EX-99.1 2 exhibit9912016q2.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1

NASDAQ: WASH
Contact: Elizabeth B. Eckel
Senior Vice President, Marketing
Telephone: (401) 348-1309
E-mail: ebeckel@washtrust.com
Date: July 25, 2016
FOR IMMEDIATE RELEASE



Washington Trust Reports Second Quarter 2016 Earnings
WESTERLY, R.I., July 25, 2016 (GLOBE NEWSWIRE)…Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced net income of $11.1 million, or $0.64 per diluted share, for the second quarter of 2016, compared to net income of $10.9 million, or $0.64 per diluted share, reported for the first quarter of 2016.
"Washington Trust posted solid second quarter earnings in a challenging economic environment," stated Joseph J. MarcAurele, Washington Trust Chairman and CEO.  "Total loans reached a record level, as a result of strong commercial loan and residential mortgage activity during the quarter.  Wealth management revenues and assets under administration also achieved all-time highs, despite financial market volatility."
Selected highlights for the second quarter of 2016 include:
•
Returns on average equity and average assets remain solid at 11.50% and 1.14%, respectively. Comparable amounts for the first quarter of 2016 were 11.50% and 1.16%, respectively.
•
Mortgage banking revenues amounted to $2.7 million, up by 23% on a linked quarter basis. Mortgage loans sold to the secondary market totaled $139 million; the second highest quarterly volume in the past three years.
•
Total loans stood at $3.1 billion at June 30, 2016, up by 1% in the quarter and up by 5% from a year ago.
•
Total deposits amounted to $2.8 billion at March 31, 2016, down by 3% in the quarter and up by 2% from a year ago.
Net Interest Income
Net interest income totaled $26.8 million for the second quarter of 2016, compared to $27.7 million, in the first quarter. Prior quarter net interest income included loan prepayment fee income of $1.0 million, compared to $48 thousand in the most recent quarter. Excluding the impact of the loan prepayment fee income from both periods, net interest income was down slightly on a linked quarter basis. The net interest margin was 3.05% for the second quarter of 2016, down by 19 basis points from the previous quarter. Excluding the impact of the loan prepayment fee income in each period, the second quarter net interest margin was 3.05%, down by 8 basis points from the prior quarter. The reduction in the net interest margin was largely due to lower yields on interest-earning assets as a result of the downward movement in longer-term market interest rates in 2016. Other significant linked quarter changes included:


Washington Trust
Page 2, July 25, 2016


•
Average interest-earning assets increased by $94 million, due to growth in average balances of commercial loans in the quarter as well as an increase in average investment securities driven by portfolio additions near the end of the previous quarter.
•
Average interest-bearing liabilities rose by $88 million, reflecting increases in the average balance of Federal Home Loan Bank of Boston ("FHLBB") advances. The cost of interest-bearing funds was 0.74%, unchanged from the previous quarter.
Noninterest Income
Noninterest income totaled $15.9 million for the second quarter of 2016, up by $1.3 million, or 9%, from the first quarter of 2016. Significant linked quarter changes included:
•
Wealth management revenues totaled $9.5 million for the second quarter, up by $307 thousand, or 3%, from the prior quarter. The increase included a $291 thousand increase in tax preparation fees, which are generally concentrated in the second quarter. Wealth management assets under administration amounted to $5.9 billion at June 30, 2016, up by $26 million on a linked quarter basis. Managed assets continue to represent over 90% of total wealth management assets at June 30, 2016.
•
Mortgage banking benefited from strong activity levels as revenues totaled $2.7 million for the second quarter, up by $512 thousand, or 23%, on a linked quarter basis. These results reflect both a higher volume and yield on loans sold to the secondary market. Residential mortgage loans sold to the secondary market amounted to $139.0 million in the second quarter, compared to $106.0 million in the previous quarter.
•
Income from bank-owned life insurance ("BOLI") amounted to $1.1 million in the the second quarter, up by $591 thousand, from the the first quarter of 2016. Included in the second quarter was a $589 thousand non-taxable gain due to the receipt of life insurance proceeds.
•
Loan related derivative income amounted to $508 thousand in the second quarter, down by $137 thousand, or 21%, from the prior quarter. The decrease reflected a lower volume of commercial borrower interest rate swaps transactions.
Noninterest Expenses
Noninterest expenses totaled $26.0 million for the second quarter of 2016, up by $580 thousand, or 2%, from the prior quarter. The largest increase was a $1.0 million increase in salaries and employee benefit costs, which included costs of $425 thousand incurred in the second quarter for various employee severance matters. The remaining increase in salaries and employee benefit costs was concentrated in transaction-based commission expense associated with the increase in mortgage banking activities. In first quarter of 2016, noninterest expenses included $431 thousand of debt prepayment penalty expense associated with the prepayment of $10.0 million in FHLBB advances. There were no such expenses in the latest quarter.

Income tax expense amounted to $5.2 million for the second quarter of 2016, down by $331 thousand from the amount recognized in the previous quarter. The effective tax rate for the second quarter of 2016 was 31.8%, compared to 33.4% for the first quarter of 2016. The reduction in the effective tax rate for the second quarter is primarily due to the non-taxable gain related to the receipt of BOLI proceeds.



Washington Trust
Page 3, July 25, 2016


Loans
Total loans amounted to $3.1 billion at June 30, 2016, up by $34 million, or 1.1%, from the balance at the end of the first quarter. The linked quarter change was due to growth of $57 million in the commercial real estate portfolio, which was partially offset by a decline of $23 million in the commercial and industrial portfolio. The residential and consumer loan portfolio balances were relatively consistent with the period-end balances at March 31, 2016. Included in the residential loan portfolio balance at the end of the second quarter was a $16.1 million purchase of whole loans acquired on June 28, 2016. These loans were individually evaluated to our underwriting standards and predominantly secured by properties in Massachusetts.
Investment Securities
The securities portfolio amounted to $420 million at June 30, 2016, down by $11 million, or 2.5%, from the balance at March 31, 2016, due to calls, maturities and routine principal pay-downs, which were partially offset by the purchases of $52 million of additional U.S. government agency and agency mortgage-backed debt securities. Investment securities were 11% of total assets as of June 30, 2016.
Deposits and Borrowings
Total deposits amounted to $2.8 billion at June 30, 2016, down by $90 million, or 3.1%, in the second quarter. Excluding wholesale brokered time deposits, in-market deposits decreased by $75 million, or 2.9%, in the quarter. The largest outflow during the quarter was $88 million of money market deposits, attributable to outflows associated with various institutional and governmental depositors. A substantial portion of these outflows are considered to be seasonal in nature based on the business cycles of the underlying depositors.

FHLBB advances amounted to $640 million at June 30, 2016, up by $153 million, or 31.4%, from March 31, 2016.
Asset Quality
Total past due loans amounted to $17.1 million, or 0.56% of total loans, at June 30, 2016, compared to $18.3 million, or 0.60% of total loans, at March 31, 2016. Total nonaccrual loans amounted to $17.2 million, or 0.56% of total loans, at June 30, 2016, compared to $17.4 million, or 0.57% of total loans, at March 31, 2016.
A loan loss provision totaling $450 thousand was charged to earnings in the second quarter of 2016, compared to a loan loss provision of $500 thousand recognized in the first quarter of 2016. The loan loss provision was based on management’s assessment of loss exposure, as well as loan loss allocations commensurate with changes in the loan portfolio during the quarter. Net charge-offs amounted to $761 thousand in the second quarter of 2016 and included a $737 thousand charge-off associated with one commercial and industrial relationship. A substantial portion of the loss exposure associated with this charge-off was recognized as of March 31, 2016. The allowance for loan losses was $25.8 million, or 0.84% of total loans, at June 30, 2016, compared to $26.1 million, or 0.86% of total loans, at March 31, 2016.
Capital and Dividends
Total shareholder's equity was $388 million at June 30, 2016, up by $7 million from March 31, 2016. Capital levels at June 30, 2016 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.43% at June 30, 2016, compared to 12.45% at March 31, 2016. At June 30, 2016, book value per share amounted to $22.73, up from $22.40 in the prior quarter.


Washington Trust
Page 4, July 25, 2016



The Board of Directors declared a quarterly dividend of 36 cents per share for the quarter ended June 30, 2016. The dividend was paid on July 14, 2016 to shareholders of record on July 1, 2016.

Conference Call
Washington Trust will host a conference call to discuss its second quarter results, business highlights and outlook on Tuesday, July 26, 2016 at 8:30 a.m. (Eastern Time). Individuals may dial in to the call at 1-877-407-0784. An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-877-870-5176 and entering the Replay PIN Number 13639564; the audio replay will be available through August 5, 2016. Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrustbancorp.com, and will be available through September 30, 2016.

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 Corporation’s common stock trades on NASDAQ OMX® under the symbol WASH. Investor information is available on the Corporation’s web site: www.washtrustbancorp.com.

Forward-Looking Statements
This press release contains statements that are “forward-looking statements”. We may also make forward-looking statements in other documents we file with the SEC, in 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: weakness in national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets; volatility in national and international financial markets; additional 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 the our 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, 2015, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, may result in these differences. You should carefully review all of these factors and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

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





Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
 
 
 
 
 
 
 
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Assets:
 
 
 
 
 
Cash and due from banks

$116,658


$89,966


$93,222


$106,445


$79,795

Short-term investments
3,255

4,931

4,409

3,629

4,298

Mortgage loans held for sale
38,554

22,895

38,554

31,805

37,389

Securities:
 
 
 
 
 
Available for sale, at fair value
401,749

411,352

375,044

323,795

351,378

Held to maturity, at amortized cost
17,917

19,040

20,023

21,140

22,523

Total securities
419,666

430,392

395,067

344,935

373,901

Federal Home Loan Bank stock, at cost
34,303

26,515

24,316

37,730

37,730

Loans:
 
 
 
 
 
Commercial
1,732,220

1,698,811

1,654,547

1,579,854

1,583,537

Residential real estate
1,005,036

1,004,349

1,013,555

1,024,214

1,001,263

Consumer
343,628

343,833

345,025

345,850

343,784

Total loans
3,080,884

3,046,993

3,013,127

2,949,918

2,928,584

Less allowance for loan losses
25,826

26,137

27,069

27,161

27,587

Net loans
3,055,058

3,020,856

2,986,058

2,922,757

2,900,997

Premises and equipment, net
29,590

29,882

29,593

28,180

28,124

Investment in bank-owned life insurance
65,036

66,000

65,501

65,000

64,502

Goodwill
64,059

64,059

64,059

64,196

58,114

Identifiable intangible assets, net
10,814

11,137

11,460

11,793

4,539

Other assets
80,088

71,577

59,365

58,366

55,088

Total assets

$3,917,081


$3,838,210


$3,771,604


$3,674,836


$3,644,477

Liabilities:
 
 
 
 
 
Deposits:
 
 
 
 
 
Demand deposits

$512,307


$539,119


$537,298


$513,856


$457,755

NOW accounts
414,532

394,873

412,602

358,973

357,922

Money market accounts
675,896

763,565

823,490

855,858

789,334

Savings accounts
342,579

331,800

326,967

305,775

300,108

Time deposits
844,036

850,294

833,898

801,818

834,000

Total deposits
2,789,350

2,879,651

2,934,255

2,836,280

2,739,119

Federal Home Loan Bank advances
640,010

487,189

378,973

381,649

471,321

Junior subordinated debentures
22,681

22,681

22,681

22,681

22,681

Other liabilities
76,708

67,409

60,307

63,699

52,189

Total liabilities
3,528,749

3,456,930

3,396,216

3,304,309

3,285,310

Shareholders’ Equity:
 
 
 
 
 
Common stock
1,068

1,064

1,064

1,062

1,052

Paid-in capital
112,314

111,641

110,949

109,724

103,408

Retained earnings
282,666

277,810

273,074

268,166

263,790

Accumulated other comprehensive loss
(7,716
)
(9,235
)
(9,699
)
(8,425
)
(9,083
)
Total shareholders’ equity
388,332

381,280

375,388

370,527

359,167

Total liabilities and shareholders’ equity

$3,917,081


$3,838,210


$3,771,604


$3,674,836


$3,644,477


-5-


CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
 
 
 
 
 
 
 
For the Six Months Ended
 
For the Three Months Ended
 
 
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
 
Jun 30,
2016
Jun 30,
2015
Interest income:
 
 
 
 
 
 
 
 
Interest and fees on loans

$29,122


$29,998


$28,511


$28,626


$28,739

 

$59,120


$57,092

Taxable interest on securities
2,487

2,370

2,262

2,178

2,176

 
4,857

4,435

Nontaxable interest on securities
280

327

352

366

402

 
607

837

Dividends on Federal Home Loan Bank stock
231

210

315

309

164

 
441

329

Other interest income
70

64

37

47

29

 
134

54

Total interest and dividend income
32,190

32,969

31,477

31,526

31,510

 
65,159

62,747

Interest expense:


 
 
 
 
 
 
 
Deposits
2,981

2,968

3,097

3,308

3,348

 
5,949

6,737

Federal Home Loan Bank advances
2,313

2,152

1,966

1,987

1,891

 
4,465

3,793

Junior subordinated debentures
119

112

157

232

241

 
231

482

Other interest expense
1

2

2

2

2

 
3

5

Total interest expense
5,414

5,234

5,222

5,529

5,482

 
10,648

11,017

Net interest income
26,776

27,735

26,255

25,997

26,028

 
54,511

51,730

Provision for loan losses
450

500

750

200

100

 
950

100

Net interest income after provision for loan losses
26,326

27,235

25,505

25,797

25,928

 
53,561

51,630

Noninterest income:


 






 
 
 
Wealth management revenues
9,481

9,174

9,167

8,902

8,912

 
18,655

17,347

Mortgage banking revenues
2,710

2,198

2,582

1,990

2,741

 
4,908

5,329

Service charges on deposit accounts
935

907

971

986

973

 
1,842

1,908

Card interchange fees
860

797

810

849

826

 
1,657

1,540

Income from bank-owned life insurance
1,090

499

502

498

492

 
1,589

982

Loan related derivative income
508

645

752

327

717

 
1,153

1,362

Equity in losses of unconsolidated subsidiaries
(89
)
(88
)
(69
)
(69
)
(69
)
 
(177
)
(155
)
Other income
419

502

431

430

669

 
921

968

Total noninterest income
15,914

14,634

15,146

13,913

15,261

 
30,548

29,281

Noninterest expense:


 






 
 
 
Salaries and employee benefits
17,405

16,380

16,053

15,971

15,506

 
33,785

31,000

Net occupancy
1,803

1,807

1,724

1,721

1,669

 
3,610

3,555

Equipment
1,503

1,501

1,393

1,424

1,376

 
3,004

2,716

Outsourced services
1,294

1,363

1,337

1,250

1,277

 
2,657

2,524

Legal, audit and professional fees
662

629

825

630

610

 
1,291

1,286

FDIC deposit insurance costs
491

493

470

467

436

 
984

909

Advertising and promotion
420

265

325

356

578

 
685

845

Amortization of intangibles
322

323

333

260

156

 
645

311

Debt prepayment penalties
—

431

—

—

—

 
431

—

Acquisition related expenses
—

—

52

504

433

 
—

433

Other expenses
2,130

2,258

2,049

1,955

2,258

 
4,388

4,251

Total noninterest expense
26,030

25,450

24,561

24,538

24,299

 
51,480

47,830

Income before income taxes
16,210

16,419

16,090

15,172

16,890

 
32,629

33,081

Income tax expense
5,153

5,484

5,346

4,964

5,387

 
10,637

10,568

Net income

$11,057


$10,935


$10,744


$10,208


$11,503

 

$21,992


$22,513

 
 
 
 
 
 
 
 
 
Net income available to common shareholders:
 
 
 
 
 
 
 
 
  Basic

$11,035


$10,910


$10,718


$10,181


$11,469

 

$21,945


$22,440

  Diluted

$11,035


$10,910


$10,718


$10,180


$11,470

 

$21,945


$22,441

Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
  Basic
17,067

17,023

17,004

16,939

16,811

 
17,045

16,785

  Diluted
17,194

17,157

17,167

17,102

16,989

 
17,185

16,977

Earnings per common share:
 
 
 
 
 
 
 
 
  Basic

$0.65


$0.64


$0.63


$0.60


$0.68

 

$1.29


$1.34

  Diluted

$0.64


$0.64


$0.62


$0.60


$0.68

 

$1.28


$1.32

 
 
 
 
 
 
 
 
 
Cash dividends declared per share

$0.36


$0.36


$0.34


$0.34


$0.34

 

$0.72


$0.68


-6-


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

Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Share and Equity Related Data:
 
 
 
 
 
Book value per share

$22.73


$22.40


$22.06


$21.82


$21.34

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

$18.35


$17.98


$17.62


$17.36


$17.61

Market value per share

$37.92


$37.32


$39.52


$38.45


$39.48

Shares issued and outstanding at end of period
17,081

17,024

17,020

16,985

16,834

 
 
 
 
 
 
Capital Ratios:
 
 
 
 
 
Tier 1 risk-based capital
11.57% (i)

11.56
%
11.64
%
11.83
%
11.79
%
Total risk-based capital
12.43% (i)

12.45
%
12.58
%
12.80
%
12.78
%
Tier 1 leverage ratio
9.21% (i)

9.31
%
9.37
%
9.26
%
9.31
%
Common equity tier 1
10.84% (i)

10.82
%
10.89
%
11.05
%
11.00
%
Equity to assets
9.91
%
9.93
%
9.95
%
10.08
%
9.86
%
Tangible equity to tangible assets - Non-GAAP (1)
8.16
%
8.13
%
8.11
%
8.18
%
8.28
%
(i) - estimated
 
 
 
 
 

 
 
 
For the Six Months Ended
 
For the Three Months Ended
 
 
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
 
Jun 30,
2016
Jun 30,
2015
Performance Ratios:
 
 
 
 
 
 
 
 
Net interest margin (FTE)
3.05
%
3.24
%
3.08
%
3.07
%
3.15
%
 
3.15
%
3.16
%
Return on average assets
1.14
%
1.16
%
1.16
%
1.11
%
1.27
%
 
1.15
%
1.25
%
Return on average tangible assets - Non-GAAP (1)
1.17
%
1.18
%
1.19
%
1.13
%
1.29
%
 
1.17
%
1.27
%
Return on average equity
11.50
%
11.50
%
11.52
%
11.13
%
12.88
%
 
11.50
%
12.71
%
Return on average tangible equity - Non-GAAP (1)
14.28
%
14.34
%
14.45
%
13.82
%
15.62
%
 
14.31
%
15.45
%


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


-7-


SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)
 
 
 
For the Six Months Ended
 
For the Three Months Ended
 
 
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
 
Jun 30,
2016
Jun 30,
2015
Wealth Management Results
 
 
 
 
 
 
 
 
Wealth Management Revenues:
 
 
 
 
 
 
 
 
Trust and investment management fees

$8,195


$8,065


$8,001


$7,768


$7,238

 

$16,260


$14,380

Mutual fund fees
812

843

952

989

1,032

 
1,655

2,068

   Asset-based revenues
9,007

8,908

8,953

8,757

8,270

 
17,915

16,448

Transaction-based revenues
474

266

214

145

642

 
740

899

Total wealth management revenues

$9,481


$9,174


$9,167


$8,902


$8,912

 

$18,655


$17,347

 
 
 
 
 
 
 
 
 
Assets Under Administration:
 
 
 
 
 
 
 
 
Balance at beginning of period

$5,878,967


$5,844,636


$5,714,201


$5,211,548


$5,159,663

 

$5,844,636


$5,069,966

Acquisition of Halsey Associates, Inc.
—

—

—

839,994

—

 
—

—

Net investment appreciation (depreciation)
 & income
71,447

22,389

153,953

(316,121
)
(13,932
)
 
93,835

66,940

Net client asset flows
(45,395
)
11,942

(23,518
)
(21,220
)
65,817

 
(33,452
)
74,642

Balance at end of period

$5,905,019


$5,878,967


$5,844,636


$5,714,201


$5,211,548

 

$5,905,019


$5,211,548

 
 
 
 
 
 
 
 
 
Mortgage Banking Results
 
 
 
 
 
 
 
 
Mortgage Banking Revenues:
 
 
 
 
 
 
 
 
Gains & commissions on loan sales, net

$2,804


$2,134


$2,528


$1,964


$2,748

 

$4,938


$5,333

Residential mortgage servicing fee income, net
(94
)
64

54

26

(7
)
 
(30
)
(4
)
Total mortgage banking revenues

$2,710


$2,198


$2,582


$1,990


$2,741

 

$4,908


$5,329

 
 
 
 
 
 
 
 
 
Residential Mortgage Loan Originations:
 
 
 
 
 
 
 
 
Originations for retention in portfolio

$54,080


$47,545


$38,080


$76,963


$65,134

 

$101,626


$119,809

Originations for sale to secondary market (1)
154,043

90,458

134,125

126,353

134,360

 

$244,501

263,356

Total mortgage loan originations

$208,123


$138,003


$172,205


$203,316


$199,494

 

$346,127


$383,165

 
 
 
 
 
 
 
 
 
Residential Mortgage Loans Sold:
 
 
 
 
 
 
 
 
Sold with servicing rights retained

$45,804


$26,454


$44,493


$37,782


$32,693

 

$72,258


$79,949

Sold with servicing rights released (1)
93,239

79,507

82,906

94,645

110,484

 

$172,746

191,125

Total mortgage loans sold

$139,043


$105,961


$127,399


$132,427


$143,177

 

$245,004


$271,074

(1)
Also includes loans originated in a broker capacity.


-8-


END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
 
 
 
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Commercial:
 
 
 
 
 
Mortgages

$1,074,747


$976,931


$931,953


$873,767


$876,589

Construction & development
81,812

123,032

122,297

121,857

110,989

Commercial & industrial
575,661

598,848

600,297

584,230

595,959

Total commercial
1,732,220

1,698,811

1,654,547

1,579,854

1,583,537

Residential real estate:
 
 
 
 
 
Mortgages
978,399

980,274

984,437

994,808

971,705

Homeowner construction
26,637

24,075

29,118

29,406

29,558

Total residential real estate
1,005,036

1,004,349

1,013,555

1,024,214

1,001,263

Consumer:
 
 
 
 
 
Home equity lines
260,541

258,513

255,565

252,862

249,845

Home equity loans
39,572

45,499

46,649

47,610

47,437

Other
43,515

39,821

42,811

45,378

46,502

Total consumer
343,628

343,833

345,025

345,850

343,784

Total loans

$3,080,884


$3,046,993


$3,013,127


$2,949,918


$2,928,584


 
June 30, 2016
 
December 31, 2015
 
Balance

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

$1,073,506

92.9
%
 

$959,883

91.0
%
New York, New Jersey, Pennsylvania
69,872

6.0
%
 
80,989

7.7
%
New Hampshire
13,181

1.1
%
 
13,377

1.3
%
Total commercial real estate loans (1)

$1,156,559

100.0
%
 

$1,054,249

100.0
%
 
 
 
 
 
 
Residential Mortgages by Property Location:
 
 
 
 
 
Rhode Island, Connecticut, Massachusetts

$989,085

98.5
%
 

$995,743

98.2
%
New Hampshire, Vermont
9,500

0.9
%
 
10,186

1.0
%
New York, Virginia, New Jersey, Maryland, Pennsylvania
3,434

0.3
%
 
4,163

0.4
%
Ohio
1,132

0.1
%
 
1,557

0.2
%
Other
1,885

0.2
%
 
1,906

0.2
%
Total residential mortgages

$1,005,036

100.0
%
 

$1,013,555

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.

 
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Deposits:
 
 
 
 
 
Non-interest bearing demand deposits

$476,848


$474,477


$475,398


$472,349


$429,904

Interest-bearing demand deposits
35,459

64,642

61,900

41,507

27,851

NOW accounts
414,532

394,873

412,602

358,973

357,922

Money market accounts
675,896

763,565

823,490

855,858

789,334

Savings accounts
342,579

331,800

326,967

305,775

300,108

Time deposits (in-market)
549,935

540,815

531,419

534,266

549,410

Wholesale brokered time deposits
294,101

309,479

302,479

267,552

284,590

Total deposits

$2,789,350


$2,879,651


$2,934,255


$2,836,280


$2,739,119




-9-


CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
 
 
 
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Asset Quality Ratios:
 
 
 
 
 
Nonperforming assets to total assets
0.48
%
0.49
%
0.58
%
0.48
%
0.45
%
Nonaccrual loans to total loans
0.56
%
0.57
%
0.70
%
0.57
%
0.52
%
Allowance for loan losses to nonaccrual loans
149.73
%
150.00
%
128.61
%
161.25
%
182.32
%
Allowance for loan losses to total loans
0.84
%
0.86
%
0.90
%
0.92
%
0.94
%
 
 
 
 
 
 
Nonperforming Assets:
 
 
 
 
 
Commercial mortgages

$4,054


$4,054


$5,711


$4,915


$4,915

Commercial construction & development
—

—

—

—

—

Commercial & industrial
1,204

2,659

3,018

1,137

1,039

Residential real estate mortgages
10,409

9,367

10,666

9,472

7,411

Consumer
1,581

1,345

1,652

1,320

1,766

Total nonaccrual loans
17,248

17,425

21,047

16,844

15,131

Other real estate owned
1,515

1,326

716

955

1,388

Total nonperforming assets

$18,763


$18,751


$21,763


$17,799


$16,519

 
 
 
 
 
 
Past Due Loans:
 
 
 
 
 
Commercial mortgages

$4,062


$4,564


$4,555


$5,062


$4,929

Commercial & industrial
1,978

2,906

462

4,337

5,518

Residential real estate mortgages
8,893

8,703

9,286

10,567

10,904

Consumer loans
2,201

2,122

3,256

1,845

2,678

Total past due loans

$17,134


$18,295


$17,559


$21,811


$24,029

 
 
 
 
 
 
Total past due loans to total loans
0.56
%
0.60
%
0.58
%
0.74
%
0.82
%
Accruing loans 90 days or more past due

$—


$—


$—


$—


$—

Nonaccrual loans included in past due loans

$13,211


$14,030


$13,635


$13,964


$12,397

 
 
 
For the Six Months Ended
 
For the Three Months Ended
 
 
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
 
Jun 30,
2016
Jun 30,
2015
Nonaccrual Loan Activity:
 
 
 
 
 
 
 
 
Balance at beginning of period

$17,425


$21,047


$16,844


$15,131


$15,865

 

$21,047


$15,945

Additions to nonaccrual status
2,072

1,352

7,029

3,319

2,567

 
3,424

4,175

Loans returned to accruing status
—

(206
)
(303
)
(156
)
(1,756
)
 
(206
)
(2,122
)
Loans charged-off
(860
)
(1,475
)
(904
)
(725
)
(355
)
 
(2,335
)
(676
)
Loans transferred to other real estate owned
(435
)
(610
)
(716
)
—

(261
)
 
(1,045
)
(491
)
Payments, payoffs and other changes
(954
)
(2,683
)
(903
)
(725
)
(929
)
 
(3,637
)
(1,700
)
Balance at end of period

$17,248


$17,425


$21,047


$16,844


$15,131

 

$17,248


$15,131

 
 
 
 
 
 
 
 
 
Allowance for Loan Losses:
 
 
 
 
 
 
 
 
Balance at beginning of period

$26,137


$27,069


$27,161


$27,587


$27,810

 

$27,069


$28,023

Provision charged to earnings
450

500

750

200

100

 
950

100

Charge-offs
(860
)
(1,475
)
(904
)
(725
)
(355
)
 
(2,335
)
(676
)
Recoveries
99

43

62

99

32

 
142

140

Balance at end of period

$25,826


$26,137


$27,069


$27,161


$27,587

 

$25,826


$27,587

 
 
 
 
 
 
 
 
 
Net Loan Charge-Offs (Recoveries):
 
 
 
 
 
 
 
 
Commercial mortgages

$65


$1,249


$405


($4
)

$196

 

$1,314


$316

Commercial & industrial
684

(18
)
217

348

26

 
666

19

Residential real estate mortgages
2

134

117

12

4

 
136

50

Consumer
10

67

103

270

97

 
77

151

Total

$761


$1,432


$842


$626


$323

 

$2,193


$536

 
 
 
 
 
 
 
 
 
Net charge-offs to average loans (annualized)
0.10
%
0.19
%
0.11
%
0.08
%
0.04
%
 
0.14
%
0.04
%


-10-


The following table presents 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. Unrealized gains (losses) on available for sale securities and fair value adjustments on mortgage loans held for sale are excluded from the average balance and yield calculations. Nonaccrual and renegotiated loans, as well as interest recognized on these loans are included in amounts presented for loans.

CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited; Dollars in thousands)
 
 
For the Three Months Ended
June 30, 2016
 
March 31, 2016
 
June 30, 2015
 
Average Balance
Interest
Yield/
Rate
 
Average Balance
Interest
Yield/
Rate
 
Average Balance
Interest
Yield/
 Rate
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Commercial mortgages

$1,019,290


$8,992

3.55
 

$933,939


$8,215

3.54
 

$873,212


$7,779

3.57
Construction & development
117,204

985

3.38
 
129,217

1,108

3.45
 
99,435

773

3.12
Commercial & industrial
591,893

6,408

4.35
 
604,519

7,681

5.11
 
601,536

7,378

4.92
Total commercial loans

$1,728,387


$16,385

3.81
 

$1,667,675


$17,004

4.10
 

$1,574,183


$15,930

4.06
Residential real estate loans, including loans held for sale
1,024,653

9,980

3.92
 
1,031,260

10,155

3.96
 
1,025,029

10,102

3.95
Consumer loans
342,866

3,311

3.88
 
343,519

3,393

3.97
 
338,809

3,183

3.77
Total loans
3,095,906

29,676

3.86
 
3,042,454

30,552

4.04
 
2,938,021

29,215

3.99
Cash, federal funds sold and short-term investments
69,839

70

0.40
 
68,488

64

0.38
 
63,858

29

0.18
FHLBB stock
31,723

231

2.93
 
25,597

210

3.30
 
37,730

164

1.74
Taxable debt securities
396,428

2,487

2.52
 
359,060

2,370

2.65
 
320,643

2,176

2.72
Nontaxable debt securities
28,531

433

6.10
 
33,313

507

6.12
 
40,886

627

6.15
Total securities
424,959

2,920

2.76
 
392,373

2,877

2.95
 
361,529

2,803

3.11
Total interest-earning assets
3,622,427

32,897

3.65
 
3,528,912

33,703

3.84
 
3,401,138

32,211

3.80
Noninterest-earning assets
247,081

 
 
 
240,113

 
 
 
221,577

 
 
Total assets

$3,869,508

 
 
 

$3,769,025

 
 
 

$3,622,715

 
 
Liabilities and Shareholders' Equity:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing demand deposits

$42,952


$7

0.07
 

$50,704


$13

0.10
 

$38,129


$3

0.03
NOW accounts
403,136

53

0.05
 
386,488

56

0.06
 
363,434

53

0.06
Money market accounts
710,075

459

0.26
 
786,633

515

0.26
 
820,887

941

0.46
Savings accounts
338,504

49

0.06
 
328,174

49

0.06
 
298,286

50

0.07
Time deposits (in-market)
542,621

1,345

1.00
 
538,035

1,315

0.98
 
554,839

1,390

1.00
Wholesale brokered time deposits
302,707

1,068

1.42
 
296,801

1,020

1.38
 
285,844

911

1.28
FHLBB advances
587,395

2,313

1.58
 
453,019

2,152

1.91
 
391,152

1,891

1.94
Junior subordinated debentures
22,681

119

2.11
 
22,681

112

1.99
 
22,681

241

4.26
Other
66

1

6.09
 
79

2

10.18
 
116

2

6.92
Total interest-bearing liabilities
2,950,137

5,414

0.74
 
2,862,614

5,234

0.74
 
2,775,368

5,482

0.79
Demand deposits
473,731

 
 
 
471,782

 
 
 
441,355

 
 
Other liabilities
60,923

 
 
 
54,287

 
 
 
48,627

 
 
Shareholders' equity
384,717

 
 
 
380,342

 
 
 
357,365

 
 
Total liabilities and shareholders' equity

$3,869,508

 
 
 

$3,769,025

 
 
 

$3,622,715

 
 
Net interest income (FTE)
 

$27,483

 
 
 

$28,469

 
 
 

$26,729

 
Interest rate spread
 
 
2.91
 
 
 
3.10
 
 
 
3.01
Net interest margin
 
 
3.05
 
 
 
3.24
 
 
 
3.15

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:
For the Three Months Ended
Jun 30, 2016
Mar 31, 2016
Jun 30, 2015
Commercial loans

$554


$554


$476

Nontaxable debt securities
153

180

225

Total

$707


$734


$701


-11-


CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited; Dollars in thousands)
 
 
For the Six Months Ended
June 30, 2016
 
June 30, 2015
 
Average Balance
Interest
Yield/
Rate
 
Average Balance
Interest
Yield/
 Rate
 
Assets:
 
 
 
 
 
 
 
Commercial mortgages

$976,619


$17,207

3.54
 

$862,638


$15,496

3.62
Construction & development
123,209

2,093

3.42
 
91,911

1,439

3.16
Commercial & industrial
598,203

14,089

4.74
 
604,984

14,307

4.77
Total commercial loans
1,698,031

33,389

3.95
 
1,559,533

31,242

4.04
Residential real estate loans, including loans held for sale
1,027,956

20,135

3.94
 
1,027,509

20,416

4.01
Consumer loans
343,193

6,704

3.93
 
337,578

6,351

3.79
Total loans
3,069,180

60,228

3.95
 
2,924,620

58,009

4.00
Cash, federal funds sold and short-term investments
69,164

134

0.39
 
57,492

54

0.19
FHLBB stock
28,660

441

3.09
 
37,730

329

1.76
Taxable debt securities
377,744

4,857

2.59
 
321,602

4,435

2.78
Nontaxable debt securities
30,922

940

6.11
 
42,762

1,291

6.09
Total securities
408,666

5,797

2.85
 
364,364

5,726

3.17
Total interest-earning assets
3,575,670

66,600

3.75
 
3,384,206

64,118

3.82
Noninterest-earning assets
243,597

 
 
 
221,686

 
 
Total assets

$3,819,267

 
 
 

$3,605,892

 
 
Liabilities and Shareholders' Equity:
 
 
 
 
 
 
 
Interest-bearing demand deposits

$46,828


$20

0.09
 

$37,991


$11

0.06
NOW accounts
394,812

110

0.06
 
346,605

100

0.06
Money market accounts
748,354

975

0.26
 
810,519

1,825

0.45
Savings accounts
333,339

96

0.06
 
296,117

96

0.07
Time deposits (in-market)
540,328

2,659

0.99
 
560,917

2,859

1.03
Wholesale brokered time deposits
299,754

2,089

1.40
 
290,230

1,846

1.28
FHLBB advances
520,207

4,465

1.73
 
397,925

3,793

1.92
Junior subordinated debentures
22,681

231

2.05
 
22,681

482

4.29
Other
73

3

8.26
 
122

5

8.26
Total interest-bearing liabilities
2,906,376

10,648

0.74
 
2,763,107

11,017

0.80
Demand deposits
472,757

 
 
 
440,136

 
 
Other liabilities
57,605

 
 
 
48,342

 
 
Shareholders' equity
382,529

 
 
 
354,307

 
 
Total liabilities and shareholders' equity

$3,819,267

 
 
 

$3,605,892

 
 
Net interest income (FTE)
 

$55,952

 
 
 

$53,101

 
Interest rate spread
 
 
3.01
 
 
 
3.02
Net interest margin
 
 
3.15
 
 
 
3.16

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:
For the Six Months Ended
Jun 30, 2016
Jun 30, 2015
Commercial loans

$1,108


$917

Nontaxable debt securities
333

454

Total

$1,441


$1,371



-12-


SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)
 
 
 
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Tangible Book Value per Share:
 
 
 
 
 
Total shareholders' equity, as reported

$388,332


$381,280


$375,388


$370,527


$359,167

Less:
 
 
 
 
 
Goodwill
64,059

64,059

64,059

64,196

58,114

Identifiable intangible assets, net
10,814

11,137

11,460

11,793

4,539

Total tangible shareholders' equity

$313,459


$306,084


$299,869


$294,538


$296,514

 
 
 
 
 
 
Shares outstanding, as reported
17,081

17,024

17,020

16,985

16,834

 
 
 
 
 
 
Book value per share - GAAP

$22.73


$22.40


$22.06


$21.82


$21.34

Tangible book value per share - Non-GAAP

$18.35


$17.98


$17.62


$17.34


$17.61

 
 
 
 
 
 
Tangible Equity to Tangible Assets:
 
 
 
 
 
Total tangible shareholders' equity

$313,459


$306,084


$299,869


$294,538


$296,514

 
 
 
 
 
 
Total assets, as reported

$3,917,081


$3,838,210


$3,771,604


$3,674,836


$3,644,477

Less:
 
 
 
 
 
Goodwill
64,059

64,059

64,059

64,196

58,114

Identifiable intangible assets, net
10,814

11,137

11,460

11,793

4,539

Total tangible assets

$3,842,208


$3,763,014


$3,696,085


$3,598,847


$3,581,824

 
 
 
 
 
 
Equity to assets - GAAP
9.91
%
9.93
%
9.95
%
10.08
%
9.86
%
Tangible equity to tangible assets - Non-GAAP
8.16
%
8.13
%
8.11
%
8.18
%
8.28
%

 
For the Three Months Ended
 
For the Six Months Ended
 
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
 
Jun 30,
2016
Jun 30,
2015
Return on Average Tangible Assets:
 
 
 
 
 
 
 
 
Net income, as reported

$11,057


$10,935


$10,744


$10,208


$11,503

 

$21,992


$22,513

 
 
 
 
 
 
 
 
 
Total average assets, as reported

$3,869,508


$3,769,025


$3,700,441


$3,678,487


$3,622,715

 

$3,819,267


$3,605,892

Less average balances of:
 
 
 
 
 
 
 
 
Goodwill
64,059

64,059

64,194

62,524

58,114

 
64,059

58,114

Identifiable intangible assets, net
10,972

11,294

11,616

8,768

4,614

 
11,133

4,691

Total average tangible assets

$3,794,477


$3,693,672


$3,624,631


$3,607,195


$3,559,987

 

$3,744,075


$3,543,087

 
 
 
 
 
 
 
 
 
Return on average assets - GAAP
1.14
%
1.16
%
1.16
%
1.11
%
1.27
%
 
1.15
%
1.25
%
Return on average tangible assets -
Non-GAAP
1.17
%
1.18
%
1.19
%
1.13
%
1.29
%
 
1.17
%
1.27
%
 
 
 
 
 
 
 
 
 
Return on Average Tangible Equity:
 
 
 
 
 
 
 
 
Net income, as reported

$11,057


$10,935


$10,744


$10,208


$11,503

 

$21,992


$22,513

 
 
 
 
 
 
 
 
 
Total average equity, as reported

$384,717


$380,342


$373,197


$366,724


$357,365

 

$382,529


$354,307

Less average balances of:
 
 
 
 
 
 
 
 
Goodwill
64,059

64,059

64,194

62,524

58,114

 
64,059

58,114

Identifiable intangible assets, net
10,972

11,294

11,616

8,768

4,614

 
11,133

4,691

Total average tangible equity

$309,686


$304,989


$297,387


$295,432


$294,637

 

$307,337


$291,502

 
 
 
 
 
 
 
 
 
Return on average equity - GAAP
11.50
%
11.50
%
11.52
%
11.13
%
12.88
%
 
11.50
%
12.71
%
Return on average tangible equity -
Non-GAAP
14.28
%
14.34
%
14.45
%
13.82
%
15.62
%
 
14.31
%
15.45
%

-13-