Washington Trust Announces Second Quarter 2013 Earnings

Business Wire

WESTERLY, R.I.--(BUSINESS WIRE)--

Washington Trust Bancorp, Inc. (NASDAQ Global Select; symbol: WASH), parent company of The Washington Trust Company, today announced second quarter 2013 net income of $9.0 million, or 54 cents per diluted share. These results compare to first quarter of 2013 net income of $7.4 million, or 45 cents per diluted share, and second quarter of 2012 net income of $8.7 million, or 53 cents per diluted share.

Washington Trust posted another quarter of solid operating results, with a continuation of strong commercial loan growth and healthy mortgage banking activity, stated Joseph J. MarcAurele, Chairman, President and CEO. We continue to attract and build customer relationships across all business lines, reinforcing our position as Rhode Islands Bank of Choice.

Highlights for the quarter or at June 30th include:

  • Total loans were $2.38 billion at June 30, 2013, up by $59.9 million, or 3%, in the second quarter of 2013, led by growth of $33.7 million, or 4%, in the commercial real estate portfolio.
  • Deposits totaled $2.30 billion at June 30, 2013, down slightly from March 31, 2013, reflecting seasonal outflow. Total deposits were up by $174.2 million, or 8%, in the last twelve months.
  • The returns on average equity and average assets for the second quarter of 2013 were 11.84% and 1.18%, respectively. Comparable amounts for the first quarter of 2013 were 9.91% and 0.98%, respectively.

2013 results also included the following transactions:

  • During the second quarter of 2013, certain junior subordinated debentures were redeemed and as a result, unamortized debt issuance costs of $244 thousand were expensed and classified as interest expense in the quarter. The after-tax impact of this was 1 cent per diluted share.
  • Included in salaries and employee benefits expense in the second quarter of 2013 was $270 thousand for severance related matters. The after-tax impact of this was 1 cent per diluted share.
  • In the first quarter of 2013, the Corporation had recognized an other-than-temporary impairment ("OTTI") charge to earnings on a trust preferred collateralized debt obligation investment security of $2.8 million (or 11 cents per diluted share). There were no such charges in the second quarter of 2013.

Net Interest Income

Net interest income totaled $22.4 million for the second quarter of 2013, essentially flat compared to the first quarter of 2013. The net interest margin for the second quarter of 2013 was 3.26%, compared to 3.32% for the first quarter of 2013.

In connection with the June 2013 redemption of $10.3 million of junior subordinated debentures, unamortized debt issuance costs of $244 thousand were expensed and classified as interest expense in the quarter. The impact of this item was an increase of 4 basis points on the cost of funds and a reduction of 4 basis points on the net interest margin for the second quarter 2013. The rate on this debt was approximately 5.69% at the time of redemption, which included the cost of a related interest rate swap that matured upon the redemption event.

Average interest-earning assets for the second quarter of 2013 increased by $14.4 million, while the yield on interest-earning assets declined by 7 basis points from the previous quarter. Average loan balances grew by $57 million, which were partially offset by payments received on mortgage-backed securities in the investment security portfolio.

Noninterest Income

Noninterest income totaled $16.4 million for the second quarter of 2013, compared to $13.2 million for the previous quarter. In the first quarter 2013, OTTI charges of $2.8 million were recognized. Excluding this item, noninterest income increased by $456 thousand, or 3%, on a linked quarter basis. Other significant linked quarter changes included the following:

  • Wealth management revenues were up by $438 thousand, or 6%, including a $344 thousand increase in tax preparation fees, which are typically concentrated in the second quarter.
  • Mortgage banking revenues decreased by $681 thousand, or 16%, reflecting a lower level of mortgage loan refinancing activity due to rising market interest rates. In the second quarter of 2013, residential loans sold to the secondary market amounted to $132 million, compared to $153 million in the previous quarter.
  • Merchant processing fee revenue rose by $636 thousand, or 32%, on a linked quarter basis, reflecting an increase in the volume of transactions processed for customers. See discussion regarding corresponding increase in merchant processing costs described below.

Noninterest Expenses

Noninterest expenses totaled $25.0 million for the second quarter of 2013, compared to $24.2 million for the previous quarter. Included in salaries and employee benefits expense in the second quarter of 2013 was $270 thousand for severance related matters. Excluding this item, noninterest expenses increased by $551 thousand, or 2%, on a linked quarter basis, largely due to a $538 thousand, or 32%, increase in merchant processing costs. See the discussion above regarding the corresponding increase in merchant processing fee income.

Asset Quality

Total nonaccrual loans decreased by $5.6 million to $20.0 million, or 0.84% of total loans, at June 30, 2013, from $25.7 million, or 1.10%, at March 31, 2013, largely reflecting charge-offs and payoffs on commercial loans. Total past due loans amounted to $26.1 million, or 1.09% of total loans, at June 30, 2013, compared to $26.2 million, or 1.13%, at March 31, 2013.

The loan loss provision charged to earnings amounted to $700 thousand for the second quarter of 2013, compared to $600 thousand for the first quarter of 2013. Net charge-offs amounted to $4.0 million in the second quarter of 2013 and was comprised primarily of a $4.0 million charge-off on one commercial mortgage loan. The remaining carrying value of this loan was $1.0 million at June 30, 2013. Net charge-offs totaled $334 thousand in the first quarter of 2013.

The allowance for loan losses was $27.9 million, or 1.17% of total loans, at June 30, 2013 compared to $31.1 million, or 1.34% of total loans, at March 31, 2013. The decline in the ratio of the allowance for loan losses to total loans reflects charge-offs and a decrease in specific reserves on impaired loans.

Loans

Total loans rose by $59.9 million in the second quarter of 2013, with increases in commercial loans of $33.0 million, or 3%, and residential loans of $24.5 million, or 3%. Total loans were up by $91.0 million, or 4%, from December 31, 2012 and by $171.1 million, or 8%, from June 30, 2012.

Investment Securities

The investment securities portfolio declined by $36.6 million from March 31, 2013 and by $65.4 million from December 31, 2012, largely due to principal payments received on mortgage-backed securities which were not reinvested in the securities portfolio.

Deposits and Borrowings

Total deposits decreased by $15.0 million from March 31, 2013 and by $8.0 million from December 31, 2012. In the last twelve months, total deposits grew by $174.2 million, or 8%, including an increase of $75.3 million, or 13%, in demand deposits and NOW account balances.

FHLBB advances increased by $32.1 million from March 31, 2013 and by $12.2 million from December 31, 2012. Junior subordinated debentures declined by $10.3 million from both March 31, 2013 and December 31, 2012, reflecting the June 2013 redemption of the junior subordinated debentures issued to and held by Washington Preferred Capital Trust.

Capital Management

Capital levels continued to exceed the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.93% at June 30, 2013, compared to 13.26% at December 31, 2012. Total shareholder's equity was $303.4 million at June 30, 2013, up by $7.7 million from the balance at December 31, 2012.

Dividends Declared

The Board of Directors declared a quarterly dividend of 25 cents per share for the quarter ended June 30, 2013. The dividend was paid on July 12, 2013 to shareholders of record on July 1, 2013.

Conference Call

Washington Trust will host a conference call to discuss second quarter results on Tuesday, July 23, 2013 at 8:30 am (Eastern Time). Individuals may dial in to the call at 1-888-317-6016. An audio replay of the call will be available by dialing 1-877-344-7529 and entering Conference Number 10030244; the audio replay will be available until 9:00 a.m. on August 7, 2013. A webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrust.com , shortly after the conclusion of the call and will be available through September 30, 2013.

Background

Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company, a state-chartered bank headquartered in Westerly, Rhode Island. Founded in 1800, Washington Trust is the oldest community bank in the nation and is the largest independent bank headquartered in Rhode Island. Washington Trust offers a full range of financial services, including commercial banking, small business banking, personal banking, and wealth management and trust services through its offices located in Rhode Island, Connecticut and Massachusetts. The Corporations common stock trades on The NASDAQ Global Select® Stock Market under the symbol WASH. Investor information is available on the Corporations web site: www.washtrust.com .

Forward-Looking Statements

This press release contains statements that are forward-looking statements. We may also make written or oral 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 the control of Washington Trust. These risks, uncertainties and other factors may cause the actual results, performance or achievements of Washington Trust 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: continued weakness in general national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets, volatility and disruption in national and international financial markets, government intervention in the U.S. financial system, 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 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 Washington Trust's competition, changes in legislation or regulation and accounting principles, policies and guidelines, 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, 2012, as filed with the Securities and Exchange Commission and as updated by our Quarterly Reports on Form 10-Q, 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 press release, and Washington Trust assumes 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
CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars in thousands, except par value)         Jun 30,
2013
    Dec 31,
2012
Assets:            
Cash and due from banks $ 79,903 $ 73,474
Short-term investments 3,764 19,176
Mortgage loans held for sale, at fair value; amortized cost $29,163 in 2013 and $48,370 in 2012 28,889 50,056
Securities:
Available for sale, at fair value; amortized cost $309,421 in 2013 and $363,408 in 2012 316,714 375,498
Held to maturity, at cost; fair value $33,762 in 2013 and $41,420 in 2012           33,803         40,381  
Total securities 350,517 415,879
Federal Home Loan Bank stock, at cost 37,730 40,418
Loans:
Commercial 1,310,114 1,252,419
Residential real estate 748,871 717,681
Consumer           325,995         323,903  
Total loans 2,384,980 2,294,003
Less allowance for loan losses           27,884         30,873  
Net loans 2,357,096 2,263,130
Premises and equipment, net 26,392 27,232
Investment in bank-owned life insurance 55,750 54,823
Goodwill 58,114 58,114
Identifiable intangible assets, net 5,827 6,173
Other assets           57,325         63,409  
Total assets         $ 3,061,307       $ 3,071,884  
Liabilities:
Deposits:
Demand deposits $ 358,797 $ 379,889
NOW accounts 301,096 291,174
Money market accounts 540,012 496,402
Savings accounts 293,405 274,934
Time deposits           811,299         870,232  
Total deposits 2,304,609 2,312,631
Federal Home Loan Bank advances 373,341 361,172
Junior subordinated debentures 22,681 32,991
Other borrowings 199 1,212
Other liabilities           57,107         68,226  
Total liabilities           2,757,937         2,776,232  
Shareholders Equity:
Common stock of $.0625 par value; authorized 30,000,000 shares; issued and outstanding 16,487,305 shares in 2013 and 16,379,771 shares in 2012 1,030 1,024
Paid-in capital 93,274 91,453
Retained earnings 221,761 213,674
Accumulated other comprehensive loss           (12,695 )       (10,499 )
Total shareholders equity           303,370         295,652  
Total liabilities and shareholders equity         $ 3,061,307       $ 3,071,884  
 
 
Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
 
(Dollars and shares in thousands, except per share amounts)       Three Months         Six Months  
Periods Ended June 30,       2013   2012       2013   2012
Interest income:          
Interest and fees on loans $ 25,513 $ 25,344 $ 50,736 $ 50,707
Interest on securities: Taxable 2,576 4,069 5,421 8,446
Nontaxable 647 682 1,306 1,375
Dividends on corporate stock and Federal Home Loan Bank stock 39 78 77 155
Other interest income         24       17           52       37  
Total interest income         28,799       30,190           57,592       60,720  
Interest expense:
Deposits 3,096 3,385 6,290 6,819
Federal Home Loan Bank advances 2,679 3,998 5,416 8,083
Junior subordinated debentures 612 391 1,002 783
Other interest expense         3       5           8       239  
Total interest expense         6,390       7,779           12,716       15,924  
Net interest income 22,409 22,411 44,876 44,796
Provision for loan losses         700       600           1,300       1,500  
Net interest income after provision for loan losses         21,709       21,811           43,576       43,296  
Noninterest income:
Wealth management services:
Trust and investment advisory fees 6,230 5,819 12,296 11,597
Mutual fund fees 1,077 1,002 2,099 2,027
Financial planning, commissions and other service fees         605       652           991       1,034  
Wealth management services 7,912 7,473 15,386 14,658
Service charges on deposit accounts 790 764 1,581 1,523
Merchant processing fees 2,613 2,732 4,590 4,720
Card interchange fees 683 626 1,282 1,169
Income from bank-owned life insurance 461 477 928 963
Net gains on loan sales and commissions on loans originated for others 3,485 3,015 7,651 6,112
Net realized gains on securities 299 299
Net gains (losses) on interest rate swap contracts 152 (4 ) 171 24
Equity in earnings (losses) of unconsolidated subsidiaries (57 ) 124 (18 ) 87
Other income         355       668           761       1,060  
Noninterest income, excluding other-than-temporary impairment losses 16,394 16,174 32,332 30,615
Total other-than-temporary impairment losses on securities (613 ) (85 )
Portion of loss recognized in other comprehensive income (before tax)                         (2,159 )     (124 )
Net impairment losses recognized in earnings                         (2,772 )     (209 )
Total noninterest income         16,394       16,174           29,560       30,406  
Noninterest expense:
Salaries and employee benefits 15,542 14,451 30,984 28,911
Net occupancy 1,364 1,527 2,878 3,053
Equipment 1,192 1,143 2,436 2,250
Merchant processing costs 2,211 2,320 3,884 3,983
Outsourced services 871 895 1,712 1,815
FDIC deposit insurance costs 451 426 882 884
Legal, audit and professional fees 554 519 1,162 1,001
Advertising and promotion 476 478 831 850
Amortization of intangibles 173 186 346 373
Foreclosed property costs 137 170 184 468
Debt prepayment penalties 961 961
Other expenses         2,034       2,152           3,890       4,078  
Total noninterest expense         25,005       25,228           49,189       48,627  
Income before income taxes 13,098 12,757 23,947 25,075
Income tax expense         4,115       4,044           7,543       7,924  
Net income       $ 8,983     $ 8,713         $ 16,404     $ 17,151  
 
Weighted average common shares outstanding - basic 16,454 16,358 16,428 16,344
Weighted average common shares outstanding - diluted 16,581 16,392 16,558 16,381
Per share information: Basic earnings per common share $ 0.54 $ 0.53 $ 0.99 $ 1.04
Diluted earnings per common share $ 0.54 $ 0.53 $ 0.99 $ 1.04
Cash dividends declared per share $ 0.25 $ 0.23 $ 0.50 $ 0.46
 
 
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
 
      At or for the Quarters Ended
(Dollars and shares in thousands, except per share amounts)       Jun 30,
2013
  Mar 31,
2013
  Dec 31,
2012
  Sep 30,
2012
  Jun 30,
2012
Financial Data:        
Total assets $3,061,307 $3,051,848 $3,071,884 $3,048,868 $3,041,050
Total loans 2,384,980 2,325,045 2,294,003 2,256,697 2,213,842
Total securities 350,517 387,102 415,879 483,858 516,193
Total deposits 2,304,609 2,319,641 2,312,631 2,234,659 2,130,453
Total shareholders' equity 303,370 301,291 295,652 298,394 292,734
Net interest income 22,409 22,467 23,164 22,736 22,411
Provision for loan losses 700 600 600 600 600
Noninterest income, excluding OTTI losses 16,394 15,938 17,899 16,921 16,174
Net OTTI losses recognized in earnings (2,772 ) (12 )
Noninterest expenses 25,005 24,184 27,421 26,290 25,228
Income tax expense 4,115 3,428 4,007 3,867 4,044
Net income 8,983 7,421 9,023 8,900 8,713
 
Share Data:
Basic earnings per common share $0.54 $0.45 $0.55 $0.54 $0.53
Diluted earnings per common share $0.54 $0.45 $0.55 $0.54 $0.53
Dividends declared per share $0.25 $0.25 $0.24 $0.24 $0.23
Book value per share $18.40 $18.34 $18.05 $18.23 $17.89
Tangible book value per share - Non-GAAP (1) $14.52 $14.44 $14.13 $14.29 $13.94
Market value per share $28.52 $27.38 $26.31 $26.27 $24.38
Shares outstanding at end of period 16,487 16,425 16,380 16,371 16,359
Weighted average common shares outstanding - basic 16,454 16,401 16,376 16,366 16,358
Weighted average common shares outstanding - diluted 16,581 16,449 16,425 16,414 16,392
 
Key Ratios:
Return on average assets 1.18 % 0.98 % 1.19 % 1.17 % 1.16 %
Return on average tangible assets - Non-GAAP (1) 1.21 % 1.01 % 1.21 % 1.19 % 1.18 %
Return on average equity 11.84 % 9.91 % 12.01 % 12.02 % 11.98 %
Return on average tangible equity - Non-GAAP (1) 15.01 % 12.62 % 15.29 % 15.37 % 15.41 %
 
Capital Ratios:
Tier 1 risk-based capital 11.74% (i) 12.25 % 12.01 % 11.93 % 11.90 %
Total risk-based capital 12.93% (i) 13.50 % 13.26 % 13.18 % 13.15 %
Tier 1 leverage ratio 9.32% (i) 9.53 % 9.30 % 9.11 % 9.00 %
Equity to assets 9.91 % 9.87 % 9.62 % 9.79 % 9.63 %
Tangible equity to tangible assets - Non-GAAP (1) 7.99 % 7.94 % 7.69 % 7.84 % 7.66 %
(i) - estimated
 
Wealth Management Assets under Administration:
Balance at beginning of period $4,420,076 $4,199,640 $4,242,520 $4,079,913 $4,196,447
Net investment (depreciation) appreciation & income (20,956 ) 213,979 (5,887 ) 155,427 (131,896 )
Net client cash flows       34,454     6,457     (36,993 )   7,180     15,362  
Balance at end of period       $4,433,574     $4,420,076     $4,199,640     $4,242,520     $4,079,913  

(1) See the section labeled Supplemental Information - Non-GAAP Financial Measures at the end of this document.

 
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
     
Six Months Ended
(Dollars and shares in thousands, except per share amounts)       Jun 30,
2013
  Jun 30,
2012
Financial Data:  
Net interest income $44,876 $44,796
Provision for loan losses 1,300 1,500
Noninterest income, excluding OTTI losses 32,332 30,615
Net OTTI losses recognized in earnings (2,772 ) (209 )
Noninterest expenses 49,189 48,627
Income tax expense 7,543 7,924
Net income 16,404 17,151
 
Share Data:
Basic earnings per common share $0.99 $1.04
Diluted earnings per common share $0.99 $1.04
Dividends declared per share $0.50 $0.46
 
Weighted average common shares outstanding - basic 16,428 16,344
Weighted average common shares outstanding - diluted 16,558 16,381
 
Key Ratios:
Return on average assets 1.08 % 1.13 %
Return on average tangible assets - Non-GAAP (1) 1.11 % 1.16 %
Return on average equity 10.88 % 11.92 %
Return on average tangible equity - Non-GAAP (1) 13.82 % 15.38 %
 
Asset Quality Data:
Allowance for Loan Losses:
Balance at beginning of period $30,873 $29,802
Provision charged to earnings 1,300 1,500
Charge-offs (4,549 ) (1,377 )
Recoveries       260     523  
Balance at end of period       $27,884     $30,448  
 
Net Loan Charge-Offs (Recoveries):
Commercial mortgages $3,922 ($381 )
Other commercial 134 873
Residential real estate mortgages 45 177
Consumer       188     185  
Total       $4,289     $854  
 
Net charge-offs to average loans (annualized) 0.37 % 0.17 %
 
Wealth Management Assets Under Administration:
Balance at beginning of period $4,199,640 $3,900,061
Net investment appreciation & income 193,023 166,259
Net client cash flows       40,911     13,593  
Balance at end of period       $4,433,574     $4,079,913  

(1) See the section labeled Supplemental Information - Non-GAAP Financial Measures at the end of this document.

 
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
 
      For the Quarters Ended
        Jun 30,
2013
    Mar 31,
2013
    Dec 31,
2012
    Sep 30,
2012
    Jun 30,
2012
Average Yield / Rate (taxable equivalent basis):                
Assets:
Commercial loans 4.58 % 4.70 % 4.90 % 4.94 % 5.03 %
Residential real estate loans, including mortgage loans held for sale 4.14 % 4.26 % 4.23 % 4.32 % 4.40 %
Consumer loans 3.81 % 3.84 % 3.86 % 3.89 % 3.85 %
Total loans 4.34 % 4.44 % 4.53 % 4.59 % 4.65 %
Cash, federal funds sold and other short-term investments 0.22 % 0.21 % 0.26 % 0.26 % 0.23 %
FHLBB stock 0.42 % 0.39 % 0.48 % 0.51 % 0.54 %
Taxable debt securities 3.52 % 3.56 % 3.49 % 3.50 % 3.63 %
Nontaxable debt securities 5.94 % 5.98 % 5.89 % 5.83 % 5.93 %
Corporate stocks % % % % 7.58 %
Total securities 3.97 % 3.98 % 3.86 % 3.83 % 3.95 %
Total interest-earning assets 4.17 % 4.24 % 4.31 % 4.34 % 4.41 %
Liabilities:
Interest-bearing demand deposits % % % % %
NOW accounts 0.06 % 0.06 % 0.07 % 0.06 % 0.06 %
Money market accounts 0.29 % 0.29 % 0.28 % 0.26 % 0.23 %
Savings accounts 0.07 % 0.07 % 0.09 % 0.11 % 0.11 %
Time deposits 1.25 % 1.28 % 1.32 % 1.33 % 1.35 %
FHLBB advances 3.29 % 3.21 % 3.27 % 3.18 % 3.25 %
Junior subordinated debentures 7.82 % 4.79 % 4.75 % 4.74 % 4.77 %
Other 5.87 % 1.77 % 5.51 % 6.33 % 2.07 %
Total interest-bearing liabilities 1.11 % 1.11 % 1.19 % 1.27 % 1.33 %
 
Interest rate spread (taxable equivalent basis) 3.06 % 3.13 % 3.12 % 3.07 % 3.08 %
Net interest margin (taxable equivalent basis) 3.26 % 3.32 % 3.33 % 3.28 % 3.30 %
        At June 30, 2013
Amortized   Unrealized   Unrealized   Fair
(Dollars in thousands)         Cost (1)   Gains   Losses   Value
Securities Available for Sale:
Obligations of U.S. government-sponsored enterprises $ 29,472 $ 1,466 $ $ 30,938
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 172,014 9,239 (28 ) 181,225
States and political subdivisions 64,838 2,850 67,688
Trust preferred securities:
Individual name issuers 30,696 (5,619 ) 25,077
Collateralized debt obligations 1,264 (867 ) 397
Corporate bonds           11,137       269       (17 )     11,389
Total securities available for sale           309,421       13,824       (6,531 )     316,714
Held to Maturity:
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises           33,803             (41 )     33,762
Total securities held to maturity           33,803             (41 )     33,762
Total securities         $ 343,224     $ 13,824       ($6,572 )   $ 350,476

(1) Net of other-than-temporary impairment losses recognized in earnings.

 
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
 
      Period End Balances At
(Dollars in thousands)       Jun 30,
2013
    Mar 31,
2013
    Dec 31,
2012
    Sep 30,
2012
    Jun 30,
2012
Loans:                
Commercial: Mortgages $ 758,437 $ 729,968 $ 710,813 $ 693,221 $ 664,410
Construction & development 39,449 34,179 27,842 25,132 17,365
  Other         512,228         513,000         513,764         500,974         510,220
Total commercial 1,310,114 1,277,147 1,252,419 1,219,327 1,191,995
Residential real estate: Mortgages 728,158 702,418 692,798 692,659 680,772
  Homeowner construction         20,713         21,943         24,883         22,753         21,247
Total residential real estate 748,871 724,361 717,681 715,412 702,019
Consumer: Home equity lines 228,367 226,640 226,861 227,549 224,550
Home equity loans 41,312 40,134 39,329 39,452 40,690
  Other         56,316         56,763         57,713         54,957         54,588
  Total consumer         325,995         323,537         323,903         321,958         319,828
  Total loans       $ 2,384,980       $ 2,325,045       $ 2,294,003       $ 2,256,697       $ 2,213,842
      At June 30, 2013
(Dollars in thousands)       Balance     % of Total
Commercial Real Estate Loans by Property Location:    
Rhode Island, Connecticut, Massachusetts $ 762,978 95.6 %
New York 26,080 3.3 %
New Hampshire         8,828       1.1 %
Total commercial real estate loans (1)       $ 797,886       100.0 %

(1) Commercial real estate loans consist of commercial mortgages and construction and development loans. Commercial mortgages are loans secured by income producing property.

     
At June 30, 2013
(Dollars in thousands)       Balance     % of Total
Residential Mortgages by Property Location:    
Rhode Island, Connecticut, Massachusetts $ 728,067 97.1 %
New York, Virginia, New Jersey, Maryland, Pennsylvania, District of Columbia 9,444 1.3 %
New Hampshire 5,224 0.7 %
Ohio 2,748 0.4 %
Washington, Oregon 1,365 0.2 %
Georgia 1,092 0.1 %
New Mexico 472 0.1 %
Other         459       0.1 %
Total residential mortgages       $ 748,871       100.0 %
     
Period End Balances At
(Dollars in thousands)       Jun 30,
2013
  Mar 31,
2013
  Dec 31,
2012
  Sep 30,
2012
  Jun 30,
2012
Deposits:        
Demand deposits $358,797 $375,156 $379,889 $352,330 $321,488
NOW accounts 301,096 294,136 291,174 267,495 263,124
Money market accounts 540,012 503,414 496,402 459,671 388,686
Savings accounts 293,405 284,983 274,934 268,191 264,772
Time deposits       811,299     861,952     870,232     886,972     892,383
Total deposits       $2,304,609     $2,319,641     $2,312,631     $2,234,659     $2,130,453
 
Out-of-market brokered certificates of deposits included in time deposits $96,177 $103,045 $102,636 $98,603 $102,661
In-market deposits, excluding out-of-market brokered certificates of deposit $2,208,432 $2,216,596 $2,209,995 $2,136,056 $2,027,792
...
 
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
 
      Period End Balances At
(Dollars in thousands)       Jun 30,
2013
    Mar 31,
2013
    Dec 31,
2012
    Sep 30,
2012
    Jun 30,
2012
Asset Quality Data:                
Nonperforming Assets:
Commercial mortgages $ 9,976 $ 14,953 $ 10,681 $ 5,956 $ 2,597
Commercial construction and development
Other commercial 1,400 3,122 4,412 3,201 3,405
Residential real estate mortgages 7,526 6,699 6,158 7,127 8,659
Consumer         1,124         901         1,292         1,463         1,081  
Total nonaccrual loans $ 20,026 $ 25,675 $ 22,543 $ 17,747 $ 15,742
Nonaccrual investment securities 397 404 843 929 767
Property acquired through foreclosure or repossession         1,230         2,625         2,047         2,447      
  2,332   Total nonperforming assets       $ 21,653       $ 28,704       $ 25,433       $ 21,123       $ 18,841     Total past due loans to total loans 1.09 % 1.13 % 1.22 % 1.05 % 0.92 % Nonperforming assets to total assets 0.71 % 0.94 % 0.83 % 0.69 % 0.62 % Nonaccrual loans to total loans 0.84 % 1.10 % 0.98 % 0.79 % 0.71 % Allowance for loan losses to nonaccrual loans 139.24 % 121.28 % 136.95 % 173.28 % 193.42 % Allowance for loan losses to total loans 1.17 % 1.34 % 1.35 % 1.36 % 1.38 %   Troubled Debt Restructured Loans: Accruing troubled debt restructured loans: Commercial mortgages $ 19,018 $ 9,600 $ 9,569 $ 9,131 $ 1,251 Other commercial 2,602 6,554 6,577 6,880 6,916 Residential real estate mortgages 876 1,599 1,123 386 570 Consumer         242         244         154         158         159   Accruing troubled debt restructured loans         22,738         17,997         17,423         16,555         8,896   Nonaccrual troubled debt restructured loans: Commercial mortgages — — — — — Other commercial 590 721 2,063 2,306 2,317 Residential real estate mortgages 144 155 688 1,697 2,028 Consumer         42         42         44         46         47   Nonaccrual troubled debt restructured loans         776         918         2,795         4,049         4,392   Total troubled debt restructured loans       $ 23,514       $ 18,915       $ 20,218       $ 20,604       $ 13,288  
 
Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
 
      Period End Balances At
(Dollars in thousands)       Jun 30,
2013
    Mar 31,
2013
    Dec 31,
2012
    Sep 30,
2012
    Jun 30,
2012
Past Due Loans:                
Loans 30-59 Days Past Due:
Commercial mortgages $ $ $ 373 $ 3,978 $ 411
Other commercial loans 505 689 260 2,719 849
Residential real estate mortgages 4,051 3,891 4,840 2,368 4,969
Consumer loans         1,588         1,534         1,134         1,876         2,660
Loans 30-59 days past due       $ 6,144       $ 6,114       $ 6,607       $ 10,941       $ 8,889
 
Loans 60-89 Days Past Due:
Commercial mortgages $ 536 $ 193 $ 408 $ 874 $ 233
Other commercial loans 34 341 296 1,169 434
Residential real estate mortgages 1,697 1,451 1,951 821 1,600
Consumer loans         689         461         385         1,213         677
Loans 60-89 days past due       $ 2,956       $ 2,446       $ 3,040       $ 4,077       $ 2,944
 
Loans 90 Days or more Past Due:
Commercial mortgages $ 8,895 $ 9,852 $ 10,300 $ 2,495 $ 2,339
Other commercial loans 3,428 2,961 3,647 1,366 1,714
Residential real estate mortgages 4,266 4,327 3,658 3,924 4,039
Consumer loans         415         484         844         811         362
Loans 90 days or more past due       $ 17,004       $ 17,624       $ 18,449       $ 8,596       $ 8,454
 
Total Past Due Loans:
Commercial mortgages $ 9,431 $ 10,045 $ 11,081 $ 7,347 $ 2,983
Other commercial loans 3,967 3,991 4,203 5,254 2,997
Residential real estate mortgages 10,014 9,669 10,449 7,113 10,608
Consumer loans         2,692         2,479         2,363         3,900         3,699
Total past due loans       $ 26,104       $ 26,184       $ 28,096       $ 23,614       $ 20,287
 
Accruing loans 90 days or more past due $ 2.431 $ $ $ $
Nonaccrual loans included in past due loans $ 17,208 $ 19,000 $ 20,979 $ 14,471 $ 12,719
      For the Quarters Ended
(Dollars in thousands)       Jun 30,
2013
    Mar 31,
2013
    Dec 31,
2012
    Sep 30,
2012
    Jun 30,
2012
Allowance for Loan Losses:                
Balance at beginning of period $ 31,139 $ 30,873 $ 30,752 $ 30,448 $ 30,045
Provision charged to earnings 700 600 600 600 600
Charge-offs (4,175 ) (374 ) (534 ) (424 ) (696 )
Recoveries         220         40         55         128         499  
Balance at end of period       $ 27,884       $ 31,139       $ 30,873       $ 30,752       $ 30,448  
 
Net Loan Charge-Offs (Recoveries):
Commercial mortgages $ 3,814 $ 108 $ 212 $ 212 ($388 )
Other commercial 63 71 225 (22 ) 549
Residential real estate mortgages 36 9 39 41 (47 )
Consumer         42         146         3         65         83  
Total       $ 3,955       $ 334       $ 479       $ 296       $ 197  
 

The following tables present average balance and interest rate information. Tax-exempt income is converted to a fully taxable equivalent basis using the statutory federal income tax rate adjusted for applicable state income taxes, net of the related federal tax benefit. For dividends on corporate stocks, the 70% federal dividends received deduction is also used in the calculation of tax equivalency. Unrealized gains (losses) on available for sale securities are excluded from the average balance and yield calculations. Nonaccrual and renegotiated loans, as well as interest earned on these loans (to the extent recognized in the Consolidated Statements of Income) are included in amounts presented for loans.

 
Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)
 
            Three Months Ended
              June 30, 2013         March 31, 2013             June 30, 2012  
Average Balance   Interest   Yield/

Rate

      Average Balance   Interest   Yield/

Rate

      Average Balance   Interest   Yield/

Rate

(Dollars in thousands)                                
Assets:    
Commercial loans $ 1,291,244 $ 14,747 4.58 % $ 1,243,716 $ 14,421 4.70 % $ 1,166,545 $ 14,590 5.03 %

Residential real estate loans, including
mortgage loans held for sale

762,363 7,877 4.14 % 755,528 7,937 4.26 % 714,154 7,809 4.40 %
Consumer loans               325,539       3,090     3.81 %         322,668       3,053     3.84 %         320,442       3,067     3.85 %
Total loans 2,379,146 25,714 4.34 % 2,321,912 25,411 4.44 % 2,201,141 25,466 4.65 %

Cash, federal funds sold and short-term
investments

44,690 24 0.22 % 53,734 28 0.21 % 30,078 17 0.23 %
FHLBB stock 37,730 39 0.42 % 39,790 38 0.39 % 40,418 54 0.54 %
 
Taxable debt securities 293,586 2,576 3.52 % 323,730 2,845 3.56 % 451,207 4,069 3.63 %
Nontaxable debt securities 66,468 985 5.94 % 68,064 1,004 5.98 % 70,462 1,039 5.93 %
Corporate stocks                         %                   %         1,804       34     7.58 %
Total securities               360,054       3,561     3.97 %         391,794       3,849     3.98 %         523,473       5,142     3.95 %
Total interest-earning assets 2,821,620 29,338 4.17 % 2,807,230 29,326 4.24 % 2,795,110 30,679 4.41 %
Noninterest-earning assets               213,336                   210,338                   222,057          
Total assets             $ 3,034,956                 $ 3,017,568                 $ 3,017,167          
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits $ 135 $ % $ $ % $ $ %
NOW accounts 289,858 45 0.06 % 283,004 45 0.06 % 254,528 39 0.06 %
Money market accounts 535,107 381 0.29 % 495,453 351 0.29 % 405,241 232 0.23 %
Savings accounts 286,547 47 0.07 % 279,536 46 0.07 % 258,824 72 0.11 %
Time deposits 843,462 2,623 1.25 % 869,576 2,752 1.28 % 905,466 3,042 1.35 %
FHLBB advances 326,839 2,679 3.29 % 345,270 2,737 3.21 % 494,257 3,998 3.25 %
Junior subordinated debentures 31,405 612 7.82 % 32,991 390 4.79 % 32,991 391 4.77 %
Other               205       3     5.87 %         1,146       5     1.77 %         973       5     2.07 %
Total interest-bearing liabilities 2,313,558 6,390 1.11 % 2,306,976 6,326 1.11 % 2,352,280 7,779 1.33 %
Demand deposits 365,747 360,851 321,094
Other liabilities 52,249 50,305 52,939
Shareholders' equity               303,402                   299,436                   290,854          
Total liabilities and shareholders' equity             $ 3,034,956                 $ 3,017,568                 $ 3,017,167          
Net interest income (FTE)                 $ 22,948                 $ 23,000                 $ 22,900      
Interest rate spread 3.06 % 3.13 % 3.08 %
Net interest margin                     3.26 %               3.32 %               3.30 %

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

(Dollars in thousands)       Three Months Ended
        Jun 30, 2013       Mar 31, 2013       Jun 30, 2012
Commercial loans $201       $188       $122
Nontaxable debt securities 338 345 357
Corporate stocks                   10
Total       $539       $533       $489
 
Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)
 
Six Months Ended June 30,         2013       2012
        Average Balance   Interest   Yield/

Rate

        Average Balance   Interest   Yield/

Rate

(Dollars in thousands)                      
Assets:
Commercial loans $ 1,267,612 $ 29,168 4.64 % $ 1,144,114 $ 28,888 5.08 %
Residential real estate loans, including mortgage loans held for sale 758,964 15,814 4.20 % 717,430 15,884 4.45 %
Consumer loans           324,111       6,143     3.82 %           320,195       6,164     3.87 %
Total loans 2,350,687 51,125 4.39 % 2,181,739 50,936 4.69 %
Cash, federal funds sold and short-term investments 49,186 52 0.21 % 41,196 37 0.18 %
FHLBB stock 38,755 77 0.40 % 41,012 106 0.52 %
 
Taxable debt securities 308,576 5,421 3.54 % 468,828 8,446 3.62 %
Nontaxable debt securities 67,261 1,989 5.96 % 71,185 2,098 5.93 %
Corporate stocks                     %           1,828       67     7.37 %
Total securities           375,837       7,410     3.98 %           541,841       10,611     3.94 %
Total interest-earning assets 2,814,465 58,664 4.20 % 2,805,788 61,690 4.42 %
Noninterest-earning assets           211,845                     221,430          
Total assets         $ 3,026,310                   $ 3,027,218          
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits $ 68 $ % $ $ %
NOW accounts 286,450 90 0.06 % 250,390 85 0.07 %
Money market accounts 515,390 732 0.29 % 408,647 457 0.22 %
Savings accounts 283,059 93 0.07 % 253,837 142 0.11 %
Time deposits 856,447 5,375 1.27 % 895,405 6,135 1.38 %
FHLBB advances 336,004 5,416 3.25 % 509,012 8,083 3.19 %
Junior subordinated debentures 32,194 1,002 6.28 % 32,991 783 4.77 %
Other           673       8     2.40 %           9,938       239     4.84 %
Total interest-bearing liabilities 2,310,285 12,716 1.11 % 2,360,220 15,924 1.36 %
Demand deposits 363,313 326,159
Other liabilities 51,282 53,012
Shareholders' equity           301,430                     287,827          
Total liabilities and shareholders' equity         $ 3,026,310                   $ 3,027,218          
Net interest income (FTE)             $ 45,948                   $ 45,766      
Interest rate spread 3.09 % 3.06 %
Net interest margin                 3.29 %                 3.28 %

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

(Dollars in thousands)          
Six Months Ended June 30,       2013     2012
Commercial loans $389 $229
Nontaxable debt securities 683 723
Corporate stocks           18
Total       $1,072     $970
 
Washington Trust Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION - Non-GAAP Financial Measures (unaudited)
 
      At or for the Quarters Ended
(Dollars in thousands, except per share amounts)       Jun 30,
2013
  Mar 31,
2013
  Dec 31,
2012
  Sep 30,
2012
  Jun 30,
2012
Calculation of Tangible Book Value per Share:        
Total shareholders' equity at end of period $303,370 $301,291 $295,652 $298,394 $292,734
Less:
Goodwill 58,114 58,114 58,114 58,114 58,114
Identifiable intangible assets, net       5,827     6,000     6,173     6,346     6,528  
Total tangible shareholders' equity at end of period       $239,429     $237,177     $231,365     $233,934     $228,092  
 
Shares outstanding at end of period       16,487     16,425     16,380     16,371     16,359  
 
Book value per share - GAAP       $18.40     $18.34     $18.05     $18.23     $17.89  
Tangible book value per share - Non-GAAP       $14.52     $14.44     $14.12     $14.29     $13.94  
 
Calculation of Tangible Equity to Tangible Assets:
Total tangible shareholders' equity at end of period       $239,429     $237,177     $231,365     $233,934     $228,092  
 
Total assets at end of period $3,061,307 $3,051,848 $3,071,884 $3,048,868 $3,041,050
Less:
Goodwill 58,114 58,114 58,114 58,114 58,114
Identifiable intangible assets, net       5,827     6,000     6,173     6,346     6,528  
Total tangible assets at end of period       $2,997,366     $2,987,734     $3,007,597     $2,984,408     $2,976,408  
 
Equity to assets - GAAP       9.91 %   9.87 %   9.62 %   9.79 %   9.63 %
Tangible equity to tangible assets - Non-GAAP       7.99 %   7.94 %   7.69 %   7.84 %   7.66 %
 
Calculation of Return on Average Tangible Assets:
Net income       $8,983     $7,421     $9,023     $8,900     $8,713  
 
Total average assets $3,034,956 $3,017,583 $3,044,764 $3,045,203 $3,017,167
Less:
Average goodwill 58,114 58,114 58,114 58,114 58,114
Average identifiable intangible assets, net       5,912     6,085     6,257     6,434     6,619  
Total average tangible assets       $2,970,930     $2,953,384     $2,980,393     $2,980,655     $2,952,434  
 
Return on average assets - GAAP       1.18 %   0.98 %   1.19 %   1.17 %   1.16 %
Return on average tangible assets - Non-GAAP       1.21 %   1.01 %   1.21 %   1.19 %   1.18 %
 
Calculation of Return on Average Tangible Equity:
Net income       $8,983     $7,421     $9,023     $8,900     $8,713  
 
Total average shareholders' equity $303,402 $299,436 $300,430 $296,150 $290,854
Less:
Average goodwill 58,114 58,114 58,114 58,114 58,114
Average identifiable intangible assets, net       5,912     6,085     6,257     6,434     6,619  
Total average tangible shareholders' equity       $239,376     $235,237     $236,059     $231,602     $226,121  
 
Return on average shareholders' equity - GAAP       11.84 %   9.91 %   12.01 %   12.02 %   11.98 %
Return on average tangible shareholders' equity - Non-GAAP       15.01 %   12.62 %   15.29 %   15.37 %   15.41 %
 
Washington Trust Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION - Non-GAAP Financial Measures (unaudited)
     
Six Months Ended
(Dollars in thousands)       Jun 30,
2013
  Jun 30,
2012
Calculation of return on average tangible assets:  
Net income       $16,404     $17,151  
 
Total average assets $3,026,310 $3,027,218
Less:
Average goodwill 58,114 58,114
Average identifiable intangible assets, net       5,998     6,712  
Total average tangible assets       $2,962,198     $2,962,392  
 
Return on average assets - GAAP       1.08 %   1.13 %
Return on average tangible assets - Non-GAAP       1.11 %   1.16 %
 
 
Calculation of return on average tangible equity:
Net income       $16,404     $17,151  
 
Total average shareholders' equity $301,430 $287,827
Less:
Average goodwill 58,114 58,114
Average identifiable intangible assets, net       5,998     6,712  
Total average tangible shareholders' equity       $237,318     $223,001  
 
Return on average shareholders' equity - GAAP       10.88 %   11.92 %
Return on average tangible shareholders' equity - Non-GAAP       13.82 %   15.38 %

Contact:
Washington Trust Bancorp, Inc.
Elizabeth B. Eckel, 401-348-1309
Senior Vice President, Marketing
ebeckel@washtrust.com

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