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Press Release

Washington Trust Reports Record Second Quarter 2018 Earnings

Company Release - 7/23/2018 4:05 PM ET

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

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

Selected highlights for second quarter 2018 include:

  • Profitability ratios were at their highest levels in over 15 years, with returns on average equity and average assets of 16.99% and 1.53%, respectively.
  • Total revenues (net interest income and noninterest income) were up by 3% on a linked quarter basis and amounted to $49.1 million, a record level for Washington Trust.
  • Total loans were up by $103 million, or 3%, from the end of the prior quarter and up by $290 million, or 9%, from a year ago.
  • Total deposits were up by $65 million, or 2%, from the end of the first quarter and up by $300 million, or 10%, from a year ago.
  • In June, Washington Trust declared a quarterly dividend of 43 cents per share.  Year-to-date dividends declared amounted to 86 cents per share, an increase of 10 cents per share, or 13%, from the same period a year ago.

Net Interest Income
Net interest income was $33.1 million for the second quarter of 2018, up by $1.3 million, or 4%, from the first quarter of 2018.  Included in net interest income in the second quarter of 2018 was loan prepayment fee income of $483 thousand, compared to $46 thousand in the first quarter of 2018.  The net interest margin was 3.05% for the second quarter, up by 2 basis points from the preceding quarter.  Excluding the impact of loan prepayment fee income in each period, the net interest margin was 3.01%, down by 2 basis points from the preceding quarter.

Significant linked quarter changes included:

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

Noninterest Income
Noninterest income totaled $16.0 million for the second quarter of 2018, up by $250 thousand, or 2%, from the first quarter of 2018.  Significant linked quarter changes included:

  • Wealth management revenues were $9.6 million for the second quarter of 2018, down by $671 thousand, or 7%, on a linked quarter basis.  Asset-based revenues were down by $819 thousand, or 8%, on a linked quarter basis.  The decline in asset-based revenues was largely attributable to client outflows that commenced in the latter portion of the first quarter of 2018 and continued into the second quarter.  These outflows were associated with the previously reported loss of certain client-facing personnel in the preceding quarter.  The decline in asset-based revenues was partially offset by an increase of $148 thousand in transaction-based revenues, largely attributable to tax preparation revenue, which is generally concentrated in the second quarter.

    Wealth management assets under administration were $6.2 billion at June 30, 2018, down by $124 million, or 2%, from the balance at March 31, 2018, with $257 million of net client outflows, partially offset by $133 million of net investment appreciation and income.
  • Mortgage banking revenues were $2.9 million for the second quarter of 2018, up by $103 thousand, or 4%, from the preceding quarter.  Residential mortgage loans sold to the secondary market were $105 million in the second quarter, up by $8 million from the $97 million sold in the first quarter of 2018.
  • Loan related derivative income was $668 thousand for the second quarter of 2018, up by $527 thousand from the preceding quarter, due to higher volume of commercial borrower loan related derivative transactions occurring in the second quarter.

Noninterest Expenses
Noninterest expenses totaled $26.3 million for the second quarter of 2018, down by $842 thousand, or 3%, from the first quarter.  The linked quarter comparison of noninterest expenses was impacted by the following:

  • As previously reported in the first quarter of 2018, one-time cash incentive bonuses of approximately $450 thousand were expensed and paid to non-executive employees as tax reform provided Washington Trust with an opportunity to further recognize and invest in our employees with special compensation enhancements.
  • In the second quarter of 2018, software system implementation expenses of $114 thousand were recognized, compared to $681 thousand recognized in the preceding quarter.  These were classified as other expenses and primarily related to the conversion of our wealth management accounting system, which was completed in April 2018.

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

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

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

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

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

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

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

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

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

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

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

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

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.


Washington Trust Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
      
 Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Assets:     
Cash and due from banks$132,068 $85,680 $79,853 $128,580 $117,608 
Short-term investments 2,624  2,322  3,070  2,600  2,324 
Mortgage loans held for sale 35,207  19,269  26,943  28,484  32,784 
Securities:     
Available for sale, at fair value 776,693  787,842  780,954  714,355  749,486 
Held to maturity, at amortized cost 11,412  11,973  12,541  13,241  13,942 
Total securities 788,105  799,815  793,495  727,596  763,428 
Federal Home Loan Bank stock, at cost 46,281  41,127  40,517  42,173  44,640 
Loans:     
Total loans 3,490,230  3,387,406  3,374,071  3,323,078  3,200,100 
Less allowance for loan losses 26,174  25,864  26,488  27,308  26,662 
Net loans 3,464,056  3,361,542  3,347,583  3,295,770  3,173,438 
Premises and equipment, net 28,377  28,316  28,333  28,591  28,508 
Investment in bank-owned life insurance 79,319  73,782  73,267  72,729  72,183 
Goodwill 63,909  63,909  63,909  63,909  63,909 
Identifiable intangible assets, net 8,645  8,893  9,140  9,388  9,642 
Other assets 88,651  81,671  63,740  69,410  67,065 
Total assets$4,737,242 $4,566,326 $4,529,850 $4,469,230 $4,375,529 
Liabilities:     
Deposits:     
Noninterest-bearing deposits$577,656 $601,478 $578,410 $575,866 $533,147 
Interest-bearing deposits 2,743,955  2,654,956  2,664,297  2,581,215  2,488,042 
Total deposits 3,321,611  3,256,434  3,242,707  3,157,081  3,021,189 
Federal Home Loan Bank advances 901,053  808,677  791,356  814,045  869,733 
Junior subordinated debentures 22,681  22,681  22,681  22,681  22,681 
Other liabilities 70,326  65,453  59,822  61,195  55,884 
Total liabilities 4,315,671  4,153,245  4,116,566  4,055,002  3,969,487 
Shareholders’ Equity:     
Common stock 1,080  1,079  1,077  1,076  1,076 
Paid-in capital 118,883  118,172  117,961  117,189  116,484 
Retained earnings 336,670  326,505  317,756  312,334  306,151 
Accumulated other comprehensive loss (35,062) (32,675) (23,510) (16,371) (17,669)
Total shareholders’ equity 421,571  413,081  413,284  414,228  406,042 
Total liabilities and shareholders’ equity$4,737,242 $4,566,326 $4,529,850 $4,469,230 $4,375,529 



CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
         
 For the Three Months Ended For the Six Months Ended
 Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
 Jun 30,
 2018
Jun 30,
 2017
Interest income:        
Interest and fees on loans$37,101 $34,578 $33,459 $32,509 $31,642  $71,679 $61,994 
Taxable interest on securities 5,358  5,118  4,719  4,655  4,844   10,476  9,553 
Nontaxable interest on securities 20  23  24  41  72   43  184 
Dividends on Federal Home Loan Bank stock 550  516  481  467  439   1,066  826 
Other interest income 257  205  217  197  156   462  260 
Total interest and dividend income 43,286  40,440  38,900  37,869  37,153   83,726  72,817 
Interest expense:        
Deposits 5,254  4,422  4,136  3,835  3,591   9,676  7,093 
Federal Home Loan Bank advances 4,707  3,983  3,708  3,816  3,509   8,690  6,853 
Junior subordinated debentures 214  183  167  159  149   397  287 
Other interest expense              1 
Total interest expense 10,175  8,588  8,011  7,810  7,249   18,763  14,234 
Net interest income 33,111  31,852  30,889  30,059  29,904   64,963  58,583 
Provision for loan losses 400    200  1,300  700   400  1,100 
Net interest income after provision for loan losses 32,711  31,852  30,689  28,759  29,204   64,563  57,483 
Noninterest income:        
Wealth management revenues 9,602  10,273  9,914  10,013  9,942   19,875  19,419 
Mortgage banking revenues 2,941  2,838  3,097  3,036  2,919   5,779  5,259 
Service charges on deposit accounts 903  863  946  942  901   1,766  1,784 
Card interchange fees 961  847  904  894  902   1,808  1,704 
Income from bank-owned life insurance 537  515  537  546  542   1,052  1,078 
Loan related derivative income 668  141  470  1,452  1,144   809  1,292 
Other income 381  266  342  400  456   647  780 
Total noninterest income 15,993  15,743  16,210  17,283  16,806   31,736  31,316 
Noninterest expense:        
Salaries and employee benefits 17,304  17,772  17,194  17,362  17,418   35,076  34,335 
Net occupancy 1,930  2,002  1,859  1,928  1,767   3,932  3,734 
Outsourced services 2,350  1,873  1,960  1,793  1,710   4,223  3,167 
Equipment 1,069  1,180  1,198  1,380  1,313   2,249  2,780 
Legal, audit and professional fees 555  726  562  534  582   1,281  1,198 
FDIC deposit insurance costs 422  404  389  308  469   826  950 
Advertising and promotion 329  177  466  416  362   506  599 
Amortization of intangibles 247  248  248  253  257   495  534 
Change in fair value of contingent consideration     (333)        (310)
Other expenses 2,082  2,748  2,211  2,780  2,428   4,830  4,605 
Total noninterest expense 26,288  27,130  25,754  26,754  26,306   53,418  51,592 
Income before income taxes 22,416  20,465  21,145  19,288  19,704   42,881  37,207 
Income tax expense 4,742  4,254  13,163  6,326  6,505   8,996  12,226 
Net income$17,674 $16,211 $7,982 $12,962 $13,199  $33,885 $24,981 
         
Net income available to common shareholders$17,636 $16,173 $7,958 $12,934 $13,170  $33,809 $24,925 
         
Weighted average common shares outstanding:        
  Basic 17,272  17,234  17,223  17,212  17,206   17,253  17,196 
  Diluted 17,387  17,345  17,349  17,318  17,316   17,384  17,312 
Earnings per common share:        
  Basic$1.02 $0.94 $0.46 $0.75 $0.77  $1.96 $1.45 
  Diluted$1.01 $0.93 $0.46 $0.75 $0.76  $1.94 $1.44 
         
Cash dividends declared per share$0.43 $0.43 $0.39 $0.39 $0.38  $0.86 $0.76 


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
  
 Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Share and Equity Related Data:     
Book value per share$24.40 $23.93 $23.99 $24.06 $23.59 
Tangible book value per share - Non-GAAP (1)$20.20 $19.71 $19.75 $19.81 $19.32 
Market value per share$58.10 $53.75 $53.25 $57.25 $51.55 
Shares issued and outstanding at end of period 17,278  17,262  17,227  17,214  17,210 
      
Capital Ratios (2):     
Tier 1 risk-based capital 11.84% 11.78% 11.65% 11.69% 11.92%
Total risk-based capital 12.61% 12.56% 12.45% 12.53% 12.78%
Tier 1 leverage ratio 8.87% 8.84% 8.79% 8.83% 8.78%
Common equity tier 1 11.20% 11.13% 10.99% 11.02% 11.23%
      
Balance Sheet Ratios:     
Equity to assets 8.90% 9.05% 9.12% 9.27% 9.28%
Tangible equity to tangible assets - Non-GAAP (1) 7.48% 7.57% 7.63% 7.76% 7.73%
Loans to deposits (3) 105.3% 103.8% 104.1% 105.3% 106.1%


   For the Six Months Ended
 For the Three Months Ended 
 Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
 Jun 30,
 2018
Jun 30,
 2017
Performance Ratios (4):        
Net interest margin (5)3.05%3.03%2.95%2.93%2.97% 3.04%2.92%
Return on average assets (net income divided by average assets)1.53%1.45%0.71%1.17%1.22% 1.49%1.16%
Return on average tangible assets - Non-GAAP (1)1.56%1.48%0.72%1.19%1.24% 1.52%1.18%
Return on average equity (net income available for common shareholders divided by average equity)16.99%15.96%7.56%12.43%13.07% 16.48%12.54%
Return on average tangible equity - Non-GAAP (1)20.58%19.40%9.17%15.12%15.99% 20.00%15.38%
Efficiency ratio (6)53.5%57.0%54.7%56.5%56.3% 55.2%57.4%
  1. See the section labeled “SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures” at the end of this document.
  2. Estimated for June 30, 2018 and actuals for the remaining periods.
  3. Period-end balances of net loans and mortgage loans held as a percentage of total deposits.
  4. Annualized based on the actual number of days in the period.
  5. Fully taxable equivalent (FTE) net interest income as a percentage of average-earnings assets.
  6. Total noninterest expense as percentage of total revenues (net interest income and noninterest income).


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)
     
 For the Three Months Ended For the Six Months Ended
 Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
 Jun 30,
 2018
Jun 30,
 2017
Wealth Management Results        
Wealth Management Revenues:        
Asset-based revenues$9,136 $9,955 $9,686 $9,791 $9,401  $19,091 $18,648 
Transaction-based revenues 466  318  228  222  541   784  771 
Total wealth management revenues$9,602 $10,273 $9,914 $10,013 $9,942  $19,875 $19,419 
         
Assets Under Administration (AUA):        
Balance at beginning of period$6,343,720 $6,714,637 $6,587,899 $6,403,501 $6,243,301  $6,714,637 $6,063,293 
Net investment appreciation (depreciation) & income 133,450  (32,024) 163,681  270,549  162,924   101,426  383,347 
Net client asset flows (257,015) (338,893) (36,943) (86,151) (2,724)  (595,908) (43,139)
Balance at end of period$6,220,155 $6,343,720 $6,714,637 $6,587,899 $6,403,501  $6,220,155 $6,403,501 
         
Percentage of AUA that are managed assets 92% 92% 93% 92% 93%  92% 93%
         
Mortgage Banking Results        
Mortgage Banking Revenues:        
Gains & commissions on loan sales, net$2,786 $2,679 $2,987 $2,952 $2,784  $5,465 $5,052 
Residential mortgage servicing fee income, net 155  159  110  84  135   314  207 
Total mortgage banking revenues$2,941 $2,838 $3,097 $3,036 $2,919  $5,779 $5,259 
         
Residential Mortgage Loan Originations:        
Originations for retention in portfolio$128,479 $67,840 $75,595 $90,378 $94,794  $196,319 $152,701 
Originations for sale to secondary market (1) 122,693  87,720  143,834  143,112  144,491   210,413  246,932 
Total mortgage loan originations$251,172 $155,560 $219,429 $233,490 $239,285  $406,732 $399,633 
         
Residential Mortgage Loans Sold:        
Sold with servicing rights retained$24,367 $33,575 $39,769 $37,823 $29,199  $57,942 $51,766 
Sold with servicing rights released (1) 81,054  63,265  105,416  109,508  108,245   144,319  192,590 
Total mortgage loans sold$105,421 $96,840 $145,185 $147,331 $137,444  $202,261 $244,356 
  1. Also includes loans originated in a broker capacity.


END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
  
 Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Loans:     
Commercial real estate (1)$1,218,643 $1,217,278 $1,210,495 $1,211,792 $1,121,273 
Commercial & industrial 632,029  603,830  612,334  588,324  577,116 
Total commercial 1,850,672  1,821,108  1,822,829  1,800,116  1,698,389 
      
Residential real estate (2) 1,327,418  1,249,890  1,227,248  1,195,537  1,168,105 
      
Home equity 283,744  285,723  292,467  294,657  299,107 
Other 28,396  30,685  31,527  32,768  34,499 
Total consumer 312,140  316,408  323,994  327,425  333,606 
Total loans$3,490,230 $3,387,406 $3,374,071 $3,323,078 $3,200,100 
  1. Commercial real estate loans consist of commercial mortgages and construction and development loans.  Commercial mortgages are loans secured by income producing property.
  2. Residential real estate loans consist of mortgage and homeowner construction loans secured by one- to four- family residential properties.
 June 30, 2018 December 31, 2017
 Balance% of Total Balance% of Total
Commercial Real Estate Loans by Property Location:     
Rhode Island$346,215 28.4% $360,834 29.8%
Connecticut 488,429 40.1   309,013 25.5 
Massachusetts 300,353 24.6   461,230 38.1 
Subtotal 1,134,997 93.1   1,131,077 93.4 
All other states 83,646 6.9   79,418 6.6 
Total commercial real estate loans$1,218,643 100.0% $1,210,495 100.0%
      
Residential Real Estate Loans by Property Location:     
Rhode Island$347,605 26.2% $343,340 28.0%
Connecticut 145,949 11.0   140,843 11.5 
Massachusetts 817,288 61.6   726,712 59.2 
Subtotal 1,310,842 98.8   1,210,895 98.7 
All other states 16,576 1.2   16,353 1.3 
Total residential real estate loans$1,327,418 100.0% $1,227,248 100.0%


 Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Deposits:     
Noninterest-bearing demand deposits$577,656 $601,478 $578,410 $575,866 $533,147 
Interest-bearing demand deposits 136,640  83,249  82,728  45,407  54,666 
NOW accounts 481,905  470,112  466,605  448,128  448,617 
Money market accounts 604,954  693,748  731,345  716,827  666,047 
Savings accounts 375,983  376,608  368,524  367,912  364,002 
Time deposits (in-market) 698,286  625,965  617,368  587,166  553,783 
Wholesale brokered time deposits 446,187  405,274  397,727  415,775  400,927 
Total deposits$3,321,611 $3,256,434 $3,242,707 $3,157,081 $3,021,189 



CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
  
 Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
Asset Quality Ratios:%    
Nonperforming assets to total assets 0.32% 0.30% 0.34% 0.44% 0.49%
Nonaccrual loans to total loans 0.34% 0.31% 0.45% 0.56% 0.63%
Total past due loans to total loans 0.48% 0.57% 0.59% 0.49% 0.66%
Allowance for loan losses to nonaccrual loans 222.85% 245.83% 174.14% 147.52% 132.00%
Allowance for loan losses to total loans 0.75% 0.76% 0.79% 0.82% 0.83%
      
Nonperforming Assets:     
Commercial real estate$ $ $4,954 $5,887 $6,422 
Commercial & industrial 397  397  283  429  1,232 
Total commercial 397  397  5,237  6,316  7,654 
Residential real estate 10,206  9,340  9,414  11,699  11,815 
Home equity 1,133  771  544  480  620 
Other consumer 9  13  16  16  109 
Total consumer 1,142  784  560  496  729 
Total nonaccrual loans 11,745  10,521  15,211  18,511  20,198 
Other real estate owned 3,206  3,206  131  1,038  1,342 
Total nonperforming assets$14,951 $13,727 $15,342 $19,549 $21,540 
      
Past Due Loans (30 days or more past due):     
Commercial real estate$ $ $4,960 $5,887 $6,422 
Commercial & industrial 2,851  3,295  4,076  455  4,009 
Total commercial 2,851  3,295  9,036  6,342  10,431 
Residential real estate 11,243  11,806  7,855  7,802  8,857 
Home equity 2,585  4,235  3,141  2,268  1,806 
Other consumer 16  22  43  35  26 
Total consumer 2,601  4,257  3,184  2,303  1,832 
Total past due loans$16,695 $19,358 $20,075 $16,447 $21,120 
      
Accruing loans 90 days or more past due$ $ $ $ $ 
Nonaccrual loans included in past due loans$8,575 $7,066 $11,788 $13,216 $14,490 


CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
 For the Three Months Ended For the Six Months Ended
 Jun 30,
 2018
Mar 31,
 2018
Dec 31,
 2017
Sep 30,
 2017
Jun 30,
 2017
 Jun 30,
 2018
Jun 30,
 2017
Nonaccrual Loan Activity:        
Balance at beginning of period$10,521 $15,211 $18,511 $20,198 $22,127  $15,211 $22,058 
Additions to nonaccrual status 2,457  1,210  462  1,969  1,946   3,667  4,084 
Loans returned to accruing status (475) (344) (1,316) (1,411) (778)  (819) (1,325)
Loans charged-off (103) (690) (1,047) (694) (642)  (793) (721)
Loans transferred to other real estate owned   (3,074)     (98)  (3,074) (576)
Payments, payoffs and other changes (655) (1,792) (1,399) (1,551) (2,357)  (2,447) (3,322)
Balance at end of period$11,745 $10,521 $15,211 $18,511 $20,198  $11,745 $20,198 
         
Allowance for Loan Losses:        
Balance at beginning of period$25,864 $26,488 $27,308 $26,662 $26,446  $26,488 $26,004 
Provision charged to earnings 400    200  1,300  700   400  1,100 
Charge-offs (103) (690) (1,047) (694) (642)  (793) (721)
Recoveries 13  66  27  40  158   79  279 
Balance at end of period$26,174 $25,864 $26,488 $27,308 $26,662  $26,174 $26,662 
         
Net Loan Charge-Offs (Recoveries):        
Commercial real estate$ $602 $932 $535 $318  $602 $318 
Commercial & industrial (3) (23) 43  114  115   (26) 10 
Total commercial (3) 579  975  649  433   576  328 
Residential real estate 5    32  (1) 8   5  4 
Home equity 73  28  (2) (7) 12   101  55 
Other consumer 15  17  15  13  31   32  55 
Total consumer 88  45  13  6  43   133  110 
Total$90 $624 $1,020 $654 $484  $714 $442 
         
Net charge-offs to average loans (annualized) 0.01% 0.07% 0.12% 0.08% 0.06%  0.04% 0.03%


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 EndedJune 30, 2018 March 31, 2018 June 30, 2017
 Average BalanceInterestYield/
Rate
 Average BalanceInterestYield/
Rate
 Average BalanceInterestYield/
 Rate
 
Assets:           
Cash, federal funds sold and short-term investments$56,142 $257 1.84% $53,138 $205 1.56% $60,428 $156 1.04%
Mortgage loans held for sale$30,203 $313 4.16  $24,424 $226 3.75  $21,977 $223 4.07 
Taxable debt securities 821,772  5,358 2.62   804,518  5,118 2.58   773,280  4,844 2.51 
Nontaxable debt securities 1,956  26 5.33   2,355  29 4.99   7,076  109 6.18 
Total securities 823,728  5,384 2.62   806,873  5,147 2.59   780,356  4,953 2.55 
FHLB stock 43,331  550 5.09   40,888  516 5.12   44,362  439 3.97 
Commercial real estate 1,225,926  13,463 4.40   1,218,702  12,346 4.11   1,162,002  11,032 3.81 
Commercial & industrial 622,141  7,569 4.88   608,784  6,823 4.55   576,312  6,607 4.60 
Total commercial 1,848,067 $21,032 4.56   1,827,486 $19,169 4.25   1,738,314 $17,639 4.07 
Residential real estate 1,275,171  12,426 3.91   1,228,379  11,929 3.94   1,140,918  10,865 3.82 
Home equity 284,188  3,278 4.63   287,176  3,160 4.46   296,971  3,047 4.12 
Other 29,696  360 4.86   30,706  370 4.89   35,082  417 4.77 
Total consumer 313,884  3,638 4.65   317,882  3,530 4.50   332,053  3,464 4.18 
Total loans 3,437,122  37,096 4.33   3,373,747  34,628 4.16   3,211,285  31,968 3.99 
Total interest-earning assets 4,390,526  43,600 3.98   4,299,070  40,722 3.84   4,118,408  37,739 3.68 
Noninterest-earning assets 238,290     230,638     236,056   
Total assets$4,628,816    $4,529,708    $4,354,464   
Liabilities and Shareholders' Equity:           
Interest-bearing demand deposits$86,204 $101 0.47% $80,502 $28 0.14% $54,675 ($8)(0.06)%
NOW accounts 460,712  57 0.05   449,298  54 0.05   437,282  57 0.05 
Money market accounts 664,127  960 0.58   718,664  880 0.50   711,711  640 0.36 
Savings accounts 375,690  57 0.06   368,012  57 0.06   361,545  52 0.06 
Time deposits (in-market) 662,969  2,265 1.37   617,878  1,820 1.19   559,442  1,460 1.05 
Wholesale brokered time deposits 430,118  1,814 1.69   409,243  1,583 1.57   392,734  1,390 1.42 
Total interest-bearing deposits 2,679,820  5,254 0.79   2,643,597  4,422 0.68   2,517,389  3,591 0.57 
FHLB advances 874,746  4,707 2.16   810,967  3,983 1.99   817,349  3,509 1.72 
Junior subordinated debentures 22,681  214 3.78   22,681  183 3.27   22,681  149 2.63 
Other             13    
Total interest-bearing liabilities 3,577,247  10,175 1.14   3,477,245  8,588 1.00   3,357,432  7,249 0.87 
Noninterest-bearing demand deposits 574,258     584,557     543,781   
Other liabilities 60,878     56,951     49,013   
Shareholders' equity 416,433     410,955     404,238   
Total liabilities and shareholders' equity$4,628,816    $4,529,708    $4,354,464   
Net interest income (FTE) $33,425    $32,134    $30,490  
Interest rate spread  2.84%   2.84%   2.81%
Net interest margin  3.05%   3.03%   2.97%

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

For the Three Months EndedJun 30, 2018Mar 31, 2018Jun 30, 2017
Commercial loans$308 $276 $549 
Nontaxable debt securities 6  6  37 
Total$314 $282 $586 


        
CONSOLIDATED AVERAGE BALANCE SHEETS (FTE Basis)
(Unaudited; Dollars in thousands)
  
For the Six Months EndedJune 30, 2018 June 30, 2017
 Average BalanceInterestYield/
Rate
 Average BalanceInterestYield/
 Rate
 
Assets:       
Cash, federal funds sold and short-term investments$54,649 $462 1.70% $58,323 $260 0.90%
Mortgage loans for sale 27,329  539 3.98   23,194  445 3.87 
Taxable debt securities 813,193  10,476 2.60   764,666  9,553 2.52 
Nontaxable debt securities 2,154  55 5.15   9,286  282 6.12 
Total securities 815,347  10,531 2.60   773,952  9,835 2.56 
FHLB stock 42,116  1,066 5.10   43,994  826 3.79 
Commercial real estate 1,222,136  25,809 4.26   1,184,294  21,588 3.68 
Commercial & industrial 615,698  14,392 4.71   575,162  12,765 4.48 
Total commercial 1,837,834  40,201 4.41   1,759,456  34,353 3.94 
Residential real estate 1,251,904  24,355 3.92   1,134,516  21,511 3.82 
Home equity 285,684  6,439 4.55   297,481  5,924 4.02 
Other 30,188  729 4.87   36,064  863 4.83 
Total consumer 315,872  7,168 4.58   333,545  6,787 4.10 
Total loans 3,405,610  71,724 4.25   3,227,517  62,651 3.91 
Total interest-earning assets 4,345,051  84,322 3.91   4,126,980  74,017 3.62 
Noninterest-earning assets 234,485     232,957   
Total assets$4,579,536    $4,359,937   
Liabilities and Shareholders' Equity:       
Interest-bearing demand deposits$83,368 $129 0.31% $55,722 $7 0.03%
NOW accounts 455,036  111 0.05   428,998  108 0.05 
Money market accounts 691,245  1,840 0.54   732,988  1,239 0.34 
Savings accounts 371,873  114 0.06