 4%, due to a higher volume of loans sold in the secondary market. Residential mortgage loans sold to the secondary market amounted to $147 million in the third quarter, compared to $137 million in the preceding quarter.

  • Loan related derivative income increased by $308 thousand, or 27%, reflecting a higher volume of commercial borrower loan related derivative transactions.

Noninterest Expenses
Noninterest expenses totaled $26.8 million for the third quarter of 2017, up by $448 thousand, or 2%, from the second quarter. Included in other noninterest expenses in the third quarter was a charge of approximately $570 thousand associated with an isolated external fraud matter. Excluding this charge, total noninterest expenses were down by 0.5% on a linked quarter basis.

Income tax expense totaled $6.3 million for the third quarter of 2017, down by $179 thousand from the preceding quarter. The effective tax rate for the third quarter of 2017 was 32.8%, compared to 33.0% for the preceding quarter.

Asset Quality
Total past due loans amounted to $16.4 million, or 0.49% of total loans, at September 30, 2017, compared to $21.1 million, or 0.66% of total loans, at June 30, 2017. Total nonaccrual loans amounted to $18.5 million, or 0.56% of total loans, at September 30, 2017, down from $20.2 million, or 0.63% of total loans, at June 30, 2017.

A loan loss provision totaling $1.3 million was charged to earnings in the third quarter of 2017, compared to a loan loss provision of $700 thousand in the preceding quarter. The increase in the loan loss provision reflected loan loss allocations commensurate with growth and other changes in the loan portfolio during the quarter as well as an increase in specific reserves on impaired loans. Net charge-offs amounted to $654 thousand in the third quarter of 2017, compared to $484 thousand in the preceding quarter. The allowance for loan losses was $27.3 million, or 0.82% of total loans, at September 30, 2017, compared to $26.7 million, or 0.83% of total loans, at June 30, 2017.

Capital and Dividends
Total shareholders' equity was $414 million at September 30, 2017, up by $8 million from June 30, 2017. Capital levels at September 30, 2017 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.53% at September 30, 2017, compared to 12.78% at June 30, 2017. Book value per share amounted to $24.06 at September 30, 2017, up from $23.59 at June 30, 2017.

The Board of Directors declared a quarterly dividend of 39 cents per share for the quarter ended September 30, 2017, an increase of 1 cent compared to the second quarter. The dividend was paid on October 13, 2017 to shareholders of record on October 2, 2017.

Conference Call
Washington Trust will host a conference call to discuss its third quarter results, business highlights and outlook on Tuesday, October 24, 2017 at 8:30 a.m. (Eastern Time). Individuals may dial in to the call at 1-877-407-9208. 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 13671590; the audio replay will be available through November 3, 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 December 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; occurrences of cyberattacks, hacking and identity theft; natural disasters; 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)
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Assets:
Cash and due from banks$128,580 $117,608 $111,941 $106,185 $126,752
Short-term investments 2,600 2,324 2,039 1,612 2,420
Mortgage loans held for sale 28,484 32,784 25,414 29,434 45,162
Securities:
Available for sale, at fair value 714,355 749,486 754,720 739,912 564,256
Held to maturity, at amortized cost 13,241 13,942 14,721 15,633 16,848
Total securities 727,596 763,428 769,441 755,545 581,104
Federal Home Loan Bank stock, at cost 42,173 44,640 43,714 43,129 37,249
Loans:
Commercial 1,800,116 1,698,389 1,762,499 1,771,666 1,757,215
Residential real estate 1,195,537 1,168,105 1,131,210 1,122,748 1,079,887
Consumer 327,425 333,606 331,151 339,957 344,253
Total loans 3,323,078 3,200,100 3,224,860 3,234,371 3,181,355
Less allowance for loan losses 27,308 26,662 26,446 26,004 25,649
Net loans 3,295,770 3,173,438 3,198,414 3,208,367 3,155,706
Premises and equipment, net 28,591 28,508 28,853 29,020 29,433
Investment in bank-owned life insurance 72,729 72,183 71,642 71,105 70,557
Goodwill 63,909 63,909 64,059 64,059 64,059
Identifiable intangible assets, net 9,388 9,642 9,898 10,175 10,493
Other assets 69,410 67,065 63,348 62,484 81,099
Total assets$4,469,230 $4,375,529 $4,388,763 $4,381,115 $4,204,034
Liabilities:
Deposits:
Demand deposits$621,273 $587,813 $596,974 $585,960 $566,027
NOW accounts 448,128 448,617 454,344 427,707 404,827
Money market accounts 716,827 666,047 762,233 730,075 794,905
Savings accounts 367,912 364,002 362,281 358,397 357,966
Time deposits 1,002,941 954,710 939,739 961,613 913,649
Total deposits 3,157,081 3,021,189 3,115,571 3,063,752 3,037,374
Federal Home Loan Bank advances 814,045 869,733 798,741 848,930 671,615
Junior subordinated debentures 22,681 22,681 22,681 22,681 22,681
Other liabilities 61,195 55,884 53,985 54,948 77,037
Total liabilities 4,055,002 3,969,487 3,990,978 3,990,311 3,808,707
Shareholders’ Equity:
Common stock 1,076 1,076 1,075 1,073 1,069
Paid-in capital 117,189 116,484 116,200 115,123 113,290
Retained earnings 312,334 306,151 299,555 294,365 288,613
Accumulated other comprehensive loss (16,371) (17,669) (19,045) (19,757) (7,645)
Total shareholders’ equity 414,228 406,042 397,785 390,804 395,327
Total liabilities and shareholders’ equity$4,469,230 $4,375,529 $4,388,763 $4,381,115 $4,204,034


CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
For the Nine Months Ended
For the Three Months Ended
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Sep 30,
2017
Sep 30,
2016
Interest income:
Interest and fees on loans$32,509 $31,642 $30,352 $30,738 $29,633 $94,503 $88,753
Taxable interest on securities 4,655 4,844 4,709 3,703 3,024 14,208 7,881
Nontaxable interest on securities 41 72 112 157 218 225 825
Dividends on Federal Home Loan Bank stock 467 439 387 362 288 1,293 729
Other interest income 197 156 104 95 93 457 227
Total interest and dividend income 37,869 37,153 35,664 35,055 33,256 110,686 98,415
Interest expense:
Deposits 3,835 3,591 3,502 3,445 3,110 10,928 9,059
Federal Home Loan Bank advances 3,816 3,509 3,344 2,886 2,641 10,669 7,106
Junior subordinated debentures 159 149 138 135 125 446 356
Other interest expense 1 1 1 1 4
Total interest expense 7,810 7,249 6,985 6,467 5,877 22,044 16,525
Net interest income 30,059 29,904 28,679 28,588 27,379 88,642 81,890
Provision for loan losses 1,300 700 400 2,900 1,800 2,400 2,750
Net interest income after provision for loan losses 28,759 29,204 28,279 25,688 25,579 86,242 79,140
Noninterest income:
Wealth management revenues 10,013 9,942 9,477 9,291 9,623 29,432 28,278
Mortgage banking revenues 3,036 2,919 2,340 4,541 3,734 8,295 8,642
Service charges on deposit accounts 942 901 883 945 915 2,726 2,757
Card interchange fees 894 902 802 858 870 2,598 2,527
Income from bank-owned life insurance 546 542 536 549 521 1,624 2,110
Loan related derivative income 1,452 1,144 148 912 1,178 2,744 2,331
Equity in losses of unconsolidated subsidiaries (89) (89) (88) (89) (88) (266) (265)
Other income 489 545 412 313 508 1,446 1,429
Total noninterest income 17,283 16,806 14,510 17,320 17,261 48,599 47,809
Noninterest expense:
Salaries and employee benefits 17,251 17,358 16,795 16,528 16,908 51,404 50,693
Net occupancy 1,928 1,767 1,967 1,775 1,766 5,662 5,376
Equipment 1,380 1,313 1,467 1,556 1,648 4,160 4,652
Outsourced services 1,793 1,710 1,457 1,311 1,254 4,960 3,911
Legal, audit and professional fees 534 582 616 597 691 1,732 1,982
FDIC deposit insurance costs 308 469 481 390 504 1,258 1,488
Advertising and promotion 416 362 237 403 370 1,015 1,055
Amortization of intangibles 253 257 277 318 321 787 966
Debt prepayment penalties 431
Change in fair value of contingent consideration (310) (939) (310) (898)
Other expenses 2,891 2,488 2,299 2,095 2,127 7,678 6,474
Total noninterest expense 26,754 26,306 25,286 24,973 24,650 78,346 76,130
Income before income taxes 19,288 19,704 17,503 18,035 18,190 56,495 50,819
Income tax expense 6,326 6,505 5,721 5,873 5,863 18,552 16,500
Net income$12,962 $13,199 $11,782 $12,162 $12,327 $37,943 $34,319
Net income available to common shareholders:
Basic$12,934 $13,170 $11,755 $12,137 $12,302 $37,859 $34,247
Diluted$12,934 $13,170 $11,755 $12,137 $12,302 $37,859 $34,247
Weighted average common shares outstanding:
Basic 17,212 17,206 17,186 17,142 17,090 17,201 17,060
Diluted 17,318 17,316 17,293 17,245 17,203 17,320 17,198
Earnings per common share:
Basic$0.75 $0.77 $0.68 $0.71 $0.72 $2.20 $2.01
Diluted$0.75 $0.76 $0.68 $0.70 $0.72 $2.19 $1.99
Cash dividends declared per share$0.39 $0.38 $0.38 $0.37 $0.37 $1.15 $1.09


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Share and Equity Related Data:
Book value per share$24.06 $23.59 $23.14 $22.76 $23.11
Tangible book value per share - Non-GAAP (1)$19.81 $19.32 $18.83 $18.44 $18.75
Market value per share$57.25 $51.55 $49.30 $56.05 $40.22
Shares issued and outstanding at end of period 17,214 17,210 17,193 17,171 17,107
Capital Ratios:
Tier 1 risk-based capital11.69% (i) 11.92% 11.54% 11.44% 11.48%
Total risk-based capital12.53% (i) 12.78% 12.38% 12.26% 12.31%
Tier 1 leverage ratio8.83% (i) 8.78% 8.58% 8.67% 8.95%
Common equity tier 111.02% (i) 11.23% 10.86% 10.75% 10.77%
Equity to assets 9.27% 9.28% 9.06% 8.92% 9.40%
Tangible equity to tangible assets - Non-GAAP (1) 7.76% 7.73% 7.51% 7.35% 7.77%
(i) - estimated


For the Nine Months Ended
For the Three Months Ended
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Sep 30,
2017
Sep 30,
2016
Performance Ratios:
Net interest margin (FTE)2.93%2.97%2.87%2.89%2.94% 2.92%3.07%
Return on average assets1.18%1.21%1.08%1.14%1.21% 1.16%1.17%
Return on average tangible assets - Non-GAAP (1)1.20%1.23%1.10%1.16%1.24% 1.18%1.20%
Return on average equity12.56%13.06%11.87%12.26%12.57% 12.50%11.86%
Return on average tangible equity - Non-GAAP (1)15.27%15.98%14.59%15.09%15.53% 15.28%14.72%


(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 Nine Months Ended
For the Three Months Ended
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Sep 30,
2017
Sep 30,
2016
Wealth Management Results
Wealth Management Revenues:
Trust and investment management fees$9,101 $8,781 $8,518 $8,283 $8,358 $26,400 $24,618
Mutual fund fees 690 620 729 771 812 2,039 2,467
Asset-based revenues 9,791 9,401 9,247 9,054 9,170 28,439 27,085
Transaction-based revenues 222 541 230 237 453 993 1,193
Total wealth management revenues$10,013 $9,942 $9,477 $9,291 $9,623 $29,432 $28,278
Assets Under Administration:
Balance at beginning of period$6,403,501 $6,243,301 $6,063,293 $6,056,859 $5,905,019 $6,063,293 $5,844,636
Net investment appreciation (depreciation) & income 270,549 162,924 220,423 (8,506) 192,518 653,896 286,354
Net client asset flows (86,151) (2,724) (40,415) 14,940 (40,678) (129,290) (74,131)
Balance at end of period$6,587,899 $6,403,501 $6,243,301 $6,063,293 $6,056,859 $6,587,899 $6,056,859
Mortgage Banking Results
Mortgage Banking Revenues:
Gains & commissions on loan sales, net$2,952 $2,784 $2,268 $4,455 $3,744 $8,004 $8,682
Residential mortgage servicing fee income, net 84 135 72 86 (10) 291 (40)
Total mortgage banking revenues$3,036 $2,919 $2,340 $4,541 $3,734 $8,295 $8,642
Residential Mortgage Loan Originations:
Originations for retention in portfolio$90,378 $94,794 $57,907 $72,533 $90,308 $243,079 $191,934
Originations for sale to secondary market (1) 143,112 144,491 102,441 185,626 170,673 390,044 415,174
Total mortgage loan originations$233,490 $239,285 $160,348 $258,159 $260,981 $633,123 $607,108
Residential Mortgage Loans Sold:
Sold with servicing rights retained$37,823 $29,199 $22,567 $48,545 $44,611 $89,589 $116,869
Sold with servicing rights released (1) 109,508 108,245 84,345 151,506 119,572 302,098 292,318
Total mortgage loans sold$147,331 $137,444 $106,912 $200,051 $164,183 $391,687 $409,187


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


END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Commercial:
Mortgages$1,085,535 $1,009,096 $1,076,648 $1,074,186 $1,086,175
Construction & development 126,257 112,177 123,841 121,371 98,735
Commercial & industrial 588,324 577,116 562,010 576,109 572,305
Total commercial 1,800,116 1,698,389 1,762,499 1,771,666 1,757,215
Residential Real Estate:
Mortgages 1,171,161 1,143,416 1,100,435 1,094,824 1,052,829
Homeowner construction 24,376 24,689 30,775 27,924 27,058
Total residential real estate 1,195,537 1,168,105 1,131,210 1,122,748 1,079,887
Consumer:
Home equity lines 259,880 263,934 258,695 264,200 265,238
Home equity loans 34,777 35,173 36,050 37,272 38,264
Other 32,768 34,499 36,406 38,485 40,751
Total consumer 327,425 333,606 331,151 339,957 344,253
Total loans$3,323,078 $3,200,100 $3,224,860 $3,234,371 $3,181,355


September 30, 2017 December 31, 2016
Balance% of Total Balance% of Total
Commercial Real Estate Loans by Property Location:
Rhode Island, Connecticut, Massachusetts$1,136,168 93.8% $1,105,539 92.5%
New York, New Jersey, Pennsylvania 62,956 5.2% 77,038 6.4%
New Hampshire 12,668 1.0% 12,980 1.1%
Total commercial real estate loans (1)$1,211,792 100.0% $1,195,557 100.0%
Residential Mortgages by Property Location:
Rhode Island, Connecticut, Massachusetts$1,179,112 98.6% $1,106,366 98.6%
New Hampshire, Vermont, Maine 12,085 1.0% 11,445 1.0%
New York, Virginia, New Jersey, Maryland, Pennsylvania 2,187 0.2% 2,648 0.2%
Ohio 884 0.1% 997 0.1%
Other 1,269 0.1% 1,292 0.1%
Total residential mortgages$1,195,537 100.0% $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.


Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Deposits:
Non-interest bearing demand deposits$575,866 $533,147 $534,792 $521,165 $520,860
Interest-bearing demand deposits 45,407 54,666 62,182 64,795 45,167
NOW accounts 448,128 448,617 454,344 427,707 404,827
Money market accounts 716,827 666,047 762,233 730,075 794,905
Savings accounts 367,912 364,002 362,281 358,397 357,966
Time deposits (in-market) 587,166 553,783 557,312 549,376 554,669
Wholesale brokered time deposits 415,775 400,927 382,427 412,237 358,980
Total deposits$3,157,081 $3,021,189 $3,115,571 $3,063,752 $3,037,374



CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Asset Quality Ratios:
Nonperforming assets to total assets 0.44% 0.49% 0.54% 0.53% 0.59%
Nonaccrual loans to total loans 0.56% 0.63% 0.69% 0.68% 0.75%
Total past due loans to total loans 0.49% 0.66% 0.65% 0.76% 0.67%
Allowance for loan losses to nonaccrual loans 147.52% 132.00% 119.52% 117.89% 107.09%
Allowance for loan losses to total loans 0.82% 0.83% 0.82% 0.80% 0.81%
Nonperforming Assets:
Commercial mortgages$5,887 $6,422 $7,809 $7,811 $10,357
Commercial construction & development
Commercial & industrial 429 1,232 1,129 1,337 1,744
Residential real estate mortgages 11,699 11,815 12,253 11,736 10,140
Consumer 496 729 936 1,174 1,709
Total nonaccrual loans 18,511 20,198 22,127 22,058 23,950
Other real estate owned 1,038 1,342 1,410 1,075 1,045
Total nonperforming assets$19,549 $21,540 $23,537 $23,133 $24,995
Past Due Loans (30 days or more past due):
Commercial mortgages$5,887 $6,422 $7,806 $8,708 $10,352
Commercial & industrial 455 4,009 1,046 1,154 1,047
Residential real estate mortgages 7,802 8,857 10,533 12,226 8,291
Consumer loans 2,303 1,832 1,547 2,334 1,565
Total past due loans$16,447 $21,120 $20,932 $24,422 $21,255
Accruing loans 90 days or more past due$ $ $ $ $
Nonaccrual loans included in past due loans$13,216 $14,490 $18,081 $18,602 $18,796


For the Nine Months Ended
For the Three Months Ended
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Sep 30,
2017
Sep 30,
2016
Nonaccrual Loan Activity:
Balance at beginning of period$20,198 $22,127 $22,058 $23,950 $17,248 $22,058 $21,047
Additions to nonaccrual status 1,969 1,946 2,138 2,105 9,750 6,053 13,174
Loans returned to accruing status (1,411) (778) (547) (718) (592) (2,736) (798)
Loans charged-off (694) (642) (79) (2,622) (2,055) (1,415) (4,390)
Loans transferred to other real estate owned (98) (478) (30) (576) (1,045)
Payments, payoffs and other changes (1,551) (2,357) (965) (627) (401) (4,873) (4,038)
Balance at end of period$18,511 $20,198 $22,127 $22,058 $23,950 $18,511 $23,950
Allowance for Loan Losses:
Balance at beginning of period$26,662 $26,446 $26,004 $25,649 $25,826 $26,004 $27,069
Provision charged to earnings 1,300 700 400 2,900 1,800 2,400 2,750
Charge-offs (694) (642) (79) (2,622) (2,055) (1,415) (4,390)
Recoveries 40 158 121 77 78 319 220
Balance at end of period$27,308 $26,662 $26,446 $26,004 $25,649 $27,308 $25,649
Net Loan Charge-Offs (Recoveries):
Commercial mortgages$535 $318 $ $2,510 $1,936 $853 $3,250
Commercial & industrial 114 115 (105) (20) (43) 124 623
Residential real estate mortgages (1) 8 (4) 6 47 3 183
Consumer 6 43 67 49 37 116 114
Total$654 $484 ($42)$2,545 $1,977 $1,096 $4,170
Net charge-offs to average loans (annualized) 0.08% 0.06% (0.01%) 0.31% 0.25% 0.04% 0.18%

The following table presents average balance and interest rate information. Tax-exempt income is converted to a fully taxable equivalent (FTE) 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 (FTE Basis)
(Unaudited; Dollars in thousands)
For the Three Months EndedSeptember 30, 2017 June 30, 2017 September 30, 2016
Average
Balance
InterestYield/
Rate
Average
Balance
InterestYield/
Rate
Average
Balance
InterestYield/
Rate
Assets:
Commercial mortgages$1,027,517 $9,909 3.83 $1,037,327 $9,821 3.80 $1,079,917 $9,362 3.45
Construction & development 133,190 1,326 3.95 126,212 1,211 3.85 86,623 712 3.27
Commercial & industrial 590,915 6,684 4.49 574,775 6,607 4.61 565,170 6,382 4.49
Total commercial loans 1,751,622 $17,919 4.06 1,738,314 $17,639 4.07 1,731,710 $16,456 3.78
Residential real estate loans, including loans held for sale 1,210,686 11,541 3.78 1,162,895 11,088 3.82 1,080,302 10,386 3.82
Consumer loans 329,689 3,604 4.34 332,053 3,464 4.18 341,829 3,340 3.89
Total loans 3,291,997 33,064 3.98 3,233,262 32,191 3.99 3,153,841 30,182 3.81
Cash, federal funds sold and short-term investments 61,390 197 1.27 60,428 156 1.04 88,414 93 0.42
FHLBB stock 44,057 467 4.21 44,362 439 3.97 37,933 288 3.02
Taxable debt securities 751,735 4,655 2.46 773,280 4,844 2.51 497,738 3,024 2.42
Nontaxable debt securities 4,287 65 6.02 7,076 109 6.18 22,038 336 6.07
Total securities 756,022 4,720 2.48 780,356 4,953 2.55 519,776 3,360 2.57
Total interest-earning assets 4,153,466 38,448 3.67 4,118,408 37,739 3.68 3,799,964 33,923 3.55
Noninterest-earning assets 248,070 236,056 262,724
Total assets$4,401,536 $4,354,464 $4,062,688
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits$46,352 $30 0.26 $54,675 ($8)(0.06) $39,865 $13 0.13
NOW accounts 442,166 68 0.06 437,282 57 0.05 402,307 51 0.05
Money market accounts 680,755 642 0.37 711,711 640 0.36 709,549 487 0.27
Savings accounts 366,177 56 0.06 361,545 52 0.06 352,032 52 0.06
Time deposits (in-market) 565,402 1,566 1.10 559,442 1,460 1.05 552,576 1,408 1.01
Wholesale brokered time deposits 404,953 1,473 1.44 392,734 1,390 1.42 310,740 1,099 1.41
FHLBB advances 837,300 3,816 1.81 817,349 3,509 1.72 690,843 2,641 1.52
Junior subordinated debentures 22,681 159 2.78 22,681 149 2.63 22,681 125 2.19
Other 1 13 53 1 7.51
Total interest-bearing liabilities 3,365,787 7,810 0.92 3,357,432 7,249 0.87 3,080,646 5,877 0.76
Demand deposits 567,737 543,781 520,439
Other liabilities 55,150 49,013 69,370
Shareholders' equity 412,862 404,238 392,233
Total liabilities and shareholders' equity$4,401,536 $4,354,464 $4,062,688
Net interest income (FTE) $30,638 $30,490 $28,046
Interest rate spread 2.75 2.81 2.79
Net interest margin 2.93 2.97 2.94

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

For the Three Months EndedSep 30,
2017
Jun 30,
2017
Sep 30,
2016
Commercial loans$555 $549 $549
Nontaxable debt securities 24 37 118
Total$579 $586 $667


CONSOLIDATED AVERAGE BALANCE SHEETS (FTE Basis)
(Unaudited; Dollars in thousands)
For the Nine Months EndedSeptember 30, 2017 September 30, 2016
Average
Balance
InterestYield/
Rate
Average
Balance
InterestYield/
Rate
Assets:
Commercial mortgages$1,047,831 $29,174 3.72 $1,011,327 $26,569 3.51
Construction & development 129,104 3,650 3.78 110,914 2,806 3.38
Commercial & industrial 579,881 19,448 4.48 587,098 20,470 4.66
Total commercial loans 1,756,816 52,272 3.98 1,709,339 49,845 3.90
Residential real estate loans, including loans held for sale 1,175,563 33,497 3.81 1,045,532 30,521 3.90
Consumer loans 332,245 10,391 4.18 342,735 10,044 3.91
Total loans 3,264,624 96,160 3.94 3,097,606 90,410 3.90
Cash, federal funds sold and short-term investments 59,357 457 1.03 75,627 227 0.40
FHLBB stock 44,015 1,293 3.93 31,774 729 3.06
Taxable debt securities 760,308 14,208 2.50 418,034 7,881 2.52
Nontaxable debt securities 7,602 347 6.10 27,939 1,276 6.10
Total securities 767,910 14,555 2.53 445,973 9,157 2.74
Total interest-earning assets 4,135,906 112,465 3.64 3,650,980 100,523 3.68
Noninterest-earning assets 238,050 250,019
Total assets$4,373,956 $3,900,999
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits$52,564 $37 0.09 $44,490 $34 0.10
NOW accounts 433,435 176 0.05 397,329 161 0.05
Money market accounts 715,386 1,881 0.35 735,324 1,461 0.27
Savings accounts 361,904 158 0.06 339,616 148 0.06
Time deposits (in-market) 559,938 4,443 1.06 544,441 4,067 1.00
Wholesale brokered time deposits 398,349 4,233 1.42 303,442 3,188 1.40
FHLBB advances 828,775 10,669 1.72 577,501 7,106 1.64
Junior subordinated debentures 22,681 446 2.63 22,681 356 2.10
Other 13 1 10.28 66 4 8.10
Total interest-bearing liabilities 3,373,045 22,044 0.87 2,964,890 16,525 0.74
Demand deposits 546,393 488,767
Other liabilities 49,721 61,555
Shareholders' equity 404,797 385,787
Total liabilities and shareholders' equity$4,373,956 $3,900,999
Net interest income (FTE) $90,421 $83,998
Interest rate spread 2.77 2.94
Net interest margin 2.92 3.07

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

For the Nine Months EndedSep 30,
2017
Sep 30,
2016
Commercial loans$1,657 $1,657
Nontaxable debt securities 122 451
Total$1,779 $2,108


SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Tangible Book Value per Share:
Total shareholders' equity, as reported$414,228 $406,042 $397,785 $390,804 $395,327
Less:
Goodwill 63,909 63,909 64,059 64,059 64,059
Identifiable intangible assets, net 9,388 9,642 9,898 10,175 10,493
Total tangible shareholders' equity$340,931 $332,491 $323,828 $316,570 $320,775
Shares outstanding, as reported 17,214 17,210 17,193 17,171 17,107
Book value per share - GAAP$24.06 $23.59 $23.14 $22.76 $23.11
Tangible book value per share - Non-GAAP$19.81 $19.32 $18.83 $18.44 $18.75
Tangible Equity to Tangible Assets:
Total tangible shareholders' equity$340,931 $332,491 $323,828 $316,570 $320,775
Total assets, as reported$4,469,230 $4,375,529 $4,388,763 $4,381,115 $4,204,034
Less:
Goodwill 63,909 63,909 64,059 64,059 64,059
Identifiable intangible assets, net 9,388 9,642 9,898 10,175 10,493
Total tangible assets$4,395,933 $4,301,978 $4,314,806 $4,306,881 $4,129,482
Equity to assets - GAAP 9.27% 9.28% 9.06% 8.92% 9.40%
Tangible equity to tangible assets - Non-GAAP 7.76% 7.73% 7.51% 7.35% 7.77%


For the Three Months Ended For the Nine Months Ended
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Sep 30,
2017
Sep 30,
2016
Return on Average Tangible Assets:
Net income, as reported$12,962 $13,199 $11,782 $12,162 $12,327 $37,943 $34,319
Total average assets, as reported$4,401,536 $4,354,464 $4,365,471 $4,272,883 $4,062,688 $4,373,956 $3,900,999
Less average balances of:
Goodwill 63,909 64,058 64,059 64,059 64,059 64,008 64,059
Identifiable intangible assets, net 9,511 9,767 10,027 10,330 10,650 9,766 10,971
Total average tangible assets$4,328,116 $4,280,639 $4,291,385 $4,198,494 $3,987,979 $4,300,182 $3,825,969
Return on average assets - GAAP 1.18% 1.21% 1.08% 1.14% 1.21% 1.16% 1.17%
Return on average tangible assets - Non-GAAP 1.20% 1.23% 1.10% 1.16% 1.24% 1.18% 1.20%
Return on Average Tangible Equity:
Net income, as reported$12,962 $13,199 $11,782 $12,162 $12,327 $37,943 $34,319
Total average equity, as reported$412,862 $404,238 $397,117 $396,741 $392,233 $404,797 $385,787
Less average balances of:
Goodwill 63,909 64,058 64,059 64,059 64,059 64,008 64,059
Identifiable intangible assets, net 9,511 9,767 10,027 10,330 10,650 9,766 10,971
Total average tangible equity$339,442 $330,413 $323,031 $322,352 $317,524 $331,023 $310,757
Return on average equity - GAAP 12.56% 13.06% 11.87% 12.26% 12.57% 12.50% 11.86%
Return on average tangible equity - Non-GAAP 15.27% 15.98% 14.59% 15.09% 15.53% 15.28% 14.72%


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

Source:Washington Trust Bancorp, Inc.