Washington Trust Reports Fourth Quarter 2017 Earnings

WESTERLY, R.I., Jan. 30, 2018 (GLOBE NEWSWIRE) -- Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced fourth quarter 2017 net income of $8.0 million, or $0.46 per diluted share, compared to net income of $13.0 million, or $0.75 per diluted share, reported for the third quarter of 2017. Net income for the year ended December 31, 2017 totaled $45.9 million, or $2.64 per diluted share, compared to $46.5 million, or $2.70 per diluted share, reported for the prior year.

On December 22, 2017, the Tax Cuts and Jobs Act ("the Tax Act") was signed into law, permanently lowering the corporate federal income tax rate from 35% to 21%, effective January 1, 2018. The enactment of the Tax Act in 2017 required companies to revalue and reassess deferred tax assets and liabilities reflecting the new federal income tax rate. As a result, in the fourth quarter of 2017, Washington Trust's net deferred tax assets were written down by a non-cash charge of $6.2 million, with a corresponding increase to income tax expense. This write-down adjustment reduced fourth quarter and full-year 2017 earnings per diluted share by $0.36.

“Our fourth quarter earnings, excluding the non-cash charge associated with the enactment of the Tax Act, were very solid. We are pleased to report record levels of total loans, total deposits, and wealth management assets under administration,” stated Joseph J. MarcAurele, Washington Trust Chairman and Chief Executive Officer. “Washington Trust’s strong financial foundation, diversified revenue stream, and market footprint positions us for future growth and success in the year ahead.”

Selected highlights for fourth quarter and full-year 2017 include:

  • Full-year 2017 net interest income increased by 8% over the prior year and amounted to $120 million, a record level for Washington Trust.

  • Total loans were $3.4 billion at December 31, 2017, up by 2% in the fourth quarter and up by 4% from a year ago.

  • Deposits totaled $3.2 billion at December 31, 2017, up by 3% in the fourth quarter and up by 6% from a year ago.

  • Wealth management assets grew to a record $6.7 billion at December 31, 2017. Full-year 2017 wealth management revenues amounted to an all-time high of $39.3 million, up by 5% from the prior year.

Net Interest Income
Net interest income totaled $30.9 million for the fourth quarter of 2017, up by $830 thousand, or 3%, from the third quarter. The net interest margin was 2.95% for the fourth quarter, up by 2 basis points from the preceding quarter. Significant linked quarter changes included:

  • Average interest-earning assets were up by $79 million, reflecting growth in average loan balances. The yield on interest-earning assets for the fourth quarter was 3.70%, up by 3 basis points from the preceding quarter.

  • Average interest-bearing liabilities increased by $54 million, with growth in average in-market deposits, partially offset by declines in average wholesale funding balances (Federal Home Loan Bank advances and wholesale brokered time deposits). The cost of interest-bearing funds was 0.93%, up by 1 basis point from the preceding quarter.

Noninterest Income
Noninterest income amounted to $16.2 million for the fourth quarter of 2017, down by $1.1 million, or 6%, from the third quarter. Significant linked quarter changes included:

  • Wealth management revenues totaled $9.9 million in the fourth quarter of 2017, compared to $10.0 million in the preceding quarter. Full-year 2017 wealth management revenues amounted to $39.3 million, up by $1.8 million, or 5%, from the prior year, due to growth in asset-based revenues.

    Wealth management assets under administration totaled $6.7 billion at December 31, 2017, up by $127 million, or 2%, from the balance at September 30, 2017. Wealth management assets were up by $651 million, or 11%, from the balance at the end of 2016, reflecting financial market appreciation. Managed assets represented 93% of total wealth management assets at December 31, 2017.

  • Mortgage banking revenues totaled $3.1 million in the fourth quarter of 2017, up modestly from the preceding quarter. Residential mortgage loans sold to the secondary market amounted to $145 million in the fourth quarter, compared to $147 million in the preceding quarter.

  • Loan related derivative income totaled $470 thousand in the fourth quarter of 2017, down by $982 thousand, or 68%, from the preceding quarter, due to a lower volume of commercial borrower loan related derivative transactions. Full-year 2017 loan related derivative income amounted to $3.2 million, essentially unchanged from the full-year amount recognized in 2016.

Noninterest Expenses
Noninterest expenses amounted to $25.8 million for the fourth quarter of 2017, down by $1.0 million, or 4%, from the third quarter. The linked quarter decline in noninterest expenses was primarily due to the following:

  • A reduction to noninterest expenses of $333 thousand ($0.02 per diluted share) was recognized in the fourth quarter resulting from a nontaxable downward adjustment in the fair value of a contingent consideration liability that was initially recorded upon the completion of a 2015 acquisition.

  • During the fourth quarter, Washington Trust received $325 thousand (after-tax $205 thousand, or $0.01 per diluted share) in settlement of a claim against another bank related to a previously disclosed dispute. This matter was the subject of a $570 thousand expense charge recognized in the third quarter. The settlement was recorded as a reduction to other noninterest expenses in the fourth quarter.

Excluding the aforementioned items from the third and fourth quarters, noninterest expenses were up by $228 thousand, or 1%, on a linked quarter basis, primarily due to an increase in foreclosed property costs in the fourth quarter.

Income tax expense totaled $13.2 million for the fourth quarter of 2017, reflecting an effective tax rate of 62.3%. As previously mentioned, income tax expense included the $6.2 million write-down associated with the revaluation of the Corporation's net deferred tax assets due to the Tax Act. The revaluation of our net deferred tax assets is subject to further guidance and interpretation of the Tax Act that may be issued. Excluding the non-cash write-down adjustment, the effective tax rate for the fourth quarter of 2017 would have been 33.1%, compared to 32.8% for the preceding quarter. Based on current federal and applicable state income tax statutes, the Corporation currently expects its 2018 effective tax rate to be approximately 21.5%.

Loans
Total loans amounted to $3.4 billion at December 31, 2017, up by $51 million, or 2%, from the end of the preceding quarter. Residential loan portfolio balances increased by $32 million, or 3%, from the balance at September 30, 2017. In late December 2017, $19 million of residential mortgage loans were purchased with a weighted average rate of 3.24%. These purchased loans were individually evaluated to our underwriting standards and are predominantly secured by properties in Massachusetts. The commercial loan portfolio increased by $23 million, or 1%, from the end of the preceding quarter, with growth in commercial and industrial loans and in commercial construction and development loans, partially offset by a decrease in commercial mortgage loans. The consumer loan portfolio was down by $3 million, or 1%, from the end of the third quarter.

For full-year 2017, total loans rose by $140 million, or 4%, including a 9% increase in the residential loan portfolio and a 3% increase in the commercial loan portfolio.

Investment Securities
The investment securities portfolio totaled $793 million at December 31, 2017, up by $66 million, or 9%, from the balance at September 30, 2017. During the quarter, government agency mortgage-backed debt securities and agency debt securities totaling $94 million and with a weighted average yield of 2.68% were purchased. The purchases were partially offset by routine principal pay-downs on mortgage-backed securities and a maturity of a municipal bond. Investment securities represented 18% of total assets at December 31, 2017.

Deposits and Borrowings
Total deposits amounted to $3.2 billion at December 31, 2017, up by $86 million, or 3%, from the end of the preceding quarter. Included in total deposits were wholesale brokered time deposit balances of $398 million, which decreased by $18 million from the balance at September 30, 2017. Excluding wholesale brokered time deposits, in-market deposits increased by $104 million, or 4%, from the end of the preceding quarter, with growth across all deposit categories.

Total deposits were up by $179 million, or 6%, from the balance at the end of 2016. Excluding balances of wholesale brokered time deposits, total in-market deposits were up by $193 million, or 7%, in 2017. The balances of demand deposits and NOW accounts grew by $114 million, or 11%, in 2017.

Federal Home Loan Bank advances stood at $791 million at December 31, 2017, down by $23 million, or 3%, from the balance at September 30, 2017 and down by $58 million, or 7%, from a year ago.

Asset Quality
Past due loans amounted to $20.1 million, or 0.59% of total loans, at December 31, 2017, compared to $16.4 million, or 0.49% of total loans, at September 30, 2017. The increase in past due loans was primarily due to one well-secured commercial and industrial loan becoming delinquent in the latter portion of the quarter. Total nonaccrual loans amounted to $15.2 million, or 0.45% of total loans, at December 31, 2017, down from $18.5 million, or 0.56% of total loans, at September 30, 2017.

A loan loss provision of $200 thousand was charged to earnings in the fourth quarter of 2017, compared to a loan loss provision of $1.3 million in the preceding quarter. These provisions were based on management's assessment of loss exposure, as well as loan loss allocations commensurate with changes in the loan portfolio. Net charge-offs totaled $1.0 million in the fourth quarter of 2017, compared to $654 thousand in the preceding quarter. The charge-offs recognized in the fourth quarter were largely attributable to two nonaccrual commercial mortgage relationships. The allowance for loan losses was $26.5 million, or 0.79% of total loans, at December 31, 2017, compared to $27.3 million, or 0.82% of total loans, at September 30, 2017.

Capital and Dividends
Total shareholders' equity was $413 million at December 31, 2017, compared to $414 million at September 30, 2017. Book value per share amounted to $23.99 at December 31, 2017, compared to $24.06 at September 30, 2017. The decline in shareholders' equity and book value per share reflects the impact of the $6.2 million net deferred tax asset write-down adjustment recognized in earnings due to the enactment of the Tax Act in December 2017.

Capital levels at December 31, 2017 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.45% at December 31, 2017, compared to 12.53% at September 30, 2017. The reduction in the total risk-based capital ratio in the fourth quarter reflects a charge of $1.9 million related to the net deferred tax asset write-down adjustment, as determined in accordance with the regulatory guidance issued on January 18, 2018.

The Board of Directors declared a quarterly dividend of 39 cents per share for the quarter ended December 31, 2017. The dividend was paid on January 12, 2018 to shareholders of record on January 2, 2018.

Conference Call
Washington Trust will host a conference call to discuss its fourth quarter results, business highlights and outlook on Wednesday, January 31, 2018 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 13675605; the audio replay will be available through February 10, 2018. 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, 2018.

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
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Assets:
Cash and due from banks$79,853 $128,580 $117,608 $111,941 $106,185
Short-term investments 3,070 2,600 2,324 2,039 1,612
Mortgage loans held for sale 26,943 28,484 32,784 25,414 29,434
Securities:
Available for sale, at fair value 780,954 714,355 749,486 754,720 739,912
Held to maturity, at amortized cost 12,541 13,241 13,942 14,721 15,633
Total securities 793,495 727,596 763,428 769,441 755,545
Federal Home Loan Bank stock, at cost 40,517 42,173 44,640 43,714 43,129
Loans:
Commercial mortgages 1,072,487 1,085,535 1,009,096 1,076,648 1,074,186
Commercial construction & development 138,008 126,257 112,177 123,841 121,371
Commercial & industrial 612,334 588,324 577,116 562,010 576,109
Residential real estate 1,227,248 1,195,537 1,168,105 1,131,210 1,122,748
Consumer 323,994 327,425 333,606 331,151 339,957
Total loans 3,374,071 3,323,078 3,200,100 3,224,860 3,234,371
Less allowance for loan losses 26,488 27,308 26,662 26,446 26,004
Net loans 3,347,583 3,295,770 3,173,438 3,198,414 3,208,367
Premises and equipment, net 28,333 28,591 28,508 28,853 29,020
Investment in bank-owned life insurance 73,267 72,729 72,183 71,642 71,105
Goodwill 63,909 63,909 63,909 64,059 64,059
Identifiable intangible assets, net 9,140 9,388 9,642 9,898 10,175
Other assets 63,740 69,410 67,065 63,348 62,484
Total assets$4,529,850 $4,469,230 $4,375,529 $4,388,763 $4,381,115
Liabilities:
Deposits:
Demand deposits$661,138 $621,273 $587,813 $596,974 $585,960
NOW accounts 466,605 448,128 448,617 454,344 427,707
Money market accounts 731,345 716,827 666,047 762,233 730,075
Savings accounts 368,524 367,912 364,002 362,281 358,397
Time deposits 1,015,095 1,002,941 954,710 939,739 961,613
Total deposits 3,242,707 3,157,081 3,021,189 3,115,571 3,063,752
Federal Home Loan Bank advances 791,356 814,045 869,733 798,741 848,930
Junior subordinated debentures 22,681 22,681 22,681 22,681 22,681
Other liabilities 59,822 61,195 55,884 53,985 54,948
Total liabilities 4,116,566 4,055,002 3,969,487 3,990,978 3,990,311
Shareholders’ Equity:
Total shareholders’ equity 413,284 414,228 406,042 397,785 390,804
Total liabilities and shareholders’ equity$4,529,850 $4,469,230 $4,375,529 $4,388,763 $4,381,115


CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
For the Three Months Ended
For the Twelve Months
Ended
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Dec 31,
2017
Dec 31,
2016
Interest income:
Interest and fees on loans$33,459 $32,509 $31,642 $30,352 $30,738 $127,962 $119,491
Taxable interest on securities 4,719 4,655 4,844 4,709 3,703 18,927 11,584
Nontaxable interest on securities 24 41 72 112 157 249 982
Dividends on Federal Home Loan Bank stock 481 467 439 387 362 1,774 1,091
Other interest income 217 197 156 104 95 674 322
Total interest and dividend income 38,900 37,869 37,153 35,664 35,055 149,586 133,470
Interest expense:
Deposits 4,136 3,835 3,591 3,502 3,445 15,064 12,504
Federal Home Loan Bank advances 3,708 3,816 3,509 3,344 2,886 14,377 9,992
Junior subordinated debentures 167 159 149 138 135 613 491
Other interest expense 1 1 1 5
Total interest expense 8,011 7,810 7,249 6,985 6,467 30,055 22,992
Net interest income 30,889 30,059 29,904 28,679 28,588 119,531 110,478
Provision for loan losses 200 1,300 700 400 2,900 2,600 5,650
Net interest income after provision for loan losses 30,689 28,759 29,204 28,279 25,688 116,931 104,828
Noninterest income:
Wealth management revenues 9,914 10,013 9,942 9,477 9,291 39,346 37,569
Mortgage banking revenues 3,097 3,036 2,919 2,340 4,541 11,392 13,183
Service charges on deposit accounts 946 942 901 883 945 3,672 3,702
Card interchange fees 904 894 902 802 858 3,502 3,385
Income from bank-owned life insurance 537 546 542 536 549 2,161 2,659
Loan related derivative income 470 1,452 1,144 148 912 3,214 3,243
Other income 342 400 456 324 224 1,522 1,388
Total noninterest income 16,210 17,283 16,806 14,510 17,320 64,809 65,129
Noninterest expense:
Salaries and employee benefits 17,083 17,251 17,358 16,795 16,528 68,487 67,221
Net occupancy 1,859 1,928 1,767 1,967 1,775 7,521 7,151
Equipment 1,198 1,380 1,313 1,467 1,556 5,358 6,208
Outsourced services 1,960 1,793 1,710 1,457 1,311 6,920 5,222
Legal, audit and professional fees 562 534 582 616 597 2,294 2,579
FDIC deposit insurance costs 389 308 469 481 390 1,647 1,878
Advertising and promotion 466 416 362 237 403 1,481 1,458
Amortization of intangibles 248 253 257 277 318 1,035 1,284
Debt prepayment penalties 431
Change in fair value of contingent consideration (333) (310) (643) (898)
Other expenses 2,322 2,891 2,488 2,299 2,095 10,000 8,569
Total noninterest expense 25,754 26,754 26,306 25,286 24,973 104,100 101,103
Income before income taxes 21,145 19,288 19,704 17,503 18,035 77,640 68,854
Income tax expense 13,163 6,326 6,505 5,721 5,873 31,715 22,373
Net income$7,982 $12,962 $13,199 $11,782 $12,162 $45,925 $46,481
Net income available to common shareholders:
Basic$7,958 $12,934 $13,170 $11,755 $12,137 $45,817 $46,384
Diluted$7,958 $12,934 $13,170 $11,755 $12,137 $45,817 $46,384
Weighted average common shares outstanding:
Basic 17,223 17,212 17,206 17,186 17,142 17,207 17,081
Diluted 17,349 17,318 17,316 17,293 17,245 17,338 17,208
Earnings per common share:
Basic$0.46 $0.75 $0.77 $0.68 $0.71 $2.66 $2.72
Diluted$0.46 $0.75 $0.76 $0.68 $0.70 $2.64 $2.70
Cash dividends declared per share$0.39 $0.39 $0.38 $0.38 $0.37 $1.54 $1.46


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Share and Equity Related Data:
Book value per share$23.99 $24.06 $23.59 $23.14 $22.76
Tangible book value per share - Non-GAAP (1)$19.75 $19.81 $19.32 $18.83 $18.44
Market value per share$53.25 $57.25 $51.55 $49.30 $56.05
Shares issued and outstanding at end of period 17,227 17,214 17,210 17,193 17,171
Capital Ratios:
Tier 1 risk-based capital11.65% (i)
11.69% 11.92% 11.54% 11.44%
Total risk-based capital12.45% (i)
12.53% 12.78% 12.38% 12.26%
Tier 1 leverage ratio8.79% (i)
8.83% 8.78% 8.58% 8.67%
Common equity tier 110.99% (i)
11.02% 11.23% 10.86% 10.75%
Equity to assets 9.12% 9.27% 9.28% 9.06% 8.92%
Tangible equity to tangible assets - Non-GAAP (1) 7.63% 7.76% 7.73% 7.51% 7.35%
(i) - estimated


For the Three Months Ended For the Twelve Months
Ended
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Dec 31,
2017
Dec 31,
2016
Performance Ratios:
Net interest margin (FTE)2.95%2.93%2.97%2.87%2.89% 2.93%3.02%
Return on average assets0.71%1.18%1.21%1.08%1.14% 1.04%1.16%
Return on average tangible assets - Non-GAAP (1)0.73%1.20%1.23%1.10%1.16% 1.06%1.19%
Return on average equity7.65%12.56%13.06%11.87%12.26% 11.26%11.96%
Return on average tangible equity - Non-GAAP (1)9.27%15.27%15.98%14.59%15.09% 13.73%14.82%

(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,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Dec 31,
2017
Dec 31,
2016
Wealth Management Results
Wealth Management Revenues:
Asset-based revenues 9,686 9,791 9,401 9,247 9,054 38,125 36,139
Transaction-based revenues 228 222 541 230 237 1,221 1,430
Total wealth management revenues$9,914 $10,013 $9,942 $9,477 $9,291 $39,346 $37,569
Assets Under Administration:
Balance at beginning of period$6,587,899 $6,403,501 $6,243,301 $6,063,293 $6,056,859 $6,063,293 $5,844,636
Net investment appreciation (depreciation) & income 163,681 270,549 162,924 220,423 (8,506) 817,577 277,848
Net client asset flows (36,943) (86,151) (2,724) (40,415) 14,940 (166,233) (59,191)
Balance at end of period$6,714,637 $6,587,899 $6,403,501 $6,243,301 $6,063,293 $6,714,637 $6,063,293
Mortgage Banking Results
Mortgage Banking Revenues:
Gains & commissions on loan sales, net$2,987 $2,952 $2,784 $2,268 $4,455 $10,991 $13,137
Residential mortgage servicing fee income, net 110 84 135 72 86 401 46
Total mortgage banking revenues$3,097 $3,036 $2,919 $2,340 $4,541 $11,392 $13,183
Residential Mortgage Loan Originations:
Originations for retention in portfolio$75,595 $90,378 $94,794 $57,907 $72,533 $318,674 $264,466
Originations for sale to secondary market (1) 143,834 143,112 144,491 102,441 185,626 533,878 600,800
Total mortgage loan originations$219,429 $233,490 $239,285 $160,348 $258,159 $852,552 $865,266
Residential Mortgage Loans Sold:
Sold with servicing rights retained$39,769 $37,823 $29,199 $22,567 $48,545 $129,358 $165,414
Sold with servicing rights released (1) 105,416 109,508 108,245 84,345 151,506 407,514 443,824
Total mortgage loans sold$145,185 $147,331 $137,444 $106,912 $200,051 $536,872 $609,238

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


END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Commercial:
Mortgages$1,072,487 $1,085,535 $1,009,096 $1,076,648 $1,074,186
Construction & development 138,008 126,257 112,177 123,841 121,371
Commercial & industrial 612,334 588,324 577,116 562,010 576,109
Total commercial 1,822,829 1,800,116 1,698,389 1,762,499 1,771,666
Residential Real Estate:
Mortgages 1,206,458 1,171,161 1,143,416 1,100,435 1,094,824
Homeowner construction 20,790 24,376 24,689 30,775 27,924
Total residential real estate 1,227,248 1,195,537 1,168,105 1,131,210 1,122,748
Consumer:
Home equity lines 258,114 259,880 263,934 258,695 264,200
Home equity loans 34,353 34,777 35,173 36,050 37,272
Other 31,527 32,768 34,499 36,406 38,485
Total consumer 323,994 327,425 333,606 331,151 339,957
Total loans$3,374,071 $3,323,078 $3,200,100 $3,224,860 $3,234,371


December 31, 2017 December 31, 2016
Balance% of Total Balance% of Total
Commercial Real Estate Loans by Property Location:
Rhode Island, Connecticut, Massachusetts$1,131,077 93.5% $1,105,539 92.5%
New York, New Jersey, Pennsylvania 66,857 5.5% 77,038 6.4%
New Hampshire 12,561 1.0% 12,980 1.1%
Total commercial real estate loans (1)$1,210,495 100.0% $1,195,557 100.0%
Residential Mortgages by Property Location:
Rhode Island, Connecticut, Massachusetts$1,210,895 98.6% $1,106,366 98.6%
New Hampshire, Vermont, Maine 12,061 1.0% 11,445 1.0%
New York, Virginia, New Jersey, Maryland, Pennsylvania 2,168 0.2% 2,648 0.2%
Ohio 862 0.1% 997 0.1%
Other 1,262 0.1% 1,292 0.1%
Total residential mortgages$1,227,248 100.0% $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.

Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Deposits:
Non-interest bearing demand deposits$578,410 $575,866 $533,147 $534,792 $521,165
Interest-bearing demand deposits 82,728 45,407 54,666 62,182 64,795
NOW accounts 466,605 448,128 448,617 454,344 427,707
Money market accounts 731,345 716,827 666,047 762,233 730,075
Savings accounts 368,524 367,912 364,002 362,281 358,397
Time deposits (in-market) 617,368 587,166 553,783 557,312 549,376
Wholesale brokered time deposits 397,727 415,775 400,927 382,427 412,237
Total deposits$3,242,707 $3,157,081 $3,021,189 $3,115,571 $3,063,752



CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Asset Quality Ratios:
Nonperforming assets to total assets 0.34% 0.44% 0.49% 0.54% 0.53%
Nonaccrual loans to total loans 0.45% 0.56% 0.63% 0.69% 0.68%
Total past due loans to total loans 0.59% 0.49% 0.66% 0.65% 0.76%
Allowance for loan losses to nonaccrual loans 174.14% 147.52% 132.00% 119.52% 117.89%
Allowance for loan losses to total loans 0.79% 0.82% 0.83% 0.82% 0.80%
Nonperforming Assets:
Commercial mortgages$4,954 $5,887 $6,422 $7,809 $7,811
Commercial & industrial 283 429 1,232 1,129 1,337
Residential real estate mortgages 9,414 11,699 11,815 12,253 11,736
Consumer 560 496 729 936 1,174
Total nonaccrual loans 15,211 18,511 20,198 22,127 22,058
Other real estate owned 131 1,038 1,342 1,410 1,075
Total nonperforming assets$15,342 $19,549 $21,540 $23,537 $23,133
Past Due Loans (30 days or more past due):
Commercial mortgages$4,960 $5,887 $6,422 $7,806 $8,708
Commercial & industrial 4,076 455 4,009 1,046 1,154
Residential real estate mortgages 7,855 7,802 8,857 10,533 12,226
Consumer loans 3,184 2,303 1,832 1,547 2,334
Total past due loans$20,075 $16,447 $21,120 $20,932 $24,422
Accruing loans 90 days or more past due$—
$—
$—
$—
$—
Nonaccrual loans included in past due loans$11,788 $13,216 $14,490 $18,081 $18,602


For the Three Months Ended For the Twelve Months
Ended
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Dec 31,
2017
Dec 31,
2016
Nonaccrual Loan Activity:
Balance at beginning of period$18,511 $20,198 $22,127 $22,058 $23,950 $22,058 $21,047
Additions to nonaccrual status 462 1,969 1,946 2,138 2,105 6,515 15,278
Loans returned to accruing status (1,316) (1,411) (778) (547) (718) (4,052) (1,516)
Loans charged-off (1,047) (694) (642) (79) (2,622) (2,462) (7,012)
Loans transferred to other real estate owned (98) (478) (30) (576) (1,075)
Payments, payoffs and other changes (1,399) (1,551) (2,357) (965) (627) (6,272) (4,664)
Balance at end of period$15,211 $18,511 $20,198 $22,127 $22,058 $15,211 $22,058
Allowance for Loan Losses:
Balance at beginning of period$27,308 $26,662 $26,446 $26,004 $25,649 $26,004 $27,069
Provision charged to earnings 200 1,300 700 400 2,900 2,600 5,650
Charge-offs (1,047) (694) (642) (79) (2,622) (2,462) (7,012)
Recoveries 27 40 158 121 77 346 297
Balance at end of period$26,488 $27,308 $26,662 $26,446 $26,004 $26,488 $26,004
Net Loan Charge-Offs (Recoveries):
Commercial mortgages$932 $535 $318 $ $2,510 $1,785 $5,760
Commercial & industrial 43 114 115 (105) (20) 167 603
Residential real estate mortgages 32 (1) 8 (4) 6 35 189
Consumer 13 6 43 67 49 129 163
Total$1,020 $654 $484 ($42)$2,545 $2,116 $6,715
Net charge-offs to average loans (annualized) 0.12% 0.08% 0.06% (0.01%) 0.31% 0.06% 0.21%


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 EndedDecember 31, 2017
September 30, 2017
December 31, 2016
Average
Balance
InterestYield/
Rate
Average
Balance
InterestYield/
Rate
Average
Balance
InterestYield/
Rate
Assets:
Commercial mortgages$1,076,786 $10,356 3.82 $1,027,517 $9,909 3.83 $1,086,772 $9,520 3.48
Construction & development 142,584 1,487 4.14 133,190 1,326 3.95 110,342 927 3.34
Commercial & industrial 598,790 6,897 4.57 590,915 6,684 4.49 575,983 6,927 4.78
Total commercial loans 1,818,160 $18,740 4.09 1,751,622 $17,919 4.06 1,773,097 $17,374 3.90
Residential real estate loans, including loans held for sale 1,226,369 11,727 3.79 1,210,686 11,541 3.78 1,140,492 10,652 3.72
Consumer loans 326,445 3,556 4.32 329,689 3,604 4.34 341,528 3,284 3.83
Total loans 3,370,974 34,023 4.00 3,291,997 33,064 3.98 3,255,117 31,310 3.83
Cash, federal funds sold and short-term investments 62,040 217 1.39 61,390 197 1.27 77,092 95 0.49
FHLBB stock 41,003 481 4.65 44,057 467 4.21 39,212 362 3.67
Taxable debt securities 756,322 4,719 2.48 751,735 4,655 2.46 636,277 3,703 2.32
Nontaxable debt securities 2,625 38 5.74 4,287 65 6.02 16,003 244 6.07
Total securities 758,947 4,757 2.49 756,022 4,720 2.48 652,280 3,947 2.41
Total interest-earning assets 4,232,964 39,478 3.70 4,153,466 38,448 3.67 4,023,701 35,714 3.53
Noninterest-earning assets 240,376 248,070 249,182
Total assets$4,473,340 $4,401,536 $4,272,883
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits$64,344 $25 0.15 $46,352 $30 0.26 $46,668 $16 0.14
NOW accounts 448,677 42 0.04 442,166 68 0.06 408,788 51 0.05
Money market accounts 743,966 807 0.43 680,755 642 0.37 761,582 574 0.30
Savings accounts 371,236 63 0.07 366,177 56 0.06 356,837 51 0.06
Time deposits (in-market) 606,732 1,765 1.15 565,402 1,566 1.10 552,474 1,419 1.02
Wholesale brokered time deposits 376,709 1,434 1.51 404,953 1,473 1.44 382,798 1,334 1.39
FHLBB advances 785,169 3,708 1.87 837,300 3,816 1.81 732,269 2,886 1.57
Junior subordinated debentures 22,681 167 2.92 22,681 159 2.78 22,681 135 2.37
Other 1 40 1 9.95
Total interest-bearing liabilities 3,419,514 8,011 0.93 3,365,787 7,810 0.92 3,264,137 6,467 0.79
Demand deposits 582,714 567,737 548,595
Other liabilities 53,544 55,150 63,410
Shareholders' equity 417,568 412,862 396,741
Total liabilities and shareholders' equity$4,473,340 $4,401,536 $4,272,883
Net interest income (FTE) $31,467 $30,638 $29,247
Interest rate spread 2.77 2.75 2.74
Net interest margin 2.95 2.93 2.89

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

For the Three Months EndedDec 31,
2017
Sep 30,
2017
Dec 31,
2016
Commercial loans$564 $555 $572
Nontaxable debt securities 14 24 87
Total$578 $579 $659


CONSOLIDATED AVERAGE BALANCE SHEETS (FTE Basis)
(Unaudited; Dollars in thousands)
For the Twelve Months EndedDecember 31, 2017
December 31, 2016
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Assets:
Commercial mortgages$1,055,127 $39,529 3.75 $1,030,289 $36,089 3.50
Construction & development 132,504 5,137 3.88 110,770 3,732 3.37
Commercial & industrial 584,647 26,347 4.51 584,307 27,398 4.69
Total commercial loans 1,772,278 71,013 4.01 1,725,366 67,219 3.90
Residential real estate loans, including loans held for sale 1,188,369 45,224 3.81 1,069,402 41,173 3.85
Consumer loans 330,783 13,947 4.22 342,431 13,328 3.89
Total loans 3,291,430 130,184 3.96 3,137,199 121,720 3.88
Cash, federal funds sold and short-term investments 60,033 674 1.12 75,997 322 0.42
FHLBB stock 43,256 1,774 4.10 33,643 1,091 3.24
Taxable debt securities 759,304 18,927 2.49 472,892 11,584 2.45
Nontaxable debt securities 6,347 384 6.05 24,939 1,520 6.09
Total securities 765,651 19,311 2.52 497,831 13,104 2.63
Total interest-earning assets 4,160,370 151,943 3.65 3,744,670 136,237 3.64
Noninterest-earning assets 238,636 249,808
Total assets$4,399,006 $3,994,478
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits$55,534 $62 0.11 $45,038 $49 0.11
NOW accounts 437,277 218 0.05 400,209 212 0.05
Money market accounts 722,590 2,688 0.37 741,925 2,035 0.27
Savings accounts 364,255 221 0.06 343,943 200 0.06
Time deposits (in-market) 571,733 6,208 1.09 546,460 5,486 1.00
Wholesale brokered time deposits 392,894 5,667 1.44 323,390 4,522 1.40
FHLBB advances 817,784 14,377 1.76 616,404 9,992 1.62
Junior subordinated debentures 22,681 613 2.70 22,681 491 2.16
Other 10 1 10.00 60 5 8.33
Total interest-bearing liabilities 3,384,758 30,055 0.89 3,040,110 22,992 0.76
Demand deposits 555,548 503,806
Other liabilities 50,684 62,021
Shareholders' equity 408,016 388,541
Total liabilities and shareholders' equity$4,399,006 $3,994,478
Net interest income (FTE) $121,888 $113,245
Interest rate spread 2.76 2.88
Net interest margin 2.93 3.02

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

For the Twelve Months EndedDec 31,
2017
Dec 31,
2016
Commercial loans$2,222 $2,229
Nontaxable debt securities 135 538
Total$2,357 $2,767


SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Tangible Book Value per Share:
Total shareholders' equity, as reported$413,284 $414,228 $406,042 $397,785 $390,804
Less:
Goodwill 63,909 63,909 63,909 64,059 64,059
Identifiable intangible assets, net 9,140 9,388 9,642 9,898 10,175
Total tangible shareholders' equity$340,235 $340,931 $332,491 $323,828 $316,570
Shares outstanding, as reported 17,227 17,214 17,210 17,193 17,171
Book value per share - GAAP$23.99 $24.06 $23.59 $23.14 $22.76
Tangible book value per share - Non-GAAP$19.75 $19.81 $19.32 $18.83 $18.44
Tangible Equity to Tangible Assets:
Total tangible shareholders' equity$340,235 $340,931 $332,491 $323,828 $316,570
Total assets, as reported$4,529,850 $4,469,230 $4,375,529 $4,388,763 $4,381,115
Less:
Goodwill 63,909 63,909 63,909 64,059 64,059
Identifiable intangible assets, net 9,140 9,388 9,642 9,898 10,175
Total tangible assets$4,456,801 $4,395,933 $4,301,978 $4,314,806 $4,306,881
Equity to assets - GAAP 9.12% 9.27% 9.28% 9.06% 8.92%
Tangible equity to tangible assets - Non-GAAP 7.63% 7.76% 7.73% 7.51% 7.35%


For the Three Months Ended For the Twelve Months Ended
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Dec 31,
2017
Dec 31,
2016
Return on Average Tangible Assets:
Net income, as reported$7,982 $12,962 $13,199 $11,782 $12,162 $45,925 $46,481
Total average assets, as reported$4,473,340 $4,401,536 $4,354,464 $4,365,471 $4,272,883 $4,399,006 $3,994,478
Less average balances of:
Goodwill 63,909 63,909 64,058 64,059 64,059 63,983 64,059
Identifiable intangible assets, net 9,261 9,511 9,767 10,027 10,330 9,639 10,810
Total average tangible assets$4,400,170 $4,328,116 $4,280,639 $4,291,385 $4,198,494 $4,325,384 $3,919,609
Return on average assets - GAAP 0.71% 1.18% 1.21% 1.08% 1.14% 1.04% 1.16%
Return on average tangible assets - Non-GAAP 0.73% 1.20% 1.23% 1.10% 1.16% 1.06% 1.19%
Return on Average Tangible Equity:
Net income, as reported$7,982 $12,962 $13,199 $11,782 $12,162 $45,925 $46,481
Total average equity, as reported$417,568 $412,862 $404,238 $397,117 $396,741 $408,016 $388,541
Less average balances of:
Goodwill 63,909 63,909 64,058 64,059 64,059 63,983 64,059
Identifiable intangible assets, net 9,261 9,511 9,767 10,027 10,330 9,639 10,810
Total average tangible equity$344,398 $339,442 $330,413 $323,031 $322,352 $334,394 $313,672
Return on average equity - GAAP 7.65% 12.56% 13.06% 11.87% 12.26% 11.26% 11.96%
Return on average tangible equity - Non-GAAP 9.27% 15.27% 15.98% 14.59% 15.09% 13.73% 14.82%

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

Source:Washington Trust Bancorp, Inc.