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, 1997
--------------------------
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
---------------
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 2,
1997 was 4,380,766.
Page 1
<PAGE>
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY
Form 10-Q For The Quarter Ended March 31, 1997
CONTENTS
Page No.
PART I. ITEM 1. Financial Information
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 3
Consolidated Statements of Income
Three Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Changes in Shareholders' Equity
Three Months Ended March 31, 1997 and 1996 5
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 6
Condensed Notes to Consolidated Financial Statements 8
PART I. ITEM 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. Other Information 16
Signatures 16
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Washington Trust Bancorp, Inc. and Subsidiary
<CAPTION>
March 31, December 31,
(Dollars in thousands) 1997 1996
- ---------------------------------------------------------------------------- ---------------- -----------------
ASSETS:
<S> <C> <C>
Cash and due from banks $16,072 $17,418
Federal funds sold 9,050 1,548
Mortgage loans held for sale 521 744
Securities:
Available for sale, at fair value 252,090 198,317
Held to maturity, at cost; fair value $27.5 million
in 1997 and $28.1 million in 1996 27,574 27,926
- ---------------------------------------------------------------------------- ---------------- -----------------
Total securities 279,664 226,243
Federal Home Loan Bank stock, at cost 16,255 11,683
Loans 425,194 418,993
Less allowance for loan losses 8,585 8,495
- ---------------------------------------------------------------------------- ---------------- -----------------
Net loans 416,609 410,498
Premises and equipment, net 20,229 19,040
Accrued interest receivable 5,136 4,160
Other real estate owned, net 1,218 1,090
Other assets 4,459 2,522
- ---------------------------------------------------------------------------- ---------------- -----------------
Total assets $769,213 $694,946
- ---------------------------------------------------------------------------- ---------------- -----------------
LIABILITIES:
Deposits:
Demand $64,399 $65,014
Savings 175,982 170,172
Time 248,713 241,375
- ---------------------------------------------------------------------------- ---------------- -----------------
Total deposits 489,094 476,561
Dividends payable 831 785
Short term borrowings 19,309 14,000
Federal Home Loan Bank advances 193,068 138,493
Accrued expenses and other liabilities 6,590 5,680
- ---------------------------------------------------------------------------- ---------------- -----------------
Total liabilities 708,892 635,519
- ---------------------------------------------------------------------------- ---------------- -----------------
SHAREHOLDERS' EQUITY:
Common stock of $.0625 par value; authorized
10,000,000 shares; issued 4,372,302 shares in 1997
and 4,362,631 shares in 1996 273 273
Paid-in capital 3,862 3,764
Retained earnings 52,206 50,886
Unrealized gain on securities available for sale, net of tax 3,980 4,504
- ---------------------------------------------------------------------------- ---------------- -----------------
Total shareholders' equity 60,321 59,427
- ---------------------------------------------------------------------------- ---------------- -----------------
Total liabilities and shareholders' equity $769,213 $694,946
- ---------------------------------------------------------------------------- ---------------- -----------------
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Washington Trust Bancorp, Inc. and Subsidiary
<CAPTION>
Three months ended March 31, 1997 1996
- --------------------------------------------------------------------- -------------------- --------------------
(Dollars in thousands, except per share amounts)
<S> <C> <C>
Interest income:
Interest and fees on loans $9,274 $8,837
Income from securities:
Interest 3,738 1,490
Dividends 402 367
Federal funds sold and securities purchased
under agreements to resell 61 85
- --------------------------------------------------------------------- -------------------- --------------------
Total interest income 13,475 10,779
- --------------------------------------------------------------------- -------------------- --------------------
Interest expense:
Savings deposits 860 968
Time deposits 3,276 3,077
Federal Home Loan Bank advances 2,345 335
Other 300 8
- --------------------------------------------------------------------- -------------------- --------------------
Total interest expense 6,781 4,388
- --------------------------------------------------------------------- -------------------- --------------------
Net interest income 6,694 6,391
Provision for loan losses 300 300
- --------------------------------------------------------------------- -------------------- --------------------
Net interest income after provision for loan losses 6,394 6,091
- --------------------------------------------------------------------- -------------------- --------------------
Noninterest income:
Trust revenue 1,088 876
Service charges on deposit accounts 553 493
Merchant processing fees 116 94
Net gains on sales of securities 254 198
Net gains on loan sales 72 29
Other income 249 249
- --------------------------------------------------------------------- -------------------- --------------------
Total noninterest income 2,332 1,939
- --------------------------------------------------------------------- -------------------- --------------------
Noninterest expense:
Salaries and employee benefits 2,953 2,705
Net occupancy 383 328
Equipment 464 365
Merchant processing costs 86 67
Office supplies 156 142
Advertising and promotion 122 65
Credit and collection 50 97
Other 1,277 1,122
- --------------------------------------------------------------------- -------------------- --------------------
Total noninterest expense 5,491 4,891
- --------------------------------------------------------------------- -------------------- --------------------
Income before income taxes 3,235 3,139
Income tax expense 1,084 1,130
- --------------------------------------------------------------------- -------------------- --------------------
Net income $2,151 $2,009
- --------------------------------------------------------------------- -------------------- --------------------
Weighted average shares outstanding - primary 4,542,453 4,397,183
Weighted average shares outstanding - fully diluted 4,542,411 4,400,334
Earnings per share - primary $.47 $.46
Earnings per share - fully diluted $.47 $.46
Cash dividends declared per share $.19 $.17
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Washington Trust Bancorp, Inc. and Subsidiary
<CAPTION>
Three months ended March 31, 1997 1996
- ------------------------------------------------------------------------------- ---------------- ----------------
(Dollars in thousands)
<S> <C> <C>
COMMON STOCK
Balance at beginning of year $273 $180
Issuance of common stock for stock option plan and other purposes - -
- ------------------------------------------------------------------------------- ---------------- ----------------
Balance at end of period 273 180
- ------------------------------------------------------------------------------- ---------------- ----------------
PAID-IN CAPITAL
Balance at beginning of year 3,764 3,071
Issuance of common stock for dividend reinvestment plan,
stock option plan and other purposes 98 237
- ------------------------------------------------------------------------------- ---------------- ----------------
Balance at end of period 3,862 3,308
- ------------------------------------------------------------------------------- ---------------- ----------------
RETAINED EARNINGS
Balance at beginning of year 50,886 45,631
Net income 2,151 2,009
Cash dividends declared (831) (750)
- ------------------------------------------------------------------------------- ---------------- ----------------
Balance at end of period 52,206 46,890
- ------------------------------------------------------------------------------- ---------------- ----------------
UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE, NET OF TAX
Balance at beginning of year 4,504 4,382
Change in unrealized gain on securities available for sale, net of tax (524) (293)
- ------------------------------------------------------------------------------- ---------------- ----------------
Balance at end of period 3,980 4,089
- ------------------------------------------------------------------------------- ---------------- ----------------
TREASURY STOCK
Balance at beginning of year - (327)
Issuance of common stock for dividend reinvestment plan
and stock option plans - 327
- ------------------------------------------------------------------------------- ---------------- ----------------
Balance at end of period - -
- ------------------------------------------------------------------------------- ---------------- ----------------
TOTAL SHAREHOLDERS' EQUITY $60,321 $54,467
- ------------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Washington Trust Bancorp, Inc. and Subsidiary
<CAPTION>
Three months ended March 31, 1997 1996
- ------------------------------------------------------------------------ ------------------- --------------------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,151 $2,009
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 300 300
Provision for valuation of other real estate owned 23 126
Depreciation of premises and equipment 449 349
Amortization of net deferred loan fees and costs (66) (28)
Net gains on sales of securities (254) (198)
Net (gains) losses on sales of other real estate owned 4 (58)
Net gains on loan sales (72) (29)
Proceeds from sales of loans 4,249 2,872
Loans originated for sale (5,219) (2,974)
Increase in accrued interest receivable (976) (505)
Increase in other assets (393) (70)
Increase in accrued expenses and other liabilities 912 576
Other, net 223 80
- ------------------------------------------------------------------------ ------------------- --------------------
Net cash provided by operating activities 1,331 2,450
- ------------------------------------------------------------------------ ------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES: Securities available for sale:
Purchases (63,389) (8,209)
Proceeds from sales 1,847 1,651
Maturities and principal repayments 6,931 2,270
Securities held to maturity:
Purchases (105) (2,518)
Maturities and principal repayments 444 1,575
Purchases of Federal Home Loan Bank stock (4,572) -
Loan originations over principal collected on loans (4,926) (5,261)
Purchase of loans (324) -
Proceeds from sales of other real estate owned 15 402
Purchases of premises and equipment (1,644) (577)
Purchase of deposits, net of premium paid 7,029 -
- ------------------------------------------------------------------------ ------------------- --------------------
Net cash used in investing activities (58,694) (10,667)
- ------------------------------------------------------------------------ ------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 4,322 (10,978)
Net increase in other short term borrowings 5,309 -
Proceeds from Federal Home Loan Bank advances 132,600 9,000
Repayment of Federal Home Loan Bank advances (78,025) (4,011)
Proceeds from issuance of common stock 98 564
Cash dividends paid (785) (686)
- ------------------------------------------------------------------------ ------------------- --------------------
Net cash provided by (used in) financing activities 63,519 (6,111)
- ------------------------------------------------------------------------ ------------------- --------------------
Net increase (decrease) in cash and cash equivalents 6,156 (14,328)
Cash and cash equivalents at beginning of year 18,966 28,651
- ------------------------------------------------------------------------ ------------------- --------------------
Cash and cash equivalents at end of period $25,122 $14,323
- ------------------------------------------------------------------------ ------------------- --------------------
</TABLE>
(continued)
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Washington Trust Bancorp, Inc. and Subsidiary
<CAPTION>
Three months ended March 31, 1997 1996
- --------------------------------------------------------------------------------- --------------- ---------------
(Dollars in thousands)
<S> <C> <C>
Noncash Investing and Financing Activities:
Net transfers from loans to other real estate owned $248 $323
Loans charged off 316 326
Loans made to facilitate the sale of other real estate owned 77 81
Decrease in unrealized gain on securities available for sale, net of tax (524) (293)
Supplemental Disclosures:
Interest payments $3,599 $1,871
Income tax payments 44 58
</TABLE>
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Washington Trust Bancorp, Inc. and Subsidiary
(1) BASIS OF PRESENTATION
The accounting and reporting policies of Washington Trust Bancorp, Inc. (the
"Corporation") are in accordance with generally accepted accounting principles
and conform to general practices within the banking industry. In the opinion of
management, the accompanying consolidated financial statements present fairly
the Corporation's financial position as of March 31, 1997 and December 31, 1996
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, 1996, included in the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1996.
All amounts are presented in thousands, except per share amounts. All share and
per share amounts have been adjusted to reflect a 3-for-2 split of the
Corporation's common stock effected on October 15, 1996.
(2) SECURITIES AVAILABLE FOR SALE
Securities available for sale are summarized as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ---------------------------------------- ---------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
March 31, 1997
U.S. Treasury obligations
and obligations of U.S.
government-sponsored agencies $71,727 281 (614) $71,394
Mortgage-backed securities 160,894 337 (1,206) 160,025
Corporate stocks 12,851 7,906 (86) 20,671
- ----------------------------------------------------------------------------------------------------------
Total $245,472 8,524 (1,906) $252,090
- ----------------------------------------------------------------------------------------------------------
December 31, 1996
U.S. Treasury obligations
and obligations of U.S.
government-sponsored agencies $48,714 500 (112) $49,102
Mortgage-backed securities 129,232 144 (872) 128,504
Corporate stocks 12,865 7,919 (73) 20,711
- ----------------------------------------------------------------------------------------------------------
Total $190,811 8,563 (1,057) $198,317
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Securities available for sale with a fair value of $40.8 million and $42.0
million were pledged to secure Treasury Tax and Loan deposits, short-term
borrowings and public deposits at March 31, 1997 and December 31, 1996,
respectively.
For the three months ended March 31, 1997, proceeds from sales of securities
available for sale amounted to $1.8 million. Net realized gains on these
sales amounted to $254,000.
<PAGE>
(3) SECURITIES HELD TO MATURITY
The amortized cost and fair value of securities held to maturity are summarized
as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ------------------------------------------ -------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
March 31, 1997
Mortgage-backed securities $11,908 41 (58) $11,891
States and political subdivisions 15,666 25 (79) 15,612
- -----------------------------------------------------------------------------------------------------
Total $27,574 66 (137) $27,503
- -----------------------------------------------------------------------------------------------------
December 31, 1996
Mortgage-backed securities $12,344 185 - $12,529
States and political subdivisions 15,582 47 (44) 15,585
- -----------------------------------------------------------------------------------------------------
Total $27,926 232 (44) $28,114
- -----------------------------------------------------------------------------------------------------
</TABLE>
There were no sales or transfers of securities held to maturity during the three
months ended March 31, 1997.
(4) LOAN PORTFOLIO
The following is a summary of loans:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Residential real estate:
Mortgages $172,483 $171,423
Homeowner construction 4,257 4,631
- ---------------------------------------------------------------------------------------------
Total residential real estate 176,740 176,054
- ---------------------------------------------------------------------------------------------
Commercial:
Mortgages 66,761 66,224
Construction and development 2,821 4,174
Other 114,395 109,485
- ---------------------------------------------------------------------------------------------
Total commercial 183,977 179,883
- ---------------------------------------------------------------------------------------------
Consumer 64,477 63,056
- ---------------------------------------------------------------------------------------------
Total loans $425,194 $418,993
- ---------------------------------------------------------------------------------------------
</TABLE>
(5) ALLOWANCE FOR LOAN LOSSES
The following is an analysis of the allowance for loan losses:
<TABLE>
<CAPTION>
Three months ended March 31, 1997 1996
- ------------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Balance at beginning of period $8,495 $7,785
Provision charged to expense 300 300
Recoveries 106 173
Loans charged off (316) (326)
- ------------------------------------------------------- ----------------- ----------------
Balance at end of period $8,585 $7,932
- ------------------------------------------------------- ----------------- ----------------
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Washington Trust Bancorp, Inc. and Subsidiary
RESULTS OF OPERATIONS - QUARTERS ENDED MARCH 31, 1997 AND 1996
Net income for the three months ended March 31, 1997 amounted to $2.2 million,
up 7.1% over the $2.0 million of net income recorded in the first quarter of
1996. Earnings per share for the quarter ended March 31, 1997 amounted to $.47,
up from the $.46 per share on net income earned in the comparable 1996 period
Net interest income for the first quarter of 1997 increased by 4.7% over the
prior year quarter, to $6.7 million. This increase was primarily attributable to
net interest income generated under an investment program, as well as higher
interest and fees on loans. (See additional discussion under the caption
"Net Interest Income".)
The provision for loan losses for the three months ended March 31, 1997 amounted
to $300,000, unchanged from the prior year period.
Other noninterest income (noninterest income excluding net gains on sales of
securities) amounted to $2.1 million for the first quarter of 1997, up 19.4%
from the same 1996 period. This increase is primarily due to higher revenues for
trust services as well as an increases in service charges earned on deposit
accounts and net gains on loan sales. For the three months ended March 31, 1997
and 1996, net gains on sales of securities amounted to approximately $254,000
and $198,000, respectively.
Total noninterest expense for the quarter ended March 31, 1997 amounted to $5.5
million, an increase of 12.3% from the comparable 1996 amount. This increase was
primarily attributable to higher salaries and benefits expense resulting from
additional employees hired to staff new branches. Equipment costs rose 27.1%
over the prior year period due primarily to depreciation expense associated with
purchases that occurred in 1996.
NET INTEREST INCOME
(The accompanying schedule on the page 12 should be read in conjunction with
this discussion.)
FTE net interest income for the three months ended March 31, 1997 amounted to
$7.0 million, up by 5.2%, over the same 1996 period due to the growth in
interest-earning assets. The interest rate spread and the net interest margin
for the three months ended March 31, 1997 amounted to 3.55% and 4.10%,
respectively. Comparable amounts for quarter ended March 31, 1996 were 4.66% and
5.28%, respectively.
For the three months ended March 31, 1997, average interest-earning assets
amounted to $684.7 million, an increase of $179.3 million, or 35.5%, over the
comparable 1996 amount. The FTE rate of return on average interest-earning
assets was 8.06% for the three months ended March 31, 1997, down from 8.75% for
the same 1996 period. The growth in average interest-earning assets was due
primarily to the increase in average taxable securities, which were up by $136.0
million from the 1996 amount. The increase in average taxable securities
resulted primarily from an investment 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. The investments purchased under this program were funded with Federal Home
Loan Bank (FHLB) advances with similar interest rate repricing characteristics.
<PAGE>
The overall yield on average total loans amounted to 8.84% for the three months
ended March 31, 1997, down from 9.12% in the comparable 1996 period due to
changes in the prime rate as well as lower yields on new loan originations.
Average consumer loans rose by 16.6% over the prior year, while the average
balance of residential real estate and commercial loans increased by 2.8% and
11.7%, respectively. The yields on residential real estate and consumer loans
decreased by 17 basis points and 56 basis points, respectively, from the
comparable prior period, primarily due to lower yields on new loan originations.
The yield on total commercial loans for the three months ended March 31, 1997
amounted to 9.44%, down 38 basis points from the comparable 1996 period. This
decrease is primarily attributable to a 25 basis point decline in the prime rate
that occurred in the first quarter of 1996. A substantial portion of the
Corporation's commercial loans reprice periodically based upon the prime rate.
The prime rate rose 25 basis points to 8.5% late in the first quarter of 1997.
The Corporation's total cost of funds on interest-bearing liabilities amounted
to 4.51% for the three months ended March 31, 1997, up from 4.09% for the
comparable 1996 period. This increase was due primarily to higher average FHLB
advances outstanding, as well as to changes in deposit mix. These factors offset
the benefit of an increase in average demand deposits, an interest-free source
of funding. Average demand deposits for the three months ended March 31, 1997
were up by $7.8 million, or 14.4%, from the same prior year period. Average time
deposits rose 6.4% from the prior year amount, to $245.3 million. The rate paid
on time deposits remained unchanged from the prior year at 5.34%. Average
savings deposits for the three months ended March 31, 1997 declined by 2.8% from
the comparable 1996 amount. The rate paid on these deposits was 2.01% for the
first three months of 1997, down from 2.20% for the same 1996 period.
Average FHLB advances for the three months ended March 31, 1997 amounted to
$163.7 million, up substantially from the $22.0 million average balance for the
same 1996 period. The additional advances were used primarily to purchase
securities under the investment program. The average rate paid on FHLB advances
for the three months ended March 31, 1997 was 5.73%, a decrease of 35 basis
points from the prior year rate.
<PAGE>
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.
<TABLE>
<CAPTION>
Three months ended March 31, 1997 1996
- ------------------------------------------ ------------------------------------ ----------------------------------
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
- -------------------------------------- ------------- ------------ ---------- -------------- ----------- -----------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Residential real estate loans $175,687 3,558 8.10% $170,825 3,531 8.27%
Commercial and other loans 182,002 4,293 9.44% 162,973 3,999 9.82%
Consumer loans 63,687 1,456 9.15% 54,638 1,327 9.71%
- -------------------------------------------------------------------------------------------------------------------
Total loans 421,376 9,307 8.84% 388,436 8,857 9.12%
Federal funds sold 4,819 61 5.11% 6,319 85 5.37%
Taxable debt securities 216,114 3,670 6.79% 80,106 1,379 6.89%
Nontaxable debt securities 15,678 259 6.61% 15,128 248 6.56%
Corporate stocks 26,699 507 7.59% 15,432 493 12.77%
- -------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 684,686 13,804 8.06% 505,421 11,062 8.75%
Non interest-earning assets 43,132 35,763
- -------------------------------------------------------------------------------------------------------------------
Total assets $727,818 $541,184
- -------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Savings deposits $170,830 860 2.01% $175,671 968 2.20%
Time deposits 245,245 3,276 5.34% 230,412 3,077 5.34%
FHLB advances 163,714 2,345 5.73% 22,032 335 6.08%
Other 21,627 300 5.54% 597 8 5.35%
- -------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities
601,416 6,781 4.51% 428,712 4,388 4.09%
Demand deposits 62,287 54,452
Non interest-bearing liabilities 3,641 3,873
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 667,344 487,037
Total shareholders' equity 60,474 54,147
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $727,818 $541,184
- -------------------------------------------------------------------------------------------------------------------
Net interest income /
interest rate spread $7,023 3.55% $6,674 4.66%
- -------------------------------------------------------------------------------------------------------------------
Net interest margin 4.10% 5.28%
- -------------------------------------------------------------------------------------------------------------------
<FN>
Interest income amounts presented in the table above include the following
adjustments for taxable equivalency:
Three months ended March 31, 1997 1996
- ------------------------------ -------------------- ---------------------
Commercial and other loans $33 $20
Taxable debt securities (1) 99 49
Nontaxable debt securities 92 88
Corporate stocks 105 126
(1)Represents adjustments for US Treasury and government agency obligations
which are exempt from state income taxes only.
</FN>
</TABLE>
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
Total assets amounted to $769.2 million at March 31, 1997, an increase of $74.3
million from the December 31, 1996 amount of $694.9 million. Average assets
totaled $727.8 million for the three months ended March 31, 1997, up by 34.5%
over the comparable 1996 period.
Securities Available for Sale - The amortized cost of securities available for
sale at March 31, 1997 amounted to $245.5 million, an increase of 28.7% over the
December 31, 1996 amount of $190.8 million. 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 program. (See Net Interest Income for additional discussion of the
investment program). The net unrealized gain on securities available for sale
decreased by approximately $888,000 during the three months ended March 31,
1997. This decrease is attributable to both the decline in the equity market
and the effect of increases in Treasury rates that have occurred since December
31, 1996.
Securities Held to Maturity - The carrying value of securities held to maturity
amounted to $27.6 million at March 31, 1997, down from $27.9 million at December
31, 1996. The net unrealized loss on securities held to maturity amounted to
approximately $71,000 at March 31, 1997, representing a reduction of $259,000
since December 31, 1996. This decline was attributable to the rise in Treasury
rates occurring since December 31, 1996.
Loans - Total loans amounted to $425.2 million at March 31, 1997, an increase of
$6.2 million, or 1.2%, from the December 31, 1996 balance of $419.0 million. All
categories of loans exhibited modest increases over the year-end 1996 amounts,
with the largest increases occurring in the commercial and consumer portfolios.
Deposits and Other Borrowings - Total deposits amounted to $489.1 million at
March 31, 1997, up by 2.6% from the December 31, 1996 amount of $476.6 million.
This increase resulted primarily from deposits of approximately $8.2 million
which were acquired in March, 1997. Savings deposits rose 3.4% and time deposits
increased by 3.0% from the December 31, 1996 balance. Demand deposits amounted
to $64.4 million, down slightly from the December 31, 1996 balance of $65.0
million.
The Corporation utilizes FHLB advances as a funding source. FHLB advances
amounted to $193.1 million at March 31, 1997, up by $54.6 million from the
December 31, 1996 amount. In addition, short-term borrowings outstanding at
March 31, 1997 amounted to $19.3 million. The additional FHLB advances and
short-term borrowings were used to fund loan growth and to purchase securities
under the investment program. 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 FHLB advances during the three months ended March
31, 1997, the Corporation has increased its investment in FHLB stock from $11.7
million at December 31, 1996 to $16.3 million at March 31, 1997.
For the three months ended March 31, 1997, net cash provided by operations
amounted to $1.3 million, the majority of which was generated by net income.
Proceeds from sales of loans in the first three months of 1997 amounted to $4.3
million, while loans originated for sale amounted to $5.2 million. Net cash used
in investing activities amounted to $58.7 million and was primarily used to
purchase securities available for sale, FHLB stock and for loan originations.
Net cash provided by investing activities was generated mainly by a net increase
in FHLB advances of $54.6 million, and by an increase in short-term borrowings
of $5.3 million. Additionally, $4.3 million was generated from a net increase in
deposits. (See Consolidated Statements of Cash Flows for additional
information.)
During the first quarter of 1997, the Corporation expanded its market area into
contiguous communities. A de novo branch was opened in February, 1997 in North
Kingstown, Rhode Island. This branch is a full service banking office, offering
deposit and loan services for businesses and consumers, as well as trust and
investment services. The Corporation installed the first of two branches in
local supermarkets during the first quarter of 1997. The supermarket branch
offers a complete range of financial products and services. The second
supermarket branch will open during the second quarter of 1997. The Corporation
also acquired a branch of a Connecticut bank including its deposits in March,
1997. This is the Corporation's first full-service branch located in
Connecticut.
ASSET QUALITY
Nonperforming assets are summarized in the following table:
<TABLE>
<CAPTION>
March 31, December 31,
(Dollars in thousands) 1997 1996
--------------- ---------------
<S> <C> <C>
Nonaccrual loans 90 days or more past due $4,205 $3,099
Nonaccrual loans less than 90 days past due 4,124 4,443
--------------- ---------------
Total nonaccrual loans 8,329 7,542
--------------- ---------------
Other real estate owned:
Properties acquired through foreclosure 1,443 1,295
Valuation allowance (225) (205)
--------------- ---------------
Total other real estate owned 1,218 1,090
--------------- ---------------
Total nonperforming assets $9,547 $8,632
--------------- ---------------
Nonaccrual loans as a % of total loans 2.0% 1.8%
Nonperforming assets as a % of total assets 1.2% 1.2%
Allowance for loan losses to nonaccrual loans 103.1% 112.6%
</TABLE>
Not included in the analysis of nonperforming assets at March 31, 1997 and
December 31, 1996 above are approximately $1.4 million of loans greater than 90
days past due and still accruing. These loans consist primarily of residential
mortgages which are considered well-collateralized and in the process of
collection and therefore are deemed to have no loss exposure.
The following is an analysis of nonaccrual loans by loan category:
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1997 1996
---------------- ----------------
<S> <C> <C>
Residential mortgages $2,756 $2,067
Commercial:
Mortgages 1,897 2,133
Construction and development 80 80
Other (1) 3,247 2,881
Consumer 349 381
--------------- ---------------
Total nonperforming loans $8,329 $7,542
--------------- ---------------
<FN>
(1) Loans to businesses and individuals, a substantial portion of which is fully
or partially collateralized by real estate.
</FN>
</TABLE>
Impaired loans consist of all nonaccrual commercial loans. At March 31, 1997,
the recorded investment in impaired loans was $5.2 million, including $4.7
million which had a related allowance amounting to $899,000. At December 31,
1996, the recorded investment in impaired loans was $5.1 million, including $4.5
million which had a related allowance amounting to $867,000. The balance of
impaired loans which did not require an allowance at March 31, 1997 and December
31, 1996 was $536,000 and $572,000, respectively. During the three months ended
March 31, 1997, the average recorded investment in impaired loans was $5.3
million. Also during this period, interest income recognized on impaired loans
amounted to approximately $99,000. Interest income on impaired loans is
recognized on a cash basis only.
CAPITAL RESOURCES
Total equity capital amounted to $60.3 million, or 7.8% of total assets at March
31, 1997. This compares to $59.4 million, or 8.6% at December 31, 1996. The
reduction in this ratio is due primarily to the growth in assets resulting from
the investment program. Total equity increased by approximately $894,000 from
December 31, 1996. A $1.3 million increase attributable to earnings retention
was offset by the $524,000 decrease in unrealized gain on securities available
for sale, net of tax. (See the Consolidated Statements of Changes in
Shareholders' Equity for additional information.)
At March 31, 1997, the Corporation's Tier 1 capital ratio was 13.03%, the total
risk-adjusted capital ratio was 14.29% and the leverage ratio was 7.83%. These
ratios were all above the ratios required to be categorized as well-capitalized.
Dividends payable at March 31, 1997 amounted to approximately $831,000,
representing $.19 per share payable on April 15, 1997, an increase of 5.6% over
the $.18 per share declared in the fourth quarter of 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.
RECENT ACCOUNTING DEVELOPMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". SFAS 128
specifies the computation, presentation, and disclosure requirements for
earnings per share (EPS) for entities with publicly held common stock or
potential common stock. The objective of this Statement is to simplify the
computation of EPS and to make the U.S. standard for computing EPS more
compatible with such standards of other countries and with that of the
International Accounting Standards Committee. SFAS 128 is effective for
reporting periods ending after December 15, 1997. The adoption of this
pronouncement is not expected to have a material impact on the Corporation's
computation of earnings per share.
<PAGE>
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, 1996.
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 Per Share Earnings
(b) There were no reports on Form 8-K filed during the quarter
ended March 31, 1997.
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 15, 1997 By: John C. Warren
-----------------------
John C. Warren
President and Chief Executive Officer
(principal executive officer)
May 15, 1997 By: David V. Devault
-------------------------
David V. Devault
Vice President, Treasurer and Chief Financial Officer
(principal financial officer)
<PAGE>
<TABLE>
EXHIBIT 11
Washington Trust Bancorp, Inc.
Computation of Per Share Earnings
For the Three Months Ended March 31, 1997 and 1996
<CAPTION>
(Shares in thousands) 1997 1996
--------------- ---------------
PRIMARY:
<S> <C> <C>
Weighted average shares 4,366.3 4,259.0
Common stock equivalents 176.2 138.2
--------------- ---------------
Primary weighted average shares 4,542.5 4,397.2
--------------- ---------------
FULLY DILUTED:
Weighted average shares 4,366.3 4,259.0
Common stock equivalents 176.1 141.3
--------------- ---------------
Fully diluted weighted average shares 4,542.4 4,400.3
--------------- ---------------
Net income $2,151 $2,009
--------------- ---------------
Primary earnings per share $.47 $.46
--------------- ---------------
Fully diluted earnings per share $.47 $.46
--------------- ---------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO OF WASHINGTON TRUST BANCORP, INC. AS
OF MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 16,072
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,050
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 252,090
<INVESTMENTS-CARRYING> 27,574
<INVESTMENTS-MARKET> 27,503
<LOANS> 425,194
<ALLOWANCE> 8,585
<TOTAL-ASSETS> 769,213
<DEPOSITS> 489,094
<SHORT-TERM> 19,309
<LIABILITIES-OTHER> 200,489
<LONG-TERM> 0
0
0
<COMMON> 273
<OTHER-SE> 60,048
<TOTAL-LIABILITIES-AND-EQUITY> 769,213
<INTEREST-LOAN> 9,274
<INTEREST-INVEST> 4,140
<INTEREST-OTHER> 61
<INTEREST-TOTAL> 13,475
<INTEREST-DEPOSIT> 4,136
<INTEREST-EXPENSE> 6,781
<INTEREST-INCOME-NET> 6,694
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 254
<EXPENSE-OTHER> 5,491
<INCOME-PRETAX> 3,235
<INCOME-PRE-EXTRAORDINARY> 3,235
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,151
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
<YIELD-ACTUAL> 8.06
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,495
<CHARGE-OFFS> 316
<RECOVERIES> 106
<ALLOWANCE-CLOSE> 8,585
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
