-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fwgi6cO2s8qXeE7CMRD45cd8y0z+zWm/Jr5IGj0Qkqs/bk8Mc8ncO3rZ1qUDdOEw UWsLqYZS27gEg85pK1hTjA== 0000737468-96-000007.txt : 19960517 0000737468-96-000007.hdr.sgml : 19960517 ACCESSION NUMBER: 0000737468-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WASHINGTON TRUST BANCORP INC CENTRAL INDEX KEY: 0000737468 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 050404671 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13091 FILM NUMBER: 96567371 BUSINESS ADDRESS: STREET 1: 23 BROAD ST CITY: WESTERLY STATE: RI ZIP: 02891 BUSINESS PHONE: 4013481200 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 ------------------------------------------ or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from ________________ to _____________ Commission file Number 0-13091 ----------------------------------------------- WASHINGTON TRUST BANCORP, INC. - --------------------------------------------------------------------- (Exact name of registrant as specified in its charter) RHODE ISLAND 05-0404671 - ------------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 23 BROAD STREET, WESTERLY, RHODE ISLAND 02891 - --------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (401) 348-1200 ------------- N/A - --------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ X ] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the close of April 22, 1996. Class Outstanding at April 22, 1996 ------------------------------ -------------------------- Common stock, $.0625 par value 2,887,937 Shares Page 1 WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 CONTENTS -------- Page No. PART I. ITEM 1. Financial Information -------- - -------------------------------------- Consolidated Balance Sheets March 31, 1996 and December 31, 1995 3 Consolidated Statements of Income Three Months Ended March 31, 1996 and 1995 4 Consolidated Statements of Changes in Shareholders' Equity Three Months Ended March 31, 1996 and 1995 5 Consolidated Statements of Cash Flows Three Months Ended March 31, 1996 and 1995 6 Condensed Notes to Consolidated Financial Statements 7 PART I. ITEM 2. - ---------------- Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. Other Information 18 - --------------------------- Signatures 19 - ---------- -2- WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
March 31, December 31, ASSETS 1996 1995 - ------ ---------- ---------- Cash and due from banks $ 12,540,210 $ 15,051,777 Federal funds sold 1,782,796 13,598,869 Mortgage loans held for sale 565,318 456,152 Securities available for sale, at fair value; cost $82,674,883 and $78,249,075 at March 31, 1996 and December 31, 1995, respectively 89,490,352 85,552,335 Securities held to maturity, at cost; fair value $29,980,524 and $29,432,819 at March 31, 1996 and December 31, 1995, respectively 29,799,185 28,872,991 Federal Home Loan Bank stock, at cost 2,995,000 2,995,000 Loans 391,367,078 386,458,892 Less allowance for loan losses 7,932,099 7,784,516 ----------- ----------- Net loans 383,434,979 378,674,376 Premises and equipment, net 14,869,164 14,646,157 Accrued interest receivable 4,044,816 3,539,305 Other real estate owned, net 1,464,833 1,705,147 Other assets 2,659,655 2,567,195 ----------- ----------- Total assets $ 543,646,308 $ 547,659,304 =========== =========== LIABILITIES Demand deposits $ 50,800,249 $ 59,470,321 Savings deposits 174,194,466 177,891,247 Time deposits 231,881,717 230,492,444 ----------- ----------- Total deposits 456,876,432 467,854,012 Dividends payable 749,685 686,189 Federal Home Loan Bank advances 25,940,389 20,951,266 Accrued expenses and other liabilities 5,612,505 5,231,339 ----------- ----------- Total liabilities 489,179,011 494,722,806 ----------- ----------- SHAREHOLDERS' EQUITY Common stock of $.0625 par value; authorized 10,000,000 shares; issued 2,881,062 shares in 1996 and 2,880,000 shares in 1995 180,066 180,000 Paid-in capital 3,247,734 3,010,795 Retained earnings 46,950,214 45,690,676 Unrealized gain on securities available for sale, net of tax 4,089,283 4,381,958 Treasury stock, at cost; 27,130 shares at December 31, 1995 -- (326,931) ----------- ----------- Total shareholders' equity 54,467,297 52,936,498 ----------- ----------- Total liabilities and shareholders' equity $ 543,646,308 $ 547,659,304 =========== ===========
See accompanying notes to consolidated financial statements. - 3 - WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 1996 1995 - ---------------------------- ---------- ---------- Interest income: Interest and fees on loans $ 8,836,844 $ 8,737,731 Income from securities: Interest 1,489,748 1,114,785 Dividends 367,152 190,601 Federal funds sold 84,772 101,283 ---------- ---------- Total interest income 10,778,516 10,144,400 ---------- ---------- Interest expense: Savings deposits 967,362 994,100 Time deposits 3,077,333 2,498,335 Other 342,867 408,691 ---------- ---------- Total interest expense 4,387,562 3,901,126 ---------- ---------- Net interest income 6,390,954 6,243,274 Provision for loan losses 300,000 150,000 ---------- ---------- Net interest income after provision for loan losses 6,090,954 6,093,274 ---------- ---------- Noninterest income: Trust income 875,987 777,823 Service charges on deposit accounts 492,837 470,287 Merchant processing fees 94,338 76,529 Gains on sales of securities 197,590 -- Gains on loan sales 28,995 21,989 Other income 208,123 254,446 ---------- ---------- Total noninterest income 1,897,870 1,601,074 ---------- ---------- Noninterest expense: Salaries and employee benefits 2,704,354 2,590,921 Net occupancy 328,225 301,097 Equipment 364,767 309,445 Deposit taxes and assessments 65,180 308,117 Foreclosed property costs, net 118,604 53,328 Office supplies 141,661 129,603 Advertising and promotion 65,427 109,546 Credit and collection 96,556 122,443 Other 964,827 919,218 ---------- ---------- Total noninterest expense 4,849,601 4,843,718 ---------- ---------- Income before income taxes 3,139,223 2,850,630 Applicable income taxes 1,130,000 1,012,000 ---------- ---------- Net income $ 2,009,223 $ 1,838,630 ========== ========== Weighted average shares outstanding - primary 2,962,654 2,876,668 Weighted average shares outstanding - fully diluted 2,964,755 2,879,382 Earnings per share - primary $ .68 $ .64 Earnings per share - fully diluted $ .68 $ .64 Cash dividends declared per share $ .26 $ .22
See accompanying notes to consolidated financial statements. - 4 - Washington Trust Bancorp, Inc. and Subsidiary Consolidated Statements of Changes in Shareholders' Equity
Three months ended March 31, 1996 1995 - --------------------------------------------------------------------------------- Common Stock Balance at beginning of year $ 180,000 $ 180,000 Issuance of common stock for stock option plans 66 -- - --------------------------------------------------------------------------------- Balance at end of period 180,066 180,000 - --------------------------------------------------------------------------------- Paid-in Capital Balance at beginning of year 3,010,795 2,869,135 Issuance of common stock for dividend reinvestment and stock option plans 236,939 4,870 - --------------------------------------------------------------------------------- Balance at end of period 3,247,734 2,874,005 - --------------------------------------------------------------------------------- Retained Earnings Balance at beginning of year 45,690,676 40,613,979 Net income 2,009,223 1,838,630 Cash dividends declared (749,685) (621,514) - --------------------------------------------------------------------------------- Balance at end of period 46,950,214 41,831,095 - --------------------------------------------------------------------------------- Unrealized Gain on Securities Available for Sale Balance at beginning of year 4,381,958 2,801,490 Change in unrealized gain on securities available for sale, net of tax (292,675) 583,860 - --------------------------------------------------------------------------------- Balance at end of period 4,089,283 3,385,350 - --------------------------------------------------------------------------------- Treasury Stock Balance at beginning of year (326,931) (681,620) Issuance of common stock for dividend reinvestment and stock option plans 326,931 19,456 - --------------------------------------------------------------------------------- Balance at end of period -- (662,164) - --------------------------------------------------------------------------------- Total Shareholders' Equity $54,467,297 $47,608,286 =================================================================================
See accompanying notes to consolidated financial statements. -5- WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, ------------------------- 1996 1995 ---------- ---------- Cash flows from operating activities: Net income $ 2,009,223 $ 1,838,630 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 300,000 150,000 Provision for valuation of other real estate owned 126,284 7,712 Depreciation of premises and equipment 348,790 325,000 Amortization of net deferred loan fees and costs (28,147) (196,421) Gains on sales of securities available for sale (197,590) -- Losses (gains) on sales of other real estate owned (57,608) 1,914 Gains on loan sales (28,995) (21,989) Proceeds from sales of loans 2,871,551 1,949,853 Loans originated for sale (2,973,721) (2,054,467) Increase in accrued interest receivable (505,511) (329,176) Increase in other assets (70,460) (449,838) Increase in accrued expenses and other liabilities 576,283 1,140,419 Other, net 80,183 22,322 ---------- ---------- Net cash provided by operating activities 2,450,282 2,383,959 ---------- ---------- Cash flows from investing activities: Securities available for sale: Purchases (8,208,788) (88,200) Proceeds from sales of equity securities 1,651,020 -- Maturities 2,270,005 3,000,000 Investment securities: Purchases (2,518,049) -- Maturities and principal repayments 1,574,588 701,730 Loan originations in excess of principal collected on loans (5,260,866) (2,304,086) Proceeds from sales and other reductions of other real estate owned 401,978 1,905 Purchases of premises and equipment (577,100) (348,393) ---------- ---------- Net cash provided by (used in) investing activities (10,667,212) 962,956 ---------- ---------- Cash flows from financing activities: Net increase (decrease) in deposits (10,977,580) 2,160,558 Proceeds from Federal Home Loan Bank advances 9,000,000 12,564,839 Repayment of Federal Home Loan Bank advances (4,010,877) (14,010,475) Proceeds from issuance of commmon stock 563,936 24,326 Cash dividends paid (686,189) (564,686) ---------- ---------- Net cash provided by (used in) financing activities (6,110,710) 174,562 ---------- ---------- Net increase (decrease) in cash and cash equivalents (14,327,640) 3,521,477 Cash and cash equivalents at beginning of period 28,650,646 18,404,910 ---------- ---------- Cash and cash equivalents at end of period $ 14,323,006 $21,926,387 ========== ========== Noncash Investing Activities: Transfers from loans to other real estate owned $ 323,047 $ 88,428 Loans charged off 325,363 807,274 Loans made to facilitate the sale of OREO 81,000 90,250 Change in unrealized gain on securities available for sale, net of tax (292,675) 583,860 Supplemental Disclosures: Interest payments $ 1,870,828 $ 1,859,443 Income tax payments 58,250 117,250
See accompanying notes to consolidated financial statements. -6- WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 AND 1995 (1) BASIS OF PRESENTATION - ------------------------- The accounting and reporting policies of Washington Trust Bancorp, Inc. (the "Corporation") are in accordance with generally accepted accounting principles and conform to general practices within the banking industry. In the opinion of management, the accompanying consolidated financial statements present fairly the Corporation's financial position as of March 31, 1996 and December 31, 1995 and the results of operations and cash flows for the interim periods presented. The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiary, The Washington Trust Company. All significant intercompany balances and transactions have been eliminated. The unaudited consolidated financial statements of Washington Trust Bancorp, Inc. presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 1995, included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1995. (2) SECURITIES AVAILABLE FOR SALE - --------------------------------- Securities available for sale are those which the Corporation intends to use as part of its asset/liability strategy or that may be sold as a result of changes in market conditions, changes in prepayment risk, rate fluctuations, liquidity or capital requirements. Securities available for sale are summarized as follows:
Amortized Unrealized Unrealized Fair March 31, 1996 Cost Gains Losses Value -------------- ---------- ---------- ---------- ----------- U.S. Treasury obligations and obligations of U.S. government-sponsored agencies $36,339,971 337,545 (94,079) $36,583,437 Mortgage-backed securities 28,701,783 24,762 (343,618) 28,382,927 Corporate stocks 17,633,129 6,959,362 (68,503) 24,523,988 ----------- ---------- --------- ---------- $82,674,883 7,321,669 (506,200) $89,490,352 =========== ========== ========= =========== Amortized Unrealized Unrealized Fair December 31, 1995 Cost Gains Losses Value ----------------- ---------- ---------- --------- ----------- U.S. Treasury obligations and obligations of U.S. government-sponsored agencies $37,346,696 549,035 (18,203) $37,877,528 Mortgage-backed securities 30,024,608 189,634 (187,345) 30,026,897 Corporate stocks 10,877,771 6,783,369 (13,230) 17,647,910 ----------- ---------- --------- ---------- $78,249,075 7,522,038 (218,778) $85,552,335 =========== ========== ========= ===========
Included in corporate stocks at March 31, 1996 and December 31, 1995 were $7.0 million of auction rate preferred stocks. These are preferred stock instruments whose dividend rate is reset by auction every 49 days to a market rate which results in a market value of par. U.S. Treasury obligations with a carrying value of $4,519,326 and $4,519,878 were pledged to secure public deposits and for other purposes at March 31, 1996 and December 31, 1995, respectively. For the three months ended March 31, 1996, proceeds from sales of corporate stocks amounted to $1,651,020. Realized gains and losses on these sales were $212,594 and $15,004, respectively. Realized gains and losses from sales of corporate stocks were determined using the average cost method. (3) SECURITIES HELD TO MATURITY - ------------------------------- Those debt securities that the Corporation has the ability and intent to hold until maturity are classified as securities held to maturity. Debt securities held to maturity are carried at cost, adjusted for amortization of premium and accretion of discount. The amortized cost and market values of securities held to maturity are summarized as follows:
Amortized Unrealized Unrealized Fair March 31, 1996 Cost Gains Losses Value -------------- ---------- ---------- ---------- ----------- Mortgage-backed securities $13,739,885 202,829 -- $13,942,714 States and political subdivisions 16,059,300 43,771 (65,261) 16,037,810 ----------- ---------- --------- ----------- $29,799,185 246,600 (65,261) $29,980,524 =========== ========== ========= =========== Amortized Unrealized Unrealized Fair December 31, 1995 Cost Gains Losses Value ----------------- ---------- ---------- ---------- ----------- Mortgage-backed securities $13,947,011 497,755 -- $14,444,766 States and political subdivisions 14,925,980 77,329 (15,256) 14,988,053 ----------- ---------- --------- ----------- $28,872,991 575,084 (15,256) $29,432,819 =========== ========== ========= ===========
There were no sales or transfers of securities held to maturity during the three months ended March 31, 1996. (4) LOAN PORTFOLIO - ------------------ The following is a summary of loans:
March 31, December 31, 1996 1995 ----------- ----------- Residential real estate: Mortgages $167,587,592 $167,510,929 Homeowner construction 4,031,274 3,071,177 ----------- ----------- Total residential real estate 171,618,866 170,582,106 ----------- ----------- Commercial: Mortgages 62,312,431 58,837,483 Construction and development 5,443,210 5,968,404 Other 96,508,199 96,830,889 ----------- ----------- Total commercial 164,263,840 161,636,776 ----------- ----------- Installment 55,484,372 54,240,010 ----------- ----------- $391,367,078 $386,458,892 =========== ===========
(5) ALLOWANCE FOR LOAN LOSSES - ----------------------------- The following is an analysis of the allowance for loan losses:
Three months ended March 31, --------------------- 1996 1995 --------- --------- Balance at beginning of period $7,784,516 $9,327,942 Provision charged to expense 300,000 150,000 Recoveries 172,946 71,557 Loans charged off (325,363) (807,274) --------- --------- Balance at end of period $7,932,099 $8,742,225 ========= =========
(6) MORTGAGE SERVICING RIGHTS - ----------------------------- Effective January 1, 1996, the Corporation adopted Statement of Financial Accounting Standards ("SFAS") No. 122, "Accounting for Mortgage Servicing Rights". This pronouncement requires that the rights to service mortgage loans for others be recognized as an asset, including rights acquired through both purchases and originations. The total cost of the mortgage loan is allocated between the mortgage servicing rights and the loan without the mortgage servicing rights based on their relative fair values. Capitalized mortgage servicing rights are amortized over the period of estimated net servicing income and are periodically evaluated for impairment based on their fair value. In order to estimate fair value, the Corporation utilizes a valuation model that calculates the present value of expected cash flows. This model incorporates assumptions for discount rate, prepayment speed and servicing cost. The fair value of capitalized mortgage servicing rights resulting from loan sales during the three months ended March 31, 1996 amounted to approximately $22,000. (7) ACCOUNTING FOR STOCK-BASED COMPENSATION - ------------------------------------------- As of January 1, 1996, the Corporation adopted SFAS No. 123, "Accounting for Stock-Based Compensation". The statement establishes financial accounting and reporting standards for stock-based compensation plans. SFAS No. 123 encourages, but does not require, a fair value based method of accounting for stock-based compensation plans. The statement allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method prescribed by APB Opinion No. 25. For those entities electing to use the intrinsic value based method, SFAS No. 123 requires pro forma disclosures of net income and earnings per share computed as if the fair value based method had been applied. The Corporation continues to account for stock-based compensation costs under APB Opinion No. 25, and will provide the additional required disclosures relating to 1995 and 1996 stock options in its 1996 Annual Report to Shareholders. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Quarters Ended March 31, 1996 and 1995 - -------------------------------------------------------------- Net income for the three months ended March 31, 1996 amounted to $2,009,223, up 9.3% over the $1,838,630 of net income recorded in the first quarter of 1995. Earnings per share for the quarter ended March 31, 1996 amounted to $.68, up 6.3% over the $.64 per share earned in the comparable 1995 period. Net interest income for the three months ended March 31, 1996 increased approximately $148,000, or 2.4%, over the prior year quarter. This increase was primarily attributable to higher dividend and interest income from securities, which was partially offset by an increase in interest paid on time deposits. (See additional discussion under the caption "Net Interest Income".) The provision for loan losses amounted to $300,000 for the first quarter of 1996, up from $150,000 for the first quarter of 1995. Total noninterest income for the three months ended March 31, 1996 amounted to $1.9 million, up from $1.6 million for the same 1995 period. The 1996 amount includes gains on sales of securities of $197,590. There were no sales of securities in the first quarter of 1995. Noninterest income excluding securities gains and gains on loan sales rose 5.8% over the prior year quarter primarily due to higher trust income. Total noninterest expense for the quarter ended March 31, 1996 amounted to $4.9 million, essentially unchanged from the 1995 amount. Federal Deposit Insurance Corporation premiums were reduced by approximately $246,000 from the 1995 amount due to a reduction in rates paid by banks for deposit insurance premiums. This savings was offset by increases in salaries and benefits, foreclosed property costs and equipment expense. Salaries and benefits were up due to increased staffing levels and normal salary adjustments. Foreclosed property costs rose due to increased provisions for valuation of other real estate owned, while equipment costs were higher due to depreciation expense associated with purchases that occurred in 1995 and in the first quarter of 1996. Advertising and promotion costs were down 40.3% in the 1996 quarter compared to the 1995 quarter, due to the timing of certain promotional events. Average Balances/Net Interest Margin - Fully Taxable Equivalent Basis (FTE) --------------------------------------------------------------------------- The following table presents average balance and interest rate information. Tax exempt income is converted to a FTE basis by assuming the applicable 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. 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.
Three months ended March 31, 1996 1995 --------------------------------------------------------------------------------------------------------- Average Yield/ Average Yield/ (Dollars in thousands) Balance Interest Rate Balance Interest Rate --------------------------------------------------------------------------------------------------------- Interest-earning assets: Residential real estate $170,825 3,531 8.27% $178,265 3,686 8.27% Commercial and other 162,973 3,999 9.82% 171,209 3,968 9.27% Installment loans 54,638 1,327 9.71% 45,154 1,107 9.80% --------------------------------------------------------------------------------------------------------- Total loans 388,436 8,857 9.12% 394,628 8,761 8.88% Federal funds sold 6,319 85 5.37% 7,081 101 5.72% Taxable securities 95,538 1,872 7.84% 72,341 1,296 7.17% Nontaxable securities 15,128 248 6.56% 10,170 171 6.74% --------------------------------------------------------------------------------------------------------- Total interest-earning assets 505,421 11,062 8.75% 484,220 10,329 8.53% Non interest-earning assets 35,763 32,498 --------------------------------------------------------------------------------------------------------- Total assets $541,184 $516,718 ========================================================================================================= Interest-bearing liabilities: Savings deposits $175,671 968 2.20% $181,912 994 2.19% Time deposits 230,412 3,077 5.34% 207,525 2,498 4.82% FHLB advances 22,032 335 6.08% 26,319 399 6.06% Other 597 8 5.35% 674 10 5.83% --------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 428,712 4,388 4.09% 416,430 3,901 3.75% Non interest-bearing liabilities 58,325 53,130 --------------------------------------------------------------------------------------------------------- Total liabilities 487,037 469,560 Total shareholders' equity 54,147 47,158 --------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $541,184 $516,718 ========================================================================================================= Net interest income / interest rate spread $ 6,674 4.66% $ 6,428 4.78% ========================================================================================================= Net interest margin 5.28% 5.31% ========================================================================================================= Interest income amounts presented in the table above include the following adjustments for taxable equivalency (in thousands): March 31, 1996 March 31, 1995 -------------- -------------- Commercial and other loans $ 20 $ 23 Nontaxable debt securities 137 114 Corporate stocks 126 49
Net Interest Income - ------------------- (The accompanying schedule on page 12 should be read in conjunction with this discussion.) FTE net interest income for the first quarter of 1996 amounted to $6.7 million, up by approximately $246,000, or 3.8%, over the prior year quarter. The growth in interest-earning assets, as well as an increase in the overall rate earned on those assets, were responsible for the improvement in net interest income. The interest rate spread and the net interest margin amounted to 4.66% and 5.28%, respectively. Comparable amounts for the 1995 quarter were 4.78% and 5.31%, respectively. The decreases in the interest rate spread and net interest margin were due primarily to growth in average time deposits and the higher rate paid on those deposits. Average interest-earning assets amounted to $505.4 million for the first quarter of 1996, an increase of $21.2 million, or 4.4%, over the comparable 1995 amount. The FTE rate of return on interest-earning assets was 8.75% for the three months ended March 31, 1996, up from 8.53% for the same 1995 period. While average total loans decreased by $6.2 million, average securities increased by $28.2 million or 34.1%. During 1995, excess liquidity resulting from deposit growth and relatively soft loan demand was invested in various categories of securities. The overall yield on average total loans amounted to 9.12% for the three months ended March 31, 1996, up from 8.88% in the comparable 1995 period. Contributing to this improvement was the increase in the yield on commercial loans which rose 55 basis points to 9.82%. Most commercial loans reprice periodically based upon the prime rate. Although the prime rate in effect at March 31, 1996 was 8.25% versus 9.0% a year earlier, many periodically repricing loans have not yet repriced downward by the full 75 basis point change in prime. The FTE yield on taxable securities rose by 67 basis points over the prior year quarter to 7.84% for the first quarter of 1996 as a result of both increases in average balances and increases in yields. The composition of taxable and nontaxable securities has changed from the prior year, as well as from December 31, 1995. Maturing U.S. Treasury obligations, short-term investments and liquidity generated from deposit growth were reallocated to mortgage-backed securities, auction rate preferred stock instruments and to state and municipal obligations. Included in taxable securities were average mortgage-backed securities of $43.4 million, up from an average of $21.5 million during the first quarter of 1995 and $29.7 million during the fourth quarter of 1995. (See notes 2 and 3 to the Consolidated Financial Statements for more information on the composition of securities.) The overall cost of funds on interest-bearing liabilities rose to 4.09% for the three months ended March 31, 1996, up from 3.75% for the comparable 1995 period. This increase is due to the average rate paid on time deposits, which increased in each quarter of 1995 as funds were shifted from lower-cost savings accounts to time deposits and maturing time deposits were renewed at higher rates. This trend, however, has leveled off in the first quarter of 1996. The rate paid on time deposits was 5.34% for the first quarter of 1996, up from 4.82% for the first quarter of 1995 but down from 5.46% for the fourth quarter of 1995. The average rate paid on savings deposits was substantially unchanged from the prior year quarter. Total average deposits grew by $16.6 million from the first quarter of 1995 to the first quarter of 1996, while average savings deposits declined by $6.2 million over the same period. Average Federal Home Loan Bank (FHLB) advances for the first quarter of 1996 amounted to $22.0 million, down from $26.3 million for the same 1995 period, but up from $17.0 million from the fourth quarter of 1995. The average rate paid on FHLB advances remained relatively unchanged from the prior year rate. Financial Condition and Liquidity - --------------------------------- Total assets amounted to $543.6 million at March 31, 1996, a decrease of $4.0 million from the December 31, 1995 amount of $547.7 million. Average assets totalled $541.2 million for the three months ended March 31, 1996, up 4.7% over the comparable 1995 period. Securities Available for Sale - The amortized cost of securities available for sale at March 31, 1996 amounted to $82.7 million, up $4.4 million from the year- end 1995 amount due to purchases of corporate stocks. The net unrealized gain on securities available for sale decreased in the first quarter of 1996 by approximately $488,000. This decline is attributable to the decline in the market value of U.S. Treasury obligations, obligations of U.S. government- sponsored agencies and mortgage-backed securities resulting from the rise in medium-term and long-term Treasury rates that has occurred during the first quarter of 1996. Securities Held to Maturity - The carrying value of securities held to maturity amounted to $29.8 million at March 31, 1996, up from $28.9 million at December 31, 1995. The net unrealized gain on investment securities amounted to approximately $181,000 at March 31, 1996, compared to $560,000 at December 31, 1995, representing a reduction of $379,000 during this three-month period. This decline was attributable to the rise in medium-term and long-term Treasury rates occurring in the first quarter of 1996. Loans - Total loans amounted to $391.4 million at March 31, 1996, an increase of 1.3% from the December 31, 1995 balance of $386.5 million. Residential real estate loans, commercial mortgages and installment loans exhibited increases over the year-end 1995 amount. The largest increase was in the commercial mortgage category and was attributable to several large loans originated in the first quarter of 1996. Deposits and Other Borrowings - Total deposits amounted to $456.9 million at March 31, 1996, down 2.3% from $467.9 million at December 31, 1995 due to normal seasonal deposit outflow. While demand and savings deposits decreased by 14.6% and 2.1%, respectively from December 31, 1995 balances, time deposits grew slightly during the first quarter of 1996 due to retail time deposit promotional programs. The Corporation utilizes Federal Home Loan Bank (FHLB) advances as a funding source. FHLB advances amounted to $25.9 million at March 31, 1996, up by $5.0 million from the December 31, 1995 amount. The additional advances were used to supplement decreased liquidity created by the seasonal deposit outflow. There were no other short-term borrowings outstanding at March 31, 1996. For the three months ended March 31, 1996, net cash provided by operations amounted to $2.5 million, the majority of which was generated by net income. Proceeds from sales of loans in the first quarter of 1996 amounted to $2.9 million, while loans originated for sale amounted to $3.0 million. Net cash used in investing activities amounted to $10.7 million and was primarily used to purchase securities available for sale and for loan originations. The funding for cash used in investing activities was generated by utilizing cash and cash equivalents and by a net increase in FHLB advances of $5.0 million. These funds were also used to fund a net reduction in deposits of $11.0 million. (See Consolidated Statements of Cash Flows for additional information.) Asset Quality - ------------- Nonperforming assets are summarized in the following table:
(Dollars in thousands) 03/31/96 12/31/95 -------- -------- Nonaccrual loans 90 days or more past due $ 5,418 $ 4,616 Nonaccrual loans less than 90 days past due 3,169 3,958 ------- -------- Total nonperforming loans 8,587 8,574 ------- -------- Other real estate owned: Properties acquired through foreclosure 1,804 2,115 Valuation allowance (339) (410) ------- -------- Total other real estate owned 1,465 1,705 ------- -------- Total nonperforming assets $10,052 $10,279 ======= ======== Nonaccrual loans as a % of total loans 2.2% 2.2% Nonperforming assets as a % of total assets 1.8% 1.9% Allowance for loan losses to nonaccrual loans 92.4% 90.8%
Not included in the analysis of nonperforming assets at March 31, 1996 and December 31, 1995 above are approximately $622,000 and $257,000, respectively, of loans greater than 90 days past due and still accruing. These loans consist primarily of residential mortgages which are considered well-collateralized and in the process of collection and therefore are deemed to have no loss exposure. The following is an analysis of nonperforming loans by loan category:
(In thousands) 03/31/96 12/31/95 -------- -------- Residential mortgages $2,509 $2,280 Commercial: Mortgages 2,917 2,798 Construction and development 280 280 Other (1) 2,476 2,779 Installment 405 437 ------- ------- Total nonperforming loans $8,587 $8,574 ======= ======= (1) Loans to businesses and individuals, a substantial portion of which is fully or partially collateralized by real estate.
Impaired loans consist of all nonaccrual commercial loans. At March 31, 1996, the recorded investment in impaired loans was $5,673,000, including $3,495,000 which had a related allowance amounting to $870,000. At December 31, 1995, the recorded investment in impaired loans was $5,855,000, including $4,854,000 which had a related allowance amounting to $953,000. The balance of impaired loans which did not require an allowance at March 31, 1996 and December 31, 1995 was $2,178,000 and $1,001,000, respectively. During the three months ended March 31, 1996, the average recorded investment in impaired loans was $5,939,000. Also during this period, interest income recognized on impaired loans amounted to approximately $41,000. Interest income on impaired loans is recognized on a cash basis only. The balance of other real estate owned is comprised of the following types of properties (in thousands):
03/31/96 12/31/95 -------- -------- Commercial real estate $ 465 $ 671 Residential real estate 644 707 Construction and development -- -- Land and other 695 737 ------ ------ 1,804 2,115 Valuation allowance (339) (410) ------ ------ Total other real estate owned $1,465 $1,705 ====== ======
An analysis of the activity relating to other real estate owned for the three months ended March 31, 1996 follows (in thousands): Balance at beginning of year $ 2,115 Transfers from loans, net 323 Sales and other reductions (636) Other 2 ------- 1,804 Valuation allowance (339) ------- Balance at end of period $ 1,465 ======= The following is an analysis of the OREO valuation allowance for the three months ended March 31, 1996 (in thousands): Balance at beginning of period $ 410 Provision charged to expense 126 Sales and other reductions (197) ----- Balance at end of period $ 339 ===== Capital Resources - ----------------- Total equity capital amounted to $54.5 million, or 10.0% of total assets at March 31, 1996. This compares to $52.9 million, or 9.7% at December 31, 1995. Total equity increased by $1.5 million from December 31, 1995, $1.3 million of which is attributable to earnings retention. The Corporation's total risk-adjusted capital ratio amounted to 15.56% at March 31, 1996. Banks are required to maintain a minimum capital to risk-adjusted asset ratio of 8%. The Corporation's leverage ratio amounted to 9.43% at March 31, 1996, well above the regulatory requirement of 3% for banking organizations with strong earnings, liquidity and asset quality who do not anticipate significant growth and who have well-diversified risk. Dividends payable at March 31, 1996 amounted to $749,685, representing $.26 per share payable on April 15, 1996, an increase of 8.3% over the $.24 per share paid in the fourth quarter of 1995. The source of funds for dividends paid by the Corporation is dividends received from its subsidiary bank. The subsidiary bank is a regulated enterprise, and as such its ability to pay dividends to the parent is subject to regulatory review and restriction. PART II OTHER INFORMATION ----------------- Item 1. Legal Proceedings - ------ ----------------- None Item 2. Changes in Securities - ------ --------------------- None Item 3. Defaults upon Senior Securities - ------ ------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders - ------ --------------------------------------------------- None Item 5. Other Information - ------ ----------------- None Item 6. Exhibits and Reports on Form 8-K - ------ -------------------------------- (a) Exhibit index Exhibit No. ---------- 10 Material Contracts - Consulting Agreement with Executive Officer of the Registrant (b) The following report on Form 8-K was filed during the quarter ended March 31, 1996: On January 4, 1996 a Form 8-K was filed which reported the appointment of John C. Warren as President and Chief Operating Officer of the Corporation and its subsidiary, The Washington Trust Company (the "Bank"), effective January 16, 1996. The Form 8-K also reported that Mr. Warren was to become a member of the Board of Directors of the Bank and Joseph J. Kirby, the then- current President of the Corporation, had been appointed as Chairman of the Board and Chief Executive Officer of the Corporation and the Bank. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WASHINGTON TRUST BANCORP, INC. ------------------------------ (Registrant) May 14, 1996 By: Joseph J. Kirby -------------------------------- Joseph J. Kirby Chairman and Chief Executive Officer (principal executive officer) May 14, 1996 By: David V. Devault -------------------------------- David V. Devault Vice President and Chief Financial Officer (principal financial officer) EX-27 2
9 THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO OF WASHINGTON TRUST BANCORP, INC. AS OF MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 MAR-31-1996 12,540,210 0 1,782,796 0 89,490,352 29,799,185 29,980,524 391,367,078 7,932,099 543,646,308 456,876,432 25,940,389 6,362,190 0 180,066 0 0 54,287,231 543,646,308 8,836,844 1,856,900 84,772 10,778,516 4,044,695 4,387,562 6,390,954 300,000 197,590 4,849,601 3,139,223 3,139,223 0 0 2,009,223 .68 .68 8.75 0 0 0 0 7,784,516 325,363 172,946 7,932,099 0 0 0
EX-10 3 Exhibit 10 April 17, 1996 Mr. Joseph H. Potter 53 Breach Drive Westerly, RI 02891 Dear Joe: re: Consulting Agreement This letter constitutes our mutual agreement regarding your early retirement election and consulting arrangement with Washington Trust Company (the Company). A. Early Retirement Election 1. Early Retirement Election: As of May 1, 1996, you have elected to take early retirement and vacate your position as Executive Vice President of both the Company and Washington Trust Bancorp, Inc. 2. Cash Compensation Payments: Your base salary payments will continue up to and include April 30, 1996. No payment from the Short Term Incentive Plan will be made to you for the 1996 partial year. 3. Company Vehicle: The Company agrees to transfer title of your current company vehicle to you on or before May 1, 1996. You will be responsible for any sales tax due upon transfer. 4. Pension: On or before May 1, 1996, you agree to make an election under the terms of the qualified pension plan sponsored by the Company to take the early retirement benefit provided under the terms of such plan and to take distributions under that plan. You also agree that, on or before May 1, 1996, you will make an election under the terms of the Supplemental Pension Benefit Plan (called the "SERP") sponsored by the Company to commence payment of supplemental retirement benefits. You have indicated that your elections will be in the form of a qualified joint and 50% survivor annuity, which will provide you with gross annual pension payments of $69,995 from the qualified plan and $10,938 from the SERP (both payable monthly commencing on May 31, 1996). 5. Additional Nonqualified Pension: You will also receive an additional nonqualified pension amount of $7,272 per year (payable monthly, commencing on May 31, 1996) for your lifetime to reflect the additional pension benefit you would have accrued if you had continued to work until your normal retirement date at age 65 at an annual salary of $131,000. 6. Spousal Pension Benefits: Given the presumption that you will elect pension payments in the form of a qualified joint and 50% survivor annuity, there will be survivor spousal pension benefits for your current wife. Upon your death, your wife will continue to receive annual pension payments of one-half of the amounts mentioned in paragraphs 4 and 5 (payable monthly) for the remainder of her lifetime; however, if your current wife predeceases you, payments will stop at your death regardless of your marital status at the time of your death. 7. Benefit Coverage: For twenty-four months following May 1, 1996, the Company agrees to continue you and your wife in the health insurance and dental insurance plans, and to continue your coverage in the life insurance plan sponsored by the Company. Your contributions, at the rate set by the Company each year, will be payable by you for such continued coverage and will be deducted on an after-tax basis from the monthly payments you will receive from the SERP. Your participation in all other benefit and compensation plans sponsored by the Company will terminate as of April 30, 1996. 8. Stock Options: You will be permitted to exercise your stock options according to the terms of the Stock Option Plan, including stock-for- stock exercises and non-vested options scheduled to vest during the period of June 2, 1996, through May 12, 1998. 9. Tax Liability and Reporting: You will be responsible for any and all income and payroll taxes due as a result of any of the early retirement provisions of this letter agreement. The Company will calculate such tax amounts that may by law be required to be withheld by the Company and deduct such amounts from the SERP and/or additional nonqualified pension payments made to you (or your wife, as the case may be). The Company will provide a statement to you of such amounts periodically and will report such amounts to the IRS and appropriate state tax authorities on Form W-2 annually. B. Consulting Arrangement 1. Term of Consulting Arrangement: May 1, 1996 to April 30, 1998. 2. Position and Duties: You will be available to me, as Chairman and Chief Executive Officer of the Company, from time to time (up to a maximum of 20 hours per month) as an outside, independent consultant focusing on site selection and related building projects, participating in monitoring legislative and lobbying matters, and handling any other matters as may be assigned to you by me. You have the right to decline to me any specific assignment within 3 business days of receiving the request from me, however, you have agreed that you will not be unreasonable in declining any request within those parameters. 3. Reporting Relationship: You will report directly to me and take overall project direction from me. You will work with other employees and outside vendors as necessary and contemplated when I assign the projects to you. It is contemplated that you may be asked to make presentations to, and attend meetings of, the Building Committee of the Board of Directors. 4. Consulting Rate: You will be paid as an outside consultant at the rate of $3,650 per month at the end of the month. Payments will be reported on Form 1099 annually. You will be responsible for paying income taxes as well as dues and memberships that would be expected to be continued in the context of your role and scope of duties. 5. Expense Reimbursement: The Company will reimburse you for out of pocket expenses (except dues and memberships) that you incur if such expenses are reasonable and approved in advance by me. 6. Termination Due to Disability: Disability is defined as your inability to perform the service due to mental or physical impairment as determined by a physician selected by me. Upon disability during the term of the consulting arrangement, the last payment will be for the month in which the disability is confirmed and determined. 7. Termination Due to Death: Upon your death during the term of the consulting arrangement, the last payment will be for the month in which death occurs. 8. Termination Due to Cause: Cause is defined as (a) the conviction for a felony or crime of moral turpitude or (b) disclosure of confidential information about the Company or its customers which has not been previously approved by me or (c) breach of the Company's ethics policy. Upon an event of cause, this consulting arrangement will be terminated immediately and you will be paid through the last day of the consultancy as identified by me. 9. Confidential Information: You agree to abide by the Company's ethics policy and be bound by its terms during the period of the consulting arrangement. 10. Non-compete Clause: During the term of this consulting arrangement, you will be prohibited from engaging in any business relationship with any financial services organization in our market area as a director, consultant, officer, employee or any other role without previous consent. The terms of this letter agreement will be governed by the laws of the state of Rhode Island; however, in the event of a dispute arising under the terms of this letter, we have agreed to nonbinding arbitration before any other legal action is commenced. If the terms and conditions of this letter agreement meet with your approval, please sign both copies, retain one for your files, and return one to me at your earliest convenience. Joe, on behalf of the entire Washington Trust Company family, I want to extend our sincere thanks for your 38 years of service to the "Hometown Bank". We wish you much health and happiness in your retirement years. I look forward to working with you on our various building projects during the term of the consulting arrangement. Sincerely yours, Agreed and accepted, Joseph J. Kirby Joseph H. Potter Joseph J. Kirby Joseph H. Potter Chairman and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----