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 JUNE 30, 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
July 31, 1999 was 10,141,290.
Page 1
<PAGE>
FORM 10-Q
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY
For The Quarter Ended June 30, 1999
TABLE OF CONTENTS
Page
Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998 3
Consolidated Statements of Income
Three Months and Six Months Ended June 30, 1999 and 1998 4
Consolidated Statements of Changes in Shareholders' Equity
Six Months Ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows
Six Months Ended June 30, 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 20
Signatures 21
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.
<PAGE>
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1999 1998
- --------------------------------------------------------------------------------
Assets:
Cash and due from banks $15,027 $18,475
Federal funds sold and other short-term investments 13,625 10,300
Mortgage loans held for sale 3,820 5,944
Securities:
Available for sale, at fair value 344,333 315,265
Held to maturity, at cost; fair value $103,031
in 1999 and $96,548 in 1998 104,918 95,647
- --------------------------------------------------------------------------------
Total securities 449,251 410,912
Federal Home Loan Bank stock, at cost 16,444 16,444
Loans 476,185 449,502
Less allowance for loan losses 11,200 10,416
- --------------------------------------------------------------------------------
Net loans 464,985 439,086
Premises and equipment, net 23,081 22,985
Accrued interest receivable 5,911 5,540
Other assets 24,360 5,383
- --------------------------------------------------------------------------------
Total assets $1,016,504 $935,069
- --------------------------------------------------------------------------------
Liabilities:
Deposits:
Demand $97,192 $87,383
Savings 218,919 210,093
Time 283,860 277,847
- --------------------------------------------------------------------------------
Total deposits 599,971 575,323
Dividends payable 1,115 1,005
Short-term borrowings 19,661 15,033
Federal Home Loan Bank advances 314,894 262,106
Accrued expenses and other liabilities 6,598 8,536
- --------------------------------------------------------------------------------
Total liabilities 942,239 862,003
- --------------------------------------------------------------------------------
Shareholders' Equity:
Common stock of $.0625 par value; authorized
30 million shares; issued 10,136,114 shares
in 1999 and 10,010,962 shares in 1998 634 626
Paid-in capital 3,892 2,855
Retained earnings 65,280 62,196
Accumulated other comprehensive income 4,459 7,389
- --------------------------------------------------------------------------------
Total shareholders' equity 74,265 73,066
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,016,504 $935,069
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands,
CONSOLIDATED STATEMENTS OF INCOME except per share data)
(Unaudited)
Three Months Six Months
--------------------------------------------
Periods ended June 30, 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $9,876 $10,022 $19,541 $20,094
Interest on securities 6,155 5,132 12,199 9,704
Dividends on corporate stock and Federal Home Loan Bank stock 515 535 1,047 1,043
Interest on federal funds sold and other short-term investments 104 115 245 284
- ---------------------------------------------------------------------------------------------------------------------
Total interest income 16,650 15,804 33,032 31,125
- ---------------------------------------------------------------------------------------------------------------------
Interest expense:
Savings deposits 900 845 1,752 1,672
Time deposits 3,523 3,926 6,983 7,816
Federal Home Loan Bank advances 4,002 3,331 7,833 6,403
Other 254 288 474 520
- ---------------------------------------------------------------------------------------------------------------------
Total interest expense 8,679 8,390 17,042 16,411
- ---------------------------------------------------------------------------------------------------------------------
Net interest income 7,971 7,414 15,990 14,714
Provision for loan losses 450 450 900 900
- ---------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 7,521 6,964 15,090 13,814
- ---------------------------------------------------------------------------------------------------------------------
Noninterest income:
Trust revenue 1,475 1,361 2,894 2,585
Service charges on deposit accounts 758 742 1,483 1,375
Merchant processing fees 393 222 642 377
Net gains on sales of securities 122 351 384 392
Net gains on loan sales 231 414 558 743
Other income 661 225 1,011 507
- ---------------------------------------------------------------------------------------------------------------------
Total noninterest income 3,640 3,315 6,972 5,979
- ---------------------------------------------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 3,938 3,472 7,721 6,891
Net occupancy 543 502 1,047 961
Equipment 709 622 1,381 1,188
Merchant processing costs 295 227 436 338
Office supplies 150 178 307 336
Advertising and promotion 291 169 463 281
Other 1,392 1,620 3,145 2,985
- ---------------------------------------------------------------------------------------------------------------------
Total noninterest expense 7,318 6,790 14,500 12,980
- ---------------------------------------------------------------------------------------------------------------------
Income before income taxes 3,843 3,489 7,562 6,813
Income tax expense 1,144 977 2,250 1,908
- ---------------------------------------------------------------------------------------------------------------------
Net income $2,699 $2,512 $5,312 $4,905
- ---------------------------------------------------------------------------------------------------------------------
Per share information:
Earnings per share - basic $.27 $.25 $.53 $.49
Earnings per share - diluted $.26 $.24 $.51 $.47
Cash dividends declared per share $.11 $.10 $.22 $.20
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
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
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 $626 $2,855 $62,196 $7,389 $- $73,066
Net income 5,312 5,312
Other comprehensive income net of tax:
Net unrealized losses on securities,
net of reclassification adjustment (2,930) (2,930)
-------
Comprehensive income 2,382
Cash dividends declared (2,228) (2,228)
Shares issued 8 1,037 1,045
- ----------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999 $634 $3,892 $65,280 $4,459 $- $74,265
- ----------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1998 $413 $3,705 $56,360 $7,059 $(333) $67,204
Net income 4,905 4,905
Other comprehensive income net of tax:
Net unrealized gains on securities,
net of reclassification adjustment 1,213 1,213
--------
Comprehensive income 6,118
Cash dividends declared (2,000) (2,000)
Shares issued 5 349 1,282 1,636
Shares repurchased (2,725) (2,725)
- ----------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998 $418 $4,054 $59,265 $8,272 $(1,776) $70,233
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30, 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $5,312 $4,905
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 900 900
Depreciation of premises and equipment 1,427 1,171
Amortization of premium in excess of accretion of
discount on debt securities 285 604
Net gains on sales of securities (384) (392)
Net gains on loan sales (558) (743)
Proceeds from sales of loans 33,275 45,469
Loans originated for sale (34,919) (46,182)
Increase in accrued interest receivable (371) (801)
Increase in other assets (3,697) (973)
Increase (decrease) in accrued expenses and other liabilities 2,218 (533)
Other, net (99) (124)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,389 3,301
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Securities available for sale:
Purchases (84,012) (122,712)
Proceeds from sales 16,175 22,544
Maturities and principal repayments 34,424 30,761
Securities held to maturity:
Purchases (31,477) (6,388)
Maturities and principal repayments 22,209 2,349
Principal collected on loans (under) over loan originations (22,634) 1,923
Proceeds from sales of other real estate owned 338 504
Purchases of premises and equipment (1,526) (2,301)
Purchase of bank-owned life insurance (18,000) -
- --------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (84,503) (73,320)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in deposits 24,648 20,862
Net increase in other short-term borrowings 4,628 6,430
Proceeds from Federal Home Loan Bank advances 286,837 313,300
Repayment of Federal Home Loan Bank advances (234,049) (258,970)
Purchase of treasury stock - (2,725)
Proceeds from issuance of common stock 1,045 1,636
Cash dividends paid (2,118) (1,925)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 80,991 78,608
- --------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (123) 8,589
Cash and cash equivalents at beginning of year 28,775 26,128
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $28,652 $34,717
- --------------------------------------------------------------------------------------------------------------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Six months ended June 30, 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Noncash Investing and Financing Activities:
Net transfers from loans to other real estate owned $252 $44
Loans charged off 410 199
(Decrease) increase in net unrealized gain on
securities available for sale (2,930) 1,213
Supplemental Disclosures:
Interest payments $16,717 $16,385
Income tax payments 2,101 1,183
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
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. and
subsidiary (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 June 30, 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
<TABLE>
<CAPTION>
Securities available for sale are summarized as follows:
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June 30, 1999
U.S. Treasury obligations and obligations
of U.S. government-sponsored agencies $113,022 $745 $(952) $112,815
Mortgage-backed securities 173,803 529 (1,583) 172,749
Corporate bonds 36,681 4 (637) 36,048
Corporate stocks 13,039 10,036 (354) 22,721
- ---------------------------------------------------------------------------------------------------------------------
Total 336,545 11,314 (3,526) 344,333
- ---------------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Securities available for sale with a fair value of $70,686 and $27,800 were
pledged to secure Treasury Tax and Loan deposits, borrowings and public deposits
at June 30, 1999 and December 31, 1998, respectively.
For the six months ended June 30, 1999, proceeds from sales of securities
available for sale amounted to $16,175 while net realized gains on these sales
amounted to $384.
<PAGE>
(3) Securities Held to Maturity
<TABLE>
<CAPTION>
The amortized cost and fair value of securities held to maturity are summarized
as follows:
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June 30, 1999
U.S. Treasury obligations and obligations
of U.S. government-sponsored agencies $25,295 $25 $(417) $24,903
Mortgage-backed securities 51,938 142 (1,418) 50,662
States and political subdivisions 27,685 72 (291) 27,466
- ---------------------------------------------------------------------------------------------------------------------
Total 104,918 239 (2,126) 103,031
- ---------------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
There were no sales or transfers of securities held to maturity during the six
months ended June 30, 1999.
(4) Loan Portfolio The following is a summary of loans:
June 30, December 31,
1999 1998
- --------------------------------------------------------------------------------
Commercial:
Mortgages $86,409 $70,468
Construction and development 1,285 612
Other (1) 113,195 111,477
- --------------------------------------------------------------------------------
Total commercial 200,889 182,557
Residential real estate:
Mortgages 184,486 179,589
Homeowner construction 10,981 10,046
- --------------------------------------------------------------------------------
Total residential real estate 195,467 189,635
Consumer (2) 79,829 77,310
- --------------------------------------------------------------------------------
Total loans $476,185 $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 $5.1 million and $5.4 million at
June 30, 1999 and December 31,1998, respectively.
<PAGE>
(5) Allowance For Loan Losses
The following is an analysis of the allowance for loan losses:
Three Months Six Months
------------------------------------------------
Periods ended June 30, 1999 1998 1999 1998
- --------------------------------------------------------------------------------
Balance at beginning of period $10,768 $9,309 $10,416 $8,835
Provision charged to expense 450 450 900 900
Recoveries 250 97 294 176
Loans charged off (268) (144) (410) (199)
- --------------------------------------------------------------------------------
Balance at end of period $11,200 $9,712 $11,200 $9,712
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors and Shareholders
Washington Trust Bancorp, Inc.:
We have reviewed the consolidated balance sheet of Washington Trust Bancorp,
Inc. and subsidiary (the "Corporation") as of June 30, 1999, the related
consolidated statements of income for the three month and six-month periods
ended June 30, 1999 and 1998, and changes in shareholders' equity and cash flows
for the six-month periods ended June 30, 1999 and 1998. These consolidated
financial statements are the responsibility of the Corporation's management.
We conducted 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 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 Company as of December 31,
1998, and the related consolidated statements of income, changes in
stockholders' 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
July 15, 1999
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net income for the three months ended June 30, 1999 amounted to $2.7 million, or
$.26 per diluted share. Net income was 7.4% higher than the $2.5 million, or
$.24 per diluted share, earned in the quarter ended June 30, 1998. The
Corporation's rates of return on average assets and average equity for the
second quarter of 1999 were 1.09% and 14.44%, respectively. Comparable amounts
for the second quarter of 1998 were 1.14% and 14.31%.
Net income for the six months ended June 30, 1999 amounted to $5.3 million, an
increase of 8.3% from the $4.9 million reported for the comparable 1998 period.
Diluted earnings per share for the six months ended June 30, 1999 amounted to
$.51, up from $.47 per share earned in the six months ended June 30, 1998. The
Corporation's rates of return on average assets and average equity for the six
months ended June 30, 1999 were 1.09% and 14.30%, respectively. Comparable
amounts for the 1998 period were 1.14% and 14.09%.
For the second quarter of 1999, net interest income (the difference between
interest earned on loans and investments and interest paid on deposits and other
borrowings) amounted to $8.0 million, an increase of 7.5% from the $7.4 million
reported for the second quarter of 1998. Net interest income for the six months
ended June 30, 1999 rose 8.7% over the corresponding 1998 period. This increase
was primarily attributable to net interest income generated by investment
securities. (See additional discussion under the caption "Net Interest Income".)
The Corporation's provision for loan losses was $450 thousand in the second
quarter of 1999 and 1998, respectively. For the six months ended June 30, 1999,
the provision for loan losses amounted to $900 thousand, unchanged from the
comparable 1998 period.
Other noninterest income (noninterest income excluding net gains on sales of
securities) amounted to $3.5 million for the second quarter of 1999, up 18.7%
from the corresponding 1998 quarter. The increase was primarily due to increases
in other income, merchant processing fees and revenues for trust services.
Included in other income was $196 thousand of earnings on bank-owned life
insurance (BOLI) purchased during the quarter. Further discussion of BOLI is
provided under the caption "Financial Condition and Liquidity". Other
noninterest income amounted to $6.6 million for the six months ended June 30,
1999, up 17.9% from the corresponding 1998 period.
For the three months ended June 30, 1999, net securities gains totaled $122
thousand, compared to $351 thousand for the quarter ended June 30, 1998.
Comparable amounts for the six months ended June 30, 1999 and 1998 amounted to
$384 thousand and $392 thousand, respectively.
Total noninterest expense for the quarter ended June 30, 1999 amounted to $7.3
million, an increase of 7.8% from the comparable 1998 amount. Total noninterest
expense for the six months ended June 30, 1999 amounted to $14.5 million, an
increase of 11.7% over the comparable 1998 amount. The increases were primarily
attributable to higher salaries and benefits expense and increases in equipment
costs. Equipment costs for the six months ended June 30, 1999 rose 16.2% over
the prior year period due primarily to depreciation expense associated with 1998
investments in technology. Included in other noninterest expense for the six
months ended June 30, 1999 and 1998 were contributions of appreciated equity
securities to the Corporation's charitable foundation amounting to $270 thousand
and $323 thousand, respectively. These transactions resulted in realized
securities gains of $262 thousand and $313 thousand, respectively, for the same
periods.
<PAGE>
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 six months ended June 30, 1999 amounted to $16.6
million, up 8.9% 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) for the six months ended June 30,
1999 and 1998 were 3.65% and 3.76%, respectively.
For the six months ended June 30, 1999, average interest-earning assets amounted
to $914.5 million, an increase of $105.7 million, or 13.1%, over the comparable
1998 amount. The growth in average interest-earning assets was due to growth in
the securities portfolio. Total average securities rose $98.4 million or 27.8%
over the comparable prior year period, mainly due to purchases of debt
securities. The FTE rate of return on securities was 6.23% for the six months
ended June 30, 1999, down from 6.46% 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 7.41% for the six months ended
June 30, 1999, down from 7.82% for the same 1998 period due to reductions in
yields on loans and securities.
The yield on average total loans amounted to 8.56% for the six months ended June
30, 1999, down from 8.87% in the comparable 1998 period due to changes in the
prime rate as well as lower yields on new loan originations. Average total loans
for the six months ended June 30, 1999 rose $7.3 million or 1.6% over the prior
year and amounted to $461.7 million. Average consumer loans and residential real
estate loans rose by 3.9% and 2.8% over the prior year, respectively, while
average commercial loans declined slightly. As a result of prime rate decreases
during the fourth quarter of 1998, the yields on consumer and residential real
estate loans declined 48 basis points and 46 basis points to 8.60% and 7.71%,
respectively. The yield on commercial loans amounted to 9.41%, down from the
prior year yield of 9.48%.
The Corporation's total cost of funds on interest-bearing liabilities amounted
to 4.26% for the six months ended June 30, 1999, down from 4.64% for the
comparable 1998 period. This decrease was due primarily to reduced rates paid on
both borrowed funds and deposits. Average FHLB advances for the six months ended
June 30, 1999 amounted to $295.1 million, up 34.5% from the $219.4 million
average balance for the same 1998 period. The average rate paid on FHLB advances
for the six months ended June 30, 1999 was 5.35%, a decrease of 49 basis points
from the prior year rate. Average time deposits declined slightly to $283.6
million with a decrease of 53 basis points in the rate paid. Average savings
deposits for the six months ended June 30, 1999 increased 12.2% from the
comparable 1998 amount to $208.1 million. The rate paid on these deposits was
1.70% for the first six months of 1999, down from 1.80% for the same 1998
period. For the six months ended June 30, 1999, average demand deposits, an
interest-free funding source, were up by $9.3 million, or 12.5%, from the same
prior year period.
<PAGE>
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.
<TABLE>
<CAPTION>
Six months ended June 30, 1999 1998
- -------------------------------------------- ------------------------------------ ----------------------------------
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
- ---------------------------------------- ------------- ----------- ----------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Residential real estate loans $193,327 $7,394 7.71% $187,998 7,680 8.17%
Commercial and other loans 191,175 8,921 9.41% 192,091 9,108 9.48%
Consumer loans 77,157 3,291 8.60% 74,285 3,371 9.08%
- --------------------------------------------------------------------------------------------------------------------
Total loans 461,659 19,606 8.56% 454,374 20,159 8.87%
Federal funds sold and other
short-term investments 10,389 245 4.76% 10,394 284 5.46%
Taxable debt securities 385,194 11,592 6.07% 294,408 9,285 6.31%
Nontaxable debt securities 27,122 916 6.81% 19,411 633 6.52%
Corporate stocks and FHLB stock 30,139 1,236 8.27% 30,191 1,250 8.28%
- --------------------------------------------------------------------------------------------------------------------
Total securities 452,844 13,989 6.23% 354,404 11,452 6.46%
- --------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 914,503 33,595 7.41% 808,778 31,611 7.82%
- --------------------------------------------------------------------------------------------------------------------
Non interest-earning assets 56,659 50,613
- --------------------------------------------------------------------------------------------------------------------
Total assets $971,162 $859,391
- --------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Savings deposits $208,066 1,752 1.70% $185,471 1,672 1.80%
Time deposits 283,598 6,983 4.97% 284,222 7,816 5.50%
FHLB advances 295,117 7,833 5.35% 219,364 6,403 5.84%
Other 19,650 474 4.86% 18,421 520 5.65%
- --------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 806,431 17,042 4.26% 707,478 16,411 4.64%
Demand deposits 83,848 74,562
Non interest-bearing liabilities 6,605 7,743
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 896,884 789,783
Total shareholders' equity 74,278 69,608
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $971,162 $859,391
- --------------------------------------------------------------------------------------------------------------------
Net interest income $16,553 $15,200
- --------------------------------------------------------------------------------------------------------------------
Net interest spread 3.15% 3.18%
- --------------------------------------------------------------------------------------------------------------------
Net interest margin 3.65% 3.76%
- --------------------------------------------------------------------------------------------------------------------
<FN>
Interest income amounts presented in the table above include the following
adjustments for taxable equivalency:
(Dollars in thousands)
Six months ended June 30, 1999 1998
- --------------------------------------------------------------------------------
Commercial and other loans $65 $65
Nontaxable debt securities 309 214
Corporate stocks 189 207
</FN>
</TABLE>
<PAGE>
Financial Condition and Liquidity
Total assets amounted to $1.016 billion at June 30, 1999, an increase of $81.4
million, or 8.7%, from the December 31, 1998 amount of $935.1 million. Average
assets totaled $971.2 million for the six months ended June 30, 1999, up by
13.0% over the comparable 1998 period.
Nonperforming assets (nonaccrual loans and property acquired through
foreclosure) amounted to $4.3 million or .43% of total assets at June 30, 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 June 30, 1999 amounted to $344.3 million, an increase of 9.2% over the
December 31, 1998 amount of $315.3 million. This increase was attributable to
purchases of debt securities. The net unrealized gain on securities available
for sale amounted to $7.8 million, down 36.3% 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 six months of 1999.
Securities Held to Maturity - The carrying value of securities held to maturity
amounted to $104.9 million at June 30, 1999, up from $95.6 million at December
31, 1998. This increase was due to purchases of mortgage-backed securities and
obligations of U.S. government-sponsored agencies. The net unrealized loss on
securities held to maturity amounted to approximately $1.9 million at June 30,
1999, down from an unrealized gain of $901 thousand at December 31, 1998. The
decline was primarily due to the effects of increases in Treasury rates that
occurred in the first six months of 1999.
Loans - Total loans amounted to $476.2 million at June 30, 1999, an increase of
$26.7 million, or 5.9%, 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 $18.3 million or 10.0% to $200.9 million
at June 30, 1999. Total residential real estate loans and consumer loans
increased by $5.8 million and $2.5 million over the December 31, 1998 balance,
respectively.
The Corporation has entered into an agreement to sell its consumer credit card
portfolio of approximately $5.1 million. The transaction is expected to be
completed in the third quarter of 1999 and to result in a pre-tax gain, net of
expenses, of approximately $500 thousand. The Corporation will continue to
provide merchant credit card processing services.
Other assets - Other assets totaled $24.4 million at June 30, 1999, up $19.0
million from $5.4 million at December 31, 1999. The increase was primarily due
to the purchase of bank-owned life insurance (BOLI) during the second quarter of
1999. The Corporation purchased $18.0 million of BOLI as a financing tool for
employee benefits. The Corporation expects to benefit from the BOLI contracts
as a result of the tax-free growth in cash surrender value and death benefits
which are expected to be generated over time. The purchase of the life insurance
policy results in an interest sensitive asset on the Corporation's consolidated
balance sheet that provides monthly tax-free income to the Corporation. The
largest risk to the BOLI program is credit risk of the insurance carriers.
To mitigate this risk, annual financial condition reviews are completed on all
carriers. BOLI is included in other assets on the Corporation's consolidated
balance sheets at its cash surrender value. Increases in BOLI's cash surrender
value are reported as other income in the Corporation's consolidated
statements of income.
Deposits - Total deposits amounted to $600.0 million at June 30, 1999, up by
4.3% from the December 31, 1998 amount of $575.3 million. Demand and savings
deposits increased by $9.8 million and $8.8 million, respectively, due to normal
seasonal deposit inflow. Time deposits amounted to $283.9 million, an increase
of 2.2% from the December 31, 1998 balance of $277.8 million. Brokered
certificates of deposit of $9.8 million are included in time deposits at June
30, 1999.
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 $314.9 million at June 30, 1999, up by $52.8 million from
the December 31, 1998 amount. In addition, short-term borrowings outstanding at
June 30, 1999 amounted to $19.7 million.
For the six months ended June 30, 1999, net cash provided by operations amounted
to $3.4 million, the majority of which was generated by net income. Net cash
used in investing activities amounted to $84.5 million and was primarily used to
purchase securities. Net cash provided by financing activities of $81.0 million
was generated mainly by a net increase in FHLB advances of $52.8 million, and by
an increase in deposits of $24.6 million. (See Consolidated Statements of Cash
Flows for additional information.)
Expansion
In April of 1999, the Corporation announced its intention to open a trust and
investment office in Providence, Rhode Island. The Corporation expects to
open this office by the end of 1999.
Nonperforming Assets
Nonperforming assets are summarized in the following table:
June 30, December 31,
(Dollars in thousands) 1999 1998
- --------------------------------------------------------------------------------
Nonaccrual loans 90 days or more past due $2,120 $2,421
Nonaccrual loans less than 90 days past due 2,041 3,192
- --------------------------------------------------------------------------------
Total nonaccrual loans 4,161 5,613
Other real estate owned 169 243
- --------------------------------------------------------------------------------
Total nonperforming assets $4,330 $5,856
- --------------------------------------------------------------------------------
Nonaccrual loans as a percentage of total loans .87% 1.25%
Nonperforming assets as a percentage of total assets .43% .63%
Allowance for loan losses to nonaccrual loans 269.17% 185.57%
Nonperforming assets continue to decline and are at the lowest level in over ten
years. Total nonperforming assets decreased from $5.9 million or .63% of total
assets at December 31, 1998 to $4.3 million or .43% of total assets at June 30,
1999. Not included in the analysis of nonperforming assets at June 30, 1999 and
December 31, 1998 above are approximately $103 thousand and $150 thousand,
respectively, of loans greater than 90 days past due and still accruing. These
loans consist primarily of residential mortgages that 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 June 30, 1999, the
recorded investment in impaired loans was $2.8 million, which had a related
allowance amounting to $625 thousand. The balance of impaired loans that did not
require an allowance at June 30, 1999 was $8 thousand. During the six months
ended June 30, 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 $179 thousand. Interest income on impaired loans is
recognized on a cash basis only.
<PAGE>
The following is an analysis of nonaccrual loans by loan category:
June 30, December 31,
(Dollars in thousands) 1999 1998
- --------------------------------------------------------------------------------
Residential mortgages $1,064 $1,417
Commercial:
Mortgages 977 1,522
Other (1) 1,791 2,141
Consumer 329 533
- --------------------------------------------------------------------------------
Total nonaccrual loans $4,161 $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 $74.3 million, or 7.3% of total assets at June
30, 1999. This compares to $73.1 million, or 7.8% at December 31, 1998. The
reduction in this ratio is due primarily to growth in the loan portfolio and
purchases of investment securities. Total equity increased by approximately $1.2
million from December 31, 1998. The increase in equity resulting from earnings
retention was reduced by a $2.9 million decline in net unrealized gains on
securities. (See the Consolidated Statements of Changes in Shareholders' Equity
for additional information.)
At June 30, 1999, the Corporation's Tier 1 capital ratio was 12.46% and the
total risk-adjusted capital ratio was 14.35%. These ratios were both above the
ratios required to be categorized as well-capitalized.
Dividends payable at June 30, 1999 amounted to approximately $1.1 million,
representing $.11 per share payable on July 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 June 30, 1999 and December 31, 1998 amounted to $7.33
and $7.30, 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. On June 16, 1999, the shareholders of PierBank approved the Agreement
and Plan of Merger under which PierBank will be merged with and into The
Washington Trust Company, the wholly-owned subsidiary of the Corporation. The
purchase, which is expected to be completed in the third quarter of 1999, is
subject to approval by 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 validation and testing of all IT and
non-IT systems were 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 through June 30, 1999 amounted
to approximately $350 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 were expanded to include specific procedures for potential Year
2000 issues, and contingency plans to protect against Year 2000-related
interruptions. These plans include backup procedures and identification of
alternative suppliers. Business resumption contingency planning was completed 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 Statement
of Financial Accounting Standards (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. 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. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133". SFAS No. 133 is effective for all fiscal quarters of
all fiscal years beginning after June 15, 2000 and is not to be applied
retroactively to financial statements of prior periods.
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 June 30, 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 -2.0% -5.6%
200 basis point decrease in rates +1.2% +0.6%
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 June 30, 1999, an immediate 200 basis
point rise in rates would result in a 4.6% 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 2.1% 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 June 30, 1999, including both debt and equity securities, was 4.8%,
assuming a one-year time horizon and a 5% probability of occurrence for "value
at risk" analysis.
<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, 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
(a) The Annual Meeting of Shareholders was held on April 27, 1999.
(c) The results of matters voted upon are presented below.
i. A proposal to elect Gary Bennett, Larry Hirsch, Mary
Kennard and Joseph Kirby as directors of the
Corporation for three year terms expiring at the 2002
Annual Meeting of Shareholders passed as follows:
Votes Votes Abstentions and Broker
In Favor Withheld Non-votes
------------ ----------------- --------------- ---------------------------
Gary Bennett 8,409,801 44,189 0
Larry Hirsch 8,405,557 48,432 0
Mary Kennard 8,404,179 49,810 0
Joseph Kirby 8,414,949 39,041 0
ii. A proposal for the ratification of KPMG LLP to serve
as independent auditors of the Corporation for the
current fiscal year ending December 31, 1999 was
passed by a vote of 8,332,179 shares in favor;
87,416 shares against, with 34,394 abstentions and
broker non-votes.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit index
Exhibit No.
-----------------
10 Change in Control Agreement (1) (2)
11 Statement re Computation of Per Share Earnings
(b) There were no reports on Form 8-K filed during the quarter ended
June 30, 1999.
(1) Not filed herewith. In accordance with Rule 12b-32 promulgated
pursuant to the Securities Exchange Act of 1934, as amended,
reference is made to the document previously filed with the
Commission, which is incorporated by reference herein.
(2) Management contract or compensatory plan or arrangement.
<PAGE>
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)
August 13, 1999 By: John C. Warren
-----------------------------------------------------
John C. Warren
Chairman and Chief Executive Officer
(principal executive officer)
August 13, 1999 By: David V. Devault
-----------------------------------------------------
David V. Devault
Executive Vice President, Treasurer
and Chief Financial Officer
(principal financial and accounting officer)
<PAGE>
Exhibit 10
Change in Control Agreements with Executive Officers
WASHINGTON TRUST BANCORP, INC.
23 BROAD STREET
WESTERLY, RHODE ISLAND 02891
In the second quarter of 1999, the Registrant entered into a Change of Control
Agreement with one of its executive officers. The form of Agreement, filed as
Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1999, 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)
- ----------------------------- ---------------------- ---------------------------
John F. Treanor
President and Chief
Operating Officer 1 year 2 times
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
Washington Trust Bancorp, Inc.
Computation of Per Share Earnings
For the Periods Ended June 30, 1999 and 1998
Three months ended June 30, 1999 1998
- ------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts) Basic Diluted Basic Diluted
----------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net income $2,699 $2,699 $2,512 $2,512
Share amounts:
Average outstanding 10,122.8 10,122.8 9,959.9 9,959.9
Common stock equivalents - 217.0 - 384.1
- ------------------------------------------------ ----------------- --------------- ---------------- --------------
Weighted average outstanding 10,122.8 10,339.8 9,959.9 10,344.0
- ------------------------------------------------ ----------------- --------------- ---------------- --------------
Earnings per share $.27 $.26 $.25 $.24
- ------------------------------------------------ ----------------- --------------- ---------------- --------------
Six months ended June 30, 1999 1998
- ------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts) Basic Diluted Basic Diluted
----------------- --------------- ---------------- --------------
Net income $5,312 $5,312 $4,905 $4,905
Share amounts
Average outstanding 10,090.1 10,090.1 9,966.9 9,966.9
Common stock equivalents - 246.0 - 397.8
- ------------------------------------------------ ----------------- --------------- ---------------- --------------
Weighted average outstanding 10,090.1 10,336.1 9,966.9 10,364.7
- ------------------------------------------------ ----------------- --------------- ---------------- --------------
Earnings per share $.53 $.51 $.49 $.47
- ------------------------------------------------ ----------------- --------------- ---------------- --------------
</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 JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 15,027
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 13,625
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 344,333
<INVESTMENTS-CARRYING> 104,918
<INVESTMENTS-MARKET> 103,031
<LOANS> 476,185
<ALLOWANCE> 11,200
<TOTAL-ASSETS> 1,016,504
<DEPOSITS> 599,971
<SHORT-TERM> 19,661
<LIABILITIES-OTHER> 322,607
<LONG-TERM> 0
0
0
<COMMON> 634
<OTHER-SE> 73,631
<TOTAL-LIABILITIES-AND-EQUITY> 1,016,504
<INTEREST-LOAN> 19,541
<INTEREST-INVEST> 13,246
<INTEREST-OTHER> 245
<INTEREST-TOTAL> 33,032
<INTEREST-DEPOSIT> 8,735
<INTEREST-EXPENSE> 17,042
<INTEREST-INCOME-NET> 15,990
<LOAN-LOSSES> 900
<SECURITIES-GAINS> 384
<EXPENSE-OTHER> 14,500
<INCOME-PRETAX> 7,562
<INCOME-PRE-EXTRAORDINARY> 7,562
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,312
<EPS-BASIC> .53
<EPS-DILUTED> .51
<YIELD-ACTUAL> 3.65
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 10,416
<CHARGE-OFFS> 410
<RECOVERIES> 294
<ALLOWANCE-CLOSE> 11,200
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
