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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): January 28, 2019
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 January 28, 2019, Washington Trust Bancorp, Inc. issued a press release in which it disclosed unaudited financial information related to fourth quarter 2018 consolidated earnings. A copy of the press release relating to such announcement, dated January 28, 2019, 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 January 28, 2019*
 
 
 
 
 
 
 
 
 
 
 
 
*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:
January 28, 2019
 
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

396506970_bancorpflatbluehorizontala12.jpg
NASDAQ: WASH
Contact: Elizabeth B. Eckel
Senior Vice President, Marketing
Telephone: (401) 348-1309
E-mail: [email protected]
Date: January 28, 2019
FOR IMMEDIATE RELEASE

Washington Trust Reports Record Full-Year 2018 Earnings and Reaches $5 Billion in Assets
WESTERLY, R.I., January 28, 2019 (GLOBE NEWSWIRE)…Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced fourth quarter 2018 net income of $17.0 million, or $0.98 per diluted share, compared to net income of $17.5 million, or $1.01 per diluted share, reported for the third quarter of 2018. Net income for the year ended December 31, 2018 totaled $68.4 million, or $3.93 per diluted share, compared to $45.9 million, or $2.64 per diluted share, reported for the prior year. Earnings in 2017 were reduced by a non-cash charge to write down net deferred tax assets by $6.2 million, or $0.36 per diluted share, due to the enactment of the Tax Cuts and Jobs Act, which included the reduction of the federal corporate income tax rate from 35% to 21% effective January 1, 2018.

“Washington Trust reported record full-year 2018 earnings, reached $5 billion in total assets and posted all-time high levels of total deposits and loans,” stated Edward O. Handy III, Washington Trust Chairman and Chief Executive Officer. “These achievements are testaments to our continued success in growing our key business lines and expanding our presence throughout the region.”

Selected highlights for fourth quarter and full-year 2018 include:
Returns on average equity and average assets for the fourth quarter were 15.61% and 1.40%, respectively. Full-year returns on average equity and average assets were at 16.20% and 1.46%, respectively.
Total loans were up by $124 million, or 3%, from the end of the prior quarter and up by $306 million, or 9%, from a year ago.
Total deposits were up by $110 million, or 3%, from the end of the preceding quarter and up by $281 million, or 9%, from a year ago.
In December, Washington Trust declared a quarterly dividend of 47 cents per share, representing a 4 cent per share, or 9%, increase over the preceding quarter. Full-year 2018 dividends declared amounted to $1.76 per share, representing an increase of 22 cents per share, or 14%, over last year.
Net Interest Income
Net interest income was $33.9 million for the fourth quarter of 2018, up by $429 thousand, or 1%, from the third quarter of 2018. Income associated with loan payoffs and prepayment penalties in the fourth quarter of 2018 was $144 thousand, compared to $173 thousand in the prior quarter. The net interest margin was 2.95% for the fourth quarter, down by 4 basis points from 2.99% reported in the preceding quarter. Excluding income associated with loan payoffs and prepayment penalties, the net interest margin was 2.94% for the fourth quarter, down by 4 basis points from 2.98% reported in the preceding quarter.

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Washington Trust
January 28, 2019


Significant linked quarter changes included:
Average interest-earning assets increased by $124 million, largely due to loan growth and purchases of securities that were made in the latter portion of the fourth quarter. The yield on interest-earning assets for the fourth quarter was 4.13%, up by 10 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 4.11%, up by 9 basis points from the preceding quarter. The yield benefited from increased market interest rates.
Average interest-bearing liabilities increased by $103 million, including increases of $66 million in average in-market deposits and $37 million in average wholesale funding balances (wholesale brokered time deposits and Federal Home Loan Bank advances). The cost of interest-bearing liabilities for the fourth quarter was 1.45%, up by 17 basis points from the preceding quarter, reflecting higher rates paid on wholesale funding sources and promotional time certificates of deposit. The increase in the cost of funds also reflected competitive pricing on money market accounts and interest-bearing demand deposits.

Noninterest Income
Noninterest income totaled $15.2 million for the fourth quarter of 2018, down modestly by $52 thousand from the third quarter of 2018. Significant linked quarter changes included:
Wealth management revenues were $9.0 million for the fourth quarter of 2018, down by $442 thousand, or 5%, on a linked quarter basis. The decrease was concentrated in asset-based revenues. Wealth management assets under administration were $5.9 billion at December 31, 2018, down by $552 million, or 9%, from the balance at September 30, 2018. Both the decline in asset-based revenues and wealth management assets under administration were attributable to financial market declines during the quarter.
Mortgage banking revenues were $2.0 million for the fourth quarter of 2018, down by $646 thousand, or 25%, from the preceding quarter, largely due to a lower volume of loans sold and a lower sales yield on mortgage loans sold in the secondary market.
Loan related derivative income was $1.4 million for the fourth quarter of 2018, up by $1.1 million from the preceding quarter, due to a higher volume of commercial borrower loan related derivative transactions.

Noninterest Expenses
Noninterest expenses totaled $26.7 million for the fourth quarter of 2018, up by $620 thousand, or 2%, from the third quarter of 2018. The linked quarter comparison of noninterest expenses was impacted by the following:
Included in other expenses were $833 thousand and $197 thousand, respectively, of write-down valuation adjustments on other real estate owned in the fourth quarter and third quarter of 2018.
In the fourth quarter of 2018, a reduction to noninterest expenses of $187 thousand was recognized, resulting from a nontaxable adjustment in the fair value of a contingent consideration liability that was initially recorded upon the completion of a 2015 acquisition.
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.

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Washington Trust
January 28, 2019


Excluding the impact of the aforementioned items, noninterest expenses for the fourth quarter of 2018 decreased by $129 thousand on a linked quarter basis.

Income tax expense totaled $4.5 million for the fourth quarter of 2018, down by $218 thousand from the preceding quarter. The effective tax rate for the fourth quarter of 2018 was 21.0%, compared to 21.3% for the preceding quarter. Based on current federal and applicable state income tax statutes, the Corporation currently expects its 2019 effective tax rate to be approximately 21.5%.

Investment Securities
The securities portfolio totaled $938 million at December 31, 2018, up by $115 million from the balance at September 30, 2018. The increase reflected purchases of debt securities in the fourth quarter totaling $124 million, with a weighted average yield of 3.85%, as well as an increase in the fair value of available for sale securities. These increases were partially offset by routine principal pay-downs on mortgage-backed securities and a called debt security. Investment securities represented 19% of total assets at December 31, 2018, compared to 17% of total assets at September 30, 2018.

Loans
Total loans amounted to $3.7 billion at December 31, 2018, up by $124 million, or 3%, from the end of the third quarter. Total commercial loans surpassed $2.0 billion at the end of 2018, increasing by $116 million, or 6%, in the fourth quarter, reflecting growth in the commercial real estate portfolio. The residential real estate loan portfolio increased by $11 million, or 1%, from the balance at September 30, 2018, while total consumer loans declined by $3 million, or 1%, from the end of the third quarter.

Total loans rose by $306 million, or 9%, from the balance at the end of 2017, with growth of $190 million, or 10%, in the commercial loan portfolio and $133 million, or 11%, in the residential loan portfolio.

Deposits and Borrowings
Total deposits amounted to $3.5 billion at December 31, 2018, up by $110 million, or 3%, from the end of the preceding quarter. Excluding the balances of wholesale brokered time deposits, total in-market deposits were up by $76 million, or 3%, largely due to growth in promotional time certificates of deposit.

Total deposits were up by $281 million, or 9%, from the balance at the end of 2017. Excluding the balances of wholesale brokered time deposits, total in-market deposits were up by $202 million, or 7%, in 2018.

Federal Home Loan Bank advances amounted to $951 million at December 31, 2018, up by $122 million from the balance at September 30, 2018, to fund balance sheet growth.

Asset Quality
Total nonaccrual loans amounted to $11.7 million, or 0.32% of total loans, at December 31, 2018, compared to $10.8 million, or 0.30% of total loans, at September 30, 2018. Total past due loans amounted to $13.6 million, or 0.37% of total loans, at December 31, 2018, compared to $13.5 million, or 0.38% of total loans, at September 30, 2018.

A loan loss provision totaling $800 thousand was recognized in the fourth quarter of 2018, compared to a loan loss provision of

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Washington Trust
January 28, 2019


$350 thousand recognized in the preceding quarter. These provisions were based on management's assessment of loss exposure, as well as loan loss allocations commensurate with growth and changes in the loan portfolio. Net charge-offs totaled $237 thousand in the fourth quarter compared to $15 thousand in the preceding quarter. The allowance for loan losses amounted to $27.1 million, or 0.74% of total loans, at December 31, 2018, compared to $26.5 million, or 0.75% of total loans, at September 30, 2018.

Capital and Dividends
Total shareholders' equity was $448 million at December 31, 2018, up by $20.3 million from September 30, 2018, including net income of $17.0 million, as well as an increase in the fair value of available for sale securities totaling $8.8 million and an increase of $2.4 million associated with the annual remeasurement of defined benefit pension plan obligations, both of which are net of tax and recognized in the accumulated other comprehensive income component of shareholders' equity. These increases were partially offset by $8.2 million in dividend declarations made in the quarter.

Capital levels at December 31, 2018 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.56% at December 31, 2018, compared to 12.77% at September 30, 2018. Book value per share amounted to $25.90 at December 31, 2018, compared to $24.75 at September 30, 2018.

The Board of Directors declared a quarterly dividend of 47 cents per share for the quarter ended December 31, 2018, an increase of 4 cents per share, or 9%, over the preceding quarter. The dividend was paid on January 11, 2019 to shareholders of record on January 2, 2019.

Conference Call
Washington Trust will host a conference call to discuss its fourth quarter results, business highlights and outlook on Tuesday, January 29, 2019 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 13686319; the audio replay will be available through February 8, 2019. 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 March 31, 2019.


-4-

Washington Trust
January 28, 2019


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

$89,923


$72,934


$132,068


$85,680


$79,853

Short-term investments
3,552

2,917

2,624

2,322

3,070

Mortgage loans held for sale
20,996

22,571

35,207

19,269

26,943

Securities:
 
 
 
 
 
Available for sale, at fair value
927,810

812,647

776,693

787,842

780,954

Held to maturity, at amortized cost
10,415

10,863

11,412

11,973

12,541

Total securities
938,225

823,510

788,105

799,815

793,495

Federal Home Loan Bank stock, at cost
46,068

44,525

46,281

41,127

40,517

Loans:
 
 
 
 
 
Total loans
3,680,360

3,556,203

3,490,230

3,387,406

3,374,071

Less allowance for loan losses
27,072

26,509

26,174

25,864

26,488

Net loans
3,653,288

3,529,694

3,464,056

3,361,542

3,347,583

Premises and equipment, net
29,005

28,195

28,377

28,316

28,333

Investment in bank-owned life insurance
80,463

79,891

79,319

73,782

73,267

Goodwill
63,909

63,909

63,909

63,909

63,909

Identifiable intangible assets, net
8,162

8,400

8,645

8,893

9,140

Other assets
77,175

94,126

88,651

81,671

63,740

Total assets

$5,010,766


$4,770,672


$4,737,242


$4,566,326


$4,529,850

Liabilities:
 
 
 
 
 
Deposits:
 
 
 
 
 
Noninterest-bearing deposits

$603,216


$611,829


$577,656


$601,478


$578,410

Interest-bearing deposits
2,920,832

2,802,519

2,743,955

2,654,956

2,664,297

Total deposits
3,524,048

3,414,348

3,321,611

3,256,434

3,242,707

Federal Home Loan Bank advances
950,722

828,392

901,053

808,677

791,356

Junior subordinated debentures
22,681

22,681

22,681

22,681

22,681

Other liabilities
65,131

77,342

70,326

65,453

59,822

Total liabilities
4,562,582

4,342,763

4,315,671

4,153,245

4,116,566

Shareholders’ Equity:
 
 
 
 
 
Common stock
1,081

1,081

1,080

1,079

1,077

Paid-in capital
119,888

119,220

118,883

118,172

117,961

Retained earnings
355,524

346,685

336,670

326,505

317,756

Accumulated other comprehensive loss
(28,309
)
(39,077
)
(35,062
)
(32,675
)
(23,510
)
Total shareholders’ equity
448,184

427,909

421,571

413,081

413,284

Total liabilities and shareholders’ equity

$5,010,766


$4,770,672


$4,737,242


$4,566,326


$4,529,850




-6-



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

$40,588


$38,877


$37,101


$34,578


$33,459

 

$151,144


$127,962

Taxable interest on securities
5,957

5,383

5,358

5,118

4,719

 
21,816

18,927

Nontaxable interest on securities
9

9

20

23

24

 
61

249

Dividends on Federal Home Loan Bank stock
669

634

550

516

481

 
2,369

1,774

Other interest income
294

261

257

205

217

 
1,017

674

Total interest and dividend income
47,517

45,164

43,286

40,440

38,900

 
176,407

149,586

Interest expense:


 
 
 
 
 
 
 
Deposits
7,953

6,546

5,254

4,422

4,136

 
24,175

15,064

Federal Home Loan Bank advances
5,446

4,937

4,707

3,983

3,708

 
19,073

14,377

Junior subordinated debentures
240

232

214

183

167

 
869

613

Other interest expense





 

1

Total interest expense
13,639

11,715

10,175

8,588

8,011

 
44,117

30,055

Net interest income
33,878

33,449

33,111

31,852

30,889

 
132,290

119,531

Provision for loan losses
800

350

400


200

 
1,550

2,600

Net interest income after provision for loan losses
33,078

33,099

32,711

31,852

30,689

 
130,740

116,931

Noninterest income:


 






 
 
 
Wealth management revenues
9,012

9,454

9,602

10,273

9,914

 
38,341

39,346

Mortgage banking revenues
1,978

2,624

2,941

2,838

3,097

 
10,381

11,392

Service charges on deposit accounts
977

885

903

863

946

 
3,628

3,672

Card interchange fees
977

983

961

847

904

 
3,768

3,502

Income from bank-owned life insurance
572

572

537

515

537

 
2,196

2,161

Loan related derivative income
1,374

278

668

141

470

 
2,461

3,214

Other income
273

419

381

266

342

 
1,339

1,522

Total noninterest income
15,163

15,215

15,993

15,743

16,210

 
62,114

64,809

Noninterest expense:


 






 
 
 
Salaries and employee benefits
16,918

17,283

17,304

17,772

17,194

 
69,277

68,891

Outsourced services
2,510

1,951

2,350

1,873

1,960

 
8,684

6,920

Net occupancy
1,946

2,013

1,930

2,002

1,859

 
7,891

7,521

Equipment
983

1,080

1,069

1,180

1,198

 
4,312

5,358

Legal, audit and professional fees
587

559

555

726

562

 
2,427

2,294

FDIC deposit insurance costs
376

410

422

404

389

 
1,612

1,647

Advertising and promotion
460

440

329

177

466

 
1,406

1,481

Amortization of intangibles
239

245

247

248

248

 
979

1,035

Change in fair value of contingent consideration
(187
)



(333
)
 
(187
)
(643
)
Other expenses
2,850

2,081

2,082

2,748

2,211

 
9,761

9,596

Total noninterest expense
26,682

26,062

26,288

27,130

25,754

 
106,162

104,100

Income before income taxes
21,559

22,252

22,416

20,465

21,145

 
86,692

77,640

Income tax expense
4,523

4,741

4,742

4,254

13,163

 
18,260

31,715

Net income

$17,036


$17,511


$17,674


$16,211


$7,982

 

$68,432


$45,925

 
 
 
 
 
 
 
 
 
Net income available to common shareholders

$17,004


$17,475


$17,636


$16,173


$7,958

 

$68,288


$45,817

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
  Basic
17,297

17,283

17,272

17,234

17,223

 
17,272

17,207

  Diluted
17,385

17,382

17,387

17,345

17,349

 
17,391

17,338

Earnings per common share:
 
 
 
 
 
 
 
 
  Basic

$0.98


$1.01


$1.02


$0.94


$0.46

 

$3.95


$2.66

  Diluted

$0.98


$1.01


$1.01


$0.93


$0.46

 

$3.93


$2.64

 
 
 
 
 
 
 
 
 
Cash dividends declared per share

$0.47


$0.43


$0.43


$0.43


$0.39

 

$1.76


$1.54


-7-



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

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

$25.90


$24.75


$24.40


$23.93


$23.99

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

$21.74


$20.57


$20.20


$19.71


$19.75

Market value per share

$47.53


$55.30


$58.10


$53.75


$53.25

Shares issued and outstanding at end of period
17,302

17,290

17,278

17,262

17,227

 
 
 
 
 
 
Capital Ratios (2):
 
 
 
 
 
Tier 1 risk-based capital
11.81
%
12.00
%
11.84
%
11.78
%
11.65
%
Total risk-based capital
12.56
%
12.77
%
12.61
%
12.56
%
12.45
%
Tier 1 leverage ratio
8.89
%
8.91
%
8.87
%
8.84
%
8.79
%
Common equity tier 1
11.20
%
11.37
%
11.20
%
11.13
%
10.99
%
 
 
 
 
 
 
Balance Sheet Ratios:
 
 
 
 
 
Equity to assets
8.94
%
8.97
%
8.90
%
9.05
%
9.12
%
Tangible equity to tangible assets - Non-GAAP (1)
7.62
%
7.57
%
7.48
%
7.57
%
7.63
%
Loans to deposits (3)
104.3
%
104.0
%
105.3
%
103.8
%
104.1
%

 
 
 
For the Twelve Months Ended
 
For the Three Months Ended
 
 
Dec 31,
2018
Sep 30,
2018
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
 
Dec 31,
2018
Dec 31,
2017
Performance Ratios (4):
 
 
 
 
 
 
 
 
Net interest margin (5)
2.95
%
2.99
%
3.05
%
3.03
%
2.95
%
 
3.01
%
2.93
%
Return on average assets (net income divided by average assets)
1.40
%
1.47
%
1.53
%
1.45
%
0.71
%
 
1.46
%
1.04
%
Return on average tangible assets - Non-GAAP (1)
1.42
%
1.49
%
1.56
%
1.48
%
0.72
%
 
1.48
%
1.06
%
Return on average equity (net income available for common shareholders divided by average equity)
15.61
%
16.26
%
16.99
%
15.96
%
7.56
%
 
16.20
%
11.23
%
Return on average tangible equity - Non-GAAP (1)
18.75
%
19.59
%
20.58
%
19.40
%
9.17
%
 
19.57
%
13.70
%
Efficiency ratio (6)
54.4
%
53.6
%
53.5
%
57.0
%
54.7
%
 
54.6
%
56.5
%

(1)
See the section labeled “SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures” at the end of this document.
(2)
Estimated for December 31, 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 Twelve Months Ended
 
Dec 31,
2018
Sep 30,
2018
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
 
Dec 31,
2018
Dec 31,
2017
Wealth Management Results
 
 
 
 
 
 
 
 
Wealth Management Revenues:
 
 
 
 
 
 
 
 
Asset-based revenues

$8,930


$9,322


$9,136


$9,955


$9,686

 

$37,343


$38,125

Transaction-based revenues
82

132

466

318

228

 
998

1,221

Total wealth management revenues

$9,012


$9,454


$9,602


$10,273


$9,914

 

$38,341


$39,346

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

$6,462,340


$6,220,155


$6,343,720


$6,714,637


$6,587,899

 

$6,714,637


$6,063,293

Net investment (depreciation) appreciation & income
(534,847
)
232,245

133,450

(32,024
)
163,681

 
(201,176
)
817,577

Net client asset flows
(16,679
)
9,940

(257,015
)
(338,893
)
(36,943
)
 
(602,647
)
(166,233
)
Balance at end of period

$5,910,814


$6,462,340


$6,220,155


$6,343,720


$6,714,637

 

$5,910,814


$6,714,637

 
 
 
 
 
 
 
 
 
Percentage of AUA that are managed assets
90%
91%
92%
92%
93%
 
90%
93%
 
 
 
 
 
 
 
 
 
Mortgage Banking Results
 
 
 
 
 
 
 
 
Mortgage Banking Revenues:
 
 
 
 
 
 
 
 
Gains & commissions on loan sales, net (1)

$1,798


$2,485


$2,786


$2,679


$2,987

 

$9,748


$10,991

Residential mortgage servicing fee income, net
180

139

155

159

110

 
633

401

Total mortgage banking revenues

$1,978


$2,624


$2,941


$2,838


$3,097

 

$10,381


$11,392

 
 
 
 
 
 
 
 
 
Residential Mortgage Loan Originations:
 
 
 
 
 
 
 
 
Originations for retention in portfolio

$58,515


$80,751


$128,479


$67,840


$75,595

 

$335,585


$318,674

Originations for sale to secondary market (2)
96,792

119,832

122,693

87,720

143,834

 
427,037

533,878

Total mortgage loan originations

$155,307


$200,583


$251,172


$155,560


$219,429

 

$762,622


$852,552

 
 
 
 
 
 
 
 
 
Residential Mortgage Loans Sold:
 
 
 
 
 
 
 
 
Sold with servicing rights retained

$16,577


$24,422


$24,367


$33,575


$39,769

 

$98,941


$129,358

Sold with servicing rights released (2)
81,985

107,694

81,054

63,265

105,416

 
333,998

407,514

Total mortgage loans sold

$98,562


$132,116


$105,421


$96,840


$145,185

 

$432,939


$536,872


(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)
 
 
 
Dec 31,
2018
Sep 30,
2018
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Loans:
 
 
 
 
 
Commercial real estate (1)

$1,392,408


$1,240,350


$1,218,643


$1,217,278


$1,210,495

Commercial & industrial
620,704

656,882

632,029

603,830

612,334

Total commercial
2,013,112

1,897,232

1,850,672

1,821,108

1,822,829

 
 
 
 
 
 
Residential real estate (2)
1,360,387

1,349,340

1,327,418

1,249,890

1,227,248

 
 
 
 
 
 
Home equity
280,626

282,331

283,744

285,723

292,467

Other
26,235

27,300

28,396

30,685

31,527

Total consumer
306,861

309,631

312,140

316,408

323,994

Total loans

$3,680,360


$3,556,203


$3,490,230


$3,387,406


$3,374,071

(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.

 
December 31, 2018
 
December 31, 2017
 
Balance

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

$377,249

27
%
 

$360,834

30
%
Connecticut
570,116

41

 
461,230

38

Massachusetts
356,615

26

 
309,013

26

Subtotal
1,303,980

94

 
1,131,077

94

All other states
88,428

6

 
79,418

6

Total commercial real estate loans

$1,392,408

100
%
 

$1,210,495

100
%
 
 
 
 
 
 
Residential Real Estate Loans by Property Location:
 
 
 
 
 
Rhode Island

$352,141

26
%


$343,340

28
%
Connecticut
141,775

10


140,843

12

Massachusetts
849,435

63


726,712

59

Subtotal
1,343,351

99


1,210,895

99

All other states
17,036

1


16,353

1

Total residential real estate loans

$1,360,387

100
%


$1,227,248

100
%

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

$603,216


$611,829


$577,656


$601,478


$578,410

Interest-bearing demand deposits
178,733

151,322

136,640

83,249

82,728

NOW accounts
466,568

468,578

481,905

470,112

466,605

Money market accounts
646,878

650,976

604,954

693,748

731,345

Savings accounts
373,545

372,425

375,983

376,608

368,524

Time deposits (in-market)
778,105

715,635

698,286

625,965

617,368

In-market deposits
3,047,045

2,970,765

2,875,424

2,851,160

2,844,980

Wholesale brokered time deposits
477,003

443,583

446,187

405,274

397,727

Total deposits

$3,524,048


$3,414,348


$3,321,611


$3,256,434


$3,242,707



-10-



CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
 
 
 
Dec 31,
2018
Sep 30,
2018
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Asset Quality Ratios:
 
 
 
 
 
Nonperforming assets to total assets
0.28
%
0.29
%
0.32
%
0.30
%
0.34
%
Nonaccrual loans to total loans
0.32
%
0.30
%
0.34
%
0.31
%
0.45
%
Total past due loans to total loans
0.37
%
0.38
%
0.48
%
0.57
%
0.59
%
Allowance for loan losses to nonaccrual loans
231.25
%
245.25
%
222.85
%
245.83
%
174.14
%
Allowance for loan losses to total loans
0.74
%
0.75
%
0.75
%
0.76
%
0.79
%
 
 
 
 
 
 
Nonperforming Assets:
 
 
 
 
 
Commercial real estate

$925


$—


$—


$—


$4,954

Commercial & industrial

122

397

397

283

Total commercial
925

122

397

397

5,237

Residential real estate
9,346

9,063

10,206

9,340

9,414

Home equity
1,436

1,624

1,133

771

544

Other consumer


9

13

16

Total consumer
1,436

1,624

1,142

784

560

Total nonaccrual loans
11,707

10,809

11,745

10,521

15,211

Other real estate owned
2,142

2,974

3,206

3,206

131

Total nonperforming assets

$13,849


$13,783


$14,951


$13,727


$15,342

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

$1,080


$931


$—


$—


$4,960

Commercial & industrial

142

2,851

3,295

4,076

Total commercial
1,080

1,073

2,851

3,295

9,036

Residential real estate
10,520

9,398

11,243

11,806

7,855

Home equity
1,989

2,939

2,585

4,235

3,141

Other consumer
33

109

16

22

43

Total consumer
2,022

3,048

2,601

4,257

3,184

Total past due loans

$13,622


$13,519


$16,695


$19,358


$20,075

 
 
 
 
 
 
Accruing loans 90 days or more past due

$—


$—


$—


$—


$—

Nonaccrual loans included in past due loans

$8,613


$6,425


$8,575


$7,066


$11,788


-11-



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

$10,809


$11,745


$10,521


$15,211


$18,511

 

$15,211


$22,058

Additions to nonaccrual status
2,918

2,179

2,457

1,210

462

 
8,764

6,515

Loans returned to accruing status
(1,500
)
(361
)
(475
)
(344
)
(1,316
)
 
(2,680
)
(4,052
)
Loans charged-off
(298
)
(96
)
(103
)
(690
)
(1,047
)
 
(1,187
)
(2,462
)
Loans transferred to other real estate owned



(3,074
)

 
(3,074
)
(576
)
Payments, payoffs and other changes
(222
)
(2,658
)
(655
)
(1,792
)
(1,399
)
 
(5,327
)
(6,272
)
Balance at end of period

$11,707


$10,809


$11,745


$10,521


$15,211

 

$11,707


$15,211

 
 
 
 
 
 
 
 
 
Allowance for Loan Losses:
 
 
 
 
 
 
 
 
Balance at beginning of period

$26,509


$26,174


$25,864


$26,488


$27,308

 

$26,488


$26,004

Provision charged to earnings
800

350

400


200

 
1,550

2,600

Charge-offs
(298
)
(96
)
(103
)
(690
)
(1,047
)
 
(1,187
)
(2,462
)
Recoveries
61

81

13

66

27

 
221

346

Balance at end of period

$27,072


$26,509


$26,174


$25,864


$26,488

 

$27,072


$26,488

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

$—


$—


$—


$602


$932

 

$602


$1,785

Commercial & industrial
(13
)
(70
)
(3
)
(23
)
43

 
(109
)
167

Total commercial
(13
)
(70
)
(3
)
579

975

 
493

1,952

Residential real estate
156

68

5


32

 
229

35

Home equity
65

(2
)
73

28

(2
)
 
164

46

Other consumer
29

19

15

17

15

 
80

83

Total consumer
94

17

88

45

13

 
244

129

Total

$237


$15


$90


$624


$1,020

 

$966


$2,116

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

-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
December 31, 2018
 
September 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

$51,584


$294

2.26
%
 

$52,218


$261

1.98
%
 

($634
)

$33

0.28
 %
Mortgage loans held for sale
24,178

289

4.74

 
34,571

384

4.41

 
(10,393
)
(95
)
0.33

Taxable debt securities
877,186

5,957

2.69

 
825,302

5,383

2.59

 
51,884

574

0.10

Nontaxable debt securities
935

12

5.09

 
935

11

4.67

 

1

0.42

Total securities
878,121

5,969

2.70

 
826,237

5,394

2.59

 
51,884

575

0.11

FHLB stock
44,662

669

5.94

 
45,181

634

5.57

 
(519
)
35

0.37

Commercial real estate
1,309,957

15,500

4.69

 
1,233,230

13,931

4.48

 
76,727

1,569

0.21

Commercial & industrial
636,156

7,732

4.82

 
642,005

7,720

4.77

 
(5,849
)
12

0.05

Total commercial
1,946,113

23,232

4.74

 
1,875,235

21,651

4.58

 
70,878

1,581

0.16

Residential real estate
1,348,993

13,516

3.98

 
1,331,304

13,362

3.98

 
17,689

154


Home equity
280,085

3,553

5.03

 
284,080

3,469

4.84

 
(3,995
)
84

0.19

Other
26,679

329

4.89

 
27,635

344

4.94

 
(956
)
(15
)
(0.05
)
Total consumer
306,764

3,882

5.02

 
311,715

3,813

4.85

 
(4,951
)
69

0.17

Total loans
3,601,870

40,630

4.48

 
3,518,254

38,826

4.38

 
83,616

1,804

0.10

Total interest-earning assets
4,600,415

47,851

4.13

 
4,476,461

45,499

4.03

 
123,954

2,352

0.10

Noninterest-earning assets
239,743

 
 
 
248,437

 
 
 
(8,694
)
 
 
Total assets

$4,840,158

 
 
 

$4,724,898

 
 
 

$115,260

 
 
Liabilities and Shareholders' Equity:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing demand deposits

$148,840


$636

1.70
%
 

$134,632


$465

1.37
%
 

$14,208


$171

0.33
 %
NOW accounts
455,052

207

0.18

 
458,143

104

0.09

 
(3,091
)
103

0.09

Money market accounts
649,535

1,449

0.89

 
631,570

1,104

0.69

 
17,965

345

0.20

Savings accounts
369,787

60

0.06

 
375,528

60

0.06

 
(5,741
)


Time deposits (in-market)
749,025

3,318

1.76

 
706,726

2,806

1.58

 
42,299

512

0.18

Total interest-bearing in-market deposits
2,372,239

5,670

0.95

 
2,306,599

4,539

0.78

 
65,640

1,131

0.17

Wholesale brokered time deposits
450,336

2,283

2.01

 
438,604

2,007

1.82

 
11,732

276

0.19

Total interest-bearing deposits
2,822,575

7,953

1.12

 
2,745,203

6,546

0.95

 
77,372

1,407

0.17

FHLB advances
878,250

5,446

2.46

 
852,904

4,937

2.30

 
25,346

509

0.16

Junior subordinated debentures
22,681

240

4.20

 
22,681

232

4.06

 

8

0.14

Total interest-bearing liabilities
3,723,506

13,639

1.45

 
3,620,788

11,715

1.28

 
102,718

1,924

0.17

Noninterest-bearing demand deposits
615,392

 
 
 
612,597

 
 
 
2,795



Other liabilities
69,217

 
 
 
65,207

 
 
 
4,010



Shareholders' equity
432,043

 
 
 
426,306

 
 
 
5,737

 
 
Total liabilities and shareholders' equity

$4,840,158

 
 
 

$4,724,898

 
 
 

$115,260

 
 
Net interest income (FTE)
 

$34,212

 
 
 

$33,784

 
 
 

$428

 
Interest rate spread
 
 
2.68
%
 
 
 
2.75
%
 
 
 
(0.07
)%
Net interest margin
 
 
2.95
%
 
 
 
2.99
%
 
 
 
(0.04
)%
Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:
For the Three Months Ended
Dec 31, 2018
Sep 30, 2018
Quarter Change
Commercial loans

$331


$333


($2
)
Nontaxable debt securities
3

2

1

Total

$334


$335


($1
)

-13-



 
 
 
 
 
 
 
 
 
 
CONSOLIDATED AVERAGE BALANCE SHEETS (FTE Basis)
(Unaudited; Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
For the Twelve Months Ended
December 31, 2018
December 31, 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

$53,264


$1,017

1.91
%

$60,033


$674