Washington Trust Reports Record Earnings for Third Quarter 2014

WESTERLY, R.I., Oct. 20, 2014 (GLOBE NEWSWIRE) -- Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced net income of $10.5 million, or 62 cents per diluted share, for the third quarter of 2014, up from second quarter of 2014 net income of $9.8 million, or 58 cents per diluted share.

"Washington Trust's strong performance continued into the third quarter, as earnings reached an all-time quarterly high," stated Joseph J. MarcAurele, Washington Trust Chairman and CEO. "These results are truly a company-wide effort, as we had good growth along key business lines."

Selected highlights for the third quarter of 2014 included:

• Returns on average equity and average assets were 12.15% and 1.25%, respectively. Comparable amounts for the second quarter of 2014 were 11.52% and 1.22%, respectively.
• Total loans at September 30, 2014 were $2.67 billion, up by a solid $92.9 million, or 4%, from June 30, 2014.
• Deposit growth was strong in the third quarter, with an increase of $152.8 million, or 6%, from June 30, 2014. Total deposits reached $2.74 billion at September 30, 2014.
• In September, we declared a quarterly dividend of 32 cents per share, representing a 3 cent increase over the dividend paid last quarter and our third dividend increase in the past year.

Net Interest Income

Net interest income totaled $24.9 million for the third quarter of 2014, up by 2% from $24.5 million for the second quarter of 2014. The net interest margin was 3.21% for the third quarter of 2014, compared to 3.35% for the second quarter of 2014. Significant linked quarter changes included:

• Average interest-earning assets increased by $146.2 million, reflecting growth in average loan balances. The yield on interest-earning assets declined by 14 basis points from the previous quarter, due to the combined effect of lower rates on loan originations and purchased securities and runoff of higher yielding loan and security balances.
• Average interest-bearing liabilities increased by $118.0 million, with growth in average wholesale funding balances and average interest-bearing deposits. The cost of funds declined by 1 basis point from the previous quarter.

Noninterest Income

Noninterest income totaled $13.1 million for the third quarter of 2014, up by 2% from $12.8 million for the second quarter of 2014. Included in noninterest income were the following:

• Wealth management revenues totaled $8.4 million for the third quarter of 2014, down by $156 thousand, or 2%, with a $324 thousand decline in transaction-based revenues, partially offset by a $168 thousand increase in asset-based revenues. The decline in transaction-based revenues was primarily attributable to a decrease in tax preparation fees, which are typically concentrated in the second quarter.
• Net gains on loan sales and commissions on loans originated for others totaled $1.7 million for the third quarter of 2014, up by $35 thousand, or 2%. Residential mortgage loans sold to the secondary market were $80.1 million in the third quarter, up by $3.1 million from the second quarter.
• Net gains on interest rate swap contracts amounted to $339 thousand for the third quarter of 2014, up by $376 thousand from the previous quarter, due to an increase in customer-related interest rate swap transactions.

Noninterest Expenses

Noninterest expenses totaled $22.0 million for the third quarter of 2014, down by 2% from $22.4 million for the second quarter of 2014. Included in noninterest expenses were the following:

• Salaries and employee benefit costs totaled $14.5 million for the third quarter of 2014, down by $255 thousand, or 2%, from the previous quarter, largely due to lower payroll tax expense.
• Advertising and promotion costs amounted to $368 thousand for the third quarter of 2014, down by $172 thousand, or 32%, as a result of seasonal promotion efforts that occurred in the second quarter.

Income tax expense amounted to $4.9 million for the third quarter of 2014, up by $291 thousand, or 6%, from $4.6 million for the second quarter of 2014. The effective tax rate for the third quarter of 2014 was 31.6%, compared to 31.9% for the second quarter of 2014. Based on current federal and applicable state income tax statutes, the Corporation currently expects the full-year effective tax rate to be approximately 31.8% for 2014.

Asset Quality

Total nonaccrual loans amounted to $17.0 million, or 0.63% of total loans, at September 30, 2014, up from $12.5 million, or 0.49%, at June 30, 2014. The increase in nonaccrual loans during the third quarter was principally due to the classification into nonaccrual status of one commercial real estate loan with a carrying value of $4.9 million. Total past due loans amounted to $19.9 million, or 0.75% of total loans, at September 30, 2014, down from $21.1 million, or 0.82% of total loans, at June 30, 2014. Loans classified as troubled debt restructurings amounted to $18.3 million at September 30, 2014, down from $26.5 million at the end of the previous quarter, reflecting the payoff of an $8.0 million commercial real estate loan.

The loan loss provision charged to earnings in the third quarter of 2014 totaled $600 thousand, up from $450 thousand in the second quarter of 2014. Net charge-offs amounted to $101 thousand in the third quarter of 2014, compared to $224 thousand in the second quarter of 2014. The allowance for loan losses was $27.8 million, or 1.04% of total loans, at September 30, 2014, compared to $27.3 million, or 1.06% of total loans, at June 30, 2014.

Loans

Total loans amounted to $2.67 billion at September 30, 2014, up by $92.9 million, or 4%, from the balance at June 30, 2014. This increase was comprised of the following:

• The residential real estate loan portfolio grew by $68.9 million, or 8%.
• Total commercial loans increased by $24.2 million, or 2%, with growth in both commercial real estate and commercial and industrial loans.
• Consumer loans declined slightly by $221 thousand, or 0.1%.

Investment Securities

The securities portfolio amounted to $402.6 million, or 12% of total assets, at September 30, 2014, up from $355.4 million, or 11%, at June 30, 2014. The net increase of $47.2 million included purchases of $74.1 million of debt obligations and mortgage-backed securities issued by U.S. government-sponsored enterprises. The purchases were offset, in part, by principal payments received on mortgage-backed securities, maturities and calls of debt obligations of U.S. sponsored enterprises and state and political subdivisions.

Deposits and Borrowings

Deposits totaled $2.74 billion at September 30, 2014, up by $152.8 million, or 6%, from the balance at June 30, 2014. This increase was comprised of the following:

• Demand deposits increased by $65.2 million, or 16%, while NOW account balances decreased slightly by $669 thousand, or 0.2%.
• Money market and savings account balances increased by $59.7 million, or 6%.
• Time deposits increased by $28.6 million, or 4%.

FHLBB advances amounted to $261.7 million at September 30, 2014, down by $60.4 million from June 30, 2014, primarily due to deposit inflows.

Capital Management

Capital levels continued to exceed the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 13.26% at September 30, 2014, compared to 13.24% at June 30, 2014. Total shareholder's equity was $348.6 million at September 30, 2014, up by $5.1 million from June 30, 2014.

Dividends Declared

The Board of Directors declared a quarterly dividend of 32 cents per share for the quarter ended September 30, 2014, a 3 cent increase over the dividend paid in the previous quarter. The dividend was paid on October 15, 2014 to shareholders of record on October 1, 2014.

Conference Call

Washington Trust will host a conference call to discuss third quarter results, business highlights and outlook on Tuesday, October 21, 2014 at 8:30 a.m. (Eastern Time). Individuals may dial in to the call at 1-877-407-0784. An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-877-870-5176 and entering the Replay PIN Number 13591326; the audio replay will be available through October 31, 2014. Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrustbancorp.com, and will be available through December 31, 2014.

Background

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

Forward-Looking Statements

This press release contains statements that are "forward-looking statements". We may also make written or oral forward-looking statements in other documents we file with the SEC, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "outlook," "will," "should," and other expressions that predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of Washington Trust. These risks, uncertainties and other factors may cause the actual results, performance or achievements of Washington Trust to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include the following: continued weakness in national, regional or local economies; reductions in net interest income resulting from a sustained low interest rate environment as well as changes in the balance and mix of loans and deposits; reductions in the market value of wealth management assets under administration; changes in the value of securities and other assets; reductions in loan demand; changes in loan collectibility, default and charge-off rates; changes in the size and nature of Corporation's competition; changes in legislation or regulation and accounting principles, policies and guidelines; and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under "Risk Factors" in Item 1A of our Annual Report on Form 10-K, as filed with the SEC and as updated by our Quarterly Reports on Form 10-Q and other SEC filings, may result in these differences. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this press release, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Supplemental Information - Explanation of Non-GAAP Financial Measures

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