-----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, NZYzryBewJaJGadgCPb2SrfTgMBjDgdD4U+JQxa+MecK2KriKKyza+4nzDpYL3ZS pEtHktbeglfhXBpEr47ylA== 0000737468-96-000018.txt : 19961118 0000737468-96-000018.hdr.sgml : 19961118 ACCESSION NUMBER: 0000737468-96-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96666132 BUSINESS ADDRESS: STREET 1: 23 BROAD ST CITY: WESTERLY STATE: RI ZIP: 02891 BUSINESS PHONE: 4013481200 10-Q 1 FORM 10-Q UNITED STATES 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 SEPTEMBER 30, 1996 --------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE 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 -------------- NOT APPLICABLE 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 the 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 classes of common stock, as of November 1, 1996. Class Outstanding at November 1, 1996 - -------------------------------- -------------------------------- Common stock, $.0625 par value 4,359,780 Shares WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996 CONTENTS Page No. PART I. ITEM 1. Financial Information Consolidated Balance Sheets September 30, 1996 and December 31, 1995 3 Consolidated Statements of Income Three Months and Nine Months Ended September 30, 1996 and 1995 4 Consolidated Statements of Changes in Shareholders' Equity Nine Months Ended September 30, 1996 and 1995 5 Consolidated Statements of Cash Flows Nine Months Ended September 30, 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 9 PART II. Other Information 17 Signatures 18 WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1996 1995 - ------------------------------------------------------------------------------- ------------------ ------------------ ASSETS Cash and due from banks $18,920,846 $15,051,777 Federal funds sold 37,426 13,598,869 Mortgage loans held for sale -- 456,152 Securities available for sale, at fair value; cost $138,373,398 and $78,249,075 at September 30, 1996 and December 31, 1995, respectively 145,015,995 85,552,335 Securities held to maturity, at cost; fair value $28,301,456 and $29,432,819 at September 30, 1996 and December 31, 1995, respectively 28,263,434 28,872,991 Federal Home Loan Bank stock, at cost 7,185,900 2,995,000 Loans 406,893,375 386,458,892 Less allowance for loan losses 8,430,182 7,784,516 - ------------------------------------------------------------------------------- ------------------ ------------------ Net loans 398,463,193 378,674,376 Premises and equipment, net 16,822,002 14,646,157 Accrued interest receivable 4,308,885 3,539,305 Other real estate owned, net 1,411,359 1,705,147 Other assets 2,985,440 2,567,195 - ------------------------------------------------------------------------------- ------------------ ------------------ Total assets $623,414,480 $547,659,304 - ------------------------------------------------------------------------------- ------------------ ------------------ LIABILITIES Demand deposits $66,931,057 $59,470,321 Savings deposits 174,593,547 177,891,247 Time deposits 229,462,099 230,492,444 - ------------------------------------------------------------------------------- ------------------ ------------------ Total deposits 470,986,703 467,854,012 Dividends payable 784,444 686,189 Short term borrowings 10,212,000 -- Federal Home Loan Bank advances 78,658,517 20,951,266 Accrued expenses and other liabilities 5,519,517 5,231,339 - ------------------------------------------------------------------------------- ------------------ ------------------ Total liabilities 566,161,181 494,722,806 - ------------------------------------------------------------------------------- ------------------ ------------------ SHAREHOLDERS' EQUITY Common stock of $.0625 par value; authorized 10,000,000 shares; issued 4,351,454 shares at September 30, 1996 and 4,320,000 shares at December 31, 1995 271,966 180,000 Paid in capital 3,352,538 3,010,795 Retained earnings 49,759,125 45,690,676 Unrealized gains on securities available for sale, net of tax 3,985,566 4,381,958 Treasury stock, at cost; 4,698 shares at September 30, 1996 and 40,695 shares at December 31, 1995 (115,896) (326,931) - ------------------------------------------------------------------------------- ------------------ ------------------ Total shareholders' equity 57,253,299 52,936,498 - ------------------------------------------------------------------------------- ------------------ ------------------ Total liabilities and shareholders' equity $623,414,480 $547,659,304 - ------------------------------------------------------------------------------- ------------------ ------------------
See accompanying notes to consolidated financial statements. WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 - --------------------------------------------------------- --------------- -------------- ------------------- ------------ Interest Income: Interest and fees on loans $9,149,276 $9,008,831 $26,963,456 $26,683,113 Interest from securities: Interest 2,313,500 1,224,064 5,334,968 3,450,502 Dividends 329,668 260,251 1,032,511 644,365 Federal funds sold and securities purchased under agreements to resell 39,944 281,664 180,024 575,618 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Total interest income 11,832,388 10,774,810 33,510,959 31,353,598 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Interest expense: Savings deposits 965,344 993,927 2,880,697 2,949,327 Time deposits 3,117,174 3,123,944 9,294,254 8,616,790 Other 960,264 274,886 1,810,727 1,025,161 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Total interest expense 5,042,782 4,392,757 13,985,678 12,591,278 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Net interest income 6,789,606 6,382,053 19,525,281 18,762,320 Provision for loan losses 300,000 275,000 900,000 725,000 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Net interest income after provision for loan losses 6,489,606 6,107,053 18,625,281 18,037,320 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Noninterest income: Trust income 904,135 808,735 2,796,555 2,433,790 Service charges on deposit accounts 552,778 491,763 1,599,605 1,448,328 Merchant processing fees 405,383 367,015 643,356 558,633 Gains on sales of securities 117,689 111,198 266,026 280,408 Gains (losses) on loan sales 65,693 (193,143) 140,734 (145,068) Other income 256,450 214,744 749,390 678,671 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Total noninterest income 2,302,128 1,800,312 6,195,666 5,254,762 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Noninterest expense: Salaries and employee benefits 2,879,537 2,588,549 8,361,495 7,748,633 Net occupancy 309,651 324,673 944,691 903,059 Equipment 387,690 315,748 1,124,302 936,428 Deposit taxes and assessments 68,500 40,036 205,500 659,002 Foreclosed property costs, net (16,457) 48,648 142,064 224,396 Office supplies 136,227 85,802 379,816 360,732 Advertising and promotion 161,214 148,052 379,768 418,379 Credit and collection 106,202 65,226 320,015 312,586 Other 1,240,643 1,178,810 3,330,796 3,050,807 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Total noninterest expense 5,273,207 4,795,544 15,188,447 14,614,022 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Income before income taxes 3,518,527 3,111,821 9,632,500 8,678,060 Applicable income taxes 1,198,000 1,079,000 3,276,000 3,056,000 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Net income $2,320,527 $2,032,821 $6,356,500 $5,622,060 - --------------------------------------------------------- --------------- -------------- ---------------- --------------- Weighted average shares outstanding - primary 4,503,519 4,384,283 4,459,812 4,348,125 Weighted average shares outstanding - fully diluted 4,513,578 4,384,236 4,485,803 4,377,233 Earnings per share - primary $.52 $.46 $1.43 $1.29 Earnings per share - fully diluted $.51 $.46 $1.42 $1.28 Cash dividends declared per share $.18 $.16 $.53 $.45
See accompanying notes to consolidated financial statements. WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Nine months ended September 30, 1996 1995 - ------------------------------------------------------------------------------------------ ---------------- ---------------- COMMON STOCK Balance at beginning of year $180,000 $180,000 Issuance of common stock for stock option plan 1,310 -- 3-for-2 stock split in the form of a stock dividend 90,656 -- - ------------------------------------------------------------------------------------------ ---------------- ---------------- Balance at end of period 271,966 180,000 - ------------------------------------------------------------------------------------------ ---------------- ---------------- PAID-IN CAPITAL Balance at beginning of year 3,010,795 2,869,135 Issuance of common stock for stock option plan 432,399 90,859 3-for-2 stock split in the form of a stock dividend (90,656) -- - ------------------------------------------------------------------------------------------ ----------------- --------------- Balance at end of period 3,352,538 2,959,994 - ------------------------------------------------------------------------------------------ ---------------- ---------------- RETAINED EARNINGS Balance at beginning of year 45,690,676 40,613,979 Net income 6,356,500 5,622,060 Cash dividends declared (2,288,051) (1,924,722) - ------------------------------------------------------------------------------------------ ---------------- ---------------- Balance at end of period 49,759,125 44,311,317 - ------------------------------------------------------------------------------------------ ---------------- ---------------- UNREALIZED GAINS 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 (396,392) 1,573,789 - ------------------------------------------------------------------------------------------ ---------------- ---------------- Balance at end of period 3,985,566 4,375,279 - ------------------------------------------------------------------------------------------ ---------------- ---------------- TREASURY STOCK Balance at beginning of year (326,931) (681,620) Purchase of treasury stock (240,500) -- Issuance of common stock for stock option plan 451,535 200,303 - ------------------------------------------------------------------------------------------ ---------------- ---------------- Balance at end of period (115,896) (481,317) - ------------------------------------------------------------------------------------------ ---------------- ---------------- TOTAL SHAREHOLDERS' EQUITY $57,253,299 $51,345,273 - ------------------------------------------------------------------------------------------ ---------------- ----------------
See accompanying notes to consolidated financial statements. WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1996 1995 - -------------------------------------------------------------------------------------- ------------------- -------------------- Cash flows from operating activities: Net income $6,356,500 $5,622,060 Adjustments to reconcile net income to cash provided by operating activities: Provision for loan losses 900,000 725,000 Provision for valuation of other real estate owned 278,180 62,999 Depreciation of premises and equipment 1,060,360 997,176 Amortization of net deferred loan fees and costs (107,062) (471,351) Gains on sales of securities (266,026) (280,408) Losses (gains) on sales of other real estate owned (292,815) 34,268 Losses (gains) on loan sales (140,734) 145,068 Proceeds from sales of loans 12,349,885 12,396,410 Loans originated for sale (11,860,824) (12,959,203) Increase in accrued interest receivable (769,580) (693,464) Increase in other assets (46,373) (1,065,680) Increase in accrued expenses and other liabilities 288,178 446,508 Other, net 155,606 61,702 - -------------------------------------------------------------------------------------- ------------------- -------------------- Net cash provided by operating activities 7,905,295 5,021,085 - -------------------------------------------------------------------------------------- ------------------- -------------------- Cash flows from investing activities: Securities available for sale: Purchases (93,759,460) (19,085,354) Proceeds from sales of securities 18,562,653 2,464,969 Maturities 15,196,223 5,000,000 Investment securities: Purchases (3,687,757) (7,980,165) Maturities and principal repayments 4,249,832 4,227,979 Investment in Federal Home Loan Bank stock (4,190,900) (88,200) Loan originations (over) under principal collected on loans (20,927,180) 5,337,870 Proceeds from sales and other reductions of other real estate owned 700,570 57,459 Purchases of premises and equipment (3,248,540) (910,875) - -------------------------------------------------------------------------------------- -------------------- -------------------- Net cash used in investing activities (87,104,559) (10,976,317) - -------------------------------------------------------------------------------------- -------------------- -------------------- Cash flows from financing activities: Net increase in deposits 3,132,691 29,268,180 Net increase in short term borrowings 10,212,000 -- Proceeds from Federal Home Loan Bank advances 111,394,000 12,564,839 Repayment of Federal Home Loan Bank advances (53,686,749) (19,125,206) Purchases of treasury stock (240,500) -- Proceeds from issuance of common stock 885,244 291,162 Cash dividends paid (2,189,796) (1,808,157) - -------------------------------------------------------------------------------------- ------------------- -------------------- Net cash provided by financing activities 69,506,890 21,190,818 - -------------------------------------------------------------------------------------- ------------------- -------------------- Net increase (decrease) in cash and cash equivalents (9,692,374) 15,235,586 Cash and cash equivalents at beginning of period 28,650,646 18,404,910 - -------------------------------------------------------------------------------------- ------------------- -------------------- Cash and cash equivalents at end of period $18,958,272 $33,640,496 - -------------------------------------------------------------------------------------- ------------------- -------------------- Noncash Investing Activities: Transfers from loans to other real estate owned $1,048,764 $233,328 Loans charged off 925,514 2,168,958 Loans made to facilitate the sale of OREO 598,000 304,550 Change in unrealized gain on securities available for sale, net of tax (396,392) 1,573,789 Supplemental Disclosures: Interest payments $6,078,780 $5,529,806 Income tax payments 3,082,088 2,511,250
See accompanying notes to consolidated financial statements. WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 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 September 30, 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 summarized as follows:
Amortized Unrealized Unrealized Fair Cost Gains Losses Value - ------------------------------------------- ---------------- ---------------- ---------------- ------------------ September 30, 1996 U.S. Treasury obligations and obligations of U.S. government-sponsored agencies $50,671,442 308,461 (148,169) $50,831,734 Mortgage-backed securities 75,936,718 157,737 (596,245) 75,498,210 Corporate stocks 11,765,238 6,988,682 (67,869) 18,686,051 - ------------------------------------------------------------------------------------------------------------------ Total $138,373,398 7,454,880 (812,283) $145,015,995 - ------------------------------------------------------------------------------------------------------------------ December 31, 1995 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 - ------------------------------------------------------------------------------------------------------------------- Total $78,249,075 7,522,038 (218,778) $85,552,335 - -------------------------------------------------------------------------------------------------------------------
Included in corporate stocks at 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. There were no auction rate preferred stocks at September 30, 1996. U.S. Treasury obligations with a fair value of $9,497,032 and $4,519,878 were pledged to secure public deposits and for other purposes at September 30, 1996 and December 31, 1995, respectively. For the nine months ended September 30, 1996, proceeds from sales of securities available for sale amounted to $18,562,653. Realized gains and losses on these sales were $477,936 and $211,910, respectively. (3) SECURITIES HELD TO MATURITY The amortized cost and fair value of securities held to maturity are summarized as follows:
Amortized Unrealized Unrealized Fair Cost Gains Losses Value - ------------------------------------------ ---------------- ---------------- ---------------- ------------------ September 30, 1996 Mortgage-backed securities $12,582,948 80,584 (1,116) $12,662,416 States and political subdivisions 15,680,486 35,919 (77,365) 15,639,040 - ----------------------------------------------------------------------------------------------------------------- Total $28,263,434 116,503 (78,481) $28,301,456 - ----------------------------------------------------------------------------------------------------------------- December 31, 1995 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 - ----------------------------------------------------------------------------------------------------------------- Total $28,872,991 575,084 (15,256) $29,432,819 - -----------------------------------------------------------------------------------------------------------------
There were no sales or transfers of securities held to maturity during the nine months ended September 30, 1996. (4) LOAN PORTFOLIO The following is a summary of loans:
September 30, 1996 December 31, 1995 - ------------------------------------------------------------------------------------------------ Residential real estate: Mortgages $171,686,033 $167,510,929 Homeowner construction 6,731,324 3,071,177 - ------------------------------------------------------------------------------------------------ Total residential real estate 178,417,357 170,582,106 - ------------------------------------------------------------------------------------------------ Commercial: Mortgages 64,774,915 58,837,483 Construction and development 6,577,463 5,968,404 Other 97,459,456 96,830,889 - ------------------------------------------------------------------------------------------------ Total commercial 168,811,834 161,636,776 - ------------------------------------------------------------------------------------------------ Installment 59,664,184 54,240,010 - ------------------------------------------------------------------------------------------------ Total loans $406,893,375 $386,458,892 - ------------------------------------------------------------------------------------------------
(5) ALLOWANCE FOR LOAN LOSSES The following is an analysis of the allowance for loan losses:
Three months ended Nine months ended September 30, September 30, ----------------------------------- --------------------------------- 1996 1995 1996 1995 - ----------------------------------------- -------------------- ------------- -------------------- ------------- Balance at beginning of period $8,150,002 $8,630,876 $7,784,516 $9,327,942 Provision charged to expense 300,000 275,000 900,000 725,000 Recoveries 173,123 269,704 671,180 455,691 Loans charged off (192,943) (835,905) (925,514) (2,168,958) - ----------------------------------------- ---------------- ----------------- ---------------- ----------------- Balance at end of period $8,430,182 $8,339,675 $8,430,182 $8,339,675 - ----------------------------------------- ---------------- ----------------- ---------------- -----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Quarters Ended September 30, 1996 and 1995 Net income for the three months ended September 30, 1996 amounted to $2,320,527, up 14.2% over the $2,032,821 of net income recorded in the third quarter of 1995. Earnings per share for the quarter ended September 30, 1996 amounted to $.51, up from the $.46 per share on net income earned in the comparable 1995 period. All share and per share amounts have been adjusted to reflect a 3-for-2 stock split effected on October 15, 1996. Net interest income for the three months ended September 30, 1996 increased by 6.4% over the prior year quarter, to $6.8 million. This increase was primarily attributable to higher interest income from securities, which was partially offset by an increase in interest paid on borrowings. (See additional discussion under the caption "Net Interest Income".) The provision for loan losses amounted to $300,000 for the third quarter of 1996, up from $275,000 recorded in the third quarter of 1995. Other noninterest income (noninterest income excluding gains on sales of securities and gains (losses) on loan sales) amounted to $2.1 million for the three months ended September 30, 1996, up 12.6% from the same 1995 period. This increase is primarily due to higher revenues for trust services as well as an increase in service charges earned on deposit accounts. For the three months ended September 30, 1996 and 1995, securities gains amounted to $117,689 and $111,198, respectively. Gains on loan sales in the third quarter of 1996 amounted to $65,693, compared to losses on sales of loans of $193,143 in the third quarter of 1995. The 1995 amount included a loss of approximately $200,000 resulting from the sale of a pool of loans, most of which were nonperforming. Total noninterest expense for the quarter ended September 30, 1996 amounted to $5.3 million, an increase of 10.0% from the comparable 1995 amount. This increase was largely attributable to higher salaries and benefits expense resulting from increased staffing levels and normal salary adjustments. In addition, equipment costs were higher due to depreciation expense associated with purchases that occurred in 1995 and in the first half of 1996. Results of Operations - Nine Months Ended September 30, 1996 and 1995 Net income for the nine months ended September 30, 1996 amounted to $6,356,500, 13.1% higher than the $5,622,060 of net income recorded in the comparable 1995 period. Fully diluted earnings per share for the nine months ended September 30, 1996 amounted to $1.42, up 10.9% over the $1.28 per share earned in the comparable 1995 period. The increase in net income in 1996 is due to increases in net interest income and noninterest income totaling $1,703,865, which were partially offset by an increase in the provision for loan losses of $175,000 and an increase in noninterest expense of $574,425. Net interest income for the nine months ended September 30, 1996 increased by 4.1% over the same prior year period. 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 and borrowings. (See additional discussion under the caption "Net Interest Income".) Other noninterest income amounted to $5.8 million for the nine months ended September 30, 1996, up by 13.1% from the comparable 1995 amount of $5.1 million. This increase is primarily due to higher revenues for trust services as well as an increase in service charges earned on deposit accounts. For the nine months ended September 30, 1996 and 1995, securities gains amounted to $266,026 and $280,408, respectively. Gains on loan sales for the 1996 year-to-date period amounted to $140,734, compared to losses on sales of loans of $145,068 for the same 1995 period. The 1995 amount includes a loss of approximately $200,000 resulting from the sale of a pool of loans, most of which were nonperforming. Total noninterest expense for the nine months ended September 30, 1996 amounted to $15.2 million, up 3.9% from the 1995 amount of $14.6 million. Federal Deposit Insurance Corporation premiums for the nine months ended September 30, 1996 were reduced by approximately $467,000 from the comparable 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 and equipment expense. Salaries and benefits were up due to increased staffing levels and normal salary adjustments, while equipment costs were higher due to depreciation expense associated with purchases that occurred in 1995 and in the first half of 1996. 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.
Nine months ended September 30, 1996 1995 - ------------------------------------------ ------------------------------------ ---------------------------------- Average Yield/ Average Yield/ (Dollars in thousands) Balance Interest Rate Balance Interest Rate - -------------------------------------- ------------- ------------ ---------- -------------- ----------- ----------- Interest-earning assets: Residential real estate loans $174,308 10,781 8.25% $176,397 11,019 8.33% Commercial and other loans 164,909 12,178 9.85% 170,141 12,142 9.52% Installment loans 56,066 4,067 9.67% 47,599 3,585 10.04% - ------------------------------------------------------------------------------------------------------------------- Total loans 395,283 27,026 9.12% 394,137 26,746 9.05% Federal funds sold and securities purchased under agreements to resell 4,509 180 5.32% 13,241 575 5.80% Taxable securities 114,347 6,469 7.54% 77,201 4,097 7.08% Nontaxable securities 15,881 777 6.52% 10,608 523 6.57% - ------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 530,020 34,452 8.67% 495,187 31,941 8.60% Non interest-earning assets 36,940 36,838 - ------------------------------------------------------------------------------------------------------------------- Total assets $566,960 $532,025 - ------------------------------------------------------------------------------------------------------------------- Interest-bearing liabilities: Savings deposits $174,556 2,881 2.20% $178,519 2,949 2.20% Time deposits 231,501 9,294 5.35% 221,956 8,617 5.18% FHLB advances 38,637 1,721 5.94% 21,790 1,006 6.15% Other 2,175 90 5.48% 442 19 5.89% - ------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 446,869 13,986 4.17% 422,707 12,591 3.97% Non interest-bearing liabilities 64,761 60,534 - ------------------------------------------------------------------------------------------------------------------- Total liabilities 511,630 483,241 Total shareholders' equity 55,330 48,784 - ------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $566,960 $532,025 - ------------------------------------------------------------------------------------------------------------------- Net interest income / interest rate spread $20,466 4.50% $19,350 4.63% - ------------------------------------------------------------------------------------------------------------------- Net interest margin 5.15% 5.21% - ------------------------------------------------------------------------------------------------------------------- Interest income amounts presented in the table above include the following adjustments for taxable equivalency (in thousands): September 30, 1996 September 30, 1995 - --------------------------- ------------------- ----------------------- Commercial and other loans $62 $63 Nontaxable debt securities 527 337 Corporate stocks 352 187
Net Interest Income (The accompanying schedule on the previous page should be read in conjunction with this discussion.) FTE net interest income for the nine months ended September 30, 1996 amounted to $20.5 million, up by approximately $1.1 million, or 5.8%, over the same 1995 period. 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 for the nine months ended September 30, 1996 amounted to 4.50% and 5.15%, respectively. Comparable amounts for 1995 were 4.63% and 5.21%, respectively. For the nine months ended September 30, 1996, average interest-earning assets amounted to $530.0 million, an increase of $34.8 million, or 7.0%, over the comparable 1995 amount. The FTE rate of return on average interest-earning assets was 8.67% for the nine months ended September 30, 1996, up from 8.60% for the same 1995 period. The growth in average interest-earning assets was due to the increase in average taxable securities, which were up by $37.1 million, or 48.1%, from the 1995 amount. The increase in average taxable securities resulted primarily from an investment leverage program which was implemented in the second quarter of 1996. The objective of the program is to increase net interest income and improve returns on equity, while incurring limited interest rate risk. Approximately $50 million of adjustable rate mortgage-backed securities were purchased under this program and funded with Federal Home Loan Bank (FHLB) advances with similar interest rate repricing characteristics. For the nine months ended September 30, 1996, the FTE yield on taxable securities rose by 46 basis points over the prior year, to 7.54%, as a result of a change in the mix of securities. During this same period, average U.S. Treasury obligations comprised 37% of total average taxable securities, down from 59% for the comparable 1995 period, due largely to the purchase of higher-yielding mortgage-backed securities under the investment leverage program. The additional growth in mortgage-backed securities and corporate stocks resulted from maturing short-term investments and liquidity generated from deposit growth. (See notes 2 and 3 to the Consolidated Financial Statements for more information on the composition of securities.) The overall yield on average total loans amounted to 9.12% for the nine months ended September 30, 1996, up from 9.05% in the comparable 1995 period due to a change in the mix of loans. The average balance of installment loans, the highest yielding loan category, rose by $8.5 million, while the average balance of residential real estate and commercial loans declined by $2.1 million and $5.2 million, respectively. Another factor in the increase in the overall yield on average total loans was the increase in the yield on commercial loans, which rose 33 basis points to 9.85%. Lower levels of nonaccrual commercial loans contributed to this yield improvement. In addition, most commercial loans reprice periodically based upon the prime rate, which was 8.25% at September 30, 1996 versus 8.75% a year earlier; however, this decline in the prime rate was partially offset by payments received under interest rate floor contracts. The interest earned on these contracts, net of floor contract premium amortization, increased interest earned on commercial loans by approximately $134,000, or 11 basis points, for the nine months ended September 30, 1996. The yields on residential real estate and installment loans decreased by 8 basis points and 37 basis points, respectively, from the prior year to date period. The Corporation's total cost of funds on interest-bearing liabilities amounted to 4.17% for the nine months ended September 30, 1996, up from 3.97% for the comparable 1995 period. This increase was due to increases in the volume of average time deposits and the rate paid on these deposits, as well as higher average FHLB advances outstanding. These factors offset the benefit of an increase in average demand deposits, an interest-free source of funding. Average demand deposits for the nine months ended September 30, 1996 were up by $7.8 million, or 14.6%, from the same prior year period. Average time deposits rose 4.3% from the prior year amount, to $231.5 million. The rate paid on time deposits was 5.35% for the first nine months of 1996, up from 5.18% for the same 1995 period. While average savings deposits for the nine months ended September 30, 1996 declined by 2.2% from the comparable 1995 amount, the rate paid on these deposits remained unchanged from the prior year period at 2.20%. Average FHLB advances for the nine months ended September 30, 1996 amounted to $38.6 million, up by 77.3% from the $21.8 million average balance for the same 1995 period. The additional advances were used primarily to purchase securities under the investment leverage program implemented in the second quarter of 1996. The average rate paid on FHLB advances for the nine months ended September 30, 1996 was 5.94%, a decrease of 21 basis points from the prior year rate. Financial Condition and Liquidity Total assets amounted to $623.4 million at September 30, 1996, an increase of $75.8 million from the December 31, 1995 amount of $547.7 million. Average assets totaled $567.0 million for the nine months ended September 30, 1996, up by 6.6% over the comparable 1995 period. Securities Available for Sale - The amortized cost of securities available for sale at September 30, 1996 amounted to $138.4 million, an increase of $60.1 million over the December 31, 1995 amount of $78.2 million. Approximately $50.0 million of this increase is attributable to adjustable rate pass-through securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies which were purchased under the investment leverage program which began in the second quarter of 1996. (See Net Interest Income for additional discussion of the investment leverage program). The net unrealized gain on securities available for sale decreased in the nine months ended September 30, 1996 by approximately $660,000. This decline is attributable to the decline in the market value of debt securities resulting from the rise in medium-term and long-term Treasury rates that has occurred since December 31, 1995. Securities Held to Maturity - The carrying value of securities held to maturity amounted to $28.3 million at September 30, 1996, down from $28.9 million at December 31, 1995. The net unrealized gain on securities held to maturity amounted to approximately $38,000 and $560,000 at September 30, 1996 and December 31, 1995, respectively, representing a reduction of $522,000 during this nine-month period. This decline was attributable to the rise in medium-term and long-term Treasury rates occurring since December 31, 1995. Loans - Total loans amounted to $406.9 million at September 30, 1996, an increase of $20.4 million, or 5.3%, from the December 31, 1995 balance of $386.5 million. All categories of loans exhibited increases over the year-end 1995 amounts. The strong growth in installment loans experienced during 1995 has continued in 1996. As of September 30, 1996, installment loans were up by 10.0% over the December 31, 1995 balance. Demand for commercial loans has improved after being relatively soft during 1995, with the largest increase occurring in the commercial mortgage portfolio. Residential mortgages increased by $4.1 million from the December 31, 1995 balance due to a decision by the Corporation to retain 15-year fixed rate mortgages in its portfolio of loans. The Corporation continues to sell substantially all 30-year fixed rate residential mortgage originations, and has retained servicing rights on all residential mortgage loans sold. Deposits and Other Borrowings - Total deposits amounted to $471.0 million at September 30, 1996, up by $3.1 million from the December 31, 1995 amount of $467.9 million. Savings and time deposits decreased by 1.1% from the December 31, 1995 balance. Demand deposits increased by 12.6% from the year-end 1995 amount due to the normal seasonal deposit inflow. The Corporation utilizes FHLB advances as a funding source. FHLB advances amounted to $78.7 million at September 30, 1996, up by $57.7 million from the December 31, 1995 amount. In addition, short-term borrowings outstanding at September 30, 1996 amounted to $10.2 million. The additional FHLB advances and short-term borrowings were used to fund loan growth and to purchase securities under the investment leverage program implemented in the second quarter of 1996. The Corporation is required to maintain a level of investment in FHLB stock which is based on the level of its FHLB advances. As a result of the increase in the FHLB advances during 1996, the Corporation has increased its investment in FHLB stock from $2,995,000 at December 31, 1995 to $7,185,900 at September 30, 1996. For the nine months ended September 30, 1996, net cash provided by operations amounted to $7.9 million, the majority of which was generated by net income. Proceeds from sales of loans in the first nine months of 1996 amounted to $12.3 million, while loans originated for sale amounted to $11.9 million. Net cash used in investing activities amounted to $87.1 million and was primarily used to purchase securities available for sale and for loan originations. Net cash used in investing activities also included $3.2 million used to purchase premises and equipment. The funding for cash used in investing activities was generated by utilizing cash and cash equivalents, by a net increase in FHLB advances of $57.7 million, and by an increase in short-term borrowings of $10.2 million. (See Consolidated Statements of Cash Flows for additional information.) During 1996, the Corporation has announced plans to expand its market area into contiguous communities. The Corporation will open a new 5,900 square foot branch office later this year in North Kingstown, Rhode Island. The branch will be a full service banking office, offering deposit and loan services for businesses and consumers, as well as trust and investment services. Plans were also announced to install branches in two supermarkets in early 1997. The branches will offer a complete range of financial products and services. The Corporation has also entered into an agreement to acquire a branch office of a Connecticut bank and its deposits of approximately $10 million. The transaction is expected to become effective during the first quarter of 1997. Asset Quality Nonperforming assets are summarized in the following table:
September 30, December 31, (Dollars in thousands) 1996 1995 ---------------- ----------------- Nonaccrual loans 90 days or more past due $3,896 $4,616 Nonaccrual loans less than 90 days past due 2,356 3,958 --------------- --------------- Total nonaccrual loans 6,252 8,574 --------------- --------------- Other real estate owned: Properties acquired through foreclosure 1,721 2,115 Valuation allowance (310) (410) --------------- --------------- Total other real estate owned 1,411 1,705 --------------- --------------- Total nonperforming assets $7,663 $10,279 --------------- --------------- Nonaccrual loans as a % of total loans 1.5% 2.2% Nonperforming assets as a % of total assets 1.2% 1.9% Allowance for loan losses to nonaccrual loans 134.8% 90.8%
Not included in the analysis of nonperforming assets at September 30, 1996 and December 31, 1995 above are approximately $1.7 million 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. In addition, at September 30, 1996 and December 31, 1995, there were approximately $47,000 and $28,000, respectively, of credit card loans which were 90 days or more past due and still accruing. The average balance and corresponding percentage of net charge-offs on credit card loans for the nine months ended September 30, 1996 amounted to $3,755,000 and 2.4%, respectively. This compares to an average balance and percentage of net charge-offs of $3,609,000 and 1.1%, respectively, for the year ended December 31, 1995. The following is an analysis of nonaccrual loans by loan category: September 30, December 31, (In thousands) 1996 1995 --------------- ---------------- Residential mortgages $2,505 $2,280 Commercial: Mortgages 1,482 2,798 Construction and development 230 280 Other (1) 1,688 2,779 Installment 347 437 --------------- --------------- Total nonperforming loans $6,252 $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 September 30, 1996, the recorded investment in impaired loans was $3,400,000, including $1,902,000 which had a related allowance amounting to $343,000. 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 September 30, 1996 and December 31, 1995 was $1,498,000 and $1,001,000, respectively. During the nine months ended September 30, 1996, the average recorded investment in impaired loans was $4,952,000. Also during this period, interest income recognized on impaired loans amounted to approximately $204,000. 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): September 30, December 31, 1996 1995 -------------- -------------- Commercial real estate $740 $671 Residential real estate 450 707 Land and other 531 737 ------------- ------------- 1,721 2,115 Valuation allowance (310) (410) ------------- ------------- Total other real estate owned $1,411 $1,705 ------------- ------------- An analysis of the activity relating to other real estate owned for the nine months ended September 30, 1996 follows (in thousands): Balance at beginning of year $2,115 Transfers from loans, net 1,049 Sales and other reductions (1,452) Other 9 ----------- 1,721 Valuation allowance (310) ----------- Balance at end of period $1,411 ----------- The following is an analysis of the OREO valuation allowance for the nine months ended September 30, 1996 (in thousands): Balance at beginning of period $410 Provision charged to expense 278 Sales and other reductions (378) ------------- Balance at end of period $310 ----------- Capital Resources Total equity capital amounted to $57.3 million, or 9.2% of total assets at September 30, 1996. This compares to $52.9 million, or 9.7% at December 31, 1995. Total equity increased by $4.3 million from December 31, 1995, $4.1 million of which is attributable to earnings retention. The Corporation's total risk-adjusted capital ratio amounted to 15.48% at September 30, 1996. Banks are required to maintain a minimum capital to risk-adjusted asset ratio of 8%. The Corporation's leverage ratio amounted to 8.90% at September 30, 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 September 30, 1996 amounted to $784,444, representing $.18 per share payable on October 15, 1996, an increase of 12.5% over the $.16 per share declared in the third quarter of 1995. These per share amounts have been adjusted to reflect the 3-for-2 stock split paid in the form of a stock dividend on October 15, 1996 to shareholders of record on October 1, 1996. 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. In June 1996, the Corporation's Board of Directors approved a program to repurchase up to 87,000 (split-adjusted) or approximately 2% of its outstanding common shares. The Corporation plans to hold the repurchased shares as treasury stock to be used for general corporate purposes. During the third quarter of 1996, shares were repurchased under this program at a total cost of $240,500. 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. Exhibit 11 Statement re Computation of Earnings Per Share (b) The following reports on Form 8-K were filed during the quarter ended September 30, 1996: On August 23, 1996, a Form 8-K was filed which reported that the Corporation's Board of Directors declared a dividend of one common share purchase right (a "Right") for each share of common stock, par value $.0625 per share (the "Common Shares") outstanding on September 3, 1996 to the shareholders of record on that date. On September 19, 1996, a Form 8-K was filed which reported that the Corporation's Board of Directors voted to approve a 3-for-2 stock split on shares on common stock. The stock split, in the form of a stock dividend, was paid on October 15, 1996 to shareholders of record as of October 1, 1996. 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) November 14, 1996 By: Joseph J. Kirby ------------------------ Joseph J. Kirby Chairman and Chief Executive Officer (principal executive officer) November 14, 1996 By: David V. Devault ------------------------- David V. Devault Vice President and Chief Financial Officer (principal financial officer) EX-11 2 Exhibit 11 Washington Trust Bancorp, Inc. Computation of Primary and Fully Diluted Earnings Per Share For the Three Months and Nine Months Ended September 30, 1996 and 1995
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 ---- ---- ---- ---- Primary: Weighted average shares 4,345,734 4,249,469 4,315,296 4,241,537 Common stock equivalents 157,785 134,814 144,516 106,588 -------------- --------------- --------------- --------------- Primary weighted average shares 4,503,519 4,384,283 4,459,812 4,348,125 -------------- --------------- --------------- --------------- Fully diluted: Weighted average shares 4,345,734 4,249,469 4,315,296 4,241,537 Common stock equivalents 167,844 134,767 170,507 135,696 -------------- --------------- --------------- --------------- Fully diluted weighted average shares 4,513,578 4,384,236 4,485,803 4,377,233 -------------- --------------- --------------- --------------- Net income $2,320,527 $2,032,821 $6,356,500 $5,622,060 -------------- --------------- --------------- --------------- Primary earnings per share $.52 $.46 $1.43 $1.29 -------------- --------------- --------------- --------------- Fully diluted earnings per share $.51 $.46 $1.42 $1.28 -------------- --------------- --------------- ---------------
EX-27 3
9 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO OF WASHINGTON TRUST BANCORP, INC. AS OF SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1996 SEP-30-1996 18,920,846 0 37,426 0 145,015,995 28,263,434 28,301,456 406,893,375 8,430,182 623,414,480 470,986,703 88,870,517 6,303,961 0 0 0 271,966 56,981,333 623,414,480 26,963,456 6,367,479 180,024 33,510,959 12,174,951 13,985,678 19,525,281 900,000 266,026 15,188,447 9,632,500 9,632,500 0 0 6,356,500 1.43 1.42 8.67 0 0 0 0 7,784,516 925,514 671,180 8,430,182 0 0 0
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