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Press Release

Washington Trust Reports Record First Quarter 2018 Earnings

Company Release - 4/20/2018 4:05 PM ET

WESTERLY, R.I., April 20, 2018 (GLOBE NEWSWIRE) -- Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced first quarter 2018 net income of $16.2 million, or $0.93 per diluted share, compared to net income of $8.0 million, or $0.46 per diluted share, reported for the fourth quarter of 2017.

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

“Washington Trust started the year on a positive note, reporting record quarterly earnings and earnings per share, for the first quarter of 2018,” stated Edward O. Handy, III, Chairman and Chief Executive Officer.  “Our continued profitability, very good asset quality, and strong capital position provide a solid foundation for future growth.”

Selected highlights for first quarter 2018 include:

  • Returns on average equity and average assets were 15.96% and 1.45%, respectively.
  • Net interest income amounted to an all-time quarterly high of $31.9 million.
  • Consistent with improvement in asset quality metrics and changes in the loan portfolio and loss exposure, no loan loss provision was necessary in the quarter.
  • In March, Washington Trust declared a quarterly dividend of 43 cents per share, representing a 4 cent per share, or 10%, increase over the preceding quarter.

Net Interest Income
Net interest income was $31.9 million for the first quarter of 2018, up by $963 thousand, or 3%, from the fourth quarter of 2017.  Included in net interest income in the first quarter of 2018 was loan prepayment fee income of $46 thousand, compared to $174 thousand in the fourth quarter of 2017.  The net interest margin was 3.03% for the first quarter, up by 8 basis points from the preceding quarter.

Significant linked quarter changes included:

  • Average interest-earning assets increased by $66 million, reflecting additions to the securities portfolio and loan growth.  The yield on interest-earning assets for the first quarter was 3.84%, up by 14 basis points from the preceding quarter.  The yield benefited from increased market rates of interest.
  • Average interest-bearing liabilities increased by $58 million, reflecting increases in average wholesale funding balances (wholesale brokered time deposits and Federal Home Loan Bank advances).  The cost of interest-bearing funds for the first quarter was 1.00%, up by 7 basis points from the preceding quarter, largely due to higher rates on wholesale funding liabilities.

Noninterest Income
Noninterest income totaled $15.7 million for the first quarter of 2018, down by $467 thousand, or 3%, from the fourth quarter of 2017.  Significant linked quarter changes included:

  • Wealth management revenues were $10.3 million for the first quarter of 2018, up by $359 thousand, or 4% on a linked quarter basis, largely due to an increase in asset-based revenues.
    Wealth management assets under administration were $6.3 billion at March 31, 2018, down by $371 million, or 6%, from the balance at December 31, 2017.  The decline in wealth management assets primarily resulted from client outflows in the latter portion of the first quarter associated with the loss of certain client-facing personnel.  We estimate that these outflows will reduce future quarterly wealth management revenues by $600 thousand to $700 thousand.
  • Mortgage banking revenues were $2.8 million for the first quarter of 2018, down by $259 thousand, or 8%, from the preceding quarter.  These results reflect a decrease in the volume of loans sold, partially offset by a $565 thousand increase in fair value adjustments on mortgage loan commitments and loans held for sale, as well as a higher sales yield.  The increase in fair value adjustments was associated with the commencement of a portfolio-based economic hedging program. Prior to January 2018, Washington Trust economically hedged mortgage loan commitments only on a loan by loan basis.
    Residential mortgage loans sold to the secondary market were $97 million in the first quarter, down by 33% from the $145 million sold in the preceding quarter and down by 9% from the first quarter of 2017.  A higher proportion of residential mortgage loans were originated for retention in portfolio in the first quarter of 2018 than in the fourth quarter of 2017.  Both the volume of residential mortgage loans originated and sold has typically been lower in the first quarter of the year.
  • Loan related derivative income was $141 thousand for the first quarter of 2018, down by $329 thousand from the preceding quarter, due to a lower volume of commercial borrower loan related derivative transactions.

Noninterest Expenses
Noninterest expenses totaled $27.1 million for the first quarter of 2018, up by $1.4 million, or 5%, from the fourth quarter.  The linked quarter comparison of noninterest expenses was impacted by the following:

  • In the fourth quarter of 2017, a reduction to noninterest expenses of $333 thousand was recognized resulting from a nontaxable downward adjustment in the fair value of a contingent consideration liability that was initially recorded upon the completion of a 2015 acquisition.
  • In the fourth quarter of 2017, the receipt of a $325 thousand settlement of a claim against another bank related to a previously disclosed dispute was recognized as a reduction to other expenses.
  • In the first quarter of 2018, software system implementation expenses of $681 thousand were recognized, an increase of $435 thousand from the amount recognized in the preceding quarter.  These were classified as other expenses and primarily relate to the conversion of our wealth management accounting system, which was completed in April 2018.
  • In the first quarter of 2018, as previously announced, one-time cash incentive bonuses of approximately $450 thousand were expensed and paid as part of Washington Trust's employee compensation enhancements that were made in response to the reduction in corporate taxes from the Tax Act.

Excluding the aforementioned items, noninterest expenses were down by $167 thousand, or 1%, on a linked quarter basis, as increases in salaries and employee benefits expense, legal, audit and professional fees and net occupancy costs were partially offset by declines in advertising and promotion expense and foreclosed property costs.

Effective January 1, 2018, we adopted Accounting Standards Update ("ASU") No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost."  As a result, we included the service cost component of net periodic benefit cost associated with our defined benefit pension plans in salaries and employee benefits expense and all other components of net periodic benefit cost in other expenses.  Also, as required by this ASU, we restated the historical periods presented reclassifying all other components of net periodic benefit costs from salaries and employee benefits expense to other expenses, with no change to total noninterest expenses.

Income tax expense totaled $4.3 million for the first quarter of 2018, down by $8.9 million from the preceding quarter.  The effective tax rate for the first quarter of 2018 was 20.8%, compared to 62.3% for the preceding quarter.  The linked quarter reduction in income tax expense and in the effective tax rate was due to the enactment of the Tax Act as described above.  Income tax expense was also net of excess tax benefits on the settlement of share-based awards of $207 thousand in the first quarter of 2018 and $94 thousand in the fourth quarter of 2017.

Investment Securities
The securities portfolio totaled $800 million at March 31, 2018, up by $6 million from the balance at December 31, 2017.  During the quarter, debt securities totaling $42 million and with a weighted average yield of 3.03% were purchased.  The purchases were partially offset by a decline in the fair value of available for sale securities, routine principal pay-downs on mortgage-backed securities and a call of a corporate bond.  Investment securities represented 18% of total assets at March 31, 2018.

Loans
Total loans amounted to $3.4 billion at March 31, 2018, up by $13 million from the end of the fourth quarter.  Total residential real estate loans increased by $23 million, or 2%, from the balance at December 31, 2017.  Total commercial loans decreased by $2 million, with an increase of $7 million in the commercial real estate portfolio and a decline of $9 million in the commercial and industrial portfolio.  Total consumer loans were down by $8 million, or 2%, from the end of the fourth quarter, concentrated in the home equity portfolio.

Deposits and Borrowings
Total deposits amounted to $3.3 billion at March 31, 2018, up by $14 million from the end of the preceding quarter.  Included in total deposits were wholesale brokered time deposit balances of $405 million, which increased by $8 million from the balance at December 31, 2017.  Excluding the wholesale brokered time deposits, our in-market deposits increased by $6 million from the end of the preceding quarter.

Federal Home Loan Bank advances amounted to $809 million at March 31, 2018, up by $17 million from the balance at December 31, 2017.

Asset Quality
Total nonaccrual loans amounted to $10.5 million, or 0.31% of total loans, at March 31, 2018, down from $15.2 million, or 0.45% of total loans, at December 31, 2017.  Total past due loans amounted to $19.4 million, or 0.57% of total loans, at March 31, 2018, down from $20.1 million, or 0.59% of total loans, at December 31, 2017.

The balance and composition of nonaccrual loans and past due loans was impacted by the resolution of two commercial real estate loans in the first quarter of 2018.  In March 2018, a commercial real estate loan with a carrying value of $3.1 million was transferred to other real estate owned as foreclosure actions were completed, and a second commercial real estate loan with a carrying value of $1.8 million was reclassified to loans held for sale as the loan was sold in early April at carrying value.

Based on management's assessment of asset quality metrics, modest loan growth and other favorable changes in loss exposure allocations, management concluded that no loan loss provision was necessary in the first quarter of 2018.  A loan loss provision of $200 thousand was charged to earnings in the preceding quarter.  Net charge-offs totaled $624 thousand in the first quarter of 2018, compared to $1.0 million in the preceding quarter.  The charge-offs recognized in both the first quarter of 2018 and the fourth quarter of 2017 were largely attributable to the two commercial real estate relationships discussed above.  The allowance for loan losses amounted to $25.9 million, or 0.76% of total loans, at March 31, 2018, compared to $26.5 million, or 0.79% of total loans, at December 31, 2017.

Capital and Dividends
Total shareholders' equity was $413 million at March 31, 2018, down by $203 thousand from December 31, 2017, reflecting net income of $16.2 million, offset by $7.5 million in dividends declared and a $10.4 million reduction in the accumulated comprehensive income component of shareholders' equity resulting from a decline in the fair value of available for sale securities.

Capital levels at March 31, 2018 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.56% at March 31, 2018, compared to 12.45% at December 31, 2017.  Book value per share amounted to $23.93 at March 31, 2018, compared to $23.99 at December 31, 2017.

The Board of Directors declared a quarterly dividend of 43 cents per share for the quarter ended March 31, 2018, a 10% increase from the preceding quarter.  The dividend was paid on April 13, 2018 to shareholders of record on April 2, 2018.

Conference Call
Washington Trust will host a conference call to discuss its first quarter results, business highlights and outlook on Monday, April 23, 2018 at 10:30 a.m. (Eastern Time).  Individuals may dial in to the call at 1-877-407-9208.  An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-844-512-2921 and entering the Replay PIN Number 13678566; the audio replay will be available through May 9, 2018.  Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrustbancorp.com, and will be available through June 30, 2018.

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

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

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

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

 
Washington Trust Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
      
 Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Assets:     
Cash and due from banks$85,680 $79,853 $128,580 $117,608 $111,941 
Short-term investments 2,322  3,070  2,600  2,324  2,039 
Mortgage loans held for sale 19,269  26,943  28,484  32,784  25,414 
Securities:     
Available for sale, at fair value 787,842  780,954  714,355  749,486  754,720 
Held to maturity, at amortized cost 11,973  12,541  13,241  13,942  14,721 
Total securities 799,815  793,495  727,596  763,428  769,441 
Federal Home Loan Bank stock, at cost 41,127  40,517  42,173  44,640  43,714 
Loans:     
Total loans 3,387,406  3,374,071  3,323,078  3,200,100  3,224,860 
Less allowance for loan losses 25,864  26,488  27,308  26,662  26,446 
Net loans 3,361,542  3,347,583  3,295,770  3,173,438  3,198,414 
Premises and equipment, net 28,316  28,333  28,591  28,508  28,853 
Investment in bank-owned life insurance 73,782  73,267  72,729  72,183  71,642 
Goodwill 63,909  63,909  63,909  63,909  64,059 
Identifiable intangible assets, net 8,893  9,140  9,388  9,642  9,898 
Other assets 81,671  63,740  69,410  67,065  63,348 
Total assets$4,566,326 $4,529,850 $4,469,230 $4,375,529 $4,388,763 
Liabilities:     
Deposits:     
Noninterest-bearing deposits$601,478 $578,410 $575,866 $533,147 $534,792 
Interest-bearing deposits 2,654,956  2,664,297  2,581,215  2,488,042  2,580,779 
Total deposits 3,256,434  3,242,707  3,157,081  3,021,189  3,115,571 
Federal Home Loan Bank advances 808,677  791,356  814,045  869,733  798,741 
Junior subordinated debentures 22,681  22,681  22,681  22,681  22,681 
Other liabilities 65,453  59,822  61,195  55,884  53,985 
Total liabilities 4,153,245  4,116,566  4,055,002  3,969,487  3,990,978 
Shareholders’ Equity:     
Common stock 1,079  1,077  1,076  1,076  1,075 
Paid-in capital 118,172  117,961  117,189  116,484  116,200 
Retained earnings 326,505  317,756  312,334  306,151  299,555 
Accumulated other comprehensive loss (32,675) (23,510) (16,371) (17,669) (19,045)
Total shareholders’ equity 413,081  413,284  414,228  406,042  397,785 
Total liabilities and shareholders’ equity$4,566,326 $4,529,850 $4,469,230 $4,375,529 $4,388,763 


 
 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
      
For the Three Months EndedMar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Interest income:     
Interest and fees on loans$34,578 $33,459 $32,509 $31,642 $30,352 
Taxable interest on securities 5,118  4,719  4,655  4,844  4,709 
Nontaxable interest on securities 23  24  41  72  112 
Dividends on Federal Home Loan Bank stock 516  481  467  439  387 
Other interest income 205  217  197  156  104 
Total interest and dividend income 40,440  38,900  37,869  37,153  35,664 
Interest expense:     
Deposits 4,422  4,136  3,835  3,591  3,502 
Federal Home Loan Bank advances 3,983  3,708  3,816  3,509  3,344 
Junior subordinated debentures 183  167  159  149  138 
Other interest expense         1 
Total interest expense 8,588  8,011  7,810  7,249  6,985 
Net interest income 31,852  30,889  30,059  29,904  28,679 
Provision for loan losses   200  1,300  700  400 
Net interest income after provision for loan losses 31,852  30,689  28,759  29,204  28,279 
Noninterest income:     
Wealth management revenues 10,273  9,914  10,013  9,942  9,477 
Mortgage banking revenues 2,838  3,097  3,036  2,919  2,340 
Service charges on deposit accounts 863  946  942  901  883 
Card interchange fees 847  904  894  902  802 
Income from bank-owned life insurance 515  537  546  542  536 
Loan related derivative income 141  470  1,452  1,144  148 
Other income 266  342  400  456  324 
Total noninterest income 15,743  16,210  17,283  16,806  14,510 
Noninterest expense:     
Salaries and employee benefits 17,772  17,194  17,362  17,418  16,917 
Net occupancy 2,002  1,859  1,928  1,767  1,967 
Outsourced services 1,873  1,960  1,793  1,710  1,457 
Equipment 1,180  1,198  1,380  1,313  1,467 
Legal, audit and professional fees 726  562  534  582  616 
FDIC deposit insurance costs 404  389  308  469  481 
Advertising and promotion 177  466  416  362  237 
Amortization of intangibles 248  248  253  257  277 
Change in fair value of contingent consideration   (333)     (310)
Other expenses 2,748  2,211  2,780  2,428  2,177 
Total noninterest expense 27,130  25,754  26,754  26,306  25,286 
Income before income taxes 20,465  21,145  19,288  19,704  17,503 
Income tax expense 4,254  13,163  6,326  6,505  5,721 
Net income$16,211 $7,982 $12,962 $13,199 $11,782 
      
Net income available to common shareholders$16,173 $7,958 $12,934 $13,170 $11,755 
      
Weighted average common shares outstanding:     
  Basic 17,234  17,223  17,212  17,206  17,186 
  Diluted 17,345  17,349  17,318  17,316  17,293 
Earnings per common share:     
  Basic$0.94 $0.46 $0.75 $0.77 $0.68 
  Diluted$0.93 $0.46 $0.75 $0.76 $0.68 
      
Cash dividends declared per share$0.43 $0.39 $0.39 $0.38 $0.38 


 
 
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
  
 Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Share and Equity Related Data:     
Book value per share$23.93 $23.99 $24.06 $23.59 $23.14 
Tangible book value per share - Non-GAAP (1)$19.71 $19.75 $19.81 $19.32 $18.83 
Market value per share$53.75 $53.25 $57.25 $51.55 $49.30 
Shares issued and outstanding at end of period 17,262  17,227  17,214  17,210  17,193 
      
Capital Ratios:     
Tier 1 risk-based capital11.78% (i) 11.65% 11.69% 11.92% 11.54%
Total risk-based capital12.56% (i) 12.45% 12.53% 12.78% 12.38%
Tier 1 leverage ratio8.84% (i) 8.79% 8.83% 8.78% 8.58%
Common equity tier 111.13% (i) 10.99% 11.02% 11.23% 10.86%
Equity to assets 9.05% 9.12% 9.27% 9.28% 9.06%
Tangible equity to tangible assets - Non-GAAP (1)                                                                                                                                          7.57% 7.63% 7.76% 7.73% 7.51%
(i) - estimated     
      
      


For the Three Months EndedMar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Performance Ratios (2):     
Net interest margin (3)3.03%2.95%2.93%2.97%2.87%
Return on average assets (net income divided by average assets)1.45%0.71%1.17%1.22%1.09%
Return on average tangible assets - Non-GAAP (1)1.48%0.72%1.19%1.24%1.11%
Return on average equity (net income available for common shareholders divided by average equity)15.96%7.56%12.43%13.07%12.00%
Return on average tangible equity - Non-GAAP (1)19.40%9.17%15.12%15.99%14.76%
  1. See the section labeled “SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures” at the end of this document.
  2. Annualized based on the actual number of days in the period.
  3. Fully taxable equivalent (FTE) net interest income as a percentage of average-earnings assets.
 
 
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)
  
For the Three Months EndedMar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Wealth Management Results     
Wealth Management Revenues:     
Asset-based revenues 9,955  9,686  9,791  9,401  9,247 
Transaction-based revenues 318  228  222  541  230 
Total wealth management revenues$10,273 $9,914 $10,013 $9,942 $9,477 
      
Assets Under Administration:     
Balance at beginning of period$6,714,637 $6,587,899 $6,403,501 $6,243,301 $6,063,293 
Net investment appreciation (depreciation) & income (32,024) 163,681  270,549  162,924  220,423 
Net client asset flows (338,893) (36,943) (86,151) (2,724) (40,415)
Balance at end of period$6,343,720 $6,714,637 $6,587,899 $6,403,501 $6,243,301 
      
Percentage of assets under administration that are managed assets 92% 93% 92% 93% 93%
      
Mortgage Banking Results     
Mortgage Banking Revenues:     
Gains & commissions on loan sales, net$2,679 $2,987 $2,952 $2,784 $2,268 
Residential mortgage servicing fee income, net 159  110  84  135  72 
Total mortgage banking revenues$2,838 $3,097 $3,036 $2,919 $2,340 
      
Residential Mortgage Loan Originations:     
Originations for retention in portfolio$67,840 $75,595 $90,378 $94,794 $57,907 
Originations for sale to secondary market (1) 87,720  143,834  143,112  144,491  102,441 
Total mortgage loan originations$155,560 $219,429 $233,490 $239,285 $160,348 
      
Residential Mortgage Loans Sold:     
Sold with servicing rights retained$33,575 $39,769 $37,823 $29,199 $22,567 
Sold with servicing rights released (1) 63,265  105,416  109,508  108,245  84,345 
Total mortgage loans sold$96,840 $145,185 $147,331 $137,444 $106,912 
  1. Also includes loans originated in a broker capacity.
 
 
END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
  
 Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Loans:     
Commercial real estate (1)$1,217,278 $1,210,495 $1,211,792 $1,121,273 $1,200,489 
Commercial & industrial 603,830  612,334  588,324  577,116  562,010 
Total commercial 1,821,108  1,822,829  1,800,116  1,698,389  1,762,499 
      
Residential real estate (2) 1,249,890  1,227,248  1,195,537  1,168,105  1,131,210 
      
Home equity 285,723  292,467  294,657  299,107  294,745 
Other 30,685  31,527  32,768  34,499  36,406 
Total consumer 316,408  323,994  327,425  333,606  331,151 
Total loans$3,387,406 $3,374,071 $3,323,078 $3,200,100 $3,224,860 
  1. Commercial real estate loans consist of commercial mortgages and construction and development loans.  Commercial mortgages are loans secured by income producing property.
  2. Residential real estate loans consist of mortgage and homeowner construction loans secured by one- to four- family residential properties.
    
    
 March 31, 2018 December 31, 2017
 Balance% of Total Balance% of Total
Commercial Real Estate Loans by Property Location:     
Rhode Island$367,643 30.2% $360,834 31.6%
Connecticut 460,338 37.8   309,013 27.0 
Massachusetts 306,590 25.2   461,230 40.3 
Subtotal 1,134,571 93.2   1,131,077 98.9 
All other states 82,707 6.8   12,561 1.1 
Total commercial real estate loans$1,217,278 100.0% $1,143,638 100.0%
      
Residential Real Estate Loans by Property Location:     
Rhode Island$340,727 27.3% $343,340 28.0%
Connecticut 141,511 11.3   140,843 11.5 
Massachusetts 751,175 60.1   726,712 59.2 
Subtotal 1,233,413 98.7   1,210,895 98.7 
All other states 16,477 1.3   16,353 1.3 
Total residential real estate loans$1,249,890 100.0% $1,227,248 100.0%


      
      
 Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Deposits:     
Non-interest bearing demand deposits$601,478 $578,410 $575,866 $533,147 $534,792 
Interest-bearing demand deposits 83,249  82,728  45,407  54,666  62,182 
NOW accounts 470,112  466,605  448,128  448,617  454,344 
Money market accounts 693,748  731,345  716,827  666,047  762,233 
Savings accounts 376,608  368,524  367,912  364,002  362,281 
Time deposits (in-market) 625,965  617,368  587,166  553,783  557,312 
Wholesale brokered time deposits 405,274  397,727  415,775  400,927  382,427 
Total deposits$3,256,434 $3,242,707 $3,157,081 $3,021,189 $3,115,571 


 
 
CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
  
 Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Asset Quality Ratios:     
Nonperforming assets to total assets 0.30% 0.34% 0.44% 0.49% 0.54%
Nonaccrual loans to total loans 0.31% 0.45% 0.56% 0.63% 0.69%
Total past due loans to total loans 0.57% 0.59% 0.49% 0.66% 0.65%
Allowance for loan losses to nonaccrual loans 245.83% 174.14% 147.52% 132.00% 119.52%
Allowance for loan losses to total loans 0.76% 0.79% 0.82% 0.83% 0.82%
      
Nonperforming Assets:     
Commercial real estate$ $4,954 $5,887 $6,422 $7,809 
Commercial & industrial 397  283  429  1,232  1,129 
Total commercial 397  5,237  6,316  7,654  8,938 
Residential real estate 9,340  9,414  11,699  11,815  12,253 
Home equity 771  544  480  620  821 
Other consumer 13  16  16  109  115 
Total consumer 784  560  496  729  936 
Total nonaccrual loans 10,521  15,211  18,511  20,198  22,127 
Other real estate owned 3,206  131  1,038  1,342  1,410 
Total nonperforming assets$13,727 $15,342 $19,549 $21,540 $23,537 
      
Past Due Loans (30 days or more past due):     
Commercial real estate$ $4,960 $5,887 $6,422 $7,806 
Commercial & industrial 3,295  4,076  455  4,009  1,046 
Total commercial 3,295  9,036  6,342  10,431  8,852 
Residential real estate 11,806  7,855  7,802  8,857  10,533 
Home equity 4,235  3,141  2,268  1,806  1,422 
Other consumer 22  43  35  26  125 
Total consumer 4,257  3,184  2,303  1,832  1,547 
Total past due loans$19,358 $20,075 $16,447 $21,120 $20,932 
      
Accruing loans 90 days or more past due$ $ $ $ $ 
Nonaccrual loans included in past due loans$7,066 $11,788 $13,216 $14,490 $18,081 


 
 
CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
  
For the Three Months EndedMar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Nonaccrual Loan Activity:     
Balance at beginning of period$15,211 $18,511 $20,198 $22,127 $22,058 
Additions to nonaccrual status 1,210  462  1,969  1,946  2,138 
Loans returned to accruing status (344) (1,316) (1,411) (778) (547)
Loans charged-off (690) (1,047) (694) (642) (79)
Loans transferred to other real estate owned (3,074)     (98) (478)
Payments, payoffs and other changes (1,792) (1,399) (1,551) (2,357) (965)
Balance at end of period$10,521 $15,211 $18,511 $20,198 $22,127 
      
Allowance for Loan Losses:     
Balance at beginning of period$26,488 $27,308 $26,662 $26,446 $26,004 
Provision charged to earnings   200  1,300  700  400 
Charge-offs (690) (1,047) (694) (642) (79)
Recoveries 66  27  40  158  121 
Balance at end of period$25,864 $26,488 $27,308 $26,662 $26,446 
      
Net Loan Charge-Offs (Recoveries):     
Commercial real estate$602 $932 $535 $318 $ 
Commercial & industrial (23) 43  114  115  (105)
Total commercial 579  975  649  433  (105)
Residential real estate   32  (1) 8  (4)
Home equity 28  (2) (7) 12  43 
Other consumer 17  15  13  31  24 
Total consumer 45  13  6  43  67 
Total$624 $1,020 $654 $484 ($42)
      
Net charge-offs to average loans (annualized) 0.07% 0.12% 0.08% 0.06% (0.01%)

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 EndedMarch 31, 2018 December 31, 2017 March 31, 2017
 Average
Balance
InterestYield/
Rate
 Average
Balance
InterestYield/
Rate
 Average
Balance
InterestYield/
Rate
 
Assets:           
Cash, federal funds sold and short-term investments$53,138 $205 1.56  $62,040 $217 1.39  $56,195 $104 0.75 
Mortgage loans held for sale$24,424 $226 3.75  $29,525 $288 3.87  $24,424 $222 3.69 
Taxable debt securities 804,518  5,118 2.58   756,322  4,719 2.48   755,955  4,709 2.53 
Nontaxable debt securities 2,355  29 4.99   2,625  38 5.74   11,521  173 6.09 
Total securities 806,873  5,147 2.59   758,947  4,757 2.49   767,476  4,882 2.58 
FHLB stock 40,888  516 5.12   41,003  481 4.65   43,622  387 3.60 
Commercial real estate 1,218,702  12,346 4.11   1,219,370  11,843 3.85   1,207,032  10,557 3.55 
Commercial & industrial 608,784  6,823 4.55   598,790  6,897 4.57   573,801  6,157 4.35 
Total commercial 1,827,486 $19,169 4.25   1,818,160 $18,740 4.09   1,780,833 $16,714 3.81 
Residential real estate 1,228,379  11,929 3.94   1,196,844  11,439 3.79   1,128,044  10,646 3.83 
Home equity 287,176  3,160 4.46   293,896  3,160 4.27   297,965  2,877 3.92 
Other 30,706  370 4.89   32,549  396 4.83   37,089  446 4.88 
Total consumer 317,882  3,530 4.50   326,445  3,556 4.32   335,054  3,323 4.02 
Total loans 3,373,747  34,628 4.16   3,341,449  33,735 4.01   3,243,931  30,683 3.84 
Total interest-earning assets 4,299,070  40,722 3.84   4,232,964  39,478 3.70   4,135,648  36,278 3.56 
Noninterest-earning assets 230,638     240,376     229,823   
Total assets$4,529,708    $4,473,340    $4,365,471   
Liabilities and Shareholders' Equity:           
Interest-bearing demand deposits$80,502 $28 0.14  $64,344 $25 0.15  $56,782 $15 0.11 
NOW accounts 449,298  54 0.05   448,677  42 0.04   420,622  50 0.05 
Money market accounts 718,664  880 0.50   743,966  807 0.43   754,501  599 0.32 
Savings accounts 368,012  57 0.06   371,236  63 0.07   357,894  51 0.06 
Time deposits (in-market) 617,878  1,820 1.19   606,732  1,765 1.15   554,855  1,418 1.04 
Wholesale brokered time deposits 409,243  1,583 1.57   376,709  1,434 1.51   397,274  1,369 1.40 
Total interest-bearing deposits 2,643,597  4,422 0.68   2,611,664  4,136 0.63   2,541,928  3,502 0.56 
FHLB advances 810,967  3,983 1.99   785,169  3,708 1.87   831,614  3,344 1.63 
Junior subordinated debentures 22,681  183 3.27   22,681  167 2.92   22,681  138 2.47 
Other             27  1 15.02 
Total interest-bearing liabilities 3,477,245  8,588 1.00   3,419,514  8,011 0.93   3,396,250  6,985 0.83 
Noninterest-bearing demand deposits 584,557     582,714     527,215   
Other liabilities 56,951     53,544     44,889   
Shareholders' equity 410,955     417,568     397,117   
Total liabilities and shareholders' equity$4,529,708    $4,473,340    $4,365,471   
Net interest income (FTE) $32,134    $31,467    $29,293  
Interest rate spread  2.84    2.77    2.73 
Net interest margin  3.03    2.95    2.87 

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

For the Three Months EndedMar 31,
2018
Dec 31,
2017
Mar 31,
2017
Commercial loans$276 $564 $553 
Nontaxable debt securities 6  14  61 
Total$282 $578 $614 


 
 
SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)
  
 Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Tangible Book Value per Share:     
Total shareholders' equity, as reported$413,081 $413,284 $414,228 $406,042 $397,785 
Less:     
Goodwill 63,909  63,909  63,909  63,909  64,059 
Identifiable intangible assets, net 8,893  9,140  9,388  9,642  9,898 
Total tangible shareholders' equity$340,279 $340,235 $340,931 $332,491 $323,828 
      
Shares outstanding, as reported 17,262  17,227  17,214  17,210  17,193 
      
Book value per share - GAAP$23.93 $23.99 $24.06 $23.59 $23.14 
Tangible book value per share - Non-GAAP$19.71 $19.75 $19.81 $19.32 $18.83 
      
Tangible Equity to Tangible Assets:     
Total tangible shareholders' equity$340,279 $340,235 $340,931 $332,491 $323,828 
      
Total assets, as reported$4,566,326 $4,529,850 $4,469,230 $4,375,529 $4,388,763 
Less:     
Goodwill 63,909  63,909  63,909  63,909  64,059 
Identifiable intangible assets, net 8,893  9,140  9,388  9,642  9,898 
Total tangible assets$4,493,524 $4,456,801 $4,395,933 $4,301,978 $4,314,806 
      
Equity to assets - GAAP 9.05% 9.12% 9.27% 9.28% 9.06%
Tangible equity to tangible assets - Non-GAAP                    7.57% 7.63% 7.76% 7.73% 7.51%


For the Three Months EndedMar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Mar 31,
 2017
Return on Average Tangible Assets:     
Net income, as reported$16,211 $7,982 $12,962 $13,199 $11,782 
      
Total average assets, as reported$4,529,708 $4,473,340 $4,401,536 $4,354,464 $4,365,471 
Less average balances of:     
Goodwill 63,909  63,909  63,909  64,058  64,059 
Identifiable intangible assets, net 9,014  9,261  9,511  9,767  10,027 
Total average tangible assets$4,456,785 $4,400,170 $4,328,116 $4,280,639 $4,291,385 
      
Return on average assets - GAAP 1.45% 0.71% 1.17% 1.22% 1.09%
Return on average tangible assets - Non-GAAP 1.48% 0.72% 1.19% 1.24% 1.11%
      
Return on Average Tangible Equity:     
Net income available to common shareholders, as reported$16,173 $7,958 $12,934 $13,170 $11,755 
      
Total average equity, as reported$410,955 $417,568 $412,862 $404,238 $397,117 
Less average balances of:     
Goodwill 63,909  63,909  63,909  64,058  64,059 
Identifiable intangible assets, net 9,014  9,261  9,511  9,767  10,027 
Total average tangible equity$338,032 $344,398 $339,442 $330,413 $323,031 
      
Return on average equity - GAAP 15.96% 7.56% 12.43% 13.07% 12.00%
Return on average tangible equity - Non-GAAP 19.40% 9.17% 15.12% 15.99% 14.76%

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

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Source: Washington Trust Bancorp, Inc.