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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): July 23, 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 July 23, 2018, Washington Trust Bancorp, Inc. issued a press release in which it disclosed unaudited financial information related to second quarter 2018 consolidated earnings. A copy of the press release relating to such announcement, dated July 23, 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 July 23, 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:
July 23, 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

394322194_bancorpflatbluehorizontala11.jpg
NASDAQ: WASH
Contact: Elizabeth B. Eckel
Senior Vice President, Marketing
Telephone: (401) 348-1309
E-mail: [email protected]
Date: July 23, 2018
FOR IMMEDIATE RELEASE

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

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

Selected highlights for second quarter 2018 include:
Profitability ratios were at their highest levels in over 15 years, with returns on average equity and average assets of 16.99% and 1.53%, respectively.
Total revenues (net interest income and noninterest income) were up by 3% on a linked quarter basis and amounted to $49.1 million, a record level for Washington Trust.
Total loans were up by $103 million, or 3%, from the end of the prior quarter and up by $290 million, or 9%, from a year ago.
Total deposits were up by $65 million, or 2%, from the end of the first quarter and up by $300 million, or 10%, from a year ago.
In June, Washington Trust declared a quarterly dividend of 43 cents per share. Year-to-date dividends declared amounted to 86 cents per share, an increase of 10 cents per share, or 13%, from the same period a year ago.
Net Interest Income
Net interest income was $33.1 million for the second quarter of 2018, up by $1.3 million, or 4%, from the first quarter of 2018. Included in net interest income in the second quarter of 2018 was loan prepayment fee income of $483 thousand, compared to $46 thousand in the first quarter of 2018. The net interest margin was 3.05% for the second quarter, up by 2 basis points from the preceding quarter. Excluding the impact of loan prepayment fee income in each period, the net interest margin was 3.01%, down by 2 basis points from the preceding quarter.

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Washington Trust
July 23, 2018


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

Noninterest Income
Noninterest income totaled $16.0 million for the second quarter of 2018, up by $250 thousand, or 2%, from the first quarter of 2018. Significant linked quarter changes included:
Wealth management revenues were $9.6 million for the second quarter of 2018, down by $671 thousand, or 7%, on a linked quarter basis. Asset-based revenues were down by $819 thousand, or 8%, on a linked quarter basis. The decline in asset-based revenues was largely attributable to client outflows that commenced in the latter portion of the first quarter of 2018 and continued into the second quarter. These outflows were associated with the previously reported loss of certain client-facing personnel in the preceding quarter. The decline in asset-based revenues was partially offset by an increase of $148 thousand in transaction-based revenues, largely attributable to tax preparation revenue, which is generally concentrated in the second quarter.
Wealth management assets under administration were $6.2 billion at June 30, 2018, down by $124 million, or 2%, from the balance at March 31, 2018, with $257 million of net client outflows, partially offset by $133 million of net investment appreciation and income.
Mortgage banking revenues were $2.9 million for the second quarter of 2018, up by $103 thousand, or 4%, from the preceding quarter. Residential mortgage loans sold to the secondary market were $105 million in the second quarter, up by $8 million from the $97 million sold in the first quarter of 2018.
Loan related derivative income was $668 thousand for the second quarter of 2018, up by $527 thousand from the preceding quarter, due to higher volume of commercial borrower loan related derivative transactions occurring in the second quarter.

Noninterest Expenses
Noninterest expenses totaled $26.3 million for the second quarter of 2018, down by $842 thousand, or 3%, from the first quarter. The linked quarter comparison of noninterest expenses was impacted by the following:
As previously reported in the first quarter of 2018, one-time cash incentive bonuses of approximately $450 thousand were expensed and paid to non-executive employees as tax reform provided Washington Trust with an opportunity to further recognize and invest in our employees with special compensation enhancements.
In the second quarter of 2018, software system implementation expenses of $114 thousand were recognized, compared to $681 thousand recognized in the preceding quarter. These were classified as other expenses and primarily related to

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Washington Trust
July 23, 2018


the conversion of our wealth management accounting system, which was completed in April 2018.
Excluding the aforementioned items, noninterest expenses were up by $175 thousand, or 1%, on a linked quarter basis. The linked quarter change included an increase in outsourced services and a decrease in equipment expenses, both of which were mainly due to the expansion of services provided by third party vendors.

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

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

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

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

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

-3-

Washington Trust
July 23, 2018



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

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

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

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

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

Conference Call
Washington Trust will host a conference call to discuss its second quarter results, business highlights and outlook on Tuesday, July 24, 2018 at 8:30 a.m. (Eastern Time). Individuals may dial in to the call at 1-877-407-9208. An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-844-512-2921 and entering the Replay PIN Number 13681368; the audio replay will be available through August 3, 2018. Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, http://ir.washtrust.com, and will be available through September 30, 2018.


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Washington Trust
July 23, 2018


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

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

Some of the factors that might cause these differences include the following: weakness in national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets; volatility in national and international financial markets; reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits; reductions in the market value or outflows of wealth management assets under administration; changes in the value of securities and other assets; reductions in loan demand; changes in loan collectibility, default and charge-off rates; changes in the size and nature of our competition; changes in legislation or regulation and accounting principles, policies and guidelines; occurrences of cyberattacks, hacking and identity theft; natural disasters; and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, may result in these differences. You should carefully review all of these factors and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

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

-5-




Washington Trust Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
 
 
 
 
 
 
 
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Assets:
 
 
 
 
 
Cash and due from banks

$132,068


$85,680


$79,853


$128,580


$117,608

Short-term investments
2,624

2,322

3,070

2,600

2,324

Mortgage loans held for sale
35,207

19,269

26,943

28,484

32,784

Securities:
 
 
 
 
 
Available for sale, at fair value
776,693

787,842

780,954

714,355

749,486

Held to maturity, at amortized cost
11,412

11,973

12,541

13,241

13,942

Total securities
788,105

799,815

793,495

727,596

763,428

Federal Home Loan Bank stock, at cost
46,281

41,127

40,517

42,173

44,640

Loans:
 
 
 
 
 
Total loans
3,490,230

3,387,406

3,374,071

3,323,078

3,200,100

Less allowance for loan losses
26,174

25,864

26,488

27,308

26,662

Net loans
3,464,056

3,361,542

3,347,583

3,295,770

3,173,438

Premises and equipment, net
28,377

28,316

28,333

28,591

28,508

Investment in bank-owned life insurance
79,319

73,782

73,267

72,729

72,183

Goodwill
63,909

63,909

63,909

63,909

63,909

Identifiable intangible assets, net
8,645

8,893

9,140

9,388

9,642

Other assets
88,651

81,671

63,740

69,410

67,065

Total assets

$4,737,242


$4,566,326


$4,529,850


$4,469,230


$4,375,529

Liabilities:
 
 
 
 
 
Deposits:
 
 
 
 
 
Noninterest-bearing deposits

$577,656


$601,478


$578,410


$575,866


$533,147

Interest-bearing deposits
2,743,955

2,654,956

2,664,297

2,581,215

2,488,042

Total deposits
3,321,611

3,256,434

3,242,707

3,157,081

3,021,189

Federal Home Loan Bank advances
901,053

808,677

791,356

814,045

869,733

Junior subordinated debentures
22,681

22,681

22,681

22,681

22,681

Other liabilities
70,326

65,453

59,822

61,195

55,884

Total liabilities
4,315,671

4,153,245

4,116,566

4,055,002

3,969,487

Shareholders’ Equity:
 
 
 
 
 
Common stock
1,080

1,079

1,077

1,076

1,076

Paid-in capital
118,883

118,172

117,961

117,189

116,484

Retained earnings
336,670

326,505

317,756

312,334

306,151

Accumulated other comprehensive loss
(35,062
)
(32,675
)
(23,510
)
(16,371
)
(17,669
)
Total shareholders’ equity
421,571

413,081

413,284

414,228

406,042

Total liabilities and shareholders’ equity

$4,737,242


$4,566,326


$4,529,850


$4,469,230


$4,375,529




-6-



CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Six Months Ended
 
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
 
Jun 30,
2018
Jun 30,
2017
Interest income:
 
 
 
 
 
 
 
 
Interest and fees on loans

$37,101


$34,578


$33,459


$32,509


$31,642

 

$71,679


$61,994

Taxable interest on securities
5,358

5,118

4,719

4,655

4,844

 
10,476

9,553

Nontaxable interest on securities
20

23

24

41

72

 
43

184

Dividends on Federal Home Loan Bank stock
550

516

481

467

439

 
1,066

826

Other interest income
257

205

217

197

156

 
462

260

Total interest and dividend income
43,286

40,440

38,900

37,869

37,153

 
83,726

72,817

Interest expense:


 
 
 
 
 
 
 
Deposits
5,254

4,422

4,136

3,835

3,591

 
9,676

7,093

Federal Home Loan Bank advances
4,707

3,983

3,708

3,816

3,509

 
8,690

6,853

Junior subordinated debentures
214

183

167

159

149

 
397

287

Other interest expense





 

1

Total interest expense
10,175

8,588

8,011

7,810

7,249

 
18,763

14,234

Net interest income
33,111

31,852

30,889

30,059

29,904

 
64,963

58,583

Provision for loan losses
400


200

1,300

700

 
400

1,100

Net interest income after provision for loan losses
32,711

31,852

30,689

28,759

29,204

 
64,563

57,483

Noninterest income:


 






 
 
 
Wealth management revenues
9,602

10,273

9,914

10,013

9,942

 
19,875

19,419

Mortgage banking revenues
2,941

2,838

3,097

3,036

2,919

 
5,779

5,259

Service charges on deposit accounts
903

863

946

942

901

 
1,766

1,784

Card interchange fees
961

847

904

894

902

 
1,808

1,704

Income from bank-owned life insurance
537

515

537

546

542

 
1,052

1,078

Loan related derivative income
668

141

470

1,452

1,144

 
809

1,292

Other income
381

266

342

400

456

 
647

780

Total noninterest income
15,993

15,743

16,210

17,283

16,806

 
31,736

31,316

Noninterest expense:


 






 
 
 
Salaries and employee benefits
17,304

17,772

17,194

17,362

17,418

 
35,076

34,335

Net occupancy
1,930

2,002

1,859

1,928

1,767

 
3,932

3,734

Outsourced services
2,350

1,873

1,960

1,793

1,710

 
4,223

3,167

Equipment
1,069

1,180

1,198

1,380

1,313

 
2,249

2,780

Legal, audit and professional fees
555

726

562

534

582

 
1,281

1,198

FDIC deposit insurance costs
422

404

389

308

469

 
826

950

Advertising and promotion
329

177

466

416

362

 
506

599

Amortization of intangibles
247

248

248

253

257

 
495

534

Change in fair value of contingent consideration


(333
)


 

(310
)
Other expenses
2,082

2,748

2,211

2,780

2,428

 
4,830

4,605

Total noninterest expense
26,288

27,130

25,754

26,754

26,306

 
53,418

51,592

Income before income taxes
22,416

20,465

21,145

19,288

19,704

 
42,881

37,207

Income tax expense
4,742

4,254

13,163

6,326

6,505

 
8,996

12,226

Net income

$17,674


$16,211


$7,982


$12,962


$13,199

 

$33,885


$24,981

 
 
 
 
 
 
 
 
 
Net income available to common shareholders

$17,636


$16,173


$7,958


$12,934


$13,170

 

$33,809


$24,925

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
  Basic
17,272

17,234

17,223

17,212

17,206

 
17,253

17,196

  Diluted
17,387

17,345

17,349

17,318

17,316

 
17,384

17,312

Earnings per common share:
 
 
 
 
 
 
 
 
  Basic

$1.02


$0.94


$0.46


$0.75


$0.77

 

$1.96


$1.45

  Diluted

$1.01


$0.93


$0.46


$0.75


$0.76

 

$1.94


$1.44

 
 
 
 
 
 
 
 
 
Cash dividends declared per share

$0.43


$0.43


$0.39


$0.39


$0.38

 

$0.86


$0.76


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SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
 
 

Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Share and Equity Related Data:
 
 
 
 
 
Book value per share

$24.40


$23.93


$23.99


$24.06


$23.59

Tangible book value per share - Non-GAAP (1)

$20.20


$19.71


$19.75


$19.81


$19.32

Market value per share

$58.10


$53.75


$53.25


$57.25


$51.55

Shares issued and outstanding at end of period
17,278

17,262

17,227

17,214

17,210

 
 
 
 
 
 
Capital Ratios (2):
 
 
 
 
 
Tier 1 risk-based capital
11.84
%
11.78
%
11.65
%
11.69
%
11.92
%
Total risk-based capital
12.61
%
12.56
%
12.45
%
12.53
%
12.78
%
Tier 1 leverage ratio
8.87
%
8.84
%
8.79
%
8.83
%
8.78
%
Common equity tier 1
11.20
%
11.13
%
10.99
%
11.02
%
11.23
%
 
 
 
 
 
 
Balance Sheet Ratios:
 
 
 
 
 
Equity to assets
8.90
%
9.05
%
9.12
%
9.27
%
9.28
%
Tangible equity to tangible assets - Non-GAAP (1)
7.48
%
7.57
%
7.63
%
7.76
%
7.73
%
Loans to deposits (3)
105.3
%
103.8
%
104.1
%
105.3
%
106.1
%

 
 
 
For the Six Months Ended
 
For the Three Months Ended
 
 
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
 
Jun 30,
2018
Jun 30,
2017
Performance Ratios (4):
 
 
 
 
 
 
 
 
Net interest margin (5)
3.05
%
3.03
%
2.95
%
2.93
%
2.97
%
 
3.04
%
2.92
%
Return on average assets (net income divided by average assets)
1.53
%
1.45
%
0.71
%
1.17
%
1.22
%
 
1.49
%
1.16
%
Return on average tangible assets - Non-GAAP (1)
1.56
%
1.48
%
0.72
%
1.19
%
1.24
%
 
1.52
%
1.18
%
Return on average equity (net income available for common shareholders divided by average equity)
16.99
%
15.96
%
7.56
%
12.43
%
13.07
%
 
16.48
%
12.54
%
Return on average tangible equity - Non-GAAP (1)
20.58
%
19.40
%
9.17
%
15.12
%
15.99
%
 
20.00
%
15.38
%
Efficiency ratio (6)
53.5
%
57.0
%
54.7
%
56.5
%
56.3
%
 
55.2
%
57.4
%

(1)
See the section labeled “SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures” at the end of this document.
(2)
Estimated for June 30, 2018 and actuals for the remaining periods.
(3)
Period-end balances of net loans and mortgage loans held as a percentage of total deposits.
(4)
Annualized based on the actual number of days in the period.
(5)
Fully taxable equivalent (FTE) net interest income as a percentage of average-earnings assets.
(6)
Total noninterest expense as percentage of total revenues (net interest income and noninterest income).



-8-



SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)
 
 
 
 
 
 
For the Three Months Ended
 
For the Six Months Ended
 
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
 
Jun 30,
2018
Jun 30,
2017
Wealth Management Results
 
 
 
 
 
 
 
 
Wealth Management Revenues:
 
 
 
 
 
 
 
 
Asset-based revenues

$9,136


$9,955


$9,686


$9,791


$9,401

 

$19,091


$18,648

Transaction-based revenues
466

318

228

222

541

 
784

771

Total wealth management revenues

$9,602


$10,273


$9,914


$10,013


$9,942

 

$19,875


$19,419

 
 
 
 
 
 
 
 
 
Assets Under Administration (AUA):
 
 
 
 
 
 
 
 
Balance at beginning of period

$6,343,720


$6,714,637


$6,587,899


$6,403,501


$6,243,301

 

$6,714,637


$6,063,293

Net investment appreciation (depreciation) & income
133,450

(32,024
)
163,681

270,549

162,924

 
101,426

383,347

Net client asset flows
(257,015
)
(338,893
)
(36,943
)
(86,151
)
(2,724
)
 
(595,908
)
(43,139
)
Balance at end of period

$6,220,155


$6,343,720


$6,714,637


$6,587,899


$6,403,501

 

$6,220,155


$6,403,501

 
 
 
 
 
 
 
 
 
Percentage of AUA that are managed assets
92%
92%
93%
92%
93%
 
92%
93%
 
 
 
 
 
 
 
 
 
Mortgage Banking Results
 
 
 
 
 
 
 
 
Mortgage Banking Revenues:
 
 
 
 
 
 
 
 
Gains & commissions on loan sales, net

$2,786


$2,679


$2,987


$2,952


$2,784

 

$5,465


$5,052

Residential mortgage servicing fee income, net
155

159

110

84

135

 
314

207

Total mortgage banking revenues

$2,941


$2,838


$3,097


$3,036


$2,919

 

$5,779


$5,259

 
 
 
 
 
 
 
 
 
Residential Mortgage Loan Originations:
 
 
 
 
 
 
 
 
Originations for retention in portfolio

$128,479


$67,840


$75,595


$90,378


$94,794

 

$196,319


$152,701

Originations for sale to secondary market (1)
122,693

87,720

143,834

143,112

144,491

 
210,413

246,932

Total mortgage loan originations

$251,172


$155,560


$219,429


$233,490


$239,285

 

$406,732


$399,633

 
 
 
 
 
 
 
 
 
Residential Mortgage Loans Sold:
 
 
 
 
 
 
 
 
Sold with servicing rights retained

$24,367


$33,575


$39,769


$37,823


$29,199

 

$57,942


$51,766

Sold with servicing rights released (1)
81,054

63,265

105,416

109,508

108,245

 
144,319

192,590

Total mortgage loans sold

$105,421


$96,840


$145,185


$147,331


$137,444

 

$202,261


$244,356

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


-9-



END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
 
 
 
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Loans:
 
 
 
 
 
Commercial real estate (1)

$1,218,643


$1,217,278


$1,210,495


$1,211,792


$1,121,273

Commercial & industrial
632,029

603,830

612,334

588,324

577,116

Total commercial
1,850,672

1,821,108

1,822,829

1,800,116

1,698,389

 
 
 
 
 
 
Residential real estate (2)
1,327,418

1,249,890

1,227,248

1,195,537

1,168,105

 
 
 
 
 
 
Home equity
283,744

285,723

292,467

294,657

299,107

Other
28,396

30,685

31,527

32,768

34,499

Total consumer
312,140

316,408

323,994

327,425

333,606

Total loans

$3,490,230


$3,387,406


$3,374,071


$3,323,078


$3,200,100

(1)
Commercial real estate loans consist of commercial mortgages and construction and development loans. Commercial mortgages are loans secured by income producing property.
(2)
Residential real estate loans consist of mortgage and homeowner construction loans secured by one- to four- family residential properties.

 
June 30, 2018
 
December 31, 2017
 
Balance

% of Total
 
Balance
% of Total
Commercial Real Estate Loans by Property Location:
 
 
 
 
 
Rhode Island

$346,215

28.4
%
 

$360,834

29.8
%
Connecticut
488,429

40.1

 
309,013

25.5

Massachusetts
300,353

24.6

 
461,230

38.1

Subtotal
1,134,997

93.1

 
1,131,077

93.4

All other states
83,646

6.9

 
79,418

6.6

Total commercial real estate loans

$1,218,643

100.0
%
 

$1,210,495

100.0
%
 
 
 
 
 
 
Residential Real Estate Loans by Property Location:
 
 
 
 
 
Rhode Island

$347,605

26.2
%


$343,340

28.0
%
Connecticut
145,949

11.0


140,843

11.5

Massachusetts
817,288

61.6


726,712

59.2

Subtotal
1,310,842

98.8


1,210,895

98.7

All other states
16,576

1.2


16,353

1.3

Total residential real estate loans

$1,327,418

100.0
%


$1,227,248

100.0
%


 
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Deposits:
 
 
 
 
 
Noninterest-bearing demand deposits

$577,656


$601,478


$578,410


$575,866


$533,147

Interest-bearing demand deposits
136,640

83,249

82,728

45,407

54,666

NOW accounts
481,905

470,112

466,605

448,128

448,617

Money market accounts
604,954

693,748

731,345

716,827

666,047

Savings accounts
375,983

376,608

368,524

367,912

364,002

Time deposits (in-market)
698,286

625,965

617,368

587,166

553,783

Wholesale brokered time deposits
446,187

405,274

397,727

415,775

400,927

Total deposits

$3,321,611


$3,256,434


$3,242,707


$3,157,081


$3,021,189



-10-



CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
 
 
 
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
Asset Quality Ratios:
 
 
 
 
 
Nonperforming assets to total assets
0.32
%
0.30
%
0.34
%
0.44
%
0.49
%
Nonaccrual loans to total loans
0.34
%
0.31
%
0.45
%
0.56
%
0.63
%
Total past due loans to total loans
0.48
%
0.57
%
0.59
%
0.49
%
0.66
%
Allowance for loan losses to nonaccrual loans
222.85
%
245.83
%
174.14
%
147.52
%
132.00
%
Allowance for loan losses to total loans
0.75
%
0.76
%
0.79
%
0.82
%
0.83
%
 
 
 
 
 
 
Nonperforming Assets:
 
 
 
 
 
Commercial real estate

$—


$—


$4,954


$5,887


$6,422

Commercial & industrial
397

397

283

429

1,232

Total commercial
397

397

5,237

6,316

7,654

Residential real estate
10,206

9,340

9,414

11,699

11,815

Home equity
1,133

771

544

480

620

Other consumer
9

13

16

16

109

Total consumer
1,142

784

560

496

729

Total nonaccrual loans
11,745

10,521

15,211

18,511

20,198

Other real estate owned
3,206

3,206

131

1,038

1,342

Total nonperforming assets

$14,951


$13,727


$15,342


$19,549


$21,540

 
 
 
 
 
 
Past Due Loans (30 days or more past due):
 
 
 
 
 
Commercial real estate

$—


$—


$4,960


$5,887


$6,422

Commercial & industrial
2,851

3,295

4,076

455

4,009

Total commercial
2,851

3,295

9,036

6,342

10,431

Residential real estate
11,243

11,806

7,855

7,802

8,857

Home equity
2,585

4,235

3,141

2,268

1,806

Other consumer
16

22

43

35

26

Total consumer
2,601

4,257

3,184

2,303

1,832

Total past due loans

$16,695


$19,358


$20,075


$16,447


$21,120

 
 
 
 
 
 
Accruing loans 90 days or more past due

$—


$—


$—


$—


$—

Nonaccrual loans included in past due loans

$8,575


$7,066


$11,788


$13,216


$14,490


-11-



CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
 
For the Three Months Ended
 
For the Six Months Ended
 
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Jun 30,
2017
 
Jun 30,
2018
Jun 30,
2017
Nonaccrual Loan Activity:
 
 
 
 
 
 
 
 
Balance at beginning of period

$10,521


$15,211


$18,511


$20,198


$22,127

 

$15,211


$22,058

Additions to nonaccrual status
2,457

1,210

462

1,969

1,946

 
3,667

4,084

Loans returned to accruing status
(475
)
(344
)
(1,316
)
(1,411
)
(778
)
 
(819
)
(1,325
)
Loans charged-off
(103
)
(690
)
(1,047
)
(694
)
(642
)
 
(793
)
(721
)
Loans transferred to other real estate owned

(3,074
)


(98
)
 
(3,074
)
(576
)
Payments, payoffs and other changes
(655
)
(1,792
)
(1,399
)
(1,551
)
(2,357
)
 
(2,447
)
(3,322
)
Balance at end of period

$11,745


$10,521


$15,211


$18,511


$20,198

 

$11,745


$20,198

 
 
 
 
 
 
 
 
 
Allowance for Loan Losses:
 
 
 
 
 
 
 
 
Balance at beginning of period

$25,864


$26,488


$27,308


$26,662


$26,446

 

$26,488


$26,004

Provision charged to earnings
400


200

1,300

700

 
400

1,100

Charge-offs
(103
)
(690
)
(1,047
)
(694
)
(642
)
 
(793
)
(721
)
Recoveries
13

66

27

40

158

 
79

279

Balance at end of period

$26,174


$25,864


$26,488


$27,308


$26,662

 

$26,174


$26,662

 
 
 
 
 
 
 
 
 
Net Loan Charge-Offs (Recoveries):
 
 
 
 
 
 
 
 
Commercial real estate

$—


$602


$932


$535


$318

 

$602


$318

Commercial & industrial
(3
)
(23
)
43

114

115

 
(26
)
10

Total commercial
(3
)
579

975

649

433

 
576

328

Residential real estate
5


32

(1
)
8

 
5

4

Home equity
73

28

(2
)
(7
)
12

 
101

55

Other consumer
15

17

15

13

31

 
32

55

Total consumer
88

45

13

6

43

 
133

110

Total

$90


$624


$1,020


$654


$484

 

$714


$442

 
 
 
 
 
 
 
 
 
Net charge-offs to average loans (annualized)
0.01
%
0.07
%
0.12
%
0.08
%
0.06
%
 
0.04
%
0.03
%

-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
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
Average Balance
Interest
Yield/
Rate
 
Average Balance
Interest
Yield/
Rate
 
Average Balance
Interest
Yield/
 Rate
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash, federal funds sold and short-term investments

$56,142


$257

1.84
%
 

$53,138


$205

1.56
%
 

$60,428


$156

1.04
%
Mortgage loans held for sale

$30,203


$313

4.16

 

$24,424


$226

3.75

 
$21,977

$223

4.07

Taxable debt securities
821,772

5,358

2.62

 
804,518

5,118

2.58

 
773,280

4,844

2.51

Nontaxable debt securities
1,956

26

5.33

 
2,355

29

4.99

 
7,076

109

6.18

Total securities
823,728

5,384

2.62

 
806,873

5,147

2.59

 
780,356

4,953

2.55

FHLB stock
43,331

550

5.09

 
40,888

516

5.12

 
44,362

439

3.97

Commercial real estate
1,225,926

13,463

4.40

 
1,218,702

12,346

4.11

 
1,162,002

11,032

3.81

Commercial & industrial
622,141

7,569

4.88

 
608,784

6,823

4.55

 
576,312

6,607

4.60

Total commercial
1,848,067


$21,032

4.56

 
1,827,486


$19,169

4.25

 
1,738,314


$17,639

4.07

Residential real estate
1,275,171

12,426

3.91

 
1,228,379

11,929

3.94

 
1,140,918

10,865

3.82

Home equity
284,188

3,278

4.63

 
287,176

3,160

4.46

 
296,971

3,047

4.12

Other
29,696

360

4.86

 
30,706

370

4.89

 
35,082

417

4.77

Total consumer
313,884

3,638

4.65

 
317,882

3,530

4.50

 
332,053

3,464

4.18

Total loans
3,437,122

37,096

4.33

 
3,373,747

34,628

4.16

 
3,211,285

31,968

3.99

Total interest-earning assets
4,390,526

43,600

3.98

 
4,299,070

40,722

3.84

 
4,118,408

37,739

3.68

Noninterest-earning assets
238,290

 
 
 
230,638

 
 
 
236,056

 
 
Total assets

$4,628,816

 
 
 

$4,529,708

 
 
 

$4,354,464

 
 
Liabilities and Shareholders' Equity:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing demand deposits

$86,204


$101

0.47
%
 

$80,502


$28

0.14
%
 

$54,675


($8
)
(0.06
)%
NOW accounts
460,712

57

0.05

 
449,298

54

0.05

 
437,282

57

0.05

Money market accounts
664,127

960

0.58

 
718,664

880

0.50

 
711,711

640

0.36

Savings accounts
375,690

57

0.06

 
368,012

57

0.06

 
361,545

52

0.06

Time deposits (in-market)
662,969

2,265

1.37

 
617,878

1,820

1.19

 
559,442

1,460

1.05

Wholesale brokered time deposits
430,118

1,814

1.69

 
409,243

1,583

1.57

 
392,734

1,390

1.42

Total interest-bearing deposits
2,679,820

5,254

0.79

 
2,643,597

4,422

0.68

 
2,517,389

3,591

0.57

FHLB advances
874,746

4,707

2.16

 
810,967

3,983

1.99

 
817,349

3,509

1.72

Junior subordinated debentures
22,681

214

3.78

 
22,681

183

3.27

 
22,681

149

2.63

Other



 



 
13



Total interest-bearing liabilities
3,577,247

10,175

1.14

 
3,477,245

8,588

1.00

 
3,357,432

7,249

0.87

Noninterest-bearing demand deposits
574,258

 
 
 
584,557

 
 
 
543,781

 
 
Other liabilities
60,878

 
 
 
56,951

 
 
 
49,013

 
 
Shareholders' equity
416,433

 
 
 
410,955

 
 
 
404,238

 
 
Total liabilities and shareholders' equity

$4,628,816

 
 
 

$4,529,708

 
 
 

$4,354,464

 
 
Net interest income (FTE)
 

$33,425

 
 
 

$32,134

 
 
 

$30,490

 
Interest rate spread
 
 
2.84
%
 
 
 
2.84
%
 
 
 
2.81
%
Net interest margin
 
 
3.05
%
 
 
 
3.03
%
 
 
 
2.97
%
Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:
For the Three Months Ended
Jun 30, 2018
Mar 31, 2018
Jun 30, 2017
Commercial loans

$308


$276


$549

Nontaxable debt securities
6

6

37

Total

$314


$282


$586


-13-



 
 
 
 
 
 
 
 
CONSOLIDATED AVERAGE BALANCE SHEETS (FTE Basis)
(Unaudited; Dollars in thousands)
 
 
For the Six Months Ended
June 30, 2018
 
June 30, 2017
 
Average Balance
Interest
Yield/
Rate
 
Average Balance
Interest
Yield/
 Rate
 
Assets:
 
 
 
 
 
 
 
Cash, federal funds sold and short-term investments

$54,649


$462

1.70
%
 

$58,323


$260

0.90
%
Mortgage loans for sale
27,329

539

3.98

 
23,194

445

3.87

Taxable debt securities
813,193

10,476

2.60

 
764,666

9,553

2.52

Nontaxable debt securities
2,154

55

5.15

 
9,286

282