-----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, Bc/MB7NrvM79pXMAd6jJgmedFVzCz34zdOlPTO0TNAkZAoueQ7FjclGT5nTLdVur Z7HY7vgOPfJRDgli2HMUoA== 0000737468-99-000008.txt : 19990517 0000737468-99-000008.hdr.sgml : 19990517 ACCESSION NUMBER: 0000737468-99-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 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: SEC FILE NUMBER: 000-13091 FILM NUMBER: 99621569 BUSINESS ADDRESS: STREET 1: 23 BROAD ST CITY: WESTERLY STATE: RI ZIP: 02891 BUSINESS PHONE: 4013481200 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 1999 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number: 000-13091 ------------------------------------- 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) (401) 348-1200 (Registrant's telephone number, including area code) 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 The number of shares of common stock of the registrant outstanding as of May 7, 1999 was10,120,257. Page 1 FORM 10-Q WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY For The Quarter Ended March 31, 1999 TABLE OF CONTENTS Page Number PART I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets March 31, 1999 and December 31, 1998 3 Consolidated Statements of Income Three Months Ended March 31, 1999 and 1998 4 Consolidated Statements of Changes in Shareholders' Equity Three Months Ended March 31, 1999 and 1998 5 Consolidated Statements of Cash Flows Three Months Ended March 31, 1999 and 1998 6 Condensed Notes to Consolidated Financial Statements 8 Independent Auditors' Review Report 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk 18 PART II. Other Information 19 Signatures 20 This report contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Corporation's actual results could differ materially from those projected in the forward-looking statements as a result, among other factors, of changes in general national or regional economic conditions, changes in interest rates, reductions in deposit levels necessitating increased borrowing to fund loans and investments, changes in the size and nature of the Corporation's competition, changes in loan default and charge-off rates, and changes in the assumptions used in making such forward-looking statements. WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands) CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 1999 1998 - -------------------------------------------------------------------------------- Assets: Cash and due from banks $13,889 $18,475 Federal funds sold and other short-term investments 11,598 10,300 Mortgage loans held for sale 4,386 5,944 Securities: Available for sale, at fair value 343,686 315,265 Held to maturity, at cost; fair value $96,918 in 1999 and $96,548 in 1998 96,744 95,647 - -------------------------------------------------------------------------------- Total securities 440,430 410,912 Federal Home Loan Bank stock, at cost 16,444 16,444 Loans 461,092 449,502 Less allowance for loan losses 10,768 10,416 - -------------------------------------------------------------------------------- Net loans 450,324 439,086 Premises and equipment, net 23,556 22,985 Accrued interest receivable 6,169 5,540 Other assets 5,965 5,383 - -------------------------------------------------------------------------------- Total assets $972,761 $935,069 - -------------------------------------------------------------------------------- Liabilities: Deposits: Demand $84,306 $87,383 Savings 208,702 210,093 Time 272,963 277,847 - -------------------------------------------------------------------------------- Total deposits 565,971 575,323 Dividends payable 1,113 1,005 Short-term borrowings 19,197 15,033 Federal Home Loan Bank advances 303,955 262,106 Accrued expenses and other liabilities 8,553 8,536 - -------------------------------------------------------------------------------- Total liabilities 898,789 862,003 - -------------------------------------------------------------------------------- Shareholders' Equity: Common stock of $.0625 par value; authorized 30 million shares; issued 10,119,093 shares in 1999 and 10,010,962 shares in 1998 632 626 Paid-in capital 3,578 2,855 Retained earnings 63,696 62,196 Accumulated other comprehensive income 6,066 7,389 - -------------------------------------------------------------------------------- Total shareholders' equity 73,972 73,066 - -------------------------------------------------------------------------------- Total liabilities and shareholders' equity $972,761 $935,069 - -------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements. WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands) CONSOLIDATED STATEMENTS OF INCOME (Unaudited) ------------------------ Three months ended March 31, 1999 1998 - -------------------------------------------------------------------------------- Interest income: Interest and fees on loans $9,665 $10,072 Interest on securities 6,044 4,571 Dividends on corporate stock and Federal Home Loan Bank stock 532 509 Interest on federal funds sold and other short-term investments 141 169 - -------------------------------------------------------------------------------- Total interest income 16,382 15,321 - -------------------------------------------------------------------------------- Interest expense: Savings deposits 852 827 Time deposits 3,460 3,890 Federal Home Loan Bank advances 3,831 3,072 Other 220 232 - -------------------------------------------------------------------------------- Total interest expense 8,363 8,021 - -------------------------------------------------------------------------------- Net interest income 8,019 7,300 Provision for loan losses 450 450 - -------------------------------------------------------------------------------- Net interest income after provision for loan losses 7,569 6,850 - -------------------------------------------------------------------------------- Noninterest income: Trust revenue 1,419 1,224 Service charges on deposit accounts 725 633 Merchant processing fees 249 155 Net gains on sales of securities 262 41 Net gains on loan sales 328 329 Other income 349 282 - -------------------------------------------------------------------------------- Total noninterest income 3,332 2,664 - -------------------------------------------------------------------------------- Noninterest expense: Salaries and employee benefits 3,783 3,419 Net occupancy 504 459 Equipment 672 566 Merchant processing costs 141 111 Office supplies 156 159 Advertising and promotion 172 112 Other 1,754 1,364 - -------------------------------------------------------------------------------- Total noninterest expense 7,182 6,190 - -------------------------------------------------------------------------------- Income before income taxes 3,719 3,324 Income tax expense 1,106 931 - -------------------------------------------------------------------------------- Net income $2,613 $2,393 - -------------------------------------------------------------------------------- Per share information: Earnings per share - basic $.26 $.24 Earnings per share - diluted $.25 $.23 Cash dividends declared per share $.11 $.10 The accompanying notes are an integral part of these consolidated financial statements.
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) Accumulated Other Common Paid-in Retained Comprehensive Treasury Stock Capital Earnings Income Stock Total - ---------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1999 $626 $2,855 $62,196 $7,389 $- $73,066 Net income 2,613 2,613 Other comprehensive income net of tax: Net unrealized losses on securities, net of reclassification adjustment (1,323) (1,323) -------- Comprehensive income 1,290 Cash dividends declared (1,113) (1,113) Shares issued 6 723 729 - ---------------------------------------------------------------------------------------------------------------------- Balance at March 31, 1999 $632 $3,578 $63,696 $6,066 $- $73,972 - ---------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1998 $413 $3,705 $56,360 $7,059 $(333) $67,204 Net income 2,393 2,393 Other comprehensive income net of tax: Net unrealized gains on securities, net of reclassification adjustment 910 910 -------- Comprehensive income 3,303 Cash dividends declared (998) (998) Shares issued 5 501 1,003 1,509 Shares repurchased (1,684) (1,684) - ---------------------------------------------------------------------------------------------------------------------- Balance at March 31, 1998 $418 $4,206 $57,755 $7,969 $(1,014) $69,334 - ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands) CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) --------------------------- Three months ended March 31, 1999 1998 - ------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $2,613 $2,393 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 450 450 Depreciation of premises and equipment 693 573 Amortization of premium in excess of accretion of discount on debt securities 23 284 Net gains on sales of securities (262) (41) Net gains on loan sales (328) (329) Proceeds from sales of loans 19,527 22,265 Loans originated for sale (17,676) (24,016) Increase in accrued interest receivable (629) (441) Increase in other assets (540) (325) Increase (decrease) in accrued expenses and other liabilities 698 (79) Other, net (56) (53) - ----------------------------------------------------------------------------------------------------- Net cash provided by operating activities 4,513 681 - ----------------------------------------------------------------------------------------------------- Cash flows from investing activities: Securities available for sale: Purchases (56,511) (95,619) Proceeds from sales 12,890 19,532 Maturities and principal repayments 13,412 11,663 Securities held to maturity: Purchases (7,043) (1,567) Maturities and principal repayments 5,967 370 Principal collected on loans (under) over loan originations (11,787) 5,276 Proceeds from sales of other real estate owned 151 340 Purchases of premises and equipment (1,265) (858) - ----------------------------------------------------------------------------------------------------- Net cash used in investing activities (44,186) (60,863) - ----------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net (decrease) increase in deposits (9,352) 16,852 Net increase (decrease) in other short-term borrowings 4,164 (610) Proceeds from Federal Home Loan Bank advances 147,336 168,400 Repayment of Federal Home Loan Bank advances (105,487) (124,591) Purchase of treasury stock - (1,684) Proceeds from issuance of common stock 729 1,509 Cash dividends paid (1,005) (927) - ----------------------------------------------------------------------------------------------------- Net cash provided by financing activities 36,385 58,949 - ----------------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (3,288) (1,233) Cash and cash equivalents at beginning of year 28,775 25,500 - ----------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $25,487 $24,267 - ----------------------------------------------------------------------------------------------------- (Continued)
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Three months ended March 31, 1999 1998 - ----------------------------------------------------------------------------------------------------- Noncash Investing and Financing Activities: Net transfers from loans to other real estate owned $194 $44 Loans charged off 142 55 (Decrease) increase in net unrealized gain on securities available for sale (1,323) 910 Supplemental Disclosures: Interest payments $8,148 $4,541 Income tax payments 1 2
The accompanying notes are an integral part of these consolidated financial statements. WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands) CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 of the banking industry. In the opinion of management, the accompanying consolidated financial statements present fairly the Corporation's financial position as of March 31, 1999 and December 31, 1998 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, 1998 included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1998 (2) Securities Available for Sale
Securities available for sale are summarized as follows: Amortized Unrealized Unrealized Fair Cost Gains Losses Value - --------------------------------------------------------------------------------------------------------------------- March 31, 1999 U.S. Treasury obligations and obligations of U.S. government-sponsored agencies $116,116 $1,146 $(184) $117,078 Mortgage-backed securities 166,405 513 (445) 166,473 Corporate bonds 37,733 103 (265) 37,571 Corporate stocks 13,211 9,638 (285) 22,564 - --------------------------------------------------------------------------------------------------------------------- Total 333,465 11,400 (1,179) 343,686 - --------------------------------------------------------------------------------------------------------------------- December 31, 1998 U.S. Treasury obligations and obligations of U.S. government-sponsored agencies 113,757 1,782 (12) 115,527 Mortgage-backed securities 143,906 666 (495) 144,077 Corporate bonds 27,533 179 (209) 27,503 Corporate stocks 17,842 10,408 (92) 28,158 - --------------------------------------------------------------------------------------------------------------------- Total $303,038 $13,035 $(808) $315,265 - ---------------------------------------------------------------------------------------------------------------------
Securities available for sale with a fair value of $31,837 and $27,800 were pledged to secure Treasury Tax and Loan deposits, short-term borrowings and public deposits at March 31, 1999 and December 31, 1998, respectively. For the three months ended March 31, 1999, proceeds from sales of securities available for sale amounted to $12,890 while net realized gains on these sales amounted to $262. (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 - --------------------------------------------------------------------------------------------------------------------- March 31, 1999 U.S. Treasury obligations and obligations of U.S. government-sponsored agencies $25,984 $67 $(27) $26,024 Mortgage-backed securities 43,586 267 (480) 43,373 States and political subdivisions 27,174 361 (14) 27,521 - --------------------------------------------------------------------------------------------------------------------- Total 96,744 695 (521) 96,918 - --------------------------------------------------------------------------------------------------------------------- December 31, 1998 U.S. Treasury obligations and obligations of U.S. government-sponsored agencies 21,987 133 (1) 22,119 Mortgage-backed securities 46,088 335 (96) 46,327 States and political subdivisions 27,572 531 (1) 28,102 - --------------------------------------------------------------------------------------------------------------------- Total $95,647 $999 $(98) $96,548 - ---------------------------------------------------------------------------------------------------------------------
There were no sales or transfers of securities held to maturity during the three months ended March 31, 1999. (4) Loan Portfolio The following is a summary of loans: March 31, December 31, 1999 1998 - -------------------------------------------------------------------------------- Commercial: Mortgages $78,396 $70,468 Construction and development 608 612 Other (1) 114,187 111,477 - -------------------------------------------------------------------------------- Total commercial 193,191 182,557 Residential real estate: Mortgages 181,918 179,589 Homeowner construction 9,125 10,046 - -------------------------------------------------------------------------------- Total residential real estate 191,043 189,635 Consumer (2) 76,858 77,310 - -------------------------------------------------------------------------------- Total loans $461,092 $449,502 - -------------------------------------------------------------------------------- (1) Loans to businesses and individuals, a substantial portion of which is fully or partially collateralized by real estate. (2) Includes credit card loans totaling $5.0 million and $5.4 million at March 31, 1999 and December 31, 1998, respectively. (5) Allowance For Loan Losses The following is an analysis of the allowance for loan losses: Three months ended March 31, 1999 1998 - -------------------------------------------------------------------------------- Balance at beginning of period $10,416 $8,835 Provision charged to expense 450 450 Recoveries 44 79 Loans charged off (142) (55) - -------------------------------------------------------------------------------- Balance at end of period $10,768 $9,309 - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REVIEW REPORT The Board of Directors and Shareholders Washington Trust Bancorp, Inc.: We have reviewed the accompanying consolidated balance sheet of Washington Trust Bancorp, Inc. and subsidiary (the "Corporation") as of March 31, 1999, and the related consolidated statements of income, changes in shareholders' equity and cash flows for the three-month periods ended March 31, 1999 and 1998. These consolidated financial statements are the responsibility of the Corporation's management. We conduct our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of the Corporation as of December 31, 1998, and the related consolidated statements of income, changes in shareholders' equity and cash flows for the year then ended not presented herein; and in our report dated January 21, 1999, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1998, is fairly stated, in all material respects. KPMG LLP Providence, Rhode Island April 15, 1999 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Quarters Ended March 31, 1999 and 1998 The Corporation recorded net income of $2.6 million for the three months ended March 31, 1999, an increase of 9.2 % over the $2.4 million of net income recorded in the first quarter of 1998. Diluted earnings per share for the quarter ended March 31, 1999 amounted to $.25, up from $.23 per share on net income earned in the comparable 1998 quarter. The Corporation's rates of return on average assets and average equity for the quarter ended March 31, 1999 were 1.10% and 14.17%, respectively. Comparable amounts for the first quarter of 1998 were 1.14% and 13.88%, respectively. Net interest income (the difference between interest earned on loans and investments and interest paid on deposits and borrowings) for the first quarter of 1999 amounted to $8.0 million, an increase of 9.8% from the $7.3 million reported for the three months ended March 31, 1998. This increase was primarily attributable to net interest income generated by investment securities. (See additional discussion under the caption "Net Interest Income".) The provision for loan losses for the three months ended March 31, 1999 amounted to $450 thousand, unchanged from the prior year period. Other noninterest income (noninterest income excluding net gains on sales of securities available for sale) amounted to $3.1 million for the first quarter of 1999, up 17.0% over the comparable 1998 amount. This increase was primarily due to growth in revenues for trust services and increases in other service charges. For the three months ended March 31, 1999 and 1998, net gains on sales of securities amounted to approximately $262 thousand and $41 thousand, respectively. Total noninterest expense for the quarter ended March 31, 1999 amounted to $7.2 million, an increase of 16.0% from the comparable 1998 amount. This increase was primarily attributable to higher salaries and benefits expense and increases in equipment and occupancy expenses resulting from the Corporation's expansion of its market area. Equipment and net occupancy costs rose 18.7% and 10.0%, respectively, over the prior year period due primarily to depreciation of premises and equipment incurred in connection with the Corporation's market area expansion efforts. Included in other noninterest expenses for the three months ended March 31, 1999 was a contribution to the Corporation's charitable foundation amounting to approximately $270 thousand. This transaction resulted in the realized securities gains of $262 thousand mentioned previously. Net Interest Income (The accompanying schedule entitled "Average Balances / Net Interest Margin - Fully Taxable Equivalent Basis (FTE)" should be read in conjunction with this discussion.) FTE net interest income for the three months ended March 31, 1999 amounted to $8.3 million, up by 10.4% over the same 1998 period due primarily to the growth in interest-earning assets. The net interest margin (FTE net interest income as a percentage of average interest-earning assets) declined slightly from 3.81% in the first quarter of 1998 to 3.73% in 1999. For the three months ended March 31, 1999, average interest-earning assets amounted to $902.6 million, an increase of $112.2 million, or 14.2%, over the comparable 1998 amount. The growth in average interest-earning assets was due to growth in the securities portfolio. Total average securities rose $113.5 million or 33.9% over the comparable prior year period, mainly due to purchases of debt securities. The FTE rate of return on securities was 6.31% for the first quarter of 1999, down from 6.50% for the same 1998 period. The decrease in yields reflects lower marginal rates on investment purchases. The FTE rate of return on average interest-earning assets was 7.49% for the three months ended March 31, 1999, down from 7.87% for the same 1998 period due to reduction in yields on loans and taxable debt securities. The yield on average total loans amounted to 8.66% for the three months ended March 31, 1999, down from 8.87% in the comparable 1998 period due primarily to lower yields on new loan originations. Average total loans for the three months ended March 31, 1999 declined slightly from the prior year and amounted to $454.2 million. Average consumer loans and residential real estate loans rose by 2.9% and 1.1% over the prior year, respectively, while average commercial loans decreased by 3.0%. As a result of prime rate decreases during the fourth quarter of 1998, the yields on consumer and residential real estate loans declined 44 basis points and 42 basis points to 8.66% and 7.79%, respectively. The yield on commercial loans increased 12 basis points from the first quarter of 1998 to 9.55%. The increase in yields on commercial loans was mainly due to the recognition of interest income relating to payoffs of nonaccrual loans. The Corporation's total cost of funds on interest-bearing liabilities amounted to 4.29% for the three months ended March 31, 1999, down from 4.63% for the comparable 1998 period. This decrease was due primarily to reduced rates paid on both borrowed funds and deposits. Average FHLB advances amounted to $288.9 million, up 37.3% from the $210.5 million average balance for the comparable 1998 period. The average rate paid on FHLB advances for the three months ended March 31, 1999 was 5.38%, an decrease of 46 basis points from the prior year rate. Average time deposits declined $3.3 million to $280.5 million with a decrease of 48 basis points in the rate paid. Average savings deposits for the three months ended March 31, 1999 increased 12.1% from the comparable 1998 amount to $204.2 million. The rate paid on these deposits was 1.69% for the first three months of 1999, down from 1.82% for the same 1998 period. For the three months ended March 31, 1999, average demand deposits, an interest-free funding source, were up by $8.6 million, or 12.0%, from the same prior year period. Average Balances / Net Interest Margin - Fully Taxable Equivalent Basis The following table sets forth average balance and interest rate information. Income is presented on a fully taxable equivalent basis (FTE). For dividends on corporate stocks, the 70% federal dividends received deduction is also used in the calculation of tax equivalency. Nonaccrual and renegotiated loans, as well as interest earned on these loans (to the extent recognized in the Consolidated Statements of Income), are included in amounts presented for loans.
Three months ended March 31, 1999 1998 - ---------------------------------------- ------------------------------------ -------------------------------------- Average Yield/ Average Yield/ (Dollars in thousands) Balance Interest Rate Balance Interest Rate - ---------------------------------------- ------------- ----------- ---------- -------------- ------------ ---------- Assets: Residential real estate loans $191,615 3,683 7.79% $189,444 3,891 8.21% Commercial and other loans 186,464 4,390 9.55% 192,136 4,532 9.43% Consumer loans 76,089 1,625 8.66% 73,970 1,682 9.10% - -------------------------------------------------------------------------------------------------------------------- Total loans 454,168 9,698 8.66% 455,550 10,105 8.87% Federal funds sold and other short-term investments 12,079 141 4.75% 12,405 168 5.43% Taxable debt securities 378,376 5,729 6.14% 275,253 4,380 6.37% Nontaxable debt securities 27,178 476 7.11% 17,774 290 6.52% Corporate stocks and FHLB stock 30,782 628 8.27% 29,448 607 8.25% - -------------------------------------------------------------------------------------------------------------------- Total securities 448,415 6,974 6.31% 334,880 5,445 6.50% - -------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 902,583 16,672 7.49% 790,430 15,550 7.87% - -------------------------------------------------------------------------------------------------------------------- Non interest-earning assets 49,522 49,231 - -------------------------------------------------------------------------------------------------------------------- Total assets $952,105 $839,661 - -------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity: Savings deposits $204,160 852 1.69% $182,156 827 1.82% Time deposits 280,537 3,460 5.00% 283,880 3,890 5.48% FHLB advances 288,876 3,831 5.38% 210,466 3,072 5.84% Other 17,727 220 5.04% 16,649 232 5.57% - -------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 791,300 8,363 4.29% 693,151 8,021 4.63% Demand deposits 79,717 71,149 Non interest-bearing liabilities 7,316 8,539 - -------------------------------------------------------------------------------------------------------------------- Total liabilities 878,333 772,839 Total shareholders' equity 73,772 66,822 - -------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $952,105 $839,661 - -------------------------------------------------------------------------------------------------------------------- Net interest income $8,309 $7,529 - -------------------------------------------------------------------------------------------------------------------- Net interest spread 3.20% 3.24% Net interest margin 3.73% 3.81% - -------------------------------------------------------------------------------------------------------------------- Interest income amounts presented in the table above include the following adjustments for taxable equivalency: (Dollars in thousands) Three months ended March 31, 1999 1998 - -------------------------------------------------------------------------------- Commercial and other loans $33 $33 Nontaxable debt securities 161 98 Corporate stocks 96 98
Financial Condition and Liquidity Total assets amounted to $972.8 million at March 31, 1999, an increase of $37.7 million, or 4.0%, from the December 31, 1998 amount of $935.1 million. Average assets totaled $952.1 million for the three months ended March 31, 1999, up by 13.4% over the comparable 1998 period. Nonperforming assets (nonaccrual loans and property acquired through foreclosure) amounted to $5.0 million or .51% of total assets at March 31, 1999, down from $5.9 million or .63% of total assets at December 31, 1998. Securities Available for Sale - The carrying value of securities available for sale at March 31, 1999 amounted to $343.7 million, an increase of 9.0% over the December 31, 1998 amount of $315.3 million. This increase is attributable to purchases of debt securities. The net unrealized gain on securities available for sale amounted to $10.2 million, down 16.4% from the December 31, 1998 balance of $12.2 million. This decrease was attributable to the effect of increases in Treasury rates that occurred in the first quarter of 1999 and a decline in net unrealized gains on corporate stocks. Securities Held to Maturity - The carrying value of securities held to maturity amounted to $96.7 million at March 31, 1999, up from $95.6 million at December 31, 1998. The net unrealized gain on securities held to maturity amounted to approximately $174 thousand at March 31, 1999, down from $901 thousand at December 31, 1998. This decline was primarily due to the effects of increases in Treasury rates that occurred in the first quarter of 1999. Loans - Total loans amounted to $461.1 million at March 31, 1999, an increase of $11.6 million, or 2.6%, from the December 31, 1998 balance of $449.5 million. Growth in the loan portfolio was led by increases in the commercial loan portfolio. Commercial loans increased $10.6 million or 5.8% to $193.2 million at March 31, 1999. Total residential real estate loans increased by $1.4 million over the December 31, 1998 balance to $191.0 million. Deposits - Total deposits amounted to $566.0 million at March 31, 1999, down by 1.6% from the December 31, 1998 amount of $575.3 million. In the first quarter of 1999, time deposits declined $4.9 million and amounted to $273.0 million. Demand deposits totaled $84.3 million at March 31, 1999, compared to the December 31, 1998 balance of $87.4 million. Savings deposits decreased by $1.4 million from the December 31, 1998 balance to $210.1 million. Borrowings - The Corporation utilizes advances from the Federal Home Loan Bank as well as other short-term borrowings as part of its overall funding strategy. The additional FHLB advances and short-term borrowings were used to meet short-term liquidity needs, to fund loan growth and to purchase securities. FHLB advances amounted to $304.0 million at March 31, 1999, up by $41.8 million from the December 31, 1998 amount. In addition, short-term borrowings outstanding at March 31, 1999 amounted to $19.2 million. For the three months ended March 31, 1999, net cash provided by operations amounted to $4.5 million, the majority of which was generated by net income and loan sale activity. A lower interest rate environment led to volume growth in loans sold into the secondary market. Proceeds from sales of loans in the three months ended March 31, 1999 amounted to $19.5 million, while loans originated for sale in the first three months of 1999 amounted to $17.7 million. Net cash used in investing activities amounted to $44.2 million and was primarily used to purchase securities available for sale. Net cash provided by financing activities of $36.4 million was generated mainly by a net increase in FHLB advances of $41.8 million. (See Consolidated Statements of Cash Flows for additional information.) Nonperforming Assets Nonperforming assets are summarized in the following table: March 31, December 31, (Dollars in thousands) 1999 1998 - -------------------------------------------------------------------------------- Nonaccrual loans 90 days or more past due $2,458 $2,421 Nonaccrual loans less than 90 days past due 2,220 3,192 - -------------------------------------------------------------------------------- Total nonaccrual loans 4,678 5,613 Other real estate owned 285 243 - -------------------------------------------------------------------------------- Total nonperforming assets $4,963 $5,856 - -------------------------------------------------------------------------------- Nonaccrual loans as a percentage of total loans 1.01% 1.25% Nonperforming assets as a percentage of total assets .51% .63% Allowance for loan losses to nonaccrual loans 230.18% 185.58% Not included in the analysis of nonperforming assets at March 31, 1999 and December 31, 1998 above are approximately $172 thousand and $150 thousand, 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. Impaired loans consist of all nonaccrual commercial loans. At March 31, 1999, the recorded investment in impaired loans was $3.0 million, which had a related allowance amounting to $694 thousand. The balance of impaired loans which did not require an allowance at March 31, 1999 amounted to $7 thousand. During the three months ended March 31, 1999, the average recorded investment in impaired loans was $3.0 million. Also during this period, interest income recognized on impaired loans amounted to approximately $124 thousand. Interest income on impaired loans is recognized on a cash basis only. The following is an analysis of nonaccrual loans by loan category: March 31, December 31, (Dollars in thousands) 1999 1998 - -------------------------------------------------------------------------------- Residential mortgages $1,392 $1,417 Commercial: Mortgages 979 1,522 Other (1) 1,974 2,141 Consumer 333 533 - -------------------------------------------------------------------------------- Total nonaccrual loans $4,678 $5,613 - -------------------------------------------------------------------------------- (1) Loans to businesses and individuals, a substantial portion of which is fully or partially collateralized by real estate. Capital Resources Total equity capital amounted to $74.0 million, or 7.6% of total assets at March 31, 1999. This compares to $73.1 million, or 7.8% at December 31, 1998. The reduction in this ratio is due primarily to the growth in assets resulting from purchases of investment securities. Total equity increased by approximately $906 thousand from December 31, 1998. The increase in equity resulting from earnings retention was reduced by a $1.3 million decline in net unrealized gains on securities. (See the Consolidated Statements of Changes in Shareholders' Equity for additional information.) At March 31, 1999, the Corporation's Tier 1 capital ratio was 12.82% and the total risk-adjusted capital ratio was 14.91%. These ratios were both above the ratios required to be categorized as well-capitalized. Dividends payable at March 31, 1999 totaled approximately $1.1 million, representing $.11 per share paid on April 15, 1999, an increase of 10.0% over the $.10 per share declared in the fourth quarter of 1998. 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. Book value per share as of March 31, 1999 and 1998 amounted to $7.31 and $6.94, respectively. On April 15, 1999, the Corporation announced that its Board of Directors voted to terminate the Corporation's stock repurchase program which had been previously announced on December 22, 1997. The repurchase program permitted the acquisition of up to 225,000 shares (adjusted to reflect a 3-for-2 stock split in August 1998) in the open market or in private transactions, based upon market conditions. Approximately 139,000 shares were repurchased under this program. Acquisition of PierBank On February 23, 1999, the Corporation announced that it had signed a definitive agreement to acquire PierBank, a Rhode Island-chartered community bank with assets of $59.4 million, which has its headquarters in South Kingstown, Rhode Island. Under the terms of the agreement, the Corporation will exchange shares of its common stock for shares of PierBank common stock. Each PierBank share will initially be valued at approximately $8.60, for a total transaction value of $13.8 million. The actual number and value of the Corporation's common shares to be issued to PierBank shareholders will be based on an exchange formula using the average closing price of the Corporation's common stock during the 15 trading days prior to receiving final regulatory approval. Based on the initial exchange ratio, the Corporation will exchange .452 shares of its common stock for each share of common stock held by a PierBank shareholder. In accordance with the agreement, PierBank granted the Corporation an option to acquire under certain terms and conditions up to 319,810 shares at $7.48 per share. The option was granted as an inducement to the Corporation's willingness to enter into the agreement. The purchase, which is expected to be completed in the second half of 1999, is subject to approval by PierBank's shareholders as well as state and federal banking regulators. The transaction is expected to be a tax-free reorganization and accounted for as a pooling of interests. On April 28, 1999, the Corporation filed with the Securities and Exchange Commission a Proxy Statement/Prospectus and Registration Statement on Form S-4 in connection with the Corporation's proposed acquisition of PierBank. On May 10, 1999, the Corporation filed an amendment to the Registration Statement. Also on May 10, 1999, the Registration Statement was declared effective by the Securities and Exchange Commission. Year 2000 The statements in the following section include "Year 2000 readiness disclosure" within the meaning of the Year 2000 Information and Readiness Disclosure Act. The following "Year 2000" discussion contains forward-looking statements which represent the Corporation's beliefs or expectations regarding future events. When used in the Year 2000 discussion, the words "believes," "expects," "estimates," and similar expressions are intended to identify forward-looking statements. Forward-looking statements include, without limitation, the Corporation's expectations as to when it will complete the phases of the Plan, its estimated costs, and its belief that its statements involve a number of risks and uncertainties that could cause the actual results to differ materially from the projected results. Factors that may cause these differences include, but are not limited to, the availability of qualified personnel and other information technology resources, the ability to identify and remediate all date sensitive lines of computer code, and the actions of governmental agencies or other third parties with respect to Year 2000 problems. The Corporation has developed a Year 2000 Project Plan (the "Plan") to address the computer-related issues concerning the century date change (the transition from the year 1999 to the year 2000). The Corporation's information technology (IT) and non-information technology (non-IT) systems have been included in the Plan. The Corporation uses internal computer systems, data communications systems and telecommunications systems as well as outside service providers (including hardware and software) to support and account for loans, deposits, fiduciary services and other purposes. Substantially all of the application software used by the Corporation is provided by outside vendors, under license or through outside service bureaus. The Corporation has distinguished between mission-critical and other, less critical, systems in assessing the needs of the Plan. The Plan includes five phases: awareness, assessment, renovation, validation and testing, and contingency planning. The Plan calls for validation and testing of all IT and non-IT systems to be completed by June 30, 1999. The Corporation's evaluation is subject to on-going verification and review by its internal audit staff. The Corporation expects that the total costs associated with the project will amount to approximately $500 thousand. The Corporation plans to account for most of these costs as expense items. In some cases, acquired hardware and software items will be capitalized and amortized in accordance with the Corporation's existing accounting policy. Total costs incurred for through March 31, 1999 amounted to approximately $300 thousand. These costs consisted primarily of system testing and modification, internal staffing and consulting, and were primarily recorded in noninterest expenses. The remaining project costs will be incurred throughout 1999. The costs of the project and the date on which the Corporation plans to complete Year 2000 testing are based on management's best estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources, third party modification plans and other factors. There can be no guarantee that the systems of other companies, or outside vendors on which the Corporation's systems rely, will be remedied on a timely basis. Therefore, the Corporation could possibly experience a negative impact to the extent other entities not affiliated with the Corporation are not Year 2000 compliant. The Corporation is in the process of evaluating the risk of customer failure to prepare for the century date change, any associated effect on the ability of customers to repay outstanding loans, and impact on the adequacy of the level of the allowance for loan losses. Because these efforts are now on-going, the Corporation is unable to assess the likelihood of any material adverse effect at this time. The Corporation's risk management program includes emergency backup and recovery procedures to be followed in the event of failure of a business-critical system. These procedures will be expanded to include specific procedures for potential Year 2000 issues, and contingency plans to protect against Year 2000-related interruptions. These plans will include development of backup procedures and identification of alternative suppliers. Business resumption contingency planning is expected to be complete by June 30, 1999. While the Corporation believes that it is taking reasonable steps with respect to the Year 2000 issue, if the phases of the Plan are not completed on time, the costs associated with becoming Year 2000 compliant exceed the Corporation's estimates, third party providers are not Year 2000 compliant on a timely basis, or customers with material loan obligations are unable to meet their repayment obligations due to Year 2000 problems, the Year 2000 issue could have a material impact on the Corporation's financial results. In addition, the Corporation's efforts to address the Year 2000 issue are being monitored by its federal banking regulators. Failure to be Year 2000 compliant on a timely basis could subject the Corporation to formal supervisory or enforcement actions. Recent Accounting Developments In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". This Statement establishes accounting and reporting standards for derivative instruments and for hedging activities. SFAS No. 133 requires a corporation to recognize all derivatives as either assets or liabilities in the balance sheet and to measure those instruments at fair value. This Statement defines conditions and criteria to be used in designating a derivative as a specific type of hedging instrument. SFAS No. 133 also explains the accounting for changes in the fair value of a derivative which depends on the intended use and the resulting designation. Under this Statement, a corporation is required to establish at the inception of the hedge the method to be used for assessing the effectiveness of the hedging derivative and the measurement approach for determining the ineffective aspect of the hedge. Those methods must be consistent with the corporation's approach to managing risk. SFAS No. 133 is effective for all fiscal quarters beginning after June 15, 1999 and is not to be applied retroactively to financial statements of prior periods. The Corporation has not yet determined what the effect of the adoption of this pronouncement will have on the financial position and earnings of the Corporation. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Sensitivity and Liquidity Interest rate risk is one of the major market risks faced by the Corporation. The Corporation's objective is to manage assets and funding sources to produce results which are consistent with its liquidity, capital adequacy, growth, risk and profitability goals. The Corporation manages interest rate risk using income simulation to measure interest rate risk inherent in its on-balance sheet and off-balance sheet financial instruments at a given point in time by showing the effect of interest rate shifts on net interest income over a 60 month period. The simulation results are reviewed to determine whether the negative exposure of net interest income to changes in interest rates remains within established tolerance levels over a 24-month horizon, and to develop appropriate strategies to manage this exposure. In addition, the ALCO reviews 60-month horizon results to assess longer-term risk inherent in the balance sheet, although no 60-month horizon tolerance levels are specified. As of March 31, 1999, the Corporation's estimated exposure as a percentage of net interest income for the next 12 month period and the subsequent 12 month period thereafter (months 13 - 24), respectively, is as follows: Months 1 - 12 Months 13 - 24 ------------------------------------ ------------------- ------------------ 200 basis point increase in rates -2.6% -5.1% 200 basis point decrease in rates +1.7% -0.9% Since this simulation assumes the Corporation's balance sheet will remain static over the 24-month simulation horizon, the results do not reflect adjustments in strategy that the Corporation could implement in response to rate shifts, and should therefore not be relied upon as a projection of net interest income. For a complete discussion of interest rate sensitivity and liquidity, including simulation assumptions, see the Corporation's Annual Report on Form 10-K for the year ended December 31, 1998. The Corporation also monitors the potential change in market value of its available for sale debt securities using both parallel rate shifts of up to 200 basis points and "value at risk" analysis. The purpose is to determine market value exposure which may not be captured by income simulation, but which might result in changes to the Corporation's capital position. Results are calculated using industry-standard modeling analytics and securities data. The Corporation uses the results to manage the effect of market value changes on the Corporation's capital position. As of March 31, 1999, an immediate 200 basis point rise in rates would result in a 4.2% decline in the value of the Corporation's available for sale debt securities. Conversely, a 200 basis point fall in rates would result in a 1.9% increase in the value of the Corporation's available for sale debt securities. "Value at risk" analysis measures the theoretical maximum market value loss over a given time period based on recent historical price activity of different classes of securities. The anticipated maximum market value reduction for the bank's available for sale securities portfolio at March 31, 1999, including both debt and equity securities, was 4.5%, assuming a one-year time horizon and a 5% probability of occurrence for "value at risk" analysis. PART II OTHER INFORMATION Item 1. Legal Proceedings No material changes since the filing of the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibit index Exhibit No. 10 Changes in Control Agreement 11 Statement re Computation of Per Share Earnings (b) On March 2, 1999, a Form 8-K was filed which reported that the Corporation had signed a definitive agreement to acquire PierBank, a Rhode-Island-chartered community bank with assets of $59.4 million as of December 31, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WASHINGTON TRUST BANCORP, INC. (Registrant) May 14, 1999 By: John C. Warren ----------------------- John C. Warren Chairman and Chief Executive Officer (principal executive officer) May 14, 1999 By: David V. Devault ------------------------- David V. Devault Executive Vice President, Treasurer and Chief Financial Officer (principal financial and accounting officer) EX-10 2 Exhibit 10 Change in Control Agreements with Executive Officers WASHINGTON TRUST BANCORP, INC. 23 BROAD STREET WESTERLY, RHODE ISLAND 02891 In the first quarter of 1999, the Registrant entered into a Change of Control Agreement with one of its executive officers. The form of Agreement attached contains blanks where the term of the Agreement and the multiple of the executive's base amount provided under the Agreement vary for certain executives. The executive officer who entered into the Agreement, the term of the Agreement and the multiple of the executive's base amount provided under the Agreement are listed in the following chart: Term of Agreement Number Times Base Amount Executive Officer (Sections 3, 4 and 13) (Section 5 a) - ----------------------------- ---------------------- --------------------------- William D. Gibson Senior Vice President - Credit Administration, of the Bank 1 year 1 time WASHINGTON TRUST BANCORP, INC. 23 BROAD STREET WESTERLY, RHODE ISLAND 02891 February 5, 1999 [Name and Address of Executive] Dear __________: Washington Trust Bancorp, Inc. (the "Corporation") considers it essential to the best interests of its shareholders to foster the continued employment of key management personnel employed by its wholly-owned subsidiary, The Washington Trust Company (the "Bank"). In this connection, the Board of Directors of the Corporation (the "Board") recognizes that the possibility of a change in control exists and that such possibility, and the uncertainty and question which it necessarily raises among management, may result in the departure or distraction of management personnel to the detriment of the Corporation and its shareholders in this period when their undivided attention and commitment to the best interests of the Corporation and its shareholders are particularly important. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation and the Bank's management. 1. Defined Terms. Certain laws, rules and regulations referenced in this agreement are attached hereto as Appendices and are hereby incorporated herein by reference. 2. Change in Control. For purposes of this Agreement, the term "Change in Control" shall mean: a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the then outstanding shares of common stock of the Corporation (the "Outstanding Corporation Common Stock"); provided, however, that any acquisition by the Corporation or its subsidiaries, or any employee benefit plan (or related trust) of the Corporation or its subsidiaries of 20% or more of Outstanding Corporation Common Stock shall not constitute a Change in Control; and provided, further, that any acquisition by a corporation with respect to which, following such acquisition, more than 50% of the then outstanding shares of common stock of such corporation, is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Corporation Common Stock immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Corporation Common Stock, shall not constitute a Change in Control; or b) Individuals who, as of the date of this Agreement, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or c) Consummation by the Corporation of (i) a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Corporation Common Stock immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 40% of the then outstanding shares of common stock of the corporation resulting from such a reorganization, merger or consolidation; (ii) a reorganization, merger or consolidation, in each case, (A) with respect to which all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Corporation Common Stock immediately prior to such reorganization, merger or consolidation, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 40% but less than 50% of the then outstanding shares of common stock of the corporation resulting from such a reorganization, merger or consolidation, (B) at least a majority of the directors then constituting the Incumbent Board do not approve the transaction and do not designate the transaction as not constituting a Change in Control, and (C) following the transaction members of the then Incumbent Board do not continue to comprise at least a majority of the Board; or (iii) the sale or other disposition of all or substantially all of the assets of the Corporation, excluding a sale or other disposition of assets to a subsidiary of the Corporation; or d) Consummation by the Bank of (i) a reorganization, merger or consolidation, in each case, with respect to which, following such reorganization, merger or consolidation, the Corporation does not beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock of the corporation or bank resulting from such a reorganization, merger or consolidation or (ii) the sale or other disposition of all or substantially all of the assets of the Bank, excluding a sale or other disposition of assets to the Corporation or a subsidiary of the Corporation. 3. Continuing Employment. You agree that you shall remain in the employ of the Corporation and the Bank for a term of _____ year following any Change in Control of the Company, unless there is an Event of Termination, as defined below, or you die or become unable to perform your duties by reason of disability. 4. Event of Termination. For purposes of this Agreement, the term "Event of Termination" shall mean: a) The involuntary termination of your employment with the Corporation and/or the Bank, other than for cause. The term "for cause" shall mean on account of (i) conviction of a crime involving moral turpitude, (ii) willful and inexcusable failure to perform the duties of your position with the Corporation and/or the Bank, and (iii) conduct that is clearly and patently detrimental to the best interests of the Corporation and/or the Bank. In any proceeding, judicial or otherwise, the Corporation and/or the Bank shall have the burden proving by clear and convincing evidence that a termination of your employment following a change in control was for cause. Termination of employment due to your death or disability shall not be deemed a termination for cause; b) A reduction in your salary, title, benefits, staff, perquisites, or duties unless you agree in writing, but only if such event occurs within _____ year after a Change in Control. 5. Entitlements Upon an Event of Termination a) Unless otherwise provided herein, within 30 days after an Event of Termination, the Bank shall pay you that amount that equals _____ time your base amount as of the date of the Event of Termination; b) Your entitlements under this Agreement and under any other plans or agreements of the Corporation and/or the Bank that constitute "parachute payments" shall never exceed that amount that is 2.99 times your "base amount." For purposes of this Agreement, the term "parachute payment" shall have the meaning ascribed to it by Section 280G(b)(2)(A) of the Internal Revenue Code of 1986, as amended and in effect on the date hereof (the "Code"), including the flush language, but without regard to clause (ii) thereof, and the term "base amount" shall have the meaning ascribed to it by Section 280G(b)(3) of the Code; c) In the event that your entitlements to parachute payments under this or any other agreement or plan of the Corporation and/or the Bank exceed 2.99 times your base amount, you agree that your total benefits shall be reduced to 2.99 times your base amount in such manner as you shall designate to the Bank in writing. In default of such designation, such benefits shall be reduced in proportion to their relative present values as determined by the Bank's certified public accountants using the discount rate prescribed by Section 280G(d)(4) of the Code; d) The Bank shall pay all legal fees and expenses that you incur seeking to obtain or enforce any right or benefit provided by this Agreement; e) You shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation you may earn as a result of employment by another employer or by reason of retirement benefits after the date of this Agreement or otherwise. 6. Successors; Binding Agreement. a) The Corporation and the Bank will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation and/or the Bank to assume expressly and perform this Agreement. Failure of the Corporation and/or the Bank to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Bank in the same amount and on the same terms as you would be entitled to hereunder following an Event of Termination, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the date on which you become entitled to such compensation from the Bank. As used in the agreement, "Corporation" and "Bank" shall mean the Corporation and the Bank, respectively, as hereinbefore defined and any successor to its respective business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, unless otherwise provided herein, such amount shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 7. Notice. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified/registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Corporation and/or the Bank shall be directed to the attention of the Board with a copy to the Secretary of the Corporation and/or the Bank, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of a change of address shall be effective only upon receipt. 8. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach of the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions as the same or at any prior or subsequent time. No agreements or representations, oral, or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Rhode Island. 9. Not Employment Agreement. No provision of this Agreement shall be deemed to provide for a continuing right to employment with the Corporation or the Bank. 10. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 11. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 12. Arbitration. Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its applicable rules and judgment and the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. 13. Term of Agreement. This Agreement shall remain in effect so long as you are employed by the Corporation and/or the Bank unless terminated in writing upon 30 days notice by either party; provided, however, following a Change in Control, that the Corporation and the Bank shall have no right to terminate this agreement for ____ year. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, WASHINGTON TRUST BANCORP, INC. THE WASHINGTON TRUST COMPANY By:_________________________________________ John C. Warren President & CEO AGREED to this ____ day of _________, 1999. - ----------------------------- [Name of Executive] APPENDIX 1 List of Appendices Copies of the following laws, rules and regulations referenced in the agreement to which this Appendix is a part are attached hereto and incorporated therein by reference: Appendix 1A -- Section 13d(3) and Section 14(d)(2) of the Exchange Act Appendix 1B -- Rule 13d-3 promulgated under the Exchange Act Appendix 1C -- Rule 14a-11 of Regulation 14A promulgated under the Exchange Act Appendix 1D -- Section 280G of the Code EX-11 3
EXHIBIT 11 Washington Trust Bancorp, Inc. Computation of Per Share Earnings For the Three Months Ended March 31, 1999 and 1998 (In thousands, except per share amounts) 1999 1998 - --------------------------------------------------------------------------------------------- Basic Diluted Basic Diluted ------------ ------------- ------------ ------------ Net income $2,613 $2,613 $2,393 $2,393 Share amounts, in thousands: Average outstanding 10,057.0 10,057.0 9,973.9 9,973.9 Common stock equivalents - 275.0 - 411.6 - ------------------------------------- ------------ ------------- ------------ ------------ Weighted average outstanding 10,057.0 10,332.0 9,973.9 10,385.5 - ------------------------------------- ------------ ------------- ------------ ------------ Earnings per share $.26 $.25 $.24 $.23 - ------------------------------------- ------------ ------------- ------------ ------------
EX-27 4
9 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO OF WASHINGTON TRUST BANCORP, INC. AS OF MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1999 MAR-31-1999 13,889 0 11,598 0 343,686 96,744 96,918 461,092 10,768 972,761 565,971 19,197 313,621 0 0 0 632 73,340 972,761 9,665 6,576 141 16,382 4,312 8,363 8,019 450 262 7,182 3,719 3,719 0 0 2,613 .26 .25 3.73 0 0 0 0 10,416 142 44 10,768 0 0 0
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