OREANDA-NEWS. July 26, 2016. Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced net income of \\$11.1 million, or \\$0.64 per diluted share, for the second quarter of 2016, compared to net income of \\$10.9 million, or \\$0.64 per diluted share, reported for the first quarter of 2016. 

"Washington Trust posted solid second quarter earnings in a challenging economic environment," stated Joseph J. MarcAurele, Washington Trust Chairman and CEO.  "Total loans reached a record level, as a result of strong commercial loan and residential mortgage activity during the quarter.  Wealth management revenues and assets under administration also achieved all-time highs, despite financial market volatility."

Selected highlights for the second quarter of 2016 include:

  • Returns on average equity and average assets remain solid at 11.50% and 1.14%, respectively.  Comparable amounts for the first quarter of 2016 were 11.50% and 1.16%, respectively.
  • Mortgage banking revenues amounted to \\$2.7 million, up by 23% on a linked quarter basis.  Mortgage loans sold to the secondary market totaled \\$139 million; the second highest quarterly volume in the past three years.
  • Total loans stood at \\$3.1 billion at June 30, 2016, up by 1% in the quarter and up by 5% from a year ago.
  • Total deposits amounted to \\$2.8 billion at March 31, 2016, down by 3% in the quarter and up by 2% from a year ago.

Net Interest Income
Net interest income totaled \\$26.8 million for the second quarter of 2016, compared to \\$27.7 million, in the first quarter.  Prior quarter net interest income included loan prepayment fee income of \\$1.0 million, compared to \\$48 thousand in the most recent quarter.  Excluding the impact of the loan prepayment fee income from both periods, net interest income was down slightly on a linked quarter basis.  The net interest margin was 3.05% for the second quarter of 2016, down by 19 basis points from the previous quarter.  Excluding the impact of the loan prepayment fee income in each period, the second quarter net interest margin was 3.05%, down by 8 basis points from the prior quarter.  The reduction in the net interest margin was largely due to lower yields on interest-earning assets as a result of the downward movement in longer-term market interest rates in 2016.  Other significant linked quarter changes included:

  • Average interest-earning assets increased by \\$94 million, due to growth in average balances of commercial loans in the quarter as well as an increase in average investment securities driven by portfolio additions near the end of the previous quarter.
  • Average interest-bearing liabilities rose by \\$88 million, reflecting increases in the average balance of Federal Home Loan Bank of Boston ("FHLBB") advances.  The cost of interest-bearing funds was 0.74%, unchanged from the previous quarter.

Noninterest Income
Noninterest income totaled \\$15.9 million for the second quarter of 2016, up by \\$1.3 million, or 9%, from the first quarter of 2016.  Significant linked quarter changes included:

  • Wealth management revenues totaled \\$9.5 million for the second quarter, up by \\$307 thousand, or 3%, from the prior quarter.  The increase included a \\$291 thousand increase in tax preparation fees, which are generally concentrated in the second quarter. Wealth management assets under administration amounted to \\$5.9 billion at June 30, 2016, up by \\$26 million on a linked quarter basis.  Managed assets continue to represent over 90% of total wealth management assets at June 30, 2016.
  • Mortgage banking benefited from strong activity levels as revenues totaled \\$2.7 million for the second quarter, up by \\$512 thousand, or 23%, on a linked quarter basis.  These results reflect both a higher volume and yield on loans sold to the secondary market.  Residential mortgage loans sold to the secondary market amounted to \\$139.0 million in the second quarter, compared to \\$106.0 million in the previous quarter.
  • Income from bank-owned life insurance ("BOLI") amounted to \\$1.1 million in the second quarter, up by \\$591 thousand, from the first quarter of 2016.  Included in the second quarter was a \\$589 thousand non-taxable gain due to the receipt of life insurance proceeds.
  • Loan related derivative income amounted to \\$508 thousand in the second quarter, down by \\$137 thousand, or 21%, from the prior quarter.  The decrease reflected a lower volume of commercial borrower interest rate swaps transactions.

Noninterest Expenses
Noninterest expenses totaled \\$26.0 million for the second quarter of 2016, up by \\$580 thousand, or 2%, from the prior quarter.  The largest increase was a \\$1.0 million increase in salaries and employee benefit costs, which included costs of \\$425 thousand incurred in the second quarter for various employee severance matters.  The remaining increase in salaries and employee benefit costs was concentrated in transaction-based commission expense associated with the increase in mortgage banking activities.  In first quarter of 2016, noninterest expenses included \\$431 thousand of debt prepayment penalty expense associated with the prepayment of \\$10.0 million in FHLBB advances.  There were no such expenses in the latest quarter.

Income tax expense amounted to \\$5.2 million for the second quarter of 2016, down by \\$331 thousand from the amount recognized in the previous quarter.  The effective tax rate for the second quarter of 2016 was 31.8%, compared to 33.4% for the first quarter of 2016.  The reduction in the effective tax rate for the second quarter is primarily due to the non-taxable gain related to the receipt of BOLI proceeds.

Loans
Total loans amounted to \\$3.1 billion at June 30, 2016, up by \\$34 million, or 1.1%, from the balance at the end of the first quarter.  The linked quarter change was due to growth of \\$57 million in the commercial real estate portfolio, which was partially offset by a decline of \\$23 million in the commercial and industrial portfolio.  The residential and consumer loan portfolio balances were relatively consistent with the period-end balances at March 31, 2016.  Included in the residential loan portfolio balance at the end of the second quarter was a \\$16.1 million purchase of whole loans acquired on June 28, 2016.  These loans were individually evaluated to our underwriting standards and predominantly secured by properties in Massachusetts.

Investment Securities
The securities portfolio amounted to \\$420 million at June 30, 2016, down by \\$11 million, or 2.5%, from the balance at March 31, 2016, due to calls, maturities and routine principal pay-downs, which were partially offset by the purchases of \\$52 million of additional U.S. government agency and agency mortgage-backed debt securities.  Investment securities were 11% of total assets as of June 30, 2016.

Deposits and Borrowings
Total deposits amounted to \\$2.8 billion at June 30, 2016, down by \\$90 million, or 3.1%, in the second quarter.  Excluding wholesale brokered time deposits, in-market deposits decreased by \\$75 million, or 2.9%, in the quarter.  The largest outflow during the quarter was \\$88 million of money market deposits, attributable to outflows associated with various institutional and governmental depositors.  A substantial portion of these outflows are considered to be seasonal in nature based on the business cycles of the underlying depositors.

FHLBB advances amounted to \\$640 million at June 30, 2016, up by \\$153 million, or 31.4%, from March 31, 2016.

Asset Quality
Total past due loans a/mounted to \\$17.1 million, or 0.56% of total loans, at June 30, 2016, compared to \\$18.3 million, or 0.60% of total loans, at March 31, 2016.  Total nonaccrual loans amounted to \\$17.2 million, or 0.56% of total loans, at June 30, 2016, compared to \\$17.4 million, or 0.57% of total loans, at March 31, 2016.

A loan loss provision totaling \\$450 thousand was charged to earnings in the second quarter of 2016, compared to a loan loss provision of \\$500 thousand recognized in the first quarter of 2016.  The loan loss provision was based on management’s assessment of loss exposure, as well as loan loss allocations commensurate with changes in the loan portfolio during the quarter.  Net charge-offs amounted to \\$761 thousand in the second quarter of 2016 and included a \\$737 thousand charge-off associated with one commercial and industrial relationship.  A substantial portion of the loss exposure associated with this charge-off was recognized as of March 31, 2016.  The allowance for loan losses was \\$25.8 million, or 0.84% of total loans, at June 30, 2016, compared to \\$26.1 million, or 0.86% of total loans, at March 31, 2016. 

Capital and Dividends
Total shareholder's equity was \\$388 million at June 30, 2016, up by \\$7 million from March 31, 2016.  Capital levels at June 30, 2016 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.43% at June 30, 2016, compared to 12.45% at March 31, 2016.  At June 30, 2016, book value per share amounted to \\$22.73, up from \\$22.40 in the prior quarter.

The Board of Directors declared a quarterly dividend of 36 cents per share for the quarter ended June 30, 2016.  The dividend was paid on July 14, 2016 to shareholders of record on July 1, 2016.

Conference Call
Washington Trust will host a conference call to discuss its second quarter results, business highlights and outlook on Tuesday, July 26, 2016 at 8:30 a.m. (Eastern Time).  Individuals may dial in to the call at 1-877-407-0784.  An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-877-870-5176 and entering the Replay PIN Number 13639564; the audio replay will be available through August 5, 2016.  Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrustbancorp.com, and will be available through September 30, 2016.

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

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

Some of the factors that might cause these differences include the following: weakness in national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets; volatility in national and international financial markets; additional government intervention in the U.S. financial system; reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits; reductions in the market value of wealth management assets under administration; changes in the value of securities and other assets; reductions in loan demand; changes in loan collectibility, default and charge-off rates; changes in the size and nature of the our competition; changes in legislation or regulation and accounting principles, policies and guidelines; and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, may result in these differences. You should carefully review all of these factors and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

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

Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
      
 Jun 30,
 2016		Mar 31,
 2016		Dec 31,
 2015		Sep 30,
 2015		Jun 30,
 2015
Assets:     
Cash and due from banks\\$116,658 \\$89,966 \\$93,222 \\$106,445 \\$79,795 
Short-term investments 3,255  4,931  4,409  3,629  4,298 
Mortgage loans held for sale 38,554  22,895  38,554  31,805  37,389 
Securities:     
Available for sale, at fair value 401,749  411,352  375,044  323,795  351,378 
Held to maturity, at amortized cost 17,917  19,040  20,023  21,140  22,523 
Total securities 419,666  430,392  395,067  344,935  373,901 
Federal Home Loan Bank stock, at cost 34,303  26,515  24,316  37,730  37,730 
Loans:     
Commercial 1,732,220  1,698,811  1,654,547  1,579,854  1,583,537 
Residential real estate 1,005,036  1,004,349  1,013,555  1,024,214  1,001,263 
Consumer 343,628  343,833  345,025  345,850  343,784 
Total loans 3,080,884  3,046,993  3,013,127  2,949,918  2,928,584 
Less allowance for loan losses 25,826  26,137  27,069  27,161  27,587 
Net loans 3,055,058  3,020,856  2,986,058  2,922,757  2,900,997 
Premises and equipment, net 29,590  29,882  29,593  28,180  28,124 
Investment in bank-owned life insurance 65,036  66,000  65,501  65,000  64,502 
Goodwill 64,059  64,059  64,059  64,196  58,114 
Identifiable intangible assets, net 10,814  11,137  11,460  11,793  4,539 
Other assets 80,088  71,577  59,365  58,366  55,088 
Total assets\\$3,917,081 \\$3,838,210 \\$3,771,604 \\$3,674,836 \\$3,644,477 
Liabilities:     
Deposits:     
Demand deposits\\$512,307 \\$539,119 \\$537,298 \\$513,856 \\$457,755 
NOW accounts 414,532  394,873  412,602  358,973  357,922 
Money market accounts 675,896  763,565  823,490  855,858  789,334 
Savings accounts 342,579  331,800  326,967  305,775  300,108 
Time deposits 844,036  850,294  833,898  801,818  834,000 
Total deposits 2,789,350  2,879,651  2,934,255  2,836,280  2,739,119 
Federal Home Loan Bank advances 640,010  487,189  378,973  381,649  471,321 
Junior subordinated debentures 22,681  22,681  22,681  22,681  22,681 
Other liabilities 76,708  67,409  60,307  63,699  52,189 
Total liabilities 3,528,749  3,456,930  3,396,216  3,304,309  3,285,310 
Shareholders’ Equity:     
Common stock 1,068  1,064  1,064  1,062  1,052 
Paid-in capital 112,314  111,641  110,949  109,724  103,408 
Retained earnings 282,666  277,810  273,074  268,166  263,790 
Accumulated other comprehensive loss (7,716) (9,235) (9,699) (8,425) (9,083)
Total shareholders’ equity 388,332  381,280  375,388  370,527  359,167 
Total liabilities and shareholders’ equity\\$3,917,081 \\$3,838,210 \\$3,771,604 \\$3,674,836 \\$3,644,477 
                
 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
       For the Six Months Ended
 For the Three Months Ended 
 Jun 30,
 2016		Mar 31,
 2016		Dec 31,
 2015		Sep 30,
 2015		Jun 30,
 2015		 Jun 30,
 2016		Jun 30,
 2015
Interest income:        
Interest and fees on loans\\$29,122 \\$29,998 \\$28,511 \\$28,626 \\$28,739  \\$59,120 \\$57,092 
Taxable interest on securities 2,487  2,370  2,262  2,178  2,176   4,857  4,435 
Nontaxable interest on securities 280  327  352  366  402   607  837 
Dividends on Federal Home Loan Bank stock 231  210  315  309  164   441  329 
Other interest income 70  64  37  47  29   134  54 
Total interest and dividend income 32,190  32,969  31,477  31,526  31,510   65,159  62,747 
Interest expense:        
Deposits 2,981  2,968  3,097  3,308  3,348   5,949  6,737 
Federal Home Loan Bank advances 2,313  2,152  1,966  1,987  1,891   4,465  3,793 
Junior subordinated debentures 119  112  157  232  241   231  482 
Other interest expense 1  2  2  2  2   3  5 
Total interest expense 5,414  5,234  5,222  5,529  5,482   10,648  11,017 
Net interest income 26,776  27,735  26,255  25,997  26,028   54,511  51,730 
Provision for loan losses 450  500  750  200  100   950  100 
Net interest income after provision for loan losses 26,326  27,235  25,505  25,797  25,928   53,561  51,630 
Noninterest income:        
Wealth management revenues 9,481  9,174  9,167  8,902  8,912   18,655  17,347 
Mortgage banking revenues 2,710  2,198  2,582  1,990  2,741   4,908  5,329 
Service charges on deposit accounts 935  907  971  986  973   1,842  1,908 
Card interchange fees 860  797  810  849  826   1,657  1,540 
Income from bank-owned life insurance 1,090  499  502  498  492   1,589  982 
Loan related derivative income 508  645  752  327  717   1,153  1,362 
Equity in losses of unconsolidated subsidiaries (89) (88) (69) (69) (69)  (177) (155)
Other income 419  502  431  430  669   921  968 
Total noninterest income 15,914  14,634  15,146  13,913  15,261   30,548  29,281 
Noninterest expense:        
Salaries and employee benefits 17,405  16,380  16,053  15,971  15,506   33,785  31,000 
Net occupancy 1,803  1,807  1,724  1,721  1,669   3,610  3,555 
Equipment 1,503  1,501  1,393  1,424  1,376   3,004  2,716 
Outsourced services 1,294  1,363  1,337  1,250  1,277   2,657  2,524 
Legal, audit and professional fees 662  629  825  630  610   1,291  1,286 
FDIC deposit insurance costs 491  493  470  467  436   984  909 
Advertising and promotion 420  265  325  356  578   685  845 
Amortization of intangibles 322  323  333  260  156   645  311 
Debt prepayment penalties—  431 — — —   431 — 
Acquisition related expenses— —  52  504  433  —  433 
Other expenses 2,130  2,258  2,049  1,955  2,258   4,388  4,251 
Total noninterest expense 26,030  25,450  24,561  24,538  24,299   51,480  47,830 
Income before income taxes 16,210  16,419  16,090  15,172  16,890   32,629  33,081 
Income tax expense 5,153  5,484  5,346  4,964  5,387   10,637  10,568 
Net income\\$11,057 \\$10,935 \\$10,744 \\$10,208 \\$11,503  \\$21,992 \\$22,513 
         
Net income available to common shareholders:        
Basic\\$11,035 \\$10,910 \\$10,718 \\$10,181 \\$11,469  \\$21,945 \\$22,440 
Diluted\\$11,035 \\$10,910 \\$10,718 \\$10,180 \\$11,470  \\$21,945 \\$22,441 
Weighted average common shares outstanding:        
Basic 17,067  17,023  17,004  16,939  16,811   17,045  16,785 
Diluted 17,194  17,157  17,167  17,102  16,989   17,185  16,977 
Earnings per common share:        
Basic\\$0.65 \\$0.64 \\$0.63 \\$0.60 \\$0.68  \\$1.29 \\$1.34 
Diluted\\$0.64 \\$0.64 \\$0.62 \\$0.60 \\$0.68  \\$1.28 \\$1.32 
         
Cash dividends declared per share\\$0.36 \\$0.36 \\$0.34 \\$0.34 \\$0.34  \\$0.72 \\$0.68 
                       
 
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)
  
 Jun 30,
 2016		Mar 31,
 2016		Dec 31,
 2015		Sep 30,
 2015		Jun 30,
 2015
Share and Equity Related Data:     
Book value per share\\$22.73  \\$22.40  \\$22.06  \\$21.82  \\$21.34  
Tangible book value per share - Non-GAAP (1)\\$18.35  \\$17.98  \\$17.62  \\$17.36  \\$17.61  
Market value per share\\$37.92  \\$37.32  \\$39.52  \\$38.45  \\$39.48  
Shares issued and outstanding at end of period 17,081   17,024   17,020   16,985   16,834  
      
Capital Ratios:     
Tier 1 risk-based capital11.57% (i) 11.56 % 11.64 % 11.83 % 11.79 %
Total risk-based capital12.43% (i) 12.45 % 12.58 % 12.80 % 12.78 %
Tier 1 leverage ratio9.21% (i) 9.31 % 9.37 % 9.26 % 9.31 %
Common equity tier 110.84% (i) 10.82 % 10.89 % 11.05 % 11.00 %
Equity to assets 9.91 % 9.93 % 9.95 % 10.08 % 9.86 %
Tangible equity to tangible assets - Non-GAAP (1) 8.16 % 8.13 % 8.11 % 8.18 % 8.28 %
(i) - estimated     
   For the Six Months Ended
 For the Three Months Ended 
 Jun 30,
 2016		Mar 31,
 2016		Dec 31,
 2015		Sep 30,
 2015		Jun 30,
 2015		 Jun 30,
 2016		Jun 30,
 2015
Performance Ratios:        
Net interest margin (FTE)3.05%3.24%3.08%3.07%3.15% 3.15%3.16%
Return on average assets1.14%1.16%1.16%1.11%1.27% 1.15%1.25%
Return on average tangible assets - Non-GAAP (1)1.17%1.18%1.19%1.13%1.29% 1.17%1.27%
Return on average equity11.50%11.50%11.52%11.13%12.88% 11.50%12.71%
Return on average tangible equity - Non-GAAP (1)14.28%14.34%14.45%13.82%15.62% 14.31%15.45%
 
(1) See the section labeled “Supplemental Information - Non-GAAP Financial Measures” at the end of this document.
 
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)
   For the Six Months Ended
 For the Three Months Ended 
 Jun 30,
 2016		Mar 31,
 2016		Dec 31,
 2015		Sep 30,
 2015		Jun 30,
 2015		 Jun 30,
 2016		Jun 30,
 2015
Wealth Management Results        
Wealth Management Revenues:        
Trust and investment management fees\\$8,195 \\$8,065 \\$8,001 \\$7,768 \\$7,238  \\$16,260 \\$14,380 
Mutual fund fees 812  843  952  989  1,032   1,655  2,068 
Asset-based revenues 9,007  8,908  8,953  8,757  8,270   17,915  16,448 
Transaction-based revenues 474  266  214  145  642   740  899 
Total wealth management revenues\\$9,481 \\$9,174 \\$9,167 \\$8,902 \\$8,912  \\$18,655 \\$17,347 
         
Assets Under Administration:        
Balance at beginning of period\\$5,878,967 \\$5,844,636 \\$5,714,201 \\$5,211,548 \\$5,159,663  \\$5,844,636 \\$5,069,966 
Acquisition of Halsey Associates, Inc.— — —  839,994 —  — — 
Net investment appreciation (depreciation) & income 71,447  22,389  153,953  (316,121) (13,932)  93,835  66,940 
Net client asset flows (45,395) 11,942  (23,518) (21,220) 65,817   (33,452) 74,642 
Balance at end of period\\$5,905,019 \\$5,878,967 \\$5,844,636 \\$5,714,201 \\$5,211,548  \\$5,905,019 \\$5,211,548 
         
Mortgage Banking Results        
Mortgage Banking Revenues:        
Gains & commissions on loan sales, net\\$2,804 \\$2,134 \\$2,528 \\$1,964 \\$2,748  \\$4,938 \\$5,333 
Residential mortgage servicing fee income, net (94) 64  54  26  (7)  (30) (4)
Total mortgage banking revenues\\$2,710 \\$2,198 \\$2,582 \\$1,990 \\$2,741  \\$4,908 \\$5,329 
         
Residential Mortgage Loan Originations:        
Originations for retention in portfolio\\$54,080 \\$47,545 \\$38,080 \\$76,963 \\$65,134  \\$101,626 \\$119,809 
Originations for sale to secondary market (1) 154,043  90,458  134,125  126,353  134,360  \\$244,501  263,356 
Total mortgage loan originations\\$208,123 \\$138,003 \\$172,205 \\$203,316 \\$199,494  \\$346,127 \\$383,165 
         
Residential Mortgage Loans Sold:        
Sold with servicing rights retained\\$45,804 \\$26,454 \\$44,493 \\$37,782 \\$32,693  \\$72,258 \\$79,949 
Sold with servicing rights released (1) 93,239  79,507  82,906  94,645  110,484  \\$172,746  191,125 
Total mortgage loans sold\\$139,043 \\$105,961 \\$127,399 \\$132,427 \\$143,177  \\$245,004 \\$271,074 
 
(1) Also includes loans originated in a broker capacity.
END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)
  
 Jun 30,
 2016		Mar 31,
 2016		Dec 31,
 2015		Sep 30,
 2015		Jun 30,
 2015
Commercial:     
Mortgages\\$1,074,747  \\$976,931  \\$931,953  \\$873,767  \\$876,589  
Construction & development 81,812   123,032   122,297   121,857   110,989  
Commercial & industrial 575,661   598,848   600,297   584,230   595,959  
Total commercial 1,732,220   1,698,811   1,654,547   1,579,854   1,583,537  
Residential real estate:     
Mortgages 978,399   980,274   984,437   994,808   971,705  
Homeowner construction 26,637   24,075   29,118   29,406   29,558  
Total residential real estate 1,005,036   1,004,349   1,013,555   1,024,214   1,001,263  
Consumer:     
Home equity lines 260,541   258,513   255,565   252,862   249,845  
Home equity loans 39,572   45,499   46,649   47,610   47,437  
Other 43,515   39,821   42,811   45,378   46,502  
Total consumer 343,628   343,833   345,025   345,850   343,784  
Total loans\\$3,080,884  \\$3,046,993  \\$3,013,127  \\$2,949,918  \\$2,928,584  
                     
    
 June 30, 2016 December 31, 2015
 Balance% of Total Balance% of Total
Commercial Real Estate Loans by Property Location:     
Rhode Island, Connecticut, Massachusetts\\$1,073,506  92.9% \\$959,883  91.0%
New York, New Jersey, Pennsylvania 69,872  6.0%  80,989  7.7%
New Hampshire 13,181  1.1%  13,377  1.3%
Total commercial real estate loans (1)\\$1,156,559  100.0% \\$1,054,249  100.0%
      
Residential Mortgages by Property Location:     
Rhode Island, Connecticut, Massachusetts\\$989,085  98.5% \\$995,743  98.2%
New Hampshire, Vermont 9,500  0.9%  10,186  1.0%
New York, Virginia, New Jersey, Maryland, Pennsylvania 3,434  0.3%  4,163  0.4%
Ohio 1,132  0.1%  1,557  0.2%
Other 1,885  0.2%  1,906  0.2%
Total residential mortgages\\$1,005,036  100.0% \\$1,013,555  100.0%
              
(1) Commercial real estate loans consist of commercial mortgages and construction and development loans.  Commercial mortgages are loans secured by income producing property.
      
 Jun 30,
 2016		Mar 31,
 2016		Dec 31,
 2015		Sep 30,
 2015		Jun 30,
 2015
Deposits:     
Non-interest bearing demand deposits\\$476,848  \\$474,477  \\$475,398  \\$472,349  \\$429,904  
Interest-bearing demand deposits 35,459   64,642   61,900   41,507   27,851  
NOW accounts 414,532   394,873   412,602   358,973   357,922  
Money market accounts 675,896   763,565   823,490   855,858   789,334  
Savings accounts 342,579   331,800   326,967   305,775   300,108  
Time deposits (in-market) 549,935   540,815   531,419   534,266   549,410  
Wholesale brokered time deposits 294,101   309,479   302,479   267,552   284,590  
Total deposits\\$2,789,350  \\$2,879,651  \\$2,934,255  \\$2,836,280  \\$2,739,119  
                     
 
CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)
  
 Jun 30,
 2016		Mar 31,
 2016		Dec 31,
 2015		Sep 30,
 2015		Jun 30,
 2015
Asset Quality Ratios:     
Nonperforming assets to total assets 0.48% 0.49% 0.58% 0.48% 0.45%
Nonaccrual loans to total loans 0.56% 0.57% 0.70% 0.57% 0.52%
Allowance for loan losses to nonaccrual loans 149.73% 150.00% 128.61% 161.25% 182.32%
Allowance for loan losses to total loans 0.84% 0.86% 0.90% 0.92% 0.94%
      
Nonperforming Assets:     
Commercial mortgages\\$4,054 \\$4,054 \\$5,711 \\$4,915 \\$4,915 
Commercial construction & development— — — — — 
Commercial & industrial 1,204  2,659  3,018  1,137  1,039 
Residential real estate mortgages 10,409  9,367  10,666  9,472  7,411 
Consumer 1,581  1,345  1,652  1,320  1,766 
Total nonaccrual loans 17,248  17,425  21,047  16,844  15,131 
Other real estate owned 1,515  1,326  716  955  1,388 
Total nonperforming assets\\$18,763 \\$18,751 \\$21,763 \\$17,799 \\$16,519 
      
Past Due Loans:     
Commercial mortgages\\$4,062 \\$4,564 \\$4,555 \\$5,062 \\$4,929 
Commercial & industrial 1,978  2,906  462  4,337  5,518 
Residential real estate mortgages 8,893  8,703  9,286  10,567  10,904 
Consumer loans 2,201  2,122  3,256  1,845  2,678 
Total past due loans\\$17,134 \\$18,295 \\$17,559 \\$21,811 \\$24,029 
      
Total past due loans to total loans 0.56% 0.60% 0.58% 0.74% 0.82%
Accruing loans 90 days or more past due\\$— \\$— \\$— \\$— \\$— 
Nonaccrual loans included in past due loans\\$13,211 \\$14,030 \\$13,635 \\$13,964 \\$12,397 
                
   For the Six Months Ended
 For the Three Months Ended 
 Jun 30,
 2016		Mar 31,
 2016		Dec 31,
 2015		Sep 30,
 2015		Jun 30,
 2015		 Jun 30,
 2016		Jun 30,
 2015
Nonaccrual Loan Activity:        
Balance at beginning of period\\$17,425 \\$21,047 \\$16,844 \\$15,131 \\$15,865  \\$21,047 \\$15,945 
Additions to nonaccrual status 2,072  1,352  7,029  3,319  2,567   3,424  4,175 
Loans returned to accruing status—  (206) (303) (156) (1,756)  (206) (2,122)
Loans charged-off (860) (1,475) (904) (725) (355)  (2,335) (676)
Loans transferred to other real estate owned (435) (610) (716)—  (261)  (1,045) (491)
Payments, payoffs and other changes (954) (2,683) (903) (725) (929)  (3,637) (1,700)
Balance at end of period\\$17,248 \\$17,425 \\$21,047 \\$16,844 \\$15,131  \\$17,248 \\$15,131 
         
Allowance for Loan Losses:        
Balance at beginning of period\\$26,137 \\$27,069 \\$27,161 \\$27,587 \\$27,810  \\$27,069 \\$28,023 
Provision charged to earnings 450  500  750  200  100   950  100 
Charge-offs (860) (1,475) (904) (725) (355)  (2,335) (676)
Recoveries 99  43  62  99  32   142  140 
Balance at end of period\\$25,826 \\$26,137 \\$27,069 \\$27,161 \\$27,587  \\$25,826 \\$27,587 
         
Net Loan Charge-Offs (Recoveries):        
Commercial mortgages\\$65 \\$1,249 \\$405 (\\$4)\\$196  \\$1,314 \\$316 
Commercial & industrial 684  (18) 217  348  26   666  19 
Residential real estate mortgages 2  134  117  12  4   136  50 
Consumer 10  67  103  270  97   77  151 
Total\\$761 \\$1,432 \\$842 \\$626 \\$323  \\$2,193 \\$536 
         
Net charge-offs to average loans (annualized) 0.10% 0.19% 0.11% 0.08% 0.04%  0.14% 0.04%

The following table presents average balance and interest rate information.  Tax-exempt income is converted to a fully taxable equivalent basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit.  Unrealized gains (losses) on available for sale securities and fair value adjustments on mortgage loans held for sale are excluded from the average balance and yield calculations.  Nonaccrual and renegotiated loans, as well as interest recognized on these loans are included in amounts presented for loans.

   
CONSOLIDATED AVERAGE BALANCE SHEETS  
(Unaudited; Dollars in thousands)  
 
For the Three Months EndedJune 30, 2016 March 31, 2016 June 30, 2015
 Average BalanceInterestYield/
Rate		 Average BalanceInterestYield/
Rate		 Average BalanceInterestYield/
 Rate
 
Assets:           
Commercial mortgages\\$1,019,290  \\$8,992  3.55  \\$933,939  \\$8,215  3.54  \\$873,212  \\$7,779  3.57 
Construction & development 117,204   985  3.38   129,217   1,108  3.45   99,435   773  3.12 
Commercial & industrial 591,893   6,408  4.35   604,519   7,681  5.11   601,536   7,378  4.92 
Total commercial loans\\$1,728,387  \\$16,385  3.81  \\$1,667,675  \\$17,004  4.10  \\$1,574,183  \\$15,930  4.06 
Residential real estate loans, including loans held for sale 1,024,653   9,980  3.92   1,031,260   10,155  3.96   1,025,029   10,102  3.95 
Consumer loans 342,866   3,311  3.88   343,519   3,393  3.97   338,809   3,183  3.77 
Total loans 3,095,906   29,676  3.86   3,042,454   30,552  4.04   2,938,021   29,215  3.99 
Cash, federal funds sold and short-term investments 69,839   70  0.40   68,488   64  0.38   63,858   29  0.18 
FHLBB stock 31,723   231  2.93   25,597   210  3.30   37,730   164  1.74 
Taxable debt securities 396,428   2,487  2.52   359,060   2,370  2.65   320,643   2,176  2.72 
Nontaxable debt securities 28,531   433  6.10   33,313   507  6.12   40,886   627  6.15 
Total securities 424,959   2,920  2.76   392,373   2,877  2.95   361,529   2,803  3.11 
Total interest-earning assets 3,622,427   32,897  3.65   3,528,912   33,703  3.84   3,401,138   32,211  3.80 
Noninterest-earning assets 247,081      240,113      221,577    
Total assets\\$3,869,508     \\$3,769,025     \\$3,622,715    
Liabilities and Shareholders' Equity:           
Interest-bearing demand deposits\\$42,952  \\$7  0.07  \\$50,704  \\$13  0.10  \\$38,129  \\$3  0.03 
NOW accounts 403,136   53  0.05   386,488   56  0.06   363,434   53  0.06 
Money market accounts 710,075   459  0.26   786,633   515  0.26   820,887   941  0.46 
Savings accounts 338,504   49  0.06   328,174   49  0.06   298,286   50  0.07 
Time deposits (in-market) 542,621   1,345  1.00   538,035   1,315  0.98   554,839   1,390  1.00 
Wholesale brokered time deposits 302,707   1,068  1.42   296,801   1,020  1.38   285,844   911  1.28 
FHLBB advances 587,395   2,313  1.58   453,019   2,152  1.91   391,152   1,891  1.94 
Junior subordinated debentures 22,681   119  2.11   22,681   112  1.99   22,681   241  4.26 
Other 66   1  6.09   79   2  10.18   116   2  6.92 
Total interest-bearing liabilities 2,950,137   5,414  0.74   2,862,614   5,234  0.74   2,775,368   5,482  0.79 
Demand deposits 473,731      471,782      441,355    
Other liabilities 60,923      54,287      48,627    
Shareholders' equity 384,717      380,342      357,365    
Total liabilities and shareholders' equity\\$3,869,508     \\$3,769,025     \\$3,622,715    
Net interest income (FTE) \\$27,483     \\$28,469     \\$26,729   
Interest rate spread  2.91    3.10    3.01 
Net interest margin  3.05    3.24    3.15 
               

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

For the Three Months EndedJun 30, 2016Mar 31, 2016Jun 30, 2015
Commercial loans\\$554  \\$554  \\$476  
Nontaxable debt securities 153   180   225  
Total\\$707  \\$734  \\$701  
CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited; Dollars in thousands)
  
For the Six Months EndedJune 30, 2016 June 30, 2015
 Average BalanceInterestYield/
Rate		 Average BalanceInterestYield/
 Rate
 
Assets:       
Commercial mortgages\\$976,619  \\$17,207  3.54  \\$862,638  \\$15,496  3.62 
Construction & development 123,209   2,093  3.42   91,911   1,439  3.16 
Commercial & industrial 598,203   14,089  4.74   604,984   14,307  4.77 
Total commercial loans 1,698,031   33,389  3.95   1,559,533   31,242  4.04 
Residential real estate loans, including loans held for sale 1,027,956   20,135  3.94   1,027,509   20,416  4.01 
Consumer loans 343,193   6,704  3.93   337,578   6,351  3.79 
Total loans 3,069,180   60,228  3.95   2,924,620   58,009  4.00 
Cash, federal funds sold and short-term investments 69,164   134  0.39   57,492   54  0.19 
FHLBB stock 28,660   441  3.09   37,730   329  1.76 
Taxable debt securities 377,744   4,857  2.59   321,602   4,435  2.78 
Nontaxable debt securities 30,922   940  6.11   42,762   1,291  6.09 
Total securities 408,666   5,797  2.85   364,364   5,726  3.17 
Total interest-earning assets 3,575,670   66,600  3.75   3,384,206   64,118  3.82 
Noninterest-earning assets 243,597      221,686    
Total assets\\$3,819,267     \\$3,605,892    
Liabilities and Shareholders' Equity:       
Interest-bearing demand deposits\\$46,828  \\$20  0.09  \\$37,991  \\$11  0.06 
NOW accounts 394,812   110  0.06   346,605   100  0.06 
Money market accounts 748,354   975  0.26   810,519   1,825  0.45 
Savings accounts 333,339   96  0.06   296,117   96  0.07 
Time deposits (in-market) 540,328   2,659  0.99   560,917   2,859  1.03 
Wholesale brokered time deposits 299,754   2,089  1.40   290,230   1,846  1.28 
FHLBB advances 520,207   4,465  1.73   397,925   3,793  1.92 
Junior subordinated debentures 22,681   231  2.05   22,681   482  4.29 
Other 73   3  8.26   122   5  8.26 
Total interest-bearing liabilities 2,906,376   10,648  0.74   2,763,107   11,017  0.80 
Demand deposits 472,757      440,136    
Other liabilities 57,605      48,342    
Shareholders' equity 382,529      354,307    
Total liabilities and shareholders' equity\\$3,819,267     \\$3,605,892    
Net interest income (FTE) \\$55,952     \\$53,101   
Interest rate spread  3.01    3.02 
Net interest margin  3.15    3.16 

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

For the Six Months EndedJun 30, 2016Jun 30, 2015
Commercial loans\\$1,108  \\$917  
Nontaxable debt securities 333   454  
Total\\$1,441  \\$1,371  
SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)
  
 Jun 30,
 2016		Mar 31,
 2016		Dec 31,
 2015		Sep 30,
 2015		Jun 30,
 2015
Tangible Book Value per Share:     
Total shareholders' equity, as reported\\$388,332 \\$381,280  \\$375,388 \\$370,527  \\$359,167 
Less:     
Goodwill 64,059  64,059   64,059  64,196   58,114 
Identifiable intangible assets, net 10,814  11,137   11,460  11,793   4,539 
Total tangible shareholders' equity\\$313,459 \\$306,084  \\$299,869 \\$294,538  \\$296,514 
      
Shares outstanding, as reported 17,081  17,024   17,020  16,985   16,834 
      
Book value per share - GAAP\\$22.73 \\$22.40  \\$22.06 \\$21.82  \\$21.34 
Tangible book value per share - Non-GAAP\\$18.35 \\$17.98  \\$17.62 \\$17.34  \\$17.61 
      
Tangible Equity to Tangible Assets:     
Total tangible shareholders' equity\\$313,459 \\$306,084  \\$299,869 \\$294,538  \\$296,514 
      
Total assets, as reported\\$3,917,081 \\$3,838,210  \\$3,771,604 \\$3,674,836  \\$3,644,477 
Less:     
Goodwill 64,059  64,059   64,059  64,196   58,114 
Identifiable intangible assets, net 10,814  11,137   11,460  11,793   4,539 
Total tangible assets\\$3,842,208 \\$3,763,014  \\$3,696,085 \\$3,598,847  \\$3,581,824 
      
Equity to assets - GAAP 9.91% 9.93 % 9.95% 10.08 % 9.86%
Tangible equity to tangible assets - Non-GAAP 8.16% 8.13 % 8.11% 8.18 % 8.28%
 For the Three Months Ended For the Six Months Ended
 Jun 30,
 2016		Mar 31,
 2016		Dec 31,
 2015		Sep 30,
 2015		Jun 30,
 2015		 Jun 30,
 2016		Jun 30,
 2015
Return on Average Tangible Assets:        
Net income, as reported\\$11,057 \\$10,935 \\$10,744 \\$10,208 \\$11,503  \\$21,992 \\$22,513 
         
Total average assets, as reported\\$3,869,508 \\$3,769,025 \\$3,700,441 \\$3,678,487 \\$3,622,715  \\$3,819,267 \\$3,605,892 
Less average balances of:        
Goodwill 64,059  64,059  64,194  62,524  58,114   64,059  58,114 
Identifiable intangible assets, net 10,972  11,294  11,616  8,768  4,614   11,133  4,691 
Total average tangible assets\\$3,794,477 \\$3,693,672 \\$3,624,631 \\$3,607,195 \\$3,559,987  \\$3,744,075 \\$3,543,087 
         
Return on average assets - GAAP 1.14% 1.16% 1.16% 1.11% 1.27%  1.15% 1.25%
Return on average tangible assets Non-GAAP 1.17% 1.18% 1.19% 1.13% 1.29%  1.17% 1.27%
         
Return on Average Tangible Equity:        
Net income, as reported\\$11,057 \\$10,935 \\$10,744 \\$10,208 \\$11,503  \\$21,992 \\$22,513 
         
Total average equity, as reported\\$384,717 \\$380,342 \\$373,197 \\$366,724 \\$357,365  \\$382,529 \\$354,307 
Less average balances of:        
Goodwill 64,059  64,059  64,194  62,524  58,114   64,059  58,114 
Identifiable intangible assets, net 10,972  11,294  11,616  8,768  4,614   11,133  4,691 
Total average tangible equity\\$309,686 \\$304,989 \\$297,387 \\$295,432 \\$294,637  \\$307,337 \\$291,502 
         
Return on average equity - GAAP 11.50% 11.50% 11.52% 11.13% 12.88%  11.50% 12.71%
Return on average tangible equity -
  Non-GAAP		 14.28% 14.34% 14.45% 13.82% 15.62%  14.31% 15.45%