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Section 1: 8-K (8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 20, 2018
WASHINGTON TRUST BANCORP, INC.
(Exact Name of Registrant as Specified in Charter)
Rhode Island
 
001-32991
 
05-0404671
(State or other jurisdiction of
 
(Commission File Number)
 
(IRS Employer Identification No.)
incorporation)
 
 
 
 

 
23 Broad Street
 
 
 
 
Westerly, Rhode Island
 
02891
 
 
(Address of Principal Executive Offices)
 
(Zip Code)
 

(401) 348-1200
(Registrant's telephone number, including area code)

N/A
(Former name or address, if changed from last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. o






Item 2.02 Results of Operations and Financial Condition.

On April 20, 2018, Washington Trust Bancorp, Inc. issued a press release in which it disclosed unaudited financial information related to first quarter 2018 consolidated earnings. A copy of the press release relating to such announcement, dated April 20, 2018, is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Pursuant to General Instructions B.2 of Form 8-K, this information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

 
(d)
Exhibits.
 
 
 
 
 
 
 
 
 
Exhibit No.
 
Exhibit
 
 
 
 
 
 
 
 
Press release dated April 20, 2018*
 
 
 
 
 
 
 
 
 
 
 
 
*Filed herewith
 
 





SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



 
 
 
WASHINGTON TRUST BANCORP, INC.
Date:
April 20, 2018
 
By:
/s/ Ronald S. Ohsberg
 
 
 
 
Ronald S. Ohsberg
 
 
 
 
Senior Executive Vice President, Chief Financial Officer and Treasurer



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1

393113042_bancorpflatbluehorizontala10.jpg
NASDAQ: WASH
Contact: Elizabeth B. Eckel
Senior Vice President, Marketing
Telephone: (401) 348-1309
E-mail: [email protected]
Date: April 20, 2018
FOR IMMEDIATE RELEASE

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.



Washington Trust
Page 2, April 20, 2018


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 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.



Washington Trust
Page 3, April 20, 2018


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.




Washington Trust
Page 4, April 20, 2018


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.




Washington Trust
Page 5, April 20, 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




-6-



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


-7-



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.


-8-



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.


-9-



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



-10-



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


-11-



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
%)

-12-



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


-13-



 
 
 
 
 
 
 
 
 
 
 
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
%

-14-
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