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Washington Trust Reports Record First Quarter 2018 Earnings

WESTERLY, R.I., April 20, 2018 (GLOBE NEWSWIRE) -- Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced first quarter 2018 net income of $16.2 million, or $0.93 per diluted share, compared to net income of $8.0 million, or $0.46 per diluted share, reported for the fourth quarter of 2017.

The Tax Cuts and Jobs Act ("the Tax Act") was enacted in December 2017 and permanently lowered the corporate tax rate from 35% to 21% effective January 1, 2018.  As previously reported, 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 December 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 2017 earnings per diluted share by $0.36.  Net income for the first quarter of 2018 benefited from the lower corporate tax rate.

“Washington Trust started the year on a positive note, reporting record quarterly earnings and earnings per share, for the first quarter of 2018,” stated Edward O. Handy, III, Chairman and Chief Executive Officer.  “Our continued profitability, very good asset quality, and strong capital position provide a solid foundation for future growth.”

Selected highlights for first quarter 2018 include:

  • Returns on average equity and average assets were 15.96% and 1.45%, respectively.
  • Net interest income amounted to an all-time quarterly high of $31.9 million.
  • Consistent with improvement in asset quality metrics and changes in the loan portfolio and loss exposure, no loan loss provision was necessary in the quarter.
  • In March, Washington Trust declared a quarterly dividend of 43 cents per share, representing a 4 cent per share, or 10%, increase over the preceding quarter.

Net Interest Income
Net interest income was $31.9 million for the first quarter of 2018, up by $963 thousand, or 3%, from the fourth quarter of 2017.  Included in net interest income in the first quarter of 2018 was loan prepayment fee income of $46 thousand, compared to $174 thousand in the fourth quarter of 2017.  The net interest margin was 3.03% for the first quarter, up by 8 basis points from the preceding quarter.

Significant linked quarter changes included:

  • Average interest-earning assets increased by $66 million, reflecting additions to the securities portfolio and loan growth.  The yield on interest-earning assets for the first quarter was 3.84%, up by 14 basis points from the preceding quarter.  The yield benefited from increased market rates of interest.
  • Average interest-bearing liabilities increased by $58 million, reflecting increases in average wholesale funding balances (wholesale brokered time deposits and Federal Home Loan Bank advances).  The cost of interest-bearing funds for the first quarter was 1.00%, up by 7 basis points from the preceding quarter, largely due to higher rates on wholesale funding liabilities.

Noninterest Income
Noninterest income totaled $15.7 million for the first quarter of 2018, down by $467 thousand, or 3%, from the fourth quarter of 2017.  Significant linked quarter changes included:

  • Wealth management revenues were $10.3 million for the first quarter of 2018, up by $359 thousand, or 4% on a linked quarter basis, largely due to an increase in asset-based revenues.
    Wealth management assets under administration were $6.3 billion at March 31, 2018, down by $371 million, or 6%, from the balance at December 31, 2017.  The decline in wealth management assets primarily resulted from client outflows in the latter portion of the first quarter associated with the loss of certain client-facing personnel.  We estimate that these outflows will reduce future quarterly wealth management revenues by $600 thousand to $700 thousand.
  • Mortgage banking revenues were $2.8 million for the first quarter of 2018, down by $259 thousand, or 8%, from the preceding quarter.  These results reflect a decrease in the volume of loans sold, partially offset by a $565 thousand increase in fair value adjustments on mortgage loan commitments and loans held for sale, as well as a higher sales yield.  The increase in fair value adjustments was associated with the commencement of a portfolio-based economic hedging program. Prior to January 2018, Washington Trust economically hedged mortgage loan commitments only on a loan by loan basis.
    Residential mortgage loans sold to the secondary market were $97 million in the first quarter, down by 33% from the $145 million sold in the preceding quarter and down by 9% from the first quarter of 2017.  A higher proportion of residential mortgage loans were originated for retention in portfolio in the first quarter of 2018 than in the fourth quarter of 2017.  Both the volume of residential mortgage loans originated and sold has typically been lower in the first quarter of the year.
  • Loan related derivative income was $141 thousand for the first quarter of 2018, down by $329 thousand from the preceding quarter, due to a lower volume of commercial borrower loan related derivative transactions.

Noninterest Expenses
Noninterest expenses totaled $27.1 million for the first quarter of 2018, up by $1.4 million, or 5%, from the fourth quarter.  The linked quarter comparison of noninterest expenses was impacted by the following:

  • In the fourth quarter of 2017, a reduction to noninterest expenses of $333 thousand was recognized 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.
  • In the fourth quarter of 2017, the receipt of a $325 thousand settlement of a claim against another bank related to a previously disclosed dispute was recognized as a reduction to other expenses.
  • In the first quarter of 2018, software system implementation expenses of $681 thousand were recognized, an increase of $435 thousand from the amount recognized in the preceding quarter.  These were classified as other expenses and primarily relate to the conversion of our wealth management accounting system, which was completed in April 2018.
  • In the first quarter of 2018, as previously announced, one-time cash incentive bonuses of approximately $450 thousand were expensed and paid as part of Washington Trust's employee compensation enhancements that were made in response to the reduction in corporate taxes from the Tax Act.

Excluding the aforementioned items, noninterest expenses were down by $167 thousand, or 1%, on a linked quarter basis, as increases in salaries and employee benefits expense, legal, audit and professional fees and net occupancy costs were partially offset by declines in advertising and promotion expense and foreclosed property costs.

Effective January 1, 2018, we adopted Accounting Standards Update ("ASU") No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost."  As a result, we included the service cost component of net periodic benefit cost associated with our defined benefit pension plans in salaries and employee benefits expense and all other components of net periodic benefit cost in other expenses.  Also, as required by this ASU, we restated the historical periods presented reclassifying all other components of net periodic benefit costs from salaries and employee benefits expense to other expenses, with no change to total noninterest expenses.

Income tax expense totaled $4.3 million for the first quarter of 2018, down by $8.9 million from the preceding quarter.  The effective tax rate for the first quarter of 2018 was 20.8%, compared to 62.3% for the preceding quarter.  The linked quarter reduction in income tax expense and in the effective tax rate was due to the enactment of the Tax Act as described above.  Income tax expense was also net of excess tax benefits on the settlement of share-based awards of $207 thousand in the first quarter of 2018 and $94 thousand in the fourth quarter of 2017.

Investment Securities
The securities portfolio totaled $800 million at March 31, 2018, up by $6 million from the balance at December 31, 2017.  During the quarter, debt securities totaling $42 million and with a weighted average yield of 3.03% were purchased.  The purchases were partially offset by a decline in the fair value of available for sale securities, routine principal pay-downs on mortgage-backed securities and a call of a corporate bond.  Investment securities represented 18% of total assets at March 31, 2018.

Loans
Total loans amounted to $3.4 billion at March 31, 2018, up by $13 million from the end of the fourth quarter.  Total residential real estate loans increased by $23 million, or 2%, from the balance at December 31, 2017.  Total commercial loans decreased by $2 million, with an increase of $7 million in the commercial real estate portfolio and a decline of $9 million in the commercial and industrial portfolio.  Total consumer loans were down by $8 million, or 2%, from the end of the fourth quarter, concentrated in the home equity portfolio.

Deposits and Borrowings
Total deposits amounted to $3.3 billion at March 31, 2018, up by $14 million from the end of the preceding quarter.  Included in total deposits were wholesale brokered time deposit balances of $405 million, which increased by $8 million from the balance at December 31, 2017.  Excluding the wholesale brokered time deposits, our in-market deposits increased by $6 million from the end of the preceding quarter.

Federal Home Loan Bank advances amounted to $809 million at March 31, 2018, up by $17 million from the balance at December 31, 2017.

Asset Quality
Total nonaccrual loans amounted to $10.5 million, or 0.31% of total loans, at March 31, 2018, down from $15.2 million, or 0.45% of total loans, at December 31, 2017.  Total past due loans amounted to $19.4 million, or 0.57% of total loans, at March 31, 2018, down from $20.1 million, or 0.59% of total loans, at December 31, 2017.

The balance and composition of nonaccrual loans and past due loans was impacted by the resolution of two commercial real estate loans in the first quarter of 2018.  In March 2018, a commercial real estate loan with a carrying value of $3.1 million was transferred to other real estate owned as foreclosure actions were completed, and a second commercial real estate loan with a carrying value of $1.8 million was reclassified to loans held for sale as the loan was sold in early April at carrying value.

Based on management's assessment of asset quality metrics, modest loan growth and other favorable changes in loss exposure allocations, management concluded that no loan loss provision was necessary in the first quarter of 2018.  A loan loss provision of $200 thousand was charged to earnings in the preceding quarter.  Net charge-offs totaled $624 thousand in the first quarter of 2018, compared to $1.0 million in the preceding quarter.  The charge-offs recognized in both the first quarter of 2018 and the fourth quarter of 2017 were largely attributable to the two commercial real estate relationships discussed above.  The allowance for loan losses amounted to $25.9 million, or 0.76% of total loans, at March 31, 2018, compared to $26.5 million, or 0.79% of total loans, at December 31, 2017.

Capital and Dividends
Total shareholders' equity was $413 million at March 31, 2018, down by $203 thousand from December 31, 2017, reflecting net income of $16.2 million, offset by $7.5 million in dividends declared and a $10.4 million reduction in the accumulated comprehensive income component of shareholders' equity resulting from a decline in the fair value of available for sale securities.

Capital levels at March 31, 2018 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.56% at March 31, 2018, compared to 12.45% at December 31, 2017.  Book value per share amounted to $23.93 at March 31, 2018, compared to $23.99 at December 31, 2017.

The Board of Directors declared a quarterly dividend of 43 cents per share for the quarter ended March 31, 2018, a 10% increase from the preceding quarter.  The dividend was paid on April 13, 2018 to shareholders of record on April 2, 2018.

Conference Call
Washington Trust will host a conference call to discuss its first quarter results, business highlights and outlook on Monday, April 23, 2018 at 10:30 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 13678566; the audio replay will be available through May 9, 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 June 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 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 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 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, 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)
           
  Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Assets:          
Cash and due from banks $ 85,680   $ 79,853   $ 128,580   $ 117,608   $ 111,941  
Short-term investments   2,322     3,070     2,600     2,324     2,039  
Mortgage loans held for sale   19,269     26,943     28,484     32,784     25,414  
Securities:          
Available for sale, at fair value   787,842     780,954     714,355     749,486     754,720  
Held to maturity, at amortized cost   11,973     12,541     13,241     13,942     14,721  
Total securities   799,815     793,495     727,596     763,428     769,441  
Federal Home Loan Bank stock, at cost   41,127     40,517     42,173     44,640     43,714  
Loans:          
Total loans   3,387,406     3,374,071     3,323,078     3,200,100     3,224,860  
Less allowance for loan losses   25,864     26,488     27,308     26,662     26,446  
Net loans   3,361,542     3,347,583     3,295,770     3,173,438     3,198,414  
Premises and equipment, net   28,316     28,333     28,591     28,508     28,853  
Investment in bank-owned life insurance   73,782     73,267     72,729     72,183     71,642  
Goodwill   63,909     63,909     63,909     63,909     64,059  
Identifiable intangible assets, net   8,893     9,140     9,388     9,642     9,898  
Other assets   81,671     63,740     69,410     67,065     63,348  
Total assets $ 4,566,326   $ 4,529,850   $ 4,469,230   $ 4,375,529   $ 4,388,763  
Liabilities:          
Deposits:          
Noninterest-bearing deposits $ 601,478   $ 578,410   $ 575,866   $ 533,147   $ 534,792  
Interest-bearing deposits   2,654,956     2,664,297     2,581,215     2,488,042     2,580,779  
Total deposits   3,256,434     3,242,707     3,157,081     3,021,189     3,115,571  
Federal Home Loan Bank advances   808,677     791,356     814,045     869,733     798,741  
Junior subordinated debentures   22,681     22,681     22,681     22,681     22,681  
Other liabilities   65,453     59,822     61,195     55,884     53,985  
Total liabilities   4,153,245     4,116,566     4,055,002     3,969,487     3,990,978  
Shareholders’ Equity:          
Common stock   1,079     1,077     1,076     1,076     1,075  
Paid-in capital   118,172     117,961     117,189     116,484     116,200  
Retained earnings   326,505     317,756     312,334     306,151     299,555  
Accumulated other comprehensive loss   (32,675 )   (23,510 )   (16,371 )   (17,669 )   (19,045 )
Total shareholders’ equity   413,081     413,284     414,228     406,042     397,785  
Total liabilities and shareholders’ equity $ 4,566,326   $ 4,529,850   $ 4,469,230   $ 4,375,529   $ 4,388,763  


 
 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
           
For the Three Months Ended Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Interest income:          
Interest and fees on loans $ 34,578   $ 33,459   $ 32,509   $ 31,642   $ 30,352  
Taxable interest on securities   5,118     4,719     4,655     4,844     4,709  
Nontaxable interest on securities   23     24     41     72     112  
Dividends on Federal Home Loan Bank stock   516     481     467     439     387  
Other interest income   205     217     197     156     104  
Total interest and dividend income   40,440     38,900     37,869     37,153     35,664  
Interest expense:          
Deposits   4,422     4,136     3,835     3,591     3,502  
Federal Home Loan Bank advances   3,983     3,708     3,816     3,509     3,344  
Junior subordinated debentures   183     167     159     149     138  
Other interest expense                   1  
Total interest expense   8,588     8,011     7,810     7,249     6,985  
Net interest income   31,852     30,889     30,059     29,904     28,679  
Provision for loan losses       200     1,300     700     400  
Net interest income after provision for loan losses   31,852     30,689     28,759     29,204     28,279  
Noninterest income:          
Wealth management revenues   10,273     9,914     10,013     9,942     9,477  
Mortgage banking revenues   2,838     3,097     3,036     2,919     2,340  
Service charges on deposit accounts   863     946     942     901     883  
Card interchange fees   847     904     894     902     802  
Income from bank-owned life insurance   515     537     546     542     536  
Loan related derivative income   141     470     1,452     1,144     148  
Other income   266     342     400     456     324  
Total noninterest income   15,743     16,210     17,283     16,806     14,510  
Noninterest expense:          
Salaries and employee benefits   17,772     17,194     17,362     17,418     16,917  
Net occupancy   2,002     1,859     1,928     1,767     1,967  
Outsourced services   1,873     1,960     1,793     1,710     1,457  
Equipment   1,180     1,198     1,380     1,313     1,467  
Legal, audit and professional fees   726     562     534     582     616  
FDIC deposit insurance costs   404     389     308     469     481  
Advertising and promotion   177     466     416     362     237  
Amortization of intangibles   248     248     253     257     277  
Change in fair value of contingent consideration       (333 )           (310 )
Other expenses   2,748     2,211     2,780     2,428     2,177  
Total noninterest expense   27,130     25,754     26,754     26,306     25,286  
Income before income taxes   20,465     21,145     19,288     19,704     17,503  
Income tax expense   4,254     13,163     6,326     6,505     5,721  
Net income $ 16,211   $ 7,982   $ 12,962   $ 13,199   $ 11,782  
           
Net income available to common shareholders $ 16,173   $ 7,958   $ 12,934   $ 13,170   $ 11,755  
           
Weighted average common shares outstanding:          
  Basic   17,234     17,223     17,212     17,206     17,186  
  Diluted   17,345     17,349     17,318     17,316     17,293  
Earnings per common share:          
  Basic $ 0.94   $ 0.46   $ 0.75   $ 0.77   $ 0.68  
  Diluted $ 0.93   $ 0.46   $ 0.75   $ 0.76   $ 0.68  
           
Cash dividends declared per share $ 0.43   $ 0.39   $ 0.39   $ 0.38   $ 0.38  


 
 
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
   
  Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Share and Equity Related Data:          
Book value per share $ 23.93   $ 23.99   $ 24.06   $ 23.59   $ 23.14  
Tangible book value per share - Non-GAAP (1) $ 19.71   $ 19.75   $ 19.81   $ 19.32   $ 18.83  
Market value per share $ 53.75   $ 53.25   $ 57.25   $ 51.55   $ 49.30  
Shares issued and outstanding at end of period   17,262     17,227     17,214     17,210     17,193  
           
Capital Ratios:          
Tier 1 risk-based capital 11.78% (i)   11.65 %   11.69 %   11.92 %   11.54 %
Total risk-based capital 12.56% (i)   12.45 %   12.53 %   12.78 %   12.38 %
Tier 1 leverage ratio 8.84% (i)   8.79 %   8.83 %   8.78 %   8.58 %
Common equity tier 1 11.13% (i)   10.99 %   11.02 %   11.23 %   10.86 %
Equity to assets   9.05 %   9.12 %   9.27 %   9.28 %   9.06 %
Tangible equity to tangible assets - Non-GAAP (1)                                                                                                                                            7.57 %   7.63 %   7.76 %   7.73 %   7.51 %
(i) - estimated          
           
           


For the Three Months Ended Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Performance Ratios (2):          
Net interest margin (3) 3.03 % 2.95 % 2.93 % 2.97 % 2.87 %
Return on average assets (net income divided by average assets) 1.45 % 0.71 % 1.17 % 1.22 % 1.09 %
Return on average tangible assets - Non-GAAP (1) 1.48 % 0.72 % 1.19 % 1.24 % 1.11 %
Return on average equity (net income available for common shareholders divided by average equity) 15.96 % 7.56 % 12.43 % 13.07 % 12.00 %
Return on average tangible equity - Non-GAAP (1) 19.40 % 9.17 % 15.12 % 15.99 % 14.76 %
  1. See the section labeled “SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures” at the end of this document.
  2. Annualized based on the actual number of days in the period.
  3. Fully taxable equivalent (FTE) net interest income as a percentage of average-earnings assets.
 
 
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)
   
For the Three Months Ended Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Wealth Management Results          
Wealth Management Revenues:          
Asset-based revenues   9,955     9,686     9,791     9,401     9,247  
Transaction-based revenues   318     228     222     541     230  
Total wealth management revenues $ 10,273   $ 9,914   $ 10,013   $ 9,942   $ 9,477  
           
Assets Under Administration:          
Balance at beginning of period $ 6,714,637   $ 6,587,899   $ 6,403,501   $ 6,243,301   $ 6,063,293  
Net investment appreciation (depreciation) & income   (32,024 )   163,681     270,549     162,924     220,423  
Net client asset flows   (338,893 )   (36,943 )   (86,151 )   (2,724 )   (40,415 )
Balance at end of period $ 6,343,720   $ 6,714,637   $ 6,587,899   $ 6,403,501   $ 6,243,301  
           
Percentage of assets under administration that are managed assets   92 %   93 %   92 %   93 %   93 %
           
Mortgage Banking Results          
Mortgage Banking Revenues:          
Gains & commissions on loan sales, net $ 2,679   $ 2,987   $ 2,952   $ 2,784   $ 2,268  
Residential mortgage servicing fee income, net   159     110     84     135     72  
Total mortgage banking revenues $ 2,838   $ 3,097   $ 3,036   $ 2,919   $ 2,340  
           
Residential Mortgage Loan Originations:          
Originations for retention in portfolio $ 67,840   $ 75,595   $ 90,378   $ 94,794   $ 57,907  
Originations for sale to secondary market (1)   87,720     143,834     143,112     144,491     102,441  
Total mortgage loan originations $ 155,560   $ 219,429   $ 233,490   $ 239,285   $ 160,348  
           
Residential Mortgage Loans Sold:          
Sold with servicing rights retained $ 33,575   $ 39,769   $ 37,823   $ 29,199   $ 22,567  
Sold with servicing rights released (1)   63,265     105,416     109,508     108,245     84,345  
Total mortgage loans sold $ 96,840   $ 145,185   $ 147,331   $ 137,444   $ 106,912  
  1. Also includes loans originated in a broker capacity.
 
 
END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
   
  Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Loans:          
Commercial real estate (1) $ 1,217,278   $ 1,210,495   $ 1,211,792   $ 1,121,273   $ 1,200,489  
Commercial & industrial   603,830     612,334     588,324     577,116     562,010  
Total commercial   1,821,108     1,822,829     1,800,116     1,698,389     1,762,499  
           
Residential real estate (2)   1,249,890     1,227,248     1,195,537     1,168,105     1,131,210  
           
Home equity   285,723     292,467     294,657     299,107     294,745  
Other   30,685     31,527     32,768     34,499     36,406  
Total consumer   316,408     323,994     327,425     333,606     331,151  
Total loans $ 3,387,406   $ 3,374,071   $ 3,323,078   $ 3,200,100   $ 3,224,860  
  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.
       
       
  March 31, 2018   December 31, 2017
  Balance % of Total   Balance % of Total
Commercial Real Estate Loans by Property Location:          
Rhode Island $ 367,643   30.2 %   $ 360,834   31.6 %
Connecticut   460,338   37.8       309,013   27.0  
Massachusetts   306,590   25.2       461,230   40.3  
Subtotal   1,134,571   93.2       1,131,077   98.9  
All other states   82,707   6.8       12,561   1.1  
Total commercial real estate loans $ 1,217,278   100.0 %   $ 1,143,638   100.0 %
           
Residential Real Estate Loans by Property Location:          
Rhode Island $ 340,727   27.3 %   $ 343,340   28.0 %
Connecticut   141,511   11.3       140,843   11.5  
Massachusetts   751,175   60.1       726,712   59.2  
Subtotal   1,233,413   98.7       1,210,895   98.7  
All other states   16,477   1.3       16,353   1.3  
Total residential real estate loans $ 1,249,890   100.0 %   $ 1,227,248   100.0 %


           
           
  Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Deposits:          
Non-interest bearing demand deposits $ 601,478   $ 578,410   $ 575,866   $ 533,147   $ 534,792  
Interest-bearing demand deposits   83,249     82,728     45,407     54,666     62,182  
NOW accounts   470,112     466,605     448,128     448,617     454,344  
Money market accounts   693,748     731,345     716,827     666,047     762,233  
Savings accounts   376,608     368,524     367,912     364,002     362,281  
Time deposits (in-market)   625,965     617,368     587,166     553,783     557,312  
Wholesale brokered time deposits   405,274     397,727     415,775     400,927     382,427  
Total deposits $ 3,256,434   $ 3,242,707   $ 3,157,081   $ 3,021,189   $ 3,115,571  


 
 
CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
   
  Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Asset Quality Ratios:          
Nonperforming assets to total assets   0.30 %   0.34 %   0.44 %   0.49 %   0.54 %
Nonaccrual loans to total loans   0.31 %   0.45 %   0.56 %   0.63 %   0.69 %
Total past due loans to total loans   0.57 %   0.59 %   0.49 %   0.66 %   0.65 %
Allowance for loan losses to nonaccrual loans   245.83 %   174.14 %   147.52 %   132.00 %   119.52 %
Allowance for loan losses to total loans   0.76 %   0.79 %   0.82 %   0.83 %   0.82 %
           
Nonperforming Assets:          
Commercial real estate $   $ 4,954   $ 5,887   $ 6,422   $ 7,809  
Commercial & industrial   397     283     429     1,232     1,129  
Total commercial   397     5,237     6,316     7,654     8,938  
Residential real estate   9,340     9,414     11,699     11,815     12,253  
Home equity   771     544     480     620     821  
Other consumer   13     16     16     109     115  
Total consumer   784     560     496     729     936  
Total nonaccrual loans   10,521     15,211     18,511     20,198     22,127  
Other real estate owned   3,206     131     1,038     1,342     1,410  
Total nonperforming assets $ 13,727   $ 15,342   $ 19,549   $ 21,540   $ 23,537  
           
Past Due Loans (30 days or more past due):          
Commercial real estate $   $ 4,960   $ 5,887   $ 6,422   $ 7,806  
Commercial & industrial   3,295     4,076     455     4,009     1,046  
Total commercial   3,295     9,036     6,342     10,431     8,852  
Residential real estate   11,806     7,855     7,802     8,857     10,533  
Home equity   4,235     3,141     2,268     1,806     1,422  
Other consumer   22     43     35     26     125  
Total consumer   4,257     3,184     2,303     1,832     1,547  
Total past due loans $ 19,358   $ 20,075   $ 16,447   $ 21,120   $ 20,932  
           
Accruing loans 90 days or more past due $   $   $   $   $  
Nonaccrual loans included in past due loans $ 7,066   $ 11,788   $ 13,216   $ 14,490   $ 18,081  


 
 
CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
   
For the Three Months Ended Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Nonaccrual Loan Activity:          
Balance at beginning of period $ 15,211   $ 18,511   $ 20,198   $ 22,127   $ 22,058  
Additions to nonaccrual status   1,210     462     1,969     1,946     2,138  
Loans returned to accruing status   (344 )   (1,316 )   (1,411 )   (778 )   (547 )
Loans charged-off   (690 )   (1,047 )   (694 )   (642 )   (79 )
Loans transferred to other real estate owned   (3,074 )           (98 )   (478 )
Payments, payoffs and other changes   (1,792 )   (1,399 )   (1,551 )   (2,357 )   (965 )
Balance at end of period $ 10,521   $ 15,211   $ 18,511   $ 20,198   $ 22,127  
           
Allowance for Loan Losses:          
Balance at beginning of period $ 26,488   $ 27,308   $ 26,662   $ 26,446   $ 26,004  
Provision charged to earnings       200     1,300     700     400  
Charge-offs   (690 )   (1,047 )   (694 )   (642 )   (79 )
Recoveries   66     27     40     158     121  
Balance at end of period $ 25,864   $ 26,488   $ 27,308   $ 26,662   $ 26,446  
           
Net Loan Charge-Offs (Recoveries):          
Commercial real estate $ 602   $ 932   $ 535   $ 318   $  
Commercial & industrial   (23 )   43     114     115     (105 )
Total commercial   579     975     649     433     (105 )
Residential real estate       32     (1 )   8     (4 )
Home equity   28     (2 )   (7 )   12     43  
Other consumer   17     15     13     31     24  
Total consumer   45     13     6     43     67  
Total $ 624   $ 1,020   $ 654   $ 484   ($ 42 )
           
Net charge-offs to average loans (annualized)   0.07 %   0.12 %   0.08 %   0.06 %   (0.01 %)

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 March 31, 2018   December 31, 2017   March 31, 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 $ 53,138   $ 205   1.56     $ 62,040   $ 217   1.39     $ 56,195   $ 104   0.75  
Mortgage loans held for sale $ 24,424   $ 226   3.75     $ 29,525   $ 288   3.87     $ 24,424   $ 222   3.69  
Taxable debt securities   804,518     5,118   2.58       756,322     4,719   2.48       755,955     4,709   2.53  
Nontaxable debt securities   2,355     29   4.99       2,625     38   5.74       11,521     173   6.09  
Total securities   806,873     5,147   2.59       758,947     4,757   2.49       767,476     4,882   2.58  
FHLB stock   40,888     516   5.12       41,003     481   4.65       43,622     387   3.60  
Commercial real estate   1,218,702     12,346   4.11       1,219,370     11,843   3.85       1,207,032     10,557   3.55  
Commercial & industrial   608,784     6,823   4.55       598,790     6,897   4.57       573,801     6,157   4.35  
Total commercial   1,827,486   $ 19,169   4.25       1,818,160   $ 18,740   4.09       1,780,833   $ 16,714   3.81  
Residential real estate   1,228,379     11,929   3.94       1,196,844     11,439   3.79       1,128,044     10,646   3.83  
Home equity   287,176     3,160   4.46       293,896     3,160   4.27       297,965     2,877   3.92  
Other   30,706     370   4.89       32,549     396   4.83       37,089     446   4.88  
Total consumer   317,882     3,530   4.50       326,445     3,556   4.32       335,054     3,323   4.02  
Total loans   3,373,747     34,628   4.16       3,341,449     33,735   4.01       3,243,931     30,683   3.84  
Total interest-earning assets   4,299,070     40,722   3.84       4,232,964     39,478   3.70       4,135,648     36,278   3.56  
Noninterest-earning assets   230,638           240,376           229,823      
Total assets $ 4,529,708         $ 4,473,340         $ 4,365,471      
Liabilities and Shareholders' Equity:                      
Interest-bearing demand deposits $ 80,502   $ 28   0.14     $ 64,344   $ 25   0.15     $ 56,782   $ 15   0.11  
NOW accounts   449,298     54   0.05       448,677     42   0.04       420,622     50   0.05  
Money market accounts   718,664     880   0.50       743,966     807   0.43       754,501     599   0.32  
Savings accounts   368,012     57   0.06       371,236     63   0.07       357,894     51   0.06  
Time deposits (in-market)   617,878     1,820   1.19       606,732     1,765   1.15       554,855     1,418   1.04  
Wholesale brokered time deposits   409,243     1,583   1.57       376,709     1,434   1.51       397,274     1,369   1.40  
Total interest-bearing deposits   2,643,597     4,422   0.68       2,611,664     4,136   0.63       2,541,928     3,502   0.56  
FHLB advances   810,967     3,983   1.99       785,169     3,708   1.87       831,614     3,344   1.63  
Junior subordinated debentures   22,681     183   3.27       22,681     167   2.92       22,681     138   2.47  
Other                           27     1   15.02  
Total interest-bearing liabilities   3,477,245     8,588   1.00       3,419,514     8,011   0.93       3,396,250     6,985   0.83  
Noninterest-bearing demand deposits   584,557           582,714           527,215      
Other liabilities   56,951           53,544           44,889      
Shareholders' equity   410,955           417,568           397,117      
Total liabilities and shareholders' equity $ 4,529,708         $ 4,473,340         $ 4,365,471      
Net interest income (FTE)   $ 32,134         $ 31,467         $ 29,293    
Interest rate spread     2.84         2.77         2.73  
Net interest margin     3.03         2.95         2.87  

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

For the Three Months Ended Mar 31,
2018
Dec 31,
2017
Mar 31,
2017
Commercial loans $ 276   $ 564   $ 553  
Nontaxable debt securities   6     14     61  
Total $ 282   $ 578   $ 614  


 
 
SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)
   
  Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Tangible Book Value per Share:          
Total shareholders' equity, as reported $ 413,081   $ 413,284   $ 414,228   $ 406,042   $ 397,785  
Less:          
Goodwill   63,909     63,909     63,909     63,909     64,059  
Identifiable intangible assets, net   8,893     9,140     9,388     9,642     9,898  
Total tangible shareholders' equity $ 340,279   $ 340,235   $ 340,931   $ 332,491   $ 323,828  
           
Shares outstanding, as reported   17,262     17,227     17,214     17,210     17,193  
           
Book value per share - GAAP $ 23.93   $ 23.99   $ 24.06   $ 23.59   $ 23.14  
Tangible book value per share - Non-GAAP $ 19.71   $ 19.75   $ 19.81   $ 19.32   $ 18.83  
           
Tangible Equity to Tangible Assets:          
Total tangible shareholders' equity $ 340,279   $ 340,235   $ 340,931   $ 332,491   $ 323,828  
           
Total assets, as reported $ 4,566,326   $ 4,529,850   $ 4,469,230   $ 4,375,529   $ 4,388,763  
Less:          
Goodwill   63,909     63,909     63,909     63,909     64,059  
Identifiable intangible assets, net   8,893     9,140     9,388     9,642     9,898  
Total tangible assets $ 4,493,524   $ 4,456,801   $ 4,395,933   $ 4,301,978   $ 4,314,806  
           
Equity to assets - GAAP   9.05 %   9.12 %   9.27 %   9.28 %   9.06 %
Tangible equity to tangible assets - Non-GAAP                      7.57 %   7.63 %   7.76 %   7.73 %   7.51 %


For the Three Months Ended Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Return on Average Tangible Assets:          
Net income, as reported $ 16,211   $ 7,982   $ 12,962   $ 13,199   $ 11,782  
           
Total average assets, as reported $ 4,529,708   $ 4,473,340   $ 4,401,536   $ 4,354,464   $ 4,365,471  
Less average balances of:          
Goodwill   63,909     63,909     63,909     64,058     64,059  
Identifiable intangible assets, net   9,014     9,261     9,511     9,767     10,027  
Total average tangible assets $ 4,456,785   $ 4,400,170   $ 4,328,116   $ 4,280,639   $ 4,291,385  
           
Return on average assets - GAAP   1.45 %   0.71 %   1.17 %   1.22 %   1.09 %
Return on average tangible assets - Non-GAAP   1.48 %   0.72 %   1.19 %   1.24 %   1.11 %
           
Return on Average Tangible Equity:          
Net income available to common shareholders, as reported $ 16,173   $ 7,958   $ 12,934   $ 13,170   $ 11,755  
           
Total average equity, as reported $ 410,955   $ 417,568   $ 412,862   $ 404,238   $ 397,117  
Less average balances of:          
Goodwill   63,909     63,909     63,909     64,058     64,059  
Identifiable intangible assets, net   9,014     9,261     9,511     9,767     10,027  
Total average tangible equity $ 338,032   $ 344,398   $ 339,442   $ 330,413   $ 323,031  
           
Return on average equity - GAAP   15.96 %   7.56 %   12.43 %   13.07 %   12.00 %
Return on average tangible equity - Non-GAAP   19.40 %   9.17 %   15.12 %   15.99 %   14.76 %

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

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