News Column

Washington Trust Reports Strong Fourth Quarter and Record 2013 Earnings

January 28, 2014

Solid Growth in Loans, Deposits and Wealth Management Business WESTERLY, R.I. --(BUSINESS WIRE)-- Washington Trust Bancorp, Inc. (NASDAQ Global Select; symbol: WASH), parent company of The Washington Trust Company , today announced net income of $9.8 million , or 58 cents per diluted share, for the fourth quarter of 2013. These results compared to third quarter of 2013 net income of $10.0 million , or 59 cents per diluted share, and fourth quarter of 2012 net income of $9.0 million , or 55 cents per diluted share. For the year ended December 31, 2013 , net income totaled $36.2 million , or $2.16 per diluted share, up from the $35.1 million , or $2.13 per diluted share, reported for 2012. The returns on average equity and average assets for 2013 were 11.65% and 1.17%, respectively, compared to 11.97% and 1.16%, respectively, for 2012. " Washington Trust's strong fourth quarter performance led to record full-year 2013 earnings," stated Joseph J. MarcAurele , Washington Trust Chairman and CEO. "We continued to build relationships with individuals and businesses throughout the region, which contributed to solid loan and deposit growth." Selected highlights for the fourth quarter included: Loan growth was strong in the fourth quarter, totaling $109.1 million , or 5%. Total loans amounted to $2.46 billion at December 31, 2013 , up by 7% from a year ago. Deposit growth continued in the fourth quarter with an increase of $50.5 million , or 2%, from the end of the third quarter. Total deposits reached $2.51 billion at December 31, 2013, up by 8% from a year ago. Wealth management assets under administration grew by $186.4 million , or 4%, to $4.78 billion . Wealth management revenues rose by $1.2 million , or 15%, on a linked quarter basis. Asset quality indicators continued to improve. Nonperforming assets were down by 4% and delinquencies were down 9% from September 30, 2013 . In December, the quarterly dividend was increased to 27 cents per share, representing the third quarterly dividend increase during 2013. Net Interest Income Net interest income totaled $23.5 million for the fourth quarter of 2013, up modestly from $23.4 million for the third quarter of 2013. The net interest margin for the fourth quarter of 2013 was 3.24%, compared to 3.29% for the third quarter of 2013. The yield on interest-earning assets declined by 10 basis points from the previous quarter largely due to lower yields on commercial loans. Meanwhile, the cost of funds improved by 4 basis points. Noninterest Income Noninterest income totaled $15.1 million for the fourth quarter of 2013, compared to $17.4 million for the third quarter of 2013. Included in noninterest income in the fourth quarter was an other-than-temporary impairment ("OTTI") charge of $717 thousand on a trust preferred collateralized debt obligation investment holding. The security has been sold in January 2014 with a realized loss equal to the impairment charge. Excluding the OTTI charge, noninterest income declined by $1.6 million , or 9%, compared to the third quarter of 2013. Other significant linked quarter changes included the following: Wealth management revenues totaled $8.8 million for the fourth quarter, up from the $7.6 million recognized in the previous quarter. This included: An increase of $375 thousand , or 5%, in asset-based revenues, which totaled $7.7 million for the fourth quarter. An increase of $805 thousand in transaction-based revenues, which totaled $1.1 million for the fourth quarter. This increase was largely due to an above-average level of insurance commission income. Transaction-based revenues were approximately $700 thousand higher than the average amount recognized for each of the previous three quarters. Net gains on loan sales and commissions on loans originated for others declined by $2.3 million compared to the third quarter. Included in the previous quarter were gains of $977 thousand resulting from the sale of residential mortgage portfolio loans. Excluding the third quarter 2013 portfolio loan sale, these revenues declined by $1.4 million , reflecting continued declines in refinancing activity due to higher mortgage interest rates. Residential mortgage loans sold to the secondary market amounted to $65.9 million in the fourth quarter, compared to $114.4 million in the previous quarter. Net gains on interest rate swap contracts increased by $672 thousand largely due to an above-average level of customer-related interest rate swap transactions in the fourth quarter of 2013. Net gains on interest rate swap contracts for the fourth quarter of 2013 were approximately $650 thousand higher than the average amount of net gains recognized for each of the first three quarters of 2013. Merchant processing fee revenue was down by $1.1 million , or 32%, reflecting a seasonal decline in the volume of transactions processed for customers. See discussion below regarding the corresponding decrease in merchant processing expenses. Noninterest Expenses Noninterest expenses totaled $24.0 million for the fourth quarter of 2013, compared to $25.5 million for the previous quarter. Debt prepayment penalties of $1.1 million were incurred in the third quarter of 2013; there were none incurred in the fourth quarter. In addition, a charitable contribution expense (classified in other expenses) of $400 thousand was incurred in the fourth quarter of 2013; there was none incurred in the previous quarter. Excluding these items, noninterest expenses for the fourth quarter of 2013 decreased by $755 thousand from the previous quarter. Significant changes, on this basis, included the following: Salaries and employee benefits expenses were down by $212 thousand , or 1%, primarily as a result of a modification to the Corporation's defined benefit pension plans adopted in the third quarter. Merchant processing expenses were down by $926 thousand , or 32%, on a linked quarter basis. This decline is consistent with the decline in merchant processing fee income described above. Income tax expense amounted to $4.4 million for the fourth quarter of 2013, compared to $4.0 million for the previous quarter. The effective tax rate for the fourth quarter was 31.0%, compared to 31.5% for the third quarter. Based on current federal and applicable state income tax statutes, the Corporation currently expects the 2014 effective tax rate to be approximately 31.7%. Asset Quality Total nonaccrual loans amounted to $18.3 million , or 0.74% of total loans, at December 31, 2013, compared to $19.5 million , or 0.83%, at September 30, 2013. Total past due loans amounted to $21.9 million , or 0.89% of total loans, at December 31, 2013, compared to $24.0 million , or 1.02%, at September 30, 2013. The loan loss provision charged to earnings in the fourth quarter of 2013 totaled $400 thousand compared to $700 thousand in the third quarter. Net charge-offs amounted to $522 thousand in the fourth quarter of 2013, compared to $576 thousand in the third quarter of 2013. The allowance for loan losses was $27.9 million , or 1.13% of total loans, at December 31, 2013, compared to $28.0 million , or 1.19% of total loans, at September 30, 2013. The decline in the ratio of the allowance for loan losses to total loans reflects charge-offs, a decrease in specific reserves on impaired loans and overall improvement in asset and credit quality indicators. Loans Total loans of $2.46 billion at December 31, 2013 increased by $109.1 million , or 5%, from the balance at September 30, 2013 and by $168.9 million , or 7%, from a year ago. Significant changes included: Commercial loan portfolio growth of $65.4 million , or 5.0%, in the fourth quarter and $110.9 million , or 9.0%, from a year ago, reflecting growth in both commercial real estate and commercial and industrial loan portfolios. Residential real estate loan portfolio growth of $41.0 million , or 6%, in the fourth quarter and $55.0 million , or 8%, in the last twelve months. Deposits Total deposits of $2.51 billion at December 31, 2013 grew by $50.5 million , or 2%, from September 30, 2013, and by $192.7 million , or 8%, from a year ago. Significant changes included: Demand deposit and NOW account growth of $29.2 million , or 4%, in the fourth quarter and $79.5 million , or 12%, from a year ago. Money market and savings account growth of $47.6 million , or 5%, in the fourth quarter and $192.7 million , or 25%, in the last twelve months. Time deposit balance decreases of $26.3 million , or 3%, in the fourth quarter and $79.5 million , or 9%, from a year ago. Capital Management Capital levels continued to exceed the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 13.29% at December 31, 2013, compared to 13.44% at September 30, 2013 and 13.26% at December 31, 2012. Total shareholder's equity was $329.6 million at December 31, 2013, up by $6.1 million from September 30, 2013. Dividends Declared The Board of Directors declared a quarterly dividend of 27 cents per share for the quarter ended December 31, 2013. The dividend was paid on January 14, 2014 to shareholders of record on January 2, 2014. Conference Call Washington Trust will host a conference call to discuss fourth quarter results, business highlights and outlook on Wednesday, January 29, 2014 at 8:30 am (Eastern Time) . Individuals may dial in to the call at 1-888-317-6016. An audio replay of the call will be available by dialing 1-877-344-7529 and entering Conference Number 10038876; the audio replay will be available until 9:00 a.m. on February 13, 2014. A webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrust.com , shortly after the conclusion of the call and will be available through March 31, 2014. Background Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company , a state-chartered bank headquartered in Westerly, Rhode Island . Founded in 1800, Washington Trust is the oldest community bank in the nation and is the largest independent bank headquartered in Rhode Island . Washington Trust offers a full range of financial services, including commercial banking, small business 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 The NASDAQ Global Select® Stock Market under the symbol WASH. Investor information is available on the Corporation’s web site: www.washtrust.com . Forward-Looking Statements This press release contains statements that are “forward-looking statements”. We may also make written or oral 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 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: continued weakness in general national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets, volatility and disruption in national and international financial markets, additional government intervention in the U.S. financial system, 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 Washington Trust's competition, changes in legislation or regulation and accounting principles, policies and guidelines, and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission and as updated by our Quarterly Reports on Form 10-Q, 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 press release, and Washington Trust assumes 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, except par value) Dec 31 , 2013 Dec 31 , 2012 Assets: Cash and due from banks $81,939 $73,474 Short-term investments 3,378 19,176 Mortgage loans held for sale, at fair value 11,636 50,056 Securities: Available for sale, at fair value 392,903 375,498 Held to maturity, at amortized cost (fair value $29,865 in 2013 and $41,420 in 2012) 29,905 40,381 Total securities 422,808 415,879 Federal Home Loan Bank stock, at cost 37,730 40,418 Loans: Commercial 1,363,335 1,252,419 Residential real estate 772,674 717,681 Consumer 326,875 323,903 Total loans 2,462,884 2,294,003 Less allowance for loan losses 27,886 30,873 Net loans 2,434,998 2,263,130 Premises and equipment, net 25,402 27,232 Investment in bank-owned life insurance 56,673 54,823 Goodwill 58,114 58,114 Identifiable intangible assets, net 5,493 6,173 Other assets 50,696 63,409 Total assets $3,188,867 $3,071,884 Liabilities: Deposits: Demand deposits $440,785 $379,889 NOW accounts 309,771 291,174 Money market accounts 666,646 496,402 Savings accounts 297,357 274,934 Time deposits 790,762 870,232 Total deposits 2,505,321 2,312,631 Federal Home Loan Bank advances 288,082 361,172 Junior subordinated debentures 22,681 32,991 Other borrowings 178 1,212 Other liabilities 42,959 68,226 Total liabilities 2,859,221 2,776,232 Shareholders’ Equity: Common stock of $.0625 par value; authorized 30,000,000 shares; issued and outstanding 16,613,561 shares in 2013 and 16,379,771 shares in 2012 1,038 1,024 Paid-in capital 97,566 91,453 Retained earnings 232,595 213,674 Accumulated other comprehensive loss (1,553 ) (10,499 ) Total shareholders’ equity 329,646 295,652 Total liabilities and shareholders’ equity $3,188,867 $3,071,884 Washington Trust Bancorp, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (unaudited) (Dollars and shares in thousands, except per share amounts) Three Months Twelve Months Periods ended December 31 , 2013 2012 2013 2012 Interest income: Interest and fees on loans $25,649 $26,109 $102,481 $102,656 Interest on securities: Taxable 3,005 3,241 11,008 15,359 Nontaxable 618 664 2,553 2,699 Dividends on corporate stock and Federal Home Loan Bank stock 35 49 148 256 Other interest income 59 27 158 91 Total interest and dividend income 29,366 30,090 116,348 121,061 Interest expense: Deposits 3,066 3,380 12,420 13,590 Federal Home Loan Bank advances 2,534 3,148 10,643 14,957 Junior subordinated debentures 241 394 1,484 1,570 Other interest expense 4 4 16 248 Total interest expense 5,845 6,926 24,563 30,365 Net interest income 23,521 23,164 91,785 90,696 Provision for loan losses 400 600 2,400 2,700 Net interest income after provision for loan losses 23,121 22,564 89,385 87,996 Noninterest income: Wealth management revenues 8,810 7,790 31,825 29,641 Service charges on deposit accounts 820 837 3,256 3,193 Merchant processing fees 2,271 2,232 10,220 10,159 Card interchange fees 775 636 2,788 2,480 Income from bank-owned life insurance 458 479 1,850 2,448 Net gains on loan sales and commissions on loans originated for others 1,551 4,476 13,085 14,092 Net realized gains on securities — 924 — 1,223 Net gains on interest rate swap contracts 726 168 951 255 Equity in earnings (losses) of unconsolidated subsidiaries (42 ) 82 (107 ) 196 Other income 468 275 1,701 1,748 Noninterest income, excluding other-than-temporary impairment losses 15,837 17,899 65,569 65,435 Total other-than-temporary impairment losses on securities 319 57 (294 ) (28 ) Portion of loss recognized in other comprehensive income (before tax) (1,036 ) (69 ) (3,195 ) (193 ) Net impairment losses recognized in earnings (717 ) (12 ) (3,489 ) (221 ) Total noninterest income 15,120 17,887 62,080 65,214 Noninterest expense: Salaries and employee benefits 14,428 15,661 60,052 59,786 Net occupancy 1,487 1,518 5,769 6,039 Equipment 1,189 1,222 4,847 4,640 Merchant processing costs 1,936 1,903 8,682 8,593 Outsourced services 1,072 900 3,662 3,560 Legal, audit and professional fees 639 641 2,330 2,240 FDIC deposit insurance costs 431 419 1,761 1,730 Advertising and promotion 321 435 1,464 1,730 Amortization of intangibles 164 173 680 728 Foreclosed property costs 36 158 258 762 Debt prepayment penalties — 1,774 1,125 3,908 Other expenses 2,345 2,617 8,155 8,622 Total noninterest expense 24,048 27,421 98,785 102,338 Income before income taxes 14,193 13,030 52,680 50,872 Income tax expense 4,404 4,007 16,527 15,798 Net income $9,789 $9,023 $36,153 $35,074 Weighted average common shares outstanding - basic 16,602 16,376 16,506 16,358 Weighted average common shares outstanding - diluted 16,770 16,425 16,664 16,401 Per share information: Basic earnings per common share $0.59 $0.55 $2.18 $2.13 Diluted earnings per common share $0.58 $0.55 $2.16 $2.13 Cash dividends declared per share $0.27 $0.24 $1.03 $0.94 Washington Trust Bancorp, Inc. and Subsidiaries SELECTED FINANCIAL HIGHLIGHTS (unaudited) At or for the Quarters Ended (Dollars and shares in thousands, except per share amounts) Dec 31 , 2013 Sep 30 , 2013 Jun 30 , 2013 Mar 31 , 2013 Dec 31 , 2012 Financial Data: Total assets $3,188,867 $3,131,958 $3,061,307 $3,051,848 $3,071,884 Total loans 2,462,884 2,353,766 2,384,980 2,325,045 2,294,003 Total securities 422,808 419,349 350,517 387,102 415,879 Total deposits 2,505,321 2,454,831 2,304,609 2,319,641 2,312,631 Total shareholders' equity 329,646 323,585 303,370 301,291 295,652 Net interest income 23,521 23,388 22,409 22,467 23,164 Provision for loan losses 400 700 700 600 600 Noninterest income, excluding OTTI losses 15,837 17,400 16,394 15,938 17,899 Net OTTI losses recognized in earnings (717 ) — — (2,772 ) (12 ) Noninterest expenses 24,048 25,548 25,005 24,184 27,421 Income tax expense 4,404 4,580 4,115 3,428 4,007 Net income 9,789 9,960 8,983 7,421 9,023 Share Data: Basic earnings per common share $0.59 $0.60 $0.54 $0.45 $0.55 Diluted earnings per common share $0.58 $0.59 $0.54 $0.45 $0.55 Dividends declared per share $0.27 $0.26 $0.25 $0.25 $0.24 Book value per share $19.84 $19.51 $18.40 $18.34 $18.05 Tangible book value per share - Non-GAAP (1) $16.01 $15.66 $14.52 $14.44 $14.13 Market value per share $37.22 $31.43 $28.52 $27.38 $26.31 Shares outstanding at end of period 16,614 16,589 16,487 16,425 16,380 Weighted average common shares outstanding - basic 16,602 16,563 16,454 16,401 16,376 Weighted average common shares outstanding - diluted 16,770 16,696 16,581 16,449 16,425 Key Ratios: Return on average assets 1.24 % 1.29 % 1.18 % 0.98 % 1.19 % Return on average tangible assets - Non-GAAP (1) 1.26 % 1.31 % 1.21 % 1.01 % 1.21 % Return on average equity 11.98 % 12.82 % 11.84 % 9.91 % 12.01 % Return on average tangible equity - Non-GAAP (1) 14.80 % 16.13 % 15.01 % 12.62 % 15.29 % Capital Ratios: Tier 1 risk-based capital 12.12% (i) 12.23 % 11.85 % 12.25 % 12.01 % Total risk-based capital 13.29% (i) 13.44 % 13.06 % 13.50 % 13.26 % Tier 1 leverage ratio 9.41% (i) 9.41 % 9.32 % 9.53 % 9.30 % Equity to assets 10.34 % 10.33 % 9.91 % 9.87 % 9.62 % Tangible equity to tangible assets - Non-GAAP (1) 8.51 % 8.47 % 7.99 % 7.94 % 7.69 % (i) - estimated Wealth Management Assets under Administration: Balance at beginning of period $4,595,594 $4,433,574 $4,420,076 $4,199,640 $4,242,520 Net investment appreciation (depreciation) & income 248,727 190,931 (20,956 ) 213,979 (5,887 ) Net client cash flows (62,363 ) (28,911 ) 34,454 6,457 (36,993 ) Balance at end of period $4,781,958 $4,595,594 $4,433,574 $4,420,076 $4,199,640 (1) See the section labeled “Supplemental Information - Non-GAAP Financial Measures” at the end of this document. Washington Trust Bancorp, Inc. and Subsidiaries SELECTED FINANCIAL HIGHLIGHTS (unaudited) Years Ended (Dollars and shares in thousands, except per share amounts) Dec 31 , 2013 Dec 31 , 2012 Financial Data: Net interest income $91,785 $90,696 Provision for loan losses 2,400 2,700 Noninterest income, excluding OTTI losses 65,569 65,435 Net OTTI losses recognized in earnings (3,489 ) (221 ) Noninterest expenses 98,785 102,338 Income tax expense 16,527 15,798 Net income 36,153 35,074 Share Data: Basic earnings per common share $2.18 $2.13 Diluted earnings per common share $2.16 $2.13 Dividends declared per share $1.03 $0.94 Weighted average common shares outstanding - basic 16,506 16,358 Weighted average common shares outstanding - diluted 16,664 16,401 Key Ratios: Return on average assets 1.17 % 1.16 % Return on average tangible assets - Non-GAAP (1) 1.20 % 1.18 % Return on average equity 11.65 % 11.97 % Return on average tangible equity - Non-GAAP (1) 14.68 % 15.35 % Asset Quality Data: Allowance for Loan Losses: Balance at beginning of period $30,873 $29,802 Provision charged to earnings 2,400 2,700 Charge-offs (6,022 ) (2,335 ) Recoveries 635 706 Balance at end of period $27,886 $30,873 Net Loan Charge-Offs (Recoveries): Commercial mortgages $4,833 $43 Other commercial 205 1,076 Residential real estate mortgages 125 257 Consumer 224 253 Total $5,387 $1,629 Net charge-offs to average loans (annualized) 0.27 % 0.07 % Wealth Management Assets Under Administration : Balance at beginning of period $4,199,640 $3,900,061 Net investment appreciation & income 632,681 315,799 Net client cash flows (50,363 ) (16,220 ) Balance at end of period $4,781,958 $4,199,640 (1) See the section labeled “Supplemental Information - Non-GAAP Financial Measures” at the end of this document. Washington Trust Bancorp, Inc. and Subsidiaries SELECTED FINANCIAL HIGHLIGHTS (unaudited) For the Quarters Ended Dec 31 , 2013 Sep 30 , 2013 Jun 30 , 2013 Mar 31 , 2013 Dec 31 , 2012 Average Yield / Rate (taxable equivalent basis): Assets: Commercial loans 4.52 % 4.67 % 4.58 % 4.70 % 4.90 % Residential real estate loans, including mortgage loans held for sale 4.09 % 4.06 % 4.14 % 4.26 % 4.23 % Consumer loans 3.77 % 3.78 % 3.81 % 3.84 % 3.86 % Total loans 4.28 % 4.35 % 4.34 % 4.44 % 4.53 % Cash, federal funds sold and other short-term investments 0.22 % 0.21 % 0.22 % 0.21 % 0.26 % FHLBB stock 0.37 % 0.38 % 0.42 % 0.39 % 0.48 % Taxable debt securities 3.40 % 3.44 % 3.52 % 3.56 % 3.49 % Nontaxable debt securities 5.88 % 5.87 % 5.94 % 5.98 % 5.89 % Corporate stocks — % — % — % — % — % Total securities 3.78 % 3.88 % 3.97 % 3.98 % 3.86 % Total interest-earning assets 4.02 % 4.12 % 4.17 % 4.24 % 4.31 % Liabilities: Interest-bearing demand deposits — % — % — % — % — % NOW accounts 0.06 % 0.06 % 0.06 % 0.06 % 0.07 % Money market accounts 0.34 % 0.31 % 0.29 % 0.29 % 0.28 % Savings accounts 0.06 % 0.06 % 0.07 % 0.07 % 0.09 % Time deposits 1.19 % 1.23 % 1.25 % 1.28 % 1.32 % FHLBB advances 3.49 % 3.25 % 3.29 % 3.21 % 3.27 % Junior subordinated debentures 4.22 % 4.22 % 7.82 % 4.79 % 4.75 % Other 2.52 % 4.50 % 5.87 % 1.77 % 5.51 % Total interest-bearing liabilities 0.98 % 1.01 % 1.11 % 1.11 % 1.19 % Interest rate spread (taxable equivalent basis) 3.04 % 3.11 % 3.06 % 3.13 % 3.12 % Net interest margin (taxable equivalent basis) 3.24 % 3.29 % 3.26 % 3.32 % 3.33 % At December 31, 2013 Amortized Unrealized Unrealized Fair (Dollars in thousands) Cost (1) Gains Losses Value Securities Available for Sale: Obligations of U.S. government-sponsored enterprises $54,474 $720 ( $79 ) $55,115 Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 230,387 8,369 (401 ) 238,355 States and political subdivisions 60,659 2,200 — 62,859 Trust preferred securities: Individual name issuers 30,715 — (6,031 ) 24,684 Collateralized debt obligations 547 — — 547 Corporate bonds 11,128 231 (16 ) 11,343 Total securities available for sale 387,910 11,520 (6,527 ) 392,903 Held to Maturity: Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 29,905 14 (54 ) 29,865 Total securities held to maturity 29,905 14 (54 ) 29,865 Total securities $417,815 $11,534 ( $6,581 ) $422,768 (1) Net of other-than-temporary impairment losses recognized in earnings. Washington Trust Bancorp, Inc. and Subsidiaries SELECTED FINANCIAL HIGHLIGHTS (unaudited) Period End Balances At (Dollars in thousands) Dec 31 , 2013 Sep 30 , 2013 Jun 30 , 2013 Mar 31 , 2013 Dec 31 , 2012 Loans: Commercial: Mortgages $796,249 $727,375 $758,437 $729,968 $710,813 Construction & development 36,289 51,951 39,449 34,179 27,842 Other 530,797 518,566 512,228 513,000 513,764 Total commercial 1,363,335 1,297,892 1,310,114 1,277,147 1,252,419 Residential real estate: Mortgages 749,163 711,427 728,158 702,418 692,798 Homeowner construction 23,511 20,265 20,713 21,943 24,883 Total residential real estate 772,674 731,692 748,871 724,361 717,681 Consumer: Home equity lines 231,362 227,063 228,367 226,640 226,861 Home equity loans 40,212 41,158 41,312 40,134 39,329 Other 55,301 55,961 56,316 56,763 57,713 Total consumer 326,875 324,182 325,995 323,537 323,903 Total loans $2,462,884 $2,353,766 $2,384,980 $2,325,045 $2,294,003 At December 31, 2013 (Dollars in thousands) Balance % of Total Commercial Real Estate Loans by Property Location: Rhode Island , Connecticut , Massachusetts $791,682 95.1 % New York , New Jersey 32,126 3.9 % New Hampshire 8,730 1.0 % Total commercial real estate loans (1) $832,538 100.0 % (1) Commercial real estate loans consist of commercial mortgages and construction and development loans. Commercial mortgages are loans secured by income producing property. At December 31, 2013 (Dollars in thousands) Balance % of Total Residential Mortgages by Property Location: Rhode Island , Connecticut , Massachusetts $751,932 97.3 % New Hampshire 7,900 1.0 % New York , Virginia , New Jersey , Maryland , Pennsylvania , District of Columbia 6,972 0.9 % Ohio 2,509 0.3 % Washington , Oregon 1,356 0.2 % Georgia 1,083 0.1 % New Mexico 468 0.1 % Other 454 0.1 % Total residential mortgages $772,674 100.0 % Period End Balances At (Dollars in thousands) Dec 31 , 2013 Sep 30 , 2013 Jun 30 , 2013 Mar 31 , 2013 Dec 31 , 2012 Deposits: Demand deposits $440,785 $420,075 $358,797 $375,156 $379,889 NOW accounts 309,771 301,250 301,096 294,136 291,174 Money market accounts 666,646 623,631 540,012 503,414 496,402 Savings accounts 297,357 292,765 293,405 284,983 274,934 Time deposits 790,762 817,110 811,299 861,952 870,232 Total deposits $2,505,321 $2,454,831 $2,304,609 $2,319,641 $2,312,631 Out-of-market brokered certificates of deposits included in time deposits $98,009 $106,231 $96,177 $103,045 $102,636 In-market deposits, excluding out-of-market brokered certificates of deposit $2,407,312 $2,348,600 $2,208,432 $2,216,596 $2,209,995 Washington Trust Bancorp, Inc. and Subsidiaries SELECTED FINANCIAL HIGHLIGHTS (unaudited) Period End Balances At (Dollars in thousands) Dec 31 , 2013 Sep 30 , 2013 Jun 30 , 2013 Mar 31 , 2013 Dec 31 , 2012 Asset Quality Data: Nonperforming Assets: Commercial mortgages $7,492 $8,956 $9,976 $14,953 $10,681 Commercial construction and development — — — — — Other commercial 1,291 1,248 1,400 3,122 4,412 Residential real estate mortgages 8,315 8,095 7,526 6,699 6,158 Consumer 1,204 1,204 1,124 901 1,292 Total nonaccrual loans $18,302 $19,503 $20,026 $25,675 $22,543 Nonaccrual investment securities 547 425 397 404 843 Property acquired through foreclosure or repossession 932 594 1,230 2,625 2,047 Total nonperforming assets $19,781 $20,522 $21,653 $28,704 $25,433 Total past due loans to total loans 0.89 % 1.02 % 1.09 % 1.13 % 1.22 % Nonperforming assets to total assets 0.62 % 0.66 % 0.71 % 0.94 % 0.83 % Nonaccrual loans to total loans 0.74 % 0.83 % 0.84 % 1.10 % 0.98 % Allowance for loan losses to nonaccrual loans 152.37 % 143.61 % 139.24 % 121.28 % 136.95 % Allowance for loan losses to total loans 1.13 % 1.19 % 1.17 % 1.34 % 1.35 % Troubled Debt Restructured Loans: Accruing troubled debt restructured loans: Commercial mortgages $22,800 $23,892 $19,018 $9,600 $9,569 Other commercial 1,265 1,576 2,602 6,554 6,577 Residential real estate mortgages 1,442 870 876 1,599 1,123 Consumer 236 239 242 244 154 Accruing troubled debt restructured loans 25,743 26,577 22,738 17,997 17,423 Nonaccrual troubled debt restructured loans: Commercial mortgages — — — — — Other commercial 542 547 590 721 2,063 Residential real estate mortgages — — 144 155 688 Consumer 38 40 42 42 44 Nonaccrual troubled debt restructured loans 580 587 776 918 2,795 Total troubled debt restructured loans $26,323 $27,164 $23,514 $18,915 $20,218 Washington Trust Bancorp, Inc. and Subsidiaries SELECTED FINANCIAL HIGHLIGHTS (unaudited) Period End Balances At (Dollars in thousands) Dec 31 , 2013 Sep 30 , 2013 Jun 30 , 2013 Mar 31 , 2013 Dec 31 , 2012 Past Due Loans: Loans 30-59 Days Past Due: Commercial mortgages $— $— $— $— $373 Other commercial loans 276 2,648 505 689 260 Residential real estate mortgages 4,040 2,624 4,051 3,891 4,840 Consumer loans 1,322 1,013 1,588 1,534 1,134 Loans 30-59 days past due $5,638 $6,285 $6,144 $6,114 $6,607 Loans 60-89 Days Past Due: Commercial mortgages $— $730 $536 $193 $408 Other commercial loans 302 8 34 341 296 Residential real estate mortgages 1,285 1,960 1,697 1,451 1,951 Consumer loans 166 328 689 461 385 Loans 60-89 days past due $1,753 $3,026 $2,956 $2,446 $3,040 Loans 90 Days or more Past Due: Commercial mortgages $7,492 $8,226 $8,895 $9,852 $10,300 Other commercial loans 731 929 3,428 2,961 3,647 Residential real estate mortgages 5,633 4,843 4,266 4,327 3,658 Consumer loans 656 693 415 484 844 Loans 90 days or more past due $14,512 $14,691 $17,004 $17,624 $18,449 Total Past Due Loans: Commercial mortgages $7,492 $8,956 $9,431 $10,045 $11,081 Other commercial loans 1,309 3,585 3,967 3,991 4,203 Residential real estate mortgages 10,958 9,427 10,014 9,669 10,449 Consumer loans 2,144 2,034 2,692 2,479 2,363 Total past due loans $21,903 $24,002 $26,104 $26,184 $28,096 Accruing loans 90 days or more past due $— $— $2,431 $— $— Nonaccrual loans included in past due loans $15,591 $17,275 $17,208 $19,000 $20,979 For the Quarters Ended (Dollars in thousands) Dec 31 , 2013 Sep 30 , 2013 Jun 30 , 2013 Mar 31 , 2013 Dec 31 , 2012 Allowance for Loan Losses: Balance at beginning of period $28,008 $27,884 $31,139 $30,873 $30,752 Provision charged to earnings 400 700 700 600 600 Charge-offs (703 ) (770 ) (4,175 ) (374 ) (534 ) Recoveries 181 194 220 40 55 Balance at end of period $27,886 $28,008 $27,884 $31,139 $30,873 Net Loan Charge-Offs (Recoveries): Commercial mortgages $309 $602 $3,814 $108 $212 Other commercial 73 (2 ) 63 71 225 Residential real estate mortgages 80 — 36 9 39 Consumer 60 (24 ) 42 146 3 Total $522 $576 $3,955 $334 $479 The following tables present average balance and interest rate information. Tax-exempt income is converted to a fully taxable equivalent basis using the statutory federal income tax rate adjusted for applicable state income taxes, net of the related federal tax benefit. For dividends on corporate stocks, the 70% federal dividends received deduction is also used in the calculation of tax equivalency. Unrealized gains (losses) on available for sale securities are excluded from the average balance and yield calculations. Nonaccrual and renegotiated loans, as well as interest earned on these loans (to the extent recognized in the Consolidated Statements of Income) are included in amounts presented for loans. Washington Trust Bancorp, Inc. and Subsidiaries CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited) Three Months Ended December 31, 2013 September 30, 2013 December 31, 2012 Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate (Dollars in thousands) Assets: Commercial loans $1,310,584 $14,944 4.52 % $1,297,705 $15,274 4.67 % $1,227,120 $15,121 4.90 % Residential real estate loans, including mortgage loans held for sale 771,272 7,947 4.09 % 780,323 7,991 4.06 % 757,764 8,049 4.23 % Consumer loans 323,778 3,078 3.77 % 323,398 3,083 3.78 % 322,476 3,131 3.86 % Total loans 2,405,634 25,969 4.28 % 2,401,426 26,348 4.35 % 2,307,360 26,301 4.53 % Cash, federal funds sold and short-term investments 104,718 59 0.22 % 87,048 47 0.21 % 42,056 27 0.26 % FHLBB stock 37,730 35 0.37 % 37,730 36 0.38 % 40,418 49 0.48 % Taxable debt securities 350,821 3,005 3.40 % 297,532 2,582 3.44 % 369,736 3,241 3.49 % Nontaxable debt securities 63,524 941 5.88 % 64,836 960 5.87 % 68,198 1,010 5.89 % Corporate stocks — — — % — — — % — — — % Total securities 414,345 3,946 3.78 % 362,368 3,542 3.88 % 437,934 4,251 3.86 % Total interest-earning assets 2,962,427 30,009 4.02 % 2,888,572 29,973 4.12 % 2,827,768 30,628 4.31 % Noninterest-earning assets 200,615 209,656 216,996 Total assets $3,163,042 $3,098,228 $3,044,764 Liabilities and Shareholders' Equity: Interest-bearing demand deposits $10,877 $— — % $6,688 $— — % $— $— — % NOW accounts 300,113 48 0.06 % 293,634 45 0.06 % 276,572 49 0.07 % Money market accounts 653,731 560 0.34 % 591,860 456 0.31 % 473,747 338 0.28 % Savings accounts 293,434 47 0.06 % 295,821 47 0.06 % 271,716 60 0.09 % Time deposits 802,979 2,411 1.19 % 811,850 2,516 1.23 % 886,355 2,933 1.32 % FHLBB advances 288,212 2,534 3.49 % 328,705 2,693 3.25 % 382,465 3,148 3.27 % Junior subordinated debentures 22,681 241 4.22 % 22,681 241 4.22 % 32,991 394 4.75 % Other 629 4 2.52 % 353 4 4.50 % 289 4 5.51 % Total interest-bearing liabilities 2,372,656 5,845 0.98 % 2,351,592 6,002 1.01 % 2,324,135 6,926 1.19 % Demand deposits 425,316 384,665 362,060 Other liabilities 38,204 51,186 58,139 Shareholders' equity 326,866 310,785 300,430 Total liabilities and shareholders' equity $3,163,042 $3,098,228 $3,044,764 Net interest income (FTE) $24,164 $23,971 $23,702 Interest rate spread 3.04 % 3.11 % 3.12 % Net interest margin 3.24 % 3.29 % 3.33 % Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency. (Dollars in thousands) Three Months Ended Dec 31 , 2013 Sep 30 , 2013 Dec 31 , 2012 Commercial loans $320 $252 $192 Nontaxable debt securities 323 331 346 Corporate stocks — — — Total $643 $583 $538 Washington Trust Bancorp, Inc. and Subsidiaries CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited) Years ended December 31 , 2013 2012 Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate (Dollars in thousands) Assets: Commercial loans $1,286,029 $59,387 4.62 % $1,177,268 $58,823 5.00 % Residential real estate loans, including mortgage loans held for sale 767,450 31,752 4.14 % 733,178 31,974 4.36 % Consumer loans 323,847 12,304 3.80 % 320,828 12,428 3.87 % Total loans 2,377,326 103,443 4.35 % 2,231,274 103,225 4.63 % Cash, federal funds sold and short-term investments 72,726 158 0.22 % 41,359 91 0.22 % FHLBB stock 38,238 148 0.39 % 40,713 207 0.51 % Taxable debt securities 316,440 11,008 3.48 % 431,024 15,359 3.56 % Nontaxable debt securities 65,708 3,889 5.92 % 69,838 4,115 5.89 % Corporate stocks — — — % 910 68 7.47 % Total securities 382,148 14,897 3.90 % 501,772 19,542 3.89 % Total interest-earning assets 2,870,438 118,646 4.13 % 2,815,118 123,065 4.37 % Noninterest-earning assets 208,463 221,031 Total assets $3,078,901 $3,036,149 Liabilities and Shareholders' Equity: Interest-bearing demand deposits $4,461 $— — % $— $— — % NOW accounts 291,705 183 0.06 % 259,595 175 0.07 % Money market accounts 569,534 1,749 0.31 % 430,262 1,078 0.25 % Savings accounts 288,892 186 0.06 % 261,795 276 0.11 % Time deposits 831,729 10,302 1.24 % 893,474 12,061 1.35 % FHLBB advances 322,118 10,643 3.30 % 466,424 14,957 3.21 % Junior subordinated debentures 27,398 1,484 5.42 % 32,991 1,570 4.76 % Other 581 16 2.75 % 5,093 248 4.87 % Total interest-bearing liabilities 2,336,418 24,563 1.05 % 2,349,634 30,365 1.29 % Demand deposits 384,323 338,046 Other liabilities 47,961 55,382 Shareholders' equity 310,199 293,087 Total liabilities and shareholders' equity $3,078,901 $3,036,149 Net interest income (FTE) $94,083 $92,700 Interest rate spread 3.08 % 3.08 % Net interest margin 3.28 % 3.29 % Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency: (Dollars in thousands) Years ended December 31 , 2013 2012 Commercial loans $962 $569 Nontaxable debt securities 1,336 1,416 Corporate stocks — 19 Total $2,298 $2,004 Washington Trust Bancorp, Inc. and Subsidiaries SUPPLEMENTAL INFORMATION - Non-GAAP Financial Measures (unaudited) At or for the Quarters Ended (Dollars in thousands, except per share amounts) Dec 31 , 2013 Sep 30 , 2013 Jun 30 , 2013 Mar 31 , 2013 Dec 31 , 2012 Calculation of Tangible Book Value per Share: Total shareholders' equity at end of period $329,646 $323,585 $303,370 $301,291 $295,652 Less: Goodwill 58,114 58,114 58,114 58,114 58,114 Identifiable intangible assets, net 5,493 5,657 5,827 6,000 6,173 Total tangible shareholders' equity at end of period $266,039 $259,814 $239,429 $237,177 $231,365 Shares outstanding at end of period 16,614 16,589 16,487 16,425 16,380 Book value per share - GAAP $19.84 $19.51 $18.40 $18.34 $18.05 Tangible book value per share - Non-GAAP $16.01 $15.66 $14.52 $14.44 $14.12 Calculation of Tangible Equity to Tangible Assets: Total tangible shareholders' equity at end of period $266,039 $259,814 $239,429 $237,177 $231,365 Total assets at end of period $3,188,867 $3,131,958 $3,061,307 $3,051,848 $3,071,884 Less: Goodwill 58,114 58,114 58,114 58,114 58,114 Identifiable intangible assets, net 5,493 5,657 5,827 6,000 6,173 Total tangible assets at end of period $3,125,260 $3,068,187 $2,997,366 $2,987,734 $3,007,597 Equity to assets - GAAP 10.34 % 10.33 % 9.91 % 9.87 % 9.62 % Tangible equity to tangible assets - Non-GAAP 8.51 % 8.47 % 7.99 % 7.94 % 7.69 % Calculation of Return on Average Tangible Assets: Net income $9,789 $9,960 $8,983 $7,421 $9,023 Total average assets $3,163,042 $3,098,228 $3,034,956 $3,017,583 $3,044,764 Less: Average goodwill 58,114 58,114 58,114 58,114 58,114 Average identifiable intangible assets, net 5,573 5,739 5,912 6,085 6,257 Total average tangible assets $3,099,355 $3,034,375 $2,970,930 $2,953,384 $2,980,393 Return on average assets - GAAP 1.24 % 1.29 % 1.18 % 0.98 % 1.19 % Return on average tangible assets - Non-GAAP 1.26 % 1.31 % 1.21 % 1.01 % 1.21 % Calculation of Return on Average Tangible Equity: Net income $9,789 $9,960 $8,983 $7,421 $9,023 Total average shareholders' equity $326,866 $310,785 $303,402 $299,436 $300,430 Less: Average goodwill 58,114 58,114 58,114 58,114 58,114 Average identifiable intangible assets, net 5,573 5,739 5,912 6,085 6,257 Total average tangible shareholders' equity $263,179 $246,932 $239,376 $235,237 $236,059 Return on average shareholders' equity - GAAP 11.98 % 12.82 % 11.84 % 9.91 % 12.01 % Return on average tangible shareholders' equity - Non-GAAP 14.80 % 16.13 % 15.01 % 12.62 % 15.29 % Washington Trust Bancorp, Inc. and Subsidiaries SUPPLEMENTAL INFORMATION - Non-GAAP Financial Measures (unaudited) Years Ended (Dollars in thousands) Dec 31 , 2013 Dec 31 , 2012 Calculation of return on average tangible assets: Net income $36,153 $35,074 Total average assets $3,078,901 $3,036,149 Less: Average goodwill 58,114 58,114 Average identifiable intangible assets, net 5,826 6,528 Total average tangible assets $3,014,961 $2,971,507 Return on average assets - GAAP 1.17 % 1.16 % Return on average tangible assets - Non-GAAP 1.20 % 1.18 % Calculation of return on average tangible equity: Net income $36,153 $35,074 Total average shareholders' equity $310,199 $293,087 Less: Average goodwill 58,114 58,114 Average identifiable intangible assets, net 5,826 6,528 Total average tangible shareholders' equity $246,259 $228,445 Return on average shareholders' equity - GAAP 11.65 % 11.97 % Return on average tangible shareholders' equity - Non-GAAP 14.68 % 15.35 % Washington Trust Bancorp, Inc. Elizabeth B. Eckel , 401-348-1309 Senior Vice President, Marketing ebeckel@washtrust.com Source: Washington Trust Bancorp, Inc.


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