Market Overview

Washington Trust Reports Record Second Quarter 2018 Earnings

Share:

WESTERLY, R.I., July 23, 2018 (GLOBE NEWSWIRE) -- Washington Trust Bancorp, Inc. (NASDAQ:WASH), parent company of The Washington Trust Company, today announced second quarter 2018 net income of $17.7 million, or $1.01 per diluted share, compared to net income of $16.2 million, or $0.93 per diluted share, reported for the first quarter of 2018.

"Washington Trust is pleased to report another strong performance, with record earnings and diluted earnings per share for the second quarter of 2018," stated Edward O. Handy III, Washington Trust Chairman and Chief Executive Officer.  "Our continued profitability and solid financial metrics reflect the strength and stability of our corporation, as evidenced by our recent recognition by American Banker as one of the nation's top performing mid-tier banks."

Selected highlights for second quarter 2018 include:

  • Profitability ratios were at their highest levels in over 15 years, with returns on average equity and average assets of 16.99% and 1.53%, respectively.
  • Total revenues (net interest income and noninterest income) were up by 3% on a linked quarter basis and amounted to $49.1 million, a record level for Washington Trust.
  • Total loans were up by $103 million, or 3%, from the end of the prior quarter and up by $290 million, or 9%, from a year ago.
  • Total deposits were up by $65 million, or 2%, from the end of the first quarter and up by $300 million, or 10%, from a year ago.
  • In June, Washington Trust declared a quarterly dividend of 43 cents per share.  Year-to-date dividends declared amounted to 86 cents per share, an increase of 10 cents per share, or 13%, from the same period a year ago.

Net Interest Income
Net interest income was $33.1 million for the second quarter of 2018, up by $1.3 million, or 4%, from the first quarter of 2018.  Included in net interest income in the second quarter of 2018 was loan prepayment fee income of $483 thousand, compared to $46 thousand in the first quarter of 2018.  The net interest margin was 3.05% for the second quarter, up by 2 basis points from the preceding quarter.  Excluding the impact of loan prepayment fee income in each period, the net interest margin was 3.01%, down by 2 basis points from the preceding quarter.

Significant linked quarter changes included:

  • Average interest-earning assets increased by $91 million, largely due to loan growth.  The yield on interest-earning assets for the second quarter was 3.98%, up by 14 basis points from the preceding quarter.  Excluding the impact of loan prepayment fee income in each period, the yield on interest-earning assets was 3.94%, up by 10 basis points from the preceding quarter.  The yield benefited from increased market rates of interest.
  • Average interest-bearing liabilities increased by $100 million, reflecting increases in average wholesale funding balances (wholesale brokered time deposits and Federal Home Loan Bank advances) and in-market time deposits.  The cost of interest-bearing funds for the second quarter was 1.14%, up by 14 basis points from the preceding quarter, largely due to higher rates paid on promotional time certificates of deposit and wholesale funding liabilities.

Noninterest Income
Noninterest income totaled $16.0 million for the second quarter of 2018, up by $250 thousand, or 2%, from the first quarter of 2018.  Significant linked quarter changes included:

  • Wealth management revenues were $9.6 million for the second quarter of 2018, down by $671 thousand, or 7%, on a linked quarter basis.  Asset-based revenues were down by $819 thousand, or 8%, on a linked quarter basis.  The decline in asset-based revenues was largely attributable to client outflows that commenced in the latter portion of the first quarter of 2018 and continued into the second quarter.  These outflows were associated with the previously reported loss of certain client-facing personnel in the preceding quarter.  The decline in asset-based revenues was partially offset by an increase of $148 thousand in transaction-based revenues, largely attributable to tax preparation revenue, which is generally concentrated in the second quarter.

    Wealth management assets under administration were $6.2 billion at June 30, 2018, down by $124 million, or 2%, from the balance at March 31, 2018, with $257 million of net client outflows, partially offset by $133 million of net investment appreciation and income.
  • Mortgage banking revenues were $2.9 million for the second quarter of 2018, up by $103 thousand, or 4%, from the preceding quarter.  Residential mortgage loans sold to the secondary market were $105 million in the second quarter, up by $8 million from the $97 million sold in the first quarter of 2018.
  • Loan related derivative income was $668 thousand for the second quarter of 2018, up by $527 thousand from the preceding quarter, due to higher volume of commercial borrower loan related derivative transactions occurring in the second quarter.

Noninterest Expenses
Noninterest expenses totaled $26.3 million for the second quarter of 2018, down by $842 thousand, or 3%, from the first quarter.  The linked quarter comparison of noninterest expenses was impacted by the following:

  • As previously reported in the first quarter of 2018, one-time cash incentive bonuses of approximately $450 thousand were expensed and paid to non-executive employees as tax reform provided Washington Trust with an opportunity to further recognize and invest in our employees with special compensation enhancements.
  • In the second quarter of 2018, software system implementation expenses of $114 thousand were recognized, compared to $681 thousand recognized in the preceding quarter.  These were classified as other expenses and primarily related to the conversion of our wealth management accounting system, which was completed in April 2018.

Excluding the aforementioned items, noninterest expenses were up by $175 thousand, or 1%, on a linked quarter basis.  The linked quarter change included an increase in outsourced services and a decrease in equipment expenses, both of which were mainly due to the expansion of services provided by third party vendors.

Income tax expense totaled $4.7 million for the second quarter of 2018, up by $488 thousand from the preceding quarter, largely due to a higher level of pre-tax income.  The effective tax rate for the second quarter of 2018 was 21.2%, compared to 20.8% for the preceding quarter.  The linked quarter increase in the effective tax rate was due to a lower level of excess tax benefits on the settlement of share-based awards.

Investment Securities
The securities portfolio totaled $788 million at June 30, 2018, down by $12 million from the balance at March 31, 2018.  The decline was due to routine principal pay-downs on mortgage-backed securities, calls and maturities of debt securities and a temporary decline in the fair value of available for sale securities.  The overall decline was partially offset by purchases of debt securities in the second quarter totaling $21 million, with a weighted average yield of 3.58%.  Investment securities represented 17% of total assets at June 30, 2018.

Loans
Total loans amounted to $3.5 billion at June 30, 2018, up by $103 million, or 3%, from the end of the first quarter.  The residential real estate loan portfolio increased by $78 million, or 6%, from the balance at March 31, 2018 as origination volume was strong in the quarter.  Residential real estate loans originated for retention in portfolio were $128 million during the second quarter of 2018, compared to $68 million in the preceding quarter.  Total commercial loans increased by $30 million, or 2%, reflecting an increase of $28 million in the commercial and industrial ("C&I") portfolio, including approximately $22 million of completed commercial construction loans that were transferred to the C&I portfolio in the quarter.  Second quarter commercial real estate loan originations and advances were essentially offset by approximately $52 million of payoffs and the transfer of the commercial construction loans to the C&I portfolio in the quarter.  Total consumer loans declined by $4 million, or 1%, from the end of the first quarter.

Deposits and Borrowings
Total deposits amounted to $3.3 billion at June 30, 2018, up by $65 million, or 2%, from the end of the preceding quarter.  Included in total deposits were wholesale brokered time deposits of $446 million, which increased by $41 million from the balance at March 31, 2018.  Excluding the wholesale brokered time deposits, in-market deposits increased by $24 million from the end of the preceding quarter.  We experienced growth in in-market time deposits resulting from a promotional campaign that began in April 2018 and we implemented a program in June 2018 to transition approximately $70 million of wealth management client assets, previously held in outside accounts, into insured interest-bearing demand deposits on Washington Trust's balance sheet.  These increases were partially offset by a decline in money market and demand account balances, reflecting seasonal outflows of various institutional and governmental depositors based on their underlying business cycles.

Federal Home Loan Bank advances amounted to $901 million at June 30, 2018, up by $92 million from the balance at March 31, 2018 to fund asset growth.

Asset Quality
Total nonaccrual loans amounted to $11.7 million, or 0.34% of total loans, at June 30, 2018, up from $10.5 million, or 0.31% of total loans, at March 31, 2018.  Total past due loans amounted to $16.7 million, or 0.48% of total loans, at June 30, 2018, down from $19.4 million, or 0.57% of total loans, at March 31, 2018.

Based on the assessment of loan and credit quality metrics, loss exposures and changes in the loan portfolio during the quarter, a loan loss provision totaling $400 thousand was recognized in the second quarter of 2018.  There was no loan loss provision recognized in the preceding quarter.  Net charge-offs were nominal in the second quarter of 2018, totaling $90 thousand, compared to $624 thousand in the preceding quarter.  The allowance for loan losses amounted to $26.2 million, or 0.75% of total loans, at June 30, 2018, compared to $25.9 million, or 0.76% of total loans, at March 31, 2018.

Capital and Dividends
Total shareholders' equity was $422 million at June 30, 2018, up by $8.5 million from March 31, 2018, reflecting net income of $17.7 million, offset by $7.5 million in dividends declared and a $2.4 million reduction in the accumulated comprehensive income component of shareholders' equity primarily resulting from a decline in the fair value of available for sale securities.

Capital levels at June 30, 2018 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.61% at June 30, 2018, compared to 12.56% at March 31, 2018.  Book value per share amounted to $24.40 at June 30, 2018, compared to $23.93 at March 31, 2018.

The Board of Directors declared a quarterly dividend of 43 cents per share for the quarter ended June 30, 2018.  The dividend was paid on July 13, 2018 to shareholders of record on July 2, 2018.

Conference Call
Washington Trust will host a conference call to discuss its second quarter results, business highlights and outlook on Tuesday, July 24, 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 13681368; the audio replay will be available through August 3, 2018.  Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, http://ir.washtrust.com, and will be available through September 30, 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 http://ir.washtrust.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 our annual reports to shareholders, 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 our control.  These risks, uncertainties and other factors may cause our actual results, performance or achievements 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 or outflows 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 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, 2017, 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)
           
  Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Assets:          
Cash and due from banks $ 132,068   $ 85,680   $ 79,853   $ 128,580   $ 117,608  
Short-term investments   2,624     2,322     3,070     2,600     2,324  
Mortgage loans held for sale   35,207     19,269     26,943     28,484     32,784  
Securities:          
Available for sale, at fair value   776,693     787,842     780,954     714,355     749,486  
Held to maturity, at amortized cost   11,412     11,973     12,541     13,241     13,942  
Total securities   788,105     799,815     793,495     727,596     763,428  
Federal Home Loan Bank stock, at cost   46,281     41,127     40,517     42,173     44,640  
Loans:          
Total loans   3,490,230     3,387,406     3,374,071     3,323,078     3,200,100  
Less allowance for loan losses   26,174     25,864     26,488     27,308     26,662  
Net loans   3,464,056     3,361,542     3,347,583     3,295,770     3,173,438  
Premises and equipment, net   28,377     28,316     28,333     28,591     28,508  
Investment in bank-owned life insurance   79,319     73,782     73,267     72,729     72,183  
Goodwill   63,909     63,909     63,909     63,909     63,909  
Identifiable intangible assets, net   8,645     8,893     9,140     9,388     9,642  
Other assets   88,651     81,671     63,740     69,410     67,065  
Total assets $ 4,737,242   $ 4,566,326   $ 4,529,850   $ 4,469,230   $ 4,375,529  
Liabilities:          
Deposits:          
Noninterest-bearing deposits $ 577,656   $ 601,478   $ 578,410   $ 575,866   $ 533,147  
Interest-bearing deposits   2,743,955     2,654,956     2,664,297     2,581,215     2,488,042  
Total deposits   3,321,611     3,256,434     3,242,707     3,157,081     3,021,189  
Federal Home Loan Bank advances   901,053     808,677     791,356     814,045     869,733  
Junior subordinated debentures   22,681     22,681     22,681     22,681     22,681  
Other liabilities   70,326     65,453     59,822     61,195     55,884  
Total liabilities   4,315,671     4,153,245     4,116,566     4,055,002     3,969,487  
Shareholders' Equity:          
Common stock   1,080     1,079     1,077     1,076     1,076  
Paid-in capital   118,883     118,172     117,961     117,189     116,484  
Retained earnings   336,670     326,505     317,756     312,334     306,151  
Accumulated other comprehensive loss   (35,062 )   (32,675 )   (23,510 )   (16,371 )   (17,669 )
Total shareholders' equity   421,571     413,081     413,284     414,228     406,042  
Total liabilities and shareholders' equity $ 4,737,242   $ 4,566,326   $ 4,529,850   $ 4,469,230   $ 4,375,529  



CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
                 
  For the Three Months Ended   For the Six Months Ended
  Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
  Jun 30,
 2018
Jun 30,
 2017
Interest income:                
Interest and fees on loans $ 37,101   $ 34,578   $ 33,459   $ 32,509   $ 31,642     $ 71,679   $ 61,994  
Taxable interest on securities   5,358     5,118     4,719     4,655     4,844       10,476     9,553  
Nontaxable interest on securities   20     23     24     41     72       43     184  
Dividends on Federal Home Loan Bank stock   550     516     481     467     439       1,066     826  
Other interest income   257     205     217     197     156       462     260  
Total interest and dividend income   43,286     40,440     38,900     37,869     37,153       83,726     72,817  
Interest expense:                
Deposits   5,254     4,422     4,136     3,835     3,591       9,676     7,093  
Federal Home Loan Bank advances   4,707     3,983     3,708     3,816     3,509       8,690     6,853  
Junior subordinated debentures   214     183     167     159     149       397     287  
Other interest expense                             1  
Total interest expense   10,175     8,588     8,011     7,810     7,249       18,763     14,234  
Net interest income   33,111     31,852     30,889     30,059     29,904       64,963     58,583  
Provision for loan losses   400         200     1,300     700       400     1,100  
Net interest income after provision for loan losses   32,711     31,852     30,689     28,759     29,204       64,563     57,483  
Noninterest income:                
Wealth management revenues   9,602     10,273     9,914     10,013     9,942       19,875     19,419  
Mortgage banking revenues   2,941     2,838     3,097     3,036     2,919       5,779     5,259  
Service charges on deposit accounts   903     863     946     942     901       1,766     1,784  
Card interchange fees   961     847     904     894     902       1,808     1,704  
Income from bank-owned life insurance   537     515     537     546     542       1,052     1,078  
Loan related derivative income   668     141     470     1,452     1,144       809     1,292  
Other income   381     266     342     400     456       647     780  
Total noninterest income   15,993     15,743     16,210     17,283     16,806       31,736     31,316  
Noninterest expense:                
Salaries and employee benefits   17,304     17,772     17,194     17,362     17,418       35,076     34,335  
Net occupancy   1,930     2,002     1,859     1,928     1,767       3,932     3,734  
Outsourced services   2,350     1,873     1,960     1,793     1,710       4,223     3,167  
Equipment   1,069     1,180     1,198     1,380     1,313       2,249     2,780  
Legal, audit and professional fees   555     726     562     534     582       1,281     1,198  
FDIC deposit insurance costs   422     404     389     308     469       826     950  
Advertising and promotion   329     177     466     416     362       506     599  
Amortization of intangibles   247     248     248     253     257       495     534  
Change in fair value of contingent consideration           (333 )                 (310 )
Other expenses   2,082     2,748     2,211     2,780     2,428       4,830     4,605  
Total noninterest expense   26,288     27,130     25,754     26,754     26,306       53,418     51,592  
Income before income taxes   22,416     20,465     21,145     19,288     19,704       42,881     37,207  
Income tax expense   4,742     4,254     13,163     6,326     6,505       8,996     12,226  
Net income $ 17,674   $ 16,211   $ 7,982   $ 12,962   $ 13,199     $ 33,885   $ 24,981  
                 
Net income available to common shareholders $ 17,636   $ 16,173   $ 7,958   $ 12,934   $ 13,170     $ 33,809   $ 24,925  
                 
Weighted average common shares outstanding:                
  Basic   17,272     17,234     17,223     17,212     17,206       17,253     17,196  
  Diluted   17,387     17,345     17,349     17,318     17,316       17,384     17,312  
Earnings per common share:                
  Basic $ 1.02   $ 0.94   $ 0.46   $ 0.75   $ 0.77     $ 1.96   $ 1.45  
  Diluted $ 1.01   $ 0.93   $ 0.46   $ 0.75   $ 0.76     $ 1.94   $ 1.44  
                 
Cash dividends declared per share $ 0.43   $ 0.43   $ 0.39   $ 0.39   $ 0.38     $ 0.86   $ 0.76  


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
   
  Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Share and Equity Related Data:          
Book value per share $ 24.40   $ 23.93   $ 23.99   $ 24.06   $ 23.59  
Tangible book value per share - Non-GAAP (1) $ 20.20   $ 19.71   $ 19.75   $ 19.81   $ 19.32  
Market value per share $ 58.10   $ 53.75   $ 53.25   $ 57.25   $ 51.55  
Shares issued and outstanding at end of period   17,278     17,262     17,227     17,214     17,210  
           
Capital Ratios (2):          
Tier 1 risk-based capital   11.84%   11.78%   11.65%   11.69%   11.92%
Total risk-based capital   12.61%   12.56%   12.45%   12.53%   12.78%
Tier 1 leverage ratio   8.87%   8.84%   8.79%   8.83%   8.78%
Common equity tier 1   11.20%   11.13%   10.99%   11.02%   11.23%
           
Balance Sheet Ratios:          
Equity to assets   8.90%   9.05%   9.12%   9.27%   9.28%
Tangible equity to tangible assets - Non-GAAP (1)   7.48%   7.57%   7.63%   7.76%   7.73%
Loans to deposits (3)   105.3%   103.8%   104.1%   105.3%   106.1%


      For the Six Months Ended
  For the Three Months Ended  
  Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
  Jun 30,
 2018
Jun 30,
 2017
Performance Ratios (4):                
Net interest margin (5) 3.05% 3.03% 2.95% 2.93% 2.97%   3.04% 2.92%
Return on average assets (net income divided by average assets) 1.53% 1.45% 0.71% 1.17% 1.22%   1.49% 1.16%
Return on average tangible assets - Non-GAAP (1) 1.56% 1.48% 0.72% 1.19% 1.24%   1.52% 1.18%
Return on average equity (net income available for common shareholders divided by average equity) 16.99% 15.96% 7.56% 12.43% 13.07%   16.48% 12.54%
Return on average tangible equity - Non-GAAP (1) 20.58% 19.40% 9.17% 15.12% 15.99%   20.00% 15.38%
Efficiency ratio (6) 53.5% 57.0% 54.7% 56.5% 56.3%   55.2% 57.4%
  1. See the section labeled "SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures" at the end of this document.
  2. Estimated for June 30, 2018 and actuals for the remaining periods.
  3. Period-end balances of net loans and mortgage loans held as a percentage of total deposits.
  4. Annualized based on the actual number of days in the period.
  5. Fully taxable equivalent (FTE) net interest income as a percentage of average-earnings assets.
  6. Total noninterest expense as percentage of total revenues (net interest income and noninterest income).


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)
         
  For the Three Months Ended   For the Six Months Ended
  Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
  Jun 30,
 2018
Jun 30,
 2017
Wealth Management Results                
Wealth Management Revenues:                
Asset-based revenues $ 9,136   $ 9,955   $ 9,686   $ 9,791   $ 9,401     $ 19,091   $ 18,648  
Transaction-based revenues   466     318     228     222     541       784     771  
Total wealth management revenues $ 9,602   $ 10,273   $ 9,914   $ 10,013   $ 9,942     $ 19,875   $ 19,419  
                 
Assets Under Administration (AUA):                
Balance at beginning of period $ 6,343,720   $ 6,714,637   $ 6,587,899   $ 6,403,501   $ 6,243,301     $ 6,714,637   $ 6,063,293  
Net investment appreciation (depreciation) & income   133,450     (32,024 )   163,681     270,549     162,924       101,426     383,347  
Net client asset flows   (257,015 )   (338,893 )   (36,943 )   (86,151 )   (2,724 )     (595,908 )   (43,139 )
Balance at end of period $ 6,220,155   $ 6,343,720   $ 6,714,637   $ 6,587,899   $ 6,403,501     $ 6,220,155   $ 6,403,501  
                 
Percentage of AUA that are managed assets   92 %   92 %   93 %   92 %   93 %     92 %   93 %
                 
Mortgage Banking Results                
Mortgage Banking Revenues:                
Gains & commissions on loan sales, net $ 2,786   $ 2,679   $ 2,987   $ 2,952   $ 2,784     $ 5,465   $ 5,052  
Residential mortgage servicing fee income, net   155     159     110     84     135       314     207  
Total mortgage banking revenues $ 2,941   $ 2,838   $ 3,097   $ 3,036   $ 2,919     $ 5,779   $ 5,259  
                 
Residential Mortgage Loan Originations:                
Originations for retention in portfolio $ 128,479   $ 67,840   $ 75,595   $ 90,378   $ 94,794     $ 196,319   $ 152,701  
Originations for sale to secondary market (1)   122,693     87,720     143,834     143,112     144,491       210,413     246,932  
Total mortgage loan originations $ 251,172   $ 155,560   $ 219,429   $ 233,490   $ 239,285     $ 406,732   $ 399,633  
                 
Residential Mortgage Loans Sold:                
Sold with servicing rights retained $ 24,367   $ 33,575   $ 39,769   $ 37,823   $ 29,199     $ 57,942   $ 51,766  
Sold with servicing rights released (1)   81,054     63,265     105,416     109,508     108,245       144,319     192,590  
Total mortgage loans sold $ 105,421   $ 96,840   $ 145,185   $ 147,331   $ 137,444     $ 202,261   $ 244,356  
  1. Also includes loans originated in a broker capacity.


END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
   
  Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Loans:          
Commercial real estate (1) $ 1,218,643   $ 1,217,278   $ 1,210,495   $ 1,211,792   $ 1,121,273  
Commercial & industrial   632,029     603,830     612,334     588,324     577,116  
Total commercial   1,850,672     1,821,108     1,822,829     1,800,116     1,698,389  
           
Residential real estate (2)   1,327,418     1,249,890     1,227,248     1,195,537     1,168,105  
           
Home equity   283,744     285,723     292,467     294,657     299,107  
Other   28,396     30,685     31,527     32,768     34,499  
Total consumer   312,140     316,408     323,994     327,425     333,606  
Total loans $ 3,490,230   $ 3,387,406   $ 3,374,071   $ 3,323,078   $ 3,200,100  
  1. Commercial real estate loans consist of commercial mortgages and construction and development loans.  Commercial mortgages are loans secured by income producing property.
  2. Residential real estate loans consist of mortgage and homeowner construction loans secured by one- to four- family residential properties.
  June 30, 2018   December 31, 2017
  Balance % of Total   Balance % of Total
Commercial Real Estate Loans by Property Location:          
Rhode Island $ 346,215   28.4 %   $ 360,834   29.8 %
Connecticut   488,429   40.1       309,013   25.5  
Massachusetts   300,353   24.6       461,230   38.1  
Subtotal   1,134,997   93.1       1,131,077   93.4  
All other states   83,646   6.9       79,418   6.6  
Total commercial real estate loans $ 1,218,643   100.0 %   $ 1,210,495   100.0 %
           
Residential Real Estate Loans by Property Location:          
Rhode Island $ 347,605   26.2 %   $ 343,340   28.0 %
Connecticut   145,949   11.0       140,843   11.5  
Massachusetts   817,288   61.6       726,712   59.2  
Subtotal   1,310,842   98.8       1,210,895   98.7  
All other states   16,576   1.2       16,353   1.3  
Total residential real estate loans $ 1,327,418   100.0 %   $ 1,227,248   100.0 %


  Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Deposits:          
Noninterest-bearing demand deposits $ 577,656   $ 601,478   $ 578,410   $ 575,866   $ 533,147  
Interest-bearing demand deposits   136,640     83,249     82,728     45,407     54,666  
NOW accounts   481,905     470,112     466,605     448,128     448,617  
Money market accounts   604,954     693,748     731,345     716,827     666,047  
Savings accounts   375,983     376,608     368,524     367,912     364,002  
Time deposits (in-market)   698,286     625,965     617,368     587,166     553,783  
Wholesale brokered time deposits   446,187     405,274     397,727     415,775     400,927  
Total deposits $ 3,321,611   $ 3,256,434   $ 3,242,707   $ 3,157,081   $ 3,021,189  



CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
   
  Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Asset Quality Ratios: %        
Nonperforming assets to total assets   0.32 %   0.30 %   0.34 %   0.44 %   0.49 %
Nonaccrual loans to total loans   0.34 %   0.31 %   0.45 %   0.56 %   0.63 %
Total past due loans to total loans   0.48 %   0.57 %   0.59 %   0.49 %   0.66 %
Allowance for loan losses to nonaccrual loans   222.85 %   245.83 %   174.14 %   147.52 %   132.00 %
Allowance for loan losses to total loans   0.75 %   0.76 %   0.79 %   0.82 %   0.83 %
           
Nonperforming Assets:          
Commercial real estate $   $   $ 4,954   $ 5,887   $ 6,422  
Commercial & industrial   397     397     283     429     1,232  
Total commercial   397     397     5,237     6,316     7,654  
Residential real estate   10,206     9,340     9,414     11,699     11,815  
Home equity   1,133     771     544     480     620  
Other consumer   9     13     16     16     109  
Total consumer   1,142     784     560     496     729  
Total nonaccrual loans   11,745     10,521     15,211     18,511     20,198  
Other real estate owned   3,206     3,206     131     1,038     1,342  
Total nonperforming assets $ 14,951   $ 13,727   $ 15,342   $ 19,549   $ 21,540  
           
Past Due Loans (30 days or more past due):          
Commercial real estate $   $   $ 4,960   $ 5,887   $ 6,422  
Commercial & industrial   2,851     3,295     4,076     455     4,009  
Total commercial   2,851     3,295     9,036     6,342     10,431  
Residential real estate   11,243     11,806     7,855     7,802     8,857  
Home equity   2,585     4,235     3,141     2,268     1,806  
Other consumer   16     22     43     35     26  
Total consumer   2,601     4,257     3,184     2,303     1,832  
Total past due loans $ 16,695   $ 19,358   $ 20,075   $ 16,447   $ 21,120  
           
Accruing loans 90 days or more past due $   $   $   $   $  
Nonaccrual loans included in past due loans $ 8,575   $ 7,066   $ 11,788   $ 13,216   $ 14,490  


CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
  For the Three Months Ended   For the Six Months Ended
  Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
  Jun 30,
 2018
Jun 30,
 2017
Nonaccrual Loan Activity:                
Balance at beginning of period $ 10,521   $ 15,211   $ 18,511   $ 20,198   $ 22,127     $ 15,211   $ 22,058  
Additions to nonaccrual status   2,457     1,210     462     1,969     1,946       3,667     4,084  
Loans returned to accruing status   (475 )   (344 )   (1,316 )   (1,411 )   (778 )     (819 )   (1,325 )
Loans charged-off   (103 )   (690 )   (1,047 )   (694 )   (642 )     (793 )   (721 )
Loans transferred to other real estate owned       (3,074 )           (98 )     (3,074 )   (576 )
Payments, payoffs and other changes   (655 )   (1,792 )   (1,399 )   (1,551 )   (2,357 )     (2,447 )   (3,322 )
Balance at end of period $ 11,745   $ 10,521   $ 15,211   $ 18,511   $ 20,198     $ 11,745   $ 20,198  
                 
Allowance for Loan Losses:                
Balance at beginning of period $ 25,864   $ 26,488   $ 27,308   $ 26,662   $ 26,446     $ 26,488   $ 26,004  
Provision charged to earnings   400         200     1,300     700       400     1,100  
Charge-offs   (103 )   (690 )   (1,047 )   (694 )   (642 )     (793 )   (721 )
Recoveries   13     66     27     40     158       79     279  
Balance at end of period $ 26,174   $ 25,864   $ 26,488   $ 27,308   $ 26,662     $ 26,174   $ 26,662  
                 
Net Loan Charge-Offs (Recoveries):                
Commercial real estate $   $ 602   $ 932   $ 535   $ 318     $ 602   $ 318  
Commercial & industrial   (3 )   (23 )   43     114     115       (26 )   10  
Total commercial   (3 )   579     975     649     433       576     328  
Residential real estate   5         32     (1 )   8       5     4  
Home equity   73     28     (2 )   (7 )   12       101     55  
Other consumer   15     17     15     13     31       32     55  
Total consumer   88     45     13     6     43       133     110  
Total $ 90   $ 624   $ 1,020   $ 654   $ 484     $ 714   $ 442  
                 
Net charge-offs to average loans (annualized)   0.01 %   0.07 %   0.12 %   0.08 %   0.06 %     0.04 %   0.03 %


The following table presents average balance and interest rate information.  Tax-exempt income is converted to a 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.  Certain previously reported amounts have been reclassified to conform to current year's presentation.

CONSOLIDATED AVERAGE BALANCE SHEETS (FTE Basis)
(Unaudited; Dollars in thousands)
   
For the Three Months Ended June 30, 2018   March 31, 2018   June 30, 2017
  Average Balance Interest Yield/
Rate
  Average Balance Interest Yield/
Rate
  Average Balance Interest Yield/
 Rate
 
Assets:                      
Cash, federal funds sold and short-term investments $ 56,142   $ 257   1.84 %   $ 53,138   $ 205   1.56 %   $ 60,428   $ 156   1.04 %
Mortgage loans held for sale $ 30,203   $ 313   4.16     $ 24,424   $ 226   3.75     $ 21,977   $ 223   4.07  
Taxable debt securities   821,772     5,358   2.62       804,518     5,118   2.58       773,280     4,844   2.51  
Nontaxable debt securities   1,956     26   5.33       2,355     29   4.99       7,076     109   6.18  
Total securities   823,728     5,384   2.62       806,873     5,147   2.59       780,356     4,953   2.55  
FHLB stock   43,331     550   5.09       40,888     516   5.12       44,362     439   3.97  
Commercial real estate   1,225,926     13,463   4.40       1,218,702     12,346   4.11       1,162,002     11,032   3.81  
Commercial & industrial   622,141     7,569   4.88       608,784     6,823   4.55       576,312     6,607   4.60  
Total commercial   1,848,067   $ 21,032   4.56       1,827,486   $ 19,169   4.25       1,738,314   $ 17,639   4.07  
Residential real estate   1,275,171     12,426   3.91       1,228,379     11,929   3.94       1,140,918     10,865   3.82  
Home equity   284,188     3,278   4.63       287,176     3,160   4.46       296,971     3,047   4.12  
Other   29,696     360   4.86       30,706     370   4.89       35,082     417   4.77  
Total consumer   313,884     3,638   4.65       317,882     3,530   4.50       332,053     3,464   4.18  
Total loans   3,437,122     37,096   4.33       3,373,747     34,628   4.16       3,211,285     31,968   3.99  
Total interest-earning assets   4,390,526     43,600   3.98       4,299,070     40,722   3.84       4,118,408     37,739   3.68  
Noninterest-earning assets   238,290           230,638           236,056      
Total assets $ 4,628,816         $ 4,529,708         $ 4,354,464      
Liabilities and Shareholders' Equity:                      
Interest-bearing demand deposits $ 86,204   $ 101   0.47 %   $ 80,502   $ 28   0.14 %   $ 54,675   ($ 8 ) (0.06 )%
NOW accounts   460,712     57   0.05       449,298     54   0.05       437,282     57   0.05  
Money market accounts   664,127     960   0.58       718,664     880   0.50       711,711     640   0.36  
Savings accounts   375,690     57   0.06       368,012     57   0.06       361,545     52   0.06  
Time deposits (in-market)   662,969     2,265   1.37       617,878     1,820   1.19       559,442     1,460   1.05  
Wholesale brokered time deposits   430,118     1,814   1.69       409,243     1,583   1.57       392,734     1,390   1.42  
Total interest-bearing deposits   2,679,820     5,254   0.79       2,643,597     4,422   0.68       2,517,389     3,591   0.57  
FHLB advances   874,746     4,707   2.16       810,967     3,983   1.99       817,349     3,509   1.72  
Junior subordinated debentures   22,681     214   3.78       22,681     183   3.27       22,681     149   2.63  
Other                           13        
Total interest-bearing liabilities   3,577,247     10,175   1.14       3,477,245     8,588   1.00       3,357,432     7,249   0.87  
Noninterest-bearing demand deposits   574,258           584,557           543,781      
Other liabilities   60,878           56,951           49,013      
Shareholders' equity   416,433           410,955           404,238      
Total liabilities and shareholders' equity $ 4,628,816         $ 4,529,708         $ 4,354,464      
Net interest income (FTE)   $ 33,425         $ 32,134         $ 30,490    
Interest rate spread     2.84 %       2.84 %       2.81 %
Net interest margin     3.05 %       3.03 %       2.97 %

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

For the Three Months Ended Jun 30, 2018 Mar 31, 2018 Jun 30, 2017
Commercial loans $ 308   $ 276   $ 549  
Nontaxable debt securities   6     6     37  
Total $ 314   $ 282   $ 586  


               
CONSOLIDATED AVERAGE BALANCE SHEETS (FTE Basis)
(Unaudited; Dollars in thousands)
   
For the Six Months Ended June 30, 2018   June 30, 2017
  Average Balance Interest Yield/
Rate
  Average Balance Interest Yield/
 Rate
 
Assets:              
Cash, federal funds sold and short-term investments $ 54,649   $ 462   1.70 %   $ 58,323   $ 260   0.90 %
Mortgage loans for sale   27,329     539   3.98       23,194     445   3.87  
Taxable debt securities   813,193     10,476   2.60       764,666     9,553   2.52  
Nontaxable debt securities   2,154     55   5.15       9,286     282   6.12  
Total securities   815,347     10,531   2.60       773,952     9,835   2.56  
FHLB stock   42,116     1,066   5.10       43,994     826   3.79  
Commercial real estate   1,222,136     25,809   4.26       1,184,294     21,588   3.68  
Commercial & industrial   615,698     14,392   4.71       575,162     12,765   4.48  
Total commercial   1,837,834     40,201   4.41       1,759,456     34,353   3.94  
Residential real estate   1,251,904     24,355   3.92       1,134,516     21,511   3.82  
Home equity   285,684     6,439   4.55       297,481     5,924   4.02  
Other   30,188     729   4.87       36,064     863   4.83  
Total consumer   315,872     7,168   4.58       333,545     6,787   4.10  
Total loans   3,405,610     71,724   4.25       3,227,517     62,651   3.91  
Total interest-earning assets   4,345,051     84,322   3.91       4,126,980     74,017   3.62  
Noninterest-earning assets   234,485           232,957      
Total assets $ 4,579,536         $ 4,359,937      
Liabilities and Shareholders' Equity:              
Interest-bearing demand deposits $ 83,368   $ 129   0.31 %   $ 55,722   $ 7   0.03 %
NOW accounts   455,036     111   0.05       428,998     108   0.05  
Money market accounts   691,245     1,840   0.54       732,988     1,239   0.34  
Savings accounts   371,873     114   0.06       359,730     102   0.06  
Time deposits (in-market)   640,548     4,085   1.29       557,161     2,878   1.04  
Wholesale brokered time deposits   419,738     3,397   1.63       394,992     2,759   1.41  
Total interest-bearing deposits   2,661,808     9,676   0.73       2,529,591     7,093   0.57  
FHLB advances   843,033     8,690   2.08       824,442     6,853   1.68  
Junior subordinated debentures   22,681     397   3.53       22,681     287   2.55  
Other               20     1   10.08  
Total interest-bearing liabilities   3,527,522     18,763   1.07       3,376,734     14,234   0.85  
Noninterest-bearing demand deposits   579,379           535,544      
Other liabilities   58,926           46,962      
Shareholders' equity   413,709           400,697      
Total liabilities and shareholders' equity $ 4,579,536         $ 4,359,937      
Net interest income (FTE)   $ 65,559         $ 59,783    
Interest rate spread     2.84 %       2.77 %
Net interest margin     3.04 %       2.92 %

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

     
For the Six Months Ended Jun 30, 2018 Jun 30, 2017
Commercial loans $ 584   $ 1,102  
Nontaxable debt securities   12     98  
Total $ 596   $ 1,200  


SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)
   
  Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Tangible Book Value per Share:          
Total shareholders' equity, as reported $ 421,571   $ 413,081   $ 413,284   $ 414,228   $ 406,042  
Less:          
Goodwill   63,909     63,909     63,909     63,909     63,909  
Identifiable intangible assets, net   8,645     8,893     9,140     9,388     9,642  
Total tangible shareholders' equity $ 349,017   $ 340,279   $ 340,235   $ 340,931   $ 332,491  
           
Shares outstanding, as reported   17,278     17,262     17,227     17,214     17,210  
           
Book value per share - GAAP $ 24.40   $ 23.93   $ 23.99   $ 24.06   $ 23.59  
Tangible book value per share - Non-GAAP $ 20.20   $ 19.71   $ 19.75   $ 19.81   $ 19.32  
           
Tangible Equity to Tangible Assets:          
Total tangible shareholders' equity $ 349,017   $ 340,279   $ 340,235   $ 340,931   $ 332,491  
           
Total assets, as reported $ 4,737,242   $ 4,566,326   $ 4,529,850   $ 4,469,230   $ 4,375,529  
Less:          
Goodwill   63,909     63,909     63,909     63,909     63,909  
Identifiable intangible assets, net   8,645     8,893     9,140     9,388     9,642  
Total tangible assets $ 4,664,688   $ 4,493,524   $ 4,456,801   $ 4,395,933   $ 4,301,978  
           
Equity to assets - GAAP   8.90 %   9.05 %   9.12 %   9.27 %   9.28 %
Tangible equity to tangible assets - Non-GAAP   7.48 %   7.57 %   7.63 %   7.76 %   7.73 %


  For the Three Months Ended   For the Six Months Ended
  Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
  Jun 30,
 2018
Jun 30,
 2017
Return on Average Tangible Assets:                
Net income, as reported $ 17,674   $ 16,211   $ 7,982   $ 12,962   $ 13,199     $ 33,885   $ 24,981  
                 
Total average assets, as reported $ 4,628,816   $ 4,529,708   $ 4,473,340   $ 4,401,536   $ 4,354,464     $ 4,579,536   $ 4,359,937  
Less average balances of:                
Goodwill   63,909     63,909     63,909     63,909     64,058       63,909     64,059  
Identifiable intangible assets, net   8,766     9,014     9,261     9,511     9,767       8,889     9,896  
Total average tangible assets $ 4,556,141   $ 4,456,785   $ 4,400,170   $ 4,328,116   $ 4,280,639     $ 4,506,738   $ 4,285,982  
                 
Return on average assets - GAAP   1.53 %   1.45 %   0.71 %   1.17 %   1.22 %     1.49 %   1.16 %
Return on average tangible assets - Non-GAAP   1.56 %   1.48 %   0.72 %   1.19 %   1.24 %     1.52 %   1.18 %
                 
Return on Average Tangible Equity:                
Net income available to common shareholders, as reported $ 17,636   $ 16,173   $ 7,958   $ 12,934   $ 13,170     $ 33,809   $ 24,925  
                 
Total average equity, as reported $ 416,433   $ 410,955   $ 417,568   $ 412,862   $ 404,238     $ 413,709   $ 400,697  
Less average balances of:                
Goodwill   63,909     63,909     63,909     63,909     64,058       63,909     64,059  
Identifiable intangible assets, net   8,766     9,014     9,261     9,511     9,767       8,889     9,896  
Total average tangible equity $ 343,758   $ 338,032   $ 344,398   $ 339,442   $ 330,413     $ 340,911   $ 326,742  
                 
Return on average equity - GAAP   16.99 %   15.96 %   7.56 %   12.43 %   13.07 %     16.48 %   12.54 %
Return on average tangible equity - Non-GAAP   20.58 %   19.40 %   9.17 %   15.12 %   15.99 %     20.00 %   15.38 %

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

Primary Logo

View Comments and Join the Discussion!