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Washington Trust Reports Fourth Quarter 2017 Earnings

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Conference Call
Washington Trust will host a conference call to discuss its fourth quarter results, business highlights and outlook on Wednesday, January 31, 2018 at 8:30 a.m. (Eastern Time).  Individuals may dial in to the call at 1-877-407-9208.  An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-844-512-2921 and entering the Replay PIN Number 13675605; the audio replay will be available through February 10, 2018.  Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrustbancorp.com, and will be available through March 31, 2018.

Background
Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company.  Founded in 1800, Washington Trust is the oldest community bank in the nation, the largest state-chartered bank headquartered in Rhode Island and one of the Northeast's premier financial services companies.  Washington Trust offers a full range of financial services, including commercial banking, mortgage banking, personal banking and wealth management and trust services through its offices located in Rhode Island, Connecticut and Massachusetts.  The Corporation’s common stock trades on NASDAQ under the symbol WASH.  Investor information is available on the Corporation’s web site at www.washtrustbancorp.com.

Forward-Looking Statements
This press release contains statements that are “forward-looking statements”.  We may also make forward-looking statements in other documents we file with the SEC, in press releases and other written materials, and in oral statements made by our officers, directors or employees.  You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters.  You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of Washington Trust.  These risks, uncertainties and other factors may cause the actual results, performance or achievements of Washington Trust to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include the following: weakness in national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets; volatility in national and international financial markets; reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits; reductions in the market value of wealth management assets under administration; changes in the value of securities and other assets; reductions in loan demand; changes in loan collectibility, default and charge-off rates; changes in the size and nature of the our competition; changes in legislation or regulation and accounting principles, policies and guidelines; occurrences of cyberattacks, hacking and identity theft; natural disasters; and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, may result in these differences. You should carefully review all of these factors and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Supplemental Information - Explanation of Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures.  Washington Trust's management believes that the supplemental non-GAAP information, which consists of measurements and ratios based on tangible equity and tangible assets, is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors.  These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.  Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

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


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


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
   
  Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Dec 31,
 2016
Share and Equity Related Data:          
Book value per share $23.99   $24.06   $23.59   $23.14   $22.76  
Tangible book value per share - Non-GAAP (1) $19.75   $19.81   $19.32   $18.83   $18.44  
Market value per share $53.25   $57.25   $51.55   $49.30   $56.05  
Shares issued and outstanding at end of period   17,227     17,214     17,210     17,193     17,171  
           
Capital Ratios:          
Tier 1 risk-based capital 11.65% (i)
    11.69 %   11.92 %   11.54 %   11.44 %
Total risk-based capital 12.45% (i)
    12.53 %   12.78 %   12.38 %   12.26 %
Tier 1 leverage ratio 8.79% (i)
    8.83 %   8.78 %   8.58 %   8.67 %
Common equity tier 1 10.99% (i)
    11.02 %   11.23 %   10.86 %   10.75 %
Equity to assets   9.12 %   9.27 %   9.28 %   9.06 %   8.92 %
Tangible equity to tangible assets - Non-GAAP (1)   7.63 %   7.76 %   7.73 %   7.51 %   7.35 %
(i) - estimated          


  For the Three Months Ended   For the Twelve Months
Ended
  Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Dec 31,
 2016
  Dec 31,
 2017
Dec 31,
 2016
Performance Ratios:                
Net interest margin (FTE) 2.95 % 2.93 % 2.97 % 2.87 % 2.89 %   2.93 % 3.02 %
Return on average assets 0.71 % 1.18 % 1.21 % 1.08 % 1.14 %   1.04 % 1.16 %
Return on average tangible assets - Non-GAAP (1) 0.73 % 1.20 % 1.23 % 1.10 % 1.16 %   1.06 % 1.19 %
Return on average equity 7.65 % 12.56 % 13.06 % 11.87 % 12.26 %   11.26 % 11.96 %
Return on average tangible equity - Non-GAAP (1) 9.27 % 15.27 % 15.98 % 14.59 % 15.09 %   13.73 % 14.82 %

(1) See the section labeled “SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures” at the end of this document.


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

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


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


  December 31, 2017   December 31, 2016
  Balance % of Total   Balance % of Total
Commercial Real Estate Loans by Property Location:          
Rhode Island, Connecticut, Massachusetts $1,131,077   93.5 %   $1,105,539   92.5 %
New York, New Jersey, Pennsylvania   66,857   5.5 %     77,038   6.4 %
New Hampshire   12,561   1.0 %     12,980   1.1 %
Total commercial real estate loans (1) $1,210,495   100.0 %   $1,195,557   100.0 %
                                       
Residential Mortgages by Property Location:                                      
Rhode Island, Connecticut, Massachusetts $1,210,895   98.6 %   $1,106,366   98.6 %
New Hampshire, Vermont, Maine   12,061   1.0 %     11,445   1.0 %
New York, Virginia, New Jersey, Maryland, Pennsylvania   2,168   0.2 %     2,648   0.2 %
Ohio   862   0.1 %     997   0.1 %
Other   1,262   0.1 %     1,292   0.1 %
Total residential mortgages $1,227,248   100.0 %   $1,122,748   100.0 %

(1) Commercial real estate loans consist of commercial mortgages and construction and development loans.  Commercial mortgages are loans secured by income producing property.

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



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


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


The following table presents average balance and interest rate information.  Tax-exempt income is converted to a fully taxable equivalent (FTE) basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit.  Unrealized gains (losses) on available for sale securities and fair value adjustments on mortgage loans held for sale are excluded from the average balance and yield calculations.  Nonaccrual and renegotiated loans, as well as interest recognized on these loans are included in amounts presented for loans.


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

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

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


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

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

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


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


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

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

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