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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): October 22, 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 October 22, 2018, Washington Trust Bancorp, Inc. issued a press release in which it disclosed unaudited financial information related to third quarter 2018 consolidated earnings. A copy of the press release relating to such announcement, dated October 22, 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 October 22, 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:
October 22, 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

395428385_bancorpflatbluehorizontala11.jpg
NASDAQ: WASH
Contact: Elizabeth B. Eckel
Senior Vice President, Marketing
Telephone: (401) 348-1309
E-mail: ebeckel@washtrust.com
Date: October 22, 2018
FOR IMMEDIATE RELEASE

Washington Trust Reports Third Quarter 2018 Earnings
WESTERLY, R.I., October 22, 2018 (GLOBE NEWSWIRE)…Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced third quarter 2018 net income of $17.5 million, or $1.01 per diluted share, compared to net income of $17.7 million, or $1.01 per diluted share, reported for the second quarter of 2018.

“Washington Trust’s third quarter results reflect another solid operating performance, led by good deposit growth, healthy loan production, and increased wealth management asset generation,” stated Edward O. Handy III, Washington Trust Chairman and Chief Executive Officer.

Selected highlights for third quarter 2018 include:
Profitability ratios remained strong, with returns on average equity and average assets of 16.26% and 1.47%, respectively.
Total loans were up by $66 million, or 2%, from the end of the prior quarter and up by $233 million, or 7%, from a year ago.
Total deposits were up by $93 million, or 3%, from the end of the preceding quarter and up by $257 million, or 8%, from a year ago.
In September, Washington Trust declared a quarterly dividend of 43 cents per share. Year-to-date dividends declared amounted to $1.29 per share, an increase of 14 cents per share, or 12%, from the same period a year ago.
Net Interest Income
Net interest income was $33.4 million for the third quarter of 2018, up by $338 thousand, or 1%, from the second quarter of 2018. Income associated with loan payoffs and prepayment penalties in the third quarter of 2018 was $173 thousand, compared to $483 thousand in the prior quarter. The net interest margin was 2.99% for the third quarter, down by 6 basis points from the preceding quarter. Excluding income associated with loan payoffs and prepayment penalties, the net interest margin was 2.98% for the third quarter, down by 3 basis points from the preceding quarter.

-1-

Washington Trust
October 22, 2018


Significant linked quarter changes included:
Average interest-earning assets increased by $86 million, largely due to loan growth. The yield on interest-earning assets for the third quarter was 4.03%, up by 5 basis points from the preceding quarter. Excluding the impact of income associated with loan payoffs and prepayment penalties, the yield on interest-earning assets was 4.02%, up by 8 basis points from the preceding quarter. The yield benefited from increased market rates of interest.
Average non-interest bearing demand deposits increased by $38 million, largely due to the recapture of second quarter seasonal outflows. Average interest-bearing liabilities increased by $44 million, reflecting an increase of $57 million in average in-market deposits, partially offset by a decline of $13 million in average wholesale funding balances (wholesale brokered time deposits and Federal Home Loan Bank advances). The cost of interest-bearing liabilities for the third quarter was 1.28%, up by 14 basis points from the preceding quarter, largely due to higher rates paid on promotional time certificates of deposit and interest-bearing demand deposits. The increase in the rate paid on interest-bearing demand deposits was primarily attributable to a program implemented in June 2018 that transitioned wealth management client assets, previously held in outside accounts, into insured deposits on Washington Trust's balance sheet.

Noninterest Income
Noninterest income totaled $15.2 million for the third quarter of 2018, down by $778 thousand, or 5%, from the second quarter of 2018. Significant linked quarter changes included:
Wealth management revenues were $9.5 million for the third quarter of 2018, down by $148 thousand, or 2%, on a linked quarter basis. This included a decrease of $334 thousand in transaction-based revenues, partially offset by an increase of $186 thousand, or 2%, in asset-based revenues. The linked quarter decrease in transaction-based revenues was largely attributable to tax preparation fee revenue, which is generally recognized in the second quarter.
Wealth management assets under administration were $6.5 billion at September 30, 2018, up by $242 million, or 4%, from the balance at June 30, 2018, with $232 million of net investment appreciation and income and $10 million of net client inflows.
Mortgage banking revenues were $2.6 million for the third quarter of 2018, down by $317 thousand, or 11%, from the preceding quarter. While third quarter results benefited from relatively higher volume of loans sold and sales yield, this was offset by a decrease in fair value adjustments on mortgage loan commitments and loans held for sale. The decrease in fair value adjustments reflected a decline in the mortgage pipeline and corresponding loan commitment balances as of September 30, 2018.
Loan related derivative income was $278 thousand for the third quarter of 2018, down by $390 thousand from the preceding quarter, due to lower transaction volume of commercial borrower loan related derivatives.

Noninterest Expenses
Noninterest expenses totaled $26.1 million for the third quarter of 2018, down by $226 thousand, or 1%, from the second quarter of 2018. The linked quarter comparison of noninterest expenses was impacted by the following:
Included in other expenses in the second quarter of 2018 were software system implementation expenses of $114 thousand primarily related to the conversion of our wealth management accounting system, which was completed in April 2018.

-2-

Washington Trust
October 22, 2018


In the third quarter of 2018, a one-time third-party vendor credit of $300 thousand was recognized as a reduction to outsourced services expense in the third quarter.
Excluding the impact of the aforementioned items, noninterest expenses for the third quarter of 2018 were up by $188 thousand or 1%, largely due to an increase in foreclosed property costs.

Income tax expense totaled $4.7 million for the third quarter of 2018, essentially unchanged from the preceding quarter. The effective tax rate for the third quarter of 2018 was 21.3%, compared to 21.2% for the preceding quarter.

Investment Securities
The securities portfolio totaled $824 million at September 30, 2018, up by $35 million from the balance at June 30, 2018. The increase reflected purchases of debt securities in the third quarter totaling $65 million, with a weighted average yield of 3.46%. These purchases were partially offset by routine principal pay-downs on mortgage-backed securities and a temporary decline in the fair value of available for sale securities. Investment securities represented 17% of total assets at September 30, 2018.

Loans
Total loans amounted to $3.6 billion at September 30, 2018, up by $66 million, or 2%, from the end of the second quarter. Total commercial loans increased by $47 million, or 3%, reflecting an increase of $25 million in the commercial and industrial ("C&I") portfolio and an increase of $22 million in the commercial real estate portfolio. The residential real estate loan portfolio increased by $22 million, or 2%, from the balance at June 30, 2018, while total consumer loans declined by $3 million, or 1%, from the end of the second quarter.

Deposits and Borrowings
Total deposits amounted to $3.4 billion at September 30, 2018, up by $93 million, or 3%, from the end of the preceding quarter. The increases reflected seasonal inflows of various institutional and governmental depositors based on their underlying business cycles, as well as growth in time certificates of deposit resulting from a promotional campaign that began in April 2018.

Federal Home Loan Bank advances amounted to $828 million at September 30, 2018, down by $73 million from the balance at June 30, 2018, due to growth in deposits.

Asset Quality
Total nonaccrual loans amounted to $10.8 million, or 0.30% of total loans, at September 30, 2018, down from $11.7 million, or 0.34% of total loans, at June 30, 2018. Total past due loans amounted to $13.5 million, or 0.38% of total loans, at September 30, 2018, down from $16.7 million, or 0.48% of total loans, at June 30, 2018.

Based on management's assessment of loan and credit quality metrics, loss exposures and changes in the loan portfolio during the quarter, a loan loss provision totaling $350 thousand was recognized in the third quarter of 2018, compared to a loan loss provision of $400 thousand recognized in the preceding quarter. Net charge-offs were nominal in both the third and second quarter of 2018, totaling $15 thousand and $90 thousand, respectively. The allowance for loan losses amounted to $26.5 million, or 0.75% of total loans, at September 30, 2018, compared to $26.2 million, or 0.75% of total loans, at June 30, 2018.

-3-

Washington Trust
October 22, 2018



Capital and Dividends
Total shareholders' equity was $428 million at September 30, 2018, up by $6.3 million from June 30, 2018, reflecting net income of $17.5 million, partially offset by $7.5 million in dividends declared and a $4.0 million reduction in the accumulated comprehensive income component of shareholders' equity primarily due to a temporary decline in the fair value of available for sale securities.

Capital levels at September 30, 2018 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.77% at September 30, 2018, compared to 12.61% at June 30, 2018. Book value per share amounted to $24.75 at September 30, 2018, compared to $24.40 at June 30, 2018.

The Board of Directors declared a quarterly dividend of 43 cents per share for the quarter ended September 30, 2018. The dividend was paid on October 12, 2018 to shareholders of record on October 1, 2018.

Conference Call
Washington Trust will host a conference call to discuss its third quarter results, business highlights and outlook on Tuesday, October 23, 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 13683640; the audio replay will be available through October 30, 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 December 31, 2018.


-4-

Washington Trust
October 22, 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)
 
 
 
 
 
 
 
Sep 30,
2018
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Assets:
 
 
 
 
 
Cash and due from banks

$72,934


$132,068


$85,680


$79,853


$128,580

Short-term investments
2,917

2,624

2,322

3,070

2,600

Mortgage loans held for sale
22,571

35,207

19,269

26,943

28,484

Securities:
 
 
 
 
 
Available for sale, at fair value
812,647

776,693

787,842

780,954

714,355

Held to maturity, at amortized cost
10,863

11,412

11,973

12,541

13,241

Total securities
823,510

788,105

799,815

793,495

727,596

Federal Home Loan Bank stock, at cost
44,525

46,281

41,127

40,517

42,173

Loans:
 
 
 
 
 
Total loans
3,556,203

3,490,230

3,387,406

3,374,071

3,323,078

Less allowance for loan losses
26,509

26,174

25,864

26,488

27,308

Net loans
3,529,694

3,464,056

3,361,542

3,347,583

3,295,770

Premises and equipment, net
28,195

28,377

28,316

28,333

28,591

Investment in bank-owned life insurance
79,891

79,319

73,782

73,267

72,729

Goodwill
63,909

63,909

63,909

63,909

63,909

Identifiable intangible assets, net
8,400

8,645

8,893

9,140

9,388

Other assets
94,126

88,651

81,671

63,740

69,410

Total assets

$4,770,672


$4,737,242


$4,566,326


$4,529,850


$4,469,230

Liabilities:
 
 
 
 
 
Deposits:
 
 
 
 
 
Noninterest-bearing deposits

$611,829


$577,656


$601,478


$578,410


$575,866

Interest-bearing deposits
2,802,519

2,743,955

2,654,956

2,664,297

2,581,215

Total deposits
3,414,348

3,321,611

3,256,434

3,242,707

3,157,081

Federal Home Loan Bank advances
828,392

901,053

808,677

791,356

814,045

Junior subordinated debentures
22,681

22,681

22,681

22,681

22,681

Other liabilities
77,342

70,326

65,453

59,822

61,195

Total liabilities
4,342,763

4,315,671

4,153,245

4,116,566

4,055,002

Shareholders’ Equity:
 
 
 
 
 
Common stock
1,081

1,080

1,079

1,077

1,076

Paid-in capital
119,220

118,883

118,172

117,961

117,189

Retained earnings
346,685

336,670

326,505

317,756

312,334

Accumulated other comprehensive loss
(39,077
)
(35,062
)
(32,675
)
(23,510
)
(16,371
)
Total shareholders’ equity
427,909

421,571

413,081

413,284

414,228

Total liabilities and shareholders’ equity

$4,770,672


$4,737,242


$4,566,326


$4,529,850


$4,469,230




-6-



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

$38,877


$37,101


$34,578


$33,459


$32,509

 

$110,556


$94,503

Taxable interest on securities
5,383

5,358

5,118

4,719

4,655

 
15,859

14,208

Nontaxable interest on securities
9

20

23

24

41

 
52

225

Dividends on Federal Home Loan Bank stock
634

550

516

481

467

 
1,700

1,293

Other interest income
261

257

205

217

197

 
723

457

Total interest and dividend income
45,164

43,286

40,440

38,900

37,869

 
128,890

110,686

Interest expense:


 
 
 
 
 
 
 
Deposits
6,546

5,254

4,422

4,136

3,835

 
16,222

10,928

Federal Home Loan Bank advances
4,937

4,707

3,983

3,708

3,816

 
13,627

10,669

Junior subordinated debentures
232

214

183

167

159

 
629

446

Other interest expense





 

1

Total interest expense
11,715

10,175

8,588

8,011

7,810

 
30,478

22,044

Net interest income
33,449

33,111

31,852

30,889

30,059

 
98,412

88,642

Provision for loan losses
350

400


200

1,300

 
750

2,400

Net interest income after provision for loan losses
33,099

32,711

31,852

30,689

28,759

 
97,662

86,242

Noninterest income:


 






 
 
 
Wealth management revenues
9,454

9,602

10,273

9,914

10,013

 
29,329

29,432

Mortgage banking revenues
2,624

2,941

2,838

3,097

3,036

 
8,403

8,295

Service charges on deposit accounts
885

903

863

946

942

 
2,651

2,726

Card interchange fees
983

961

847

904

894

 
2,791

2,598

Income from bank-owned life insurance
572

537

515

537

546

 
1,624

1,624

Loan related derivative income
278

668

141

470

1,452

 
1,087

2,744

Other income
419

381

266

342

400

 
1,066

1,180

Total noninterest income
15,215

15,993

15,743

16,210

17,283

 
46,951

48,599

Noninterest expense:


 






 
 
 
Salaries and employee benefits
17,283

17,304

17,772

17,194

17,362

 
52,359

51,697

Net occupancy
2,013

1,930

2,002

1,859

1,928

 
5,945

5,662

Outsourced services
1,951

2,350

1,873

1,960

1,793

 
6,174

4,960

Equipment
1,080

1,069

1,180

1,198

1,380

 
3,329

4,160

Legal, audit and professional fees
559

555

726

562

534

 
1,840

1,732

FDIC deposit insurance costs
410

422

404

389

308

 
1,236

1,258

Advertising and promotion
440

329

177

466

416

 
946

1,015

Amortization of intangibles
245

247

248

248

253

 
740

787

Change in fair value of contingent consideration



(333
)

 

(310
)
Other expenses
2,081

2,082

2,748

2,211

2,780

 
6,911

7,385

Total noninterest expense
26,062

26,288

27,130

25,754

26,754

 
79,480

78,346

Income before income taxes
22,252

22,416

20,465

21,145

19,288

 
65,133

56,495

Income tax expense
4,741

4,742

4,254

13,163

6,326

 
13,737

18,552

Net income

$17,511


$17,674


$16,211


$7,982


$12,962

 

$51,396


$37,943

 
 
 
 
 
 
 
 
 
Net income available to common shareholders

$17,475


$17,636


$16,173


$7,958


$12,934

 

$51,284


$37,859

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
  Basic
17,283

17,272

17,234

17,223

17,212

 
17,263

17,201

  Diluted
17,382

17,387

17,345

17,349

17,318

 
17,392

17,320

Earnings per common share:
 
 
 
 
 
 
 
 
  Basic

$1.01


$1.02


$0.94


$0.46


$0.75

 

$2.97


$2.20

  Diluted

$1.01


$1.01


$0.93


$0.46


$0.75

 

$2.95


$2.19

 
 
 
 
 
 
 
 
 
Cash dividends declared per share

$0.43


$0.43


$0.43


$0.39


$0.39

 

$1.29


$1.15


-7-



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

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

$24.75


$24.40


$23.93


$23.99


$24.06

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

$20.57


$20.20


$19.71


$19.75


$19.81

Market value per share

$55.30


$58.10


$53.75


$53.25


$57.25

Shares issued and outstanding at end of period
17,290

17,278

17,262

17,227

17,214

 
 
 
 
 
 
Capital Ratios (2):
 
 
 
 
 
Tier 1 risk-based capital
12.00
%
11.84
%
11.78
%
11.65
%
11.69
%
Total risk-based capital
12.77
%
12.61
%
12.56
%
12.45
%
12.53
%
Tier 1 leverage ratio
8.91
%
8.87
%
8.84
%
8.79
%
8.83
%
Common equity tier 1
11.37
%
11.20
%
11.13
%
10.99
%
11.02
%
 
 
 
 
 
 
Balance Sheet Ratios:
 
 
 
 
 
Equity to assets
8.97
%
8.90
%
9.05
%
9.12
%
9.27
%
Tangible equity to tangible assets - Non-GAAP (1)
7.57
%
7.48
%
7.57
%
7.63
%
7.76
%
Loans to deposits (3)
104.0
%
105.3
%
103.8
%
104.1
%
105.3
%

 
 
 
For the Nine Months Ended
 
For the Three Months Ended
 
 
Sep 30,
2018
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
 
Sep 30,
2018
Sep 30,
2017
Performance Ratios (4):
 
 
 
 
 
 
 
 
Net interest margin (5)
2.99
%
3.05
%
3.03
%
2.95
%
2.93
%
 
3.03
%
2.92
%
Return on average assets (net income divided by average assets)
1.47
%
1.53
%
1.45
%
0.71
%
1.17
%
 
1.48
%
1.16
%
Return on average tangible assets - Non-GAAP (1)
1.49
%
1.56
%
1.48
%
0.72
%
1.19
%
 
1.51
%
1.18
%
Return on average equity (net income available for common shareholders divided by average equity)
16.26
%
16.99
%
15.96
%
7.56
%
12.43
%
 
16.41
%
12.50
%
Return on average tangible equity - Non-GAAP (1)
19.59
%
20.58
%
19.40
%
9.17
%
15.12
%
 
19.86
%
15.29
%
Efficiency ratio (6)
53.6
%
53.5
%
57.0
%
54.7
%
56.5
%
 
54.7
%
57.1
%

(1)
See the section labeled “SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures” at the end of this document.
(2)
Estimated for September 30, 2018 and actuals for the remaining periods.
(3)
Period-end balances of net loans and mortgage loans held for sale 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 Nine Months Ended
 
Sep 30,
2018
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
 
Sep 30,
2018
Sep 30,
2017
Wealth Management Results
 
 
 
 
 
 
 
 
Wealth Management Revenues:
 
 
 
 
 
 
 
 
Asset-based revenues

$9,322


$9,136


$9,955


$9,686


$9,791

 

$28,413


$28,439

Transaction-based revenues
132

466

318

228

222

 
916

993

Total wealth management revenues

$9,454


$9,602


$10,273


$9,914


$10,013

 

$29,329


$29,432

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

$6,220,155


$6,343,720


$6,714,637


$6,587,899


$6,403,501

 

$6,714,637


$6,063,293

Net investment appreciation (depreciation) & income
232,245

133,450

(32,024
)
163,681

270,549

 
333,671

653,896

Net client asset flows
9,940

(257,015
)
(338,893
)
(36,943
)
(86,151
)
 
(585,968
)
(129,290
)
Balance at end of period

$6,462,340


$6,220,155


$6,343,720


$6,714,637


$6,587,899

 

$6,462,340


$6,587,899

 
 
 
 
 
 
 
 
 
Percentage of AUA that are managed assets
91%
92%
92%
93%
92%
 
91%
92%
 
 
 
 
 
 
 
 
 
Mortgage Banking Results
 
 
 
 
 
 
 
 
Mortgage Banking Revenues:
 
 
 
 
 
 
 
 
Gains & commissions on loan sales, net (1)

$2,485


$2,786


$2,679


$2,987


$2,952

 

$7,950


$8,004

Residential mortgage servicing fee income, net
139

155

159

110

84

 
453

291

Total mortgage banking revenues

$2,624


$2,941


$2,838


$3,097


$3,036

 

$8,403


$8,295

 
 
 
 
 
 
 
 
 
Residential Mortgage Loan Originations:
 
 
 
 
 
 
 
 
Originations for retention in portfolio

$94,866


$128,479


$67,840


$75,595


$90,378

 

$291,185


$243,079

Originations for sale to secondary market (2)
119,832

122,693

87,720

143,834

143,112

 
330,245

390,044

Total mortgage loan originations

$214,698


$251,172


$155,560


$219,429


$233,490

 

$621,430


$633,123

 
 
 
 
 
 
 
 
 
Residential Mortgage Loans Sold:
 
 
 
 
 
 
 
 
Sold with servicing rights retained

$24,422


$24,367


$33,575


$39,769


$37,823

 

$82,634


$89,589

Sold with servicing rights released (2)
107,724

81,054

63,265

105,416

109,508

 
252,043

302,098

Total mortgage loans sold

$132,146


$105,421


$96,840


$145,185


$147,331

 

$334,677


$391,687


(1)
Includes gains on loan sales, commissions on loans originated for others, servicing right gains, fair value adjustments on loans held for sale, and fair value adjustments and gains on forward loan commitments.
(2)
Also includes loans originated in a broker capacity.


-9-



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

$1,240,350


$1,218,643


$1,217,278


$1,210,495


$1,211,792

Commercial & industrial
656,882

632,029

603,830

612,334

588,324

Total commercial
1,897,232

1,850,672

1,821,108

1,822,829

1,800,116

 
 
 
 
 
 
Residential real estate (2)
1,349,340

1,327,418

1,249,890

1,227,248

1,195,537

 
 
 
 
 
 
Home equity
282,331

283,744

285,723

292,467

294,657

Other
27,300

28,396

30,685

31,527

32,768

Total consumer
309,631

312,140

316,408

323,994

327,425

Total loans

$3,556,203


$3,490,230


$3,387,406


$3,374,071


$3,323,078

(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.

 
September 30, 2018
 
December 31, 2017
 
Balance

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

$352,297

28.4
%
 

$360,834

29.8
%
Connecticut
499,996

40.3

 
461,230

38.1

Massachusetts
299,082

24.1

 
309,013

25.5

Subtotal
1,151,375

92.8

 
1,131,077

93.4

All other states
88,975

7.2

 
79,418

6.6

Total commercial real estate loans

$1,240,350

100.0
%
 

$1,210,495

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

$347,657

25.8
%


$343,340

28.0
%
Connecticut
145,962

10.8


140,843

11.5

Massachusetts
838,628

62.1


726,712

59.2

Subtotal
1,332,247

98.7


1,210,895

98.7

All other states
17,093

1.3


16,353

1.3

Total residential real estate loans

$1,349,340

100.0
%


$1,227,248

100.0
%

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

$611,829


$577,656


$601,478


$578,410


$575,866

Interest-bearing demand deposits
151,322

136,640

83,249

82,728

45,407

NOW accounts
468,578

481,905

470,112

466,605

448,128

Money market accounts
650,976

604,954

693,748

731,345

716,827

Savings accounts
372,425

375,983

376,608

368,524

367,912

Time deposits (in-market)
715,635

698,286

625,965

617,368

587,166

In-market deposits
2,970,765

2,875,424

2,851,160

2,844,980

2,741,306

Wholesale brokered time deposits
443,583

446,187

405,274

397,727

415,775

Total deposits

$3,414,348


$3,321,611


$3,256,434


$3,242,707


$3,157,081



-10-



CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
 
 
 
Sep 30,
2018
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Asset Quality Ratios:
 
 
 
 
 
Nonperforming assets to total assets
0.29
%
0.32
%
0.30
%
0.34
%
0.44
%
Nonaccrual loans to total loans
0.30
%
0.34
%
0.31
%
0.45
%
0.56
%
Total past due loans to total loans
0.38
%
0.48
%
0.57
%
0.59
%
0.49
%
Allowance for loan losses to nonaccrual loans
245.25
%
222.85
%
245.83
%
174.14
%
147.52
%
Allowance for loan losses to total loans
0.75
%
0.75
%
0.76
%
0.79
%
0.82
%
 
 
 
 
 
 
Nonperforming Assets:
 
 
 
 
 
Commercial real estate

$—


$—


$—


$4,954


$5,887

Commercial & industrial
122

397

397

283

429

Total commercial
122

397

397

5,237

6,316

Residential real estate
9,063

10,206

9,340

9,414

11,699

Home equity
1,624

1,133

771

544

480

Other consumer

9

13

16

16

Total consumer
1,624

1,142

784

560

496

Total nonaccrual loans
10,809

11,745

10,521

15,211

18,511

Other real estate owned
2,974

3,206

3,206

131

1,038

Total nonperforming assets

$13,783


$14,951


$13,727


$15,342


$19,549

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

$931


$—


$—


$4,960


$5,887

Commercial & industrial
142

2,851

3,295

4,076

455

Total commercial
1,073

2,851

3,295

9,036

6,342

Residential real estate
9,398

11,243

11,806

7,855

7,802

Home equity
2,939

2,585

4,235

3,141

2,268

Other consumer
109

16

22

43

35

Total consumer
3,048

2,601

4,257

3,184

2,303

Total past due loans

$13,519


$16,695


$19,358


$20,075


$16,447

 
 
 
 
 
 
Accruing loans 90 days or more past due

$—


$—


$—


$—


$—

Nonaccrual loans included in past due loans

$6,425


$8,575


$7,066


$11,788


$13,216


-11-



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

$11,745


$10,521


$15,211


$18,511


$20,198

 

$15,211


$22,058

Additions to nonaccrual status
2,179

2,457

1,210

462

1,969

 
5,846

6,053

Loans returned to accruing status
(361
)
(475
)
(344
)
(1,316
)
(1,411
)
 
(1,180
)
(2,736
)
Loans charged-off
(96
)
(103
)
(690
)
(1,047
)
(694
)
 
(889
)
(1,415
)
Loans transferred to other real estate owned


(3,074
)


 
(3,074
)
(576
)
Payments, payoffs and other changes
(2,658
)
(655
)
(1,792
)
(1,399
)
(1,551
)
 
(5,105
)
(4,873
)
Balance at end of period

$10,809


$11,745


$10,521


$15,211


$18,511

 

$10,809


$18,511

 
 
 
 
 
 
 
 
 
Allowance for Loan Losses:
 
 
 
 
 
 
 
 
Balance at beginning of period

$26,174


$25,864


$26,488


$27,308


$26,662

 

$26,488


$26,004

Provision charged to earnings
350

400


200

1,300

 
750

2,400

Charge-offs
(96
)
(103
)
(690
)
(1,047
)
(694
)
 
(889
)
(1,415
)
Recoveries
81

13

66

27

40

 
160

319

Balance at end of period

$26,509


$26,174


$25,864


$26,488


$27,308

 

$26,509


$27,308

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

$—


$—


$602


$932


$535

 

$602


$853

Commercial & industrial
(70
)
(3
)
(23
)
43

114

 
(96
)
124

Total commercial
(70
)
(3
)
579

975

649

 
506

977

Residential real estate
68

5


32

(1
)
 
73

3

Home equity
(2
)
73

28

(2
)
(7
)
 
99

48

Other consumer
19

15

17

15

13

 
51

68

Total consumer
17

88

45

13

6

 
150

116

Total

$15


$90


$624


$1,020


$654

 

$729


$1,096

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

-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
September 30, 2018
 
June 30, 2018
 
Quarter Change
 
Average Balance
Interest
Yield/
Rate
 
Average Balance
Interest
Yield/
Rate
 
Average Balance
Interest
Yield/
Rate
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash, federal funds sold and short-term investments

$52,218


$261

1.98
%
 

$56,142


$257

1.84
%
 

($3,924
)

$4

0.14
 %
Mortgage loans held for sale
34,571

384

4.41

 
30,203

313

4.16

 
4,368

71

0.25

Taxable debt securities
825,302

5,383

2.59

 
821,772

5,358

2.62

 
3,530

25

(0.03
)
Nontaxable debt securities
935

11

4.67

 
1,956

26

5.33

 
(1,021
)
(15
)
(0.66
)
Total securities
826,237

5,394

2.59

 
823,728

5,384

2.62

 
2,509

10

(0.03
)
FHLB stock
45,181

634

5.57

 
43,331

550

5.09

 
1,850

84

0.48

Commercial real estate
1,233,230

13,931

4.48

 
1,225,926

13,463

4.40

 
7,304

468

0.08

Commercial & industrial
642,005

7,720

4.77

 
622,141

7,569

4.88

 
19,864

151

(0.11
)
Total commercial
1,875,235


$21,651

4.58

 
1,848,067


$21,032

4.56

 
27,168


$619

0.02

Residential real estate
1,331,304

13,362

3.98

 
1,275,171

12,426

3.91

 
56,133

936

0.07

Home equity
284,080

3,469

4.84

 
284,188

3,278

4.63

 
(108
)
191

0.21

Other
27,635

344

4.94

 
29,696

360

4.86

 
(2,061
)
(16
)
0.08

Total consumer
311,715

3,813

4.85

 
313,884

3,638

4.65

 
(2,169
)
175

0.20

Total loans
3,518,254

38,826

4.38

 
3,437,122

37,096

4.33

 
81,132

1,730

0.05

Total interest-earning assets
4,476,461

45,499

4.03

 
4,390,526

43,600

3.98

 
85,935

1,899

0.05

Noninterest-earning assets
248,437

 
 
 
238,290

 
 
 
10,147

 
 
Total assets

$4,724,898

 
 
 

$4,628,816

 
 
 

$96,082

 
 
Liabilities and Shareholders' Equity:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing demand deposits

$134,632


$465

1.37
%
 

$86,204


$101

0.47
%
 

$48,428


$364

0.90
 %
NOW accounts
458,143

104

0.09

 
460,712

57

0.05

 
(2,569
)
47

0.04

Money market accounts
631,570

1,104

0.69

 
664,127

960

0.58

 
(32,557
)
144

0.11

Savings accounts
375,528

60

0.06

 
375,690

57

0.06

 
(162
)
3


Time deposits (in-market)
706,726

2,806

1.58

 
662,969

2,265

1.37

 
43,757

541

0.21

Total interest-bearing in-market deposits
2,306,599

4,539

0.78

 
2,249,702

3,440

0.61

 
56,897

1,099

0.17

Wholesale brokered time deposits
438,604

2,007

1.82

 
430,118

1,814

1.69

 
8,486

193

0.13

Total interest-bearing deposits
2,745,203

6,546

0.95

 
2,679,820

5,254

0.79

 
65,383

1,292

0.16

FHLB advances
852,904

4,937

2.30

 
874,746

4,707

2.16

 
(21,842
)
230

0.14

Junior subordinated debentures
22,681

232

4.06

 
22,681

214

3.78

 

18

0.28

Total interest-bearing liabilities
3,620,788

11,715

1.28

 
3,577,247

10,175

1.14

 
43,541

1,540

0.14

Noninterest-bearing demand deposits
612,597

 
 
 
574,258

 
 
 
38,339



Other liabilities
65,207

 
 
 
60,878

 
 
 
4,329



Shareholders' equity
426,306

 
 
 
416,433

 
 
 
9,873

 
 
Total liabilities and shareholders' equity

$4,724,898

 
 
 

$4,628,816

 
 
 

$96,082

 
 
Net interest income (FTE)
 

$33,784

 
 
 

$33,425

 
 
 

$359

 
Interest rate spread
 
 
2.75
%
 
 
 
2.84
%
 
 
 
(0.09
)%
Net interest margin
 
 
2.99
%
 
 
 
3.05
%
 
 
 
(0.06
)%
Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:
For the Three Months Ended
Sep 30, 2018
Jun 30, 2018
Quarter Change
Commercial loans

$333


$308


$25

Nontaxable debt securities
2

6

(4
)
Total

$335


$314


$21


-13-



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

$53,828


$723

1.80
%
 

$59,357


$457

1.03
%
 

($5,529